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This appeal concerns the lawfulness of a proposal by the Lord Chancellor (then The Rt Hon Christopher Grayling MP) in September 2013 to introduce a residence test for civil legal aid by amending Schedule 1 to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), by means of delegated legislation, in the form of a statutory instrument, which I will refer to as the draft order.
Part 1 of LASPO
In November 2010, the Ministry of Justice published a consultation paper entitled Proposals for the Reform of Legal Aid in England and Wales.
Following the subsequent public consultation exercise, the Ministry published a paper entitled Reform of Legal Aid in England and Wales: the Government Response in June 2011.
The proposals in this June 2011 paper were then largely reflected in a Bill which was put before Parliament, and which, subject to amendments, was enacted as LASPO, a statute which was enacted on 1 May 2012.
As its title suggests, LASPO is concerned with a number of different areas of the legal system.
This case is concerned with Part 1 of LASPO, which came into force on 1 April 2013, is entitled Legal Aid, and contains 43 sections.
Sections 1 to 12 are headed Provision of legal aid.
Sections 8 to 12 are concerned with civil legal services, and sections 13 to 20 with Criminal legal aid.
Sections 21 and 22 are concerned with Financial resources, sections 23 to 26 with Contributions and costs, and sections 27 to 30 with Providers of services etc.
Sections 31 to 43 are Supplementary provisions.
Section 1(1) of LASPO imposes on the Lord Chancellor a duty to secure that legal aid is made available in accordance with this Part, and section 1(4) enables him to do anything to further those functions.
Section 2(1) empowers him to make such arrangements as [he] considers appropriate to carry out those functions, and section 3 is concerned with standards of service.
Section 4(1) requires the Lord Chancellor to appoint a Director of Legal Aid Casework, defined as the Director.
Section 8 defines civil legal services as the provision of legal advice and assistance as to the law, proceedings, disputes and enforcement other than in connection with criminal matters.
Section 9 of LASPO is entitled General cases, and it provides: (1) Civil legal services are to be available to an individual under this Part if they are civil legal services described in Part 1 of (a) Schedule 1, and (b) the Director has determined that the individual qualifies for the services in accordance with this Part (2) The Lord Chancellor may by order add services to Part 1 of Schedule 1, or (a) (b) vary or omit services described in that Part, (whether by modifying that Part or Parts 2, 3 or 4 of the Schedule).
Section 10 of LASPO deals with Exceptional cases, in respect of which civil legal services are to be available even though they would not be available under section 9.
It includes, in subsection (3), cases where the denial of civil legal services would be a breach of [an] individuals Convention rights or EU rights.
Section 11 of LASPO is entitled Qualifying for civil legal aid.
Section 11(1) requires the Director to determine whether an individual qualifies for civil legal services by reference to (a) his financial resources (as defined in section 21 and regulations under that section), and (b) criteria set out in regulations.
Section 11(2) provides that, in setting the criteria under section 11(1)(b), the Lord Chancellor (a) must consider the circumstances in which it is appropriate to make civil legal services available, and (b) must, in particular, consider the extent to which the criteria ought to reflect the factors set out in subsection (3).
The ten factors set out in section 11(3) include (a) the likely cost and likely benefit of providing the services, (b) the availability of resources, (e) the nature and the seriousness of the case, (f) the availability of alternative services, (g) the prospects of success, (h) the conduct of the individual concerned in connection with services made available under this Part, and (j) the public interest.
subsections (1), (2) and (3) are in these terms: Section 41 of LASPO is headed Orders, regulations and directions, and (1) Orders, regulations and directions under this Part (a) may make different provision for different cases, circumstances or areas, (b) may make provision generally or only for specified cases, circumstances or areas, and (c) may make provision having effect for a period specified or described in the order, regulations or direction. (2) They may, in particular, make provision by reference to services provided for the purposes of (a) proceedings before a particular court, tribunal or other person, (b) individual, or (c) services provided for individuals selected by reference to particular criteria or on a sampling basis. services provided for a particular class of (3) Orders and regulations under this Part (a) may provide for a person to exercise a discretion in dealing with any matter, (b) may make provision by reference to a document produced by any person, and (c) may make consequential, supplementary, incidental, transitional or saving provision.
Section 41(6) provides that a statutory instrument containing an order made under any section mentioned in section 41(7) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament, and section 41(7) included, in para (a), orders under section 9.
Schedule 1 to LASPO is headed Civil Legal Services and Part 1 sets out the Services, which are referred to in section 9(1)(a).
Over 40 categories are set out in Part 1 of Schedule 1, and almost all of them begin with the words Civil legal services provided either to or in relation to.
They include care, supervision and protection of children (para 1), special educational needs (para 2), and abuse of an individual when a child or a vulnerable adult, but only where (a) the services are provided to the individual (para 3).
The categories also include appeals relating to welfare benefits (para 8), victims of domestic violence and family matters (para 12), and judicial review, save where such review will produce no benefit to the individual concerned (para 19).
Other categories are breach of Convention rights by a public authority (para 22), certain specified immigration matters (paras 24 31), loss of home and homelessness (paras 33 and 34), protection from harassment (para 37), in relation to a sexual offence, but only where (a) the services are provided to the victim of the offence (para 39).
Also, inquests (para 41), environmental pollution (para 42), and equality (para 43).
Some of these paragraphs are fairly detailed and include exclusions and definitions.
Part 2 of Schedule 1 is entitled Excluded services, and it is introduced with the following words, The services described in Part 1 of this Schedule do not include the services listed in this Part of this Schedule, except to the extent that Part 1 of this Schedule provides otherwise.
Part 2 contains 18 paragraphs, and (with the exception of para 14) they all begin with the words Civil legal services provided in relation to, and then refer to specific areas, including personal injury or death (para 1), a claim in tort in respect of negligence (para 2), damage to property (para 6), a claim in tort in respect of breach of statutory duty (para 8) and a benefit, allowance, payment, credit or pension under certain statutes (para 15).
Paragraph 14 of Part 2 of Schedule 1 is Civil legal services provided to an individual in relation to matters arising out of establishing, carrying on, or terminating a business.
Part 3 of Schedule 1 is concerned with Advocacy: exclusion and exceptions, and it sets out tribunals before which advocacy is within the Services covered by Part 1 of the Schedule.
Part 4 of that Schedule is concerned with Interpretation.
The draft order
In April 2013, the Ministry of Justice issued a paper, Transforming Legal Aid, and subsequently carried out a public consultation exercise in connection with its proposals.
In September 2013, the Ministry published its response to the results of that exercise, Transforming Legal Aid: Next Steps.
In the September 2013 paper, the Ministry stated at para 132 that, subject to certain specified exceptions: [T]he Government has decided to proceed with the introduction of a residence test in civil legal aid so that only those who are: lawfully resident in the UK, Crown Dependencies or British Overseas Territories at the time the application for civil legal aid was made; and have resided lawfully in the UK, Crown Dependencies or British Overseas territories for a continuous period of at least 12 months at any point in the past
would be eligible for civil legal aid
The specified exceptions were (i) serving members of the armed forces and their families, (ii) asylum seekers, and (iii) in relation to the second bullet point, children aged under 12 months.
No exception was to be made for older children who were not responsible for their lack of lawful resident status.
The Ministry later agreed to exclude certain classes of case from the ambit of this proposal, namely categories of case which broadly relate to an individuals liberty, where the individual is particularly vulnerable, or where the case relates to the protection of children.
In its September 2013 paper, the Ministry described the proposal as justified and proportionate, and pointed out that anyone excluded by the residence test would be entitled to apply for exceptional funding.
In para 6.3 of an Equality Statement attached to that paper, the Ministry described the primary objective of the proposal as being to bear down on the cost of legal aid, ensuring that every aspect of expenditure is justified and that we are getting the best deal for the taxpayer, and further stated that the reforms seek to promote public confidence in the system by ensuring limited public resources are targeted at those cases which justify it and those people who need it.
Also in September 2013, the Lord Chancellor decided to proceed with his proposal described in paras 12 and 13 above, and to give effect to that decision by laying a draft order before Parliament.
The draft order was put before Parliament on 31 March 2014.
The draft order stated that it was made pursuant to sections 9(2)(b), 41(1)(a) and (b), 41(2)(a) and (b), and 41(3)(b) and (c) of LASPO.
The draft order effectively provides that an individual who fails the residence test would no longer qualify for civil legal aid for any types of claim, subject to certain limited exceptions.
The effect of the draft order was to insert a new para 19 into Part 2 of Schedule 1, whose effect was explained by Moses LJ in the Divisional Court at [2015] 1 WLR 251, paras 21 24, and was more shortly summarised by Mr Eadie QC, who appeared for the Lord Chancellor, in a description adopted by Laws LJ in the Court of Appeal at para 8: To satisfy the residence test, an individual would have to be lawfully resident in the UK, the Channel Islands, Isle of Man or a British Overseas Territory on the day the application for civil legal services was made, and (unless they were under 12 months old or a particular kind of asylum claimant or involved with the UK Armed Forces) have been so lawfully resident for a 12 month period at some time in the past (excluding absences of up to 30 days).
There were proposed exceptions to the test.
Claimants pursuing certain types of proceedings were not required to satisfy the test (for example, domestic violence cases, and challenges to the lawfulness of detention).
In any event, regardless of residence, a claimant who failed the residence test would have been entitled to apply for legal aid under the Exceptional Case Funding regime in section l0 of LASPO whose purpose is to ensure that all those who have a right to legal aid under the European Convention or EU law are able to obtain it.
The instant proceedings
Before the draft order had been laid before Parliament, Public Law Project (PLP) applied to the High Court for a declaration that it would be unlawful.
The alleged unlawfulness was based on two grounds, namely that the draft order was or would be (i) ultra vires, ie outside the scope of the power granted to the Lord Chancellor in LASPO to bring forward delegated legislation, and (ii) unjustifiably discriminatory in its effect.
The Divisional Court, in a judgment given by Moses LJ (with whom Collins and Jay JJ agreed), held that the draft order was unlawful on both grounds [2015] 1 WLR 251.
As the draft order was before Parliament at the time of the decision of the Divisional Court, it was withdrawn, and that remains the position today.
The Lord Chancellor appealed against both conclusions reached by the Divisional Court.
The Court of Appeal, in a judgment given by Laws LJ (with whom Kitchin and Christopher Clarke LJJ agreed), allowed his appeal, holding that the draft order was intra vires and, while it was discriminatory in its effect, the discrimination could be justified [2016] 2 WLR 995.
PLP now appeals to this court, and maintains both the ultra vires and the discrimination arguments.
The ultra vires principle in the present context
The draft order, once formally made, would, of course, be secondary, or subordinate, legislation, unlike LASPO itself which, as a statute, is primary legislation.
Primary legislation is initiated by a Bill which is placed before Parliament.
To the extent that Parliament considers it appropriate, all or any of the provisions of a Bill can be subject to detailed scrutiny, discussion, and amendment in Parliament before being formally enacted as primary legislation; it is then formally approved by the monarch, whereupon it becomes a statute.
In our system of parliamentary supremacy (subject to arguable extreme exceptions, which I hope and expect will never have to be tested in practice), it is not open to a court to challenge or refuse to apply a statute, save to the extent that Parliament authorises or requires a court to do so.
Subordinate legislation consists of legislation made by members of the Executive (often, as in this case, by Government ministers), almost always pursuant to an authority given by Parliament in primary legislation.
The draft order in the present case would be a statutory instrument, which is a type of subordinate legislation which must be laid in draft before Parliament.
Some statutory instruments are subject to the negative resolution procedure ie they will become law unless, within a specified period, they are debated and voted down.
Other statutory instruments, such as the draft order in this case, are subject to the affirmative resolution procedure ie they can only become law if they are formally approved by Parliament see subsections (6) and (7)(a) of section 41.
Although they can be said to have been approved by Parliament, draft statutory instruments, even those subject to the affirmative resolution procedure, are not subject to the same legislative scrutiny as bills; and, unlike bills, they cannot be amended by Parliament.
Accordingly, it is well established that, unlike statutes, the lawfulness of statutory instruments (like other subordinate legislation) can be challenged in court.
As Lord Diplock said in F Hoffmann La Roche & Co v Secretary of State for Trade and Industry [1975] AC 295, 365, even though [subordinate legislation] is contained in an order made by statutory instrument approved by resolutions of both Houses of Parliament, I entertain no doubt that the courts have jurisdiction to declare it to be invalid if they are satisfied that in making it the Minister who did so acted outwith the legislative powers conferred upon him by the Act of Parliament under which the order [was] purported to be made .
Subordinate legislation will be held by a court to be invalid if it has an effect, or is made for a purpose, which is ultra vires, that is, outside the scope of the statutory power pursuant to which it was purportedly made.
In declaring subordinate legislation to be invalid in such a case, the court is upholding the supremacy of Parliament over the Executive.
That is because the court is preventing a member of the Executive from making an order which is outside the scope of the power which Parliament has given him or her by means of the statute concerned.
Accordingly, when, as in this case, it is contended that actual or intended subordinate legislation is ultra vires, it is necessary for a court to determine the scope of the statutorily conferred power to make that legislation.
Normally, statutory provisions which provide for subordinate legislation are concerned with subsidiary issues such as procedural rules, practice directions, and forms of notice; hence statutory instruments are frequently referred to as regulations.
However, such statutory provisions sometimes permit more substantive issues to be covered by subordinate legislation, and, as is the case with section 9(2)(b) of LASPO, they sometimes permit subordinate legislation which actually amends the statute concerned (or even another statute), by addition, deletion or variation.
As explained in Craies on Legislation (10th ed (2015)), edited by Daniel Greenberg), para 1.3.9: The term Henry VIII power is commonly used to describe a delegated power under which subordinate legislation is enabled to amend primary legislation.
When a court is considering the validity of a statutory instrument made under a Henry VIII power, its role in upholding Parliamentary supremacy is particularly striking, as the statutory instrument will be purporting to vary primary legislation passed into law by Parliament.
The interpretation of the statutory provision conferring a power to make secondary legislation is, of course, to be effected in accordance with normal principles of statutory construction.
However, in the case of an amendment that is permitted under a Henry VIII power, to quote again from Craies (op cit) para 1.3.11: as with all delegated powers the only rule for construction is to test each proposed exercise by reference to whether or not it is within the class of action that Parliament must have contemplated when delegating.
Although Henry VIII powers are often cast in very wide terms, the more general the words by Parliament to delegate a power, the more likely it is that an exercise within the literal meaning of the words will nevertheless be outside the legislatures contemplation.
In two cases, R v Secretary of State for Social Security, Ex p Britnell [1991] 1 WLR 198, 204 and R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349, 383, the House of Lords has cited with approval the following observation of Lord Donaldson MR in McKiernon v Secretary of State for Social Security, The Times, November 1989; Court of Appeal (Civil Division) Transcript No 1017 of 1989, which is to much the same effect: Whether subject to the negative or affirmative resolution procedure, [subordinate legislation] is subject to much briefer, if any, examination by Parliament and cannot be amended.
The duty of the courts being to give effect to the will of Parliament, it is, in my judgment, legitimate to take account of the fact that a delegation to the Executive of power to modify primary legislation must be an exceptional course and that, if there is any doubt about the scope of the power conferred upon the Executive or upon whether it has been exercised, it should be resolved by a restrictive approach.
Immediately after quoting this passage in Spath Holme, Lord Bingham went on to say [r]ecognition of Parliaments primary law making role in my view requires such an approach.
He went on to add that, where there is little room for doubt about the scope of the power in the statute concerned, it is not for the courts to cut down that scope by some artificial reading of the power.
Is the draft order ultra vires?
The argument that the draft order is ultra vires the powers granted to the Lord Chancellor is, in essence, as follows.
The exclusion of a specific group of people from the right to receive civil legal services in relation to an issue, on the ground of personal circumstances or characteristics (namely those not lawfully resident in the UK, Crown Dependencies or British Overseas Territories) which have nothing to do with the nature of the issue or services involved or the individuals need, or ability to pay, for the services, is simply not within the scope of the power accorded to the Lord Chancellor by section 9(2)(b) of LASPO, and nothing in section 41 undermines that contention.
In my view, that argument is sound, and should be accepted.
Turning to section 9(2)(b) itself, as a matter of ordinary language, the relevant parts of the draft order do not seek to vary or omit services: rather they seek to reduce the class of individuals who are entitled to receive those services by reference to a personal characteristic or circumstance unrelated to the services.
Of course, the words of section 9(2)(b) have to be interpreted in their context, and I accept that a sufficiently clear and strong context could justify a different conclusion, in the sense that the words of section 9(2)(b) could, as a matter of language, just about extend to a regulation such as the draft order.
Nonetheless, that is not their natural meaning, and, of course, the natural meaning of the words in question is an important factor in an issue of statutory interpretation, particularly when they suggest that a so called Henry VIII power does not extend to authorise the subordinate legislation in question.
When one turns to the wider statutory context, I consider that it supports, rather than undermines, the conclusion indicated by the natural meaning of the words of section 9(2)(b) on their own.
First, section 9(2)(b) permits a variation or omission of the services set out in Part 1 of Schedule 1, by, inter alia, modifying that Part or Part 2 of that Schedule.
Each of the services identified in Part 1 and Part 2 is linked to a specific type of legal issue or claim, and has nothing to do with the personal circumstances or characteristics, and in particular the geographical residence, of the potential recipient of the services, other than those which relate to the issue or the services concerned.
The point is well demonstrated by the fact that, as mentioned in para 10 above, all the existing 18 paragraphs of Part 2 of the Schedule are concerned with Civil legal services provided in relation to specified areas of litigation, whereas the new proposed para 19 will have nothing to do with any specified area of litigation at all.
It is true that, as mentioned in para 9 above, some provisions, such as paras 3(a) and 39(a) of Part 1, limit the right to receive legal services to one specific group, namely the victims of alleged wrongdoing, and exclude, for instance, the alleged perpetrators.
However, that does not in any way undermine PLPs case, because the objection to the draft order is that it excludes (albeit subject to exceptions) a group of individuals on grounds which have nothing to do with the issue or services involved.
This conclusion is supported by the contrast in the wording of the two subsections of section 9.
Subsection (1) states that [c]ivil legal services are to be available to an individual if (a) they are civil legal services described in Part 1 of Schedule 1, and (b) the Director determines that the individual qualifies for the services.
Thus, subsection (1) clearly distinguishes between the question whether the particular services qualify para (a) and whether the particular individual qualifies para (b).
When one turns to the subsection under which the draft order in the present case is said to have been made, both para (a) and para (b) of subsection (2) refer only to services within Part 1 of Schedule 1.
The natural inference from this is that subsection (2) is concerned with adding to, varying or omitting services, and not the individuals to whom the services may be provided.
Looking elsewhere in LASPO, whereas section 9, the section under which the draft order was purportedly made, is concerned with the issues in respect of which civil legal services are to be available, section 11 of LASPO is the provision which appears to be concerned with identifying the characteristics or circumstances of individuals who are to qualify for civil legal aid.
Section 11 gives rise to two points in favour of PLPs case.
First, the very fact that it is that section which sets out the personal characteristics or circumstances of those individuals who are entitled to civil legal aid provides obvious support that such matters are outwith section 9.
Secondly, the factors listed in section 11(1) or (3), some of which are described in para 7 above, are concerned with criteria which are connected to the need of the individual for the services, the cost of the services, the extent and likelihood of the benefit from those services and the conduct of the individual in connection with the services.
There is no criterion which is based on personal characteristics or circumstances which have nothing to do with the issue involved, the services concerned, or the need of the individual concerned for financial assistance. (It is true that public interest, mentioned in section 11(3)(j), would be capable in some contexts of extending to personal characteristics or circumstances, but, read in their context, those words cannot have such an effect in section 11(3), and it was not argued otherwise.) This suggests that the draft order is attempting to do something which the legislature never had in mind when enacting Part 1 of LASPO, let alone section 9.
As Lord Carnwath mentioned, that point is underlined by the strong presumption that, as it is put in Bennion on Statutory Interpretation 6th ed (2013), section 129, an enactment applies to foreigners within its territory as it applies to persons within that territory belonging to it.
It was conceded on behalf of the Lord Chancellor that he could not have made the draft order under section 11.
Given that that section is concerned with prescribing the characteristics and circumstances of those who should be able to qualify for civil legal services, it seems to me that that concession tends of itself to provide additional support for PLPs contention that the Lord Chancellor cannot make such an order under section 9.
The Court of Appeal concluded that section 41, and in particular section 41(2)(b), could be invoked to defeat this contention.
It is true that section 41(2)(b) permits any order made under section 9(2)(b) to make provision by reference to services provided for a particular class of individual.
However, I cannot accept that this means that the power to make orders under section 9(2)(b) is thereby extended to exclude a whole class of individuals from the scope of Part 1 of LASPO by reference to their residence.
Section 41 is clearly intended to grant ancillary powers to those powers which are, as it were, primarily granted by provisions such as section 9: it is not intended to permit an alteration in the nature, or a substantive extension, of those powers.
The observations in Craies, cited in para 26 above, is very much in point.
In my view, in relation to his powers under section 9(2), section 41(2)(b) enables the Lord Chancellor to make limitations such as those already found in paras 3(a) and 39(a) of Part 1 of Schedule 1 to LASPO, and explained in para 8 above.
Finally, looking at the issue more broadly, it is said that one of the main purposes of Part 1 of LASPO was to reduce the availability of legal aid in connection with legal advice and representation in relation to civil claims, and that this is also the reason for the draft order.
It is also said that one of the aims of the provisions of sections 9 and 11 of, and Parts 1 and 2 of Schedule 1 to, LASPO is to direct legal aid to what are believed to be the individuals who, and types of claim which, are most deserving of public support, and that the draft order has that aim too.
However, even if they are right (which in a broad sense I think they are), those contentions involve expressing the aim of the legislation in far too general terms to justify rejecting PLPs case.
As is apparent from sections 9 and 11 themselves, and from the Ministry of Justices June 2011 paper referred to in para 2 above, the purpose of Part 1 of LASPO was, in very summary terms, to channel civil legal aid on the basis of the nature and importance of the issue, an individuals need for financial support, the availability of other funding, and the availability of other forms of dispute resolution.
The exclusion of individuals from the scope of most areas of civil legal aid on the ground that they do not satisfy the residence requirements of the proposed order involves a wholly different sort of criterion from those embodied in LASPO and articulated in the 2011 paper.
Conclusion
Accordingly, in agreement with the Divisional Court, I have reached the conclusion that the appeal should be allowed on the first, ultra vires, issue.
We had unanimously come to this view at the end of the argument on the ultra vires issue, and decided that, subject to the parties seeking to persuade us otherwise, it would be wiser not to deal with the discrimination issue.
The parties did not seek to dissuade us from this course, and therefore it would be inappropriate to say anything more about it.
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This appeal concerns the legality of attempts by the Lord Chancellor to introduce a residence test for civil legal aid by amending the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO).
Part 1 of LASPO came into force on 1 April 2013.
It includes section 9, subsection (1) of which provides that civil legal services are to be available to an individual if they are legal services described in Part 1 of Schedule 1, and the Director of Legal Aid Casework has determined that the individual qualifies for the services in accordance with Part 1 of LASPO.
Part 1 of Schedule 1 accordingly sets out the services for which civil legal aid is available.
Subsection 9(2) permits the Lord Chancellor to (a) add to, and (b) vary or omit services in Part 1 of the Schedule.
In April 2013, the Ministry of Justice (MOJ) issued a paper in which it stated that, subject to certain specific exceptions, the Government would proceed with the introduction of a residence test so that only those who are lawfully resident in the UK (or Crown Dependencies or British Overseas Territories) at the time of the application and have so resided for a continuous period of at least 12 months at any point in the past would be eligible for civil legal aid.
In September 2013, the Lord Chancellor decided to proceed with the proposal and to make regulations to that effect in the form of delegated legislation (the draft order), which was put before Parliament on 31 March 2014.
Before the draft order was laid before Parliament, the Public Law Project applied to the High Court for a declaration that the draft order was unlawful on the basis that it was (i) ultra vires, i.e. outside the scope of the power granted to the Lord Chancellor by LASPO to bring forward delegated legislation; and (ii) unjustifiably discriminatory in its effect.
The Divisional Court held that the draft order was unlawful on both grounds.
Following the decision of the Divisional Court, the Lord Chancellor withdrew the draft order before any debate in the House of Lords could take place.
On appeal, the Court of Appeal allowed the Lord Chancellors appeal on both grounds, holding that the draft order was intra vires and that, while it was discriminatory in its effect, the discrimination could be justified.
The Public Law Project now appeal to the Supreme Court on both grounds.
Following a hearing at which the Court heard argument on the ultra vires issue and indicated that it did not need to hear argument on the discrimination issue, the Supreme Court unanimously allows the
Public Law Projects appeal on the ultra vires issue.
Lord Neuberger gives the only judgment, with which the other Justices agree.
The Public Law Project contend that the exclusion of a specific group of people from the right to receive legal services on the ground of personal circumstances or characteristics, which have nothing to do with the nature of the issue or services involved or the individuals need, or ability to pay, for the services, is not within the scope of the power accorded to the Lord Chancellor by section 9(2)(b) of LASPO, and that nothing in section 41 undermines that contention.
That argument is accepted by the Court [30].
In declaring subordinate legislation to be outside the scope of the statutory power pursuant to which it was purportedly made, the Court is upholding the supremacy of Parliament over the Executive [23].
Section 9(2)(b) provides a power to vary or omit services, but the relevant parts of the draft order do not seek to vary or omit services; rather, they seek to reduce the class of individuals who are entitled to receive those services by reference to a personal characteristics or circumstance unrelated to the services (i.e. length of residency) [30].
This interpretation of the wording of section 9(2) is supported by the wider statutory context.
Each of the services identified in Part 1 and Part 2 of Schedule 1 is linked to a specific type of legal issue or claim, and has nothing to do with the personal circumstances or characteristics in particular the geographical residence of the potential recipient of the services [31].
This conclusion is also supported by contrasting the wording of the two subsections of section 9.
Subsection (1) clearly distinguishes between the question of whether the particular services qualify and whether the particular individual qualifies [33].
Section 9(2) is concerned with the services which qualify, and it is section 11 which appears to be concerned with identifying the characteristics or circumstances of individuals who are to qualify for civil legal aid.
The criteria that section 11 sets out all relate to the issue involved, the services concerned, or the need of the individual for financial assistance, in contrast to the draft order.
This indicates that the draft order is attempting to do something which the legislature never had in mind when enacting section 9 [34].
The Court of Appeal concluded that section 41 could be invoked to defeat the contention that the Lord Chancellor could not make the draft order under section 9.
While it is true that section 41(2)(b) permits any order made under section 9(2)(b) to make provision by reference to services provided for a particular class of individual, this cannot extend the power under section 9(2)(b) so as to exclude a whole class of individuals from the scope of Part 1 of LASPO by reference to their residence [36].
Section 41 is clearly intended to grant ancillary powers to those primarily granted under section 9 [36].
Accordingly, the appeal should be allowed on the first, ultra vires, issue, and the Court does not have to deal with the discrimination issue [39].
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The appellant, Nottingham City Council (Nottingham), is the licensing authority for those houses in multiple occupation (HMOs) in its district which are licensable under Part 2, Housing Act 2004.
This appeal concerns two HMOs, namely 44, Rothesay Avenue, Lenton, Nottingham NG7 1PU and 50, Bute Avenue, Lenton, Nottingham NG7 1QA.
Both are owned by the second respondent, Trevor Parr Associates Ltd, which carries on the business of providing accommodation for students.
The first respondent Dominic Parr is the managing director of the second respondent and the manager of the properties.
Nottingham appeals against the decision of the Court of Appeal dated 29 March 2017, dismissing its appeal against the decision of the Upper Tribunal (Lands Chamber) dated 9 February 2016, dismissing its appeals against decisions of the First tier Tribunal dated 5 November 2014 (44, Rothesay Avenue) and 6 May 2015 (50, Bute Avenue) respectively, allowing the respondents appeal against the imposition by Nottingham of certain HMO licensing conditions.
On this appeal to the Supreme Court the respondents have not appeared and have not been represented.
In these circumstances, at the request of the Court an Advocate to the Court was appointed in order to argue the grounds for resisting the present appeal and we are grateful to Mr Martin Chamberlain QC for performing this role.
In addition, the Secretary of State for Housing, Communities and Local Government (the Secretary of State) has intervened in this appeal.
We are grateful to all counsel for their submissions.
Legislation
The Housing Act 2004, Part 2 replaced the previous law on HMOs which was to be found in the Housing Act 1985, Part XI (the 1985 Act).
The 1985 Act defined an HMO as a house which is occupied by persons who do not form a single household but left the word household undefined.
In Barnes v Sheffield City Council (1995) 27 HLR 719 the Court of Appeal set out a number of factors relevant to determining whether occupants were living together as a single household.
It held that in the particular circumstances of that case a group of students sharing a house constituted a single household.
The 1999 consultation paper, Licensing of Houses in Multiple Occupation England (DETR, 1999), which preceded the 2004 Act observed (section 2, para 24) that, as a result of this judgment, housing authorities were wary of attempting to use their HMO powers in shared houses, particularly those occupied by students.
The 2004 Act was intended, inter alia, to extend the regulatory scheme of HMOs to include shared student accommodation, subject to certain exceptions.
The 2004 Act introduced for the first time a system of licensing of HMOs authorising occupation of the house concerned by not more than a maximum number of households or persons specified in the licence (section 61(2)).
A building or part of a building will qualify as an HMO if the living accommodation is occupied by persons who do not form a single household (section 254(2)(b), (3) and 4(c)) and if occupied by those persons as their only or main residence or they are to be treated as so occupying it (section 254(2)(c), (3) and 4(d)).
Section 258 makes provision for determining when persons are to be regarded as not forming a single household for the purposes of section 254.
They are to be so regarded unless they are members of the same family or their circumstances are of a description specified in regulations (section 258(2)).
Such provision is made in the Licensing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (England) Regulations 2006 (SI 2006/373) (the 2006 Regulations).
Section 259 makes provision for determining when persons should be treated as occupying premises as their only or main residence.
In particular, a person is to be so treated, inter alia, if premises are occupied by the person as the persons residence for the purpose of undertaking a full time course of further or higher education (section 259(2)(a)).
If an application for a licence is made to the local housing authority, it may grant a licence if it is satisfied as to the matters mentioned in section 64(3).
Those requirements include that the house is reasonably suitable for occupation by not more than the maximum number of households or persons [specified in the application or decided by the authority] or that it can be made so suitable by the imposition of conditions under section 67 (section 64(1), (2), (3)(a)).
Section 67 provides in material part: 67 Licence conditions (1) A licence may include such conditions as the local housing authority consider appropriate for regulating all or any of the following the management, use and occupation of the house (a) concerned, and (b) its condition and contents. (2) Those conditions may, in particular, include (so far as appropriate in the circumstances) (a) conditions imposing restrictions or prohibitions on the use or occupation of particular parts of the house by persons occupying it; (5) A licence may not include conditions imposing restrictions or obligations on a particular person other than the licence holder unless that person has consented to the imposition of the restrictions or obligations. (6) A licence may not include conditions requiring (or intended to secure) any alteration in the terms of any tenancy or licence under which any person occupies the house.
Guidance
At the material time, minimum sizes of bedrooms in HMOs were not prescribed in legislation.
However, Nottingham issues guidance to its housing officers on the operation of this licensing system.
For present purposes the relevant document is HMO Amenity Guidance 3 Space Provision for Licensable and Non Licensable HMOs.
This states that in the case of bedrooms in single occupation in HMOs where there is adequate dining space elsewhere and where cooking facilities are not provided in the room the minimum space provision is eight square metres.
A general note adds: The dimensions and areas specified shall normally be regarded as the minimum, particularly with regard to new proposals.
However it is recognised that existing buildings cannot always achieve these minima.
A degree of flexibility will sometimes be possible if other compensating features are present.
Conversely it should be noted that irrespective of the dimensions, the shape and useable living space of any room is a determining factor in the calculation of the maximum number of people for which it is suitable.
In carrying out its measurements Nottingham disregards all space with a floor to ceiling height of less than 1.53 metres.
Nottingham participates with other housing authorities in the East Midlands in an organisation named East Midlands Decent and Safe Homes which also sets out amenity standards for HMOs in Amenity and Space in HMOs: A Landlords Guide (the East Midlands DASH Guide).
This recommends adopting eight square metres as the minimum size for bedrooms of this sort but also states: The standards are usually regarded as a MINIMUM but are a guide only.
Other factors or compensatory features will be taken into account when inspecting a property, therefore allowing for a degree of flexibility in certain circumstances.
These factors could include the shape of the usable living space, or the needs and wishes of the occupants. (Original emphasis)
The properties
44, Rothesay Avenue and 50, Bute Avenue are both terraced houses of traditional brick construction with a slate roof.
Both are used for letting to students and in each case the attics have been converted into bedrooms.
In each property the front attic bedroom has a sloping ceiling which reduces the area regarded by Nottingham as useable living space below eight square metres.
At 44, Rothesay Avenue the front attic room has a total floor area of 9.75 square metres but, due to the sloping ceiling, only 5.89 square metres has a floor to ceiling height of 1.53 metres or more.
The front attic room at 50, Bute Avenue has a floor area of approximately 11 square metres of which only 6.89 square metres has a floor to ceiling height of 1.53 metres or more.
Both the Upper Tribunal and the Court of Appeal quoted the following description of the attic bedroom at 44, Rothesay Avenue by the First tier Tribunal: The area of the relevant bedroom having a height of less than 1.53m was utilised to accommodate a desk and for storage.
The relevant room includes a double bed, desk, chest of drawers, bedside table, bookshelves and a built in wardrobe.
The pitch of the roof slope was such that it appeared possible to use the desk without undue risk of collision and any such risk could be reduced further by placing the chair in the area beneath the pitched roof window thereby eliminating the risk of collision when rising from the chair.
The head of the bed was fitted under that part of the room with reduced height.
Risk of collision could be avoided by turning the bed through 180.
The risk of collision when changing the bed linen could be avoided by pulling the bed out of the area with reduced headroom prior to performing the task.
The assessment of the attic bedroom at 50, Bute Avenue was to similar effect.
Nottinghams decisions and the appeals
In each case Nottingham granted a new HMO licence which imposed a condition prohibiting the use of the attic bedroom for sleeping.
The licence for 44, Rothesay Avenue provided: [T]he second floor front bedroom be prohibited for the use of sleeping.
This room will not be allowed for the use for sleeping until it has provided by way of alteration, adaptation or extension a useable floor surface area of eight square metres within a minimum ceiling height of 1.53 metres below the sloping ceiling from the floor. (para 36) The licence for 50, Bute Avenue limited the number of persons permitted to occupy the HMO to a maximum of five and provided: The second floor front bedroom is not to be used as a sleeping room, except where it is let in combination with another room within the property in such a way as to provide the occupant with the exclusive use of two rooms. (para 38) This licence further provided that the restriction on sleeping in the room might be removed if alterations were carried out to increase the size of the room to eight square metres (excluding any area where the ceiling height is below 1.53m).
In each case the respondents appealed to the First tier Tribunal against the imposition of these conditions.
Each of the First tier Tribunals referred in its decision to the guidance issued by Nottingham and, in particular, to the general note quoted at para 7 above.
Each considered that Nottinghams guidance on space provision was reasonable as general guidance but noted that some flexibility was permitted if other compensating features were present.
Each considered that in each of the rooms the area with the reduced headroom was of some value for the uses described.
Furthermore, each considered that in each of the HMOs the provision of communal living space was significantly larger than the minimum contemplated by Nottinghams requirements for additional living space.
In each case the Tribunal regarded this over provision as a compensating feature which could be taken into account in applying Nottinghams own guidance.
In each case the Tribunal concluded that the attic rooms were adequate as study/bedrooms where cohesive living is envisaged and that there were sufficient compensating features in the HMOs to make them suitable for student or similar cohesive occupation for six persons in six households.
Accordingly, in the licence for 44, Rothesay Avenue the First tier Tribunal substituted an alternative condition, namely that: The second floor front bedroom may only be used for sleeping accommodation by a person engaged in full time education and who resides in the dwelling for a maximum period of ten calendar months over a period of one year.
No similar condition was introduced by the First tier Tribunal which heard the appeal in relation to 50, Bute Avenue, but it justified its conclusion by stating that there are sufficient compensating features in the property to make it suitable for students or similar cohesive occupation for six persons in six households.
In dismissing Nottinghams further appeal in that case, however, the Upper Tribunal directed that the same condition be included in the licence for 50, Bute Avenue.
On appeal to the Upper Tribunal (Lands Chamber) both appeals were dismissed.
Martin Rodger QC, Deputy President, referred to examples of guidance by local housing authorities modifying space standards for particular modes of occupation which, he considered, recognise that certain categories of occupier may wish to occupy accommodation in a particular way.
The purpose of all conditions under section 67 was to ensure that the HMO is suitable for the number of persons permitted to occupy it and there was therefore nothing unlawful in formulating a condition applicable to a particular mode of occupation by a category of occupants if the house was suitable for them in greater numbers than it would be for a different mode of occupation.
He rejected Nottinghams submission that the Act requires that an HMO must be capable of occupation by all potential occupants.
Referring to the substituted condition in the case of 44, Rothesay Avenue, he observed that the condition was formulated on the basis that the property was one where cohesive living is envisaged and that by cohesive living the First tier Tribunal clearly had in mind the level of shared activity and social interaction to be expected in a shared house or Category B HMO, as described at greater length in the policy documents of other local authorities.
In his view, the basic idea of a house shared by a number of individuals, not forming a family but who nevertheless wish to share communal living facilities and enjoy a significant level of social interaction, is readily understood.
With regard to the terms of the condition he observed: I am satisfied that there is nothing unlawful in a condition restricting the use of sleeping accommodation in part of an HMO to a person in full time education, if the decision maker is satisfied that, looked at as a whole, the HMO is suitable for the number of households specified in the licence.
An alternative condition, perhaps more closely reflecting the reason for permitting the use of a room smaller than would normally be acceptable, might require that the occupiers be members of a group who intend to share the communal living space, but I do not think the reference to students makes the condition unlawful.
The Court of Appeal (Longmore, Lewison and Briggs LJJ) upheld the decision of the Upper Tribunal: [2017] PTSR 879.
The Court of Appeal considered that the power to impose conditions permitted a condition defined by reference to the general characteristics and activities of an occupier.
A restriction of occupation to occupation by students was a restriction on occupation by persons.
The Court of Appeal rejected submissions that the condition imposed by the First tier Tribunal was irrational and incapable of effective enforcement.
However, it varied the licences to include two further conditions: that the communal space on the ground floor, (i) comprising a kitchen/diner and living room area, be kept available for communal living space only; (ii) students engaged in full time education.
that no bedrooms may be let to persons other than
Nottingham now appeals to the Supreme Court, by leave granted by this Court, on the following grounds: Ground 1: The power to impose conditions under sections 64 and 67, Housing Act 2004, in order to make an HMO suitable for a particular number of households or persons, cannot be used so as to limit the class of persons for whom the HMO is suitable.
Ground 2: The conditions imposed by the Tribunals and Court of Appeal are irrational and unenforceable.
Ground 1
Submissions of the parties
On behalf of Nottingham, Mr Andrew Arden QC submits that the conditions imposed seek to make an exception for full time students otherwise than in the circumstances permitted by the legislation.
Section 64(3)(a) requires the authority to be satisfied that the house is reasonably suitable for occupation by not more than the maximum number of households or persons mentioned in subsection (4) or that it can be made so suitable by the imposition of conditions under section 67.
In his submission the legislation, at this stage, is unequivocal and concerned only with numbers.
Furthermore, section 67(2)(a) which permits conditions imposing restrictions or prohibitions on the use or occupation of particular parts of the house by persons occupying it does not permit conditions restricting who may occupy an HMO.
The references elsewhere in the statute to the characteristics of occupants do not support setting conditions by reference to such characteristics.
In the alternative, the proposed conditions here seek, contrary to the policy of the legislation, to introduce an exception to its operation for a category of persons or a defined set of circumstances.
A condition which restricts the occupation of an HMO by reference to a class of occupier does not achieve the purpose of improving or maintaining standards and has the effect of making accommodation unavailable to a section of the rental market.
That standards may be lowered for certain categories otherwise than as specified by Parliament is the antithesis of the legislative purpose.
In the further alternative, treating occupation by students in this way is contrary to the statutory object of Part 2 of the 2004 Act which was intended in part to reverse the decision of the Court of Appeal in Barnes v Sheffield City Council.
On behalf of the Secretary of State Mr Jonathan Moffett QC accepts that, in an appropriate case, section 67 does empower a housing authority to impose a condition on a licence which restricts the occupation of all or part of an HMO to occupation by a particular class of person.
However, he submits that a housing authority may not, on the basis of such a condition, grant a licence for an HMO which authorises the HMO to be occupied by a greater number of households or persons than the authority would otherwise authorise.
In particular, he criticises the approach of the Court of Appeal on the grounds that it allows for the application of different standards for different classes of person and assumes that a particular class of occupier will live in the HMO in a way that requires a lower standard of accommodation than other classes.
He submits that section 64(3)(a) refers to conditions that make the house reasonably suitable for occupation by the maximum number of households or persons and does not refer to conditions that make the households or persons suitable to occupy the house.
Mr Chamberlain, as Advocate to the Court, has at the Courts request advanced the submissions which might have been made by the respondents had they taken part in this further appeal.
He submits that section 67 permits the imposition of the conditions in question here.
First, he submits that the conditions imposed on the letting of each of the properties were, on their face, conditions regulating the use of the second floor front bedroom and were correctly characterised as such.
However, Parliament chose to permit conditions regulating management, use and occupation of an HMO.
On a natural reading, a condition regulating the occupation of a house is apt to include one that governs how or by whom it may be occupied.
Contrary to the submissions of Nottingham, the Court of Appeal decision does not introduce an exception to the operation of the legislation for a category of persons or a defined set of circumstances, nor does it allow occupation at a lower standard than would otherwise have been permitted in the circumstance of the HMOs in question.
Discussion
Section 64(3)(a) indicates that the purpose of the imposition of conditions is to make a house reasonably suitable for occupation by not more than the maximum number of households or persons specified in the application or decided by the housing authority.
The question as to what sort of conditions may be imposed is governed by section 67.
Section 67(1)(a) provides that a licence may include such conditions as the local housing authority considers appropriate for regulating all or any of the management, use and occupation of the house concerned.
Section 67(1) is followed in section 67(2) by a non exhaustive list of permitted conditions including in section 67(2)(a) conditions imposing restrictions or prohibitions on the use or occupation of particular parts of the house by persons occupying it.
Considering these words in their natural meaning, they extend sufficiently widely to include the conditions with which we are concerned.
I am persuaded that the words use and occupation in section 67(1) are not used as a composite term.
Section 67(2)(a) refers disjunctively to the use or occupation of particular parts of the house.
The inclusion of occupation in addition to use must have been intended to extend the scope of permissible conditions.
It may well be, as Mr Chamberlain submits, that the conditions in respect of each of these houses related to the use of the attic bedrooms.
However, it seems clear that they relate to the occupation of those rooms.
As Mr Chamberlain put it, on a natural reading a condition regulating the occupation of a house is apt to include one that governs how or by whom it may be occupied.
In my view, these conditions seek to regulate the occupation of particular parts of the house by persons occupying it and fall squarely within the natural meaning of section 67(2)(a).
It is, however, necessary to stand back from the plain meaning of these provisions and to consider whether such a reading is consistent with the object of the legislation.
In this regard it is significant that elsewhere in Part 2 of the 2004 Act the manner of occupation of a house and the general characteristics of occupants are considered relevant in contexts connected with HMOs and with housing standards generally.
In some instances, the personal occupation or activities of an occupier will have a bearing on whether the legislation applies.
Thus, for example, persons carrying out domestic services are regarded as occupying the same household as their employer if they are occupying rent free tied accommodation in the same building (2006 Regulations, regulation 3); a full time student is regarded as occupying accommodation as his only or main residence if it is occupied for the purpose of his full time course (section 259(2)(a)); and some religious communities are outside the HMO scheme if their principal occupation is prayer, contemplation, education or the relief of suffering (Schedule 14, paragraph 5).
Therefore, in certain circumstances the operation of the legislative scheme will depend on the personal characteristics of the occupants or their activities.
In the present case the Deputy President of the Upper Tribunal drew attention in his judgment to the fact that prior to the present legislation, under the 1985 Act, regard was had to the suitability of an HMO for occupation by a particular category of occupier.
Thus, in 1986 the Institution of Environmental Health Officers published guidance on amenity standards for HMOs which distinguished between different categories of HMOs.
In particular, Category A comprised houses occupied as individual rooms where there was some exclusive occupation and some sharing of amenities but each occupant lived otherwise independently of all others.
Category B comprised houses occupied on a shared basis which would normally be occupied by members of a defined social group, for example students or a group of young single adults.
In such houses the occupants each enjoyed exclusive use of a bedroom but would share other facilities including a communal living space.
Having distinguished between these categories in this way on the basis of the manner of occupation, the guidance then went on to set out different specifications for each category.
I note, moreover, that a revised version, the 1994 Amenity Standards, remained current until very recently and was available on the website of the successor body, the Chartered Institute of Environmental Health.
A similar approach can be detected in certain guidance issued following the implementation of the current legislation.
The Deputy President of the Upper Tribunal in his judgment in the present case drew attention to the East Midlands DASH Guide produced by housing authorities in the East Midlands including Nottingham (see para 8, above) which recognises that different facilities may be required for different modes of occupation.
It provides that in HMOs where the occupants tend to live separately there should be a sink/wash hand basin within the living units.
Similarly, there was before the Court of Appeal in the present case a note prepared by Mr Robert Fookes, counsel for the respondents, setting out extracts from the current guidance issued by a selection of housing authorities responsible for accommodation likely to be used by students attending Oxford, Cambridge and Russell Group universities.
In half of these standards the housing authorities distinguish between students and other occupants.
As the Deputy President of the Upper Tribunal observed, it is obvious that nothing in this guidance can change the meaning of the present legislation.
Nevertheless, I agree with him that it provides a useful point of reference.
It may be thought that, as a matter of common sense, the manner of occupation of a room and the type of occupant may have a bearing on the suitability of a particular room for a particular use and that this is reflected in the guidance referred to above.
That guidance also supports the view that in practical terms the availability of communal living space may be capable of compensating for an undersized bedroom.
However, the critical question is whether the approach reflected in such guidance is consistent with the present legislation.
At the heart of the appeal on this ground lie two submissions by Mr Arden on behalf of Nottingham.
First, he submits that the conditions in issue here seek, contrary to the policy of the legislation, to introduce an exception to its operation for a category of persons or a defined set of circumstances.
It is clear that Part 2 of the 2004 Act is intended to apply to shared student houses.
One purpose behind the 2004 Act was to reverse the effect of Barnes v Sheffield City Council as a result of which many shared student houses fell outside the scope of the 1985 Act.
Express provision is made in section 259(2)(a) in respect of occupation for the purpose of undertaking a full time course of further or higher education and the effect of section 254(5) and Schedule 14, paragraph 4 is, by way of exception, to remove from this regulatory scheme certain buildings occupied by students.
Contrary to Nottinghams submission, however, I do not consider that the three conditions with which we are concerned have the effect of undermining this purpose.
These conditions do not remove shared student houses from the regulatory scheme.
On the contrary, as the decisions of the First tier Tribunal in the present cases demonstrate, the standard of accommodation available in a shared student house will be inspected and subjected to rigorous examination and the house will be licensed as suitable for a stipulated number of occupants only if it is considered to be so suitable (if necessary subject to conditions) by the housing authority for the area or, on appeal, by a specialist tribunal.
Secondly, Mr Arden submits that there is no doubt that the purpose in imposing the conditions in the present case was to allow occupation at a lower standard or by a greater number than would otherwise have been permitted in the circumstances of the HMOs in question.
I should observe at this point that it is clear that Nottingham in bringing this appeal and the Secretary of State in intervening have clearly been motivated by a wish to ensure that HMOs provide acceptable living conditions, to protect the vulnerable or potentially vulnerable groups that tend to occupy HMOs and to avoid an interpretation of the legislation as a result of which lower standards are to be considered appropriate for particular groups such as students.
That is commendable.
However, I consider that their concern is unfounded.
The imposition of conditions such as those imposed by the Tribunals and the Court of Appeal in the present case do not have that effect.
It is entirely appropriate, when considering the suitability of accommodation in an HMO for a particular purpose, to have regard to the mode of occupation.
If the house is to be occupied by a group living together cohesively, each having his or her own bedroom but sharing other facilities including a kitchen/diner and a living room, the availability of those additional facilities is a material consideration.
In these circumstances the mode of occupation means that the shared facilities will benefit all the occupants and, as a result, this may compensate for a bedroom which is slightly smaller than the recommended minimum.
By contrast, where occupants of an HMO each live independently of all others, sharing only bathroom, toilet and kitchen facilities, any communal living space made available will not benefit the occupants in the same way because of their different living arrangements.
It seems to me to be entirely appropriate, therefore, that in considering the suitability of accommodation in an HMO regard should be had to the proposed mode of occupation.
Furthermore, in appropriate cases effect may be given to such considerations by the imposition of conditions in the licence.
This is not inconsistent with the statutory scheme.
As the Deputy President of the Upper Tribunal pointed out in his judgment, certain types of accommodation may lend themselves to different styles of occupation and it would be surprising if the 2004 Act did not reflect that.
The various guidelines referred to earlier in this judgment refer in different ways to the need for flexibility in their application.
In that regard, account should be taken of the proposed mode of occupation where it is likely to influence the quality of the accommodation made available to the occupant.
It must be emphasised that this does not permit the application of lower standards than would otherwise be applicable.
On the contrary, it is simply that there will be certain circumstances in which, as a matter of common sense, it will be appropriate to have regard to the mode of occupation when applying the same objective standards which apply to all HMOs.
For these reasons, I consider that the power to impose conditions under sections 64 and 67, Housing Act 2004, in order to make an HMO suitable for a particular number of households or persons, can be used so as to limit the class of persons for whom the HMO is suitable.
Finally, I should draw attention to the fact that there exist other mechanisms to maintain standards of accommodation in HMOs, in particular the imposition of mandatory conditions under Schedule 4 of the 2004 Act.
In this regard, I note that the Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018 (2018 No 616) (the 2018 Regulations), came into force on 1 October 2018 and introduced additional mandatory conditions in respect of floor area.
As a result a licence must now include a condition requiring the licence holder to ensure that the floor area of any room in the HMO used as sleeping accommodation by one person over ten years is not less than 6.51 square metres (paragraph 2, inserting Schedule 4, paragraph 1A(2)(a)).
Ground 2
Submissions of the parties
On behalf of Nottingham, Mr Arden submits that if there is a power to impose a condition based on a class of occupier, the conditions in the present case as directed by the Tribunals and the Court of Appeal are irrational, both in the conventional sense and in the sense that they are not effective to achieve their purpose, and incapable of enforcement.
While the conditions are designed to secure occupation only by students, this, he submits, is not necessarily the same as cohesive living.
The judgments below are said to have proceeded on the basis of an image of student life which is simply not true of all or necessarily most students, and this is an irrational basis for determining who may or may not occupy an HMO.
The conditions go no further than setting up the possibility of sharing.
In addition, it is said that the condition limiting occupation for a maximum period of ten calendar months over a period of one year is irrational.
Either the rooms are or are not suitable to be used as sleeping accommodation all the year round.
Nottingham objects that the condition that the attic rooms be occupied for only ten months over the course of a year could not practicably be monitored.
It also maintains that while it is possible to ensure that occupants are all in full time education, that requirement cannot in practice be enforced.
The Secretary of State has taken no position on this ground of appeal.
Mr Chamberlain submits that, while not all students live in the same way, the proxy employed by the condition is sufficiently precise.
Moreover, the First tier Tribunals which heard the initial appeals were well placed to judge whether cohesive living was the norm among students in the area where the properties were located.
With regard to enforceability, he takes issue with Nottingham.
Discussion
I agree with the Court of Appeal that the conditions imposed by the Tribunals were deficient in that they failed to require any part of the HMO to be available for communal living and did not require the bedrooms other than the front attic bedrooms to be let to students.
That deficiency is, however, cured by the further conditions introduced by the Court of Appeal.
The reasoning of the First tier Tribunals and the Upper Tribunal in this case makes clear that the intention was to restrict occupation to students because they were considered to be a category of occupants who were likely to live in a cohesive manner.
In the Upper Tribunal the Deputy President observed that by cohesive living the First tier Tribunal clearly had in mind the level of shared activity and social interaction to be expected in a shared house or Category B HMO, as described at greater length in the policy documents of other local authorities.
The first issue for consideration under this ground is therefore, as Mr Chamberlain put it, whether a condition limiting the occupation of each of the houses to occupation by persons engaged in full time education is a sufficiently precise proxy for occupation by persons living together cohesively.
All students are individuals and their respective activities and life styles will, no doubt, vary considerably.
Nevertheless, it does seem to me that the normal state of affairs generally to be expected when students share a student house is that there will be a high level of social activity and social interaction among them and that they will all make extensive use of the shared living facilities.
There can be no guarantee that any given student occupier will make full use of the shared facilities, but the availability of such facilities, emphasised by the Court of Appeal, coupled with the normal expectation of cohesive living in a student house makes it reasonable to adopt this proxy in this context.
It is also significant that the members of the First tier Tribunals in these cases, with their experience of student accommodation in Nottingham, considered this a reasonable approach.
While I agree with the Deputy President of the Upper Tribunal that an alternative condition, perhaps more closely reflecting its rationale, might require that all occupants be members of a group who intend to share the communal living space, the proxy adopted is sufficiently precise.
Moreover, the alternative might give rise to difficulties of enforcement.
The requirement that the attic rooms may only be occupied for ten months in each year was clearly intended to reinforce the requirement that occupation be by full time students.
If the latter requirement is lawful, the former is strictly unnecessary.
I consider that the requirement limiting occupation to ten months in each year is irrational.
If a room is suitable for occupation for sleeping for ten months in the year, it is suitable for such occupation for the entire year.
Moreover, full time students often require accommodation for the entire year.
In these circumstances, it is unnecessary to consider whether this requirement is enforceable.
I would vary the conditions imposed in respect of each property to delete the requirement that the attic rooms may only be occupied for ten months in each year.
Finally, it is said on behalf of Nottingham that while it is possible to ensure that occupants are all in full time education, it is not in practice possible to enforce the requirement.
Nottingham points to the 12 months assured shorthold tenancy agreements employed by the respondents.
Each requires the tenant to ensure that the propertys strict purpose as a set of lets to students of the University is not prejudiced and also contains a clause which entitles the landlord to re enter if the tenant ceases to be a student of the university.
However, Nottingham draws attention to the practical difficulties of evicting a tenant in these circumstances which, it is said, would make it practically impossible to enforce the conditions in the way envisaged by the legislation.
I note that if a landlord tries but fails to evict tenants who have ceased to be full time students, for example because the court considers it unreasonable to make the order, the landlord may well have a reasonable excuse for permitting the occupants to remain and a defence under section 72(5) of the 2004 Act to the offence of failing to comply with the licence condition.
However, the sanction of revocation of the licence will be available which, in itself, should be a sufficient sanction.
Conclusion
For these reasons, and subject to the deletion of the requirement of occupation for only ten months in each year, I consider that the conditions imposed by the Tribunals and the Court of Appeal, considered cumulatively, in respect of 44, Rothesay Avenue and 50, Bute Avenue, respectively, were entirely lawful.
Accordingly, I would vary the conditions to delete the requirement of occupation for only ten months in each year but would otherwise dismiss the appeal.
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Nottingham City Council, the appellant, is the licensing authority for houses in multiple occupation (HMOs) in its area under Part 2 of the Housing Act 2004 (2004 Act).
This appeal concerns two HMOs, 44, Rothesay Avenue and 50, Bute Avenue which are owned by the second respondent, Trevor Parr Associates Ltd. The first respondent, Dominic Parr, is the managing director of the second respondent and the manager of the two HMOs.
The 2004 Act requires HMOs to be licensed by the local housing authority.
The local housing authority can grant the application under section 64 of the 2004 Act if it is satisfied that, among other requirements, the house is reasonably suitable for occupation by not more than the maximum number of households or persons [specified in the application or decided by the authority] or that it can be made so suitable by the imposition of conditions under section 67 [of the 2004 Act].
The appellant issued guidance on the operation of the licensing system, which provides that the minimum space provision in the case of bedrooms in single occupation in HMOs is eight square metres, although a degree of flexibility is sometimes possible if other features are present. 44, Rothesay Avenue and 50, Bute Avenue are both used for letting to students and each has an attic bedroom with an area of useable living space below eight square metres.
In each case, the appellant granted an HMO licence which imposed a condition prohibiting the use of the attic bedroom for sleeping.
The respondents appealed to the First tier Tribunal against the imposition of the conditions.
The First tier Tribunal at separate hearings deleted the conditions imposed by the appellant.
In the case of 44, Rothesay Avenue it substituted a condition that the attic bedroom may only be used for sleeping accommodation by a full time student who resides in the bedroom for a maximum of ten months in each year.
The appellant appealed both decisions to the Upper Tribunal, which dismissed the appeals and also directed that the substituted condition be included in the HMO licence for 50, Bute Avenue.
The appellant then appealed to the Court of Appeal, which upheld the decision of the Upper Tribunal and included further conditions in both HMO licences that the communal space be kept available for communal living only and that no bedrooms be let to persons other than full time students.
The appellant appealed to the Supreme Court contending that the power to impose conditions under sections 64 and 67 of the 2004 Act cannot be used to limit the class of persons for whom the HMO is suitable, and that the conditions imposed by the First tier Tribunal, Upper Tribunal and the Court of Appeal are irrational and unenforceable.
The Supreme Court unanimously dismisses the appeal, subject to varying the conditions to delete the requirement of occupation for a maximum of ten months in each year.
Lord Lloyd Jones gives the sole judgment with which the other Justices agree.
Section 64(3)(a) of the 2004 Act indicates that the purpose of the imposition of conditions is to make a house reasonably suitable for occupation by not more than the maximum number of households or persons specified in the application or decided by the housing authority.
Section 67(1)(a) provides that a licence may include such conditions as the local housing authority considers appropriate for regulating all or any of the management, use and occupation of the house concerned, and section 67(2) sets out a non exhaustive list of permitted conditions including conditions imposing restrictions or prohibitions on the use or occupation of particular parts of the house by persons occupying it [18].
These words in their natural meaning are sufficiently wide to include the conditions imposed by the Tribunals and the Court of Appeal [18].
Such a reading is also consistent with the object and purpose of the 2004 Act.
Elsewhere in Part 2 of the 2004 Act, the manner of occupation and characteristics of occupants are considered relevant in contexts connected with HMOs and housing standards generally [20].
The guidance in respect of the 2004 Act also supports the view that the manner of occupation of a room and the type of occupant may have a bearing on the suitability of a particular room for a particular use [23].
The Court does not consider that the conditions in issue introduce an exception for a category of persons or a defined set of circumstances [24].
Furthermore, they do not permit occupation at a lower standard [25].
It is therefore appropriate to have regard to the proposed mode of occupation in considering the suitability of accommodation in an HMO [26].
In particular, account should be taken of the proposed mode of occupation where it is likely to influence the quality of the accommodation made available to the occupant.
However, this does not permit the application of lower standards than would otherwise be applicable [26].
Thus, the power to impose conditions under sections 64 and 67 of the 2004 Act can be used to limit the class of persons for whom the HMO is suitable [27].
The Court agrees with the Court of Appeal that the conditions imposed by the Tribunals were deficient in that they failed to require any part of the HMO to be available for communal living and did not require the bedrooms other than the attic bedrooms to be let to students.
That deficiency was, however, cured by the further conditions introduced by the Court of Appeal [33].
The condition limiting the occupation to persons engaged in full time education is rational [35] and enforceable [37].
The Court considers, however, that the requirement limiting occupation to ten months in each year is irrational [36].
Therefore, subject to the deletion of the requirement of occupation for a maximum of ten months in each year, the conditions imposed by the Tribunals and the Court of Appeal in each case, considered cumulatively, were entirely lawful.
Accordingly, the Supreme Court varies the conditions to delete the requirement of occupation for a maximum of ten months in each year but otherwise dismisses the appeal [38].
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This appeal arises from a sorry case of a serious failure by an air tour operator to see that proper provision was made for the needs of a disabled passenger, contrary to the requirements of the Civil Aviation (Access to Air Travel for Disabled Persons and Persons with Reduced Mobility) Regulations 2007 (SI 2007/1895) (the UK Disability Regulations).
The UK Disability Regulations implement Regulation (EC) No 1107/2006 of the European Parliament and the Council concerning the rights of disabled persons and persons with reduced mobility when travelling by air (the EC Disability Regulation).
The issue is whether a court may award damages for a claimants discomfort and injury to feelings caused by a breach of the UK Disability Regulations.
The conclusion of the courts below was that any such award is precluded by the Montreal Convention, as adopted in the EU by the Montreal Regulation (or, to use its full title, Council Regulation (EC) No 2027/97 on air carrier liability in the event of accidents, as amended by Parliament and Council Regulation (EC) No 889/2002).
The appeal has been brought with the backing of the Equality and Human Rights Commission and it has the additional support of the Secretary of State for Transport as an intervener.
The parties
Mr Christopher Stott is paralysed from the shoulders down and is a permanent wheel chair user.
He has double incontinence and uses a catheter.
When travelling by air, he depends on his wife to manage his incontinence since he cannot move round the aircraft.
He also relies on her to help him to eat and to change his sitting position.
Thomas Cook Tour Operators Ltd is a well known tour operator which provides overseas package holidays and flights to many destinations.
It is an air carrier with an operating licence granted by a Member State of the EU and therefore subject to the obligations imposed on Community air carriers by the EC Disability Regulation.
The facts
I take the following summary of the facts from the judgment of the trial judge, Recorder Atherton, delivered on 19 January 2011 in the Manchester County Court: 4.
On 12 September 2008 Mr Stott booked with the defendant to fly from East Midlands Airport to Zante, departing 22 September and returning 29 September 2008.
Soon after making the booking on the internet he telephoned the defendant's helpline to advise that he had booked and paid to be seated next to his wife on both flights.
He called the helpline again on 19 September and was assured that he and his wife would be seated together. 5.
The outward flight went reasonably according to plan but sadly the return journey did not.
Mr and Mrs Stott encountered many difficulties at the airport in Zante.
At check in they were told they would not be seated together.
In response to their protestations the supervisor eventually told them that their problem would be sorted out at the departure gate.
When they arrived at the departure gate their expectations were unfulfilled.
They were told that other passengers had already boarded and the seat allocations could not be changed. 6.
When boarding the aircraft from an ambulift, matters got much worse.
As he entered the aircraft, Mr Stott's wheelchair overturned and he fell to the cabin floor.
Those present appeared not to know how to deal with the situation.
Mr Stott felt extremely embarrassed, humiliated and angry and his wife, who had recently suffered serious ill health herself, was also very distressed at the chaotic scenes. 7.
Eventually Mr Stott was assisted into his aisle seat in the front row and his wife was seated behind him.
This arrangement caused them considerable difficulties in that it was difficult for Mrs Stott to assist her husband with his catheterisation, catheter bags, food and movement during the three hour twenty minute flight.
The defendant's cabin crew apparently made no attempt to ease their difficulties.
They made no requests of other passengers to enable Mr and Mrs Stott to sit together.
From time to time during the flight she had to kneel or crouch in the aisle to attend to her husband's personal needs and inevitably she obstructed the cabin crew and other passengers as they made their way up and down the aisle.
It was, therefore, a very unhappy experience for them.
The claim 8.
Mr Stott brought a claim under the UK Disability Regulations for a declaration that the respondents treatment of him was in breach of its duty under the EC Disability Regulation, in that it had failed to make all reasonable efforts to give his wife a seat next to him, together with damages including aggravated damages.
The recorder made such a declaration, and there has been no appeal against it.
He found that Mr Stott had suffered injury to his feelings, for which he said that he would have awarded 2,500 as compensation (taking into account the duration of the flight), if it had been open to him to do so.
However, he concluded that he had no power to make such an award, by reason of the Montreal Convention.
The Court of Appeal upheld the recorders decision in a judgment delivered by Maurice Kay LJ, with which Sullivan LJ and Dame Janet Smith agreed ([2012] EWCA Civ 66).
Both courts expressed their sympathy for Mr Stott but they considered that the law was clear.
UK Disability Regulations
The UK Disability Regulations were made by the Secretary of State for Transport under section 2(2) of the European Communities Act 1972.
As the explanatory note states, they provide for the enforcement of the rights set out in the EC Disability Regulation.
The UK Disability Regulations are short.
Regulation 3 makes it an offence for an air carrier, an agent of an air carrier or a tour operator to contravene an obligation imposed by any of a number of articles of the EC Disability Regulation, and regulation 4 provides penalties for such offences.
In the present case the respondent has not been prosecuted, but on the recorders finding it was guilty of an offence carrying a potential fine not exceeding level 5 on the standard scale.
The maximum level 5 fine on summary conviction is currently 5,000: Criminal Justice Act 1982, as amended, section 37.
There will be no maximum limit when the Legal Aid, Sentencing and Punishment of Offenders Act 2012, section 85, comes into effect.
Regulation 9 is headed Compensation claims by disabled persons etc.
It provides: (1) A claim by a disabled person or a person with reduced mobility for an infringement of any of his rights under the EC Regulation may be made the subject of civil proceedings in the same way as any other claim in tort or (in Scotland) in reparation for breach of statutory duty. (2) For the avoidance of doubt, any damages awarded in respect of any infringement of the EC Regulation may include compensation for injury to feelings whether or not they include compensation under any other head. (3) Proceedings in England, Wales or Northern Ireland may be brought only in a county court. (4) Proceedings in Scotland may be brought only in a sheriff court. (5) The remedies available in such proceedings are those which are available in the High Court or (as the case may be) the Court of Session.
EC Disability Regulation
The general purpose of the EC Disability Regulation is apparent from the following paragraphs of the preamble: (1) The single market for air services should benefit citizens in general.
Consequently, disabled persons and persons with reduced mobility, whether caused by disability, age or any other factor, should have opportunities for air travel comparable to those of other citizens.
Disabled persons and persons with reduced mobility have the same right as all other citizens to free movement, freedom of choice and non discrimination.
This applies to air travel as to other areas of life. (4) In order to give disabled persons and persons with reduced mobility opportunities for air travel comparable to those of other citizens, assistance to meet their particular needs should be provided at the airport as well as on board aircraft, by employing the necessary staff and equipment.
In the interests of social inclusion, the persons concerned should receive this assistance without additional charge. (15) Member States should supervise and ensure compliance with this Regulation and designate an appropriate body to carry out enforcement tasks.
This supervision does not affect the rights of disabled persons and persons with reduced mobility to seek legal redress from courts under national law. (18) Member States should lay down penalties applicable to infringements of this Regulation and ensure that those penalties are applied.
The penalties, which could include ordering the payment of compensation to the person concerned, should be effective, proportionate and dissuasive.
Article 1 provides: 1.
This Regulation establishes rules for the protection of and provision of assistance to disabled persons and persons with reduced mobility travelling by air, both to protect them against discrimination and to ensure that they receive assistance. 2.
The provisions of this Regulation shall apply to disabled persons and persons with reduced mobility, using or intending to use commercial passenger air services on departure from, on transit through, or on arrival at an airport, when the airport is situated in the territory of a Member State to which the Treaty applies.
Article 7 provides: 1.
When a disabled person or person with reduced mobility arrives at an airport for travel by air, the managing body of the airport shall be responsible for ensuring the provision of the assistance specified in Annex I in such a way that the person is able to take the flight for which he or she holds a reservation, provided that the notification of the person's particular needs for such assistance has been made to the air carrier or its agent or the tour operator concerned at least 48 hours before the published time of departure of the flight.
This notification shall also cover a return flight, if the outward flight and the return flight have been contracted with the same air carrier. 2.
Where use of a recognised assistance dog is required, this shall be accommodated provided that notification of the same is made to the air carrier or its agent or the tour operator in accordance with applicable national rules covering the carriage of assistance dogs on board aircraft, where such rules exist. 3.
If no notification is made in accordance with paragraph 1, the managing body shall make all reasonable efforts to provide the assistance specified in Annex I in such a way that the person concerned is able to take the flight for which he or she holds a reservation. 4.
The provisions of paragraph 1 shall apply on condition that: (a) the person presents himself or herself for check in: (i) at the time stipulated in advance and in writing (including by electronic means) by the air carrier or its agent or the tour operator, or (ii) if no time is stipulated, not later than one hour before the published departure time, or (b) the person arrives at a point within the airport boundary designated in accordance with article 5: (i) at the time stipulated in advance and in writing (including by electronic means) by the air carrier or its agent or the tour operator, or (ii) if no time is stipulated, not later than two hours before the published departure time.
Article 10 provides: An air carrier shall provide the assistance specified in Annex II without additional charge to a disabled person or person with reduced mobility departing from, arriving at or transiting through an airport to which this Regulation applies provided that the person in question fulfils the conditions set out in article 7(1), (2) and (4).
The assistance specified in Annex II includes: Where a disabled person or person with reduced mobility is assisted by an accompanying person, the air carrier will make all reasonable efforts to give such person a seat next to the disabled person or person with reduced mobility.
This was the obligation which the respondent breached.
Article 12 provides: Where wheelchairs or other mobility equipment or assistive devices are lost or damaged whilst being handled at the airport or transported on board aircraft, the passenger to whom the equipment belongs shall be compensated, in accordance with rules of international, Community and national law.
Although article 12 is not applicable in the present case, since Mr Stotts wheelchair was not damaged, it has a broader relevance inasmuch as the reference to compensation in accordance with rules of international law clearly embraces the Montreal Convention.
Articles 14 to 16 provide for three methods of enforcement.
Article 14 provides for each Member State to designate an enforcement body or bodies.
In the UK the designated body is the Civil Aviation Authority.
Article 15 provides for the establishment of complaints procedures.
Article 16 provides: The Member States shall lay down rules on penalties applicable to infringements of this Regulation and shall take all the measures necessary to ensure that those rules are implemented.
The penalties provided for must be effective, proportionate and dissuasive.
The Member States shall notify those provisions to the Commission and shall notify it without delay of any subsequent amendment affecting them.
Montreal Convention
The full title of the Montreal Convention is the Convention for the Unification of Certain Rules for International Carriage by Air.
It was agreed at Montreal on 28 May 1999.
The EU is a signatory.
The predecessor of the Montreal Convention was signed at Warsaw on 12 October 1929 (the Warsaw Convention).
It was amended in 1955 at the Hague, but the amended Convention continued to be known by its original name.
The Montreal Convention replaced the Warsaw Convention but followed its general structure.
Its purpose according to the preamble was to modernize and consolidate the Warsaw Convention and related instruments.
There is no material difference in their scope of application, as defined in each case in article 1.
Each begins by stating that the Convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward.
Chapter III of the Warsaw Convention was headed Liability of the carrier.
The heading of the same chapter in the Montreal Convention has the additional words and extent of compensation for damage.
In chapter III of the Warsaw Convention, article 17 dealt with liability for death or injury to passengers as a result of an accident sustained on board the aircraft or in the course of embarkation or disembarkation, and article 18 dealt with liability for damage to or loss of any registered luggage or goods.
In chapter III of the Montreal Convention liability for death or bodily injury is dealt with in article 17.1 in materially identical terms to article 17 of the Warsaw Convention.
Loss of or damage to a passengers baggage is dealt with in article 17.2 to 17.4, and loss of or damage to cargo are dealt with in article 18, but the differences are matters of detail.
There are also broadly parallel provisions for liability for damage occasioned by delay in the carriage of passengers, baggage or cargo.
Two features of the Conventions are of critical relevance.
First, there are limits to the type of injury or damage which is compensable and the amount of compensation recoverable.
Bodily injury (or lsion corporelle) has been held not to include mental injury, such as post traumatic stress disorder or depression (Morris v KLM Royal Dutch Airlines [2002] UKHL 7; [2002] 2 AC 628).
The same would apply to injury to feelings.
Secondly, there is an exclusivity provision.
The exclusivity provision in the Warsaw Convention was contained in article 24: 1.
In the cases covered by articles 18 and 19 any action for damages, however founded, can only be brought subject to the conditions and limits set out in this Convention. 2.
In the cases covered by article 17 the provisions of the preceding paragraph also apply, without prejudice to the questions as to who are the persons who have the right to bring suit and what are their respective rights.
The effect of this provision was considered by the House of Lords in Sidhu v British Airways plc [1997] AC 430, to which I will refer in more detail.
29: In the Montreal Convention the exclusivity provision is contained in article In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights.
In any such action, punitive, exemplary or any other non compensatory damages shall not be recoverable.
The effect is the same as that of article 24 of the Warsaw Convention, except for the addition of the sentence specifically excluding punitive, exemplary or other non compensatory damages.
Article 29 is the rock on which Mr Stotts claim for damages foundered.
Montreal Regulation
The Montreal Convention has effect in the UK by different routes depending on whether the carrier is a Community air carrier.
Generally the Montreal Convention has force in the UK by virtue of section 1 of the Carriage by Air Act 1961 as amended, but not in relation to Community air carriers to the extent that the Montreal Regulation has force in the UK: section 1(2) of the 1961 Act.
The Montreal Regulation has direct effect in the UK by virtue of section 2 of the European Communities Act 1972.
The Montreal Regulation followed the conclusion of the Montreal Convention.
Its purpose, as stated in an explanatory memorandum issued by the Commission, was to ensure full alignment between the Montreal Convention and community law.
To that end, article 3.1 states: The liability of a Community air carrier in respect of passengers and their baggage shall be governed by all provisions of the Montreal Convention relevant to such liability.
The Montreal Convention therefore has effect in the UK in relation to Community air carriers through that article.
The exclusivity principle
In Sidhu the House of Lords considered the question whether a passenger who sustained damage in the course of international carriage by air due to the fault of the carrier, but had no claim against the carrier under article 17 of the Warsaw Convention, was left without a remedy.
It concluded that this was so.
Lord Hope gave the only speech.
He analysed the history, structure and text of the Convention, and he reviewed the domestic and international case law.
He explained that the Convention was a package.
It gave to passengers significant rights, easily enforceable, but it imposed limitations.
He held that the whole purpose of article 17, read in its context, was to prescribe the circumstances that is to say, the only circumstances in which a carrier would be liable to the passenger for claims arising out of his international carriage by air.
To permit exceptions, whereby the passenger could sue outside the Convention for losses sustained in the course of international carriage by air, would distort the whole system, even in cases for which the Convention did not create any liability on the part of the carrier.
This interpretation has been accepted and applied in many other jurisdictions.
In the USA the leading authority is the decision of the Supreme Court in El Al Israel Airlines Ltd v Tseng 525 US 155 (1999).
The plaintiff was subjected to an intrusive security search at John F Kennedy International Airport in New York before she boarded a flight to Tel Aviv.
She sued the airline under New York tort law for damages for psychosomatic injury.
The Supreme Court had previously held in Eastern Airlines Inc v Floyd 499 US 530 (1991) that mental or psychic injuries unaccompanied by physical injuries were not compensable under article 17, but the plaintiff argued that her claim in respect of the treatment which she suffered before embarkation was not within the reach of the preemptive effect of the Convention.
The Court of Appeals for the Second Circuit accepted that argument.
In its judgment it expressed the fear that if the Convention had the preclusive effect for which the airline contended, it would follow, for example, that a passenger injured by a malfunctioning escalator in the airlines terminal would have no remedy against the airline even if it had recklessly disregarded its duty to maintain the escalator in proper repair.
The Supreme Court reversed the decision of the Court of Appeals in an opinion delivered by Justice Ginsburg (Justice Stevens dissenting).
Applying the principle that an international treaty must be interpreted not as if it were a domestic instrument, but so as to accord with the courts understanding of the shared expectations of the contracting parties, Justice Ginsburg referred to the French text of article 24 of the Warsaw Convention (the earlier equivalent of article 29 of the Montreal Convention): (1) Dans les cas prevus aux articles 18 et 19 toute action en responsabilite, a quelque titre que ce soit, ne peut etre exercee que dans les conditions et limites prevues par la presente Convention. (2) Dans les cas prevus a l'article 17, s'appliquent egalement les dispositions de l'alinea precedent, sans prejudice de la determination des personnes qui ont le droit d'agir et de leurs droits respectifs.
Tseng argued that les cas prevus a larticle 17 meant those cases in which a passenger could actually maintain a case for relief under article 17.
El Al argued, with the support of the US government as amicus curiae, that the expression referred generically to all personal injury cases stemming from occurrences on board an aircraft or in embarking or disembarking.
So read, article 24 would preclude a passenger from asserting any air transit personal injury claims under local law, including claims that failed to satisfy article 17s liability conditions (perhaps because the injury did not result from an accident or because the accident did not result in physical injury or manifestation of injury).
The court judged that the governments interpretation of article 24 was more faithful to the Conventions text, purpose and overall structure.
Its reasoning process accorded with that of the House of Lords in Sidhu, to which Justice Ginsburg referred, at pp 175 176: Decisions of the courts of other Convention signatories corroborate our understanding of the Convention's preemptive effect.
In Sidhu, the British House of Lords considered and decided the very question we now face concerning the Convention's exclusivity when a passenger alleges psychological damages, but no physical injury, resulting from an occurrence that is not an accident under Article 17.
See [[1997] AC 430, 441, 447].
Reviewing the text, structure, and drafting history of the Convention, the Lords concluded that the Convention was designed to ensure that, in all questions relating to the carrier's liability, it is the provisions of the Convention which apply and that the passenger does not have access to any other remedies, whether under the common law or otherwise, which may be available within the particular country where he chooses to raise his action. Ibid.
Courts of other nations bound by the Convention have also recognized the treaty's encompassing preemptive effect.
The opinions of our sister signatories, we have observed, are entitled to considerable weight. [Air France v] Saks, 470 US at 404 (internal quotation marks omitted).
The text, drafting history, and underlying purpose of the Convention, in sum, counsel us to adhere to a view of the treaty's exclusivity shared by our treaty partners.
The court put to rest the Court of Appeals fear that such a conclusion would mean that a passenger who had an accident in the terminal building through the negligence of the person responsible for its maintenance might be left without a remedy.
Justice Ginsburg observed that the Conventions preemptive effect on local law extended no further than the Conventions own substantive scope, and that a carrier would be indisputably subject to liability under local law for injuries arising outside that scope, for example, for passenger injuries occurring before the operation of embarking.
In King v American Airlines Inc 284 F 3d 352 (2002) the Court of Appeals for the Second Circuit considered the question whether discrimination claims could properly be regarded as generically outside the Conventions substantive scope, so that a claim for compensation under local law would not be affected by the Convention.
The assumed facts were that the plaintiffs were bumped from an overbooked flight because of their race.
Upholding an order for the dismissal of the claim, the court held that discrimination claims under local law which arose in the course of embarking on an aircraft were preempted by the Convention.
The argument advanced unsuccessfully by the plaintiffs was that discrimination claims fell outside the scope of the Convention because of their qualitative nature.
Sotomayor CJ (now Justice Sotomayor of the US Supreme Court), delivering the opinion of the court, emphasised that the preemptive scope of the Convention depends not on the qualitative nature of the act or omission giving rise to the claim but on when and where the salient event took place: Article 17 directs us to consider when and where an event takes place in evaluating whether a claim for an injury to a passenger is preempted.
Expanding upon the hypothetical posed by the Tseng Court, a passenger injured on an escalator at the entrance to the airport terminal would fall outside the scope of the Convention, while a passenger who suffers identical injuries on an escalator while embarking or disembarking a plane would be subject to the Convention's limitations.
Tseng, 525 US at 171.
It is evident that these injuries are not qualitatively different simply because they have been suffered while embarking an aircraft, and yet article 17 plainly distinguishes between these two situations.' [Original emphasis] The aim of the Warsaw Convention is to provide a single rule of carrier liability for all injuries suffered in the course of the international carriage of passengers and baggage.
As Tseng makes clear, the scope of the Convention is not dependent on the legal theory pled nor on the nature of the harm suffered.
See Tseng, 525 US at 171 (rejecting a construction of the Convention that would look to the type of harm suffered, because it would encourage artful pleading by plaintiffs seeking to opt out of the Convention's liability scheme when local law promised recovery in excess of that prescribed by the treaty); Cruz v Am Airlines, 338 US App DC 246, 193 F3d 526, 531 (DC Cir 1999) (determining that fraud claim was preempted by Article 18, because the events that gave rise to the action were so closely related to the loss of [plaintiffs'] luggage . as to be, in a sense, indistinguishable from it).
The judge noted that in a number of cases US District Courts had addressed the issue whether discrimination claims were preempted by the Convention and had all reached a similar view.
She concluded her judgment with some broader observations which have a resonance in the present case: Plaintiffs raise the specter that our decision will open the doors to blatant discrimination aboard international flights, invoking images of airline passengers segregated according to race and without legal recourse.
They suggest that, despite Article 24's plain mandate that the Warsaw Convention preempts any cause of action, however founded, we should nonetheless carve out an exception for civil rights actions as a matter of policy.
This we decline to do.
It is our responsibility to give the specific words of the treaty a meaning consistent with the shared expectations of the contracting parties.
Saks, 470 US at 399.
It is not for the courts to rewrite the terms of a treaty between sovereign nations.
Cf Turturro, 128 F Supp 2d at 181 (The Convention massively curtails damage awards for victims of horrible acts [of] terrorism; the fact that the Convention also abridges recovery for . discrimination should not surprise anyone.).
Moreover, while private suits are an important vehicle for enforcing the anti discrimination laws, they are hardly the only means of preventing discrimination on board aircraft.
Federal law provides other remedies.
Responsibility for oversight of the airline industry has been entrusted to the Secretary of Transportation.
The Kings could, therefore, have filed a complaint with the Secretary. 49 USC 46101.
The FAA prohibits air carriers, including foreign air carriers, from subjecting a person to unreasonable discrimination.
Id 41310(a).
The Secretary has the authority to address violations of FAA provisions, including the power to file civil actions to enforce federal law.
Id 46106.
It does not follow from the preemption of the Kings' private cause of action that air carriers will have free rein to discriminate against passengers during the course of an international flight.
Sidhu and Tseng have been followed by the Federal Court of Australia in South Pacific Air Motive Pty Ltd v Magnus 157 ALR 443 (1998), the Court of Appeal of Hong Kong in Ong v Malaysian Airline System Berhad [2008] HKCA 88, the Federal Court of Appeal of Canada in Air Canada v Thibodeau [2012] FCA 246 and the High Court of Ireland in Hennessey v Aer Lingus Ltd [2012] IEHC 124.
Sidhu was similarly followed by the Court of Appeal of New Zealand in Emery Air Freight Corpn v Nerine Nurseries Ltd [1997] 3 NZLR 723.
The same principle has been recognised by the Supreme Court of Germany (Bundesgerichtshof), 15 March 2011, Urteil Az X ZR 99/10.
The arguments
Mr Robin Allen QC submitted that since the Montreal Convention has effect within the EU via the Montreal Regulation, it is a question of European law whether the courts below were right to hold that Mr Stotts claim for damages for breach of the UK Disability Regulations was incompatible with the Convention.
He submitted that Mr Stotts claim is unaffected by the Montreal Regulation because its subject matter was outside both the substantive scope and the temporal scope of the Regulation.
The argument on the first point was summarised succinctly in the appellants written case as follows: Applying the Vienna Convention, the [Montreal Convention] is not in any sense concerned with giving access to air travel to disabled persons.
Rights conferred in order to ensure equal access to air travel for disabled people (and remedies granted for breach of those rights) are simply not to use Lord Hopes language in Sidhu areas with which [the Convention] deals.
For this reason, it is submitted that it would be a mistake to use the MC to limit the rights and obligations that Union legislation imposes in relation to such access.
The argument on the second point was based on the recorders finding that the airlines failure to make all reasonable efforts to seat Mr Stott next to his wife began prior to embarkation.
In support of his argument Mr Allen relied on a number of European authorities.
He accepted that none of them was conclusive in relation to the present case, but he submitted that the court ought to refer the following questions to the Court of Justice of the European Union (CJEU): (a) Whether the right to compensation for breach of duties to take reasonable steps to assist disabled persons in the context of air travel (which the Union legislator specifically contemplated in the EC Disability Regulation), like the rights to compensation conferred by Regulation 261/2004, should be regarded as falling within a different regulatory framework from, or as complementary to, the MC (rather than in conflict with it); (b) Whether compensation awarded in respect of breaches of the duties imposed by the EC Disability Regulation both on board the aircraft and earlier, like compensation for delay awarded under Regulation 261/2004, simply operates at an earlier stage than the system which results from the Montreal Convention; (c) Whether a member state which confers a right to compensation under its domestic law for failures by the providers of goods and services to take reasonable steps to accommodate the needs of disabled persons is obliged by the principles of equivalence and/or effectiveness, when implementing the EC Disability Regulation, to provide a similarly favourable remedy for similar failures in the context of air travel amounting to breaches of that Regulation; (d) How that obligation to provide an effective remedy for breaches of the EC Disability Regulation is to be reconciled with the exclusivity principle contained in the MC in circumstances where:(a) the remedy is provided to give effect to the right to equal access to air travel, which is itself derived from the fundamental anti discrimination rights conferred by the Charter and (b) the MC was never intended to, and does not, deal with the question of access to air travel.
Mr Allen submitted that these questions are important and unresolved.
The answers to them are not so obvious as to leave no scope for any reasonable doubt.
Article 267 therefore requires a reference from this court, as the UKs final court of appeal, to the CJEU.
Mr Daniel Beard QC, on behalf of the Secretary of State, concentrated on the temporal argument.
He submitted that on the recorders findings of fact, liability for breach of the UK Disability Regulations arose prior to embarkation, and therefore it was plain that Mr Stotts claim was not preempted by the Montreal Convention.
In his submission, there was no need for a reference to the CJEU and the appeal should be allowed.
Mr John Kimbell, on behalf of the respondent, pointed out that the particulars of injury to feelings pleaded in Mr Stotts particulars of claim related to his treatment during the process of embarkation and during the flight, which made him feel humiliated and for which he claimed damages.
It was for such injury to his feelings, occasioned during the embarkation and flight, that the recorder assessed the appropriate monetary compensation, subject to the question whether it was permissible.
Mr Kimbell submitted that this was the gravamen of the claim, and that it fell within the temporal scope of the Montreal Convention.
The claim for damages for such injury to feelings under the UK Disability Regulations was therefore preempted by article 29 of the Montreal Convention, as that article (or rather its predecessor) had been interpreted in Sidhu.
He observed that the court was not being asked to reconsider the correctness of the decision in Sidhu, which has moreover received uniform international support.
He submitted that the legal basis of Mr Stotts claim for damages under domestic law was irrelevant (as properly recognised, for example, in King v American Airlines).
All that mattered was that it was a claim for damages referable to the treatment of Mr Stott in the course of his international carriage by air.
Accordingly, he submitted that on the established authorities the decision of the Court of Appeal upholding the recorder was plainly right, and there was no cause for a reference to the CJEU.
European case law
Mr Allen relied on a line of cases in which the CJEU has considered the compatibility of the Montreal Regulation with the provisions of another EU Regulation, No 261/2004, requiring compensation and assistance to passengers in the event of denial of boarding, cancellation or long delays of flights.
Article 5 concerns cancellation.
Article 6 concerns delay.
Each requires the passengers to be offered various forms of assistance, such as hotel accommodation where necessary, and to be paid compensation in accordance with article 7.
The compensation payable under article 7 is at a standard rate (which varies according to the length of the flight), regardless of the personal circumstances of the passengers and the amount of any actual loss suffered by them individually.
The most recent decision is that of the Grand Chamber in Nelson v Deutsche Lufthansa AG (Joined Cases C 581/10 and C 629/10), [2013] 1 CMLR 1191.
Reiterating the courts reasoning in earlier cases beginning with R (IATA and ELFAA) v Department of Transport (Case C 344/04)[2006] ECR I 403, the court held that the scheme established by Regulation 261/2004 for standardised redress was a form of protection supplementary to, and not incompatible with, the Montreal Convention because it did not affect the right of a passenger to bring a claim for compensation for individual damage suffered by him or the limitations imposed by the Convention on the right to redress on an individual basis.
Analysis
It is convenient to begin by clearing the ground.
There is no dispute about the meaning of the EC Disability Regulation or its compatibility with the Montreal Convention, to which the EU is a party and which is incorporated into the Montreal Regulation.
The EC Disability Regulation imposes obligations on air carriers and others who operate in the air services market to provide equal access to such services for disabled persons and others with reduced mobility for any reason.
It leaves enforcement to the Member States.
It requires Member States to lay down rules on penalties for infringement but it does not require such penalties to include financial compensation.
There is similarly no dispute about the meaning of the UK Disability Regulations or their compatibility with the Montreal Convention.
If the airline is right in its contention that Mr Stotts claim for damages is precluded by article 29 of the Montreal Convention, it follows that the wording of regulation 9(2) is misleading, because it states (supposedly for the avoidance of doubt) that any damages awarded in respect of any infringement of the EC Regulation may include compensation for injury to feelings.
It has rightly not been argued that regulation 9(2) should be read as purporting to create a power to award such damages, if it would be inconsistent with article 29, for that would be ultra vires.
The effect of regulation 9 is to make it clear that the Regulations are capable of giving rise to an action for breach of statutory duty, for which damages are unrestricted by the Regulation, but it does not (and could not) remove any limitation resulting from the Montreal Convention.
The European case law does not assist Mr Stott.
The question in the cases about Regulation (EC) 261/2004 was whether the scheme of standardised remedial measures was compatible with the Montreal Convention.
The court recognised that any claim for damages on an individual basis would be subject to the limits of the Convention (IATA para 42).
Mr Stotts claim is for damages on an individual basis.
To summarise, this case is not about the interpretation or application of a European regulation, and it does not in truth involve a question of European law, notwithstanding that the Montreal Convention has effect through the Montreal Regulation.
The question at issue is whether the claim is outside the substantive scope and/or temporal scope of the Montreal Convention, and that depends entirely on the proper interpretation of the scope of that Convention.
The governing principles are those of the Vienna Convention on the Law of Treaties.
If the issue concerned the compatibility of the Regulation with the Convention (as in Nelson) it would indeed involve a question of European law, but no such question arises and there is no basis for supposing that the Montreal Convention should be given a different European meaning from its meaning as an international convention.
On the contrary, it was the acknowledged purpose of the Regulation to ensure full alignment between the Convention as an international instrument and community law.
The temporal question can be answered by reference to the facts pleaded and found.
The claim was for damages for the humiliation and distress which Mr Stott suffered in the course of embarkation and flight, as pleaded in his particulars of claim and set out in paras 6 to 8 of the recorders judgment.
The particulars of injury to Mr Stotts feelings and the particulars of aggravated damages related exclusively to events on the aircraft.
In the course of argument it was suggested that Mr Stott had a complete cause of action before boarding the aircraft based on his poor treatment prior to that stage.
If so, it would of course follow that such a pre existing claim would not be barred by the Montreal Convention, but that was not the claim advanced.
Mr Stotts subjection to humiliating and disgraceful maltreatment which formed the gravamen of his claim was squarely within the temporal scope of the Montreal Convention.
It is no answer to the application of the Convention that the operative causes began prior to embarkation.
To hold otherwise would encourage deft pleading in order to circumvent the purpose of the Convention.
Many if not most accidents or mishaps on an aircraft are capable of being traced back to earlier operative causes and it would distort the broad purpose of the Convention explained by Lord Hope in Sidhu to hold that it does not apply to an accident or occurrence in the course of international carriage by air if its cause can be traced back to an antecedent fault.
Should a claim for damages for ill treatment in breach of equality laws as a general class, or, more specifically, should a claim for damages for failure to provide properly for the needs of a disabled passenger, be regarded as outside the substantive scope of the Convention? As to the general question, my answer is no for the reasons given by Sotomayor CJ in King v American Airlines.
I agree with her analysis that what matters is not the quality of the cause of action but the time and place of the accident or mishap.
The Convention is intended to deal comprehensively with the carriers liability for whatever may physically happen to passengers between embarkation and disembarkation.
The answer to that general question also covers the more specific question.
Mr Allen submitted that the consequences were unfair, because if Mr Stott and his wife had not been misled at the check in desk into believing that their seating problem would be sorted out at the departure gate, they would never have proceeded and they would have been able to recover damages for their loss.
The complaint is just, but that is not a sufficient reason to reinterpret the Convention.
The underlying problem is that the Warsaw Convention long pre dated equality laws which are common today.
There is much to be said for the argument that it is time for the Montreal Convention to be amended to take account of the development of equality rights, whether in relation to race (as in King v American Airlines) or in relation to access for the disabled, but any amendment would be a matter for the contracting parties.
It seems unfair that a person who suffers ill treatment of the kind suffered by Mr Stott should be denied any compensation.
Under the law as it stands, a declaration that the carrier was in breach of the UK Regulations is likely to be small comfort to a passenger who has had Mr Stotts experience, but I draw attention, as did Sotomayor CJ at the end of her opinion in King v American Airlines, to the fact that there are other possible means of enforcement.
It is for the Civil Aviation Authority to decide what other methods of enforcement should be used, including possible criminal proceedings.
Conclusion
The embarrassment and humiliation which Mr Stott suffered were exactly what the EC and UK Disability Regulations were intended to prevent.
I share the regret of the lower courts that damages are not available as recompense for his ill treatment and echo their sympathy for him, but I agree with the reasoning of their judgments and would dismiss this appeal.
I would not make a reference to the CJEU for two reasons.
As I have explained, I do not consider that the questions of interpretation of the Montreal Convention on which the appeal turns are properly to be regarded as questions of European law merely because the Convention takes effect via the Montreal Regulation.
Secondly and in any event, I consider the answer to be plain.
LADY HALE
Mr and Mrs Stott have both been treated disgracefully by Thomas Cook and it is hardly less disgraceful that, for the reasons given by Lord Toulson, the law gives them no redress against the airline.
The apparently adamant exclusion, in article 29 of the Montreal Convention, of any liability for damages other than that specifically provided for in the Convention, while perhaps unsurprising in a trade treaty, is more surprising when the fundamental rights of individuals are involved.
Some treaties make express exception for anything which conflicts with the fundamental rights protected within a member state, but the Montreal Convention does not.
Whatever may be the case for private carriers, can it really be the case that a State airline is absolved from any liability in damages for violating the fundamental human rights of the passengers it carries?
The most obvious example is an airline which requires black or female passengers to sit at the back of the plane while white or male passengers sit at the front (and thus nearer to the exit).
This would be unconstitutional in most civilised countries.
Indeed, there is a respectable argument that race (but not sex) discrimination is not only contrary to customary international law, as well as to many international human rights instruments, but also contravenes a peremptory norm of international law which is binding on all states (see R (European Roma Rights Centre) v Immigration Officer at Prague Airport (United Nations High Comr for Refugees intervening) [2004] UKHL 55, [2005] 2 AC 1, per Lord Steyn at para 46).
If it were, then any treaty conflicting with that norm at the time of its conclusion would be void, at least to that extent, by virtue of article 53 of the Vienna Convention on the Law of Treaties; and if a new peremptory norm of international law emerges, then any existing treaty which is in conflict with that norm becomes void and terminates, at least to that extent, by virtue of article 64 of the Vienna Convention.
More important still, it might be thought, is the prohibition of torture.
This is indeed a peremptory norm.
There is a respectable case to be made that what happened to Mr Stott on board the plane amounted to inhuman or degrading treatment within the meaning of article 3 of the European Convention on Human Rights (see, for example, the case of Price v United Kingdom (2002) 34 EHRR 1285, concerning the conditions in which a severely disabled woman was held in police custody).
It seems extraordinary that a State should be able to subject a passenger to such treatment with impunity.
However, it may well be that the prohibition of cruel, inhuman and degrading treatment has not yet reached the status of a peremptory norm in general international law, even though torture in the narrower sense defined in the Torture Convention of 1984 has done so.
None of this was ventilated before us, no doubt for the good reason that Thomas Cook is not a State airline.
The extent to which international law imposes positive obligations upon States to protect individuals against violations of their fundamental rights by non state actors is controversial.
There may or may not be something in the issues I have raised.
But the question of whether there are indeed any limits to the apparently adamant exclusion in article 29 of the Montreal Convention may well require ventilation in another case or another place.
At the very least, as Lord Toulson says, the unfairness of the present position ought to be addressed by the parties to the Convention.
Small comfort though it may be to them, both Mr and Mrs Stott, with the support not only of the Equality and Human Rights Commission but also of the responsible department of the United Kingdom government, have done us all a service by exposing a grave injustice to which the international community should now be turning its attention.
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Mr and Mrs Stott decided to take a holiday in Zante, Greece, in September 2008.
Mr Stott is paralysed from the shoulders down and a permanent wheelchair user.
He has double incontinence and uses a catheter.
When travelling by air, he depends on his wife to manage his incontinence, help him to eat, and change his sitting position.
Mr Stott booked return flights with Thomas Cook Tour Operators Ltd (Thomas Cook), a tour operator and air carrier.
He telephoned Thomas Cooks helpline twice, informing them that he had paid to be seated with his wife, and was assured that this would happen.
However, on arrival at check in for the return journey, Mr and Mrs Stott were told that they would not be seated together.
They protested, but were eventually told that the seat allocations could not be changed.
Mr Stott had difficulties in boarding the aircraft, and was not sufficiently assisted by Thomas Cook staff.
He felt extremely embarrassed, humiliated, and angry.
He was eventually helped into his seat, with his wife sitting behind him.
This arrangement was problematic, since Mrs Stott could not properly assist her husband during the three hour and twenty minute flight.
She had to kneel or crouch in the aisle to attend to his personal needs, obstructing the cabin crew and other passengers.
The cabin crew made no attempt to ease their difficulties.
Mr Stott, assisted by the Equality and Human Rights Commission, brought a claim under the Civil Aviation (Access to Air Travel for Disabled Persons and Persons with Reduced Mobility) Regulations 2007 (SI 2007/1895) (the UK Regulations), which implement EC disability rights regulations (the EC Regulations).
The UK Regulations enable civil proceedings in UK courts for breaches of the EC Regulations, and state that compensation awarded may include sums for injury to feelings.
The EC Regulations require Community air carriers (among other things) to make reasonable efforts to provide accompanying persons with a seat next to a disabled person.
Mr Stott claimed that Thomas Cook had breached this duty, and sought a declaration and damages for injury to his feelings.
Thomas Cook argued that it had made reasonable efforts and that the Montreal Convention (the Convention), an international treaty which governs the liability of air carriers in international carriage by air, precluded a damages award for injury to feelings.
Under Articles 17 and 29 of the Convention, damages can only be awarded for harm to passengers in cases of death or bodily injury.
The judge at trial found that Thomas Cook had breached the UK Regulations, and made a declaration to that effect.
However, he held that the Convention prevented him from making any damages award to Mr Stott.
The Court of Appeal agreed.
Mr Stott appealed, arguing that his claim was (i) outside the substantive scope of the Convention, since the Convention did not touch the issue of equal access to air travel which are governed by the EC Regulations and (ii) outside the temporal scope of the Convention, since Thomas Cooks failure to make all reasonable efforts began before Mr and Mrs Stott boarded the aircraft.
He relied on EU cases discussing a different EU Regulation which required compensation and assistance for
passengers in the event of cancellations and delays: the European Court had held that this Regulation was not incompatible with the Convention.
The Secretary of State for Transport intervened to support Mr Stotts claim on the second (temporal) ground.
The Supreme Court unanimously dismisses the appeal.
The judgment of the Court is given by Lord Toulson, with a concurring judgment by Lady Hale.
Mr Stott was treated in a humiliating and disgraceful manner by Thomas Cook.
However, his claim falls within the substantive and temporal scope of the Convention, and as a result damages cannot be awarded for injury to feelings.
Substantively, the Convention deals comprehensively with the carriers liability for physical incidents involving passengers between embarkation and disembarkation.
The fact that Mr Stotts claim involves an EU law right makes no difference.
Temporally, Mr Stotts claim is for damages and distress suffered in the course of embarkation and flight, and these fall squarely within the temporal scope of the Convention.
It is not enough that the operative causes began prior to boarding.
The only true question in the case is whether Mr Stotts claim falls within the scope of the Montreal Convention.
There is no dispute between Mr Stott and Thomas Cook as to the interpretation of the EC Regulations or UK Regulations, or their compatibility with the Convention.
The EU cases do not assist: that other Regulation concerned general standardised measures, and the European Court had recognised that any claim for individualised damages would be subject to the Convention.
The case raised no question of European law [54 59].
On substantive scope: the Convention was intended to deal comprehensively with the liability of the air carrier for whatever might physically happen to passengers between embarkation or disembarkation.
The fact that Mr Stotts claim relates to disability discrimination makes no difference.
The underlying difficulty is that the Montreal Convention and its predecessors long pre dated equality laws.
It is unfair that someone suffering as Mr Stott had could not obtain any compensation, but that is the plain meaning of the Convention.
It would be desirable for the states parties to the Convention to consider its amendment.
It is also possible that the Civil Aviation Authority could take other enforcement actions against Thomas Cook [61 64].
On temporal scope: the operative causes of Mr Stotts treatment undoubtedly began at check in, prior to embarkation.
However, this is not enough.
Mr Stotts claim is for damages for the humiliation and distress that Mr Stott had suffered during the course of the flight, which fall squarely within the Convention period of exclusivity.
To hold otherwise would encourage deft pleading and would circumvent the purpose of the Convention [60].
In her concurring judgment, Lady Hale considers it disturbing that the Convention excludes damages claims for breaches of individuals fundamental rights.
It is particularly unsettling that this applies not only to private air carriers such as Thomas Cook, but also to state airlines.
A treaty which contravened a fundamental international law norm would be void.
Torture is a fundamental norm of this kind, and race discrimination might be another.
There is a respectable view that Mr Stotts treatment would, under the European Convention on Human Rights, constitute inhuman and degrading treatment (IDT).
However, it appears that IDT has not yet become a fundamental international law norm.
Since Thomas Cook is not a state air carrier, these issues do not arise in this case.
At the very least, however, the grave injustice done to those in Mr Stotts position should be addressed by the parties to the Convention [67 70].
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It is the role of the common law to adapt to meet new circumstances and challenges.
Mesothelioma has been and is a tragedy for individuals and families.
It is caused by exposure to the inhalation of asbestos dust, and has a gestation period measured typically in decades.
The more fibres inhaled, the greater the risk of contracting mesothelioma.
But, beyond that, its specific causation is highly uncertain: see Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 19, Durham v BAI (Run off) Ltd [2012] UKSC 14, [2012] 1 WLR 867, para 6.
It was thought it might be caused by a single fibre, but Lord Phillips annex to his judgment in Sienkiewicz, part A, paras 10 11, notes that the process of causation may involve (different) fibres acting in a way which gives rise to a series of as many as six or seven genetic alterations, ending with a malignant cell in the pleura.
In any event, the evidential uncertainties about its causation led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 to create a special common law rule, operating within what may be called the Fairchild enclave, to govern liability between victims and those who in breach of duty had exposed them to asbestos dust.
Following the Houses decision in Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572, this special rule was fortified by the Compensation Act 2006.
Unsurprisingly, the courts are still working out the implications.
Courts which have embarked on it have had to focus on disputes gradually shifting from (a) the position between victims and those responsible for their exposure, on which substantial authority now exists under English law, to (b) the position between persons so responsible and their insurers.
This appeal and the conclusions I reach on it are concerned exclusively with situations falling within the special rule.
The appeal, brought by Zurich Insurance plc (Zurich) as appellant against International Energy Group Ltd (IEG) as respondent, raises points under both (a) and (b).
The issues under (a) are subject to Guernsey law, and there is a difference between the English and Guernsey statute law.
The parties are however agreed that Guernsey common law is to be treated as identical with English common law on this appeal.
According to the special rule recognised by the House of Lords, a person contracting mesothelioma, after being exposed to significant quantities of asbestos dust originating from different sources over the same or different periods, can sue any person who was (negligently or in breach of duty) responsible for any such source of exposure, although unable to show which exposure in probability actually led or contributed to the disease: Fairchild and Barker.
This rule applies even if the only potential sources consist in the ambient environmental exposure which the population generally experiences and some other negligently created source which only increases this ambient exposure by a small percentage 18% in the case so holding: Sienkiewicz.
The special rule confers a right of suit on victims of mesothelioma by reference to each significant exposure, rather than any probability that the particular exposure relied upon led or contributed to the disease.
As formulated in Fairchild, it left open the damages recoverable from a person responsible for an exposure.
In Barker the House of Lords held that a person responsible was liable not for the whole damages attributable to the mesothelioma, but only in proportion to his own contribution to the overall exposure, probably measured by the duration and intensity of the particular exposure for which he was responsible.
This proportionate recovery applied whether the other sources were tortious, non tortious, by natural causes or by the victim him or herself.
The United Kingdom Parliament reacted immediately, reversing the Houses ruling that recovery should be proportionate by the Compensation Act 2006.
This Act preserves all other aspects of the special rule, as is apparent from section 3(1) and (2): 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.
Industry guidelines for apportioning and handling employers liability mesothelioma claims were developed in October 2003, taking account of the Financial Services Compensation Scheme (FSCS) available under the Policyholders Protection Act 1975 and the Financial Services and Markets Act 2000 in relation to insolvent insurers.
These guidelines were also reflected in the Industrial Disease Claims Working Party handling guidelines issued in 2006, which were themselves revised in 2008 following the expansion of the FSCS by the Compensation Act 2006 (Contribution for Mesothelioma Claims) Regulations 2006 (SI 2006/3259).
Lord Sumption has described some of the features of the guidelines, which, it appears, achieved general acceptance in the industry, by the FSCS and by reinsurers, before the decision of the Court of Appeal in the present case on 6 February 2013 appeared to undermine their application.
Most recently, after consultations going back to 2010 and to meet the possibility that a mesothelioma victim might be unable to identify any solvent employer with an identifiable insurer, the Mesothelioma Act 2014 has established an insurance industry fund to pay out in such a case a sum fixed by schedule initially at about 80% but since a Ministerial announcement on 10 February 2015 at 100% of the average damages recovery which a victim of the particular victims age would be expected to recover in a civil claim.
In Durham v BAI (Run Off) Ltd [2012] UKSC 14, [2012] 1 WLR 867 (the Trigger litigation), the Supreme Court held that, where an employer is insured against liability for a disease suffered by an employee which has been caused during the insurance period, the necessary causal requirement or link is satisfied in the case of mesothelioma by the employers negligent exposure of the victim during such period to asbestos (and so to the risk of suffering mesothelioma), with the result that the insurer must indemnify the employer against the liability so incurred.
Guernsey has not passed any equivalent of the United Kingdoms Compensation Act 2006.
The first main question on this appeal is whether, apart from that Act, the proportionate recovery rule in Barker still exists at common law.
Guernsey common law is, as stated, to be taken to be the same as English common law.
IEGs case is that Barker has become past history after the 2006 Act and in the light of the Supreme Courts decision in the Trigger litigation.
The second main question concerns the position where the person responsible for exposing a mesothelioma victim has the benefit of liability insurance covering only part of the period for which he exposed the victim.
If in such a case the person responsible incurs an expense or liability which is not proportionate, must an insurer who has covered only part of the whole exposure period bear the whole expense or liability? Before the Supreme Court, the parties and interveners accepted that such an insurer must, at least in the first instance, answer for the whole expense or liability, but Lord Sumptions judgment on this appeal raises for consideration whether they were correct to do so.
Assuming they were, the further question arises whether such an insurer is in any way entitled to recoup himself proportionately, and if so from whom, when during the remaining period of exposure the employer chose either to insure with other insurers or not to insure at all or no identifiable insurer can now be shown to have covered the employer.
If Barker no longer represents the common law, this question arises directly on this appeal.
Zurich submits that it anyway also arises in respect of defence costs incurred by or on behalf of a person responsible for a particular exposure, where the overall exposure is greater.
Most obviously, it is a question of general importance in the United Kingdom in relation to claims under the 2006 Act, though the present appeal concerns no such claim.
The facts
The facts can be shortly stated.
IEG is a solvent Guernsey company, a supplier of gas to the Channel Islands and a subsidiary of a global utilities, transport, energy and timber company quoted on the New York Stock Exchange.
IEG is the successor in title of Guernsey Gas Light Co Ltd (GGLCL), which for a period of over 27 years from 13 November 1961 to 31 December 1988 employed Mr Carr and during such employment exposed him to asbestos dust.
Mr Carr subsequently contracted and died of mesothelioma.
It is common ground for present purposes that Mr Carr was exposed with the same degree of frequency and intensity throughout the 27 year period, without adequate protection being provided by GGLCL, under circumstances that materially increased the risk of his contracting mesothelioma and constituted breaches of duty by GGLCL towards him.
On 22 September 2008 Mr Carr brought proceedings against IEG claiming that he had sustained mesothelioma consequent on his exposure to asbestos dust throughout his 27 year period of employment with GGLCL.
IEG settled his claim on 19 December 2008 by a compensation payment consisting of 250,000 in damages and interest plus 15,300 towards Mr Carrs costs.
IEG also incurred defence costs of 13,151.60.
Thereafter IEG looked to GGLCLs liability insurers under policies in force during the period of exposure.
Two have been identified, first the Excess Insurance Co Ltd, which provided employers liability insurance for two years from 31 December 1978 to 30 December 1980, and, second the Midland Assurance Ltd, to whose insurance liabilities Zurich has succeeded, which provided such insurance for six years from 31 December 1982 to 31 December 1988.
The present appeal thus proceeds on the basis that GGLCL had insurance for eight of the 27 years throughout which it exposed Mr Carr to asbestos dust.
Guernsey did not have legislation making employers liability insurance compulsory until 1993, when the Employers Liability (Compulsory Insurance) (Guernsey) Law 1993 came into effect.
Each of the Midland policies issued during the six years when it was on risk provided that: Whereas the Insured carrying on the business described in the Schedule and no other for the purposes of this insurance has applied to Midland Assurance Limited (hereinafter called the Company) for the insurance hereinafter contained and has paid or agreed to pay the premium as consideration for such insurance during the period stated in the Schedule or for any subsequent period for which the Company shall have accepted the premium required for renewal of this policy.
If any person under a contract of service or apprenticeship with the Insured shall sustain any bodily injury or disease caused during any period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned, the Company will indemnify the Insured against all sums for which the Insured shall be liable in respect of any claim for damages for such injury or disease settled or defended with the consent of the Company.
The Company will in addition pay claimants costs and expenses and be responsible for all costs and expenses incurred with the consent of the Company in defending any such claim for damages.
IEG notified a claim for its total loss to Zurich, which offered to meet 72/326ths of the damages and interest paid to Mr Carr and of the defence costs incurred.
The proportion reflected the relationship between the six years of the Midland insurance and the 27 year period of Mr Carrs exposure by GGLCL.
It was arrived at on the basis that IEGs liability to Mr Carr was incurred and increased from day to day throughout the 27 years, while only six years of such liability fell within the period of the Midland insurance. (Any slight inaccuracy in equating a period of 27 years one month 17 days with 326 months can be ignored.
Cooke J at trial converted 72/326ths into a percentage of 22.08%, which has not been challenged.)
A trial was ordered on the basis of a statement of facts and issues recording the common ground between the parties, and on 24 January 2012 (two months before this court handed down judgment in the Trigger litigation) Cooke J accepted Zurichs case regarding the compensation, but not the defence costs, paid in respect of Mr Carr.
He held it liable to pay 71,729.84 in full discharge of its policy liabilities, being its relevant proportion of such compensation plus 100% of the defence costs: [2012] EWHC 69 (Comm).
On 6 February 2013 the Court of Appeal allowed IEGs appeal, rejected Zurichs cross appeal relating to defence costs, and ordered Zurich to pay 278,451.60, representing 100% of both the compensation paid and defence costs incurred by IEG: [2013] EWCA Civ 39.
The Trigger litigation
The issue in the Trigger litigation was whether and how various differently worded employers liability insurance policies should respond to mesothelioma claims.
Typical wordings in use at various relevant dates were set out in annex A to and summarised in paras 7 to 9 of my judgment in that case.
Under some of the policy wordings there considered (including some early Excess policies in different form to the present), the insurer promised to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee should sustain personal injury by accident or disease or [any] bodily injury or disease, 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.
Other policy wordings were in more developed form, promising for example indemnity in respect of legal liability for sums payable as compensation for 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 issue in the Trigger litigation was whether these wordings responded by reference to the date of exposure to asbestos dust or to the date when the onset of mesothelioma or any other long term disease developed or manifested itself.
In determining this issue, this court found assistance as to the scope, purpose and proper interpretation of each of the insurances in a study of its language, read in its entirety (paras 19 and 41).
It relied on the wordings assumption that the course of employment and the sustaining of injury would be contemporaneous (para 20) and that there would be a close link between the risks attaching to the employment or work undertaken in the insurance period and the risks which the insurers, for a premium calculated by reference to the nature of such employment during such period, agreed to insure (paras 21 23).
It also relied on the improbability that insurers would offer or sell cover in respect of risks attaching to ancient, as opposed to current, employment or activities (para 24) or on a basis that would leave it open to insurers to refuse further cover once it became apparent that such employment or activities were likely to produce claims (paras 24 25).
In the upshot, all the insurance wordings considered in the Trigger litigation were held to operate on a similar basis.
Whether the wording referred to a disease contracted or an injury or disease sustained, the reference was to be taken as being to the date when mesothelioma was caused or initiated by exposure, even though it only developed or manifested itself long afterwards (paras 49 51).
In respect of the limited number of the insurances with which the court was concerned which post dated the Employers Liability (Compulsory Insurance) Act 1969, the court also regarded its conclusions on interpretation as the only conclusions consistent with the employers duty to carry insurance under that Act.
The Midland policy wording in issue on this appeal is expressly on a causation basis, and the risks undertaken are closely tied to the period of insurance.
A second, yet more fundamental, point arose during the course of the appeal in Trigger.
If causation grounded liability under the insurance wordings, could causation be shown to exist, bearing in mind that the special rule established by Fairchild, Barker and Sienkiewicz derives from the impossibility of proving as a matter of probability that any particular exposure has led or contributed to the occurrence of mesothelioma in any particular case? The rival possibilities examined in Trigger were that (a) the special rule involves a legal inference or fiction that, despite the evidential impossibility, the particular exposure has as a matter of probability caused or contributed to the occurrence of the mesothelioma or (b) the special rule involves a weak or broad view of the causal requirements or link satisfied in the case of mesothelioma by proof of exposure to asbestos dust or, both these possibilities failing, (c) the employers liability under the special rule arises not for, or because he has in any sense caused, the mesothelioma, but on the contrary for, and because of, his creation of the risk of causing the disease.
On this last basis no relevant causation would have existed sufficient to trigger the insurance wordings in Trigger, since they required causation of a disease, not causation of a risk.
In Trigger, none of the members of the court accepted possibility (a): see eg paras 59 and 71 74 in my judgment and para 131 per Lord Phillips.
But Lord Phillips went on, after analysing Barker, to accept possibility (c).
Dissenting, he held that employers could not pass on to their insurers the liability which they had incurred under the special rule, and he refused to engage in any redefinition of that special rule to render insurers liable: paras 133 134.
The majority on the other hand accepted the employers case that insurances underwritten on a causation basis must respond in circumstances where employers incur liability for mesothelioma under the special rule because they have exposed the victim to asbestos dust during the relevant insurance period.
In my judgment, with which Lord Kerr, Lord Clarke and Lord Dyson agreed, this was explained by reference to possibility (b): the ordinary requirements of causation (proof on a balance of probability) were modified as between the victim and person responsible, so as to make the latter liable for the mesothelioma because of the risk of sustaining mesothelioma to which the victim had been exposed during the relevant period: see paras 66 and 73.
Further, and importantly, the majority also held that a liability insurer covering the person responsible on a causation basis must accept the development of, and the increase of employers liability resulting from, the special rule within the limits of the relevant insurance and insurance period: see paras 66 (end), 69 70 and 73 74.
If causation is given a weak or broad meaning as against the person tortiously responsible, the same weak or broad meaning should be treated as carrying through into a liability insurance covering an insured on a causation basis.
However, Trigger was not directly concerned with, and did not examine, the situation or the consequences where a person responsible for exposing a mesothelioma victim to asbestos dust has an insurance covering only part of the period of that exposure.
That is the situation which gives rise to the present appeal.
If one puts on one side the fact that exposure continued for a further 21 years, Trigger is direct authority that the Midland policy must respond to liability for mesothelioma incurred by IEG under the special rule as a result of GGLCLs tortious exposure of Mr Carr throughout the six year period of the Midland insurances.
The policy period is fundamental under any liability policy, as the reasoning in Trigger summarised in para 18 above itself indicates.
But, under Trigger, the sufficient weak or broad cause which grounds liability for any subsequently incurred mesothelioma occurs within the policy period, and that is sufficient.
Zurich has at all times accepted that, if Mr Carr was, as a result of being exposed to asbestos dust during the six years for which Midland insured GGLCL, entitled to the full compensation payment of 250,000 plus costs which he received from IEG, then the policy wording on its face requires Zurich to answer in full notwithstanding that he was also exposed to asbestos dust during a further 21 years: see its written case before this court on the present appeal, para 4.4.
However, the policy and its wording only govern the parties relationship in and with respect to the policy periods and risks arising during such periods.
The special rule recognised in Fairchild as modified by the 2006 Act has the unique effect of requiring Zurich to respond potentially under its policy wordings to liabilities incurred by GGLCL/IEG which are: (a) attributable to the mere risk that GGLCLs conduct during the Midland insurance period led or contributed to Mr Carr incurring mesothelioma, but also (b) equally easily, or proportionately much more easily, attributable to GGLCLs conduct wholly outside the scope and period of the Midland insurance.
Zurichs case is that, since GGLCLs conduct within (b) was wholly independent of and outside the scope of the Midland insurance and Midland insurance period, there is no reason why it cannot be recognised as giving rise to obligations as between Zurich and IEG, no inconsistency with the Midland insurance in recognising that such obligations may result from such conduct, and every reason in justice why this should be recognised.
Barker
The first main question on this appeal is whether Barker remains good common law, not in the United Kingdom, where it has been superseded by the 2006 Act, but in Guernsey where no such statute exists.
I do not understand there to be any issue that, if Barker remains good common law, then IEGs liability in respect of the six years of Midland cover was and is for a proportionate part (22.08%) of the full compensation which IEG in fact paid.
If Mr Carr had only been able to show six years of exposure with GGLCL, but a further 21 years exposure elsewhere, he could not have claimed more than 22.08% of his total loss from IEG.
Equally IEG cannot now claim from Zurich more than the same proportion (22.08%) of the whole compensation paid which it can properly attribute to the six years of the Midland insurance.
This is the corollary of the fundamental principle of indemnity, which governs liability insurance.
This principle was articulated long ago in Godin v London Assurance Co (1758) 1 Burr 489, a case in which the defendant insurers were contending that because there had been double insurance they ought only to have to pay half the loss, although neither insurer had as yet paid any sum.
Lord Mansfield, in giving the judgment of the court upholding a verdict for the whole loss in these circumstances, observed (p 492): Before the introduction of wagering policies, it was, upon principles of convenience, very wisely established, that a man should not recover more than he had lost.
Insurance was considered as an indemnity only, in case of a loss: and therefore the satisfaction ought not to exceed the loss.
If the insured is to receive but one satisfaction, natural justice says that the several insurers shall all of them contribute pro rata, to satisfy that loss against which they have all insured.
Where a man makes a double insurance of the same thing, in such a manner that he can clearly recover, against several insurers in distinct policies, a double satisfaction, the law certainly says that he ought not to recover doubly for the same loss, but be content with one single satisfaction for it.
And if the whole should be recovered from one, he ought to stand in the place of the insured, to receive contribution from the other, who was equally liable to pay the whole.
In IEGs submission, Barker is fatally undermined by the Compensation Act 2006 and/or the decision in Trigger.
IEG points out that section 16(3) of the 2006 Act provides that Section 3 shall be treated as having always had effect, and suggests that the Act was in section 3 declaring what the common law has always been.
I do not accept that.
Section 16 is a section dealing with Commencement, and the 2006 Act was clearly passed to change a common law rule expounded in Barker.
It is true that the 2006 Act leads to a result which the common law might itself have accepted as appropriate: Trigger, para 70.
But the common law did not do so, and the reasons why it did not are in my view both coherent and understandable.
They are set out extensively in Barker, and I need not repeat them here.
What the House did in Barker was to treat proportionality as a concomitant of the exceptional liability which derives from the special rule in Fairchild and which the House was, on that basis, prepared in Barker to extend to situations beyond those which Fairchild had held covered by it.
The United Kingdom Parliaments reaction was its right, but does not alter the common law position apart from statute, or have any necessary effect in jurisdictions where the common law position has not been statutorily modified.
In Trigger the court looked closely at Barker, and saw itself as applying what Barker established: see paras 63 66 and 72 of my judgment.
At para 66 I noted that the speeches of Lord Hoffmann, Baroness Hale and (possibly) Lord Walker in Barker all viewed an employers legal responsibility as 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.
To those references can be added that Lord Scott at para 50 and Lord Walker at para 103 in Barker both expressly agreed with Lord Hoffmanns reasons for allowing the appeals on the issue of apportionment.
Further, there was in Trigger no issue about or challenge to the correctness of Barker.
In these circumstances, it would on the face of it be surprising to find that Trigger had consigned that decision to history.
IEG submits that, under Trigger, an employer shown to have significantly exposed a mesothelioma victim to asbestos dust is liable for having caused (in a weak or broad sense) the mesothelioma, and that anyone who is liable for causing a disease must answer for the whole loss resulting from that disease.
In the Court of Appeal, [2013] EWCA Civ 39, that submission was accepted by Toulson LJ at paras 30 31 and Aikens LJ at paras 53 55.
No doubt the submission is (subject to conventional limitations like remoteness and mitigation) generally correct in a conventional case where causation must exist in its ordinary sense of conduct which on a balance of probability brought about or contributed to the disease.
But causation in a weak or broad sense is unconventional.
Barker, as analysed in Trigger, accepted causation in this weak or broad sense and nonetheless held an employers responsibility to be proportionate to that part for which that employer was responsible of the victims total exposure to asbestos dust.
Trigger cannot therefore be said to affect or undermine the reasoning or decision in Barker.
The argument that insists that a conventional approach to the measure of damages must apply in a context where liability is imposed on an unconventional basis was rejected by Baroness Hale in her judgment in Barker.
The relevant passages are worth quoting at length: 121. mesothelioma is an indivisible injury.
What makes it an indivisible injury, and thus different from asbestosis or industrial deafness or any of the other dose related cumulative diseases, is that it may be caused by a single fibre.
This much, as I understand it, is known, although the mechanism whereby that fibre causes the transformation of a normal into a malignant cell is not known. 122.
But it does not necessarily follow from the fact that the damage is a single indivisible injury that each of the persons who may have caused that injury should be liable to pay for all of its consequences.
The common law rules that lead to liability in solidum for the whole damage have always been closely linked to the common law's approach to causation.
There is no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations.
Where joint tortfeasors act in concert, each is liable for the whole because each has caused the whole.
The owner of one of the two dogs which had worried the sheep was liable for the whole damage because each of the dogs did in law occasion the whole of the damage which was suffered by the sheep as a result of the action of the two dogs acting together: Arneil v Paterson [1931] AC 560, 563, per Viscount Hailsham.
Where two people, acting independently, shoot simultaneously and kill another, each is still liable for the whole.
This is because, according to Prosser & Keeton on Torts, 5th ed, p 345, there is no sensible basis for dividing up the single damage which they have combined to cause for death cannot be divided or apportioned except by an arbitrary rule. 123.
But as our perceptions of causation have expanded, so too has our conception of whether there may exist a sensible basis for apportionment.
In Bonnington Castings Ltd v Wardlaw [1956] AC 613, the issue was whether the employer was liable at all, given that some of the exposure to dust was in breach of duty and some was not; but it could be shown that the tortious exposure had materially contributed to the harm, even if it was not the only cause.
In McGhee v National Coal Board [1973] 1 WLR 1, where again some of the exposure was in breach of duty and some was not, but this time it could not be shown that the tortious exposure had even materially contributed to the harm, the issue again was whether the employer was liable at all; it was held that a material increase to the risk of harm was the equivalent of a material contribution to causing the harm.
In neither case was it argued that the employer should only be liable to the extent that his behaviour had been in breach of duty.
Yet in the case of diseases which progress over time, such exercises have now become commonplace, following the decision of Mustill J in Thompson v Smiths Shiprepairers (North Shields) Ltd [1984] QB 405, whether as between successive employers or as between tortious and non tortious exposure by the same employer. 124.
There is, therefore, a logical connection between the law's approach to causation and the law's approach to the extent of liability.
At each point along the road in developing the concept of causation, there is a choice to be made as to whether a single tortfeasor or a joint or concurrent tortfeasor should be liable for the whole or only for part of the damage.
This is a policy question.
One element in making that choice is whether there exists a sensible basis for apportioning liability.
Another element is whether this would strike the right balance of fairness between claimant and defendant. 125.
In one sense, there always exists a sensible basis for apportioning liability where more than one person is involved.
Liability could be divided equally between them.
But that would be arbitrary unless each was equally responsible.
Even if liability were equally divided, this could be unfair to the claimant if, as in the dog worrying and shooting examples, each defendant has in fact caused the whole of his damage.
In the Bonnington Castings and McGhee situations, where one employer is responsible for all the potentially harmful exposure, there may exist a sensible basis for apportioning liability, but it may still be unfair to the claimant to do this, if the one employer has undoubtedly caused all his harm. 126.
But in the Fairchild situation we have yet another development.
For the first time in our legal history, persons are made liable for damage even though they may not have caused it at all, simply because they have materially contributed to the risk of causing that damage.
Mr Stuart Smith does not quarrel with the principle in Fairchild.
He simply argues that it does not follow from the imposition of liability in such a case that each should be liable for the whole.
I agree with the majority of your Lordships that indeed it does not follow.
There is in this situation no magic in the indivisibility of the harm.
It is not being said that each has caused or materially contributed to the harm.
It can only be said that each has materially contributed to the risk of harm.
The harm may be indivisible but the material contribution to the risk can be divided.
There exists a sensible basis for doing so.
Is it fair to do so? 127.
In common with the majority of your Lordships, I think that it is fair to do so.
On the one hand, the defendants are, by definition, in breach of their duties towards the claimants or the deceased.
But then so are many employers, occupiers or other defendants who nevertheless escape liability altogether because it cannot be shown that their breach of duty caused the harm suffered by the claimant.
For as long as we have rules of causation, some negligent (or otherwise duty breaking) defendants will escape liability.
The law of tort is not (generally) there to punish people for their behaviour.
It is there to make them pay for the damage they have done.
These Fairchild defendants may not have caused any harm at all.
They are being made liable because it is thought fair that they should make at least some contribution to redressing the harm that may have flowed from their wrongdoing.
It seems to me most fair that the contribution they should make is in proportion to the contribution they have made to the risk of that harm occurring. 128.
This solution is all the more attractive as it also provides the solution to the problem posed by the Barker appeal.
If the damage could have been suffered during a period of non tortious exposure, it is suggested that the tortious exposers should escape liability altogether.
There is considerable logic in this.
One way of explaining Fairchild is that all were in breach of duty and one of them must be guilty, so that it made sense that all should be liable.
That rationale does not apply, or certainly not with the same force, if there are other, non tortious causers in the frame.
But if the tortious exposers are only liable in proportion to their own contribution to the claimants overall exposure to the risk of harm, then the problem does not arise.
The victim's own behaviour is only relevant if he fails to take reasonable care for his own safety during a period of tortious exposure by a defendant.
This reasoning remains in my view convincing at common law.
In the United Kingdom, Parliament has, as is its right, taken a different view of the equities as between a person responsible and a victim of mesothelioma.
That in turn gives rise to further problems of equity in relation to other, indirectly affected persons under the second main question on this appeal.
But for the reasons I have given, neither the 2006 Act nor Trigger is inconsistent with or undermines the decision in Barker.
For completeness, I record that Mr Antonio Bueno QC representing IEG expressly disclaimed any intention to invite the court to overrule Barker on this appeal.
That, he frankly said, would bring in other considerations, and he said that IEGs case was that it has already become history as a result of Trigger.
However, Mr Patrick Limb QC, also representing IEG, did at times appear to be inviting the court to address and overrule Barker head on.
In my view, that latter invitation is not open to IEG, and further Barker has not been overruled by Trigger, and remains as part of the common law of England, which we are to take to be the same as the common law of Guernsey.
The all sums policy construction issue
The written cases identify under this head a secondary issue, concerning the extent of Zurichs liability to indemnify IEG.
It arises from observations made by Aikens LJ, with whose judgment Kay LJ agreed.
After concluding in para 53 that the majority in Trigger had grounded liability on a weak or broad causal link within the policy period, he went on in para 54 to say: Once that causal requirement is fulfilled, then the employer will have proved that the mesothelioma (the disease) was caused during any period of insurance.
It follows from the policy wording that the insurer is then liable to indemnify IEG for all sums for which the Insured shall be liable in respect of any claim for damages for such disease (my emphasis).
In other words, Zurich will be liable to indemnify IEG for the whole of the damages paid out by IEG in respect of Mr Carrs claim for damages for contracting mesothelioma, not just a proportion worked out by reference to the period during which IEG was covered by policies for which Zurich is responsible.
The reference to all sums comes from the primary insuring clause set out in para 13 above.
As I understand Zurichs written case, raising the secondary issue on the basis of this paragraph, Zurich was concerned that Aikens LJ was or might be suggesting that, even if Barker stood and applied (so that IEGs liability towards Mr Carr would have been limited to a proportion of his total loss, had IEG only exposed him for six out of the total of 27 years), IEG, having actually exposed him for the total 27 years though only insured with Midland for six of such years, might under the all sums provision in the insurance be entitled to recover from Zurich in respect of Mr Carrs total loss attributable to the 27 years.
Any such argument would be clearly contrary to the fundamental principle of indemnity mentioned in para 26 above.
Further, as I understand it, no such argument is in fact advanced by IEG.
On the other hand, IEG appears to have understood Zurich to contend that, even if Barker had become past history (so that IEG was liable in full to Mr Carr for the whole of his loss resulting from mesothelioma, whatever the period for which it had exposed him compared with other periods of exposure), Zurich should under the Midland policies only answer for a rateable proportion of such total loss, viz 22.08%.
For reasons indicated in para 23 above, I do not understand Zurich to make any such case.
Zurich accepts that, if Barker no longer represents the common law, and IEG became liable for Mr Carrs full loss simply because he was exposed to asbestos dust during the six year Midland insurance period, then Zurich must on the face of the Midland policy wordings answer under the insurance, even though he was also exposed during 21 other years.
In these circumstances, I need say no more on the secondary issue.
It follows that the appeal must succeed as regards the compensation and interest paid by IEG to Mr Carr, because Barker continues to represent the common law position which applies in Guernsey.
The Court of Appeal was wrong to set aside Cooke Js judgment, which should be restored, on this aspect.
Defence costs
That leaves the defence costs totalling 13,151.60 which IEG incurred in defending Mr Carrs claim based on exposure to asbestos dust over the full 27 years of his employment with GGLCL.
Zurich submits that these costs should be pro rated on the same 22.08% basis.
An important parallel, though not in my view identical, issue would arise in any case where the Compensation Act 2006 applies, making a responsible person liable for the whole damage suffered by a mesothelioma victim, regardless of the length and volume of his other exposures to asbestos dust.
As regards defence costs, IEG relies upon reasoning adopted by the Privy Council in New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd [1997] 1 WLR 1237.
There proceedings were instituted on the basis of five causes of action against a company and its director, whose costs were both covered by an insurance policy, and in the case of one of the causes of action against a third person not so covered.
All the defendants were represented by the same lawyers.
It was common ground that costs not relating in any way to the insured directors defence would not be covered, while costs exclusively related to the insured directors defence would be covered.
The issue which arose was as to defence costs which related at one and the same time to the defence both of the claim against the insured director and of the claim against the uninsured third person.
The courts below took the view that there should be an apportionment.
The Privy Council reached a different view, as a matter, it said, of construction of the relevant insurance.
This covered all loss which such officer has become legally obligated to pay on account of any claim made against him for a wrongful act.
As this wording would cover the whole costs incurred in the defence where the insured officer was the sole defendant, the Board saw no reason why it should not cover them all, where some of them related also to the defence of an uninsured co defendant.
There was no question of the costs relating to any period other than that insured, and, importantly, they arose on a conventional causative basis because of a claim against the director for a wrongful act.
Two points are notable in relation to the defence costs which IEG seeks to recover from Zurich.
First, there is nothing to suggest that these would have been any less had the claim against IEG been confined to the six year period covered by the Midland policies.
Second, and more significantly, the defence costs which IEG incurred were incurred with the consent of the Company in defending any such claim for damages within the meaning of the second sentence of the main insuring clause set out in para 13 above.
That is, they were incurred by IEG in defending a claim by a former employee for damages for injury or disease which he was caused to sustain while employed during the periods of insurance provided by Midland.
The claim against IEG could, under the special rule in Fairchild, be pursued on the basis that GGLCL had done no more than expose Mr Carr to a risk of suffering mesothelioma.
In the light of Trigger the first sentence of the main insuring clause set out in para 13 above covers liability arising on this basis.
But IEGs liability for and right to recover defence costs does not arise under the special rule, or on the basis that Mr Carr was exposed to any risk.
It is not recoverable under the first, but under the second sentence of the main insuring clause.
Under the second sentence, it is recoverable on the conventional basis that IEG can prove that it incurred (as a matter of fact or probability) actual financial loss in the circumstances covered by that sentence.
This distinction is important.
Once it is shown that an insured has on a conventional basis incurred defence costs which are covered on the face of the policy wording, there is, as the New Zealand Forest case shows, no reason to construe the wording as requiring some diminution in the insureds recovery, merely because the defence costs so incurred also benefitted some other uninsured defendant.
The special rule analysis
However, liability arising under the special rule in Fairchild on the exceptional basis of a weak or broad causal link consisting of exposure to a risk is different.
As the volume of case law indicates and not surprisingly, it has proved difficult to work through the implications of the special rule in Fairchild.
But, having, for wholly understandable reasons, gone down the Fairchild route, the common law must, in my view, face up to the consequences, if necessary by further innovation.
That is so, even if some of the problems arise from Parliaments intervention by the 2006 Act.
As already observed, the common law might itself have taken the same approach as that Act, though it did not in fact do so.
Had it done, it would certainly have had to work out the common law implications.
Parliaments intervention does not release the courts from their role of working out the common law implications of a special rule which remains essentially common law based, although subject to the modification introduced by the 2006 Act.
Trigger may be regarded as an instance of performance of this role.
It is worth emphasising how novel the situation created by Fairchild and Trigger is in an insurance context.
When the present liability insurances were placed, what Hobhouse LJ said about the fundamental nature of the insurance period in the context of a property reinsurance in Municipal Mutual Insurance Ltd v Sea Insurance Co Ltd [1998] Lloyd's Rep IR 421, 435 436 would have been just as true of them: The judge came to the surprising conclusion that each reinsurance contract covered liability in respect of physical loss or damage whether or not it occurred during the period covered by the reinsurance contract and he went on expressly to contemplate that the same liability for the same physical loss or damage might be covered under a number of separate contracts of reinsurance covering different periods.
This is a startling result and I am aware of no justification for it.
When the relevant cover is placed on a time basis, the stated period of time is fundamental and must be given effect to.
It is for that period of risk that the premium payable is assessed.
This is so whether the cover is defined as in the present case by reference to when the physical loss or damage occurred, or by reference to when a liability was incurred or a claim made.
Contracts of insurance (including reinsurance) are or can be sophisticated instruments containing a wide variety of provisions, but the definition of the period of cover is basic and clear.
In short, insurance would have been and was placed on the basis that a particular liability or loss would fall into one, not a series of separate periods.
If an insured wanted complete cover, it would have to maintain it for all such periods.
The relevant period would also be ascertained by objective criteria, which meant that insureds could not select it at will or to obtain the advantage of the cover most favourable from their viewpoint.
Thus: (i) Under a liability insurance where the trigger is causation in its traditional sense based on probability, no problem exists about allocating tortious liability to one and only one policy period. (ii) Under a claims made policy, claims must be notified and will attach at latest when they arise, while specific clauses dealing with the notification of circumstances likely to give rise to a claim may attach a claim to an earlier policy than that during which it actually arises. (iii) An insured may, for one reason or another, have double insurance.
In that context, it may elect which to invoke, but well established principles exist for the two insurers to share liability equally up to the common limit. (iv) An insured may also agree to carry an excess or franchise, in which case it will have to bear that amount before looking to its insurer, and will as a self insurer rank last in any recoveries made by way of subrogation from any third party: Lord Napier and Ettrick v Hunter [1993] AC 713.
Against this background, the present appeal illustrates some of the problems, arising from the special principles recognised and applied in Fairchild and Trigger, at the level of relationships between persons responsible and their insurers: (a) An employer, manufacturer or other person may well have been responsible for exposing employees and others to asbestos dust over many years. (b) For many years, he may have decided not to insure, or been unable to obtain cover which he regarded as acceptable. (c) During some years or as from some date, he may have decided to take out insurance.
Employers should have done so, once employers liability insurance became compulsory, that is in and after 1972 in England, Wales and Scotland, 1975 in Northern Ireland and 1993 in Guernsey. (d) Even when insurance was taken out, it may have been taken out on a claims made, rather than causation, basis; even after employers liability insurance was compulsorily required, it may have been taken out on this basis under what Trigger indicates to have been the misapprehension that this form of insurance would satisfy that requirement. (e) Where insurance was taken out: (i) the employer, manufacturer or other person may not have fully appreciated the long term nature of the risks covered and may have failed to keep records from which the insurance can now be traced; or (ii) the insurer may have become insolvent.
Where a person responsible for exposing a victim of mesothelioma to asbestos dust over a period of years has had liability insurance with the same insurer over the whole period, no problem arises.
But frequently this will not have been, or cannot be shown to have been, the case, and the potential anomalies then arise.
On IEGs case, the special rule, as modified by the 2006 Act and explained in Trigger, allows a person responsible for exposure to select any year during which he can show that he carried liability insurance and to pass the whole of any liability for such exposure to the liability insurer on risk in that year, without regard to other periods of exposure.
anomalies are self evident: If matters stop there, and the insurer ends up carrying the whole liability, the (a) It is contrary to principle for insurance to operate on a basis which allows an insured to select the period and policy to which a loss attaches.
This is elementary.
If insureds could select against insurers in this way, the risks undertaken by insurers would be entirely unpredictable. (b) It is anomalous for a liability insurance underwritten for a premium covering losses arising from risks created during its particular period to cover losses about which all that can be said is that they arise from risks extending over a much longer period, in respect of which no premium has, or could have, been assessed or received by the insurer. (c) An insured is able to ignore long periods in respect of which he himself has chosen not to insure, or has not kept any record of any insurance which he may have taken out, or has chosen to entrust his insurance to an insurer who has become insolvent. (d) An insured has no incentive to take out or maintain continuous insurance cover.
On the contrary, it is sufficient to take out one years cover, or even to arrange to be held covered for only one day, during whatever happens subsequently to prove to have been the overall exposure period whether this is done at the very start of the overall exposure period, or later after many decades of exposure, perhaps due to a sudden appreciation of the virtues of insurance under the special rule.
In each case the anomaly arises because, without more, the analysis identified in the last sentence of para 42 above fails to adjust to the unique situation which arises from the principles recognised in Fairchild and Trigger.
There are various responses that the law might have taken to such anomalies.
One is that which Lord Phillips took in Trigger, viz that the insurance only answered for liability proved as a matter of probability to have resulted from asbestos exposure in the insurance period.
Lord Phillips approach can be viewed as entirely conventional, in the sense that it reflected the traditional view that, under a liability policy like the Midlands, the concept of causation looked to the proximate or effective cause, to be proved as a matter of probability.
But it would have meant that no liability insurance cover existed in respect of mesothelioma.
In the light of this drastic consequence, the majority of the court in Trigger preferred a second response.
It equated the concept of causation in an insurance context with the weaker or broader meaning which the courts have, to the benefit of victims, given it in tort.
This was a choice rationalised in terms of the principle that a facultative liability insurance normally responds to whatever may prove to be the liability incurred by the insured.
In Trigger there was no consideration of a situation in which a relevant insurance covered only part of an overall period during which the insured employer had exposed the victim to asbestos dust.
But in my view the reasoning in Trigger binds this court to hold that the mesothelioma is caused in the sense that it results from exposure which existed in each and every period of any overall period of exposure.
The fact that a victim or an insured only relies on one period of exposure does not alter the legal position, that it can equally be said to have been caused in every other period of exposure.
This is because, as a matter of law, exposure connotes causation, in both tort and tort liability insurance law.
It is the anomalies resulting from that conclusion which the court must now resolve, accepting but building on its own prior jurisprudence.
Lord Sumptions judgment argues for a third response.
He agrees that the respondents case involves all the anomalies already identified.
But he considers that they can and can only be met by interpreting the insurance policy wording in a way which none of the parties or interveners before the court has suggested.
He regards it as consistent with the decision in Trigger to say that an insurer, who only covers part of the total period for which the insured exposed the victim, is only liable for a corresponding part of the insureds liability to the victim.
In my view, this is inconsistent with Trigger.
Once one accepts that causation equates with exposure, in tort and tort liability insurance law, there is no going back on this conclusion simply because there was exposure by the insured of the victim both within and outside the relevant insurance period.
More specifically, Lord Sumption suggests that the insurer must still show that the occurrence fell within the chronological limits of the policy (para 156).
But that raises the question: what is here meant by the occurrence for which the employer is liable? It cannot be the disease itself, which can and does occur decades later.
If it is the incident which causes the disease, then, as Lord Sumption himself recognises (para 157), it is each and every, or any, negligent exposure to asbestos involving a contribution by the employer to the risk of the victim sustaining mesothelioma that constitutes causation for the purposes of a liability insurance like the present.
Any such exposure can be relied on as causing the mesothelioma and making the employer fully liable for the victims loss, and any such exposure occurring during any policy period will on a like basis mean that the insurer incurs full liability.
Lord Sumption seeks to avoid this conclusion, acknowledging that it makes some sense as between successive employers who are guilty of a continuous tort, but saying that the same logic cannot be applied as between successive insurers (para 157).
But the primary question is not as between two insurers, it is as between the employer and any insurer against which he claims; and there is also nothing illogical about a conclusion that each of successive insurers is potentially liable in full, with rights of contribution inter se.
Lord Sumption also advances a broader argument, that it is conceptually impossible for mesothelioma to be successively caused in every period of exposure, because Mesothelioma is caused only once, or, as he later puts it, that it is not conceptually possible for an insurer to be liable on the footing that the disease was actually caused in every year (para 158).
But this moves the terminological goalposts, by reverting to traditional notions of causation those applicable outside the Fairchild enclave, where proof on the balance of probabilities is traditionally required.
Within that enclave, the House accepted in Fairchild that it was necessary to adopt a weak notion of causation, in order to protect victims, and in Trigger the Supreme Court held that this weak notion of causation carries through into an insurance context.
On this basis, loss is caused for the purposes of tort and liability insurance contracts like the present in any and every period when the victim was exposed to asbestos and so to the risk of mesothelioma.
Lord Sumptions broader argument is therefore incorrect.
Moreover, if it had any force, it is not obvious why it would not apply equally to tort and so preclude one negligent employer from seeking contribution from another yet that is expressly provided for by the 2006 Act.
Lord Sumption states further that Trigger cannot be applied without modification when the question is how much of the loss is attributable to particular years, and continues by saying the the rational response of the law is to prorate the whole loss between every policy year during which the insured employer exposed the victim to asbestos (para 160).
Lord Sumption correctly points out that it is only when one aggregates every successive period that the chances add up to 100% (para 158).
But this means, logically, that, if (as Lord Sumption maintains) any insurance can only answer pro rata for exposure or risk occurring during the insurance policy period, the relevant pro rating must be by reference to the total exposure of the victim from all employers and sources.
The total period of exposure by the particular employer is in this context irrelevant, since the insurance wording says nothing about it and the chances of sustaining mesothelioma do not correspond with it when there are other sources of exposure.
For all these reasons, I cannot therefore accept Lord Sumptions approach.
An insurer, whether for the whole or part of the period for which the insured employer has negligently exposed the victim to asbestos, is on the face of it liable for the victims full loss.
However, I agree that the analysis cannot stop here.
The court is faced with an unprecedented situation, arising from its own decisions affecting both tort and insurance law.
A principled solution must be found, even if it involves striking new ground.
The courts cannot simply step back from an issue which is of their own making, by which I do not mean to suggest that it was in any way wrong for the courts, from Fairchild onwards, to have been solicitous of the needs of both victims and insureds.
But by introducing into tort and liability insurance law an entirely novel form of causation in Trigger, the courts have made it incumbent on themselves to reach a solution representing a fair balance of the interests of victims, insureds and insurers.
In my view, the law has existing tools which can be adapted to meet this unique situation.
The concepts of co insurance and self insurance are both at hand.
Co insurance is relevant in so far as the insured has other insurance to which it could also have resorted on the basis that it had also exposed the victim during the period of that insurance.
Self insurance is relevant, because an insured who has not (i) taken out or (ii) kept records of or (iii) been able to recover under such other insurance must be regarded as being its own insurer in respect of the period in question for which it has no cover.
A sensible overall result is only achieved if an insurer held liable under a policy like the Midland policy is able to have recourse for an appropriate proportion of its liability to any co insurers and to the insured as a self insurer in respect of periods of exposure of the victim by the insured for which the insurer has not covered the insured.
There are of course difficulties about drawing a direct analogy between the present situation and conventional situations in which the concepts of co insurance and self insurance have previously been deployed.
But the court would be abrogating its role to achieve a just solution consistently with what any sensible commercial party would have contemplated if it does not adapt and develop conventional principles to meet an unconventional, indeed unique, challenge.
I see no barrier at all to this in the fact that the parties did not directly contemplate or cater for it in the insurance policy between them.
It is equally clear that they did not contemplate or cater for the principles imposed upon them by the decisions in Fairchild and Trigger.
To carry the declaratory theory to the point of asserting the contrary would be absurd.
To say that [judges] never change the law is a fiction and to base any practical decision upon such a fiction would indeed be abstract juridical correctitude, rather it is the case that a judicial decision can change the law retrospectively: Deutsche Morgan Grenfell Group plc v IRC [2006] UKHL 49, [2007] 1 AC 558, para 23, per Lord Hoffmann.
Equally, the fact that the parties may not have contemplated or made specific provisions about co insurance and self insurance on the basis of those decisions is no obstacle to the court doing so.
To say (as Lord Sumption does: para 185) that there has here been a contractual allocation of risks which precludes the court taking steps to avoid evident absurdity which no contracting party can sensibly have contemplated or intended appears to me unrealistic.
There was a contractual allocation of risks on the basis and in respect of exposure by the insured during the policy period.
But if there was further exposure by the insured, outside the policy period, there is no reason why the insurer should not have proportionate recourse against anyone who can be seen to carry the risks attaching to such further exposure.
There is nothing inconsistent with the agreed insurance or its period in deriving from a consideration of circumstances outside that insurance and its period a right to contribution in respect of the loss incurred in the first instance by the insurer: see further paras 67 73 below.
In summary, so long as the insured has insured itself for the whole period for which it exposes the victim, the insurer can ask for no more, and must, as Trigger decides, bear the whole of any liability which the insured incurs.
The palliative in this latter situation is of course that an employer/insured will have a right to contribution under the Civil Liability (Contribution) Act 1978 against any other person who was, negligently or in breach of duty, responsible for exposing the victim to asbestos, and its insurer will, after meeting the insurance claim, be subrogated to this right to contribution against the other responsible source of exposure.
The anomalies therefore only arise when the insured has exposed the victim for a longer period than that for which it is covered by the insurer to which it chooses to look for indemnity.
The anomalies are, as stated, not capable of being addressed by any of the laws existing tools for dealing with more conventional problems.
As observed in Trigger, paras 67 68, section 3(3) of the 2006 Act preserves the conventional tools, found in the Law Reform (Contributory Negligence) Act 1945 and the Civil Liability (Contribution) Act 1978, for dealing with the conventional problems of contributory fault (by a victim of mesothelioma) and concurrent liability in respect of the same damage (between different persons responsible for exposing a victim of mesothelioma to asbestos dust, whether over the same or different periods).
Persons responsible for exposing victims to asbestos dust are thus appropriately protected.
Their protection is carried one step further by section 3(7), which enables the Treasury to make regulations for the provision of compensation to a responsible person who is unable to obtain contribution under the 1978 Act, because an insurer of such person is or is likely to be unable to satisfy the claim for a contribution.
By definition in section 3(10), the reference in section 3(7) to a responsible person also includes an insurer of such a person.
That is the only respect in which the Act addresses the interests of an insurer, as a corollary of the rules relating to contribution between persons responsible.
The Act is not concerned with, and does not address, the effects on insurers or as between persons responsible and insurers of the special rule as modified by section 3(1) and (2).
It is for the courts to work out these effects at that level.
Co insurance
So far as appears, during the overall period of 27 years during which it exposed Mr Carr to asbestos dust, GGLCL only had insurance for two periods, six years with Midland and two years with Excess.
Not surprisingly, no previous authority exists regarding the relationship between Midland and the Excess in the present context.
Zurich could not have any sort of subrogation right against Excess, since, if Zurich is liable for IEGs full loss, IEG can have no further claim for indemnity against Excess.
Further, no one would ordinarily regard insurances for different insurance periods as double insurance.
The reason for taking out or renewing a fresh annual policy during a fresh year is, on the contrary, the common sense truism that, unless one does so, one will be uninsured.
The concept of double insurance, as hitherto recognised in English law, was explained by Mr Gavin Kealey QC, sitting as a deputy judge of the Commercial Court, in National Farmers Union Mutual Insurance Society Ltd v HSBC Insurance (UK) Ltd [2010] EWHC 773 (Comm), [2010] 1 CLC 557, para 15: Double insurance arises where the same party is insured with two (or more) insurers in respect of the same interest on the same subject matter against the same risks.
If a loss by a peril insured against occurs, the general rule is that, subject to any particular modifying terms and to the limits of indemnity provided under each insurance contract, the insured may recover for the whole of the loss from either insurer.
Upon such indemnity being paid to the insured by either one of the two insurers, that insurer is, in general, entitled to recover a contribution from the other.
To quote from Lord Woolf in Eagle Star Insurance Co Ltd v Provincial Insurance plc [1994] 1 AC 130, 138: As was pointed out by Lloyd LJ at the beginning of his judgment in the Legal and General case [Legal and General Assurance Society Ltd v Drake Insurance Co Ltd] [1992] QB 887, 891], in general the principles on which one insurer is entitled to recover from another in a case of double insurance have been settled since Lord Mansfield's day.
As Kitto J stated in Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342, 349 350, a principle applicable at law no less than in equity, is that persons who are under co ordinate liabilities to make good one loss (eg sureties liable to make good a failure to pay the one debt) must share the burden pro rata: the object being, as Hamilton J stated in American Surety Co of New York v Wrightson (1910) 103 LT 663, 667: to put people who have commonly guaranteed or commonly insured in the same position as if the principal creditor or the assured had pursued his remedies rateably among them instead of doing as he is entitled to do, exhausting them to suit himself against one or other of them.
Previous first instance statements to like effect that double insurance requires the same insured to be covered in respect of the same property against the same risks can be found in Petrofina (UK) Ltd v Magnaload Ltd [1984] 1 QB 127, 140F G per Lloyd J, followed in Wimpey Construction UK Ltd v D V Poole [1984] 2 Lloyds Rep 499, 516 (Webster J).
The insurances taken out with Midland and Excess would not satisfy this concept.
In particular, they were not on the same interest or against the same risks.
Nor does the special rule recognised in Fairchild as modified by the 2006 Act make them so.
The Excess policies covered injury or disease caused by the risk of exposure occurring in 1979 and 1980, whereas the Midland policies covered injury or disease caused by the risk of exposure occurring in the years 1983 to 1988.
If one accepts the definition accepted by Gavin Kealey QC, then Eady J was right in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Rep IR 426, para 22, to reject the submission that two or more successive policies of insurance could be regarded as covering the same liability towards a victim of mesothelioma for the purposes of a condition in the relevant policy in that case addressing situations of double insurance.
However, Australian appellate courts have been willing to contemplate a more relaxed view of double insurance, to address situations where the same liability is ultimately covered albeit by different routes and involving different insureds: AMP Workers Compensation Services (NSW) Ltd v QBE Insurance Ltd [2001] NSWCA 267, (2001) 53 NSWLR 35, Zurich Australian Insurance Ltd v GIO General Ltd [2011] NSWCA 47.
They have in a series of cases also emphasised the root principles of equity and justice which lie behind the laws recognition of rights of contribution: see Albion Insurance Co Ltd v Government Insurance Office of New South Wales [1969] HCA 55, 121 CLR 342, esp per Kitto J. Kitto Js judgment has been cited with approval in Burke v LFOT Pty Ltd [2002] HCA 17, 187 ALR 612, Zurich Australian Insurance Ltd v GIO General Ltd [2011] NSWCA 47 and, in a brief extract, by Lloyd LJ in the Legal and General case: see para 57 above.
As Burke v LFOT Pty Ltd shows, Australian courts have carried the doctrine of equitable contribution far enough for it to provide as a matter of common law a right of contribution in respect of any common obligation, with a breadth and flexibility similar to that statutorily available in England under, now, the Civil Liability (Contribution) Act 1978, and, previously (though only as between tortfeasors), the Law Reform (Married Women and Joint Tortfeasors) Act 1935.
In Burke itself the claim for contribution was only refused because it was inequitable in the particular circumstances to award any contribution against a negligent solicitor in favour of LFOT which had engaged in misleading and deceptive conduct in breach of a statutory obligation.
Contribution is, ultimately, a principle based on natural justice, as Lord Mansfield said in Godins case, cited in para 26 above.
A similar justification was given by Lord Chief Baron Eyre in Dering v Earl of Winchelsea (1787) 1 Cox Eq 318, 321, for recognising a right of contribution between sureties who had each accepted distinct and separate obligations and were not therefore in any contractual relationship with each other: If we take a view of the cases both in law and equity, we shall find that contribution is bottomed and fixed on general principles of justice, and does not spring from contract; though contract may qualify it . [I]n equali jure the law requires equality; one shall not bear the burthen in ease of the rest, and the law is grounded in great equity.
A similar approach is not out of place in a context where the law has developed new liabilities to redress perceived injustice.
Consistently with this, Charles Mitchell, in The Law of Contribution and Reimbursement (2003) notes, para 4.14, that The categories of claimant by whom contribution can be claimed at common law or in equity are not closed Mitchell cites in this connection, inter alia, Burke v LFOT Pty Ltd. Meagher, Gummow and Lehane in Equity, Doctrines and Remedies (4th ed) (2002), para 10 020, also note the influence on the principles governing contribution of the equitable maxim that equality is equity and the doctrine of marshalling, whereby: as between several interested parties it should not rest with the creditor by his selection of remedies open to him to determine where ultimately the burden was to fall.
The Legal and General case, referred to in the passage cited by Mr Gavin Kealey QC (see para 57 above), illustrates the latter principle.
There the insureds choice to proceed against insurer A under one policy meant that no notice of claim was given to insurer B under the other policy within 14 days as required by its terms.
It was held by the majority (Lloyd and Nourse LJJ) that the absence of any such notice did not defeat the claim for contribution based on double insurance.
Again, the reasoning is founded on broad principles of equity: Since the assured could have gone against B, had he chosen to do so, the burden as between A and B should be shared equally.
It would be inequitable for either of the insurers to receive the benefit of the premium without being liable for their share of the loss. (per Lloyd LJ, p 892C D) There being no contract between the two insurers, the right of contribution depends, and can only depend, on an equity which requires someone who has taken the benefit of a premium to share the burden of meeting the claim.
Why should that equity be displaced simply because the assured has failed to give the notice which is necessary to make the other insurer liable to him? As between the two insurers the basis of the equity is unimpaired.
He who has received a benefit ought to bear his due proportion of the burden. (per Nourse LJ, at p 898B D)
In my view, the principles recognised and applied in Fairchild and Trigger do require a broad equitable approach to be taken to contribution, to meet the unique anomalies to which they give rise.
I note that this solution is also advocated by Professors Merkin and Steele in their recent study on Insurance and the Law of Obligations (2013) (OUP), p 378.
If a broad equitable approach is taken in the present unique circumstances, then it should no doubt also be possible in the present context to overcome the normal presumption with double insurance that loss should be shared equally.
Contribution between insurers covering liability on the basis of exposure should take account of differing lengths of insured exposure.
Conventional rules need to be adapted to meet unconventional problems arising from the principles recognised and applied in Fairchild and Trigger.
An alternative possible avenue of recourse against a double insurer in respect of policy liabilities based on breach of an obligation assumed on or after 1 January 1979 is the Civil Liability (Contribution) Act 1978.
The argument would be that both insurers are liable for the same damage within the meaning of section 1(1) of that Act.
The possibility that the 1978 Act applies is dismissed in Colinvaux & Merkins Insurance Contract Law, para C 0643, while Charles Mitchell in The Law of Contribution and Reimbursement, (2003), paras 4.13 and 4.43 4.44, suggests that it turns on whether liability under an indemnity insurance is regarded as the right to be indemnified by a payment of money or is, under a view which the author suggests that the cases favour, regarded as arising from breach of an undertaking to prevent the insured risk from materialising.
It is unnecessary to resolve this difference here.
It suffices to say that, if insurance contract liabilities are viewed as sounding in damages, it appears somewhat surprising if the 1978 Act could operate as an alternative statutory remedy with different effect in a case of true double insurance in respect of post commencement liabilities.
Self insurance
The extension of currently recognised principles of double or co insurance would operate only to address a very limited part of the problem.
The fundamental problem remains that Zurich is, as a result of insurance policies covering only six years of exposure, liable for consequences of an exposure lasting 27 years.
There can be and is no proof or likelihood that the mesothelioma resulted from fibres ingested in the six, rather than the remaining 27, years.
Even assuming that Zurich has a right of contribution against the Excess, this can only be in respect of two of those 27 years, so that the two insurers would, if matters stopped there, share the consequences of 27 years of exposure by GGLCL on the basis of only eight years of insurance in the proportions of (Zurich) and (Excess).
The obvious counter balance in this situation is to treat the insured employer, GGLCL or now IEG, as a self insurer for the remainder of the 27 year period in respect of which it can show no insurance capable of affording contribution.
Nothing obliged GGLCL to maintain its liability insurance with any particular insurer.
But in so far as it chose not to take out any insurance or chose to insure with another insurer, that should in common sense be at its risk.
It should not be able to avoid the consequences of that risk by electing to pursue Zurich.
IEGs response to such an approach is in substance two faceted.
It submits, first, that it finds no support in existing or conventional principles of contribution, and, second, that the recognition of a right of contribution would be inconsistent with the insurance contracts made with Midland.
In my opinion, neither aspect of this response is valid.
As to the first, if the common law always depended on a precedent, Fairchild, or perhaps the earlier Scots House of Lords authority of McGhee v National Coal Board 1973 SC (HL) 37, should never have been decided as it was; but in any event, as I shall indicate, the concept of contribution to counter balance a prima facie contractual right is not without precedent.
The second part of IEGs response, the suggested inconsistency between any right of contribution and the insurance contracts which Midland issued for six years, is taken up by Lord Sumption, who rules out recoupment merely because it operates by reference to the [insurance] contract (Lord Sumption, paras 184 and 185).
The answer to this in my view is that a mere need to refer to the insurance contracts is not fatal to a recoupment claim.
It does not involve contradicting or acting inconsistently with such contracts.
On the contrary, it is accepting their implications, and relying on matters independent of them.
It is relying on GGLCLs decision not to insure with Midland for 21 years and its decision, so far as appears, to go without insurance for up to 19 of such years.
These are matters that are not touched by, and are outside, the terms and scope of the Zurich and Excess policies.
They ground an equity that IEG should contribute proportionately to a loss arising from risks of exposure continuing throughout the whole 27 years.
Second, however, I do not accept that there is any absolute bright line principle, of the sort which IEG and Lord Sumption advocate, whereby equity must always refuse to recognise a right of contribution between parties to a contract which according to its terms involves a particular result.
Neither jurisprudentially nor on authority is this so.
There is a general rule to that effect, but it is subject to exceptions.
The position is well put by Professor Andrew Burrows QC in The Law of Restitution (3rd ed) (2011), p 88 et seq: (i) The general rule Where the defendant is legally entitled to the enrichment in the sense that that enrichment is owed to it by the claimant under a valid legal obligation [FN15: This will most commonly be a contractual or statutory obligation. ] there can normally be no liability to make restitution despite there being an unjust factor.
The reason for this is that the prima facie injustice established by the unjust factor is normally outweighed by the fact that the defendant is legally entitled to the enrichment.
Overall, therefore, the enrichment is not unjust. (ii) Exceptions to the general rule Although the general rule is that the claimant will not be entitled to restitution where the defendant was legally entitled to the enrichment, there are some exceptions.
The interplay between the general rule and the exceptions is an interesting and difficult one which, until recently, had been little explored.
In essence it would appear that the exceptions operate where, contrary to the general position, there is no policy inconsistency in granting the claimant restitution of the enrichment even though the defendant is legally entitled to it.
Put another way, the prima facie injustice constituted by there being an unjust factor is not outweighed by the defendant's legal entitlement to the enrichment.
Professor Burrows then gives four examples of exceptions, concluding, at p 91: The recognition and application of exceptions requires a carefully considered approach to the policies involved.
A blanket rule that legal entitlement to the enrichment bars restitution does not represent the present law and would be needlessly blunt and insufficiently nuanced.
Two of Professor Burrows examples are Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 and Deutsche Morgan Grenfell Group plc v IRC [2006] UKHL 49, [2007] 1 AC 558.
The other two examples are restitution in respect of contractual obligations accruing due prior to frustration or termination for breach and restitution in respect of services rendered under an unenforceable contract.
In Roxborough contracts for sale of tobacco products had been made at prices which took account of a so called licence fee which the High Court of Australia had subsequently held to be an unlawful excise duty.
The majority held that it was not possible to imply any term to cater for this unforeseen eventuality (paras 20 and 60), but that restitutionary relief could be granted in respect of the tax component of the price.
Gleeson CJ, Gaudron J and Hayne J said that there was no conceptual objection to treating this as a severable part of the consideration which had failed, because it would not result in confusion between rights of compensation and restitution, or between enforcing a contract and claiming a right by reason of events which have occurred in relation to a contract. (para 21) Gummow J said (para 75) that the action to recover the moneys sought by the appellants after the failure of the purpose of funding Rothmans to renew its licence may be illustrative of the gap filling and auxiliary role of restitutionary remedies.
These remedies do not let matters lie where they would fall if the carriage of risk between the parties were left entirely within the limits of their contract.
Hence there is some force in the statement by Laycock [The Scope and Significance of Restitution (1989) 67 Texas Law Review 1277, 1278]: The rules of restitution developed much like the rules of equity.
Restitution arose to avoid unjust results in specific cases as a series of innovations to fill gaps in the rest of the law.
As Gummow J went on to point out, there is authority of Lord Mansfield in the same direction.
Moses v Macferlan (1760) 2 Burr 1005, a corner stone of common law restitution, was itself a case where the plaintiff successfully reclaimed in the Kings Bench money which he had been held liable to pay under various bills by the Court of Conscience, which had refused or been unable to look at the parties wider relationship outside the bills.
The plaintiff could not rely on any express or implied promise to repay.
Lord Mansfield grounded the obligation simply on the equity of the plaintiffs case to recover back money, which ought not in justice to be kept (pp 1009 and 1012), and later described it as a liberal action in the nature of a bill in equity: Clarke v Shee (1774) 1 Cowp 197, 199.
In Deutsche Morgan Grenfell the legislation governing advance corporation tax (ACT) contravened EU law in not allowing the claimant the option to avoid or defer ACT by making a group income election.
Absent any actual election by Deutsche Morgan Grenfell (DMG), ACT was strictly due.
But it was held recoverable.
Professor Burrows states, at p 91: The best explanation for the departure from the general rule is that restitution did not here conflict with the statutory obligation because that statutory obligation was undermined by the legislature's failure, contrary to EU law, to provide a group income election for companies such as the claimants.
As a matter of policy the injustice of the ultra vires exaction outweighed the point that, technically, the Revenue was legally entitled to the tax.
Unsurprisingly, in view of the obvious equity of DMGs position, the judgments take this aspect very shortly.
Lord Hoffmann treated the election provisions as purely machinery and the real mistake as being whether DMG was liable for ACT (para 32).
But Lord Hope (para 62) and it seems Lord Walker (para 143) (and Lord Scott, dissenting, paras 81 82) agreed with the trial judge (Park J) that the case fell to be analysed on the basis that, in the absence of any actual election, the tax was due.
On that basis Lord Hope and Lord Walker held it recoverable, because it became due as a result of DMGs mistaken belief that it could not claim group relief by making an election.
Lord Brown expressed general agreement with Lord Walkers speech (para 161 162), but elsewhere also spoke of the ACT as not due (para 172).
In the present case, applying the approach indicated by Professor Burrows, there is no policy inconsistency between recognising that the terms of the insurances underwritten by Midland make Zurich answerable in the first instance for IEGs liability towards Mr Carr and recognising an equity, based on consideration of the wider circumstances in particular GGLCL/IEGs exposure of Mr Carr for further periods when it was not insured by Midland requiring IEG itself to contribute towards Zurichs cost of meeting such liability.
This conclusion is also not inconsistent with the well established principle of insurance law that an insured can recover under an insurance for a risk which is covered, even though another cause of the loss exists which is not covered, so long as that other cause is not positively excluded: see eg Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corpn Ltd [1974] QB 57.
Generally, insurance law identifies a single effective, dominant or proximate cause, though there can be rare exceptions where there are dual effective causes as Wayne Tank illustrates.
But the principle addresses a situation where more than one cause operating during the policy period can be said to have caused the insured loss in a conventional sense, that is by bringing it about or contributing to it as a matter of probability.
It is not directed to the present situation where liability is based on a causal link consisting only of the risk involved in exposure, where the insured loss arises from exposure both within and outside the insurance period, and where the exposure outside the insurance period increased the risk of the insured loss occurring proportionately.
Nor is the analysis in the previous paragraphs inconsistent with the House of Lords decision in Simpson & Co v Thomson (1877) 3 App Cas 279.
An insured vessel was run down and lost with all its cargo in a collision due to the negligence of another vessel owned by the same insured.
The underwriters of the first vessel having paid claimed to rank pari passu with the lost cargo owners in the distribution of the limitation fund lodged in court by the owners in respect of the second vessel.
Insurers under English law have no right in their own name to recoup insured losses from wrongdoers.
They have to rely on rights of subrogation, using their insureds name.
Since the common owner of the two vessels could not sue himself, the underwriters claim failed.
The case does not however address situations of contribution.
Where there is a right to contribution, an insurer can recoup his loss from a third party.
Here, the question is whether a right of contribution should be recognised by Zurich against IEG on the basis that IEG should in justice pay its proportionate part of a liability arising from a risk which increased proportionately over the whole period of 27 years during which it exposed Mr Carr to asbestos dust.
It is equally irrelevant that the law knows no such thing as a contract of self insurance.
It is of course true that, just as an insured cannot sue himself, so an insured cannot in law insure with himself.
But the concept of self insurance is not unhelpful in identifying an important truth.
A person who does not insure at all is well understood to be undertaking a risk for his own account, for which he should answer accordingly.
A person who after insuring for a period with insurer A then goes for a period to insurer B is understood to be looking in relation to the later period to insurer B alone.
Even courts are entitled to deploy a helpful phrase to point to such truths.
The United States courts did so in Insurance Company of North America v Forty Eight Insulations Inc 633 F 2d 1212 and Security Insurance Co of Hartford v Lumbermens Mutual Casualty Co (2003) 264 Conn 688, 826 A 2d 107, when they held that, as between an insured and its insurers, liability for defence costs should be pro rated across all periods of insurance and self insurance during which exposure had occurred.
In Lumbermens the insurer was thus held liable pro rata by reference to the relationship between its insurance period, other periods of insurance with other insurers and periods of self insurance.
The use of the concept in this jurisdiction is illustrated by Lord Napier and Ettrick v Hunter [1993] AC 713, 730E F, where Lord Templeman had no hesitation about describing a Lloyds name as his own insurer in respect of a 25,000 excess under the stop loss policy in issue.
He concluded in its light that such a name was not entitled, as against his stop loss insurers, to retain the benefit of damages for negligent underwriting received from the Outhwaite syndicate.
The fundamental principle in Castellain v Preston (1883) 11 QBD 380, that an insured was entitled to be fully indemnified, was not helpful in deciding whether a name who promised the stop loss insurers to bear the first 25,000 loss is entitled to be put in the same position as an insured person who makes no such promise: p 731B C.
In the present case, an insured who insures for a limited period necessarily accepts that it is only liability incurred during that period for which he has cover.
The unique feature of the present situation is that the whole substratum of the relevant insurance policies has changed fundamentally since they were underwritten, and the law has, for the first time ever, imposed liability on the basis of risk, rather than the probability, that negligence during the insurance period led or contributed to the illness complained of.
The concomitant of insurance liability in this situation must be a recognition that the law can and should redress the unjust and wholly anomalous burden which would otherwise fall on any particular insurer with whom insurance was only taken out for part of the total period of exposure by the insured, by recognising an obligation on the part of the insured to contribute pro tanto to such liability as a self insurer.
In my opinion, therefore, Zurich is entitled to look to IEG to make a contribution based on the proportionate part of the overall risk in respect of which it did not place insurance with Midland and in respect of which Zurich does not recover contribution from any other insurer.
Any contribution which is credited by Excess to Zurich in excess of 2/27 of Zurichs liability to IEG should also give Excess a corresponding right to contribution from IEG.
I believe that this leads in practice, at least in the case of a solvent insured, to substantially the same result as that at which Lord Sumption arrives, but by a different route, which in my opinion reflects the reasoning and result in Trigger.
The difference between the two routes may however be important in the context of an insured who is not solvent.
It is convenient to address an area about which Lord Sumption expresses conclusions at the outset of his judgment, and to which he reverts at paras 172 173.
That is that the conclusions reached up to this point will not mesh with the FSCS schemes established under the Financial Services and Markets Act 2000 for insurer insolvency (see para 6 above) and more recently the Mesothelioma Act 2014 for cases where there is employer insolvency and no identifiable insurer.
This point relates to statutory schemes separate from and in part post dating the development of the common law and statutory principles with which this appeal is concerned.
No submissions have been addressed to the court on it.
That itself also suggests that the insurance industry and their expert representatives before this court do not share Lord Sumptions concerns.
One reason for this may also be that Lord Sumptions account of the position is incomplete.
He states that The effect of the majoritys view is simply to transfer risk from the statutory compensation schemes which were created to assume that risk, to an arbitrarily selected solvent insurer who has not agreed to do so (para 112, last sentence).
This analysis does not address the fact that, on his own case, the statutory compensation schemes do not cover all situations or losses.
Take a case of two responsible employers, one of which [A] is solvent or has a solvent insurer for the whole period for which it exposed the victim, the other of which [B] is insolvent and without any identifiable insurer.
The victim will, on Lord Sumptions case (para 160), recover 100% from employer A. Employer B will be liable to contribute to employer A (or its insurer, by right of subrogation), but will have no money and no insurer to enable it to do so.
The 2014 Act scheme will not step into the gap to enable employer A or its insurer to recoup pro rata contribution, because of section 2(1)(d) or (e), and possibly also because of section 2(1)(c), of the Act.
This is because the Act was passed to protect unpaid victims, not for insurers benefit.
It was and is directed, as the notes to the relevant Bill state, to situations where by virtue of the passage of time no solvent employer remains to be sued, and the employee is often unable to trace any insurer who was providing EL insurance to the employer at the relevant time.
Recovery from another insurer of another employer precludes use of the 2014 scheme: see The Diffuse Mesothelioma Payment Scheme 2014, by Judge Nicholas Wikeley, Emeritus Professor at Southampton University, (2014) 21 JSSL 65, 78.
Any action for damages or receipt of any damages or of a specified payment (which, like the 2014 scheme itself see para 6 above might not cover the full loss) precludes use of the 2014 scheme.
This makes sense, since the 2014 scheme assumes, in general, that any recovery by a mesothelioma victim will correspond, even if only approximately, with full recovery of the victims whole loss.
This is unsurprising in the light of Fairchild, the 2006 Act and Trigger, all of which form part of the background to the Act.
But it indicates that the 2014 Act, far from supporting, is inconsistent with the scheme which Lord Sumption advocates whereby an insurer may only be liable to indemnify on a pro rata basis.
Finally, if Lord Sumption be right and he has identified significant potential anomalies on the approach which has been advocated by counsel representing insurers before us and which in my opinion should be adopted, the reality is that the Fairchild enclave has necessitated adjustment from time to time of the legal and regulatory framework by the courts, the legislature and regulatory authorities.
As Wikeley notes, further attempts to engineer improvements to the underlying compensation arrangements [are] almost inevitable (p 82).
I do not myself see such a process of adjustment as one from which courts should withdraw.
Third Parties (Rights against Insurers) Act
Since IEG is solvent and has met the whole of Mr Carrs loss, the present appeal concerns only the relationship between IEG and Zurich.
In that context, the precise legal relationship between Zurichs right to look to IEG for contribution and IEGs policy claim against Zurich does not matter.
In practice, even if Zurichs right to contribution does not give rise to a defence, a procedural order for a stay would ensure that the one claim could not be enforced without taking into account the other.
But in cases where the person responsible is insolvent, and the use of the Third Parties (Rights against Insurers) Act 1930 (soon, it is to be hoped, to be replaced by the 2010 Act) is invoked, it may be important whether the right of contribution which Zurich enjoys constitutes a defence reducing the indemnity for which the insured can sue under that Act.
Section 1 of the 1930 Act provides: (1) Where under any contract of insurance a person (hereinafter referred to as the insured) is insured against liabilities to third parties which he may incur, then (a) in the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or (b) in the case of the insured being a company, in the event of a winding up order or an administration order being made, or a resolution for a voluntary winding up being passed, with respect to the company, or of a receiver or manager of the companys business or undertaking being duly appointed, or of possession being taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property comprised in or subject to the charge or of a voluntary arrangement proposed for the purposes of Part I of the Insolvency Act 1986 being approved under that Part; if, either before or after that event, any such liability as aforesaid is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred. (2) Where the estate of any person falls to be administered in accordance with an order under section 421 of the Insolvency Act 1986, then, if any debt provable in bankruptcy is owing by the deceased in respect of a liability against which he was insured under a contract of insurance as being a liability to a third party, the deceased debtors rights against the insurer under the contract in respect of that liability shall, notwithstanding anything in any such order, be transferred to and vest in the person to whom the debt is owing. (3) In so far as any contract of insurance made after the commencement of this Act in respect of any liability of the insured to third parties purports, whether directly or indirectly, to avoid the contract or to alter the rights of the parties thereunder upon the happening to the insured of any of the events specified in paragraph (a) or paragraph (b) of subsection (1) of this section or upon the estate of any person falling to be administered in accordance with an order under section 421 of the Insolvency Act 1986, the contract shall be of no effect. (4) Upon a transfer under subsection (1) or subsection (2) of this section, the insurer shall, subject to the provisions of section 3 of this Act, be under the same liability to the third party as he would have been under to the insured, but (a) if the liability of the insurer to the insured exceeds the liability of the insured to the third party, nothing in this Act shall affect the rights of the insured against the insurer in respect of the excess; and (b) if the liability of the insurer to the insured is less than the liability of the insured to the third party, nothing in this Act shall affect the rights of the third party against the insured in respect of the balance.
When the 1930 Act applies, it therefore transfers to the mesothelioma victim the insureds rights under the insurance contract in respect of the insureds liability to the victim.
The same is provided by the 2010 Act, not yet in force.
Whether an insurers right to contribution against the insured constitutes a full or partial answer to a victims policy claim based on such a transfer is a question of great potential importance.
It raises questions of some complexity, on which it is unnecessary to give a final answer on this appeal, but about which I wish to make some observations.
One question is whether, apart from any statutory transfer under the 1930 or 2010 Act, the insurers right to contribution would be a defence at common law to a claim by the insured for indemnity under the insurance, as opposed to giving rise to procedural remedies such as a stay.
A second is whether it makes any difference to the application of the relevant common law rules in this context that the claim is being brought under the 1930 or 2010 Act.
A third is whether the terms of the Act positively exclude or restrict any such defence.
The first and second aspects raise, as sub issues, the existence of any right of relief based on set off, circuity of action or other equitable basis.
Zurich positively submitted that it would have no right of set off, legal or equitable.
One objection to set off is that a right to contribution only arises upon payment by the person seeking contribution: see eg Andrews & Milletts Law of Guarantees (6th ed) (2011), para 12 019, citing Ex p Gifford (1802) 6 Ves Jr 805 and In re Snowdon (1881) 17 Ch D 44; and see Davies v Humphreys (1840) 6 M & W 153, Stirling v Burdett [1911] 2 KB 418 and In re Beaven [1913] 2 KB 595, 600.
On the face of it, that presents a real obstacle to any suggestion by any insurer in Zurichs position of set off, whether legal or equitable, against IEGs claim for the full amount of its loss.
There is however first instance authority endorsing the availability of a further remedy in cases where a person A (here, for example, Zurich), liable to make a payment to person B (here, the person suffering mesothelioma), has a potential right to receive contribution (or a full indemnity) from a third person C (here, IEG).
In Wolmershausen v Gullick [1893] 2 Ch 514, Wright J made a prospective order in such a case directing that, upon person A paying person B, person C was to exonerate person A from liability beyond person As share.
In Rowland v Gulfpac Ltd [1999] Lloyds Rep 86, 98, Rix J held that he had jurisdiction to grant a freezing order quia timet to support an indemnity claim by person A against person C, even though the common law claim for an indemnity was not complete.
His decision was more recently followed by Burton J in Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG (The Alexandros T) [2011] EWHC 3381 (Comm), [2012] 1 Lloyds Rep 162, paras 37 38, where he said that the constitution of such a fund would ensure that person A was held harmless and not be required to use his own funds to discharge liabilities falling within the relevant contract of indemnity by person C.
Accepting the fairness of the thinking behind this first instance authority without further examination, I doubt whether it could or should affect the application of the general principle mentioned in para 86 in the particular context of a claim by a victim under the 1930 or 2010 Act.
Zurichs obligation under the insurance and that Act would be to indemnify the victim.
Any consequential right to contribution from IEG would arise not under, but outside, the insurance contract in terms of section 1(1) of the 1930 Act.
Considerations of justice and policy would also support the treatment of the insurance and the contribution positions as legally separate, when an opposite approach would be to the prejudice of the victim, in whose favour the insurance would otherwise operate and who is not concerned with the circumstances giving rise to any contribution claim.
A second sub issue is that legal set off is in any event confined to debts due and payable and either liquidated or capable of ascertainment without valuation or estimation: Stein v Blake [1996] AC 243, 251 per Lord Hoffmann.
On current authority, at Court of Appeal level, the right to recover under an insurance contract is classified not as a debt, but as a right in damages: see eg The Italia Express (No 2) [1992] 2 Lloyds Rep 281, 286, Sprung v Royal Insurance (UK) Ltd [1999] 1 Lloyds Rep IR 111.
Further, a right to claim proportionate contribution would not normally satisfy the test of legal set off, although, on the agreed facts in this case, it might perhaps do so, since they lead to a definite percentage contribution of 22.08%.
Regardless of the view taken on these two points, legal set off is procedural, not substantive.
When one comes to the second aspect, the statutory transfer probably therefore precludes legal set off.
In contrast, equitable set off, where available, can give rise to a substantive defence.
The locus classicus is Hanak v Green [1958] 2 QB 9 and the later case law includes Federal Commerce and Navigation Co Ltd v Molena Alpha Inc (The Nanfri) [1978] 2 QB 927, and has, more recently, been analysed by Rix LJ in Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667, [2010] 4 All ER 847.
Rix J noted (para 26) that in The Nanfri the Court of Appeal had identified the need for the cross claim to arise out of the same transaction as the claim or be closely connected with it.
He concluded (para 43(vi)) that the best restatement of the principle was that it applies where there were a cross claim so closely connected with [the claimants] demands that it would be manifestly unjust to allow him to enforce payment without taking into account the cross claim.
Again, I consider that, in a context where any set off arises from circumstances outside the insurance policy and would be to the prejudice of a third party victim, the considerations of policy and justice behind the rules developed in Fairchild and Trigger would probably mean that it was just (rather than manifestly unjust) for Zurich to have to fulfil its insurance policy obligations, before asserting against IEG any contribution claim based on circumstances outside the scope of the insurance to the prejudice of that victim.
Even in circumstances where liability insurance is not compulsory, it would be wrong to view liability insurance as if its only rationale was to benefit the insureds bottom line, rather than to give effect to legitimate expectations regarding the protection of employees and other third party victims.
That rationale is reflected in the 1930 and 2010 Acts, and reinforced by the now compulsory nature of employers liability insurance.
The court would also be entitled to take it into account, when considering for the purposes of equitable set off what is or is not manifestly unjust.
As to circuity of action, this is an ill defined principle, recently confirmed though not elaborated in Farstad Supply A/S v Enviroco Ltd [2010] UKSC 18, [2010] Bus LR 1087, where previous authorities are identified.
In the present context it could not, I think, be more than a remedy existing where there would be no point in a claim being permitted, because any amount awarded could be immediately recovered on another basis.
On that basis, it could not add anything to the previous discussion.
The third aspect identified in para 85 above would also be problematic, were it to be relevant.
Where an insurer does have a set off (one which appears in each case to have been capable of operating in equity), there is conflicting authority as to whether such a set off is excluded by the 1930 Act.
In Murray v Legal and General Assurance Society Ltd [1970] 2 QB 495, Cumming Bruce J held that a right to recover premiums did not arise in respect of the insureds liability to the third party, within section 1(2), and that insurers could not therefore set off unrecovered premiums.
In Cox v Bankside Members Agency Ltd [1995] 2 Lloyds Rep 437, 451, Phillips J refused to follow Murray and held the third party claim to be subject to a set off arising from payment by insurers of defence costs falling within the insureds policy excess and recoverable either under an express policy term or in restitution.
However, both these cases concerned cross claims which arose directly from and under the insurance policy.
Here, any right of contribution is best analysed in my view as arising from circumstances outside the insurance policy, and on that basis as not capable of giving rise to a set off at all.
As noted in para 86 above, no right of contribution normally arises until payment.
Once the victim (person C) has established the liability of the insured (person B), person Bs rights to indemnity by the insurer (person A) under the contract in respect of that liability are transferred to person C. Neither Murray nor Cox concerned a defence to a claim under the insurance contract which was based on a cross claim arising from circumstances outside the insurance contract and which could only become due on person B being paid in full in respect of his liability to person C.
There is thus, in my view, a strongly arguable case for treating the language of section 1(1) of the 1930 Act as entitling the third party to recover against the insurer in such a case, leaving the insurer to enforce any claim to contribution which it may have against anyone separately and in the ordinary course, subsequently.
Conclusions
For reasons given in paras 37 and 38 above, there are significant differences between the defence costs incurred by IEG and the hypothetical position regarding compensation in circumstances covered by the 2006 Act, which I have been discussing in paras 39 to 82.
In particular, the right to defence costs exists under the insurances on a conventional causative basis, and the defence costs incurred were not increased by the fact that they related to a claim for an additional 21 years in addition to the six years insured by Midland.
In contrast, in the hypothetical position, the insurer only incurs liability on the unconventional basis of a risk that the mesothelioma was due to exposure during the insurance period, when there was a proportionately greater risk that mesothelioma was due to exposure during other periods when the insured did not insure at all or chose to insure elsewhere.
It may still be as a matter of fact that the likelihood of mesothelioma occurring (and so of any defence costs being incurred) would have been proportionately reduced, had there only been exposure during the six years of the Midland insurance.
But the liability for defence costs incurred in defending a claim embracing a period longer than that insured arises directly from the policy wording, as it would always have been understood, and it has, at most, been only indirectly affected by the special rule of causation and statutory intervention which have impacted the rest of the main insuring clause.
In these circumstances, the impetus to recognise a right to contribution as a matter of compelling justice and equity is self evidently diminished.
I would therefore decline to recognise any such right to contribution in respect of defence costs, but I would accept that such a right exists regarding compensation in the hypothetical situation which would arise had the 2006 Act applied.
On the agreed facts, the only tenable basis for apportioning responsibility and arriving at the appropriate contribution would be proportionately to the relevant periods of exposure insured and not insured with Midland.
It follows from the above that the appeal should succeed on the first main point, as stated in para 35 above.
It fails on the second main issue as regards defence costs.
Had the 2006 Act been applicable, I would have recognised Zurich as having rights both to look to Excess for a pro rata share of liability and to require IEG to bear an appropriate contribution, as indicated in paras 39 to 82 above.
As at present advised, and although IEG is solvent so that the present appeal is concerned only with the position between IEG and Zurich, I also consider that, in the case of a claim by a victim of mesothelioma against an insurer (such as Zurich) under the Third Party (Rights against Insurers) Act 1930, the insurer would be obliged to provide the full policy indemnity, without being able to set off against the victim any consequential right to contribution which it might thereafter have as against the insured (here IEG): see paras 83 to 93 above.
LORD HODGE: (with whom Lord Mance, Lord Clarke and Lord Carnwath agree)
The courts continue to grapple with the consequences of departing from the but for test of causation in order to provide a remedy to those who have contracted mesothelioma as a result of wrongful exposure to asbestos fibres.
As the precise pathogenesis of that terrible disease is unknown, the House of Lords and the Supreme Court departed from established legal principle and extended the law of causation.
As a result, an employer, which has wrongfully exposed its employee to significant quantities of asbestos fibres and thus materially increased the risk of his suffering mesothelioma, incurs liability in damages to the employee or his estate if the employee subsequently contracts the disease.
The claimant does not have to prove on the balance of probabilities that the wrongful exposure caused or materially contributed to the development of the disease.
This innovative rule of causation has, within its defined scope, which is not confined to mesothelioma, imposed liability not only on employers (Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] 2 AC 572) but also on their liability insurers through the courts interpretation of liability insurance contracts (Durham v BAI (Run Off) Ltd [2012] 1 WLR 867 (the Trigger litigation)).
Parliament has also intervened in section 3 of the Compensation Act 2006 by reversing the effect of Barker in relation to mesothelioma cases.
This appeal concerns the liability of an insurer which has provided an employer with liability insurance cover for only part of the period of the employees employment, during which he was wrongfully exposed to significant quantities of asbestos fibres, and the employer was either uninsured for the rest of the period or was insured by an insurer who is now insolvent or who cannot now be traced.
The principal issues are (i) whether the insurance policies respond to the full extent of an employers liability to the employee or only a proportionate part of that liability fixed by reference to the periods of cover for which premiums have been assessed and paid, and (ii) if the former, whether the insurer has a claim against insurers of the employer in respect of other periods of the employees exposure and against the employer itself for periods in which it was uninsured or in respect of which its insurer can no longer be identified or traced.
This court is unanimously of the view that section 3 of the Compensation Act 2006 did not change the common law, which the House of Lords had laid down in Barker v Corus UK Ltd [2006] 2 AC 572, but overrode it only to the extent that the section provides.
The court also holds, unanimously, that the appeal fails on the issue of defence costs.
On those matters no more need be said.
The division of opinion arises in relation to what Lord Mance describes as the second main question, namely the extent of the insurers liability when it has insured the employer for part only of the period of the employees exposure.
It is a matter of agreement that liability insurance would have been placed on the basis that a particular loss would fall into one insurance period, for which the insurer had assessed the premiums and provided the cover.
As Lord Mance has shown in para 43 of his judgment and Lord Sumption in para 155 of his, it would be seriously anomalous if the insurer, which provided cover for a small proportion of the period of the employees exposure, were to carry the whole of the employers liability without any recourse against others in respect of the other periods of exposure.
The stark options to avoid the identified anomalies are: (i) to hold, as Lord Sumption propones, that the insurance contract is to be construed so that the insurers liability for the loss is limited to the proportion of the policy years in which it provided cover relative to the whole period during which the employer wrongfully exposed the employee to the asbestos fibres; or (ii) to adopt the approach, which Lord Mance proffers, that the insurer must meet the whole of the employers liability to the employee and that, having done so, the insurer has the right to seek proportionate contributions from other insurers, which gave liability cover to the employer in other periods, and also, in respect of any period in which there was no insurance company from which a contribution can be obtained, against the employer itself.
Each approach is a possible way of avoiding unfairness to the insurer.
Lord Mances is more radical.
I have found this a difficult case, not least because I am generally averse to developing the common law other than by the application of general principles.
I have shared the concerns which Lord Neuberger and Lord Reed have articulated.
But we are where we are.
The law has tampered with the but for test of causation at its peril: Sienkiewicz v Greif (UK) Ltd [2011] 2 AC 229, Lord Brown at para 186.
The Fairchild enclave exists: the courts in Fairchild and Barker and the Trigger litigation, for obvious reasons of policy, have developed a special rule of causation to do justice to the victims of wrongful exposure to asbestos fibres who have contracted mesothelioma as a result.
Having done so, the courts must address the consequences of that innovation.
I am persuaded that this court should develop the law as Lord Mance has proposed for the following six reasons.
The first three address the extent of the insurers liability to the employer.
The next two relate to the rights of recourse of the insurer, once it has paid the employer or victim in implement of its obligations under its insurance policy.
The final reason relates to Lord Mances proposal as a whole.
First, in my view, the finding that the insurer, which has provided liability cover to an employer for only part of the period of the employees exposure, must meet the entirety of the employers liability for the whole period of exposure is consistent with the way the courts have developed the common law in the trilogy of cases.
In particular, it is consistent with the position of the majority of this court in the Trigger litigation.
In that case the majority imported into the insurance contract the weak or broad concept of causation, which the House of Lords had adopted in imposing tortious liability on the employer.
To my mind this is clear from Lord Mances leading judgment in the Trigger litigation (in particular at paras 52 and 57, 64 68, and 72 74) and also in the concurring judgment of Lord Clarke of Stone cum Ebony (at paras 83 85).
The creation of liability for mesothelioma by virtue of the exposure to the asbestos fibres, which materially increases the risk of that disease, means that the mesothelioma is caused in this broad sense in each and every period of such exposure, as Lord Mance argues in this appeal.
As a result, the insurer, which provided liability insurance for a limited period, is exposed to the whole of the employees claim if there was wrongful exposure in that period.
Secondly, while this imposes a heavy burden on the insurer which the employer selects to claim its indemnity, it is a result for which the appellants and interveners have argued in this appeal.
It appears to be a result that the London insurance market is prepared to live with.
It is striking that the insurance industry in this appeal has shown no enthusiasm for the elegant and less complex idea of construing the insurance contract to restrict the insurers liability to a proportionate part of the loss.
Thirdly, it is consistent with the policy of the United Kingdom Parliament that the employee victim should be able to obtain damages for his loss in a straightforward way.
This policy of protecting the employee victim is clear at a general level from the enactment of the Employers Liability (Compulsory Insurance) Act 1969.
It is clear, more specifically, in Parliaments enactment of (i) section 3 of the Compensation Act 2006 to reverse the decision of the House of Lords in Barker and more recently (ii) the Mesothelioma Act 2014 to establish an insurance industry fund to deal with the contingency that a victim is unable to bring an action for damages against an employer or a relevant liability insurer.
It is also consistent with the expansion of the Financial Services Compensation Scheme by the Compensation Act 2006 (Contribution for Mesothelioma Claims) Regulations 2006 (SI 2006/3259).
Confining the insurers liability to a time related proportion of the employers liability would not be in line with this policy of the legislature and would probably engender further legislation.
While Parliaments role of legislating in the public interest differs from the role of judges in developing the common law, it is legitimate for the courts to consider whether their initiatives are in harmony with legislative policy expressed in statutes: Johnson v Unisys Ltd [2003] 1 AC 518, para 37 per Lord Hoffmann.
I turn to Lord Mances proposed innovations to address the serious anomalies, which he and Lord Sumption have identified, if the insurer in one insurance period were to bear 100% liability without any recourse against those responsible during other insurance periods.
They are: (a) the broad equitable extension of the right of contribution between insurers and (b) a right of recoupment against the employer in respect of years in which it was not insured or can identify no insurer against which contribution can be claimed.
Thus, fourthly, if, as I consider, it is correct that the majoritys decision in the Trigger litigation points towards the insurers 100% liability (para 104 above), the interpretation of the insurance contract as creating a pro rata liability is not an option and the anomalies must be addressed in some other way.
Fifthly, I am not as concerned as Lord Neuberger and Lord Reed are about the danger of infecting other areas of the common law with uncertainty.
The court is crafting a solution for the problems that stem from the alteration of the rules of causation and the solution applies only to cases to which the altered rules of causation apply.
In other words the special rules apply only to cases within the Fairchild enclave.
The House of Lords in Gregg v Scott [2005] 2 AC 176 has been careful not to allow the relaxation of the established rules of causation more widely by applying a weak rule of causation outside the Fairchild enclave.
The courts will have to police the boundaries of the enclave.
So long as (a) the rights of recourse against other insurers and the insured employer are recognised for what they are, namely as a means of avoiding anomalies as a result of the special rules of causation and (b) those special rules are confined to the circumstances which Fairchild addresses, there is no reason why the boundaries of the Fairchild enclave should not be preserved.
I recognise that those boundaries are not coterminous with liability for mesothelioma and that the precise boundaries of the Fairchild principle, like those of the earlier case of McGhee v National Coal Board [1973] 1 WLR 1, may have to be worked out in other cases viz Novartis Grimsby Ltd v Cookson [2007] EWCA Civ 1261.
But it is sufficient, in my view, that the insurers rights of recourse are available only within the Fairchild enclave.
Finally, the practical solution which Lord Mance proffers appears to be consistent with the way in which the London insurance market has operated in handling mesothelioma claims.
That may suggest that the solution will not give rise to major practical difficulties.
This is not a view which I have come to without hesitation because I see the strength of the arguments (a) that the courts should develop the common law in a principled way, (b) that in the context of an insurance contract the correct tools to give effect to the parties intentions are construction of the contractual words or the recognition of an implied term, and (c) that the protection of the employee victims entitlement to recover damages is a matter for Parliament.
In short, having dug a hole, the courts should not keep digging.
But the majority judgment in the Trigger litigation, which is the first of the six reasons set out above, appears to preclude the construction of the insurance contract which the minority favour.
That consideration and the other five reasons persuade me that Lord Mances approach is the best available means of avoiding the injustice which the insurer would otherwise suffer.
LORD SUMPTION: (with whom Lord Neuberger and Lord Reed agree)
I agree that this appeal should be allowed, but I regret that I cannot agree with the reasons given by the majority, which seem to me to be contrary to a number of basic principles of the law of contract and to be productive of uncertainty and injustice.
Suppose that an insolvent employer had tortiously exposed his employee to asbestos for, say, 30 years before going out of business.
The employer had failed to insure his liabilities at all for years one to 20.
Insurer A insured his liability on an occurrence basis in year 21.
Insurer B insured his liabilities under successive annual policies for years 22 to 30, but insurer B is insolvent.
The majority would hold that, in a case governed by the 2006 Act, insurer A is liable for the entire loss incurred over the 30 years of exposure, although he was only on risk for one, but that he has an equitable right to recoup a proportionate part of that liability from the insolvent estate of insurer B in respect of the nine years when insurer B was on risk, and from the insolvent estate of the employer in respect of the 20 years when there was no insurance.
The effect, and as I understand it the object, of this is to make insurer A, who is solvent, answerable, (i) in respect of periods when insurer A was not on risk but insurer B was; and (ii) for the failure of the employer to insure at all in the first 20 years.
In my opinion, the correct result in this situation is that insurer A is liable for a proportionate part of the loss in respect of the one year out of 30 when he was on risk.
The employee is entitled to recover insurer Bs proportion under the statutory compensation scheme established under section 213 of the Financial Services and Markets Act 2000 for cases of insurer insolvency.
In respect of the 20 years when there was no insurance, he is entitled subject to the statutory conditions of eligibility to recover under the statutory compensation scheme established under the Mesothelioma Act 2014 for cases where there is no insurance.
The effect of the majoritys view is simply to transfer risk from the statutory compensation schemes which were created to assume that risk, to an arbitrarily selected solvent insurer who has not agreed to do so.
The liabilities of an insurer are wholly contractual.
The answer to the questions now before the court necessarily depend on the construction of the contract and on nothing else.
Under an annual policy of insurance written on an occurrence basis, the insurers liability is limited to occurrences caused during the contractual term.
Where the relevant occurrence has been caused at an indeterminate time during the period of exposure, there are in my view only two possible meanings that can be given to the contract.
One is that the insurer is not liable at all.
That possibility was rejected by this court in Durham v BAI Runoff Ltd. (In re Employers Liability Policy Trigger Litigation [2011] 1 All ER 605.) The other is that each insurer must severally answer for a rateable part of the employers liability, corresponding to the proportion which his time on risk bears to the period of exposure.
No insurer can be liable in respect of other periods when he was not on risk or there was no insurance in place at all.
That appears to me to be the correct answer to the problem which has arisen on this appeal.
The suggestion that an insurer who was on risk for only part of the period of exposure, however brief, can be liable as if he had been on risk for the entire period, is contrary to the express terms of the contract and to the nature of annual insurance.
The suggestion that some doctrine of law can be devised which imposes on an insurer in one year the risk that insurers of other years may become insolvent or that in other years the employer may fail to insure at all, is both unprincipled and unjust.
The suggestion that equity can partially adjust the result of this injustice by requiring the insured to repay to the insurer part of the insurance moneys which the latter was contractually obliged to pay him, is contrary to basic principles of law.
It is the proper function of this court to review those principles.
But the very immensity of this power requires it to act within a framework of legal principle.
The court identifies general principles of law and applies them to the case in hand.
If the facts of that case disclose some generally unsatisfactory feature of the law as hitherto understood, it may modify it.
To devise a special rule for one industrial disease and impose it retrospectively on a policy that covers all industrial accidents and diseases, so as to alter what all members of this court acknowledge to be the basis of the parties agreement, seems to me to be an extremely undesirable course to adopt.
It may fairly be said, and indeed is said by the majority, that this court had already, in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 created a special rule for mesothelioma which does not conform to the ordinary principles on which the common law acts.
It has done this in the interests of avoiding a serious injustice.
Therefore, the argument continues, it is incumbent upon us now to develop what is called the Fairchild enclave by devising ancillary rules which appear to do justice to cases within the enclave, even if they are also out of line with the ordinary principles of law.
The difficulty about this approach is that a measure of legal coherence seems desirable even within the Fairchild enclave.
The contractual analysis has the considerable advantage that it draws on a substantial body of existing legal principle, which can be expected to supply answers to unforeseen issues as they arise.
The alternative is for the law to move from each one off expedient to the next.
This can only generate knock on consequences which we are not in a position to predict or take into account.
If there were no other way to achieve justice, these consequences should no doubt be borne.
But it is quite unnecessary to do so in this case.
In the first place, the incidents of liability in tort are the creation of rules of common law, whereas the extent of a contractual liability depends on the intentions of the parties.
The scope for judicial inventiveness is therefore necessarily more limited in the latter context than in the former.
Secondly, it goes without saying that insurers are as much entitled to justice as mesothelioma victims.
Third, the protection of victims against the insolvency of some out of a number of employers liability insurers or the failure of an employer to insure at all in some out of a number of years of exposure, is properly a matter for statute.
It has in fact been dealt with, to the extent that Parliament considers appropriate, by the creation of statutory compensation schemes.
It is difficult in those circumstances to discern what social imperative can require us to depart from ordinary principles of law.
Mesothelioma
Between the end of the nineteenth century and the 1970s asbestos was commonly used for a wide variety of purposes, notably for sound and heat insulation in the building trades and in the manufacture of electrical and other appliances.
It has been known for more than 80 years that exposure to high levels of asbestos is injurious to health, and in the United Kingdom regulations have sought to limit levels of exposure since 1931.
Mesothelioma is a malignant tumour whose association with asbestos exposure was identified in the 1960s.
It is usually caused by asbestos particles inhaled in the course of occupational exposure to the mineral, although occasionally by environmental asbestos.
It is a breach of an employers duty to allow its employees to be exposed to significant levels of asbestos without taking reasonable steps to protect them from inhaling it.
Mesothelioma has a number of distinctive characteristics.
A single exposure to asbestos particles may be enough to cause the condition to develop but will not necessarily do so.
The intensity of exposure depends, among other things, on the dose and fibre type.
The greater the intensity and duration of exposure, the higher the risk that mesothelioma will develop.
But once contracted the disease is not progressive with exposure: subsequent further exposure will not aggravate it.
As Rix LJ put it in the Court of Appeal in the Trigger litigation [2011] 1 All ER 605, at para 51, summarising the findings of the trial judge: 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.
These features differentiate mesothelioma from other industrial diseases and from long term sources of damage such as the industrial pollution of land which are progressively aggravated by successive occurrences to a degree which is in principle capable of being measured or estimated.
They present particular problems of attributing responsibility given that the disease is undetectable until shortly before death, and once initiated may be latent for many years (30 to 40 years is common) before the symptoms appear.
If a person has been exposed to high levels of asbestos over a long period, it is impossible in the current state of medical science to determine at what stage he inhaled the fibres which ultimately led to his developing mesothelioma.
This means that if he was exposed to asbestos by successive employers during that period, each period of employment will have materially increased the risk of his contracting the disease without necessarily causing it.
Employers liability insurance has been compulsory in the United Kingdom since the Employers Liability (Compulsory Insurance) Act 1969, which came into force on 1 January 1972.
Section 1(1) of that Act requires employers to be insured 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.
It is normal for employers to be insured on an occurrence (as opposed to a claims made) basis under successive annual policies which may be underwritten by different insurers.
Under most of the standard wordings in common use, an industrial disease will be treated as having occurred when it was caused or initiated, even though it only developed or manifested itself later.
I shall return to this point when I come to deal more fully with the Trigger litigation.
It follows from the characteristics of mesothelioma which I have described that three potential problems can affect the availability of insurance cover.
The first is that where an employee was exposed to asbestos by different employers at different times, it will be impossible to determine which employers wrong caused the disease to develop and therefore which employers insurers should respond.
The second is that even where only one employer was involved, that employer may have been insured for only part of the period of exposure, or may have been insured in different years by different insurers.
It will then be impossible to determine whether at the time when the disease occurred the employer was insured or, if he was, under which policy and by which insurer.
The third is that one or more of the insurers potentially liable may have become insolvent or have been wound up in the course of corporate restructuring or have ceased to carry on this class of business and simply disappeared.
The present appeal is primarily concerned with the second of these problems, although it also has implications for the third.
Since at least the 1990s the insurance industry in the United Kingdom has evolved voluntary procedures for dealing with these problems in the context of claims for mesothelioma.
Since these procedures have had a significant influence on the positions taken by the parties to this appeal, and affect the commercial implications of the various possible outcomes, it is necessary to say something about them.
The arrangements appear to have varied in detail, but since 2003 have been embodied in guidelines issued by the Association of British Insurers, a body predominantly comprising insurers but with some representation of non insurance interests.
The 2003 Guidelines, which were issued in the aftermath of the decision in Fairchild, recommend a scheme of settlement which is described as equitable and pragmatic.
Its essential features are: (i) that the victim is to be paid in full by the Lead Insurer; (ii) that where more than one employer is involved liability is notionally apportioned between them pro rata to their respective periods of culpable exposure, without regard to any difference in the intensity of exposure; (iii) that each employers proportion of the claim is then further apportioned between that employer and its insurer or insurers according to the proportion which their time on risk bears to the whole period of culpable exposure by that employer; and (iv) that periods when the employer was self insured, uninsured or unable to trace insurance are apportioned to the employer if it is solvent, and otherwise to the relevant employers insurers (irrespective of their solvency).
The effect of point (iv) is that where the employer was insured but the insurer is insolvent, the insolvent insurers pro rata share is paid by the Financial Services Compensation Scheme established under section 213 of the Financial Services and Markets Act 2000, which is party to the scheme.
According to Mr Allen, an experienced claims manager whose witness statement was put in by the Association of British Insurers, the main objectives of the industry scheme are to promote speed of settlement, to prevent the spiking of claims from an uninsured year into an insured one, or from a year with a higher deductible into another with a lower one, and to avoid time consuming and costly disputes about issues such as the dose, intensity or fibre type of a claimants exposure.
His evidence is that it proved impossible in practice to persuade insurers to pay the employee up front and then sort out the distribution of the cost among other participants later.
Insurers preferred to wait until the FSMA compensation scheme was committed.
Subject to that, the industry scheme has been accepted by the United Kingdom industry and has not in practice been challenged by reinsurers, although they would be likely to do so if they thought that claims were being artificially spiked into a year when their reinsured was on risk.
There is some dispute about how far the industry scheme has been accepted by insureds, as Mr Allen contends, but it is neither necessary nor possible to resolve that question.
The facts
International Energy Group Ltd (IEG), is the successor to the rights and liabilities of Guernsey Gas Light Company Ltd, which employed Mr Alan Carr between 1961 and 1988.
Mr Carr claimed to have been negligently exposed by his employer to asbestos particles throughout that period, and to have contracted mesothelioma in consequence.
The obligations of the employer to Mr Carr were governed by Guernsey law.
It is agreed for the purpose of these proceedings that the common law of Guernsey is the same as the common law of England.
The statute law is, however, different.
One of the differences is that employers liability insurance was not compulsory in Guernsey until the Employers Liability (Compulsory Insurance) (Guernsey) Law 1993, which came into force on 1 March 1994.
Nonetheless, Guernsey Gas was insured for at least part of the period during which it employed Mr Carr.
It was insured between 31 December 1978 and 30 December 1980 by Excess Insurance Co Ltd, and between 31 December 1982 and 31 December 1988 by Midland Assurance Ltd. Accordingly Excess was on risk for two and Midland for six of the 27 years during which Guernsey Gas employed Mr Carr.
For the remaining 19 years, the employer was either uninsured or else insured under a policy all trace of which has been lost so that it is for practical purposes unable to claim under it.
IEG is, however, solvent and capable of meeting the claim from its own resources.
Zurich Insurance plc, are a major insurer of employers liability in the British Isles who acquired Midland and succeeded to its liabilities.
In September 2008, shortly before his death, Mr Carr began proceedings against the employer in the Royal Court in Guernsey in support of a claim for damages on the footing that it had exposed him to asbestos without adequate protection.
The proceedings were settled in December 2008 for 250,000 in respect of damages and interest and 15,300 in respect of Mr Carrs costs.
IEG also incurred defence costs of 13,151.60.
The company settled these sums in full and claimed them from Zurich.
Zurich offered to settle the companys claim in accordance with the industry guidelines.
Since IEG was solvent, it offered a rateable proportion of the claim, reflecting the ratio of its time on risk to the total period of Mr Carrs employment by Guernsey Gas.
IEG began the present proceedings against Zurich in support of their claim for the entire amount.
It was agreed that the dispute should be resolved on the basis of agreed facts.
These were, in summary, (i) that Mr Carr was exposed to asbestos with the same frequency and intensity throughout the 27 years of his employment by the employer, (ii) that that exposure materially increased the risk that he would contract mesothelioma, and (iii) that by reason of the exposure Guernsey Gas was in breach of its duty to him.
Before examining the basis of IEGs claims and Zurichs response, it is necessary to deal with the complex legal background against which the rival contentions were advanced.
The position as between employer and employee: Fairchild
In Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32, the House of Lords held that where one of a number of successive employers must have caused the development of mesothelioma by tortiously exposing the employee to the same noxious agent, the ordinary rules for proving causation fell to be varied as a matter of policy so as to ensure that an irrefutable claim against at least one of an ascertained group of defendants should not fail for want of any scientific possibility of identifying him.
The ordinary rule, as the House agreed in Fairchild, was that the employee must prove that the damage was caused by the particular defendant sought to be held liable.
As Lord Bingham said of the ordinary rule, at para 9: The issue in these appeals does not concern the general validity and applicability of that requirement, which is not in question, but is whether in special circumstances such as those in these cases there should be any variation or relaxation of it.
He regarded the issue before the House as an obvious and inescapable clash of policy considerations (at para 33).
He continued: The crux of cases such as the present, if the appellants' argument is upheld, is that an employer may be held liable for damage he has not caused.
The risk is the greater where all the employers potentially liable are not before the court.
This is so on the facts of each of the three appeals before the House, and is always likely to be so given the long latency of this condition and the likelihood that some employers potentially liable will have gone out of business or disappeared during that period.
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.
Were the law otherwise, an employer exposing his employee to asbestos dust could obtain complete immunity against mesothelioma (but not asbestosis) claims by employing only those who had previously been exposed to excessive quantities of asbestos dust.
Such a result would reflect no credit on the law.
It seems to me, as it did to Lord Wilberforce in McGhee [1973] 1 WLR 1, 7 that: the employers should be liable for an injury squarely within the risk which they created and that they, not the pursuer, should suffer the consequence of the impossibility, foreseeably inherent in the nature of his injury, of segregating the precise consequence of their default.
Lord Bingham concluded that all of the successive employers were liable.
Lord Nicholls of Birkenhead, expressing the same view, put the matter as follows at paras 41 42: 41 The present appeals are another example of such circumstances, where good policy reasons exist for departing from the usual threshold but for test of causal connection.
Inhalation of asbestos dust carries a risk of mesothelioma.
That is one of the very risks from which an employer's duty of care is intended to protect employees.
Tragically, each claimant acquired this fatal disease from wrongful exposure to asbestos dust in the course of his employment.
A former employee's inability to identify which particular period of wrongful exposure brought about the onset of his disease ought not, in all justice, to preclude recovery of compensation. 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.
Given the present state of medical science, this outcome may cast responsibility on a defendant whose exposure of a claimant to the risk of contracting the disease had in fact no causative effect.
But the unattractiveness of casting the net of responsibility as widely as this is far outweighed by the unattractiveness of the alternative outcome.
Lord Hoffmann, at para 63, said: which rule would be more in accordance with justice and the policy of common law and statute to protect employees against the risk of contracting asbestos related diseases? One which makes an employer in breach of his duty liable for the employee's injury because he created a significant risk to his health, despite the fact that the physical cause of the injury may have been created by someone else? Or a rule which means that unless he was subjected to risk by the breach of duty of a single employer, the employee can never have a remedy? My Lords, as between the employer in breach of duty and the employee who has lost his life in consequence of a period of exposure to risk to which that employer has contributed, I think it would be both inconsistent with the policy of the law imposing the duty and morally wrong for your Lordships to impose causal requirements which exclude liability.
As Lord Hoffmann pointed out, more clearly perhaps than any other member of the committee, it was essential that each of the successive employers should have wrongfully exposed the employee to asbestos particles and thereby materially increased the risk of his contracting the disease.
The same policy would not therefore necessarily have justified a finding that all manufacturers of a drug causing injuries to patients were fixed with liability, simply because it was impossible to prove which manufacturers product had been administered to the particular claimant.
This was because the existence of the additional manufacturers did not materially increase the risk of injury: see para 74.
Lord Rodger of Earlsferry made the same point, at para 170: 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. the claimant must prove that his injury was caused by the eventuation of the kind of risk created by the defendant's wrongdoing 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 defendant's wrongful act or omission.
It should be observed that although the House was concerned with mesothelioma, it recognised that the legal issue was not necessarily peculiar to mesothelioma.
It could arise in cases concerning other injuries or diseases or other sources of danger, provided that the damage was inflicted by the same destructive agent.
The question, as they pointed out, had arisen in other jurisdictions whose law was reviewed by the House, in the context of groups of hunters, party goers, footpads and the like negligently causing injury, each member of which had materially increased the risk of the injury which occurred without its being possible to identify whose negligence had actually caused it: see Lord Bingham at paras 25 29, Lord Hoffmann at paras 73 74, and Lord Rodger at paras 158 160.
In McGhee v National Coal Board [1973] 1 WLR 1, which was held to have been founded on the same principle as Fairchild, the problem had arisen from the impossibility of determining the precise causal mechanism by which the claimant employee had contracted dermatitis, when some hypotheses involved a breach of duty while others did not.
More generally, as Lord Bingham observed at para 34, it would be unrealistic to suppose that the principle here affirmed will not over time be the subject of incremental and analogical development.
The decision in Fairchild has not given entire satisfaction to all of its authors.
Lord Hoffmann has described it as a revolutionary judgment.
The ordinary function of the House of Lords in changing the common law is to modify some principle which had proved unsatisfactory.
In Fairchild, the House did not modify or even criticise the general principle that the claimant had to demonstrate that the defendants negligence had on a balance of probabilities caused the injury.
Instead, they created a special exception to it which could not be justified by reference to any general principle and depended on a distinction which had no rational factual or legal justification: Hoffmann, Constitutionalism and Private Law (Cambridge Freshfields Law Lecture, 28 January 2015).
Be that as it may, the decision in Fairchild is the starting point for any analysis of the legal issues arising between successive employers, or between employers and their insurers.
In Fairchild itself, the House of Lords left those issues unresolved.
Subsequent decisions of the House of Lords and Supreme Court have cruelly exposed the problem of dealing with complex and interrelated issues piecemeal.
In order to accommodate the implications of earlier decisions for issues which they did not directly address, it has more than once proved necessary to subject their reasoning to some reanalysis.
Apportionment: Barker
In Fairchild, the House of Lords held that each of the successive employers was liable, but expressly declined to decide how, if at all, the liability was to be apportioned between them: see Lord Bingham at para 34, Lord Hoffmann at para 74, and Lord Rodger at para 125.
That question did, however, arise in Barker v Corus UK Ltd [2006] 2 AC 572.
The facts of Barker were that each of the claimants had been exposed to asbestos particles by successive employers or else by employers in one period and the claimant himself in another.
The House of Lords held that the Fairchild principle applied in these cases also.
Against that background, the question which arose was stated by Lord Hoffmann, at para 25, as follows: whether under the Fairchild exception a defendant is liable, jointly and severally with any other defendants, for all the damage consequent upon the contraction of mesothelioma by the claimant or whether he is liable only for an aliquot share, apportioned according to the share of the risk created by his breach of duty.
The ordinary rule in the law of tort is that, where a number of defendants separately contribute to the same indivisible damage, each of them is jointly and severally liable for the whole.
For want of a better word, this can be called the Dingle principle after Dingle v Associated Newspapers Ltd [1961] 2 QB 162, in which it received its classic formulation at the hands of Devlin LJ at paras 188 189: Where injury has been done to the plaintiff and the injury is indivisible, any tortfeasor whose act has been a proximate cause of the injury must compensate for the whole of it.
As between the plaintiff and the defendant it is immaterial that there are others whose acts also have been a cause of the injury and it does not matter whether those others have or have not a good defence.
These factors would be relevant in a claim between tortfeasors for contribution, but the plaintiff is not concerned with that; he can obtain judgment for total compensation from anyone whose act has been a cause of his injury.
If there are more than one of such persons, it is immaterial to the plaintiff whether they are joint tortfeasors or not.
If four men, acting severally and not in concert, strike the plaintiff one after another and as a result of his injuries he suffers shock and is detained in hospital and loses a month's wages, each wrongdoer is liable to compensate for the whole loss of earnings.
If there were four distinct physical injuries, each man would be liable only for the consequences peculiar to the injury he inflicted, but in the example I have given the loss of earnings is one injury caused in part by all four defendants.
It is essential for this purpose that the loss should be one and indivisible; whether it is so or not is a matter of fact and not a matter of law.
Contracting mesothelioma is indivisible damage.
If it had been proved that all of the successors had contributed to causing the employees mesothelioma, they would have been jointly and severally liable for the whole damage on the Dingle principle.
The question in Barker was whether the same principle applied when all that could be proved was that each employer had contributed to the risk without contributing to the disease.
The trial judge and the Court of Appeal in Barker held that it did, and that each employer was jointly and severally liable.
The House of Lords overruled them.
It held by a majority (Lord Rodger dissenting) that liability was several, and fell to be apportioned according to the tortfeasors relative contribution to the risk, measured by the duration and intensity of the exposure for which he was responsible.
The ratio of the decision may be taken from the speech of Lord Hoffmann, with whom Lord Scott of Foscote, Lord Walker of Gestingthorpe and Baroness Hale of Richmond agreed.
Lord Hoffmann held that the Dingle principle could apply only if each employer had contributed to the employee contracting the disease or was deemed to have done so.
But it could not be proved that they actually had done so, and Lord Hoffmann denied that Fairchild had introduced a rule that they were deemed to have done so by creating a material risk of contracting mesothelioma.
That, he thought, had been the view of Lord Rodger and Lord Hutton in Fairchild.
But he considered that the speeches of the majority were authority for the proposition that the creation of a material risk of mesothelioma was sufficient for liability: see paras 31 34.
From this he concluded, at para 35: Consistency of approach would suggest that if the basis of liability is the wrongful creation of a risk or chance of causing the disease, the damage which the defendant should be regarded as having caused is the creation of such a risk or chance.
If that is the right way to characterise the damage, then it does not matter that the disease as such would be indivisible damage.
Chances are infinitely divisible and different people can be separately responsible to a greater or lesser degree for the chances of an event happening, in the way that a person who buys a whole book of tickets in a raffle has a separate and larger chance of winning the prize than a person who has bought a single ticket.
He went on at para 43 to summarise his reasons for regarding the apportionment of liability according to the time and intensity of the wrongful exposure for which each successive employer was responsible as representing the fair outcome: In my opinion, the attribution of liability according to the relative degree of contribution to the chance of the disease being contracted would smooth the roughness of the justice which a rule of joint and several liability creates.
The defendant was a wrongdoer, it is true, and should not be allowed to escape liability altogether, but he should not be liable for more than the damage which he caused and, since this is a case in which science can deal only in probabilities, the law should accept that position and attribute liability according to probabilities.
The justification for the joint and several liability rule is that if you caused harm, there is no reason why your liability should be reduced because someone else also caused the same harm.
But when liability is exceptionally imposed because you may have caused harm, the same considerations do not apply and fairness suggests that if more than one person may have been responsible, liability should be divided according to the probability that one or other caused the harm.
And at para 48: Although the Fairchild exception treats the risk of contracting mesothelioma as the damage, it applies only when the disease has actually been contracted.
Mr Stuart Smith, who appeared for Corus, was reluctant to characterise the claim as being for causing a risk of the disease because he did not want to suggest that someone could sue for being exposed to a risk which had not materialised.
But in cases which fall within the Fairchild exception, that possibility is precluded by the terms of the exception.
It applies only when the claimant has contracted the disease against which he should have been protected.
And in cases outside the exception, as in Gregg v Scott [2005] 2 AC 176, a risk of damage or loss of a chance is not damage upon which an action can be founded.
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.
In the course of his analysis, at para 46, Lord Hoffmann referred to the implications of the alternative approach, which would have imposed joint and several liability: The effect of the Civil Liability (Contribution) Act 1978 is that if each defendant is treated as having caused the mesothelioma as an indivisible injury and pays the damages in full, he will be able to recover contribution to the extent that he has paid more than his fair share of the responsibility from such other tortfeasors as are traceable and solvent.
But he will in effect be a guarantor of the liability of those who are not traceable or solvent and, as time passes, the number of these will grow larger.
Experience in the United States, where, for reasons which I need not examine, the DES rule of several liability has not been applied to indivisible injuries caused by asbestos, suggests that liability will progressively be imposed upon parties who may have had a very small share in exposing the claimant to risk but still happen to be traceable and solvent or insured: see Jane Stapleton, Two causal fictions at the heart of US asbestos doctrine 122 LQR 189.
That would, as I have said, not be unfair in cases in which they did actually cause the injury.
It is however unfair in cases in which there is merely a relatively small chance that they did so.
Lord Scott, at para 61, put the same points in this way: If the Fairchild principle were based upon the fiction that each Fairchild defendant had actually caused the eventual outcome, the analogy with tortfeasors each of whom had contributed to an indivisible outcome would be very close.
But Fairchild liability is not based on that fiction.
It is based on the fact that each negligent defendant has wrongfully subjected the victim to a period of exposure to an injurious agent and has thereby, during that period, subjected the victim to a material risk that he or she will contract the disease associated with that agent.
Each successive period of exposure has subjected the victim to a further degree of risk.
If, in the event, the victim does not contract the disease, no claim can be made for the trauma of being subjected to the risk: see Gregg v Scott [2005] 2 AC 176.
But if the victim does contract the disease the risk has materialised.
If the degree of risk associated with each period of exposure, whether under successive employers or during self employment or while engaged in domestic tasks, were expressed in percentage terms, the sum of the percentages, once the disease had been contracted, would total 100%.
But the extent of the risk for which each negligent employer was responsible and on the basis of which that employer was to be held liable would be independent of the extent of the risk attributable to the periods of exposure for which others were responsible.
The relationship between the various negligent employers seems to me much more akin to the relationship between tortfeasors each of whom has, independently of the others, caused an identifiable part of the damage of which the victim complains.
The joint and several liability of tortfeasors is based upon a finding that the breach of duty of each has been a cause of the indivisible damage for which redress is sought.
No such finding can be made in a Fairchild type of case and the logic of imposing joint and several liability on Fairchild defendants is, in my opinion, absent.
Moreover, Fairchild constitutes an exception, perhaps an anomalous one, to the causation principles of tortious liability.
It should not, therefore, be found to be surprising if consequential adjustments to other principles of tortious liability become necessary.
Lord Walker, at para 113, drew attention to the fact that the Fairchild principle had involved a departure from ordinary rules of law, which called for the application of special principles of apportionment unique to the situation in which it applied: The solution to the problem is in my opinion more radical, in line with the radical departure which this House has already made in Fairchild.
That case was decided by the majority, as I have already noted, not on the fictional basis that the defendants should be treated as having caused the claimant's (or deceased's) damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
The damage was indivisible, but the risk was divisible a matter of statistics.
In line with that new principle established or affirmed in Fairchild, and as a solution which does justice (so far as possible) both to the generality of claimants and to the generality of defendants, limited liability proportionate to risk is the better course for the law to take.
Baroness Hale made a similar point in her own speech, at paras 122 and 126 127: But it does not necessarily follow from the fact that the damage is a single indivisible injury that each of the persons who may have caused that injury should be liable to pay for all of its consequences.
The common law rules that lead to liability in solidum for the whole damage have always been closely linked to the common law's approach to causation.
There is no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations.
But in the Fairchild situation we have yet another development.
For the first time in our legal history, persons are made liable for damage even though they may not have caused it at all, simply because they have materially contributed to the risk of causing that damage.
Mr Stuart Smith does not quarrel with the principle in Fairchild.
He simply argues that it does not follow from the imposition of liability in such a case that each should be liable for the whole.
I agree with the majority of your Lordships that indeed it does not follow.
There is in this situation no magic in the indivisibility of the harm.
It is not being said that each has caused or materially contributed to the harm.
It can only be said that each has materially contributed to the risk of harm.
The harm may be indivisible but the material contribution to the risk can be divided.
There exists a sensible basis for doing so.
Is it fair to do so? In common with the majority of your Lordships, I think that it is.
The speeches of the majority in Barker are not easy to analyse, and perhaps for that reason the analysis of them by Lord Rodger in his dissenting speech has proved influential.
He attributed to Lord Hoffman and those who agreed with him the opinion that the employer was liable for creating a risk of contracting mesothelioma, and not for the mesothelioma itself.
I do not think that this is the correct analysis of the majoritys reasoning.
In his essay in Perspectives in Causation, ed R Goldberg (2011), at p 8, Lord Hoffmann certainly adopted it.
He suggested that the majority view in Barker had created a special cause of action for the causing of the risk.
But his words in Barker itself were more circumspect.
In the passage which I have cited from para 48 of his speech, he certainly suggested that the Fairchild exception treated the creation of the risk as the damage which gave rise to liability.
But, like Lord Scott and Lord Walker, he emphasised that there was no cause of action for the risk in the absence of the disease.
And Baroness Hale (at para 120), while agreeing with Lord Hoffmann, had no difficulty in agreeing with Lord Rodger 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.
In my opinion, the natural reading of the speeches of the majority, read as a whole, is that the Fairchild exception is an exception to the ordinary rules of causation alone.
It treats a material contribution to the risk as enough to discharge the burden of proving that the breach of duty has caused the disease.
It followed that by reason of having contributed to the risk the employer was liable for the disease itself.
Or, as Lord Walker put it at para 109, the Fairchild exception is A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury.
The real difference between Lord Rodger and the majority was that the majority thought that it was unknowable and irrelevant who had caused the disease to develop.
They considered that each successive employer should be liable in proportion to the significance of its contribution to the risk because, exceptionally, what had made each of them liable for the disease was its contribution to the risk and not its contribution to the damage.
Lord Rodger on the other hand thought that each successive employer was deemed to have contributed to the damage and that it was that contribution to the damage which was the source of the liability.
He therefore thought that each of them incurred the joint and several liability which the Dingle principle imposed on those who severally contribute in different degrees to the same damage.
Underlying his reasoning was an expressed reluctance to adopt an analysis of Fairchild which made the cases in which it applied into an enclave subject to rules quite different to those which applied generally in the law of personal injuries: see para 85.
The majority on the other hand considered that Fairchild had already created the enclave and that the task in hand was to devise a basis of liability consistent with its peculiarities.
Within three months of the decision in Barker, its effect was reversed by section 3 of the Compensation Act 2006.
Section 3 applied in any case where a person (the victim) contracted mesothelioma as a result of exposure to asbestos, and another (the responsible person) was liable in tort for having wrongfully exposed him to asbestos, whether by reason of having materially increased a risk or for any other reason.
Section 3(2) provided that the responsible person was liable irrespective of whether the victim was also exposed to asbestos on other occasions, either by other tortfeasors or in circumstances where there was no liability in tort.
Not only was that person liable, but he was jointly and severally liable with any other responsible person.
The result was to make each responsible person liable for the whole damage, without prejudice (see subsections (3) and (4)) to the right of contribution between them.
Section 3 applied retrospectively: see section 16(3).
The position as between the employer and his insurer: Trigger
Mesothelioma, like other industrial diseases characterised by long periods of latent development, poses particular problems for insurers writing employers liability business on an occurrence basis.
None of the cases which I have cited was concerned with the impact of the Fairchild exception on coverage under an employers liability insurance.
That question arose in the Employers Liability Policy Trigger litigation, six cases heard together before the Supreme Court and reported under the title Durham v BAI (Run off) Ltd [2012] 1 WLR 867.
A number of different policy forms were before the court.
They all insured the employers liability for personal injury (including disease) contracted or sustained during the period of insurance, generally a year.
There were two issues.
The first was whether the trigger for the insurers liability was the exposure of the employee to asbestos (as the employers and the personal representatives of deceased employees contended), or only to the development or manifestation of mesothelioma (as the insurers contended).
These alternatives were referred to as the causation basis and the manifestation basis respectively.
It was clear that the policies did not respond if the manifestation basis was correct, for the disease developed or manifested itself long after the relevant policies had expired and generally after the victim had ceased to be employed.
The second issue was raised in terms not by the parties but by Lord Phillips of Worth Matravers in the course of the hearing.
It was whether, if the causation basis was correct, the triggering event could be shown in the current limited state of scientific knowledge to have occurred during the policy period.
If not, it was suggested, the insurer could not be liable at all.
The leading judgment was delivered by Lord Mance.
The courts decision on the first issue is summarised at paras 49 51 of his judgment.
It was held that the policies insured the damage attributable to the actual injury or disease, which was suffered when mesothelioma developed.
But the triggering event which had to occur within the policy period was the event upon which mesothelioma was sustained (the term used in the Midland policies in the present appeal) or contracted (the term used in some other policies).
In either case, that happened when it was caused or initiated, even though it only developed or manifested itself subsequently.
The whole panel was agreed upon this.
The second issue turned on the effect of Fairchild and Barker on the footing that causation or initiation of the disease was the relevant triggering event.
This question divided the panel.
Lord Phillips in his dissenting judgment held that the insurers could be found liable only if the effect of these decisions was that the employer was deemed to have caused the development of the disease by exposing the employee to asbestos particles.
That analysis of Fairchild had, however, been rejected by the majority in Barker.
The alternative in his view was to treat Fairchild as creating liability not for the disease but for the contribution to the risk of the disease.
Since the contribution to the risk was not an insured peril, the insureds and their statutory assignees could succeed against the insurers only if they demonstrated that the disease had in fact been caused or initiated during the policy period, something which the current state of scientific knowledge made it impossible for them to do.
This view was rejected by the majority.
Again, the reasons may be taken from the judgment of Lord Mance.
He agreed that the deemed causation theory had been rejected in Barker.
He held that the employer was not liable for merely exposing the victim to the risk.
He was liable for the disease.
But he was liable for the disease, because his tortious exposure of the victim to the risk was in law enough to establish that he had caused it.
The issue, as Lord Mance put it at para 66, concerned: 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.
He summarised the effect on the policy at paras 73 74 as follows: 73.
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.
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. 74.
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.
In substance, the result was that the same weak test of causation which applied as between the victim and the employer should be applied as between the employer and his liability insurer.
The parties arguments
This appeal is not concerned with multiple successive causes of exposure to asbestos, nor is it concerned with multiple successive employers.
Guernsey Gas, for whose liabilities IEG is responsible, employed Mr Carr throughout the 27 year period when he was tortiously exposed to asbestos.
IEGs case for recovering in full against the insurers who were on risk for six of those years is as follows.
The decision of this court in the Trigger appeals established (i) that the policy responds if during the period of insurance something happened which caused the ultimate development of mesothelioma, and (ii) that that causal link is sufficiently demonstrated by proving that during the period of insurance the insured employer wrongfully exposed the employee to the risk of contracting mesothelioma.
Therefore, it is said, just as an employer is liable if he employed the victim at any time when he was wrongfully exposed to the risk of contracting mesothelioma, so the employers liability insurer is liable if he was on risk at any time when such exposure occurs.
If by statute the employer must bear the entire loss attributable to the disease by reason of having exposed the employee to asbestos particles at any time that is also the measure of his claim against the insurer.
Zurich advances two alternative contentions in response to this.
The first is that as between the victim and his employer Barker remains good law in all cases to which the Compensation Act 2006 does not apply.
It therefore remains good law in Guernsey, where Mr Carr was employed.
It follows that the liability of Guernsey Gas is apportionable over the period of exposure, and that the insurer is liable only for a proportionate part of the loss representing that part of the period of exposure during which he was on risk.
If, contrary to this submission, Barker is no longer good law even in Guernsey, Zurich concedes that it is liable under the policy terms for the whole of Mr Carrs loss.
On that footing, Zurichs second argument is that they have a right of equitable recoupment against the other insurers pro rata to their respective periods on risk, and against the employer for that proportion of the claim which reflects the time he was uninsured.
So far as the compensation element of the claim is concerned, the second argument arises only if the first one fails.
But as far as the claim for defence costs is concerned, the second argument arises anyway, because Zurich accepts that they were contractually liable for the whole of the defence costs.
This is because the same defence costs would have been incurred whether the employer was liable for the whole loss or only a proportion of it.
The decisions of Cooke J and the Court of Appeal
Cooke J accepted Zurichs first argument.
He held that the insurer was liable only for a rateable proportion reflecting time on risk.
The alternative claim for recoupment therefore did not arise.
But if it had arisen, Cooke J would have rejected it.
The Court of Appeal reversed him on Zurichs primary case.
They held that Barker was no longer good law after the Compensation Act, and therefore no part of the common law of Guernsey.
It followed in their view that each successive insurer was liable for the entire loss.
They considered that no allowance fell to be made for the substantial periods of exposure when it was not on risk, whether that was because other insurers were on risk or because the employer elected to bear the risk itself.
Both Toulson LJ and Aikens LJ, who both delivered reasoned judgments, considered that the issue was concluded by Trigger, in particular the statement of principle in the judgment of Lord Mance at para 73.
Both of them thought that once it was accepted that each insurers liability was triggered by any period of exposure during which it was on risk, it followed as a matter of course that each insurer was liable for the entire loss.
Citing the decision of the United States Court of Appeals for the District of Columbia in Keene Corporation v Insurance Company of North America (1981) 667 F 2d 1034, Toulson LJ expressed at para 42 his agreement with the proposition that: once it is accepted that exposure during any policy period met the causal requirement for the employer's liability to the victim, for which the employer was potentially entitled to indemnity from the insurer under the terms of the relevant policies, to withhold part of that indemnity from the employer on account of its conduct in other years would be to deprive the employer of insurance coverage for which it paid.
Aikens LJ agreed, adding at paras 53 54 what is perhaps implicit in Toulson LJs judgment and may stand as the essence of the courts reasoning: If an employer is liable to his employee for his employee's mesothelioma following upon a tortious exposure to asbestos created during an insurance period, then, for the purposes of the insuring clause in the employers liability policy, the disease is caused within the insurance period.
This is because it is sufficient that there is what Lord Mance calls (following Hart & Honors use of the phrase) a weak or broad causal link, in this case between the exposure to the asbestos during the insurance period and the employee's eventual contraction of the mesothelioma.
Once that causal requirement is fulfilled, then the employer will have proved that the mesothelioma (the disease) was caused during any period of insurance.
It follows from the policy wording that the insurer is then liable to indemnify IEG for all sums for which the Insured shall be liable in respect of any claim for damages for . such disease (my emphasis).
In other words, Zurich will be liable to indemnify IEG for the whole of the damages paid out by IEG in respect of Mr Carrs claim for damages for contracting mesothelioma, not just a proportion worked out by reference to the period during which IEG was covered by policies for which Zurich is responsible.
Like Cooke J, the Court of Appeal rejected the recoupment argument.
The decision of the Court of Appeal created consternation among the interests represented by the Association of British Insurers.
This was mainly because the decision recognised a right in an insured employer to recover in full from any insurer on risk at any time during the period of tortious exposure.
In practise this meant that employers could be expected to pick off the easiest target.
This undermined the industry settlement scheme, which: (i) apportioned the liability by time on risk among all insurers on risk during the period of exposure; (ii) apportioned uninsured periods to the employer if he was solvent; and (iii) left the employer to claim against an insolvent insurer under the compensation scheme established under section 213 of the Financial Services and Markets Act 2000.
These consequences of the decision would be aggravated if there was no right of contribution between insurers.
The result, the Association of British Insurers submitted, would be to encourage insurers to be more vigorous in defending claims, to delay settlements and potentially to cause difficulties with reinsurers.
In addition, the Court of Appeals reliance on the all sums wording of the insuring clause opened up the prospect that insurers might be held liable in full even in the case of divisible diseases where the contribution of the tort to the actual development of the disease was more readily assignable to distinct policy periods.
The issues in the Supreme Court
In this court, the parties arguments were the same as they were in the courts below.
However, after the case had been argued for the first time before five justices, the court raised a number of further questions with the parties which expanded the scope of the argument.
We directed that the case should be reargued before seven justices so that those questions could be considered.
The matters raised by the court included the correctness of Zurichs concession that if their first argument failed they were contractually liable (subject to recoupment) for the whole loss.
An alternative possibility was that the insurer was liable for a proportionate part of the loss as a matter of construction of the policy, whether Barker remained good law or not and even in England where the Compensation Act applied.
Upon reargument, Zurich addressed the construction question but maintained its concession.
It was supported in this line by the Association of British Insurers.
Construction of the policy
I turn first to the construction of the policy, partly because it is the natural starting point for any analysis of its effect, and partly because I do not accept the construction which the parties have adopted as their premise.
The six annual policies written by Midland were issued between 1982 and 1988.
At that time, Fairchild, the Compensation Act and their legal progeny lay well into the future.
These developments have greatly increased the potential liability of employers to employees whom they have wrongfully exposed to asbestos but that, as everyone can agree, is an ordinary hazard of liability insurance.
The policies respond to the liability incurred by the insured in the course of the employment of its employees as the law may from time to time determine it to be, whether or not that liability would have been anticipated at the time that the contract of insurance was made.
That, however, is not the problem with which we are presently concerned.
We are concerned with the construction of the policies themselves.
They cannot be construed on the footing that the parties were contracting by reference to the extraordinary legal problems to which Fairchild and its progeny have given rise.
In Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, Sir Thomas Bingham MR observed at paras 481 482: The courts usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract.
The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract.
So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear.
Tempting, but wrong. it is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred.
Each Midland policy recited that the insured had applied for insurance and had paid or agreed to pay the premium as consideration for such insurance during the period stated in the Schedule or for any subsequent period for which the Company shall have accepted the premium required for renewal of this policy.
The insuring clause provided: If any person under a contract of service or apprenticeship with the Insured shall sustain any bodily injury or disease caused during any period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned, the Company will indemnify the Insured against all sums for which the Insured shall be liable in respect of any claim for damages for such injury or disease settled or defended with the consent of the Company.
The Company will in addition pay claimants costs and expenses and be responsible for all costs and expenses incurred with the consent of the Company in defending any such claim for damages.
The insuring clause makes explicit what would be implicit in any contract of liability insurance written on an occurrence basis for a limited period.
The occurrence is not the mere exposure of the victim to asbestos.
It is the sustaining of bodily injury or disease caused during any period of insurance.
The indemnity extends to the insureds liability for damages for such injury or disease, ie injury or disease caused during the period of insurance.
The insurance is expressed to apply only to liability in respect of any injury or disease caused in Great Britain, Northern Ireland, the Isle of Man and the Channel Islands, and to injury or disease sustained by employees temporarily employed elsewhere under a contract of service or apprenticeship entered into in one of those jurisdictions.
A liability policy responds to the specified liabilities of the insured, but only subject to any overall limitations of the policy.
One of these limitations is the period of insurance, which is a fundamental feature of any such policy.
The whole of the insuring clause depends upon the assumption that it is possible to assign the time when an injury or disease was caused to a given period which either is or is not within the period of insurance.
Either the damage will be divisible, in which case parts of it may have been caused in different periods and must be divided between those periods, or it will be indivisible, in which case it will have been caused in a single period.
As the opening recital reminds us, the period of insurance is a critical element of the ex ante assessment of the risk on which the premium is based.
Insurance for any further period is dependent on renewal and the payment of a further premium.
It may also (although not in this policy) be critical to the application of a deductible or an aggregate annual limit or excess.
In addition, the attribution of loss to particular years is likely to have a significant effect on an insurers reserving and his reinsurance.
In the English case law the point has commonly been made in the context of reinsurance.
In Municipal Mutual Insurance v Sea Insurance Co Ltd [1998] Lloyds Rep IR 421, a port authority was insured against liability for (among other things) damage to property in its custody.
Damage was done to equipment stored with it by a succession of independent acts of vandalism over a period of 18 months.
It was impossible to differentiate between one act of vandalism and another, and the port authority was held to be entitled to aggregate all of them and to make a single claim against its insurer for the whole.
The insurer was reinsured under successive facultative annual reinsurances, on terms which were back to back with the direct insurances and contained a standard follow clause (to follow their settlements).
This gave rise to difficulty when the claim was passed on as a single claim to the reinsurers, because the 18 month period when the damage was done extended over the periods covered by three successive annual reinsurance policies written by different insurers, each of which provided for a substantial excess.
The insurers attempt to make a single aggregate claim on one reinsurance policy was rejected by the Court of Appeal.
Hobhouse LJ, giving the only reasoned judgment, said at paras 435 436: it was incumbent upon the judge to recognise and give effect to the essentially annual character of each reinsurance contract.
Applying the wording of the original policy to each reinsurance contract it is necessary to ask whether or not the relevant physical loss or damage arose during the relevant period of cover.
The judge came to the surprising conclusion that each reinsurance contract covered liability in respect of physical loss or damage whether or not it occurred during the period covered by the reinsurance contract and he went on expressly to contemplate that the same liability for the same physical loss or damage might be covered under a number of separate contracts of reinsurance covering different periods.
This is a startling result and I am aware of no justification for it.
When the relevant cover is placed on a time basis, the stated period of time is fundamental and must be given effect to.
It is for that period of risk that the premium payable is assessed.
This is so whether the cover is defined as in the present case by reference to when the physical loss or damage occurred, or by reference to when a liability was incurred or a claim made.
Contracts of insurance (including reinsurance) are or can be sophisticated instruments containing a wide variety of provisions, but the definition of the period of cover is basic and clear.
It provides a temporal limit to the cover and does not provide cover outside that period; the insurer is not then on risk.
It will be appreciated that the judge's suggestion that there could or should be contribution between those signing the different slips for the different years is likewise radically mistaken.
In Wasa International Insurance Co Ltd v Lexington Insurance Co [2010] 1 AC 180, Lexington had insured an aluminium manufacturer for a single period of three years between 1977 and 1980 against property damage.
The insured incurred large liabilities for environmental clean up costs.
The clean up costs were necessitated by industrial pollution occurring since the early 1940s.
It claimed indemnity for the entire loss from each successive insurer by whom they had been insured against property or liability risks between 1956 and 1985, including Lexington.
The claim was heard in Pennsylvania under Pennsylvania law.
The courts there held that each insurer was jointly and severally liable for all damage which was manifest during their period of insurance irrespective of when it occurred.
This meant substantially all the pollution damage attributable to industrial operations not only during the period of insurance but over the previous three decades.
Lexington settled with the aluminium company on that basis.
The reinsurance was on the same terms as the original as to period and coverage.
It also contained a follow the settlements clause.
But it was governed by English law, under which liability would have been limited to damage caused during the period of insurance, whereas the Pennsylvania court applied its own law under which no such limit applied.
The argument for Lexington was that the Pennsylvania courts had decided that the pollution damage occurring over the whole period was insured under the 1977 1980 policy and that the reinsurance, which was on the same terms save as to the proper law, must respond on a like basis.
The House of Lords rejected this contention.
They held that, notwithstanding the ordinary presumption that reinsurance was back to back with the underlying insurance, the reinsurers liability was limited to damage caused between 1977 and 1980.
The leading speeches were delivered by Lord Mance and Lord Collins of Mapesbury.
Lord Mance said, at paras 40 41: 40.
Viewing the reinsurance through purely English law eyes, it cannot therefore be construed as a contract to indemnify Alcoa in respect of all contamination of Alcoa sites, whenever caused or occurring, provided that part of such contamination manifested itself or was in being during the reinsurance period.
That would involve reinsurers in an unpredictable exposure, to which their own protections might not necessarily respond.
It would mean that the same exposure would arise, even if they had granted the reinsurance for a shorter period than the three year period matching the original since the original itself would, even if in force for only one year, have had effectively the same exposure as that for which the Washington Supreme Court held it answerable.
Under the approach taken by the Washington Supreme Court, reinsurers must have incurred liability (in practice probably up to the reinsurance limits), as soon as they wrote the reinsurance.
The retention must likewise have been exhausted before the reinsurance period began, and cannot have fulfilled any object of introducing an element of discipline into insurers' handling of the insurance.
These represent as fundamental and surprising changes in the ordinary understanding of reinsurance and of a reinsurance period as those to which Hobhouse LJ was referring in the Municipal Mutual case [1998] Lloyd's Rep IR 421. 41.
The reference in the reinsurance slip to the retention as subject to excess of loss &/or treaty R/I is a reminder that an insurance and reinsurance such as the present are likely to be part of a larger programme of protections.
Excess of loss reinsurance is underwritten on either a losses occurring or risks attaching basis: Balfour v Beaumont [1984] 1 Lloyd's Rep 272.
In other words, it is fundamental that such a reinsurance will respond in the one case to losses occurring during the reinsurance period, in the other to losses occurring during the period of policies attaching during the reinsurance period.
To treat excess of loss policies as covering losses through contamination occurring during any period, so long as some of the contamination occurred or existed during the reinsurance period, would be to change completely their nature and effect.
Lord Collins said, at para 74: 74.
In English law, where an insurance or reinsurance contract provides cover for loss or damage to property on an occurrence basis, the insurer (or reinsurer) is liable to indemnify the insured (or reinsured) in respect of loss and damage which occurs within the period of cover but will not be liable to indemnify the insured (or reinsured) in respect of loss and damage which occurs either before inception or after expiry of the risk.
As Lord Campbell CJ said in Knight v Faith (1850) 15 QB 649, 667: the principle of insurance law [is] that the insurer is liable for a loss actually sustained from a peril insured against during the continuance of the risk.
Lord Brown of Eaton under Heywood, concurring with Lord Collins, pointed out at para 15 that if Lexingtons argument were correct, the reinsurers would have incurred the same liability if they had been on risk for only three months instead of three years: Given the fundamental importance under English law of the temporal scope of a time policy, I find it impossible to construe the reinsurance contracts in the way contended for.
Reinsurance is not an insurance on liability, but on the original risk.
In Municipal Mutual the original risk was the insureds liability for property damage and in Wasa it was the property damage itself.
But the principle stated in them is the same, and it is of general application, as Hobhouse LJ pointed out.
The courts are bound to give effect to the contractual limitations on the insurers liability.
In particular, they are bound to give effect to the chronological limits of the risks covered, and to those provisions of the contract that operate by reference to the insurance period.
The question on this appeal is how the terms of a chronologically limited policy are to apply to the liability resulting from the decision in Fairchild and the Compensation Act 2006.
The objection to construing the Midland policies in this case as covering the damage caused at any time during the 27 years in which Mr Carr was exposed to the risk of contracting mesothelioma is the same as the objection of the Court of Appeal in Municipal Mutual and the House of Lords in Wasa to the corresponding arguments in those cases.
The consequences are both commercially absurd and entirely inconsistent with the nature of annual insurance.
The longer an employee is exposed to asbestos, the greater the risk of his contracting mesothelioma at some stage in his life.
The result of IEGs argument is that under the contract the financial consequences for the insurer of writing the contract for a single year are the same as the financial consequences of writing the risk for the full 30 years, although he only receives a single years premium in the former case and 30 years premium in the latter.
Indeed, the consequences would be the same even if the insured had been held covered for a time on risk premium for just a week or two while an unsuccessful attempt was made to agree terms.
This entirely severs the functional connection between premium and risk.
The employer for his part would obtain cover in respect of those whom he employed and exposed to asbestos particles in the period of cover, notwithstanding that for the rest of their working lives he elected to insure with others, or indeed elected not to insure at all.
On that footing, the insurer assumes a liability of indeterminate duration notwithstanding that he expressly limited his liability to a single year.
The indeterminate duration of the liability would extend both backwards and forwards.
Thus an insurer who wrote a policy for, say, the first year of compulsory insurance, 1972, for an employer who had exposed its employees to asbestos particles for the previous half century and continued to do so, would assume liability for the entire accumulated legacy of exposure in the case of all employees on its payroll at the inception of the policy however far back the exposure of those employees extended.
An insurer who insured the employer for a single year but refused to renew because of unfavourable claims experience or an increase in the risk would nevertheless remain liable in respect of the exposure of existing employees for an indefinite period into the future without payment of any further premium.
Moreover, the insurer of a single year would have to pick up the tab for every other insurer who was on risk over an indeterminate period, although he had assumed a liability which was not co ordinate with theirs because they covered distinct periods.
It also would mean that where the terms of successive policies were different, for example as to the excess or the limit, the insured could select a policy and spike the whole of the loss into the period covered by it.
In the course of his judgment in the Court of Appeal, Toulson LJ observed that awarding less than the whole loss against any one insurer would deprive the insured of the insured coverage for which it paid.
This observation seems to me to be the reverse of the true position.
An employer who has paid a single years premium has not paid for 27 years of cover, which is what the decision of the Court of Appeal gives him.
I understand every member of this court to be agreed that these consequences are unacceptable.
As Lord Mance points out at para 40 of his judgment, the insurance was placed on the basis that a particular liability or loss would fall into one, not a series of separate periods.
If an insured wanted complete cover, it would have to maintain it for all such periods.
At para 43, he draws attention to the consequences which I have summarised above, and describes them as contrary to principle and anomalous.
He is, with respect, plainly right to do so.
These consequences are not just remarkable in themselves, but are directly inconsistent with the language of the Midland policies and the fundamental characteristics of insurance.
This is not because any of the elements of liability, such as causation or damage, is divisible by time.
Plainly they are not.
It is because once the insured has proved each of those elements, he must still show that the occurrence fell within the chronological limits of the policy.
If a particular result is inconsistent with the nature of insurance, and with the basis on which annual insurance is placed, there must be the strongest possible presumption that it was not intended, in the absence of clear language showing that it was.
To explain why IEGs submission is mistaken, it is first necessary to differentiate between the legal basis of an employers liability to his employee and the legal basis of the insurers liability to the employer.
At common law, the Dingle principle is that if several people tortiously contribute by independent acts to the same damage, they are all jointly and severally liable for the whole of the resulting damage.
In Barker, the Court of Appeal and Lord Rodger in his dissenting speech in the House of Lords likened this state of affairs to the situation where several employers successively exposed the same victim to the risk of contracting mesothelioma.
The majority of the House rejected that analogy, but the effect of section 3 of the Compensation Act was to reinstate it.
The result is that each employer is contributing to the risk all the time, and is therefore incurring liability all the time.
This makes some sense as between successive employers who are guilty of a continuous tort.
However, the same logic cannot be applied as between successive insurers.
Insurers are not wrongdoers.
They have not contributed to any tortiously inflicted damage.
The principles on which they are liable to indemnify their insured are not affected by the Compensation Act.
Their liability depends not on common law or statutory concepts of culpability but on the liability that they have agreed to assume by contract.
Although they have contracted to indemnify the insured in respect of his liability, they have done so on terms which require the assignment of causation to a contractual period and limit their liability to that period.
This raises a problem which is, essentially, not legal but factual.
The Fairchild principle is the laws response to the factual certainty that the disease was caused during the period of exposure combined with a complete uncertainty about when.
If the assignment of causation to a particular period of coverage is scientifically impossible, then one solution would be for the law to say that the insured has not proved his case, as Lord Phillips would have held in Trigger.
The alternative, once that is rejected, is to devise a mode of assigning causation to a particular period of time which is the closest possible surrogate for the real thing.
The majority in Trigger adopted the latter solution, holding that any period of tortious exposure to the risk of contracting mesothelioma was enough to establish that the employer had caused the disease if it subsequently developed.
The employers liability insurer was liable on that basis.
The fallacy of IEGs argument is that it assumes that because any period of tortious exposure to the risk of contracting mesothelioma is enough to establish causation of the disease, it must follow that the disease was successively caused in every period of exposure.
But that is conceptually impossible.
Mesothelioma is caused only once.
Once the process by which it develops has been initiated, subsequent further exposure to asbestos will not aggravate the victims condition or increase the loss.
Pursuing the example of an employee exposed to asbestos particles for 30 years, let us assume that a different insurer is on risk in each year of exposure.
If IEG is right, each insurer is liable for the entire loss in respect of an employee exposed to asbestos in his year who subsequently contracts mesothelioma, subject only to the limitation that the insured cannot recover more than an indemnity.
By the same token, if the same insurer was on risk throughout the period of exposure, that insurer would be liable for the entire loss in each year, subject to the same limitation.
But this makes no sense.
It is conceptually possible for an insurer to be liable on the footing that there is a chance that the disease was caused in any year and that that should be enough to establish the necessary causal link.
It is not conceptually possible for an insurer to be liable on the footing that the disease was actually caused in every year.
It is only when one aggregates every successive period that the chances add up to 100%.
IEGs answer to this is that because for the purposes of the insuring clause Trigger equates exposure to the risk with causation of the disease, it follows from the fact that the risk operated continuously throughout the period of exposure that the disease was continuously caused throughout the period of exposure.
Therefore, it is said, causation of the disease is at one and the same time (i) a single indivisible occurrence, resulting in the entire claim falling into a single policy year, and (ii) a continuing occurrence extending over every policy year and equally efficacious in causing the disease in each one.
I would be reluctant to assume that any judicial decision was authority for a contradiction in terms, and I do not think that Trigger is authority for this one.
The effect of Trigger is that the insurers liability is triggered in each insurance year during the period of exposure.
This is not because the insurance is against the exposure to the risk, a proposition which the court was at pains to reject in Trigger, just as the House of Lords had previously rejected it in Barker.
Nor is it because the disease was actually caused in each insurance year, which is logically impossible and in any event ex hypothesi unknowable.
It is because exposure to the risk is the closest surrogate that can be devised for determining when the disease was caused.
This is the meaning of the weak or broad causal link to which Lord Mance referred at para 74 of Trigger.
The link is, as he put it, 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.
The theory that an insurer is liable in respect of any year of insurance when the employee was exposed to the risk of contracting mesothelioma is a perfectly satisfactory answer to the question whether the insurer is liable at all, which was the only relevant question at issue in the Trigger litigation.
But it cannot be applied without modification when the question is how much of the loss is attributable to particular years.
If, as Trigger teaches, the insurers liability is triggered in each policy year, the rational response of the law is not to assign the whole of that loss to a policy year of the insureds choice.
That would be to assume that the whole loss was caused in that year, whereas the law proceeds from the premise that we cannot know that.
The rational response is that the loss must be prorated between every policy year during which the insured employer exposed the victim to asbestos.
In my opinion, once one rejects the conclusion that the insurer is not liable at all, proration on that basis is the only way of giving effect to the overriding requirement of each annual policy that the liability should be assigned to policy years.
If exposure to the risk of contracting mesothelioma is equated with causation, the natural consequence is that the resultant liability falls to be apportioned to policy years according to the duration and intensity of the exposure.
What is being prorated as between the insurer and the employer is the employer's liability, not the indivisible harm of the mesothelioma itself.
The chances of contracting mesothelioma, as Lord Hoffmann observed in Barker, are infinitely divisible, even if mesothelioma itself is not.
This conclusion does not, as it seems to me, require words to be read into the policy, any more than the weak or broad test of causation adopted in Trigger required words to be read into the policy.
It simply involves, as Trigger involved, construing the words caused during any period of insurance in the light of the terms of the policy as a whole and applying them to an insured liability with the unusual legal incidents of an employers liability for mesothelioma.
I can deal very shortly with the words all sums in the insuring clause, on which Aikens LJ relied to support his conclusion.
The relevant phrase is not all sums but all sums for which the insured shall be liable in respect of any claim for damages for such injury or disease, ie for injury or disease caused during any period of insurance.
The insurance does not cover all sums for which the insured may be liable, but only those which fall within the chronological limits of the risk which the insurer has assumed.
I have concentrated on the case where there is a single culpable employer whose operations are the sole relevant source of exposure to asbestos particles, because those are the facts of the present case.
But there is no particular difficulty in applying the same principle to cases where there are successive tortfeasors or successive sources of exposure.
The liability of the employer to the victim is apportioned to the insurer according to the proportion which its period on risk bears to the whole period during which that employer has tortiously exposed the victim to asbestos.
If the insured employer is jointly and severally liable to the victim under section 3 of the Compensation Act with earlier employers who exposed the same victim to asbestos, that liability will form part of the liability which falls to be prorated between his successive insurers or between them and himself in respect of periods of non insurance.
If the insured employer is insured throughout the period during which he exposed the victim to asbestos, the insurers will be liable for their respective proportions of 100%.
Likewise, if there is another source of exposure to asbestos (for example ambient environmental asbestos) which were to be held to reduce the insured employers liability, the liability passed on to his insurer will be correspondingly reduced, but if not, not.
United States Authority
This conclusion, which appears to me be a logical application of the insuring clause to the kind of liability which arises in this case, derives some support from the rich jurisprudence of the United States, where similar questions have frequently come before the courts in the context of asbestosis and environmental pollution claims.
Insurance is governed by state law and there are, perhaps inevitably, significant differences of approach in different state jurisdictions.
In the celebrated case of Keene Corporation v Insurance Company of North America (1981) 667 F 2d 1034 the United States Court of Appeals for the District of Columbia (applying the laws of Delaware, New York, Pennsylvania, Connecticut and Massachusetts) held that either exposure or manifestation of the disease would make the insurer liable, and that each insurer was jointly and severally liable for the whole loss.
The courts decision on the latter point was endorsed by Toulson LJ in his judgment in the Court of Appeal in the present case: see para 42.
It was based mainly on the reasonable expectations of policyholders, a consideration which, except as background to the construction of the policy, does not have the significant place in English insurance law as it has in many jurisdictions of the United States.
So far as it was based on the language of the policy at all, the imposition of joint and several liability in Keene was based on the expression all sums which the insured shall become legally obligated to pay as damages because of bodily injury: see note 20 (emphasis added).
I have given my reasons for regarding the corresponding words as inconclusive in the context of the Midland policies.
So far as Keene is authority for a triple or continuous trigger in cases about insurers liability for latent industrial diseases, it has been widely followed in other jurisdictions of the United States.
But so far as it imposes joint and several liability on successive insurers, it has not met with universal acceptance, and major insurance jurisdictions have rejected it.
In Insurance Company of North America v Forty Eight Insulations Inc (1980) 633 F 2d 1212, the Sixth Circuit Court of Appeals applied the laws of Illinois and New Jersey to a dispute about the allocation of a loss among successive insurers and the insured itself (in respect of periods of self insurance).
The court construed product liability policies in respect of bodily injury as covering latent diseases on an exposure basis.
The insured conceded that the insurers liability fell to be prorated according to time on risk, leaving them with a rateable part representing the period of exposure when they were uninsured.
The issue was, however, argued out on the question whether the same rule applied to defence costs, which the employer did not concede.
By a majority, the court ordered the proration of the defence costs, observing at para 73: In an underlying asbestosis suit, the plaintiff must show that Forty Eight's products injured him in order to be able to maintain a cause of action against Forty Eight.
Under Borel, Forty Eight would be jointly and severally liable along with the other asbestos manufacturers: 493 F 2d at 1094 96.
However, in allocating the cost of indemnification under the exposure theory, only contract law is involved.
Each insurer is liable for its pro rata share.
The insurer's liability is not joint and several, it is individual and proportionate.
Accordingly, where an insurer can show that no exposure to asbestos manufactured by its insured took place during certain years, then that insurer cannot be liable for those years.
The reason is simple: no bodily injury resulting from Forty Eight's products, took place during the years in question.
The same thing would be true if an insurer could show that a worker used an effective respirator during certain years.
Again, no bodily injury would have taken place.
In my view, this analysis of the reason why the compensation element of the claim falls to be prorated cannot be faulted, although for reasons which I shall explain I do not think that it can be applied to defence costs.
In Owens Illinois Inc v United Insurance Company (1994) 138 NJ 437, another product liability insurance case, the Supreme Court of New Jersey reached a similar conclusion on the assumption that the insurers liability was continuously triggered throughout the period of exposure, but rejected the solution proposed in Keene that each insurer on risk during that period was liable for the entire loss.
Instead, it proposed a complex system of proration.
At p 468, the court observed: The occurrence clauses undoubtedly contemplated indemnity for provable damages incurred by the policyholder because of injury that occurred during the policy period.
The continuous trigger theory coupled with joint and several liability is premised on a tenuous foundation: that at every point in the progression the provable damages due to injury in any one of the years from exposure to manifestation will be substantially the same (the collapsed accordion).
As we have seen, our law has been developing in a different manner.
The court found little assistance in the language of the contract, but concluded that for reasons essentially of policy and practical efficacy, proration was the appropriate solution.
It was particularly concerned with the anomaly that the Keene solution placed an insured with insurance for a small part of the period of exposure in the same position as one with insurance for all of it.
At p 473, the court said: the Keene rule of law reduces the incentive of the property owners to insure against future risks.
Recall the circumstances in the final three years.
Assuming the availability of insurance, a principle of law that would act as a disincentive to the building owners in the hypothetical might serve in the long run to reduce the available assets to manage the risk.
O I's counsel counters that these are not correct assumptions about the way in which the real world responds.
We cannot be sure that the policy will be effective.
We believe, however, that the policy goal is sound.
Finally, principles of simple justice cannot be entirely discounted.
To rebut effectively the question posed in Forty Eight Insulations is difficult.
Were we to adopt [the policyholder's] position on defence costs a manufacturer which had insurance coverage for only one year out of 20 would be entitled to a complete defence of all asbestos actions the same as a manufacturer which had coverage for 20 years out of 20.
Neither logic nor precedent support such a result.
And at p 479: Because multiple policies of insurance are triggered under the continuous trigger theory, it becomes necessary to determine the extent to which each triggered policy shall provide indemnity.
Other insurance clauses in standard CGL policies were not intended to resolve that question.
A fair method of allocation appears to be one that is related to both the time on the risk and the degree of risk assumed.
When periods of no insurance reflect a decision by an actor to assume or retain a risk, as opposed to periods when coverage for a risk is not available, to expect the risk bearer to share in the allocation is reasonable.
Estimating the degree of risk assumed is difficult but not impossible.
Insurers whose policies are triggered by an injury during a policy period must respond to any claims presented to them and, if they deny full coverage, must initiate proceedings to determine the portion allocable for defence and indemnity costs.
In Consolidated Edison Company of New York Inc v Allstate Insurance Company (2002) 98 NY 2d 208, a similar issue arose in relation to a claim under a policy for environmental pollution liability.
The assured argued for joint and several liability on the part of all insurers during the period when the pollutants were being released into the ground, because of the difficulty of assigning the damage to any one period.
Rejecting this argument, the New York State Court of Appeals said, at p 224: Con Edison wants to combine this uncertainty based approach, which implicates many successive policies, with an entitlement to choose a particular policy for indemnity.
Yet collecting all the indemnity from a particular policy presupposes ability to pin an accident to a particular policy period (see Sybron Transition Corp, 258 F 3d at 601; Owens Illinois, 138 NJ at 465, 650 A 2d at 988 989).
Although more than one policy may be implicated by a gradual harm (see eg McGroarty v Great Am Ins Co, 36 NY 2d 358, 365), joint and several allocation is not consistent with the language of the policies providing indemnification for all sums of liability that resulted from an accident or occurrence during the policy period (see Olin Corp, 221 F 3d 307, 323).
Pro rata allocation under these facts, while not explicitly mandated by the policies, is consistent with the language of the policies.
Most fundamentally, the policies provide indemnification for liability incurred as a result of an accident or occurrence during the policy period, not outside that period (see Forty Eight Insulations, 633 F 2d at 1224).
Con Edison's singular focus on "all sums" would read this important qualification out of the policies.
Proration of liability among the insurers acknowledges the fact that there is uncertainty as to what actually transpired during any particular policy period (see Sybron Transition Corp, 258 F 3d at 602).
Recently, in State of California v Continental Insurance Company (2012) 55 Cal 4th 186, 198 (and note 4), the Supreme Court of California noted that proration had been adopted by at least 12 states (Colorado, Connecticut, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Utah and Vermont), while Keene had been followed on this point in at least six states in addition to California itself (Delaware, Indiana, Ohio, Pennsylvania, Washington and Wisconsin), generally on account of the all sums language of the policy.
Policy considerations
Fairchild and Barker were both cases in which legally unconventional rules for establishing liability in tort were adopted for reasons of policy.
In Trigger, there was clearly a significant policy element behind the majoritys adoption of a weak test of causation in the construction of the insuring clause, in place of the austere logic of Lord Phillips, who would have held that employers liable on the Fairchild basis were not insured at all.
It is therefore natural to ask whether a similar approach may not justify a rule which would make each insurer liable in full irrespective of the period for which he was on risk, so as to ensure that whatever happens the employee is protected.
This is essentially what the victim support groups submit.
Judges are not always candid about the broader considerations which lead them to prefer one view of the law to another.
But the desire to ensure an outcome which protects victims of occupational mesothelioma has had such a strong influence on recent case law, that its relevance to the present issues is a question that needs to be confronted.
There are two reasons why the employee might be unable to recover damages for contracting mesothelioma resulting from his tortious exposure to asbestos.
One is that his employer has insured with an insurer who subsequently becomes insolvent.
The other is that his employer has in breach of his statutory obligation failed to insure at all.
The employee has no reason to be concerned with either problem if his employer is solvent and able to meet his liabilities from his own resources.
But both are a potential problem if, in addition, his employer is insolvent.
It is clear that the main reason for holding an insurer who was on risk at any time during the period of exposure liable for the entire loss is that this obliges that insurer to bear the risk of the absence of effective insurance in other years in which it was not on risk.
It is therefore necessary to ask what conceivable policy could justify that? The Fairchild principle is not addressed to the problems of insurer solvency or non insurance.
It is addressed to the scientific impossibility of ascertaining when the insured occurrence happened.
The Midland policies were written in a standard form which by its express terms applies only to injury or disease caused in Great Britain, Northern Ireland, the Isle of Man and the Channel Islands or to employees temporarily employed elsewhere under a contract entered into in one of those jurisdictions.
It is therefore clear that it was designed to satisfy the employers statutory obligation to insure under the Employers Liability (Compulsory Insurance) Act 1969.
It is self evident that that Act was intended to protect employees with claims against their employers rather than the employers themselves.
We can deduce from this that the Act of 1969 should predispose a court to find that that coverage for occupational injury and disease has been provided, as indeed this court held that it was in Trigger.
But there is nothing in the policy of the Act which is inconsistent with insurance being obtained through annual policies, as it normally has been throughout the history of this market.
And nothing which assumes that coverage will be provided beyond the express chronological limits of the policy simply because there is no effective insurance in place beyond those limits.
On the contrary, the Act envisages that there will be continuous cover with authorised insurers.
Insurers have deep pockets, but that in itself cannot justify imposing on them a liability which they have not agreed.
Nor is there any need to pick the pockets of the insurers in this way, since the employee is amply protected by various statutory schemes from the risk of being unable to recover.
The Policyholders Protection Act 1975 introduced a statutory scheme of compensation for policyholders of insolvent insurers.
It protected business policyholders in full in respect of risks subject to compulsory insurance.
These arrangements have since been replaced by the wider terms of the Financial Services Compensation Scheme introduced by section 213 of the Financial Services and Markets Act 2000.
The successive schemes have all been funded by statutory levies from the insurance industry.
This legislation does not protect the employee in respect of loss attributable to a period for which there was no insurance in place.
But such protection has now been conferred on eligible persons diagnosed on or after 25 July 2012 by the Mesothelioma Act 2014.
The Act provides for a scheme to be established by secondary legislation under which the victim or his dependants will be entitled to specified payments from a statutory fund if they are unable to bring an action for damages in respect of the disease against any employer of the person or any insurer with whom such an employer maintained employers liability insurance (because they cannot be found or no longer exist or for any other reason): section 2(1)(d).
Section 18(3) provides that for this purpose the scheme may specify circumstances in which a person is, or is not, to be treated as able to bring an action for the purposes of section 2(1)(d) .
The scheme was established by the Diffuse Mesothelioma Payment Scheme Regulations 2014 (SI 2014/916).
It provides for the payment of specified lump sums to victims or their dependents, the amount of which varies with the age of the victim upon diagnosis.
The power conferred by section 18(3) has been exercised by extending eligibility to any case in which the employer falls within the 1930 Act (ie is insolvent) and no other employer or insurer can be found or exists against whom the person can maintain an action for damages: regulation 7(1)(b) (emphasis added).
There are potential issues about the criteria of eligibility in section 2 of the Act, in a case where the employee is entitled to proportionate amounts in respect of different years and there is insurance for some of those years but not for others.
Like the Financial Services and Markets Act scheme, the cost of the fund is met by a levy on the United Kingdom insurance industry.
The combined effect of these schemes is that the employee is protected against the insolvency of an insurer or the absence of insurance, in any case where his employer is unable to meet his liabilities.
As the rules governing the Financial Services and Markets Act scheme presently stand, if an insurer on risk in one year were required to pay the entire loss, thus discharging the liability of insolvent insurers on risk in other years, that insurer would to that extent be entitled to claim against the scheme: see Prudential Regulation Authority: Handbook, Compensation Rules, para 4.4.3.
But if an insurer on risk in one year were required to make good the failure of the employer to insure at all in other years, that insurer would have no equivalent right to recover from the scheme created under the Mesothelioma Act 2014.
Accordingly, the result of imposing on him a liability to pay the entire loss is to cast the entire burden of the insurance gap on him when the scheme of the Act of 2014 is to spread it across the insurance industry as a whole.
Defence costs
That leaves the question whether the right to prorate the insureds loss across the period of exposure applies also to defence costs.
The insuring clause provides, immediately after the principal coverage provision: The Company will in addition be responsible for all costs and expenses incurred with the consent of the Company in defending any such claim for damages.
The insurer is liable under this provision for costs and expenses incurred with its consent in defending any such claim for damages, ie a claim for damages for disease caused during any period of insurance.
Similar language has been held in some of the jurisdictions of the United States which prorate the principal liability to require the proration of the defence costs as well: Insurance Company of North America v Forty Eight Insulations Inc (1980) 633 F 2d 1212.
I have some sympathy with the instinct behind this view, but the difficulty about it is that the tests are not the same.
The insurers liability for the compensation element of the claim falls to be prorated according to time on risk because on a proper analysis it relates only in part to the period for which the risk was insured.
The insurers liability for the defence costs is different.
Unless there was some severable part of the defence costs that can be specifically related to a period when the insurer was not on risk, the whole of the defence costs had to be incurred to meet that part of the claim which was insured.
The fact that it was also required to meet the uninsured remainder of the claim is irrelevant.
The most that the insurer can say in this situation is that in funding the defence of a claim so far as it related to an insured period, it incidentally conferred a benefit on those who were potentially liable for the same claim in respect of an uninsured period: ie other insurers and IEG in its capacity as self insurer.
In New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd [1997] 1 WLR 1237, the insured incurred costs in defending litigation in California against a number of parties only one of whom, a director, was insured against the relevant liability.
The Privy Council held that the defence costs did not fall to be apportioned between the insured and uninsured defendants.
So far as the defence costs were reasonably required to meet the defence of a party whose liability was insured, the insurer was bound to pay them.
It did not matter that the expenditure also benefitted other parties whose liabilities were not insured.
The principle is accepted by the insurers on this appeal, who concede that they are liable to pay the defence costs in full.
That concession appears to me to be correct.
It follows that as a matter of contract Zurich is contractually liable to meet the defence costs in full.
The Guernsey angle
In the Court of Appeal in the present case, Toulson LJ expressed the view that in the light of the subsequent developments in the law, Barker had become past history and was no longer good law even in cases (such as those arising in Guernsey) where the Compensation Act did not apply.
I have arrived at the conclusion about the proration of contractual liability for compensation by reference to the terms and nature of the contract of insurance.
The analysis would have been the same if Mr Carr had been employed in England.
It is therefore strictly speaking unnecessary to address the question whether Toulson LJ was right about the current status of Barker.
But in view of the fact that the point was fully argued, I will briefly summarise my reasons for thinking that he was wrong.
The common law is not a series of ad hoc answers to particular cases, but a body of general principle by reference to which answers may be found.
The Act of 2006 did not alter any principle of the common law.
In the first place, it did not lay down the elements of liability.
It assumed liability and regulated only the measure of recovery.
Secondly, it applied only to mesothelioma cases, and then only to regulate the measure of liability in tort as between the tortfeasor and the victim.
Thirdly, even in relation to mesothelioma, section 3(1) applied only where the responsible person incurred liability for materially increasing the risk.
Liability is incurred on that basis only on the footing that the time at which the disease is caused is impossible to determine.
As Lord Phillips pointed out in Sienkiewicz v Greif (UK) Ltd [2011] 2 AC 229, at para 70, the courts would be entitled to revert to the conventional approach of requiring proof of causation on the balance of probabilities if advances in medical science make this possible.
In other words, the Act left the common law intact, but carved an exception out of it for mesothelioma.
It follows that Fairchild as interpreted by Barker remains good law in those jurisdictions (such as Guernsey) where the Act does not apply, and remains good law as applied to those legal relationships (such as the contractual relationship between insurer and insured) to which it does not apply.
In those cases to which Barker continues to apply, it stands as authority for the allocation of liabilities which at common law are several only.
Equitable recoupment and redistribution
This question arises only on the assumption that an insurer who is on risk for only part of the period of exposure is contractually liable to meet the whole of the compensation element of the employers claim or the whole of the defence costs.
On that assumption, Zurichs argument is that insurers are entitled in equity (i) to redistribute the burden among other insurers who are liable in respect of the same amounts but in respect of different policy periods, and (ii) to recoup from the insured a pro rata part of the cost of meeting that liability in respect of periods when there was no insurance at all.
As I have already explained, I consider that the assumption on which this argument arises, namely that an insurer on risk for only part of the period of exposure is contractually liable for the whole loss, is false.
However, the question has a more general significance.
If, as Zurich contend, there is a general right of contribution or recoupment (i) as between insurers and (ii) as between insurers and insureds in respect of periods of non insurance, that would provide an alternative way of rectifying the anomalies associated with holding the insurer liable for the entire loss, alternative that is to construing the policy as responding for only a pro rata part of the loss.
As between insurers each of whom insured only part of the period of exposure but are liable (on this hypothesis) in full, I think it clear that there is a statutory right of contribution.
Section 1(1) of the Civil Liability (Contribution) Act 1978 came into force on 1 January 1979, and applies to damage occurring after that date: see section 7(1).
This has sometimes been questioned, for example by Friedmann, Double insurance and payment of anothers debt (1993) 109 LQR 51, 54.
But I can see no principled reason for questioning it.
Section 1(1) provides that a person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).
A contract of indemnity gives rise to an action for unliquidated damages, arising from the failure of the indemnifier to prevent the indemnified person from suffering damage, for example, in a liability policy by having to pay the third party claimant: Firma C Trade SA v Newcastle Protection and Indemnity Association [1991] 2 AC 1, 34 (Lord Goff of Chieveley).
The class of persons liable in respect of any damage suffered by another may include those liable in contract, and there is no reason to limit it to those who have themselves caused the damage, as opposed to those who have assumed a contractual liability in respect of it.
The question is therefore whether the damage for which successive insurers are liable is the same damage.
As a matter of construction and on ordinary principles of insurance law, it is not.
As I have said, successive insurers of liability on an occurrence basis do not insure the same liability.
Each of them has contracted to indemnify the insured against an insured peril occurring in its own period on risk.
In the case of an indivisible injury the liability of successive insurers is therefore alternative and not cumulative.
However, on the footing that (contrary to my opinion) the law treats each insurer as liable for the whole loss in each period of insurance, then it must necessarily have been the same damage.
Whether there would be a right of contribution in respect of liabilities arising before 1 January 1979 is a more difficult question.
There has always been a right of contribution at common law in cases of double insurance.
But double insurance normally requires that two or more insurers should be liable in respect of the same interest on the same subject matter against the same risks.
On this ground, English law has hitherto declined to recognise that double insurance can exist as between insurers liable in respect of different periods even if the loss is the same: National Employers Mutual General Insurance Association Ltd v Haydon [1980] 2 Lloyds Rep 149; Phillips v Syndicate 992 Gunner [2004] Lloyds Rep IR 426.
It would require some considerable development of traditional concepts of double insurance to accommodate a situation like the present one.
In Australia, where there is no legislation corresponding to the 1978 Act, this development has occurred: see Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342.
Whether the law should develop in the same way in England is a question that I should prefer to leave to a case in which it is more central to the outcome and the arguments of the parties.
The Act of 1978 will cover the great majority of cases that seem likely now to arise.
What is in my view clear is that there cannot be an equitable right of recoupment as between the insurer and his insured in respect of periods when the latter was not insured.
The reason is that unlike an insurers relationship with other insurers under a co ordinate liability for the same loss, his relationship with the insured is a contractual relationship.
Its content has been determined by agreement, and a right of recoupment would be inconsistent with that agreement.
If the insured is contractually entitled to the whole amount, there cannot be a parallel right of recoupment in equity on the footing that it is inequitable for the insured to have more than part of it.
The basis of the suggested right of recoupment is that it is unjust for the insurer to have to bear the whole loss.
But I do not understand by what standard it is said to be unjust when the parties have agreed that it should be so.
It is no answer to this to say that the alleged right of recoupment arises outside the contract.
Of course, a contractual right and an equitable right of recoupment are juridically different.
But the question is not what is the juridical origin of the claim for recoupment, but whether it operates by reference to the contract.
To that question, there is only one possible answer.
The alleged right of recoupment arises only because the contract (on this hypothesis) provides for the insurer to pay the whole loss.
It arises as a direct result of the payment of the contractual indemnity.
Its purpose is to undo in part what the contract has done.
Mr Edelman submitted that a right of recoupment would only reflect the contribution of the employer to the risk of years which the insurer did not insure.
So it would.
But that is because (on this hypothesis) the contract requires the insurer to pay in full notwithstanding the contribution of the employer to the risk in the years which were not insured.
If that is the consequence of the parties agreement, I know of no legal doctrine which can do away with it.
Equity does not mend mens bargains.
It may intervene to avoid unconscionable bargains, or to give effect to the parties real intentions (for example when proprietary rights are conferred for a limited purpose such as security), or to provide remedies where those available at law are defective.
But these are principled exceptions which depend on the unconscionability of allowing the law to take its course.
There is nothing unconscionable about the performance of a contract of insurance according to its terms.
In this respect, the principle on which equity acts is no different from that of the common law, even where the relevant common law claim is non contractual.
Thus a contractual relationship may give rise to a parallel duty of care in tort, and the consequences of breach (for example as regards limitation or foreseeability) may be different.
But any contractual provisions about the content of the duty must apply to both: Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 191, 193 194 (Lord Goff of Chieveley).
And a claim for unjust enrichment, which is probably the closest analogue to the right of recoupment proposed in this case, will not be allowed where its effect is to alter the contractual allocation of risks: Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 WLR 161, 164 (Lord Goff).
As Etherton LJ said in MacDonald Dickens & Macklin (a firm) v Costello [2012] QB 244, at para 23, in language which applies well beyond the domain of unjust enrichment with which he was concerned: The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non performance.
That general rule reflects a sound legal policy which acknowledges the parties' autonomy to configure the legal relations between them and provides certainty, and so limits disputes and litigation.
Of course, this will not necessarily apply where the relevant contractual right is vitiated, for example by illegality, frustration or mistake, all of which give rise to well established grounds for restitution: see Lord Mances observations at paras 69 71.
But this has no bearing on a case such as this is said to be, where a valid, lawful and effective contract requires the insurer to satisfy the whole liability notwithstanding that he accepted only a time limited part of it.
It is I think beyond question that to require part of that amount to be repaid on the ground that its retention would be unjust is a reversal of the effect of the contract by operation of law, something which cannot be justified if the contract is valid, lawful and effective.
Mr Edelman QC, who appeared for Zurich, submitted that in respect of periods when the employer was not insured, he could be regarded as self insured and his position as regards contribution assimilated to that of a true insurer.
Even if this were correct, it would not displace contractual allocation of risk.
But in my view it is not correct.
The submission is founded mainly on the decision of the House of Lords in Lord Napier and Ettrick v Hunter [1993] AC 713, 730, which is said to be authority for the proposition that self insurance is a form of insurance.
The House held that a Lloyds name was accountable to his subrogated stop loss insurer for recoveries which he had made from successful litigation against his managing agents.
Under the terms of the stop loss policy, the name had agreed to bear the first 25,000 of loss.
It was held that he was not entitled to apply the recoveries against the bottom 25,000 of loss, because recoveries are applied to insurers top down, starting with the insurer of the highest tranche of loss.
Lord Templeman referred to the name (p 730E) as acting as his own insurer for the uninsured tranches.
But this was a figure of speech.
The point that he was making was that if the name had actually insured the bottom tranche of loss, the insurer of that tranche would have been entitled to nothing from the recoveries because the insurers of higher tranches would have exhausted them.
The name, having agreed to bear the bottom tranche himself, could be no better off than an insurer of the bottom tranche if there had been one.
Self insurance is non insurance.
Even if for the purposes of subrogation the position of a person with an uninsured excess is similar to that of an insurer of that excess, it does not follow that it is similar for any other purpose, still less that such a person is himself an insurer.
IEG cannot be regarded for the purposes of the Civil Liability (Contribution) Act 1978 as being liable to themselves in respect of the uninsured periods of exposure for the same damage for which their insurers are liable to them in other years.
The real basis for the alleged right of recoupment is the intolerable consequences of holding an insurer liable for a loss sustained over many years irrespective of how long he was on risk.
But the correct response to these consequences is for the courts to do what they normally do when one construction of a contract leads to absurd results.
They reject it and prefer another which does not exhibit the same anomalies.
The whole recoupment analysis is in my opinion a classic example of the problems associated with the adoption of special rules within the Fairchild enclave which differ from those that would follow from the application of ordinary principles of law.
Third Parties (Rights Against Insurers) Acts 1930 and 2010
I do not propose to lengthen this judgment yet further by addressing the question whether, if there were a right of recoupment as between the insurer and the insured, it could be set off against the claim on the policy.
If it could be set off, the employee of an insolvent employer, suing under the Acts of 1930 or 2010, would be no better off by having a contractual right to recover the entire loss under the policy.
In my opinion, the question does not arise because he has no such contractual right.
I will simply observe that this is another difficult question which arises only as a result of the discarding of orthodox principles of contractual interpretation in favour of special rules devised for special enclaves without regard to general principles.
LORD NEUBERGER AND LORD REED: (agree with Lord Sumption)
This appeal represents yet another demanding chapter in the difficult series of decisions of the House of Lords and Supreme Court in relation to an employers liability to a former employee, who was exposed to asbestos fibres during the course of his employment, and subsequently contracted mesothelioma, a disease which has been rightly described by other judges as hideous and dreadful.
For ease of reference we will refer to such an employer and such a former employee as an employer and an employee respectively.
The decisions start with Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32, which raised the question of an employers liability to an employee, who had also been exposed to asbestos dust when working for another employer.
In that case, as explained by Lord Mance at paras 3 4 and Lord Sumption at paras 114 116 and 124 128 above, the House of Lords was faced with an unedifying choice between (i) applying well established rules of causation in tort and arriving at a thoroughly unpalatable decision, namely that neither employers negligence could be proved to have caused the disease, and (ii) extending the law of causation on an ad hoc basis, so that it was enough to prove that an employers negligence had materially increased the risk of contracting the disease, in order to achieve a tolerably fair outcome, namely that each employer was liable.
The House elected for the latter course, and held that, in such a case, given that it was impossible to tell whether either employers breach of duty had caused the employee to contract the disease, each of the two employers should be held liable to the employee.
To many people, that avowedly policy based decision, which is applicable to any disease which has the unusual features of mesothelioma (as described by Lord Sumption in paras 116 117) seemed, and still seems, not only humane, but obviously right.
Indeed, there can be no doubt that it would have required an exceptionally hard headed (and, many people would say, hard hearted) approach to hold that neither employer was liable, which is what the application of established legal principle would have indicated.
However, as subsequent decisions have shown, the effect of what was a well intentioned, and may seem a relatively small, departure from a basic common law principle by a court, however understandable, can lead to increasingly difficult legal problems a sort of juridical version of chaos theory.
The problems stem from the fact that, unlike legislation, the common law cannot confine itself to a particular situation and deal with it in isolation from the remainder of the law; nor can it resolve problems on a purely pragmatic basis.
It is a complex and extensive network of interconnected principles applicable to all situations falling within their scope.
As Lord Nicholls of Birkenhead stated in Fairchild itself: To be acceptable the law must be coherent.
It must be principled.
The basis on which one case, or one type of case, is distinguished from another should be transparent and capable of identification.
When a decision departs from principles normally applied, the basis for doing so must be rational and justifiable if the decision is to avoid the reproach that hard cases make bad law. (para 36).
The creation of an ad hoc exception from established principles governing causation in order to provide a remedy to the victims of mesothelioma was, in the first place, likely to result in uncertainty as to the legal rationale of the exception (as distinct from the social policy of enabling victims of mesothelioma to obtain a remedy against negligent employers), and the consequent breadth of that exception.
The rationale could not be merely the impossibility of establishing the cause of an injury, since such a wide exception to the general rule governing causation would destroy the rule (see, for example, the attempt to extend the exception to cases of medical negligence, narrowly defeated in Gregg v Scott [2005] 2 AC 176).
As Lord Brown observed in Sienkiewicz v Greif (UK) Ltd [2011] 2 AC 229, para 186, the unfortunate fact is 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 would turn our law upside down and dramatically increase the scope for what hitherto have been rejected as purely speculative compensation claims.
In the event, the rationale of the Fairchild exception continues to cause difficulty (as, for example, in Novartis Grimsby Ltd v Cookson [2007] EWCA Civ 1261).
Secondly, the introduction of a novel test of causation in tort was bound, given the legal and commercial connections between different areas of the law, to give rise to a series of difficult questions and consequent uncertainty, as the ripples spread outwards.
The first question which subsequently manifested itself was how the common law, having taken this step into the unknown, should allocate liability for damages as between two employers, each of whom had permitted an employee to be exposed to asbestos fibres.
That question was addressed in Barker v Corus UK Ltd [2006] 2 AC 572, a decision analysed by Lord Sumption in paras 129 135.
The pragmatic decision that each employer was responsible for a proportion of the damages but not for the whole created a further exception to established legal principles.
Perhaps unsurprisingly, it was not unanimous, and, as Lord Sumption says, the reasoning is not easy to analyse.
Indeed, it is not without interest that Lord Rodger disagreed with the majority as to the proper analysis of the reasoning in Fairchild.
Parliament was unhappy with the decision in Barker, since it meant that, if an employer was insolvent, the employee might not recover that employers proportion of the damages.
The decision was effectively reversed in short order by section 3 of the Compensation Act 2006.
Unlike the two House of Lords decisions, section 3 of the 2006 Act was expressly limited to mesothelioma cases: a restriction which Parliament could impose, but the courts could not.
The effect of section 3 is explained in para 136 by Lord Sumption.
The next case to arrive at the Supreme Court in connection with employers liability to employees was Sienkiewicz v Greif (UK) Ltd [2011] 2 AC 229, a decision which has no direct part to play in the present appeal, although it involved a logical, if probably unanticipated, extension of what had by then been dubbed the Fairchild exception, in order to accommodate the existence of non tortious environmental exposure to asbestos.
In his judgment, the decisions and reasoning in the judgments in Fairchild and in Barker were discussed by Lord Phillips, who described them in paras 45 and 52 as raising two conundrums in connection with causation, which needed to be solved.
In the course of her concise judgment, Lady Hale in paras 167 168 referred to the decision in Fairchild as kick[ing] over the hornets nest.
She added that she f[ound] it hard to believe that their Lordships there foresaw the logical consequence of abandoning the but for test.
She also mentioned the possibility of overruling Fairchild, but said that Even if we thought it right to do this, Parliament would soon reverse us.
On one view, that might have been regarded as the best of reasons for overruling Fairchild.
Lord Brown in para 185 also expressed doubts whether those who decided Fairchild could have appreciated the full implications of their decision.
Lord Mance put the same point at a rather higher level of principle in para 189, when he referred to the lesson of caution that the history may teach in relation to future invitations to depart from conventional principles of causation.
At least to a reasonable degree of clarity, these three cases and the 2006 Act have established the extent of an employers liability for damages in relation to an employee who has been exposed to asbestos fibres in the course of his employment and has subsequently developed mesothelioma.
Problems next arose in connection with the extent of the liability of insurers.
The general position of insurers in law and in practice is summarised by Lord Sumption in paras 118 119.
However, the way in which the law had developed in relation to mesothelioma claims by employees against employers raised problems of principle in relation to the liability of the employers insurers.
Two such problems were decided by the Supreme Court in the so called Trigger litigation, Durham v BAI (Run off) Ltd [2012] 1 WLR 867, and they are explained by Lord Mance and Lord Sumption at paras 16 24 and 137 140 respectively.
The conceptual difficulties thrown up by the decisions in Fairchild and in Barker were again demonstrated by the discussion in paras 63 66 of Lord Mances majority judgment in Trigger, and by the contrast between his reasoning and that of Lord Phillips, who dissented (and see per Lord Clarke in para 84).
However, the position is still unclear in a case where an insurer insured an employer for only part of the period of a claimant employees employment, and the employer was either uninsured for the rest of the period, or was insured with an insurer who is now insolvent.
It is that situation with which this appeal is concerned, and the problem is identified by Lord Mance in his paras 42 44 and by Lord Sumption in his paras 141 142.
As Lord Mance goes on to explain in paras 44 46, three different approaches are suggested.
The first is that adopted by the Court of Appeal; the second is that proposed by Lord Mance; the third is that proposed by Lord Sumption.
We agree with Lord Mance and Lord Sumption that the Court of Appeals analysis cannot be supported.
It seems to us that they were wrong to conclude that the common law, as laid down by the House of Lords in Barker, had been changed as a result of section 3 of the 2006 Act.
The section changed the law in this country, because (save perhaps in extreme circumstances) Parliament can, by statute, override the common law as laid down by the courts.
However, it is clear from the terms of section 3 that it was intended to deal with a specific and limited class of case, namely the liability to employees, who were exposed to asbestos fibres in the course of their employment and subsequently contracted mesothelioma.
In those circumstances, it seems to us that section 3 cannot be said to have altered the common law: it simply superseded the common law in the circumstances in which it applies.
That leaves the very difficult question as to which of the two approaches proffered by Lord Mance and Lord Sumption to prefer.
The difficulty is compounded by the high quality and depth of reasoning in their two judgments.
Further, it is interesting to note that each of these approaches has its adherents in other jurisdictions, as Lord Mance and Lord Sumption explain in paras 69 and 164 168 respectively.
Lord Mances solution has a number of attractions.
First, it is more in line with the Parliamentary approach as demonstrated by section 3 of the 2006 Act, because, unlike Lord Sumptions solution, it ensures that every employee whose employer was insured for any period of his employment, can look to any such insurer who is still solvent for full compensation.
Secondly, unlike Lord Sumptions solution, it has been supported by one of the parties to this appeal: despite being raised by the court at a reconvened hearing, Lord Sumptions solution has not been adopted by either party.
We suspect that these two points are not unconnected: the insurance market may fear that, if the court adopts the solution favoured by Lord Sumption, Parliament will intervene as it did following Barker.
Indeed, such a concern may have been seen by some members of the court in Sienkiewicz as a reason for not reconsidering the decision in Fairchild.
However, as a matter of principle, having rejected the contention that section 3 has changed the common law, it seems somewhat quaint (although, we accept, not logically inconsistent) to invoke section 3 as a reason for developing the common law in a certain way rather than another.
Thirdly, Lord Mances solution represents a solution which is far closer to that which the London insurance market has worked out in practice.
Fourthly, Lord Mances approach does not clash with any of the preceding decisions to which we have referred, while it is, we accept, arguable whether Lord Sumptions solution is consistent with the reasoning of this court in the Trigger litigation.
Just as in Barker there was a division of opinion as to the reach of the reasoning in Fairchild so there is a difference in this case as to the reach of the reasoning in the Trigger litigation compare Lord Mance at paras 45 and 55 with Lord Sumption at paras 159 161.
While, like so many points in this area, the issue is not easy, we agree with Lord Sumptions view.
On the other hand, in favour of Lord Sumptions view, it seems to us rather remarkable for an insurance contract to be construed as rendering the insurer liable for the whole of an employees damages, where, for instance, the employee has been exposed to fibres for the whole of his 40 years of employment and the insurer in question has only provided cover for one of those years. (Or even for a temporary period of two weeks while the employer was considering whether to take out longer term cover.) As Lord Sumption explains, such an approach is inconsistent with the link between risk and premium which lies at the heart of a contract of insurance.
Yet that is the basis of Lord Mances conclusion.
Lord Sumptions solution, which involves a pro rata liability, produces no such anomalous result: in the example just given, the insurer would be liable for 1/40 of the employees damages.
It is true that the apparently anomalous result in the example we have just mentioned is mitigated by Lord Mances view that the employer has to be treated as a self insurer for the 39 years of non insurance, so that the insurer can recover 39/40 of the damages it has to pay from the employer, provided the employer is solvent.
While impressively reasoned in paras 56 78, Lord Mances view that an insurer could recover a contribution from the employer, his insured (but not set it off against his own liability to the employer under the insurance contract), seems to us to open up a dangerous seam of potential litigation, as an exception is made to another established principle, namely that the respective rights and liabilities of the parties to a contract are governed by their agreement.
We appreciate that it can be emphasised that that aspect of Lord Mances analysis is strictly limited to cases within the Fairchild exception, or as Lord Hodge has put it, the analysis only applies within the Fairchild enclave.
Enclaves are however notoriously difficult to police, and experience suggests that judicial attempts at restricting ratios may run into the same danger as when a court emphasises that a particular course is only to be taken in very exceptional circumstances.
Once a principle is approved by a court (particularly, it may be said, this court), it is quite legitimate, indeed appropriate, for lawyers to invoke it and seek to apply it more generally, if it assists their clients case.
And here, it may well be argued, this court is invoking a new and wide general equitable power, which is, to put it at its lowest, close to inconsistent with an express contractual term, in order to reconstitute a contractual relationship so as to achieve what it regards as a fair result in a purely commercial context.
Lord Sumptions analysis, by contrast, turns simply on the interpretation of the relevant contract of insurance, and does not appear to us to have any unfortunate wider ramifications.
Thus, Lord Sumptions analysis appears to us to do significantly less violence (and we think it probably does no violence) to established legal principles, whereas Lord Mances analysis accords more with current practice and what is likely to be the view of the legislature.
We accept that the fact that we are in the Fairchild enclave is a reason for favouring what may be said to be the more practical solution.
However, our preference is in favour of learning what Lord Mance in Sienkiewicz referred to as the lesson of caution that the history of the decisions of the House of Lords and Supreme Court to which we have referred may teach in relation to future invitations to depart from conventional principles, and agree with Lord Sumption.
But we can readily appreciate why the majority of the court has formed the opposite conclusion.
In conclusion, it seems to us that it is at least worth considering what lessons can be learnt from the history summarised in this judgment and more fully treated by Lord Mance and Lord Sumption.
There is often much to be said for the courts developing the common law to achieve what appears to be a just result in a particular type of case, even though it involves departing from established common law principles.
Indeed, it can be said with force that that precisely reflects the genius of the common law, namely its ability to develop and adapt with the benefit of experience.
However, in some types of case, it is better for the courts to accept that common law principle precludes a fair result, and to say so, on the basis that it is then up to Parliament (often with the assistance of the Law Commission) to sort the law out.
In particular, the courts need to recognise that, unlike Parliament, they cannot legislate in the public interest for special cases, and they risk sowing confusion in the common law if they attempt to do so.
When the issue is potentially wide ranging with significant and unforeseeable (especially known unknown) implications, judges may be well advised to conclude that the legislature should be better able than the courts to deal with the matter in a comprehensive and coherent way.
It can fairly be said that the problem for the courts in taking such a course is that the judges cannot be sure whether Parliament will act to remedy what the courts may regard as an injustice.
The answer to that may be for the courts to make it clear that they are giving Parliament the opportunity to legislate, and, if it does not do so, the courts may then reconsider their reluctance to develop the common law.
For the courts to develop the law on a case by case basis, pragmatically but without any clear basis in principle, as each decision leads to a new set of problems requiring resolution at the highest level, as has happened in relation to mesothelioma claims, is not satisfactory either in terms of legal certainty or in terms of public time and money.
In the case of mesothelioma claims, there can be no real doubt but if Fairchild had been decided the other way, in accordance with normal common law principles, Parliament would have intervened very promptly.
That may very well have been a better solution, but it can fairly be said that that observation is made with the wisdom of hindsight.
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The present appeal is from Guernsey, where there is no equivalent of the 2006 Act.
The common laws of England and Guernsey are agreed to be identical in this area.
The principal issues are: (1) whether the reasoning in Barker still applies in Guernsey [8], and means that an employers liability insurer covering an employer for only part of the period during which the employer exposed a victim is liable for only a pro rata part of the employers liability to the victim [9], and (2) if Barker does not apply and the position in Guernsey is now the same as in the UK under the 2006 Act, whether such an insurer is liable in the first instance for the whole of the employers liability to the victim, and (3) if so, whether the insurer has pro rata rights to contribution from any other insurer of that employer and/or from the employer in respect of any periods not covered by the insurer [9].
There are parallel issues regarding such an insurers responsibility for defence costs incurred in meeting the victims claim.
For 27 years from 1961 to 1988, Mr Carr was negligently and consistently exposed to asbestos dust by his employer, Guernsey Gas Light Co Ltd (GGLCL).
He later contracted mesothelioma, from which he died [10].
Before his death, he sued the Respondent (IEG), as successor in title of GGLCL, and recovered compensation of 250,000 damages and interest plus 15,300 towards his costs.
IEG also incurred defence costs of 13,151.60 [11].
During the 27 years of exposure GGLCL had two identifiable liability insurances, one with Excess Insurance Co Ltd, for two years from 1978 to 1980, the other with Midland Assurance Ltd, for six years from 1982 to 1988 [12].
The Appellant (Zurich), as successor to Midlands liabilities, maintains that it is only liable to meet 22.08% of IEGs loss and defence costs, based on the fact that Midland only insured GGLCL for 6/27ths of the 27 year period
of exposure [14].
The trial judge ordered Zurich to meet 22.08% of the compensation but 100% of defence costs.
The Court of Appeal ordered Zurich to pay 100% of both the compensation and defence costs [15].
Zurich appeals in relation to both compensation and defence costs.
The Supreme Court unanimously holds that the common law rule of proportionate recovery established in Barker [2006] UKHL 20 continues to apply in Guernsey; it accordingly allows Zurichs appeal in respect of compensation; but it dismisses the appeal in relation to defence costs [35 and 100].
The judges order is therefore restored.
The other issues do not in these circumstances arise, but, because of their general importance, the Supreme Court states its opinion on them.
By a majority of 4 3 the Court concludes that, had the position in Guernsey been as in the UK under the 2006 Act, Zurich would have been liable in the first instance to meet IEGs claim in respect of the compensation paid by IEG in full, but would have been entitled, in respect of the 21 years not covered by the Midland insurance, to claim pro rata contribution from the Excess and IEG [96].
Lord Mance (with whom Lords Clarke, Carnwath and Hodge agree) gives the leading majority judgment, and Lord Sumption (with whom Lords Neuberger and Reed agree) the leading minority judgment.
Lord Hodge gives a separate judgment, as does Lord Neuberger and Lord Reed.
(1) All members of the Court agree that the common law rule in Barker remains unaltered in Guernsey where the 2006 Act does not apply. [27 31].
Only 22.08% of IEGs loss is thus attributable to the period of the Midland insurance for which Zurich must answer [35]. (2) The defence costs are different.
They would have been incurred in defending the claim whatever the total period of exposure by GGLCL.
They were incurred with insurers consent, in defending a claim for damages for injury or disease caused during the Midland insurance period within the meaning of the main insuring clause.
Under the rule in Fairchild, as applied in Trigger, mesothelioma is caused in any period in which exposure occurs which materially contributed to the risk of contracting mesothelioma [36 39]. (3) Had Guernsey had an equivalent to the 2006 Act, IEG would have been liable to Mr Carr for his full 100% loss whether it had exposed him to asbestos for actual 27 years or only for the 6 years of the Midland insurance cover.
But it would be anomalous if Zurich had to answer for the full 100% loss without any defence or right of recourse.
In this situation, the majority holds that, although Zurich must in the first instance answer for the full 100%, Zurich has equitable rights to contribution pro rata from any other insurer (such as Excess) able to contribute and, in respect of any period where there is no such insurer, from IEG itself. [42 54], [63] and [77 78].
The minority considers that Zurich is only liable to IEG in the first instance for 22.08% of the full loss [180 187]. (4) Lord Mances judgment also discusses the position under the Third Party (Rights against Insurers) Act 1930 had IEG been insolvent, and concludes that it is probable that Mr Carr would in such a case have been able to look to Zurich for his full 100% loss [97].
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This appeal concerns the liability for Value Added Tax (VAT) of a company which markets and arranges holiday accommodation through an on line website.
The outcome turns on the appropriate characterisation of the relationship between the company, the operators of the hotels, and the holiday makers or their travel agents (which is an English law issue), and the impact of certain provisions of the relevant EU Directive on that relationship once it has been characterised (which is an EU law issue).
The basic facts
The appellant, Secret Hotels2 Ltd (formerly called Med Hotels Ltd, and known as Med), marketed holiday accommodation, consisting of around 2,500 resort hotels, villas, and apartments in the Mediterranean and the Caribbean, through a website, www.medhotels.com (the website).
In these proceedings, everyone has focussed on hotel rooms, and has ignored villas and apartments, and I shall do the same.
Around 94% of the sales of hotel rooms from the website were made to travel agents who no doubt sold them on to holiday makers; the remainder of the sales were directly to holiday makers.
An hotelier who wished his hotel to be marketed by Med had to enter into a written agreement with Med headed global hotels Terms and Conditions for allotment contracts, which I will call the Accommodation Agreement.
Once an hotelier had signed up to the Accommodation Agreement, his hotel would normally be included among those shown on the website.
When a potential customer (be it travel agent or holiday maker) logged onto the website, she would see some Terms of Use.
If, after considering what was available, she identified a hotel at which she (or a client) wished to stay, she would book a holiday through a form on the website, which set out standard Booking Conditions, which included, of course, terms as to payment.
The customer had to pay the whole of the sum which she had agreed with Med to pay for the holiday (which I will call the gross sum) before the holiday maker arrived at the hotel.
However, Med only paid the hotel a lower sum (which I will call the net sum) in respect of the holiday concerned, pursuant to an invoice which was rendered by the hotelier when the holiday had ended.
The relevant VAT law
These proceedings concern Meds liability to VAT in respect of the supply of hotel accommodation through the medium of the website between the period between December 2004 and May 2007 (the relevant period).
VAT is, of course, an EU tax, which is levied on the supply of goods or services.
For the majority of the relevant period, the primary source of law on VAT was contained in Directive 77/388/EEC (the Sixth Directive), but on 1 January 2007 it was replaced by Directive 2006/112/EC (the Principal VAT Directive).
As the two Directives contain effectively identical, although somewhat differently worded, provisions for present purposes, I will limit my references to the current one, and all references to articles are to articles of that Directive, unless stated otherwise.
By article 2.1(c), VAT is liable to be levied on the supply of goods for consideration within the territory of a Member State by a taxable person acting as such.
By virtue of article 135(2)(a), while leasing of property is exempt from VAT, the provision of accommodation in the hotel sector or in sectors with a similar function is not.
Article 45 states that The place of the supply of services connected with immovable property shall be the place where the property is located .
The application of article 45 to travel agents could often result in their having to be registered in many member states, which could be inconvenient both for travel agents and for member states taxing authorities.
Accordingly, articles 306 310 contain a special scheme relating to travel agents.
Article 306, which is the crucial provision for present purposes, is in these terms (albeit adding sub paragraphs to para 1): Article 306 1. [(a)] Member States shall apply a special VAT scheme, in accordance with this Chapter, to transactions carried out by travel agents who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities. [(b)] This special scheme shall not apply to travel agents where they act solely as intermediaries and to whom point (c) of the first paragraph of Article 79 applies for the purposes of calculating the taxable amount. 2.
For the purposes of this Chapter, tour operators shall be regarded as travel agents.
Article 79(c) excludes from liability to VAT the amounts received by a taxable person from the customer, as repayment of expenditure entered in his books in a suspense account.
Articles 307 and 308 are also of some relevance, and (with the paragraph numbering added to article 307) they provide as follows: Article 307 1.
Transactions made, in accordance with the conditions laid down in Article 306, by the travel agent in respect of a journey shall be regarded as a single service supplied by the travel agent to the traveller. 2.
The single service shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services.
Article 308 The taxable amount and the price exclusive of VAT, within the meaning of point (8) of Article 226, in respect of the single service provided by the travel agent shall be the travel agent's margin, that is to say, the difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual cost to the travel agent of supplies of goods or services provided by other taxable persons, where those transactions are for the direct benefit of the traveller.
Provisions equivalent to articles 306 310 were contained in article 26 of the Sixth Directive (which was slightly different in both wording and layout, but identical in its central provisions and effect).
They were given effect in the United Kingdom through the Tour Operators Margin Scheme (known as TOMS), which was promulgated in the Value Added Tax (Tour Operators) Order 1987 (SI 1987/1806).
It is unnecessary to set out the provisions of TOMS as it has never been suggested that they have any different effect from articles 306 310.
The contentions of the parties in summary
HM Commissioners for Revenue and Customs (the Commissioners) assessed Med for VAT in respect of the relevant period on the basis that TOMS applied.
The Commissioners justified this on the ground that Med was a travel agent within the meaning of article 306, which deal[t] with customers [namely travel agents and, less frequently, holiday makers directly] in [its] own name and use[d] the services of other taxable persons [namely the hoteliers] in the provision of travel facilities.
In effect, the Commissioners analysis was that Med booked a room in a hotel for the net sum, which it paid to the hotelier when the holiday had ended, and Med supplied the room to its customer in return for the gross sum, which it received in advance of the holiday.
On that basis, it is agreed that Med would be a travel agent whose operations fell within article 306.1(a), and it would therefore be liable for VAT in accordance with article 307.1, namely on the gross sum paid by the customer to Med.
Further, by virtue of article 307.2, the VAT would be levied in the UK, as that was Meds place of business.
On the Commissioners approach, therefore, where a customer had booked and paid for a holiday in Greece, by virtue of articles 306 and 307, as enacted through TOMS, Med would be liable to the Commissioners for VAT on the margin.
Med challenged this assessment on the ground that the nature of its business was such that it did not fall within article 306.1(a), but within article 306.1(b).
This was on the basis that it was, during the relevant period, a travel agent which was act[ing] solely as [an] intermediar[y]. (Although article 306.1(b) also contains a requirement that point (c) of the first paragraph of article 79 must appl[y] for the purposes of calculating the taxable amount, it is common ground that it would so apply if Med was act[ing] solely as [an] intermediar[y].) Meds analysis of the position was that, through Meds agency, the hotelier supplied a hotel room to a customer for the gross sum, and that Med was entitled to the difference between the gross sum and the net sum as a commission from the hotelier for acting as his agent.
On Meds approach, TOMS would not apply, and it is agreed that the difference between the gross sum and the net sum would be Meds commission for providing services to the hotelier, who was entitled to the gross sum from the customer.
On that basis, the prima facie position would be as follows: (i) Med would have to register for VAT in Greece, (ii) it would have to pay VAT to the Greek taxation authorities on its commission, (iii) the hotelier would have to account for VAT on the gross sum, but (iv) the hotelier would be able to set off against its liability for that VAT, the input tax on the commission.
However, by virtue of regulation 14(2) of the Value Added Tax Regulations 1995 (SI 1995/2518), there was an alternative way of accounting for VAT if Meds analysis was correct and TOMS did not apply, namely the so called reverse charge procedure.
Under this procedure, provided for in article 194, the hotelier would account for the VAT on the gross sum to the Greek authorities, so that Med would not have to pay any VAT.
The procedural history
The Commissioners analysis based on TOMS resulted in their assessing Med to liability for VAT in respect of the relevant period in the sum of 5,643,736.
Med challenged this assessment, but its challenge was rejected by the First Tier Tribunal (FTT, Miss J C Gort and Mr A McLoughlin) after a four day hearing in a carefully reasoned judgment [2010] UKFTT 120 (TC).
The FTT identified the main issue as being: Does [Med] act as a principal, as the Commissioners allege, or as an agent, as [Med] contends, when making the supplies of hotel accommodation? It is common ground that if the Commissioners are correct then [Med] is in principle required to account for output tax under the TOMS and if [Med] is correct then the supplies are treated as taking place in the jurisdiction in which the hotel belongs (and are, therefore, outside the scope of UK VAT).
The FTT answered that question in favour of the Commissioners.
In arriving at this conclusion, they took into account both the contractual documentation and the way in which Meds business was conducted.
They considered that the principal document for our consideration is the contract between [Med] and the hotel.
After taking into account the way in which Med conducted its business, the FTT concluded that the document as a whole was not consistent with the notion that Med was the agent and the hotel the principal.
Accordingly, the FTT dismissed Meds appeal.
Med appealed against that decision to the Upper Tribunal, where its appeal was allowed by Morgan J [2011] UKUT 308 (TCC).
He made the point that the agreed issue as identified by the FTT (see para 14 above) was not entirely satisfactory, as a result of which the issue was reformulated in these terms by the parties: whether the [FTT] was entitled to find (as a matter of law and fact) that [Med] was supplying accommodation services as principal, in which case it was required to account for VAT in the United Kingdom, or whether it should have found that [Med] was acting as agent for a disclosed principal, in which case the supplies of accommodation services fell to be treated as made in the jurisdiction in which the hotel was situated and so do not give rise to any liability to VAT in the United Kingdom.
Morgan J considered that the FTT should not have addressed the issue by simply considering only part of the contractual documentation together with the way in which Med conducted its business.
Rather, they should have started by assessing the effect of the totality of the contractual documentation, and only then asked themselves whether their assessment was altered by the way in which Med conducted its business.
He approached the issue on that basis, and first decided that (i) the contractual arrangements between Med and the customers established that Med was contracting as agent for the hotelier, and (ii) the contractual arrangements between Med and the hoteliers were consistent with that conclusion.
He then turned to various factors which impressed the FTT as to the way in which Med carried on business, and decided that none of those facts justified rejecting the view that Med was an agent acting for a disclosed principal.
Morgan Js decision was appealed by the Commissioners to the Court of Appeal, who allowed their appeal for reasons given in a judgment by Sir John Chadwick, with which Ward and McFarlane LJJ agreed [2012] EWCA Civ 1571.
They held that Morgan J was wrong to criticise the FTT for looking at the whole facts of the case as opposed to concentrating on the contractual documentation.
They also held that the FTT was plainly entitled to reach the conclusion that they did, in the light of the contractual documentation and the way in which Med conducted its business.
At the end of his judgment, Sir John identified a number of aspects of the way in which Med conducted its business which he regarded as being of particular weight in justifying the conclusion that it was a principal rather than an agent in terms of supplying hotel rooms to customers.
Med now appeals to this Court.
Overview of the issues
The outcome of this appeal ultimately turns on the question whether Meds activities in relation to the provision of hotel rooms to customers fell within article 306.1(a) or article 306.1(b).
That question must be decided by the proper application of the provisions of article 306 to the circumstances of this case.
Once the appropriate tribunal has identified and applied the relevant legal principles, it is ultimately a question of fact for that tribunal whether a travel agent falls within para 306.1(a) or para 306.1(b).
Accordingly, as the Court of Appeal held, it would only have been open to Morgan J to reverse the FTTs decision if (i) they had wrongly analysed the law, ie if they had been wrong in their view as to legal effect of the contractual relations and subsequent facts, or had wrongly interpreted or applied article 306, or (ii) the FTT had reached a conclusion which no reasonable tribunal could have reached.
So far as the law is concerned, what article 306 means and how it is to be applied is a matter of EU law, a topic on which the decisions of the Court of Justice of the European Community, the CJEU, are binding on national courts see eg Customs and Excise Commissioners v Madgett and Baldwin (Joined cases C 308/96 and C 94/97) [1998] STC 1189.
That case decided that the predecessor of article 306 applied not just to travel agents, but to all traders who habitually arrange travel or tours and, in order to supply the services generally associated with activities of that kind, have recourse to other taxable persons see para AG33.
However, in so far as the provisions of article 306 depend upon the precise nature and character of the contractual relationship between two or more parties, that issue must be determined by reference to the proper law of the contract or contracts concerned, and, in so far as the subsequent conduct of the parties is said to affect that nature and character, the effect must also be assessed by reference to the proper law of the contract or contracts.
In that connection, it is worth referring to the observation of the CJEU in Revenue and Customs Commissioners v RBS Deutschland Holdings GmbH (Case C 277/09) [2011] STC 345, para 53, that taxable persons are generally free to choose the organisational structures and the form of transactions which they consider to be most appropriate for their economic activities and for the purposes of limiting their tax burdens, albeit that this is subject to an exception for abusive transactions as discussed in Halifax plc v Customs and Excise Commissioners (Case C 255/02) [2006] Ch 387.
The correct approach to article 306
Article 306.1 postulates two categories of travel agent, namely (a) those who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities, and (b) those who act solely as intermediaries.
The parties were agreed that the two categories were mutually exclusive, but also that, taken together, they were comprehensive in the sense that a travel agent arranging accommodation for a customer must fall within one of the two categories.
It may be that the proper analysis is that advanced by Lord Sumption during the hearing, namely that a travel agent can only be within article 306 if it falls within category (a), but it would be taken out of the article if it also falls within category (b).
However, it is unnecessary to decide whether that is right, at least for present purposes.
So far as the meaning of in their own name is concerned, some useful guidance was given by the CJEU in relation to the expression in a case concerned with the provisions in the Sixth Directive relating to an operator who received bets, arguably on behalf of a bookmaker.
In Belgium v Henfling (Case C 464/10) [2011] STC 1851, para 33, the CJEU said that involvement in his own name means that a legal relationship is brought about not directly between the better and the undertaking on behalf of which the operator involved acts, but between that operator and the better, on the one hand, and between that operator and that undertaking, on the other.
There appears to be no case in the CJEU where the meaning of the word intermediaries has been considered.
However, it would seem at any rate in most cases to be the equivalent of agents in English law, although both parties were (rightly in my view) inclined to accept that it had a wider meaning than agents.
In particular, it was not suggested to be a term of article
The CJEU has given guidance as to the proper approach to be adopted in a case such as the present.
In Beheersmaatschappij Van Ginkel Waddinxveen BV v Inspecteur der Omzetbelasting, Utrecht (Case C 163/91) [1996] STC 825, para 21, the court said that the predecessor of article 306.1(a) in the Sixth Directive: makes the application of that article subject to the condition that the travel agent shall deal with customers in his own name and not as an intermediary.
It is for the national court before which a dispute concerning the application of these provisions is brought to inquire, having regard to all the details of the case, and in particular the nature of the travel agent's contractual obligations towards the traveller, whether or not that condition is met.
The point was taken a little further in Revenue and Customs Commissioners v Newey (Case C 653/11) [2013] STC 2432, where the CJEU said this, reflecting what it had said in a number of earlier decisions: 42.
As regards in particular the importance of contractual terms in categorising a transaction as a taxable transaction, it is necessary to bear in mind the case law of the court according to which consideration of economic and commercial realities is a fundamental criterion for the application of the common system of VAT . 43.
Given that the contractual position normally reflects the economic and commercial reality of the transactions and in order to satisfy the requirements of legal certainty, the relevant contractual terms constitute a factor to be taken into consideration when the supplier and the recipient in a supply of services transaction within the meaning of articles 2(1) and 6(1) of the Sixth Directive have to be identified. 44.
It may, however, become apparent that, sometimes, certain contractual terms do not wholly reflect the economic and commercial reality of the transactions. 45.
That is the case in particular if it becomes apparent that those contractual terms constitute a purely artificial arrangement which does not correspond with the economic and commercial reality of the transactions.
Where the question at issue involves more than one contractual arrangement between different parties, this Court has emphasised that, when assessing the issue of who supplies what services to whom for VAT purposes, regard must be had to all the circumstances in which the transaction or combination of transactions takes place per Lord Reed in Revenue and Customs Commissioners v Aimia Coalition Loyalty UK Ltd [2013] 2 All ER 719, para 38.
As he went on to explain, this requires the whole of the relationships between the various parties being considered.
The correct approach in domestic law
Where parties have entered into a written agreement which appears on its face to be intended to govern the relationship between them, then, in order to determine the legal and commercial nature of that relationship, it is necessary to interpret the agreement in order to identify the parties respective rights and obligations, unless it is established that it constitutes a sham.
When interpreting an agreement, the court must have regard to the words used, to the provisions of the agreement as whole, to the surrounding circumstances in so far as they were known to both parties, and to commercial common sense.
When deciding on the categorisation of a relationship governed by a written agreement, the label or labels which the parties have used to describe their relationship cannot be conclusive, and may often be of little weight.
As Lewison J said in A1 Lofts Ltd v Revenue and Customs Commissioners [2010] STC 214, para 40, in a passage cited by Morgan J: The court is often called upon to decide whether a written contract falls within a particular legal description.
In so doing the court will identify the rights and obligations of the parties as a matter of construction of the written agreement; but it will then go on to consider whether those obligations fall within the relevant legal description.
Thus the question may be whether those rights and obligations are properly characterised as a licence or tenancy (as in Street v Mountford [1985] AC 809); or as a fixed or floating charge (as in Agnew v IRC [2001] 2 AC 710), or as a consumer hire agreement (as in TRM Copy Centres (UK) Ltd v Lanwall Services Ltd [2009] 1 WLR 1375).
In all these cases the starting point is to identify the legal rights and obligations of the parties as a matter of contract before going on to classify them.
In English law it is not permissible to take into account the subsequent behaviour or statements of the parties as an aid to interpreting their written agreement see FL Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235.
The subsequent behaviour or statements of the parties can, however, be relevant, for a number of other reasons.
First, they may be invoked to support the contention that the written agreement was a sham ie that it was not in fact intended to govern the parties relationship at all.
Secondly, they may be invoked in support of a claim for rectification of the written agreement.
Thirdly, they may be relied on to support a claim that the written agreement was subsequently varied, or rescinded and replaced by a subsequent contract (agreed by words or conduct).
Fourthly, they may be relied on to establish that the written agreement represented only part of the totality of the parties contractual relationship.
In the present proceedings, it has never been suggested that the written agreements between Med and hoteliers, namely the Accommodation Agreements, were a sham or liable to rectification.
Nor has it been suggested that the terms contained on the website (the website terms), which governed the relationship between Med and the customers, namely the Terms of Use and the Booking Conditions, were a sham or liable to rectification.
In these circumstances, it appears to me that (i) the right starting point is to characterise the nature of the relationship between Med, the customer, and the hotel, in the light of the Accommodation Agreement and the website terms (the contractual documentation), (ii) one must next consider whether that characterisation can be said to represent the economic reality of the relationship in the light of any relevant facts, and (iii) if so, the final issue is the result of this characterisation so far as article 306 is concerned.
This is a slightly more sophisticated analysis than the single issue as it has been agreed between the parties, as set out in para 16 above, but, as will become apparent, at least in the circumstances of this case, it amounts to the same thing.
In order to decide whether the FTT was entitled to reach the conclusion that it did, one must identify the nature of the relationship between Med, the hotelier, and the customer, and, in order to do that, one must first consider the effect of the contractual documentation, and then see whether any conclusion is vitiated by the facts relied on by either party.
The effect of the documentation
The provisions of the contractual documentation were set out extensively in the Tribunal decisions below see paras 27 36 of the FTTs decision, and paras 10 40 of Morgan Js decision.
In my view, both the Accommodation Agreement and the website terms make it clear that, both as between Med and the hotelier, and as between Med and the customer, the hotel room is provided by the hotelier to the customer through the agency of Med, and the customer pays the gross sum to the hotelier, on the basis that the amount by which it exceeds the net sum is to be Meds commission as agent.
Turning first to the Accommodation Agreement, it begins by identifying the hotelier as the Principal and Med as the Agent, and goes on to provide that, for a specified season, certain types (and sometimes certain numbers) of rooms in the hotel will be available at certain rates (which are what I have called the net sums), as set out in an attached rate sheet.
The Accommodation Agreement then states that the Principal hereby appoints the Agent as its selling agent and the Agent agrees to act as such.
It immediately goes on to provide that the Agent agrees to deal accurately with the requests for accommodation bookings and relay all monies which it receives from the Principals Clients (Clients) which are due to the Principal.
The Agreement also states that it is to be construed in accordance with English law and that the English courts have exclusive jurisdiction.
Subject to the other provisions of the Accommodation Agreement showing otherwise, the nature of the intended relationship appears to be quite clear.
Med is to be the hoteliers agent for the purpose of marketing rooms in the hotel, and Clients, or customers as I have called them, will book rooms through the agency of Med directly with the hotelier.
The Commissioners rely on four aspects of the Accommodation Agreement to justify the contention that it is not in fact an agency arrangement, but that, in truth, it envisages that Med will book rooms itself, with a view to sub booking them on to customers.
First, there is the basic financial arrangement under which Med was entitled to receive a commission calculated as any sum charged to a Client by the Agent which is over and above the prices set out in the rate sheet.
Secondly, some of the financial provisions are said to be inconsistent with agency relationship.
Thirdly, it is said that the terms of the Accommodation Agreement include provisions which indicate that Meds interest is wider than that of a mere agent such as covenants by the hotelier to honour customers bookings, to insure the hotel against a number of risks, to keep the hotel clean, and to permit Meds representative to inspect the hotel.
Fourthly, the Accommodation Agreement was very one sided, in that it contained no express obligations on Med beyond those in the opening provision quoted in para 38 above, not even an obligation to promote the hotel, whereas there were many obligations imposed on the hotelier.
I am unimpressed with these points.
They all stem from, and reflect, the fact that Med had a substantial business based on the website (as is evidenced by Meds turnover, the number of hotels for which it had an exclusive agency, and the fact that it was a member of a large group of companies including lastminute.com).
This in turn means that it had built up a substantial goodwill in the holiday making market which it wished to protect, and that it was in a much more powerful negotiating position than the hoteliers with which it was contracting.
More specifically, there is no reason why an agent should not be able to fix its own commission.
It is common for agents acting in the sale of financial products, eg many types of insurance policies, to do so, and it has been specifically held to be an arrangement which is consistent with agency see Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd [2002] 1 All ER (Comm) 788.
As to the other financial terms, it is true that the hotelier was obliged to compensate Med for its losses (including loss of commission) if it did not provide the accommodation it had agreed to provide to a customer, and that Med was entitled to retain the equivalent of the last 100 bed overnights as a guarantee to cover marketing costs for the next season.
I do not see why such provisions are inconsistent with a principal and agent relationship: all they did was to reflect the relative negotiating positions of the parties.
The fact that the hotelier agreed to do things which would be of benefit to people staying in the hotel is easily explained by the point that Med was anxious to maintain its goodwill among holiday makers and travel agents, and was in a strong enough bargaining position to impose such terms on the hotelier.
Turning to the website terms, the Terms of Use explained that Med provides information concerning the price and availability of hotels and that [a]ny reservations you make on this site will be directly with the company whose hotel services you are booking.
They also emphasised that Med acts as agent only for each of the hotels to provide you with information on the hotels and an on line reservation service.
As for the Booking Conditions, they began by stating that Med act[s] as booking agents on behalf of all the hotels featured on this website and your contract will be made with these accommodation providers.
They also stated that [o]nce the contract is made, the accommodation provider is responsible to you to provide you with what you have booked and you are responsible to pay for it.
The Booking Conditions also explained that [b]ecause [Med is] acting only as a booking agent, it has no liability for any of the accommodation arrangements.
The Booking Conditions also provide that they are governed by English law and that any dispute is to be determined by the English courts.
The Commissioners point to one or two provisions of the Booking Conditions which, they say, are inconsistent with the notion that Med was only acting as the hoteliers agent rather than as a principal.
First, if a customer (i) made a change to a booking or (ii) cancelled a booking, she was liable to pay to Med (i) an administration charge of 15, or (ii) a cancellation charge, whose quantum depended on how late the cancellation occurred, and in neither case did it appear that the charge was passed on to the hotelier.
Secondly, if the hotelier was unable to provide the room as booked, Med agreed to try to provide [the customer] with similar accommodation of equal standard, but if this was not possible, Med would allow a cancellation free of charge.
I do not consider that either of these points undermine the conclusion that Med was acting as the hoteliers agent.
The failure to account for the administration charge is irrelevant; there is no reason to think that it did not reflect the genuine cost to Med.
The failure to account for the cancellation charge, the no show forfeit, and the interest on the deposits is more striking.
As a matter of law, these sums would have been payable to the hotelier, but the fact that they were not so paid represents a breach of the agency arrangement on the part of Med or an accepted variation of the Accommodation Agreement, either of which would merely have reflected the relative bargaining positions of Med and the hotelier, and did not alter the nature of the relationship of the arrangement between Med, the hotelier and the customer.
As to Meds obligation to try to provide alternative accommodation, it is clear, as a matter of interpretation, that the obligation could, and no doubt in practice would, have involved Med procuring the provision of accommodation by another hotelier; in any event, the obligation was clearly included to protect Meds goodwill.
The factors relied on by the FTT and the Court of Appeal
Having decided that the effect of the contractual documentation between hoteliers, Med, and customers is that Med marketed and sold hotel accommodation to customers as the agent of the hoteliers, I turn to consider the characteristics of the way in which Med conducted its business which persuaded the FTT and the Court of Appeal that Med in fact marketed and sold the hotel accommodation to customers as a principal.
At the end of his judgment, Sir John Chadwick summarised the main factors as follows (with the addition of subparagraphs and adaptations to reflect the terminology adopted in this judgment): (1) Med dealt with customers in its own name (a) in respect of the use of its website and (b) in the services of its local handling agents. (2) Med dealt with customers in its own name (and not as intermediary) in those cases where the hotel operator was unable to provide accommodation as booked and the customer rejected the alternative accommodation offered. (3) Med dealt with matters of complaint and compensation in its own name and without reference to the hotelier. (4) Med used the services of other taxable persons (the hoteliers) in the provision of the travel facilities marketed through its website. (5) In relation to VAT, Med dealt with hoteliers in other Member States in a manner inconsistent with the relationship of principal and agent.
In particular, Med did not provide the hoteliers with invoices in respect of its commission (nor even notify the hoteliers of the amount of that commission); so making it impossible for the hoteliers to comply with their obligations to account to the tax authorities of that Member State in accordance with the Principal VAT Directive. (6)(a) Med treated deposits and other monies which it received from customers and their agents as its own monies.
It did not account to the hoteliers for those monies. (b) It did not enter those monies in a suspense account so as to take advantage of article 79(c); and so cannot rely on the exclusion from the scope of article 306.1(b).
The Commissioners also rely on the points that (7) hoteliers would invoice Med for the net sum in respect of each customer at the end of the relevant holiday, and (8) Med reserved a number of rooms, and sometimes specific rooms, in many hotels for which it paid the net sum in advance.
There is nothing in factor (1)(a): until a customer selected a particular hotel on the website, Med had to deal with the customer in its own name, but that does nothing to undermine the point that, once a hotel was selected, Med acted as the hoteliers agent.
As to factor 1(b), it is true that Med appointed its own local agents to look after holiday makers, but that was not inconsistent with its status as an agent of the hotelier, and is easily explicable by reference to Meds need to maintain goodwill in the holidaymaking market.
The Commissioners relied on some of the terms of Meds standard form Handling Agency Agreement, but they take matters no further.
Factor (2) is of no assistance: I have already discussed it at para 44 above.
Factor (3) is correct, and can be said to be contrary to one of the terms of the contractual documentation, which envisage a customer sorting out complaints with the hotelier.
However, particularly given that (i) Med recovered from the hotelier any compensation which it negotiated and paid to a holiday maker and (ii) Meds activities in this connection were not inherently inconsistent with its status as the hoteliers agent (albeit an agent in a strong bargaining position), the departure from the contractual terms was not of significance for present purposes.
Factor (4) takes matters no further either.
As to factor (5), it is quite true that Med failed to provide the hoteliers with the information necessary to enable them to provide proper VAT returns, and that it failed to account for VAT as it should have done if it had been the hoteliers agent as it contends.
It is also true that this can be said to represent some sort of indication that the arrangements were not as the contractual documentation suggests.
However, not only is it not a very strong point in itself, but, as Morgan J said, while Med did not account for VAT in accordance with its contentions as to the legal position, it did not account for VAT in accordance with the Commissioners contentions as to the legal position either.
Factor (6)(a) is of no assistance, and my remarks about the cancellation charge in para 44 above apply.
Factor (6)(b) is merely an aspect of factor (5).
As to factor (7), if Med was an agent as it contends, one would have expected the hoteliers invoices to have been for the gross sums with a deduction for Meds commission, and the fact that they were for the net sums is consistent with the Commissioners analysis.
However, the invoices are not financially inconsistent with the contractual arrangements contended for by Med, as the hotelier would expect Med to pay the net sum, not the gross sum.
In any event, at least on their own, such invoices cannot change the nature of the contractual arrangements between Med, the customer and the hotelier, given that (i) they post date not merely the contracts but their performance, and (ii) the customer was not aware of the invoices, so it is hard to see how they could affect her contractual rights or obligations.
As to factor (8), it seems to me that there is nothing inconsistent in terms of logic or law in Med reserving a hotel room in its own name in anticipation of subsequently offering it on the market, on the basis that a customer who booked the room would not contract with Med, but would contract through Med with the hotelier.
The purpose of Med reserving rooms in this way is obvious, namely to maximise its opportunity to earn commission and to maintain or improve its goodwill with potential customers.
The fact that Med had to pay for the rooms it reserved is unsurprising, but such payments were always recoverable, in that, if there were insufficient bookings by customers at the hotel for the season in question, the amount paid by Med was carried forward to the next season.
Of course, Med ran a risk of losing its money, but that fact does not undermine the notion that Med acted as an agent.
The Commissioners contend that the factors identified in para 45 above justify the conclusion that the agency arrangement was somehow varied by the parties conduct, and in particular the conduct of Med, as the commercially dominant party, so that it became the person providing the customers with hotel rooms, as opposed to the agent of the hoteliers who provided the rooms.
It is unnecessary to address the question of how such a contention might be analysed in legal terms, because, for the reasons given in paras 46 49 above, those factors, even taken together, are not inconsistent with, and therefore cannot undermine, the existence and nature of the agency arrangement.
The decisions below
The decision of the FTT cannot stand, as they appear to have held that, after taking into account the way in which Med conducted its business, the true effect of the written contractual arrangements between Med and the hoteliers was not that Med was an agent through whom the hotelier provided the customer with a room, but that the hotelier provided Med with a room which Med then provided on to the customer.
For the reasons I have given, that analysis is unsustainable.
The decision of Morgan J to the contrary effect was right, and I shall consider his conclusion further in the next section of this judgment.
Given that the FTT was wrong in its legal analysis of the relationship between Med, hoteliers and customers, the Court of Appeals decision, which was based on the conclusion that the FTT adopted a permissible approach, cannot stand.
In these circumstances, as Morgan J was right to reverse the FTTs decision, and analysed the legal relationship between Med, the hoteliers and customers correctly, we should uphold his conclusion, unless we consider that he then went wrong in relation to the question of the application of article 306 to the facts of this case, an issue to which I now turn.
If he did go wrong, then we should, if possible, resolve that question ourselves.
The application of article 306 to the facts of this case
Given that I have concluded [Med] was acting as agent for a disclosed principal, the consequence according to the agreed reformulated issue (set out in para 16 above) would appear to be that the supplies of accommodation services fell to be treated as made in the jurisdiction in which the hotel was situated and so do not give rise to any liability to VAT in the United Kingdom.
However, as a matter of principle, it is necessary to address the question whether, as a matter of EU law, the fact that Med was acting as an agent does justify that conclusion.
As explained above, the characterisation of the relationship between Med, customers, and hoteliers is a matter of English law, but the ultimate issue on this appeal is an issue of EU law, namely whether, in the light of that characterisation, Med is liable for VAT as the Commissioners allege, and that issue must be resolved by applying article 306 to the facts of this case, which include the fact that Med is an agent as it contends.
The reformulated issue effectively assumes the correctness of the proposition that, once it is concluded as a matter of English law, that the effect of the contractual documentation and the way in which the parties conducted their relationship was that Med was an agent for the hotelier with whom a customer booked accommodation, as opposed to a principal who booked accommodation with the hotelier and then booked it on to a customer, Med fell within article 306.1(b), rather than article 306.1(a).
That is not an assumption which can safely be made in every case, but it seems to me that in the general run of cases, such a proposition will be correct.
It seems to me clear from the guidance given by the CJEU in Henfling (quoted in para 26 above) that the concepts of an intermediary and an agent are similar, as are the concepts of a person dealing in his own name and a principal.
Furthermore, the CJEUs suggested approach as to how the issue should be determined seems very similar to that of the English court.
I have in mind what was said in Van Ginkel and Newey (quoted in paras 28 and 29 above), namely that the travel agents contractual obligations towards the traveller are of particular importance in deciding whether article 306.1(a) or article 306.1(b) applies, but it is also necessary to hav[e] regard to all the details of the case, and, in that connection, the economic and commercial realities represent a fundamental criterion.
A contract which does not reflect economic reality and a purely artificial arrangement are similar to the shams, rectifiable agreements and other arrangements considered in para 33 above.
Thus, in deciding whether article 306.1(a) or article 306.1(b) applies, the approach laid down by the CJEU in order to decide whether a person such as Med is an intermediary is very similar to the approach which is applied in English law in order to determine whether Med was an agent, ie the very exercise undertaken in paras 31 50 above.
One starts with the written contract between Med and the customer, as it is the customer to whom the ultimate supply is made.
However, one must also consider the written contract between Med and the hotelier, as there would be a strong case for saying that, even if Med was the hoteliers agent as between it and the customer, Med should nonetheless be treated as the supplier as principal (in English law) or in its own name (in EU law) if, as between the hotelier and Med, the hotel room was supplied to Med.
For the reasons set out in paras 36 44 above, I consider that the contractual documentation supports the notion that Med was an intermediary, and, in the light of the discussion in paras 45 50 above, it seems to me that economic reality does not assist a contrary view.
Further, one aspect of economic reality is that it is the hotelier, not Med, who owns the accommodation and it is the customer, not Med, to whom it is ultimately supplied: that does not, of course, prevent the hotelier supplying the accommodation to Med for supply on to the customer, but it makes it hard to argue that Meds analysis that it is no more than an agent is contrary to economic reality.
Further, one must be careful before stigmatising the contractual documentation as being artificial, bearing in mind that EU law, like English law, treats parties as free to arrange or structure their relationship so as to maximise its commercial attraction, including the incidence of taxation see RBS Deutschland, cited in para 24 above.
As is realistically, if impliedly, acknowledged by the Commissioners (and indeed by Med) in the reformulated agreed issue on this appeal (as set out in para 16 above), once it has been decided that Med was, as it contends, the hoteliers agent in relation to the supply of accommodation to customers as a matter of English law, it follows, at least on the facts of this case, that it was an intermediary for the purpose of article 306.1, and accordingly this appeal must succeed.
It may be that Morgan J was wrong not to go on to consider the EU law issue, but it is scarcely surprising that he did not do so in the light of the agreed formulation of the issue before him.
Indeed, as appears from the discussion in paras 53 57 above, EU law and English law in this case seem to travel along effectively the same lines, and accordingly I consider that Morgan J reached the right conclusion for substantially the right reasons.
Conclusion
I would accordingly allow Meds appeal, discharge the order of the Court of Appeal, and restore the order of Morgan J in the Upper Tribunal.
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This appeal concerns the liability for Value Added Tax (VAT) of a company known as Med, which marketed hotel accommodation in the Mediterranean and the Caribbean through a website.
An hotelier who wished his hotel to be marketed by Med had to enter into a written agreement with Med (the Accommodation Agreement).
When a potential customer identified a hotel at which she wished to stay, she would book a holiday through a form on the website, which set out standard booking conditions (the website terms).
The customer had to pay the whole of the sum she agreed with Med to pay for the holiday (the gross sum) before arriving at the hotel.
However, Med only paid the hotel a lower sum (the net sum) for the holiday after it had ended.
VAT is an EU tax levied on the supply of goods or services.
By article 2.1(c) of Directive 2006/112/EC (the Principal VAT Directive) VAT is liable to be levied on the supply of services for consideration within the territory of a Member State by a taxable person acting as such.
Article 45 states that The place of the supply of services connected with immovable propertyshall be the place where the property is located.
The application of article 45 to travel agents could result in their having to be registered in many member states, and so articles 306 310 contain a special scheme relating to travel agents.
Article 306 differentiates between two categories of travel agent, namely (a) those who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities and (b) those who act solely as intermediaries (referred to for convenience as, respectively, article 306.1(a) and article 306.1(b)), and provides for a special VAT scheme for transactions carried out by travel agents who fall within article 306.1(a).
The Commissioners for Her Majestys Revenue and Customs (HMRC) assessed Med for VAT on the basis that Med was a travel agent that deals with customers in its own name within the meaning of article 306.1(a).
On that basis, it was agreed that Med would be liable for VAT on the gross sum paid by the customer to Med.
Med challenged this assessment, on the ground that it was a travel agent acting solely as an intermediary within the meaning of article 306.1(b).
On this approach, any VAT would be due to the Greek taxation authorities.
The First Tier Tribunal upheld HMRCs analysis.
Morgan J allowed Meds appeal, but HMRCs subsequent appeal to the Court of Appeal was successful.
The Supreme Court unanimously allows the appeal.
Lord Neuberger gives the only judgment, with which the rest of the court agrees.
Med was acting as an intermediary rather than in its own name, and so falls within article 306.1(b).
Consequently, the Supreme Court discharges the order of the Court of Appeal and restores the order of Morgan J.
The outcome of this appeal turns on the question whether Meds activities in relation to the provision of hotel rooms to customers fell within article 306.1(a) or article 306.1(b) of the Principal Tax Directive [20].
What article 306 means and how it is to be applied is a matter of EU law, a topic on which the decisions of the Court of Justice of the European Community (CJEU) are binding on national courts [22].
However, insofar as the provisions of article 306 depend upon the precise nature and character of the contractual relationship between two or more parties, that issue must be determined by reference to the proper law of the contract or contracts concerned [23].
The domestic law Where parties have entered into a written agreement which appears on its face to be intended to govern the relationship between them, in order to determine the legal and commercial nature of that relationship it is necessary to interpret the agreement in order to identify the parties respective rights and obligations, unless it is established that it constitutes a sham [31].
While it is not possible to take into account the subsequent behaviour or statements of the parties as an aid to interpreting their written agreement, this may be invoked for other reasons: (i) to support the contention that the written agreement was sham; (ii) to support a claim for rectification; (iii) to support a claim that the written agreement was subsequently varied, or rescinded and replaced by a subsequent contract; or (iv) to establish that the written agreement represented only part of the parties contractual relationship [33].
It is not suggested that either the Accommodation Agreement or the website terms is a sham or liable to rectification.
Accordingly, one must start by characterising the nature of the relationship between Med, the customer, and the hotel, in the light of the Accommodation Agreement and the website terms (the contractual documentation).
One must then consider whether this characterisation represents the economic reality of the situation, and, finally, one must determine the result of this characterisation under article 306 [34].
The contractual documentation makes it clear that, both as between Med and the hotelier, and as between Med and the customer, the hotel room is provided by the hotelier to the customer through the agency of Med.
The customer pays the gross sum to the hotelier on the basis that the amount by which it exceeds the net sum is to be Meds commission as agent [36].
None of the provisions of the contractual documentation relied on by HMRC is inconsistent with Med acting as the hoteliers agent: they merely reflect the relative bargaining positions of Med and the hoteliers.
They do not alter the nature of the relationship between Med, the hotelier and the customer [37] [44].
The EU law It is clear from the guidance given by CJEU that the concepts of an intermediary and an agent are similar, as are the concepts of a person dealing in his own name and a principal [55].
In deciding whether article 306.1(a) or 306.1(b) applies, the approach laid down by the CJEU in order to determine whether a person such as Med is an intermediary is very similar to the approach applied in English law to determine whether Med was an agent [56].
For the same reasons that the contractual documentation supports the notion that Med was an agent, it also supports the conclusion that Med was an intermediary, and the economic reality does not assist a contrary view [57].
Once it has been decided that Med was the hoteliers agent in relation to the supply of accommodation to customers as a matter of English law, it follows, at least on the facts of this case, that it was an intermediary for the purpose of article 306.1 [58].
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This appeal concerns the question whether the provisions of Part 4 of the Children and Young People (Scotland) Act 2014 lie within the legislative competence of the Scottish Parliament.
Before considering the issues that arise (summarised in para 26 below), it is helpful to begin with an account of the background to the legislation.
A suitable starting point is the consultation paper, A Scotland for Children, published by the Scottish Government in July 2012.
In general terms, two ideas underlay many of the proposals.
The first was a shift away from intervention by public authorities after a risk to childrens and young peoples welfare had been identified, to an emphasis on early intervention to promote their wellbeing, understood as including all the factors that could affect their development.
The second was a shift away from a legal structure under which the duties of statutory bodies to cooperate with one another (under, for example, section 13 of the National Health Service (Scotland) Act 1978 and section 21 of the Children (Scotland) Act 1995) were linked to the performance of their individual functions, to ensuring that they work collaboratively and share relevant information so that all relevant public services can support the whole wellbeing of children and young people (para 73).
In that regard, the consultation paper stated that it was essential that information is shared not only in response to a crisis or serious occurrence but, in many cases, information should be shared about relevant changes in a child's and young persons life.
There was, however, no commonly agreed process for routine information sharing about concerns about wellbeing (para 110).
The establishment of a new professional role, that of named person, was proposed in order to address those concerns (para 111).
On its introduction in April 2013, the Children and Young People (Scotland) Bill was accompanied by a Policy Memorandum which was similar in content to the consultation paper.
It stated, in relation to named persons: They can monitor what children and young people need, within the context of their professional responsibilities, link with the relevant services that can help them, and be a single point of contact for services that children and families can use, if they wish.
The named person is in a position to intervene early to prevent difficulties escalating.
The role offers a way for children and young people to make sense of a complicated service environment as well as a way to prevent any problems or challenges they are facing in their lives remaining unaddressed due to professional service boundaries. (para 68) The Bill aimed to ensure that every child in Scotland had a named person (para 70).
It provided for a wide ranging duty on all relevant public authorities to cooperate with the named person in the conduct of their duties.
This would be of particular importance in the area of information sharing, since the role of the named person will depend on the successful sharing of information between relevant public authorities (para 73).
The memorandum explained that concern had been expressed about the existing legal framework for information sharing.
This was felt to be confusing and potentially insufficient to enable the role of the named person to operate as well as anticipated.
In particular, there were concerns regarding sharing information about children where consent was not given (para 75).
The memorandum continued: Currently, information about a child may be shared where the child is at a significant risk of harm.
However, the role of the named person is based on the idea that information on less critical concerns about a childs wellbeing must be shared if a full picture of their wellbeing is to be put together and if action is to be taken to prevent these concerns developing into more serious issues.
Without the necessary power to share that kind of information, the named person will not be able to act as effectively as is intended Specific provisions in the Bill, therefore, set out arrangements on information sharing, to give professionals and named persons the power to share information about those concerns. (paras 76 77)
It appears, therefore, that one of the principal purposes of Part 4, as envisaged at that stage, was to alter the existing law in relation to the sharing of information about children and young people, so as to enable information about concerns about their wellbeing, held by individual bodies, to be pooled in the hands of named persons and shared with other bodies, with the ultimate aim of promoting their wellbeing.
The provisions of Part 4
Part 4 of the Act begins with section 19, which defines a named person service as the service of making available, in relation to a child or young person, an identified individual who is to exercise the functions listed in subsection (5): (a) doing such of the following where the named person considers it to be appropriate in order to promote, support or safeguard the wellbeing of the child or young person (i) advising, informing or supporting the child or young person, or a parent of the child or young person, (ii) helping the child or young person, or a parent of the child or young person, to access a service or support, or (iii) discussing, or raising, a matter about the child or young person with a service provider or relevant authority, and such other functions as are specified by this Act or any (b) other enactment as being functions of a named person in relation to a child or young person.
In relation to section 19(5)(a)(iii), the expression service provider is defined by section 32 as meaning, in a context of this kind, each health board, local authority, directing authority, and the Scottish Ministers.
The expression directing authority is defined by section 32 as meaning the managers of each grant aided school, the proprietor of each independent school, and the local authority or other person who manages each residential establishment which comprises secure accommodation.
The expression relevant authorities is defined by section 31 and Schedule 2 as including a wide variety of public bodies, including NHS 24, NHS National Services Scotland, the Scottish Ambulance Service Board, the Scottish Sports Council, the Scottish Police Authority, and the Scottish Fire and Rescue Service.
Under sections 20 and 21, responsibility for the provision of a named person service lies with health boards in relation to all pre school children residing within their area, and generally with local authorities in relation to all other children residing within their area.
There are exceptions in relation to pupils at independent and grant aided schools, where responsibility lies with the directing authority; children kept in secure accommodation, where responsibility lies with the directing authority; children kept in custody, where responsibility lies with the Ministers; and children (as defined) who are members of the armed forces.
Under section 22, named person services must also be provided in relation to all young people over 18 who remain at school.
Responsibility for making provision for them in that situation lies with the local authority, except in relation to young people at independent or grant aided schools, where responsibility lies with the directing authority.
Section 23 deals with the communication of information following a change in the identity of the service provider in relation to a child or young person (defined by section 32, in this context, as meaning the person whose function it is to make arrangements for the provision of a named person service in relation to the child or young person).
That will occur, for example, when a child first goes to school, and the service provider ceases to be the health board and becomes the local authority or directing authority, or when a child goes from a local authority school to an independent or grant aided school, and the service provider ceases to be the local authority and becomes the directing authority of the school.
In terms of section 23(2)(b), the outgoing service provider must provide the incoming service provider with: Information falls within section 23(3) if the outgoing service provider considers that: the name and address of the child or young person and (i) each parent of the child or young person (so far as the outgoing service provider has that information), and (ii) all information which the outgoing service provider holds which falls within subsection (3). (a) (b) it is likely to be relevant to (i) the exercise by the incoming service provider of any functions of a service provider under this Part, or (ii) the future exercise of the named person functions in relation to the child or young person, it ought to be provided for that purpose, and (c) its provision would not prejudice the conduct of a criminal investigation or the prosecution of any offence.
In considering for the purpose of section 23(3)(b) whether information ought to be provided, the outgoing service provider is, so far as reasonably practicable, to ascertain and have regard to the views of the child or young person, taking account of the childs age and maturity: section 23(4) and (5).
In terms of section 23(6), the outgoing service provider may decide for the purpose of section 23(3)(b) that information ought to be provided only if the likely benefit to the wellbeing of the child or young person outweighs any likely adverse effect on that wellbeing.
Section 23(7) provides: Other than in relation to a duty of confidentiality, this section does not permit or require the provision of information in breach of a prohibition or restriction on the disclosure of information arising by virtue of an enactment or rule of law.
Section 24 imposes on service providers a duty to publish information about the operation of the named person service, and to provide children and young people and their parents with information about the arrangements for contacting named persons.
Section 25 imposes on service providers and relevant authorities a duty to help in the exercise of named person functions.
Section 26 is concerned with the sharing of information, and is expressed in similar language to section 23.
It imposes two duties to disclose information, and also confers a power.
First, under section 26(1), a service provider or relevant authority (or any person exercising a function on their behalf, such as an independent contractor: section 26(10)) must provide to the service provider in relation to a child or young person any information which falls within subsection (2).
Information falls within section 26(2) if the information holder considers that: (a) it is likely to be relevant to the exercise of the named person functions in relation to the child or young person, it ought to be provided for that purpose, and (b) (c) its provision to the service provider in relation to the child or young person would not prejudice the conduct of any criminal investigation or the prosecution of any offence.
Secondly, under section 26(3) the service provider in relation to a child or young person must provide to a service provider or relevant authority (or any person exercising a function on their behalf) any information which falls within subsection (4).
Information falls within section 26(4) if the information holder considers that: it is likely to be relevant to the exercise of any function (a) of the service provider or relevant authority which affects or may affect the wellbeing of the child or young person, (b) it ought to be provided for that purpose, and (c) its provision to the service provider or relevant authority would not prejudice the conduct of any criminal investigation or the prosecution of any offence.
In considering for the purpose of section 26(2)(b) and the corresponding provision in section 26(4)(b) whether information ought to be provided, the information holder is, so far as reasonably practicable, to ascertain and have regard to the views of the child or young person, taking account of the childs age and maturity: section 26(5) and (6).
In terms of section 26(7), the information holder may decide for the purpose of section 26(2)(b) and (4)(b) that information ought to be provided only if the likely benefit to the wellbeing of the child or young person outweighs any likely adverse effect on that wellbeing.
Thirdly, section 26(8) confers an additional power: the service provider in relation to a child or young person may provide to a service provider or relevant authority any information which falls within subsection (9).
Information falls within section 26(9) if the information holder considers that its provision to the service provider or relevant authority is necessary or expedient for the purpose of the exercise of any of the named person functions.
Finally, in relation to section 26, subsection (11) provides: Other than in relation to a duty of confidentiality, this section does not permit or require the provision of information in breach of a prohibition or restriction on the disclosure of information arising by virtue of an enactment or rule of law.
Section 27 makes further provision in relation to the disclosure of information in breach of a duty of confidentiality: where a person by virtue of Part 4 provides information in breach of such a duty and informs the recipient of that breach, the recipient may not provide the information to another person unless its provision is permitted or required by virtue of any enactment or rule of law.
Section 28 imposes a duty on local authorities, health boards, directing authorities and relevant authorities to have regard to guidance issued by the Ministers about the exercise of functions conferred by Part 4.
Section 29 imposes a duty on the same bodies to comply with any direction issued by the Ministers.
Section 30 confers on the Ministers a power to make provision about complaints concerning the exercise of functions conferred by or under Part 4.
These provisions confirm that one of the central purposes of Part 4 is to establish new legal powers and duties, and new administrative arrangements, in relation to the sharing of information about children and young people, so as to create a focal point, in the form of named persons, for the pooling and sharing of such information, and the initiation of action to promote their wellbeing.
The terms in which sections 23 and 26 define the information which is subject to those powers and duties indicate an intention that the range of information to be shared will depend on the exercise of judgement by the information holder, and is potentially very wide.
That is consistent with the emphasis in the consultation paper on collaborative working and routine information sharing.
Thus, under sections 23(3) and 26(2), the duty to share information does not depend on whether it is objectively relevant or necessary that it should be shared, but on whether the information holder considers that the information is likely to be relevant to the exercise of the named person functions (or, as the case may be, the functions of a service provider under Part 4): functions which are defined by section 19(5) by reference to what the named person considers to be appropriate in order to promote, support or safeguard wellbeing.
Section 26(4)(a) is equally wide: the duty again applies to information which the information holder considers is likely to be relevant to the exercise of a function, and in addition the function need not be one which actually affects the wellbeing of a child or young person, but merely one which the information holder considers may affect their wellbeing.
Section 26(9) is wider still: the power of disclosure conferred by section 26(8) can be exercised in relation to information whose disclosure the information holder considers to be necessary or expedient for the purpose of the exercise of any of the named person functions.
Wellbeing is not defined.
The only guidance as to its meaning is provided by section 96(2), which lists eight factors to which regard is to be had when assessing wellbeing.
The factors, which are known under the acronym SHANARRI, are that the child or young person is or would be: safe, healthy, achieving, nurtured, active, respected, responsible, and included.
These factors are not themselves defined, and in some cases are notably vague: for example, that the child or young person is achieving and included.
The identification of a wellbeing need does not of itself give rise to compulsory measures.
Part 5 of the Act introduces the childs plan and targeted interventions.
Section 33(2) defines wellbeing need broadly: a child has a wellbeing need if the childs wellbeing is being, or is at risk of being, adversely affected by any matter.
Where the responsible authority considers that a child has a wellbeing need and that that need cannot be met, or met fully, without a targeted intervention which is capable of meeting the need to some extent, it is to prepare a childs plan for a targeted intervention or interventions.
A targeted intervention is the provision of services for the child to meet needs which are not capable of being fully met by the general services to children which the relevant authority provides (section 33(4)).
The childs plan identifies the relevant authority which is to provide the service, the manner in which it is to be provided and the outcome which the targeted intervention is intended to achieve (section 34(1)).
This does not involve any compulsion.
Further, in deciding whether a child requires a childs plan the responsible authority is required to consult the named person and, so far as reasonably practicable, to ascertain and have regard to the views of the child and the childs parents, among others (section 33(6)).
The Scottish Governments revised draft statutory guidance
Section 28(1) of the Act provides that a local authority, a health board, a directing authority and a relevant authority must have regard to guidance issued by the Scottish Ministers about the exercise of functions under Part 4.
The Scottish Government in performance of its duty under section 96(3) published revised draft statutory guidance (RDSG) in December 2015.
The RDSG is aimed at the strategic leaders and operational managers of health boards, local authorities, directing authorities and relevant authorities, which are responsible for operating Parts 4, 5 and 18 of the Act.
It provides that the organisations must have regard to the guidance in carrying out those functions (para 1.2.2).
It states (para 1.2.5) that separate practice materials will be made available for practitioners.
It records the success of the pathfinder project set up in the Highland council area in 2006, which achieved the better coordination of assessment and planning in support of childrens needs by establishing common procedures and processes for sharing concerns about a child (para 1.3.3).
It states: The pathfinder brought significant improvements to children and young people and their families, reducing the need for statutory intervention in childrens and families lives by resolving potential problems at an earlier stage.
The improvements included greater clarity about whom families should go to when they needed help, falls in the number of referrals to the Childrens Reporter, a reduced number of children placed on the Child Protection Register, and the focussing of resources on the children who needed most support (para 1.3.3).
It records that the approach had been adopted to varying degrees across Scotland (para 1.3.4).
The RDSG provides a useful insight into the context in which the named person is expected to operate.
It explains that wellbeing is multidimensional (para 2.3.4) and that wellbeing is a broader, more holistic concept than welfare (para 2.3.5).
It advises on the relationship between child protection and wellbeing in these terms at para 2.3.6: child protection is not something which sits separately from wellbeing.
Indeed a series of low level indicators of wellbeing need (whether obviously related or not) taken together can amount to a child protection issue.
Child protection requires taking prompt action to safeguard a child where an assessment indicates that the child may be at risk of significant harm.
The childs wider wellbeing should also be assessed to ensure their current and future holistic needs are considered.
In para 2.4.2, it gives guidance on the interpretation of the eight wellbeing indicators in section 96(2) as follows: Safe protected from abuse, neglect or harm at home, at school and in the community.
Healthy having the highest attainable standards of physical and mental health, access to suitable healthcare, and support in learning to make healthy, safe choices.
Achieving being supported and guided in learning and in the development of skills, confidence and self esteem, at home, in school and in the community.
Nurtured having a nurturing place to live in a family setting, with additional help if needed, or, where this is not possible, in a suitable care setting.
Active having opportunities to take part in activities such as play, recreation and sport, which contribute to healthy growth and development, at home, in school and in the community.
Respected having the opportunity, along with carers, to be heard and involved in decisions that affect them.
Responsible having opportunities and encouragement to play active and responsible roles at home, in school and in the community, and where necessary, having appropriate guidance and supervision, and being involved in decisions that affect them.
Included having help to overcome social, educational, physical and economic inequalities, and being accepted as part of the community in which they live and learn.
The RDSG observes (at para 2.5.4) that the views of the child, young person or parents may differ from the practitioners view of wellbeing needs and states that a holistic assessment should take account of all views.
It recognises that children can thrive in different environments and counsels respect for their and their parents culture and beliefs (para 2.5.5).
It advises that a referral to the Childrens Reporter should be made where the wellbeing assessment reveals that a child needs protection, guidance, treatment or control and that a compulsory supervision order might be needed (para 2.5.6).
It continues (at para 2.5.7): Early intervention and a compulsory supervision order are not mutually exclusive in promoting, supporting and safeguarding the wellbeing of a child or young person.
The use of compulsion at an early stage may help to ensure compliance with interventions, and prevent wellbeing needs escalating.
Parental capacity and willingness to change should be considered in order to assess whether the childs wellbeing needs are likely to be met by voluntary support or whether a compulsory supervision order might be necessary.
A named person, on becoming aware of a wellbeing need, should use professional judgement in deciding how to respond.
Seeking and considering the views of the child and parent should be a key part of the process unless doing this is likely to be detrimental to the childs wellbeing (para 4.1.28).
The RDSG also gives guidance on the information sharing duties contained in sections 23, 26 and 27 of the Act.
It records (para 10.1.2) that Part 4 of the Act does not change the type of information being shared and received by service providers and relevant authorities but expresses the view that the Act will increase consistency in practice which in turn is likely to mean that more information will be shared.
It advises that the Information Commissioners Office (ICO) Guide to Data Protection and its Data Sharing Code of Practice should be used to support the governance of data sharing (para 10.1.4).
On article 8 of the European Convention on Human Rights (ECHR) it states (para 10.3.1): The right to privacy in article 8 is a qualified rather than an absolute right.
Public authorities can share information if it is lawful and proportionate to do so, but each case must be considered carefully to assess what is lawful and proportionate in the particular circumstances.
The RDSG refers to the three tests for the sharing of information in section 26(2) and (4), namely (i) that the information is likely to be relevant to the exercise of the functions in question, (ii) that it ought to be provided for that purpose, and (iii) that the sharing of the information would not prejudice the conduct of a criminal investigation or the prosecution of any offence.
In its discussion of the second test (para 10.7.4) it states: It is routine good practice to seek parents views about information shared, unless it would be against the childs wishes, where they are considered capable of making that decision, or where seeking the views of the parent may be detrimental to the childs wellbeing.
It states that in all but exceptional situations, the child or young person, and, as appropriate, their parents will be involved in the decision to share information (para 10.10.3) (emphasis added).
It does not make the involvement of the parents a requirement in all but exceptional circumstances.
It says, without elaborating, that there must be no other legal restrictions (paras 10.7.1 and 10.8.1).
It explains the discretionary power of a named person service provider to share information under section 26(8) and (9) in para 10.11: where the named person service has identified a wellbeing need or has been made aware of a likely wellbeing need they have the opportunity to share information in order to explore options for support or to make enquiries on behalf of the child, young person or parents.
It states in relation to this discretionary sharing of information (para 10.11.2): Any information shared must be legal and considered in terms of the principles and boundaries of data protection, human rights and childrens rights, again without elaboration.
It explains section 26(11) in these terms (paras 10.13.2 10.13.4): This sub section of the Act permits health professionals and others governed by a professional or common law duty of confidentiality to legally disclose relevant information without the information providers consent where disclosure of that information has been considered and meets the tests set out in the relevant sub sections of section 26.
Section 26(11) does not permit or require the sharing of information in breach of any other legal restriction such as the [Data Protection Act 1998 (DPA)], the Human Rights Act 1998, an order of the court or a decision by a Childrens Hearing specifying non disclosure of specific information.
In all but exceptional situations, the child or young person, and as appropriate their parents, will be involved in the decision to share information and will be told what information has been shared in breach of a duty of confidentiality. (emphasis added)
Finally, the RDSGs guidance on section 27 (disclosure of information provided in breach of confidentiality) is as follows (para 10.14.2): If the person receiving the information believes it is necessary to share all or part of it in order to promote, support or safeguard the childs wellbeing, then the considerations in section 26 must be applied.
This would include taking into account the childs views and understanding the likely effect of sharing on the childs wellbeing.
Other legal requirements must also be considered, including the DPA and the childs right to private and family life under article 8 of the ECHR.
Decisions to share information in these situations will need to be evidenced, and the rationale recorded. (emphasis added) The reserved matters challenge
The challenges to legislative competence
Section 29(1) of the Scotland Act 1998 provides that an Act of the Scottish Parliament is not law so far as any provision of the Act is outside its legislative competence.
In terms of section 29(2), a provision is outside its competence so far as any of the following paragraphs apply.
Paragraph (b) applies where the provision relates to reserved matters.
We address that challenge in section I (paras 27 to 66 below).
Paragraph (d) applies where the provision is incompatible with any of the Convention rights or with EU law.
We address the Convention rights challenge and comment briefly on the EU law challenge in sections II and III (paras 67 to 105 below).
The appellants are four registered charities with an interest in family matters and three individual parents.
They challenge the lawfulness of the data sharing and retention provisions in the Act on the ground that they relate to reserved matters, with the consequence that section 29(2)(b) of the Scotland Act applies.
They have focused on sections 26 and 27 of the 2014 Act, but their arguments apply also in relation to section 23(2).
In terms of section 29(3) of the Scotland Act, the question whether a provision relates to a reserved matter is to be determined (subject to subsection (4), which has no bearing on the present case) by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances.
Section 30 of the Scotland Act gives effect to Schedule 5, in which reserved matters are defined.
In particular, paragraph 1 of Part II of Schedule 5 provides that the matters to which the Sections in that Part apply are reserved matters.
As was pointed out by Lord Hope in Imperial Tobacco Ltd v Lord Advocate [2012] UKSC 61; 2013 SC (UKSC) 153, in a judgment with which the other members of the court agreed, the matters listed have a common theme: It is that matters in which the United Kingdom as a whole has an interest should continue to be the responsibility of the UK Parliament at Westminster.
They include matters which are affected by its treaty obligations and matters that are designed to ensure that there is a single market within the United Kingdom for the free movement of goods and services. (para 29) Amongst the matters listed in Schedule 5 is Section B2: B2.
Data protection The subject matter of the Data Protection Act 1998, and (a) (b) Council Directive 95/46/EC (protection of individuals with regard to the processing of personal data and on the free movement of such data).
Paragraph 5 of Part III of Schedule 5 provides that references in the schedule to the subject matter of any enactment are to be read as references to the subject matter of that enactment as it had effect on the principal appointed day, which was 1 July 1999.
It is therefore the version of the Data Protection Act (DPA) which was in force on that date which is relevant.
This court has had to apply section 29(2)(b) and (3) on a number of occasions, and the approach to be adopted is now well established.
In Martin v Most [2010] UKSC 10; 2010 SC (UKSC) 40, para 49, Lord Walker said that the expression relates to was familiar in this sort of context, indicating more than a loose or consequential connection, and the language of section 29(3), referring to a provisions purpose and effect, reinforces that.
That approach was endorsed by Lord Hope in Imperial Tobacco (para 16).
Whether a provision relates to a reserved matter, in the sense explained by Lord Walker, is determined by reference to the purpose of the provision in question.
That purpose is to be ascertained having regard to the effect of the provision, amongst other relevant matters.
As was said in relation to the similar provisions in the Government of Wales Act 2006 in In re Agricultural Sector (Wales) Bill [2014] UKSC 43; [2014] 1 WLR 2622, para 50: 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.
Determining the purpose of a provision may not be an easy matter.
For example, must a single predominant purpose be identified, or will the provision relate to a reserved matter provided one purpose which can properly be attributed to it justifies that conclusion? That question was considered, obiter, by Lord Hope in Imperial Tobacco.
The legislation in issue imposed restrictions upon the advertising and sale of tobacco products, and was challenged as relating to reserved matters, namely consumer protection and product safety.
Lord Hope stated: I do not see this as a case which gives rise to the problem which may need to be dealt with if the provision in question has two or more purposes, one of which relates to a reserved matter.
In such a situation the fact that one of its purposes relates to a reserved matter will mean that the provision is outside competence, unless the purpose can be regarded as consequential and thus of no real significance when regard is had to what the provision overall seeks to achieve. (para 43)
This approach should not be confused with the pith and substance test developed to resolve problems in a number of federal systems, to which the Court of Session referred in the present case.
Although in Martin v Most Lord Hope mentioned cases applying that test as forming part of the background to the scheme applied in the Scotland Act, he went on to point out that the phrase did not appear in the Act, and that the rules which had to be applied were those laid down in the Act (para 15).
In Imperial Tobacco, Lord Hope emphasised the latter point: [T]he intention was that it was to the 1998 Act itself, not to decisions as to how the problem was handled in other jurisdictions, that one should look for guidance.
So it is to the rules that the 1998 Act lays down that the court must address its attention. (para 13) So, in the present case, the Second Divisions finding that the pith and substance of the 2014 Act are child protection does not answer the question whether any of its provisions relate to the subject matter of the DPA and Directive 95/46/EC (the Directive).
It is necessary only to add that the question whether a provision of an Act of the Scottish Parliament relates to a reserved matter is different from the question whether such a provision modifies the law on reserved matters.
The latter question is addressed by section 29(2)(c) of the Scotland Act and Schedule 4, paragraph 2.
The subject matter of the Directive
The Directive was made under article 100a of the EC Treaty, which authorises measures for the harmonisation of national laws with the aim of achieving the internal market.
The subject matter of the Directive is described in general terms in its title: it is a directive on the protection of individuals with regard to the processing of personal data, and the free movement of such data.
The link between these two subjects is explained in the recitals.
In particular, recital 7 states that the difference in levels of protection of the rights and freedoms of individuals, notably the right to privacy, with regard to the processing of personal data afforded in the member states may . constitute an obstacle to the pursuit of a number of economic activities at Community level, distort competition and impede authorities in the discharge of their responsibilities under Community law.
The recital continues by noting that this difference in levels of protection is due to the existence of a wide variety of national laws, regulations and administrative provisions.
Accordingly, recital 8 states that in order to remove the obstacles to flows of personal data, the level of protection of the rights and freedoms of individuals with regard to the processing of such data must be equivalent in all member states.
The intended result, as recital 9 states, is that given the equivalent protection resulting from the approximation of national laws, the member states will no longer be able to inhibit the free movement between them of personal data on grounds relating to protection of the rights and freedoms of individuals, and in particular the right to privacy.
The scope of application of the Directive is not, however, restricted to situations involving free movement: Bodil Lindquist (Case C 101/01) [2003] ECR I 12971, paras 40 44.
Turning to the substantive articles of the Directive, Chapter I sets out general provisions.
In particular, article 1 defines the twofold object of the Directive: In accordance with this Directive, member states shall 1. protect the fundamental rights and freedoms of natural persons, and in particular their right to privacy with respect to the processing of personal data. 2.
Member states shall neither restrict nor prohibit the free flow of personal data between member states for reasons connected with the protection afforded under paragraph 1.
Article 2 defines certain terms, and article 3 describes the scope of the Directive.
In terms of article 3(1), it applies to the processing of personal data wholly or partly by automatic means, and to the processing otherwise than by automatic means of personal data which form part of a filing system or are intended to form part of a filing system.
Personal data is defined by article 2(a) as meaning any information relating to an identified or identifiable natural person (data subject).
Processing of personal data is defined by article 2(b) as meaning any operation or set of operations which is performed upon personal data, whether or not by automatic means, such as collection, recording, organization, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction.
Article 3(2) lists certain circumstances in which the Directive is not to apply.
It has not been argued that any of those circumstances applies in the present case.
Chapter II sets out general rules on the lawfulness of the processing of personal data.
Article 5 requires member states, within the limits of the provisions of that Chapter, to determine more precisely the conditions under which the processing of personal data is lawful.
Article 6 sets out five general principles, somewhat misleadingly described as principles relating to data quality, to which member states must give effect.
For example, the second principle is that personal data must be collected for specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes.
Article 7 sets out six general conditions, described as criteria for making data processing legitimate, which member states must apply to the processing of personal data, so that at least one of the conditions is satisfied.
Article 8 sets out particular rules in relation to the processing of what are described as special categories of data, including data revealing racial or ethnic origins, and data concerning health or sex life.
Article 8(1) requires member states to prohibit the processing of such data.
The remaining paragraphs of article 8 then disapply article 8(1) in a number of specified circumstances, to which it will be necessary to return.
Articles 10 and 11 require member states to provide that the data controller must provide the data subject with information about the processing of his personal data.
Article 12 requires member states to guarantee certain rights of data subjects in relation to data controllers.
Article 13 permits member states to adopt legislation restricting the scope of certain of these rights and obligations where specified conditions are met.
Article 14 requires member states to grant the data subject the right to object to the processing of his personal data in certain circumstances.
Most of the remaining provisions of Chapter II are concerned with the regulation of data controllers.
Chapter III is concerned with judicial remedies, liability, and sanctions.
Chapter IV is concerned with the transfer of personal data to third countries.
Chapter V is concerned with codes of conduct, and Chapter VI with the establishment of national supervisory authorities and of an EU working party.
Finally, Chapter VII is concerned with Community implementing measures.
Put shortly, therefore, the Directive was designed to harmonise the laws of the member states relating to the protection of individuals interests in relation to the use of their personal data.
Its provisions specify the standards of protection which the laws of the member states must afford, and the methods by which those standards are to be secured and enforced.
The subject matter of the DPA
The DPA is the measure implementing the Directive in the UK.
One would therefore expect its subject matter to be the same as that of the Directive, and so it proves.
The subject matter of the DPA is described in general terms in its short title: the regulation of the processing of information relating to individuals, including the obtaining, holding, use or disclosure of such information.
Part I of the DPA defines some of the critical terms, broadly following the definitions in the Directive.
Part I also contains some other fundamental provisions of the DPA.
Section 4 imposes on a data controller an obligation to comply with the data protection principles set out in Part I of Schedule 1, to which it will be necessary to return.
Section 6 establishes the office of Information Commissioner, known in 1999 (cf para 28 above) as the Data Protection Commissioner.
Part II of the DPA confers various rights on individuals relating to information concerning themselves, including rights to access personal data (section 7), to prevent processing which is likely to cause damage or distress (section 10), and to apply for the rectification or destruction of inaccurate data (section 14).
Part III contains provisions relating to the regulation of data controllers by the Commissioner.
Part IV makes provision for exemptions from the data protection principles, and from Parts II and III.
Part V concerns enforcement by the Commissioner, and Part VI contains miscellaneous and general provisions.
It is apparent that the DPA is intended to secure equivalent standards of protection of the rights of individuals in relation to the processing of personal data throughout the UK, and equivalent methods of securing and enforcing those standards.
That is as one would expect, given the aims of the Directive.
Accordingly, the DPA applies to data controllers throughout the UK: section 5.
It establishes a single regulatory authority for the whole of the UK: section 6. (Somewhat confusingly, a separate Scottish Information Commissioner exercises functions under the Freedom of Information (Scotland) Act 2002, but has no regulatory role in relation to data protection).
The Commissioner is the designated authority in the UK for the purposes of the 1981 Council of Europe Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, and is also the supervisory authority in the UK for the purposes of the Directive: section 54(1).
He is accountable to the UK Parliament, and must lay before it reports and codes of practice: section 52.
His accounts are examined by the Comptroller and Auditor General: Schedule 5, Part I, paragraph 10.
His power to issue codes of practice is exercisable as directed by the Secretary of State: section 51(3).
The powers to make orders, regulations and rules under the DPA are exercisable only by the Secretary of State, and only by means of a statutory instrument approved by the UK Parliament: see, for example, sections 30, 38, 54, 64 and 67.
The power to designate codes of practice, for the purpose of exemptions relating to journalism, literature and art, is similarly conferred on the Secretary of State: section 32(3).
Appeals under the DPA lie to the First tier and Upper Tribunals (in 1999, to the Data Protection Tribunal) throughout the UK: section 70(1).
The DPA allows scope for derogation from certain of its requirements by enactments either of the UK Parliament or of the Scottish Parliament.
An example relevant to the present case, to which it will be necessary to return, is section 35(1), under which personal data are exempt from certain provisions relating to the disclosure of information where the disclosure is required by or under any enactment, an expression which is defined by section 70(1) as including any enactment comprised in, or in any instrument made under, an Act of the Scottish Parliament.
Put shortly, therefore, the DPA was designed to implement the Directive by establishing standards of protection of individuals interests in relation to the use of their personal data, and methods by which those standards are to be secured and enforced, which are equivalent in effect throughout the UK.
In particular, it imposes obligations on data controllers in relation to the processing of data, and creates rights on the part of data subjects.
It also creates a system for the regulation of data controllers by the Commissioner.
It allows scope, however, for derogation from certain of its requirements by legislation which need not be UK wide in application.
The effect of Part 4 of the 2014 Act in relation to the DPA
The bodies described in Part 4 of the 2014 Act as service providers, relevant authorities and directing authorities are currently subject, prior to the entry into force of that Act, to a variety of legal duties in relation to the disclosure of information, including duties imposed by the DPA.
In particular, as mentioned earlier, section 4 of that Act imposes on a data controller an obligation to comply with the data protection principles set out in Part I of Schedule 1.
Those principles include the following: 1.
Personal data shall be processed fairly and lawfully and, in particular, shall not be processed unless at least one of the conditions in Schedule 2 is met, (a) and in the case of sensitive personal data, at least one (b) of the conditions in Schedule 3 is also met. 2.
Personal data shall be obtained only for one or more specified and lawful purposes, and shall not be further processed in any manner incompatible with that purpose or those purposes. 3.
Personal data shall be adequate, relevant and not excessive in relation to the purpose or purposes for which they are processed.
Section 2 of the DPA defines sensitive personal data as including (amongst other matters) information as to a persons racial or ethnic origins, his physical or mental health or condition, his sexual life, or the commission or alleged commission by him of any offence.
Those principles are supplemented by the provisions of Part II of Schedule 1 to the DPA, which indicate how they are to be interpreted.
For example, Part II contains provisions specifying circumstances in which a data subject is to be provided with information, and the nature of that information, in order for the data to be regarded as having been processed fairly for the purposes of the first principle.
In relation to the conditions referred to in the first principle, Schedule 2 sets out the following conditions, so far as material to the present case: 1.
The data subject has given his consent to the processing. 3.
The processing is necessary for compliance with any legal obligation to which the data controller is subject, other than an obligation imposed by contract. 4.
The processing is necessary in order to protect the vital interests of the data subject. 5.
The processing is necessary . for the exercise of any functions conferred on any (b) person by or under any enactment . 6. (1) The processing is necessary for the purposes of legitimate interests pursued by the data controller or by the third party or parties to whom the data are disclosed, except where the processing is unwarranted in any particular case by reason of prejudice to the rights and freedoms or legitimate interests of the data subject.
It follows from those conditions that, prior to the entry into force of the 2014 Act, a data controller in Scotland can disclose information about a child or young person without her consent (assuming, in the case of a statutory body, that the disclosure is otherwise within its powers), if the disclosure is necessary to protect her vital interests (condition 4), a test which requires more than that it is likely to benefit her wellbeing; or if the disclosure is necessary for the exercise of a statutory function (condition 5(b)), but not merely because it considers that the information is likely to be relevant to the exercise of that function.
The data controller is also, of course, obliged to comply with the other data protection principles so far as relevant, and with any requirements arising from Part II of Schedule 1.
In particular, it is required to comply with the third data protection principle, in terms of which personal data must be relevant (and not merely considered by the data controller to be likely to be relevant) in relation to the purpose or purposes for which they are processed.
conditions, so far as material: In relation to sensitive data, Schedule 3 sets out the following additional 1.
The data subject has given his explicit consent to the processing of the personal data. 3.
The processing is necessary in order to protect the vital interests of the data (a) subject or another person, in a case where consent cannot be given by or on behalf of (i) the data subject, or (ii) the data controller cannot reasonably be expected to obtain the consent of the data subject, or in order to protect the vital interests of another (b) person, in a case where consent by or on behalf of the data subject has been unreasonably withheld. 7. (1) The processing is necessary for the exercise of any functions conferred on any (b) person by or under an enactment . 8.
The processing is necessary for medical purposes and is undertaken by a health professional, or (a) (b) a person who in the circumstances owes a duty of confidentiality which is equivalent to that which would arise if that person were a health professional.
It follows from those conditions that, prior to the entry into force of the 2014 Act, a data controller in Scotland of sensitive data can disclose information about the health or sexual life of a child or young person, without his or her explicit consent (assuming, in the case of a statutory body, that the disclosure is otherwise within its powers), if the disclosure is necessary in order to protect his or her vital interests (and not merely because it is likely to benefit her wellbeing) and, in addition, it is either impossible for him or her to give consent or the data controller cannot reasonably be expected to obtain it (condition 3).
The information can also be disclosed if its disclosure is necessary for the exercise of a statutory function (condition 7(1)(b)), but not merely because the data controller considers that the information is likely be relevant to the exercise of that function.
It can also be disclosed for medical purposes, but only where a duty of confidentiality is owed (condition 8): a requirement which gives rise to a difficulty (not discussed in this appeal) where disclosure is liable to be made under Part 4 of the 2014 Act, since sections 23(7) and 26(11) of the 2014 Act override duties of confidentiality.
It is in addition necessary to comply with the other data protection principles, and with any requirements arising from Part II of Schedule 1.
The effect of Part 4 of the 2014 Act on the requirements of the DPA is extremely complex.
Numerous difficult questions are liable to arise, which were not discussed in detail, if at all, in the present appeal.
A sufficient idea of the effect of Part 4 can, however, be obtained to enable the issue arising in relation to reserved matters to be determined.
It may be helpful to explain at the outset that much of the difficulty arises from sections 23(7) and 26(11) of the 2014 Act, in terms of which sections 23 and 26 do not permit or authorise the provision of information in breach of a prohibition or restriction on its disclosure arising by virtue of an enactment or rule of law (other than in relation to a duty of confidentiality).
This means that the powers and duties of disclosure set out in sections 23 and 26 cannot be taken at face value.
To the extent that their terms may be inconsistent with the requirements of the DPA, they have no effect.
The DPA itself, however, contains provisions which confer exemptions from some of its requirements where they are inconsistent with another enactment, or which treat some of its requirements as satisfied where disclosure is necessary for compliance with a statutory obligation.
In these circumstances, it is necessary for anyone wanting to understand the effect of sections 23 and 26 on the disclosure of information to have the 2014 Act in one hand and the DPA in the other, to determine the priority which their provisions have vis vis one another notwithstanding the logical puzzle created by sections 23(7) and 26(11) of the 2014 Act when read with the DPA, and to try, by cross reference, to work out their cumulative effect.
One potentially significant effect follows from section 35(1) of the DPA, in terms of which personal data are exempt from the non disclosure provisions where the disclosure is required by or under any enactment.
A provision of an Act of the Scottish Parliament is an enactment for this purpose: section 70(1).
The non disclosure provisions are defined by section 27(3) of the DPA as meaning the provisions specified in section 27(4) of that Act, to the extent to which they are inconsistent with the disclosure in question.
Those provisions are the first data protection principle, except to the extent to which it requires compliance with the conditions in Schedules 2 and 3, the second, third, fourth and fifth data protection principles, section 10 (the right to prevent processing likely to cause damage or distress) and section 14(1) to (3) (the rectification, blocking, erasure and destruction of data).
Sections 23(2), 26(1) and 26(3) of the 2014 Act require the disclosure of personal data, subject to sections 23(7) and 26(11).
Accordingly, if those provisions are within devolved competence, and if the logical puzzle as to whether section 35(1) of the DPA prevails over sections 23(7) and 26(11) of the 2014 Act is resolved in favour of section 35(1) (a point which was not the subject of argument in this appeal, but was the implicit basis on which the arguments proceeded), then it follows that disclosure as required by sections 23 and 26 is exempt from the non disclosure provisions, as defined, to the extent that the non disclosure provisions are inconsistent with the disclosure.
For example, the third data protection principle is inconsistent with the disclosure required by sections 23(2), 26(1) and 26(3) of the 2014 Act, since those provisions require disclosure of information which is considered by the data processor to be likely to be relevant, whereas the third principle requires any personal data disclosed to be relevant, as well as adequate and not excessive in relation to the purpose or purposes for which they are processed.
On the other hand, the fifth principle (that data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes) is not inconsistent with sections 23 and 26 of the 2014 Act, and therefore continues to apply.
The duties of disclosure imposed by sections 23 and 26 remain subject to numerous other provisions of the DPA, including the first data protection principle, to the extent to which it requires compliance with the conditions in Schedules 2 and 3.
The power conferred by section 26(8) of the 2014 Act, on the other hand, does not require disclosure, and therefore cannot benefit from the exemption conferred by section 35(1) of the DPA.
The discussion in this appeal focused on only one aspect of the complex inter relationship between Part 4 of the 2014 Act and the DPA, namely the question whether disclosure in accordance with the duties imposed by Part 4 of the 2014 Act would comply with the conditions imposed by Schedules 2 and 3 to the DPA.
It was argued on behalf of the Ministers that conditions 3 and 5(b) in Schedule 2, and condition 7(1)(b) in Schedule 3, would be met.
Condition 3 is satisfied where the processing is necessary for compliance with any legal obligation to which the data controller is subject, other than an obligation imposed by contract.
Condition 5(b) in Schedule 2, and condition 7(1)(b) in Schedule 3, are satisfied where the processing is necessary . for the exercise of any functions conferred on any person by or under any [or an] enactment.
The imposition of a statutory duty of disclosure by sections 23(2), 26(1) and 26(3) of the 2014 Act has the consequence that condition 3 in Schedule 2 to the DPA is satisfied.
The terms in which that duty is imposed do not, on the other hand, meet the requirements of condition 5(b) in Schedule 2 and condition 7(1)(b) in Schedule 3.
In each case, the data controller is required by the 2014 Act to disclose personal data to a third party if he considers that the data are likely to be relevant to the exercise of certain statutory functions by the third party and ought to be provided for that purpose.
The test imposed by condition 5(b) in Schedule 2 and condition 7(1)(b) in Schedule 3 to the DPA requires that disclosure must be necessary for the exercise of statutory functions (which must again refer to the functions of the person to whom the disclosure is made, given that section 35(1), read with section 27, requires that a data processor who is under a statutory duty to make the disclosure must comply with Schedules 2 and 3: a requirement which would be pointless if it were met ex hypothesi).
The meaning of necessary was considered by this court in South Lanarkshire Council v Scottish Information Comr [2013] UKSC 55; 2014 SC (UKSC) 1; [2013] 1 WLR 2421.
As was explained there at paras 25 27, it is an expression whose meaning depends on the context in which it falls to be applied.
Where the disclosure of information constitutes an interference with rights protected by article 8 of the ECHR, as in the present context (as explained at paras 75 77 below), the requirement that disclosure is necessary forms part of a proportionality test: the disclosure must involve the least interference with the right to respect for private and family life which is required for the achievement of the legitimate aim pursued.
Disclosure where the data processor considers that the information is likely to be relevant cannot be regarded as necessary if the legitimate aim could be achieved by something less.
It cannot be necessary, in that sense, to disclose information merely on the ground that it is objectively relevant, let alone on the ground that a particular body considers that it is likely to be relevant.
Relevance is a relatively low threshold: information may be relevant but of little significance.
A test of potential relevance fails to recognise the need to weigh the importance of the disclosure in achieving a legitimate aim against the importance of the interference with the individuals right to respect for her private and family life.
That deficiency is not made good by the requirement that the data controller considers that the information ought to be provided.
It will be necessary to return to the question of proportionality when we consider the challenge to the legislation under article 8.
So far as the power conferred by section 26(8) is concerned, a data controller may disclose information to a third party if he considers that to do so is necessary or expedient for the purpose of the exercise of any of the named person functions.
Those conditions are less demanding than any of the conditions in Schedules 2 and 3 to the DPA that are relied on by the Ministers.
Condition 3 in Schedule 2 is not satisfied, since the disclosure does not have to be necessary for compliance with any legal obligation imposed on the data controller.
Condition 5(b) in Schedule 2, and condition 7(1)(b) in Schedule 3, are not satisfied, since the processing does not have to be necessary for the exercise of any of the named person functions.
Nor is the third data protection principle met, since there is no requirement that the information should be relevant.
The first data protection principle is therefore complied with, in so far as the duties of disclosure imposed by Part 4 of the 2014 Act apply to non sensitive data, but not in so far as they apply to sensitive data or in so far as Part 4 confers a power to disclose information rather than imposing a duty.
Sections 23(7) and 26(11) therefore apply, with the consequence that the duties imposed by sections 23(2), 26(1) and 26(3) in respect of sensitive data, and the power conferred by section 26(8) in respect of data of all kinds, cannot be taken at face value.
Instead, the duties imposed by sections 23(2), 26(1) and 26(3) in respect of sensitive data must be understood as being conditional upon compliance with at least one of the conditions in Schedule 3 to the DPA, and therefore as being subject to more stringent criteria than those which appear on the face of the 2014 Act.
The power conferred by section 26(8) must likewise be understood as being conditional upon compliance with at least one of the conditions in Schedule 2 to the DPA, and also, if the information in question is sensitive data, upon compliance with at least one of the conditions in Schedule 3.
In addition, it is subject to compliance with the requirements arising in relation to the first data protection principle under Part II of Schedule 1 to the DPA, and also to compliance with the other data protection principles and the other duties imposed by the DPA.
The effect of Part 4 of the 2014 Act in relation to the Directive
As explained earlier, the Directive requires member states to establish a number of principles relating to the processing of data, which find their counterpart in the data protection principles laid down in the DPA.
The principles set out in the Directive are complex and raise numerous issues of interpretation, like their UK counterparts.
For present purposes, it is sufficient to focus on the provisions corresponding to Schedules 2 and 3 to the DPA.
As explained earlier, article 7 sets out six general criteria which member states must apply to the processing of personal data, so that at least one of the criteria is satisfied.
The criteria which the Ministers maintain are satisfied by the terms of Part 4 of the 2014 Act are the following: (c) processing is necessary for compliance with a legal obligation to which the controller is subject; or . (e) processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller or in a third party to whom the data are disclosed.
These criteria are almost identical to those set out in conditions 3 and 5(b) in Schedule 2 to the DPA.
For the reasons explained earlier, sections 23(2), 26(1) and 26(3) meet the requirements of criterion (c), but section 26(8) does not meet the requirements of any of the criteria.
As explained earlier, article 8(2) permits specified exemptions from the general prohibition imposed by article 8(1) on the processing of personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, and the processing of data concerning health or sex life.
The exemptions, so far as potentially relevant, are as follows: (a) the data subject has given his explicit consent to the processing of those data, except where the laws of the member state provide that the prohibition referred to in paragraph 1 may not be lifted by the data subjects giving his consent; or . (c) processing is necessary to protect the vital interests of the data subject or of another person where the data subject is physically or legally incapable of giving his consent.
Article 8(3) disapplies the prohibition in article 8(1) where processing of the data is required for the purposes of preventive medicine, medical diagnosis, the provision of care or treatment or the management of health care services, and where those data are processed by a health professional subject . to the obligation of professional secrecy or by another person also subject to an equivalent obligation of secrecy.
Article 8(4) of the Directive permits member states to lay down additional exemptions for reasons of substantial public interest, subject to the provision of suitable safeguards.
Any such additional exemptions must be notified to the Commission.
Sections 23(2) and 26(1), (3) and (8) of the 2014 Act do not meet the requirements of the exemptions in article 8(2).
The provisions of Part 4 of the 2014 Act have not been notified to the Commission, and it is not suggested that there has been any other relevant notification.
Nor has it been argued that the provisions of Part 4 would meet the other requirements of article 8(4).
It follows for this reason also that, applying sections 23(7) and 26(11), sections 23 and 26 cannot be taken at face value.
The performance of the powers and duties created by those provisions, in respect of data falling within the scope of article 8, must be understood as being permissible only where either one of the exemptions listed in article 8(2) applies, or the processing falls within the scope of article 8(3).
Discussion
Does it follow, for the purposes of Section B2 of Schedule 5 to the Scotland Act, that any of the provisions of Part 4 of the 2014 Act relate to the subject matter of the DPA and the Directive? The fact that a provision of an Act of the Scottish Parliament requires or authorises the disclosure of personal data does not in itself mean that the provision is outside legislative competence: as explained earlier, the DPA envisages in section 35(1), read with section 70(1), that the disclosure of personal data may be required by an enactment comprised in an Act of the Scottish Parliament.
In view of that provision, the Scotland Act cannot sensibly be interpreted as meaning that an enactment relates to the subject matter of the DPA, and is therefore outside the powers of the Scottish Parliament, merely because it requires or authorises the disclosure of personal data.
On the other hand, an enactment does not have to modify the DPA in order to relate to the subject matter of that Act.
That follows from the distinction between section 29(2)(b) and (c) of the Scotland Act.
The question whether an enactment relates to the subject matter of the DPA and the Directive has to be decided by following the approach described in paras 29 to 31 above.
Following that approach, it was argued on behalf of the Ministers that the purpose of Part 4 is to promote the wellbeing of children and young people, and that the provisions concerning the processing of personal data are merely consequential upon, or incidental to, that purpose.
It is true that the ultimate aim of Part 4 is to promote the wellbeing of children and young people.
Its more specific objective is to alter the institutional arrangements, and the legal structure of powers and duties, governing cooperation between the different agencies which deal with children and young people, so that they work collaboratively, with the named person playing a coordinating role.
That objective reflects the concern, noted in the background material to the 2014 Act, that a weakness in the existing arrangements was that information was not shared until the stage had been reached where a child or young person was at risk of harm.
Part 4 is designed to address that concern by ensuring that information is shared between the relevant agencies, and acted on where appropriate, before that stage is reached.
Accordingly, although Part 4 contains provisions whose objective is to ensure that information relating to children and young people is shared, that objective is not truly distinct from the overall purpose of promoting their wellbeing, but can be regarded as consequential upon it.
It is also important to bear in mind the central aim of the provisions in the Scotland Act concerning reserved matters, explained at para 28 above: that matters in which the UK as a whole has an interest should continue to be the responsibility of the UK Parliament.
As explained at para 44 above, the DPA deals with matters in which the UK as a whole has an interest, because it implements the Directive, in accordance with the UKs treaty obligations, by establishing standards of protection of individuals interests in relation to the use of their personal data, and methods by which those standards are to be secured and enforced, which are equivalent in effect throughout the UK.
But it also, in section 35 and elsewhere, leaves scope for derogation from certain of its requirements by the UK Parliament and by the Scottish Parliament.
To the extent that Part 4 of the 2014 Act affects the way in which the data protection regime under the DPA applies to matters falling within its scope, that possibility is contemplated by the DPA itself, in section 35.
Part 4 does not detract from the regime established by the DPA and the Directive, even if that is only by reason of the fail safe provisions of sections 23(7) and 26(11).
For these reasons, we are not persuaded that the provisions of Part 4 relate to the subject matter of the DPA and the Directive.
The appellants challenge the compulsory appointment of a named person as a breach of the rights of the parents of children under article 8 of the ECHR.
Article 8 provides: The human rights challenge 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 wellbeing 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 appellants challenge proceeds on both a broad basis and a narrower basis.
The broad challenge is that the compulsory appointment of a named person to a child involves a breach of the parents article 8 rights unless the parents have consented to the appointment or the appointment is necessary to protect the child from significant harm.
The narrower challenge focusses on the provisions in sections 26 and 27 for the sharing of information about a child.
Before the Inner House, the appellants narrower challenge, as recorded by the Lord Justice Clerk, raised article 8 of the ECHR but concentrated on EU law.
That was also the appellants focus in this court.
The intervener, Community Law Advice Network, challenges only the information sharing provisions, arguing that they impose too low a threshold for the disclosure of confidential information and amount to an infringement of the article 8 rights of children and young people.
As a result there was more focus on article 8 of the ECHR in the narrower challenge than there had been in the debates both in the Inner House and before the Lord Ordinary.
In our view these challenges raise the following four questions: (i) what are the interests which article 8 of ECHR protects in this context, (ii) whether and in what respects the operation of the Act interferes with the article 8 rights of parents or of children and young people, (iii) whether that interference is in accordance with the law, and (iv) whether that interference is proportionate, having regard to the legitimate aim pursued.
(i) The interests protected by article 8
In the context of this legislation, the interests protected by article 8 include both family life and privacy.
The relationship between parent and child is an integral part of family life.
As the European Court of Human Rights (ECtHR) stated in, among others, Olsson v Sweden (No 1) (1988) 11 EHRR 259, [t]he mutual enjoyment by parent and child of each others company constitutes a fundamental element of family life (para 59).
Family life also encompasses a broad range of parental rights and responsibilities with regard to the care and upbringing of minor children, enabling parents to take important decisions on their behalf, and article 8 protects the rights of parents to exercise such parental authority: Nielsen v Denmark (1988) 11 EHRR 175, para 61.
As is well known, it is proper to look to international instruments, such as the UN Convention on the Rights of the Child 1989 (UNCRC), as aids to the interpretation of the ECHR.
The Preamble to the UNCRC states: the family, as the fundamental group of society and the natural environment for the growth and wellbeing of all its members and particularly children, should be afforded the necessary protection and assistance so that it can fully assume its responsibilities within the community.
Many articles in the UNCRC acknowledge that it is the right and responsibility of parents to bring up their children.
Thus article 3(2) requires States Parties, in their actions to protect a childs wellbeing, to take into account the rights and duties of his or her parents or other individuals legally responsible for him or her; article 5 requires States Parties to respect the responsibilities, rights and duties of parents or, where applicable, other family or community members or others legally responsible for the child to provide appropriate direction and guidance to the child in the exercise of his or her rights under the Convention; article 14(2) makes similar provision in relation to the childs right to freedom of thought, conscience and religion; article 27(2) emphasises that the parents have the primary responsibility to secure, within their abilities and financial capabilities, the conditions of living necessary for the childs development; article 18(1) provides that: States Parties shall use their best efforts to ensure recognition of the principle that both parents have common responsibilities for the upbringing and development of the child.
Parents or, as the case may be, legal guardians, have the primary responsibility for the upbringing and development of the child.
The best interests of the child will be their basic concern. (Emphasis supplied) Articles 27(3) and 18(2) make it clear that the states role is to assist the parents in carrying out their responsibilities, although article 19(1) requires the state also to take appropriate measures to protect the child from all forms of abuse or neglect.
This represents the detailed working out, for children, of the principle established in article 16(3) of the Universal Declaration of Human Rights and article 23(1) of the International Covenant on Civil and Political Rights that the family is the natural and fundamental group unit of society and is entitled to protection by society and the state.
There is an inextricable link between the protection of the family and the protection of fundamental freedoms in liberal democracies.
The noble concept in article 1 of the Universal Declaration, that all human beings are born free and equal in dignity and rights is premised on difference.
If we were all the same, we would not need to guarantee that individual differences should be respected.
Justice Barak of the Supreme Court of Israel has put it like this (in El Al Israeli Airlines Ltd v Danielowitz [1992 4] IsrLR 478, para 14): The factual premise is that people are different from one another, no person is completely identical to another Every person is a world in himself.
Society is based on people who are different from one another.
Only the worst dictatorships try to eradicate these differences.
Individual differences are the product of the interplay between the individual person and his upbringing and environment.
Different upbringings produce different people.
The first thing that a totalitarian regime tries to do is to get at the children, to distance them from the subversive, varied influences of their families, and indoctrinate them in their rulers view of the world.
Within limits, families must be left to bring up their children in their own way.
As Justice McReynolds, delivering the Opinion of the Supreme Court of the United States famously put it in Pierce v Society of Sisters 268 US 510 (1925), 534 535: The fundamental theory of liberty upon which all governments in this Union repose excludes any general power of the state to standardize its children by forcing them to accept instruction from public teachers only.
The child is not the mere creature of the state; those who nurture him and direct his destiny have the right, coupled with the high duty, to recognize and prepare him for additional obligations.
Thus it is not surprising that the ECtHR, in Neulinger and Shuruk v Switzerland (2012) 54 EHRR 31, interpreted article 8 in the context, among other instruments, of the UNCRC and explained the concept of the childs best interests in this way: The childs interest comprises two limbs.
On the one hand, it dictates that the childs ties with its family must be maintained, except in cases where the family has proved particularly unfit.
It follows that family ties may only be severed in very exceptional circumstances and that everything must be done to preserve personal relations and, if and when appropriate, to rebuild the family (see Gnahor, cited above, para 59).
On the other hand, it is clearly also in the childs interest to ensure its development in a sound environment, and a parent cannot be entitled under article 8 to have such measures taken as would harm the childs health and development (see, among many other authorities, Elsholz v Germany (2002) 34 EHRR 58 at [50], and Marlek v the Czech Republic, no 8153/04, at [71], 4 April 2006). (para 136)
The privacy of a child or young person is also an important interest.
Article 16 of the UNCRC provides: 1.
No child shall be subjected to arbitrary or unlawful interference with his or her privacy, family, home or correspondence, nor to unlawful attacks on his or her honour and reputation. 2.
The child has the right to the protection of the law against such interference or attacks.
The concept of private life in article 8 covers the disclosure of personal data, such as information about a persons health, criminal offending, sexual activities or other personal matters.
The notion of personal autonomy is an important principle underlying the guarantees of the ECHR.
See, for example, Gillan v United Kingdom (2010) 50 EHRR 1105, para 61.
Article 8 protects confidential information as an aspect of human autonomy and dignity: Campbell v MGN Ltd [2004] 2 AC 457, Lord Hoffmann paras 50 51, Lady Hale para 134.
Thus in Z v Finland (1998) 25 EHRR 371, para 95, a case concerning the disclosure by a court of a persons identity and medical data, the ECtHR stated: the protection of personal data, not least medical data, is of fundamental importance to a persons enjoyment of his or her right to respect for private and family life as guaranteed by article 8 of the Convention.
Respecting the confidentiality of health data is a vital principle in the legal systems of all the Contracting Parties to the Convention.
It is crucial not only to respect the sense of privacy of a patient but also to preserve his or her confidence in the medical profession and in the health services in general.
Without such protection, those in need of medical assistance may be deterred from revealing such information of a personal and intimate nature as may be necessary in order to receive appropriate treatment and, even, from seeking such assistance, thereby endangering their own health and, in the case of transmissible diseases, that of the community.
The domestic law must therefore afford appropriate safeguards to prevent any such communication or disclosure of personal health data as may be inconsistent with the guarantees in article 8 of the Convention. (para 95)
More recently, in a case concerning a complaint that a hospital had failed to guarantee the security of a persons data against unauthorised access, the ECtHR repeated that statement and again confirmed that the processing of information relating to an individuals private life comes within the scope of article 8 and that personal information relating to a patient undoubtedly belongs to his or her private life: I v Finland (2009) 48 EHRR 740, paras 35 38.
Similarly, the Court of Justice of the European Union in X v Commission [1994] ECR I 4347 has opined (para 17) that the right to respect for private life, embodied in article 8, includes in particular a persons right to keep his state of health secret.
(ii) Whether Part 4 of the 2014 Act interferes with article 8 rights
The provisions of Part 4 of the 2014 Act by which the state may intervene in family life and private life engage article 8.
But, while article 8 is engaged, not all that may be done under Part 4 would involve an interference with a persons article 8 rights.
There are elements of the role of the named person which are unlikely, by themselves, to involve any interference with the right of a parent, child or young person to respect for his or her private and family life.
Thus, by themselves, the functions in section 19(5)(a)(i) and (ii) of providing advice, information and support and helping the parent, child or young person to access a service or support would not normally constitute an interference with the article 8 rights of either the child or his or her parents.
But it is clear from the consultation paper, A Scotland for Children and the Policy Memorandum, which we discussed in paras 1 to 3 above, that the sharing of personal data between relevant public authorities is central to the role of the named person.
As we have explained, this may well constitute an interference with the article 8 rights of those to whom the information relates.
We are therefore satisfied that the operation of the information sharing provisions of Part 4 (in particular, sections 23, 26 and 27) will result in interferences with rights protected by article 8 of the ECHR.
The question therefore arises whether such interferences can be justified under article 8(2).
(iii) In accordance with the law
In order to be in accordance with the law under article 8(2), the measure must not only have some basis in domestic law which it has in the provisions of the Act of the Scottish Parliament but also be accessible to the person concerned and foreseeable as to its effects.
These qualitative requirements of accessibility and foreseeability have two elements.
First, a rule must be formulated with sufficient precision to enable any individual if need be with appropriate advice to regulate his or her conduct: Sunday Times v United Kingdom (1979) 2 EHRR 245, para 49; Gillan v United Kingdom (2010) 50 EHRR 1105, para 76.
Secondly, it must be sufficiently precise to give legal protection against arbitrariness: it must afford a measure of legal protection against arbitrary interferences by public authorities with the rights safeguarded by the Convention.
In matters affecting fundamental rights it would be contrary to the rule of law 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 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.
Gillan v United Kingdom, para 77; Peruzzo v Germany (2013) 57 EHRR SE 17, para 35.
Recently, in R (T) v Chief Constable of Greater Manchester Police [2015] AC 49 this court has explained that the obligation to give protection against arbitrary interference requires that there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined.
This is an issue of the rule of law and is not a matter on which national authorities are given a margin of appreciation.
In deciding whether there is sufficient foreseeability to allow a person to regulate his or her conduct and sufficient safeguards against arbitrary interference with fundamental rights, the court can look not only at formal legislation but also at published official guidance and codes of conduct: Silver v United Kingdom (1983) 5 EHRR 347 (paras 88 90); Gillan v United Kingdom (paras 35, 36 and 78) and MM v United Kingdom (Application no 24029/07).
In R (Roberts) v Comr of Police of the Metropolis [2015] UKSC 79; [2016] 1 WLR 210 this court took into account as constraints on the power of the police to stop and search not only the limits on that power in section 60 of the Criminal Justice and Public Order Act 1994 and the legal protection provided by both section 6 of the Human Rights Act 1998 and the Equality Act 2010, but also the requirements of the Metropolitan Polices Standard Operating Procedures.
That statutory document, which was published on the Metropolitan Polices website, regulated the authorisation of stop and search, the operation and also the individual encounter between a police officer and a member of the public on the street.
In relation to the exercise on the street of the stop and search power it not only gave officers detailed instructions, which were designed to ensure their proportionate use of such power, but also required them to explain to the individual who was to be searched the reason for the search, to record that reason in writing and make available to the affected individual a copy of that written record.
These provided adequate safeguards to enable the courts to examine the proportionality of any interference with fundamental rights: see the judgment of Lady Hale and Lord Reed at paras 43 48.
Thus in assessing whether Part 4 of the 2014 Act is in accordance with the law this court has been invited to take into account not only the terms of the Act but also, proleptically, the RDSG, which we have discussed in paras 18 to 25 above.
As we have stated (in para 18 above), the RDSG is directed to specified public authorities, which under section 28(1) of the Act are required to have regard to it.
In contrast with, for example, the Metropolitan Polices Standard Operating Procedures which we have mentioned, there is no compulsion to follow the guidance.
The RDSG gives very little guidance as to the requirements of the DPA or article 8 of the ECHR but envisages that separate practice materials will be made available to practitioners.
As we explained in paras 52 to 62 above when we discussed the effect of the Act in relation to the DPA and the Directive, the powers and duties of disclosure set out in sections 23 and 26 cannot be taken at face value.
In several crucial respects, the scope of the duties and powers to disclose or share information set out on the face of the Act are, in reality, significantly curtailed by the requirements of the DPA and the Directive.
To recap: (1) Although section 23(2)(b) purports to impose on the outgoing service provider a duty to provide the incoming service provider with all information which it holds which falls within subsection (3), in reality no such duty exists in relation to sensitive data as defined in the DPA, unless at least one of the conditions set out in Schedule 3 to the DPA is satisfied (the conditions set out in section 23(3) (6) of the 2014 Act not in themselves ensuring their satisfaction). (2) Although section 26(1) purports to impose on a service provider or relevant authority (or any person exercising a function on their behalf) a duty to provide to the service provider in relation to a child or young person any information which the person holds which falls within subsection (2), in reality no such duty exists in relation to sensitive data as defined in the DPA, unless at least one of the conditions set out in Schedule 3 to the DPA is satisfied (the conditions set out in section 26(2) and (5) (7) of the 2014 Act not in themselves ensuring their satisfaction). (3) Although section 26(3) purports to impose on the service provider in relation to a child or young person a duty to provide to a service provider or relevant authority (or any person exercising a function on their behalf) any information which the person holds which falls within subsection (4), in reality no such duty exists in relation to sensitive data as defined in the DPA, unless at least one of the conditions set out in Schedule 3 to the DPA is satisfied (the conditions set out in section 26(4) and (5) (7) of the 2014 Act not in themselves ensuring their satisfaction). (4) Although section 26(8) purports to confer on the service provider in relation to a child or young person the power to provide to a service provider or relevant authority (or any person exercising a function on their behalf) any information which the person holds which falls within subsection (9), in reality no such power can lawfully be exercised unless the requirements of the DPA are satisfied (the condition set out in section 26(9) of the 2014 Act not in itself ensuring their satisfaction).
Those requirements include, but are not limited to, compliance with at least one of the conditions in Schedule 2 to the DPA, and also, if the information in question is sensitive data, compliance with at least one of the conditions in Schedule 3.
They also include compliance with the requirements arising in relation to the first data principle under Part II of Schedule 1 to the DPA, and also the other data protection principles and the other duties imposed by the DPA.
That is not a comprehensive account of the requirements imposed by the DPA: as explained above, those requirements were not fully discussed at the hearing of the appeal.
The relationship between the Act and the DPA is rendered particularly obscure by what we have described as the logical puzzle arising from sections 23(7) and 26(11) when read with section 35(1) of the DPA.
It is also necessary to ensure that the requirements of articles 7 and 8 of the Directive are met, so far as information falls within its scope.
There are thus very serious difficulties in accessing the relevant legal rules when one has to read together and cross refer between Part 4 of the Act and the DPA and work out the relative priority of their provisions.
Of even greater concern is the lack of safeguards which would enable the proportionality of an interference with article 8 rights to be adequately examined.
Section 26(5) requires an information holder, when considering whether information ought to be provided in the exercise of the duties in section 26(1) or (3), so far as reasonably practicable to ascertain and have regard to the views of the child or young person.
But there is no such requirement in relation to a service providers discretionary power to share information under section 26(8).
There the test is merely that the provision of the information is necessary or expedient for the purposes of the exercise of any of the named person functions.
Moreover, there is no statutory requirement, qualified or otherwise, to inform the parents of a child about the sharing of information.
The RDSG is only guidance, speaks of routine good practice, and leaves it to the discretion of the information holder whether to involve the parent or parents.
It is thus perfectly possible that information, including confidential information concerning a child or young persons state of health (for example, as to contraception, pregnancy or sexually transmitted disease), could be disclosed under section 26 to a wide range of public authorities without either the child or young person or her parents being aware of the interference with their article 8 rights, and in circumstances in which there was no objectively compelling reason for the failure to ascertain and have regard to their views.
While para 10.14.2 of the RDSG advises that a record should be kept of the rationale behind a decision to share information, such a record will not assist a child, young person or parent who is not informed that the information is to be or has been shared.
We conclude therefore that the information sharing provisions of Part 4 of the Act and the RDSG as currently drafted do not meet the article 8 criterion of being in accordance with the law.
(iv) Whether the interference is proportionate
The fourth question is whether Part 4 of the Act, when considered along with section 6 of the Human Rights Act 1998, the DPA and the RDSG, will give rise to interferences with the article 8 rights of children, young persons or parents which are proportionate, having regard to the legitimate aim pursued.
In assessing proportionality it is necessary to distinguish between the Act itself and its operation in individual cases.
The Act gives the named person three principal functions in section 19(5).
As we have said (para 78 above), the first two would not normally constitute an interference with the right to respect for private or family life.
The third, which itself involves the sharing of information, may more readily do so.
The information sharing provisions in sections 23, 26 and 27 are, as we have said, limited by the DPA, particularly in relation to the disclosure of sensitive personal data.
Separately, the operation of the Act in individual cases will involve the exercise of powers in many different circumstances which may entail more or less serious interferences with private and family life and which may provide stronger or weaker justification for such interference.
This court has explained that an ab ante challenge to the validity of legislation on the basis of a lack of proportionality faces a high hurdle: if a legislative provision is capable of being operated in a manner which is compatible with Convention rights in that it will not give rise to an unjustified interference with article 8 rights in all or almost all cases, the legislation itself will not be incompatible with Convention rights: R (Bibi) v Secretary of State for the Home Department [2015] UKSC 68; [2015] 1 WLR 5055, paras 2 and 60 per Lady Hale, para 69 per Lord Hodge.
The proportionality challenge in this case does not surmount that hurdle.
Nonetheless, it can readily be foreseen that in practice the sharing and exchange of information between public authorities are likely to give rise to disproportionate interferences with article 8 rights, unless the information holder carries out a scrupulous and informed assessment of proportionality.
In their submissions, the Ministers treated the promotion of childrens wellbeing as being in itself a legitimate aim under article 8.
They relied on international instruments in which the term wellbeing is used, although possibly not in quite as wide a sense as in the 2014 Act.
For example, article 3(2) of the UNCRC provides: States Parties undertake to ensure the child such protection and care as is necessary for his or her wellbeing, 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.
Similarly, article 24(1) of the EU Charter of Fundamental Rights (CFR) provides: Children shall have the right to such protection and care as is necessary for their wellbeing The promotion of the wellbeing of children and young people is not, however, one of the aims listed in article 8(2) of the ECHR.
At the most general level, it can be said to be linked to the economic wellbeing of the country, as the Ministers submissions emphasised.
The extent to which an individual intervention is likely to promote the achievement of such a general aim is however very limited.
Individual interventions may make a greater contribution towards achieving other legitimate aims, such as the prevention of disorder or crime, or the protection of health or morals, depending on the circumstances.
However, the more tenuous the link between the objective pursued by the intervention (eg that a child or young person should be achieving, nurtured, active, respected, responsible and included) and the achievement of one of the legitimate aims listed in article 8(2), the more difficult it will be to justify a significant interference with the individuals private and family life.
For example, if (contrary to our view) the 2014 Act as currently enacted had enabled the disclosure of sensitive personal data without the consent of the affected party, the disclosure by health professionals of information that a young person was being prescribed contraceptives or had contracted a sexually transmitted disease would be a major interference with private life which could only be justified on very compelling grounds.
questions when it considers the question of proportionality: It is now the standard approach of this court to address the following four (i) whether the objective is sufficiently important to justify the limitation of a protected right, (ii) whether the measure is rationally connected to the objective, (iii) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective, and (iv) 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 (ie whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure).
See Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167, para 19 per Lord Bingham of Cornhill; R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45; [2012] 1 AC 621, para 45 per Lord Wilson; Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014] AC 700, para 74 per Lord Reed; and R (Bibi) v Secretary of State for the Home Department [2015] UKSC 68; [2015] 1 WLR 5055, para 29 per Lady Hale.
As to the first of those questions, it can be accepted, focusing on the legislation itself rather than on individual cases dealt with under the legislation, that Part 4 of the 2014 Act pursues legitimate aims.
The public interest in the flourishing of children is obvious.
The aim of the Act, which is unquestionably legitimate and benign, is the promotion and safeguarding of the wellbeing of children and young persons.
As the Dean of Faculty submitted, the policy of promoting better outcomes for individual children and families is not inconsistent with the primary responsibility of parents to promote the wellbeing of their children.
Improving access to, and the coordination of, public services which can assist the promotion of a childs wellbeing are legitimate objectives which are sufficiently important to justify some limitation on the right to respect for private and family life.
Secondly, Part 4 of the Act is rationally connected to the legitimate aims pursued.
As the Scottish Governments consultation paper, A Scotland for Children showed, the aims of the legislation are to move public bodies with responsibility for children towards early intervention to promote childrens wellbeing rather than only responding to a serious occurrence and to ensure that those public bodies collaborated and shared relevant information concerning the wellbeing of individual children.
As the Second Division stated (para 63), the named person is at the heart of the Scottish Governments proposals.
That person is tasked with advising on the wellbeing of a child, helping a child or parent to access a service or support, and being the single point of contact for public services in relation to the child in order to promote, support or safeguard the childs wellbeing.
The third question (whether a less intrusive measure could have been used) does not involve a court in identifying the alternative legislative measure which was least intrusive.
The court allows the legislature a margin of discretion and asks whether the limitation on the fundamental right is one which it was reasonable for the legislature to impose: Bank Mellat v HM Treasury (No 2), para 75.
If, as the appellants submitted in their broader challenge, a named person should be appointed in relation to a child only if the parents consented or, absent such consent, if the appointment was necessary to protect the welfare of a child who was at risk of harm, the scope for early intervention to resolve problems and for the coordination of public services in support of a childs wellbeing would be diminished.
Separate questions will arise as to whether, in an individual case, early intervention and coordination of services could be achieved by less intrusive means.
That issue can be considered under the final question of fair balance.
The fourth question is whether the impact of the rights infringement may be disproportionate to the likely benefit of the impugned measure.
This requires consideration of the operation of Part 4 of the Act in particular cases, since it cannot be said that its operation will necessarily give rise to disproportionate interferences in all cases.
In that regard, the named persons functions to give advice, information and support (section 19(5)(a)(i)) and to help the child, young person or parent to access a service or support (section 19(5)(a)(ii)) are, as we have said, less likely to give rise to any question of disproportion in a particular case.
The provision of access to services could involve the creation of a childs plan under Part 5 of the Act, but that involves no compulsion.
The Act does not alter the statutory criteria of any compulsory measures in relation to children and young people.
Thus the criteria for making a child assessment order in section 36(2) or a child protection order in sections 38 and 39 of the Childrens Hearings (Scotland) Act 2011 require (put shortly) reasonable grounds to suspect that the child is likely to suffer significant harm.
The long list of grounds upon which a child may come before a childrens hearing with a view to making a compulsory supervision order (which can include taking the child away from home) in section 67 of that Act remain focused upon the risk of harm to the child or the childs own misconduct.
Nevertheless, there must be a risk that, in an individual case, parents will be given the impression that they must accept the advice or services which they are offered, especially in pursuance of a childs plan for targeted intervention under Part 5; and further, that their failure to co operate with such a plan will be taken to be evidence of a risk of harm.
An assertion of such compulsion, whether express or implied, and an assessment of non cooperation as evidence of such a risk could well amount to an interference with the right to respect for family life which would require justification under article 8(2).
Given the very wide scope of the concept of wellbeing and the SHANARRI factors, this might be difficult.
Care should therefore be taken to emphasise the voluntary nature of the advice, information, support and help which are offered under section 19(5)(a)(i) and (ii) and the Guidance should make this clear.
The function, in section 19(5)(a)(iii), of discussing or raising a matter about a child or young person with a service provider or relevant authority, involves the disclosure of information.
It and the information sharing provisions in sections 23, 26 and 27 raise difficult questions of proportionality in particular cases, where the information holder, when considering whether the information ought to be provided (section 26(2)(b) and (4)(b)) or whether to provide information under section 26(8), will have to consider carefully whether the particular circumstances justify the disclosure of the particular information.
In our view, given this role of the information holder, it cannot be said that the operation of the information sharing duties and powers in relation to any of the named persons functions will necessarily amount to a disproportionate interference with article 8 rights.
But for the problem in relation to the requirement that the Act be in accordance with the law (paras 79 85 above), we consider that the Act would be capable of being operated in a manner which is compatible with the Convention rights.
But the task facing the information holder is a daunting one because the Act does not address the factors to be considered in an assessment of proportionality and the RDSG gives exiguous guidance on that issue.
The provisions of the Act appear to point toward a more relaxed approach to disclosure than is compatible with article 8.
Section 26(1) and (3) oblige the information holder to provide information which meets the criteria set out in subsections (2) and (4).
Those criteria include an assessment of whether the information is likely to be relevant to the exercise of functions which may affect the wellbeing of the child or young person.
In turn, the assessment of that wellbeing under section 96, as explained by the RDSG, involves the use of very broad criteria which could trigger the sharing of information by a wide range of public bodies (as to which see para 5 above) and also the initiation of intrusive inquiries into a childs wellbeing.
In our view, the criteria in sections 23(3), 26(2) and 26(4) by themselves create too low a threshold for disclosure (as explained at para 56 above), and for the overriding of duties of confidentiality in relation to sensitive personal information.
Under sections 23(4) and 26(5) the information holder, when deciding whether information ought to be provided under sections 23(2) and 26(1) or (3), is obliged so far as is reasonably practicable to ascertain and have regard to the views of the child or young person.
But those provisions do not require that persons consent, or require that there be any good reason for dispensing with her consent, before what may be highly personal information, imparted in confidence, is shared.
Further, the information holder is under no obligation to ascertain the views of the child or young person, or her parents, when exercising a discretion under section 26(8), in which the test is whether the provision of the information is considered to be necessary or expedient for the purposes of the exercise of any of the named person functions.
Thus the exercise of the section 26(8) power could involve the overriding of duties of confidentiality without any obligation even to consult the child, young person or parent.
The RDSG (at paras 4.1.28 and 10.7.4) presents such consultation as good practice but it is not obligatory, even on a qualified basis.
Further, there is no provision imposing even a qualified requirement that the child or young person or her parents be warned that confidential information may be disclosed, or informed after the event that it has been shared.
In many circumstances the Acts intended overriding of the duty of confidentiality may not be achieved.
In our discussion of reserved matters (paras 27 to 66 above) we showed that, because of the terms of sections 23(7) and 26(11), the DPA and the Directive impose significant restrictions on the ability of public authorities in the performance of their duties under sections 23(2), 26(1) and (3) to share information which is sensitive personal data, such as information about a persons health or sexual life, without the explicit consent of the data subject.
We showed that, for the same reasons, the power under section 26(8) to share information remains subject to all of the restrictions of the DPA against disclosure, thus normally requiring consent of the data subject, in relation also to non sensitive personal data.
Thus some of the concerns of the appellants and the interveners in relation to the criteria for the sharing of information are, on a proper interpretation of the legislation, addressed by the continued operation of the DPA and the Directive, which in many cases will require the consent of the data subject to the sharing of the information.
Nonetheless, there may be information which is not sensitive personal data which is nonetheless confidential.
Even with the restrictions of the DPA, the Act does not point towards a fair balance in relation to the disclosure of such confidential information in the performance of duties under sections 23(2), 26(1) and 26(3).
The central problems are the lack of any requirement to obtain the consent of the child, young person, or his or her parents to the disclosure, the lack of any requirement to inform them about the possibility of such disclosure at the time when the information is obtained from them, and the lack of any requirement to inform them about such disclosure after it has taken place.
Such requirements cannot, of course, be absolute: reasonable exceptions can be made where, for example, the child is unable to give consent, or the circumstances are such that it would be inappropriate for the parents consent to be sought, or the childs best interests might be harmed.
But, without such safeguards, the overriding of confidentiality is likely often to be disproportionate.
In order to reduce the risk of disproportionate interferences, there is a need for guidance to the information holder on the assessment of proportionality when considering whether information should be provided.
In particular, there is a need for guidance on (a) the circumstances in which consent should be obtained, (b) those in which such consent can be dispensed with and (c) whether, if consent is not to be obtained, the affected parties should be informed of the disclosure either before or after it has occurred.
Also relevant is whether the recipient of the information is subject to sufficient safeguards to prevent abuse: MS v Sweden (1997) 28 EHRR 313.
Further, if the guidance is to operate as law for the purposes of article 8, the information holder should be required to do more than merely have regard to it.
III The EU Law challenge
The appellants also challenge the information sharing provisions of sections 26 and 27 of the Act on the ground that they are incompatible with EU law.
Counsel referred to the following articles of the CFR: article 7 (respect for private and family life), article 8 (protection of personal data), article 14 (right to education) particularly 14(3): respect for the right of parents to ensure that the education of their children conforms with their convictions and article 33(1) (family and professional life).
In short, they submitted that the sharing of personal data without consent and absent strict necessity infringed one or more of those articles of the CFR.
It is not suggested that the DPA fails to transpose the Directive or is contrary to the CFR.
In so far as the appellants complaint relates to the sharing of what the DPA describes as sensitive personal data, we have, in large measure in agreement with the Inner House and the Lord Ordinary, interpreted the relevant provisions of the DPA and the 2014 Act as preserving the stringent restrictions in Schedule 3 to the DPA and having the effect that condition 7(1)(b) of Schedule 3 is not met (paras 49 to 58 above).
In so far as the DPA allows the 2014 Act to authorise the disclosure of (non sensitive) personal data which are not subject to any duty of confidentiality, we do not see a separate issue arising under EU law.
In so far as the challenge relates to the over riding of confidentiality of personal data (whether or not sensitive), we have addressed this in our discussion of article 8 of the ECHR.
In Volker und Marcus Schecke GbR and Hartmut Eifert v Land Hessen (Cases C 92/09 and C 93/09) [2010] ECR I 11063, the Court of Justice of the European Union (Grand Chamber) held (para 52) that the limitations which may lawfully be placed on the right to the protection of personal data correspond to those tolerated in relation to article 8 of the ECHR.
We are therefore satisfied that there is no additional incompatibility with EU law beyond that which we have found in relation to article 8 of the ECHR.
The appellants also submit that the Act contravenes EU law because there is no provision enabling a parent or child to seek the removal of information concerning a child from a named persons database once the data are no longer needed for the purposes for which they were collected or processed.
Reference was made to Google Spain SL v Agencia Espaola de Proteccin de Datos (Case C 131/12) [2014] QB 1022, paras 93 97.
We do not accept this submission.
In our view the data retained by public authorities in the exercise of powers under the Act are subject to the fifth data protection principle in Part I of Schedule 1 to the DPA, namely that personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes.
This is because this provision is not inconsistent with the disclosure which sections 23(2), 26(1) and 26(3) of the 2014 Act allows: DPA section 27(3) & (4) (paras 53 and 54 above).
Part V of the DPA empowers the Information Commissioner, whether at the request of a data subject or otherwise, to enquire into a data controllers compliance with the data protection principles.
Under section 40 of the DPA, the Information Commissioner is empowered to serve an enforcement notice on a data controller to require such compliance.
The DPA thus has protections for a data subject, who can also, if necessary, seek judicial review of a decision of the Information Commissioner.
In our view, the data subject is thereby given a legal remedy and judicial protection as required by Schrems v Data Protection Comr (Case C 362/14) [2016] QB 527, para 95.
IV Remedy
In summary, we conclude that the information sharing provisions of Part 4 of the Act (a) do not relate to reserved matters, namely the subject matter of the DPA and the Directive, (b) are incompatible with the rights of children, young persons and parents under article 8 of the ECHR because they are not in accordance with the law as that article requires, (c) may in practice result in a disproportionate interference with the article 8 rights of many children, young persons and their parents, through the sharing of private information, and (d) are not incompatible with EU law in any way which goes beyond their incompatibility with article 8 of the ECHR.
We are satisfied that it is not possible to remedy this defect by reading down the provisions under section 101 of the Scotland Act 1998.
Conclusion (b) therefore means that the information sharing provisions of Part 4 of the Act are not within the legislative competence of the Scottish Parliament.
It would not be appropriate for this court to propose particular legislative solutions.
But we can properly say the following.
We do not think that amendment of the RDSG will get round the problem in conclusion (b) or be sufficient in itself to prevent many instances of disproportionate interference to which we refer in conclusion (c).
Section 28 requires the specified public authorities merely to have regard to the guidance.
In relation to conclusion (b), it is necessary to address the lack of clarity as to the relationship between the Act and the DPA, arising from the conflict between the provisions of sections 23, 26 and 27 of the Act and the non disclosure provisions of the DPA, and, in particular, the confusion caused by sections 23(7) and 26(11) when read together with provisions of the DPA such as section 35(1).
Further, in relation to conclusion (c), the Act, subordinate legislation, or binding guidance, should address the circumstances in which (i) the child, young person or parent should be informed of the sharing of information or (ii) consent should be obtained for the sharing of information, including confidential information.
If the resolution of the problem in conclusion (b) leads to the authorisation of the disclosure of sensitive personal data, the problem identified in conclusion (c) will become even more acute as the sharing of such data will require a compelling justification.
In short, changes are needed both to improve the accessibility of the legal rules and to provide safeguards so that the proportionality of an interference can be challenged and assessed.
The reconsideration of the terms of the Act and the RDSG also provides an opportunity to minimise the risk of disproportionate interferences with the article 8 rights of children, young persons and parents.
Consideration of these matters will involve policy questions which are the responsibility of the Scottish Ministers and the democratic legislature.
Section 102 of the Scotland Act 1998 provides: (1) This section applies where any court or tribunal decides that an Act of the Scottish Parliament or any (a) provision of such an Act is not within the legislative competence of the Parliament (2) The court or tribunal may make an order suspending the effect of the decision for any (b) period and on any conditions to allow the defect to be corrected.
We are of the view that this court should consider making an order under section 102(2)(b) of the Scotland Act 1998 to allow the Scottish Parliament and the Scottish Ministers an opportunity, if so advised, to correct the defects which we have identified.
We do not think that it is appropriate to set out the possible terms of such an order until we have received written submissions from the parties on the terms of the order, including both the period of suspension and any conditions which should be attached to the order.
As was said in Salvesen v Riddell 2013 SC (UKSC) 236 (Lord Hope at para 57), if such an order is made, it may be appropriate to give permission to the Lord Advocate to return to the court for any further orders under section 102(2)(b) as may be required.
The court which is best placed to make such further orders may be the Court of Session.
In the meantime, since the defective provisions are not within the legislative competence of the Parliament, they cannot be brought into force.
Conclusion
We would allow the appeal and invite the parties to produce written submissions on the terms of a section 102 order within 42 days of the date of this judgment.
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The Children and Young People (Scotland) Act 2014 (the 2014 Act) makes provision for a named person service (the NPS) in relation to children and young people (C&YP) in Scotland.
The NPS establishes the new professional role of the named person, and envisages that all C&YP in Scotland will be assigned a named person.
The NPS aims to achieve two policy aims: first, a shift away from intervention by public authorities after a risk to welfare has been identified, to an emphasis on early intervention to promote wellbeing.
Secondly, moving from a legal structure under which the duties of statutory bodies to cooperate were linked to the performance of their individual functions, to one which ensures that they work collaboratively and share information in order to support wellbeing.
The 2014 Act is supplemented by revised statutory guidance (the Guidance), which is still in draft.
Part 4 of the 2014 Act (Part 4) provides that named persons will exercise certain functions in relation to C&YP.
These include: (a) advising, informing or supporting them or their parents; (b) helping them or their parents access a service or support; and (c) discussing or raising a matter about them with a service provider (e.g. health boards and local authorities) or relevant authority (e.g. the NHS and Scottish Police Authority).
The authority responsible for the provision of the NPS (the NPS Provider) changes depending on the age and circumstances of the child or young person.
Part 4 also sets out powers and duties relating to information sharing, including (in s.23) conditions for when information must be shared following a change in NPS Provider, and (in s.26) conditions for when information must be shared between service providers or relevant authorities, and the NPS Provider.
Section 26(8) includes an additional power of disclosure where the NPS Provider holds information and it considers that providing it to a service provider or relevant authority is necessary or expedient (s.26(9)) for the purpose of the exercise of any of the named person functions.
The powers and duties of disclosure under ss.23 and 26 cannot, however, be exercised where the information would be provided in breach of a prohibition or restriction under an enactment.
The appellants are four registered charities with an interest in family matters, and three individual parents.
They challenged Part 4 by way of judicial review on the basis that it is outside the legislative competence of the Scottish Parliament under the Scotland Act 1998 (the Scotland Act) because: (a) it relates to matters which are reserved under the Scotland Act to the UK Parliament (the Reserved Matters Challenge); (b) it is incompatible with rights under the European Convention on Human Rights (the ECHR Challenge); and/or (c) it is incompatible with EU law (the EU Law Challenge).
The appellants challenges were dismissed in both the Outer House and the Inner House of the Court of Session.
They now appeal to the Supreme Court.
The Supreme Court unanimously allows the appeal on the basis of the ECHR Challenge and the EU Law Challenge (to the extent it mirrors the ECHR Challenge).
The Court invites written submissions
as to the terms of its order under s.102 of the Scotland Act in order to give the Scottish Parliament and Scottish Ministers an opportunity to address the matters raised in the judgment.
In the meantime, since the defective provisions of Part 4 of the 2014 Act are not within the legislative competence of the Scottish Parliament, they cannot be brought into force.
Lady Hale, Lord Reed and Lord Hodge (with whom Lord Wilson and Lord Hughes agree) give the joint leading judgment.
The Reserved Matters Challenge Part 4 is challenged on the ground that the data sharing provisions relate to the reserved matter of the Data Protection Act 1998 (the DPA) and Council Directive 95/46/EC (the Directive).
Whether a provision relates to a reserved matter under the Scotland Act is determined by reference to its purpose [27 33].
The subject matter of the Directive (and therefore the DPA, which implemented the Directive in the UK) is the standards of protection which must be afforded to data and the methods by which those standards are secured [34 39].
The DPA imposes obligations on data controllers in relation to data processing, and creates rights for data subjects and a system for the regulation of data controllers.
Section 35 of the DPA allows scope for derogation from certain of its requirements by legislation, which may include devolved legislation [44].
The bodies described in Part 4 as service providers and relevant authorities are currently subject to legal duties in relation to the disclosure of information as data controllers under the DPA [45 47].
The result of these duties is that information about C&YP can currently be disclosed, without their consent, if the disclosure is necessary in order to protect their vital interests, or if the disclosure is necessary for the exercise of a statutory function.
These thresholds are higher than those under Part 4 which (respectively) refer to disclosure being likely to benefit wellbeing, and being likely to be relevant to the exercise of statutory functions.
Data controllers are also obliged to comply with other data protection principles under the DPA [48].
Further protections are included in relation to sensitive data (e.g. health and sexual life) under Schedule 3 to the DPA [49 50].
The effect of Part 4 on the requirements of the DPA is extremely complex and was not fully discussed at the hearing.
Sections 23 and 26 of Part 4 do not permit disclosure of information in breach of a prohibition or restriction on its disclosure arising by virtue of an enactment.
At first sight, that means that disclosure under Part 4 is subject to compliance with the requirements of the DPA, since the DPA is an enactment.
However, under sections 27 and 35 of the DPA, personal data are exempt from some of the requirements of the DPA where the disclosure is required by or under any enactment.
An Act of the Scottish Parliament is an enactment for this purpose.
The result is a logical puzzle [51 54].
It is, however, clear that the powers and duties of disclosure under Part 4 cannot be taken at face value; in several respects, they are significantly curtailed by the DPA and the Directive [55 58].
However, although Part 4 contains powers and duties the objective of which is to ensure that information is shared, that objective is not distinct from the overall purpose of promoting the wellbeing of C&YP [64].
Part 4 also does not detract from the regime established by the DPA and the Directive [65].
Part 4 does not therefore relate to the subject matter of the DPA and the Directive for the purposes of the Scotland Act, and the Reserved Matters Challenge cannot succeed [66].
The ECHR Challenge The appellants claim that the NPS breaches Article 8 ECHR rights.
This is both (a) on the broad basis that compulsory appointment of a named person without parental consent amounts to a breach of the parents Article 8 rights, and (b) on the narrow basis that the information sharing provisions under Part 4 amount to breaches of parents and C&YPs Article 8 rights [67 68].
The Community Law Advice Network, as intervener, also challenged the information sharing provisions on the basis that they impose too low a threshold for the disclosure of confidential information and amount to an infringement of the Article 8 rights of C&YP.
This meant that there was more focus on Article 8 in the appeal before this Court than there had been before the Court of Session below [69].
In the context of the 2014 Act, the interests protected by Article 8 include both family life [71 74] and privacy [75 77], and the operation of the information sharing provisions of Part 4 will result in interferences with those interests [78].
In accordance with the law In order for that interference to be in accordance with the law (for the purposes of Article 8(2)), the measures must not only have some basis in domestic law but also be accessible to the person(s) concerned and foreseeable as to their effects.
This means rules must be formulated with sufficient precision to give legal protection against arbitrariness [79 81].
In assessing the legality of Part 4, regard must be had to the Guidance [82].
As is clear from the Courts findings on the Reserved Matters Challenge, there are difficulties in accessing the relevant rules for information sharing.
An information holder would need to read together and cross refer between Part 4, the DPA and the Directive in order to work out the priority of their provisions.
Of even greater concern is the lack of safeguards which would enable the proportionality of any interference with Article 8 to be adequately examined [83 84].
For example, information, including confidential information concerning a child or young persons state of health (e.g. as to contraception, pregnancy or sexually transmitted disease), could be disclosed to a wide range of authorities without either the child or young person or their parents being aware of the interference with their Article 8 rights, and in circumstances in which there was no objectively compelling reason for the failure to inform them.
Accordingly, as currently drafted, the information sharing sections of Part 4 and the Guidance do not satisfy the requirement of being in accordance with the law [85].
Proportionality In assessing whether the operation of Part 4 would give rise to interferences with Article 8 which are disproportionate having regard to the legitimate aim pursued, it is necessary to distinguish between the 2014 Act and its operation in individual cases [86 88].
Focusing on the proportionality of the legislation itself, Part 4 undoubtedly pursues legitimate policy aims and is clearly rationally connected to those aims [91 92].
Allowing the legislature the appropriate margin of discretion, Part 4 is also a reasonable measure for the legislature to impose in order to achieve those legitimate aims.
It is for this reason that the appellants broad challenge cannot succeed.
If a named person could be appointed only with parental consent, the scope for early intervention would be diminished [93].
However, the operation of Part 4 may well give rise to disproportionate interferences in particular cases: First, there is a risk that parents will be given the impression that they must accept advice in relation to the services offered by a named person in the exercise of the named person functions, and that their failure to cooperate would be taken as evidence of risk of harm.
Care should therefore be taken to emphasise the voluntary nature of the advice, information, support and help offered by the named person [94 95].
Secondly, the information holder will have to address difficult questions of proportionality in relation to the disclosure of confidential information with the help of only the Guidance, which is limited, and the Part 4 criteria, which set too low a threshold for overriding duties of confidentiality [96 100].
There is therefore a need for clear guidance to information holders as to how to assess proportionality when considering whether information should be shared [101].
The EU Law Challenge In relation to the EU Law Challenge, there is no incompatibility additional to that identified in relation to the ECHR Challenge [102 105].
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This appeal challenges the validity of two patents, which seek to confer a monopoly over the creation of a range of types of transgenic mouse.
The subject matter, genetic engineering for medical purposes, is of great technical complexity, but the legal question which falls for determination in this court may be quite shortly stated.
It is a general requirement of patent law both in this country and under the European Patent Convention (EPC) that, in order to patent an inventive product, the patentee must be able to demonstrate (if challenged) that a skilled person can make the product by the use of the teaching disclosed in the patent coupled with the common general knowledge which is already available at the time of the priority date, without having to undertake an undue experimental burden or apply any inventiveness of their own.
This requirement is labelled sufficiency.
It is said that the invention must be enabled by the teaching in the patent.
Patent protection is sometimes claimed for a single product, but sometimes
for a range of products.
Whether the patent claims one or the other is a question of construction of the claim (or claims) in the patent.
In the latter case the sufficiency requirement has usually been expressed as meaning that the invention must be enabled over the whole of the range of products for which the claim is made.
In the present case both the trial judge (the late Henry Carr J) and the Court of Appeal construed the relevant claim as extending to a range of products (transgenic mice) answering a certain description.
The judge held that the teaching in the patent did not enable any type of mouse within the range to be made, let alone mice across the whole of the relevant range.
The Court of Appeal held, to the contrary, that the teaching in the patent, coupled with the available common general knowledge as at the priority date, did enable some types of mouse within the range to be made, but not all types across the whole range.
There is no appeal against that essentially factual finding.
But they held that the sufficiency requirement was nonetheless satisfied, because the invention for which protection was claimed amounted to an inventive, indeed ground breaking, general principle, such that every type of mouse with the specified characteristics would display the particular benefits which the invention was designed to achieve, benefits which would not be displayed by any types of mouse outside the specified range.
The invention constituted by the specified characteristics was therefore sufficiently enabled across the whole scope of the claim, and matched the contribution which the disclosure of the invention made to the article
The question for this court is therefore whether a product patent, the teaching of which enables the skilled person only to make some, but not all, of the types of product within the scope of the claim, passes the sufficiency test where the invention would contribute to the utility of all the products in the range, if and when they could be made.
This is a pure question of law, but an understanding of its implications requires at least a bare summary of the technical context in which it arises.
A full description of the technical context may be found in the judgments of the courts below.
The Technical Background in Outline
By the priority date, which was 16 February 2001, it was well recognised that antibodies (also known as immunoglobulins) could be used for treatment of disease in humans, by way of augmentation of, or in substitution for, antibodies produced by the patients own immune systems.
Since the development of antibodies is a natural process shared by mammals generally, and since ethical constraints prevented the use of fellow humans as platforms for antibody development, mice had been identified as suitable platforms for the development of antibodies suitable for use in treatment of humans, and were already in use for that purpose by the priority date.
Two main problems inhibited the use of mice for that purpose.
The first was that humans tend to reject murine antibodies.
The second was that if human antibody genes are genetically implanted in mice, so that the mice then produce human antibodies coded from those genes, then the mice suffer from a reduced immune response, and therefore reduced development of suitable antibodies in response to antigens, which seriously impairs their efficiency as platforms for antibody development.
In the jargon of this litigation, this rendered the mice immunologically sick.
The solution, which is the innovative idea at the heart of this case, was to develop a hybrid (chimeric) antibody gene structure, consisting in part of human and in part of murine elements, created by insertion into the genome of the mouse.
Mammalian antibodies are proteins which all share a characteristic structure consisting of four polypeptide chains, two identical heavy chains and two identical light chains bonded in a Y formation.
Each chain has a constant region, so named because it does not vary in its segments, called C segments, and a variable region, in which the segments vary between different antibodies.
In both mice and humans the variable regions consist, in the light chains, of V (variable) and J (joining) segments and, in the heavy chains, of V, D (diversity) and J segments.
Production of antibodies is one of the major functions of B cells.
The natural development of specific antibodies in humans and mice involves a complex process of rearrangement among the segments in the variable regions, within the B cells which are created in the bone marrow.
During this stage of development, each B cell acquires a B cell receptor on its surface.
As a result of different combinations of the V, D and J segments, B cells are created with a variety of B cell receptors.
As all the antibodies made by one B cell are identical, it is necessary to produce a diversity of B cells in order to have a diversity of antibodies.
The degree of variety is important, because the body faces invasion by a wide variety of antigens associated with disease.
The effectiveness of the bodys immunological response against a specific antigen depends upon the body producing a B cell whose receptor happens to be capable of binding to that antigen.
The chances of that happening are increased the greater the number of different B cells (with different receptors) which the body produces.
Repeated rearrangements of the V, D and J segments (known as somatic gene rearrangement or V(D)J recombination) through combinatorial use of a number of different gene segments coding for the polypeptide chains means that a huge variety of antibodies can be generated eventually.
Where a B cell does encounter an antigen to which it binds, it is activated and induced to divide and differentiate.
Repeated cell divisions give rise to sizeable clones that depend on antigen recognition for their survival.
B cells that are unable to bind the antigen simply die.
Those that do bind the antigen can be taken and subjected to other processes to produce antibodies in quantities which can be introduced into humans to combat or vaccinate against that particular antigen.
It was generally understood, at least as at the priority date, that these processes of rearrangement were likely to be optimised, and the range of potential and effective antibodies increased, if the antibody genes implanted in the mice had as many as possible of the human V, D and J segments included within them.
A typical human heavy chain gene locus has around 125 V segments (each different from the others), 27 D segments and nine J segments in the variable region.
If the V and J segments in the light chains gene loci are factored in as well, the number of possible combinations which may be made from the human antibody gene loci is about 1.5m.
The hybrid gene structure at the heart of the present dispute was designed to combine within one antibody gene structure the murine constant region and the whole of the human variable region.
That was indeed what the patents in issue taught.
But the judge found that the formidable difficulties in producing such a hybrid gene structure could not be surmounted at all by the combination of the existing common general knowledge and the disclosure in the patents.
By contrast, the Court of Appeal found that it could be done, by a combination of the prior knowledge and the disclosure in the patents, but only so as to produce a hybrid gene structure with a small sub set of the 125 human V segments in the variable region (on the appellants estimate between two and six V segments), and an unspecified number of human D and J segments.
Transplantation of the whole of the human variable region into a hybrid gene structure has since been achieved but only with the benefit of further inventive processes not forming part of the disclosure of the patents or the prior article
The name given to this type of hybrid gene structure, containing the murine constant region and all or part of the human variable region is the Reverse Chimeric Locus.
Once created in the mouse genome, it operated as the code for the production of a variety of hybrid antibodies which, when the B cells which contain the relevant coding are isolated and removed, could then have the murine constant regions removed and replaced with human equivalents before mass production and use in humans for therapy.
The Patents in Issue
The foregoing bare outline of the technical background makes it possible to understand the relevant claims of the patents in issue, to the limited extent necessary for the resolution of the single issue of law before this court.
The dispute relates to two patents obtained by the respondent, Regeneron Pharmaceuticals Inc, each with a priority date of 16 February 2001, and each with substantially the same disclosure for the purpose of justifying different claims.
They are European Patent (UK) No 1 360 287 (the 287 Patent) and European Patent (UK) No 2 264 163 (the 163 Patent).
The 163 Patent is a divisional of the 287 Patent.
The challenge to validity arose because Regeneron alleged infringement by Kymab Ltd of claim 1 in the 163 Patent and claims 5 and 6 of the 287 Patent by the offer to the pharmaceutical industry of its own Kymouse, a transgenic mouse with a Reverse Chimeric Locus some of which included the whole of the human variable segments in both the heavy and the light chain loci.
The judge found infringement proved, but that all three claims were invalid for insufficiency.
It was common ground before this court that the outcome for the validity of all three claims turns on the validity of claim 1 of the 163 Patent (Claim 1), which reads as follows: A transgenic mouse that produces hybrid antibodies containing human variable regions and mouse constant regions, wherein said mouse comprises an in situ replacement of mouse VDJ regions with human VDJ regions at a murine chromosomal immunoglobulin heavy chain locus and an in situ replacement of mouse VJ regions with human VJ regions at a murine chromosomal immunoglobulin light chain locus.
This is of course a product claim, seeking a monopoly for the making (at first sight a strange but serviceable word to use of an animal) of a genetically engineered mouse having the characteristics described in the claim.
The characteristics related both to what such a mouse does (namely produce the hybrid antibodies described) and to what is contained in its genome, namely the Reverse Chimeric Locus, achieved by a process of in situ replacement of the murine variable regions in both the light and heavy chain gene loci with the corresponding but of course different human variable regions.
The claim seeks protection for the making and exploitation of any type of mouse having those characteristics.
Since the description of what the mouse does is more loosely worded than the description of what lies within its genome, it is the latter description which mainly controls the breadth of the claim.
All issues as to the construction of Claim 1, ie as to what it means, were resolved in the courts below, and none are subject to appeal in this court.
There were, for example, issues as to the meaning of in situ replacement, which no longer matter.
But there was a more important issue about whether Claim 1 described a single type of mouse or a range of types which the courts below also resolved, in favour of the range, arising from the meaning of the phrase with human VDJ regions in the heavy chain locus, and the phrase with human VJ regions in the light chain locus.
Did this mean (only) all the segments in the VDJ and VJ regions, or did it include any of them? Looking at the V segments, did this capture only a mouse with all 125 human V segments, or also a mouse with only one such segment, and therefore mice with any number of V segments between one and 125?
Both the judge and the Court of Appeal concluded that the quoted phrase meant both all and any.
It was this interpretation which led them both to conclude that Claim 1 extended to a range of qualifying types of mice, rather than to a single type.
Taking the V segments in the heavy chain locus as the best example, the range was denominated by reference to the number, between one and 125, of the human V segments introduced into the mouses genome as part of the human variable region.
The conclusion that Claim 1 sought to protect the making of a range of transgenic mice was not in dispute on this appeal, even though every type (or embodiment) within the range would necessarily have a form of Reverse Chimeric Locus as part of its genome.
The fact that there is such a range is the foundation for the agreed identification of the legal issue before this court, since the question, as framed above, makes no sense if there is not a relevant range with different types or embodiments within it.
There was nonetheless a sharp difference in this court between the parties submissions on the relevance or otherwise of the existence of this range to the question of sufficiency.
For the appellant it was submitted that the range was of the highest importance because of its effect upon the ability of a particular type of mouse to produce a wide variety of B cells, and hence its potential to deliver a broad stream of useful antibodies.
A mouse fitted with only (say) four V segments from the human variable region gene locus would produce only a small fraction of the variety of B cells that would be produced by a mouse fitted with the entire 125 V segments in the human variable region gene locus.
That at least (as the judge found) was the assumption made by the skilled person as at the priority date, even though research and development since 2001 have called into question to some extent the assumption that the full range of 125 V segments is necessary to optimise the desirable combinatorial possibilities needed for there to be a reasonable prospect of delivery of useful antibodies.
For the respondent it was submitted that the existence of this range was irrelevant, because the unique advantage conferred by the use of a Reverse Chimeric Locus, namely a cure for the immunological sickness of the recipient mouse, worked across the whole range, regardless of the amount of the human variable region DNA inserted into the murine genome, because it was the product of the retention in the hybrid gene structure of the murine constant region genes.
In a functional sense, both these submissions are to an extent literally true, on the facts found by the courts below.
The amount of human variable region DNA inserted into the murine genome does substantially affect the usefulness of the mouse fitted with the Reverse Chimeric Locus as (to use the judges summary) a platform for therapeutic antibody discovery.
More to the point that was the general understanding at the time of the priority date, and the patents in issue did not teach the contrary.
But the ground breaking invention encapsulated and disclosed in the Reverse Chimeric Locus would (and eventually did) deliver a solution to murine immunological sickness across the whole of the range captured by Claim 1, making all of them better platforms than mice which had (as previously) been fitted with fully human antibody gene structures.
That analysis does not of itself lead to a conclusion that the range which is denominated by reference to the amount of human variable segments in the hybrid gene structure is irrelevant, for sufficiency purposes.
One can imagine an obviously irrelevant range, such as mice which are large and small, of differing colours, or having tails of varying length.
No one would say that Claim 1 fails for insufficiency because it includes mice with very short tails (which it does) merely because it does not teach how to make such mice.
The quality and diversity of the stream of antibodies which the mouse exists to produce is, so far as is known, wholly unaffected by the length of its tail.
The question whether the range denominated by the amount of human segments in the variable region within the Reverse Chimeric Locus is relevant for sufficiency purposes is best answered from the terms of Claim 1 itself.
The claim is to mice which produce a stream of antibodies with human variable regions, and the disclosure more generally shows that this stream is for eventual use (after further engineering and mass production) in treating disease in humans.
True it is that the particular ground breaking contribution achieved by the invention of the Reverse Chimeric Locus is the delivery of a means of preventing (or greatly reducing) murine immunological sickness, to which the range of embedded human variable segments is irrelevant, but murine immunological health is not an end in itself.
It is a means to a different end.
Sufficiency the Basic Principle
Sufficiency is one of the established tools by which is measured the correspondence, or lack of it, between the protection afforded by the claim and the technical contribution to the art made by the disclosure of the invention in the patent.
The other main tools are novelty, inventive step and industrial application: see Actavis Group PTC EHF v ICOS Corpn [2019] UKSC 15; [2019] Bus LR 1318, para 57 per Lord Hodge.
The essence of the bargain between the patentee and the public is that the patentee dedicates the invention to the public by making full disclosure of it, in return for a time limited monopoly over its use.
The benefit afforded to the public is not merely the disclosure, but the ability to work the invention after the expiry of the monopoly by the use of the disclosure.
Where the invention enables patentees to make a particular product, and they seek a monopoly over the making and exploitation of the product (which is what a product claim does), they must disclose enough in the teaching of the patent to enable the public also to make the product.
In that context work the invention means make the product: see Generics (UK) Ltd v H Lundbeck A/S [2008] EWCA Civ 311; [2008] RPC 19, para 30 per Lord Hoffmann.
If the patentee were able to obtain a product monopoly without disclosing how to make the product, the public would get nothing of substance in return for the grant of the monopoly.
Furthermore, other inventors would be deterred from conducting the research and development in fact necessary to take advantage of the inventive idea for the benefit of society as a whole, since during the period of the monopoly they could derive no benefit from their own inventiveness.
Similar basic principles apply to the patenting of processes, but such distinctions as there may be do not call for examination here.
Disclosure does not, of course, have to enable the product to be made by any member of the public, or solely by using the teaching in the patent.
The law creates, distinctly for each patent under scrutiny, a notional skilled person or (as here) skilled team who must be enabled to make the product by the combination of the teaching in the patent, the general technical knowledge available at the priority date, and a reasonable (ie not burdensome) element of experimentation.
But the skilled person is not expected to be inventive or even, as is sometimes said, imaginative: see Rockwater Ltd v Technip France SA [2004] RPC 46, paras 7 and 10 per Jacob LJ.
Sufficiency Enablement across the Range
Starting to apply those basic principles to the question before the court, is disclosure sufficient if the teaching in the patent enables only some but not all of the products within the claimed range to be made? Subject to de minimis exceptions, the instinctive answer would be: surely not.
If in principle the patentee should be entitled to a monopoly only over the making of a product which the teaching in the patent enables the skilled person to make, why should not the same principle apply to every product type within the relevant range for which a monopoly is sought? The essential patent bargain is not satisfied in relation to products in that part of the range which cannot be made, using the teaching in the patent.
This analysis may be tested by a simple example.
Suppose that five types of product (types A to E) were all claimed to be more efficient or useful than their predecessors by the application to their manufacture of the same new invention.
The patentee made separate claims in relation to each type, all supported by the same disclosure.
Each claim would be subjected to the sufficiency test: could a product of that type be made by use of the teaching in the patent, coupled with the existing common general knowledge? Suppose that types A and B could but C, D and E could not.
Then claims A and B would be valid, and the remainder invalid.
But now suppose that all five types were covered by the more compendious wording of a single claim.
Would this enable the patentee also to obtain a monopoly for the making of types C, D and E? Surely not.
The Court of Appeal did not doubt this analysis as a general rule, but concluded that it would defeat the implementation of the essential patent bargain if applied to a case in which the invention amounted to a principle of general application, which would yield the relevant increase in efficiency or usefulness across a range of potential product types if they incorporated the invention, as and when they could be made, even if only a few could be made as at the priority date by using the teaching in the patent.
In bare outline their reasoning was as follows.
The patent bargain requires that the reward given to the patentee should be commensurate with the contribution which the invention makes to the article An invention which consists of a new generally applicable principle may contribute to the art by its use, not only in products which can currently be made, but equally in products which will only be capable of being made in the future, after further inventive research and development.
To limit the patentee strictly to a monopoly over the products which can immediately be made would be to deprive the patentee of any reward for the public benefit which will be derived from the use of that same invention in future types of product.
In a fast moving field, where new products quickly outperform their predecessors so as to render them obsolete, the reward of a monopoly limited to those immediately capable of being made would be short lived and illusory.
Accordingly the invention should be regarded as sufficiently enabled across the range if it can be seen that it will in due course benefit all products in the range, provided that, as at the priority date, the teaching in the patent enables at least one type to be made immediately.
Since the Reverse Chimeric Locus would be likely to deal with murine immunological sickness in mice whose genomes were fitted with all or any amount of the human variable segments, up to and including the whole of the human variable region, its invention was one of those principles of general application which should be regarded as enabled across the whole range contemplated by Claim 1.
A monopoly over the making and exploitation of the whole range would correspond with the contribution made by the Reverse Chimeric Locus to the article
This is a sophisticated and internally logical process of reasoning, which certainly would tend to increase the rewards obtainable by inventors in a complex, rapidly developing field like genetic engineering for use in treatment of disease.
The question is whether it is part of the law or, perhaps, a legitimate development of it.
The requirement for sufficiency is now enshrined in article 83 of the EPC as follows (in its English version): The European patent application shall disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the article This is replicated in section 14(3) of the Patents Act 1977 as follows: The specification of an application shall disclose the invention in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the article Article 100(b) of the EPC makes it a ground of opposition that: the European patent does not disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art; This is reflected in section 72(1)(c) of the Act which provides as a ground for revocation that: the specification of the patent does not disclose the invention clearly enough and completely enough for it to be performed by a person skilled in the article By section 130(7) of the Act, provisions including section 72(1): are so framed as to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of the European Patent Convention, the Community Patent Convention and the Patent Co operation Treaty have in the territories to which those Conventions apply.
Those terse statements of the sufficiency requirement in articles 83 and 100(b) of the EPC and in sections 14(3) and 72(1)(c) of the Act offer no particular illumination in the present debate.
Rather the answer is to be found in the European and UK authorities on sufficiency, which were subjected to intensive review both by the Court of Appeal and in submissions to this court.
The interpretative objective is to strive for consistency between European and UK patent law: see Generics (UK) Ltd v H Lundbeck A/S [2009] RPC 13, para 86 per Lord Neuberger of Abbotsbury.
A chronological review of the relevant decisions of the Technical Board of Appeal of the European Patent Office (EPO) begins with Unilever/Stable Bleaches (T 226/85) ECLI:EP:BA:1987:T022685.19870317, decided in March 1987.
The appeal included opposition on the ground of insufficiency.
At para 2 the Board provided this general summary of the sufficiency requirement: An attack on the ground of insufficiency under article 100(b) EPC is, of course, based on article 83 EPC which requires that the disclosure of the invention must be sufficiently clear and complete for it to be carried out by the person skilled in the article It is understood that this means that substantially any embodiment of the invention, as defined in the broadest claim, must be capable of being realised on the basis of the disclosure.
That case was not specifically about a claim for a range of products, or an assertion that the invention disclosed a generally applicable principle.
But such a claim and assertion were directly in issue in Exxon/Fuel Oils (T 409/91) EP:BA:1993:T040991.19930318, decided in March 1993.
This has come to be seen as the leading case on the subject of sufficiency across a range.
In Generics v Lundbeck (supra) at para 21 Lord Walker of Gestingthorpe described the requirement that the invention be enabled across the whole of the claim as the Exxon principle.
At certain temperatures, wax crystals suspended in diesel fuel tend to clog fuel filters in diesel engines.
Exxon claimed a monopoly over fuel oils which, within specified temperatures, had wax crystals having an average particle size of less than 4,000 nm.
This was challenged on the basis that the claimed range was from 1 nm to 3,999 nm, but the teaching in the patent did not enable fuel oil to be produced (by the insertion of additives) with a wax crystal size below 1,000 nm.
This was a relevant range because the smaller the crystal the more easily it would pass through a filter.
The sufficiency challenge was eventually met by amending the claim to exclude crystal size below 1,000 nm (although it still failed for other reasons, under article 84 of the EPC).
But Exxon sought to defend the claim by asserting that the invention embodied a general principle, applicable across the whole claimed range, that small crystals do not clog filters.
Prior to amendment of the claim the sufficiency challenge was upheld, in these terms, at para 2: In other words, in the present case there is absolutely no doubt that all these claims must be so construed as to relate to fuel oils containing wax crystals smaller than 1,000 nanometres.
The appellant has admitted that no way of obtaining such fuel oils was disclosed or could be found in the body of relevant common general knowledge.
However, in the Boards judgment, in order to fulfil the requirement of article 83 EPC, the application as filed must contain sufficient information to allow a person skilled in the art, using his common general knowledge, to carry out the invention within the whole area that is claimed.
Later, at para 3.5, the sufficiency requirement was defined as meaning that: the disclosure of the claimed invention is only sufficient if it enables the skilled person to obtain substantially all
embodiments falling within the ambit of the claims
At para 3.6 the Board directly addressed the submission that the invention disclosed a general principle, and decided that, even if it did, that made no difference.
They said that the claim must fail: regardless of whether or not the alleged principle to avoid the so called cold filter plugging (or clogging) by reducing the size of the wax crystals would be novel and inventive.
Despite the very different subject matter there is an obvious similarity between the claimed range in the Exxon case (wax crystals from 3,999 nm down to 1 nm) and the claimed range in the present case (from all the segments in the human variable region locus down to just one V, D and J segment in the heavy chain locus and one V and J segment in the light chain locus).
Although the lower the better in Exxon contrasts with the higher the better in the present case, it is a feature of both cases that the invention was not enabled by the disclosure in the patent at the more beneficial end of the range.
It is noteworthy that the descriptions of the sufficiency requirement in these
EPO cases use the adverb substantially to qualify the strictness of the requirement, meaning that it is a requirement of substance, which may on a de minimis basis still be satisfied where there are or may be a tiny or inconsequential number of embodiments which are not enabled.
But the enablement shortfall in the present case is, as already explained, much greater than anything which could be saved by that qualification.
In Unilever/Detergents (T 435/91) ECLI:EP:BA:2008, decided in March 1994, the Board described the requirement that the invention be enabled across the whole of the claim as a rule of general application to all inventions, as follows: In the Boards judgment the criteria for determining the sufficiency of the disclosure are the same for all inventions, irrespective of the way in which they are defined, be it by way of structural terms of their technical features or by their function.
In both cases the requirement of sufficient disclosure can only mean that the whole subject matter that is defined in the claims, and not only a part of it, must be capable of being carried out by the skilled person without the burden of an undue amount of experimentation or the application of inventive ingenuity.
The Board shed some useful light on what the specification in a patent must do if it is to qualify as a general principle which enables an invention across a broad claim.
It must disclose: a technical concept fit for generalisation which makes available to the skilled person the host of variants encompassed by the respective functional definition of the . claim.
A similar analysis of the contribution which a general concept may make to sufficiency across a range is to be found in Mycogen/Modifying plant cells (T 694/92) ECLI:EP:BA:1996, decided in May 1996, at p 19.
The key for present purposes is that the general concept or principle must actually make the embodiments within the claim available.
It is not enough for the general inventive concept or principle to make all those variants, if and when they become available, fit or better than their predecessors for beneficial or efficient use.
Henry Carr J had this well in mind when he said in the present case (at para 257): I do not accept that all embodiments within the claim are unified by a single principle of a reverse chimeric locus.
This is not a principle that enables the method to be performed, rather it is the result of successfully carrying out the method.
He was speaking mainly of process rather than product claims at that point, but the principle is the same for both.
In relation to Claim 1 he could equally have said that the Reverse Chimeric Locus was not a principle that enables the products to be made, rather it is the result of successfully making the products.
Lord Pannick QC, Adrian Speck QC and Justin Turner QC for the respondent relied on three EPO cases which, they submitted, supported the Court of Appeals analysis in the present case.
The earliest, Genentech I/Polypeptide expression (T 292/85) ECLI:EP:BA:1988, was decided in January 1988.
The Board upheld a patent claiming processes and resulting products which produced a uniform stream of specified polypeptides by the use as input components of a range of bacteria, plasmids and regulons, wide enough to embrace types which had yet to be made available under the then state of the article The Examining Division had rejected the patent because, in its view, the specification did not enable embodiments containing such future input components to be made.
The Board of Appeal stated, to the contrary: 3.1.2 There is, however, in the opinion of the Board, no such requirement in the European Patent Convention, nor is such principle established in normal patent practice within the Contracting States.
The suggested features in the claims are essentially functional terms in this particular context, in spite of structural connotations, and may cover an unlimited number of possibilities.
It follows that the features may generically embrace the use of unknown or not yet envisaged possibilities, including specific variants which might be provided or invented in the future.
The Board continued: In appropriate cases, such as the present, it is only possible to define the invention (the matter for which protection is sought article 84 EPC) in a way which gives a fair protection having regard to the nature of the invention which has been described, by using functional terminology in the claims. 3.1.3 What is also important in the present case is the irrelevancy of the particular choice of a variant within the functional terms bacteria, regulon or plasmid.
It is not just that some result within the range of polypeptides is obtained in each case but it is the same polypeptide which is expressed, independent of the choice of these means . 3.1.5 Unless variants of components are also embraced in the claims, which are, now or later on, equally suitable to achieve the same effect in a manner which could not have been envisaged without the invention, the protection provided by the patent would be ineffectual.
Thus it is the view of the Board that an invention is sufficiently disclosed if at least one way is clearly indicated enabling the skilled person to carry out the invention.
At first sight, and taken out of context, (for which see paras 42 and 53 below) the first and last of those quoted passages might appear to provide powerful support for the respondents case.
But an attempt to rely upon them for a similar purpose was made and firmly rejected in Unilever/Detergents (T 435/91).
At pp 10 11 the Board said: In particular, it is not adequate to take the finding in point 3.1.5 of Decision T 292/85 (OJ EPO 1989, 275) out of its context.
It is not only stated there, as quoted by the respondent, that an invention is sufficiently disclosed if at least one way of carrying out the invention is clearly indicated enabling the skilled person to carry out the invention, but in the next sentence it is made clear that any non availability of some particular variants of a functionally defined component feature of the invention is immaterial to sufficiency as long as there are suitable variants known to the skilled person through the disclosure or common general knowledge which provide the same effect for the invention .
Moreover, in respect of the functional expression suitable bacterium it was pointed out that the applicability of the claimed method to any kind or most species of bacteria has not been effectively challenged.
Similar findings of fact concerned the remaining functional
definitions in the considered claim
Unilever/Detergents was one of the EPO cases cited above where the requirement that the specification should enable all embodiments across the whole range of the claim was firmly asserted.
The Board plainly did not regard that requirement as necessitating any departure from the decision in the Polypeptide case although, if such a departure was the only way of reconciling them, the law ought now to be taken as laid down by the Detergents case and by the Exxon case which applied the requirement to facts closely allied with those of the present case.
But the Polypeptide and Detergents cases can be reconciled.
In the former the claims were (necessarily in the Boards view) framed by reference to function, and sought to protect products and processes which in fact achieved that function when applied to a broad range of input variables, none of which were themselves embodiments of the claim.
In the Detergents case (as the headnote explains) the claim was again made by reference to function, but the patent failed to disclose any general technical principle by which the skilled person could achieve the desired result across the whole range of claimed embodiments.
Furthermore the range of the input variables which could be used to work the invention in the Polypeptide case was held to be irrelevant.
For reasons already explained, Claim 1 in the present case is of the kind which falls within the Detergents and Exxon line of EPO authority.
Mention should briefly be made of two EPO decisions which followed and applied the Polypeptide case.
The first, decided in June 1988, is Nabisco/Micro organisms (T 361/87) ECLI:EP:BA:1988.
A claim to protect a means of preparing fructose was challenged for sufficiency on the ground that a certain type of input variable falling within the claim only became available to persons skilled in the art after the priority date.
The challenge was rejected in part by application of the cited passage in the Polypeptide case, but also because the description contained sufficient teaching to enable the invention to be used with that new input element, once available.
The decision takes the matter no further for the purposes of the present case than does the Polypeptide case.
The second, more recent, case is Novartis II/Transgenic plant (G 1/98) ECLI:EP:BA:1999, decided by the Enlarged Board in December 1999.
The decision makes brief reference to both the Polypeptide and Nabisco cases as demonstrating that the requirement that the claim be enabled across the full range of the claim is not without exception.
Save that it suggests that those earlier cases should not simply be regarded as having been overruled by the Detergents and Exxon line of EPO authority, it sheds little further light on the necessary distinction between the two.
Reference was also made to the decision of the German Federal Supreme Court in Dipeptidyl Peptidase Inhibitoren (X ZB 8/12).
It was about a medical use patent, rather than a product claim.
It sought to protect a method of using a range of known substances for lowering the blood glucose level in mammals, in a manner which would be simple, cost efficient and not too burdensome on the patient, by comparison with methods already known.
As in the Polypeptide case it was held not to be fatal to the validity of the patent that it applied to a range of known input substances and extended to substances not yet available.
Neither the outcome nor the language used by the court (at paras 19 20) takes the matter any further than either the Polypeptide or Nabisco cases, when read in the context of a medical use claim.
It is convenient at this point to explain why the present case falls on the Detergents/Exxon side of this line.
The reason why Claim 1 fails to enable the skilled person to make mice with Reverse Chimeric Loci across the whole range of the human variable regions of the hybrid antibody gene structure is not because any of the V, D and J segments had yet to be discovered or mapped by the priority date, or even because any of them could not be inserted into mice.
The whole of the human variable region gene locus had already been mapped.
It could be (and had been) inserted into mice, but only when attached to the human constant region genes, thereby causing murine immunological sickness.
The problem facing those skilled in the art at the priority date was that there was no known way, even using the teaching in the patents, to combine more than a very small part of the human variable region gene locus with the endogenous murine constant region gene locus, in the same hybrid gene structure.
It took several years, and significant further inventive steps, before methods were developed sophisticated enough to accommodate the whole of the human variable and murine constant region genes in a single hybrid gene structure.
Thus the inventive shortfall at the priority date lay not in the range of possible inputs to which the invention could be applied, but in the inability to create a Reverse Chimeric Locus involving the whole (or anything more than a very small part of) the human variable region.
It was truly a shortcoming in the invention itself, which, as at the priority date, limited its use to only a small part of the relevant range within the scope of Claim 1.
In sharp contrast the inventions in the Polypeptide line of cases did disclose a sufficient general principle which, without any further inventive step, would enable the skilled person to work the relevant invention by using, as input elements, examples of those components described generally in the claims, which were unavailable as at the priority date, in order to make products across the scope of the claim.
The fact that the claim permitted alternative examples of input elements, as yet unavailable at the priority date, is the exception to the requirement for enablement across the whole scope of the claim to which the Enlarged Board made brief reference in the Novartis II decision.
A study of the relevant UK cases reveals a similar approach to the existence and nature of this exception to the Exxon principle.
The earliest, and perhaps best known, are the decisions of the Court of Appeal and the House of Lords in Biogen Inc v Medeva plc [1995] RPC 25 and [1997] RPC 1.
It was, like the present, a case about genetic engineering, but the claim sought to protect a genetic molecule rather than a whole mouse.
The claim was that the molecule would, if inserted into a suitable host cell, cause the cell to make antigens of the Hepatitis B virus.
Both the Court of Appeal and the House of Lords held that the claim failed, inter alia for insufficiency, but for different reasons.
Apart from the holding that sufficiency is to be tested as at the priority date (a rule which is not in dispute in this appeal) the case is of importance for present purposes only because of the reliance placed by the parties on different dicta by Hobhouse LJ (in the Court of Appeal) and Lord Hoffmann (in the House of Lords) about the sufficiency requirement and the principles of UK law to be derived from the main EPO decisions cited above.
It is, again, important not to take the dicta out of context.
In the Court of Appeal Hobhouse LJ addressed the submission, accepted by
the trial judge, that the sufficiency requirement was satisfied whenever the patentee demonstrated that the invention enabled one embodiment of the claimed range to be made.
Having cited extensively from the Exxon case, and held that it correctly represented UK law, he continued, at pp 98 99: The disclosure must be sufficient to enable the whole width of the claimed invention to be performed.
What will suffice to satisfy this criterion will vary depending upon the nature of the claim that has been made.
It is essential to apply the test having regard to the extent of the claim.
It is not the law that the disclosure of a single embodiment will always satisfy the requirement regardless of the width of the claim.
Having noted counsels attempt to limit his submission to cases where the patent related to the invention of a principle, he continued: The disclosure must be wide enough to enable the man skilled in the art to perform the claimed invention across its full width not just by reference to one type of antigen or one type of host.
The plaintiff had a choice as to how widely it would draw its claim.
If it chose to draw it widely, it must accept the co relative obligation to make a correspondingly wide disclosure.
If it is unable to make that disclosure, that shows that it is seeking to claim an invention to which it is not entitled.
In the House of Lords Lord Hoffmann described the submission that enablement of a single embodiment was sufficient (rejected by Hobhouse LJ) as having originated from a misunderstanding of the meaning of the Polypeptide case by Aldous J (who was the trial judge in Biogen) in Chiron Corpn v Organon Teknika Ltd (No 3) [1994] FSR 202.
At pp 48 49 he set out his own understanding of the Polypeptide case as follows: In other words, the applicants had invented a general principle for enabling plasmids to control the expression of polypeptides in bacteria and there was no reason to believe that it would not work equally well with any plasmid, bacterium or polypeptide.
The patent was therefore granted in general terms.
He continued: In fact the Board in Genentech I/Polypeptide expression was doing no more than apply a principle of patent law which has long been established in the United Kingdom, namely, that the specification must enable the invention to be performed to the full extent of the monopoly claimed.
If the invention discloses a principle capable of general application, the claims may be in correspondingly general terms.
The patentee need not show that he has proved its application in every individual instance.
On the other hand, if the claims include a number of discrete methods or products, the patentee must enable the invention to be performed in respect of each of them.
Thus if the patentee has hit upon a new product which has a beneficial effect but cannot demonstrate that there is a common principle by which that effect will be shared by other products of the same class, he will be entitled to a patent for that product but not for the class, even though some may subsequently turn out to have the same beneficial effect: see May & Baker Ltd v Boots Pure Drug Co Ltd (1950) 67 RPC 23, 50.
On the other hand, if he has disclosed a beneficial property which is common to the class, he will be entitled to a patent for all products of that class (assuming them to be new) even though he has not himself made more than one or two of them.
He continued by treating the Exxon case as reinforcing the established principle of UK law which he had earlier described.
In the event Lord Hoffmann decided that the patent failed for insufficiency because it disclosed only one method of working the invention, whereas there were other methods available to the skilled person.
He did not disagree with Hobhouse LJs analysis of the law.
At p 51 he concluded: This shows that there is more than one way in which the breadth of a claim may exceed the technical contribution to the art embodied in the invention.
The patent may claim results which it does not enable, such as making a wide class of products when it enables only one of those products and discloses no principle which would enable others to be made.
Or it may claim every way of achieving a result when it enables only one way and it is possible to envisage other ways of achieving that result which make no use of the invention. (my underlining)
Both the Court of Appeal and the respondent in the present case placed great emphasis on the reference by Lord Hoffmann to a common principle by which products in a class may share the same beneficial effect, as if this was separate and additional to the case of a general principle which enables a whole class of products to be made.
He did so by reference to the May & Baker Ltd v Boots Pure Drug Co Ltd (1950) 67 RPC 23 case, where a beneficial therapeutic effect was said to be of the essence of the claim.
But the case before him and the submission with which he was dealing were all about the question whether the disclosure needed to enable all, or only some, of the embodiments of a claimed range to be made, as he acknowledged in the last of the passages quoted (and underlined) above.
In Kirin Amgen Inc v Hoechst Marion Roussel Ltd [2005] RPC 9, the trial judge had cited Lord Hoffmanns concept of a general principle of beneficial effect in Biogen.
Lord Hoffmann commented, at p 202 (para 112): This gave rise to a good deal of argument about what amounted to a principle of general application.
In my opinion there is nothing difficult or mysterious about it.
It simply means an element of the claim which is stated in general terms.
Such a claim is sufficiently enabled if one can reasonably expect the invention to work with anything which falls within the general term.
For example, in Genentech I/Polypeptide expression (T 292/85) [1989] OJ EPO 275, the patentee claimed in general terms a plasmid suitable for transforming a bacterial host which included an expression control sequence to enable the expression of exogenous DNA as a recoverable polypeptide.
The patentee had obviously not tried the invention on every plasmid, every bacterial host or every sequence of exogenous DNA.
But the Technical Board of Appeal found that the invention was fully enabled because it could reasonably be expected to work with any of them.
Lord Hoffmanns reference to the Polypeptide case as an example shows that he was not thinking in terms of general beneficial effect.
By reasonably expect the invention to work in relation to a product claim he meant reasonably expect the product to be able to be made.
This is clear from dicta of his, sitting in the Court of Appeal, in the third of the UK cases, Generics (UK) Ltd v H Lundbeck A/S [2008] RPC 19.
Two product claims were rejected by the trial judge for insufficiency, because the patent disclosed only one of a number of methods of making the products, following Biogen.
Lord Hoffmann, with whom Jacob and Smith LJJ agreed, reversed him.
At paras 29 30 he said: In order to decide whether the specification is sufficient, it is therefore first necessary to decide what the invention is.
That must be found by reading and construing the claims, in which the inventor identifies what he claims to be his invention.
As the Board of Appeal of the European Patent Office said in Exxon/Fuel Oils (T 409/91) [1994] OJ EPO 653, para 3.3, It is the definition of the invention in the claims that needs support.
Section 60(1) of the Act makes it clear that a claim may be either to a product or a process.
In the case of a product claim, performing the invention for the purposes of section 72(1)(c) means making or otherwise obtaining the product.
In the case of a process claim, it means working the process.
A product claim is therefore sufficiently enabled if the specification discloses how to make it.
There is nothing to say that it must disclose more than one way.
At paras 34 36 he continued: Thus, as a matter of construction, the House of Lords interpreted the claim as being to a class of products which satisfied the specified conditions, one of which was that the molecule had been made by recombinant technology.
That expression obviously includes a wide variety of possible processes.
But the law of sufficiency, both in the United Kingdom and in the EPO, is that a class of products is enabled only if the skilled man can work the invention in respect of all members of the class.
The specification might show that this has been empirically demonstrated or it might disclose a principle which can reasonably be expected to apply across the class: see T 292/85 Polypeptide expression/Genentech [1989] OJ EPO 275; T 409/91 Exxon/Fuel Oils [1994] OJ EPO 653; Kirin Amgen Inc v Hoechst Marion Roussel Ltd [2005] RPC 9, para 112.
But the specification in Biogen described only one method of making the molecule by recombinant technology and disclosed no general principle.
It was easy to contemplate other methods about which the specification said nothing and which would owe nothing to the matter disclosed.
In my opinion, therefore, the decision in Biogen is limited to the form of claim which the House of Lords was there considering and cannot be extended to an ordinary product claim in which the product is not defined by a class of processes of manufacture.
It is true that the House in Biogen endorsed the general principle stated by the Board of Appeal in Exxon/Fuel Oils (T 409/91) [1994] OJ EPO 653, that: the extent of the patent monopoly, as defined by the claims, should correspond to the technical contribution to the art in order for it to be supported or justified.
The judge said that in holding claim 1 insufficient, he was applying this principle.
But then he treated the relevant technical contribution to the art as being the inventive step, namely a way of making the enantiomer.
That, I respectfully consider, was a mistake.
When a product claim satisfies the requirements of section 1 of the 1977 Act, the technical contribution to the art is the product and not the process by which it was made, even if that process was the only inventive step.
The House of Lords dismissed the appeal.
Lord Walker placed emphatic reliance upon the Exxon case as the leading statement of the law on sufficiency in relation to a product claim.
At para 20 he said: The disclosure must be such as to enable the invention to be performed (that is, to be carried out if it is a process, or to be made if it is a product) to the full extent of the claims.
Analysis
Reflection upon those European and UK authorities yields the following principles: i) The requirement of sufficiency imposed by article 83 of the EPC exists to ensure that the extent of the monopoly conferred by the patent corresponds with the extent of the contribution which it makes to the article ii) In the case of a product claim, the contribution to the art is the ability of the skilled person to make the product itself, rather than (if different) the invention. iii) Patentees are free to choose how widely to frame the range of products for which they claim protection.
But they need to ensure that they make no broader claim than is enabled by their disclosure. iv) The disclosure required of the patentee is such as will, coupled with the common general knowledge existing as at the priority date, be sufficient to enable the skilled person to make substantially all the types or embodiments of products within the scope of the claim.
That is what, in the context of a product claim, enablement means. v) A claim which seeks to protect products which cannot be made by the skilled person using the disclosure in the patent will, subject to de minimis or wholly irrelevant exceptions, be bound to exceed the contribution to the art made by the patent, measured as it must be at the priority date. vi) This does not mean that the patentee has to demonstrate in the disclosure that every embodiment within the scope of the claim has been tried, tested and proved to have been enabled to be made.
Patentees may rely, if they can, upon a principle of general application if it would appear reasonably likely to enable the whole range of products within the scope of the claim to be made.
But they take the risk, if challenged, that the supposed general principle will be proved at trial not in fact to enable a significant, relevant, part of the claimed range to be made, as at the priority date. vii) Nor will a claim which in substance passes the sufficiency test be defeated by dividing the product claim into a range denominated by some wholly irrelevant factor, such as the length of a mouses tail.
The requirement to show enablement across the whole scope of the claim applies only across a relevant range.
Put broadly, the range will be relevant if it is denominated by reference to a variable which significantly affects the value or utility of the product in achieving the purpose for which it is to be made. viii) Enablement across the scope of a product claim is not established merely by showing that all products within the relevant range will, if and when they can be made, deliver the same general benefit intended to be generated by the invention, regardless how valuable and ground breaking that invention may prove to be.
Application of those principles to the facts of the present case shows clearly that Claim 1 fails for insufficiency.
At the priority date the disclosure of the two patents, coupled with the common general knowledge, did not enable transgenic mice to be made with a Reverse Chimeric Locus containing more than a very small part of the human variable region gene locus.
The extent to which that variable region of the human antibody gene structure could be included in the hybrid antibody gene structure was, at that date, understood to be a very important factor affecting the diversity of useful antibodies capable of being discovered by the use of transgenic mice, so that the range thus denominated was a relevant range for sufficiency purposes, even though it did not affect the immunological health of the transgenic mouse.
Thus the claim to a monopoly over the whole of that range went far beyond the contribution which the product made to the art at the priority date, precisely because mice at the more valuable end of the range could not be made, using the disclosure in the patents.
A comparison between those principles and those applied by the Court of Appeal reveals that they did not correctly apply the law as it stands, for the following reasons.
First, I cannot accept their summary of the essential patent bargain.
In the case of a product claim, the contribution to the art is the product which is enabled to be made by the disclosure, not the invention itself.
Patents are about products and processes, not pure ideas.
Secondly, I do not accept their conclusion that an invention may be enabled in relation to a particular type of product falling within the scope of the claim even if it does not permit the skilled person to make it.
They thought it was enough that the benefits which the invention unlocked (in terms of preventing murine immunological sickness) would in due course be realised over the whole range, if and when all embodiments within the range could be made.
In practical terms they upheld a monopoly over that part of the range of products answering the broad description in Claim 1 which was likely to be of most benefit to medical genetic engineering, at a time when the disclosure in the patent only enabled the skilled person to make products over a very small part of the range, and at the least beneficial end of the range denominated by the amount of the human variable region gene locus incorporated in the hybrid gene structure.
It is now known that the type of mouse fitted with a Reverse Chimeric Locus which actually does serve as the gold standard in the art has the whole of the human variable region gene locus as part of its hybrid antibody gene structure.
Yet the Court of Appeal would have upheld a monopoly for its manufacture and exploitation when the disclosure in the patent, coupled with the common general knowledge, would not have enabled a skilled person to make such a mouse at all.
The ability of both the appellant and the respondent to make such a mouse now depends upon further (and different) inventions separately made by each of them some years after the priority date.
Nor is the Court of Appeals analysis to be regarded as a legitimate development of the law.
The sufficiency requirement, namely that the disclosure in the patent should enable substantially all products within the scope of a product claim to be made by the skilled person as at the priority date, is part of the bedrock of the law, worked out over time both in the UK and by the EPO, which is essential to prevent patentees obtaining a monopoly which exceeds their contribution to the article To water down that requirement would tilt the careful balance thereby established in favour of patentees and against the public in a way which is not warranted by the EPC, and which would exceed by a wide margin the scope for the development of the law by judicial decision making in a particular Convention state.
It may well be, as the Court of Appeal clearly thought, that the consequence of confining the patentee with a ground breaking invention to protection only over a range of products which the invention currently enables to be made at the priority date will give the patentee scant and short lived reward for their efforts and ingenuity, viewed in particular with the benefit of hindsight.
The Court of Appeal put this point forcefully to counsel for Kymab at the hearing in October 2017, and the transcript discloses that little was said in response by way of mitigation.
A little more was attempted in this court in the appellants reply, but it would not be a useful exercise to engage with it.
What matters is that it is settled law, in relation to a product claim, that sufficiency requires substantially the whole of the range of products within the scope of the claim to be enabled to be made by means of the disclosure in the patent, and this both reflects and applies the principle that the contribution to the art is to be measured by the products which can thereby be made as at the priority date, not by the contribution which the invention may make to the value and utility of products, the ability to make which, if at all, lies in the future.
I would therefore allow the appeal.
LADY BLACK: (dissenting)
I differ from the view of the majority and would have dismissed this appeal for reasons which I will set out shortly.
I should first explain that, in what follows, in order to express myself as clearly as possible, I have at times consciously used simplified descriptions of the scientific concepts to which I need to refer.
The issue raised by the appeal
Lord Briggs says, at para 5, that the legal question that arises is whether a product patent, the teaching of which enables the skilled person to make some, but not all, of the types of product within the scope of the claim, passes the sufficiency test where the invention would contribute to the utility of all the products in the range, if and when they could be made.
It is useful to bear in mind also how the issue was formulated by the parties in the Statement of Facts and Issues for this court, which was as follows: Is it a requirement for a valid patent under article 83 EPC that the description enables the skilled reader (at the date of the Patent) to make products across the whole scope of the claim, or is it enough that they could make products within only a limited part of that range, provided that all the products within the scope of the claim (if and when they could be made) would use the invention?
The nature of the claims
The Court of Appeal described claim 1 of the 287 patent as a method claim directed to the modification of an endogenous immunoglobulin heavy chain locus in a mouse ES cell such that murine V, D and J gene segments are replaced by human V, D and J segments and the locus produces hybrid antibodies containing human variable regions and mouse constant regions (para 114), the method having four steps as described in para 115.
Claims 5 and 6 of the 287 patent were described as product by process claims (para 121).
The issues in the appeal have been considered through the medium of claim 1 of the 163 patent, so it is worth setting that out again here.
It is a claim to: A transgenic mouse that produces hybrid antibodies containing human variable regions and mouse constant regions, wherein said mouse comprises an in situ replacement of mouse VDJ regions with human VDJ regions at a murine chromosomal immunoglobulin heavy chain locus and an in situ replacement of mouse VJ regions with human VJ regions at a murine chromosomal immunoglobulin light chain locus.
The Court of Appeal said of this claim that it is directed to a transgenic mouse in which there has been in situ replacement of mouse V, D and J regions on the heavy chain by human V, D and J regions; and in which there has been in situ replacement of mouse V and J regions on the light chain by human V and J regions (para 125).
It then observed (para 126) that the claim contains no requirement that any particular size of DNA fragment is inserted or replaced; nor is there any limit to the number of steps by which the claim requirements may be met.
Further, the reference to V, D and J regions must mean one or more V, D and J segments respectively.
The Court of Appeal agreed with the judge that the claim was: not confined to a single product.
It includes mice in which different amounts of mouse V, D and J regions (of the heavy chain) and mouse V and J regions (of the light chain) have been replaced with human V, D and J regions and V and J regions, respectively.
So it includes, for example, a mouse in which one V, one D, and one J region (of the heavy chain) and one V and one J region (of the light chain) have been replaced and mice in which several such regions have been replaced. (para 127(i)) and that it: extends to a mouse in which the entire murine variable gene locus has been replaced with the entire human variable gene locus. (para 127(iv))
Henry Carr Js determination and how it fared in the Court of Appeal
Henry Carr J made two key decisions which formed the foundation for the rest of his conclusions.
First, he had to determine the proper construction of the claims in issue, in particular what was meant by in situ replacement in claim 1 of the 287 Patent.
He accepted Regenerons proposed construction of the words, as did the Court of Appeal.
No construction issue has been pursued before this court.
Secondly, Henry Carr J had to make findings as to the feasibility of putting the invention into practice, which he did focussing specifically on claim 1 of the 287 Patent.
He rejected the approaches proposed, for varying reasons, concluding that the whole subject matter defined in the claim was not capable of being performed at the priority date without undue burden and without invention (para 257).
He considered that the difficulty did not relate to some hypothetical puzzle at the edge of the claim, but rather to the central disclosure of the specification, and the amounts of genetic sequence of which it contemplates the deletion and insertion.
None of the methods disclosed would have worked, and the task could not have been achieved, if it could be achieved at all at the priority date, without a great deal of creative thinking.
On appeal from the trial judge, Regeneron argued that it was in fact possible for a skilled team to have implemented the reverse chimeric locus without undue effort by means of minigenes.
The Court of Appeal was persuaded that this was correct.
It was satisfied that the use of minigenes was part of the common general knowledge, and said (para 200): In our judgment and given the idea of the reverse chimeric locus, it would have been obvious to the skilled team and technically feasible to produce a transgenic mouse that would produce hybrid antibodies containing human variable regions and mouse constant regions, and in which mouse V, D and J segments had been replaced with human V, D and J segments in the mouse immunoglobulin heavy chain gene locus, and mouse V and J segments had been replaced with human V and J segments in the immunoglobulin light chain gene locus.
Given that it differed from Henry Carr J in this respect, the Court of Appeal inevitably had a different starting point for its consideration of the central legal issue of whether the claim was enabled across its whole scope.
As the Court of Appeals finding of technical feasibility has not been challenged before us, we share the Court of Appeals starting point.
But it is nevertheless important to note the following observation that Henry Carr J made at para 257, and to which Lord Briggs refers at para 38, with approval: I do not accept that all embodiments within the claim are unified by a single principle of a reverse chimeric locus.
This is not a principle that enables the method to be performed, rather it is the result of successfully carrying out the method.
The Court of Appeals determination of the enablement issue
Having reviewed various decisions of the Technical Boards of Appeal of the EPO and of the domestic courts, the Court of Appeal turned at para 250 to the application of the law to the instant case.
This involved, inter alia, a consideration of the nature and extent of the contribution to the art that the disclosure of the invention had made, which Regeneron submitted Henry Carr J had failed to appreciate properly.
The Court of Appeal noted that the claim is drawn in general language and is of broad scope, but that: each of the mice it encompasses has the reverse chimeric locus, that is to say, it is a mouse which produces hybrid antibodies containing human variable regions and mouse constant regions, and in which mouse V, D and J segments have been replaced with human V, D and J segments at a chromosomal immunoglobulin heavy chain locus, and mouse V and J segments have been replaced with human V and J segments at a chromosomal immunoglobulin light chain locus. (para 254)
It observed that the disclosure of the reverse chimeric locus was a major contribution to the art for it provided the answer to a significant problem which those working in the field had faced, namely that transgenic mice produced by conventional methods were immunologically sick [whereas those] with the reverse chimeric locus do not suffer from this deficiency (para 255).
It proceeded to characterise the invention as a principle of general application, supporting that conclusion as follows (para 256): The character of this invention is therefore such that any transgenic mouse which falls within the scope of the claim and so produces hybrid antibodies containing the human variable regions and mouse constant regions will benefit from the technical contribution the disclosure of the 163 patent has made to the art, and will do so irrespective of the antigen which is used to challenge the mouse.
The court then noted, at paras 257 to 259, that it was satisfied that the ability of the skilled team to implement the teaching of the 163 patent had been established.
It was also noted that the mice produced would have had only a subset of the human V gene segments, although they would have had an immunological response close to that of wild type mice.
The court continued (para 260): These points, taken together, strongly suggest to us that the 163 patent does disclose the invention clearly enough and completely enough for it to be performed by a person skilled in the article The character of the invention is one of general application.
It applies to any mouse challenged with any antigen and the benefit it confers will be shared by every mouse falling within the scope of the claim.
The skilled team would reasonably expect the invention to work across the scope of the claim and that expectation would be correct.
What is more, there is nothing in the claim which could have been envisaged without the invention and, were protection to be limited to only those embodiments which could have been made at the priority date without undue effort, the protection provided by the patent would have rapidly become ineffectual.
A further passage is of importance, taken from the following paragraphs in which the court examines the implications of it not being possible to perform, precisely, elements of what was described in the examples.
In explaining why this did not render the patent insufficient, the court recalled that the law does not require a patentee to enable each and every embodiment of a claimed invention, but recognises that a claim may encompass inventive improvements of what is described and that a specification is not insufficient merely because it does not enable the person skilled in the art to make every such invention.
It then continued (para 265): It is important, however, that any such improvement is still a way of working the original invention.
In this case we have no doubt that this is the case: there is no mouse falling within the scope of claim 1 of the 163 patent which does not embody the reverse chimeric locus and enjoy the benefits it brings.
Claim 1 of the 163 patent was therefore found not to exceed the contribution to the art which the disclosure of its specification made, the extent of the patent monopoly corresponding to the technical contribution and being adequately enabled across its scope (para 267).
The 287 patent was seen to be subject to very similar considerations.
Here too, the invention was found to be one of general application, being a methodology of making the reverse chimeric locus in which successful integrations using LTVECs are detected by using the MOA assay (para 272).
Claims 1, 5 and 6 of that patent were also adequately enabled across its scope (paras 273 and 274).
It is useful to note particularly what the Court of Appeal said, at the end of its judgment, in summarising what it saw as the reasons why its conclusion was different from that of the very experienced first instance patent judge.
It seems to me that this short summary reveals what is at the heart of the Court of Appeals reasoning.
It said: we are satisfied that, in assessing the sufficiency of the disclosure of the patents, [the judge] did not attach sufficient weight to the character of the invention as claimed in each of the claims in issue, the contribution that its disclosure made to the art and the need to confer a fair degree of protection on the patentee. (para 275)
The approach of the majority in this court
The majority in this court would allow the appeal, holding that the Court of Appeal failed to apply the law correctly and should have concluded that Regenerons claims failed for insufficiency.
In essence, this is because the disclosure of the patents did not enable the making of a mouse which incorporated any more than a small part of the human variable region, yet claimed a monopoly including mice incorporating a far greater quantity of the human variable region.
In the majoritys view, the claims therefore fail to satisfy the requirement that substantially the whole range of products within the scope of the claim be enabled.
Discussion
It is common ground between the parties, established in the authorities, and acknowledged in Lord Briggs judgment (see for example para 56(vi)), that an invention may disclose a principle of general application.
It is also common ground between the parties (and again see Lord Briggs judgment at para 56(vi)) that there is no exception from the ordinary principles of enablement for such inventions; the invention must be enabled across its full scope, as with any other invention.
It is when it comes to characterising this claim, determining what its scope is, and deciding whether it is enabled across that full scope that the argument arises.
The claim is framed in terms of the mouse, specifying what it does (produces the hybrid human/mouse antibodies), and what it has in it (the reverse chimeric locus).
As the trial judge said, and the Court of Appeal reiterated, it is not confined to a single product in that it includes mice in which different amounts of the mouse variable regions have been replaced, extending to a mouse with the entire murine variable region replaced with the entire human variable gene locus.
It is the existence of this range of mice that leads the majority of my colleagues to conclude that, as only a limited amount of replacement was possible at the priority date, the claim was insufficient.
But this was not the view of the Court of Appeal, and it is important to attempt to isolate the point at which the two approaches diverge.
As I have already foreshadowed, it seems to me that there is little, if any, real disagreement with the Court of Appeals statement of the legal principles.
It is in the application of them that the paths diverge.
Lord Briggs says, at para 58, that the Court of Appeal did not correctly apply the law as it stands, having failed to recognise that the contribution to the art is the product which is enabled to be made by the disclosure, not the invention itself, and having erroneously concluded that it was enough that the benefits unlocked by the invention would in due course be realised over the whole range if and when all embodiments could be made.
The Court of Appeals characterisation of the claim was informed by the principle that (to use the Board of Appeals formulation in Unilever/Detergents (T 435/91)) the protection covered by a patent should correspond to the technical contribution to the art made by the disclosure of the invention described therein.
This principle, and the other principles that are relevant to determining sufficiency, can only be applied having close regard to the facts of the particular case, and the authorities make clear that an assessment of sufficiency does depend very much upon the nature of the individual invention and the facts of the particular case, see for example Unilever/Detergents (T 435/91), para 2.2.1.
The Court of Appeal here recognised the general language used in the claim and its broad scope (Court of Appeal judgment, para 254), and we know that it had well in mind that it extended to a mouse with its entire variable gene locus replaced with the entire human variable gene locus (ibid, para 127).
It focussed its analysis firmly on the reverse chimeric locus.
The disclosure of the reverse chimeric locus was, it observed, a major contribution to the art because it solved the problem of immunological sickness (ibid, para 255).
Every mouse encompassed in the claim will have the reverse chimeric locus, or, as the court put it at para 256 will benefit from the technical contribution the disclosure of the 163 patent has made to the article Every such mouse will, in the terms of the issue stated by the parties in the Statement of Fact and Issues, use the invention.
This is what led the court to characterise the claim as a principle of general application (ibid, para 256).
For sufficiency, it was necessary for the skilled team to be able to produce transgenic mice incorporating the reverse chimeric locus and producing hybrid antibodies, and this they could do, producing mice which would have had a near wild type response (ibid, para 264).
That the claim encompassed inventive improvements (more human variable region incorporated) did not make it insufficient as any such improvement was still a way of working the original invention (ibid, para 265).
Lord Briggs, seeking to concentrate attention upon the fact that this is a product claim, and to emphasise that patents are about products and not about ideas, chooses terms which focus rather upon the mice containing the reverse chimeric locus (mice fitted with a reverse chimeric locus as Lord Briggs terms them at para 58).
This difference of terminology is perhaps of less significance than the spotlight that he trains upon the range of the mice, extending from mice fitted with a reverse chimeric locus incorporating a subset of the human variable region (feasible at the time of the claim) to mice fitted with a reverse chimeric locus incorporating the whole human variable region (achievable now but not at the time of the claim).
It is this focus on the quantum of replaced material in the reverse chimeric locus, rather than on the reverse chimeric locus as a general principle, that leads to a different conclusion about sufficiency from that reached by the Court of Appeal.
Given that I am alone in my disagreement with my colleagues, I can see little to be gained by a lengthy exegesis on the issues arising in the appeal.
As I see it, and as perhaps appears from my exploration of the differences between the approach of this court and that of the Court of Appeal, the case turns upon how this particular claim is characterised, and how the law is applied to the particular facts of this case.
I do not perceive the errors in the Court of Appeals approach that have been identified by the majority, and I would not have interfered with their conclusion that the claim here relates to a principle of general application.
It still has to be enabled across its scope, but seen in this way, it is so enabled, being deployed in each mouse across the range, irrespective of the quantum of human material incorporated.
Furthermore, it can also be said that protection across the range coincides with the technical contribution of the patents which was to solve the problem of immunological sickness, or putting it (loosely) another way, to facilitate the making of immunologically efficient mice.
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In 2001 Regeneron Pharmaceuticals Inc filed patents for a new type of genetically modified mouse.
Regenerons breakthrough was a hybrid version of the gene that produces antibodies, combining a section of the mouses genetic material (the constant region DNA) with a section of genetic material from a human (the variable region DNA).
The resulting mouse can be used to produce antibodies which are suitable for medical treatment in humans, but are sufficiently similar to mouse antibodies that they do not cause immunological sickness in the mouse.
The idea of combining a human variable region with a mouse constant region was a major contribution to science.
At the hearing in February 2020 the court was told that hybrid mice incorporating this invention had a range of medical uses, including in the race to generate antibody therapies against coronavirus.
In 2013 Regeneron sued a British company, Kymab Ltd, for infringement of its patents.
Kymab was producing its own genetically modified mice, branded Kymice, with a similar genetic structure to Regenerons mice.
Kymab responded by arguing the patents filed by Regeneron in 2001 were invalid because they fell foul of a patent law rule called sufficiency.
Sufficiency means documents filed with the patent must be detailed enough to enable scientifically skilled readers to make the invention for themselves.
The Court of Appeal found that Regenerons patents contained enough information to enable a skilled reader to insert some of the human material into a mouses genes.
This would have created one type of hybrid mouse.
However, the patents did not explain how to create a hybrid structure incorporating the full human variable region genes into the mouses genome.
That was a complicated feat of genetic engineering and no reliable method for doing it was invented until 2011.
This meant an expert reading the patents in 2001 would be unable to make many types of hybrid mice which Regeneron had claimed to have invented.
The Court of Appeal upheld the patents, saying there was no need for the patents to explain how to make the full range of mice because Regenerons idea was a principle of general application.
Kymab appealed to the Supreme Court.
The Supreme Court allows Kymabs appeal by a majority of four to one, holding that the patents are invalid.
Lord Briggs gives the majority judgment.
Lady Black gives a dissenting judgment.
A patent reflects a bargain between the inventor and the public.
The inventor gains a time limited monopoly over the making and use of a product.
In return, the public gains the ability to make the product after the expiry of the monopoly.
As part of this bargain, the inventor must publish sufficient information to enable a skilled member of the public to make the product.
This ensures that patent holders only gain legal protection which is proportional to their actual technical contribution to the art, and encourages inventors to conduct research for the benefit of society [23].
The Court of Appeal was influenced by the fact that Regenerons invention is a principle of general application.
Its contribution to the field was present not only in mice which could be made in 2001, but also in mice with a larger amount of human genetic material which could be made using later scientific developments.
The Court of Appeal thought it was unfair to limit Regenerons monopoly to types of hybrid mice which could be made when the patent was filed [27].
However, the authorities establish a number of principles in this area.
Patentees must not make overly broad claims [56(iii)].
If they claim the right to make a range of products, sufficiency means they must disclose enough information to enable a skilled person to make the full range which is claimed [56(iv)].
This means a relevant range which affects the utility of the product [56(vii)].
So Regeneron was not required to explain how to make mice of varying colours, or with tails of varying length, because these features do not affect a mouses ability to produce antibodies [21].
Applying these principles, Regenerons patents did not enable a skilled person to make mice containing more than a very small section of the human variable region.
The amount of human material was an important factor which was thought to affect the diversity of useful antibodies which the mice would produce.
Mice at the more valuable end of the range could not be made using Regenerons patents.
So Regeneron was claiming a monopoly which was far wider than its contribution to the art [57].
The Court of Appeal upheld patents over a range of mice even though Regeneron could only make mice over a small part of the range, at the least beneficial end of the range with the smallest amount of human genetic material [58].
Its analysis watered down the sufficiency requirement which is a bedrock of patent law, tilting the balance of patent law in favour of patentees and against the public [59].
Therefore, the majority allows the appeal and holds that the patents are invalid for insufficiency.
Lady Black gives a dissenting judgment, in substance agreeing with the Court of Appeal.
The application of the sufficiency requirement depends on the nature of the individual invention and the facts of the case.
The Court of Appeal characterised Regenerons invention as a principle of general application which solved the problem of immunological sickness [83 84].
Seen in this way, the sufficiency requirement was met since the invention was deployed in each mouse across the range, irrespective of the quantum of human material incorporated [86].
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These proceedings arise out of the admitted and continuing failure by the United Kingdom since 2010 to secure compliance in certain zones with the limits for nitrogen dioxide levels set by European law, under Directive 2008/50/EC.
The legal and factual background is set out in the judgment of this court dated 1 May 2013 [2013] UKSC 25, and need not be repeated.
For the reasons given in that judgment, the court referred certain questions to the Court of Justice of the European Union (CJEU).
That court has now answered those questions in a judgment dated 14 November 2014 (Case C 404/13).
It remains to consider what further orders if any should be made in the light of those answers.
Central to the referred questions were the interpretation of, and relationship between, three provisions of the Directive: articles 13, 22 and 23.
Article 13 laid down limit values for the protection of human health, and provided that in respect of nitrogen dioxide, the limit values specified in annex XI may not be exceeded from the dates specified therein, the relevant date being 1 January 2010.
Article 22 provided a procedure for the postponement of the compliance date for not more than five years in certain circumstances and subject to specified conditions.
Article 23 imposed a general duty on member states to prepare air quality plans for areas where the limit values were not met.
By the second paragraph of article 23(1), in cases where the attainment deadline (was) already expired, the air quality plans were required to set out appropriate measures, so that the exceedance period can be kept as short as possible.
The required contents of air quality plans prepared under article 23 were laid down by annex XV section A.
In addition, where an application for an extension of the deadline was made under article 22, the plan was to be supplemented by the information listed in annex XV section B. The additional requirements were, first, information concerning the status of implementation of 14 listed Directives, not all directly relevant to nitrogen dioxide emissions (para 2), and, secondly, information on all air pollution abatement measures that have been considered at appropriate local, regional or national level for implementation in connection with the attainment of air quality objectives, including five specified categories of measures, such as for example: (d) measures to limit transport emissions through traffic planning and management (including congestion pricing, differentiated parking fees or other economic incentives; establishing low emission zones); (para 3)
When making the reference, this court determined to make a declaration of the breach of article 13, notwithstanding its admission by the Government.
Differing in this respect from the Court of Appeal, this court thought it appropriate to do so, both as a formal statement of the legal position, and also to make clear that, regardless of arguments about articles 22 and 23 of the Directive, the way is open to immediate enforcement action at national or European level.
The referred questions and the CJEUs response
The questions referred by this court were as follows: (1) Where, under the Air Quality Directive (2008/50/EC) (the Directive), in a given zone or agglomeration conformity with the limit values for nitrogen dioxide was not achieved by the deadline of 1 January 2010 specified in annex XI of the Directive, is a member state obliged pursuant to the Directive and/or article 4 TEU to seek postponement of the deadline in accordance with article 22 of the Directive? (2) If so, in what circumstances (if any) may a member state be relieved of that obligation? (3) To what extent (if at all) are the obligations of a member state which has failed to comply with article 13 affected by article 23 (in particular its second paragraph)? (4) In the event of non compliance with articles 13 or 22, what (if any) remedies must a national court provide as a matter of European law in order to comply with article 30 of the Directive and/or article 4 or 19 TEU?
The CJEU, for reasons it did not clearly explain, decided to reformulate the first two questions: By its first and second questions, which it is appropriate to consider together, the referring court asks, in essence, (i) whether article 22 of Directive 2008/50 must be interpreted as meaning that, where conformity with the limit values for nitrogen dioxide laid down in annex XI to that Directive cannot be achieved in a given zone or agglomeration of a member state by 1 January 2010, the date specified in annex XI, that State is, in order to be able to postpone that deadline for a maximum of five years, obliged to make an application for postponement in accordance with article 22(1) of Directive 2008/50 and (ii) whether, if that is the case, the State may nevertheless be relieved of that obligation in certain circumstances. (para 24, emphasis added) As will be seen, the reformulation of the first two questions, in particular by the inclusion of the emphasised words, has introduced a degree of ambiguity which it had been hoped to avoid in the original formulation.
This has had the unfortunate effect of enabling each party to claim success on the issue.
Fortunately, for reasons I will explain, it is unnecessary to making a final ruling on this difference, or to make a further reference for that purpose.
The courts answers to the three questions as so reformulated were: 1.
Article 22(1) of Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient air quality and cleaner air for Europe must be interpreted as meaning that, in order to be able to postpone by a maximum of five years the deadline specified by the Directive for achieving conformity with the limit values for nitrogen dioxide specified in annex XI thereto, a member state is required to make an application for postponement and to establish an air quality plan when it is objectively apparent, having regard to existing data, and notwithstanding the implementation by that member state of appropriate pollution abatement measures, that conformity with those values cannot be achieved in a given zone or agglomeration by the specified deadline.
Directive 2008/50 does not contain any exception to the obligation flowing from article 22(1). 2.
Where it is apparent that conformity with the limit values for nitrogen dioxide established in annex XI to Directive 2008/50 cannot be achieved in a given zone or agglomeration of a member state by 1 January 2010, the date specified in that annex, and that member state has not applied for postponement of that deadline under article 22(1) of Directive 2008/50, the fact that an air quality plan which complies with the second subparagraph of article 23(1) of the Directive has been drawn up, does not, in itself, permit the view to be taken that that member state has nevertheless met its obligations under article 13 of the Directive. 3.
Where a member state has failed to comply with the requirements of the second subparagraph of article 13(1) of Directive 2008/50 and has not applied for a postponement of the deadline as provided for by article 22 of the Directive, it is for the national court having jurisdiction, should a case be brought before it, to take, with regard to the national authority, any necessary measure, such as an order in the appropriate terms, so that the authority establishes the plan required by the Directive in accordance with the conditions laid down by the latter.
The parties have made written and oral submissions on the appropriate response to the CJEU decision.
In summary, Mr Jaffey for ClientEarth invites the court: i) to confirm, in accordance with their interpretation of the CJEU judgment, that the article 22 time extension procedure was mandatory, and to quash the existing air quality plan which was prepared under an error of law in that respect; ii) to direct the production within three months of a new air quality plan under article 23(1) demonstrating how the exceedance period will be kept as short as possible, and complying with the additional and stricter requirements of annex XV section B.
In response Miss Smith for the Secretary of State submits that the correct interpretation of the CJEU decision is that the article 22 procedure was not mandatory, and that, given the stated intention of the Secretary of State to prepare updated plans by the end of the year, no further relief is necessary or appropriate.
The Commissions submissions to the CJEU
There was no Advocate Generals opinion in this case to provide background to the courts characteristically sparse reasoning.
However, the European Commission had presented detailed Observations, which help to fill the gap.
Their submission contains a valuable discussion of the legal and factual background to the relevant provisions of the Directive and their objectives, before giving the Commissions proposed responses to the referred questions.
They give a much clearer answer to the first two questions than the court ostensibly in favour of the Government, but in terms which may be regarded as making it a somewhat Pyrrhic victory in its practical consequences.
Their answers to the third and fourth questions are in substance the same as those given by the court, in essence for the same reasons albeit more fully stated.
The Commission explained that the limit values for nitrogen dioxide were previously defined in Directive 99/30/EC in April 1999, which also fixed the date for compliance at 1 January 2010.
In that respect the 2008 Directive made no change.
However, a review in 2005 had shown that compliance would be problematic for a significant number of states.
In recognition of this, the 2008 Directive introduced, in article 22, the possibility of an application for an extension of up to five years, subject to a number of substantive requirements and procedural safeguards (para 22), and subject to approval and supervision by the Commission.
Although the choice of measures was left to member states, annex XV section B lays down a new requirement for a very detailed scientific examination and consideration of all available measures, and entailing a degree of effort by a member state to demonstrate that it will introduce and implement the most appropriate measures to tackle the anticipated delay in compliance (para 25).
Article 22 was thus conceived as derogation, albeit one subject to significant procedural and substantive requirements and safeguards (para 27).
Where a member had not applied for derogation for particular zones, but the limits were exceeded, then article 13 was breached and article 23 applied.
The Commission pointed out that in such cases, the state would have been already bound to take all necessary measures to secure compliance by January 2010, and would have had 11 years (from 1999) to do so: In the Commission's view, therefore, the second subparagraph of article 23(1) must be seen as an emergency mechanism that applies where there is already a serious breach of Union law that results in grave dangers to human health.
In that regard, it must also be seen as a specific implementation of article 4(3) TEU, where a member state is already in breach of Union law and is already bound to remedy that breach. (para 34)
In the Commissions view, article 22 was the only lawful solution offered by the legislator to member states facing a problem of compliance (para 37).
They stressed the key point that air quality plans produced under article 22 have to meet the stricter conditions laid down by annex XV section B: If a member state could circumvent such conditions by using article 23 instead of article 22 in situations where exceedances were predictable, this would result in a kind of self service derogation (derogation la carte) and in an erosion in oversight, enforcement and in the standard of legal protection of public health that would be contrary to both the structure and the spirit of the Directive. (para 39)
Commenting on the compliance situation in the United Kingdom, the Commission observed that there appeared to have been a choice of less expensive and intrusive measures than those that would be required to put an end to a string of continuous breaches of the limit values.
The plans submitted showed that for the relevant zones the UK only expects compliance to be achieved for each zone between 2015 and 2020 or even between 2020 and 2025 (London) (para 43).
In answer to the first two questions, the Commission expressed the view that the article 22 procedure was not mandatory, but was foreseen as an optional derogation for member states to obligations that already existed (para 48).
The consequence was that the United Kingdom was not obliged, in terms of TEU article 4(3), to apply for a derogation; but rather it was obliged to adopt all necessary measures to put an end to the infringement of article 13 as soon as possible.
The infringement for article 13 resulted, not from its decision not to apply for a derogation, but from its failure to adopt adequate measures to achieve compliance by January 2010 (para 53).
With regard to the third question (the relationship between articles 13 and 23), the Commission emphasised that, if the state chose not to apply for derogation under article 22, it remained under a mandatory obligation under article 23 to prepare air quality plans showing measures appropriate to keep the exceedance period as short as possible.
Noting the emergency character of plans drawn up under the second subparagraph, it commented on the relevance of annex XV section B: The obligation in the second subparagraph of article 23(1), in the case of exceedances for which a derogation has not been granted, requires member states to achieve a very precise result compliance with the limit values for nitrogen dioxide in the shortest possible period of time.
In other words, the Directive requires the member state to bring the infringement of article 13 to as swift an end as possible by adopting measures that would be appropriate for the specific zone or agglomeration and that would most swiftly and concretely tackle the specific problems in that area.
These measures, as opposed to the ones referred to in annex XV section B, will have to tackle any problems in concreto, for each zone (para 62) In other words, the obligation under article 23(1) was not less onerous than annex XV section B, but more specific.
As the Commission observed: It would be perverse if article 23(1) were treated as requiring a lesser effort from member states than article 22. (paras 64)
The Commission also noted ClientEarths concerns that the plans submitted by the United Kingdom were simply not ambitious enough to address the problem in as short a time as possible (para 65).
This view seemed to be confirmed by Mitting Js observation in the High Court that a mandatory order would impose upon taxpayers and individuals a heavy burden of expenditure which would require difficult political choices to be made.
The Commission noted the European courts rejection of similar arguments of impossibility in a line of cases under the air quality Directives, beginning with (Case C 68/11) Commission v Italy (19 December 2012); and, by analogy, in an earlier series of cases relating to the bathing water Directive, beginning with (Case C 56/90) Commission v United Kingdom [1993] ECR I 4109.
The Commission observed: In each of these cases, the court found no obstacle to rely on annual bathing water reports to declare failures, finding unfounded any arguments as to difficulties faced by member states. (para 79)
In line with these observations, the Commissions answer to the third question was that, where a member state finds itself in breach of article 13, it may either request and obtain a derogation under article 22, or comply with article 23(1) by preparing plans to bring the breach to an end as soon as possible: That is to say that the air quality plan must foresee effective, proportionate and scientifically feasible measures to address the specific emissions problems in the relevant zone as swiftly as possible, subject to judicial review by the domestic courts.
A failure by a member state to do so would result in the infringement also [of] article 23(1) of the Directive, alongside article 4(3) TEU. (para 84)
With regard to the fourth question (the duty of the national court), the Commission noted that the United Kingdoms claim that it was not possible to achieve earlier compliance had not yet been tested in the national court.
It regarded this as a particularly serious question where there was an established breach of article 13 resulting in a clear and grave hazard to human health (para 87).
It reviewed the authorities on the right of individuals to invoke Directives before national courts, and the duty of the latter to provide appropriate remedies for their breach.
It was the duty of national courts to ensure that those directly concerned by a violation of article 13 were in a position to require the competent authorities either to seek and obtain a derogation under article 22, or, if they chose not to do so, to adopt and communicate to the Commission air quality plans, compliant with article 23(1), so as to deal with the specific problems in the relevant zones as swiftly as possible (para 113).
Non compliance the present position
Before discussing the proposed responses to the CJEU decision, it is appropriate to record the present position in respect of compliance with the Directive, as summarised in the frank and helpful evidence of Jane Barton on behalf of the Secretary of State.
The latest information, published in July 2014, shows a significant deterioration since the case was last before the court (and as compared to the information considered in the Commissions submission): In July 2014, the UK Government published updated projections for concentrations and expected dates for compliance with the annual mean limit values in the Air Quality Directive.
These projections showed that compliance would be achieved later than previously projected.
The previous projections for NO2 published in September 2011 show 27 zones compliant by 2015, 42 zones compliant by 2020 and all 43 zones compliant by 2025.
The updated projections up to 2030 show five out of 43 zones compliant by 2015, 15 zones by 2020, 38 by 2025 and 40 by 2030.
The remaining three zones would not be compliant by 2030 (Greater London Urban Area, West Midlands Urban Area and West Yorkshire Urban Area).
It is fair to add that the failures of compliance are not confined to the United Kingdom.
Analysis of 2013 air quality compliance data reported by member states indicated that 17 member states reported exceedances of the hourly mean limit value.
One of the reasons for the worsening position is said to be failure of the European vehicle emission standards for diesel vehicles to deliver the expected emission reductions of oxides of nitrogen.
Ms Barton explains: The main reason for this is that the real world emission performance of a vehicle has turned out to be quite different to how the vehicle performs on the regulatory test cycle.
Vehicles are emitting more NOx than predicted during real world operation.
This disparity has meant the expected reductions from the introduction of stricter euro emission standards have not materialised.
In fact, as is recognised in the new Clean Air Programme for Europe, average real world NOx emissions from Euro 5 diesel cars type approved since 2009 now exceed those of Euro I cars type approved in 1992.
She adds that this is a problem which cannot easily be addressed by individual member states, since they cannot unilaterally set stricter vehicle emission standards than those set at EU level.
The European Commission, with the support of the UK Government, has made a proposal to introduce a new test procedure from 2017 to assess NOx emissions of light duty diesel vehicles under real world driving conditions.
Even if some aspects of the problem may be affected by matters beyond the control of individual states, this has not led to any loosening of the limit values set by the Directive, which remain legally binding.
In February 2014, the Commission launched a formal infringement proceeding against the UK for failure to meet the nitrogen dioxide limit values.
It is not clear why for the moment only the UK has been selected for such action.
It may have been triggered by the declaration made by this court in 2013, which was referred to in the Commissions press release, and the detailed consideration given by the Commission in connection with the CJEU case.
Without sight of the correspondence with the Commission (which is said to be confidential), it is not possible to comment on the scope of that action or its likely timing and outcome.
However, as is clear from the answer to the fourth question, any enforcement action taken by the Commission does not detract from the responsibility of the domestic courts for enforcement of the Directive within this country.
It is in any event accepted by the Secretary of State that the air quality plans which were before the court in 2011 will need to be revised to take account of the new information, and of new measures to address the problems.
It is intended that these should be submitted to the European Commission, following consultation, by the end of this year.
It is estimated that on average around 80% of nitrogen dioxide emissions at sites exceeding the EU limit values come from transport, so that developing effective transport measures is regarded as a key priority for work and investment.
According to Ms Barton, the Government has since 2011 committed over 2 billion in measures to reduce transport emissions.
Other initiatives are being developed at local level.
One example is what she describes as a game changing proposal by the Mayor of London, published on 27 October 2014, for an Ultra Low Emission Zone (ULEZ) in central London from 2020.
One of the issues for consideration in the appeal is whether these proposals should be taken on trust, or should be subject to some measure of court enforcement.
Discussion
These proceedings were commenced in July 2011, shortly following the publication in June of air quality plans for consultation under article 23, which included an indication of the zones for which the Secretary of State did not intend to apply under article 22 because compliance within the extended time limit was considered impossible.
At that time the possibility of an effective application under article 22 for a postponement to January 2015 remained a live issue, at least in theory.
It is understandable therefore that the focus of the claim was on that article.
Unfortunately, the time taken by the proceedings, including the reference to the CJEU, has meant that article 22, with one possible exception, is of no practical significance.
An extension to January 2015, the maximum allowed under that article, is of no use to the Secretary of State.
Indeed, it may have been in anticipation of this position that the CJEU felt able to avoid a direct answer.
The possible exception relates to the requirements of annex XV section B, which would apply to a plan produced under article 22, but not, in terms, under article 23.
However, the difference is more apparent than real.
The purpose of the listed requirements under article 22 appears closely related to the procedure envisaged by the article, which involves approval and supervision by the Commission.
As the Commission explained, the requirements of article 23(1) are no less onerous, but may be more specific than those under article 22.
They are also subject to judicial review by the national court, which is able where necessary to impose such detailed requirements as are appropriate to secure effective compliance at the earliest opportunity.
A formulaic recitation of steps taken under the long list of Directives in paragraph 2 of section B may be of little practical value.
Mr Jaffey realistically limited his claim to paragraph 3 of section B, which he described as a checklist of measures which had to be considered in order to demonstrate compliance with either article.
I agree with that approach, but do not regard it as necessary to spell it out in an order of the court.
In those circumstances I need comment only briefly on the courts answer to the first two questions.
As already noted, the problem with the courts reformulation was that it introduced ambiguity in both question and answer.
The court did not say whether the state was or was not obliged to make the application; but simply that it was obliged to so in order to be able to postpone the deadline specified by the Directive .
This formulation appeared to start from the assumption that the state was seeking to extend the deadline, and to leave open the question whether it was obliged to do so.
On the other hand, the concluding statement that Directive 2008/50 does not contain any exception to the obligation flowing from article 22(1) might be thought to imply an unqualified obligation in all circumstances.
Before this court, both counsel have bravely attempted their own linguistic analysis of the reasoning to persuade us that the answer is clearer than it seems at first sight.
I am unpersuaded by either.
Understandably neither party wanted us to make a new reference, although that might be difficult to avoid if it were really necessary for us to reach a determination of the issues before us.
If I were required to decide the issue for myself, I would see considerable force in the reasoning of the Commission, which treats article 22 as an optional derogation, but makes clear that failure to apply, far from strengthening the position of the state, rather reinforces its essential obligation to act urgently under article 23(1), in order to remedy a real and continuing danger to public health as soon as possible.
For the reasons I have given I find it unnecessary to reach a concluded view.
The remaining issue, which follows from the answers to the third and fourth questions, is what if any orders the court should now make in order to compel compliance.
In the High Court, Mitting J considered that compliance was a matter for the Commission: If a state would otherwise be in breach of its obligations under article 13 and wishes to postpone the time for compliance with that obligation, then the machinery provided by article 22(1) is available to it, but it is not obliged to use that machinery.
It can, as the United Kingdom Government has done, simply admit its breach and leave it to the Commission to take whatever action the Commission thinks right by way of enforcement under article 258 of the Treaty on the Functioning of the European Union. (para 12) The Court of Appeal adopted the same view.
That position is clearly untenable in the light of the CJEUs answer to the fourth question.
That makes clear that, regardless of any action taken by the Commission, enforcement is the responsibility of the national courts.
Notwithstanding that clear statement, Miss Smith initially submitted that, in the absence of any allegation or finding that the 2011 plans were as such affected by error of law (apart from the interpretation of article 22), there is no basis for an order to quash them, nor in consequence for a mandatory order to replace them.
I have no hesitation in rejecting this submission.
The critical breach is of article 13, not of article 22 or 23, which are supplementary in nature.
The CJEU judgment, supported by the Commissions observations, leaves no doubt as to the seriousness of the breach, which has been continuing for more than five years, nor as to the responsibility of the national court for securing compliance.
As the CJEU commented at para 31: Member states must take all the measures necessary to secure compliance with that requirement [in article 13(1)] and cannot consider that the power to postpone the deadline, which they are afforded by article 22(1) of Directive 2008/50, allows them to defer, as they wish, implementation of those measures.
Furthermore, during the five years of breach the prospects of early compliance have become worse, not better.
It is rightly accepted by the Secretary of State that new measures have to be considered and a new plan prepared.
In those circumstances, we clearly have jurisdiction to make an order.
Further, without doubting the good faith of the Secretary of States intentions, we would in my view be failing in our duty if we simply accepted her assurances without any legal underpinning.
It may be said that such additional relief was not spelled out in the original application for judicial review.
But the delay and the consequent change of circumstances are not the fault of the claimant.
That is at most a pleading point which cannot debar the claimant from seeking the appropriate remedy in the circumstances as they now are, nor relieve the court of its own responsibility in the public interest to provide it.
In normal circumstances, where a responsible public authority is in admitted breach of a legal obligation, but is willing to take appropriate steps to comply, the court may think it right to accept a suitable undertaking, rather than impose a mandatory order.
However, Miss Smith candidly accepts that this course is not open to her, given the restrictions imposed on Government business during the current election period.
The court can also take notice of the fact that formation of a new Government following the election may take a little time.
The new Government, whatever its political complexion, should be left in no doubt as to the need for immediate action to address this issue.
The only realistic way to achieve this is a mandatory order requiring new plans complying with article 23(1) to be prepared within a defined timetable.
Although Mr Jaffey initially pressed for a shorter period than that proposed by the Secretary of State, he made clear that his principal objective was to secure a commitment to production of compliant plans within a definite and realistic timetable, supported by a court order.
In the circumstances, I regard the timetable proposed by the Secretary of State as realistic.
There should in any event be liberty to either party to apply to the Administrative Court for variation if required by changes in circumstances.
Finally, I should mention a further important issue which we have not been called upon to determine as part of these proceedings, but which may well arise in connection with the new plans.
This concerns the interpretation of the words as short as possible in article 23(1).
The judgments of the European court noted by the Commission (para 17 above), in particular the Italian case (relating to the precursor of article 13 itself) indicate that the scope for arguing impossibility on practical or economic grounds is very limited.
Miss Smith sought to distinguish the Italian case, on the grounds that it related to article 13, not article 23.
Mr Jaffey objects that this argument takes insufficient account of the direct relationship between the two articles, as underlined by both the Commission and the CJEU.
If this remains an issue in relation to the new air quality plans, when they are published for consultation, it may call for resolution by the court at an early stage to avoid further delay in the completion of compliant plans.
That is a further factor which makes it desirable that the new plans should be prepared under a timetable approved by the court, with liberty to apply for the determination of such issues as and when they arise in the course of the production of the plan, without the need for the expense and delay of new proceedings.
For these reasons, I would allow the appeal.
In addition to the declaration already made, I would make a mandatory order requiring the Secretary of State to prepare new air quality plans under article 23(1), in accordance with a defined timetable, to end with delivery of the revised plans to the Commission not later than 31 December 2015.
There should be provision for liberty to apply to the Administrative Court for variation of the timetable, or for determination of any other legal issues which may arise between the present parties in the course of preparation of the plans.
The parties should seek to agree the terms of the order, or submit proposed drafts with supporting submissions within two weeks of the handing down of this judgment.
Easter Term [2013] UKSC 25 On appeal from: [2012] EWCA Civ 897 JUDGMENT R (on the application of ClientEarth) (Appellant) v The Secretary of State for the Environment, Food and Rural Affairs (Respondent) Lord Hope, Deputy President before Lord Mance Lord Clarke Lord Sumption Lord Carnwath 1 May 2013 Heard on 7 March 2013 JUDGMENT GIVEN ON Appellant Dinah Rose QC Emma Dixon Ben Jaffey (Instructed by Client Earth) Respondent Kassie Smith (Instructed by Treasury Solicitors) LORD CARNWATH, DELIVERING THE JUDGMENT OF THE COURT 1.
This is the judgment of the court, giving reasons for making a reference to the Court of Justice of the European Union (CJEU).
The court has also decided that, on the basis of concessions made on behalf of the respondent, the appellant is entitled to a declaration that the United Kingdom is in breach of its obligations to comply with the nitrogen dioxide limits provided for in Article 13 of Directive 2008/50/EC (the Air Quality Directive).
Decisions on the extent of other relief (if any) will have to await the determination of the CJEU on the questions referred.
In these circumstances the judgment does no more than set out the factual and legal context of the dispute, and the issues of European law which now arise (as a basis in due course for a reference in compliance with the recommendations of the CJEU: 6 November 2012 C 338/1).
Background 2.
Nitrogen dioxide is a gas formed by combustion at high temperatures.
Road traffic and domestic heating are the main sources of nitrogen dioxide in most urban areas in the UK.
The Air Quality Directive imposes limit values for levels of nitrogen dioxide in outdoor air throughout the UK.
These limits are based on scientific assessments of the risks to human health associated with exposure to nitrogen dioxide.
These risks are described in the agreed statement of facts and issues: At concentrations exceeding the hourly limit value, nitrogen dioxide is associated with human health effects.
Short term heightened concentrations of nitrogen dioxide are associated with increased numbers of hospital admissions and deaths.
At elevated concentrations, nitrogen dioxide can irritate the eyes, nose, throat and lungs and lead to coughing, shortness of breath, tiredness and nausea.
Long term exposure may affect lung function and cause respiratory symptoms.
Nitrogen dioxide, along with ammonia, also contributes to the formation of microscopic airborne particles, one of the many components of particulate matter (PM10 and PM2.5) which have been calculated to have an effect equivalent to 29,000 premature deaths each year in the UK.
It is currently unclear which components or characteristics of particulate matter lead to these health impacts.
European Air Quality Legislation 3.
The current EU legislative framework governing air quality has its origins in the Air Quality Framework Directive of September 1996 (96/62/EC) (the Framework Directive).
The general aim of the directive, as stated in article 1, was to define the basic principles of a common strategy to: define and establish objectives for ambient air quality in the Community designed to avoid, prevent or reduce harmful effects on human health and the environment as a whole, assess the ambient air quality in Member States on the basis of common methods and criteria, obtain adequate information on ambient air quality and ensure that it is made available to the public, inter alia by means of alert thresholds, maintain ambient air quality where it is good and improve it in other cases. 4.
Article 2 contained the key definitions which have been carried into the later directives, including: 'limit value` shall mean a level fixed on the basis of scientific knowledge, with the aim of avoiding, preventing or reducing harmful effects on human health and/or the environment as a whole, to be attained within a given period and not to be exceeded once attained; 'target value` shall mean a level fixed with the aim of avoiding more long term harmful effects on human health and/or the environment as a whole, to be attained where possible over a given period; 'margin of tolerance` shall mean the percentage of the limit value by which this value may be exceeded subject to the conditions laid down in this Directive; 5.
A zone was defined as a part of their territory delimited by the Member States, and an agglomeration was defined as; a zone with a population concentration in excess of 250 000 inhabitants or, where the population concentration is 250 000 inhabitants or less, a population density per km which for the Member States justifies the need for ambient air quality to be assessed and managed. 6.
By article 4(1) the Commission was required to submit proposals on the setting of limit values for various atmospheric pollutants, one being nitrogen dioxide.
They were required to take account of the factors listed in Annex II, which included economic and technical feasibility.
Article 7(1) required member states to take the necessary measures to ensure compliance with the limit values.
By article 7(3) they were required to draw up action plans indicating the measures to be taken in the short term where there is a risk of the limit values being exceeded.
Such plans may, depending on the individual case provide for measures to control and, where necessary, suspend activities, including motor vehicle traffic, which contribute to the limit values being exceeded. 7.
Article 8 headed Measures applicable in zones where levels are higher than the limit value provided: 1.
Member States shall draw up a list of zones and agglomerations in which the levels of one or more pollutants are higher than the limit value plus the margin of tolerance 3.
In the zones and agglomerations referred to in paragraph 1, Member States shall take measures to ensure that a plan or programme is prepared or implemented for attaining the limit value within the specific time limit.
The said plan or programme, which must be made available to the public, shall incorporate at least the information listed in Annex IV. 8.
Article 11 contained detailed provisions for information to be given to the Commission about areas of non compliance and progress in dealing with it.
In particular, member states were required to send to the Commission the plans or programmes referred to in Article 8(3) no later than two years after the end of the year during which the levels were observed (art 11(1)(a)(iii)). 9.
A further Directive 1999/30/EC (the First Daughter Directive) contained the detail of the limit values, margins of tolerance, and deadlines for compliance for the various pollutants.
Annex II set two types of limit values for nitrogen dioxide, an hourly limit value (a maximum of 18 hours in a calendar year in which hourly mean concentrations can exceed 200 micrograms g/m3) and an annual mean limit value (mean concentrations must not exceed 40 g/m3 averaged over a year).
The deadline for achieving both limit values was 1 January 2010.
It is to be noted that for some other pollutants (sulphur dioxide and particulates) an earlier date was set (1 January 2005). 10.
The 2008 Air Quality Directive was a consolidating and amending measure.
As paragraph (3) of the preamble explained, the earlier directives need to be substantially revised in order to incorporate the latest health and scientific developments and the experience of the Member States.
In the interests of clarity, simplification and administrative efficiency it is therefore appropriate that those five acts be replaced by a single Directive and, where appropriate, by implementing measures.
The Framework Directive and the First Daughter Directive were repealed (Article 31), but the same limit values, margin of tolerances, and deadlines were reproduced in annex XI of the new directive. 11.
Article 13 provides: Limit values and alert thresholds for the protection of human health 1.
Member States shall ensure that, throughout their zones and agglomerations, levels of sulphur dioxide, PM10, lead, and carbon monoxide in ambient air do not exceed the limit values laid down in Annex XI.
In respect of nitrogen dioxide and benzene, the limit values specified in Annex XI may not be exceeded from the dates specified therein.
The margins of tolerance laid down in Annex XI shall apply in accordance with Article 22(3) and Article 23(1) The difference between the first and second paragraphs of article 13 appears to reflect the fact that the former relates to limits which, unlike those for nitrogen dioxide, had already come into effect at the time of the directive.
The absolute terms of the obligation under article 13 may be contrasted, for example, with article 16 which requires all necessary measures not entailing disproportionate costs to achieve the target value set for concentrations of PM2.5. 12.
Of direct relevance to the present appeal are articles 22 and 23.
They come in different chapters: the former in chapter III (Ambient and Air Quality Management, the latter in chapter IV (Plans).
The relevant parts are as follows: Article 22 Postponement of attainment deadlines and exemption from the obligation to apply certain limit values 1.
Where, in a given zone or agglomeration, conformity with the limit values for nitrogen dioxide or benzene cannot be achieved by the deadlines specified in Annex XI, a Member State may postpone those deadlines by a maximum of five years for that particular zone or agglomeration, on condition that an air quality plan is established in accordance with Article 23 for the zone or agglomeration to which the postponement would apply; such air quality plan shall be supplemented by the information listed in Section B of Annex XV related to the pollutants concerned and shall demonstrate how conformity will be achieved with the limit values before the new deadline. 3.
Where a Member State applies paragraphs 1 or 2, it shall ensure that the limit value for each pollutant is not exceeded by more than the maximum margin of tolerance specified in Annex XI for each of the pollutants concerned. 4.
Member States shall notify the Commission where, in their view, paragraphs 1 or 2 are applicable, and shall communicate the air quality plan referred to in paragraph 1 including all relevant information necessary for the Commission to assess whether or not the relevant conditions are satisfied.
In its assessment, the Commission shall take into account estimated effects on ambient air quality in the Member States, at present and in the future, of measures that have been taken by the Member States as well as estimated effects on ambient air quality of current Community measures and planned Community measures to be proposed by the Commission.
Where the Commission has raised no objections within nine months of receipt of that notification, the relevant conditions for the application of paragraphs 1 or 2 shall be deemed to be satisfied.
If objections are raised, the Commission may require Member States to adjust or provide new air quality plans.
Article 23 Air quality plans 1.
Where, in given zones or agglomerations, the levels of pollutants in ambient air exceed any limit value or target value, plus any relevant margin of tolerance in each case, Member States shall ensure that air quality plans are established for those zones and agglomerations in order to achieve the related limit value or target value specified in Annexes XI and XIV.
In the event of exceedances of those limit values for which the attainment deadline is already expired, the air quality plans shall set out appropriate measures, so that the exceedance period can be kept as short as possible.
The air quality plans may additionally include specific measures aiming at the protection of sensitive population groups, including children.
Those air quality plans shall incorporate at least the information listed in Section A of Annex XV and may include measures pursuant to Article 24.
Those plans shall be communicated to the Commission without delay, but no later than two years after the end of the year the first exceedance was observed 13.
Annex XV section A lists categories of information to be included in air quality plans generally (generally reproducing the categories in Annex IV of the Framework Directive); section B sets out additional information to be provided under article 22(1), including information on all air pollution abatement measures that have been considered for implementation in connection with the attainment of air quality objectives, under specified headings.
The headings include, for example (a) reduction of emissions from stationary sources by ensuring that polluting small and medium sized stationary combustion sources (including for biomass) are fitted with emission control equipment or replaced; (b) reduction of emissions from vehicles through retrofitting with emission control equipment.
The use of economic incentives to accelerate take up should be considered; (h) where appropriate, measures to protect the health of children or other sensitive groups. 14.
The term air quality plan was new to this directive, but not the content of article 23.
The correlation table (annex XVII) indicates that article 23 and annex XV section A were designed to reproduce with amendments the effect of article 8(1) (4), and annex IV of the Framework Directive, where the corresponding term was measures.
The time limit of two years, in the third paragraph, corresponds to that set by article 11(1)(a)(iii) for submission of plans under article 9(3). 15.
By contrast, article 22 and annex XV section B were new.
The purpose was explained by paragraph (16) of the preamble: (16) For zones and agglomerations where conditions are particularly difficult, it should be possible to postpone the deadline for compliance with the air quality limit values in cases where, notwithstanding the implementation of appropriate pollution abatement measures, acute compliance problems exist in specific zones and agglomerations.
Any postponement for a given zone or agglomeration should be accompanied by a comprehensive plan to be assessed by the Commission to ensure compliance by the revised deadline.
The availability of necessary Community measures reflecting the chosen ambition level in the Thematic Strategy on air pollution to reduce emissions at source will be important for an effective emission reduction by the timeframe established in this Directive for compliance with the limit values and should be taken into account when assessing requests to postpone deadlines for compliance. 16.
A Commission communication relating to notifications under article 22 was issued on 26 June 2008.
It noted that a majority of member states had not attained the limit values for PM10 even though they had become mandatory on 1 January 2005.
Current assessments indicated that a similar situation might arise in 2010 when limit values for nitrogen dioxide would become mandatory (para 3).
The notification procedure was described as follows: The initial notifications are expected principally to concern PM10, for which the potential extensions will end three years after the entry into force of the Directive, i.e. on 11 June 2011.
In view of the existing levels of non compliance with the limit values for PM10, it is important to submit notifications as soon as possible after the Directive enters into force for zones and agglomerations where Member States consider that the conditions are met.
When preparing the notifications, care must, however, be taken to ensure that the data necessary to demonstrate compliance with the conditions are complete. 9.
As regards nitrogen dioxide and benzene, the limit values may not be exceeded from 1 January 2010 at the latest.
Where the conditions are met, the deadline for achieving compliance may be postponed until such time as is necessary for achieving compliance with the limit values, but at maximum until 2015.
The aim must be to keep the postponement period as short as possible.
If an exceedance of the limit values for nitrogen dioxide or benzene occurs for the first time only in 2011 or later, postponing the deadline is no longer possible.
In those cases, the second subparagraph of Article 23(1) of the new Directive will apply.
Air Quality Plans in the United Kingdom 17.
For the purposes of assessing and managing air quality, the UK is divided into 43 zones and agglomerations. 40 of these zones and agglomerations were in breach of one or more of the limit values for nitrogen dioxide in 2010. 18.
On 20 December 2010, in response to a letter before action from ClientEarth, the Secretary of State indicated that air quality plans were being drawn up for Greater London and all other non compliant zones and agglomerations as part of the time extension notification process under article 22.
It was said that these plans would demonstrate how compliance would be achieved in these areas by 2015.
However, when draft air quality plans were published on 9 June 2011 for the purposes of public consultation, the proposals indicated that in 17 zones and agglomerations, including Greater London, compliance was expected to be achieved after 2015. 19.
The UK Overview Document stated (referring to projections shown in Table 1): The table shows that of the 40 zones with exceedances in 2010, compliance may be achieved by 2015 in 23 zones, 16 zones are expected to achieve compliance between 2015 and 2020 and that compliance in the London zone is currently expected to be achieved before 2025 (para 1.3). 20.
On 19 September 2011, the Secretary of State published an analysis of responses to the consultation.
It stated, in response to comments that the plans did not meet the requirements for a time extension under Article 22: The Introduction to the UK Overview document makes clear that the European Commission advised Member States to also submit air quality plans for zones where full compliance is projected after 2015.
As set out in paragraph 1.1 of the UK Overview document, the UK will be submitting plans with a view to postponement of the compliance date to 2015 where attainment by this date is projected.
Plans for zones where full compliance is currently expected after that date will also be submitted to the Commission under Article 23 on the basis that they set out actions to keep the exceedances period as short as possible. 21.
Final plans were submitted to the Commission on 22 September 2011, including applications for time extensions under Article 22 in 24 cases supported by plans showing how the limit values would be met by 1 January 2015 at the latest.
In the remaining 16 cases, no application has been made under Article 22 for a time extension, but air quality plans were prepared projecting compliance between 2015 and 2025. 22.
In a decision dated 25 June 2012, the European Commission raised objections to 12 of the 24 applications for time extensions, unconditionally approved nine applications, and approved three subject to certain conditions being fulfilled.
It made no comment on the zones for which compliance by 2015 had not been shown. 23.
A letter from the Commission (EU Pilot) dated 19 June 2012 referred to multiple complaints concerning the UKs compliance with PM10 and NO2 limit values in the Air Quality Directive, including its failure to request time extensions for 17 zones, in which the NO2 limits were exceeded.
The letter commented: The Commission has noted your confirmation that these zones have indeed not applied under Article 22 of the Directive and is considering how to address this issue under its wider enforcement strategy for the Directive.
At this point, the Commission would like to draw your attention to the obligation of setting out appropriate measures, so that the exceedance period can be kept as short as possible, as provided by Article 23 for all zones and agglomerations where an exceedance is taking place and no time extension has been requested under Article 22. 24.
Another letter from the Commission (Directorate General Environment) to ClientEarth dated 29 June 2012 commented on their own complaint of non compliance: We will await the outcome of your appeal to the United Kingdom's Supreme Court in R (ClientEarth) vs Secretary of State for the Environment, Food and Rural Affairs and your further update on the situation to decide how best to proceed with this matter given that it now appears clear that numerous Air Quality Plans, including the plan for London, were not communicated to the Commission under Article 22 of Directive 2008/50/EC as was originally thought The Commission would have some considerable concerns if Article 23 of the Directive were seen to be a way of allowing Member States to circumvent the requirements of Article 22 of the Directive.
Article 22 of the Directive was introduced in order to afford Member States additional time for compliance for up to a maximum of 5 years, on condition that an air quality plan is established in accordance with Article 23 and communicated to the Commission for assessment.
It is only under these conditions that Member States can be afforded additional time for compliance and Article 23 itself cannot be relied upon to further extend this clearly prescribed and limited time extension clause.
As explained, our normal policy is to stay or close complainant files where the issue in question is before the national courts so as to allow national proceedings to run their course before deciding whether or not to instigate our own infringement proceedings under Article 258 of the Treaty on the Functioning of the European Union (TFEU): The national courts are the key authority in Member States tasked with the interpretation and implementation of EU law.
The fact that the Commission has powers to bring its own infringement proceedings against Member States under Article 258 TFEU should not mean that individuals cannot plead these obligations before a national court as has been recognised by the Court of Justice as long ago as 1963 (Van Gend en Loos judgment [1963] ECR 1).
As the Court already recognised in that case, a restriction of the guarantees against an infringement by Member States to the procedures under Article 258 TFEU would remove all direct legal protection of the individual rights of their nationals.
The Court concluded that the vigilance of individuals concerned to protect their rights amounted to an effective supervision in addition to the supervision entrusted by Article 258 TFEU to the Commission.
The proceedings 25.
The present proceedings for judicial review had been commenced on 28 July 2011.
The claimants sought (i) a declaration that the draft nitrogen dioxide air quality plans do not comply with the requirements of EU law; and (ii) a mandatory order requiring the Secretary of State to (a) revise the draft air quality plans to ensure that they all demonstrate how conformity with the nitrogen dioxide limit values will be achieved as soon as possible and by 1 January 2015 at the latest, and (b) publish the revised draft air quality plans as public consultation documents, giving a reasonable timeframe for response.
By amendment, the Appellant also sought a declaration that the United Kingdom is in breach of its obligations to comply with the nitrogen dioxide limits provided for in Article 13 of Directive 2008/50/EC.
The proceedings 26.
The claim was heard by Mitting J on 13 December 2011.
He dismissed the claim (R (ClientEarth) v Secretary of State for the Environment, Food and Rural Affairs [2011] EWHC 3623 (Admin)).
He held that article 22 was discretionary.
He declined in any event to grant a mandatory order: such a mandatory order, like the imposition of an obligation on the Government to submit a plan under Article 22 to bring the United Kingdom within limit values by 1 January 2015, would raise serious political and economic questions which are not for this court.
It is clear from all I have seen that any practical requirement on the United Kingdom to achieve limit values in its major agglomerations, in particular in London, would impose upon taxpayers and individuals a heavy burden of expenditure which would require difficult political choices to be made.
It would be likely to have a significant economic impact.
The courts have traditionally been wary of entering this area of political debate for good reason. (para 15) He also declined to make a declaration: A declaration will serve no purpose other than to make clear that which is already conceded.
The means of enforcing Article 13 lie elsewhere in the hands of the Commission under article 258 of the Treaty on the Functioning of the European Union, and if referred to it, the Court of Justice of the European Union under Article 260.
Those remedies are sufficient to deal with the mischief at which the 2008 Directive is aimed. (para 16) 27.
The appeal was dismissed by the Court of Appeal on 30 May 2012 ([2012] EWCA Civ 897).
Laws LJ, giving the only substantive judgment, agreed with Mitting J that article 22 was discretionary.
In those circumstances, he declined to consider the issue of a mandatory order which he regarded as moot.
Of the judges reasons for refusing a declaration he said: it seems to me that he was, with respect, plainly right and the contrary is not contended.
His judgment speaks as a declaration.
No substantive issue of effective judicial protection arises from his refusal to grant a formal declaration. (paras 22 23) 28.
Permission to appeal to the Supreme Court was granted by the court on 19 December 2012.
The submissions of the parties (in summary) ClientEarth 29.
ClientEarth does not accept that the UK has considered or put in place all practical measures to ensure compliance by 2015. 30.
In any event, article 22 is a mandatory procedure which applied to any member state which remained in breach of the relevant limit value at 1 January 2010.
That is confirmed by article 22(4): where in the view of a member state paragraph 1 is applicable, the state shall notify the Commission and communicate the required air quality plan.
Paragraph 1 is applicable where in a given zone or agglomeration, conformity with the limit values for nitrogen dioxide or benzene cannot be achieved by the deadlines specified 31.
Article 23 does no more than preserve the system already in place under the previous directive.
It is not an alternative procedure for a state which is in breach of the limit value, nor a means by which it can avoid the more stringent controls set out in annex XV(B) or the maximum margins of tolerance set by article 22(3). 32.
The lower court erred in disregarding the responsibility of the domestic courts to provide an effective remedy for the admitted breach of article 13 (see eg Joined Cases C 444/09 and C 456/09 Gavieiro Gavieiro and Iglesias Torres ([2010] ECR I 0000, paras 72, 75).
Neither practical difficulties nor the expense of compliance can be relied on as defences (see eg Case C 390/07 Commission v UK [2009] ECR I 00214, para 121; Case C 68/11 Commission v Italy paras 41, 59 60).
The Secretary of State 33.
The Secretary of State accepts that the UK is in breach of article 13 in relation to certain zones, and that for certain zones it has not produced plans showing conformity by 2015; but asserts that for those zones compliance within that timetable is not realistically possible, due to circumstances out of its control and unforeseen in 2008.
These problems are shared with other states.
In many cases the Commission has rejected plans submitted under article 22 because the notifications have failed to fulfil the condition of demonstrating compliance by 2015. 34.
Article 22 is not mandatory, as indicated by the use of the word may in article 22(1).
An air quality plan demonstrating compliance by 1 January 2015 is only required if a member state is applying under Article 22 for postponement of the deadline.
Further, postponement can only properly be sought if the state is able to demonstrate how conformity will be achieved by the new deadline. 35.
Where postponement is not sought, the state is at immediate risk of infraction proceedings, but remains subject to a continuing duty, under the second paragraph of article 23, to maintain plans setting out appropriate measures so that the exceedance period can be kept as short as possible.
That paragraph (which was not in the earlier Directives) envisages, and provides for, the situation in which a Member State has failed to comply with the relevant limit values by the relevant deadline.
The refusal of discretionary relief by the courts below was consistent with EU principles, both of effective judicial protection, which leave to domestic systems the procedural conditions governing actions for the protection of the rights under Community law (Case 33/76 Rewe Zentralfinanz eG and Rewe Zentral AG v Landwirtschaftskammer fr das Saarland [1976] ECR 1989 at 5); and of sincere co operation, in cases of unforeseeable difficulties which make it absolutely impossible to carry out obligations imposed Community law (see Case C 217/88 Commission v Federal Republic of Germany [1990] ECR I 2879 at 33).
The courts preliminary conclusion
The court is satisfied that it should grant the declaration sought, the relevant breach of article 13 having been clearly established.
The fact that the breach has been conceded is not, in the courts view, a sufficient reason for declining to grant a declaration, where there are no other discretionary bars to the grant of relief.
Such an order is appropriate both as a formal statement of the legal position, and also to make clear that, regardless of arguments about the effect of articles 22 and 23, the way is open to immediate enforcement action at national or European level.
The other issues raise difficult issues of European law, the determination of which in the view of the court, requires the guidance of the CJEU, and on which accordingly as the final national court we are obliged to make a reference.
Taking note of the draft questions provided by the appellants, and subject to any further submissions of the parties, the following questions appear appropriate: i) Where in a given zone or agglomeration conformity with the limit values for nitrogen dioxide cannot be achieved by the deadline of 1 January 2010 specified in annex XI of Directive 2008/50/EC (the Directive), is a Member State obliged pursuant to the Directive and/or article 4 TEU to seek postponement of the deadline in accordance with article 22 of the Directive? ii) If so, in what circumstances (if any) may a Member State be relieved of that obligation? iii) If the answer to (i) is no, to what extent (if at all) are the obligations of a Member State which has failed to comply with article 13, and has not made an application under article 22, affected by article 23 (in particular its second paragraph)? iv) In the event of non compliance with article 13, and in the absence of an application under article 22, what (if any) remedies must a national court provide as a matter of European law in order to comply with article 30 of the Directive and/or article 4 or 19 TEU?
The parties are accordingly requested to submit to the court (if possible in agreed form) their proposals for any revisions to the questions to be referred to the CJEU, together with brief summaries of their respective submissions as to the answers to those questions.
These should be submitted within 4 weeks of this judgment.
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The proceedings arose out of the admitted and continuing failure of the United Kingdom since 2010 to secure compliance in certain zones with the limits for nitrogen dioxide levels set by European Union law, under Directive 2008/50/EC.
In a judgment of 1 May 2013, the Supreme Court referred certain questions to the Court of Justice of the European Union (CJEU) concerning the interpretation of articles 13, 22 and 23 of the Directive.
Article 13 laid down limit values for the protection of human health; in respect of nitrogen dioxide, certain limits may not be exceeded from the relevant date, i.e. 1 January 2010.
Article 22 provided a procedure for a member state to apply to the European Commission to postpone the compliance date for not more than five years in certain circumstances and subject to specified conditions.
Article 23 imposed a general duty on member states to prepare air quality plans for areas where the limits were exceeded.
By the second paragraph of article 23(1), in cases where the attainment deadline (was) already expired, the air quality plans must set out appropriate measures, so that the period for which the member state would be in exceedance of the limits can be kept as short as possible.
Where an application was made under article 22, the air quality plan had to include the information listed in Annex XV, section B of the Directive.
This included information on all air pollution abatement measures considered, including five specified categories of measures, such as for example (d) measures to limit transport emissions.
The required contents of air quality plans prepared under article 23 were in Annex XV section A. ClientEarth argued that the UK was required by article 22 to apply for postponement in respect of all zones where compliance with the air quality limits could not be met by the original deadline.
The Secretary of State had not applied to postpone the deadline for some of the UKs non compliant zones, but instead in 2011 had produced air quality plans under article 23, predicting compliance would not be achieved until 2025.
The Secretary of State argued that it was not required to apply for postponement under article 22.
The Supreme Court in its judgment of 1 May 2013 declared the UK to be in breach of article 13, and referred the following questions to the CJEU: (1) Where in any zone of the UK the state has not achieved conformity with the nitrogen dioxide limit values by the 2010 deadline, is a member state obliged to seek postponement of the deadline in accordance with article 22? (2) If so, in what circumstances (if any) may a member state be relieved of that obligation? (3) To what extent (if at all) are the obligations of a member state which
has failed to comply with article 13 affected by article 23? (4) In the event of non compliance with articles 13 or 22, what remedies must a national court provide? The CJEU answered these questions in a judgment dated 14 November 2014 (C 404/13).
The present proceedings considered what further orders, if any, should be made by the Supreme Court.
The Supreme Court unanimously orders that the government must submit new air quality plans to the European Commission no later than 31 December 2015.
Lord Carnwath gives a judgment with which all members of the Court agree.
The CJEU decided to reformulate the first two questions referred.
This introduced ambiguity enabling each party to claim success on the issue of whether the Secretary of State had breached article 22 by not applying to extend the deadline.
However, it is unnecessary to make a final ruling on the meaning of the CJEUs judgment on these questions. [5] The CJEUs answer to the third question was that the fact that an air quality plan complying with article 23(1) has been drawn up does not in itself mean the member state has met is obligations under article 13.
Its answer to the fourth question was that where a member state has failed to comply with article 13 and not applied to postpone the deadline under article 22, it is for the national court to take any necessary measure so that the authority establishes the plan required by the Directive in accordance with the conditions laid down by the latter. [6] The time taken by these proceedings has meant that the article 22 issue has no practical significance, except in relation to the requirements of Annex XV section B, which apply to a plan produced under article 22 but not, in terms, to a plan under article 23.
However, as the Commission explained in its observations to the CJEU, the requirements of article 23(1) are no less onerous than those under article 22.
The court is able where necessary to impose requirements which are appropriate to secure effective compliance at the earliest possible opportunity.
The checklist of measures under paragraph 3 of section B have to be considered in order to demonstrate compliance with either article 22 or 23. [23 24] It is unnecessary to reach a concluded view on whether the article 22 procedure was obligatory.
Lord Carnwath saw force in the Commissions reasoning, which treats article 22 as an optional derogation, but makes clear that failure to apply for a postponement, far from strengthening the position of the state, rather reinforces its essential obligation to act urgently under article 23(1) in order to remedy the danger to public health as soon as possible. [25 26] The Secretary of States argument that there was no basis for an order quashing the 2011 plans, nor a mandatory order to replace them, was rejected.
The critical breach is of article 13, not of articles 22 or 23.
The CJEU judgment leaves no doubt as the seriousness of the breach, which has been continuing for more than five years, nor as to the responsibility on the national court to secure compliance.
Further, during those five years the prospects of early compliance have become worse (2014 projections predicting non compliance in some zones after 2030).
The Secretary of State accepted that a new plan has to be prepared.
The new government should be left in no doubt as to the need for immediate action, which is achieved by an order that new plans must be delivered to the Commission not later than 31 December 2015. [19, 28 29, 33]
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This appeal raises a question as to the scope of the exceptions to the principle that statements made in the course of without prejudice negotiations are not admissible in evidence (the without prejudice rule).
Specifically, the question is whether facts which (a) are communicated between the parties in the course of without prejudice negotiations and (b) would, but for the without prejudice rule, be admissible as part of the factual matrix or surrounding circumstances as an aid to construction of an agreement which results from the negotiations, should be admissible by way of exception to the without prejudice rule.
The dispute between the parties relates to a series of forward freight agreements (FFAs) and is set against the background of the extraordinary volatility of the freight markets in 2008.
Capesize bulk carriers are large vessels, so called because they were historically too large to pass through the Suez Canal.
The Baltic Exchange index of daily rates of time charter hire for such vessels fell from about US$200,000 per day in May 2008 to US$3,000 per day in December 2008.
Each FFA was a swap agreement which consisted of a bet on whether the settlement rate (being the average of the published rates, as stated in the relevant index, for each index publication day in the relevant settlement month) would, on specified future settlement dates, be higher or lower than the contract rate as defined in the FFA.
Under each FFA the seller bet that the market rate on the settlement dates would be lower than the contract rate and the buyer bet that it would be higher.
If it was higher on a given settlement day, the seller was obliged to pay the difference between the two rates multiplied by the contract period, which was usually the number of days in the month.
If it was lower the buyer was obliged to pay the seller the appropriate amount.
The relevant FFAs had settlement days at the end of one or more months within the period May to December 2008.
At the end of each month all settlement sums due under all the FFAs were to be netted off and payment made by the indebted party under the net position to the other party. (I use the word bet because it was used by the parties in the agreed statement of facts and issues and because it appears to me to be accurate, but in doing so I do not intend to suggest that the FFAs were unenforceable or that FFAs are not a commonly used method of hedging against market fluctuations.)
All the FFAs were on the same underlying terms.
As at the end of May 2008 the appellants, whom I will together call TMT, were short against the market and, as a result of the netting off process, owed the respondent (Oceanbulk) more than US$40m for that month and were likely to owe a further US$30m for the following month.
If Oceanbulk had terminated the FFAs on the basis of an event of default, TMT would have been potentially liable for some US$300 to 400m by way of liquidated damages.
TMT failed to pay the May 2008 instalment when it fell due and sought time for payment.
The parties entered into settlement negotiations which were expressed to be without prejudice.
They were between the parties representatives and solicitors.
The negotiations were partly in writing but included two lengthy meetings on 19 and 20 June 2008 which were attended both by the parties representatives and their solicitors.
The parties entered into a written settlement agreement dated 20 June, in which they agreed (among other things): (a) to crystallise 50 per cent of each of the FFAs for 2008 based on the difference between the contract rate and the average of the ten day closing prices for the relevant Baltic indices from 26 June 2008; and (b) to co operate to close out the 50 per cent balance of the open 2008 FFAs against the market on the best terms achievable by 15 August 2008.
There is no issue between the parties as to the existence or terms of the settlement agreement.
It is common ground that all the terms of the agreement between them are accurately recorded in the written settlement agreement.
For that reason neither party seeks rectification of it.
There is however a dispute between the parties as to the true construction of one of the terms of the agreement.
The issue which divides the parties in this appeal is whether it is permissible to refer to anything written or said in the course of the without prejudice negotiations as an aid to the interpretation of the agreement.
The issues
Construction of the settlement agreement
Oceanbulks claim is based on the alleged breach by TMT of clause 5 of the agreement, which provides as follows: In respect of FFA open contracts between TMT interests and [Oceanbulk] for 2008, the parties shall crystallise within the ten trading days following 26 June 2008, as between them, 50 per cent of those FFAs at the average of the ten days closing prices for the relevant Baltic Indices from 26 June 2008 and will co operate to close out the balance of 50 per cent of the open FFAs for 2008 against the market on the best terms achievable by 15 August 2008.
The parties crystallised 50 per cent of the contracts within ten days following 26 June.
There is accordingly no dispute about that part of the clause.
However, Oceanbulk says that TMT is in breach of the second part of the clause (the co operation term) on the basis that, so it is said, TMT did not co operate to close out the balance of 50 per cent of the open FFAs for 2008 against the market on the best terms achievable by 15 August.
By way of damages Oceanbulk claims the difference between the sums it says would have been owed by TMT had the FFAs been closed out by 15 August, when the market was still in Oceanbulks favour, and the amount that is said to be due to TMT under the FFAs as a result of those positions having remained open.
The loss arises (in part at least) out of the dramatic fall in the market to which I have referred.
Oceanbulks case is that, on the true construction of the co operation term, the parties obligation was to close out the open FFAs bilaterally, that is as between Oceanbulk and TMT.
TMTs case is that the meaning of the term depends upon a fact which it says was in the contemplation of both parties: viz that the FFAs between Oceanbulk and TMT were sleeved by Oceanbulk.
In para 5 of his judgment Andrew Smith J (the judge) quoted Oceanbulks summary of what the parties meant by sleeving, which the parties have agreed is sufficient for the purposes of this appeal.
It is in these terms: Sleeving is an arrangement by which one party (party B) will, at the request of another party (party A), enter into a specific FFA trade with a third party (party C) and party B will then replicate that position back to back with party A.
The usual reasons for such an arrangement are that (i) party C would not be willing to trade with party A (eg because of perceived counterparty risk) and/or (ii) party A does not wish to reveal to the market that he is seeking that position, eg because he is concerned that he will move the market.
However, once the contracts have been concluded then (absent eg an agency arrangement), the two contracts are independent and each party acts as a principal: the contracts do not necessarily remain coupled.
In para 18(1)(ii) of the re re amended defence and counterclaim TMT pleads that, in the context of the relevant negotiations, the words co operate to close out against the market mean that TMT would (if Oceanbulk so requested) assist Oceanbulk to agree fixed figures payable by Oceanbulk to counterparties to close out Oceanbulks opposite market positions; that Oceanbulk would then close out those positions; and that thereafter the FFAs between Oceanbulk and TMT would be crystallised at rates to be agreed.
As it is put in the agreed statement of facts and issues, there is therefore a dispute as to whether the closing out process envisaged by the co operation term was bilateral (on Oceanbulks case) or trilateral (on TMTs case).
The phrase opposite market position is defined in para 18(1)(i) of TMTs re re amended defence and counterclaim by references to sleeves.
TMT pleads that both parties understood that, in respect of all or substantially all the FFAs between Oceanbulk and TMT, Oceanbulk held an opposite position with other participants in the FFA market so that the liabilities TMT had to Oceanbulk were sleeved by Oceanbulk in that they were equal in amount to liabilities Oceanbulk had to counterparties under equivalent swap agreements.
In support of its case that the parties understood that the FFAs were sleeved, TMT relies upon four representations made or allegedly made by Mr Pappas on behalf of Oceanbulk.
They are pleaded in para 18(1)(i) of the re re amended defence and counterclaim and are summarised in the agreed statement of facts and issues. i) In an email dated 1 June 2008 from Mr Pappas to Mr Su of TMT he said that Oceanbulk was expecting US$40.5m from TMT on Friday, 5 June and that most of this position is in any case due to sleeves we did for you when you asked us in the past to assist.
It is common ground that this was an open communication and that it is arguably admissible in evidence on the issue of construction as part of the factual matrix. ii) TMT says that at a meeting on 5 June Mr Pappas said that he had sleeved TMTs trading at Mr Sus request.
It is common ground that this was an open meeting and that, to the extent that any such representation was made, it is arguably admissible in evidence on the same basis.
In an email dated 10 June from Mr Pappas to Mr Su he said that Oceanbulk had to pay US$40.5m on TMTs behalf against zero receipts.
The judge held that this email was sent without prejudice and there was no appeal against that finding. iii) iv) TMT says that at meetings on 19 and 20 June Mr Pappas again asserted (or allowed the negotiations to proceed on the assumption) that the FFAs were sleeved.
It is common ground that these meetings were without prejudice.
The issue between the parties is whether TMT are entitled to rely upon representations or alleged representations iii) and iv) as an aid to interpretation of the agreement.
Oceanbulk seeks to exclude the evidence relating to them on the ground that they were made in the course of without prejudice negotiations.
The construction of clause 5 will of course be a matter for the trial judge.
At para 35 of his judgment the judge expressed the view that the evidence was potentially of significant probative value and might possibly be crucial upon an issue of construction that is central to these proceedings.
By contrast, in the Court of Appeal, Longmore LJ said at para 22 that it was not entirely easy to see how the facts relied upon by TMT assisted the construction of clause 5.
It is not for this court to express a view on that question in this appeal.
For present purposes it is sufficient to note that, at any rate at this interlocutory stage, Oceanbulk does not seek to exclude the evidence simply on the ground that it does not form part of the admissible factual matrix.
It follows that it must be assumed for the purpose of this appeal that, subject to the question whether it is excluded by the without prejudice rule, the evidence will be admissible at the trial on the issue of construction of the agreement.
Indeed, given the conclusion reached by the judge, it must be assumed that (in the judges phrase already quoted) the evidence is potentially of significant probative value and might possibly be crucial upon an issue of construction that is central to these proceedings.
The judge held that the evidence was admissible notwithstanding the without prejudice rule.
The majority of the Court of Appeal (Longmore and Stanley Burnton LJJ) allowed Oceanbulks appeal, holding that the evidence was not admissible.
Ward LJ agreed with the judge and thus dissented.
This appeal is brought with the permission of this court.
Estoppel
pleads an estoppel in these terms: In para 18(1)(ia) of the re re amended defence and counterclaim TMT In its amended reply and defence to counterclaim Oceanbulk has denied that all the transactions were in fact sleeved. [TMT] will say that for the reasons pleaded in para 18(1)(i) above Oceanbulk is estopped from denying that the swap agreements Oceanbulk had entered into with [TMT] were sleeved transactions; alternatively Oceanbulk is estopped from denying that in negotiating and entering into the settlement agreement the parties were proceeding on the common assumption that they were sleeved transactions.
In support of that plea TMT seeks to rely upon representations iii) and iv).
Oceanbulk says that such reliance is excluded by the without prejudice rule.
Remoteness
Essentially the same issues arise under this head.
In para 27(2)(iii) of the re re amended defence and counterclaim TMT denies that Oceanbulk is entitled to recover the loss and damage it asserts because: (1) As pleaded in para 18 above, clause 5 of the settlement agreement was agreed in reliance upon and on the basis of Mr Pappass representation or representations on behalf of Oceanbulk and the parties understood that the swap agreements between Oceanbulk and [TMT] were sleeved transactions with the Oceanbulk opposite market positions; and (2) Accordingly, it was or should have been in the parties reasonable contemplation that closing out the 2008 FFAs left the risk of the market rising and the benefit of the market falling on [TMT] but no risk or benefit on Oceanbulk because Oceanbulk was (until completion of the closing out process) protected by Oceanbulks opposite market positions; accordingly, the loss which Oceanbulk seeks to claim is too remote and/or is not loss for which [TMT]
had assumed responsibility
TMT seeks to rely upon representations iii) and iv) in support of the case that Oceanbulks loss is too remote to be recoverable and/or that it is not a loss for which TMT assumed responsibility.
Oceanbulk says that TMT is not entitled to rely upon those representations for the same reasons as stated above, namely that they were made (if at all) in the course of without prejudice negotiations.
Without prejudice the legal principles
The approach to without prejudice negotiations and their effect has undergone significant development over the years.
Thus the without prejudice principle, or, as it is usually called, the without prejudice rule, initially focused on the case where the negotiations between two parties were regarded as without prejudice to the position of each of the parties in the event that the negotiations failed.
The essential purpose of the original rule was that, if the negotiations failed and the dispute proceeded, neither party should be able to rely upon admissions made by the other in the course of the negotiations.
The underlying rationale of the rule was that the parties would be more likely to speak frankly if nothing they said could subsequently be relied upon and that, as a result, they would be more likely to settle their dispute.
Thus in Walker v Wilsher (1889) 23 QBD 335 at 337 Lindley LJ asked what was the meaning of the words without prejudice in a letter written without prejudice and answered the question in this way: I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted.
If the terms proposed in the letter are accepted a complete contract is established, and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one.
It is now well settled that the rule is not limited to such a case.
This can be seen from a series of decisions in recent years, including most clearly from Cutts v Head [1984] Ch 290, Rush & Tompkins Ltd v Greater London Council [1989] AC 1280, Muller v Linsley & Mortimer [1996] PNLR 74, Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436 and most recently Ofulue v Bossert [2009] UKHL 16, [2009] AC 990.
In particular, in Unilever Robert Walker LJ (with whom Simon Brown LJ and Wilson J agreed) set out the general position with great clarity at pp 2441 2444 and 2448 2449.
He first quoted from Lord Griffiths speech in Rush & Tompkins, with which the other members of the appellate committee agreed.
Rush & Tompkins is important because it shows that the without prejudice rule is not limited to two party situations or to cases where the negotiations do not produce a settlement agreement.
It was held that in general the rule makes inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made with a genuine intention to reach a settlement and that admissions made to reach a settlement with a different party within the same litigation are also inadmissible, whether or not settlement is reached with that party.
The passage quoted by Robert Walker LJ is at p 1299 of the report of Rush & Tompkins as follows: The without prejudice rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish.
It is nowhere more clearly expressed than in the judgment of Oliver LJ in Cutts v Head [at] 306: That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy.
It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings.
They should, as it was expressed by Clauson J in Scott Paper Co v Drayton Paper Works Ltd (1927) 44 RPC 151, 156, be encouraged fully and frankly to put their cards on the table.
The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability.
The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence.
Robert Walker LJ observed at p 2442D that, while in that well known passage the rule was recognised as being based at least in part on public policy, its other basis or foundation is in the express or implied agreement of the parties themselves that communications in the course of their negotiations should not be admissible in evidence if, despite their negotiations, a contested hearing ensues.
Robert Walker LJ further noted that these two justifications for the rule are referred to in some detail by Hoffmann LJ in Muller v Linsley & Mortimer.
At pp 2442 and 2443 he quoted two substantial passages from the judgment of Hoffmann LJ in that case which it is not necessary to repeat here because in this appeal the issue is not so much about the scope of the rule as about the extent of the exceptions to it.
It is therefore sufficient to quote two paragraphs from the judgment of Robert Walker LJ which show that the rule is not limited to admissions but now extends much more widely to the content of discussions such as occurred in this case.
He said this at pp 2443H 2444C: Without in any way underestimating the need for proper analysis of the rule, I have no doubt that busy practitioners are acting prudently in making the general working assumption that the rule, if not sacred (Hoghton v Hoghton (1852) 15 Beav 278, 321), has a wide and compelling effect.
That is particularly true where the without prejudice communications in question consist not of letters or other written documents but of wide ranging unscripted discussions during a meeting which may have lasted several hours.
At a meeting of that sort the discussions between the parties representatives may contain a mixture of admissions and half admissions against a partys interest, more or less confident assertions of a partys case, offers, counter offers, and statements (which might be characterised as threats, or as thinking aloud) about future plans and possibilities.
As Simon Brown LJ put it in the course of argument, a threat of infringement proceedings may be deeply embedded in negotiations for a compromise solution.
Partial disclosure of the minutes of such a meeting may be, as Leggatt LJ put it in Muller, a concept as implausible as the curates egg (which was good in parts).
Finally, at pp 2448 2449 Robert Walker LJ expressed his conclusions on the cases as follows: [they] make clear that the without prejudice rule is founded partly in public policy and partly in the agreement of the parties.
They show that the protection of admissions against interest is the most important practical effect of the rule.
But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties in the words of Lord Griffiths in Rush & Tompkins [at p 1300] to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts.
Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders.
The without prejudice rule is thus now very much wider than it was historically.
Moreover, its importance has been judicially stressed on many occasions, most recently perhaps in Ofulue, where the House of Lords identified the two bases of the rule and held that communications in the course of negotiations should not be admissible in evidence.
It held that the rule extended to negotiations concerning earlier proceedings involving an issue that was still not resolved and refused, on the ground of legal and practical certainty, to extend the exceptions to the rule so as to limit the protection to identifiable admissions.
The speeches of the majority contain a number of references to the importance of the rule which are relied upon on behalf of Oceanbulk.
I take some examples.
Lord Hope said at para 12: The essence of [the rule] lies in the nature of the protection that is given to parties when they are attempting to negotiate a compromise.
It is the ability to speak freely that indicates where the limits of the rule should lie.
Far from being mechanistic, the rule is generous in its application.
It recognises that unseen dangers may lurk behind things said or written during this period, and it removes the inhibiting effect that this may have in the interests of promoting attempts to achieve a settlement.
It is not to be defeated by other considerations of public policy which may emerge later, such as those suggested in this case, that would deny them that protection.
In para 2 Lord Hope had said that where a letter is written without prejudice during negotiations conducted with a view to a compromise, the protection that these words claim will be given to it unless the other party can show that there is a good reason for not doing so.
In para 43 Lord Rodger recognised the breadth of the without prejudice rule and rejected the proposed exception.
So too did Lord Walker.
He said at para 57 that he would not restrict the without prejudice rule unless justice clearly demands it.
This seems to me to be entirely consistent with the approach of Lord Griffiths in Rush & Tompkins at p 1300C, where he said that the rule is not absolute and that resort may be had to the without prejudice material for a variety of reasons where the justice of the case requires it.
See also per Lord Neuberger at para 89, endorsing the passage from the judgment of Robert Walker LJ in Unilever at pp 2448 2449 (referred to above).
The exceptions to the without prejudice rule
The cases to which I have referred (and others) show that, because of the importance of the without prejudice rule, its boundaries should not be lightly eroded.
The question in this appeal is whether one of the exceptions to the rule should be that facts identified during without prejudice negotiations which lead to a settlement agreement of the dispute between the parties are admissible in evidence in order to ascertain the true construction of the agreement as part of its factual matrix or surrounding circumstances.
This issue must be put in the context of the exceptions which have already been permitted to the rule.
In this connection I again turn to the illuminating judgment of Robert Walker LJ in Unilever.
Having set out the general principles at pp 2443 2444 (quoted above), which included the general working assumption that the rule has a wide and compelling effect, he said at p 2444C D that there are nevertheless numerous occasions on which the rule does not prevent the admission into evidence of what one or both parties said or wrote in the course of without prejudice negotiations.
Robert Walker LJ then set out (at pp 2444D 2446D) a list of what he called the most important instances.
He described them thus (omitting some of the references): (1) when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible. (2) Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence.
Underwood v Cox (1912) 4 DLR 66, a decision from Ontario, is a striking illustration of this. (3) Even if there is no concluded compromise, a clear statement which is made by one party to negotiations and on which the other party is intended to act and does in fact act may be admissible as giving rise to an estoppel.
That was the view of Neuberger J in Hodgkinson & Corby Ltd v Wards Mobility Services [1997] FSR 178, 191 and his view on that point was not disapproved by this court on appeal. (4) Apart from any concluded contract or estoppel, one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other unambiguous impropriety But this court has, in Forster v Friedland and Fazil Alizadeh v Nikbin, [1993 CAT 205], warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion. (5) Evidence of negotiations may be given (for instance, on an application to strike out proceedings for want of prosecution) in order to explain delay or apparent acquiescence.
Lindley LJ in Walker v Wilsher [at] 338, noted this exception but regarded it as limited to the fact that such letters have been written and the dates at which they were written.
But, occasionally, fuller evidence is needed in order to give the court a fair picture of the rights and wrongs of the delay. (6) In Mullers case (which was a decision on discovery, not admissibility) one of the issues between the claimant and the defendants, his former solicitors, was whether the claimant had acted reasonably to mitigate his loss in his conduct and conclusion of negotiations for the compromise of proceedings brought by him against a software company and its other shareholders.
Hoffmann LJ treated that issue as one unconnected with the truth or falsity of anything stated in the negotiations, and as therefore falling outside the principle of public policy protecting without prejudice communications.
The other members of the court agreed but would also have based their decision on waiver. (7) The exception (or apparent exception) for an offer expressly made 'without prejudice except as to costs' was clearly recognised by this court in Cutts v Head, and by the House of Lords in Rush & Tompkins, as based on an express or implied agreement between the parties.
It stands apart from the principle of public policy (a point emphasised by the importance which the new Civil Procedure Rules, Part 44.3(4), attach to the conduct of the parties in deciding questions of costs).
There seems to be no reason in principle why parties to without prejudice negotiations should not expressly or impliedly agree to vary the application of the public policy rule in other respects, either by extending or by limiting its reach.
In Cutts v Head Fox LJ said (at p 316) what meaning is given to the words without prejudice is a matter of interpretation which is capable of variation according to usage in the profession.
It seems to me that, no issue of public policy being involved, it would be wrong to say that the words were given a meaning in 1889 which is immutable ever after. (8) In matrimonial cases there has developed what is now a distinct privilege extending to communications received in confidence with a view to matrimonial conciliation:
Although it is not included in that list, it is not in dispute between the parties that another of the exceptions to the rule is rectification.
A party to without prejudice negotiations can rely upon anything said in the course of them in order to show that a settlement agreement should be rectified.
It was so held at first instance in Canada in Pearlman v National Life Assurance Co of Canada (1917) 39 OLR 141 and in New Zealand in Butler v Countrywide Finance Ltd (1992) 5 PRNZ 447.
Neither case contains much reasoning but both courts treated the point as self evident.
In my opinion the parties correctly recognised such an exception because it is scarcely distinguishable from the first exception.
No sensible line can be drawn between admitting without prejudice communications in order to resolve the issue of whether they have resulted in a concluded compromise agreement and admitting them in order to resolve the issue of what that agreement was.
This can be seen most clearly where the alleged agreement is oral but, in my opinion, must equally apply where the agreement is partly oral and partly in writing and where the agreement is wholly in writing but the issue is whether it reflects the common understanding of the parties.
It was submitted on behalf of Oceanbulk that none of those exceptions applies here and that the general principle that one party should not be permitted to cross examine the other party (or its witnesses) on matters disclosed or discussed in without prejudice negotiations should be applied in its full rigour.
Although it was correctly accepted that the point for decision in this appeal was not decided in Unilever or any of the other cases, it was submitted that the decided cases, especially Unilever and Ofulue, strongly point the way.
By contrast, it was submitted on behalf of TMT that facts which (a) are communicated between the parties in the course of without prejudice negotiations, (b) form part of the factual matrix or surrounding circumstances and (c) would, but for the without prejudice rule, be admissible as an aid to construction of a settlement agreement which results from the negotiations should be admissible in evidence by way of exception to the rule because the agreement cannot otherwise be properly construed in accordance with the well recognised principles of contractual interpretation and because there is no distinction in principle between this exception (the interpretation exception) and, for example, the rectification exception.
Should the interpretation exception be recognised as an exception to the without prejudice rule?
I have reached the conclusion that this question should be answered in the affirmative for these reasons.
The principles which govern the correct approach to the interpretation of contracts have been the subject of some development, or at least clarification, in recent years as a result of a number of important decisions of the House of Lords.
The position was clearly stated by Lord Steyn in R (Westminster City Council) v National Asylum Support Service [2002] UKHL 38, [2002] 1 WLR 2956.
He summarised the position thus in para 5: The starting point is that language in all legal texts conveys meaning according to the circumstances in which it was used.
It follows that the context must always be identified and considered before the process of construction or during it.
It is therefore wrong to say that the court may only resort to evidence of the contextual scene when an ambiguity has arisen.
In regard to contractual interpretation this was made clear by Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381, 1384 1386, and in Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989, 995 996.
Moreover, in his important judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912 913, Lord Hoffmann made crystal clear that an ambiguity need not be established before the surrounding circumstances may be taken into account.
As Lord Hoffmann himself put it in para 14 of his speech in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] AC 1101, in every case in which the interpretation of the language used in the contract is in issue, the question is what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean.
In Chartbrook the House of Lords considered and rejected the submission that what at para 42 Lord Hoffmann called the exclusionary rule, which excludes evidence of what was said or done in the course of negotiating an agreement for the purpose of drawing inferences about what the contract means, should now be abolished.
It accordingly remains part of English law.
The exclusionary rule does not exclude such evidence for all purposes.
Lord Hoffmann put it thus in para 42: It does not exclude the use of such evidence for other purposes: for example, to establish that a fact which may be relevant was known to the parties, or to support a claim for rectification or estoppel.
These are not exceptions to the rule.
They operate outside it.
It is not in dispute that, where negotiations which culminate in an agreement are not without prejudice, the exclusionary rule applies to the correct approach to the construction of the agreement.
Nor is it in dispute that in those circumstances evidence of the factual matrix is admissible as an aid to interpretation even where the evidence formed part of the negotiations.
The distinction between objective facts and other statements made in the course of negotiations was clearly stated by Lord Hoffmann in para 38 of Chartbrook: Whereas the surrounding circumstances are, by definition, objective facts, which will usually be uncontroversial, statements in the course of pre contractual negotiations will be drenched in subjectivity and may, if oral, be very much in dispute.
Trial judges frequently have to distinguish between material which forms part of the pre contractual negotiations which is part of the factual matrix and therefore admissible as an aid to interpretation and material which forms part of the pre contractual negotiations but which is not part of the factual matrix and is not therefore admissible.
This is often a straightforward task but sometimes it is not.
In my opinion this problem is not relevant to the question whether, where the pre contractual negotiations that form part of the factual matrix are without prejudice, evidence of those negotiations is admissible as an aid to construction of the settlement agreement.
The two questions are, as I see it, entirely distinct.
In these circumstances, I see no reason why the ordinary principles governing the interpretation of a settlement agreement should be any different regardless of whether the negotiations which led to it were without prejudice.
The language should be construed in the same way and the question posed by Lord Hoffmann should be the same, namely what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean.
That background knowledge may well include objective facts communicated by one party to the other in the course of the negotiations.
As I see it, the process of interpretation should in principle be the same, whether the negotiations were without prejudice or not.
In both cases the evidence is admitted in order to enable the court to make an objective assessment of the parties intentions.
The parties entering into such negotiations would surely expect the agreement to mean the same in both cases.
I would not accept the submission that to hold that the process of interpretation should be the same in both cases would be to offend against the principle underlying the without prejudice rule.
The underlying principle, whether based in public policy or contract, is to encourage parties to speak frankly and thus to promote settlement.
As I see it, the application in both cases of the same principle, namely to admit evidence of objective facts, albeit based on what was said in the course of negotiations, is likely to engender settlement and not the reverse.
I would accept the submission made on behalf of TMT that, if a party to negotiations knows that, in the event of a dispute about what a settlement contract means, objective facts which emerge during negotiations will be admitted in order to assist the court to interpret the agreement in accordance with the parties true intentions, settlement is likely to be encouraged not discouraged.
Moreover this approach is the only way in which the modern principles of construction of contracts can properly be respected.
Any other approach would be to introduce an unprincipled distinction between this class of case and two others which have already been accepted as exceptions to the without prejudice rule.
I have already expressed the view that the rectification exception is correctly accepted because no sensible line can be drawn between admitting without prejudice communications in order to resolve the issue whether they have resulted in a concluded compromise agreement, which was the first exception identified by Robert Walker LJ in Unilever, and admitting them in order to resolve the issue what that agreement was.
There is also no sensible basis on which a line can be drawn between the rectification case and this type of case.
This can clearly be seen by a consideration of Sir Richard Buxtons article at [2010] CLJ 253 entitled Construction and Rectification after Chartbrook, where he compares the fifth principle identified by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society (the ICS case) and the principles of rectification.
It is not necessary to set out in full the five principles which Lord Hoffmann set out in that case at [1998] 1 WLR 896, 912H 913E.
However, his fourth and fifth principles were in these terms: (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words.
The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.
The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749. 5) The rule that words should be given their natural and ordinary meaning reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents.
On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.
In his article Sir Richard Buxton expresses the view at p 256 that the fifth principle was revolutionary because it overrode the previous understanding that, rectification apart, the court could not depart from the words of a document to find an agreement different from that stated in the document.
Whether that is so or not, Sir Richard is in my opinion correct when he notes that the principles enshrined in ICS, especially the fifth principle, point to the close relationship between interpretation and rectification.
He notes at p 257 the essence of rectification as described in the judgment of Slade LJ (with whom Oliver and Robert Goff LJJ agreed) in Agip SpA v Navigazione Alta Italia SpA (The Nai Genova) [1984] 1 Lloyds Rep 353 at 359: In principle, the remedy of rectification is one permitted by the Court, not for the purpose of altering the terms of an agreement entered into between two or more parties, but for that of correcting a written instrument which, by a mistake in verbal expression, does not accurately reflect their true agreement.
Sir Richard then says that a closer expression of the process necessarily envisaged by principle 5 of ICS could scarcely be found.
I am not sure that I would put it quite as high as Sir Richard does but I entirely agree with him that the problems with which both the principles of rectification and the principles of construction (as explained in recent cases) grapple are closely related.
This is an important factor in leading to the conclusion that evidence of what was said or written in the course of without prejudice negotiations should in principle be admissible, both when the court is considering a plea of rectification based on an alleged common understanding during the negotiations and when the court is considering a submission that the factual matrix relevant to the true construction of a settlement agreement includes evidence of an objective fact communicated in the course of such negotiations.
For these reasons I would hold that the interpretation exception should be recognised as an exception to the without prejudice rule.
I would do so because I am persuaded that, in the words of Lord Walker in Ofulue (at para 57), justice clearly demands it.
In doing so I would however stress that I am not seeking either to underplay the importance of the without prejudice rule or to extend the exception beyond evidence which is admissible in order to explain the factual matrix or surrounding circumstances to the court whose responsibility it is to construe the agreement in accordance with the principles identified in ICS and Chartbrook.
In particular nothing in this judgment is intended otherwise to encourage the admission of evidence of pre contractual negotiations.
Conclusion
For these reasons, I would hold that evidence in support of representations iii) and iv) is in principle admissible as part of the factual matrix or surrounding circumstances on the true construction of the agreement.
It is I think common ground that it follows that it is also in principle admissible on the issues of estoppel and remoteness.
In short I have reached a different conclusion from the majority of the Court of Appeal but essentially the same conclusion as was reached by Andrew Smith J at first instance and by Ward LJ in the Court of Appeal.
For the reasons I have given I would allow the appeal.
LORD PHILLIPS
I agree with the reasoning and the conclusion of Lord Clarke.
The principle to be derived from this appeal can be shortly stated.
When construing a contract between two parties, evidence of facts within their common knowledge is admissible where those facts have a bearing on the meaning that should be given to the words of the contract.
This is so even where the knowledge of those facts is conveyed by one party to the other in the course of negotiations that are conducted without prejudice.
This principle applies both in the case of a contract that results from the without prejudice negotiations and in the case of any other subsequent contract concluded between the same parties.
Accordingly I would allow this appeal.
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This appeal concerns the scope of the exceptions to the principle that statements made in the course of without prejudice negotiations are not admissible in evidence (the without prejudice rule).
The issue is whether it is permissible to refer to anything written or said in the course of the without prejudice negotiations to help interpret any agreement which results from the negotiations.
The appellants, TMT Asia Limited and others, and the respondent, Oceanbulk Shipping & Trading SA, had entered into a number of forward freight agreements.
When the appellants failed to pay a sum due under those agreements, the parties entered into settlement negotiations which were expressed to be without prejudice.
The negotiations resulted in a written settlement agreement in respect of the sum due.
The respondent brought a claim for damages against the appellants alleging breach of a clause of the settlement agreement.
In their defence the appellants sought to rely on statements made during the without prejudice negotiations in support of their interpretation of the clause.
The respondent contended that reliance on the statements was precluded by the without prejudice rule.
The High Court held that the evidence was admissible for the purpose of determining how the terms of the settlement agreement were to be construed notwithstanding the without prejudice rule.
The majority of the Court of Appeal (Longmore and Stanley Burnton LJJ), however, allowed Oceanbulks appeal, holding that the evidence was not admissible.
The Supreme Court unanimously allowed the appeal.
The substantive judgment was given by Lord Clarke, with whom the other Justices agreed.
Lord Clarke observed that the without prejudice rule was now very much wider than it had been historically and extended to admissions made with a genuine intention to reach a settlement, including any admissions made to reach a settlement with a different party within the same litigation, and applied whether or not settlement was reached with that party: [19] [29].
The without prejudice rule was an important rule that founded upon the public policy of encouraging litigants to settle their differences, as well as the express or implied agreement of the parties themselves that communications in the course of their negotiations should not be admissible in evidence: [24].
Because of the importance of the without prejudice rule, its boundaries should not be lightly eroded.
Nevertheless, the authorities
clearly established that resort might be had to without prejudice material by way of exception to the rule where the justice of the case required it: [30] [33].
The central issue in the present case was whether one of the exceptions to the rule should be that facts which (a) are communicated between the parties in the course of without prejudice negotiations, (b) form part of the factual matrix or surrounding circumstances and (c) would, but for the without prejudice rule, be admissible as an aid to construction of a settlement agreement which results from the negotiations should be admissible in evidence by way of exception to the rule (the interpretation exception): [35].
Lord Clarke reached the conclusion that justice clearly demanded that the interpretation exception should be recognised as an exception to the without prejudice rule for two principal reasons: [36] and [46].
Without recourse to the without prejudice material the agreement could not be properly construed in accordance with the well recognised principles identified in Investors Compensations Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] AC 1101 that objective facts which emerge during negotiations are admissible as part of the factual matrix in order to assist courts to interpret an agreement in accordance with the parties true intentions.
The process of interpretation of a settlement agreement should in principle be the same, whether negotiations are without prejudice or not, and permitting recourse to the without prejudice material for this purpose was the only way in which the modern principles of contractual interpretation could be properly respected: [36] [41].
Any other approach would introduce an unprincipled distinction between this class of case and two other exceptions to the without prejudice rule.
The first such exception, which has already been accepted, is that resort might be had to without prejudice material in order to resolve the issue whether negotiations had resulted in a concluded compromise agreement.
The second such exception (which has not yet been accepted) followed from the first, namely that if a party could have resort to without prejudice material to see whether negotiations had resulted in a concluded settlement agreement, then a party could also rely on such material in order to show that a settlement agreement should be rectified.
There was no sensible basis on a which a line could be drawn between admitting without prejudice communications in order to consider a plea of rectification and admitting them as part of the factual matrix relevant to the true construction of a settlement agreement: [42] [45].
Lord Clarke stressed that nothing in the judgment was intended to underplay the importance of the without prejudice rule or to encourage the admission of evidence of pre contractual negotiations beyond that which is admissible in order to explain the factual matrix or surrounding circumstances: [46].
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provides as follows: 15.
Registration of Greens Section 15 of the Commons Act 2006, so far as relevant to this appeal, (1) Any person may apply to the commons registration authority to register land to which this Part applies as a town or village green in a case where subsection (2), (3) or (4) applies. (2) This subsection applies where (a) a significant number of the inhabitants of any locality, or of any neighbourhood within a locality, have indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years; and (b) they continue to do so at the time of the application. (4) This subsection applies (subject to subsection (5)) where (a) a significant number of the inhabitants of any locality, or of any neighbourhood within a locality, indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years; (b) they ceased to do so before the commencement of this section; and (c) the application is made within the period of five years beginning with the cessation referred to in paragraph (b). (7) For the purposes of subsection (2)(b) in a case where the condition in subsection (2)(a) is satisfied (a) where persons indulge as of right in lawful sports and pastimes immediately before access to the land is prohibited as specified in subsection (6), those persons are to be regarded as continuing so to indulge; and (b) where permission is granted in respect of use of the land for the purposes of lawful sports and pastimes, the permission is to be disregarded in determining whether persons continue to indulge in lawful sports and pastimes on the land as of right.
The application relevant to this appeal was expressed to be made under section 15(4).
It was suggested in argument that (because of the deeming provision in subsection (7)) it was also, or alternatively, made under subsection (2).
In any case it was a valid application, and neither subsection (5) nor subsection (6) is in point.
The issue
The general issue for the Court is whether a piece of open land next to the sea in Redcar ought to have been registered as a town green under section 15.
For at least 80 years before 2002 the land in question (the disputed land) formed part of a golf course in regular use by members of the Cleveland Golf Club, whose trustees were tenants of the course.
The inspector who held a public inquiry found as a fact that when local residents using the disputed land for recreation encountered members of the golf club playing golf, the former deferred to the latter.
In these circumstances the legal issue for the Court can be more particularly stated as whether the legal consequence of this deference was that the local residents were not indulging in recreation as of right within the meaning of the Commons Act 2006.
During the last decade there have been three important decisions of the House of Lords dealing with different aspects of the law (as it stood before the Commons Act 2006) as to town and village greens: R v Oxfordshire County Council Ex p Sunningwell Parish Council [2000] 1 AC 335 (Sunningwell); R(Beresford) v Sunderland City Council [2003] UKHL 60, [2004] 1 AC 889 (Beresford); and Oxfordshire County Council v Oxford City Council [2006] UKHL 25, [2006] 2 AC 674 (Oxfordshire).
In none of these appeals did the House of Lords have to decide the point now at issue, although both sides have placed reliance on some passages in their Lordships opinions.
The Commons Act 2006 (which is still not fully in force) makes important changes in the law, but does not directly affect the issue of deference.
The facts
The appellant, Mr Kevin Lewis, is one of five local residents who made the application for registration of the disputed land under section 15 of the Commons Act 2006.
The first respondent, Redcar and Cleveland Borough Council, has a dual capacity, being both the registration authority and the freehold owner of the disputed land.
The second respondent, Persimmon Homes (Teesside) Ltd is an interested party.
It has since 2003 been the Borough Councils development partner in the Coatham Links coastal regeneration project.
The project is for a mixed development for residential and leisure purposes on a site extending to 14 hectares.
The disputed land forms an important, and possibly indispensable, part of the development site.
The appeal is therefore of great importance to the parties, as well as raising a point of law of general public interest.
Redcar is on the south side of the Tees estuary.
The disputed land is part of an area known as Coatham Common or Coatham Links (Coatham was originally a separate village but is now part of Redcar).
On the south (landward) side of the disputed land there is a mainly residential area.
To the east is the site of the former club house and a leisure centre (the club house site is not included in the disputed land but was included in the earlier application mentioned below).
To the west is more open land still used as a golf course.
To the north is the beach and the North Sea.
The disputed land formerly included the tees, fairways and greens of the first and eighteenth holes, and a small practice area.
The inspectors report dated 14 March 2006 described the boundaries in more detail and contained (paras 6 and 7) this further description of the disputed land (referred to as the Report Land): The character of the Report Land is typical of coastal sand dunes, with irregular sand hills covered in rough grass.
The dunes are noticeably higher on the northern side.
There is a flatter area along the southern side, particularly west of the Church Street access.
The former tees, greens and fairways of the golf course are no longer obvious.
The Report Land is crossed by numerous informal paths of which the most well used run alongside and close to the southern and northern boundaries.
A number of photographs show the general nature of the land.
There are some fairly new signs erected by [the Borough Council] on the Report Land.
The gist of the signs is that they give the public temporary permission to use the Report Land for recreation pending its redevelopment.
I call these signs the permissive signs.
The footpath near the southern boundary is a public footpath.
Mr Lewis and his fellow applicants applied for registration of the disputed land on 8 June 2007, soon after section 15 of the Commons Act 2006 had come into force on 5 April 2007.
It was not the first application that had been made in respect of the disputed land.
An earlier application had been made by another group of local residents on 1 March 2005.
It was therefore considered under the earlier law, that is the Commons Registration Act 1965 as amended by the Countryside and Rights of Way Act 2000.
This earlier application was the subject of a public inquiry held by Mr Vivian Chapman QC as an inspector appointed by the Borough Council as registration authority.
The inquiry was held over several days in December 2005 and January 2006.
Mr Chapman produced a lengthy report dated 14 March 2006 recommending that the application should be refused, and the Borough Council accepted his recommendation.
An application for leave for judicial review of that decision was refused on the papers by Collins J on 22 August 2006 and was not renewed.
When the second application was made in 2007 it was rightly thought that it was unnecessary, and would be a waste of time and money, to hold a second public inquiry, since it would be directed to the same factual issues.
Mr Chapman did however (in connection with the first application) make a second report dated 9 June 2006 addressing the decision of the House of Lords in Oxfordshire (he advised that it made no difference to his conclusions, and that in any case it was not open to the Borough Council to reopen its decision).
The relevant findings of fact are therefore in Mr Chapmans report dated 14 March 2006 on the first application.
The crucial findings are in paras 171, 172, and 175.
These paragraphs are set out in full in the judgment of Dyson LJ in the Court of Appeal [2009] EWCA Civ 3, [2009] 1 WLR 1461, but they are of such central importance that they need to be set out again.
Para 171 dealt with use of the disputed land by golfers: 171.
I find that, from as far back as living memory goes (at least as far back as the 1920s), the Report Land was continuously used as part of the Cleveland Golf Club links.
The only exception is that the golfing was suspended during World War II.
Golfing use ceased in 2002.
I find that the club was a popular one and that the golf links were well used nearly every day of the year.
In the years before 2002, the Report Land was used for the club house, the first and eighteenth holes and for a practice ground.
There is some evidence that the precise configuration of the course changed somewhat over the years.
The club house, tees, fairways, greens and practice ground did not, however, take up the whole of the Report Land and there were substantial areas of rough ground beside and between these features.
Para 172 dealt with use by non golfers (that is, local residents): I find that from as far back as living memory goes, the open parts of the Report Land have also been extensively used by non golfers for informal recreation such as dog walking and childrens play.
Some of the walking has been linear walking in transit.
Thus the informal paths running east west have been used by caravan residents to get access to the centre of Redcar with its shops and public houses.
Also, there is evidence of people taking a short cut south north from Church Street to the gap in the fence in Majuba Road.
However I am satisfied that the open parts of the Report Land have been extensively used by non golfers for general recreational activities apart from linear walking.
I prefer the evidence on this point of the applicants witnesses and of Mr Fletcher to the evidence of the objectors other witnesses that such use was occasional and infrequent.
Paras 173 and 174 concluded that the local people who used the land for informal recreation came primarily from the Coatham area of Redcar.
Then para 175 dealt with the relationship between the two types of use: I find that the relationship between the golfers and the local recreational users was generally cordial.
There was evidence of only a few disputes.
Only Squadron Leader Kime seems to have caused problems by actively asserting a right to use the Report Land and the golf club appears to have tried to avoid any formal dispute with him.
In my judgment, the reason why the golfers and the local people generally got on so well was because the local people (with the exception of Squadron Leader Kime) did not materially interfere with the use of the land for playing golf.
Many of the applicants witnesses emphasised that they would not walk on the playing areas when play was in progress.
They would wait until the play had passed or until they were waved across by the golfers.
Where local people did inadvertently impede play, a shout of fore would be enough to warn them to clear the course.
I find that recreational use of the Report Land by local people overwhelmingly deferred to golfing use.
Para 221 (in the part of the report applying the law to the facts as found) referred to the decisions of Sullivan J in R (Laing Homes Ltd) v Buckinghamshire County Council [2003] EWHC 1578 (Admin), [2004] 1 P&CR 573 (Laing Homes) and His Honour Judge Howarth in Humphreys v Rochdale MBC unreported, 18 June 2004: Leaving aside the public footpath, I consider that the reasoning in Laing Homes Ltd and Humphreys squarely applies to the Report Land in the present case.
Use of the Report Land as a golf course by the Cleveland Golf Club would have been in breach of Inclosure Act 1857 section 12 and Commons Act 1876 section 29 if the Report Land had been a town or village green.
It was a use which conflicted with the use of the Report Land as a place for informal recreation by local people.
It was not a use which was with a better view to the enjoyment of the Report Land as a town or village green.
The overwhelming evidence was that informal recreational use of the Report Land deferred to its extensive use as a golf course by the Cleveland Golf Club.
Accordingly, use of the Report Land by local people was not as of right until use as a golf course ceased in 2002.
Mr Chapman concluded (para 223) that (apart from use of the public footpath) recreational user of the disputed land was not as of right before 2002 because it deferred to extensive use of the land by the golf club, and that user as of right was not continuing because of the permissive signs erected in 2003.
It is convenient, at this point, to dispose of the matter of the signs.
They were contentious earlier but are no longer a live issue.
There were two sets of signs: warning signs erected by the golf club in 1998 and the permissive signs erected by the Borough Council in 2003.
The warning signs read Cleveland Golf Club. Warning.
It is dangerous to trespass on the golf course.
The inspector found (para 176): Although these were vandalised several times after which the golf club gave up trying to maintain them, I am satisfied that they were in place long enough for regular users of the report land to know of them.
Indeed it seems that they caused a stir locally because of the implication that local people using Coatham Common were trespassers.
The inspector treated them as material to the outcome of both applications, but on judicial review of the second application Sullivan J ([2008] EWHC 1813 (Admin), paras 11 to 23) held that the wording was too ambiguous to alter the character of the residents use of the land, and that conclusion has not been challenged by the respondents.
The permissive signs erected in 2003 were fatal to the first application but not to the second application, because of the change in the law made by s.15 of the Commons Act 2006.
The course of the second application
Mr Chapman advised the Borough Council in an opinion dated 12 June 2007 that the application made on 6 June 2007 was bound to fail on two of the same grounds on which the first application failed, that is the deference issue and the 1998 warning notices.
He recommended that the application should be summarily dismissed, subject to any new points raised by the applicants.
Various points were raised but in three further opinions dated 29 July, 13 October and 18 October 2007 Mr Chapman maintained his advice that the application should be rejected.
On 19 October 2007 the Borough Council, by its General Purposes and Village Greens Committee, accepted Mr Chapmans advice and resolved to reject the application for registration.
On 18 July 2008 Sullivan J, at a rolled up hearing, granted the applicants permission to apply for judicial review of the Borough Councils decision, but dismissed the substantive application.
He did so on the ground that the local residents deference to the golfers had prevented their user being as of right before 2002.
He relied on para 82 of his own judgment in Laing Homes [2004] 1 P & CR 573, and on para 57 of Lord Hoffmanns opinion in Oxfordshire [2006] 2 AC 674.
He granted leave to appeal, commenting, deference is judge made law, judge made by me.
The Court of Appeal (Laws, Rix and Dyson LJJ) unanimously dismissed the appeal in reserved judgments handed down on 15 January 2009: [2009] 1 WLR 1461.
Dyson LJ gave the principal judgment, and Rix LJ added a concurring judgment.
Both judgments put the decision squarely on the ground of deference excluding user as of right (although Dyson LJ denied that there was any principle of deference).
The provisions of two Victorian statutes relating to greens (section 12 of the Inclosure Act 1857 and section 29 of the Commons Act 1876) which had formed part of the grounds of decision in Laing Homes, were not relied on in the Court of Appeal.
In short, all the subsidiary issues have disappeared and this Court is faced with the single issue of deference.
It is not however a simple issue.
As of right
The concept of user as of right is found (either in precisely those words or in similar terms) in various statutory provisions dealing with the acquisition by prescription of public or private rights.
Section 5 of the Prescription Act 1832 makes it sufficient to plead enjoyment as of right (while section 2 refers to a way actually enjoyed by any person claiming right thereto without interruption for the full period of 20 years).
Section 31 of the Highways Act 1980 refers to use of a way being actually enjoyed by the public as of right and without interruption for the full period of 20 years.
Section 22(1A) of the Commons Registration Act 1965, as substituted by the Countryside and Rights of Way Act 2000, refers simply to inhabitants indulging in lawful sports and pastimes as of right for at least 20 years.
Both Sunningwell [2000] 1 AC 335 and Beresford [2004] 1 AC 889 were concerned with the meaning of as of right in the Commons Registration Act 1965.
In Sunningwell Lord Hoffmann discussed the rather unprincipled development of the English law of prescription.
He explained that by the middle of the 19th century the emphasis shifted from fictions (pp350 351): to the quality of the 20 year user which would justify recognition of a prescriptive right or customary right.
It became established that such user had to be, in the Latin phrase, nec vi, nec clam, nec precario: not by force, nor stealth, nor the licence of the owner. (For this requirement in the case of custom, see Mills v Colchester Corporation (1867) LR 2 CP 476, 486.) The unifying element in these three vitiating circumstances was that each constituted a reason why it would not have been reasonable to expect the owner to resist the exercise of the right in the first case, because rights should not be acquired by the use of force, in the second, because the owner would not have known of the user and in the third, because he had consented to the user, but for a limited period.
Lord Hoffmann pointed out that for the creation of a highway, there was an additional requirement that an intention to dedicate it must be evinced or inferred (as to that aspect see R(Godmanchester Town Council) v Secretary of State for the Environment, Food and Rural Affairs [2007] UKHL 28; [2008] AC 221).
In Sunningwell the villagers had used about ten acres of glebe land for dog walking, childrens games, and similar activities.
This use seems to have coincided with the land being let for grazing by horses, but the report gives little detail about this.
The inspector (as it happens, Mr Chapman) advised against acceptance of the registration because although the witnesses had said that they thought they had the right to use the glebe, they did not say that they thought the right was confined to villagers (as opposed to the general public).
Lord Hoffmann held (and the rest of the Appellate Committee agreed) that this was an error.
The decision of the Court of Appeal in R v Suffolk County Council Ex p Steed (1996) 75 P & CR 102 was overruled.
That was the context in which Lord Hoffmann stated in a passage (at pp352 353) relied on by the respondents: My Lords, I pause to observe that Lord Blackburn [in Mann v Brodie (1885) 10 App Cas 378, 386, as to dedication of a highway] does not say that there must have been evidence that individual members of the public using the way believed there had been a dedication.
He is concerning himself, as the English theory required, with how the matter would have appeared to the owner of the land.
The user by the public must have been, as Parke B said in relation to private rights of way in Bright v Walker 1 CM & R 211, 219, openly and in the manner that a person rightfully entitled would have used it.
The presumption arises, as Fry J said of prescription generally in Dalton v Angus & Co 6 App Cas 740, 773, from acquiescence.
The proposition that as of right is sufficiently described by the tripartite test nec vi, nec clam, nec precario (not by force, nor stealth, nor the licence of the owner) is established by high authority.
The decision of the House of Lords in Gardner v Hodgsons Kingston Brewery Co. [1903] AC 229 is one of the clearest: see Lord Davey at p238 and Lord Lindley at p239.
Other citations are collected in Gale on Easements, 18th ed. (2008) paras 4 80 and 4 81.
The proposition was described as clear law by Lord Bingham of Cornhill in Beresford [2004] 1 AC 889, para 3.
The opinion of Lord Rodger of Earlsferry (para 55) is to the same effect.
So is that of Lord Scott of Foscote (para 34), though with a cautionary note as to the difference between the acquisition of public and private rights.
Laing Homes
The respondents case is that although Sullivan J, in his judgment in Laing Homes [2004] 1 P & CR 573, was indeed the first judge to speak in terms of deference shown by local residents, he was not striding into entirely unknown and uncharted territory.
Earlier authorities (including those mentioned in the passage of Lord Hoffmanns opinion in Sunningwell quoted in para [19] above) suggest that although the local residents private beliefs as to their rights are irrelevant, the same is not true of their outward behaviour on the land in question, as it would appear to a reasonable owner of the land.
It is relevant, on this argument, to look at what might today be called the residents attitude or body language (this thought is elaborated in an imaginary example given by JG Riddall, Miss Tomkins and the Law of Village Greens [2009] Conveyancer and Property Lawyer 326).
I propose to look next at Laing Homes itself, and then to consider how far the respondents can claim much more long established roots for the doctrine of deference which Laing Homes articulates.
Laing Homes was concerned with three adjoining fields (the application area), extending in all to 38 acres, on the edge of Widmer End in Buckinghamshire.
This land, together with three smaller fields not affected by the application for registration, had been acquired by Laing Homes, a house builder, and held in its land bank since 1963.
The land was subject to a grazing licence from 1973 to 1979, when the farmer stopped using it for grazing because of repeated troubles with trespassers.
In the course of time footpaths were established round the three fields in the application area (cutting some corners) and these were officially recognised as public footpaths in June 2000.
An application for registration of the application area was made in August 2000.
The registration authoritys decision to register the land as a village green was challenged by way of judicial review on various grounds (including human rights grounds on which Sullivan J did not find it necessary to rule).
In his judgment Sullivan J listed, in para 50, the four main grounds on which Laing Homes was attacking the inspectors report (and the registration based on it).
The first ground was that there was insufficient evidence of the use of the whole of the application area for lawful sports and games over the 20 year period.
The second was the inspectors conclusion that the use of the fields for an annual hay crop (from about 1980 until the early 1990s) was not incompatible with the establishment of village green rights.
Sullivan J considered the second ground first.
He discussed it at some length and differed from the inspector.
He did so primarily on the view he took of the perception of a reasonable landowner, although he was also influenced by the point (no longer relied on) as to the Victorian statutes (para 86): Like the Inspector, I have not found this an easy question.
Section 12 [of the Inclosure Act 1857] acknowledges that animals may be grazed on a village green.
Rough grazing is not necessarily incompatible with the use of land for recreational purposes: see Sunningwell.
If the statutory framework within which section 22(1) [of the Commons Registration Act 1965] was enacted had made provision for low level agricultural activities to coexist with village green type uses, rather than effectively preventing them once such a use has become established, it would have been easier to adopt the Inspectors approach, but it did not.
I do not consider that using the three fields for recreation in such a manner as not to interfere with [the farmers] taking of an annual hay crop for over half of the 20 year period, should have suggested to Laings that those using the fields believed that they were exercising a public right, which it would have been reasonable to expect Laings to resist.
I have to say that I am rather puzzled by Sullivan Js summary of the evidence about hay making, and the discussion of it (both by the inspector at paras 56 and 57, and by the judge himself at paras 59 63).
There is a detailed description of the local residents keeping off the fields for a few days in spring when they were harrowed, rolled and fertilized, and again for a few days during hay making.
But there are only the most passing references by the judge (in paras 59 and 111) to the further need for people to keep off the fields for many weeks while the crop was growing, if it was to be worth the farmers while to get it in.
The length of this period would vary with the quality of the land and the seasonal weather, but would usually, I imagine, be of the order of three months.
The evidence was that the farmer generally got well over 2,000 bales of hay from the application area.
So it seems that the local residents must, in general, have respected the hay crop.
The puzzle is partly explained by Sullivan Js consideration of the first ground (evidence of use of the whole application area) which follows at paras 88 111.
In para 111 the judge commented that there was an overlap between the two grounds, because the existence of public footpaths round the three fields (cutting some corners) provided an alternative explanation of the local residents use of the fields.
It seems likely that they used the perimeter paths and kept off the hay while it was growing, although their dogs may not have done, as the judge discussed at some length (paras 103 to 110).
There are some dicta about Laing Homes in Lord Hoffmanns opinion in Oxfordshire [2006] 2 AC 674.
Lord Rodger and I expressed general agreement with Lord Hoffmann, but did not comment on this point.
Lord Hoffmann observed (para 57): No doubt the use of the land by the owner may be relevant to the question of whether he would have regarded persons using it for sports and pastimes as doing so as of right.
But, with respect to the judge, I do not agree that the low level agricultural activities must be regarded as having been inconsistent with use for sports and pastimes for the purposes of section 22 if in practice they were not.
There was some discussion in the course of argument of what Lord Hoffmann meant by the first sentence of this passage.
In the Court of Appeal (para 45) Dyson LJ took it to mean inconsistency between competing uses manifested where the recreational users adjust their behaviour to accommodate the competing activities of the owner (or his lessees or licensees).
I am rather doubtful about that.
I think it just as likely that Lord Hoffmann had in mind, not concurrent competing uses of a piece of land, but successive periods during which recreational users are first excluded and then tolerated as the owner decides.
An example would be a fenced field used for intensive grazing for nine months of the year, but left open for three months when the animals were indoors for the worst of the winter.
Whether that is correct or not, I see great force in the second sentence of the passage quoted.
Taking a single hay crop from a meadow is a low level agricultural activity compatible with recreational use for the late summer and from then until next spring.
Fitch v Fitch (1797) 2 Esp 543 is venerable authority for that.
That is not to say that Laing Homes was wrongly decided, although I see it as finely balanced.
The residents of Widmer End had gone to battle on two fronts, with the village green inquiry in 2001 following a footpaths inquiry two or three years earlier, and some of the evidence about their intensive use of the footpaths seems to have weakened their case as to sufficient use of the rest of the application area.
The earlier authorities
I have already referred to Fitch v Fitch, the case about cricket and hay making at Steeple Bumpstead in Essex.
The report is brief, but what Heath J is reported as having said is a forthright declaration of the need for coexistence between concurrent rights: The inhabitants have a right to take their amusement in a lawful way.
It is supposed, that because they have such a right, the plaintiff should not allow the grass to grow.
There is no foundation in law for such a position.
The rights of both parties are distinct, and may exist together.
If the inhabitants come in an unlawful way, or not fairly, to exercise the right they claim of amusing themselves, or to use it in an improper way, they are not justified under the custom pleaded, which is a right to come into the close to use it in the exercise of any lawful games or pastimes, and are thereby trespassers.
Against that Mr Laurence QC relied on the general proposition that if the public (or a section of the public) is to acquire a right by prescription, they must by their conduct bring home to the landowner that a right is being asserted against him, so that the landowner has to choose between warning the trespassers off, or eventually finding that they have established the asserted right against him.
That was in line with what Lord Hoffmann (in Sunningwell [2000] 1 AC 335, 350 351, quoted at para [18] above) called the unifying element in the tripartite test: why it would not have been reasonable to expect the owner to resist the exercise of the right.
The first of the old authorities relied on by Mr Laurence was Bright v Walker (1834) 1 CM & R 211, 219, a case on a private right of way, in which Parke B spoke of use of a way openly and in the manner that a person rightfully entitled would have used it.
I read that reference to the manner of use as emphasising the importance of open use, rather than as prescribing an additional requirement.
On its facts the case raised as much of an issue as to vi as to clam since gates had been erected and broken down during the relevant period.
The point of law in the case turned on the peculiarity that the freehold owner of the servient tenement was a corporation sole.
The next case relied on (another case about a claim to a private way) was Hollins v Verney (1884) 13 QBD 304 (there is a fuller statement of the facts in the first instance report (1883) 11 QBD 715).
Lindley LJ (giving the judgment of the Court of Appeal) observed at p315: No user can be sufficient which does not raise a reasonable inference of such a continuous enjoyment.
Moreover, as the enjoyment which is pointed out by the statute is an enjoyment which is open as well as of right, it seems to follow that no actual user can be sufficient to satisfy the statute, unless during the whole of the statutory term (whether acts of user be proved in each year or not) the user is enough at any rate to carry to the mind of a reasonable person who is in possession of the servient tenement, the fact that a continuous right to enjoyment is being asserted, and ought to be resisted if such right is not recognised, and if resistance to it is intended.
Can a user which is confined to the rare occasions on which the alleged right is supposed in this instance to have been exercised, satisfy even this test? It seems to us that it cannot: that it is not, and could not reasonably be treated as the assertion of a continuous right to enjoy; and when there is no assertion by conduct of a continuous right to enjoy, it appears to us that there cannot be an actual enjoyment within the meaning of the statute.
The second sentence of this passage begins with Moreover, suggesting that Lindley LJ was adding to the requirement that the use should be continuous.
But the passage as a whole seems to be emphasising that the use must be openly (or obviously) continuous (the latter word being used three more times in the passage).
The emphasis on continuity is understandable since the weight of the evidence was that the way was not used between 1853 and 1866, or between 1868 and 1881.
It was used exclusively, or almost exclusively, for carting timber and underwood which was cut on a 15 year rotational system.
The use relied on was too sparse for any jury to find section 2 of the Prescription Act 1832 satisfied.
In Bridle v Ruby [1989] QB 169 the plaintiff established a right of way by prescription despite his personal belief that he had such a right by grant.
Ralph Gibson LJ said at p178: The requirement that user be as of right means that the owner of the land, over which the right is exercised, is given sufficient opportunity of knowing that the claimant by his conduct is asserting the right to do what he is doing without the owners permission.
If the owner is not going to submit to the claim, he has the opportunity to take advice and to decide whether to question the asserted right.
The fact that the claimant mistakenly thinks that he derived the right, which he is openly asserting, from a particular source, such as the conveyance to him of his property, does not by itself show that the nature of the user was materially different or would be seen by the owner of the land as other than user as of right.
That the claimants private beliefs are generally irrelevant, in the prescription of either private or public rights, was finally confirmed by the House of Lords in Sunningwell (see paras [18] and [19] above).
The last authority calling for mention on this point is Cumbernauld and Kilsyth District Council v Dollar Land (Cumbernauld) Ltd [1992] SLT 1035 (Court of Session), 1993 SC (HL) 44 (House of Lords).
In the Court of Session the Lord President (Lord Hope), after considering several authorities, observed (at p1041): The significance of these passages for present purposes is that, where the user is of such amount and in such manner as would reasonably be regarded as being the assertion of a public right, the owner cannot stand by and ask that his inaction be ascribed to his good nature or to tolerance.
Lord Hopes reference to the manner of use must, I think, be related to the unusual facts of the case (set out in detail at pp1037 1038).
The issue was whether there was a public right of way over an extensive walkway in a new town, designed to separate pedestrian from vehicular traffic.
It gave access to the town centre where there were numerous shops (whose tenants no doubt had private rights of way for themselves and their customers).
But the walk was also used for access to public places such as the railway station, the church, a health centre and a swimming pool.
It was held that the use of the way had the character of general public use of a town centre pedestrian thoroughfare (p1042).
The House of Lords upheld this decision.
It is worth noting that Lord Jauncey of Tullichettle stated, at p47, There is no principle of law which requires that there be conflict between the interest of users and those of a proprietor.
Deference or civility?
In the light of these and other authorities relied on by Mr Laurence I have no difficulty in accepting that Lord Hoffmann was absolutely right, in Sunningwell [2000] 1 AC 335, to say that the English theory of prescription is concerned with how the matter would have appeared to the owner of the land (or if there was an absentee owner, to a reasonable owner who was on the spot).
But I have great difficulty in seeing how a reasonable owner would have concluded that the residents were not asserting a right to take recreation on the disputed land, simply because they normally showed civility (or, in the inspectors word, deference) towards members of the golf club who were out playing golf.
It is not as if the residents took to their heels and vacated the land whenever they saw a golfer.
They simply acted (as all the members of the Court agree, in much the same terms) with courtesy and common sense.
But courteous and sensible though they were (with occasional exceptions) the fact remains that they were regularly, in large numbers, crossing the fairways as well as walking on the rough, and often (it seems) failing to clear up after their dogs when they defecated.
A reasonably alert owner of the land could not have failed to recognise that this user was the assertion of a right and would mature into an established right unless the owner took action to stop it (as the golf club tried to do, ineffectually, with the notices erected in 1998).
There is in my opinion a significant difference, on this point, between the acquisition of private and public rights.
As between neighbours living in close proximity, what I have referred to as body language may be relevant.
In a Canadian case of that sort, Henderson v Volk (1982) 35 OR (2d) 379, 384, Cory JA (delivering the judgment of the Court of Appeal of Ontario) observed: It is different when a party seeks to establish a right of way for pedestrians over a sidewalk.
In those circumstances the user sought to be established may not even be known to the owner of the servient tenement.
In addition, the neighbourly acquiescence to its use during inclement weather or in times of emergency such as a last minute attempt to catch a bus, should not too readily be accepted as evidence of submission to the use.
It is right and proper for the courts to proceed with caution before finding that title by prescription or by the doctrine of lost modern grant was established in a case such as this.
It tends to subject a property owner to a burden without compensation.
Its ready invocation may discourage acts of kindness and good neighbourliness; it may punish the kind and thoughtful and reward the aggressor.
That is, if I may say so, obviously good sense.
But I do not think it has any application to a situation, such as the Court now faces, in which open land owned by a local authority is regularly used, for various different forms of recreation, by a large number of local residents.
The inspectors assessment did in my opinion amount to an error of law.
He misdirected himself as to the significance of perfectly natural behaviour by the local residents.
Rights after registration
Mr Laurence made some forceful submissions as to what the position would have been on a double hypothesis: that the disputed land had been registered as a town green, and that it had continued to be let to the golf club after its registration.
In those circumstances, he said, the fortunes of the golfers and the local residents would be dramatically reversed: instead of being all give by the residents it would be all take, to the point at which the golf club would no longer be able to function at all.
There was, he said, a massive mismatch between what the residents would have done in order to gain the rights, and what they would be in a position to do after the green had been registered.
This lack of symmetry was a reason, he argued, for doubting the soundness of the reasoning on which the appellants case rested.
These submissions raise two distinct questions.
The first is a question of law about the effect of registration of a green.
The second is a speculative question of predicting the behaviour of a group of people in an eventuality which cannot now arise.
I would spend little time on the second question.
Like other members of the Court, I am sceptical about the notion that the local residents attitude towards the golfers, if the green were to be registered in circumstances where it was still being used by the golf club, would suddenly turn from friendly civility to vindictive triumphalism.
Many of them must have friends or neighbours who are members of the golf club; some are even members themselves.
But I would accept that the question of law needs to be considered on the footing that it is at least possible that relations between the two groups might become rather more strained.
Here it is necessary to come back to Oxfordshire [2006] 2 AC 674.
The proceedings in that case were not judicial review proceedings.
They were initiated by the registration authority, by a claim form under CPR Part 8, for guidance on a pending application for registration (the first instance judgment is reported at [2004] Ch 253).
In the House of Lords both Lord Scott of Foscote and Baroness Hale of Richmond regarded some of the questions raised as unnecessary, academic and inappropriate (see Lord Scott at paras 91 103 and Baroness Hale at paras 131 137).
The questions to which they most strongly objected were (i) whether, when a green was registered, the relevant inhabitants had legal rights to take recreation on it; and (ii) whether land registered as a green fell within the scope of what had been referred to as the Victorian statutes.
Lord Hoffmann, while recognising these concerns, thought that it would be appropriate to answer the questions, because Oxford City Council had a real interest in the question (para 45): But the interest of the city council in these questions is concrete in the most literal sense.
They wish to build houses on the land.
If registration creates no rights and the land does not fall within the Victorian statutes, they will be able to do so.
So Lord Hoffmann proceeded to answer them, and Lord Rodger and I expressed general agreement with his opinion.
Lord Hoffmann noted (para 46) that registration is conclusive evidence of the matters registered, but In the case of a town or village green, the registration states simply that the land is a green.
No other information is prescribed.
The position under the Commons Act 2006 will be similar once it has come fully into force.
The only rights specifically registrable in respect of a town or village green will be rights of common: see section 2(2) and section 3(4).
But section 3(5) enables regulations to be made requiring or permitting other information to be included in the register.
Regulations have been made (The Commons Registration (England) Regulations 2008 S.I.2008/1961) but they do not require or permit specific rights of recreation to be registered.
The extensive management provisions in Part 2 of the Act apply to town or village greens only if they are subject to rights of common, and deal with the regulation of rights of common.
This seems to be in line with what Lord Hoffmann said in Oxfordshire [2006] 2 AC 674, para 48, that although the Commons Registration Act 1965 was intended to be followed by further legislation in relation to the management of commons, it was by no means clear that Parliament contemplated further legislation as to rights over greens.
I must set out at some length what Lord Hoffmann said about rights after registration (paras 49 to 51): So one has to look at the provisions about greens in the 1965 Act like those of any other legislation, assuming that Parliament legislated for some practical purpose and was not sending commons commissioners round the country on a useless exercise.
If the Act conferred no rights, then the registration would have been useless, except perhaps to geographers, because anyone asserting rights of recreation would still have to prove them in court.
There would have been no point in the conclusive presumption in section 10.
Another possibility is that registration conferred such rights as had been proved to support the registration but no more.
So, for example, if land had been registered on the strength of a custom to have a bonfire on Guy Fawkes Day, registration would confer the right to have a bonfire but no other rights.
But this too would make the registration virtually useless.
Although the Act provides for the registration of rights of common, it makes no provision for the registration of rights of recreation.
One cannot tell from the register whether the village green was registered on the basis of an annual bonfire, a weekly cricket match or daily football and rounders.
So the establishment of an actual right to use a village green would require the inhabitants to go behind the registration and prove whatever had once satisfied the Commons Commissioner that the land should be registered.
In my view, the rational construction of section 10 is that land registered as a town or village green can be used generally for sports and pastimes.
It seems to me that Parliament must have thought that if the land had to be kept available for one form of recreation, it would not matter a great deal to the owner whether it was used for others as well.
This would be in accordance with the common law, under which proof of a custom to play one kind of game gave rise to a right to use the land for other games: see the Sunningwell case [2000] 1 AC 335, 357A C.
This does not mean that the owner is altogether excluded from the land.
He still has the right to use it in any way which does not interfere with the recreational rights of the inhabitants.
There has to be give and take on both sides.
Lord Hoffmann then (paras 54 to 57) dealt with the Victorian statutes as I have already mentioned.
Lord Scott (thinking it right to express a limited view on this issue) disagreed (para 105): But I do not agree that registration can authorise local inhabitants to enjoy recreative user of the land that is different in kind from the 20 years user that has satisfied the statutory criteria for registration or that would diminish the ability of the landowner to continue to use the land in the manner in which he has been able to use the land during that 20 year period.
I do not accept that a tolerant landowner who has allowed the local inhabitants to use his grass field for an annual 5 November bonfire for upwards of 20 years must, after registration, suffer his field to be used throughout the year for all or any lawful sports and pastimes with the consequential loss of any meaningful residual use that he could continue to make of the field.
Having reconsidered the general agreement that I expressed in Oxfordshire, I find that I agree with almost all that Lord Hoffmann said in the paragraphs that I have quoted.
He had already, in Sunningwell [2000] 1 AC 335, 357, explained that sport or pastime denotes a single composite class, and recognised that dog walking and playing with children [are], in modern life, the sort of informal recreation which may be the main function of a village green.
The only point on which I differ from Lord Hoffmann is the point which Lord Scott picked up in para 105: the notion that a custom to have an annual bonfire on Guy Fawkes Day could be a sufficient basis for registration of a green.
Such a right might have been established as a stand alone custom, but would to my mind be far too sporadic to amount to continuous use for lawful sports and pastimes (quite apart from the fact that most bonfires are now illegal on environmental grounds).
Once that special case is eliminated, I see little danger, in normal circumstances, of registration of a green leading to a sudden diversification or intensification of use by local residents.
The alleged asymmetry between use before and after registration will in most cases prove to be exaggerated.
Golfers and local residents can co exist without much friction even when the latter have established legal rights.
Conclusion
Disparaging references are sometimes made to the village green industry and to applications for registration being used as a weapon of guerrilla warfare against development of open land.
The House of Lords has (both in Beresford and Oxfordshire) expressed some doubt about the extension of town or village green protection to land very different (both in size and appearance) from a traditional village green.
However, in the Commons Act 2006 Parliament has made it easier, rather than more difficult, to register a green.
There is also the prospect (as Lord Hope mentions in para 56 of his judgment) of further legislation, which might possibly make provision for the management of greens on lines comparable to those proposed for commons in Part 2 of the Commons Act 2006.
As it is, district councils have power under section 1 of the Commons Act 1899 to make by laws for the preservation of order on commons, which are defined (in section 15) as including town and village greens.
Even without such regulation, conflicts over competing uses (whether as between the owner and the local residents, or between different interest groups among the local residents) are capable of resolution by the constant refrain in the law of easements that between neighbours there must be give as well as take (Gray and Gray, Elements of Land Law, 5th ed. (2009) para 5.2.72, citing Megarry J in Costagliola v English (1969) 210 EG 1425, 1431).
For these reasons I would allow the appeal and order that the Borough Council should register the disputed land as a town green under section 1 of the Commons Act 2006 (if then in force in Redcar and Cleveland) or under the applicable transitional provisions.
LORD HOPE
This appeal relates to an application by Kevin Paul Lewis for judicial review of a decision of the General Purposes and Village Greens Committee of Redcar and Cleveland Borough Council on 19 October 2007 to reject an application to register part of the land in Redcar known as Coatham Common as a town or village green under the Commons Act 2006 (the 2006 Act).
On 18 July 2008 Sullivan J dismissed the application but granted permission to appeal: [2008] EWHC 1813 (Admin).
On 15 January 2009 the Court of Appeal (Laws, Rix and Dyson LJJ) dismissed the appeal: [2009] EWCA Civ 3; [2009] 1 WLR 1461.
The applicant now appeals to this court.
The interested party, Persimmon Homes (Teesside) Ltd., seeks to develop the land for housing and leisure activities.
It supports the case for the local authority, as it did in the courts below.
As Lord Walker has explained, the land is owned by the local authority.
Until 2002 it was part of the land that formed the links of the Cleveland Golf Club.
It comprised the first and eighteenth holes of the golf course and a practice ground.
There were also substantial areas of rough ground beside and between these features.
It was also used by the local inhabitants for informal recreation such as walking their dogs, childrens games and picnics.
They did not interfere with or interrupt play by the golfers.
They would wait until the play had passed or until they were waved through by the golfers.
The relationship between the golfers and the local inhabitants was cordial.
The two activities appear to have co existed quite happily during this period.
The details are set out in the report by Mr Vivian Chapman QC (the Inspector).
He was appointed by the local authority to hold an inquiry following an application by Mr Lewis and a number of other local inhabitants to register an area of land which included the club house as a town or village green under the Commons Registration Act 1965 (the 1965 Act).
He was asked to provide a further report following a second application to register the area with which this case is concerned which was made after the 2006 Act came into force.
His comments in a series of further opinions on the relationship between the golfers and the local inhabitants confirmed his earlier conclusions that the local inhabitants deferred to the golfers, and that the deferral to golfing use precluded use of the land by the local inhabitants as of right for recreational purposes.
The relevant findings have been quoted in full by Lord Walker: see paras 9 11, above.
On 18 January 2008 these judicial review proceedings were commenced.
Sullivan J agreed with Mr Chapmans conclusion that the recreational use of the land was not as of right because it deferred to the use of the land by the golf club.
Asking himself how the matter would have appeared to the golf club, he said that it would not be reasonable to expect the club to resist the recreational use of the land by local users if their use of the land did not in practice interfere with its use by the golf club: para 41.
The Court of Appeal agreed with that approach: [2009] 1WLR 1461, Dyson LJ, para 54; Rix LJ, paras 64 65.
Rix LJ said that, if it were otherwise, there would be no way of resolving questions that would subsequently arise, given that registration does not confer qualified or limited rights but the unqualified right to use the land generally for sports and pastimes.
He envisaged questions as to whether, if a right of registration were to be assumed, the local inhabitants had a right of walking on the golf greens themselves during play or of playing golf as though they were members of the club itself.
The issues
As Lord Walker has explained, the question is whether the land ought to have been registered.
In an attempt to focus their arguments more precisely, the parties were agreed that it raised the following issues: (1) Where land has been extensively used for lawful sports and pastimes nec vi, nec clam, nec precario for 20 years by the local inhabitants, is it necessary under section 15(4) of the 2006 Act to ask the further question whether it would have appeared to a reasonable landowner that users were asserting a right to use the land for the lawful sports and pastimes in which they were indulging? (2) If the answer to (1) is yes, does the mere fact that local inhabitants did not prevent the playing of golf by walking in front of the ball (or seeking to prevent the playing of strokes by golfers) preclude the use from being as of right under section 15(4)? (3) If the answer to (2) is no, did the local authority (and the Inspector) err in law in concluding that the inhabitants use was not as of right, given what the Inspector described as overwhelming evidence that recreational use of the land by local people deferred to the golfing use?
This presentation was not, as it turned out, particularly helpful.
As counsel recognised, issues (2) and (3) fall to be taken together, as they are both directed to the question of deference.
And I agree with Lord Brown that the critical question, which none of these issues addresses, is what are the respective rights of the local inhabitants and the owner of the land once it has been registered.
It is a remarkable fact that the statute gives no guidance at all on this issue.
In R (Laing Homes Ltd) v Buckinghamshire County Council [2003] EWHC 1578 (Admin), [2004] 1 P & C R 573, paras 27 29, referring to what Carnwath J said in R v Suffolk County Council, Ex p Steed (1995) 70 P & C R 487, Sullivan J said that this was not the original intention.
The 1965 Act was intended to be a two stage legislative process.
As a first step the registers would establish the facts and provide a definitive record of what land was, and was not, common land or a town or village green.
In the second stage Parliament would deal with the consequences of registration by defining what rights the public had over the land that had been registered.
In New Windsor Corporation v Mellor [1975] Ch 380, 392, Lord Denning MR said that he hoped that the second stage legislation would not be long delayed.
But here we are, 45 years after the passing of the 1965 Act.
Parliament has still not said what these rights are.
In Oxfordshire County Council v Oxford City Council [2006] 2 AC 674, para 48 Lord Hoffmann said that, while there were indications that further legislation about rights over common land was in prospect, it was by no means clear that Parliament contemplated further legislation about rights over village greens.
It has been left to the courts to try to work this out for themselves.
As Lord Hoffmann put in para 49, one has to look at the provisions about greens like those of any other legislation and assume that Parliament legislated for some practical purpose.
I think that one must assume too that it was Parliaments intention that practical common sense would be the best guide to the way the public right was to be exercised once the land had entered the register.
In answer to a series of written questions by Lord Greaves, the Parliamentary Under Secretary of State for the Department for the Environment, Food and Rural Affairs, Lord Davies of Oldham, said that the Government proposes to consult in the spring of 2010 as to whether changes are needed to the existing framework: Hansard (HL) Written Questions, 15 January 2010, Qs 961 964.
This initiative appears to have been prompted by a research report which was received by DEFRA into the registration of new town and village greens, which has identified particular concerns as to its use in relation to land which is subject to proposals for residential development.
I hope that the opportunity will be taken to look at the consequences of registration as revealed by the developing case law as well as how the registration system itself is working.
Previous authority
I agree with Lord Walker that in none of the three decisions of the House of Lords to which he refers (see para 3, above) was it necessary for the House to address the question of deference which lies at the heart of this case.
Reg v Oxfordshire County Council, Ex p Sunningwell Parish Council [2000] 1 AC 335 was concerned with the registration of a glebe which was used predominantly by the villagers for informal recreation.
The diocesan board had obtained planning permission to build two houses on part of the glebe, and it objected to registration.
But the inspector found that it had been tolerant of harmless public use of the land for informal recreation.
In R (Beresford) v Sunderland City Council [2004] 1 AC 889 the land was an open, flat area of grass which was used by the local inhabitants for ball games and other lawful pastimes.
The council cut the grass from time to time, but it did not use it in any other way that might have interfered with its use by the locals.
In Oxfordshire County Council v Oxford City Council, para 125 the land was described by Lord Walker as an overgrown, rubble strewn, semi submerged area, sandwiched between the canal and the railway in north west Oxford hardly the ideal site to focus close attention on the critical issue that is before us in this case.
The only passages in these three cases that might be taken as suggesting that the rights acquired by the local inhabitants would be enlarged over those of the owner once the land had been registered, as Rix LJ assumed would happen in this case, are to be found in Lord Hoffmanns speech in Oxfordshire.
In para 51 he said of the effect of registration: This does not mean that the owner is altogether excluded from the land.
He still has the right to use it in any way which does not interfere with the recreational rights of the inhabitants.
In para 59, where he distinguished Oxfordshire from the decision of the European Court of Human Rights in J A Pye (Oxford) Ltd v United Kingdom [2005] 3 EGLR 1, there is a subtle change of language.
He said: In the present case, first, the owner retains his title to the land and his right to use it in any way which does not prevent its use by the inhabitants for recreation and, secondly, the system of registration under the 1965 Act was introduced to preserve open spaces in the public interest.
I think that the first passage, in which Lord Hoffmann uses the words interfere with, goes some way to supporting the idea that after registration the rights of the local inhabitants predominate.
The second passage, on the other hand, does not.
Preventing the use of the land for recreation would, of course, defeat the point of registration completely.
Lord Scott of Foscote was obviously very troubled in Oxfordshire by the idea that the public would acquire much broader, more intrusive rights over the land after registration and the management problems that this might give rise to: para 85.
But his objections were, as I read them, based on an assumption as to the effect of the registration as a town or village green on places such as a dense wood in which people wandered to pick bluebells or look for mushrooms: para 76.
His dissent casts some light on what he thought was at issue in that case.
But I do not think that it can be used to elevate what Lord Hoffmann said in para 51 to a ruling on the point which, on the facts of that case, did not arise.
The only case which directly addresses the question of deference is R (Laing Homes Ltd) v Buckinghamshire County Council [2004] 1 P & CR 573, in which Sullivan J quashed the resolution that the land should be registered.
As Dyson LJ observed in the Court of Appeal, [2009] 1 WLR 1461, para 30, the concept of deference as a bar to the creation of a new town or village green is Sullivan Js creation.
The land in that case consisted of three adjacent fields which Laing Homes Ltd held as part of its land bank.
It granted a grazing licence to a farmer, Mr Pennington, who for a few years at the start of the 20 year period kept cattle on the fields until he had to give this up because of problems with members of the public, whose use of the perimeters of the fields resulted in the paths that they had established there being registered as public footpaths.
For over half of that period Mr Pennington used the land for taking an annual crop of hay.
The question was whether this use of the land, or the growing of any other crop, was inconsistent with the right to use the land for recreation that was contended for by the local inhabitants.
After referring to passages in Lord Hoffmanns speech in Sunningwell about the extent of the user by the public that was needed to establish that the land was being used by them as of right, Sullivan J said in para 82: If the starting point is, how would the matter have appeared to Laings? it would not be reasonable to expect Laings to resist the recreational use of their fields so long as such use did not interfere with their licensee, Mr Penningtons, use of them for taking an annual hay crop.
In para 84 he said that, so long as the local inhabitants recreational activities did not interfere with the way in which the owner had chosen to use his land, there would be no suggestion to him that they were exercising or asserting a public right to use it for lawful sports and pastimes.
In para 85 he said: I do not believe that Parliament could have intended that such a user for sports or pastimes would be as of right for the purposes of section 22 [of the 1965 Act].
It would not be as of right, not because of interruption or discontinuity, which might be very slight in terms of numbers of days per year, but because the local inhabitants would have appeared to the landowner to be deferring to his right to use his land (even if he chose to do so for only a few days in the year) for his own purposes.
In para 86 he added these words: Like the Inspector, I have not found this an easy question.
Section 12 acknowledges that animals may be grazed on a village green.
Rough grazing is not necessarily incompatible with the use of the land for recreational purposes: see Sunningwell.
If the statutory framework within which section 22(1) was enacted had made provision for low level activities to co exist with village green type uses, rather than effectively preventing them once such a use has become established, it would have been easier to adopt the Inspectors approach, but it did not.
I do not consider that using the
three fields for recreation in such a manner as not to interfere with
Mr Penningtons taking of an annual hay crop for over half the 20 year period, should have suggested to Laings that those using the fields believed that they were exercising a public right, which it would have been reasonable to expect Laings to resist.
This passage suggests that Sullivan J was approaching the case on the assumption that registration was inconsistent with the continued use of the land by Mr Pennington for taking the annual hay crop.
In other words, registration would bring non interference to an end.
The public right to use the fields for recreational purposes would make it impossible for them to be used for growing hay.
His approach has also been taken as indicating that in cases where the land has been used by a significant number of inhabitants for 20 years for recreational purposes nec vi, nec clam, nec precario, there is an additional question that must be addressed: would it have appeared to a reasonable landowner that the inhabitants were asserting a right to use the land for the recreational activities in which they were indulging? I am not sure that Sullivan J was really saying that there was an additional question that had to be addressed.
But if he was, I would respectfully disagree with him on both points.
The section 15 questions
The application in this case was made under section 15(4) of the 2006 Act, which provides that a person may apply for registration of land as a town or village green where a significant number of the inhabitants of any locality, or of any neighbourhood within a locality, indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years if they ceased to do so before the commencement of that subsection, so long as the application is made within a period of five years beginning with the date of the cessation.
The words that I have set out in quotation marks appear in each of subsections (2), (3) and (4) of section 15.
The definition of the phrase town or village green in section 22(1) of the 1965 Act, as amended by section 98 of the Countryside and Rights of Way Act 2000, has been repeated throughout this section, with the addition of the words a significant number.
The theory on which these provisions are based is known to the common law as prescription: see Lord Hoffmanns explanation in Sunningwell, [2000] 1 AC 335, 349 351, of the background to the definition of town or village green in section 22(1) of the 1965 Act.
As the law developed in relation to private rights, the emphasis was on the quality of the user for the 20 year period which would justify recognition of a prescriptive right: It became established that such user had to be, in the Latin phrase, nec vi, nec clam, nec precario: not by force, nor stealth, nor the licence of the owner.
The unifying element in these three vitiating circumstances was that each constituted a reason why it would not have been reasonable to expect the owner to resist the exercise of the right in the first case, because rights should not be acquired by the use of force, in the second, because the owner would not have known of the user and in the third, because he had consented to the use, but for a limited period.
So in Dalton v Angus (1881) 6 App Cas 740, 773 Fry J (advising the House of Lords) was able to rationalise the law of prescription as follows: the whole law of prescription and the whole law which governs the presumption or inference of a grant or covenant rest upon acquiescence.
Section 2 of the Prescription Act 1832 made it clear that what mattered was the quality of the user during the 20 year period.
It had to be by a person claiming right thereto.
It must have been enjoyed openly and in the manner that a person rightfully entitled would have used it, and not by stealth or by licence: Bright v Walker (1834) 1 CM & R 211, 219 per Parke B.
In Gardner v Hodgson's Kingston Brewery Co Ltd [1903] AC 229, 239 Lord Lindley said that the words as of right were intended to have the same meaning as the older expression nec vi, nec clam, nec precario.
Referring then to section 1(1) of the Rights of Way Act 1932, Lord Hoffmann said in Sunningwell at p 353: The words actually enjoyed by the public as of right and without interruption for a full period of 20 years are clearly an echo of the words actually enjoyed by any person claiming right thereto without interruption for the full period of 20 years in section 2 of the Act of 1832.
Introducing the Bill into the House of Lords (HL Debates), 7 June 1932, col 637, Lord Buckmaster said that the purpose was to assimilate the law of public rights of way to that of private rights of way.
It therefore seems safe to assume that as of right in the Act of 1932 was intended to have the same meaning as those words in section 5 of the Act of 1832 and the words claiming right thereto in section 2 of that Act.
He concluded at p 354 that there was no reason to believe that as of right in section 22(1) of the 1965 Act was intended to mean anything different from what those words meant in the Acts of 1832 and 1932.
The same can be said of the meaning of those words in section 15 of the 2006 Act.
In the light of that description it is, I think, possible to analyse the structure of section 15(4) in this way.
The first question to be addressed is the quality of the user during the 20 year period.
It must have been by a significant number of the inhabitants.
They must have been indulging in lawful sports and pastimes on the land.
The word lawful indicates that they must not be such as will be likely to cause injury or damage to the owners property: see Fitch v Fitch (1797) 2 Esp 543.
And they must have been doing so as of right: that is to say, openly and in the manner that a person rightfully entitled would have used it.
If the user for at least 20 years was of such amount and in such manner as would reasonably be regarded as being the assertion of a public right (see R (Beresford) v Sunderland City Council [2004] 1 AC 889, paras 6 and 77), the owner will be taken to have acquiesced in it unless he can claim that one of the three vitiating circumstances applied in his case.
If he does, the second question is whether that claim can be made out.
Once the second question is out of the way either because it has not been asked, or because it has been answered against the owner that is an end of the matter.
There is no third question.
The answer to the first issue (see para [4], above) is: no.
Mr Charles George QC for the appellants said that there was only one simple test: was the use caught by any of the three vitiating circumstances? Mr George Laurence QC confirmed that it was common ground that the use of the land for recreation in this case was nec vi, nec clam, nec precario, but he said that this did not exhaust the issue.
The unifying principle was one of reasonableness.
He said that, if it was not reasonable to expect the owner to resist what the users were doing, no harm could come to the owner from his omission to resist or complain.
In this case, as the Inspector held, the local inhabitants overwhelmingly deferred to the golfers.
As Dyson LJ said in the Court of Appeal, the user of the local inhabitants was extensive and frequent, but so too was the use by the golfers: the greater the degree of deference, the less likely it was that it would appear to the reasonable owner that the locals were asserting any right to use the land [2009] 1 WLR 1461, paras 48 49.
I agree with Mr George that all the authorities show that there are only three vitiating circumstances: Gardner v Hodgson's Kingston Brewery Co Ltd [1903] AC 229, 238 per Lord Davey, p 239 per Lord Lindley; Sunningwell [2000] 1 AC 335, p 350, per Lord Hoffmann; Beresford [2004] 1 AC 889, para 3 per Lord Bingham of Cornhill, para 16 per Lord Scott of Foscote, para 55 per Lord Rodger of Earlsferry; Riddall and Trevelyan, Rights of Way, 4th ed (2007) pp 41, 47.
There is no support there for the proposition that there is an additional requirement.
But that does not answer Mr Laurences point, which was really and quite properly directed to the first question as to the quality of the user that is relied on.
That, as has been said, is the critical question in this case.
Deference
In para 175 of his report the Inspector said that he found that the relationship between the golfers and the local recreational users was generally cordial.
This was because local people (with the exception of Squadron Leader Kime) did not materially interfere with the use of the land for playing golf.
They would wait until the play had passed or until they had been waved on by the golfers.
When local people did inadvertently impede play, the golfers shout of fore was enough to warn them to clear the course.
The Inspector asked himself whether this indicated deference to the golfers.
Following what Sullivan J said in Laing [2004] P & CR 573, para 85, he understood that the use would not be as of right if the local inhabitants would have appeared to the owner to be deferring to his right to use his land for his own purposes.
That approach is based on the judges assumption, which the Court of Appeal endorsed, that the effect of registration would be to enlarge the right of the local inhabitants in a way that would effectively prevent the golfers from using the land for their own purposes.
I do not find anything in the words used in section 15(4) of the 2006 Act that supports that approach.
On the contrary, the theme that runs right through all of the law on private and public rights of way and other similar rights is that of an equivalence between the user that is relied on to establish the right on the one hand and the way the right may be exercised once it has been established on the other.
In Dalton v Henry Angus & Co (1881) 6 App Cas 740, 774 Fry J, having stated at p 773 that the whole law of prescription rests upon acquiescence, said that it involved among other things the abstinence by the owner from any interference with the act relied on for such a length of time as renders it reasonable for the Courts to say that he shall not afterwards interfere to stop the act being done. [my emphasis] In other words, one looks to the acts that have been acquiesced in.
It is those acts, and not their enlargement in a way that makes them more intrusive and objectionable, that he afterwards cannot interfere to stop.
This is the basis for the familiar rule that a person who has established by prescriptive use a right to use a way as a footpath cannot, without more, use it as a bridleway or for the passage of vehicles.
In White v Taylor (No 2) [1969] 1 Ch 160, 192 Buckley LJ said that the user must be shown to have been of such a character, degree and frequency as to indicate an assertion by the claimant of a continuous right, and of a right of the measure of the right claimed. [again, my emphasis] That was a case in which it was claimed, among other things, that sheep rights had been established by prescription at common law.
But I think that this observation is consistent with the approach that is taken to prescriptive rights generally.
It has to be recognised, of course, that once the right to use the land for lawful sports and pastimes is established and the land has been registered its use by the local inhabitants for those purposes is not restricted to the sports or pastimes that were indulged in during the 20 year period.
Lord Hoffmann said in Oxfordshire [2006] 2 AC 674, para 50, that the rational construction of section 10 of the 1965 Act, which did not require the rights of recreation as such to be registered, was that land registered as a town or village green can be used generally for sports and pastimes: It seems to me that Parliament must have thought that if the land had to be kept available for one form of recreation, it would not matter a great deal to the owner whether it was used for others as well.
This would be in accordance with the common law, under which proof of a custom to play one kind of game gave rise to a right to use the land for other games: see the Sunningwell case [2000] 1 AC 335, 357A C.
As he put in the passage referred to in Sunningwell, as long as the activity can properly be called a sport or pastime, it falls within the composite class.
This approach indicates that, while the principle of equivalence tells one in general terms what the land may be used for, there may be some asymmetry as to the manner of its use for that purpose before and after it has been registered.
But it does not follow that, where the use for recreation has co existed with the owners use of the land during the 20 year period, the relationship of co existence is ended when registration takes place.
In Fitch v Fitch 2 Esp 543, where the inhabitants had the right to play lawful games and pastimes on the plaintiffs close which he used for growing grass for hay, the jury were told that the rights of both parties were distinct and might co exist together.
But the inhabitants could not use the close in the exercise of their right in a way that was not fair or was improper.
Referring to that case in Oxfordshire [2006] 2 AC 674, para 51, Lord Hoffmann said that there had to be give and take on both sides.
Mr Stewart Smith, following Mr Laurence QC, did not agree.
He said that it was fundamental to his argument that the concept of give and take had no place in rights of the kind that were established by registration under the 2006 Act.
He submitted that these rights were unqualified and unlimited.
He said that Fitch v Fitch did not support the idea of give and take, and he sought to contrast rights of the kind that follow registration with those of the kind discussed in Mercer v Woodgate (1869) LR 5 QB 26, where there was dedication of the right of way to the public subject to the owners right to plough the soil in the due course of husbandry.
Cockburn CJ said at p 30 that there would be great injustice and hardship to hold that there had been an absolute dedication where the owner had clearly only intended a limited dedication.
Blackburn J said at p 31 that he could see no objection in law to such a partial dedication.
I agree that care needs to be taken in drawing conclusions from cases about the creation of a right of way by dedication.
But the concepts of partial dedication and the co existence of rights on both sides appear to me to be capable of being applied generally.
Lord Hoffmann would not have mentioned give and take in the Oxfordshire case [2006] 2 AC 674 if he had thought that it had no application to town and village greens.
If it were otherwise it would in practice be very difficult, if not impossible, to obtain registration in cases where the owner is putting his land to some use other than, perhaps, growing and cutting grass for hay or silage.
There being no indication in the statute to the contrary, I would apply these concepts to the rights created by registration as a town or village green too.
Where then does this leave deference? Its origin lies in the idea that, once registration takes place, the landowner cannot prevent use of the land in the exercise of the public right which interferes with his use of it: Laing [2004] P & CR 573, para 86.
So it would be reasonable to expect him to resist use of his land by the local inhabitants if there was reason to believe that his continued use of the land would be interfered with when the right was established.
Deference to his use of it during the 20 year period would indicate to the reasonable landowner that there was no reason to resist or object to what was taking place.
But once one accepts, as I would do, that the rights on either side can co exist after registration subject to give and take on both sides, the part that deference has to play in determining whether the local inhabitants indulged in lawful sports or pastimes as of right takes on an entirely different aspect.
The question is whether the user by the public was of such amount and in such manner as would reasonably be regarded as being the assertion of a public right.
Deference by the public to what the owner does on his land may be taken as an indication that the two uses can in practice co exist.
Of course, the position may be that the two uses cannot sensibly co exist at all.
But it would be wrong to assume, as the Inspector did in this case, that deference to the owners activities, even if it is as he put it overwhelming, is inconsistent with the assertion by the public to use of the land as of right for lawful sports and pastimes.
It is simply attributable to an acceptance that where two or more rights co exist over the same land there may be occasions when they cannot practically be enjoyed simultaneously: Rowena Meager, Deference & user as of right: an unholy alliance, Rights of Way Law Review, October 2009, 147, 152.
If any of the local inhabitants were to exercise their rights by way of all take and no give in a way to which legitimate objection could be taken by the landowner they could, no doubt, be restrained by an injunction: Philip Petchey, R (Lewis) v Redcar and Cleveland B C, Rights of Way Law Review, March 2009, 139, 143.
In my opinion the Inspector misdirected himself on this point.
The question then is whether the Councils decision which was based on his recommendation can be allowed to stand if the facts are approached in the right way.
The facts of this case, as described by the Inspector, show that the local inhabitants (except for Squadron Leader Kime) were behaving when they were using the land for sports and pastimes in the way people normally behave when they are exercising public rights over land that is also used as a golf course.
They recognise that golfers have as much right to use the land for playing golf as they do for their sports and pastimes.
Courtesy and common sense dictates that they interfere with the golfers progress over the course as little as possible.
There will be periods of the day, such as early in the morning or late in the evening, when the golfers are not yet out or have all gone home.
During such periods the locals can go where they like without causing inconvenience to golfers.
When golf is being played gaps between one group of players and another provide ample opportunities for crossing the fairway while jogging or dog walking.
Periods of waiting for the opportunity are usually short and rarely inconvenience the casual walker, rambler or bird watcher.
I cannot find anything in the Inspectors description of what happened in this case that was out of the ordinary.
Nor do I find anything that was inconsistent with the use of the land as of right for lawful sports and pastimes.
Conclusion
For these reasons, and those given by everyone else with which I agree, I would allow the appeal and make the order that has been proposed by Lord Walker.
LORD RODGER
issue, I add some observations of my own.
As Lord Walker has explained, until 2002 an area of land (the disputed land) in the Coatham district of Redcar formed part of a golf course on which members of the Cleveland Golf Club played.
The club were tenants of the Council, which owned the land.
Then, in 2002, the course was reconfigured and the club gave up its tenancy of the disputed land.
The following year, the Council entered into an agreement with Persimmon Homes (Teesside) Ltd for a mixed residential I agree with the judgment of Lord Walker.
In view of the importance of the and leisure development on an area of land of which the disputed land formed an important part.
In March 2005 a group of residents applied to have the disputed land registered as a village green.
In March 2006 the inspector recommended against registration.
In June 2007 Mr Lewis and his fellow applicants put in a fresh application under section 15 of the Commons Act 2006.
Again the inspector recommended against registration and the matter has now led to the present appeal.
This sequence a proposal to develop an area of open land, followed by an application to register the land as a village green in order to stop the development is very familiar.
The House of Lords dealt with three such cases in the space of a few years and newspaper articles refer to many other examples.
But the fact that the disputed land was used by the golf club during the period of 20 years which the applicants rely on to justify its registration as a village green has prompted much heart searching as to what the position would have been if the land had been registered as a village green while the club was still in occupation and its members were still wanting to play on the land.
Would registration have enabled the dog walkers of Redcar to take over and, in effect, extinguish the rights of the golfers to play on that part of their course?
However interesting the point of law may be, in a case like this the issue is more than just a little unreal.
The fact of the matter is that, if the golf club had remained as tenants after 2002, the golfers would have continued to hack their way over the disputed area and the dog walkers would have continued to make their way across the course.
It is a fair bet that in that happy state of affairs no one would have dreamed of applying to have the land registered as a village green.
It was only the prospect of the development on this open space, when the golf club was no longer using it, which prompted the application for registration with a view to stopping the development in its tracks.
So, in the real world, the dog walkers and golfers will never actually have to co exist on the disputed land if it is registered as a village green.
If, however, in some imaginary parallel universe, the two groups had been required to co exist after registration, then, like Lord Walker, I find it hard to imagine that there would, in practice, have been many problems.
The pre existing situation suited the local inhabitants well enough: doubtless, some of them were themselves members of the club and played on the land; in any event, the golf club must have kept the grass cut and the area looking presentable.
If the inhabitants had previously shown no inclination to break out the croquet hoops, or to set up butts or cricket stumps or to dance around a maypole on the disputed land, it seems unlikely that registration would have suddenly brought on the urge.
Indeed, too many developments of these kinds would probably have upset the dog walkers almost as much as the golfers.
In all likelihood, therefore, things would have gone on much as before, with a bit of give and take on both sides.
I would therefore particularly associate myself with what Lord Walker says in para 47 of his judgment.
Under section 15 of the Commons Act 2006 registration of land as a village green requires that a significant number of the inhabitants of any locality, or of any neighbourhood in a locality, have indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years.
Since R v Oxfordshire County Council Ex p Sunningwell Parish Council [2000] 1 AC 335 it has been settled law that dog walking and playing with children count as lawful sports and pastimes.
Since both activities can and do take place on almost any and every open space near centres of population, the scope for applying to register land as a village green is correspondingly wide.
Owners of land are taken to be aware of this chapter of the law and of the need to take appropriate preventive steps if they see a risk of circumstances arising in which an application could be made and their land become registered as a village green.
If they fail to do so, they are treated as having acquiesced in the inhabitants indulging in sports and pastimes on their land as of right.
Here the evidence shows that, as far back as living memory goes, many local inhabitants used the disputed land for informal recreation such as dog walking and childrens play.
But the courts below have held that they were not doing so as of right.
The basic meaning of that phrase is not in doubt.
In R v Oxfordshire County Council Ex p Sunningwell Parish Council [2000] 1 AC 335 Lord Hoffmann showed that the expression as of right in the Commons Registration Act 1965 was to be construed as meaning nec vi, nec clam, nec precario.
The parties agree that the position must be the same under the Commons Act 2006.
The Latin words need to be interpreted, however.
Their sense is perhaps best captured by putting the point more positively: the user must be peaceable, open and not based on any licence from the owner of the land.
The opposite of peaceable user is user which is, to use the Latin expression, vi.
But it would be wrong to suppose that user is vi only where it is gained by employing some kind of physical force against the owner.
In Roman law, where the expression originated, in the relevant contexts vis was certainly not confined to physical force.
It was enough if the person concerned had done something which he was not entitled to do after the owner had told him not to do it.
In those circumstances what he did was done vi.
See, for instance, D.43.24.1.5 9, Ulpian 70 ad edictum, commenting on the word as used in the interdict quod vi aut clam.
English law has interpreted the expression in much the same way.
For instance, in Sturges v Bridgman (1879) 11 Ch D 852, 863, where the defendant claimed to have established an easement to make noise and vibration, Thesiger LJ said: Consent or acquiescence of the owner of the servient tenement lies at the root of prescription, and of the fiction of a lost grant, and hence the acts or user, which go to the proof of either the one or the other, must be, in the language of the civil law, nec vi nec clam nec precario: for a man cannot, as a general rule, be said to consent to or acquiesce in the acquisition by his neighbour of an easement through an enjoyment of which he has no knowledge, actual or constructive, or which he contests and endeavours to interrupt, or which he temporarily licenses (emphasis added).
In short, as Gale on Easements 18th ed, (2008), para 4 84, suggests, user is If the use continues despite the neighbours protests and attempts to interrupt it, it is treated as being vi and so does not give rise to any right against him.
Similarly, in Dalton v Henry Angus & Co (1881) 6 App Cas 740, 786, Bowen J equated user nec vi with peaceable user and commented that a neighbour, without actual interruption of the user, ought perhaps, on principle, to be enabled by continuous and unmistakeable protests to destroy its peaceable character, and so to annul one of the conditions upon which the presumption of right is raised: Eaton v Swansea Waterworks Co (1851) 17 QB 267.
The contrary view, that the only manner in which enjoyment of window lights could be defeated before the Prescription Act was by physical obstruction of the light, was not the doctrine of the civil law, nor the interpretation which it placed upon the term non vi.
only peaceable (nec vi) if it is neither violent nor contentious.
In R v Oxfordshire County Council ex p Sunningwell Parish Council [2000] 1 AC 335, 350 351, Lord Hoffmann found that the unifying element in the three vitiating circumstances was that each constituted a reason why it would not have been reasonable to expect the owner to resist the exercise of the right.
In the case of nec vi he said this was because rights should not be acquired by the use of force.
If, by force, Lord Hoffmann meant only physical force, then I would respectfully disagree.
Moreover, some resistance by the owner is an aspect of many cases where use is vi.
Assuming, therefore, that there can be vis where the use is contentious, a perfectly adequate unifying element in the three vitiating circumstances is that they are all situations where it would be unacceptable for someone to acquire rights against the owner.
If, then, the inhabitants use of land is to give rise to the possibility of an application being made for registration of a village green, it must have been peaceable and non contentious.
This is at least part of the reason why, as Lord Jauncey observed, in the context of a claim to a public right of way, in Cumbernauld and Kilsyth District Council v Dollar Land (Cumbernauld) Ltd 1993 SC (HL) 44, 47, There is no principle of law which requires that there be conflict between the interest of users and those of a proprietor.
In this case the local inhabitants use of the disputed land for recreation was peaceable, open and not based on any licence from the Council or the golf club.
So, prima facie, the inhabitants did everything that was necessary to bring home to the Council, if they were reasonably alert, that the inhabitants were using the land for recreation as of right.
But the Council argue that, since there were competing interests, the inhabitants use of the land was peaceable only because they overwhelmingly deferred to the golfers simultaneous use of the same land.
Had they not done so, it would have become contentious.
But, because they routinely deferred to the golfers, the inhabitants did not do sufficient to bring home to the reasonable owner of the application site that they were asserting a right to use it.
Cf Dyson LJ, [2009] 1 WLR 1461, para 49.
In other words, the reasonable owner of the disputed land would have inferred from the behaviour of the inhabitants that they were not asserting a right over the land and so would have seen no need to take any steps to prevent such a right accruing.
On closer examination, the starting point for this argument must be that the owner of the land is entitled to infer from the inhabitants behaviour in deferring to the golfers that they are aware of the legal position.
But that starting point is inherently implausible.
To adapt what Lord Sands said in connexion with a public right of way in Rhins District Committee of Wigtownshire County Council v Cuninghame 1917 2 SLT 169, 172, people walk their dogs or play with their children on the disputed land because they have been accustomed to see others doing so without objection.
The great majority know nothing about the legal character of their right to do so and never address their minds to the matter.
Moreover, to draw an inference based on the premise that the inhabitants are aware of the legal position is hard to reconcile with the decision in R v Oxfordshire County Council, Ex p Sunningwell Parish Council [2000] 1 AC 335, 355 356, that the subjective views of the inhabitants as to their right to indulge in sports and pastimes on the land are irrelevant.
It would therefore have been far from reasonable for the Council to infer that the inhabitants behaviour towards the golfers was based on some understanding of the legal position.
It would have been equally unreasonable for the Council to go further and conclude that the inhabitants were deferring to the golfers because of a conscious decision on their part to respect what they perceived to be the superior rights of the owners of the land.
Such a conclusion might, just conceivably, have been plausible and legitimate if there had been no other explanation for the inhabitants behaviour.
But that is far from so.
The local inhabitants may well have deferred to the golfers because they enjoyed watching the occasional skilful shot or were amused by the more frequent duff shots, or simply because they were polite and did not wish to disturb the golfers who experience shows almost invariably take their game very seriously indeed.
A reasonable landowner would realise that any of these motives was a more plausible explanation for the inhabitants deference to the golfers than some supposed unwillingness to go against a legal right which they acknowledged to be superior.
In my view the inspector misdirected himself on this aspect of the case.
I would accordingly allow the appeal and make the order proposed by Lord Walker.
I confess that I view the outcome with little enthusiasm.
The idea that this land should be classified and registered as a village green, when it was really just an open space that formed part of a golf course, is unattractive, to say the least.
It is hard to imagine that those who devised the registration system ever contemplated that it would produce such a result.
But, given the established case law and given also that Parliament has not amended the law despite the known problems, the result is unavoidable.
LORD BROWN
I would formulate the critical question for the Courts determination on this appeal very differently from any of those identified in the statement of facts and issues.
The critical question to my mind is what are the respective rights of the landowner (the owner) and the local inhabitants (the locals) over land once it is registered as a town or village green?
Take the facts of this case, as already sufficiently recounted by other members of the Court, but assume that the land here in question, instead of becoming vacant in 2002 and subject now to development proposals, remained in use by the owner (as for convenience I shall call the Redcar & Cleveland Golf Club, the actual owners licensee) as the first and 18th holes (and practice green) of their golf course.
Suppose then that the local inhabitants, having themselves made such use of the land as the Inspector records, deferring to the golfers in the way he describes, successfully applied for its registration as a town green, what then would be the consequences with regard to the owners own continuing rights? Would the owner remain entitled to use the land for golf with the locals continuing to defer to the golfers? Or would the balance shift entirely, the locals rights being substantially enlarged by registration, the owners effectively extinguished?
So far from this question begging that as to the right to registration (the ultimate question at issue here), it seems to me one which necessarily should be resolved before it can sensibly be decided what must be established in order to have the land registered.
Indeed, I may as well say at once that, were it the law that, upon registration, the owners continuing right to use his land as he has been doing becomes subordinated to the locals rights to use the entirety of the land for whatever lawful sports and pastimes they wish, however incompatibly with the owner continuing in his, I would hold that more is required to be established by the locals merely than use of the land for the stipulated period nec vi nec clam nec precario.
If, however, as I would prefer to conclude, the effect of registration is rather to entrench the previously assumed rights of the locals, precluding the owner from thereafter diminishing or eliminating such rights but not at the expense of the owners own continuing entitlement to use the land as he has been doing, then I would hold that no more is needed to justify registration than what, by common consent, is agreed to have been established by the locals in the present case.
This is not merely because in my opinion no other approach would meet the merits of the case.
Also it is because, to my mind, on the proper construction of section 15 of the Commons Act 2006, the only consequence of registration of land as a green is that the locals gain the legal right to continue to indulge in lawful sports and pastimes upon it (which previously they have done merely as if of right) no more and no less.
To the extent that the owners own previous use of the land prevented their indulgence in such activities in the past, they remain restricted in their future use of the land.
The owners previous use ex hypothesi would not have been such as to have prevented the locals from satisfying the requirements for registration of the land as a green.
No more should the continuance of the owners use be regarded as incompatible with the lands future use as a green.
Of course, in so far as future use by the locals would not be incompatible with the owner continuing in his previous use of the land, the locals can change, or indeed increase, their use of the land; they are not confined to the same lawful sports and pastimes, the same recreational use as they had previously enjoyed.
But they cannot disturb the owner so long as he wishes only to continue in his own use of the land.
Is there, then, anything in the case law which precludes our deciding, as I have already indicated I would prefer to decide, that registration does not carry with it a right in future to use the land inconsistently with such use as the owner himself has been making and wishes to continue making of it? The respondents here urge that the decision of the House of Lords in Oxfordshire County Council v Oxford City Council [2006] 2 AC 674 is just such a case.
They so submit notwithstanding that the land there was disused scrubland of which the owner made no use whatever so that no question arose there as to possibly conflicting uses or the respective rights of owners and locals following registration.
For my part I simply cannot regard Oxfordshire as having decided the particular question I am addressing here.
The respondents rely on passages in Lord Hoffmanns speech such as that, following registration, [The owner] still has the right to use it in any way which does not interfere with the recreational rights of the inhabitants (para 51) and [T]he owner retains his title to the land and his right to use it in any way which does not prevent its use by the inhabitants for recreation (para 59).
To my mind, however, these are not inconsistent with the position which I have suggested arises on registration and, indeed, (also at para 51) Lord Hoffmann states: There has to be give and take on both sides.
True it is that, in a partially dissenting opinion, Lord Scott (at para 105) himself appears to have understood the other members of the Committee to have decided that registration of land as a green bring[s] about a diminution of the landowners property rights, not simply by establishing the local inhabitants right to go on doing what they had been doing for the last 20 years but by depriving the landowner of the right to go on doing what he has been doing for the last 20 years.
Lord Scott did not agree [inferentially, with the majority view] that registration can authorise local inhabitants to enjoy recreative user of the land that is different in kind from the 20 years user that has satisfied the statutory criteria for registration or that would diminish the ability of the landowner to continue to use the land in the manner in which he had been able to use the land during that 20 year period . [or] that a tolerant landowner who has allowed the local inhabitants to use his grass field for an annual 5 November bonfire for upwards of 20 years must, after registration, suffer his field to be used throughout the year for all or any lawful sports and pastimes with the consequential loss of any meaningful residual use that he could continue to make of the field.
That, however, was in the context of Lord Scotts view (para 106) that registration of the land there in question would (or at least should) entitle the locals only to recreative rights of user . commensurate with the nature of the user that had led to that result and would not necessarily extend to the right to use the land for all or any lawful sports or pastimes [for instance, clay pigeon shooting or archery contests].
It is important to note, moreover, that all of this was concerned with the first of the ten issues before the House as to which it was held (per the headnote) that: registration gave rise to rights for the relevant inhabitants to indulge in lawful sports and pastimes, such rights extending (Lord Scott of Foscote dissenting) to sports and pastimes generally and not merely that use which had been the basis for registration, the landowner retaining the right to use the land in any way which did not interfere with those rights.
I repeat, the position arising on registration at a time when both the owner and the locals are using land in theoretically conflicting ways but in fact harmoniously simply did not arise in Oxfordshire and I for my part would decline to treat that case as if it has decided how such an issue should be resolved.
I would, therefore, hold that in this different situation the owner remains entitled to continue his use of the land as before.
If, of course, as in Oxfordshire itself, he has done nothing with his land, he cannot complain that upon registration the locals gain full and unqualified recreational rights over it.
But that is not the position I am considering here.
In short, on the facts of this case, had the use of the land as part of a golf course continued, the locals would in my opinion have had to continue deferring to the golfers.
By this I understand the Inspector to have meant no more than that the locals (with the single exception of Squadron Leader Kime) recognised the golfers rights to play (in this sense only the locals overwhelmingly deferred to golfing use), both locals and golfers sensibly respecting the use being made of the land by the other, neither being seriously inconvenienced by the other, sometimes the locals waiting for the golfers to play before themselves crossing, sometimes the golfers waiting for the walkers to cross before playing.
It is not unique for golf courses to embrace at least some common land and there are innumerable courses crossed by public footpaths.
Both walkers and golfers are generally sensible and civilised people and common courtesy dictates how to behave.
Harmonious coexistence is in practice easily achievable.
For my part, and in the light of my own experience both as a golfer and a walker for over six decades, I do not read the Inspectors findings as indicating (to quote Sullivan J) [2008] EWHC 1813 (Admin) para 40 that there was overwhelmingly give on the part of the local users and take on the part of the golfers.
This being so I see no good reason whatever to superimpose upon the conventional tripartite test for the registration of land which has been extensively used by local inhabitants for recreational purposes a further requirement that it would appear to a reasonable landowner that the users were asserting a right to use the land for the lawful sports and pastimes in which they were indulging.
As Lord Walker has explained, there is nothing in the extensive jurisprudence on this subject to compel the imposition of any such additional test.
Rather, as Lord Hope, Lord Walker and Lord Kerr make plain, the focus must always be on the way the land has been used by the locals and, above all, the quality of that user.
I too, therefore, would allow this appeal.
LORD KERR
For the reasons given by Lord Hope, Lord Rodger, Lord Walker and Lord Brown with all of which I agree, I too consider that this appeal should be allowed.
I venture to offer a few words of my own because my conclusion that the appeal should be allowed represents a change from the view that I initially held and because I can well understand why the Court of Appeal and Sullivan J dismissed the application for judicial review.
The critical question in this case centres on the meaning to be given to the words as of right in section 15 of the Commons Act 2006.
It is not possible to give a literal interpretation to the words since, clearly, the right cannot vest in the local inhabitants until the period of twenty years has elapsed.
They cannot be considered to have indulged in sports and pastimes by dint of a right until the right has come to fruition see Lord Bingham in R(Beresford) v Sunderland City Council [2003] UKHL 60 [2004] 1 AC 889, para 3.
It is also clear that they do not need to believe that they have a right see below.
As Lord Walker said in Beresford at paragraph 72 it has sometimes been suggested that the meaning of the statutory formula is closer to as if of right: see, for instance, Lord Cowie in Cumbernauld & Kilsyth District Council v Dollar Land (Cumbernauld) Ltd 1992 SLT 1035, 1043.
Using this formulation, the question is what does as if of right mean.
Does it simply mean openly indulging in the pastimes etc without force or under licence or does it connote something more? Clearly, it cannot be construed to mean as if they believed they had the right.
The House of Lords so held in R v Oxfordshire County Council, Ex p Sunningwell Parish Council [2000] 1 AC 335.
Does it mean that they acted as if they had the right? If so, how is that to be judged? Does it mean that they gave every indication that they had the right to indulge in the pastimes and sports? According to Mr George QC, the only exception to the tripartite test arises where the users expressly represent that they are not asserting any right at all.
In those circumstances, according to him, they are either benefitting from the implied permission of the owner or they are covertly allowing the necessary period to elapse in which case they fall foul of the requirement that the use of the lands should not be secret.
The question that has troubled me is, What if the inhabitants engagement in the pastimes and sports is not on foot of an express representation that they are not asserting a right but on the basis of an unspoken understanding by all concerned that they are not doing so? Is there a reason why, as a matter of principle, there should be any different legal outcome? It appears to me that there is none.
If the owner of the lands and those who recreate on them share the appreciation that no right is being asserted, then no right is acquired.
Therefore, as Lord Hope has said (in para 19 of his judgment), one must focus on the manner in which the local inhabitants have used the land or, as he has put it, the quality of the user relied on.
The use of the word deferring in the context of the inhabitants use of lands is potentially misleading.
In common parlance deferring to an owners use of his lands can easily be understood to mean no more than the ordinary courteous and civilised acknowledgement of the entitlement of the owner to make use of the lands.
Such civility does not necessarily import an acceptance of any lack of entitlement on the part of the users to continue to indulge their recreations with a view to the acquisition of a right under section 15.
But if deference takes the form of acceptance that the users are not embarked on a process of accumulating the necessary number of years of use of the lands or if it evinces an intention not to embark on such a process, this must surely have significance in relation to the question whether the inhabitants have indulged in the activities as of right.
It is for this reason in particular that I am in emphatic agreement with Lord Hope in his view that one must focus on the way in which the lands have been used by the inhabitants.
Have they used them as if they had the right to use them? This question does not require any examination of whether they believed that they had the right.
That is irrelevant.
The question is whether they acted in a way that was comparable to the exercise of an existing right? Posed in that way, one can understand why the Court of Appeal considered that the examination of the relevant question partook of an inquiry as to the outward appearance created by the use of the lands by the inhabitants.
On that basis also one can recognise the force of Mr Laurence QCs argument that it was necessary to show not only that the lands had been used nec vi, nec clam, nec precario but also that it was reasonable to expect the landowner to resist the use of the land by the local inhabitants.
The essential underpinning of both these assertions, however, was the view that the registration of the lands as a village or town green had the inexorable effect of enlargement of the inhabitants rights and the commensurate diminution of the right of the owner to maintain his pre registration level of use, if that interfered with the inhabitants extended use of the lands.
For the reasons that Lord Hope and Lord Walker have given, the view that this was the effect of the relevant authorities in this area may now be discounted.
For my part, I find it unsurprising that this view formerly held sway.
Mr Laurence (without direct demur from Mr George) informed us that it was the universal opinion of all who practised in this field that the inevitable consequence of the decision in Oxfordshire County Council v Oxford City Council [2006] 2 AC 674 was that local inhabitants acquired unrestricted rights of recreation after registration.
Passages from the speech of Lord Hoffmann in that case particularly at para 51 appeared to lend support for the notion that general, unrestricted rights of recreation over the entire extent of the lands followed upon registration.
And the speech of Lord Scott of Foscote certainly seemed to imply that he apprehended that this was the outcome of the decision by the majority.
Whatever may have been the position previously, however, it is now clear that, where it is feasible, co operative, mutually respecting uses will endure after the registration of the green.
Where the lands have been used by both the inhabitants and the owner over the pre registration period, the breadth of the historical user will be, if not exactly equivalent to, at least approximate to that which will accrue after registration.
On that basis, I am content to accept and agree with the judgments of Lord Hope, Lord Walker and Lord Brown that no overarching requirement concerning the outward appearance of the manner in which the local inhabitants used the land is to be imported into the tripartite test.
The inhabitants must have used it as if of right but that requirement is satisfied if the use has been open in the sense that they have used it as one would expect those who had the right to do so would have used it; that the use of the lands did not take place in secret; and that it was not on foot of permission from the owner.
If the use of the lands has taken place in such circumstances, it is unnecessary to inquire further as to whether it would be reasonable for the owner to resist the local inhabitants use of the lands.
Put simply, if confronted by such use over a period of twenty years, it is ipso facto reasonable to expect an owner to resist or restrict the use if he wishes to avoid the possibility of registration.
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In order to be as of right, use must not be by force, nor stealth, nor by permission of the landowner [20, 67, 87 107, 115].
The law in this area was also concerned with how the matter would have appeared to the reasonable landowner [36].
There was great difficulty in seeing how a reasonable landowner would have concluded that the residents were not asserting a right to take recreation on the disputed land simply because they showed civility towards members of the golf club [36].
The inspector misdirected himself as to the significance of perfectly
natural behaviour by the residents [38, 96].
The appeal would be allowed and the council should register the land [49, 78, 97 108, 116].
The Respondent had argued that the rights of the residents after registration of a village green afforded them unqualified use of the land whatever the landowner wished to do with it.
There would be a mismatch between what the residents would have done to gain the rights and what they would be in a position to do after the green had been registered.
However, Lords Walker and Rodger considered that there was little danger in normal circumstances of registration leading to a sudden diversification or intensification of use by residents [47, 84]; the parties could co exist.
Lords Hope and Kerr considered that there was a broad equivalence between the use relied on to establish the right and what the land might be used for after registration, although there may be some asymmetry as to the manner of its use pre and post registration [72, 115].
Lord Brown considered that the locals could increase their use of the land but only in so far as it would not be incompatible with the owner continuing with his previous use [101].
Lord Hope suggested that the forthcoming review of village greens by the Government should look at the consequences of registration as revealed by the developing case law as well as how the registration system itself is working [56].
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The appellant was questioned at an airport under Schedule 7 to the Terrorism Act 2000 (TA 2000), which requires a person in her position to answer questions asked by police officers, immigration officers and customs officers for the purpose there set out.
She refused to answer the questions and was subsequently convicted of the offence of wilfully failing to do so, contrary to paragraph 18 of that Schedule.
Her appeal against her conviction raises the issue whether Schedule 7 is compatible with the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR), and in particular with articles 8 (right to respect for private and family life), 5 (right to liberty) and 6 (privilege against self incrimination).
The statutory power
Schedule 7 of TA 2000 has been somewhat amended, by the Anti Social Behaviour, Crime and Policing Act 2014 (the 2014 Act), since the date when the appellant was questioned, but the issues of compatibility remain substantially the same.
Since the argument before this court has in effect been concerned with its future application as well as with the appellants particular case, it is convenient to set out the statute in its present form, unless necessary to draw attention to any change which has been made.
material, it provides: Paragraph 2 of Schedule 7 creates the power which was exercised.
So far as 2(1) An examining officer may question a person to whom this paragraph applies for the purpose of determining whether he appears to be a person falling within section 40(1)(b). (2) This paragraph applies to a person if (a) he is at a port or in the border area, and (b) the examining officer believes that the person's presence at the port or in the area is connected with his entering or leaving Great Britain or Northern Ireland or his travelling by air within Great Britain or within Northern Ireland. (3) This paragraph also applies to a person on a ship or aircraft which has arrived at any place in Great Britain or Northern Ireland (whether from within or outside Great Britain or Northern Ireland). (4) An examining officer may exercise his powers under this paragraph whether or not he has grounds for suspecting that a person falls within section 40(1)(b).
The statutory purpose for which the questions may be asked is thus for determining whether the person questioned appears to fall within section 40(1)(b).
That in turn defines terrorist for the purposes of the Act, and does so in these terms: (1) In this Part terrorist means a person who (a) has committed an offence under any of sections 11, 12, 15 to 18, 54 and 56 to 63, or (b) is or has been concerned in the commission, preparation or instigation of acts of terrorism.
So the statutory purpose for which the questions may be asked is for determining whether the person appears either to be, or to have been, concerned in the commission, preparation or instigation of acts of terrorism.
Terrorism is defined for the purposes of the Act in section 1.
Shorn of inessential detail it means the use or threat of action which meets all of three conditions: (1) it must be done for the purpose of advancing a political, religious, racial or ideological cause, (2) it must be designed to influence the government or an international governmental organisation or to intimidate the public and (3) it must involve serious violence to a person or to property, danger to life or serious risk to public health or the risk of serious interference with an electronic system.
Acts of terrorism are therefore to be construed as acts or omissions having these characteristics.
Whilst the statute creates some new offences, most acts of terrorism once committed will in any event constitute long established criminal offences such as murder, infliction of grievous bodily harm, criminal damage, explosives offences or the like.
The TA 2000 is largely concerned with the essential process of counter terrorism, much of which is preventative in character.
Part II deals with the proscription of terrorist organisations.
Part III prohibits fund raising for terrorist purposes and makes provision for the disclosure of terrorist property.
Part IV contains provisions for terrorist investigations, which are not confined to inquiry into known criminal acts which have already occurred but, clearly necessarily, extend to planned or prospective acts, including the commission, preparation or instigation of acts of terrorism.
It is within Part IV that Schedule 7, containing the power now under consideration, is given effect.
Schedule 7 is headed Port and Border Controls.
It follows that what Schedule 7 paragraph 2 does is to create a power to stop and to question people passing through ports or borders in order to see whether they appear to be terrorists in the sense defined by section 40(1)(b), that is to say whether they are or have been concerned in the commission, preparation or instigation of acts of terrorism.
This core power to question is supplemented by subsequent provisions of Schedule 7 which give the officer additional powers in relation to a person questioned under paragraph 2.
These are as follows: (i) (ii) (iii) (iv) to stop; under paragraph 6 the officer may stop the person in order to question him; to require production of documents carried; under paragraph 5 the person questioned must give the officer any information in his possession which the officer requests, provide his passport or other document verifying his identity, and hand over any document requested if he has it with him; to search; under paragraph 8 the person may be searched, an intimate search is not permitted and a strip search is allowed only when there are reasonable grounds for suspecting concealment of something which may be evidence that the individual falls within section 40(1)(b), and then only on the authority of a second and senior officer; to copy and retain material; paragraph 11 (and now paragraph 11A (inserted by the 2014 Act)) contain provisions for the retention of material handed over or found; this includes power to copy and retain electronic data contained on any device carried, the detail of which it will be necessary to consider later; (v) to detain; under paragraph 6 (and now paragraph 6A (inserted by the 2014 Act)) the officer may detain the person, for the purpose of exercising the questioning power under paragraph 2; by paragraph 6A he may not continue the questioning beyond one hour without invoking the more formal rules which attend detention; these are found in separate provisions in both Schedule 7 and Schedule 8 and include regular reviews by a different officer senior to the examining officer; it is necessary to note that at the time of the appellants questioning this power to detain was limited to nine hours, but now it is limited to six hours (the latter including the first hour).
The sanction in the event that the person stopped wilfully fails to comply with the obligations of Schedule 7 is conviction of a specific offence created by paragraph 18.
That paragraph provides: (1) A person commits an offence if he (a) wilfully fails to comply with a duty imposed under or by virtue of this Schedule; (b) wilfully contravenes a prohibition imposed under or by virtue of this Schedule; or (c) wilfully obstructs, or seeks to frustrate, a search or examination under or by virtue of this Schedule.
The penalty available is a fine and/or imprisonment with a maximum of three months, together of course with the generally available lesser penalties of discharge or community orders; an amendment passed in 2003 to increase the maximum imprisonment to 51 weeks has never been brought into force.
These statutory powers are supplemented by a Code of Practice for officers exercising them, issued by the Home Secretary under Schedule 14 paragraph 6, laid before Parliament, published generally and available wherever the powers may be exercised.
This power of questioning, and its associated provisions, is separate from the general power to arrest, detain and question persons who are reasonably suspected of having committed an offence, and, in the context of terrorism, from the specific power to arrest on reasonable suspicion of having been concerned in the commission, preparation or instigation of an act of terrorism.
That latter separate power is provided for by section 41 and different consequential provisions are made by Schedule 8 for the conduct of detention which is consequent upon such an arrest.
The power in issue in the present case is a preliminary power of inquiry in aid of the prevention of terrorism.
It is not dependent on the existence of any reasonable suspicion of either a past offence or act of terrorism or a plan to commit such in future.
It is expressly provided in order to assist officers stationed at ports and borders to make counter terrorism inquiries of any person entering or leaving the country.
If such inquiries lead to a reasonable suspicion of terrorism or offence then the different provisions appropriate to such a case become operative.
The appellants case
The appellant Mrs Beghal passed through East Midlands Airport on 4 January 2011.
She was returning from Paris where she had visited her husband, who is a French national in custody, so the courts have been told in this litigation, in relation to terrorist offences. (The court was given no further information about him.) She was accompanied by her three children.
She was not arrested and was told that whilst the police did not presently suspect her of being a terrorist they needed to speak to her in order to establish whether or not she was a person concerned in the commission, preparation or instigation of acts of terrorism.
Someone was meeting her, so her two older children continued through to the land side of the airport to join that person.
She elected to keep the youngest with her.
She asked to consult with a lawyer.
She requested an opportunity to pray, which was granted, and whilst she did so one of the officers contacted her lawyer.
She was permitted to speak to him on the telephone.
In the meantime she was searched.
The police officers made it clear that the questions would not await the arrival of the lawyer, and proceeded to ask them.
The questions concerned, inter alia, (i) her reasons for travel, (ii) where she had stayed, (iii) whether she had travelled on beyond France, (iv) the identity of the person meeting her, (v) whether she had been arrested in the past, (vi) her relationship with her husband given his imprisonment for terrorism, (vii) whether she was employed or supported by benefits, (viii) how she had paid for the flight, (ix) whether she had a motor car, (x) the details of her parents and siblings, (xi) her nationality status, (xii) how long she had lived in England and (xiii) whether she was carrying a mobile telephone.
She was not formally detained.
She remained at the airport.
Including arrangements for the children, time for prayer (approximately 20 minutes) and time to find and speak to her solicitor, the process appears to have lasted about an hour and three quarters from her being stopped to her being told that she was free to go.
The questions, plus reporting her for the failure to answer them, lasted a little under half an hour.
She refused to answer most of the questions.
She was charged with the offence of wilful failure to comply with the requirement to answer questions.
In due course, after an unsuccessful application to the District Judge to stay the proceedings as an abuse of process, she pleaded guilty to the offence of wilfully failing to answer questions asked under Schedule 7 paragraph 2.
She was sentenced to be conditionally discharged.
History of the power
Although now contained in the TA 2000, the power to question at ports and borders in relation to possible terrorism has been in existence in the UK for 40 years.
It was amongst powers introduced, initially as temporary measures, by the Prevention of Terrorism (Temporary Provisions) Act 1974, which was passed in response to the then threat of IRA terrorism and the bombing campaigns associated with it.
Terrorism legislation has been subject to almost continuous scrutiny ever since.
Other powers introduced by the 1974 Act have not survived, notably a power for the Secretary of State, of his own motion, to remove from Great Britain, and thereafter to exclude, any person he was satisfied was a terrorist, even UK citizens unless they were long term residents.
But the power to question at ports and borders has been re enacted at regular intervals since 1974.
It was re enacted annually until 1984, and then replaced by the Prevention of Terrorism (Temporary Provisions) Act of that year.
That in turn was replaced by the Prevention of Terrorism (Temporary Provisions) Act 1989, which itself was renewed annually until replaced by the TA 2000.
Quite apart from the examination involved in repeated Parliamentary re enactment, there have been both specific inquiries and continuous review.
A review of the then new 1974 Act was undertaken shortly afterwards by Lord Shackleton (Review of the operation of the Prevention of Terrorism (Temporary Provisions) Acts 1974 and 1976 (Cmnd 7324), August 1978).
A further wholesale independent inquiry into terrorism legislation was undertaken in 1995 1996 by Lord Lloyd of Berwick, then, as a Law Lord, one of the UKs most senior judges (Inquiry into Legislation Against Terrorism (Cm 3420), October 1996).
The occasion for his review was the then current hope for a peaceful accord in Northern Ireland, and he reported on the situation as it might be if that occurred; the prospect was subsequently confirmed by the Good Friday Agreement of 1998.
The government then conducted a public consultation on terrorist legislation in 1998.
More recently, in 2012 2013, the government undertook a further public consultation specifically in relation to the Schedule 7 powers and, independently of any tabled legislative proposal, the joint committee on human rights of the Houses of Parliament then examined the powers in 2013 and produced a public report.
In addition to those specific inquiries, there has been in existence since 1984 the office of Independent Reviewer of terrorism legislation, currently pursuant to section 36 of the Terrorism Act 2006.
The reviewers have been distinguished independent lawyers, charged with reporting at least annually on the structure and working of the legislation.
Their reports must be laid before Parliament and thus the public.
Lord Lloyd, successive Independent Reviewers, and the joint committee have all advised that the port questioning power should remain, in some cases with suggested modifications, some of which have been made.
The power to detain was originally limited to 12 hours.
It was reduced to nine hours in 1998 after Lord Lloyd had suggested a six hour limit.
It was further reduced to the present six hours by the 2014 Act, following the 2012 2013 consultation.
At the same time other alterations were made to the Schedule 7 powers by Schedule 9 to the 2014 Act: (i) searches were confined to non intimate searches, with the restrictions on strip searches described above introduced (para 8(3) to (7)); the power to take blood and urine samples was removed; (ii) (iii) a person detained was ensured the right to have a third person informed, when detained at the port as well as if taken to a police station (Schedule 8 paragraph 6(1)) (iv) similarly all persons detained were ensured the right to consult a solicitor, and the questioning is now to be postponed until his arrival unless that would prejudice the inquiry being made (Schedule 8 paragraph 7A); (v) A new requirement for periodic review of detention by a senior officer (vi) was introduced (Schedule 8, Part 1A); and the power to retain documents or data was supplemented by a specific power to copy them, with the same limit to seven days or during a criminal or deportation inquiry.
The Code of Practice
The current Code of Practice was issued in 2014.
Amongst its provisions are the following: (i) examining officers must be specially trained and authorised for the purpose and must normally be police officers; an immigration or customs officer is in effect to be used only exceptionally and when specifically designated by the Secretary of State after consultation with the chief officer of police on both his training and the proposal for his designation (paras 8 to 13); (ii) officers are advised that it will often be helpful to ask initial screening questions without compulsion and that this may avoid the need for the exercise of Schedule 7 powers (para 20); (iii) emphasis is placed upon the need to avoid discrimination and/or arbitrary action, by selecting persons only for the statutory purpose; selection must not be based solely upon the ethnic background or religion of the individual but rather must be informed by considerations relating to the threat of terrorism (paras 18 19); (v) (iv) persons questioned must be informed clearly of the statutory basis for what is being done and of the procedure for feedback or complaint (para 22); if a person questioned but not detained asks to notify a third party and/or to consult a solicitor, these requests should be granted (paras 41 42); records must be kept of the fact and duration of each examination and detention and, from April 2015 when the equipment will be in place, examinations of those in detention must be audio recorded (paras 43 and 66 68); (vi) (vii) guidance is given as to when it may be appropriate to exercise the power of detention; essentially this will be when detention is made necessary by lack of co operation; officers are instructed that if questioning is to last longer than an hour, formal detention must take place before the hour elapses (paras 45 46).
Use of the power
The Independent Reviewers have set out the use of, inter alia, the Schedule 7 powers.
In 2013 there were approximately 245m passenger movements through the ports of the UK.
In 2012 2013, 61,145 were examined under Schedule 7, and in 2013 2014 47,350 were.
Others were asked screening questions, but these entailed the use of no compulsory powers.
It follows that the proportion of passengers examined under compulsion was between 0.02% and 0.025%, or between 1 in 4,000 and 1 in 5,000.
Of the 47,350 examined in 2013 2014, before a decision on detention was required to be made within the first hour, all but 1,889 were dealt with within that time and only 517 were detained (a fraction over 1% of those examined or very roughly 1 in 500,000 passengers).
The Reviewers reports show that the numbers examined have been falling steadily over the past five years.
The Reviewers themselves, whilst concluding that the Schedule 7 questioning power should be retained, have consistently counselled against its over use, and have not detected such.
They have also reported favourably on the manner in which they have observed the power being exercised.
The independent reviewer: recent reports
There has been broad consensus over recent years in the conclusions of successive Independent Reviewers as to the Schedule 7 powers.
It will suffice to refer to the most recent reports of David Anderson QC.
These reports make clear the conclusion that the presence of a port questioning and search power which does not require prior objectively established suspicion on reasonable grounds has undoubted utility in the struggle against terrorism.
The June 2012 report sets out these conclusions at para 9.43ff, and subsequent reports make clear that they still hold good.
The questioning and search powers are found to have three principal values and one ancillary one: (a) (b) (c) (d) in providing evidence which assists in the conviction of terrorists; in furnishing intelligence about the terrorist threat; in disrupting and deterring terrorist activity; and, as an ancillary benefit; in enabling the recruitment of informants.
The principal source of evidence subsequently used either in evidence or in investigations leading to conviction is material found on persons questioned, especially the contents of mobile telephones, laptops or data storage devices such as pen drives.
The Reviewer catalogued five different examples, over a four year period, of convictions deriving from evidence produced from the exercise of Schedule 7 powers.
Even more potent, the Reviewer concluded, has been the gathering of valuable intelligence.
Sometimes this may trigger a train of inquiry which leads directly to a prosecution; on far more occasions it is the accumulation of individually small pieces of intelligence which, combined, may inform both particular and general responses to the terrorist threats confronting this country.
It is a commonplace of detective or security work that a jigsaw approach can yield vital results beyond the significance initially apparent from any single piece of information.
The Reviewer has satisfied himself that port checks can help to dissuade young, nervous or peripheral members of terrorist networks from their plans.
Stops not based on intelligence can help to inhibit the use of clean skins or persons selected for their absence of any prior known connection with terrorism.
The knowledge of port stops can help to disrupt plans which involve international travel.
The Reviewer has attended training sessions for examining officers and has watched them at work.
His conclusion is that the examinations he saw were non confrontational, considerate and no longer than necessary (June 2012 report, para 9.61).
He comments specifically on being struck by the light touch and professionalism displayed by nearly all the ports officers observed. (ibid para 9.58).
In his June 2014 report Mr Anderson expressly considered the potential for ethnically discriminatory use of these powers.
The Strasbourg court had adverted in Gillan v United Kingdom (2010) 50 EHRR 1105 to this potential in the context of the different powers there studied (see below), and the Equality and Human Rights Commission had addressed the same issue, as it helpfully has before this court.
The Reviewer found that there was a significantly higher incidence of the use of Schedule 7 powers in relation to persons of Asian origin than there was for those of white, black or other origin.
He made adjustments for the lower proportion of Asian persons travelling through ports than in the population generally, but there remained a clearly greater use of the powers in the case of such persons.
He concluded that if Schedule 7 were intended to be operated on a random basis, this would be worrying, but that since the powers were, as required by the Code, to be operated having regard to the nature of the terrorist threat confronted by this country, this was, in conditions of the present threat, inevitable and indeed an indication that the Schedule was being properly used.
His conclusion was expressed at paras 7.11 and 7.14 as follows: If Schedule 7 is being skilfully used, therefore, one would expect its exercise to be ethnically proportionate not to the UK population, nor even to the airport using population, but rather to the terrorist population that travels through UK ports.
I have no reason to believe that Schedule 7 powers are exercised in a racially discriminatory manner.
The so called disproportionality identified by the EHRC is not evidence (and not suggested to be evidence) of this.
What matters is that Schedule 7 should be operated responsively to the terrorist threat.
The ethnicity figures are not indicative of a failure to do this.
The Reviewer made several recommendations for changes in Schedule 7.
To the extent that these have been adopted either by statute or the Code (see paras 16 and 17 above) they need not be further rehearsed.
He also made recommendations which have not been adopted, the principal of which were as follows (July 2014 report, paras 19ff): (a) (b) (c) that detention should be permitted only when a senior officer is satisfied that there are (subjectively judged) grounds for suspicion that the person falls within section 40(1)(b); that a similar condition should govern the copying and retention of data downloaded from electronic devices; and that a statutory bar be introduced on the admission of anything said in a Schedule 7 interview in any subsequent criminal trial.
The different powers
In analysing the lawfulness of Schedule 7 it is convenient to break them down into (a) the power of port questioning and search, (b) the power of detention and (c) the power to inspect data on any electronic device carried and to copy and retain that data.
Port questioning and search: article 8
There was, rightly, no dispute before us that Schedule 7 questioning and search under compulsion constitutes an interference with the private life of a person questioned.
It does not follow that screening questions without compulsion do so, and they would appear not to pass the threshold of interference, but that issue does not arise on the facts of this case.
The issue here, accordingly, is whether the interference by questioning and search under compulsion is justified under article 8(2).
In order for it to be justified, it must be (1) in accordance with the law and (2) a proportionate means to a legitimate end.
In accordance with the law
It is well established that the primary constituent of the requirement that interference with an ECHR right must be in accordance with the law (legality) is that there must be a lawful domestic basis for it, that this law must be adequately accessible to the public and that its operation must be sufficiently foreseeable, so that people who are subject to it can regulate their conduct.
An example of a case which failed these primary tests is Malone v United Kingdom (1985) 7 EHRR 14, where it was found to be impossible to say with any reasonable certainty what elements of the powers to intercept communications were incorporated in legal rules and what elements remained within the discretion of the executive.
The requirement of legality, however, is now established to go further than this.
It calls for the law to contain sufficient safeguards to avoid the risk that power will be arbitrarily exercised and thus that unjustified interference with a fundamental right will occur.
This proposition has often been re stated by the European Court of Human Rights (ECtHR).
An example is S & Marper v United Kingdom (2008) 48 EHRR 1169, para 95: The court recalls its well established case law that the wording in accordance with the law requires the impugned measure both to have some basis in domestic law and to be compatible with the rule of law, which is expressly mentioned in the preamble to the Convention and inherent in the object and purpose of article 8.
The law must thus be adequately accessible and foreseeable, that is, formulated with sufficient precision to enable the individual if need be with appropriate advice to regulate his conduct.
For domestic law to meet these requirements, it must afford adequate legal protection against arbitrariness and accordingly indicate with sufficient clarity the scope of discretion conferred on the competent authorities and the manner of its exercise (see Malone v United Kingdom 1984 7 EHRR 14, paras 66 68; Rotaru v Romania (2000) 8 BHRR 449, para 55; and Amann v Switzerland (2000) 30 EHRR 843, para 56).
Legality in this latter sense may be failed, for example, where there is an over rigid regime which does not contain the flexibility which is needed to avoid an unjustified interference with a fundamental right.
This was the situation in both MM v United Kingdom [2012] ECHR 1906 and R (T) v Chief Constable of Greater Manchester Police (Liberty intervening) [2014] UKSC 35, [2015] AC 49.
In those cases the statutory rules under which recordable convictions and cautions were automatically retained and compulsorily disclosed upon applications for particular forms of employment were held to fail the test of legality.
This was in large part because they were without any flexibility or discretion to allow for the case where the recorded matter was irrelevant to the proposed employment and thus disclosure would constitute an unjustified (disproportionate) interference with article 8 rights.
The safeguards (there of discretion or flexibility) were required in order to guard against automatic operation of the rule resulting in disproportionate interference with article 8 rights.
It was in this context that Lord Reed observed in R(T), at para 114, that to satisfy the test of legality there must be sufficient safeguards in place to demonstrate that the State has properly addressed the issue of the proportionality of any interference and enabled it to be examined in a particular instance.
In other situations, however, legality is relevant to the reverse case of discretionary power.
Here what legality may require is that the safeguards should be present in order to guard against overbroad discretion resulting in arbitrary, and thus disproportionate, interference with Convention rights.
The present is a case where the complaint of lack of legality is of this latter kind.
In both kinds of case, the issue of legality is thus, whilst distinct from proportionality, closely linked to it.
In both kinds of case, legality is a prior test which is designed to ensure that interference with Convention rights can be proportionate.
It does not, however, subsume the issue of proportionality, whether the issue is the proportionality of the measure as a whole or the proportionality of its application in a particular case.
As recorded above, there has been unanimity amongst all the independent reviews of the port questioning power as to its utility.
This is clearly relevant to the question of the proportionality of the power, but it does not contribute significantly to the question of its legality.
It is obvious that an arbitrary power can be useful, but it is not legitimate.
In Gillan v United Kingdom (2010) 50 EHRR 1105 the Strasbourg court applied these principles to a different set of counter terrorist provisions of the TA 2000 and, differing from the House of Lords (R (Gillan) v Comr of Police of the Metropolis [2006] 2 AC 307), found that those failed the test of legality.
There, the provisions in question were sections 44 46 TA 2000, which enabled a senior police officer to designate an area for a period of 28 days as one in which police officers could stop and search any person for articles of a kind which could be used in connection with terrorism.
The power to stop and search did not depend on the existence of any objectively judged grounds for suspicion relating to the person intercepted.
That characteristic is shared by the Schedule 7 power of port questioning here under consideration.
The appellant in the present case relies heavily on that decision and contends that the port questioning power similarly fails the test of legality.
The fact that the power was exercisable without depending on any prior suspicion, subjective or objective, was one of the reasons for the Strasbourg courts conclusion in Gillan.
At para 83 the court said this: Of still further concern is the breadth of the discretion conferred on the individual police officer.
The officer is obliged, in carrying out the search, to comply with the terms of the Code.
However, the Code governs essentially the mode in which the stop and search is carried out, rather than providing any restriction on the officers decision to stop and search.
That decision is, as the House of Lords made clear, one based exclusively on the hunch or professional intuition of the officer concerned.
Not only is it unnecessary for him to demonstrate the existence of any reasonable suspicion; he is not required even subjectively to suspect anything about the person stopped and searched.
The sole proviso is that the search must be for the purpose of looking for articles which could be used in connection with terrorism, a very wide category which could cover many articles commonly carried by people in the streets.
Provided the person concerned is stopped for the purpose of searching for such articles, the police officer does not even have to have grounds for suspecting the presence of such articles.
As noted by Lord Brown of Eaton under Heywood in the House of Lords [at para 74], the stop and search power provided for by section 44, radically . departs from our traditional understanding of the limits of police power.
Whilst that factor is common to the provisions considered in Gillan and the present ones, there are otherwise very significant differences between that case and this.
First, the section 44 power was exercisable in relation to any person anywhere in the street, whereas the Schedule 7 power is confined to those who are passing through ports of entry/exit.
The public in this country has historically enjoyed the right to free movement about the streets and the power to stop and search is, as Lord Brown observed, a substantial intrusion upon it.
In this country, there is no general requirement for identity documents to be carried and produced on demand when a citizen is out and about.
By contrast, those who pass through our ports have always been adjusted to border controls, including the requirement to identify oneself and to submit to searches and answer questions in aid of general security.
The potential importance of intercepting, detecting and deterring terrorists at border points is generally recognised.
The current public concern about those leaving this country with a view to joining terrorist groups abroad is simply an example.
The intrusion inherent in stopping for questioning and/or search is accordingly less at border points.
As long ago as 1981 the European Commission on Human Rights referred in McVeigh, ONeill and Evans v United Kingdom (1981) 5 EHRR 71, para 192 to this factor, and to the widely recognised importance of controlling the international movement of terrorists.
In his 1996 report Lord Lloyd identified it in the following passage: 10.27 As an island nation it has long been the British way to concentrate controls at its national frontiers, and to maintain a correspondingly greater freedom from random checks inland.
This is not always the practice adopted in continental countries which have long land frontiers.
But our geography gives us a unique opportunity to target checks where they are likely to be most effective; namely at the choke points provided by our ports and airports.
That, of course, is where immigration and customs controls are also to be found.
But it is only by virtue of the PTA [ie the then Prevention of Terrorism (Temporary Provisions) Act 1989] that the police have any power to stop and question people passing through ports.
Immigration checks on EU nationals having in most eases been reduced to a simple passport check, only a separate police check is likely to identify a terrorist suspect if he is a national of an EU country.
Lord Lloyd added at para 10.47 that the port powers were among the less controversial of the provisions in the statute and that very few of those who submitted evidence to him took exception to them.
Those who did were comprised chiefly of those who were regular travellers to and from Ireland, who might at that time experience frequent questioning, together with pilots who wished to use airfields which were not authorised and port operators who wished to speed up the movement of travellers through their domains.
This distinction between port controls and street searches is by no means confined to the UK.
In the USA, for example, border searches of persons or packages are a long recognised exception to the Fourth Amendments prohibition on searches without probable cause and a warrant: see for example the decision of the Supreme Court in United States v Ramsey 431 US 606 (1977).
Similarly, the Canadian Supreme Court referred in R v Simmons [1988] 2 RCS 495, 528 (in the context of holding that a contraband search based on reasonable suspicion of the presence of smuggled material is an exception to the usual requirements for searches imposed by section 8 of the Charter) to the fact that the degree of personal privacy reasonably expected at customs is lower than in most other situations.
Delivering the majority opinion, Dickson CJ observed: People do not expect to be able to cross international borders free from scrutiny.
Consequently, travellers seeking to cross national boundaries fully expect to be subject to a screening process.
This process will typically require the production of proper identification and travel documentation and involve a search process Of course, the powers there under consideration differed from the present, as did the grounds for their exercise.
The relevance of the cases is the recognition that public expectations are different at borders and that the intrusion represented by checks, questioning and searches is less than it is elsewhere.
Second, the Strasbourg court in Gillan had great regard to the manner in which the section 44 power was actually being used, and in which controls over it provided by the statute were in fact not working.
It identified several different failings. (a) Although there was an authorisation procedure for designation of a particular area, it depended only upon the senior police officer determining that such designation was expedient, which, unlike a test of necessity, betokened no assessment of proportionality (para 80). (b) Although authorisation required the approval of the Secretary of State, he had no power to alter the geographical scope of it, nor was there any evidence that he ever altered the time limit (para 80). (c) Much more significantly, for some years there had been, in the Metropolitan Police district, continuous rolling authorisations for the whole of the area, with each 28 day period being succeeded immediately by another (para 81).
The result was that in the whole of Greater London any person might be subject to stop and search anywhere in the streets at any time.
The same did not apply in other cities even when there might be specific reason for heightened terrorist alert (para 40).
There was thus every sign that the authorisations were not responsive to particular calls for them, as they were clearly intended to be.
This misuse of authorisations had been identified by the then Independent Reviewer, Lord Carlile, in 2002.
It contrasted with the position at the time of Lord Lloyds inquiry six years earlier, when he had reported (at para 10.22) that the power was used with great discretion. (d) The evidence recorded by the Independent Reviewer showed a rapidly mushrooming use of the power of stop and search, from about 33,000 in 2004/2005 to triple that (117,000) in 2007/2008 (para 83). (e) The Independent Reviewer was an additional safeguard but although he had been calling for some years for the power to be used less, this had not been heeded (para 82). (f) The Independent Reviewer had, moreover, found that poor and unnecessary use of section 44 abounded, and he reported evidence of cases where the person stopped was so obviously far from any known terrorist profile that there was, realistically, not the slightest possibility that he or she was a terrorist, and there was no other reason for the stop (para 84).
He had concluded that the evidence showed that section 44 was in some cases being used unacceptably as an instrument to aid non terrorism policing (para 43). (g) There was evidence of the section 44 power being used in a discriminatory fashion against black and Asian persons and indeed of a practice developing of stopping white people for no other reason than to produce greater racial balance in the statistics (para 85). (h) There was a real risk of the section 44 power being misused against demonstrators and protestors in breach of articles 10 or 11 (para 85).
These factors demonstrated in Gillan that the apparent safeguards against disproportionate interference with Convention rights which were provided in the case of section 44 were ineffective.
None of these factors, however, applies to port questioning and search powers.
By contrast, in relation to them, the frequency of use has diminished, the Independent Reviewer endorses their continuation without expressing anxiety of misuse, his suggestions for improvements have been heard, and additional safeguards for the individual have been introduced as set out at paras 16 and 17 above.
Although it is obvious that questioning is in one sense a different power from search, there are in the case of port questioning and search powers sufficient effective safeguards in the manner of operation to meet the requirement of legality.
They include: (i) (ii) (iii) (iv) (v) (vi) the restriction to those passing into and out of the country; the restriction to the statutory purpose; the restriction to specially trained and accredited police officers; the restrictions on the duration of questioning; the restrictions on the type of search; the requirement to give explanatory notice to those questioned, including procedure for complaint; (vii) the requirement to permit consultation with a solicitor and the notification of a third party; (viii) the requirement for records to be kept; (ix) the availability of judicial review; the contention of the appellant and of Liberty that judicial review would be ineffective is overstated; judicial review is available if bad faith or collateral purpose is alleged, and also via the principle of legitimate expectation where a breach of the Code of Practice or of the several restrictions listed above is in issue; courts are well used to requiring police officers to justify their actions and to drawing the correct inference if there is material to do so; use of the power for a collateral purpose, such as to investigate a non terrorism suspected offence, would be likely to become apparent, as it did in the case of section 44 see para 41(f), (g) and (h) above. the continuous supervision of the Independent Reviewer is of the first importance; it very clearly amounts to an informed, realistic and effective monitoring of the exercise of the powers and it results in highly influential recommendations for both practice and rule change where needed. (x)
The fact that questioning is not dependent on the existence of objectively established grounds for suspicion does not by itself mean that there are not adequate safeguards or that the power is not in accordance with the law.
If that had been enough, the long discussion in Gillan of the failures of the safeguards would have been unnecessary.
That is also to an extent illustrated by Colon v Netherlands (2012) 55 EHRR SE45 where a power of universal or random search in aid of public order in a particular area was held to meet the requirement of legality, although not grounded on any basis of suspicion.
Certainly the power was granted for a short period, but that does not affect the principle.
In the particular instance of the exercise of the power which had there occurred the searching had been universal, which meant that there was no potentially arbitrary selection by police officers, but the power did not have to be exercised in that way; random selection for search was equally permitted.
The applicants contention in that case appears to have been limited to the absence of prior judicial approval, but the court reviewed Gillan and it seems clear that if it had concluded that the power failed for want of a suspicion based grounding, it would have said so, particularly since its practice is to consider issues of its own motion under the principle jura novit curia: see for example MM v United Kingdom (supra) at para 150.
For these reasons the principle of legality is satisfied in relation to the Schedule 7 port questioning power.
The suggested analogy with Gillan requires examination but fails.
The need for safeguards is measured by the quality of intrusion into individual liberty and the risk of arbitrary misuse of the power.
The intrusion into individual liberty is of a significantly lesser order at ports than in the streets generally.
There are sufficient safeguards against arbitrary use of this power which either were not present or were not working in Gillan.
There are effective controls via judicial review and the Independent Reviewer which prevent arbitrary use of the power or provide a correction if it should occur.
Proportionality
In Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014] AC 700, 770 771, para 20 Lord Sumption conveniently formulated the concept of proportionality into four questions.
There has been no dispute in the present appeal about this formulation: (i) is the objective sufficiently important to justify limitation upon a fundamental right? (ii) is the measure rationally connected to the objective? (iii) could a less intrusive measure have been adopted? (iv) has a fair balance been struck between individual rights and the interests of the community?
So far as concerns the power of port questioning and search the live dispute is as to the combination of the last two questions, which are inevitably linked.
As to the first, the objective of Schedule 7 is clearly not border control per se but rather the prevention and detection of terrorism.
That is clearly sufficiently important to justify some intrusion upon article 8 rights.
The power of questioning and search is rationally connected to that objective; it is designed to serve it and the unanimous findings of the Independent Reviewers demonstrate its utility in aid of it.
The appellant contended that it was not rationally connected to ports and borders, but that is not the question.
Rather that contention is another way of confronting questions (iii) and (iv); moreover there is a plain rational reason for connecting questioning and search aimed at the prevention and detection of terrorism with border control.
Of course acts of terrorism may be entirely confined to these shores, but it is obvious that those concerned in acts of terrorism, at whatever level, are very likely to be travellers and, certainly given the sources of present terrorist threats, to have international connections leading to travel.
The current concern for outgoing travellers, some very young, seeking to join terrorist organisations abroad is merely an example.
The gravamen of the appellants case is that all questioning and searching is plainly disproportionate unless it is based upon an objectively established reasonable ground for suspecting the person concerned of being within section 40(1)(b).
Thus her case is that a less intrusive measure, namely a power based on such objective grounds for suspicion, could and should have been adopted, and that failure to do so does not strike a fair balance.
The answer to these two linked questions depends in the end on the balance between the level of intrusion for the individual and the value of the power in community purpose served.
It is common ground that the State is entitled to a generous margin of judgment in striking this balance.
The importance for the public of the prevention and detection of acts of terrorism can scarcely be overstated and the level of risk of such acts is at least as high now as it has been at any time in the 40 years since these powers were introduced, though of course the sources of the threats have changed from time to time.
Lord Lloyds 1996 report referred in the passage quoted at para 39 above to the unique opportunity to target checks where they are likely to be most effective, namely at the choke points provided by our ports and airports.
He went on to record that the port checks were designed to deter terrorists from entering the UK to catch those who try: and to collect intelligence on the movement of persons of interest.
He concluded that the intelligence which they yielded is a valuable by product of the work of the port examiners, and that he had heard that it makes a real contribution to the counter terrorism effort (para 10.41).
The unanimous view of all independent observers who have considered the matter has consistently been that questioning and search powers which are not grounded on objectively demonstrable reasonable suspicion of involvement in terrorism are of undoubted value in the struggle against the threat of terrorism, and that to restrict the powers to those in respect of whom a reasonable suspicion can be demonstrated to the satisfaction of a court would not achieve anything like the same utility.
The present Independent Reviewer gave specific consideration to this in his July 2013 report at paras 10.58ff.
He gave examples of the detection and prevention of terrorist activity in cases where the threshold of objectively demonstrated grounds for reasonable suspicion would not have been passed.
He adverted to the way in which, if such a threshold had to be passed, the use of clean skins (or previously innocent unknowns) could thwart investigation, travelling companions of known suspects could not be questioned and those actively involved in terrorism would be likely to be alerted (and, he might have added, likely to be given an insight into intelligence gathering).
There is no reason to doubt these conclusions.
In particular, it is clear that the vital intelligence gathering element of Schedule 7 would not be achieved if prior suspicion on reasonable grounds were a condition for questioning.
A distinct issue relating to proportionality arises in connection with any potential for discriminatory application of the powers.
There is in this case no separate claim that the appellant suffered discrimination, nor could there be given her husbands apparent connection with some form of terrorism.
But if there were a real potential for misuse of the power on a racially discriminatory basis, that would be a reason pointing towards a lack of proportionality, and thus of justification.
For the reasons explained by the Independent Reviewer, however, (see para 25 above) this risk is not a substantial one.
Moreover the Code of Practice (para 43) requires that the records kept of examinations should detail the self declared ethnicity of the subject, which is a guard against discriminatory misuse.
Nor is there any sign of compensatory selection of white subjects simply in order to balance the statistics, as there was found to be in relation to section 44 see para 41(g) above.
Some degree of profiling of potential subjects for questioning is inevitable given the sources, from time to time, of terrorist threat.
The present Code of Practice (at para 4) does little more than rehearse the public sector duty under the Equality Act 2010.
Its later provisions in paras 18 and 19 do confront the issue more directly and they make clear that selection for questioning must be informed by the known sources of terrorist threat.
However the statement that ethnic background or religion must not be used alone or in combination with each other as the sole reason for selecting the person for examination (para 19) is potentially confusing.
The two propositions could usefully be drawn together.
What needs to be made clear is that neither ethnic background nor religion can (separately or together) be the sole criterion for selection, unless present in association with known terrorist profiles or with other relevant characteristics, such as age, mode of travel, destination or origin.
Overall, the level of intrusion into the privacy of the individual is, for the reasons which have been explained above, comparatively light and not beyond the reasonable expectations of those who travel across the UKs international borders.
Given the safeguards set out above, it is not an unreasonable burden to expect citizens to bear in the interests of improving the prospects of preventing or detecting terrorist outrages.
In those circumstances, the port questioning and associated search powers represent a fair balance between the rights of the individual and the interests of the community at large and are thus not an unlawful breach of article 8.
Detention: article 5
The power of detention here under consideration exists only as an ancillary to the Schedule 7 powers of port questioning and search, that is to say to reinforce them and to make them effective.
Such detention falls within article 5(1)(b) in that it is made in order to secure the fulfilment of an obligation prescribed by law.
It follows that what has already been said about the port questioning and search powers applies also to detention, and that the safeguards which exist in relation to them stand also in relation to detention.
It does not, however, follow, although the Divisional Court [2014] QB 607 thought otherwise, that the power of detention is automatically justified.
The level of intrusion occasioned by detention for up to six hours is of a different order to the intrusion occasioned by compulsory questioning and search, and it does not follow either that the safeguards which are adequate for the one are sufficient for the other, or that the fair balance between the rights of the individual and the interests of the public falls in the same place.
Detention under Schedules 7 and 8 may involve the removal of the individual to a police station, and even if it is conducted entirely at the port it represents a substantial interference with the freedom to travel on either in or out of the country and to go about ones ordinary business.
The question of the compatibility of the power of detention with article 5 only barely arises in the present case.
The appellant was prevented from moving on from the airport for about an hour and three quarters, some of which time she chose to use for prayer and thus to an extent delayed the questioning process.
Whether that period was sufficient to constitute a deprivation of liberty for the purposes of article 5 is a question to which the answer is not clear.
Deprivation of liberty, contrary to article 5, is to be contrasted with a simple restriction of freedom of movement, which is the subject of article 2 of Protocol 4, to which the UK is not a ratifying party: see Austin v United Kingdom (2012) 55 EHRR 359, where public order containment for several hours was held not to infringe article 5.
We were referred also to the admissibility decision of the ECtHR in Gahramanov v Azerbaijan (Application No 26291/06) (unreported) given 15 October 2013, in which the applicant was prevented for (on his own case) some four hours from leaving, after being stopped at an airport.
The court held the complaint inadmissible on the ground that it had not been shown that he had been obliged to remain any longer than was necessary to ascertain his status.
In the present case the Secretary of State, as intervener, disputed that the appellant had suffered a deprivation of liberty.
However, in the court below the Crown conceded that she had.
It is helpful to address the question of detention more generally.
To the extent that it is necessary to prevent a person being questioned from leaving whilst the process is underway, some degree of restriction of movement is a proper corollary of the port questioning and search power.
It will usually not constitute a deprivation of liberty, as in Gahramanov.
Even if it does, it will if it is for no more than is necessary to complete the process, be justified.
The separate sanction of prosecution for the offence of failing to comply with the requirements of Schedule 7 may not be sufficient to ensure that questioning and search are effective and may not always bite on those who are leaving the country.
What is not easy to see is why detention for as long as six hours can be necessary for this purpose.
If a subject is bent on refusal, the additional period in a police station is unlikely to make a difference, and in any event the interference with personal liberty is sufficiently serious to call for greater justification than this.
To be proportionate detention for this length of time calls for objectively demonstrated grounds, such as a suspicion on reasonable grounds that the subject falls within section 40(1)(b) or, of course, other grounds for arrest.
The Independent Reviewer also had doubts about the power of detention, although he contemplated a test of subjective, rather than objectively justified, suspicion.
The better view is that if detention beyond what is necessary to complete the process is to be undertaken it ought to be justified by objectively demonstrated suspicion.
A refusal to co operate after explanation that the purpose of inquiry is to establish whether the subject is within that section might, depending on the circumstances, itself provide or contribute to grounds for such reasonable suspicion that he is, especially, for example, if he fails to identify himself.
But it will not always do so; everything will depend on the facts.
The Independent Reviewer doubted whether this would be so at the outset of questioning, and he is no doubt right that often it would not, but for the reasons given it is at that stage perfectly proportionate to prevent the subject moving on for a reasonable time whilst questions are asked, possessions inspected and any search undertaken.
To the extent that there was any deprivation of liberty in the present case, it seems clear that it was for no longer than was necessary for the completion of the process.
There was no requirement to attend a police station.
Accordingly, there was in this case no breach of article 5.
Inspection, copying and retention of electronic data
The use of this power does not arise in the present appeal and it was not separately argued.
The inspection of electronic data is no doubt akin to the inspection of written documents, or for that matter the inspection of baggage or possessions, and it may, as in those analogous cases, yield valuable intelligence, especially of contacts between persons who have separately come to attention.
The Independent Reviewer has emphasised the value of material extracted from such sources (see para 21 above).
But the retention of such data is a considerable intrusion into the private life of the subject, particularly given the volume and content of personal material which is kept nowadays on mobile telephones or portable computers.
Paragraph 11A(3) of Schedule 7 permits retention under three heads.
Under para 11A(3)(b) it may be retained while the examining officer believes it may be needed as evidence in criminal proceedings.
Under para 11A(3)(c) it may be retained while he believes it may be needed in connection with an immigration decision.
There appears no arguable disproportion in these provisions.
But under para 11A(3)(a) it may be retained for so long as is necessary for the purpose of determining whether a person falls within section 40(1)(b).
To the extent that this justifies retention for the duration of the stop, and for a short period afterwards to compare records, this would appear not to be disproportionate.
Retention for long enough to compare with other records necessarily goes with the power to inspect, which would otherwise be of very limited value.
But if para 11A(3)(a) were to be used to justify retention indefinitely so as to provide a bank of data, that would seem to be a different matter.
Other objects seized cannot be retained beyond seven days in the absence of potential use as evidence on criminal or immigration issues (para 11(2)(a)).
The Code (para 40) offers no further guidance on the retention of electronic data.
In a case such as that postulated there appears to be a good deal of force in the Independent Reviewers conclusion that greater safeguards are called for (see para 26(b) above).
His proposal was for a requirement that subjective suspicion should be enough, that it should be required for both copying and retention, and that if it exists both copying and retention should follow.
It may be that the better view is that copying and initial inspection for a reasonable period should be governed by the same criteria as port questioning and the other search and retention powers, but that if longer retention is to be justified objectively established grounds for suspicion should be required.
Whether the right period for initial inspection is the seven days prescribed for other material obtained by search would need evidence which this court has not needed to be given.
Moreover, there ought to be verifiable means of destruction if retention is not justified.
A definitive ruling on such matters must, however, if suitable adjustments are not made to the legislation or Code, await a case in which they are directly raised.
It may also be necessary then to give detailed consideration to the inter relation between such data retention and other surveillance and data interception powers.
Self incrimination and article 6
Two related questions arise at this stage: (a) could the appellant avail herself of the common law privilege against self incrimination when questioned under Schedule 7 or is that privilege inapplicable either because it is by necessary inference abrogated by the statute or because in the case of a person questioned under its powers no sufficient risk existed of the answers being used in criminal proceedings against either that person or her spouse? and (b) was the appellant in any event provided with a privilege against self incrimination by article 6 of the ECHR? In the Divisional Court the appellants case seems to have been argued almost entirely upon the second of these questions, but the first was fully raised in this court and should be addressed first.
The privilege against self incrimination is firmly established judge made law dating from the 17th century abolition of the Star Chamber: see Holdsworths History of English Law (3rd ed) (1944) and Bishopsgate Investment Management Ltd v Maxwell [1993] Ch 1, 17.
It entitles any person to refuse to answer questions or to yield up documents or objects if to do so would carry a real or appreciable risk of its use in the prosecution of that person or his spouse: In re Westinghouse Electric Corpn Uranium Contract Litigation MDL Docket No 235 (Nos 1 and 2) [1978] AC 547 and Rank Film Distributors Ltd v Video Information Centre [1982] AC 380.
If such level of risk exists, the individual should be allowed great latitude in judging for himself the effect of any particular question: R v Boyes (1861) 1 B & S 311, 330, cited with approval in Westinghouse.
A statute may, however, exclude this privilege in a particular situation, and may do so either expressly or by necessary implication: Bishopsgate (supra).
Because the privilege is firmly embedded in the common law, such necessary implication must be established with clarity and is not to be assumed; the approach classically enunciated by Lord Hoffmann in relation to fundamental human rights in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131 is clearly appropriate: Parliamentary sovereignty means that Parliament can, if it chooses, legislate contrary to fundamental principles of human rights.
The Human Rights Act 1998 will not detract from this power.
The constraints upon its exercise by Parliament are ultimately political, not legal.
But the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost.
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.
For the appellant Mr Matthew Ryder QC correctly submitted that such a parliamentary intention will often be gathered from an ancillary provision preventing the use in criminal prosecutions of answers or material disclosed, or sometimes limiting such use to specific kinds of prosecution, such as for giving false information on the occasion of the questioning.
As he says, no such ancillary provision is present here.
That, however, is to overstate the position.
There is no parliamentary consistency of practice.
Sometimes, a statute which provides for an obligation to provide information or to answer questions will indeed say that no privilege against self incrimination may be claimed.
Sometimes there will be added a provision that any answer given may not be relied upon in a subsequent criminal prosecution, or only in prosecutions for making a false statement in answer.
A familiar example of both provisions occurring is section 31 of the Theft Act 1968.
But other provisions which are clearly intended to impose an unqualified obligation to answer do not contain one, or either, of such stipulations.
An example is afforded by the provisions considered in Bishopsgate, sections 235 and 236 of the Insolvency Act 1986.
In that case, the Court of Appeal concluded that the transparent purpose of those provisions to enable a liquidator or similar office holder to obtain information in the public interest, would be stultified if a person required to give that information could refuse to answer by claiming privilege.
Another illustration is R v Hertfordshire County Council, Ex p Green Environmental Industries Ltd [2000] 2 AC 412 where the House of Lords, in a speech delivered by Lord Hoffmann, held that the same applied to section 71(2) of the Environmental Protection Act 1990.
The same applies to the present provisions.
The Schedule 7 powers are patently not aimed at the obtaining of information for the purpose of prosecuting either the person questioned or his spouse.
Whilst that does not by itself mean that there is no real risk that such information could be so used subsequently, it is an indicator that the process of information gathering is not to be limited by the operation of privilege.
The reality is that Schedule 7 powers would be rendered very largely nugatory if privilege applied.
The necessary implication is that it does not.
Moreover, there is a powerful reason why the risk of prosecution based upon answers to Schedule 7 questioning is not a real and appreciable one.
Whilst the mere fact that prosecution is not the purpose of such questioning does not sufficiently reduce the risk, the provisions of section 78 of the Police and Criminal Evidence Act 1984 in practice do.
That section provides that evidence relied upon by the prosecution in a criminal trial may be excluded if it appears to the court that, having regard to all the circumstances, including those in which the evidence was obtained, its admission would have such an adverse effect upon the fairness of the proceedings that it should not be admitted.
Before the Divisional Court, and likewise in this court, the Crown has been unable to postulate any scenario in which answers obtained under the compulsory powers afforded by Schedule 7 would not fall to be excluded under this section, and there is no known case in which such answers have been adduced in a prosecution, although on one occasion they were adduced at the request of the defendant.
It is to be accepted as a general proposition that reliance on a judicial discretion is not to be equated, for a prospective defendant, with the exercise of his privilege against self incrimination: see observations to this effect in Rank Films (para 442) and Bishopsgate (para 19).
But the section 78 controlling power, vested in the trial judge in criminal proceedings, is not sufficiently described as a matter of discretion.
It is a matter of judgment.
If in practice the outcome of the exercise of that judgment is inevitably that the evidence will be excluded, then the real and appreciable risk which the privilege against self incrimination exists to guard against is not present.
The circumstances in which the evidence was obtained are a central consideration in the exercise of the section 78 judgment.
Evidence obtained from the defendant himself (or his spouse) by means of legal compulsion is a classic case of evidence which it will be unfair to admit.
Even without the direct application of article 6 ECHR the outcome of the section 78 judgment is effectively inevitable.
Once article 6, directly binding on a court under section 6(3) of the Human Rights Act 1998, is brought into the equation, there is simply no room for any contrary conclusion, for, as is shown by Saunders v United Kingdom (1997) 23 EHRR 313 (below), article 6 has the effect that any use in a criminal prosecution of answers obtained under compulsion of law will be a breach of the right to a fair trial.
The presence or absence of other evidence implicating the defendant is irrelevant to this proposition.
For this reason, it is simply nothing to the point that the Director of Public Prosecutions declined in the Divisional Court to volunteer an undertaking never to seek to adduce Schedule 7 material if later there were a criminal prosecution; she would never be allowed to do so.
For the same reason, the suggested possibility of use does not contribute to the assessment of proportionality.
So clearly is this the inevitable outcome of the application of section 78 that it is difficult to understand why effect has not been given to the Independent Reviewers recommendation that the position be put beyond argument (such as has been made here) by the enactment of a provision making answers or information obtained inadmissible except in proceedings under para 18 of Schedule 7 or for an offence of which the gist is deliberately giving false information when questioned.
It may be that the view has been taken that the effect of section 78 was so clear that specific provision is not necessary.
The present argument demonstrates that it is desirable.
Moreover, it is necessary to make the position plain in relation to the (largely theoretical) possibility that if A was indeed prosecuted, his co accused B, if hostile to him, might seek to adduce material deriving from Schedule 7 questioning; section 78 would have no application since it would not be the Crown which was adducing the evidence, and fairness might have to be achieved by the unsatisfactory method of severance.
It is to be hoped that following the observations of the Divisional Court and (now) this court, such enactment will follow.
Article 6 ECHR does not contain an explicit privilege against self incrimination, but it is well established that such is implicit in it.
The trigger for the privilege is, however, that a person is charged with a criminal offence, in the special sense in which that word is used in the jurisprudence of the Strasbourg court, that is to say that his position has been substantially affected by an allegation against him and he has become, in effect, a suspect: see Lord Hopes summary of the rule in Ambrose v Harris [2011] UKSC 43; [2011] 1 WLR 2435, paras 62 63.
If a person is charged in this sense, then the effect of article 6 will be to confer the privilege against self incrimination and any abrogation by statute of the common law privilege will accordingly be ineffective; moreover the use in a subsequent criminal trial of answers obtained under compulsion before the defendant was charged will be an infringement of the right to a fair trial.
See for example Saunders v United Kingdom where section 434(5) of the Companies Act 1985 had abrogated the privilege.
In that case the answers given under compulsion to DTI inspectors were adduced in a criminal prosecution of the subject and it was that which constituted the breach of article 6.
The court made it clear at para 67 that the asking of the questions, at a stage when the defendant (as he later became) had not been charged and the purpose of the questioning was an administrative investigation quite different from a criminal one, did not amount to a breach of article 6.
Port questioning and search under Schedule 7 TA 2000 is not part of a criminal investigation.
Its purpose is not the accumulation of an evidential case against the subject.
If that follows, it is a separate matter.
The subject is not a person charged for the purposes of article 6, which has no application to him.
The appellant was at no stage a defendant to a criminal charge and no question of a breach of a right to a fair trial arises.
For those reasons, there was in the present case neither a wrongful denial of the common law privilege against self incrimination nor a breach of article 6 ECHR.
Conclusion
It follows that the appeal should be dismissed.
LORD NEUBERGER AND LORD DYSON:
The relevant factual and legal background is set out in the judgment of Lord Hughes at paras 1 27 above, and we agree with most of his subsequent reasoning.
There is nothing we wish to add to what Lord Hughes says in paras 57 70 in relation to electronic data, self incrimination and article 6 of the Convention.
However, because we consider that there is force in the opposite view, we will briefly express our reasoning on the two main points which have caused Lord Kerr to reach the opposite conclusion in relation to article 8 (albeit in a different order from that on which they are discussed in his judgment), namely proportionality (his paras 119 128) and legality ie in accordance with the law (his paras 93 111).
Exercise of the Schedule 7 powers, and in particular exercise of the initial powers of stopping and questioning under para 2, which are the focus of this appeal, is said to involve a potential interference with the rights of the person concerned under articles 5 and 8 of the Convention.
We agree with Lord Hughes that article 5 is not engaged for the reasons which he gives at paras 52 56 above.
However, as he says, it is common ground that article 8 is engaged.
Accordingly, the four requirements set out in R (Aguilar Quila) v Secretary of State for the Home Department (AIRE Centre intervening) [2011] UKSC 45, [2012] 1 AC 621, para 45 (Lord Wilson) and Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014] AC 700, 770 771, 790 791, paras 20 and 74 (Lord Sumption and Lord Reed respectively) must be satisfied.
We agree that the first two requirements, namely importance of objective and rationality of connection, are satisfied as Lord Hughes and Kerr say; however, unlike Lord Kerr, we also consider that the third and fourth requirements, namely necessity and fair balance (or proportionality), are satisfied.
The two most fundamental and well established functions of any government are the defence of the realm from external attack and the maintenance of the rule of law internally.
The powers granted to the executive by the legislature under Schedule 7 are for the purpose of ensuring national security, which includes aspects of both those vital functions as well as having the important role of curbing terrorism internationally.
A court should be circumspect before upholding any challenge to such legislative powers, when that challenge is based on necessity or disproportionality.
The executive is, or at any rate should be, particularly well informed and experienced in assessing any risks to national security and how to deal with them, whereas the courts are not.
However, this does not mean that the court should simply wave through any such legislation: the rule of law crucially requires the court to be vigilant when assessing the necessity or proportionality of both the contents and the implementation of any statute which interferes with human rights.
The importance of, and tension between, the need for circumspection and the need for vigilance is apparent from the discussion in the judgments in this court in R (Lord Carlile of Berriew) v Secretary of State for the Home Department [2014] UKSC 60, [2015] AC 945, paras 31 44, 67 74, 104 109, 112 117 and 147 174.
Further, as Lord Reed also said in Bank Mellat (No 2), para 71, 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.
In our view, it is not correct to say that in every case where the issue of necessity or proportionality arises the executive must produce positive evidence to show that the means which it has adopted to meet the objective in question is no more than is required.
In some cases, it would be tantamount to proving a negative, which is often hard and sometimes impossible.
It is important to be realistic as well as principled when assessing the proportionality of any means adopted: the need for a degree of reality in relation to proportionality was acknowledged by Lord Reed in Bank Mellat (No 2) at para 75.
In any case where an issue of necessity or proportionality arises, it is appropriate to consider the third and fourth questions raised by Aquila and Bank Mellat (No 2) by reference to the practical realities of the case in question, as well as general principles.
Turning to this case, it is of course not in dispute that properly trained police officers should have the power to exercise border controls to curb terrorism by stopping and questioning individuals entering or leaving the United Kingdom, ie at ports and borders.
Once that is accepted, we find it hard to see how there could be any objection to giving officers the right to stop and question people at ports or borders on a random, or unpredictable, basis ie on a basis which cannot be predicted by those passing through the ports and borders provided that that right is properly regulated and supervised, and as predictable and controlled as reasonably possible.
The legislature does not consider it necessary that officers should stop and question everyone passing through ports and borders, a course which would be self evidently generally much more intrusive on individual rights.
In those circumstances, it is easy to understand why Schedule 7 does not limit the right to stop and question to those people who give rise to objectively explicable suspicion.
The fact that officers have the right to stop and question unpredictably is very likely to assist in both detecting and preventing terrorism, and in deterring some who might otherwise seek to travel to or from this country for reasons connected with terrorism.
Further, many experienced officers may have a feeling of suspicion, which is justified but objectively inexplicable, of a particular individual passing through a port or border.
Of course, in many cases, it may be inappropriate to allow even the likelihood of an increase in the prospects of successfully achieving a legitimate aim to justify an interference with human rights.
However, in this case, the interference is slight (see paras 51 and 54 56 above), the independent justification is convincing (see paras 39 and 49 above), the supervision is impressive (see paras 19 26 above), there are substantial safeguards (para 43 above), the benefits are potentially substantial (see paras 20 23 above), and no equally effective but less intrusive proposal has been forthcoming.
In those circumstances, we conclude that the appeal, in so far as it is based on proportionality, should fail.
We turn to legality.
The requirement that legislation is in accordance with the law means (i) that the legislation must have some basis in domestic law and (ii) that it must be compatible with the rule of law, as the Grand Chamber of the Strasbourg court put it in S & Marper v United Kingdom (2008) 48 EHRR 1169, para 95.
Unsurprisingly, it is not suggested that Schedule 7 fails to satisfy the first requirement, and the argument on legality therefore focusses on the second requirement.
The argument that the Schedule 7 powers are incompatible with Convention rights in this connection is that they are unlawful in the light of the unpredictability of, and lack of control over, their application.
Thus, it is said, contrary to what the Fourth Section of the Strasbourg court held was required in Gillan v United Kingdom (2010) 50 EHRR 1105, paras 76 77, the powers in question are not sufficiently precise or constrained.
In other words, it is said that the power under paragraph 2 of Schedule 7 has not been formulated with sufficient precision to enable the individual to regulate his conduct, and it involves a legal discretion granted to the executive expressed in terms of an unfettered power.
In Gillan, the court had to consider the lawfulness of the power conferred by section 44 of the 2000 Act on a senior police officer to designate an area anywhere in the United Kingdom as one in which the police could stop and search any person for articles in connection with terrorism.
The designated areas were often substantial (eg the whole of the Greater London area) and the periods, although limited, were almost automatically renewed.
Both the successful applicants and the court made the point that the power under consideration was to be distinguished from a power of search exercised at airports (paras 59 and 64).
To use the words of the court, [a]n air traveller may be seen as consenting to such a search by choosing to travel and has a freedom of choice, whereas, under section 44, [t]he individual [could] be stopped anywhere and at any time, without notice and without any choice as to whether or not to submit to a search.
Furthermore, the court in Gillan was also plainly influenced by a number of other factors which it mentioned in paras 83 85 of its judgment.
Those factors were (i) the fact that the domestic court, the House of Lords, considered that the section 44 power radically . departs from our traditional understanding of the limits of police power, (ii) the very large and fast increasing number of stop and searches which were being conducted annually under section 44, (iii) the startling fact that every one of them had been fruitless, (iv) the fact that the independent reviewer had criticised the way in which stop and search under section 44 had been conducted in a number of highly significant respects, (v) the fact that black and Asian persons [had been] disproportionately affected by the section 44 stop and search system, and (vi) the fact that section 44 could be used against demonstrators and protesters in breach of articles 10 and/or 11.
We do not read the decision in Gillan as ruling that any random stop and search system, let alone any system which permits officers randomly to stop and question preliminarily, cannot be in accordance with the law.
This view is supported by the Third Sections decision in Colon v Netherlands (2012) 55 EHRR SE45, which upheld a universal right of stop and search in a particular area, albeit for a limited, but not inconsiderable, period.
While the court in Colon relied in paras 73 and 76 78 on certain factors which distinguished it from Gillan, its decision emphasises how the determination of lawfulness is very sensitive to the facts of the particular case. (However, it is only fair to acknowledge that the court in Colon relied on some features of the Dutch stop and search system which are not present here.)
The point that the lawfulness of any scheme is highly fact sensitive was made by the court in Gillan at para 77, where it said that [t]he 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 (a passage repeated in Colon in para 72).
And, as the Grand Chamber observed in Rekvnyi v Hungary (Application No 25390/94) (2000) 30 EHRR 519, para 34: [w]hilst certainty is highly desirable, it may bring in its train excessive rigidity and the law must be able to keep pace with changing circumstances.
Accordingly, many laws are inevitably couched in terms which, to a greater or lesser extent, are vague and whose interpretation and application are questions of practice.
In the same case, the Grand Chamber said at para 59 that lawfulness implies qualitative requirements in the domestic law such as foreseeability and, generally, an absence of arbitrariness.
When considering whether the legality principle is satisfied in relation to a particular system, it appears clear from the reasoning in the judgment in Gillan that one must look not only at the provisions of the statute or other relevant instrument which gives rise to the system in question but also at how that system actually works in practice.
There are, in our view, important differences between the statutory provisions and modus operandi of the system in this case and those of the system in Gillan, and those differences establish that the powers in this case are more foreseeable and less arbitrary than those in Gillan and, in our view, justify the lawfulness of the Schedule 7 powers.
First, the areas in which Schedule 7 powers can be exercised are targeted by statute to specific and relatively limited and confined places, namely ports and airports.
As Lord Lloyd put it in his report, these locations constitute the first line of defence against the entry of terrorists and, it may be added, the exit of terrorists.
Secondly, the individuals against whom the powers in question can be exercised are limited by statute to a relatively limited, identifiable and specific group, namely, only against those passing across the UKs borders.
Thirdly, the Schedule 7 powers may only be exercised for a limited purpose, namely to determine whether the person concerned appears to be a person who is or has been concerned in the commission, preparation or instigation of acts of terrorism.
Furthermore, none of the more specific concerns which the court raised in paras 83 85 of Gillan, summarised in para 83 above, appear to us to arise here. (i) The Schedule 7 powers, particularly as they are only exercisable at a port or airport, cannot be said to be extraordinary.
Questioning, even challenging, people who are seeking to enter or leave a country is relatively commonplace.
Physical searches at security points in airports are not infrequently conducted on a random basis. (ii) As the evidence summarised in para 18 above establishes, a relatively limited number of people are interviewed under Schedule 7, and the number has decreased each year between 2009/2010 and 2013/2014, whereas the court in Gillan (see para 84) was struck by the dramatic increase in numbers of people stopped and searched, year on year. (iii) Quite unlike the powers in Gillan, the exercise of the powers under review in the present case has produced some successful outcomes see paras 20 23 above. (iv) The independent reviewer is very positive about the way in which the Schedule 7 system is working and is being operated, as is apparent from what is said in para 24 above; indeed, he describes the system as an essential ingredient in the fight against terrorism.
Again, this is quite different from the independent reviewers assessment in Gillan.
By contrast with point (v) in para 83, there is no evidence that the Schedule 7 powers have been used in a racially discriminatory fashion.
Indeed, discriminatory use is specifically prohibited by the code.
In this connection, the independent reviewers reports quoted in para 25 above are significant.
Finally, (vi) unlike the powers in Gillan, the Schedule 7 powers could not be used against demonstrators and protesters in breach of articles 10 and/or 11.
It is right to add that we are not convinced that there is much force in the respondents arguments that (i) the code governing the Schedule 7 powers is more restrictive than that governing the powers considered in Gillan, or (ii) the nature of the powers exercised under Schedule 7 is less intrusive than those exercisable under the powers considered in Gillan.
So far as point (i) is concerned, little if any argument was directed to it, and consideration of the two codes does not suggest a very significant difference between them.
As to point (ii), we do not consider that it has much, if any, bearing on the issue of legality, although we accept that it could be of real relevance to the issue of proportionality.
Nonetheless, these reservations do not in any way undermine the significance of the points made in paras 87 and 88 above.
The significant differences between the Schedule 7 powers and the powers considered in Gillan, which are set out in paras 88 and 89 above do not, of course, automatically mean that the powers granted by Schedule 7 to the 2000 Act satisfy the requirement of legality.
Legality is said to give rise to a problem for the powers granted under paragraph 2 of Schedule 7 because those powers can be exercised randomly.
However, it is important to the effectiveness of these powers that they can be exercised in this way.
Furthermore, if the power to stop and question under Schedule 7 infringes the Convention because it is exercisable randomly, the logical conclusion must be either that the valuable power must be abandoned or the power must be exercised in a far more invasive and extensive way, namely by stopping and questioning everyone passing through ports and borders.
The former alternative would be unfortunate in terms of deterring and hindering terrorism, whereas the latter alternative would seem to put proportionality and legality in irreconcilable tension.
Further, the Schedule 7 powers are subject to the specific controls set out by Lord Hughes in paras 16, 17 and 43 of his judgment.
There are, of course, cases in which legality requires practical systems that are otherwise in the public interest to be abandoned.
However, given the various factors summarised in paras 88 89 above, as more fully considered by Lord Hughes in his judgment, we have reached the conclusion the powers granted by paragraph 2 of Schedule 7 to the 2000 Act do not offend against the requirement of legality, and accordingly we conclude that this appeal should be dismissed.
LORD KERR: (dissenting)
Legality
The opportunity to exercise a coercive power in an arbitrary or discriminatory fashion is antithetical to its legality.
The primary question in this case is whether the powers under Schedule 7 to the Terrorism Act 2000 can be used in this way or whether there are in place sufficient safeguards to prevent them from being exercised in such a manner.
It is not enough that they have not in fact been used arbitrarily or in a discriminatory way.
If they can be used in such a way, they will not be legal.
Moreover, powers which can be used in an arbitrary or discriminatory way are not transformed to a condition of legality simply because they are of proven utility.
The most important authority in this area is the Strasbourg decision in Gillan v United Kingdom (2010) 50 EHRR 1105 and probably the most important passage from the judgment (in relation to the issues in the present case) is that contained in para 83, quoted by Lord Hughes in para 36 above.
There are important earlier passages, however.
In paras 76 and 77, the court said this: 76. the words, in accordance with the law require the impugned measure both to have some basis in domestic law and to be compatible with the rule of law, which is expressly mentioned in the preamble to the Convention and inherent in the object and purpose of article 8.
The law must thus be adequately accessible and foreseeable, that is, formulated with sufficient precision to enable the individual if need be with appropriate advice to regulate his conduct. 77.
For domestic law to meet these requirements it must afford a measure of legal protection against arbitrary interferences by public authorities with the rights safeguarded by the Convention.
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 (emphasis supplied)
As ECtHR acknowledged, eleven constraints on the exercise of the powers at issue in the Gillan case had been identified by Lord Bingham when the case had been before the House of Lords (R (on the application of Gillan) v Comr of Police of the Metropolis [2006] UKHL 12; [2006] 2 AC 307).
These were set out in para 14 of Lord Binghams speech: .
First, an authorisation under section 44(1) or (2) may be given only if the person giving it considers (and, it goes without saying, reasonably considers) it expedient for the prevention of acts of terrorism.
The authorisation must be directed to that overriding objective.
Secondly, the authorisation may be given only by a very senior police officer.
Thirdly, the authorisation cannot extend beyond the boundary of a police force area, and need not extend so far.
Fourthly, the authorisation is limited to a period of 28 days, and need not be for so long.
Fifthly, the authorisation must be reported to the Secretary of State forthwith.
Sixthly, the authorisation lapses after 48 hours if not confirmed by the Secretary of State.
Seventhly, the Secretary of State may abbreviate the term of an authorisation, or cancel it with effect from a specified time.
Eighthly, a renewed authorisation is subject to the same confirmation procedure.
Ninthly, the powers conferred on a constable by an authorisation under sections 44(1) or (2) may only be exercised to search for articles of a kind which could be used in connection with terrorism.
Tenthly, Parliament made provision in section 126 for reports on the working of the Act to be made to it at least once a year, which have in the event been made with commendable thoroughness, fairness and expertise by Lord Carlile of Berriew QC.
Lastly, it is clear that any misuse of the power to authorise or confirm or search will expose the authorising officer, the Secretary of State or the constable, as the case may be, to corrective legal action.
Notwithstanding the existence of these constraints, ECtHR considered that the safeguards provided for in domestic law did not constitute a real curb on the wide powers afforded to the executive so as to offer the individual adequate protection against arbitrary interference para 79.
The reasons for this conclusion were given in para 83 of the courts judgment (op cit) and in the following passages from paras 80 82: 80.
The court notes at the outset that the senior police officer referred to in section 44(4) of the Act is empowered to authorise any constable in uniform to stop and search a pedestrian in any area specified by him within his jurisdiction if he, considers it expedient for the prevention of acts of terrorism.
However, expedient means no more than advantageous or helpful.
There is no requirement at the authorisation stage that the stop and search power be considered necessary and therefore no requirement of any assessment of the proportionality of the measure.
The authorisation is subject to confirmation by the Secretary of State within 48 hours.
The Secretary of State may not alter the geographical coverage of an authorisation and although he or she can refuse confirmation or substitute an earlier time of expiry, it appears that in practice this has never been done.
Although the exercise of the powers of authorisation and confirmation is subject to judicial review, the width of the statutory powers is such that applicants face formidable obstacles in showing that any authorisation and confirmation are ultra vires or an abuse of power. 81.
The authorisation must be limited in time to 28 days, but it is renewable.
It cannot extend beyond the boundary of the police force area and may be limited geographically within that boundary.
However, many police force areas in the United Kingdom cover extensive regions with concentrated populations.
The Metropolitan Police Force Area, where the applicants were stopped and searched, extends to all of Greater London.
The failure of the temporal and geographical restrictions provided by Parliament to act as any real check on the issuing of authorisations by the executive are demonstrated by the fact that an authorisation for the Metropolitan Police District has been continuously renewed in a rolling programme since the powers were first granted. 82.
An additional safeguard is provided by the independent reviewer.
However, his powers are confined to reporting on the general operation of the statutory provisions and he has no right to cancel or alter authorisations, despite the fact that in every report from May 2006 onwards he has expressed the clear view that, section 44 could be used less and I expect it to be used less.
Drawing on the description of the section 44 powers in this passage, it is possible to contrast them with the powers contained in Schedule 7 in a variety of different ways.
These illustrate the greater ambit of the Schedule 7 powers.
No authorisation, whether from a senior police officer or otherwise, is required for the examining officer to have resort to the Schedule 7 powers.
The exercise of those powers is not dependent on the examining officer (or anyone else) considering that it is expedient to do so for the prevention of acts of terrorism.
Since no authorisation is required, there is no question of it being subject to review by the Secretary of State.
There is no geographical or temporal limitation on the exercise of the powers (other than, of course, that they are to be used at a port of entry into or exit from the United Kingdom).
There is no provision for automatic lapse of the powers nor is there any question of their renewed authorisation being subject to confirmation.
Certain features are common to both sets of powers.
The width of the powers is similar in both instances and challenges to their use on conventional judicial review grounds both face the same difficulty as was identified by ECtHR in Gillan.
Both are subject to review by the independent reviewer but, as in Gillan, so in this case, this is a post hoc review.
The independent reviewer cannot restrict the exercise of the powers.
He may merely make recommendations as to their future use and, as we have seen in this case, his recommendations are not always followed.
Resort to the powers may be based on no more than a hunch or the professional intuition of the officer concerned.
Indeed, the absence of any requirement of either reasonable or even subjective suspicion in both instances clearly contemplates that this is the basis on which the powers will in fact be exercised.
The sole proviso as in Gillan is that the Schedule 7 powers should be exercised for the purpose of determining whether the person who is subject to them appears to be or have been concerned in the commission, preparation or instigation of acts of terrorism.
The same considerations affect the viability of a judicial review challenge and this in turn brings sharply into question the claim that judicial superintendence of the exercise of the powers is an effective safeguard against their being resorted to in an arbitrary, discriminatory or disproportionate fashion.
If an examining officer does not have to form a suspicion, how is his exercise of the powers to be reviewed? At present, the only averment required of an officer whose use of the powers is challenged is that they were exercised for the statutory purpose.
On the current state of the law that unvarnished statement will be sufficient to insulate the exercise of the powers from further investigation or challenge.
It is said that a distinguishing feature of the Schedule 7 powers is that, whereas the section 44 power was exercisable in relation to any person in the designated geographical area, the Schedule 7 powers may only be used in relation to those passing through ports of entry or exit.
It is suggested that, while people in this country expect to be allowed to pass through the streets freely, they have traditionally accepted that they will be subject to border controls such as the requirement to identify themselves.
Two points should be made about this.
Firstly, being subject to border controls such as the requirement to provide proof of identity and entitlement to enter is an entirely different matter from being required to answer questions about ones movements and activities.
As this case shows, these questions can be quite detailed and, more importantly, if they are not answered, the person of whom they are asked faces criminal sanction.
Secondly, and more importantly, whether people in this country are accustomed to intrusion when they move through ports of entry or exit does not bear on the question of whether the circumstances in which the Schedule 7 powers may be exercised are too widely drawn to satisfy the test of in accordance with law.
Put shortly, an unfettered power which may be arbitrarily or capriciously used does not become legal just because people generally do not take exception to its use.
The significance of the restriction on the use of Schedule 7 powers to ports of entry should not be misunderstood.
As the respondent has acknowledged, there are 245m passenger movements through United Kingdom ports every year.
All are potentially subject to this power.
The fact that it is exercised sparingly has no direct bearing on its legality.
A power on which there are insufficient legal constraints does not become legal simply because those who may have resort to it, exercise self restraint.
It is the potential reach of the power rather than its actual use by which its legality must be judged.
Moreover, although the percentage of travellers who are subjected to the use of the power is small, in absolute terms the number is not inconsequential.
On average 5 to 7 people each day are examined for more than an hour.
That there is the potential for arbitrary or discriminatory exercise of the power is apparent from, among other things, the provisions of the Code of Practice.
It stipulates that selection should not be based solely upon the ethnic background or religion of the individual.
This provision is objectionable for two reasons.
In the first place there is no clearly obvious means of policing the requirement that persons should not be stopped and questioned just because of their ethnic background or religion.
As ECtHR held in Gillan at para 86 in the absence of any obligation on the part of the officer [exercising powers of stop and search under TA section 44] to show a reasonable suspicion, it is likely to be difficult if not impossible to prove that the power was improperly exercised.
Keeping records of the self declared ethnicity of those subject to the Schedule 7 powers does not, of itself, provide a guarantee that the powers are not being exercised in a discriminatory way.
Secondly, the provision in the Code of Practice contemplates that ethnic origin or religious adherence can be at least one of the reasons for exercising the power.
In so far as the perceived religious belief or ethnic origin of an individual (as opposed to his or her capacity to provide information about their possible involvement in terrorism) is the basis on which he or she is made subject to Schedule 7 powers, this constitutes direct discrimination.
As Lord Nicholls of Birkenhead held in Nagarajan v London Regional Transport [2000] 1 AC 501, 512H: Decisions are frequently reached for more than one reason.
Discrimination may be on racial grounds even though it is not the sole ground for the decision.
Provided that race exerted a more than trivial influence on the decision to treat a person less favourably, the decision will constitute race discrimination (Igen Ltd (formerly Leeds Careers Guidance) v Wong [2005] ICR 931, paras 36 37).
As Mr Squires, for the intervener, the Equality and Human Rights Commission, submitted, if examining officers exercise Schedule 7 powers not because they have any particular suspicion or intelligence about an individual but on the basis of an intuition that a person looks like a terrorist, it is predictable that those of Asian or Muslim appearance will be disproportionately targeted.
The startling reality that this legislation authorises the use of a coercive power, at least partly, on the grounds of race and religion should be starkly confronted.
That not only permits direct discrimination, it is entirely at odds with the notion of an enlightened, pluralistic society all of whose members are treated equally.
The legality of a measure which interferes with a Convention right must also be vouched against its demonstrable proportionality.
Limits to police powers must be prescribed in order to enable the necessary examination of whether the specific exercise of those powers is proportionate to take place and in order to demonstrate that a proper balance between individual rights and wider public interests has been struck.
The majority in R (T) v Chief Constable of Greater Manchester Police (Liberty intervening) [2015] AC 49, held that ensuring that a particular provision was proportionate was an aspect of the prescribed by law requirement.
This is, of course, distinct from the question whether an interference in a particular case was necessary (see per Lord Reed paras 114 115).
In order to be prescribed by law, the legal regime governing the exercise of police powers must include limitations capable of securing the proportionate exercise of those powers and of ensuring that the proportionality of any interference can be adequately examined (ibid para 114).
Where the stop, question and search powers can be exercised without any suspicion whatever, there is simply no material on which a judgment as to whether they are being used proportionately can be made.
The examining officer does not have to explain why he or she chose a particular individual for the exercise of the Schedule 7 powers.
Indeed, he or she does not have to have a reason (in the sense of a rationalised conclusion) for the exercise of the power, since it is unnecessary to have any form of suspicion.
A purely instinctive impulse based on nothing more than a feeling that something relating to terrorism might be disclosed by the exercise of the powers is enough to permit recourse to them.
In those circumstances, an examination of whether the powers have been used proportionately is simply unfeasible.
This crucial dimension of the prescribed by law requirement is missing from the Schedule 7 regime.
On that account use of the Schedule 7 powers cannot be said to be in accordance with law.
Utility
The utility of a provision in this case, its effectiveness as a counter terrorism measure is, at least potentially, relevant to a claimed justification of interference with a qualified Convention right.
So, for instance, if it could be shown that the exercise of Schedule 7 powers provided a tangible result in terms of reducing the risk of terrorist attack, this would sound on the question of pursuit of a legitimate aim for the interference and whether a proper balance had been struck between the rights of the individual and the interests of the community.
But it is misconceived to assume that, because the possible utility of Schedule 7 powers is relevant to justification of an interference with a Convention right, it meets the requirement that the measure be in accordance with law.
The distinction between the manner in which a power is exercised and the result that its exercise may achieve should be clearly recognised.
It does not follow that, because a measure is an effective counter terrorist tool, the way in which that tool is deployed is automatically proportionate and in accordance with law.
In Colon v The Netherlands (2012) 55 EHRR SE45 a power of search in aid of public order, on foot of a designation by the Burgomaster, in the old centre of Amsterdam was held to meet the requirement of legality, although not grounded on any basis of suspicion.
It is to be noted, however, that the applicants complaint that the interference with his right to respect for his private life was not in accordance with the law was confined to what he claimed was the ineffectiveness of the judicial remedies available.
In particular, he argued that an essential guarantee in the form of prior judicial control was missing.
The European Court dealt with that claim in paras 75 78 as follows: 75.
The court has accepted in past cases that prior judicial control, although desirable in principle where there is to be interference with a right guaranteed by article 8, may not always be feasible in practice; in such cases, it may be dispensed with provided that sufficient other safeguards are in place (see, mutatis mutandis, Klass v Germany (1979 80) 2 EHRR 214, para 56; and Rotaru v Romania, (2000) 8 BHRC 449 para 59).
In certain cases, an aggregate of non judicial remedies may replace judicial control (see, mutatis mutandis, Leander v Sweden (1987) 9 EHRR 433, paras 64 65). 76.
In the Netherlands, all pertinent legal texts are in the public domain (compare and contrast para 30 of Gillan).
Before the public prosecutor can order police to carry out a search operation, a prior order designating the area concerned must be given by an administrative authority of the municipality, the Burgomaster.
That order must in turn be based on a byelaw adopted by an elected representative body, the local council, which has powers to investigate the use made by the Burgomaster of his or her authority (see paras 34 36 above). 77.
Review of a designation order, once it has been given, is available in the form of an objection to the Burgomaster, followed if necessary by an appeal to the Regional Court and a further appeal to the Administrative Jurisdiction Division of the Council of State (see para 40 above). 78.
The criminal courts have a responsibility of their own to examine the lawfulness of the order and the scope of the authority of the official who gave it.
It is a defence for anyone charged with failing to comply with a search order issued by or on behalf of the public prosecutor to state that the order was not lawfully given; the criminal court must answer it in its judgment (see para 41 above).
The emphasis of the legality debate was on the reviewability of the authorising agents (the Burgomasters) decision, rather than on any opportunity to examine the proportionality of the individual decision of officers as to who should be stopped and searched.
The use which the Burgomaster made of his or her powers remained subject to review and control by the local council, an elected representative body.
It is important to understand, therefore, that the courts reference to the effectiveness of the measure (in paras 94 and 95 of its judgment) was made in the context of the justification of the interference with the article 8 right, rather than as an assessment of the accordance with law requirement.
The fact that a measure may be effective in pursuit of the aim of counteracting terrorism does not mean that its use in accordance with law is to be assumed.
If the measure is not effective to achieve its avowed aim, this is, of course, a reason to find it disproportionate.
But the converse does not hold true.
The proportionality of a measure is not to be determined by its efficacy in fulfilling its objective.
The privilege against self incrimination and article 6
The venerable history of the privilege against self incrimination and its place at the centre of our system of criminal justice have been described by Lord Hughes in para 60 of his judgment.
The importance attached to this right is such that it is not to be lightly set aside.
As Lord Griffiths said in AT & T Istel Ltd v Tully [1993] AC 45, 57 the privilege is deeply embedded in English law and can only be removed or moderated by Parliament and in Gray v News Group Newspapers Ltd [2013] 1 AC 1, para 18 Lord Neuberger of Abbotsbury MR said that it was for the legislature and not the judiciary to remove or cut down the privilege against self incrimination.
Two particular features of the right should be noted.
It is engaged when compliance with a legal obligation to answer questions would create a real and appreciable risk of criminal proceedings being brought In re Westinghouse Electric Corpn Uranium Contract Litigation MDL Docket No 235 (Nos 1 and 2) [1978] AC 547, 574 per Lord Denning MR.
Secondly, the relevant risk is of prosecution, not conviction: Sociedade Nacional de Combustiveis de Angola UEE v Lundqvist [1991] 2 QB 310; JSC BTA Bank v Ablyazov (No 13) [2014] EWHC 2788.
So, if answering the questions put to her by examining officers would expose Mrs Beghal (or, for that matter, her husband) to an appreciable risk of prosecution, the privilege against self incrimination is in play.
It is not necessary to show that criminal proceedings are likely.
The privilege arises unless the risk is so far beyond the bounds of reason as to be no more than a fanciful possibility: Westinghouse [1978] AC 547, 579 per Roskill LJ.
It is suggested that the powers under Schedule 7 would be ineffective if the privilege against self incrimination was held to apply to them.
The premise on which this is based appears to be that those stopped and questioned under Schedule 7 would be unlikely to answer without there being in place the prospect of prosecution if they refused to respond.
It must therefore be assumed that Parliament intended that the privilege should be abrogated in relation to the use of these powers.
For my part, I would be reluctant to make the assumption that those who were questioned under Schedule 7 would indeed refuse to answer unless faced with the possibility that they would be prosecuted in consequence.
But I have a more fundamental reason for disagreeing with the conclusion that the privilege against self incrimination does not arise in relation to the exercise of Schedule 7 powers.
I am therefore prepared to proceed on the hypothetical basis that Parliament did indeed intend that the privilege should be abrogated.
It is suggested that Schedule 7 powers are not aimed at obtaining information for the purpose of prosecuting the person questioned or her spouse.
I do not understand why this should be so.
The purpose of questioning under the schedule is to determine whether the person questioned appears to be a terrorist within the wide definition contained in section 40(1)(b) of the 2000 Act.
If answers to the questions posed suggest that the person questioned is indeed someone who has committed an offence under one of the sections specified in section 40 or who is or has been concerned in the commission, preparation or instigation of acts of terrorism, why should those answers not form the basis of a prosecution? It seems to me inescapable that there is a real and appreciable risk of prosecution if the answers to the questions posed prove to be self incriminating.
The fact that, in this case, it was not suspected that the appellant was a terrorist is nothing to the point.
If, as she should have been, she was asked questions designed to establish whether she appeared to be a terrorist, the potential of her answers to incriminate her if they were of an inculpatory character, is indisputable.
In the Divisional Court [2014] QB 607 there was some discussion as to whether the Director of Public Prosecutions might be prepared to give an undertaking that answers to questions asked in the exercise of Schedule 7 powers would never form part of a subsequent prosecution case.
Unsurprisingly, to me at least, the Director declined to give that undertaking.
It would be a startling policy decision to give an assurance that evidence of terrorism elicited by Schedule 7 questioning would not be used to prosecute someone implicated by such evidence.
The independent reviewer and, incidentally, the Divisional Court and Lord Hughes in his judgment in this case, have recommended that Parliament should enact a provision making answers or information obtained inadmissible in proceedings, except where there has been a breach of paragraph 18 of the Schedule (wilful failure to comply with a duty under Schedule 7) or for an offence of deliberately giving false information when questioned.
The plain fact is, however, that self incriminating answers given in response to questions posed under Schedule 7 can form the basis of a prosecution.
It is suggested, however, that such a prosecution would not be viable by reason of section 78 of the Police and Criminal Evidence Act 1984.
True it is that the exercise of the power to exclude evidence under this provision must be exercised in accordance with article 6 of ECHR and that this has the effect that any use in a criminal prosecution of answers obtained under compulsion of law will generally be a breach of the right to a fair trial.
But two caveats to that must be entered.
In the first place, answers to questions posed under Schedule 7 can prompt inquiry which might lead to the obtaining of evidence independent of the material which the responses have supplied.
Secondly, it is by no means clear that evidence of those answers will automatically be excluded if there is other evidence which directly implicates the person responding.
So, for instance, if there is significant other evidence which, alone, might be sufficient to establish the guilt of the accused, is it inevitable that evidence of responses given during a Schedule 7 investigation which corroborates or reinforces that evidence, would be excluded? I do not believe that it is.
Of greater importance, however, is the consideration that the protection afforded by the privilege against self incrimination is against the risk of prosecution rather than conviction.
In this context the significance of the DPPs understandable refusal to confirm that there will never be any circumstances in which responses to a Schedule 7 questioning will not be used in a prosecution comes fully into play.
There is, currently, no guarantee that someone who gives a self incriminating answer in the course of a Schedule 7 inquiry will not be confronted by those answers in a subsequent criminal trial.
He may succeed in having evidence of those answers excluded but he cannot ensure that he will not be prosecuted on foot of them.
I consider therefore that the requirement in Schedule 7 that a person questioned under its provisions must answer on pain of prosecution for failing to do so is in breach of that persons common law privilege against self incrimination.
On that account it is incompatible with article 6 of ECHR.
Articles 5 and 8
It is accepted that the exercise of Schedule 7 powers constitutes an interference with article 5 and article 8 rights.
This throws the focus of the discussion about those rights on the question of justification.
To establish justification, it is necessary to satisfy a trilogy of tests: the interference must pursue a legitimate aim; it must be in accordance with law; and it must be necessary in a democratic society.
An aspect of the last of these is proportionality.
As Lord Wilson in R (Aguilar Quila) v The Secretary of State for the Home Department (AIRE Centre intervening) [2012] 1 AC 621, para 45 and Lord Sumption and Lord Reed in Bank Mellat v HM Treasury (No 2) [2014] AC 700, 770 771, 789, paras 20 and 70ff explained, this normally requires that four questions be addressed: (a) (b) 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?; and (c) (d) do they strike a fair balance between the rights of the individual and the interests of the community?
The objective of the Schedule 7 powers (counteracting terrorism) can be readily acknowledged as a legitimate aim.
And obtaining information about whether a person appears to be a terrorist is rationally connected to that aim.
As is usually the case, the real debate centres on the third and fourth issues: is the breadth of the powers no more than is necessary to achieve the aim; and has a fair balance been struck between the rights of the individual and the interests of the community.
The fact that a power has been successful in promoting the aim of the interference with a Convention right does not supply the complete answer to the question whether it is no more than is necessary to achieve the aim.
Nor does the endorsement of the usefulness of the power by the independent reviewer.
Valuable though the independent reviewers opinions are, the question whether this undoubted interference with an individuals Convention rights is no more than is necessary is one for the courts.
And the courts should be mindful that the proven success of the use of the power does not establish that no lesser form of interference would be just as efficacious.
Nor does it, indeed, address the question whether, even if somewhat less effective, a more unobtrusive interference would be sufficient to fulfil the aim of the measure.
While the state enjoys an area of discretionary judgment as to what measures are needed to pursue a particular aim, this does not relieve it of the obligation to produce some evidence that the specific means chosen to bring that about are no more than is required.
There is no evidence that a suspicion less power to stop, detain, search and question is the only way to achieve the goal of combatting terrorism.
The fact that the measure has been successful does not establish that proposition.
Indeed, to take the example of detention, it is clear that the measure goes beyond what is necessary.
As Lord Hughes has pointed out in paras 54 and 55, detention beyond what is necessary to complete the process should be justified by objectively demonstrated suspicion.
The fact that the appellant was not detained for more than was necessary does not establish that the breadth of the power available to examining officers is proportionate.
Plainly, it is not.
Likewise, the failure or refusal of Parliament to enact a provision making answers or information obtained by use of Schedule 7 powers inadmissible in proceedings disposes of any possible argument that this measure goes no further than is required to meet its aim.
The opinion of the independent reviewer and the Divisional Court that this enactment should be made has not been challenged.
While the provision remains in force, that aspect of the Schedule 7 powers is not only not in accordance with law (for the reasons earlier given) but also, ipso facto, more than is necessary to fulfil the objective of the interference.
Of course it is true that the threat of terrorism is substantial and should not be downplayed.
But that undoubted truth should not mask or distort the obligation to dispassionately examine the aptness of measures taken to deal with it.
If they are to be seen as no more than necessary, the powers under Schedule 7 must be capable of withstanding scrutiny of their rationale.
In my view, no reasoned justification has been proffered for investing examining officers with a power to stop, search, question and detain anyone passing through a port and for making those who refuse to answer questions amenable to the criminal law.
On the issue of whether a proper balance has been struck between the rights of the individual and the interests of the community, the degree of interference with rights is self evidently relevant.
And it is unquestionably true that in many cases, the interference with the Convention rights may be relatively unobtrusive.
It is also undoubtedly relevant that members of the public expect to be questioned at ports of entry to and exit from the United Kingdom and that many raise no objection to the use of Schedule 7 powers.
Again, the scourge of terrorism and the need to take effective measures against it loom large in this context.
But the potential reach of the Schedule 7 powers must also be clearly recognised.
A person stopped under this provision is required to answer questions even though they may not have had the benefit of legal advice.
Individuals may have many reasons why they do not want to answer questions as to their movements and activities.
These reasons are not necessarily or invariably discreditable.
Some may be apprehensive about answering questions without a lawyer being present or may lack a full understanding of the significance of refusing to answer.
The fact that they are open to criminal sanction, which could include imprisonment, for failing to answer questions, renders the exercise of these powers a significant interference with article 8 rights, in my opinion.
Again, the absence of any articulated reason for the need for a suspicion less power to stop, detain, etc makes its justification on the basis that it strikes the right balance problematic.
The safeguards outlined by Lord Hughes in para 43 of his judgment do not bear on this anterior question, and, in fairness, he does not suggest that they do.
Whatever may be said about the efficacy of those safeguards (and there is, at least, ample scope for debate about, for instance, the effectiveness of judicial review) they do not supply the necessary justification for allowing examining officers to exercise the powers under Schedule 7 without any suspicion whatever.
For that fundamental reason, I cannot accept that the particular form of interference which Schedule 7 represents has been shown to be justified.
Conclusion
I would allow the appeal and declare that Schedule 7 of the Terrorism Act 2000 is incompatible with articles 5, 6 and 8 of ECHR.
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On 4 January 2011, Mrs Sylvie Beghal passed through East Midlands Airport with her three children on returning from visiting her husband in Paris, a French national in custody on terrorist offences.
She was stopped by police and, although not formally detained, arrested or suspected of being a terrorist, was told they needed to speak to her to establish whether she was involved in terrorist acts.
The police did this exercising the power under Paragraph 2 of Schedule 7 of the Terrorism Act 2000, which deals with questioning individuals at ports or borders for the purpose of determining whether he appears to be [or to have been concerned in the commission, preparation or instigation of acts of terrorism].
No reasonable suspicion of a past or future offence is needed.
Under other provisions of Schedule 7, officers may also: require the production of documents carried; copy and retain material; and, search and detain (currently for a maximum of 6 hours) individuals.
By way of sanction, Paragraph 18 of Schedule 7 of the Terrorism Act 2000 makes it a criminal offence, on pain of fine and/or imprisonment, wilfully to fail to comply with such requirements.
A Code of Practice exists for officers exercising these powers.
Mrs Beghal sent her two eldest children to the arrivals gate, asked for a lawyer (with whom she spoke on the phone) and requested and was granted an opportunity to pray.
She was searched and in the absence of the lawyer was asked, amongst other questions, about her relationship with her husband, her reasons for travel, where she had stayed and whether she had travelled beyond France.
She refused to answer most of the questions and was charged with the offence of wilful failure to comply with the requirement to answer questions.
The questions and reporting her for failure to answer them lasted under half an hour.
She later pleaded guilty to this offence and her sentence was a conditional discharge.
Mrs Beghal brought proceedings arguing that the Schedule 7 powers breached her Article 5 (right to liberty), Article 6 (privilege against self incrimination) and Article 8 (right to respect for private and family life) rights under the European Convention on Human Rights (ECHR).
The Divisional Court dismissed her claims.
The Supreme Court dismisses the appeal by a majority of 4 1 (Lord Kerr dissenting).
Lord Hughes delivers the lead judgment.
Lord Neuberger and Lord Dyson give a joint concurring opinion.
Powers of questioning and search and inspecting, copying and retaining data on electronic devices Article 8 ECHR Questioning and search under compulsion undoubtedly constitutes an interference with Article 8(1) ECHR [28].
As to justification under Article 8(2) ECHR, it is in accordance with the law as there are sufficient safeguards and controls against overbroad and arbitrary use of this power [45].
These include, for example, the restrictions on the location, duration and type of questioning and search, the requirement to permit consultation with a solicitor, the availability of judicial review and the supervision
of the Independent Reviewer of terrorism legislation [43].
The fact that questioning does not require objective grounds for suspicion does not by itself mean that the safeguards are inadequate [44].
The power is also proportionate: (i) questioning and search at ports is rationally connected to the proper objective of Schedule 7, which is preventing and detecting terrorism [47]; (ii) to require reasonable suspicion before using the power would not achieve anything like the same utility in fighting the threat of terrorism [49]; and, (iii) it also represents a fair balance between the rights of individuals and the interests of community at large; the level of intrusion is comparatively light and not beyond the reasonable expectations of international travellers and the importance of preventing and detecting acts of terrorism can scarcely be overstated [48, 51].
There is also no substantial risk of these powers being used on a racially discriminatory basis.
The statistics show that the exercise of Schedule 7 powers is proportionate to the terrorist population, considering the sources of the terrorist threat, that travels through UK ports [50].
Retaining electronic data is a considerable intrusion into the private life of an individual [57].
It may well be that retention longer than an initial inspection for a reasonable period can only be justified if there exist objectively established grounds for suspicion [58].
This power, however, was not used in the case of Mrs Beghal.
Power to detain Article 5 ECHR The power to detain for six hours falls within Article 5(1)(b) ECHR and involves a greater level of intrusion than questioning and search [52].
Nonetheless, restricting an individuals movement in order to exercise the questioning and search power, and for no more than is necessary, will either not be a deprivation of liberty or will be justified [54].
The better view is that detention beyond what is necessary to complete the process of questioning and search for example, for six hours can only be justified by objectively demonstrated suspicion [55].
However, in this case any deprivation of Mrs Beghals liberty was for no longer than was necessary for the completion of the process [56].
Privilege against self incrimination Article 6 ECHR Schedule 7 excludes privilege against self incrimination as it is by necessary inference abrogated by the words of the statute [64].
Moreover, the risk of prosecution based on answers to Schedule 7 is not a real and appreciable one; in practice section 78 of the Police and Criminal Evidence Act 1984 (PACE) would inevitably render such evidence inadmissible.
Article 6 ECHR would also compel the same result [65 66].
As port questioning and search is not part of a criminal investigation, the individual is not a person charged for the purposes of Article 6 ECHR so that Article 6 ECHR has no application [69].
Lord Kerr (dissenting) would find that the Schedule 7 powers are incompatible with Articles 5, 6 and 8 ECHR: (i) they are not in accordance with the law.
The potential for arbitrary or discriminatory exercise of the powers is apparent from the Code of Practice [103 104].
Moreover, a crucial element of this requirement is to make it possible to examine whether the powers have been used proportionately.
Where the Schedule 7 powers can be exercised without any suspicion whatsoever there is simply no material to judge whether they are being used proportionately [106]; (ii) the powers are greater than necessary to accomplish the aims; there is no evidence that such suspicion less powers are the only way to achieve the goal of combatting terrorism and no reasoned justification has been given for granting examining officers such powers [122, 124]; (iii) a proper balance has not been struck between the rights of the individual and the interests of the community [126 127].
Lord Kerr further finds that the requirement to answer questions breaches an individuals common law privilege against self incrimination and is incompatible with Article 6 ECHR.
There is, inescapably, a real and appreciable risk of prosecution if answers to the questions posed prove to be self incriminating [115].
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On 6 August 2003 a young man of 17 and a young girl of 13 had sexual intercourse.
Afterwards the young girl told her mother that this had occurred but she suggested that she had not been a willing participant.
Understandably, her mother went to the police and the young man was arrested.
Later her daughter retracted her account of not having consented to sexual relations.
The young man was therefore charged with a less serious offence than that which he might have faced.
It was, nonetheless, a serious charge.
He was charged with having had unlawful carnal knowledge of a girl under the age of 14 years contrary to section 4 of the Criminal Law Amendment Acts (Northern Ireland) 1885 1923.
The young man pleaded guilty to that charge at Belfast Crown Court on 22 June 2004.
That plea had been entered on the basis that the offence created by section 4 was one in which reasonable belief that the girl was over the age of 14 was not available to him as a defence.
The defendant was sentenced to three years detention in a Young Offenders Centre.
The sentence was suspended for two years.
Later, having received different legal advice from that which had prompted his plea of guilty, the young man applied to the Court of Appeal in Northern Ireland for leave to appeal against his conviction.
The issue before the Court of Appeal was whether section 4 of the 1885 Act created an offence in which proof that the defendant did not honestly believe that the girl was over the age of 14 was not required.
That is also the issue with which this court has had to deal.
The legislative provisions
Traditionally, sexual offences (other than forced intercourse) against girls and young women have been dealt with in legislation according to age bands, with, in general, more grave offences reserved for and heavier penalties imposed for crimes involving younger females.
A clearly discernible historical trend of increasing the age of the victim at which liability for more serious offences is incurred, while reducing the sentence to be imposed, can be detected.
Thus, section 20 of the Offences against the Person (Ireland) Act 1829 provided that any person who had unlawful carnal knowledge of a girl under the age of ten years was guilty of a felony, punishable by death.
By contrast, the same section provided that unlawful carnal knowledge of a girl between ten and 12 years was a misdemeanour punishable by a term of imprisonment at the discretion of the court.
Section 50 of the Offences against the Person Act 1861 reduced the sentence to be imposed for the felony of unlawful carnal knowledge of a girl under the age of ten to, at the discretion of the court, penal servitude for life or for a term of not less than three years or imprisonment for a term not exceeding two years with or without hard labour.
For unlawful carnal knowledge of a girl between the ages of ten and 12, a defendant was guilty of a misdemeanour under section 51 of the same Act and liable to be sentenced to penal servitude for three years or to be imprisoned for up to two years with or without hard labour.
Section 3 of the Offences against the Person Act 1875 made it a felony to unlawfully and carnally know and abuse any girl under the age of 12 years.
Section 4(3) of the Criminal Law Amendment Act (Northern Ireland) 1923 provided that the Criminal Law Amendment Acts (Northern Ireland) 1885 1912 and the Criminal Law Amendment Act (Northern Ireland) 1923 should, to the extent to which they applied to Northern Ireland, be cited together as the Criminal Law Amendment Acts (Northern Ireland) 1885 1923.
Section 2 of the 1885 1923 Acts provided for a procuration offence: Any person who . procures or attempts to procure any girl or woman under 21 years of age to have unlawful carnal connexion, either within or without the Queen's dominions, with any other
person or persons . shall be guilty of a misdemeanour
Section 4, as amended, and in so far as is relevant to the present appeal, provided that Any person who unlawfully and carnally knows any girl under the age of 14 years shall be guilty of felony, and being convicted thereof shall be liable to be imprisoned for life or to be fined or both. (As originally enacted, section 4 had stipulated an age of 13 years.
This was increased to 14 by the Children and Young Persons Act (Northern Ireland) 1950).
As also originally enacted, section 5 of the 1885 Act provided for an offence of unlawful carnal knowledge of a girl between 13 and 15.
The age limit was increased by section 13 of the 1950 Act so that in its amended form it provided as follows: Any person who . unlawfully and carnally knows or attempts to have unlawful carnal knowledge of any girl under the age of 17
years; shall be guilty of a misdemeanor
offence of permitting defilement on premises: Section 6, as amended by section 13 of the 1950 Act, provided for an Any person who, being the owner or occupier of any premises, or having, or acting or assisting in, the management or control thereof induces or knowingly suffers any girl to resort to or be in or upon such premises for the purpose of being unlawfully and carnally known by any man, whether such carnal knowledge is intended to be with any particular man or generally, shall . if such girl is under the
age of 17 years be guilty of a misdemeanour
Section 7 provided for an offence of abduction: Any person who with intent that any unmarried girl under the age of 18 years should be unlawfully and carnally known by any man, whether such carnal knowledge is intended to be with any particular man, or generally takes or causes to be taken such girl out of the possession and against the will of her father or mother, or any other person having the lawful care or charge of her, shall be guilty of a misdemeanour, and being convicted thereof shall be liable at the discretion of the court to be imprisoned for any term not exceeding two years or to be fined or both.
Provided that it shall be a sufficient defence to any charge under this section if it shall be made to appear to the court or jury that the person so charged had reasonable cause to believe that the girl was of or above the age of 18 years.
Provisos of a similar nature to that contained in the latter part of section 7 were included in sections 5 and 6 of the 1885 Act as originally enacted.
These were removed by section 2 of the 1923 Act, as amended by section 13 of the 1950 Act: Reasonable cause to believe that a girl was of or above the age of 17 years shall not be a defence to a charge under sub section (1) of section five or under section six of the Criminal Law Amendment
Act 1885
In August 2003, therefore, the Criminal Law Amendment Acts (Northern Ireland) 1885 1923 included five offences in which age was an essential component of the actus reus, of which two (sections 2 and 4) were silent as to the effect, if any, of reasonable belief as to the age of the girl; two (sections 5 and 6) were subject to an express exclusion of a defence of reasonable belief as to age; and one (section 7) was subject to a defence of reasonable belief as to age.
Thus, from 1885 until 1923, unlawful carnal knowledge of a girl of 13 years or more was not an offence under section 4.
During the same period such an offence was committed under section 5 of the 1885 Act if the girl was between the ages of 13 and 15 but a defence of reasonable belief that the girl was 16 years or more was available.
From 1923 until 1950 unlawful carnal knowledge of a girl of 13 or more continued not to be an offence under section 4.
During that time, however, unlawful carnal knowledge of a girl between 13 and 15 years did not require proof under section 5 that the defendant did not believe that the girl was over the age of 16.
From 1950 onwards sexual intercourse with a girl under the age of 14 became an offence under section 4.
The appellants arguments
The appellant argued that the approach to the interpretation of section 4 of the 1885 1923 Acts must be informed by a fundamental common law principle.
This was that there should be a mental element, commonly referred to as mens rea, for criminal liability unless a clear intention was evinced by the words of a statute that a particular criminal offence should be one of strict liability.
The presumption that mens rea was required could only be displaced, it was suggested, where it could be shown that this was the unmistakable intention of Parliament.
Such an intention was less readily found to exist where the offence was a serious one.
In this regard, reliance was placed on the judgment in R v Muhamad [2003] QB 1031 where, at para 19, Dyson LJ said: The offences where no mental element is specified, for the most part, attract considerably lower maximum sentences than those where a mental element is specified.
Since section 4 was silent on the question of whether proof of mens rea was required, the appellant submitted that the offence specified in the provision could only be regarded as not requiring such proof if that had to be unavoidably and necessarily implied.
The suggestion that a particular provision imposed strict liability had to be considered, the appellant argued, in its statutory and social contexts.
The Criminal Law Amendment Acts (Northern Ireland) 1885 1923 fell to be interpreted as they stood at the time of the appellant's offence: that is, with an express provision making clear that no defence of reasonable belief applied to sections 5 and 6, but remaining silent as to the mens rea of an offence contrary to section 4.
The legislative history of the relevant provisions, although not irrelevant, was, the appellant argued, merely one factor to be taken into account.
In this regard, reference was made to the speech of Lord Steyn in R v K [2002] 1 AC 462, para 30 where he said that it was unhelpful to inquire into the history of subjective views held by individual legislators and that the always speaking nature of a statute dealing with sexual offences meant that a particular provision had to be interpreted in the world as it exists today, and in the light of the legal system as it exists today.
The statutory context of section 4 therefore suggested that the presumption that mens rea was required had not been displaced.
The appellant argued further that, if an implication of strict liability was to be considered as compellingly clear, it must arise from a coherent and consistent legislative scheme.
The Acts of 1885 1923 did not fit that description.
The express provision of a defence of reasonable belief to an offence under section 7, when considered alongside the explicit exclusion of such a defence to offences under sections 5 and 6, and silence on the issue under section 4, meant that the legislation contained signposts which pointed in various directions.
It was impossible to detect a convincingly obvious implication.
As to the social context of the offence under section 4, the appellant again referred to the particular strength of the presumption where the offence was serious or, as described by Lord Scarman in Gammon (Hong Kong) v Attorney General of Hong Kong [1985] AC 1, 14, truly criminal.
The offence under section 4 was unquestionably serious and carried a maximum penalty of life imprisonment.
As Lord Bingham said in Sheldrake v Director of Public Prosecutions [2005] 1 AC 264, para 6, The more serious the crime, and the more severe the potential consequences of conviction, the less readily will it be displaced.
The appellant accepted that section 4 dealt with an issue of social concern but pointed out that Lord Scarman in Gammon (Hong Kong) v Attorney General of Hong Kong had observed that the presumption of mens rea should stand unless it could be shown that the creation of strict liability would be effective to promote the objects of the statute.
The objects of the statute in this context were considered to be the encouraging of greater vigilance to prevent the commission of the prohibited act.
To the extent that strict liability might be said to promote the objects of the statute by encouraging greater vigilance against sexual intercourse with girls under the age of 17, it was submitted that this was sufficiently achieved in Northern Ireland by the strict liability imposed under section 5.
Finally, in a written submission provided on his behalf after the hearing of the appeal before this court, it was pointed out that the appellant could not have been convicted of the section 4 offence in 1885 (the time of the original enactment) since the offence at that time related to girls under the age of 13.
Nor could he have been convicted of such an offence until 1950.
An analysis of whether the common law presumption was displaced had to be conducted against the background that no consistent policy approach had been adopted to the question of whether unlawful carnal knowledge of a girl under 14 years should be a strict liability offence.
The case for the respondent
The proviso introduced by sections 5 and 6 of the 1885 Act introduced for the first time, the respondent explained, a defence of reasonable belief as to the age of the person against whom an offence under these sections was charged.
The background against which the defence had been made available was that R v Prince (1875) LR 2 CCR 154 had held that reasonable grounds for believing that the girl involved was over the age of consent did not constitute a defence under section 51 of the Offences against the Person Act 1861.
But when Parliament came to abrogate that rule in 1885, it did so (by virtue of section 5 of the 1885 Act) only in relation to girls between the ages of 13 and 16.
It did not do so in relation to girls under the age of 13.
The decision not to provide for a similar defence under section 4 of the 1885 Act could not have been other than deliberate, it was argued.
This was not the only distinction between sections 4 and 5, however.
A limitation period of three months on the prosecution of offences under section 5 was also provided for but there was no corresponding provision in section 4. (This limitation period was subsequently increased to 12 months but it was expressly recommended that no such limitation should be introduced for an offence of unlawful sexual intercourse with a girl under the age of 13 because of the gravity of that particular offence in this regard, see R v J [2005] 1 AC 562, para 10).
Section 4 of the 1885 Act also made specific provision for a lesser sentence in respect of an attempt.
And, as originally enacted, it also provided for a less severe sentence with respect to young offenders under 16.
Neither of these different sentencing options was provided for by section 5(1), however.
In England and Wales maintenance of the distinction between, on the one hand section 4 and, on the other, sections 5 and 6 of the 1885 Act, could be seen, the respondent argued, in the amendments introduced by section 2 of the Criminal Law Amendment Act 1922.
It appears that the government had intended to remove altogether the defence of reasonable cause to believe that the girl was over the age of 16 years but, by way of compromise, introduced what has become known as the young mans defence.
By virtue of section 2 of the 1922 Act a man of 23 years or less could avail of the defence (on the first occasion that he was charged with an offence under sections 5 or 6 of the 1885 Act) that he had reasonable cause to believe that the girl was over the age of 16 years.
No such defence was provided for in relation to offences under section 4.
In 1923 the Northern Ireland Parliament, in one of its first items of legislation, achieved, according to the respondent, what Parliament in Westminster had failed to bring about in 1922, namely, the complete abolition of the defence of reasonable belief on the part of the defendant that the girl was above the age of consent.
To have abolished that defence in relation to sections 5 and 6 while leaving open the question whether such a defence might be available in respect of the more serious offence under section 4 was inconceivable, the respondent claimed.
It was therefore argued that it has always been undeniably clear that an offence under section 4 should be one in which proof of mens rea as to the age of the victim was not required.
Discussion
The constitutional principle that mens rea is presumed to be required in order to establish criminal liability is a strong one.
It is not to be displaced in the absence of clear statutory language or unmistakably necessary implication.
And true it is, as the appellant has argued, that the legislative history of an enactment may not always provide the framework for deciding whether the clearly identifiable conditions in which an implication must be made are present.
It is also undeniable that where the statutory offence is grave or truly criminal and carries a heavy penalty or a substantial social stigma, the case is enhanced against implying that mens rea of any ingredient of the offence is not needed.
The strength of the constitutional principle in favour of a presumption that criminal liability requires proof of mens rea finds eloquent expression in what Lord Nicholls, in B (A Minor) v Director of Public Prosecutions [2000] 2 AC 428, 460, referred to as the magisterial statement of Lord Reid in Sweet v Parsley [1970] AC 132, 148 149: there has for centuries been a presumption that Parliament did not intend to make criminals of persons who were in no way blameworthy in what they did.
That means that whenever a section is silent as to mens rea there is a presumption that, in order to give effect to the will of Parliament, we must read in words appropriate to require mens rea . it is firmly established by a host of authorities that mens rea is an essential ingredient of every offence unless some
reason can be found for holding that that is not necessary
where he said: In B (A Minor) Lord Nicholls reinforced that essential message at p 460G the starting point for a court is the established common law presumption that a mental element, traditionally labelled mens rea, is an essential ingredient unless Parliament has indicated a contrary intention either expressly or by necessary implication.
The common law presumes that, unless Parliament has indicated otherwise, the appropriate mental element is an unexpressed ingredient of every statutory offence.
One must begin, therefore, with this strong presumption firmly at centre stage.
And its ready displacement should not be countenanced, as has, perhaps, happened in the past.
In Smith and Hogans Criminal Law, 13th ed (2011), para 7.2 the authors deprecated the tendency of some judges to declaim that the presumption was well embedded only to willingly find that it was easily rebutted.
Lord Bingham made clear in R v K [2002] 1 AC 462, para 18 that description of an offence such as that prescribed by section 4 as an absolute offence or an offence of strict liability is a misnomer.
There must always be deliberation on the part of the defendant in committing the acts which constitute the factual underpinning of the offence.
The real and proper question is whether it must be proved that there was a lack of reasonable belief, on the part of the perpetrator of the acts, that the girl was above the prescribed age.
In R v K at para 17 Lord Bingham referred with approval to Lord Steyns quotation in B (A Minor) at p 470F of Professor Sir Rupert Crosss statement that the presumption that mens rea was required in the case of all statutory crimes was a constitutional principle not easily displaced by a statutory text.
These sturdy assertions provide the setting for the inquiry whether mens rea in relation to the girls age had to be proved in order to found liability under section 4.
That inquiry must start, I believe, with a clear understanding of what the legal position was at the time that the relevant provisions were enacted.
It is true that the subjective intention of individual legislators will not always provide an incontrovertible guide to the meaning of the legislation, as Lord Steyn said in R v K.
But one must at least begin with an examination of what the legislative intention was before considering whether modification of that intention is justified by later amendments or contemporary social contexts.
In my view, there can really be no doubt that section 4 in its original form was intended to impose criminal liability for carnal knowledge of a female under the age of 13 without proof that the perpetrator knew or had reason to believe that she was below that age.
Two considerations make that conclusion inevitable.
Firstly, the decision in R v Prince had confirmed that proof of knowledge or lack of reasonable belief in the age of the victim was not required.
Coming as it did merely ten years before the 1885 Act, that decision formed the crucial backdrop to the enactment of section 4.
It is inconceivable that, had it been intended that such proof was required, section 4 would have remained silent on the issue.
Secondly and relatedly, the juxtaposition of sections 5 and 6 (in which a dispensing proviso was contained) with section 4 makes it impossible to conclude that the absence of such a proviso in section 4 signified anything other than a clear intention that a defence of reasonable belief in the girls age was not to be available.
This is particularly so because the 1885 Act introduced for the first time such a defence in relation to offences of the type provided for in sections 5 and 6.
It seems to me unquestionable that the decision not to extend the defence to offences under section 4 was deliberate and that it clearly signified that the legislature intended that no such defence would be available in relation to offences under that section.
That being so, the next question is whether the amendment in the 1923 Act made any difference to the availability of the defence under section 4.
The appellant contended that the textual amendment of the 1885 Act prompted consideration within a new context of the question whether the presumption that mens rea is required had been displaced.
A change to the statutory framework, the appellant argued, required examination of that question from an entirely new perspective one in which, in contrast to that which had hitherto obtained, the defence of reasonable belief no longer applied to sections 5 and 6 (as a consequence of explicit provision to that effect) but the question of whether it applied to offences under section 4 was open because of the absence of any reference to it in that section.
It would be a curious, indeed anomalous, outcome of the removal of the defence from sections 5 and 6 that it should be implied into section 4 to which it had not previously applied.
At a technical or theoretical level, it can be argued that such a result is feasible because, as the appellant has submitted, the 1885 1923 Acts are to be construed as a whole in their amended form.
Bennion on Statutory Interpretation, 5th ed (2008) describes the effect of textual amendment of a statute at p 290 as follows: . under modern practice the intention of Parliament when effecting textual amendment of an Act is usually to produce a revised text of the Act which is thereafter to be construed as a whole.
Any repealed provisions are to be treated as never having been there, so far as concerns the application of the amended Act for the future. (original emphasis)
The appellant has pointed out that in B (A Minor), in deciding whether the presumption was rebutted, both Lord Nicholls and Lord Steyn had taken account of the amendment of the applicable maximum penalty from two to ten years imprisonment.
And in R v Kumar [2005] 1 WLR 1352, paras 11 13, 28, the Court of Appeal construed section 12 of the Sexual Offences Act 1956 in its present form within an amended statutory framework that included the Sexual Offences Act 1967 and amendments to section 12 in 1994 and 2000, by virtue of which homosexual acts between consenting males of a prescribed age were decriminalised.
It was suggested therefore that a new approach to the interpretation of section 4 is now warranted.
I cannot accept that argument.
In the first place, while the amended legislation is to be construed as a whole in its revised form, it does not follow that its antecedent history be left entirely out of account.
More pertinently, the relevant amendment of the 1885 Act removed a defence which had previously been available for offences under sections 5 and 6 when none had existed for offences under section 4.
To suggest that the removal of the defence under sections 5 and 6 would have the effect of introducing it under section 4 by implication takes contrivance too far.
I am satisfied that in its statutory context section 4 must be interpreted as not requiring proof that the defendant did not know or reasonably believe that the girl was aged 14 or over.
The appellants argument that the Acts of 1885 1923 did not form a coherent and consistent legislative scheme must likewise be rejected.
The fact that the legislation contained signposts which pointed in various directions does not render it incoherent.
It is entirely logical (and in keeping with the historical trend described earlier) that a defence of reasonable belief should be available for the less serious offences prescribed by sections 5 and 6, but that it should not exist for the more grave offence under section 4.
For essentially the same reasons, I would reject the appellants argument that there was no consistent policy approach to the question of whether unlawful carnal knowledge of a girl under 14 years should be a strict liability offence.
On the contrary, the policy approach of protecting younger females by ensuring that a defence of reasonable belief should not be available has been unswerving.
The fact that the age was increased from 13 to 14 does not make the policy inconsistent.
It merely represents the evolution of changing views as to when the policy should take effect.
Finally, there is nothing in the contemporary social context which militates against the denial of the defence of reasonable belief as to age for section 4 offences.
This issue was dealt with authoritatively in R v G (Secretary of State for the Home Department intervening) [2009] AC 92.
In that case the appellant had pleaded guilty to an offence of rape of a child under the age of 13, contrary to section 5 of the Sexual Offences Act 2003.
The prosecution had accepted the appellants claim that the girl had consented to sexual intercourse and had told him that she was 15 years old.
The appellant himself was 15 at the time of the offence and the girl was aged 12.
At para 3 Lord Hoffmann said: The mental element of the offence under section 5, as the language and structure of the section makes clear, is that penetration must be intentional but there is no requirement that the accused must have known that the other person was under 13.
The policy of the legislation is to protect children.
If you have sex with someone who is on any view a child or young person, you take your chance on exactly how old they are.
To that extent the offence is one of strict liability and it is no defence that the accused believed the other person to be 13 or over.
Precisely the same policy considerations underpin section 4 of the 1885 1923 Acts.
Young girls must be protected and, as part of that protection, it should not be a defence that the person accused believed the girl to be above the prescribed age.
As Lady Hale said in para 46 of G, When the child is under 13 [the accused] takes the risk that she may be younger than he thinks she is.
The object is to make him take responsibility for what he chooses to do If you have sexual intercourse with someone who is clearly a child or young person, you do so at your peril.
I would dismiss the appeal.
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The question in this appeal is whether there is a requirement for the prosecution to prove a defendant had an absence of belief that the person they were having sexual intercourse with was over the age of 13, before they can be convicted of an offence of unlawful carnal knowledge of a girl under the age of 14.
The appellant, who was 17 years old at the time, had sexual intercourse with a 13 year old girl.
Initially the girl informed her mother of this fact but told her the intercourse had not been consensual.
The appellant was arrested.
Subsequently however, the girl withdrew the allegation and admitted the sex had been consensual.
As a result, the appellant was charged with the offence of having unlawful carnal knowledge of a girl under the age of 14 contrary to section 4 of the Criminal Law Amendment Acts (Northern Ireland 1885 1923) (the 1885 Act) a serious offence that carries a maximum of life imprisonment.
The appellant was represented and pleaded guilty to the charge at Belfast Crown Court in 2004.
He was sentenced to 3 years detention in a Young Offenders Centre, suspended for 2 years.
He had pleaded guilty on the understanding that it was no defence to a charge under section 4 for the defendant to show he believed the girl was over the age of 13.
Following his conviction the appellant received advice from different solicitors and launched an appeal, arguing that the Crown was indeed required to prove that the appellant did not believe the girl was over 13 years old.
The appellant argued before the Northern Ireland Court of Appeal that section 4 was silent as to such a defence but in view of the legislative history and its seriousness, it must be presumed that there is a mental element to the offence.
The appellant relied on the general presumption that criminal offences require the prosecution to prove mens rea i.e. some intent on the part of the accused, unless explicitly excluded by the language of the statute or necessarily inferred from the language of the offence.
Such a presumption is hard to displace, especially in relation to serious offences.
The Court of Appeal rejected the appellants arguments and held that no defence of reasonable or honest belief existed.
All that was necessary was for the prosecution to prove the accused had had sex with a girl who was actually under the age of 14.
The appellant thus appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Kerr gives the judgment of the court.
A clearly discernible historical trend of increasing the age at which liability for more serious offences is incurred, while reducing the sentence imposed, can be detected [3].
Section 4 as originally enacted referred to unlawful carnal knowledge of a girl under 13 years old.
This was amended to 14 years by the Children and Young Persons (Northern Ireland) Act 1950 (the 1950 Act).
Section 5 of the 1885 Act created the same offence in relation to a girl between the ages of 13 15.
Section 5 and section 6 (permitting defilement on premises) contained provisos that it would be a defence to show that the accused reasonably believed the girl was of or above the age of 16 years.
Such defences were abolished by section 2 of the Criminal Law (Northern Ireland) Amendment Act 1923, as amended by section 140 of the 1950 Act.
Section 5 thus referred to any girl under 17 years old, with an express prohibition of any defence of reasonable belief that she was 17 or older.
No such type of defence has ever been explicitly provided in any version of section 4 [7 13].
The constitutional principle that mens rea is presumed to be required in order to establish criminal liability is a strong one.
It is not to be displaced in the absence of clear statutory language or unmistakably necessary implication.
Where the statutory offence is grave and carries a heavy penalty or a substantial social stigma, the case is enhanced against implying that mens rea of any ingredient of the offence is not needed [26].
One must at least begin with an examination of what the legislative intention was before considering whether modification of that intention is justified by later amendments or contemporary social contexts [31].
There can really be no doubt that the section in its original form was intended to impose criminal liability for carnal knowledge of a female under the age of 14 without proof that the perpetrator knew or had reason to believe that she was below that age.
The decision in R v Prince (1875) LR 2 CCR 154 10 years prior to the 1885 Act confirmed that proof of knowledge or lack of reasonable belief in the age of the victim was not required under section 51 of the Offences Against the Person Act 1861.
This formed the crucial backdrop to the 1885 Act.
The juxtaposition of sections 5 and 6 of the 1885 Act, which originally contained a defence of reasonable belief, with section 4 make it clear that no such defence was to be provided for under the latter section [32].
It would be anomalous if the subsequent removal of the defence from sections 5 and 6 meant that it should be implied into section 4 to which it had not previously applied [34].
While the amended legislation is to be construed in its revised form, it does not follow that its antecedent history has to be entirely left out of account.
To suggest that the removal of the defence under sections 5 and 6 would have the effect of introducing it under section 4 by implication takes contrivance too far [36].
The policy approach of protecting younger females by ensuring that a defence of reasonable belief should not be available has been unswerving.
Further, there is nothing in the contemporary social context which militates against the denial of the defence of belief as to age for section 4 offences [37 38].
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This appeal raises an interesting but complicated question as to the meaning of the GLA Roads and Side Roads (Transfer of Property etc) Order 2000 (SI 2000/1552) (the Transfer Order) made by the Secretary of State in exercise of powers conferred by section 405 and following of the Greater London Authority Act 1999 (the GLA Act).
By that Act Parliament reorganised local government in London and created the Greater London Authority (GLA) under a directly elected Mayor of London.
The GLA performs its strategic transport and road traffic functions through the appellant Transport for London (TfL), which became the highway authority for those public highways in London designated as GLA roads, in the GLA Roads Designation Order 2000 (SI 2000/1117) (the Designation Order).
Previously those highways had been the responsibility of individual London borough councils as local highway authorities including, for their respective areas, the respondents London Borough of Southwark and the City of London Corporation (the Councils).
As its name implies, the Transfer Order provided for the transfer from local highway authorities to TfL of specified property and liabilities relating to highways designated as GLA roads by the Designation Order.
The present dispute concerns, in particular, the meaning of the following provisions in article 2 of the Transfer Order (article 2): (1) Subject to paragraph (2) and article 4 below, on the operative date there are hereby transferred to Transport for London in relation to each GLA road the highway, in so far as it is vested in the former (a) highway authority; (b) on the designation date, it was vested the property mentioned paragraph (3) in so far as, (i) in the former highway authority for the purposes of their highway functions in relation to the GLA road (3) The property referred to in paragraph (1)(b) is (a) land, other than land (i) vested in the former highway authority for the purpose of being used for the storage of material required wholly or mainly for the maintenance and improvement of other highways; (ii) where the former highway authority is a relevant authority, held by that authority for the improvement or development of frontages to the highway, or of land adjoining or adjacent to the highway; .
The dispute arose, and was directed to be determined as a preliminary issue, in an arbitration held under article 8 of the Transfer Order.
At its heart, the appeal is about what is transferred by the words in paragraph (1)(a) of article 2: the highway, in so far as it is vested in the former highway authority.
The question is whether that phrase captures everything which the former authority owns in the vertical plane bounded by the road, which may include all the airspace above and all the subsoil below the surface of the road, or only that part which is necessary for the operation, maintenance and repair of the road, ie a slice of the airspace and a slice of the underlying subsoil.
The Secretary of States drafting team adopted, as their model for article 2, the content of section 265 of the Highways Act 1980 (section 265) which provides for the transfer of property and liabilities upon a highway becoming, or ceasing to be, a trunk road.
Although not part of that Act, article 2 therefore forms part, at least by inheritance, of what counsel fairly described as the rich tapestry of the highways legislation in England and Wales.
In Farrell v Alexander [1977] AC 59, at 73, Lord Wilberforce said: self contained statutes, whether consolidating previous law, or so doing with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot resolve.
Goodes v East Sussex County Council [2000] 1 WLR 1356 was a case about the Highways Act 1980, and its predecessor, the Highways Act 1959.
After citing Lord Wilberforces well known dictum, Lord Hoffmann continued, at p 1360H: It seems to me quite impossible, in construing the Act of 1959, to shut ones eyes to the fact that it was not a code which sprang fully formed from the legislative head but was built upon centuries of highway law.
The provisions of the Act itself invited reference to the earlier law and in some cases were unintelligible without them.
See also, to much the same effect: Cusack v Harrow London Borough Council [2013] UKSC 40; [2013] 1 WLR 2022, per Lord Carnwath at para 19 and per Lord Neuberger at paras 64 65.
Lord Wilberforces wise words have lost none of their force, in an era which has seen an exponential increase in the complexity of legislation.
It is hard enough on the law abiding public that legislation is often unintelligible without the assistance of skilled lawyers.
It is even worse if its meaning requires, in addition, the assistance of a legal historian.
None the less, this is a case, as were the Goodes and Cusack cases, where neither the analysis of the dispute as to statutory meaning, nor the appropriate solution to it, can be undertaken without substantial recourse to the history of English and Welsh highways law and in particular legislation.
Even the innocent sounding word highway is itself capable of having a range of different meanings, dependent upon the context in which it is used.
The Statutory History
The word highway has no single meaning in the law but, in non technical language, it is a way over which the public have rights of passage, whether on foot, on horseback or in (or on) vehicles.
At common law, at least prior to 1835, there was, generally speaking, no necessary connection between those responsible for the maintenance and repair of a public highway and those with a proprietary interest in the land over which it ran.
Prima facie the inhabitants of the parish through which the highway ran would be responsible for its repair, but they were not a corporate body suitable to hold ownership rights in relation to it: see Sauvain on Highway Law (5th ed, 2013) at para 3 05.
As he puts it: It was left to statute, therefore, to create an interest in land which was to be held by the body on whom the duty to repair had fallen.
Parliament began this task, in a rudimentary way, in section 41 of the Highways Act 1835, continued it in section 68 of the Public Health Act 1848, section 96 of the Metropolis Management Act 1855 and section 149 of the Public Health Act 1875.
They all provided for a form of automatic vesting of a property interest in the land over which the highway ran in favour of the body responsible for its maintenance and repair.
A basic feature of the conveyance or transfer of freehold land by reference to an identified surface area is that, unless the context or the language of the grant otherwise requires or provides (eg by a reservation of minerals), its effect is to vest in the transferee not only the surface of the ground, but the subsoil down (at least in theory) to the centre of the earth and the air space up (at least in theory) into the heavens.
Viewed in the vertical plane, the transferee acquires ownership not only of the slice on the surface but of the whole of the space above it, and the ground below it.
But a series of 19th century cases beginning with Coverdale v Charlton (1878) 4 QBD 104 and culminating in the decision of the House of Lords in Tunbridge Wells Corpn v Baird [1896] AC 434, established that the successive statutory provisions for the automatic vesting of proprietary interests in highways in the bodies responsible for their maintenance and repair operated in a much more limited way than would a simple conveyance or transfer of the freehold.
First, it was a determinable, rather than absolute, fee simple, which would end automatically if the body responsible for its repair ceased to be so responsible (eg if the road ceased to be a public highway): see Rolls v Vestry of St George the Martyr, Southwark (1880) 14 Ch D 785.
Secondly it was inalienable, for so long as that responsibility lasted.
Thirdly, and most importantly for present purposes, statutory vesting conferred ownership only of that slice of the land over which the highway ran, viewed in the vertical plane, as was necessary for its ordinary use, including its repair and maintenance.
Following the example of counsel, I shall call this the Baird principle.
That slice of the vertical plane included, of course, the surface of the road over which the public had highway rights, the subsoil immediately beneath it, to a depth sufficient to provide for its support and drainage, and a modest slice of the airspace above it sufficient to enable the public to use and enjoy it, and the responsible authority to maintain and repair it, and to supervise its safe operation.
That lower slice was famously labelled the top two spits in Tithe Redemption Commission v Runcorn Urban District Council [1954] 1 Ch 383 at 407.
A spit is a spades depth.
Although colourful, that phrase says nothing about the necessary airspace above the surface.
Again following counsels example, I prefer the phrase zone of ordinary use.
It is common ground that the zone of ordinary use is a flexible concept, the application of which may lead to different depths of subsoil and heights of airspace being vested in a highway authority, both as between different highways and even, over time, as affects a particular highway, according to differences or changes in the nature and intensity of its public use.
A simple footpath or bridleway might only require shallow foundations, and airspace of up to about ten feet, to accommodate someone riding a horse.
By contrast a busy London street might require deep foundations to support intensive use, and airspace sufficient to accommodate double decker buses, and even the overhead electric power cables needed, in the past, by trolley buses and, now, by urban trams.
The Baird principle was developed so as to limit, in the vertical plane, the defeasible freehold interest automatically vested in the body responsible for the repair of a highway.
This was because, in a series of leading judgments, the court regarded this statutory vesting as a form of expropriation of private property rights without compensation, and was therefore concerned to limit its effect strictly to that which was necessary to achieve the Parliamentary objective, that is conferring upon highway authorities sufficient property to enable them to perform their statutory duties of the repair, maintenance and operation of highways.
Thus for example, in Coverdale v Charlton, Bramwell LJ said (at p 116) that it would be monstrous if the highway authority thereby acquired rights in valuable minerals below the surface.
In Rolls v Vestry of St George the Martyr, Southwark James LJ in a celebrated passage at p 796 said, of section 149 of the Public Health Act 1875: It seems to me very reasonable then to interpret this enactment in a way which gives everything that is wanted to be given to the public authority for the protection of the public rights without any unnecessary violation of the rights of the landowner.
In Tunbridge Wells Corpn v Baird Lord Halsbury LC said, after approving every word of what James LJ had said in the passage quoted above: That the street should be vested in them as well as under their control, may be, I suppose, explained by the idea that as James LJ points out, it was necessary to give, in a certain sense, a right of property in order to give efficient control over the street.
It was thought convenient, I presume, that there should be something more than a mere easement conferred upon the local authority, so that the complete vindication of the rights of the public should be preserved by the local authority; and, therefore, there was given to them an actual property in the street and in the materials thereof.
It is intelligible enough that Parliament should have vested the street qua street and, indeed, so much of the actual soil of the street as might be necessary for the purpose of preserving and maintaining and using it as a street.
At p 442 Lord Herschell said: My Lords, it seems to me that the vesting of the street vests in the urban authority such property and such property only as is necessary for the control, protection and maintenance of the street as a highway for public use.
The modern successor currently in force, to the 19th century legislation to which those authorities refer, is section 263 of the Highways Act 1980.
It provides, so far as is relevant, as follows: Vesting of highways maintainable at public expense. (1) Subject to the provisions of this section, every highway maintainable at the public expense together with the materials and scrapings of it, vests in the authority who are for the time being the highway authority for the highway. (2) Subsection (1) does not apply to a highway with respect to the vesting of which, on its becoming or ceasing to be a trunk road provision is made by section 265 below, It was, rightly, common ground between counsel that the Baird principle is firmly embedded in section 263.
Apart from the section numbers, this provision for automatic vesting was taken, word for word, from section 226 of the Highways Act 1959.
In its 1959 Report, the Committee of Consolidation on Highway Law, chaired by Lord Reading, which had been asked to consider the then draft bill, and whether amendments not of substantial importance to existing legislation should be made, clearly understood the rationale for the application of the Baird principle to what became section 226 (then clause 225), at para 135.
They said: The enactments reproduced in the clause have frequently been considered by the courts and it has been held that they vest in the highway authority the property in the surface of the highway and in so much of the actual soil below and the air above as may be reasonably required for its control, protection and maintenance as a highway.
Of rather more recent origin are those statutory antecedents to what is now section 265 of the Highways Act 1980, which make provision for the transfer of property and liabilities in connection with the designation of a highway as a trunk road, and the revocation of any such designation.
These provisions respond, not to the need to vest in a highway authority rights formerly enjoyed by private owners of the land, but rather to the need to transfer such rights (and liabilities) from one highway authority to another where the changed status of the highway causes a change in the identity of the public body responsible for its maintenance, repair and operation.
Prior to 1929 there was no specific statutory provision for this purpose.
In Finchley Electric Light Co Ltd v Finchley Urban District Council [1903] 1 Ch 437 the question was whether the defendant as local highway authority could restrain the running of a power cable by the plaintiff at a height of 34 feet above Regents Park Road in London.
The council had acquired property rights in relation to the road by automatic vesting under section 149 of the Public Health Act 1875 (a direct statutory predecessor of what is now section 263), the previous owners having been turnpike trustees, who had acquired it for the construction of a road.
The fact that the councils predecessors in title were turnpike trustees did not permit the Court of Appeal to do otherwise than apply the Baird principle to the automatic vesting achieved by section 149, even though the turnpike trustees had acquired their title by conveyance in unqualified terms, so as to have been the owners of the whole of the vertical plane above and below the location of the road.
Collins MR said: It seems to me that the standard which determines this question is, not how much the owner has to give, but how much the local authority under the Public Health Act have the right to take.
A hesitant start towards a more bespoke regime for transfers of property between successive highway authorities was made in section 29 of the Local Government Act 1929, in relation to main roads (renamed county roads) for which, thereafter, county councils rather than local councils were to be responsible.
Section 29 affords little assistance for present purposes because it appears to provide for the vesting only of the materials of the road and the drains belonging to it, leaving the vesting of property in the land itself (including the airspace above it) to the then provision for automatic vesting, in the Public Health Act 1875.
A more ambitious property transfer scheme was undertaken in relation to newly designated trunk roads by section 7 of the Trunk Roads Act 1936.
It provided as follows: Transfer of property and liabilities. (1) When a road becomes a trunk road, then, subject to the provisions of this section, of the property which immediately before the date on which the road became a trunk road was vested in the former highway authority for the purposes of their functions in relation to the road there shall, as from that date, be transferred to, and vest in, the Minister, by virtue of this section, the following property, that is to say: The road and any land (not being land vested in the former highway authority for the purpose of being used for the storage of materials required wholly or partly for the maintenance, repair or improvement of other roads or land acquired for the improvement or development of frontages or of land abutting on or adjacent to the road);
This was the provision in force in relation to trunk roads when the Reading Committee came to review the consolidating and amending Highways Bill in 1959.
Clause 229 of the Bill (which became, without amendment, section 228 of the 1959 Act) provided as follows: Transfer of property and liabilities on change of status of highway. (1) Where a highway becomes a trunk road, then, subject to the provisions of this section, there shall, as from the date on which the highway becomes a trunk road, be transferred to the Minister by virtue of this section (a) the highway, in so far as, immediately before said date, it was vested in the former highway authority, and (b) the property mentioned in the next following subsection, being property which, immediately before the said date, was vested (i) in the former highway authority for the purposes of their functions in relation to the highway, or in a council for the purposes of functions (ii) in relation to the highway under any enactment to which this section applies, and the highway and other property so transferred shall by virtue of this section vest in the Minister: (2) The property referred to in paragraph (b) of the foregoing subsection is (a) land, other than land vested in the former highway authority for (i) the purpose of being used for storage of materials required wholly or mainly for the maintenance or improvement of other highways, or (ii) acquired for improvement or development frontages to the highway, or of land adjoining or adjacent to the highway
It will be immediately apparent that there are significant linguistic similarities and differences between section 7 of the 1936 Act and section 228 of the 1959 Act.
What was previously called the road is now called the highway.
Whereas, in the 1936 Act, the transfer both of the road and other property (including land) was all regulated by the condition that it had been vested in the former highway authority for the purposes of their functions in relation to the highway that condition is, in the 1959 Act, applied in the same language to other property including land, but not in express terms to the highway.
Rather, the condition relating to the highway itself is that it is transferred in so far as, immediately before the said date, it was vested in the former highway authority.
There is also, in section 228(6), a provision for reverse transfer where a trunk road ceases to be a trunk road but it is not suggested that this significantly affects the present dispute.
Nothing in the Reading report (which includes a short commentary on what was then clause 227) suggests that the Committee thought that these changes to the language and layout of the provisions for transfer of property in relation to trunk roads effected any material change to the substance of those provisions.
The wording of section 228 of the 1959 Act was carried forward into what is now section 265 of the 1980 Act with very little alteration.
The phrase and the highway and other properties so transferred shall by virtue of this section vest in the Minister has been removed.
As already noted, article 2 of the Transfer Order takes as its model the provisions of section 265, again with no amendment which has any consequence in relation to the present dispute.
It was, more or less, common ground that since article 2 had been drafted on the basis of the model constituted by section 265, it was to that section that recourse had to be made to resolve the dispute as to the meaning of the article.
Analysis
The question for determination on this appeal, which is more focussed than the more widely drawn preliminary issues, is whether the provision in article 2(1)(a) for the transfer to TfL of the highway in relation to a GLA road, and the identical provision in section 265(1)(a) in relation to a trunk road, is governed by the Baird principle so as, in every case, to limit the property transferred within the vertical plane above and below the highway to the zone of ordinary use.
The appellant TfL claim that it is not so limited.
The respondent Councils say that it is.
This would be an arid academic question if the only way in which local authorities (including the respondent Councils) could ever acquire property rights in relation to highways was by automatic vesting under section 263 and its predecessors.
If that were so, the former highway authorities would only own the zone of ordinary use, and nothing in the airspace above it or the soil below it could ever be transferred, either under section 265(1)(a) or under article 2(1)(a).
But local highway authorities may also acquire, and the Councils certainly have acquired, property rights in relation to highways by other means.
They include compulsory purchase and acquisition by private treaty, which is completed in both cases by conveyance or transfer.
Furthermore, local authorities may come to have property rights in relation to highway land for purposes other than highways purposes, and may acquire such rights, again, by compulsory or voluntary purchase, by means of conveyance or transfer.
In the generality of such cases (save, that is, where there is a reservation of part of the vertical plane in the conveyance, or where the transferor does not own the whole of it) the local authority will acquire ownership of the whole of the vertical plane, not just the zone of ordinary use.
Local authorities may also come to have ownership rights in relation to highways by being or becoming adjoining owners: see below.
Furthermore, the ownership of airspace above, and subsoil below, the zone of ordinary use relating to a highway may, particularly in Central London, be of substantial commercial value.
Buildings are commonly constructed across a highway in the airspace above that part needed for its use as such.
The ground beneath highways is often intensively used for other purposes, such as underground railway stations, public lavatories and even, under the approach to Blackfriars bridge, a shooting gallery.
Similarly, ownership of the airspace and subsoil, even where not yet used for buildings or other structures, may have substantial development value.
These complexities are well illustrated in the admirable award of the arbitrator Mr John Male QC, and in the supporting materials.
There is nothing new about disputes concerning highway ownership arising from commercial motivation.
The question in the very earliest case, Coverdale v Charlton, was whether the highway authority had a sufficient proprietary right in the surface of the highway to let it for pasturage, sufficient to enable the plaintiff as lessee to bring proceedings for interference with it.
It was sufficient for the courts affirmative conclusion that the highway authority did own the surface of the highway, so that the vertical plane issue in the present case did not arise.
TfLs case, which was broadly accepted both by the arbitrator Mr John Male and, on the first appeal, by Mann J, may be summarised in this way.
The purpose of the Transfer Order, as part of a scheme under which TfL replaced the Councils as highway authority in relation to GLA roads was, at least in relation to property rights, to place TfL squarely in the shoes of those Councils.
Accordingly, whatever part of the vertical plane was owned by the Councils on the operative date, transferred under article 2(1)(a) to TfL.
From the generality of this conclusion the arbitrator made this exception.
Where particular layers or slices of subsoil and/or airspace (for example, certain structures) may have received or acquired a separate identity by the operative date, such that they could not properly be called parts of the highway, ownership in those slices would not pass to TfL.
This qualification is recorded in paragraph 265.2(1)(c) of his award.
On appeal, Mann J recorded a more significant concession made by Mr Morshead QC on behalf of TfL, namely that its claim related to land acquired for or appropriated to highway purposes: see para 56 of his judgment.
At common law (and subject to any statutory vesting) the owner of land adjoining a highway is taken to be the owner of the subsoil beneath it and the airspace above it ad medium filum ie as far as the centre line of the highway.
If the same person owns the adjoining land on both sides of the highway, then prima facie that person owns the whole of the vertical plane defined by the highway, outside the zone of ordinary use.
As the judge explained, the specific purpose of TfLs concession, quoted above, was to renounce any claim to a transfer of parts of the vertical plane above and below a GLA road where the Councils ownership of it derived from its status as the owner of adjoining land.
The Councils case, which was broadly accepted by the Court of Appeal, may be summarised as follows.
The purpose of the Transfer Order, like the purpose of all provisions for statutory vesting of property in highway authorities, was to vest in TfL only those ownership rights in the vertical plane of the highway which were necessary to enable it to perform its functions as highway authority.
Thus the Baird principle applied to article 2 just as much as it did to statutory vesting under section 263 and to transfer of property relating to trunk roads under section 265.
That was apparent from the fact that in all those instances, the drafter defined the property transferred as the highway, which had by the time of the Transfer Order come to have a clear and consistent meaning, limited to the zone of ordinary use.
Further, any more generous interpretation of article 2(1)(a) would expropriate from the Councils valuable property rights, particularly in Central London, without compensation to their ratepayers.
Accordingly, article 2(1)(a) transfers as the highway only the zone of ordinary use, leaving the Councils as continuing owners of anything else which they owned on the operative date within the vertical plane.
The question really boils down to this: does the Baird principle apply to article 2? In respectful disagreement with the Court of Appeal, I do not regard article 2 or, for that matter, section 265, as governed or constrained by the Baird principle.
My reasons follow.
In my judgment article 2(1)(a) transfers to TfL ownership of all that part of the vertical plane relating to a GLA road vested in the relevant council on the operative date, but only to the extent that ownership was then vested in the council in its capacity as former highway authority.
That is, in my view, the true meaning of the phrase the highway, in so far as it is vested in the former highway authority.
It follows that: i) rights held by the Councils in the vertical plane of a highway as adjoining owner, for purposes other than highway purposes, do not pass under article 2(1)(a).
This is because they are not held by the Council in its capacity as highway authority. ii) rights originally acquired for purposes other than highway purposes, or appropriated to those other purposes by the operative date, do not pass under article 2(1)(a).
This is so whether or not some non highway structure has by then been constructed.
If acquisition or appropriation for non highway purposes has occurred by the operative date, it matters not that the relevant purpose has yet to be fulfilled, so that the relevant part of the vertical plane remains undeveloped. iii) rights originally acquired for highway purposes in the vertical plane, for example by conveyance on compulsory acquisition for highway purposes, do pass under article 2(1)(a), even if they extend beyond the zone of ordinary use, provided that they have not, by the operative date, been appropriated to some non highway use outside the zone of ordinary use. iv) All these consequences, and in particular the first, flow from the true construction of article 2, rather than merely by way of TfLs concession as recorded by Mann J.
It may be that sub paragraph (ii) of the above summary differs a little from the reasoning of the arbitrator.
This is because, whereas he regarded a non highway structure actually built in the vertical plane (like an over flying building of underground public lavatory) as falling outside the definition of highway for all purposes, he did not (at least expressly) also regard the acquisition or appropriation of part of the vertical plane for non highway purposes as sufficient on its own to take that part, even if undeveloped, out of the property transferred under article 2(1)(a).
Meaning of highway
The Court of Appeal concluded that highway as used in article 2 and section 265 had a clear common law meaning, limited in the vertical plane to the zone of ordinary use.
I respectfully disagree.
The word highway is not a defined term, either in the 1980 Act, in the Transfer Order, or in the GLA Act.
There is a limited explanation, in section 328 of the 1980 Act that: In this Act, except where the context otherwise requires, highway means the whole or a part of a highway other than a ferry or waterway.
This is largely circular so far as concerns the core meaning of highway and, in any event, subject to context.
It does not follow that the interpreter is therefore required to find some uniform meaning of the word highway wherever it is used, either in the relevant legislation or, as the Court of Appeal thought, at common law.
There is in my view no single meaning of highway at common law.
The word is sometime used as a reference to its physical elements.
Sometimes it is used as a label for the incorporeal rights of the public in relation to the locus in quo.
Sometimes, as here, it is used as the label for a species of real property.
When used within a statutory formula, as here, the word necessarily takes its meaning from the context in which it is used.
In agreement with counsel and with the Court of Appeal, I do consider that the meaning of article 2 is to be found by an examination of the meaning of the almost identically worded section 265.
This is not merely because of the linguistic similarity between those two provisions, but because the whole of the structure for the transfer of property and liabilities in the Transfer Order is closely modelled on the pre existing structure of the provisions in section 265 relating to trunk roads.
It is tempting but, in my view, wrong to assume that, where sections 263 and 265 both refer to highway as a label for real property rights which are to be vested in a highway authority, the word highway must therefore have precisely the same meaning in both sections.
This is not merely because the word appears as part of two quite differently worded provisions.
Rather, it is because, although now lying almost side by side in a consolidating statute, the two sections have completely different ancestry, and serve two very different purposes.
As already noted, section 263 takes away from private ownership only those rights in the vertical plane of the highway which are necessary to enable the highway authority to perform its statutory functions of operation, maintenance and repair.
By contrast, section 265 merely transfers rights in the vertical plane already owned by one public authority to a successor public authority, so that the successor can stand in the shoes of its predecessor so far as ownership is concerned.
This is, in particular, apparent from the way in which the Bill which became the Trunk Roads Act 1936 was described to Parliament by the then Minister for Transport at its second reading.
Speaking of clause 7, he said: The basis for the transfer is, as laid down in clause 7, that the Minister should take over the road and all properties and liabilities attaching to it In the House of Lords the Earl of Erne, speaking for the Government,
described the objectives of the Bill as follows: The principle on which the Bill is based is to make a clean
transfer of responsibility
As already explained, section 7 of the Trunk Roads Act 1936 is the original progenitor of what is now section 265, having been significantly re worded in 1959 as section 228 of the Highways Act 1959, without any apparent intention thereby to effect any change of substance in its meaning.
There is no reason why the Baird principle should apply so as to restrict the nature or extent of property being transferred between two public highway authorities, one of which is stepping into the shoes of the other.
The only limitation which does need to be imposed is one which restricts the rights transferred to those enjoyed by the former highway authority in its capacity as such.
If the former authority enjoys rights in the vertical plane of the highway in some other capacity, such as adjoining owner, or for other public purposes, there is no sensible reason why those rights should be transferred to its successor as highway authority, merely because of the happenstance that they were vested in the former authority on the operative date.
Full effect to that qualification upon the extent of the rights transferred is given if the words in section 265(1)(a) in so far as, immediately before the operative date, it was vested in the former highway authority are taken as meaning vested in the former highway authority in its capacity as such.
When this way of interpreting section 265(1)(a), and the similarly worded article 2(1)(a), was suggested by the court to Mr Morshead for TfL, he acknowledged, upon reflection although not by way of concession, that this might well be correct.
By contrast, the respondent Councils case, that highway in section 265 and article 2 can never mean more than the zone of ordinary use, makes the words which immediately follow, quoted above, redundant.
A highway authority always has vested in it the zone of ordinary use, because of section 263, so the qualification beginning with the words in so far as then becomes meaningless.
Multi layering
Both the arbitrator and Mann J were powerfully affected by a perception of the unattractive consequences of the Councils construction, under what may be labelled as multi layering of the vertical plane.
Where a local highway authority had acquired land by compulsory purchase (or private treaty) for the purpose of building a road, and thereby had the whole of the vertical plane conveyed or transferred to it, the effect of the Councils construction of section 265 and article 2 would be, for the first time, to split that vertical plane between two successive highway authorities, one owning the top slice and the bottom slice, and the other owning the middle slice constituted by the zone of ordinary use.
As the arbitrator put it, at para 104: With all due respect to the Councils, I cannot see what rational purpose is served by there being two public bodies owning different layers of what was formerly owned by one single public body.
I agree.
The Court of Appeal acknowledged that this was a consequence of its interpretation but noted that multi layering of the vertical plane was already endemic within Central London, and that it was an insufficient factor to overcome what it regarded as the plain meaning of the word highway.
In my view, where the transposition of the settled meaning of a word from one section to another section of a complex consolidating statute produces an irrational result, that is a powerful reason for treating the word as having different meanings in those different contexts.
Furthermore, although article 2 only has effect in London, section 265 has effect in urban and rural areas alike.
It is of course true that some layering of the vertical plane is inevitable in relation to highways, both in rural and urban areas.
For example, it occurs whenever there is automatic vesting under section 263.
But in such a case the layering arises between a public authority on the one hand and private owners on the other, for reasons which are not irrational.
Equally, and particularly in the modern urban environment, there may be layering of the vertical plane between different public authorities, such as those responsible for highways, sewers and underground railways.
Again, this is for reasons which have a rational purpose.
By contrast, the irrationality identified by the arbitrator is that arising from two different highway authorities owning parts of the vertical plane in the same highway.
To that I would add that, on the Councils case, by virtue of the transfer of highway functions from one to the other, the former authority, which held rights in the vertical plane only as highway authority, continues to enjoy those rights while it has no further statutory responsibilities to discharge in its capacity as such.
It is difficult to identify any sensible purpose served by such an outcome.
I acknowledge also that my interpretation of article 2(1)(a), which limits the rights transferred to those transferred by the former highway authority in its capacity as such, will also lead to layering of the vertical plane in some cases where it did not previously exist.
This will occur, for example, where the former authority is an adjoining owner (with rights ad medium filum) or where the former authority has rights in part of the vertical plane for other statutory purposes, such as sewerage or the operation of underground railways.
But again, there is nothing irrational about layering of that kind.
Section 266A
The Court of Appeal was significantly influenced in its reasoning by a perception of the difficulties which might flow from TfLs interpretation of article 2, in conjunction with section 266A of the Highways Act 1980.
Mr Elvin QC for the respondent Councils pressed the same point upon us in his own excellent and succinct submissions.
Section 14B of the 1980 Act empowers the Mayor of London to direct that a highway or proposed highway shall become or cease to be a GLA road.
Section 266A provides for transfer of property and liabilities upon such an event.
It contains provisions which broadly reflect article 2(1)(b) and (3) of the Transfer Order, for the transfer of property including land, but contains no equivalent to article 2(1)(a) providing expressly for the transfer of the highway itself.
Mr Elvin submits that this must mean that in such a case, rights in the highway itself are transferred only under section 263, subject of course to the Baird principle.
Thus, if TfLs interpretation of article 2(1)(a) is correct, TfL would receive more of the vertical plane upon the original designation of a GLA road under the Designation Order than it would have to give back under section 266A if that designation was subsequently revoked under section 14B, an irrational outcome which cannot have been intended.
I agree that this would be a surprising and probably unintended outcome, but not that it is the consequence of the omission of an express reference to the highway in section 266A.
In my judgment, a preferable view may be that when a highway becomes or ceases to be a GLA road by virtue of an order made under section 14B, rights in the nature of real property in the vertical plane of the highway pass under section 266A(4)(a) as land.
It is preferable to Mr Elvins construction because a conclusion that rights in the highway itself only pass by virtue of section 263 would introduce the Baird principle into a context (transfer between successive public highway authorities) to which it has no sensible application.
I accept that this requires the word land to be given a different, larger, meaning in section 266A than it has in article 2, but this is simply because its narrower meaning in article 2 is necessitated by the separate express treatment of rights in the highway as real property; ie as land.
It is another example of identical words having different meanings as necessitated by their different contexts.
I need express no final view on the interpretation of section 266A because it is not directly in issue in this case.
Its later date means that it cannot be an aid to the interpretation of section 265, which was the model chosen for article 2, rather than the differently framed section 266A.
The Baylis case
Mr Elvin sought also to derive assistance from dicta of Mr Lewison QC (as he then was) in Secretary of State v Baylis (Gloucester) Ltd (2000) 80 P & CR 324, in a judgment with which the Court of Appeal agreed.
The issue in the Baylis case did relate to what had by the time of the trial become a trunk road, but it had nothing to do with the extent of rights in the vertical plane of a highway transferred between highway authorities under what is now section 265.
The dispute was about whether the strip of land in dispute, which adjoined the physical surface of the road, had ever been dedicated to the public as part of a highway, and that turned upon the true construction of a written agreement between the then owner and the county council.
The adjacent highway (for which the dedicated strip was to facilitate an improvement) had later been designated a trunk road, but that had no consequence for the determination of the dispute.
In an otherwise unimpeachable summary of the effect of land becoming part of a highway, Mr Lewison said: The effect of trunking a highway is that the highway vests in the Minister (now the Secretary of State).
The extent of such vesting is such part of the land as is necessary for the highway authority to perform its statutory functions.
It has been described as the top two spits.
It did not matter in that case whether the Secretary of State received the top two spits (or as I would prefer to call it the zone of ordinary use) or the whole of the vertical plane.
Furthermore the former highway authority had never obtained more than the zone of ordinary use, because its title depended upon automatic vesting under what is now section 263, following dedication.
I therefore respectfully disagree with that small (and obiter) part of Mr Lewisons succinct summary of the relevant highways law, for the detailed reasons which I have given.
Expropriation
A final reason why the Court of Appeal was persuaded that transfers under article 2 should be subject to the Baird principle of necessity was that, otherwise, the residents and ratepayers of the respondent Councils would be deprived, without compensation, of more property than was necessary to fulfil the purpose of constituting TfL as the relevant highway authority.
I have not been persuaded by this analogy.
In every case of a transfer between highway authorities, whether under section 265 or article 2, the former authority is being relieved of its responsibilities for operation, maintenance and repair of the relevant highway, and all associated liabilities (subject to certain exceptions).
The transfer of property held by the former highway authority in its capacity as such is simply the quid pro quo for that relief from responsibility.
The ratepayers get the full financial benefit of that relief from responsibility.
There may be cases where the value of the transferred ownership of the vertical plane exceeds the financial burden of the responsibilities, eg where the vertical plane outside the zone of ordinary use has development value.
That may be part of the reason for this long and costly litigation.
But usually it will have no such excess value.
The meaning of article 2 and section 265 cannot vary as between one highway and another by reference to such infinitely variable economic comparisons.
Burden of Proof
While acknowledging that article 2(1)(a) of the Transfer Order might best be interpreted as subject to the limitation that rights in the highway should have been vested in the former highway authority in its capacity as such, Mr Morshead for TfL submitted that there should, nonetheless, be a strong presumption that all rights in the vertical plane as were in fact vested in the former highway authority on the operative date were vested in it in that capacity.
It would be, he said, for the former authority (here the respondent Councils) to prove otherwise, the burden being firmly upon them.
I can see no good reason why any such presumption or burden of proof should be identified as flowing from the true interpretation of article 2.
The papers lodged with the court on this appeal demonstrate that the resolution of these vertical plane issues in the context of highways in Central London, where they cannot be agreed, is an intensely fact sensitive and complex task.
As already explained, the Councils will have acquired rights in the vertical plane in a variety of different ways, and it will be necessary to analyse both the extent of the rights acquired, and the capacity in which the Council acquired those rights.
Sometimes the GLA road has a non GLA highway running over or under it.
There are frequently buildings and other structures encroaching upon the vertical plane of the highway, outside the zone of ordinary use.
The arbitrator should not be saddled with a presumption as to the outcome of that difficult factual analysis, one way or the other.
The Lateral Plane
It was mentioned by counsel, and in the statement of agreed facts and issues, that the resolution of the dispute in this appeal would also have consequences in the lateral plane, rather than only the vertical plane, of land defined by a highway.
That may be so, but all the argument before this court has been directed to the vertical plane.
Nothing in this judgment should be taken as implying any view about lateral plane issues, which were not explored.
Conclusion
For the above reasons, I consider that this appeal should be allowed.
The interpretation which I conceive to be correct differs in some small respects from that adopted by the arbitrator and indeed by Mann J, in dismissing the first appeal.
Furthermore the questions as originally framed in the preliminary issues determined by the arbitrator have since narrowed.
It will therefore be necessary to receive submissions about the precise form of order which this court should now make in relation to the preliminary issues which are the subject of this appeal.
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This appeal concerns the effect of the GLA Roads and Side Roads (Transfer of Property etc) Order 2000 (SI 2000/1552) (the Transfer Order) and the GLA Roads Designation Order 2000 (SI 2000/1117) (the Designation Order).
By combined operation of those Orders, responsibility for Greater London Authority (GLA) roads was transferred from individual London borough councils, including the Respondents (the Councils) as local highway authorities, to the Appellant (TfL).
The provision at the heart of this appeal is article 2(1)(a) of the Transfer Order, which provides for the transfer of the highway, in so far as it is vested in the former highway authority.
TfL and the Councils convened a statutory arbitration before Mr John Males QC.
The purpose was to determine exactly what specified property and liabilities transferred to TfL in relation to each highway.
The dispute between the parties is whether the automatic transfer of the highway under article 2(1)(a) of the Transfer Order carried with it: (i) only the zone of ordinary use (i.e. the road surface and the airspace and subsoil necessary for the operation, maintenance and repair of the road) or (ii) the entire vertical plane (i.e. all the airspace above and the subsoil below the surface of the road), to the extent that the relevant council already owned it prior to the transfer date.
In the arbitration and at each stage on appeal, the Councils argued the transfer was limited to the former, while TfL argued for the latter, wider approach.
The arbitrator broadly agreed with TfLs case.
The caveat was that particular layers or slices of subsoil and/or airspace that had acquired a separate identity by the transfer date could not be treated as parts of the highway and so did not pass to TfL.
On appeal to the High Court, Mr Justice Mann agreed with the arbitrator, recording a concession by counsel for TfL that its claim related to land acquired for or appropriated to highway purposes.
However, on further appeal, the Court of Appeal adopted a narrower position.
It considered that the word highway in article 2(1)(a) of the Transfer Order must have been intended to carry the same meaning as it had at common law, and in relation to section 263 of the Highways Act 1980 (the 1980 Act).
Thus, the Court of Appeal held that only the zone of ordinary use had transferred to TfL.
The Supreme Court unanimously allows the appeal.
Lord Briggs gives the sole judgment of the Court.
The word highway has no single meaning in the law [6].
The default land law position, that the conveyance of freehold land automatically involves the transfer of the entire vertical plane, was not
followed in successive statutory provisions dealing with automatic vesting of highway interests formerly in private ownership, as seen in the decision in Tunbridge Wells Corpn v Baird [1896] AC 434 (HL) (the Baird principle) [7 8].
The Baird principle provides that such a transfer was limited to the road surface, the subsoil immediately beneath it and airspace sufficient to enable use and enjoyment by the public and maintenance by the highway authority [9].
The limits set by the Baird principle reflected concerns about expropriation of private property without compensation resulting from statutory vesting [11].
It was, rightly, common ground that the Baird principle applies to section 263 of the 1980 Act, replicating section 226 of the Highways Act 1959 (the 1959 Act) [12].
However, section 265 of the 1980 Act and its predecessors make provision for the transfer of property and liabilities, as between successive highway authorities, of highways designated as trunk roads [13].
The first major property transfer scheme was undertaken in relation to newly designated trunk roads by section 7 of the Trunk Roads Act 1936 (the 1936 Act) [15].
Despite differences in language, the substance of section 228 of the 1956 Act and section 265 of the 1980 are materially the same as section 7 of the 1936 Act [16 19].
The extent of transfer of highway rights is complicated by the fact that local highway authorities often acquire property rights in relation to highways by means other than automatic vesting under section 263, such as compulsory purchase and acquisition by private treaty and, at times, for non highway purposes [21].
Ownership of airspace above and subsoil below the zone of ordinary use may also be of substantial commercial or development value, particularly in urban areas like Central London [22].
Disagreeing with the Court of Appeal, the Supreme Court decides that the Baird principle does not apply to article 2 of the Transfer Order or to section 265 of the 1980 Act, upon which article 2 was modelled [28].
The words [t]he highway, in so far as it is vested in the former highway authority in article 2, properly construed, mean only that part of the vertical plane relating to a GLA road which was vested in the relevant council on the operative date, in its capacity as former highway authority, is transferred [29].
The Supreme Court disagrees with the Court of Appeals reasoning that the word highway, used in article 2 and section 265, has a clear common law meaning it is not a defined term and its meaning in this context is to be found through the almost identical wording of section 265 on trunk roads [31 33].
Given the different ancestry of, and purposes served by, section 263 and section 265 of the 1980 Act, the word highway used in both provisions cannot be given the same meaning [34 36].
The phrase beginning with in so far as in section 265(1)(a) of the 1980 Act, and in article 2, imports the ownership capacity limitation [37 39].
The Courts approach, like that of the arbitrator, largely avoids irrational types of multi layering on the vertical plane in the sense of different highway authorities owning parts of the vertical plane in the same highway [40 43].
Further, expropriation concerns are not well founded because, generally, the transfer of property from one highway authority to another is simply the quid pro quo for relief from responsibility for operation and maintenance [48].
Lastly, there is no presumption or burden of proof as to the extent of highway rights transferred [49 50].
This decision does not resolve any issues as to the ownership of the lateral plane of a highway [51].
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This is an appeal brought by Mohammed Gul against a decision of the Court of Appeal (Criminal Division) dismissing an appeal against his conviction for dissemination of terrorist publications contrary to section 2 of the Terrorism Act 2006 (the 2006 Act), for which he was sentenced to a term of five years imprisonment (a sentence against which he also unsuccessfully appealed).
The appeal raises the issue of the meaning of terrorism in section 1 of the Terrorism Act 2000 (the 2000 Act).
The factual and procedural background
The appellant was born in Libya in February 1988, but he has lived much of his life in this country and he is a British citizen.
In February 2009, as a result of executing a search warrant at his house, police officers found videos on his computer uploaded onto various websites, including the YouTube website.
These videos included ones that showed (i) attacks by members of Al Qaeda, the Taliban, and other proscribed groups on military targets in Chechnya, and on the Coalition forces in Iraq and in Afghanistan, (ii) the use of improvised explosive devices (IEDs) against Coalition forces, (iii) excerpts from martyrdom videos, and (iv) clips of attacks on civilians, including the 9/11 attack on New York.
These videos were accompanied by commentaries praising the bravery, and martyrdom, of those carrying out the attacks, and encouraging others to emulate them.
The case for the prosecution was that each of these videos constituted a terrorist publication within section 2(3), which the appellant had distribute[d] or circulate[d] within section 2(2)(a), and consequently he had committed an offence by virtue of section 2(1), of the 2006 Act.
The appellants principal defence was that, although he did not agree with the targeting of and attacks on civilians, he believed that the use of force shown in the other videos was justified as it was being employed in self defence by people resisting the invasion of their country.
At his first trial, the jury acquitted the appellant on four counts and was unable to agree on two other counts.
A retrial in relation to those two counts (plus a further four counts added by the Crown by way of a voluntary bill) took place in front of HH Judge Paget QC with a jury at the Central Criminal Court.
After the evidence, speeches and summing up, the jury retired to consider their verdict in the normal way on 22 February 2011.
They then asked the judge for guidance on certain questions relating to the meaning of terrorism, which, after hearing submissions from counsel, he answered.
One of the jurys questions was: Re: definition of terrorism in [section 1 of the 2000 Act], would the use of force by Coalition forces be classed as terrorism? In relation to that question, the judge gave the following direction: the use of force by Coalition forces is not terrorism.
They do enjoy combat immunity, they are ordered there by our government and the American government, unless they commit crimes such as torture or war crimes .
Later the same day, the jury asked a further question, which was in these terms: Please confirm that within Iraq/Afghanistan now there are governments in place there cannot now be said to be a conflict and therefore no combatant exemption from what would otherwise be a terrorist attack, ie IED on Coalition Forces.
To simplify, would an IED attack (ignoring self defence) on Coalition Forces be a terrorist attack if carried out in 2008/9? The judge answered this question, after hearing submissions from counsel, in these terms: I have to apply the Terrorism Act and the definition of terrorism which is part of English law, and the answer is yes, it would.
But it is ultimately for you to say.
The jury then proceeded to convict the appellant on five of the six counts.
The count on which he was acquitted related to a video which contained footage concerning the Israeli Palestinian conflict in Gaza.
The judge directed the jury that, if Israel was involved in an incursion into Gaza which involved attacks on civilians, schools, hospitals and ambulances, and all that the appellant was encouraging was resistance to these attacks, the prosecution did not seek a conviction.
The present appeal proceeded without considering whether, as a matter of law, the stance adopted by the prosecution was correct, and we do not propose to address it further.
The judge sentenced the appellant to five years imprisonment, with appropriate allowance for time spent on remand.
The appellant sought to appeal against his conviction on a number of grounds, only one of which is relevant for present purposes.
That ground, which was expressed in various ways during the course of his appeal, is ultimately embodied in the question which the Court of Appeal certified to be a point of general public importance, namely: Does the definition of terrorism in section 1 of the Terrorism Act 2000 operate so as to include within its scope any or all military attacks by a non state armed group against any or all state or inter governmental organisation armed forces in the context of a non international armed conflict?
The Court of Appeal (Sir John Thomas P, Silber and Kenneth Parker JJ) answered that question in the affirmative, and also rejected certain other grounds of appeal, as well as refusing to interfere with the sentence which the judge had imposed.
Accordingly, the appellants appeal was dismissed [2012] EWCA Crim 280, [2012] 1 WLR 3432.
The appellant now appeals to this court contending that the answer to the certified question should be in the negative.
The Terrorism Acts 2000 and 2006
The 2000 Act
Section 1 of the 2000 Act is headed Terrorism: Interpretation, and, as amended by the 2006 Act and the Counter Terrorism Act 2008, it provides as follows: (1) In this Act terrorism means the use or threat of action where (a) the action falls within subsection (2), (b) the use or threat is designed to influence the international governmental government or an organisation or to intimidate the public or a section of the public, and (c) the use or threat is made for the purpose of advancing a political, religious, racial or ideological cause. (2) Action falls within this subsection if it (a) involves serious violence against a person, (b) involves serious damage to property, (c) endangers a persons life, other than that of the person committing the action, (d) creates a serious risk to the health or safety of the public or a section of the public, or (e) is designed seriously to interfere with or seriously to disrupt an electronic system. (4) In this section (a) action includes action outside the United Kingdom, (b) a reference to any person or to property is a reference to any person, or to property, wherever situated, (c) a reference to the public includes a reference to the public of a country other than the United Kingdom, and (d) the government means the government of the United Kingdom, of a part of the United Kingdom or of a country other than the United Kingdom. (5) In this Act a reference to action taken for the purposes of terrorism includes a reference to action taken for the benefit of a proscribed organisation.
Part II of the 2000 Act is concerned with proscribed organisations and Part III with terrorist property.
Part III creates certain offences, such as (in sections 15 18) terrorist fundraising, using money and money laundering for terrorist purposes.
It also imposes certain duties, such as a duty of disclosure in some circumstances, a duty not to tip off, and a duty to cooperate with the police and certain government agencies, such as the Serious Organised Crime Agency.
It also granted certain powers to the police and such agencies, such as the right to detain, seize, and forfeit terrorist cash.
Parts IV and V of the 2000 Act are respectively concerned with terrorist investigations and counter terrorist powers.
Part V confers powers to stop and search (sections 44 47), to search individuals and premises (sections 42 43), and to arrest without warrant (section 41), and section 53 and Schedule 7 grant very wide powers to detain, interrogate, and confiscate in relation to people at ports and borders.
Part VI of the 2000 Act is entitled Miscellaneous, and it creates a number of offences related to terrorism including weapons training in connection with terrorism (section 54), directing terrorist organisations (section 56), possession for terrorist purposes (section 57), collecting information for such purposes (section 58), and inciting terrorism abroad (section 59).
Included in Part VI are sections 62 64.
Section 62(1) provides that: If (a) a person does anything outside the United Kingdom as an act of terrorism or for the purposes of terrorism, and (b) his action would have constituted the commission of one of the offences listed in subsection (2) if it had been done in the United Kingdom, he shall be guilty of the offence.
Subsection (2) states that the offences referred to in subsection (1) are offences under the Explosive Substances Act 1883, the Biological Weapons Act 1974, and the Chemical Weapons Act 1996.
Section 63 of the 2000 Act renders it an offence for a person to conduct an activity outside the UK which would be an offence under sections 15 18 if carried out in the UK.
Section 64 makes amendments to the Extradition Act 1989.
Also in Part VI of the 2000 Act are sections 63A 63E, which were inserted by the Crime (International Co operation) Act 2003 (the 2003 Act).
Section 63A provides that a UK national or UK resident commits an offence if he carries out abroad any activity which, if carried out in the UK would be an offence under, inter alia, sections 54 59.
Sections 63B 63D, in very summary terms, provide that a person commits an offence when he carries out abroad certain specified actions which, if carried out in the UK, would amount to terrorism.
Part VII of the 2000 Act is concerned with Northern Ireland.
Part VIII is entitled General, and it includes, in sections 114 116, certain police powers in connection with counter terrorism, including the power to stop and search.
Also in Part VIII is section 117, which, according to subsection (1), applies to almost all offences created by the 2000 Act; those offences to which it does not apply have no relevance for present purposes.
Subsections (2) and (2A) of section 117 (the latter subsection having been added by the 2006 Act) are in these terms: (2) Proceedings for an offence to which this section applies (a) shall not be instituted in England and Wales without the consent of the Director of Public Prosecutions, and (b) shall not be instituted in Northern Ireland without the consent of the Director of Public Prosecutions for Northern Ireland. (2A) But if it appears to the Director of Public Prosecutions or the Director of Public Prosecutions for Northern Ireland that an offence to which this section applies has been committed outside the United Kingdom or for a purpose wholly or partly connected with the affairs of a country other than the United Kingdom, his consent for the purposes of this section may be given only with the permission (a) in the case of the Director of Public Prosecutions, of the Attorney General; and (b) in the case of the Director of Public Prosecutions for Northern Ireland, of the Advocate General for Northern Ireland.
The 2006 Act
The 2006 Act made some amendments to the 2000 Act, including the addition of or an international governmental organisation (an IGO) into section 1(1)(b).
Part 1 of the 2006 Act creates certain further offences in relation to terrorism; in particular, sections 1 and 2 respectively created the new offences of Encouragement of terrorism and Dissemination of terrorist publications.
Section 2 of the 2006 Act is in these terms: (1) A person commits an offence if he engages in conduct falling within subsection (2) and, at the time he does so (a) he intends an effect of his conduct to be a direct or indirect encouragement or other inducement to the commission, preparation or instigation of acts of terrorism; . or (c) he is reckless as to whether his conduct has an effect mentioned in paragraph (a) . (2) For the purposes of this section a person engages in conduct falling within this subsection if he (a) distributes or circulates a terrorist publication; . (e) transmits the contents of such a publication electronically; . (3) For the purposes of this section a publication is a terrorist publication, in relation to conduct falling within subsection (2), if matter contained in it is likely (a) to be understood, by some or all of the persons to whom it is or may become available as a consequence of that conduct, as a direct or indirect encouragement or other inducement to them to the commission, preparation or instigation of acts of terrorism; . (4) For the purposes of this section matter that is likely to be understood by a person as indirectly encouraging the commission or preparation of acts of terrorism includes any matter which (a) glorifies the commission or preparation (whether in the past, in the future or generally) of such acts; . [Subsections (5), (6), (7) and (8) amplify the preceding subsections; subsections (9) and (10) identify certain defences]. (11) A person guilty of an offence under this section shall be liable (a) on conviction on indictment, to imprisonment for a term not exceeding 7 years or to a fine, or to both; (13) In this section . publication means an article or record of any description that contains any of the following, or any combination of them (a) matter to be read; (b) matter to be listened to; (c) matter to be looked at or watched.
Part 2 of the 2006 Act contains certain miscellaneous provisions, including the extension and modification of some of the powers granted by the 2000 Act, such as in relation to proscription, searches and investigations.
Part 3 of the 2006 Act includes some supplementary provisions of which section 36 is significant for present purposes.
That section is headed Review of terrorism legislation, and it provides as follows: (1) The Secretary of State must appoint a person to review the operation of the provisions of the Terrorism Act 2000 and of Part 1 of this Act. (2) That person may, from time to time, carry out a review of those provisions and, where he does so, must send a report on the outcome of his review to the Secretary of State . (3) . (4) That person must carry out and report on a review under this section at least once in every twelve month period . (5) On receiving a report under this section, the Secretary of State must lay a copy of it before Parliament.
An outline of the issues
Although the appellant was convicted of offences contrary to section 2 of the 2006 Act, the issue which has to be addressed involves the interpretation of section 1 of the 2000 Act, and, in particular, the meaning of the word terrorism.
Terrorism is, of course, central to the offences in issue.
In finding him guilty on the five counts, the jury must have been satisfied that the videos which the appellant uploaded satisfied the requirements of section 2(3)(a) of the 2006 Act.
Thus, the jury must have concluded that the videos would have been understood by others to be encouraging or inducing them to commit, prepare or instigate acts of terrorism, and that the appellant had intended, or had been reckless as to, that consequence.
The point which the Court of Appeal certified may be thought to be somewhat peripheral to the issues which confronted the jury.
However the jury asked a question which gives rise to the point, and in this particular case it would be inappropriate to disregard it as irrelevant to the eventual verdict.
If some or all of the activities shown in the uploaded videos, whose contents are briefly described in paras 2(i) to (iv) above, did not involve terrorism within the meaning of section 1 of the 2000 Act, it is possible that the appellant may have been acquitted on some or all of the five counts on which he was convicted.
The case for the prosecution is that the definition of terrorism in section 1 of the 2000 Act, and, in particular, in subsections (1) and (2), is very wide indeed, and that it would be wrong for any court to cut it down by implying some sort of restriction into the wide words used by the legislature.
On that basis, the appellant was rightly convicted and the answer to the certified question must be yes.
The case for the appellant, as it developed in oral argument, had three strands.
The first is that the 2000 Act, like the 2006 Act, was intended, at least in part, to give effect to the UKs international treaty obligations, and the concept of terrorism in international law does not extend to military attacks by a non state armed group against state, or inter governmental organisation, armed forces in the context of a non international armed conflict, and that this limitation should be implied into the definition in section 1 of the 2000 Act.
The second, and closely connected, argument is that it would be wrong to read the 2000 or 2006 Acts as criminalising in this country an act abroad, unless that act would be regarded as criminal by international law norms.
The third argument raised by the appellant is that, as a matter of domestic law and quite apart from international law considerations, some qualifications must be read into the very wide words of section 1 of the 2000 Act.
Although it was advanced as an alternative argument to the contentions based on international law, we propose to start by addressing the appellants case based on the relevant statutory provisions by reference to the familiar domestic principles, and then to consider whether that meaning conflicts with international law.
The appellants argument based on domestic law
The definition of terrorism in section 1 of the 2000 Act is, at any rate on the face of it, very wide.
That point was well made in R v F [2007] QB 960, paras 27 28: What is striking about the language of section 1, read as a whole, is its breadth.
It does not specify that the ambit of its protection is limited to countries abroad with governments of any particular type or possessed of what we, with our fortunate traditions, would regard as the desirable characteristics of representative government.
There is no list or Schedule or statutory instrument which identifies the countries whose governments are included in section 1(4)(d) or excluded from the application of the 2000 Act.
Finally, the legislation does not exempt, nor make an exception, nor create a defence for, nor exculpate what some would describe as terrorism in a just cause.
Such a concept is foreign to the 2000 Act.
Terrorism is terrorism, whatever the motives of the perpetrators.
Terrorist action outside the United Kingdom which involves the use of firearms or explosives, resulting in danger to life or creating a serious risk to the health or safety to the public in that country, or involving (not producing) serious personal violence or damage to property, or designed seriously to interfere with an electronic system, is terrorism Following these observations, the Court of Appeal in this case underlined the comprehensive scope and broad nature of the definition of terrorism in the 2000 Act: [2012] EWCA Crim 280, [2012] 1 WLR 3432, paras 16 and 52.
The effect of section 1(1) of the 2000 Act is to identify terrorism as consisting of three components.
The first is the use or threat of action, inside or outside the UK, where that action consists of, inter alia, serious violence, serious damage to property, or creating a serious risk to public safety or health section 1(1)(a), (2) and (4).
The second component is that the use or threat must be designed to influence the government [of the UK or any other country] or an [IGO] or to intimidate the public section 1(1)(b) and (4).
The third component is that the use or threat is made for the purpose of advancing a political, religious, racial or ideological cause section 1(1)(c).
As a matter of ordinary language, the definition would seem to cover any violence or damage to property if it is carried out with a view to influencing a government or IGO in order to advance a very wide range of causes.
Thus, it would appear to extend to military or quasi military activity aimed at bringing down a foreign government, even where that activity is approved (officially or unofficially) by the UK government.
It is neither necessary nor appropriate to express any concluded view whether the definition of terrorism goes that far, although it is not entirely easy to see why, at least in the absence of international law considerations, it does not.
For present purposes it is enough to proceed on the basis that, subject to these considerations, the definition of terrorism in section 1 in the 2000 Act is, at least if read in its natural sense, very far reaching indeed.
Thus, on occasions, activities which might command a measure of public understanding, if not support, may fall within it: for example, activities by the victims of oppression abroad, which might command a measure of public understanding, and even support in this country, may well fall within it.
The Crown argues that, particularly given the purpose of the 2000 Act, terrorism cannot be narrowly defined, if one is to allow for the many disparate forms which terrorism may take, and the inevitable changes which will occur in international relations, in political regimes in other countries, and in the UKs foreign policy.
Accordingly, runs the argument, a very wide definition was deliberately adopted, but, recognising the risks of criminalising activities which should not be prosecuted, the 2000 Act has, through section 117, precluded any prosecution without the consent of the Director of Public Prosecutions (DPP) or, if the activities under consideration occurred abroad, the Attorney General.
It is clear that it is very hard to define terrorism.
Thus, Lord Lloyd of Berwick, who wrote an Inquiry into the Legislation against Terrorism (Cm 3420) which contained recommendations which were reflected in the 2000 Act, observed in a speech on the second reading of the Bill which later became that Act that there are great difficulties in finding a satisfactory definition of terrorism, and suspected that none of us will succeed.
That view has been cited with agreement in reports produced by the two successive Independent Reviewers of the legislation appointed under section 36 of the 2006 Act, Lord Carlile of Berriew QC and Mr David Anderson QC.
In reports produced in 2006 and 2007 Lord Carlile concluded that the statutory definition of terrorism was practical and effective and advised that, save for small amendments, the definition should remain as originally drafted.
More specifically, he observed that the current definition in the Terrorism Act 2000 is consistent with international comparators and treaties, and is useful and broadly fit for purpose.
Lord Carlile also stated that the discretion vested in the authorities to use or not to use the special laws is a real and significant element of protection against abuse of rights.
Mr Anderson published his first report in June 2012, in which he referred to the definition in section 1 in the 2000 Act as complex and notable for its breadth.
He pointed out that actions may amount to terrorism within the definition even when they might otherwise constitute lawful hostilities under international humanitarian law (e.g. acts of violent rebellion against oppressive governments).
Mr Anderson recognised that the statutory definition left a large discretion to prosecutors, mitigated only by the requirement [for] consent under section 117 of the 2000 Act, together with other wide discretions.
He went on to refer to the risk that strong powers could be used for purposes other than the suppression of terrorism as it is generally understood.
He also observed that there was a case for shrinking the definition of terrorism, given that [a]s presently drafted, the definition is so broad as to criminalise certain acts carried out overseas that constitute lawful hostilities under international humanitarian law.
In his recent second report, published in July 2013, Mr Anderson again
referred to the definition, describing it as remarkably broad absurdly so in some cases, and went on discuss the issue very instructively.
He pointed out that the consequence of the very broad definition was to grant unusually wide discretions to all those concerned with the application of the counter terrorism law, from Ministers exercising their power to impose executive orders to police officers deciding whom to arrest or to stop at a port and prosecutors deciding whom to charge, but went on to say that that the wide discretions appear for the most part to be responsibly exercised.
He also expressed the view that any amendment to the definition would involve a root and branch review of the entire edifice of anti terrorism law, based on a clear headed assessment of why and to what extent it is operationally necessary to supplement established criminal laws and procedures, a review which he said that he would welcome.
He also made the point that if special legal rules are to be devised in relation to it, they should be limited in their application, and justified on the basis of operational necessity.
We turn to the consent requirement created by section 117 of the 2000 Act.
In the general way the decision whether to initiate the prosecution of any crime, whether created by statute or common law, is subject to the well known prosecutorial discretion.
Where the consent of the DPP or the Attorney General is required, their respective responsibilities are exercised for the unexceptionable purpose of ensuring that a prosecution should not be instigated nor proceed if this would not be in the public interest.
However, the prosecutorial discretion was never intended, and as far as we can ascertain, it has never been suggested that it was ever intended, to assist in the interpretation of legislation which involves the creation of a criminal offence or offences.
Either specific activities carried out with a particular intention or with a particular state of mind are criminal or they are not.
The Crowns reliance on prosecutorial discretion is intrinsically unattractive, as it amounts to saying that the legislature, whose primary duty is to make the law, and to do so in public, has in effect delegated to an appointee of the executive, albeit a respected and independent lawyer, the decision whether an activity should be treated as criminal for the purposes of prosecution.
Such a statutory device, unless deployed very rarely indeed and only when there is no alternative, risks undermining the rule of law.
It involves Parliament abdicating a significant part of its legislative function to an unelected DPP, or to the Attorney General, who, though he is accountable to Parliament, does not make open, democratically accountable decisions in the same way as Parliament.
Further, such a device leaves citizens unclear as to whether or not their actions or projected actions are liable to be treated by the prosecution authorities as effectively innocent or criminal in this case seriously criminal.
Given that the consent requirement in section 117 is focused on the decision whether to consent to a prosecution, this approach to the construction of the 2000 Act has two further undesirable consequences.
First, the lawfulness of executive acts such as detention, search, interrogation and arrest could be questioned only very rarely indeed in relation to any actual or suspected involvement in actual or projected acts involving terrorism, in circumstances where there would be no conceivable prospect of such involvement being prosecuted.
Secondly, the fact that an actual or projected activity technically involves terrorism means that, as a matter of law, that activity will be criminal under the provisions of the 2000 and 2006 Acts, long before, and indeed quite irrespective of whether, any question of prosecution arises.
We return to the language used in section 1 of the 2000 Act.
Despite the undesirable consequences of the combination of the very wide definition of terrorism and the provisions of section 117, it is difficult to see how the natural, very wide, meaning of the definition can properly be cut down by this Court.
For the reasons given by Lord Lloyd, Lord Carlile and Mr Anderson, the definition of terrorism was indeed intended to be very wide.
Unless it is established that the natural meaning of the legislation conflicts with the European Convention on Human Rights (which is not suggested) or any other international obligation of the United Kingdom (which we consider in the next section of this judgment), our function is to interpret the meaning of the definition in its statutory, legal and practical context.
We agree with the wide interpretation favoured by the prosecution: it accords with the natural meaning of the words used in section 1(1)(b) of the 2000 Act, and, while it gives the words a concerningly wide meaning, there are good reasons for it.
We are reinforced in this view by the further consideration that the wide definition of terrorism was not ignored by Parliament when the 2000 Act was being debated.
It was discussed by the Home Secretary who also, in answer to a question, mentioned the filter of section 117 (see Hansard (HC Deb) 14 December 1999, cols 159, 163).
This is not a case in which it is appropriate to refer to what was said in Parliament as an aid to statutory interpretation, but it provides some comfort for the Crowns argument.
Of rather more legitimate relevance is the fact that Parliament was content to leave the definition of terrorism effectively unchanged, when considering amendments or extensions to the 2000 Act, well after the 2007 report of Lord Carlile, which so clearly (and approvingly) drew attention to the width of the definition of terrorism see eg the Crime and Security Act 2010, the Terrorist Asset Freezing etc Act 2010 and the Terrorism Prevention and Investigation Measures Act 2011.
In reaching our conclusion, we do not attach any weight to the provisions of
section 117 of the 2000 Act as an aid to construction.
It may well be that any concern which Parliament had about the width of the definition of terrorism in section 1(1) was mitigated by the existence of the statutory prosecutorial discretion, but, for the reasons given in paras 35 and 37 above, we do not regard it as an appropriate reason for giving terrorism a wide meaning.
Accordingly, we conclude that, unless the appellants argument based on international law dictates a different conclusion, the definition of terrorism as in section 1 of the 2000 Act is indeed as wide as it appears to be.
This would result in the certified question being answered yes.
The appellants argument based on international law Introductory
If the attacks on Coalition forces in Afghanistan and Iraq, and on military
targets in Chechnya, shown on the seized videos would otherwise amount to terrorism as defined in section 1 of the 2000 Act, the appellant contends that this would be contrary to, or inconsistent with, the norms of international law.
The appellant has two arguments in this connection.
The first is that some provisions of the 2000 and 2006 Acts were enacted to give effect to the UKs international obligations arising under treaties concerned with the suppression of terrorism, and that terrorism should accordingly be given a meaning in those statutes which accords with the international law norm, and at any rate with the definition in the relevant international document to which effect is intended to be given.
The second argument is that, as the 2000 and 2006 Acts criminalise certain terrorist actions committed outside the UK, the meaning of terrorism in those statutes should not be wider than what is accepted as an international norm.
No international consensus as to terrorism
These two arguments each face more than one insuperable obstacle.
The common obstacle they both face is that there is no accepted norm in international law as to what constitutes terrorism.
As this court observed in a judgment given by Lady Hale and Lord Dyson in Al Sirri v Secretary of State for the Home Department (United Nations High Commissioner for Refugees intervening) [2013] 1 AC 745, para 37, there is as yet no internationally agreed definition of terrorism and no comprehensive international Convention binding Member States to take action against it.
Indeed, the reasoning in that case proceeded on the basis that the definition of terrorism in the 2000 Act was significantly wider than in article 1F(c) of the 1951 Convention relating to the Status of Refugees (the Geneva Convention) see para 36.
The appellant seeks to meet this point through the contention that, whereas there is no international agreement as to the meaning of terrorism, there is a general understanding that it does not extend to the acts of insurgents or freedom fighters in non international armed conflicts.
The short answer to this point is that, while there is significant support for such an idea, any such support falls far short of amounting to a general understanding which could be properly invoked as an aid to statutory interpretation.
As the Court of Appeal said in para 35, while international law has developed so that the crime of terrorism is recognised in situations where there is no armed conflict, it has not developed so that it could be said there is sufficient certainty that such a crime could be defined as applicable during a state of armed conflict.
Accordingly, as it went on to conclude in para 50, there is no rule of international law which requires this court to read down section 1 of the 2000 Act.
The United Nations has attempted to identify a comprehensive definition of terrorism, but has so far failed.
Indeed, it appears that one of the difficulties has been achieving agreement as to the very point at issue in this appeal.
In 2007, the ad hoc committee established by General Assembly resolution 51/210 of 17 December 1996 suggested that it be agreed that the activities of armed forces during an armed conflict, as those terms are understood under international humanitarian law, which are governed by that law, are not governed by this Convention.
However no consensus has been achieved, because various states delegations were concerned about (a) the right of peoples to self determination under international law; (b) the activities of armed forces in armed conflict; and (c) the activities of military forces of a State in peacetime, also taking into account related concerns about State terrorism to quote from the committees 2011 report.
In early 2012, the General Assembly established a working group to finalise the drafting of a comprehensive international convention on terrorism, but, by the end of that year, the chair of the group reported that there were still disagreements, including as to the precise distinction between terrorism and legitimate struggle of peoples fighting in the exercise of their right to self determination.
It is true that there are UN Conventions and Council of Europe Conventions concerned with counter terrorism, which define terrorism as excluding activities of armed forces during an armed conflict, but there is room for argument as to their precise effect, and, more importantly, it is quite impossible to suggest that there is a plain or consistent approach in UN Conventions on this issue.
Thus, the Crown asserts that the UN has adopted fourteen counter terrorism treaties to date1, and of these fourteen treaties (i) seven state that the activities of armed forces during an armed conflict, as those terms are understood under international humanitarian law, which are governed by that law are not governed 1 1963 Convention on Offences and Certain Other Acts Committed on Board Aircraft; 1970 Convention for the Suppression of Unlawful Seizure of Aircraft; 2010 Protocol Supplementary to the Convention for the Suppression of Unlawful Seizure of Aircraft; 1971 Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation; 1973 Convention on the Prevention and Punishment of Crimes Against Internationally Protected Persons; 1979 International Convention against the Taking of Hostages; 1980 Convention on the Physical Protection of Nuclear Material; 1988 Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, supplementary to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation; 1988 Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation; 2005 Protocol to the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation; 1988 Protocol for the Suppression of Unlawful Acts Against the Safety of Fixed Platforms Located on the Continental Shelf; 2005 Protocol to the Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms Located on the Continental Shelf; 1991 Convention on the Marking of Plastic Explosives for the Purpose of Detection; 1997 International Convention for the Suppression of Terrorist Bombings; 1999 International Convention for the Suppression of the Financing of Terrorism; 2005 International Convention for the Suppression of Acts of Nuclear Terrorism; 2010 Convention on the Suppression of Unlawful Acts Relating to International Civil Aviation; http://www.un.org/terrorism/instruments.shtml by this Convention, (ii) of the seven which have no such statement, six provide that the treaty does not exclude any criminal jurisdiction exercised in accordance with national law, and (iii) of the seven which include such a statement, at least five contain a provision substantially to the like effect.
The appellant contends that the absence of an armed conflict exclusion from a treaty does not mean that that treaty applies in relation to an action at a time of armed conflict.
However, it is not normally appropriate to imply a term into an international treaty, and, in any event, the absence of any such express exclusion is scarcely consistent with the contention that there is an internationally accepted norm such as the appellant suggests.
Further, as this court pointed out in Al Sirri, para 68, an attack on [the International Security Assistance Force in Afghanistan] is in principle capable of being an act contrary to the purposes and principles of the United Nations, and such an attack therefore can constitute terrorism see para 3 of the same judgment.
Consistently with this, there have been UN resolutions referring to the activities of Al Qaida and the Taliban as terrorism, notwithstanding allegations that their actions involved insurgents attacking forces of states and IGOs in non international armed conflict (eg UN Security Council resolutions 2041, 2069 and 2082 of 2012, and Council Decision 2011/486/CFSP of 1 August 2011).
In addition, in international humanitarian law, it appears that insurgents in non international armed conflicts do not enjoy combatant immunity.
Crawford in the Treatment of Combatants and Insurgents under the Law of Armed Conflict (2010), pp 78 79, says that international law does not immunize participation in non international armed conflict, and that there is nothing in the customary international law that replicates combatant immunity for persons who participate in non international armed conflicts, a view supported by Sivakumaran in The Law of Non International Armed Conflicts (2012), p 515.
As for domestic legislation across the world, the Crown states in its argument, without challenge, that of a survey of 42 states it has identified with legislation which defines terrorism, (i) 28 do not exclude armed attacks, (ii) four explicitly include armed attacks, and (iii) seven explicitly exclude armed attacks (which includes the United States, although its position might be said to be ambivalent, as some of the relevant legislation is widely drawn without the exclusion).
It is true that none of these legislative provisions explicitly refer to armed attacks during a time of armed conflict, but we would refer back to the point made at the end of para 48 above.
Other problems faced by the appellants case
It appears clear that sections 62 64 of the 2000 Act give effect to the UKs obligations under the International Convention for the Suppression of Terrorist Bombings 1997 and the International Convention for the Suppression of the Financing of Terrorism 1999.
It is also fair to say that these two Conventions, particularly the latter, appear to have been drafted so as to exclude insurgent attacks on military forces in non international armed conflicts from their respective ambits.
However, the notion that the meaning of terrorism in section 1 of the 2000 Act should be read down, because some of the activities which were rendered offences by that Act were criminalised as a result of the UKs obligations under the two Conventions, runs into two difficulties.
First, there is no rule that the UK government cannot go further than is required by an international treaty when it comes to legislating the exercise is often known as gold plating.
It is not as if there is anything in either the 1997 or the 1999 Convention which excludes a signatory state going further than the requirements of the Convention, or anything in the 2000 Act which suggests that Parliament intended to go no further.
That is not to say that gold plating is never objectionable, but no argument was advanced on this appeal to suggest that there was any reason why it was objectionable in this case (save that considered and rejected in paras 44 51 above).
Secondly, quite apart from this, if the wide definition of terrorism in section 1 of the 2000 Act has to be read down for the purposes of sections 62 64, there is no reason to read it down when it comes to any other provision of the Act or of the 2006 Act.
In Al Sirri, para 36, this court appears to have approved, indeed to have relied on, the proposition that, if application of the wide definition of terrorism in section 1 of the 2000 Act led to another provision of the Act conflicting with the UKs obligations under the Geneva Convention, then the definition should be read down when applied to the provision in question, and not generally throughout the Act.
To conclude otherwise would be a classic case of letting the tail wag the dog.
The 2006 Act takes the appellants argument no further.
It is true that some of its provisions give effect to the UKs obligations under the Council of Europe Convention on the Prevention of Terrorism 2005 and the International Convention for the Suppression of Acts of Nuclear Terrorism 2005.
However, section 2 of the 2006 Act was not enacted to give effect to any international Convention, and, even if it had been and had gone further than the Convention concerned required, there is no reason why Parliament should not have gold plated the legislation, as already explained.
The appellants reliance on the fact that there are provisions of the 2000 and 2006 Acts which criminalise various activities as terrorist offences even if committed abroad, runs into similar problems.
Even if it were the case that, because of the need to take into account the UKs international law obligations, the wide definition of terrorism had to be read down when it comes to construing those provisions, that would be of no assistance to a defendant such as the appellant, who is a UK citizen being prosecuted for offences allegedly committed in this country.
There is no reason to read down the wide definition of terrorism in a case such as this.
The present case does not involve a defendant who has committed acts, which are said to be offences, abroad: the activities said to be offences were committed in the UK and by a UK citizen.
That renders it unnecessary for us to consider whether, as there is no internationally agreed definition of terrorism, the Court of Appeal was right to decide that there is no reason why Parliament cannot criminalise acts of terrorism, as defined in section 1 of the 2000 Act, committed outside the UK.
In reaching that decision, the Court of Appeal relied on the Permanent Court of International Justices statement in The SS Lotus 1927, PCIJ, Series A, No 10, para 48 that [r]estrictions upon the independence of states cannot be presumed given that the rules of law binding upon states emanate from their own free will as expressed in conventions or by usages generally accepted as expressing principles of law and established in order to regulate the relations between [states] or with a view to the achievement of common aims.
Whilst various assumptions on which that decision was based have been modified or superseded by subsequent developments in international law, the Lotus principle [is] that states have the right to do whatever is not prohibited by international law, as is stated in the Max Planck Encyclopaedia of Public International Law, in its discussion of the case.
The appellant contends that the mere fact that certain actions can be characterised as terrorism without offending international law does not mean that those actions can be criminalised by one state if they are carried out in another state.
The appellant cites, for example, Brownlies Principles of Public International Law (8th ed 2012), p 458, which says if a state wishes to project its prescriptive jurisdiction extra territorially, it must find a recognised basis in international law for doing so.
That raises a point of some importance and some difficulty, and it might be said to represent a shift in focus in international law.
Given that we do not have to decide the issue, we should not do so in this appeal: it should await another case.
Conclusion
We would accordingly answer the certified question yes, and consequently we would dismiss this appeal.
Before ending this judgment, we would make two further points of a general nature about the 2000 and 2006 Acts.
First, we revert to the concern about the width of the definition of terrorism, as discussed in paras 28 29 and 33 37 above.
In his first report, Mr Anderson QC made the point that the current law allows members of any nationalist or separatist group to be turned into terrorists by virtue of their participation in a lawful armed conflict, however great the provocation and however odious the regime which they have attacked.
He went on to say that other definitions of terrorism choose to exclude activities sanctioned by international law from the reach of terrorist activity, citing the Canadian and South African Criminal Codes as examples.
In his second report, Mr Anderson mentioned the potential application of the Terrorism Acts even to UK forces engaged in conflicts overseas, and referred to the fact that a recent Australian report recommend[ed] that Australian law be changed so as to provide that the relevant parts of the Criminal Code, as in Canada, do not apply to acts committed by parties regulated by the law of armed conflict.
While acknowledging that the issue is ultimately one for Parliament, we should record our view that the concerns and suggestions about the width of the statutory definition of terrorism which Mr Anderson has identified in his two reports merit serious consideration.
Any legislative narrowing of the definition of terrorism, with its concomitant reduction in the need for the exercise of discretion under section 117 of the 2000 Act, is to be welcomed, provided that it is consistent with the public protection to which the legislation is directed.
The second general point is that the wide definition of terrorism does not only give rise to concerns in relation to the very broad prosecutorial discretion bestowed by the 2000 and 2006 Acts, as discussed in paras 36 37 above.
The two Acts also grant substantial intrusive powers to the police and to immigration officers, including stop and search, which depend upon what appears to be a very broad discretion on their part.
While the need to bestow wide, even intrusive, powers on the police and other officers in connection with terrorism is understandable, the fact that the powers are so unrestricted and the definition of terrorism is so wide means that such powers are probably of even more concern than the prosecutorial powers to which the Acts give rise.
detain in port and at borders is left to the examining officer.
The power is not subject to any controls.
Indeed, the officer is not even required to have grounds for suspecting that the person concerned falls within section 40(1) of the 2000 Act (ie that he has committed an offence, or he is or has been concerned in the commission, preparation or instigation of acts of terrorism), or even that any offence has been or may be committed, before commencing an examination to see whether the person falls within that subsection.
On this appeal, we are not, of course, directly concerned with that issue in this case.
But detention of the kind provided for in the Schedule represents the possibility of serious invasions of personal liberty.
Thus, under Schedule 7 to the 2000 Act, the power to stop, question and
|
The issue in the appeal is whether the definition of terrorism in the Terrorism Act 2000 includes military attacks by non state armed groups against national or international armed forces in a non international armed conflict.
Mr Gul was convicted by a jury of five counts of disseminating terrorist publications, for which he was sentenced to five years imprisonment.
The offence was created by section 2 of the Terrorism Act 2006, which defines terrorist publications as including publications which are likely to be understood as a direct or indirect encouragement to the commission, preparation, or instigation of acts of terrorism.
Terrorism is defined in section 1 of the Terrorism Act 2000, as the use or threat of action, inside or outside the United Kingdom, (a) involving serious violence against a person, involving serious damage to property, endangering another persons life, creating a serious risk to public health or safety, or designed to seriously interfere with seriously disrupt an electronic system; (b) designed to influence a government or intergovernmental organization or to intimidate the public or a section of the public; and (c) made for the purpose of advancing a political, religious, racial, or ideological cause.
The publications in question included videos which Mr Gul posted on YouTube showing (i) attacks by members of al Qaeda, the Taliban, and other proscribed groups on military targets in Chechnya, and on the Coalition forces in Iraq and in Afghanistan, (ii) the use of improvised explosive devices against Coalition forces, (iii) excerpts from martyrdom videos, and (iv) clips of attacks on civilians, including the 11 September 2001 attack on the United States.
These videos were accompanied by commentaries praising the bravery, and martyrdom, of those carrying out the attacks, and encouraging others to emulate them.
The Court of Appeal refused Mr Guls appeal against conviction and sentence.
His appeal to the Supreme Court was based on a challenge to the conclusion of the Court of Appeal (arising from a direction given by the trial judge following a request from the jury) that the definition of terrorism included military attacks by non state armed groups against national or international armed forces in their territory.
The Supreme Court unanimously dismisses Mr Guls appeal for reasons contained in a judgment given by Lord Neuberger and Lord Judge, with whom the other members of the Court agree.
Mr Gul argued that both domestic law and international law required the statutory definition of terrorism to be interpreted narrowly, so as to exclude its application to situations such as those depicted in some of the videos which he had uploaded, namely those involving actions by non state armed troops attacking foreign armed forces in their territory.
The court addresses this argument first by considering the application of familiar domestic law principles to the statutory definition of terrorism, and then by considering whether that results in a conclusion which has to be adapted to meet those requirements of international law that are incorporated into domestic law [25].
Applying the familiar domestic law approach to statutory interpretation, the Court holds that there is no basis on which the natural, very wide, meaning of section 1 of the 2000 Act could be read restrictively, as Mr Gul
argued.
The definition had clearly been drafted in deliberately wide terms so as to take account of the various and possibly unpredictable forms that terrorism might take, and the changes which may occur in the diplomatic and political spheres [312, 38].
In reaching this conclusion, the Court considers that section 117 of the 2000 Act, which prohibits the prosecution of most offences under the 2000 and 2006 Acts without the consent of the Director of Public Prosecutions or (in some cases) the Attorney General, is of no assistance [35 37, 42].
The Court also observes that creating an offence with a very broad reach and then invoking prosecutorial discretion as a means of mitigation is undesirable in principle and should only be adopted if it is unavoidable.
In these circumstances, the only reason for the Court to interpret the definition more restrictively would be if it conflicted with the European Convention on Human Rights (which was not relied on by Mr Gul) or with the United Kingdoms obligations in international law more generally [38].
The first aspect of Mr Guls argument here was that the United Kingdoms international obligations require it to define terrorism more narrowly in its criminal laws, as it should have the same meaning as it has in international law.
The second aspect was that the United Kingdom could not criminalize terrorism happening abroad except so far as international law allowed.
Both aspects of the international law argument face the insuperable obstacle that there is no accepted definition of terrorism in international law [44].
The U.N. General Assemblys working group seeking to agree a comprehensive international convention on terrorism, reported in 2012 that there were disagreements as to the precise distinction between terrorism and legitimate struggle of peoples fighting in the exercise of their right to self determination.
And, although there are other, non comprehensive treaties dealing with terrorism, there is no plain or consistent approach in UN Conventions on the issue [4648].
This is consistent with what was said by this Court in Al Sirri v Secretary of State [2012] UKSC 54, [2012] 3 WLR 1263, para 37 [44].
Moreover, there have been U.N. resolutions referring to the activities of al Qaeda and the Taliban as terrorism, although their actions involved insurgents attacking forces of states and intergovernmental organizations in non international armed conflict.
And the international law of armed conflict does not give any immunity combatants in non international armed conflicts [4950].
It is true that some other provisions of the 2000 and 2006 Acts give effect to treaties that do not extend to insurgent attacks on military forces in non international armed conflicts.
But there was no reason why the United Kingdom could not go further in the 2000 Act than the treaties had.
And even if those treaties had intended to limit the definition of terrorism that they applied, that would only affect the particular provisions of the 2000 Act that implemented those treaties [54].
As to the second aspect of the international law argument, it is irrelevant for present purposes whether the United Kingdom can criminalize certain actions committed abroad, because the material in this case was disseminated in the United Kingdom [56].
Therefore, whether one approaches the matter as an issue of purely domestic law, or as an issue of domestic law read in the light of international law, there is no valid basis for reading the definition of terrorism more narrowly than the plain and natural meaning of its words suggested.
In parting, the Court notes that although the issue is one for Parliament to decide, the current definition of terrorism is concerningly wide. [38] Canada and South Africa, for example, exclude acts committed by parties regulated by the law of armed conflict from the definition, and a recent report in Australia recommends that that country should follow suit. [61] The Independent Reviewer of Terrorism Legislation in the United Kingdom, Mr David Anderson QC, has made the point that the current law allows members of any nationalist or separatist group to be turned into terrorists by virtue of their participation in a lawful armed conflict, however great the provocation and however odious the regime which they have attacked [61].
The 2000 and 2006 Acts also grant substantial intrusive powers to the police and to immigration officers, which depend upon what appears to be a very broad discretion on their part.
While the need to bestow wide, even intrusive, powers on the police and other officers in connection with terrorism is understandable, the fact that the powers are so unrestricted and the definition of terrorism is so wide is probably of even more concern than the power of criminal prosecution to which the Acts give rise. [64]
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The Scottish Parliament was established by section 1 of the Scotland Act 1998.
It was opened on 1 July 1999.
Section 29(1) of the Act provides: An Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament.
This provision lies at the heart of the scheme of devolution to which the Act gives effect.
Section 29 has to be read together with Schedule 4 which protects certain enactments from modification, and then with section 30 and Schedule 5 which defines reserved matters.
These are matters reserved to the UK Parliament, and which are therefore excluded from the legislative competence of the Scottish Parliament.
The area of competence that is identified by this group of provisions forms the basis for a series of sections that are designed to ensure that the Scottish Parliament confines itself to the defined areas of competence: section 31 (scrutiny of Bills before introduction), section 32 (the responsibility of the Presiding Officer), section 33 (reference of Bills to the Judicial Committee now the UK Supreme Court for scrutiny), section 35 (the power of the Secretary of State to intervene in certain cases) and sections 98 to 103 and Schedule 6 (post enactment adjudication of issues about legislative competence by the courts).
The White Paper, Scotlands Parliament, Cm 3658 (1997), para 4.3, contrasted this scheme of devolution with that which had been laid down by the Scotland Act 1978, which was repealed because less than 40 per cent of the persons entitled to vote in the referendum which was required by section 85 of that Act voted in favour of it.
Under that Act legislative competence was to be transferred to the Scottish Assembly in specifically defined particular groups, further defined by reference to a long list of existing statutes.
That scheme, which would have required frequent updating by the UK Parliament, was seen to be incompatible with the aim that the White Paper expressed of ensuring maximum clarity and stability.
While the scheme in the 1998 Act may not strike one as a model of clarity, it does appear so far to have achieved the aim of stability.
Of course, harmony between the governments at Westminster and Holyrood until the May 2007 elections to the Scottish Parliament contributed to this process, as did frequent use of legislative consent motions (also known as Sewel motions, named after Lord Sewel, Parliamentary Under Secretary of State for Scotland during the passage of the Scotland Act 1998) passed by the Scottish Parliament agreeing that the UK Parliament might pass legislation on a devolved issue extending to Scotland.
But it is a remarkable fact that the myriad of devolution issues that have come before the courts for determination since May 1999 have been devoted almost exclusively to the exercise of functions in criminal cases by the Lord Advocate.
Logan v Harrower [2008] HCJAC 61, 2008 SLT 1049 was the first case that brought the extent of the legislative competence of the Scottish Parliament under judicial scrutiny on grounds other than compliance with Convention rights.
As in the case of the appeals that are now before this court, it arose of out of a prosecution for contraventions of section 103(1)(b) of the Road Traffic Act 1988.
There was no appeal against the appeal courts determination to the Judicial Committee.
The question whether an Act of the Scottish Parliament is within the legislative competence of the Parliament is a devolution issue: Schedule 6, para 1(a).
So it is for the courts to decide whether an Act which is challenged is within or outside competence.
But the judicial function in this regard has been carefully structured.
It is not for the judges to say whether legislation on any particular issue is better made by the Scottish Parliament at Holyrood or by the UK Parliament at Westminster.
How that issue is to be determined has already been addressed by the legislators.
It must be decided according to particular rules that the Scotland Act 1998 has laid down.
But those rules, just like any other rules, have to be interpreted.
That is the courts function.
It is for the court to say what the rules mean and how, in a case such as this, they must be applied in order to resolve the issue whether the measure in question was within competence.
These proceedings
Section 33 of and Part I of Schedule 2 to the Road Traffic Offenders Act 1988 provide that the offence of driving while disqualified under section 103(1)(b) of the Road Traffic Act 1988 may be prosecuted in Scotland either summarily or on indictment.
As originally enacted, the maximum punishment for that offence if prosecuted summarily in Scotland was six months or the statutory maximum fine or both.
If it was prosecuted on indictment in Scotland the maximum sentence was twelve months or a fine or both.
By section 45 of the Criminal Proceedings etc (Reform) (Scotland) Act 2007, the provisions of which I shall examine in more detail later, the Scottish Parliament increased to twelve months the maximum sentence that might be imposed for this offence under the 1998 Act by the sheriff sitting summarily.
That section came into force on 10 December 2007: the Criminal Proceedings etc (Reform) (Scotland) Act 2007 (Commencement No 2 and Transitional Provisions and Savings) Order 2007 (SSI 2007/479).
Sean Martin was charged on summary complaint at Oban with a co accused named Rodney Cuthill.
The complaint contained fourteen charges, of which charges 1, 2, 8 and 9 were directed against Martin.
In charges 1 and 8 it was alleged that he drove a motor vehicle on a road while disqualified, contrary to section 103(1)(b) of the Road Traffic Act 1988, and that he committed those offences while on bail.
On 14 December 2007 he pled guilty to charges 1 and 8 and to the other two charges.
On 17 December 2007 he was sentenced to 12 months imprisonment on charges 1 and 8, of which four months was attributed to the fact that he committed the offences while on bail.
On 12 March 2008 he presented a Bill of Suspension to the High Court of Justiciary in which he sought suspension of the sentence of imprisonment on the ground that the relevant provisions of the Criminal Proceedings etc (Reform) (Scotland) Act 2007 were beyond the legislative competence of the Scottish Parliament.
On 28 March 2008 he was granted interim liberation pending the determination of his Bill of Suspension.
Ross Miller was charged on summary complaint at Stirling.
The complaint contained three charges.
In charge 1 it was alleged that he drove a motor vehicle on a road while disqualified, contrary to section 103(1)(b) of the Road Traffic Act 1988.
On 24 April 2008 he pled guilty to charge 1 and to one of the other charges and was remanded in custody.
On 14 May 2008 he was sentenced to seven months imprisonment on charge 1, back dated to 24 April 2008.
On 20 June 2008 he presented a Bill of Suspension to the High Court of Justiciary in which he sought suspension of the sentence of imprisonment on the same grounds as Martin.
He applied for interim liberation, but on 3 July 2008 he withdrew that application.
Unlike Martin, he has now served his sentence.
The two Bills of Suspension came before the appeal court for a hearing on 6 January 2009.
Devolution minutes identifying the devolution issue in these proceedings had also been lodged.
The court saw no reason for distinguishing these cases from its previous decision in Logan v Harrower, in which it held that the increase in the sentencing power of the sheriff sitting summarily by section 45 of the Criminal Proceedings etc (Reform) (Scotland) Act 2007 was within the legislative competence of the Scottish Parliament.
As nothing had been said to suggest that that decision was wrong, it refused to pass the Bills.
It also refused the devolution minutes.
On 30 January and 24 February 2009 respectively it granted the appellants leave to appeal to this court.
As this narrative shows, the only reasoned decision on this issue by the appeal court is to be found in Logan v Harrower.
In para 24 of that case, Lord Nimmo Smith, delivering the opinion of the court, said: We agree with the advocate depute that, in the present case, the purpose of the provision is to make Scots criminal law with regard to penalties, procedure and jurisdiction in the sheriff court apply consistently to both common law offences and statutory offences.
As provided by para 3 in part I of Schedule 4 to the Scotland Act, the modifications made by section 45 of the 2007 Act to the reading of Part I of Schedule 2 to the Road Traffic Offenders Act 1988 are merely incidental to, or consequential on, the more general aspect of the provision, which relates generally to the powers of the sheriff in relation to statutory offences, whatever their origin; and the modifications do not have a greater effect upon reserved matters than is necessary to give effect to the purpose of the provision in section 45.
The legislative competence rules
The scheme of devolution of legislative power which the Scotland Act 1998 sets out recognises that it was not possible, if a workable system was to be created, for reserved and devolved areas to be divided into precisely defined, watertight compartments.
Some degree of overlap was inevitable, for the reasons explained by Lord Rodger in his discussion of the division of responsibility on matters of policy; see paras [73] and [74].
This is a familiar phenomenon in the case of federal systems such as those in Canada and Australia, where legislative competence is divided between the Dominion and the Provinces or the Commonwealth and the States.
In Prafulla Kumar Mukherjee v Bank of Commerce Ltd, Khulna (1947) LR 74 Indian Appeals 23 the Judicial Committee rejected the argument that the principles which obtain in Canada and Australia had no application in India.
Lord Porter gave this explanation at p 42: It is not possible to make so clean a cut between the powers of various legislatures: they are bound to overlap from time to time.
The rule that was evolved by the Judicial Committee was to examine the statute that was impugned to ascertain its pith and substance, or its true nature and character, to determine whether it was legislation with respect to matters that were in the prohibited or permitted sphere.
The phrase pith and substance was first used by Lord Watson in Union Colliery Co of British Columbia Ltd v Bryden [1899] AC 580, 587.
The phrase true nature and character was first used in Russell v The Queen (1882) 7 App Cas 829, 839 840.
The principles that these phrases embody are sometimes referred to, by a word that went out of fashion in mediaeval times, as the respection doctrine.
In Prafulla Kumar Mukherjee v Bank of Commerce Ltd, Khulna having referred to the rule and found that it applied to Indian as well as Dominion legislation, Lord Porter went on to say this at p 43: No doubt experience of past difficulties has made the provisions of the Indian Act more exact in some particulars .
But the overlapping of subject matter is not avoided by substituting three lists for two, or even by arranging for a hierarchy of jurisdictions.
Subjects must still overlap, and where they do the question must be asked what in pith and substance is the effect of the enactment of which complaint is made, and in what list is its true nature and character to be found.
If these questions could not be asked, much beneficent legislation would be stifled at birth, and many of the subjects entrusted to provincial legislation could never effectively be dealt with.
The same point had already been made by Lord Atkin in Gallagher v Lynn [1937] AC 863, which was an appeal from Northern Ireland.
Section 4 of the Government of Ireland Act 1920 provided that the Parliament of Northern Ireland had power to make laws for the peace, order and good government of Northern Ireland, but not to make laws in respect of, among other things, trade with any place out of Northern Ireland.
He held that an Act regulating the supply of milk in Northern Ireland which imposed controls on every person who within Northern Ireland sold or exposed for sale milk, whether produced within or without the territory of Northern Ireland, was a law for the peace, order and good government of Northern Ireland in respect of precautions taken to secured the health of its inhabitants, not a law in respect of trade.
At p 870, explaining what was meant by the pith and substance doctrine, he said: If, on the view of the statute as a whole, you find that the substance of the legislation is within the express powers, then it is not invalidated if incidentally it affects matters which are outside the authorized field.
The legislation must not under the guise of dealing with one matter in fact encroach upon the forbidden field.
Nor are you to look only at the object of the legislator.
An Act may have a perfectly lawful object, eg to promote the health of the inhabitants, but may seek to achieve that object by invalid methods, eg a direct prohibition of any trade with a foreign country.
The rule that was evolved and applied in these cases, among others, provides the background to the scheme that is now to be found in the Scotland Act.
It was referred to at the committee stage in the House of Lords by Lord Sewel: Hansard HL Debates (21 July 1998), vol 592, col 818 et seq.
The scheme seeks to give effect to the rule.
Lord Sewel, recognising that a degree of trespass into reserved areas was inevitable, said that it was intended that any argument as to whether a provision in an Act of the Scottish Parliament relates to a reserved matter must be decided by reference to its pith and substance or its purpose and if its purpose is a devolved one it is not to be outside legislative competence merely because it affects a reserved matter: col 819.
The question whether that aim has been achieved must be determined by examining the provisions of the Scotland Act in which the scheme is laid out.
While the phrase pith and substance was used while these provisions were being debated, it does not appear in any of them.
The idea has informed the statutory language, and the rules to which the court must give effect are those laid down by the statute.
As to what they mean, the Scotland Act provides its own dictionary.
Section 29, which must now be quoted in full, provides as follows: (1) An Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament. (2) A provision is outside that competence so far as any of the following paragraphs apply (a) it would form part of the law of a country or territory other than Scotland, or confer or remove functions exercisable otherwise than in or as regards Scotland, (b) it relates to reserved matters, (c) it is in breach of the restrictions in Schedule 4, (d) it is incompatible with any of the Convention rights or with Community law, (e) it would remove the Lord Advocate from his position as head of the systems of criminal prosecution and investigation of deaths in Scotland. (3) For the purposes of this section, the question whether a provision of an Act of the Scottish Parliament relates to a reserved matter is to be determined, subject to subsection (4), by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances. (4) A provision which (a) would otherwise not relate to reserved matters, but (b) makes modifications of Scots private law, or Scots criminal law, as it applies to reserved matters, is to be treated as relating to reserved matters unless the purpose of the provision is to make the law in question apply consistently to reserved matters and otherwise.
The paragraphs of section 29(2) that require to be examined in this case are paras (b) and (c).
The first question is whether section 45 of the Criminal Proceedings etc (Reform) (Scotland) Act 2007 relates to a reserved matter.
Reserved matters are the matters reserved to Westminster by section 30(1) of the Scotland Act, which gives effect to the list of matters in Schedule 5.
Para 1 of Part II of Schedule 5 provides that the matters to which any of the sections in the Part apply are reserved matters for the purposes of the Act.
Head E Transport lists among the subject matter of section E1, which applies to Road Transport, the following: (d) the Road Traffic Act 1988 and the Road Traffic Offenders Act 1988.
Section 45 of the 2007 Act does not refer expressly to any of the provisions of the Road Traffic Act 1988 or the Road Traffic Offenders Act 1988.
But, as it applies to offences under enactments passed before the 2007 Act generally, it must be taken to refer to them by implication.
Their subject matter is a reserved matter.
The question whether a provision relates to a reserved matter in terms of section 29(2)(b) is to be determined by reference to the purpose of the provision, applying the rule set out in section 29(3).
This rule lays down the primary test of what is meant by purpose.
But it is necessary to have regard also to section 29(4) which deals with a special category of overlap between reserved matters and matters which are not reserved that is in point in this case.
This is because section 126(5) of the Scotland Act provides that references in the Act to Scots criminal law include criminal offences, jurisdiction, evidence, procedure and penalties and the treatment of offenders, and because section 45 of the 2007 Act deals with what the head note to Part 3 of that Act refers to as penalties.
The list of reserved matters has been drawn up by reference to different aspects of executive or governmental responsibility.
But the spheres of activity embraced by Scots private law and Scots criminal law, which are not reserved, do not respect those boundaries.
They extend across all of them.
The regulation of both devolved matters and reserved matters within Scotland is likely to involve questions of Scots private law and Scots criminal law.
Section 29(4) does not apply if, applying the test laid down by section 29(2), the provision in question has already been found otherwise to relate to a reserved matter.
That is the effect of para (a) of this subsection.
It does apply, however, if it makes modifications of Scots private law or Scots criminal law as it applies to reserved matters: para (b).
Here too the boundary between what is reserved and what is not reserved is to be determined by applying a purpose test.
The key word here is consistently.
If the purpose is to make the relevant rule of Scots criminal law apply consistently to reserved matters and otherwise, it will pass the test.
The provision will not then fall to be treated as relating to a reserved matter, and thus outside the legislative competence, because it is caught by section 29(2)(b).
The question whether the provision is in breach of any of the restrictions in Schedule 4 must also be addressed in this case.
The paragraphs in that Schedule that need to be considered are paras 2 and 3, which so far as relevant provide as follows: 2 (1) An Act of the Scottish Parliament cannot modify, or confer power by subordinate legislation to modify, the law on reserved matters. (2) In this paragraph, the law on reserved matters means (a) any enactment the subject matter of which is a reserved matter and which is comprised in an Act of Parliament or subordinate legislation under an Act of Parliament, and (b) any rule of law which is not contained in an enactment and the subject matter of which is a reserved matter, and in this sub paragraph Act of Parliament does not include this Act. (3) Sub paragraph (1) applies in relation to a rule of Scots private law or Scots criminal law (whether or not contained in an enactment) only to the extent to that the rule in question is special to a reserved matter 3 (1) Paragraph 2 does not apply to modifications which (a) are incidental to, or consequential on, provision made (whether by virtue of the Act in question or another enactment) which does not relate to reserved matters, and (b) do not have a greater effect on reserved matters than is necessary to give effect to the purpose of the provision. (2) In determining for the purposes of sub paragraph (1)(b) what is necessary to give effect to the purpose of a provision, any power to make laws other than the power of the Parliament is to be disregarded.
There is obviously some duplication between section 29 and the provisions of this Schedule.
At first sight, paragraph 2(1) declares what the reader already knows, having studied section 29(4).
But, in contrast to section 29(4) which deals with the question whether a provision relates to a reserved matter, para 2(1) refers to the law on reserved matters.
The meaning of this expression is set out in para 2(2)(a).
The starting point is that the law on reserved matters as a whole is protected from modification by the Scottish Parliament.
This appears to withdraw the protection that is given by section 29(4) to modifications of a rule of Scots private law or Scots criminal law as it applies to reserved matters whose purpose was to make the law apply consistently to reserved matters and otherwise.
But paragraph 2(1) is itself qualified by the opening words of paragraph 2(3).
The words is special to a reserved matter are the key words in this subparagraph.
The contrast which they suggest is between a rule of Scots criminal law which is special to a reserved matter on the one hand and one which is general in its application on the other because it extends to both reserved matters and matters which have not been reserved.
There is a strong family likeness between the two tests, as Lord Walker says: see para [54].
But a modification which survives the test in section 29(4) will have to pass the tests in Schedule 4: section 29(2)(c).
If it passes the test in paragraph 2(3), paragraph 2(1) will not apply.
It will have no need of the protection that is given by paragraph 3 to modifications that fall within the scope of that paragraph.
This analysis shows that the questions which lie at the heart of this case are: (1) whether the purpose of section 45 was to make a modification to Scots criminal law as defined in section 126(5); (2) if so, whether its purpose was to make the law apply consistently to reserved matters and otherwise; and (3) if it passes those tests, whether the rule that it sought to modify was special to a reserved matter within the meaning of paragraph 2(3) of Schedule 4.
Section 45 of the 2007 Act
Section 45 of the Criminal Proceedings etc (Reform) (Scotland) Act 2007 is one of a group of sections dealing with sentencing powers which appear in Part 3 of the Act under the heading Penalties.
Two sections require to be noticed in addition to section 45.
First there is section 43, which deals with common law offences.
It amends section 5 of the Criminal Procedure (Scotland) Act 1995, which deals with the sheriffs summary jurisdiction and powers, in two respects: in section 5(2)(d), the power to impose imprisonment is raised from any period not exceeding three months to twelve; and section 5(3) is repealed.
Secondly, there is section 44, which increases the maximum sentence of imprisonment for a list of particular summary only statutory offences which had attracted a maximum sentence in excess of the previous common law maximum but were below the new maximum of twelve months for offences dealt with summarily.
Section 45 is headed Other statutory offences.
It is not necessary for the purposes of this case to quote it in full.
The provisions that are relevant provide as follows: (1) The maximum term of imprisonment to which a person is liable on summary conviction of a relevant offence is, by virtue of this subsection, 12 months. (2) Accordingly, the specification of a maximum period of imprisonment in every relevant penalty provision is, in relation to any relevant offence to which it applies, to be read subject to subsection (1). (3) Without prejudice to subsections (1) and (2), the Scottish Ministers may by order amend the specification of a maximum term of imprisonment in a relevant penalty provision so as to specify, in relation to the relevant offence to which it applies, that the maximum term of imprisonment to which a person is liable on summary conviction is 12 months. (6) In this section, a relevant offence is an offence under a relevant enactment or instrument which is (a) triable either on indictment or summary complaint, and (b) punishable on summary conviction with a maximum term of imprisonment of less than 12 months. (7) In this section a relevant enactment is an Act passed before this Act It is common ground that the Road Traffic Offenders Act 1988 is a relevant enactment and that a contravention of section 103(1)(b) of the Road Traffic Act 1988 is a relevant offence for the purposes of this section.
What was the purpose of section 45?
Section 29(3) of the Scotland Act provides that, when consideration is being given to the purpose of the provision, regard is to be had to its effect in all the circumstances.
One of the circumstances to which it is proper to have regard is the situation before the provision was enacted, which it was designed to address.
Reports to and papers issued by the Scottish Ministers prior to the introduction of the Bill, explanatory notes to the Bill, the policy memorandum that accompanied it and statements by Ministers during the proceedings in the Scottish Parliament may all be taken into account in this assessment.
The sentencing powers of the sheriff, sitting as a court of summary jurisdiction, are regulated by statute.
Section 7(5) of the Criminal Procedure (Scotland) Act 1995 provides that a stipendiary magistrate shall have the summary criminal jurisdiction and powers of a sheriff.
Prior to the commencement of the Criminal Proceedings etc (Reform) (Scotland) Act 2007, section 5(2) of the 1995 Act provided inter alia as follows: The sheriff shall, without prejudice to any other or wider powers conferred by statute, have power on convicting any person of a common law offence . (d) to impose imprisonment, for any period not exceeding three months.
Section 5(3) of the 1995 Act provided that the maximum sentence for a second or subsequent offence involving violence or dishonesty was six months.
The effect of these provisions was that the power of the sheriff or stipendiary magistrate to impose a sentence of imprisonment was limited to a maximum of three months in the case of common law crimes (except in the case of certain types of repeat offences) and, in the case of statutory offences, to the maximum laid down by the relevant statute.
In the case of a contravention of section 103(1)(b) of the Road Traffic Act 1988, section 33 of and Part I of Schedule 2 to the Road Traffic Offenders Act 1988 provided that the maximum if the offence was prosecuted summarily in Scotland was six months.
In November 2001 the Minister of Justice appointed a committee under Sheriff Principal John McInnes QC to review the provision of summary justice in Scotland, including the structures and procedures of the sheriff courts and the district courts as they related to summary business and the inter relation between the two levels of court, and to make recommendations for the more efficient and effective delivery of summary justice in Scotland.
In the report which it presented to Ministers in January 2004 the Summary Justice Review Committee identified a need to relieve pressure on the higher courts.
This implied a need to move cases from the High Court of Justiciary to the sheriff and jury court, and in turn a need to move cases from the sheriff and jury court to summary procedure.
In para 7.87 of its report it recommended that, to equip summary judges with the disposals that would be necessary to deal with cases that would be heard summarily in the future, the criminal jurisdiction of judges sitting summarily should be increased to a maximum of twelve months detention or imprisonment or a 20,000 fine.
Having consulted on this recommendation among other proposals, the Scottish Ministers decided to accept it.
In March 2005 the Minister for Justice published Smarter Justice, Safer Communities Summary Justice Reform Next Steps (Scottish Executive, March 2005).
In para 4.10 reference was made to the recommendations that the Committee had made which were designed to promote case handling at a more appropriate level: Recognising the pressures on the solemn system, the Committee recommended that the sentencing powers of a sheriff sitting without a jury should be raised to one year in custody or a fine of 20,000, enabling the transfer of the least serious solemn business to the summary courts In para 4.50 it was stated that it was proposed to implement the reports recommendations in relation to the custodial sentencing powers of sheriffs sitting summarily.
The Criminal Proceedings etc (Reform) (Scotland) Bill was introduced into the Scottish Parliament in February 2006.
In para 186 of the explanatory notes to the Bill it was said of section 35 (which became section 45 when the Bill was passed) that it brought the maximum summary prison sentences for certain statutory offences into line with the new maximum sentence for common law offences set out in what is now section 43 of the Act.
In the Policy Memorandum which accompanied the Bill it was stated in para 6 that the Bill made provision in eight main policy areas, including: increases in the criminal sentencing powers of the summary courts, ensuring that those courts can deal with an appropriate range of cases in terms of both severity and caseload, and do so more quickly than is currently the case.
In para 206 it was stated that the Executive believed that professional sheriffs should be able to deal with a wider range of cases under summary procedure than they were currently entitled to, including some that would attract a higher penalty.
The theme that is apparent from these earlier documents was picked up by the Justice 1 Committee in its report on the general principles of the Bill: Justice 1, 10th Report 2006, Stage 1 Report on Criminal Proceedings etc (Reform) (Scotland) Bill, 5th July 2006.
In para 293 of its report the Committee said that one of the principal drivers for the reforms proposed by the Bill was that justice should be dispensed at the appropriate level and that this meant, among other things, the granting of significantly increased sentencing powers to sheriffs sitting without a jury.
In para 294 it said that it broadly accepted that there was merit in some cases being dealt with at lower levels of the judicial system than was the case at present.
Introducing the stage 1 debate in the Parliament on 14 September 2006, the Minister for Justice said that the Bill made a number of changes to the detailed law of criminal procedure, that each of these changes played its part in speeding up the system as a whole, that the Bill would ensure that increased sentencing powers for sheriffs would ease the pressure on the higher courts and that the bill was to be regarded as part of the executives wider work to reform the summary justice system: Scottish Parliament Official Report, cols 27664 6.
In my opinion this material shows conclusively that the purpose of section
45 of the 2007 Act was to contribute to the reform of the summary justice system by reducing pressure on the higher courts.
An increase in the sentencing powers of sheriffs when they were dealing with statutory offences was seen as a necessary of this process.
The jurisdiction of the sheriff sitting summarily is defined by reference to the penalties that the sheriff can impose.
These are pre eminently matters of Scots criminal law: see section 126(5).
As it was to a rule of Scots criminal law that the provision was directed, I would hold that it does not relate to a reserved matter within the meaning of section 29(2)(b).
Was it to make the law apply consistently?
Section 45 of the 2007 Act forms part of a group of sections, all directed to a reform or modification of the sentencing powers of the sheriff sitting summarily.
The leading provision is section 43, which increased the maximum sentence for common law offences from three (or, in the case of some repeat offences, six) months to twelve months.
It is obvious however that to have left the matter there would have led to an imbalance in the system between how common law offences were to be dealt with on the one hand and how statutory offences were to be dealt with on the other.
The reform that this would have achieved would have been incomplete and confusing.
To achieve its object it had to be extended across the board to statutory offences as well.
To draw a line between statutory offences relating to reserved matters and those relating to matters that were not reserved would have been even more confusing.
When they were dealing with an offence created by a United Kingdom statute, prosecutors and sheriffs would have had to check in each case whether they were on the right side of the line.
Statutory offences of all kind form a large part of the diet of the summary courts.
To achieve a complete and worthwhile reform of the summary justice system a modification of the sentencing power across the whole range of statutory offences was required.
In my opinion the purpose of the modification in section 45 must be taken to have been to make the law relating to the increased sentencing power of the sheriff sitting summarily apply consistently to reserved matters and otherwise.
I would hold that section 45 is not to be treated as relating to a reserved matter under section 29(4).
Is the rule special to a reserved matter?
The question that must now be addressed is that set out in para 2(3) of Schedule 4: is the rule of Scots criminal law that the Act seeks to modify special to a reserved matter? To answer it, one must first identify the rule of Scots criminal law that is being modified.
Then one must ask whether that rule is special to a reserved matter.
Identifying the rule is a crucial step towards reaching the right answer to the question whether the modification that is proposed is within the competence of the Scottish Parliament or must be dealt with at Westminster.
I agree with Lord Rodger that, unlike section 29(3) and (4), para 2 of the Schedule concentrates on the rule of law that is being modified by the enactment and makes no mention of the purpose of the modification: see para [122].
But the purpose of the enactment may nevertheless be referred to in order to identify the rule of law that is being modified.
I think that it is clear that any modification of the maximum punishment
that can be imposed for the offences that the road traffic legislation has created must be held to be a matter for the United Kingdom Parliament at Westminster.
The rule of Scots law as to the maximum term of imprisonment that can be imposed would fall to be treated as a rule that was special to a reserved matter.
So would any other limits on the extent of the penalties or as to the scope of offences that the Road Traffic legislation lays down.
The Calman Report, Serving Scotland Better: Scotland and the United Kingdom in the 21st Century, June 2009, considered in paras 5.167 181 certain aspects of road traffic regulation including drink driving limits and speed limits.
As the authors of the report were right to recognise, under the current legislation any alteration to those limits that might be thought to be acceptable in Scotland would not be within the legislative competence of the Scottish Parliament.
Some concern was expressed during the progress of the Bill as to whether this reform might lead to what was referred to as sentence drift a tendency on the part of sheriffs to impose higher sentences for these offences than they would previously have regarded as appropriate.
But it is plain that this was not what the reform was intended to do, and there is no evidence that this has in fact happened.
So I do not think that it would right to say that the purpose of section 45 was to achieve an overall increase in the sentences that sheriffs were imposing.
Had that been the purpose, it would have gone some way to identifying the rule of law that was being modified.
As it is, the rule cannot be identified by that route.
Section 33 of and Part I of Schedule 2 to the Road Traffic Offenders Act 1988 provide that the maximum sentence of imprisonment for the offence under section 103(1)(b) of the Road Traffic Act 1988 if prosecuted summarily in Scotland is six months and that it is twelve months if prosecuted in Scotland on indictment.
They contain, in effect, two rules of Scots criminal law.
One is a rule as to the overall maximum sentence, which is twelve months imprisonment.
That, plainly, is a rule which is special to the Road Traffic Acts and it is a reserved matter.
The other is a rule about Scots criminal jurisdiction and procedure, which is not reserved.
It is that rule which determines the procedure under which the maximum sentence can be imposed.
The purpose of the modification that section 45 makes is to enable more statutory offences to be prosecuted summarily.
The maximum sentence of imprisonment for the offence if prosecuted in Scotland remains twelve months.
The modification relates to the procedure which determines whether the sheriff has jurisdiction to impose the maximum sentence.
It extends the power that is given to him when he is sitting summarily.
It seems to me therefore that the rule of Scots law that is being modified is the rule of procedure, not the rule of Scots law as to the maximum sentence for the offence.
The rule of procedure is a rule that applies generally to the way cases are dealt with in the sheriff court.
It is not special to the Road Traffic Offenders Act 1988.
The purpose of para 2(3) of Schedule 4 to the 1998 Act, as I understand it, is to avoid the fragmentation of rules of Scots criminal law which are of general application into some parts which are within the Scottish Parliaments competence and some parts which are not.
It is, of course, the case that the difference between the maximum sentence that could be imposed by a sheriff sitting summarily and that which could be imposed by him in solemn proceedings was prescribed in Schedule 2 to the Road Traffic Offenders Act 1988.
But in doing so the Schedule was basing itself on a distinction between two forms of Scots criminal procedure which apply generally.
I think that it was within the competence of the Scottish Parliament to extend its general reform of that procedure to the forms of procedure referred in this and other statutes that deal with reserved matters, otherwise fragmentation would occur.
I am not confident that it helps to reason by way of examples.
Each case must be taken on its own merits.
In case of doubt, the words to the extent only suggest that a generous application of para 2(3) which favours competence is to be preferred, as opposed to one which applies it narrowly.
And the key to the decision in this case lies in identifying the rule in question, which is achieved by examining the purpose of the provision which is under scrutiny.
One could, of course, say that Schedule 2 contains two maximum sentences, one for summary proceedings and the other for proceedings on indictment, and that as both are reserved matters it was not open to the Scottish Parliament to alter either of them.
But that, in my opinion, would be to carry the process of analysis too far.
The word special indicates that, in cases such as this where the decision depends on the exercise of judgment, the purpose of the provision may be the best guide.
So, in agreement with Lord Walker and Lord Brown and respectful disagreement with Lord Rodger and Lord Kerr, I would hold that section 45 was not directed to a rule which was special to a reserved matter within the meaning of para 2(3) of Schedule 4, that para 2(1) of the Schedule does not apply, that it survives scrutiny under section 29(2)(c) and there is no need to refer to para 3.
Had it been necessary to refer to para 3, I would have held that section 45 of the 2007 Act was not saved by it.
On this point I disagree with the appeal court in Logan v Harrower.
A decision as to the procedure under which a sentence of more than six months could be imposed was not a modification of an incidental or consequential nature.
It was an important change in the procedure which one would expect to see set out in the body of the enactment, not in a schedule of the kind that generally deals with matters that are merely incidental or consequential on provisions found elsewhere in the enactment.
Section 104 of the Scotland Act enables Her Majesty in Council or a Minister of the Crown, with the consent of both Houses of the United Kingdom Parliament, to make such provision as is considered necessary or expedient in consequence of any provision made by or under any Act of the Scottish Parliament.
As the explanatory notes to that section point out, the power to make provision consequential on legislation under paragraph 3 of Schedule 4 is very limited.
Among other things, it does not enable the Scottish Parliament to legislate otherwise than as a matter of Scots law.
It does not have power under that provision to make any consequential provisions that require to take effect elsewhere in the United Kingdom.
Examples of the use that is made of the power under section 104 are to be found in the Adults with Incapacity (Scotland) Act 2000 (Consequential Modifications) (England, Wales and Northern Ireland) Order 2005 (SI 2005/1790) and the Police, Public Order and Criminal Justice (Scotland) Act 2006 (Consequential Provisions and Modifications) Order 2007 (SI 2007/1098).
There are many others.
Lord Rodger in para [81] has mentioned some of them.
The use of section 104 is not confined to cross border matters.
The power was used in connection with the reforms introduced by the 2007 Act to make the powers to impose sanctions under the Road Traffic Offenders Act 1988 available in the justice of the peace courts that were to be established under the 2007 Act, and to make the same powers available in the district courts during the phased introduction of the justice of the peace courts: see the Criminal Proceedings etc (Reform) (Scotland) Act 2007 (Powers of District and JP Courts) Order 2007 (SI 2007/3480).
I agree with Lord Rodger that the scheme for adjusting the sheriffs summary criminal jurisdiction in relation to statutory offences could have been dealt with in this way, had this been thought to be necessary.
But the modification that was required in their case was to a procedural route that was already available for dealing with these offences in the sheriff court.
For the reasons that I have given I consider that the judgment that was made that the modification was within the legislative competence of the Scottish Parliament was correct, and that the use of the section 104 power was not necessary.
Conclusion
The result of this analysis is that section 45 of the 2007 Act survives scrutiny.
Endorsing what the appeal court decided in Logan v Harrower but differing from it as to the reason why the section is not in breach of the restrictions in Schedule 4, I would hold that the provision is within the legislative competence of the Scottish Parliament.
I would therefore dismiss these appeals.
Bearing in mind that the appellant Martin who is on interim liberation has not yet served the sentence that the sheriff imposed on him, I would remit both cases to the appeal court for any further orders that may be required.
Had I been in favour of allowing the appeals I would have made an order under section 102(2)(a) of the 1998 Act removing the retrospective effect of the decision that, so far as it purports to modify the penalty provision for a contravention of section 103(1)(b) of the Road Traffic Act 1988 in Part I of Schedule 2 to the Road Traffic Offenders Act 1988, section 45(2) of the Criminal Proceedings etc (Reform) (Scotland) Act 2007 is outside the competence of the Scottish Parliament.
I would also have made an order under section 103(2)(b) suspending its effect for two months to allow the defect to be corrected as it seems to me that, in a case of this kind, these two orders go hand in hand.
LORD WALKER
The Scotland Act 1998 is on any view a monumental piece of constitutional legislation.
Parliament established the Scottish Parliament and the Scottish Executive and undertook the challenging task of defining the legislative competence of the Scottish Parliament, while itself continuing as the sovereign legislature of the United Kingdom.
That task is different from defining the division of legislative power between one federal legislature and several provincial or state legislatures (as in Canada or Australia, whose constitutional difficulties the Judicial Committee of the Privy Council used to wrestle with, often to the dissatisfaction of those dominions).
The doctrine of pith and substance mentioned by Lord Hope in his judgment is probably more apt to apply to the construction of constitutions of that type.
But both have to face the difficulty of defining (necessarily in fairly general and abstract terms) permitted or prohibited areas of legislative activity.
The difficulties (viewed from the perspective of Northern Ireland) are discussed in Harry Calverts Constitutional Law in Northern Ireland, which, though written as long ago as 1968, still provides a very helpful commentary.
It shows how different forms of words have come to be recognised as indicating a more or less proximate (or direct, or crucial) connection between a proposed enactment and an area of legislative activity.
Calvert quotes (from an unidentified source), at pp 180 181, the argument of the Attorney General for Northern Ireland when Lynn v Gallagher [1937] AC 863 was before the House of Lords: The crux of this whole legislation lies in three words, the words in respect of used in section 4(1) of the Government of Ireland Act, 1920.
These three words are the apt words to indicate the true subject matter of an enactment but they are not, we submit, the apt words to indicate merely the results of an enactment.
They are possibly rather stronger than a word such as concerning, and than the phrase in relation to, but they certainly must have a different meaning, unless they may be construed contrary to the general use of language, from the word affecting.
In the British North America Act the words used are in relation to and these words in respect of do not occur in it.
We submit that these words in respect of are no weaker than the words there used.
Calvert also quotes, at p 179, Higgins J in McArthur Ltd v Queensland (1920) 28 CLR 530, 565: We have to determine in each case what is the subject of the legislation what subject is the Act with respect to what it effects not what things or operations it may indirectly affect.
These background matters must have been in the mind of those who undertook the drafting of the Scotland Act (and in particular the provisions directly relevant to these appeals).
But in the Scotland Act Parliament has gone further, and has used more finely modulated language, in trying to explain its legislative purpose as regards reserved matters.
The Court has to consider two groups of provisions, each of which has a particular nexus with reserved matters as defined in Schedule 5 of the Act.
The first group of provisions consists of section 29(2)(b) as explained and qualified by subsections (3) and (4).
The second group consists of section 29(2)(c) and Schedule 4, paras 2 and 3.
All these provisions are set out in Lord Hopes judgment (paras 16 and 20) and I need not repeat them.
But it is worth considering the manner in which reserved matters are defined in Schedule 5 (to which both groups of provisions are linked).
Schedule 5, Part I, contains general reservations: the constitution, political parties, foreign affairs, public service, defence and treason.
Part II then contains specific reservations under eleven heads (themselves elaborately subdivided and made subject to exceptions).
Although termed specific, some of these are expressed in general terms.
For instance, Head A1, Fiscal, economic and monetary policy, is as follows: Fiscal, economic and monetary policy, including the issue and circulation of money, taxes and excise duties, government borrowing and lending, control over United Kingdom public expenditure, the exchange rate and the Bank of England.
Exception Local taxes to fund local authority expenditure (for example, council tax and non domestic rates).
Many of the specific reservations in Part II are expressed as the subject matter of a particular statute (or part of a statute).
For example Head E.1, Road Transport, includes The subject matter of . (d) the Road Traffic Act 1988 and the Road Traffic Offenders Act 1988 (subject to an exception for a few sections of the Road Traffic Act 1988).
The use of the expression subject matter has been described (in an unsigned editorial in (1998) 19 Statute Law Review v) as an elegant drafting device but as having potential difficulties.
So I come back to the first group of provisions, consisting of subsection (2)(b) of section 29 as explained and qualified by subsections (3) and (4).
Its structure appears reasonably straightforward.
Section 29(2)(b) prohibits legislation by the Scottish Parliament which relates to reserved matters.
That is an expression which is familiar in this sort of context, indicating more than a loose or consequential connection, and the language of section 29(3), referring to a provisions purpose and effect, reinforces that.
Section 29(4) adds to the reach of section 29(2) (as is clear from section 29(4)(a)) as regards modifications of Scots private law, or Scots criminal law, as it applies to reserved matters.
Scots private law and Scots criminal law are widely defined in section 126 (4) and (5).
Paragraph 29(4)s default position is restrictive: the modification is to be treated as relating to reserved matters unless the purpose of the provision is to make the law in question apply consistently to reserved matters and otherwise.
Here the law in question must mean the relevant rule of Scots private law or Scots criminal law.
The second group of provisions consists of section 29(2)(c) and Schedule 4, paras 2 and 3.
Para 2(1) contains a general prohibition on modification (including amendment or repeal) of the law on reserved matters, that composite expression being defined in sub paragraph (2) by reference to the subject matter of an enactment or non statutory rule.
So reading Schedule 4, para 2(1) and (2) together with Schedule 5, Part II, Head E1(d), we see that (if those provisions stood alone) an Act of the Scottish Parliament could not modify the Road Traffic Offenders Act 1988, because the subject matter of that Act is a reserved matter.
As I understand it the Court is agreed (although not for identical reasons) that the legislation now in point, section 45 of the Criminal Proceedings etc (Reform)(Scotland) Act 2007, does not infringe section 29(2)(b) of the Scotland Act.
The Court is however divided as to the effect of section 29(2)(c).
Lord Rodger and Lord Kerr take the view that section 45 of the 2007 Act infringes section 29(2)(c) and Schedule 4, para 2 (being special to a reserved matter for the purposes of para 2(3) and not being saved by para 3, relating to incidental or consequential modifications).
I agree that para 3 is not in point.
The crucial provision is para 2(3).
But it is important, in my view, to try and see it as part of a rational and coherent scheme defining the legislative competence of the Scottish Parliament.
That is easier said than done, as the division within the Court indicates.
When I first studied this second group of provisions I got the impression that they replicated, but in different language, the effect of what I have called the first group of provisions, and that it was hard to discern the legislative scheme or purpose underlying this.
I still have difficulty with this.
But I think the answer may be that section 29(2) is dealing comprehensively with the scope of any new legislation enacted by the Scottish Parliament, whereas Schedule 4 is (as its heading indicates) concerned with the protection of some existing legislation (or some non statutory rule of law) which has a reserved matter as its subject matter.
However the statute book is already so heavily burdened that almost any new legislation is likely to modify existing legislation, and in Scotland a lot of new legislation will have the effect of modifying Scots private law or Scots criminal law.
So in most cases both groups of provisions will be in point.
Section 29(4) is concerned with a provision which makes a modification to Scots private law or Scots criminal law as it applies to reserved matters; in that case it is necessary to enquire whether its purpose is to make the law in question apply consistently to reserved matters and otherwise (that is, to non reserved matters).
Schedule 4, para 2(3) is concerned with the modification of a rule of Scots private law or Scots criminal law to the extent that the rule in question is special to a reserved matter.
There is to my mind an obvious degree of affinity between these two enactments, in that a provision intended to produce consistency in a rules application across the board (that is, to reserved matters and non reserved matters alike) is unlikely to apply to a rule which is special to a reserved matter.
Special is to be contrasted with general and a measure intended to produce consistency across the board is general by its very nature.
The two statutory tests are not identical (if Parliament had intended them to be identical it would no doubt have used the same words in each).
Nevertheless they have a strong family likeness, and it would be rather surprising if a provision came within the legislative competence of the Scottish Parliament under section 29(4) but failed on the test in Schedule 4, paragraph 2(3).
In applying each test it is necessary to identify the rule of Scots criminal law which is to be modified.
It is to be found in sections 9 and 33 of, and Schedule 2 to, the Road Traffic Offenders Act 1988, so far as they apply to an either way offence under section 103(1)(b) of the Road Traffic Act 1988 committed in Scotland.
These provisions are part of Scots criminal law, and they relate (almost by definition, having regard to the wording of Head E1(d)) to a reserved matter.
It is also necessary to identify the purpose of the provision which makes the modification, that is section 45 of the 2007 Act.
Its purpose was (as Lord Hope says in his judgment, para [31]) to contribute to the reform of the summary justice system by reducing pressure on the higher courts.
An increase in the sentencing powers of sheriffs when they were dealing with statutory offences was seen as a necessary of this process.
Similarly in Lord Rodgers view (para [105]) it was to introduce a novel, general, provision for determining the maximum term which a sheriff, sitting as a court of summary jurisdiction, could impose by way of imprisonment in respect of either way statutory offences which had previously attracted a maximum sentence of less than 12 months imprisonment.
Lord Rodger gives a very similar explanation of the purpose of section 45 in para [113] of his judgment.
In my opinion this statutory purpose includes achieving consistency in the sheriffs sentencing powers, on summary conviction, as between reserved and non reserved matters.
Lord Rodger accepts this in para [116] of his judgment, but reaches a different conclusion on the similar point (not, I accept, exactly the same point) arising under Schedule 4, paragraph 2(3).
I would accept that on my interpretation both section 29(4) and Schedule 4, para 2(3) may produce some difficult borderline cases, and some results which might appear anomalous.
Perhaps they would do so on any interpretation, since in the Scotland Act Parliament was attempting to define legislative competence across the whole broad expanse of what are now regarded as the concerns of government.
But (with great respect to the contrary views of Lord Rodger and Lord Kerr) I do not see this as a difficult borderline case.
The relevant rule of Scots criminal law to be modified is not that driving while disqualified is a criminal offence, nor that it is a criminal offence punishable by imprisonment, nor that the maximum term of imprisonment is 12 months.
All that has been enacted by the Westminster Parliament, and is left untouched.
The rule to be modified is whether (and if so to what degree) the option of summary trial before the sheriff should reduce the maximum sentence that can be passed.
That is to my mind a general matter relating to the Scottish system of criminal justice, and is not something special to the reserved matter of road transport.
For these reasons, and for the fuller reasons in the judgment of Lord Hope, while respecting the closely argued contrary views of the minority, I agree with Lord Hope and Lord Brown that the appeals should be dismissed and the cases remitted to the Appeal Court for any further orders that may be required.
LORD BROWN
Section 33 of and Part 1 of Schedule 2 to the Road Traffic Offenders Act 1988 (the RTOA), as originally enacted, provided that the offence of driving while disqualified (the offence) under section 103(1)(b) of the Road Traffic Act 1988 (the RTA) could be prosecuted in Scotland either summarily or on indictment; if summarily, the maximum punishment was six months imprisonment (and/or a fine); if on indictment, twelve months (and/or a fine).
The RTOA and the RTA are reserved matters.
By section 45 of the Criminal Proceedings etc (Reform) (Scotland) Act 2007 (the 2007 Act) the Scottish Parliament purported to increase from six months to twelve months the maximum sentence that could be imposed for the offence by the sheriff sitting summarily. (Although immaterial to this appeal, it may be noted that in England and Wales the offence was, and remains, triable summarily only and subject to a maximum sentence of six months imprisonment.)
The sole issue for determination on this devolution appeal is whether section 45 of the 2007 Act was within the Scottish Parliaments legislative competence within the meaning of section 29 of the Scotland Act 1998 (the 1998 Act).
Section 29 has already been set out in full by other members of the Court and I need not repeat it.
So too the relevant paragraphs of Schedule 4 to the 1998 Act (referred to in section 29(2)(c)).
Before coming to the single point on which the Court is divided it is worth noting the following basic matters.
First, that section 45 of the 2007 Act, the enactment impugned, did not increase the maximum penalty available for the offence in Scotland: that remained at twelve months imprisonment; what changed was that the sheriff could impose this maximum sentence no less when sitting as a court of summary jurisdiction than as a court of solemn jurisdiction.
Secondly, that the essential purpose of section 45 (indeed, of sections 43 to 49 of the 2007 Act as a whole) was not to increase the penalties imposed by the Scottish courts but rather, by enlarging the sheriffs summary sentencing powers, to reallocate business within the court system to have more cases tried summarily instead of by a jury, summary trials generally being simpler, faster and cheaper than jury trials.
Thirdly, that had the 2007 Act, directed as it was to reallocating court business in this way and to standardising the sheriffs summary sentencing powers for the future, not included within its provisions modification of the RTOA and the RTA in the way described, it would have created a striking contrast between the sheriffs summary powers when dealing with reserved matters and those available to him in other cases.
Of course, as Lord Rodger points out, any such anomaly or inconsistency could if necessary be cured by resort to section 104 of the 1998 Act.
But was that the only lawful means of achieving the desired consistency in this case? That is the question.
I understand all of us to agree that section 45 does not fall foul of section 29(2)(b) of the 1998 Act.
It does not relate to a reserved matter having regard to section 29(3) and is not to be deemed to relate to reserved matters by virtue of section 29(4).
On this latter point, in common with Lord Hope, I regard section 45 as making modifications of Scots criminal law as it applies to reserved matters but as doing so for the purpose of making Scots criminal law (as to the allocation of court business) apply consistently.
What critically divides the Court is the question raised under section 29(2)(c): as to whether section 45 is in breach of the restrictions in Schedule 4.
I do not pretend to find paragraphs 2 and 3 of Schedule 4 entirely easy to follow and naturally I recognise the force of Lord Rodgers reasoning.
For my part, however, I remain unpersuaded that section 45 modifies the law on reserved matters within the meaning of paragraph 2(1), given that (by virtue of paragraph 2(3)) paragraph 2(1) applies in relation to a rule of Scots criminal law only to the extent that the rule is special to a reserved matter (which I do not regard the unamended 6 months limits of the sheriffs summary jurisdiction to be).
Even, however, were I persuaded that section 45 is to be regarded as modifying the law on reserved matters within the meaning of paragraph 2, I would conclude here that paragraph 2 is then disapplied by paragraph 3 since such modification is to be seen merely as incidental to a provision being made (for reallocation of court business and the standardisation of the sheriffs summary sentencing powers) in relation to unreserved matters and has no greater effect on reserved matters than is necessary to give effect to such purpose.
Given that the Scottish Parliament is plainly intended to regulate the Scottish legal system I am disinclined to find a construction of Schedule 4 which would require the Scottish Parliament, when modifying that system, to invoke Westminsters help to do no more than dot the is and cross the ts of the necessary consequences.
I too, therefore, would dismiss these appeals.
LORD RODGER
Does an enactment of the Scottish Parliament relate to reserved matters? Does it modify a rule of Scots criminal law that is special to a reserved matter? These are the key questions in the present appeals.
The answers depend on the interpretation of section 29(2)(b) and (c) of the Scotland Act 1998 (the 1998 Act), along with paras 2 and 3 of Part I of Schedule 4 to the Act.
Viewed in isolation, para 2, in particular, can appear to use impenetrable language to erect an arbitrary restriction on the Parliaments powers.
Matters become clearer, however, when the provisions are seen in their setting in life.
A useful starting point is the situation before 1999.
Policy responsibility before devolution
Until devolution took effect, leaving aside the fluctuating position of Northern Ireland, the central government of the United Kingdom was carried on by a single executive and a single Parliament.
The executive was responsible for, and could determine, all areas of policy for the entire United Kingdom.
Similarly, Parliament could legislate to give effect to the chosen policy in all parts of the United Kingdom.
In practice, Parliament did not always insist on the law being uniform
throughout the United Kingdom.
To take only the most obvious example, Parliament did not intervene to impose uniformity on the private or criminal laws of England and Scotland.
Instead, when legislation was to apply in both jurisdictions, where necessary, it included provisions that were tailored to fit the underlying law of both systems.
So, for instance, the Rehabilitation of Offenders Act 1974 had to take account of differences in the two systems of criminal procedure.
Sometimes, even if Parliament was legislating for England and Wales only, for example, the legislation could not be effective unless some provisions were made to extend to Scotland and vice versa.
To take another obvious example, aspects of the legislation on detained patients in the Mental Health Act 1983 and the Mental Health (Scotland) Act 1984 had a cross border dimension and would have been unworkable if various provisions of the English Act had not extended to Scotland and various provisions of the Scottish Act had not extended to England.
When the legislation was being prepared, officials and, if necessary, ministers in the various departments, including the Scottish Office, would discuss the proposals and try to iron out any difficulties.
Even where there was no particular cross border dimension, legislation proposed by one department might have an impact on matters for which another department was responsible.
Proposed legislation on, say, education might have an impact on employment; legislation on care in the community might raise law and order questions; legislation on transport might affect the environment; legislation on planning might affect trade and industry.
And so on.
More particularly, to be effective, legislation on a matter for which one department had responsibility might require that a piece of legislation falling within another departments sphere of responsibility should be amended.
So, when a policy was being worked up and incorporated into a Bill, while one department would take the lead, very frequently officials and ministers from a number of departments would be involved.
Suppose, for instance, the Home Office and the Scottish Office had proposed legislation to adjust the jurisdiction of the courts by increasing the sentencing powers of summary courts in both England and Wales and in Scotland.
Suppose also that, in order to be effective, the reforming legislation would have had to modify the penalty provisions for offences in various Acts, such as the Road Traffic Offenders Act 1988 (the RTOA).
In that event, officials of the lead departments would have consulted officials and ministers from all the departments, including the Department of Transport, having responsibility for the Acts which it was proposed should be modified.
Sometimes the impact of the proposed legislation on a different area would be relatively insignificant perhaps involving little more than updating statutory references or bringing the language of existing legislation into conformity with the language of the proposed legislation.
In such cases the main task of the other departments might well be to help the lead department and the Bill team by identifying provisions that would require to be modified in this way.
But sometimes the impact would be more significant and would trench on issues of policy.
Then there could well be differences of opinion among the departments concerned as to the best way forward.
If officials could not resolve them, the disputed issues could be taken for decision to the appropriate cabinet committee and ultimately, if necessary, to the full cabinet or to the Prime Minister.
The result would be a Bill which made all the necessary amendments, whatever the subject matter of the legislation being amended and irrespective of the department which had responsibility for that subject.
Policy responsibility after devolution
In the 1998 Act and the corresponding Acts for Wales and Northern Ireland, Parliament devolved legislative and executive authority in varying degrees.
The powers of the Scottish Parliament are to be found in sections 28 and 29 of the 1998 Act.
Section 28(1) of the 1998 Act provides that, subject to section 29, the Scottish Parliament may make laws.
In terms of section 29(1), an Act of the Scottish Parliament is not law so far as any of its provisions is outside the legislative competence of the Parliament.
Under section 29(2) a provision is outside that competence in various circumstances in particular, if, (b), it relates to reserved matters or, (c), it is in breach of the restrictions in Schedule 4.
Leaving aside certain matters where powers are shared (section 56), it is immediately obvious that the overall scheme was to devolve power to the Scottish Executive and Scottish Parliament, but to except certain reserved matters, which are identified in Schedule 5 to the 1998 Act.
All other matters are devolved matters although that term is not used since the Act concentrates on identifying the matters lying outside the competence of the Scottish Parliament and Scottish Executive.
So far as these reserved matters are concerned, policy responsibility in respect of Scotland remains with the United Kingdom government and the United Kingdom Parliament retains the sole responsibility for legislating on them.
The purpose of a provision and its validity
It is convenient at this stage to notice that, under section 29(3) of the 1998 Act, the question whether a provision of an Act of the Scottish Parliament relates to a reserved matter and so is outside the competence of the Parliament under section 29(2)(b) is to be determined by reference to the purpose of the provision.
Sometimes the clearest indication of the purpose of a provision will be found in a report which gave rise to the legislation or in a report of one of the committees of the Parliament.
But very often the purpose of a provision will be clear from its context in the Act in question.
For example, the subject matter of the Carriage of Goods by Sea Act 1992 is a reserved matter: para 1 and Section E3 of Part II of Schedule 5 to the 1998 Act.
Obviously, therefore, if the Scottish Parliament purported to pass a Carriage of Goods by Sea (Scotland) Act with the sole purpose of repealing the 1992 Act in Scots law, its purpose would relate to a reserved matter and so its provisions would be outside the competence of the Parliament by virtue of section 29(2)(b).
In practice, such a clear example would be unlikely to get past the legal advisers to the Scottish Parliament.
In real life the problem is likely to arise in more complex situations.
But assume, for example, that the purpose of an Act is to increase the sentencing powers of the lower courts in Scotland so as to allow them to deal with more serious cases.
The purpose of the Act plainly relates to a devolved, rather than a reserved, matter.
So its provisions will not be outside the competence of the Scottish Parliament by reason of section 29(2)(b).
Does it follow that all of its provisions are automatically within the competence of the Scottish Parliament? By no means.
For example, any provision which was incompatible with rights under the European Convention on Human Rights or with Community law would be outside competence by reason of section 29(2)(d) even if that provision was designed to help achieve the purpose of increasing the sentencing powers of the lower courts in Scotland.
Similarly, any provision which was in breach of the restrictions in Schedule 4 to the 1998 Act would be outside competence again, even though the provision was designed to help achieve the purpose of increasing the sentencing powers of the lower courts in Scotland.
Quite simply, therefore, even if the purpose of an Act is within the competence of the Scottish Parliament in terms of section 29(2)(b) of the 1998 Act, the Parliament cannot achieve that purpose by enacting provisions which are beyond its competence for one of the reasons listed in the other paragraphs of that subsection.
As Lord Atkin put it in Gallagher v Lynn [1937] AC 863, 870, an Act may have a perfectly lawful object but may seek to achieve that object by invalid methods.
In other words, the fact that a provision may have a lawful (devolved) purpose does not validate the provision if, for some other reason, it is outside the competence of the Parliament.
So, in particular, the mere fact that the purpose of a provision is to increase the sentencing powers of the sheriff, sitting as a court of summary jurisdiction, will not validate it if the provision is outside the competence of the Parliament because it purports to modify a rule of Scots criminal law that is special to a reserved matter: section 29(2)(c) of, and para 2 of Part I of Schedule 4 to, the 1998 Act.
Section 104 orders
The fact that the powers of the Scottish Parliament are subject to these limitations means that there is now a stark contrast between the position in England and Scotland.
For England, one executive and one Parliament continue to have the necessary powers to determine policy in all subject areas and to put it into effect by legislation.
For Scotland, however, the necessary powers are divided between two executives and two legislatures.
Even though the legislative arrangements for Scotland have changed in this way, the nature of the problems to be tackled by legislation has not changed.
So, for example, some measures, like mental health legislation, which are devolved matters, still have a cross border dimension.
Similarly, proposed legislation in one field, which happens now to be devolved, may require substantial amendment to legislation in another field, which happens now to be reserved.
In these situations the Scottish Parliament will not have all the powers that are needed to make a fully effective reform.
So its legislation can take the matter only so far.
If it is to be fully effective, the legislation passed by the Scottish Parliament will require to be topped up by legislation of the United Kingdom Parliament dealing with any aspects which are beyond its competence.
The need to provide for such situations was foreseen by those who drafted the 1998 Act.
Section 104, which is designed to be used when they arise, is therefore a key element of the scheme for devolution.
It contains a tailor made mechanism for using the powers of the United Kingdom Parliament to supplement legislation of the Scottish Parliament, without the need for full scale legislation by Parliament: (1) Subordinate legislation may make such provision as the person making the legislation considers necessary or expedient in consequence of any provision made by or under any Act of the Scottish Parliament or made by legislation mentioned in subsection (2). (2) The legislation is subordinate legislation under an Act of Parliament made by a member of the Scottish Executive, a Scottish public authority with mixed functions or no reserved functions, or any other person (not being a Minister of the Crown) if the function of making the legislation is exercisable within devolved competence.
Of course, the Scottish Parliament and Scottish Executive cannot compel a Minister of the Crown to exercise the power under section 104.
The intention underlying section 104 and indeed the whole scheme of devolution is, however, that the redistribution of powers should not impair but improve the government of the United Kingdom as a whole.
It proceeds on the basis that both administrations can be expected to co operate appropriately.
In particular, it presupposes that the United Kingdom ministers and Parliament will not be indifferent to the effectiveness of legislation passed by the Scottish Parliament.
Not surprisingly, therefore, since devolution, ministers have made more than 40 orders under section 104.
Some of the section 104 orders have concerned matters with a cross border aspect.
When legislating for England and Wales, Parliament can, of course, still include any provisions which require to extend to Scotland in order to make the legislation effective though, doubtless, only after discussion with the Scottish Executive and their officials.
But, as already noted, it is outside the competence of the Scottish Parliament to make any provision that would form part of the law of England and Wales: section 29(1) and (2)(a) of the 1998 Act.
So the Scottish Parliament cannot make any changes to English law which may be needed in order to make its legislation on the devolved matter effective.
Section 104 comes to the rescue.
For instance, following the enactment of the Mental Health (Care and Treatment) (Scotland) Act 2003 by the Scottish Parliament, a Scotland Office minister used his power under section 104 of the 1998 Act to make the Mental Health (Care and Treatment) (Scotland) Act 2003 (Consequential Provisions) Order 2005 (No 2078; S 9), amending the law of, inter alia, England and Wales in order to facilitate the removal of detained patients from Scotland to England or Wales.
But section 104 may also be needed in cases where proposed changes in the law on one subject require changes in the law on another subject.
Given the large measure of devolution in matters such as justice, education and health, many of the subjects that are likely to be affected by legislation of the Scottish Parliament will fall within the sphere of responsibility of the Scottish Executive.
If the proposed amendments to existing legislation are uncontroversial, then officials can deal with them.
If there are disputes on significant matters of policy between, say, the education and criminal justice directorates, it will be for the Scottish Ministers and their officials to thrash them out and incorporate the agreed policy into legislation for the consideration of the Parliament.
Again, whatever the principal subject matter of an Act may be, it can be expected to include the necessary amendments to all the relevant legislation on other devolved matters.
After, as before, devolution, however, legislation on a subject which is now a reserved matter is liable to have an impact on a subject which is now devolved.
For example, legislation on asylum seekers (a reserved matter) might have an impact on the legislation relating to accommodation for homeless persons (a devolved matter).
Given the continuing power of Parliament to legislate for Scotland (section 28(7)), there would be no difficulty in incorporating all the necessary changes into the legislation on asylum seekers presumably, after the Home Office had discussed the proposals with the Scottish Executive, just as, formerly, the Home Office would have discussed them with the Scottish Office.
The converse situation is where the Scottish Executive and Parliament wish to legislate on a matter which has implications for what is now a reserved matter.
If, in the days before devolution, effective legislation could often only be prepared and introduced once policy issues in a number of discrete areas had been hammered out, the position must be the same after devolution.
Likewise, if different departments were the guardians of policy on different matters before devolution, the same must apply after devolution the difference being that the Scottish Ministers and their directorates are now responsible for policy on devolved matters, the United Kingdom government and its departments for policy on the other (reserved) matters.
Under section 54 of the 1998 Act, the competence of Scottish ministers is, of course, modelled on the competence of the Scottish Parliament.
Suppose, for instance, that the Scottish Executive wanted to introduce legislation changing the system of accommodation for homeless persons in Scotland, but the reform would involve modifying provisions in a (reserved) Act on asylum seekers.
If similar legislation had been proposed by the Scottish Office before devolution, the Scottish Office and the Home Office would have discussed the relevant policy issues.
Eventually, the government as a whole would have reached a view on them and this view would have been reflected in the resulting legislation if any.
Obviously, after devolution, exactly the same policy issues would present themselves.
By devolving power over Scottish housing policy to the Scottish Executive and the Scottish Parliament, Parliament cannot have intended to remove from the United Kingdom government the power to take all the necessary decisions on asylum matters.
So, in principle, the position after devolution must remain the same as before.
If the Home Office and the United Kingdom Parliament were content with
the proposed changes to the legislation on asylum seekers, there would be no difficulty: they could be made by order under section 104 of the 1998 Act.
One example of such an order dealing with a reserved matter is the Housing (Scotland) Act 2006 (Consequential Provisions) Order 2008 (No 1889), article 6 of which amends the list of disqualifying offices in Part 3 of Schedule 1 to the House of Commons Disqualification Act 1975.
Another example is more immediately relevant to the Criminal Proceedings etc (Reform) (Scotland) Act 2007 (the 2007 Act) which gives rise to these appeals.
The Criminal Proceedings etc (Reform) (Scotland) Act 2007 (Powers of District and JP Courts) Order 2007 (No 3480; S 7) repeals or amends provisions of the RTOA.
I return to this order briefly at para 151 below.
On the other hand, if agreement could not be reached and proposed Scottish housing legislation would involve changes to legislation on asylum seekers which the United Kingdom government regarded as unacceptable, it would have to be either dropped or modified.
This would not be to single out Scottish housing legislation exactly the same would apply to any similar proposal from the ministry with responsibility for housing in England.
The only difference is that, for England, the dispute would have to be settled by ministers and departments within the United Kingdom government, whereas, for Scotland, it would have to be settled between a minister and department in Westminster and a minister and directorate in Edinburgh or, ultimately, between the United Kingdom government and the Scottish Executive.
If, therefore, the Scottish Parliament persisted in legislating on the matter, despite the United Kingdom governments opposition, one would expect to find that the relevant provisions affecting asylum seekers would be outside its competence and so not law.
By no means all encroachments by the Scottish Parliament into the territory of reserved matters are going to be dramatic or unacceptable.
As already explained, legislation on a devolved matter is quite likely to entail some change in a reserved matter.
Section 29(2)(c) recognises this reality.
It proceeds on the basis that, even when the legislation of the Scottish Parliament does not relate to a reserved matter and so must relate to a devolved matter the legislative package, as a whole, may require to have some impact on the law on reserved matters, if it is to be effective.
Section 29(2)(c) and Schedule 4 are designed to show how far, in this respect, the Scottish Parliament can go by itself.
Consistently with the general structure of the Act, these provisions prescribe what modifications of the law on reserved matters lie outside the competence of the Scottish Parliament since they would truly be a matter for the consideration of the United Kingdom government and Parliament.
If a proposed reform includes aspects which fall outside the competence of the Scottish Parliament in this way, that does not mean that the reform cannot go ahead: if the United Kingdom government and Parliament are content, these aspects can be addressed by an appropriate order under section 104.
Incidental or consequential modifications
I shall have to look at paras 2 and 3 of Part I of Schedule 4 to the 1998 Act in more detail in due course, but it is convenient to notice one aspect at this stage.
As in pre devolution days, a piece of legislation on what is now a devolved matter may require essentially minor and technical modifications to the law on what are now reserved matters.
Obviously, the Scottish Parliament should be able to make these modifications for itself.
And para 3(1) of Part I of Schedule 4 makes it clear that it can provided that the modifications do not go further than is necessary.
Referring back to the restriction imposed by para 2, para 3(1) provides: Paragraph 2 does not apply to modifications which (a) are incidental to, or consequential on, provision made (whether by virtue of the Act in question or another enactment) which does not relate to reserved matters, and (b) do not have a greater effect on reserved matters than is necessary to give effect to the purpose of the provision.
The paragraph refers to modifications which are incidental to, or consequential on, provision made . which does not relate to reserved matters.
The adjectives suggest the kinds of relatively minor modifications which are often to be found in schedules, rather than cluttering up the body of a traditional United Kingdom statute.
The wording of a form to be used in making an application or carrying out a transaction is an example of the kind of incidental matter which is usually consigned to a schedule.
As mentioned already at para 72 above, typical consequential amendments are concerned to modernise the language of an existing provision or to update legislative references.
Amendments of this kind are also usually found in a schedule to an Act.
Precisely because they raise no separate issue of principle, amendments of these kinds can be safely stowed away in a schedule, which is unlikely to be debated in any detail, if at all.
If the legislature approves the main provisions, then it must equally approve these technical and mechanical changes which are needed to give effect to the main provisions.
Similarly, it is easy to see that a modification of that kind to the law on a reserved matter, following on from legislation on a devolved matter, would be unlikely to raise any issue of principle to which the relevant United Kingdom minister or Parliament would object.
So the Scottish Parliament can deal with it.
That is what para 3(1) provides.
In the unlikely event that a problem arose, the Secretary of State could make an order under section 35(1)(b) of the 1998 Act prohibiting the Presiding Officer from submitting the Bill for Royal Assent.
With that rather lengthy introduction, I can now turn to examine the particular problem which gives rise to these appeals.
The problem in these appeals
Put briefly, section 45 of the 2007 Act purports to provide inter alia that a person convicted on summary complaint of a contravention of section 103(1)(b) of the Road Traffic Act 1988 (the RTA) is liable to a maximum term of imprisonment of 12 months rather than of 6 months, as originally provided in section 33 of, and Part I of Schedule 2 to, the RTOA.
The effect of para 1 and Section E1 of Part II of Schedule 5 to the 1998 Act is that the RTOA is a reserved matter.
So the enactment that comprises section 33 of, and Part I of Schedule 2 to, that Act is the law on a reserved matter.
The appellants maintain that, to the extent that it purported to modify the maximum term of imprisonment on summary conviction laid down by the RTOA, section 45 was special to this reserved matter and so outside the competence of the Scottish Parliament by reason of section 29(2)(c) of, and para 2 of Part I of Schedule 4 to, the 1998 Act.
It is therefore not law.
It follows, they say, that the maximum term of imprisonment on summary conviction of a contravention of section 103(1)(b) of the RTA remains 6 months.
If so, the terms of imprisonment, of over 6 months, imposed on the appellants for their respective contraventions of section 103(1)(b) of the RTA, were incompetent and the bills of suspension must be passed and the sentences quashed.
The same point came before the criminal appeal court (Lord Nimmo Smith, Lord Eassie and Lord Wheatley) in Logan v Harrower 2008 SLT 1049.
The court held that section 45 of the 2007 Act was within the competence of the Parliament.
In the present cases the appeal court simply followed that decision and, without issuing any written judgment, refused to pass the bills of suspension.
Summary jurisdiction before the 2007 Act
Before looking in detail at the provisions of the 1998 Act, it is necessary to examine the position on summary jurisdiction before section 45 of the 2007 Act was brought into force on 10 December 2007.
Following the enactment of the Criminal Procedure (Scotland) Act 1995 (the 1995 Act), the only provision dealing with the summary jurisdiction and powers of the sheriff to impose a sentence of imprisonment was section 5 of that Act.
By section 5(1) the sheriff, sitting as a court of summary jurisdiction, was to continue to have all the jurisdiction and powers exercisable by him at the commencement of the Act.
Section 5(2) then provided that, without prejudice to any other or wider powers conferred by statute, on convicting any person of a common law offence, the sheriff was to have power, (d), to impose imprisonment, for any term not exceeding 3 months.
By subsection (3), in the case of a second or subsequent conviction of an offence inferring dishonest appropriation of property (or attempt) or of an offence inferring personal violence, the sheriff was to have power to impose a term of imprisonment not exceeding 6 months.
Since this was the only general provision dealing with the extent of the sheriffs summary powers of imprisonment, under the 1995 Act there was no general provision of any kind in Scottish criminal procedure which prescribed the maximum term of imprisonment which a sheriff, sitting as a court of summary jurisdiction, could impose where someone was convicted of a statutory offence.
The limit depended on what the legislature had provided for the particular offence.
So, if you wanted, for example, to know the maximum sentence of imprisonment available on a conviction, on summary complaint, under the Knives Act 1997 you would look at sections 1(5)(a) and 2(2)(a) of that Act.
Similarly, for a summary conviction of a contravention of section 103(1)(b) of the RTA, you would look in Part I of Schedule 2 to the RTOA.
Often you would find that the maximum penalty on summary conviction was 3 or 6 months.
But, even as long ago as 1871, section 7 of the Prevention of Crime Act permitted the sheriff to impose 12 months imprisonment on summary conviction of an offence against the Act.
And, if you looked at section 25 of, and Schedule 4 to, the Misuse of Drugs Act 1971 today, you would see that the maximum sentence on summary conviction of various offences is 12 months imprisonment.
In 2004 the Summary Justice Review Committee chaired by Sheriff Principal McInnes QC recommended that, in order to relieve pressure on the courts of solemn jurisdiction, the criminal jurisdiction of judges sitting summarily should be increased: they should be able to impose a maximum sentence of 12 months imprisonment or detention and a maximum fine of 20,000.
The first group of sections in Part 3 of the 2007 Act (sections 43 to 49) was designed to give effect to a slightly modified version of the Committees recommendation.
Sections 43 to 45 dealt with the recommendation on imprisonment for the sheriff court.
Section 46 dealt with the justice of the peace court, while sections 47 and 48 were designed to increase the maximum available fine to 10,000, rather than 20,000, as contemplated by the Committee.
Section 49 dealt with compensation orders.
The intention behind the relevant provisions of the 2007 Act therefore was that sheriffs sitting as a court of summary jurisdiction should be able to deal with more serious contraventions of the common law and statute law not that they should impose higher sentences for the same conduct.
The anticipated benefits of the reform were thought to outweigh the admitted risk that the effect of increasing the sentences which the summary courts could impose would be an undesirable upward drift in the level of sentences.
The appeal court has the necessary powers to check any such tendency in an appropriate case.
The reform as carried out by the 2007 Act
So far as imprisonment is concerned, the reform was effected by three separate provisions.
The first, section 43, dealt with the power of imprisonment for common law offences.
Most common law offences, such as assault, are triable either on summary complaint or on indictment.
For these cases the reform was effected simply by substituting 12 months for 3 months in section 5(2)(d) of the 1995 Act.
So now the maximum penalty for all common law offences is 12 months.
Section 5(3), being no longer needed, was repealed.
No common law offence falls within the area of reserved matters and so no issue as to legislative competence arises.
The second provision was in section 44, which deals with certain specified offences that can be tried only on summary complaint.
Again, the maximum term of imprisonment is increased to 12 months.
The reform was effected by amending the penalty provisions in the individual statutes creating the offences.
Since none of the offences falls within the area of reserved matters, again no issue as to legislative competence arises.
Section 45 completed the scheme by dealing with statutory offences which are triable either on indictment or on summary complaint (either way offences) and which are punishable on summary conviction with a maximum term of imprisonment of less than 12 months (subsection (6)).
Section 45(1) and (2) provide: (1) The maximum term of imprisonment to which a person is liable on summary conviction of a relevant offence is, by virtue of this subsection, 12 months. (2) Accordingly, the specification of a maximum period of imprisonment in every relevant penalty provision is, in relation to any relevant offence to which it applies, to be read subject to subsection (1).
By section 45(2) the specification of a maximum period of imprisonment in any relevant penalty provision in any Act passed before the 2007 Act is to be read subject to section 45(1).
In short, section 45 was intended to introduce a novel, general, provision for determining the maximum term which a sheriff, sitting as a court of summary jurisdiction, could impose by way of imprisonment in respect of either way statutory offences which had previously attracted a maximum sentence of less than 12 months imprisonment.
In all such cases the sheriff is now to be able to impose a maximum sentence of 12 months imprisonment.
In order to achieve its purpose, section 45 had to do two things.
First, it had to make provision for the maximum term of imprisonment to which a person is liable on summary conviction of a relevant offence to be 12 months.
That is what subsection (1) does.
But, by itself, that provision would not have worked or, at the very least, would have left the position unclear.
By the very terms of subsection (6)(b), section 45 applies only to offences where the statutory maximum term of imprisonment on summary complaint has already been fixed at less than 12 months.
In other words, if it is to work, section 45 must also, secondly, increase the previous maximum term of imprisonment for the offences in question when tried on summary complaint.
So the new rule in section 45(1) has to be made to prevail over, and to supersede, any penalty provision providing for a lower maximum term of imprisonment on summary conviction of any either way offence in any relevant enactment.
That is what subsection (2) is designed to do.
The present case shows subsection (2) in action.
Section 33 of the RTOA provides: (1) Where a person is convicted of an offence against a provision of the Traffic Acts specified in column 1 of Part I of Schedule 2 to this Act or regulations made under any such provision, the maximum punishment by way of fine or imprisonment which may be imposed on him is that shown in column 4 against the offence and (where appropriate) the circumstances or the mode of trial there specified. (2) Any reference in column 4 of that Part to a period of years or months is to be construed as a reference to a term of imprisonment of that duration. (6) (5) (b) Summarily, in Scotland. (c) On indictment, in Scotland. (7) (4) Punishment Disqualification Endorsement Penalty points The table below sets out the entry relating to contraventions of section 103(1)(b) of the RTA in Part I of Schedule 2 to the RTOA: (3) (2) (1) Provision General Mode of creating nature of prosecution offence offence Offences under the Road Traffic Act 1988 RTA Driving (a) Summarily, (a) 6 months Discretionary. Obligatory. 6 in England and or level 5 on section while 103(1)(b) disqualified. Wales. the standard scale or both. (b) 6 months or the statutory maximum or both. (c) 12 months or a fine or both.
Taking section 33 and the table together leaving the 2007 Act on one side on a summary conviction of a contravention of section 103(1)(b) of the RTA in Scotland, the maximum punishment by way of imprisonment which may be imposed on the offender is 6 months.
A contravention of section 103(1)(b) of the RTA is a relevant offence in terms of section 45(6) of the 2007 Act.
Similarly, section 33 of, and Part I of Schedule 2 to, the RTOA constitute a relevant penalty provision in terms of section 45(7) of the 2007 Act.
So, by virtue of section 45(2), the specification of a maximum period of imprisonment of 6 months on summary conviction in column 4 of Part I of Schedule 2 is to be read subject to section 45(1) of the 2007 Act.
In other words, the relevant entry in column 4 of the Schedule is to be read subject to the requirement that the maximum term of imprisonment on summary conviction of any relevant offence (including a contravention of section 103(1)(b) of the RTA) is to be 12 months.
Section 45(3) of the 2007 Act gives the Scottish Ministers power by order actually to amend the specification of a maximum term of imprisonment in a relevant penalty provision.
But the Court was told that the Ministers had not exercised that power in respect of Part I of Schedule 2 to the RTOA.
An order amending the figure in column 4 of the Schedule from 6 to 12 would make the position clearer for anyone consulting it.
But it would not change the substance.
If section 45 was within the competence of the Scottish Parliament in this regard, section 45(1) prevails over the Schedule and provides that the maximum term of imprisonment for someone convicted on summary complaint of a contravention of section 103(1)(b) of the RTA is 12 months.
Therefore, even if section 45 does not technically amend the figure in column 4 of the Schedule, it certainly purports to supersede, and thereby modify, the law comprising section 33 of the RTOA and the relevant entry in the Schedule.
Similarly, it purports to supersede and modify all the other comparable penalty provisions which prescribe the maximum term of imprisonment that can be imposed, on summary conviction, for either way offences in statutes dealing with reserved matters.
In short, section 45 purports to modify, inter alia, the maximum term of imprisonment to which someone is liable on summary conviction of a contravention of section 103(1)(b) of the RTA by increasing it from 6 months to 12 months.
The issue in the appeals is whether, in so far as it purports to make this modification of the provisions of the RTOA, section 45 of the 2007 Act is outside the competence of the Scottish Parliament in any of the ways specified in section 29(2) of the 1998 Act.
In fact, the parties are agreed that the only relevant limits are those in section 29(2)(b) and (c).
Therefore, the Court has to decide whether section 45 of the 2007 Act falls foul of the limits in section 29(2)(b) and (c) and para 2 of Part I of Schedule 4.
It is convenient to start with section 29(2)(b).
Is section 45 beyond the competence of the Scottish Parliament because it relates to a reserved matter?
In para 75 above, I have given a hypothetical example of an Act of the Scottish Parliament whose purpose would obviously relate to a reserved matter.
The Act would therefore be outside its competence.
Sometimes, of course, the purpose of a provision may be obscure.
And, even when it is not obscure, people may describe the purpose in slightly different ways.
But, having regard to its background and its context, I would identify the purpose of section 45 of the 2007 Act as being to adjust the jurisdiction of the Scottish courts by making 12 months the maximum term of imprisonment to which a person is liable on summary conviction of any either way statutory offence.
For the sake of brevity, I shall refer to this purpose as being to increase the sheriffs summary sentencing powers.
The jurisdiction and sentencing powers of the Scottish courts are not reserved matters.
So the purpose of the section can on no view be said to relate to reserved matters.
This is so, even though, in order to achieve its purpose, as part of the scheme for adjusting the jurisdiction of the Scottish courts, the section does undoubtedly purport to affect reserved matters, viz, by modifying the relevant penalty provision in the RTOA and, as the advocate depute accepted, by modifying penalty provisions for either way offences in any other statutes falling within the scope of the reserved matters in Schedule 5 to the 1998 Act.
An example would be the maximum term of imprisonment on summary conviction of a corrupt practice under section 168(1)(b) of the Representation of the People Act 1983.
Section 29(4) of the 1998 Act has also to be considered, however, since it contemplates the possibility that a provision whose purpose does not otherwise relate to a reserved matter may nevertheless be treated as relating to a reserved matter and so fall outside the competence of the Scottish Parliament.
Subsection (4) applies to a provision which makes modifications of Scots private law, or Scots criminal law, as it applies to reserved matters.
So the subsection would apply only if section 45 could be said to make a modification to Scots criminal law as it applies to reserved matters.
The advocate depute argued that subsection (4) did not apply to a case like the present because it was restricted to cases where the provision in question applied only to reserved matters.
Although no such qualification appears in the wording, he submitted that it was implicit since, if a provision applied to both reserved and devolved matters, its purpose would, inevitably, be to make the law apply consistently to reserved matters and otherwise.
I accept that, where a provision applies to both reserved and devolved matters, its effect may be to make the law apply consistently to both.
But its purpose may be different.
It is possible, for example, to conceive of a situation where the purpose of a provision was actually to make a modification in relation to the criminal law applying to a particular reserved matter, but the provision was made to apply, incidentally, to devolved matters.
Section 29(4) must be apt to catch a case of that kind.
That said, I am very doubtful whether subsection (4) applies in this case.
The words of the subsection obviously cover a case where some general provision of Scots private or criminal law applies to reserved matters.
For example, it would cover modifications to the general law on limitation as it applied to actions relating to some reserved matter; or modifications to, say, the general law of criminal procedure as it applied to an accuseds trial, on summary complaint or on indictment, for some offence constituting a reserved matter.
In such cases the provision modifies the law applying to the reserved matter; it does not modify the reserved matter itself.
But Parliament provides that, subject to the unless clause, it is none the less to be treated as relating to the reserved matter.
In the present case, by contrast, section 45 actually modifies the reserved matter or, rather, the law on the reserved matter viz, the penal provision in Part I of Schedule 2 to the RTOA.
In my view section 29(4) is not designed to cover a provision of this kind.
Therefore, as far as section 29(2)(b) is concerned, the position is regulated by section 29(3).
Even if this were considered to be too narrow a construction of section 29(4) of the 1998 Act, section 45 of the 2007 Act would still not fall to be treated as relating to the reserved matter of the RTOA.
A provision which makes modifications of Scots criminal law, as it applies to reserved matters, is to be treated as relating to reserved matters unless the purpose of the provision is to make the law apply consistently to reserved matters and otherwise.
The phrase, the purpose of the provision, must refer to the same purpose in both subsection (3) and subsection (4).
Part of the purpose of section 45 as described in para 112 above is indeed to make the law on the sheriffs power to imprison apply consistently to all either way statutory offences, whether constituting reserved matters in terms of Schedule 5 or not.
So section 45 is not to be treated as relating to a reserved matter under section 29(4).
In effect, the unless clause in section 29(4) allows the Scottish Parliament to make a general reform of Scottish private or criminal law, even though it modifies the law which applies to reserved matters.
Again, this is not surprising since the United Kingdom Parliaments legislation on particular topics has always been framed and operated against the background of the general private and criminal law as it applies in the various jurisdictions from time to time.
Equally, any reform of the general law has to take account of all the matters to which it actually applies.
In agreement with all of your Lordships, I am therefore satisfied that section 45 of the 2007 Act is not outside the competence of the Scottish Parliament by reason of relating to a reserved matter.
The question then arises: even though the purpose of section 45 is one that the Scottish Parliament can legitimately pursue, is the section nevertheless to some extent outside its competence because it is in breach of a restriction in para 2 of Part I of Schedule 4 to the 1998 Act? This question has to be addressed in stages.
Does section 45 modify the law on a reserved matter?
As already explained, under section 29(2)(c) of the 1998 Act, section 45 will be outside the competence of the Scottish Parliament so far as it breaches any of the restrictions in Schedule 4 to the 1998 Act.
The relevant paragraphs for present purposes are paras 2 and 3.
Paragraph 2 provides: (1) An Act of the Scottish Parliament cannot modify, or confer power by subordinate legislation to modify, the law on reserved matters. (2) In this paragraph, the law on reserved matters means (a) any enactment the subject matter of which is a reserved matter and which is comprised in an Act of Parliament or subordinate legislation under an Act of Parliament, and (b) any rule of law which is not contained in an enactment and the subject matter of which is a reserved matter, and in this sub paragraph Act of Parliament does not include this Act. (3) Sub paragraph (1) applies in relation to a rule of Scots private law or Scots criminal law (whether or not contained in an enactment) only to the extent that the rule in question is special to a reserved matter or the subject matter of the rule is (a) interest on sums due in respect of taxes or excise duties and refunds of such taxes or duties, or (b) the obligations, in relation to occupational or personal pension schemes, of the trustees or managers.
At first sight, para 2(1) appears to impose a very drastic limit on the competence of the Scottish Parliament: an Act of the Parliament cannot modify (which includes amending or repealing section 126(1)) the law on reserved matters.
If that were all that para 2 said, then it would prevent the Scottish Parliament from ever touching legislation on reserved matters even if the purpose of the provision related to a devolved matter.
In effect, it would make section 29(2)(b) superfluous.
But para 2(1) is actually qualified by para 2(3) and does not apply to modifications falling within the scope of para 3.
Section 29(3) and (4) focus on the provision which is being enacted and on its purpose.
By contrast, para 2 of Part I of Schedule 4 focuses on the rule of law that is being modified by the enactment and makes no mention whatever of the purpose of the modification.
Paragraph 2(2)(a) defines the law on reserved matters as any enactment the subject matter of which is a reserved matter and which is comprised in an Act of Parliament or subordinate legislation under an Act of Parliament.
As explained in para 95 above, the effect of para 1 and Section E1 of Part II of Schedule 5 to the 1998 Act is that the subject matter of the RTOA is a reserved matter.
So the enactment comprising section 33 of, and the relevant entry in Part I of Schedule 2 to, that Act is part of the law on this reserved matter.
This conclusion supports my earlier conclusion that these provisions are not provisions of Scots criminal law, as it applies to reserved matters in terms of section 29(4)(b).
A provision cannot be both the law on a reserved matter and the law as it applies to the self same reserved matter.
As I have already explained at para 110 above, section 45 of the 2007 Act undoubtedly purports to supersede and modify the enactment in section 33 of, and the relevant entry in Part I of Schedule 2 to, the RTOA.
Therefore the power of the Scottish Parliament to enact section 45 for reserved statutes depends on whether the restriction in para 2(1) of Part I of Schedule 4 to the 1998 Act applies to the modification made by section 45.
Does section 45 fall within para 3(1) of Part I of Schedule 4?
In Logan v Harrower 2008 SLT 1049, 1054, at para 24, giving the opinion of the appeal court, Lord Nimmo Smith said this: While we were not fully addressed on the extent to which recourse may legitimately be had to extra statutory materials as an aid to the construction of a statutory provision such as section 45, in order to discover whether its purpose is such as to bring it within the proviso to section 29(4), it appears to us to be legitimate to have regard to the passages in the Policy Memorandum and Explanatory Notes, quoted above, which contain express statements about its purpose.
From these it may be taken, as the advocate depute submitted, that the purpose and of the provision in section 45 of the 2007 Act is to increase generally the criminal sentencing powers of the sheriff, sitting as a court of summary jurisdiction, and that the provision, construed in this light, fulfils this purpose.
We agree with the advocate depute that, in the present case, the purpose of the provision is to make Scots criminal law with regard to penalties, procedure and jurisdiction in the sheriff court apply consistently to both common law offences and statutory offences.
As provided by paragraph 3 in Part I of Schedule 4 to the Scotland Act, the modifications made by section 45 of the 2007 Act to the reading of Part I of Schedule 2 to RTOA 1988 are merely incidental to, or consequential on, the more general aspect of the provision, which relates generally to the powers of the sheriff in relation to statutory offences, whatever their origin; and the modifications do not have a greater effect upon reserved matters than is necessary to give effect to the purpose of the provision in section 45.
Lord Nimmo Smith had already explained, at para 22 of the courts opinion, that the argument before the court had centred on section 29(4) of the 1998 Act.
And para 23 and the first three sentences of para 24 contain the reasoning by which the court concluded that section 45 of the 2007 Act was not to be treated as relating to reserved matters by reason of section 29(4).
In the final sentence of para 24 the appeal court moved on to consider whether, nevertheless, section 45 was in breach of the restriction in para 2(1) of Part I of Schedule 4 to the 1998 Act.
The court held that it was not on the view that the modifications made by section 45 of the 2007 Act to the reading of Part I of Schedule 2 to the RTOA are merely incidental to, or consequential on, the more general aspect of the provision, which relates generally to the powers of the sheriff in relation to statutory offences, whatever their origin.
The appeal court had in mind para 3(1) of Part I of Schedule 4 which is set out in para 91 above.
In other words, the court held that the modifications made by section 45 were incidental to, or consequential on, provision made which did not relate to reserved matters.
So the prohibition in para 2(1) did not apply to those modifications.
In my view the reasoning is unsound.
I have already indicated, at paras 91 93 above, that para 3(1) appears to be intended to cover the kinds of minor modifications which are obviously necessary to give effect to a piece of devolved legislation, but which raise no separate issue of principle.
Indeed the amendments to the RTOA replacing references to the district court with references to the justice of the peace court in para 7 of the Schedule to the 2007 Act are as good an example as any of minor consequential amendments to the law on reserved matters which para 3(1) of Part I of Schedule 4 to the 1998 Act permits the Scottish Parliament to make.
In fact, para 444 of the Explanatory Notes says that Paragraph 7 is consequential upon the establishment of JP courts and inserts references to that court in place of the district court.
But the modifications made by section 45 of the 2007 Act are of a completely different character and the draftsman clearly thought so, since they are effected not in the Schedule but by a separate section in the body of the Act.
Section 45 is one of three sections (the others being 43 and 44) which combine to alter the jurisdiction of the sheriff sitting as a court of summary jurisdiction.
None of the sections can be regarded as incidental to, or consequential on, another: they are all independent and deal with distinct aspects of the situation.
Needless to say, the relevant paragraphs of the Explanatory Notes do not suggest that section 45 is to be regarded as merely consequential or incidental.
Moreover, section 45 applies to any penalty provision in a relevant enactment which, by subsection (7), covers any Act passed before the 2007 Act.
These are the words which bring in, for example, the RTOA.
So the modifications of the law on reserved matters made by section 45 are effected by exactly the same words as the modifications of the law on devolved matters.
Both sets of modifications play an equivalent part in the overall scheme the modifications to reserved penalty provisions are of no less importance than the modifications to devolved penalty provisions.
Neither can be regarded as incidental to, or consequential on, the other.
Despite this, in Logan v Harrower the appeal court considered that the modifications to the law in Part I of Schedule 2 to the RTOA were merely incidental to, or consequential on, the more general aspect of the provision, which relates generally to the powers of the sheriff in relation to statutory offences, whatever their origin.
The reasoning is not easy to follow.
It is enough, however, to observe that neither section 45 nor any other provision in the 2007 Act actually has any separate more general aspect relating generally to the powers of the sheriff in relation to statutory offences.
So there is no separate devolved provision of that kind and, more particularly, no separate provision made which does not relate to reserved matters in relation to which the modifications to the RTOA made by section 45 could ever be regarded as incidental or consequential.
For these reasons, like Lord Hope, I am satisfied that para 3(1) of Part I of Schedule 4 to the 1998 Act does not have the effect of preventing para 2 from applying to section 45 of the 2007 Act.
It is therefore necessary to look at the qualification to para 2(1) which is to be found in para 2(3), and which the appeal court did not consider in Logan v Harrower because of their conclusion on para 3(1).
Is the rule of law in the RTOA special to a reserved matter under para 2(3)?
Unquestionably, section 33 of the RTOA and the relevant entry in Part I of Schedule 2 comprise a rule of Scots criminal law to the effect that, on a summary conviction of a contravention of section 103(1)(b) of the RTA, the maximum punishment by way of imprisonment which may be imposed on the offender is 6 months.
That is the rule which section 45 purports to modify.
Paragraph 2(1) of Part I of Schedule 4 prevents the Scottish Parliament from modifying a rule of Scots criminal law only to the extent that the rule is special to a reserved matter.
So the Court has to decide whether this rule is special to a reserved matter.
The advocate depute argued that the rule is not special to this reserved matter or indeed to any other reserved matter: the rule simply prescribes a maximum penalty of 6 months imprisonment for a conviction on summary complaint and that is a penalty that is found in many statutes, on both reserved and devolved matters.
To be special, the penalty would have to be one that was not prescribed for an infringement of any statute dealing with a devolved matter.
In theory, for instance, it would have applied if the unique penalty for an infringement of section 103(1)(b) of the RTA had been per impossibile say, whipping.
Then, because that was a penalty which was found only within the sphere of reserved matters, the Scottish Parliament would be prevented from modifying it.
It is fair, however, to say that the advocate depute was unable to point to any actual rule of Scottish criminal law or procedure to which, on his preferred construction, para 2(1) would apply.
Although I was initially attracted by the advocate deputes argument, it cannot be right, since, on his construction, the limit makes no sense whatever.
Why should the Scottish Parliaments power to modify an enactment whose subject matter is a reserved matter depend on whether there happens to be some comparable enactment dealing with a completely different devolved matter? More particularly, why should the Scottish Parliament be entitled to modify the maximum term of 6 months imprisonment on summary conviction of a contravention of section 103(1)(b) of the RTA in Part I of Schedule 2 to the RTOA simply because there happen to be a number of either way offences in the devolved area where the maximum term of imprisonment on summary conviction is also 6 months? Of course, the Parliament can alter the penalty provision for those offences because it is its business to make such amendments where appropriate.
But that is, of itself, no reason why it should become the Scottish Parliaments business for whatever purpose to modify the penalty provision which Parliament has deliberately chosen to enact for a specific offence for which Parliament retains responsibility.
The general point can be illustrated by reference to limitation periods.
As Mr Johnston QC points out, in Prescription and Limitation (1999), Appendix II, p 371, the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act) does not say that its provisions are not to apply where other enactments establish a prescriptive or limitation period for specific rights or remedies.
Nevertheless, as he goes on to say, on general principles of statutory construction, it can be assumed that an enactment of a special nature takes precedence over an enactment of a general nature: the 1973 Act is therefore displaced by more specific provision in other enactments.
Mr Johnston then gives a useful table listing a range of enactments which contain their own specific limitation periods.
By contrast, there are many statutes which provide for civil liability but do not contain any separate, specific, provision on limitation of proceedings brought for their breach.
For example, a breach of a duty under the Provision and Use of Work Equipment Regulations 1998 (No 2306) is actionable: section 42 of the Health and Safety Act 1974.
But there is no special rule of law on the limitation of proceedings for such a breach: the general rule of law in the 1973 Act applies.
Therefore, if the Scottish Parliament chose to alter that general rule in the 1973 Act, it could do so and the new period would apply to actions for breach of the Regulations.
This is so, even though Part I of the Health and Safety Act is a reserved matter: para 1 and Section H2 of Part II of Schedule 5 to the 1998 Act.
Many statutes do make special provision on limitation, however.
For example, under section 568(5) of the Companies Act 2006, an action for loss suffered because of a contravention of the pre emption provision in a companys articles must be brought within 2 years.
That is unquestionably the law on a reserved matter as defined in para 2(2) of Part I of Schedule 4 to the 1998 Act.
It is surely unthinkable that, even as part of an exercise to tidy up the Scots law of limitation of actions, the Scottish Parliament would be able to alter that period, which is special in the sense that, instead of relying on the general law of limitation, Parliament has deliberately selected 2 years as being appropriate for proceedings of that particular kind.
Leaving aside any other possible difficulties, if the Scottish Parliament could change the period, the result would be to introduce a difference between English and Scots law in an area where Parliament, legislating after devolution, must have considered that the same special rule should continue to apply in both jurisdictions.
Equally surely, the power of the Scottish Parliament to alter the period in section 568(5) of the Companies Act could not be affected because, if you rooted around in the statute book, you could find that, under section 5 of the Limitations of Actions and Costs Act 1842, the limitation period for actions brought under local and personal Acts (which would, usually at least, concern devolved matters) happened also to be 2 years.
Likewise, it would be irrational to conclude that, if the Scottish Parliament were to repeal or amend section 5 of the 1842 Act so that it no longer provided for a period of 2 years, this would somehow simultaneously remove a power which the Parliament had hitherto enjoyed to amend the limitation period under section 568(5) of the Companies Act 2006.
Quite simply, the two enactments have nothing to do with one another.
Conversely and reverting to penalties it would be absurd to hold that the Scottish Parliament could not modify a penalty provision so long as it was special to, in the sense of unique to, a reserved matter, but could give itself the power to do so by enacting the same penalty for a devolved matter.
Besides being absurd, this would offend against the principle that the limits on the competence of the Scottish Parliament are fixed by the 1998 Act and cannot be altered except by new legislation by Parliament or by Order in Council under section 30(2).
What, then, do the critical words mean? In my view, a statutory rule of law is special to a reserved matter if it has been specially, specifically, enacted to apply to the reserved matter in question as opposed to being a general rule of Scots private or criminal law which applies to, inter alia, a reserved matter.
Only general rules whose subject matter is listed in sub paras (a) to (e) of para 2(3), as amended, are protected from modification.
If interpreted in this way, para 2(3) means that para 2(1) prevents the Scottish Parliament from modifying any enactment which must be taken to reflect the conscious choice of Parliament to make special provision for the particular circumstances, rather than to rely on some general provision of Scottish private or criminal law.
Whether or not to modify such an enactment involves questions of policy which must be left for the consideration of the United Kingdom government and Parliament which are responsible for the matter.
On this interpretation, paras 2(1) and (3) place a comprehensible limit on what the Scottish Parliament can do.
I return to the particular problem in these appeals.
Suppose that, instead of increasing the maximum term of imprisonment available on summary conviction of a contravention of section 103(1)(b) of the RTA from 6 to 12 months, the Scottish Parliament had chosen to reduce it to 3 months perhaps as part of a general package of reductions in sentences designed to save money by cutting expenditure on criminal justice.
The purpose of the legislation would plainly relate to a devolved matter.
Nevertheless, the Scottish Parliament could not achieve that purpose by modifying the RTOA in that way because the maximum term of imprisonment on summary conviction of the offence had been specially chosen by Parliament.
The modification would therefore be outside the competence of the Scottish Parliament by virtue of para 2 of Part I of Schedule 4.
And it would rightly be outside competence because it would inevitably involve significant road traffic policy issues which, under the 1998 Act, it would be for the United Kingdom government (more particularly, the Secretary of State for Transport) and Parliament to evaluate.
For instance, would it be acceptable if the average sentence for driving while disqualified fell because prosecutors were reluctant to mount the more complicated and time consuming sheriff and jury trials necessary to attract a prison sentence of more than 3 months? Would the potential cost cutting advantages of the policy outweigh this possible disadvantage? Mutatis mutandis, the Secretary of State for Transport and the United Kingdom government as a whole would have to consider these issues if the Ministry of Justice made an equivalent proposal for England and Wales.
If they ultimately agreed, Parliament would be asked to legislate to amend the RTOA.
In the case of Scotland, if the United Kingdom government and Parliament were content, the necessary changes could be made by a section 104 order.
If a reduction in the maximum term of imprisonment on summary conviction would be outside the competence of the Scottish Parliament in this way, the same must apply to an increase.
For these reasons I conclude that the rule of Scots criminal law prescribing the maximum term of imprisonment for a summary conviction of a contravention of section 103(1)(b) of the RTA, in Part I of Schedule 2 to the RTOA, is special to that reserved matter, in the sense that Parliament has chosen it specifically for that offence.
So, by virtue of para 2(1) of Part I of Schedule 4 to the 1998 Act, the Scottish Parliament has no power to modify it.
A majority of your Lordships have reached the opposite view.
At para 34 of his judgment, Lord Hope accepts that, when considering para 2 of Part I of Schedule 4, the starting point is identifying the rule of Scots criminal law that is being modified.
Then one must ask whether that rule is special to a reserved matter.
Naturally, I agree.
Lord Hope takes the view that the purpose of the enactment may be referred to in order to identify the rule of law that is being modified.
I see no room for that approach in this case.
Here, the purpose of the enactment is clear and undisputed: to increase the sheriffs summary sentencing powers.
If, however, you want to know which rules of Scottish criminal law the enactment is modifying in order to achieve that purpose, you simply have to look at the perfectly clear terms of section 45 and apply them to the penal provisions in question.
I agree with Lord Hope when he says, at paras 35 and 37, that the rule of Scots law as to the maximum term of imprisonment that can be imposed i e the maximum period of 12 months on indictment, set out in the relevant part of column 4 of the Schedule falls to be treated as a rule that is special to a reserved matter.
I have explained my reasons for taking that view.
These cannot, of course, be Lord Hopes reasons.
But he gives no explanation for his view beyond the assertion that it plainly, is a rule which is special to the Road Traffic Acts and it is a reserved matter.
In para 39 Lord Hope considers that it would be to carry the process of analysis too far to say that the Schedule contains two maximum sentences, one for summary proceedings and the other for proceedings on indictment.
But that is precisely what Parliament does say in section 33(1) of the RTOA read together with the relevant entry in the Schedule (referring to the maximum punishment by way of imprisonment and giving different figures depending on the mode of trial).
Lord Hope also thinks that it would be carrying the process of analysis too far to say that both of these maximum sentences are special.
Apparently this is because such a decision depends on an exercise of judgment in which the purpose of the provision (here, section 45) may be the best guide.
But, as the cross headings show, para 2 of Part I of Schedule 4 is designed to protect the law on reserved matters from modification.
It is therefore necessary to identify which rules of Scots criminal law are to be regarded as special to a reserved matter in terms of para 2(3) and so protected from modification.
Since, ex hypothesi, these rules cannot be modified, they cannot be identified by reference to the purpose of a provision which purports to modify them.
In the end, therefore, all we know is that, for some unstated reason, the maximum sentence which can be imposed on conviction of a contravention of section 103(1)(b) of the RTA in a prosecution on indictment is a rule which is special to the Road Traffic Acts, but the maximum sentence which can be imposed for the same offence in a summary prosecution is not.
In para 59 of his judgment Lord Walker identifies what the relevant rule of Scots criminal law to be modified is not: it is not that driving while disqualified is a criminal offence (agreed), nor that it is a criminal offence punishable by imprisonment (agreed), nor that the maximum term of imprisonment is 12 months (also agreed, since, again, this must be a reference to the maximum term of imprisonment in a prosecution on indictment).
The inference seems to be that these rules might indeed be special to a reserved matter and beyond the reach of the Scottish Parliament.
As Lord Walker says, however, all these rules have been left untouched.
You then eagerly wait to hear about the rule that has not been left untouched: that the maximum term of imprisonment is 6 months in a summary prosecution.
But you wait in vain.
Instead, the rule to be modified turns out to be whether (and if so to what degree) the option of summary trial before the sheriff should reduce the maximum sentence that can be passed.
With great respect, that does not really look much like a rule of Scots criminal law.
But, whatever the description, it is actually the product of the two specific rules of Scots criminal law as to the maximum term of imprisonment for a contravention of section 103(1)(b) of the RTA in summary and indictment proceedings respectively.
That product can itself be modified only by modifying either or both of these specific rules.
By enacting section 45, the Scottish Parliament purported to modify the rule that the maximum term of imprisonment for this offence in summary proceedings is 6 months.
The unavoidable question is whether that rule is special to a reserved matter in terms of para 2(3) of Part I of Schedule 4 to the 1998 Act.
But that question is neither posed nor answered.
Having bowed politely in the general direction of the argument, Lord Brown rests his conclusion on simple assertion.
Until now, judges, lawyers and law students have had to try to work out what Parliament meant by a rule of Scots criminal law that is special to a reserved matter.
That is, on any view, a difficult enough problem.
Now, however, they must also try to work out what the Supreme Court means by these words.
It is a new and intriguing mystery.
Conclusion
In my view, so far as it relates to the penalty provision in the RTOA relating to contraventions of section 103(1)(b) of the RTA, section 45 was outside the competence of the Scottish Parliament.
There was, of course, nothing to prevent the Scottish Parliament from increasing the maximum term of imprisonment which a sheriff, sitting as a court of summary jurisdiction, could impose.
That is what section 45(1) does and, by itself, the provision is unobjectionable since it merely deals with the jurisdiction of the sheriff.
But any increase in jurisdiction brought about by section 45(1) would remain subject to all the penalty provisions in statutes which stipulate a lower maximum term of imprisonment on summary conviction.
So subsection (2) was introduced in order to modify all those provisions.
Modification of penal provisions in statutes falling within the devolved sphere causes no difficulty.
But, for the reasons I have explained, modifying a specific penal provision in a statute within the reserved area is outside competence essentially, because it involves making a significant change to law which Parliament has decided is to be its own responsibility.
Of course, it is true that the purpose of section 45 is to increase the sheriffs summary sentencing powers.
That is why section 45 does not relate to reserved matters and so is not beyond the competence of the Scottish Parliament by virtue of section 29(2)(b).
But a purpose of increasing the summary sentencing powers of sheriffs or other lower court judges is not a passport that entitles the Scottish Parliament to disregard the prohibitions in the other paragraphs of section 29(2) and to sweep aside any provision of the RTOA which stands in its way.
The competent end does not justify the use of means which are beyond competence.
If evidence to support that simple proposition were needed, it is to be found in the Criminal Proceedings etc (Reform) (Scotland) Act 2007 (Powers of District and JP Courts) Order 2007, which was made under section 104 of the 1998 Act shortly before the 2007 Act came into force.
The order was not mentioned by counsel on either side.
Its purpose was, first, to repeal the provisions of the RTOA which prevented the district court (and its successor, the justice of the peace court) from imposing the penalty of disqualification for traffic offences, and then to amend section 34 so as to include the district court (and, hence, the justice of the peace court) among the courts with the power to impose that penalty for such offences.
Even though these changes were clearly part of the overall scheme in the 2007 Act, to allow the lower courts to hear more serious cases by increasing their sentencing powers, it was recognised that the section 104 order was needed to carry out this particular aspect of the scheme.
By contrast, the minor consequential amendment to section 248C(1) of the 1995 Act, relating to the disqualification power for other offences, was made by section 80 of, and para 26 of the Schedule to, the 2007 Act.
In order to achieve another part of the scheme to adjust the jurisdiction of the Scottish courts by increasing the sentencing powers of the lower courts, section 45 of the 2007 Act purports to modify, inter alia, the enactment relating to contraventions of section 103(1)(b) of the RTA in Part I of Schedule 2 to the (reserved) RTOA.
As a result, the maximum term of imprisonment that can be imposed for that offence by a court of summary jurisdiction in Scotland is intended to be twice what can be imposed by the equivalent court in England.
Of course, it is not essential that the two jurisdictions should march exactly in step on this matter as is plain from the availability of indictment proceedings with a maximum sentence of 12 months imprisonment in Scotland, but not in England.
But that is a disparity which Parliament chose to introduce.
Whether a further disparity between the jurisdictions should indeed be introduced is precisely the kind of issue like the issue as to whether the district court or justice of the peace court, rather than just the sheriff court, should have power to disqualify for road traffic offences which the 1998 Act intends that Parliament should decide.
This need cause no difficulty for the Scottish Executives scheme to adjust the jurisdiction of the Scottish courts by increasing the sentencing powers of sheriffs in summary cases if the United Kingdom government and Parliament are content that the maximum available term of imprisonment for this offence on summary conviction should be increased in this way.
Provided the draft is approved by both Houses of Parliament, the appropriate order can be made under section 104 of the 1998 Act: sections 114 and 115 and paras 2 and 3 of Schedule 7.
This is indeed precisely the kind of situation for which section 104 was designed.
Applying section 101 of the 1998 Act, I would therefore hold that the definition of relevant penalty provision in section 45(7) of the Criminal Proceedings etc (Reform) (Scotland) Act 2007 does not include a provision of a relevant enactment or instrument which is special to a reserved matter within the meaning of para 2(3) of Part I of Schedule 4 to the Scotland Act 1998.
It follows that section 45 does not modify the maximum term of imprisonment of 6 months on summary conviction of a contravention of section 103(1)(b) of the Road Traffic Act 1988 in column 4 of Part I of Schedule 2 to the Road Traffic Offenders Act 1988.
I would accordingly allow the appeals, pass the bills of suspension, quash the sentence imposed by the sheriff court in each case for the contravention of section 103(1)(b) of the Road Traffic Act 1988 and remit to the appeal court to proceed as accords.
LORD KERR
The legislative competence of the Scottish Parliament is self evidently a subject of fundamental importance.
As the appeals in these cases amply demonstrate, however, it is impossible to devise a comprehensive charter which, for every conceivable situation, infallibly prescribes the limits of that legislatures enacting power.
This, it seems to me, is the inevitable consequence of the transfer by the United Kingdom government of some or even many powers to a devolved administration while retaining or, as it is more usually put, reserving, certain other matters to Parliament in Westminster.
Whether a particular Act of the Scottish Parliament falls within its legislative competence will, for the most part therefore, depend on a consideration of the particular provisions of the enactment in question.
The quest will usually begin with section 29 of the Scotland Act 1998.
It stipulates (in subsection (1)) that any provision of an Act of the Scottish Parliament is not law so far as it is outside the legislative competence of the Parliament.
Subsection (2) (b) states that a provision is outside the competence of the Scottish Parliament if it relates to reserved matters.
The issue as to whether a provision does so relate is to be determined in accordance with subsection (3) which, so far as is material, provides: the question whether a provision of an Act of the Scottish Parliament relates to a reserved matter is to be determined, subject to subsection (4), by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances.
Subsection (3) has a number of component parts, each of which deserves careful consideration.
The first is that which specifies that it is subject to subsection (4).
This latter subsection (to which I shall turn presently) is a deeming provision designed to expand the category of cases in which a change in the law is to be considered to relate to reserved matters because it modifies Scots private or criminal law as it applies to reserved matters.
The need to enlarge the group in this way appears to me to clearly indicate that the construction to be placed on the expression relates to reserved matters must be suitably restrained.
If, in every instance where a provision of the Scottish Parliament touched on a reserved matter, it was to be considered to relate to a reserved matter, subsection (4) would not be needed.
The phrase needs a more careful and restricted application, therefore.
Guidance as to the extent of the restriction is provided by the next component part of section 29 (3).
The resolution of the question whether a particular provision relates to a reserved matter is to be determined by reference to the purpose of the provision.
One is immediately thereby drawn to an examination of the objective of the legislation and of the particular provision within it.
Before dealing with the result of that examination, it is useful to note the next component part of subsection (3).
It is to the effect that the determination (by reference to its purpose) whether an Act of the Scottish Parliament relates to a reserved matter is to be conducted having regard to (among other things) its effect in all the circumstances.
It seems to me obvious that the way in which the subsection is structured signifies that the effect of the provision is subordinate to its purpose in the inquiry as to whether it relates to a reserved matter.
Indeed, the assessment of the effect of the provision is directly linked to the search for its purpose.
This is unsurprising.
As Lord Brown pointed out in the course of argument, one will customarily expect that the purpose of a particular provision is to bring about a desired effect.
The other things, apart from the effect of the provision, which are to be taken into account in ascertaining its purpose are not specified in subsection (3).
Mr Brown on behalf of the appellant, Mr Miller, accepted (sensibly and correctly, in my view) that these would include statements by those responsible for the legislation which purported to identify the reasons for its enactment.
The genesis of the legislation under challenge here is the report of the Committee appointed in November 2001 to review summary justice in Scotland under the chairmanship of Sheriff Principal John McInnes QC.
The formal remit of the Committee was stated to be: To review the provision of summary justice in Scotland, including the structures and procedures of the sheriff courts and district courts as they relate to summary business and the inter relation between the two levels of court, and to make recommendations for the more efficient and effective delivery of summary justice in Scotland.
In paragraph 9 of its summary of recommendations the Committee recorded its proposal that the criminal jurisdiction for judges in summary cases should be a maximum 12 months detention or imprisonment and a 20,000 fine.
The reasons for this particular recommendation are discussed throughout the report.
In paragraph 7.72 on page 78 at paragraph (iv) it is explained that the view of the majority of the Committee was that there was a need to relieve pressure on the higher courts.
This required the lower courts to take on more serious cases.
Consequently, some increase in sentencing powers for the judges in those courts was required.
The Committee recognised that recommending an increase in the sentencing powers of the courts of summary jurisdiction could give rise to what is described in the report as sentence drift, that is a tendency to increase the normal sentencing range because of the availability of the increase in the statutory maxima.
It made clear its express disavowal of any intention to bring about sentence drift in paragraph 7.89 of the report where the following appears: In proposing an increase in sentencing powers, we are clear that we do not intend any uplift of the going rate for all offences, but rather we wish to extend the range of offences that can appropriately be dealt with in the summary courts.
The Ministerial response to the McInnes recommendations was contained in a report entitled, Smarter Justice, Safer Communities Summary Justice Reform published in March 2005.
In paragraph 4.10 the Scottish Executive signalled its acceptance of the proposal that there be an increase in the sentencing powers of a sheriff sitting without a jury in summary proceedings, stating that this form of proceeding was generally simpler and faster than trials in a solemn court.
The report also acknowledged the concern that there might be upward sentence drift but recorded the Committees finding that there was no evidence that this was linked to an increase of sentencing powers in summary proceedings (para 4.51).
The Bill which was to give effect to the recommendations of the McInnes Committee (among other matters), the Criminal Proceedings etc. (Reform) (Scotland) Bill, was introduced to the Scottish Parliament on 27 February 2006.
Clause 35, which became section 45 of the enacted legislation, dealt with certain statutory offences (including driving whilst disqualified) and provided for a new maximum term of imprisonment of twelve months to which a person summarily convicted of such an offence would be liable.
The Bill was considered by the Justice 1 Committee of the Scottish Parliament on 19 April 2006.
In answer to a question from a member of the Justice Committee concerning the possibility of an increase in the prison population because of the enlarged sentencing powers of the sheriff courts in summary proceedings, Noel Rehfisch of the Scottish Executive Justice Department said this, at Scottish Parliament Official Report, cols 2838 2839: it is clear that the intention of the changes is not to be more punitive in respect of any particular offence.
For example, for any statutory offence that can be tried only summarily at present, the sentencing limit will not change.
The increase to 12 months is about providing headroom in the summary system to deal with slightly more serious cases that, in the view of the McInnes Committee which ministers accepted could relevantly, competently and capably be dealt with in the sheriff summary court.
On two occasions in recent years there have been increases in the maximum sentencing level in the sheriff solemn courts.
The same sheriffs, albeit with a jury, are responsible for determining sentences in those cases.
To date, there is no evidence that those increases have led to what might popularly be described as sentence drift.
We are confident that the judiciary will continue to consider individual cases on their merits.
The measures are about having the appropriate level of business in certain sectors of the system.
These comments were reflected in the 10th report of the Justice 1 Committee published on 5 July 2006.
At paragraph 135 of the report the following appears: In oral evidence Executive officials stated that these provisions are about seeking some form of business redistribution to ensure that every level of the system deals with the business that it ought to deal with and managing that as effectively as possible.
Indeed, in the Policy Memorandum [containing the Executives comments on the provisions of the Bill], the Executive refers to its policy of creating a flexible court capacity to ensure that cases can be dealt with quickly and at the appropriate level. and at paragraph 136: The Executives expectation is that this redistribution of cases would represent a downward shift of around 500 to 550 cases per year from sheriff and jury to sheriff summary procedure.
The Executive has also stated that the provisions in the Bill are not designed to be more punitive in relation to any particular offences.
The Scottish Prison Service referred in oral evidence to its view that it does not expect the Bill to have a significant impact on the prison population.
It appears to me from all this material that the purpose of section 45 of the 2007 Act is unmistakably clear.
As the advocate depute submitted, it is to effect a reallocation of business within the court structure.
The means by which this is achieved is an increase in the sentencing powers available to sheriffs sitting in their summary jurisdiction.
The greater maximum penalty is not an end in itself nor is it intended that that the going rate for relevant offences should be increased.
This is merely the mechanism by which the quite different purpose of providing for a more expeditious dispatch of business can be achieved.
This conclusion is reinforced by the consideration that defendants charged with relevant offences are not exposed to a greater penalty in the summary proceedings than they formerly faced if prosecuted for the same offences on indictment.
In this context, I should say that I consider that the analogy which the appellants sought to draw with the decision of the Divisional Court in Northern Ireland in the case of Reg (Hume) v Londonderry Justices [1972] N. I. 91 is misconceived.
In that case the Parliament of Northern Ireland, in exercise of its powers under section 4 of the Government of Ireland Act 1920 to make laws for the peace, order and good government of Northern Ireland, had purported (by a regulation made in a statutory rule and order by the Minister of Home Affairs) to authorise certain members of Her Majestys forces to require an assembly of persons to disperse if a breach of the peace was apprehended.
The Divisional Court held that the regulation was made in breach of section 4 (3) of the 1920 Act which forbade the making of laws by the Northern Ireland Parliament in respect of Her Majestys forces.
It had been argued on behalf of the respondent that the pith and substance of the regulation was the peace, order and good government of Northern Ireland and that the conferring of powers on members of the armed forces was merely incidental.
This argument was rejected, Lowry LCJ observing (at page 111) that both the object and the method of achieving it must be valid.
Since the method in that case had been expressly forbidden, the regulation could not be rescued from its invalidity because it was for a permitted object.
By contrast, in the present case the method (enlargement of the sentencing powers in sheriff summary proceedings) of achieving the object (the more efficient and expeditious prosecution of offences) is not expressly forbidden.
For these reasons, and for the reasons more fully given by Lord Hope and Lord Rodger, I am therefore satisfied that section 45 of the Criminal Proceedings etc (Reform) (Scotland) Act 2007 does not relate to reserved matters within the meaning to be ascribed to that condition in section 29 (2) (b) of the Scotland Act 1998.
I turn to briefly consider section 29 (4).
It provides: (4) A provision which (a) would otherwise not relate to reserved matters, but (b) makes modifications of Scots private law, or Scots criminal law, as it applies to reserved matters, is to be treated as relating to reserved matters unless the purpose of the provision is to make the law in question apply consistently to reserved matters and otherwise.
As I have already observed, this is a deeming provision which expands the category of cases in which a change in the law is to be considered to relate to reserved matters, although not so relating for the purposes of section 29 (3).
Modifications of Scots private or criminal law are to be treated as relating to reserved matters subject to two important qualifications.
The first of these is that such modifications are confined to the law as it applies to reserved matters.
The advocate depute argued that section 45 of the 2007 Act modified Scots criminal law generally and on that account could not be said to apply solely to reserved matters.
It appears to me, however, that this first qualification is not designed to exclude from the ambit of section 29 (4) modifications that relate to both reserved and devolved matters.
It was suggested in argument that the purpose of the provision was to prevent the Scottish legislature from targeting reserved matters.
This may well be correct but that objective is likely to be severely curtailed if a measure of the Scottish Parliament applying to reserved and devolved measures which were unrelated to each other was exempt from the reach of section 29 (4) and it appears to me that this must be the logical conclusion of the advocate deputes argument.
A final determination of this issue is not, in my opinion, strictly necessary, however, because it is quite clear that the impugned legislation comes squarely within the second qualification in section 29 (4).
A provision, the purpose of which is to make the law apply consistently to reserved matters and otherwise, is not caught by the subsection.
It is unquestionably clear that section 45 of the 2007 Act has that precise purpose and for that reason it does not come within section 29 (4).
The final and, to my mind, most troubling issue arises from section 29 (2) (c) of the 1998 Act.
It states that a provision is outside the competence of the Scottish Parliament if it is in breach of the restrictions in Schedule 4 to the Act.
Paragraph 2 of that Schedule contains the following material provisions: (1) An Act of the Scottish Parliament cannot modify, or confer power by subordinate legislation to modify, the law on reserved matters. (2) In this paragraph, the law on reserved matters means (a) any enactment the subject matter of which is a reserved matter and which is comprised in an Act of Parliament or subordinate legislation under an Act of Parliament, and (b) any rule of law which is not contained in an enactment and the subject matter of which is a reserved matter, and in this sub paragraph Act of Parliament does not include this Act. (3) Sub paragraph (1) applies in relation to a rule of Scots private law or Scots criminal law (whether or not contained in an enactment) only to the extent that the rule in question is special to a reserved matter .
Section 45 of the 2007 Act self evidently relates to a rule of Scottish criminal law.
Is the rule special to a reserved matter? Lord Hope has concluded that the rule is not special to a reserved matter because it does not increase the penalty that can be imposed in respect of the offence but has merely changed the procedural route by which the enlarged penalty can be imposed.
It is concerned with a rule of procedure that applies generally to prosecutions for offences in the sheriff court.
On this analysis, section 45 is not to be regarded as directed to a rule which is special to a reserved matter.
By contrast, Lord Rodger considers that a statutory rule is special to a reserved matter if it has been enacted in order to apply specifically to the rule in question.
I have not found it easy to reach a view as to which of these competing and persuasively argued positions is to be preferred.
It is clear that paragraph 2 (3) contemplates an ambit or scope of application for a particular rule beyond its possible impact on reserved matters.
It is only on the extent to which the application of the rule is special to reserved matters that the denial of legislative competence is engaged.
In this context, special to may be regarded as connoting having a specific effect on reserved matters.
Where an act of the Scottish Parliament seeks to modify a rule of Scots law which has an effect on reserved matters that act will be outside the legislative competence of the Scottish Parliament.
But where the rule of Scots law being modified is not special to reserved matters, Parliaments legislative power remains intact.
Viewing the effect of the provision in this way, I have concluded that where an act of the Scottish Parliament modifies a statutory rule which has a specific effect on a reserved matter it comes within the prohibition contained in paragraph 2 (1) of Schedule 4 to the 1998 Act.
I therefore agree with Lord Rodger that section 45 is caught by that paragraph.
The question then arises whether the section can be saved by recourse to paragraph 3 of Schedule 4 to the 1998 Act which provides: (1) Paragraph 2 does not apply to modifications which are incidental to, or consequential on, provision made (whether by virtue of the Act in question or another enactment) which does not relate to reserved matters, and do not have greater effect on reserved matters than is necessary to give effect to the purpose of the provision.
Both Lord Hope and Lord Rodger have concluded that a statutory provision that alters the sentencing power of the sheriff court sitting in its summary jurisdiction cannot be regarded as coming within this provision.
Although I was initially attracted by the notion that the increase in sentencing powers was incidental to a provision being made for the reallocation of court business, I have come to the view that this cannot be right.
The increase in sentencing powers is the provision concerned.
It is not incidental to another permissible statutory rule.
It cannot be saved by paragraph 3, therefore.
In the result, I agree with Lord Rodger that this appeal should be allowed.
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As originally enacted, s.33 and Part 1 of Schedule 2 to the Road Traffic Offenders Act 1988 (the RTOA) provided that the maximum sentence that a Sheriff sitting summarily could impose in respect of the offence of driving while disqualified (s.103(1)(b) of the Road Traffic Act 1988 (the RTA)) was six months imprisonment or the statutory maximum fine or both.
If the offence was prosecuted on indictment, the maximum sentence was 12 months imprisonment or a fine or both.
Following a recommendation by a committee appointed to review the provision of summary justice in Scotland that the criminal jurisdiction of judges sitting summarily should be increased to a maximum of 12 months, the Criminal Proceedings etc (Reform)(Scotland) Act 2007 (the 2007 Act) was enacted by the Scottish Parliament.
S.45 of that Act increased the maximum sentence that sheriffs sitting summarily could impose for the offence of driving while disqualified to 12 months imprisonment.
On 17 December 2007 and 14 May 2008, respectively, in summary proceedings Sean Martin and Ross Miller were each sentenced by Sheriffs to periods in excess of six months imprisonment for driving while disqualified contrary to s.103(1)(b) of the RTA.
They both sought to challenge their sentences on the basis that amending the relevant provisions of the 2007 Act were outside the legislative competence of the Scottish Parliament.
The High Court of Justiciary (the HCJ) dismissed the appeals, holding that the increase in the sentencing power of Sheriffs sitting summarily by s.45 of the 2007 Act was within the Scottish Parliaments legislative competence.
The HCJ gave the Appellants permission to appeal to the Supreme Court.
The Supreme Court, by a majority of three to two (Lord Rodger and Lord Kerr dissenting), dismisses the appeals.
The Court holds that the provision in question was within the Scottish Parliaments legislative competence.
Lord Hope delivered the leading judgment on behalf of the majority.
Majority Judgments The answer to the question raised by this case is to be found by applying the rules laid down in s 29 and Part 1 of Schedule 4 the Scotland Act 1998 which determine whether a provision of an Act is
outside the Scottish Parliaments legislative competence.
Three questions arise in this case: (1) whether the purpose of s.45 was to modify Scots criminal law as defined in s.126(5) of the Scotland Act; (2) if so, whether its purpose was to make the law apply consistently to reserved matters and otherwise; and (3) if (1) and (2) are answered in the affirmative, whether the rule that s.45 modified was special to a reserved matter within the meaning of para 2(3) of Schedule 4 [para [22]].
The purpose of s.45 of the Criminal Proceedings etc (Reform)(Scotland) 2007 Act The available material conclusively demonstrates that the purpose of s.45 was to contribute to the reform of summary justice by reducing pressure on the higher courts.
The jurisdiction of a Sheriff is defined by the penalties which he can impose and his powers in this respect are quintessentially matter of Scots criminal law.
S.45 was directed to a rule of Scots criminal law, so it does not relate to a reserved matter within the meaning of s.29(2)(b) of the Scotland Act 1998 [para [31]].
Was s.46 concerned to ensure that law applied consistently between reserved and non reserved matters? S.45 is one of a group of related provisions contained in the 2007 Act increasing the summary sentencing powers of Sheriffs in respect of a number of common law and statutory offences.
If the 2007 Act had increased the sentencing power in respect of common law but not statutory offences the reform would have been incomplete and confusing.
This problem would have been exacerbated if the reform had attempted to distinguish between statutory offences related to reserved matters and those which did not.
The purpose of s.45 was to ensure that the law relating to the sentencing powers of Sheriffs was consistent as between offences concerning reserved matters and otherwise.
Consequently, s.45 is not related to a reserved matter for the purpose of s.29(4) of the Scotland Act 1998 [paras [32] [33]].
Is the sentencing jurisdiction of a Sheriff in relation to road traffic offences special to the Road Traffic Offenders Act 1988 and the Road Traffic Act 1988? In identifying the rule of law that is being modified for the purpose of the test established by para 2(3) of Schedule 4, regard may be had to the purpose of the legislative provision effecting the modification [para [34]].
The key to the decision in this case lies in identifying the rule that is being modified.
This is achieved by examining the purpose of the legislative provision which is under scrutiny [para [38] and [39]].
S.33 and Part 1 of Schedule 2 to the RTOA and s.103(1)(b) of the RTA contain, in effect, two rules of Scots criminal law.
Firstly, that the overall maximum sentence in respect of driving while disqualified is 12 months.
Secondly, the route by which the maximum sentence can be imposed.
The former provision is plainly a rule that is special to the RTOA and RTA and is a reserved matter that the Scottish Parliament has no power to modify.
However, the latter is a rule concerning Scots criminal jurisdiction and procedure which is not reserved.
The change in the law effected by s.45 does not alter the maximum period of imprisonment for the offence of driving while disqualified.
It relates to the procedure which determines whether the sheriff has power to impose that sentence.
The rule of Scots law being modified is the rule of Scots criminal procedure.
This rule of procedure is not special to the RTOA or RTA [para [37]].
Had it been necessary to address the point, para 3 of Schedule 4 (which provides that legislation having incidental or minor effects upon reserved matters shall be within competence) could not, contrary to the conclusion reached by the HCJ, render s.45 within the Scottish Parliaments legislative competence. s.45 constituted an important modification to a rule of Scots criminal procedure that could not be regarded as incidental or consequential [para [40]].
Accordingly the court holds that s.45 is within the legislative competence of the Scottish Parliament.
The appeals are dismissed and remitted to the HCJ for any further orders that may be required [para [43]].
Dissenting Judgments Lord Rodger agreed that s.45 did not relate to a reserved matter [para [119]].
But he would have held that the provision of the RTOA prescribing the maximum term of imprisonment for a summary conviction for driving while disqualified is special to a reserved matter, in the sense that the United Kingdom Parliament has chosen it specifically for that offence.
Lord Rodger did not agree that the purpose of the modifying provision can be a relevant consideration in identifying the rule of Scots law that is being modified for the purpose of para 2(3) of Schedule 4 [para [143]].
He also did not agree that the purpose of a provision which purports to modify a rule of Scots law can be used to determine whether that rule is special to a reserved matter [para [145]].
Lord Kerr agreed with Lord Rodger.
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Under the Equal Pay Act 1970, women (or men) whose work is of equal value to that of men (or women) in the same employment are entitled to the benefit of a deemed equality clause in their contracts of employment.
This means that if any of their terms and conditions is less favourable than the equivalent term or condition of the men with whom they are compared, they are entitled to have the benefit of that more favourable term, as if it had been included in their original contract of employment.
It is therefore necessary to identify the precise terms and conditions with which comparison is to be made.
This entails finding an individual or group of the opposite sex who constitute a valid comparator.
There are several elements in that task.
One involves looking at the kind of work the men and the women do: is it like, or has it been rated as equivalent, or is it of equal value? Another involves looking to see whether there are material factors other than the difference in sex which explain the difference in treatment.
But a threshold question is whether the men and women are in the same employment.
The issue in this case is what that means.
The answer would be easy if all it meant was that they were employed by the same employer, the person with whom they all have contracts of employment and who therefore has it within his power to correct the inequality.
Unfortunately, it is not that simple.
There are occasions when women may be able to compare themselves with men who are not employed by the same employer.
However, in United Kingdom law, there are also occasions when women may not be able to compare themselves with men, even though they are employed by the same employer, because they are not employed at the same establishment.
But if that provision erects a barrier to a claim which would otherwise be available under European Union law, it would be our duty to disapply it.
Section 1(6) of the Equal Pay Act 1970 provides:
. men shall be treated as in the same employment with a woman if they are men employed by her employer or any associated employer at the same establishment or at establishments in Great Britain which include that one and at which common terms and conditions of employment are observed either generally or for employees of the relevant classes. (emphasis supplied) The Equal Pay Act 1970 has now been repealed and replaced by provisions in the Equality Act 2010 which are intended to be of equivalent effect, but the 1970 Act continues to govern claims, such as those in the present case, which were brought before the 2010 Act came into force.
The case law so far
Section 1(6) falls into two separate propositions, one contained in the words before and the other contained in the words after or where it appears for the second time in the subsection.
The first proposition is straightforward: if the woman and her comparator are employed by the same or an associated employer in the same establishment, then they are in the same employment and there is no need to consider the question of common terms of employment: see Lawson v Britfish Ltd [1987] ICR 726; North Cumbria Acute Hospitals NHS Trust v Potter [2009] IRLR 176.
The difficulty comes with the second proposition, where they are employed at establishments in Great Britain which include that one and at which common terms and conditions of employment are observed either generally or for employees of the relevant classes.
The interpretation of this proposition has come before the House of Lords on two previous occasions and we have not been invited to depart from the conclusions they reached.
In Leverton v Clwyd County Council [1989] AC 709, the applicant was a nursery nurse who wished to compare herself with male clerical workers employed by the same local authority under terms and conditions derived from the same collective agreement, known as the Purple Book.
None of the male workers worked at the same establishment as she did and their hours of work were longer and their holidays shorter than those of the applicant.
The employment tribunal, the Employment Appeal Tribunal, and the Court of Appeal (by a majority) held that they were not in the same employment for the purpose of section 1(6).
They took the view that the subsection called for a comparison between the terms and conditions of the applicant and of her comparators and that only if those were broadly similar to one another was the test satisfied.
The House of Lords disagreed.
Lord Bridge of Harwich gave the leading opinion, with which the other members of the appellate committee agreed.
He thought that the language of the subsection was clear and unambiguous: The concept of common terms and conditions of employment observed generally at different establishments necessarily contemplates terms and conditions applicable to a wide range of employees whose individual terms will vary greatly inter se (p 745F).
Terms and conditions governed by the same collective agreement seemed to him the paradigm, though not necessarily the only example, of common terms and conditions contemplated by the subsection.
But if there was any ambiguity, he would reject a construction which required a broad similarity between the terms and conditions of the woman and of her claimed comparators.
Such a construction: frustrates rather than serves the manifest purpose of the legislation.
That purpose is to enable a woman to eliminate discriminatory differences between the terms of her contract and those of any male fellow employee doing like work, work rated as equivalent or work of equal value, whether he works in the same establishment as her or in another establishment where terms and conditions of employment common to both establishments are observed (pp 745H 746A).
It could not have been the intention of Parliament to require a woman to prove an undefined substratum of similarity between her terms of employment and his as the basis of a claim to eliminate any discriminatory difference between them.
In his view, the reason why Parliament had not simply required that the
woman and her comparators be employed by the same employer but had also required that common terms and conditions of employment be observed between two different establishments was that a single employer might operate essentially different employment regimes at different establishments (p 746C).
He gave the examples of one employer having establishments in London and in Newcastle, where the regimes were quite different, or of a company operating one factory taking over a company operating another factory, where there were quite different collective agreements resulting in quite different structures.
Leverton was an easy case, because everyone was employed under the same Purple Book agreement.
But once it is clear that Parliament cannot have been referring to common, or even broadly similar, terms and conditions between the woman and her comparators, it is equally clear that it cannot be a requirement that they are covered by the same collective agreement.
In British Coal Corporation v Smith [1996] ICR 515, the applicants were canteen workers, canteen manageresses and cleaners, employed at 47 different British Coal Corporation establishments.
Their named comparators were mainly surface mineworkers working at 14 different establishments, some of them the same as the places where the women worked and some of them not.
Their terms and conditions were governed by a variety of agreements.
It was not disputed that the women could take a comparator from their own colliery or other workplace.
The question was whether they could take comparators from other collieries or workplaces.
Lord Slynn of Hadley, with whose opinion all the other members of the appellate committee agreed, pointed out that it was obvious why a woman was not limited to comparing herself with men employed in the same workplace as she was: . otherwise an employer could so arrange things as to ensure that only women worked at a particular establishment or that no man who could reasonably be considered as a possible comparator should work there (p 525H).
The inclusion in section 1(6) of the words which include that one (that is, the establishment at which the woman works) was at first sight puzzling, but read with the words and at which common terms . are observed which follow it simply meant that common terms must be observed, not only at the other place but also at the womans place of work if employees of the relevant class were employed there.
It was agreed that the woman did not have to show that she shared common terms and conditions with her comparator, either in relation to those terms which were alleged to constitute the discrimination or in relation to the other terms.
What had to be shown was that the different classes of employee shared common terms.
It was agreed that the women did so.
Hence: What therefore has to be shown is that the male comparators at other establishments and at her establishment share common terms and conditions.
If there are no such men at the claimants place of work then it has to be shown that like terms and conditions would apply if men were employed there in the particular jobs concerned (p 526F).
The Corporation claimed that this meant that the terms and conditions of the comparators had to be the same in substantially all respects.
Lord Slynn rejected this and adopted a test of broad similarity: The purpose of requiring common terms and conditions was to avoid it being said simply a gardener does work of equal value to mine and my comparator at another establishment is a gardener.
It was necessary for the applicant to go further and to show that gardeners at other establishments and at her establishment were or would be employed on broadly similar terms.
It was necessary but it was also sufficient (p 527D).
The principles to be derived from these two cases are therefore plain.
First, the common terms and conditions referred to in section 1(6) are not those of, on the one hand, the women applicants and, on the other hand, their claimed comparators.
They are, on the one hand, the terms and conditions under which the male comparators are employed at different establishments from the women and, on the other hand, the terms and conditions under which those male comparators are or would be employed if they were employed at the same establishment as the women.
Second, by common terms and conditions the subsection is not looking for complete correspondence between what those terms are, or would be, in the womans place of work.
It is enough that they are, or would be, broadly similar.
It is also plain from the reasoning of both Lord Bridge in Leverton and Lord Slynn in British Coal Corporation that it is no answer to say that no such male comparators ever would be employed, on those or any other terms, at the same establishment as the women.
Otherwise, it would be far too easy for an employer so to arrange things that only men worked in one place and only women in another.
This point is of particular importance, now that women are entitled to claim equality with men who are doing completely different jobs, provided that the women are doing jobs of equal value.
Those completely different jobs may well be done in completely different places from the jobs which the women are doing.
However, it is fair to say that it is not clear from the facts as we have them that this was the actual situation in the British Coal Corporation case.
Some of the male surface mine workers were working in the same colliery as some of the claimants.
It could just be, as suggested by Mr Truscott QC on behalf of the employers in this case, that all the 47 places where the women worked were collieries at which it was possible that surface mineworkers might also work, even though those chosen do not in fact do so.
The issue, therefore, is whether the women can compare themselves with men employed by the same employer in other places of work when in practice those men would never be employed to do their current jobs in the same place as the women.
The facts
These claims are brought by 251 classroom assistants, support for learning assistants and nursery nurses employed in a local authoritys schools.
The classroom and support for learning assistants are employed in the local authoritys education service under the terms contained in a national collective agreement, the Administrative, Professional, Technical and Clerical agreement, known as the Blue Book.
The nursery nurses are employed under a supplement to the Blue Book.
They are based at a variety of schools in the local authoritys area.
Their individual contracts specify the particular school at which they are based and also state that they may be required to work at other locations.
They are employed during the school terms only and work less than 35 hours per week.
The convenience of these hours for people with child care or other domestic responsibilities is no doubt one of the reasons why these posts are predominantly held by women.
The claimants wish to compare themselves with a variety of manual workers employed by the same local authority, as groundsmen, refuse collectors, refuse drivers and a leisure attendant.
They are employed in the authoritys combined services, under a different collective agreement, the Scottish Council for Local Authorities Services (Manual Workers) Scheme of Pay and Conditions of Service, known as the Green Book.
The leisure attendant is based at a swimming pool, but the others are based at various depots in the local authoritys area, from which they go out to do their work in a variety of locations.
Although some of their work is done at schools, they are not based there.
Their individual contracts of employment specify the depot at which they are based and that they may be required to work at other locations.
They work full time with a fixed annual leave entitlement.
They are entitled to substantial bonus payments or supplements on top of their basic pay, whereas the claimants are not.
The authority does employ a small number of manual workers as school janitors.
They are based in schools and, like the claimants, work only during the school terms.
But the claimants do not wish to compare themselves with the janitors, who are not entitled to the bonuses or supplements which the other manual workers enjoy.
It may be worth noting that the employers and trade unions have negotiated a single status collective agreement, known as the Red Book, which would cover both the claimants and the comparators.
But the existing pay and grading arrangements were to remain in force until the employers had completed a job evaluation exercise.
This had not been done at the time of the employment tribunals decision in this case, so the essential terms remained governed by the original Blue and Green Books.
The proceedings
Most of the claims were lodged between February and December 2006, with the last claim lodged in February 2007.
As none of the claimants was employed at the same establishment as their chosen comparators, the local authority applied for a pre hearing review to have the employment tribunal determine whether or not they were in the same employment as defined in section 1(6) of the 1970 Act.
The claims were conjoined by order at the outset of the pre hearing review in December 2007.
This is but the first hurdle which the claimants face.
If they succeed in jumping it, they will still have to prove that their work is comparable to that of the men.
In its original form, the 1970 Act only imposed an equality clause where they were employed in like work (now covered by section 1(2)(a)) or work rated as equivalent in a formal job evaluation exercise (now covered by section 1(2)(b)).
Although both are mentioned in the sample claim form which we have seen, these claims are primarily based on the allegation that the work done by the claimants is of equal value to that done by the comparators.
Section 1(2)(c) of the 1970 Act (added by SI 1983/1794) applies where a woman is employed on work which, not being work in relation to which paragraph (a) or (b) above applies, is, in terms of the demands made on her (for instance under such headings as effort, skill and decision), of equal value to that of a man in the same employment.
That issue has yet to be addressed.
Furthermore, if the claimants succeed in establishing that their work is of equal value, the employer could still seek to establish that there was a good reason for the difference between their terms and conditions.
Section 1(3) of the 1970 Act (as substituted by SI 1983/1794) provides: An equality clause . shall not operate in relation to a variation between the womans contract and the mans contract if the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor (a) in the case of an equality clause falling within subsection (2)(a) or (b) above, must be a material difference between the womans case and the mans; and (b) in the case of an equality clause falling within subsection (2)(c) above, may be such a material difference.
This issue, too, has yet to be addressed.
Nevertheless, it is important to bear in mind that the question of whether there are other explanations for the difference in treatment is analytically quite distinct from the question whether the claimants and their comparators are in the same employment within the meaning of section 1(6).
So too is the question of what modifications to the womens terms and conditions would be necessary to eliminate the less favourable treatment.
At times during the argument at all levels in this case, it appears that those distinctions have not been observed.
In May 2008, the employment tribunal determined the same employment issue in the claimants favour.
The employment judge defined the question in this way, at para 61: In the present case, the claimants and comparators are neither employed under the same terms and conditions nor in the same establishment.
It is therefore necessary for the claimants to satisfy the Tribunal that if their comparators were employed at their establishment, they would be employed under broadly similar terms to those that they are employed under at present.
That, as the Court of Session later acknowledged, was exactly the right question.
The judge answered that question in the affirmative.
It was not enough for the respondents to say that the comparators would never be employed at the same establishment.
They did some of their work at schools, there was no suggestion that this work was of less significance than the work they did elsewhere, and when they did work at schools there was no change to their terms and conditions of employment.
There was no persuasive evidence before the Tribunal that in the event they were based at the same establishment as the claimants, the comparators would be employed under terms and conditions other than the Green Book (para 61 bis).
The judge did not at that stage specifically refer to the evidence which had been given for the local authority on which that statement was based (excerpted at para 27 below), although she had earlier referred to some of it when reciting the submissions of the parties.
The local authority appealed to the Employment Appeal Tribunal, which handed down judgment allowing the appeal in May 2009: UKEATS/47/08, [2009] ICR 1363.
Lady Smith accepted the respondents argument that a woman who seeks to compare her terms and conditions with those of a man who does not work at the same establishment as she does must first show that there is a real possibility that he could be employed there to do the same or a broadly similar job to the one which he does at the other establishment.
Such a finding was not open to the Tribunal on the evidence.
The claimants then appealed to the Court of Session.
Before their appeal was heard, the EAT decided the case of City of Edinburgh Council v Wilkinson [2010] IRLR 756.
The women claimants were employed by the council on Blue Book terms in a variety of posts in schools, hostels, libraries or social work.
They wished to compare themselves with manual workers, including road workers, refuse collectors, gardeners and grave diggers, employed on Green Book terms.
Lady Smith (having revisited the House of Lords authorities discussed above) accepted that the intention of section 1(6) could be undermined if claimants were required to establish, as fact, that there was a real possibility of their comparators being employed at the same establishments as them.
It was enough to show that it is likely that those comparators would, wherever they worked, always be employed on the same terms and conditions.
If they were always employed on the same terms and conditions, it was legitimate to assume that they would be employed on those terms and conditions at the claimants establishment and men and women would thus be shown to be in the same employment (para 77).
The paradigm example of the required hypothetical exercise would be where the comparators were always employed under the same collective agreement, as in that case.
When the present case came before the Court of Session, in January 2011, that court agreed with Lady Smiths rejection of the real possibility test in Wilkinson: [2011] CSIH 2, 2011 SLT 203.
Nevertheless, Lady Paton (delivering the opinion of the court) held that the evidence did not support the employment tribunals factual conclusion.
She quoted several paragraphs from the evidence of Mr Archibald, for the local authority, at para 35 of her judgment, which included the following: If a manual worker comparator were for any reason to transfer to do their job solely and only in a school context, which would seem an impossible suggestion, then I cannot envisage other than that they would retain core Green Book conditions, but because of the nature of the work undertaken across all educational establishments, their terms and conditions would require to be very significantly varied to make working in such locations possible (para 32).
In her view, that passage was concerned with a worker who was transferred to do most of his work at a school but remained based at his depot.
Later passages in Mr Archibalds evidence hypothesised a manual worker based at a school: Conceivably some new, hybrid, handyperson type job incorporating all the tasks of the comparators could be created but as to what the terms of such a job would be would be difficult to assess if it was to remain on Manual Worker terms, because of the job content then the Green Book terms any such postholder would be on (whether doing a hybrid job or his/her current job) would not be similar to those s/he currently enjoys because so many of the provisions of the Green Book which s/he now enjoys would no longer be apt.
I cannot imagine even in the hypothetical context the job or jobs being able to remain similar to what they would be now they simply would not fit into any JES manual worker profile and that would have an effect on their terms and conditions (para 36).
Hence the claimants had not established that, if the comparators were based at the same establishment as the claimants, the comparators would still have been employed on Green Book terms and conditions.
The appeal was therefore refused, not because the employment tribunal had applied the wrong legal test, but because the evidence did not support the conclusion on the facts.
To complete the chronology, the Wilkinson case then came before the Court of Session: [2011] CSIH 70, 2012 SC 423.
The Court upheld the decision of the EAT.
Lord Eassie held, at para 35, that: What has to be considered is whether if a manual worker, in casu a gardener, refuse collector, or grave digger, whether hypothetically likely or not, were to be located in the claimants establishment for the performance of his current job he would continue to be employed on terms and conditions applicable to manual workers.
Lady Paton distinguished the case from the present one, because the tribunal had analysed the evidence relating to the terms and conditions of work for the hypothetical transposed worker, and found it not inconceivable that he could be assigned to work at one of the claimants establishments and that, if so, he would still be employed on Green Book terms.
But both she, at para 49, and Lord Hardie, at para 54, disagreed with Lord Eassies further observation, in para 35, that it was: erroneous (perhaps particularly in an equal value claim) to consider whether, on the transfer of the male comparator hypothetically to the womans establishment, adjustment might be made to his terms and conditions to dovetail more closely with those of the female claimant.
Thus, it would appear that, while the Court of Session has rejected the real possibility test, it remains unclear to what extent the Tribunal is obliged to hypothesise about possible adjustments to the terms and conditions which would apply in the unlikely event of the comparator being transferred to work at the same establishment as the claimant.
Discussion
Not surprisingly, Ms Dinah Rose QC, on behalf of the appellant claimants, argues that the tribunal should not speculate about the adjustments to the comparators present terms and conditions which might be made in the unlikely event that they were transferred to the claimants workplace.
The hypothesis is that the comparators are transferred to do their present jobs in a different location.
The question is whether in that event, however unlikely, they would remain employed on the same or broadly similar terms and conditions to those applicable in their current place of work.
As Lord Slynn had recognised in the British Coal Corporation case, the object of the legislation was to allow comparisons to be made between workers who did not and never would work in the same work place.
An example might be a manufacturing company, where the (female) clerical workers worked in an office block, whereas the (male) manufacturers worked in a factory.
She also argues that, the employment tribunal having adopted the correct test, the Court of Session should not have interfered with its findings in fact.
The tribunal had founded its conclusion on the first of the two passages of Mr Archibalds evidence quoted in paragraph 27 above.
This was contemplating that the manual workers would become based in the claimants schools in order to do their present jobs, although he could not envisage that ever happening.
In the second passage, he was hypothesising the creation of a completely new all purpose handyman who might plausibly be based in schools.
That was an unnecessary and illegitimate hypothesis and the tribunal was clearly entitled to conclude that there was no compelling evidence that the comparators would not be employed on the same or broadly similar terms and conditions in the unlikely event that they became based in schools.
Mr Truscott, for the local authority, agrees that there is no need to show a real possibility that the comparators could be transferred to do their current jobs in the claimants workplace.
But, he argues, how does the British Coal Corporation test work in a factual situation such as this, which goes well beyond what was envisaged in that case? That case was premised on the fact that the comparators could be based at the same place as the claimants, even though some of them were not.
So, while he agrees that there is no need to show a real possibility that the workers could be co located, he argues that it should at least be feasible that they might be.
The evidence of Mr Archibald was clear that it was not.
I have no hesitation in preferring the arguments presented by Ms Rose.
In the first place, it is by no means clear from the facts reported in the British Coal Corporation case that all the women claimants were based in collieries where there might also be surface mine workers employed.
In the second place, there is no hint of a real possibility or feasibility test in that case and I find it difficult to discern a genuine difference in principle between them.
Both add an unwarranted gloss to the wording of the subsection as interpreted in the British Coal Corporation case.
In the third place, to adopt such a test would be to defeat the object of the exercise.
This is not just a matter of preventing employers from so organising their workplaces that the women work in one place and the men in another.
There may be perfectly good reasons for organising the work into different places.
But the object of the legislation is to secure equality of treatment, not only for the same work, but also for work rated as equivalent or assessed by the experts to be of equal value.
It stands to reason, therefore, that some very different jobs which are not or cannot be carried out in the same workplaces may nevertheless be rated as equivalent or assessed as having equal value.
One example is the (female) office worker who needs office equipment in a clean environment and the (male) factory worker who needs machines which create dirt and dust.
But another is the (female) factory worker who puts microscopic circuits on silicon chips in one factory and the (male) factory worker who assembles computer parts in another.
The fact that of necessity their work has to be carried on in different places is no barrier to equalising the terms on which it is done.
It is well known that those jobs which require physical strength have traditionally been better rewarded than those jobs which require dexterity.
It is one of the objects of the equality legislation to iron out those traditional inequalities of reward where the work involved is of genuinely equal value.
In the fourth place, it is not the function of the same employment test to
establish comparability between the jobs done.
That comparability is established by the like work, work rated as equivalent and work of equal value tests.
Furthermore, the effect of the deemed equality clause is to modify the relevant term of the womans contract so as not to be less favourable than a term of a similar kind in the contract under which the man is employed or to include a beneficial term in her contract if she has none (section 1(2)(a), (b) or (c) as the case may be).
That modification is clearly capable of taking account of differences in the working hours or holiday entitlement in calculating what would be equally favourable treatment for them both.
Moreover, the equality clause does not operate if a difference in treatment is genuinely due to a material factor other than sex (section 1(3)).
The same employment test should not be used as a proxy for those tests or as a way of avoiding the often difficult and complex issues which they raise (tempting though this may be for large employers faced with multiple claims such as these).
Its function is to establish the terms and conditions with which the comparison is to be made.
The object is simply to weed out those cases in which geography plays a significant part in determining what those terms and conditions are.
In the fifth place, the construction of section 1(6) favoured by the appellants
is more consistent with the requirements of European Union law than is the construction favoured by the respondents.
The 1970 Act was the United Kingdoms way of giving effect in United Kingdom law to the principle of equal treatment of men and women, first enshrined in article 119 EEC, then translated into article 141 EC, and now translated into article 157 of the Treaty on the Functioning of the European Union.
The Court of Justice held as long ago as 1976, in the case of Defrenne v Sabena (Case 43/75) [1976] ICR 547, 566, para 12 that the principle of equal pay for men and women forms part of the foundations of the community and has direct effect in the member states in relation to direct discrimination which may be identified solely with the aid of the criteria based on equal work and equal pay.
As Advocate General Geelhoed explained in Lawrence v Regent Office Care Ltd (Case C 320/00) [2003] ICR 1092: It is not evident from the wording of Article 141 EC that the comparison must be confined to one and the same employer.
Its case law demonstrates that the Court has consistently stood by its requirement that for a finding of direct discrimination there must be a clear difference in pay vis vis male co workers working in the same establishment or service (see, inter alia, Defrenne v Sabena (Case 43/75) [1976] ICR 547, 567, para 22) or that the difference in pay must have its origin in legislative provisions or provisions of collective labour agreements (Defrenne, para 21). (para 46)
There were three categories of case where it was possible to go outside the individual undertaking or service in order to make the comparison: first, where statutory rules applied to the working and pay conditions in more than one undertaking, establishment or service, such as the pay of nurses in the National Health Service; second, where several undertakings or establishments were covered by the same collective works agreement or regulations; and third where terms and conditions were laid down centrally for more than one organisation or business within a holding company or conglomerate (paras 50, 49).
This was because: The feature common to the three categories is that regulation of the terms and conditions of employment actually applied is traceable to one source, whether it be the legislature, the parties to a collective works agreement, or the management of a corporate group (para 51).
This was an essential criterion because article 141 was addressed to those who may be held responsible for the unauthorised differences in terms and conditions of employment (para 52).
Hence: It is clear from the foregoing that the direct effect of article 141 EC extends to employees working for the same legal person or group of legal persons, or for public authorities operating under joint control, as well as cases in which for purposes of job classification and remuneration, a binding collective agreement or statutory regulation applies.
In all these cases the terms and conditions of employment can be traced back to a common source (para 54).
In Lawrence itself, the Court of Justice agreed that the principle was not limited to situations in which men and women worked for the same employer (Judgment, para 17).
But in the case in question, the differences cannot be attributed to a single source, there is no body which is responsible for the inequality and which could restore equal treatment (Judgment, para 18).
This was because the claimants, women cleaners and catering workers who had previously been employed by North Yorkshire County Council and whose work had then been rated as equivalent to that of men doing jobs such as gardening, refuse collection and sewage treatment, were now working for the private company to whom the cleaning and catering service had been contracted out.
They could no longer, therefore, compare their pay and conditions with the men who now worked for a different employer. (It is worth noting that no question had been referred to the court about the effect of the regulations governing the transfer of undertakings.)
The position is thus that, for the principle of equal pay to have direct effect, the difference in treatment must be attributable to a single source which is capable of putting it right.
As it happens, the researches of counsel have discovered no case in the Court of Justice in which the principle of equal pay has not been applied between men and women who work for the same employer.
However, in Department for Environment, Food and Rural Affairs v Robertson [2005] EWCA Civ 138, [2005] ICR 750, the Court of Appeal held that the terms and conditions of civil servants working in different Government departments were not attributable to a single source for the purpose of article 141 EC.
Although they were all the servants of the Crown, responsibility for negotiating and agreeing their pay and conditions had been devolved by delegated legislation to the individual departments concerned.
It was common ground that the claimants and their would be comparators in the Department for Transport, Environment and the Regions were not in the same employment within the meaning of section 1(6) of the 1970 Act, because they did not work at the same establishment and common terms and conditions had not been observed in the two departments since the delegation.
Mr Robin Allen QC, for the Equality and Human Rights Commission, tells us that it is the view of the Commission that Robertson was wrongly decided, because it did lie within the power of the Crown to put matters right.
It is not necessary for us to determine that question now.
In this case it is quite clear that the difference in treatment between the claimants and their comparators is attributable to a single source, namely the local authority which employs them and which is in a position to put right the discrepancy if required to do so.
If section 1(6) were to operate as a barrier to a comparison which was required by EU law in order to give effect to the fundamental principle of equal treatment, it would be our duty to disapply it.
However, for the reasons given earlier, it sets a low threshold which does not operate as a barrier to the comparison proposed in this case.
I would therefore allow this appeal and restore the decision of the
employment tribunal.
The employment judge asked herself the right question and was entitled on the evidence to answer it in the way that she did.
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The issue arising in the appeal is whether the appellants have satisfied the threshold conditions set out in section 1(6) of the Equal Pay Act 1970 (the Act) in order to bring claims alleging that they are employed under less favourable terms and conditions than certain male employees of the respondent council who do work of equal value.
The appellants have to establish that the male employees are in the same employment as they are, notwithstanding the fact that they are employed on different terms and conditions at different establishments from the appellants.
The appellants are 251 classroom assistants, support for learning assistants and nursery nurses employed during school term time in the respondents schools under terms contained in a national collective agreement known as the Blue Book.
The appellants wish to compare their terms and conditions with those enjoyed by a variety of full time manual workers employed by the respondent, as groundsmen, refuse collectors, refuse drivers and a leisure attendant (the comparators), under a different collective agreement known as the Green Book.
The comparators are entitled to a substantial supplement on top of their basic pay, whereas the appellants are not.
The issue of whether the appellants are in the same employment as the comparators was determined in a pre hearing review.
The Employment Tribunal ruled that they are, because the appellants could show that if the comparators were employed at their establishments they would be employed under broadly similar terms to those under which they are employed at present.
The Employment Appeal Tribunal allowed an appeal by the respondent on the ground that the appellants could not show that there was a real possibility that the comparators could be employed in schools to do their existing jobs.
The Court of Session held that this was the wrong test, but that the appellants still failed on the evidence to show that if the comparators were to be based at schools they would be employed on Green Book terms and conditions.
The appellants appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal and restores the decision of the Employment Tribunal permitting the claims to be brought.
The tribunal will now proceed to decide whether the appellants work is in fact of equal value to that of the comparators and, if so, whether there is an explanation other than the difference in sex for the difference between their terms and conditions.
Lady Hale gives the only judgment.
The requirement that claimants and their chosen comparators are in the same employment before a claim can be brought under the Act does not simply mean that they must be employed by the same employer.
If they do not work at the same establishment as their comparators, claimants must show that they are both employed at establishments in Great Britain at which common terms and conditions of employment are observed either generally or for employees of the relevant classes (s 1 (6) of the Act).
The common terms and conditions are between the comparators terms at different establishments and those on which they are or would be employed at the claimants establishment [12].
It is no answer to say that no such comparators ever would be employed at the same establishment as the claimant, otherwise it would be far too easy for an employer to arrange things so that only men worked in one place and only women in another [13].
The correct hypothesis to consider is the transfer of the comparators to do their present job in a different location [30].
The evidence from the respondents Group Manager of Human Resources confirmed that, although he could not envisage it happening, in the event that the comparators were based in schools then they would retain their Green Book conditions [31].
The Employment Tribunal adopted the correct test and was entitled to find it satisfied on this evidence.
It was not necessary to show that it was feasible to co locate the relevant workers.
This was an unwarranted gloss on s 1(6) [33] and would defeat the object of the legislation.
The fact that of necessity work has to be carried on in different places is no barrier to equalising the terms on which it is done [34].
It is not the function of the same employment test to establish comparability between the jobs done, but simply to weed out those cases in which geography plays a significant part in determining the relevant terms and conditions [35].
This construction of s 1(6) is more consistent with the requirements of European Union law, to which the Act gives effect [36].
Case law of the European Court of Justice has established that for the principle of equal pay to have direct effect, the difference in treatment must be attributable to a single source which is capable of putting it right [40].
That is clearly the case here.
If s 1(6) were to operate as a barrier to a comparison which was required by EU law to give effect to the fundamental principle of equal treatment it would be the courts duty to disapply it.
However, s 1(6) sets a low threshold which does not operate as a barrier to the comparison proposed in this case [42].
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This case raises difficult issues about the scope for justifying direct discrimination on the ground of age and in particular a mandatory contractual retirement age.
It arises under the Employment Equality (Age) Regulations 2006 (SI 2006/1031) (the Age Regulations), the measure by which the United Kingdom transposed Council Directive 2000/78/EC, establishing a general framework for equal treatment in employment and occupation (the Directive), into UK law in respect of age discrimination.
But the same issues arise under the Equality Act 2010, which has now replaced those Regulations.
Age is a relative newcomer to the list of characteristics protected against discrimination.
Laws against discrimination are designed to secure equal treatment for people who are seen by society to be in essentially the same situation.
The Aristotelian injunction that like cases be treated alike depends upon which characteristics are seen as relevant for the particular purpose.
For most of history it was assumed that the differences between men and women were relevant for a whole host of purposes.
Now the general rule is that they are not.
But as Advocate General Sharpston commented in her Opinion in Bartsch v Bosch und Siemens Hausgerte (BSH) Altersfrsorge GmbH Case C 427/06 [2008] ECR I 7245, at [47], until comparatively recently differentiating on the basis of age was considered obviously relevant for the purpose of termination of employment.
And it is still considered that age may be a relevant consideration for many more purposes than is so with the other protected characteristics.
Hence recital 25 to the Directive, after recognising that the prohibition of age discrimination is an essential part of meeting the aims set out in the Employment Guidelines and encouraging diversity in the workforce, continued: However, differences in treatment in connection with age may be justified under certain circumstances and therefore require specific provisions which may vary in accordance with the situation in Member States.
It is therefore essential to distinguish between differences in treatment which are justified, in particular by legitimate employment policy, labour market and vocational training objectives, and discrimination which must be prohibited.
The reasons why age may be relevant in more circumstances than the other characteristics may seem obvious, at least where this has to do with the comparative capabilities of people of different ages.
A younger person may not have the same training and experience as an older person.
An older person may have lost the mental or physical strength which once she had.
But it will be seen from recital 25 above that the European legislators considered that age discrimination might be justified by factors which had nothing to do with the characteristics of the individual but had to do with broader social and economic policy.
These factors would not justify direct discrimination on the ground of any of the other protected characteristics, so why should age be different?
The answer must be that age is different.
As Ms Rose put it on behalf of the Secretary of State, age is not binary in nature (man or woman, black or white, gay or straight) but a continuum which changes over time.
As Lord Walker pointed out in R (Carson and Reynolds) v Secretary of State for Work and Pensions [2006] 1 AC 173, at [60], Every human being starts life as a tiny infant, and none of us can do anything to stop the passage of the years.
This means that younger people will eventually benefit from a provision which favours older employees, such as an incremental pay scale; but older employees will already have benefitted from a provision which favours younger people, such as a mandatory retirement age.
The critical issues in this case are what sort of policy considerations can justify such discrimination, who decides upon them, and how they are to be applied to any individual person.
I turn, therefore, to the facts of this case.
The facts
Mr Seldon was born on 15 January 1941, qualified as a solicitor in 1969, joined Clarkson Wright and Jakes, the respondent firm, in 1971 and became an equity partner in 1972.
He became the senior partner in 1989.
He was also managing partner from 1989 to 1993.
He reached the age of 65 on 15 January 2006.
There had been a succession of partnership deeds over that period but all had provided for the mandatory retirement of partners at the end of the year in which they reached the age of 65.
Clause 22 of the deed adopted in 2005 provided: Any partner who attains the age of 65 years shall retire from the Partnership on 31st day of December next following his attainment of such age (or on such later date as the Partners shall from time to time and for the time being determine.) The deed did not make any provision for the removal of underperforming partners or for the reduction of their profit share to reflect underperformance.
The partners preferred to address these matters through discussion and agreement.
As he approached his 65th birthday, Mr Seldon realised that for financial reasons he would need to go on working in some capacity for another three years.
Early in 2006 he made a series of proposals to his partners with a view to continuing to work as a consultant or salaried employee for another three years.
These proposals were rejected by the other partners in May 2006 on the basis that there was no sufficient business case, but an ex gratia payment of 30,000 was offered as a goodwill gesture to reflect his long service with the firm.
The Age Regulations came into force on 1 October 2006.
Mr Seldon told the firm that he was seeking legal advice on the Regulations and the offer of an ex gratia payment was withdrawn.
Mr Seldon automatically ceased to be a partner in accordance with the partnership deed on 31 December 2006.
He began these proceedings in March 2007, alleging that his expulsion from the firm was an act of direct age discrimination and the withdrawal of the offer of the ex gratia payment was an act of victimisation.
The firm claimed that his treatment was justified.
They put forward six legitimate aims: 29.1 ensuring that associates are given the opportunity of partnership after a reasonable period as an associate, thereby ensuring that associates do not leave the firm; 29.2 ensuring that there is a turnover of partners such that any partner can expect to become Senior Partner in due course; 29.3 facilitating the planning of the partnership and workforce across individual departments by having a realistic long term expectation as to when vacancies will arise; 29.4 limiting the need to expel partners by way of performance management, thus contributing to a congenial and supportive culture in the Respondent firm; 29.5 enabling and encouraging employees and partners to make adequate financial provision for retirement; 29.6 protecting the partnership model of the Respondent.
If equity partners could not be forced to retire at 65, but employees (including salaried partners) could be, it would be preferable to keep lawyers at the Respondent as employees or salaried partners rather than equity partners.
It was made clear that the firm was not relying on the personal characteristics or any poor performance of Mr Seldon, nor were they relying on the structure of the wider market for legal services, but simply upon their own circumstances.
The Employment Tribunal (ET) accepted that the firm did have the first, third and fourth of the claimed aims and that they were legitimate.
Retention of associates was a legitimate aim for a firm with a strategy for growth and the preservation of a reputation for the quality of its legal services (ET [51.5]).
The short and long term planning of the requirement for professional staff was facilitated by solicitors having, among other things, an expectation of when vacancies within the partnership would arise (ET [53.4]).
The lack of a power to expel partners for under performance was capable of contributing to the creation of a congenial and supportive culture among the partners (ET [54.8].
The tribunal were not persuaded that the firm actually had the second, fifth and sixth of the claimed aims: enabling all partners who stayed the course to become senior partner (ET [52.4]); encouraging partners to make financial provision for their retirement (ET [55.5]); or protecting the partnership model (ET [56.3]).
The ET also accepted that compulsory retirement was an appropriate means of achieving the firms legitimate aims of staff retention, workforce planning and allowing an older and less capable partner to leave without the need to justify his departure and damage his dignity.
The first two could not be achieved in any other way and introducing performance management would be difficult, uncertain and demeaning, so there was no non discriminatory alternative to the third.
Having balanced the needs of the firm against the impact of the rule upon the partners, the ET concluded that it was a proportionate means of achieving a congenial and supportive culture and encouraging professional staff to remain with the firm (ET [67]).
The discrimination claim therefore failed but the victimisation claim succeeded.
The ET was not asked to consider whether any of those aims could be achieved by a different retirement age.
The Employment Appeal Tribunal [2009] IRLR 267 appears to have accepted that the aims of staff retention and workforce planning could be met by any fixed retirement age.
But there was no evidential basis for the assumption that performance would drop off at around the age of 65, and thus for choosing that age in order to avoid performance management and promote collegiality (EAT [77, 78]).
As the EAT could not be sure what decision the Tribunal would have reached had it assessed the justification by reference only to the other two objectives, the case was remitted to the Tribunal to consider the question afresh (EAT [81]).
Mr Seldon appealed to the Court of Appeal, where the principal issues were the same as those before this Court.
The appeal was dismissed: [2010] EWCA Civ 899, [2011] ICR 60.
The issues
The issues before this Court, as agreed by the parties, are three: (1) whether any or all of the three aims of the retirement clause identified by the ET were capable of being legitimate aims for the purpose of justifying direct age discrimination; (2) whether the firm has not only to justify the retirement clause generally but also their application of it in the individual case; and (3) whether the ET was right to conclude that relying on the clause in this case was a proportionate means of achieving any or all of the identified aims.
Both Mr Seldon and Age UK invite the Court to consider these issues having it firmly in mind that the purpose of all anti discrimination legislation is to address the mismatch between reality and past assumptions or stereotypes.
In the context of age discrimination these assumptions have usually concerned age as a proxy for continuing competence or capability or financial security or intentions about work.
These assumptions no longer hold good (if they ever did) in times of increasing longevity, where there are benefits both to individuals and to the wider society if people continue to work for as long as they can.
Put simply, the younger generations need the older ones to continue to be self supporting for as long as possible.
So we should put such stereotypical assumptions out of our minds.
The legislation
Article 1 of the Directive proclaims that its purpose is to: lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the Member States the principle of equal treatment.
Article 2 defines the concept of discrimination thus: 1.
For the purposes of this Directive, the 'principle of equal treatment' shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in article 1. 2.
For the purposes of paragraph 1: (a) direct discrimination shall be taken to occur where one person is treated less favourably than another is, has been or would be treated in a comparable situation, on any of the grounds referred to in article 1; (b) indirect discrimination shall be taken to occur where an apparently neutral provision, criterion or practice would put persons having . a particular age . at a particular disadvantage compared with other persons unless: (i) that provision, criterion or practice is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary, .
Thus it can be seen that the possibility of justification is built into the very concept of indirect discrimination in a way which is familiar from the prohibition of discrimination on other grounds.
The possibility of justification of direct discrimination is not built into the concept itself, but has to be found elsewhere.
Article 2(5) provides the familiar general exception that: This Directive shall be without prejudice to measures laid down by national law which, in a democratic society, are necessary for public security, for the maintenance of public order and the prevention of criminal offences, for the protection of health and for the protection of the rights and freedoms of others.
Article 4(1) makes the familiar general exception for genuine occupational requirements: .
Member States may provide that a difference of treatment which is based on a characteristic related to any of the grounds referred to in article 1 shall not constitute discrimination where, by reason of the nature of the particular occupational activities concerned or of the context in which they are carried out, such a characteristic constitutes a genuine and determining occupational requirement, provided that the objective is legitimate and the requirement is proportionate.
Both of these exceptions feature in some of the case law of the European Court of Justice but they have not featured in this case.
We are concerned with article 6, which makes special provision for the justification of differences of treatment on grounds of age.
Only article 6(1) is relevant to this case: 1.
Notwithstanding article 2(2), Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.
Such differences of treatment may include, among others: (a) the setting of special conditions on access to employment and vocational training, employment and occupation, including dismissal and remuneration conditions, for young people, older workers and persons with caring responsibilities in order to promote their vocational integration or ensure their protection; (b) the fixing of minimum conditions of age, professional experience or seniority in service for access to employment or to certain advantages linked to employment; (c) the fixing of a maximum age for recruitment which is based on the training requirements of the post in question or the need for a reasonable period of employment before retirement.
Article 6 contemplates provision being made by the Member States, within the context of national law, but article 18 contemplates that alternatively they may entrust the social partners, at their joint request, with the implementation of this Directive as regards provisions concerning collective agreements.
This has no direct relevance in the United Kingdom where collective agreements are not legally enforceable, but it serves to explain why all the cases before the European Court of Justice have concerned the provisions either of national law or of collective agreements.
The United Kingdom has implemented the Directive through the 2006 Age Regulations.
Principally relevant is regulation 3, which defines age discrimination: (1) For the purposes of these Regulations, a person (A) discriminates against another person (B) if (a) on grounds of B's age, A treats B less favourably than he treats or would treat other persons, or (b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same age group as B, but (i) which puts or would put persons of the same age group as B at a particular disadvantage when compared with other persons, and (ii) which puts B at that disadvantage, and A cannot show the treatment or, as the case may be, provision, criterion or practice to be a proportionate means of achieving a legitimate aim. (2) A comparison of Bs case with that of another person under paragraph (1) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other. (3) In this regulation (a) age group means a group of persons defined by reference to age, whether by reference to a particular age or a range of ages; and .
Also relevant is regulation 17, which makes unlawful certain acts of discrimination by partnerships: (1) It is unlawful for a firm, in relation to a position as partner in the firm, to discriminate against a person . (d) in a case where the person already holds that position (i) in the way they afford him access to any benefits or by refusing to afford, or deliberately not affording, him access to them; or (ii) by expelling him from that position, or subjecting him to any other detriment." It is not in dispute that enforcing a retirement age would be unlawful within regulation 17 if it amounts to unjustified discrimination within regulation 3.
Although it did not apply to partners, it is also relevant to note that at the material time, regulation 30 provided for a designated retirement age for employees: (1) This regulation applies in relation to an employee within the meaning of section 230(1) of the [Employment Rights Act 1996], a person in Crown employment, a relevant member of the House of Commons staff, and a relevant member of the House of Lords staff. (2) Nothing in Part 2 or 3 shall render unlawful the dismissal of a person to whom this regulation applies at or over the age of 65 where the reason for the dismissal is retirement.
Regulation 30 did not preclude an employer from having an earlier retirement age, but it would have to be justified under regulation 3.
Nor did it require an employer to retire an employee at that age.
It simply meant that an employer could do so without having to justify it under regulation 3.
By regulation 47 and Schedule 6 to the Regulations, an employer who intended to retire an employee on a particular date had to give the employee between six and 12 months notice of that intention; the employee had a statutory right to request not to retire on that date and to continue working either indefinitely or for a stated period; the employer had then to take the request seriously, meet with the employee to discuss it, and give the employee a right of appeal if it was turned down.
The Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 (SI 2011/1069) phase out the designated retirement age in regulation 30, so that (at the latest from October 2012) there is no longer any self justifying retirement age for employees.
Employees will therefore be in the same position as partners, to whom regulation 30 has never applied.
The principles governing the approach to the justification of compulsory retirement ages are therefore relevant to a much larger section of the working population than they were when these proceedings were begun.
This particular retirement has of course to be considered as at the date when it took place, on 31 December 2006.
Legitimate aims
The principal case advanced on behalf of Mr Seldon is that regulation 3 is inconsistent with the Directive, for two inter linked reasons.
The first is that it combines the justification of direct and indirect discrimination in a single familiar phrase: and A cannot show the treatment or, as the case may be, the provision, criterion or practice to be a proportionate means of achieving a legitimate aim.
The Directive, on the other hand, draws a careful distinction.
Article 2 prohibits all direct discrimination and all indirect discrimination where the provision etc cannot be justified.
Article 6 contains a special rule for age discrimination, which although literally applying to both direct and indirect discrimination, is most likely to apply to direct discrimination.
Regulation 3 has impermissibly elided the two types of justification.
The second reason is that article 6 contemplates that the justifications for direct age discrimination should be the broad social and economic policy objectives of the state (or, elsewhere in Europe, the social partners) and not the individual business needs of particular employers or partnerships.
This point was most clearly articulated in reply.
The problem is that the social policy aims may conflict: there is the need to get young people into the workforce and there is the need to enable older people to continue working for as long as they are able and wish to do so.
Only the state (or the social partners) can make the choice between these conflicting aims and that is clearly what is contemplated by article 6.
The respondent firm points out that regulation 3 was held by Blake J to be a proper implementation of the Directive in R (Age UK) v Secretary of State for Business, Innovation and Skills (Equality and Human Rights Commission and another intervening) [2009] EWHC 2336 (Admin), [2010] ICR 260 (Age UK) after a reference to the Luxembourg Court.
And the jurisprudence has made plain that aims analogous to those found in fact to be the aims of the firm are capable of being legitimate aims in this context.
The Secretary of State accepts that only certain kinds of aim are capable of justifying direct age discrimination and that the apparently broad terms of regulation 3 must be read down accordingly.
The distinction drawn in the evolving case law of the European Court of Justice/Court of Justice of the European Union (Luxembourg) is between aims relating to employment policy, the labour market or vocational training, which are legitimate, and purely individual reasons particular to the employers situation, such as cost reduction or improving competitiveness, which in general are not.
It is necessary, therefore, to turn to the developing Luxembourg jurisprudence, coupled with its application to these Regulations in the Age UK case.
It is helpful to do so chronologically.
The jurisprudence
Age Concern England (which later became Age UK) brought its challenge to the Regulations in July 2006, just after they had been made.
Their principal target was the designated retirement age in regulation 30, but they also attacked regulation 3 on the ground that it was necessary for the state to spell out the circumstances in which age discrimination might be justified.
At that stage it was not clear whether the Directive covered retirement ages at all.
Recital 14 states that the Directive shall be without prejudice to national provisions laying down retirement ages.
In July 2007, therefore, the administrative court referred five questions to Luxembourg, the first three of which concerned whether the Directive did cover retirement ages, the fourth asked whether article 6 required the state to specify the kinds of differences in treatment on grounds of age which might be justified, and the last asked whether there was any significant difference between the test in article 2(2) and the test in article 6(1).
In October 2007, the Grand Chamber in Luxembourg gave judgment in Flix Palacios de la Villa v Cortefiel Servicios SA, Case C 411/05, [2009] ICR 1111.
Spain had legislated for compulsory retirement when it wanted to encourage recruitment; then abolished it when economic circumstances improved and it wanted to encourage people to stay in work; and then reintroduced it by allowing collective agreements to prescribe retirement ages, provided that the worker had qualified for a retirement pension.
The Court held that, despite recital 14, requiring retirement at a particular age is direct age discrimination within the meaning of article 2(1) and 2(2)(a) and has therefore to be justified.
But this did not preclude national legislation allowing for this, even if the social policy aims were not spelled out in the legislation, as long as it could be decided from the context and other sources what those aims were.
The encouragement of recruitment was a legitimate aim.
The means employed had still to be both appropriate and necessary, although member states (and where appropriate social partners) enjoyed a broad discretion in the choice both of the aims and of the means to pursue them.
The measure in question did not unduly prejudice the legitimate claims of the workers because it was based, not only on a specific age, but also on having qualified for a pension.
Not surprisingly, therefore, when the Third Chamber (with Judge Lindh as juge rapporteur) came to decide the Age Concern reference, in R (Age Concern England) v Secretary of State for Business, Enterprise and Regulatory Reform, Case C 388/07 [2009] ICR 1080 (Age Concern), it held that member states were not required to draw up a list of differences in treatment which might be justified by a legitimate aim [43].
Lack of precision as to the aims which might be considered legitimate did not automatically preclude justification, although it was necessary to be able to identify the aim in order to review whether it was legitimate and the means of achieving it were appropriate and necessary [44, 45].
However, at [46], much relied upon on behalf of Mr Seldon: It is apparent from article 6(1) of Directive 2000/78 that the aims which may be considered legitimate within the meaning of that provision are social policy objectives, such as those related to employment policy, the labour market or vocational training.
By their public interest nature, those legitimate aims are distinguishable from purely individual reasons particular to the employers situation, such as cost reduction or improving competitiveness, although it cannot be ruled out that a national rule may recognise, in the pursuit of those legitimate aims, a certain degree of flexibility for employers.
As to the fifth question, as the dispute was about the retirement age provisions, it was not necessary to interpret article 2(2)(b) which was concerned with indirect discrimination [63, 64].
But the Court did observe that the scope of article 2(2)(b) and article 6(1) is not identical [58].
In another passage at [65], also much relied upon on behalf of Mr Seldon, it pointed out that: . it is important to note that [article 6(1)] is addressed to the member states and imposes on them, notwithstanding their broad discretion in matters of social policy, the burden of establishing to a high standard of proof the legitimacy of the aim pursued.
Before Age UK came back before the administrative court, the Third Chamber (again with Judge Lindh as juge rapporteur) decided the case of David Htter v Technische Universitt Graz, Case C 88/08 [2009] All ER (EC) 1129.
The law governing public service stipulated that service before the age of 18 was not to be taken into account in determining the pay grade.
This discriminated against those who had undertaken apprenticeships in the public sector compared with those who had stayed in general education.
The aims of not discouraging people to stay in secondary education, of not making apprenticeship costly for the public sector, and of promoting the integration of young apprentices into the labour market (see [16]) were social policy aims of the kind which could be justification under article 6(1) [43].
But those aims were contradictory [46] and the law was not appropriate to achieve them [50].
This case therefore illustrates that it is not enough for the aims of a measure to be legitimate: the measure must still be carefully scrutinised to ensure that it is both appropriate to meeting those aims and a proportionate means of doing so.
The Grand Chamber (again with Judge Lindh as juge rapporteur) decided three cases in January 2010, after Advocate General Bot had given his opinions in July and September 2009.
Petersen v Berufungsausschuss fr Zahnrzte fr den Bezirk Westfalen Lippe, Case C 341/08, [2010] 2 CMLR 830 concerned a law which prohibited practice as a panel dentist after reaching the age of 68.
Both protecting the health of patients and controlling public health expenditure were legitimate objectives under the exception in article 2(5) for measures necessary . for the protection of health.
Prohibiting practice as a panel dentist but not private practice over the age of 68 was inconsistent with the former aim but not inconsistent with the latter [63, 64].
The other possible aim, of sharing out employment opportunities between the generations, could be regarded as an employment policy measure under article 6(1) [68].
It might be necessary to impose such an age limit where there were too many panel dentists or a latent risk of such [73, 77].
Having given that guidance, the court repeated that it was for the national court to identify the aim which was actually being pursued by the measure [78].
Wolf v Stadt Frankfurt am Main, Case C 229/08 [2010] 2 CMLR 849 concerned a regulation of the Land Hessen setting an age limit of 30 for recruitment as a firefighter.
Although the referring court had asked about justification under article 6(1), the Luxembourg court considered that it could be justified under article 4(1), because the physical capabilities required for the job were related to age.
Kckdeveci v Swedex GmbH & Co KG, Case C 555/07, [2011] 2 CMLR 703 was about a law which calculated the length of notice to which employees were entitled by reference to their length of service but disregarding any period of service below the age of 25.
The aim of facilitating the recruitment of young people, who could react more easily to the loss of their jobs, by increasing the flexibility of personnel management did belong to employment and labour market policy within the meaning of article 6(1) [35, 36]; but the law was not appropriate to that aim because it applied to all employees who joined before 25 irrespective of their age at dismissal [40].
Nor was it appropriate to the aim of strengthening the protection of workers according to their length of service [41].
It is worth noting that Advocate General Bot had found it difficult to accept that the flexibility granted to employers could be an aim in itself, because the Court in Age Concern had made it clear that legitimate objectives are of a public interest nature [AG44 49].
The Court did not expressly endorse this, but the aim it was considering was more than mere flexibility it was flexibility designed to encourage the recruitment of young people.
When Blake J came to decide Age UK in September 2009, he had the decisions in Palacios de la Villa, Age Concern, and Htter, coupled with the Advocate Generals opinion in Kckdeveci, to guide him in deciding whether regulations 3 and 30 were compatible with the Directive.
Clearly, a regulation in such general terms as regulation 3 was not precluded, provided that it could be justified.
He concluded that the Governments aim in promoting the regulations was to preserve the confidence and integrity of the labour market and that this was a legitimate aim for the purpose of article 6(1).
In the context of regulation 3 he pointed out that the private employer is not allowed the wider margin of discretion in the application of the regulation that the state is [92] and that there was a clear distinction between the government as a public body being concerned about the social cost to competitiveness of UK employment in the early phase of implementing the new principles and policies of the Directive, and individual business saying it is cheaper to discriminate than to address the issues that the Directive requires to be addressed [93].
In the context of regulation 30, he concluded that while a designated retirement age could be justified, it was harder to justify adopting the age of 65.
Had this been done for the first time in 2009 or there was no indication of an early review, he would have concluded that it was not proportionate [128].
As things were in 2006, however, it was not beyond the competence of government [129].
But he correctly predicted that the age would not survive the review [130].
As we have seen, of course, the whole concept of a designated retirement age has not survived.
In October 2010 the Grand Chamber (again with Judge Lindh as juge rapporteur) decided two more age discrimination cases.
Rosenbladt v Oellerking GmbH, Case C 45/09, [2011] CMLR 1011, is much relied upon by the respondent firm and the Secretary of State.
The dispute was about a clause in the collective agreement for employees in the commercial cleaning sector (RTV) which provided for automatic termination when an employee became entitled to a retirement pension and at the latest at the end of the month when she reached 65.
Para 10.5 of the General Law on Equal Treatment (AGG) listed agreements providing for automatic termination on reaching the age when an employee might claim an old age pension among the examples of differences in treatment which might be justified if necessary and appropriate for a legitimate aim.
The Court held that the aims of sharing employment between the generations, making it easier for younger workers to find work, particularly in a time of chronic unemployment, while protecting the rights of older workers whose pensions serve as replacement income, and not requiring employers to dismiss them on grounds of incapacity, which may be humiliating [43] were in principle capable of objectively and reasonably justifying a difference in treatment on grounds of age [45].
Authorising clauses like this could not generally be regarded as prejudicing the legitimate interests of the workers concerned [47].
It is based not only on age but also on entitlement to a replacement income [48].
Also, unlike dismissal or resignation, it has its basis in an agreement.
That allows not only employees and employers, by means of individual agreements, but also the social partners, by means of collective agreements and therefore with considerable flexibility to opt for application of that mechanism so that due account may be taken not only of the overall situation in the labour market concerned, but also of the specific features of the jobs in question (Palacios de la Villa, [74]). [49] So article 6(1) did not preclude a measure such as paragraph 10.5 of the national law; but the collective agreement implementing it must itself pursue a legitimate aim in an appropriate and necessary manner [53].
The clause offered stability of employment and the promise of foreseeable retirement while offering employers a certain flexibility in the management of their staff, thus reflecting a balance between diverging but legitimate interests, against a complex background of employment relationships closely linked to political choices in the area of retirement and employment [68].
So it was not unreasonable for social partners to regard the clause as appropriate [69].
But was it necessary, given the significant financial hardship caused to workers in the commercial cleaning sector, where poorly paid part time employment is typical [71]? Were there less onerous measures? People who had reached retirement age could continue to work, and must not be discriminated against on grounds of age in finding work [74], so they were not forced to withdraw from the labour market [75].
So the measure was not precluded.
There is no suggestion that its actual application to Frau Rosenbladt, who needed to carry on working because her pension was so small, had also to be justified.
In contrast, in Ingenirforeningen i Danmark v Region Syddanmark, Case C 499/08 [2011] 1 CMLR 1140, the Grand Chamber (again with Judge Lindh as juge rapporteur) held that a Danish law on severance allowances, which did not apply to people dismissed when they had qualified for a retirement pension, was not justified.
The general (and legitimate) aim of the severance allowances was to facilitate the move to new employment of people who might find it difficult to find new employment because of the length of time they had been with their old employer.
Excluding people who had qualified for a pension and who actually intended to retire was not inappropriate [34, 35].
But it was not necessary to exclude those who wished to waive their pension claims in order to try to continue working [4447].
In Georgiev v Technicheski Universitet Sofia, Filial Plovdiv, Joined Cases C 250/09 & C 268/09 [2011] 2 CMLR 179, the Second Chamber (again with Judge Lindh as juge rapporteur) held that article 6(1) did not preclude national legislation under which university professors are compulsorily retired when they reach 68 and may only work beyond 65 on one year fixed term contracts renewable at most twice, provided that it pursued a legitimate aim linked to employment and labour market policy, such as the delivery of quality teaching and the best possible allocation of posts for professors between the generations and that it makes it possible to achieve that aim by appropriate and necessary means [68].
Given that the average age of Bulgarian professors was 58 and younger people were not interested in entering the career, it was for the national court to decide whether these actually were the aims of the Bulgarian legislature.
The second chamber (again with Judge Lindh as juge rapporteur) had to consider a very similar law of the Land Hessen, providing for the compulsory retirement of civil servants, including state prosecutors, in Fuchs and another v Land Hessen, Joined Cases C 159/10 and C 160/10, [2011] 3 CMLR 1299.
The claimed aims were to achieve a balance between the generations, plus the efficient planning of the departure and recruitment of staff, encouraging the recruitment or promotion of young people, and avoiding disputes about older employees ability to perform their duties [47]; and also to promote interchange between the experience of older colleagues and the recently acquired knowledge of younger ones [48].
All of these could constitute legitimate aims [49], [50].
The court repeated the general propositions about the nature of legitimate aims in Age Concern [46] at [52].
But it went on to issue some words of warning.
Member states may not frustrate the prohibition of discrimination on grounds of age, read in the light of the fundamental right to engage in work [62].
Particular attention must be paid to the participation of older workers in the labour force and thus in economic, cultural and social life.
Keeping older workers in the labour force promotes diversity, and contributes to realising their potential and to their quality of life [63].
This interest must be taken into account in respecting the other, potentially divergent, interests [64].
Therefore, in defining their social policy on the basis of political, economic, social, demographic and/or budgetary considerations, the national authorities concerned may be led to choose to prolong peoples working life or, conversely, to provide for early retirement (see Palacios de la Villa, [68] and [69]).
The Court has held that it is for those authorities to find the right balance between the different interests involved, while ensuring that they did not go beyond what is appropriate and necessary to achieve the legitimate aim pursued (Palacios de la Villa [69], [71] Rosenbladt [44]). [65] Budgetary considerations might underpin the chosen social policy, but they could not in themselves constitute a legitimate aim within article 6(1) [74].
This measure might be appropriate to the aim of facilitating access to employment by younger people, in a profession where the number of posts is limited (citing Petersen and Georgiev) [58, 59, 60].
Nor did it go beyond what was necessary to achieve its aims, given that the prosecutors could retire at 65 on generous pensions, continue working until 68, and practise as lawyers if they left [68].
Hennigs v Eisenbahn Bundesamt; Land Berlin v Mai, Joined Cases C 297/10 and C 298/10, [2011] ECR, decided by the Second Chamber (again with Judge Lindh as juge rapporteur) in September 2011, is another example of a finding that determining pay grades by reference to age at first appointment could not be justified.
Rewarding experience was a legitimate aim (see Htter), but while length of service was appropriate to achieve that aim, age did not always correlate with experience [74, 75, 76].
Finally, in Prigge and others v Deutsche Lufthansa AG, Case C 447/09 [2011] IRLR 1052, the Grand Chamber (again with Judge Lindh as juge rapporteur) found that a collective agreement providing for the employment of Lufthansa pilots to terminate automatically at the age of 65 could not be justified.
This was not an article 6(1) case, as the suggested aims had to do with the safety and security of air travel, which fell within article 2(5), or the physical capabilities required for flying a plane, which fell within article 4(1).
But as neither international nor national legislation considered that an absolute ban at the age of 65 was necessary to achieve these aims, it could not be justified.
What messages, then, can we take from the European case law? (1) All the references to the European Court discussed above have concerned national laws or provisions in collective agreements authorised by national laws.
They have not concerned provisions in individual contracts of employment or partnership, as this case does.
However, the Bartsch case, mentioned at [2] above, did concern the rules of a particular employers pension fund; and the Prigge case, [49] above, concerned a collective agreement governing the employees of a single employer, Deutsche Lufthansa. (2) If it is sought to justify direct age discrimination under article 6(1), the aims of the measure must be social policy objectives, such as those related to employment policy, the labour market or vocational training.
These are of a public interest nature, which is distinguishable from purely individual reasons particular to the employers situation, such as cost reduction or improving competitiveness (Age Concern, Fuchs). (3) It would appear from that, as Advocate General Bot pointed out in Kckdeveci, that flexibility for employers is not in itself a legitimate aim; but a certain degree of flexibility may be permitted to employers in the pursuit of legitimate social policy objectives. (4) A number of legitimate aims, some of which overlap, have been recognised in the context of direct age discrimination claims: (i) promoting access to employment for younger people (Palacios de la Villa, Htter, Kckdeveci); (ii) the efficient planning of the departure and recruitment of staff (Fuchs); (iii) sharing out employment opportunities fairly between the generations (Petersen, Rosenbladt, Fuchs); (iv) ensuring a mix of generations of staff so as to promote the exchange of experience and new ideas (Georgiev, Fuchs); (v) rewarding experience (Htter, Hennigs); (vi) cushioning the blow for long serving employees who may find it hard to find new employment if dismissed (Ingenirforeningen i Danmark); (vii) facilitating the participation of older workers in the workforce (Fuchs, see also Mangold v Helm, Case C 144/04 [2006] 1 CMLR 1132); (viii) avoiding the need to dismiss employees on the ground that they are no longer capable of doing the job which may be humiliating for the employee concerned (Rosenbladt); or (ix) avoiding disputes about the employees fitness for work over a certain age (Fuchs). (5) However, the measure in question must be both appropriate to achieve its legitimate aim or aims and necessary in order to do so.
Measures based on age may not be appropriate to the aims of rewarding experience or protecting long service (Htter, Kckdeveci, Ingenirforeningen i Danmark). (6) The gravity of the effect upon the employees discriminated against has to be weighed against the importance of the legitimate aims in assessing the necessity of the particular measure chosen (Fuchs). (7) The scope of the tests for justifying indirect discrimination under article 2(2)(b) and for justifying any age discrimination under article 6(1) is not identical.
It is for the member states, rather than the individual employer, to establish the legitimacy of the aim pursued (Age Concern).
Issues 1 and 3
Not surprisingly, in view of the way in which regulation 3 is constructed, the ET in this case approached the task of justifying direct age discrimination in the way that was familiar to them in the context of indirect discrimination on other grounds (as to which see Homer v Chief Constable of West Yorkshire Police [2012] UKSC 15).
They did not, of course, have the benefit of any of the subsequent jurisprudence either in Luxembourg or the UK.
It now seems clear that the approach to justifying direct age discrimination cannot be identical to the approach to justifying indirect discrimination and that regulation 3 (and its equivalent in section 13(2) of the Equality Act 2010) must be read accordingly.
In Age Concern, the Court recorded the submission of the EU Commission that in article 6, the focus is on the legitimate aim pursued by the member state, whereas in article 2(2)(b) the focus is on whether the employer can justify his employment practices [57].
The Court did not expressly approve that, but it did say that the scope of the two is not identical [58] and that article 6 is addressed to member states [67]. (It is also worth noting that in Ingenirforeningen i Danmark, Advocate General Kokott pointed out that the objectives which might be relied upon to justify direct discrimination, whether under article 6(1), 4(1) or 2(5), were fewer than those capable of justifying an indirect difference in treatment, even though the proportionality test requirements are essentially the same [AG31].)
But what exactly does this mean in practical terms? On the one hand, Luxembourg tells us that the choice of social policy aims is for the member states to make.
It is easy to see why this should be so, given that the possible aims may be contradictory, in particular between promoting youth employment and prolonging the working life of older people.
On the other hand, however, Luxembourg has sanctioned a generally worded provision such as regulation 3, which spells out neither the aims nor the means which may be justified.
It is also easy to see why this should be so, given that the priority which might be attached to particular aims is likely to change with the economic, social and demographic conditions in the country concerned.
In Age UK, Blake J identified the states aim, in relation both to regulation 3 and to the designated retirement age in regulation 30, as being to preserve the confidence and integrity of the labour market.
This is not an easy concept to understand, and there is a risk that it might be taken as allowing employers to continue to do whatever suits them best.
But it is, as Advocate General Bot observed in Kckdeveci, difficult to see how granting flexibility to employers can be a legitimate aim in itself, as opposed to a means of achieving other legitimate aims.
Furthermore, the Secretary of State accepts that there is a distinction between aims such as cost reduction and improving competitiveness, which would not be legitimate, and aims relating to employment policy, the labour market and vocational training, which would.
It seems, therefore, that the United Kingdom has chosen to give employers and partnerships the flexibility to choose which objectives to pursue, provided always that (i) these objectives can count as legitimate objectives of a public interest nature within the meaning of the Directive and (ii) are consistent with the social policy aims of the state and (iii) the means used are proportionate, that is both appropriate to the aim and (reasonably) necessary to achieve it.
Two different kinds of legitimate objective have been identified by the Luxembourg court.
The first kind may be summed up as inter generational fairness.
This is comparatively uncontroversial.
It can mean a variety of things, depending upon the particular circumstances of the employment concerned: for example, it can mean facilitating access to employment by young people; it can mean enabling older people to remain in the workforce; it can mean sharing limited opportunities to work in a particular profession fairly between the generations; it can mean promoting diversity and the interchange of ideas between younger and older workers.
The second kind may be summed up as dignity.
This has been variously put as avoiding the need to dismiss older workers on the grounds of incapacity or underperformance, thus preserving their dignity and avoiding humiliation, and as avoiding the need for costly and divisive disputes about capacity or underperformance.
Either way, it is much more controversial.
As Age UK argue, the philosophy underlying all the anti discrimination laws is the dignity of each individual, the right to be treated equally irrespective of either irrational prejudice or stereotypical assumptions which may be true of some but not of others.
The assumptions underlying these objectives look suspiciously like stereotyping.
Concerns about capacity, it is argued, are better dealt with, as they were in Wolf and Prigge under article 4(1), which enables them to be related to the particular requirements of the job in question.
I confess to some sympathy with the position taken by Age UK.
The fact that most women are less physically strong than most men does not justify refusing a job requiring strength to a woman candidate just because she is a woman.
The fact that this particular woman is not strong enough for the job would justify refusing it to her.
It would be consistent with this principle to hold that the fact that most people over a certain age have slower reactions than most people under that age does not justify sacking everyone who reaches that age irrespective of whether or not they still do have the necessary speed of reaction.
But we know that the Luxembourg court has held that the avoidance of unseemly debates about capacity is capable of being a legitimate aim.
The focus must therefore turn to whether this is a legitimate aim in the particular circumstances of the case.
The fact that a particular aim is capable of being a legitimate aim under the Directive (and therefore the domestic legislation) is only the beginning of the story.
It is still necessary to inquire whether it is in fact the aim being pursued.
The ET, EAT and Court of Appeal considered, on the basis of the case law concerning indirect discrimination (Schnheit v Stadt Frankfurt am Main, Joined Cases C 4/02 and C 5/02, [2004] IRLR 983; see also R (Elias) v Secretary of State for Defence [2006] 1 WLR 3213), that the aim need not have been articulated or even realised at the time when the measure was first adopted.
It can be an ex post facto rationalisation.
The EAT also said this [50]: A tribunal is entitled to look with particular care at alleged aims which in fact were not, or may not have been, in the rule makers mind at all.
But to treat as discriminatory, what might be a clearly justified rule on this basis would be unjust, would be perceived to be unjust, and would bring discrimination law into disrepute.
There is in fact no hint in the Luxembourg cases that the objective pursued has to be that which was in the minds of those who adopted the measure in the first place.
Indeed, the national court asked that very question in Petersen.
The answer given was that it was for the national court to seek out the reason for maintaining the measure in question and thus to identify the objective which it pursues [42] (emphasis supplied).
So it would seem that, while it has to be the actual objective, this may be an ex post facto rationalisation.
Once an aim has been identified, it has still to be asked whether it is legitimate in the particular circumstances of the employment concerned.
For example, improving the recruitment of young people, in order to achieve a balanced and diverse workforce, is in principle a legitimate aim.
But if there is in fact no problem in recruiting the young and the problem is in retaining the older and more experienced workers then it may not be a legitimate aim for the business concerned.
Avoiding the need for performance management may be a legitimate aim, but if in fact the business already has sophisticated performance management measures in place, it may not be legitimate to avoid them for only one section of the workforce.
Finally, of course, the means chosen have to be both appropriate and necessary.
It is one thing to say that the aim is to achieve a balanced and diverse workforce.
It is another thing to say that a mandatory retirement age of 65 is both appropriate and necessary to achieving this end.
It is one thing to say that the aim is to avoid the need for performance management procedures.
It is another to say that a mandatory retirement age of 65 is appropriate and necessary to achieving this end.
The means have to be carefully scrutinised in the context of the particular business concerned in order to see whether they do meet the objective and there are not other, less discriminatory, measures which would do so.
Issue 2
This leads to the final issue, which is whether the measure has to be justified, not only in general but also in its application to the particular individual.
After all, the regulation applies to a particular act of direct discrimination, where on grounds of Bs age, A treats B less favourably than he treats or would treat other persons and A cannot show the treatment . to be a proportionate means of achieving a legitimate aim. The argument on behalf of Mr Seldon, therefore, is that the partnership, A, had to show that its particular less favourable treatment of him, B, was justified.
This could be another distinction between direct and indirect discrimination, because for indirect discrimination the regulation only requires A to show that the provision, criterion or practice is a proportionate means of achieving a legitimate aim.
Hence, it is argued, the partnership should have to show, not only that the mandatory retirement rule was a proportionate means of achieving a legitimate aim, but also that applying it to Mr Seldon could be justified at the time.
The answer given in the EAT, at [58], with which the Court of Appeal agreed, at [36], was that: Typically, legitimate aims can only be achieved by the application of general rules or policies.
The adoption of a general rule, as opposed to a series of responses to particular individual circumstances, is itself an important element in the justification.
It is what gives predictability and consistency, itself an important virtue.
Thus the EAT would not rule out the possibility that there may be cases where the particular application of the rule has to be justified, but they suspected that these would be extremely rare.
I would accept that where it is justified to have a general rule, then the existence of that rule will usually justify the treatment which results from it.
In the particular context of inter generational fairness, it must be relevant that at an earlier stage in his life, a partner or employee may well have benefited from a rule which obliged his seniors to retire at a particular age.
Nor can it be entirely irrelevant that the rule in question was re negotiated comparatively recently between the partners.
It is true that they did not then appreciate that the forthcoming Age Regulations would apply to them.
But it is some indication that at the time they thought that it was fair to have such a rule.
Luxembourg has drawn a distinction between laws and regulations which are unilaterally imposed and collective agreements which are the product of bargaining between the social partners on a presumably more equal basis (Rosenbladt, Hennigs).
There is therefore a distinction between justifying the application of the rule to a particular individual, which in many cases would negate the purpose of having a rule, and justifying the rule in the particular circumstances of the business.
All businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified.
Application to this case
In common with both the EAT and the Court of Appeal, I would pay tribute to the careful judgment of the ET.
Their conclusions are particularly impressive given that they were deciding the case in November 2007, before any of the European jurisprudence discussed earlier had emerged.
They did approach the justification of direct discrimination in the same way as they would have approached the justification of indirect discrimination, whereas we now know that there is a difference between the two.
However, they identified three aims for the compulsory retirement age, which the Court of Appeal summed up as dead mens shoes and collegiality.
Mr Seldon, with the support of Age UK, has argued that these were individual aims of the business rather than the sort of social policy aims contemplated by the Directive.
I do not think that that is fair.
The first two identified aims were staff retention and workforce planning, both of which are directly related to the legitimate social policy aim of sharing out professional employment opportunities fairly between the generations (and were recognised as legitimate in Fuchs).
The third was limiting the need to expel partners by way of performance management, which is directly related to the dignity aims accepted in Rosenbladt and Fuchs.
It is also clear that the aims can be related to the particular circumstances of the type of business concerned (such as university teaching, as in Georgiev).
I would therefore accept that the identified aims were legitimate.
As to whether the means chosen were proportionate, in the article 6(1) sense of being both appropriate and (reasonably) necessary to achieving those aims, the case is already to go back to the ET on the basis that it had not been shown that the choice of 65 was an appropriate means of achieving the third aim.
The question, therefore, was whether the ET would have regarded the first two aims as sufficient by themselves.
In answering that question, I would not rule out their considering whether the choice of a mandatory age of 65 was a proportionate means of achieving the first two aims.
There is a difference between justifying a retirement age and justifying this retirement age.
Taken to extremes, their first two aims might be thought to justify almost any retirement age.
The ET did not unpick the question of the age chosen and discuss it in relation to each of the objectives.
It would be unduly constraining to deny them the opportunity of doing so now.
I would emphasise, however, that they are considering the circumstances as they were in 2006, when there was a designated retirement age of 65 for employees, and not as they are now.
Subject to that observation, I would dismiss this appeal.
LORD HOPE
I am in full agreement with Lady Hales comprehensive judgment.
For the reasons she gives, I too would dismiss this appeal.
I wish to add only a few words of my own.
Article 6(1) of Council Directive 2000/78/EC declares that Member States may provide that differences of treatment on grounds of age shall not constitute discrimination if, within the context of national law, they are objectively and reasonably justified by a legitimate aim including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.
The provision in national law which defines age discrimination is regulation 3 of the Employment Equality (Age) Regulations 2006.
This case seemed at one stage to be being argued on the basis that it concerns the application to Mr Seldon of a measure of the kind referred to in regulation 3(1)(b), under which a person (A) discriminates against another person (B) if A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same age group as B, but (i) which puts or would put persons of the same age group as B at a particular disadvantage when compared with other persons, and (ii) which puts B at that disadvantage, and A cannot show the treatment or, as the case may be, provision, criterion or practice to be a proportionate means of achieving a legitimate aim.
But I think that it is truly a case of direct discrimination of the kind referred to in regulation 3(1)(a).
The proportionality test quoted above also applies to it, although the layout of the regulation in the statutory instrument might be taken as suggesting otherwise.
Regulation 3(1)(a) provides that a person discriminates against another person for the purposes of the Regulations if, on grounds of Bs age, A treats B less favourably than he treats or would treat other persons.
Regulation 3 was held by the ECJ in R (Age Concern England) v Secretary of State for Business, Enterprise and Regulatory Reform, Case C 388/07 [2009] ICR 1080 to be a proper implementation of the Directive, and the general words which appear at the end of the passage which I have quoted survived scrutiny by Blake J in R (Age UK) v Secretary of State for Business, Innovation and Skills (Equality and Human Rights Commission and another intervening) [2010] ICR 260: see paras 84 90.
They must however be read together with article 6 of the Directive which indicates that aims of a certain character only can be regarded as legitimate in this context.
The characteristic which distinguishes aims which are legitimate from those which are not is indicated by the words including legitimate employment policy, labour market and vocational training objectives.
As Lady Hale has demonstrated, the evolving case law of the ECJ and the CJEU has shown that a distinction must be drawn between legitimate employment policy, labour market and vocational training objectives and purely individual reasons which are particular to the situation of the employer.
There is a public interest in facilitating and promoting employment for young people, planning the recruitment and departure of staff and the sharing out of opportunities for advancement in a balanced manner according to age.
These social policy objectives have private aspects to them, as they will tend to work to the employers advantage.
But the point is that there is a public interest in the achievement of these aims too.
They are likely to be intimately connected with what employers do to advance the interests of their own businesses, because that it how the real world operates.
It is the fact that their aims can be seen to reflect the balance between the differing but legitimate interests of the various interest groups within society that makes them legitimate.
It was submitted that the aims which were identified by the firm to justify the compulsory retirement age in this case were not social policy aims at all, when viewed objectively.
Mr Allen QC for Mr Seldon said that the state had no interest in whether it was run in this way.
It would make it all too easy for a prejudiced employer to avoid being held to be in breach of the regulation if it could rely on aims such as those that had been identified in this case.
Like Lady Hale, I would reject these arguments.
It is true that the aims which the Employment Tribunal accepted as legitimate the retention of associates, facilitating the planning of the partnership and workforce and limiting the need to expel partners by way of performance management were directed to what could be regarded as being in the firms best interests.
That in itself is not surprising, because firms such as Clarkson Wright and Jakes are in business and must organise their affairs accordingly.
They are exposed to all the forces of competition in their chosen market.
They are not a social service.
This affects the way they choose to manage the partnership and other aspects of their workforce, just as much as it affects the way in which their business as a whole is conducted.
But this does not mean that their aims cannot be seen, when viewed objectively, as being directly related to what is regarded as a legitimate social policy.
I agree that the Employment Tribunal reached a sound decision on this point and that the aims which it identified were of a kind that, in terms of article 6 of the Directive, were legitimate.
The question then is whether, as Mr Allen contended, the partners of the firm had to show that they had the legitimate public interests in mind at the time when the partnership deed was entered into in 2005, or at least that these were their only or main aims or objectives.
I would answer this question in the negative.
What article 6 requires is that the measure must be objectively justified.
Just as it will not be sufficient for the partners simply to assert that their aims were designed to promote the social policy aims that the article has identified, it does not matter if they said nothing about this at the time or if they did not apply their minds to the issue at all.
As it happens, no minute was taken of the reasons why clause 22 was framed as it was.
But I regard this fact as immaterial, as the matter was one for the Employment Tribunal and not for the partners themselves to determine.
Furthermore, the time at which the justification for the treatment which is said to be discriminatory must be examined is when the difference of treatment is applied to the person who brings the complaint.
The case must go back to the Employment Tribunal on the issue as to whether it was proportionate for clause 22 to provide for the mandatory retirement of the partners at the end of the calendar year when they reached the age of 65.
I agree with Lady Hale that it would be right for account to be taken of the fact that at the time both when the clause was agreed to and when it was applied to Mr Seldon, regulation 30 which provided for a designated retirement age for employees, was still in force.
This fact is not, of course, conclusive.
But it is a factor that can properly be taken into account, as the question is whether the treatment which Mr Seldon received was discriminatory at the time when he was subjected to it.
The fact that it was lawful for others to be subjected to a designated retirement age may help to show that what was agreed to in this case was, at the relevant time, an acceptable way of achieving the legitimate aim.
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This case concerns the scope for justifying direct discrimination on the ground of age and in particular a mandatory retirement age contained within a partnership agreement.
The case was heard alongside Homer (Appellant) v Chief Constable of West Yorkshire Police (Respondent) [2012] UKSC 15 which concerned the scope of indirect discrimination on the ground of age.
Mr Seldon joined the Respondent law firm in 1971 and was made an equity partner in 1972.
In 2005 he and the other partners in the firm agreed and adopted a partnership deed which (like earlier deeds) provided that, subject to the partners agreement to the contrary, partners who attain the age of 65 had to retire from the firm by the end of the following December.
Mr Seldon reached the age of 65 on 15 January 2006.
Realising that he would need to continue working beyond this point, he asked the other partners to extend his tenure.
The proposals were rejected on the basis of there being no sufficient business need.
The partners did however offer Mr Seldon an ex gratia payment of 30,000.
The Employment Equality (Age) Regulations 2006, SI 2006/1031 (the Age Regulations) came into force in October 2006.
Mr Seldon informed the partners that he was considering his rights under the Age Regulations (which have since been repealed but substantially re enacted under the Equality Act 2010).
The partners then withdrew their offer of an ex gratia payment.
Mr Seldon ceased to be a partner in the firm on 31 December 2006.
He issued proceedings in March 2007 alleging, under the Age Regulations, that his forced retirement was an act of direct age discrimination and that the withdrawal of the offer of an ex gratia payment was an act of victimisation.
Regulation 17 of the Age Regulations provides that it is unlawful for a firm to discriminate against partners by, amongst other things, expelling them from that position.
The definition of discrimination is contained in regulation 3 which provides that a person (A) discriminates against another person (B) if on grounds of Bs age, A treats B less favourably than he treats or would treat other persons and A cannot show the treatment to be a proportionate means of achieving a legitimate aim.
There was no dispute that the mandatory retirement age treated Mr Seldon less favourably than other partners and that this was necessarily on account of his age.
The key issue was whether that treatment could be justified.
The Age Regulations were intended to transpose Council Directive 2000/78/EC on equal treatment in occupation and employment into UK law.
Article 2(1)(a) of the Directive states that direct discrimination shall be taken to occur where one person is treated less favourably than another is, has been or would be treated in a comparable situation.
Article 2(1)(b) provides that indirect discrimination occurs where an apparently neutral provision, criterion or practice puts people of a particular age at a particular disadvantage, unless the provision, criterion or practice is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.
In relation to age discrimination, however, article 6(1) allows member states to provide that differences of treatment on grounds of age shall not constitute discrimination if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.
Regulation 3 does not distinguish between direct and indirect discrimination for the purpose of justification.
The Employment Tribunal accepted that the retirement policy pursued three legitimate aims: (i) giving
associates an opportunity of partnership within a reasonable time, and thereby an incentive to remain with the firm; (ii) facilitating workforce planning by knowing when vacancies were to be expected; (iii) limiting the need to expel underperforming partners, thus contributing to a congenial and supportive culture within the firm.
The Tribunal found that the mandatory retirement age of 65 was a proportionate means of achieving the three legitimate aims and therefore rejected the discrimination claim (but upheld the victimisation claim).
The Employment Appeal Tribunal held that the Employment Tribunal had failed to consider whether the aims could have been met by a retirement age other than 65 and remitted the case on that point alone.
The Court of Appeal dismissed Mr Seldons appeal.
He then appealed to the Supreme Court asserting that: first, it is wrong to elide the tests for justification in direct and indirect discrimination cases and that the aims pursued by the firm were not legitimate in the context of the former; and secondly, that the treatment had to be justified not only in respect of the firm generally but in its particular application to Mr Seldon.
The Supreme Court unanimously dismisses the appeal and remits the case to the Employment Tribunal on the outstanding issue.
Lady Hale gives the lead judgment with which the other members of the Court agree.
Lord Hope adds some further comments.
As to the first issue, the Employment Tribunal did not have the benefit of the later decisions in the European Court of Justice/Court of Justice of the European Union and in the High Court.
That jurisprudence shows that a distinction must be drawn between the tests for justification in direct and indirect discrimination and regulation 3 should be read accordingly [51].
The aims set out in article 6(1) of the Directive are directed primarily to the Member States and are of a public interest nature, which is distinguishable from purely individual reasons particular to the employers situation, such as cost reduction or improving competitiveness [50(2)].
The Age Regulations had given employers and partnerships the flexibility to choose which aims to pursue, provided that (i) they can count as legitimate objectives of a public interest nature within the meaning of the Directive, (ii) they are consistent with the social policy aims of the state, and (iii) the means used are both appropriate to the aim and reasonably necessary to achieve it [55].
It is necessary to identify the actual objective being pursued, although it may not have been articulated or even realised when the measure was first adopted [59, 60]].
Once an aim has been identified, it has to be asked whether it is legitimate in the particular circumstances of the employment or partnership concerned [61].
Finally, the means chosen must be both appropriate and necessary to achieve that aim [62].
Two broad categories of aim had been accepted as legitimate by the European Court: inter generational fairness and preserving the dignity of older workers [56, 57].
The three aims accepted by the Employment Tribunal in this case were consistent with article 6(1) of the Directive.
Staff retention and workforce planning were directly related to the social policy aim of sharing out professional employment opportunities fairly between the generations.
Limiting the need to expel partners by way of performance management was directly related to the dignity aim [67] (despite some reservations expressed about this aim generally [57, 58]).
As to the second issue, the wording of regulation 3 suggests that the focus is on whether the treatment of Mr Seldon (B) in particular was justified [63].
However, where it is justified to have a general rule, then the existence of that rule will usually justify the treatment which results from it. [65].
Often, requiring the application of the rule to the individual to be specifically justified would negate the purpose of having a rule in the first place [66].
However, all businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified in their particular business [66].
The case is remitted to the Employment Tribunal to consider whether the choice of a mandatory age of 65 was a proportionate means of achieving the legitimate aims of the partnership [68].
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Do the principles referable to the admissibility of fresh evidence on appeal, as propounded in the decision of the Court of Appeal in Ladd v Marshall [1954] 1 WLR 1489, have any relevance to the determination of a spouses application to set aside a financial order in divorce proceedings on the ground of a fraudulent non disclosure of resources on the part of the other spouse? The trial judge cast his judgment on two alternative grounds and in his analysis of one ground he identified a particular relevance for the principles propounded in the Ladd case.
It is now accepted that, in so holding, he was wrong and that the Court of Appeal was right so to declare.
But, when so declaring, the Court of Appeal purported to identify a different relevance for the principles propounded in the Ladd case to the determination of an application to set aside.
The main point of general importance which generates this further appeal is whether the Court of Appeal was right to hold that those principles have any relevance to such a determination.
Introduction
Mrs Gohil (whom I will call the wife notwithstanding that she was divorced from Mr Gohil, the husband, in 2004) appeals against an order of the Court of Appeal dated 13 March 2014.
By a judgment delivered by McFarlane LJ, with which Arden and Pitchford LJJ agreed, the Court of Appeal then explained its decision to set aside an order made by Moylan J on 25 September 2012, [2012] EWHC 2897 (Fam); the judgments of the Court of Appeal are numbered [2014] EWCA Civ 274 and it is clear that a decision was made to report them at the highest level of authority, namely as Gohil v Gohil (No 2) [2015] Fam 89.
The order of Moylan J had been to set aside part of a financial order which, by consent, Baron J had made against the husband in favour of the wife on 30 April 2004, namely the part by which she had dismissed all the wifes remaining claims against him for capital provision.
Moylan J had proceeded to order that her claims be listed for further directions to be given in aid of their ultimate determination.
The effect of the order of the Court of Appeal was therefore to prevent the wife from asking the court to revisit the level of capital provision made by the husband for her under the order dated 30 April 2004.
This court directed that the wifes appeal be heard at the same time as the appeal in Sharland v Sharland, [2015] UKSC 60, which also raised issues in relation to the determination of a spouses application for a further hearing of her claims on the ground of the others fraudulent non disclosure of resources.
Convenient though the conjoined hearing proved to be, it has nevertheless been considered preferable for the courts judgments on the two appeals to be given separately, albeit upon this same day.
The wife is now aged 51.
The husband is now aged 50.
They were married in 1990 and lived in a house in Chislehurst owned and also occupied by the husbands parents.
The parties had three children, all now adult.
The husband was a solicitor and became a partner in a small firm in Mayfair, some of whose clients, often living overseas, had, by fair means or foul, become wealthy and sought the firms assistance in protecting their wealth.
In 2002 the wife, with the children, moved out of the house in Chislehurst and she petitioned for divorce.
In response to her financial claims the husband asserted that in effect all his ostensible wealth represented assets held by him on behalf of his clients.
Shortly prior to 30 April 2004 he produced a balance sheet of what he alleged to be his personal assets which, when set against his liabilities, yielded a net deficit of 311,512.
The settlement of the wifes claims was achieved at a Financial Dispute Resolution (FDR) meeting conducted by Baron J on 30 April 2004.
There was a recital [recital 14] to the order then made, namely that the [wife] believes that the [husband] has not provided full and frank disclosure of his financial circumstances (although this is disputed by the [husband]), but is compromising her claims in the terms set out in this consent order despite this, in order to achieve finality.
The order dated 30 April 2004 provided that the husband should make to the wife, in final settlement of her capital claims, a lump sum payment of 270,000, payable as to 100,000 by 30 June 2004 and as to the balance immediately prior to the wifes exchange of contracts for the purchase of a home.
The husband alleged that he could make these payments only as a result of promised assistance on the part of his family.
The order also provided for him to make periodical payments to the wife of 6,000 pa from 1 January 2005 during their joint lives until her remarriage or further order, together with periodical payments for the children.
The husband duly paid the first instalment of the lump sum and in 2009, following a variation of the condition for its payment, he paid the balance.
He complied with the orders for periodical payments only until 2008, since when no such payments have been made.
Meanwhile, in 2007, the wife had applied for an order setting aside the order dated 30 April 2004 on the ground of the husbands fraudulent non disclosure of his resources at that time.
The wifes application took the form of a simple notice issued within the divorce proceedings.
The first four hearings for directions were conducted by Baron J because she had made the substantive order; then in 2008 she ruled that, having conducted the privileged FDR meeting, she should not continue to have conduct of the application.
Following ten further interlocutory hearings spread over three years, the substantive hearing of the wifes application began before Moylan J on 13 February 2012.
The major reason for the delay was that in 2008 the husband had been charged with offences of money laundering to a value of about 25m contrary to sections 327 and 328 of the Proceeds of Crime Act 2002 (the 2002 Act).
The prosecution case had been that from mid 2005 the husband had assisted Mr Ibori, who had been a state governor in Nigeria, in the laundering of money which in that capacity Mr Ibori had corruptly obtained.
In the criminal proceedings orders had been made restraining the husband from deploying his assets.
In November 2010, following an eight week trial, the husband had been found guilty and remanded in custody.
Thereupon a second trial had begun, at which the husband pleaded guilty to six further counts of money laundering and conspiracy to defraud.
In April 2011 the husband had been committed to prison for a total of ten years, whereupon the Crown Prosecution Service (the CPS) had launched confiscation proceedings against him under the 2002 Act.
They are still on foot and the husband remains in prison.
Moylan J heard the wifes application over eight days in February and June 2012.
The wife, who gave oral evidence, had sporadic legal representation but largely conducted the case herself.
The husband, who was produced from prison in order to give oral evidence, was represented pursuant to a civil aid certificate by counsel other than counsel who have represented him in the successive appeals.
The husbands father, who lives in India, gave evidence on behalf of the wife by video link.
On 30 May 2012, when the wifes application was part heard, Moylan J ordered the CPS to make extensive disclosure of documents which it had obtained for the purpose of the criminal proceedings against the husband: [2013] 1 FLR 1003.
It had opposed the order on the basis that many of the documents or their contents had been obtained from sources outside the UK pursuant to requests made by the Crown Court under the Crime (International Co operation) Act 2003 (the 2003 Act) and that section 9(2) of it precluded any use of them other than that specified in the requests.
Applying the decision of the Court of Appeal in BOC Ltd v Instrument Technology Ltd [2001] EWCA Civ 854, [2002] QB 537, Moylan J rejected the construction of section 9(2) for which the CPS contended.
The CPS appealed to the Court of Appeal against Moylan Js order and in the interim his order for disclosure was stayed.
On 25 September 2012 Moylan J delivered a reserved, oral judgment, by which he granted the wifes application and set aside the order which had dismissed her remaining capital claims against the husband.
The judge resolved not at that stage to set aside the order for payment of the lump sum in case its consequence should be that the lump sum, by then in the wifes hands, became subject to the restraint order obtained by the CPS against the husband.
In giving judgment Moylan J, no doubt sensitive to the existing delays, did not await the determination of the pending appeal of the CPS against his order dated 30 May 2012.
It follows that he never saw the documents which were the subject of that order.
But the contents of some of the documents had been in evidence before him.
For reference had been made to them in open court in the course of the husbands criminal trials, which the wife had attended; Moylan J had allowed her to relay in her evidence to him some of what she had then heard for challenge or otherwise by the husband; and no doubt some of her evidence in this regard reflected material which the CPS had obtained pursuant to requests made under the 2003 Act.
In his judgment Moylan J laid great stress on some of the evidence thus relayed to him from the criminal trials.
In the event, on 26 November 2012, the Court of Appeal allowed the appeal of the CPS against the order dated 30 May 2012: Gohil v Gohil [2012] EWCA Civ 1550, [2013] Fam 276.
The court concluded that the decision in the BOC case was wrong and that it was not bound by it.
It also concluded that the fact that material obtained under the 2003 Act had been adduced in open court in a criminal trial did not render it admissible in proceedings not identified in the requests.
The result was that Moylan J had relied upon evidence from the criminal trials which was inadmissible insofar as it reflected material obtained under the 2003 Act.
While rightly noting the inadmissibility of some of the evidence on which Moylan J relied, the Court of Appeal, in setting his order aside, was not in a position to distinguish evidence from the criminal trials which was admissible from that which was inadmissible.
Were it necessary for this court to direct that the wifes application be reheard, such would be a task for the trial judge.
Jurisdiction of the High Court to set aside
The first ground of the husbands appeal to the Court of Appeal was that, as a judge of the High Court, Moylan J had no jurisdiction to set aside an order made in the High Court.
The husband relied in particular on section 17 of the Senior Courts Act 1981 (the 1981 Act) which provides: (1) Where any cause or matter, or any issue in any cause or matter, has been tried in the High Court, any application for a new trial thereof, or to set aside a verdict, finding or judgment therein, shall be heard and determined by the Court of Appeal, except where rules of court made in pursuance of subsection (2) provide otherwise.
Subsection (2) permits rules of court to provide otherwise where no error of the court at the trial is alleged but, as McFarlane LJ pointed out, the only rule ever made pursuant to the subsection did not extend to an application to set aside a financial order.
As the argument before the Court of Appeal unfolded, however, the husbands jurisdictional objection to the order of Moylan J seems not to have been pressed.
Perhaps the husband had no appetite for a result which might consign the wifes application to substantive consideration elsewhere.
There is high authority although its consonance with section 17(1) of the 1981 Act seems never to have been established that the issue by the wife of a fresh action to set the order aside would have conferred the necessary jurisdiction on a judge of the High Court: de Lasala v de Lasala [1980] AC 546, 561.
In the present case the Court of Appeal seems to have deemed the wifes application in the divorce proceedings to have been a fresh action and, on that basis, it turned to address the other grounds of the husbands appeal.
It follows that no issue about the jurisdiction of Moylan J to have set aside the order dated 30 April 2004 is raised before this court.
But the Family Procedure Rule Committee (the committee) is currently considering how best to formulate a clear procedure for those who aspire to set aside financial orders made by courts at every level.
In those circumstances it may therefore be helpful for this court to make the following observations: (a) The Court of Appeal has itself long recognised that it is an inappropriate forum for inquiry into disputed issues of non disclosure raised in proceedings for the setting aside of a financial order: Robinson v Robinson (Practice Note) [1982] 1 WLR 786, 786, and Judge v Judge [2008] EWCA Civ 1458, [2009] 1 FLR 1287, para 48.
Indeed its observations to that effect in the Robinson case were quoted with approval by Lord Brandon of Oakbrook in Livesey (formerly Jenkins) v Jenkins [1985] AC 424, 442.
The Court of Appeal is not designed to address a factual issue other than one which has been ventilated in a lower court. (b) That the Court of Appeal is an inappropriate forum is clearly demonstrated by the present case: there is no way in which it would have devoted its resources to the conduct of an intensive eight day fact finding hearing, upon controversial evidence given by live witnesses and contained in a mass of documents, such as was conducted by Moylan J. (c) There is therefore need for definitive confirmation, whether by a rule made pursuant to section 17(2) of the 1981 Act or otherwise, of the jurisdiction of the High Court to set aside a financial order made in that court.
A substantive order will bring the existence of ordinary civil proceedings to an end and will therefore require any attempt to set it aside to be made within a fresh action.
But the same effect has never been attributed to a financial order made in divorce proceedings; so there is no need to provide that the jurisdiction of the High Court to set aside its financial orders be invoked by a fresh action, rather than by application within those proceedings.
It is nowadays rare, however, for a financial order to be made in the High Court: it is normally made in the family court and, when made there by a High Court judge, he or she sits in that court as a judge of High Court level.
It seems highly convenient that an application to set aside a financial order of the family court on the ground of non disclosure should, again, be made to that court and indeed at the level at which the order was made; and this convenient solution seems already to have been achieved by the provision of the Matrimonial and Family Proceedings Act 1984 recently inserted as section 31F(6), under which the family court has power to rescind any order made by it. (d) The minutes of the meeting of the committee on 20 April 2015 have been placed before this court.
The committees conclusion, which in my view this court should indorse, is that its Setting Aside Working Party should proceed on the basis that: (i) there is power for the High Court and the family court to set aside its own orders where no error of the court is alleged and for rules to prescribe a procedure; (ii) financial remedy only; (iii) ; the rule should be limited so as to apply to all types of (iv) applications to set aside should be made to the level of judge (including magistrates) that made the original order; and (v) if an application to set aside can be made, any application for permission to appeal be refused.
Recital 14
The husband argued unsuccessfully before Moylan J that recital 14 to the order dated 30 April 2004 disabled the wife from making any complaint about non disclosure on his part.
The husband seems scarcely to have pressed the argument in the Court of Appeal and it did not figure in McFarlane LJs judgment; but, apparently emboldened by the recent decision of the Court of Appeal in Hayward v Zurich Insurance Co PLC [2015] EWCA Civ 327, the husband revives the argument in case the Court of Appeals decision in the present case needs extra defence.
It is obvious that recital 14 to the order dated 30 April 2004 was inserted at the request of the husband, albeit that the wife agreed to it.
Such recitals to financial orders made by consent in divorce proceedings are not common; but nor are they unknown.
Those advising a husband in negotiating a settlement with a wife openly sceptical about the comprehensiveness of his financial disclosure occasionally appear to consider that such a recital has some protective effect for him against any later attempt to reopen it on the ground of his non disclosure.
Are they correct?
In the Hayward case the claimant alleged that his accident at work had led to specified injuries of a long term character.
In their defence the employers, by their insurers, pleaded that the claimant had exaggerated his injuries and that he was guilty of lack of candour.
His claim was thereupon settled in the sum of 135k.
Five years later the insurers, who had received fresh evidence of the claimants full recovery prior to the settlement, sought to reclaim most of the award in an action for deceit.
The Court of Appeal held that it could not do so.
In the light of its pleaded assertions that the claimants presentation of his injuries had been dishonest, the insurers could not be said to have relied on his presentation when entering into the settlement.
So said Underhill LJ at para 23; and at para 25 he concluded that parties who settle claims with their eyes wide open should not be entitled to revive them only because better evidence comes along later.
This court has recently granted permission to the insurers to appeal against the Court of Appeals decision.
In my view the reasoning of the Court of Appeal in the Hayward case, even if it were to be upheld by this court in the circumstances of that case, does not apply to a case in which the dishonesty takes the form of a spouses deliberate non disclosure of resources in financial proceedings following divorce.
For the spouse has a duty to the court to make full and frank disclosure of his resources (see the Livesey case cited in para 18(a) above at p 437), without which the court is disabled from discharging its duty under section 25(2) of the Matrimonial Causes Act 1973 and any order, by consent or otherwise, which it makes in such circumstances is to that extent flawed.
One spouse cannot exonerate the other from complying with his or her duty to the court.
No doubt on 30 April 2004 Baron J closely scrutinised the order which she was invited to make; and scrutinised also the content of the undertakings which she was invited to accept, in the knowledge that on a later occasion she might be invited to enforce them.
But what the parties found convenient to record as agreed recitals to the order was of little interest to Baron J.
In the present context, namely that of a financial order in divorce proceedings, a form of words such as recital 14 has no legal effect.
Ladd v Marshall
In the Ladd case, cited in para 1 above, the claimant sued the defendant for repayment of 1,000.
The claim turned on whether he had paid 1,000 to the defendant in the first place.
The claimant called the defendants wife but she said that she recalled no such payment.
The claim was dismissed.
In his appeal the claimant sought to adduce further evidence or to secure a direction for a new trial at which he could adduce it.
The proposed fresh evidence was to be given by the defendants wife, who intended to say that she had lied at the trial and that she had been present when the claimant had paid 1,000 to her husband.
The Court of Appeal refused to receive the further evidence and dismissed the appeal.
Denning LJ said at p 1491 that fresh evidence would be received, or a new trial directed, only when, first, the evidence could not have been obtained with reasonable diligence for use at the trial; second, the evidence would probably have an important influence on the result of the case; and, third, it was presumably to be believed, ie was apparently credible.
The court held that the evidence of the defendants wife, who was proposing to confess to having lied, did not satisfy the third criterion.
In his judgment Moylan J recorded the husbands concession, by his then counsel, that the court had jurisdiction to set aside the order dated 30 April 2004 on the basis either that material non disclosure has been proved or by application of the principles set out in Ladd v Marshall.
The judge proceeded to analyse the wifes case separately on each basis and he upheld it by reference to each.
On any view it was unfortunate that Moylan J accepted counsels concession uncritically.
As the Court of Appeal held, the decision in the Ladd case does not propound criteria for what needs to be proved, whether in an application to set aside a financial order or otherwise.
Its criteria are evidential: other legal principles will identify the facts which a claimant needs to prove and the criteria propounded in the Ladd case do no more than to identify the material upon which, in one unusual situation, litigants can rely in seeking to prove or to dispute the facts which the claimant needs to prove.
The unusual situation is that in which, following a trial in which they will each have had the opportunity to adduce evidence in accordance with all general rules of evidence, one of the litigants seeks to adduce further evidence in the course of an appeal.
It is thus clear that Moylan J fell into error in holding that, since she had adduced evidence which satisfied the criteria propounded in the Ladd case, the wife was entitled to have the order dated 30 April 2004 set aside.
Separately, however, the judge conducted the correct exercise and held that it yielded the same conclusion.
The correct exercise was that mandated by the decision in the Livesey case, to which Moylan J referred.
In this separate section of his judgment Moylan J recognised that the wife needed to establish material non disclosure on the part of the husband.
Notwithstanding suggestions to the contrary by the Court of Appeal (for which, with respect, I perceive little or no foundation), it is clear that over the eight days Moylan J did conduct a full fact finding hearing and did find as a fact, no doubt on the balance of probabilities, that the husband had been guilty of non disclosure.
He also found as to which there could be no live dispute that the non disclosure was material in the sense in which Lord Brandon used the word in the Livesey case at p 438 and explained it at p 445, and indeed as further elucidated in para 44 of Lord Neubergers judgment below and in para 33 of the judgment given by Lady Hale today in the Sharland case.
I now turn to the crux of the wifes appeal.
For, having correctly held that the use made by Moylan J of the decision in the Ladd case had been misconceived, the Court of Appeal held that it was appropriate to apply the decision in a different way.
For it accepted the husbands submission not only that the wife had needed to establish that he had been guilty of material non disclosure within the meaning of the Livesey case but also that the evidence which it had been open to her to adduce before Moylan J in that respect had been limited to evidence which satisfied the criteria propounded in the Ladd case.
The husbands argument to this effect had first surfaced at a hearing for directions in the wifes application before Baron J on 3 April 2008.
Although a transcript of her judgment is not to hand, it is clear from her order that Baron J rejected it.
In his appeal against the order of Moylan J the husband revived the argument.
The report of his counsels oral argument, [2015] Fam 89, 92, correctly replicates counsels written argument that [i]f jurisdiction to set aside does exist [in a High Court judge], the Ladd v Marshall principles should be applied to the question of whether any particular fresh evidence should be admitted.
In paras 39 and 40 of his judgment McFarlane LJ recited counsels general argument to that effect; in para 41 he noted that counsel had, by way of example, directed his argument to the evidence given on behalf of the wife by the husbands father on the basis that, with reasonable diligence, she could have obtained it in 2004, with the result that it was inadmissible; and in para 72 he expressed his entire agreement with the argument of counsel as set out in those paragraphs.
Of course, in appraising the evidence on which Moylan J relied in finding material non disclosure on the part of the husband, it was necessary for the Court of Appeal to strip out such evidence from the criminal trials as had been obtained under the 2003 Act.
In the event, as explained in para 15 above, it stripped out all the evidence from the criminal trials since it was not practicable for that court to have done otherwise.
But what of the other evidence on which Moylan J relied? The evidence of the husbands father was expressly held to have been inadmissible on the basis that it did not satisfy the criteria propounded in the Ladd case.
But all the other evidence relied on by Moylan J seems to have been considered inadmissible on that same basis.
Following appropriate hesitation and intensive study of the judgment of McFarlane LJ, I draw that inference from his thrice asserted conclusion that it was not open to Moylan J to have made a finding of material non disclosure.
Such was a conclusion about the admissibility of the evidence rather than about its weight.
Indeed, had McFarlane LJ disagreed with Moylan J about the weight to be attached to particular evidence, he would have been the first to acknowledge the advantage which, in having heard the application over eight days and listened to the oral evidence, Moylan J enjoyed over the Court of Appeal.
The absence of any such acknowledgment confirms the conclusion that Moylan Js order was reversed on grounds of the inadmissibility of the evidence on which he had relied.
The purported justification for this entirely novel inhibition on the ability of some spouses to establish a ground for the setting aside of a financial order appears to be this: (a) one avenue open to this wife would have been to seek to appeal out of time to the Court of Appeal against the order dated 30 April 2004; (b) had she so proceeded, that court would have applied the criteria propounded in the Ladd case to any evidence which she wished to adduce in support of her appeal; and (c) by choosing instead to apply to the High Court for the order to be set aside, the wife should not be able to bypass the evidential restrictions which would have confronted her in the Court of Appeal.
Evidently the Court of Appeal accepted this argument.
In doing so it was in my view guilty of a rare aberration for the following reasons: (a) The Court of Appeal would not have embarked on the disputed fact finding exercise required by the wifes application: see para 18(b) above.
So the rules for adducing fresh evidence before that court are irrelevant. (b) The first criterion propounded in the Ladd case, namely that the evidence could not have been obtained with reasonable diligence for use at the trial, presupposes that there has already been a trial.
It severely curtails a litigants enjoyment of a second opportunity to adduce evidence.
It is misconceived to apply it to the evidence adduced by the wife at the hearing before Moylan J, which was only her first opportunity to do so. (c) The argument would not apply to an application to set aside a financial order made by a district judge, against which no appeal out of time would lie to the Court of Appeal in any event.
But why should the level of the court which made the order precipitate different evidential rules? (d) Overarchingly, the argument loses sight of the basis of an application to set aside a financial order for non disclosure.
It is that the respondent failed to discharge his duty to make full and frank disclosure.
The Court of Appeal held that it was open to the wife in the present case not to have consented to the order on 30 April 2004; instead to have proceeded to a substantive hearing of her financial claims; and, if reasonably diligent, there to have adduced the evidence of the husbands resources which she adduced before Moylan J in 2012.
But at that hypothetical hearing the onus would not have been on her to adduce evidence of the husbands resources.
The onus would have remained on him.
Answer
The answer to the question in para 1 above is that the principles propounded in the Ladd case have no relevance to the determination of an application to set aside a financial order on the ground of fraudulent non disclosure.
Consequence
The Court of Appeal not only set aside the order dated 25 September 2012 by which Moylan J granted the wifes application to set aside the order dated 30 April 2004.
It also dismissed her application.
In the light of its erroneous approach to the admissibility of so it appears all the evidence which she adduced, its dismissal of her application cannot stand.
But what further orders should this court make? The complication is that some of the evidence on which Moylan J relied was indeed inadmissible by virtue of section 9(2) of the 2003 Act.
Has this court therefore no option but to uphold the setting aside of his order and to direct that the wifes application be reheard? Or might it nevertheless reinstate the order of Moylan J, with the result that the wifes claim for further capital provision may at once, and at last, proceed?
The reinstatement of the order dated 25 September 2012 would not be justified by a conclusion that, by reference only to the evidence admissible before him, Moylan J might properly have found that the husband had been guilty of material non disclosure in 2004.
It would be justified only by a conclusion that Moylan J would properly have so found.
If he would properly have so found, his decision itself, as opposed to some of his reasoning, would not have been wrong within the meaning of rule 52.11(3)(a) of the CPR and the Court of Appeal should not have set his order aside.
Nor would a direction for a rehearing in those circumstances be consonant with one aspect of the overriding objective of the CPR identified in rule 1.1(2)(e), namely that the court (including the Court of Appeal) should allot to the wifes application only an appropriate share of the resources of the Family Division in the light of its need to allot resources to other cases.
I will summarise the clearly admissible evidence before Moylan J under three headings.
I will also refer to his appraisal of it and ask whether, as the husband suggests, the appraisal can realistically be taken to have been contaminated by the attention which the judge paid to the evidence which was inadmissible by virtue of the 2003 Act.
The husbands father
The evidence of the husbands father (the father) was not only admissible.
It was highly significant. (a) The father said that, although a flat in a suburb of Mumbai known as Bhayander, which had been purchased in 1994, had at the husbands request been placed in his, the fathers, name, the husband had provided the purchase price.
In the presentation of his resources on 30 April 2004 the husband had alleged that he had no interest in the flat in Bhayander. (b) The father said that, although a flat in Ashoka, Mumbai, which had been purchased in 1999, had at the husbands request also been placed in his, the fathers, name, the husband had provided the purchase price by paying a Mr Saldhana who had paid the builders.
The father admitted that he had later sold the flat and kept the proceeds.
In the presentation of his resources on 30 April 2004 the husband had alleged that he had never had an interest in the flat in Ashoka and that he had no interest in the proceeds of its sale. (c) The father said that prior to 2001 the husband had purchased a car with funds taken from the Sunfor Trust.
The evidence on 30 April 2004 suggested that the Sunfor Trust owned an offshore company, Sunfor Commercial Inc, which was the registered owner of a property in Sydney Street, Chelsea.
But the husband had at that time alleged that he had no interest in the trust. (d) The father referred to the husbands purchase of a new Mercedes SL Convertible in 1998 for about 43,000.
In the presentation of his resources on 30 April 2004 the husband had alleged that the father had paid for the vehicle.
But in his evidence to Moylan J the father denied that he had paid for any part of it. (e) By letter sent to the wife soon after he had sworn his affidavit, the father referred to a BMW 300 motor car which, so he said, the husband had registered in his, the fathers, name without his knowledge.
Upon its sale in 1999 the price of 15,700 had therefore been payable to him, the father, and had been paid into his bank account in Orpington.
With the letter to the wife, the father enclosed a copy of the letter which he had then sent to the bank in Orpington.
He alleged that it was in the husbands handwriting and that he, the father, had done no more than to sign it.
The letter instructed the bank to transfer 15,700 to an account in Mauritius for the benefit of Hempton International Ltd (Hempton).
In the presentation of his resources on 30 April 2004 the husband had alleged that he had never had an interest in Hempton. (f) To his affidavit the father exhibited a statement dated 5 April 1997 relating to an account in the name of himself and his wife (the mother) with Banque Indosuez, Gibraltar.
He averred that he had not opened the account and, until he had been shown the statement, he had known nothing about the account. (g) The father referred to an account in the name of Odessa Management Ltd (Odessa) with Bank Schroder, Geneva.
The ownership of Odessa had been in issue in the proceedings which concluded on 30 April 2004.
The husband had then alleged that he held a one third interest in Odessa and that the father and the mother each also held a one third interest.
But in his evidence to Moylan J the father averred that he had never paid funds into Odessa and had no interest in it; and that his signature on a document dated 8 July 1996, by which he appeared to declare to the bank that he was one of its three beneficial owners, had been forged.
If true, these seven aspects of the fathers evidence manifestly established large scale material non disclosure on the part of the husband on 30 April 2004.
In that Moylan J attached substantial importance to the evidence later held to have been inadmissible by virtue of the 2003 Act, he no doubt considered that it was unnecessary for him to recite the fathers evidence in the detail in which I have recited it in para 36 above.
Nevertheless he specifically referred to each of the seven aspects of it apart from that to which I have referred at (d).
Moylan J noted that, other than to admit the allegation at (e) and to aver that the transfer to Hempton was by way of repayment of a debt, the husband had denied the fathers allegations and he recorded his counsels submission that the estrangement between the husband and the father should lead him to afford little, if any, weight to the allegations.
The judge concluded however that the fathers evidence was apparently credible.
In one ground of his decision the judge, as noted in para 24 above, wrongly applied the criteria propounded in the Ladd case and his description of the fathers evidence reflects the third criterion, namely that the evidence should be apparently credible.
The judge concluded, by contrast, that aspects of the evidence of the husband to which he had earlier referred were to put it mildly, unconvincing and inconsistent.
The husbands contention before this court is that the judges preference for the evidence of the father rather than for the evidence of himself may partly have been induced by a low opinion of his general credibility derived from the inadmissible evidence.
Moylan J was of course well aware that a person who has been dishonest in relation to one matter may well be telling the truth in relation to another matter; and the terms of his judgment well demonstrate the discharge of his duty to survey the factual disputes between the father and the husband on their merits.
Insofar, however, as Moylan J took into account that the husband had been guilty of dishonesty in other respects, such was a perception likely to have been derived from something quite other than the inadmissible evidence.
It was far more likely to have been derived from the fact that in 2010 the husband had been found guilty of five offences of money laundering under the 2002 Act, committed in and after 2005, and that he had then pleaded guilty to a further eight analogous offences, for all of which he had been sentenced to terms of imprisonment totalling ten years.
Transactions in Odessa
Moylan J stated that the evidence to which he attributed the greatest weight was not only the evidence much of which was later held to have been inadmissible but also the evidence in relation to the US dollar and sterling accounts held by Odessa with Bank Schroder.
The latter evidence was, in summary, that: (a) on 25 May 2007 the husband stated, in answer to a questionnaire, that the accounts were almost depleted, retained only balances to cover guarantees for credit cards and were about to be closed; and (b) on 3 July 2007 his solicitors stated that the accounts had been closed; but (c) on 9 July 2007 40,000 was paid into the sterling account; and (d) on 18 July 2007 $90,000 was paid into, and then out of, the dollar account; and (e) by November 2007 the sterling account held about 79,000.
Moylan J stated that the husband had been unable to explain the inconsistency between (a) and (b), on the one hand, and (c), (d) and (e), on the other.
The funds identified at (c), (d) and (e) were, said the judge, relatively modest, although no doubt he did not, in this respect, forget the modesty of the capital provision agreed to be made for the wife on 30 April 2004.
The judge found, however, that the husbands drawings from his solicitors partnership, said by the husband to have been only 18,000 in 2004 and only 13,000 in 2005 and again in 2006, had been manifestly insufficient to generate these funds and that the husband had been unable credibly to explain their source.
The judge proceeded to infer, in my view legitimately, that, had the husband been willing truthfully to explain their source, the trail would be likely to have led to the discovery of other assets which ought to have been disclosed in 2004.
Purchase of further flats
In support of his conclusion Moylan J also referred to the purchase of two adjoining flats in Mumbai in 2006 or 2007, with which, on any view, the husband had been associated.
The judge noted a variety of inconsistencies in the husbands explanations of the source of the purchase price in his written reply to a questionnaire, in the course of a hearing for directions before Baron J, in his written response to her ensuing order and in his oral evidence before Moylan J himself.
The husbands explanations, so the judge concluded, were entirely lacking in credibility.
Adverse inferences
The husband argues that if, from the evidence in relation to the funds held by Odessa and to the purchase of the further, adjoining, flats in Mumbai, there was any ground for inferring that in 2006 and 2007 he held undisclosed assets, there remained no ground for inferring that he held them in 2004.
In the light of his conviction for offences committed no earlier than 2005, any such assets, so his argument runs, were clearly the product of his criminal activities.
On examination the argument is as unsound as at first sight it is unattractive.
For it fails to allow for the role of adverse inferences in the courts generation of its factual conclusions.
In Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415, Lord Sumption quoted at para 44 the following statement of Lord Lowry in R v Inland Revenue Comrs, Ex p TC Coombs & Co [1991] 2 AC 283, 300: In our legal system generally, the silence of one party in face of the other partys evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence.
Lord Sumption added at para 45 that judges exercising family jurisdiction are entitled to draw on their experience and to take notice of the inherent probabilities when deciding what an uncommunicative husband is likely to be concealing.
The husband was well aware that the inquiry conducted by Moylan J was into the extent of his assets on 30 April 2004.
It is clear that he held assets in 2006 and 2007 and he must have been aware of their origin.
Had he demonstrated that they originated in or after 2005, they would have been irrelevant to the inquiry.
Instead, however, he chose to obfuscate about their origin.
In those circumstances it was reasonable for Moylan J to infer that a truthful explanation of their origin would have been probative of the existence of undisclosed assets on 30 April 2004 and that the husbands withholding of it should be no less probative.
Conclusion
I conclude that, even if he had referred only to the evidence admissible before him, Moylan J would still properly have found the husband to have been guilty of material non disclosure in 2004; that his order dated 25 September 2012 should therefore be reinstated; and that the wifes claim for further capital provision should therefore proceed before him.
It is unclear whether her claim will succeed and, if so, to what extent.
Moylan J will need to decide, no doubt with the assistance of the CPS, how best to synchronise his conduct of her application with the confiscation proceedings pending against the husband in the Crown Court; and he will need to investigate not only the extent of the husbands current assets but the extent to which they represent the proceeds of his crimes.
For, although the court has jurisdiction to order a transfer to the wife of property so tainted, it will ordinarily, as a matter of public policy, decline to exercise its jurisdiction to do so (CPS v Richards [2006] EWCA Civ 849, [2006] 2 FLR 1220, para 26) and in the present case the wife has made clear that she will not ask it to do so.
In its submissions to Moylan J the CPS informed him of its allegation in the confiscation proceedings, disputed by the husband, that he had realisable assets of almost 35m.
With respect the Court of Appeal was wrong to say that, to the extent that they existed, the husbands realisable assets would necessarily represent the proceeds of crime; but some or indeed all of them may well do so and Moylan J faces an unenviable task in keeping the scale of his inquiry within tight bounds.
LORD NEUBERGER: (with whom Lord Clarke, Lord Sumption and Lord Reed agree)
I agree with the judgment of Lord Wilson.
The only issue on which I have entertained doubts is whether this court could properly reinstate the order made by Moylan J setting aside the consent order of 30 April 2004 (the 2004 order), rather than directing a rehearing of the wifes application to set aside the 2004 order.
For the following reasons, I have concluded that we properly can do so.
The ultimate question in these proceedings is whether the 2004 order should be set aside, and that turns on whether the husband had been guilty of material non disclosure in the proceedings leading up to the hearing at which the 2004 order was made.
If there had been such non disclosure, but it had been accidental or negligent, the wife would also have had to establish that the effect of the non disclosure was such that the 2004 order was substantially different from the order which would have been made (or agreed) if the husband had afforded proper disclosure see per Lord Brandon in Livesey v Jenkins [1985] AC 424, 445.
However, as the non disclosure alleged by the wife in this case is said to be intentional, then, if there was such non disclosure, the 2004 order should be set aside, unless the husband could satisfy the court that the 2004 order would have been agreed and made in any event see per Lady Hale in Sharland v Sharland [2015] UKSC 60, paras 29 33.
In other words, where a partys non disclosure was inadvertent, there is no presumption that it was material and the onus is on the other party to show that proper disclosure would, on the balance of probabilities, have led to a different order; whereas where a partys non disclosure was intentional, it is deemed to be material, so that it is presumed that proper disclosure would have led to a different order, unless that party can show, on the balance of probabilities, that it would not have done so.
After hearing oral evidence from the husband, the wife and the husbands father, and after considering a number of documents put before him, Moylan J decided that the husband had been guilty of intentional non disclosure (and, for good measure, that it would have affected the terms of the order made in 2004), so he set aside the 2004 order.
When deciding that there had been non disclosure, Moylan J relied on evidence derived from criminal proceedings which had been brought against the husband, including the Crown Prosecution Services testimony that he had realisable assets of 35m.
As that evidence resulted from the Crown Courts request for assistance under section 7 of the Crime (International Co operation) Act 2003, it was in fact inadmissible (although it is only fair to add that Moylan Js conclusion to the contrary was justified at the time that he reached it in the light of the state of the authorities).
In the light of this, the question to be faced is whether, as a result of the fact that Moylan J wrongly relied on the inadmissible evidence obtained under the 2003 Act, there will indeed have to be a retrial of the issue or whether Moylan Js decision can nonetheless stand.
There is no doubt that Moylan J gave considerable weight to the inadmissible evidence from the criminal proceedings in coming to his conclusion that the husband had failed to disclose his assets in 2004.
In justifying the statement in para 91 of his judgment that there is clearly credible evidence that the husband's resources, both income and capital, were not limited to those disclosed, Moylan J first and most fully referred, in paras 91 and 92, to the inadmissible evidence from the criminal proceedings.
And when reaching his conclusion in para 100 that the husband had failed to make full and frank disclosure of his resources in 2004 and that such failure was material, the Judge said this: I have had regard to the combined effect of all the new evidence.
However, the evidence to which I attribute the greatest weight is the evidence from the criminal proceedings and the evidence from the Odessa account statements.
This evidence demonstrates that it is extremely unlikely that the husbands resources were limited to those disclosed by him in 2004, in other words, substantial debts and a very modest income.
The husband, in my view, is very unlikely suddenly to have accumulated 35m of realisable assets from a negative base in 2004.
On the other hand, there was other, undoubtedly admissible, evidence to support Moylan Js conclusion that there had been material non disclosure, and that evidence is very fully set out by Lord Wilson in paras 36 40 of his judgment.
Although it is true that the evidence first identified by the Judge to support his conclusion that there had been material non disclosure was the inadmissible evidence from the criminal proceedings (paras 92 93), he relied on other evidence as well.
Thus, in paras 93 94 he relied on [i]n addition, evidence as to monies passing through the Odessa account and the purchase of the Raj Classic flats.
In paras 97 98, Moylan J also said that he would add that [he] found the [husbands] fathers evidence apparently credible, and that the husbands mothers assertions in her statement are clearly inconsistent with the husbands disclosure.
Further in para 99, the Judge said that [o]ther aspects of the husbands evidence were, to put it mildly, unconvincing and inconsistent and support the wifes case that he had other resources available to him.
And in para 100, quoted above, he did not refer only to the inadmissible evidence but also to the Odessa account.
The issue whether there has been non disclosure is a question of fact which involves an evaluative assessment of the available admissible evidence.
Such a question is, of course, common in civil and family litigation, and under our common law system the rule is that it can only be answered by a judge after hearing from live witnesses as well as looking at the documents.
The most common exceptions to this rule are (i) cases where the evidence is so clear that there is no need for oral testimony and (ii) cases where neither party wishes, or alternatively is unable, to call any witnesses.
Ignoring cases in the second category (which has no application here), attempts to seek summary judgment in relation to such disputed issues often fail even when the evidence appears very strong, because experience shows that a full investigation at a trial with witnesses occasionally undermines what appears pretty clearly to be the truth when relying on the documents alone: see eg per Sir Terence Etherton C in Allied Fort Insurance Services Ltd v Creation Consumer Finance Ltd [2015] EWCA Civ 841, paras 81, 89 and 90 and the cases which he cites.
Accordingly, in practice it is only when the documentary evidence is effectively unanswerable that summary judgment can be justified.
There is also a principled reason behind this rule, namely that, at least where there is a bona fide dispute of fact on which oral testimony is available, a party is normally entitled to a trial where he and his witnesses can give evidence, and he can test the reliability of the other party and/or her witnesses by cross examination. (I say normally, because, in exceptional cases, there may be reasons, such as a sanction in the form of a debarring order, for not following the rule.)
The issue in this appeal is unusual, although by no means unprecedented, in that there has been a full trial with witnesses who have given oral evidence which has been tested by cross examination.
However, the husband effectively relies on the rule to justify his contention that there should be a full re hearing of the non disclosure issue.
He argues that, once one strips out the inadmissible evidence from the criminal proceedings, the decision of Moylan J clearly cannot stand, and that therefore one is in the same position as if there had been no trial with witnesses.
In my view, there are obvious and important differences between a case where a party seeks summary judgment (ie where she applies for judgment on the documents and witness statements or affidavits, before any hearing has occurred) and a case such as the present, where a party is arguing that she should be entitled to maintain a judicial decision after a full hearing, even though the judge took into account inadmissible evidence.
In the former case the rule would be abrogated whereas in the latter case it would not.
Thus, in this case, the husband has had the benefit of a full hearing, which, it is worth mentioning lasted around eight days.
He has called all the oral evidence he wanted, and was able to subject the testimony of the wife and her witnesses to cross examination.
Accordingly, while it is vital to recognise his right to a fair trial (which includes a right not to have any issues determined by reference to inadmissible evidence), it must be acknowledged that the husband has had a full trial perhaps one may say, not entirely flippantly, too full a trial.
Further, in a case such as this, where all the oral evidence which the parties wish to put before the court has been adduced and cross examined, an appellate court is in a much stronger position to reach a confident and concluded view on the facts than it would be in an appeal against an ordinary grant of summary judgment (as in Allied Fort).
The appellate court knows what the parties and their witnesses would say in the witness box as they have said it.
So, in this case, we can be informed about all the admissible oral evidence which the husband wanted to put before the court, including the results of any cross examination of the wifes witnesses.
It is clearly open to an appellate court to make findings of fact in such circumstances, given that the trial judge could or should have done so: see CPR 52.10(1) (whereby the Court of Appeal has all the powers of the lower court), and rule 29(1) of the Supreme Court Rules 2009 2009/1603 (whereby the Supreme Court has all the powers of the court below).
It is also germane to bear in mind the overriding objective in CPR 1.1, which includes requirements that courts deal with cases at proportionate cost, sav[e] expense, ensur[e] that [a case] is dealt with expeditiously, and allot to it an appropriate share of the courts resources.
These factors justify a much greater reluctance on the part of an appellate court to order a rehearing in a case such as this (particularly when one bears in mind that the hearing before Moylan J lasted around eight days) than would be justified when considering whether to direct a hearing rather than award a party summary judgment.
All these factors make it quite clear that, on this appeal, we should not remit the issue whether there was material non disclosure, provided that it would not involve an unavoidable injustice to the husband not to do so.
The qualification is of course vital, so that, if it would be impossible to uphold Moylan Js decision without doing or risking injustice to the husband, then the factors discussed in paras 52 54 above could not prevail, and there would have to be a rehearing.
The hurdle which has to be crossed in order to establish that there would be no risk of injustice to the husband can be expressed in more than one way.
It could be said that we have to be satisfied that (i) Moylan J would have decided that there had been material non disclosure even if he had not heard or seen the inadmissible evidence obtained under the 2003 Act, or (ii) looking at the totality of the admissible evidence in this court, we can safely conclude for ourselves that there has been material non disclosure, or (iii) if the issue was remitted for a re hearing, the judge could only realistically come to that conclusion in the light of the totality of the admissible evidence.
In my view, a party such as the wife on this appeal can succeed provided that the court is satisfied that any one of the three requirements is satisfied, although it will, I suspect, be a rare case where only one (or even two) of those requirements is (or are) satisfied: it is particularly hard to imagine circumstances where requirements (ii) and (iii) would not march together.
There is in my judgment, great force in the argument that, for the reasons given by Lord Wilson in paras 36 40, we should be satisfied that there was material non disclosure and that, if the issue was remitted any judge, properly directed, would so hold ie that requirements (ii) and (iii) in para 56 above are satisfied.
I would be more comfortable about reaching that conclusion if we had been provided with the transcripts of the evidence before Moylan J. That would normally be the appropriate course where an appellate court is being asked to decide for itself a question of fact which was in issue before a judge who heard relevant oral evidence.
However, we have been provided with around 500 pages of documents (including applications, submissions, answers to questionnaires, letters, affidavits, and a forensic accountants report), as well as the Judges full analysis of the evidence.
Furthermore, it has not been suggested that the husband has been unable to put before this court any of the testimony given to Moylan J which he wishes us to see, or that there is any relevant material in the oral evidence which was not apparent from the judgment.
Accordingly, albeit with some hesitation, I am prepared to accept that requirements (ii) and (iii) are satisfied.
I also have concerns about requirement (i), namely whether Moylan J would have reached the conclusion that he did if he had not been able to take account of the inadmissible evidence, in the light of the way in which he expressed himself as set out in paras 47 48 above.
However, I have concluded that requirement (i) is also satisfied.
Even if one strips out the reference to the inadmissible evidence obtained under the 2003 Act, Moylan J still said in para 100 that he attached the greatest weight to the evidence from the Odessa account statements, and there was the other very significant evidence which he set out in paras 93 94 and 97 98 and which is summarised in para 48 above.
In addition to the positive evidence referred to in those passages (and more fully explained by Lord Wilson), there is the important point that in para 99, the Judge found aspects of the husbands evidence to put it mildly, unconvincing and inconsistent and that they support[ed] the wifes case that he had other resources available to him.
In other words, the only positive oral testimony in favour of the husbands case was unconvincing and inconsistent and actually supported the case for saying that there had been material non disclosure.
Accordingly, while the wife need only satisfy one of the three requirements identified in para 56 above, I am persuaded that this is an example of what I suspect would usually be the case, namely that the three requirements march together, and in this case I consider that they are all satisfied.
For these reasons, I have reached the conclusion that this court can, and therefore should, decide that Moylan Js decision that the 2004 order was obtained by material non disclosure and should be set aside, can stand notwithstanding that, in reaching that conclusion, he relied in part on the inadmissible evidence obtained under the 2003 Act.
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The appellant ("the wife") used to be married to the respondent ("the husband"), a former solicitor.
In 2002, the wife petitioned for a divorce.
In response to her financial claims, the husband asserted that all of his ostensible wealth represented assets held on behalf of his clients [4 6].
In 2004, the wife's claims were settled at a Financial Dispute Resolution (FDR) meeting.
The settlement order (the 2004 Order) provided that the husband should make a lump sum payment in final settlement of the wife's capital claims (which was eventually paid), and periodical annual payments (which the husband stopped paying in 2008).
The 2004 Order included a recital that "the [wife] believes that the [husband] has not provided full and frank disclosure of his financial circumstances (although this is disputed by the [husband]), but is compromising her claims in the terms set out in this consent order despite this in order to achieve finality" (the Recital) [7 9].
In 2007, the wife applied by notice issued within the divorce proceedings to set aside the 2004 Order on the ground that the husband had fraudulently failed to disclose his assets.
These proceedings were delayed, largely because in 2008 the husband was charged with serious money laundering offences dating from mid 2005.
He was eventually convicted and committed to prison in 2011, and confiscation proceedings against him are ongoing [10 11].
In September 2012, after an eight day hearing, Moylan J set aside the 2004 Order [12 14].
His decision was made on the basis both that (a) there had been material non disclosure by the husband when the 2004 Order was made and, had he made full disclosure, the outcome would have been different, and (b) because the wifes evidence satisfied the criteria in Ladd v Marshall (which govern when fresh evidence may be adduced on appeal) it followed that her application should be allowed [24 25].
The Court of Appeal allowed the husbands appeal.
It held that Moylan J had incorrectly applied the Ladd criteria and was wrong to allow the wifes application on that basis [24].
However, it held that the Ladd criteria were relevant in order to establish what evidence the wife could adduce in order to establish material non disclosure by the husband.
Applying those criteria to the evidence before Moylan J, and discounting other inadmissible evidence, the Court of Appeal concluded that there was no admissible evidence to support Moylan Js conclusions on material non disclosure [26 29].
The Supreme Court unanimously allows Mrs Gohils appeal and reinstates Moylan Js order.
Lord Wilson (with whom Lord Neuberger, Lady Hale, Lord Clarke, Lord Sumption, Lord Reed and Lord Hodge agree) gives the leading judgment.
Lord Neuberger gives a short concurring judgment.
The husband had suggested that, as a judge of the High Court, Moylan J did not have jurisdiction to
set aside an order of the High Court.
This argument was not pursued in the Court of Appeal, but the Supreme Court makes the following observations: (a) the Court of Appeal has long recognised that it is an inappropriate forum for inquiries into non disclosure issues raised in proceedings for the setting aside of a financial order; (b) this is shown by the present case, where an intensive fact finding hearing was necessary; (c) there is an urgent need for definitive confirmation of the High Courts jurisdiction to set aside a financial order made in that court; (d) the Supreme Court endorses the conclusion of the Family Procedure Rule Committee in relation to its Setting Aside Working Party, set out in the minutes of its meeting on 20 April 2015 [16 18].
The Recital Words such as those used in the Recital have no legal effect in a financial order in divorce proceedings.
The husband owed a duty to the court to make full and frank disclosure of his resources, without which the court would be disabled from discharging its duty under section 25(2) of the Matrimonial Causes Act 1973.
One spouse cannot exonerate the other from complying with this duty [19 22].
Criteria in Ladd v Marshall The Ladd criteria have no relevance to the determination of an application to set aside a financial order on grounds of fraudulent non disclosure [32].
The Court of Appeal was wrong to accept an argument that the criteria should apply to determine what evidence could be adduced because: (a) the Court of Appeal would not have conducted the necessary fact finding exercise, so the criteria for determining the admissibility of evidence in that court were irrelevant; (b) the first Ladd criterion presupposes that there has been a trial whereas, in this case, the wifes first opportunity to adduce the evidence was at the hearing before Moylan J; (c) the argument would not apply to an application to set aside a financial order made by a district judge and the evidential criteria should not depend on the level of court, and (d) the argument ignores the fact that, had the wifes claims proceeded to trial in 2004, the duty would have lain on the husband, not on her, to explain his resources [31].
In light of the erroneous approach to the admissibility of the wifes evidence, the dismissal of her set aside application cannot stand [33].
Consequences To decide whether Moylan Js order could be reinstated, it was necessary to consider what admissible evidence was before him and ask whether he would properly have found that the husband had been guilty of material non disclosure in 2004 [33 35].
Through no fault of his own, Moylan J had relied on evidence from the husbands criminal proceedings obtained from sources outside the UK (which had since been held inadmissible and had been discounted by the Court of Appeal) [13 15, 33].
However, even if Moylan J had referred only to the remaining admissible evidence [36 40], he would, in the light of his findings on it, still have concluded that the husband was guilty of material non disclosure [42].
Lord Neuberger agrees that Moylan Js order can be reinstated.
Several factors make it clear that the material non disclosure issue should not be remitted, provided that there is no risk of injustice to the husband [49 55].
The court has to be satisfied that: (a) Moylan J would have decided that there had been material non disclosure even if he had not received the inadmissible evidence; or (b) looking at the totality of the admissible evidence, it could safely be concluded that there had been material non disclosure; or (c) if the issue was remitted, the judge could only realistically come to that conclusion in light of the totality of the admissible evidence [56 57].
For the reasons given by Lord Wilson, all three of these requirements were satisfied [58 61].
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This appeal concerns the statutory right of appeal against decisions by the Secretary of State for the Home Department (the Secretary of State) to refuse protection claims and human rights claims under Part 5 of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act) as amended.
The particular question for decision is as follows: Where a person has already had a protection claim or a human rights claim refused and there is no pending appeal, do further submissions which rely on protection or human rights grounds have to be accepted by the Secretary of State as a fresh claim in accordance with rule 353 of the Immigration Rules if a decision in response to those representations is to attract a right of appeal under section 82 of the 2002 Act?
It is a conspicuous feature of litigation in the field of immigration and asylum in this jurisdiction that those whose protection claims or human rights claims have already been refused seek to make further applications adducing further submissions or evidence in support.
It is necessary that provision be made for such renewed applications for which there is a sound basis, not least because circumstances may change significantly and unforeseeably following the rejection of a claim.
In R v Secretary of State for the Home Department, Ex p Onibiyo [1996] QB 768 Sir Thomas Bingham MR noted (at pp 781 782) that, for example, it is not hard to imagine cases in which an initial claim for asylum might be made on insubstantial, or even bogus, grounds, and be rightly rejected, but in which circumstances would subsequently arise or come to light showing a threat of a kind requiring the grant of asylum.
As he observed, a scheme of legal protection which could not accommodate that possibility would be seriously defective.
In appropriate cases, it will be necessary to afford access to the statutory system of appeals when a second or subsequent submission is rejected.
Nevertheless, it is necessary to protect such a scheme of legal protection from abuse.
There is, therefore, a need to exclude from the statutory system of appeals second or successive applications which are made on grounds which have previously been rejected or which have no realistic prospect of success, and which are often advanced simply in order to delay removal from the United Kingdom.
The challenge is to provide a system which can deal fairly and effectively with all such applications while also complying with the United Kingdoms international obligations.
The facts
The appellant, Mr Jamar Robinson, is a national of Jamaica who was born on 14 May 1991.
He arrived in the United Kingdom on 9 October 1998 when he was seven years old.
He was given leave to enter until 9 April 1999 and then remained in the United Kingdom without leave.
In 2005, at the age of 13, he applied for indefinite leave to remain in the United Kingdom as a dependant of his aunt who had made an application under a one off exercise to allow families who have been in the United Kingdom for three years or more to stay.
His aunt was granted indefinite leave to remain on 13 May 2011.
The appellants application was refused as part of later deportation proceedings.
The appellant has a number of criminal convictions.
The index offences which triggered deportation proceedings were two robberies for each of which he was sentenced on 20 April 2011 to 18 months detention, to run concurrently.
At sentence he was 19 years of age.
On the same occasion he was convicted of failing to comply with the requirements of a previous community order.
On 31 August 2011, aged 20, he was convicted of an offence of robbery and an offence of theft, in respect of which he was sentenced to terms of 40 months detention and 16 months detention respectively, to run concurrently.
On 12 October 2012, aged 21, he was convicted of an offence of violent disorder, committed while he was an inmate at HMP Feltham, for which he was sentenced to 12 months imprisonment.
On 10 June 2011 he was notified by the Secretary of State of his liability to deportation.
His previous legal representatives responded on 16 August 2011.
On 17 July 2013 a deportation order was signed in respect of the appellant.
He appealed to the First tier Tribunal (Immigration and Asylum Chamber) (FTT) against his proposed deportation.
His appeal was based on his claimed right to respect for his private life in the United Kingdom.
It was accepted that at that time there was no family life in play.
His appeal was dismissed and he was refused permission to appeal to the Upper Tribunal (Immigration and Asylum Chamber) (UT) by the FTT and by the UT.
He exhausted his rights of appeal on 1 May 2015.
On 13 May 2015 the appellants previous solicitors made brief further submissions to the Secretary of State on his behalf.
The focus of these submissions was that the appellants then partner was pregnant and due to give birth on 28 July 2015.
The application did not explicitly request that the deportation order be revoked, nor did it explicitly make reference to human rights.
The Secretary of State treated the further representations as an application to revoke the appellants deportation order on the basis that deportation would breach article 8 of the European Convention on Human Rights.
She responded to those submissions in a letter of 23 June 2015.
She concluded that deportation would not breach article 8.
She refused to revoke the deportation order, and she decided that his submissions did not amount to a fresh human rights claim under rule 353 of the Immigration Rules.
The appellants son was born on 26 July 2015.
He is a British citizen by birth because his mother is British.
The appellant then made further submissions to the Secretary of State on 28 July 2015 regarding the birth of his son and providing some documentation from the hospital.
The Secretary of State responded to these further submissions in a letter dated 31 July 2015.
Once again, the Secretary of State concluded that deportation of the appellant would not breach article 8 and that his further submissions did not amount to a fresh claim under rule 353 of the Immigration Rules.
On 18 July 2015 the Secretary of State gave directions for the appellants removal to Jamaica on 9 August 2015.
A request for temporary admission was made on 30 July 2015 in order to enable the appellant to visit his son.
The enclosed documents included a statutory declaration from the appellant declaring that he is the childs father.
The appellant was subsequently named as the father on the childs birth certificate.
On 5 August 2015 the appellants solicitors gave notice of appeal to the FTT against the Secretary of States decision of 31 July 2015.
In a decision dated 7 August 2015, promulgated on 10 August 2015, the FTT declined jurisdiction on the basis that there was no right of appeal against the decision of 31 July 2015.
On 7 August 2015 the appellant made an application for permission to apply for judicial review of the Secretary of States decisions of 23 June 2015 and 31 July 2015 not to accept the further representations as fresh claims and the removal directions given on 18 July 2015.
After the proceedings were lodged the Secretary of State confirmed that removal of the appellant would be deferred.
The appellant applied to amend his grounds to include the FTT as second respondent and to challenge its decision of 7 August 2015 that the appellant had no right to appeal against the decision of 31 July 2015.
UT Judge Allen granted the appellant permission to join the FTT and to amend his grounds.
On 19 November 2015 UT Judge Eshun granted the appellant permission to apply for judicial review.
The application for judicial review was heard by UT Judge Southern on 16 February 2016 who held that: the decisions of 23 June 2015 and 31 July 2015 were lawful with the Secretary of States letters were not refusals to revoke the the FTT had correctly decided that the appellant had no right of appeal (1) to the FTT; (2) appellants deportation order; and (3) regard to rule 353 of the Immigration Rules.
He refused permission to appeal to the Court of Appeal.
On 9 March 2016 the appellant applied to the Court of Appeal for permission to appeal.
The Secretary of State sought to deport the appellant to Jamaica on 13 April 2016.
On 12 April 2016 Rafferty LJ granted the appellant a stay on removal.
On 2 December 2016 Underhill LJ, on consideration of the papers, granted permission to appeal to the Court of Appeal.
On 4 May 2017 the Court of Appeal (Jackson, Hamblen and Flaux LJJ) dismissed the appellants appeal and refused permission to appeal to the Supreme Court.
The appellant was granted a stay on removal pending final determination of his appeal.
The Supreme Court granted permission to appeal by order dated 10 April 2018.
The relevant legislation
Part 5 of the 2002 Act in force immediately prior to the commencement of the Immigration Act 2014 (the 2014 Act) ie prior to 20 October 2014, provided in relevant part: 82.
Right of appeal: general (1) Where an immigration decision is made in respect of a person he may appeal to the Tribunal. (2) refusal of entry clearance, refusal of a certificate of entitlement In this Part immigration decision means refusal of leave to enter the United (a) Kingdom, (b) (c) under section 10 of this Act, (d) refusal to vary a persons leave to enter or remain in the United Kingdom if the result of the refusal is that the person has no leave to enter or remain, (e) variation of a persons leave to enter or remain in the United Kingdom if when the variation takes effect the person has no leave to enter or remain, (f) revocation under section 76 of this Act of indefinite leave to enter or remain in the United Kingdom, (g) a decision that a person is to be removed from the United Kingdom by way of directions under section 10(1)(a), (b), (ba) or (c) of the Immigration and Asylum Act 1999 (c 33) (removal of person unlawfully in United Kingdom), (h) a decision that an illegal entrant is to be removed from the United Kingdom by way of directions under paragraphs 8 to 10 of Schedule 2 to the Immigration Act 1971 (c 77) (control of entry: removal), (ha) a decision that a person is to be removed from the United Kingdom by way of directions under section 47 of the Immigration, Asylum and Nationality Act 2006 (removal: persons with statutorily extended leave), (i) a decision that a person is to be removed from the United Kingdom by way of directions given by virtue of paragraph 10A of that Schedule (family), (ia) a decision that a person is to be removed from the United Kingdom by way of directions under paragraph 12(2) of Schedule 2 to the Immigration Act 1971 (c 77) (seamen and aircrews), (ib) a decision to make an order under section 2A of that Act (deprivation of right of abode), a decision to make a deportation order (j) under section 5(1) of that Act, and (k) under section 5(2) of that Act. refusal to revoke a deportation order 84.
Grounds of appeal (1) An appeal under section 82(1) against an immigration decision must be brought on one or more of the following grounds (c) that the decision is unlawful under section 6 of the Human Rights Act 1998 (c 42) (public authority not to act contrary to Human Rights Convention) as being incompatible with the appellants Convention rights; that removal of the appellant from the (g) United Kingdom in consequence of the immigration decision would breach the United Kingdoms obligations under the Refugee Convention or would be unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights. 92.
Appeal from within United Kingdom: general (1) A person may not appeal under section 82(1) while he is in the United Kingdom unless his appeal is of a kind to which this section applies. (4) This section also applies to an appeal against an immigration decision if the appellant (a) has made an asylum claim, or a human rights claim, while in the United Kingdom, or 94.
Appeal from within United Kingdom: unfounded human rights or asylum claim (1) This section applies to an appeal under section 82(1) where the appellant has made an asylum claim or human rights claim (or both). (2) A person may not bring an appeal to which this section applies in reliance on section 92(4)(a) if the Secretary of State certifies that the claim or claims mentioned in subsection (1) is or are clearly unfounded. 96.
Earlier right of appeal (1) An appeal under section 82(1) against an immigration decision (the new decision) in respect of a person may not be brought if the Secretary of State or an immigration officer certifies (a) that the person was notified of a right of appeal under that section against another immigration decision (the old decision) (whether or not an appeal was brought and whether or not any appeal brought has been determined), (b) that the claim or application to which the new decision relates relies on a matter that could have been raised in an appeal against the old decision, and (c) that, in the opinion of the Secretary of State or the immigration officer, there is no satisfactory reason for that matter not having been raised in an appeal against the old decision. (2) An appeal under section 82(1) against an immigration decision (the new decision) in respect of a person may not be brought if the Secretary of State or an immigration officer certifies (a) that the person received a notice under section 120 by virtue of an application other than that to which the new decision relates or by virtue of a decision other than the new decision, (b) that the new decision relates to an application or claim which relies on a matter that should have been, but has not been, raised in a statement made in response to that notice, and that, in the opinion of the Secretary of (c) State or the immigration officer, there is no satisfactory reason for that matter not having been raised in a statement made in response to that notice. 113.
Interpretation (1) In this Part, unless a contrary intention appears asylum claim means a claim made by a person to the Secretary of State at a place designated by the Secretary of State that to remove the person from or require him to leave the United Kingdom would breach the United Kingdoms obligations under the Refugee Convention, human rights claim means a claim made by a person to the Secretary of State at a place designated by the Secretary of State that to remove the person from or require him to leave the United Kingdom would be unlawful under section 6 of the Human Rights Act 1998 (c 42) (public authority not to act contrary to Convention) as being incompatible with his Convention rights, the Refugee Convention means the Convention relating to the Status of Refugees done at Geneva on 28 July 1951 and its Protocol,
Part 5 of the 2002 Act was amended with effect from 20 October 2014 in a number of respects.
Section 82(1) now provides: 82.
Right of appeal to Tribunal (1) A person (P) may appeal to the Tribunal where the Secretary of State has decided to the Secretary of State has decided to (a) refuse a protection claim made by P, (b) refuse a human rights claim made by P, or (c) revoke Ps protection status. the Secretary of State has decided to (1) An appeal under section 82(1)(a) (refusal of protection claim) must be brought under one or more of the following grounds (a) that removal of the appellant from the United Kingdom would breach the United Kingdoms obligations under the Refugee Convention; Section 84 of the 2002 Act now provides: 84.
Grounds of appeal (b) that removal of the appellant from the United Kingdom would breach the United Kingdoms obligations in relation to persons eligible for a grant of humanitarian protection; (c) that removal of the appellant from the United Kingdom would be unlawful under section 6 of the Human Rights Act 1998 (public authority not to act contrary to Human Rights Convention). (2) An appeal under section 82(1)(b) (refusal of human rights claim) must be brought on the ground that the decision is unlawful under section 6 of the Human Rights Act 1998.
There were consequential amendments to sections 85, 86, 92, 94 and 96.
Substantive changes were made to section 92 which now provides: 92.
Place from which an appeal may be brought or continued (1) This section applies to determine the place from which an appeal under section 82(1) may be brought or continued. (2) In the case of an appeal under section 82(1)(a) (protection claim appeal), the appeal must be brought from outside the United Kingdom if (a) the claim to which the appeal relates has been certified under section 94(1) or (7) (claim clearly unfounded or removal to safe third country), or (b) Otherwise the appeal must be brought from within the United Kingdom. (3) In the case of an appeal under section 82(1)(b) (human rights claim appeal) where the claim to which the appeal relates was made while the appellant was in the United Kingdom, the appeal must be brought from outside the United Kingdom if (a) the claim to which the appeal relates has been certified under section 94(1) or (7) (claim clearly unfounded or removal to safe third country) or section 94B (certification of human rights claims made by persons liable to deportation), or Otherwise, the appeal must be brought from within the United Kingdom.
In the case of an appeal under section 82(1)(b) (4) (human rights claim appeal) where the claim to which the appeal relates was made while the appellant was outside the United Kingdom, the appeal must be brought from outside the United Kingdom.
Section 94 now provides in relevant part: 94.
Appeal from within United Kingdom: unfounded human rights or protection claim (1) The Secretary of State may certify a protection claim or a human rights claim as clearly unfounded.
The definition of human rights claim in section 113 was amended by the 2014 Act and now provides as follows: human rights claim means a claim made by a person to the Secretary of State at a place designated by the Secretary of State that to remove the person from or require him to leave the United Kingdom or to refuse him entry to the United Kingdom would be unlawful under section 6 of the Human Rights Act 1998 (c 42) (public authority not to act contrary to Convention).
Immigration Rules, rule 353
The Immigration Rules have contained provisions in respect of previously refused applications since May 1994 (HC 395, rule 346).
A rule in substantially the same form as the current rule 353 has been in force since it was introduced by HC 1112 in October 2004. (See para 36, below.) The current rule 353 of the Immigration Rules HC 1025, which has been in force since February 2015, provides: 353.
When a human rights or protection claim has been refused or withdrawn or treated as withdrawn under paragraph 333C of these Rules 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: had not already been considered; and (i) taken together with the previously considered (ii) material, created a realistic prospect of success, notwithstanding its rejection.
This paragraph does not apply to claims made overseas.
The decision of the Court of Appeal
In the Court of Appeal Jackson LJ, with whom the other members of the court agreed, rejected a submission on behalf of the appellant that human rights claim in section 82(1)(b) of the 2002 Act as amended means any human rights claim and that its meaning is not confined to an original claim or a subsequent claim which constitutes a fresh claim within rule 353 of the Immigration Rules.
He also rejected a submission that the Supreme Court considered precisely the same question in R (BA (Nigeria)) v Secretary of State for the Home Department [2009] UKSC 7; [2010] 1 AC 444 when construing the phrase a human rights claim in section 92(4)(a) of the 2002 Act as it then stood.
The decision of the Supreme Court on the meaning of human rights claim in BA (Nigeria) did not apply to statutory provisions which determine whether a right of appeal exists at all.
In his view, it would be an absurd reading of section 82, in either its previous or current form, to interpret it as permitting an applicant to make the same human rights claim over and over again, each time appealing to the FTT against the rejection of that claim.
He concluded that a human rights claim in section 82(1)(b) of the 2002 Act must mean an original human rights claim or a fresh human rights claim which falls within rule 353 of the Immigration Rules.
Submissions of the parties
On this appeal the parties have made very detailed submissions orally and in writing for which the court is grateful.
It seems to me, however, that Mr Michael Fordham QC on behalf of the appellant makes two essential submissions which lie at the heart of his case. (1) First, he submits that the Onibiyo line of authority which established that in the case of a second or successive submission it was for the Secretary of State to decide whether this constituted a fresh claim giving rise to a right to appeal did not survive the decision of the Supreme Court in BA (Nigeria), and that, accordingly, there is no longer any role for rule 353 of the Immigration Rules.
In this regard he submits that this court should reject the reading of BA (Nigeria) favoured by Lord Neuberger of Abbotsbury MR in the Court of Appeal in R (ZA (Nigeria)) v Secretary of State for the Home Department [2010] EWCA Civ 926; [2011] QB 722. (2) Secondly, he submits that the amendments to Part 5 of the 2002 Act effected by the 2014 Act abrogate the control mechanism established by the Onibiyo line of authority and rule 353 of the Immigration Rules and that the words human rights claim as they appear in section 82(1)(b) of the 2002 Act following amendment by the 2014 Act are to be interpreted without reference to rule 353.
On this basis he submits that any second or subsequent submission which is a human rights claim under section 113(1) attracts a right of appeal under section 82, notwithstanding that the individual has made a previous claim that removal would breach a relevant obligation, whether the same relevant obligation or a different one, whether on the same basis or a different one, whether with the same or different submissions and evidence, but subject however to the certification provisions in sections 94 and 96.
In response on behalf of the Secretary of State, Sir James Eadie QC submits: (1) BA (Nigeria) does not establish that the words human rights claim as they appear in Part 5 of the 2002 Act are to be interpreted without reference to the Onibiyo line of authority or rule 353 of the Immigration Rules.
The actual decision in BA (Nigeria) was that rule 353 had no further part to play for the purposes of section 92(4)(a) once there was an appeal against an immigration decision.
It did not determine that the Secretary of State was no longer entitled to decide the prior question as to whether a second or subsequent submission constituted a claim at all.
In his support he relies on the analysis of BA (Nigeria) by Lord Neuberger MR in ZA (Nigeria). (2) The amendments to the 2002 Act effected by the 2014 Act have not changed the position.
It remains the case that there will only be an asylum or human rights claim to be determined if, in relevant cases, further submissions are considered to amount to a fresh claim.
The Onibiyo line of authority
In order to address the issues raised by this appeal it is necessary to consider in some detail the way in which a line of authority concerning second or subsequent submissions to the Secretary of State has developed.
It starts in 1996 with the decision of the Court of Appeal (Sir Thomas Bingham MR, Roch and Swinton Thomas LJJ) in Onibiyo.
The applicant had made an application for asylum under the Asylum and Immigration Appeals Act 1993 (1993 Act), based on the political activities of his father.
The Secretary of State refused his application and his appeal under section 8(3)(b) of the 1993 Act was dismissed.
The applicant then indicated that he was making a fresh claim for asylum based on his own association with the opposition in Nigeria.
Rule 346, Statement of Changes in Immigration Rules (1994) (HC 395), which was then current, provided: When an asylum applicant has previously been refused asylum in the United Kingdom and can demonstrate no relevant and substantial change in his circumstances since that date, his application will be refused.
The Home Office stated in a letter that it was of the view that the representations did not constitute a fresh claim for asylum and had been treated as further information to the original claim.
The request for revocation of the deportation order against him was refused on the ground that there had not been any material change in circumstances since the previous refusal decision sufficient to justify revocation.
The applicants solicitors took issue with this letter and submitted a notice of appeal to a special adjudicator under section 8(3)(b) of the 1993 Act.
The Secretary of State maintained his position and in a subsequent letter explained that the first letter had not constituted a refusal of asylum but a consideration and dismissal of the further information provided.
In the circumstances the Secretary of State had not made a fresh decision and the appeal was invalid.
The applicant applied for judicial review.
A preliminary question was whether a person may during a single uninterrupted stay in the United Kingdom make more than one claim for asylum within the 1993 Act.
The Master of the Rolls, with whom the other members of the court agreed, rejected the submission of the Secretary of State that once a person had made a claim for asylum, been refused by the Secretary of State and unsuccessfully exercised his rights of appeal, that exhausted his legal rights.
The obligation of the United Kingdom under the Refugee Convention not to return a refugee to a county where his life or freedom would be threatened for a Convention reason remained binding until the moment of return.
Accordingly, three questions arose for consideration.
First, what constitutes a fresh claim? Secondly, how and by whom is it decided whether a claim is a fresh claim or not? Thirdly, what are the procedural consequences of a decision that a claim is or is not a fresh claim?
In response to the first question, it was not controversial that there had to be a significant change from the claim as previously presented, such as might reasonably lead a special adjudicator to take a different view.
The acid test must always be whether, comparing the new claim with that earlier rejected, and excluding material on which the claimant could reasonably have been expected to rely in the earlier claim, the new claim is sufficiently different from the earlier claim to admit of a realistic prospect that a favourable view could be taken of the new claim despite the unfavourable conclusion reached on the earlier claim. (at pp 783H 784B) In response to the second question, rule 328 of the Statement of Changes in Immigration Rules made clear that all asylum applications would be determined by the Secretary of State in the first instance.
In response to the third question, no particular difficulty arose where the Secretary of State treated the submission as a fresh claim, whether asylum was then granted or refused.
In the latter case, the same consequences should follow as on a refusal of an initial claim.
A problematic situation arose, however, where, as on the facts of that case, the Secretary of State did not recognise the submission as a fresh claim and, therefore, declined to take or omit to take any action which would trigger a right of appeal.
It would clearly be open to the asylum seeker, in those circumstances, to have resort to the court to challenge that decision.
However, a question of considerable difficulty was whether the court should approach this as a question of precedent fact or whether the decision should be susceptible to challenge only on Wednesbury principles.
As the answer to the question was not determinative of the appeal, the Master of the Rolls proffered a tentative answer in favour of the latter view. (at pp 784D 785D)
Following the decision in Onibiyo, rule 346 was amended to reflect the judgment in that case.
The amended version provided: Where an asylum applicant has previously been refused asylum the Secretary of State will determine whether any further representations should be treated as a fresh application for asylum.
The Secretary of State will treat representations as a fresh application for asylum if the claim advanced in the representations is sufficiently different from the earlier claim that there is a realistic prospect that the conditions set out in para 334 will be satisfied.
In considering whether to treat the representations as a fresh claim, the Secretary of State will disregard any material which: is not significant; or is not credible; or (i) (ii) (iii) was available to the applicant at the time when the previous application was refused or when any appeal was determined. (CM 3365)
In Cakabay v Secretary of State for the Home Department (Nos 2 and 3) [1999] Imm AR 176, after the appellants appeals against the refusal of asylum had been dismissed, he had submitted further evidence which the Secretary of State concluded did not constitute a fresh claim.
The appellant purported to appeal against this decision.
The Secretary of State successfully applied for a declaration that the appellate authorities had no jurisdiction in the matter.
The judge, reviewing the decision on Wednesbury principles, also concluded that the Secretary of States decision could not be held to be unreasonable.
The Court of Appeal (Peter Gibson, Schiemann and Potter LJJ) upheld the decision.
Schiemann LJ explained that the statute made no express provision as to what is to be done in the case of repeated claims for asylum by the same person.
Nevertheless, there was a need for categorisation and to distinguish between what he termed a repetitious claim and a fresh claim: In the case of a repetitious claim no more is required to be done: the first decision has ensured that the United Kingdom has complied with its obligations under the Convention.
Section 6 of the 1993 Act creates no inhibition on the claimants removal: the Secretary of State has on the occasion of his decision on the first claim decided the repetitious claim.
So far as the decision on the claimants repetitious application for leave to enter is concerned, the claimant will be told that leave has already been refused and that there is no need for any new decision. (at p 181) Despite the focus on repetitious claims, it is clear that the reasoning of Schiemann LJ applies equally to any further submissions that failed to meet the test in rule 346.
Similarly, Peter Gibson LJ (at p 193) considered that if the representations amounted to no more than the same claim as that which had already failed, or if the criteria of rule 346 were not met, there would be no claim for asylum within the statute and therefore no appeal would lie under section 8(1) of the 1993 Act against a determination adverse to the asylum seeker that there had been no fresh claim.
Consistently with what the Court of Appeal in Onibiyo had assumed to be correct, the court went on to hold that no appeal lay under section 8(1) of the 1993 Act from the determination of the Secretary of State that fresh representations do not amount to a claim for asylum.
Schiemann LJ accepted that a categorisation decision has potentially severe consequences and that, in such a context, arguments based on the possibilities of abuse should not weigh heavily in matters of construction.
Nevertheless, Parliament had not provided for an appeal on the merits against a categorisation decision (at p 185 186). (See also Peter Gibson LJ at p 194.)
In this way the courts imposed a gloss on the operation of the statutory scheme which made no express provision for the handling of second or successive submissions.
The effect of these decisions was that it was for the Secretary of State to decide whether further submissions amounted to a fresh claim.
Where the Secretary of State had taken a rational decision that further submissions did not amount to a fresh claim for asylum under rule 346 of the Immigration Rules, there was no asylum claim to determine and therefore no need to make any decision to refuse leave to enter.
In these circumstances, no right of appeal arose under section 8 of the 1993 Act.
A categorisation decision was, however, open to challenge by judicial review.
On 7 November 2002 Parliament enacted the 2002 Act, which effectively replaced the 1993 Act.
The 2002 Act itself has subsequently been amended on a number of occasions.
Part 5 of the 2002 Act concerns immigration and asylum appeals.
Section 82 conferred a statutory right of appeal against an immigration decision and listed what constituted an immigration decision.
The grounds of appeal included in section 84(1)(g) that removal would breach the United Kingdoms obligations under the Refugee Convention or would be unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights.
Section 92 required an appeal to be out of country unless it concerned one of five of the immigration decisions listed in section 82(2) or the individual had made an asylum or human rights claim.
Section 94 empowered the Secretary of State to issue a certificate that an asylum or human rights claim was clearly unfounded, in which case an appeal would be limited to an out of country appeal.
Section 96 empowered the Secretary of State to issue a certificate relating to an earlier right of appeal in which a matter now relied upon could and should have been raised, in which case an appeal could not be brought at all.
In October 2004 rule 353 was introduced (HC 1112). 353.
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: had not already been considered; and (i) taken together with the previously considered (ii) material, created a realistic prospect of success, notwithstanding its rejection.
This paragraph does not apply to claims made overseas.
Rule 353A was inserted by HC 82/2007. 353A. Consideration of further submissions shall be subject to the procedures set out in these Rules.
An applicant who has made further submissions shall not be removed before the Secretary of State has considered the submissions under paragraph 353 or otherwise.
This paragraph does not apply to submissions made overseas.
In WM (DRC) v Secretary of State for the Home Department [2006] EWCA Civ 1495; [2007] Imm AR 337 the Court of Appeal (Buxton, Parker and Moore Bick LJJ) confirmed (per Buxton LJ at paras 8 10) that there is no provision for appeal from a decision of the Secretary of State as to the existence of a fresh claim and, accordingly, the court was engaged only through the medium of judicial review.
The Secretary of States decision as to whether there was a fresh claim was not a fact, nor precedent to any other decision, but was the decision itself.
The court could not take that decision out of the hands of the decision maker.
The decision remained that of the Secretary of State, subject only to review on a Wednesbury basis, albeit applying anxious scrutiny.
In ZT (Kosovo) v Secretary of State for the Home Department [2009] UKHL 6; [2009] 1 WLR 348 the House of Lords by a majority extended the applicability of the Onibiyo approach.
The Secretary of State had rejected the applicants claims for asylum and protection on human right grounds and certified the claims as clearly unfounded under section 94(2) of the 2002 Act.
As a result, the applicant had no in country right of appeal and he was served with a decision to remove him as an illegal immigrant.
He made two further submissions, but the Secretary of State maintained her certification of the claims as clearly unfounded.
The House of Lords held by a majority (Lord Hope dissenting) that the Secretary of State had erred in applying section 94(2) of the 2002 Act rather than rule 353 to the further submissions.
The words any appeal relating to that claim is no longer pending in rule 353 should be interpreted in accordance with the definition of a pending appeal in section 104 of the 2002 Act.
If there was no appeal pending, the qualifying words had no application.
Furthermore, it made sense that the rule should be disapplied during, and only during, the currency of an appeal since if an appeal was pending further submissions could be made to the appeal tribunal.
As Lord Neuberger observed (at para 86), it would seem silly if rule 353 only applied after an appeal had been brought and concluded but did not apply before an appeal was brought and could never apply in a case where no appeal had been brought.
BA (Nigeria)
Some nine months after the House of Lords delivered its decision in ZT (Kosovo) on 4 February 2009, the Supreme Court delivered its decision in BA (Nigeria) on 26 November 2009.
Mr Fordhams primary submission is that the Onibiyo line of authority did not survive the decision of the Supreme Court in BA (Nigeria) and that, accordingly, there is no longer any role for rule 353 of the Immigration Rules.
BA (Nigeria) concerned two separate cases.
BA, who had previously been granted indefinite leave to remain, was served with a decision that he would be deported on his release from prison on licence from a sentence of imprisonment of ten years.
He appealed on human rights grounds against that decision and his appeal failed.
He was served with a deportation order.
BA then made further submissions as to why he should not be deported.
The Secretary of State agreed to consider his reasons for seeking revocation of the deportation order but declined to revoke it.
Directions were then given for his removal.
The other case was that of PE who had entered the United Kingdom clandestinely.
His application for asylum was rejected by the Secretary of State.
It was decided that directions were to be given for his removal to Cameroon.
He did not appeal against that decision.
Before it was put into effect, however, he was convicted and sentenced to imprisonment for having a forged passport and using it to obtain work.
The Secretary of State decided to make a deportation order against him.
PE appealed unsuccessfully against that decision on asylum and human rights grounds.
The deportation order was signed and served on him, following which his representatives made written representations for the decision to be reconsidered.
In particular, it was claimed that he would be persecuted in Cameroon on account of his homosexuality.
The Secretary of State declined to reconsider her decision; in her view the representations did not amount to a fresh claim within rule 353.
PE purported to appeal against that decision but the tribunal held that it was not an appealable decision.
Both BA and PE applied for judicial review.
In each of these cases the refusal of the Secretary of State to revoke the deportation order following further representations was accepted to be an immigration decision within section 82(2)(k).
It was common ground, accordingly, that each applicant had a right of appeal under section 82(1).
It was also common ground that neither of the claims would have been certifiable under section 94 or section 96 (although it appears that the Secretary of State took this position solely because, so far as section 94 was concerned, it applied only where the appellant has made an asylum claim or a human rights claim (or both)).
The issue was whether the right of appeal could be exercised from within the United Kingdom. (See Lord Hope DPSC at para 14.) Section 92(1) precluded an appeal under section 82(1) by a person while he is in the United Kingdom, unless his appeal was of a kind to which section 92 applied.
Section 92, by virtue of section 92(4)(a), applied to an appeal against an immigration decision if the appellant has made an asylum claim, or a human rights claim, while in the United Kingdom so that in such a case there would be a right to an in country appeal.
Lord Hope encapsulated the issue (at para 2): The question is whether the expression an asylum claim, or a human rights claim, in section 92(4)(a) of the 2002 Act includes any second or subsequent claim that the asylum seeker may make, or only a second or subsequent claim which has been accepted as a fresh claim by the Secretary of State under rule 353 of the Statement of Changes in Immigration Rules (1994) (HC 395).
The Supreme Court (Baroness Hale JSC dissenting) held that it was not open to the Secretary of State to rely on rule 353 and the Onibiyo reasoning to deny an in country right of appeal in those circumstances.
As Lord Neuberger MR observed in ZA (Nigeria) at para 52, the actual decision in BA (Nigeria) was that rule 353 had no further part to play for the purposes of section 92(4)(a) once there was an appeal against an immigration decision.
However, the reasoning by which the Supreme Court reached that conclusion is open to different interpretations which were formulated by Lord Neuberger in ZA (Nigeria) in the following terms (at para 51).
Like the Administrative Court, I have not found it entirely easy to resolve the issue of whether the Supreme Court was saying (a) as the claimants contend, that rule 353 has no part to play at all following the introduction of Part 5 of the 2002 Act, or (b) as the Secretary of State argues, that rule 353 has no part to play where there has been an appealable immigration decision and the only issue is whether the appeal is of a kind to which section 92 applies.
Ultimately, however, again like the Administrative Court, I have come to the conclusion that the Secretary of States more limited interpretation is to be preferred.
In the present appeal, Mr Fordham has sought to persuade us that the broader reading of BA (Nigeria) is correct and that the narrower reading favoured by Lord Neuberger in ZA (Nigeria) is incorrect.
Mr Fordham is able to point to certain passages in the judgment of Lord Hope in BA (Nigeria) (with which Lord Scott, Lord Rodger and Lord Brown agreed) which certainly lend support to the view that the new scheme introduced by the 2002 Act has rendered the reasoning in Onibiyo and rule 353 redundant.
I draw attention, in particular, to the following passages. (1) Lord Hope (at para 29), referring to section 94(2) and section 96, noted that the new system introduced by Part 5 of the 2002 Act contains a range of powers that enable the Secretary of State or an immigration officer to deal with the problem of repeat claims.
It was common ground that the present cases were not certifiable under either of these two sections.
Why then, he asked rhetorically, should they be subjected to a further requirement which is not mentioned anywhere in the 2002 Act.
He continued: It can only be read into the Act by, as Sedley LJ in the Court of Appeal put it, glossing the meaning of the words a claim so as to exclude a further claim which has not been held under rule 353 to be a fresh claim The court had to do this in Ex p Onibiyo But there is no need to do this now.
It is not just that there is no need now to read those words into the statute.
As Mr Husain pointed out, the two systems for excluding repeat claims are not compatible. (at paras 29, 30) (2) At para 31 Lord Hope observed: The ground of appeal referred to in section 84(1)(g) has been designed to honour the international obligations of the United Kingdom.
To exclude claims which the Secretary of State considers not to be fresh claims from this ground of appeal, when claims which he certifies as clearly unfounded are given the benefit of it, can serve no good purpose.
On the contrary, it risks undermining the beneficial objects of the Refugee Convention which the court in Ex p Onibiyo , under a legislative system which had no equivalent to section 95, was careful to avoid. (3) At para 33 Lord Hope observed: There is no doubt, as I indicated in ZT (Kosovo) v Secretary of State for the Home Department , para 33, that rule 353 was drafted on the assumption that a claimant who made further submissions would be at risk of being removed or required to leave immediately if he does not have a fresh claim.
That was indeed the case when this rule was originally drafted, as there was no equivalent of section 92(4) of the 2002 Act.
But Mr Husains analysis has persuaded me that the legislative scheme that Parliament has now put in place does not have that effect.
Its carefully interlocking provisions, when read as a whole, set out the complete code for dealing with repeat claims.
Rule 353, as presently drafted, has no part to play in the legislative scheme.
As an expression of the will of Parliament, it must take priority over the rules formulated by the executive.
Rule 353A on the other hand remains in place as necessary protection against premature removal until the further submissions have been considered by the Secretary of State.
Similarly, Lord Rodger (at para 37), rejecting the submission that the expression an asylum claim in section 92(4)(a) should be given the same meaning as Sir Thomas Bingham MR gave to the expression a claim for asylum in section 6 of the 1993 Act, noted that the contexts were significantly different since the 2002 Act contains a new scheme for dealing with abusive claims.
Given that new scheme, there is no longer the same need to adopt the former interpretation and, indeed, the one now adopted fits the new context better.
Lord Brown (at para 44) explained that he had reached his conclusion only on the basis that: the statutory solution to the problem of abuse created by the making of repeat asylum claims lies not in construing an asylum claim in section 92(4)(a) of the Nationality, Immigration and Asylum Act 2002 as the Court of Appeal in R v Secretary of State for the Home Department, Ex p Onibiyo construed a claim for asylum in section 6 of the Asylum and Immigration Appeals Act 1993 but rather in the Secretary of State issuing certificates where appropriate under sections 94 or 96 of the 2002 Act (no equivalent provisions having been available under the 1993 Act).
Nevertheless, there are to my mind major difficulties inherent in this reading of BA (Nigeria).
Here I find myself in total agreement with the reasoning of Lord Neuberger on this point in ZA (Nigeria) which I gratefully acknowledge.
First, in principle there is no conflict between Onibiyo and rule 353 on the one hand and the statutory scheme in Part 5 of the 2002 Act on the other.
I note that when Onibiyo was decided in 1996 there was in force a system of certification under paragraph 5 of Schedule 2 to the 1993 Act which established special appeal procedures for claims without foundation.
With respect to Lord Hope, I do not consider that there is any incompatibility between what he described as the two systems for excluding repeat claims.
They operate at different stages of the response to a purported renewed claim.
BA (Nigeria) establishes that, as the statutory provisions then stood, where the Secretary of State receives further submissions on which he makes an immigration decision within section 82 there will, in the absence of certification, be an in country right of appeal.
It decides that in those circumstances it is not then open to the Secretary of State to rely on the Onibiyo reasoning or rule 353 in order to contend that the submissions did not amount to a claim and that, as a result, there is no need for a decision and no entitlement to a statutory appeal.
It is entirely understandable that in such a case there is no room for the operation of rule 353.
Onibiyo and rule 353, by contrast, address a prior issue, namely whether there is a claim which requires a decision at all.
Secondly, I do not consider that the effect of the machinery introduced by Part 5 of the 2002 Act, in particular the powers of certification under sections 94 and 96, is to render the Onibiyo reasoning and rule 353 redundant.
As Lord Neuberger observed in ZA (Nigeria) (at para 24), the issue should not be decided simply by seeing whether sections 94 and 96 can be interpreted so as to cover every application falling within rule 353, as it is equally valid to consider whether they can be construed consistently with rule 353 having an independent effect.
In my view, rule 353 continues to perform a useful role notwithstanding the machinery introduced by Part 5 of the 2002 Act. (1) Section 94 applies to claims which are clearly unfounded, whether they are original claims or purported renewed claims.
By contrast, rule 353 applies only to supplemental submissions which purport to be claims. (2) The effect of certification under section 94 is to limit an appeal to an out of country appeal.
Certification under section 96 has the effect that an appeal under section 82(1) may not be brought.
The effect of rule 353 is that no right of appeal ever arises. (3) As indicated above, where it applies rule 353 operates at a prior stage to section 94.
In the case of a purported renewed claim there is a legitimate preliminary issue as to whether it constitutes a claim requiring a decision on the merits at all.
Rule 353 addresses that issue.
Section 94, on the other hand, proceeds on the basis that there is a valid claim which requires consideration on the merits and a decision.
It creates a machinery of certification of the claim as clearly unfounded so as to prevent an in country appeal. (4) The fact that section 94 applies to both original and purported renewed claims does not deprive rule 353 of its utility in relation to the latter category.
In appropriate cases, rule 353 relieves the Secretary of State from taking a decision on the merits of the application and refusing it.
It operates by enabling him to reject the submissions as not constituting a claim requiring decision.
Section 94, however, comes into play only when the Secretary of State has considered a claim on its merits and refused it.
At that stage, certification operates to block a right to an in country appeal which would otherwise arise.
Thus rule 353 can be operated as a sort of gatekeeper by the Secretary of State to prevent further submissions amounting to, or being treated as, a claim, thereby not getting into Part 5 territory at all. (ZA (Nigeria) per Lord Neuberger MR at para 26) With respect to Mr Fordham, it is not the case that this interposing function arose only because of the additional requirement of an immigration decision in the pre 2014 statutory list in section 82(1) of the 2002 Act.
On the contrary, it is founded on the need to identify what constitutes a claim for this purpose. (5) Section 96(1) addresses a different aspect of renewed claims from rule 353.
Section 96(1) applies where a person seeks to rely on a matter that could have been raised in an earlier appeal against an immigration decision and the Secretary of State or the immigration officer considers that there is no satisfactory reason for the failure to do so.
It is, in a sense, the converse of the situation addressed by rule 353. (6) Part 5 as originally enacted included a subsection 96(3) which provided: (3) A person may not rely on any ground in an appeal under section 82(1) if the Secretary of State or an immigration officer certifies that the ground was considered in another appeal under that section brought by that person.
This provision was much closer to rule 353 than is section 96(1) as both rule 353 and section 96(3) address similar situations.
However, section 96(3) did not achieve its effect by denying the existence of a claim requiring a decision on the merits, but by requiring such a renewed claim to be treated as a fresh claim and enabling the Secretary of State to block an appeal on the particular ground which had been raised previously.
In any event, section 96(3) is no longer in force, having been repealed by section 30 of the Asylum and Immigration (Treatment of Claimants, etc) Act 2004 with effect from 1 October 2004.
Thirdly, there are features of the regulatory scheme which are difficult to reconcile with an intention on the part of Parliament that provisions in Part 5 of the 2002 Act should provide a comprehensive and exclusive code for dealing with repeat claims and that rule 353 should no longer be effective. (1) When the 2002 Act was enacted there was no attempt to repeal or amend rule 346, the predecessor to rule 353. (2) Parliament has approved subsequent amendments to the Immigration Rules which have not included the deletion of rule 353 which remains in force. (3) Section 53 of the Borders, Citizenship and Immigration Act 2009 (the 2009 Act) amended section 31A of the Senior Courts Act 1981 to permit transfer from the High Court to the Upper Tribunal of judicial review applications where: the application calls into question a decision of the Secretary of State not to treat submissions as an asylum claim or a human rights claim wholly or partly on the basis that they are not significantly different from material that has previously been considered As Lord Neuberger observed in ZA (Nigeria) (at para 19), here Parliament has plainly legislated on the basis that rule 353 is still in force and section 53 of the 2009 Act would have been positively meaningless if rule 353 had no further function. (4) Following the amendment of the 2002 Act by the 2014 Act, rule 353 was amended so as to ensure that it applies to human rights claims and protection claims (HC 1025).
Once again, this is inconsistent with the suggestion that rule 353 had become ineffective.
These features strongly suggest that rule 353 continues to perform an important function.
Fourthly, I am persuaded that the broad reading of BA (Nigeria) for which the appellant contends is inconsistent with ZT (Kosovo) where the House of Lords held (Lord Hope dissenting) that the Secretary of State had erred in applying section 94(2) of the 2002 Act rather than rule 353 in considering the applicants further submissions.
By contrast, there is no difficulty in reconciling the two decisions if the ratio decidendi of BA (Nigeria) is merely that rule 353 has no part to play where there is an appealable immigration decision.
If the Supreme Court did decide in BA (Nigeria) that rule 353 is entirely redundant following the introduction of Part 5 of the 2002 Act, it must have intended to overrule or to depart from the decision of the House of Lords some nine months earlier in ZT (Kosovo).
However, BA (Nigeria) contains no express statement to that effect.
Moreover, while an earlier decision may be impliedly overruled, it is extremely improbable that this was the intention here, for reasons summarised by Lord Neuberger in ZA (Nigeria) as follows (at para 53): I have great difficulty with the notion that the later case relied on by the claimants overruled the earlier case. (i) Both decisions relate to a much litigated issue, and the earlier decision was given less than a year before the later decision; (ii) the point at issue was directly addressed and decided in all five reasoned judgments in the earlier decision, and even the reasoning of the dissenter would have to be treated as overruled; (iii) the earlier decision is expressly referred to three times in the leading judgment, and once in the only other reasoned judgment, in the later decision without apparent disapproval, and both judgments were given by judges involved in the earlier decision; (iv) the actual outcome in the later decision can perfectly easily be reconciled with the earlier decision, namely on the basis that the later decision is limited to further submissions which have been treated as a fresh claim; (v) this more limited interpretation of the later decision is consistent with the Court of Appeals reasoning and conclusion in that case, which was specifically approved by the Supreme Court; (vi) this more limited interpretation of the later decision is also consistent with a recent statute, whereas the wider interpretation, which would involve overruling the earlier decision, is not.
For these reasons I agree with the Court of Appeal in ZA (Nigeria) that what is said in BA (Nigeria) is limited to cases where there is an appealable decision.
As Lord Neuberger explained: Once there is such a decision, the complete code contained in the legislative scheme applies and rule 353 has no part to play.
However, as decided in ZT (Kosovo) , rule 353 still has a part to play: the Secretary of State can decide that the further submissions are not a fresh claim, in which case one does not enter the territory governed by the complete code of the legislative scheme. (ZA (Nigeria) at para 59)
For these reasons, I consider that Mr Fordhams primary case is not made out.
The 2014 amendments to the 2002 Act
Part 5 of the 2002 Act was substantially amended by the 2014 Act which restructured rights of appeal.
The most relevant provisions as amended are set out at paras 19 to 23 above.
Section 82 no longer restricts a right of appeal to an appeal against an immigration decision as formerly listed in section 82(2).
In particular, there is no longer any right of appeal in respect of a decision to make a deportation order or a refusal to revoke such an order per se.
Instead a person may appeal where the Secretary of State has decided to refuse a protection claim or a human rights claim made by that person or has decided to revoke that persons protection status.
Post 2014 authority
Before drawing conclusions as to the impact of the 2014 amendments to the 2002 Act on the present proceedings, it is convenient to consider the more recent decisions on this point.
In Waqar v Secretary of State for the Home Department [2015] UKUT 169 (IAC) the appellant contended that the Secretary of States decision not to treat his further submissions as amounting to a fresh claim for the purposes of rule 353 amounted to a refusal of a human rights claim under section 82 as amended.
The appellant maintained that rule 353 is now subsumed within the statutory provisions and that a right of appeal under section 82 as amended arises in all refused human rights claims, subject only to certification under sections 94 or 96.
It was submitted that there is no longer a requirement for a categorisation step because the statutory framework now provides all necessary safeguards against repetitious or unmeritorious claims.
In rejecting the submission, the Upper Tribunal (UTJ Coker, UTJ Kebede) held (at paras 18, 19, 20) that BA (Nigeria) is not authority for the proposition that submissions amount to a claim and that the response to those submissions is a decision within the meaning of Part 5.
Submissions that purport to be a human rights claim do not without more trigger a right of appeal.
There has to be an intermediate categorisation in which rule 353 provides the mechanism to determine whether they amount to a claim.
If they do not, the decision is not a decision to refuse a human rights claim.
In R (MG) v First tier Tribunal (Immigration and Asylum Chamber) [2016] UKUT 283 (IAC) the applicant had made a claim for asylum which had been rejected and his appeal had been dismissed.
Further submissions on his behalf were rejected by the Secretary of State who maintained the earlier decision that he did not qualify for asylum and concluded that the further representations were not a fresh claim.
The applicant lodged a notice of appeal with the First tier Tribunal which rejected it because no notice of an appealable decision had been issued.
On a challenge to that decision by way of judicial review it was submitted, without taking issue with the decision of the Upper Tribunal in Waqar, that as a result of Parliaments decision to grant a right of appeal from a refusal of a protection claim the judge in the First tier Tribunal has jurisdiction to decide whether there had been a decision to refuse a protection claim.
The Upper Tribunal (Blake J and UTJ Grubb) rejected the submission.
In our view, notwithstanding the significant change in section 82 from a right of appeal against an immigration decision on a protection ground to a right of appeal against a protection decision itself, Parliament can be presumed to have legislated against the background of satisfaction with the previous law as declared in ZA (Nigeria).
There is no indication in the amendments made, that it was intended to transfer responsibility for the categorisation decision of whether a claim is a fresh claim to the FtT. Indeed, the general purpose of the 2014 amendments was to reduce the appellate jurisdiction of the FtT. (at para 14) They further held that an assessment of whether a protection claim is a fresh claim is not a question of jurisdictional fact but a matter of assessment and evaluation for the Secretary of State subject to supervision by judicial review.
Furthermore, when the Secretary of State concludes that the claim before her is not a fresh claim she does not refuse a protection claim.
In R (Sharif Hussein) v First Tier Tribunal (para 353: present scope and effect) IJR [2016] UKUT 409 (IAC); [2017] Imm AR 84 the applicants appeal against a deportation order had been dismissed.
He made further submissions in support of a request to revoke the order which were rejected by the Secretary of State who also concluded that they did not amount to a fresh claim within rule 353.
The First tier Tribunal held that there was no exercisable right of appeal.
The issue in the judicial review which followed was to what extent, if at all, the Secretary of State could utilise rule 353 to preclude the applicant from appealing to the First tier Tribunal under section 82.
The applicant, first, relied on the judgment of Lord Hope in BA (Nigeria) in support of the proposition that rule 353 had no part to play following the introduction of Part 5 of the 2002 Act.
Secondly, he submitted that the effect of the 2014 amendments to the 2002 Act was that rule 353 no longer applied to the categorisation issue as to whether submissions were a claim within section 82 and was now relevant only to certification issues.
The Upper Tribunal (Dove J and Peter Lane UTJ) rejected both submissions.
It was bound by ZA (Nigeria) to reject the first submission.
With regard to the second submission it considered that despite the changes made by the 2014 Act the concept of a claim remained central to the new section 82.
It also noted that if Parliament had intended to limit rule 353 to certification decisions, it would have been amended to make that clear.
In fact, the amendment to rule 353 made following the 2014 Act to ensure that it applies to human rights claims and protection claims demonstrated that it was intended to have continuing effect.
These matters have been considered recently by the Court of Appeal (Arden and Sales LJJ) in Secretary of State for the Home Department v VM (Jamaica) [2017] EWCA Civ 225; [2017] Imm AR 1237, a judgment delivered shortly before that of the Court of Appeal in the present case.
Sales LJ described the relationship of section 82(1) and rule 353 in the clearest terms (at para 28): Section 82(1) and paragraph 353 of the Immigration Rules operate in combination.
If the Secretary of State decides that new representations in relation to some earlier decision (whether of her own or by the tribunal) which is now final and closed do not amount to a fresh claim under paragraph 353 she will simply reject the representations as matters which do not affect the position of the applicant within the regime of immigration law.
In that sort of case, on the assessment of the Secretary of State the representations do not amount to a claim by the applicant, so her decision is not a decision to refuse a human rights claim (or any other sort of claim) within the scope of section 82(1).
No right of appeal arises in relation to her decision that the new representations do not amount to a fresh claim.
Such a decision can only be challenged by way of judicial review.
On this point I agree with the decision of the UT in Waqar v Secretary of State for the Home Department (Statutory Appeals/paragraph 353) [2015] UKUT 169 (IAC) at paras 19 20.
The effect of the 2014 amendments
The second principal submission on behalf of the appellant is that the amendments made in 2014 to Part 5 of the 2002 Act have effected a fundamental change in the operation of the statutory scheme with the result that, whatever may have been the position after BA (Nigeria), rule 353 no longer applies and accordingly no longer performs a gatekeeper function.
First, on behalf of the appellant, Mr Fordham points to the fact that section 82, as amended, now confers a right of appeal where the Secretary of State has decided to refuse a human rights claim (section 82(1)(b)).
Human rights claim is defined by section 113(1) for the purposes of Part 5 unless a contrary intention appears.
Mr Fordham submits that this is striking because the question of the Part 5 meaning of human rights claim is the same question that previously arose for decision in the Supreme Court in BA (Nigeria) which established that those words, as they appear in Part 5 of the 2002 Act, are to be interpreted without reference to rule 353.
Thus, he submits, a second or subsequent human rights claim is a human rights claim for the purpose of those statutory provisions regardless of whether the Secretary of State accepts or refuses to accept that the claim is a fresh claim within rule 353.
I am unable to accept this submission.
In BA (Nigeria) the Supreme Court considered that there was, in each of the cases, a human rights claim within section 92(4)(a) and, therefore, an appeal would be an in country right of appeal, subject to the possibility of certification which did not arise in that case.
However, the reason there was an entitlement to appeal there was because the human rights claims had resulted, in each case, in a refusal to revoke a deportation order which was a qualifying immigration decision under section 82(2)(k).
It was this which excluded the operation of rule 353.
Consequently, the present issue is not the same issue that previously arose for consideration in BA (Nigeria).
The issue in the present case, as previously explained, is the prior question of whether there is a claim at all.
For the same reason, it is not the case that rejection of Mr Fordhams submission results in the same words bearing different meanings in different sections within Part 5 of the 2002 Act.
Secondly, Mr Fordham relies on the fact that the 2014 amendments remove the former requirement of an immigration decision to which the human rights claim and its rejection needed to have a nexus.
He submits that the effect of the simplified scheme is that any submission that removal would breach a relevant obligation will amount to a human rights or protection claim, the rejection of which will give rise to a right of appeal.
Once again, I am unable to accept this submission.
The appellant is not assisted by the fact that under the amended section 82 there is no longer a requirement to establish an immigration decision within the list previously set out in section 82(2).
In fact, the contrary is the case.
A decision to refuse to revoke a deportation order was formerly an immigration decision under section 82(2)(k) and therefore gave rise to an in country right of appeal, subject to the possibility of certification, but this is no longer the case.
The 2014 amendments limit immigration appeals to circumstances in which there has been a refusal of a protection claim or a human rights claim, or where protection status has been revoked. (For present purposes I will concentrate on human rights claims.) However, the structure and operation of section 82 remain unchanged.
Under the amended section 82(1) a person may appeal to the tribunal where the Secretary of State has decided to refuse a human rights claim made by him, but this does not relieve that person of the burden of establishing that the refusal was in response to a valid claim.
The definitions in Part 5 do not address this question and the answer will depend on the application of the Onibiyo line of authority.
Onibiyo, Cakabay, ZA (Nigeria) and VM (Jamaica) establish that there will only be a human rights claim to be determined if further submissions are considered to amount to a fresh claim.
Rule 353, in turn, is directed at the manner in which a court should approach that prior question.
Under the post 2014 provisions it remains the case that if there is no claim, there is no appealable decision.
Thirdly, Mr Fordham makes a series of submissions relating to the intention of Parliament in enacting the 2014 amendments.
In his submission, Parliament used straightforward language for the purposes of the section 82 statutory right of appeal.
If, he submits, it had been the intention to maintain the structure for which the Secretary of State contends, Parliament would be expected to make that clear, but the contrary is the case.
Parliament did not introduce Sir Thomas Binghams acid test into the definition of asylum claim in Part 5 of the 2002 Act.
Parliament did not provide that claim was to be construed in accordance with the Immigration Rules, as it did in the case of humanitarian protection in section 82(2)(d) of the 2002 Act introduced by amendment in 2014.
It did not say that claim involved an act by the Secretary of State, giving the Secretary of State a gatekeeper function as to what constitutes a claim.
It did not impose an exclusion by reference to the Immigration Rules in any statutory provision which is in force.
Here Mr Fordham draws attention to the fact that section 12 of the Immigration, Asylum and Nationality Act 2006 (the 2006 Act) has never been brought into force.
It provides that human rights claim does not include a claim which, having regard to a former claim, falls to be disregarded for the purposes of this Part in accordance with immigration rules.
Parliament did not say that the Part 5 right of appeal is subject to exceptions or limitations specified in the Immigration Rules.
Rather section 82(3) states that the right of appeal under subsection (1) is subject to the exceptions and limitations specified in this Part.
Mr Fordham submits that such clarification might have been expected in the light of BA (Nigeria).
The difficulty with these submissions is that they fail to take account of the principle of informed interpretation and the judicial authorities on Part 5 as they stood at the date of the 2014 amendments.
Parliament is normally presumed to legislate in the knowledge of and having regard to relevant judicial decisions. (See, generally, Bennion on Statutory Interpretation, 7th ed, (2017) section 24.6.) In the present context, the Court of Appeal in ZA (Nigeria) had provided an authoritative explanation of the effect of BA (Nigeria).
As Sir James Eadie put it in his submissions, Parliament can therefore be assumed to have legislated in the light of a consistent line of authority which established that a purported human rights claim that did not meet the threshold of a fresh claim under rule 353 was not a claim at all.
Had Parliament intended to depart from this approach, it would surely have made express provision to that effect.
On the contrary, there is nothing in the amendments made in 2014 which supports the view that Parliament intended to open the door so as to enable repeated claims raising human rights issues to generate multiple appeals. (See, in this regard, Hussein per Dove J and UTJ Lane at para 42.)
I should, for the sake of completeness, address two further matters arising from Mr Fordhams submissions in this regard.
First, it would not be appropriate to speculate as to why section 12(3) of the 2006 Act has not been brought into force but, in any event, in seeking to ascertain the intention of Parliament the court must have regard to the legislation as enacted. (See ZA (Nigeria) per Lord Neuberger MR at para 57.) Secondly, the explanatory notes to the 2006 Act state that the amendments to the definition of human rights claim and asylum claim in section 113 of the 2002 Act were made to clarify that further submissions which follow the refusal of an asylum or human rights claim but which do not amount to a fresh claim will not carry a further right of appeal.
Conclusion
For these reasons I consider that the Court of Appeal was correct to conclude that a human rights claim in section 82(1)(b) of the 2002 Act as amended means an original human rights claim or a fresh human rights claim within rule 353.
More generally, where a person has already had a protection claim or a human rights claim refused and there is no pending appeal, further submissions which rely on protection or human rights grounds must first be accepted by the Secretary of State as a fresh claim in accordance with rule 353 of the Immigration Rules if a decision in response to those representations is to attract a right of appeal under section 82 of the 2002 Act.
For these reasons I would dismiss the appeal.
Finally, I draw attention to two recent developments.
First, in July 2018 Justice published a report on Immigration and Asylum Appeals by a Working Party chaired by Professor Sir Ross Cranston which highlights the pressures facing the current appeals system.
Secondly, since the oral hearing on this appeal the Law Commission has published a consultation paper on the Immigration Rules which seeks to identify the underlying causes of their complexity, and to identify principles under which they can be redrafted to make them simpler and more accessible (Law Commission: Simplification of the Immigration Rules; CP 242, 21 January 2019).
The Law Commissions initiative is timely and welcome.
As will be apparent from this judgment, the structure of both primary and secondary legislation in this field has reached such a degree of complexity that there is an urgent need to make the law and procedure clear and comprehensible.
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The appellant is a Jamaican national who arrived in the United Kingdom on 9 October 1998 when he was seven years old.
He has several criminal convictions, including two robberies that triggered deportation proceedings.
On 17 July 2013, a deportation order was issued.
He appealed to the First tier Tribunal (Immigration and Asylum Chamber) (FTT) against his proposed deportation, based on a claimed right to respect for his private life in the UK.
It was accepted at the time that there was no family life in play.
His appeal was dismissed, and he was refused permission to appeal to the Upper Tribunal (Immigration and Asylum Chamber) (UT).
He exhausted his rights of appeal on 1 May 2015.
On 13 May 2015, the appellants previous solicitors made further submissions to the Secretary of State, focusing on the fact that his partner at the time was pregnant.
The submissions did not explicitly request that the deportation order be revoked, nor did they refer to human rights.
The Secretary of State treated the representations as an application to revoke the deportation order on the basis that it would breach Article 8 of the ECHR.
In a letter dated 23 June 2015, the Secretary of State concluded that deportation would not breach Article 8, refused to revoke the deportation order and decided that the submissions did not amount to a fresh human rights claim under paragraph 353 of the Immigration Rules (rule 353).
The appellants son was born on 26 July 2015.
The appellant made further submissions to the Secretary of State on 28 July 2015 regarding the birth of his son and providing documentation from the hospital.
In a letter dated 31 July 2015, the Secretary of State again concluded that deportation would not breach Article 8 and that the further submissions did not amount to a fresh claim.
The appellant appealed against the decision of 31 July 2015 but the FTT declined jurisdiction on the basis that there was no right of appeal against the decision.
The UT dismissed his application for judicial review of the Secretary of States decision that the further representations were not a fresh claim and the FTTs decision that he had no right of appeal.
On 4 May 2017, the Court of Appeal dismissed his appeal.
The Supreme Court dismisses the appeal.
Lord Lloyd Jones gives the sole judgment with which the other Justices agree.
The question in this appeal is: where a person has already had a human rights claim refused and there is no pending appeal, do further submissions that rely on human rights grounds have to be accepted by the Secretary of State as a fresh claim in accordance with rule 353 if a decision in response to those representations is to attract a right of appeal under section 82 of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act) [1]? The appellant raises two principal arguments for why they do not. 1.
BA (Nigeria) The appellant submits that the line of authority beginning with R v Secretary of State for the Home Department Ex p Onibiyo [1996] QB 768, which established that it was for the Secretary of State to decide whether further
submissions constituted a fresh claim giving rise to a right of appeal, did not survive the Supreme Courts decision in BA (Nigeria) v Secretary of State for the Home Department [2009] UKSC 7 [26].
The Court disagrees as BA (Nigeria) was limited to cases where the further submissions have been rejected and there was an appealable decision [50].
Its reasons are as follows: (1) BA (Nigeria) established that, where the Secretary of State receives further submissions on which he makes an immigration decision within section 82 of the 2002 Act, in the absence of certification there will be an in country right of appeal.
Onibiyo and rule 353, by contrast, address a prior issue of whether there is a claim requiring a decision at all [46]. (2) The 2002 Act, particularly the powers of certification under sections 94 and 96, does not render Onibiyo and rule 353 redundant.
The effect of rule 353 is that no right of appeal ever arises, rather than only to limit to an out of country appeal, and it operates at a prior stage to section 94.
Section 96(1) addresses a different aspect of renewed claims, as it applies where a person relies on a matter that could have been raised in an earlier appeal but has no satisfactory reason for not doing so [47]. (3) Parliament did not intend the 2002 Act to provide a comprehensive code for dealing with repeat claims or for rule 353 no longer to be effective.
There was no attempt to repeal rule 353s predecessor and Parliament has approved subsequent amendments to the Immigration Rules that did not delete rule 353.
Moreover, following the amendment of the 2002 Act in 2014, rule 353 was amended to ensure it applies to human rights claims and protection claims, which suggests it was still effective [48]. (4) The appellants broad reading of BA (Nigeria) is inconsistent with ZT (Kosovo) v Secretary of State for the Home Department [2009] UKHL 6, in which the House of Lords held that the Secretary of State had erred in applying section 94(2) of the 2002 Act rather than rule 353 in considering further submissions.
BA (Nigeria) merely decided that rule 353 has no part to play once there is an appealable immigration decision.
It contains no express statement that it intends to overrule or depart from ZT (Kosovo), and it is extremely improbable that that was the intention [49]. 2. 2014 Amendments to the 2002 Act The appellant submits that the amendments to the 2002 Act effected by the Immigration Act 2014 fundamentally changed the operation of the statutory scheme, with the result that rule 353 no longer applies [58].
The Court rejects these submissions for the following reasons: (1) Referring to rule 353 to determine if subsequent submissions are a human rights claim does not result in the same words bearing different meanings.
In BA (Nigeria) there was in each case a human rights claim, but there was a right of appeal against an immigration decision, so the interpretation of human rights claim did not need to refer to rule 353.
In this case, the issue is the prior question of whether there is a claim at all [59]. (2) The 2014 amendments limit appeals to where there has been a refusal of a protection claim or a human rights claim, or the revocation of protection status.
The structure and operation of section 82 remains unchanged.
The amended section 82 does not relieve a person of the burden of establishing that the Secretary of State has refused a valid human rights claim [60]. (3) Parliament is presumed to legislate in the knowledge of and having regard to relevant judicial decisions.
In the present context, the Court of Appeal in ZA (Nigeria) v Secretary of State for the Home Department [2010] EWCA Civ 926 had provided an authoritative explanation of the effect of BA (Nigeria).
Parliament is therefore assumed to have legislated in light of a consistent line of authority establishing that a purported human rights claim short of the threshold of a fresh claim under rule 353 was not a claim at all.
There is nothing in the 2014 amendments to suggest Parliament intended to enable repeated claims raising human rights issues to generate multiple appeals [62].
Therefore, human rights claim in section 82 of the amended 2002 Act means an original human rights claim or a fresh human rights claim within rule 353.
As a result, the Secretary of States response to the appellants further submissions did not attract a right of appeal [64].
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This is an appeal against a decision of the Court of Appeal upholding a series of case management decisions by judges of the Chancery Division.
It arises out of a joint venture between Apex Global Management Ltd (Apex), a Seychelles company owned by Mr Almhairat, and Global Torch Ltd (Global), a BVI company owned by Prince Abdulaziz (the Prince), Mr Abu Ayshih and Mr Sabha.
Apex and Global set up an English company Fi Call Ltd (Fi Call), and then fell out badly.
On 2 December 2011, Global issued a petition under section 994 of the Companies Act 2006 against Apex, Mr Almhairat and Fi Call seeking share purchase orders, and pecuniary and declaratory relief.
Ten days later, Apex issued a not dissimilar cross petition against Global, the Prince, Mr Abu Ayshih, the Princes father, and Fi Call.
Allegations and counter allegations of seriously unlawful misconduct are involved, including money laundering, financial misappropriation, and funding of terrorism.
The two petitions were ordered to be heard together.
It is relevant to mention that the pecuniary relief sought by Apex included a claim for just under $6m (and for convenience I shall treat it as $6m) plus interest, which it contended was owing to Apex by the Prince.
The Prince denied that the $6m was owing on the ground that he had paid it into various bank accounts of Fi Call for which Mr Abu Ayshih and Mr Almhairat were apparently joint signatories.
Apex accepted that it had been agreed that the Prince could pay the $6m to Apex by paying it into Fi Call bank accounts, but did not accept that the payments relied on by the Prince were intended to discharge, or did discharge, his liability to pay Apex $6m.
A Case Management Conference took place before Vos J on 30 and 31 July 2013, at which he considered and resolved a number of disputed case management issues, and his directions were set out in a detailed order (the Order).
For present purposes, only paras 14 and 15 of the Order are relevant.
Both paragraphs contain a direction that all parties (save Fi Call) should by 6 August (para 14) or 12 August (para 15) file and serve a statement, certified by a Statement of Truth signed by them personally in the case of individuals and by an officer of the company in the case of the two companies.
The statements under para 14 were required to identify the location and other details of servers, electronic devices and email accounts of Fi Call to which the party concerned had or had had access.
The statements under para 15 were required to identify the location and other details of email accounts and electronic device not provided by Fi Call to which the party concerned had or had had access.
The Prince did not object to this form of order when it was proposed on 30 July, but, on the following day, his counsel argued that he ought not be required to sign the statements referred to in paras 14 and 15 of the Order personally, but Vos J rejected the argument.
Thereafter, the Prince purported to comply with paras 14 and 15 of the Order, but his statements did not deal with mobile devices, and, more to the point, the accompanying Statements of Truth were signed not by the Prince, but by Mr Abu Ayshih, who was his close adviser, on his own and on the Princes behalf.
As the Prince had failed to comply with paras 14 and 15, Apex and Mr Almhairat (the Apex parties) applied to Norris J on 9 September 2013, seeking an unless order, ie an order that, unless the Prince complied with those paragraphs of the Order, and in particular signed a Statement of Truth, his defence be struck out and judgment be entered against him.
On the basis that he was being asked to enforce[e] compliance with rules, practice directions and orders under CPR 1.1(2)(f), Norris J made the unless order sought, giving the Prince nine days to comply, and refused permission to appeal.
The Prince maintained his position, and accordingly the Apex parties applied to Norris J on 14 October 2013 under CPR 3.5(2) for judgment to be entered in their favour, and in particular Apex applied for judgment to be entered in its favour for the $6m plus interest.
Norris J granted that application on the papers ie without an oral hearing.
The Prince then applied under CPR 3.1(7) for a variation of Vos Js order so as to permit his solicitor to confirm on oath, on his behalf, that he had given full disclosure and for relief from sanctions.
He also filed a witness statement from his solicitor, seeking to make it clear that the Prince had had explained to him the effect of paras 14 and 15 of the Order, and that he had complied with it.
In a judgment given on 30 October 2013, Mann J refused to vary the order of Vos J on the ground that there had been no change of circumstances.
Subsequently, in a judgment given on 29 November he rejected the Princes application to be relie[ved] from sanctions under CPR 3.9.
On 31 July 2014, Hildyard J refused, with some reluctance, an application (the precise nature of which is unimportant for present purposes) for summary judgment in relation to the question whether the $6m had in fact been repaid by the Prince.
Meanwhile, the Prince appealed the decisions of Vos J, Norris J and Mann J to the Court of Appeal which rejected his appeals for reasons contained in a judgment, which (like that of Hildyard J) was given on 31 July 2014, the reasons being expressed by Arden LJ with whom McFarlane and McCombe LJJ agreed [2014] EWCA Civ 1106.
The Prince now appeals to this court against that decision.
The Prince sought permission to appeal to this Court against the decision of the Court of Appeal, and he was given permission on terms that he paid $6m (plus interest) to his solicitors to abide the order of the court, a condition which he complied with, albeit late.
Because the trial was due to start shortly, the Princes appeal was heard on 13 October, and on the day following the hearing we informed the parties that the appeal would be dismissed for reasons which would be given later, on the basis that the parties could thereafter make written submissions as to the order which should be made in relation to the monies paid to the Princes solicitors. 12.
The attack on the decisions below: general
14. 13.
Accordingly, at least as at present advised, I consider that the view taken by Vos J and the Court of Appeal, namely that a direction requiring personal signing of disclosure statements reflected the normal practice, was correct.
However, that is not, in my view, the essential question when it comes to challenging paras 14 and 15 of the Order.
The essential question is whether it was a direction which Vos J could properly have given.
Given that it was a case management decision, it would be inappropriate for an appellate court to reverse or otherwise interfere with it, unless it was plainly wrong in the sense of being outside the generous ambit where reasonable decision makers may disagree as Lewison LJ expressed it in Broughton v Kop Football (Cayman) Ltd [2012] EWCA Civ 1743, para 51.
It appears clear from the transcript of the hearing before Vos J that the ground on which he was being invited not to order the Prince to sign the disclosure statement personally was that the Prince would not sign the document because there was a Saudi Arabian protocol (to use Vos Js description) that members of the Royal Family should not become personally involved in any way in litigation.
Vos J was sceptical as to the existence and the applicability of this protocol.
This is unsurprising, as (i) the evidence as to its existence was principally given by a witness, whose evidence on other points the Judge had previously rejected as incredible, (ii) Vos J was also told by the Princes counsel that he understood that the question of his client giving evidence was still being considered, (iii) another Saudi prince had given evidence in a case before Peter Smith J, and (iv) even if the protocol existed, it was hard to accept that it can have been intended to apply outside Saudi Arabia.
In any event, as Arden LJ put it in para 29 in the judgment of the Court of Appeal, Vos J considered it of the utmost importance having regard to the gravity of the allegations that there should be proper pleadings and full disclosure. 15.
Given the very serious and bitterly disputed allegations and counter allegations in the proceedings, the doubts as to the existence, status and reach of the alleged protocol and the fact that all other parties were being required to sign disclosure statements personally (and it was not suggested by anyone to Vos J that all the parties should have the same indulgence as the Prince), it is very difficult to see how Vos Js conclusion could be faulted; it appears to me to have been well within the generous margin accorded to case management decisions of first instance judges. 16.
As for the hearing before Norris J on 9 September ([2013] EWHC 2818 (Ch)), the Prince again raised the alleged protocol, and suggested that Mr Abu Ayshih could sign the required statement on his behalf confirming that full disclosure had been given.
In the course of a careful judgment, Norris J accepted, at para 8, that the striking out of a statement of case is one of the most powerful weapons in the courts case management armoury and should not be deployed unless its consequences can be justified.
He also accepted, at para 11, that he should consider the effect of making, or not making, the order sought on the overall fairness of the proceedings and the wider interests of justice as reflected in the overriding objective (quoting from Christopher Clarke J in JSC BTA Bank v Ablyazov (No 3) [2010] EWHC 2219). 17.
Norris J then rejected the Princes proposal, saying at para 13 that, if that suggestion was adopted there is a real risk that the overall fairness of the proceedings will be jeopardised.
Everyone else will have put their cards on the table.
The Prince will deal through an agent.
He explained that this would be unfair because [e]veryone else will be exposed to criticism and have their credibility attacked if they are shown to have concealed some relevant account, relevant device, or relevant communication.
But, the Prince says that he should be exempt from that criticism.
He therefore considered (para 15) that some sanction must be applied and was satisfied that an unless order is the only proper relief to grant in these circumstances, not least because it gave the Prince another opportunity to comply with paras 14 and 15 of the Order. 18.
Again, I find it very hard to discern any grounds for challenging Norris Js first decision, which resulted from a correct approach in principle and a careful consideration of the competing arguments, unless it can be said to have resulted in a disproportionate result the first point mentioned in para 11 above, and which I shall consider below.
Similarly, there is no basis for challenging the second decision of Norris J (which was almost administrative in nature). 19.
The first decision of Mann J ([2013] EWHC 3478 (Ch)), rejecting the Princes application to vary paras 14 and 15 of the Order, was based on a very full analysis of the factual and procedural position, and he approached the issue by reference to the guidance given by Rix LJ in Tibbles v SIG plc [2012] 1 WLR 2591, para 39.
He concluded, at para 20, that the requirements for attacking the decision of Vos J within the Tibbles catalogue have [not] come even close to being fulfilled.
It is unnecessary to expand on this brief and allusive summary of Mann Js first decision, because, realistically, the reasoning has not been questioned on this appeal.
What is relied on by the Prince are the three arguments summarised in para 11 above, which I shall consider below. 20.
The second judgment of Mann J ([2013] EWHC 3752 (Ch)) dealt with many issues which are irrelevant for present purposes.
However, he dealt in some detail with the Princes application to be relieved from the sanction imposed and enforced by Norris J, which amounted to an application to set aside the judgment entered against the Prince.
This was proposed on the basis that the Prince had substantially complied with paras 14 and 15 of the Order in the light of a very full witness statement from his solicitor.
Mann J thought that the Prince was raising points which had already been decided.
In any event, he was concerned that, if the Princes proposal was adopted, there would not be what he called a level playing field so far as the other litigants were concerned a point which had also weighed with Norris J, as explained in para 16 above.
Mann J was also sceptical about the existence of the alleged protocol, which he described as having emerged in a piecemeal and relatively casual way for something which is as central as it is now said to be.
He also described it as a matter of collective choice for members of the Saudi Royal Family, to which an English court should not defer (para 41, viii).
He also rejected arguments based on the points mentioned in para 11 above, which I deal with below.
At any rate subject to those points, it seems to me that the second decision of Mann J was unassailable.
In the light of my conclusion that, at least subject to the three points mentioned in para 11 above, the decisions of Vos J, Norris J and Mann J in these proceedings were unassailable, it follows that, in dismissing the appeals against those decisions, I consider that the Court of Appeal was right, albeit again subject to the three points to which I now turn. 21.
Alleged disproportionality 22.
There is undoubtedly attraction in the contention that preventing the Prince from challenging his liability for $6m is a disproportionate sanction in circumstances where he appears to have what was referred to on his behalf at first instance as a substantive defence (and as it was put by Mann J in his first judgment).
A stark view of the Court of Appeals decision is that it deprived a defendant of the opportunity to maintain a defence to a claim for $6m simply because he has failed to comply with an order that he sign a document, when his solicitor was prepared to sign it on his behalf.
Expressed thus, the decision may indeed look like an overreaction, and that is no doubt how it would strike the Prince. 23.
This contention effectively involves saying that, although each decision on the way to the final result is unassailable (at least subject to the Princes two remaining arguments), the final result is wrong on the ground of lack of proportionality.
I suppose that may be logically possible, but it is a difficult 24. position to maintain.
More to the point, in my view, on analysis, the contention does not stand up.
The importance of litigants obeying orders of court is self evident.
Once a court order is disobeyed, the imposition of a sanction is almost always inevitable if court orders are to continue to enjoy the respect which they ought to have.
And, if persistence in the disobedience would lead to an unfair trial, it seems, at least in the absence of special circumstances, hard to quarrel with a sanction which prevents the party in breach from presenting (in the case of a claimant) or resisting (in the case of a defendant) the claim.
And, if the disobedience continues notwithstanding the imposition of a sanction, the enforcement of the sanction is almost inevitable, essentially for the same reasons.
Of course, in a particular case, the court may be persuaded by special factors to reconsider the original order, or the imposition or enforcement of the sanction.
In the present case, essentially for the reasons given by the three judges in their respective judgments, there do not appear to be any special factors (subject to what I say in the next two sections of this judgment).
Further, it is difficult to have much sympathy with a litigant who has failed to comply with an unless order, when the original order was in standard terms, the litigant has been given every opportunity to comply with it, he has failed to come up with a convincing explanation as to why he has not done so, and it was he, albeit through a company of which he is a major shareholder, who invoked the jurisdiction of the court in the first place. 25.
One of the important aims of the changes embodied in the Civil Procedure Rules and, more recently, following Sir Rupert Jacksons report on costs, was to ensure that procedural orders reflected not only the interests of the litigation concerned, but also the interests of the efficient administration of justice more generally.
The Prince has had two very clear opportunities to comply with the simple obligation to give disclosure in an appropriate fashion, namely pursuant to the orders of Vos J and of Norris J.
Indeed, there would have been a very good chance that, if he had offered to sign the relevant statement after judgment had been entered against him, the court would have set aside the judgment and permitted him to defend (provided that no unfair prejudice was thereby caused to the other parties, and he satisfied any appropriate terms which were imposed). 26.
The offer made to Mann J and repeated to the Court of Appeal that the Princes solicitor would confirm, on the Princes instruction, that full disclosure had been given, does not assist the Prince.
It would not, I think, have complied with the normal procedure as set out in the relevant Practice Direction, and while the court had the power to depart from that procedure, there is no obvious reason why it should have done so in this case.
It would have involved undermining the case management decisions of Vos J, Norris J and Mann J.
It would also have been unfair on the respondents as it would have meant that the intended contemporaneous exchange of disclosure statements could not take place.
Further, the Prince would have been accorded a privilege over the other parties.
In addition, even now the disclosure given by the Princes solicitor is self evidently defective as he failed to give details of all email addresses and electronic devices to which the Prince had access.
It also seems quite probable that the hearing date would have been lost if the Prince had been permitted to take part in the trial at such a late stage. 27.
Mr Fenwick relied on Cropper v Smith (1884) 26 Ch D 700, 710, where Bowen LJ said that he knew of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party.
There are three problems for the Prince in this connection.
The first is that these observations were made in connection with a proposed amendment to a pleading, ie an attempt by a litigant to do something which he would be entitled to do, but to do it late; whereas here we are concerned with a party who does not even now intend to obey a court order.
Secondly, as the points made in the last few sentences of the immediately preceding paragraph of this judgment illustrate, there would be prejudice to the other parties if the Princes current proposal was adopted.
Thirdly and even more importantly, the approach laid down in Cropper has been overtaken by the CPR.
The strength of the Princes defence 28.
Mr Fenwick also relied on the fact that the Princes contention in his pleaded case that he had already paid the $6m was very strong, that this should have been taken into account by the courts below, and should have resulted in his being permitted to defend the claims against him.
Presumably, this would be on the basis that some other unspecified sanction should be imposed on the Prince.
Some of the evidence relied on to justify this contention came into existence after the Court of Appeal gave its decision, but I am prepared to assume, without deciding, that it can be taken into account.
In my view, the strength of a partys case on the ultimate merits of the proceedings is generally irrelevant when it comes to case management issues of the sort which were the subject matter of the decisions of Vos J, Norris J and Mann J in these proceedings.
The one possible exception could be where a party has a case whose strength would entitle him to summary judgment.
Both the general rule and the exception appeared to be common ground between the parties, although Mr Fenwick seemed to be inclined at one stage 29. to suggest that the exception might be a little wider.
In my view, the general rule is justifiable on both principled and practical grounds. 31. 30.
A trial involves directions and case management decisions, and it is hard to see why the strength of either partys case should, at least normally, affect the nature or the enforcement of those directions and decisions.
While it may be a different way of making the same point, it is also hard to identify quite how a court, when giving directions or imposing a sanction, could satisfactorily take into account the ultimate prospects of success in a principled way.
Further, it would be thoroughly undesirable if, every time the court was considering the imposition or enforcement of a sanction, it could be faced with the exercise of assessing the strength of the parties respective cases: it would lead to such applications costing much more and taking up much more court time than they already do.
It would thus be inherently undesirable and contrary to the aim of the Woolf and Jackson reforms.
In principle, where a person has a strong enough case to obtain summary judgment, he is not normally susceptible to the argument that he must face a trial.
And, in practical terms, the risk involved in considering the ultimate merits would be much reduced: the merits would be relevant in relatively few cases, and, in those cases, unless the court could be quickly persuaded that the outcome was clear, it would refuse to consider the merits.
Accordingly, there is force in the argument that a party who has a strong enough case to obtain summary judgment should, as an exception to the general rule, be entitled to rely on that fact in relation to case management decisions.
For present purposes, I am prepared to assume in the Princes favour that that is indeed correct.
I should add that I do not think that it would be enough for a party to show that, while his arguments were not strong enough to justify summary judgment, his arguments were strong enough to justify the other party being required to bring the disputed sum into court if he was to be entitled to proceed with his case.
For present purposes, as with an outright order for summary judgment, a claim or defence is either unanswerable or it is not.
A conditional order, typically requiring a party to provide security if it wishes to proceed with its claim or defence, is granted in rather nuanced and case specific circumstances.
Neither as a matter of principle nor as a matter of practicality would it be appropriate to extend the exception to such a case. 33.
Turning to the facts of this case, I do not need to set them out, not least because they are clearly recited by Lord Clarke in paras 48 61, 64 66 and 68 73 of his judgment.
I readily accept that the evidence shows that the Prince would have had a good prospect of establishing that the $6m was paid as he 32. 34. contends in his defence.
However, I cannot accept that his prospects can be said to be any higher.
In the first place, it would risk unfairness to the Apex parties to hold that the Prince had an unanswerable case, as that point had not really been flagged up as part of his argument until the Prince was given permission to appeal to this court.
As mentioned, before Mann J, the Prince argued that he had a substantive defence, and before the Court of Appeal it was argued that the merits of the case should be considered, but it does not appear to have been claimed that he had an unanswerable case (see para 87 of Arden LJs judgment).
Even in his printed case for this appeal, the Prince is described as having a very strong defence on the merits, not an unanswerable defence.
If, at an interlocutory hearing which is not a summary judgment hearing, a party wishes to rely on the contention that he has an unanswerable claim or defence, it seems to me that he should spell out that contention very clearly in advance, as otherwise the raising of the contention at the hearing could wreak obvious unfairness on the other party. 35.
Secondly, even based on the current evidence, I do not consider that it can be said that it is plain that the Prince will succeed in establishing that he had paid the $6m as he alleges.
It is true that payments totalling around $6m were made by the Prince into accounts in the name of Fi Call mentioned in para 2 above.
However, the payments were not made on the dates or into the accounts into which they ought to have been made if they were paid pursuant to the arrangements relied on by the Prince.
The Apex parties suggestion that the money was paid by the Prince under a $20m loan agreement does not appear fanciful, although it may ultimately be rejected: it is common ground that the loan agreement exists.
Further, the fact that much of the money may have been subsequently paid out to the Prince may be inconsistent with the Princes case.
We have seen some of the payments into and out of the bank accounts into which the Prince paid the $6m, but we have not seen all of them.
It is also true that the Apex parties case on the payments by the Prince has not been consistent.
However, the proceedings involve many serious allegations by and against the Prince, and it would require a particularly clear case before any court could properly conclude that the claim for $6m against him was plainly bound to fail or indeed to succeed.
It is also true that, when the matter was before him, Hildyard J described the case against the Prince on this issue as [to] put it lightly, frail.
But he did not think it right to enter summary judgment, and in any event we have to form our own view.
The fact that there will be a trial 36.
The final point relied on by Mr Fenwick was that the issue of whether the $6m had been paid may well be raised at the trial, and at least will be the basis on an attack on the credibility of Mr Almhairat.
Thus, the very issue which the Prince would be precluded from contesting if his appeal is dismissed may be determined in the very proceedings which he would have been debarred from defending.
This was a point which featured in the Princes argument before Mann J, who rejected it.
And although it has some attraction, I consider that he was right, and certainly entitled, to reject it. 37.
While, as I say, this argument has some attraction, in the end it seems to me that it simply represents, as Lord Hodge pointed out in argument, a relatively extreme example of what happens if the court orders that a default judgment be entered against a defendant.
It is inherent in such an order that the claimants will obtain judgment for relief to which it may subsequently be shown that they were not entitled.
Indeed, it is fair to say that, even where judgment for some relief is obtained by claimants after a full trial, evidence may emerge in a later case which establishes that they were not entitled to that relief. 38.
So far as this case is concerned, it is worth considering the point a little further.
It seems unlikely that, if the contention that the Prince had already paid the $6m is maintained at trial, it will be ruled on by the trial judge unless it is necessary to do so in order to resolve a live issue between the remaining parties, ie an issue which will affect the terms of any court order.
And, if the contention had to be resolved in order to determine such an issue between the remaining parties, and the trial judge concluded that the $6m had in fact been paid by the Prince, it is conceivable that the Prince would be able to recover the $6m or its equivalent.
That is, I must emphasise, mere speculation on my part, but it illustrates that the Prince may not be without some hope, albeit of a highly speculative nature, of getting the $6m returned, if he had in fact paid it.
To that extent, he is actually better off than if this was a more normal case involving the enforcement of a sanction.
Concluding remarks 39.
It is right to acknowledge that, in the course of this judgment, I have expressed myself in some places in somewhat tentative terms (eg in paras 12 13, 23, and 31).
This reflects the point that issues such as those raised by this appeal are primarily for the Court of Appeal to resolve.
It would, of course, be wrong in principle for this court to refuse to entertain an appeal against a decision simply because it involved case management and the application of the CPR.
However, when it comes to case management and application of the CPR, just as the Court of Appeal is generally reluctant to interfere with trial judges decisions so should the Supreme Court be very diffident about interfering with the guidance given or principles laid down by the Court of Appeal.
It is also right to say that nothing in this judgment is intended to impinge on the decisions or reasoning of the Court of Appeal in Mitchell vs News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 WLR 795 or Denton v TH White Ltd [2014] EWCA Civ 906. 40. 41.
As it is, for the reasons I have given, I consider that we should dismiss the Princes appeal. 43.
Postscript 42.
After the argument on this appeal had been concluded and we had notified the parties of our conclusion, but before we handed down this judgment, we were advised of recent judgments of Hildyard J in the principal action, given on 3 and 5 November, when he reluctantly adjourned the trial to 2015 (subject to certain conditions) on the application of Mr Almhairat and, in light of Mr Almhairats own evidence as to what had happened to some of the assets of Fi Call, gave some protection to the Prince in respect of the monies held by his solicitors.
It would not be right for this Court to address the question whether to reconsider its decision to dismiss the Princes appeal in the light of these developments, and in particular in the light of any breaches of the CPR or any orders by any of the Apex parties.
If, in the light of events which have occurred since we heard and decided the Princes appeal, reconsideration, revocation or modification of any of the orders affirmed by the Court of Appeal is appropriate (as to which it would be wrong for this Court to give any encouragement or discouragement), then that is a matter which should be raised before a Judge of the Chancery Division.
As I have already indicated, case management and procedural issues should be determined by a first instance judge, and, occasionally, on appeal, by the Court of Appeal, when they decide it is right not to send a matter back to a judge, but to decide it for themselves.
It may be worth emphasising that, if such an application were made, then the effect of the previous first instance decisions of Vos J, Norris J and Mann J should not be treated as having any greater (or any lesser) force than if they had not been upheld by the Court of Appeal and the Supreme Court. 44.
As to the monies held by the Princes solicitors, we can well understand what led Hildyard J to be concerned about the possibility of the monies being released to the Apex parties or any of them.
It seems to me that the appropriate order for this Court to make in connection with the monies is that they continue to be held by the Princes solicitors until such time as a High Court Judge directs them to be paid out, whereupon they should be paid out in accordance with the Judges direction. 45.
The parties counsel should draw up and agree a form of order which gives effect to our decision.
LORD CLARKE: 46.
I have reached a different conclusion from the majority in this appeal.1 I would have allowed the appeal on the ground that, in all the circumstances, justice requires that Prince Abdulaziz (the Prince) should be allowed to challenge the claim by Apex and Mr Almhairat that he owes them the US$6m referred to by Lord Neuberger in para 1 of his judgment.
I would allow him to do so on terms that the monies amounting to US$8,699,988.49 (ie US$8,700,000 less US$11.51 bank charges) secured by the Princes solicitors in an undertaking given to the Supreme Court by letter dated 8 October 2014 should be made available to the respondents if they succeed.
In this way all parties would be protected and justice would be done because the court would be able to resolve all the issues between the parties, both to this appeal and to the underlying proceedings.
Moreover there would be no possibility of inconsistency between the outcome of this appeal and the outcome of the underlying proceedings. 47.
Lord Neuberger has set out in detail an account of the proceedings to date.
I do not disagree with his conclusions at paras 1 to 21.
Indeed, I agree that the Prince only has himself to blame for the predicament he is in.
However, each case depends upon its own facts and this is in some respects a most unusual case.
In a somewhat different context, in Summers v Fairclough Homes Ltd [2012] UKSC 26, [2012] 1 WLR 2004, I expressed the view in para 48 (on 1 In this judgment I will for the most part use the same abbreviations as Lord Neuberger has used in his judgment. behalf of the court) that, in deciding whether to strike out an action, both under the inherent jurisdiction of the court and under the CPR, the court must examine the circumstances of the case scrupulously in order to ensure that to strike out the claim is a proportionate means of controlling the process of the court and deciding cases justly.
Then, before expressing the view that the draconian step of striking a claim out is always a last resort, I then referred (at para 49) to a number of cases and, in particular, this statement of Rix LJ in Aktas v Adepta [2011] QB 894, para 92: Moreover, it should not be forgotten that one of the great virtues of the CPR is that, by providing more flexible remedies for breaches of rules as well as a stricter regulatory environment, the courts are given the powers and the opportunities to make the sanction fit the breach.
That is the teaching of one of the most important early decisions on the CPR to be found in Biguzzi v Rank Leisure plc. [1999] 1 WLR 1926, 1933 48.
As I see it, the same principles apply to the striking out of a defence.
In my opinion it would be disproportionate to allow the judgment to stand, at any rate on the basis that the respondents would forthwith be able to call upon the undertaking referred to above.
I have reached this conclusion on the particular facts of this case.
It is important to have regard to the stance taken by all the parties in this litigation.
Lord Neuberger has referred to what I agree have been the failings of the Prince in this litigation.
However, account must in my opinion also be taken of the stance taken by the respondents as well as the Prince.
If such account is taken, it is my opinion that the just course is that proposed above. 49.
The position on the pleadings is as follows.
In paras 64 to 71 of the amended points of claim Apex and Mr Almhairat pleaded their case in relation to the Al Masoud SPA shortly in this way.
The agreement included the following.
Apex would sell 4,400,000 A shares in Fi Call to Mr Al Masoud for US$5,984,000 and Global Torch would sell 2,933,333 B shares in Fi Call to Mr Al Masoud for US$4,016,000.
The total purchase price was thus US$10,000,000.
Payment was to be by bankers drafts into the bank account of Fi Call at HSBC in London.
Fi Call would receive the monies as agent for Apex and Global Torch respectively.
It was alleged in para 67 that Mr Al Masoud did not pay any part of the price into a Fi Call company account at HSBC.
Instead (it is said) on or about 7 February 2010 he or his agent paid the sum of US$10m to the Prince, purportedly in satisfaction of the debts owed by Mr Al Masoud to Apex and Global Torch, and the Prince accepted 50. 51. 52. 53. that payment in purported satisfaction of those debts.
It was alleged in para 68 that Apex was entitled to treat the Prince as having received the sum of US$5,984,000 on behalf of and for the benefit of Apex.
It was alleged in para 69 that Apex elected to treat the Prince as having received the sum of US$5,984,000 on its behalf on various bases and in para 70 that the Prince held that sum on trust for Apex.
It was then alleged in para 71 that the Prince had failed to account for any part of the US$5,984,000 or indeed of the US$10m.
In para 151.5 it was asserted that there should be added to the notional value of Apexs shares the sum of US$5,984,000 to which Apex was entitled pursuant to the Al Masoud SPA but which was instead paid to the Prince.
In para 75 of the defence and counterclaim of Global Torch (and the defence of Mr Abu Ayshih) the following pleas were advanced in response to para 67 of the amended points of claim.
It was admitted that Mr Al Masoud paid the share purchase consideration to the Prince on 7 February but not that it was done without the knowledge or consent of Apex.
On the contrary it was alleged that Mr Almhairat knew full well how the payment would be made because it was discussed beforehand.
The following was alleged in para 75.3.
It was admitted that the Prince accepted the payment as being in satisfaction of the debt owed under the Al Masoud SPA.
However, it was averred that he did not retain the whole sum for his own benefit.
He retained US$1,999,985 in his account as representing part payment of the sum that would have been due to Global Torch under the Al Masoud SPA.
The remainder of the monies were paid as follows: US$1,999,985 to Fi Calls bank account held at Al Mawarid Bank in the Lebanon; US$1,999,985 to Fi Calls bank account held by HSBC in London; and on 11 March 2010 US$3,999,973 to Fi Calls bank account held at the ABC Bank in Jordan.
It was noted that once regard is had to bank charges the total of those sums is US$10m.
In para 76 it was alleged that on 15, 24 and 26 March 2010 Mr Almhairat withdrew from those various bank accounts a total of US$4,410,115 for his own purposes, leaving the balance of the sale proceeds as a contribution by Apex to the working of Fi Call.
In para 77, para 68 of the amended points of claim was denied and it was specifically denied that the Prince received any element of the funds for the benefit of Apex.
In para 39 of the reply and defence to counterclaim, which was dated 24 January 2014, it was admitted that Mr Al Masoud made the payments alleged but it was denied that they were made pursuant to, or in performance of, the Al Masoud SPA.
By para 42, paras 75 and 76 of the defence and counterclaim were not admitted.
Thus no positive case was pleaded as to the detailed payments alleged in paras 75.3 and 76 summarised in paras 5 and 6 above. 54.
The position of the Global Parties (ie Global Torch and Mr Abu Ayshih) was summarised in a notice to admit the following facts served on 5 February 2014.
On or about 7 or 8 February 2010 the equivalent of US$10m was paid into the Princes SABB bank account.
That payment represented the payment by Mr Al Masoud in consideration of the shares sold by Apex and Global Torch to him under the Al Masoud SPA.
Between 16 and 18 February, the equivalent of US$1,999,985 was transferred from the Princes SABB bank account to his M300 bank account.
Between 16 and 17 February 2010 the equivalent of US$1,999,985 was transferred from the Princes SABB account to Fi Calls Al Mawarid bank account.
On or about 11 March 2010 the equivalent of US$3,999,373 was transferred from the Princes SABB account to Fi Calls Arab Banking Corporation (Jordan) bank account.
Between 13 and 15 March 2010 the equivalent of US$1,999,871 was transferred from the Princes SABB account to Fi Calls Arab Banking Corporation (Jordan) bank account.
As a result of those transactions, out of the US$10m paid to him by Mr Al Masoud in connection with the Al Masoud SPA, the Prince paid about US$8m (or US$7,999,829) to accounts in Fi Calls name and did not retain any part for his own purposes except for the US$1,999,985 transferred to his M300 account. 55.
Further, the notice to admit invited admission of the following further facts.
On or about 15 March 2010 Mr Almhairat withdrew (or transferred to an account controlled by him and/or Apex) US$2,310.115 from Fi Calls Arab Banking Corporation (Jordan) bank account.
On or about 26 March 2010 Mr Almhairat withdrew (or transferred to an account controlled by him and/or Apex) US$1,850,000 from Fi Calls Al Mawarid bank account. 56.
The respondents declined to respond to the notice to admit or to explain the position.
Thereafter, on 9 May 2014 Mr Jeremy Marshall made his 14th statement in support of the application to strike out, alternatively for summary judgment dismissing, paras 70, 71 and 151.5 of the amended points of claim, which are summarised in paras 49 and 50 above.
The statement described the nature of the pleaded issues as set out above.
It then relied upon the first witness statement, dated 28 October 2013, of an independent accountant, Mr Sumail Nerula, which is based on accounts which showed the payments identified above. 57.
The Court of Appeal heard the appeals referred to in detail by Lord Neuberger, beginning on 21 May 2014, although they did not give judgment until the morning of 31 July.
In the meantime, on 17 June 2014, there was a directions hearing on the strike out/summary judgment application before Chief Registrar Baister to which the Prince was not of course a party, although Global Torch was.
Counsel for Global Torch (Mr Saoul) submitted to the Registrar that, if the Princes appeal to the Court of Appeal succeeded, the issues identified above would have to go to trial.
However, he also submitted that the allegations were part of the wider undue prejudice issues so that they were likely to go to trial in any event.
He invited counsel for the respondents (Mr Lightman) to identify the true issues between the parties relating to the payment of the US $6m.
The Chief Registrar was attracted by that approach but Mr Lightman said that the issue would have to go to trial in any event, if only as between Prince Mishal and the respondents.
At best, he said, Global Torch were seeking to strike out allegations only as against themselves, that the issue would survive as against Prince Mishal and that both Global Torch and Prince Mishal would have to give disclosure relating to it.
Mr Lightman added (at A/3/45): It is very likely that they [ie Global Torch and Mr Abu Ayshih] will want to put in evidence anyway about this issue.
If the summary judgment application fails of course they will have to do it anyway.
If it succeeded, clearly they would want to do a proxy defence for the Princes, as they have in the past.
Mr Saoul represents the Prince in other hearings.
Also they will want to say, We issue a summary judgment application in respect of something, we succeeded, this allegation should never have been made, so this is unfair prejudice.
It is fanciful to say that this is a side issue which, if it was disposed of now, would not nevertheless be live at trial. 58.
The Chief Registrar said that this seemed to him to be an important issue which, if Mr Lightman was right, should be resolved sooner rather than later.
He therefore gave directions for the filing of evidence. 59.
Mr William Christopher made a statement on 30 June 2014 on behalf of Apex and Mr Almhairat, in response to the application to strike out and for summary judgment by the Global Torch parties.
So far as I can see, while throwing some doubts upon the way the payments were made, Mr Christopher does not say that no payments were made to Fi Call by the Prince.
He said in para 9 that Mr Almhairat informed him that he only discovered that Mr Al Masoud had made a payment direct to the Prince on or about 23 February and he was not aware that the Prince had subsequently made any payments into bank accounts of Fi Call which were intended to be in satisfaction of the share purchase monies payable to Apex under the Al Masoud SPA.
Mr Almhairat told Mr Christopher that he only became aware of the Global Torch Parties present position when Mr Narulas statement of 28 October 2013 was served.
Mr Christopher said that there remained issues of fact, which could only be resolved at a trial after hearing oral evidence in the light of the disclosure given by the parties.
Importantly, he noted that the Prince was debarred from defending the proceedings and that Prince Mishal had refused to take part in the proceedings but that the issues would continue to be live at the trial, at the very least in the context of Apexs claim against Prince Mishal and so would be an issue in respect of which the Global Torch Parties would be obliged to give disclosure regardless of the outcome of the application.
He concluded that that was a compelling reason why the application should be dismissed even if (contrary to the Apex Parties primary contention) the court were to form the view that Apex had no real prospect of succeeding on the issue against the Global Torch Parties.
The Apex Parties also relied upon the first statement of Victoria Middleton, a chartered accountant, dated 30 June 2014 in response to Mr Narulas first statement.
She cast doubt on some of his conclusions. 60.
Mr Marshall and Mr Narula responded in their seventeenth and second statements respectively, each dated 14 July 2014.
Their main point was that the respondents did not rely upon any positive case.
In summary they said that it was undisputed that the Prince received the US$10m from Mr Al Masoud.
Further, it was accepted that the Prince had paid US$7,999,829 to Fi Call.
The Global Torch Parties case was that, of that sum, US$5,984,000 was due to Apex as its share of the share purchase price.
In the absence of any explanation to the contrary the only reasonable inference to be drawn was that the monies were intended to be payments for the shares under the Al Masoud SPA and that the Prince had accounted to Apex for its share of the proceeds by paying the money to Fi Call.
It is true that the monies were paid to a Fi Call bank account other than that provided for in the SPA but there is no evidence that anything turns on that.
On the contrary, as I see it, based on the evidence which was available in July, there was no arguable case that payment to a Fi Call company did not have the effect of accounting to Apex for the US$5,984,000 in respect of the price of the shares.
As stated in para 4 above, the Apex parties pleaded that payment under the Al Masoud SPA was to be by payment into a Fi Call bank account and that Fi Call would receive the monies as agent for Apex and Global Torch respectively.
I note in passing that in a solicitors letter dated 24 May 2012 the Apex Parties case was advanced on the basis that Mr Al Masouds payment should be paid into Fi Calls bank account and that this 61. would have been received by the Company as agent for Apex and as agent for Global Torch, although it was envisaged that the Company might subsequently be permitted 62. 63. to retain some or all of the money by way of loans from Apex and Global Torch.
In these circumstances, viewed on the basis of that evidence, the Apex parties had no defence to the application for summary relief because Fi Call had received approximately US$6m on behalf of Apex and there was no basis upon which the Prince could have been held separately liable for it.
In the absence of a satisfactory explanation, there is also force in the point that a reasonable inference can be drawn from the fact that on or about 15 and 26 March 2010 Mr Almhairat withdrew (or transferred to an account controlled by him and/or Apex) the sums of US$2,310.115 and US$1,850,000 from Fi Calls Arab Banking Corporation (Jordan) and Mawarid bank account respectively.
They were the opening balances in each account.
The inference is that the monies used came from Mr Al Masoud and that Mr Almhairat regarded those sums as his to use. 64.
No positive case was made by the Apex Parties at any time before the matter came before Hildyard J on the afternoon of 31 July 2014, which was after the Court of Appeal had given judgment that morning.
Both the transcript of the hearing and of his judgment, which is now available, are in my opinion instructive.
They show that, although he declined to grant either of the Global Torch Parties applications for summary relief, he made it clear that he would have granted summary relief but for the fact that the trial was so soon. 65.
Hildyard J had before him the evidence to which I have referred above.
The position was explained to him by Mr Fenwick, who was representing the Global Torch Parties, in much the same way as I have set it out above.
With respect to Mr Lightman, who represented the Apex Parties before the judge, it is far from clear what their case was.
He accepted that some payments were made into Fi Calls accounts.
He at first suggested (at A8/124) that his clients did not regard the payments as accounting for the monies due to them under the SPA.
He suggested that the Prince was lending money to the company.
The judge asked him whether Apex thought the payments were a loan.
He said that it was unclear what they were, whereupon the judge said that his clients had not been very forthcoming as to what they thought (A8/125).
As I see it, the difficulty for them was that, while for the purposes of this application they were saying that there was a triable issue, their pleaded case was that the Prince held the monies for them on the basis that he had received monies from Mr Al Masoud as agent or trustee for them.
Yet, as stated above, there was strong evidence that those monies were paid into the Fi Call company accounts referred to above for the benefit of the shareholders.
However that may be, Mr Lightman told the judge at A8/125 that his clients 66. were saying that there was a triable issue as to the extent to which the Prince discharged his obligation as trustee.
In giving judgment, Hildyard J expressed some concern (at A9/137/para 3) that, if the decision of the Court of Appeal stood, with the result that the Prince owed US$6m, and it was subsequently held that Apex had been paid, that would give rise to an inconsistency and, one might have thought, some anxiety.
As I read paras 4 to 6 of the judgment, the judge would have afforded the Global Torch Parties a summary remedy disposing of the Apex parties claim but concluded that the safest course was to allow the issue to go to trial.
He said at A9/138 139: 4.
If the respondents are right in the matter now, they will be right then.
It is not suggested that the trial will be seriously disrupted if the issue is held over until then: it is of short compass. 5 Accordingly I have approached the matter by reference to what is loosely described as the approach in Williams & Humbert Ltd v W&H Trade Marks (Jersey) Ltd [1986] AC 368 and I have sought simply to weigh the advantages and disadvantages of dealing with the matter now, safe in the knowledge that the ultimate merits will not spoil.
As I have said, my initial instinct and my abiding instinct is that the balance is in favour of allowing the matter to proceed.
I say that with particular regard to an argument which may or may not be proved correct, which was raised by Mr Lightman, that it is inevitable that the issues regarding the $6m, even if decided on a point of liability, will be ventilated on the broader questions which arise in the petition.
These include issues as to the honesty of Mr Almhairat generally and in procuring this claim to be brought forward, it being my assumption that if at any stage he had accepted and told his solicitors that he accepted payment, that should of course have been reflected in the claim being withdrawn. 6.
I do this in some senses with a heavy heart because, notwithstanding the general rule that the court at this stage should not poison the water, I should say by way of warning that as matters presently appear to me at this stage, the arguments on behalf of the petitioners seem, if I can put it lightly, frail.
I quite understand that they may be entitled to contend that it is the third respondent who agreed to accept the monies in effect as a fiduciary and who bears the responsibility of explaining each and every twist and turn and has not done so.
But I consider there to be at least a powerful argument that if receipt is demonstrated and not allocated to any other reason, that will conclude the matter against the petitioners.
I do not dare in a sense say more than that, since to say more would falsify my approach of leaving the matter over for determination at trial.
But I do caution the petitioners in persisting with this and call upon them to exercise restraint and utmost care.
If at trial it were to emerge that there was never any proper defence, though I cannot tie the hands of the trial judge which may very well be myself I would expect the trial judge to separate out these costs and make the strongest possible order in respect of them. 67.
For the reasons given above, I agree with Hildyard J that, but for the reasons advanced by Mr Lightman why the matter should proceed to trial, this would have been a proper case for summary disposal based upon the strength of the Global Torch Parties case and the failure on the part of the Apex Parties to advance an arguable defence.
What then changed thereafter? 68.
There was further evidence before us in the form of the sixth and seventh statements of Mr Almhairat which were dated 8 September and 6 October 2014 respectively.
They were prepared for the trial and thus cover many different aspects of the dispute, including the issues discussed above.
They were put before this court without demur.
In para 43 of the sixth statement he says that on 1 November 2009 the Prince entered into a loan agreement with Fi Call under which he agreed to lend up to US$20m to Fi Call.
In para 46 he says that the Prince advanced 1m to Fi Call pursuant to that loan facility.
There is however no evidence that any of the monies referred to above were part of a loan. 69. 70.
The sixth statement accepts at para 62 that on or about 7 February 2010 Mr Al Masoud (or someone at his request) paid the sum of US$10m to the Prince.
He says in para 63 that Apex has never received any of the purchase price paid to the Prince.
He says in para 64 that he has seen that it is alleged that the Prince paid about US$6m into various accounts of Fi Call in February and March 2010, although he says that he was not aware of it.
He further says that, if it is said that those payments are proceeds of the Al Masoud SPA, neither he nor Apex agreed to its share being paid to the Company rather than Apex.
This is odd in circumstances where the SPA originally provided to the monies to be paid to a Fi Call account, namely HSBC. 71. 72. 73. 74. 75.
It is fair to say that Mr Almhairat does give an explanation in paras 65 to 68 for the receipt of US$4.41m referred to in para 52 above.
He says that it was a loan agreed to by the Prince and the other Global Torch Parties, that some of it was paid back and that he ultimately received a net loan of US$2.1m.
In Mr Almhairats most recent statement, the seventh, which was dated 6 October 2014, he again focuses on payments that the Global Torch parties say were paid to the Prince and then to various Fi Call accounts.
He now says (contrary to para 64 of his sixth statement) that he was aware that the sums set out above had been paid into Fi Calls accounts.
As to their source, he simply says that he did not know precisely where they had originated, although he understood that they had been paid by the Prince or on his behalf.
He says that he did not understand that they were the proceeds of the Al Masoud SPA.
It is thus unclear on what basis he now says that the Prince was liable to him for the US$6m.
In the remainder of the seventh statement Mr Almhairat speculates that the Prince used money paid into the various Fi Call accounts to discharge various obligations of his own, to make transfers to his other accounts and to facilitate what he calls the Princes money laundering activities referred to in the pleadings as the Beirut Transaction (at paras 13 et seq).
This statement has been prepared for the trial and gives some indication of the issues at the trial.
It appears to me that there may be a close relationship between the Princes alleged liability for US$6m and the shareholders liabilities inter se which will are likely to be the subject matter of dispute at the trial.
I recognise, however, that ultimately the question of what issues are to be determined at the trial are matters for the trial judge.
In all these circumstances it seems to me (as I stated at the outset) that the just disposal of this appeal would be to allow the appeal to the extent of setting aside the default judgment against the Prince but ensuring that the monies secured by the undertaking referred to above would be available to Apex if they succeed at the trial.
I recognise the force of the points made by Lord Neuberger in paras 22 to 27 of his judgment.
However, I am of the opinion that each case depends upon its own facts and that it is almost always wrong in principle to disregard the underlying merits altogether as irrelevant.
In paragraphs 28 to 35 Lord Neuberger expresses the view that the merits will be relevant where party has a case whose strength would entitle him to summary judgment.
Although I entirely agree that the court should not conduct a trial of the issues, I would not limit the relevance of the merits to such a case.
On an application for summary judgment it is not uncommon for the judge to refuse summary judgment but only to grant leave to defend on terms that the defendant pays the amount in dispute into court (or otherwise provides satisfactory security) in order to permit the defendant to advance what the judge thinks is a weak case provided that the claimants claim is secured. 77. 76.
On a summary judgment application the court has power to make a conditional order: see CPR 24.6.1 and 24PD5 under which it may order a party to pay a sum of money into court.
In volume 1 of Civil Procedure, para 24.6.6 notes that in Olatawura v Abiloye [2002] EWCA Civ 998, [2003] 1 WLR 275 Simon Brown LJ gave guidance as to the court's approach to the making of conditional orders requiring a party advancing an improbable case to give security for their opponent's costs.
In the present case, for the reasons given above, it is Apex that has the improbable case on the merits, not the Prince.
Apex would be fully protected if my proposed order were made.
I appreciate that, as Lord Neuberger observes, there is now a good deal of evidence which was not available to the Court of Appeal.
However, that is in large part due to the fact that the proceedings before Hildyard J took place after the decision of the Court of Appeal and evidence relevant to the trial has been put before this court.
Those circumstances make this a very unusual case.
I would add that, notwithstanding the position as it was before Norris J as explained in para 15 of his judgment delivered on 9 September 2013, nobody suggested before Hildyard J (or this court) that it will not now be possible to have a fair trial because of the Princes breach of the orders which led to judgment being entered against him.
That seems to me to be a further reason why it would be disproportionate not to afford the Prince relief. 78.
For my part, I hope that, if it is established at the trial that the Prince did account for the US$6m as he says he did, it will be possible for that fact to be taken into consideration in resolving the issues between the parties. 79.
Finally, I would like to express my agreement with para 39 of Lord Neubergers judgment.
As to para 40, as in his case, nothing in this judgment is intended to impinge on the decision or reasoning of the Court of Appeal in Mitchell or Denton.
Postscript 80.
I learned of the developments referred to by Lord Neuberger in his para 42, only after completing paras 46 to 79 above.
As to those developments, I agree with the approach described by Lord Neuberger in his paras 42 to 44.
Subject to arguments based on (i) general disproportionality, (ii) the fact that there will be a trial in any event, and (iii) the strength of the Princes case (arguments which I consider in the next three sections of this judgment), it appears clear to me, as it did to the Court of Appeal, that the decisions of Vos J, Norris J and Mann J, as summarised above, cannot be faulted.
It was suggested on behalf of the Prince by Mr Fenwick QC and Mr Saoul (neither of whom appeared before Vos J or Norris J) that Vos J erred in making the order in paras 14 and 15, because he mistakenly believed that this was the usual order.
The fact that Vos J and the Court of Appeal (see per Arden LJ in the Court of Appeal at para 44) considered that it was the usual order to make renders it very hard for this court to take a different view.
However, while it is unnecessary to decide the point, I incline to the view that the standard form of disclosure by a party does require personal signing by the party.
CPR 31.10(6) refers to a disclosure statement as being a statement made by the party disclosing the documents, and the notion that it should be the party himself also seems to get support from CPR 31.10(7).
Similarly, that conclusion is supported by para 4 of PD31A, especially sub paras 4.2, 4.3, 4.4 and 4.7 (and also the annex to PD31A).
It also seems clear that, no doubt when good reasons are made out, the court can permit a departure from this see CPR 31.5(1)(a) and (b).
It is true that para 3.7 of PD22 specifically permits a statement of truth to be signed by a partys solicitor and that para 15 of the Order referred to statements of truth not disclosure statements.
However, it seems to me that, although it referred to statements of truth, para 15 was actually referring to disclosure statements a view supported by paras 1.1 and 1.4 of PD22 and CPR 22.1(1).
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This appeal arises out of a joint venture between Apex Global Management Ltd (Apex), a Seychelles company owned by Mr Almhairat, and Global Torch Ltd (Global), a British Virgin Islands company owned by Prince Abdulaziz (the Prince), Mr Abu Ayshih and Mr Sabha.
Apex and Global set up an English company Fi Call Ltd (Fi Call), and then fell out badly.
In December 2011, Global issued a petition under sections 994 996 of the Companies Act 2006 against Apex, Mr Almhairat and Fi Call seeking share purchase orders, and pecuniary and declaratory relief.
Ten days later, Apex issued a very similar cross petition against the Prince, the Princes father Prince Mishal, Global, Mr Abu Ayshih, and Fi Call.
Allegations and counter allegations of seriously unlawful misconduct are involved, including money laundering, financial misappropriation, and funding of terrorism.
The two petitions were ordered to be heard together.
The relief sought by Apex included a claim for just under US$6 million plus interest, which it contended was owing to Apex by the Prince.
The Prince denied that the $6m was owing on the ground that he had paid it into the bank account of certain companies.
In July 2013 Vos J made a number of directions, including that each party file and serve a disclosure statement certified by a Statement of Truth signed personally.
The Prince, who had objected to the order, failed to comply.
This was on the basis that, as a member of the Saudi Royal Family, he was bound by a protocol which prevented him from taking part in litigation personally or from signing court documents.
Apex applied to Norris J for, and obtained, an order that unless the Prince complied with the order, and in particular signed a Statement of Truth, his Defence be struck out and judgment be entered against him (an Unless Order).
The Prince maintained his position and Apex applied to Norris J for, and obtained, judgment in its favour under Civil Procedure Rules (CPR) r.3.5(2).
The Prince applied under CPR 3.1(7) for a variation of the Vos Js order and for relief from sanctions.
Mann J refused to vary Vos Js order and rejected the application for relief from sanctions under CPR 3.9.
In July 2014, Hildyard J refused an application for summary judgment in relation to the question of whether the $6m had in fact been repaid.
The Prince unsuccessfully appealed the decisions of Vos J, Norris J and Mann J to the Court of Appeal, and was given permission to appeal to the Supreme Court on terms that he paid $6m to his solicitors to abide the order of the Court.
The issue in this appeal is therefore whether The Prince is entitled to the relief he seeks.
The Supreme Court dismisses the appeal by a majority of 4 1.
Lord Neuberger (with whom Lord Sumption, Lord Hughes and Lord Hodge agree) gives the main judgment.
Lord Clarke gives a dissenting judgment.
The language of the CPR and of the relevant Practice Direction suggests that the standard form of disclosure by a party does require personal signing by the party and such an order reflected the normal practice [12 13].
Vos Js decision to make the order was well within the margin accorded to case management decisions [15].
Similarly, the approaches taken by Norris J to making an Unless Order and of Mann J to refusing relief from sanctions each represented a correct approach in principle and a careful consideration of the competing arguments, and Norris Js second decision was almost administrative in nature [18].
The decisions of Vos J, Norris J and Mann J are individually unassailable [20 21].
The contention that the consequence of these orders is disproportionate is difficult to maintain; the importance of litigants obeying court orders is self evident and if the disobedience continues notwithstanding the imposition of a sanction, the enforcement of the sanction is almost inevitable [23].
There are no special factors which justify reconsidering the original orders, and the Prince had two very clear opportunities to comply with the simple obligation to give disclosure in an appropriate fashion. [24 25].
The strength of a partys case on the ultimate merits of the proceedings is generally irrelevant when it comes to case management issues of this sort, though there may be an exception where a party has a case the strength of which would entitle him to summary judgment.
A trial involves directions and case management decisions, and it is hard to see why the strength of either partys case should, at least normally, affect the nature or the enforcement of those directions and decisions [29 31].
The Prince would have a good prospect of establishing that the $6m was paid as he contends in his defence, but his prospects cannot be said to be any higher [33].
It is true that the question of whether the Prince has paid may be determined in the very proceedings which he would have been debarred from defending.
However, it is inherent in orders such as default judgment that the claimants will obtain judgment for relief to which it may subsequently be shown they were not entitled. [36 37].
The Supreme Court should be very diffident about interfering with the guidance given or principles laid down by the Court of Appeal when it comes to case management and application the CPR [39].
Lord Clarke would have allowed the appeal on the basis that justice requires that the Prince should be allowed to challenge the claim against him, and all parties would be protected because the court would be able to resolve all the issues between the parties [46].
Lord Clarke would not limit the relevance of the merits to a case where the strength of a partys case would entitle him to summary judgment. [75].
Nobody had suggested that it will not be possible to have a fair trial because of the Princes breach of the orders which led to judgment being entered against him [77].
Lord Clarke agrees with Lord Neubergers comments on the role of the Supreme Court in relation to case management and the CPR [79].
Postscript After the oral argument on this appeal had been concluded and the Court had notified the parties of its conclusion, but before judgment was handed down, the Court was advised of recent judgments of Hildyard J in the principal action, given on 3 and 5 November, when he reluctantly adjourned the trial to 2015 on the application of Mr Almhairat.
It would not be right for this Court to address the question whether to reconsider its decision to dismiss the Princes appeal in the light of these developments, and in particular in the light of any breaches of the CPR or any orders by any of the Apex parties.
If, in the light of events which have occurred since the Court heard and decided the Princes appeal, reconsideration, revocation or modification of any of the orders is appropriate then that is a matter which should be raised before a Judge of the Chancery Division, who should also be responsible for deciding how the $6m should be dealt with [42 44].
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On 27 November 2008, at the Crown Court in Isleworth, the respondent, Aloke Varma, pleaded guilty to three offences of being knowingly concerned in the fraudulent evasion of duty, contrary to section 170(2)(a) of the Customs and Excise Management Act 1979.
The offences were committed on 24 October 2007 and 3 and 13 April 2008.
On each occasion the defendant was stopped at Gatwick Airport and found to be in possession of a quantity of tobacco which he had brought into the United Kingdom without payment of the relevant import duties.
Following his pleas of guilty, the matter was adjourned for sentence.
I take these facts from the agreed statement of facts and issues.
On 15 January 2009 His Honour Judge Katkhuda (the judge), exercising his powers under section 12 of the Powers of Criminal Courts (Sentencing) Act 2000, sentenced Varma to a conditional discharge for a period of two years.
In deciding that this was the appropriate sentence, the judge referred to Varmas psychological problems and facial neuralgia.
Confiscation proceedings under Part 2 of the Proceeds of Crime Act 2002 (the 2002 Act) were postponed.
The confiscation hearing was held on 3 April 2009.
The judge found the value of the defendants benefit to be 7,257.86 and the available amount to be 1,500.
Each of these figures had been agreed between the parties.
A confiscation order was made in the sum of 1,500, which was ordered to be paid by 31 March 2010, with a term of imprisonment of 45 days in default of payment.
On 13 July 2009 Varma sought leave to appeal out of time against the confiscation order.
He relied on R v Clarke [2009] EWCA Crim 1074, [2010] 1 WLR 223, in which the Court of Appeal (comprising Hooper LJ, Cox J and the Recorder of Nottingham) held in a reserved judgment that the Crown Court does not have the power to make a confiscation order against a defendant following conviction for an offence if he or she is made the subject of an absolute or conditional discharge in respect of that same offence.
The essential reasoning was that it was inappropriate to punish a defendant by imposing a confiscation order in a case in which (by virtue of the fact that a conditional discharge had been imposed) the court thought that punishment was inexpedient.
Varmas appeal was heard on 10 June 2010, together with three similar cases.
The defendant in each of the four cases before the Court of Appeal had pleaded guilty in the Crown Court to one or more offences, had received a conditional discharge and had been made the subject of a confiscation order under the 2002 Act.
The ground of appeal in each case was that, following Clarke, the Court had no power to make a confiscation order.
According to the agreed statement of facts and issues, oral argument was constrained by the Court of Appeals clear indication that it wished to focus on whether it was bound by Clarke.
On 8 July 2010 the Court of Appeal (Lord Judge CJ, Goldring LJ and Rafferty, Wilkie and King JJ) handed down their judgment in each of the four appeals: R v Magro, R v Brissett, R v Smith and R v Varma [2010] EWCA Crim 1575, [2011] QB 398.
The Court of Appeal held that, following the decision in Clarke, the Crown Court did not have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge in respect of that offence.
Giving the judgment of the court, Lord Judge CJ made clear (at para 29) that, but for the decision in Clarke, the court would have reached a contrary conclusion.
On this basis, the Court of Appeal extended time to appeal in the case of Varma, allowed the appeal against sentence and quashed the confiscation order.
The court held that a point of law of general public importance was involved in their decision and certified the following question: Does the Crown Court have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence? This court subsequently granted permission to appeal.
The three remaining applications for leave to appeal against sentence were adjourned pending the outcome of this appeal.
As agreed in the statement of facts and issues, the issue which arises for consideration in this appeal is whether the Crown Court has power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence.
The statutory framework
provides: Section 12 of the Powers of Criminal Courts (Sentencing) Act 2000, (1) Where a court by or before which a person is convicted of an offence . is of the opinion, having regard to the circumstances including the nature of the offence and the character of the offender, that it is inexpedient to inflict punishment, the court may make an order either (a) discharging him absolutely; or (b) if the court thinks fit, discharging him subject to the condition that he commits no offence during such period, not exceeding three years from the date of the order, as may be specified in the order . (7) Nothing in this section shall be construed as preventing a court, on discharging an offender absolutely or conditionally in respect of any offence, from making an order for costs against the offender or imposing any disqualification on him or from making in respect of the offence an order under section 130, 143 or 148 below (compensation orders, deprivation orders and restitution orders).
As is apparent, there is no reference in subsection (7) to confiscation orders.
At the date when section 12 of the 2000 Act came into force, section 2(6) of the Drug Trafficking Act 1994, repeating section 1(6) of the Drug Trafficking Offences Act 1986, provided: No enactment restricting the power of a court dealing with an offender in a particular way from dealing with him also in any other way shall by reason only of the making of an order under this section restrict the Crown Court from dealing with an offender in any way the court considers appropriate in respect of a drug trafficking offence." Similar provision was made, with necessary alterations to the language, to deal with non drug trafficking offences, by section 72(6) of the Criminal Justice Act 1988.
Section 14 of the 2000 Act provides: (1) Subject to subsection (2) below, a conviction of an offence for which an order is made under section 12 above discharging the offender absolutely or conditionally shall be deemed not to be a conviction for any purpose other than the purposes of the proceedings in which the order is made and of any subsequent proceedings which may be taken against the offender under section 13 above. (3) Without prejudice to subsections (1) and (2) above, the conviction of an offender who is discharged absolutely or conditionally under section 12 above shall in any event be disregarded for the purposes of any enactment or instrument which (a) imposes any disqualification or disability upon convicted persons; or (b) authorises or requires the imposition of any such disqualification or disability. (6) Subsection (1) above has effect subject to section 50(1A) of the Criminal Appeal Act 1968 and section 108(1A) of the Magistrates' Courts Act 1980 (rights of appeal); and this subsection shall not be taken to prejudice any other enactment that excludes the effect of subsection (1) or (3) above for particular purposes.
Section 6 of the Proceeds of Crime Act 2002, as amended, provides: (1) The Crown Court must proceed under this section if the following two conditions are satisfied. (2) The first condition is that a defendant falls within any of the following paragraphs (a) he is convicted of an offence or offences in proceedings before the Crown Court; (3) The second condition is that (a) the prosecutor asks the court to proceed under this section, or (b) the court believes it is appropriate for it to do so. (a) it must decide whether the defendant has a criminal lifestyle; (b) if it decides that he has a criminal lifestyle it must decide whether he has benefited from his general criminal conduct; (4) The court must proceed as follows (c) if it decides that he does not have a criminal lifestyle it must decide whether he has benefited from his particular criminal conduct. (5) 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. (6) But the court must treat the duty in subsection (5) as a power if it believes that any victim of the conduct has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the conduct. (7) The court must decide any question arising under subsection (4) or (5) on a balance of probabilities.
Section 13 of the 2002 Act provides: (1) If the court makes a confiscation order it must proceed as mentioned in subsections (2) and (4) in respect of the offence or offences concerned. (2) The court must take account of the confiscation order before (a) it imposes a fine on the defendant, or (b) it makes an order falling within subsection (3). (3) These orders fall within this subsection (a) (compensation orders); (b) (forfeiture orders); (c) (deprivation orders); (d) (forfeiture orders). (4) Subject to subsection (2), the court must leave the confiscation order out of account in deciding the appropriate sentence for the defendant .
Section 14 of the 2002 Act provides: (1) The court may (a) proceed under section 6 before it sentences the defendant for the offence . or (b) postpone proceedings under section 6 for a specified period. (11) A confiscation order must not be quashed only on the ground that there was a defect or omission in the procedure connected with the application for or the granting of a postponement. (12) But subsection (11) does not apply if before it made the confiscation order the court (a) imposed a fine on the defendant; (b) made an order falling within section 13(3); (c) made an order under section 130 of the Sentencing Act (compensation orders).
Section 15 of the 2002 Act provides: (1) If the court postpones proceedings under section 6 it may proceed to sentence the defendant for the offence (or any of the offences) concerned. (2) In sentencing the defendant for the offence (or any of the offences) concerned in the postponement period the court must not (a) impose a fine on him, (b) make an order falling within section 13(3), or (c) make an order for the payment of compensation under section 130 of the Sentencing Act. (3) If the court sentences the defendant for the offence (or any of the offences) concerned in the postponement period, after that period ends it may vary the sentence by (a) imposing a fine on him, (b) making an order falling within section 13(3), or (c) making an order for the payment of compensation under section 130 of the Sentencing Act. (4) But the court may proceed under subsection (3) only within the period of 28 days which starts with the last day of the postponement period. (7) The postponement period is the period for which proceedings under section 6 are postponed.
Statutory construction
In my opinion the question whether the Crown Court has power to make a confiscation order under Part 2 of the 2002 Act in a case where the court has given the defendant an absolute or conditional discharge depends upon the true construction of sections 6 and 13 to 15 of that Act.
I have reached the clear conclusion that there is, not only such a power, but in most cases a duty to make such an order for the reasons set out below.
It is first important to have regard to the duties imposed upon the court by section 6.
Those duties are contained in section 6(1), (4), (5) and (7).
The duties are absolute, subject to subsection (6), which qualifies subsection (5).
By subsection (1), the court must proceed under the section if the two conditions in subsections (2) and (3) are satisfied.
Subsection (2)(a) is satisfied if the defendant is convicted.
Subsection (3) is satisfied if, as in this case, the prosecutor asks the court to proceed under the section.
If the prosecutor does not ask the court to proceed under the section, subsection (3) will also be satisfied if the court believes that it is appropriate to do so.
There was no argument in this case as to the correct approach of the judge in such a case and I therefore say nothing about it.
If those conditions are met (as they were in this case), the court must proceed as set out in subsection (4), under which it must decide whether the defendant has a criminal lifestyle and, if so, whether he has benefited from his general criminal conduct and, if he does not have a criminal lifestyle, whether he has benefited from his particular criminal conduct.
There are specific provisions relating to those questions which are not relevant for the purposes of resolving the issue in this appeal.
By subsection (5), if the court decides that the defendant has benefited from his general criminal conduct or his particular criminal conduct, it must decide the recoverable amount and make a confiscation order requiring him to pay that amount.
Subsection (6) converts that duty into a power in circumstances which are not relevant for present purposes.
Sections 7 to 12 are also for the most part irrelevant for present purposes.
It can be seen that there is nothing in section 6 which suggests that the court should not make a confiscation order where it gives or proposes to give the defendant an absolute or conditional discharge.
On the contrary section 6(1) is expressed in absolute terms in that it leaves the court with no discretion whether or not to make a confiscation order if the conditions in subsections (2) and (3) are satisfied.
Subsection (4) then provides how the court must proceed and subsection (5) provides that, where the court decides that the defendant has benefited from relevant criminal conduct, it must decide the recoverable amount (in accordance with section 7) and must make a confiscation order requiring him to pay that amount.
Section 13 expressly provides what the court is to do if it makes a confiscation order.
By subsection (1) it must proceed as mentioned in subsections (2) and (4).
By subsection (2) it must take account of the confiscation order before it imposes a fine on the defendant or imposes any of the financial penalties specified in subsection (3).
Subsection (5) and (6) contain provisions which relate to a case where the court makes both a confiscation order and a compensation order under section 130 of the 2000 Act.
Section 13(4) is of significance in the context of this appeal.
It provides that, subject to subsection (2), the court must leave the confiscation order out of account in deciding the appropriate sentence for the defendant.
It is important to note that the purpose of section 13(4) is not to limit the scope of the confiscation order, let alone to prohibit the making of such an order.
It could not have that effect because it assumes that a confiscation order has been made.
However that may be, as I see it, the expression in deciding the appropriate sentence for the defendant must be a reference to the sentencing process, at which the court will consider how the defendant should be dealt with.
As part of that process the court will no doubt consider all the options open to it, including the option of giving the defendant an absolute or conditional discharge.
It is sometimes said that an absolute or conditional discharge is not a sentence because, under section 12(1) of the 2000 Act, the court may make such an order only if it is of the opinion that it is inexpedient to inflict punishment.
Whether such an order is a sentence or not, it is in my opinion an order made as a result of deciding the appropriate sentence within the meaning of section 13(4).
The effect of section 13(4) is that, in making that decision, the court must leave the confiscation order out of account.
It was not suggested in argument that it would not be open to the court which had made a confiscation order to give the defendant an absolute or conditional discharge.
The Court of Appeal thought (at para 28) that it would in principle be free to do so.
I agree, although whether it would have power to do so would depend upon whether the court was of the opinion that it was inexpedient to inflict punishment.
In deciding that question, by reason of section 13(4), it must, subject to subsection (2), leave the confiscation order out of account.
All naturally depends upon the circumstances and it will no doubt be a rare case in which it will be appropriate to make an order in the form of an absolute or conditional discharge.
However, it does not seem to me to be necessarily wrong in principle for a court to conclude that it is inexpedient to inflict punishment in a case where the defendant has benefited from his criminal conduct and a confiscation order has been made.
For example, it may be inappropriate to impose a fine or other financial penalty in the light of the confiscation order, perhaps because of the defendants means, and there may be strong mitigation which persuades the court that it would not be appropriate to impose a sentence of imprisonment or a community order.
Some assistance is also to be derived from sections 14 and 15.
Subsections (1) to (4) of section 14 provide that the court may either (a) proceed under section 6 before it sentences the defendant or (b) postpone proceedings under section 6 for a period or periods up to a maximum of two years, although the maximum does not apply if there are exceptional circumstances.
Section 15(1) provides that, if the court postpones proceedings under section 6, it may proceed to sentence the defendant.
Although sections 14 and 15 contemplate the postponement of the section 6 proceedings, they do not nullify the duty of the court to act under section 6.
Thus, where, as is common in practice, the court proceeds to sentence before the confiscation proceedings under section 6, the duty of the court to proceed under section 6 remains.
The Court of Appeal has correctly so held on a number of occasions: see eg R v Hockey [2007] EWCA Crim 1577, [2008] 1 Cr App R (S) 279.
The effect of section 15(2) and (3) is that, where the confiscation proceedings are postponed and the defendant is sentenced during the postponement period, the court may not impose a fine or other financial penalty upon him, but (subject to subsection (4)) the court may subsequently vary the sentence, by imposing a fine or other financial penalty, after the postponement period.
Those provisions expressly contemplate confiscation proceedings after the end of the postponement period.
They are consistent with section 13(2), which provides that the court must take account of the confiscation order before it imposes a fine or other specified financial penalty.
Thus a sentence passed before a confiscation order is made cannot include a fine or other financial penalty because to do so would be inconsistent with section 13(2).
By section 15(3) the Act contemplates that in those circumstances, when a confiscation order is made after the end of the postponement period, the court may then think it appropriate to impose a fine or other financial penalty, in which case it must take account of the confiscation order in accordance with section 13(2).
The importance of these provisions for present purposes is that they show that the statutory scheme envisages, indeed requires, that confiscation proceedings take place after the end of the postponement period.
In summary, the position as I see it on the true construction of the 2002 Act is that the court remains under a duty to proceed under section 6 and, subject to the express terms of the section, must make an order.
In the case in which the section 6 proceedings take place before the defendant is sentenced, as stated above I can see no basis upon which it could be submitted to the court that no confiscation order should be made because it would be appropriate to give the defendant an absolute or conditional discharge.
There is nothing in the Act which gives the court power to decline to discharge its duty to make a confiscation order under section 6 on that or any other ground.
On the other hand, if the court decides (as it is entitled to do under section 15(1)) to postpone the confiscation proceedings under section 6 and proceed to sentence the defendant, if it makes an order for an absolute or conditional discharge, again I can see no basis upon which the making of such an order could absolve the Crown Court from its duty to proceed under section 6 or, having done so, from its duty to make a confiscation order under that section.
If the relevant subsections of section 6 were satisfied, it would be bound to make such an order by reason of the plain words of subsection (1).
I turn to consider those conclusions in the light of the decision in Clarke, the history of the 2002 Act, the meaning of punishment in section 12(1) of the 2000 Act and the position in Scotland.
The decision in Clarke
In Clarke the Court of Appeal said at para 48, in my opinion correctly, that, if the 2002 Act is read on its own, there could be no doubt that the court has jurisdiction to make a confiscation order.
Equally it recognised at para 77 that the fact that the 2002 Act imposes a mandatory regime is obviously a powerful argument for saying that the court must proceed under section 6 even though the defendant is being absolutely or conditionally discharged, but in the remainder of para 77 it summarised its reasons for rejecting the argument.
However before doing so, it considered the position under section 14 of the 2000 Act.
It first rejected the argument that, as a matter of jurisdiction, section 14 prevented the court from making both a confiscation order and an order for an absolute or conditional charge.
It did so on two bases.
The first (at para 46) was that the court had jurisdiction to make a confiscation order under section 14(1)(a) of the 2002 Act before proceeding to sentence the defendant.
There was nothing in section 14 of the 2000 Act retrospectively to deprive the court of that jurisdiction.
The second was this.
By section 14(1) of the 2000 Act, a conviction of an offence for which an order is made under section 12 of the 2000 Act discharging the offender absolutely or conditionally shall be deemed not to be a conviction for any purpose other than the purposes of the proceedings in which the order is made.
The court held that a conviction which leads to the conditional or absolute discharge in the circumstances of the instant case is a conviction in the same proceedings as those in which the confiscation order is made, so that the conviction is not deemed not to be a conviction, within section 14(1): see paras 68 and 70 in Clarke and para 17 in the Court of Appeals judgment in the instant case.
I agree with that analysis.
The critical question was whether section 12 of the 2000 Act prevents the Crown Court from making a confiscation order and an absolute or conditional discharge order.
The reasons given by the court in Clarke for answering that question in the affirmative were these (at para 77): However, in the light of R v Savage (1983) 5 Cr App R (S) 216 and R v Young (1990) 12 Cr App R (S) 262, section 12(7) [of the 2000 Act] and the history of section 12(7), we have reached the conclusion that the Crown Court has no power to make a confiscation order against a defendant following conviction of an offence if he or she receives an absolute or conditional discharge for that offence.
If Parliament had wanted to include confiscation orders within the 1973 predecessor to section 12 (see para 37 above) or in the 2000 Act, it could easily have done so.
We are mindful of the fact that the orders which had been made in R v Savage and R v Young were made under legislation which gave the power to make the order but did not require the making of an order, but we do not think that this affects the conclusion which we have reached.
The argument accepted by the court in Clarke was that, as a matter of principle or law, section 12 of the 2000 Act prevented the Crown Court from making both an order for an absolute or conditional discharge and a confiscation order.
The court concluded (at para 31) that there is a general principle or rule of law that no punitive order may be made in conjunction with an absolute or conditional discharge unless (a) it is listed in section 12(7) of the 2000 Act (viz orders for costs or disqualification, compensation orders, deprivation orders or restitution orders) or (b) the enactment which permits or requires the punitive order to be made expressly or impliedly provides for the making of that punitive order notwithstanding section 12(7).
As it said in para 77, the court derived that principle from the two earlier decisions of the Court of Appeal in Savage and Young.
The issue in Savage, in which the appellant pleaded guilty to handling stolen goods, was whether a deprivation order under section 43 of the Powers of Criminal Courts Act 1973 in respect of a motor car could stand with a conditional discharge for the handling.
The issue in Young, in which the appellant pleaded guilty to managing a company as an undischarged bankrupt, was whether a disqualification under section 2 of the Company Directors Disqualification Act 1986 could stand with a conditional discharge on the count on which he had pleaded guilty.
It was held in both cases that it could not.
As Brooke J put it in Young at p 267, it was quite inappropriate for a [disqualification] to be linked with a conditional discharge.
As is plain from section 12(7) of the 2000 Act, which re enacted earlier statutes, the result in both those cases was reversed by statute.
However that may be, in my opinion the principle in those cases does not apply to the problem under consideration in this appeal.
As expressly recognised in Clarke, in Savage and Young the court was considering whether a discretionary order (ie of deprivation or disqualification) could stand with an absolute or conditional discharge.
In the instant case, for the reasons given above, the confiscation order was not made in the exercise of a power to impose it but in the discharge of a duty to do so.
This is in my view a critical distinction.
See further paras 33 to 39 below.
The Court of Appeal in Clarke accepted the force of that point but held that Parliament must have intended that the court should not have a power or duty to make a confiscation order in circumstances in which an order for an absolute or conditional discharge was made because the Act did not include a reference to confiscation in section 12(7).
However, it was accepted in Clarke at paragraph 46 (and it is not and could not be in dispute) that the Crown Court has jurisdiction under section 6 of the 2000 Act to make a confiscation order before the judge decides on sentence.
The court added that such an order would (presumably) have to be quashed if, subsequently, an order of absolute or conditional discharge was made but it recognised that there was no express power to do that.
For my part, I can see no mechanism by which a lawful confiscation order made by a court pursuant to its duty under section 6 could be quashed.
The Crown Court would have no jurisdiction to quash it and I can see no basis upon which the Court of Appeal could properly quash it either.
In Clarke the courts only solution to this problem was as stated in para 78, namely that, given that a confiscation order can, at least in theory, be made before passing sentence it would, as the court put it, obviously be prudent in those very rare cases where an absolute or conditional discharge is a possibility, to decide upon sentence first.
In the instant case the Court of Appeal described that suggestion as an extra legislative process (para 28) and described the removal of the confiscation order as one which does not easily fit with the structure of the legislative provisions in sections 6, 14 and 15 of the 2002 Act.
I would go further.
In my opinion it is inconsistent with them.
As I see it, the fact that there is no reference to a confiscation order in section 12(7) of the 2000 Act does not lead to the conclusion that Parliament intended that such an order could not stand with an absolute or conditional discharge.
Whether it can or not depends upon the true construction of the 2002 Act, which to my mind is in clear terms.
For these reasons I would reject the first of the two reasons given in para 31 in Clarke, namely that no punitive order may be made in conjunction with an absolute or conditional discharge unless (a) it is listed in section 12(7) of the 2000 Act (viz orders for costs or disqualification, compensation orders, deprivation orders or restitution orders).
The second reason was that no such order may be made unless (b) the enactment which permits or requires the punitive order to be made, here the 2002 Act, expressly or impliedly provides for the making of that punitive order notwithstanding section 12(7).
I would not accept the second reason precisely as formulated, if only because it assumes that the principles in Savage and Young apply in the present context, whereas to my mind they do not apply to duties imposed upon the court as opposed to powers conferred upon it.
It is true that there is an argument, which was advanced on behalf of the respondent, that the principle in Savage and Young applies to duties as well as powers.
Thus attention was drawn to Taylor v Saycell [1950] 2 All ER 887 and Dennis v Tame [1954] 1 WLR 1338 and to section 46 of the Road Traffic Offenders Act 1988.
In this regard the submission made on behalf of the respondent can be summarised in this way.
Historically, an important forerunner of section 12(1) of the 2000 Act was section 7(1) of the Criminal Justice Act 1948 (the 1948 Act), which contained the original section which provided for an absolute or conditional discharge if it was inexpedient to inflict punishment.
Section 12(2) of the 1948 Act, which was a forerunner of section 14(3) of the 2000 Act, provided that the conviction of an offender who is discharged absolutely or conditionally shall be disregarded for the purposes of any enactment which imposes any disqualification or disability upon convicted persons, or authorises or requires the imposition of any such disqualification or disability.
These sections were considered in the cases of Taylor v Saycell and Dennis v Tame, which were both decisions of the Divisional Court presided over by Lord Goddard CJ.
In Taylor v Saycell the respondents were convicted by magistrates of using a vehicle without insurance.
They were fined and disqualified from holding a licence for 12 months.
They appealed to the Crown Court, which quashed the fines and the disqualifications and substituted conditional discharges.
On a case stated by the prosecutor, the Divisional Court quashed the conditional discharges on the basis that there was no evidence upon which it could be said that it was inexpedient to inflict punishment.
Moreover no special reasons had been advanced to avoid what would otherwise be a mandatory disqualification.
At p 889H Lord Goddard said, obiter, that convictions under the Road Traffic Act 1930 (the RTA 1930) were within section 12(2) of the 1948 Act, that it was within the jurisdiction of the court to make an order for a conditional discharge and that such an order would avoid the necessity for disqualification.
In Dennis v Tame the defendant was given a conditional discharge, which had the effect under section 12(2) of avoiding disqualification.
The conditional discharge was set aside on the basis that the Divisional Court had said more than once that the conditional discharge provisions should not be used in order to avoid disqualification in cases where, under the RTA 1930, the defendant must be disqualified in the absence of special circumstances.
It further held that there were no special circumstances on the facts.
Attention was also drawn to section 46 of the Road Traffic Offenders Act 1988 (the RTOA 1988), which was relied upon on behalf of the respondent.
It provides, so far as material (and as set out in Clarke at para 52): Notwithstanding anything in section 14(3) of the Powers of Criminal Courts (Sentencing) Act 2000 a court in England and Wales which on convicting a person of an offence involving obligatory or discretionary disqualification makes . an order discharging him absolutely or conditionally may or must disqualify or endorse.
It was noted in Clarke that the reference to section 14(3) must have been included because of Taylor v Saycell.
In Clarke the court said at para 52 that it followed from the reference to section 14(3) in section 46 of the RTOA 1988 that the draftsman was accepting Lord Goddards interpretation of what is now section 14(3), namely that it prevented the imposition of any disqualification or disability in the proceedings for the offence for which the conditional discharge had been granted, subject to any contrary enactment.
It was submitted on behalf of the respondent that the effect of Taylor v Saycell and Dennis v Tame was that sentencing courts should not impose absolute or conditional discharges in an attempt to avoid disqualification because such a result was inconsistent with the statutory requirement that special circumstances (or special reasons) must be found before disqualification could be avoided.
For my part, I am not persuaded that either those cases or section 46 of the RTOA 1988 carry the present debate much further forward.
The cases do no more than reflect the position as it stood under the statutes then in force.
Otherwise all that the cases did was to say that, as a matter of principle, the courts should not use an absolute or conditional discharge in order to avoid the effect of the RTA 1930, which required disqualification in the absence of special circumstances.
The reason the cases were decided as they were was because of section 12(2) of the 1948 Act.
They were concerned with the circumstances in which the court should impose an absolute or conditional discharge where to do so would avoid the effect of the statute.
They treated the provisions of the statute as paramount.
They were not concerned with the position we have here, where the terms of the statute are said to yield to the fact of a conditional discharge.
In all these circumstances I remain of the view that there is an important distinction between the correct approach where the court has a power to impose a penalty together with an absolute or conditional discharge and the correct approach where the court has a duty to do so on the true construction of the statute.
However, whether that is correct or not, all turns on the true construction of the 2002 Act.
In my opinion, for the reasons I have given in paras 12 to 22 above, on its true construction the 2002 Act imposes a duty upon the court to make a confiscation order, whether the section 6 proceedings take place before or after the sentencing process.
As to the second reason in para 31 of Clarke, the courts reasoning may be summarised in this way.
Parliament had enacted legislation empowering courts to make various other punitive orders and had in the same legislation specified that such orders could be made even where an absolute or conditional discharge had been imposed.
Examples of such punitive orders were orders disqualifying a person from driving under section 46(1) of the RTOA 1988, exclusion orders made under section 1 of the Licensed Premises (Exclusion of Certain Persons) Act 1980, designed to deal with persons who commit violent offences on licensed premises, banning orders made under the Football (Disorder) Act 2000 and orders made under the Sex Offenders Act 1997 requiring a defendant to comply with notification requirements.
The 2002 Act does not expressly provide for the making of a confiscation order where an order for discharge is imposed.
The absence of a specific provision in the 2002 Act could be taken to show Parliaments intention that confiscation orders should not be coupled with an order for absolute or conditional discharge.
This was so notwithstanding the fact that the 2002 Act imposed a mandatory regime for confiscation orders.
The difficulty with this general point is that identified on behalf of the appellant.
Each of the statutes referred to empowered or required the court to impose a disqualification or disability of one kind or another.
The explicit reference in those statutes to the regime for conditional and absolute discharges appears to have been designed principally to ensure that courts do not interpret section 14(3) of the 2000 Act as preventing the court from making such orders.
However, first, section 14(3) would have no application to confiscation orders because a confiscation order is not a disqualification or disability.
Secondly, it does not necessarily follow from the fact that other legislation contains an express provision permitting a punitive order and an absolute or conditional discharge to be made in respect of the same offence that the absence of such a provision in the 2002 Act has the effect of preventing a court from imposing both a confiscation order and an absolute or conditional discharge.
All depends upon the scheme of the particular Act and, for the reasons I have given, I would accept the submission made on behalf of the appellant that the scheme of the 2002 Act demonstrates an intention on the part of Parliament to put in place a mandatory scheme of confiscation designed to deprive offenders of the benefit of their offending.
The history of the 2002 Act
Some reliance was placed upon the history of the 2002 Act, which was considered in detail by the Court of Appeal in Clarke.
The first statute which provided for confiscation to which we were referred was the Drug Trafficking Offences Act 1986 (the 1986 Act).
Section 1(1) (5) were very similar to what became section 6 of the 2002 Act.
In summary, they required the court to take certain steps when a person appeared before the Crown Court for sentencing.
They required the court to determine whether he had benefited from the drug trafficking offence or offences for which he was to be sentenced.
Section 1(4), (5) and (6) then provided: (4) If the court determines that he has so benefited, the court shall, before sentencing or otherwise dealing with him in respect of the offence or, as the case may be, any of the offences concerned, determine in accordance with section 4 of this Act the amount to be recovered in his case by virtue of this section. (5) The court shall then, in respect of the offence or offences concerned (a) order him to pay that amount, (b) take account of the order before (i) imposing any fine on him, or (ii) making any order involving any payment by him, or (iii) making any (forfeiture orders), or (deprivation orders), and (c) subject to paragraph (b) above, leave the order out of account in determining the appropriate sentence or other manner of dealing with the defendant. (6) No enactment restricting the power of a court dealing with an offender in a particular way from dealing with him also in any other way shall by reason only of the making of an order under this section restrict the Crown Court from dealing with an offender in any way the court considers appropriate in respect of a drug trafficking offence.
The 1986 Act was followed by the Criminal Justice Act 1988 (the 1988 Act), which extended the confiscation regime beyond drug trafficking.
Section 72(5) and (6) of the 1988 Act were in very similar terms to sections 1(5) and (6) of the 1986 Act.
The 1988 Act was amended by a number of subsequent Acts.
Those amendments included the addition of section 72A, which provided for the postponement of the confiscation proceedings in very similar terms to the equivalent provisions of the 2002 Act.
It is of interest to note the following.
Section 72A(7) provided that, where the court exercised its power of postponement, it might nevertheless proceed to sentence, or otherwise deal with, the defendant in respect of the offence or any of the offences concerned.
See also section 72A(8)(c) and section 72A(9), which provided that in sentencing, or otherwise dealing with, the defendant during the period of postponement, the court must not impose a fine or other financial penalty on him.
The Drug Trafficking Act 1994 (the 1994 Act) repealed and replaced the 1986 Act.
It was limited to drug trafficking offences but was in very similar terms to the 2002 Act.
The equivalent of section 13(2), (3) and (4) in the 2002 Act was section 2(5) of the 1994 Act, although by section 2(5)(c) it provided that, subject to paragraph (b) (which was the equivalent of section 13(2) and (3)), the court must leave the confiscation order out of account in determining the appropriate sentence or other manner of dealing with the defendant.
Section 3 provided for postponed determinations in very similar terms to section 15 of the 2002 Act, save that in subsection (7) it gave the court power during the postponement to proceed to sentence, or otherwise deal with the defendant and in subsection (9) it prohibited the court from imposing a fine or other specified financial penalty in sentencing, or otherwise dealing with, the defendant.
The 2002 Act has replaced both the 1988 Act and the 1994 Act.
In the Court of Appeal in the instant case the court noted in para 28 that the position when the 2002 Act came into force was that the effect of section 72(6) of the 1988 Act and of section 2(6) of the 1994 Act, which was of course the successor to section 1(6) of the 1986 Act, was that the court was not deprived of its power to make a confiscation order in addition to an absolute or conditional discharge or vice versa.
In summary, the position when the 2002 Act came into force was that the court had both the duty (or in rare cases power) to make a confiscation order and also had the power to make an order for an absolute or conditional discharge in an appropriate case.
The Court of Appeal noted that an equivalent provision to section 2(6) of the 1994 Act was included as clause 14(7) of the Bill which led to the 2002 Act but that the clause was removed from the Bill before it was enacted.
The Court of Appeal plainly thought that it was very unlikely indeed that Parliament intended to change that position, when enacting the 2002 Act.
It held (or would have held) that section 13(4) was in sufficiently clear terms to make such a provision unnecessary.
It is of interest to note that, according to the explanatory note to section 13, it reproduces the effect of the existing legislation.
Conclusions
I would accept the approach of the Court of Appeal to the position as it was when the 2002 Act came into force.
However, I am aware that the distinguished commentator, Dr David Thomas QC, has expressed the view in [2010] Crim LR 64 and 790 that, in so far as the argument of the appellant rests upon section 1(6) of the 1986 Act and section 72(6) of the 1988 Act it rests on what he calls an uncertain foundation.
Fortunately the conclusion which I have reached does not depend upon that foundation, whether uncertain or not.
It depends upon my view of the true construction of the relevant provisions of the 2002 Act, which I have set out in paras 12 to 22 above.
I note in passing that Dr Thomas does not express a view on the Court of Appeals opinion that Clarke was wrongly decided.
For my part, I agree with the Court of Appeal that section 13(4) is in clear terms and that Clarke was wrongly decided.
In para 77 (quoted at para 26 above) the court in Clarke referred to the fact that the 2002 Act required the making of a confiscation order but simply said that it did not think that that affected the conclusion they had reached.
I respectfully disagree.
The issue was one of construction of the 2002 Act, which in my opinion required the making of a confiscation order whatever order was made as a result of the sentencing exercise.
In short it is my view that in Clarke the court placed insufficient weight upon the mandatory provisions of the statute.
On behalf of the appellant some reliance was placed upon the obligations of the United Kingdom under what is known as the Framework Decision, namely the Council Framework Decision of 26 June 2001 On Money Laundering, the Identification, Tracing, Freezing, Seizing and Confiscation of Instrumentalities and the Proceeds of Crime (2001/500/JHA).
In the light of the conclusion which I have reached above, it is not necessary further to lengthen this judgment by referring to its provisions.
Punishment
There was some discussion in the course of the argument as to whether the making of a confiscation order is or is not punishment within the meaning of section 12(1) of the 2000 Act.
The relevance of the issue is that, if a confiscation order is not punishment, it is not inconsistent with an order for an absolute or conditional discharge, which can only be made if it is inexpedient to inflict punishment, whereas if it is punishment, it is said to be inconsistent with an absolute or conditional discharge.
The argument that a confiscation order is not punishment is that it is not intended to punish the defendant but to ensure that he disgorges any benefit he has made from crime, at any rate to the extent of his assets.
On the other hand, the court in Clarke expressed the clear view that such an order is punishment: see in particular paras 65 and 74.
It noted in para 65 that it has been treated as part of the process of sentencing and that, at least for some purposes, has been held to be a penalty: see eg R v Briggs Price [2009] 1 AC 1026, paras 30, 63, 112, 113, 115 and 134.
At para 74 the court said: There can be no doubt that confiscation orders constitute punishment.
The regime under what is now the 2002 Act is aptly described as Draconian.
The use of the offender's realisable assets to recover any benefit (not merely profit), including benefits from criminal activity unassociated with the index offence with a maximum of ten years' imprisonment in default must constitute punishment.
Thus, applying these cases, the making of a confiscation order is inconsistent with a finding that it is inexpedient to inflict punishment.
It seems to me that must be correct.
However, it is not necessary to reach a final conclusion on that question because section 13(4) of the 2002 Act expressly provides that the confiscation order must be left out of account in deciding the appropriate sentence for the defendant.
It follows that whether a confiscation order is punishment or not is irrelevant to the question whether or not to make an order for an absolute or conditional discharge.
Scotland
The conclusions which I have reached seem to me to receive strong support from the position in Scotland, which is governed by Part 3 of the 2002 Act.
Section 92 of the 2002 Act is almost identical to section 6, most of which is set out above.
Section 92, however, provides three conditions rather than two.
So far as relevant to the question in this appeal, section 92 provides: or (1) The court must act under this section where the following three conditions are satisfied. (2) The first condition is that an accused falls within either of the following paragraphs (a) he is convicted of an offence or offences, whether in solemn or summary proceedings, (b) in the case of summary proceedings in respect of an offence (without proceeding to conviction) an order is made discharging him absolutely. (3) The second condition is that the prosecutor asks the court to act under this section. (4) The third condition is that the court decides to order some disposal in respect of the accused; and an absolute discharge is a disposal for the purpose of this subsection.
The remaining provisions are identical or almost identical to those in Part 2 relating to England and Wales which are quoted above.
The significant provisions for present purposes are subsections (2)(b) and (4).
Subsection (2)(b) provides that the first condition is satisfied in the case of summary proceedings if, without proceeding to a conviction, an order is made discharging the defendant absolutely and subsection (4) provides that the third condition is satisfied if the court decides to order a disposal, an absolute discharge being a disposal for that purpose.
It is thus plain that, at any rate in the case of Scotland, Parliament expressly contemplated that the court will have a duty to make a confiscation order in circumstances in which it thinks it right to make an order for an absolute discharge, both where there is a conviction and where there is not.
It seems inconceivable that Parliament intended that in England and Wales the making of an order for an absolute discharge should be a bar to the making of a confiscation order.
In these circumstances, the position in Scotland seems to me to give some force to the underlying rationale of the construction of the 2002 Act set out in paras 12 to 22 above.
Postscript
There was a suggestion that confiscation proceedings after an absolute or conditional discharge were or might be an abuse of process or an infringement of the appellants rights under Article 1 Protocol 1 of the European Convention on Human Rights (A1P1).
However, the duty of the court to make a confiscation order arises where the defendant has benefited from either general or particular criminal conduct and the court has determined the recoverable amount, which is defined in section 7(1) of the 2002 Act as an amount equal to the defendants benefit from the conduct concerned.
I do not see how such proceedings could be an abuse of process.
The present case is not concerned with the determination of the amount of that benefit or with the possible application, for example, of the provisions of A1P1 to that determination.
A1P1 may have its part to play on issues of proportionality but not in the context of this appeal.
Disposition
As stated in para 6 above, the certified question is Does the Crown Court have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence? For the reasons I have given, I would answer that question in the affirmative but I would go further.
I would hold that, where the criteria in section 6 of the 2002 Act are satisfied, subject to subsection (6), the Crown Court has a duty to make a confiscation order against a defendant following conviction for an offence, whether or not he or she receives an absolute or conditional discharge for that offence.
Where subsection (6) applies, that duty must be treated as a power.
In all the circumstances I would allow the appeal and restore the confiscation order in the sum of 1,500.
LORD PHILLIPS
I am in full agreement with the judgment of Lord Clarke.
I wish, however, to add a footnote, based on information supplied pursuant to a request from the Court.
The prosecuting authority responsible for the prosecution of Mr Varma and for the decision to seek a confiscation order was the Revenue and Customs Prosecutions Office (the Customs).
Where the Customs seize goods that a defendant is seeking to bring into the country without paying duty it would be open to them to confiscate the goods, to prosecute the defendant and to exact the duty payable on them.
It is, however, their practice, where they prosecute in such circumstances, not to seek to exact payment of the duty but to initiate confiscation proceedings in the amount of the duty payable instead.
That is what they did in the case of Mr Varma.
This practice may well be convenient, but I doubt whether it is legitimate.
Mr Varma pleaded guilty to section 170(2)(a) of the Customs and Excise Management Act 1979, which provides, in so far as material: if any person is, in relation to any goods, in any way knowingly concerned in any fraudulent evasion or attempt at evasion (a) of any duty payable on the goods (my emphasis).
I consider it questionable whether, in confiscation proceedings, it is legitimate to treat a defendant in the position of Mr Varma as having evaded duty when the only reason that he has done so is that the Customs have chosen not to exact it.
If I am correct, then it is doubtful whether there was any basis for bringing confiscation proceedings in this case.
I am aware that I am questioning the assumption that underlay the decision of the House of Lords in R v David Smith [2002] 1 WLR 54, but that aspect of that decision (at least) calls out for review.
It has not, however, been challenged in this case so the confiscation order made must stand.
I agree with the judgment delivered by Lord Clarke and with his proposed
LORD MANCE
disposal of this appeal.
As a member of the Court of Appeal with whose judgment the House of Lords disagreed in R v David Smith [2001] UKHL 68, [2002] 1 WLR 54, I have read with a particular interest Lord Phillipss supplementary judgment.
In it he doubts whether, in confiscation proceedings, it is legitimate to treat a defendant as having evaded duty when the only reason that he has done so is that the Customs have chosen not to exact it.
That, he suggests, was the assumption underlying the decision in David Smith.
A problem about this suggestion appears to me to be that the evasion relied upon by the Customs in such cases as David Smith and the present lies in the initial importation of the dutiable goods without declaration or payment of duty, not in any non payment resulting from Customs failure to pursue the defendant.
On that basis, therefore, the argument resolves itself into a question whether he has benefited from his particular criminal conduct.
That was the question which the Court of Appeal answered in the favour of, and the House of Lords answered against, the defendant in David Smith.
As I understand Lord Phillipss current suggestion, it would be impossible to treat any smuggler as having actually evaded any duty payable on the goods, unless and until it was clear that Customs could not pursue him for and presumably actually recover the duty.
All that could be said until then was that the defendant was, by not declaring the importation and by not paying the duty, attempting to evade the duty payable.
Without having heard argument on the point, I see some difficulty in thinking that this analysis reflects the ingredients of the criminal offence created by section 170(2) of the Customs and Excise Management Act 1979.
That does not mean that I do not consider that the proper scope of confiscation orders in the present area merits further consideration at the highest level.
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On 24 October 2007 and again on both 3 and 13 April 2008 the Respondent, Mr Varma, was stopped at Gatwick Airport and found to be in possession of a quantity of tobacco which he had brought into the United Kingdom without having made payment of the relevant import duties.
On 27 November Mr Varma was convicted in the Crown Court of being knowingly concerned in fraudulently evading duty chargeable on goods, contrary to section 170(2)(a) of the Customs and Excise Management Act 1979.
Following this, on 15 January 2009 the judge made Mr Varma subject to a conditional discharge under section 12 of the Powers of Criminal Courts (Sentencing) Act 2000 (the 2000 Act), the condition being that he did not commit any further offence for a two year period from the date of the order.
Confiscation proceedings under Part 2 of the Proceeds of Crime Act 2002 (the 2002 Act) were postponed until 3 April 2009.
On that date the judge made a confiscation order depriving Mr Varma of the profits of his crimes to the extent of the amount available for recovery.
The judge valued that sum at 1,500 and made a confiscation order in that amount.
On 13 July 2009 Mr Varma sought leave to appeal out of time against the confiscation order on the basis that there was Court of Appeal authority (R v Clarke [2009] EWCA Crim 1074) to the effect that the Crown Court has no power to impose a confiscation order against an offender following conviction for an offence in respect of which the offender has been absolutely or conditionally discharged.
This reflected the fact that the Court could only discharge an offender where it was of the opinion that it would be inexpedient to inflict punishment; this is subject to a number of specified exceptions listed in section 12(7) of the 2000 Act which the Court would not be prevented from imposing on an offender subject to a discharge.
Given that section 12(7) made no reference to confiscation orders the Court in Clarke held that confiscation proceedings could not be brought where an offender is absolutely or conditionally discharged.
The Court of Appeal granted permission to appeal, allowed Mr Varmas appeal and quashed the confiscation order, holding that it was bound by the decision in Clarke.
However, the Court made clear that, but for the decision in Clarke, it would have reached the contrary conclusion and allowed the confiscation order to be made.
The Court of Appeal certified the following point of law of general public importance for consideration by the Supreme Court of the United Kingdom: Does the Crown Court have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence? The Supreme Court of the United Kingdom granted permission to appeal.
The Supreme Court unanimously allows the appeal; the Crown Court has the power and, where the criteria in section 6 of the 2002 Act are satisfied, the duty to make a confiscation order against an offender following conviction for an offence in respect of which the offender has been absolutely or conditionally discharged.
Lord Clarke gives the lead judgment with which Lord Dyson and Lord Reed agree.
Lord Phillips and Lord Mance give short concurring judgments.
Where the criteria in section 6 of the 2002 Act are satisfied the Crown Court is not only empowered to make a confiscation order but, unless it believes the victim of the conduct has started or intends to start civil proceedings against the offender for loss, injury or damage arising from that conduct, is under a duty to make such an order against the offender even where the offender has been absolutely or conditionally discharged following conviction for that offence [58].
The criteria in section 6 of the 2002 Act are satisfied in this case; (a) Mr Varma has been convicted of offences in proceedings before the Crown Court; (b) the prosecutor has requested that the court proceed under section 6 of the 2002 Act; (c) the Crown Court held Mr Varma benefited to the tune of 7,257.86; and, (d) the Court has decided upon the recoverable amount which it valued at 1,500.
Consequently, the Court was under a duty to make a confiscation order to the extent of that amount; even where an offender is absolutely or conditionally discharged.
There is nothing in the Act which gives the Court the power to decline to exercise its duty to make a confiscation order where the criteria in section 6 of the 2002 Act are satisfied.
The Court found that the purpose of section 13(4) of the 2002 Act was neither to prohibit nor to limit the scope of a confiscation order [17].
The reference in section 13(4) of the 2002 Act to deciding the appropriate sentence for the defendant referred to the sentencing process during which the court considers how the defendant should be dealt with.
It is unnecessary to decide whether an absolute or conditional discharge constitutes a sentence for these purposes; it is sufficient that an absolute or conditional discharge is an order made as a result of deciding the appropriate sentence within the meaning of section 13(4) of the 2002 Act [17].
Sections 14 and 15 of the 2002 Act contemplate circumstances in which confiscation proceedings may be postponed until after sentence is imposed.
The Court holds that such a postponement of confiscation proceedings in no way nullifies the courts duty to return to those proceedings after deciding upon the appropriate sentence [20].
The Court acknowledges that there is no express reference to confiscation orders amongst the measures the courts are not prevented from imposing under section 12(7) of the 2000 Act where an offender is absolutely or conditionally discharged.
Nonetheless, the Court holds that the lack of any express reference to a confiscation order in section 12(7) in no way nullifies the duty upon the court to make such an order where the criteria in section 6 of the 2002 Act are satisfied [29 31].
Lord Phillips gives a short concurring judgment in which he questions whether it is legitimate for the Revenue and Customs Prosecution Office (Customs), as the prosecuting authority in this case, to seek a confiscation order rather than seeking to exact the duty payable on the goods [59 60].
Lord Phillips questions whether, in confiscation proceedings, it is legitimate to treat a defendant as having evaded duty where the only reason he has done so is that Customs have chosen not to exact it.
Lord Mance gives a short concurring judgment in which he contends that Lord Phillipss suggestion would render it impossible to treat any smuggler as having evaded duty payable on goods, unless and until it is clear that Customs could not pursue and recover the duty.
Lord Mance expresses some doubt as to whether that position accurately reflects the ingredients of the criminal offence created by section 170(2) of the Customs and Excise Management Act 1979 [61 63].
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The three appellants in these two appeals were each convicted of murder.
Each had his conviction quashed pursuant to a reference to the Court of Appeal by the Criminal Cases Review Commission (CCRC) in the exercise of its powers under Part II of the Criminal Appeal Act 1995 (the 1995 Act).
In each case no order was made for a retrial.
Each claimed compensation from the Secretary of State pursuant to section 133 of the Criminal Justice Act 1988 (section 133).
That section applies to England and Wales, to Northern Ireland and to Scotland.
I shall not refer to provisions which cater for differences of procedure in Scotland.
The most material part of that section provides: (1)when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation for the miscarriage of justice to the person who has suffered punishment as a result of such conviction In each case the claim for compensation was refused by the Secretary of State, whose decisions were upheld on judicial review both at first instance and on appeal.
The common issue that arises in relation to each appeal is the meaning of miscarriage of justice in section 133.
In the case of Adams there is a second issue, which is the meaning of a new or newly discovered fact.
Lord Hope has set out the background to the statutory right to compensation provided by section 133 and I need not repeat his summary.
Lord Kerr has set out in detail the relevant facts in the appeals of Mr MacDermott and Mr McCartney and I gratefully adopt his account of these.
It remains for me to summarise the facts relevant to the appeal of Mr Adams.
They can be shortly stated.
A more detailed summary can be found in the extract of the judgment of Simon J at first instance, annexed to the judgment of the Court of Appeal [2009] EWCA Civ 1291; [2010] QB 460.
The facts in Mr Adams appeal
On 18 May 1993 Mr Adams was convicted in the Crown Court at Newcastle of the murder of a man called Jack Royal and sentenced to life imprisonment.
He appealed to the Court of Appeal and on 16 January 1998 his appeal was dismissed.
Some nine years later his case was referred to the Court of Appeal by the CCRC on three grounds.
The first, and only material ground, was that incompetent defence representation had deprived him of a fair trial.
On 12 January 2007 the Court of Appeal allowed his appeal on this ground.
The relevant shortcomings in the conduct of Mr Adams defence were, in large measure, the result of a late change of his counsel.
This was made when those originally instructed to represent him had to withdraw from the case because of a conflict of interest.
Those instructed to replace them were hard pressed to prepare for the trial and failed to consider relevant unused material.
Some of this had been disclosed by the prosecution.
Some was available on a computer database known as the Holmes database.
The case against Mr Adams was essentially based on the evidence of a single witness, Mr Kevin Thompson.
His evidence was supported by that of two police officers.
It was the defence case that Mr Thompson was lying, that he had entered into a deal with the police to give evidence against Mr Adams, and that he had been fed with information about Mr Royals murder by the police.
The evidence which had been overlooked by defence counsel would have provided valuable assistance in cross examining Mr Thompson and the two police officers.
The Court of Appeal concluded that, had it been available and deployed, the jury might not have been satisfied of Mr Adams guilt.
Accordingly the court quashed the conviction, but in doing so stated expressly that they were not to be taken as finding that, if the failings on the part of the defence lawyers had not occurred, Mr Adams would inevitably have been acquitted: [2007] 1 Cr App R 449 at para 157.
Miscarriage of Justice
Section 133(1) reproduces, in almost identical wording, the following provision in article 14(6) of the International Covenant on Civil and Political Rights 1966, which this country ratified in May 1976 (article 14(6) of the ICCPR).
I shall emphasise the material differences: When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such
conviction shall be compensated according to law
The reference to a final decision is accommodated by a provision in section 133(5) which defines reversed as referring to a conviction which has been quashed on an appeal out of time or on a reference under the 1995 Act.
The possible meanings of miscarriage of justice
The meaning of miscarriage of justice in section 133 received consideration by the House of Lords in R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18; [2005] 1 AC 1, when rejecting a claim for compensation by Mr Mullen.
He had been convicted of terrorist offences.
His conviction had been quashed by an appeal out of time.
This was not because there was any doubt that he had committed the offences of which he was convicted.
His conviction was quashed because he had been seized and brought to this country from Zimbabwe in circumstances that had involved a flagrant abuse of power.
It was not suggested that there was any defect in the trial process itself.
The House held that in these circumstances Mr Mullens conviction had not been quashed on the ground of a miscarriage of justice within the meaning of section 133.
Lord Steyn expressed the view that this phrase only extended to the conviction of someone subsequently shown to be innocent.
Lord Bingham of Cornhill expressed doubt as to whether this was correct.
Both were agreed that section 133 was enacted to give effect to article 14(6) and that the meaning of the latter should govern the interpretation of the section.
They were not, however, agreed as to the meaning of article 14(6).
Lord Rodger of Earlsferry accepted the interpretation reached by Lord Steyn.
Lord Walker of Gestingthorpe considered that Lord Steyn had given powerful reasons for his conclusion, but preferred not to go beyond the limited common ground for allowing the appeal.
Lord Scott expressed no view on the difference between Lord Bingham and Lord Steyn.
Miscarriage of justice is a phrase that is capable of having a number of different meanings.
In giving the judgment of the Court of Appeal in relation to Adams case Dyson LJ divided the circumstances in which convictions may be quashed on the basis of the discovery of fresh evidence into four categories, which I shall summarise in my own words. (1) Where the fresh evidence shows clearly that the defendant is innocent of the crime of which he has been convicted. (2) Where the fresh evidence is such that, had it been available at the time of the trial, no reasonable jury could properly have convicted the defendant. (3) Where the fresh evidence renders the conviction unsafe in that, had it been available at the time of the trial, a reasonable jury might or might not have convicted the defendant. (4) Where something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
These four categories have provided a useful framework for discussion.
There are relatively few domestic authorities that bear on the meaning of miscarriage of justice in section 133 and none which provides a definitive answer.
In these circumstances, before considering those authorities, I propose to consider extrinsic sources that might be expected to assist with the interpretation of this phrase.
Parliamentary material
Mr Bailin QC, appearing for JUSTICE as intervener, submits that a statement made by Earl Ferrers, the Minister of State at the Home Office, throws light on the meaning of miscarriage of justice.
The statement was made in the course of debate on the clause that was to become section 133: see Hansard (HL Debates), 22 July 1988, cols 1630 1632.
At the outset Earl Ferrers explained that the object of the clause was to give statutory effect to the United Kingdoms obligations under article 14.
Lord Hutchinson of Lullington then asked the very question that lies at the heart of these appeals.
He contrasted a new fact which resulted in the quashing of a conviction because it raised a lurking doubt in the mind of the Court of Appeal about the safety of the conviction and a new fact which caused the Secretary of State to advise that a defendant should be pardoned because he had been shown to be innocent.
Which, he asked, amounted to a miscarriage of justice under the clause? This, he stated, was a crucial point.
If it is not contempt of Parliament to observe that Lord Bingham, in his judicial capacity, was uncertain of the answer to this question, after giving it detailed consideration in Mullen, it is not, I hope, contempt of Parliament to suggest that Earl Ferrers, when faced with the question ex improviso in the course of debate, may have had to seek assistance from an official before giving the answer.
At all events the answer that he gave was: The normal course is to refer cases to the Court of Appeal and to regard its view as binding.
Mr Bailin submits that, in accordance with Lord Hopes observations on the use that can be made of parliamentary material in R v A (No 2) [2002] 1 AC 45 at para 81, this statement binds the Secretary of State to accept that the question of whether there has been a miscarriage of justice must be determined from the judgment of the Court of Appeal in the particular case and that, as the Court of Appeal does not and cannot rule on whether the defendant is innocent, that cannot be the test of whether there has been a miscarriage of justice.
I do not accept this submission.
The reply given by Earl Ferrers did not answer the question posed by Lord Hutchinson.
To be blunt it made no sense.
It affords no guidance on the meaning in section 133 of miscarriage of justice.
The relevant part of the debate clearly indicates that the intention of Parliament in enacting section 133 was to give effect to the obligation imposed by article 14(6).
It does not suggest that Parliament intended that the meaning of section 133 should differ in any way from the meaning of article 14(6).
This reinforces the rule of statutory interpretation that raises a presumption that, where a statute is passed in order to give effect to the obligations of the United Kingdom under an international convention, the statute should be given a meaning that conforms to that of the convention: see Salomon v Customs and Excise Commissioners [1967] 2 QB 116, 141 and Bennion on Statutory Interpretation, 5th ed (2008), section 221.6.
What then is the meaning of miscarriage of justice in article 14(6)? In answering this question the provisions of the Vienna Convention on the Law of Treaties should be applied: see Fothergill v Monarch Airlines Ltd [1981] AC 251, 283, per Lord Diplock.
The interpretation of Article 14(6)
As the wording of the English text of article 14(6) is virtually identical to that of section 133, the former throws no light on the meaning of the latter.
Article 33 of the Vienna Convention permits reference to the text of a convention in an alternative authenticated language.
In Mullen Lord Steyn at para 47 derived assistance from the French text of article 14(6).
This uses the phrase une erreur judiciare for miscarriage of justice.
Lord Steyn stated that this was a technical expression indicating a miscarriage of justice in the sense of the conviction of someone who was innocent.
He did not explain the basis for this assertion and Lord Bingham did not agree with it.
He expressed the view at para 9 that erreur judiciare could be understood as equivalent to miscarriage of justice in its broad sense.
Lord Binghams interpretation of the French text is to be preferred to that of Lord Steyn.
The difference between them received detailed consideration by Girvan LJ in In re Boyles Application [2008] NICA 35 at paras 11 13.
He concluded that the French term was as elastic as the English miscarriage of justice.
In his written case at para 4.32 Mr Tam QC for the Secretary of State invited the Court to reject Girvan LJs analysis of the French law.
In these circumstances the Court allowed Mr Owen to adduce a witness statement from Dr Cristina Mauro, who teaches Criminal Procedure as an Assistant Professor at Universit Panthon Assas at Paris.
She confirmed that Girvan LJs interpretation of erreur judiciare was correct, and Mr Tam accepted this to be the case.
Had the French text given a more precise meaning to article 14(6) than the English this would have been a legitimate aid to the interpretation of the latter.
As it is the French text leaves us no further forward.
Article 31(3)(b) of the Vienna Convention also permits one to take into account any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation.
Lord Steyn, Girvan LJ and Dr Mauro, in progressively greater detail, have examined articles 622 to 626 of the French Code de Procdure Pnale, which give effect to article 14(6).
Once again the analysis of the latter two is to be preferred to that of Lord Steyn.
This indicates that in France a conviction will be reviewed where a new element gives rise to serious doubts about guilt and that the reviewing court can then either quash the conviction on the ground that the new element proves that the defendant is not guilty or direct a retrial.
Compensation will be recoverable in the former event or, if there is a retrial, if this results in an acquittal.
This practice on the part of only one of the many signatories to the ICCPR does not provide a guide to the meaning of article 14(6) but it does demonstrate that proof of innocence has not been universally adopted as the test of entitlement to compensation.
It has not been suggested that there is any consistency of practice on the part of the signatories that assists in determining the meaning of article 14(6).
If it is not possible to deduce the meaning of article 14(6) from subsequent practice in its application, what of the travaux prparatoires? Article 32 of the Vienna Convention permits recourse to these where necessary to determine the meaning to be attributed to the term of a treaty in the light of its object and purpose see article 31.
The Court has been provided with relevant comments on the travaux in The Right to a Fair Trial under the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights by D Weissbrodt (2001) and Guide to the Travaux Prparatoires of the International Covenant on Civil and Political Rights by M Bossuyt (1987).
So far as the precise meaning of miscarriage of justice is concerned the travaux are inconclusive.
They disclose that Mrs Roosevelt was opposed to the inclusion of article 14(6) on the ground that its implementation would cause significant technical difficulties because of the diversity of national legislation.
They show concern by some, including the British delegate, that the provision should not create an obligation to pay compensation when a conviction was reversed on appeal.
Of most significance is the rejection by 22 votes to 11 with 40 abstentions of an amended provision initially proposed by Israel, with input from France and Afghanistan.
This reads: The judicial recognition of the innocence of a convicted person shall confer on him the right to request the award of compensation in accordance with the law in respect of any damage caused him by the conviction.
While this provides no positive indication of precisely what the state parties intended miscarriage of justice to mean, it makes it difficult to argue that they intended it to mean conviction of the innocent.
Lord Bingham suggested at para 9 in Mullen that the phrase miscarriage of justice may have commended itself to the parties because of the latitude of interpretation that it offered and it seems to me that this may well be the case.
It is, I believe, possible to make some more positive conclusions about what it was that the states who were involved in the drafting of article 14(6) were trying to achieve.
They were concerned with the emergence of a new fact after the completion of the trial process, including review on appeal.
Article 14(5) provides that everyone convicted of a crime shall have the right to have his conviction and sentence reviewed by a higher tribunal according to law.
Article 14(6) applies to the discovery of a new fact after that final decision.
Compensation was only payable where the new fact demonstrated conclusively that there had been a miscarriage of justice.
Thus miscarriage of justice had to be the kind of event that one could sensibly require to be proved conclusively.
Article 14 is, in general, concerned with the right to a fair trial.
Most of its provisions relate to procedure.
One might have expected article 14(6) similarly to have been concerned with the consequences of shortcomings in procedure.
The travaux do not suggest that this was the primary concern of the delegates.
It is perhaps significant that Mrs Roosevelt and Ms Bowie did not consider that the provision belonged in the Covenant and suggested deleting it.
What the delegates appear to have been primarily concerned about was not errors of procedure, but the emergence of fresh facts that were inconsistent with the conviction of the defendant.
Thus, at the outset, the Philippines suggested that the circumstances in which the provision should apply should be spelt out and that these should be where the true offender had confessed and there were no reasonable grounds to doubt his confession or where the fact or event which was the basis of the conviction was shown beyond reasonable doubt never to have taken place.
A comment by Mrs Roosevelt that compensation should be denied to someone who deliberately concealed facts which would have exonerated him if discovered (my emphasis) is a further example of this approach, as is the proposed amendment to which I have referred at para 19 above.
The fact remains, however, that this amendment was not carried and that the travaux show concern on the part of some delegates that the provision under discussion would allow compensation to persons who were clearly guilty but whose conviction had been annulled for reasons of form or procedure while others appear to have considered that the provision should provide a guarantee for lawful process.
The travaux clearly demonstrate that the parties intended article 14(6) to cover the situation where a newly discovered fact demonstrated conclusively that the defendant was innocent of the crime of which he had been convicted.
They were not, however, prepared to agree an interpretation which restricted the ambit of article 14(6) to this situation.
In the 14th and final session it is recorded that most of the Committee agreed that only adequate legislation could solve the technical difficulties involved in the problem of compensation for a miscarriage of justice.
Thus, while the principle was agreed that there should be compensation for the consequences of a conviction reversed on the ground of conclusive proof of a miscarriage of justice as a result of the discovery of new evidence after the conclusion of the criminal process, and that this would cover the case of a convicted man who was shown to be innocent, it seems to have been left to the individual parties by domestic legislation to identify the precise parameters of the miscarriage of justice that would give rise to a right to compensation.
The words according to law were added to the article by a late amendment.
It would have been possible for the contracting parties to have agreed that any person whose conviction was reversed by reason of a newly discovered fact should be given compensation for the consequences of the conviction.
This could have been justified on the basis that the reversal of the conviction raised a presumption of innocence and that compensation should be paid on the basis of that presumption.
The parties did not take that course.
The fact that they did not do so, and the requirement that the miscarriage of justice should be established conclusively, indicates so it seems to me, an anxiety not to agree to an entitlement to compensation that would result in compensation being paid to those who had in fact committed the crimes of which they were convicted, at least on a substantial scale.
In these circumstances the fact that section 133 is intended to give effect to the obligation imposed by article 14(6) is of limited assistance in interpreting that section.
It would not be right, however, when interpreting section 133 to lose sight of the fact that it is giving effect to a convention agreed by parties with varying systems of criminal justice.
Article 14(6) is applicable to criminal trials in jurisdictions that have jury trials and jurisdictions that do not, to civil and to common law jurisdictions.
The meaning given to miscarriage of justice should be one that is capable of application to the systems of criminal justice of the other parties to the covenant.
I have not found any other extrinsic material to be of assistance.
In Mullen Lord Bingham at para 9(3) considered the jurisprudence of the United Nations Human Rights Committee and concluded that this did not assist.
He reached the same conclusion in relation to the explanatory report of the Steering Committee for Human Rights in relation to article 3 of the Seventh Protocol to the European Convention on Human Rights.
I agree with Lord Bingham for the reasons which he gave.
Mullen
I now turn to consider the decision of the House of Lords in Mullen.
This task has been undertaken in a little detail by Lord Hope, which shortens the comments that I wish to make on this decision.
The reason why the appeal in Mullen did not succeed was that the House of Lords were unanimous in holding that the abuse of power that had led to the quashing of Mr Mullens conviction did not fall within the definition of miscarriage of justice, whatever the meaning of that phrase.
At para 8 Lord Bingham said: It is for failures of the trial process that the Secretary of State is bound, by section 133 and article 14(6), to pay compensation.
On that limited ground I would hold that he is not bound to pay compensation under section 133.
It was this statement that led Mr Owen to advance, initially, an argument that section 133 was directed at some failure in the trial process.
This led him to submit that if, after an impeccably conducted trial, the discovery of DNA evidence demonstrated conclusively that the convicted defendant was innocent, no claim for compensation would lie under section 133.
He was right subsequently to acknowledge that this could not be correct, but that acknowledgement raised a question as to the validity of Lord Binghams observation that section 133 applied to failures of the trial process.
I also question that statement.
It is not the failure of the trial process that constitutes a miscarriage of justice, but the wrongful conviction that may be caused by it.
A wrongful conviction is capable of amounting to a miscarriage of justice whether or not it has been caused by a failure of the trial process.
I do not believe that Lord Bingham can have intended to exclude from the ambit of section 133 convictions quashed as the result of the discovery of new facts in circumstances where there has been no failure of the trial process.
That, I believe, is the situation with which section 133 is, at least primarily, concerned.
There is a question as to the assistance that is to be derived from the following earlier comments in para 4 of Lord Binghams judgment: The expression wrongful convictions is not a legal term of art and it has no settled meaning.
Plainly the expression includes the conviction of those who are innocent of the crime of which they have been convicted.
But in ordinary parlance the expression would, I think, be extended to those who, whether guilty or not, should clearly not have been convicted at their trials.
It is impossible and unnecessary to identify the manifold reasons why a defendant may be convicted when he should not have been.
It may be because the evidence against him was fabricated or perjured.
It may be because flawed expert evidence was relied on to secure conviction.
It may be because evidence helpful to the defence was concealed or withheld.
It may be because the jury was the subject of malicious interference.
It may be because of judicial unfairness or misdirection.
In cases of this kind, it may, or more often may not, be possible to say that a defendant is innocent, but it is possible to say that he has been wrongly convicted.
The common factor in such cases is that something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
In R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin) at para 25 I stated that in this passage Lord Bingham was identifying the types of miscarriage of justice that would fall within section 133.
On reflection I believe that I was wrong.
As Lord Hope has pointed out in para 90 Lord Bingham was discussing the meaning of wrongful conviction in the context of the previous ex gratia scheme.
There is a further point to be made in relation to para 4 of Lord Binghams speech.
He has included in the catalogue of cases resulting in the conviction of someone who should not have been convicted the case of a judicial misdirection.
A judicial misdirection could not be a new or newly discovered fact, but if it were it would fall into Dyson LJs third category.
So might a conviction based on flawed expert evidence: see R (Allen) (formerly Harris)) v Secretary of State for Justice [2008] EWCA Civ 808; [2009] 2 All ER 1.
Thus para 4 would appear to embrace all four of Dyson LJs categories.
In para 9 Lord Bingham observed, when considering section 133, that, while miscarriage of justice can be used to describe the conviction of the demonstrably innocent, it can be and has been used to describe cases in which defendants, guilty or not, certainly should not have been convicted.
This also has been treated by some as expressing Lord Binghams view of the scope of section 133, but I do not think that it is clear that this was so.
In these circumstances, I agree with Lord Hope that Lord Binghams speech does not provide significant positive assistance in interpreting miscarriage of justice in section 133.
It is of assistance in respect of his comments on Lord Steyns answer to that question.
Lord Steyns conclusion in Mullen that miscarriage of justice was restricted to the conviction of an innocent person was largely founded on his misreading of the French text of article 14(6) and of the position in France.
Shorn of that support, his speech does not provide compelling justification for his conclusion.
For all these reasons I do not believe that Mullen helps very much in determining the meaning of miscarriage of justice in section 133.
The cases that have followed Mullen, including those before this Court, have proceeded on the basis that Lord Bingham had laid down an alternative test to that of Lord Steyn, and concluded, in each case, that neither test was satisfied.
In the circumstances there is nothing to be gained by considering those decisions.
I agree with Lord Hope that a fresh approach is required.
I propose to adopt the four categories identified by Dyson LJ as the framework for discussion.
The nature of the exercise
The wording of section 133, following that of article 14(6), might suggest that the terms of the judgment of the court that reverses the conviction will establish whether the entitlement to compensation has been made out.
It speaks of a conviction being reversed on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice (emphasis added).
That is not, however, the test for quashing a conviction in this jurisdiction.
The words on the ground that must, if they are to make sense, be read as in circumstances where.
Section 133(1) provides that the compensation will be paid by the Secretary of State, and section 133(2) provides for a two year time limit for application for compensation to the Secretary of State.
Thus it is for the Secretary of State to decide whether the requirements of section 133 are satisfied, an exercise which is, of course, subject to judicial review.
The Secretary of State first has to consider whether a new or newly discovered fact has led to the quashing of a conviction.
If it has, he then has to consider whether that fact shows beyond reasonable doubt that there has been a miscarriage of justice, applying the true meaning of that phrase.
The Secretary of State will plainly have regard to the terms of the judgment that quashes the conviction, but ultimately he has to form his own conclusion on whether section 133 is satisfied.
The object of the exercise
I think that the primary object of section 133, as of article 14(6), is clear.
It is to provide entitlement to compensation to a person who has been convicted and punished for a crime that he did not commit.
But there is a subsidiary object of the section.
This is that compensation should not be paid to a person who has been convicted and punished for a crime that he did commit.
The problem with achieving both objects is that the quashing of a conviction does not of itself prove that the person whose conviction has been quashed did not commit the crime of which he was convicted.
Thus it is not satisfactory to make the mere quashing of a conviction the trigger for the payment of compensation.
It was this problem which led to the adoption of the imprecise language of article 14(6), which has been reproduced in section 133.
In interpreting section 133 it is right to have in mind the two conflicting objectives.
It is necessary to consider whether the wording of the section permits a balance to be struck between these two objectives and, if so, how and where that balance should be struck.
I turn to consider Dyson LJs four categories having in mind these considerations.
I shall deviate from the order in which he set them out.
Category 4: where something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who
should not have been convicted
This category is derived from Lord Binghams speech in Mullen.
As I have explained, I do not believe that he put it forward as falling within the scope of section 133.
As I understand it, the category embraces an abuse of process so egregious that it calls for the quashing of a conviction, even if it does not put in doubt the guilt of the convicted person.
I would not interpret miscarriage of justice in section 133 as embracing such a situation.
It has no bearing on what I have identified as the primary purpose of the section, which is the compensation of those who have been convicted of a crime which they did not commit.
If it were treated as falling within section 133 this would also be likely to defeat the subsidiary object of section 133, for it would result in the payment of compensation to criminals whose guilt was not in doubt.
Category 3: Fresh evidence rendering the conviction unsafe
Dyson LJ propounded this test as requiring consideration of whether a fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
This raises the question, which I shall consider further when I come to category 2, of whether section 133 requires the Secretary of State to consider the reaction to fresh evidence of a fair minded jury.
Put another way, the situation under consideration is one where the fresh evidence reduces the strength of the case that led to the claimants conviction, but does not diminish it to the point where there is no longer a significant case against him.
I would not place this category within the scope of section 133 for two reasons.
The first is that it gives no sensible meaning to the requirement that the miscarriage of justice must be shown beyond reasonable doubt, or conclusively in the wording of article 14(6).
It makes no sense to require that the new evidence must show conclusively that the case against the claimant is less compelling.
It is tantamount to requiring the Secretary of State to be certain that he is uncertain of the claimants guilt.
My second reason is that, if category 3 were adopted as the right definition of miscarriage of justice, it would not strike a fair balance between the two objectives of section 133.
The category of those who are convicted on evidence which appears to establish guilt beyond reasonable doubt, but who have their convictions quashed because of fresh evidence that throws into question the safety of their convictions, will include a significant number who in fact committed the offences of which they were convicted.
This is the inevitable consequence of a system which requires guilt to be proved beyond reasonable doubt.
When these two factors are considered together they lead to the conclusion that section 133 does not, on its true interpretation, apply to category 3.
Category 1: Fresh evidence that shows clearly that the defendant is innocent of the
crime of which he was convicted
Having considered the categories which were at one extremity of Dyson LJs list, I now turn to the category at the other.
Plainly section 133 will embrace this category, but does it provide the exclusive definition of miscarriage of justice in that section? There are a number of points to be made in favour of this suggestion.
The first is that it gives section 133 a perfectly natural and logical meaning, indeed it is the meaning that the man in the street would be likely to accord to the wording of section 133.
More particularly, if miscarriage of justice is read as meaning the conviction of someone who is innocent, it makes perfect sense of the requirement that the new fact should prove this beyond reasonable doubt.
Next it gives section 133 a meaning which is eminently practicable.
Objection has been made to category 1 on the ground that it is not the role of the Court of Appeal, when reviewing a conviction, to rule whether the defendant is innocent of the crime of which he was convicted.
In R v McIlkenny (1991) 93 Cr App R 287, 311 Lloyd LJ observed that the Court of Appeal was neither obliged nor entitled to state that an appellant was innocent.
Its task was simply to decide whether the verdict of the jury could stand.
He described this as a point of great constitutional importance.
I think that he was right.
The point was well put by the Court of Appeal for Ontario in R v Mullins Johnson 2007 ONCA 720; 87 OR (3d) 425.
The appellant had been convicted of murder of his 4 year old niece and served 12 years in prison.
His conviction was based on expert evidence that the autopsy indicated that the young girl had been sexually abused and suffocated.
Subsequent medical evidence totally discredited the evidence given at the trial, so that it became clear that there was no reliable pathological evidence either of sexual abuse or of homicidal asphyxia of the child.
The case was referred to the Court of Appeal on terms that it should treat it as an appeal on fresh evidence.
In a passage which merits citation in full, the Court explained why it would not be proper for it in these circumstances to make a declaration that the appellant was in fact innocent: 22 The fresh evidence shows that the appellants conviction was the result of a rush to judgment based on flawed scientific opinion.
With the entering of an acquittal, the appellants legal innocence has been re established.
The fresh evidence is compelling in demonstrating that no crime was committed against Valin Johnson and that the appellant did not commit any crime.
For that reason an acquittal is the proper result. 23 There are not in Canadian law two kinds of acquittals: those based on the Crown having failed to prove its case beyond a reasonable doubt and those where the accused has been shown to be factually innocent.
We adopt the comments of the former Chief Justice of Canada in The Lamer Commission of Inquiry Pertaining to the Cases of: Ronald Dalton, Gregory Parsons, Randy Druken, Annex 3, pp. 342: [A] criminal trial does not address factual innocence.
The criminal trial is to determine whether the Crown has proven its case beyond a reasonable doubt.
If so, the accused is guilty.
If not, the accused is found not guilty.
There is no finding of factual innocence since it would not fall within the ambit or purpose of criminal law. 24 Just as the criminal trial is not a vehicle for declarations of factual innocence, so an appeal court, which obtains its jurisdiction from statute, has no jurisdiction to make a formal legal declaration of factual innocence.
The fact that we are hearing this case as a Reference under section 696.3(3)(a)(ii) of the Criminal Code does not expand that jurisdiction.
The terms of the Reference to this court are clear: we are hearing this case as if it were an appeal.
While we are entitled to express our reasons for the result in clear and strong terms, as we have done, we cannot make a formal legal declaration of the appellants factual innocence. 25 In addition to the jurisdictional issue, there are important policy reasons for not, in effect, recognizing a third verdict, other than guilty or not guilty, of factually innocent.
The most compelling, and, in our view, conclusive reason is the impact it would have on other persons found not guilty by criminal courts.
As Professor Kent Roach observed in a report he prepared for the Commission of Inquiry into Certain Aspects of the Trial and Conviction of James Driskell, there is a genuine concern that determinations and declarations of wrongful convictions could degrade the meaning of the not guilty verdict (p 39).
To recognize a third verdict in the criminal trial process would, in effect, create two classes of people: those found to be factually innocent and those who benefited from the presumption of innocence and the high standard of proof beyond a reasonable doubt.
But the decision whether there has been a miscarriage of justice within section 133 is not for the court but for the Secretary of State.
He should have no difficulty in deciding whether new evidence that has led to the quashing of a conviction shows beyond reasonable doubt that the defendant was innocent of the crime of which he was convicted.
Where the prosecution has satisfied the jury beyond reasonable doubt that a defendant is guilty, evidence that demonstrates beyond reasonable doubt that he was in fact innocent will not be equivocal.
Even though it is not for the Court of Appeal, when quashing the conviction, to express its opinion that the defendant is innocent, the reasons given for quashing the conviction are unlikely to leave any doubt of this, just as was the position in Mullins Johnson.
The other obvious point in favour of category 1 is that it precludes all possibility of a defendant who in fact committed the crime of which he was convicted receiving compensation for the consequences of his conviction.
If this is to be treated as being of paramount importance, then category 1 is the only satisfactory interpretation of section 133.
The Law Commission of New Zealand in its 1998 Report No 49 on Compensating the Wrongly Convicted advised at para 127 A requirement to prove innocence is, however, necessary to prevent the guilty claimant, acquitted on a technicality, from profiting from the crime.
It recognises that it is a persons innocence which provides the justification for compensation in the first place.
This brings me to the last point that is advanced in favour of category 1.
It is argued that it is not in practice possible to draw a line between category 2 and category 3.
Unless category 1 is adopted as the correct interpretation of section 133, defendants whose convictions are quashed on technicalities will profit from compensation.
I shall consider this argument when I deal with category 2.
The first argument against restricting the ambit of section 133 to category 1 is that the parties to article 14(6) voted against an amendment which would have done this.
The second is that this will deprive some defendants who are in fact innocent and who succeed in having their convictions quashed on the grounds of fresh evidence from obtaining compensation.
It will exclude from entitlement to compensation those who no longer seem likely to be guilty, but whose innocence is not established beyond reasonable doubt.
This is a heavy price to pay for ensuring that no guilty person is ever the recipient of compensation.
Does category 2, or some similar formulation of miscarriage of justice, provide a more satisfactory approach to the desire to provide compensation to the innocent without rewarding the guilty that both accords with the language of the section and is workable in practice? Category 2: Fresh evidence such that, had it been available at the trial no
reasonable jury could convict the defendant
This category applies to the evidence, including the fresh evidence, the test that a judge has to apply when considering an application at the end of the prosecution case for dismissal of a charge on the ground that the defendant has no case to answer.
It focuses on the evidence before the jury.
If the fresh evidence were always evidence of primary fact, or new expert evidence, the test might be satisfactory.
The position is not, however, as simple as that.
The new evidence that leads to the quashing of a conviction is very often not primary evidence that bears directly on whether the defendant committed the crime of which he was convicted, but evidence that bears on the credibility of those who provided the primary evidence on which he was convicted.
Both of the appeals before the Court fall into this category.
So does the example of category 2 given by Dyson LJ: fresh evidence which undermines the creditworthiness of the sole witness for the prosecution.
Here one can run into a problem that is peculiar to the criminal procedures that apply in common law jurisdictions.
Under common law procedures the evidence that is permitted to be placed before the jury is screened by a number of rules that are designed to avoid the risk that the jury will be unfairly prejudiced and to ensure that the trial is fair.
Thus section 78 of the Police and Criminal Evidence Act 1984 gives the judge a general jurisdiction to exclude evidence on the grounds of fairness and section 76A of the same Act contains a little code governing the admissibility of a confession.
So does section 8(2) of the Northern Ireland (Emergency Provisions) Act 1978, which was applicable to the critical evidence adduced against the defendants in the second appeal.
Often it will be appropriate for the judge to hold a voir dire in order to decide whether or not evidence can be admitted.
The question of whether there is evidence upon which a jury can properly convict is taken after the judge has screened from the jury evidence which, under the relevant procedural code, he has ruled to be inadmissible.
That is often a difficult judicial task.
I do not believe that section 133 should be so interpreted as to impose on the Secretary of Sate the task of deciding whether the fresh evidence would have rendered inadmissible the primary evidence to which it related, in order to answer the question whether there would have been a case upon which a reasonable jury could convict.
There is a further difficulty with category 2.
The question of whether a reasonable jury could properly convict falls to be answered having regard to the fact that a jury must be satisfied of guilt beyond reasonable doubt.
Section 133 requires the Secretary of State to be satisfied beyond reasonable doubt that a miscarriage of justice has occurred.
Category 2 thus operates as follows: compensation will be payable where the Secretary of State is satisfied beyond reasonable doubt that no reasonable jury could have been satisfied beyond reasonable doubt that the defendant was guilty.
This does not seem a very sensible test.
The final point to make about category 2 is that it applies a test the result of which depends critically on common law procedural rules.
As the test is derived from article 14(6), it would be preferable if it were one more readily applicable in other jurisdictions.
For these reasons I do not consider the second category, as formulated by Dyson LJ, provides a satisfactory definition of miscarriage of justice.
I would replace it with a more robust test of miscarriage of justice.
A new fact will show that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
This is a matter to which the test of satisfaction beyond reasonable doubt can readily be applied.
This test will not guarantee that all those who are entitled to compensation are in fact innocent.
It will, however, ensure that when innocent defendants are convicted on evidence which is subsequently discredited, they are not precluded from obtaining compensation because they cannot prove their innocence beyond reasonable doubt.
I find this a more satisfactory outcome than that produced by category 1.
I believe that it is a test that is workable in practice and which will readily distinguish those to whom it applies from those in category 3.
It is also an interpretation of miscarriage of justice which is capable of universal application.
Retrial
The provisions in relation to retrial introduced into section 133 in the circumstances described by Lord Hope at paras 103 and 104 of his judgment raise a problem.
A retrial will only be ordered where, although it quashes the defendants conviction on the grounds of fresh evidence, the Court of Appeal considers that there remains a case against him that is fit for trial.
Assuming that they are correct in that view, the fresh evidence could never fall within the scope of section 133 if it is right to interpret that section as being limited to either category 1 or category 2, as formulated by Dyson LJ or as I have reformulated it.
The introduction into the section of the provisions in relation to retrial would make more sense if section 133 embraced category 3.
In that case, however, one might have expected compensation to be payable automatically if the retrial ended in an acquittal, but the amended section 133 does not so provide.
It does not follow, however, that category 1 or category 2 cannot stand with section 133, as amended.
Entitlement to compensation does not turn on the view that the Court of Appeal takes of the new evidence.
The defendant may contend, even where a retrial is ordered, that the fresh evidence proves his innocence.
Although the Court of Appeal is not persuaded of this, it may become apparent in the course of the retrial that the defendant is correct.
Thus the provisions in relation to retrial make sense, even if category 1 or category 2 represents the correct interpretation of miscarriage of justice.
Article 6(2) of the European Convention on Human Rights
The Strasbourg Court has stated that one of the functions of article 6(2) is to protect an acquitted persons reputation from statements or acts that follow an acquittal which would seem to undermine it see Taliadorou and Stylianou v Cyprus (Application Nos 39627/05 and 39631/05) (unreported) 16 October 2008, at para 26.
The Courts expansion of what would seem to be a rule intended to be part of the guarantee of a fair trial into something coming close to a principle of the law of defamation is one of the more remarkable examples of the fact that the Convention is a living instrument.
Mr Owen QC for Mr Adams referred the Court to a series of decisions of the Strasbourg Court in which it was held to be a violation of article 6(2) for a state to refuse compensation to which an applicant who had been held in preventative detention was normally entitled on acquittal at the end of a criminal trial on the ground that his acquittal did not establish his innocence.
Lord Hope has summarised the details and effect of those authorities.
Mr Owen argued that their effect was that, once Mr Adams conviction had been quashed, he was entitled to be treated as innocent in the context of his claim for compensation.
A rather different argument based on article 6(2) was rejected by Lord Steyn in Mullen at para 44.
Mr Owen first advanced the present argument when appearing for the claimant in R(Allen) (formerly Harris)) v Secretary of State for Justice [2009] 2 All ER 1.
In that case the claimants claim for compensation under section 133 was rejected on the grounds that his case satisfied neither Lord Steyns test in Mullen nor the test that Lord Bingham had been thought to advance in that case.
Giving the only reasoned judgment, Hughes LJ comprehensively rejected Mr Owens argument based on article 6(2) for a series of ten reasons.
On the present appeals Lord Hope has held that reliance on article 6(2) is misplaced for reasons that have much in common with those of Hughes LJ.
I agree with both of them.
I would add this.
The appellants claims are for compensation pursuant to the provisions of section 133.
On no view does that section make the right to compensation conditional on proof of innocence by a claimant.
The right to compensation depends upon a new or newly discovered fact showing beyond reasonable doubt that a miscarriage of justice has occurred.
Whatever the precise meaning of miscarriage of justice the issue in the individual case will be whether it was conclusively demonstrated by the new fact.
The issue will not be whether or not the claimant was in fact innocent.
The presumption of innocence will not be infringed.
Newly discovered fact
Mr Adams appeal raises a second issue.
Were the facts that led to the quashing of his conviction newly discovered despite the fact that they were contained in documents disclosed to his legal representatives before his trial or available on the Holmes database? The phrase newly discovered raises a further difficult problem of interpretation, for it does not indicate to whom the discovery must be new.
Procedure Act 1993.
Section 9(6) of that Act provides: Ireland has given effect to article 14(6) by section 9 of the Criminal newly discovered fact means ( a ) where a conviction was quashed by the Court on an application under section 2 or a convicted person was pardoned as a result of a petition under section 7, or has been acquitted in any re trial, a fact which was discovered by him or came to his notice after the relevant appeal proceedings had been finally determined or a fact the significance of which was not appreciated by the convicted person or his advisers during the trial or appeal proceedings.
I would adopt this generous interpretation of newly discovered fact.
Section 133(1), following the almost identical wording of article 14(6), ends with the proviso : unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
This proviso is significant in more than one way.
First, the use of the word non disclosure would seem to equate the new discovery with disclosure.
The latter word has a broad ambit and, in context, suggests to me the bringing of a fact into the public domain and, in particular, the disclosure of that fact to the court.
Secondly, I read the provision as excluding a right to compensation where the person convicted has deliberately prevented the disclosure of the relevant fact, or where the non discovery of that fact is otherwise attributable to his own fault.
We are envisaging a situation where a claimant has been convicted, and may well have served a lengthy term of imprisonment, in circumstances where it has now been discovered that a fact existed which either demonstrates that he was innocent or, at least, undermines the case that the prosecution brought against him.
If he was aware of this fact but did not draw it to the attention of his lawyers, and he did not deliberately conceal it (which would bring the fact within the proviso), this will either be because the significance of the fact was not reasonably apparent or because it was not apparent to him.
Many who are brought before the criminal courts are illiterate, ill educated, suffering from one or another form of mental illness or of limited intellectual ability.
A person who has been wrongly convicted should not be penalised should this be attributable to any of these matters.
It is for those reasons that I would adopt the same interpretation of newly discovered fact as the Irish legislature.
Conclusions
It has always been common ground that Mr Adams case falls into category 3.
The newly discovered facts (as I would hold them to be) in his case do not show that a miscarriage of justice has occurred within the meaning that I would give to that phrase in section 133.
Accordingly, I would dismiss his appeal.
The newly discovered facts in the case of Mr McCartney and Mr MacDermott, as described by Lord Kerr, so undermine the evidence against them that no conviction could possibly be based upon it.
There can be no reasonable doubt of this.
Accordingly I would allow their appeal and hold that they are entitled to compensation pursuant to the provisions of section 133.
LORD HOPE
I accept with gratitude Lord Phillips description of the facts in the case of Andrew Adams and Lord Kerrs description of the facts in the cases of Eamonn MacDermott and Raymond McCartney.
With that advantage I can go straight to the issues of principle that these cases have raised.
Mention should also be made of Barry George, who was granted permission to intervene in this appeal.
On 2 July 2001 he was convicted of the murder on 26 April 1999 of the television presenter Jill Dando, who was killed by a single shot to the head as she was about to enter her home in Fulham.
His appeal against conviction was dismissed on 29 July 2002: [2002] EWCA Crim 1923.
A major part of the Crowns case against him was that a single particle of firearms discharge, which matched particles found in the cartridge case of the bullet which killed Miss Dando, in her coat and in samples of her hair, had been found nearly 12 months later in the pocket of a coat owned and worn by Mr George.
Following a review of his case, the Criminal Cases Review Commission decided to refer his conviction to the Court of Appeal under section 9 of the Criminal Appeal Act 1995 on the ground that new evidence called into question the evidence at the trial about the firearms discharge and the significance that had apparently been attached to that evidence.
New reports obtained from the Forensic Science Service had shown that it had no evidential value in the case against Mr George.
On 15 November 2007 the Court of Appeal quashed the conviction and ordered a retrial: [2007] EWCA Crim 2722.
The evidence of the firearms discharge was not admitted at the trial.
On 1 August 2008 the jury by a unanimous verdict found Mr George not guilty.
On the day of the acquittal the Crown Prosecution Service issued a press statement in which it was stated that Mr George now had the right to be regarded as an innocent man.
On 7 October 2009 Mr George applied for compensation under section 133 of the Criminal Justice Act 1988.
By letter dated 15 January 2010 the Secretary of State for Justice told Mr George that he was not prepared to authorise an award of compensation as the new forensic evidence did not prove beyond reasonable doubt that he was innocent.
He referred to the fact that in its judgment of 15 November 2007 the Court of Appeal stated that in the absence of the evidence of the firearms discharge there was circumstantial evidence capable of implicating Mr George, and that it had ordered a retrial which defence counsel conceded should take place.
Mr George applied for judicial review of that decision on 14 April 2010.
On 25 August 2010 Collins J granted permission.
But he stayed the proceedings pending the decision of this Court as to the meaning of miscarriage of justice in section 133 of the 1988 Act.
Mr Glen QC for Mr George submitted that it was sufficient to entitle a person to an award of compensation under that section that his conviction had been reversed on the ground of a new or newly discovered fact and that, in the event of his being subjected to a retrial, he had been acquitted of the offence.
As that was what had happened in his case it should be made clear by this Court in its judgment that, where a person had suffered punishment in such circumstances, compensation should be paid to him under the scheme that had been set up by the statute.
With that introduction I can go straight to the issues of principle that these cases have raised.
Background
The background to the introduction of a statutory right to compensation for miscarriages of justice by section 133 of the Criminal Justice Act 1988 was described in In re McFarland [2004] UKHL 17, [2004] 1 WLR 1289, paras 6 9 by Lord Bingham of Cornhill and R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1, paras 25 28 by Lord Steyn.
Lord Bingham drew attention in McFarland, para 6, to the underlying principles.
In any liberal democratic state there will be those who are accused of crime and are acquitted at trial, or whose convictions are reversed following an appeal.
Those affected will have suffered the stigma of being accused and the trauma of standing trial and of imprisonment before the process is brought to an end.
In principle it might seem that the state, which initiated the unsuccessful prosecution, should compensate those who have been acquitted, or at least some of them.
How this was to be done and in what circumstances was much debated before the current system was adopted: see David Harris, The Right to a Fair Trial in Criminal Proceedings as a Human Right (1967) 16 ICLQ 352, 372 375.
It was, as Lord Steyn said in Mullen, para 52, a process of evolution.
First, there was the adoption on 16 December 1966 of the International Covenant on Civil and Political Rights (the ICCPR), article 14(6) of which made provision for what it described as compensation according to law to a person whose conviction had been reversed or had been pardoned in the circumstances to which it referred and who had suffered punishment as a result of such a conviction.
The ICCPR was ratified by the United Kingdom on 20 May 1976.
On 29 July 1976 the Home Secretary (Mr Roy Jenkins) set out in a written answer the procedure which was being adopted for the making of ex gratia payments in recognition of the hardship caused by what he referred to as a wrongful conviction: Hansard (HC Debates), WA cols 328 330.
Three weeks later, on 20 August 1976, the ICCPR entered into force.
Thereafter the United Kingdom continued to fulfil its international obligations under article 14(6) under the ex gratia scheme.
The scheme was put onto a more formal basis on 29 November 1985: see Hansard (HC Debates), WA cols 689 690.
The then Home Secretary (Mr Douglas Hurd) said that he would be prepared to pay compensation where this was required by the international obligations, and that he remained prepared to pay compensation to people who did not fall within the terms of article 14(6) but who had spent a period in custody following a wrongful conviction or charge, where he was satisfied that it had resulted from serious default on the part of a member of a police force or of some other public authority.
He said that the Secretary of State for Northern Ireland intended to follow a similar practice.
A similar scheme was already in operation in Scotland.
There was however international pressure on the United Kingdom to put its obligations under article 14(6) on a statutory footing: see R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1, para 28 by Lord Steyn.
The response to it was section 133 of the Criminal Justice Act 1988.
The new statutory right superseded in part the existing scheme for ex gratia payments, which remained in being until April 2006, when it was terminated both in England and Wales and Northern Ireland.
This has had the inevitable, but unfortunate, consequence that claimants in those jurisdictions are now dependent solely upon the scheme provided by the statute.
The ex gratia scheme which has been operated in Scotland by the Scottish Ministers still remains in force there, alongside the system for the payment of compensation in respect of all reversals of convictions that fall within section 133 of the 1988 Act.
This enables those against whom criminal proceedings were taken which can properly be regarded with hindsight as wrongful to be compensated even though their cases cannot be brought within the terms of the statute.
The way the scheme is currently operated in England and Wales was set out by the Minister of State (Lord McNally) in a written answer which was published on 1 March 2011 (Hansard (HL Debates), WA col 318), in which he said: Compensation is paid under [section 133] where a conviction is quashed following an out of time appeal or following a reference by the Criminal Cases Review Commission to the relevant appeal court on the basis that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
Section 133 fully meets our international obligations.
The Government do not operate a compensation scheme for those who have convictions quashed at in time appeals or those who are acquitted at trial.
Figures disclosed by the Ministry of Justice about the number of applications received and the number of applications approved in England and Wales show that there has been a very substantial drop in the number of applications approved since the abolition of the ex gratia scheme in 2006.
The system prior to that date was that all applications were considered first under section 133 and then, if not approved, were considered under the ex gratia scheme.
The following table shows all applications for compensation received since May 2004 and those which were approved under section 133 : Year 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10
The statutory scheme
Article 14(6) of the ICCPR provides: Total Applications Received 88 74 39 40 38 37 Applications Approved Under s 133 39 21 23 7 7 1 When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
The wording of section 133(1) of the 1988 Act follows that of article 14(6).
It provides: (1) Subject to subsection (2) below, when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation to the person who has suffered punishment as a result of such conviction or, if he is dead, to his personal representatives, unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
Subsection (2) provides that no payment of compensation is to be made unless an application for compensation is made to the Secretary of State, for which a time limit of two years beginning with the date when the persons conviction is reversed or he is pardoned was introduced in relation to England and Wales and Northern Ireland by section 61(3) of the Criminal Justice and Immigration Act 2008.
Section 133(5) of the 1988 Act, as amended by paragraph 16(4) of Schedule 2 to the Criminal Appeal Act 1995, provides: In this section reversed shall be construed as referring to a conviction having been quashed or set aside (a) on an appeal out of time; or (b) on a reference (i) (ii) under section 194B of the Criminal Procedure (Scotland) Act under the Criminal Appeal Act 1995; or 1995.
Subsection (5A), which was inserted in relation to England and Wales and Northern Ireland by section 61(5) of the Criminal Justice and Immigration Act 2008, provides: (5A) But in a case where (a) a persons conviction for an offence is quashed on an appeal out of time, and (b) the person is to be subject to a retrial, the conviction is not to be treated for the purposes of this section as reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial.
To be entitled to compensation under section 133(1) the claimant must show that he has been convicted of a criminal offence and that subsequently his conviction has been reversed on an appeal out of time or on a reference by the CCRC, or he has been pardoned: on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
The words that I have quoted from the subsection differ from the equivalent part of article 14(6) of the ICCPR in one respect only.
The statute uses the phrase beyond reasonable doubt where article 14(6) uses the word conclusively.
One might have thought at first sight that, when applications for compensation were made to the Secretary of State, such simple wording could be applied to each case without much difficulty.
But that has proved not to be the case, as can be seen from the speeches in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, where the meaning of the words miscarriage of justice was under scrutiny.
Lord Bingham said that he would hesitate to accept the submission of the Secretary of State that section 133 obliged him to pay compensation only when a defendant, finally acquitted in the circumstances satisfying the statutory conditions, is shown beyond reasonable doubt to be innocent of the crime of which he had been convicted: para 9.
Lord Steyn, on the other hand, said that the words miscarriage of justice extend only to cases where the person concerned is acknowledged to be clearly innocent: para 56.
Then there are the words new or newly discovered fact.
What is a fact for this purpose? And to whom does it have to be new or by whom does it have to be newly discovered? The meaning of those words is in issue in the appeal by Adams, whose conviction was reversed because of a failure by his representatives to make themselves aware of and make use of three pieces of important material at his trial which had been made available to them by the prosecution but of which Adams himself was not aware.
The issue as to what is meant by the words miscarriage of justice is common to his appeal and the appeals of MacDermott and McCartney.
It will be convenient to examine this issue first.
Miscarriage of justice
Attempts have been made in subsequent cases to reconcile the differing views as to the meaning of miscarriage of justice that were expressed in Mullen: see R (Murphy) v Secretary of State for the Home Department [2005] EWHC 140 (Admin), [2005] 1 WLR 3516; R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin); In re Boyles Application [2008] NICA 35; R (Allen) (formerly Harris) v Secretary of State for Justice [2008] EWCA Civ 808, [2009] 2 All ER 1; R (Siddall) v Secretary of State for Justice [2009] EWHC 482 (Admin).
In the Court of Appeal in Adamss case Dyson LJ said that, like Lord Phillips of Worth Matravers CJ in Cliberys case and Richards J in Murphy, he did not propose to express a view as to whether Lord Binghams interpretation was to be preferred to that of Lord Steyn: R (Adams) v Secretary of State for the Home Department [2009] EWCA Civ 1291, [2010] QB 460, para 42.
The assumption has been that Lord Binghams reference in para 4 of his speech in Mullen to something having gone seriously wrong in the investigation of the offence or the conduct of the trial could be taken as a test of whether the right to compensation under section 133 was available that could sit alongside that preferred by Lord Steyn.
In Allen, para 26 Hughes LJ said that this was made the plainer by Lord Binghams references to a defendant who should clearly not have been convicted in para 4 and who certainly should not have been convicted in para 9(1).
Dyson LJ set the scene for a discussion of this issue in these appeals in para 19 of his judgment in R (Adams) v Secretary of State for the Home Department [2009] EWCA Civ 1291, [2010] QB 460, when he said: The question what is meant by miscarriage of justice has not been resolved by the courts.
As Toulson LJ said when giving permission to appeal in the present case, there are at least three classes of case where the Court of Appeal allows an appeal against conviction on the basis of fresh evidence.
I shall call them category 1, category 2 and category 3 cases.
A category 1 case is where the court is sure that the defendant is innocent of the crime of which he has been convicted.
An obvious example is where DNA evidence, not obtainable at the trial, shows beyond reasonable doubt that the defendant was not guilty of the offence.
A category 2 case is where the fresh evidence shows that he was wrongly convicted in the sense that, had the fresh evidence been available, no reasonable jury could properly have convicted.
An example is where the prosecution case rested entirely on the evidence of a witness who was put forward as a witness of truth and fresh evidence undermines the creditworthiness of that witness, so that no fair minded jury could properly have convicted on the evidence of that witness.
It does not follow in a category 2 case that the defendant was innocent.
A category 3 case is where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
The court concludes that a fair minded jury might convict or it might acquit.
There is a fourth category of case to which Lord Bingham referred in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1.
This is where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
This list of the different types of case where appeals are allowed according to the practice of the Court of Appeal (Criminal Division) was used in argument to focus the positions adopted by either side in these appeals.
It was assisted later in the judgment by an acknowledgment that there were two limbs to Lord Binghams interpretation as set out in his speech in Mullen, para 4: [2010] QB 460, para 43.
The first limb was where the person was innocent of the crime of which he had been convicted: category 1 according to Toulson LJs analysis.
The second limb was where something had gone seriously wrong in the investigation or the conduct of the trial and the person should clearly not have been convicted.
For the Secretaries of State it was submitted that only cases falling within category 1 would satisfy the requirements of section 133(1).
For Adams Mr Owen QC submitted that it was not possible to draw a clear line between categories 2 and 3, so it was sufficient for him to bring his case within category 3.
In any event, he submitted that Lord Binghams interpretation of the phrase in his second limb in Mullen was to be preferred, that proof of innocence was not required and that his case came within category 4.
Counsel for the appellants McCartney and MacDermott submitted that Lord Binghams interpretation was to be preferred, and that their cases too fell within his second limb and category 4.
It would be wrong to regard the way these categories were identified and described by the Court of Appeal as a substitute for looking at the language of section 133(1) itself and reaching our own view as to its effect.
Lord Bingham said in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, para 2 that he would allow the Secretary of States appeal on a narrow ground which made it unnecessary for him to reach a concluded view as to whether the right to compensation under the statute was available only to those who were innocent of the crime of which they had been convicted.
We do not have that luxury in the cases that are before us in these appeals.
A choice has to be made.
It is time to take a fresh look at the arguments.
Our task is made less onerous, although no less difficult, by the fact that the materials that were said to be relevant were discussed so fully by Lord Bingham and Lord Steyn in Mullen.
It is striking how little assistance they were able to derive from the materials that were before the House.
On many points both Lord Steyn and Lord Bingham were in agreement.
They were agreed that the wording of section 133(1) was intended, as Lord Bingham put it in para 9, to reflect article 14(6).
In para 5 he said that the parties were rightly agreed that the key to interpretation of section 133 was a correct understanding of article 14(6).
They were also agreed that, as Lord Bingham said in para 9(1), the expression miscarriage of justice is not a legal term of article Taken on its own and out of context, it has no settled meaning.
Lord Steyn said that the expression had to be looked at in the relevant international context, and that the only relevant context here was the international meaning of the words in article 14(6) on which section 133 is based: para 36.
The question then was, what did the materials reveal as to its international meaning?
The travaux prparatoires disclosed no consensus of opinion on the meaning to be given to it.
Lord Steyn said that they were neutral and did not assist in any way on the proper construction of article 14(6): para 54.
Lord Bingham seems to have seen this as a possible pointer towards a more generous interpretation.
He said that the expression miscarriage of justice may have commended itself because of the latitude of interpretation that it offered: para 9(2).
But this was no more than a straw in the wind.
The jurisprudence of the United Nations Human Rights Committee was of little assistance either indeed, Lord Steyn does not mention it at all.
And there was no consensus of academic opinion on the issue.
In this situation Lord Steyn resorted first to an examination of article 14(6) on its own terms: para 45.
Lord Bingham did not undertake this exercise.
Instead he took as his starting point the statements that Mr Jenkins and Mr Hurd made when they were explaining the ex gratia scheme to Parliament: para 4.
As he said at the outset of this paragraph, they were addressing the subject of wrongful convictions and charges.
He observed that, like the expression miscarriage of justice, the expression wrongful convictions is not a legal term of art and it has no settled meaning.
He then set out to describe in some detail the situations to which in ordinary parlance, as he put it, the expression would be taken to extend.
Here we find the first and second limbs, as Dyson LJ in the Court of Appeal described them at [2010] QB 460, para 43, set out.
The first is the conviction of those who are innocent of the crime of which they were convicted.
The second embraces cases where those who, whether guilty or not, should not have been convicted.
The manifold reasons where this might happen were impossible and unnecessary to identify.
The common factor however was that something had gone seriously wrong in the investigation of the offence or the conduct of the trial.
It is important not to lose sight of the fact that Lord Bingham was not seeking in para 4 to describe what, in the context of article 14(6), was meant by the expression miscarriage of justice.
He was concentrating here on the expression wrongful conviction in the statements about the ex gratia scheme.
He did not refer to the fact that it is a precondition of the right to compensation under article 14(6), and in its turn section 133, that the conviction was reversed because of a new or newly discovered fact.
The descriptions of the ex gratia scheme did not mention this as a prerequisite.
Quite what part this discussion had to play in the interpretation of article 14(6), to which he turned in para 5, is unclear.
He took account of the fact that in the course of his statement Mr Hurd recited the terms of, and undertook to observe, article 14(6): para 5.
There is an indication in that paragraph that he saw the only difference between that part of Mr Hurds statement and the enactment of section 133 as being that the right to be compensated should more obviously be, as article 14(6) requires, according to law.
But, as he said at the end of that paragraph, the task of the House was to interpret section 133.
He did not say and it would have been surprising if he had done that the key to this was to be found in Mr Hurds description of the cases where he was willing to pay compensation for a wrongful conviction under the ex gratia scheme.
When he said at the end of para 8 that it is for failures of the trial process that the Secretary of State is bound by section 133 and article 14(6) to pay compensation, he was not offering a considered view as to what those provisions actually mean.
He was explaining why, because there was no failure in the trial process, he could decide the case against Mullen on that limited ground without forming a concluded view as to what the convicted person had to show to be entitled to compensation.
In R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin), para 25, Lord Phillips of Worth Matravers CJ said that in para 4 of his speech in Mullen Lord Bingham considered two different situations, each of which he (that is, Lord Bingham) considered fell within the description of miscarriage of justice in section 133 of the 1988 Act.
It is true, as Lord Phillips went on to point out, that in para 6 of his speech Lord Bingham referred to the core right with which article 14(6) is concerned as the right to a fair trial.
But I think, with respect, that Lord Phillips was wrong to say that in para 4 of his speech Lord Bingham was considering what was meant by miscarriage of justice in section 133, as he himself has accepted: see para 30, above.
Hughes LJ drew attention to this point in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 25.
He said that it must be remembered that in Mullen both the statutory and the ex gratia schemes were under consideration.
In my opinion the value of Lord Binghams speech in Mullen lies not in any attempt on his part to subject section 133 to textual analysis, for he did not do this.
It is to be found in the reasons he gave for hesitating to accept the argument for the Secretary of State that section 133 was satisfied only when the defendant was shown beyond reasonable doubt to have been innocent of the crime of which he had been convicted, and in particular in the three points on which he disagreed with Lord Steyn.
Lord Steyns textual analysis of article 14(6) begins with a warning that there was no overarching purpose of compensating all who are wrongly convicted.
For the reasons he gives in para 45, the fundamental right under article 14(6) is narrowly circumscribed.
There was no intention to compensate all those whose convictions were quashed within the ordinary time limits, only those whose convictions were quashed on appeal out of time.
And this was only where a new or newly discovered fact showed conclusively that there had been a miscarriage of justice.
Having made this point, he then concentrated in para 46 on the requirement that the new or newly discovered fact must show conclusively (or beyond reasonable doubt in the language of section 133) that there has been a miscarriage of justice.
He said that this filtered out cases of two kinds, (1) where there may have been a wrongful conviction and (2) where it is only probable that there may have been a wrongful conviction.
He concluded that the only relevant context pointed to a narrow interpretation, that is to say the case where innocence is demonstrated.
This approach leans very heavily on the use of the word conclusively.
That word certainly points towards a narrow interpretation.
But it does not point inevitably to the demonstration of innocence as the only case that could qualify for compensation under the article.
The fact that a person who has been pardoned is brought within the scheme does not have that effect either.
It would plainly have been wrong to exclude those who are pardoned from the scheme when those whose convictions have been reversed are given the benefit of it.
But the reversal of a conviction and a pardon are processes which are distinct from each other.
It does not follow from the mere fact that they are both covered by the same scheme that the only reversals of convictions that can be contemplated are those which would otherwise have deserved a pardon.
Lord Steyn might have examined these points more fully, had he not been persuaded by two considerations to which he then turned that he had found the right answer.
The first was the use of the words une erreur judiciaire in the French text of the ICCPR.
In para 47 of his speech in Mullen Lord Steyn said that this was a technical expression indicating a miscarriage of justice in the sense of the conviction of the innocent.
In para 9(4) of his speech Lord Bingham expressed some unease about this, as he contrasted these words with the reference to un condamn reconnu innocent in article 626 of the French Code de Procdure Pnale.
He said that the expression une erreur judiciaire could be understood as equivalent to miscarriage of justice in its broad sense, and that it was not obviously apt to denote proof of innocence.
In In re Boyles Application [2008] NICA 35, para 11 Girvan LJ said that he considered that Lord Binghams hesitation in not accepting Lord Steyns stringent requirement of proof of innocence was justified.
In para 12 he pointed out that the term erreur judiciaire is defined by Grard Cornu in his Vocabulaire Juridique, 7th ed (1998), as une erreur de fait commise par une juridiction de jugement dans son appreciation de la culpabilit dune personne poursuivie.
In para 13 he enlarged on Lord Binghams reference to article 626 of the Code de Procdure Pnale, pointing out that it did not require proof of innocence but rather that, where a defendants conviction is quashed and he is subsequently acquitted, he is reconnu innocent in consequence in other words, the annulment of the conviction itself leads to the establishment of his innocence.
Although Mr Tam QC for the Secretary of State sought to defend Lord Steyns interpretation in his written case, he accepted in the course of Mr Owens oral argument that it was probably incorrect.
For my part, I think that Girvan LJs researches have shown that Lord Steyns understanding of the words une erreur judiciaire in the French text of article 14(6), for which he gave no authority, was mistaken.
The second consideration on which Lord Steyn relied was an observation in para 25 of an explanatory report by the Steering Committee for Human Rights appointed by the Council of Europe which accompanied the Seventh Protocol of the European Convention when it was published in November 1984: Mullen, para 48.
It said of article 3, which follows the wording of article 14(6) of the ICCPR, that the intention was that states would be obliged to compensate persons only in clear cases of miscarriage of justice, in the sense that there would be an acknowledgment that the person concerned was clearly innocent.
Having noted that in the introduction to the report it was stated that participation in the Protocol would not affect the application of provisions containing obligations under any other international instrument, Lord Steyn said that the explanatory report nevertheless had great persuasive value in the process of interpretation.
In para 9(4), on the other hand, Lord Bingham set out five reasons for thinking that this passage does not bear the weight that Lord Steyn attached to it.
Among those reasons are two which seem to me to be particularly significant.
First, many more states are parties to the ICCPR than to the European Convention or the Seventh Protocol, which the United Kingdom has not signed or ratified.
Second, para 25 does not appear to be altogether consistent with para 23, which suggests that a miscarriage of justice occurs where there is a serious failure in the judicial process involving grave prejudice to the convicted person.
Furthermore, as Lord Bingham noted in para 9(5), van Dijk and van Hoof, Theory and Practice of the European Convention on Human Rights, 3rd ed (1998), p 689 take a different view, suggesting that the explanatory reports interpretation is too strict and that reversal of the conviction on the ground that new facts have been discovered which introduce a reasonable doubt as to the guilt of the accused is enough.
Lord Steyn said in para 48 that the explanatory report had great persuasive value.
I think that, for the reasons Lord Bingham gives, this overstates the position.
The better view is that it lends some support the Secretary of States argument, but that it must be for the court to work out for itself what the words mean.
There was one further difficulty about Lord Steyns interpretation to which Lord Bingham drew attention in para 9(6).
This is that courts of appeal, although well used to deciding whether convictions are safe or whether reasonable doubts exist about their safety, are not called upon to decide whether a defendant is innocent and in practice rarely do so.
In R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 40(iii) Hughes LJ said that cases where the innocence of the convicted defendant is genuinely demonstrated beyond reasonable doubt by the new or newly discovered fact will be identifiable in that court and the judgment will, in virtually every case, make this plain.
I do not think that this entirely meets Lord Binghams point.
I have no doubt that there will be cases of the kind that Hughes LJ describes.
But it remains true that courts of appeal are not called upon to say whether or not a defendant was innocent, and it is at least questionable whether restricting the right to compensation to cases where the establishment of innocence is apparent from the courts judgment imposes too severe a test for the entitlement to compensation.
A fresh analysis
If one accepts, as I would do, Lord Binghams reasons for doubting whether Lord Steyn was right to find support for his reading of article 14(6) in the French text and in para 25 of the explanatory committees report on article 3 of the Seventh Protocol, one is driven back to the language of the article itself as to what the words miscarriage of justice mean.
Taken by itself this phrase can have a wide meaning.
It is the sole ground on which convictions can be brought under review of the High Court of Justiciary in Scotland: Criminal Procedure (Scotland) Act 1995, section 106(3).
But the fact that these words are linked to what is shown conclusively by a new or newly discovered fact clearly excludes cases where there may have been a wrongful conviction and the court is persuaded on this ground only that it is unsafe.
It clearly includes cases where the innocence of the defendant is clearly demonstrated.
But the article does not state in terms that the only criterion is innocence.
Indeed, the test of innocence had appeared in previous drafts but it was not adopted.
I would hold, in agreement with Lord Phillips (see para 55 above) that it includes also cases where the new or newly discovered fact shows that the evidence against the defendant has been so undermined that no conviction could possibly be based upon it.
In that situation it will have been shown conclusively that the defendant had no case to answer, so the prosecution should not have been brought in the first place.
There is an important difference between these two categories.
It is one thing to be able to assert that the defendant is clearly innocent.
Cases of that kind have become more common and much more easily recognised since the introduction into the criminal courts, long after article 14(6) of the ICCPR was ratified in 1976, of DNA evidence.
It seems unlikely that the possibility of demonstrating innocence in this way was contemplated when the test in article 14(6) was being formulated.
Watson and Crick published their discovery of the double helix in 1951, but DNA profiling was not developed until 1984 and it was not until 1988 that it was used to convict Colin Pitchfork and to clear the prime suspect in the Enderby Murders case.
The state should not, of course, subject those who are clearly innocent to punishment and it is clearly right that they should be compensated if it does so.
But it is just as clear that it should not subject to the criminal process those against whom a prosecution would be bound to fail because the evidence was so undermined that no conviction could possibly be based upon it.
If the new or newly discovered fact shows conclusively that the case was of that kind, it would seem right in principle that compensation should be payable even though it is not possible to say that the defendant was clearly innocent.
I do not think that the wording of article 14(6) excludes this, and it seems to me that its narrowly circumscribed language permits it.
The range of cases that will fall into the category that I have just described is limited by the requirement that directs attention only to the evidence which was the basis for the conviction and asks whether the new or newly discovered fact has completely undermined that evidence.
It is limited also by the fact that the new or newly discovered fact must be the reason for reversing the conviction.
This suggests that it must be the sole reason, but I do not see the fact that the appellate court may have given several reasons for reversing the conviction as presenting a difficulty.
All the other reasons that it has given will have to be disregarded.
The question will be whether the new or newly discovered fact, taken by itself, was enough to show conclusively that there was a miscarriage of justice because no conviction could possibly have been based on the evidence which was used to obtain it.
For these reasons it is plain that category 1 in Dyson LJs list (see para 83, above) falls within the scope of section 133.
I think that it is equally plain that category 4 (Lord Binghams second limb) does not, as it is taken from para 4 of Lord Binghams speech in Mullen where he was discussing what was included within the phrase wrongful convictions, not what was meant by section 133.
This leaves category 2, where the fresh evidence shows that the defendant was wrongly convicted in the sense that, had the fresh evidence been available, no reasonable jury could properly have convicted; and category 3, where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
Bearing in mind that we must form our own view as to what section 133 means, can the wording of that section on a correct understanding of article 14(6) include either or both of these categories?
I have put the words fresh evidence, which of course echo the wording of section 23 of the Criminal Appeal Act 1968 (see also section 106(3) of the Criminal Procedure (Scotland) Act 1995), into inverted commas because they depart from the words of section 133.
The statute, like article 14(6), refers to a new, or newly discovered fact, not to fresh evidence.
And it must be a fact which shows beyond reasonable doubt, or conclusively, that there was a miscarriage of justice.
Fresh evidence does not attain that status until the matter to which it relates has been proved or has been admitted to be true.
Fresh evidence that justifies the conclusion referred to in category 3 will usually not be, and certainly need not be, of that character.
If it shows that the conviction is merely unsafe, the court may order a retrial.
Under our system of trial by jury there will be no way of knowing, beyond reasonable doubt, whether it was a new or newly discovered fact that led to the acquittal.
For these reasons I would exclude category 3 from the scope of section 133.
This leaves category 2.
As Hughes LJ indicates in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 40(iii), we are dealing here with a new or newly discovered fact that is identifiable as such by the Court of Appeal.
Category 2, as described in Dyson LJs list, is of course accurate as a description of what happens according to the Court of Appeals practice.
But it is too broadly framed for use as a reliable guide to what falls within the scope of section 133 read with article 14(6).
It lacks the limiting factors indicated by the words new or newly discovered fact and shows conclusively.
It may not be easy in practice to distinguish cases that fall within it from those that fall within category 3.
So in my opinion a more precise, and more exacting, formula must be found.
I am uneasy too about requiring the Secretary of State, whose function it is to administer the scheme under the statute, to apply a test which refers to what a reasonable jury would do.
This is a judgment that is best left to the courts.
While he will be guided by what the appellate court said when it reversed the conviction, he is entitled to look at the new or newly discovered fact for himself and draw his own conclusions as to its consequences so long as they are not in conflict with what the court has said in its judgment.
This brings me back to what I said in para 94 above.
For the reasons I give there I would rephrase category 2, so that it fits with the narrowly circumscribed language of article 14(6) and section 133.
I would limit it to cases where the new or newly discovered fact shows conclusively that there was a miscarriage of justice because the evidence that was used to obtain the conviction was so undermined by the new or newly discovered fact that no conviction could possibly be based upon it.
This would include cases where the prosecution depended on a confession statement which was later shown by a new or newly discovered fact to have been inadmissible because, as the defendant had maintained all along, it was extracted from him by improper means.
It may be quite impossible to say in such a case that he was, beyond reasonable doubt, innocent.
But, as the evidence against him has been completely undermined, it can be said that it has been shown beyond reasonable doubt, or conclusively, that there has been a miscarriage of justice in his case which was as great as it would have been if he had in fact been innocent, because in neither case should he have been prosecuted at all.
Retrial
Section 133(5A), which was inserted by section 61 of the Criminal Justice and Immigration Act 2008, changed the timetable as to when a persons conviction was to be taken to have been reversed in a case where a retrial is ordered.
This amendment has to be read with the amendment which was made at the same time to section 133(2) by inserting a time limit for making an application for compensation under section 133.
This is a period of two years beginning with the date when the conviction is reversed.
Section 133(5A) provides that where the person is to be subject to a new trial the conviction is not to be treated as reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial.
This provision introduces a feature of the statutory scheme which was not before the House in Mullen.
But I do not think that it affects Lord Steyns interpretation of section 133, or the qualification which I would make to it to include cases where the prosecution should never have been brought.
It is not to be taken as suggesting that compensation is payable in every case where the appellate court has ordered a new trial because it is satisfied that the conviction was unsafe in the light of fresh evidence.
What it does, as it seems to me, is to allow for the possibility that something may emerge either before or during the retrial which would require compensation to be paid.
Nor is it to be taken as suggesting that compensation is payable in every case, such as that of Mr George, where the person was acquitted at his retrial.
The tests laid down in section 133(1) must still be applied.
It is only where a new fact or a newly discovered fact shows conclusively that the person was innocent or that the prosecution should never have been brought that there will be a right to compensation.
This will not be the case where a retrial has been ordered, and it may not be apparent from the jurys verdict at the retrial.
The fact that it returned a verdict of not guilty will not be enough.
But if new facts emerge during the retrial process that have the effect of showing conclusively that the person was innocent or that the prosecution should never have been brought they can be taken into account, even though they emerged after the date when the conviction was reversed by the Court of Appeal.
New or newly discovered fact
A question that is raised in Adamss case is to whom these words are addressed.
His appeal was allowed by the Court of Appeal on the basis that, owing to inadequacies in the conduct of his case by his then legal team, there had been a failure by them to discover and make use at the trial of three pieces of important material which had been made available to them by the prosecution but of which Adams himself was not aware: [2007] 1 Cr App R 449, para 155.
In other words, this was material that was available at the trial but not used.
Could it be said that these were new or newly discovered facts? His case is that all he needed to show was that he himself was unaware of them.
They were new to him because they were not revealed to him by his legal team.
They did not have to be new, as the Secretary of State maintains, to everyone involved in the trial.
The Divisional Court (Maurice Kay LJ and Simon J) held that the Secretary of State was right to reject Adamss claim for compensation on the ground that his conviction was not quashed because of a new or newly discovered fact: [2009] EWHC 156 (Admin).
The Court of Appeal (Waller, Dyson and Lloyd LJJ) disagreed, for three reasons: [2010] QB 460, paras 14 16.
First, it was difficult to accept that those who drafted the article intended to deny compensation to a person whose conviction was reversed on the basis of material which was available to his legal team and would have shown that he was innocent.
Second, there was no need to interpret the phrase in a way that yielded such an extreme result.
Third, the focus of the language was on the convicted person.
There was no mention of his legal representatives in the article.
So compensation was not to be denied to him if facts emerged that were new to him, although they were known to his legal representatives.
I do not think that the language of article 14(6) bears this interpretation.
It seems to me that the focus of attention is on what was known or not known to the trial court, not to the convicted person.
The assumption is that the trial court did not take the fact into account because it was not known or had not been discovered at the time of the trial.
If this was attributable wholly or in part to the convicted person because he deliberately chose not to reveal what he knew to his defence team compensation must be denied to him, as the coda to article 14(6) makes clear.
But, leaving that point out of account, the only relevant questions are whether it was not available to the trial court because it was not known then at all or whether, although knowable, it had not been discovered by the time of the trial.
Material that has been disclosed to the defence by the time of the trial cannot be said to be new or to have been newly discovered when it is taken into account at the stage of the out of time appeal.
To focus on the state of mind of the convicted person goes too far.
It ignores the fact that in practice the defendants legal representatives are unlikely to have discussed with him every piece of information that they come across in the course of their preparation for and conduct of the trial.
I agree with Lord Judge that a fact is not new or newly discovered for the purposes of section 133 just because the defendant himself, who was previously unaware of that fact, ceases to be ignorant of it.
Does denial of compensation infringe the presumption of innocence?
Mr Owen submitted that a narrow interpretation of article 14(6) would conflict with the presumption of innocence in article 6(2) of the European Convention.
He relied on a series of decisions by the European Court of Human Rights which show that the presumption of innocence may be violated in particular circumstances where, following an acquittal, a court or other authority expresses an opinion of continuing suspicion which amounts in substance to a determination of guilt of the person concerned: Sekanina v Austria (1993) 17 EHRR 221; Leutscher v The Netherlands (1996) 24 EHRR 181; Rushiti v Austria (2000) 33 EHRR 1331; Weixelbraun v Austria (2001) 36 EHRR 799; Orr v Norway (Application No 31283/04) (unreported) 15 May 2008; and Hammern v Norway (Application No 30287/96) (unreported) 11 February 2003.
These cases, other than Orr v Norway, were examined in Mullen by Lord Bingham in para 10 and by Lord Steyn in paras 41 44.
Mr Owen said that the reasons that Lord Steyn gave for finding these cases of no assistance on the question as to whether article 6(2) requires an expansive interpretation of article 3 of the Seventh Protocol or of article 14(6) of the ICCPR were correct but irrelevant.
Lord Bingham on the other hand said in para 10 that they were of no assistance, since Mullens acquittal was based on matters entirely unrelated to the merits of the accusation against him.
So it was open to this court to take a fresh look at the issue.
As Mr Tam for the Secretary of State pointed out, article 6(2) applies according to its own terms to the criminal process.
The Strasbourg cases show that its jurisprudence is designed to protect the criminal acquittal in proceedings that are closely linked to the criminal process itself.
In Sekanina v Austria (1993) 17 EHRR 221, para 30, for example, the court said that the voicing of suspicions regarding a persons innocence is conceivable as long as the conclusion of criminal proceedings has not resulted in a decision on the merits but that it was no longer admissible to rely on such suspicions once an acquittal has become final.
That was a case where the applicant had been charged with murder and remanded in custody but was subsequently acquitted at his trial.
His claim for compensation was dismissed on the ground that there were still strong suspicions regarding his guilt.
The problem was that Austrian legislation and practice linked the two questions the criminal responsibility of the accused and the right to compensation to such a degree that the decision on the latter issue could be seen to be regarded as a consequence and, to some extent, the concomitant of the decision on the former: para 22.
The court was careful to point out in para 25, however, that the situation in that case was not comparable to that governed by article 3 of the Seventh Protocol.
This distinction shows that a person might properly be refused compensation under that article, and thus under article 14(6) of the ICCPR which marches together with article 3 of the Seventh Protocol, without violating the presumption of innocence under article 6(2).
The same approach was taken in Hammern v Norway (Application No 30287/96) 11 February 2003 where the conditions for obtaining compensation were linked to the issue of criminal responsibility in such a manner, by the same court sitting largely in the same formation, so as to bring the proceedings within the scope of article 6(2): para 46.
A further example of this line of reasoning is provided by Y v Norway (2003) 41 EHRR 87, where the applicant was acquitted by the High Court which then went on to refuse his claim for compensation the next day on the ground that it was clearly probable that he had committed the offences with which he had been charged.
So too in Orr v Norway (Application No 31283/04) 15 May 2008, where the High Court dealt with the acquittal and the payment of compensation to the complainant in two clearly distinct parts of its judgment, but in several places highlighted that the standard of proof for civil liability to pay compensation was less strict than for criminal liability: para 52.
This was held in para 53 to cast doubt on the correctness of the acquittal.
The principle that is applied is that it is not open to the state to undermine the effect of the acquittal.
What article 14(6) does not do is forbid comments on the underlying facts of the case in subsequent proceedings of a different kind, such as a civil claim of damages, when it is necessary to find out what happened.
The system that article 14(6) of the ICCPR provides does not cross the forbidden boundary.
The procedure laid down in section 133 provides for a decision to be taken by the executive on the question of entitlement to compensation which is entirely separate from the proceedings in the criminal courts.
As Lord Steyn pointed out in Mullen, paras 41 43, in none of the cases from Austria or Norway, nor in Leutscher v The Netherlands 24 EHRR 181, was the court called upon to consider the interaction between article 6(2) and article 3 of the Seventh Protocol.
On the contrary, the fact that the court was careful to emphasise in Sekanina v Austria, para 25 that the situation in that case was not comparable to that governed by article 3 of the Seventh Protocol is an important pointer to the conclusion that, as Lord Steyn put it in Mullen, para 44, article 14(6) and section 133 of the 1988 Act are in the category of lex specialis and that the general provision for a presumption of innocence does not have any impact on them.
A refusal of compensation under section 133 on the basis that the innocence of the convicted person has not been clearly demonstrated, or that it has not been shown that the proceedings should not have been brought at all, does not have the effect of undermining the acquittal.
Conclusions
I would dismiss the appeal by Adams on the ground that the phrase new or newly discovered fact does not encompass the material that was available to but not used at the trial by the convicted persons legal representatives.
But I would add that the second limb of the test that has been attributed to Lord Bingham because of what he said in para 4 of his speech in Mullen, on which Mr Owen relied, does not meet the requirements of article 14(6).
So, even if the material in question could be said to have been newly discovered, his case would not have entitled him to compensation under the statute.
I would allow the appeals by McCartney and MacDermott, for the reasons given by Lord Kerr.
It is not possible to say in their cases that the newly discovered facts show conclusively that they were innocent of the crimes of which they were convicted.
But it is possible to say, in the light of the newly discovered facts, that these were proceedings that ought not to have been brought because the evidence against them has been so completely undermined that no conviction could possibly be based upon it.
I would hold that their cases fall within the narrowly circumscribed language of article 14(6) and section 133 of the 1988 Act, and they are entitled to be compensated.
LADY HALE
I agree that a miscarriage of justice in section 133 of the Criminal Justice Act 1988 (see para 1 above) should be interpreted as proposed by Lord Phillips in para 55 of his judgment.
The phrase is clearly capable of bearing a wider meaning than conclusive proof of innocence.
Both the inspiration for section 133, in article 14(6) of the ICCPR (see para 6 above) and the meaning of miscarriage of justice in domestic law in 1988 support a wider meaning.
The drafters of article 14(6) rejected all attempts to confine it to proof of innocence.
In 1988, the Criminal Appeal Act 1968 permitted the Court of Appeal to dismiss an appeal if they considered that no miscarriage of justice has actually occurred (section 2(1) before its amendment by the Criminal Appeal Act 1995).
This points strongly to the meaning of miscarriage of justice as the conviction of someone who ought not to have been convicted.
The addition in section 133 of the requirement that this be shown beyond reasonable doubt (in substitution for conclusively in article 14(6)) indicates that this refers to someone who definitely should not have been convicted rather than to someone who might or might not have been convicted had we known then what we know now.
As I understand it, Lord Phillips formulation, with which both Lord Hope and Lord Kerr agree, would limit the concept to a person who should not have been convicted because the evidence against him has been completely undermined.
Unlike Lord Clarke, therefore, he would not include a person who should not have been convicted because the prosecution was an abuse of process.
I agree with Lord Phillips that the object of this particular exercise is to compensate people who cannot be shown to be guilty rather than to provide some wider redress for shortcomings in the system.
I do sympathise with Lord Browns palpable sense of outrage that Lord Phillips test may result in a few people who are in fact guilty receiving compensation.
His approach would of course result in a few people who are in fact innocent receiving no compensation.
I say a few because the numbers seeking compensation are in any event very small.
But Lord Phillips approach is the more consistent with the fundamental principles upon which our criminal law has been based for centuries.
Innocence as such is not a concept known to our criminal justice system.
We distinguish between the guilty and the not guilty.
A person is only guilty if the state can prove his guilt beyond reasonable doubt.
This is, as Viscount Sankey LC so famously put it in Woolmington v Director of Public Prosecutions [1935] AC 462, at p 481, the golden thread which is always to be seen throughout the web of the English criminal law.
Only then is the state entitled to punish him.
Otherwise he is not guilty, irrespective of whether he is in fact innocent.
If it can be conclusively shown that the state was not entitled to punish a person, it seems to me that he should be entitled to compensation for having been punished.
He does not have to prove his innocence at his trial and it seems wrong in principle that he should be required to prove his innocence now.
Of course, it is not enough that the evidence supporting his conviction has been fatally undermined.
This has to be because of a new or newly discovered fact.
On this point, I also agree with Lord Phillips, who adopts the definition contained in section 9(6) of the Criminal Procedure Act 1993 in Ireland (see para 60).
This means that the person convicted either did not know or did not appreciate the significance of the information in question.
It seems difficult to make sense of the proviso to section 133(1) unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted in any other way.
For these reasons, in agreement with Lord Phillips, I would dismiss Mr Adams appeal but allow the appeals of Mr MacDermott and Mr McCartney.
The evidence against Mr Adams has not been so undermined that no conviction could possibly be based upon it, whereas Lord Kerr has demonstrated that this is indeed the case with Mr MacDermott and Mr McCartney.
LORD KERR The appeals of Eamonn MacDermott and Raymond McCartney
Introduction
On 12 January 1979, after a trial by a judge, sitting without a jury at Belfast City Commission, Raymond Pius McCartney was convicted of two offences of murder and one of membership of the Irish Republican Army.
The two murder victims were Geoffrey Agate and Detective Constable Liam Patrick McNulty.
Mr McCartney was sentenced to life imprisonment on each of the murder counts and to five years imprisonment for the offence of membership of a proscribed organisation.
On the same date and at the same court Eamonn MacDermott was convicted of various offences including the murder of Detective Constable McNulty.
He was sentenced to life imprisonment for that offence and to various terms of imprisonment for the other offences.
The sole evidence on which Mr McCartney and Mr MacDermott were convicted consisted of written and verbal admissions that they were said to have made during interviews by police.
Both contested the admissibility of the statements, alleging that they had either been the product of ill treatment by interviewing police officers or that they had been concocted.
The admissibility of the statements was considered by the trial judge after a long voire dire hearing.
He rejected the allegations of the appellants and stated that he was satisfied that neither had been ill treated.
The judge also considered whether to exercise his residual discretion to exclude the statements from evidence if he considered it proper to do so.
He concluded that it would not be proper to do so and the statements were duly admitted.
An appeal by Mr MacDermott and Mr McCartney against their convictions was dismissed by the Court of Appeal in Northern Ireland (Jones LJ, Gibson LJ and Kelly J) on 29 September 1982.
Both spent several years in prison.
On 18 January 2006 the Criminal Cases Review Commission referred the convictions of Mr MacDermott and Mr McCartney to the Court of Appeal.
On 15 February 2007 their convictions were quashed, the Court of Appeal declaring that they had a distinct feeling of unease about their safety.
Following the quashing of their convictions by the Court of Appeal, Mr McCartney and Mr MacDermott applied to the Secretary of State for Northern Ireland for compensation under section 133 of the Criminal Justice Act 1988 on the basis that they had been victims of a miscarriage of justice.
The applications were refused.
They then sought judicial review of that decision.
The application for judicial review was rejected by Weatherup J on 25 June 2009.
An appeal against that decision was dismissed by the Court of Appeal in Northern Ireland (Morgan LCJ, Girvan LJ and Coghlin LJ) on 8 February 2010.
The appellants trials
Mr McCartney
Mr McCartneys case on trial had been that he did not make any verbal admissions and that the two written statements attributed to him had been fabricated by police officers.
He claimed that he had been ill treated before each statement had been written out.
He had refused to sign them but he had initialled the caution that appeared at the head of the first statement and had drawn a line and had written the words "end of statement" at the concluding part of the second statement.
Mr McCartney claimed that his ill treatment began during the second of a series of interviews that took place in Castlereagh Police Office between 3 and 7 February 1977.
The ill treatment continued during a number (although not all) of the succeeding interviews.
Two police officers in particular were identified by him as having been the most persistent and determined perpetrators.
He gave evidence that he had been told that they had been specially chosen in order to extract confessions from him.
The suggestion was made by Mr McCartneys counsel that proper supervision of interviews had broken down and that a concerted campaign of abuse had been conducted in order to obtain confessions that would lead to convictions.
The interviewing police officers denied that they had been guilty of any form of ill treatment.
Superior officers rejected the suggestion that there had been any lack of supervision or that particular officers were chosen in order to extract confessions.
It was accepted, however, that a new team of detectives had been selected to continue interviews with Mr McCartney on the second day of interviewing.
This new team was chosen, according to one of the senior officers in charge of interviews, because Mr McCartney, despite having shown signs of co operation on the first evening of interviews, had evinced a less co operative attitude the following day.
The detectives thus selected were those identified by Mr McCartney as his principal abusers.
During the course of Mr McCartneys trial, an application was made on his behalf for leave to call three witnesses who had been arrested at the same time as he and who had been interviewed at Castlereagh Police Office during the same period.
In the event, two of the witnesses gave evidence.
One of these was a man called John Thomas Pius Donnelly.
He had been arrested at the same time as Mr McCartney.
He was interviewed about and subsequently charged with one of the murders of which Mr McCartney was later convicted.
He was also charged with having caused an explosion.
For reasons that will appear presently, the charges against Mr Donnelly were not proceeded with and he did not stand trial.
During the trial of Mr McCartney and Mr MacDermott, Mr Donnelly gave evidence that he had been subjected to serious assaults during his interviews and had sustained significant injuries in consequence.
Although the detectives who, according to Mr Donnelly, had assaulted him, Detective Constable French and Detective Constable Newell, were not those who were alleged to have ill treated Mr McCartney, they were members of the group of officers who had been conducting interviews into the murders of Mr Agate and Detective Constable McNulty.
Detective Constable French had interviewed Mr MacDermott and had recorded the most significant statement of admission from him.
Mr MacDermott alleged that he had been assaulted by Detective Constable French and by the officer who accompanied him, Detective Constable Dalton.
This second detective had also interviewed Mr McCartney and Mr McCartney claimed to have been assaulted by him also.
On 6 February 1977, after he had been interviewed for several days, two doctors carried out a joint examination of Mr Donnelly.
One of them was a forensic medical officer, retained by the police.
No fewer than ten areas of injury on Mr Donnellys body were recorded.
Substantial bruising, particularly in the abdominal area was found.
The trial judge observed that both doctors were shocked and horrified by what they found on examination.
How Mr Donnellys injuries had been caused was the subject of acute controversy on trial.
It was trenchantly put to him by counsel for the prosecution that some had been sustained during a series of struggles while he was being taken to and from interview rooms and that the remaining injuries were self inflicted.
This was a highly significant cross examination when seen in the light of the subsequently discovered reasons that the charges against Mr Donnelly had not been proceeded with.
The decision not to proceed with the prosecution of Mr Donnelly was itself highly significant for he was alleged to have made verbal and written admissions of murder and causing an explosion.
The second witness, Hugh Brady, also gave evidence of having been assaulted during interviews which took place during the same period as those of Mr McCartney and Mr Donnelly.
One of the detectives identified by Mr Brady as having assaulted him (Detective Constable Dalton) had also interviewed Mr McCartney and, as noted at para 126 above, Mr McCartney claimed that he too had been assaulted by this officer.
Mr Brady was also found on medical examination to have multiple injuries, most notably bruising of the abdomen and a burn to his hand which he claimed had been caused by the hand being forcibly held against a hot radiator.
One of the doctors who examined him, Dr Hendron, who had been retained by Mr Bradys solicitors, concluded his medical report by saying that he had no doubt that Mr Brady had been assaulted, although he conceded during cross examination at the trial of Mr McCartney and Mr MacDermott that Mr Brady may have exaggerated.
Other doctors who examined Mr Brady believed that he had exaggerated and gave evidence to that effect.
Mr Brady did not make admissions and was not charged with any offences.
Under cross examination at the trial of Mr McCartney and Mr MacDermott it was also suggested to him that his injuries had been self inflicted.
The trial judge, MacDermott J, did not find him an impressive witness for reasons that I will turn to presently.
Mr McCartney was examined by two doctors, Dr Henderson, the Force medical officer and Dr Hendron, who attended at the request of Mr McCartneys solicitors.
The medical examination took place shortly after the tenth interview which had ended at 5.20 pm on 6 February 1977.
A linear abrasion, 1 1/4 inches long was observed in the centre of McCartney's forehead, with two further small abrasions above and below it.
Dr Hendron noted that Mr McCartneys right cheek was red and puffy.
Dr Henderson had no note of this but on the form used to record the findings on examination he wrote "claimed struck on face no evidence of any bruises".
The mark on Mr McCartney's forehead was superficial; it was considered to have been present for a couple of days and was of a type that could be caused by a finger nail.
When asked for his conclusions on the evidence, Dr Hendron stated that he had no doubt that Mr McCartney had been assaulted.
Mr MacDermott
Mr MacDermott had been arrested on 31 January 1977 and his interviews took place in Strand Road Police Station in Derry between the date of his arrest and 2 February.
He claimed that he had been beaten before making admissions and had been abused and threatened on his way to the interview room.
He also gave evidence that the principal statement of admission had been prepared by a detective officer while he, MacDermott, lay on a bed.
It was claimed that his mental resolve had been so eroded by the assaults and threats that by the time the statement was being recorded, he did not care what it contained.
Mr MacDermott was examined by a number of doctors, including his own father who was a general medical practitioner.
No significant signs of physical injury were found.
He was observed to have tenderness of the jaw and ears which, he claimed, had been areas of assault.
He also exhibited signs of anxiety tension.
Towards the end of the trial, the judge asked counsel for the prosecution about the charges against Donnelly.
He said, Am I right in saying that the position is that he was charged and then what happened? The court was informed that no evidence was being offered? Counsel for the prosecution replied, He was never returned for trial.
The charges were not proceeded with.
In a lengthy judgment the trial judge found that neither Mr McCartney nor Mr MacDermott had been ill treated as they had alleged.
Indeed, in relation to Mr McCartney, the judge declared that his certain conclusion [was] that the Crown has satisfied me beyond reasonable doubt that McCartney was not ill treated and in relation to Mr MacDermott that he was absolutely satisfied that he had not been ill treated in any way or threatened.
The judge fully accepted the evidence of the police officers denying ill treatment at all times.
In relation to Mr Donnelly, the judge said that he was satisfied that the police had not assaulted or ill treated him.
Mr Brady was condemned as a dishonest and unreliable witness whose evidence the judge found did not assist in deciding whether Mr McCartney had been ill treated.
Dr Hendron had expressed the strong opinion that Mr McCartney, Mr Donnelly and Mr Brady had been assaulted by police officers.
MacDermott J said this about the doctors evidence: There is no doubt in my mind that Dr. Hendron believes, I am sure genuinely, that McCartney, Brady, Donnelly and others have been ill treated at Castlereagh, and such a conclusion could be reached by anyone who is prepared to form a conclusion after hearing only what might be described as one side of the case.
To my mind, Dr. Hendron's evidence throughout was coloured by this belief and lacked the professional objectivity displayed later by other doctors
Robert Barclay
On 2 January 1977 Robert Barclay was arrested and taken to Omagh Police Station where he was interviewed over a number of days by Detective Constables French and Newell (the same officers who had interviewed Mr Donnelly approximately one month later).
Mr Barclay was said to have made admissions during these interviews.
He also complained of ill treatment at the hands of both detective officers.
He alleged that they assaulted him by slapping him and punching him and that they had threatened him.
On 2 December 1977, after a trial in which he gave evidence that he had been assaulted by the officers, Mr Barclay was convicted on foot of the admissions that he had made during interview.
He appealed his convictions.
A solicitor had given evidence on his trial that when he saw Mr Barclay in court on 4 January he had a black eye.
Two doctors who had examined him while he was at Omagh Police Station found signs of injury.
On 12 April 1978, the then Lord Chief Justice of Northern Ireland, Lord Lowry, delivering the judgment of the Court of Appeal, quashed the convictions.
Although no written judgment appears to have been given, Lord Lowry was recorded as having said: It is not possible to exclude the conclusion that the injuries found on the accused were inflicted at Omagh Police Station and this renders inadmissible any statement made by him.
Subsequently, Mr Barclay brought a private prosecution against Detective Constable French and Detective Constable Newell.
In his judgment, which was delivered on 25 April 1979, the trial judge in that case accepted that there was a strong prima facie case that Mr Barclay had been assaulted.
He said that Mr Barclay had undoubtedly sustained injuries in Omagh Police Station.
He referred, however, to Mr Barclays admission that, on other occasions quite unconnected with the proceedings against the police officers, he had been dishonest.
Also, on certain matters relating to his interviews by the detectives (such as, for instance, which of them had taken the notes of the interview) Mr Barclay was found by the judge to have been inaccurate.
But the medical evidence that was called on the prosecution of the police officers was found to be consistent with Mr Barclays allegations.
The judge said, however, that he could not be certain that the injuries had occurred at the time that Mr Barclay alleged they had been inflicted.
The effect of the evidence made it unlikely that they were self inflicted but this was a possibility in the estimation of the judge.
Therefore, on the basis that there was a reasonable doubt as to their guilt, he considered that he was left with no alternative but to acquit the officers.
Although the private prosecution of Detective Constables French and Newell took place after the trial of Mr McCartney and Mr MacDermott, Mr Barclays appeal against his convictions had succeeded before their trial began.
Their trial commenced on 18 September 1978.
Of course, no reference to Mr Barclays successful appeal was made during the trial of Mr McCartney and Mr MacDermott.
There is no reason to believe that anything was known of that by those involved in their trial.
On the contrary, the fact that such a relevant circumstance was not referred to is a clear indication that nothing was known about it.
The reasons that the prosecution of John Donnelly did not proceed
In a memorandum of 29 June 1977, Mr Roy Junkin, then an assistant director in the Department of the Director of Public Prosecutions, considered the prospects of success for the prosecution of Mr Donnelly.
He concluded that a court would not accept that the statement of admission made by Mr Donnelly was voluntary.
He therefore recommended that the prosecution should not proceed.
That recommendation was accepted by Mr Junkins superior, Mr George McLaughlin, to whom the memorandum had been addressed and a direction of no prosecution was duly issued.
Mr Donnelly was interviewed about his complaint of ill treatment after being informed that the prosecution against him was not to proceed.
Following the interview, Mr Junkin considered the papers again.
In a further memorandum to Mr McLaughlin dated 6 October 1977, Mr Junkin reviewed all the evidence including that obtained from Mr Donnelly during the interview about his complaint.
He stated that he had no doubt that Donnelly was assaulted whilst in police custody at Castlereagh.
The only detective identified by Mr Donnelly was Detective Constable Newell.
He had claimed that this was the only police officer who had disclosed his name.
Since this police officer had interviewed Mr Donnelly with Detective Constable French and since Mr Donnelly had said that both Detective Constable Newell and the other officer present had assaulted him, Mr Junkin recommended that both be prosecuted for assault.
In his response to Mr Junkins recommendation, Mr McLaughlin, in a memorandum dated 10 March 1978 (6 months before the trial of Mr McCartney and Mr MacDermott began), agreed that there was no doubt that Mr Donnelly had been assaulted while in custody at Castlereagh.
But Mr McLaughlin concluded that not all of Mr Donnellys complaints were supported by findings on medical examination.
He also considered that because 8 or 9 other police officers had interviewed Mr Donnelly the prosecution would not be able to establish that any particular injury had been inflicted by Detective Constables Newell and French.
He therefore declined to accept Mr Junkins recommendation that the officers be prosecuted.
The quashing of the appellants convictions
On the hearing before the Court of Appeal of the reference by CCRC, Ms McDermott QC, appearing on behalf of Mr McCartney, submitted that if counsel for the prosecution had known the reason that the prosecution of Donnelly had been discontinued, he would not have put to him in cross examination that his injuries were self inflicted.
This submission does not appear to have been countered by counsel who appeared for the Crown on the hearing of the reference and it does not feature in the conclusions expressed by the Court of Appeal in its judgment on the reference.
At the same hearing, counsel for the appellant Mr MacDermott drew attention to what he suggested was a striking similarity between the manner in which, on Mr Donnellys account, a statement was taken from him by Detective Constable French and the way in which, according to Mr MacDermott, the most important statement of admission had been recorded from him by the same police officer.
Generally, it was submitted that if the trial judge had been aware of the reasons that Mr Donnelly had not been prosecuted (viz that an assistant director in the office of the DPP and a senior assistant director considered that he had certainly been assaulted by police officers) he would not have admitted the confession statements.
It was suggested that the judge would have formed a more favourable view of the evidence of Mr Donnelly and Mr Brady and would have considered that the police officers credibility was wholly undermined.
The Court of Appeal gave its decision on these arguments in the final paragraph of its judgment as follows: We cannot rule out the possibility that the evidence of the police officers may have been discredited by evidence that is now available.
The admission in evidence of MacDermott's confessions depended upon the acceptance by the judge of the evidence of DC French.
If the judge had known of the finding of a prima facie case in the prosecution brought by Mr Barclay against DC French he may well have reached a different conclusion.
To this is to be added the striking similarity between the description given by Donnelly and MacDermott as to the manner in which their admissions were recorded.
If the allegations by Donnelly had been supported and strengthened by the new evidence this could have served also to discredit the evidence given by the police officers in McCartney's case.
In both cases we are left with a distinct feeling of unease about the safety of their convictions based as they were on admissions and the convictions must therefore be quashed.
The challenge to the refusal of compensation
On 7 November 2007 a letter in the following terms was sent to Mr McCartneys solicitors in response to the application that they had made on his behalf for compensation under section 133 of the 1988 Act: The Secretary of State has not yet reached a decision about the application; before he does so I would like to give you the opportunity to comment in writing on the views set out below.
Under section 133 compensation is payable to an applicant where his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
Mr McCartneys convictions were, we believe, reversed within the meaning of section 133, by the decision of the Court of Appeal on 15 February 2007.
We also tend to the view that this reversal was based on a new or newly discovered fact.
However, in light of the available case law on these matters, we believe that your client has so far failed to establish that a new or newly discovered fact has shown beyond reasonable doubt that there has been a miscarriage of justice either on the basis that your client is demonstrably innocent or on the basis of a failure of the trial process.
Further representations were made on behalf of Mr McCartney.
Rejecting these, a letter dated 16 May 2008 sent on behalf of the Secretary of State, communicated his decision that Mr McCartney was not eligible under section 133.
It contained the following passage: The reasons for that decision are those as previously set out in my letter of 7 November.
In your further representations you made two main points.
Firstly, you suggest that there was a comprehensive failure to disclose material critical to Mr McCartney's defence.
The Secretary of State does not consider that anything went wrong with the investigation of the offence or in the conduct of the trial so as to result in a failure of the trial process.
Secondly, you suggest that the tape of the appeal should be listened to.
It is the written judgment of the CoA that sets out the basis for the decision that a conviction was unsafe and therefore the basis on which the Secretary of State decides if the conditions for statutory compensation are fulfilled.
Similar letters were sent to solicitors acting for Mr MacDermott.
These solicitors also made further representations and on 17 November 2008 a final responding letter was sent in which the following appeared: We have now considered the other points you put to us on 1 August in relation to the Boyle case [In re Boyles Application [2008] NICA 35].
The majority of the Court of Appeal in that case posed the test of whether the claimant should not have been convicted.
We do not believe that the terms of the Court of Appeal's judgment in your client's appeal mean that he should not have been convicted.
Therefore, the Boyle case does not alter the Secretary of State's decision that your client is not entitled to compensation.
Both appellants sought judicial review of the Secretary of States decision.
These applications were dismissed by Weatherup J, although it is clear that he felt that they might have succeeded if he had felt able to apply the test which, he considered, had been propounded by Lord Bingham in R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1.
Weatherup J considered that there were two types of new or newly discovered fact (necessary as a prerequisite for eligibility under section 133, as explained by Lord Hope in paras 79 and 81 of his judgment).
The first was the evidence that it had been accepted by the assistant director and the senior assistant director in the DPPs office that Mr Donnelly had been assaulted and that this would have tended to throw doubt on the credibility of the police witnesses.
The second type was described by the judge in paras 23 and 24 of his judgment: 23another part of the new evidence relating to the prosecution of Donnelly concerned the manner in which his evidence was dealt with at the trial.
When Donnelly was called as a defence witness, counsel for the DPP, rather than proceeding on the position of the DPP officials dealing with the prosecution of Donnelly, adopted and put to Donnelly in cross examination the police approach rejected by those officials, namely that Donnelly had received injuries after an attack on police officers and that some injuries were also self inflicted.
Further, when the trial judge was considering the evidence of Donnelly, he asked counsel for the DPP about the absence of a prosecution of Donnelly and a complete reply was not furnished.
It is important to note that this was a non jury Diplock trial.
It is apparent that the tria1 Judge was inviting counsel to disclose, as delicately as the situation demanded, whether there was a reason for the decision not to prosecute that related to matters other than the alleged ill treatment of Donnelly, in respect of which the answer of counsel implied that there was.
The trial judge was not told that the DPP had concluded that Donnelly had been ill treated, that his confession was not to be considered as being voluntary and there was no other evidence against him.
There is no suggestion that counsel in the applicants trial had been made aware of the DPP position relating to the prosecution of Donnelly.
Had counsel for the DPP been aware of the DPPs approach to the prosecution of Donnelly two aspects of the trial would have been different.
First of all, the cross examination of Donnelly would have taken a different course and counsel would not have put to Donnelly that his injuries had been occasioned by defensive action by the police and by his own hand.
Secondly, the submission of counsel for the DPP in relation to the prosecution of Donnelly would not have rested on the bald assertion that the prosecution was not proceeded with but should have indicated the basis of the DPP decision. 24 Thus the issue of the treatment of the Donnelly evidence is not directly a matter about the credibility of the evidence given by the police officers, nor is it directly a matter about withholding disclosure from the defence.
Rather it is a matter about the conduct of the prosecution in relation to the evidence of a witness who was central to the defence challenge to the voluntariness of the admissions on which the applicants were convicted.
In light of the above discussion of the Donnelly evidence there is a basis for concluding that something had gone seriously wrong with the conduct of the trial.
This is a matter that is capable of satisfying the wider interpretation of miscarriage of justice expounded by Lord Bingham.
It is evident from these passages that Weatherup J considered that it would have been quite wrong for prosecuting counsel, had he known of the reasons that Mr Donnelly had not been prosecuted, to pursue the line of questioning that he did.
On the hearing of the appeal before this court Mr Maguire QC, who appeared on behalf of the Secretary of State for Northern Ireland, was unable to confirm that Crown counsel was unaware of the reasons that the prosecution of Mr Donnelly was not pursued but I share Weatherup Js view that this is the only possible explanation for his having cross examined Mr Donnelly as he did.
Mr Junkin and Mr McLaughlin had concluded that Mr Donnelly had been assaulted by police officers.
If that view (which was the product of extensive consideration of all the relevant material) had been communicated to prosecuting counsel, it would have been improper for him to advance a case which was quite at odds with the conclusion that had been reached by two experienced officers in the department of the Director of Public Prosecutions.
At a more fundamental level, however, it was not open to the prosecuting authority to adopt a different stance in relation to Mr Donnellys evidence according to the context in which it was being considered or, as Lord Rodger so pertinently put it during argument, to face both ways.
The decision not to prosecute Mr Donnelly on a charge of murder and one of causing an explosion when, according to police evidence, he had voluntarily admitted to both was a momentous one.
It is unsurprising that Mr Junkin and Mr McLaughlin only felt able to take that course because they were convinced that he had been assaulted by police officers.
It is simply incompatible with the prosecutions duty of fairness for a different position to be taken thereafter as to the manner in which Mr Donnellys injuries were caused unless there was fresh evidence that warranted a different view.
In this instance there was no such evidence.
Weatherup J was therefore perfectly right when he said that something had gone seriously wrong with the conduct of the trial.
Crown counsel ought to have been aware of the DPPs position on this and, if he had been, cross examination of Mr Donnelly challenging his account of how he sustained his injuries would not have taken place.
Although Weatherup J concluded that the circumstances of the reversal of the appellants convictions were capable of satisfying the test that Lord Bingham had propounded for eligibility for compensation under section 133, he felt bound to follow more recent authority in England and Wales, particularly R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 1 Cr App R 36 which had expressed a clear preference for the test advocated by Lord Steyn in Mullen.
The appellants appeal against the decision of Weatherup J was dismissed by the Court of Appeal.
That court did not share Weatherup Js view that the circumstances revealed by the judgment which had quashed the appellants convictions were sufficient to satisfy Lord Binghams formulation of the correct test.
The conclusions of the court are contained in para 15 of the judgment of the Lord Chief Justice: In the second category of cases it is necessary to demonstrate that something has gone seriously wrong in the conduct of the trial resulting in the conviction of someone who should not have been convicted.
In this case the new facts upon which the appellants rely raise issues about the credibility of one police officer and one other witness.
It is not possible to come to any conclusion as to whether the new facts would have led to a different outcome in respect of the assessment of either witness.
The new evidence was sufficient to give rise to unease about the safety of the conviction but this is a case in which at its height it can only be said that the appellants might not have been convicted.
Such a case lies outside either of the categories identified by Lord Bingham.
That is also the reasoning of the decision in Boyles Application [2008] NICA 35 by which we are bound.
Should the appellants have been acquitted?
In re Boyles Application [2008] NICA 35 was an appeal in which the appellant claimed entitlement to compensation under section 133 and the ex gratia scheme which was then still extant.
Some years after the appellants conviction a note taken of one of a series of interviews had been shown by electrostatic detection apparatus (ESDA) testing techniques to have been made at a time other than that claimed by police officers.
Another version of the note for that single interview existed, contrary to the denials of the interviewing police officers.
The differences were not substantial and nothing which was inculpatory of the appellant had been written in to the version of the notes that had been presented to the court and which the police officers claimed was the only note of the interview.
Nevertheless, because the police officers had firmly denied that a different version had been prepared and because that had been shown to be incorrect, it was considered that doubt had been thrown on their credibility and the appellants conviction could not be regarded as safe.
In dismissing Mr Boyles appeal against the finding that he was not eligible to apply for compensation under section 133, the Court of Appeal said at para 22: it is impossible for the appellant to assert that he should not have been convicted.
One can certainly say that the police officers should not have given the evidence that they did.
One may even say with confidence that the trial judge is bound to have taken an entirely different view of their credibility from the extremely favourable impression that he appears to have formed.
But it is impossible to conclude that the appellant would not have been found guilty (much less that he should have been acquitted) if evidence of the other version of the interview notes had been given.
The circumstances in the Boyle case were obviously and markedly different from those that arise in the present appeals of Mr McCartney and Mr MacDermott.
The most that could be said in Boyle was that the newly discovered fact (that there was a different version of the notes of a single interview) cast doubt on the credibility of the police officers who asserted to the contrary.
By contrast, although the Court of Appeal which quashed Mr McCartneys and Mr MacDermotts convictions expressed itself in a restrained fashion, there is simply no doubt that these appellants ought not to have been convicted.
For the reasons that I have given, it was not open to prosecuting counsel to challenge Mr Donnellys account that he had been assaulted by police officers.
I am satisfied that he would not have done so if he had been aware of the true circumstances in which the decision not to continue with the prosecution of Mr Donnelly had been taken.
Mr Donnellys evidence that he had been assaulted would therefore have been received without challenge.
That evidence, if uncontradicted, is bound to have changed the entire course of the trial.
It could not have done less than establish the reasonable possibility that Detective Constable French had assaulted Mr Donnelly and that he had recorded a statement purporting to come from him but which was not given at Mr Donnellys dictation.
When those inevitable findings were brought to bear on Mr MacDermotts case they could not have done other than create a doubt as to the voluntariness of his admissions.
Section 8(2) of the Northern Ireland (Emergency Provisions) Act 1978 was in force at the date of the trial.
It provided: If, in any such proceedings [ie criminal proceedings for a scheduled offence] where the prosecution proposes to give in evidence a statement made by the accused, prima facie evidence is adduced that the accused was subjected to torture or to inhuman or degrading treatment in order to induce him to make the statement, the court shall, unless the prosecution satisfies it that the statement was not so obtained (a) exclude the statement, or (b) if the statement has been received in evidence, either (i) continue the trial disregarding the statement; or (ii) direct that the trial shall be restarted before a differently constituted court (before which the statement in question shall be inadmissible).
The trial judge had reminded himself of this provision at the beginning of his judgment.
He said that the appellants had raised a prima facie case as required by the section and that, in those circumstances, the burden passes to the Crown to satisfy me beyond reasonable doubt that the statement, whose admissibility is challenged, was not obtained by ill treatment.
In other words, a prima facie case of ill treatment having been established the burden rests squarely on the Crown of satisfying me (and by that I mean satisfying me beyond reasonable doubt) that the accused was not ill treated.
In making these observations the trial judge was reflecting the well known statement of the law in this area provided by Lowry LCJ in R v Hetherington [1975] NI 164, 168 where he said: It is not for the defence to prove but for the prosecution to disprove beyond reasonable doubt in relation to each accused that he was not subject even to any degrading treatment in order to induce him to make a statement on which the Crown rely, the decision under section 6(2) [the precursor of section 8(2) of the 1978 Act] must be based solely on how the statement is proved to have been obtained and not on whether it was true.
The prosecution would therefore have had to prove beyond reasonable doubt that the statements made by Mr McCartney and Mr MacDermott had not been obtained by any degrading treatment whatever.
It can now be seen that this would have been an impossible task had the full facts and circumstances come to light.
A person detained at the same time as Mr McCartney had been assaulted while in Castlereagh Police Office during the same period; the police officers who carried out the assaults on Mr Donnelly were part of the group of officers who were investigating the murders with which Mr McCartney was charged; one of the officers who had assaulted Mr Donnelly had been accused by Mr MacDermott of assaulting him; and the other officer who, according to Mr MacDermott, had assaulted him, had also interviewed Mr McCartney and had been accused of assault by him.
Quite apart from these considerations, two further factors of substantial importance must be taken into account.
Firstly, by the time that Mr McCartney and Mr MacDermott stood trial, Mr Barclays conviction, based on statements of admission allegedly obtained by Detective Constable French and Detective Constable Newell on interview, had been quashed.
If the trial judge had been aware that this conviction had been quashed because the possibility that Mr Barclay had been assaulted by these two officers could not be excluded (which was the necessary implication from the finding of the Court of Appeal) he could not have concluded with the same firmness that he did that Detective Constable French had not engaged in ill treatment of Mr MacDermott.
Secondly, once it was established, even as a reasonable possibility, that Mr Donnelly had been assaulted, the judges view of Dr Hendrons evidence could not have remained as he had expressed it in his judgment.
Dr Hendron had stated unequivocally that he was convinced that Mr McCartney, Mr Donnelly and Mr Brady had been assaulted.
The judge found that this opinion was sincerely held but that Dr Hendrons evidence was coloured by his conviction that the men had been attacked and on that account his testimony lacked professional objectivity.
If it had become known that the doctors view about Mr Donnelly was shared by an assistant director and a senior assistant director in the department of the Director of Public Prosecutions, it is not likely that his opinion would have been dismissed in the manner that it was by the trial judge.
The combined effect of all these factors makes it inevitable, in my opinion, that, had the judge been fully acquainted with all the material information about the reasons for the decision not to continue the prosecution of Mr Donnelly and the circumstances of the quashing of Mr Barclays convictions, he would not have convicted the appellants.
Should the appellants have been prosecuted?
Not only should the appellants have been acquitted, in my opinion they should not have been put to their trial.
If prosecuting counsel had become aware of the shadow that necessarily fell on Detective Constable Frenchs evidence by the decision not to proceed with the prosecution of Mr Donnelly and by the quashing of Mr Barclays conviction, it is, in my view, inevitable that he could not have proffered this officer as a witness of truth on the issue of whether Mr MacDermott had been ill treated.
Moreover, the conclusion of Mr Junkin and Mr McLaughlin that Mr Donnelly had been assaulted cast significant doubt on the evidence of the entire interviewing team.
Although Mr McLaughlin considered that there was insufficient evidence to charge Detective Constables French and Newell, he was of the clear view that Mr Donnelly had been physically attacked by some police officers.
It was therefore the case that the office of the Director of Public Prosecutions had determined that some officers within the team that conducted interviews of Mr Donnelly, Mr Brady and Mr McCartney had been guilty of assault on Mr Donnelly.
Mr Brady alleged that he had been assaulted in much the same manner as Mr Donnelly had been.
Despite this, he had not made admissions.
He had no personal advantage to gain by fabricating his account of the attacks on him.
The trial judge found, however, that he was prepared to do so in order to help a friend (Mr McCartney) and because of his animus towards the police.
I cannot believe that the judge would have reached that view if he had known that the DPP had concluded that Mr Donnelly had been assaulted and that Mr Barclays conviction had been quashed because of the reasonable possibility that two members of the same interviewing team had also assaulted him.
Likewise, I cannot believe that if experienced Crown counsel had been aware of these matters he would have done other than advise that the prosecution of Mr McCartney and Mr MacDermott should not proceed.
That prosecution was only viable if there was a realistic prospect of the Crown establishing beyond reasonable doubt that Mr McCartney and Mr MacDermott had not been ill treated.
Any objective assessment of all the circumstances as they are now known was bound to have resulted in the conclusion that there was no such prospect.
In reaching this view I intend no criticism whatever of counsel who, for the reasons that I have given, must have been wholly unaware of why it had been decided not to prosecute Mr Donnelly.
He must also have been ignorant of the fact that Mr Barclays conviction had been quashed and of the circumstances in which that had occurred.
A fortiori, no criticism of the trial judge is warranted.
On the contrary, he made what in retrospect was an astute and pertinent inquiry as to why Mr Donnelly had not been prosecuted and was not given the information which, if it had been provided, would certainly have led to a completely different outcome.
While it might be said that the assistant director and the senior assistant director in the department of the Director of Public Prosecutions ought to have been alive to the impact that their conclusion about the assaults on Mr Donnelly was bound to have on the propriety of proceeding with the prosecution of Mr McCartney and Mr MacDermott, there is no reason to suppose that they were aware of the quashing of Mr Barclays convictions or of the evidence of Mr Brady.
Neither is discussed in the exchange of memoranda between Mr Junkin and Mr McLaughlin.
These are matters which have played a significant part in leading me to the conclusion that the prosecution of Mr McCartney and Mr MacDermott ought not to have taken place.
In deciding that the appellants ought not to have been convicted and, indeed, ought not to have been required to stand trial, I have gone beyond the findings of the Court of Appeal which quashed their convictions.
On one reading, the letter of 16 May 2008 sent on behalf of the Secretary of State suggests that the judgment of the Court of Appeal provides the exclusive basis on which the Secretary of State decides if the conditions for statutory compensation are fulfilled.
And much was made in the course of argument of an answer given by Earl Ferrers in the course of the passage through the House of Lords of the Bill which ultimately became the 1988 Act.
Earl Ferrers answer was to the effect that the Secretary of State would regard the Court of Appeals view as to whether there had been a miscarriage of justice as binding.
In my opinion, the decision as to whether the statutory conditions have been fulfilled is one for the Secretary of State to make and he may not relinquish that decision to the Court of Appeal.
True, of course, it is that the material on which the decision is taken will derive in most cases from the judgment of the Court of Appeal.
True it also is that it would not be appropriate for the Secretary of State to depart from the reasoning that underlies that judgment unless for good reason it is shown to be erroneous but the Secretary of State must make his own decision based on all relevant information touching on the question whether there has been a miscarriage of justice.
In the present appeals, Weatherup J considered that it was open to him to examine the question whether there had been a miscarriage of justice not merely by reference to what the Court of Appeal had said but by taking into account the circumstances revealed by its judgment.
At para 20 of his judgment he said: Counsel for the respondent contends that there is nothing in the judgment of the Court of Appeal indicating that the applicants should not have been convicted.
It should not be expected that a Court of Appeal will state in terms that an appellant should not have been convicted.
The approach of the Court of Appeal on an appeal against conviction is concerned with whether that conviction is unsafe.
In taking the cue from the Court of Appeal in determining a successful appellants entitlement to compensation it is necessary to have regard to the circumstances set out in the judgment of the Court of Appeal as well as the wording adopted in the judgment in relation to the position of the appellant.
I agree with these observations and they appear, implicitly at least, to have been approved by the Court of Appeal.
As Weatherup J stated, the task of the Court of Appeal is not to decide whether the appellant should have been convicted, much less to determine whether the appellant is innocent.
It is to decide whether the conviction is safe.
The decision whether there has been a miscarriage of justice (whatever meaning is to be given to that phrase) of necessity takes place on a different basis and on foot of consideration of issues beyond those which sound only on whether the conviction is safe.
Section 133
As Lord Hope has said, it has been possible until now for courts to avoid a final resolution of the question of what is required in order to establish entitlement to compensation under section 133 of the 1988 Act.
Must a person whose conviction has been reversed as the result of a new or newly discovered fact show that he was innocent (Lord Steyns view in Mullen) or can eligibility arise in somewhat wider circumstances (Lord Binghams provisional opinion)? These appeals require this court to confront that debate and to resolve that conflict.
For the reasons given by Lord Hope and Lord Clarke, with which I agree, the analysis of Lord Bingham in Mullen as to the possible scope of section 133 is to be preferred to that of Lord Steyn.
I cannot accept that the section imposes a requirement to prove innocence.
In the first place, not only does such a requirement involve an exercise that is alien to our system of criminal justice, that system of justice does not provide a forum in which assertion of innocence may be advanced.
An appeal against conviction heard by the Court of Appeal Criminal Division is statutorily required to focus on the question whether the conviction under challenge is safe.
In a number of cases, evidence may emerge which conclusively demonstrates that the appellant was wholly innocent of the crime of which he or she was convicted but that will inevitably be incidental to the primary purpose of the appeal.
The Court of Appeal has no function or power to make a pronouncement of innocence.
It may observe that the effect of the material considered in the course of the appeal is demonstrative of innocence but it has no statutory function to make a finding to that effect: R v McIlkenny (1991) 93 Cr App R 287.
It is therefore not surprising that in New Zealand when the Law Commission proposed that a prerequisite of establishing entitlement to compensation for a wrongful conviction was proof of innocence, it was careful to recommend that a tribunal be set up in which that issue could be frankly addressed and confidently determined: see New Zealand Law Commission Report No 49 (1988) Compensating the Wrongly Convicted paras 124 127 and 136 137.
In Canada in 1988 Federal/Provincial Guidelines on Compensation for Wrongly Convicted and Imprisoned Persons likewise required that there be proof of innocence in order to qualify under the ex gratia scheme operated there.
In the case of Dumont v Canada (Communication 1467/2006, 21 May 2010) the UN Human Rights Committee held that the failure of the state authorities to establish a procedure for conducting an investigation to examine whether the applicant was innocent and to possibly identify the real perpetrator constituted a breach of article 2(3) of ICCPR read in conjunction with article 14(6).
Article 2(3)(a) requires that state authorities provide an effective remedy in the form of access to a procedure in which adequate compensation can be claimed.
The respondents in this case rely on the experience in New Zealand and Canada in support of their argument that a miscarriage of justice within the meaning of article 14(6) of the Covenant occurs only when the convicted person is in fact innocent of the offence with which he is charged.
The Human Rights Committee in Dumont, while recording the states submission to that effect, reached its decision without adjudicating on it.
The New Zealand Law Commissions report does not suggest that article 14(6) must be given that meaning.
On the contrary para 71 of the report states that article 14(6) while an important normative statement by the international community and a reference point for domestic compensation schemes was not relied on as a model for the Commissions recommended scheme.
There was no unanimity as to the meaning to be given to miscarriage of justice among the delegates who were involved in the negotiations which led to the adoption of ICCPR: see para 9(2) of Lord Binghams speech in Mullen.
As he observed, it is possible that the expression commended itself because of the latitude in interpretation which it offered.
Or, as the New Zealand Law Commission put it, it is a normative statement which provides a general template for domestic provisions in the subscribing states which can vary as to content.
Certainly, while the travaux prparatoires may be regarded as neutral on the meaning of the expression, it is unquestionably clear from these that every proposal that its ambit should be confined to compensating those whose innocence was established was roundly defeated.
Against that background, it would be a surprising conclusion that article 14(6) had the very effect that a majority of delegates clearly did not intend.
The twin theses on which Lord Steyn relied to support his conclusion that proof of innocence was required in order to establish entitlement to compensation under section 133 have been subject to scrupulous examination in paras 93 and 94 of Lord Hopes judgment.
For the reasons that appear there, with which I fully agree, these arguments can no longer be regarded as sound.
I also agree with Lord Clarkes reasons for rejecting Lord Steyns formulation of the test.
As Lord Clarke has pointed out, if Parliament had intended that a proof of innocence test was to be preferred, that could surely have been easily prescribed.
The debate as to whether such a test was appropriate had been extensively referred to in the travaux prparatoires and it is to be presumed that Parliament was aware of this when it came to enact section 133.
Confining the application of the section to those who could show that they were innocent was, in any event, a perfectly obvious option.
The failure to articulate that test in the legislation can only be explained on the basis that Parliament decided not to choose that option.
This conclusion is fortified by the consideration that the expression miscarriage of justice, although its meaning may vary according to context, is a very familiar one in our system of law.
In no other context has it been used to connote proof of innocence.
I am therefore satisfied that proof of innocence cannot be the criterion on which entitlement to compensation under section 133 is to be determined.
Rejection of this hypothesis brings with it the need to determine how miscarriage of justice is to be interpreted.
As Lord Hope has said, a fresh analysis is required and for the reasons that he gives the answer is not necessarily provided by the speech of Lord Bingham in Mullen.
The use of the word conclusively in article 14(6) of ICCPR and the expression beyond reasonable doubt lends support to the view that the section does not contemplate that all whose convictions have been quashed and who satisfy the other requirements of the section will be entitled to compensation.
On this there is no dispute between the parties to these appeals.
Lord Hope has proposed that the section should be interpreted as targeting those cases where, as a consequence of the state of affairs revealed by the new or newly discovered fact, it can be concluded that no prosecution ought to have taken place.
Lord Clarke prefers to define the category of eligibility as extending to those cases where the new or newly discovered fact leads inexorably to the conclusion that no jury, properly directed, would have convicted.
As a matter of practical experience, there may be little difference as to which of these tests should be applied.
But it is important that, if possible, clear guidance be given by this court as to the circumstances in which the section should be held to apply.
Lord Hope has pointed out that requiring the Secretary of State to apply a test which refers to what a reasonable jury would do is not appropriate since this is a matter best left to the courts.
Lord Clarke, on the other hand, suggests that a test which requires the Secretary of State to focus on whether the claimant should never have been prosecuted runs the risk of the inquiry wrongly focusing on the propriety of the decision to prosecute by reference to the circumstances that obtained when the decision was taken.
There is substance in both concerns.
I believe that a simple test can cater for these concerns and will also faithfully reflect the intention of article 14 (6) and section 133 that only truly deserving applicants should be included in the compensatory scheme.
The test which I would have proposed was: whether, on the facts as they now stand revealed, it can be concluded beyond reasonable doubt that the applicant should not have been convicted.
Lord Phillips has suggested that the test should be worded in the following way: the new fact shows that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
This appears to me to achieve the same result as the test which I would have proposed and I am therefore quite content to subscribe to his formulation.
The proper application of either test ties entitlement to compensation firmly to the true factual situation.
Procedural deficiencies that led to irregularities in the trial or errors in the investigation of offences will not suffice to establish entitlement to compensation.
A claimant for compensation will not need to prove that he was innocent of the crime but he will have to show that, on the basis of the facts as they are now known, he should not have been convicted or that conviction could not possibly be based on those facts.
Of course, if innocence can be proved, the test, on either formulation, will be amply satisfied.
The adoption of a single, simple test dispenses with the need to consider possible categories of entitlement which, I believe, tends more to confuse than to enlighten.
As it happens, although it is possible to construct from Lord Binghams observations a fourth category of case beyond the three that were identified by Toulson LJ in giving permission to appeal in the Adams case, I do not believe that Lord Bingham intended that this be considered a freestanding category.
New or newly discovered fact
I find myself in complete agreement with the reasoning of Dyson LJ on this issue in the judgment of the Court of Appeal in Adams [2010] QB 460, paras 14 16 and with what Lord Phillips has had to say on the matter in paras 59 63 of his judgment.
The newly discovered limb of the requirement clearly, to my mind, connotes discovery by the party who prays it in aid to demonstrate that he should not have been convicted.
It would be wholly anomalous, as Dyson LJ has pointed out, that a person whose innocence can be conclusively proved, should be deprived of compensation simply because his lawyers failed to communicate the vital information or failed to grasp its significance.
Does denial of compensation infringe the presumption of innocence?
Lord Hope has dealt comprehensively with the arguments made by the appellants on this issue in paras 108 to 111 of his judgment.
I agree with his reasons for rejecting the arguments.
There is nothing further that I could usefully say on the topic.
Conclusions
I would allow the appeals of Mr McCartney and Mr MacDermott.
For the reasons that I have given, I am satisfied that, on the facts as they are now known, they should not have been convicted.
As it happens, I am also satisfied that they ought not to have been prosecuted and their cases therefore fulfil the requirement that Lord Hope has formulated.
Clearly they also satisfy the test preferred by Lord Clarke of being cases in which no reasonable jury, properly directed, could convict.
Like Lord Phillips and Lord Hope I consider that both are entitled to be compensated under section 133.
Although I would hold that the material on which Mr Adams relied constituted a newly discovered fact, I do not consider that he has demonstrated that, on the facts as they now stand revealed, it can be concluded beyond reasonable doubt that he should not have been convicted.
I would dismiss his appeal.
LORD CLARKE
Introduction
I gratefully adopt Lord Hopes description of the background to the introduction of the statutory right to compensation for miscarriages for justice in section 133 of the Criminal Justice Act 1988 in the light of article 14(6) of the ICCPR.
He has set out the relevant provisions of section 133 and article 14(6).
I shall not therefore repeat them.
The principal issues for decision in this appeal are the meaning of the expressions miscarriage of justice and new or newly discovered fact in those provisions.
Miscarriage of justice
The meaning of this expression has been considered in a number of cases as described by Lord Hope.
I agree with him that it is helpful to consider its meaning in the present context by reference to the categories identified by Toulson LJ when giving permission to appeal to the Court of Appeal in the Adams appeal which are described by Dyson LJ [2010] QB 460, at para 19 of his judgment which is quoted in full by Lord Hope.
Dyson LJ described the categories of case thus: A category 1 case is where the court is sure that the defendant is innocent of the crime of which he has been convicted.
An obvious example is where DNA evidence, not obtainable at the time of trial, shows beyond doubt that the defendant was not guilty of the offence.
A category 2 case is where the fresh evidence shows that he was wrongly convicted in the sense that, had the fresh evidence been available at the trial, no reasonable jury could properly have convicted.
An example is where the prosecution case rested entirely on the evidence of a witness who was put forward as a witness of truth and fresh evidence undermines the creditworthiness of that witness, so that no fair minded jury could properly have convicted on the evidence of that witness.
It does not follow in a category 2 case that the defendant was innocent.
A category 3 case is where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
The court concludes that a fair minded jury might convict or it might acquit.
There is a fourth category of case to which Lord Bingham referred in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1.
This is where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
The respondents say that there is only a miscarriage of justice within the meaning of article 14(6) and section 133 in a category 1 case.
They say that the provision that the new or newly discovered fact must show conclusively (in article 14(6)) or beyond reasonable doubt (in section 133(1)) that there has been a miscarriage of justice points to the conclusion that it is only where the claimant can prove his innocence that there has been a miscarriage of justice.
The appellants say, by contrast, that the words conclusively and beyond reasonable doubt do not inform the meaning of miscarriage of justice but only indicate the standard of proving the miscarriage of justice, once its meaning has been established.
They say that if the Court of Appeal allows an appeal in any of the three categories of case there will have been a miscarriage of justice, unless the claimant is convicted at a retrial.
Another possibility is, of course, that section 133 applies in a category 1 and a category 2 case, but not to a category 3 case.
Category 1 proof of innocence
I turn first to the question whether the expression miscarriage of justice is confined to the case where the claimant can prove beyond reasonable doubt that he was innocent.
This was of course the view espoused by Lord Steyn in Mullen.
Lord Bingham expressed a different view in that case, albeit without reaching a firm conclusion, and Lord Hope has taken a different view in this case.
I agree with him.
To my mind there is nothing in either the language or the context to limit the meaning of miscarriage of justice to the case where the claimant can prove that he was innocent.
If that is so, it is not for the court to limit the meaning because its own view is that it would be desirable to do so as a matter of policy.
Such matters of policy are for Parliament and not for the courts.
It is common ground that the expression is capable of a broader meaning than that espoused by Lord Steyn.
For reasons which I explain below, to my mind the natural meaning is broader, but I will begin with the context because I appreciate that, as has famously been said, context is everything.
The context of section 133 is of course article 14(6).
Both Lord Steyn and Lord Bingham considered the travaux prparatoires in Mullen.
In para 9(2) of his speech Lord Bingham said this: The House was referred to the travaux prparatoires of the negotiations which culminated in adoption of the ICCPR.
It is plain that some delegates contended that compensation should not be paid save to those who were shown to be innocent, and such delegates found no difficulty in expressing this very simple principle.
But it is equally plain, as Mr Pleming submitted, that every proposal to that effect was voted down.
The travaux disclose no consensus of opinion on the meaning to be given to this expression.
It may be that the expression commended itself because of the latitude in interpretation which it offered.
It is common ground that the expression miscarriage of justice in article 14(6) and therefore section 133(1) should if possible be given an autonomous meaning.
Although the travaux are far from conclusive, they do seem to me to point the way because, as Lord Bingham put it, every proposal that innocence should be the test was turned down.
So, if the expression is to be given an autonomous meaning, it cannot be limited to cases where innocence can be shown.
It follows that I do not agree with Lord Steyns view that the travaux do not assist in any way.
On the contrary, they assist on the first question in this appeal, namely whether proof of innocence should be the test.
I agree with Lord Steyn (at para 35) that there is no foundation in the language of article 14(6) and section 133, or by reference to any relevant external aids to construction, for the suggestion that Parliament intended to use the words miscarriage of justice in any wider sense than it bears in article 14(6) and that Parliament intended to give effect to the United Kingdoms international obligations in article 14(6) and no more.
I would add and no less.
Parliament used the same or almost the same language, so that there is to my mind no warrant for holding that it intended to confer narrower rights to compensation than those afforded by article 14(6).
As Lord Hope observes at para 91, Lord Steyn correctly said at para 45 that both article 14(6) and section 133 show that there was no overarching purpose of compensating all who are wrongly convicted.
This is demonstrated by the fact that compensation only arises at all in the case of appeals out of time and by the indispensable pre condition that a new or newly discovered fact shows conclusively (or beyond reasonable doubt) that there has been a miscarriage of justice.
So, for example, in the case of a recognition that an earlier dismissal of an appeal was wrong, the case falls outside article 14(6).
That is so, however palpable the error in the first appellate decision may have been, and however severe the punishment that the victim suffered unjustly.
As Lord Steyn put it, those considerations demonstrate that the fundamental right under article 14(6) was unquestionably narrowly circumscribed.
Para 46 is the only paragraph in which Lord Steyn focuses on the relevant language.
In it, as Lord Hope explains at paras 91 and 92, Lord Steyn focused on the language of article 14(6) and section 133, and in particular on the use of conclusively and beyond reasonable doubt respectively.
He said that that language filters out cases where it is only established that there may have been a wrongful conviction and cases where it is only probable that there has been a wrongful conviction.
He observed that those two categories would include the vast majority of cases where an appeal is allowed out of time.
He concluded that those considerations militated against an expansive interpretation of miscarriage of justice and ultimately held that: While accepting that in other contexts a miscarriage of justice is capable of bearing a narrower or wider meaning, the only relevant context points to a narrow interpretation, viz, the case where innocence is demonstrated.
I accept that the language points to a narrow construction but not that it is restricted to the case where innocence is demonstrated.
Indeed, to my mind Lord Steyn did not point to any reason why the right to compensation should be so confined.
There is nothing in the language or the context to lead to the conclusion that cases in category 2 should be excluded.
Yet the expression miscarriage of justice naturally includes such a case.
Indeed it seems to me to be the paradigm case.
A criminal trial is concerned (and concerned only) with the question whether the prosecution has proved beyond reasonable doubt to the satisfaction of the jury that the defendant is guilty of the offence charged.
If the new or newly discovered fact shows that, in the light of it, no reasonable jury, properly directed, could have convicted the accused, to my mind his conviction would, in ordinary language, be a miscarriage of justice.
I see no reason why such a case should not be a miscarriage of justice within the meaning of article 14(6) or section 133(1).
None of Lord Steyns reasoning leads to the conclusion that it is not.
He himself did not address this possibility.
In paras 91 to 95 Lord Hope has given his reasons for disagreeing with Lord Steyn that innocence must be proved.
I agree with them.
I would very briefly summarise my own reasons (in addition to those already given) in this way. (a) (b) If Parliament had intended to limit miscarriages of justice to cases where the claimant could prove innocence, it would have been easy to say so.
As Lord Bingham put it in Mullen at para 9(2) quoted above, those delegates who wished to limit compensation in that way found no difficulty in expressing this very simple principle.
In para 9(1) Lord Bingham noted that when what was to become section 133 was debated in the House of Lords, the minister, Earl Ferrers, was pressed by Lord Hutchinson QC to say whether a miscarriage of justice connoted the innocence of a defendant or the raising of a doubt about his guilt, but the minister said nothing to suggest that compensation would be payable only to the innocent: Hansard (HL Debates), 22 July 1988, cols 1631 1634. (c) Lord Steyns reliance upon the words une erreur judiciaire in the French text of article 14(6) was unsound for the reasons given by Lord Hope at para 93. (d) The five reasons given by Lord Bingham in para 9(4) of Mullen for thinking that reliance upon para 25 of the explanatory report prepared by a committee of experts on human rights with reference to article 3 of the Seventh Protocol was not of the persuasive value which Lord Steyn identified are convincing: see Lord Hope at para 94. (e) Little assistance is to be gained from either the jurisprudence of the United Nations Human Rights Committee or academic opinion. (f) Courts of appeal are not called upon to decide whether defendants are innocent: see Lord Bingham at para 9(6) and Lord Hope at para 95.
If, as I believe is the case, Lord Steyns test is too narrow, the question arises what is the correct construction of the expression miscarriage of justice in this context.
I will consider the possibilities in turn.
Category 2 no reasonable jury properly directed could convict
Category 2 would of course include category 1, but not vice versa.
Mr Owen QC submitted that cases in this category would involve a miscarriage of justice, although he also sought to include category 3, to which I will return.
I have already expressed my view that there is nothing in the language or context of article 14(6) or section 133 to exclude category 2 and that the expression naturally includes it.
Absent any clear indication in the language or context, it is to my mind permissible to have regard to the approach to it within the United Kingdom.
In 1988 the Court of Appeal in England and Wales determined criminal appeals by reference to the unamended section 2(1) of the Criminal Appeal Act 1968.
The proviso to that subsection provided that, notwithstanding that the Court of Appeal were of the opinion that the point raised in the appeal might be decided in favour of the appellant, they may dismiss the appeal if they consider that no miscarriage of justice has actually occurred.
In R v Secretary of State for the Home Department, Ex p Bateman (1994) 7 Admin LR 175 the Court of Appeal (Sir Thomas Bingham MR, Farquharson and Simon Brown LJJ) dismissed an appeal from an order of the Divisional Court refusing judicial review of a decision refusing the appellant compensation under section 133.
He had been convicted of several counts of receiving stolen goods and sentenced to six years imprisonment.
He had appealed to the Court of Appeal on the ground that he had been convicted on the basis of evidence in statement form given by witnesses from New Zealand.
His appeal failed.
Some time later his case was referred back to the Court of Appeal under section 17 of the Criminal Appeal Act 1968.
This time his appeal succeeded on what was essentially the same ground as that which had failed before and his convictions were quashed.
In the Court of Appeal he argued inter alia that the second Court of Appeal must have regarded his conviction as a miscarriage of justice because they would otherwise have applied the proviso.
Sir Thomas Bingham (with whom the other members of the court agreed) said this: Therefore, it follows, he says, that he is a victim of a miscarriage of justice and from that it follows that he is entitled to compensation.
To deny him compensation is, he argues, to undermine his acquittal and the presumption of innocence which flows from the fact that his convictions have been quashed.
I am, for my part, unable to accept that argument, although I hasten to assure Mr Bateman that in doing so I have no intention whatever to undermine the effect of the quashing of his convictions.
He is entitled to be treated, for all purposes, as if he had never been convicted.
Nor do I wish to suggest that Mr Bateman is not the victim of what the man in the street would regard as a miscarriage of justice.
He has been imprisoned for three and a half years when he should not have been convicted or imprisoned at all on the second decision of the Court of Appeal (Criminal Division).
The man in the street would regard that as a miscarriage of justice and so would I.
But that is not, in my judgment, the question.
The question is whether the miscarriage of justice from which Mr Bateman has suffered is one that has the characteristics which the Act lays down as a pre condition of the statutory right to demand compensation.
That, therefore, is the question to which I now turn.
The Master of the Rolls then held that there was no new or newly discovered fact, so that Mr Bateman could not satisfy the relevant criteria under section 133.
The relevance of the statement quoted above is that it supports the conclusion that the Master of the Rolls accepted that there had been a miscarriage of justice within the meaning of section 133, which in turn supports the conclusion that that expression is not limited to cases in which the claimant can prove his innocence.
It is perhaps the forerunner of Lord Binghams approach in Mullen.
A similar conclusion can be drawn from the terms of section 106, of the Criminal Procedure (Scotland) Act 1995, which sets out the test for criminal appeals in Scotland.
By subsection (3) it provides: By an appeal under subsection (1) above a person may bring under review of the High Court any alleged miscarriage of justice, which may include such a miscarriage based on (a) subject to subsections 3A to 3D below, the existence and significance of evidence which was not heard at the original proceedings; and (b) the jurys having returned a verdict which no reasonable jury, properly directed, could have returned.
It can thus be seen that a miscarriage of justice for the purposes of a fresh evidence appeal in Scotland includes the case where the jurys verdict is one which no reasonable jury, properly directed, could have returned.
That is of course a category 2 case.
Section 106(3) is thus an example of the expression miscarriage of justice being used in a very similar context to that with which we are concerned.
It has been suggested that to include category 2 within the test of miscarriage of justice in section 133 would cause difficulties of application.
For my part, I would not accept that suggestion.
It is a test used at the end of the prosecution case in countless criminal trials in England and Wales.
Moreover, it is used in the Court of Appeal in England and Wales.
While it is not the question for decision in an English appeal because the question is now simply whether the conviction is safe, it is plainly relevant when a retrial is sought.
The Court of Appeal would not make an order for a retrial if it formed the view that the effect of the new or newly discovered evidence led to the conclusion that no reasonable jury, properly directed, could convict.
Moreover, so far as I am aware, this test has caused no difficulty in criminal appeals in Scotland.
It is a test which is familiar to the criminal trial and appeal process, which the proposed test of innocence is not.
As Lord Hope has observed at para 95, in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1 at para 40(iii) Hughes LJ said that cases where the innocence of the convicted defendant is genuinely demonstrated beyond reasonable doubt by the new or newly discovered fact the Court of Appeal will, in virtually every case, make that plain.
However, that may not be the case and, as Lord Hope says, the Court of Appeal is not bound to say whether or not a defendant is innocent.
In this regard there is authority for the proposition that the Court of Appeal is neither obliged nor entitled to say whether an appellant is innocent: see R v McIlkenny (1991) 93 Cr App R 287 at 310 311.
Whether that is correct or not, I agree with Lord Hope that, to put it no higher, it is at least questionable whether it can be right to restrict the entitlement to compensation to cases where the establishment of innocence is apparent from the Court of Appeals judgment.
It is of interest in the context of this debate to note that it is common ground that it was only after the decision in Mullen that Secretaries of State have applied an innocence test and that they do not do so in Scotland even now.
It was suggested in argument that it is not appropriate for the Secretary of State, and not a court, to make judgments of this kind.
However, section 133(3) expressly provides that the question whether there is a right to compensation shall be determined by the Secretary of State.
Nobody has suggested that it is not appropriate for the Secretary of State to decide whether the claimant has proved that the new or newly discovered fact shows that he is innocent.
It does not seem to me to be any less appropriate for the Secretary of State to decide whether he has proved that it shows that no reasonable jury could have convicted him.
In reaching his or her conclusion the Secretary of State is of course bound to have regard to what the Court of Appeal which reverses the conviction has said.
In In re McFarland [2004] UKHL 17, [2004] 1 WLR 1289 Lord Bingham said at para 16, albeit in the context of a claim under the ex gratia scheme, that the Secretary of State must properly be guided by the judgment of the Court of Appeal.
However, it seems to me that it is for the Secretary of State to have regard to all relevant material when deciding whether the claimant has established beyond reasonable doubt that, in the light of the new or newly discovered fact, no reasonable jury, properly directed, could have convicted him.
I see no reason why the Secretary of State could not decide that question, whether on the grounds of innocence or otherwise.
As I see it, the matter has to be tested as at the date of the reversal, having regard both to the evidence that was available at the trial and to the new or newly discovered facts.
I would include in the evidence available at the trial, all such evidence, not just that adduced on behalf of the prosecution, but also that adduced during the defence case.
I would therefore include admissions made by the defendant in cross examination in a case in which the new evidence showed that the case should have been stopped.
The question is whether, on that material, he had a case to answer or, put another way, whether a reasonable jury properly directed could have convicted him.
If he proves beyond reasonable doubt that the answer to those questions is no, he is in my opinion entitled to compensation under section 133 on the basis that there has been a miscarriage of justice.
I entirely accept that the cases in which compensation can be claimed are limited by the necessity to satisfy the criteria in the section and by the need to show beyond reasonable doubt that the new or newly discovered fact demonstrates, in the light of the other material before the court that no reasonable jury, properly directed, could have convicted him.
The Secretary of State would of course have to be satisfied that the alleged fact was indeed a fact.
I should add by way of postscript that, as I see it, category 2 potentially includes a case where the new or newly discovered fact is such that, if it had been known at the trial, the trial judge would have stopped the trial on the ground of abuse of process.
If the Court of Appeal concluded that a new trial could not properly be ordered on the basis that it was not possible to cure the abuse, so that no reasonable jury, properly directed, could convict, there would, in my opinion have been a miscarriage of justice within section 133.
It seems to me that this must be within the kind of miscarriage of justice which Lord Bingham had in mind in Mullen, namely where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who certainly should not have been convicted.
Since Mullen, some doubt has been expressed as to whether the basis upon which it was decided is correct.
See, for example, R (Siddall) v Secretary of State for Justice [2009] EWHC 482 (Admin) per Leveson LJ at paras 47 48.
The basis on which it was decided by the majority, comprising Lord Bingham, Lord Scott, Lord Rodger and Lord Walker was that Mr Mullens conviction had been reversed by the Court of Appeal on the ground that there had been an abuse of executive power and not any failure in the trial process: see per Lord Bingham at para 8, Lord Scott at para 65, Lord Rodger at para 69 and Lord Walker at para 70.
In particular, Lord Bingham said that it was for failures in the trial process that the Secretary of State is bound by article 14(6) and section 133 to pay compensation.
He distinguished those from abuse of executive power.
He did so by reference to R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42 per Lord Griffiths at pp 61 62 and R v Looseley [2001] 1 WLR 2060 at para 40.
Lord Scott said that the Court of Appeal had not reversed the conviction because there had been any failure in the trial process but because, prior to the commencement of the trial process, there had been serious abuse of executive power which had led to the removal of the claimant from Zimbabwe to this country and thus enabled the trial to take place.
Although Leveson LJ observed that this distinction has its difficulties and noted that Lord Steyn said at para 57 that, if that abuse had been disclosed the trial would have been stopped, and in its written submissions Justice suggested that Mullen might now be decided differently on its facts.
There is I think scope for argument in the future as to whether there is a class of cases in which the section would not apply, of which Mullen is an example.
They are cases in which it has been held that the trial should not be permitted to proceed, not because of anything related to the case against the defendant, but because to permit it would offend against the rule of law or would seriously affect the integrity of the administration of justice.
In quashing Mullens conviction Rose LJ, giving the judgment of the Court of Appeal, said at [2000] QB 520, 535 536: This court recognises the immense degree of public revulsion which has, quite properly, attached to the activities of those who have assisted and furthered the violent operations of the IRA and other terrorist organisations.
In the discretionary exercise, great weight must therefore be attached to the nature of the offence involved in this case.
Against that, however, the conduct of the security services and police in procuring the unlawful deportation of the defendant in the manner which has been described represents, in the view of this court, a blatant and extremely serious failure to adhere to the rule of law with regard to the production of a defendant for prosecution in the English courts.
The need to discourage such conduct on the part of those who are responsible for criminal prosecutions is a matter of public policy to which, as appears from R v Horseferry Road Magistrates' Court, Ex p Bennett [1994] 1 AC 42 and R v Latif [1996] 1 WLR 104, very considerable weight must be attached.
It appears to me to be at least arguable that such a case would not fall within section 133.
None of the cases before the Court in these appeals is such a case.
I recognise that Lord Phillips rejects category 2 as a test and that he has suggested an alternative test.
However, section 133 inevitably requires the Secretary of State to consider the effect of the new or newly discovered fact upon the other evidence before the court and thus on the validity of the conviction.
This involves the evaluation of the evidence in its legal context.
It also expressly requires the Secretary of State to decide whether in the light of all the evidence the claimant has shown beyond reasonable doubt that there has been a miscarriage of justice.
In considering all these questions, the Secretary of State can of course always take such advice as is appropriate.
I remain of the view that category 2 is an appropriate formulation of the test and that the position is or should be as stated above.
Compensation is only payable where, in the light of the new or newly discovered fact, no reasonable jury, properly directed, could have convicted or, subject perhaps to the point made in para 215 above, where the new or newly discovered fact would have led the judge to stop the case on the ground of abuse in the trial process.
However, I recognise that Lord Phillips suggests replacing the category 2 test with a more robust test.
It is that a new fact will show that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
I have assumed that the second it means the evidence against the defendant.
To my mind that test is consistent with the category 2 test identified above because, in such a case, no reasonable jury properly directed, could convict the defendant.
For that reason and on that basis, I would accept the proposed test, with which Lord Hope, Baroness Hale and Lord Kerr agree.
Category 3 unsafe conviction
Section 2(1) of the Criminal Appeal Act 1968, as substituted by section 2(1) of the Criminal Appeal Act 1995, provides that the Court of Appeal shall allow an appeal if they think the conviction is unsafe.
The proviso in the previous section 2(1) was repealed.
Mr Owen submitted that where a qualifying appeal is allowed on the basis that the claimant has shown beyond reasonable doubt that the conviction was unsafe because of a new or newly discovered fact, it follows that there was a miscarriage of justice within the meaning of section 133.
It is certainly possible to construe the expression miscarriage of justice as wide enough to include such a case.
I do not however think that Parliament can have intended the expression to have such a wide meaning in section 133(1) because it would have been easy for the section to have been drafted in such a way as to include every case where the relevant appeal was allowed on the basis of a new or newly discovered fact.
Moreover none of the courts which have considered section 133 have suggested that it might have such a wide meaning: see the cases referred to by Lord Hope at para 82.
In particular, the formulation of the test by Lord Bingham in Mullen does not encompass every case where the conviction was held to be unsafe on the basis of new evidence.
His formulation was that there is a miscarriage of justice where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who certainly should not have been convicted.
It is not possible to say that, merely because a conviction has been quashed because it was unsafe, the appellant should not have been convicted.
A conviction may be unsafe because the Court of Appeal concludes that, but for the successful ground of appeal, the jury might not have convicted.
Indeed, this is by far the most common case in which an appeal is allowed.
It is a category 3 case in which, as Dyson LJ put it in the passage quoted above, a fair minded jury might convict or might acquit.
In such a case I do not think that one can say as a matter of course that the defendant should not have been convicted.
It seems to me that it is only in a category 2 case (which of course includes a category 1 case) that it can be said that a person should not have been convicted.
It can be so held in such a case because it follows from the conclusion that no reasonable jury, properly directed, could have convicted the defendant that he should not have been convicted.
Any lesser test is to my mind too uncertain and would not satisfy the statutory test that, in order to be entitled to compensation, the claimant must prove beyond reasonable doubt that there has been a miscarriage of justice.
If he might have been convicted by a jury on all the evidence including the new or newly discovered fact, he cannot show for sure that there has been a miscarriage of justice within section 133(1).
Retrial
Section 133(5A) was not part of section 133 when Mullen was decided.
It makes it clear that, where the claimant succeeds on appeal but is convicted at a retrial, he is not entitled to compensation because his conviction has not been reversed.
If his appeal succeeds and the Court of Appeal orders a retrial, but the prosecution decides not to proceed with the retrial, the conviction is treated a reversed when it so indicates.
In these circumstances, the position is as described above.
If a retrial takes place and the claimant is acquitted of all offences at a retrial, there is scope for debate as to the position.
By subsection (5A) the conviction is treated as reversed when he is so acquitted.
It is not necessary to decide this question in this appeal but it is my provisional view that the same approach as described above would apply.
Thus, in order to be entitled to compensation, he would have to prove beyond reasonable doubt that on the basis of the new or newly discovered fact no reasonable jury would have convicted him.
New or newly discovered fact
The question is what is meant by a new or newly discovered fact.
In particular the question is what is meant by a newly discovered fact.
Mr Tam QC submitted that a fact which was known to the prosecution and knowable to the defence because it was available to them, but which they did not know because they did not take the steps they should have taken to examine the evidence was not a newly discovered fact.
I would not accept that submission.
If the fact was not in fact discovered at or before the trial or at an in time appeal but was discovered thereafter, it follows that it was a newly discovered fact.
The question is whether it was discovered earlier, not whether it was discoverable earlier.
In my opinion the fact that it was discovered by the prosecution before the appeal is irrelevant.
In neither of the appeals before the Supreme Court were the relevant facts discovered by the defendants or their lawyers at or before the trial or the in time appeal.
It follows that they were newly discovered facts.
The fact that in the Adams case they were discoverable by the defendants lawyers is irrelevant.
As I see it, therefore, on the facts of these appeals this part of the test is satisfied.
However, there was much debate as to whether it is possible for a fact to be a newly discovered fact if it was known to the defendants lawyers.
In my opinion it is.
Section 133(1) is subject to the proviso unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
The proviso does not apply if the non disclosure of the fact was attributable to his lawyers.
It could have done so.
As Dyson LJ explained at paras 14 16 of his judgment, there is no mention of the convicted persons legal advisers in article 14(6) or section 133, whereas article 14(3) does refer to legal advisers.
Moreover, there is no suggestion that the person convicted in section 133(1) includes his lawyers.
In my opinion the Court of Appeal correctly held that knowledge of the fact by the defendants lawyers would not prevent it being a newly discovered fact.
I note in this regard that in a case where the fact was known to the defendants lawyers and not used at the trial, the failure to use it would be very relevant to the question whether the evidence of the fact would be admissible under section 23 of the Criminal Appeal Act 1968.
It might well be held that in the light of the fact that the lawyers failed to deploy it, it was not necessary or expedient in the interests of justice to admit it on an appeal.
In that event the appeal would not be allowed or the conviction reversed on the basis of it.
The remaining question is whether it is possible for a fact to be a newly discovered fact if it was known to the defendant himself at trial or at an in time appeal.
The Court of Appeal held that it was, for the reasons given by Dyson LJ at paras 14 to 18.
I agree.
Section 133(1) contains the proviso unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
This proviso would not be necessary if the question whether evidence was new or newly discovered were tested by reference to the knowledge of the convicted person himself.
The proviso seems to me to assume that a fact may be newly discovered even though it is known to the defendant at the relevant time.
Otherwise it would have very little effect because it would only apply where the defendant did not know the fact but its non disclosure was attributable to him.
Such a situation is perhaps theoretically possible but the natural meaning of the proviso is that it covers the case where the defendant is aware of the fact at the relevant time but does not deploy it either personally or through his lawyers.
So understood, the proviso seems to me to point to the conclusion that a fact may be a newly discovered fact even if it was known to the defendant himself at trial or at an in time appeal.
For these reasons I agree with Lord Hopes conclusion at para 107 and Lord Phillips conclusion at para 62 that the relevant knowledge is that of the trial court, but do not agree with Lord Hopes conclusion, also at para 107, that material disclosed to the defence by the time of the trial cannot be said to have been newly discovered when it is taken into account at the stage of the out of time appeal.
For the reasons given earlier, it is my view that material that was not discovered either by the defendant or his lawyers but was discovered only after the in time appeal was newly discovered on the simple basis that, whether or not it ought to have been discovered, it was not in fact discovered.
That was the position in both the Adams appeal and the Northern Irish appeals.
Article 6(2) of the European Convention of Human Rights
Other members of the Court have considered the issues under this head in some detail.
The European Court of Human Rights (ECtHR) has applied article 6(2) in cases which are not covered by its language.
For my part, I do not think that this is a case in which it is necessary or would be appropriate to analyse that jurisprudence in detail.
I will only say that I am not at present persuaded that article 14(6) and section 133 are a form of lex specialis to which article 6(2) can never be relevant.
For present purposes I shall simply assume that it is in principle possible for article 6(2) to apply to proceedings under section 133.
I can see that it is inappropriate, to put it no higher, to impute criminal liability to a person who has been acquitted.
In each of the cases in which a claim for compensation arises under section 133(1) the claimants conviction has been reversed by the Court of Appeal in an out of time appeal.
Section 2(3) of the Criminal Appeal Act 1968 (as substituted in 1995) provides: (3) An order of the Court of Appeal quashing a conviction shall, except when under section 7 below the appellant is ordered to be retried, operate as a direction to the court of trial to enter, instead of the record of conviction, a judgment and verdict of acquittal.
Thus the effect of the reversal of the conviction by the order of the Court of Appeal quashing it, is that the person concerned is formally acquitted.
In these circumstances the court hearing and determining a claim for compensation under section 133(1) must not say or do anything inconsistent with the claimants acquittal.
If the analysis set out above is adopted, there is no risk of its doing so.
The question in each case is whether the claimant has proved beyond reasonable doubt that the new or newly discovered fact has demonstrated that there was a miscarriage of justice on the basis that no reasonable jury, properly directed, could convict him.
The trial of that question does not in any way affect or impugn the acquittal of the claimant as provided by section 2(3) of the Criminal Appeal Act 1968 quoted above.
The question at such a trial is different and so is the burden of proof.
The position is not unlike a civil process where a claimant seeks damages from a defendant who has been acquitted of, say, causing grievous bodily harm to A at a criminal trial.
Under English law it is permissible for A to seek damages from the defendant on the ground that he was unlawfully injured by him, alleging all the same facts as had been relied upon at the criminal trial.
The critical difference between the two processes is that at the criminal trial the prosecution has to prove guilt beyond reasonable doubt, whereas at the civil trial A only has to prove liability on the balance of probabilities.
The ECtHR has expressly recognised that civil proceedings of that kind do not infringe article 6(2) of the Convention: see eg Y v Norway (2003) 41 EHRR 87, where the court expressly said at para 41 that, while the acquittal from criminal liability ought to be maintained in compensation proceedings, it should not preclude the establishment of civil liability to pay compensation arising out of the same facts on the basis of a less strict burden of proof.
It did add in para 42 that, if the national decision on compensation contains a statement imputing the criminal liability of the respondent party, this could raise an issue falling within the ambit of article 6(2) of the Convention.
See also Bok v The Netherlands, (Application No 45482/06), 18 January 2011.
Similarly, here, where, at any rate on the analysis set out above, there is no question of anything said or done in the section 133 proceedings impugning the acquittal in the criminal proceedings, I see nothing in article 6(2) which is in any way inconsistent with the conclusions I have reached.
Disposal
I agree with Lord Phillips, Lord Hope, Baroness Hale and Lord Kerr that the appeal in the Adams case must be dismissed.
Lord Phillips has set out the relevant facts.
As Dyson LJ observed at para 59, the Court of Appeal allowed the appeal because the undeployed material was important and might have led the jury to acquit.
The decision to quash the conviction was founded on the potential that the undeployed material had for affecting the jurys verdict.
It was thus a category 3 case and, for the reasons given earlier, section 133(1) does not cover such a case.
I also agree that the appeals in the Northern Irish cases should be allowed.
Lord Kerr has set out the facts in some detail.
They show, at any rate to my mind, that, in the light of the newly discovered facts, no reasonable jury, properly directed, could have convicted them.
DISSENTING JUDGMENTS LORD JUDGE
The legislation
Section 133(1) of the Criminal Justice Act 1988 (section 133) provides: when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation for the miscarriage of justice to the person who has suffered punishment as a result of such conviction or, if he is dead, to his personal representatives, unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
Reversed refers to a conviction which is quashed on an appeal out of time or following a reference by the Criminal Cases Review Commission (section 133(5)).
By section 133(2) compensation is not payable unless the application for compensation has been made: Before the end of the period of 2 years beginning with the date on which the convictionis reversed or he is pardoned.
This limitation was inserted by sections 61(1) (3) and (9) of the Criminal Justice and Immigration Act 2008 and came into force on 1 December 2008.
Simultaneously, in accordance with section 61(1), (2), (5) and (9) of the 2008 Act, provision was made for the cases where the conviction is quashed on an appeal out of time, and a retrial ordered, so that: The conviction is not to be treatedas reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial. (Section 133(5A))
The determination whether there is an entitlement to compensation is vested exclusively in the Secretary of State, (section 133(3)) who in exceptional circumstances may extend the time for making an application. (section 133(2A))
When section 133 was enacted an ex gratia system operated in tandem with it.
In England and Wales and Northern Ireland, but not in Scotland, the ex gratia scheme was abolished in 2006.
In his article Compensation for Wrongful Imprisonment [2010] Crim LR 805, Professor John Spencer QC convincingly criticised the narrowness of and consequent anomalies which arise from the limitations of the statutory scheme.
No alternative remedy is provided unless, perhaps, and subject to limitation periods, where malpractice in the investigative process is established, the victim may pursue a remedy in tort, or when the individual suffered a wrongful conviction as a consequence of negligence by his legal advisors, a claim in damages may be available.
In short, the statutory scheme does not preclude any relevant action which may, in theory, be available in tort, but it is in any event unsupported by the ex gratia scheme.
Nevertheless we must analyse section 133 and the ambit of the scheme for the payment of compensation without reference to its anomalies and disadvantages.
When it was examined by the House of Lords in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1 the meaning and effect of section 133 produced contradictory opinions with no authoritative decision.
Lord Steyn concluded that the statutory scheme was confined to cases where the person concerned was clearly innocent.
Lord Bingham of Cornhill, while agreeing with the result, for carefully explained reasons, hesitated to accept this restriction on the ambit of the statutory scheme.
The differences between their respective approaches to the problem have been considered and examined in a number of subsequent decisions, of which the most recent is R (Allen (formerly Harris) v Secretary of State for Justice [2009] 1 Cr App R 36.
They must finally be resolved now.
As we are not agreed, without embarking on what would be a repetitious discourse of much of the voluminous material drawn to our attention, I shall briefly explain the reasons why I agree with Lord Steyn.
In Mullen the parties were agreed that the interpretation of section 133 required what was described as a correct understanding of article 14(6) of the International Covenant on Civil and Political Rights, dated 16 December 1966. (ICCPR) That view was adopted by the House of Lords and it is unchallenged in the present proceedings.
Article 14(6) provides: When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the grounds that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
In short, the enactment of section 133 in virtually identical terms represented the response of the United Kingdom to a Treaty obligation.
One further Treaty provision needs immediate attention.
In November 1984 article 3 of Protocol 7 to the Convention of Human Rights also made what was effectively an identical provision to article 14(6) of the ICCPR.
When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed, or he has been pardoned, on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to the law or the practice of the State concerned, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
Article 3, Protocol 7 will become relevant when the jurisprudence of the European Court of Human Rights falls to be considered.
In the context of a statutory provision reflecting the international obligations undertaken by the United Kingdom, it would be productive of confusion for the phrase miscarriage of justice to be analysed by reference to the many different ways in which, looking at our own statutes which enable convictions to be quashed, and the language used, sometimes loosely, in the course of numerous judgments bearing on these questions.
The phrase reflects an autonomous concept, in which the words miscarriage of justice reflect the international obligations of the United Kingdom under article 14(6).
Like article 14(6), section 133 distinguishes the reversal of the conviction (or a pardon) and a miscarriage of justice.
Within the section itself, as with article 14(6), these concepts are distinct.
Even if the remaining pre conditions to the payment of compensation are established, the reversal of the conviction is an essential prerequisite to but is not conclusive of the entitlement to compensation.
In short, for the purposes of section 133 the reversal of the conviction and the consequent revival of the legal presumption of innocence is not synonymous with a miscarriage of justice.
Therefore before compensation is payable under the statutory scheme more than the reversal of the conviction is required.
The requirement is that a miscarriage of justice must be demonstrated beyond reasonable doubt.
In my view the use of this phrase was deliberate and significant.
The phrase is not relevant to the evidential question whether the conviction has been reversed and it is not directed to any individual feature or aspect of the investigation or trial processes.
If the reversal of the conviction alone were sufficient, that fact would be proved beyond reasonable doubt by the court record, and if any specific feature of the investigation or trial processes were relevant, appropriate provision could readily have been made in section 133 itself.
Instead the phrase describes the characteristics or attributes of the miscarriage of justice which must be established.
The word conclusively in article 14(6) was not repeated.
Rather the familiar description of the standard of proof in criminal cases and, significantly in the context of a claim for the payment of compensation (normally a civil claim), the standard normally applied to the prosecution in the criminal justice process was imposed on the defendant.
For this purpose the balance of probabilities was expressly ignored.
Accordingly, for section 133 to apply, following a conviction of an offence which was proved beyond reasonable doubt, the emergence of a new or newly discovered fact should demonstrate not only that the conviction was unsafe, or that the investigative or trial processes were defective, but that justice had surely miscarried.
In the present context, the ultimate and sure miscarriage of justice is the conviction and incarceration of the truly innocent.
This leads me to the conclusion that as a matter of construction the operation of the compensation scheme under section 133 is confined to miscarriages of justice in which the defendant was convicted of an offence of which he was truly innocent.
In my judgment nothing less will do, and no alternative or half way house or compromise solution consistent with this clear statutory provision is available.
I must therefore address some of the contentions which suggest that this construction is over restrictive.
The unsafe conviction
Mr Tim Owen QC highlighted the absence of word innocent from section 133.
The omission reflects not only the autonomous concept of miscarriage of justice, but more significantly, the absence of an innocent verdict in the criminal justice process.
The defendant is either proved to be guilty of the crime alleged, or he is entitled to a not guilty verdict and acquittal.
A verdict of innocent is unknown.
On acquittal, or the reversal of a conviction, the presumption of innocence revives.
It applies when the jury considers that there is a high probability that the defendant is guilty, and indeed to cases like Mullen, whose conviction was quashed notwithstanding the assessment of the court that he was undoubtedly guilty.
Just because it is a concept to which the criminal justice process is not directed, the word innocent could have no place in section 133.
The only ground for quashing a conviction in the Court of Appeal Criminal Division (the Court) is that it is unsafe.
There are however occasions when a new or newly discovered fact may well demonstrate the factual innocence of the appellant.
And if it does, the judgment of the court may say so.
I respectfully disagree with the observation in R v McIlkenny (1991) 93 Cr App R 287 that the court is not entitled to state that an appellant is innocent.
The processes of the Court of Appeal do not allow for a formal declaration of factual innocence, any more than the trial process recognises a verdict of innocent.
However there can surely be no stronger case for doubting the safety of a conviction than evidence which unmistakenably demonstrates that the appellant is in truth an innocent man or woman. (See R v Fergus (1994) 98 Cr App R 313: R v Hodgson [2009] EWCA Crim 490.) Although the conviction is quashed not on the ground that the defendant is innocent, but because his conviction is unsafe, the terms of the judgment should conscientiously reflect the true reasons for its decision that the conviction should indeed be quashed as unsafe.
At the risk of stating the obvious, the decision whether to quash a conviction is for the Court: so are all features of the trial process, and indeed any order for retrial.
If the end of the judicial process is that the conviction is quashed, or if following a retrial, the defendant is acquitted, the administrative decision whether compensation is payable for a miscarriage of justice is vested exclusively in the Secretary of State.
The determination is not limited to some kind of administrative assessment of the circumstances in which the judicial process has come to an end.
Therefore while the Secretary of State should pay the closest possible attention to the terms of the judgment of the Court, whatever the terms in which the judgment is expressed, when making the decision whether a miscarriage of justice has occurred, he is not confined to the judgment of the Court.
Retrial
The circumstances in which a retrial will be ordered following the quashing of a conviction vary enormously.
The single question is whether in a fact specific context the interests of justice should lead to such an order.
Dealing with it generally it is most unusual for an order for retrial to be made many years after conviction, or when the sentence imposed at the original trial has been or is close to being completed.
On the other hand, again dealing with it generally, where a conviction is recent, and the sentence substantial, and the evidence relied on the prosecution is likely to be available at the retrial, then a retrial may well be ordered.
Exceptions can be found both ways.
At the risk of repetition, the decision is fact specific.
It can however be confidently stated that it would be inconceivable for the Crown to seek or the Court to order a new trial if it were made clear in the terms of the judgment that the conviction was being quashed on the basis that the fresh evidence demonstrated that the defendant was innocent.
This reinforces my view that if that conclusion is justified, the court is entitled to say so in its judgment.
These considerations bring me to section 133(5A).
This subsection addresses the newly introduced statutory time limit in which an application for compensation may be made in the context of an order for retrial.
If for any reason (including the conclusion of the Court that the defendant is truly innocent) no order for retrial is made, time runs from the date when the conviction is quashed.
If however (again, for whatever reason) the order quashing the conviction is accompanied by an order for retrial, notwithstanding the presumption of innocence, for the purposes of the scheme for the payment of compensation the conviction is not reversed or quashed and the time for making an application is accordingly postponed until the retrial process is completed.
This enables first, the defendant to concentrate his attention on the forthcoming retrial.
Second, it is conclusive of the question (adversely to the defendant) if he is convicted, when his position is exactly the same as it would have been if the original conviction had not been quashed.
Third, if he is acquitted, the process may provide the Secretary of State with further material on which to base his determination.
In my judgment section 133(5A) has no bearing on the proper construction of the words beyond reasonable doubt that there has been a miscarriage of justice, and the entitlement to compensation under the statutory scheme was not expanded with effect from 1 December 2008 when section 133(5A) came into force.
That was not the purpose of this new inserted provision which was directed to the consequences of the introduction of the new timetable within which applications should be made.
It was procedural only.
European Court of Human Rights
In my judgment the jurisprudence of the European Court of Human Rights drawn to our attention by Mr Owen does not bear on the issues which arise in this litigation.
As already indicated once a conviction has been reversed the presumption of innocence applies.
Subject only to the provisions of sections 76 83 of the Criminal Justice Act 2003 the rule against double jeopardy applies and the defendant cannot be prosecuted a second time for an offence of which he has been acquitted, or when his conviction has been reversed and for the purposes of the administration of criminal justice the prosecution process is at an end.
Nevertheless the acquittal, or the successful appeal against conviction, does not operate as an absolute bar to litigation.
It remains open to any individual to assert that notwithstanding the acquittal or quashing of the conviction, the defendant was guilty.
That is what Lord Steyn said about Mullen in his judgment in that case.
A defendant who has been acquitted of rape may face proceedings for damages by the complainant and she may successfully establish on the balance of probabilities that he did indeed rape her and is liable in damages.
In proceedings for defamation on the basis that the defendants innocence is questioned, the acquittal does not create an irrebuttable presumption that the assertion cannot be justified and must be unjustifiable.
Article 3, Protocol 7 forms part of the Convention.
It must be read together with the Convention.
The jurisprudence of the European Court of Human Rights relied on by Mr Owen was not directed to and did not address the provisions of article 3, Protocol 7.
If the decisions he relied on apply in the present case it will in effect mean that the reversal of the conviction carries with it an obligation to pay compensation in accordance with section 133, although such a conclusion would be inconsistent with the wording of article 3, Protocol 7 itself.
Bok v The Netherlands (Application No 45482/06) (unreported) 18 January 2011 confirms that it does not.
Section 133 therefore provides an individual whose conviction has been reversed with the opportunity (but no obligation) to make a claim for compensation based on a statutory test which is effectively identical to the provisions of the European Convention.
The Secretary of State must allow or reject the application in accordance with that test.
Conviction Impossible
This heading is used to encompass some of the alternative ways of approaching the concept of miscarriage of justice adopted in the majority judgments which have reached the conclusion that the phrase has a rather broader ambit than I do.
A newly discovered fact which demonstrates that the prosecution against the defendant is shredded to the extent that no conviction could have been based on it, or that no evidence would properly have been offered or, if there had been a trial, there would have been no case to answer at the close of the prosecution case, is likely to provide powerful material which may lead the Secretary of State to conclude that the defendant is indeed innocent.
However that conclusion does not automatically follow, and unless it does, section 133 does not apply.
In short, these considerations are of evidential significance, maybe of crucial evidential significance, but not determinative.
There are a variety of different circumstances in which the Court may make a decision on appeal in relation to decisions at trial that what appeared to be powerful evidence for the Crown should have been excluded.
For example, in the light of some newly discovered fact the Court may conclude that the decision of the trial judge to allow crucial prosecution eye witnesses to give their evidence anonymously was wrong, or no longer tenable: without that evidence there would be no case against the defendant.
The Court may order a retrial, but without the protection of an anonymity order, the crucial witnesses may then refuse to give evidence at all.
Accordingly no further evidence would be offered against the defendant.
In my judgment it should not, and it would not, follow that the defendant would be entitled to compensation.
Similar considerations would arise if, on the basis of fresh evidence, the Court concluded that the judge had wrongly admitted crucial hearsay evidence without which there would have been no prosecution.
Taking the matter further, R v Smith [1999] 2 Cr App R 238 illustrates the difficulty of equating the no case to answer situation with the concept of miscarriage of justice within section 133.
The judge rejected a submission that there was no case to answer.
The Court concluded that he was wrong and went on to examine the question, what if a submission is wrongly rejected but the defendant is cross examined into admitting his guilt? It concluded that the conviction would still be unsafe because the defendant was entitled to be acquitted at the close of the prosecution case.
It would be surprising if notwithstanding his own sworn admission of guilt, the discovery of a new fact which demonstrated that the decision that there was a case to answer was wrong, should be followed by the payment of compensation.
Again, where fresh evidence is advanced on behalf of the appellant which undermines the safety of the conviction, and indeed puts into question a substantial part of the prosecutions case, the prosecution may seek to adduce fresh evidence demonstrative of guilt.
The jurisdiction to permit the Crown to do so is available (for example, see R v Hanratty [2002] EWCA Crim 1141; [2002] 3 All ER 534).
In the interests of justice the Court may order a new trial to enable all the issues to be resolved by a jury notwithstanding that, standing on its own, the original evidence advanced by the Crown was no longer sufficient to found a case for the appellant to answer.
Finally, I must return to Mullen itself, which at [1999] 2 Cr App R 143 sets out the reasons why the conviction was quashed.
The matters which constituted the abuse of process occurred before Mullen was returned from Zimbabwe to this jurisdiction.
The British authorities procured his deportation by unlawful means, in breach of public international law.
The prosecution itself was held to be unlawful.
Mullen therefore should not have been charged, let alone prosecuted to trial.
Yet the House of Lords was agreed that he was not entitled to compensation, and I wholeheartedly agree.
Considerations like these underline some of the practical difficulties with any approach to the construction of section 133 which goes beyond the limits suggested by Lord Steyn in his judgment in Mullen, that compensation within the statutory scheme is payable only when the defendant was convicted of an offence of which he was truly innocent, and therefore beyond reasonable doubt the victim of a miscarriage of justice.
In my judgment the principle is that section 133 is concerned with the fact rather than the presumption of innocence in the context of the administrative decision to be made by the Secretary of State.
It is not related to different (and if so which?) aspects of the trial processes, or the likely or possible impact which the new or newly discovered fact would have had on the decision to prosecute or on the forensic processes which culminated in conviction.
Their practical effect is demonstrated in the case of MacDermott and McCartney.
The confessions on which the prosecution relied would have been inadmissible if they had been made not as a result of violence, but rather of inducements.
Assuming for present purposes that the newly discovered material demonstrated that Donnelly had been offered identical inducements to those which MacDermott and McCartney had asserted at their trials, their convictions would have been no less liable to be quashed than they were in the light of the fresh evidence relating to police violence.
As there was no evidence beyond their inadmissible confession there would have been no basis for any prosecution.
And there would, if they were prosecuted, have been no case for either to answer.
Yet, in the context of an inducement or inducements, there might, if the confessions were sufficiently detailed, be no reason to doubt that the confessions were true, even if inadmissible.
In my judgment their cases would not qualify for compensation.
We are here dealing not with inducements which cast doubt on the voluntariliness of the confessions, but with violence.
The newly discovered material would have borne on the decision of the trial judge whether the defendants confessions were voluntary or not.
The fresh evidence led the Court of Appeal in Northern Ireland to conclude that if it had been available at trial there was a realistic possibility that the evidence of the police officers (who asserted that there had been no intimidation of the defendants, and no grounds for doubting that the confession statements were voluntary) may have been discredited.
If so the statements would have been excluded from consideration, and there would then have been no prosecution and no case for either of them to answer.
In principle, however, the impact on the admissibility of their confessions would have been the same, whether they responded to inducements to confess or succumbed to violence.
Although I share the distinct unease of the Court of Appeal in Northern Ireland about the circumstances in which the confessions were made by the appellants, it does not follow that the Secretary of State was obliged to conclude that they were innocent for the purposes and within the ambit of section 133.
New or newly discovered fact
In the discussion about the meaning of new or newly discovered fact the rival contentions went too far.
It would be unrealistic, and removed from the realities of the conduct of the defence at trial that his legal advisers should inform the defendant personally of each and every fact and matter to which their attention is drawn by the prosecution.
When all is said and done, the defence advocate is not a mouthpiece or echo chamber for his client.
The responsibility for giving advice and assisting the defendant to make whatever decisions which he must make for himself is one aspect of the responsibilities: the deployment of evidence and argument on his behalf is another.
Sometimes the lines overlap, but often they do not.
It therefore follows that merely because the defendant himself is personally ignorant of a particular fact, it is not new or newly discovered when the defendant personally ceases to be ignorant of it.
On the other hand, when the prosecution has complied with all its obligations in relation to disclosure of material to the defence lawyers, and they, for whatever reason, do not then deploy material which appears to be adverse to the prosecution or which would assist the defendant, that material should not automatically be excluded from the ambit of the section on the basis of prosecutorial compliance with its disclosure obligations.
Rather the approach should coincide with the circumstances in which fresh evidence is sought to be deployed before the Court in accordance with section 23 of the Criminal Appeal Act 1968.
This normally predicates that there should be a reasonable explanation for the earlier failure to adduce the evidence at the trial.
In the present case, it is clear from the judgment of the Court in Adams that the conviction was quashed on the basis of fresh evidence in circumstances in which, notwithstanding that the prosecution had fully performed its responsibilities in relation to disclosure, Adamss legal team had failed adequately to respond and fulfil theirs.
In my judgment that failure or omission was a new or newly discovered fact within the ambit of section 133.
Conclusion
In my judgment the appeal of Adams should be dismissed: as to the appeals of MacDermott and McCartney, I should have agreed with Lord Browns proposal that they should be remitted to the Secretary of State for further consideration.
LORD BROWN (with whom Lord Rodger agrees)
I have had the advantage of reading in draft the judgment of Lord Judge, the Lord Chief Justice, and, agreeing with it as I do, I shall try not to repeat the bulk of its reasoning.
So troubled am I, however, that apparently ours is the minority view on these appeals that I wish to add some additional thoughts of my own.
That section 133 of the Criminal Justice Act 1988 was intended to give effect to the United Kingdoms international obligation under article 14(6) of the International Covenant on Civil and Political Rights 1966 is, of course, plain and obvious.
Section 133(1) omits the phrase in article 14(6) by a final decision reflecting it instead in the definition of reversal in section 133(5) by referring there to an appeal out of time or on a reference and substitutes for the word conclusively in article 14(6) the hallowed expression beyond reasonable doubt.
Otherwise the language of the two provisions is virtually identical.
It is clear, therefore, that the right to compensation arises only when each of four conditions is satisfied: (i) the conviction is quashed on an appeal out of time or a reference (not, therefore, when a timeous appeal succeeds, nor, of course, on an acquittal at trial); (ii) the appeal succeeds on the ground of a new or newly discovered fact; (iii) the appellant was in no way responsible for the previous non disclosure of that fact; and (iv) that fact shows beyond reasonable doubt that there has been a miscarriage of justice.
The critical question for decision here, of course, is what precisely is meant in this context by a miscarriage of justice.
As to this, whilst recognising that the expression has an autonomous meaning, I share the view expressed in several of the judgments that there is no real assistance to be derived here from any of the extrinsic material, for example, the travaux or other states practices.
Rather, as Lord Bingham suggested in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, 27, para 9(2): It may be that the expression [miscarriage of justice] commended itself because of the latitude in interpretation which it offered.
That being so, it was perfectly open to the UK to introduce legislation intended to compensate only those shown to be clearly innocent of the crime of which they had been convicted and in this connection I see no reason to ignore the explanatory report relating to article 3 of Protocol 7 to the European Convention on Human Rights (an article almost precisely reproducing the language of article 14(6)) which, at para 25, states: The intention is that states would be obliged to compensate persons only in clear cases of miscarriage of justice, in the sense that there would be acknowledgment that the person concerned was clearly innocent.
True, the UK never ratified Protocol 7 and I am far from suggesting that the explanatory report shows plainly that section 133(1) is to be construed in the way para 25 suggests.
But it does surely show that this is both a permissible view to take of the extent of the article 14(6) obligation undertaken by the UK and a perfectly possible construction of section 133(1) itself.
Before turning more particularly to whether it is the right construction, it is I think worth pointing out too that the provision whereby those benefiting from article 14(6) are entitled to be compensated according to law similarly accords to individual states a wide discretion as to how such compensation is to be assessed.
As to this the UKs approach seems to me notably generous.
In reaching his assessment, the Secretary of States assessor is directed to apply principles analogous to those governing the assessment of damages for civil wrongs including, therefore, claims for wrongful imprisonment although a deduction may be made on account of the claimants criminal record.
An illustration of the size of the awards liable to be made in these cases is provided by R (OBrien) v Independent Assessor [2007] UKHL 10; [2007] 2 AC 312 concerning compensation claims arising out of the wrongful conviction of the Hickey brothers and others for the murder of Carl Bridgewater at Yew Tree Farm.
The first instance decision in that case [2003] EWHC 855 (Admin) shows net final compensation assessments there of 990,000 for Michael Hickey and 506,220 for Vincent Hickey (wrongfully detained in prison respectively for just under thirteen years and something under fourteen years see para 8 of Lord Binghams judgment in the House of Lords).
What, then, is the correct interpretation of a miscarriage of justice in section 133(1)? More particularly, is it: (i) the conviction of an innocent defendant, or (ii) the conviction of a defendant who, by a new fact, so undermines the evidence against him as to show that, on the undermined evidence, he could not possibly have been convicted essentially Lord Phillips (category 2) formulation (at para 55), apparently now subscribed to by the majority of the court.
I mention only those two possible constructions since no member of the court appears to favour any yet wider construction of section 133 so as to embrace also cases where the fresh evidence renders the conviction unsafe in that, had it been available at the time of the trial, a reasonable jury might or might not have convicted the defendant (Lord Phillips category 3 at para 9).
Strikingly, and to my mind significantly, it was this wider construction that not just the appellants but also Mr Alex Bailin QC for the Intervener, JUSTICE, were urging upon the court; indeed, both Mr Owen QC for Mr Adams and Mr Bailin expressly submitted that there was no logical or principled dividing line between categories 2 and 3.
And to my mind they were right to do so.
Of course, innocence as such (factual as opposed to presumptive) is not a concept known to the criminal law.
But nor too, in the context of criminal appeals, is the notion of a prosecution case so undermined that no jury could possibly convict.
The criminal court deals only in the safety of convictions.
On a fresh evidence appeal the sole question the court asks itself is whether the conviction is unsafe (essentially the lurking doubt test).
If the case is a difficult one it sometimes finds 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 R v Pendleton [2001] UKHL 66; [2002] 1 WLR 72, 83, para 19.
The ultimate and only question, however, is for the court: is the verdict unsafe? The question raised by section 133, by contrast, is not one for the criminal court but rather one entirely for the Secretary of State.
Similarly, no member of the court appears to suggest that Mullen itself was wrongly decided.
Lord Steyn, of course, reached his decision there (to allow the Secretary of States appeal and reinstate the decision of the Divisional Court) on the ground that section 133 compensates only those who are clearly innocent whereas Lord Bingham reached his on the altogether narrower ground that: It is for failures of the trial process that the Secretary of State is bound . to pay compensation (para 8).
Mr Mullens conviction was, of course, quashed not because of anything that had gone wrong in the trial process but because he would not have been on trial at all but for having been unlawfully returned to this country.
Certainly Lord Bingham disagreed with Lord Steyns approach.
But it cannot be pretended that Lord Binghams own approach supports the particular formulation suggested by the majority in the present case.
My own reasoning in the Divisional Court in Mullen [2002] 1 WLR 1857, 1864 was essentially that later to be adopted by Lord Steyn: 25 What was shown beyond reasonable doubt here was that there had been an abuse of process in bringing the claimant to trial.
That was the newly discovered fact.
But that fact did not itself show beyond reasonable doubt that there had been a miscarriage of justice.
All that it showed was that the court needed to conduct a discretionary exercise to decide in effect which of two important public interests should prevail: the public interest in trying, convicting and punishing the guilty or that in discouraging breaches of the rule of law and preserving the integrity of the criminal justice system.
It preferred the latter.
True, it had no doubt that the balance came down decisively in the defendants favour.
But that was by no means to find that he was innocent, still less that he was plainly so.
Rather it was a judgment that the lawful administration of justice would be affronted by his remaining convicted and imprisoned. 26 In short, a miscarriage of justice in the context of section 133 means, in my judgment, the wrongful conviction of an innocent accused.
Compensation goes only to those ultimately proved innocent, not to all those whose convictions are adjudged unsafe.
The quashing of the claimants conviction in this case was a vindication of the rule of law, not the righting of a mistaken verdict.
As I shall come to suggest, the quashing of the conviction in many cases which would fall within the majoritys formulation for compensation here is more properly to be characterised as a vindication of the rule of law than as the righting of a mistaken verdict.
Par excellence, indeed, this seems to me to be so in cases where confession statements, even though perhaps demonstrably true (by referring, say, to facts known only to the perpetrator of the crime) are excluded because of intimidation or inducement see particularly in this regard paras 264 and 265 of Lord Judges judgment.
My reasons for remaining precisely of the view I expressed in the Divisional Court in Mullen are essentially a combination of the considerations in favour of the category 1 test (that of innocence) and the considerations weighing against the category 2 test (that of critical evidence undermined).
As for the factors favouring the test of innocence, it is difficult to improve upon those listed by Lord Phillips at paras 43 48 of his judgment.
As Lord Phillips there points out, this construction gives section 133 a perfectly natural and logical meaning, indeed it is the meaning that the man in the street would be likely to accord to the wording of section 133 (para 43); it makes perfect sense of the requirement that the new facts should prove this beyond reasonable doubt (para 44); and it gives section 133 a meaning which is eminently practicable (para 45).
It seems to me unnecessary to decide whether Lloyd LJ was right to say in R v McIlkenny (1991) 93 Cr App R 287, 311 that the Court of Appeal is not entitled to state that an appellant is innocent a point on which Lord Phillips (at para 45) and Lord Judge (at para 251) disagree.
The all important consideration in this respect is, as Lord Phillips says, that it is for the Secretary of State, not the Court of Appeal, to decide whether there has in fact been a miscarriage of justice (and, therefore, on the innocence test, whether the fresh evidence shows beyond reasonable doubt that the defendant was innocent) and the reasons given for quashing the conviction are unlikely to leave any doubt of this (para 46).
As, moreover, Lord Phillips observes (at para 47) the innocence test will ensure that a guilty defendant is not compensated for the consequences of his conviction.
If I may revert to the man in the street, he would, I think, be appalled at a construction which, on the contrary, would not infrequently result in the compensation of the guilty, sometimes, as already indicated, to the extent of hundreds of thousands of pounds.
As for the factors weighing against the category 2 test, prominent amongst these is undoubtedly the converse of the point just made, the fact that it would result in very substantial compensation for many defendants who are in truth guilty.
I have already instanced (para 275 above and paras 264 and 265 of Lord Judges judgment) those whose confession statements (even if true) come to be undermined.
Equally this is so in cases where it comes to be seen that anonymous or hearsay evidence should not have been allowed (see particularly in this regard para 260 of Lord Judges judgment).
This point, indeed, can be illustrated by the facts of R v Secretary of State for the Home Department, Ex p Bateman (1994) 7 Admin LR 175 (where, as Lord Clarke notes at para 199, I was sitting in the Court of Appeal with Sir Thomas Bingham MR and Farquharson LJ).
Mr Batemans appeal for compensation failed in the event because the success of his second criminal appeal owed nothing to a new or newly discovered fact.
Obiter, however, the Master of the Rolls suggested that he had suffered a miscarriage of justice.
On an appeal out of time his conviction had been quashed because certain statements had been wrongly admitted in evidence at trial.
These were statements from important New Zealand witnesses whom he had wanted called and cross examined.
But why, I am now inclined to ask, should a successful appellant be compensated in those circumstances? The case against him might well have become more, rather than less, damning had the witnesses indeed been called and given their evidence orally (as was held should have happened).
One other case I want to mention which to my mind strikingly illustrates the dangers of adopting the category 2 construction is a recent decision of this court.
The case concerned the conviction of each of two brothers (A and B) for murder and two robberies following, as later investigations and a reference by the Criminal Cases Review Commission were to show, police misconduct of the gravest kind (most notably by colluding with the main prosecution witness).
On a second appeal some twelve years after conviction there was accordingly no dispute but that As and Bs convictions had to be quashed.
The only issue for the Court of Appeal had been whether A should be retried, this time not on the basis of the irredeemably tainted evidence given at his original trial but rather based on a series of admissions of guilt he had made following his conviction and the failure of his first appeal.
Because the decision upheld by the majority in this court was to order a retrial, the reporting of the detailed judgments both of the Court of Appeal and of this court has had to be delayed.
As, however, these judgments make plain, although B could not be retried (he having made no confession of guilt), the guilt of both was in reality plain.
True, the most critical evidence in the case against them had been that of a supergrass (without whose evidence, indeed, it was agreed that there could have been no prosecution at all), upon whose evidence the Crown could no longer rely because of the polices misconduct in conferring upon him a whole host of benefits to secure his continuing cooperation in the brothers prosecution at trial.
But his evidence had been supported by a jigsaw of other pieces of evidence.
That said, however, in the language of the majoritys category 2 test, no conviction could possibly be based upon it.
Is it then to be said that B must be compensated for the twelve years or so he spent in prison before being released at his second appeal? And, indeed, that A too would have had to be compensated had the Court of Appeal not decided to order his retrial? Will the Court of Appeal in future, when deciding at the conclusion of an out of time appeal whether the interests of justice require a retrial, have to factor in the consideration that, unless a retrial is ordered, the successful appellant will or may be found entitled to compensation under the majoritys approach to section 133?
The other centrally important consideration militating against a category 2 construction of section 133 is the difficulty indeed, to my mind, impossibility of reconciling this with the language of the section as a whole, and most especially with its requirement that the new facts establish a miscarriage of justice beyond reasonable doubt.
It seems to me nonsensical to suggest that the category 2 test is one that can sensibly be satisfied (or not) beyond reasonable doubt.
For good measure although, I accept, less conclusively the alternative basis of entitlement to compensation provided for by the section, namely a pardon, naturally connotes innocence rather than some less exacting test.
Even the language of a new or newly discovered fact (rather than fresh evidence) to my mind tends to suggest the revelation of something clear and certain namely innocence, rather than merely the undermining of the prosecutions overall case.
I entirely accept, of course, that a new fact which does so undermine this case as to show that the appellant could not properly have been convicted on the evidence in fact adduced against him may well in many cases suggest actual innocence and duly persuade the Secretary of State of this.
Lord Judge expressly recognises this at para 259 of his judgment.
But what if, say, as a result of inadmissible intercept evidence or other reliable intelligence the Secretary of State reasonably believes (perhaps, indeed, is convinced) that the appellant is in fact guilty.
Must he nevertheless compensate him? I would hope and respectfully maintain not.
Naturally I recognise that the application of the innocence test will exclude from compensation a few who are in fact innocent.
Even on the majoritys test, of course, some who are innocent will be excluded.
That, however, seems to me preferable to compensating a considerable number (although mercifully not so many as would be compensated on the category 3 approach) who are guilty.
After all, this whole compensation scheme operates by creating only a narrow and exceptional class who qualify.
The claimant qualifies only by producing a new or newly discovered fact.
And only if his conviction is quashed on a reference or an appeal out of time. (It will, indeed, often be a matter of chance whether an appeal is out of time the lawyers may simply have missed the time limit.) Why should the state not have a scheme which compensates only the comparatively few who plainly can demonstrate their innocence and, as I have shown, compensate them generously rather than a larger number who may or may not be innocent? That, at all events, is the scheme which in my opinion Parliament enacted here.
On certain of the questions raised there is nothing I wish to add to what Lord Judge has said.
I agree with him (at para 252) about the material to be considered by the Secretary of State (indeed, as to this, I agree too with what Lord Phillips says at para 36 of his judgment, subject only to applying the correct test).
I agree with all that Lord Judge says (at para 254) as to the relevance here of section 133(5A).
I agree with him too (at paras 255 and 256) about the relevance of the Strasbourg jurisprudence in this context. (It hardly needs pointing out that, were the Strasbourg cases to present a problem, they would do so no less for the majority than for the minority view.) And I agree with Lord Judges approach (at paras 266 and 267) to a new or newly discovered fact.
In common, as I understand it, with every other member of the Court, I too would dismiss Mr Adamss appeal.
Had Lord Judges and my view as to the meaning of section 133 prevailed, I would have been inclined to remit Mr MacDermotts and Mr McCartneys compensation claims to the Secretary of State for his further consideration in the light of our judgments and more particularly of Lord Kerrs masterly analysis of the facts of those two cases.
LORD WALKER
I agree with the judgments of Lord Judge and Lord Brown.
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Section 133 of the Criminal Justice Act 1988 (s 133) provides that the Secretary of State for Justice shall pay compensation when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
It was enacted to give effect to Article 14(6) of the International Covenant on Civil and Political Rights 1966 (Article 14(6)), which the United Kingdom ratified in May 1976.
Article 14(6) also refers to a miscarriage of justice.
The principal issue in these appeals was the meaning of this phrase in this context; in particular whether compensation should only be given if someone was subsequently shown conclusively to have been innocent of the offence.
The three appellants each claimed compensation following the quashing of their convictions for murder by the Court of Appeal.
In each case the claim was refused on the ground that the appellant had not shown that a miscarriage of justice had occurred.
In Mr Adams case, it was also refused on the ground that he had not shown that his conviction had been reversed by reason of a new or newly discovered fact.
Mr Adams was convicted on 18 May 1993 of the murder of Jack Royal.
His conviction was referred to the Court of Appeal in 2007 on the ground that incompetent defence representation had deprived him of a fair trial.
His representatives had failed to consider unused material provided by the police which would have assisted in undermining the evidence given by the sole prosecution witness.
The Court of Appeal found that if this had been done the jury might not have been satisfied of Mr Adams guilt, although he would not inevitably have been acquitted.
Mr McCartney was convicted of the murders of Geoffrey Agate and DC Liam McNulty, and Mr MacDermott that of DC McNulty, on 12 January 1979.
The sole evidence was their admissions during interviews with the police.
They alleged that these had been made after ill treatment and called other witnesses who claimed to have suffered similar treatment from the same group of police officers.
The judge rejected their evidence.
He had been told that a prosecution brought against one of these witnesses had not been proceeded with.
But he was not told that this was because senior officers in the Department of the Director of Public Prosecutions considered that he had been assaulted by police officers to obtain his confession and that a conviction in another case, based on a confession obtained in similar circumstances and involving one of the same officers, had been quashed.
The Court of Appeal in Northern Ireland quashed the convictions of Mr McCartney and Mr MacDermott on 15 February 2007 on the ground that this new evidence left it with a distinct feeling of unease about the safety of their convictions.
The Supreme Court unanimously dismisses the appeal of Mr Adams and by a majority (Lord Rodger, Lord Walker, Lord Brown and Lord Judge dissenting) allows the appeals of Mr MacDermott and Mr McCartney.
The majority hold that a miscarriage of justice has occurred for the purposes of s 133 when a new or newly discovered fact shows conclusively that the evidence against a defendant has been so undermined that no conviction could possibly be based upon it.
Miscarriage of justice Miscarriage of justice was a phrase capable of a number of different meanings.
It was useful to consider four categories of cases in which the Court of Appeal would quash a conviction on the basis of fresh evidence: Where it showed a defendant was innocent of the crime (category 1) Where it was such that, had it been available at the time of the trial, no reasonable jury could properly have convicted the defendant (category 2) Where it rendered the conviction unsafe in that, had it been available at the trial, a reasonable jury might or might not have convicted the defendant (category 3) Where something had gone seriously wrong in the investigation of the offence or the conduct of the trial resulting in the conviction of someone who should not have been convicted (category 4) [9] The primary object of s133, and of Article 14(6), was clearly to compensate a person who had been convicted and punished for a crime which he did not commit.
A subsidiary objective was not to compensate someone who had in fact committed the crime [37].
Category 4 fell outside this purpose as it dealt with abuses of process so shocking that the conviction should be quashed even if it did not put in doubt the guilt of the convicted person [38].
Category 3 was also outside s 133 because the miscarriage of justice had to be shown beyond reasonable doubt.
Category 3 would include a significant number who had in fact committed the offences, as an inevitable consequence of a system which required guilt to be proved beyond reasonable doubt [42].
Category 1 cases were clearly covered by s 133.
However, the majority (Lord Phillips, Lord Hope, Lady Hale, Lord Kerr and Lord Clarke) held that the ambit of s 133 was not restricted to category 1 as it would deprive of compensation some defendants who were in fact innocent but could not establish this beyond reasonable doubt.
A wider scope was plainly intended at the time of the drafting of Article 14(6).
Even though it would not guarantee that all those entitled to compensation were in fact innocent, the test for miscarriage of justice in s 133 (in more robust terms than category 2) was as follows: A new or newly discovered fact will show conclusively that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it [55].
A miscarriage of justice in a case of that kind would be as great as it would have been if he had in fact been innocent, because in neither case would he have been prosecuted at all [102].
Four justices dissented on this issue.
Lord Judge considered that the words beyond reasonable doubt in s 133 meant that the miscarriage of justice was the conviction and incarceration of the truly innocent [248].
Lord Brown considered that there was no logical or principled dividing line between categories 2 and 3 [274] and the arguments in favour of an interpretation limited to category 1 were compelling [277].
Lord Rodger agreed with Lord Brown, and Lord Walker agreed with Lord Brown and Lord Judge.
Application of s 133 to cases involving a retrial An amendment to s 133 (subsection 5A) which referred to a retrial changed the timetable for a claim for compensation.
It did not mean that compensation was payable in every case in which a retrial had been ordered and the defendant then acquitted, as was argued by counsel for the intervener Barry George.
The same test was to be applied.
The amendment allowed for the possibility that something might emerge in the retrial which would require compensation [104].
New or newly discovered fact Lord Phillips (with whom Lady Hale, Lord Kerr and Lord Clarke agreed) held that the phrase new or newly discovered fact should be interpreted generously in accordance with the effect given to Article 14(6) by legislation in Ireland as including facts the significance of which was not appreciated by the convicted person or his advisers during the trial [60].
Lord Hope disagreed, considering that material disclosed to the defence by the time of the trial could not be said to be new and the focus on the state of mind of the convicted person went too far [107].
Lord Judge (with whom Lords Brown, Rodger and Walker agreed) preferred an approach which coincided with the test for admission of fresh evidence before the Court of Appeal, which required a reasonable explanation for the failure to adduce the evidence at the trial.
This had been satisfied by Mr Adams in his case [281].
Disposal of the appeals Mr Adams appeal was unanimously dismissed on the ground that his was a category 3 case and did not fall within s 133.
The majority allowed the appeals of Mr McCartney and Mr MacDermott as it had been shown conclusively that the evidence against them had been so undermined that no conviction could possibly be based upon it.
The minority would have remitted their cases to the Secretary of State for further consideration in the light of the judgment.
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The claimant, Tiuta International, was a specialist lender of short term business finance, until it went into administration on 5 July 2012.
These proceedings were brought by Tiuta in support of a claim against the defendant surveyors for negligently valuing a partially completed residential development over which it proposed to take a charge to secure a loan.
The present appeal raises a question of principle concerning the quantum of damages.
Since it arises out of an application for summary judgment, it has to be determined on facts some of which are admitted but others of which must be assumed for the purposes of the appeal.
They are as follows.
On 4 April 2011, Tiuta entered into a loan facility agreement with Mr Richard Wawman in the sum of 2,475,000 for a term of nine months from initial drawdown, in connection with a development in Sunningdale by a company called Drummond House Construction and Developments Ltd, with which Mr Wawman was associated.
Advances under the facility were to be secured by a legal charge over the development.
The facility agreement was made on the basis of a valuation of the development by De Villiers.
They had reported that the development was worth 2,300,000 in its current state and that if completed in accordance with all current consents and to a standard commensurate with its location it would be worth about 4,500,000.
The initial advance was drawn down on 8 April 2011 as soon as the charge had been executed.
Other advances under the facility followed.
On 19 December 2011, shortly before the facility was due to expire, Tiuta entered into a second facility agreement with Mr Wawman in the sum of 3,088,252 for a term of six months in connection with the same development.
Of this sum, 2,799,252 was for the refinancing of the indebtedness under the first facility and 289,000 was new money advanced for the completion of the development.
A fresh charge was taken over the development to secure sums due under the second facility agreement.
On 19 January 2012, Tiuta advanced 2,560,268.45, which was paid into Mr Wawmans existing loan account, thereby discharging the whole of the outstanding indebtedness under the first facility.
Between that date and 8 June 2012 further sums were drawn down under the second facility amounting to 281,590 and presumably spent on the development.
The advances under the second facility were made on the basis of a further valuation of the development by De Villiers.
There were three iterations of the further valuation.
On 8 November 2011, De Villiers had valued the development in its current state at 3,250,000 and upon completion at 4,900,000.
The current state valuation was subsequently revised on 22 December 2011 to 3,400,000 and on 23 December 2011 to 3,500,000.
The second facility agreement expired on 19 July 2012, a few weeks after Tiuta went into administration.
None of the indebtedness outstanding under it has been repaid.
It is common ground that there can be no liability in damages in respect of the advances made under the first facility.
This is because (i) there is no allegation of negligence in the making of the valuation on which the first facility agreement was based; and (ii) even if there had been, the advances made under that facility were discharged out of the advances under the second facility, leaving the lender with no recoverable loss.
This last point is based on the decisions of the Court of Appeal in Preferred Mortgages Ltd v Bradford & Bingley Estate Agencies Ltd [2002] EWCA Civ 336 and of this court in Swynson Ltd v Lowick Rose LLP (in liquidation) [2017] 2 WLR 1161.
It is not challenged on this appeal.
The present claim is concerned only with the liabilities arising out of the valuation which De Villiers made for the purposes of the second facility.
It is alleged, and for present purposes must be assumed, that the valuations given for the purposes of the second facility were negligent, and that but for that negligence the advances under the second facility would not have been made.
In those circumstances, the valuers contend that the most that they can be liable for by way of damages is the new money advanced under the second facility.
They cannot, they say, be liable for that part of the loss which arises from the advance made under the second facility and applied in discharge of the indebtedness under the first.
If (as has to be assumed) Tiuta would not have made the advances under the second facility but for the valuers negligence, the advances under the first facility would have remained outstanding and would have remained unpaid.
That part of their loss would therefore have been suffered in any event, irrespective of the care, or lack of it, which went into the valuations prepared for the purposes of the second facility.
On that ground, the valuers applied for a summary order dismissing that part of the claim which arose out of the refinancing element of the advances under the second facility.
In my opinion the result of the facts as I have set them out is perfectly straightforward and turns on ordinary principles of the law of damages.
The basic measure of damages is that which is required to restore the claimant as nearly as possible to the position that he would have been in if he had not sustained the wrong.
This principle is qualified by a number of others which serve to limit the recoverable losses to those which bear a sufficiently close causal relationship to the wrong, could not have been avoided by reasonable steps in mitigation, were reasonably foreseeable by the wrongdoer and are within the scope of the latters duty.
In the present case, we are concerned only with the basic measure.
In a case of negligent valuation where but for the negligence the lender would not have lent, this involves what Lord Nicholls in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627, 1631 called the basic comparison: It is axiomatic that in assessing loss caused by the defendants negligence the basic measure is the comparison between (a) what the plaintiffs position would have been if the defendant had fulfilled his duty of care and (b) the plaintiffs actual position.
Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property.
When this is so, a professional negligence claim calls for a comparison between the plaintiffs position had he not entered into the transaction in question and his position under the transaction.
That is the basic comparison.
Thus, typically in the case of a negligent valuation of an intended loan security, the basic comparison called for is between (a) the amount of money lent by the plaintiff, which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrowers covenant and the true value of the overvalued property.
If the valuers had not been negligent in reporting the value of the property for the purpose of the second facility, the lenders would not have entered into the second facility, but they would still have entered into the first.
On that hypothesis, therefore, the lenders would have been better off in two respects.
First, they would not have lost the new money lent under the second facility, but would still have lost the original loans made under the first.
Secondly, the loans made under the first facility would not have been discharged with the money advanced under the second facility, so that if the valuation prepared for the first facility had been negligent, the irrecoverable loans made under that facility would in principle have been recoverable as damages.
There being no allegation of negligence in relation to the first facility, this last point does not arise.
Accordingly, the lenders loss is limited to the new money advanced under the second facility.
This is what Timothy Fancourt QC, sitting as a Deputy High Court Judge, held.
But the Court of Appeal disagreed.
By a majority (Moore Bick and King LJJ, McCombe LJ dissenting), they allowed the appeal.
The leading judgment was delivered by Moore Bick LJ.
He criticised the deputy judges reasoning on the ground that it failed to take into account the fact that the second facility was structured as a refinancing so that the advance was used to pay off the pre existing debt, thereby releasing the valuers from any potential liability in respect of the first valuation.
From this, he concluded that the advance under the second facility stands apart from the first and the basic comparison for ascertaining the appellants loss is between the amount of that second loan and the value of the security.
He explained this as follows: The appellant entered into the second transaction in reliance on the respondents valuation.
If the valuation had not been negligent, the appellant would not have entered into the second transaction, and would have suffered no loss on that transaction as a result.
It would have been left with the first loan and the security for it, together with any claim it might have had against the valuer.
However, that is of no relevance to the respondent in its capacity as valuer for the purposes of the second loan.
The loss which the appellant sustained as a result of entering into the second transaction was the advance of the second loan, less the developers covenant and the true value of the security.
If the value of the property was negligently overstated, the respondent will be liable to the extent that the appellant's loss was caused by its over valuation.
Moore Bick LJ went on to say that his conclusion would have been the same even if a different valuer had prepared the original valuation on which the first facility was based.
This was because the valuer valued the property itself in the expectation that the appellant would advance funds up to its full reported value in reliance on its valuation.
There is nothing unfair in holding the respondent liable in accordance with its own valuation for the purposes of the second transaction.
I regret that I cannot agree.
It does not follow from the fact that the advance under the second facility was applied in discharge of the advances under the first, that the court is obliged to ignore the fact that the lender would have lost the advances under the first facility in any event.
Lord Nicholls statement in Nykredit assumes, as he points out in the passage that I have quoted, that but for the negligent valuation, he would still have had the money which it induced him to lend.
In the present case, Tiuta would not still have had it, because it had already lent it under the first facility.
Moore Bick LJ appears to have thought that this was irrelevant because the effect was to release the valuer from any potential liability in respect of the first facility.
I would agree that if the valuers had incurred a liability in respect of the first facility, the lenders loss in relation to the second facility might at least arguably include the loss attributable to the extinction of that liability which resulted from the refinancing of the existing indebtedness.
But the premise on which this matter comes before the court is that there was no potential liability in respect of the first facility because that was entered into on the basis of another valuation which is not said to have been negligent.
Moore Bick LJs view appears to have been that none of this mattered because the valuer would have contemplated that he might be liable for the full amount of the advances under the second facility, so that it was a windfall for him that part of the advances was used to repay a pre existing debt rather than to fund the development.
A similar argument was advanced before us.
The difficulty about it is that while the reasonable contemplation of the valuer might be relevant in determining what responsibility he assumed or what loss might be regarded as foreseeable, it cannot be relevant to Lord Nicholls basic comparison.
That involves asking by how much the lender would have been better off if he had not lent the money which he was negligently induced to lend.
This is a purely factual inquiry.
There are, as I have pointed out, legal filters which may result in the valuer being liable for less than the difference.
For example, part of it may be too remote or is not within the scope of the relevant duty.
But the valuer cannot be liable for more than the difference which his negligence has made, simply because he contemplated that on hypothetical facts different from those which actually obtained, he might have been.
There are many cases in which the internal arrangements of a claimant mean that his financial loss is smaller than it might have been.
That may be fortunate for the defendant, but it cannot make him liable for more than the claimants actual financial loss.
Ms Joanna Smith QC, who appeared for the lenders, was realistic enough to perceive these difficulties, and adopted a rather different approach.
She submitted that the court should disregard the fact that the advance under the second facility was applied in discharge of the outstanding indebtedness under the first, because that application of the funds was a collateral benefit to the lender, which they were not obliged to take into account in computing their loss.
The argument is that if the discharge of the outstanding indebtedness under the first facility is disregarded, damages can be assessed as if the whole of the loan under the second facility was an additional advance.
Since that additional advance would not have been made or lost but for the negligent valuations of November and December 2011 the whole of it is recoverable as damages.
I am not persuaded that this was what the Court of Appeal had in mind, but her point is none the worse for that.
The real objection to it is more fundamental.
This court has recently had to deal with collateral benefits in a context not far removed from the present one.
The general rule is that where the claimant has received some benefit attributable to the events which caused his loss, it must be taken into account in assessing damages, unless it is collateral.
In Swynson Ltd v Lowick Rose LLP (in liquidation) [2017] 2 WLR 1161, para 11, it was held that as a general rule collateral benefits are those whose receipt arose independently of the circumstances giving rise to the loss.
Leaving aside purely benevolent benefits, the paradigm cases are benefits under distinct agreements for which the claimant has given consideration independent of the relevant legal relationship with the defendant, for example insurance receipts or disability benefits under contributory pension schemes.
These are not necessarily the only circumstances in which a benefit arising from a breach of duty will be treated as collateral, for there may be analogous cases which do not exactly fit into the traditional categories.
But they are a valuable guide to the kind of benefits that may properly be left out of account on this basis.
The discharge of the existing indebtedness out of the advance made under the second facility was plainly not a collateral benefit in this sense.
In the first place, it did not confer a benefit on the lenders and so no question arises of either taking it into account or leaving it out of account.
Lord Nicholls basic comparison requires one to look at the whole of the transaction which was caused by the negligent valuation.
In this case, that means that one must have regard to the fact that the refinancing element of the second facility both (i) increased the lenders exposure and ultimate loss under the second facility by 2,560,268.45, and (ii) reduced its loss under the first facility by the same amount.
Its net effect on the lenders exposure and ultimate loss was therefore neutral.
Only the new money advanced under the second facility made a difference.
It is true that the refinancing element might not have been neutral if the discharge of the indebtedness under the first facility had also extinguished a liability of the valuers under the first facility.
But on the assumptions that we must make on this appeal there was no such liability.
Secondly, even on the footing that there was such a liability, the benefit arising from the discharge of the indebtedness under the first facility was not collateral because it was required by the terms of the second facility.
The lenders did not intend to advance the whole of the second facility in addition to the whole of the first, something which would have involved lending a total amount substantially in excess of any of the successive valuations.
They never intended to lend more than 289,000 of new money.
The concept of collateral benefits is concerned with collateral matters.
It cannot be deployed so as to deem the very transaction which gave rise to the loss to be other than it was.
This is why the decision of Toulson J in Komercni Banka AS v Stone and Rolls Ltd [2003] 1 Lloyds Rep 383, which was pressed on us as an analogy, was ultimately unhelpful.
Toulson J was concerned with a complex series of frauds against a bank under which part of the proceeds of one fraud found its way back to the bank via a third party to serve as pump priming for distinct, further frauds.
He declined to reduce the damages by the amount of these circular payments, because they were not an intrinsic part of the relevant venture or transaction but were simply the result of [the fraudsters] independent choice how to use the opportunity created by his fraud (para 171).
I doubt whether much is to be gained by analogies with other cases decided on their own peculiar facts, but Komercni Banka does not even offer a relevant analogy.
For these reasons, which correspond to those given by the Deputy Judge and by McCombe LJ in his dissenting judgment, I would allow the appeal.
The reasons are of course sensitive to the facts, including those facts which are disputed and have been assumed for the purposes of this appeal.
In particular, different considerations might arise were it to be alleged that the valuers were negligent in relation to both facilities.
The Deputy Judges order was carefully drawn so as to address the point of principle while leaving these matters open.
Subject to any submissions that may be made about the exact form of relief, I would restore his order.
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The appellant company, De Villiers, is a surveyor.
The respondent, Tiuta International, was a lender of short term business finance until it went into administration in July 2012.
This appeal arises out of De Villiers application for summary judgment on part of a claim which Tiuta brought against De Villiers.
As a result, the following facts have been either admitted or assumed to be correct.
In April 2011 Tiuta entered into a nine month loan facility agreement (the First Facility) with a Mr Wawman in connection with a residential property development.
Advances under the First Facility were to be secured by a charge over the development.
The First Facility was agreed on the basis of De Villiers valuation of the development.
Tiuta advanced various sums under the First Facility.
In December 2011, shortly before the expiry of the First Facility, Tiuta entered into a second loan facility agreement (the Second Facility) with Mr Wawman in the sum of 3,088,252 in connection with the same development.
Of that sum, 2,799,252 was to be used to discharge the outstanding indebtedness under the First Facility; the remaining 289,000 was new money, advanced to fund the development.
The sums advanced under the Second Facility were secured by a further charge over the development.
In January 2012 Tiuta advanced 2,799,252 to Mr Wawmans existing loan account, thereby discharging his outstanding indebtedness under the First Facility in full.
Tiuta then advanced further sums as new money for the development.
The advances under the Second Facility were made on the basis of De Villiers further valuation of the development in November 2012, which it revised twice in December 2012.
None of the sums advanced under the Second Facility have been repaid.
It is assumed for the purposes of the appeal that the valuations given for the purposes of the Second Facility were negligent, as Tiuta alleges.
It is also assumed that, but for that negligence, Tiuta would not have advanced the sums under the Second Facility.
Tiuta does not allege negligence in respect of the First Valuation, under which all the advanced sums were repaid in full.
De Villiers application for summary judgment argued that Tiuta would have suffered some loss in any event because, but for the allegedly negligent undervaluation in respect of the Second Facility, no sums would have been advanced under the Second Facility.
As a result, sums owed to Tiuta under the First Facility would have remained unpaid.
The Deputy High Court Judge accepted that argument and held that Tiutas loss was limited to the new money advanced under the Second Facility.
The Court of Appeal disagreed and allowed Tiutas appeal.
The Supreme Court unanimously allows the appeal.
Lord Sumption gives the judgment with which Lady Hale, Lord Kerr, Lord Lloyd Jones and Lord Briggs agree.
The basic measure of damages is the sum which restores the claimant as closely as possible to the position that he would have been in if he had not been wronged.
That principle is qualified by various rules which limit recoverable losses.
Where a claimant lends money, and but for a negligent valuation would not have done so, the basic measure of damages is the difference between: (a) the position the claimant would have been in, had the defendant not been negligent and (b) the claimants actual position.
This is the basic comparison discussed by Lord Nicholls in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627.
The basic comparison is typically between: (a) the amount of money lent by the claimant, plus interest on that money and (b) the value of the rights acquired under the loan agreement plus the true value of the overvalued property [6].
It is assumed in this appeal that Tiuta would not have entered into the Second Facility, had De Villiers not negligently undervalued the security property.
Tiuta would have still entered into the First Facility, but would not have lost the new money advanced under the Second Facility.
Whereas the Deputy High Court Judge held that Tiutas losses were limited to that new money, the majority of the Court of Appeal held that the judge failed to take into account that the Second Facility was structured so as to pay off the indebtedness under the First Facility.
The majority consequently held that the basic measure of Tiutas loss was: (a) the sums advanced under the Second Facility, less (b) the value of Tiutas rights under the Second Facility plus the true value of the security [7 8].
The Supreme Court disagrees with that approach.
The fact that the advance under the Second Facility was used to pay off indebtedness under the First Facility does not require the Court to ignore the fact that Tiuta would have lost the sums which had been outstanding under the First Facility in any event.
The basic comparison envisaged in Nykredit assumes that, but for the negligent valuation, the claimant would still have had the money which the negligent valuation caused him to lend.
In this case Tiuta would not have had that money, because it had already lent it under the First Facility [9].
It is irrelevant, for the purposes of the basic comparison discussed in Nykredit, that the valuer might have contemplated being liable for the full amount of the advances under the Second Facility.
The foreseeability of loss is not relevant to the basic comparison.
Various legal filters may result in the valuer being liable for less than the difference calculated under the basic comparison.
However, the valuer cannot be liable for more than the difference which his negligence has made simply because he contemplated that he might be liable in circumstances other than those which actually came about [10].
Tiuta argued that the use of the advance under the Second Facility to discharge the indebtedness under the First Facility was a collateral benefit to Tiuta, which need not be taken into account when calculating Tiutas loss [11].
The Supreme Court rejects that argument.
Generally, where a claimant has received some benefit attributable to the events which caused his loss, it must be taken into account in assessing damages unless the benefit is collateral.
Collateral benefits are generally those whose receipt arose independently of the circumstances giving rise to the loss [12].
The discharge of the existing indebtedness was not a collateral benefit.
First, the refinancing part of the Second Facility was neutral in its effect, rather than beneficial: it both increased Tituas exposure and reduced its loss under the First Facility by the same amount.
Secondly, the terms of the Second Facility required the indebtedness under the First Facility to be discharged, so that outcome was not collateral to the Second Facility [13].
The appeal is therefore allowed.
These reasons are sensitive to these facts, including those which have been assumed for the purposes of the appeal.
Subject to any submissions that may be made about the exact form of relief, the order of the Deputy High Court Judge will be restored [15].
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Until 2006, pension schemes could be approved by the Inland Revenue (subsequently HM Revenue and Customs).
Approved status carried with it advantages in the tax treatment of contributions to the scheme and investments within it, but it also imported restrictions on the form in which benefits were taken.
In particular, until recently, benefits had to be taken as income, for example by applying the capital to the purchase of an annuity.
The Finance Act 1991 amended the Income and Corporation Taxes Act 1988 so as to provide for the cessation of approval if a scheme ceased to qualify.
A practice grew up by which small schemes (typically for the controlling directors of private companies) would contrive a loss of approval with a view to allowing the accumulated fund to be applied free of the restrictions on the form of benefits.
To deal with this practice, section 61 of the Finance Act 1995 introduced a tax charge of 40% of the value of the assets of the scheme immediately before the cessation of approval.
The question at issue on this appeal is whether, when approval is withdrawn by a decision of Revenue, the tax charge falls to be assessed in the tax year with effect from which the approval ceased or in the tax year when the Revenues decision to withdraw approval was notified to the administrator of the scheme.
The John Mander Ltd Directors Pension Scheme was approved by the Revenue on 24 September 1987.
Its beneficiaries were Mr Mander and his wife.
On 5 November 1996 the funds of the scheme were transferred to a new scheme, whose rules were subsequently changed so as to provide for the trustees to make advances to beneficiaries which were not permitted for an approved scheme.
On 19 April 2000 the Revenue notified the administrator of the scheme that approval was withdrawn under section 591B(1) of the Income and Corporation Taxes Act 1988 with effect from 5 November 1996.
On 27 July 2000, the then administrator was assessed under section 591C of the Act for the current tax year, 2000 2001.
Following a change of administrator, a fresh assessment in the same terms was raised against the new administrator on 22 January 2007.
The taxpayer appealed against both assessments on the ground that the tax should have been assessed for the tax year 1996 1997 when the scheme ceased to be eligible and when the withdrawal of approval took effect under the terms of the Revenues notice.
This contention was rejected by the First tier Tribunal (Tax Chamber).
Their decision was upheld by the Upper Tribunal (Vos J) [2013] UKUT 51 (TCC); [2013] STC 1453 and subsequently by the Court of Appeal (Moses, Patten and Beatson LJJ) [2013] EWCA Civ 1683; [2014] 1 WLR 2209.
They all considered that the tax charge fell to be assessed for the year 2000 2001 when the withdrawal was notified.
The point is of greater significance than this rather technical statement of the issue might suggest.
If the taxpayer is right, it may now be too late for the Revenue to raise a fresh assessment for 1996 1997.
In some cases, although not this one, it will already have been too late by the time that the revenue learn of the facts leading to the withdrawal of approval.
A substantial number of other schemes is affected.
This is the lead case of a number of appeals awaiting decision in the First tier Tribunal.
The statutory framework
Section 590 of the Income and Corporation Taxes Act 1988 laid down a number of conditions for the approval of a pension scheme.
Section 591 conferred a discretion on the Revenue to approve schemes satisfying certain criteria even if it did not qualify under section 590, but subject to regulations which the Board was empowered to make by section 591(6).
At the relevant times, approval could cease in any of three ways: (1) Section 591A was in effect a transitional provision relating to schemes which had received discretionary approval under section 591 but ceased to qualify as a result of restrictions subsequently introduced by regulations under section 591(6).
Their approval ceased automatically 36 months after the introduction of the regulations if the scheme still failed to comply with them. (2) Section 591B(1), which was the basis on which the approval of the Mander scheme was withdrawn, provided: If in the opinion of the Board the facts concerning any approved scheme or its administration cease to warrant the continuance of their approval of the scheme, they may at any time by notice to the administrator, withdraw their approval on such grounds, and from such date (which shall not be earlier than the date when those facts first ceased to warrant the continuance of their approval or 17 March 1987, whichever is the later), as maybe specified in the notice. (3) Section 591B(2) provided that where an alteration had been made to a scheme which was neither specifically approved by the Revenue nor generally authorised by regulations, no approval given by the Board as regards the scheme before the alteration shall apply after the date of
the alteration
It should be noted that in each case, the approval is lost with effect from a date established by reference to the time when the scheme ceased to qualify for approval.
In cases (1) and (3), this is clear from the express terms of the relevant provisions.
Where approval is lost under section 591A, it ceases with effect from a date 36 months after regulations came into force under which it no longer qualified for discretionary approval.
The period of grace is intended to allow the trustees to modify the scheme so as to qualify under the new regime.
Approval is lost only if they fail to do so.
Where approval ceases under section 591B(2), it ceases on the date of the alteration to the scheme which caused it no longer to qualify for approval.
The relationship between the date when the scheme ceases to qualify and the date when approval ceases is less clear in cases governed by section 591B(1).
This is the only case in which the cessation of approval requires any action on the part of the Revenue, as opposed to occurring automatically when the statutory conditions for cessation are satisfied.
A notice of withdrawal is required, which will specify an effective date for the withdrawal not earlier than the time when the facts cease to warrant approval.
It is, however, clear that the Revenue do not have an unfettered choice of effective date.
They must select one which bears a rational relationship to the facts to which they are responding.
That will normally be the date when the scheme ceased to qualify for approval.
But it may be after that date if in the judgment of the Revenue the circumstances in which the scheme ceased to qualify justify an interval before the withdrawal takes effect.
This might happen, for example, if the loss of approval was inadvertent on the part of the trustees or administrator and there was a period of time during which they might reasonably have been expected to rectify the position.
Other examples could no doubt be cited.
When approval is lost in any of the three ways contemplated by sections 591A or 591B, a charge to tax is imposed by sections 591C.
This provides, so far as relevant: 591C Cessation of approval: tax on certain schemes (l) Where an approval of a scheme to which this section applies ceases to have effect . , tax shall be charged in accordance with this section. (2) The tax shall be charged under Case VI of Schedule D at the rate of 40% on an amount equal to the value of the assets which immediately before the date of the cessation of the approval of the scheme are held for the purposes of the scheme (taking that value as it stands immediately before that date). (3) Subject to section 591D(4), the person liable for the tax shall be the administrator of the scheme.
Section 591D contains supplementary provisions.
For present purposes, only subsection (7) is relevant: (7) The reference in section 591C(l) to an approval of a scheme ceasing to have effect is a reference to the scheme ceasing to be an approved scheme by virtue (a) of section 591A(2); (b) section 591B(l); (c) of section 591B(2); the approval of the scheme being withdrawn under the approval of the scheme no longer applying by virtue and any reference in section 591C to the date of the cessation of the approval of the scheme shall be construed accordingly.
In respect of what year does the charge to tax arise?
Section 591C does not in terms specify a date at which the tax is chargeable.
In principle, it is the date when approval is lost since that is the occasion for the tax charge.
But in a case where approval is withdrawn retrospectively, does that mean the date on which it is withdrawn or the date with effect from which it is withdrawn? The Revenues argument is, in substance, that until the moment when a notice of withdrawal is issued, the scheme remains technically an approved scheme, notwithstanding that it was not entitled to be, and notwithstanding that when approval was withdrawn it was withdrawn retrospectively.
In my opinion, however, the correct answer is that the tax charge falls to be assessed for the chargeable period in which the withdrawal of approval took effect in accordance with the terms of the statutory notice.
The starting point is to ask what the tax is being charged upon.
That depends on the charging provision.
Before us there was an issue about which parts of section 591C should be regarded as the relevant charging provision.
The Court of Appeal considered that it was only subsection (1).
I should myself have regarded at least the first three sub sections as constituting the charging provision, but the issue is a sterile one, because even if subsection (1) is to be regarded as the charging provision, its ambit and effect depend on the remaining sub sections and indeed on the supplementary provisions of section 591D.
These provisions have to be read as a whole.
In those circumstances, the critical point is that although the charge is in reality a levy on the capital value of the fund, section 591C(2) imposed it as a charge to income tax under Case VI of Schedule D.
That is therefore necessarily its legal characterisation.
Case VI of Schedule D charged tax in respect of any annual profits or gains not falling under any other Case of Schedule D and not charged by virtue of Schedule A, B, C or E. Under section 69(1) of the Income and Corporation Taxes Act 1988, tax chargeable under Case VI of Schedule D was computed on the full amount of the profits or gains arising in the year of assessment.
For this purpose, the relevant year of assessment is the year in which the relevant profit of gain arose: see Income and Corporation Taxes Act 1988, section 832(1).
Reading section 591C(2) together with Case VI of Schedule D, their combined effect is that the administrator of the scheme is treated for tax purposes as having received an annual profit or gain in an amount equal to the value of the assets which immediately before the cessation of the approval of the scheme are held for the purposes of the scheme.
Income tax at 40% is then charged on that profit or gain.
It follows that the tax must be assessed on a notional profit or gain accruing immediately before the cessation of approval.
Subject to section 591D(7), to which I shall return, the cessation of approval in section 591C(2) must refer back to the opening words of subsection (1) which identify the condition on which the charge to tax arises (Where an approval ceases to have effect ).
As a matter of ordinary language, that means the time with effect from which the previous approval of the scheme no longer had effect.
As I have pointed out, this is obvious in a case falling within section 591A or 591B(2).
In a case like the present one falling under section 591B(1), it means the date specified in the Revenues notice from which approval is withdrawn, which is the functional equivalent.
Not only is this the natural result of the language of these provisions, but on any other view the tax charge under section 591C would fall to be assessed in a later tax year where approval was lost under section 591B(1) than it would have been if approval had been lost under section 591A or 591B(2).
Given the common purpose of the three provisions, I can see no rational basis for such a difference.
The same point may be made about the conditions for liability to the tax charge in section 591C(4) (6A).
These conditions relate to the number of members of the scheme immediately before the date of the cessation of the approval of the scheme, to their relationship with the company contributing to the scheme within the period of one year ending with the date of the cessation of the approval of the scheme, and to the contributions made by any person to the scheme within the period of three years ending with the date of the cessation of the approval of the scheme.
These provisions make sense only on the footing that the cessation of the approval of the scheme is the effective date of the withdrawal of approval, and not the date of the Revenues notice of withdrawal.
This analysis derives support from the terms of section 61 of the Finance Act 1995, which introduced sections 591C and 591D into the Income and Corporation Taxes Act 1988.
Section 61(3) provided: (3) This section shall apply in relation to any approval of a retirement benefits scheme which ceases to have effect on or after 2 November 1994 other than an approval ceasing to have effect by virtue of a notice given before that day under section 591B(1)of the Taxes Act 1988. 2 November 1994 was the date when the Revenue announced its intention to promote legislation imposing a tax charge on the assets of schemes ceasing to qualify for approval.
The purpose of section 61(3) is to ensure that the tax charge introduced by section 591C does not apply unless both the cessation of approval and the giving of notice of withdrawal of approval under section 591B(1) occurred after that date.
It presupposes that the date when an approval ceases to have effect is not the same as the date when notice is given to that effect.
I now return to section 591D(7), which I have already set out.
The Revenue argue that the effect of this subsection, as applied to schemes like this one whose approval is withdrawn under section 591B(1), is that approval of the scheme is treated as having been withdrawn when the Revenue gives notice of withdrawal: see para (b).
The Court of Appeal accepted this submission, but I do not think that section 591D(7) will bear that construction.
It does not refer to the Revenues notice of withdrawal.
It refers only to the approval of the scheme being withdrawn under section 591B(1).
In themselves, these words beg the question whether approval is withdrawn under section 591B(1) when notice of withdrawal of approval is given or when it takes effect according to its terms.
But read in the context of the sub section as a whole, the inference is that it is when the withdrawal of approval takes effect.
On the face of it, the draftsman is equating approval of the scheme being withdrawn with its ceasing to have effect and with the cessation of approval.
What then was the purpose of section 591D(7)? In my view there were two purposes.
The first was to identify the three statutory bases on which an approval may cease to have effect for the purpose of section 591C(1).
This was evidently thought necessary because none of the three provisions for the cessation of approval uses the expression ceases to have effect which appears in section 591C(1).
The second purpose of the provision was to stipulate the date as at which the assets fall to be valued under section 591C(2) for the purpose of computing the charge.
It is the date when the schemes approval ceases to have effect under each of the three provisions.
It follows that the tax falls to be assessed in the chargeable period with effect from which the approval ceased to have effect in accordance with the notice of withdrawal.
Alleged anomalies
As is traditional, each side pointed to a chamber of horrors which would be opened up were the other sides submissions to be accepted.
In general, this contributed little to the debate.
But I should deal with two points made on behalf of HMRC, partly because they influenced the Court of Appeal, and partly because they raise questions of some wider legal significance.
One was that Parliament cannot have intended to empower the Revenue to impose a charge to tax retrospectively, with the result that although the tax would not actually be payable until the prescribed interval after the assessment (30 days), the taxpayer would be liable for interest from a date well before the assessment.
The other was that unless the Revenue was entitled to assess the taxpayer under section 591C in the year of the notice of withdrawal, they would in many cases be unable to do so at all because of the long interval which can elapse before the facts justifying withdrawal come to their attention.
Retroactivity
If the relevant chargeable period is the year of assessment with effect from which the approval was withdrawn, it is undeniable that the result is to expose the taxpayer to an assessment which is retrospective in the sense that it relates to a charging period up to six years earlier.
It is correct that this will generally have adverse consequences for his liability to interest.
However, I cannot regard this as anomalous or share the Court of Appeals dismay at the prospect.
It is inherent in the process of assessment that a taxpayer may be assessed to tax on profits or gains that arose in a charging period earlier than that in which the assessment was raised.
This occurs whenever tax is assessed in arrears.
The period of retrospectivity may be considerable if profits or gains for an earlier period were previously overlooked or wrongly thought not to be chargeable to tax.
But it may also occur when something happens which makes it necessary to recharacterise the taxpayers financial affairs in an earlier period.
Before this state of affairs can be regarded as anomalous, we need to ask ourselves what the recharacterisation involves.
It would be surprising if the law allowed a tax to be charged in an earlier period by reference to criteria which did not apply until a later one.
On the other hand, it may involve no more than a recognition of facts which always existed.
A good example of the latter situation is provided by the Scottish case of Spence v Inland Revenue Comrs (1941) 24 TC 311.
The facts were that the taxpayer sold shares to a third party in 1933 under a contract which he subsequently alleged to have been induced by fraud.
In 1939 he obtained a judgment reducing the contract (anglice setting it aside) with effect from the date that it was made, together with orders that the shares be retransferred to him and a sum paid to him representing the dividends which the purchaser had received while he was registered as the shareholder.
After the judgment, the Revenue repaid the surtax assessed on the dividends in the hands of the fraudulent purchaser and assessed the taxpayer instead.
The years of assessment were those in which the dividends had been paid by the company.
The assessment was upheld in the Inner House of the Court of Session.
Lord President Normand said, at p 317: In this case the contract was not void; it was merely voidable on the ground that it had been induced by fraudulent misrepresentations.
When a contract has been induced by fraudulent misrepresentations, it is open to the party defrauded either to sue for rescission of the contract or to sue for damages.
In this case the party sued for rescission and in the end of the day he obtained a decree of reduction.
The effect of that reduction was to restore things to their position at the date of the transaction reduced, with the result that as at that date and afterwards the successful pursuer in the action fell to be treated as having been the person in titulo of the shares which he had sold to the defender and therefore to have been in right of the dividends.
No doubt it is true that in the interval the dividends had to be paid and were paid to the defender because his name stood in the register as the proprietor of the shares and no doubt also they were for the time being treated by the Inland Revenue as his income and while matters stood entire no other person had any right to the shares or to the dividends except the defender, Mr Crawford.
But from the moment the reduction took place Mr Spence fell to be treated as having been throughout the proprietor of the shares and equally the person properly entitled to receive the dividends.
On the other hand the Inland Revenue repaid to Mr Crawford the surtax attributable to the dividends actually paid to him by the company on the footing that he had never been in titulo to receive them.
The critical feature of this case was that although the assessment arose out of the order for reduction, and operated ab initio, its effect was to restore the parties to the situation in which they would have been in 1933 but for the fraud.
This may be contrasted with the decision in Morley Clarke v Jones (Inspector of Taxes) [1986] Ch 311.
In 1969 an order had been made in divorce proceedings for the payment by the husband to the wife of a sum by way of maintenance for their child.
In 1979 the order was varied with effect from the date of the original order, so as to make the sum payable directly to the child, because this would be more tax efficient.
It was certainly more tax efficient for the future, because the child had no other income.
But the Revenue assessed the wife to income tax on maintenance received by her between 1969 and 1979 without regard to the retrospective variation.
Upholding the assessments, the Court of Appeal distinguished Spence on the ground that the 1979 order purported to alter the effect of what had gone before as opposed to merely recognising it.
Oliver LJ, delivering the leading judgment, observed at pp 331 332: A retrospective order cannot, any more than a retrospective agreement, undo the past and convert something that has already happened, and to which legal consequences have already attached, into something which never in fact did happen. [In Spence] the restitutio in integrum represented by the court order obtained some years later did not so much reconstruct history as recognise and declare that which had all along been the legal position, although until the order the parties were in a state of some uncertainty as to what their rights were.
The Revenue can issue a notice of withdrawal of approval under section 591B(1) only if the facts cease to warrant the continuance of approval.
Where the effective date stated in the notice is the date when those facts first ceased to warrant the continuance of their approval, as it generally will be, the relevant facts will be those in existence in the earlier charging period.
The retrospective character of the withdrawal of approval simply recognises the facts as they were at the earlier stage.
If interest accrues on the tax assessed with effect from the earlier charging period, that does no more than reflect the fact that throughout the intervening period the scheme has enjoyed tax advantages to which it was not entitled and has deferred a tax charge under section 591C which would have been assessed as soon as the facts warranted if the Revenue had known them.
Difficulties of enforcement
At the relevant time the right to assess the taxpayer to income tax ordinarily ceased six years after the end of the chargeable period when the relevant profit or gain arose: Taxes Management Act 1970, sections 34.
The submission of HMRC is that in many cases this will not be long enough to enable the Revenue to learn of the facts and respond with a notice withdrawing approval from the scheme in time to assess the charge under section 591C.
Therefore, it is said, they must be entitled to assess the tax in the chargeable period when they give the notice, if the tax charge is to be effective.
The information before us does not enable me to say how serious a problem this is, but I shall proceed on the footing that it is significant.
Even so, I reject the argument.
In the first place, the Revenue had ample powers to make regulations requiring information relating to any approved scheme to be furnished to them without prior request.
At the relevant time, the powers were conferred by section 605(1A) (1D) of the Income and Corporation Taxes Act 1988 (inserted by section 105 of the Finance Act 1994).
The regulations in force at the relevant time were the Retirement Benefits Schemes (Information Powers) Regulations (SI 1995/3103).
These did not require the reporting of transactions of the kind which caused the Mander pension scheme no longer to qualify for approval.
But they could have done, and in fact did with effect from 2003 when they were amended: see Retirement Benefits Schemes (Information Powers) (Amendment) Regulations (SI 2002/3006).
Secondly, there is an extended period of 20 years for assessment in cases of fraud or negligence, under section 36 of the Taxes Management Act 1970 (as amended).
The Revenues argument must therefore be tested by assuming a taxpayer acting carefully and in good faith.
On that assumption, there is no reason in principle why the legislation should be interpreted in a way which exposes the taxpayer to an assessment after the normal time limit has expired.
Thirdly, the cure which HMRC proposes for dealing with this problem, if it is one, seems to me to be a great deal worse than the disease.
If the charge to tax were to be treated as arising at the date of assessment, it would follow that the chargeable period would be wholly at the discretion of the Revenue.
That result, surprising enough in itself, would lead to the even more surprising conclusion that a charge to tax could be imposed without limitation any number of years after the facts which justified it.
Conclusion
I would allow the appeal and declare that the Inland Revenue were not entitled to assess the administrator of the John Mander Pension Scheme to tax under section 591C of the Income and Corporation Taxes Act 1988 for the year 2000 2001.
LORD NEUBERGER:
The relevant facts and applicable statutory provisions are set out in paras 56 64 of Lord Hodges judgment and paras 1 7 of Lord Sumptions judgment.
In a nutshell, the issue on this appeal is whether, in a case where the Revenues approval is withdrawn by a notice (a Notice) under section 591B(1) of the Income and Corporation Taxes Act 1988, tax under section 591C is chargeable by reference to the tax year which includes (i) the date with effect from which the approval is specified to have been withdrawn (ie the date stated in the Notice), or (ii) the date on which the approval is actually withdrawn (ie the date of the Notice).
The appellant taxpayer, John Mander Pension Trustees Ltd, contends that it is the former date (the earlier date), whereas HM Commissioners for Revenue and Customs (HMRC), with whom the First tier Tribunal, the Upper Tribunal and the Court of Appeal agreed, argues for the latter date (the later date).
As the judgments of Lord Hodge and Lord Sumption demonstrate, there are powerful arguments both ways, and I will briefly explain why, in disagreement with the courts below and with the minority in this court, I agree with Lord Sumption and Lord Reed that the earlier date is the correct answer.
Section 591B(1) entitles HMRC, in certain circumstances (which it is conceded for present purposes arise here), to withdraw by a Notice their approval, given under section 590 to a pension scheme, from such date as may be specified in the notice (subject to certain restrictions).
Section 591C(1) provides that where an approval ceases to have effect tax shall be charged in accordance with this section.
Section 591C(2) states that such tax is to be paid by reference to the value of the assets immediately before the date of the cessation of the approval.
Two points can be noted about those two consecutive subsections at this stage.
First, two different expressions are used in the two subsections an approval [ceasing] to have effect and the cessation of the approval.
Those two expressions could be synonyms or they could have different meanings.
As a general proposition, in the absence of any indication to the contrary, one would presume that different expressions were intended to have different meanings.
In this case in particular, one expression could mean the earlier date and the other could mean the later date.
Secondly, it was common ground in the Court of Appeal, and accepted by Moses LJ that the meaning of the cessation of approval is the earlier date see [2013] EWCA Civ 1683, [2014] 1 WLR 2209, para 17.
Next, there are subsections (5), (6) and (6A) of section 591C, which set out certain conditions, one or more of which, according to subsection (3), must be satisfied if the charge to tax under subsections (1) and (2) arises.
These subsections appear to me to make it clear that the date of cessation of approval means the earlier date.
Accordingly, they confirm the second point mentioned in para 28 above.
One then turns to section 591D(7).
This states that, for the purpose of section 591C(1), an approval ceasing to have effect means, in a case such as the present, the approval of the scheme being withdrawn, and it also states that any reference in section 591C to the date of the cessation of the approval shall be construed accordingly.
To my mind, the natural meaning of this provision is that, for the purposes of these sections, (i) approval ceases to have effect in section 591C(1) when approval of the scheme is withdrawn, and (ii) the date of cessation of approval in the other subsections of section 591C has the same meaning.
Point (i) is self evident.
As to point (ii), I find it hard to see how the closing words of section 591D(7) could have any other meaning.
If they do not state that the two expressions used in section 591C(1) and in section 591C(2) have the same meaning, they would be very curious.
They would have no effect, because they would take the question of what the expression the date of cessation of approval means no further, and that would be particularly surprising given that they were plainly included to give guidance as to what that expression means.
Accordingly, the presumption I refer to in para 28 above is rebutted by section 591D(7).
In the light of this analysis, it seems to me that the appeal should succeed, and the relevant tax year is that which includes the earlier date, rather the later date.
In summary, it appears to me that (i) the expressions an approval [ceasing] to have effect and the date of the cessation of the approval have the same meaning, in the light of section 591D(7), (ii) the date of the cessation of the approval means the earlier date, in the light of section 591C(4) (6A), so (iii) both subsections (1) and (2) of section 591C are linked to the earlier date and not the later date, and therefore (iv) it is the earlier date which governs the taxing year.
I accept that this conclusion is contrary to the presumption against retroactivity, which is discussed in para 70 of Lord Hodges judgment.
It also seems to me that the force of that presumption is somewhat reinforced in the present case by the fact that HMRC can, albeit within express and public law limits, choose the date by reference to which tax would be charged.
On the other hand, it is only a presumption.
In this case, it seems to me that the presumption against retroactivity is rebutted for the reason I have given, and that in any event the presumption does not have particularly compelling force.
It is specifically contemplated in section 591B(1) that a Notice will normally have retroactive effect, so that retroactivity can be said to be inherent in a case where a Notice is served under section 591B(1).
More specifically, the valuation exercise prescribed by section 591C(2) requires the assets to be valued at the earlier date: not only is that an example of retroactivity, but it seems to me that, if the assets are to be valued as at the earlier date, there is a degree of consistency in assessing the tax as at that day too.
The conclusion which I favour receives significant support from section 61 of the Finance Act 1995, which introduced sections 591C and 591D into the 1988 Act.
Section 61(3) is set out and explained in para 12 of Lord Sumptions judgment and para 77 of Lord Hodges judgment.
It is a transitional provision, which clearly envisages that the date when approval ceases to have effect is not the same as the date on which Notice is given.
In my view, it is clearly permissible, indeed appropriate, when interpreting new sections inserted into an Act, to take into account transitional provisions contained in the section of the later Act which introduced the new sections.
The transitional provisions are plainly in pari materia with the new sections.
It is true that section 61(3) is puzzling in that it assumes that a Notice under section 591B(1) can be prospective, which is hard to understand, but that does not undermine the centrally important point that the drafter of the statute plainly considered that the date when approval ceases to have effect was not the same as the date of the Notice.
I shall deal very briefly with the other arguments discussed by Lord Hodge and Lord Sumption.
The reference to Case VI of Schedule D in section 591C(2), referred to by Lord Sumption at para 9 underlines the point he makes in his para 17 and which I make in para 32 above.
I see some force in Lord Sumptions point in his para 10 that the conclusion which he and I have reached is consistent with the other two circumstances dealt with in section 591D(7)(a) and (c), but the point is of limited (but not negligible) force in my view for the reasons given by Lord Hodge in para 77.
So far as the alleged anomalies are concerned, it seems to me that none of them is particularly striking, and there is a degree of anomaly either way.
On the view I have formed, there would be a liability for interest retrospectively.
While that is inherently unattractive, it is consistent with the retroactive effect of a Notice, and with the notion that the pension fund should have been taxed at the date specified in the Notice.
Also on the view I have formed, HMRC would lose the right to claim tax pursuant to section 591B(1) after six years (absent fraud or wilful default), but there is nothing particularly surprising about that, given that one is assuming a taxpayer who has acted in good faith.
If I am wrong in my view, there would be no time limit on HMRCs entitlement to recover tax under section 591C, which would be a little surprising, although there would be a limited degree of protection for a taxpayer in those circumstances through public law if HMRC unreasonably delayed.
Nonetheless, this would be an anomaly if HMRCs case was correct, and I am unimpressed with the answer that the purpose of this tax was to discourage abusive arrangements, because that can equally well be used to support the retrospective effect of the legislation if the appellants case is correct.
For these reasons, I would allow this appeal.
LORD REED:
During the period with which this appeal is concerned, taxpayers who paid contributions into approved pension schemes received relief from income tax on their contributions.
Until 1997, the investments held in the fund administered by the scheme also benefited from favourable tax treatment.
The consequence of these tax privileges was that, as the fund accumulated, a substantial proportion of it represented tax which would otherwise have been paid, either by the contributors or by the administrators.
These tax privileges were granted on the basis that benefits would be taken from the scheme only in accordance with the rules governing approved pension schemes.
This normally meant that benefits would be taken only at retirement (or on death, if earlier), when the fund would be used to purchase an annuity.
The tax privileges were therefore enjoyed in anticipation of the use to which the fund would be put, usually many years later.
A practice however developed of small schemes obtaining approval, the contributors benefiting from the consequent tax privileges (typically by saving higher rate tax at 40%), and then the schemes being managed in such a way as to lose their approval.
The accumulated fund, including the tax savings made over the years, could then be enjoyed free of restrictions.
This abusive practice depended on the schemes failure to fulfil the expectation on the basis of which the tax privileges had been granted.
Before looking at how Parliament responded to this situation, it may be useful to consider what one might reasonably expect it to have done.
In the first place, one might expect provision to be made for the Revenue to withdraw approval from a scheme as from the date when it ceased to comply with the conditions for approval.
Contributions into the scheme would then cease to qualify for tax relief as from that date, and the investments of the fund would cease to receive favourable treatment.
Turning to the legislation which was actually enacted by Parliament, it is consistent with the approach which I have described.
Sections 591A(2), 591B(1) and 591B(2) of the Income and Corporation Taxes Act 1988 (the Taxes Act) provide for approval to cease in three situations: (1) where the scheme fails to comply with regulations, 36 months after the introduction of the regulations (section 591A(2)); (2) where the facts concerning the scheme cease to warrant the continuance of approval (section 591B(1)); and (3) where an unapproved and unauthorised alteration is made to the scheme (section 591B(2)).
The first of these is a transitional provision, as Lord Sumption has explained.
The second and third address the type of problem which I have discussed.
In the first and third of these situations, approval is withdrawn automatically: under section 591A, 36 months after the introduction of the regulations, and under section 591B(2), with effect from the date of the alteration.
In the second situation, with which we are concerned in this appeal, section 591B(1) permits the Revenue to withdraw their approval from such date (which shall not be earlier than the date when those facts first ceased to warrant the continuance of their approval . ), as may be specified in the notice [withdrawing their approval].
Approval can therefore be withdrawn retrospectively, as it was in the present case, and as it is likely to be in most if not all cases.
The withdrawal of approval has the effect of exposing those who previously benefited from the privileges flowing from approval to the ordinary tax regime which applies in its absence.
The latter regime inevitably applies from the date as from which approval is withdrawn, since the scheme lacks approval as from that date.
In a case under section 591B(1), the date in question is the date specified in the notice.
In consequence, the issuing of a notice may trigger tax liabilities in respect of income and capital gains arising between the date specified in the notice and the date when the notice is issued.
The withdrawal of approval does not however deal with the tax savings accumulated and invested since the inception of the scheme, which could be seen in retrospect to have been unmerited.
In order to address that issue, one might expect provision to be made for the portion of the fund representing those benefits to be paid as tax.
Given the difficulty of calculating the precise proportion, a broad rule of thumb might be adopted.
Turning to the legislation, one again finds that Parliament has acted as one would have expected.
Section 591C provides for a portion of the fund to be paid as tax: (l) Where an approval of a scheme to which this section applies ceases to have effect . tax shall be charged in accordance with this section. (2) The tax shall be charged under Case VI of Schedule D at the rate of 40% on an amount equal to the value of the assets which immediately before the date of the cessation of the approval of the scheme are held for the purposes of the scheme (taking that value as it stands immediately before that date). (3) Subject to section 591D(4), the person liable for the tax shall be the administrator of the scheme.
Tax is to therefore to be charged where an approval ceases to have effect.
The portion of the fund which is to be paid in tax is 40%: a figure corresponding to the higher rate tax relief which will in most cases have been granted to the contributors to the scheme.
Two questions remain.
First, in a case where approval is withdrawn under section 591B(1), is the date of cessation of the approval of the scheme, immediately before which the fund is to be valued for the purpose of calculating the tax due, the date specified in the notice, or the date when the notice is issued? Secondly, is the year of assessment the year during which the date falls as at which the fund is to be valued, or the year during which the notice is issued?
In relation to the first question, it is common ground that the relevant date is the date with effect from which the approval is withdrawn, ie the date specified in the notice.
I am in no doubt that that is correct.
In the first place, that is the date most naturally described as the date of the cessation of the approval.
Secondly, and more importantly, the appropriate point in time as at which to calculate the tax payable is, in principle, immediately before the date when the fund ceased to qualify for approval.
That is so for two reasons.
First, the withdrawal of approval with effect from that date, under section 591B(1), means that any tax savings which may have been obtained subsequently are already recoverable by assessment on ordinary principles.
To require a proportion of the fund which included those post withdrawal tax savings to be paid to the Revenue under a further assessment would effectively involve double taxation.
Secondly, the fund will not necessarily remain intact after it ceases to qualify for approval (particularly, it might be thought, if the amount of the tax charge were to depend on the size of the fund when the Revenue discovered the abuse and issued a notice).
I have not so far referred to section 591D(7): (7) The reference in section 591C(1) to an approval of a scheme ceasing to have effect is a reference to (a) the scheme ceasing to be an approved scheme by virtue of section 591A(2); (b) the approval of the scheme being withdrawn under section 591B(l); (c) the approval of the scheme no longer applying by virtue of section 591B(2); and any reference in section 591C to the date of the cessation of the approval of the scheme shall be construed accordingly.
It appears from section 591D(7)(b) that, in a case where approval is withdrawn under section 591B(1), the reference in section 591C(1) to an approval ceasing to have effect is a reference to the approval being withdrawn.
Considering that provision in isolation, there might perhaps be room for argument as to whether approval was withdrawn when the notice was sent or when the withdrawal of approval took effect.
It has however to be read in its context.
Section 591D7(a) and (c) make it clear that, in all other circumstances where approval is lost, the relevant date is the date when the scheme ceases to qualify for approval.
The functionally equivalent date in a case where a notice was issued is the date specified in the notice.
Furthermore, the final words of section 591D(7) make it clear the date of an approval ceasing to have effect is the same as the date of the cessation of the approval of the scheme, as indeed one would expect as a matter of ordinary language.
As explained in para 48, there is no doubt (and no dispute) that the date of the cessation of the approval is the date specified in the notice.
If, then, the tax charge is to be calculated as 40% of the value of the fund immediately before the date specified in the notice, the question remains whether the year of assessment is the year during which the date falls as at which the fund is to be valued, or the year during which the notice is issued.
The correct answer must be the former.
That is the year during which the occasion for the tax charge falls, in terms of section 591C(1) (where an approval of a scheme . ceases to have effect), as I have interpreted it.
It is also the year during which the value of the fund, and therefore the amount of the tax charge, is to be computed, as I have explained.
If it is objected that an assessment on this basis is retrospective, the answer is that it is only in retrospect that it can be seen that the scheme and its contributors have benefited from unmerited tax savings.
Securing the restoration of that benefit does not in substance involve the imposition of retrospective taxation, but rather the recovery of tax which was foregone at an earlier date in reliance upon an expectation as to the future management of the scheme which was induced but not subsequently fulfilled.
An analogy can be drawn with restitution on the basis of a failure of consideration.
If it is objected that interest should not be payable to the Revenue on tax which is assessed retrospectively, the answer is that the taxpayer has enjoyed the unmerited use of the money, which in hindsight ought to have been in the hands of the Revenue during the intervening period.
The correctness of this construction of the provisions is confirmed by section 239A of the Taxation of Chargeable Gains Act 1992.
Under that provision, the assets of the scheme are deemed to have been acquired immediately before the date specified in the notice withdrawing approval, at their then value.
The provision thus resets the base cost of the assets for the purpose of calculating the gain or loss on any disposal subsequent to the date specified in the notice.
The reason why gains or losses accruing prior to the date specified in the notice are not taken into account is that the scheme is then liable to the 40% charge imposed by section 591C of the Taxes Act.
For these reasons, and those given by Lord Sumption and Lord Neuberger, I would allow the appeal.
LORD HODGE: (dissenting with whom Lord Carnwath agrees)
Revenue approved pension schemes have had significant tax advantages.
But the misuse of those advantages by the diversion of funds, which had received tax benefits, from the funding of pension income, which had justified those benefits, gave rise to anti avoidance legislation.
This appeal concerns a tax avoidance scheme and an attempt by the Inland Revenue, now HM Revenue and Customs (HMRC), to impose a tax charge on the pension trustees as a result.
It raises a question of statutory interpretation about the correct year of assessment of the tax charge arising from the withdrawal of Revenue approval.
It is relevant to many other cases which have arisen out of events which occurred before 2006, when the Finance Act 2004 changed the tax regime.
The statutory framework
Section 590 of the Income and Corporation Taxes Act 1988 (the TA) set out conditions for the approval by HMRC of retirement benefit schemes.
The Finance Act 1991 introduced sections into the TA to provide for Revenue approval of pension schemes to be lost in three circumstances: (i) Approval ceased automatically if, by the end of 36 months after regulations made under section 591 had come into force, a retirement benefits scheme contained a provision that the regulations prohibited or did not contain a provision that the regulations required (section 591A(2)). (ii) Section 591B(1), which is relevant in this appeal, provided: If in the opinion of the Board the facts concerning any approved scheme or its administration cease to warrant the continuance of their approval of the scheme, they may at any time by notice to the administrator, withdraw their approval on such grounds, and from such date (which shall not be earlier than the date when those facts first ceased to warrant the continuance of their approval or 17 March 1987, whichever is the later), as may be specified in the notice. (iii) Approval also ceased automatically whenever the terms of a retirement benefits scheme were altered without obtaining the approval of HMRC (section 591B(2)).
Further measures followed.
Section 61 of the Finance Act 1995 imposed a tax charge where approval of a scheme ceased to have effect, in any of the three circumstances which I have mentioned, by introducing sections 591C and 591D into the TA.
Section 591C(1) (3) provided: (1) Where an approval of a scheme to which this section applies ceases to have effect , tax shall be charged in accordance with this section. (2) The tax shall be charged under Case VI of Schedule D at the rate of 40% on an amount equal to the value of the assets which immediately before the date of the cessation of the approval of the scheme are held for the purposes of the scheme (taking that value as it stands immediately before that date). (3) Subject to section 591D(4), the person liable for the tax shall be the administrator of the scheme.
Section 591D(7) provided further guidance on the meaning of section 591C(1) as follows: The reference in section 591C(1) to an approval of a scheme ceasing to have effect is a reference to the scheme ceasing to be an approved scheme by virtue (a) of section 591A(2); (b) section 591B(1); or (c) of section 591B(2); the approval of the scheme being withdrawn under the approval of the scheme no longer applying by virtue and any reference in section 591C to the date of the cessation of the approval of the scheme shall be construed accordingly.
The factual background
Mr and Mrs John Mander were the shareholders of John Mander Ltd. They were also its directors.
On 24 September 1987 they created the John Mander Ltd Directors Pension Scheme (the JM Scheme).
They were the beneficiaries of the JM Scheme and they and a Mr Alexander Jackson, who was the Revenue approved pensioneer trustee, were its original trustees.
On 9 September 1994 Mr Jackson resigned as a trustee of the JM Scheme and DJT Trustees Ltd (DJT) were appointed in his place.
On 5 November 1996 a series of events occurred which HMRC later treated as amounting to a tax avoidance device.
First, Mr and Mrs Mander resigned as trustees of the JM Scheme and a Guernsey based company, Louvre Trust Co Ltd (Louvre), was appointed a trustee.
Secondly the new trustee (Louvre) authorised the transfer of funds from the JM Scheme to the Vesuvius Shipping Ltd Pension Scheme (the Vesuvius Scheme), an insured executive pension plan of which Mr and Mrs Mander were also members.
Mr Mander, as agent of the JM Scheme trustees, signed a cheque for 1,188,000 in favour of the trustees of the Vesuvius Scheme and the cheque was given to them.
Thirdly, the trustee and administrator of the Vesuvius Scheme were replaced by offshore trustees.
At the time of the transfer of funds the Vesuvius Scheme was a Revenue approved scheme, but its rules were subsequently changed to enable loans to be made which would not be permitted under an approved scheme.
DJT, after discovering what had occurred, resigned as pensioneer trustee of the JM Scheme on 18 March 1997.
On 20 June 1997 TM Trustees Ltd and Mrs Mander were appointed trustees of the JM Scheme and Louvre resigned as trustee.
On 26 February 1998 Louvre Trustees Ltd, a Guernsey based company, was appointed a trustee of JM Scheme and Mrs Mander resigned as trustee.
HMRC wrote to the administrators of the JM Scheme on 9 December 1997, suggesting that there had been a tax avoidance scheme and proposing to withdraw approval of the Scheme with effect from 5 November 1996.
Lengthy correspondence followed.
On 19 April 2000 HMRC gave notice of withdrawal of approval of the JM Scheme with effect from 5 November 1996, under section 591B(1) of the TA.
On 27 July 2000, in the year of assessment 2000 2001, HMRC made an assessment in the sum of 475,200 on Louvre Trustees Ltd as administrator of the JM Scheme.
On 11 April 2001 Sullivan J refused an application by Mr Mander for permission to apply for judicial review of HMRCs decision to withdraw approval from the JM Scheme.
On 22 January 2007 HMRC issued an assessment for the year 2000 2001 for 475,200 on the then current administrators of the JM Scheme.
The administrators appealed against the assessment, arguing that the tax should have been assessed in the tax year 1996 1997.
They claimed that the 2000 2001 assessment was invalid and that HMRC were out of time to assess in the tax year 1996 1997.The appeal gave rise to the legal proceedings of which this appeal is part.
The legal proceedings
The First tier Tribunal (Tax Chamber) designated the appeal as the lead case and in a decision (by Judge Mosedale and Mr N Collard) dated 28 October 2011 dismissed the appeal against the assessment, holding that the tax charge arose in the year ending 5 April 2001.
On 28 January 2013 Vos J sitting in the Upper Tribunal (Tax and Chancery Chamber) upheld that decision and held that the current trustee of the JM Scheme was liable for the tax assessed by the 27 July 2000 assessment.
On 19 December 2013 the Court of Appeal (Moses, Patten and Beatson LJJ) dismissed the trustees appeal.
The trustee appeals with permission to this court.
Discussion
Which was the correct year of assessment? Was it 1996 1997 as the appellant submits or 2000 2001 as HMRC submit? This is a question of statutory interpretation and in particular of sections 591B(1), 591C(1) and (2) and 591D(7) of the TA.
Section 591B(1) provided for the withdrawal of approval by notice.
In that respect it differed from the other methods of the cessation of approval which happened automatically on the occurrence of events without any intervention by HMRC.
Under section 591B, until HMRC served a notice, the pension scheme enjoyed Revenue approval.
But the section allowed HMRC to specify in the notice the date from which approval had ceased and that date could be earlier than the date of the notice.
It was thus retrospective at least in the sense that it looked to the past and changed the future legal consequences of the transaction or transactions which gave rise to the withdrawal of approval.
The appellants argue that the tax charge imposed by section 591C(1) was also retrospective in the more radical sense that it was retroactive, coming into force not at the date of the HMRC notice but at the earlier date of cessation of approval which was specified in the notice.
This would have the effect of exposing trustees to claims for interest on unpaid tax from a date before they received notice of the withdrawal of approval.
HMRC on the other hand submit that the tax charge arises only in the tax year in which the notice of withdrawal was served.
The interest incurred may be very substantial.
While the tax charge was in form a tax on income, using the residual charge to tax of Case VI of Schedule D (section 18 of the TA), it was in substance a charge not on actual annual profits or gains but of 40% of the capital value of the scheme assets.
It was designed to recoup the tax advantages that the funds conferred when contributed to and kept in an approved scheme.
Both parties pray in aid of their cases the provisions of section 591D(7), which is not a straightforward provision.
The appellants submit that the first part of the subsection merely identified the relevant statutory provisions in the three listed provisions and that the second part of the section was directed to the timing of the cessation of approval, including for the purposes of section 591C(1).
In the case of a section 591B(1) notice, that is the date from which the notice took effect.
HMRC on the other hand submit that the reference in the first part of the subsection to the three methods of cessation performed the substantive role of distinguishing their effect.
Thus on HMRCs case, section 591D(7) had the effect that the reference in section 591C(1) to the approval ceasing to have effect under circumstances (a) and (c) (ie sections 591A(2) and 591B(2)) was a reference to the automatic ending of the approval under those sections, whereas in circumstance (b) it was a reference to the withdrawal by notice under section 591B(1).
The tax charge under section 591C(1) therefore occurred in the tax year in which the event occurred under section 591A(2) and 591B(2) or in the tax year in which the section 591B(1) notice is served.
The date of the cessation, which is an expression used in section 591C(2), (5), (6) and (6A) but not in section 591C(1), was construed accordingly by reference to the date specified in the three listed subsections, which in the case of the section 591B(1) notice was the date specified in that notice.
It is not disputed that in all circumstances the date of the cessation was the date from which HMRC approval ceased.
While in this case it suits the appellants to submit that the year of assessment is 1996 1997 rather than 2000 2001, the effect of their submission would be that section 591C imposed a retroactive tax, potentially giving rise to a liability for substantial sums in interest on the charge from the date of the cessation of the approval, during a period in which the trustees of a scheme might otherwise have believed that they had a continuing HMRC approval.
There is a strong common law presumption against retrospective tax legislation.
In Greenberg v Inland Revenue Comrs [1972] AC 109, 143 Lord Morris of Borth y Gest stated: Very clear words are necessary to overturn the presumption against the retroactive operation of a taxing provision.
A provision designed to have retroactive operation would have to be enacted in clear and positive terms.
While legislation to counter tax avoidance strategies may as a matter of sound policy involve retrospective provisions with retroactive effect, that policy does not remove the requirement for clear words.
This accords with the general principle which Lord Wilberforce set out in W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300, at p 323: A subject is only entitled to be taxed upon clear words, not upon intendment or upon the equity of an Act.
Any taxing Act of Parliament is to be construed in accordance with this principle.
What are clear words is to be ascertained upon normal principles: these do not confine the courts to literal interpretation.
There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.
Section 591B(1) is retrospective and has the potential for a limited retroactive effect in that it allows the withdrawal of approval from a date earlier than the notice of withdrawal.
But, importantly, the retroactive withdrawal of approval does not of itself give rise to any tax charge, retroactive or otherwise.
In this case section 591C(1) provided that tax shall be charged where an approval of a scheme ceases to have effect.
I agree with Judge Mosedale (para 121) that synonyms of where are the word whenever or the phrase if at any time.
Where the approval did not cease automatically but required the service of a notice by HMRC, the subsection did not deem tax to have been charged at a date earlier than the date on which the notice was served.
Like Lord Carnwath I interpret the subsection as looking to the future, consistently with but independently of the presumption that legislation speaks only as to the future: West v Gwynne [1911] 2 Ch 1, 12 per Buckley LJ.
In my view, by itself section 591C(1) pointed to a charge to tax in the tax year in which a section 591B(1) notice was issued.
Subsection (2), which imposed the capital charge, specified the rate of the charge by reference to the value of the assets immediately before the cessation of the approval of the scheme but made no statement as to the tax year in which that charge was to fall.
The other relevant provision is section 591D(7).
While it is possible to construe the subsection as the appellants urge, I am not persuaded by that interpretation.
In particular, I am not satisfied that the subsection contains clear and positive words to give retroactive effect to the section 591C tax charge in the circumstances of a section 591B(1) notice.
Like Moses LJ (at paras 18 22 of his judgment), I consider that it is no accident that different wording was adopted in section 591D(7), defining on the one hand approval of a scheme ceasing to have effect (the phrase used in section 591C(1)) and on the other the date of the cessation of the approval.
In relation to the former expression the subsection looked to the process by which withdrawal occurred; in the context of section 591D(7)(b) it referred to the notice of withdrawal of approval.
The service of the notice withdrew the approval.
I see no ambiguity there.
There is also no doubt that the latter expression referred to the date from which approval ceased to have effect.
That is the date which HMRC specified in its section 591B(1) notice, or the date when a scheme ceased to be an approved scheme automatically either under section 591A(2) on the expiry of time after the commencement of the section 591 Regulations or on an unauthorised alteration of a scheme under section 591B(2).
In each case the concluding phrase of section 591D(7) invited the reader to turn to whichever of the three enumerated statutory provisions was relevant to ascertain the date of cessation: the date was construed according to sections 591A(2), 591B(1) or 591B(2) as the case may be.
Where there was a section 591B(1) notice, it is the date of cessation specified in that notice.
This interpretation of the relevant provisions avoids a retroactive tax charge where there are no clear words imposing such a charge.
It is consistent with that of the First tier Tribunal, which Vos J in the Upper Tribunal and the Court of Appeal upheld.
Their unanimity strongly suggests that the clarity needed for a retroactive provision is lacking.
The presumption against retrospective tax charges is an important principle of statutory interpretation which in my view justifies the dismissal of this appeal.
There is also a good reason why the tax charge arising from withdrawal of approval under section 591B(1) is treated differently from the charge that arises out of the automatic cessation of approval in sections 591A(2) and 591B(2).
Parliament has not enacted that any circumstance justifying cessation of approval automatically results in that cessation, as in the latter provisions.
It required HMRC to give notice of withdrawal of approval when they were aware of facts which merited that withdrawal.
Where Parliament provided for automatic cessation of approval, the trustees of a relevant scheme were in a position to inform themselves as to the requirements of the regulations and to make sure that their scheme complied with them (section 591A(2)) and they would also know if they altered the terms of the scheme without HMRC approval (section 591B(2)).
By contrast, the trustees of a scheme might be unaware of circumstances which later caused HMRC to withdraw the approval of their scheme, for example, as occurred in this case, where the transactions which ultimately caused the removal of the approval were carried out by trustees of another scheme into which funds had been transferred.
To impose on the trustees a liability in interest for unpaid tax arising from circumstances of which they were unaware would be to tax retroactively.
Other arguments have been aired which I have not found persuasive.
I summarise them briefly.
First, the appellants derived support from section 61 of the Finance Act 1995, which, as I have said, introduced sections 591C and 591D into the TA.
Section 61(3) provided: This section shall apply in relation to any approval of a retirement benefits scheme which ceases to have effect on or after 2 November 1994 other than an approval ceasing to have effect by virtue of a notice given before that day under section 591B(1) of the Taxes Act 1988.
This transitional provision was designed to make sure that the tax charge under section 591C did not apply unless both the cessation of approval and the giving of the section 591B(1) notice occurred after 2 November 1994.
Mr Thornhill for the appellants was correct in his submission that the draftsman of this provision must have thought that the date of an approval ceasing to have effect was not the same as the date of the section 591B notice.
But, to my mind dubiously, the provision appears to assume that a section 591B notice could be made prospectively.
In my view that understanding in a transitional provision, which did not become part of the corpus of the TA, does not provide the needed clarity to construe the substantive tax provision, section 591C, as a retroactive tax charge.
Secondly, I was initially impressed by the respondents argument that, if the correct year of assessment when HMRC issued a section 591B(1) notice were the year of the date of cessation, it might be impracticable for HMRC to obtain the needed knowledge of offending transactions within the ordinary time limits under sections 34 and 36 of the Taxes Management Act 1970.
Those provisions require HMRC to make an assessment to tax within six years after the end of the chargeable period to which the assessment relates unless any form of fraud or wilful default has been committed.
But after the parties provided further information, at the courts request, on the matters which administrators have to report to HMRC, the argument lost much of its force.
The Retirement Benefits Schemes (Information Powers) Regulations 1995 (SI 1995/3103) required the administrator to report certain payments or transfers of scheme funds.
At the time of the transfer to the Vesuvius scheme the regulations did not require the reporting of a transfer from a small self administered scheme to an executive pension plan.
The tax avoidance scheme in this case exploited that loophole, which was later closed by the Retirement Benefits Schemes (Information Powers) (Amendment) Regulations 2002 (SI 2002/3006).
It appears that the administrator of the Vesuvius Scheme had no statutory duty to report and did not report the change of rules which permitted it to make loans.
But the relevant regulations could have been amended to require the reporting of events which might lead to the withdrawal of approval.
Thirdly and conversely, I am not swayed by Mr Thornhills observation that the interpretation that has found favour in the Court of Appeal and tribunals below would enable HMRC to impose a tax charge under section 591C which circumvented those ordinary time limits under sections 34 and 36 of the Taxes Management Act 1970.
He is correct.
But the tax charge was enacted to discourage abusive arrangements and thus differs from normal charges to tax.
Further, I do not accept his submission that HMRC could impose such a charge at any time: HMRC would be subject to a judicial review challenge if they acted capriciously or delayed unreasonably in their withdrawal of approval and imposition of the tax charge.
Finally, I do not derive assistance from the Scottish tax case of Spence v Inland Revenue Comrs (1941) TC 311.
It concerned an assessment to surtax which a taxpayer had to pay after he had rescinded a contract for the sale of shares on the ground that it had been induced by fraudulent misrepresentation.
The dividends had been paid to the purchaser in the interim, but the taxpayer achieved restitutio in integrum through the setting aside of the sale, the retransfer of the shares and the payment of a sum representing the dividends.
The Revenue repaid the surtax assessed on the dividends to the fraudulent purchaser and assessed the taxpayer instead.
In my view it is unsurprising that the Inner House upheld the assessments of the taxpayer in the years of assessment in which the dividends had been paid by the company, as the setting aside of the sale of the shares restored the taxpayer to the position that he had been in ab initio.
The case involved no imposition of a retroactive tax charge by parliamentary legislation but only the application of normal tax rules to circumstances which the general law had reinstated.
Conclusion
I am with respect unable to agree with the majority as I consider that their views give insufficient weight to the statutory language in the light of the important presumption against retroactive taxation.
I would dismiss the appeal.
LORD CARNWATH: (who agrees with Lord Hodge)
appeal should be dismissed for the reasons given by Lord Hodge.
The principal difficulty I see with the alternative view is that it is inconsistent with the language of the statute, in particular of the charging provision.
Section 591C(1) is expressed in unequivocal terms.
It is directed to the future: tax shall be charged .
Similarly, the occasion of the charge is fixed by reference to the future not the past: where an approval ceases to have effect, defined (by section 591D(7)(b)) as a reference to the approval being withdrawn under section 591B(1).
That sub section in turn makes clear that the approval is withdrawn by notice to the administrator, although it will take effect from an earlier date determined by the Board as specified in the notice.
Taken together, to my mind, those provisions indicate unambiguously that the charge arises in the year when the notice is served, not some earlier year.
I do not see how the majoritys interpretation can be achieved without reading into section 591C(1) words which are not there.
That view is reinforced by the strong presumption against retroactivity, to which Lord Hodge has referred.
In respectful disagreement with the majority, I would have held that the accordingly might be thought to point to the date of cessation of the approval being the same as the date of withdrawal under paragraph (b).
That is not a problem which we need to resolve, since it is common ground that it refers to the date from which the withdrawal takes effect, as specified in the notice.
This seems to me at least a possible interpretation (on either view of the charging provision), and it is one clearly justified by a purposive approach to the use of the expression cessation of the approval where it occurs in section 591C.
However, it has no direct relevance to section 591C(1), which does not use that expression.
I can see no principled basis for using that possible difficulty as an excuse for rewriting the otherwise clear words of the charging provision.
The main argument to the contrary turns on the last words of section 591D(7), which as all agree is not clearly drafted.
At first sight, the words shall be construed
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Until 2006, pension schemes could be approved by the Inland Revenue (now HMRC).
Taxpayers who paid contributions into approved pension schemes received relief from income tax on their contributions, but were subject to certain restrictions on the application of the fund.
In particular, with limited exceptions assets could only be withdrawn from an approved pension scheme on retirement (or death, if earlier), and then had to be used to purchase an annuity.
A practice arose under which small pension schemes would gain approval and the consequent tax advantages, then be managed in such a way as to lose their approval, so that the scheme funds could be withdrawn free of the restrictions.
Parliament enacted anti avoidance legislation to prevent this practice.
The Income and Corporation Taxes Act 1988 (as amended) sets out three scenarios where a schemes approval may cease.
Approval is withdrawn automatically where the scheme fails to comply with regulations, in which case its approval automatically ceases 36 months after the introduction of the regulations (s 591A(2), a transitional provision), and immediately after an unapproved and unauthorised alteration is made to the scheme (s 591B(2)).
Where the Revenue considers that the facts cease to warrant the continuance of approval, the Revenue may also withdraw approval by notice from a date specified in the notice, which must not be earlier than the date when the facts first ceased to warrant the continuance of approval (s 591B(1)).
Under s 591C of the Act, once approval ceases to have effect, the scheme is liable to a 40% tax charge on an amount equal to the value of the scheme assets immediately before the date of the cessation of approval of the scheme.
The question arising in this appeal is when the charge is incurred where approval is withdrawn following the giving of notice by the Revenue under s 591B(1).
In that case, does approval cease to have effect at the date of the notice itself, or at the date from which the facts of the scheme cease to warrant the continuance of approval, as specified in the notice? The Revenue notified the administrator of the Appellant pension scheme on 19 April 2000 that approval was withdrawn under s 591B(1) with effect from 5 November 1996.
The Revenue says that the 40% tax charge fell to be assessed in the 2000/1 tax year when the withdrawal was notified.
The taxpayer says that it fell to be assessed in the 1996/7 tax year when the scheme ceased to be eligible and withdrawal of approval took effect under the Revenues notice (and therefore that the Revenue is out of time to impose the assessment).
The First tier tribunal, Upper Tribunal and Court of Appeal all considered that the tax charge fell in the 2000/1 tax year.
The Supreme Court allows the appeal by a 3:2 majority.
Lord Sumption gives the leading judgment.
Lord Neuberger agrees with Lord Sumption and sets out his own reasoning.
Lord Reed agrees with both Lord Sumption and Lord Neuberger, and again sets out his own reasoning.
Lord Hodge and Lord Carnwath give dissenting judgments.
The charge is assessed on a notional profit or gain accruing immediately before the cessation of approval under s 591C(2). [9] The parties correctly agreed that the date of cessation of approval, immediately before which the fund is valued, is the date specified in the notice.
The conditions for liability to the tax charge in s 591C(4) (6A) only make sense on the footing that the cessation of the approval of the scheme is the effective date of the withdrawal of the approval and not the date of the notice itself. [11, 29] This is also the outcome which makes most sense as a matter of language and of principle: it avoids double taxation, and ensures that the fund is valued while it is still intact. [48] The words cessation of approval in s 591C(2) mean the same thing as the words ceases to have effect in s 591C(1).
The date of cessation of approval is obvious in the case of automatic withdrawal under ss 591A(2) and 591B(2): it is the date when the scheme ceases to qualify for approval.
The functional equivalent in the case of withdrawal by notice under s 591B(1) is the date specified in the Revenues notice.
This is the natural result of the language of these provisions, and also reflects their common purpose. [10, 50] This is confirmed by s 591D(7), which equates approval of the scheme being withdrawn with its ceasing to have effect and cessation of approval. [13, 50] Lord Neuberger notes that as a general proposition, the use of two different expressionsan approval [ceasing] to have effect in s 591C(1), and the cessation of the approval in s 591C(2)indicates an intention that the expressions should have different meanings; however, that presumption is rebutted by s 591D(7). [28, 30] The majoritys analysis is supported by s 61 of the Finance Act 1995 (introducing ss 591C and D into the 1988 Act), which presupposes that the date of the notice and the date of cessation of approval may be different. [12, 33] The result is therefore to expose the taxpayer to retrospective assessment and to the payment of interest from the earlier date.
Per Lord Sumption [15 20], this is not anomalous, but occurs whenever tax is assessed in arrears, and amounts simply to a recognition of facts which already existed; per Lord Neuberger [32], retroactivity is inherent in any case where a notice is served under s 591B(1), and it is consistent that the valuation of the assets and the charge to tax should take place at the same date; and per Lord Reed [52] the charge is not truly retrospective, because it involves the recovery of tax forgone at an earlier date in reliance upon an expectation as to the future management of the scheme which was not fulfilled, and it is legitimate to charge interest from the earlier date because the taxpayer has had the use of the money for that period.
The Revenues concern that it will often take more than the six year time limit to identify abusive schemes and issue the requisite notice is better addressed through the Revenues power to make regulations requiring the provision of information relating to any approved scheme; accepting the Revenues argument would effectively mean that there would be no time limit and that it could choose the chargeable period at its discretion. [21] Lord Hodge, dissenting, considers that s 591C(2) specifies the rate of the charge by reference to the value of the assets immediately before the cessation of approval of the scheme, but makes no statement as to the tax year in which that charge is to fall. [75] He emphasises that clear and positive words are needed to justify the imposition of retrospective tax and is not satisfied that s 591D(7) contains such words, particularly in light of the different conclusion reached by the lower courts. [72 73, 76] Rather, s 591D(7) shows that the words approval of a scheme ceasing to have effect in s 591C(1) look to the process by which withdrawal occurred, namely the giving of the notice. [77] The administrator of a pension scheme may, as in this case, be unaware of the circumstances which later cause the Revenue to withdraw approval of their scheme, and it would be unfair retroactive taxation to impose a liability in interest for unpaid tax on the scheme administrator in such circumstances. [79] The majoritys other points do not provide the needed clarity. [80 84] Lord Carnwath, agreeing with Lord Hodge, considers that the s 591C(1) charging provision unequivocally provides that an approval ceases to have effect when it is withdrawn by notice and so the charge arises in the year when the notice is served. [87] Section 591D(7) provides no principled basis for rewriting it. [88]
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The appellant Dermot Patrick OBrien (Mr OBrien) is a retired barrister.
He also held part time judicial office as a recorder appointed under section 21 of the Courts Act 1971, as amended.
He claims to be entitled to a pension in respect of his part time non salaried judicial work.
The case raises questions of domestic law about the status and terms of service of part time non salaried judges in England and Wales.
They include chairmen and members of tribunals and others exercising judicial functions for remuneration.
It also raises important questions of EU law as to which, having sought a preliminary ruling under article 267 of the Treaty for the Functioning of the European Union (the TFEU), the court has now received guidance from the Court of Justice of the European Union (the CJEU).
The effect of section 3(1) of the European Communities Act 1972 is that the questions of EU law must be determined in accordance with the principles laid down in its preliminary ruling by that court.
The EU law questions relate to Council Directive 97/81/EC of 15 December 1997 [1997] OLJ 14/9 (the PTWD) concerning the Framework Agreement on part time work which was concluded on 6 June 1997 between the general cross industry organisations (UNICE, CEEP and ETUC) and is annexed to the Directive (the Framework Agreement).
Directives are binding as to the result to be achieved, leaving only the choice of form and methods to the Member State: article 288 TFEU.
The PTWD was extended to the United Kingdom by Directive 98/23 [1998] OJL 131/10.
It was transposed into domestic law by the Part time Workers (Prevention of Less Favourable Treatment) Regulations 2000, SI 2000/1551 (the 2000 Regulations), which were made under section 19 of the Employment Relations Act 1999.
They came into force on 1 July 2000.
Background
With the encouragement of the leader of the Western Circuit, Mr OBrien, who was then in practice as a barrister, decided to apply to become a recorder.
He was appointed as a recorder with effect from 1 March 1978, and he continued sitting as a recorder with regular extensions until he ceased to hold that office on 31 March 2005.
The question then arose as to whether, as he was no longer the holder of a judicial office, he was entitled to a pension under the judicial pension scheme.
The office of recorder is not one of the judicial offices for which provision for the payment of pensions was made in the Judicial Pensions Act 1981.
Further provisions for the payment of pensions to judicial office holders are contained in the Judicial Pensions and Retirement Act 1993 (the 1993 Act).
Section 2 of the 1993 Act provides that any person retiring from qualifying judicial office having attained the age of 65 and having completed at least 5 years service in qualifying judicial office is entitled to receive a pension at the appropriate annual rate.
Section 1(6) provides that, for the purposes of the Act, any reference to a qualifying office is a reference to any office specified in Schedule 1 to the Act if that office is held on a salaried basis.
The office of recorder is not one of the offices specified in Schedule 1.
On 9 June 2005 Mr OBrien wrote to the Department of Constitutional Affairs requiring that he be paid a retirement pension on the same basis, adjusted pro rata temporis, as that paid to former full time judges who had been engaged on the same or similar work.
He was informed by the Department in its reply dated 5 July 2005 that he fell outside the categories of judicial office holder to whom a judicial pension was payable.
This was because the office of recorder was not a qualifying judicial office under the 1993 Act, and because there was no obligation to provide him with a pension under European law as he was an office holder, not a worker.
Mr OBrien was not satisfied with the reasons he was given.
On 29 September 2005 he started proceedings in the Employment Tribunal in which he claimed among other things that he was being discriminated against because he was a part time worker.
His claim was brought under the Equal Pay Act 1970, the Sex Discrimination Act 1975 and the Human Rights Act 1998 together with the PTWD and the 2000 Regulations.
The claim was opposed by the Department of Constitutional Affairs (now the Ministry of Justice) unsuccessfully in the Employment Tribunal, but successfully on appeal to the Employment Appeal Tribunal, on the grounds that it was out of time, as it ought to have been presented within three months of the date when he ceased to hold office, and that there was no relevant statutory extension of the time within which a claim could be presented.
But it was later ordered, by consent, that the substantive issue and the time limit issue should both be heard by the Court of Appeal as a test case.
On 19 December 2008 the Court of Appeal (the Chancellor, Smith and Maurice Kay LJJ) allowed Mr OBriens appeal on the time limit issue, but directed the Employment Tribunal to dismiss the claim on the issue of substance: Department of Constitutional Affairs v OBrien [2008] EWCA Civ 1448, [2009] ICR 593, [2009] 2 CMLR 15.
Its findings on the substantive issue were that judges are not workers, either under the main definition in regulation 1(2) of the 2000 Regulations which requires there to be a contract or under the extended definition of worker in regulation 12 which applies to Crown employment: see paras 15 and 17, below.
Mr OBrien was given permission to appeal to the Supreme Court.
On 28 July 2010 this court, having considered the parties written and oral submissions and submissions for the Council of Immigration Judges as interveners, referred two questions to the CJEU for a preliminary ruling under Article 267 TFEU: see [2010] UKSC 34, [2011] 1 CMLR 36, to which reference may be made for much of the background.
The questions that were referred were as follows: 1) Is it for national law to determine whether or not judges as a whole are workers who have an employment contract or employment relationship within the meaning of clause 2.1 of the Framework Agreement, or is there a Community norm by which this matter must be determined? 2) If judges as a whole are workers who have an employment contract or employment relationship within the meaning of clause 2.1 of the Framework Agreement, is it permissible for national law to discriminate (a) between full time and part time judges, or (b) between different kinds of part time judges in the provision of pensions?
On 1 March 2012 the Second Chamber of the CJEU, having received the opinion of the Advocate General (Kokott) on 17 November 2011, gave judgment.
It answered the questions as follows [2012] ICR 955, para 68: 1) European Union law must be interpreted as meaning that it is for the member states to define the concept of workers who have an employment contract or an employment relationship in clause 2.1 of the Framework Agreement . and in particular, to determine whether judges fall within that concept, subject to the condition that that does not lead to the arbitrary exclusion of that category of persons from the protection offered by Directive 97/81, as amended by Directive 98/23, and that agreement.
An exclusion from that protection may be allowed only if the relationship between judges and the Ministry of Justice is, by its nature, substantially different from that between employers and their employees falling, according to national law, under the category of workers. 2) The Framework Agreement . must be interpreted as meaning that it precludes, for the purpose of access to the retirement pension scheme, national law from establishing a distinction between full time judges and part time judges remunerated on a daily fee paid basis, unless such a difference in treatment is justified by objective reasons, which is a matter for the referring court to determine.
The effect of the questions that were referred, and of the ruling in response to them, is to divide the issues raised by Mr OBriens case into two parts.
Firstly, there is the worker issue: whether the relationship between judges and the Ministry of Justice is substantially different from that between employers and persons who fall to be treated in national law as workers.
The principles to which the CJEU refers are of general application.
So although the argument was directed to the position of recorders like Mr OBrien, the issue is of interest to all part time judges, not just recorders.
Secondly, there is the objective justification issue: whether the difference in treatment of part time judges is justified by objective reasons.
The answer to this issue may differ from one kind of non salaried part time judge to another.
So, in addressing it, the court will confine its attention to recorders.
The question is whether there is an objective justification for treating recorders, all of whom are non salaried, differently from full time or salaried judges for the purposes of access to the retirement pension scheme.
The matter came before this court for a further oral hearing on 4 July 2012, when it also had before it written submissions on behalf of the Council of Immigration Judges.
In the light of the discussion at that hearing the court made a preliminary ruling that Mr OBrien was at the material time a part time worker within the meaning of clause 2.1 of the Framework Agreement, for reasons that were to be given in writing at a later date.
That ruling was communicated to the parties by the Registrar on 9 July 2012.
The court also gave case management directions for the future course of the proceedings.
The parties were told that the court had decided not to direct an immediate remission to the Employment Tribunal on the issue of objective justification, and that remission would be appropriate only if there were significant disputed issues of fact to be determined.
Directions were given for the presentation of the parties cases on the objective justification issue as it applied to recorders at a further hearing to be held on 21 November 2012, at which the court would determine what issues, if any, should be remitted and decide any issues that were not to be remitted.
This judgment does two things.
First, it sets out the courts reasons for its preliminary ruling on the worker issue which, together with the introduction, have been prepared by Lord Hope.
Secondly, it sets out the courts reasoning and conclusions on the issue of objective justification.
They have been prepared by Lady Hale.
The court acknowledges and is grateful for all the work by the legal advisers on both sides in preparing a considerable volume of documentary evidence and other material against a demanding timetable.
The PTWD and the Framework Agreement
The PTWD contains in recital (11) a reference to the parties to the Framework Agreement wishing to establish a general framework for eliminating discrimination against part time workers and to contribute to developing the potential for part time work on a basis which is acceptable for employers and workers alike.
Recital (16) is as follows: Whereas, with regard to terms used in the Framework Agreement which are not specifically defined therein, this Directive leaves Member States free to define those terms in accordance with national law and practice, as is the case for other social policy Directives using similar terms, providing that the said definitions respect the content of the Framework Agreement.
Article 1 states that the purpose of the Directive is to implement the Framework Agreement.
Article 2 requires Member States to transpose it into national law by 20 January 2000 at the latest.
Clauses 1 and 2 of the Framework Agreement are as follows: Clause 1: Purpose The purpose of this Framework Agreement is: (a) to provide for the removal of discrimination against part time workers and to improve the quality of part time work; (b) to facilitate the development of part time work on a voluntary basis and to contribute to the flexible organization of working time in a manner which takes into account the needs of employers and workers.
Clause 2: Scope 1.
This Agreement applies to part time workers who have an employment contract or employment relationship as defined by the law, collective agreement or practice in force in each Member State. 2.
Member States, after consultation with the social partners in accordance with national law, collective agreements or practice, and/or the social partners at the appropriate level in conformity with national industrial relations practice may, for objective reasons, exclude wholly or partly from the terms of this Agreement part time workers who work on a casual basis.
Such exclusions should be reviewed periodically to establish if the objective reasons for making them remain valid.
The Ministry of Justice do not place any reliance on Clause 2(2).
Clause 3 contains definitions of part time worker and comparable full time worker.
Clause 4 sets out the principle of non discrimination: Clause 4: Principle of non discrimination 1.
In respect of employment conditions, part time workers shall not be treated in a less favourable manner than comparable full time workers solely because they work part time unless different treatment is justified on objective grounds. 2.
Where appropriate, the principle of pro rata temporis shall apply. 3.
The arrangements for the application of this clause shall be defined by the Member States and/or social partners, having regard to European legislation, national law, collective agreements and practice. 4.
Where justified by objective reasons, Member States after consultation of the social partners in accordance with national law, collective agreements or practice and/or social partners may, where appropriate, make access to particular conditions of employment subject to a period of service, time worked or earnings qualification.
Qualifications relating to access by part time workers to particular conditions of employment should be reviewed periodically having regard to the principle of non discrimination as expressed in Clause 4.1.
The domestic regulations
The United Kingdom gave effect to the PTWD and the Framework Agreement by the 2000 Regulations which were made on 8 June 2000 and came into force on 1 July 2000.
The Regulations were made under section 19 of the Employment Relations Act 1999.
Regulation 1(2) contains definitions, including: contract of employment means a contract of service or of apprenticeship, whether express or implied, and (if it is express) whether oral or in writing; worker means an individual who has entered into or works under or (except where a provision of these Regulations otherwise requires) where the employment has ceased, worked under (a) a contract of employment; or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
There is no reference to employment relationship.
Regulation 2 (as amended) contains definitions of a full time worker, a part time worker and a comparable full time worker.
It is common ground that if Mr OBrien was a worker at all, he was a part time worker.
Regulation 5 sets out the prohibition on unjustified less favourable treatment of part time workers: 5.
Less favourable treatment of part time workers (1) A part time worker has the right not to be treated by his employer less favourably than the employer treats a comparable full time worker (a) as regards the terms of his contract; or (b) by being subjected to any other detriment by any act, or deliberate failure to act, of his employer. (2) The right conferred by paragraph (1) applies only if (a) the treatment is on the ground that the worker is a part time worker, and (b) the treatment is not justified on objective grounds. (3) In determining whether a part time worker has been treated less favourably than a comparable full time worker the pro rata principle shall be applied unless it is inappropriate.
Part IV of the regulations is headed Special Classes of Person and contains six Regulations numbered 12 to 17.
Regulation 12 (Crown employment) provides (so far as now material): (1) Subject to regulation 13, these Regulations have effect in relation to Crown employment and persons in Crown employment as they have effect in relation to other employment and other employees and workers. (2) In paragraph (1) Crown employment means employment under or for the purposes of a government department or any officer or body exercising on behalf of the Crown functions conferred by a statutory provision.
Regulations 13 (Armed forces), 14 (House of Lords staff), 15 (House of Commons staff) and 16 (Police service) make similar provision for the classes of service personnel, office holders or employees to which they relate (but subject to an exception for certain types of military training under the Reserve Forces Acts).
Subject to that exception, all these provisions include within the scope of the Regulations persons who would not or might not otherwise be included.
By contrast regulation 17 (Holders of judicial offices) disapplies the Regulations in relation to fee paid part time judges: These Regulations do not apply to any individual in his capacity as the holder of a judicial office if he is remunerated on a daily fee paid basis.
The parties take different views as to whether, in the absence of regulation 17, fee paid part time judges would have been treated as part time workers for the purposes of the Regulations.
The facts
Until the 1970s part time judges, variously styled as recorders, commissioners or chairmen of Quarter Sessions, were a smaller proportion of the judiciary in England and Wales than they are now.
Many part time judicial officers who are now called judges were then designated by other terms such as registrars, stipendiary magistrates, tribunal chairmen and social security or tax commissioners.
Professor Bell, Judiciaries in Europe (2006), p 312 records that in 1970 full time judges outnumbered part time judges by about three to one.
All these part time judges were the holders of a statutory judicial office.
They were remunerated by fees calculated on a daily fee paid basis.
The Courts Act 1971 made major changes in the justice system and (as amended) conferred the powers under which all recorders are still appointed.
Section 21 of the Courts Act 1971, as originally enacted, was in the following terms: (1) Her Majesty may from time to time appoint qualified persons, to be known as Recorders, to act as part time judges of the Crown Court and to carry out such other judicial functions as may be conferred on them under this or any other enactment. (2) Every appointment of a person to be a Recorder shall be of a person recommended to Her Majesty by the Lord Chancellor, and no person shall be qualified to be appointed a Recorder unless he is a barrister or solicitor of at least ten years standing. (3) The appointment of a person as a Recorder shall specify the term for which he is appointed and the frequency and duration of the occasions during that term on which he will be required to be available to undertake the duties of a Recorder. (4) Subject to subsection (5) below the Lord Chancellor may, with the agreement of the Recorder concerned, from time to time extend for such period as he thinks appropriate the term for which a Recorder is appointed. (5) Neither the initial term for which a Recorder is appointed nor any extension of that term under subsection (4) above shall be such as to continue his appointment as a Recorder after the end of the completed year of service in which he attains the age of 72. (6) The Lord Chancellor may if he thinks fit terminate the appointment of a Recorder on the ground of incapacity or misbehaviour or of a failure to comply with any requirement specified under subsection (3) above in the terms of his appointment. (7) There shall be paid to Recorders out of money provided by Parliament such remuneration and allowances as the Lord Chancellor may, with the approval of the Minister for the Civil Service, determine.
The section has been amended from time to time.
The most significant amendment, influenced by the Human Rights Act 1998, was the introduction of safeguards limiting the Lord Chancellors right to decline to extend, or to terminate, an appointment.
This amendment gave effect to new terms and conditions of service promulgated by the Lord Chancellors Department in 2000.
Recorders appointments are automatically extended under section 21(4) at the end of the five year appointment for further successive terms of five years, subject to the individuals agreement and the upper age limit, unless a question of cause for non renewal is raised or the individual no longer satisfies the conditions or qualifications for appointment.
Since the Courts Act 1971 was enacted there has been a remarkable growth in the number and type of part time judges.
The Council of Immigration Judges estimate that there are now about thirty types of fee paid part time judges in the United Kingdom, and that they are relied upon substantially in all but three specialist tribunals.
Statistics in Professor Bells chapter (table 6.1a) show that there were 2,041 part time judges (recorders and deputy district judges) in 1993 and 2,414 in 2005 (including 200 female deputy district judges, up from 89 in 1993, indicating the success of the official policy of encouraging women to become part time judges).
There are now almost twice as many part time judges (recorders and deputy district judges) as full time judges.
These figures do not take account of remunerated chairmen and members of tribunals, the structure of which has been radically reformed by the Tribunals Courts and Enforcement Act 2007.
Submissions from the Council of Immigration Judges show that in 2009 there were 145 full time immigration judges and 440 part time immigration judges (the latter group being divided between salaried part time judges and fee paid part time judges as mentioned below).
The proportion of sitting days worked by fee paid judges rose from 49% in 2008 to 72% in 2010 and 2011.
For about 30 years after the Courts Act 1971 all part time judges were remunerated on a fee paid basis.
That was not a statutory requirement, as section 21(7) is in very general terms.
It was an administrative arrangement chosen by the Lord Chancellors Department (later the Department of Constitutional Affairs, and now the Ministry of Justice).
Since about 2000 there has been an increase in salaried part time judges, especially among district judges and immigration judges.
As they are salaried holders of qualifying judicial offices, they are entitled to receive a judicial pension under the 1993 Act on their retirement.
The Lord Chancellor has from time to time issued and amended written memoranda as to the terms and conditions of service of recorders.
The memorandum current in 1978 when Mr OBrien was appointed contained 15 paragraphs covering, among other things, a requirement for attendance at sentencing conferences, and the frequency and duration of sittings and fees.
There was a minimum sitting requirement of at least 20 days a year, which could be split into two periods of at least ten days.
Subject to certain limitations provided for in the terms and conditions, he was not precluded from continuing in professional practice.
Many recorders continued to provide services for remuneration as barristers or solicitors in addition to holding that judicial office.
It was the expectation of the Lord Chancellor when preparing these memoranda that persons appointed as recorders would normally be in active practice or hold a full time judicial office.
The version of the terms and conditions current at Mr OBriens retirement, which was issued in April 2000, is a more elaborate document of 49 paragraphs together with two appendices on relations with the media.
Most of the new material dealt with the renewal of appointments and judicial conduct.
A recorder is entitled to be offered a minimum of fifteen sitting days a year and may be required to sit for up to thirty days unless there are reasonable grounds for not sitting.
The daily fee is unspecified.
But in practice all part time judicial office holders are paid one 220th of the annual salary of a full time judicial office holder of the same court or tribunal.
A fee at half the daily rate is paid for attending Judicial Studies Board residential conferences.
The submissions for the Council of Immigration Judges state that some immigration judges work part time on a salaried basis.
A substantial majority, estimated to be about 75%, work part time on a daily fee paid basis.
Fee paid part time immigration judges sittings should not normally exceed 105 days a year, but for each days sitting an immigration judge is credited a further days work and pay for writing determinations and similar out of court duties.
In practice they work up to 210 days per year.
They are paid at about half a days fee to attend mandatory training days.
Some immigration judges combine their work as a fee paid immigration judge with other fee paid judicial work in courts and other tribunals.
But about half are estimated to rely on their remuneration as fee paid immigration judges as their principal income.
All part time judges are entitled, where appropriate, to sick pay, maternity or paternity pay and similar benefits during service.
Full time judges and salaried part time judges are entitled to pensions on retirement, subject to and in accordance with the provisions of the Judicial Pensions Act 1981 and the Judicial Pensions and Retirement Act 1993.
Fee paid part time judges have no entitlement to a judicial pension on retirement.
Pensions under the 1981 Act are calculated on a basis related to salary and, as already noted, references in the 1993 Act to a qualifying judicial office limit the entitlement to the holder of an office specified in Schedule 1 to the Act that is held on a salaried basis: 1993 Act, section 2(1).
The worker issue
The CJEU noted in paras 30 to 33 of its judgment that there is no single definition of worker in EU law.
The PTWD and the Framework Agreement do not aim at complete harmonisation of national laws in this area, but only, as the agreements name indicates, to establish a general framework for eliminating discrimination against part time workers.
It is for national law to determine whether a person in part time work has a contract of employment or an employment relationship: Wippel v Peek & Cloppenburg GmbH & Co KG C 313/02 [2005] 1CR 1604, para 40.
The discretion given to member states is however qualified by the need to respect the effectiveness of the PTWD, and general principles of EU law: paras 34 to 38.
A member state may not remove at will, in violation of the effectiveness of the directive, categories of persons from protection.
In particular, the sole fact that judges are treated as judicial office holders is insufficient in itself to exclude the latter from enjoying the rights provided for by the Framework Agreement: para 41.
Such an exclusion may be permitted, if it is not to be regarded as arbitrary, only if the nature of the employment relationship is substantially different from the relationship between employers and their employees which fall within the category of workers under national law.
The CJEU stated in para 43 of its judgment: It is ultimately for the referring court to examine to what extent the relationship between judges and the Ministry of Justice is, by its nature, substantially different from an employment relationship between an employer and a worker.
The court may, however, mention to the referring court a number of principles and criteria which it must take into account in the course of its examination. [emphasis added] The principles and criteria which it then set out include the following: (1) The term worker is used in the definition of the scope of the Framework Agreement to draw a distinction from a self employed person, and the court will have to bear in mind that this distinction is part of the spirit of the Framework Agreement on part time work: para 44, referring to para 48 of the opinion of the Advocate General. (2) The rules for appointing and removing judges must be considered, and also the way their work is organised.
The fact that judges are expected to work during defined times and periods, albeit with a greater degree of flexibility than members of other professions, and that they are entitled to benefits such as sick pay are also relevant: paras 45 and 46. (3) The fact that judges are subject to terms of service and that they might be regarded as workers within the meaning of the Framework Agreement on part time work would not undermine the principle of the independence of the judiciary, or respect for the national identities of Member States.
It merely aims to extend to those judges the scope of the principle of equal treatment and to protect them against discrimination as compared with full time workers: paras 47 to 49.
At the hearing on 4 July 2012 there was argument about whether the case should be remitted to the Employment Tribunal for further fact finding on the issues of (i) whether Mr OBrien was a worker for EU law purposes, and (ii) objective justification.
This court concluded, although only after the end of the oral argument, that it had sufficient evidence to determine the worker issue.
It has also concluded that it need not, and should not, decide the very large question of whether all or any servants of the Crown have contracts of employment.
Mr Allen QC for Mr OBrien pragmatically observed that his client wanted to win and that, so long as his client did so, he did not intend to press the court to express a view about the existence of a contract of employment.
So the issue turns on whether there is an employment relationship in the relevant sense.
Mr Allen pointed out that in making the reference to the CJEU the Supreme Court had already expressed the view that recorders are subject to the sort of terms of service referred to by Sir Robert Carswell LCJ in Perceval Price v Department of Economic Development [2000] IRLR 380.
The claimants in that case were three female holders of full time judicial office.
They brought claims on sex discrimination grounds, but the statutory provisions under which they were made excluded the holder of a statutory office.
Giving the judgment of the court, Sir Robert Carswell pointed out that the purpose of article 119 of the Treaty and of the Equal Pay and Equal Treatment Directives was to protect against discrimination.
At p 384 he said: All judges, at whatever level, share certain common characteristics.
They all must enjoy independence of decision without direction from any source, which the respondents quite rightly defended as an essential part of their work.
They all need some organisation of their sittings, whether it be prescribed by the president of the industrial tribunals or the Court Service, or more loosely arranged in collegiate fashion between the judges of a particular court.
They are all expected to work during defined times and periods, whether they be rigidly laid down or managed by the judges themselves with a greater degree of flexibility.
They are not free agents to work as and when they choose, as are self employed persons.
Their office accordingly partakes of some of the characteristics of employment .
Agreeing with these observations, this court said in para 27 of its judgment on the reference that judicial office partakes of most of the characteristics of employment.
However, because domestic law could not readily be disentangled from EU law on this issue, it preferred to express no concluded view as to whether judges as a general class would qualify as workers under the Regulations, or whether Mr OBrien would qualify as a worker if regulation 17 were to be disregarded, until it had received guidance from the CJEU.
Mr Allen submitted that nothing in the judgment of the CJEU tended to cast doubt on this courts provisional opinion.
The argument for the Ministry of Justice is that there is no obligation to provide Mr OBrien with a pension under European law as he was a judicial office holder, not a worker.
As Mr David Staff of the then Department of Constitutional Affairs explained in a statement that was shown to the Employment Tribunal, judicial office holders were seen as being in a distinct category with an entirely separate status.
Fundamental to the concept of judicial independence was the fact that judicial office holders exercise their function wholly independently of influence or direction by any Minister, Government Department or agency.
The CJEU has, however, made it clear that the principle that judges are independent in the exercise of the function of judging as such is not called into question by extending to part time judges the scope of the principle of equal treatment to protect them against discrimination as compared with full time workers: paras 47 49.
In these paragraphs the court was, in effect, endorsing the observations of Advocate General Kokott, where she said in paras 50 51 of her opinion: 50 In this connection, I would also point out that it is difficult to determine how the rights granted by the Framework Agreement in general, and an entitlement to a retirement pension in particular, can jeopardise the essence of the independence of a judge; on the contrary, an entitlement to a retirement pension strengthens the economic independence of judges, and thus also the essence of their independence. 51 Independence in terms of the essence of an activity is not therefore an appropriate criterion for justifying the exclusion of a professional category form the scope of the Framework Agreement.
In these circumstances Mr Cavanagh QC for the Ministry did not pursue the
argument that the principle of the independence of the judiciary justified according a different status for the purposes of the Framework Agreement to recorders from that which governed ordinary departmental staff in the civil service.
The fact that recorders are not subject to direction or control over the decisions that they take in the performance of the responsibilities of their office does not deprive them of the protection against discrimination that the Framework Agreement was designed to provide.
Instead, recognising that this argument was no longer open to him, Mr Cavanagh confined his argument to addressing points of detail.
He submitted that a recorders terms and conditions of service, as set out in a succession of memoranda from the Lord Chancellor, did not tell the whole story.
It was, he submitted, necessary to go into the reality and substance of the matter.
The issue could only be resolved if one was in possession of the full facts.
In particular, evidence could usefully be heard about such matters as the way recorders were appointed and removed, the way their work was organised, whether sanctions were imposed upon recorders for sitting less than the minimum of 15 days a year and whether in practice the fixing and carrying out of sitting engagements was substantially different from the other professional commitments they undertook.
He submitted that, while salaried part time judges would have a stronger case for being regarded as workers, fee paid part time judges are in a position similar to self employed persons.
If the case were remitted to the Employment Tribunal, the evidence would show that the booking of judicial sittings by a recorder is similar to the booking of counsels engagements.
One could not assume that the position of other judges was the same as that for recorders, although his position was that they all fell outside the definition of worker within the meaning of the Framework Agreement.
As narrated in para 11, above, the court was satisfied that it was unnecessary to remit the matter to the Employment Tribunal on the worker issue, and that it should confirm its provisional view expressed in paragraph 27 of its judgment on the reference.
Nothing in the judgment of the CJEU is inconsistent with that provisional view, and much of the judgment supports it.
Following the guidance that the CJEU provided in para 43 of its judgment (see para 30, above), account in arriving at this decision was taken of the following matters mentioned in paras 44 46: (i) the fact that the character of the work that a recorder does in the public service differs from that of a self employed person; (ii) the rules for their appointment and removal, to which no self employed person would subject himself; (iii) the way their work is organised for them, bearing in mind that recorders, in common with all other part time judges, are expected to work during defined times and periods; (iv) their entitlement to the same benefits during service, as appropriate, as full time judges.
The court does not accept that the terms and conditions laid down by the Lord Chancellor for recorders do not give a true picture of the reality of the work that is done by a recorder.
On the contrary, Mr OBriens evidence shows that he was on one occasion required to explain why he had in two successive years failed to achieve the required number of sittings, and Mr OBrien had to explain and apologise.
The reality is that recorders are expected to observe the terms and conditions of their appointment, and that they may be disciplined if they fail to do so.
The very fact that most recorders are self employed barristers or solicitors merely serves to underline the different character of their commitment to the public service when they undertake the office of recorder.
As the CJEU made clear in para 44, the spirit and purpose of the Framework Agreement requires that a distinction must be made between the category of worker and that of self employed persons.
The matters referred to in the previous paragraph, taken together, really speak for themselves.
The self employed person has the comparative luxury of independence.
He can make his own choices as to the work he does and when and where he does it.
He works for himself.
He is not subject to the direction or control of others.
Of course, he must adhere to the standards of his trade or profession.
He must face the reality that, if he is to succeed, he must satisfy the needs and requirements of those who engage his services.
They may be quite demanding, and the room for manoeuvre may be small.
But the choices that must be made are for him, and him alone, to take.
In Percy v Board of National Mission of the Church of Scotland [2005] UKHL
73, [2006] 2 AC 28, para 141, Lady Hale referred to the authors comment in Harvey on Industrial Relations and Employment Law, para A[4] that the distinction as to whether a person is in an employment relationship is between those who work for themselves and those who work for others, regardless of the nature of the contract under which they are employed.
This was the same distinction that in para AG48 Advocate General Kokott said must be made in order to have regard to the spirit and purpose of the Framework Agreement.
In para 145 Lady Hale quoted the passage from Sir Robert Carswells judgment in Perceval Price v Department of Economic Development [2000] IRLR 380, 384, where he said that judges are not free agents to work as and when they choose as are self employed persons, and that their office partakes of some of the characteristics of employment: see para 31, above.
In para 146 Lady Hale went on to say this: I have quoted those words because they illustrate how the essential distinction is, as Harvey says, between the employed and the self employed.
The fact that the worker has very considerable freedom and independence in how she performs the duties of her office does not take her outside the definition.
Judges are servants of the law, in the sense that the law governs all that they do and decide, just as clergy are servants of God, in the sense that Gods word, as interpreted in the doctrine of their faith, governs all that they practise, preach and teach.
This does not mean that they cannot be workers or in the employment of those who decide how their ministry should be put to the service of the Church.
As that was a case about the rights of a member of the clergy, she did not say, and did not have to say, in so many words that judges can be workers.
But in their case too, and especially in the case of those who work as part time judges, the same essential distinction between the employed and the self employed can be drawn.
The fact is, as the matters referred to above make clear, that they are not free agents to work as and when they choose.
They are not self employed persons when working in that capacity.
For these reasons the court holds recorders are in an employment relationship within the meaning of clause 2.1 of the Framework Agreement on part time work and that, as the result to be achieved by the PTWD is binding on the United Kingdom, they must be treated as workers for the purposes of the 2000 Regulations.
Objective justification
The Part Time Workers Directive, like the Fixed term Work Directive, is unusual in allowing the justification of direct discrimination against part time workers.
Clause 4.1 of the Framework Agreement (quoted at para 14 above) prohibits treating part time workers less favourably than comparable full time workers, solely because they work part time, unless different treatment is justified on objective grounds.
Regulation 5(2) of the domestic 2000 Regulations (quoted at para 17 above) is to the same effect.
However, clause 4.2 of the Framework Agreement sets out the general principle that where appropriate, the principle of pro rata temporis shall apply.
Regulation 5(3) is to the same effect.
Hence the usual expectation is that part time workers will receive the same remuneration and other benefits as comparable full time workers, calculated on a pro rata basis, unless there are objective grounds for departing from this principle.
There is, however, little guidance from the CJEU as to what might constitute such objective grounds, other than that which we have been given in this particular case, at paras 64 to 66 of the judgment of the court: 64 . the concept objective grounds . must be understood as not permitting a difference in treatment between part time workers and full time workers to be justified on the basis that the difference is provided for by a general, abstract norm.
On the contrary, that concept requires the unequal treatment at issue to respond to a genuine need, be appropriate for achieving the objective pursued and be necessary for that purpose: see, by way of analogy with clause 5.1(a) of the Framework Agreement on Fixed term Work, Del Cerro Alonso [2008] ICR 145, paras 57 and 58. 65 Since no justification has been relied on during the proceedings before the court, it is for the referring court to examine whether the inequality of the treatment between full time judges and part time judges remunerated on a daily fee paid basis may be justified. 66 It must be recalled that budgetary considerations cannot justify discrimination: see, to that effect, Schnheit v Stadt Frankfurt am Main (Joined Cases C 4/02 and C 5/02 [2003] ECR I 12575, para 85, and Zentralbetriebsrat der Landeskrankenhuser Tirols v Land Tirol (Case C 486/08) [2010] ECR I 3527, para 46.
The first sentence of para 64 means no more than that it is not enough for a member state to provide for the difference in treatment in its law (or enforceable collective agreement): see Adeneler v Ellenikos Organismos Galaktos (Case C 212/04) [2006] ECR I 6057.
The fact that regulation 17 of the domestic Regulations excludes fee paid part time judicial officers from the protection given by the Regulations is neither here nor there.
The second sentence of para 64 repeats the familiar general principles applicable to objective justification: the difference in treatment must pursue a legitimate aim, must be suitable for achieving that objective, and must be reasonably necessary to do so.
The opinion of Advocate General Kokott is slightly more expansive at para 62: 62 The unequal treatment at issue must therefore be justified by the existence of precise, concrete factors, characterising the employment condition concerned in its specific context and on the basis of objective and transparent criteria for examining the question whether that unequal treatment responds to a genuine need and whether it is appropriate and necessary for achieving the objective pursued: see Del Cerro Alonso [2008] ICR 145, para 58, and Ang Serrano v European Parliament (Case C 496/08P) [2010] ECR I 1793, para 44.
This court proposes to follow the guidance given by the CJEU and the Advocate General in those passages.
Although the CJEU did not repeat the first part of para 62 of the Advocate Generals opinion, it is merely a longer quotation from para 58 of the judgment in Del Cerro Alonso v Osakidetza Sevvicio Vasco del Salud [2008] ICR 145 which the court did cite.
The Ministry of Justice face the difficulty that they have not until now articulated a justification for their policy.
It is clear from the history that when the 2000 Regulations were made the Lord Chancellor took the view that judges were not workers for this purpose, a view which was maintained until this court rejected it following the renewed hearing of this case in July 2012.
This does not preclude the Ministry from now advancing a justification for maintaining the policy: see Seldon v Clarkson Wright & Jakes [2012] UKSC 16, [2012] ICR 716, para 60, citing Petersen v Berufsausschuss fr Zahnrtze fr den Bezirk Westfalen Lippe (Case C 341/08) [2010] ECR I 47.
It is also clear from the history that, insofar as there was a reason for ensuring that fee paid part time judges were not covered by the 2000 Regulations, it was to save cost.
By itself, of course, this cannot constitute justification.
But once again, this does not preclude the Ministry from now advancing a different and better justification: see Finalarte Sociedade Construo Civil Lda v Urlaubs und Lohnausgleichskasse der Bauwirtschaft (Cases C 49/98, C 50/98, C 52/98 to C 54/98 and C 68/98 to C 71/98) [2003] 2 CMLR 11.
However, in this as in any other human rights context, this court is likely to treat with greater respect a justification for a policy which was carefully thought through by reference to the relevant principles at the time when it was adopted: see Belfast City Council v Miss Behavin Ltd [2007] UKHL 19, [2007] 1 WLR 1420, paras 26 and 37; R (SB) v Governors of Denbigh High School [2006] UKHL 15, [2007] 1 AC 100, para 31.
In particular, as Mummery LJ pointed out in R (Elias) v Secretary of State for Defence [2006] EWCA Civ 1293, [2006] 1 WLR 3213, at paras 128 to 132, it is difficult for the Ministry to justify the proportionality of the means chosen to carry out their aims if they did not conduct the exercise of examining the alternatives or gather the necessary evidence to inform the choice at that time.
treatment complained of: In their pleaded case, the Ministry advance three inter related aims for the (i) fairness in the distribution of the States resources that are available to fund judicial pensions; (ii) to attract a sufficiently high number of good quality candidates to salaried judicial office; and (iii) to keep the cost of judicial pensions within limits which are affordable and sustainable.
In Mr Cavanaghs written and oral submissions on their behalf, fairness was divided into two elements: (a) the alternative opportunities available to part timers, but denied to full timers, to make provision for their retirement; and (b) the greater contribution made by the full timers to the working of the justice system.
Remission?
Before considering each of these suggested justifications, it is necessary to consider whether the case should be remitted to the Employment Tribunal for the determination of any relevant disputed facts.
The Ministry, Mr OBrien and the interveners have all filed extensive evidence in accordance with this courts directions in July 2012.
While much is agreed, Mr Cavanagh argues that there are five key areas of dispute: (i) the extent to which Recorders also have practices as barristers or solicitors; (ii) the number of days which Recorders are required to sit in a year and the extent of the flexibility which they are allowed in order to accommodate the demands of their practices; (iii) whether the work of Recorders is in general less onerous than the work of Circuit Judges; (iv) the extent to which Recorders suffer a drop in pay if they become Circuit Judges and whether there would be a drop in high quality candidates for full time appointment if the pensions payable to full timers were reduced; and (v) how much it would cost to provide pro rata pensions to Recorders.
Mr Cavanagh acknowledges that the most important areas are (i) and (iii), as these are directly relevant to the fairness justification.
Once the arguments were examined in detail, however, it became apparent that resolving these factual issues would not resolve the central issue of whether the discrimination is objectively justified.
To the extent that it might do so, the court was content to take the factual basis of the Ministrys case at the highest at which it could properly be put.
Accordingly, the court decided not to remit for this purpose.
Fairness: alternative means of providing for retirement
The Ministry point out that recorders are far removed from the type of part time worker for whom the protection of the PTWD was designed.
These were, it is said, low paid workers who were driven to take part time jobs by their personal circumstances, often their childcare or other domestic responsibilities, and were in a very weak bargaining position compared with their full time and more often unionised colleagues.
Many of them were women.
Indeed, before the PTWD, there were many cases decided where discrimination against part time workers was held to be indirect discrimination on grounds of sex because women were so much more likely to be adversely affected by it than men: see, for example, R v Secretary of State for Employment, Ex p Seymour Smith (No 2) [2000] 1 WLR 435.
The aim of the Directive was to promote more flexible working patterns, by eliminating discrimination against part time workers and assisting the development of opportunities for part time working in a way which would benefit both employers and workers.
Recorders, it is said, do not undertake their part time judicial work in order to prepare for retirement, reconcile professional and family life, and take up education and training opportunities (the reasons mentioned in the fifth of the General Considerations listed in the Framework Agreement for attaching importance to measures which would facilitate access to part time work).
The great majority of recorders are either in practice at the Bar or as solicitors or hold other judicial offices as District or Tribunal Judges.
A few may be employed, for example as academic lawyers or even Law Commissioners.
The point is that they have a principal occupation which is not judging.
This means that they can provide for their retirement in other ways: a sole practitioner such as a barrister can build up his own pension pot from his earnings at the Bar; a partner in a solicitors practice can take part in the firms pension scheme; an employed person can take part in his occupational or other pension arrangements.
They do not need to rely upon a pension from their very limited time sitting in court.
The availability of other resources has been taken into account in the justification of age discrimination: see, for example, Palacios de la Villa v Cartefiel Services SA (Case C 411/05) [2009] ICR 1111; Rosenbladt v Oellerking Gebudereinigungs GmbH (Case C 45/09) [2011] IRLR 51.
Full timers, on the other hand, have hardly any opportunity for outside earnings and have no means other than the judicial pension scheme to make provision for their retirement.
It is fair, therefore, that the limited sums available for judicial pensions should be allocated to the full timers (and to the salaried part timers) rather than to the fee paid part timers.
The full timers need them and the part timers do not.
The Ministry are able to make this argument with particular force because this case happens to be about a recorder.
The great majority of recorders do have other sources of income from which to provide for their retirement.
As the Council of Immigration Judges make clear, this is by no means true of many fee paid judicial officers.
Some, indeed, are sitting virtually full time but on a part time fee paid basis.
Some have a portfolio of fee paid offices which add up to a full time post.
Some are sitting part time precisely because they need more flexible work to accommodate their domestic or other responsibilities.
None of these have the opportunity to provide for their retirement out of other income.
They are just the sort of people for whom the PTWD was designed.
The fallacy in the Ministrys argument, it is said, is that fee paid part timers may (or may not) have the opportunity to provide for their retirement out of other earnings, but they do not have the opportunity to do so while they are engaged in their part time sittings.
While engaged on judicial duties they are deprived of the opportunity to make other earnings and the pension contributions which could be made from them.
Occupational pension schemes are part of the package of remuneration which goes with a particular occupation: they are often referred to as deferred pay.
They are part of the price which the employer pays for the workers services.
It would not be justifiable for an employer to pay a lesser daily rate to a fee paid part timer than to a full timer: indeed, recorders are paid a daily rate which is the equivalent pro rata temporis to the salary of a full time circuit judge, but without the pension element in the package.
It is equally unjustifiable, it is said, to separate out the pension element in the remuneration package and refuse to apply the pro rata temporis principle to it.
In this respect, it is irrelevant that the employer is the State.
The Ministry should be regarded like any other employer.
A private employer would not be able to justify paying part time workers less or denying them access to its occupational pension scheme and the State should be in no different position.
At bottom, this is not an argument about fairness.
It is premised on there being a limited pot of money available to fund judicial pensions.
That, it is said, is an impermissible premise: budgetary considerations cannot justify discriminatory treatment.
Fairness: the greater contribution made by full timers
Another aspect of fairness, argue the Ministry, is that recorders generally do the less onerous work in the Crown and county courts.
They only sit for a limited period each year and so cannot try the longer and more complicated cases, nor do they generally have to do the paperwork which the full time judges have to do.
There are also a few, very limited, powers which are statutorily reserved to circuit judges.
Against that, and with those very limited exceptions, it is said that the statutory jurisdiction of recorders is exactly the same as the jurisdiction of a circuit judge (as indeed the jurisdiction of a deputy district judge is exactly the same as the jurisdiction of a district judge).
Certain types of work require a ticket for example, to try serious sexual offences, for child care cases, or for Technology and Construction Court work.
But some recorders have such tickets (Mr OBrien, for example, was ticketed to do Technology and Construction Court work) and many circuit judges do not.
Some recorders, especially if they sit in the smaller courts, may also be required to do paperwork.
If circuit judges do undertake tasks which recorders are not required to undertake, the proper response is to reward these with extra responsibility payments, not to make a whole sale and indiscriminate exception to the pro rata temporis principle.
A further aspect of this fairness argument, which tells against the Ministry, is that it suits Her Majestys Courts and Tribunals Service to have a cadre of fee paid part timers who can be flexibly deployed to meet the varying demands of court business.
If all the work was done by full timers, there would have to be enough judges to cater for the busiest times.
Inevitably, some would not have enough to do at other times.
But once a judge is appointed to a full time post, it is not possible to dismiss him for redundancy.
Appointing a large number of fee paid part timers enables the system to respond economically and flexibly to the fluctuations in demand for the courts services.
Like a bank of agency nurses or supply teachers, it is an efficient method of working which benefits everyone.
This efficiency should not be purchased at a price which discriminates against the part timers.
Recruitment
The Ministry argue that (even with the recent and proposed changes) the judicial pension scheme is a substantial incentive for high quality practitioners to seek and accept a full time appointment.
It is a matter of general public importance that the remuneration package of circuit judges is sufficiently appealing to attract a sufficient number of high quality candidates.
Barristers and solicitors in private practice frequently suffer a drop in income when they are appointed to the Bench.
The pension sweetens the pill.
This argument does, of course, assume that the persons best qualified to serve as circuit judges are the barristers and solicitors who have been most successful in private practice.
Even assuming that to be the case, however, it is difficult to see why denying pensions to recorders increases the attractions of full time appointment. (It has echoes of the argument that denying the benefits of marriage to same sex couples increases the attractions of marriage to couples of opposite sexes.) The effect of paying pensions to part timers would be to increase their remuneration package for the limited number of days on which they sit.
For recorders in particular, it would come nowhere close to making proper provision for their retirement.
The pension entitlement attached to a full time appointment would still present a significant attraction, especially to a practitioner who had not already built up a very substantial pension pot of his own.
Further, the Ministry do not argue that the recent and proposed changes to the judicial pension scheme, which will significantly reduce its attractiveness to the most successful practitioners, have had any impact upon the quantity and quality of applications for the full time Circuit bench.
Quite the reverse.
Their assessment of the impact of the introduction of contributions last year was that this would not have a significant effect upon recruitment.
Promoting a high quality judicial system is of course a legitimate aim but it applies just as much to the part timers as to the full timers.
Both must be of a high standard, so it is not an aim which divides them.
While there is no evidence that the lack of a pension deters good quality candidates from applying to be recorders, the same may not be true of those parts of the justice system which rely upon fee paid part timers to do the great majority of the work.
The Ministry accept that cost alone cannot justify discriminating against part time workers.
But they argue that cost plus other factors may do so.
This is a subtle point which is not without difficulty.
The starting point for the discussion of this issue is the statement of the ECJ in MA de Weerd (Roks) v Bestuur Van de Bedrijfsvereniging voor de Gezondheid, Geestilijke en Maatschappelijke Belangen (Case C 343/92) [1994] 2 CMLR 325, a case about sex discrimination in social security benefits, at para 35: 35although budgetary considerations may influence a Member States choice of social policy and affect the nature or scope of the social protection measures it wishes to adopt, they cannot in themselves constitute the aim pursued by that policy and cannot, therefore, justify discrimination against one of the sexes.
In other words, richer states may have more generous benefits systems than do poorer states.
Cost may inform how much the state will spend upon its benefits system, but the choices made within that system must pursue policy aims other than saving cost.
The court continued: 36 Moreover, to concede that budgetary considerations may justify a difference in treatment as between men and women which would otherwise constitute indirect discrimination on grounds of sex . would be to accept that the application and scope of as fundamental a rule of Community law as that of equal treatment between men and women might vary in time and place according to the state of the public finances of the Member States.
It is one thing to set benefits at a particular level for budgetary reasons.
It is another thing to pay women less than men because it is cheaper so to do.
Sex discrimination is wrong whether the state (or the employer) is rich or poor.
But, say the Ministry, the fact that a social policy aim is affected by budgetary considerations does not invalidate it if it is otherwise justified.
Mr Cavanaghs best case is Jrgensen v Foreiningen af Speciallaeger and Sygesikringens Forhandlingsudvalg (Case C 226/98) [2000] IRLR 726.
Mrs Jrgensen, a specialist rheumatologist, complained about a rule which meant that, if she sold her practice, it would, because of its turnover, be treated as a part time practice and subject to a cap on the fees it could receive from the Danish national health authorities.
She argued that this was indirectly discriminatory on grounds of sex, because her lower turnover was the result of her domestic responsibilities, which affected many more women than men.
The aim of the scheme which imposed the cap was to limit the exercise of part time specialist practice, it being considered that many doctors who worked principally in a hospital and part time in their own practices neglected the former for the sake of the latter.
Among other questions, the Danish court asked the ECJ whether considerations relating to budgetary stringency, savings or medical practice planning might be regarded as objective considerations justifying a measure which adversely affected a larger number of women than men.
In answering the question, the court repeated (at para 39) paragraphs 35 and 36 of Roks (see para 64 above) but agreed with the Commission that reasons relating to the need to ensure sound management of public expenditure on specialised medical care and to guarantee peoples access to such care are legitimate (at para 40).
Their answer to the question was that budgetary considerations cannot in themselves justify discrimination on grounds of sex.
However, measures intended to ensure sound management of public expenditure on specialised medical care and to guarantee peoples access to such care may be justified if they meet a legitimate objective of social policy, are appropriate to attain that objective and are necessary to that end (at para 42).
If this is the Ministrys best case on budgetary considerations, it can be said, then it does not take them very far.
Sound management of the public finances may be a legitimate aim, but that is very different from deliberately discriminating against part time workers in order to save money.
In European Commission v The Netherlands (Case C 542/09), the Commission complained that imposing a residence requirement upon migrant workers and their families for eligibility for student support for courses outside the Netherlands breached the principle of non discrimination against migrant workers.
The Netherlands argued that the requirement was necessary in order to avoid an unreasonable financial burden which could have consequences for the very existence of the assistance scheme (para 56).
The court reiterated (at paras 57 and 58), mutatis mutandis, the principles set out in Roks (see para 64 above) and concluded that the objective pursued by the Kingdom of the Netherlands of avoiding an unreasonable financial burden cannot be regarded as an overriding reason relating to the public interest, capable of justifying the unequal treatment of workers from other Member States as compared with Netherlands workers (para 69).
As Advocate General Sharpston had put it in her opinion, Any conditions attached to [the scheme] in order to keep expenditure within acceptable limits must be borne equally by migrant workers and Netherlands workers (para 89).
On the other hand, the court held that the aim of promoting student mobility was legitimate and a residence requirement was an appropriate means of achieving that aim, as only students resident in the Netherlands would need to be encouraged to study elsewhere; but the Netherlands had not succeeded in establishing that the particular residence rule adopted did not go beyond what was necessary in order to achieve that objective.
So a completely different aim might have been capable of justifying the policy.
Hence the European cases clearly establish that a Member State may decide for itself how much it will spend upon its benefits system, or presumably upon its justice system, or indeed upon any other area of social policy.
But within that system, the choices it makes must be consistent with the principles of equal treatment and non discrimination.
A discriminatory rule or practice can only be justified by reference to a legitimate aim other than the simple saving of cost.
No doubt it was because the CJEU foresaw that the Ministry would seek to rely upon considerations of cost when the case returned to the national courts that it took care to reiterate that budgetary considerations cannot justify discrimination (para 66).
Our attention was drawn to some domestic authorities, and in particular to Woodcock v Cumbria Primary Care Trust [2012] EWCA Civ 330, [2012] ICR 1126.
This was an age discrimination case, in which the claimant complained that the trust had deliberately failed to comply with a requirement to consult before declaring him to be redundant, so that his employment would cease before he reached the age which would trigger a higher severance payment.
The Court of Appeal held that the dismissal notice was not served with the simple aim of dismissing him before his 49th birthday but in order to give effect to a genuine decision that his position was redundant.
It was justifiable to implement that decision in a way which saved money.
This court must, however, take its guidance from the jurisprudence of the CJEU, and in particular the guidance which we have been given in this very case.
In the circumstances it is unnecessary for us to express a view upon whether the case of Woodcock was rightly decided.
Conclusions
We agree with the arguments advanced on behalf of Mr OBrien.
The Ministry have struggled to explain what they are seeking to achieve by denying a pension to part timers while granting one to full timers.
One aim seems to be to give a greater reward to those who are thought to need it most.
This might be a legitimate aim, but (as Advocate General Kokott explained) the unequal treatment of different classes of employees must be justified by the existence of precise, concrete factors, characterising the employment condition concerned in its specific context and on the basis of objective and transparent criteria.
An employer might devise a scheme which rewarded its workers according to need rather than to their contribution, but the criteria would have to be precise and transparent.
That is not so here.
Some part timers will need this provision as much as, if not more than, some of the full timers.
On examination, this objective amounts to nothing more than a blanket discrimination between the different classes of worker, which would undermine the basic principle of the PTWD.
Similarly (but inconsistently), an employer might aim to give a greater reward to those who make the greater contribution to the justice system, but the Ministry have failed to demonstrate that fee paid part timers, as a class, make a lesser contribution to the justice system than do full timers, as a class.
Once again, the criteria for assessing such contributions are not precise and transparent.
They amount to nothing more than a blanket discrimination between the two classes of worker.
The proper approach to differential contributions is to make special payments for extra responsibilities.
The argument also fails to take into account the benefits to the system in having a cadre of fee paid part timers who can be flexibly deployed to meet the changing demands upon it.
The aim of recruiting a high quality judiciary is undoubtedly legitimate, but it applies to the part time judiciary as much as it applies to the full timers.
Nor has it been shown that denying a pension to the part timers has a significant effect upon the recruitment of full timers.
In effect, the arguments presented to us are the same as the arguments
presented by the Kingdom of the Netherlands in Commission v The Netherlands: that if recorders get a pension, then the pensions payable to circuit judges will have to be reduced.
That is a pure budgetary consideration.
It depends upon the assumption that the present sums available for judicial pensions are fixed for all time.
Of course there is not a bottomless fund of public money available.
Of course we are currently living in very difficult times.
But the fundamental principles of equal treatment cannot depend upon how much money happens to be available in the public coffers at any one particular time or upon how the State chooses to allocate the funds available between the various responsibilities it undertakes.
That argument would not avail a private employer and it should not avail the State in its capacity as an employer.
Even supposing that direct sex discrimination were justifiable, it would not be legitimate to pay women judges less than men judges on the basis that this would cost less, that more money would then be available to attract the best male candidates, or even on the basis that most women need less than most men.
It follows that no objective justification has been shown for departing from the basic principle of remunerating part timers pro rata temporis.
Although this case is concerned only with the case of a recorder, it seems unlikely that the Ministrys argument could be put any higher than it has been.
The court holds that the appellant is entitled to a pension on terms equivalent to those applicable to a circuit judge.
Disposal
Trinity Term [2010] UKSC 34 On appeal from: [2008] EWCA Civ 1448 JUDGMENT O'Brien (Appellant) v Ministry of Justice (Formerly the Department for Constitutional Affairs) (Respondents) Lord Hope, Deputy President before Lord Walker Lady Hale Lord Clarke Lord Dyson 28 July 2010 JUDGMENT GIVEN ON Heard on 14 and 15 June 2010 Appellant Robin Allen QC Rachel Crasnow (Instructed by Browne Jacobson LLP) Respondent John Cavanagh QC Sarah Moore Holly Stout (Instructed by Treasury Solicitor) Intervener (Council of Immigration Judges) Ian Rogers (Instructed by Underwood Solicitors LLP) LORD WALKER (delivering the judgment of the court) Introductory 1.
This appeal raises questions of EU law relating to Council Directive 97/81/EC of 15 December 1997 (the PTWD) concerning the Framework Agreement on part time work concluded by UNICE, CEEP and ETUC (the Framework Agreement) which the Court considers it necessary to refer to the Court of Justice under article 267 of the Treaty on the Functioning of the European Union.
The appeal also raises questions of domestic law, as to the status and terms of service of judges in England and Wales (the term judges being here used as a compendious term so as to include, in general, chairmen and members of tribunals and others exercising judicial functions for remuneration, but not lay magistrates).
The domestic law questions cannot easily be disentangled from the questions of EU law, partly because of the Marleasing principle (see Marleasing SA v La Comercial Internacional de Alimentacion SA C 106/89 [1991] I ECR 4135) and partly because Clause 2(1) of the Framework Agreement refers to employment contract or employment relationship as defined by the law, collective agreement or practice in force in each Member State. 2.
This judgment is in five sections.
The first section summarises the relevant parts of the PTWD, the Framework Agreement and the regulations transposing these EU measures into domestic law.
The second and third sections set out the (largely undisputed) facts both as to the wider factual context (including the growing importance of part time judges in the English legal system) and as to Mr OBriens claim against the Ministry of Justice.
The fourth section considers and gives this Courts opinion on the relevant principles of domestic law, but with the important qualification that (because of their entanglement with EU issues) some of the Courts conclusions must be treated as provisional, and may have to be revisited in the light of the Court of Justices preliminary ruling.
The fifth and final section explains why a preliminary ruling is necessary, and sets out the questions referred to the Court of Justice.
I The PTWD, the Framework Agreement and the domestic regulations 3.
The PTWD contains in recital (11) a reference to the parties to the Framework Agreement wishing to establish a general framework for eliminating discrimination against part time workers and to contribute to developing the potential for part time work on a basis which is acceptable for employers and workers alike.
Recital (16) is as follows: Whereas, with regard to terms used in the Framework Agreement which are not specifically defined therein, this Directive leaves Member States free to define those terms in accordance with national law and practice, as is the case for other social policy Directives using similar terms, providing that the said definitions respect the content of the Framework Agreement.
Article 1 states that the purpose of the Directive is to implement the Framework Agreement.
Article 2 requires Member States to transpose it into national law by 20 January 2000 at latest. 4.
Clauses 1 and 2 of the Framework Agreement are as follows: Clause 1: Purpose The purpose of this Framework Agreement is: (a) to provide for the removal of discrimination against part time workers and to improve the quality of part time work; (b) to facilitate the development of part time work on a voluntary basis and to contribute to the flexible organization of working time in a manner which takes into account the needs of employers and workers.
Clause 2: Scope 1.
This Agreement applies to part time workers who have an employment contract or employment relationship as defined by the law, collective agreement or practice in force in each Member State. 2.
Member States, after consultation with the social partners in accordance with national law, collective agreements or practice, and/or the social partners at the appropriate level in conformity with national industrial relations practice may, for objective reasons, exclude wholly or partly from the terms of this Agreement part time workers who work on a casual basis.
Such exclusions should be reviewed periodically to establish if the objective reasons for making them remain valid.
The Ministry of Justice does not place any reliance on Clause 2(2).
Clause 3 contains definitions of part time worker and comparable full time worker.
Clause 4 sets out the principle of non discrimination: Clause 4: Principle of non discrimination 1.
In respect of employment conditions, part time workers shall not be treated in a less favourable manner than comparable full time workers solely because they work part time unless different treatment is justified on objective grounds. 2.
Where appropriate, the principle of pro rata temporis shall apply. 3.
The arrangements for the application of this clause shall be defined by the Member States and/or social partners, having regard to European legislation, national law, collective agreements and practice. 4.
Where justified by objective reasons, Member States after consultation of the social partners in accordance with national law, collective agreements or practice and/or social partners may, where appropriate, make access to particular conditions of employment subject to a period of service, time worked or earnings qualification.
Qualifications relating to access by part time workers to particular conditions of employment should be reviewed periodically having regard to the principle of non discrimination as expressed in Clause 4.1. 5.
The PTWD did not initially apply to the United Kingdom.
But Council Directive 98/23/EC of 7 April 1998 provided for it to apply to the United Kingdom with 7 April 2000 being substituted for 20 January 2000 as the final date for transposition. 6.
The United Kingdom gave effect to the PTWD and the Framework Agreement by the Part time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000 No.1551) (the Regulations) which were made on 8 June 2000 and came into force on 1 July 2000.
The Regulations were made under section 19 of the Employment Relations Act 1999. 7.
Regulation 1(2) contains definitions, including: contract of employment means a contract of service or of apprenticeship, whether express or implied, and (if it is express) whether oral or in writing; worker means an individual who has entered into or works under or (except where a provision of these Regulations otherwise requires) where the employment has ceased, worked under (a) a contract of employment; or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
There is no reference to employment relationship.
Regulation 2 (as amended) contains definitions of a full time worker, a part time worker and a comparable full time worker.
It is common ground that if Mr OBrien was a worker at all, he was a part time worker. 8.
Regulation 5 sets out the prohibition on unjustified less favourable treatment of part time workers: 5.
Less favourable treatment of part time workers (1) A part time worker has the right not to be treated by his employer less favourably than the employer treats a comparable full time worker (a) as regards the terms of his contract; or (b) by being subjected to any other detriment by any act, or deliberate failure to act, of his employer. (2) The right conferred by paragraph (1) applies only if (a) the treatment is on the ground that the worker is a part time worker, and (b) the treatment is not justified on objective grounds. (3) In determining whether a part time worker has been treated less favourably than a comparable full time worker the pro rata principle shall be applied unless it is inappropriate.
Part IV of the Regulations is headed Special Classes of Person and 9. contains six Regulations numbered 12 to 17.
Regulation 12 (Crown employment) provides (so far as now material) (1) Subject to regulation 13, these Regulations have effect in relation to Crown employment and persons in Crown employment as they have effect in relation to other employment and other employees and workers. (2) In paragraph (1) Crown employment means employment under or for the purposes of a government department or any officer or body exercising on behalf of the Crown functions conferred by a statutory provision.
Regulations 13 (Armed forces), 14 (House of Lords staff), 15 (House of Commons staff) and 16 (Police service) make similar provision for the classes of service personnel, office holders or employees to which they relate (but subject to an exception for certain types of military training under the Reserve Forces Acts).
Subject to that exception all these provisions include within the scope of the Regulations persons who would not or might not otherwise be included. 10.
By contrast Regulation 17 (Holders of judicial offices) disapplies the Regulations in relation to fee paid part time judges: These Regulations do not apply to any individual in his capacity as the holder of a judicial office if he is remunerated on a daily fee paid basis.
The parties take different views as to whether, in the absence of Regulation 17, fee paid part time judges would have been treated as part time workers for the purposes of the Regulations.
II The facts: the part time judiciary 11.
Until the 1970s the English judicial system had relatively few part time judges, variously styled recorders, commissioners or chairmen of quarter sessions.
All these part time judges were remunerated by fees calculated on a daily basis (fee paid).
Professor Bell (Judiciaries in Europe (2006) p312) records that in 1970 full time judges outnumbered part time judges by about three to one.
Many judicial officers who are now called judges were then designated by other terms such as registrars, stipendiary magistrates and social security or tax commissioners. 12.
The Courts Act 1971 made major changes in the justice system and (as amended) conferred the powers under which all recorders are still appointed.
Section 21 of the Courts Act 1971, as originally enacted, was in the following terms: (1) Her Majesty may from time to time appoint qualified persons, to be known as Recorders, to act as part time judges of the Crown Court and to carry out such other judicial functions as may be conferred on them under this or any other enactment. (2) Every appointment of a person to be a Recorder shall be of a person recommended to Her Majesty by the Lord Chancellor, and no person shall be qualified to be appointed a Recorder unless he is a barrister or solicitor of at least ten years standing. (3) The appointment of a person as a Recorder shall specify the term for which he is appointed and the frequency and duration of the occasions during that term on which he will be required to be available to undertake the duties of a Recorder. (4) Subject to subsection (5) below the Lord Chancellor may, with the agreement of the Recorder concerned, from time to time extend for such period as he thinks appropriate the term for which a Recorder is appointed. (5) Neither the initial term for which a Recorder is appointed nor any extension of that term under subsection (4) above shall be such as to continue his appointment as a Recorder after the end of the completed year of service in which he attains the age of 72. (6) The Lord Chancellor may if he thinks fit terminate the appointment of a Recorder on the ground of incapacity or mis behaviour or of a failure to comply with any requirements specified under subsection (3) above in the terms of his appointment. (7) There shall be paid to Recorders out of money provided by Parliament such remuneration and allowances as the Lord Chancellor may, with the approval of the Minister for the Civil Service, determine.
The section has been amended from time to time.
The most significant amendment, influenced by the Human Rights Act 1998, was the introduction of safeguards limiting the Lord Chancellors right to decline to extend, or to terminate, an appointment.
This amendment gave effect to new terms and conditions of service promulgated by the Lord Chancellors Department (the predecessor to the Ministry of Justice) in 2000. 13.
Since the Courts Act 1971 there has been a remarkable growth in the number of part time judges.
Statistics in Professor Bells chapter (table 6.1a) show that there were 2,041 part time judges (recorders and deputy district judges) in 1993 and 2,414 in 2005 (including 200 female deputy district judges, up from 89 in 1993, indicating the success of the official policy of encouraging women to become part time judges).
There are now almost twice as many part time judges (recorders and deputy district judges) as full time judges.
These figures do not take account of remunerated chairmen and members of tribunals, the structure of which has been radically reformed by the Tribunals Courts and Enforcement Act 2007.
Submissions from the Council of Immigration Judges show that in 2009 there were 145 full time immigration judges and 440 part time immigration judges (the latter group being divided between salaried part time judges and fee paid part time judges as mentioned below). 14.
For about thirty years after the Courts Act 1971 all part time judges were remunerated on a fee paid basis.
That was not a statutory requirement (section 21(7) is in very general terms) but it was the administrative arrangement chosen by the Lord Chancellors Department (later the Department of Constitutional Affairs, and now the Ministry of Justice).
Since about 2000, however, there has been an increase in salaried part time judges, especially among district judges and immigration judges. 15.
The Lord Chancellor has from time to time issued and amended written memoranda as to the terms and conditions of service of recorders.
The memorandum current in 1978 (when Mr OBrien was appointed) contained fifteen paragraphs covering (among other things) the requirement for attendance at sentencing conferences, the frequency and duration of sittings (at least twenty days a year, which could be split into two periods of at least ten days) and fees (60 a day).
The version (issued in April 2000) current at his retirement is a more elaborate document of 49 paragraphs together with two appendices (on relations with the media).
Most of the new material dealt with the renewal of appointments and judicial conduct.
A recorder was entitled to be offered a minimum of fifteen sitting days a year and might be required to sit for up to thirty days.
The daily fee was unspecified but in practice was (and still is) 1 220th of the salary of a full time circuit judge.
A fee at half the daily rate is paid for attending Judicial Studies Board residential conferences.
The CIJs submissions state that fee paid part time immigration judges sittings should not normally exceed 105 days a year, and that for each days sitting an immigration judge is credited a further days work and pay for writing determinations and similar out of court duties. 16.
All part time judges are entitled (where appropriate) to sick pay, maternity or paternity pay, and similar benefits during service.
Full time judges and salaried part time judges are entitled to pensions on retirement, subject to and in accordance with the provisions of the Judicial Pensions Act 1981 as amended and the Judicial Pensions and Retirement Act 1993 as amended.
Fee paid part time judges have no entitlement to a judicial pension on retirement.
That is what Mr OBrien complains of in these proceedings.
His complaint is founded on the PTWD and the Framework Agreement.
III Facts relevant to Mr OBriens complaint 17.
Mr OBrien was born in 1939 and called to the bar in 1962.
From about 1970 his practice was in civil (as opposed to criminal) work on the western circuit.
He was appointed Queens Counsel in 1983. 18.
With the encouragement of the leader of the western circuit Mr OBrien applied to become a recorder and was appointed as a recorder with effect from 1 March 1978.
He then continued sitting as a recorder until 31 March 2005, with regular extensions, the last extension being in 1999.
In 1986 and 1987 he was unable to comply with his sitting requirement because he was engaged in a heavy case in Hong Kong.
For this he received what he called a polite but firm reprimand from the Lord Chancellors Department.
In 1998 the Department adopted the policy, set out in its memorandum of terms and conditions, of not renewing a recorders appointment beyond the year in which he or she attained the age of 65.
From 2000 the policy was for recorders terms to be five years, automatically renewable except in the case of incapacity or misbehaviour. 19.
Mr OBrien started proceedings in the Employment Tribunal on 29 September 2005.
Initially his claim was opposed by the Department of Constitutional Affairs (now the Ministry of Justice) unsuccessfully in the Employment Tribunal, but successfully on appeal to the Employment Appeal Tribunal, on the ground that it was out of time.
But it was later ordered, by consent, that the substantive issue and the time limit issue should both be heard by the Court of Appeal as a test case.
On 19 December 2008 the Court of Appeal (the Chancellor and Smith and Maurice Kay LJJ) [2008] EWCA Civ 1448, [2009] ICR 593 allowed Mr OBriens appeal on the time limit issue, but directed the Employment Tribunal to dismiss the claim on the issue of substance. 20.
Mr OBrien was given permission to appeal to the Supreme Court and this Court heard submissions on 14 and 15 June 2010.
As often happens, each sides primary submission to the Court was that the matter was acte clair in its favour, and its secondary submission was that if the Court did not accept its primary submission, a reference under Article 267 was necessary.
For the reasons set out at V below the Court accepts each sides secondary submission.
IV Domestic law issues 21.
Mr OBrien makes two main alternative submissions, described by his counsel as his high ground and low ground positions.
These submissions were developed at length but essentially both are founded on the contention that as a recorder appointed under section 21 of the Courts Act 1971 (as amended) Mr OBrien worked for remuneration subject to terms and conditions akin to an employment contract.
Either it was a contract, Mr OBrien says, of a type falling within the definition of worker in Regulation 1(2) of the Regulations (his high ground position) or there was an employment relationship falling within Clause 2(1) of the Framework Agreement (his low ground position). 22.
By contrast the position of the Ministry of Justice is that Mr OBrien was not a person working under any sort of contract.
He was, it is said, the holder of an office and (as the independence of the judiciary demands) was not subject to the direction of any employer.
The fact that he was subject to income tax under Schedule E is of no assistance to him since income tax under Schedule E is charged on the earnings of an office or employment (Income Tax (Earnings and Pensions) Act 2003 section 5). 23.
Both sides referred to numerous authorities, the most important being the decision of the House of Lords in Percy v Board of National Mission of the Church of Scotland [2005] UKHL 73 [2006] 2 AC 28.
That case concerned a claim for sex discrimination by a female associate minister of the Church of Scotland.
Her claim was made under the Sex Discrimination Act 1975, section 82(1) of which contains a definition of employment substantially similar (in its requirement of a contract of service or a contract for personal execution of work or labour) to that in the Regulations.
The House of Lords, by a majority of four (Lord Nicholls, Lord Hope, Lord Scott and Lady Hale) to one (Lord Hoffmann) allowed Ms Percys appeal, holding that she was in employment and that the Employment Tribunal had jurisdiction to hear her claim.
In Percy the majority held that tenure of an office does not necessarily 24. exclude employment, especially where there is a wide statutory definition of that term (see especially Lord Nicholls at paras 18 22, concurred in by Lord Scott and Lady Hale).
Employment may extend beyond the traditional concept of a contract of service between master and servant (Lord Nicholls at para 13, Lord Hope at para 113, Lady Hale at para 141; compare Lord Hoffmann in dissent at para 66).
The degree of control exercised over the employee is therefore less important, and in any case Ms Percy was, in that case, conducting her ministry under the control of a senior minister (Lord Nicholls at para 13, Lord Hope at para 127, Lady Hale at paras 145 146 and 148). 25.
Lord Hoffmann (at para 73) and Lady Hale (at para 145) referred to the principle laid down by the Court of Justice in Lawrie Blum v Land Baden Wurttenberg C66/85 [1986] ECR 2121, para 17: That concept [worker] must be defined in accordance with objective criteria which distinguish the employment relationship by reference to the rights and duties of the persons concerned.
The essential feature of an employment relationship, however, is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.
That was a case on free movement of workers under what was then article 48 of the Treaty.
The claimant was a trainee teacher working in Germany.
As the Court of Justice was concerned with a fundamental freedom, the term worker had to be given an autonomous Community meaning, and the concept was to be interpreted broadly (para 16). 26.
Lady Hale, at paras 143 148, gave detailed consideration to the decision of the Court of Appeal of Northern Ireland in Perceval Price v Department of Economic Development [2000] IRLR 380, a claim on sex discrimination grounds brought by three female holders of full time judicial office (two were chairmen of tribunals and one was a social security commissioner).
Their claims were made under statutory provisions which excluded the holder of a statutory office, but the Court of Appeal of Northern Ireland disregarded the exclusion as being inconsistent with the Equal Treatment Directive 76/207/EEC of 9 February 1976 (which had direct effect).
Sir Robert Carswell LCJ, giving the judgment of the court, pointed out that the purpose of article 119 of the Treaty and the Equal Pay and Equal Treatment Directives was to protect against discrimination and continued (p384): All judges, at whatever level, share certain common characteristics.
They all must enjoy independence of decision without direction from any source, which the respondents quite rightly defended as an essential part of their work.
They all need some organisation of their sittings, whether it be prescribed by the President of the Industrial Tribunals or the Court Service, or more loosely arranged in collegiate fashion between the judges of a particular court.
They are all expected to work during defined times and periods, whether they be rigidly laid down or managed by the judges themselves with a greater degree of flexibility.
They are not free agents to work as and when they choose, as are self employed persons.
Their office accordingly partakes of some of the characteristics of employment .
The Supreme Court agrees with these observations. 27.
A recorder appointed under section 21 of the Courts Act 1971 (as amended) undoubtedly holds an office.
Judicial office is one of the oldest and most important offices known to English law.
That office is marked by a high degree of independence of judgment, as it must be in order to satisfy the requirements of Article 6 of the European Convention on Human Rights for an independent and impartial tribunal.
A recorder, unlike the associate minister of religion in Percy, is not subject to the directions of any superior authority as to the way in which he or she performs the function of judging.
Nevertheless recorders (and all judges at every level) are subject to terms of service of the sort referred to by Sir Robert Carswell LCJ.
Indeed judicial office partakes of most of the characteristics of employment.
However, because domestic law cannot readily be disentangled from EU law on this issue the Court prefers to express no concluded view, as to whether judges (as a general class) would qualify as workers under the Regulations, and as to whether Mr OBrien would qualify as a worker if regulation 17 were to be disregarded (in the same way as part of a domestic measure was disregarded in Perceval Price v Department of Economic Development).
V The need for a reference to the Court of Justice 28.
In approaching the EU issues this Court considers that three general points are clear.
First, there is no single definition of worker which holds good for all the purposes of Community law: Martinez Sala v Freistaat Bayern C 85/96 [1998] ECR I 2691 para 31; Allonby v Accrington and Rossendale College C 256/01 [2004] ICR 1328.
Second, in contrast to the position under other Directives (where references to workers have an autonomous European meaning) the effect of Clause 2(1) of the Framework Agreement, read together with Recital (16) of the PTWD, is to make domestic law relevant to the interpretation of the expression worker.
Thirdly, however, domestic law is not to oust or trump the principles underlying the EU legislation in such a way as to frustrate them.
Its underlying purposes must be (as Recital (16) puts it) respected. 29.
The Court has heard sharply conflicting submissions as to how these general points, which are not in dispute, should be applied to the circumstances of Mr OBriens case.
In particular the Court has heard detailed submissions on three comparatively recent decisions of the Court of Justice, that is Landeshauptstadt Kiel v Jaeger C 151/02 [2004] ICR 1528, Wippel v Peek & Cloppenburg GmbH & Co KG C 313/02 [2005] ICR 1604 and Del Cerro Alonso v Osakidetza (Servicio Vasco de Salud) C 307/05 [2008] ICR 145. 30.
Jaeger was concerned with the application of the definition of working time in para 2(1) of the Working Time Directive 93/104/EC of 23 November 1993 to time spent on call by junior doctors in German hospitals: working time shall mean any period during which the worker is working, at the employers disposal and carrying out his activity or duties, in accordance with national laws and/or practice.
The doctors had to be on call at the hospital, but when not actually working could sleep in accommodation provided for them at the hospital. 31.
The Advocate General (Colomer) stated in para 36 of his opinion: despite the fact that article 2(1) of Directive 93/104 provides that the three criteria used to define working time are to be specifically delimited in accordance with national laws and/or practice, that stipulation does not mean that member states may refrain from applying those criteria and rely on rules of national law .
However a member state may not rely on its own legislation to support the view that a doctor who carries out periods of duty on call in a hospital is not at the employers disposal at times when he is inactive but is waiting for his services to be called on again. 32.
The Court of Justice stated (paras 58 and 59 of the judgment): In any event the concepts of working time and rest period within the meaning of Directive 93/104 may not be interpreted in accordance with the requirements of the various legislations of the member states, but constitute concepts of Community law which must be defined in accordance with objective characteristics by reference to the scheme and purpose of that Directive as the Court did in SIMAP, at p1147, paras 48 50.
Only such an autonomous interpretation is capable of securing for that Directive full efficacy and uniform application of those concepts in all the member states.
Accordingly, the fact that the definition of the concept of working time refers to national laws and/or practice does not mean that the member states may unilaterally determine the scope of that concept.
Thus, those states may not make subject to any condition the right of employees to have working periods and corresponding rest periods duly taken into account, since that right stems directly from the provisions of that Directive.
Any other interpretation would frustrate the objective of Directive 93/104 of harmonising the protection of the safety and health of workers by means of minimum requirements: see United Kingdom of Great Britain and Northern Ireland v Council of the European Union (Case C 84/94) [1999] ICR 443, 506, 510, paras 47 and 75.
That passage has been adopted in another case on the Working Time Directive, Pfeiffer v Deutsches Rotes Kreuz C 397 403/01 [2005] ICR 1307, para 99. 33.
These decisions seem to show that the need to make some reference to domestic law cannot be permitted to frustrate the overriding Community purpose of safeguarding the health and safety of workers.
The Ministry of Justices written submissions (para 109) contend that a claim under the PTWD does not engage any fundamental Community right.
But the aim of the PTWD and the Framework Agreement is to eliminate inequality and discrimination.
As the Advocate General (Sharpston) stated in Istituto Nazionale della Previdenza Sociale v Bruno & Pettini C 395/08, para 119: The prohibition on discrimination in Clause 4 of the Framework Agreement is a particular expression of the general principle of equality.
It must therefore be interpreted in accordance with that principle.
Any national implementing measures must likewise respect the general principles of Community law, including the principle of equal treatment.
The elimination of inequality and discrimination is at least as important a Community principle as the health and safety of workers. 34.
Wippel was concerned with an Austrian part time worker whose contract was of an exiguous character in that she was not entitled to be offered any minimum amount of work, nor was she bound to accept work if it was offered.
Nevertheless the Austrian Oberster Gerichtshof, in making its reference, stated that the claimant was recognised as a worker by domestic law.
She was therefore within para 2(1) of the Framework Agreement. 35.
In that case the Advocate General (Kokott) stated (para 45): Consequently, for the purposes of the Framework Agreement, the term worker is not a Community law concept.
Indeed, the personal scope of application of the Framework Agreement is defined by reference to the national law applicable in each case.
The term worker therefore has to be defined in reliance on the law, collective agreements and practices in force in each member state.
The member states have wide discretionary powers in this respect.
Only the very broadest limits can be determined in this respect by reference to Community law.
It could therefore constitute a breach of the duty of co operation (article 10 EC) if a member state were to define the term worker so narrowly under its national law that the Framework Agreement on part time work were deprived of any validity in practice and achievement of its purpose, as stipulated in Clause 1, were greatly obstructed.
However, there is no sign of that here.
The Ministry of Justice relies heavily on this passage, as did the Court of Appeal ([2008] EWCA Civ 1448, para 46) following Elias J in Christie v Department of Constitutional Affairs [2007] ICR 1553, para 40.
The Court of Justice reached the same conclusion as the Advocate General, but its judgment on the first question (paras 35 40) appears to give no support to her statement that member states have wide discretionary powers or that only the very broadest limits can be set by reference to Community law. 36.
Del Cerro Alonso was concerned with workers in the Basque health service who were initially classified as temporary regulated staff but were then regraded as permanent staff.
They were refused length of service allowances in respect of their service in the temporary grade and made complaints under Council Directive 99/70/EC of 28 June 1999 concerning the Framework Agreement on fixed term work.
Their claims were resisted by the health service on the ground of objective justification, but the Kingdom of Spain intervened to contend that the regulated staff, as public sector workers, were completely outside the scope of the Directive (which contained a definition of worker in terms very similar to that in Clause 2(1) of the Framework Agreement under the PTWD). 37.
The Advocate General (Poiares Maduro) considered this point in a long passage in his opinion (paras 11 15).
It is sufficient to cite the conclusion in para 15: That conditional renvoi appears to me to be the process which is most faithful to both the letter and the spirit of the Community legislation.
The effect of it is that the member state cannot merely rely on the formal or special nature of the rules applicable to certain employment relationships in order to exclude the latter from the benefit of the protection afforded by the Framework Agreement.
If that were the case, there would be grounds for concern that the Framework Agreement could be rendered completely redundant.
If it were the case, it would be open to any member state to make the contract staff of the public authorities subject to special rules in order to call in question the decisions adopted by the Court of Justice in Adeneler v Ellinikos Organismos Galaktos (ELOG) (Case C 212/04) [2006] ECR I 6057; Marrosu v Azienda Ospedaliera Ospedale San Martino di . Genova . (Case C 53/04) [2006] ECR I 7213 and Vassalo v Azienda Ospedaliera Ospedale San Martino di Genova . (Case C 180/04) [2006] ECR I 7251.
Consequently, the exclusion of public servants from the scope of Directive 99/70 cannot be accepted unless it is demonstrated that the nature of the employment relationship between them and the administration is substantially different from that between employees falling, according to national law, within the category of workers and their employers. 38.
The Court of Justice observed (para 29 of the judgment): The mere fact that a post may be classified as regulated under national law and has certain characteristics typical of the Civil Service in the member state in question is irrelevant in that regard.
Otherwise, in reserving to member states the ability to remove at will certain categories of persons from the protection offered by Directive 99/70 and the Framework Agreement, the effectiveness of those Community instruments would be in jeopardy as would their uniform application in the member states: see, by analogy, Landeshauptstadt Kiel v Jaeger (Case C 151/02) [2004] ICR 1528, paras 58 and 59, and Pfeiffer v Deutsches Rotes Kreuz (Joined Cases C 397 403/01) [2005] ICR 1307, para 99.
As is clear not only from the third paragraph of article 249 EC, but also from the first paragraph of article 2 of Directive 99/70, in light of recital (17) of the preamble to that Directive [which is identical to recital (16) of the PTWD] the member states are required to guarantee the result imposed by Community law: Adeneler [2006] ECR I 6057, para 68. 39.
For the Ministry of Justice, the high point of these citations is the statement by Advocate General Kokott in Wippel that member states have wide discretionary powers (a statement not endorsed by the Court of Justice).
For Mr OBrien the high point is the passage (set out in the last paragraph) from the judgment of the Court of Justice in Del Cerro Alonso.
The jurisprudence of the Court of Justice appears to give little clear guidance as to what type of national deviation from the Community norm shows a lack of respect (Recital (16) of the PTWD), or is justified by the nature of the post or office being substantially different from that of normal workers (para 15 of the opinion of Advocate General Poiares Maduro in Del Cerro Alonso). 40.
Accordingly the Supreme Court of the United Kingdom seeks guidance as to whether the permissibility of a national deviation from the Community norm should be judged by some or all of the following considerations: (1) the number of persons affected (large numbers of doctors and healthcare workers must have been affected by the issues raised in Jaeger and Del Cerro Alonso); or (2) the special position of the judiciary, for whose work independence of judgment, is an essential feature; or (3) the degree to which a particular exclusion under national law appears to have been effected with a particular Community measure in mind.
In connection with this last point it is a particular cause for concern that the exclusion of fee paid part time judges by Regulation 17 of the Regulations has some appearance of being a deliberate ad hoc exclusion of a particular category while their full time or salaried part time colleagues, doing the same or similar work, will be entitled to judicial pensions on retirement. 41.
The Supreme Court has therefore concluded that it is necessary to refer the following questions to the Court of Justice: (1) Is it for national law to determine whether or not judges as a whole are workers who have an employment contract or employment relationship within the meaning of clause 2.1 of the Framework Agreement, or is there a Community norm by which this matter must be determined? (2) If judges as a whole are workers who have an employment contract or employment relationship within the meaning of clause 2.1 of the Framework Agreement, is it permissible for national law to discriminate (a) between full time and part time judges, or (b) between different kinds of part time judges in the provision of pensions? For these reasons the appeal is allowed and the order of the Court of Appeal of 19 December 2008 is set aside.
Working out exactly what this conclusion entails will not be without its difficulties.
The case will be remitted to the Employment Tribunal for the determination of the amount of the pension to which Mr OBrien is entitled under the Regulations in accordance with this judgment.
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This appeal raises questions of European Union law.
These questions have their origins in an EU Framework Agreement on part time work which was concluded in 1997.
It was implemented by a Council Directive of the same year, which was extended to the United Kingdom in 1998.
Directives are binding as to the result to be achieved, leaving only the choice of form and methods to the Member State.
The Council Directive was transposed into UK law by the Part time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (the 2000 Regulations).
In essence, the 2000 Regulations provide that a part time worker has the right not to be treated by his employer less favourably than a comparable full time worker [2, 13 and 17].
Recorders are one of several types of part time judge who are paid a fee for their work.
Mr OBrien is now a retired barrister.
During his practice at the bar, he sat as a recorder from 1 March 1978 until 31 March 2005.
Mr OBrien claimed to be entitled to a pension in respect of his part time non salaried judicial work as a recorder on the same basis, adjusted pro rata temporis, as that paid to former full time judges who had done the same or similar work.
The then Department for Constitutional Affairs (DCA) told him that he was not entitled to a judicial pension since the office of recorder was not a qualifying judicial office under the relevant UK legislation and because, under European law, he was an office holder rather than a worker [1 and 5].
Mr OBrien began proceedings in the Employment Tribunal, claiming amongst other things that he was being discriminated against because he was a part time worker.
His claim was successful but the DCA (now the Ministry of Justice (MoJ)) appealed successfully to the Employment Appeal Tribunal on the grounds that Mr OBriens claim was made after the relevant time limit.
The Court of Appeal allowed Mr OBriens appeal on the time limit issue but directed the Employment Tribunal to dismiss his claim, since it found that judges were not workers under the 2000 Regulations [6 and 7].
Mr OBrien appealed to the Supreme Court which, in 2010, made a reference to the Court of Justice of the European Union (CJEU) for a preliminary ruling.
Because domestic law could not readily be disentangled from EU law on the issue, the Supreme Court preferred to express no concluded view on whether Mr OBrien would qualify as a worker under the 2000 Regulations until it had received guidance from the CJEU.
The CJEU issued its preliminary ruling, and the matter returned to the Supreme Court.
The Supreme Court is obliged under section 3(1) of the European Communities Act 1972 to determine the questions of EU law in this case in accordance with the principles laid down in the CJEUs preliminary ruling [1, 8 and 33].
As a result of the questions that were referred and of the CJEUs preliminary ruling in response to them, there were two issues before the Supreme Court: (1) whether the relationship between the MoJ and judges is substantially different from that between employers and those treated in national law as workers (the worker issue); and (2) whether the difference in treatment of recorders as compared to full time or salaried judges for the purposes of access to the retirement pension scheme is justified by objective reasons (the objective justification issue).
After a hearing in July 2012, the Supreme Court ruled that Mr OBrien was a part time worker within the meaning of the Framework Agreement.
The parties were heard on the objective justification issue in November 2012.
The judgment of the Supreme Court sets out the reasons for its ruling on the worker issue and its reasoning and conclusions on the objective justification issue [10 12].
The Supreme Court unanimously allows Mr OBriens appeal.
Recorders are in an employment relationship within the meaning of the Framework Agreement on part time work and must be treated as workers for the purposes of the 2000 Regulations.
No objective justification has been shown in this case for departing from the basic principle of paying a part time worker the same as a full time worker calculated on a pro rata temporis basis.
Mr OBrien is entitled to a pension on terms equivalent to those applicable to a circuit judge.
The case will be remitted to the Employment Tribunal for the determination of the amount of the pension to which he is entitled.
The judgment is given by Lord Hope and Lady Hale [12, 42, 75 and 76].
The CJEU stated that it was ultimately for the Supreme Court to decide the worker issue, but it set out a number of factors which the Supreme Court had to take into account, including that the term worker in the Framework Agreement is used to draw a distinction from a self employed person, which distinction is part of the spirit of the Framework Agreement.
In arriving at its ruling on the worker issue, and following the guidance from the CJEU, the Supreme Court took into account the following: (1) the character of the work that a recorder does in the public service differs from that of a self employed person; (2) the rules for the appointment and removal of recorders, to which no self employed person would subject himself; (3) the way recorders work is organised for them, bearing in mind that, in common with all other part time judges, recorders are expected to work during defined times and periods; and (4) recorders entitlement to the same benefits during service, as appropriate, as full time judges [30 and 37].
Recorders are expected to observe the terms and conditions of their appointment, and they may be disciplined if they fail to do so.
The very fact that most recorders are self employed barristers or solicitors merely serves to underline the different character of their commitment to the public service when they undertake the office of recorder.
As the CJEU made clear, the spirit and purpose of the Framework Agreement requires a distinction between worker and self employed person.
When taken together, the matters taken into account by the Supreme Court following the guidance of the CJEU really speak for themselves.
In the case of part time judges, the essential distinction between the employed and the self employed can be drawn.
The self employed person has the comparative luxury of independence.
Part time judges are not free agents to work as and when they choose.
They are not self employed persons when working in that capacity [38 40].
The Supreme Court follows the guidance given by the CJEU and the Advocate General (who presents an impartial opinion on the case to assist the CJEU) in relation to the objective justification issue.
To give a greater reward to those who are thought to need it most or alternatively to those who make the greater contribution to the justice system may be legitimate aims for the MoJ. However, they ultimately amount to nothing more than blanket discriminations between the different classes of worker, which would undermine the basic principle of the Council Directive.
The criteria adopted in relation to each of the MoJs stated aims are not precise and transparent.
In relation to the first aim, some part timers will need pension provision as much as, if not more than, some of the full timers.
In relation to the second aim, the MoJ have failed to demonstrate that fee paid part timers, as a class, make a lesser contribution to the justice system than do full timers, as a class.
The proper approach to differential contributions is to make special payments for extra responsibilities.
The argument also fails to take into account the benefits to the system in having a cadre of fee paid part timers who can be flexibly deployed to meet the changing demands upon it.
The aim of recruiting a high quality judiciary is undoubtedly legitimate, but it applies to the part time judiciary as much as it applies to the full timers.
Nor has it been shown that denying a pension to the part timers has a significant effect upon the recruitment of full timers [71 73].
The MoJs argument was essentially that if recorders receive a pension, then the pensions payable to circuit judges will have to be reduced.
That is a pure budgetary consideration which depends upon the assumption that the present sums available for judicial pensions are fixed for all time.
Of course there is not a bottomless fund of public money available and we are currently living in very difficult times.
But the fundamental principles of equal treatment cannot depend upon how much money happens to be available in the public coffers at any one particular time or upon how the State chooses to allocate the funds available between the various responsibilities it undertakes.
That argument would not avail a private employer and it should not avail the State in its capacity as an employer [74].
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Allegations that a bribe was paid to procure a contract are by no means unknown in international business disputes heard by the Commercial Court in London.
Allegations that evidence was procured by torture are thankfully rare.
In this case allegations of both bribery and torture were made.
A claim under a guarantee of a contract to charter a vessel was met with a defence that the contract was procured by bribery, with the consequence that the guarantee was therefore unenforceable.
The allegation of bribery was founded on evidence of confessions made by the individuals who had allegedly paid and received the bribe.
The claimant in turn alleged that the confessions were obtained by torture and for that reason were inadmissible as evidence in legal proceedings.
The relevant events all took place in the Peoples Republic of China (the PRC) and the judge was faced with a difficult task of having to assess the truth of the allegations on the basis of limited evidence.
In particular, no one with first hand knowledge of the alleged bribery or torture gave evidence and the documentation available at the trial was substantially incomplete.
The judge concluded that torture could not be ruled out as a reason for the confessions and that in any case the allegations of bribery had not been proved.
He therefore found that the contract was enforceable and awarded damages to the claimant.
The Court of Appeal allowed an appeal from that decision and remitted the case for redetermination.
They did so on the grounds that the judge failed to ask and answer the correct legal question as to what weight should be accorded to the confession evidence and, in those circumstances, fell into legal error in failing to take all the appropriate matters into account and failing to exclude irrelevant matters in considering whether the alleged bribe was paid.
Those irrelevant matters included, in the Court of Appeals view, the judges finding that torture could not be ruled out as a reason for the confessions.
The Court of Appeal decided that, as a matter of law, if an allegation that a statement was made as a result of torture has not been proved on the balance of probabilities, a court when estimating the weight to be given to the statement as hearsay evidence in civil proceedings must entirely disregard the possibility that the statement was obtained by torture, even if on the evidence given at trial the court considers this to be a serious possibility which it cannot rule out.
In this judgment we explain our reasons for concluding that the Court of Appeal was wrong to interfere with the factual findings made by the trial judge in this case and was also wrong in its approach to the question whether evidence had been obtained by torture.
On the latter question we explain why, as matter of principle and authority, the judges finding that torture could not be ruled out as a reason for confessions of bribery was a factor that he was entitled to take into consideration in deciding whether the confessions were reliable evidence that bribery had in fact occurred.
Factual background
The contract in dispute is a charterparty concluded on 6 August 2008 between the appellant, Shagang Shipping Company Ltd (Shagang), as disponent owner and Grand China Shipping Company Ltd (Grand China) as charterer.
Under the charterparty Grand China agreed to charter from Shagang a capesize bulk carrier, then under construction, for a period of 82 to 86 months to run from when the vessel was delivered in 2010.
A few months earlier, Shagang had itself chartered the vessel from head owners, Dong A Tanker Corporation, on similar terms save for the rate of hire.
Grand China was a new company.
Its ultimate parent company was the respondent, HNA Group Company Ltd (HNA), which guaranteed the performance of Grand Chinas obligations under the charterparty.
The guarantee, also dated 6 August 2008, is governed by English law and provides that any dispute arising from it is subject to the exclusive jurisdiction of the English courts.
Shagang, Grand China and HNA are all companies based in the PRC.
Shagang, which is now in liquidation, is based in Hong Kong, as is Grand China (also now in liquidation).
HNA is based in Haikou, which is the capital of Hainan province.
In August 2008 the relevant chartering market was at its height.
It was an
active market in which owners (including disponent owners like Shagang) held the dominant bargaining position.
The rates of hire for the vessel agreed in the charterparty were in line with the market.
The vessel, named Dong A Astrea, was delivered to Grand China in April 2010.
By that time market rates were very considerably lower than in August 2008, the financial crisis in the autumn of 2008 having changed things dramatically.
From September 2010 onwards, Grand China defaulted in making payments of hire under the charterparty.
Shagang commenced arbitration proceedings against Grand China and obtained a series of interim final awards for unpaid hire.
Some payments were made by Grand China but it remained in arrears, and on 17 January 2012 Shagang In the meantime, on 13 September 2012 Shagang commenced the present terminated the charterparty on the basis of Grand Chinas default in paying hire and consequent repudiatory breach of the charterparty.
The claim for unpaid hire was settled in May 2012 but Shagang pursued its claim in arbitration for damages for the loss caused by Grand Chinas repudiatory breach of the charterparty.
On 1 November 2012 the arbitral tribunal issued a partial final award for damages in a sum of US$58,375,709.
On 8 April 2013 Grand China was wound up in Hong Kong.
action in the Commercial Court against HNA under its guarantee.
The PSB investigation and allegations of bribery
HNA filed its defence to Shagangs claim on 4 November 2013, initially without making any allegation of bribery.
On 23 June 2014, however, HNA amended its defence to allege that the charterparty had been procured by the payment of bribes by or on behalf of Shagang to senior employees of Grand China.
In support of this allegation, HNA relied on confessions made during an investigation undertaken by the Chinese Public Security Bureau (the PSB).
At the time when the charterparty was concluded in August 2008, Mr Jia Hongxiang (Mr Jia H) was a general manager within HNA and the chief executive officer of Grand China.
On 11 November 2013, Mr Jia H was detained by the Haikou PSB on suspicion of embezzlement.
On 29 November 2013, Mr Jia Hs son, Mr Jia Tingsheng (Mr Jia T), was detained on bribery charges.
Mr Jia T was not employed directly by either Grand China or HNA but was employed by an associate company, GCS Development Company.
Mr Jia T knew from college Mr Xu Wenzhong (Mr Xu) who in August 2008 had been employed by Shagang.
Both men lived in Shanghai.
On 22 January 2014, Mr Xu was detained by officers of the Haikou PSB on the charge of bribing a non public servant.
He was flown to Haikou (over a thousand miles away), where he was questioned by PSB officers from the Meilan district branch overnight and during 23 January 2014.
According to the PSBs interrogation record, Mr Xu gave an account of being asked by the general manager of Shagang, Mr Shen Wenfu (Mr Shen), to use his relationship with Mr Jia T to cause Mr Jia Ts father, Mr Jia H, to charter the vessel from Shagang as soon as possible.
Mr Xu is recorded as saying that Mr Shen gave him RMB 100,000 (equivalent to around US$16,000 at that time) in cash, which Mr Xu delivered to Mr Jia T at Mr Jia Ts home in a single instalment.
The interrogation record states that Mr Xu was willing to confess his crime for leniency.
Also on 23 January 2014, Mr Jia T was questioned by the same PSB officers who had interrogated Mr Xu.
The only interrogation record disclosed is described as the 4th.
It records Mr Jia T as saying that Mr Xu gave him RMB 150,000 in the hope that Mr Jia Ts father would communicate with HNA to arrange the guarantee as quickly as possible.
The money was said to have been handed over by Mr Xu in cash in the cafeteria of a hotel near Mr Jia Ts home.
When Mr Jia T told his father about this payment, Mr Jia H said that he could only communicate with HNA according to the companys normal rules and told Mr Jia T to send the money back.
Mr Jia T did not do so and, shortly after the charterparty was concluded, met Mr Xu again at a restaurant near Mr Xus house where he received another RMB 150,000.
He did not tell his father about this payment.
The interrogation record states that Mr Jia T was asked whether his confession had been extorted by torture or deceit, to which he replied no.
A confession note dated 24 January 2014 in Mr Xus name gives a similar account to that given in Mr Jia Ts 4th interrogation record.
It describes Mr Xu paying Mr Jia T a sum of RMB 300,000 in two instalments, one before and one after the signing of the charterparty.
Another interrogation record dated 4 March 2014 refers to Mr Xu being asked why he had initially stated that he had bribed Mr Jia T with RMB 100,000, when he was now saying that the amount was RMB 300,000.
He answered that in his initial confession he had lied and deliberately given a lower amount because he was trying to escape punishment.
However: Being educated by the police officers, I realised the mistakes I made.
Now, I am willing to truthfully confess, for leniency.
Mr Xu was also asked why he and Mr Shen would want to bribe HNA if, as he had told the PSB, the pricing of the charterparty was reasonable in any event.
Mr Xu is recorded as answering that it would otherwise have been difficult to charter the vessel quickly.
Mr Shen was also detained on bribery charges and on 16 February 2014 was questioned by the PSB.
According to the PSBs interrogation record, Mr Shen said that he had given Mr Xu RMB 300,000 in two instalments to pay Mr Jia T.
The money was said to have been provided at Mr Xus request to make sure that HNA would provide a guarantee of Grand Chinas performance of the charterparty.
The same account is contained in an undated confession note.
On 17 February 2014, the PSB sent a letter to HNA summarising the confessions made by the individuals accused of bribery.
This letter was sent in response to a request made by HNA on 10 February 2014 for information about the criminal investigation to enable HNA to explain and prove the facts in the English court proceedings.
Allegations of torture and Mr Xus guilty plea
On 1 May 2014 Mr Zhang Jie (Mr Zhang), who had by then replaced Mr Shen as the general manager of Shagang, made a formal complaint to the Peoples Procuratorate (the entity that has supervisory responsibility for the PSB) of Haikou.
The complaint alleged that the confessions of Mr Xu and Mr Shen had been procured by torture and that HNA had wrongly used the PSB to manufacture false charges with a view to interfering in an economic dispute.
Mr Zhang requested the Procuratorate urgently to investigate these allegations.
On 23 June 2014, the Procuratorate made a report on the outcome of its investigation into this complaint.
The report stated that the Procuratorate had visited the [PSB], interviewed the concerned suspects, [and] retrieved from the detention centre relevant materials.
It concluded that the allegations made in the complaint were not supported by the facts. (Copies of the complaint and report were not available at the trial and were admitted as new evidence in the Court of Appeal.)
On 23 July 2014 Mr Xu (who in the meantime had been under a form of house arrest at a hotel in Hainan province) was arrested for bribery of a non public servant and transferred to a detention centre in Haikou.
On 21 August 2014 he was visited and interviewed at the detention centre by Mr Guo, a lawyer retained by his wife.
Mr Guos interview notes record that Mr Xu maintained that he was innocent and gave the following account of his interrogations: I was brought to Hainan on 23 January this year [2014], Initially there werent any charges.
I was taken to the basement of the [PSB].
It was around 11pm and I was definitely there for over 48 hours.
I came out on the afternoon of the 26 [January].
The least serious methods used against me were fists and truncheons.
I was stripped of my clothes and cold air was blown on me.
They covered my mouth with their hands after water was poured into me.
I was also burnt with a cigarette butt.
At first I said that there had been no such thing [bribery], but then they tortured me and I couldnt take it any longer.
On the morning of 24 [January], I said I had paid out 100,000 yuan.
I made this up.
On the afternoon of 24 [January] they tortured me again and poured water into me.
I couldnt bear it any more.
They told me it had been 300,000 and it had been paid in two batches 150,000 each time.
In the end, I had no other way out but to say what I was told to say .
I definitely never did it.
At that time, the market was dominated by shipowners and we didnt have to ask any favours of [Grand China].
They had to ask help from us.
Their company was a new company and we were an established company.
Despite what Mr Xu had told Mr Guo in this interview, on 22 August 2014 Mr Guo made an application for bail on behalf of Mr Xu on the basis that Mr Xu had given a true account in his confessions and had repented.
Bail was refused.
On 15 September 2014, in a further interview, Mr Xu gave Mr Guo a detailed account of all his interrogations by the PSB and of the visit by the Procuratorate in June.
As well as describing how he had allegedly been tortured by the PSB, Mr Xu said that, before he was interrogated again on 24 January 2014, he had heard Mr Jia T screaming from another room.
He also said that he was later told that Mr Shen had confessed and was taken to see Mr Shen.
He said that Mr Shens whole face was red and it was obvious that he had had water poured into him.
On 14 November 2014 Shagang amended its reply in the Commercial Court proceedings to plead an allegation that the confessions of bribery relied upon by HNA in its defence had been obtained by torture, with the consequence that they were inadmissible as evidence in the proceedings.
In response, on 3 December 2014, HNA wrote to the Haikou PSB accusing Mr Xu, his wife, Mr Zhang, Mr Guo and two solicitors acting for Shagang in the Commercial Court proceedings of crimes involving interference with the PSBs investigation and fabricating evidence.
HNA asked the PSB to handle the case legally and punish the criminals severely so as to realise the fairness and justice of our society and maintain judicial authority.
On 17 and 19 December 2014, Mr Xu was visited by two lawyers from Mr Guos firm.
According to their notes of these meetings, Mr Xu said that he had been interrogated again on two consecutive days at the end of November.
At first he had not admitted to bribery but he was told that, if he admitted the offence, the sentence would be two years at most; otherwise he would be imprisoned for much longer.
Mr Xu was recorded as telling the lawyers that he had already been detained for almost a year and that, in order to get out as soon as possible, he had decided to repeat the fabricated account of events he had previously given to the PSB officers.
He said that he had then given a video recorded interview in which he repeated that account.
The case against Mr Xu came before the Meilan District Peoples Court of Haikou City in Hainan province on 22 September 2015.
Before the hearing Mr Xu instructed Mr Guo that he wanted to admit the allegations against him in order to be released sooner.
In his submissions Mr Guo relied on Mr Xu having made a voluntary confession in asking the court for leniency.
Mr Xu was sentenced on 16 November 2015 to a term of imprisonment of one year and eight months.
With credit given for the time he had already spent in detention, this led to his release the following month.
No prosecution was brought against Mr Shen or Mr Jia H.
In late 2015 Mr Guo met Mr Jia Hs lawyer, who gave him a copy of an unsigned document said to have come from Mr Jia Ts wife.
The document is entitled Report on torture suffered by [Mr Jia T] during the period detained in Hainan.
This report contains a detailed account written in the first person of three interrogations of Mr Jia T, in each of which torture was allegedly used: the first, lasting 46 hours, from 29 November to 1 December 2013; the second, lasting 24 hours, on 19 and 20 December 2013; and the third, lasting 42 hours, on 23 and 24 January 2014.
The torture alleged to have occurred during the last of these interrogations, in which the confession recorded in the 4th interrogation record was made, included: sleep deprivation; putting a cover over Mr Jia Ts head so that it was difficult to breathe and then pouring wasabi oil on his head near his mouth and nose as he lay on his back so that he was forced to inhale it; and covering his face with a sweater soaked in iced water until he could hardly breathe, then loosening the sweater as water was poured into his nose (a procedure said to have been continued over a period of around four hours).
The report also contains the following passage, which occurs at the point in the narrative in the early hours of 24 January 2014 after the alleged torture had ended and just before the confession that Mr Jia T had given was written down: [The PSB team leader] came in and said: Actually, you do not know to what stage this situation has developed.
Shagang recently wound up Grand China, and took over USD20m, now they are preparing to wind up our HNA.
We are undoubtedly not interested in you people as individuals, our HNA Group just wants to solve a problem.
So really it is no big deal, you need not worry, just co operate and write down a confession, and strive to return home for Chinese New Year.
After you go home do not ever recant your confession or you know what the consequence will be.
The trial
The trial of Shagangs claim against HNA in the Commercial Court took place over ten days between 26 January and 9 February 2016 before Robin Knowles J.
By the time of the trial it was agreed that, unless HNA succeeded in its defence that the charterparty was procured by bribery, Shagang was entitled to judgment on its claim under the guarantee in a sum of US$68,641,712.
Only three witnesses gave oral evidence at the trial.
They were Mr Guo and Mr Zhang for Shagang and the general manager of HNAs audit and legal affairs department, Mr Wu.
None of the witnesses had first hand knowledge of the alleged bribery or torture, although (as mentioned) Mr Guo had interviewed Mr Xu and represented him in the criminal proceedings against him.
Each party also relied at the trial on expert evidence of Chinese criminal law and procedure and of experience of confession evidence in China.
Neither party sought to cross examine the others experts but each party provided (at the judges request) a list of key propositions to be derived from this evidence.
The expert evidence showed that, in a high proportion of criminal cases in the PRC (as many as 95% according to Shagangs expert), the suspect confesses, and also that it is the almost invariable practice of the PSB to interrogate suspects and obtain their confessions on multiple occasions.
It is normal for suspects to plead guilty and innocent verdicts are very rare.
Torture is illegal in the PRC and legislative reforms of criminal procedure were introduced in 2012 with the aim of giving greater protections to suspects and seeking to eradicate a perceived problem of the use of torture to coerce confessions.
However, there have continued to be reported instances of torture being used.
The experts were also agreed that it is by no means unknown for local PSBs to interfere in commercial disputes in favour of locally powerful economic interests, although over the years the Chinese authorities have issued various promulgations seeking to clamp down on this practice.
The judgment of the trial judge
In his judgment given on 16 May 2016, the judge noted that there was little first hand oral evidence available at the trial.
None of Mr Xu, Mr Jia T, Mr Jia H or Mr Shen was available to give evidence.
Nor was there any evidence from any officer of the PSB.
The judge declined to draw any adverse inference against Shagang from the absence of Mr Xu, Mr Xus wife (who had made a witness statement) and Mr Shen.
He noted that Shagang was now in liquidation and found that Shagang could not realistically be expected to procure their presence at trial.
With regard to the witnesses who gave oral evidence, the judge commented unfavourably on the evidence of Mr Wu, finding that he chose to attempt to avoid giving straightforward answers.
In relation to Mr Guo, the judge said that, whilst he was able to accept substantial parts of his evidence, there were other parts that he found unconvincing.
He observed that it was to Mr Guos credit that he was prepared to attend the trial and said that there was nothing in the suggestion that he was looking to help Shagang.
The judge also said that he did not doubt the essential accuracy of the notes made by Mr Guo of his interviews with Mr Xu.
The judge found that the expert evidence relating to Chinese criminal law and procedure, and experience in China of confession evidence, was valuable context or background evidence.
The documentation available was found by the judge to be substantially incomplete.
He rejected the suggestion that Shagang had deliberately withheld or deleted documents.
The judge said that the evidence available was limited in many respects when compared with the evidence that would be desirable for conclusions on the issues in this case, observing at para 85 that: many of the documents require caution before reliance can be put on what they appear to say.
The evidence of those few factual witnesses the court has seen has its shortcomings.
Accounts of the same key people (Mr Xu in particular) are used both to support and to deny the case of bribery, and both to support and to deny the case of torture.
Accounts are altogether missing from other key people.
The judge summarised the evidence under the following headings: Commercial Context (paras 18 22); Approval of the Charterparty within Grand China and HNA (paras 23 24); Confession by Mr Xu (paras 25 44); Confession by Mr Jia T (paras 45 50); Confession by Mr Shen (paras 51 55); Mr Jia H (paras 56 57); the Sun bribe (paras 58 62); and Confession evidence and torture (paras 63 82). (The Sun bribe was a separate allegation of bribery made by HNA against a broker, which HNA accepted did not give it a defence and which the judge found was not relevant to Shagangs claim.)
The judge then proceeded straight to his conclusions.
Under the heading Conclusions on bribery he found at para 87 that: On the limited evidence at this trial, and after careful consideration, on the balance of probabilities I find that there was no bribe by Mr Xu.
At paras 88 93 he set out his principal reasons for reaching that conclusion.
Because criticisms made of the judges reasoning are at the centre of this appeal, we quote these paragraphs in full: 88.
I fully acknowledge that the Meilan District Peoples Court of Haikou City found Mr Xu guilty of bribery and sentenced him.
On the material put before that Court I can entirely follow its finding.
However, material has been put before this Court that was not put before the Meilan District Peoples Court.
In particular, the Meilan District Peoples Court had evidence of Mr Xu (and others) admitting the alleged bribery, but did not have the evidence of his (and their) also denying the alleged bribery. 89.
When Mr Xu, Mr Jia T and Mr Shen each first referred to a bribe they did so without a lawyer or representative present.
Although it appears Mr Guo was not his first lawyer, when Mr Xu had access to Mr Guo as his lawyer Mr Xu denied that there was a bribe. 90.
There is no evidence that any account of the officers of PSB who were present at any interrogation has been tested with them in China.
I appreciate the practical difficulties, but there has been no opportunity to test an account from them at this trial. 91.
The reason given for the alleged bribing concluding the charterparty quickly rather than the pricing of the charterparty is unconvincing, in my judgment.
Even if there was a desire for a quick conclusion I am unpersuaded, on the evidence, that bribes were introduced to achieve that end.
On the documents, Mr Xu at one point suggested it as a reason for bribing.
The same appears to be the case for Mr Shen.
But both have also denied any such bribe.
Further, the state of the market was not such as to provide an objective reason for a quick conclusion being so important, or being other than achievable in ordinary course in any event.
The relevant chartering market was active and an owners market.
As for the facts that the charter period would commence in 2010 and be of some length, it is hard to accept these would have made a difference: Shagang itself had recently agreed a charterparty for the Vessel of identical commencement and duration to the Charterparty. 92.
Even when Mr Jia T gave an account consistent with receiving a bribe, that account supported the fact that Mr Jia Hs response was to insist on normal procedures.
I do not overlook HNAs point that a requirement for board approval was lifted and the charterparty was not submitted for a required legal and financial review, but in the result the charterparty was approved by, among others, a main board director of HNA, and by the Chairman of HNA.
I do not overlook Mr Wus own evidence that he did not become aware of the charterparty until 2011, but in the next several years following the agreement of the charterparty in 2008 I do not see anyone at HNA bringing out the point that the charterparty was agreed too quickly so as to cause suspicion of bribery. 93.
Further, I have seen no records to show withdrawal of funds used for the alleged bribe or expenditure of funds by Mr Jia T.
At para 94 the judge observed that the reasons I have given would alone cause me to reach the conclusion that there was no bribe.
He then addressed various contrary arguments advanced by HNA as follows: I am not led to a different conclusion by the fact that Mr Xu pleaded guilty at trial, when I consider that plea in context.
Further my conclusion is not disturbed by Mr Xus admission of accepting a watch as a bribe in connection with an unrelated matter. 95.
I have considered carefully a challenge by HNA to the reliability of Mr Xus apparent accounts by reference to the dates and times, and sequence of events, in January 2014, including by comparison with the Jia T report.
I do not find these points affect the substance of the matter, and I would have been surprised not to find some possible discrepancies in the circumstances that obtained. 96.
HNA argues that an unequivocal confession is sufficient to convict an accused even on the criminal standard of proof.
But the question in the present case is not whether a confession by an accused may lead to a conviction of that accused.
In these proceedings HNA relies on the alleged confessions against Shagang and not against the individuals said to have made them. [Counsel for HNA] refers to R v Tippet (1823) Russ & Ry 509 and R v Sykes (1913) 8 Cr App 233 at 236 but those were cases where confessions were relied upon against the individuals said to have made them. 97.
HNA argues that, in the absence of torture, there is no credible reason why Mr Xu, Mr Jia T and Mr Shen should falsely confess to crimes which they did not commit.
However, the possibility of a large difference between the sentence that might follow an admission and the sentence that might follow a conviction was referenced expressly by Mr Xu in his exchanges with Mr Guo, and on his account reflected what had been indicated to him by officers of the PSB. 98.
HNA argues that the prospect of a lighter sentence cannot be a reason for a false confession.
I do not accept that argument.
In the following section the judge set out his conclusions on torture: 101.
But what of the allegations of torture? I have considered the evidence available at this trial for and against the allegations of torture, and the limitations of that evidence, including the absence emphasised by HNA of medical evidence.
Having done so, I find that torture cannot be ruled out as a reason for the confessions. 102.
The fact that I cannot rule out torture further reduces the confidence that I can put in the confessions, although it will be apparent from my conclusions on bribery (above) that I already have insufficient confidence in the confessions to allow a finding of bribery. 103.
HNA distinguishes the confessions from later admissions (including in bail applications) and pleas of guilty, at which later points torture is not alleged to have been practised.
But in the present case the matters are interconnected.
Once the confessions had been made, a departure from them, in the form of a denial or a not guilty plea, would likely require reference back to the torture allegations. 104.
In the present case, in the circumstances of my conclusion that there was no bribe, it is not necessary to express a definitive conclusion on whether there was torture.
I have said that I cannot rule it out; the evidence available does not equip me well to reach a firmer conclusion. 105.
That I should so confine my view at this trial is also in the interests of leaving proper room for investigation in China by the appropriate authorities, to include questioning of the officers who were on duty.
I have not set out in this judgment the full extent and nature of the torture alleged to have occurred, but if the allegations were all true it would be hard to imagine a more comprehensive breach of the duties and responsibilities of the officers.
In the light of his conclusions, the judge found that HNA was liable to pay
damages to Shagang and judgment was entered in the agreed principal sum of US$ 68,597,049.59.
The judge refused permission to appeal to the Court of Appeal, as did Davis LJ when he considered HNAs application for permission on the papers.
Permission to appeal was granted by Longmore LJ, however, following an oral hearing.
On the appeal HNA contended that the judges conclusion on bribery was unsustainable and that, having accepted that the confession evidence was admissible, the judge should have held that the charterparty was procured by bribery.
The Court of Appeals judgment
For reasons given in a joint judgment dated 23 July 2018 [2018] EWCA Civ 1732, the Court of Appeal (Sir Geoffrey Vos, Chancellor of the High Court, Newey LJ and Dame Elizabeth Gloster DBE) allowed the appeal.
The Court of Appeal recognised that it was concerned with an appeal on questions of fact but observed that there was no appeal against the findings of primary fact made by the judge.
The challenge made was to the manner in which the judge reasoned and his conclusion, drawn from his unchallenged findings of primary fact, that there was no bribe (para 53).
In these circumstances, it was common ground that the proper approach to the appeal was that set out in Clarke LJs judgment in Assicurazioni Generali SpA v Arab Insurance Group (Practice Note) [2002] EWCA Civ 1642; [2003] 1 WLR 577, as approved by the House of Lords in Datec Electronics Holdings Ltd v United Parcels Service Ltd [2007] UKHL 23; [2007] 1 WLR 1325, and that the relevant questions were whether the judge made an error of law in reaching his ultimate conclusion and/or whether it was a conclusion that no reasonable judge could have reached (para 53).
The Court of Appeals answer to those questions was that the judges decision was unsustainable for reasons summarised in para 79 as follows: The judge did not follow the logical steps necessary to reach a proper evaluation of the admissible evidence.
He failed to ask and answer the correct legal question as to what weight should be accorded to the admissions evidence.
The judge ought to have said why he was unable to place any reliance on the admissions, if that was his view.
The judge also fell into legal error in failing to take all the appropriate matters into account in deciding the crucial bribery issue.
As we have also said, the judge failed to exclude irrelevant matters (including his lingering doubt as to whether the admissions were procured by torture) in considering whether the alleged bribe was paid.
The Court of Appeal decided that the case should be sent back for reconsideration of the issue of the weight to be attached to the admissions and of the issue of bribery in the light of this judgment, and on the basis that the issue of torture has already been decided (para 88).
It directed that these issues be determined by a different Commercial Court judge.
This appeal
As encapsulated in para 79 of its judgment (quoted above), the Court of Appeal made four main criticisms of the judges reasoning: The judge failed to follow the logical steps necessary to reach a proper i) evaluation of the admissible evidence. ii) The judge failed to ask and answer the correct legal question as to what weight should be accorded to the confession evidence. iii) The judge fell into legal error in failing to take all the appropriate matters into account in deciding the bribery issue. iv) The judge fell into legal error in failing to exclude irrelevant matters, including what the Court of Appeal described as his lingering doubt as to whether the confessions were procured by torture, in considering whether the alleged bribe was paid.
The central issue on this further appeal is whether these criticisms were justified and, to the extent that they were, whether they warranted overturning the judges decision and remitting the case for a fresh determination.
If the Court of Appeal was right to remit the case, a further question arises as to whether the basis on which it did so was appropriate.
Although not all aspects of these issues were covered by Shagangs original grounds of appeal, they are fully covered by the statement of issues agreed between the parties and by the parties written cases.
To answer an objection raised by HNA that some of the arguments advanced by Shagang fall outside the scope of the original grounds, Shagang has applied for permission to amend its grounds of appeal to add a ground, in similar terms to the first agreed issue, that there was no basis in law for the Court of Appeal to interfere with the judges conclusions in light of the facts found by the judge (which are not in themselves challenged by either party).
We would grant this application, as the amendment ensures that all the important points in dispute are properly before the court and causes no prejudice to HNA.
It is convenient to consider each of the four key criticisms of the judges reasoning made by the Court of Appeal in turn.
(i) Alleged failure to address issues in the logical order
The Court of Appeal considered that the judge approached the issues in the wrong order and that he ought to have decided the issue of torture first.
As stated at para 63: In our view, the judge ought to have decided the issue of torture first.
It was the sole basis on which the admissibility of the admissions was resisted.
All the other arguments went only to the weight that should be accorded to them.
Thus, the judges first task was to decide on the facts whether or not torture had taken place in order to extract each of the three main admissions (leaving aside Mr Jia H) relied upon by HNA.
Once he had done that exercise, the judge should have stated his conclusion that, since torture had not been proved, the admissions were admissible as evidence of their contents.
In the view of the Court of Appeal, having decided that the confession evidence was admissible, the judge should next have determined the weight to be given to that hearsay evidence, having regard in particular to the considerations set out in section 4(2) of the Civil Evidence Act 1995.
Only then should the judge have moved on to decide whether there had been bribery.
The Court of Appeal summarised at para 65 the approach which it said should have been taken: In our judgment, therefore, the proper approach in a case of this kind is to decide first whether torture is proved.
If it is not proved, as in this case, the statements are admitted as hearsay evidence.
The next step is to decide the weight that can be attached to that evidence in all the circumstances, including those in section 4 of the 1995 Act.
Only then could the court properly move on to an evaluation of all the evidence, including the hearsay statements of admission, in order to decide the primary factual issue in the case, which was whether the alleged bribery occurred.
We can quite see that the second and third stages of the process might be undertaken together, but it must be clear that both have actually been considered.
We fully accept that, where there is an issue as to whether important hearsay evidence is admissible, it is a logical approach to decide that issue first before going on, if the evidence is held to be admissible, to consider its weight and its evidential impact on the substantive issues to be determined.
We do not, however, accept that such an approach is mandatory, either generally or in this particular case.
How and in what order questions concerning the admissibility and weight of evidence are dealt with is very much a matter for the trial judge.
There is no one size fits all approach.
The judge will consider how best to deal with such matters in the light of the issues, the evidence and the arguments in the case as a whole.
There will usually, if not invariably, be more than one legitimate approach which can be taken.
In many cases, for example, issues of admissibility can be dealt with
efficiently by admitting the evidence de bene esse.
This means taking the evidence into account on the assumption, without deciding, that the evidence is admissible.
Unless the evidence turns out to be critical to the decision to be reached, the issue of admissibility may never need to be determined.
This is often a convenient approach to adopt, as resolving issues of admissibility can be complex and time consuming.
Mr Brown for HNA realistically accepts that it would have been a permissible approach in this case.
To make his reasoning clear the judge ought to have stated at the start of his conclusions on bribery that this was what he was doing.
Nevertheless, when his conclusions are read as a whole, it is apparent that this is in fact the approach which the judge took.
The judge was clearly aware that the issue of torture was a sensitive one and that any findings that he made about whether torture had occurred might have ramifications beyond the confines of the case, as he indicated at para 105 of his judgment.
In these circumstances, it is understandable that he should have preferred not to determine that issue unless it was necessary to do so.
This explains why he proceeded, as he manifestly did, by treating the confession evidence as admissible before coming to the issue of torture.
If, as was the case, he reached the conclusion that notwithstanding the confession evidence there was no bribery, then the question whether that evidence was inadmissible because obtained by torture did not have to be decided.
This also explains why the judge did not find in terms whether there was or was not torture, but instead left the matter open.
Thus, he stated in para 101 that: I find that torture cannot be ruled out as a reason for the confessions.
Similarly, in para 104 he stated that: it is not necessary to express a definitive conclusion on whether there was torture.
I have said that I cannot rule it out.
At para 105 he gave reasons why he considered that he should so confine my view.
The Court of Appeal considered that, since the judge treated the confessions as admissible, he must have held that torture had not been proved on the balance of probabilities.
We disagree.
In our judgment, it is clear that the judge deliberately refrained from deciding that question.
He considered that he did not need to decide it because he was in any event satisfied that there was no bribery.
It is common for judges not to make findings on particular issues where to do so is unnecessary for the disposal of the case.
As Davis LJ stated in refusing permission to appeal on the papers, in circumstances where the judge had decided that there was no bribery notwithstanding the confession evidence: there was no further requirement for the judge to make an express finding of whether or not there was also torture.
He clearly had doubts on the matter; but he in terms stated that it was not necessary to reach a conclusion.
We also note that the judges approach was consistent with the way in which Shagang put its case at trial.
Its primary case was that, even taking the confession evidence at face value, it did not support HNAs pleaded case since it did not demonstrate the requisite inducement.
Its secondary case was that such evidence was internally inconsistent, made no sense in the commercial context, and provided no or no sufficient basis for a finding of bribery.
Its tertiary case was that if, contrary to both these arguments, the evidence did support a prima facie case of bribery, then it should be ruled inadmissible as having been procured by torture.
In all the circumstances we do not consider the Court of Appeals criticism that the judge made an error by not deciding the issue of torture first to be justified.
The approach taken was both legitimate and consistent with the way the case was put before him.
We deal under the next heading with the Court of Appeals further criticism that the judge ought to have decided the weight to be given to the confession evidence before moving on to decide the primary factual issue of whether the alleged bribery occurred.
(ii) Alleged failure to assess the weight of the confession evidence
The Court of Appeal considered that the judge did not adequately address the weight to be given to the confession evidence, stating at para 77 that: he did not really address the point at all.
He seems to have omitted that step in the argument.
Once he found that the admissions had not been obtained by torture, if he was going to reject them as unreliable, he needed in our judgment to say why he was doing so.
The nine factors relied upon by the judge in his conclusions on bribery may be summarised as follows: the confessions had been made without a lawyer present (para 89); the PSB officers present at the interrogations had not given any the fact of the confessions and the guilty plea of Mr Xu (para 88); the fact that all three individuals accused of bribery had retracted their i) ii) admissions and asserted their innocence privately (para 88); iii) iv) account which could be tested (para 90); v) the reason for the bribe given in the confessions, namely the need to conclude the charterparty speedily, was unconvincing, and the bribe made no sense commercially (para 91); vi) there was no evidence that the alleged bribe was ever received by Mr Jia H and the account of Mr Jia T in his confession on which HNA relied was that Mr Jia H had told him to return the bribe and abide by normal procedures (para 92); vii) and the chairman of HNA (para 92); viii) there was no evidence of withdrawal of funds used to pay the bribe or expenditure of those funds by Mr Jia T (para 93); and ix) confessions (paras 97 98).
It is correct that the judge did not address the question of what weight should be given to the confession evidence as a separate step in his reasoning before going on to decide whether the alleged bribery had occurred.
He did not refer to section 4 of the 1995 Act or to any of the considerations there set out.
It is also fair to say that the charterparty was approved by an unconnected HNA board director the prospect of leniency was a credible reason for making false the judge stated his conclusions in what may be described as thumbnail terms without any detailed discussion of the evidence underlying them.
It would have been much more satisfactory if he had dealt in more detail with the content of the confessions, the circumstances in which the confessions were made and other factors bearing directly on their reliability, such as the evidence that each of the individuals had told others their confessions were false, before bringing into consideration other factors bearing on the likelihood or otherwise that the confessions were truthful, such as the lack of any plausible commercial reason for paying a bribe.
We do not accept, however, that the judge failed to address the question of what weight should be given to the confession evidence or to say why he rejected it as unreliable.
The confession evidence was the first matter to which he referred in the reasons given for his conclusion that no bribe was paid.
Furthermore, the judges second, third and fourth factors listed above all directly relate to the reliability and weight of that evidence.
The third factor is of obvious importance.
The right in most circumstances to consult a lawyer before police questioning is well recognised in this jurisdiction and under the European Convention on Human Rights.
It is an important safeguard and incriminating evidence obtained without affording that opportunity will generally be inadmissible see section 58 of the Police and Criminal Evidence Act 1984 (PACE); Cadder v HM Advocate (HM Advocate General for Scotland intervening) [2010] UKSC 43; [2010] 1 WLR 2601.
The judge was also entitled to attach weight to the fact that none of the PSB officers present at the interrogations had given any account which could be tested (his fourth factor).
The Court of Appeal considered that this factor could only have been relevant to the question of whether the confessions were obtained by torture, and not to the question whether the confessions were otherwise reliable evidence of bribery.
We disagree.
It seems to us that there were many questions that it would have been relevant to ask the PSB officers had there been an opportunity to do so and the fact that such questions were unanswered was relevant, not only to the allegation of torture, but more generally to the reliability of the confession evidence and the weight that should be accorded to it.
One obvious area of enquiry is what caused officers of the Haikou PSB to detain Mr Jia T and Mr Xu on bribery charges in the first place and whether they had any information to suggest that a bribe had been paid before Mr Jia T and Mr Xu made their confessions.
There was no evidence at the trial that they did.
Mr Wu in his testimony accepted that HNA had no evidence that Shagang had bribed anyone in relation to the charterparty when the PSB began its investigation.
Nor did HNA ever acquire any such evidence apart from the confessions.
None of the interrogation records and other documents relating to the PSB investigation and to the subsequent criminal proceedings against Mr Xu refers to any reason for suspecting Mr Jia T, Mr Xu or Mr Shen of bribery apart from their confessions, or records any question confronting any of them with any reason for suspicion.
According to the first interrogation record of Mr Xu, for example, his initial confession came about in the following way.
Having been asked about his personal details and background and told that he was under suspicion of bribery, Mr Xu was asked: Question: Do you have any criminal action, please explain? Answer: Yes, I have criminal action of bribery.
Question: Please describe in detail your behaviour of bribery.
Answer: Sure.
In June 2008 [The confession then follows]
While there are no doubt cases where individuals confess to crimes including crimes of dishonesty entirely of their own initiative, when there is no evidence to implicate them, such an occurrence raises questions about how the individual had come to be suspected of a criminal action of bribery, whether the interrogation records are complete and whether the suspect was offered any inducement or given any motive to confess.
Quite apart from its relevance to the allegation of torture, the judge was entitled to regard the inability to test any account from any officer of the PSB of how the confessions had come about as tending to reduce the reliance he could reasonably place on the confession evidence.
It is also important to bear in mind that the question whether the confession
evidence was reliable and the question whether bribery had taken place were not merely inter related but, in the circumstances of this case, were simply different ways of framing the same issue.
It was not disputed that Mr Xu, Mr Jia T and Mr Shen had made the confessions attributed to them in the interrogation records and that Mr Xu had pleaded guilty to an offence of bribing a non public servant.
The issue was whether or not, when they made the confessions, these individuals were telling the truth.
Furthermore, the confessions were the only evidence to support the allegation of bribery made by HNA.
There was no evidence apart from the confession evidence to suggest that a bribe had been paid.
In addressing the issue of bribery, the judge was therefore necessarily engaged in estimating the weight to be given to the confession evidence.
It was the only matter to be put into the evidential scale on behalf of HNA.
As part of the exercise of evaluating the weight to be given to the confession evidence, it was appropriate for the judge to consider the plausibility of the alleged bribe.
The more implausible it was that a bribe had been paid, the less likely the confessions were to be true and therefore the less weight he should give to that evidence.
A number of the factors identified by the judge went to the implausibility of any bribe and/or the alleged bribe having been paid, in particular his fifth to eighth factors.
In summary, the explanation given for the bribe was unconvincing; bribery made no sense in the commercial context; the charterparty went through normal approval procedures; no one complained about the fixture for a considerable period of time and there were no documents to support the allegation, despite the fact that there had been a criminal investigation.
The fact that the confession evidence may have been induced by the prospect of a lenient sentence was also relevant to the weight which it was appropriate to give that evidence the judges ninth factor.
As already noted, there was evidence that all three individuals had offers of leniency made to them and of both Mr Xu and Mr Jia T saying: I am willing to truthfully confess, for leniency.
In the interrogation record dated 4 March 2014 Mr Xu was recorded as stating: Being educated by the police officers, I fully realised my crimes.
I am willing to truthfully confess my problems, for leniency.
And I would like to give my appreciation to the Public Security Bureau for its lawful acts and protection of my rights.
There was also the striking evidence of Mr Xu deciding, for reasons of leniency, to adhere to his original confession even after he had told his lawyer that it was false.
As the judge found at para 38: Mr Xu explained a decision to adhere to his earlier account accepting guilt because it would lead to a much reduced sentence than if he contested the allegations and was found guilty.
This evidence fell to be considered against the background evidence that in the region of 95% of criminal cases in China involve a confession, that it is normal for suspects to plead guilty and that Chinese courts very rarely hand down innocent verdicts.
The attractions of leniency are clear if allegations are believed to be highly likely to lead to conviction in any event and to much greater punishment if they are denied.
Whilst the Court of Appeal recognised that leniency could certainly have been a relevant factor, it pointed out that the judge had not found that the prospect of leniency was in fact a reason for false confessions having been made.
It was not, however, necessary for the judge so to find.
That it may have been a reason is sufficient for it to be relevant to an assessment of weight.
The Court of Appeal also found it difficult to see why someone might make up something which was untrue in order to obtain a more lenient sentence.
False confessions are, however, a known problem for criminal justice systems, and are a reason why in this jurisdiction there are important safeguards governing the admission of confession evidence see section 76 of the Police and Criminal Evidence Act 1984 (PACE).
Indeed, as Davis LJ observed when refusing permission to appeal, under English law an indication of leniency such as those given in the present case would render the alleged confessions vulnerable under section 76 of PACE 1984 even as against the accused.
It is a fortiori with regard to a third party (Shagang).
For all these reasons, it is in our judgment clear that the judge did address the question of the weight to be given to the confession evidence.
He also answered that question.
In circumstances where that evidence was the only evidence of bribery, in finding that there was no bribery the judge was necessarily finding that the confession evidence was of little or no weight, as confirmed by his statement in para 102 that it will be apparent from my conclusions on bribery (above) that I already have insufficient confidence in the confessions to allow a finding of bribery.
Moreover, it cannot be said that such a conclusion was unreasonable or unsustainable.
There were ample grounds to support it.
(iii) Alleged failure to take all appropriate matters into account
The principal matters which HNA contended, and the Court of Appeal appears to have considered, that the judge failed to take into account are the details of the confessions made, including such matters as the content of each confession made by each individual, their timing, surrounding circumstances and how they tallied with one another.
It is said, in particular, that the judge should have addressed each confession made by each of the three individuals rather than simply dealing with the matter compendiously.
We agree that it would have been much more satisfactory for the judge to have addressed the confession evidence in greater detail.
It is, however, apparent that those of his factors which went to the circumstances of the confessions (retraction, no lawyer present, no PBS evidence and offers of leniency) applied to all three individuals.
His conclusions also have to be read together with the earlier part of his judgment, at paras 25 55, where he dealt in some detail with the confessions made by each individual.
In assessing the reliability of the confession evidence, the judge can fairly be taken to have had this detail well in mind.
Further, he addressed some issues relating to how the confession evidence tallied together at para 95.
He also referred to the importance of the initial confessions, and the difficulty of formally resiling from them once they had been made, at para 103.
This is not therefore a case in which it can be said that the judge failed to have any regard to material evidence.
He clearly did consider the confession evidence of all three individuals.
The real complaint is as to the degree of depth in which he did so and that he did not do so in a sufficiently systematic way.
Such a shortcoming, whilst regrettable, does not involve an error of law or otherwise justify intervention by an appellate court.
(iv) Whether the possibility of torture was irrelevant
As mentioned, when he came to consider the allegations of torture, the judge found that torture cannot be ruled out as a reason for the confessions.
He said that this further reduces the confidence that I can put in the confessions (para 102).
The possibility that the confessions may have been obtained by torture therefore provided an additional ground for his conclusion that the confession evidence could not be relied on.
The most striking criticism of the judges reasoning made by the Court of Appeal is that, in considering whether the alleged bribe was paid, the judge failed to exclude his lingering doubt as to whether the confessions were procured by torture.
The Court of Appeal described the possibility of torture as an irrelevant matter (para 79) and considered that the judge ought not to have allowed his doubts about whether torture had occurred to infect his findings on the central issue in the case (para 69).
The judge was clearly very troubled by the evidence of torture and, although he did not find it necessary to express a definitive conclusion on the question, his emphasis on his finding that he could not rule out torture as a reason for the confessions made it clear that he considered there to be at least a serious possibility that torture had been used.
It is a general principle of the law of evidence that, in assessing what weight (if any) to give to evidence, a court should have regard to any matters from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.
In the case of hearsay evidence in civil proceedings this principle is embodied in section 4 of the Civil Evidence Act 1995.
Circumstances specifically listed in section 4(2) to which regard may be had include whether any person involved had any motive to conceal or misrepresent matters.
It is difficult to think of a motive which would more seriously undermine the reliability of a confession than a desire to escape intense physical pain and suffering caused by torture.
The Court of Appeal nevertheless held that to take account of such a possible motive is an error of law and contrary to the established rules of evidence in civil proceedings.
In re B
The argument made by HNA which persuaded the Court of Appeal to reach this conclusion was founded on passages in the judgments in In re B (Children) (Care Proceedings: Standard of Proof) (CAFCASS intervening) [2008] UKHL 35; [2009] AC 11, a decision of the House of Lords.
Lord Hoffmann said (at para 2): If a legal rule requires a fact to be proved (a fact in issue), a judge or jury must decide whether or not it happened.
There is no room for a finding that it might have happened.
The law operates a binary system in which the only values are zero and one.
The fact either happened or it did not.
If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carries the burden of proof.
If the party who bears the burden of proof fails to discharge it, a value of zero is returned and the fact is treated as not having happened.
If he does discharge it, a value of one is returned and the fact is treated as having happened.
To similar effect, Baroness Hale observed (at para 32): In our legal system, if a judge finds it more likely than not that something did take place, then it is treated as having taken place.
If he finds it more likely than not that it did not take place, then it is treated as not having taken place.
He is not allowed to sit on the fence.
He has to find for one side or the other.
HNA argued and the Court of Appeal accepted that, applying this binary principle, the fact that the judge in the present case did not find that on the balance of probabilities the confessions had been obtained by torture was, in law, a finding that there was no torture (para 60).
Hence, in estimating the weight to be attached to the confession evidence, the judge was bound entirely to disregard the possibility that the admissions had been obtained by torture and, to the extent that he took this possibility into account, he made an error of law.
As already discussed, the judge expressly said that he had not reached any definitive conclusion on whether there was torture.
He did not have to find for one side or the other on that question because he had already concluded that, notwithstanding the confession evidence, no bribe was paid.
It was therefore unnecessary for him to decide one way or the other whether torture had occurred and he did not do so.
The absence of a finding on that question is not the same as a finding that torture had not been proved on the balance of probabilities.
Even if the binary principle operated in this context, therefore, the judge could not be treated as having, in law, made a finding that there was no torture.
Nor, as the transcript makes clear, was it common ground that he had done so, as the Court of Appeal appears to have erroneously assumed (see para 3 of its judgment).
This is a short answer to HNAs argument.
Even if, however, the judge had reached a definite conclusion that the use of torture had not been proved on the balance of probabilities, there would have been no inconsistency between that conclusion and the judges finding that torture was a real possibility which affected the reliance that should be placed on the confessions.
It is of course true that, as Lord Hoffmann observed in In re B, if a legal rule requires a fact to be proved, the law operates a binary system.
So where it is necessary to prove a fact for the purpose of a rule governing the admissibility of evidence, there are only two possibilities: either the evidence is admissible or it is not, which depends on whether the fact has been proved or not.
There is no room for a finding that the fact might have happened.
But not all legal rules do require relevant facts to be proved in this binary way.
In particular, the rule governing the assessment of the weight to be given to hearsay evidence in civil proceedings does not.
It requires the court to have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence: see section 4(1) of the Civil Evidence Act 1995.
Such circumstances are not limited to facts which have been proved to the civil standard of proof.
HNAs argument depends on an assertion that, if failure to prove a fact to the requisite standard of proof requires a value of zero to be returned for the purpose of a particular legal rule, then that fact must be treated as not having happened for the purpose of other legal rules as well.
But there is no logical reason why that should be so.
Nor is there anything in In re B (or any other authority cited in these proceedings) which lends that notion any support.
What was decided in In re B was that section 31(2)(a) of the Children Act 1989 requires any facts used as the basis of a prediction that a child is likely to suffer significant harm to be proved on the balance of probabilities, and that the assessment of the childs welfare required in care proceedings once the threshold in section 31(2) has been crossed must be conducted on the same factual basis as the determination of whether that threshold has been crossed.
Hence, if a particular fact (in that case an allegation of sexual abuse) has not been proved, it must be treated as not having happened for the purposes of both section 31(2) and the assessment of the childs welfare.
That is a decision about the meaning and effect of particular provisions of the Children Act.
It does not establish any general principle that failure to prove that a fact happened for the purpose of a particular legal rule has the legal consequence that the fact must be treated as not having happened for all other purposes in the litigation.
In particular, it provides no support for the proposition that failure to prove that a fact happened for the purpose of determining whether evidence is admissible has the legal consequence that the fact must be treated as not having happened for the purpose of assessing the weight to be given to the evidence, if it is admissible.
Facts in issue
Some confusion seems to have arisen in the arguments in this case from the use by Lord Hoffmann in the passage quoted above of the expression fact[s] in issue.
This phrase commonly and in our view most usefully refers to those facts which as a matter of law it is necessary to prove in order to establish a claim or a defence: see eg Phipson on Evidence, 19th ed (2018), para 7 02; Cross and Tapper on Evidence, 13th ed (2018), p 30.
That is how we shall use the expression in this judgment.
Thus, for example, in the present case the facts that the charterparty and the guarantee were entered into and that Grand China failed to pay hire in accordance with the terms of the charterparty were all facts in issue which Shagang had to prove in order to establish its claim (until those facts were formally admitted by HNA).
The fact that a bribe was paid by an employee of Shagang to an individual connected with HNA was also, and remained throughout the trial, a fact in issue which it was necessary for HNA to prove in order to establish a defence that the charterparty (and therefore its guarantee) was unenforceable by reason of bribery.
Indeed, this was the key fact in issue in the case.
On the other hand, the fact that torture was used to procure the confessions of Mr Xu, Mr Jia T and Mr Shen was not a fact in issue as we are using the term.
There was no claim for relief made by Shagang for which it was legally necessary, in order for the claim to succeed, to prove that torture had been used by the PSB.
It was therefore unnecessary for the judge to make any finding as to whether on the balance of probabilities torture had taken place in order to decide the facts in issue in the case.
The requirement to discharge the legal burden of proof, which operates in a binary way, applies to facts in issue at a trial, but it does not apply to facts which make a fact in issue more or less probable.
Lord Hoffmann was alert to this point in In re B as, immediately after the passage quoted above, he contrasted facts in issue with facts which merely form part of the material from which a fact in issue may be inferred, which need not each be proved to have happened (para 3).
So, for example, in the present case (as already discussed) it was not necessary to prove that the prospect of leniency in fact caused the confessions to be made.
That it may have done is sufficient to make it relevant to take into account in deciding whether a bribe had been paid.
Judges need to take account, as best they can, of uncertainties and degrees of probability and improbability in estimating what weight to give to evidence in reaching their conclusions on whether facts in issue have been proved.
It would be a mistake to treat assessments of relevance and weight as operating in a binary, all or nothing way.
Preliminary facts
In the present case the allegations of torture were relevant in two different ways.
One was in assessing the likelihood or otherwise that the confessions were reliable and hence whether it was proved as a fact that a bribe had been paid.
The other was in order to determine whether the confession evidence was admissible.
Whilst the core purpose for which evidence is admissible in legal proceedings is that of proving or disproving facts in issue at a trial, it is also often necessary for a court to decide factual questions for the purpose of applying procedural and evidential rules.
Facts which must be proved for such purposes have been called preliminary facts: see R Pattenden, The proof rules of pre verdict judicial fact finding in criminal trials by jury (2009) 125 LQR 79.
The distinction between finding preliminary facts and finding facts in issue is embodied in criminal proceedings by the division of responsibilities between judge and jury.
Although in civil proceedings both functions may be performed by the same person, the distinction is conceptually no less important.
Examples of preliminary facts which may need to be determined in civil proceedings are: the fact that a communication between a lawyer and client was made in confidence for the purpose of giving or receiving legal advice (in order to decide whether the communication is protected by legal professional privilege); the fact that a person is capable of understanding the nature of an oath and of giving rational testimony (in order to decide whether the person is competent to testify as a witness); and facts which it is necessary to determine for the purpose of deciding whether evidence is admissible.
In criminal proceedings where there is a division of function between judge and jury a factual finding made by the judge for a preliminary purpose such as determining whether evidence is admissible is not binding on (nor even generally known to) the jury when it is performing its task of deciding facts in issue in proceedings.
So if, for example, the defence alleges that a confession was obtained by an improper threat and the judge finds that the prosecution (on whom the burden of proof lies) has proved beyond reasonable doubt that the confession was not so obtained, evidence of the confession will be admissible; but the jury at the trial will be free to make its own assessment of the facts and to reach a different conclusion on whether the alleged threat was or might have been made.
In civil proceedings, at least in cases where both functions are performed by the same decision maker in the course of a single hearing, it seems to us that unlike at a jury trial there is a requirement of consistency in performing these functions.
A judge could not rationally reach one factual conclusion for the preliminary purpose of deciding whether evidence is admissible and then, on the same evidence, reach a different factual conclusion for the purpose of deciding a fact in issue in proceedings.
That would be illogical.
But there is no inconsistency in finding that a factual allegation may well be true but has not been established on the balance of probabilities.
Nor is there any reason why the fact that such a finding results in the admission of evidence (by reason of the burden and standard of proof governing its admissibility) should require the finding to be ignored when assessing the weight to be given to the evidence in deciding a fact in issue in proceedings.
That would also be illogical.
Evidence obtained by torture
In the modern law of evidence relevance is the paramount consideration.
The general test of whether evidence is admissible is whether it is relevant (or of more than minimal relevance) to the determination of any fact in issue in the proceedings.
In the days when facts in civil as well as criminal cases were found by juries and there was fear that more weight would be given to certain kinds of evidence than they deserved, rules were developed to exclude reliance on evidence notwithstanding its relevance.
The rule against hearsay is a classic example.
The tendency of the law has been and continues to be towards the abolition of such rules.
Thus, the rule excluding hearsay evidence has been abolished in civil proceedings.
The modern approach is that judges (and, increasingly, juries) can be trusted to evaluate evidence in a rational manner, and that the ability of tribunals to find the true facts will be hindered and not helped if they are prevented from taking relevant evidence into account by exclusionary rules.
There are now very few categories of relevant evidence which are inadmissible in civil proceedings, but one such category is evidence obtained by torture.
Article 15 of the United Nations Convention Against Torture 1984 imposes an international obligation on state parties to ensure that any statement which is established to have been made as a result of torture shall not be invoked as evidence in any proceedings, except against a person accused of torture as evidence that the statement was made.
In A v Secretary of State for the Home Department (No 2) [2005] UKHL 71; [2006] 2 AC 221 a seven member appellate committee of the House of Lords unanimously held that it is also a rule of the common law that evidence obtained by torture is inadmissible in judicial proceedings.
A minority (of three members of the committee) would have held that it was sufficient to render evidence inadmissible that there was a real risk that it was obtained by torture.
However, it was decided by the majority that the test for this purpose is proof on a balance of probabilities.
It is accordingly settled law, and common ground in this case, that if it is proved on a balance of probabilities that a confession (or other statement) on which a party wishes to rely in legal proceedings was made as a result of torture, evidence of the statement is not admissible and must be excluded from consideration altogether when deciding the facts in issue.
The total exclusion of evidence shown to have been obtained by torture is not justified on grounds of relevance alone.
As the judgments in In re A (No 2) make clear, the exclusion is founded also on reasons of public policy and morality.
In the words of Lord Hope at para 112: The use of such evidence is excluded not on grounds of its unreliability if that was the only objection to it, it would go to its weight, not to its admissibility but on grounds of its barbarism, its illegality and its inhumanity.
The law will not lend its support to the use of torture for any purpose whatever.
It does not follow, and there is no rule, that if it is not proved on a balance of probabilities that a statement was made as a result of torture, evidence that torture was used is not admissible and must be ignored when deciding the facts in issue.
There is no legal or logical reason for treating such evidence as inadmissible and good reason to treat it as admissible given its obvious relevance.
We go further.
A rule that required a court, in assessing the reliability of a confession, to disregard entirely evidence which discloses a serious possibility that the confession was made as a result of torture would not only be irrational; it would also be inconsistent with the moral principles which underpin the exclusionary rule.
As Mr Jaffey QC observed in his helpful submissions on behalf of Liberty as an intervenor on this appeal, even when there are reasonable grounds for suspecting that torture has been practised, its use is often inherently difficult to prove because it tends to happen in secret, where there are no safeguards such as the recording of interviews or the presence of a legal representative, and often involves techniques which leave no lasting marks.
A rule which excluded evidence that a confession has been obtained by torture unless this has been proved on a balance of probabilities would be calculated positively to encourage the practice of torture to obtain evidence for use in legal proceedings, provided that it is done in a way which is deniable.
It would also put evidence that may have been obtained by torture in a uniquely advantageous position, since as counsel for HNA rightly accepted no such rule applies to a possibility that a confession was obtained by ill treatment less severe than torture or by other forms of oppression or inducement.
Granting a special dispensation for evidence that may have been obtained by torture would turn the law in this area upside down.
In In re A (No 2) the majority of the House of Lords who did not accept that a real risk that evidence was obtained by torture was sufficient to justify its exclusion nevertheless made it clear that such a risk would need to be taken into account in evaluating the evidence.
Thus, Lord Hope said (at para 118): So SIAC should not admit the evidence if it concludes on a balance of probabilities that it was obtained by torture.
In other words, if SIAC is left in doubt as to whether the evidence was obtained in this way, it should admit it.
But it must bear its doubt in mind when it is evaluating the evidence. (Emphasis added) The other judges in the majority agreed with this observation: see paras 141 142 and 145 (Lord Rodger), para 158 (Lord Carswell) and para 173 (Lord Brown).
There has been much argument devoted in this case to whether, as HNA contended and the Court of Appeal thought, the relevant passages in the judgments in In re A (No 2) were confined to the context of proceedings in the Special Immigration Appeals Commission (SIAC).
We accept that there were conclusions reached in In re A (No 2), including conclusions about the applicable burden and standard of proof, which were specific to that context.
However, the observations that, when evaluating evidence which although admissible may have been obtained by torture, a tribunal should bear that possibility in mind are not related to any special feature of SIAC and are no more, in our view, than a reminder of the approach which should rationally be adopted in evaluating such evidence.
Conclusion on evidence of torture
We conclude that the Court of Appeal was wrong to hold that, if the use of torture has not been proved on the balance of probabilities, a serious possibility that a statement was obtained by torture must be ignored by a court in estimating the weight to be given to the statement.
Such an approach is contrary to principle.
The true position is that, where there are reasonable grounds for suspecting that a statement was obtained by torture, this is a matter which a judge can and should take into account, along with all other relevant circumstances, in assessing the reliability of the statement as evidence of the facts stated.
It follows that in the present case the judge was entitled to rely, as he did, on his finding that torture could not be ruled out as providing further support for the conclusion he had already reached that there was no bribe paid by Mr Xu.
Evidence admitted on appeal
The Court of Appeal allowed an application by HNA to adduce new evidence in the form of a complaint made by Mr Zhang to the Peoples Procuratorate of Haikou City and the report of the Procuratorate in June 2014 into the outcome of its investigation into this complaint (referred to at paras 20 and 21 above), together with a report of a medical examination of Mr Xu on his arrival at a detention centre on 23 July 2014 (which did not record any injury).
The Court of Appeal did not find that this new evidence was a reason to overturn the judges decision.
Having reviewed this evidence ourselves, we can see that it would have been relevant to consider it in deciding whether torture had been proved on the balance of probabilities.
However, as discussed, the judge did not decide that question.
We think it inconceivable that, if this evidence had been available at the trial, it might have affected the judges conclusion that torture could not be ruled out.
The most material new document was the investigation report.
The report is, however, written in very general terms and adds little or nothing of substance to the record of the interrogation of Mr Xu on 6 June 2014 carried out for the purpose of that investigation and Mr Xus own account of the same occasion given to Mr Guo on 15 September 2014, both of which were in evidence at the trial.
The fact that further evidence was admitted in the Court of Appeal therefore makes no difference to our conclusions.
The causation issue
In the Court of Appeal Shagang argued that, even if the judges finding that no bribe had been paid could not be sustained, his decision should be upheld on the ground that there was no sufficient causal connection between the alleged bribe and Grand Chinas entry into the charterparty.
The Court of Appeal rejected that argument.
On this appeal it was common ground that, if it became necessary to decide that issue, it would have to be determined at a further trial.
As it is unnecessary to remit the case for any further hearing, the issue does not arise.
Had it arisen, it was common ground that the observations at paras 84 85 of the judgment of the Court of Appeal had not decided the question.
Overall conclusion
The judgment which has given rise to an appeal and second appeal in this case is short, running to 16 pages.
As Males LJ observed in Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA Civ 1413; [2019] 4 WLR 112 at para 46: succinctness is as desirable in a judgment as it is in counsels submissions, but short judgments must be careful judgments.
In this case it is right to observe that the judges reasoning is not merely succinct but sparse.
The judgment contains no sustained analysis of the main evidence and arguments.
In particular, the judge did not spell out the fact that he was admitting the confession evidence de bene esse, did not in his essential reasoning discuss the confession evidence in any detail and did not directly address the reliance placed by HNA on the fact that three individuals had separately confessed.
It is important to make it plain to the losing party that its case has been fully considered and to leave no doubt about the reasons which have led to its rejection.
In this case the judge approached this task in too cursory a manner.
This can only encourage appeals.
The question on an appeal, however, is whether the decision was wrong.
For the reasons we have given, none of the key criticisms which led the Court of Appeal to decide that the judges decision is unsustainable and ought to be set aside has been made out.
In the final analysis the judge did identify reasons for reaching the conclusion that bribery had not been established and those reasons are sufficient to support that conclusion.
It has not been shown that the judge made an error of law or that he reached a conclusion in his evaluation of the facts which no reasonable judge could have reached.
Furthermore, the approach adopted by the Court of Appeal to reliance on evidence that statements were made as a result of torture was itself erroneous.
The judge was entitled to rely on his finding that torture could not be ruled out as a reason for the confessions as providing additional support for his conclusion that no bribe had been paid.
The appeal must therefore be allowed and the judgment in favour of Shagang restored.
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This appeal arises out of a claim by the appellant under a guarantee of a contract, to charter a vessel which was met with a defence from the respondent that the contract was procured by bribery and that the guarantee was therefore unenforceable.
The bribery allegation was based on evidence of confessions that the appellant alleged were obtained by torture and therefore inadmissible.
A contract for the charter of a ship was agreed in August 2008 between the appellant, a Hong Kong company now in liquidation, and the respondents subsidiary, a Hong Kong company also now in liquidation.
A guarantee was agreed between the respondent, a Chinese company, and the appellant by which the respondent guaranteed its subsidiarys performance under the contract.
The guarantee is governed by English law and confers jurisdiction on the English courts.
The vessel was delivered in April 2010, but from September 2010 the subsidiary defaulted on its payments.
The appellant brought arbitration proceedings and ultimately terminated the contract for the subsidiarys repudiatory breach.
The appellant pursued its claim in arbitration for damages for the subsidiarys breach, achieving a partial final award in November 2012.
In September 2012, the appellant commenced proceedings against the respondent under the guarantee in the Commercial Court.
In its amended defence, the respondent alleged that the contract had been procured by bribes paid by or on behalf of the appellant to senior employees of the subsidiary.
The respondent relied on confessions made by three individuals during an investigation undertaken by the Chinese Public Security Bureau.
In an amended reply the appellant alleged that those confessions had been obtained by torture and consequently were inadmissible as evidence in the proceedings.
At trial, Knowles J gave judgment in favour of the appellant, finding that there was no bribery and that he could not rule out torture.
On appeal, the Court of Appeal held that the judges decision was unsustainable and sent the case back for reconsideration by a different judge.
The appellant appealed to the Supreme Court seeking restoration of the judges judgment.
The Supreme Court unanimously allows the appeal and restores the judgment in favour of the appellant.
Lord Hamblen and Lord Leggatt give the judgment, with which all members of the Court agree.
The issue on the appeal is whether the Court of Appeals criticisms were justified and warranted remitting the case for fresh determination.
The four main criticisms were that the judge: (i) failed to follow the
logical steps necessary to reach a proper evaluation of the admissible evidence; (ii) failed to ask and answer the correct legal question as to what weight should be accorded to the confession evidence; (iii) fell into legal error in failing to take all the appropriate matters into account in deciding the bribery issue; and (iv) fell into legal error in failing to exclude irrelevant matters, including what the Court of Appeal described as his lingering doubt as to whether the confessions were procured by torture, in considering whether the alleged bribe was paid [51] [52].
On the first criticism, the judge had considered the bribery issue before the torture allegations [41] [44].
The Court of Appeal took the view that the judge should have decided the torture allegations first and, having concluded the confession evidence was admissible, proceeded to determine the weight to be given to that evidence, then subsequently have considered whether bribery had taken place [55] [56].
The Supreme Court accepts that the Court of Appeals approach is logical, but it is not mandatory.
The manner and order of the consideration of admissibility and weight of evidence are matters for the trial judge and there will usually be more than one legitimate approach [57] [58].
The judge took the confession evidence into account on the assumption, without deciding, that the evidence was admissible.
That was a permissible approach [59].
Having done so, the judge considered it unnecessary to make a finding on the torture issues because he was in any event satisfied there was no bribery.
The approach taken was both legitimate and consistent with the way the case was put before him [62], [65].
On the second criticism, the Court of Appeal considered that the judge had not adequately addressed the weight to be given to the confession evidence [66].
Though not separately set out, the Supreme Court considers that the judge did address the weight of the evidence in the factors relied upon in his conclusion on bribery.
In circumstances where that evidence was the only evidence of bribery, in finding that there was no bribery the judge was necessarily finding that the confession evidence was of little or no weight.
It cannot be said that his conclusion on bribery was unreasonable or unsustainable and there were ample grounds to support it [67] [84].
On the third criticism, the Court of Appeal considered that the judge failed to take into account the details of the confessions made and should have addressed each confession made by each individual rather than dealing with them compendiously [85].
Though the Supreme Court agrees that it would have been more satisfactory for the judge to have addressed the confession evidence in greater detail, it is clear that he did consider the confession evidence of all three individuals.
The failure to consider it systematically is not an error of law [85] [87].
On the fourth criticism, the Court of Appeal considered that, as the judge did not find the allegation of torture proved on a balance of probabilities, he should have disregarded it entirely [93].
However, the judge did not need to and did not reach any conclusion that torture had or had not been proved [94].
Even if the judge had reached a definite conclusion that torture had not been proved on a balance of probabilities, there would have been no inconsistency between such a conclusion and the finding that torture was a real possibility that affected the reliance that should be placed on the confessions [95].
The facts that the court can take into account in assessing the weight to be given to hearsay evidence in civil proceedings are not limited to facts proved to the civil standard of proof [96].
While it is settled law that evidence proved on a balance of probabilities to have been obtained by torture is inadmissible, there is no rule that if an allegation that torture was used is not proved to that standard a possibility that evidence was obtained by torture must be ignored when deciding the facts in issue [106] [108].
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A judge who is holding an extradition hearing pursuant to the Extradition Act 2003 (the 2003 Act) is required to consider whether the extradition of the person against whom the order is sought would be compatible with that persons human rights under the Human Rights Act 1998.
If not, that person must be discharged.
The issues of principle raised by this appeal relate to the approach that should be adopted in carrying out this exercise where extradition will interfere with that persons right to respect for his private and family life under article 8 of the European Convention on Human Rights (the Convention).
Once I have identified these principles, I shall apply those that are relevant to the case of the appellant, Mr Norris.
His extradition is sought by the respondent, the United States Government (the Government), in order that he may be tried on an indictment charging him with obstruction of justice.
His case is that when the consequences of extradition to the article 8 rights that he and his wife enjoy in this country are weighed against the public interest in his extradition for what is no more than an ancillary offence, the interference that this would cause with those rights cannot be justified.
This case was rejected by District Judge Evans and by the Divisional Court, consisting of Laws LJ and Openshaw J.
I shall say no more about the facts until I have dealt with the issues of principle.
The 2003 Act
The 2003 Act created a new extradition regime that was intended to simplify the process.
Under the new regime considerations that were for the Secretary of State are transferred to the court, and these include the compatibility of extradition with Convention rights.
Part 1 of the 2003 Act deals with extradition to Category 1 territories.
These are, in effect, members of the European Union which operate the European Arrest Warrant.
Part 2 deals with extradition to Category 2 territories that have been designated by order of the Secretary of State.
The United States is a category 2 territory.
Under both Part 1 and Part 2 procedures the appropriate judge has to carry out an extradition hearing at which he considers whether there exists any of the prescribed statutory bars to extradition.
These include incompatibility with Convention rights.
Section 21 in Part 1 and section 87 in Part 2 provide in identical terms that the judge must decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998.
If yes, an order for extradition must follow.
If no, the person must be discharged.
General provision is made in both Part 1 and Part 2 for circumstances that may well involve interferences with Convention rights.
Section 13 in Part 1 and section 81 in Part 2 bar extradition by reason of extraneous considerations which might result in discrimination or an unfair trial, in violation of the Convention.
Section 14 in Part 1 and section 82 in Part 2 provide that extradition is barred by the passage of time if, but only if, this would make extradition appear unjust or oppressive.
Section 91 in Part 2 precludes extradition where it appears to the judge that the physical or mental condition of the person whose extradition is sought is such that it would be unjust or oppressive to extradite him.
It is not alleged that any of these provisions applies in the case of Mr Norris.
Extradition treaties
Public international law does not impose a general duty upon countries to accede to requests for extradition.
Obligations to extradite arise out of bilateral treaties.
Nonetheless a number of Conventions have been concluded that impose on states an obligation to extradite or prosecute in respect of certain offences or which limit the grounds upon which a state can refuse to extradite.
These reflect increasing international cooperation in the fight against crime.
The relevant treaty in the present case is the Extradition Treaty of 1972 between the United Kingdom and the United States, for this applies in the case of any extradition proceedings in which the extradition documents were submitted before 26 April 2007.
On that date a new treaty, the Extradition Treaty of 2003 (Cm 5821) came into force.
The extradition documents in this case were submitted in January 2005.
The 1972 Treaty imposes, subject to specified exceptions, mutual obligations to extradite in respect of offences which carry a sentence of at least 12 months imprisonment in each jurisdiction.
Article V (2) of the 1972 Treaty provides that extradition may be refused on any ground which is specified by the law of the requested party.
Thus the United Kingdom will not be in breach of its treaty obligations if, by reason of section 87 of the 2003 Act, extradition is refused on human rights grounds.
Common ground
Article 8 of the Convention 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 following matters are common ground: i) In this case, as in most extradition cases, extradition of Mr Norris from this country will interfere with his exercise in this country of his right to respect for his private and family life. ii) This interference will be in accordance with the law. iii) The critical issue in this case is whether this interference is necessary in a democratic societyfor the prevention of disorder or crime. iv) Resolving this issue involves a test of proportionality.
The interference must fulfil a pressing social need.
It must also be proportionate to the legitimate aim relied upon to justify the interference.
The Government contends that the legitimate aim, or pressing social need, is the honouring of extradition arrangements (an important aspect of the prevention of crime), that this aim weighs heavily in the scales and that the circumstances in which interference with article 8 rights will not be proportionate to it will be exceptional.
Mr Sumption QC for Mr Norris does not challenge this assertion.
He accepts that it will only be in exceptional circumstances that extradition will be refused on the ground that it involves a disproportionate interference with article 8 rights.
He submits, however, that this fact cannot be translated into a legal principle.
The court cannot impose on a person challenging extradition a threshold requirement of demonstrating that his case is exceptional.
He submits that this is what the Divisional Court did.
The primary issue of principle
The primary issue of principle is whether the court can properly require a person resisting extradition on article 8 grounds to demonstrate exceptional circumstances.
Mr Sumption contends that the Divisional Court erred in doing just this.
His argument is precisely expressed in the following two paragraphs of his written case: 19. [The Divisional Courts] essential error was that they sought to balance the principle of international cooperation in enforcing the criminal law, against the respect due to the private and family life of accused persons.
Concluding that the former was the more potent interest, they held as a matter of law that the latter could prevail only on facts which were striking or unusual or which reached a high threshold.
Hence the question which they certified as being of general public importance: Is the public interest in honouring extradition treaties such as to require, in any extradition case, that an appellant must show striking and unusual facts or reach a high threshold if his article 8 claim is to succeed? The effect is to create a strong presumption against the application of article 8 in extradition cases, and to require exceptional circumstances before any objection to extradition on article 8 grounds can succeed, a proposition which has been rejected by the House of Lords, following a substantial body of case law in the European Court of Human Rights. 20.
The correct approach is to balance the public interest in the extradition of this particular accused against the damage which would be done to the private or family life of this particular accused and his family.
The court must ask how much damage will really be done to the orderly functioning of the system of extradition, or the prevention of disorder or crime, by declining to extradite Mr. Norris in this case.
And whether that damage is so great as to outweigh the devastating impact that extradition would have upon the rest of his and his wifes life together.
These questions must, moreover be answered with an eye to the fact that the test imposed by article 8(2) is not whether his extradition is on balance desirable, but whether it is necessary in a democratic society.
For the Government Mr Perry QC has not sought to challenge the assertion that the court must not replace the test of proportionality with a test of exceptionality.
His submission has been that the Divisional Court has not done so.
All that it has done is to acknowledge the fact that, in an extradition context, an article 8 challenge will rarely succeed.
This is unobjectionable.
Subsidiary issues of principle
A number of subsidiary issues of principle in relation to the application of the test of proportionality in an extradition case became apparent in the course of argument.
These are as follows: i) Is the gravity of the crime in respect of which extradition is sought a relevant factor? Mr Sumption submits that it is and that this weighs in favour of Mr Norris for, so he submits, the extradition crime in this case is not a grave one.
Mr Perry joins issue with this last contention, but submits that the gravity of the extradition crime is of no relevance.
The obligation to extradite only arises in respect of offences which attract at least 12 months imprisonment.
Subject to that it matters not whether the person whose extradition is sought is a thief or a mass murderer. ii) Do you consider the interference in respect for family rights solely from the viewpoint of the person whose extradition is sought (the extraditee), or also from the viewpoint of other members of his family who are affected? Mr Perry submits the former, so that we should consider only the effect of extradition on Mr Norris.
Mr iii) Sumption submits the latter, and places particular emphasis on the effect that Mr Norris extradition will have upon his wife.
Is it relevant to consider whether it would be possible to prosecute the extraditee in the requested state? It has become common to urge this possibility as a factor that weighs against extradition.
It is not suggested that Mr Norris could be prosecuted in this jurisdiction for obstructing justice in the United States, so this issue is of no interest to Mr Sumption.
Mr Perry none the less urges us to make it clear that the possibility of prosecution in the requested state is an irrelevance.
Preliminary observations
Before embarking on an analysis of the jurisprudence I would make these preliminary observations.
The jurisprudence often deals with deportation and extradition without distinguishing between the two.
In one context this is understandable.
Usually human rights issues relate to the treatment of an individual within the jurisdiction of the State whose conduct is under attack (domestic cases).
Issues have, however, arisen as to whether, and in what circumstances, the Convention can be infringed by despatching a person to a territory where there is a risk that his human rights will not be respected (foreign cases).
In considering such issues it may be of no or little relevance whether the individual in question is facing deportation or extradition.
It would, however, be a mistake to assume that this question is of no relevance in a case such as the present.
This is a domestic case.
The family rights that are in issue are rights enjoyed in this country.
The issue of proportionality involves weighing the interference with those rights against the relevant public interest.
The public interest in extraditing a person to be tried for an alleged crime is of a different order from the public interest in deporting or removing from this country an alien who has been convicted of a crime and who has served his sentence for it, or whose presence here is for some other reason not acceptable.
This is a matter to which I shall return after considering the relevant jurisprudence.
The Strasbourg jurisprudence
I propose to follow the development of the Strasbourg jurisprudence in relation to deportation and extradition with particular reference to the issues raised on this appeal.
The starting point is Soering v United Kingdom (1989) 11 EHRR 439.
This was the first case in which the Strasbourg Court recognised that the Convention could be infringed by sending a person to a country where Convention rights would be violated.
It was an extradition case.
The issue was whether the United Kingdom would be in breach of the Convention if it extradited the applicant to Virginia to stand trial for capital murder.
The evidence was that, if he was convicted, the applicant would face up to eight years on death row.
This, he contended, would be inhuman and degrading treatment.
The Court accepted this argument.
It first made this observation in relation to the fact that article 1 of the Convention requires each contracting state to secure the Convention rights for those within their jurisdiction. 86.
Article 1 cannot be read as justifying a general principle to the effect that, notwithstanding its extradition obligations, a Contracting State may not surrender an individual unless satisfied that the conditions awaiting him in the country of destination are in full accord with each of the safeguards of the Convention.
Indeed, as the United Kingdom Government stressed, the beneficial purpose of extradition in preventing fugitive offenders from evading justice cannot be ignored in determining the scope of application of the Convention and of article 3 in particular.
The Court went on to conclude, however: 88 .
It would hardly be compatible with the underlying values of the Convention, that common heritage of political traditions, ideals, freedom and the rule of law to which the Preamble refers, were a Contracting State knowingly to surrender a fugitive to another State where there were substantial grounds for believing that he would be in danger of being subjected to torture, however heinous the crime allegedly committed.
Extradition in such circumstances, while not explicitly referred to in the brief and general wording of article 3, would plainly be contrary to the spirit and intendment of the article, and in the Courts view this inherent obligation not to extradite also extends to cases in which the fugitive would be faced in the receiving State by a real risk of exposure to inhuman or degrading treatment or punishment proscribed by that article. 91 In sum, the decision by a Contracting State to extradite a fugitive may give rise to an issue under article 3, and hence engage the responsibility of that State under the Convention, where substantial grounds have been shown for believing that the person concerned, if extradited, faces a real risk of being subjected to torture or to inhuman or degrading treatment or punishment in the requesting country.
In paras 110 and 111 the Court considered an argument advanced on behalf of Soering that it was relevant that, instead of extraditing him to Virginia, he could be deported to his own country, Germany, where he could be tried without the risk of the death penalty or death row conditions.
The United Kingdom Government urged that no such distinction should be drawn.
The Court held, nonetheless: However, sending Mr Soering to be tried in his own country would remove the danger of a fugitive criminal going unpunished as well as the risk of intense and protracted suffering on death row.
It is therefore a circumstance of relevance for the overall assessment under article 3 in that it goes to the search for the requisite fair balance of interests and to the proportionality of the contested extradition decision in the particular case.
A further consideration of relevance is that in the particular instance the legitimate purpose of extradition could be achieved by another means which would not involve suffering of such exceptional intensity or duration. (paras 110, 111)
At para 113 the Court dealt with a submission that extradition would also infringe the applicants article 6 rights because he would not be able to obtain legal assistance in Virginia.
The Court held: The right to a fair trial in criminal proceedings, as embodied in Article 6, holds a prominent place in a democratic society.
The Court does not exclude that an issue might exceptionally be raised under Article 6 by an extradition decision in circumstances where the fugitive has suffered or risks suffering a flagrant denial of a fair trial in the requesting country.
However, the facts of the present case do not disclose such a risk. (emphasis added)
In HG v Switzerland (Application No 24698/94) (unreported) given 6 September 1994 the Commission considered the admissibility of a complaint by a Turkish national that extradition from Switzerland to Turkey to serve a sentence imposed for kidnapping and raping a 14 year old girl would infringe article 3 because of Turkish prison conditions, article 6 because his trial in Turkey had not been fair and article 8 because extradition would interfere with respect for his family life in Switzerland.
The Commission held in para 2 that expulsion or extradition might in exceptional circumstances involve a violation of fundamental rights because of the serious fear of treatment contrary to article 2 or 3 in the requesting country.
It further held that an issue might exceptionally be raised under article 6 where a fugitive had suffered or risked suffering a flagrant denial of a fair trial in the requesting state (emphases added).
The Commission held that, on the facts, this was not such a case.
It went on to reject the admissibility of the article 8 claim on the facts.
In Raidl v Austria (1995) 20 EHRR CD 114 the Commission once again considered the admissibility of a claim that extradition to Russia on suspicion of murder had infringed the applicants Convention rights.
After finding ill founded a complaint based on article 3 the Commission went on to consider the applicants complaint that extradition had interfered with her married life in Austria, thereby violating her article 8 rights.
The Commission held at p 123: the interference with the applicants family life was proportionate to the legitimate aim pursued, given the seriousness of the crime, of which the applicant was suspected even before she contracted marriage in Austria. (emphasis added)
In Launder v United Kingdom (1997) 25 EHRR CD 67 the Commission considered the admissibility of a complaint that the United Kingdom would violate articles 2, 3, 5, 6 and 8 if it extradited him to the Hong Kong Special Administrative Region.
In finding the application manifestly ill founded the Commission said this in relation to article 8, at para 3: The Commission considers that it is only in exceptional circumstances that the extradition of a person to face trial on charges of serious offences committed in the requesting state would be held to be an unjustified or disproportionate interference with the right to respect for family life. (emphasis added)
In Chahal v United Kingdom (1996) 23 EHRR 413 the United Kingdom had detained Mr Chahal for some six years on the ground that they were taking action against him with a view to his deportation, this being a justification for interference with the article 5 Convention right to liberty by virtue of article 5(1)(f).
The Government wished to deport him to India because he was suspected of involvement in terrorism.
The Court held that, because of the danger of torture or inhuman or degrading treatment that he would face if deported, his deportation would violate article 3.
It rejected the contention of the UK Government that the fact that he posed a risk to the security of the United Kingdom had any relevance to the assessment of this question.
Mr Chahal and his wife and two children, who joined in his application, also contended that his deportation would violate their article 8 rights to respect for their family life in the United Kingdom.
The Court held that it had no need to decide this hypothetical question.
The principles to be applied when considering the proportionality of deportation that would interfere with article 8 family rights were first enunciated by the Court in Boultif v Switzerland (2001) 33 EHRR 1179.
The applicant, an Algerian, had married a Swiss citizen and established a home in Switzerland.
He then committed a robbery for which he received a two year prison sentence.
After he had come out of prison the Swiss authorities refused to renew his residence permit.
This meant that he would have to return to Algeria whither, the Court found, his wife could not reasonably be expected to follow him.
The Court laid down the following principles: 46.
The Court recalls that it is for the Contracting States to maintain public order, in particular by exercising their right, as a matter of well established international law and subject to their treaty obligations, to control the entry and residence of aliens.
To that end they have the power to deport aliens convicted of criminal offences.
However, their decisions in this field must, in so far as they may interfere with a right protected under paragraph 1 of Article 8, be necessary in a democratic society, that is to say justified by a pressing social need and, in particular, proportionate to the legitimate aim pursued (see Dalia, cited above, p. 91, 52, and Mehemi vs France, judgment of 26 September 1997, Reports 1997 VI, p. 1971, 34). 47.
Accordingly, the Court's task consists in ascertaining whether the refusal to renew the applicant's residence permit in the circumstances struck a fair balance between the relevant interests, namely the applicant's right to respect for his family life, on the one hand, and the prevention of disorder and crime, on the other. 48.
The Court has only to a limited extent decided cases where the main obstacle to expulsion is the difficulties for the spouses to stay together and in particular for a spouse and/or children to live in the other's country of origin.
It is therefore called upon to establish guiding principles in order to examine whether the measure was necessary in a democratic society.
In assessing the relevant criteria in such a case, the Court will consider the nature and seriousness of the offence committed by the applicant; the length of the applicant's stay in the country from which he is going to be expelled; the time elapsed since the offence was committed as well as the applicant's conduct in that period; the nationalities of the various persons concerned; the applicant's family situation, such as the length of the marriage; and other factors expressing the effectiveness of a couples family life; whether the spouse knew about the offence at the time when he or she entered into a family relationship; and whether there are children in the marriage, and if so, their age.
Not least, the Court will also consider the seriousness of the difficulties which the spouse is likely to encounter in the country of origin, though the mere fact that a person might face certain difficulties in accompanying her or his spouse cannot in itself exclude an expulsion.
Applying these principles, the Court found violation of article 8.
confirmed the principles laid down in Boultif, adding to these at para 58: In ner v The Netherlands (2006) 45 EHRR 421 the Grand Chamber the best interests and well being of the children, in particular the seriousness of the difficulties which any children of the applicant are likely to encounter in the country to which the applicant is to be expelled; and the solidity of social, cultural and family ties with the host country and with the country of destination.
The Court then went on to say this: 59.
The Court considered itself called upon to establish guiding principles in the Boultif case because it had only a limited number of decided cases where the main obstacle to expulsion was that it would entail difficulties for the spouses to stay together and, in particular, for one of them and/or the children to live in the others country of origin .
It is to be noted, however, that the first three guiding principles do not, as such, relate to family life.
This leads the Court to consider whether the Boultif criteria are sufficiently comprehensive to render them suitable for application in all cases concerning the expulsion and/or exclusion of settled migrants following a criminal conviction.
It observes in this context that not all such migrants, no matter how long they have been residing in the country from which they are to be expelled, necessarily enjoy family life there within the meaning of article 8.
However, as article 8 also protects the right to establish and develop relationships with other human beings and the outside world (see Pretty v the United Kingdom, no.2346/02, [61], ECHR 2002 III) and can sometimes embrace aspects of an individuals society identity (see Mikulic v Croatia, No.53176/99, [53], ECHR 2002 1), it must be accepted that the totality of social ties between settled migrants and the community in which they are living constitute part of the concept of private life within the meaning of article 8.
Regardless of the existence or otherwise of a family life, therefore, the court considers that the expulsion of a settled migrant constitutes interference with his or her right to respect for private life.
It will depend on the circumstances of the particular case whether it is appropriate for the Court to focus on the family life rather than the private life aspect. 60.
In the light of the foregoing, the Court concludes that all the above factors (see [57] [59]) should be taken into account in all cases concerning settled migrants who are to be expelled and/or excluded following a criminal conviction.
Finally I must refer to the decision of the Grand Chamber in Saadi v Italy (2008) 24 BHRC 123.
The United Kingdom intervened in this case in an attempt to persuade the Grand Chamber to reconsider the principles laid down in Chahal.
The attempt did not succeed.
The Grand Chamber held: 139.
The Court considers that the argument based on the balancing of the risk of harm if the person is sent back against the dangerousness he or she represents to the community if not sent back is misconceived.
The concepts of risk and dangerousness in this context do not lend themselves to a balancing test because they are notions that can only be assessed independently of each other.
Either the evidence adduced before the Court reveals that there is a substantial risk if the person is sent back or it does not.
The prospect that he may pose a serious threat to the community if not returned does not reduce in any way the degree of risk of ill treatment that the person may be subject to on return.
For that reason it would be incorrect to require a higher standard of proof, as submitted by the intervener, where the person is considered to represent a serious danger to the community, since assessment of the level of risk is independent of such a test. 140.
With regard to the second branch of the United Kingdom Government's arguments, to the effect that where an applicant presents a threat to national security, stronger evidence must be adduced to prove that there is a risk of ill treatment (see para 122, above), the Court observes that such an approach is not compatible with the absolute nature of the protection afforded by article 3 either.
It amounts to asserting that, in the absence of evidence meeting a higher standard, protection of national security justifies accepting more readily a risk of ill treatment for the individual.
The Court therefore sees no reason to modify the relevant standard of proof, as suggested by the third party intervener, by requiring in cases like the present that it be proved that subjection to ill treatment is more likely than not.
On the contrary, it reaffirms that for a planned forcible expulsion to be in breach of the Convention it is necessary and sufficient for substantial grounds to have been shown for believing that there is a real risk that the person concerned will be subjected in the receiving country to treatment prohibited by article 3.
Discussion
The Strasbourg cases to which I have referred illustrate three different situations.
The first is the foreign case, where the applicant seeks to establish a breach of the Convention because of the treatment that he fears that he will receive in the country to which he is to be sent.
Here Strasbourg has not differentiated between extradition and expulsion or deportation.
Language has been used suggesting that it will only be in exceptional circumstances that a foreign case will involve an infringement of the Convention and that the Convention will only prove a bar to extradition or deportation where there is a real risk of a flagrant breach of the Convention.
It is not any anticipated breach that will suffice.
The second situation is where, in a domestic case, breach of article 8 rights within the territory of the respondent State is relied upon as a bar to deportation or expulsion of an alien.
Here the Grand Chamber has made it plain that the question of proportionality is detailed and fact specific.
On the one hand the extent to which the removal of the alien is necessary in the public interest has to be considered having regard to the facts of the particular case.
On the other hand the extent of the interference with article 8 rights has to receive an equally careful evaluation, having regard to the facts of the particular case.
While it is unusual for an applicant to be able to make out a case of breach of the Convention in such circumstances, it is by no means unknown.
The third situation is where, in a domestic case, breach of article 8 rights within the territory of the respondent State is advanced as a bar to extradition.
There is, in fact, no reported case in which such a complaint has succeeded, or even been held admissible where not joined with other allegations of breach.
So far as the subsidiary issues are concerned, i) The reasoning of the Court in Soering 11 EHRR 439 and the express reference to the seriousness of the crime in Raidl 20 EHRR CD 114, 123 suggest that the gravity of the crime in respect of which extradition is sought is capable of being a material factor. ii) There is no support for the proposition that the Court is solely concerned with the family rights of the applicant, to the exclusion of those of other members of the family.
On the contrary, at least in deportation and expulsion cases, the Grand Chamber has made it clear in ner 45 EHRR 421 that the interests of children are particularly material, and there is no reason to conclude that the same is not true in an extradition case, in so far as family rights weigh in the balance at all. iii) The Court in Soering held that the possibility of trying a defendant in a forum where his fundamental rights will not be at risk can be a material factor when considering the proportionality of extradition in the face of a risk to those rights.
The domestic jurisprudence
When considering the domestic jurisprudence it is important to distinguish between the three different categories of case that I have identified in paragraphs 29 to 31 above.
It is a failure to do so that has led to the primary issue of principle in this appeal.
I shall start my survey of the domestic cases with three appeals to the House of Lords that were heard together R (Ullah) v Special Adjudicator; Do v Immigration Appeal Tribunal [2004] UKHL 26; [2004] 2 AC 323; R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27; [2004] 2 AC 368.
The appellants in each appeal were unsuccessful asylum applicants who were resisting removal from the United Kingdom.
In Ullah the applicants complained that in the countries to which they were to be removed their article 9 rights to practise their religions would be infringed.
In Razgar the applicant complained that in Germany, to which country he was to be removed, he would not receive appropriate treatment for psychiatric illness from which he suffered, with the consequence that there would be interference with his article 8 right to respect for his private life.
Thus these were foreign cases; indeed it was on these appeals that Lord Bingham of Cornhill coined the phrases domestic cases and foreign cases that I have adopted in this judgment: see [2004] 2 AC 323, paras 8 9.
The principal issue was whether, in a foreign case, rights other than article 3 could be engaged.
The House of Lords, applying dicta of the Strasbourg Court, held that they could.
In paragraphs 17 to 20 of Razgar Lord Bingham set out five sequential questions that an immigration adjudicator should consider in cases where removal was resisted in reliance on article 8.
The fourth was whether interference with the article 8 right was 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 these being the criteria of justification under article 8(2).
The fifth question, assuming an affirmative answer to the fourth question, was whether such interference was proportionate to the legitimate public end sought to be achieved.
Lord Bingham made the following comments on the answers to these questions: 19.
Where removal is proposed in pursuance of a lawful immigration policy, question (4) will almost always fall to be answered affirmatively.
This is because the right of sovereign states, subject to treaty obligations, to regulate the entry and expulsion of aliens is recognised in the Strasbourg jurisprudence (see Ullah [2004] 2 AC 323, 339, para 6) and implementation of a firm and orderly immigration policy is an important function of government in a modern democratic state.
In the absence of bad faith, ulterior motive or deliberate abuse of power it is hard to imagine an adjudicator answering this question other than affirmatively. 20.
The answering of question (5), where that question is reached, must always involve the striking of a fair balance between the rights of the individual and the interests of the community which is inherent in the whole of the Convention.
The severity and consequences of the interference will call for careful assessment at this stage.
He subsequently added: Decisions taken pursuant to the lawful operation of immigration control will be proportionate in all save a small minority of exceptional cases, identifiable only on a case by case basis.
It is not apparent that these observations were restricted to foreign cases.
They appear to have been of general application to cases of immigration control.
More generally, so far as there was discussion in these appeals of the approach to foreign cases, no distinction was drawn between expulsion and extradition.
Indeed, in Ullah at para 13 Lord Bingham held that what he described as the Soering principle was potentially applicable in either case.
He held that in either case successful invocation of Convention rights in a foreign case required the satisfaction of a stringent test.
Where qualified rights, such as those under articles 8 and 9, were concerned, it would be necessary to show that there would be a flagrant denial or gross violation of the right, so that it would be completely denied or nullified in the destination country see para 24.
distinction between foreign cases and domestic cases.
She said: In Razgar, at para 42, Baroness Hale of Richmond, emphasised the The distinction is vital to the present case.
In a domestic case, the state must always act in a way which is compatible with the Convention rights.
There is no threshold test related to the seriousness of the violation or the importance of the right involved.
Foreign cases, on the other hand, represent an exception to the general rule that a state is only responsible for what goes on within its own territory or control.
The Strasbourg court clearly regards them as exceptional.
It has retained the flexibility to consider violations of articles other than articles 2 and 3 but it has not so far encountered another case which was sufficiently serious to justify imposing upon the contracting state the obligation to retain or make alternative provision for a person who would otherwise have no right to remain within its territory.
For the same reason, the Strasbourg court has not yet explored the test for imposing this obligation in any detail.
But there clearly is some additional threshold test indicating the enormity of the violation to which the person is likely to be exposed if returned.
I doubt whether, in making these comments, Lady Hale had in mind the question of whether a threshold test was appropriate in an extradition case.
Razgar and Ullah were considered by the Divisional Court in R (Bermingham) v Director of the Serious Fraud Office [2006] EWHC 200; (Admin); [2007] QB 727.
Among the many points taken by the applicants, who were resisting extradition to the United States on charges of fraud in relation to the Enron affair, was a contention that their article 8 rights in respect of family life in this jurisdiction would be infringed by their extradition.
Further infringements of article 8 rights in the United States were also invoked.
Laws LJ, in delivering the sole judgment, referred to the opinion of Baroness Hale, but doubted whether the cases classification as foreign or domestic would cast much light on the stringency of the test for violation of Article 8 which the Court should apply para 115.
At para 118 he said this: If a person's proposed extradition for a serious offence will separate him from his family, article 8(1) is likely to be engaged on the ground that his family life will be interfered with.
The question then will be whether the extradition is nevertheless justified pursuant to article 8(2).
Assuming compliance with all the relevant requirements of domestic law the issue is likely to be one of proportionality: is the interference with family life proportionate to the legitimate aim of the proposed extradition? Now, there is a strong public interest in honouring extradition treaties made with other states (the Ullah case [2004] 2 AC 323, para 24).
It rests in the value of international co operation pursuant to formal agreed arrangements entered into between sovereign states for the promotion of the administration of criminal justice.
Where a proposed extradition is properly constituted according to the domestic law of the sending state and the relevant bilateral treaty, and its execution is resisted on article 8 grounds, a wholly exceptional case would in my judgment have to be shown to justify a finding that the extradition would on the particular facts be disproportionate to its legitimate aim.
Bermingham is also of relevance to one of the subsidiary issues.
The applicant sought an order that the Director of the Serious Fraud Office should exercise his statutory powers to investigate the possibility of instituting criminal proceedings in this jurisdiction, having particular regard to the fact that if the prosecution took place here the article 8 rights of the defendants would be protected.
The court held that it would not be appropriate to grant such relief.
Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167 involved the approach that should be adopted by an appellate authority to the invocation of article 8 rights by aliens who wished to be permitted to remain in this country in order to live with members of their families who were already established here.
Thus the appeals involved domestic cases.
Mr Nicholas Blake QC, for Mrs Huang, appears from p 179 of the law report to have suggested that Razgar had laid down a truly exceptional threshold test for the successful invocation of article 8 rights in the face of deportation, and to have attacked such a test.
question of proportionality, at para 20: In delivering the opinion of the committee Lord Bingham said this about the In an article 8 case where this question is reached, the ultimate question for the appellate immigration authority is whether the refusal of leave to enter or remain, in circumstances where the life of the family cannot reasonably be expected to be enjoyed elsewhere, taking full account of all considerations weighing in favour of the refusal, prejudices the family life of the applicant in a manner sufficiently serious to amount to a breach of the fundamental right protected by article 8.
If the answer to this question is affirmative, the refusal is unlawful and the authority must so decide.
It is not necessary that the appellate immigration authority, directing itself along the lines indicated in this opinion, need ask in addition whether the case meets a test of exceptionality.
The suggestion that it should is based on an observation of Lord Bingham in Razgar, para 20.
He was there expressing an expectation, shared with the Immigration Appeal Tribunal, that the number of claimants not covered by the rules and supplementary directions but entitled to succeed under article 8 would be a very small minority.
That is still his expectation.
But he was not purporting to lay down a legal test.
The final comment has since been treated as an embargo on the application of a test of exceptionality, not only in domestic immigration cases but in extradition cases.
So far as immigration cases are concerned, the decision in Huang led to a number of cases being remitted to the Asylum and Immigration Tribunal on the ground that a test of exceptionality had mistakenly been applied by the Tribunal.
In AG (Eritrea) v Secretary of State for the Home Department [2007] EWCA Civ 801, [2008] 2 All ER 28, a domestic immigration case, Sedley LJ said this about Huang, at para 25: The effect of their Lordships' decision (and, if we may say so, the intended effect of this court's decision) in Huang has thus not been to introduce a new interpretation of article 8 but to clarify and reiterate a well understood one.
While its practical effect is likely to be that removal is only exceptionally found to be disproportionate, it sets no formal test of exceptionality and raises no hurdles beyond those contained in the article itself.
At para 31 Sedley LJ found it necessary to reiterate that there was no legal test of exceptionality as a surrogate for the article 8 decision.
He said: The fact that in the great majority of cases the demands of immigration control are likely to make removal proportionate and so compatible with article 8 is a consequence, not a precondition, of the statutory exercise.
No doubt in this sense successful article 8 claims will be the exception rather than the rule; but to treat exceptionality as the yardstick of success is to confuse effect with cause.
The first decision to which we have been referred in which Huang was applied in an extradition context is Jaso v Central Criminal Court No 2 Madrid [2007] EWHC 2983 (Admin).
The Madrid Court had issued European Arrest Warrants against the three appellants on charges of membership of a criminal organisation and terrorism.
The appellants had unsuccessfully challenged extradition before the District Judge on a large number of grounds.
These included the contention that extradition would violate articles 3, 5, 6 and 8 of the Convention.
The factual basis for this contention was an allegation that, if extradited, the appellants would be subject to incommunicado police detention for up to 5 days.
Thus this was a foreign case.
The District Judge had applied an exceptionality test and this was attacked before the Divisional Court.
Dyson LJ, when giving the leading judgment, held, applying Huang, that there was no exceptionality test.
He added, however, at para 57: It is clear that great weight should be accorded to the legitimate aim of honouring extradition treaties made with other states.
Thus, although it is wrong to apply an exceptionality test, in an extradition case there will have to be striking and unusual facts to lead to the conclusion that it is disproportionate to interfere with an extraditees article 8 rights.
Jaso was followed by Richards LJ, when giving the leading judgment in the Divisional Court in Tajik v Director of Public Prosecutions and Government of the United States of America [2008] EWHC 666 (Admin).
He said at para 156: What is said in Jaso about the need for striking and unusual facts to lead to the conclusion that extradition would be disproportionate does not constitute a separate legal test but recognises the practical reality that article 8 will rarely
provide a ground for refusing extradition
The final decision to which I should refer is R (Wellington) v Secretary of State for the Home Department [2008] UKHL 72; [2009] 1 AC 335.
The appellant was resisting extradition to Missouri on charges which included two counts of murder in the first degree.
He contended that, if convicted, he would be sentenced to imprisonment for life without eligibility of parole and that this would be inhuman treatment in violation of article 3.
The House unanimously dismissed his appeal.
A majority of the House held that the desirability of extradition was such that punishment which would be regarded as inhuman and degrading in the domestic context would not necessarily be so regarded when the choice was between either extraditing or allowing a fugitive offender to escape justice altogether.
This has proved a controversial finding, but this is not an occasion on which it would be appropriate to review it.
The case underlines the weight that the desirability of extradition carries as an essential element in combating public disorder and crime.
The judgment of the Divisional Court.
In giving the judgment of the Divisional Court in this case [2009] EWHC 995 (Admin), Laws LJ followed the approach of that court in Jaso and Tajik.
He said: 21 the learning, here and in Strasbourg, shows that the public interest in giving effect to bilateral extradition arrangements possesses especially pressing force because of its potency (a) in the fight against increasingly globalised crime, (b) in the denial of safe havens for criminals, and (c) in the general benefits of concrete co operation between States in an important common cause.
The gravity of the particular extradition crime may affect the weight to be attached to these factors, but because they are of a strategic or overarching nature, the public interest in extradition will always be very substantial.
Accordingly the claim of a prospective extraditee to resist his extradition on article 8 grounds must, if it is to succeed, possess still greater force.
That is why there must be striking and unusual facts (Jaso), and in practice a high threshold has to be reached (Tajik). 22.
That is how the balance between the public interest and the individual's right, inherent in the whole of the Convention, is to be struck where an article 8 claim is raised in an extradition case.
Their Lordships in Huang disapproved the application of a test of exceptionality as the means of striking the balance; though it is perhaps not without interest that the European Commission of Human Rights stated in Launder v United Kingdom (1997) 25 EHRR CD 67 that [I]t is only in exceptional circumstances that the extradition of a person to face trial on charges of serious offences committed in the requesting State would be held to be an unjustified or disproportionate interference with the right to respect for family life.
The formulations in Jaso and Tajik show that what was sought, incorrectly, to be gathered in a test of exceptionality is correctly reflected in a recognition of the force of the public interest in giving effect to a properly founded extradition request: a recognition, that is to say, of the relevant article 8(2) considerations (which in my judgment find concrete form in the three public benefits I have set out at paragraph 21).
Mr Sumption submitted in his written case that this reasoning embodied three fundamental errors: i) Whilst purporting to abjure any test of exceptionality, in effect it applied just such a test. ii) It subordinated a fact sensitive assessment of the interest in extradition in the individual case to a categorical assumption about the importance of that interest generally.
It relied upon a sentence from the Commissions decision in Launder when this had never been approved or followed by the Strasbourg Court and was inconsistent with the Courts approach in article 8 deportation cases. iii)
Discussion
It was a fundamental premise of Mr Sumptions submissions that, when considering the impact of article 8, the Court should adopt a similar approach in an extradition case as that to be adopted in a case of deportation or expulsion.
He drew our attention to the fact that in France the Conseil dEtat certainly does not do this.
In a deportation case, the Conseil dEtat now has regard to the human rights implications see Abraham, R. La Convention europeenne des droits de lhomme et les measures deloignement detrangers (1991) Rev fr Droit adm, 497.
So far as extradition is concerned, however, the Conseil dEtat considers that, as a matter of principle extradition justifies any interference with article 8 rights that may be involved see De Deus Pinto, CE, ass, 8 October 1999.
Mr Sumption submitted that the latter stance was incompatible with the Strasbourg jurisprudence.
I agree that there can be no absolute rule that any interference with article 8 rights as a consequence of extradition will be proportionate.
The public interest in extradition nonetheless weighs very heavily indeed.
In Wellington the majority of the House of Lords held that the public interest in extradition carries special weight where article 3 is engaged in a foreign case.
I am in no doubt that the same is true when considering the interference that extradition will cause in a domestic case to article 8 rights enjoyed within the jurisdiction of the requested State.
It is certainly not right to equate extradition with expulsion or deportation in this context.
It is of critical importance in the prevention of disorder and crime that those reasonably suspected of crime are prosecuted and, if found guilty, duly sentenced.
Extradition is part of the process for ensuring that this occurs, on a basis of international reciprocity.
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] EWCA Civ 1151, [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.
Massey v United Kingdom (Application No 14399/02) (unreported) given 8 April 2003 illustrates this proposition.
The applicant complained, inter alia, that criminal proceedings and a sentence of six years imprisonment constituted an unwarranted interference with his family life and his childrens right to a father.
In ruling the complaint inadmissible, the court held: The Court recalls that article 8.2 permits interference with an individuals right to respect for his private and family life in certain circumstances.
The Court considers that the bringing of criminal proceedings and the imposition of a punishment following conviction fall within these exceptions since they are in accordance with the law and pursue . legitimate aims, namely, public safety, the prevention of disorder and crime and protection of the rights and freedoms of others.
The Court therefore concludes that the prosecution and imprisonment of the applicant does not raise any issues under article 8 of the Convention.
There is an analogy between the coercion involved in extradition and the coercion involved in remanding in custody a prisoner reasonably suspected of wishing to abscond.
In either case the coercion is necessary to ensure that the suspect stands his trial.
Each is likely to involve a serious interference with article 8 rights.
The dislocation of family life that will frequently follow extradition will not necessarily be more significant, or even as significant, as the dislocation of family life of the defendant who is remanded in custody.
It seems to me that, until recently, it has also been treated as axiomatic that the dislocation to family life that normally follows extradition as a matter of course is proportionate.
This perhaps explains why we have been referred to no reported case, whether at Strasbourg or in this jurisdiction, where extradition has been refused because of the interference that it would cause to family life.
I reject Mr Sumptions contention that it is wrong for the court, when approaching proportionality, to apply a categorical assumption about the importance of extradition in general.
Such an assumption is an essential element in the task of weighing, on the one hand, the public interest in extradition against, on the other hand, its effects on individual human rights.
This is not to say that the latter can never prevail.
It does mean, however, that the interference with human rights will have to be extremely serious if the public interest is to be outweighed.
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.
That, no doubt, is what the Commission had in mind in Launder 25 EHRR CD 67, 73 when it stated that it was only in exceptional circumstances that extradition would be an unjustified or disproportionate interference with the right to respect for family life.
I can see no reason why the District Judge should not, when considering a challenge to extradition founded on article 8, explain his rejection of such a challenge, where appropriate, by remarking that there was nothing out of the ordinary or exceptional in the consequences that extradition would have for the family life of the person resisting extradition.
Exceptional circumstances is a phrase that says little about the nature of the circumstances.
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.
A judge should not be criticised if, as part of his process of reasoning, he considers how, if at all, the nature and extent of the impact of extradition on family life would differ from the normal consequences of extradition.
These considerations are reflected in the judgment of Laws LJ in this case and the attack made on that judgment by Mr Sumption is not justified.
What general approach to human rights should the District Judge adopt at the extradition hearing? My comments in relation to this question should not be treated as laying down a course that the judge is bound to follow.
They are no more than advisory.
Mr Hermer QC, who appeared for Liberty as intervener, submitted that the judge should not start with consideration of the case for extradition, before turning to ask whether this was outweighed by the impact that extradition would have on article 8 rights.
This approach was the wrong way round.
The judge should first consider the effect of the proposed extradition on the article 8 rights, before going on to consider whether such interference could be justified.
The decision in each case should turn upon its individual facts.
Mr Hermers submissions did not recognise any difference between extradition and expulsion or deportation.
I did not find them either realistic or helpful.
The 2003 Act specifies those matters that the extradition judge has to consider.
Before considering any objections to extradition, he has to consider whether the statutory requirements for extradition have been satisfied.
This requires the judge to consider, among other things, the offence or offences in respect of which extradition is sought.
These must carry a minimum sentence of at least 12 months imprisonment, but this leaves scope for a very wide variation in the seriousness of the offence or offences that are alleged to have been committed.
The judge then has to consider a considerable number of possible statutory barriers to extradition.
These include the matters that might violate human rights to which I have referred at para 4 above.
It is only after he has done this that the judge has to consider whether extradition will be compatible with Convention rights pursuant to section 87 of the 2003 Act.
This is a fact specific exercise, and the judge must have regard to the relevant features of the individual case.
It is at this point that it is legitimate for the judge to consider whether there are any relevant features that are unusually or exceptionally compelling.
In the absence of such features, the consideration is likely to be relatively brief.
If, however, 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.
I do not accept Mr Perrys submission that the gravity of the offence can never be of relevance where an issue of proportionality arises in the human rights context.
The importance of giving effect to extradition arrangements will always be a significant factor, regardless of the details of the particular offence.
Usually the nature of the offence will have no bearing on the extradition decision.
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 a disproportionate interference with human rights.
Rejecting an extradition request may mean that a criminal never stands trial for his crime.
The significance of this will depend upon the gravity of the offence.
This obvious fact has been recognised at Strasbourg (see para 32 above).
When considering the impact of extradition on family life, this question does not fall to be considered simply from the viewpoint of the extraditee.
On this subsidiary issue also I reject Mr Perrys submission to the contrary.
This issue was considered by the House of Lords in the immigration context in Beoku Betts v Secretary of State for the Home Department [2008] UKHL 39; [2009] AC 115.
After considering the Strasbourg jurisprudence the House 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 regarded as a victim.
I consider that this is equally the position in the context of extradition.
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 under section 87 of the 2003 Act.
At this point I will deal with the other subsidiary issue of principle that has been raised is it of relevance when considering proportionality that a prosecution for the extradition offence might be brought in the requested jurisdiction? As I have pointed out, the Strasbourg Court gave a positive answer to this question in Soering 11 EHRR 439.
There has recently been a spate of cases in which the extraditee has argued that he ought to be prosecuted in this jurisdiction, of which Bermingham [2007] QB 727 was but one.
The most recent was R(Bary) v Secretary of State for the Home Department [2009] EWHC 2068 (Admin).
References to the others can be found at para 72 of the judgment in that case.
In each one the argument was rejected.
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 enquiry as to the possibility of prosecution in this country.
Application of the principles to the facts of this case
Human rights are in issue and it is for this court to reach its own decision as to whether Mr Norris extradition would be compatible with his article 8 rights.
This is the second occasion on which this matter has reached the highest court in this jurisdiction.
Mr Norris is a British national, born on 15 February 1943.
He retired owing to ill health in 2002.
For some four years before he had been Chief Executive Officer of Morgan Crucible plc (Morgan) and he had worked in the carbon division of that company for 29 years before then.
Morgan and its subsidiaries became involved in the United States in price fixing that was contrary to the law of the United States.
Criminal proceedings in the United States resulted in a plea bargain under which Morgan paid a fine of $1 million and one of its subsidiaries paid a fine of $10 million.
Most of Morgans senior personnel were granted immunity from prosecution but these did not include Mr Norris.
On 28 September 2004 Mr Norris was indicted by a Grand Jury in Pennsylvania on one charge of price fixing and three charges of obstructing justice.
Extradition proceedings were commenced which he resisted on grounds, among others, that the conduct with which he was charged was not criminal under English law.
So far as the price fixing charge was concerned, this contention succeeded, but only when the matter reached the House of Lords Norris v Government of the United States of America [2008] UKHL 16; [2008] AC 920.
The House held, however, that the conduct alleged in relation to the charges of obstructing justice would have been criminal if carried out in this jurisdiction and that, accordingly, those offences were extraditable.
The House remitted the matter for reconsideration by the District Judge because: he exercised his judgment on a basis different from that which now pertains, namely that Mr Norris was to be extradited on the main price fixing count, and not merely the subsidiary counts. (Para 110).
Mr Sumption fastened on this passage and submitted in his written case that the main stuffing of the case against Mr Norris had been knocked out by the decision of the House.
As to that submission I would simply comment that there is plenty of stuffing left.
The gravamen of the case of obstructing justice appears in the following passages of the judgment of Auld LJ in the earlier proceedings Norris v Government of the United States of America (Goldshield Group plc intervening) [2007] EWHC 71 (Admin); [2007] 1 WLR 1730 based on a deposition of Lucy P.McClain, a trial attorney for the antitrust division of the US Department of Justice: 12.
Mr Norris instructed, through a 'task force' he set up for the purpose, all Morgan entities involved in the price fixing conspiracy to remove, conceal or destroy any documentary material, in particular Morgan's sales files in Europe, evidencing Morgan's involvement in the conspiracy.
He also instructed the retention and concealment of certain documents to enable Morgan to continue monitoring the working of the conspiracy. 13.
In about November 1999 Mr Norris met several of the co conspirators in England to discuss the United States authorities' investigation into their conspiratorial dealings and meetings, and to devise a false explanation, other than price fixing, to be put to the authorities for the meetings.
As Ms McClain put it in her affidavit: 'Norris and his subordinates discussed ways in which they could conceal the true purpose of the price fixing meetings when asked about them.
They decided to falsely characterise their meetings with competitors as discussions of legitimate joint ventures rather than disclose the fact that they were price fixing meetings.
Norris expressed his concern that the United States investigators would not believe Morgan's false explanation that the meetings were held to discuss joint ventures, in part because Morgan had no contemporaneous notes of the meetings to support its joint venture explanation.
Norris then directed his subordinates to create false summaries of the price fixing meetings that they would use as a guide or script in answering any future questions about what had occurred at their meetings.' 14.
To that end, a 'script' was prepared which Mr Norris approved, of false information as to the purpose of the meetings for use in the event of any of the Morgan staff or others involved in the conspiracy being questioned by the authorities or by the federal grand jury.
Those provided with the script were rehearsed and questioned about their recollection of the material contained in it.
Those who Mr Norris felt would not be able to withstand questioning, he distanced from Morgan by arranging for their retirement or for them to become consultants.
In January 2001 false handwritten summaries of potentially incriminating meetings were provided to the United States' authorities' investigators, who made plain they regarded Morgan's accounts of the meetings as false. 15.
At or about the same time, Morgan sought to persuade a German company alleged to be a party to the conspiracy, to support it in its false representations to the United States authorities so as, not only to exculpate Morgan, but also to cast blame on a French company, also alleged to be a party to the conspiracy a solicitation in which Mr Norris took a prominent and personal role.
Laws LJ rightly observed [2009] EWHC 995 (Admin), para 29 that the obstruction of justice charges, taken at their face value, were very grave indeed.
The evidence is that, if Mr Norris is convicted, the conduct in question is likely to attract a sentence of between 21 and 27 months imprisonment.
There is a possibility that the sentence will be significantly longer in order to reflect the gravity of the conduct that the obstruction of justice was designed to conceal.
If Mr Norris is extradited a year or more is likely to elapse before his trial.
It is possible that the Department of Justice would oppose the grant of bail before and during the trial.
If convicted he might be imprisoned in a low security Federal Correctional Institution with dormitory or cubicle accommodation.
There is a considerable body of medical evidence before the court, as there was before the Divisional Court, and I shall adapt and adopt the careful summary of that evidence made by Laws LJ.
Mr Norris is now 66 years of age.
He and his wife were married in 1966.
They have two sons and three grandchildren.
The US Department of Justice investigation began in 1999.
In 2000 Mr Norris was diagnosed as suffering from prostate cancer and underwent surgery in March 2001.
He contracted MRSA in the hospital.
A benign tumour was removed from his side in June 2002.
He was not, however, free of cancer and had to undergo radiotherapy in 2002.
He retired from Morgan on health grounds in October of that year.
Towards the end of the same year Morgan struck a plea agreement with the Department of Justice, but it did not include the appellant.
The extradition process effectively commenced in 2005, with the appellant's arrest on 13 January.
In her first witness statement (made on 27 April 2005) Mrs Norris describes with some eloquence the deteriorating quality of life which she and her husband faced as these events crowded around them.
In her second statement (30 May 2008) she paints a worsening picture, and also states (paragraph 8) that if the appellant had to spend any length of time in custody in the United States her psychiatric condition would prevent her from re locating there, where the only people she knows are connected with Morgan, and they are prohibited by the terms of the plea bargain from speaking to her or her husband.
In a letter of 20 April 2005 to Mr Norriss solicitors Dr Jones, his general practitioner, reviewed the prostate cancer history, as regards which he could not say there had been a complete recovery, and the onset of other problems: raised blood pressure and shortness of breath.
In October 2006 Dr Jones described difficulties relating to the appellant's hearing, left knee, right hip, incontinence and a recently developed hernia.
He stated that "[t]he legal problems Mr Norris has been having during the past 2 3 years have had a devastating effect upon him and his family".
By 7 February 2007, when the GP next wrote, the appellant's mental state had deteriorated.
His powers of concentration were poor, he had marked short term memory loss, was depressed and tended to shut himself away.
He was anxious about his wife's psychological state.
His physical problems largely persisted although his blood pressure was normal.
He and his wife were "at the end of their tether".
By 23 May 2008, when the GP next reported, the appellant was registered disabled and had had a total left knee replacement.
Dr Jones was anxious as to his mental state and arranged for him and his wife to see a psychologist.
There are in fact psychiatric reports on both Mr Norris and his wife which pre date the GP's May 2008 letter.
Professor Tom Fahy provided these on 15 February 2007.
In his report on Mr Norris he states that when he interviewed him, he "presented a normal mental state".
However, Although Mr Norris' current symptoms fall short of a formal psychiatric diagnosis, it is reasonable to assume that his symptoms would deteriorate in the face of imminent extradition, and/or actual imprisonment in the US. extradition,
conviction
Professor Fahy reported again on 27 May 2008.
He stated that Mr Norris' mental health has deteriorated since I saw him in February 2007.
He is now describing more prominent symptoms of low mood, loss of interest and pleasure in his usual activities and feelings of helplessness and pessimism about his life situation.
However, Finally, Mr Norris' mood disturbance is not persistent or severe enough to warrant a diagnosis of a depressive illness.
There is no serious prospect of this situation improving for him until the legal situation is resolved, though if he were to be extradited, it is likely that imprisonment and isolation from his family would lead to a further deterioration in his mental health and the development of more significant depressive symptoms.
Mrs Norris' state of health is described in a report dated 19 June 2008 from Michael Kopelman, who is a professor of neuropsychiatry at King's College London and St Thomas's Hospital.
He saw both Mr and Mrs Norris on 9 June 2008, and interviewed them separately and together.
Mrs Norris told him she had had suicidal ideas, panic attacks and palpitations.
Mr Norris told him there had been a "total change" in his wife's personality.
Professor Kopelman opined that Mrs Norris suffered from a "major depression of moderate severity" or a "moderate depressive episode" (depending on which set of criteria was used).
Its severity was however difficult to evaluate: she was able to maintain at least some social activities, but was a person who the doctor suspected was "good at hiding her real emotions".
He concluded (Opinion, paragraph 6): I have no doubt that the prolonged and more serious nature of Mrs Norris's current depression results from the prolonged extradition proceedings.
To this extent, the continuing nature of these extradition proceedings has caused Mrs Norris 'hardship' in the sense of severe psychological suffering and mental deterioration.
I have no doubt that this would be greatly worsened, were her husband to be extradited.
Mr Sumption submits that Mr and Mrs Norris poor health, together with the length and closeness of their marriage, has made them highly dependent on each other.
This and their advancing years, make them less resilient to the separation that Mr Norris extradition would involve.
It was originally Mrs Norris intention to accompany her husband to the United States should he be extradited, but in a witness statement that she made last year she says that she cannot now contemplate going to the US to live on her own there without friends and family support.
Because Mrs Norris will not accompany her husband to the United States, the interruption to their family life should he be remanded in custody, and during his imprisonment, should he be convicted, will be total.
This contrasts with the position that would have prevailed had Mr Norris been imprisoned in this country, where visiting rights enable the family relationship to be preserved.
Mr Sumption contends that Mr Norris extradition in these circumstances cannot be said to represent a proportionate answer to a pressing social need.
Nor, he argues, can it plausibly be said that the prevention of crime or the orderly functioning of extradition are public interests which will suffer substantial damage if someone in the particular position of Mr Norris is not extradited.
The Government has argued that not to extradite Mr Norris would damage the principle of automatic, or virtually automatic, extradition, but no such principle exists.
In a case such as this it is the exception that proves the rule.
One has to consider the effect on the public interest in the prevention of crime if any defendant with family ties and dependencies such as those which bind Mr Norris and his wife was thereby rendered immune from being extradited to be tried for serious wrongdoing.
The answer is that the public interest would be seriously damaged.
It is for this reason that only the gravest effects of interference with family life will be capable of rendering extradition disproportionate to the public interest that it serves.
This is not such a case.
Unhappily the delay that has been caused by Mr Norris efforts to avoid extradition to the United States has increased the severity of the consequences of that extradition for his family life.
But those consequences do not undo the justification that exists for that interference.
For these reasons I would dismiss this appeal.
Postscript
On the eve of delivering judgment in this case the court received the report of the admissibility decision in King v United Kingdom Application no. 9742 /07.
In holding Mr Kings application in relation to his extradition to Australia manifestly ill founded the Court at para 29 followed Launder in expressing the view, 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), 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 Referring to the fact that the applicant had a wife, two young children and a mother in the United Kingdom whose ill health would not allow her to travel to Australia the Court remarked that this was, in its view, not an exceptional circumstance.
This decision does not alter my view that it is more helpful, when considering proportionality, to consider whether the consequences of interference with article 8 rights are exceptionally serious rather than simply whether the circumstances are exceptional.
Either test is, however, likely to produce the same result and the decision demonstrates the futility of attempting to found an appeal on the basis that there has been inappropriate use of a test of exceptionality.
The court also cited Soering in support of the proposition that the considerations of whether prosecution exists as an alternative to extradition may have a bearing on whether extradition would be in violation of a Convention right.
I remain of the view that rarely, if ever, is this possibility likely in practice to tilt the scales against extradition and it certainly does not do so in this case.
LORD HOPE
It would not be right to say that a persons extradition can never be incompatible with his right to respect for his family life under article 8 of the European Convention on Human Rights.
But resisting extradition on this ground is not easy.
The question in each case is whether it is permitted by article 8(2).
Clearly some interference with the right is inevitable in a process of this kind, which by long established practice is seen as necessary in a democratic society for the prevention of disorder or crime.
That aim extends across international boundaries, and it is one which this country is bound by its treaty obligations to give effect to.
In this case extradition will be in accordance with the law, as the preconditions for Mr Norriss lawful extradition have all been satisfied.
So, as Mr Sumption QC made clear in his opening remarks, the issue is entirely one of proportionality.
This, as he said, is a fact specific issue.
He submitted that in the circumstances of this case extradition would be a violation of the article 8 right.
Mr Sumption challenged the governments assertion that the circumstances in which the interference with article 8 rights would not be proportionate will be exceptional.
In para (2) of a closing memorandum on law which he provided to the District Judge and made available to the court on the second day of the argument he said that it was not necessary to show exceptional circumstances in order to make out a case for refusing extradition.
He referred to Huang v Secretary of State for the Home Department [2007] 2 AC 167, para 20, where Lord Bingham of Cornhill said that exceptionality was not a legal test.
Applying that observation to this case, he added that the law recognises that the balance will not necessarily come down in favour of extradition, and that it would not be right to treat the test as a rule of thumb with substantially the same effect.
In oral argument he said that there was no such threshold that had to be crossed.
As it was put in Haung, this may be the expectation but it is not a legal test.
The phrase only in exceptional circumstances was used by the Commission in Launder v United Kingdom (1997) 25 EHRR CD 67, but he said that this was an early decision and it had not been adopted by the Strasbourg Court in its later case law.
I agree that exceptionality is not a legal test, and I think that it would be a mistake to use this rather loose expression as setting a threshold which must be surmounted before it can be held in any case that the article 8 right would be violated.
As Lord Phillips has observed, the phrase exceptional circumstances says little about the nature of the circumstances: para 56, above.
It tends to favour maintaining the integrity of the system as the primary consideration rather than focusing on the rights of the individual.
It risks diverting attention from a close examination of the circumstances of each case.
Although in its admissibility decision in King v United Kingdom, Application No 9742/07, 26 January 2010, it followed the Commissions decision in Launder in using the phrase exceptional circumstances, decisions of the Strasbourg court have repeatedly shown that an intense focus on the rights of the individual is necessary when striking the balance that proportionality requires.
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.
Huang v Secretary of State for the Home Department was a domestic case where article 8 was relied on as a bar to expulsion, but I think that Lord Binghams statement that exceptionality is not a legal test can be applied to extradition cases too.
In R (Ullah) v Special Adjudicator [2004] 2 AC 323, para 13, he said that, while there were substantive differences between expulsion and extradition, the Strasbourg court had held the Soering principle to be potentially applicable in either situation: Cruz Varas v Sweden (1991) 14 EHRR 1, para 70.
Lord Steyn said in para 33 that, while the purpose of the two procedures was different, in the context of the possible engagement of fundamental rights under the ECHR the Strasbourg court has not in its case law drawn a distinction between cases in the two categories.
I would apply that approach to this case.
The fact remains however that the cases in which an argument of the kind that Mr Sumption sought to present will succeed are likely to be very few.
I agree with Lord Phillips that the reality is that it is only if some exceptionally compelling feature, or combination of features, is present that the interference with the article 8 right that results from extradition will fail to meet the test of proportionality.
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.
As against that, those aspects of the article 8 right which must necessarily be interfered with in every case where criminal proceedings are brought will carry very little, if any, weight; Massey v United Kingdom (Application No 14399/02) (unreported) given 8 April 2003, p 12.
Separation by the person from his family life in this country and the distress and disruption that this causes, the extent of which is bound to vary widely from case to case, will be inevitable.
The area for debate is likely to be narrow.
What is the extra compelling element that marks the given case out from the generality? Does it carry enough weight to overcome the public interest in giving effect to the request?
In the present case extradition is sought on charges of obstructing justice.
These are serious charges because of the methods that are said to have been used and the nature of the alleged conduct, and there is a strong public interest in giving effect to the treaty obligation so that they can be properly dealt with.
It was submitted that extradition in this case would cause disproportionate damage to Mr and Mrs Norriss physical or psychological integrity, having regard to their state of health, their age and the likely effect of the separation that extradition will impose on them.
Added to that is the fact that Mr Norris has had this process hanging over him for three years, much of which has been due to his successful challenge to his extradition on the charges of price fixing.
The effect of the delay is that he and his wife are that much older than they otherwise would have been, and this will make it all the more difficult for them to adapt to the consequences.
Mr Sumption invited the court to avoid short cuts and to pay close attention to all the relevant facts in its assessment.
The only circumstance which strikes me as not inherent in every extradition process is the delay.
Otherwise the issues that are raised in this case are really questions of degree.
Distressing the process of separation will undoubtedly be, and I am conscious of the extra element of hardship which will arise because of the state of health of the parties.
Due to their age, and especially to Mrs Norriss psychological condition, this is greater than it would normally be, but in my opinion not excessively so.
Mr Norris is fit to travel and he is fit to stand trial.
His family life must, for the time being, take second place.
The delay is unusually long due to the time it took for Mr Norris to assert his legal rights in regard to the charges of price fixing.
Its effect has been to increase the element of hardship.
Had the remaining charges been less serious this might perhaps have been sufficient to tip the balance in Mr Norriss favour.
But allegations of an attempt to obstruct the course of justice must always be taken very seriously, and I see no grounds for making an exception in this case.
In view of the strong public interest in giving effect to the respondents request so that these charges can be brought to trial in the jurisdiction that is best equipped to deal with them, I do not think that it is possible to say that Mr Norriss extradition on these charges would be disproportionate.
For these reasons, and those which Lord Phillips has given with which I am in full agreement, I agree that the appeal should be dismissed.
LORD BROWN
I agree entirely with the judgment of Lord Phillips on this appeal.
For the reasons he gives 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.
As Lord Phillips observes (at para 82): [O]nly the gravest effects of interference with family life will be capable of rendering extradition disproportionate to the public interest that it serves.
Paragraph 65 of his judgment instances a rare case where the defence might succeed.
It is difficult to think of many others, particularly where, as here, the charges are plainly serious.
It is important to understand the difference between the public interests under consideration by Strasbourg in the Boultif v Switzerland (2001) 33 EHRR 1179 and ner v The Netherlands (2006) 45 EHRR 421 line of cases, upon which so much of the appellants argument rested, and those involved in extradition.
True, the ECtHR describes this interest as the prevention of disorder or crime but this is always in the specific context of the expulsion and/or exclusion of settled migrants following a criminal conviction (ner paras 59 and 61).
Those invoking article 8 rights in such cases have already been convicted and punished for their crimes.
Decisions to expel or exclude are taken essentially in the interests of a sovereign states right to regulate the entry and expulsion of aliens, besides, of course, the interests of deterring immigrants generally from crime.
The public interests in extradition, however, are altogether more compelling.
I fully share Lord Phillips views expressed at para 52 of his judgment and for my part would also wish to endorse paras 21 and 22 of Laws LJs judgment in the court below.
As to our domestic jurisprudence, Huang v Secretary of State for the Home Department [2007] 2 AC 167 was concerned with article 8 in the context, not of extradition, but of immigration control.
In this context, of course, the immigration rules and supplementary directions (to which Lord Bingham, giving the opinion of the Committee, referred at para 20) for the most part take account of the immigrants article 8 rights.
But not in all circumstances, so that there remains scope for article 8 to be successfully invoked in some cases.
We rejected an exceptionality test since exceptionality as such can never be a helpful touchstone against which to judge whether in any particular case the interests of a lawful immigration policy are outweighed by the immigrants (and his familys) rights to private and/or family life.
But even in this, non extradition, context we contemplated article 8 succeeding only in a very small minority of cases.
The legal test is proportionality, not exceptionality, but in immigration cases the court will seldom find removal disproportionate and, in extradition cases, more rarely still.
Gomes v Government of the Republic of Trinidad and Tobago [2009] 1 WLR 1038 was a domestic extradition case concerned not with section 87 but with section 82 of the Extradition Act 2003 (making identical provision to section 14 in Part 1 of the Act).
Amongst the issues arising was the correct approach to the question raised by section 82 as to whether the passage of time makes extradition unjust.
In giving the judgment of the Committee I said this: [W]e would . stress that the test of establishing the likelihood of injustice will not be easily satisfied.
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.
We were told that the section 82 (or section 14) defence is invoked in no fewer than 40% of extradition cases.
This seems to us an extraordinarily high proportion and we would be unsurprised were it to fall following the Committees judgment in the present case. (para 36)
Seemingly it is now the section 87 (section 21 in Part 1) defence based on the extraditees article 8 rights which is regularly being invoked.
The incidence of this too may be expected to decline in the light of the Courts judgments on the present appeal.
The reality is that, once effect is given to sections 82 and 91 of the Act, the very nature of extradition leaves precious little room for a defence under section 87 in a domestic case.
To my mind section 87 is designed essentially to cater to the occasional foreign case where (principally although not exclusively) article 2 or 3 rights may be at stake.
It follows that I too would dismiss this appeal.
In doing so I would register my agreement also with the judgments of Lord Hope, Lord Mance, Lord Collins and Lord Kerr, each of which I understand to be (as I believe and intend my own judgment to be) entirely consistent with everything said by Lord Phillips.
LORD MANCE
Central to the issues argued on this appeal is the submission by Mr Jonathan Sumption QC for the appellant, Mr Norris, that the District Judge and Divisional Court, while purporting to apply the decision of the House of Lords in Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167, erred by in effect reintroducing for extradition cases an exceptionality test.
Huang was a case involving claims by two failed asylum seekers that their removal would infringe their rights under article 8 of the European Convention on Human Rights to enjoy family life with relatives in the United Kingdom.
But it is submitted that that difference in subject matter is immaterial.
It is further submitted that, whatever the test, the Divisional Court erred in concluding that the interference with Mr and Mrs Norriss private life that Mr Norris extradition would entail is necessary in a democratic society (that it is proportionate to the legitimate interest served by his extradition) within the meaning of article 8(2) of the Convention.
That extradition would interfere with Mr and Mrs Norriss private and family life within article 8(1) is not in doubt.
Further, it would do so within the United Kingdom, where such life is currently enjoyed.
The case is thus a domestic rather than a foreign one, in the sense in which Lord Bingham drew this distinction in R (Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 AC 323, para. 9.
This is relevant when considering whether the interference is justified or excused under article 8(2), as being in accordance with the law and necessary in a democratic society in an interest or for a purpose there specified.
In foreign cases (like Ullah itself and R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27; [2004] 2 AC 368) the person resisting removal to a foreign country on the ground that it would interfere there with rights protected under article 8 must present a very strong case: see Ullah per Lord Bingham at para. 24.
In the same case, Lord Steyn at para. 50 spoke of the need to satisfy a high threshold test, by establishing at least a real risk of a flagrant violation of the very essence of the right before other articles [of the Convention] become engaged.
See also per Lord Carswell at paras. 67 70, as well as the later decisions in EM (Lebanon) v Secretary of State for the Home Department (AF (A Child) intervening) [2008] UKHL 64; [2009] AC 1198 and MT (Algeria) v Secretary of State for the Home Department [2009] UKHL 10; [2009] 2 WLR 512.
The approach taken in foreign cases cannot be transposed to domestic cases, where the removal of a foreigner from the jurisdiction would interfere with his or her private or family life within the jurisdiction.
Huang was a domestic case, in which Lord Bingham, giving the opinion of the appellate committee, noted that the questions generally to be asked in deciding whether a measure is proportionate were "whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective".
However, Lord Bingham at para 19 went on to stress the need in applying this test to balance the interests of society with those of individuals and groups, and to refer, in this connection, to the Houses previous statement in Razgar [2004] 2 AC 368, paras 17 20, 26, 27, 60, 77 that the judgment on proportionality "must always involve the striking of a fair balance between the rights of the individual and the interests of the community which is inherent in the whole of the Convention.
The severity and consequences of the interference will call for careful assessment at this stage".
Similar reference to the importance of achieving a fair balance between public and private interests is found in Strasbourg case law, including Dickson v United Kingdom (2007) 46 EHRR 927 and S v United Kingdom (2008) 48 EHRR 1169 (paras. 109 and 111 below).
Addressing a submission by the Secretary of State that it would only be in an exceptional case that the removal under the immigration rules would infringe article 8 (p. 173E), Lord Bingham in Huang [2007] 2 AC 167, para 20 said that, where the issue of proportionality was reached, . the ultimate question for the appellate immigration authority is whether the refusal of leave to enter or remain, in circumstances where the life of the family cannot reasonably be expected to be enjoyed elsewhere, taking full account of all considerations weighing in favour of the refusal, prejudices the family life of the applicant in a manner sufficiently serious to amount to a breach of the fundamental right protected by article 8.
If the answer to this question is affirmative, the refusal is unlawful and the authority must so decide.
It is not necessary that the appellate immigration authority, directing itself along the lines indicated in this opinion, need ask in addition whether the case meets a test of exceptionality.
The suggestion that it should is based on an observation of Lord Bingham in Razgar, para 20.
He was there expressing an expectation, shared with the Immigration Appeal Tribunal, that the number of claimants not covered by the rules and supplementary directions but entitled to succeed under article 8 would be a very small minority.
That is still his expectation.
But he was not purporting to lay down a legal test.
In a later domestic case, EB (Kosovo) v Secretary of State for the Home Department [2008] UKHL 41; [2009] AC 1159, Lord Bingham again described the exercise required under article 8: 12. the appellate immigration authority must make its own judgment and that judgment will be strongly influenced by the particular facts and circumstances of the particular case.
The authority will, of course, take note of factors which have, or have not, weighed with the Strasbourg court.
It will, for example, recognise that it will rarely be proportionate to uphold an order for removal of a spouse if there is a close and genuine bond with the other spouse and that spouse cannot reasonably be expected to follow the removed spouse to the country of removal, or if the effect of the order is to sever a genuine and subsisting relationship between parent and child.
But cases will not ordinarily raise such stark choices, and there is in general no alternative to making a careful and informed evaluation of the facts of the particular case.
The search for a hard edged or bright line rule to be applied to the generality of cases is incompatible with the difficult evaluative exercise which article 8 requires.
The present case concerns extradition, not immigration control, a distinction which Mr Perry QC for the Government emphasises.
The purpose for which Mr Norriss extradition is sought is, in terms of article 8(2), the prevention of disorder or crime .
Mr Sumption argues that this restricts the courts focus to the particular risks of disorder or crime which may flow, presumably from Mr Norris himself, if Mr Norris were not extradited.
That is in my view unrealistic.
The balancing exercise between the public and private interests involves a broader focus.
Ullah underlines both the great importance of operating firm and orderly immigration control in an expulsion case and the great desirability of honouring extradition treaties made with other states: [2004] 2 AC 323, para 24.
The European Court of Human Rights in Soering v United Kingdom (1989) 11 EHRR 439 acknowledged the beneficial purpose of extradition in preventing fugitive offenders from evading justice (para. 86) and said that, as movement about the world becomes easier and crime takes on a larger international dimension, it is increasingly in the interest of all nations that suspected offenders who flee abroad should be brought to justice (para. 89).
These statements refer to fugitive offenders, but similar public interests in extradition apply to suspects who have allegedly committed offences in countries other than those where they habitually reside.
In agreement with others of your Lordships, it is clear that the general public interest in extradition is a powerful one.
This is so, not only in respect of a person already convicted, but also in respect of a person wanted to face trial.
Without affecting the need for a case by case approach, I see it as being, in each of these situations, generally stronger than either the public interest in enforcing immigration control in respect of a failed asylum seeker or an over stayer who has established family roots within the jurisdiction or even than the public interest in deporting a convicted alien upon the conclusion of his sentence, although this be to avoid the commission of further offences within the jurisdiction of the deporting state.
Under article 8, the ultimate question is whether Mr and Mrs Norriss interests in the continuation of their present private and family life in the United Kingdom are outweighed by a necessity, in a democratic society and for the prevention of disorder or crime, for Mr Norris to be extradited in order to face trial in the United States.
Whether extradition is necessary depends upon whether it is proportionate to the legitimate interest served by extradition in his case or, as the European Court of Human Rights said in Dickson 46 EHRR 927 para 71, whether a fair balance [is] struck between the competing public and private interests involved.
The first step in any such enquiry must, in this context also, be to identify and examine all the relevant facts in the particular case.
The nature and seriousness of the alleged offence will be relevant to the strength of the case in favour of extradition: see e.g. Raidl v Austria (1995) 20 EHRR CD114 and King v United Kingdom (Application no. 9742/07) (both extradition cases) in which complaints were held inadmissible.
Laws LJ examined this aspect in the Divisional Court [2009] EWHC 995, paras. 28 29 and concluded that the obstruction of justice charges, taken at their face value, are very grave indeed.
Lord Phillips after re examining the position in his paras. 69 72 reaches the same conclusion, and so do I. Another relevant factor may sometimes be whether a trial would be possible in the United Kingdom, but I agree with Lord Phillips (paras. 66 67) that, while one should not prejudge the facts of particular cases, this is in practice likely to be relevant (if it can be at all) only in otherwise marginal cases.
Mr and Mrs Norriss personal circumstances, the nature of their private and family life and the likely effect of extradition upon it and each of them will all be of primary importance.
I need not repeat here the detailed account of these matters contained in the judgment of Laws LJ in the Divisional Court, paras. 30 37 and of Lord Phillips, paras. 73 80.
In weighing up such personal factors against other factors, it is of course also relevant that extradition is by its nature very likely to have adverse consequences for the private or family life within the jurisdiction of the person being extradited.
The mere existence of some adverse consequences will not be a sufficient counterweight, where there is a strong public interest in extradition.
The principal question of law raised by Mr Sumption centres upon the District Judges and Laws LJs use of phrases referring to a need for a high threshold or for striking and unusual facts before the claim of a prospective extraditee to resist extradition under article 8 would in practice succeed.
However, Laws LJ prefaced his reference to such phrases with an explanation of the force of the public interest in extradition.
This meant, he stated, that any claim to resist extradition on article 8 grounds must, if it is to succeed, possess still greater force: para. 21.
Provided that it is recognised that the force of the public interest in extradition must itself be weighed according to the particular circumstances, I see no objection to this last statement.
In a case involving obstruction of justice charges of a gravity such as the present, the public interest in extradition is self evidently very substantial.
It has to be weighed against other relevant factors, including the delay and above all the impact on Mr and Mrs Norriss private and family life.
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.
There is a possible risk about formulations which suggest in general terms that any person seeking to avoid extradition under article 8 must cross a high threshold or establish striking and unusual facts or exceptional circumstances.
They may be read as suggesting that the public interest in extradition is the same in every case (in other words, involves a threshold of a constant height, whereas in fact it depends on the nature of the alleged offence involved) and also that the person resisting extradition carries some form of legal onus to overcome that threshold, whereas in fact what are in play are two competing interests, the public and the private, which have to be weighed against each other, as required by the case law under the Convention as well as by s.87 of the Extradition Act 2003.
It can be expected that the number of potential extraditees who can successfully invoke article 8 to resist extradition will be a very small minority of all those extradited, but that expectation must not be converted into an a priori assumption or into a part of the relevant legal test.
A further potential problem about such formulations is that they may tend to divert attention from consideration of the potential impact of extradition on the particular persons involved and their private and family life towards a search for factors (particularly external factors) which can be regarded as out of the run of the mill.
Different people have different ages, different private and family lives and different susceptibilities.
They may react and suffer in different ways to the threat of and stress engendered by potential extradition in respect of the same offence or type of offence.
And some of the circumstances which might influence a court to consider that extradition would unduly interfere with private or family life can 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 dependant upon the care performed by the former.
Strasbourg case law supports the need for caution about the use of such formulations, while also indicating that statements that undue interference with article 8 rights will only occur in exceptional circumstances have not either necessarily or always been viewed as problematic.
Thus, the Commission in Launder v United Kingdom (1997) 25 EHRR CD67, 73, para 3 after reciting the basic test of necessity (which implies a pressing social need and requires that the interference at issue be proportionate to the legitimate aim pursued) added: The Commission considers that it is only in exceptional circumstances that the extradition of a person to face trial on charges of serious offences committed in the requesting state would be held to be an unjustified or disproportionate interference with the right to respect for family life.
The Commission finds that in the present case no such circumstances have been shown to exist.
In King v United Kingdom (where Mr King was accused of being a member of a gang engaged in a conspiracy to import large quantities of ecstasy into Australia) the Court returned to this passage, saying: 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 (see Launder v United Kingdom, no. 27279/95, Commission decision of 8 December 1997).
The fact that Mr King had in the United Kingdom two young children and a mother whose health would not allow her to travel to Australia was not an exceptional circumstance, in which connection the Court could not overlook the very serious charges he faces and was accordingly satisfied that it would not be disproportionate to extradite him to Australia.
In Dickson v United Kingdom 46 EHRR 927 the issue was the consistency with article 8 of a policy whereby requests for artificial insemination by prisoners were carefully considered on individual merit but only . granted in exceptional circumstances (para. 13).
The European Court of Human Rights considered that the policy set the threshold so high against them [the applicant prisoners] . that it did not allow a balancing of the competing individual and public interests and a proportionality test ,,,, as required by the Convention (para. 82); and that it was not persuasive to argue . that the starting point of exceptionality was reasonable since only a few persons would be affected, implying as it did the possibility of justifying the restriction of the applicants Convention rights by the minimal number of persons adversely affected (para. 84).
On the other hand, in McCann v United Kingdom 47 EHRR 913, the local authority had determined Mr McCanns right to remain in his home by obtaining from his wife a notice to quit, the effect of which upon him she did not understand.
The European Court of Human Rights, while holding that Mr McCann should in these circumstances have been given the opportunity to argue the issue of proportionality under article 8, added: 54.
The court does not accept that the grant of the right to the occupier to raise an issue under article 8 would have serious consequences for the functioning of the system or for the domestic law of landlord and tenant.
As the minority of the House of Lords in Kay v Lambeth London Borough Council [2006] UKHL 10; [2006] 2 AC 465 observed . , it would be only in very exceptional cases that an applicant would succeed in raising an arguable case which would require a court to examine the issue; in the great majority of cases, an order for possession could continue to be made in summary proceedings.
The minority observation which the European Court approved appears in these terms in Lord Binghams speech [2006] 2 AC 465, para 29: I do not accept, as the appellants argued, that the public authority must from the outset plead and prove that the possession order sought is justified.
That would, in the overwhelming majority of cases, be burdensome and futile.
It is enough for the public authority to assert its claim in accordance with domestic property law.
If the occupier wishes to raise an article 8 defence to prevent or defer the making of a possession order it is for him to do so and the public authority must rebut the claim if, and to the extent that, it is called upon to do so.
In the overwhelming majority of cases this will be in no way burdensome.
In rare and exceptional cases it will not be futile.
The context in both Kay and McCann was one of an absolute common law right to possession of property, to enforcement of which the article 8 right to respect for the home might sometimes represent an obstacle.
In contrast, as Lord Bingham noted in Huang [2007] 2 AC 167, para 17, the statutory scheme governing immigration control itself contemplates that a person may fail to qualify under the immigration rules and yet have a valid claim under article 8.
A similar exercise of weighing competing interests is required under s.87 of the Extradition Act 2003.
Finally, in S v United Kingdom 48 EHRR 1169, the European Court held that the blanket and indiscriminate retention of fingerprints, cellular samples and DNA profiles of persons suspected, but not convicted, of offences, and subject only to a discretion in exceptional circumstances to authorise their deletion, failed to strike a fair balance between the competing public and private interests (paras. 35 and 125).
The preferable course is, in my view, to approach the exercise required by article 8 by (a) identifying the relevant facts and on that basis assessing the force of, and then weighing against each other, the considerations pointing in the particular case for and against extradition, and (b) when addressing the nature of the considerations which might outweigh the general public interest in extradition to face trial for a serious offence, doing so in terms which relate to the exceptional seriousness of the consequences which would have to flow from the anticipated interference with private and family life in the particular case.
But this is very far from saying that any adjudicative exercise which refers to a need in practice for exceptional circumstances or striking and unusual facts in the context of a particular application for extradition is axiomatically flawed.
Still less can it be a ground of objection if the expectation that only a small minority of potential extraditees will in practice be able successfully to rely on article 8 to resist extradition proves statistically to be the case as a result of the decisions reached over a period and over the whole range of such cases.
What matters in any event is whether, as a result of whatever formulation has been adopted, the adjudicative exercise has been slanted or distorted in a manner which undermines its outcome in any particular case.
In the present case, on the facts set out by Laws LJ and Lord Phillips and for the reasons given in relation to those facts by Lord Phillips in para 82 and by Lord Hope in para 93, I am left in no doubt that the balance between public and private interests comes down clearly in favour of Mr Norriss extradition, as serving a pressing social need and being proportionate to the legitimate aim pursued, or, in conclusion, as reflecting an appropriate weighing of the public and private interests engaged, despite the grief and interference with his and his wifes private and family life that extradition will undoubtedly cause.
I have read Lord Phillips judgment with its addendum written in the light of King v United Kingdom, and find nothing inconsistent with the way in which I see the matter and in which I have expressed my own reasons for reaching the same conclusion as he does.
LORD COLLINS
I agree with Lord Phillips that Mr Norris appeal should be dismissed for the reasons he gives.
In 1878 the Report of the Royal Commission on Extradition said: it is the common interest of mankind that offences against person and property, offences which militate against the general well being of society, should be repressed by punishment [W]e may reasonably claim from all civilised nations that they shall unite with us in a system which is for the common benefit of all (in Parry, British Digest of International Law, vol 6 (1965), at 805)
Some 75 years ago the commentary to the Harvard draft Convention on extradition pointed out: The suppression of crime is recognized today as a problem of international dimensions and one requiring international co operation The State, whose assistance is requested, should view the request with favor, if for no other reason, because it may soon be in the position of requesting similar assistance [T]he most effective deterrent to crime is the prompt apprehension and punishment of criminals, wherever they may be found.
For the accomplishment of these purposes States cannot act alone; they must adopt some effective concert of action (Harvard Research in International Law, 1935, p 32)
This appeal concerns crime of an international character, although with some unusual features.
The principal charge in the United States was that of price fixing contrary to the Sherman Act.
The 1972 UK US Extradition Treaty (by contrast with the 2003 Treaty, Article 2(4) and Extradition Act 2003, section 137(3)) applied only to offences committed within the jurisdiction of the other Party (Article I).
Much of Mr Norris alleged conduct was said to have occurred outside the United States (in particular, participation in meetings in Europe, Mexico and Canada to discuss and agree prices), but Morgan Crucible had subsidiaries in the United States which were alleged to be part of the price fixing cartel, and no point on extra territoriality was taken.
The basis of the decision of the House of Lords in March 2008 was that price fixing was not a criminal offence in England until the Enterprise Act 2002, and that since it was not a criminal offence when the offence was alleged to have been committed, it was not an extradition offence under the Extradition Act 2003 and therefore there was not the requisite double criminality: Norris v Government of the United States of America [2008] UKHL 16, [2008] AC 920.
But the obstruction of justice charges brought against Mr Norris were held to satisfy the double criminality test: if Mr Norris had done in England what he was alleged to have done in the United States he would have been guilty in England of offences of conspiring to obstruct justice or of obstructing justice.
The obstruction of justice charges involve conduct outside the United States, but also include allegations that Mr Norris directed an alleged co conspirator to instruct an employee of a United States subsidiary to conceal or destroy incriminating documents, and that he participated in a scheme to prepare false evidence to be given to the United States authorities and to the Grand Jury.
The effect of the evidence before the Divisional Court was that, if Mr Norris is convicted on the obstruction of justice charges, it is at the least possible that the judge will have regard to the anti trust violations in sentencing him for obstruction of justice.
The Divisional Court, applying Welsh v Secretary of State for the Home Department [2006] EWHC 156 (Admin), [2007] 1 WLR 1281 and R (Bermingham) v Director of the Serious Fraud Office [2006] EWHC 200 (Admin), [2007] QB 727, held that this was not contrary to the principle of specialty (also, but less commonly, referred to as speciality): [2009] EWHC 995 (Admin).
The principle is reflected in Article XII(1) of the 1972 UK US Extradition Treaty and section 95 of the Extradition Act 2003.
The traditional statement of the principle is that a surrendered person will not be tried or punished for any offence other than that in respect of which he has been extradited: Oppenheims International Law, 9th ed Jennings and Watts (1992), vol 2, para 420; Whiteman, Digest of International Law, vol 6 (1968), p 1095 (and at 1100 on non extraditable offences as aggravation).
The Divisional Court refused to certify as a question of law of general public importance the question whether it offended the specialty principles if offences which were not extradition offences could be treated as aggravating factors for sentencing purposes.
The Appeal Committee of the House of Lords did not give leave to appeal on this point, and it is therefore not before this court.
The sole question before this court is whether Mr Norris extradition to the United States is compatible with the Convention rights within the meaning of the Human Rights Act 1998 (Extradition Act 2003, section 87(1)).
The same question would have arisen prior to the Extradition Act 2003 as a result of the combined effect of the Human Rights Act 1998, section 6(1), and the discretion of the Home Secretary under the Extradition Act 1989, section 12.
The only direct reference to extradition in the Human Rights Convention is the exception to the right to liberty under Article 5(1) for the lawful arrest or detention of a person against whom action is being taken with a view to deportation or extradition (Article 5(1)(f)).
But the extradition process may engage other Convention rights, as the leading judgment in Soering v United Kingdom (1989) 11 EHRR 439 on the responsibility of the requested State under Article 3 dramatically shows.
But while the Strasbourg jurisprudence does not preclude reliance on articles other than article 3 as a ground for resisting extradition it makes it quite clear that successful reliance demands presentation of a very strong case. [T]he removing state will always have what will usually be strong grounds for justifying its own conduct: the great desirability of honouring extradition treaties made with other states: R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, at [24].
In the present case the question is whether, in extraditing Mr Norris to the United States, the United Kingdom would be in breach of its obligation under Article 8 of the Human Rights Convention to respect private and family life.
The primary object of Article 8 is to protect the individual against arbitrary action by public authorities, but it is well established that there are, in addition, positive obligations inherent in effective respect for family life.
The removal of a person from a country where close members of that persons family are living may amount to an infringement of the right to respect for family life: Boultif vs Switzerland (2001) 33 EHRR 1179, and many other decisions including Y v Russia [2008] ECHR 1585, at [103].
In determining whether interference by a public authority with the rights guaranteed by Article 8(1) is necessary for the purposes of Article 8(2), regard must be had to the fair balance which has to be struck between the competing interests of the individual and of the community as a whole: Keegan vs Ireland (1994) 18 EHRR 342, at [49], and most recently Eberhard and M v Slovenia [2009] ECHR 1976, at [126].
In this case the balance has to be struck in the context of a bilateral extradition treaty providing for the surrender of persons alleged to have committed extraditable crimes.
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: e.g. R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, at [24]; Wright v Scottish Ministers (No 2) 2005 1 SC 453, at [77]; R (Wellington) v Secretary of State for the Home Department [2008] UKHL 72, [2009] 1 AC 335, at [24].
As a result, in cases of extradition, interference with family life may easily be justified under Article 8(2) on the basis that it is necessary in a democratic society for the prevention of crime: HG v Switzerland, Application 24698/94, September 6, 1994 (Commission).
In Soering v United Kingdom (1989) 11 EHRR 439 at [89] the Strasbourg Court said: inherent in the whole of the Convention is a search for a fair balance between the demands of the general interest of the community and the requirements of the protection of the individuals fundamental rights.
As movement about the world becomes easier and crime takes on a larger international dimension, it is increasingly in the interest of all nations that suspected offenders who flee abroad should be brought to justice.
Conversely, the establishment of safe havens for fugitives would not only result in danger for the State obliged to harbour the protected person but also tend to undermine
the foundations of extradition
More recently the Court, in calan v Turkey (2005) 41 EHRR 45, re affirmed what had been said in Soering and added (at [86]): The Convention does not prevent cooperation between States, within the framework of extradition treaties or in matters of deportation, for the purpose of bringing fugitive offenders to justice, provided that it does not interfere with
any specific rights recognised in the Convention
It is inherent in the extradition of a citizen of the requested state that it is almost certain to involve an interference with family life, and that it is why it has been said that it is only in exceptional circumstances that extradition to face trial for serious offences in the requesting state would be an unjustified or disproportionate interference with family life: Launder v United Kingdom (1997) 25 EHRR CD67, at [3]; and cf Raidl v Austria (1995) 20 EHRR CD114, at 123.
See also R (Warren) v Secretary of State for the Home Department [2003] EWHC 1177 (Admin), at [40] [41].
This approach has been confirmed in the recent admissibility decision in King v United Kingdom, Applicn 9742/07.
The public interest in the prevention and suppression of crime, which includes the public interest in the United Kingdoms compliance with extradition arrangements, is not outweighed by the mutual dependency and the ill health, both physical and mental, of Mr and Mrs Norris.
Lord Phillips has dealt with the question whether it is relevant whether a prosecution for the alleged offences could be brought in the requested State.
It was treated as a factor in Soering v United Kingdom at para 110.
In the admissibility decision in King v United Kingdom, Applicn 9742/07, the Court confirmed that considerations as to whether prosecution existed as an alternative to extradition might have a bearing on whether the extradition would be in violation of Convention rights.
The point has also arisen in Ahsan v United Kingdom [2009] ECHR 362, a case involving a request by the United States for extradition to answer charges for alleged terrorist offences, in which the Strasbourg court has asked the parties for submissions on the relevance, if any, which is to be attached to the applicants submission that he could and should be tried in the United Kingdom.
Although the point does not arise for decision on this appeal, it will not normally be relevant, for the reasons given by Lord Phillips, that a prosecution could be brought in the United Kingdom.
LORD KERR
I agree that this appeal should be dismissed.
The centrepiece of the appellants case is that the importance to be attached to the need for an effective system of extradition should only be assessed by reference to the particular circumstances of an individual case.
Thus, the question becomes, would the decision not to extradite this person because of interference with his Article 8 rights cause unacceptable damage to the public interest.
I do not accept this argument.
The specific details of a particular case must obviously be taken into account but recognition of a wider dimension is also required.
In other words, it is necessary to recognise that, at some level of abstraction or generality, the preservation and upholding of a comprehensive charter for extradition must be maintained.
The question cannot be confined to an inquiry as to the damage that an individual case would do to the system of extradition.
It must be approached on a broader plane.
It should also be recognised that the public interest in having an effective extradition system extends beyond deterrence of crime.
It also embraces the need for effective prosecution of offenders see Soering v United Kingdom (1989) EHRR 439, para 89.
Although the appellant argued that the Divisional Court, while disavowing an exceptionality approach, in fact applied such a test in a somewhat re cast form, that claim does not survive careful consideration of what the Divisional Court actually said.
The Divisional Court did not impose an exceptionality requirement.
It merely reflected the significant difficulty involved in displacing the substantial consideration of the need for a coherent and effective system of extradition.
Mr Perry QCs principal argument was to the effect that the public interest in preserving a workable and effective system of extradition was unalterable and constant.
I would be disposed to accept that argument provided constant is understood in this context to mean that it will always arise.
I do not accept that it will be of unvarying weight in every case.
It will always be a highly important factor but there will be some cases where its importance will be properly assessed as overwhelming.
Recognition of the fact that this will always be an important consideration does not create an exceptionality requirement, however; it merely reflects the reality that this is an unchanging feature of the extradition landscape.
Sedley LJ was therefore right in AG (Eritrea) v Secretary of state for the Home Department [2007] EWCA Civ 801; [2008] 2 All ER 28 when he said at para 31 that the circumstance that article 8 claims will rarely be successful is one of result rather than a reflection of an exceptionality requirement.
While it will be, as a matter of actual experience, exceptional for article 8 rights to prevail, it seems to me difficult, in light of Huang v Secretary of State for the Home Department [2007] 2 AC 167, to revert to an exceptionality test a test which, at times, Mr Perry appeared to invite us to rehabilitate.
But 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.
This message does not depend on the adoption of a rubric such as striking or unusual to describe the circumstances in which an article 8 claim might succeed.
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.
I accept Mr Sumption QCs argument that the starting point must be that article 8 is engaged and that it is then for the state to justify the interference with the appellants rights.
But, because of the inevitable relevance of the need to preserve an effective extradition system, that consideration will always loom large in the debate.
It will always be a weighty factor.
Following this line, there is no difficulty in applying the approach prescribed in para 12 of EB (Kosovo) v Secretary of State for the Home Department [2008] UKHL 41; [2009] AC 1159.
On this analysis the individual facts of each case can be evaluated but that evaluation must perforce be conducted against the background that there are substantial public interest arguments in play in every extradition case.
That is not an a priori assumption.
It is the recognition of a practical reality.
There is nothing about the facts of this case that distinguishes it significantly from most cases of extradition, or indeed from most cases of white collar crime.
If Mr Norris were prosecuted in this country, no doubt many of the fears, apprehensions and effects on his and his wifes physical and mental health would accrue in any event.
The added dimension of having to face trial and possible incarceration in America is, of course, a significant feature but not substantially more so than in many other cases of extradition.
The only matter of moment is the delay that has occurred from the time that extradition was first sought but, as has been pointed out, this was to some extent created by the actions of the appellant himself and is, in any event, not of sufficient significance that it cannot be outweighed by the need to preserve effective extradition.
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The United States Government is seeking the extradition of the appellant, Mr Norris, so he may be tried on an indictment charging him with obstruction of justice.
He had originally faced a further charge of price fixing.
The House of Lords ruled in 2008 ([2008] UKHL 16) that the conduct alleged in relation to the price fixing charge was not capable of amounting to an extradition offence as it was not a crime under English law when it was committed.
His case was then sent back to the district judge to decide whether he should be extradited on the remaining charges in the indictment.
Mr Norris submitted that extradition would cause disproportionate damage to his and his wifes physical and psychological wellbeing having regard to their age, their state of health and the likely effect of the separation that extradition would impose upon them.
Thus extradition would be incompatible with his right to private and family life under article 8 of the European Convention on Human Rights and he should be discharged pursuant to s 87 Extradition Act 2003.
The district judge found there to be no bars to extradition.
His decision was upheld on appeal to the High Court, which found that the public interest in honouring extradition treaties was such as to require Mr Norris to show striking and unusual facts or reach a high threshold if his article 8 rights were to prevail.
Mr Norris appealed to the Supreme Court, arguing that the courts below had wrongly required him to demonstrate exceptional circumstances in order to show that his extradition would be disproportionate.
The Supreme Court unanimously dismissed the appeal.
It held that a test of exceptional circumstances had not been applied.
However, in an extradition case, the consequences of any interference with article 8 rights would have to be exceptionally serious before this could outweigh the public importance of extradition.
This was not such a case.
Lord Phillips (with whom all the members of the court agreed) stated that it was common ground that the extradition of Mr Norris would interfere with the exercise in this country of his right to respect for his private and family life.
The critical question was whether this interference was necessary in a democratic society for the prevention of disorder or crime.
On the issue of principle of whether a court could properly require a person resisting extradition on article 8 grounds to demonstrate exceptional circumstances, there was no rule of law that this was the test of disproportionality but the public interest in extradition weighed very heavily indeed [paragraph 51].
It was of critical importance in the prevention of disorder and crime that those reasonably suspected of crime were prosecuted and, if found guilty, duly sentenced.
Extradition was part of the process for ensuring that this occurred on a basis of international reciprocity [paragraph 52].
The reality was that only if some quite exceptionally compelling feature, or combination of features, was present that interference with family life consequent upon extradition would be other than proportionate to the objective that extradition served.
Exceptional circumstances was a phrase which said little about the nature of the circumstances: it was more accurate and more helpful to say that the consequences of interference with article 8 rights must be exceptionally serious before this could outweigh the importance of extradition.
The courts below were justified in considering how if at all the impact of extradition on family life would differ from the normal consequences of extradition [paragraph 56].
Three subsidiary issues arose,, which the court answered as follows: The gravity of the offence could be of relevance, especially if it was at the bottom of scale, but it usually would not be [paragraph 63]; The effect of extradition on innocent members of the family of a person resisting extradition was relevant and could be a cogent consideration [paragraph 64]; and It would rarely be relevant to consider whether the person resisting extradition could be prosecuted in the requested state.
The extradition process should not become an occasion for debate about the most convenient forum for criminal proceedings [paragraph 67] On the facts of Mr Norris case, he was now 67 and had suffered ill health for some years.
His wifes psychiatric condition would preclude her from travelling to the United States to support her husband and she would lose his support.
The offences of obstructing justice, although subsidiary to the price fixing charge, were however very grave indeed [paragraph 72].
The public interest would be seriously damaged if any defendant with family ties and dependencies such as those which bound Mr Norris and his wife was thereby rendered immune from being extradited to be tried for serious wrongdoing [paragraph 82].
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For some four centuries, the United Kingdom and its component nations have been a major source of emigration.
As a result, schemes for defining the right to British nationality have been complicated by the need to accommodate those born abroad but having significant connections with the United Kingdom by descent.
Until 1983, the basic principle was that British nationality by descent was available to any person whose father was a citizen of the United Kingdom and Colonies.
But if his father was himself a citizen by descent only, then unless the child was born in a British controlled territory or the father was in Crown service at the time of the birth, it was normally a condition that the birth should be registered at a British consulate within a year.
In no case could citizenship by descent be transmitted through the female line.
Regulations governing the registration of births by British consuls restricted registration to those eligible for British citizenship.
The respondent, Shelley Elizabeth Romein, was born in the United States on 16 June 1978.
Her father was a US citizen with no personal connection to the United Kingdom.
Her mother had been born in South Africa and was a citizen of the United Kingdom and Colonies by descent because her father (Ms Romeins grandfather) had been born in the United Kingdom on 1 November 1905.
Ms Romeins mother swore an affidavit in which she said that while pregnant with her she spent some time in South Africa and contacted the British consulate in Johannesburg to enquire about British citizenship for her unborn child.
She was told, correctly, that the child would not be eligible because her only claim by descent was through her mother.
With effect from 1 January 1983, the restriction to descent in the male line was abrogated by legislation for those born after that date, and 20 years later in 2003 the legislation was retrospectively amended so as to allow those born before 1983 to acquire citizenship through the female line.
However, when Ms Romein, who had been born under the old regime, sought to take advantage of the change in 2013, her application for citizenship was rejected on the ground that she was unable to satisfy the statutory condition of registration within a year.
The reason why she was unable to do so was that although the law was now deemed at all material times to have allowed claims to citizenship by descent through the female line, the staff of British consulates, acting entirely properly under the law as it actually was, would have refused to register her birth because she was ineligible.
A result so paradoxical clearly calls for scrutiny.
Legislative history
The exclusion of claims to British citizenship by descent through the female line is a curious survivor of redundant social and political priorities.
At common law, English nationality was based on allegiance.
It was acquired by birth within the Kings realm or by marriage to an Englishman.
Nationality by descent was wholly statutory and available under a statute of 1351 only where the child was born outside the realm to parents both of whom were English: see 25 Ed III, cap 1.
It followed that an English woman who married an alien could not transmit her English nationality to her child born outside the realm.
The Naturalization Act 1870 abolished the common law principle that allegiance was indelible, and provided for a woman to lose her British nationality upon marriage to an alien.
From this it followed that no question could arise of transmission of British citizenship by descent through the female line alone.
The position was formalised by the British Nationality and Status of Aliens Act 1914, which was the first statute comprehensively regulating eligibility for British nationality.
A valuable account of the historical background to this legislation will be found in M P Baldwin, Subject to Empire: Married Women and the British Nationality and Status of Aliens Act, Journal of British Studies, xl (2001), 522.
The Act arose from the Imperial Conference of 1911, in which the United Kingdom and the Dominions had agreed upon the principle of a common imperial nationality.
A number of its provisions reflected concern among the Dominions that a common imperial nationality would undermine their attempts to restrict the right of entry by undesirables.
The common nationality was therefore restricted with a view to meeting these concerns.
The 1914 Act repealed the statute of 1351.
Section 10 reproduced the effect of the Naturalization Act 1870 by providing that the British wife of an alien would become an alien on her marriage.
Consistently with these provisions, section 1(1) of the 1914 Act as originally enacted defined a British subject as (a) any person born within His Majestys dominions and allegiance, and (b) any person born elsewhere whose father was a British subject.
This provision was amended by the British Nationality and Status of Aliens Acts of 1918 and 1922.
In its final form, the Act made (b) dependent on the father satisfying any one of five conditions, the most significant of which was condition (v), which was that the birth of a child born outside His Majestys dominions must be registered at a British consulate within a year or in special circumstances and with the consent of the Secretary of State within two years.
Section 1 of the British Nationality and Status of Aliens Act 1943, repealed condition (v) and replaced it with a provision to substantially the same effect but authorising the Secretary of State to permit registration at any time.
The Report of the Joint Select Committee on the Nationality of Married Women (24 July 1923) recorded the main reasons advanced by the Foreign Office in support of these measures: the dominant role of the husband in shaping the cultural affiliation of the family, the problems under British diplomatic practice of affording consular protection to British citizens with dual nationality, the need to maintain commonalty with the Dominions and the desirability of deterring certain mixed marriages which were in the womens case nearly always most undesirable.
The Act of 1914 was superseded with effect from 1 January 1949 by the British Nationality Act 1948, which was the statute in force at the time of Ms Romeins birth.
The occasion for the new Act was the Commonwealth Conference of 1947 on nationality and citizenship, which agreed that each of the Dominions should in future legislate for its own citizenship instead of sharing in a common British citizenship.
This made it possible for the new Act to abrogate the rule that British women who married aliens lost their nationality.
But it did not alter the basic principles on which citizenship by descent was available.
Section 5 provided: 5.(1) Subject to the provisions of this section, a person born after the commencement of this Act shall be a citizen of the United Kingdom and Colonies by descent if his father is a citizen of the United Kingdom and Colonies at the time of the birth: Provided that if the father of such a person is a citizen of the United Kingdom and Colonies by descent only, that person shall not be a citizen of the United Kingdom and Colonies by virtue of this section unless (a) that person is born or his father was born in a protectorate, protected state, mandated territory or trust territory or any place in a foreign country where by treaty, capitulation, grant, usage, sufferance, or other lawful means, His Majesty then has or had jurisdiction over British subjects; or (b) that persons birth having occurred in a place in a foreign country other than a place such as is mentioned in the last foregoing paragraph, the birth is registered at a United Kingdom consulate within one year of its occurrence, or, with the permission of the Secretary of State, later; or (c) that persons father is, at the time of the birth, in Crown service under His Majestys government in the United Kingdom; or that person is born in any country (d) mentioned in subsection (3) of section one of this Act in which a citizenship law has then taken effect and does not become a citizen thereof on birth.
If the Secretary of State so directs, a birth shall be (2) deemed for the purposes of this section to have been registered with his permission notwithstanding that his permission was not obtained before the registration.
Nothing was done to remedy the inability of women to transmit British nationality by descent until 1979.
Under section 7(1) of the Act of 1948 the Secretary of State had a discretion to cause a minor child of a British citizen to be registered as a British subject on the application of his or her parent or guardian.
On 7 February 1979, Mr Merlyn Rees, the then Home Secretary, made a written statement in the House of Commons that he would in future exercise this discretion in favour any minor child of a woman who was herself born in the United Kingdom.
He added that in due course legislation would be introduced to address more generally the transmission of citizenship in the female line: Hansard HC vol 962, cols 203 204W.
Since Ms Romeins mother had not been born in the United Kingdom, this change of policy made no difference to her situation.
Neither did the promised legislation, when it was eventually enacted.
The British Nationality Act 1981, which came into force on 1 January 1983, removed the limitation to descent through the male line for the future.
It also abolished acquisition of nationality by children of British nationals by descent by the registration of their births at a consulate.
For a five year transitional period nationality could still be acquired in similar circumstances by registration with the Secretary of State (but still restricted, as before 1983, to descent through the male line).
In April 1986, the United Kingdom ratified the United Nations Convention on the Elimination of All Forms of Discrimination Against Women.
Article 9.2 of the Convention required state parties to grant equal rights to men and women with respect to the nationality of their children.
However, the United Kingdoms ratification was subject to a reservation that it would continue to apply the five year transitional provision in the Act of 1981.
Those born before the commencement of the 1981 Act continued to benefit from the Rees policy until the end of 2000, when the last person born while the 1948 Act was in force ceased to be a minor.
There was then a hiatus of some two years until 30 April 2003, when section 13 of the Nationality, Immigration and Asylum Act 2002 came into force.
This retrospectively amended the Act of 1981 by inserting a new section 4C. Section 4C was subsequently replaced by a revised section 4C to similar but not identical effect, which was introduced into the 1981 Act by section 45(3) of the Borders, Citizenship and Immigration Act 2009.
In this form it was in force at the time of Ms Romeins application, and indeed still is.
It provides as follows: 4C Acquisition by registration: certain persons born before 1983 (1) A person is entitled to be registered as a British citizen if (a) he applies for registration under this section, and (b) he satisfies each of the following conditions. (2) The first condition is that the applicant was born before 1 January 1983. (3) The second condition is that the applicant would at some time before 1 January 1983 have become a citizen of the United Kingdom and Colonies (a) under section 5 of, or paragraph 3 of Schedule 3 to, the 1948 Act if assumption A had applied, (b) under section 12(3), (4) or (5) of that Act if assumption B had applied and as a result of its application the applicant would have been a British subject immediately before 1 January 1949, or (c) under section 12(2) of that Act if one or both of the following had applied (i) assumption A had applied; (ii) assumption B had applied and as a result of its application the applicant would have been a British subject immediately before 1 January 1949. (3A) Assumption A is that (a) section 5 or 12(2) of, or paragraph 3 of Schedule 3 to, the 1948 Act (as the case may be) provided for citizenship by descent from a mother in the same terms as it provided for citizenship by descent from a father, and (b) references to the applicants mother. references in that provision to a father were (3B) Assumption B is that (a) a provision of the law at some time before 1 January 1949 which provided for a nationality status to be acquired by descent from a father provided in the same terms for its acquisition by descent from a mother, and (b) references to the applicants mother. references in that provision to a father were (3C) For the purposes of subsection (3B), a nationality status is acquired by a person (P) by descent where its acquisition (a) depends, amongst other things, on the nationality status of one or both of Ps parents, and (b) does not depend upon an application being made for Ps registration as a person who has the status in question. (3D) For the purposes of subsection (3), it is not to be assumed that any registration or other requirements of the provisions mentioned in that subsection or in subsection (3B) were met. (4) The third condition is that immediately before 1st January 1983 the applicant would have had the right of abode in the United Kingdom by virtue of section 2 of the Immigration Act 1971 (c 77) had he become a citizen of the United Kingdom and Colonies as described in subsection (3) above. (5) For the purposes of the interpretation of section 5 of the 1948 Act in its application in the case of assumption A to a case of descent from a mother, the reference in the proviso to subsection (1) of that section to a citizen of the United Kingdom and Colonies by descent only includes a reference to a female person who became a citizen of the United Kingdom and Colonies by virtue of section 12(2), (4) or (6) only of the 1948 Act, section 13(2) of that Act, (a) (b) (c) paragraph 3 of Schedule 3 to that Act, or (d) (No 2) Act 1964. section 1(1)(a) or (c) of the British Nationality In other words, applications for citizenship by descent through the female line are now to be dealt with on the assumption that the law had always provided for citizenship by descent from the mother on the same terms as it provided for citizenship by descent from the father.
Application to Ms Romeins case
The paradox of the Secretary of States decision in the present case is that although section 4C(3)(a) of the 1981 Act (as amended) and the associated Assumption A require her to assume that section 5 of the 1948 Act had always provided for citizenship by descent from a mother in the same terms as it provided for citizenship by descent from a father, nevertheless an application for citizenship on that basis must fail because no such assumption would or could have been made by the officials responsible for registration at the time.
To this conundrum there are logically only three possible solutions: (1) Section 4C requires one to assume not only that section 5 of the 1948 Act had always provided for citizenship by descent in the female line, but that the historic facts were different, ie that consular officials in fact acted on that basis.
The argument is that in terms of subsection (3) Ms Romein would have become a citizen under section 5 of the 1948 Act if Assumption A had applied, because on that hypothesis consular officials would have registered her.
This is Ms Romeins case, which was substantially adopted by the Inner House. (2) Section 4C requires one to assume only that section 5 of the 1948 Act had always provided for citizenship by descent, but not to make any assumption that the facts were other than they were.
The result is that applications based on descent through the female line must fail in every case where citizenship was dependent on the fact of registration under section 5(1)(b).
This is the case which the Advocate General makes in support of the Secretary of States decision, and which was substantially accepted by the Lord Ordinary. (3) Effect cannot be given to the registration condition in section 5(1)(b) of the 1948 Act at all, as applied to applications for citizenship by descent through the female line, because insisting on that condition would nullify the practical effect of making Assumption A.
This possibility was raised with Counsel in the course of argument before us, but does not appear to have been considered below.
I start with the first hypothesis, which is the one that found favour with the Inner House.
There are formidable difficulties about the counterfactual assumption on which this hypothesis depends.
In the first place, Ms Romeins contention is that on the assumption made about the law in Assumption A, she would have acquired citizenship under section 5(1)(b) of the 1948 Act.
No other provision of that Act could be relevant to her case.
The registration condition is an integral part of section 5(1)(b).
If any effect is to be given to it, the only counterfactual assumption that would enable her application to succeed is that consular officials not only made Assumption A but actually registered the applicant as a British citizen.
But that assumption cannot be made consistently with subsection (3D), because registration is one of the requirements of section 5 of the 1948 Act, which is one of the provisions mentioned in subsection (3).
It follows that the decision maker cannot assume that the registration condition was met.
Since without such an assumption, one is left with the fact that she was not registered, she would not have become a citizen.
I cannot accept the view of the Inner House that subsection (3D) is concerned only to cast on the applicant the burden of proving his or her claim, without the assistance of any presumption of fact.
It does not say this.
Moreover, she would have that burden anyway.
Secondly, on the present hypothesis the question whether an applicant would have acquired citizenship under section 5(1)(b) of the 1948 Act if Assumption A is made, depends not just on what action consular registrars would have taken if the law had been in accordance with Assumption A, but on what steps the childs parents would have taken to have her registered on that assumption.
It so happens that in Ms Romeins case the answer is reasonably clear if her mothers affidavit is accepted.
Her mother would have received a different answer to her enquiry of the Johannesburg consulate and would have sought to register the birth.
If consular officials had made Assumption A in 1978, that attempt would have succeeded.
It is clear that Ms Romeins mother not only attached a high value to her unborn childs future nationality, but not realising the legal impediments, took some steps towards registering her.
Someone who knew about the legal impediments would have done nothing and generated no evidence of this kind.
Yet it is not obvious why that should make any difference.
There is a conceptual problem about making the operation of section 4C dependent on an enquiry conducted years later into the question whether a parent would before 1983 have wished or intended or attempted to avail herself of a right which did not then exist.
Thirdly, that problem is immeasurably increased when one examines the other implications of this approach.
Subsection (3D) applies to all the provisions mentioned in section 5 of the 1948 Act, including sections 5(1)(a) and (c).
There is nothing to suggest that claims under these provisions fall to be treated differently from those made under section 5(1)(b).
If the counterfactual assumption to be made includes the steps which the parents would have taken, then it would be open to an applicant to say that had the law allowed citizenship by descent in the female line the mother would have moved to a British controlled territory for the birth so as to qualify under section 5(1)(a), or one or other parent would have entered or continued in Crown service in time for the birth so as to qualify under section 5(1)(c).
It seems extremely unlikely that Parliament envisaged in 2002 or 2009 that the operation of this provision would depend on the practically unanswerable question what adjustments parents would hypothetically have made to their lives with a view to obtaining British citizenship for their children.
Subsection (3D) appears to have been added precisely to rule out any such unrealistic enquiries.
In my view the only counter historical assumptions authorised by the Act are Assumptions A and B.
However, the Advocate Generals case faces, as it seems to me, equally formidable objections.
He submits that Assumption A requires section 5 of the 1948 Act to be read as providing for citizenship by descent from a mother in the same terms as it provided for citizenship by descent from a father.
Since those terms included the registration condition in section 5(1)(b), effect must be given to that condition.
Subsection (3D) then provides that it is not to be assumed that these terms, including the registration condition, have been met.
In the absence of a statutory assumption to that effect, he submits, the applicant must demonstrate that the terms, including the registration condition, have in fact been met, just as a claimant to citizenship by descent from a father would have to do.
This accords with the literal words of section 4C.
The difficulty about it is that while purporting to give effect to section 5(1)(b), its actual result is to make section 4C inapplicable to substantially all claims based on it.
Section 4C(3)(a) assumes that by making Assumption A it will in principle be possible to claim citizenship by descent under section 5 of the 1948 Act, including section 5(1)(b).
But if (as the Advocate General submits) effect must be given to the registration condition in section 5(1)(b) of the 1948 Act, then citizenship by descent through the female line would be available under section 5(1)(b) only in those anomalous cases where persons claiming descent through the female line were registered at a British consulate by mistake or in defiance of the regulations.
There were apparently a few such cases.
It is difficult to discern any rational reason why the legislature should have intended to help only them.
Yet, except in cases where the birth of an ineligible child was registered unlawfully, the effect of the Advocate Generals reading is to close off section 5(1)(b) as a route to citizenship by descent from a mother.
Mr Johnston QC, who appeared for the Advocate General, suggested at one point that the intention was to allow claims to citizenship by descent from a woman only in the cases covered by section 5(1)(a), (c) or (d) of the 1948 Act where citizenship followed automatically from a specified state of affairs and was not dependent on steps being taken by any human actor.
But the problem about this argument, apart from being inconsistent with his primary argument (that the registration condition in section 5(1)(b) must be given effect), is that if it was intended to rule out all applications under section 4C based on section 5(1)(b) of the 1948 Act, the provision as drafted would be a most extraordinary way of doing it.
The obvious course would have been to limit the reference to section 5 of the 1948 Act in section 4C of the 1981 Act (as amended) to section 5(1)(a), (c) and (d).
In fact, it must be in the highest degree unlikely that Parliament entertained any such intention.
Since section 5(1)(b) of the 1948 Act seems likely to be the basis of a large proportion of applications under section 4C of the 1981 Act (as amended), it would have significantly undermined the purpose of the provision, for no reason that can readily be imagined.
I think that the solution to the paradox is more straightforward than either of these hypotheses.
Because section 4C requires one to assume that section 5 of the 1948 Act had always provided for citizenship by descent in the female line, it is not possible to apply the registration condition in section 5(1)(b) of the 1948 Act to those claiming on that basis, because its application would make nonsense of that assumption.
The past is done, and cannot be undone.
For nearly 70 years, British consuls have declined to register the births of those claiming by descent through the female line.
Throughout that period any purported registration of a person claiming citizenship only through the female line would have been legally ineffective.
Given that we are forbidden by section 4C(3D) to assume contrary to the facts that the birth was in fact registered, the only way in which effect can be given to section 4C(3) is I should, finally, notice two objections urged against this analysis, neither of to treat the registration condition in section 5(1)(b) as being inapplicable in cases where citizenship is claimed by descent from a mother.
which I would accept.
The first objection is that it leads to unacceptable discrimination between those born before and after the 1948 Act came into force on 1 January 1949.
This is because claims to citizenship by descent from a mother by persons born before 1 January 1949 are governed by section 4C(3)(b) and (c) of the 1981 Act (as amended).
These provisions deal with claims based on section 12(2) (5) of the 1948 Act, which provide subject to certain conditions for persons who were British subjects immediately before the commencement of the 1948 Act to become Citizens of the United Kingdom and Colonies on the commencement date.
The status of British subjects immediately before 1 January 1949 was governed by the 1914 Act, which contained provisions for citizenship by descent similar to those of the 1948 Act.
Section 4C(3)(b) and (c) of the 1981 Act (as amended) provides for Assumption B to be made where an applicant was born before 1 January 1949.
Assumption B is that the law in force before 1 January 1949, ie section 1 of the Act of 1914, provided for a nationality status to be acquired by descent from the mother on the same terms as from a father.
For this purpose, section 4C(3C) of the 1981 Act (as amended) provides that a nationality status is acquired by descent where its acquisition depends on the nationality status of one or both parents and does not depend upon an application being made for registration as a person who has that status.
The Advocate General submits that in the case of persons born before 1 January 1949 this rules out claims to citizenship by descent through the female line based on reading section 1(1)(b)(v) of the 1914 Act (which applied a condition of registration for any person born outside His Majestys dominions) in accordance with Assumption B.
The Inner House rejected this argument because section 1(1)(b)(v) of the 1914 Act did not require anything that could properly be described as an application for registration.
An application, they thought, suggested an appeal to discretion whereas registration of the birth of an eligible child was a right.
They concluded that subsection (3C) must be taken to refer to the registration of a person as having British nationality by naturalisation under regulations envisaged by section 19(1) of the 1914 Act.
This may be so, although it is right to point out that section 1(1)(b)(v) of the 1914 Act is the only statutory provision in force before 1 January 1949 which referred to registration as a requirement for British nationality by descent.
I should, however, prefer not to decide this point.
It does not affect Ms Romeins case.
For the purposes of this appeal, it is enough to point out that the provisions of subsection (3C) referring to the claims of those born before 1 January 1949 and those of subsection (3D) referring to the claims of those born after that date are in different terms.
If there is any difference between the treatment of the two categories under section 4C of the 1981 Act (as amended), it arises from differences in the language of the two subsections.
It is not anomalous.
The second objection is that failing to apply the registration condition to those claiming under section 4C would lead to a different form of gender discrimination, because claimants through the female line would be free of the registration condition whereas claimants through the male line under the previous law were not.
In other words there would be a difference of treatment between (i) persons who could have been registered as citizens because their fathers were citizens, but for whatever reason were not, and can do nothing about it, and (ii) persons who could not have been registered because their only claim was through their mother, in relation to whom no registration condition arises.
I do not regard this as anomalous either.
There is no discrimination between applicants, whether by gender or otherwise.
There was historic discrimination between their parents, since a father was held to transmit his citizenship to his children while a mother was not.
Section 4C simply corrects the subsisting consequences for their children of this historic discrimination.
There is no question of current discrimination.
Disposal
I would dismiss the appeal and affirm the decision of the Inner House, albeit for the rather different reasons which I have given.
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Under section 5(1) of the British Nationality Act 1948 the general rule was that British citizenship was available to a person by descent if his or her father was a citizen of the United Kingdom and Colonies at the time of the persons birth.
But, if the persons father was himself a citizen by descent only, then unless either the person was born in a British controlled territory or the father was in Crown service at the time of the birth, it was normally a condition under section 5(1)(b) that the persons birth should be registered at a British consulate within a year.
Citizenship by descent could not be transmitted through the female line.
Regulations permitted a British consul to register a birth only if the child was eligible for British citizenship.
The Respondent, Shelley Elizabeth Romein, was born in the USA in 1978.
The 1948 Act was in force at that time.
Ms Romeins father was a US citizen with no personal connection to the UK.
Her mother had been born in South Africa and was a citizen of the United Kingdom and Colonies by descent, because her father (Ms Romeins grandfather) had been born in the UK.
Ms Romeins mother swore an affidavit in which she said that, while pregnant with her and in South Africa, she contacted the British consulate in Johannesburg to enquire about British citizenship for her unborn child.
She was correctly told that the child was ineligible because her only claim by descent was through her mother.
The British Nationality Act 1981 removed the restriction to descent through the male line for those born after 1 January 1983 (subject to a five year transitional period).
The 1981 Act was amended retrospectively in 2003 and 2009.
Section 4C of the amended 1981 Act, as it stood when Ms Romein applied for citizenship and as it now stands, requires applications for citizenship to be dealt with on the assumption that the law had always provided for citizenship by descent from the mother on the same terms as it provided for citizenship by descent from the father.
However, in 2013 when Ms Romein sought to take advantage of the change, her application for citizenship was rejected because she was unable to satisfy the condition of registration within a year.
The reason why she was unable to do so was that although the law was now deemed at all material times to have allowed claims to citizenship by descent through the female line, at the time of Ms Romeins birth in 1978 the staff of British consulate, acting entirely properly under the law as it actually was, would have refused to register her birth because she was ineligible for citizenship.
Ms Romein applied for judicial review of the decision refusing her citizenship application.
The Lord Ordinary dismissed that application for judicial review.
Ms Romein appealed to the Inner House of the Court of Session which allowed her appeal, quashed the refusal of her citizenship application, and remitted her citizenship application for reconsideration.
The Supreme Court unanimously dismisses the appeal, although for reasons other than those given by the Inner House.
Lord Sumption gives the judgment, with which Lady Hale, Lord Reed, Lord Hodge and Lady Black agree.
The refusal of Ms Romeins citizenship application, notwithstanding the assumption in section 4C, on the ground that the consular staff would have properly refused to register her birth is a paradoxical result, calling for scrutiny [3].
There are logically only three possible solutions to this conundrum [9].
The first approach is that Section 4C requires one to assume not only that the law had always provided for citizenship by descent through the female line, but that consular officials at the time in fact acted on that basis.
This is Ms Romeins case, which the Inner House substantially adopted [9(1)].
This involves formidable difficulties.
First, the counterfactual assumption that the consular officials would have registered the birth is inconsistent with section 4C(3D), according to which it is not to be assumed that the registration requirement was met.
The Court cannot accept the view of the Inner House that section 4C(3D) serves only to cast on the applicant the burden of proving his her of claim without the assistance of any presumption of fact.
Subsection (3D) does not say that.
Moreover, the applicant would bear the burden of proving his or her claim anyway.
Second, there is a conceptual problem about making the operation of section 4C dependent on an enquiry conducted years later into the question of whether a parent would have wished or intended or attempted to take advantage of a then non existent right.
Third, if the counterfactual assumption includes an assumption about the steps which the parents would have taken with a view to obtaining British citizenship for their children, then it would be open to an applicant to seek citizenship by descent on the basis that the mother would have moved to a British controlled territory for the birth, or that a parent would have entered or continued in Crown service in time for the birth.
It seems extremely unlikely that Parliament expected the operation of section 4C to depend on that practically unanswerable question.
Subsection (3D) appears to have been added precisely to rule out such unrealistic enquiries [10].
The second approach is that section 4C requires one to assume only that the law had always provided for citizenship by descent, but not to make any assumption that the facts were other than they actually were.
This is the Advocate Generals case, which the Lord Ordinary substantially adopted.
This accords with the literal words of section 4C, but its result is that citizenship by descent through the female line would be available under section 5(1)(b) of the 1948 Act only where persons were registered by mistake or in defiance of the regulations.
It is difficult to see why Parliament should have intended to help only them.
The Court cannot accept the suggestion that the intention behind section 4C was to allow claims to citizenship by descent from a woman only in cases where citizenship followed automatically from certain specified circumstances and was not dependent on a person taking steps, such as registering a birth.
Section 4C as drafted would be an extraordinary way of doing that.
Parliament is highly unlikely to have had any such intention.
It would have significantly undermined the purpose of section 5(1)(b) of the 1948 Act for no discernible reason [9(2) 11].
The solution is to treat the registration condition in section 5(1)(b) as inapplicable in applications for citizenship by descent from the mother.
This is the only way to give effect to section 4C(3), given that section 4C(3D) precludes any counterfactual assumption that the birth was registered [9(3) 12].
There are two objections to this solution.
The Court accepts neither.
The first is that it is said to lead to unacceptable discrimination between those born before and after the 1948 Act came into force.
The Court prefers not to decide this point.
It does not affect Ms Romeins case.
It is enough to point out that, if there is any difference between the treatment of those two categories of people, it arises from the wording of the 1981 Act (as amended) [13 14].
The second objection is that this solution leads to a different form of gender discrimination, because claimants through the female line would be free of the registration condition whereas claimants through the male line under the previous law were not.
This is not anomalous either: there is no current discrimination between applicants.
There was historic discrimination between their parents.
Section 4C simply corrects the remaining consequences [13, 15].
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This appeal raises the question whether the Commissioner of Police of the Metropolis (the Commissioner) owes a duty to her officers, in the conduct of proceedings against her based on their alleged misconduct, to take reasonable care to protect them from economic and reputational harm.
Background facts
The pleaded facts may be summarised as follows.
On 2 December 2003 the respondents, four police officers serving in the Metropolitan Police Service, (the officers) took part in the arrest of a suspected terrorist, BA.
BA subsequently made allegations that the officers had seriously assaulted and injured him during the arrest.
The complaints were investigated by the Metropolitan Police Services Directorate of Professional Standards and the Crown Prosecution Service who concluded that there was no case to answer.
However, the Independent Police Complaints Commission decided in October 2004 that one charge relating to the use of excessive force should be brought against the first respondent.
That charge was dismissed by the disciplinary panel in April 2005.
Between 14 January 2005 and 2 February 2005 the Independent Police Complaints Commission released the officers identities into the public domain.
This led to threats of serious violence to the officers and their families on a website which supported BA.
On 18 October 2007 BA issued civil proceedings against the Commissioner in which he alleged that the Commissioner was vicariously liable under section 88 of the Police Act 1996 for the serious assaults which he alleged the officers had inflicted on him.
His claim included claims for aggravated and exemplary damages.
The officers were not defendants in the action nor were contribution proceedings brought against them by the Commissioner.
The defence of the claim on behalf of the Commissioner was undertaken by the Metropolitan Police Directorate of Legal Services (DLS).
A defence denying liability was entered.
On 10 January 2008 an offer of settlement was rejected by BA.
On 18 March 2008 the officers attended a conference with Mr Jeremy Johnson of counsel, instructed by the DLS on behalf of the Commissioner.
The officers subsequently alleged that counsel and the DLS solicitor assured them on that occasion that they were also acting for them and in their interests and told them that BAs claims would be vigorously defended.
On 13 February 2009 an application by the Commissioner that the officers be permitted to give evidence from behind screens was dismissed at the pre trial review.
On 10 March 2009 BA rejected a further offer of settlement because he wanted an apology or a finding in open court.
The officers attended a second conference with Mr Johnson and the DLS on 11 March 2009.
On this occasion the officers were accompanied by a solicitor from Russell Jones and Walker who attended only in relation to matters arising from a special measures application which had been made in respect of the evidence to be given by the respondents.
At that conference the officers said that they would be reluctant to give evidence without special measures being in place.
They allege that Mr Johnson informed them that he was no longer representing their interests but only the interests of the Commissioner.
The officers allege that Mr Johnson indicated that the claim would be lost due to BAs medical evidence and they complained to him that they were unable to raise points on various aspects of the defence including medical evidence, expert evidence, CCTV footage and notes of arrest.
The trial of BAs claim commenced on 16 March 2009.
The officers declined to give evidence voluntarily without special measures being in place.
On the third day of the trial, 18 March 2009, the Commissioner settled the claim on the basis of agreed damages of 60,000 and agreed costs of 240,000 with an admission of liability and an apology for gratuitous violence to which BA had been subjected by the officers.
Paragraph 82 of the Particulars of Claim in the present proceedings alleges that the Commissioners office issued a press release stating: The Commissioner has demanded an immediate investigation into the circumstances surrounding the officers refusal to give evidence relating to this arrest in 2003.
Whilst the arrest and subsequent events are historic this is a serious matter which has been referred to the IPCC.
In the present proceedings the officers maintain that this was tantamount to endorsing their culpability.
On 12 August 2010 the officers were each charged with one count of an assault occasioning actual bodily harm arising out of the arrest of BA.
In June 2011, following a trial lasting five weeks, the officers were all acquitted.
The current proceedings
On 23 September 2013 the officers commenced the present proceedings against the Commissioner alleging breach of contract, negligence and misfeasance in public office arising from the manner in which the Commissioner had defended BAs claim.
They sought compensation for reputational, economic and psychiatric damage.
In the particulars of claim the officers put forward three bases on which it was alleged that the Commissioner owed them a duty of care. (1) A retainer had arisen between them and the Commissioners legal team because of the assurances given to them by counsel and the DLS solicitor. (2) The Commissioner had assumed a duty of care to the officers by reason of those same assurances. (3) The Commissioner owed the officers a duty of care in tort and concurrently in contract as employer or quasi employer to take reasonable care to safeguard their safety, health, welfare (including economic and professional welfare) and reputational interests, in the preparation and conduct of the defence to BAs claim and when considering and effecting any settlement of it.
This third head of claim was said to include the following specific obligations to take reasonable care. (a) To keep the officers informed of the progress of the case. (b) To keep them and their families safe from threats by BAs supporters against their homes and physical safety. (c) To explain and provide reasons in the event that the Commissioner believed that BAs civil claim could no longer be defended or that a conflict had arisen between the officers and the Commissioner. (d) To consult the officers in sufficient time prior to the trial for them to obtain alternative and independent legal advice in the event that the Commissioner had decided to admit liability and make a public apology. (e) To warn the officers in sufficient time (to enable them to take independent legal advice or any other necessary steps to protect their own interests) prior to the opening of the trial that the application for special measures had failed, that the Commissioners lawyers were no longer acting for the officers or protecting their interests and that the Commissioner was considering admitting liability and making a public apology.
The particulars of claim then provided detailed particulars of the alleged breaches of the duties.
The officers do not allege that entering into an agreement on the terms of the settlement between the Commissioner and BA was in itself negligent.
Their complaint is about the antecedent conduct of the defence by the Commissioner.
In particular it is alleged that the Commissioner failed to conduct and prepare a competent defence to BAs claim. (See Jay J at para 23) Here complaint is made of the failure to proof or call as witnesses a list of named persons or to ascertain the availability of covert recordings.
Complaint is made that evidence was lost, not located or not disclosed as a result of a systems failure.
Complaint is also made of failure to take account of a list of miscellaneous evidential concerns raised by the respondents which, it is said, were either ignored or not adequately addressed.
More generally, it is said that the Commissioner failed to keep the officers informed of the progress of the litigation and the preparation of the defence and failed to advise the officers within a reasonable time of the alleged conflict of interests.
Complaint is made of the failure to obtain expert medical evidence to challenge the expert evidence called on behalf of BA and of a failure to apply for an adjournment of the trial.
By notice dated 28 April 2014 the Commissioner applied to strike out the claims pursuant to CPR Part 3.4(2) on the grounds that they disclosed no reasonable grounds for the making of a claim, alternatively for summary judgment pursuant to CPR Part 24 on the grounds that the claims had no real prospect of success.
On 1 May 2015 Jay J struck out the claims and entered summary judgment for the Commissioner.
He considered that, in the absence of an express contract of retainer with the DLS, no retainer existed.
Furthermore, the officers had no direct interest in the prior litigation and the possibility of consequential impact on their reputations was insufficient to create such an interest to which the Commissioner would be legally required to have regard or to promote or safeguard.
The focus of the claim founded on the more general duty of care to protect the health, economic or reputational interests of the officers shifted during the hearing before Jay J.
The judge seems to have been under the impression that the duty relied on by the officers was a duty to avoid psychiatric injury and that the claims for reputational damage and economic loss were entirely consequential on that head of damage.
The judge considered that the officers had no real prospect of proving at trial that it was reasonably foreseeable that any breaches of duty by the Commissioner might cause psychiatric injury.
However, the judge also observed that this basis of claim faced an insuperable difficulty under Caparo Industries plc v Dickman [1990] 2 AC 605 in that, given that the officers were not parties to BAs civil proceedings, the Commissioners lawyers owed duties solely to the Commissioner and the Commissioner was free to protect his own interests as he saw fit.
He stated: The principled objection to this claim is that the postulated duty of care cuts right across the rights and obligations of the defendant itself, and those advising the defendant, in circumstances where no implied retainer existed.
It would not be fair, just and reasonable to impose a concurrent conflicting duty of care in these circumstances: (at para 36) The claim for misfeasance was struck out as inadequately pleaded.
The officers appealed to the Court of Appeal, save in respect of the claim in misfeasance.
The Court of Appeal (Moore Bick, Longmore and Patten LJJ) dismissed the appeal in relation to the existence of a retainer and in relation to the assumption of responsibility.
In addition, it dismissed the appeal in relation to psychiatric injury on the ground that such injury was not reasonably foreseeable.
However, it allowed the appeal on the remaining issue, holding that it was arguable that the Commissioner owed a duty of care to the officers to safeguard their economic and reputational interests and that this extended to the conduct of litigation by the Commissioner.
Moore Bick LJ, with whom the other members of the court agreed, accepted that the Commissioners primary duty was to protect the interests of the Metropolitan Police Service, but he did not consider that a duty of the kind alleged by the officers necessarily cut across this.
In his view it was in the interest of the Commissioner and the officers for the defence to be conducted as effectively as possible and a duty of care in that regard would not inevitably give rise to any conflict of interest.
Accordingly, he considered it arguable that the Commissioner owed to the officers (1) a duty to defend the litigation as effectively as possible and (2) a duty, when deciding whether to compromise the claim and if so on what terms, to take reasonable care not to sacrifice their interests and professional reputation without good reason and without giving them reasonable warning of what he intended to do.
So far as breach of duty giving rise to actionable losses was concerned, Moore Bick LJ noted that there was no allegation that the Commissioners decision to compromise the claim was negligent in all the circumstances.
However, the Commissioners forensic difficulties were alleged to have been a consequence of failures on the part of the MPS to identify or make available certain important pieces of evidence.
In his view the essential elements of the claim for breach of a duty of care in relation to the conduct of the proceedings were present.
The Court of Appeal came to a different conclusion, however, in respect of the allegation that the Commissioner was in breach of duty by failing to warn the officers in good time that he intended to pursue the interest of the MPS, if necessary at their expense.
Moore Bick LJ agreed with the judge in dismissing as fanciful the suggestion that, had they been warned, the officers would have applied to be joined as defendants and would have instructed solicitors to conduct their defence independently.
The Commissioner now appeals to the Supreme Court.
The sole remaining allegation in the proceedings is that the Commissioner owed a duty of care to the officers to conduct the defence of the proceedings brought against her as effectively as possible in order to protect the officers from economic or reputational harm.
There is no cross appeal by the officers in relation to the alleged retainer, the alleged assumption of responsibility or the head of claim alleging psychiatric injury.
Nevertheless, the subject matter of those heads of claim which have fallen by the wayside forms an important part of the context in which the central issue now falls to be decided.
The implied duty of trust and confidence
Both before the Court of Appeal and before this court Mr Nicholas Bowen QC on behalf of the officers has placed at the forefront of his submissions the duty of trust and confidence which exists between an employer and his employees.
He submits that the duty of care for which he contends is simply a manifestation of the long established term of trust and confidence which is implied into contracts of employment and that, accordingly, there is no scope or need for the court to conduct an assessment of whether the ingredients identified in Caparo v Dickman criteria are present and, in particular, whether the imposition of such a duty would be fair, just and reasonable.
Police officers hold the public office of constable and are not employees.
They have no contract of employment and the terms on which they hold their office are governed principally by the Police Regulations 2003 (SI 2003/527).
Nevertheless, the relationship of Commissioner and officer is closely analogous to that of employer and employee (White v Chief Constable of South Yorkshire Police [1999] 2 AC 455, per Lord Steyn at p 497E F; per Lord Hoffmann at p 505C).
In Mullaney v Chief Constable of West Midlands Police [2001] EWCA Civ 700 Clarke LJ, with whom Potter LJ and Bodey J agreed, considered (at para 52) that the relationship is so closely analogous as to make it just in principle to hold that a Chief Constable owes the same duties to his officers as an employer does to his employees.
At this point of the discussion I am content to proceed on the basis that the Commissioner and these officers should be treated as if they were employer and employee, while recognising that, in the absence of any actual contract, any duty derived by analogy with the standard terms implied in an employment contract must necessarily sound as a duty of care, rather than be absolute.
The mutual obligation of employer and employee not, without reasonable and proper cause, to engage in conduct likely to destroy or seriously damage the relationship of trust and confidence required between employer and employee is a standardised term implied by law into all contracts of employment rather than a term implied from the particular provisions of a particular employment contract (Malik v Bank of Credit and Commerce International SA [1998] AC 20, per Lord Steyn at p 45D).
It was described by Lord Nicholls in Malik at p 35A, as a portmanteau concept.
In that case the House of Lords considered it the source of a more specific implied obligation on the part of the employer bank not to conduct its business in a dishonest and corrupt manner, the breach of which gave rise to a cause of action for damage to the economic and reputational interests of its employees.
Similarly, in Eastwood v Magnox Electric plc [2004] UKHL 35; [2005] 1 AC 503 the House of Lords recognised an obligation on an employer, in the conduct of his business and in the treatment of his employees, to act responsibly and in good faith (per Lord Nicholls at para 11).
The implied term has been held to give rise to an obligation on the part of an employer to act fairly when taking positive action directed at the very continuance of the employment relationship (Gogay v Hertfordshire County Council [2000] IRLR 703; McCabe v Cornwall County Council [2004] UKHL 35; [2005] 1 AC 503; Bristol City Council v Deadman [2007] EWCA Civ 822; [2007] IRLR 888; Yapp v Foreign and Commonwealth Office [2014] EWCA Civ 1512; [2015] IRLR 112; Stevens v University of Birmingham [2015] EWHC 2300 (QB); [2016] 4 All ER 258).
Furthermore, any decision making function entrusted to an employer must be exercised in accordance with the implied obligation of trust and confidence (Braganza v BP Shipping Ltd [2015] UKSC 17; [2015] 1 WLR 1661).
If the present case is approached on the basis of implied contractual terms, the issue becomes whether, in unpacking this particular portmanteau implied term of trust and confidence, it is possible to extract a duty of care owed by an employer to its employees to conduct litigation in a manner which protects them from economic or reputational harm.
It is significant that, despite the researches of counsel, we have not been referred to any decided case in any jurisdiction which holds that an employer owes such a duty of care to his employees.
To derive such an obligation from the implied term of trust and confidence would be to move substantially beyond the specific derivative duties established to date.
Although in Malik the House of Lords derived from the mutual implied contractual obligations of trust and confidence an implied obligation owed by the bank to its employees not to conduct a dishonest or corrupt business and held that damage to reputation resulting from breach sounded in damages, this is at a considerable remove from a duty to exercise care in the conduct of business so as to avoid economic or reputational damage to employees.
This point was, in fact, emphasised by Lord Nicholls in a cautionary footnote: , [T]here are many circumstances in which an employees reputation may suffer from his having been associated with an unsuccessful business, or an unsuccessful department within a business.
In the ordinary way this will not found a claim of the nature made in the present case, even if the business or department was run with gross incompetence.
A key feature in the present case is the assumed fact that the business was dishonest or corrupt. (at p 42C D).
In Scally v Southern Health and Social Services Board [1992] 1 AC 294 doctors sued their employer claiming damages, inter alia, in breach of contract and negligence, in respect of the failure of the employer to notify them of their entitlement under their contracts of employment to purchase, during a limited period of time, additional years of pension entitlement.
The House of Lords held that the claimants common law claims were to be determined by reference to the contractual relationship and not in tort.
The doctors claim succeeded but it is noteworthy that it did so on the narrow ground that where a contract negotiated between an employer and a representative body contains a term conferring on an employee a valuable benefit contingent upon his acting to obtain it, of which he could not be expected to be otherwise aware, there was an implied obligation on the employer to take reasonable steps to publicise that term.
It is significant that the House of Lords did not base its decision on a more general duty of care owed by an employer to protect the economic interests of employees.
Similarly, in Crossley v Faithful & Gould Holdings Ltd [2004] ICR 1615 the Court of Appeal refused to derive from the mutual duty of trust and confidence a standard obligation, implied by law as a term of all contracts of employment, which requires an employer to take reasonable care for the economic well being of his employees.
The claimant, a senior employee and director of the defendant company, retired on grounds of ill health.
He later brought an action for damages for breach of contract alleging that in failing to warn him of the effect which resigning from his employment would have on his entitlements under its insurance scheme, the defendant company had acted in breach of an implied term of the contract of employment requiring it to take reasonable care for his economic well being.
Dyson LJ, with whom Thomas LJ and Sir Andrew Morritt V C agreed, rejected the proposed implied term.
Having observed (at para 42) that it was not for that court to take a big leap to introduce a major extension of the law in this area when the House of Lords had declined to do so in Scally v Southern Health and Social Services Board [1992] 1 AC 294 and Spring v Guardian Assurance plc [1995] 2 AC 296, he developed (at para 43) the more fundamental objection that such an implied term would impose an unfair and unreasonable burden on employers.
While an employer might assume responsibility under the Hedley Byrne principle, it was a quite different matter to impose on an employer the duty to give his employee financial advice or generally to safeguard his economic well being.
Furthermore, I have difficulty in understanding how this principal argument on behalf of the officers can circumvent the requirement adverted to by Lord Bridge in Caparo v Dickman that the imposition of the duty must be fair, just and reasonable.
In order to establish such a duty of care, the officers rely here upon a class of implied terms which are implied in law as a necessary incident of a particular class of contractual relationship.
In Crossley Dyson LJ observed at para 36: [R]ather than focus on the elusive concept of necessity, it is better to recognise that, to some extent at least, the existence and scope of standardised implied terms raise questions of reasonableness, fairness and the balancing of competing policy considerations.
This approach was commended by Lady Hale in Geys v Societe Generale, London Branch [2013] 1 AC 523 at paras 55, 56.
The argument that such an implied term should extend to the conduct of litigation raises, therefore, precisely the same question as to whether the proposed term is fair and reasonable as arises if the claim is put in tort.
Such an implied term, implied by law as an incident of a standardised contract, could not, to my mind, be wider in scope than the duty imposed by the law of tort. (White v Chief Constable of South Yorkshire Police, per Lord Griffiths at p 464C G; per Lord Goff at p 483C E; per Lord Steyn at p 498A B; per Lord Hoffmann at pp 505B 506B. See also the observations of Underhill LJ in Yapp v Foreign and Commonwealth Office at para 120.) It is difficult to see why such an implied term should extend further than a concurrent duty in negligence.
Accordingly, it seems to me that the battlefield on which the conflicting contentions as to the existence of such a duty must be fought out is the scope of the duty of care in tort.
In the present case the courts below have proceeded on the basis that, with the exception of the claim in respect of psychiatric injury which is no longer pursued, harm was arguably foreseeable.
Furthermore, it was clearly arguable that by virtue of their relationship, akin to that of employer and employee, the parties were in a sufficiently proximate relationship to give rise to a duty of care.
The argument therefore focussed on whether the imposition of a duty of care was fair, just and reasonable as indicated in Caparo.
In Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4; [2018] 2 WLR 595 this court recently held, with regard to this aspect of Caparo, that it is normally only in a novel type of case, where established principles do not provide an answer, that the courts need to go beyond those principles in order to decide whether a duty of care should be recognised.
Since the police generally owe a duty of care not to inflict physical injury by their actions when such a duty arises under the ordinary principles of the law of negligence, unless statute or other common law principle provides otherwise, there was no requirement in that case to examine whether the recognition of the claimed duty would be fair, just and reasonable.
However, this ingredient will be of critical importance in a situation where it is proposed that a duty of care should be imposed in novel circumstances.
Thus Lord Reed observed (at para 29): Properly understood, Caparo thus achieves a balance between legal certainty and justice.
In the ordinary run of cases, courts consider what has been decided previously and follow the precedents (unless it is necessary to consider whether the precedents should be departed from).
In cases where the question whether a duty of care arises has not previously been decided, the courts will consider the closest analogies in the existing law, with a view to maintaining the coherence of the law and the avoidance of inappropriate distinctions.
They will also weigh up the reasons for and against imposing liability, in order to decide whether the existence of a duty of care would be just and reasonable.
Contrary to the submission of Mr Bowen on behalf of the officers, the present case is very clearly one in which it is sought to extend a duty of care to a new situation.
As Lord Reed explained in Robinson, in determining whether such a duty should be recognised the law will proceed incrementally and by analogy with previous decisions.
He referred, in particular, to the following passage in the judgment of Brennan J in Sutherland Shire Council v Heyman (1985) 60 ALR 1, 43 44, which was approved by Lord Bridge in Caparo at p 618: It is preferable, in my view, that the law should develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension of a prima facie duty of care restrained only by indefinable considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed.
The theme was developed by Lord Bingham in Customs and Excise Comrs v Barclays Bank plc [2007] 1 AC 181 where he observed at para 7: I incline to agree with the view that the incremental test is of little value as a test in itself, and is only helpful when used in combination with a test or principle which identifies the legally significant features of a situation.
The closer the facts of the case in issue to those of a case in which a duty of care has been held to exist, the readier a court will be, on the approach of Brennan J adopted in Caparo Industries plc v Dickman, to find that there has been an assumption of responsibility or that the proximity and policy conditions of the threefold test are satisfied.
The converse is also true.
In addition, the proposed duty will be tested against considerations of legal policy and judgement will have to be exercised with particular regard to both the achievement of justice in the particular case and the coherent development of the law.
The law protects reputation in a variety of ways in different circumstances.
Causes of action such as libel, slander, malicious falsehood and passing off are designed to protect reputation.
Moreover, a variety of other causes of action including breach of confidence, misuse of private information and causes of action in relation to data protection and intellectual property may often indirectly achieve this result.
The common law does not usually recognise a duty of care in the tort of negligence to protect reputational interests.
However, there are exceptions.
In Spring v Guardian Assurance plc [1995] 2 AC 296 a majority of the House of Lords held that an employer who gave a reference in respect of a former employee owed that employee a duty to take reasonable care in its preparation and would be liable to him in negligence for a breach of duty which caused him economic loss.
Lord Lowry, Lord Slynn and Lord Woolf reached this conclusion on the basis of the three ingredients identified by Lord Bridge in Caparo.
Lord Goff (at p 316E F) concluded that a duty of care was owed to the former employee on a narrower ground.
In his view the source of the duty of care was the principle in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 ie an assumption of responsibility by the authors of the reference to the plaintiff in respect of the reference, and reliance by the plaintiff upon the exercise by them of due care and skill in respect of its preparation.
This case was essentially concerned with negligent mis statement and it may be that assumption of responsibility is the better rationalisation of the recognition of a duty in these circumstances. (See NRAM Ltd (formerly NRAM plc) v Steel [2018] UKSC 13; [2018] 1 WLR 1190 per Lord Wilson at para 24 referring also to Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 per Lord Goff at p 181 and Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 per Lord Steyn at p 837.)
This decision should be contrasted with Calveley v Chief Constable of the Merseyside Police [1989] 1 AC 1228.
Following their reinstatement, police officers, against whom disciplinary proceedings had been taken, brought actions in negligence against their Chief Constables on the basis that they were vicariously liable for the investigating officers.
The claimants alleged that the investigating officers had failed to conduct the proceedings properly or expeditiously and claimed, inter alia, damages in respect of loss of overtime earnings during their suspension and damages for injury to reputation.
The House of Lords considered the submission that a duty of care was owed to the claimants to be unsustainable.
First, Lord Bridge explained (at p 1238B G), anxiety, vexation and injury to reputation did not constitute reasonably foreseeable damage capable of sustaining an action in negligence within Donoghue v Stevenson [1932] AC 562.
Secondly, it was not reasonably foreseeable that the negligent conduct of a criminal investigation would cause injury to the health of the suspect, whether in the form of depressive illness or otherwise.
Thirdly, while it is reasonably foreseeable that a suspect may suffer some economic loss which might have been avoided had more careful investigation established his innocence at an earlier stage, such a claim would encounter the formidable obstacles in the path of liability in negligence for purely economic loss.
Fourthly, it would be contrary to public policy to prejudice the discharge by police officers of their public duty of investigating crime by requiring them to act under the shadow of a potential action for damages for negligence by the suspect.
To my mind Calveley has an important bearing on the present case.
If a Chief Constable does not, in principle, owe a duty of care to protect the economic and reputational interests of his officers in respect of the prosecution of an investigation or disciplinary proceedings, it is difficult to see why he should owe a duty to his officers as to the manner in which he defends a claim brought against him by a third party.
In the former situation the Chief Constable has himself initiated the investigation or proceedings over which he has at least a substantial measure of control and he is responsible for making allegations against officers.
In the latter situation his role is essentially responsive to allegations made by third parties.
In these circumstances it is necessary to test the proposed duty of care against relevant policy considerations and to consider the coherence of the resulting state of the law if such a duty is recognised.
Conflicting interests
The fact that a duty of care may give rise to conflicting interests will often be a weighty consideration against its imposition.
In D v East Berkshire Community Health NHS Trust [2005] 2 AC 373 a majority of the House of Lords held that health care and childcare professionals investigating allegations of child abuse did not owe a duty of care to the parents of the children concerned.
Lord Nicholls explained (at para 85) that conflict of interest was a persuasive factor here.
When considering whether a child has been abused, a doctor should be able to act single mindedly in the interests of the child and he ought not to have at the back of his mind an awareness that if his doubts about intentional injury or sexual abuse were to prove unfounded he might be exposed to claims by a distressed parent.
At that time [when a doctor is carrying out his investigation] the doctor does not know whether there has been abuse by the parent.
But he knows that when he is considering this possibility the interests of parent and child are diametrically opposed.
The interests of the child are that the doctor should report any suspicions he may have and that he should carry out further investigation in consultation with other child care professionals.
The interests of the parent do not favour either of these steps.
This difference of interest in the outcome is an unsatisfactory basis for imposing a duty of care on a doctor in favour of a parent. (at para 88) Similarly, in SXH v Crown Prosecution Service [2017] UKSC 30; [2017] 1 WLR 1401 Lord Toulson, with whom Lord Mance, Lord Reed and Lord Hughes agreed, considered (at para 38) that the duty of the Crown Prosecution Service (CPS) is to the public and not to the victim or the suspect, who have separate interests, and that to recognise a duty of care towards victims or suspects or both would put the CPS in positions of potential conflict.
Yet, the fact that the recognition of a duty of care may potentially subject an individual to conflicting duties is not, of itself, necessarily conclusive against its recognition in all situations.
Clearly, there will be many situations in which an individual will owe potentially conflicting duties to different persons.
In Gogay v Hertfordshire County Council the managers of a childrens home owed both a duty of care to the resident children and an implied contractual duty of trust and confidence to its staff, notwithstanding the fact that in the case of an actual conflict the interests of the child should prevail. (See Hale LJ at para 59) Similarly, in D v East Berkshire Lord Nicholls referred (at para 86) to the fact that a doctor often owes duties to more than one person.
He may owe duties, for example, to his employer and to his patient. (See also ABC v St Georges Healthcare NHS Trust [2017] EWCA Civ 336; [2017] PIQR P15.) However, in D the House concluded that the seriousness of child abuse as a social problem demanded that health professionals, acting in good faith in what they believe are the best interests of the child, should not be subject to potentially conflicting duties when deciding whether a child may have been abused or in deciding what action should be taken.
It is necessary, therefore, to have regard to the competing underlying policy considerations, when determining whether a duty of care may be imposed notwithstanding that it may give rise to a conflict of interests.
The interests of an employer who is sued on the basis that he is vicariously liable for the tortious conduct of his employees differ fundamentally from the interests of those employees.
The financial, commercial and reputational standing of the employer may be at stake.
It is the employer who will incur the cost of defending the proceedings which, however successful the defence may be, is most unlikely to be recovered in full, and who, if unsuccessful, will bear the liability to the claimant.
The employer must be able to make his own investigation into the claim and to assess its strength based on the conduct of his employee and the prospects of a successful defence.
In this regard, he will need to form his own view as to the reliability and veracity of his employee and as to how the employee is likely to perform as a witness.
The interests of insurers may have to be taken into account.
The employer will have to decide what degree of importance he attaches to successfully defending the claim and what financial and other resources should be devoted to its defence.
He may consider that, however strong the prospects of a successful defence, he cannot justify the cost and effort of defending the claim and that it should, therefore, be settled.
The predominant interest of the employee, by contrast, will be that his reputation should be vindicated.
The position will often be complicated further by the existence of inconsistent views or interests between different employees or groups of employees. (See, for example, Mohidin v Comr of Police of the Metropolis [2016] EWHC 105 (QB) (Gilbart J) [2016] 1 Costs LR 71, para 14)
In cases where an employer is alleged to be vicariously liable for the tortious conduct of his employee, the possibility of contribution proceedings between employer and employee highlights this potential conflict of interests.
It is particularly relevant here that claims under the Civil Liability (Contribution) Act 1978 may be brought up to two years after judgment in the original claim or settlement of that claim (Limitation Act 1980, section 10).
That the possibility of bringing such a claim is not fanciful, at least in cases where deliberate misconduct is alleged, is demonstrated by Mohidin v Comr of Police of the Metropolis where such a claim succeeded.
These stark differences between the interests of employer and employee strongly suggest that it would not be fair, just or reasonable to impose on an employer a duty of care to defend legal proceedings so as to protect the economic or reputational interests of his employee.
Nor do I consider it realistic to suggest, as do the respondents in the present case, that this potential for conflict can be overcome by the recognition of a duty of care up to the time at which an actual conflict of interests arises, at which point timeous notification by the Commissioner could result in the duty of care ceasing to apply.
Where an employer defends a claim against him founded on his vicarious liability for his employees, the potential for conflict is too great to permit such a compromise.
Moreover, it would often be totally impracticable.
A civil claim and its defence, as they proceed, often develop in unexpected ways.
There could be no justification for imposing on an employer the burden of keeping under review at each stage of the proceedings the question whether an actual conflict has arisen.
Furthermore, steps taken by the employee as a result of such timeous notification of the emergence of an actual conflict may well be disruptive of the litigation.
In the present case, moreover, the Commissioner is not merely in a position analogous to that of an employer.
She also holds public office and has responsibility for the Metropolitan Police Service.
This adds a further dimension to this appeal because in the conduct of the proceedings against her she must be free to act as she considers appropriate in accordance with her public duty.
This duty is, to my mind, totally inconsistent with her owing a duty of care to protect the reputational interests of her employees when defending litigation based on vicarious liability for their alleged misconduct.
As we have seen, in Calveley the House concluded that it would be contrary to public policy to prejudice the discharge by the police of their public duty to investigate alleged misconduct by officers by imposing a conflicting duty of care to protect the reputational interests of those officers.
In the same way in SXH this court considered (at para 38) that to recognise a duty of care owed by the CPS to victims or suspects would not be conducive to the best interests of the criminal justice system.
These considerations apply with equal force to the present case.
Policy considerations relating to the conduct of litigation
Considerations relating to legal policy and the practical conduct of proceedings also weigh heavily against the duty for which the officers contend.
First, there is an important public policy that parties in dispute should, in general, be able to avail themselves of the processes of litigation in order to resolve their disputes, without fear of incurring liability to third parties if they do so.
This policy was expressed by Wilde CJ (with whom Maule J, Cresswell J, Williams J, Parke B and Rolfe B agreed) in De Medina v Grove (1847) 10 QB 172 at p 176: The law allows every person to employ its process for the purpose of trying his rights, without subjecting him to any liability, unless he acts maliciously and without probable cause.
This policy underlies a number of legal principles including the general immunity which attaches to things said and done in court by witnesses and litigants and the principle that a duty of care is not owed by one litigant to an opposing litigant. (See, generally, Willers v Joyce [2016] UKSC 43; [2016] 3 WLR 477 per Lord Mance at para 135.) An employer who wishes to defend a claim based on vicarious liability for the alleged conduct of his employees should be entitled to defend the claim in the way he sees fit, notwithstanding that his employees will or may as a result be subjected to public criticism during the trial process.
He should be free to do so without having constantly to look over his shoulder for fear that his conduct of the defence may expose him to a claim by his employees.
Decisions in the conduct of the defence, such as which inquiries to undertake, which experts to instruct, which witnesses to call or which resources to devote to resisting the claim, are essentially matters for the employer as defendant and should be taken free of anxiety as to possible future claims by the employees on the basis that the case should have been run differently.
The proposed duty would, to my mind, inevitably inhibit the conduct of the defence.
An employer would, understandably, be less likely to make admissions in circumstances where they are objectively justified or to make use of evidence which reflects unfavourably on an employee, for fear of the subsequent repercussions.
I have no doubt that the imposition of the duty of care contended for in the present case would, as the Commissioner submits, have a chilling effect on the defence of civil proceedings.
Secondly, the recognition of a duty owed by an employer to his employees to defend a claim effectively would be inconsistent with the important legal policy which encourages the settlement of civil claims and seeks to promote out of court settlement.
The resulting risk of exposure to consequential claims would, in many situations, operate as a powerful disincentive to settlement.
Thirdly, the duty contended for could result in delay or disruption of civil proceedings.
Disputes between employers and employees as to the appropriate way in which the defence should be conducted could well paralyse the defence.
Resort to some form of dispute resolution procedure could be expensive and time consuming.
In many instances the employer may well feel compelled to make a contribution claim against his employees in order to negative the imposition of a duty of care owed to them.
Moreover, the existence of such a duty may result in an employer needlessly prolonging proceedings against him in an attempt to establish that he has taken care to protect the interests of his employees. (See N McBride, PN 2017 (33) 3, 216 at p 219.)
Fourthly, the recognition of such a duty of care would be a fruitful source of satellite litigation.
While there are some situations in which litigation about the conduct of prior litigation is unavoidable, it is generally to be discouraged.
The acknowledgement of a duty owed by employers to their employees to protect their economic or reputational interests in the conduct of litigation would be likely to result in a proliferation of consequential claims which would often amount to a collateral challenge to the outcome of earlier proceedings.
Legal professional privilege
It is also necessary to say something about the issue of legal professional privilege.
At first instance, it was submitted on behalf of the Commissioner that legal professional privilege was a further policy consideration for not imposing a duty of care in these circumstances.
It was submitted that if such a duty of care existed an employer would in effect be compelled to waive privilege in circumstances where he would otherwise be entitled to assert privilege, because the correctness or reasonableness of his conduct of the underlying litigation could not be properly examined without relevant legal advice being properly exposed to judicial scrutiny.
The response on behalf of the officers was that the relationship between the parties gave rise to a joint or common interest with the result that the Commissioner would, in any event, be unable to rely on legal professional privilege against the officers to the extent that common interest privilege applied.
In his judgment Jay J expressly stated that he did not rely on legal professional privilege in coming to the conclusion that there was no arguable duty of care.
The Court of Appeal did not address this point in its judgments.
The judgments below have established that the legal advisers who defended the claim brought by BA were instructed on behalf of the Commissioner only and that neither those lawyers nor the Commissioner undertook responsibility to the officers for the conduct of the litigation.
The officers attended conferences with counsel in the capacity of witnesses not clients.
The officers do not seek to appeal those conclusions.
Accordingly, there can be no question of legal professional privilege belonging jointly to the Commissioner and the officers.
However, the officers rely on common interest privilege and seek to employ it as a sword in asserting an entitlement to disclosure of material in the possession of the Commissioner which is privileged against disclosure to others.
Whether the officers have such an entitlement will depend on whether such a claim is consistent with the underlying relationship of the Commissioner and the officers. (See Phipson on Evidence, 19th ed (2017), para 24 11.) In my view it is not.
If one sets to one side the decided cases which turn on contractual access rights, the cases show that something more than a shared interest in the outcome of litigation is required before common interest privilege can be used as a sword in the manner proposed here.
For example, in Dennis & Sons Ltd v West Norfolk Farmers Manure and Chemical Co operative Co Ltd [1943] Ch 220 Simonds J held that shareholders were entitled to disclosure of an accountants report concerning the rights and duties of the board commissioned by the directors, notwithstanding that by the time the report was received the shareholders had commenced proceedings against the company in relation to the conduct of the companys affairs.
The report had been commissioned by the directors on behalf of all the shareholders and not for the purpose of defending themselves against hostile litigation.
The judge observed (at p 222) that the general rule applied equally as between a company and its shareholders and as between a trustee and his beneficiaries.
A claim to privilege between the company and its shareholders would have been inconsistent with the nature of the relationship.
Similarly, in CIA Barca de Panama SA v George Wimpey & Co Ltd [1980] 1 Lloyds Rep 598, Barca and Wimpey each held half the shares in a joint venture company, DLW, which had claims against Aramco.
Wimpey settled the claims without authority from Barca.
In the resulting proceedings brought by Barca against Wimpey the Court of Appeal held that Barca was entitled to disclosure of privileged documents of Wimpey generated in the original litigation as the Aramco claims had been made by Wimpey on behalf of itself and Barca (per Stephenson LJ at p 614).
In Commercial Union Assurance Co plc v Mander [1996] 2 Lloyds Rep 640, at 647 648, Moore Bick J provided the following example: Although in many cases a relationship between two parties which supports common interest privilege will be one which also gives each of them a right to obtain disclosure of confidential documents relating to the matter in which they are both interested, one can readily think of situations in which that would not be so.
Take the example given by Donaldson LJ in Buttes v Hammer (No 3) of tenants in a block of flats.
One tenant, acting entirely for his own benefit, obtains legal advice concerning a dispute with the landlord over a provision in the lease which affects other tenants in a similar way.
If he chooses to give a copy of the document containing that advice in confidence to another tenant who is willing to cooperate with him in pursuing a claim their common interest would be sufficient for the document to remain privileged in the latters hands.
I do not, however, see any basis upon which the second tenant could have insisted on seeing the advice if the first tenant did not wish to show it to him, even though they had a common interest in the subject matter.
Both as a matter of principle and authority it is not enough that the person seeking disclosure of confidential documents can show that he has an interest in the subject matter which would be sufficient to give rise to common interest privilege if the documents had been disclosed to him; he must be able to establish a right to obtain access to them by reason of a common interest in their subject matter which existed at the time the advice was sought or the documents were obtained.
In the present case the Commissioner and the officers are likely to have had a shared interest in successfully defending the claim brought by BA against the Commissioner, at least initially.
It may well be that, had privileged documents been disclosed in confidence by the Commissioner to the officers at that stage, that shared interest would have enabled the officers to defeat an application for disclosure by a third party on grounds of common interest privilege.
However, before the officers could compel disclosure of privileged material in the hands of the Commissioner, considerably more would be required.
Although the relationship between the Commissioner and the officers is closely analogous to that of employer and employees, there is nothing in the present situation which resembles the relationship between a company and its shareholders, or between a trustee and his beneficiaries, or between parties to a joint venture agreement.
Here the relationship between the Commissioner and the officers does not require or justify such an entitlement of access to legally privileged material.
Considered against this background, there is force in the Commissioners submission as to the practical consequences in this regard of the recognition of the duty of care for which the officers contend.
Although employees would normally have no entitlement to disclosure of privileged material in the possession of their employer relating to the defence of the original proceedings, the effective defence of proceedings by the employees against the employer brought on the basis that the earlier proceedings were conducted in breach of duty may well require waiver of privilege in order to demonstrate the contrary.
This has the potential to undermine the effective conduct of the defence of the original claim against the employer in that the possibility of such a claim in negligence and the likelihood of having to waive privilege may well inhibit frank discussion between the employer and his legal advisers.
This is, therefore, a further consideration which weighs against the recognition of the duty of care for which the officers contend.
Conclusion
For these reasons I would allow the appeal.
The imposition of the claimed duty would not be fair, just or reasonable.
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On 2 December 2003 the Respondents, four police officers serving in the Metropolitan Police Service (the officers), took part in the arrest of a suspected terrorist, BA.
BA subsequently made allegations that the officers had seriously assaulted and injured him during the arrest.
In October 2004, the Independent Police Complaints Commission (IPCC) decided that one charge should be brought against the First Respondent.
That charge was dismissed in April 2005.
Between 14 January and 2 February 2005 the IPCC released the officers identities into the public domain.
This led to threats of serious violence to the officers and their families on a website that supported BA.
On 18 October 2007 BA commenced civil proceedings against the Appellant Commissioner in which he alleged that the Commissioner was vicariously liable for the serious assaults that he alleged the officers had inflicted on him.
The officers were not parties to these proceedings.
On 18 March 2008 the officers attended a meeting with legal advisers instructed on behalf of the Commissioner.
The officers subsequently alleged that they were assured at this meeting that the Commissioners legal advisers were also acting for them.
The officers maintain that at a second meeting with legal advisers instructed on behalf of the Commissioner on 11 March 2009 they were told that the legal team was no longer representing their interests but only those of the Commissioner.
The trial of BAs claim commenced on 16 March 2009.
The officers declined to give evidence voluntarily without special measures to protect their identity being put in place.
On the third day of the trial, the claim was settled with an admission of liability by the Commissioner and an apology for the gratuitous violence to which BA had been subjected by the officers.
The officers maintain that a press release issued by the Commissioner after trial was tantamount to endorsing their culpability.
In June 2011, the officers were all acquitted in the Crown Court of charges of assault occasioning actual bodily harm arising out of the arrest of BA.
On 23 September 2013, the officers commenced the present proceedings against the Commissioner seeking compensation for reputational, economic and psychiatric damage.
They advanced three claims: (i) a retainer had arisen between them and the Commissioners legal team, (ii) the Commissioner had assumed a duty of care by reason of the assurances, and (iii) the Commissioner owed them a duty to take reasonable care to safeguard their safety, health, welfare (including economic and professional welfare) and reputational interests in the preparation and conduct of the defence of BAs claim.
On 1 May 2015 the judge struck out these claims.
The judge found, amongst other things, that the officers had no direct interest in the litigation between the Commissioner and BA and the possibility of consequential impact on their reputations was insufficient to create such an interest to which the Commissioner would be legally required to have regard.
The officers appeal to the Court of Appeal was successful in part.
The Court of Appeal held that it was arguable that the Commissioner owed a duty of care to the officers to safeguard their economic and reputational interests and that this extended to the Commissioners conduct of the litigation.
The Commissioner now appeals to the Supreme Court solely on this issue.
The Supreme Court unanimously allows the appeal.
Lord Lloyd Jones gives the judgment with which the other Justices agree.
Although police officers have no contract of employment, the officers relied heavily on the analogy of the implied term in employment contracts of mutual trust and confidence between employer and employee [16].
However, the Court was not referred to any decided case in any jurisdiction which holds that the duty of care for which the officers contend can be derived from this mutual implied term [17].
To derive such an obligation would be to move substantially beyond the specific derivative duties established in previous cases [18 20].
The existence of the proposed duty must be established in the tort of negligence [21].
This is clearly a case in which it is sought to extend a duty of care to a new situation.
In determining whether such a duty should be recognised the law will proceed incrementally and by analogy with previous decisions (Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4).
The proposed duty will also be tested against considerations of legal policy and the coherent development of the law [22 23] The common law does not usually recognise a duty of care in the tort of negligence to protect reputational interests [23].
The decision in Calveley v Chief Constable of Merseyside Police [1989] 1 AC 1228 has an important bearing on the present case.
There it was held that a Chief Constable does not, in principle, owe a duty of care to protect the economic and reputational interests of his officers in respect of the prosecution of an investigation or disciplinary proceedings against them.
It is therefore difficult to see why a Chief Constable should owe a duty to his officers as to the manner in which he defends a claim brought against him by a third party, especially considering that, in such a claim, the Chief Constables role is essentially responsive to allegations made by the third party [25 26].
The fact that the recognition of a duty of care may potentially subject an individual to conflicting duties does not necessarily preclude its imposition but in such cases it is necessary to have regard to the competing underlying policy considerations [28 29].
The interests of an employer who is sued on the basis that he is vicariously liable for the tortious conduct of his employees differ fundamentally from the interest of those employees [30].
The possibility of contribution proceedings between employer and employee highlights the potential for conflicts of interests [31].
These stark differences in interests strongly suggest that it would not be fair, just or reasonable to impose on an employer a duty of care to defend legal proceedings so as to protect the economic or reputational interests of his employees.
It is not realistic to suggest that this potential for conflict can be overcome by recognition of a duty of care up to the time at which an actual conflict arises [32].
Moreover, in the context of the present case, the Commissioners public duties are inconsistent with the imposition of such a duty of care [33].
Considerations relating to legal policy and the practical conduct of proceedings also weigh heavily against the duty for which the officers contend.
For instance, parties to a dispute should be able to conduct litigation in order to resolve their disputes without fear of incurring liability to third parties [34 38].
Finally, the officers argue that, because both they and the Commissioner had a common interest in the outcome of BAs claim, they would have been able to rely on common interest privilege in asserting an entitlement to the disclosure of material in the possession of the Commissioner which is privileged against disclosure to others.
However, the cases show that something more than a shared interest in the outcome of litigation is required before common interest privilege can be used in this manner.
Legal professional privilege is, therefore, a further policy consideration that weighs against the recognition of the duty of care for which the officers contend [39 46].
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The Rehabilitation of Offenders Act 1974 (the 1974 Act) provides that, after a period of time, the criminal convictions of a person, say of a man, are in many cases spent.
This means, among other things, that he is not obliged to disclose them in response to a question by, for example, a prospective employer and that the prospective employer is not entitled to make a decision prejudicial to him by reference to them or to any failure on his part to disclose them.
The same goes for cautions (which include warnings given to a child: section 65(9) Crime and Disorder Act 1998).
Subject to an immaterial exception, cautions are spent as soon as they have been given: para 1(1)(b) of Schedule 2 to the 1974 Act, added by paragraph 6 of Schedule 10 to the Criminal Justice and Immigration Act 2008.
But the law identifies exceptions to a persons protection from reference to spent convictions and to cautions.
In these proceedings the two respondents, T and JB, claim that the reference in certificates issued by the state to cautions given to them violated their right to respect for their private life under article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention).
T further claims that the obligation cast upon him to disclose the warnings given to him violated the same right.
To the extent that the claims of T and JB are valid, another important question arises in relation to the width of the appropriate remedy.
The Secretary of State for the Home Department has responsibility for the Disclosure and Barring Service (the DBS), an executive agency charged with the issue of certificates relating to a persons criminal record pursuant to the Police Act 1997 (the 1997 Act).
The Secretary of State for Justice has responsibility for the working of the 1974 Act.
The two Secretaries of State appeal against orders made by the Court of Appeal (Lord Dyson MR, Richards and Davis LJJ) on 29 January 2013: [2013] 1 WLR 2515.
It upheld Ts appeal against the dismissal of his claim for judicial review and, in his case, declared first, pursuant to section 4 of the Human Rights Act 1998 (the 1998 Act), that the provisions of Part V of the 1997 Act were incompatible with article 8 insofar as they require the disclosure of all convictions and cautions that are recorded on central records on certificates; and second that the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (SI 1975 /1023) (the 1975 Order) was incompatible with article 8 and ultra vires the 1974 Act.
A judge had refused to grant JB permission to apply for judicial review and, in her case, the Court of Appeal allowed her appeal, granted permission, upheld her claim and declared, pursuant to section 4 of the 1998 Act, that the provisions of Part V of the 1997 Act were incompatible with article 8 for the reasons set out in [its] judgment.
In both cases the Court of Appeal provided that its declarations should not take effect pending application by the Secretaries of State to this court for permission to appeal.
On granting permission, this court extended the stay until its determination of the appeals.
In particular, therefore, the result is that there is no presently effective declaration that the 1975 Order is ultra vires.
In these circumstances one would expect the Secretaries of State to have awaited the determination of the current appeals before exercising powers under the 1974 Act to amend the 1975 Order and powers under the 1997 Act to amend that Act itself, with a view to eliminating the incompatibilities and indeed invalidities identified by the Court of Appeal.
On 22 May 2013, however, no doubt for reasons which they considered to be good, the Secretaries of State made the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (Amendment) (England and Wales) Order 2013 (SI 2013/1198) and the Police Act 1997 (Criminal Record Certificates: Relevant Matters) (Amendment) (England and Wales) Order 2013 (SI 2013/1200) with a view to eliminating the identified incompatibilities and invalidities.
In paras 13 to 15 below I will, in effect in parenthesis, summarise the effect of the recent orders, which took effect on 29 May 2013.
These appeals, however, concern the provisions of the 1975 Order and of the 1997 Act as they stood prior to the amendments wrought by the recent orders and, unless the context otherwise requires, references to the 1975 Order and to the 1997 Act should be understood accordingly.
The appeals therefore lose some, but only some, of their practical significance.
There would be a piquancy about any conclusion by this court that the 1975 Order and the 1997 Act were not, after all, incompatible with the respondents rights.
But the court must beware of allowing its knowledge of the recent orders to lead it to avoid such a conclusion otherwise than on a principled basis.
In 2002 the police issued two warnings to T, who was then aged 11, in respect of the theft of two bicycles.
Like a caution issued to an adult, a warning to a child can be given only following his admission of guilt.
T has no other criminal record.
In 2008 a football club, to whom he had applied for part time employment, required him to obtain an enhanced criminal record certificate (an ECRC) under section 113B of the 1997 Act (as inserted by section 163 of the Serious Organised Crime and Police Act 2005 and amended by section 97(2) of the Policing and Crime Act 2009 and section 82(1) of the Protection of Freedoms Act 2012).
The certificate disclosed the warnings but, following the intervention of Ts M.P., the police agreed to apply to the warnings their policy of stepping down in some cases.
The effect was that, while the warnings remained on police files, they were not automatically to be disclosed on certificates.
This seems to have resolved any problem between T and the football club.
In 2010, however, T applied for enrolment on a sports studies course, which was to entail his contact with children.
The college required him to obtain an ECRC.
No doubt T was unaware that in the interim the police had acknowledged that their policy of stepping down contravened the 1997 Act: Chief Constable of Humberside Police v Information Comr (Secretary of State for the Home Department intervening) [2009] EWCA Civ 1079, [2010] 1 WLR 1136, at para 3.
In the event, therefore, the ECRC issued in relation to T again disclosed the warnings.
The college responded that Ts place on the course was at risk.
It was only as a result of representations by his solicitor that it accepted T for enrolment on the course notwithstanding the warnings.
In 2001 the police issued a caution to JB, then aged 41, in respect of the theft
from a shop of a packet of false fingernails.
She has no other criminal record.
In 2009 she completed a training course arranged by the Job Centre for employment in the care sector.
The provider of the course asked her to obtain an ECRC, which disclosed the caution.
It thereupon told her that it felt unable to put her forward for employment in the care sector.
THE 1974 ACT AND THE 1975 ORDER
Section 4(2) and (3)(b) of the 1974 Act applies to such convictions as are treated as spent under the Act; and para 3(3) and (5) of Schedule 2 to it applies analogously to cautions.
Broadly summarised, section 4(2) and para 3(3) provide that, where a question is asked of a person about his criminal record, it shall be treated as not extending to them and he is entitled not to disclose them and cannot be liable for failure to do so.
Also thus summarised, section 4(3)(b) and para 3(5) provide that a persons spent conviction or his caution, or a failure to disclose it, cannot justify his exclusion or dismissal from a profession or employment or any action prejudicial to him in the course of his employment.
But the 1975 Order makes exceptions to these provisions: article 3 of it specifies the exception to section 4(2) and to para 3(3) of the Schedule and article 4 specifies the exception to section 4(3)(b) and to para 3(5).
In the light of the Court of Appeals declaration that the whole order was ultra vires, it is important to note the width of the two articles.
Article 3 of the 1975 Order (as amended by article 3 of the Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) Order 2001 (SI 2001/1192) and article 4 of the Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2008 (SI 2008/3259) (the 2008 Order)) provides that a persons entitlement not to disclose either spent convictions or cautions in answer to questions does not extend to situations in which the questions are asked in order to assess his suitability in any one of 13 specified respects.
Six examples are his suitability, at (a) of the article, for admission to certain professions and for entry into certain types of employment, all specified in Schedule I to the Order; at (aa), for his assignment to work with children in specified circumstances; at (b), for his assignment to work which impacts on national security; at (e), for his proposed adoption of a child; at (f), for his assignment to the provision of day care; and, at (g), for the grant to him by the Financial Conduct Authority of specified permissions and approvals.
Analogously article 4 of the 1975 Order (as amended by article 5 of the 2008 Order) provides that the inability to exclude or dismiss a person from a profession or employment or to take action prejudicial to him in the course of his employment, by reference to a spent conviction or to a caution or to a failure to disclose it, does not apply: at (a) and (b) of the article, to the professions and types of employment specified in Schedule 1 to the Order; at (c), to any action taken for the purpose of safeguarding national security; at (d), to any one of 16 specified decisions of the Financial Conduct Authority; and at (e) to (n), to ten specified decisions of other authorities.
The shape of the 1975 Order is therefore clear.
It is the circumstances in which the question is asked which dictate whether an exception from protection under the 1974 Act arises; and when it arises, the duty to disclose in response to the question and the entitlement of the questioner to act in reliance upon the disclosure or upon a failure to do so are both absolute, being unrelated to the circumstances in which the spent conviction or the caution arose.
THE 1997 ACT
Sections 113A and 113B of the 1997 Act identify the circumstances in which the DBS must issue a criminal record certificate (a CRC) and an ECRC respectively.
The only substantive difference between the two certificates is that an ECRC must include not only, as must a CRC, relevant matters recorded on the Police National Computer but also, by way of enhancement, information about the person on local police records which they reasonably believe to be relevant and ought to be included (conveniently described as soft intelligence): contrast section 113A(3)(a) with section 113B(3)(a) and (4).
It is only where the certificate is required for the purposes of an exempted question asked for a prescribed purpose that an ECRC, rather than a CRC, is available.
The present appeals concern ECRCs and, since in any event the greater includes the lesser, it will be convenient to address the circumstances in which the DBS must issue an ECRC.
following circumstances: (a) The application for it is made by the person who is to be the subject of it (subsection (1)(a)).
In summary, section 113B provides that an ECRC must be issued in the (b) The application is countersigned by a person listed in a register, maintained by the DBS, of persons likely to ask exempted questions (subsection (2)(a), read with section 120). (c) The application is accompanied by a statement by the registered person that the certificate is required for the purposes of an exempted question asked for a prescribed purpose (subsection (2)(b)). (d) An exempted question is a question to which exemption from protection arises under the 1975 Order (subsection (9) and section 113A(6)). (e) A prescribed purpose is a purpose prescribed in regulation 5A of the Police Act 1997 (Criminal Records) Regulations 2002 (SI 2002/233) which sets out a list overlapping with, but not co extensive with, the list in article 3 of the 1975 Order, of situations in which the registered person proposes to consider the applicants suitability for a specified position of trust or sensitivity.
In what follows it will be convenient to regard both the exceptional obligation of a person to disclose a spent conviction or a caution under the 1975 Order and the obligation of the DBS to make disclosure of it by an ECRC under the 1997 Act as running in parallel.
But the parallel is not exact.
For the obligation of the DBS to make disclosure under an ECRC is, at the same time, both wider than the obligation of the person in terms of its inclusion of soft intelligence and yet narrower in that it arises only in circumstances in which the application is countersigned by a registered person who states that the certificate is required for a prescribed purpose.
There will therefore be cases in which, although the questioned person is not exempt from a duty of disclosure, the questioner is not entitled to call for an ECRC.
Nevertheless the shape of the 1975 Order is certainly reflected in the 1997 Act: for, if the prescribed circumstances surrounding the application for the ECRC are present, the duty of the DBS is to disclose even spent convictions and cautions irrespective of the circumstances in which they arose.
THE 2013 AMENDMENTS
In that the 1975 Order removes the protection from disclosure and reliance afforded by the 1974 Act when questions are asked in the circumstances which I have described, the first order dated 22 May 2013, made by way of amendment of the 1975 Order, (SI 2013/1198), in effect reinstates protection in the case of what it calls a protected caution and a protected conviction.
A caution is protected if it was given otherwise than for any of 14 listed categories of offence and if at least six years have passed since the date of the caution (or two years if the person was then a minor): article 4.
A conviction is protected if it was imposed otherwise than for any of the listed categories; if it did not result in a custodial sentence; if the person has not been convicted of any other offence; and if at least 11 years have passed since the date of the conviction (or five and a half years if he was then a minor): article 4.
But this new, more nuanced, regime does not apply when questions are asked in order to assess a persons suitability for a few specified types of employment: article 6.
The entitlement of the questioner to act in reliance upon the disclosure of a spent conviction or a caution, or upon a failure to disclose it, is re cast along the same lines: articles 8 and 9.
The second order dated 22 May 2013, made by way of amendment of the 1997 Act, (SI 2013/1200), narrows the content of a CRC and of an ECRC analogously.
The obligation of the DBS is to include in the certificate details of every relevant matter (sections 113B(3)(a) and 113A(3)(a)); and, whereas the definition of relevant matter in section 113A(6) originally included all convictions including all spent convictions, the new order amends the definition so as to render the obligation of the DBS to make disclosure of spent convictions and of cautions under the 1997 Act broadly co extensive with the new, narrower, obligation of the person to make disclosure under the amended 1975 Order: articles 3 and 4.
It may be that information about the circumstances behind a spent conviction or a caution which is now no longer required to be disclosed on a certificate will nevertheless, in the case of an ECRC, be disclosed as soft intelligence; but that will occur only if the police reasonably believe it to be relevant (section 113B(4)(a)).
The recent orders, each approved by resolution of Parliament, therefore represent a departure from the former regime under which disclosure of all spent (as well, of course, as unspent) convictions and of all cautions was required if the question was put, or the application for a certificate made, in the specified circumstances.
Even in those circumstances certain spent convictions and cautions, identified by their subject matter and in the case of a conviction also by the sentence, and also by the number and age of them, are no longer required to be disclosed.
WITHIN SCOPE OF ARTICLE 8
Did the cautions issued to T and to JB represent an aspect of their private life, respect for which, subject to qualification, is guaranteed to them under article 8 of the Convention? An authoritative affirmative answer is provided within the judgments of this court in R(L) v Commissioner of Police of the Metropolis (Secretary of State for the Home Department intervening) [2009] UKSC 3, [2010] 1 AC 410.
The decision itself related to soft intelligence included in an ECRC under the precursor of section 113B of the 1997 Act.
Mrs L was employed by an agency which provided staff for schools and the ECRC which it required her to obtain disclosed police intelligence to the effect that, two years previously, her teenage son had been placed on the child protection register under the category of neglect, on the basis that Mrs L, with whom the son had not then been living, had little control over his behaviour and was not prepared to cooperate with social services.
The agency then terminated her employment.
Her claim against the police for infringement of her rights under article 8 failed but only on the basis that the interference with her rights had been justified.
By reference to various decisions of the European Court of Human Rights (the ECtHR), Lord Hope of Craighead said: 24it has been recognised that respect for private life comprises, to a certain degree, the right to establish and develop relationships with other human beingsExcluding a person from employment in her chosen field is liable to affect her ability to develop relationships with others, and the problems that this creates as regards the possibility of earning a living can have serious repercussions on the enjoyment of her private life: see Sidabras v Lithuania (2004) 42 EHRR 104, para 48.
She is entitled also to have her good name and reputation protected As Baroness Hale said in R (Wright) v Secretary of State for Health [2009] AC 739, para 36, the fact that a person has been excluded from employment is likely to get about and, if it does, the stigma will be considerable. 27.
This line of authority from Strasbourg shows that information about an applicants convictions which is collected and stored in central records can fall within the scope of private life within the meaning of article 8(1), with the result that it will interfere with the applicants private life when it is released.
It is, in one sense, public information because the convictions took place in public.
But the systematic storing of this information in central records means that it is available for disclosure under Part V of the 1997 Act long after the event when everyone other than the person concerned is likely to have forgotten about it.
As it recedes into the past, it becomes a part of the persons private life which must be respected.
Moreover, much of the other information that may find its way into an ECRC relates to things that happen behind closed doors.
A caution takes place in private, and the police gather and record information from a variety of sources which would not otherwise be made public.
See also the judgment of Lord Neuberger of Abbotsbury at paras 68 to 72.
Building on the comments in those two main judgments in the L case, the Court of Appeal in the present cases held that, in that a caution takes place in private, the receipt of a caution was part of a persons private life from the outset.
The proposition calls for careful thought but in the end I find myself in agreement with it.
My receipt of a caution, whenever received, is a sensitive, certainly embarrassing and probably shameful, part of my history, which may have profound detrimental effects on my aspirations for a career; and the unchallengeable fact that I did commit the offence for which I was cautioned makes it no less sensitive but, on the contrary, more sensitive.
These appeals do not relate to the disclosure of a spent conviction which will have been imposed in public.
But it might be helpful to refer to Lord Hopes comment in the L case at para 27, quoted at para 16 above, that as it recedes into the past it becomes a part of the persons private life.
Liberty, an intervener in these appeals, suggests that the point at which a conviction recedes into the past and becomes part of a persons private life will usually be the point at which it becomes spent under the 1974 Act.
It is a neat and logical suggestion which this court should adopt.
INTERFERENCE: THE 1997 ACT
In the Sidabras case, cited by Lord Hope in para 24 of his judgment in the L case quoted at para 16 above, the ECtHR addressed a law, passed following Lithuanias declaration of independence, that former KGB officers could not pursue certain types of employment in the private sector for ten years.
It held that the law violated the rights of the two applicants under Article 8, taken in conjunction with article 14.
The court said: 48.
Admittedly, the ban has not affected the possibility for the applicants to pursue certain types of professional activities.
The ban has, however, affected the applicants ability to develop relationships with the outside world to a very significant degree, and has created serious difficulties for them as regards the possibility to earn their living, with obvious repercussions on their enjoyment of their private life.
It was the Sidabras case, together with other authorities, which led Lord Hope to conclude in the L case at para 27, also quoted at para 16 above, that it was the disclosure of the information about L in the ECRC which represented the interference with her rights.
Referring to the precursor of section 113B(3)(a), Lord Neuberger added, at para 75 of the L case, that it is likely that an adverse ECRC, ie one falling within section 115(6)(a), will represent something close to a killer blow to the hopes of a person who aspires to any post which falls within the scope of the section.
In the present appeals it is true that, in the end, T was allowed to enrol on the sports studies course and it is possible, albeit unlikely, that, notwithstanding the refusal of the provider of the training course to put her forward for work in the care sector, JB could have secured it by direct application.
But the point is that, in both cases, the disclosure in the ECRCs of the cautions issued to them significantly jeopardised entry into their chosen field of endeavour.
This court need therefore proceed no further before concluding not just that (as the Secretaries of State concede) the ECRCs, once issued, were capable of interfering with the rights under Article 8 of the two applicants but that they did interfere with them.
It is, however, at least arguable that the states retention of data about cautions (and spent convictions), even prior to their disclosure in a CRC or an ECRC, amounts to interference with Article 8 rights which thus requires justification.
In S v United Kingdom (2009) 48 EHRR 1169 the Grand Chamber of the ECtHR held that the retention by the police, save in exceptional circumstances, of DNA samples and fingerprints taken from persons suspected, but never convicted, of a criminal offence represented an interference with their rights under Article 8: paras 77 and 86.
It rejected the UKs argument that there was no interference until use was made of the retained material (para 70) and it held persuasively that the applicants reasonable concern about its possible future use was relevant to whether an interference had already arisen (para 71).
It is true that the Grand Chamber stressed the highly personal and sensitive nature of the material (para 72) and one could argue that a record of cautions and of spent convictions is not in that league.
On the other hand, in Bouchacourt v France, Application No.5335/06, (unreported) 17 December 2009, which concerned material on a sex offenders register, the ECtHR seemed to declare categorically that retention of data relating to private life by itself represented interference irrespective of its sensitivity (para 57).
This court can leave open whether it should go as far as that.
POSITIVE OBLIGATIONS: THE 1975 ORDER
The Secretaries of State put forward a distinct and undeniably seductive argument in response to the challenge of T to the lawfulness of the 1975 Order.
It relates to the difference between the imposition by the Convention upon a public authority of an obligation not to act in such a way as to violate a persons human rights (ie a negative obligation) and its imposition upon it of an obligation to act in such a way as not to do so (ie a positive obligation).
In the case of the 1997 Act (they argue) the state has done something: for it has issued a certificate.
If the court concludes that it has thereby interfered with the Article 8 rights of T and JB and proceeds also to conclude that the state has thereby violated them, it will hold that the state must not continue to do it.
In other words the positive character of the states violation attracts the imposition of a negative obligation.
The argument is that, in the case of the 1975 Order, the nature of the alleged violation of the Article 8 rights of T is opposite: it is that the state has not done something, specifically that it has not legislated so as to permit him to deny (let us not forget, falsely to deny) that, when aged 11, he received two warnings for stealing two bicycles and, equally, that it has not legislated so as to disable specified third parties from making decisions by reference to his receipt of them.
Unlike, for example, Article 6(3), Article 8 of the Convention does not routinely oblige a member state to take positive action, whether it be to legislate or otherwise; and on any view (see para 24 below) it will pay special respect to the judgment made by the state before obliging it to do so.
An initial question is how the imposition of a positive obligation can arise at all under Article 8.
Paragraph 2 prohibits interference with the exercise of the right except in the circumstances there specified.
When it has omitted to do something, how can the state be said to have interfered? Happily the ECtHR does not seek to pretend that non interference can amount to interference.
In Rees v United Kingdom (1986) 9 EHRR 56, at paras 35 and 37, the court accepted that, by failing to confer on a transsexual a right to an amended birth certificate, the state was not guilty of interference with his rights under article 8.
It noted that the article could nevertheless give rise to positive obligations but proceeded, in a decision later superseded, not to discern one in that situation.
How, then, can the article yield a positive obligation? The answer is to be found in para 1 of the article, which is not cast in prohibitory terms.
It provides that everyone has the right to respect for certain things and in some circumstances a state can respect them only by taking positive action: Marckx v Belgium (1979) 2 EHRR 330 at paras 31 and 43.
It is necessary therefore to address the argument of the Secretaries of State on its merits.
They rely on the decision of the ECtHR in Mosley v UK (2011) 53 EHRR 1011.
A domestic court had held that, in publishing an article about his participation in sexual activities, a newspaper had breached the applicants privacy.
Before the ECHtR he contended that, by failing to legislate so as to require a newspaper to give prior notice to a person of publication of material about his personal life, the UK had infringed his rights under article 8.
The claim failed.
The court said: 106. the words the right to respect forprivatelife which appear in article 8 require not only that the state refrain from interfering with private life but also entail certain positive obligations on the state to ensure effective enjoyment of this right by those within its jurisdiction.
Such an obligation may require the adoption of positive measures designed to secure effective respect for private life even in the sphere of the relations of individuals between themselves. 107.
The court emphasises the importance of a prudent approach to the states positive obligations to protect private life in general and of the need to recognise the diversity of possible methods to secure its respect.
The choice of measures designed to secure compliance with that obligation in the sphere of the relations of individuals between themselves in principle falls within the contracting states margin of appreciation.
However, this discretion goes hand in hand with European supervision. 108 First, the court reiterates that the notion of respect in article 8 is not clear cut, especially as far as the positive obligations inherent in that concept are concerned: bearing in mind the diversity of the practices followed and the situations obtaining in the contracting states, the notions requirements will vary considerably from case to case.
Thus contracting parties enjoy a wide margin of appreciation in determining the steps to be taken to ensure compliance with the Convention.
In this regard, the court recalls that by reason of their direct and continuous contact with the vital forces of their countries, the state authorities are, in principle, in a better position than the international judge to give an opinion on how best to secure the right to respect for private life within the domestic legal order. 109.
Secondly, the nature of the activities involved affects the scope of the margin of appreciation. [A] serious interference with private life can arise where the state of domestic law conflicts with an important aspect of personal identity.
Thus, in cases concerning article 8, where a particularly important facet of an individuals existence or identity is at stake, the margin allowed to the state is correspondingly narrowed.
The same is true where the activities at stake involve a most intimate aspect of private life. 110.
Thirdly, the existence or absence of a consensus across the member states of the Council of Europe, either as to the relative importance of the interest at stake or as to the best means of protecting it, is also relevant to the extent of the margin of appreciation: where no consensus exists, the margin of appreciation afforded to states is generally a wide one.
From the foot of these observations the Secretaries of State argue that even a domestic court should afford considerable latitude to the state before interpreting article 8 as imposing upon it a positive obligation to legislate in the manner proposed; that T cannot claim that the issue surrounds the most intimate aspect of his private life; and that there is no consensus among member states about the extent to which minor or ancient entries in a persons criminal record should be deleted.
The trouble is, however, that the classification of an obligation as positive rather than negative is not always as easy as in relation to the obligation proposed in the Mosley case.
The boundaries between them are not susceptible of precise definition: Garnaga v Ukraine, ECtHR, (Application No.20390/07) (unreported) 16 May 2013, para 37.
T argues, with only a limited degree of contrivance, that the state has already taken a positive step namely to attach legal sanctions, civil and sometimes even criminal, to untruthful representations made in specified circumstances and that the only question is whether its delineation of those circumstances has been so broad as to have violated his rights and whether it should therefore be the subject of a negative obligation, namely not to maintain rules of that breadth.
He argues, analogously, that the state has already taken another positive step namely by the 1974 Act to relieve a person from an obligation to refer to certain entries in his criminal record save where excepted by the 1975 Order and that the only question is whether its delineation of the exceptions has been so broad as to have violated his rights and whether it should therefore be the subject of a negative obligation, namely not to maintain exceptions of that breadth.
In this respect there is an analogy with the decisions of the ECtHR that, although the Convention does not require a state to establish, by article 6, a system for appeals (Delcourt v Belgium (1970) 1 EHRR 355) nor, by article 1 of Protocol 1, a welfare system (Carson v United Kingdom (2010) 51 EHRR 369), the system, if established, must not violate Convention rights.
If, which is therefore debateable, Ts challenge to the 1975 Order is properly classified as a demand for the imposition of a positive obligation, I conclude that, of itself, the classification should not inhibit the court from further proceeding to determine the challenge and, if valid, from granting such remedy in respect of it as would otherwise be appropriate.
In Dickson v United Kingdom (2008) 46 EHRR 927, the ECtHR said, at para 71, that, irrespective of whether the suggested obligation was positive or negative, the core issue was whether a fair balance had been struck between the competing interests.
In so concluding I have an eye also to the paradox which would arise if treatment of the 1997 Act differed from treatment of the 1975 Order: it would make no sense to conclude that the state had violated Ts rights by issue of the ECRC for the attention of the college but that it had not violated them by requiring him truthfully to answer its questions about his criminal record nor by permitting the college to act in reliance upon his answers in deciding whether to enrol him on the course.
For an ECRC is in effect no more than the method of verification of a persons answers.
LEGALITY
In that, by the issue of the ECRCs under the 1997 Act and, in Ts case, by the imposition upon him of the obligations of the 1975 Order, they interfered with the right of T and JB to respect for their private life, para 2 of article 8 casts upon the Secretaries of State the onus of establishing that the interference was in accordance with law (the requirement of legality) and necessary in a democratic society (the requirement of necessity).
But for the decision of the ECtHR on 13 November 2012 in MM v UK, No 24029/07 The Times 16 January 2013, to which I will turn at para 35 below, there is in my view little reason to doubt that the issue of the certificates and the imposition of the obligations upon T were, at any rate, in accordance with law.
R (Gillan and another) v Comr of Police of the Metropolis [2006] UKHL 12, [2006] 2 AC 307, concerned a power given by statute to senior police officers, in the event that they considered it expedient for the prevention of acts of terrorism, to confer authority, limited by time and place, upon constables to stop and search pedestrians at random.
In the domestic courts two innocent pedestrians, who had been stopped and searched, unsuccessfully argued that the stop and search regime had violated their Convention rights, including under article 8.
They argued unsuccessfully that it was not in accordance with law.
Lord Bingham of Cornhill said: 34.
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.
This is the test which any interference with or derogation from a Convention right must meet if a violation is to be avoided.
Lord Hopes analysis, at para 52, was only subtly different.
He too stressed the need for the domestic law to be not only accessible but clear (sufficiently precise to enable the individual to foresee the consequences) but he suggested that the need for the regime not to be arbitrary was a further factor as opposed to being the opposite side of the coin of clarity and precision.
At all events, when the pedestrians took their case to the ECtHR, they secured a contrary determination, namely that the stop and search regime had not been in accordance with law and that their rights under article 8 had been violated: Gillan v United Kingdom (2010) 50 EHRR 1105.
The courts analysis was in conflict not with the enunciation of legal principle by Lord Bingham but only with the committees application of it. 76 the words, in accordance with the law require the impugned measure both to have some basis in domestic law and to be compatible with the rule of law, which is expressly mentioned in the preamble to the Convention and inherent in the object and purpose of article 8.
The law must thus be adequately accessible and foreseeable, that is, formulated with sufficient precision to enable the individual if need be with appropriate advice to regulate his conduct. 77.
For domestic law to meet these requirements it must afford a measure of legal protection against arbitrary interferences by public authorities with the rights safeguarded by the Convention.
In matters affecting fundamental rights it would be contrary to the rule of law 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.
It could not seriously be argued that the way in which the regimes for the issue of certificates under the 1997 Act and for the obligation to answer questions (and for the questioner to act in reliance on them) under the 1975 Order worked were insufficiently accessible or foreseeable for them not to be in accordance with law as interpreted in the Gillan case both in the House of Lords and in the ECtHR.
There is no doubt that, in the light of the way in which the requirements of legality and necessity in article 8(2) have been developed, there is some overlap between them.
To take the obvious example, rules which are insufficiently precise for the purposes of the former are likely to go wider than is necessary to accomplish their legitimate objective for the purposes of the latter.
It is however important that we domestic judges, and particularly (if I may say so) our respected colleagues in the ECtHR, should not erode the distinction between the two requirements more than logic compels.
It is particularly important that our colleagues should not do so because a cardinal feature of their courts jurisprudence in relation to necessity is to afford a margin of appreciation, of greater or lesser width, to the contours within which the member state has seen fit to draw the impugned rules.
The ECtHR does not extend the margin of appreciation and it is right that it should not do so to its consideration of legality.
In S v United Kingdom (2009) 48 EHRR 1169, cited in para 21 above, concerning the retention of fingerprints and DNA samples taken from those suspected of a crime, the ECtHR observed, at para 99, that the statutory authority for the use of such material for purposes related to the prevention or detection of crime was in rather general terms.
It went on to conclude that complaints about the absence of detailed safeguards in respect of the use (and storage) of the material were more conveniently considered in terms of the necessity for the interference.
In that it was to proceed to conclude that the nature of the statutory powers overstepped the margin of appreciation and failed to satisfy the requirements of necessity, it saw no need to decide whether it also failed to satisfy the requirement of legality.
When the issues had been before the House of Lords, the committee had given short shrift to the argument that retention of the material had not been in accordance with law: R (S) v Chief Constable of the South Yorkshire Police [2004] UKHL 39, [2004] 1 WLR 2196, para 36.
It would have been surprising if, whatever its other shortcomings, the statutory power had been held in the ECtHR to fail even the requirement of legality.
In Kennedy v United Kingdom (2010) 52 EHRR 207 the applicant failed to persuade the ECtHR that the states possible past, and at any rate its potential future, interception of his telephone and email communications had violated his rights under article 8.
The court held that there were sufficient safeguards in the interception regime, including in particular a right of complaint to a tribunal (which had rejected a complaint by the applicant), to justify interference with his rights.
But the court took a significant step towards blurring the difference between legality and necessity: for it decided, at para 155, to address them jointly.
So we arrive at the MM case, cited above.
The applicant, who lived in Northern Ireland, was a babys paternal grandmother and was distressed at the prospect of the mothers removal of him to her native Australia.
In order, apparently, to induce the mother and her son to reconcile their differences, the grandmother disappeared with the baby for more than a day.
She accepted a caution for the offence of child abduction on the basis that, as the Northern Ireland police assured her in accordance with what was then their practice, the caution would be deleted from her record after five years, namely in 2005.
At around that time, however, the Northern Ireland police changed their practice so as to retain adult cautions on file indefinitely and, in that year, they disclosed it to a potential employer of MM, who, in consequence, did not offer her employment.
The disclosure was pursuant to the powers of the Northern Ireland police at common law for sections 113A and 113B of the 1997 Act did not come into force in Northern Ireland until 2008.
The ECtHR nevertheless also considered the new, statutory regime for the issue of certificates on the basis that the grandmother was at risk of its future application to her.
police had violated the grandmothers rights under article 8 as follows: 206.
In the present case, the court highlights the absence of a clear legislative framework for the collection and storage of data, and the lack of clarity as to the scope, extent and restrictions of the common law powers of the police to retain and disclose caution data.
It further In the MM case the ECtHR explained its conclusion that the Northern Ireland refers to the absence of any mechanism for independent review of a decision to retain or disclose data, either under common law police powers or pursuant to Part V of the 1997 Act.
Finally, the Court notes the limited filtering arrangements in respect of disclosures made under the provisions of the 1997 Act: as regards mandatory disclosure under section 113A, no distinction is made on the basis of the nature of the offence, the disposal in the case, the time which has elapsed since the offence took place or the relevance of the data to the employment sought. 207.
The cumulative effect of these shortcomings is that the court is 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 applicants 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 applicants caution data accordingly cannot be regarded as being in accordance with the law.
There has therefore been a violation of article 8 of the Convention in the present case.
This conclusion obviates the need for the court to determine whether the interference was necessary in a democratic society for one of the aims enumerated therein.
In the present appeals the Secretaries of State argue that it is surprising that the ECtHR should have determined the grandmothers application by reference to the requirement of legality.
The first of that courts three points in para 206 is criticism of lack of clarity about the extent of the common law powers of the Northern Ireland police, albeit circumscribed by the Data Protection Act 1998, to retain and disclose information about cautions.
That criticism, well founded or otherwise, is indeed one of inadequate precision.
The court made its second point, namely the absence of mechanism for independent review, after, in particular, having noted at para 197 the stress laid by this court on that factor in its analysis of the regime for notifications by sex offenders in R (F) (A Child) v Secretary of State for the Home Department (Lord Advocate intervening) [2010] UKSC 17, [2011] 1 AC 331.
But this courts analysis was specifically conducted in terms of necessity rather than legality (see para 41, Lord Phillips of Worth Matravers).
It is hard to see how absence of review can affect either the accessibility or the precision of the legislation although, if safeguards against arbitrariness are a free standing aspect of the principle, it might arguably qualify in that regard.
But in my view the courts third and final point, namely its powerful criticism of the failure of the regime under the 1997 Act to regulate disclosure by reference to the circumstances of the caution, clearly addresses its proportionality and thus the necessity, as opposed to the legality, of the interference.
Then in para 207 the court concluded that the consequence of these three points was an absence of safeguards which precipitated a violation of the grandmothers rights and that accordingly the retention and disclosure of the information about her caution were not in accordance with law.
So, although significantly the grandmother had not even disputed that the interference was in accordance with law (para 192), the court reached its determination on that basis and therefore without any reference to the margin of appreciation.
In my view the Secretaries of State raise a legitimate concern that issues which, when properly analysed, fall to be resolved in the ECtHR by reference to the principle of necessity, and therefore to attract extension to the member state of the margin of appreciation, should not instead be resolved by reference to the principle of legality.
Although the first and perhaps also the second of the three points addressed above probably justified the resolution of the MM case by reference to it, I take the view, in respectful disagreement with the other members of this court, that the 1997 Act does not fall foul of the principle of legality.
The Court of Appeal was in my view right to decline to conclude, even in the light of the MM case, that either the 1997 Act or the 1975 Order did so; and counsel for T and JB have been wise not to seek to uphold any part of its decision by reference to the principle of legality.
The complaint in the MM case of an absence of a clear legislative framework in Northern Ireland and of lack of clarity in the contours of the common law powers of its police has no analogue in the present cases; and the instant proceedings demonstrate independent review of a most exacting character.
Lord Reed suggests in para 114 that the question whether there are safeguards which enable the proportionality of the interference adequately to be examined affects legality, whereas the question whether the interference was proportionate affects necessity.
But in my view the ECtHRs third point logically falls within the latter; and I deprecate its seepage into the former.
There is also, if I may say so, a paradox about Lord Reeds conclusion on the one hand, at para 119, that the 1997 Act falls foul of the principle of legality but yet his disinclination to conclude on the other hand, at para 140, that the 1975 Order does so: for both the arrangement of the two provisions and the charge against them run in broad parallel and the different degree of their intrusiveness, to which Lord Reed refers at para 140, is pre eminently a factor which relates to necessity.
NECESSITY
In this respect one asks first whether the objective behind the interference was sufficiently important to justify limiting the rights of T and JB under article 8; second whether the measures were rationally connected to the objective; third whether they went no further than was necessary to accomplish it; and fourth, standing back, whether they struck a fair balance between the rights of T and JB and the interests of the community (R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45, [2012] 1 AC 621, para 45).
The objective behind the regime created by the 1975 Order and by Part V of the 1997 Act was supremely important.
It was to protect various members of society, particularly vulnerable groups such as the elderly and children but also, for example, consumers of financial advice, from exposure to persons able and likely to mistreat, neglect or defraud them.
On any view the contents of the Order and of the Act were rationally connected to the objective.
The issue surrounds the third and fourth questions, in relation to both of which the Secretaries of State make a valid preliminary point.
It is that whether the measures were necessary to accomplish the objective and whether the balance was fairly struck are issues of fine judgement which, by affirmatively approving the 1975 Order and by enacting the 1997 Act, Parliament itself determined and that the courts should therefore hesitate long before concluding that its judgement in these respects was wrong.
Nevertheless the nature of Ts and JBs attack on the regime is obvious.
It is that it operated indiscriminately.
The exception (so the argument goes) from the eradication for practical purposes of certain entries from a persons record in accordance with the 1974 Act should be bounded by two sets of rules: rules which specify the type of request which should justify some disclosure and rules which identify the entries which should then be disclosed.
The regime certainly contained rules of the former character.
But there were none of the latter character.
If the type of request was as specified, there had to be disclosure of everything in the kitchen sink.
There was no attempt to separate the spent convictions and the cautions which should, and should not, then be disclosed by reference to any or all of the following: (a) the species of the offence; (b) the circumstances in which the person committed it; (c) his age when he committed it; (d) in the case of a conviction, the sentence imposed upon him; (e) his perpetration or otherwise of further offences; (f) the time that elapsed since he committed the offence; and (g) its relevance to the judgement to be made by the person making the request.
The case of T is held up as an egregious example of the flaws in the regime.
His theft of two bicycles before he even became a teenager was disclosed in connection with his proposed participation in sporting activities with children, to which (it is said) it had no conceivable relevance; indeed entries reflective of childish error should be a particular candidate for total elimination in the interests (in the words of article 40 of the UN Convention on the Rights of the Child 1989) of promoting the childs reintegration and the childs assuming a constructive role in society.
T and JB fortify their attack by demonstrating that, long before they introduced the 2013 amendments, the Secretaries of State were actively contemplating the making of changes to the regime which would make its operation less indiscriminate.
In 2010 the Secretary of State for the Home Department established the Criminal Records Review and set its terms of reference in arresting language as follows: To review whether the criminal records regime strikes the right balance between respecting civil liberties and protecting the public and make proposals to scale back the use of systems involving criminal records to common sense levels.
Mrs Mason, the governments Independent Advisor for Criminality Information Management, was appointed to conduct the review in two phases, of which the first was to encompass disclosure under Part V of the 1997 Act.
Mrs Mason published her Report on Phase One in February 2011 and aptly headed it A Common Sense Approach.
Her fifth recommendation was that the government should introduce a filter to remove old and minor conviction information from criminal record checks and that an advisory panel, which the government had already set up, should make recommendations about the optimum mechanism for filtering them.
In December 2011 the government responded that it was considering the proposal and was in particular attempting to identify an appropriate and workable filtering mechanism: Independent Review of the Criminal Records Regime Government Response, p 3.
At about the same time the panel made its report; but, although all members of it were agreed on eight basic principles, they were not unanimous about how they should be applied.
Evidence filed in these proceedings on behalf of the Secretary of State for the Home Office convincingly demonstrates the complexities of developing a satisfactory filter, with which the government was apparently continuing to wrestle until (so it seems to have considered) its hand was forced into making the 2013 amendments.
Against the attack on the regime the Secretaries of State raise three points by way of defence.
They say, first, that a filter mechanism was always in place in that it was only convictions and cautions for recordable offences that were entered on the Police National Computer and were therefore available for disclosure.
About one half of all offences are not recordable and so are, in that sense, filtered out.
An offence is recordable if it is punishable with imprisonment or is one of a number of disparate offences identified in the Schedule to the National Police Records (Recordable Offences) Regulations 2000 (SI 2000/1139).
The trouble is however that the identification of an offence as recordable under the Regulations is not effected with a view to limiting disclosure under the 1997 Act to what might be relevant.
An offence which is imprisonable but which in the event is visited with a minor penalty is recorded; but an offence which is not imprisonable but which is visited with a substantial fine is not recorded.
A few offences relevant to suitability for certain occupations, such as causing unnecessary suffering to animals contrary to section 4(1) of the Animal Welfare Act 2006, are not imprisonable and are not identified as recordable.
By contrast, a multitude of offences irrelevant to suitability are imprisonable and so are recordable.
The Secretaries of State say, second, that the regime reflected a conclusion by Parliament that it was preferable to make the prospective employer or other registered person the judge of the relevance of the disclosure to his decision.
Rely on him (they say) to sift the wheat from the chaff.
But will he do so? In these days of keen competition and defensive decision making will the candidate with the clean record not be placed ahead of the other, however apparently irrelevant his offence and even if otherwise evenly matched? More fundamentally, the regime reflects an exception to the eradication of the offence under the 1974 Act and it is the fact, or even the potentiality, of disclosure, whatever its ultimate consequences, which causes the interference and for the person creates, as a minimum, embarrassment, uncertainty and anxiety.
The Secretaries of State say, third, that the Convention can discern justification for an interference in a regime set within bright lines, which is simple and inexpensive to operate.
In this regard they rely, in particular, on three authorities.
The first is Evans v United Kingdom (2008) 46 EHRR 728, where the ECtHR held that a womans rights under article 8 had not been violated by application of a bright line rule that a frozen embryo which a woman and a man had created could no longer be implanted in the woman once the man had withdrawn his consent.
The applicant had complained in particular of the lack of any mechanism for the rule to be disapplied but the court held at para 89 that the absolute nature of the rule promoted legal certainty and avoided the problems of individual assessment of the incommensurable interests of the man and the woman.
The second is R (RJM) v Secretary of State for Work and Pensions (Equality and Human Rights Commission intervening) [2008] UKHL 63, [2009] AC 311, in which the House of Lords held that the application of a rule which disentitled a person from receiving a state disability premium when he became homeless had not violated his rights under Article 1 of the First Protocol to the Convention even though it was a blunt instrument and hard cases would fall on the wrong side of its line (Lord Neuberger, para 54).
The third is Animal Defenders International v United Kingdom (2013) 57 EHRR 607, in which the Grand Chamber held that the rights under article 10 of an animal rights group had not been violated by the prohibition of their proposed television advertisement pursuant to a statutory prohibition on political advertising, defined in wide terms.
The difficulty of framing the legislation and the depth of prior consideration given to it had afforded the state a wide margin of appreciation, which the prohibition did not exceed.
Three other authorities, by contrast, reject bright line rules.
In Hirst v United Kingdom (No 2) (2006) 42 EHRR 849 the disenfranchisement of convicted prisoners, irrespective of the length of their sentence or of the gravity of their offence, was held to violate their rights under Article 3 of the First Protocol.
Such a general, automatic and indiscriminate restriction on a vitally important Convention right, said the ECtHR at para 82, must be seen as falling outside any acceptable margin of appreciation.
In the S case (2009) 48 EHRR 1169, cited at para 21 above, it was the blanket and indiscriminate nature of the powers of retention of the fingerprints and DNA samples which rendered the interference disproportionate and precipitated the violation (para 125).
And in the F case [2011] 1 AC 331, cited at para 37 above, the obligation upon sex offenders sentenced to imprisonment for at least 30 months to notify the police of their changing circumstances for the rest of their lives following release violated their rights under article 8 because it failed to provide for review of whether they continued to pose a risk of re offending (para 58).
It is easy to conclude that, of the above authorities referable to bright line rules, the F case is closest to the present.
The three situations in which interference was justified by bright line rules related to complex areas of judgement in which it was far from obvious that a more calibrated system could operate more satisfactorily.
The F case, like the present cases, addressed a regime which condemned people to suffer, like an albatross which they could never shake off, permanent adverse consequences of ancient wrong doing notwithstanding completion of the ostensible punishment (if any) and irrespective of its continuing significance.
Nor, to take the present cases, can the Secretaries of State contend that it is impossible to devise a more calibrated system for identifying material which should be the subject of disclosure under the 1997 Act and the 1975 Order.
For, in introducing the 2013 amendments, they duly devised it! Indeed back in 2010 the Secretary of State for the Home Department commissioned Mrs Masons review.
The Secretaries of State convincingly protest that Mrs Masons commission was not born of any acceptance that the regime which then existed violated rights under article 8.
They point out, more broadly, that the fact that another, more specific, regime might be able to be devised does not, of itself, render the contested regime disproportionate: Wilson v First County Trust Ltd (No.2) [2003] UKHL 40, [2004] 1 AC 816, para 70.
But it was the Secretary of State for the Home Department who chose to describe Mrs Masons remit as being to scale back the criminal records system (obviously including disclosure under the 1997 Act) to common sense levels.
In the L case [2010] 1 AC 410, cited at para 16 above, the subject matter was, as there explained, soft intelligence included in an ECRC.
Lord Hope, at para 41, endorsed remarks made in R (X) v Chief Constable of the West Midlands Police [2004] EWCA Civ 1068, [2005] 1 WLR 65, para 20, in which, although that case also related to soft intelligence, Lord Woolf CJ seems to have accepted that the regime for disclosure under the 1997 Act, taken as a whole, did not violate rights under article 8.
Lord Hope added that the question was whether the particular exercise of judgement required by the Act of the police in its disclosure of soft intelligence had been proportionate.
Lord Neuberger, at para 76, was more specific.
As a preface to his treatment of soft intelligence, he said that he was prepared to proceed on the basis that there was nothing objectionable about the inclusion in an ECRC of spent convictions and cautions, which reflected the actual commission of crimes.
There was no focus in the L case on the indiscriminate disclosure of spent convictions and cautions and, notwithstanding the eminence of their authors, the above remarks cannot represent a significant contribution to the decision for which the current appeals call.
In its application to the cases of T and JB the regime set up by the 1997 Act and by the 1975 Order failed the requirement of necessity.
The disclosure of their cautions, obviously that of T but also in my view, in the light of the triviality of her one and only offence, that of JB, went further than was necessary to accomplish the statutory objective and failed to strike a fair balance between their rights and the interests of the community; and so it violated their rights under article 8.
THE 1997 ACT: DECLARATION OF INCOMPATIBILITY
Under article 34 of the ECHR the jurisdiction of the ECtHR is to determine an application from a person claiming to be the victim of a violation by a member state of his Convention rights.
So its inquiry is into violation in the individual case before the court.
When it concludes that the legislation of a state is incompatible with the Convention, the ECtHR is understood to mean not that the legislation will always operate incompatibly but that it operated incompatibly in its application to the individual case.
In the Hirst case (2006) 42 EHRR 849, cited in para 47 above, the ECtHR appeared to depart from this understanding: it appeared to consider whether the disenfranchisement of prisoners was compatible with the Convention irrespective of the fact that the applicant was a life prisoner to whom denial of the vote could in any event scarcely amount to a violation.
The courts approach was criticised first in a minority judgment of the court in that case and then by this court in R (Chester) v Secretary of State for Justice [2013] UKSC 63, [2014] AC 271.
Lady Hale observed, at para 100, that it would have been in accordance with the consistent practice of the court for the majority to indicate in precisely what way Mr Hirsts rights had been violated by the law in question.
Then, relevantly to the present appeals, she added it seems to me that the courts of this country should adopt that sensible practice when considering the application of the various remedies provided by the Human Rights Act 1998.
Finally, in addressing the apparent width of the power to make a declaration of incompatibility under section 4 of the 1998 Act, she stated at para 102 that the court should be extremely slow to make a declaration of incompatibility at the instance of an individual litigant with whose own rights the provision in question is not incompatible.
As Lady Hales last statement makes clear, a declaration of incompatibility is not a declaration that the legislation always operates incompatibly with convention rights.
It is a declaration only that it is capable of operating incompatibly and, almost always, that it has operated incompatibly in the case before the court.
Thus, in Bellinger v Bellinger [2003] 2 AC 467, a statutory provision that a marriage was void if the parties to it were 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.
In making a declaration of incompatibility of the 1997 Act with article 8, the Court of Appeal was therefore not suggesting that disclosure of spent convictions and cautions in certificates would always violate rights under article 8.
Its order in Ts case was appropriately qualified, namely that the provisions of the Act were incompatible only insofar as they require the disclosure of all convictions and cautions . recorded on central records (emphasis supplied).
In relation to the 1997 Act the Court of Appeal was fully entitled, in the exercise of its discretion under section 4 of the 1998 Act, to make a declaration of incompatibility.
It was impossible for it to read and give effect to its provisions in a way which was compatible with the rights of T and JB pursuant to section 3 of the 1998 Act.
The beauty of its declaration was that, while it alerted Parliament to the fact that, for the reasons given in the courts judgment, the 1997 Act was capable of operating incompatibly with Convention rights and so required amendment (which the Secretary of State could then achieve by a remedial order under section 10 of the 1998 Act), it did not affect the validity, continuing operation or enforcement of the Act (section 4(6)(a) of the 1998 Act).
Although the Secretary of State for the Home Department contends that, by her amendment of the Act in 2013, she has remedied the incompatibility identified by the Court of Appeal, its declaration, when made, was rightly made and it seems logical, in the context of an appeal, not now to set it aside.
This court is informed that in future proceedings it may be argued that operation even of the amended regime under the Act will have precipitated a violation of rights under article 8.
Today this court can say nothing about that.
THE 1975 ORDER: ULTRA VIRES?
No doubt the Court of Appeal considered that, had it been open to it to do so, the convenient course would have been to make an analogous declaration of incompatibility in relation to the 1975 Order.
But it was not open to it to do so: for the order is subordinate legislation and it cannot be said, for the purposes of section 4(4)(b) of the 1998 Act, that the 1974 Act prevents removal of the incompatibility with article 8 rights to which its operation is capable of giving rise.
The Secretaries of State contended before the Court of Appeal, as, albeit faintly, they contend before this court, that in the case of the 1975 Order, it is possible to read it and give effect to it in a way which is compatible with Convention rights.
The contention is that article 4 of the 1975 Order, which releases certain prospective employers and other specified decision makers from the prohibition against acting in reliance on spent convictions and cautions, should be qualified by words such as save where this would violate the article 8 rights of any person.
No doubt it is true that many of the specified employers (such as public hospitals and schools) and other decision makers are public authorities for whom it is unlawful to act incompatibly with Convention rights and who therefore have in any event to make the judgements thereby required.
Nevertheless, as the Court of Appeal held, it would be unsatisfactory for each individual decision maker to be made the arbiter albeit perhaps only the initial arbiter of whether his proposed action would violate the rights of the person whom he has questioned.
The 1975 Order is the responsibility of the Secretary of State for Justice.
It is for him to devise a regime which is not capable of operating so as to violate rights under article 8 and the court should not lend itself to a construction which enables him to pass this buck to individual decision makers.
So it was that the Court of Appeal exercised its discretion to grant a declaration that the 1975 Order was ultra vires.
When is subordinate legislation ultra vires? A leading, relatively recent, example is Director of Public Prosecutions v Hutchinson [1990] 2 AC 783.
The Secretary of State for Defence made a byelaw prohibiting all entry into designated land at Greenham Common without authority.
His statutory authority for doing so was expressed not to extend to interference with any right of common.
It turned out that there were 62 commoners who had rights to take gravel and wood from, and to graze animals on, part of the land which he had designated.
So he had no power to prohibit entry in such unqualified terms.
Then the question arose whether the byelaw could be severed so that its validity could be retained in respect of people who, like the appellants, were not commoners yet had entered the land.
To this the House of Lords gave a negative answer.
It held, at p 811, that the fact that the invalid feature of the byelaw could not be excised with a blue pen did not preclude severance.
What precluded it was that, if the byelaw was so construed as to allow the 62 commoners to enter the land, the legislative purpose behind it would be undermined: p 813.
By way of contrast the House cited with approval Dunkley v Evans [1981] 1 WLR 1522, in which the Minister of Agriculture had made an order prohibiting fishing for herring in designated waters.
One per cent of the area which he designated was a stretch of water off Northern Ireland which he had no power to include in his designation.
The respondents had been fishing for herring in the remaining 99% of the area.
The Divisional Court held that the order was severable and that the respondents should have been convicted.
These then, are examples of the classic situation in which the width of the subordinate legislation exceeds the contours expressed in the authority for it to be made.
Sometimes the court decides that the operation of a piece of subordinate legislation has violated fundamental rights in circumstances in which the logic of the decision means that its operation will always violate fundamental rights.
A good example is A v HM Treasury [2010] UKSC 2, [2010] 2 AC 534.
By a subparagraph of an article of an order purportedly made pursuant to the United Nations Act 1946, the Treasury provided that any person listed by the Sanctions Committee of the United Nations, on the basis that he was associated with an organisation threatening international peace, was a designated person for the purposes of another order, which dramatically deprived him of access to financial resources.
Two of the parties before the court had been so listed.
The Supreme Court held that the absence in the order of a facility for them to mount a domestic challenge to the basis of their listing by the Sanctions Committee ran counter to their fundamental rights.
The court therefore held that the subparagraph was ultra vires but that a judge had been wrong to declare the whole order to be ultra vires: paras 81 and 83 (Lord Hope) and para 241 (Lord Mance).
It is easy to see that the vice of the order was not related to the particular circumstances of the two parties who had been listed: the rights of every person listed by the Sanctions Committee would be violated by the absence in the order of a facility for challenge.
The conclusion about T in the present case is, however, of an entirely different character.
It is that, in the light of the circumstances surrounding his receipt of the warnings, the requirement in the 1975 Order that he should disclose them to the college and its entitlement to act in reliance on them violated his rights under article 8.
It cannot possibly be said that the operation of the order will always be such as to violate the rights of those required to make disclosure of spent convictions and cautions under it: for in some, perhaps many, cases the circumstances of the conviction or caution will not render its disclosure disproportionate to the objective behind the order.
It is in the light of the above considerations that the Court of Appeals
declaration that the entire 1975 Order was ultra vires falls to be assessed.
Its effect was that the operation of the entire order always violated article 8 rights and therefore that all actions taken by questioners in reliance on disclosures made pursuant to it since 2 October 2000, when section 1 of the 1998 Act came into force, had been unlawful in that, not having been permitted by the 1974 Act, they had not been the subject of any valid exception under the order.
The Financial Conduct Authority, for example, which intervenes in the appeals to this court, complains unanswerably that it was given no notice of the Court of Appeals intention to declare the order to be ultra vires and thus no opportunity to address it; and that only subsequently did it discover that the jurisdiction which it and its predecessor had long purported to exercise so as to withhold specified permissions and approvals in the discharge of its regulatory functions by reference to spent convictions and cautions had been declared non existent.
The Financial Conduct Authority points out that, as a public authority, it must not act incompatibly with a Convention right; that its decisions are reviewable, including for alleged violation of Convention rights, by the Upper Tribunal (Tax and Chancery Chamber) pursuant to section 133 of the Financial Services and Markets Act 2000; and that the Court of Appeal did not find, and could not have found, that in its case the operation of the 1975 Order violated rights under article 8.
But the effect of the declaration of ultra vires was still more astonishing: for, by a sidewind, its effect was to declare that the regime for the issue of certificates under the 1997 Act was also invalid.
Application for a CRC and an ECRC can be made only if accompanied by a statement that it is required for the purposes of an exempted question: see para 11(c) above.
An exempted question is a question to which exemption from protection arises under the 1975 Order: see para 11(d) above.
If the order is ultra vires, there is no valid definition of an exempted question and it follows that no valid application for a CRC or for an ECRC can be made.
In that about four million certificates are issued each year, the declaration raises the spectre of the unlawful issue of many millions of certificates.
It follows that the Court of Appeals declaration of ultra vires in relation to the 1975 Order was, apart from anything else, entirely inconsistent with its declaration of incompatibility in relation to the 1997 Act.
As noted in para 53 above, it was a fundamental feature of the declaration of incompatibility that it would not affect the validity or continuing operation of the 1997 Act.
Yet the declaration of ultra vires had precisely that consequence.
What was the source of the Court of Appeals jurisdiction to make the declaration that the 1975 Order was ultra vires? Section 8(1) of the 1998 Act provides that: In relation to any act of a public authority which the court finds is unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.
So the subsection does not confer powers.
It refers to existing powers and confirms their applicability to unlawful acts of public authorities.
The existing power to make a declaration in proceedings for judicial review is to be found in section 31(2) of the Senior Courts Act 1981, which provides that: A declaration may be made under this subsection in any case where an application for judicial review, seeking that relief, has been made and the High Court considers that, having regard to (a) (b) (c) it would be just and convenient for the declaration to be made all the circumstances of the case, In Attorney Generals Reference (No 2 of 2001) [2003] UKHL 68, [2004] 2 AC 72, Lord Bingham suggested in para 24 that, in Convention terms, the words just and appropriate in section 8(1) above mean effective, just and proportionate.
Although the notion of convenience has been applicable to the grant of discretionary remedies ever since 1925, it may no longer be helpful and in particular it may sound insufficiently demanding; and Lord Binghams Convention terms seem just as apt in extracting the meaning of the words just and convenient in section 31(2) above as they are in relation to the words in section 8(1).
In my view the declaration of ultra vires was not just to all those who had been parties to the lawful operation of the order; was not appropriate; and on any view was not proportionate.
It is therefore wrong for courts to assume that, where a persons human rights have been violated by the application of subordinate legislation in circumstances in which the application was not mandated by primary legislation, the appropriate remedy is always to declare the subordinate legislation to be ultra vires.
It was nevertheless appropriate for the Court of Appeal to indicate in its judgment, as the Secretaries of State have recognised in introducing the 2013 amendments, that the interlocking character of the 1997 Act with the 1975 Order demanded that the requisite amendments to the former should broadly be reflected in the latter.
So the question arises: should some other form of declaration in relation to the 1975 Order be substituted for that made by the Court of Appeal? Without affecting the validity of the order, might the court, for example, declare that the Secretary of State for Justice acted unlawfully between 2 October 2000 and 29 May 2013 in failing to cause it to be amended so as to render it compatible with article 8 of the Convention? I am grateful to Lord Reed for demonstrating at paras 148 and 149 that the answer is no.
The obstruction lies in section 6(6)(a) of the 1998 Act which provides that a failure to lay before Parliament a proposal for legislation cannot amount to an unlawful act within the meaning of section 6(1).
As Lord Reed points out, any order made by the Secretary of State by way of amendment of the 1975 Order is, by section 10(2) of the 1974 Act, made subject to approval by resolution of each House of Parliament so, speaking for myself, I am clear that the subject of the suggested declaration of unlawfulness would indeed be the Secretary of States failure to lay before Parliament a proposal for legislation and would thus be impermissible.
The rationale behind section 6(6) of the 1998 Act is the thread, central to the whole Act, of respect for Parliamentary supremacy (see the speech of the Lord Chancellor, Lord Irvine of Lairg, in the House of Lords, 24 November 1997, vol.583, cols 814 5) but whether respect for Parliamentary supremacy truly requires protection to be given to the Secretary of State in circumstances such as the present is an interesting question.
Lord Reed proceeds to conclude at para 157 that no judicial remedy in relation to the 1975 Order is necessary.
I respectfully agree with the reasons which he gives for that conclusion.
LORD REED
If a person applies for a job, the employer is entitled under the common law to ask whatever questions of the applicant he considers relevant, and the applicant is obliged, if he chooses to answer them, to do so truthfully.
If therefore he is asked about his criminal record, he can decline to answer the question, in which event he may of course not be considered further for the position.
If he chooses to answer the question, however, he is under an obligation to do so truthfully.
If he lies about his past, a resultant contract of employment will be regarded as having been induced by a fraudulent misrepresentation.
If the deceit is discovered, the employer is in principle entitled to have the contract set aside.
A person who obtained employment by means of deceit is also in principle liable to prosecution.
The position of a person applying for appointment to certain offices, such as judicial office, or for admission to certain professions, such as accountancy or the legal profession, or for permission to carry on certain other regulated activities, such as providing financial services or operating a casino, is broadly analogous.
At common law, the applicant may again be asked about his criminal record.
If he chooses to answer the question, he is again under a duty to do so truthfully, and his failure to do so will expose him to the risk of adverse consequences under both the civil and the criminal law.
The Rehabilitation of Offenders Act 1974
The common law position was altered significantly by the Rehabilitation of Offenders Act 1974 (the 1974 Act).
This landmark measure, enacted following the report of a committee chaired by Lord Gardiner, Living it Down the Problem of Old Convictions (1972), was designed to facilitate the rehabilitation of offenders who have not been reconvicted of any serious offence for a period of years, and to penalise the unauthorised disclosure of their previous convictions.
The provisions of the Act are complex, and have undergone repeated amendment.
The central provision is section 4.
Subsection (1) provides: Subject to sections 7 and 8 below, a person who has become a rehabilitated person for the purposes of this Act in respect of a conviction shall be treated for all purposes in law as a person who has not committed or been charged with or prosecuted for or convicted of or sentenced for the offence or offences which were the subject of that conviction; and, notwithstanding the provisions of any other enactment or rule of law to the contrary, but subject as aforesaid (a) no evidence shall be admissible in any proceedings before a judicial authority exercising its jurisdiction or functions in Great Britain to prove that any such person has committed or been charged with or prosecuted for or convicted of or sentenced for any offence which was the subject of a spent conviction; and (b) a person shall not, in any such proceedings, be asked, and, if asked, shall not be required to answer, any question relating to his past which cannot be answered without acknowledging or referring to a spent conviction or spent convictions or any circumstances ancillary thereto.
Section 7 imposes limitations upon the effect of section 4(1) in a number of circumstances, so as to ensure for example that evidence of a persons criminal convictions continues to be admissible in criminal proceedings, and in subsection (4) provides the Secretary of State with the power to add to those circumstances: The Secretary of State may by order exclude the application of section 4(1) above in relation to any proceedings specified in the order (other than proceedings to which section 8 below applies) to such extent and for such purposes as may be so specified.
Section 4(2) provides: Subject to the provisions of any order made under subsection (4) below, where a question seeking information with respect to a person's previous convictions, offences, conduct or circumstances is put to him or to any other person otherwise than in proceedings before a judicial authority (a) the question shall be treated as not relating to spent convictions or to any circumstances ancillary to spent convictions, and the answer thereto may be framed accordingly; and (b) the person questioned shall not be subjected to any liability or otherwise prejudiced in law by reason of any failure to acknowledge or disclose a spent conviction or any circumstances ancillary to a spent conviction in his answer to the question.
Section 4(2) does not affect the rights of employers or others to ask questions about criminal convictions, but it alters the obligations and liabilities of persons to whom the questions are addressed, by requiring such questions to be treated as not relating to spent convictions, and by exempting such persons from any liability by reason of their failure to disclose such convictions.
A person with a spent conviction is therefore entitled to treat a question about his criminal record as not relating to spent convictions; and he cannot incur any civil or criminal liability if he answers the question on that basis.
Section 4(3) provides: Subject to the provisions of any order made under subsection (4) below, (a) any obligation imposed on any person by any rule of law or by the provisions of any agreement or arrangement to disclose any matters to any other person shall not extend to requiring him to disclose a spent conviction or any circumstances ancillary to a spent conviction (whether the conviction is his own or another's); and (b) a conviction which has become spent or any circumstances ancillary thereto, or any failure to disclose a spent conviction or any such circumstances, shall not be a proper ground for dismissing or excluding a person from any office, profession, occupation or employment, or for prejudicing him in any way in any occupation or employment.
Section 4(3) deals with the situation where no question is asked, but where an obligation to disclose criminal convictions arises for some other reason.
In that situation too, such an obligation is not to extend to spent convictions, and neither the spent conviction nor the failure to disclose it is to be a proper ground for dismissing or excluding the person from (read short) any occupation or employment.
Section 4(4) enables exceptions to be made to the general principles set out in section 4(2) and (3): The Secretary of State may by order (a) make such provision as seems to him appropriate for excluding or modifying the application of either or both of paragraphs (a) and (b) of subsection (2) above in relation to questions put in such circumstances as may be specified in the order; (b) provide for such exceptions from the provisions of subsection (3) above as seem to him appropriate, in such cases or classes of case, and in relation to convictions of such a description, as may be specified in the order.
The operation of section 4(2) and (3) is therefore subject to any order made under section 4(4), and it also depends of course upon the provisions defining the circumstances in which convictions become spent.
As originally enacted, the 1974 Act was silent on the subject of cautions, and the equivalent warnings and reprimands given to offenders under the age of 18.
The Act was however amended with effect from 19 December 2008 by the Criminal Justice and Immigration Act 2008, so as to enable cautions, warnings, and reprimands to become spent.
In what follows, I shall refer generally to cautions as including each of these disposals, unless I wish to refer specifically to warnings.
The relevant provisions are set out in Schedule 2 to the Act, as added by paragraph 6 of Schedule 10 to the 2008 Act, and in subordinate legislation.
They are broadly analogous in structure to those applicable to convictions, subject to the qualification that a caution (other than a conditional caution) becomes spent at the time it is given.
In particular, paragraphs 3(1), 3(3), 3(4) and 3(5) of Schedule 2 correspond to sections 4(1), 4(2), 4(3)(a) and 4(3)(b) respectively; paragraph 4 of Schedule 2 corresponds to section 4(4); and paragraph 6(4) of Schedule 2 corresponds to section 7(4).
The Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975
As I have explained, sections 4(4) and 7(4) of the 1974 Act confer a power upon the Secretary of State to make exceptions to the general principles laid down in section 4(1), (2) and (3).
That power was exercised when the Secretary of State made the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (SI 1975/1023) (the 1975 Order), which came into force on the same day as the Act.
The Order has undergone repeated amendment, but the general scheme has remained the same.
For present purposes, the relevant version of the Order is as it stood prior to amendment by the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (Amendment) (England and Wales) Order 2013 (SI 2013/1198) (the 2013 Order).
The substantive provisions of the Order begin with article 3, which excludes the application of section 4(2) of the Act, and paragraph 3(3) of Schedule 2 to the Act, to questions asked in a number of specified circumstances.
These include admission to a number of specified professions, appointment to certain offices and employments, and working with children or in circumstances raising issues of national security.
Article 3A of the 1975 Order, added by article 3 of the Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2010 (SI 2010/1153), excludes the application of section 4(2) of the Act, and paragraph 3(3) of Schedule 2 to the Act, in two particular situations.
Put shortly, the first is where it is necessary to assess the suitability of a person for work with children, and that person is barred from regulated activity relating to children, or is included in the list kept under the Protection of Children Act 1999, or is subject to a direction made under section 142 of the Education Act 2002.
The second situation is the analogous situation relating to work with vulnerable adults, where the person is barred from regulated activity relating to vulnerable adults or is included in the list kept under the Care Standards Act 2000.
Article 4 of the 1975 Order excludes the application of section 4(3)(b) of the 1974 Act, and paragraph 3(5) of Schedule 2 to the Act, to professions, offices and employments falling within the scope of article 3.
Article 4A of the Order, added by article 3 of the Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2012 (SI 2012/1957), excludes the application of sections 4(2) and (3) specifically in relation to the election of police and crime commissioners.
Article 5 of the Order excludes the application of section 4(1) of the Act, and paragraph 3(1) of Schedule 2 to the Act, in relation to particular proceedings, such as disciplinary proceedings in respect of members of the professions falling within the scope of article 3.
Finally, article 6 of the Order deals specifically with offices and employments in the Channel Islands and the Isle of Man.
The Police Act 1997
Part V of the Police Act 1997 (the 1997 Act) created a statutory scheme for the disclosure of criminal records and, in limited circumstances, other information held by the police relating to individuals, where required in order to assess the suitability of a person for employment in particular types of position of trust or sensitivity, such as those involving contact with children, or suitability for the grant of particular types of licence or permit, such as gaming, betting and lottery licences.
In particular, sections 113A and 113B (inserted by section 163(2) of the Serious Organised Crime and Police Act 2005) have the practical effect of enabling employers and regulatory bodies to obtain access to such records and information when considering applications falling within the scope of the 1975 Order.
The application for a criminal record certificate (or, under section 113B, for an enhanced criminal record certificate) must be made to the Disclosure and Barring Service (DBS) by the individual to whom the certificate relates.
It must be accompanied by a statement by the prospective employer or regulatory body that the certificate is required for the purposes of an exempted question: that is to say, a question in relation to which section 4(2) of the 1974 Act, or paragraph 3(3) or (4) of Schedule 2 to the Act, has been excluded by an order made under section 4(4) of the Act.
In consequence, the circumstances must fall within the scope of articles 3, 3A or 4A of the 1975 Order.
In such a situation, disclosure is made under section 113A of every relevant matter recorded on the Police National Computer.
Under section 113A as it stood at the relevant time, prior to its amendment by the Police Act 1997 (Criminal Record Certificates: Relevant Matters) (Amendment) (England and Wales) Order 2013 (SI 2013/1200), a relevant matter was any conviction or caution, whether spent or not, other than a disregarded caution within the meaning of Chapter 4 of Part 5 of the Protection of Freedoms Act 2012 (which is concerned with sexual offences committed upon a consenting adult).
Section 113B provides for the disclosure of additional information where it is required for the purpose of an exempted question which is asked for a prescribed purpose.
Such purposes include considering the suitability of a person to engage in a regulated activity relating to children or vulnerable adults, as defined in legislation.
In that situation, in addition to the information which would be disclosed under section 113A, disclosure is also made under section 113B(4) of any information held on local police records which the chief officer of the relevant police force reasonably believes to be relevant, and which in his opinion ought to be included in the certificate.
In exercising these functions, the chief officer is required to have regard to guidance published by the Secretary of State.
The process of obtaining a criminal record certificate is thus initiated by the person to whom it relates.
He applies for the certificate because he wishes to obtain an employment, or some form of permit or licence to carry on an activity, which involves such a degree of trust, or is of such sensitivity, as to have been excluded from the general regime for the rehabilitation of offenders laid down in the 1974 Act.
In practice, without the certificate he will not be able to obtain the employment or licence in question, since the employer or regulatory authority is likely to insist upon it.
The certificate will only be seen by the applicant and by the employer or authority to which he produces it: it is an offence for the latter to make further disclosure of the certificate, under section 124.
Provision is made in section 117 for the applicant to be able to challenge the inclusion of information in an enhanced criminal record certificate.
Provision is made in section 119B, inserted by section 28 of the Safeguarding Vulnerable Groups Act 2006, for the independent monitoring of the operation of section 113B(4), so as to ensure compliance with article 8 of the Convention.
It follows that the relevant provisions of the 1997 Act are different in nature
from the 1974 Act and the 1975 Order.
The 1974 Act innovates upon the common law in relation to the rights and obligations of employers and persons seeking employment (and, in an analogous manner, in relation to those of persons seeking to be admitted to some office or to be permitted to carry on some activity, and the persons responsible for controlling admission to such offices or the right to carry on such activities).
The 1975 Order limits the effect of the 1974 Act, and in consequence preserves the common law position in relation to the employments, offices and activities falling within its scope.
Part V of the 1997 Act as amended, and in particular sections 113A and 113B, are on the other hand concerned with the disclosure by the DBS of the criminal records of individuals which are held on the Police National Computer and, where section 113B applies, of additional information held in local police records.
There are however both legal and practical connections between the provisions of the 1997 Act and the 1975 Order.
Sections 113A and 113B of the 1997 Act are legally dependent upon the 1975 Order, in that the information disclosed under those sections must be required for the purposes of a question falling within the ambit of the 1975 Order.
But the converse is not true: the amendment or repeal of sections 113A and 113B would have no effect upon the legal status of the 1975 Order, which was in force for more than 20 years before the 1997 Act was enacted.
The amendment or repeal of those sections would nevertheless affect the practical working of the 1975 Order, to the extent that, in circumstances falling within their scope, disclosure under those sections provides a means of obtaining information which might otherwise be obtained from the individual by virtue of the 1975 Order.
Since it provides a means of obtaining information which is independent of the individual and potentially more reliable, the effect of the 1997 Act is to improve the effectiveness of the vetting of potential employees by employers and others who come within its scope.
Personal data and the Convention
The United Kingdom has never had a secret police or internal intelligence agency comparable to those that have existed in some other European countries, the East German Stasi being a well known example.
There has however been growing concern in recent times about surveillance and the collection and use of personal data by the state.
Some might argue that the grounds for such concern are illustrated in the present case by the information that about four million criminal record certificates are provided annually under Part V of the 1997 Act.
But such concern on this side of the Channel might be said to have arisen later, and to be less acutely felt, than in many other European countries, where for reasons of history there has been a more vigilant attitude towards state surveillance.
That concern and vigilance are reflected in the jurisprudence of the European Court of Human Rights in relation to the collection, storage and use by the state of personal data.
The protection offered by the common law in this area has, by comparison, been of a limited nature.
The contrast is exemplified by the judgments in Malone v Metropolitan Police Commissioner [1979] Ch 344 and Malone v United Kingdom (1984) 7 EHRR 14.
The higher level of concern elsewhere in Europe is reflected in the repeated condemnation by the European court of the law of this country in this area, often on the basis that the law contains no adequate safeguards, in such cases as Malone v United Kingdom (1984) 7 EHRR 14, Halford v United Kingdom (1997) 24 EHRR 523, Khan v United Kingdom (2000) 31 EHRR 1016, Peck v United Kingdom (2003) 36 EHRR 719, Copland v United Kingdom (2007) 45 EHRR 858, S v United Kingdom (2008) 48 EHRR 1169 and Kennedy v United Kingdom (2010) 52 EHRR 207.
Although there is a relationship between the disclosure of criminal records and the rehabilitation of offenders, the retention and use by the state of data relating to individuals, including data relating to their criminal records, therefore raise different issues under the European Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention) from the question whether employers and regulatory authorities are entitled to ask applicants for employment or a licence about their past histories.
Part V of the 1997 Act is accordingly best considered separately from the 1975 Order.
I shall consider the aspect of the present appeals relating to the 1997 Act before turning to the aspect concerning the 1975 Order.
Domestic case law and the judgments of the European Court of Human Rights
Under article 1 of the Convention, the member states undertake to secure to everyone within their jurisdiction the rights and freedoms defined in Section I. Those include the right set out in article 8, which 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.
There is a substantial body of judgments of the European court concerned with the effect of article 8 in relation to the retention and use by the state of personal data.
As I have indicated, many of the judgments concern the United Kingdom.
The issue has also been considered by the courts of this country, but none of the domestic judgments cited to us fully reflects the Strasbourg courts approach to the application of article 8 in this context, or appears to me to provide an answer to the present appeals.
In particular, although the judgments of Lord Hope and Lord Neuberger in R
(L) v Comr of Police for the Metropolis (Secretary of State for the Home Department intervening) [2009] UKSC 3; [2010] 1 AC 410 contain much that is valuable in relation to the applicability of article 8 in the present context and, as I shall explain, passages from the judgments were subsequently incorporated by the Strasbourg court into its own reasoning on that point they are of less assistance in relation to the application of article 8(2) in the circumstances of the present appeals.
In the first place, the court was concerned in that case only with the disclosure of information under the then equivalent of section 113B(4) of the 1997 Act: that is to say, the additional information contained in an enhanced criminal record certificate.
That issue does not arise on the facts of the present appeals.
Secondly, and more importantly, the court did not approach the question of justification under article 8(2) in the way in which it would be addressed by the European court.
As Lord Hope explained at para 41, there was no suggestion in that case that the relevant legislation contravened article 8: the argument focused upon whether it had been interpreted and applied in a way that was proportionate.
Following the common law conception of the judicial function, the court dealt with the appeal on the basis of the arguments presented to it.
As I shall explain, the European courts consideration of article 8(2) in this context begins by addressing the question whether the interference with the right protected by article 8 is in accordance with the law; and it often ends there.
It ended there, in particular, in a carefully considered judgment of the Strasbourg court, which I shall discuss shortly, that addressed the very point in issue in these appeals in relation to the 1997 Act.
Rotaru v Romania
Although the Strasbourg jurisprudence in this area goes back more than 30 years, a suitable starting point is the judgment of the Grand Chamber in Rotaru v Romania (2000) 8 BHRC 449, in which the court considered the storage and disclosure of a criminal record.
The applicant in the case complained about the disclosure by the security services of the contents of a file containing information about him, and his inability to have inaccuracies in the information corrected.
It was argued by the government that article 8 was not applicable, since the information in question, which included information about the applicants political activities and his criminal record, related not to his private life but to his public life.
That contention was rejected.
As in its earlier case law, the court began by emphasising the correspondence between its broad interpretation of private life and that adopted in the Council of Europes Convention of 28 January 1981 for the Protection of Individuals with regard to Automatic Processing of Personal Data, which came into force on 1 October 1985, and of which the UK is a signatory (the 1981 Convention).
The purpose of the 1981 Convention is to secure for every individual respect for his rights and fundamental freedoms, and in particular his right to privacy, with regard to automatic processing of personal data relating to him (article 1), such personal data being defined in article 2 as any information relating to an identified or identifiable individual.
Article 5 requires that personal data undergoing automatic processing shall be, inter alia, stored for specified and legitimate purposes and not used in a way incompatible with those purposes, adequate, relevant and not excessive in relation to the purposes for which they are stored, and preserved in a form which permits identification of the data subjects for no longer than is required for the purpose for which those data are stored.
Article 6 provides that special categories of data, including personal data relating to criminal convictions, may not be processed automatically unless domestic law provides appropriate safeguards.
In relation to this aspect of the case, the court stated at paras 43 44: 43. public information can fall within the scope of private life where it is systematically collected and stored in files held by the authorities.
That is all the truer where such information concerns a person's distant past. 44.
In the instant case the court notes that the [letter containing the disclosure] contained various pieces of information about the applicant's life, in particular his studies, his political activities and his criminal record, some of which had been gathered more than 50 years earlier.
In the court's opinion, such information, when systematically collected and stored in a file held by agents of the state, falls within the scope of private life for the purposes of article 8(1) of the Convention.
As to whether there had been an interference with the right protected by article 8, the court stated at para 46 that both the storing by a public authority of information relating to an individuals private life and the use of it and the refusal to allow for an opportunity for it to be refuted amount to interference with the right to respect for private life secured in article 8(1) of the Convention.
In considering whether the interference was justifiable under article 8(2), the court stated at para 47 that that paragraph, since it provides for an exception to a right guaranteed by the Convention, is to be interpreted narrowly.
As in many of its earlier judgments in this area, including the Grand Chamber judgment given earlier that year in the case of Amman v Switzerland (2000) 30 EHRR 843, the court held that the holding and use of the information in question had not been in accordance with the law, as required by article 8(2), because of the absence from the relevant national legislation of adequate protection against arbitrary interference.
In that regard, the court based its decision upon a number of aspects of the legislation, including the absence of a definition of the kind of information that might be recorded, and the absence of limits as to the age of the information held or the length of time for which it might be kept.
MM v United Kingdom
This approach was followed in the case of MM v United Kingdom (Application No 24029/07) (unreported) given 13 November 2012, which concerned the disclosure of a caution which the applicant had received for child abduction.
Disclosures had been made by the police to organisations to which the applicant had applied for employment as a family support worker.
The disclosures occurred in Northern Ireland, prior to the entry into force there of the relevant provisions of the 1997 Act, and were made under common law powers.
The European court however treated the complaint as encompassing the continuing threat of future disclosure under sections 113A and 113B of the 1997 Act as amended, the terms of which were for all material purposes indistinguishable from the version with which the present appeals are concerned.
As the court observed, the data in question would be retained for life, and would be disclosed under the 1997 Act whenever the applicant applied for employment falling within its scope.
It was therefore clear that for as long as her data are retained and capable of being disclosed, she remains a victim of any potential violation of article 8 arising from retention or disclosure (para 159).
The judgment is therefore directly relevant to the present appeals.
As in Rotaru, the court referred to the 1981 Convention, citing articles 5 and 6.
It also referred to a number of other relevant Council of Europe and EU instruments.
In particular, it considered in detail Recommendation No R (87) 15 regulating the use of personal data in the police sector, adopted by the Committee of Ministers on 17 September 1987 in the context of an approach to data protection intended to adapt the principles of the 1981 Convention to the requirements of particular sectors.
The Recommendation does not have the same status as the 1981 Convention, but sets out principles to serve as guidance to the governments of the member states in their domestic law and practice.
Principle 2 concerns the collection of data and states: 2.1 The collection of personal data for police purposes should be limited to such as is necessary for the prevention of a real danger or the suppression of a specific criminal offence.
Any exception to this provision should be the subject of specific national legislation. the background The Explanatory Memorandum setting out the to Recommendations adoption states that Principle 2.1 excludes an "open ended, indiscriminate" collection of data by the police (paragraph 43).
Principle 5 of the Recommendation deals with communication of police data.
Principle 5.2 states: 5.2.i Communication of data to other public bodies should only be permissible if, in a particular case: a. there exists a clear legal obligation or authorisation, or with the authorisation of the supervisory authority, or if b. these data are indispensable to the recipient to enable him to fulfil his own lawful task and provided that the aim of the collection or processing to be carried out by the recipient is not incompatible with the original processing, and the legal obligations of communicating body are not contrary to this. the 5.2.ii Furthermore, communication to other public bodies is exceptionally permissible if, in a particular case: b. the communication is necessary so as to prevent a serious and imminent danger.
Principle 5.3 makes analogous provision in relation to communication to private parties.
The Explanatory Memorandum stresses that Principles 5.2 and 5.3 allow communication only in circumstances of an exceptional nature (paragraph 58).
Principle 7 deals with length of storage and updating of data.
Principle 7.1 requires measures to be taken to delete personal data kept for police purposes if they are no longer necessary for the purposes for which they are stored.
In that regard, it requires consideration to be given to a number of criteria, including rehabilitation, spent convictions and the age of the data subject.
The Explanatory Memorandum states that it is essential that periodic reviews of police files are undertaken to ensure that they are purged of superfluous data (paragraph 96).
In its assessment of the merits of the application, the court reiterated that both the storing of information relating to an individuals private life and the release of such information come within the scope of article 8(1), that even public information can fall within the scope of private life where it is systematically collected and stored in files held by the authorities, and that this is all the more true where the information concerns a persons distant past (para 187).
In particular, data relating to the applicants caution related to her private life, and their disclosure constituted an interference with her private life.
In reaching that conclusion, the court noted that the data constituted both personal data and sensitive personal data within the meaning of the Data Protection Act 1998, and also fell within a special category of data under the 1981 Convention.
Further, the data formed part of the applicants criminal record: In this regard the court, like Lord Hope in R (L) v Comr of Police for the Metropolis (Secretary of State for the Home Department intervening) [2009] UKSC 3; [2010] 1 AC 410 [at para 27], emphasises that although data contained in the criminal record are, in one sense, public information, their systematic storing in central records means that they are available for disclosure long after the event when everyone other than the person concerned is likely to have forgotten about it, and all the more so where, as in the present case, the caution has occurred in private.
Thus as the conviction or caution itself recedes into the past, it becomes a part of the persons private life which must be respected. (para 188)
The court rejected the Governments contention that it was material that disclosure was made to the applicant herself, on her own application: The court notes and agrees with the comments of Lords Hope and Neuberger in R (L) [at paras 43 and 73], to the effect that the fact that disclosure follows upon a request by the data subject or with her consent is no answer to concerns regarding the compatibility of disclosure with article 8 of the Convention.
Individuals have no real choice if an employer in their chosen profession insists, and is entitled to do so, on disclosure. (para 189)
In considering whether the interference was justified under article 8(2), the court focused initially upon the question whether the interference was in accordance with the law.
In order to satisfy that test, the domestic law had to be compatible with the rule of law, and therefore must afford adequate legal protection against arbitrariness (para 193).
In particular, following the approach adopted by the Grand Chamber in such cases as Amman v Switzerland, Rotaru v Romania and Bykov v Russia (Application No 4378/02) (unreported) given 10 March 2009, the court considered it essential in the context of the recording and communication of criminal record data, as in relation to telephone tapping, secret surveillance and covert intelligence gathering, to have 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 their destruction, thus providing sufficient guarantees against the risk of abuse and arbitrariness (para 195).
In that regard, the court drew attention to Principles 2.1, 5 and 7 of Recommendation No R (87) 15.
The court acknowledged that there might be a need for a comprehensive record of all cautions, convictions and other information of the nature disclosed under section 113B of the 1997 Act.
But it observed that the indiscriminate and open ended collection of criminal record data was unlikely to comply with the requirements of article 8 in the absence of clear and detailed statutory regulations clarifying the safeguards applicable and setting out the rules governing, inter alia, the circumstances in which data could be collected, the duration of their storage, the use to which they could be put and the circumstances in which they might be destroyed (para 199).
The court referred in that connection to passages in the judgments of Lord Hope and Lord Neuberger in R (L) as demonstrating the wide reach of the legislation requiring disclosure and the impact of an adverse certificate upon the hopes of a person who aspires to any post which falls within the scope of disclosure requirements.
In relation to the possibility of future disclosure of the applicants caution, the court stated: Pursuant to the legislation now in place, caution data contained in central records, including where applicable information on spent cautions, must be disclosed in the context of a standard or enhanced criminal record check.
No distinction is made based on the seriousness or the circumstances of the offence, the time which has elapsed since the offence was committed and whether the caution is spent.
In short, there appears to be no scope for the exercise of any discretion in the disclosure exercise.
Nor, as a consequence of the mandatory nature of the disclosure, is there any provision for the making of prior representations by the data subject to prevent the data being disclosed either generally or in a specific case.
The applicable legislation does not allow for any assessment at any stage in the disclosure process of the relevance of conviction or caution data held in central records to the employment sought, or of the extent to which the data subject may be perceived as continuing to pose a risk such that the disclosure of the data to the employer is justified. (para 204)
The court concluded: 206.
In the present case, the court highlights the absence of a clear legislative framework for the collection and storage of data, and the lack of clarity as to the scope, extent and restrictions of the common law powers of the police to retain and disclose caution data.
It further refers to the absence of any mechanism for independent review of a decision to retain or disclose data, either under common law police powers or pursuant to Part V of the 1997 Act.
Finally, the court notes the limited filtering arrangements in respect of disclosures made under the provisions of the 1997 Act: as regards mandatory disclosure under section 113A, no distinction is made on the basis of the nature of the offence, the disposal in the case, the time which has elapsed since the offence took place or the relevance of the data to the employment sought. 207.
The cumulative effect of these shortcomings is that the court is 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 applicants 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 applicants caution data accordingly cannot be regarded as being in accordance with the law.
There has therefore been a violation of article 8 of the Convention in the present case.
This conclusion obviates the need for the court to determine whether the interference was necessary in a democratic society for one of the aims enumerated therein.
In the present case, counsel for the Secretaries of State were critical of the reasoning of this judgment.
Lord Wilson adopts some of their criticisms.
I take a different view.
The approach adopted by the court in MM appears to me to have been based on its settled case law.
As long ago as 1984, the court said in Malone v United Kingdom (1984) 7 EHRR 14, in the context of surveillance measures, that the phrase in accordance with the law implies that the law must give the individual adequate protection against arbitrary interference (para 68).
In Kopp v Switzerland (1998) 27 EHRR 91, para 72, it stated that since the surveillance constituted a serious interference with private life and correspondence, it must be based on a law that was particularly precise: It is essential to have clear, detailed rules on the subject, especially as the technology available for use is continually becoming more sophisticated.
These statements were reiterated in Amman v Switzerland 30 EHRR 843.
As I have explained, that approach to the question whether the measure provides sufficient protection against arbitrary interference was applied, in the context of criminal records and other intelligence, in Rotaru v Romania, where the finding that the interference was not in accordance with the law was based upon the absence from the national law of adequate safeguards.
The condemnation of Part V of the 1997 Act in MM v United Kingdom is based on an application of the same approach.
Put shortly, legislation which requires the indiscriminate disclosure by the state of personal data which it has collected and stored does not contain adequate safeguards against arbitrary interferences with article 8 rights.
This issue may appear to overlap with the question whether the interference is necessary in a democratic society: a question which requires an assessment of the proportionality of the interference.
These two issues are indeed inter linked, as I shall explain, but their focus is different.
Determination of whether the collection and use by the state of personal data was necessary in a particular case involves an assessment of the relevancy and sufficiency of the reasons given by the national authorities.
In making that assessment, in a context where the aim pursued is likely to be the protection of national security or public safety, or the prevention of disorder or crime, the court allows a margin of appreciation to the national authorities, recognising that they are often in the best position to determine the necessity for the interference.
As I have explained, the courts focus tends to be upon whether there were adequate safeguards against abuse, since the existence of such safeguards should ensure that the national authorities have addressed the issue of the necessity for the interference in a manner which is capable of satisfying the requirements of the Convention.
In other words, in order for the interference to be in accordance with the law, there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined.
Whether the interference in a given case was in fact proportionate is a separate question.
The criticism that the court in MM did not allow for any margin of appreciation is therefore misplaced.
Whether a system provides adequate safeguards against arbitrary treatment, and is therefore in accordance with the law within the meaning of the Convention, is not a question of proportionality, and is therefore not a matter in relation to which the court allows national authorities a margin of appreciation.
The criticism that the court reached its conclusion in MM on a basis that had not been argued by the applicant reflects assumptions about the judicial role that do not hold good across the English Channel.
In Strasbourg, the civilian principle jura novit curia applies: the court indeed referred to the principle in its judgment.
This was by no means the first occasion on which the court had found a violation on a basis which the applicant had not raised: the court gave some other examples at para 150 of the judgment.
The present case the 1997 Act
The respondent T received two warnings from the police in 2002, when he was 11 years old, in respect of the theft of two bicycles.
He has no other criminal record.
The warnings were disclosed under Part V of the 1997 Act in 2008, when he applied for a part time job with a football club which might involve contact with children.
They were disclosed again in 2010, when he applied for a place on a sports studies course, which again might involve contact with children.
Under the legislation as it then stood, they were bound to be disclosed throughout the rest of his life, whenever he made an application falling within the ambit of Part V of the 1997 Act.
The respondent JB received a caution from the police in 2001, when she was 41years old, in respect of the theft from a shop of a packet of false fingernails.
She has no other criminal record.
The caution was disclosed under Part V of the 1997 Act in 2009, when she completed a training course for employment in the care sector and was required by the training organsiation to obtain a criminal record certificate.
The organisation told her that it felt unable to put her forward for employment in the care sector.
In the light of the judgment in MM v United Kingdom, it is plain that the disclosure of the data relating to the respondents cautions is an interference with the right protected by article 8(1).
The legislation governing the disclosure of the data, in the version with which these appeals are concerned, is indistinguishable from the version of Part V of the 1997 Act which was considered in MM.
That judgment establishes, in my opinion persuasively, that the legislation fails to meet the requirements for disclosure to constitute an interference in accordance with the law.
That is so, as the court explained in MM, because of the cumulative effect of the failure to draw any distinction on the basis of the nature of the offence, the disposal in the case, the time which has elapsed since the offence took place or the relevance of the data to the employment sought, and the absence of any mechanism for independent review of a decision to disclose data under section 113A.
I would therefore dismiss the appeals of the Secretaries of State against the grant of declarations of incompatibility in respect of sections 113A and 113B of the 1997 Act.
Although I have reached that conclusion on the basis that Part V of the 1997 Act (as it stood at the material time) fails to meet Convention requirements as to the quality of the law, I agree with Lord Wilson that the disclosure of the respondents cautions could not in any event be regarded as necessary in a democratic society.
In the case of the respondent T, the disclosure of the warnings for dishonesty which had been given to him when he was a young child bore no rational relationship to the aim of protecting the safety of children with whom, as an adult, he might come into contact.
In the case of the respondent JB, the impact upon her private life of the disclosure of her caution for minor dishonesty, many years earlier, was disproportionate to its likely benefit in achieving the objective of protecting people receiving care.
The 1975 Order and the Convention: introduction
The challenge made to the 1975 Order in these proceedings raises different issues from the challenge to the 1997 Act.
Part V of the 1997 Act is concerned with the use by the state of data which it collects and stores, relating to the criminal records of individuals.
The 1975 Order is on the other hand concerned largely with relationships between employers and potential employees, and has the effect, broadly speaking, that those relationships, in circumstances falling within the scope of the Order, remain governed by the common law of contract and tort.
It is less immediately obvious why this should be regarded as an interference by the state with the right to respect for private life.
Positive and negative obligations
The primary argument advanced on behalf of the respondent T is that the effect of the 1975 Order, taken together with the common law, is to require applicants for employment of a kind falling within its scope, or for a licence to carry on a regulated activity falling within its scope, to make a full disclosure of their criminal records when asked about them by prospective employers or regulatory bodies, however old, trivial or irrelevant a conviction or caution may be.
The 1975 Order is therefore, it is argued, an unjustifiable interference by the state with the applicants right to respect for his private life under article 8.
Counsel for the Secretaries of State submit that the respondents argument amounts to an assertion that article 8 imposes a positive obligation upon contracting states to enact legislation establishing a scheme which excuses applicants for employment from any obligation to provide information to employers about their criminal records, except to the extent that an obligation to provide specific information may be proportionate in the particular circumstances.
This question of classification should not inhibit the court from considering the challenge to the 1975 Order and, if it is valid, granting an appropriate remedy.
Even if the respondents argument is correctly characterised as involving the assertion of a positive obligation on the part of the state, that does not mean that it is necessarily ill founded.
The European court has said repeatedly that, although the purpose of article 8 is essentially to protect the individual against arbitrary interference by public authorities, it does not merely compel the state to abstain from such interference: in addition to this primarily negative undertaking, there may be positive obligations inherent in an effective respect for private life.
These obligations may involve the adoption of measures designed to secure respect for private life even in the sphere of relations between individuals: see, amongst many other authorities, the courts recent judgment in Wgrzynowski and Smolczewski v Poland (Application No 33846/07) (unreported) given 16 July 2013, para 54.
The court developed the concept of the positive obligation precisely to express the principle that the state cannot fulfil its duty under article 1 of the Convention to secure the rights guaranteed by simply remaining passive: it must, for example, ensure through its legal system the protection of those whose lives are at risk, the recognition of novel forms of family relationship, and the prevention of undue media intrusion into the private lives of individuals.
Furthermore, as the European court has often said, the boundary between the state's positive and negative obligations under article 8 does not lend itself to precise definition.
There are many situations which could be analysed on either basis, particularly where the complaint concerns a defect in a states existing law.
In such a situation (as, for example, in the series of cases concerning the failure of the United Kingdom to amend its law so as to recognise the change of gender of transsexual people), a negative/positive dichotomy is unhelpful, since the situation can be analysed either on the basis that the existing law results in a breach of a negative obligation not to interfere with the relevant Convention right, or on the basis that the state is in breach of a positive obligation to adapt its law so as to comply with the Convention right.
The mode of analysis selected can hardly determine the outcome of the complaint.
I doubt therefore whether there is much value in debating whether the argument advanced on behalf of T is more aptly regarded as involving a positive or a negative obligation.
The complaint about the 1975 Order can be analysed either as concerning a violation resulting from the existing law (ie the common law, to the extent that it is excluded from the ambit of the 1974 Act by the 1975 Order), and therefore as involving the breach of a negative obligation, or as concerning a violation resulting from the states failure to extend more widely the scope of the 1974 Act, and therefore as involving the breach of a positive obligation.
The real issue, however it is presented, is whether the obligation imposed upon T by the law of the United Kingdom to disclose to any potential employer in his chosen career, for the remainder of his life, the fact that he had received two warnings for stealing a bicycle when he was a child of 11, or otherwise lose the opportunity of being employed, involves an interference with his right to private life which is unjustifiable under article 8(2).
Relevant international instruments
The search for common standards, whether evidenced by international instruments or by national laws and practices, is a constant thread running through the case law of the European court.
By anchoring developments in its jurisprudence to developments at the national or international level, the court seeks to ensure that it keeps pace with societal developments.
I shall therefore begin by considering relevant developments at the international level.
There is no doubt that the importance attached to the rehabilitation of offenders in a variety of international instruments can be a relevant consideration in the application of the Convention.
For example, in its judgment in MM v United Kingdom the court referred at para 142 to Recommendation No R (84) 10 on the criminal record and rehabilitation of convicted persons, adopted by the Committee of Ministers on 21 June 1984.
The document sets out measures which the governments of the member states are recommended to introduce where necessary.
In particular, recommendation 1 is to provide that the information mentioned on the criminal record will be communicated only in the form of extracts whose content will be strictly limited to the legitimate interest of the recipients.
That recommendation reflects the view, expressed in the preamble to the document, that the disclosure of criminal records outside the context of criminal proceedings may jeopardise the convicted person's chances of social reintegration, and should therefore be restricted to the utmost.
Other recommendations include to provide for an automatic rehabilitation after a reasonably short period of time (recommendation 10) and to provide that rehabilitation implies prohibition of any reference to the convictions of a rehabilitated person except on compelling grounds provided for in national law (recommendation 13).
In its judgment in V v United Kingdom (1999) 30 EHRR 121 the court also referred to Recommendation R (87) 20 on social reactions to juvenile delinquency, adopted by the Committee of Ministers on 17 September 1987.
The document recommends the governments of member states to review, if necessary, their legislation and practice with a view: 10. to ensuring that the entries of decisions relating to minors in the police records are treated as confidential and only communicated to the judicial authorities or equivalent authorities and that these entries are not used after the persons concerned come of age, except on compelling grounds provided for in national law.
There are a number of other international instruments which are also relevant to the rehabilitation of juvenile offenders, and which the court has referred to in its case law.
First, the United Nations Standard Minimum Rules for the Administration of Juvenile Justice (the Beijing Rules), adopted by the United Nations General Assembly on 29 November 1985, contain a number of relevant provisions.
Rule 21, concerned with records, provides: 21.1 Records of juvenile offenders shall be kept strictly confidential and closed to third parties.
Access to such records shall be limited to persons directly concerned with the disposition of the case at hand or other duly authorized persons. 21.2 Records of juvenile offenders shall not be used in adult proceedings in subsequent cases involving the same offender.
These Rules are not binding in international law: in the Preamble, states are invited, but not required, to adopt them.
The United Nations Convention on the Rights of the Child, adopted by the General Assembly of the United Nations on 20 November 1989, has binding force under international law on the contracting states, including all of the member states of the Council of Europe.
Article 40 provides: 1.
States Parties recognize the right of every child alleged as, accused of, or recognized as having infringed the penal law to be treated in a manner consistent with the promotion of the child's sense of dignity and worth, which reinforces the child's respect for the human rights and fundamental freedoms of others and which takes into account the child's age and the desirability of promoting the child's reintegration and the child's assuming a constructive role in society.
Finally, in this connection, the International Covenant on Civil and Political Rights 1966 provides in article 14(4), which broadly corresponds to article 6 of the European Convention, that: In the case of juvenile persons, the procedure shall be such as will take account of their age, and the desirability of promoting their rehabilitation.
Some of these instruments are of greater significance than others in the present context, but they are consistent in their emphasis upon the importance attached to the rehabilitation of minor and juvenile offenders, and to the confidentiality of their criminal records as an aid to promoting their rehabilitation.
In particular, recommendations 10 and 13 of Recommendation No R (84) 10, recommendation 10 of Recommendation R (87) 20, and rule 21 of the Beijing Rules, are directly relevant to the present context.
That a person should in practice be required throughout his adult life to disclose the fact that he committed a minor offence as a juvenile, if he wishes to pursue a wide range of careers, is difficult to reconcile with these provisions, in the absence of what recommendation 10 of Recommendation R (87) 20 describes as compelling grounds.
The laws of the member states
When considering what the position might be under the Convention, it is also relevant to consider whether there is or is not a consensus across the member states: as the European court has often said, where no consensus exists, the margin of appreciation afforded to states is generally a wide one.
No comparative analysis was however presented by any of the parties to the appeals.
Although a certain amount of information is readily available, notably in the Home Office report, Breaking the Circle a Report of the Review of the Rehabilitation of Offenders Act (2002), the Report of the Irish Law Reform Commission on Spent Convictions, LRC 84 2007 (2007), and the report published by KPMG, Disclosure of Records in Overseas Jurisdictions (2009), it would not be appropriate to draw firm conclusions from it in the absence of submissions.
The reports that I have mentioned indicate that a survey would probably be of limited assistance in any event, since almost all the other member states do not have legislation equivalent to the 1974 Act, but address the issue of rehabilitation in other ways, such as provisions in their constitution or civil code which prohibit unjustified discrimination against ex offenders.
The reports focus upon the vetting of potential employees on the basis of criminal record certificates.
In that context, there appears to be a widely held view that the disclosure of information about a minor conviction of a juvenile offender, after he has become an adult, is not appropriate.
That is consistent with the international instruments to which I have referred.
It is relevant to note that a child of 11 would not be regarded as criminally responsible in most of the member states.
The present case the 1975 Order
No judgment or decision of the European Court of Human Rights, or of the European Commission on Human Rights, has been cited to this court relating to legislation (or the absence of legislation) analogous to the 1974 Act, or the exceptions made to it by the 1975 Order: that is to say, legislation relating to the right of employers to require information from applicants for employment about their criminal records, or the obligation of such applicants to provide the information requested.
That does not however prevent this court from reaching its own view on the compatibility of the 1975 Order with the Convention rights protected by the Human Rights Act 1998, if the relevant principles are sufficiently clear.
It seems to me to be reasonably clear that laws requiring a person to disclose his previous convictions or cautions to a potential employer constitute an interference with the right to respect for private life, protected by article 8.
Whereas the European court laid particular emphasis, when considering Part V of the 1997 Act in MM v United Kingdom, upon the interference constituted by the states disclosure of personal data which it had collected and stored, that issue does not arise directly in relation to the disclosure by a person of information retained in his own memory.
On the other hand, the same issue arises out of the private aspect of a persons personal history, especially as it fades into the past and becomes forgotten by the world at large.
It is also important to remember that article 8 protects the right to personal development, and the right to establish and develop relationships with other human beings, including relationships at work.
As the court has said, it is, after all, in the course of their working lives that the majority of people have a significant, if not the greatest, opportunity of developing relationships with the outside world (Niemitz v Germany (1992) 16 EHRR 97, para 29).
Viewed in that way, laws which have the effect of jeopardising a persons ability to pursue his chosen career, or which in practice close off to him a wide range of potential employments, must be regarded as interfering with his private life: see, for example, Sidabras v Lithuania (2004) 42 EHRR 104.
The fact that the relevant laws do not, strictly speaking, require an ex offender to disclose his criminal record, since he can avoid doing so by refraining from applying for jobs in the relevant sectors or by abandoning such an application when the inevitable question is asked, is no answer to these points.
The question then arises whether the interference with the right to respect for private life resulting from the 1975 Order is justifiable under article 8(2).
This question can in my view be addressed most conveniently by considering in the first place whether the interference resulting from the Order, in a case such as that of the respondent T, has a legitimate aim and is necessary in a democratic society.
As I shall explain, that question admits of a clear answer.
The question whether the interference is in accordance with the law appears to me to be less straightforward, and it is unnecessary to answer it.
The conclusion reached in relation to the 1997 Act cannot automatically be extended to the 1975 Order, since the question whether the domestic law affords adequate safeguards against abuse must be judged by reference to the degree of intrusiveness of the interference being considered.
As I have explained, particularly strict standards apply in relation to the collection, storage and use by the state of personal data, as under Part V of the 1997 Act.
It may be arguable that the requirements in the context of the 1975 Order are somewhat less stringent, as the particularly sensitive element of the use by the state of personal data is absent.
Focusing then on the questions of legitimate aim and necessity in a democratic society, there is undoubtedly a public interest in ensuring the suitability of applicants for certain positions, including those involving the supervision or care of children or vulnerable adults, and those which are of particular sensitivity, such as positions connected with the administration of justice.
In principle, measures designed to facilitate the vetting of applicants for such positions fall within the scope of one or more of the legitimate aims listed in article 8(2), namely 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.
I cannot however see any rational connection between minor dishonesty as a child and the question whether, as an adult, the person might pose a threat to the safety of children with whom he came into contact.
There is therefore no rational connection between the interference with article 8 rights which results from the requirement that a person disclose warnings received for minor dishonesty as a child, and the aim of ensuring the suitability of such a person, as an adult, for positions involving contact with children, let alone his suitability, for the remainder of his life, for the entire range of activities covered by the 1975 Order.
It can only be concluded that the interference in issue in this case was not necessary in a democratic society to attain the aim of protecting the safety of children.
Remedy
I have already explained that the Court of Appeal was correct to make the declaration of incompatibility which it made in relation to the 1997 Act.
The position in relation to the 1975 Order appears to me to be less straightforward.
The Human Rights Act 1998 makes express provision for two distinct types of remedy to be given.
Under section 4, the court can grant a declaration of incompatibility in circumstances falling within the scope of that section.
Under section 8, the court can grant a remedy in relation to an act of a public authority which it finds is unlawful under section 6(1).
Considering first the possibility of a remedy under section 8, the application of the 1975 Order to a particular person is not an act of the Secretary of State.
The Order forms part of the law of the land governing the obligations inter se of (amongst others) employers and applicants for employment.
Its operation, and in particular the resultant obligation of an applicant for employment to answer questions about his past history, does not depend upon any action on the part of the Secretary of State.
The question then arises whether the making of the 1975 Order was an unlawful act of the Secretary of State within the meaning of section 6(1).
The answer would appear to be that it was not.
Subject to an exception created by section 22(4), which has no application in these proceedings, none of the operative provisions of the Act is retroactive: Wilson v First County Trust (No 2) [2003] UKHL 40; [2004] 1 AC 816, para 212.
Could it however be said that the Secretary of State acted unlawfully by failing to amend the 1975 Order, following the entry into force of the Human Rights Act, so as to establish a proportionate scheme in relation to the disclosure of convictions and cautions (at least until 29 May 2013, when the 2013 Order came into force: whether that Order succeeded in rendering the scheme compatible with Convention rights is not a question raised in these appeals)? By virtue of section 6(6), an act includes a failure to act but does not include a failure to (a) introduce in, or lay before, Parliament a proposal for legislation, or (b) make any primary legislation or remedial order.
The term legislation, as used in section 6(6)(a), must include subordinate legislation, given the express reference in section 6(6)(b) to primary legislation.
Was the Secretary of States failure in relation to the amendment of the 1975 Order a failure to lay before Parliament a proposal for legislation?
I am inclined to think that it was.
The power to make orders under the 1974 Act is exercisable in accordance with section 10(2), which requires that a draft of the proposed order must be laid before Parliament and approved by an affirmative resolution.
The draft order would appear to me to be properly described as a proposal for legislation.
That approach leads to the somewhat unattractive conclusion that whether a failure to make subordinate legislation falls within the scope of section 6 of the Human Rights Act depends upon the particular way in which the legislation must be made: an order made by the Secretary of State subject to annulment by a resolution of either House, for example, would not on any view involve the laying before Parliament of a proposal for legislation.
On the other hand, it is consistent with the respect for Parliamentary sovereignty found throughout the Human Rights Act that the decision of a member of either House whether to lay a legislative proposal before Parliament, whether in the form of a Bill or a draft order, should not be the subject of judicial remedies.
As I shall explain, however, I find it unnecessary to reach a concluded view upon the point, which was not the subject of submissions.
If no remedy can be granted under section 8 of the Human Rights Act, can a declaration of incompatibility be made under section 4? Where primary legislation cannot be interpreted compatibly with Convention rights, the court can make a declaration of incompatibility under section 4(2).
The position in relation to subordinate legislation is governed by section 4(3) and (4): (3) Subsection (4) applies in any proceedings in which a court determines whether a provision of subordinate legislation, made in the exercise of a power conferred by primary legislation, is compatible with a Convention right. (4) If the court is satisfied (a) that the provision is incompatible with a Convention right, and (b) that (disregarding any possibility of revocation) the primary legislation concerned prevents removal of the incompatibility, it may make a declaration of that incompatibility.
By virtue of subsection (3), subsection (4) applies in the present proceedings.
Subsection (4)(a) is satisfied: even applying the rule of interpretation set out in section 3(1) of the Act, the 1975 Order cannot be interpreted compatibly with Convention rights.
In relation to subsection (4)(b), however, there is no suggestion that the 1974 Act prevents removal of the incompatibility of the 1975 Order with article 8 of the Convention.
The condition laid down by section 4(4)(b) of the Human Rights Act is therefore not satisfied.
It follows that the court cannot make a declaration of incompatibility under section 4.
If, then, there is no remedy that can be granted under either section 4 or section 8 of the Human Rights Act, is there any other basis upon which a remedy might be granted? This question was not addressed in the parties submissions, and I do not consider it necessary to reach a concluded view.
A number of potential answers present themselves.
An approach that has been adopted in some cases, such as Francis v Secretary of State for Work and Pensions [2005] EWCA Civ 1303; [2006] 1 WLR 3202 and In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] AC 173 has been to make a declaration that it was unlawful for a public authority to act in the manner required by subordinate legislation which could not be interpreted or given effect in a way which was compatible with Convention rights.
That solution does not however appear to be apt in the present case, for the reason I have explained at para 146.
A more attractive possibility in the present circumstances is that a declaration might be granted to the effect that the 1975 Order cannot be read or given effect in a way which is compatible with Convention rights, or at least with the Convention rights of the respondent T.
Although it appears that a declaration of incompatibility could not be granted under section 4 of the Human Rights Act, for the reasons I have explained at para 151, and the powers conferred by section 10 would therefore not be available, it is arguable that a declaration along the lines I have suggested, reflecting the result of applying section 3(1) of the Act to the 1975 Order, might nevertheless be granted.
A further possibility is that the Order might be declared to be ultra vires, on the basis that the entry into force of section 3(1) of the Human Rights Act had the effect that the order making powers conferred by sections 4(4) and 7(4) of the 1974 Act must, as from 2 October 2000, be read and given effect in a way which is compatible with Convention rights, and therefore could not be read as authorising the making of an order which was incompatible with Convention rights.
It might perhaps be argued that it follows that the making of the 1975 Order could not after 2 October 2000 be regarded as being authorised by the 1974 Act.
On the other hand, the idea that subordinate legislation which was intra vires when made could subsequently become ultra vires would give rise to numerous counter arguments and questions.
One such question concerns the effect which a declaration that the Order was to be treated as ultra vires with effect from 2 October 2000 might have upon actions taken since that date by persons affected by the Order.
Lord Wilson comments, in relation to the Court of Appeals declaration that the 1975 Order was ultra vires, that its effect was that all actions taken by questioners in reliance on disclosures made pursuant to it had been unlawful.
Its effect in his view was indeed still more astonishing, since if the Order was ultra vires, it would follow that no valid application for a criminal records certificate could have been made.
These are serious concerns, but I would wish to reserve my opinion as to whether they are well founded.
In a suitable case, consideration would have to be given to the protection of legal certainty in our administrative law, under reference to such authorities as R v Wicks [1998] AC 92, Boddington v British Transport Police [1999] 2 AC 143 and Mossell (Jamaica) Ltd v Office of Utilities Regulations [2010] UKPC 1, to the Convention principle of legal certainty (discussed, for example, in Cadder v HM Advocate (HM Advocate General for Scotland intervening) [2010] UKSC 43; [2010] 1 WLR 2601, para 58), and to the possibility, if necessary to protect legal certainty, of either exercising the courts discretion to refuse to provide a remedy, or alternatively granting a remedy with only prospective effect.
In the circumstances of the present case, however, it does not appear to me to be necessary for the court to insist upon further discussion of these questions, or of the other possible remedies that I have discussed.
The respondent T does not complain of any adverse consequences which he has suffered as a result of the 1975 Order: on the contrary, he failed to disclose his cautions when asked questions about his record, as he mistakenly believed that they no longer formed part of his record, and no adverse consequences are said to have resulted from that failure.
The harm of which he complains resulted rather from the operation of the 1997 Act.
As a result of these proceedings, the 1975 Order has been amended with the intention of rectifying the problem identified.
There is therefore no possibility of T being affected in future by the 1975 Order in the form in which it has been considered in these proceedings.
He can be regarded for the purposes of the Convention as having obtained just satisfaction by reason of the courts acceptance that his complaint was well founded, and the resultant amendment of the Order.
In these circumstances, it appears to me that the court can properly conclude that, even if a remedy might in principle be granted, this is not a case in which, in relation to the 1975 Order, any judicial remedy is necessary.
LORD NEUBERGER, LADY HALE AND LORD CLARKE
We agree with Lord Reed and Lord Wilson that the appeal of the Secretaries of State against the grant of a declaration of incompatibility in respect of sections 113A and 113B of the Police Act 1997 should be dismissed; but that their appeal against the declaration that the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 is ultra vires should be allowed; and that there is no need for a judicial remedy in respect of that Order.
They disagree on only one matter: whether those sections of the 1997 Act are incompatible because they fail to meet the requirement that the interference with the Convention right be in accordance with the law.
As to that, we agree with Lord Reed that those sections of the 1997 Act are incompatible for that reason, although we also agree with both Lord Reed and Lord Wilson that the interferences in these cases failed to meet the requirement that they be necessary in a democratic society.
In all other respects, we agree with both judgments.
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Under the Rehabilitation of Offenders Act 1974, where a person is asked about his criminal record the question will be treated as not extending to spent convictions.
Consequently, he is entitled not to disclose these and cannot be liable for a failure to do so.
Equally, a prospective employer is not entitled to make any decision prejudicial to the individual by reference to spent convictions or to any failure to disclose them [6].
This applies to cautions, warnings or reprimands, which are spent as soon as they are given [76].
These appeals concern the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 and sections 113A and 113B in Part V of the Police Act 1997.
The 1975 Order makes certain questions exempt from the above provisions of the 1974 Act, including where they relate to specified professions and employments, and to working with children and vulnerable adults [78 79].
Part V of the 1997 Act deals with enhanced criminal record certificates (ECRCs).
These are issued where an exempted question within the meaning of the 1975 Order is asked, including by a prospective employer.
Disclosure is then made of every relevant matter recorded on the Police National Computer, including, at the relevant time, any spent conviction or caution [83 84].
In T, the police issued warnings in 2002 to an 11 year old boy in respect of the theft of two bicycles.
The warnings were disclosed in 2008 under Part V of the 1997 Act when T applied for a part time job with a football club possibly involving contact with children.
They were disclosed again in 2010 when he applied for a place on a sports studies course which again might have involved contact with children [117].
In JB, the police issued a caution to a 41 year old woman in 2001 in respect of the theft from a shop of a packet of false fingernails.
In 2009 she completed a training course for employment in the care sector.
She was required to obtain an ECRC, which disclosed the caution.
The training organisation told JB that it felt unable to put her forward for employment in the care sector [118].
The respondents have no other criminal records.
Both claim that the references in the ECRCs to their cautions violated their right to respect for private life under article 8 of the European Convention on Human Rights.
T also asserts that his obligation to disclose the warnings violated the same right.
T and JB were successful in the Court of Appeal, which made declarations that the relevant provisions of the 1997 Act were incompatible with article 8.
The Court of Appeal in T held that the 1975 Order was also incompatible with article 8 and ultra vires (that is, that it went beyond the powers set out in) the 1974 Act.
The Secretaries of State now appeal to this Court.
While they have made amendment orders designed to eliminate the problems identified by the Court of Appeal, their appeals concern the 1975 Order and 1997 Act as they stood at the time [3].
The Court unanimously (1) dismisses the appeals against the declarations of incompatibility in respect of the 1997 Act; and (2) allows the appeal against the declaration that the 1975 Order was ultra vires [158].
The respondents cautions represent an aspect of their private lives, respect for which is guaranteed by article 8 [16].
Laws requiring a person to disclose his previous convictions or cautions to a potential employer constitute an interference with that right [138].
The disclosures in the ECRCs also constituted article 8 interferences, significantly jeopardising the respondents entry into their chosen fields of endeavour [20].
Lord Reed in line with 2012 decision of the European Court of Human Rights in MM v UK considers that sections 113A and 113B of the 1997 Act are incompatible with article 8 because they fail to meet the requirement of legality, that is, that the interference with the Convention right be in accordance with law.
Legality requires safeguards which enable the proportionality of the interference to be adequately examined [108 119; 158].
Legislation like the present which requires the indiscriminate disclosure by the state of personal data which it has collected and stored does not contain adequate safeguards against arbitrary interferences with article 8 rights [113 119].
Lord Neuberger, Lord Clarke and Lady Hale agree with Lord Reeds conclusion on legality [158], while Lord Wilson disagrees [28 38], emphasising the importance of the distinction between the tests of legality and necessity in a democratic society.
On this point he is critical of the European Courts approach in MM.
The Court unanimously holds that the article 8 interferences under both the 1997 Act and the 1975 Order could not, in any event, be said to meet the requirement of being necessary in a democratic society [50; 121; 158].
Lord Wilson notes that it was the Home Secretary who identified a need to scale back the criminal records system to common sense levels [48].
Lord Reed points to a lack of a rational connection between dishonesty as a child and the question of whether, as an adult, the person might pose a threat to the safety of children with whom he comes into contact [142].
The Court upholds the declarations of incompatibility in relation to the 1997 Act.
It is impossible to read and give effect to its provisions in a way which was compatible with the respondents Convention rights [53; 120].
The Court, however, allows the appeal in T against the decision that the 1975 Order was ultra vires.
This was inconsistent with the declaration of incompatibility, which stated that it did not affect the validity or continuing operation of the 1997 Act, Part V of which in fact relied upon the validity of the terms of the Order [61 62].
No judicial remedy in relation to the Order is necessary.
Lord Reed explains that it had no adverse consequences for T and he can be regarded for the purposes of the Convention as having obtained just satisfaction given the courts acceptance that his complaint is well founded and the resultant amendment of the Order [66;157 158].
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From time to time over many years the Secretary of State for the Home Department has been concerned to deport a foreign national on the grounds of national security.
Sometimes, indeed with increasing frequency, those facing such deportation decisions have wished to contest them, either by challenging that they present a national security risk, or by invoking the European Convention on Human Rights and contending that they would be at risk of article 3 ill treatment if returned to their home country.
To enable such cases to be properly heard, Parliament, by the Special Immigration Appeals Commission Act 1997 (the 1997 Act) established SIAC and, as will be very familiar to all with any interest in this area of the law, provided for an appeal system which allows where necessary for closed material procedures and the appointment of special advocates.
All this has been rehearsed time and again in a succession of judgments not least, indeed, in paras 4 15 of the judgment below and no useful purpose would be served by my repeating it all here.
Put very shortly, if the Secretary of State wishes to adduce evidence which, for reasons of national security or other sufficient public interest reasons, cannot safely be communicated to the appellant, SIACs rules and procedures provide for this to be done just how satisfactorily being a matter of continuing debate into which, happily, there is on this appeal no need to enter.
The difficulty raised by the present case is a very different one and, it should be recognised at once, one that faces the court with what can only be regarded as the most unpalatable of choices.
It is lesser evils which the court is searching for here, not perfect solutions.
The difficulty and dilemma now before us can most easily be illustrated by my immediately sketching out a notional set of facts.
Suppose that an appellant before SIAC (A) is a suspected terrorist whom it is proposed to return to Algeria.
Such, indeed, is the position of each of the appellants now before us.
Suppose this, too, is no mere supposition; it has been common ground before SIAC in a number of cases that Algeria is a country where torture is systematically practised by the DRS (Information and Security Department) and that no DRS officer has ever been prosecuted for it; and that: in the absence of [certain assurances from the Algerian Government] there would be a real risk that on his return to Algeria A (and persons in a similar position) would be tortured or subject to other ill treatment (SIACs judgment of 8 February 2007 in G v Secretary of State for the Home Department: Appeal No SC/02/05 G being one of the appellants now before us).
Suppose that the Algerian authorities are hostile to any independent scrutiny of their actions in the human rights sphere: human rights organisations such as Amnesty and Human Rights Watch are not permitted to operate there; even the International Red Cross is denied access to DRS facilities.
And suppose, as is also here the case, that the Secretary of State obtains assurances from the Algerian Government that As rights will be respected on return, the value of these assurances being the principal question at issue on As SIAC appeal.
Suppose, then, that A wishes to adduce evidence from someone with inside knowledge of the position in Algeria asserting that, notwithstanding the Algerian Governments official assurances, those in As position on return to Algeria are in fact likely to be subject to torture or other article 3 ill treatment.
Perhaps this prospective witness (W) was himself ill treated on return.
Perhaps W is a whistleblower working within the Algerian prison service: an official or an interrogator or a medical practitioner.
Perhaps he is a journalist or other outsider who has obtained particular information as to the fate of those like A on their return.
Suppose that W (whether or not himself still in Algeria) is in a vulnerable position: he fears future torture or ill treatment either of himself or of someone near and dear to him.
Perhaps at an earlier stage he had raised his concerns internally and been threatened that if ever he voiced them abroad his wife or children would suffer for it.
Suppose finally that, such being the circumstances, W is not prepared to give evidence in As appeal to SIAC save only on one unalterable condition, namely that his identity and evidence will forever remain confidential to SIAC and the parties to the appeal (A and the Secretary of State).
He is concerned in particular that the Secretary of State might seek to communicate something at least of his evidence to the Algerian authorities (or indeed to others in such a way as may bring him to the attention of the Algerian authorities) if only to seek to assess its veracity and reliability, and that her doing so might place him or his family in peril, something he is simply not prepared to risk.
W, therefore, requires an absolute and irreversible guarantee of total confidentiality before he will permit his identity and evidence to be disclosed to the Secretary of State.
Is it open to SIAC to make an order providing for such a guarantee? That, as will shortly appear, is the central question now before us.
It is not, I should make clear at this stage, the appellants case that, SIAC having made an absolute and irreversible order giving W the guarantee he seeks, Ws evidence will necessarily then have to be regarded by SIAC as properly before them when finally it comes to their determining the disputed issue as to As safety on return.
Rather the appellants propose an intermediate, inter partes hearing, by which time the Secretary of State must have been provided with full information as to Ws identity and intended evidence, and at which she will be able to contend that, for whatever reason, it would be wrong for SIAC to admit Ws evidence on the substantive appeal.
She may suggest that in reality W has advanced no coherent case for saying that he is at risk of reprisals.
Or she may say that Ws proposed evidence is inherently implausible and that, without her being afforded the least opportunity to check its authenticity or credibility or reliability it would simply not be right to afford it any weight whatever.
Or she may have other arguments to advance.
If, having heard them, SIAC then chooses to shut the evidence out, so be it.
If, however, SIAC admits the evidence, then, reluctant though doubtless they will be to give it the weight it might have been expected to carry had the Secretary of State been permitted to check it, at least it will be before them (when ex hypothesi it would otherwise not have been) and in the result SIAC will have the benefit of the fullest possible picture on a critically important issue in the appeal: the question of As safety on return.
It is on this basis and in this context that the question now arises: in such circumstances can SIAC ever properly make an absolute and irreversible order (necessarily on an ex parte application by A without the Secretary of State having an opportunity to resist it), prohibiting the Secretary of State from ever disclosing to anyone anything of Ws identity or evidence?
This question the Court of Appeal on 29 July 2010 answered in the negative: [2010] EWCA Civ 898.
Giving the only reasoned judgment (with which Jacob and Sullivan LJJ simply agreed), Sir David Keene (at para 27) concluded that: [I]t is not open to SIAC to make an order giving the absolute and irrevocable guarantee which is sought by the appellants.
This may create a difficulty for the appellants, because of the reluctance of their potential witnesses, but it is inescapable.
The adverse effect on them can be mitigated by such steps as anonymity orders and hearings in private, but irrevocable orders preventing the Secretary of State from disclosing material to a foreign state in any circumstances cannot properly be made by SIAC in advance of the Secretary of State seeing that material.
As counsel for the Secretary of State said at the SIAC hearing, such a proposal is unworkable and in my view falls outside the scope of SIACs powers to give directions, broad though those powers are.
Before turning to the Secretary of States objections I should observe that, although Sir David there spoke of the appellants proposals fall[ing] outside the scope of SIACs powers, he had earlier, at para 20, recorded that: Mr Tam QC, on behalf of the Secretary of State, accepts that SIAC could give directions under the Procedure Rules preventing the Secretary of State from disclosing such material to any other person, including the Algerian authorities.
He acknowledges that SIACs power under rule 39 (1) to give directions relating to the conduct of any proceedings is expressed in wide and unlimited terms and could be used in conjunction with the rule 43(2) power to conduct a hearing in private for any good reason so as to prevent disclosure to other persons, including the authorities of the appellants country of origin.
And that, indeed, I understand to remain the Secretary of States position.
It is not for want of jurisdiction that SIAC should never make an order of the sort here contended for; rather it is because, so the Secretary of State submits, such an order could never properly be made; it can never be appropriate.
Such being the case, I shall not burden this judgment with an exposition and analysis of all the various rules which arguably bear upon SIACs powers but instead shall turn at once to the Secretary of States principal reasons for saying that no order of the kind here sought should ever be made, notwithstanding that, for want of it, evidence directly going to the issue of As safety on return will on occasion not be available to SIAC when otherwise it would have been.
Essentially, it seems clear, the Secretary of States fundamental objection to an order of the sort proposed is this: such an order having been made, the Secretary of State may then find herself in possession of information which (whether or not appreciated by SIAC, A or even W himself) might in one way or another suggest the existence of a terrorist threat abroad or some other risk to national security.
Viewed in the context of myriad other pieces of information, it may be seen to form part of a jigsaw or mosaic (one is well familiar with the concept) whereby such risks come to be recognised.
Because, however, of SIACs order, the Secretary of State will be unable to alert the foreign state to the risk, thereby gravely imperilling future diplomatic relations.
True, but for the order, the Secretary of State would never have been put in possession of the information in the first place.
But, runs the argument, the Secretary of State is in fact worse off with it than without it.
Without it she cannot be criticised.
But with it, yet bound by SIACs order to keep it to herself, she may become deeply embarrassed if the risk were then to eventuate.
The court below, at paras 24 and 25 of Sir David Keenes judgment, accepted this argument: SIAC cannot, it seems to me, tie its hands in advance and say that, whatever the fresh slant on the material provided by the Secretary of State, it will in no circumstances allow disclosure to the authorities of a foreign state.
How could it? It might be that the appellants material, innocuous when seen in isolation, becomes of vital diplomatic importance once combined with material in the possession of the Secretary of State.
As was explored in argument, it might reveal a potential terrorist risk within the foreign state.
It might indicate that, instead of the appellant having been the perpetrator of a terrorist outrage, as suspected hitherto, the true culprit remains at large in a foreign state and presents a real and immediate threat to that state.
It is no answer for Mr Fordham to argue that, without the cast iron and irrevocable guarantee of non disclosure, the British Government would not even come into possession of the information.
That is true, but the consequences for the United Kingdoms diplomatic relations differ radically between the two scenarios.
If this countrys government is in possession of information indicating the existence of a risk of a terrorist outrage in a foreign state with which we have friendly relations and it does not warn that state, the potential impact on the United Kingdoms diplomatic relations with that state could be very serious indeed if it ever became known that our government knew of the risk.
If, however, the government does not possess such information, then while the terrorist risk to the foreign state may remain the same, this country could not be accused of withholding vital information, and our diplomatic relations would not be affected.
I confess to finding the argument a good deal less persuasive than did the Court of Appeal.
Nor to my mind was it made good by a post hearing note submitted by the Secretary of State at our invitation giving five examples of prospective scenarios (understandably at a high level of generality) suggested to illustrate the problem.
In all five examples, as it happens, the Home Secretarys stated concern is at her inability to communicate not with the country to which she proposes deporting A (here Algeria) but rather with some other foreign country (country C) to which, let us suppose, W, a known terrorist mastermind who trains suicide operatives, now says that he has moved (following torture on his return to Algeria), something about which the Secretary of State would wish to inform country C (an example in fact suggested by Lord Kerr during the hearing).
Even, however, were such a scenario to play out and culminate in a terrorist atrocity in country C and it were later to emerge that the Secretary of State had known, but failed to warn country C, about Ws move there, it must surely be a substantial defence to any diplomatic complaint by country C that the Secretary of State was subject to a final and absolute court order prohibiting her from acting differently.
After all, as the appellants point out, a number of recent international instruments are replete with statements urging states to ensure that witnesses are protected against ill treatment or intimidation, particularly in a human rights context see, for example, article 13 of the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; Principle 3(b) of Annex I to the Istanbul Protocol Principles on the Effective Investigation and Documentation of Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; paras 3, 7, 12, 13 and 20 of the 28 July 2010 Report of the United Nations High Commissioner for Human Rights on the Right to the truth; and para 3.2.8 (under the heading, Handling reluctant Sources) of the November 2010 EU common guidelines on (Joint) Fact Finding Missions.
In short, I regard the Secretary of States concerns at learning more than she is permitted to divulge as an insufficient ground on which to deny A and SIAC the possible benefits of Ws evidence.
That said, I do not overlook the radical nature of orders of the sort proposed here, nor, indeed, the kinds of difficulty they may bring in their wake.
In the first place, such orders could be thought to come perilously close to offending against basic principles of open justice.
There is nothing novel, of course, in the making of ex parte orders.
But it is difficult to think of any other situation in which a respondent would be unable to seek release from a permanent injunction in this case, not to communicate his knowledge to others.
The respondent can, as indicated, object at the inter partes hearing to the material being used at the eventual substantive hearing.
But that is by no means the same thing as seeking to overturn the original order.
There is, moreover, as the respondent points out, the further difficulty that, even though theoretically it will be open to SIAC at the inter partes hearing to rule out Ws evidence, it may be difficult for them to ignore it entirely.
SIAC are, after all, required by section 5(6)(a) of the 1997 Act and by rule 4(3) of their 2003 Rules to ensure that on the material before them they can properly determine the proceedings.
And there could hardly be a more important issue in those proceedings than that of As safety on return.
It is that consideration, indeed, which weighs so very heavily in As favour in justifying the making of these proposed orders in the first place, given that without them SIAC will by definition never see the material.
There is the obvious further problem with regard to evidence adduced on the basis proposed that the Secretary of State will be largely unable to investigate it and will find it difficult, therefore, to explain or refute it.
Accordingly, the very making of the initial order must to a degree undermine the likely weight of the evidence and devalue its overall worth.
In the last analysis, however, none of these considerations to my mind outweighs the imperative need to maximise SIACs chances of arriving at the correct decision on the article 3 issue before them and their need, therefore, to obtain all such evidence as may contribute to this task.
I would rule, therefore, that it is open to SIAC to make such absolute and irreversible ex parte orders as are here contended for and that on occasion it may be appropriate to do so.
This is, I conclude, the least worst option open to us the lesser of two evils as I put it at the outset.
But at the same time I should make plain that I am far from enthusiastic about such orders and would certainly not expect a rash of them.
Rather it would seem to me that the power to make them should be most sparingly used.
There is, of course, the risk that the very availability of such orders may be exploited by the unscrupulous in the hope that SIAC may thereby be induced to receive untruthful evidence which, had it in the ordinary way been subject to full investigation, would have been exposed as such.
I would advocate that before making one of these proposed ex parte orders, SIAC should require the very fullest disclosure from A of (a) Ws proposed evidence (namely a detailed final statement or proof of evidence depending upon whether it is proposed to adduce the evidence orally or in writing, and if the latter why in writing), (b) the particular circumstances in which W claims to fear reprisals, and (c) how A and his legal advisers came to hear about Ws proposed evidence and what if any steps they have taken to encourage him to give that evidence in the usual way subject to the usual steps generally taken to safeguard witnesses in these circumstances, namely by anonymity orders and hearings in private.
If, moreover, one of these orders is made and it does then come to appear to the Secretary of State that the information disclosed may indeed be of some importance with regard to national security concerns, whether here or abroad, it should be open to the Secretary of State to try to persuade SIAC either to seek from A and W a sufficient waiver of the ex parte order forbidding any further communication of the information to enable these national security concerns to be met or, if such waiver, unreasonably in SIACs view despite their recognition of Ws fears, proves unobtainable, to shut out (or regard with additional scepticism) the evidence submitted.
This power, in other words, should be exercised sensibly as well as sensitively, there being ample room for flexibility in its operation notwithstanding the absolute and irreversible nature of whatever order may initially be made.
I should perhaps add this.
In striking the balance in this way, I am in no way influenced by the consideration that, as earlier stated, there are circumstances in which the Secretary of State for her part is on occasion entitled to adduce evidence in closed proceedings divulged only to a special advocate and not to A.
I do not see the scope for orders of the sort contended for here as, so to speak, levelling the playing field or providing equality of arms between the parties.
The plain fact is that the Secretary of State is acting in these cases in the wider public interest, not as an interested party.
She is, for example, obliged (now under the rules) to search for and disclose material, both open and closed, which may possibly assist As case. (He, of course, is under no corresponding duty towards the Secretary of State.) And the special advocate will to the best of his ability serve As interests, procuring on occasion rulings which may preclude the Secretary of State from relying on material however apparently damning to As cause.
As Sir David Keene observed below (at para 26): The reality is that the position of an appellant and the position of the Secretary of State are not comparable, because of the public responsibilities of the latter.
Since completing this judgment I have seen in draft the judgment of Lord Dyson and agree with him also.
I would accordingly allow these appeals to the extent indicated.
It must, of course, now be for SIAC to consider what, if any, impact our decision has upon the outcome of these appellants individual appeals: whether there is a need now to reopen them and what, if any, orders should now be made.
It is to be hoped that no further order (save as to costs as to which the parties may have 28 days for written submissions) is required from this court.
LORD DYSON
National security issues continue to present difficult challenges to the courts.
Lord Brown has explained the problem that is raised by the facts of the present case.
The appellants are all Algerian nationals whom the Secretary of State for the Home Department decided under section 3(5)(a) of the Immigration Act 1971 to deport to Algeria on the basis that their presence in the United Kingdom is not conducive to the public good on grounds of national security.
They appealed to the Special Immigration Appeals Commission (SIAC) who held that they posed a risk to national security and that the decisions to deport them were lawful and compatible with the European Convention on Human Rights (the Convention).
Their appeals were dismissed by the Court of Appeal.
The issue in all these cases is whether, if returned to Algeria, there is a real risk that the appellants would be subjected to ill treatment at the hands of the Algerian Authorities (AAs) contrary to article 3 of the Convention.
One of the appellants (Z) was in a position to put forward material from a source or sources in Algeria which was relevant to safety on return.
But the source(s) feared reprisals in Algeria if there were to be any disclosure of their identity to the AAs.
They were willing to tell their story to SIAC (and indeed to the Secretary of State), but only on an absolute and irrevocable assurance that there would be no onward disclosure to the AAs.
Rule 4(1) of the Special Immigration Appeals Commission (Procedure) Rules 2003 (SI 2003/1034) (the SIAC Rules) provides that, when exercising its functions, SIAC shall secure that information is not disclosed in any other circumstances where disclosure is likely to harm the public interest.
Rule 39(1) confers on SIAC the power to give directions relating to the conduct of any proceedings.
Subrule (2) provides that the power to give directions is to be exercised subject to the obligation in rule 4(1); and subrule (5) provides that directions under rule 39(1) may in particular (e) relate to any matter concerning the preparation for a hearing.
Rule 43(2) enables SIAC to conduct a hearing or part of a hearing in private for any good reason (in addition to the reason identified in rule 43(1) which is not material to the appeal).
It is common ground that these rules are wide enough to give SIAC the jurisdiction to make an absolute and irrevocable order prohibiting the Secretary of State from disclosing material to any person and to do so at or after a hearing from which the Secretary of State is excluded.
The question is in what circumstances (if any) it may be appropriate to make such an order (which I shall refer to as an irrevocable non disclosure order).
For the appellants, Mr Fordham QC submits that SIAC has the power to make such an order although it has not received informed representations from the Secretary of State as to whether the order should be made.
It is able subsequently to hear informed representations from the Secretary of State as to the admission of the material in evidence.
For the Secretary of State, Mr Tam QC accepts that there may be cases where an appellant is found to have good reasons for wishing to keep certain material confidential and this might provide a sound basis for SIAC to exercise its power to hold a private hearing under rule 43 and make an irrevocable non disclosure order.
But he submits that it is never appropriate to make such an order on the basis of a hearing from which the Secretary of State is excluded and she should always be given the opportunity to apply subsequently to vary or discharge the order.
In testing these submissions, it should be borne in mind that, as is illustrated by the circumstances of the present appeals, two conflicting considerations are in play here.
On the one hand, the appellants say that, unless the order that they seek is made, they will be unable to place material before SIAC which may be crucial to their case that, if returned to Algeria, they face a real risk of ill treatment by the AAs contrary to article 3 of the Convention.
If they are able to persuade SIAC of this risk, their appeals will succeed.
Thus, the appellants say that it is essential to their case that they are able to place this evidence before SIAC: the stakes could hardly be higher for them (short of a risk to life itself).
They also rely on rule 4(3) of the SIAC Rules which provides that subject to paragraphs (1) and (2), SIAC must satisfy itself that the material available to it enables it properly to determine proceedings.
In other words, it has a duty to ascertain all relevant facts.
On the other hand, it is said on behalf of the Secretary of State that there are important countervailing considerations both in relation to the conduct of the appeals and more generally.
So far as the conduct of the appeals is concerned, the ability of the Secretary of State to participate in them effectively may be seriously undermined by an irrevocable non disclosure order.
There are two aspects to consider.
First, the cogency and validity of the reasons asserted by the source(s) in support of the claimed need for confidentiality may be open to question, but the Secretary of State will be denied the ability to test the reasons or to obtain information and/or adduce evidence from or with the assistance of the AAs to demonstrate that the asserted reasons for the claim to confidentiality are groundless.
Secondly (and of perhaps even greater importance) is the fact that the Secretary of State may be seriously disadvantaged in her ability to test and challenge the substance of the evidence of the witness(es).
The effect of the order may be to deprive the Secretary of State of the ability to place before SIAC relevant evidence which it should properly consider in deciding the substantive issues arising in the appeals.
This would occur, for example, if the AAs were able to provide information bearing on the issue of safety on return of the appellants, but could not do so unless the identity of the witness(es) and what they have to say are disclosed to them.
Once the authorities know the identity of the witness(es) and the substance of their evidence, the authorities might be able to demonstrate that what is said about the risk to the appellants on return to Algeria is false.
I should add that the SIAC Rules do not make provision for the appointment of special advocates to represent the interests of the Secretary of State and it is (rightly) not suggested that SIAC could appoint special advocates under any of the powers conferred by the general rules.
It follows that the difficulties to which the Secretary of State draws attention cannot be overcome or even mitigated by the appointment of a special advocate.
In addition to the problems that are likely to be suffered by the Secretary of State in relation to the appeals, she says that irrevocable non disclosure orders may also cause collateral prejudice.
It became clear during the course of the argument that this prejudice is the potential risk of harm to future diplomatic relations with a friendly foreign state.
This is a factor which carried considerable weight with the Court of Appeal and which Lord Brown deals with at paras 11 to 15.
In weighing these competing considerations, I have no doubt that the scales come down in favour of making an irrevocable non disclosure order where SIAC is satisfied that such an order is necessary in the interests of justice.
I agree entirely with what Lord Brown says at paras 19 to 21 as to how the power to make an order should be exercised.
SIAC should be astute to guard against the danger of abuse and should scrutinise with great care and test rigorously the claimed need for an order.
But if SIAC (i) is satisfied that a witness can give evidence which appears to be capable of belief and which could be decisive or at least highly material on the issue of safety of return and (ii) has no reason to doubt that the witness genuinely and reasonably fears that he and/or others close to him would face reprisals in Algeria if his identity and the evidence that he is willing to give were disclosed to the AAs, then in my view an irrevocable non disclosure order should be made.
I accept that to make such an order is a striking step for any court to take and is contrary to the instincts of any common lawyer.
It is inimical to the fundamental principles which we rightly cherish of open justice and, above all, procedural fairness.
To make an order without giving the Secretary of State an opportunity to be heard is a clear breach of the principles of natural justice.
Any such order requires compelling justification.
Regrettably, however, the circumstances of a case sometimes call for unusual and undesirable remedies.
Ultimately, the court has to decide what is demanded by the interests of justice.
In weighing the prejudice that the Secretary of State may suffer in the appeal process as a result of an irrevocable non disclosure order, it should not be overlooked that the appeals themselves will be conducted entirely inter partes.
In particular, no material that is placed before SIAC by the appellants will be withheld from the Secretary of State.
She may be able to demonstrate that the claimed need for confidentiality is without foundation and to persuade SIAC to give the evidence little or no weight for that reason alone.
She may also be able to test the evidence of the witness(es) effectively even though she has been unable to discuss it with the AAs.
For example, she may be able to show on the basis of objective general material about the conditions in Algeria that the evidence of the witness is unlikely to be true; and even where the evidence is more specific, she may be able to obtain information from the AAs which will enable her to rebut the evidence without divulging the name or identity of the witness or saying anything which might lead to his or her identification.
It will, of course, depend on the nature of the evidence to be given by the witness.
I do not wish to suggest that the effect of an irrevocable non disclosure order may not inhibit the ability of the Secretary of State to resist the appeals.
In some cases, such an order will undoubtedly have that effect.
But it cannot safely be said that it is bound to do so in every case.
As regards the collateral prejudice claimed by the Secretary of State, like Lord Brown I consider that this has relatively little weight for the reasons that he gives.
In my view, if SIAC concludes that the two conditions to which I have referred at para 34 above are satisfied, then the countervailing considerations relied on by the Secretary of State should not outweigh the need to ensure that the appellants are able to deploy any material which might show that, on return to Algeria, they would face a real risk of treatment contrary to article 3 of the Convention.
The same considerations and the same result would follow if the case raised a question under article 2 of the Convention.
But if the ground on which an appellant is resisting deportation is an alleged risk of breach of some other article of the Convention, the balance will almost certainly be struck the other way.
For example, in many appeals against orders for deportation, the ground of appeal is that to deport the appellant would involve a breach of his or her article 8 rights.
I find it difficult to conceive of a case in which it would be appropriate to make an order in order to protect the wish for confidentiality of a witness in those circumstances.
For these reasons as well as those given by Lord Brown (with which I am in entire agreement), these appeals should be allowed to the extent indicated.
LORD PHILLIPS, LORD KERR AND LORD WILSON
We agree with both the judgments of Lord Brown and Lord Dyson.
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The appellants, all Algerian nationals, were suspected terrorists whom the Secretary of State proposed to deport to Algeria.
It was common ground that Algeria was a country where torture was systematically practised by state officials and no state official had ever been prosecuted for it.
The Secretary of State obtained assurances from the Algerian Government that the appellants rights not to be tortured or subjected to other ill treatment would be respected on return to Algeria.
The Special Immigration Appeals Commission Act 1997 established an appeal system which allows where necessary for closed material procedures and the appointment of special advocates.
If the Secretary of State wishes to adduce evidence which, for reasons of national security or other sufficient public interest reasons, cannot safely be communicated to the other party, SIACs rules and procedures provide for this to be done.
In this case, however, it was one of the appellants who wished to adduce evidence from a witness (W), who had inside knowledge of the position in Algeria and asserted that, notwithstanding the Algerian Governments official assurances, those in the appellants positions were in fact likely to be subjected on return to torture or other ill treatment.
W was prepared to give evidence in the appellants appeals to SIAC only on one unalterable condition: that his identity and evidence would by order remain absolutely and irrevocably confidential to SIAC and the parties to the appeals.
W was concerned that the Secretary of State might otherwise seek to communicate his evidence to the Algerian authorities, if only to assess its veracity and reliability, and that her doing so would place him and/or his family in peril.
The Secretary of State had two main objections to such an order being made.
First, she would be unable to participate effectively in the conduct of the appeals before SIAC, being unable to test either the validity of the reasons asserted by W in support of his claimed need for confidentiality or the substance of Ws evidence itself.
Secondly, the Secretary of State may find herself in possession of information pointing to the existence of a terrorist threat abroad or some other risk to national security, yet, bound by SIACs order, unable to alert the foreign state to the risk.
This could gravely imperil future diplomatic relations with foreign states.
The question in the appeals therefore was whether it was open to SIAC to make an order for an absolute and irreversible guarantee of total confidentiality in respect of Ws identity and evidence before the same were disclosed to the Secretary of State (in circumstances where it would nevertheless remain open to the Secretary of State to challenge the admissibility or weight of that evidence before SIAC in its determination of the substantive appeals).
The Supreme Court unanimously allows the appeals.
Lord Brown gives the leading judgment of the Court; Lord Dyson gives a concurring judgment.
The fundamental objection of the Secretary of State to the proposed order, based on her concerns about being obliged to withhold vital information relating to national security from a foreign state, thereby imperilling future diplomatic relations, is unpersuasive [11] [13].
It must surely be a substantial defence to any diplomatic complaint by a foreign state that the Secretary of State is subject to a final and absolute court order prohibiting her from acting differently [14].
A number of recent international instruments are replete with statements urging states to ensure that witnesses are protected against ill treatment or intimidation, particularly in a human rights context [15].
The imperative need here is to maximise SIACs chances of arriving at the correct decision on the issue before them concerning the safety of the appellants on return to Algeria and, therefore, for SIAC to obtain all such evidence as may contribute to this task [18].
Accordingly, it is open to SIAC to make absolute and irreversible ex parte orders of the kind sought in this case and on occasion it may be appropriate to do so [19].
The power to make such orders should however be used most sparingly [19].
Before making one of the proposed ex parte orders, SIAC should require the very fullest disclosure from the applicant (A) of (a) the proposed evidence from As proposed witness (W), (b) the particular circumstances in which W claims to fear reprisals, and (c) how A and his legal advisers came to hear about Ws proposed evidence and what if any steps they have taken to encourage W to give that evidence in the usual way subject to the usual steps generally taken to safeguard witnesses in such circumstances (e.g. anonymity orders and hearings in private) [20].
SIAC should only then, in the interests of justice, grant such an order if it (1) is satisfied that a witness can give evidence which appears to be capable of belief and which could be decisive or at least highly material on the issue of safety of return and (2) has no reason to doubt that the witness genuinely and reasonably fears that he and/or others close to him would face reprisals if his identity and the evidence that he is willing to give were disclosed to the relevant foreign state [34].
Notwithstanding the absolute and irreversible nature of the order, it should in addition be open to the Secretary of State, upon such order being made, to try to persuade SIAC either to seek from A and W a sufficient waiver of the ex parte order forbidding any further communication of the information, or, if such waiver proves unobtainable, to exclude or regard with additional scepticism the evidence submitted [21].
The Court, in permitting the making of such ex parte orders in the circumstances of this case, has in no way been influenced by the circumstances in which the Secretary of State is on occasion entitled to adduce evidence in closed proceedings divulged only to a special advocate and not to A. The scope of the orders sought here should not be regarded as levelling the playing field between the parties: the Secretary of State in cases before SIAC acts in the wider public interest and not as an interested party [22].
The same considerations and the same result would follow if the case engaging as it does here the rights of the appellants under article 3 of the ECHR raised a question under article 2 of the same.
However, if the ground on which an appellant is resisting deportation is an alleged risk of breach of some other article of the ECHR (e.g. article 8), the balance will almost certainly be struck the other way.
In those circumstances it would be inappropriate to make an ex parte order to protect the confidentiality of a witness [38].
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These appeals arise out of an application for a permanence order under section 80 of the Adoption and Children (Scotland) Act 2007 (the 2007 Act), with authority to adopt, brought by West Lothian Council (the local authority) in December 2014.
The application relates to a child, EV, who was born on 30 December 2013, and has been in care since her birth.
It is opposed by the childs parents, to whom I shall refer as the mother and father.
The application was granted by the Lord Ordinary on 31 March 2016, following a preliminary proof of one day and a further proof of eight days.
His decision was upheld by the Second Division, other than in relation to the grant of authority to adopt and a related prohibition on contact by the parents, on 20 July 2016.
Permission to appeal to this court was granted to each of the parents by an Extra Division on 14 October 2016.
The issues in the appeals
The Extra Division identified a single issue which satisfied the criterion in section 40A of the Court of Session Act 1988 for the grant of permission to appeal, namely an arguable point of law of general public importance which ought to be considered by the Supreme Court at this time.
That issue was whether the guidance given in the case of In re J (Children) (Care Proceedings: Threshold Criteria) [2013] UKSC 9; [2013] 1 AC 680 is applicable in Scotland, where different legislation applies.
The grant of permission was not, however, restricted to that issue, since it was closely interconnected with the other grounds of appeal.
In the event, at the hearing of the appeals, there was no issue between the parties in relation to In re J.
They agree that the decision of the majority in that case, encapsulated in Lord Hopes golden rule (to which I shall return), applies equally to the legislation with which these appeals are concerned.
The point which prompted the grant of permission to appeal does not, therefore, require to be decided.
It is nevertheless appropriate, given the uncertainty implicit in the grant of permission, to make some observations about the issue.
I shall do so at a later point.
Neither the Lord Ordinary nor the Second Division followed the approach laid down in In re J.
The first question which arises is whether their decisions can nevertheless be supported.
If not, the second question is whether the case should be remitted to the Inner House for it to determine the application on the basis of the evidence led before the Lord Ordinary and such further evidence as may be appropriate, or whether the application should simply be refused.
The statutory framework
The legislation governing the making of a permanence order is contained in sections 80 to 84 of the 2007 Act.
Section 80 permits the granting of a permanence order, defined as an order consisting of the mandatory provision specified in section 81, such of the ancillary provisions specified in section 82 as the court thinks fit, and, if the conditions in section 83 are met, provision granting authority for the child to be adopted.
The mandatory provision is a provision vesting in the local authority the parental right to have the child living with them or otherwise to regulate the childs residence, and the parental responsibility to provide guidance to the child.
The ancillary provisions are provisions vesting other parental rights and responsibilities in the local authority or in another person, and extinguishing parental rights and responsibilities previously vested in a parent or guardian of the child.
The parental right in respect of the childs residence which was previously vested in a parent or guardian is automatically extinguished: section 87.
In relation to section 80, it is important to note section 80(3): In making a permanence order in respect of a child, the appropriate court must secure that each parental responsibility and parental right in respect of the child vests in a person.
Parental responsibilities and parental rights include the responsibility and the right, respectively, if the child is not living with the parent, to maintain personal relations and direct contact with the child on a regular basis: Children (Scotland) Act 1995, sections 1(1)(c) and 2(1)(c).
If, therefore, the court makes a permanence order, it must ensure that there is someone who has the responsibility and right to maintain personal relations and direct contact with the child.
That person must be someone other than the local authority: section 82(1)(a) and (b).
The conditions laid down in section 83 for the granting of authority for adoption lay down crucial tests, which were discussed in the case of R v Stirling Council [2016] CSIH 36; 2016 SLT 689, paras 16 18.
They include a requirement that the court must be satisfied that the child has been, or is likely to be, placed for adoption.
Section 84 sets out the conditions and considerations applicable to the making of a permanence order.
In relation to these, section 84(1), read with section 84(2), enables the court to make a permanence order without the consent of the child where the child is aged under 12, as was the position in this case.
Section 84(3) to (5) is in the following terms: (3) The court may not make a permanence order in respect of a child unless it considers that it would be better for the child that the order be made than that it should not be made.
In considering whether to make a permanence order and, (4) if so, what provision the order should make, the court is to regard the need to safeguard and promote the welfare of the child throughout childhood as the paramount consideration. (5) Before making a permanence order, the court must after taking account of the childs age and (a) maturity, so far as is reasonably practicable (i) give the child the opportunity to indicate whether the child wishes to express any views, and (ii) opportunity to express them, if the child does so wish, give the child the (b) have regard to (i) any such views the child may express, (ii) the childs religious persuasion, racial origin and cultural and linguistic background, and (iii) of the order, and (c) be satisfied that the likely effect on the child of the making (i) there is no person who has the right mentioned in subsection (1)(a) of section 2 of the [Children (Scotland) Act 1995] to have the child living with the person or otherwise to regulate the childs residence, or (ii) where there is such a person, the childs residence with the person is, or is likely to be, seriously detrimental to the welfare of the child.
These three subsections are of a different character from one another, and are to be applied in different ways.
Section 84(5) is particularly complex.
Subsections (a) and (b)(i) impose duties in respect of ascertaining and considering the views of the child, so far as is reasonably practicable.
In the present case, given the very young age of the child, those duties did not arise.
Subsection (b)(ii) and (iii) impose duties to have regard to specified factors.
In the present case, two of the factors mentioned in subsection (b)(ii) are relevant, namely the childs racial origin and cultural and linguistic background.
Section 84(5)(c) is of a different nature.
It lays down a factual test in each of subsections (c)(i) and (ii).
One or other of those tests must be satisfied before a permanence order can be made.
Section 84(5)(c) therefore imposes a threshold test.
It has to be addressed, and satisfied, before any issue requires to be considered under the other provisions of section 84.
In the present case, it was paragraph (c)(ii) which was relevant, since both parents had the right mentioned in paragraph (c)(i).
It was therefore necessary, before a permanence order could be made, for the court to be satisfied, in relation to each of the parents, that the childs residence with that person was likely to be seriously detrimental to her welfare.
Section 84(3) arises only if the test in section 84(5)(c) is met.
It imposes a prohibition on the making of a permanence order unless a specified requirement is met, namely that it would be better for the child that the order be made than that it should not be made.
Section 84(4) applies when the court is considering whether to make a permanence order and, if so, what provision the order should make.
It has no bearing on the test imposed by section 84(5)(c), since (1) that is a factual test which cannot be affected by treating the childs welfare as the paramount consideration, and (2) the test must be satisfied before the court reaches the stage of considering whether to make a permanence order.
Once that stage is reached, however, section 84(4) is plainly important.
The relevant Scottish case law
In TW v Aberdeenshire Council [2012] CSIH 37; 2013 SC 108, the Extra Division correctly rejected an argument that sections 84(3) and (4) had a particular core status.
It said that subsections (3), (4) and (5) impose separate requirements, all of which have a bearing on whether a permanence order should be made.
Lord Bonomy, giving the opinion of the court, stated at para 13: It is . difficult to envisage circumstances in which a court, faced with an application for a permanence order, would not first of all address the factors that arise under subsection (5)(c), in this case paragraph (c)(ii), and any other matters arising under subsection (5), always bearing in mind the requirement of subsection (4) to regard the need to safeguard and promote the welfare of the child throughout childhood as the paramount consideration, and only then consider the application of the no order principle in subsection (3), again keeping subsection (4) in mind.
The statement that section 84(5)(c) raises factors which have to be addressed does not make clear its true significance: it lays down factual tests which must be satisfied before a permanence order can be made.
The passage is also mistaken in stating that subsection (4) has to be borne in mind when addressing subsection (5): I have explained why subsection (4) does not affect the test imposed by subsection (5)(c), and it is equally incapable of affecting the duty to have regard to the matters mentioned in subsection (5)(a) and (b).
Nevertheless, the passage provides clear guidance as to the need to address the issue arising under subsection (5)(c) before considering subsections (3) and (4).
Clearer guidance was provided by Lord Drummond Young, giving the opinion of the Extra Division in R v Stirling Council.
At para 13, Lord Drummond Young stated: Thus section 84 imposes two critical conditions if a permanence order is to be made in a case where the natural parent does not consent.
First, in terms of subsection (3), the court must consider that it would be better for the child that the order should be made than that it should not be made; that decision must be made in the light of the requirement of subsection (4) that the welfare of the child throughout childhood is to be the paramount consideration.
Secondly, in terms of subsection (5)(c)(ii), the court must be satisfied that the childs residence with the parent is, or is likely to be, seriously detrimental to his or her welfare.
Of the two conditions, that in subsection (5)(c)(ii) is the more fundamental: it imposes a threshold test, in the sense that, if it is not satisfied, the court is not permitted to dispense with the parents consent.
It is only if the test is satisfied that the court requires to go on to consider the welfare of the child .
The critical point is that the requirements of subsection (5) set a threshold test, and unless that test is satisfied no permanence order can be made and any further consideration of the other provisions of section 84 is irrelevant.
Subject to the observation, in relation to the first sentence, that section 84 applies to all applications for a permanence order, and that no question of parental consent arises unless authority for adoption is sought, I respectfully agree.
Lord Drummond Young added at para 15: The threshold test is in our opinion a matter of fundamental importance, and we must express regret at the manner in which section 84 of the Adoption and Children (Scotland) Act 2007 is structured.
In that section the fundamental threshold provision comes at the end, after the subsections dealing with the welfare of the child.
It would clearly be more sensible to state the threshold test at an earlier point, before the welfare provisions, because the threshold test must be satisfied before any of the other provisions becomes relevant.
As matters stand there is an obvious risk that the sheriff will fail to appreciate the fundamental importance of the criterion in subsection (5).
That is what appears to have happened in the present case.
And also, as will appear, in the present case.
The judges function
In determining the issue arising under section 84(5)(c)(ii), and indeed the other issues arising under that section, the judge is the primary decision maker.
He is wholly responsible for deciding the issues arising under the legislation on the basis of his own findings on the evidence.
His role is not that of a judge exercising a supervisory jurisdiction (as, for example, in an application for judicial review), assessing whether the local authority had a reasonable basis for its concerns and its consequent actions.
In this regard, guidance can be taken from decisions concerned with the similar judicial function in relation to the corresponding threshold test in England and Wales.
Section 31(2) of the Children Act 1989 requires the court to be satisfied that the child concerned is suffering, or is likely to suffer, significant harm, before it can make a care order or supervision order.
Such orders place a child in the care or under the supervision of a local authority, and for those purposes the local authority is given parental responsibility for the child.
Section 31(2) shares with section 84(5)(c)(ii) of the 2007 Act the fact that it imposes a threshold test for the making of orders concerned with the care of children, the requirement that the court must be satisfied, and the provision that the matter of which the court must be satisfied is a likelihood: in the English provision, a likelihood of significant harm to the child, and in the Scottish provision, a likelihood of serious detriment to the childs welfare.
The case of In re B (Children) (Care Proceedings: Standard of Proof) (CAFCASS intervening) [2008] UKHL 35; [2009] AC 11 concerned the question whether the threshold condition in section 31(2) of the 1989 Act was satisfied.
Lady Hale emphasised at para 57 the importance of keeping separate the roles of the courts and the local authorities.
Having explained the functions of local authorities in the protection of children from harm, her Ladyship continued: The task of the court is to hear the evidence put forward on behalf of all the parties to the case and to decide, first, whether the threshold criteria are met and, second, what order if any will be best for the child.
While the local authority may well take preliminary or preventive action based upon reasonable suspicions or beliefs, it is the courts task when authorising permanent intervention in the legal relationship between parent and child to decide whether those suspicions are well founded .
To allow the courts to make decisions about the allocation of parental responsibility for children on the basis of unproven allegations and unsubstantiated suspicions would be to deny them their essential role in protecting both children and their families from the intervention of the state, however well intentioned that intervention may be.
It is to confuse the role of the local authority, in assessing and managing risk, in planning for the child, and deciding what action to initiate, with the role of the court in deciding where the truth lies and what the legal consequences should be.
I do not underestimate the difficulty of deciding where the truth lies but that is what the courts are for. (paras 58 59)
In the later case of In re S B (Children) (Care Proceedings: Standard of Proof) [2009] UKSC 17; [2010] 1 AC 678, again concerned with section 31(2) of the 1989 Act, Lady Hale emphasised that the decision whether to make an order interfering with individual rights must be taken by an independent and impartial court.
In order to bring home to judges that their role is not merely supervisory, she drew an analogy with criminal proceedings: Social workers are the detectives.
They amass a great deal of information about a child and his family.
They assess risk factors.
They devise plans.
They put the evidence which they have assembled before a court and ask for an order.
The court subjects the evidence of the local authority to critical scrutiny, finds what the facts are, makes predictions based upon the facts, and balances a range of considerations in deciding what will be best for the child.
We should no more expect every case which a local authority brings to court to result in an order than we should expect every prosecution brought by the CPS to result in a conviction.
The standard of proof may be different, but the roles of the social workers and the prosecutors are similar.
They bring to court those cases where there is a good case to answer.
It is for the court to decide whether the case is made out. (paras 18 19)
The application of the threshold test
It follows that decisions under section 31(2) of the 1989 Act as to a future likelihood of harm cannot be based merely on allegations or suspicions: a conclusion that harm is likely must be based on findings of fact.
Lady Hale put the matter in this way in In re J, para 49: Care courts are often told that the best predictor of the future is the past.
But prediction is only possible where the past facts are proved.
A real possibility that something has happened in the past is not enough to predict that it will happen in the future.
It may be the fact that a judge has found that there is a real
possibility that something has happened.
But that is not
Facts have to be established on a balance of probabilities.
Lord Hoffmann explained this in In re B, para 2: sufficient for this purpose.
A finding of a real possibility that a child has suffered harm does not establish that he has.
A finding of a real possibility that the harm which a child has suffered is non accidental does not establish that it was.
A finding of a real possibility that this parent harmed a child does not establish that she did.
Only a finding that he has, it was, or she did, as the case may be, can be sufficient to found a prediction that because it has happened in the past the same is likely to happen in the future.
Care courts need to hear this message loud and clear.
If a legal rule requires a fact to be proved (a fact in issue), a judge or jury must decide whether or not it happened.
There is no room for a finding that it might have happened.
The law operates a binary system in which the only values are zero and one.
The fact either happened or it did not.
If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carries the burden of proof.
If the party who bears the burden of proof fails to discharge it, a value of zero is returned and the fact is treated as not having happened.
If he does discharge it, a value of one is returned and the fact is treated as having happened.
More recently, in In re J, Lord Hope said that the golden rule must surely be that a prediction of future harm has to be based on facts that have been proved on a balance of probabilities (para 84).
This does not require the courts to do anything unusual.
As Lord Nicholls of Birkenhead remarked in In re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563, 589, to resolve disputed issues of relevant fact in order to reach a conclusion on the issue it has to decide is a commonplace exercise carried out daily by courts.
Lady Hale put the point more pithily in the passage cited from In re B: deciding where the truth lies is what the courts are for.
The considerations which led to these conclusions in the English cases are equally applicable to the Scottish legislation.
Foremost among them is the need to construe the legislation in a way which strikes a proper balance between the need to safeguard children and the need to respect family life: a consideration which applies equally to the making of permanence orders under the Scottish legislation.
As Lady Hale said in In re B, para 54: The threshold is there to protect both the children and their parents from unjustified intervention in their lives.
It would provide no protection at all if it could be established on the basis of unsubstantiated suspicions: that is, where a judge cannot say that there is no real possibility that abuse took place, so concludes that there is a real possibility that it did.
In other words, the alleged perpetrator would have to prove that it did not.
A second consideration is the wording of the test itself, and comparison with the wording of other provisions, such as those concerned with orders of an emergency character.
In that regard, the most significant terms satisfied and likely are common to both the Scottish and the English provisions.
In particular, as Lord Nicholls observed in In re H at pp 585 586, the need for the court to be judicially satisfied is an indication that unresolved doubts and suspicions cannot form the basis of the order, and can be contrasted with the statutory language used where suspicion may be enough (as, for example, in relation to orders under sections 35 and 37 of the Childrens Hearings (Scotland) Act 2011).
It also indicates that the burden of proof rests on the party seeking the order.
The requirement in the threshold test that residence with the parent should be not merely detrimental to the welfare of the child, but seriously detrimental, is also of crucial importance.
In R v Stirling Council, Lord Drummond Young referred at para 14 to several decisions of the House of Lords and of this court concerned with the corresponding issue arising under the English threshold test, namely whether there is a likelihood of significant harm.
They included the case of In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911, where the English authorities are reviewed.
As Lord Drummond Young noted, the fundamental point is that depriving the parents of a child of their parental authority at common law is a most serious matter, and it should only be done if strict criteria are satisfied.
It is, emphatically, not enough to show that a child would benefit from being brought up elsewhere.
This is made clear in the speech of Lord Templeman in In re KD (A Minor) (Ward: Termination of Access) [1988] AC 806, 812: The best person to bring up a child is the natural parent.
It matters not whether the parent is wise or foolish, rich or poor, educated or illiterate, provided the child's moral and physical health are not endangered.
The implications of that statement were considered in In re L (Care: Threshold Criteria [2007] 1 FLR 2050, a case which, like the present case, concerned parents with learning difficulties.
Hedley J, having quoted Lord Templeman, continued: It follows inexorably from that, that society must be willing to tolerate very diverse standards of parenting, including the eccentric, the barely adequate and the inconsistent.
It follows too that children will inevitably have both very different experiences of parenting and very unequal consequences flowing from it.
It means that some children will experience disadvantage and harm, while others flourish in atmospheres of loving security and emotional stability.
These are the consequences of our fallible humanity and it is not the provenance [semble: province] of the state to spare children all the consequences of defective parenting. (para 50) He concluded that the children were suffering, and likely to suffer, some harm to their intellectual development as a result of their parents inadequacies, but that it was not of a character or significance to justify compulsory intervention.
Finally, in relation to the application of the legislation, it is important that the courts reasoning should demonstrate that it has applied the legislation correctly.
This requires more than the formulaic repetition of the statutory language.
It should be apparent that the court has analysed the arguments for and against making a permanence order (including the various provisions which might realistically be under consideration) and, where appropriate, an order granting authority for adoption.
Its reasons for preferring one option to the potential alternatives should be explained.
In order to carry out this task, the court requires evidence which addresses all the options which are realistically available and analyses the arguments for and against each option.
If the court finds that the threshold test is satisfied, it should be clear (1) what is the nature of the detriment which the court is satisfied is likely if the child resides with the parent, (2) why the court is satisfied that it is likely, and (3) why the court is satisfied that it is serious.
The Lord Ordinarys opinion
Considered in the light of the foregoing, the Lord Ordinarys opinion is, unfortunately, deficient in a number of respects.
In fairness, it should be stressed that, since he gave judgment before the decision of the Inner House in R v Stirling Council, he did not have the benefit of the guidance provided in that case.
The Lord Ordinary did not set out in his opinion the material provisions of sections 80 to 84 of the 2007 Act, or identify the separate conditions, each of which has to be satisfied before a permanence order, or an order granting authority for adoption, can be made.
He did not distinguish in his opinion between the making of a permanence order and the granting of authority for adoption.
He did not refer to the case of In re J, although this court was informed that it had been relied on by counsel for the parents.
His general approach was to consider whether the local authoritys actions had been justified, in the sense that they had responded in a reasonable manner to concerns for which an evidential basis existed.
As a consequence, he made few findings of fact in relation to the issues in dispute, and none in relation to the threshold issue arising under section 84(5)(c)(ii).
It was a matter of agreement before the Lord Ordinary that the childs parents lived together.
Both parents had experienced learning difficulties throughout their lives.
It was also agreed that on the date of the childs birth, a child protection order was granted by the Sheriff on the ex parte application of the local authority, with a condition that there should be no contact between the father and the child.
That condition has remained in place ever since.
The Lord Ordinary was provided with reasoned decisions maintaining that condition.
The first was taken by a childrens hearing on 10 January 2014, when an interim compulsory supervision order was made.
Later decisions were taken during February, March, April and May 2014 when the interim compulsory supervision order was continued, and on 12 June 2014, when a compulsory supervision order was made.
None of that reasoning is referred to in the Lord Ordinarys opinion, with the consequence that the decision to deny the father all contact with his child over the entirety of her life to date (with the exception of one hour, for the purposes of these proceedings), is unexplained.
It was also agreed that on 10 January 2014 the childrens hearing decided to refer the grounds of referral to the Sheriff for proof, and that on 23 May 2014 amended grounds of referral were held to be established.
The Lord Ordinary was provided with the amended grounds of referral, but his opinion does not explain what they were.
It was also agreed that a parenting capacity assessment was carried out in relation to the mother.
The Lord Ordinary was provided with a copy of the assessment report.
No such assessment was carried out in relation to the father.
The Lord Ordinarys opinion does not explain why that was.
The Lord Ordinary also narrates that he was provided with a copy of a report prepared by a Dr Coupar, but the opinion contains no indication of the subject matter of the report.
The Lord Ordinary explains that the primary source of the local authoritys concerns in relation to the child arose as a result of the relationship between her parents.
There were three main causes for these concerns, all of them arising out of what the Lord Ordinary described as perceived concerns about the behaviour of [the father].
The first concern, which appears to have been of particular importance to the local authority, related to criminal charges of alleged sexual conduct . brought in England in 2010.
The Lord Ordinary does not explain what those charges were.
Whatever they may have been, they were dropped within a short period of being made, because the complainant had given inconsistent and contradictory accounts.
The police did not pass the case to the Crown Prosecution Service.
It appears that the complainant was a vulnerable female person who suffered from learning difficulties.
According to the fathers affidavit, she was a friend of his who had wanted to have a sexual relationship with him.
He had not been interested.
She then made allegations to the police that he had raped her.
This court has been informed that they were both aged about 19 at the time.
The Lord Ordinary narrates that he heard evidence from a police officer that the father had given a statement in which he accepted that he had had consensual sex with the complainant.
The father also gave evidence before the Lord Ordinary.
He accepted that he had said what was recorded in the statement, but denied that it was true.
Having narrated this evidence, and expressed reservations about the evidence given by the father in relation to this matter, the Lord Ordinary stated: In these circumstances it appears to me to be established on the balance of probabilities that the concerns harboured by the petitioners in relation to the [fathers]s sexual proclivities were justified.
In arriving at that conclusion I should make it clear that I am making no finding in relation to whether or not the sexual allegations made in 2010 were true or not.
The relevancy or otherwise of these allegations is not a matter for me, nor have I heard any evidence in relation to the relevancy of these matters.
My finding is confined to concluding that, notwithstanding the lack of any criminal conviction, there was material available to the petitioners at the time of the child EVs birth relative to the [father]s behaviour towards vulnerable females which they could not ignore and were required to have consideration of when formulating a policy or plan towards the ongoing care of the child EV. (para 20)
This passage epitomises the Lord Ordinarys misunderstanding of his function.
As previously explained, it was not his function to determine whether the (unexplained) concerns harboured by the local authority about the fathers sexual proclivities (whatever may have been meant by that phrase) were justified.
The conclusion stated in the last sentence is irrelevant to the task which he had to perform.
The entire discussion of this topic is beside the point unless the allegations are relevant to the issues which the Lord Ordinary had to determine.
The allegations concern the fathers sexual behaviour with another adult with learning difficulties, three years before the child was born.
The Lord Ordinary does not address the question whether, or how, they might be relevant to the question whether the childs residing with her parents would be seriously detrimental to her welfare.
If the allegations are relevant, however, then the Lord Ordinary has to make a finding of fact, on the balance of probabilities, as to whether the allegations are true.
If he is unable to make such a finding, then he has to find that the allegations are unproved, and dismiss them from his mind.
The Lord Ordinary noted that a subsidiary matter arising out of these allegations concerned the period before the allegations were dropped, when the father was briefly on police bail.
The father accepted in his evidence that he had entered the college where the complainant was studying.
This was reported to the police, as there was a bail condition not to approach the college.
There was also evidence that the father had admitted the complainant to his home.
This was regarded by the police as a breach of a bail condition not to approach the complainant.
The father accepted in his evidence that these events had occurred.
No criminal charges were brought.
The Lord Ordinary appears to have accepted that the father had contravened his bail conditions, although the way in which he expressed his conclusion again shied away from making a finding of fact: he said that it appeared to him that there was evidence before the court to support the proposition.
He did not address the question whether the breaches were relevant to the issue arising under section 84(5)(c)(ii).
It is difficult to see what significance they could have had.
The second matter of concern to the local authority was an allegation concerning the mothers daughter from a previous relationship, whom I shall refer to as MP.
MP did not live with her mother, but was in care.
Evidence was given by the social worker responsible for EV that she (the social worker) had been told that other workers in a homeless unit where the mother had once stayed had been told by the mother that the father had said to her that he would like to have sex with MP, who was aged about eight at the time.
The social worker also said that, at a meeting she attended, the father had adopted the position that he should not have said this out loud.
The mother, in her evidence, said that she accepted the fathers assurance that the statement was either not said or, if it was, was uttered as a joke.
The Lord Ordinary says nothing about whether this matter was addressed in the fathers evidence, or, if it was, what he said about it.
Nor does the Lord Ordinary make any finding about this matter, beyond saying that regard required to be had to that remark by the [local authority].
Whether that statement was intended to bear the implication that the remark was actually made is not clear.
The Lord Ordinary does not address the significance of this matter in relation to the threshold test.
That would depend on what inferences should be drawn from the remark, if it was made: inferences which might not be as straightforward as in the case of a man with normal social skills.
Was it meant to be a joke? Or was it a serious expression of sexual desire?
The third matter of concern to the local authority was described by the Lord Ordinary as follows: The third concern in relation to the [father] were threats made by him to social workers in August 2013 that he would kill a support worker and social worker in the event that they refused to allow him and the [mother] to have the baby after its birth.
In the same vein threats, or a message of a threatening nature, made by the [father] to the [mother] also in August 2013.
These threats were reported to the police, were the subject of a criminal prosecution and resulted in [a] conviction. (para 13) In relation to the first of these matters, the Lord Ordinary states that the threats against social workers were spoken to by the two persons against whom the threats were uttered.
The father accepted that he made the utterances, but said that they were merely hot air or said in the heat of the moment.
Before this court, it was common ground that the Lord Ordinary had misunderstood the evidence in relation to this matter.
According to counsel, there was only one incident involving a threat, not two.
There was no evidence from social workers who had been threatened.
The matter arose out of a telephone call which the father had made to the mother when she was in a car with a social worker in August 2013, four months before the child was born.
There were already plans for the child to be removed from the parents as soon as she was born.
The father said to the mother over the telephone something to the effect that he would kill social work staff if he and she did not get custody.
Evidence that this had occurred was given by a social worker who had not been present.
It was agreed that the father pled guilty to a charge under section 127(1) of the Communications Act 2003 in relation to this matter and was fined 135.
It is agreed that this is his only criminal conviction.
The Lord Ordinary considered the relevance of this matter, as he understood it, only in relation to the actions taken by the local authority.
His conclusion was that there being evidence of the threats being uttered . they were factors which the [local authority] required to have regard to.
The real question, if it was found that a threatening statement had been made, was how much significance, if any, should be attached to it by the court when considering whether the childs residence with her father was likely to be seriously detrimental to her welfare.
Both the court and the local authority should maintain a sense of perspective: if this was merely a momentary expression of anger by a father who had much to be angry about, it should not be given exaggerated importance in determining the childs future.
In the light of all this evidence, the Lord Ordinary stated that there was plainly established before the court evidence of the concerns which caused the [local authority] to proceed down the route of permanence which ultimately led to the presentation of this petition to the court.
Once again, the Lord Ordinarys focus appears to have been on assessing whether the local authoritys actions had a proper basis.
So far as the care of the child was concerned, the Lord Ordinary explained that the local authoritys views were critically dependent on the fact that her parents were a couple.
It had been made clear to the mother that, if she left EVs father, the local authority would reassess the case.
Although the mother would have difficulties caring for a young child, efforts could be made to assist her and thereafter assess her suitability as a custodian for her child.
Her unwillingness to leave the father rendered that course of action impossible, in the view of the local authority.
In relation to the parenting skills of the mother, the Lord Ordinary said that there was evidence, which he accepted, of a lack of engagement with social workers, and of an inability to grasp more than basic parenting skills.
An expert in social work practice named Helen Stirling, giving evidence on behalf of the mother, said that, even with extensive support from social workers, the mother might only even master physical care tasks, and not manage the more complex tasks of meeting EVs emotional and social needs.
In relation to these matters, it is relevant to note that the mother had two children by a previous partner, one of them being the child MP referred to earlier.
She and her partner looked after those children (born in 2004 and 2007), without significant support from the local authority, until October 2012, when the couple separated and the children went to live with their father.
In 2013 their father died, and the children were accommodated by the local authority, but continued to have regular contact with their mother.
The mothers relationship with EVs father was a factor in the local authoritys decision that the children should not be in her care.
This court was informed that the mother has now been prevented even from having contact with the children.
So far as EVs father is concerned, the Lord Ordinary stated that the social workers were concerned about his ability to acquire parenting skills and to cooperate with them.
As mentioned earlier, however, the local authority had carried out no parenting assessment.
The father had been permitted to see the child for one hour, for the purpose of allowing observation of his interaction with the child by an expert witness instructed on his behalf.
The Lord Ordinary found the witnesss evidence of limited utility, since it was based on a single contact session.
The Lord Ordinary noted that it was not suggested on the fathers behalf that he was able to demonstrate the parenting skills required for the care of the child.
The Lord Ordinary said very little in his opinion about the child herself, and her particular needs.
This court was told that the child may have global developmental delay.
It is unclear whether that matter was raised before the Lord Ordinary.
If it was, he made no finding about it.
If that is correct, however, then it is something which may be relevant to the ability of the parents to care for her, and also to the prospects of her being adopted.
It may also bear on the question, which can arise in cases involving parents with learning difficulties, whether the childs residing with them might harm her own intellectual development.
Nor did the Lord Ordinary explain whether the alternative to her residing with her parents was, or was not, a permanent placement, with carers who were committed to her safety, welfare and wellbeing, where she would receive a high standard of care until adulthood.
In fact, as this court was informed, it is not envisaged that she will continue to reside with the foster carer with whom she has lived since she was three days old, since her foster carer does not intend to adopt her; and the local authority has not found any adoptive placement for her.
The Lord Ordinary did not make any finding as to whether she was likely to be placed for adoption.
Nor did he say anything said about her racial, cultural and linguistic background.
She is of mixed race, her mother being white and her father being a Sri Lankan whose first language is Tamil.
As explained earlier, the court is under a statutory duty, under section 84(5)(b)(ii) of the 2007 Act, to have regard to the childs racial origin and cultural and linguistic background.
The Lord Ordinary then turned to the issue of contact, noting that there was evidence that the child derived no significant benefit from contact with her mother, and that the father had had contact with the child on only one occasion.
Unsurprisingly in the circumstances, it was conceded that there was no existing bond between the child and her father (nor, of course, is she likely to have an existing bond with any potential adoptive parents).
The Lord Ordinary made an order prohibiting contact between the child and her parents.
The result was that there was no person in whom the parental responsibility and parental right in respect of contact was vested, contrary to the statutory duty of the court, under section 80(3) of the 2007 Act, to secure that each parental responsibility and parental right in respect of the child vests in a person.
Finally, the Lord Ordinary said that he should mention that there was some evidence in relation to the parents difficulties in coping with financial matters and in relation to consistent maintenance of appropriate standards of cleanliness and hygiene in their accommodation.
He found these matters proved, but said that they were of less significance than the concern with which he had dealt at greater length (ie the concerns about the fathers behaviour).
The Lord Ordinary completed his opinion by expressing his conclusion as follows: I am satisfied that both for the safety and welfare of the child throughout her childhood it is necessary that the orders sought should be granted. (para 28) That conclusion dealt with the basic permanence order and the grant of authority for adoption without differentiation.
In expressing his conclusion in that way, the Lord Ordinary may have had in mind the paramount consideration mentioned in section 84(4), namely the need to safeguard and promote the welfare of the child throughout childhood.
As Lord Drummond Young explained, that issue did not arise unless and until the test in section 84(5)(c)(ii) was satisfied.
Or he may have had in mind the test under section 83(2)(d) for dispensing with parental consent to adoption, namely that the welfare of the child requires it.
It is impossible to say.
What can be said, however, is that the Lord Ordinary did not address the threshold issue arising under section 84(5)(c)(ii).
Nor was any reference made to the matters to which section 84(5)(b)(ii) and (iii) required regard to be had.
Equally importantly, the Lord Ordinary did not support his conclusion by an analysis of the benefits and detriments of the available options.
Although much was said about the local authoritys concerns about the fathers behaviour years earlier, nothing was said, for example, about how the childs current foster care arrangements were working, or about the prospects of a suitable adoptive placement being found.
There was no analysis of the merits of her living with a foster carer who has no intention of adopting her, as compared with her living with her parents.
At the most basic level, the possibility of her parents being able to offer her a permanent home might have been a relevant factor, particularly if the prospects of her being adopted were poor, to set against the negative factors.
The proceedings in the Inner House
Before the Extra Division, it was conceded that the Lord Ordinarys decision to grant authority for adoption could not be supported.
So far as the permanence order was concerned, the Lord Justice Clerk, giving the opinion of the court, treated the deficiencies of the Lord Ordinarys opinion as more apparent than real.
She said that the Lord Ordinary, as the family judge, could safely be taken to have a sound understanding of the relevant law.
This was supported by his having recorded counsels agreement that the correct interpretation of the legal test for the making of a permanence order, as he put it, was that set out in TW v Aberdeenshire Council.
The Lord Ordinarys conclusion, set out at para 52 above, was glossed as addressing the issue raised by section 84(5)(c)(ii): His reference not only to welfare but to the childs safety indicates that he had the issue of serious detriment at the forefront of his mind.
He specifically said that he had concern as to the welfare of the child throughout her childhood.
His reference to necessity indicates that he had proper regard to the proportionality of his decision.
We are satisfied that the Lord Ordinary both identified and applied the correct test (para 30)
With great respect, I am unable to agree.
Section 84(5)(c)(ii) does not refer to safety.
Nor does it refer to the welfare of the child throughout childhood: that is a phrase which appears in section 84(4).
The use of that phrase suggests that the Lord Ordinarys conclusion may have been expressed with section 84(4) in mind, but, notwithstanding his reference to TW v Aberdeenshire Council, there is nothing to indicate that he was addressing the threshold test in section 84(5)(c)(ii).
In the absence of any indication in his opinion that he identified and addressed the correct test, he cannot be assumed to have done so merely because he is a specialist judge.
The Second Division treated the Lord Ordinarys focus on the local authoritys concerns about the father as being of less importance than it appeared, since this was against a background of accepted deficiencies in the parents ability to provide basic elements of care.
In that regard, the Lord Justice Clerk said that it was not disputed that both parents had serious learning difficulties and would require considerable support from the local authority.
She said that the Lord Ordinary had accepted the evidence of Helen Stirling to the effect that, even with support, it was likely that the mother would not manage the tasks of meeting the childs emotional and social needs.
The Lord Ordinary had noted that it was not suggested that the father was able to show the necessary parenting skills required for the care of the child.
Of less significance, but proven nonetheless, was that the parents had difficulties with financial matters, and in consistent maintenance of appropriate standards of cleanliness and hygiene in their accommodation.
In relation to these matters, the Lord Ordinary did not find that the threshold test in section 84(5)(c)(ii) was met on the basis of deficiencies in the care which the child might receive if residing with her parents.
Ms Stirlings evidence in relation to the mother was that she might not manage the more complex tasks.
It also has to be borne in mind that the mother had brought up her two older children with her previous partner.
So far as the father is concerned, it was not for him to show that he possessed the necessary parenting skills.
The onus lay on the local authority to demonstrate that he did not, and that any resulting risk to the welfare of the child could not be addressed by the provision of support.
The local authority was not in a position to adduce evidence on the point, having failed to carry out a parenting assessment.
There was no finding as to the level of assistance which the parents might require.
The issues relating to financial management and cleanliness were treated by the Lord Ordinary as being of relatively minor significance.
Turning to the local authoritys concerns about the fathers behaviour, the Lord Justice Clerk described these as serious concerns, established in evidence.
It is true that the Lord Ordinary accepted that the concern relating to a threatening statement had been established in evidence, although he misunderstood the evidence about this, as explained earlier, and did not address the question of its significance in relation to the threshold test.
It also appears to be correct to say that the breaches of bail were established.
Unlike the Lord Ordinary, the Lord Justice Clerk considered their relevance, and concluded that they suggested a lack of thought as to the consequences of his actions, and an inability to learn from his mistakes.
That is a reasonable conclusion, but it is of little apparent significance in relation to the threshold test.
In relation to the charges made against the father following a complaint by a woman with learning difficulties, the Lord Justice Clerk stated that the Lord Ordinary was careful to recognise that he was not in a position to determine whether there had been any truth in the criminal charges . and that he should not attempt to do so.
As previously explained, however, the Lord Ordinary could only take the fathers alleged behaviour into account if he was satisfied, on a balance of probabilities, that the father had actually behaved as alleged, and that his proved behaviour was relevant to the question in issue.
In that regard, the Lord Justice Clerk concluded that the Lord Ordinary considered that the [father] had a relationship with the complainer, contrary to denials made at various stages, including denials made on oath.
That way of putting the matter, however, leads to the question: what does it have to do with the making of a permanence order, if a young man with learning difficulties had a relationship with a young woman with similar difficulties several years before his child was born, and lied when asked about it afterwards? The whole point of the concern was the allegation that the fathers behaviour was of a criminal character: indeed, although the nature of the charges is unexplained, it is known that the complaint was of rape.
As earlier explained, that could only be relied on as the basis of a finding that the threshold test was satisfied, if, in the first place, the allegation was proved to be true.
The Lord Ordinary expressly stated that he was making no finding in relation to whether the sexual allegations made in 2010 were true or not.
In relation to the remaining concern, arising from the fathers alleged statement relating to MP, the Lord Justice Clerk inferred from the Lord Ordinarys opinion that he had accepted that the statement had been made.
She related this acceptance to the Lord Ordinarys reference, in his conclusion, to EVs safety.
It appears, from the Lord Justice Clerks linking the allegation concerning MP to EVs safety, that she understood the Lord Ordinary to be implying that the father might sexually assault his own child.
If the Lord Ordinary intended to imply that there was a real possibility that the father would sexually assault his daughter, then it is far from clear from what he wrote in his opinion.
Such an important finding should not be left as a matter of inference.
The Lord Justice Clerk continued: Even if we had not been satisfied as to the adequacy of the Lord Ordinarys expressed opinion, had the matter been at large for this court, we would have made a permanence order.
Set against the background of the [parents] continuing lack of parental skills, the findings in relation to the three areas of concern are sufficient to meet the threshold test.
The comments made in respect of the [mothers] eight year old daughter raise grave concerns.
It is plain from the Lord Ordinarys account of the way in which the [father] gave evidence and the nature of the evidence given, that the [father] is unreliable and lacks understanding of the significance of his sexual conduct.
The parents reside together, and the [mother] has made it clear that there is no prospect of that situation changing.
Were the child to reside with her, the child would also be residing with the [father].
Such a situation would run the risk of serious detriment to her welfare.
Taking account of all the matters upon which the Lord Ordinary made findings, we are satisfied that not only has the threshold test been met, but also that it would be better for the child that the order be made than that no order be made. (para 41) The only alteration which the court therefore made to the Lord Ordinarys order, other than quashing the grant of authority for adoption, was to remove a prohibition on contact by the parents, which the Lord Ordinary had imposed in anticipation of adoption.
It is entirely understandable that the Second Division should have sought to avoid further delay in determining the future of this young child.
Nevertheless, with the greatest respect, the Lord Ordinarys opinion did not provide a satisfactory basis for the Inner House to grant the application itself.
In relying on the Lord Ordinarys opinion to justify the conclusion that the threshold test had been met and that a permanence order should be made, the Second Division rendered their conclusion vulnerable to some of the same criticisms as his opinion.
It involved taking account of unproved allegations of criminal conduct, contrary to the guidance given in In re J, which it is now conceded should be followed when applying the Scottish legislation.
It involved finding that the threshold test was satisfied without clearly explaining what exactly the apprehended detriment was, why it was considered serious, and why it was considered likely (a risk of serious detriment not being enough).
It involved no consideration of the childs racial origin and cultural and linguistic background, to which the court is required by statute to have regard.
It involved the same failure as the Lord Ordinarys opinion to explain satisfactorily why a permanence order should be made, on the basis of a reasoned analysis of the available options and an assessment of their respective pros and cons.
What next?
It is clear that the appeals must be allowed.
Parties were divided as to what should happen next.
The local authority wishes the case to be remitted to the Inner House, so that it can re consider the reclaiming motions on the basis of the transcript of the evidence led before the Lord Ordinary, the documentary evidence before him, and such additional evidence as may be necessary and appropriate.
The mother and father, on the other hand, would prefer the application for the permanence order to be refused.
The prospect of the Inner House having to go through nine days worth of evidence and determine the application on that basis is unattractive, for several reasons.
The evidence is now somewhat stale, the proof having been heard over a year ago.
Events during the intervening period may be relevant, particularly given that the case concerns a young child.
More importantly, as the Lord Ordinary made clear, the case is also one where an assessment of the evidence of the parents is particularly difficult, because of their learning difficulties.
In particular, an assessment of the significance of the statement concerning MP, if proved to have been made, may well be influenced by the impression which the court forms of the father.
Much may turn on whether, if proved to have been made, it is regarded as signifying a real possibility that KV would sexually abuse his daughter.
This is therefore a case where there may be a significant benefit in seeing and hearing the evidence, rather than reading a transcription of it.
So far as can be judged from the opinions below, the evidence led may in any event have failed to focus adequately on the child herself and her needs, as distinct from the concerns held by the local authority about what the father may have said or done several years ago (for the most part, in unrelated contexts).
It is also apparent that the local authority still considers that adoption is the best option for the child, and will therefore need to make a further application to the court in any event.
In these circumstances, the most sensible way forward is for this court to allow the appeals and refuse the petition, leaving it to the local authority to commence fresh proceedings as and when that may be appropriate.
That will also allow parties in particular, the local authority an opportunity to ensure that the evidence provided to the court focuses on matters which are truly relevant to the issues which the court has to determine.
The local authority will also have an opportunity to reconsider whether to carry out a parenting assessment in respect of the father.
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These appeals arise out of an application by West Lothian Council (the local authority) for a permanence order under s.80 of the Adoption and Children (Scotland) Act 2007 (the 2007 Act), granting it parental responsibilities and rights in relation to a child (EV), including the authority to adopt.
EV was born on 30 December 2013 and has been in care since her birth.
The application is opposed by EVs parents, both of whom have experienced learning difficulties throughout their lives.
Section 84 of the 2007 Act sets out the conditions and considerations applicable to the making of a permanence order. s.84(3) prohibits the making of an order unless the court considers that it would be better for the child that the order be made than that it should not be made.
In considering whether to make an order and, if so, what provision the order should make, the need to safeguard and promote the welfare of the child throughout childhood is to be regarded as the paramount consideration (s.84(4)).
S.84(5)(b) imposes a duty on the court to have regard to certain factors before making a permanence order.
Under s.84(5)(c)(ii), before making a permanence order the court must be satisfied, in relation to each of the parents, that the childs residence with that person is likely to be seriously detrimental to her welfare.
The local authoritys concerns in relation to EV primarily related to her father, and arose out of allegations concerning his behaviour before she was born.
The Lord Ordinary, after hearing 9 days of evidence, granted the permanence order with authority to adopt.
He made few findings of fact in relation to the issues in dispute, and none in relation to whether the threshold test in s.84(5)(c)(ii) was satisfied.
Instead of considering whether the allegations were relevant to the threshold test; if so, whether they were true; and if so, whether the test was met, his approach was to consider whether the local authoritys actions had a proper basis.
The Lord Ordinarys decision was upheld by the Inner House, except in relation to the grant of authority to adopt and a related prohibition on contact by the parents.
The parents now appeal to the Supreme Court.
On the parents appeals to the Supreme Court, the local authority argued that if the appeal against the decision of the Inner House were allowed, the application for a permanence order should not be refused, but should be remitted to the Inner House for it to determine the application on the basis of the evidence before the Lord Ordinary (and such further evidence as may be appropriate).
The Supreme Court unanimously allows the appeals, and refuses the petition for a permanence order.
Lord Reed gives the judgment, with which the rest of the Court agrees.
The test under s.84(5)(c)(ii) is a factual threshold test which has to be met before the court reaches the stage of considering whether to make a permanence order under the other provisions of s.84.
The judge is the primary decision maker in determining whether the threshold test has been met, and must base his or her determination of that issue on findings of fact.
The judge is not exercising a merely supervisory jurisdiction over the approach of the local authority.
S.84(5)(c)(ii) is similar to section 31(2) of the Children Act 1989, which requires the court to be satisfied that the child concerned is suffering, or is likely to suffer, significant harm before it can make a care order.
Both provisions impose a threshold test, requiring the court to be satisfied of a likelihood.
Decisions under s.31(2) of the 1989 Act as to a future likelihood of harm cannot be based merely on allegations or suspicions, but on facts which have been established on a balance of probabilities (In re J (Children) Care Proceedings: Threshold Criteria) [2013] UKSC 9).
The approach in In re J is also applicable to the 2007 Act.
The legislation needs to be construed in a way which strikes a proper balance between the need to safeguard children and the need to respect family life.
The requirement that residence with the parent was likely to be seriously detrimental indicates depriving parents of their parental authority is a serious matter and should only be done if strict criteria are satisfied.
The inclusion of the word satisfied as part of the test indicates that suspicions cannot form the basis of the order (and can be contrasted with other statutory language used where suspicion may be enough).
If the court finds that the threshold test is satisfied, it must make clear (1) what the nature of the detriment is, which the court is satisfied is likely if the child resides with the parent, (2) why the court is satisfied that it is likely and (3) why the court is satisfied that it is serious.
The alleged behaviour about which the local authority was concerned could only be relied on as a basis of a finding that the threshold test was satisfied if the allegations were relevant to that issue and if they were proved on the balance of probabilities to be true [19 29].
The approach of the Lord Ordinary was deficient in a number of respects.
He did not determine the threshold issue arising under s.84(5)(c)(ii) but approached the case in a supervisory manner considering whether the local authoritys concerns about EVs father were justified.
The correct approach would have been to consider whether the allegations were relevant to the issue arising under s.84(5)(c)(ii).
If they were, then the Lord Ordinary should have made a finding of fact on the balance of probabilities as to whether the allegations were true.
If he was unable to make such a finding, he should not then take them into account in his consideration of the threshold test.
Further, the Lord Ordinary did not refer to the matters which he had a duty to consider under s.84(5)(b).
It is not clear whether he had in mind the requirement under s.84(4) that the childs welfare is paramount, but that is not in any event a consideration that would arise until the threshold test under s.84(5)(c)(ii) was satisfied [30 62].
The application should not be remitted to be decided again by the Inner House, but refused.
It is open to the local authority to commence fresh proceedings as and when that may be appropriate.
Remitting the case would require the Inner House to go through nine days worth of evidence which by now is somewhat stale and which would not take into account intervening events which may be relevant.
This is a case where the assessment of the evidence is difficult because of the learning difficulties of the parents and there may be a significant benefit in seeing and hearing the evidence at first instance [63 66].
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This appeal concerns what is sometimes called a fully qualified covenant in a lease of real property.
Leases commonly contain a series of covenants by the tenant not to do things, typically relating to assignment, sub-letting and the use of the demised premises.
By what is called a qualified covenant, the tenant promises not to do something without the landlords consent.
By a fully qualified covenant, the tenant promises not to do something without the landlords consent, not to be unreasonably withheld.
In the present case, the tenant promised not to apply for any planning permission without the consent of the landlord, not to be unreasonably withheld.
The tenant wished to apply for planning permission for a change of use of part of the demised premises, from business to residential use, but the landlord refused consent on the ground that this would substantially increase the risk that the tenant could compulsorily acquire the freehold reversion under the Leasehold Reform Act 1967.
The tenant claimed that the landlord was unreasonably withholding consent.
Both the judge and the Court of Appeal agreed.
This was in their view because, although the premises were in mixed use at the time of its grant, the lease permitted the tenant to use the whole of the premises for residential purposes.
Since this inevitably exposed the landlord to the risk of a compulsory purchase of the freehold (enfranchisement), to refuse permission to the tenant to seek planning permission for a change of use of part of the premises to residential use was to seek to obtain an uncovenanted advantage falling outside the purpose of the fully qualified covenant against seeking planning permission.
The landlord appeals to this court, upon the basis that protection against an increased risk of enfranchisement is a well-recognised and legitimate reason for refusing consent under a fully qualified covenant, within the general purposes of restrictive covenants in leases, namely the protection of the value of the reversion and, a fortiori, its very existence.
The Facts
The leasehold property in question is a terraced building at 51 Brewer Street London W1, being part of the appellants Soho estate which includes numbers 39- 61 (odd numbers) Brewer Street.
No 51 is constructed over six floors including a basement.
The basement and ground floor are, in area, much greater than any of the upper floors.
By a lease dated 4 April 1986 (the Lease) the whole of No 51 was let by Standard Wharf (No 2) to Burgess & Galer Ltd for a 100 year term from 25 December 1985, for a premium of 200,000 and a peppercorn rent.
The respondent has been the tenant under the Lease since 1998.
The appellant is now the successor in title to the reversion under the Lease, as freeholder of No 51.
The whole of No 51 has since October 1998 been sublet, initially to Cusdens (Victoria) Ltd and, following an assignment, since 2008 to Romanys Ltd, under two successive sub- leases, the second of which will expire in September 2023.
The Lease contains the following relevant tenants covenants.
Clause 3(11) contained a general user covenant in the following terms: Not to use the Demised Premises otherwise than for one or more of the following purposes (a) retail shop (b) offices (c) residential purposes (d) storage (e) studio PROVIDED however that nothing herein contained shall imply or be deemed to be a warranty that the Demised Premises may in accordance with all Town Planning Laws and Regulations now or from time to time in force be used for the purpose above mentioned.
By clause 3(15) the Lease contained further specific user covenants prohibiting, for example, noxious noisy or offensive trades, illegal or immoral acts, use as a sex shop, use for an auction, for holding of public meetings or entertainments or use as a betting shop, public house, restaurant, off-license or wine bar.
By clause 3(19) the tenant covenanted as follows: To perform and observe all the provisions and requirements of all statutes and regulations relating to Town and Country Planning and not to apply for any planning permission without the prior written consent of the Landlord such consent not to be unreasonably withheld This is the fully qualified covenant in issue on this appeal.
The Lease permitted assignment of the whole (but not part) of the premises and a sub-letting of the whole or part of the premises otherwise than during the last seven years of the term, in relation to which there was a fully qualified covenant.
At the time of the grant of the Lease in 1986, the ground floor and basement of No 51 were in retail use.
The first and second floors were used for storage and as a staff area in connection with the retail use on the lower floors.
The top two floors were in occasional residential use.
At all material times the permitted use of No 51 in planning terms has been as follows: for the ground floor and basement it is retail; for the first and second floors it is office/ancillary; for the top two floors it is residential.
Between 2013 and 2015 Romanys carried out, and the respondent paid for, building works on the four upper floors of No 51 by which each floor was converted into a self-contained flat.
Although this was carried out with knowledge of the landlord, it reserved its rights to refuse an application for permission to apply for a change of use under clause 3(19) of the Lease, in respect of the first and second floors.
Following the completion of those works, the top two floors of No 51 have been let to residential tenants but, pending the obtaining of planning permission for consent to a change of use, the first and second floors remain vacant.
At the time of the grant of the Lease in 1986, the freeholder faced no immediate risk of enfranchisement because the 1967 Act imposed a residence qualification on a tenant which could not be satisfied by a limited company.
That qualification was however removed by the Commonhold and Leasehold Reform Act 2002.
Nonetheless the proportion of No 51 in residential use did not, for as long as it was confined to the top two floors, amount to a sufficient proportion of the whole building to give rise to a real risk of enfranchisement, because the building could not, in that state of occupation, be described as a house reasonably so called within the meaning of section 2(1) of the 1967 Act.
It is common ground that it was for that reason that, having served a notice of claim to acquire the freehold under the 1967 Act in October 2012, the respondent abandoned it in January 2013.
But the judge (Judge Collender QC) found, and it is not now in dispute, that if (as he thought likely) the respondent were to obtain planning permission for a change of the use of the first and second floor to residential, this would, in his words, substantially enhance the respondents prospects of obtaining enfranchisement.
On 17 April 2015 the respondent applied under clause 3(19) of the Lease for permission from the appellants predecessor in title (Tuesday One) to apply for planning permission to change the use of the first and second floors of No 51 to residential, on the basis that residential use of those two floors was permitted by clause 3(11).
In its reply refusing consent dated 30 April 2015, Tuesday One identified the increased risk of a successful claim to enfranchise under the 1967 Act as its reason for refusal.
Without admitting that an enfranchisement claim would then necessarily succeed, the refusal letter continued: The effect of a successful claim to enfranchise would not merely damage the reversion; it would deprive our client of its reversion in the Premises entirely.
Furthermore, it would deprive our client of control for estate management purposes of the block containing the Premises, which would have an adverse impact on the value of our clients investment in the block.
It is common ground on the pleadings in the litigation which ensued that one purpose of the respondents contemplated planning application was indeed to improve its prospects of a successful claim for enfranchisement.
Tuesday Ones refusal of consent under clause 3(19) was the casus belli for this litigation.
The respondent was successful, both at trial and in the Court of Appeal, in its contention that consent to its intended planning application had been unreasonably withheld.
The respondents success turned upon a perception by both the courts below (although for slightly different reasons) about what was and was not, as a matter of construction of the Lease, the purpose of clause 3(19).
In his careful and comprehensive judgment Judge Collender put it this way: I accept that the purpose of the covenant at clause 3(19) of the lease is to protect the lessor from the possible effect of an application for planning permission, because as the owner of the land, it could be subject to enforcement action if there were a breach of a planning obligation.
I accept the argument that it is not to enable the lessor to restrict or limit the permitted use under clause 3(11).
In my judgment, the lessors refusal of consent under clause 3(19) is unreasonable because thereby they are seeking to achieve a collateral purpose, ie the imposition of a restriction on use that was not negotiated and is not included within clause 3(11).
Giving the leading judgment in the Court of Appeal ([2018] Ch 603) Sir Terence Etherton MR agreed generally with the judges reasoning.
In his view, the key reason why clause 3(19) could not be construed as having been intended to permit the landlord to refuse to consent to an application for planning permission for a use authorised by clause 3(11) which increased the risk of enfranchisement was because any third party, other than the tenant, could apply for the same planning permission, which the landlord would be powerless to oppose, and which would give rise to the same increased risk of enfranchisement.
At para 49 he put it this way: If Rotrust were correct in its argument, Hautford would be precluded from applying for planning permission to enable Hautford to use the first and second floors for residential purposes for the 70 or so years remaining of the original 100- year term so long as Rotrust was the landlord or any assignee of the freehold held the same views as Rotrust.
Hautford would be precluded from doing so, even though any third party would be free at any time to make such an application and, if made and successful, Hautford could take advantage of the planning permission.
Indeed, that would have been the position from the first day of the 100-year term.
It seems inconceivable that this was the intention of the original parties to the lease.
Both the courts below regarded the appellants additional estate management reason for refusing consent as insufficient to render that refusal reasonable.
The judge held that the effect of the loss of one freehold within the terrace upon enfranchisement could largely be remedied by the imposition of freehold covenants under section 10(4) of the 1967 Act, and the Court of Appeal upheld that analysis.
In this court it was sensibly conceded by the appellant that, regardless whether section 10 afforded a complete remedy for the loss of this one freehold within the terrace in estate management terms, this could not on its own be a sufficient ground for a reasonable refusal of consent.
The Law
The substantial body of case law which assists the court in determining whether a particular refusal of consent under a fully qualified covenant is unreasonable is not, subject only to one matter, significantly in issue on this appeal.
Rather, the outcome turns on whether the courts below were correct in their identification of the limited purpose behind clause 3(19) of this particular Lease.
It is therefore appropriate to set out the relevant principles relatively briefly.
The only contentious question of principle is whether the cases (and there are several) which suggest that a landlord may reasonably refuse consent under a fully qualified covenant to the doing of something by the tenant which increases the risk of enfranchisement are limited to covenants in leases granted before the passing of the 1967 Act.
Both the courts below considered that this was so: see para 63 of the judges judgment and para 53 of the judgment of the Master of the Rolls.
The summary of the relevant principles which best combines completeness with conciseness is to be found in the judgment of Balcombe LJ in International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513, at 519H- 521E. Although the seven principles there set out are directed to the reasonableness of a refusal of consent to an assignment, the substance of them is equally applicable to refusal of consent to the making of a planning application.
It is unnecessary to set them out here because, in Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 2180 they were, without being disapproved, helpfully condensed by the House of Lords into three overriding principles.
At paras 3 to 5 (on pp 2182-2183) Lord Bingham of Cornhill said as follows: The first (Balcombe LJs second principle) is that a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease
Thirdly: The landlords obligation is to show that his conduct was reasonable, not that it was right or justifiable.
As Danckwerts LJ held in Pimms Ltd v Tallow Chandlers Co [1964] 2 QB 547, 564: it is not necessary for the landlords to prove that the conclusions which led them to refuse consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances .... Subject always to the first principle outlined above, I would respectfully endorse the observation of Viscount Dunedin in Viscount Tredegar v Harwood [1929] AC 72, 78 that one should read reasonableness in the general sense.
There are few expressions more routinely used by British lawyers than reasonable and the expression should be given a broad, common sense meaning in this context as in others.
At para 67, (on p 2201), Lord Rodger of Earlsferry said this: The test of reasonableness is to be found in many areas of the law and the concept has been found useful precisely because it prevents the law becoming unduly rigid.
In effect, it allows the law to respond appropriately to different situations as they arise.
This has to be remembered when a court is considering whether a landlord has unreasonably withheld consent to the assignment of a lease.
He continued by endorsing the passage from Tredegar v Harwood to which Lord Bingham had earlier referred.
Both Lord Bingham and Lord Rodger placed particular emphasis upon the following dicta of Lord Denning MR in Bickel v Duke of Westminster [1977] QB 517, at 524: The words of the contract are perfectly clear English words: such licence shall not be unreasonably withheld.
When those words come to be applied in any particular case, I do not think the court can, or should, determine by strict rules the grounds on which a landlord may, or may not, reasonably refuse his consent.
He is not limited by the contract to any particular grounds.
Nor should the courts limit him.
Not even under the guise of construing the words.
(Emphasis added)
The Ashworth Frazer case is, again, about refusal of consent to an assignment.
Nonetheless, the general statements of principle which it contains are equally applicable to a refusal of consent to an application for planning permission, and need no further refinement or elucidation as general principles.
The Bickel case was one of those in which it was held reasonable for a landlord to refuse consent to the doing of something by the tenant which would cause or increase a risk of enfranchisement.
Another, referred to by the Court of Appeal, is Norfolk Capital Group Ltd v Kitway Ltd [1977] QB 506.
In both cases the relevant lease was granted before the passing of the 1967 Act, and the judgments were handed down by differently constituted Courts of Appeal within ten days of each other in mid-1976.
Taking the (slightly earlier) Kitway case first, the issue was whether the landlord could reasonably refuse consent to an assignment by a limited company (which could not enfranchise) to a private individual (who could after five years residence).
All three members of the court gave judgments, and it is impossible to discern in any of them a process of reasoning along the lines that it was only because the lease was granted prior to the coming into force of the 1967 Act that it was reasonable for a landlord to have regard to the risk of enfranchisement in refusing consent.
On the contrary, all three members of the court appeared to have regarded such a reason for refusal as eminently reasonable, subject only to authorities in Rent Act cases about normal and abnormal assignments which, in the event, they held not to be applicable.
At p 511 Megaw LJ said: If one were asked, without having been taken into any legal authorities relating to the matter, whether or not, in the circumstances which I have outlined, it was unreasonable for the landlords to refuse their consent when the consequences of giving that consent and of the assignment being made were likely to be that they would be deprived of their freehold interest in the property in five years time, I find it very difficult to think that anyone would find it possible to say that the landlords refusal was unreasonable.
At p 515 Brown LJ said: If there were no authorities, I think, like Megaw LJ, that there could be no doubt that the landlords refusal here was entirely reasonable.
Geoffrey Lane LJ added, at p 516: Now, what are the facts here? Mr Barnes concedes that the value of the landlords reversion is less if there is a possibility of any of the mews houses being enfranchised.
There is clearly such a possibility, and accordingly the value of the landlords reversion is less.
That being so, it would be a strange landlord indeed who gave his consent to the proposed assignments.
The refusal of the landlords in the present circumstances was eminently reasonable.
In the Bickel case the tenants, a friendly society not in occupation, requested consent to assign the lease to their sub-tenant, who was.
This gave rise to the likelihood that, five years later, the assignee would be entitled to enfranchise.
In a later part of the passage approved by Lord Bingham and Lord Rodger in the Ashworth Frazer case (quoted above), Lord Denning continued, at [1977] QB 517, 524D: The landlord has to exercise his judgment in all sorts of circumstances.
It is impossible for him, or for the court, to envisage them all.
When this lease was granted in 1947 no one could have foreseen that 20 years later Parliament would give a tenant a right to buy up the freehold.
Seeing that the circumstances are infinitely various, it is impossible to formulate strict rules as to how a landlord should exercise his power of refusal.
This passage from Lord Dennings judgment is not to be read as meaning that it was only because the lease was granted prior to the coming into force of the 1967 Act that the landlord could reasonably refuse consent to an assignment, on the grounds of an increased risk of enfranchisement.
On the contrary, Lord Denning was simply saying that the landlord could do so in spite of the fact that such a risk could not have been within the contemplation of the parties at the time of the grant of the lease, so that it could not have been a purpose for which the covenant against assignment had originally been sought and given.
He used the risk of enfranchisement as an example of the infinitely variable circumstances in which the landlord has a choice to consent or refuse consent, illustrative of the need to address the reasonableness of a refusal by reference to the facts as they are at the date of the tenants request.
It was a warning against addressing the reasonableness of a refusal by reference to an over-refined construction of the lease as at the time of its grant, something which Lord Denning called the guise of construing the words.
The thinking that a fully qualified covenant may not entitle a landlord to refuse consent because of an increased risk of enfranchisement where the covenant is contained in a lease granted after the passing of the 1967 Act may be based upon the notion that, if the lease itself gives rise to such a risk, then the landlord (who must be taken to be cognisant of the 1967 Act) must be assumed to have undertaken that risk by granting the lease, so that to seek to fend off that risk by the refusal of consent would be to obtain a collateral or uncovenanted advantage.
The lease in the present case was granted after the passing of the 1967 Act, but to a limited company tenant which could not (then) enfranchise.
But, as the judge observed, there was no sufficient restriction upon an assignment to a private individual, and that would increase the risk.
Furthermore, the permission to the tenant under clause 3(11) to use the whole of the premises for residential purposes might be thought to invite it.
It is over-simplistic, and contrary to the principles as laid down in the Ashworth Frazer case, to approach this question in any rigid or doctrinaire way, still less solely by reference to original purposes of the covenant in clause 3(19) which may have been within the contemplation of the parties when the lease was granted.
It will in every case be a question of fact and degree measured as at the date upon which the relevant consent is sought by the tenant.
There will no doubt be some leases granted after the passing of the 1967 Act which render the risk of enfranchisement so great and so obvious that the risk is not materially increased by the tenant doing that for which he seeks the landlords consent.
There will be other cases where the alteration in the risk attributable to the giving of consent is substantial.
Likewise there will be cases where the landlords reversion is of only nominal value (such as the reversion on a 999 year lease) and others where, notwithstanding reforms to the enfranchisement legislation, the landlord nonetheless reasonably anticipates a real diminution in the value of his reversion occasioned by the increase in the risk of enfranchisement, which a statutory right to compensation will not sufficiently eradicate.
In the present case, it is not in dispute either that the risk of enfranchisement would be substantially increased by the grant of the proposed planning permission, or that the appellants reversionary interest is of real value which would be adversely affected by enfranchisement, notwithstanding a statutory right to compensation.
Analysis
This appeal does not turn upon any refined analysis of the general principles relating to the reasonableness or otherwise of the refusal of consent under a fully qualified covenant.
Indeed, the reasoning in the Ashworth Frazer case is antipathetic to the carrying out of any such process of refinement.
Nor is there any real dispute about the relevant facts, applicable as at the date when the respondent requested consent to apply for planning permission.
The real issue is whether the courts below were correct in construing the Lease in such a way as to exclude resisting an increased risk of enfranchisement as a legitimate purpose of the right to refuse consent under clause 3(19).
In my opinion none of those three strands of reasoning supports the conclusion reached by the courts below.
All of them seek to address the question whether the landlords consent was unreasonably withheld by reference to an over- refined attempt to identify a limited original purpose behind clause 3(19), contrary to Lord Dennings dictum in the Bickel case, approved in the Ashworth Frazer case, that it is wrong in principle to address the question under the guise of construing the words.
Mr Philip Rainey QC for the appellant submitted that nothing in clause 3 and in particular clause 3(11) of the Lease could be treated as a grant because they were all parts of a comprehensive series of interlocking covenants restrictive of use.
That may be formally correct, but it misses the substance of Miss Scotts point.
Nonetheless, looking at the question as a matter of substance, it cannot be said that the Lease, read as a whole, conferred an unqualified right on the tenant to use the whole, or any particular part, of No 51 for residential purposes.
Clause 3(11) must be read with clause 3(19), which required the tenant to perform and observe all the provisions and requirements of the planning legislation.
Read together, the effect of those two clauses was to permit the tenant to use for residential purposes only such parts of No 51 as were from time to time permitted by the planning regime to be used for residential purposes.
This might be either because of an established use when the Lease was granted, or because the tenant obtained, with the landlords consent, permission for residential use, or because such permission was obtained by a third party or, by some change in the legislation, residential use became lawful without the need for planning permission.
At the time of the grant of the Lease, the tenant could not without breach of covenant use the first and second floors for residential purposes.
At the time when it sought consent to apply for planning permission for that purpose, residential use of those two floors was still prohibited by the planning legislation, and therefore by clause 3(19).
As to the judges reasoning, it may well be that one purpose of clause 3(19) was to protect the landlord from liability for compliance with conditions upon which a planning permission requested by the tenant might be granted.
But the identification of that specific purpose by no means excludes other purposes for the existence of clause 3(19), or for the use of the landlords right (not unreasonably) to refuse consent.
Nothing in the language of clause 3(19) supports the judges identification of a single purpose for its existence within the Lease, and it is simply a non sequitur to say that, because one specific purpose can be identified, no other purpose is permissible.
On the contrary the correct approach is to construe clause 3(19) so as to discover what, upon its express terms, it permits the landlord to do and then to decide the question of unreasonableness by asking whether the landlords refusal serves a purpose sufficiently connected with the landlord and tenant relationship, as at the time when consent is requested, in accordance with the first of Lord Binghams three principles in the Ashworth Frazer case, set out above.
Turning finally to the Court of Appeals reasoning, it is undoubtedly true that the combination of clause 3(11) and the ability of a third party to seek planning permission for the residential use of the first and second floors of No 51 together created a vulnerability of the freehold to enfranchisement which would not have existed if clause 3(11) had itself contained provision requiring the tenant to seek the landlords consent for an increased level of residential use within the building.
But the fact that the Lease by its terms rendered the freehold vulnerable to enfranchisement does not mean that a clause like 3(19), which provided a measure of protection against that risk, should be treated as incapable of being used reasonably for that purpose.
The fact is that, by the time when the respondent sought consent under clause 3(19), no third party had applied for planning permission for a change of the use of the first and second floors to residential and, so far as this court is aware, no such third party application has been made to date.
The result is that, looking at the matter as a question of fact as at the time when the respondent sought consent, the landlords ability to refuse that consent continued to afford a real measure of protection against enfranchisement of the freehold.
It follows that the courts below treated the question whether consent had been unreasonably refused as effectively determined by an erroneous construction of the Lease, contrary to Lord Dennings guidance in the Bickel case.
They therefore made an error of law which requires this court to consider the matter afresh, upon the same undisputed facts.
By April 2015 (when consent was sought) it remained unlawful in planning terms for the first and second floors of No 51 to be used for residential purposes.
There was, as at that date, no real risk of enfranchisement.
On the judges findings, planning permission, if requested, was likely to be granted, and the consequence would significantly increase the risk of enfranchisement which would, in turn, have a real rather than purely theoretical adverse consequence in terms of the value of the freehold reversion to the appellant.
No third party had applied, or was threatening to apply, for similar planning permission for change of use.
Applying Lord Binghams first principle in the Ashworth Frazer case, it cannot possibly be said that seeking to avoid a significant increase in the risk of enfranchisement, with consequential damage to the reversion, was something extraneous to or dissociated with the landlord and tenant relationship created by the Lease.
On the contrary, damage to the reversion is the quintessential type of consideration rendering reasonable the refusal of consent, as is illustrated in particular by the dicta (quoted above) in the Kitway case.
Applying the second principle, a down to earth factual analysis of the economic consequences to the landlord of giving or refusing the requested consent in the present case plainly suggests that a refusal is reasonable.
Applying the third principle, the appellant did not need to show that a refusal was right or justifiable, but merely that it was reasonable.
In my opinion it clearly was.
For those reasons I would allow this appeal.
I have come to the conclusion that this appeal should be dismissed effectively for the reasons given by the Court of Appeal and the judge.
The first step is to examine the scope of the power of the lessor to refuse its consent to a planning application and this can only be done by interpreting clause 3(19) in the context of the lease in the usual way.
The most relevant circumstances to take into account are the other provisions of the lease, including the lessees unrestricted right to use the whole of the premises if he wishes to do so for residential purposes.
I do not agree that this sub-clause must be read subject to the lessee first obtaining the lessors consent to a planning application for a change of use (where that is required) or that, as Lord Briggs has concluded, the right to use the premises for residential purposes was limited to those parts for which planning consent had already been obtained.
That would involve writing words into the user clause as opposed to treating the lessors power reasonably to refuse its consent in clause 3(19) as impliedly limited to other aspects of a planning application.
The lessor would have been ill-advised to rely on his power to withhold his consent to a planning application as a means of preventing the lessee from improving his chances of obtaining leasehold enfranchisement because a third party, such as a developer, could obtain that consent free from the restrictions in the lease.
It is not a point which is ultimately in the lessors favour that at the date of the lease the lessee could not apply for leasehold enfranchisement though he could have done if he had been an individual.
It was only possible for a company to apply as a result of a subsequent amendment.
The lessee was, however, from the date of the lease free under clause 3(13) to assign the whole of the premises to an individual who would have been free to apply for leasehold enfranchisement when he met the conditions as from the date of the lease.
The lessor must be taken to have been aware of this.
The key point in Lord Briggs judgment is that the lessor was entitled to protect the value of his reversion against a substantial increase in the chances of the lessee achieving leasehold enfranchisement and thus destroying the lessors interest in the reversion.
I have no doubt that the lessor can seek to protect his own interests when exercising power to refuse consent in this way, but only when that is within the purposes for which the lease permits him to use the power to refuse consent.
On my interpretation of the lease, the power to refuse consent to a planning application was not granted to enable the landlord to cut down the user clause.
Lord Briggs considers that in Bickel v Duke of Westminster [1977] QB 517, 524 (which was approved by the House of Lords in Ashworth Frazer) Lord Denning MR held that the landlord could reasonably refuse consent to an assignment on the grounds that it gave rise to an increased risk of enfranchisement in spite of the fact that such a risk could not have been within the contemplation of the parties at the time of the grant of the lease.
I do not agree that that is the way to read Lord Denning MRs judgment.
In my judgment, it is clear that Lord Denning MR attached considerable weight to the fact that the parties had not known about the possibility of enfranchisement when they entered into the lease.
Enfranchisement was something of a windfall for the tenant.
Lord Denning MR held, at pp 524-525: I have studied all the previous cases and find little guidance in any of them to solve our present problems.
The reason is simply because it is a new situation, consequent on the Leasehold Reform Act 1967, which was never envisaged before.
I would test it by considering first the position of the landlords - the Grosvenor Estate.
They hold a large estate which they desire to keep in their hands so as to develop it in the best possible way.
This would be much impeded if one house after another is bought up by sitting tenants.
Further, if they are compelled to sell under the Leasehold Reform Act, they will suffer much financial loss, because the price is much less than the value of the house.
Test it next by considering the position of the tenants - the Foresters.
They hold the premises as an investment and want to sell it.
It matters not to them whether they sell to the landlord or to sub-tenants, so long as they receive a fair price for it.
The landlords say they are willing to negotiate a fair price for it.
They will give the Foresters a sum equivalent to that offered by the sub-tenants.
Test it next by considering the position of the sub-tenant herself.
When she took her sub-lease, she had no possible claim to enfranchisement.
It was at a high rent, outside the Act of 1967.
She is quite well protected by the Rent Acts so far as her own occupation is concerned.
She will not be evicted at the end of her term.
The only result on her of a refusal will be that she will not be able to buy up the freehold for a very low figure.
Lord Denning MRs insight was that it was not appropriate to decide the unreasonableness of consent to assignment, as Orr and Waller LJJ did, by reference to whether the circumstances of the proposed assignment were abnormal.
They based their conclusion on the availability of enfranchisement following assignment, when that was not available at the date of the lease.
Lord Denning MR considered that the court should make an assessment of all the relevant considerations to determine whether the consent was unreasonably refused.
In Ashworth Frazer v Gloucester City Council [2001] 1 WLR 2180 at p 2183, Lord Bingham held that Lord Denning MRs approach was the correct one.
The other members of the House of Lords agreed with Lord Bingham or, in the case of Lord Rodger of Earlsferry, that Lord Denning MR was correct to hold that the question whether the refusal of consent was reasonable was one of the circumstances of the case, and not of law (see para 74 of Lord Rodgers speech).
Here the parties cannot have intended that the lessor should be able to protect itself against the increased risk of leasehold enfranchisement, resulting from an increased use of the premises for residential purposes, by using the power to refuse consent to a planning application when the lessee could assign to an individual who, even at the date of the lease, would have the right to apply for enfranchisement, and when any necessary planning permission for a change of user could be obtained by the prospective assignee without any involvement of the lessee.
This would be so even if the circumstances at the date of the application were that the risk stood to be substantially increased and the lessor might lose his right to the reversion completely.
In those particular circumstances, I consider that the judge and the Court of Appeal were entitled to conclude, and right to conclude, that it would be unreasonable for the lessor to use clause 3(19) for such purpose.
Like Lady Arden, I would have dismissed this appeal.
Clause 3(11) of the Lease is crucial.
I would therefore dismiss the appeal essentially for the reasons given by the Court of Appeal and the judge.
In the letter dated 17 April 2015 by which, through its solicitors, the leaseholder sought the freeholders consent under clause 3(19), it suggested that clause 3(11) was crucial.
So did the trial judge and the Court of Appeal.
The subclause bears recital again.
It is a covenant by the leaseholder (11) Not to use the Demised Premises otherwise than for one or more of the following purposes (a) retail shop (b) offices (c) residential purposes (d) storage (e) studio PROVIDED however that nothing herein contained shall imply or be deemed to be a warranty that the Demised Premises may in accordance with all Town Planning Laws and Regulations now or from time to time in force be used for the purpose above mentioned.
Clause 3(11) is not a common form, or boilerplate, subclause.
It is a bespoke subclause of singular generosity to the leaseholder.
One result of it is that the Lease goes further than to omit to prohibit the use of any part of the premises for residential use.
Its effect is specifically to permit residential use of every part of them.
Indeed the permission is unqualified by any requirement to secure the freeholders prior consent to the proposed use.
The proviso which excludes any warranty on the part of the freeholder about accordance with planning laws in no way detracts from the width of its permission.
The trial judge was right to note another subclause which, albeit of some triviality, addresses the prospect of residential use of the premises, not limited to the third and fourth floors.
It is part of clause 3(15)(c), by which the leaseholder covenanted not to permit animals of any kind to be kept [on the demised premises] except that (1) domestic animals may be kept with the consent of the Lessor and (2) this provision regarding animals shall not apply to the existing residential sub-tenants of the upper floors of the premises.
The generosity of clause 3(11) to the leaseholder was no doubt a feature of the Lease which was reflected in the premium paid to the freeholder by the initial leaseholder for it and in the premiums paid for the later assignments of the lease and of the freehold reversion respectively.
In Soho, unlike in many parts of England and Wales, a change in the use of premises from office use or use ancillary to retail to residential use represents unlawful development unless it has been the subject of planning permission.
Unlike clause 3(11), clause 3(19) is a boilerplate clause.
The leaseholders usual covenant not to apply for any planning permission without the prior written consent of the Landlord such consent not to be unreasonably withheld generates this litigation.
I agree with Lord Briggs that the meaning of the leaseholders covenant in clause 3(19) is clear and generates no issue of construction.
I also acknowledge that, within their overarching inquiry into the reasonableness of the freeholders withholding of consent, the judges in the lower courts found it helpful to consider the purpose of the covenant.
For my part, I find that perspective less helpful than they did.
I prefer to go straight to that one word: unreasonably.
Were it reasonable for the freeholder not to consent to an application by the leaseholder to apply for permission to make residential use of the first and second floors, the provisions of clause 3(11) would be deprived of substantial effect.
Instead of the unqualified permission for residential use there given, the permission, in so far as it relates to the first and second floors, would become a fully qualified permission.
I agree with Sir Terence Etherton MR, at para 47, that, to that extent, any permissible withholding of consent in such circumstances would in effect rewrite clause 3(11).
Like the courts below, I cannot accept that an express grant of permission for residential use can - reasonably - be overridden by the freeholders deployment of an entirely unfocussed provision in relation to applications for planning permission.
However legitimate its concern about the prospect of enfranchisement, the freeholder cannot - reasonably - withhold its consent if the effect of doing so is to negate the permission for residential use which it granted and for which it received valuable consideration.
Our duty is to appraise the trial judges determination that the leaseholder had established that the freeholder was unreasonably withholding its consent to the application.
I happen to agree with the judges determination.
But, more importantly, I see no significant flaw in the manner in which he approached it.
The Court of Appeal was in my view right to conclude that his determination ought to be upheld.
In my respectful view the contrary conclusion of the majority falls foul of the second overriding principle articulated by Lord Bingham in the Ashworth Frazer case, set out in para 22 of the judgment of Lord Briggs.
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The Appellant is the landlord of a six storey terraced building at 51 Brewer Street, Soho, London W1.
The Respondent is the current tenant under a lease granted in 1986.
Its sub tenant, Romanys Ltd, runs an ironmongers shop from the basement and ground floor.
Under clause 3(11) of the lease, the tenant may use any part of the building for (among other things) retail, offices or residential purposes, although the landlord gives no warranty that this usage will comply with planning rules.
Clause 3(19) of the lease says the tenant cannot apply for planning permission without the landlords consent.
It also says this consent must not be unreasonably withheld.
This is known as a fully qualified covenant.
Between 2013 and 2015, the sub tenant converted the first, second, third and fourth floors into self contained flats.
The first and second floors were previously used as storage and office space, and the existing planning permission did not allow residential use.
The former landlord (the Appellants predecessor in title) reserved its position on a planning application until the works were completed.
At that point, the tenant sought the former landlords consent to apply for planning permission to use those two floors residentially.
The former landlord believed a change of use would damage its own financial interests.
The majority of the building would become residential which, in turn, would give the tenant the chance to compulsorily acquire the freehold under the Leasehold Reform Act 1967 (a process called enfranchisement.) An increased risk of enfranchisement would devalue the landlords property.
So the landlord refused consent to make a planning application for increased residential use.
The tenant said this was unreasonable and challenged the landlords decision in the County Court.
HHJ Collender agreed with the tenant, as did the Court of Appeal (Sir Terence Etherton MR, McCombe LJ and Lindblom LJ.) The landlord now appeals to the Supreme Court.
The key question is whether the trial judge was right to find the landlord acted unreasonably in withholding consent.
The Supreme Court allows the appeal by a majority of three to two.
Lord Briggs gives the main judgment with which Lord Carnwath and Lord Hodge agree.
Lady Arden and Lord Wilson each give a dissenting judgment.
The circumstances in which a landlord may be asked to give consent under a fully qualified covenant are infinitely variable.
In every case, the reasonableness of the landlords decision will be a question of fact and degree.
This must be assessed by reference to the facts at the date of the tenants request, not what the parties contemplated when the lease was granted [27] [32].
The real issue in this case is whether the courts below were correct in construing the lease in such a way as to prevent the landlord from having regard to an increased risk of enfranchisement from residential use.
Three reasons have been advanced in support of that conclusion [33] [34].
The first reason (adopted by the tenants counsel before the Supreme Court) is that refusal of consent under clause 3(19) is inconsistent with the landlords grant of rights under clause 3(11).
The majority rejects this argument, holding that the two clauses must be read together.
Under clause 3(19) the tenant must act consistently with planning legislation; so clause 3(11) only allows residential use of the building to the extent that it is permitted by the planning regime [34]; [36].
The second reason (adopted by HHJ Collender) is that clause 3(19) serves a limited purpose of protecting the landlord from liability which might arise under new planning conditions.
But there is nothing to suggest that there is only one purpose for the existence of clause 3(19).
The right approach is to decide whether the landlords refusal serves a purpose which is sufficiently connected with the landlord and tenant relationship: [37].
The third reason (adopted by the Court of Appeal) is that it makes no sense to allow the landlord to refuse planning permission to avoid the risk of enfranchisement, because a third party could apply for the same planning permission free of any such restraint and with the same adverse consequences to the landlord [18]; [34].
It is true that the landlord was vulnerable to enfranchisement if a third party sought planning permission.
But, as a matter of fact, no third party did apply for planning permission.
At the time of the tenants request, the landlords ability to refuse consent under clause 3(19) gave the landlord a real measure of protection against enfranchisement [38].
So the Court of Appeal made an error of law which requires the Supreme Court to consider the question of reasonableness for itself [39].
The Court considers that, on the undisputed facts, the landlord was acting reasonably in protecting the value of its property [40] [42].
Dissenting judgments of Lady Arden and Lord Wilson Lady Arden and Lord Wilson both rely on clause 3(11) which suggests the tenant may use the building for residential purposes.
In their judgment, this cannot be cut down by the landlords power to refuse consent to a planning application [44]; [47]; [55] [60].
If so, this effectively rewrites clause 3(11) [61] [62].
Lady Arden reads the authorities as establishing that the court should make an assessment of all the circumstances to determine whether the consent was unreasonably refused.
Here, the parties cannot have intended that the landlord should be able to protect itself against the risk of increased enfranchisement by refusing consent to a planning application for increased residential use [48] [50].
Lord Wilson emphasises that reasonableness is fact sensitive and considers that the Supreme Court has no reason to depart from the trial judges determination [63].
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This appeal arises from a tragic incident on 5 July 2000 at Gloucester Park swimming pool in Basildon, Essex.
The Appellant, then aged ten, was a pupil at Whitmore Junior School, for which the Respondent education authority was responsible.
The national curriculum, in its then form, included physical training of a number of alternative kinds, one of which was swimming, and pupils at the school had swimming lessons in normal school hours.
What appears to have happened was that the Appellant and other members of her class went to the pool, accompanied by a class teacher, Mrs Holt.
At the pool, the children were divided into groups.
The group to which the Appellant was assigned was taught by a swimming teacher, Ms. Burlinson, with a lifeguard, Ms Maxwell, in attendance.
At some point, the Appellant got into difficulties, and was found (in the judges words) hanging vertically in the water.
She was resuscitated, but suffered a serious hypoxic brain injury.
The Appellant alleges (among other things) that her injuries were due to the negligence of Ms Burlinson and Ms Maxwell.
Neither of them was employed by the education authority.
Their services had been provided to the authority by Mrs Beryl Stopford.
She was an independent contractor who carried on an unincorporated business under the name of Direct Swimming Services, and had contracted with the education authority to provide swimming lessons to its pupils.
The issue on the present appeal arises out of an allegation in the Appellants pleadings that the Council owed her a non-delegable duty of care, with the result that it is liable at law for any negligence on the part of Ms Burlinson or Ms Maxwell.
Langstaff J struck it out on the ground that on the pleaded facts the education authority could not be said to have owed a non-delegable duty of care.
The Court of Appeal affirmed his decision by a majority (Tomlinson and Kitchin LJJ, Laws LJ dissenting).
The appeal provides a useful occasion for reviewing the law on what have been called non-delegable duties of care.
But it must be very doubtful whether deciding such a point on the pleadings was really in the interests of these parties or of the efficient conduct of their litigation.
The pleadings are unsatisfactory.
There are no findings of fact and almost everything is disputed.
A decision of the point presently before us will not be decisive of the litigation either way, because there are other bases of claim independent of it.
The point has taken more than two years to reach this stage, during which, if the allegation had been allowed to go to trial, it would almost certainly have been decided by now.
As it is, regardless of the outcome of this appeal it will now have to go back to the High Court to find the relevant facts.
Non-delegable duties
In principle, liability in tort depends upon proof of a personal breach of duty.
To that principle, there is at common law only one true exception, namely vicarious liability.
Where a defendant is vicariously liable for the tort of another, he commits no tort himself and may not even owe the relevant duty, but is held liable as a matter of public policy for the tort of the other: Majrowski v Guys and St Thomass NHS Hospital Trust [2007] 1 AC 224.
The boundaries of vicarious liability have been expanded by recent decisions of the courts to embrace tortfeasors who are not employees of the defendant, but stand in a relationship which is sufficiently analogous to employment: Various Claimants v Catholic Child Welfare Society [2013] 2 AC 1.
But it has never extended to the negligence of those who are truly independent contractors, such as Mrs Stopford appears to have been in this case.
The issue on this appeal is, however, nothing to do with vicarious liability, except in the sense that it only arises because there is none.
On the footing that the local authority was not vicariously liable for the negligence of Mrs Stopford, Ms Burlinson or Ms Maxwell, the question is what was the scope of the authoritys duty to pupils in its care.
Was it a duty to take reasonable care in the performance of the functions entrusted to it, so far as it performed those functions itself, through its own employees? Or was it a duty to procure that reasonable care was taken in their performance by whomever it might get to perform them?
On either view, any liability of the education authority for breach of it is personal, not vicarious.
The law of negligence is generally fault-based.
Generally speaking, a defendant is personally liable only for doing negligently that which he does at all, or for omissions which are in reality a negligent way of doing that which he does at all.
The law does not in the ordinary course impose personal (as opposed to vicarious) liability for what others do or fail to do.
This is because, as Cory J observed, delivering the judgment of the majority in the Supreme Court of Canada in Lewis v British Columbia [1997] 3 SCR 1145 at para 17, a common law duty of care does not usually demand compliance with a specific obligation.
It is only when an act is undertaken by a party that a general duty arises to perform the act with reasonable care.
The expression non-delegable duty has become the conventional way of describing those cases in which the ordinary principle is displaced and the duty extends beyond being careful, to procuring the careful performance of work delegated to others.
English law has long recognised that non-delegable duties exist, but it does not have a single theory to explain when or why.
There are, however, two broad categories of case in which such a duty has been held to arise.
The first is a large, varied and anomalous class of cases in which the defendant employs an independent contractor to perform some function which is either inherently hazardous or liable to become so in the course of his work.
The early cases are concerned with the creation of hazards in a public place, generally in circumstances which apart from statutory authority would constitute a public nuisance: see Pickard v Smith (1861) 10 CB (NS) 470 (which appears to be the first reported case of a non-delegable duty), Penny v Wimbledon Urban District Council [1898] 2 QB 212 and Holliday v National Telephone Company [1899] 2 QB 392.
In Honeywill and Stein Ltd v Larkin Brothers (Londons Commercial Photographers) Ltd [1934] 1 KB 191, the principle was applied more broadly to extra-hazardous operations generally.
Many of these decisions are founded on arbitrary distinctions between ordinary and extraordinary hazards which may be ripe for re-examination.
Their justification, if there is one, should probably be found in a special public policy for operations involving exceptional danger to the public.
But their difficulties do not need to be considered further on these appeals, because teaching children to swim, while it unquestionably involves risks and calls for precautions, is not is not on any view an extra-hazardous activity.
It can be perfectly satisfactorily analysed by reference to ordinary standards of care.
The second category of non-delegable duty is, however, directly in point.
It comprises cases where the common law imposes a duty upon the defendant which has three critical characteristics.
First, it arises not from the negligent character of the act itself but because of an antecedent relationship between the defendant and the claimant.
Second, the duty is a positive or affirmative duty to protect a particular class of persons against a particular class of risks, and not simply a duty to refrain from acting in a way that foreseeably causes injury.
Third, the duty is by virtue of that relationship personal to the defendant.
The work required to perform such a duty may well be delegable, and usually is.
But the duty itself remains the defendants.
Its delegation makes no difference to his legal responsibility for the proper performance of a duty which is in law his own.
In these cases, the defendant is assuming a liability analogous to that assumed by a person who contracts to do work carefully.
The contracting party will normally be taken to contract that the work will be done carefully by whomever he may get to do it: see Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 848 (Lord Diplock).
The analogy with public services is often close, especially in the domain of hospital treatment in the National Health Service or education at a local education authority school, where only the absence of consideration distinguishes them from the private hospital or the fee-paying school performing the same functions under contract.
In the law of tort, the same consequence follows where a statute imposes on the defendant personally a positive duty to perform some function or to carry out some operation, but he performs that duty by entrusting the work to some one else for whose proper performance he is legally responsible.
In Morris v C.W. Martin & Sons Ltd [1966] 1 QB 716, 725-728, Lord Denning MR analysed the liability of a non-contractual bailee for reward in similar terms, as depending on his duty to procure that proper care was exercised in the custody of the goods bailed.
Origins
This characterisation of non-delegable duties originated in the law of nuisance, and in a number of seminal judgments of Lord Blackburn in the late nineteenth century.
It was implicit in the famous judgment of the Exchequer Chamber in Rylands v Fletcher (1866) LR 1 Ex 265, delivered by Blackburn J and subsequently affirmed by the House of Lords (1868) LR 3 HL 330, that the duty of the defendant to prevent the escape of water from his reservoir was non-delegable, for on the facts it was due to the operations of an independent contractor.
The point became explicit in Dalton v Henry Angus & Co (1881) 6 App Cas 740, in which the House of Lords had to consider the duty of adjoining landowners not to withdraw support from each others land.
The withdrawal of support had been due to works carried out on the defendants land by an independent contractor.
Lord Blackburn, who delivered the principal speech on this point, regarded the interposition of an independent contractor as irrelevant, because of the nature of the duty.
At p 829 he put the point in this way: Ever since Quarman v Burnett (1840) 6 M & W 499 it has been considered settled law that one employing another is not liable for his collateral negligence unless the relation of master and servant existed between them.
So that a person employing a contractor to do work is not liable for the negligence of that contractor or his servants.
On the other hand, a person causing something to be done, the doing of which casts on him a duty, cannot escape from the responsibility attaching on him of seeing that duty performed by delegating it to a contractor.
He may bargain with the contractor that he shall perform the duty and stipulate for an indemnity from him if it is not performed, but he cannot thereby relieve himself from liability to those injured by the failure to perform it: Hole v Sittingbourne Railway Co (1861) 6 H & N 488; Pickard v Smith 10 CB (NS) 470; Tarry v Ashton (1876) 1 QBD 314.
Rylands v Fletcher and Dalton v Henry Angus & Co might have been explained by reference to the hazardous character of the operation carried out by the defendants contractor, and sometimes have been, notably by the Court of Appeal in Honeywill and Stein Ltd v Larkin Brothers (Londons Commercial Photographers) Ltd [1934] 1 KB 191.
But it is clear from Lord Blackburns observations that the essential point about them was that there was an antecedent relationship between the parties as neighbouring landowners, from which a positive duty independent of the wrongful act itself could be derived.
The duty was personal to the defendant, because it attached to him in his capacity as the occupier of the neighbouring land from which the hazard originated.
All of these features were also present in Hughes v Percival (1883) 8 App Cas 443, which was one of the first cases in which the same principle was applied to a duty of care.
The parties were neighbouring householders with a party wall.
A builder working in the defendants house negligently cut into the party wall, causing the partial collapse of both the defendants house and the Plaintiffs house next-door.
On its facts, therefore, the case had many of the classic features of the cases about non-delegable duties in the law of nuisance, and Lord Blackburn, delivering the leading speech in the Appellate Committee, proceeded by analogy with them.
He put the matter in this way, at pp 445-446: The first point to be considered is what was the relation in which the defendant stood to the plaintiff.
It was admitted that they were owners of adjoining houses between which was a party-wall the property of both.
The defendant pulled down his house and had it rebuilt on a plan which involved in it the tying together of the new building and the party-wall which was between the plaintiff's house and the defendant's, so that if one fell the other would be damaged.
The defendant had a right so to utilize the party-wall, for it was his property as well as the plaintiff's; a stranger would not have had such a right.
But I think the law cast upon the defendant, when exercising this right, a duty towards the plaintiff.
I do not think that duty went so far as to require him absolutely to provide that no damage should come to the plaintiff's wall from the use he thus made of it, but I think that the duty went as far as to require him to see that reasonable skill and care were exercised in those operations which involved a use of the party-wall, exposing it to this risk.
If such a duty was cast upon the defendant he could not get rid of responsibility by delegating the performance of it to a third person.
He was at liberty to employ such a third person to fulfil the duty which the law cast on himself, and, if they so agreed together, to take an indemnity to himself in case mischief came from that person not fulfilling the duty which the law cast upon the defendant; but the defendant still remained subject to that duty, and liable for the consequences if it was not fulfilled.
This is the law I think clearly laid down in Pickard v Smith 10 CB (NS) 470, and finally in (1881) Dalton v Angus 6 App Cas 740.
But in all the cases on the subject there was a duty cast by law on the party who was held liable.
Assumption of responsibility
The duty to which Lord Blackburn was referring would today be regarded as arising from an assumption of responsibility imputed to the defendant by virtue of the special character of his relationship with the claimant.
The concept of an assumption of responsibility is usually relevant in the law of negligence as a tool for determining whether a duty of care is owed to protect against a purely economic loss.
There is no doubt in this case that the education authority owed a duty of care to its pupils to protect them from injury.
But the concept of assumption of responsibility is relevant to determine its scope, whether the potential loss is economic or physical.
The circumstances must be such that the defendant can be taken not just to have assumed a positive duty, but to have assumed responsibility for the exercise of due care by any one to whom he may delegate its performance.
This is a markedly more onerous obligation.
What are the circumstances in which a person may be taken to have assumed it? They have been considered in a number of cases involving injuries sustained by employees, hospital patients, school pupils and invitees, at the hands of persons working for the defendant for whom the defendant was not vicariously liable.
There are a number of situations where by virtue of some special relationship the defendant is held to assume positive duties.
Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 is a classic example of a duty of care to perform professional services, arising out of a special relationship equivalent to contract but not contractual: see, in particular Lord Goff of Chieveley at pp 180-181.
A corresponding relationship may also arise out of a sufficient degree of dependence, even in the absence any reliance, as it did in very different circumstances in Dorset Yacht Company v Home Office [1970] AC 1004 and White v Jones [1995] 2 AC 207, 275 (Lord Browne-Wilkinson).
It does not, however, follow from the mere existence of a positive duty that it is personal to the defendant so as to make it non- delegable.
In the nuisance or quasi-nuisance cases, the personal character of the duty results, as I have pointed out, from the fact it arises from the defendants occupation of the land from which the hazard originates.
In other cases, the personal character of the duty must be derived from something else.
Both principle and authority suggest that the relevant factors are the vulnerability of the claimant, the existence of a relationship between the claimant and the defendant by virtue of which the latter has a degree of protective custody over him, and the delegation of that custody to another person.
The employment cases
These matters first arose for consideration in the context of the common law duty of an employer to his workforce.
This was an area in which the courts at an early stage of the development of the law of tort, adopted a protective approach to those who were vulnerable and not in a position to defend their own interests.
In Wilsons & Clyde Coal Co Ltd v English [1938] AC 57, the House of Lords not only held that the employer had a duty to provide a safe system of work, but also that it was (in the modern terminology) non-delegable.
Liability was not therefore excluded on the ground that the breach was due to the negligence of another employee, for which the employer would not (as the law then stood) have been liable because of the doctrine of common employment.
The duty was non- delegable because of its personal character.
Lord Macmillan said at p 75: [The defendant] cannot divest himself of this duty, though he mayand, if it involves technical management and he is not himself technically qualified, mustperform it through the agency of an employee.
It remains the owner's obligation, and the agent whom the owner appoints to perform it performs it on the owner's behalf.
The owner remains vicariously responsible for the negligence of the person whom he has appointed to perform his obligation for him, and cannot escape liability by merely proving that he has appointed a competent agent.
If the owner's duty has not been performed, no matter how competent the agent selected by the owner to perform it for him, the owner is responsible.
The fullest rationalisation of the principle appears in the speech of Lord Wright.
Referring to the earlier decision of the House in Lochgelly Iron and Coal Co v Mc Mullan [1934] AC 1, he observed at p 78: This House held that, on the contrary, the statutory duty was personal to the employer, in this sense that he was bound to perform it by himself or by his servants.
The same principle, in my opinion, applies to those fundamental obligations of a contract of employment which lie outside the doctrine of common employment, and for the performance of which employers are absolutely responsible.
Dealing, later in his speech, with the scope of the duty, Lord Wright said at pp 83- 84: The true question is, What is the extent of the duty attaching to the employer? Such a duty is the employer's personal duty, whether he performs or can perform it himself, or whether he does not perform it or cannot perform it save by servants or agents.
A failure to perform such a duty is the employer's personal negligence.
This was held to be the case where the duty was statutory, and it is equally so when the duty is one attaching at common law... I think the whole course of authority consistently recognizes a duty which rests on the employer and which is personal to the employer, to take reasonable care for the safety of his workmen, whether the employer be an individual, a firm, or a company, and whether or not the employer takes any share in the conduct of the operations.
The principle thus expressed was qualified only by its limitation to those acts of the delegate which were within the scope of the employers personal duty: It is not, however, broken by a mere misuse or failure to use proper plant and appliances due to the negligence of a fellow-servant or a merely temporary failure to keep in order or adjust plant and appliances or a casual departure from the system of working, if these matters can be regarded as the casual negligence of the managers, foreman, or other employees.
(pp 84-5) So far as there was ever any doubt about the application of this principle to the negligence of an independent contractor, it was resolved by the House of Lords in McDermid v Nash Dredging and Reclamation Co Ltd [1987] AC 906.
The hospital cases
In Gold v Essex County Council [1942] 2 KB 293, a voluntary hospital operated by a local authority was held liable for the negligence of a radiographer employed by it.
The decision was an orthodox application of the doctrine of vicarious liability.
The main issue was whether the authority could be vicariously liable even for employees in cases where their employment called for the exercise of special skill of a kind which the authority could not reasonable be expected to supervise or control.
Lord Greene MR, however, considered more broadly the basis of the hospitals liability for the negligence of those through whom it discharged its duty of care to patients, at p 301: the extent of the obligation which one person assumes towards another is to be inferred from the circumstances of the case.
This is true whether the relationship be contractual (as in the case of a nursing home conducted for profit) or non-contractual (as in the case of a hospital which gives free treatment).
In the former case there is, of course, a remedy in contract, while in the latter the only remedy is in tort, but in each case the first task is to discover the extent of the obligation assumed by the person whom it is sought to make liable.
Once this is discovered, it follows of necessity that the person accused of a breach of the obligation cannot escape liability because he has employed another person, whether a servant or agent, to discharge it on his behalf, and this is equally true whether or not the obligation involves the use of skill.
It is also true that, if the obligation is undertaken by a corporation, or a body of trustees or governors, they cannot escape liability for its breach, any more than can an individual, and it is no answer to say that the obligation is one which on the face of it they could never perform themselves.
In Cassidy v Ministry of Health [1951] 2 KB 343, Gold v Essex County Council was followed in another case involving employed medical staff.
The majority of the Court of Appeal (Somervell and Singleton LJJ) were content to treat the matter as an ordinary case of vicarious liability and to leave it at that.
But Denning LJ considered that the critical factor was not the hospitals relationship with the doctor or surgeon, but its relationship with the patient, arising from its acceptance of the patient for treatment.
He put the point as follows, at pp.
362-363: when hospital authorities undertake to treat a patient, and themselves select and appoint and employ the professional men and women who are to give the treatment, then they are responsible for the negligence of those persons in failing to give proper treatment, no matter whether they are doctors, surgeons, nurses, or anyone else... where the doctor or surgeon, be he a consultant or not, is employed and paid, not by the patient but by the hospital authorities, I am of opinion that the hospital authorities are liable for his negligence in treating the patient.
It does not depend on whether the contract under which he was employed was a contract of service or a contract for services.
That is a fine distinction which is sometimes of importance; but not in cases such as the present, where the hospital authorities are themselves under a duty to use care in treating the patient.
This is a robust assertion, albeit reflecting a minority view, that a hospitals duty of care to patients is personal as well as vicarious, and therefore non-delegable.
Denning LJ cited in support of his view the classic statements of the principle of non-delegable duty by Lord Blackburn in Dalton v Angus and Hughes v Percival.
At pp 364-365, he went on to consider the scope of the matters for which the authority was responsible: The truth is that, in cases of negligence, the distinction between a contract of service and a contract for services only becomes of importance when it is sought to make the employer liable, not for a breach of his own duty of care, but for some collateral act of negligence of those whom he employs.
He cannot escape the consequences of a breach of his own duty, but he can escape responsibility for collateral or casual acts of negligence if he can show that the negligent person was employed, not under a contract of service but only under a contract for services... These distinctions are, however, of no importance in the present case, because we are not concerned with any collateral or casual acts of negligence by the staff, but negligence in the treatment itself which it was the employer's duty to provide.
In Roe v Minister of Health [1954] 2 QB 66, Denning LJ repeated his analysis in Cassidy, but the case was once again decided on other grounds by the other members of the Court of Appeal.
These dicta have never been adopted as part of the ratio of any English case.
But the principle which they embody is supported by powerful dicta.
In particular, Lord Browne-Wilkinson, delivering the leading speech in the House of Lords in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, considered that a hospital authority assumed a personal and not just a vicarious liability for the negligence of medical staff, which might therefore be broken even in a case where no duty of care was owed by the staff themselves.
At p 740, he observed: It is established that those conducting a hospital are under a direct duty of care to those admitted as patients to the hospital (I express no view as to the extent of that duty).
They are liable for the negligent acts of a member of the hospital staff which constitute a breach of that duty, whether or not the member of the staff is himself in breach of a separate duty of care owed by him to the plaintiff: Gold v Essex County Council [1942] 2 KB 293, 301, per Lord Green[e]; Cassidy v Ministry of Health [1951] 2 KB 343, per Denning LJ; Roe v Minister of Health [1954] 2 QB 66; see also Wilsons & Clyde Coal Co Ltd v English [1938] AC 57; McDermid v Nash Dredging & Reclamation Co Ltd [1987] AC 906.
Therefore in the cases under appeal, even where there is no allegation of a separate duty of care owed by a servant of the authority to the plaintiff, the negligent acts of that servant are capable of constituting a breach of the duty of care (if any) owed directly by the authority to the plaintiff.
The Australian case-law
Professor Glanville Williams, who was hostile to the whole notion of a non- delegable duty of care, criticised these statements in a famous article, "Liability for Independent Contractors" [1956] CLJ, 180, on the ground that they asserted that a non-delegable duty arose without explaining why.
I think that this criticism is unfair, for the circumstances which made the duty non-delegable are reasonably clear from the facts that were being discussed.
But they have been considered and applied in four important decisions of the High Court of Australia, which consider in some detail the underlying rationale of non-delegable duties.
In Commonwealth v Introvigne (1982) 150 CLR 258, the Commonwealth of Australia, as the authority responsible for a school in the Australian Capital Territory, was held liable for injury to a child on school premises, notwithstanding that the running of the school and the employment of the staff were delegated to the State of New South Wales.
This was because the duty of the Commonwealth was held to be a non-delegable duty.
Mason J, with whom Gibbs CJ agreed, took the dicta in Gold and Cassidy as his starting point, and justified this step at paras 29-35 by reference to the vulnerability and consequent dependence of school children: 29.
The concept of personal duty, performance of which is incapable of delegation, has been strongly criticised, especially outside the master and servant relationship where its introduction was designed to overcome the consequences of the doctrine of common employment (see Glanville Williams "Liability for Independent Contractors" (1956) Cambridge Law Journal, p 180).
It has been said that the concept of personal duty departs from the basic principles of liability and negligence by substituting for the duty to take reasonable care a more stringent duty, a duty to ensure that reasonable care is taken.
This criticism fails to acknowledge that the law has, for various reasons, imposed a special duty on persons in certain situations to take particular precautions for the safety of others, e.g. the occupier of premises.
30.
There are strong reasons for saying that it is appropriate that a school authority comes under a duty to ensure that reasonable care is taken of pupils attending the school... The immaturity and inexperience of the pupils and their propensity for mischief suggest that there should be a special responsibility on a school authority to care for their safety, one that goes beyond a mere vicarious liability for the acts and omissions of its servants.
... 32.
By establishing a school which was "maintained" on its behalf at which parents could enrol their children for instruction pursuant to the obligation imposed on them by the Ordinance, the Commonwealth, in my opinion, came under a duty of care to children attending the school.
The nature and scope of that duty of care was co-extensive with the duty of care owed by any authority or body conducting a school to pupils attending the school.
It was a duty to ensure that reasonable care was taken for the safety of the pupil which was breached in the circumstances of this case, in the two respects already mentioned.
It was, as I see it, a duty directly owed by the Commonwealth for breach of which it is liable.
It was not a case of vicarious liability for the omissions of the acting principal and the members of his staff, though had it been necessary to do so, the Commonwealth might have been found liable on this score.
33.
The fact that the Commonwealth delegated the teaching function to the State, including the selection and control of teachers, does not affect its liability for breach of duty.
Neither the duty, nor its performance, is capable of delegation.
It is not enough for the Commonwealth, in providing a school, to leave it to the State to take care for the safety of the children attending the school.
Nor does it matter that the Commonwealth does not control and cannot direct the teaching staff in the performance of its duties.
That would be a relevant factor if the question was: are the teachers servants of the Commonwealth? However, that is not the issue here.
The issue is whether the Commonwealth is liable as a school authority when it establishes the school and arranges with the State to run the school on its behalf.
In my opinion, the Commonwealth does not cease to be liable because it arranges for the State to run the school on its behalf.
34. ...the Government of the State of New South Wales is not a subcontractor.
What it did was to supply the services of its employees to perform for the Commonwealth a task which the Commonwealth had undertaken, i.e. the establishment and operation of schools in the Australian Capital Territory.
The High Court of Australia returned to this question in Kondis v State Transport Authority (1984) 154 CLR 672.
Kondis was not about schools.
It concerned the duty of care owed by an employer.
The case was argued on the basis of vicarious liability, but Mason J, with whom Deane and Dawson JJ agreed, decided it on the ground that the relevant duty was non-delegable.
For present purposes, the most valuable part of his analysis is a section at paras 29-33 in which he took the opportunity to consider more generally the basis on which the law holds some duties to be non-delegable: 32. ...when we look to the classes of case in which the existence of a non-delegable duty has been recognized, it appears that there is some element in the relationship between the parties that makes it appropriate to impose on the defendant a duty to ensure that reasonable care and skill is taken for the safety of the persons to whom the duty is owed... 33.
The element in the relationship between the parties which generates a special responsibility or duty to see that care is taken may be found in one or more of several circumstances.
The hospital undertakes the care, supervision and control of patients who are in special need of care.
The school authority undertakes like special responsibilities in relation to the children whom it accepts into its care... In these situations the special duty arises because the person on whom it is imposed has undertaken the care, supervision or control of the person or property of another or is so placed in relation to that person or his property as to assume a particular responsibility for his or its safety, in circumstances where the person affected might reasonably expect that due care will be exercised.
In Burnie Port Authority v General Jones Pty (1994) 179 CLR 520, the High Court of Australia was concerned with a case in which fire escaped from the defendants property and damaged the Plaintiffs goods which were stored on an adjoining property.
The case is best known for subsuming the rule in Rylands v Fletcher within the law of negligence, a step which has not been taken in England: Transco Plc v Stockport Metropolitan Borough Council [2004] 2 AC 1.
Viewing it as part of the law of negligence, the court considered the case-law on non- delegable duties and adopted the general statement of the test based on control which had been proposed by Mason J in Kondis.
The difference was that this being a dispute about the duties arising from the occupation of land, they were talking about control over the source of the hazard rather than (as in Kondis) control over the Plaintiff.
At para 37, the Court observed: The relationship of proximity which exists, for the purposes of ordinary negligence, between a plaintiff and a defendant in circumstances which would prima facie attract the rule in Rylands v Fletcher is characterized by such a central element of control and by such special dependence and vulnerability.
One party to that relationship is a person who is in control of premises and who has taken advantage of that control to introduce thereon or to retain therein a dangerous substance or to undertake thereon a dangerous activity or to allow another person to do one of those things.
The other party to that relationship is a person outside the premises and without control over what occurs therein, whose person or property is thereby exposed to a foreseeable risk of danger... In such a case, the person outside the premises is obviously in a position of special vulnerability and dependence.
Finally, in New South Wales v Lepore (2003) 212 CLR 511, the High Court of Australia revisited the question of the non-delegable duty owed by schools to pupils.
It was a difficult case arising out of sexual assaults on children by a teacher in circumstances where there was no allegation and no finding of vicarious liability by the courts below, perhaps because criminal assaults were thought to be outside the course of a teachers employment (the case was pleaded and tried before the decision of the House of Lords in Lister v Hesley Hall Ltd [2002] 1 AC 215).
The Court was divided.
Several of its members thought that vicarious liability was a simpler route to liability than a non-delegable duty of care.
Nonetheless, by a majority of 4-3 (Gaudron, McHugh, Gummow and Hayne JJ) the Court held that the schools owed a non-delegable duty.
There are differences of emphasis among the majority.
Gaudron J, citing the judgment of Blackburn J in Hughes v Percival, based her view on (i) the fact that the school owed a positive duty to take reasonable care for the safety of children in their charge, and not merely a negative duty to avoid the consequences of a foreseeable risk of injury (paras 104-105), and (ii) the material increase in risk associated with the operation of institutions for the young or vulnerable, such as schools, prisons, nursing homes, old peoples homes and geriatric wards.
McHugh J considered that the non-delegable duty arose upon the enrolment of the child para 142.
In each case, he observed at para 139, the duty arises because the school authority has control of the pupil whose immaturity is likely to lead to harm to the pupil unless the authority exercises reasonable care in supervising him or her and because the authority has assumed responsibility for the child's protection.
Gummow and Hayne JJ were more cautious.
At para 255, they suggested that in each case in which a non-delegable liability had been held to exist, there was: ...a relationship in which the person owing the duty either has the care, supervision or control of the other person or has assumed a particular responsibility for the safety of that person or that person's property.
It is not suggested, however, that all relationships which display these characteristics necessarily import a non-delegable duty.
In what circumstances will a non-delegable duty arise?
The main problem about this area of the law is to prevent the exception from eating up the rule.
Non-delegable duties of care are inconsistent with the fault-based principles on which the law of negligence is based, and are therefore exceptional.
The difference between an ordinary duty of care and a non-delegable duty must therefore be more than a question of degree.
In particular, the question cannot depend simply on the degree of risk involved in the relevant activity.
The ordinary principles of tortious liability are perfectly capable of answering the question what duty is an appropriate response to a given level of risk.
In my view, the time has come to recognise that Lord Greene in Gold and Denning LJ in Cassidy were correct in identifying the underlying principle, and while I would not necessarily subscribe to every dictum in the Australian cases, in my opinion they are broadly correct in their analysis of the factors that have given rise to non-delegable duties of care.
If the highway and hazard cases are put to one side, the remaining cases are characterised by the following defining features: (1) The claimant is a patient or a child, or for some other reason is especially vulnerable or dependent on the protection of the defendant against the risk of injury.
Other examples are likely to be prisoners and residents in care homes.
(2) There is an antecedent relationship between the claimant and the defendant, independent of the negligent act or omission itself, (i) which places the claimant in the actual custody, charge or care of the defendant, and (ii) from which it is possible to impute to the defendant the assumption of a positive duty to protect the claimant from harm, and not just a duty to refrain from conduct which will foreseeably damage the claimant.
It is characteristic of such relationships that they involve an element of control over the claimant, which varies in intensity from one situation to another, but is clearly very substantial in the case of schoolchildren.
(3) The claimant has no control over how the defendant chooses to perform those obligations, i.e. whether personally or through employees or through third parties.
(4) The defendant has delegated to a third party some function which is an integral part of the positive duty which he has assumed towards the claimant; and the third party is exercising, for the purpose of the function thus delegated to him, the defendants custody or care of the claimant and the element of control that goes with it.
(5) The third party has been negligent not in some collateral respect but in the performance of the very function assumed by the defendant and delegated by the defendant to him.
In A (Child) v Ministry of Defence [2005] QB 183, at para 47 Lord Phillips of Worth Matravers MR, delivering the leading judgment in the Court of Appeal, suggested that hitherto a non-delegable duty has only been found in a situation where the claimant suffers an injury while in an environment over which the defendant has control.
This is undoubtedly a fundamental feature of those cases where, in the absence of a relevant antecedent relationship, the defendant has been held liable for inherently hazardous operations or dangers on the public highway.
But I respectfully disagree with the view that control of the environment in which injury is caused is an essential element in the kind of case with which we are presently concerned.
The defendant is not usually in control of the environment in which injury is caused by an independent contractor.
That is why as a general rule he is not liable for the contractors negligence.
Where a non-delegable duty arises, the defendant is liable not because he has control but in spite of the fact that he may have none.
The essential element in my view is not control of the environment in which the claimant is injured, but control over the claimant for the purpose of performing a function for which the defendant has assumed responsibility.
The actual result in A (A Child) was therefore correct.
The Ministry of Defence was not responsible for the negligence of a hospital with whom it contracted to treat soldiers and their families.
But the true reason was the finding of the trial judge (quoted at para 28 of Lord Phillips judgment) that there was no sound basis for any feeling... that secondary treatment in hospital was actually provided by the Army (MoD) as opposed to arranged by the army.
There was therefore no delegation of any function which the Ministry had assumed personal responsibility to carry out, and no delegation of any custody exercised by the Ministry over soldiers and their families.
For exactly the same reason, I think that the Court of Appeal was right in Myton v Woods (1980) 79 LGR 28 to dismiss a claim against a local education authority for the negligence of a taxi firm employed by the authority to drive children to and from school.
The school had no statutory duty to transport children, but only to arrange and pay for it.
As Lord Denning MR put it, the authority was not liable for an independent contractor except he delegates to the contractor the very duty which he himself has to fulfil.
Likewise, the Court of Appeal was right in Farraj v Kings Healthcare NHS Trust [2010] 1 WLR 2139, to dismiss a claim against a hospital which had employed an independent laboratory to analyse a tissue sample for a patient who was not being treated by the hospital and was therefore not in its custody or care.
As Dyson LJ put it at para 88, the rationale of any non-delegable duty owed by hospitals is that the hospital undertakes the care, supervision and control of its patients who are in special need of care.
Patients are a vulnerable class of persons who place themselves in the care and under the control of a hospital and, as a result, the hospital assumes a particular responsibility for their well-being and safety.
The courts should be sensitive about imposing unreasonable financial burdens on those providing critical public services.
A non-delegable duty of care should be imputed to schools only so far as it would be fair, just and reasonable to do so.
But I do not accept that any unreasonable burden would be cast on them by recognising the existence of a non-delegable duty on the criteria which I have summarised above.
My reasons are as follows: (1) The criteria themselves are consistent with the long-standing policy of the law, apparent notably in the employment cases, to protect those who are both inherently vulnerable and highly dependent on the observance of proper standards of care by those with a significant degree of control over their lives.
Schools are employed to educate children, which they can do only if they are allowed authority over them.
That authority confers on them a significant degree of control.
When the schools own control is delegated to someone else for the purpose of performing part of the schools own educational function, it is wholly reasonable that the school should be answerable for the careful exercise of its control by the delegate.
(2) Parents are required by law to entrust their child to a school.
They do so in reliance on the schools ability to look after them, and generally have no knowledge of or influence over the arrangements that the school may make to delegate specialised functions, or the basis on which they do so, or the competence of the delegates, all of which are matters about which only the school is in a position to satisfy itself.
(3) This is not an open-ended liability, for there are important limitations on the range of matters for which a school or education authority assumes non-delegable duties.
They are liable for the negligence of independent contractors only if and so far as the latter are performing functions which the school has assumed for itself a duty to perform, generally in school hours and on school premises (or at other times or places where the school may carry out its educational functions).
In the absence of negligence of their own, for example in the selection of contractors, they will not be liable for the negligence of independent contractors where on analysis their own duty is not to perform the relevant function but only to arrange for its performance.
They will not be liable for the defaults of independent contractors providing extra-curricular activities outside school hours, such as school trips in the holidays.
Nor will they be liable for the negligence of those to whom no control over the child has been delegated, such as bus drivers or the theatres, zoos or museums to which children may be taken by school staff in school hours, to take some of the examples canvassed in argument and by Laws LJ in his dissenting judgment.
(4) It is important to bear in mind that until relatively recently, most of the functions now routinely delegated by schools to independent contractors would have been performed by staff for whom the authority would have been vicariously liable.
The recognition of limited non-delegable duties has become more significant as a result of the growing scale on which the educational and supervisory functions of schools are outsourced, but in a longer historical perspective, it does not significantly increase the potential liability of education authorities.
(5) The responsibilities of fee-paying schools are already non-delegable because they are contractual, and the possibility of contracting out of them is limited by legislation.
In this particular context, there seems to be no rational reason why the mere absence of consideration should lead to an entirely different result when comparable services are provided by a public authority.
A similar point can be made about the technical distinctions that would otherwise arise between privately funded and NHS hospital treatment.
(6) It can fairly be said that the recognition of a non-delegable duty of care owed by schools involves imputing to them a greater responsibility than any which the law presently recognises as being owed by parents.
Parents would not normally incur personal liability for the negligence of (say) a swimming instructor to whom they had handed custody of a child.
The Appellants pleaded allegation that the school stood in loco parentis may not therefore assist their case.
The position of parents is very different to that of schools.
Schools provide a service either by contract or pursuant to a statutory obligation, and while LEA schools do not receive fees, their staff and contractors are paid professionals.
By comparison, the custody and control which parents exercise over their children is not only gratuitous, but based on an intimate relationship not readily analysable in legal terms.
For this reason, the common law has always been extremely cautious about recognising legally enforceable duties owed by parents on the same basis as those owed by institutional carers: see Surtees v Kingston-on-Thames Borough Council [1992] PIQR 101, 121 (Beldam LJ); Barrett v Enfield London Borough Council [2001] 2 AC 550, 588 (Lord Hutton).
Application to the present case
In my opinion, on the limited facts pleaded or admitted, the respondent education authority assumed a duty to ensure that the Appellants swimming lessons were carefully conducted and supervised, by whomever they might get to perform these functions.
The Appellant was entrusted to the school for certain essential purposes, which included teaching and supervision.
The swimming lessons were an integral part of the schools teaching function.
They did not occur on school premises, but they occurred in school hours in a place where the school chose to carry out this part of its functions.
The teaching and the supervisory functions of the school, and the control of the child that went with them, were delegated by the school to Mrs Stopford and through her to Ms Burlinson, and probably to Ms Maxwell as well, to the extent necessary to enable them to give swimming lessons.
The alleged negligence occurred in the course of the very functions which the school assumed an obligation to perform and delegated to its contractors.
It must follow that if the latter were negligent in performing those functions and the child was injured as a result, the educational authority is in breach of duty.
I would accordingly allow the appeal and set aside the judges order striking out the allegation of a non-delegable duty.
LADY HALE (with whom Lord Clarke, Lord Wilson and Lord Toulson agree)
The common law is a dynamic instrument.
It develops and adapts to meet new situations as they arise.
Therein lies its strength.
But therein also lies a danger, the danger of unbridled and unprincipled growth to match what the court perceives to be the merits of the particular case.
So it must proceed with caution, incrementally by analogy with existing categories, and consistently with some underlying principle (see Caparo Industries plc v Dickman [1990] 2 AC 605).
But the words used by judges in explaining why they are deciding as they do are not be treated as if they were the words of statute, setting the rules in stone and precluding further principled development should new situations arise.
These things have been said many times before by wiser judges than me, but are worth repeating in this case, where we are accepting an invitation to develop the law beyond the point which it has currently reached in this jurisdiction.
It is because we are doing that, and thus disagreeing with the conclusions reached in the courts below, that I am adding a few thoughts to the judgment of Lord Sumption, with which of course I agree.
It is also important, so far as possible, that the distinctions produced by this process make sense to ordinary people.
They should not, as Lord Steyn observed in White v Chief Constable of South Yorkshire Police [1999] 2 AC 455, 495, produce an imbalance in the law of tort which might perplex the man on the underground.
In that case, their Lordships obviously thought that the public would be perplexed if the police officers who were present at the Hillsborough disaster could claim compensation for the psychiatric harm they had suffered as a result of the negligence of their fellow officers when the spectators who had suffered the same harm for the same reason could not.
In this case we have the reverse situation, where the public might well be perplexed if one pupil could sue her school for injuries sustained during a negligently conducted swimming lesson but another could not.
Consider the cases of three 10-year-old children, Amelia, Belinda and Clara.
Their parents are under a statutory duty to ensure that they receive efficient full-time education suitable to their age, ability and aptitude, and to any special needs they may have (Education Act 1996, section 7).
Amelias parents send her to a well-known and very expensive independent school.
Swimming lessons are among the services offered and the school contracts with another school which has its own swimming pool to provide these.
Belindas parents send her to a large school run by a local education authority which employs a large sports staff to service its schools, including swimming teachers and life-guards.
Claras parents send her to a small state-funded faith school which contracts with an independent service provider to provide swimming lessons and life-guards for its pupils.
All three children are injured during a swimming lesson as a result (it must be assumed) of the carelessness either of the swimming teachers or of the life-guards or of both.
Would the man on the underground be perplexed to learn that Amelia and Belinda can each sue their own school for compensation but Clara cannot?
As lawyers, we know that the three girls fall into three different legal categories.
Amelia (we will assume) has the benefit of a contractual obligation of the school to secure that care be taken for her safety.
Belinda has the benefit of the rule which makes an employer vicariously liable for the negligence of its employees.
Clara has the benefit of neither and can only succeed if the school has an obligation to secure that care be taken for her safety.
In many ways, as Christine Beuermann points out in her valuable article Vicarious liability and conferred authority strict liability (2013) 20 Torts Law Journal 265, it is unfortunate that the courts have not considered both bases of liability in previous cases concerning harm suffered by school pupils.
They are conceptually quite different, as Laws LJ made clear in the Court of Appeal at [2012] EWCA Civ 239; [2013] 3 WLR 853, paras 5 to 7, and Lord Sumption explains at paras 3 and 4 above.
In the one case, the defendant is not liable because he has breached a duty which he owes personally to the claimant; he is liable because he has employed someone to go about his business for him and in the course of doing so that person has breached a duty owed to the claimant.
In the other case, the defendant is liable because he has breached a duty which he owes personally to the claimant, not because he has himself been at fault, but because his duty was to see that whoever performed the duty he owed to the claimant did so without fault.
No-one in this case has seriously questioned that if a hospital patient is injured as a result of a nurses carelessness it matters whether the nurse is employed by the hospital or by an agency; or if a pupil at school is injured by a teacher it matters whether the teacher is employed by the school or is self- employed.
Yet these are not employees of the hospital or school, nor can it be said that their relationship with the school is akin to employment in the sense in which the relationship of the individual Christian Brothers to their Order was akin to employment in the case of Various Claimants v Catholic Child Welfare Society and others [2012] UKSC 56, [2013] 2 AC 1.
The reason why the hospital or school is liable is that the hospital has undertaken to care for the patient, and the school has undertaken to teach the pupil, and that responsibility is not discharged simply by choosing apparently competent people to do it.
The hospital or school remains personally responsible to see that care is taken in doing it.
As Lord Sumption has shown, the principle of personal responsibility of this sort is well-established in our law.
The prime example is the responsibility of an employer to see that his employees are provided with a safe place of work, safe equipment and a safe system of working.
As Lord Brandon of Oakwood put it in McDermid v Nash Dredging & Reclamation Co Ltd [1987] AC 906, 919: The essential characteristic of the duty is that, if it is not performed, it is no defence for the employer to show that he delegated its performance to a person, whether his servant or not his servant, whom he reasonably believed to be competent to perform it.
Despite such delegation the employer is liable for the non-performance of the duty.
The duty may originally have been formulated in that way to get round the problem that, at common law, an employer could not be vicariously liable for injuries negligently caused by one of his employees to another.
But McDermid shows that it not only survived the abolition of that doctrine by the Law Reform (Personal Injuries) Act 1948 but also applied where performance of the duty was delegated to an independent contractor.
Also, given that there exists a contract of employment between employer and employee, the duty might perhaps have been formulated as an implied term in that contract, rather than in the law of tort.
But it was not.
As Lord Sumption has explained, both Lord Greene MR in Gold v Essex County Council [1942] 2 KB 293, 301, and Denning LJ in Cassidy v Ministry of Health [1951] 2 KB 343, 362-363, would have applied the same principle to get round what was then perceived to be another problem with the law of vicarious liability, that its theoretical foundation was supposed to be the control which the employer could exercise over the manner in which the employee did his work.
This provides a ready answer to the examples of the agency nurse and the supply teacher and I agree with Lord Sumption that the time has come to recognise that Lord Greene and Denning LJ were correct in identifying the underlying principle.
I also agree that the principle will apply in the circumstances set out by Lord Sumption at paragraph 23, subject of course to the usual provisos that such judicial statements are not to be treated as if they were statutes and can never be set in stone.
In my view, those features clearly apply to the delegation of the conduct of swimming lessons to the swimming teacher, Mrs Burlinson, and (subject to any factual matters of which we are unaware) to the lifeguard, Ms Maxwell.
Taking care to keep the children safe is an essential part of any swimming lesson and of the responsibility which the school undertakes towards its pupils.
That is what the life-guard is for.
These features clearly would not apply to the negligent ice-cream vendor or zoo-keeper.
They would not normally apply to the bus driver but they might do so if the school had undertaken to provide transport and placed the pupils in his charge rather than that of a teacher.
The boundaries of what the hospital or school has undertaken to provide may not always be as clear cut as in this case and in Gold and Cassidy, but will have to be worked out on a case by case basis as they arise.
I also agree with Lord Sumption that recognising the existence of a non- delegable duty in the circumstances described above would not cast an unreasonable burden upon the service-providers for all the reasons he gives.
It is particularly worth remembering that for the most part public authorities would have been vicariously liable to claimants who were harmed in this way until the advent of outsourcing of essential aspects of their functions.
As Lord Sumption also explains, it is not particularly helpful to plead that the school is in loco parentis.
The school clearly does owe its pupils at least the duty of care which a reasonable parent owes to her children.
But it may owe them more than that.
Children rarely sue their parents for the harm that they suffer at their parents hands save where that harm is covered by an insurance policy.
But that is not because the parents do not owe them a duty of care.
Rather it is because any damages recovered will normally reduce the resources available to cater for the needs of the child and her family.
The courts are also anxious not to impose an impossibly high standard of care in an ordinary domestic setting, as was common ground between the judges in Surtees v Kingston-upon-Thames Borough Council [1992] PIQR 101 (although speaking for myself, I share the dissenting view of Beldam LJ that the judges factual findings were incomprehensible and the foster parents had not discharged the burden of showing that the severe scalding suffered by their two year old foster child had occurred without negligence on their part).
But neither of those factors applies to institutional carers including schools.
As Lord Hutton explained in Barrett v Enfield London Borough Council [2001] 2 AC 550, 588, when considering the liability of a local authority for the exercise of its parental responsibility towards a child in its care: I consider that the comparison between a parent and a local authority is not an apt one in the present case because the local authority has to make decisions of a nature which a parent with whom a child is living in a normal family relationship does not have to make, . . .
Moreover a local authority employs trained staff to make decisions and to advise it in respect of the future of a child in its care, and if it can be shown that decisions taken in respect of the child constitute, in the circumstances, a failure to take reasonable care, I do not think that the local authority should be held to be free from liability on the ground that it is in the position of a parent to the child.
Both of those features apply as much to a school as to a local authority having parental responsibility for a child and constitute reasons for imposing upon it a responsibility which the law would not impose upon a parent.
Finally, it is of interest to consider the objections raised by Professor Glanville Williams in his famous article Liability for Independent Contractors [1956] CLJ 180.
I agree with Lord Sumption that it was unfair to criticise the concept of the non-delegable duty on the ground that it was not adequately explained.
It has been.
But his main criticism was one of policy that liability should rest solely with the person at fault.
In his view The argument from poverty hardly applies to contractors, who are often far wealthier than their employers (195) and it may be questioned whether the social evil of the occasional insolvent tortfeasant contractor is of sufficient gravity to justify the somewhat complicated rules and the imposition of vicarious liability (198).
Such arguments scarcely apply in todays world where large organisations may well outsource their responsibilities to much poorer and un- or under-insured contractors.
Nor can it be an objection that there may be more than one tortfeasor to hold liable.
That, after all, is the situation in vicarious liability, as Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 made clear.
Thus, for all those reasons, in agreement with Lord Sumption, I would allow this appeal and set aside the judges order striking out the allegation of a non-delegable duty.
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On 5 July 2000 the appellant suffered a serious hypoxic brain injury during a school swimming lesson at Gloucester Park swimming pool in Basildon, Essex.
At the time she was aged ten and a pupil at Whitmore Junior School, for which the respondent education authority was responsible.
The swimming lesson took place in normal school hours as required by the national curriculum.
The appellant was assigned to a group being taught by a swimming teacher, Ms Burlinson, and a lifeguard, Ms Maxwell, was also in attendance.
It is alleged on the appellants behalf that both negligently failed to notice that she had got into difficulties in the water, causing her to suffer the injury.
Neither was employed by the respondent.
Their services had been provided to the respondent pursuant to a contract with Beryl Stopford (trading as Direct Swimming Services) to provide the lessons.
The appellant issued proceedings for negligence against a number of parties, including the respondent.
Her case against the respondent included an allegation that it owed her a non delegable duty of care, with the result that it was liable for any negligence on the part of Ms Burlinson or Ms Maxwell.
The respondent denied that it owed such a duty and applied to strike out this allegation against it.
The allegation was struck out in the High Court and this decision was upheld in the Court of Appeal.
The Supreme Court unanimously allows the appeal against the order striking out the allegation of a non delegable duty.
The case will now return to the High Court to determine whether the appellant was in fact a victim of negligence.
Lord Sumption gives the main judgment.
Lady Hale gives a supporting judgment.
Lord Clarke, Lord Wilson and Lord Toulson agree with both judgments.
The question before the court was the scope of the respondents duty to pupils in its care: was it a duty to take reasonable care in the performance of the functions entrusted to it only if it performed those functions itself, through its own employees; or was it to procure that reasonable care was taken in their performance by whomever it might get to perform them a non delegable duty [4]?
Non delegable duties of care are inconsistent with the fault based principles on which the law of negligence is based and are therefore exceptional [22].
English law has recognised that non delegable duties can arise in cases with the following characteristics: (1) the claimant is a patient or child or for some other reason is especially vulnerable or dependant on the protection of the defendant against the risk of injury; (2) there is an antecedent relationship between the claimant and the defendant independent of the negligent act or omission itself (i) which puts the claimant in the actual custody, charge or care of the defendant, and (ii) from which it is possible to impute to the defendant the assumption of a positive duty to protect the claimant from harm in the performance of those obligations and not just a duty to refrain from conduct which will foreseeably damage the claimant; (3) the claimant has no control over how the defendant chooses to perform those obligations; (4) the defendant has delegated some function which is an integral part of the positive duty which he has assumed towards the claimant and the third party is exercising the defendants custody or care of the claimant and the element of the control that goes with it; and (5) the third party has been negligent in the performance of the very function assumed by the defendant and delegated by the defendant to him [23].
It is fair, just and reasonable to impose such duties.
It is consistent with the long standing policy of the law to protect those who are inherently vulnerable and subject to a significant degree of control.
It is wholly reasonable that a school should be answerable for the performance of part of its own educational function.
Parents are required by law to entrust their child to a school and have no knowledge or influence over the arrangements that the school may make to delegate specialised functions, or the competence of the delegates.
It is not an open ended liability and will only cover functions which the school has assumed for itself a duty to perform rather than to arrange for its performance, and only where control over the child has been delegated.
The recognition of this duty has become more significant as a result of increased outsourcing of educational and supervisory functions but only replaces duties which the school formerly owed when the functions were performed by its staff [25].
On the facts of this case, as pleaded by the appellant, the respondent had delegated the control of the appellant to third parties to carry out an integral part of its teaching function during school hours, in a place where the school chose to carry out this part of its functions.
If it is found that the third parties were negligent then the respondent will be in breach of duty [26].
Lady Hale, agreeing with Lord Sumption, suggests that this development of the law avoids the unsatisfactory possibility that one pupil could sue her school for injuries sustained during a negligently conducted swimming lesson where another could not, depending on the precise arrangements made by the school to provide them with swimming lessons.
The boundaries of what a school may have undertaken to provide might not always be as clear cut as in this case but would have to be worked out on a future case by case basis [38].
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Two appeals are before the Court by prisoners who were convicted of murder and sentenced to life imprisonment.
In the case of the appellant Peter Chester, the tariff period fixed expired many years ago, but he has not yet satisfied the Parole Board that it is no longer necessary for the protection of the public that he should be confined.
In the case of the appellant George McGeoch, the sentencing judge fixed a punishment part of 13 years which expired on 7 October 2011, but he has committed various intervening offences including violently escaping from lawful custody in 2008 for which he received a seven and a half year consecutive sentence.
The result is that the earliest date on which McGeoch could be considered for parole is July 2015.
Both the appellants claim that their rights have been and are being infringed by reason of their disenfranchisement from voting.
Chesters claim for judicial review was issued in December 2008 and relates to voting in United Kingdom and European Parliamentary elections.
It relies on Article 3 of Protocol No 1 (A3P1) as incorporated into domestic law by the Human Rights Act 1998 and directly on European Union law.
Burton J and the Court of Appeal (Lord Neuberger MR, Laws and Carnwath LJJ), [2010] EWCA Civ 1439, [2011] 1 WLR 14346, dismissed Chesters claim.
They held that it was not the courts role to sanction the government for continuing delay in implementing the European Court of Human Rights decision in Hirst v United Kingdom (No 2) (2005) 42 EHRR 849 or to repeat the declaration of incompatibility issued by the Scottish Registration Appeal Court in Smith v Scott 2007 SC 345 or issue advice as to the form which compatible legislation might take.
They held that European Union law raises no separate issue.
McGeochs claim for judicial review was issued in February 2011 and related to voting in local municipal and Scottish Parliamentary elections.
It relies solely on European Union law.
The Extra Division dismissed the petition on the ground that European Union law only conferred a right to vote in municipal elections in a Member State on European Union citizens residing in a Member State of which they were not nationals.
It also considered that Scottish Parliamentary elections were not for this purpose municipal elections.
Before the Extra Division McGeoch was refused permission to amend to include a complaint relating to voting in European Parliamentary elections, but a corresponding amendment was permitted by the Supreme Court by order of 15 October 2012.
The following summarises my conclusions: (A) Human Rights Act In respect of Chesters claim under the Human Rights Act, which only relates to elections to the European and United Kingdom Parliaments (para 2), I would decline the Attorney Generals invitation to this Court not to apply the principles in Hirst v United Kingdom (No 2) (2005) 42 EHRR 849 (Hirst (No 2)) and Scoppola v Italy (No 3) (2012) 56 EHRR (paras 34 35) (Scoppola), but also decline to make any further declaration of incompatibility with the Convention rights (paras 39 42). (B) European law a.
In respect of McGeochs and Chesters claims under European law, which can at most relate to elections to the European Parliament and municipal authorities (paras 9, 45 and 46), I conclude that European law does not incorporate any right to vote paralleling that recognised by the European Court of Human Rights in its case law or any other individual right to vote which is engaged or upon which, if engaged, they are able to rely (paras 46 47, 58, 59, 63 64 and 68). b.
Had European law conferred any right to vote on which McGeoch and Chester can rely: i. the only relief that might have been considered would have been a generally phrased declaration that the legislative provisions governing eligibility to vote in European Parliamentary and municipal elections in the United Kingdom were inconsistent with European Community or Union law but that would not have appeared appropriate in the particular cases of Chester and McGeoch (para 72); ii. the general ban on voting in European Parliamentary and municipal elections could not have been disapplied as a whole (para 73); iii. it would not have been possible to read the RPA section 3 or EPEA section 8 compatibly with European law (para 74); iv. the Supreme Court could not itself devise a scheme or arrangements that would or might pass muster with European law; that would be for Parliament (para 74); vs neither of the appellants could have had any arguable claim for damages in respect of any breach of European law which may be involved in RPA section 3 and/or EPEA section 8 (paras 82 83). (C) European Court of Justice The resolution of these appeals does not necessitate a reference to the European Court of Justice.
In so far as it raises issues of European law for determination, they are either not open to reasonable doubt or involve the application by this Court to the facts of established principles of European law (para 84). (D) Both appeals fall therefore, in my opinion, to be dismissed (para 85).
Legislation
Entitlement to vote in parliamentary and local government elections in the United Kingdom is governed by the Representation of the People Act 1983 (RPA).
Section 1, as substituted by section 1 of the Representation of the People Act 2000, provides that: (1) A person is entitled to vote as an elector at a parliamentary election in any constituency if on the date of the poll he (a) is registered in the register of parliamentary electors for that constituency; (b) is not subject to any legal incapacity to vote (age apart); (c) is either a Commonwealth citizen or a citizen of the Republic of Ireland; and (d) is of voting age (that is, 18 years or over).
Section 2 provides in similar terms in relation to local government elections, but with the addition in (c) of the words or a relevant citizen of the Union, to meet the requirements of what is now article 22(1) TFEU.
Section 3 of the Act, as amended by section 24 of and paragraph 1 of Schedule 4 to the Representation of the People Act 1985, disenfranchises serving prisoners, providing: Disfranchisement of offenders in prison etc (1) A convicted person during the time that he is detained in a penal institution in pursuance of his sentence or unlawfully at large when he would otherwise be so detained is legally incapable of voting at any parliamentary or local government election. (2) For this purpose (a) convicted person means any person found guilty of an offence (whether under the law of the United Kingdom or not), . , but not including a person dealt with by committal or other summary process for contempt of court; (c) a person detained for default in complying with his sentence shall not be treated as detained in pursuance of the sentence The effect of the last words of section 3(2)(a) and of section 3(2)(c) is to exclude persons imprisoned for contempt of court or default in paying a fine.
Entitlement to vote in European Parliamentary elections is provided domestically by the European Parliamentary Elections Act 2002 (EPEA).
For present purposes section 8(2) and (3) are relevant, and they confer such entitlement on a person: (2) . if on the day of the poll he would be entitled to vote as an elector at a parliamentary election in a parliamentary constituency wholly or partly comprised in the electoral region, and (a) the address in respect of which he is registered in the relevant register of parliamentary electors is within the electoral region, or (b) his registration in the relevant register of parliamentary electors results from an overseas elector's declaration which specifies an address within the electoral region.
The disenfranchisement enacted by RPA section 3 is thus extended to apply to European Parliamentary elections.
Under the Scotland Act 1998, section 11(1), the persons entitled to vote as electors at an election for membership of the Scottish Parliament in any constituency are those who on the day of the poll would be entitled to vote as electors at a local government election in an electoral area falling wholly or partly within the constituency.
In effect, RPA section 3 is extended to Scottish Parliamentary elections.
A3P1 reads: 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.
The European Parliament is for this purpose a legislature within the meaning of A3P1: see Matthews v United Kingdom (1999) 28 EHRR 361.
So too is clearly the Scottish Parliament, under the devolution arrangements instituted by the Scotland Act, giving it wide ranging legislative authority.
Lord Hope described as such in AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2012] 1 AC 868, para 46: The Scottish Parliament takes its place under our constitutional arrangements as a self standing democratically elected legislature.
Its democratic mandate to make laws for the people of Scotland is beyond question.
Acts that the Scottish Parliament enacts which are within its legislative competence enjoy, in that respect, the highest legal authority.
The United Kingdom Parliament has vested in the Scottish Parliament the authority to make laws that are within its devolved competence.
The conclusion that the Scottish Parliament is a legislature within A3P1 was a conclusion implicitly accepted by the European Court of Human Rights in McLean and Cole v United Kingdom (Application Nos 12626/13 and 2522/12) (unreported) given 11 June 2013, and was shared by Lord Reed in the Extra Division in the present case (para 29 of his judgment).
Conversely, a local government body or municipal authority is not part of a legislature in the United Kingdom within A3P1: McLean and Cole v United Kingdom.
Under European Union law, as it stands since 1 December 2009 when the Treaty of Lisbon came into force, a wide range of provisions is potentially relevant.
Articles 6, 10 and 14 TEU provide: COMMON PROVISIONS . 6.1.
The Union recognises the rights, freedoms and principles set out in the Charter of Fundamental Rights of the European Union of 7 December 2000, as adapted at Strasbourg, on 12 December 2007, which shall have the same legal value as the Treaties.
The provisions of the Charter shall not extend in any way the competences of the Union as defined in the Treaties.
The rights, freedoms and principles in the Charter shall be interpreted in accordance with the general provisions in Title VII [Articles 5154] of the Charter governing its interpretation and application and with due regard to the explanations referred to in the Charter, that set out the sources of those provisions. 6.3.
Fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms and as they result from the constitutional traditions common to the Member States, shall constitute general principles of the Unions law.
PROVISIONS ON DEMOCRATIC PRINCIPLES . 10. 1.
The functioning of the Union shall be founded on representative democracy. 10.2.
Citizens are directly represented at Union level in the European Parliament.
Member States are represented in the European Council by their Heads of State or Government and in the Council by their governments, themselves democratically accountable either to their national Parliaments, or to their citizens. 10.3.
Every citizen shall have the right to participate in the democratic life of the Union.
Decisions shall be taken as openly and as closely as possible to the citizen. 10.4.
Political parties at European level contribute to forming European political awareness and to expressing the will of citizens of the Union.
PROVISIONS ON THE INSTITUTIONS . 14.3.
The members of the European Parliament shall be elected for a term of five years by direct universal suffrage in a free and secret ballot.
The pre Lisbon Treaty predecessor of article 14.3 was article 190.1 and 190.4, reading: 190.1 The representatives in the European Parliament of the peoples of the States brought together in the Community shall be elected by direct universal suffrage. 4 The European Parliament shall draw up a proposal for elections by direct universal suffrage in accordance with a uniform procedure in all Member States or in accordance with principles common to all Member States.
To give effect to article 190.4 the Council of Ministers agreed the Act concerning the election of the representatives of the European Parliament by direct universal suffrage, annexed to Council Decision 76/787/ECSC, EEC, Euratom of 20 September 1976 (0J 1976 L 278, p 1), as amended by Council Decision 2002/772/EC, Euratom of 25 June 2002 and 23 September 2002 (OJ 2002 L 283, p 1) (the 1976 Act), which continues to apply in the post Lisbon Treaty era.
The 1976 Act provides inter alia by what is now article 7: Subject to the provisions of this Act, the electoral procedure shall be governed in each Member State by its national provisions.
These national provisions, which may if appropriate take account of the specific situation in the Member States, shall not affect the essentially proportional nature of the voting system.
Voting in European Parliamentary and municipal elections is dealt with more specifically by Articles 20 and 22 TFEU in a Part headed Non discrimination and Citizenship of the Union: 20.1.
Citizenship of the Union is hereby established.
Every person holding the nationality of a Member State shall be a citizen of the Union.
Citizenship of the Union shall be additional to and not replace national citizenship. 2.
Citizens of the Union shall enjoy the rights and be subject to the duties provided for in the Treaties.
They shall have, inter alia: (a) the right to move and reside freely within the territory of the Member States; (b) the right to vote and to stand as candidates in elections to the European Parliament and in municipal elections in their Member State of residence, under the same conditions as nationals of that State; (c) the right to enjoy, in the territory of a third country in which the Member State of which they are nationals is not represented, the protection of the diplomatic and consular authorities of any Member State on the same conditions as the nationals of that State; (d) the right to petition the European Parliament, to apply to the European Ombudsman, and to address the institutions and advisory bodies of the Union in any of the Treaty languages and to obtain a reply in the same language. 22.1.
Every citizen of the Union residing in a Member State of which he is not a national shall have the right to vote and to stand as a candidate at municipal elections in the Member State in which he resides, under the same conditions as nationals of that State.
This right shall be exercised subject to detailed arrangements adopted by the Council, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament; these arrangements may provide for derogations where warranted by problems specific to a Member State. 2.
Without prejudice to Article 223(1) and to the provisions adopted for its implementation, every citizen of the Union residing in a Member State of which he is not a national shall have the right to vote and to stand as a Candidate in elections to the European Parliament in the Member State in which he resides, under the same conditions as nationals of that State.
This right shall be exercised subject to detailed arrangements adopted by the Council, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament; these arrangements may provide for derogations where warranted by problems specific to a Member State.
Article 52 of the Charter of Fundamental Rights (CFR) deals with the Charters scope and interpretation: 1.
Any limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms.
Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others. 2.
Rights recognised by this Charter for which provision is made in the Treaties shall be exercised under the conditions and within the limits defined by those Treaties. 3.
In so far as this Charter contains rights which correspond to rights guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms, the meaning and scope of those rights shall be the same as those laid down by the said Convention.
This provision shall not prevent Union law providing more extensive protection. 4.
In so far as this Charter recognises fundamental rights as they result from the constitutional traditions common to the Member States, those rights shall be interpreted in harmony with those traditions. 5.
The provisions of this Charter which contain principles may be implemented by legislative and executive acts taken by institutions, bodies, offices and agencies of the Union, and by acts of Member States when they are implementing Union law, in the exercise of their respective powers.
They shall be judicially cognisable only in the interpretation of such acts and in the ruling on their legality. 6.
Full account shall be taken of national laws and practices as specified in this Charter. 7.
The explanations drawn up as a way of providing guidance in the interpretation of this Charter shall be given due regard by the courts of the Union and of the Member States.
The CFR includes the following provisions: Article 39 Right to vote and to stand as a candidate at elections to the European Parliament 1.
Every citizen of the Union has the right to vote and to stand as a candidate at elections to the European Parliament in the Member State in which he or she resides, under the same conditions as nationals of that State. 2.
Members of the European Parliament shall be elected by direct universal suffrage in a free and secret ballot.
Article 40 Right to vote and to stand as a candidate at municipal elections Every citizen of the Union has the right to vote and to stand as a candidate at municipal elections in the Member State in which he or she resides under the same conditions as nationals of that State.
The Explanations relating to the CFR, referred to in article 6.1 TEU, state that article 39 CFR: applies under the conditions laid down in the Treaties, in accordance with Article 52(2) of the Charter.
Article 39(1) corresponds to the right guaranteed in Article 20(2) [TFEU] (cf. also the legal base in Article 22 [TFEU] for the adoption of detailed arrangements for the exercise of that right) and Article 39(2) corresponds to Article 14(3) [TEU].
Article 39(2) takes over the basic principles of the electoral system in a democratic state.
The Explanations state further that article 40 CFR: corresponds to the right guaranteed by Article 20(2) [TFEU] (cf. also the legal base in Article 22 [TFEU] for the adoption of detailed arrangements for the exercise of that right).
In accordance with Article 52(2) of the Charter, it applies under the conditions defined in these Articles in the Treaties.
European Convention on Human Rights
The general significance of A3P1 was summarised by Lord Collins in a judgment with which all members of the Court agreed in R (Barclay) v Lord Chancellor and Secretary of State for Justice [2009] UKSC 9, [2010] 1 AC 464, para 52.
I need only to set out parts of his summary, omitting also some of the case references: 53.
First, article 3 of the First Protocol enshrines a characteristic principle of an effective democracy. 54.
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 . 55.
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 (1987) 10 EHRR 1, para 52; Yumak v Turkey (2008) 48 EHRR 61, para 109(ii). 56.
Fourth, the content of the obligation under article 3 varies in accordance with the historical and political factors specific to each state; . 57.
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, para 109 (iii); Tanase v Moldova (Application No 7/08) (unreported) given 18 November 2008, para 105. 58.
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, para 109(iii) to (iv). 59.
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, para 52; Yumak, para 109(iv).
The European Court of Human Rights has expressed its attitude to the exclusion or limitation of prisoners voting rights in well known decisions.
Hirst v United Kingdom (No 2) (2005) 42 EHRR 849 and Scoppola v Italy (No 3) (2012) 56 EHRR 663 each came first before a simple Chamber of seven judges and then before a Grand Chamber composed of 17 judges.
Hirst (No 2) was a claim regarding his disenfranchisement from voting in United Kingdom Parliamentary and local elections brought by a prisoner serving a life sentence in England for manslaughter on the ground of diminished responsibility, whose tariff period had expired without his release.
Scoppola was a claim relating to disenfranchisement under Italian law brought by a prisoner serving a sentence of 30 years imprisonment for murder, attempted murder and other offences.
In between these two decisions came Greens and MT v United Kingdom (2010) 53 EHRR 710, in which a simple Chamber applied the principles in Hirst (No 2) to complaints of ineligibility to vote in both European and United Kingdom Parliamentary elections.
More recently simple Chambers have applied the principles in Hirst (No 2) and Scoppola in Anchugov and Gladkov v Russia (Application Nos 11157/04 and 15162/05) (unreported), 4 July 2013, and Syler v Turkey (Application No 29411/07) (unreported), 17 September 2013.
In Greens the Strasbourg Court gave the United Kingdom six months to introduce legislative proposals to amend RPA section 3, a period subsequently extended first pending the decision in Scoppola and then to six months after the Grand Chamber decision in Scoppola, delivered 22 May 2012.
A draft Bill was published for pre legislative scrutiny on 22 November 2012 (Cm 8499) and a joint select committee was established to undertake this and to report by 31 October 2013.
As envisaged in Hirst (No 2), para 83, the United Kingdom government has continued in this regard to liaise with the Committee of Ministers of the Council of Europe, which has on 6 December 2012 accepted the draft bill and the establishment of the committee as a legitimate means of implementing the judgment in Greens, and at its meeting on 26 September 2013, noted with interest that the pre legislative scrutiny by the committee was now due to be completed by 31 October 2013, underlined the urgency of bringing the legislative process to a conclusion, urged the United Kingdom authorities to provide information on the proposed legislative timescale without further delay and decided to resume examination of the progress made at a meeting in December 2013.
This ongoing process was in June 2013 noted by the Strasbourg Court in its judgment in McLean and Cole, paras 36 37, where the Court concluded that, in its light, there was nothing to be gained from examining applications concerning future elections at this time (para 37).
In Hirst (No 2), Greens and Scoppola the European Court of Human Rights acknowledged the width of the margin of appreciation, or the wide range of policy alternatives, which States enjoy in relation to voting rights (Hirst (No 2), para 78, Greens, para 114 and Scoppola, para 83).
In both Hirst (No 2) and Scoppola the Grand Chamber acknowledged that disenfranchisement of convicted serving prisoners may be considered to pursue the aims of preventing crime and enhancing civic responsibility and respect for the rule of law (Hirst (No 2), paras 74 75 and Scoppola, para 90).
In Hirst (No 2) the Grand Chamber (upholding the earlier Chamber) held that the United Kingdoms ban on prisoner voting was a general, automatic and indiscriminate restriction on a vitally important Convention right which fell outside any acceptable margin of appreciation and was incompatible with A3P1 (para 82).
A powerfully constituted minority of the Grand Chamber (including its President and future President) dissented.
It took as its test whether the restrictions on prisoner voting impair the very essence of the right to vote or are arbitrary (para O III5), and it pointed out that the Court should be very careful not to assume legislative functions and that there was little consensus in Europe about whether or not prisoners should have the vote (para O III6).
It noted that a multi party Speakers Conference on Electoral Law in 1968 had unanimously recommended that convicted persons should not be entitled to vote, and that the RPA had been amended in 2000 only to permit remand prisoners and unconvicted mental patients to vote.
As to the majority comment that there was no evidence of substantive debate in Parliament about the ban on convicted prisoners voting, the minority disagreed, on the basis that it was not for the Court to prescribe the way in which national legislatures carry out their legislative functions, and it must be assumed that the RPA reflects political, social and cultural values in the United Kingdom (para O III7)
In Scoppola the United Kingdom intervened and the Attorney General appeared before the Grand Chamber to ask that it reconsider Hirst (No 2).
But, in its judgment the Grand Chamber said (para 96) that it reaffirmed the principles set out by the Grand Chamber in the Hirst (No 2) judgment, in particular the fact that when disenfranchisement affects a group of people generally, automatically and indiscriminately, based solely on the fact that they are serving a prison sentence, irrespective of the length of the sentence and irrespective of the nature or gravity of their offence and their individual circumstances, it is not compatible with [A3P1].
However, the Grand Chamber (reversing the simple Chamber) found no contravention in relation to the Italian law in issue in Scoppola.
The only dissent, by Judge Thr Bjrgvinsson, related to this conclusion.
The Italian law was held compatible with the Convention because disenfranchisement applied only to sentences of three or more years, and lasted for only five years in the case of sentences of three to five years, though for life in the case of longer sentences.
The Grand Chamber said that As a result, a large number of convicted prisoners are not deprived of the right to vote (paras 106 and 108).
Furthermore, any prisoner could, three years after completing his sentence, apply for rehabilitation, which would be granted upon his displaying consistent and genuine good conduct and would terminate any ancillary penalties and other penal effect of the conviction including disenfranchisement (Scoppola, paras 38 and 109).
The Grand Chamber specifically rejected the Chamber view that any decision to deprive a prisoner of the vote should be taken by a court, saying (para 99): While the intervention of a judge is in principle likely to guarantee the proportionality of restrictions on prisoners' voting rights, such restrictions will not necessarily be automatic, general and indiscriminate simply because they were not ordered by a judge.
Indeed, the circumstances in which the right to vote is forfeited may be detailed in the law, making its application conditional on such factors as the nature or the gravity of the offence committed.
Judge Thr Bjrgvinsson dissented because in his view the Grand Chamber judgment in Scoppola offer[ed] a very narrow interpretation of the Hirst judgment which stripped it of all its bite (para OI 16).
In particular, the Grand Chamber had in his view overlooked significant elements of the reasoning in Hirst (No 2), notably the absence of any direct link between the facts of the individual case and the ban on voting, the bluntness of the Italian legislation, just like the UK legislation, and the absence of evidence that either the legislature or the courts had weighed the proportionality of the ban (para 0I 13).
Should the Supreme Court follow the Strasbourg case law?
On the present appeal, the Attorney General (withdrawing a concession of incompatibility made in the courts below) has made a fresh challenge to the principles endorsed by the European Court of Human Rights in Hirst (No 2) and Scoppola.
He points out, correctly, that the Supreme Court is, under section 2(1) of the Human Rights Act, obliged only to take into account any judgment or decision of the European Court of Human Rights when determining a question which has arisen in connection with a Convention right.
In R v Horncastle [2009] UKSC 14, [2010] 2 AC 373, para 11 Lord Phillips said that The requirement to take into account the Strasbourg jurisprudence will normally result in the domestic court applying principles that are clearly established by the Strasbourg court.
There will, however, be rare occasions where the domestic court has concerns as to whether a decision of the Strasbourg court sufficiently appreciates or accommodates particular aspects of our domestic process.
In such circumstances it is open to the domestic court to decline to follow the Strasbourg decision, giving reasons for adopting this course.
This is likely to give the Strasbourg court the opportunity to reconsider the particular aspect of the decision that is in issue, so that there takes place what may prove to be a valuable dialogue between the domestic court and the Strasbourg court.
In Manchester City Council v Pinnock [2010] UKSC 45, [2011] 2 AC 104,
para 48 Lord Neuberger summarised the position: This court is not bound to follow every decision of the European court.
Not only would it be impractical to do so: it would sometimes be inappropriate, as it would destroy the ability of the court to engage in the constructive dialogue with the European court which is of value to the development of Convention law: see e g R v Horncastle [2010] 2 AC 373.
Of course, we should usually follow a clear and constant line of decisions by the European court: R (Ullah) v Special Adjudicator [2004] 2 AC 323.
But we are not actually bound to do so or (in theory, at least) to follow a decision of the Grand Chamber.
As Lord Mance pointed out in Doherty v Birmingham City Council [2009] AC 367, para 126, section 2 of the 1998 Act requires our courts to take into account European court decisions, not necessarily to follow them.
Where, however, there is a clear and constant line of decisions whose effect 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, we consider that it would be wrong for this court not to follow that line.
In relation to authority consisting of one or more simple Chamber decisions, dialogue with Strasbourg by national courts, including the Supreme Court, has proved valuable in recent years.
The process enables national courts to express their concerns and, in an appropriate case such as R v Horncastle, to refuse to follow Strasbourg case law in the confidence that the reasoned expression of a diverging national viewpoint will lead to a serious review of the position in Strasbourg.
But there are limits to this process, particularly where the matter has been already to a Grand Chamber once or, even more so, as in this case, twice.
It would have then to involve some truly fundamental principle of our law or some most egregious oversight or misunderstanding before it could be appropriate for this Court to contemplate an outright refusal to follow Strasbourg authority at the Grand Chamber level.
The Attorney Generals submissions to us in this case have to be considered in that light.
Parliament has required this Court to take into account Strasbourg case law (Human Rights Act, section 2(1)(a)) and, So far as it is possible to do so, to read and give effect to legislation in a way which is compatible with the Convention rights (section 3(1)).
Parliament has given this Court, if satisfied that a provision of primary legislation is incompatible with a Convention right, power to make a declaration of that incompatibility (section 4).
The Act itself contemplates that domestic legislation may not match this countrys international obligations as established by case law of the European Court of Human Rights.
It is against this background that the Supreme Court must consider whether the Attorney General has made good his case that the Court should refuse to follow and apply the approach taken by the European Court of Human Rights in Hirst (No 2) and Scoppola.
The Attorney General took issue with any description of Hirst (No 2) and Scoppola as a clear and consistent line of decisions.
But, whatever else may be said about their reasoning or its outcome, they both clearly stand for the core proposition, directly applicable to the current general ban on convicted prisoners voting, quoted in paras 20 and 22 above.
At the heart of the Attorney Generals submissions lies the wide margin of appreciation which States have in this area, and the variety of legislative attitudes in other States, some according with the United Kingdoms.
These were matters which the European Court of Human Rights acknowledged, but in the Attorney Generals submission failed to respect.
In support of his submission the Attorney General makes a number of points.
First, the area is one where there is room (in Laws LJs words in the Court of Appeal, [2010] EWCA Civ 1439, [2011] 1 WLR 1436, para 32) for deep philosophical differences of view between reasonable people.
In circumstances where the Grand Chamber accepted as a legitimate aim of disenfranchisement enhancing civic responsibility and respect for the rule of law (Scoppola, para 90), the United Kingdom was, as a participatory democracy, entitled to withhold the vote from those serving sentences for offences sufficiently serious to justify such a sentence, including those who, after their tariff period, could not satisfy the Parole Board that it was no longer necessary for the protection of the public that they should be confined (Crime (Sentences) Act 1997, section 28(6)(b)).
Secondly, the Grand Chamber in Hirst (No 2) (para 79) attached some significance to a suggested lack of evidence that Parliament [had] ever sought to weigh the competing interests or to assess the proportionality of a blanket ban on the right of a convicted prisoner to vote, adding only: It may perhaps be said that, by voting the way they did to exempt unconvicted prisoners from the restriction on voting, Parliament implicitly affirmed the need for continued restrictions on the voting rights of convicted prisoners.
Nonetheless it cannot be said that there was any substantive debate by members of the legislature on the continued justification in light of modern day penal policy and of current human rights standards for maintaining such a general restriction on the right of prisoners to vote.
The majority in Scoppola did not mention this factor, as Judge Thr Bjrgvinsson, dissenting, pointed out at paras OI 09 and OI 15.
Nevertheless, the Attorney General submits that it is relevant that Parliament has, since Hirst (No 2), conducted three formal debates, in Westminster Hall on 11 January 2011, in the Commons on 10 February 2011, when MPs voted 234 to 22 to maintain the status quo, and again in the Commons on 22 November 2012, after the Lord Chancellor introduced a draft Bill, the outcome of which is not yet determined.
Mindful of the injunction in the Bill of Rights 1688 That the Freedome of Speech and Debates or Proceedings in Parlyament ought not to be impeached or questioned in any Court or Place out of Parlyament, the Attorney General did not suggest that we should seek to evaluate the quality of the debate in Parliament.
But he relied upon the fact of debate and the continuation following it of the ban on prisoner voting as underlining his submission that the Convention rights should be understood and applied in a way respecting the choice made by the institution competent to make such choices in a democracy.
He pointed out that the Court in its recent decision in Animal Defenders International v United Kingdom (Application No 48876/08, 22 April 2013) demonstrated the considerable weight that it was prepared to attach to exacting and pertinent reviews, by both parliamentary and judicial bodies, of the complex regulatory regime governing political broadcasting in the United Kingdom and to their view that the general measure [prohibiting religious or political advertising on radio and television] was necessary to prevent the distortion of crucial public interest debates and, thereby, the undermining of the democratic process (para 116).
Thirdly, the Attorney General argues, it was fallacious to treat the United Kingdom ban as affecting a group of people generally, automatically and indiscriminately, simply because the ban was based solely on the fact that they are serving a prison sentence, irrespective of the length of the sentence and irrespective of the nature or gravity of their offence and their individual circumstances.
Any rule of law affects a group of people defined by its terms.
If a group is rationally defined, there is no reason why there should necessarily be exceptions.
As the Grand Chamber pointed out in relation to the Italian legislation in Scoppola (para 106), so also in the United Kingdom a sentencing court takes into account the nature and gravity of the offence as well as individual circumstances when deciding in the first place whether any and if so what sentence of imprisonment is required.
As a result, only 8% of convicted offenders go to prison in England, 15% in Scotland.
The group affected is confined to convicted prisoners and so excludes those in prison on remand awaiting trial as well as hospital detainees.
Further, within the group of convicted prisoners, the ban does not extend to those in prison for contempt or default in paying fines.
Despite the Attorney Generals forceful submissions, I do not consider that it would be right for this Court to refuse to apply the principles established by the Grand Chamber decisions in Hirst (No 2) and Scoppola consistently with the way in which they were understood and applied in those decisions.
The Grand Chamber in Scoppola was prepared to give the Italian legislator a greater margin of manoeuvre than one would have expected from its previous decision in Hirst (No 2).
But this was on the basis that the Italian law did not involve a blanket ban in respect of all or almost all convicted prisoners.
It excluded those convicted of minor offences (involving less than three years imprisonment), and it had a two step gradation in the length of the ban according to whether the sentence was for less or for more than five years imprisonment.
As a result a large number of convicted prisoners had the vote.
Furthermore, there was the possibility of rehabilitation for consistent and genuine good conduct displayed for three years after release.
Nothing in Scoppola therefore suggests that the Grand Chamber would revise its view in Hirst (No 2) to the point where it would accept the United Kingdoms present general ban.
There is on this point no prospect of any further meaningful dialogue between United Kingdom Courts and Strasbourg.
I would also reject the suggestion that the Supreme Court should refuse to apply the principles stated in the Strasbourg case law in the present circumstances.
Deep though the philosophical differences of view between reasonable people may be on this point, it would in my opinion exaggerate their legal and social importance to regard them as going to some fundamental substantive or procedural aspect of our law: see the citation from Pinnock in para 26 above.
While the diversity of approach in this area within Europe derives from different traditions and social attitudes, it makes it difficult to see prisoner disenfranchisement as fundamental to a stable democracy and legal system such as the United Kingdom enjoys.
It is possible to argue, as the Canadian Supreme Court did in Sauv v Canada (No 2) [2002] 3 SCR 519 that the objective of promoting civic responsibility and respect for the law may be undermined, rather than enhanced, by denying serving prisoners the right to vote.
The haphazard effects of an effectively blanket ban are certainly difficult to deny.
As the Grand Chamber observed in Hirst (No 2) (para 77) it includes a wide range of offenders and sentences, from one day to life and from relatively minor offences to offences of the utmost gravity.
The Grand Chamber may have had in mind that, although minor offences involve shorter periods of disenfranchisement, the effect is more likely to be haphazard, depending as it must upon the timing of elections.
Application of the principles in Hirst (No 2) and Scoppola
This brings me to the effect of the principles in Hirst (No 2) and Scoppola in the present cases.
Chesters claim, which relates to voting in European Parliamentary elections, is based directly on the Convention rights as well as on EU law.
The first question is therefore whether he is a victim capable of bringing a claim against the respondents under the Human Rights Act.
Section 7 of the Act provides: (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. (3) If the proceedings are brought on an application for judicial review, the applicant is to be taken to have a sufficient interest in relation to the unlawful act only if he is, or would be, a victim of that act. (4) If the proceedings are made by way of a petition for judicial review in Scotland, the applicant shall be taken to have title and interest to sue in relation to the unlawful act only if he is, or would be, a victim of that act. (7) For the purposes of this section, a person is a victim of an unlawful act only if he would be a victim for the purposes of Article 34 of the Convention if proceedings were brought in the European Court of Human Rights in respect of that act.
In Hirst (No 2), the majority rejected a submission by the United Kingdom Government that the Chamber had assessed the compatibility of the legislation with the Convention in the abstract without consideration of whether removal of the vote from the applicant as a person convicted of a serious offence and sentenced to life imprisonment disclosed a violation.
It said (para 72) that Hirsts complaint was in no sense an actio popularis.
He was directly and immediately affected by the legislative provision of which complaint is made and in these circumstances the Chamber was justified in examining the compatibility with the Convention of such a measure, without regard to the question whether if the measure had been framed otherwise and in a way which was compatible with the Convention, the applicant might still have been deprived of the vote.
It would not in any event be right for the Court to assume that, if Parliament were to amend the current law, restrictions on the right to vote would necessarily still apply to post tariff life prisoners or to conclude that such an amendment would necessarily be compatible with Article 3 of Protocol No 1.
This was another point on which the minority disagreed, observing the Courts task was not normally to review the relevant law and practice in abstracto and that it was in our opinion, difficult to see in what circumstances restrictions on voting rights would be acceptable, if not in the case of persons sentenced to life imprisonment (para O III8).
Taking the majority approach, Chester is a victim for the purposes of section 7 of the Human Rights Act, but this means that he satisfies a pre condition to, not that he is necessarily entitled to any particular relief in, a complaint about the general disenfranchisement of prisoners from voting in United Kingdom and European Parliamentary elections which results from EPEA section 8(2) and (3), read with RPA section 3.
He claims a declaration that both RPA section 3 and EPEA section 8(2) are incompatible with A3P1. (I note that, in contrast, under European Union law, his primary submission in relation to EPEA section 8(2) is that it can be rendered compatible with European Union law by reading in an additional right to vote in European Parliamentary elections if necessary to comply with European Union law.)
The incompatibility of RPA section 3 with A3P1 was recognised by the Registration Appeal Court in Smith v Scott 2007 SC 345, which made a declaration of incompatibility.
That declaration was properly made in the case of a convicted person sentenced to five years imprisonment for being concerned with supply of controlled drugs.
It entitled the Government to use the remedial order provisions contained in section 10 of the Human Rights Act.
The Government decided not to do this.
The issue is now however before the United Kingdom Parliament and under active consideration in the light of the decisions in Hirst (No 2), Greens and Scoppola.
Further, it is clear from Greens (para 18 above) and the Attorney General accepts that EPEA section 8 is, in relation to European Parliamentary elections, as incompatible with A3P1 as RPA section 3 is, in relation to United Kingdom Parliamentary elections.
A declaration is a discretionary remedy, both generally and under the Human Rights Act 1998, section 4 (4).
There is in these circumstances no point in making any further declaration of incompatibility.
On this I am in agreement with both Burton J at first instance, [2009] EWHC 2923 (Admin), and the Court of Appeal, [2010] EWCA Civ 1439, [2011] 1 WLR 1436.
The Strasbourg Courts own decision in McLean and Cole to defer consideration of applications concerning future elections in the light of the ongoing Parliamentary process is also consistent with this view.
Further, it can, I consider, now be said with considerable confidence that the ban on Chesters voting is one which the United Kingdom Parliament can, consistently with the Convention right, and would maintain, whatever amendments it may be obliged to make or may make to allow any prisoners detained for different reasons or periods to vote.
In the original Chamber decision in Hirst (2004) 38 EHRR 825, reference was made to the continuation of the ban on voting after the expiry of the tariff period in the case of a life prisoner as an additional anomaly (para 49).
Nevertheless, the Chamber went on to say that it could not speculate as to whether Hirst, whose tariff had expired, would still have been deprived of the vote even if a more limited restriction on the right to [sic] prisoners to vote had been imposed, which was such as to comply with the requirements of [A3P1] (para 51).
It is notable that the majority in the Grand Chamber in Hirst (No 2) did not endorse this reference in para 49 of the simple Chambers judgment to an additional anomaly, saying only that it would not in any event be right for the Court to assume that, if Parliament were to amend the current law, restrictions on the right to vote would necessarily still apply to post tariff life prisoners or to conclude that such an amendment would necessarily be compatible with [A3P1] (para 72).
Only in a concurring opinion of Judge Caflisch did he raise the point, going so far as to say that this may be the essential point for the present case (para O 17(d)).
His opinion does not appear to have been shared by other judges, and must now in any event be seen in the light of the decision in Scoppola, accepting that a lifelong ban on voting by prisoners sentenced for five or more years was legitimate.
The additional fact that it was subject to removal after three years had elapsed from release, provided that the offender has displayed consistent and genuine good behaviour does not appear to have been critical to this conclusion; but, however that may be, it points strongly in favour of a view that it can be legitimate to withhold a prisoners voting rights until satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined.
The Grand Chambers reasoning in its very recent decision in Vinter v United Kingdom (Application Nos 66069/09, 130/10 and 3896/10; 9 July 2013), which post dated submissions in this case, is also worth noting for its explanation of detention during a post tariff period by reference to core aims of imprisonment: 108.
First, a life sentence does not become irreducible by the mere fact that in practice it may be served in full.
No issue arises under Article 3 if a life sentence is de jure and de facto reducible .
In this respect, the Court would emphasise that no Article 3 issue could arise if, for instance, a life prisoner had the right under domestic law to be considered for release but was refused on the ground that he or she continued to pose a danger to society.
This is because States have a duty under the Convention to take measures for the protection of the public from violent crime and the Convention does not prohibit States from subjecting a person convicted of a serious crime to an indeterminate sentence allowing for the offenders continued detention where necessary for the protection of the public .
Indeed, preventing a criminal from re offending is one of the essential functions of a prison sentence .
This is particularly so for those convicted of murder or other serious offences against the person.
The mere fact that such prisoners may have already served a long period of imprisonment does not weaken the States positive obligation to protect the public; States may fulfil that obligation by continuing to detain such life sentenced prisoners for as long as they remain dangerous . [case references omitted]
emphasised in Hirst (No 2) that In Greens, the Court noted (para 113) that the Grand Chamber had there are numerous ways of organising and running electoral systems and a wealth of differences, inter alia, in historical development, cultural diversity and political thought within Europe which it is for each contracting state to mould into their own democratic vision.
The Court recalls that its role in this area is a subsidiary one: the national authorities are, in principle, better placed than an international court to evaluate local needs and conditions and, as a result, in matters of general policy, on which opinions within a democratic society may reasonably differ, the role of the domestic policy maker should be given special weight.
See also Scoppola, para 83 and Syler, para 33.
Within the domestic legal context, it is now therefore for Parliament as the democratically elected legislature to complete its consideration of the position in relation to both RPA section 3 and EPEA section 8.
There is no further current role for this Court, and there is no further claim, for a declaration or, in the light of the incompatibility, for damages which the appellant Chester can bring.
European law
I turn to the position under European Community and now Union law.
Before Burton J and the Court of Appeal, and reflecting no doubt the argument before those courts, any claim under European Union law by Chester was treated as effectively consequential on the incompatibility of the ban with A3P1, and attracted no separate analysis.
Bearing in mind the date of Chesters claim for judicial review (December 2008), he is also unable to rely upon European law as it stands after 1 December 2009 under the TEU and TFEU, as a result of the Treaty of Lisbon.
This difficulty is not overcome by maintaining that his claim related to forthcoming elections.
It still required to be viewed in the light of the law when it was brought.
At that date, the Charter of Fundamental Rights did not have direct legal force, so that there was no equivalent of article 6.1 TEU.
The predecessor of article 6.3 TEU was article 6.2 of the pre December 2009 TEU reading: The Union shall respect fundamental rights, as guaranteed by the [Human Rights] Convention and as they result from the constitutional traditions common to the Member States, as general principles of Community law.
The predecessor of article 14.3 TEU was article 190.1 and 4 of the Treaty on the European Community (EC), set out in para 11 above.
Article 22.1 and 22.2 had a precise equivalent in article 19.1 and 19.2 EC, but the predecessor of article 20 was article 17 EC, reading simply: 17.1 Citizenship of the Union is hereby established.
Every person holding the nationality of a Member State shall be a citizen of the Union.
Citizenship of the Union shall complement and not replace national citizenship. 2.
Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby.
McGeochs claim under European Union law was on the other hand issued in early 2011 and relates to voting in local as well as Scottish and European Parliamentary elections.
It therefore opens up all possible avenues for exploration under current European Union law.
However, there is nothing in European Union law which can entitle McGeoch to complain in respect of his inability to vote in Scottish Parliamentary elections.
European Union law refers in various contexts, which have already been set out in this judgment, to voting in European Parliamentary elections and in municipal elections, and to no other elections.
It is obvious that Scottish Parliamentary elections fall within neither category: see also what I have already said in para 9 above.
That municipal elections are local government elections at a lower level of government, closer to people and with a more direct responsibility for service delivery, is furthermore consistent with the nature of the units found (though in the case of Scotland, not yet updated) in the annex to Council Directive 94/80/EC, which lays down detailed arrangements for the exercise of the right to vote and stand in municipal elections by Union citizens residing in a Member State of which they are not nationals.
The submissions under European Union law are put at various different levels.
Mr Aidan ONeill QC for McGeoch concentrated upon articles 20 and 22 TFEU, read with articles 39 and 40 CFR.
Mr Southey for Chester adopted Mr ONeills submissions, but relied in addition upon the more general provisions of articles 6.3 (or its predecessor article 6.2 in the pre December 2009 TEU), 10 and 14.3 TEU (or the latters predecessor articles 190.1 and 4 EC).
In his submission, the effect of these articles was, at the least, to incorporate into European Union law in relation to voting in European Parliamentary elections the principles recognised under Strasbourg case law (Hirst (No 2) and Scoppola) in relation to national legislatures.
Quite possibly, he submitted, their effect may even be to lead the Court of Justice to go further than Strasbourg case law by prohibiting on a more extensive basis any limitations on the democratically based universal suffrage to which the Treaties refer.
If Mr Southeys wider submission with regard to the wholesale importation into European Community or Union law of the Strasbourg jurisprudence regarding the right to vote were valid, it would be surprising to find no hint of this in any Court of Justice judgment.
That is particularly so with regard to Case C 145/04 Spain v United Kingdom [2006] ECR I 7917 and Case 300/04 Eman and Sevinger v College van Burgemeester en Wethouders van den Haag [2006] ECR I 8055, despite the difference in the actual issues.
Mr Southeys submission would also mean that a case such as Matthews v United Kingdom (1999) 28 EHRR 361 could, now at least, be pursued in either of two parallel forums.
Spain v United Kingdom and Eman and Sevinger
The judgments in Spain v United Kingdom and Eman and Sevinger were both issued on the same day (12 September 2006) following an opinion of Advocate General Tizzano (dated 6 April 2006) which had covered both cases.
The judgments contain discussion of the scope and effect of European Treaty law which bears on both Mr Southeys wider and Mr ONeills narrower submissions.
In Spain v United Kingdom the first issue was whether it was legitimate under European law for the United Kingdom to extend the franchise in European Parliamentary elections to qualifying Commonwealth citizens, as well as European Union citizens, registered in the Gibraltar register.
The Court held (para 78) that, in the then current state of Community law the definition of the persons entitled to vote and to stand as a candidate in elections to the European Parliament falls within the competence of each Member State in compliance with Community law, and that Articles 189 EC, 190 EC, 17 EC and 19 EC do not preclude the Member States from granting that right to vote and to stand as a candidate to certain persons who have close links to them, other than their own nationals or citizens of the Union resident in their territory.
In the course of its reasoning, the Court said:
Articles 189 EC and 190 EC do not expressly and precisely state who are to be entitled to the right to vote and to stand as a candidate for the European Parliament. 66 [Article 19 EC] is confined to applying the principle of non discrimination on grounds of nationality to the exercise of that right, by providing that every citizen of the Union residing in a Member State of which he is not a national is to have the right to vote and to stand as a candidate in elections to the European Parliament in the Member State in which he resides, under the same conditions as nationals of that State. 76 .
Article 19(2) EC . is confined, as pointed out in paragraph 66 above, to stating a rule of equal treatment between citizens of the Union residing in a Member State so far as concerns that right to vote and stand for election.
While that provision, like Article 19(1) EC relating to the right of Union citizens to vote and to stand as a candidate at municipal elections, implies that nationals of a Member State have the right to vote and to stand as a candidate in their own country and requires the Member States to accord those rights to citizens of the Union residing in their territory, it does not follow that a Member State in a position such as that of the United Kingdom is prevented from granting the right to vote and to stand for election to certain persons who have a close link with it without however being nationals of that State or another Member State.
The Court also referred to the provisions of the 1976 Act (paras 67 to 69).
In paras 90 to 97 the Court of Justice addressed Spains second plea that the United Kingdom had, in the arrangements made to enable the Gibraltar electorate to vote, gone further than required to comply with the European Court of Justices judgment in Matthews v United Kingdom.
It recited in this connection that it was the United Kingdoms obligation to comply with Matthews and that in the light of the case law of the European Court of Human Rights and the fact that that Court has declared the failure to hold elections to the European Parliament in Gibraltar to be contrary to [A3P1] ., the United Kingdom cannot be criticised for adopting the necessary legislation.
In Eman and Sevinger the Court was concerned with the legitimacy under European Union law of a provision of Dutch law which conferred the right to vote in European Parliamentary elections upon Dutch nationals residing in the Netherlands or abroad except in Aruba and the Netherlands Antilles.
After repeating (para 45) that in the current state of Community law, the definition of the persons entitled to vote and to stand for election falls within the competence of each Member State in compliance with Community law, the Court opened a possible role for European law in the instant case by continuing It must, however, be ascertained whether that law precludes a situation such as that in the main proceedings, in which Netherlands nationals residing in Aruba do not have the right to vote and to stand as a candidate in elections to the European Parliament.
In relation to articles 189 and 190 EC, the Court repeated its words in para
65 of Spain v United Kingdom.
It also repeated (para 53) that Article 19(2) EC is confined to applying the principle of non discrimination on grounds of nationality to that right to vote and stand for election, by stipulating that every citizen of the Union residing in a Member State of which he is not a national is to have the right to vote and to stand as a candidate in elections to the European Parliament in the Member State in which he resides, under the same conditions as nationals of that State.
The Court further noted that the European Court of Human Rights had accepted that the right to vote might be limited by reference to residence.
However, the Court found in the principle of equal treatment or non discrimination, which is one of the general principles of Community law a basis for comparing the position of a Netherlands national resident in the Netherlands Antilles or Aruba and one residing in a non member country (paras 57 58) and for concluding that the Dutch Government had not demonstrated an objective justification for the different treatment of these two persons (para 60).
Earlier in its judgment, the Court of Justice had observed that A3P1 did not apply to Aruba; unlike the case with Gibraltar, the European Treaties have no application there, so the European Parliament could not be regarded as the Aruba legislature (para 48).
But the Courts decision was based on the fact that the complainants held Dutch nationality and were as such citizens of the Union under article 17(1) EC, and entitled to enjoy the rights conferred by the Treaty under article 17(2).
They succeeded under the general European legal principle of non discrimination.
In Spain v United Kingdom the Court was thus concerned with Gibraltar which is within the territorial scope of both the Community and the European Convention on Human Rights, but with voting rights which the United Kingdom had conferred on persons who were not United Kingdom nationals for the purposes of Community law.
The Court had nonetheless to consider the nature of the United Kingdoms obligation to extend the franchise in European Parliamentary elections to Gibraltar.
In Eman and Sevinger, the Court was concerned with Aruba which is outside the territorial scope of the Community, but within the territorial scope of the European Convention on Human Rights (by the combination of declarations dated 29 November 1954 and 24 December 1985 deposited by the Netherlands with the Council of Europe), and with voting rights which had been withheld from persons who were citizens of the European Union.
What is notably absent from the Court of Justices judgments in both Spain v United Kingdom and Eman and Sevinger is any suggestion that, by reason of article 6.2 of the pre December 2009 TEU and articles 17 and 190 EC, the European Treaties confer on citizens of the Union an individual right to vote, the scope and conditions of which must be measured by reference to the principles established in European Court of Human Rights jurisprudence, such as Hirst (No 2) and Scoppola.
If available, that could have been advanced as a reason why it was obligatory under European Community law for the United Kingdom to take steps to enable the Gibraltar electorate to vote.
Instead, the reason given was the United Kingdoms Council of Europe obligations to comply with Strasbourg decisions: see para 49 above.
Likewise, in Scoppola there was no suggestion that as Union citizens the claimants were under Community law entitled to enjoy an individual right to vote, complying with the principles established by European Court of Human Rights jurisprudence.
Advocate General Tizzano in his opinion for these two cases had adopted much broader reasoning which the Court in its judgments was careful not to endorse.
He would have inferred from Community principles and legislation as a whole . that there is an obligation to grant the voting rights in question to citizens of the Member States and, consequently, to citizens of the Union (para 67), deriving this (para 69) from the principles of democracy on which the Union is based, and in particular, to use the words of the Strasbourg Court, the principle of universal suffrage which has become the basic principle in modern democratic States [FN: Eur.
Court H.R. Mathieu Mohin and Clerfayt v Belgium, judgment of 2 March 1987 . , Hirst v United Kingdom (No 2), . 30 March 2004] and is also codified within the Community legal order in Article 190(1) EC and Article 1 of the 1976 Act, which specifically provide that the members of the European Parliament are to be elected by direct universal suffrage.
He went on to say that this general guidance was also confirmed by the fact that the right in question is a fundamental right safeguarded by [A3P1], and to mention in a footnote that the text of article 6(2) need merely be borne in mind (paras 70 to 71).
Turning to Spains second criticism, Advocate General Tizzano also derived from his conclusion that individual voting was a fundamental right of citizens of the Union a converse conclusion that it was illegitimate for the United Kingdom to deviate to any greater extent from its statement in what was then Annex II of the 1976 Act that The United Kingdom will apply the provisions of this Act only in respect of the United Kingdom.
As stated in para 49 above, the Court of Justice adopted quite different reasoning and reached an opposite conclusion, based simply on the United Kingdoms obligation to give effect to the European Court of Human Rights ruling in Matthews.
The Court of Justice did not therefore endorse Advocate General Tizzanos broad approach, or import the Strasbourg jurisprudence into the general provisions of Community and Union law referring to voting in European Parliamentary elections.
There was good reason for this.
Eligibility to vote is under the Treaties and the 1976 Act a matter for national Parliaments, one of considerable national interest.
There is no sign that the European Commission has ever sought to involve itself in or take issue with voting eligibility in Member States or specifically with the restrictions on prisoner voting which apply in a number of such States.
The Strasbourg jurisprudence operates as the relevant control, albeit one that has itself proved in some respects controversial.
It would not only unnecessarily duplicate that control at the European Community or Union level, it could also lead to further conflict and uncertainty.
Hence the Court of Justice in Eman and Sevinger confined its reasoning to a well established core principle of Treaty law, that of non discrimination, in that case between different categories of Dutch national, to which I shall return (paras 60 64 below).
Further, even in the form into which they have been shaped by the Treaty of Lisbon, it is notable that such provisions as the European Treaties contain concerning individual voting rights are notably limited in scope.
They relate to the core Treaty concerns of equality between nationals or Union citizens and freedom of movement within the European Union (see para 59 below).
For all these reasons, I reject Mr Southeys wider submission set out in (paras 46 47 above).
Articles 20.2 and 22 TFEU
In Mr ONeills submission, the changes effected by the Treaty of Lisbon significantly altered the Treaty position considered in Spain v United Kingdom and Eman and Sevinger.
In those cases article 19 EC was explained as confined to stating rules of equal treatment requiring Union citizens residing in Member States of which they were not nationals to be able to vote and stand in municipal as well as European Parliamentary elections under the same conditions as nationals.
The same must apply to the current equivalent, article 22 TFEU.
But Mr ONeill relies upon the introduction of the new article 20.2(b).
This, he submits, is a self standing provision, expressly conferring the individual right to vote on citizens of the Union in respect of European Parliamentary and municipal elections.
In my opinion, it is clear that that is not the effect of article 20.2(b).
As its opening sentence proclaims, article 20 deals with the enjoyment of rights provided in the Treaties.
What follow are some of the basic rights so enjoyed.
They all have a supra national element.
Article 20.2(b) is thus expressly limited to recording the existence of the right of Union citizens to vote and stand in municipal and European Parliamentary elections in their Member State of residence under the same conditions as nationals of that State.
The omission of express reference to the fact that this is dealing with citizens resident in a State other than that of their nationality is entirely understandable in the context of what was intended as a concise summary.
That fact is anyway implicit.
The detailed Treaty provisions regarding the rights to which article 20.2(b) refers are contained in article 22.1 and 22.2, which would on Mr ONeills case in fact be not only redundant but also positively misleading in their limitation to the situation of residence in a Member State other than that of nationality.
The position is further confirmed by articles 39 and 40 CFR, which again would be positively misleading in their limitation to that situation, and by the Explanations to the CFR which explicitly equate articles 20.2 and 22: see para 16 above.
There is no basis for or likelihood in Mr ONeills supporting submission that article 20.2(b) was expressly aimed at, in effect, endorsing Advocate General Tizzanos views as to where European Union law was or should go in conferring individual rights.
Had that been remotely intended, quite different explicit language would have been used.
Non discrimination
The other limb of Mr ONeills submissions involves reliance on the principle of non discrimination applied in Eman and Sevinger.
The infringement there consisted in unequal treatment by Dutch law in relation to voting in European Parliamentary elections by Netherlands nationals in comparable situations.
The most fundamental area in which this principle has always manifested itself is in relation to discrimination on the grounds of nationality: see article 7 of the original EEC Treaty, now article 18 TFEU, which provides: Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on the grounds of nationality shall be prohibited.
But the principle has achieved much wider application.
Article 13.1 EC (now substantially reproduced as article 19.1 TFEU) provides: Without prejudice to the other provisions of this Treaty and within the limits of the powers conferred by it upon the Community, the Council . may take appropriate action to combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation.
Article 13 has been responsible for some well known, if in some respects controversial case law.
The Court of Justice has accepted that, although the Treaty contemplates that the general principle of non discrimination underlying article 13 will be implemented by directives, Member States will be bound thereby to discontinue, disregard or set aside measures so far as they involve discrimination on a basis contrary to article 13 at least after the time for transposition of such a directive: Case C 555/07 Kkkdeveci v Swedex GmbH & Co KG [2010] 2 CMLR 33, para 61 and perhaps even when legislating in the area of the directive during the period for transposition: Case C 144/04 Mangold v Helm [2005] ECR I 9981.
However, for the general principle of non discrimination to apply, the context must fall within the scope of Community or now Union law: see Mangold, para 75, Case C 427/06 Bartsch v Bosch und Siemens Hausgerte (BSH) Altersfrsorge GmBH [2008] ECR I 7245, para 25, Kkkdeveci, para 23, Case C 147/08 Rmer v Freie und Hansestadt Hamburg [2013] CMLR 11, para 70, and Craig and de Burca, EU Law: Text, Cases and Materials [OUP: 4th ed, 2008, p 891].
The only difficulty about Eman and Sevinger is to identify the link with European law, once one has rejected the conclusion that European law recognises all EU citizens as having under European law an individual right to vote in European Parliamentary elections (paras 56 to 58 above).
The general principle was simply stated to be applicable in a context where, and on the basis that, Netherlands nationals, who were under article 17.1 EC Union citizens, were being treated unequally in comparable situations in relation to European Parliamentary elections, having regard to the difference in treatment of Netherlands nationals resident, on the one hand, in the Netherlands Antilles and Aruba and, on the other hand, in other non EU member countries: see in particular paras 45, 56 to 58 of the Courts judgment.
It is however a general principle of Strasbourg law under article 14 of the Convention that additional rights falling within the general scope of any Convention right for which the state has voluntarily decided to provide must in that event be provided without discrimination: Belgian Linguistics Case (No 2) (1968) 1 EHRR 252, 283, R (Clift) v Secretary of State for the Home Department [2006] UKHL 54, [2007] 1 AC 484, paras 12, 17 18.
This principle in my opinion clearly underlies Eman and Sevinger.
As the Court noted (para 53), article 19 EC (now article 22 TFEU) only covered nationals resident in another Member State.
But the Dutch legislator had chosen to extend the right to vote to its nationals resident outside any Member State but not in the Dutch Antilles or Aruba.
There was no justification for this different treatment of comparable situations in a context which fell within the scope of European law, that is voting by nationals residing outside their own member state.
Supporting this is also the consideration that the Court accepted that the definition of the persons entitled to vote and to stand falls within the competence of each Member State in compliance with Community law (Spain v United Kingdom, para 78, Eman and Sevinger, para 45).
If the qualification in compliance with Community law were meant to require scrutiny by reference to European Community law of all national limitations affecting European Parliamentary elections for their non discriminatory quality even where no other link with European law was established other than that the elections were European Parliamentary elections, that could, depending upon the intensity of the scrutiny, effectively erode the general principle that the Court was accepting.
Position if the principle of non discrimination had been engaged
This brings me to consideration of the nature and intensity of the scrutiny which would be required, if (contrary to my conclusion in paras 63 64) the principle of non discrimination were to be viewed as all embracing in the manner advocated by Mr ONeill and Mr Southey.
In both Strasbourg and Luxembourg case law, discrimination issues are customarily described as involving a two stage process, consisting of first the identification of an appropriate comparator and then, if one is found, examination of the justification for any difference in treatment: see e.g. Edward and Lane, European Union Law (EE, 2013) para 6.125, citing numerous authorities.
The exercise as presented is neither a unitary nor an entirely open one, or a court would in every case be required to ascertain the differences between two different situations and ask whether, assessing such differences and their significance as best it could, it considered the differences in their treatment to be fair or justified.
There must be basic comparability before the court embarks on considering justification.
Thus, in Eman and Sevinger itself the Court observed (para 57) that the principle of equal treatment or non discrimination, which is one of the general principles of Community law, requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified The principle was reiterated in Case C485/08 P, Gualtieri v European Commission [2010] ECR I 3009, para 70 with reference to Eman and Sevinger as well as other cases including Case C 227/04 P Lindorfer v Council of the European Union [2007] ECR I6767.
As the Court noted in Case C 267/06 Maruko v Versorgungsanstalt der deutschen Bhnen [2008] ECR I 1757, para 73, it is for the national court to determine whether two persons are in a comparable position.
That does not however mean an identical position.
The referring court in Maruko identified a gradual movement towards recognising equivalence of life partnership and marriage, meaning that, although the two were not identical, persons of the same sex could be regarded as being in a situation comparable to that of spouses so far as concerns the survivors benefit at issue in that case.
The Court of Justice in Case 147/08 Rmer v Freie und Hansestadt Hamburg approved that approach, saying: 41 Accordingly, the existence of direct discrimination, within the meaning of the Directive, presupposes, first, that the situations being weighed up are comparable. 42 In that regard, it should be pointed out that, as is apparent from the judgment in Maruko at [67][73], first, it is required not that the situations be identical, but only that they be comparable and, secondly, the assessment of that comparability must be carried out not in a global and abstract manner, but in a specific and concrete manner in the light of the benefit concerned.
Gualtieri was an appeal from the General Court and provides a contrasting example.
The claimant complained that she received a lower daily allowance on the basis of the proximity of her spouses residence to her place of secondment than she would have done if she had been single, but living in a de facto union.
The Court upheld the General Courts conclusion that the two situations were not comparable, saying: 75 . it must be observed that, although de facto unions and legally recognised unions, such as marriage, may display similarities in certain respects, those similarities do not necessarily mean that those two types of union must be treated in the same way. 76 In those circumstances, the decision to apply the criterion of matrimonial legal status appears neither arbitrary nor manifestly inappropriate in relation to the objective of reducing the allowances paid to SNEs [national experts seconded to the Commission] when they are in a situation in which it can be assumed that they bear fewer costs and disadvantages on account of their matrimonial status.
Applying these principles to the present case, I do not regard convicted prisoners serving their sentence as in a comparable position either to free persons or to remand prisoners awaiting trial.
They have a very different status, to which it is evident that very different considerations may apply and which are capable at least of giving rise to very different arguments.
It follows that, assuming that the general principle of non discrimination applies under European Union law to eligibility to vote in European Parliamentary elections, there is in my view no basis for its application in the context of a complaint that convicted prisoners are discriminated against by reference to free persons or remand prisoners.
The position assuming contrary conclusions
I have concluded that the appellants are not entitled to invoke European law, because, firstly, it confers no individual right by reference to which the Strasbourg case law of Hirst (No 2) and Scoppola could be relevant (paras 58 and 59) and, secondly, the general principle of non discrimination recognised in Eman and Sevinger is not engaged (paras 63 64) or, if it is engaged, does not assist the appellants (para 68).
In what follows, I will, for completeness, consider the position assuming opposite conclusions on all these points.
If European law recognises an individual right to vote in European Parliamentary and/or municipal elections, I would reject Mr Southeys submission that it would or might go further than the Strasbourg case law in allowing convicted prisoners the vote.
Court of Justice jurisprudence pays close attention to and, with very few exceptions, follows Strasbourg jurisprudence.
Examples of divergence are few and far between, although one may, ironically, have occurred in a sequel to Eman and Sevinger concerning the right to vote in elections for the Kingdom of Holland, in so far as it is arguable that the Strasbourg court went less far in Sevinger and Eman v Netherlands (2007) 46 EHRR 179 than the Court of Justice did in Eman and Sevinger itself: see an instructive case note by Professor Leonard F M Besselink on this Strasbourg authority in (2008) 45 CMLR 787.
In the present case, I reject in particular the submission that the Court of Justice might return to the theme suggested in Frodl v Austria (2010) 52 EHRR 267, para 34 by reference to Hirst (No 2), para 82 that it is essential that any disenfranchisement of a convicted prisoner be ordered on a case by case basis by a judge, rather than be pre determined by an otherwise appropriate legislative scheme.
This suggestion was very clearly, and for very obvious reasons, rejected by the Grand Chamber in Scoppola v Italy, paras 99 100, a rejection which the simple Chamber in Anchugov, para 107, took pains to reiterate; see also (though coupled with a reference to judicial interventions being likely to guarantee the proportionality of restrictions on prisoners voting rights) Syler, para 39.
The majority in the European Court of Human Rights in Hirst (No 2) found a violation because Hirst was directly and immediately affected by the legislative provision of which complaint is made and that the Chamber was justified in examining the compatibility with the Convention of such a measure, without regard to the question whether, if the measure had been framed otherwise and in a way which was compatible with the Convention, the applicant might still have been deprived of the vote (para 72).
But it regarded the finding of a violation as just satisfaction and awarded no damages.
As the Court said in Kkkdevici, para 51, it is for a national court, in applying national law, to provide, within the limits of its jurisdiction, the legal protection which individuals derive from European Union law and to ensure the full effectiveness of that law, disapplying if need be any provision of national legislation contrary to that principle (see, to that effect, Mangold, para 77).
In the present cases, on the assumptions (contrary to my conclusions), first, that European law recognises an individual right to vote paralleling in substance that recognised in the Strasbourg case law of Hirst (No 2) and Scoppola, and, second, that the view taken by the majority of the Grand Chamber in Hirst (No 2) regarding standing to claim a general declaration were to be transposed into European law, the only relief that could be considered under domestic law would be a generally phrased declaration that the legislative provisions governing eligibility to vote in European Parliamentary and municipal elections in the United Kingdom were inconsistent with European Union law.
Thereafter, it would be for the United Kingdom Parliament to address the position and make such legislative changes as were considered appropriate.
But, for reasons paralleling those given in paras 40 42 above, it appears improbable that the Convention rights would, even when viewed through the prism of European Union law, involve or require the granting of declarations in the abstract at the instance of claimants like both Chester and McGeoch, detained in circumstances summarised in para 1 above, from whom the United Kingdom Parliament could legitimately, and it seems clear would, under any amended legislative scheme still withhold the vote.
I reject the submission that the Supreme Court could or should simply disapply the whole of the legislative prohibition on prisoner voting, in relation to European Parliamentary and municipal elections, thereby making all convicted prisoners eligible to vote pending fresh legislation found to conform with European Union law.
It is clear from both Hirst (No 2) and Scoppola that, under the principles established by those cases, a ban on eligibility will be justified in respect of a very significant number of convicted prisoners.
Nor would it have been possible to read the RPA section 3 or EPEA section 8 compatibly with European law; the legislation is entirely clear and it would flatly contradict the evident intention of the United Kingdom, when enacting it, to read into it or to read it as subject to some unspecified scheme or set of qualifications allowing some unspecified set of convicted prisoners to vote under some unspecified conditions and arrangements.
It would also be impossible for the Supreme Court itself to devise an alternative scheme of voting eligibility that would or might pass muster in a domestic or supra national European Court.
Equally, the Court could not determine or implement the practical and administrative arrangements that would need to be made to enable any convicted prisoners eligible under any such scheme to have the vote.
Such matters would be beyond its jurisdiction.
In the domestic constitutional scheme, any scheme conferring partial eligibility to vote on some convicted prisoners is quintessentially a matter for the United Kingdom Parliament to consider, determine and arrange.
In the passage quoted in para 72 above, the Court of Justice made clear that it is only within the limits of its jurisdiction that a national court can be expected to provide the legal protection that European Union law requires.
That being so, the creation of any new scheme must be a matter for the United Kingdom Parliament.
That does not necessarily conclude this Courts role under European law.
The principles established in Case C 6/90 Francovich v Italian Republic [1992] IRLR 84 and Joined Cases C 46/93 and C 48/93 Brasserie du Pecheur SA v Federal Republic of Germany and R v Secretary of State for Transport, Ex p Factortame Ltd (No 4) [1996] QB 404 require domestic courts, under certain conditions, to order their State to make good any loss caused by breach of European Union law, even where the breach consists in legislation incompatible with that law.
After these decisions by the Court of Justice, the principles stated by that Court were examined and applied domestically by the House of Lords in R v Secretary of State, Ex p Factortame Ltd (No 5) [2000] 1 AC 524.
Neither Chester nor McGeoch has set out, supported with evidence or pursued any claim for damages in the courts below.
Both now seek to claim damages, still without any supporting evidence, and, if necessary, to have their cases remitted for further determination in this regard.
I will however put on one side without deciding the question whether either should be given leave to enable them at this late stage to raise any damages claim, and consider the nature and application of the relevant principles, assuming that such claims were to be permitted.
An important factor in determining whether liability in damages may exist under European law is the width of the discretion available to the legislator: see Ex p Factortame, paras 44 to 46.
In this respect the Court equated the position of the Community and national legislators (para 47).
A strict (meaning more limited) approach was taken towards the liability of the Community (or therefore of national legislators) in the exercise of legislative activities.
This was explained (para 45) as due to two considerations: 45.
First, even where the legality of measures is subject to judicial review, exercise of the legislative function must not be hindered by the prospect of actions for damages whenever the general interest of the Community requires legislative measures to be adopted which may adversely affect individual interests.
Secondly, in a legislative context characterized by the exercise of a wide discretion, which is essential for implementing a Community policy, the Community cannot incur liability unless the institution concerned has manifestly and gravely disregarded the limits on the exercise of its powers As the Court went on to point out, the national legislature like the Community institutions does not systematically have a wide discretion when it acts in a field governed by Community law (para 46).
It depends on the nature of the European law or principle being implemented.
However, in the context of eligibility to vote, it is clear that national legislatures have a wide discretion.
Where a wide legislative discretion of this nature exists, three conditions govern the incurring of any liability on account of the legislative choices made by the State pursuant to such discretion.
These were explained in Ex p Factortame as follows: 51 In such circumstances, Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious, and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties. 52 First, those conditions satisfy the requirements of the full effectiveness of the rules of Community law and of the effective protection of the rights which those rules confer. 53 Secondly, those conditions correspond in substance to those defined by the Court in relation to Article 215 in its case law on liability of the Community for damage caused to individuals by unlawful legislative measures adopted by its institutions. 55 As to the second condition, as regards both Community liability under Article 215 and Member State liability for breaches of Community law, the decisive test for finding that a breach of Community law is sufficiently serious is whether the Member State or the Community institution concerned manifestly and gravely disregarded the limits on its discretion. 56 The factors which the competent court may take into consideration include the clarity and precision of the rule breached; the measure of discretion left by that rule to the national or Community authorities; whether the infringement and the damage caused was intentional or involuntary; whether any error of law was excusable or inexcusable; the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law. 57 On any view, a breach of Community law will clearly be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case law of the Court on the matter from which it is clear that the conduct in question constituted an infringement.
These principles were reiterated in Case 392/93 R v HM Treasury, Ex p British Telecommunications plc [1996] QB 615, an example of a case where the Court of Justice held that the breach had not involved a manifest and grave disregard of European law, and Case 278/05 Robins v Secretary of State for Work and Pensions [2007] ICR 779, where the Court emphasised the importance of the breadth of the legislative discretion in that case and the fact that the provisions of the relevant directive did not make it possible to establish with any precision the level of pension protection which it required.
Turning to apply these principles to the present cases, I make the twin assumptions (again contrary to my conclusions) that (a) European Union confers rights to vote on individual citizens of the Union, subject to the United Kingdoms legislative discretion to introduce limitations, but that (b) the present general prohibition on prisoner voting is contrary to principles paralleling those stated by the Strasbourg court in Hirst (No 2) and Scoppola and/or the general European Union principle of equality or non discrimination.
On those assumptions, the second and third conditions for any personal claim arise for consideration.
The second condition is that the breach was sufficiently serious.
This in turn depends, under European law, upon whether Parliament, the relevant United Kingdom authority, can be said manifestly and gravely to have disregarded the limits on its discretion.
This must be judged taking into consideration the clarity and precision of the rule breached; the measure of discretion left by that rule to the national or Community authorities; whether the infringement and the damage caused was intentional or involuntary; whether any error of law was excusable or inexcusable (para 77 above).
In relation to voting by convicted prisoners, the United Kingdom legislature enjoyed a wide margin of discretion.
Further, this is in a context where there has been and remains a considerable lack of certainty about what the parameters of that discretion may be.
This is evident from a reading of the Strasbourg case law, particularly the two Hirst judgments, the Chamber judgment in Frodl v Austria (2010) 52 EHRR 267 and the Grand Chamber judgment over ruling the Chamber judgment in Scoppola v Italy, in which the European Court of Human Rights has sought to identify the relevant considerations and to apply them to particular facts.
Accordingly, it is clearly very arguable that this condition is not met.
I will not however say more about the application of the second condition in this case, in view of one further factor, which I prefer to leave open.
The test stated in the European authorities postulates some degree of examination of the conduct of the relevant national authority.
Since the relevant United Kingdom authority is here Parliament in enacting and continuing in force the relevant legislation, an assessment of some of these matters (particularly whether the infringement was intentional or involuntary, excusable or inexcusable) may threaten conflict with the constitutional principle enshrined in the Bill of Rights 1688 that domestic courts in the United Kingdom ought not to impeach or question proceedings in Parliament.
To avoid this, it may perhaps be necessary to approach a claim for damages in a case like the present on an objective basis, without regard to what has actually happened or been said in Parliament.
The decision in R v Secretary of State, Ex p Factortame (No 5) [2000] 1 AC 524 does not appear to throw any light on this problem, because there does not seem there to have been any call to consider Parliamentary debates.
On any view, however, the fact of Parliamentary activity, referred to in Greens and continuing, can no doubt be taken into account.
The third condition is that there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties.
In relation to both the second and the third conditions, it must in my opinion be relevant to have regard to the particular position of the present appellants.
The questions are whether, in refusing them the vote, the United Kingdom has manifestly and gravely disregarded the limits on its discretion and whether they have sustained damage directly caused by the United Kingdoms breach of an obligation owed to give each of them a right to vote.
In Strasbourg case law, according to the majority in Hirst (No 2), a claimant can complain that the law in general is incompatible with the Convention rights, without showing that it was or would have been incompatible with such rights to deprive him in particular of the vote.
But to award a convicted prisoner damages without showing that European Union law required him, rather than some other prisoner or prisoners, to have the vote would be positively inconsistent with the conditions stated in Francovich and Ex p Factortame.
On that basis, I consider that any claim for damages by McGeoch and Chester must on any view fail.
McGeoch is still serving the punishment part of his sentence resulting from the combination of his life and consecutive fixed term sentence.
There can, in the light of Scoppola, be no question about the United Kingdoms entitlement to deprive a prisoner in his position of the vote.
Chester is in his post tariff period of his life sentence, but it is notable that the European Court of Human Rights deliberately refrained from endorsing the original Chamber view or Judge Caflischs concurring minority view (para 40 above) that there is a critical distinction between the tariff and post tariff period.
Further, in Scoppola, the Strasbourg court accepted that disenfranchisement could continue for life in the case of sentences of five years or more.
This was subject only to the right, three years after release, to apply for rehabilitation, which would be granted upon his displaying consistent and genuine good conduct: see para 22 above.
The requirement to display good conduct in order to regain voting rights was thus regarded as not only relevant, but acceptable.
The Strasbourg court accepted as a legitimate aim enhancing civic responsibility and respect for the rule of law.
Continuing detention for a period lasting so long as necessary for the protection of the public (paras 30 and 40 above) can be no less relevant and acceptable as a criterion for continuing deprivation of the right to vote during that period.
The underlying consideration, that the offender is not fully rehabilitated or ready to participate responsibly in the countrys democratic life, is the same in each case.
This is underlined by the passage from the Grand Chambers recent decision in Vinter quoted in para 41 above.
Conclusions
My conclusions on the issues argued on this appeal are summarised in para 4 above.
It remains only to consider whether the resolution of this appeal necessitates a reference to the European Court of Justice.
This depends upon whether it depends upon the determination of any question of European law which is open to reasonable doubt under the principles stated in Case 283/81 CILFIT Srl v Ministry of Health [1982] ECR 3415 and recently discussed in this Court in X v Mid Sussex Citizens Advice Bureau [2012] UKSC 59, [2013] ICR 249.
In my opinion, the conclusions of European law reached in paras 45, 58, 59 and 63 64 are acte clair, and they are by themselves sufficient to resolve the appeals.
Were it necessary for the decision of these appeals, I would also regard the conclusions in para 70 as acte clair.
The further conclusions (again not necessary for the resolution of these appeals) reached in other paras are matters for this Court to determine, applying established principles of European law where relevant.
In the circumstances, I do not consider that any reference to the Court of Justice is called for.
It follows that, in my opinion, both appeals should be dismissed.
LADY HALE (with whom Lord Hope and Lord Kerr agree)
Prisoners voting is an emotive subject.
Some people feel very strongly that prisoners should not be allowed to vote.
And public opinion polls indicate that most people share that view.
A YouGov poll in November 2012 found that 63% of respondents said that no prisoners should be allowed to vote, 15% said that those serving sentences of less than six months should be allowed to vote, 9% said that those serving less than four years should be allowed to vote, and 8% said that all prisoners should be allowed to vote.
A YouGov poll in January 2011 which asked the same questions produced respective figures of 69%, 6%, 3% and 8%.
This suggests that public opinion may be becoming more sympathetic to the idea, with 32% now favouring some relaxation in the present law, but there is still a substantial majority against it.
It is not surprising, therefore, that in February 2011 elected Parliamentarians also voted overwhelmingly against any relaxation of the present law.
In such circumstances, it is incumbent upon the courts to tread delicately.
As I shall explain, in my view it is now clear that the courts should not entertain a human rights claim on behalf of Mr Chester or, indeed, of Mr McGeoch had he made one.
Both are serving sentences of life imprisonment for murder.
Mr Chester was sentenced to life imprisonment for the murder of his niece, with a tariff of 20 years which expired in October 1997.
The Parole Board has not yet found him suitable for release on licence.
Mr McGeoch was also sentenced to life imprisonment for murder, with a tariff of 13 years which expired in October 2011; but he has had further convictions for serious offences committed while in prison and is currently serving seven and a half years for violently escaping from prison in 2008.
I do not consider that the human rights of either were violated by the Electoral Registration Officers refusal to register them on the electoral roll.
Their claims under European Union law are another story, because they raise novel arguments which require to be resolved.
On those claims I have nothing to add to the judgment of Lord Mance, with which I agree.
Of course, in any modern democracy, the views of the public and Parliamentarians cannot be the end of the story.
Democracy is about more than respecting the views of the majority.
It is also about safeguarding the rights of minorities, including unpopular minorities.
Democracy values everyone equally even if the majority does not: Ghaidan v Godin Mendoza [2004] 2 AC 557, para 132.
It follows that one of the essential roles of the courts in a democracy is to protect those rights.
It was for that reason that Lord Bingham took issue with the argument of a previous Attorney General, Lord Goldsmith, in A v Secretary of State for the Home Department [2005] 2 AC 68, para 42: I do not . accept the distinction which he 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.
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.
The present Attorney General has wisely not suggested any such thing.
He recognises that it is the courts task to protect the rights of citizens and others within the jurisdiction of the United Kingdom in the ways which Parliament has laid down for us in the Human Rights Act 1998.
But insofar as he implied that elected Parliamentarians are uniquely qualified to determine what the franchise should be, he cannot be right.
If the current franchise unjustifiably excludes certain people from voting, it is the courts duty to say so and to give them whatever remedy is appropriate.
More fundamentally, Parliamentarians derive their authority and legitimacy from those who elected them, in other words from the current franchise, and it is to those electors that they are accountable.
They have no such relationship with the disenfranchised.
Indeed, in some situations, they may have a vested interest in keeping the franchise as it is.
To take an obvious example, we would not regard a Parliament elected by an electorate consisting only of white, heterosexual men as uniquely qualified to decide whether women or African Caribbeans or homosexuals should be allowed to vote.
If there is a Constitution, or a Bill of Rights, or even a Human Rights Act, which guarantees equal treatment in the enjoyment of its fundamental rights, including the right to vote, it would be the task of the courts, as guardians of those rights, to declare the unjustified exclusion unconstitutional.
Given that, by definition, Parliamentarians do not represent the disenfranchised, the usual respect which the courts accord to a recent and carefully considered balancing of individual rights and community interests (as, for example, in R (Countryside Alliance) v Attorney General [2007] UKHL 52, [2008] AC 719 and R (Animal Defenders International) v Secretary of State for Culture, Media and Sport [2008] UKHL 15, [2008] AC 1312, both upheld in Strasbourg for that very reason) may not be appropriate.
Of course, the exclusion of prisoners from voting is of a different order from the exclusion of women, African Caribbeans or homosexuals.
It is difficult to see how any elected politician would have a vested interest in excluding them (save just possibly from local elections in places where there are very large prisons).
The arguments for and against their exclusion are quite finely balanced.
On the one hand, unlike women, African Caribbeans and homosexuals, prisoners share a characteristic which many think relevant to whether or not they should be allowed to vote: they have all committed an offence deemed serious enough to justify their removal from society for at least a while and in some cases indefinitely.
While clearly this does not mean that all their other rights are forfeited, why should they not for the same time forfeit their right to take part in the machinery of democracy?
Hence I see the logic of the Attorney Generals argument, that by deciding that an offence is so serious that it merits a custodial penalty, the court is also deciding that the offence merits exclusion from the franchise for the time being.
The custody threshold means that the exclusion, far from being arbitrary and disproportionate, is tailored to the justice of the individual case.
One problem with that argument is that it does not explain the purpose of the exclusion.
Any restriction of fundamental rights has to be a proportionate means of pursuing a legitimate aim.
Is it simply an additional punishment, a further mark of societys disapproval of the criminal offence? Or is it rather to encourage a sense of civic responsibility and respect for democratic institutions? If so, it could well be argued that this is more likely to be achieved by retaining the vote, as a badge of continuing citizenship, to encourage civic responsibility and reintegration in civil society in due course.
This is indeed, as Laws LJ observed in the Court of Appeal, a matter on which thoughtful people can hold diametrically opposing views.
A more concrete objection to the Attorney Generals argument is that the custody threshold in this country has never been particularly high.
As Lord Bingham of Cornhill CJ observed in R v Howells [1999] 1 WLR 307, 310, deciding when an offence is so serious that only a custodial sentence can be justified is one of the most elusive problems of criminal sentencing.
Between 1992 and 2002, the custodial sentencing rate rose from 5% to 15% in the magistrates courts and from 44% to 63% in the Crown Court (for an overview of sentencing trends in the last 20 years, see Ministry of Justice, The Story of the Prison Population 1993 2012, 2013).
Some of the rise may be accounted for by the greater seriousness of the offences coming before the courts, but this cannot be the whole explanation.
There are many people in prison who have not committed very serious crimes, but for whom community punishments are not available, or who have committed minor crimes so frequently that the courts have run out of alternatives.
Also, the threshold has varied over time in accordance with changes in penal policy which have nothing to do with electoral policy: what, for example, are we to make of the ups and downs in the legislative popularity of suspended sentences? Exactly the same crime may attract an immediate custodial sentence and disenfranchisement at one time or a suspended sentence without disenfranchisement at another.
Moreover, the custody threshold has traditionally varied as between different parts of the United Kingdom, with a significantly greater use of imprisonment in Scotland than in England and Wales (although this is diminishing).
The sentencing regimes are different in England and Wales, Scotland and Northern Ireland, but the exclusion from voting is the same.
All of this suggests an element of arbitrariness in selecting the custody threshold as a unique indicator of offending so serious as to justify exclusion from the democratic process.
To this may be added the random impact of happening to be in prison on polling day and the various reasons why someone who has been sentenced to a period of imprisonment may not in fact be in prison on that day.
He may, as Lord Clarke points out, be on bail pending an appeal; or he may be released early under electronic monitoring.
Then there is the situation of mental patients.
All those who are detained in hospital as a result of an order made in a criminal court, apart from those on remand, are also disenfranchised (Representation of the People Act 1983, section 3A(1),(2)).
This includes patients who have been found unfit to plead or not guilty by reason of mental disorder, whose culpability may be very different from that of convicted prisoners.
There is no equivalent of the custody threshold (as long as the offence is punishable with imprisonment) and no correlation between the seriousness of the offence and the length of time that the patient will be detained in hospital.
I mention these additional matters to explain why, in common with Lord Clarke, I have some sympathy for the view of the Strasbourg court that our present law is arbitrary and indiscriminate.
But I acknowledge how difficult it would be to devise any alternative scheme which would not also have some element of arbitrariness about it.
The Strasbourg court, having stepped back from the suggestion in Frodl v Austria (2010) 52 EHRR 267 that exclusion from the franchise requires a judicial decision in every case and approved the Italian law in Scoppola v Italy (No 3) (2012) 56 EHRR 663, must be taken to have accepted this.
However, I have no sympathy at all for either of these appellants.
I cannot envisage any law which the United Kingdom Parliament might eventually pass on this subject which would grant either of them the right to vote.
In Hirst v United Kingdom (No 2) (2005) 42 EHRR 849, the Strasbourg court declined to conclude that applying the ban to post tariff life prisoners would necessarily be compatible with article 3 of the First Protocol.
But it seems clear from the decision in Scoppola v Italy (No 3) that Strasbourg would now uphold a scheme which deprived murderers sentenced to life imprisonment of the right to vote, certainly while they remained in prison, and probably even after they were released on licence, as long as there was then a power of review.
Hence I cannot see how Mr Chester can sensibly have a claim to a remedy under the Human Rights Act.
It may be, as Lord Mance has concluded, that he qualifies as a victim for the purpose of section 7 of the Human Rights Act.
But this is only in the sense that, as the majority of the Grand Chamber in Hirst (No 2) held, he was directly affected by the law in question.
This justified that court, in the majority view, examining the compatibility of the law with the Convention, irrespective of whether he might justifiably have been deprived of the vote under some other law.
A strong minority, including the then President, Judge Wildhaber, and his successor, Judge Costa, pointed out that this was not the usual practice of the court (para OIII8): The Court has consistently held in its case law that its task is not normally to review the relevant law and practice in abstracto, but to determine whether the manner in which they were applied to, or affected, the applicant gave rise to a violation of the Convention.
It is, in our opinion, difficult to see in what circumstances restrictions on voting rights would be acceptable, if not in the case of persons sentenced to life imprisonment.
Generally speaking, the Court's judgment concentrates above all on finding the British legislation incompatible with the Convention in abstracto.
We regret that despite this focus it gives the states little or no guidance as to what would be solutions compatible with the Convention.
Since restrictions on the right to vote continue to be compatible, it would seem obvious that the deprivation of the right to vote for the most serious offences such as murder or manslaughter, is not excluded in the future.
Either the majority are of the view that deprivations for the post tariff period are excluded, or else they think that a judge has to order such deprivations in each individual case.
We think that it would have been desirable to indicate the correct answer.
In other words, it would have been in accordance with the consistent practice of the court for the majority to indicate in precisely what way Mr Hirsts rights had been violated by the law in question.
It seems to me that the courts of this country should adopt that sensible practice when considering the application of the various remedies provided by the Human Rights Act.
In this case, there can be no question of Mr Chester having a cause of action under section 6(1) of the Human Rights Act.
The Electoral Registration Officer for Wakefield refused his application for inclusion on the electoral roll.
But in my view that could not have been incompatible with his Convention rights, because (at least following Scoppola v Italy) the Convention does not give him the right to vote.
But even if it was incompatible, the public authority could not have acted differently, because of the provisions of the Representation of the People Act, and so by virtue of section 6(2)(a) the act was not unlawful.
Nor is there any question of our reading and giving effect to the Act in a way which is compatible with the Convention rights, in accordance with our duty under section 3(1).
No one has suggested that it would be possible to do so in a case such as this.
It is obvious that any incompatibility can only be cured by legislation and the courts cannot legislate.
But even if we could, we would only seek to read and give effect to the statute in a way which was compatible with the rights of the individual litigant before us.
As, in my view at least, the ban on voting is not incompatible with the rights of this particular litigant, a reading which was compatible with the rights of a completely different litigant would do him no good.
That leaves the possibility of a declaration of incompatibility under section 4(2) of the Human Rights Act.
This applies in any proceedings in which a court determines whether a provision of primary legislation is compatible with a Convention right.
This does appear to leave open the possibility of a declaration in abstracto, irrespective of whether the provision in question is incompatible with the rights of the individual litigant.
There may be occasions when that would be appropriate.
But in my view the court should be extremely slow to make a declaration of incompatibility at the instance of an individual litigant with whose own rights the provision in question is not incompatible.
Any other approach is to invite a multitude of unmeritorious claims.
It is principally for that reason that I would decline to make a declaration of incompatibility on the application of either Mr Chester or (had he made one) Mr McGeoch.
Indeed, in my view the courts should not entertain such claims.
It is otherwise, of course, in borderline cases.
In those circumstances it seems to me unnecessary to express a view on whether we should follow or depart from the substance of the decision in Hirst v
LORD CLARKE
I agree that these appeals should be disposed of as proposed by Lord Mance and Lord Sumption.
I also agree with the reasoning of both Lord Mance and Lord Sumption, subject to this.
I would be less critical than Lord Sumption of the decisions of the European Court of Human Rights to which they refer.
The reasoning of the Strasbourg Court has very recently been summarised in Anchugov and Gladkov v Russia (Application Nos 11157/04 and 15162/05), 4 July 2013, at paras 93 100.
In particular, in para 100 it distinguished between Hirst v United Kingdom (No 2) (2005) 42 EHRR 849 and Scoppola v Italy (No 3) (2012) 56 EHRR 663 in this way: 100.
The principles set out in the Hirst (No 2) case were later reaffirmed in the Scoppola (No 3) [GC] judgment.
The Court reiterated, in particular, that when disenfranchisement affected a group of people generally, automatically and indiscriminately, based solely on the fact that they are serving a prison sentence, irrespective of the length of the sentence and irrespective of the nature or gravity of their offence and their individual circumstances, it was not compatible with Article 3 of Protocol No 1 (see Scoppola (No 3) [GC], cited above, para 96).
The Court found no violation of that Convention provision in the particular circumstances of this latter case however, having distinguished it from the Hirst (No 2) case.
It observed that in Italy disenfranchisement was applied only in respect of certain offences against the State or the judicial system, or offences punishable by a term of imprisonment of three years or more, that is, those which the courts considered to warrant a particularly harsh sentence.
The Court thus considered that the legal provisions in Italy defining the circumstances in which individuals may be deprived of the right to vote show[ed] the legislatures concern to adjust the application of the measure to the particular circumstances of [each] case, taking into account such factors as the gravity of the offence committed and the conduct of the offender (ibid, para 106).
As a result, the Italian system could not be said to have a general automatic and indiscriminate character, and therefore the Italian authorities had not overstepped the margin of appreciation afforded to them in that sphere (ibid, paras 108 and 110).
On the facts the Court held at para 101 that the position in Russia was very similar to that in Hirst (No 2), namely that the applicants were stripped of their right to vote by virtue of a provision of the Russian Constitution which applied to all persons convicted and serving a custodial sentence, irrespective of the length of their sentence and of the nature or gravity of their offence and their individual circumstances.
The Court compared Hirst (No 2) at para 82 with Scoppola (No 3) at paras 105 110.
The Court said at para 102 that it was prepared to accept that the relevant measure pursued the aims of enhancing civic responsibility and the respect for the rule of law and ensuring the proper functioning and preservation of civil society and the democratic regime and that those aims could not, as such, be excluded as untenable or incompatible with A3P1.
The essence of the Courts decision is set out in para 103.
It rejected the Governments arguments on the issue of proportionality, reiterating the point made in para 82 of Hirst (No 2), that, although the margin of appreciation is wide, it is not all embracing and added: the right to vote is not a privilege; in the twenty first century, the presumption in a democratic State must be in favour of inclusion and universal suffrage has become the basic principle.
In the light of modern day penal policy and of current human rights standards, valid and convincing reasons should be put forward for the continued justification of maintaining such a general restriction on the right of prisoners to vote as that provided for in Article 32(3) of the Russian Constitution (ibid, para 79).
Further, at para 105 the Court emphasised the fact that the Russian constitution imposed a blanket ban on all those imprisoned, from two months, which is the minimum period of imprisonment following conviction in Russia, to life and from relatively minor offences to offences of the utmost seriousness.
At para 106 it stressed that, as in the United Kingdom, there was no evidence that, when deciding whether to impose a custodial sentence, the court should take into account the fact that the sentence would involve disenfranchisement, so that there was no direct link between the facts of a particular case and the loss of the right to vote.
It recognised in para 107 that removal of the right to vote without an ad hoc judicial decision does not of itself give rise to a violation but, in response to an argument that the adoption of the Russian constitution was preceded by extensive public debate, it observed that the Government had submitted no relevant materials to support it.
In doing so, it expressly followed an almost identical conclusion in para 79 of Hirst (No 2).
As I see it, the thrust of the conclusions in the Strasbourg cases is that a blanket ban is disproportionate and indiscriminate, at any rate without detailed analysis of the problem because, as it is put at para 82 of Hirst (No 2), the ban applies automatically to all prisoners irrespective of the nature and gravity of the relevant offence or the individual circumstances of the particular offender.
It thus applies to those sentenced to very short sentences and operates in an arbitrary way for two reasons.
First, it applies in the same way to a person sentenced to 28 days or 28 years.
Yet there is clearly an enormous gulf in terms of culpability between those sentenced to 28 days for, say, persistent shoplifting and those sentenced to 28 years for a very serious offence.
Secondly, whether a person loses the right to vote depends upon the chance that the relevant person happens to be in prison on a particular day, by comparison perhaps with a co defendant who received an identical sentence but is on bail pending appeal.
Moreover, it is difficult to see how it can be proportionate to deprive a person of a vote which is relevant to the governance of the state for a period of five years in circumstances where that person may be in prison for no more than 14 days.
I appreciate that, wherever the line may be drawn, there may be an element of arbitrariness as to the choice and effect of a particular line.
But there seems to me to be much to be said for the Strasbourg Courts approach to a blanket ban, at any rate absent detailed consideration of the pros and cons of such a ban.
However that may be, I agree that this Court should follow the now settled jurisprudence in the Strasbourg Court for the reasons given by Lord Mance and Lord Sumption.
Since writing the above, I have read the judgment of Baroness Hale in draft and would simply like to add that I agree with it.
LORD SUMPTION (with whom Lord Hughes agrees)
I agree with the orders proposed by Lord Mance, for all of the reasons that he gives in his judgment as well as those given in the judgment of Lady Hale.
I wish to add my own observations on one question only, namely whether we should apply the principles stated by the European Court of Human Rights in Hirst (No 2) and Scoppola.
It is an issue which raises in an acute form the potential conflict between the interpretation of the European Convention on Human Rights by the European Court of Human Rights and the processes by which alone laws are made in a democracy.
The conflict arises from the requirement of the European Court of Human Rights that the United Kingdom should amend the Representation of the People Act 1983 so as to give at least some convicted prisoners the right to vote in national and local elections, something for which there is at present only negligible support in the House of Commons and very little among the public at large.
If democracy is viewed as a system of decision making by those answerable to the electorate (as opposed to a system of values thought to be characteristic of democracies), this is bound to be a matter of real concern.
Of course, as Lady Hale has pointed out, it does not follow that a democracy can properly do whatever it likes, simply by virtue of the democratic mandate for its acts.
The protection of minorities is a necessary concern of any democratic constitution.
But the present issue has nothing whatever to do with the protection of minorities.
Prisoners belong to a minority only in the banal and legally irrelevant sense that most people do not do the things which warrant imprisonment by due process of law.
In any democracy, the franchise will be determined by domestic laws which will define those entitled to vote in more or less inclusive terms.
The right to vote may be based on citizenship or residence, or a combination of the two.
There will invariably be a minimum voting age and may be other conditions of eligibility, such as mental capacity.
In the United Kingdom, the right to vote at parliamentary and local government elections is enjoyed by Commonwealth citizens and citizens of the Republic of Ireland aged over 18, who are on the electoral roll, and not subject to any legal incapacity to vote.
Inclusion on the electoral roll depends on current (or in some cases recent) residence.
The only legal incapacity of any significance relates to convicted prisoners.
Section 3(1) of the Representation of the People Act 1983 provides that convicted prisoners are legally incapable of voting at any parliamentary or local government election.
There are limited exceptions for those committed for contempt of court or detained for default of compliance with another sentence (such as a fine).
Section 8(1) and (2) of the European Parliamentary Elections Act 2002 apply the same rules of eligibility to elections for the European Parliament.
These provisions are entirely clear.
There is no way in which they can be read down so as to allow voting rights to any category of convicted prisoners other than those falling within the specified exceptions.
The exclusion of convicted prisoners from the franchise is not a universal principle among mature democracies, but neither is it uncommon.
Information provided by the Foreign Office in answer to a parliamentary question (updated to July 2012) indicates that at least 18 European countries including Denmark, Finland, Ireland, Spain, Sweden and Switzerland have no restrictions on voting by prisoners.
Bulgaria, Estonia, Georgia, Hungary, Japan, Liechtenstein, Russia and the United States ban all convicted prisoners from voting, as do two of the seven Australian states.
In some countries such as France disenfranchisement is reserved for those convicted of certain particularly serious offences, and in others such as Belgium for cases in which the prisoner is sentenced to a period of imprisonment exceeding a given threshold.
In France, the Netherlands and Belgium disenfranchisement is an additional penalty imposed as a matter of judicial discretion.
In other countries, such as Germany and Italy, it is automatic in specified cases.
In Belgium, Italy and some jurisdictions of the United States, the loss of voting rights may continue even after a prisoners release.
It is apparent that this is not a question on which there is any consensus.
From a prisoners point of view the loss of the right to vote is likely to be a very minor deprivation by comparison with the loss of liberty.
There are no doubt prisoners whose interest in public affairs or strong views on particular issues are such that their disenfranchisement represents a serious loss, just as there are prisoners (probably more numerous) whose enthusiasm for active sports makes imprisonment a special hardship.
The severity of a sentence of imprisonment for the convicted person will always vary with a wide variety of factors whose impact on him or her will inevitably be arbitrary to some degree.
It has been said, for example, that disenfranchisement may bear hardly on someone sentenced to, say, a short period of imprisonment which happens to coincide with a general election.
For some prisoners, this will no doubt be true.
But I decline to regard it as any more significant than the fact that it may coincide with a special anniversary, a long anticipated holiday or the only period of fine weather all summer.
Article 3 of the First Protocol to the Human Rights Convention provides that the 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.
In 2005, the Grand Chamber of the European Court of Human Rights held in Hirst v United Kingdom (No 2) (2005) 42 EHRR 849 that a blanket restriction on voting by all prisoners violated article 3 of the First Protocol.
In Greens and MT v United Kingdom (2010) 53 EHRR 710, the European Court of Human Rights delivered a pilot judgment on a large number of petitions by convicted prisoners which sought damages for the denial of their rights under article 3 of the First Protocol, consequent upon the decision in Hirst.
The court refused to make an award of damages, but directed that the United Kingdom should bring forward, within six months of the date upon which the present judgment becomes final, legislative proposals intended to amend the 1983 Act and, if appropriate, the 2002 Act in a manner which is Convention compliant and effectively stayed further proceedings on pending petitions of the same kind until the expiry of that period.
The deadline was subsequently extended by the European Court until six months after the judgment of the Grand Court in another case, Scoppola v Italy (No 3) (2012) 56 EHRR 663, in which the United Kingdom government proposed to intervene to make submissions about the correctness of Hirst.
However, the judgment in that case, which was delivered on 22 May 2012, reaffirmed both the reasoning and the decision in Hirst.
The deadline imposed by the Strasbourg Court expired in November 2012.
In December 2006, in the light of the decision in Hirst, the Government published a consultation paper setting out two alternative proposals for amending section 3 of the Representation of the People Act.
One was to enfranchise prisoners sentenced to less than a specified term, which would be low. , such as one year in prison.
The other was to allow sentencers a discretion on whether the franchise should be withdrawn in the particular case.
A further consultation paper was published in April 2009 summarising responses to the first paper and seeking views on the approach to be adopted.
The Government indicated its own preference for an automatic restriction of the franchise based on the seriousness of the offence, as reflected in the length of the sentence.
On 20 December 2010, after the decision of the European Court of Human Rights in Greens and MT, the Government announced that it would propose to Parliament that offenders sentenced to a term of imprisonment of less than four years would have the right to vote in parliamentary and European Parliament elections, unless the sentencing judge directed otherwise.
Subsequently, the question of prisoners voting rights was debated twice.
There was a Westminster Hall adjournment debate on 10 January 2011, at which many members of the House of Commons expressed strong opposition to enfranchising any prisoners.
A month later, on 11 February 2011, there was an all day debate on the floor of the House of Commons on a motion put forward jointly by senior backbench MPs from both sides of the House, that legislative decisions of this nature should be a matter for democratically elected lawmakers; and supports the current situation in which no sentenced prisoner is able to vote except those imprisoned for contempt, default or on remand.
This motion was carried by 234 votes to 22, both front benches abstaining.
On 22 November 2012 the Government published the Voting Eligibility (Prisoners) Draft Bill (Cm 8499), setting out three options, (a) a ban on voting by prisoners sentenced to four years imprisonment or more, (b) a ban for prisoners sentenced to more than six months imprisonment, or (c) a general ban, i.e. a restatement of the present position.
The explanatory memorandum accompanying the draft Bill pointed out that option (c) could not be regarded as compatible with the Convention.
The draft Bill is currently being considered by a joint Select Committee of both Houses.
For the moment, however, the only reasonable conclusion that can be drawn from this history is that there is no democratic mandate for the enfranchisement of convicted prisoners.
It is an international obligation of the United Kingdom under article 46.1 of the Convention to abide by the decisions of the European Court of Human Rights in any case to which it is a party.
This obligation is in terms absolute.
The remainder of article 46 contains provisions for its collective enforcement by the institutions of the Council of Europe.
Many states have written constitutions which give automatic effect in domestic law to treaties to which they are party.
Constitutional provisions of this kind are generally accompanied by provisions giving the legislature a role in the ratification of treaties.
But the making of treaties in the United Kingdom is an exercise of the royal prerogative.
There was no legal requirement for parliamentary scrutiny until the enactment of Part 2 of the Constitutional Reform and Governance Act 2010, although pursuant to an undertaking given to Parliament in April 1924 treaties were in practice laid before Parliament and there was a recognised constitutional convention (the so called Ponsonby Rule) that this should be done.
The result of the constitutional status of treaties in the United Kingdom is that they are not a source of rights or obligations in domestic law unless effect is given to them by statute: R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696, 747 748 (Lord Bridge of Harwich), 762 (Lord Ackner); R v Lyons [2003] 1 AC 976; In re McKerr [2004] 1 WLR 807, para 25 (Lord Nicholls of Birkenhead), para 48 (Lord Steyn), para 63 (Lord Hoffmann), para 80 (Lord Rodger of Earlsferry) and para 90 (Lord Brown of Eaton under Heywood).
The Human Rights Act 1998 might have given direct legal effect to interpretations of the Human Rights Convention by the Strasbourg Court, or required the executive to give effect to them by statutory instrument.
Both techniques were employed in relation to EU law by the European Communities Act 1972.
But, as is well known, its drafting was a compromise designed to make the incorporation of the Convention into English law compatible with the sovereignty of Parliament.
Neither of these techniques was therefore adopted.
Under section 10 of and Schedule 2 to the Act, the Crown has a power but not a duty to amend legislation by order so as to conform with the Convention where there are compelling reasons for doing so, but this is subject to prior parliamentary approval under the positive resolution procedure (there are special provisions in urgent cases for an order to be made with provisional effect subject to such a resolution being passed).
It follows that the interpretation of the Convention by the Strasbourg Court takes effect in English law only by decision of the English courts.
Section 2(1) of the Act provides that a United Kingdom court determining a question which has arisen in connection with a Convention right must take into account any judgment, decision or declaration of the European Court of Human Rights.
For this purpose Convention rights are those set out in those of its provisions to which effect is given by the Act, i.e. articles 2 to 12 and 14 of the Convention, articles 1 to 3 of the First Protocol and article 1 of the Thirteenth Protocol: see section 1(1) and (2).
Whatever may be meant by taking into account a decision of the Strasbourg Court, it is clearly less than an absolute obligation.
The international law obligation of the United Kingdom under article 46.1 of the Convention goes further than section 2(1) of the Act, but it is not one of the provisions to which the Act gives effect.
In the ordinary use of language, to take into account a decision of the European Court of Human Rights means no more than to consider it, which is consistent with rejecting it as wrong.
However, this is not an approach that a United Kingdom court can adopt, save in altogether exceptional cases.
The courts have for many years interpreted statutes and developed the common law so as to achieve consistency between the domestic law of the United Kingdom and its international obligations, so far as they are free to do so.
In enacting the Human Rights Act 1998, Parliament must be taken to have been aware that effect would be given to the Act in accordance with this long standing principle.
A decision of the European Court of Human Rights is more than an opinion about the meaning of the Convention.
It is an adjudication by the tribunal which the United Kingdom has by treaty agreed should give definitive rulings on the subject.
The courts are therefore bound to treat them as the authoritative expositions of the Convention which the Convention intends them to be, unless it is apparent that it has misunderstood or overlooked some significant feature of English law or practice which may, when properly explained, lead to the decision being reviewed by the Strasbourg Court.
In R v Horncastle [2010] 2 AC 373 at para 11, Lord Phillips of Worth Matravers, with the agreement of the rest of this court, rejected the submission that it should hold itself to be bound by a clear statement of principle of the European Court on the precise issue that was before it: The requirement to take into account the Strasbourg jurisprudence will normally result in the domestic court applying principles that are clearly established by the Strasbourg court.
There will, however, be rare occasions where the domestic court has concerns as to whether a decision of the Strasbourg court sufficiently appreciates or accommodates particular aspects of our domestic process.
In such circumstances it is open to the domestic court to decline to follow the Strasbourg decision, giving reasons for adopting this course.
This is likely to give the Strasbourg court the opportunity to reconsider the particular aspect of the decision that is in issue, so that there takes place what may prove to be a valuable dialogue between the domestic court and the Strasbourg court.
In Manchester City Council v Pinnock (Nos 1 and 2) [2011] 2 AC 104, para 48, Lord Neuberger MR, again with the agreement of the whole court, expanded on this statement: This court is not bound to follow every decision of the European court.
Not only would it be impractical to do so: it would sometimes be inappropriate, as it would destroy the ability of the court to engage in the constructive dialogue with the European court which is of value to the development of Convention law: see e.g. R v Horncastle [2010] 2 AC 373.
Of course, we should usually follow a clear and constant line of decisions by the European court: R (Ullah) v Special Adjudicator [2004] 2 AC 323.
But we are not actually bound to do so or (in theory, at least) to follow a decision of the Grand Chamber.
As Lord Mance pointed out in Doherty v Birmingham City Council [2009] AC 367, para 126, section 2 of the 1998 Act requires our courts to take into account European court decisions, not necessarily to follow them.
Where, however, there is a clear and constant line of decisions whose effect 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, we consider that it would be wrong for this court not to follow that line.
It follows that the exceptionally delicate issues presently before the court cannot be resolved by summarily applying the decisions of the European Court of Human Rights in Hirst and Scoppola.
It is necessary to consider the basis on which the Strasbourg Court approached the relevant features of our domestic law.
What is the rationale of the statutory rule excluding convicted prisoners from the franchise? In his Second Treatise of Government (1690), John Locke considered that because (as he saw it) all social obligations were ultimately founded upon implicit contract, a criminal, having repudiated that contract, had no rights.
He had repudiated the collective security which was the purpose of the social contract and returned to the pre existing state of nature in which force was the only law.
It followed, Locke thought, that he may be destroyed as a lion or tyger, one of those wild savage beasts, with whom men can have no society nor security.
The same view was taken by others who identified the social contract as the foundation of the state, including Thomas Hobbes and Jean Jacques Rousseau.
It is tempting to regard the present British rule about prisoners voting rights as a distant reflexion of this view, and plenty of commentators have succumbed to the temptation.
But like most rhetoric, this is misleading.
The disenfranchisement of convicted prisoners is not and never has been a form of outlawry, or civil death (the phrase sometimes used to describe the current state of the law on prisoners voting rights).
On the contrary, until the 1960s, it was mainly the incidental consequence of other rules of law.
In the first place, until 1870, convicted felons automatically suffered the confiscation of their real property, as a result of which they could not meet the property qualification which at that time was part of United Kingdom electoral law.
The Forfeiture Act 1870 abolished the rule of confiscation.
But section 2 partially preserved its effect on the franchise by providing that those sentenced for treason or felony to a period of imprisonment exceeding one year could not vote in parliamentary elections until they had served their sentence.
This remained the position until the Criminal Law Act 1967 abolished the distinction between felonies and misdemeanours and amended section 2 of the Act of 1870 so that it applied only to those convicted of treason.
Secondly, section 41(5) of the Representation of the People Act 1918 provided that an inmate in any prison, lunatic asylum, workhouse, poorhouse, or any other similar institution was not to be treated as resident there.
This had the unintended effect of excluding from registration not only convicted prisoners, but prisoners on remand, an anomaly which was not corrected until the Representation of the People Act 2000 allowed remand prisoners to be treated as residing in the place where they were in custody.
Thirdly, even those prisoners who before 1969 were eligible to vote were generally unable in practice to do so because of the absence of the necessary administrative arrangements.
Except in the case of servicemen, postal voting was not introduced until the Representation of the People Act 1948, and was not available generally until the Representation of the People Act 2000.
The modern law on this subject can be said to date from the Speakers Conference on Electoral Reform, which sat from 1965 to 1968 and issued its final report in February 1968 (Cmnd 3550).
The conference was a non partisan body drawn from all parties in the House of Commons and meeting under the chairmanship of the Speaker.
It gave systematic consideration to all aspects of electoral law including the franchise and, apparently for the first time, the question of prisoners voting rights.
Only its conclusions, not its reasons, were published, but the final report records that it considered evidence and documentation from many sources.
It unanimously recommended that all convicted prisoners should be ineligible to vote.
This recommendation was accepted, and effect was given to it by section 3 of the Representation of the People Act 1969.
The rationale of the exclusion of convicted prisoners from the franchise is as complex as the rationale for imprisonment itself.
Section 142(1) of the Criminal Justice Act 2003 provides: Any court dealing with an offender in respect of his offence must have regard to the following purposes of sentencing (a) (b) (c) (d) the punishment of offenders, the reduction of crime (including its reduction by deterrence), the reform and rehabilitation of offenders, the protection of the public, and the making of reparation by offenders to persons affected by (e) their offences.
All of these factors, except in the earlier period for (e), have been features of sentencing policy for very many years.
For my part, I doubt whether the disenfranchisement of convicted prisoners can realistically be regarded as an additional punishment or a deterrent, and it may at least arguably be said to work against the reform and rehabilitation of the offender.
But in my opinion, it has a more fundamental rationale.
All criminal law, and penal policy in particular, has an important demonstrative function, which underlies all five of the statutory sentencing factors.
The sentencing of offenders, and imprisonment more than any other sentence, is a reassertion of the rule of law and of the fundamental collective values of society which the convicted person has violated.
This does not mean that the offender is disenfranchised because he is unpopular.
Nor does it mean that he is regarded as having lost all civil rights or all claims against society, which is why the expression civil death is inappropriate.
The present rule simply reflects the fact that imprisonment is more than a mere deprivation of liberty.
It is a temporary reclusion of the prisoner from society, which carries with it the loss of the right to participate in societys public, collective processes.
Similar principles appear to underlie the exclusion of convicted offenders from the franchise in the many other jurisdictions which practise it, whether on an automatic or a discretionary basis, and in particular those in which the suspension or abrogation of voting rights may be imposed independently of a prison sentence or continue after a term of imprisonment has been served.
Fundamental to this approach, and to the automatic character of the exclusion of convicted prisoners from the franchise is the principle that sentences of imprisonment are imposed only for the more serious offences.
This has always been a central feature of sentencing policy.
Currently, section 152 of the Criminal Justice Act 2003, repeating previous statutory provisions and the long standing practice of the Court of Appeal (Criminal Division) provides: (2) The court must not pass a custodial sentence unless it is of the opinion that the offence, or the combination of the offence and one or more offences associated with it, was so serious that neither a fine alone nor a community sentence can be justified for the offence.
The only exceptions relate either to a very few grave offences where the sentence is prescribed (such as murder, some firearms offences, repeated violence or Class A drug trafficking) or to a separate sentencing regime for dangerous repeat offenders.
The section also provides that it does not apply in cases where the offender has refused to accept or comply with the conditions on which some lesser sentence would have been imposed.
These principles are broadly reflected in the composition of the prison population.
As Lord Mance has pointed out, only 8 per cent of persons convicted of an offence in England and 15 per cent in Scotland are sentenced to imprisonment.
A statistical breakdown of the prison population as at 30 September 2010 suggests that 85% of prisoners serving sentences of less than five years were convicted of violent or sexual offences, robbery, burglary, theft, handling, fraud, forgery or drug offences.
No doubt the threshold of seriousness for the passing of a sentence of imprisonment will vary in practice from one country to another.
Different offences will perfectly properly be regarded as having more serious implications for some societies than for others.
The United Kingdom is widely thought to have a relatively low threshold, but I am not aware that any comprehensive comparative study has been carried out which takes account of the underlying patterns of criminality.
Although article 3 of the First Protocol is in unqualified terms, the jurisprudence of the Strasbourg Court has acknowledged from the outset that the right to vote may be subject to limitations of a kind which is familiar in the case law governing other Convention rights.
The limitations must pursue a legitimate aim by proportionate means and must not be such as to impair the essence of the right: see Mathieu Mohin and Clerfayt v Belgium (1988) 10 EHRR 1, para 52; Matthews v United Kingdom (1999) 28 EHRR 361, para 63.
It has generally been held that the essence of the right is not impaired if it does not thwart the free expression of the opinion of the people as a whole: see Holland v Ireland (Application No 24827/94) (unreported) 14 April 1998.
It follows that the exclusion of certain categories of person from the franchise may be compatible with the Convention notwithstanding that as far as those persons are concerned the exclusion is total while it lasts.
The case law has consistently emphasised that these are matters on which the state enjoys a wide margin of appreciation.
In Hirst this was said to reflect the numerous ways of organising and running electoral systems and a wealth of differences, inter alia, in historical development, cultural diversity and political thought within Europe which it is for each Contracting State to mould into its own democratic vision (para 61).
The United Kingdom government argued before the Strasbourg Court in Hirst that the objective of disenfranchisement was to serve as an additional punishment.
The court accepted that that was a possible rationalisation, and regarded it as a legitimate objective, compatible with article 3 of the First Protocol.
The rule was nevertheless held to be incompatible because it was disproportionate, essentially as it was an automatic blanket ban imposed on all convicted prisoners which was arbitrary in its effects and could no longer be said to serve the aim of punishing the applicant once his tariff (that period representing retribution and deterrence) had expired (para 76).
The court considered the governments argument that the exclusion affected only those convicted of crimes serious enough to warrant a custodial sentence, and the very similar argument put forward by an intervener that imprisonment was the last resort of criminal justice.
They appear to have rejected this argument on the facts, observing that sentences of imprisonment are imposed for a wide range of offenders and for periods from one day to life, and that because disenfranchisement was automatic the sentencer had no opportunity to assess its proportionality in any particular case (paras 77, 80).
The court considered that the absolute character of the rule disenfranchising convicted prisoners and its application to all convicted prisoners put it beyond the states margin of appreciation.
They were fortified in this conclusion by their view that there was no evidence that Parliament had weighed the proportionality of a general exclusion.
The court referred to the Speakers Conference of 1965 1968, and the Home Office working party of 1998 1999, and acknowledged that Parliament might be said implicitly to have endorsed their conclusions: Nonetheless [they concluded] it cannot be said that there was any substantive debate by members of the legislature on the continued justification in light of modern day penal policy and of current human rights standards for maintaining such a general restriction on the right of prisoners to vote. (para 79).
The court concluded as follows, at para 82: Therefore, while the court reiterates that the margin of appreciation is wide, it is not all embracing.
Further, although the situation was somewhat improved by the Act of 2000 which for the first time granted the vote to persons detained on remand, section 3 of the 1983 Act remains a blunt instrument.
It strips of their Convention right to vote a significant category of persons and it does so in a way which is indiscriminate.
The provision imposes a blanket restriction on all convicted prisoners in prison.
It applies automatically to such prisoners, irrespective of the length of their sentence and irrespective of the nature or gravity of their offence and their individual circumstances.
Such a general, automatic and indiscriminate restriction on a vitally important Convention right must be seen as falling outside any acceptable margin of appreciation, however wide that margin might be, and as being incompatible with article 3 of Protocol No 1.
Scoppola v Italy (No 3) (2012) 56 EHRR 663 was directly concerned with the automatic lifetime exclusion from the franchise which was the consequence under Italian law of the imposition of a sentence of life imprisonment.
However, the United Kingdom rule was indirectly in question, because the Grand Chamber reviewed the decision in Hirst and the British government intervened to make submissions about it.
The Chamber had held that the Italian rule violated article 3 of the First Protocol because of its automatic character.
The Grand Chamber held that it was compatible with the Convention.
It found that the rule pursued the legitimate aim of preventing crime and enhancing civil responsibility and respect for the rule of law (para 90).
Turning to proportionality, it held that notwithstanding the statements in Hirst the test of proportionality did not require that disenfranchisement should be discretionary.
It could be automatic, provided that the principles governing its imposition were sufficiently related to the gravity of the offence.
The provisions of the relevant Italian law were held to be proportionate, unlike the English rule, because they disenfranchised only those convicted of particularly serious offences and those sentenced to the longer terms of imprisonment.
Subject to the point about the absence of judicial discretion, the Grand Chamber reaffirmed the decision in Hirst.
Accordingly, the Strasbourg Court has arrived at a very curious position.
It has held that it is open to a Convention state to fix a minimum threshold of gravity which warrants the disenfranchisement of a convicted person.
It has held that the threshold beyond which he will be disenfranchised may be fixed by law by reference to the nature of the sentence.
It has held that disenfranchisement may be automatic, once a sentence above that threshold has been imposed.
But it has also held that even with the wide margin of appreciation allowed to Convention states in this area, it is not permissible for the threshold for disenfranchisement to correspond with the threshold for imprisonment.
Wherever the threshold for imprisonment is placed, it seems to have been their view that there must always be some offences which are serious enough to warrant imprisonment but not serious enough to warrant disenfranchisement.
Yet the basis of this view is nowhere articulated.
It might perhaps have been justified by a careful examination of the principles of sentencing in the United Kingdom, with a view to demonstrating that they involve the imprisonment of some categories of people for offences so trivial that one could not rationally suppose them to warrant disenfranchisement.
That would be an indictment not just of the principle of disenfranchisement but of the sentencing principles themselves.
However, no such exercise appears to have been carried out.
I confess that I also find it surprising that the Strasbourg Court should have concluded in Hirst that the United Kingdom Parliament adopted the present rule per incuriam, so to speak, in 1969, without properly considering the justification for it as a matter of penal policy.
The absence of debate to which the court referred reflects the attention which had already been given to the issue by the Speakers Conference, and the complete consensus on the appropriateness of the voting ban.
Without the decisions in Hirst and Scoppola, I would have held that the question how serious an offence has to be to warrant temporary disenfranchisement is a classic matter for political and legislative judgment, and that the United Kingdom rule is well within any reasonable assessment of a Convention states margin of appreciation.
However, the contrary view has now been upheld twice by the Grand Chamber of the European Court of Human Rights, and is firmly established in the courts case law.
It cannot be said that the Grand Chamber overlooked or misunderstood any relevant principle of English law.
The problems about the view which the court ultimately came to were fairly pointed out in both cases in the course of argument.
Whatever parliamentary consideration may or may not have been given to the issue in 1969, it has undoubtedly received a great deal of parliamentary attention more recently, in debates which were drawn to the Grand Chambers attention in Scoppola but made no difference to its view.
There is no realistic prospect that further dialogue with Strasbourg will produce a change of heart.
In those circumstances, we would be justified in departing from the case law of the Strasbourg Court only if the disenfranchisement of convicted prisoners could be categorised as a fundamental feature of the law of the United Kingdom.
I would regard that as an extreme suggestion, and in agreement with Lord Mance I would reject it.
A wider and perhaps more realistic assessment of the margin of appreciation would have avoided the current controversy.
But it would be neither wise nor legally defensible for an English court to say that article 3 of the First Protocol has a meaning different from that which represents the settled view of the principal court charged with its interpretation, and different from that which will consequently apply in every other state party to the Convention.
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The appellants in these two appeals are prisoners serving sentences of life imprisonment imposed for murder, combined in the case of McGeogh with a later sentence of seven and a half years for violent escape from lawful custody.
Both the appellants claim that their rights have been and are being infringed because they are not entitled to vote.
United Kingdom law currently contains a general prohibition on voting by prisoners.
In a series of cases (Hirst (No 2) v UK, Greens v UK and Scoppola v Italy) the European Court of Human Rights (ECtHR) has held that a blanket prohibition of this nature is an indiscriminate restriction on a vitally important right and, as such, incompatible with Article 3 of Protocol No 1 (A3P1, the duty to hold free and fair elections) of the European Convention on Human Rights (the Convention) [18 22].
The appellant Peter Chester issued a claim for judicial review in December 2008 in relation to UK and European Parliamentary elections.
He relies on A3P1, as incorporated into domestic law by the Human Rights Act (the HRA), and also on European Community or now Union law (EU law).
The appellant George McGeochs claim for judicial review was issued in February 2011 in relation to local and Scottish Parliamentary elections.
He relies solely on EU law [1 3].
Both claims were dismissed by the courts below.
The High Court and Court of Appeal held in Chesters case that it was not their role to sanction the Government for the delay in implementing the decision in Hirst (No 2) or to advise as to how the Government might implement a voting system that would be compatible with A3P1, and that EU law raised no separate issue.
The Inner House dismissed McGeoghs claim on the ground that EU law only conferred a right to vote in municipal (i.e. local) elections on EU citizens residing in a Member State of which they were not nationals.
The Supreme Court permitted McGeoch to add a complaint that his rights in relation to EU Parliamentary elections were also being infringed [2 3].
The issues before the Supreme Court are: (a) whether it should apply the principles established in Hirst (No 2);(b) whether, if such principles are applied, the current ban on voting is incompatible with Chesters rights under A3P1, and Supreme Court should make a further declaration of incompatibility under the HRA; (c) whether EU law recognises an individual right to vote, in terms paralleling or greater than that arising under A3P1, on which the appellants can rely upon as EU citizens claiming to vote in their own countries; and (d) what consequences would follow if EU law were to recognise an individual right to vote of this nature and, in particular, what if any relief would be available to Chester and McGeogh.
The Supreme Court unanimously dismisses both appeals.
Lord Mance gives the lead judgment.
Lady Hale, Lord Clarke and Lord Sumption give additional judgments.
With regard to claims under the Convention, the Supreme Court applies the principles in Hirst (No 2) and Scoppola regarding the blanket ban on voting, but declines to make any further declaration of incompatibility in respect of Chester [39 42].
With regard to EU law, this does not provide an individual right to vote paralleling
that recognised by the ECtHR in its case law.
The resolution of these appeals does not require a reference to the Court of Justice of the European Union (CJEU) [46 47, 58, 59, 63 64 and 68].
Claims under the Human Rights Act Under the HRA, the Supreme Court is required to take into account decisions of the ECtHR, not necessarily to follow them.
This enables the national courts to engage in a constructive dialogue with the ECtHR.
However, the prohibition on prisoner voting in the UK has now been considered by the Grand Chamber of the ECtHR twice and, on each occasion, found to be incompatible with A3P1.
In these circumstances, it would have to involve some truly fundamental principle of law or the most egregious oversight or misunderstanding before it could be appropriate for the Supreme Court to refuse to follow Grand Chamber decisions of the ECtHR.
The ban on prisoner voting is not a fundamental principle of law in the UK, and the circumstances do not justify a departure from the ECtHRs caselaw [25 35].
Accepting that, on the reasoning in Hirst (No 2), Chester was a victim for the purposes of the HRA and the Convention and entitled as such to bring a claim against the respondents, that does not necessarily entitle him to any particular remedy under the HRA.
A declaration of incompatibility is a discretionary remedy.
The incompatibility of the prohibition on prisoner voting in the UK with the Convention is already the subject of a declaration of incompatibility made in Smith v Scott and is currently under review by Parliament.
In these circumstances there is no point in making a further declaration of incompatibility.
This is particularly so in the case of Chester.
Given that he is serving a sentence of life imprisonment, ECtHR caselaw indicates that he would not himself have a right to benefit from any amendments to the law on prisoner voting necessary to remedy the present incompatibility of UK law with the Convention [36 42].
That is so although his tariff period has expired and he remains in detention because his detention continues to be necessary for the protection of the public.
Claims under EU law The provisions on voting contained in the applicable European Treaties focus on the core concerns of ensuring equal treatment between EU citizens residing in Member States other than that of their nationality, and so safeguarding freedom of movement within the EU.
Eligibility to vote in Member States is basically a matter for national legislatures [58 59].
The CJEU has scrutinised national eligibility criteria for conformity with the EU legal principle of non discrimination in a context where Netherlands law extended the right to vote of its nationals to nationals resident in some, but not all, non EU States.
But there is no equivalent link with EU law in the present cases [60 64].
Additional EU analysis For completeness, the Supreme Court has considered the consequences if, contrary to their conclusions, EU law were to regarded as conferring an individual right to vote on which McGeoch and Chester could rely.
On that hypothesis, it considers that: The EU legal principle of non discrimination would still not be engaged.
Convicted prisoners serving their sentence are not in a comparable position to persons not in prison [65 68] In any event, the general ban on prisoner voting could not have been disapplied as a whole, and the relevant domestic legislation could not have been interpreted compatibly with EU law.
Nor could the Supreme Court itself have devised a scheme compatible with EU law; that would be for Parliament.
Therefore, the only relief that might have been appropriate would have been a declaration that the legislative provisions governing eligibility to vote in European Parliamentary and municipal elections in the UK were inconsistent with EU law, although even that would not have appeared appropriate in the instant cases [72 74].
Neither of the appellants could have had any arguable claim for damages in respect of any breach of EU law [82 83].
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The principal issue in these two appeals relates to the circumstances in which the concept of statutory incompatibility will defeat an application to register land as a town or village green where the land is held by a public authority for statutory purposes.
In R (Newhaven Port & Properties Ltd) v East Sussex County Council [2015] UKSC 7; [2015] AC 1547 (Newhaven) this court held that the duty under section 15 of the Commons Act 2006 did not extend to an area held under the specific statutes relating to the Newhaven Harbour.
We are asked to decide whether the same principle applies to land held by statutory authorities under more general statutes, relating respectively (in these two cases) to education and health services.
Although the two appeals raise similar issues, they were dealt with by different procedural routes.
The first (Lancashire) is within the area of a pilot scheme under the Commons Registration (England) Regulations 2008, under which, where the registration authority (in this case Lancashire County Council LCC) has an interest in the land, applications are referred for determination to the Planning Inspectorate (regulations 27 28).
The second case (Surrey) was not covered by the pilot scheme.
The application was determined by Surrey County Council as registration authority, following a non statutory inquiry before a barrister appointed by the council.
Modern greens development of the law
As will be seen, in Newhaven the issue was described as one of statutory interpretation.
Unfortunately, interpreting the will of Parliament in this context is problematic, because there is no indication that the concept of a modern green, as it has been developed by the courts, was part of the original thinking under the Commons Registration Act 1965.
Lord Carnwath reviewed the earlier history, including the Report of the Royal Commission on Common Land 1955 1958 (1958) (Cmnd 462) which preceded the 1965 Act, in his judgments at first instance in R v Suffolk County Council, Ex p Steed (1995) 71 P & CR 463 (one of the first cases under the 1965 Act), and later in the Court of Appeal in Oxfordshire County Council v Oxford City Council [2006] Ch 43 (the Trap Grounds case).
As he observed in the latter: 51.
The concept of a modern class c green, as it has emerged in the cases since 1990, would, I think, have come as a surprise to the Royal Commissioners, and to the draftsman of the 1965 Act.
There is no hint of it in the Royal Commission Report, or the Parliamentary Debates on the Bill.
The commissioners terms of reference were directed to sorting out the problems of the past, not to creating new categories of open land, for which there was no obvious need.
By this time, of course, there were numerous statutes conferring on public authorities modern powers for the creation and management of recreational spaces for the public.
Lord Carnwath also noted, at para 52, that, as late as 1975, in New Windsor Corpn v Mellor [1976] Ch 380 (New Windsor), all three members of the Court of Appeal (including Lord Denning MR) had thought it natural to read the Act as referring to 20 years before the passing of the Act (at pp 391, 395) an interpretation which would have ruled out the possibility of a modern green being established by more recent use.
It was not until the early 1990s that claims were first put forward based on 20 years use since the 1965 Act had come into force at the end of July 1970 (apparently following the advice of the Open Spaces Society in their publication Getting Greens Registered (1995)).
When the first case came before the House of Lords in 1999 (R v Oxfordshire County Council, Ex p Sunningwell Parish Council [2000] 1 AC 335 Sunningwell), no one seems to have argued that the Act was directed to pre 1965 use only.
In that case, the House of Lords, led by Lord Hoffmann, adopted a relatively expansive view of the new concept.
He drew a parallel with the Rights of Way Act 1932, which he thought had reflected Parliaments view that the previous law gave too much weight to the interests of the landowner and too little to the preservation of rights of way which had been for many years in de facto use and the strong public interest in facilitating the preservation of footpaths for access to the countryside (p 359D E).
He commented, at p 359E: in defining class c town or village greens by reference to similar criteria in 1965, Parliament recognised a similar public interest in the preservation of open spaces which had for many years been used for recreational purposes.
That interpretation of Parliaments thinking would, with respect, have been difficult to deduce from the 1965 Act itself, or from anything said in Parliament or anywhere else at the time.
However, when the issue came before the House again, in the Trap Grounds case [2006] 2 AC 674, Lord Hoffmann was able to claim implicit Parliamentary support in the debates which preceded the amendments made by the Countryside and Rights of Way Act 2000.
As he said, at para 26: No one voiced any concern about the construction which the House in its judicial capacity had given to the 1965 Act.
On the contrary, the only question raised in debate was whether the locality rule did not make it too difficult to register new village greens.
By then, as he also noted (para 28) the new Commons Bill (the 2006 Act as it became) was before Parliament, providing a further opportunity for legislative reconsideration if thought appropriate.
In Newhaven [2015] AC 1547, para 18, this fact was cited as a reason for not having given permission to reopen the general approach adopted in the Trap Grounds case.
As to the attributes of a modern green, the 2006 Act itself, like the 1965 Act which preceded it, is very sparse in the information it gives.
Section 1 of the 2006 Act requires each registration authority to maintain a register of town or village greens.
Section 15 indicates that any person can apply to register land as a green where, in subsection (1)(a) a significant number of the inhabitants of any locality, or of any neighbourhood within a locality, have indulged as of right in lawful sports and pastimes on the land for the period of at least 20 years As to the purpose of registration, section 2(2)(a) states simply that the purpose of the register is to register land as a town or village green.
The Act offers no further guidance as to the interpretation of the section 15 formula, nor as to the practical consequences of registration.
An unexplained curiosity is that section 10 of the 1965 Act, which provided that the register was conclusive evidence of the matters registered, as at the date of registration, is not repeated in the 2006 Act.
As things stand the repeal of section 10 has been brought into effect only in the pilot areas. (Section 18 of the 2006 Act, headed Conclusiveness, which has effect in the pilot areas, does not on its face go so far as section 10.) In the Trap Grounds case, Lord Hoffmann had agreed (at para 43) with Lord Carnwaths analysis in the Court of Appeal [2006] Ch 43, para 100, that the 1965 Act created no new legal status, and no new rights or liabilities other than those resulting from the proper interpretation of section 10.
It was on the rational construction of section 10 that he relied for his view that land registered as a town or village green can be used generally for sports and pastimes (para 50), and was also subject to section 12 of the Inclosure Act 1857 and section 29 of the Commons Act 1876 (para 56).
None of the experienced counsel before us was able to offer an explanation for the disappearance of section 10, but none sought to argue that it had made any material difference to the rights following registration.
Not without some hesitation, we shall proceed on that basis.
Lord Hoffmann made clear that, following registration, the owner was not excluded altogether, but retained the right to use the land in any way which does not interfere with the recreational rights of the inhabitants, with give and take on both sides (para 51).
That qualification was further developed in R (Lewis) v Redcar and Cleveland Borough Council [2010] UKSC 1; [2010] 2 AC 70 (Lewis), in which it was held that the local inhabitants rights to use a green following registration could not interfere with competing activities of the landowner to a greater extent than during the qualifying period.
One important control mechanism which emerged from the cases was the need for the use to be as of right.
It was established that these words, by analogy with the law of easements, imported the principle nec vi, nec clam, nec precario, or in other words the absence of any of the three characteristics of compulsion, secrecy or licence (per Scott LJ in Jones v Bates [1938] 2 All ER 237, 245, cited by Lord Hoffmann in Sunningwell [2000] 1 AC 335, 355).
It followed that in practice an owner could prevent use qualifying under section 15 by making it sufficiently clear to those seeking to use the land (generally by suitable notices) either that their use was objected to, or that it was permissive.
On the other hand, silent acquiescence in the use, or toleration, did not prevent it being as of right.
More recently (from 25 April 2013) amendments made by the Growth and Infrastructure Act 2013 (embodied in new sections 15A and following of the 2006 Act) have provided some assistance to landowners, first by enabling a formal statement to be made to bring user as of right to an end, and secondly by defining certain planning related trigger events which suspend or extinguish the right to apply to register a green.
In Wiltshire Council v Cooper Estates Strategic Land Ltd [2019] EWCA Civ 840; [2019] PTSR 1980, para 4, Lewison LJ said of these amendments: Ever since the Trap Grounds case the courts have adopted a definition of a TVG [town or village green] which goes far beyond what the minds eye would think of as a traditional village green.
The consequence of this interpretation of the definition is that there have been registered as TVGs: rocks, car parks, golf courses, school playgrounds, a quarry, scrubland, and part of a working port.
If land is registered as a TVG the effect of the registration is, for practical purposes, to sterilise land for development.
This became a concern for the Government, because the criteria for registration did not take into account any planning considerations; and because it was thought in some quarters that applications for registration of TVGs were being used as a means of stopping development outside the planning system.
The 2013 amendments are of no direct relevance to the issues in the present appeal, but they are relied on as showing that Parliament has given specific attention to the balance to be drawn between the rights of the various interests involved.
We would draw two main lessons from the historical review.
First, whatever misgivings one may have about the unconventional process by which the concept of a modern green became part of our law, the emphasis now should be on consolidation, not innovation.
Secondly, the balance between the interests of landowners and those claiming recreational rights, as established by the authorities, and as now supplemented by the 2013 Act, should be respected.
Our task in the present appeal is not to make policy judgments, but simply to interpret the majority judgment in Newhaven and apply it to the facts of these cases.
The proceedings and the parties
Lancashire
The land at issue in the first appeal is known as Moorside Fields, in Lancaster.
It lies adjacent to Moorside Primary School and extends to some 13 hectares.
It is divided into five areas, referred to in the proceedings as Areas A to E, described (by the planning inspector) as follows: Area A, referred to as the meadow was, until recently, an undeveloped plot of land.
It is adjacent to Moorside Primary School (the school) and is currently being used to facilitate the construction of an extension at the rear of the school.
Area B is a mowed field, referred to as the school playing field and both it and Area A are currently surrounded by fencing.
Areas C and D border Areas A and B.
In the past they have been the subject of mowing tenancy agreements but these ceased in around 2001.
They are separated from each other and from Areas A and B by hedges and in places are overgrown with brambles.
Area E, also adjacent to the school, is currently overgrown and difficult to access.
At some times of the year it contains a pond.
Like the school the land is owned by LCC, the present appellant, which is both education authority and registration authority.
On 9 February 2010 Ms Janine Bebbington, a local resident, applied to register the land as a town or village green.
Her application was based on 20 years qualifying use up to the date of registration, or alternatively up to 2008.
LCC, as local education authority, objected.
Following a statutory inquiry, an inspector appointed by the Secretary of State (Ms Alison Lea, a solicitor) in a decision letter dated 22 September 2015 determined that four of the five areas (that is A to D, but not E) should be registered under the Act.
She excluded Area E because she found insufficient evidence of its use over the 20 year period.
LCC has postponed formal registration of Areas A to D, pending the outcome of the judicial review claim.
LCC maintains that the land was acquired for and remains appropriated to educational purposes, in exercise of the LCCs statutory powers as education authority.
The statutory provisions upon which LCC relied (or now rely) as showing incompatibility were: (1) section 8 of the 1944 Education Act which imposed a duty on local education authorities to secure that there shall be available for their area sufficient schools for providing primary and secondary education, sufficient in number, character and equipment; (2) sections 13 and 14 of the Education Act 1996 which require local authorities to contribute to the development of the community by securing efficient primary and secondary education; (3) section 542 of the 1996 Act which requires school premises to conform to prescribed standards, including (under regulation 10 of the School Premises (England) Regulations (SI 2012/1943)) suitable outside space for physical education and outside play; and (4) section 175 of the Education Act 2002 which requires the education authority to make arrangements for ensuring that their education functions are exercised with a view to safeguarding and promoting the welfare of children. (The issue of safeguarding does not appear to have been raised at the inquiry.)
The inspector was not satisfied that the land was held for educational purposes (an issue to which we shall return below), but even on the assumption that it was she found no incompatibility: 119.
Furthermore, even if the land is held for educational purposes, I agree with the applicant that that could cover a range of actual uses.
LCC states that the landholding is associated with a specific statutory duty to secure a sufficiency of schools and that if LCC needed to provide a new school or extra school accommodation in Lancaster in order to enable it to fulfil its statutory duty, it would not be able to do so on the Application Land were it to be registered as a town or village green.
However, Areas A and B are marked on LCCs plan as Moorside Primary School.
The school is currently being extended on other land and will, according to Lynn MacDonald [a school planning manager for the county council], provide 210 places which will meet current needs.
There is no evidence to suggest that the school wishes to use these areas other than for outdoor activities and sports and such use is not necessarily incompatible with use by the inhabitants of the locality for lawful sports and pastimes. 120.
Areas C and D are marked on LCCs plan as Replacement School Site.
However, there is no evidence that a new school or extra school accommodation is required on this site, or indeed anywhere in Lancaster.
Lynn MacDonald stated that the Application Land may need to be brought into education provision at some time but confirmed that there were no plans for the Application Land within her five year planning phase. 121.
Nevertheless, she pointed out there is a rising birth rate and increased housing provision in Lancaster, and that although there are surplus school places to the north of the river, no other land is reserved for school use to the south of Lancaster.
Assets are reviewed on an annual basis and if not needed land can be released for other purposes.
However there was no prospect that this would happen in relation to the Application Land in the immediate future. 122.
I do not agree with LCCs submission that the evidence of Lynn MacDonald demonstrates the necessity of keeping the Application Land available to guarantee adequate future school provision in order to meet LCCs statutory duty.
Even if at some stage in the future there becomes a requirement for a new school or for additional school places within Lancaster, it is not necessarily the case that LCC would wish to make that provision on the Application Land.
She concluded (para 124): 124.
It seems to me that, in the absence of further evidence, the situation in the present case is not comparable to the statutory function of continuing to operate a working harbour where the consequences of registration as a town or village green on the working harbour were clear to their Lordships [in Newhaven].
Even if it is accepted that LCC hold the land for educational purposes, there is no clear incompatibility between LCCs statutory functions and registration of the Application Land as a town or village green.
Accordingly I do not accept that the application should fail due to statutory incompatibility.
On the LCCs application for judicial review, the inspectors decision was upheld by Ouseley J [2016] EWHC 1238 (Admin), including her approach to the issue of statutory incompatibility.
Surrey
The second appeal relates to some 2.9 hectares of land at Leach Grove Wood, Leatherhead, owned by NHS Property Services Ltd (NHS Property Services), a company wholly owned by the Secretary of State for Health.
The land adjoins Leatherhead Hospital, and is in the same freehold title.
An application for registration under the Act was made by Ms Philippa Cargill on 22 March 2013, with the support of Mr Timothy Jones and others.
They relied on use over a period of 20 years ending in January 2013 (when permissive signs were erected on the land).
At the time of the application, the land was owned by the Surrey Primary Care Trust.
By section 83(1) of the National Health Service Act 2006 primary care trusts were under a duty to provide, or to secure the provision of, primary medical services in their area.
The land was held by the Trust pursuant to the statute, for those purposes.
On the dissolution of the Trust in 2013, the freehold title of the land was transferred to NHS Property Services, which had been created by the Secretary of State for Health under his power to form companies to provide facilities or services to persons or bodies exercising functions, or otherwise providing services, under this Act (section 223(1) of the National Health Service Act 2006).
Following the amendment of the National Health Service Act 2006 by the Health and Social Care Act 2012, functions previously exercised by the Secretary of State acting through a primary care trust fell to be exercised by a clinical commissioning group (CCG) in this case the Surrey Downs Clinical Commissioning Group.
The principal statutory duties of a CCG are defined by section 3(1) of the National Health Service Act 2006; in summary they involve the provision of hospital accommodation and medical services to such extent as it considers necessary to meet the reasonable requirements of the persons for whom it has responsibility.
Following a non statutory inquiry, the inspector, William Webster, barrister, in his report dated 9 June 2015, recommended refusal of registration.
He rejected the companys objection based on statutory incompatibility (paras 175(d) (f)).
He contrasted the case with Newhaven [2015] AC 1547 in which there had been an obvious and irreconcilable clash as between the conflicting statutory regimes: (e) The position of the NHS is quite different in that no positive duty (analogous to that imposed on the undertaker in Newhaven) arises on the part of the landowner to do anything in the case of the land (in contrast to Newhaven) and the general duty imposed on the Secretary of State to promote a comprehensive health service is wholly unaffected. (f) It seems to me that it is irrelevant that the land may be held under the same title as the remainder of the hospital site.
The fact that the relevant NHS bodies had (and still has [sic]) the capacity to use the land for health and ancillary purposes is no different to any other public body holding land for a purpose which they do not choose to exercise for the time being.
He also accepted that there had been sufficient qualifying use of the land by local inhabitants for more than 20 years, but he held that it was not in respect of a relevant locality or neighbourhood as required by section 15.
Surrey County Council, as registration authority, did not accept his recommendation, but determined to register the land which was done on 5 October 2015.
On the application for judicial review by NHS Property Services, on 13 July 2016 Gilbart J ([2016] EWHC 1715 (Admin); [2017] 4 WLR 130) quashed the registration, holding that the county council had failed properly to consider the question of statutory incompatibility.
He had before him the judgment of Ouseley J in the Lancashire case ([2016] EWHC 1238 (Admin)), but distinguished it by reference to the wider powers conferred by the education statutes: 134.
It is clear that there was no general power in any of the relevant bodies to hold land.
Land could only be acquired or held if done so for the purposes defined in the relevant Acts.
The defined statutory purposes do not include recreation, or indeed anything outside the purview of (in summary) the purposes of providing health facilities.
Could the land be used for the defined statutory purposes while also being used as a town or village green? No one has suggested that the land in its current state would perform any function related to those purposes, and the erection of buildings or facilities to provide treatment, or for administration of those facilities, or for car parking to serve them, would plainly conflict with recreational use. 135.
Indeed, it is very hard indeed to think of a use for the land which is consistent with those powers, and which would not involve substantial conflict with use as a village green.
A hospital car park, or a clinic, or an administrative building, or some other feature of a hospital or clinic would require buildings or hard standing in some form over a significant part of the area used.
By contrast, it is easy to think of functions within the purview of education, whereby land is set aside for recreation.
Indeed, there is a specific statutory duty to provide recreational facilities, which may include playing fields, and other land, for recreation, the playing of games, and camping, among other activities see section 507A Education Act 1996. 136.
It is not relevant to the determination of the issue that the land has not in fact been used for the erection of hospital buildings or used for other hospital related purposes.
The question which must be determined is not the factual one of whether it has been used, or indeed whether there any plans that it should be, but only whether there is incompatibility as a matter of statutory construction.
If the land is in fact surplus to requirements, then the use of the [2006 Act] is not the remedy. 137.
Given those conclusions, it is my judgement that there is a conflict between the statutory powers in this case and registration.
The Court of Appeal
The appeals in both cases, respectively by LCC and the applicants for registration in the Surrey case, were heard together by the Court of Appeal (Jackson, Lindblom and Thirlwall LJJ).
In a judgment dated 12 April 2018 ([2018] EWCA Civ 721; [2018] 2 P & CR 15), given by Lindblom LJ, with whom the others agreed, the court upheld the decision to register in both cases.
On the issue of statutory incompatibility, he distinguished the Newhaven case [2015] AC 1547, for reasons which are sufficiently apparent from the following short extracts from the judgment: Lancashire 40.
Crucially, as a matter of statutory construction there was no inconsistency of the kind that arose in Newhaven Port & Properties between the provisions of one statute and the provisions of the other.
The statutory purpose for which Parliament had authorized the acquisition and use of the land and the operation of section 15 of the 2006 Act were not inherently inconsistent with each other.
By contrast with Newhaven Port & Properties, there were no specific statutory purposes or provisions attaching to this particular land.
Parliament had not conferred on the county council, as local education authority, powers to use this particular land for specific statutory purposes with which its registration as a town or village green would be incompatible.
Surrey 46.
As in the Lancaster case, therefore, the circumstances did not correspond to those of Newhaven Port & Properties.
The land was not being used for any defined statutory purposes with which registration would be incompatible.
No statutory purpose relating specifically to this particular land would be frustrated.
The ownership of the land by NHS Property Services, and the existence of statutory powers that could be used for the purposes of developing the land in the future, was not enough to create a statutory incompatibility.
The clinical commissioning group would still be able to carry out its statutory functions in the provision of hospital and other accommodation and the various services and facilities within the scope of its statutory responsibilities if the public had the right to use the land at Leach Grove Wood for recreational purposes, even if the land itself could not then be put to use for the purposes of any of the relevant statutory functions.
None of those general statutory functions were required to be performed on this land.
And again, it is possible to go somewhat further than that.
Although the registration of the land as a village green would preclude its being developed by the construction of a hospital or an extension to the existing hospital, or as a clinic or administrative building, or as a car park, and even though the relevant legislation did not include a power or duty to provide facilities for recreation, there would be nothing inconsistent either in principle or in practice between the land being registered as a green and its being kept open and undeveloped and maintained as part of the Leatherhead Hospital site, whether or not with access to it by staff, patients or visitors.
This would not prevent or interfere with the performance of any of the relevant statutory functions.
But in any event, as in the Lancaster case, the two statutory regimes were not inherently in conflict with each other.
There was no statutory incompatibility.
Was the Lancashire land held for educational purposes?
Before we turn to the main issue it is convenient to dispose of a preliminary issue which arises only in respect of the first appeal.
For what purposes was the land held? The inspector recorded the evidence on which LCC relied as showing that the land was held for the relevant statutory purposes. 113.
LCC has provided Land Registry Official copies of the register of title which show that LCC is the registered proprietor of the Application Land.
Areas A, B and E were the subject of a conveyance dated 29 June 1948, a copy of which has been provided.
It makes no mention of the purposes for which the land was acquired but is endorsed with the words Recorded in the books of the Ministry of Education under section 87(3) of the Education Act 1944.
The endorsement is dated 12 August 1948. 114.
Areas C and D were the subject of a conveyance dated 25 August 1961.
Again the conveyance makes no mention of the purposes for which the land was acquired but the copy provided has a faint manuscript endorsement as follows Education Lancaster Greaves County Secondary School. 115.
In addition LCC provided an instrument dated 23 February 1925 and a letter from LCC to the school dated 1991.
The instrument records that the Council of the Borough of Lancaster has applied to the Minister of Health for consent to the appropriation for the purposes of the Education Act 1921 of the land acquired by the council otherwise than in their capacity as Local Education Authority.
The land shown on the plan is the [Barton Road Playing Field (land also owned by LCC, to the immediate west of Areas C and D and separated from them by a shallow watercourse, but accessible from them via a stone bridge and also stepping stones)].
An acknowledgement and undertaking dated March 1949 refers to the transfer to the county council of the education functions of the City of Lancaster and lists deeds and documents relating to school premises and other land and premises held by the corporation.
It lists the [Barton Road Playing Field].
The 1991 letter encloses a note from Lancashire Education Committee outlining a proposal to declare land surplus to educational requirements.
This relates to the land adjacent to Area C which was subsequently developed for housing.
As none of this documentation relates directly to the Application Land I do not find it of particular assistance. 116.
At the inquiry LCC provided a print out of an electronic document headed Lancashire County Council Property Asset Management Information which in relation to Moorside Primary School records the committee as E.
I accept that it is likely that this stands for Education.
An LCC plan showing land owned by CYP education shows Areas A, B and E as Moorside Primary School and Areas C and D as Replacement School Site.
In relation to Areas C and D the terrier was produced, and under committee is the word education.
The whole page has a line drawn through it, the reason for which is unexplained. 117.
LCC submits that the documentation provides clear evidence that the Application Land is held for educational purposes and that no further proof is necessary.
However, no council resolution authorising the purchase of the land for educational purposes or appropriating the land to educational purposes has been provided.
The conveyances themselves do not show for what purpose the council acquired the land, and although the endorsements on those documents make reference to education, the authority for them is unknown.
Lynn MacDonald confirmed that the Application Land was identified as land which may need to be brought into education provision, but was unable to express an opinion about the detail of LCCs ownership of the land. 118.
The information with regard to the purposes for which the Application Land is held by LCC is unsatisfactory.
Although there is no evidence to suggest that it is held other
than for educational purposes, it is not possible to be sure that
The inspector stated her conclusions: LCCs statement that the Application Land was acquired and is held for educational purposes and was so held throughout the 20 year period relevant to the Application accurately reflects the legal position.
In fairness to the inspector, we should note that this issue seems to have been raised rather the late in the day, and was less than fully explored in LCCs submissions before her (see Ouseley J [2016] EWHC 1238 (Admin), para 49, noting Ms Bebbingtons evidence as to what took place at the inquiry; the counsel who have appeared for LCC in the court proceedings did not act for it at the inquiry.
Ouseley J indicated that, left to himself, he would have been likely to have reached a different view, at para 57: I rather doubt that, confined to the express reasoning in the DL [the decision letter], I would have reached the same conclusion as the inspector as to what could be inferred from the conveyances and endorsements on them in relation to the purpose of the acquisition of the various areas.
I can see no real reason not to conclude, on that basis, that the acquisition was for educational purposes.
No other statutory purpose for the acquisition was put forward; there was no suggestion that the parcels were acquired for public open space.
I would have inferred that there were resolutions in existence authorising the acquisitions for that contemporaneously evidenced intended purpose, which simply had not been found at this considerable distance in time.
It would be highly improbable for the lands to have been purchased without resolutions approving it.
The presumption of regularity would warrant the assumption that there had been resolutions to that effect, and that the purpose resolved upon would have been the one endorsed on the conveyances.
This is reinforced by the evidence in DL para 116, which shows the property, after acquisition, to be managed by or on behalf of the Education Committee.
The actual use made of some of the land is of limited value in relation to the basis of its acquisition or continued holding.
However, he was unwilling to conclude that the inspectors decision was irrational, at para 61: As I read the DL, the fundamental problem for the inspector in the LCC evidence was the absence of what she regarded as the primary sources for power under which the acquisition or appropriation of the land occurred: the resolutions to acquire or to appropriate it for educational purposes.
She was entitled to regard those as the primary sources to prove the basis for the exercise of the powers of the authority she approached her decision, as I read it, knowing what transpired before her, not on the basis that resolutions related to acquisition might well have existed but could not be found at this distance in time, but on the basis that none had been produced despite proper endeavours to find them, endeavours which had nonetheless produced the conveyances, and other related documents.
So she was not prepared to assume that resolutions in relation to acquisition had existed.
That was entirely a matter for her, and cannot come close to legal error.
The Court of Appeal in substance adopted Ouseley Js reasoning.
In this court, Mr Edwards QC for LCC accepts that this issue was one of fact for the inspector.
But he submits that her conclusion was unsupportable on the evidence before her, or was vitiated by error of fact (under the principles set out in E v Secretary of State for Home Department [2004] QB 1044).
For good measure he submits that the courts below were wrong not to admit evidence, discovered after the inquiry, in the form of council minutes from February 1948 recording the resolution to acquire Areas A and B (and E) for a proposed primary school.
He starts from the proposition that the LCC, as a statutory local authority, could only acquire land for the purposes of any of their [statutory] functions (see now the Local Government Act 1972, section 120(1)(a)); and that in normal circumstances the land would continue to be held for the purpose for which it was acquired unless validly appropriated for an alternative statutory purpose, when no longer required for the first (section 122).
The inspector, he says, gave no weight to that statutory context.
As regards Areas A, B and E, he submits, the evidence before the inspector was quite clear (even without the new evidence).
The inspector properly noted that the acquisition had been Recorded in the books of the Ministry of Education under section 87(3) of the Education Act 1944.
However, she failed to understand or give due weight to the significance of that note.
As Mr Edwards explains, the effect of section 87 of the Education Act 1944 (headed Exemption of assurances of property for educational purposes from the Mortmain Acts) was to exempt from the Mortmain and Charitable Uses Act 1888 and related Acts, land transferred (inter alia) to a local education authority, if the land was to be used for educational purposes. (The law of Mortmain dating back to the Statutes of Mortmain in 1279 and 1290, was not finally abolished until 1960.) A copy of the conveyance or other document by which the transfer of such land was made was required, within six months of its taking effect, to be sent to the Education Minister.
Section 87(3) provided that a record should be kept of any conveyance sent to the minister pursuant to the section.
Accordingly, says Mr Edwards, the reference to the record under section 87(3) should have been treated by the inspector as clear evidence that the original purpose of the acquisition was for educational purposes, even in the absence of a contemporary resolution to that effect.
Against that background, the lack of evidence of any competing purpose to which the land might have been appropriated over the subsequent years pointed to the inference that it continued to be held for its original purpose.
As regards Areas C and D, Mr Edwards submits, the indication on the 1961 conveyance of an educational purpose, taken with the references in later documents to its being treated as educational land, and the lack of any evidence of a competing purpose, were sufficient to support the inference, on the balance of probabilities, that education was the purpose for which it had been acquired and subsequently held.
Discussion
Although Mr Edwards has accepted that this issue was one of fact for the inspector, that concession needs to be seen in context.
The inspectors assessment was one depending, not so much on evaluation of oral evidence, but largely on the inferences to be drawn from legal or official documents of varying degrees of formality.
In our view, Ouseley Js approach to the natural inferences to be drawn from the material before the inspector was correct, but he was wrong to be deflected by deference to the inspectors fact finding role.
The main difference between them was in the weight given by the inspector to the absence of specific resolutions, from which she found it not possible to be sure that the land had been acquired and held for educational purposes.
On its face the language appears to raise the threshold of proof above the ordinary civil test to which she had properly referred earlier in the decision.
But even discounting that point, she was wrong in our view to place such emphasis on the lack of such resolutions.
Her task was to take the evidence before her as it stood, and determine, on the balance of probabilities, for what purpose the land was held.
On that approach, Ouseley Js own assessment ([2016] EWHC 1238 (Admin)) was in our view impeccable.
The inspectors assessment was irrational, having regard to the relevant standard of proof and the evidence available.
There was no evidence to support any inference other than that each part of the land had been acquired for, and continued during the relevant period to be held for, statutory educational purposes.
An assessment made without any supporting evidence cannot stand: Edwards v Bairstow [1956] AC 14, 29.
In respect of Areas A and B, furthermore, there was a clear error of law, in the inspectors failure to appreciate, or take account of, the significance of the reference to section 87(3) of the 1944 Act.
This may be because she was given little assistance on the point by LCC at the inquiry.
It is less clear why the point, having been clearly raised in submissions in the court proceedings (see Ouseley J, para 44), seems to have been ignored in the subsequent judgments.
On any view, that reference, and the inferences to be drawn from it, went beyond a pure issue of fact, and were appropriate for review by the court.
In agreement with Mr Edwards we would regard it as providing unequivocal support for the conclusion that the land comprising Areas A and B was acquired for educational purposes.
There was no evidence to suggest that it had ever been appropriated to other purposes.
In respect of Areas C and D, the evidence is less clear cut, but we agree with Mr Edwards submission that it is sufficient, on the balance of probabilities, to support the same conclusion and that, in the absence of any evidence to support any other view, it was irrational for the inspector to reach a different conclusion.
Again, we think that Ouseley Js assessment of the facts was the correct one.
In these circumstances it is unnecessary to consider whether Ouseley J erred in refusing to admit the new evidence.
We note, however, that it does no more than support what was already a strong case in respect of Areas A and B; it does nothing to enhance the case for Areas C and D.
Implied permission
We can also deal more briefly with an issue that arises only in respect of the Surrey site: that is Mr Laurence QCs application for permission to argue (for the first time) that the publics use of the land for recreation should be treated as having implied permission from NHS Property Services or its predecessors, thus showing that the use was by right rather than as of right.
This, as he accepts, is a departure from Sunningwell [2000] 1 AC 335, where it was held that mere toleration by a landowner of the publics use could not be taken as evidence that the landowner had impliedly consented to that use.
He seeks to distinguish the position of land that is held for public purposes such as by his client.
We quote his printed case: there is a critical distinction between (i) a private owner (such as the kindly rector in Sunningwell) tolerating use of land not held for public purposes which can provide no evidence of an implied permission and (ii) a public owner passively responding to recreational use in a statutory context which justifies the inference that that response to the publics use of the land is evidence of an implicit permission so long as the permitted use does not disrupt the public authoritys use of the land for its statutory purposes.
In such a case it is irrelevant that in a non statutory, private context such a response might be characterised as toleration.
He also relies on section 120(2) of the Local Government Act 1972, which authorises land acquired by agreement by a local authority for a particular purpose to be used, pending its requirement for that purpose, for any of the authoritys functions, which, he submits, would include recreational use.
It can be inferred, accordingly, that any use by the public was permitted under that power, and as such was pursuant to the same kind of public law right, derived from statute, as was held in R (Barkas) v North Yorkshire County Council [2014] UKSC 31; [2015] AC 195 (Barkas) and Newhaven [2015] AC 1547 to give rise to implied permission.
This submission seems to us to face two major difficulties.
The first is that no such claim was made before the inspector.
As he recorded: 174(f) No issue arises on as of right.
There were no vitiating features in play which would preclude use as of right and the application land was at no time held by SCC [Surrey County Council] or by any of the various NHS bodies mentioned herein for purposes which conferred an entitlement on members of the public to use the land for informal recreation.
For instance, there was no evidence of any overt act or acts on the part of the objector, or its predecessor, to demonstrate that, before January 2013, the landowner was granting an implied permission for local inhabitants to use the wood.
In answer to this, Mr Laurence asserts that the issue is one of law rather than fact.
Even if that were so, it would in our view be unfair to all those who took part in the five day inquiry in 2015 to allow the point to be taken for the first time four years later in this court.
However, his main difficulty is that the submission is contradicted by clear authority.
In R (Beresford) v City of Sunderland [2003] UKHL 60; [2004] 1 AC 889 Lord Walker had accepted the emphasis placed by Mr Laurence himself (appearing on that occasion for the supporters of registration) on the need for the landowner to do something (para 78); passive acquiescence could not be treated as having the same effect as permission communicated (whether in writing, by spoken words, or by overt and unequivocal conduct) (para 79).
Later in the judgment (para 83) Lord Walker accepted that permission might be implied by (or inferred from) overt conduct of the landowner, such as making a charge for admission, or asserting his title by the occasional closure of the land to all comers, but he found no evidence in that case of overt acts (on the part of the city council or its predecessors) justifying the inference of an implied licence.
Nothing in Barkas or Newhaven undermines the principle that passive acquiescence is insufficient.
Mr Laurences then submission that the land owner must do something remains good law, even if there has been some qualification of the form of communication required to the public.
The existence in each case of an overt act of the owner was emphasised in the majority judgment in Newhaven [2015] AC 1547, para 71: In this case, as in Barkas, the legal position, binding on both landowner and users of the land, was that there was a public law right, derived from statute, for the public to go onto the land and to use it for recreational purposes, and therefore, in this case, as in Barkas, the recreational use of the land in question by inhabitants of the locality was by right and not as of right.
The fact that the right arose from an act of the landowner (in Barkas, acquiring the land and then electing to obtain ministerial consent to put it to recreational use; in this case, to make the Byelaws which implicitly permit recreational use) does not alter the fact that the ultimate right of the public is a public law right derived from statute (the Housing Act 1936 in Barkas; the 1847 Clauses Act and the 1878 Newhaven Act in this case).
The law remains, as submitted by Mr Laurence in Beresford, that passive acquiescence, even by a statutory authority with power to permit recreational use, is not enough.
Accordingly we would refuse permission for this additional ground of appeal.
Statutory incompatibility
We turn next to the central issue in the case, based on the Newhaven case.
The majority judgment
In the judgment of the majority (given by Lord Neuberger PSC and Lord Hodge JSC) the decision not to confirm the registration was supported by two separate lines of reasoning: implied permission and statutory incompatibility.
Although the latter was unnecessary for the decision, it was clearly identified as a separate ground of decision (para 74).
Lord Carnwath was alone in basing his decision on the implied permission issue alone (para 137), seeing considerable force in the contrary reasoning on the latter issue of Richards LJ in the Court of Appeal ([2014] QB 186).
No one has argued that we should regard the majoritys reasoning on this issue as other than binding.
Accordingly our decision in the present case depends to a large extent on the correct analysis of that reasoning, and its application to the facts of the two cases before us.
The operation of Newhaven Harbour had been subject to legislation since at least 1731.
At the relevant time the governing statutes included (inter alia) the Newhaven Harbour and Ouse Lower Navigation Act 1847, section 49 of which required the trustees to maintain and support the said harbour of Newhaven, and the piers, groynes, sluices, wharfs, mooring berths, and other works connected therewith and section 33 of the Harbours, Docks and Piers Clauses Act 1847, which provided that, subject to payment of rates the harbour, dock and pier shall be open to all persons for the shipping and unshipping of goods, and the embarking and landing of passengers.
The land owned by the harbour company (NPP) included an area known as West Beach, described in the judgment as part of the operational land of the Harbour (para 8), although not currently used for any harbour purpose.
As the judgment explained, at para 9: The Beach owes its origin to the fact that, in 1883, pursuant to the powers granted by the 1863 Newhaven Act, the substantial breakwater was constructed to form the western boundary of the Harbour.
The breakwater extends just over 700 metres out to sea.
After the construction of the breakwater, accretion of sand occurred along the eastern side of the breakwater, and that accretion has resulted in the Beach.
Following an application by the Newhaven Town Council to register the Beach as a town or village green, and the holding of a public inquiry, it was found by the inspector that the beach had been used by residents of the locality for well over 80 years (save during the war periods) for recreation.
On that basis the registration authority resolved to register the land.
That decision was subject to an application for judicial review, which succeeded before Ouseley J, but was dismissed by the Court of Appeal.
Their decision was in turn reversed by the Supreme Court.
The judgment of this court in Newhaven
In the part of their judgment directed to the statutory incompatibility issue, Lord Neuberger and Lord Hodge referred to case law on public rights of way, easements and servitudes by way of analogy, adopting a cautious approach (paras 76 90).
Nonetheless, they found it did provide guidance.
In English law, public rights of way are created by dedication by the owner of the land, and the legal capacity of the landowner to dedicate land for that purpose is a relevant consideration (para 78, referring in particular to British Transport Commission v Westmorland County Council [1958] AC 126; see also para 87).
Similarly, in the English law of private easements, the capacity of the owner of the potential servient tenement to grant an easement is relevant to prescriptive acquisition, which is based on the fiction of a grant by that owner (para 79).
The law of Scotland with respect of creation of public rights of way and private servitudes had also developed on the footing that the statutory capacity of a public authority landowner to allow the creation of such rights was a relevant matter.
In particular, in Magistrates of Edinburgh v North British Railway Co (1904) 6 F 620 it was held that it was not possible that a public right of way which it would be ultra vires to grant can be lawfully acquired by user ([2015] AC 1547, paras 83 84); and in Ellices Trustees v Comrs of the Caledonian Canal (1904) 6 F 325 it was held that the commissioners of the canal did not have the power to grant a right of way which was not compatible with the exercise of their statutory duties, and that this also meant that no private right of way or servitude could arise by virtue of user of the land over many years by those claiming such a right of way (paras 85 86).
Although the Scots law of prescription had been reformed by statute, Lord Neuberger and Lord Hodge still regarded the historic position as instructive.
Their discussion of English law and Scots law in respect of dedication and prescription at paras 76 90 is significant for present purposes, because the reasoning in the cases in those areas regarding statutory incompatibility is general, and is not dependent on the narrower rule of statutory construction that a general provision does not derogate from a special one (generalia specialibus non derogant), to which they also later referred by way of analogy.
There follows the critical part of the majority judgment, under the heading Statutory incompatibility: statutory construction, the material parts of which we should quote in full, at paras 91 96: 91.
As we have said, the rules of prescriptive acquisition apply only by analogy because Parliament in legislating for the registration of town and village greens has chosen similar wording (indulging as of right in lawful sports and pastimes) in the 1965 and 2006 Acts.
It is, none the less, significant in our view that historically in both English law and Scots law, albeit for different reasons, the passage of time would not give rise to prescriptive acquisition against a public authority, which had acquired land for specified statutory purposes and continued to carry out those purposes, where the user founded on would be incompatible with those purposes.
That approach is also consistent with the Irish case, McEvoy v Great Northern Railway Co [1900] 2 IR 325, (Palles CB at pp 334 336), which proceeded on the basis that the acquisition of an easement by prescription did not require a presumption of grant but that the incapacity of the owner of the servient tenement to grant excluded prescription. 92.
In this case if the statutory incompatibility rested only on the incapacity of the statutory body to grant an easement or dedicate land as a public right of way, the Court of Appeal would have been correct to reject the argument based upon incompatibility because the 2006 Act does not require a grant or dedication by the landowner.
But in our view the matter does not rest solely on the vires of the statutory body but rather on the incompatibility of the statutory purpose for which Parliament has authorised the acquisition and use of the land with the operation of section 15 of the 2006 Act. 93.
The question of incompatibility is one of statutory construction.
It does not depend on the legal theory that underpins the rules of acquisitive prescription.
The question is: does section 15 of the 2006 Act apply to land which has been acquired by a statutory undertaker (whether by voluntary agreement or by powers of compulsory purchase) and which is held for statutory purposes that are inconsistent with its registration as a town or village green? In our view it does not.
Where Parliament has conferred on a statutory undertaker powers to acquire land compulsorily and to hold and use that land for defined statutory purposes, the 2006 Act does not enable the public to acquire by user rights which are incompatible with the continuing use of the land for those statutory purposes.
Where there is a conflict between two statutory regimes, some assistance may be obtained from the rule that a general provision does not derogate from a special one (generalia specialibus non derogant), which is set out in section 88 of the code in Bennion, Statutory Interpretation, 6th ed (2013), p 281: Where the literal meaning of a general enactment covers a situation for which specific provision is made by another enactment contained in an earlier Act, it is presumed that the situation was intended to continue to be dealt with by the specific provision rather than the later general one.
Accordingly the earlier specific provision is not treated as impliedly repealed.
While there is no question of repeal in the current context, the existence of a lex specialis is relevant to the interpretation of a generally worded statute such as the 2006 Act. 94.
There is an incompatibility between the 2006 Act and the statutory regime which confers harbour powers on NPP to operate a working harbour, which is to be open to the public for the shipping of goods etc on payment of rates: section 33 of the 1847 Clauses Act.
NPP is obliged to maintain and support the Harbour and its connected works (section 49 of the 1847 Newhaven Act), and it has powers to that end to carry out works on the Harbour including the dredging of the sea bed and the foreshore: section 57 of the 1878 Newhaven Act, and articles 10 and 11 of the 1991 Newhaven Order. 95.
The registration of the Beach as a town or village green would make it a criminal offence to damage the green or interrupt its use and enjoyment as a place for exercise and recreation section 12 of the Inclosure Act 1857 or to encroach on or interfere with the green section 29 of the Commons Act 1876 See the Oxfordshire case [2006] 2 AC 674, per Lord Hoffmann, at para 56. 96.
In this case, which concerns a working harbour, it is not necessary for the parties to lead evidence as to NPPs plans for the future of the Harbour in order to ascertain whether there is an incompatibility between the registration of the Beach as a town or village green and the use of the Harbour for the statutory purposes to which we have referred.
Such registration would clearly impede the use of the adjoining quay to moor vessels.
It would prevent the Harbour authority from dredging the Harbour in a way which affected the enjoyment of the Beach.
It might also restrict NPPs ability to alter the existing breakwater.
All this is apparent without the leading of further evidence.
We discuss this reasoning in detail below.
Finally in this part of the majority judgment reference is made to cases in which registration of land held by public bodies had been approved by the court: New Windsor, the Trap Grounds case and Lewis [2010] 2 AC 70.
The treatment of these cases by Lord Neuberger and Lord Hodge is also significant for present purposes.
As regards New Windsor, they emphasised that the land was not acquired and held for a specific statutory purpose, so [n]o question of statutory incompatibility arose (para 98).
They observed that in the Trap Grounds case, though the land was wanted for use as an access road and housing development there was no suggestion that [the city council] had acquired and held the land for specific statutory purposes that might give rise to a statutory incompatibility (para 99).
With respect to Lewis they pointed out that [it] was not asserted that the council had acquired and held the land for a specific statutory purpose which would be likely to be impeded if the land were to be registered as a town or village green; hence [a]gain, there was no question of any statutory incompatibility (para 100).
In relation to each of these cases, Lord Neuberger and Lord Hodge referred in entirely general terms to the statutory powers under which a local authority might hold land and were at pains to emphasise that the land in question was not in fact held in exercise of any such powers which gave rise to a statutory incompatibility.
That was the basis on which they distinguished the cases.
It is clearly implicit in this part of their analysis that they considered that land which was acquired and held by a local authority in exercise of general statutory powers which were incompatible with use of that land as a town or village green could not be registered as such.
Their discussion concludes, at para 101: In our view, therefore, these cases do not assist the respondents.
The ownership of land by a public body, such as a local authority, which has statutory powers that it can apply in future to develop land, is not of itself sufficient to create a statutory incompatibility.
By contrast, in the present case the statutory harbour authority throughout the period of public user of the Beach held the Harbour land for the statutory harbour purposes and as part of a working harbour.
Incompatibility the case for the appellants
For LCC Mr Edwards submits that the decision in Newhaven is of general application to land held by a statutory authority for statutory purposes, whatever the nature of the Act.
He points out that the statutory duties or powers in Newhaven were not specific to the beach itself, but rather applied to all of the land acquired and held, from time to time, by NPP and its predecessors for the operation of the Port.
NPP had not, within living memory, used the Beach for its statutory harbour purposes.
The critical passage in the majority judgment (para 93) refers generally to land which has been acquired by a statutory undertaker (whether by voluntary agreement or by powers of compulsory purchase) and which is held for statutory purposes It is not limited to statutory powers directed to a specific location or undertaking.
No one has argued that the principle is limited to statutory undertakers, as opposed to public authorities in general.
Nor is there any requirement for the land to be in actual use for statutory purposes at the point of registration; it simply has to be held for such purposes.
In Newhaven the Beach had not been used for harbour purposes nor was there any fixed intention to do so at any particular time in the future (see para 96).
In the present case, notwithstanding the inspectors findings, there was, he submits, clear incompatibility with LCCs functions in respect of the land.
The effect of registration would be that there accrues a right vested in the inhabitants of Scotforth East Ward to use the land for lawful sports and pastimes of a variety of forms, including walking and dog walking.
LCC could not restrict their entry onto the land, including Area B which was at the time of the inspectors decision used as a playing field by the school (see Decision Letter, para 10).
Given the statutory safeguarding obligations towards primary school pupils, the use of that area for play could not continue.
Any use of the land to provide a new or expanded school would be precluded.
In substance, the land would be no longer available in any meaningful sense for use in fulfilment of the LCCs statutory duties as local education authority.
Mr Laurence makes similar submissions in respect of the Surrey site, supported in that case by the conclusions of Gilbart J [2017] 4 WLR 130.
Discussion
In our judgment, the appeals should be allowed in both cases.
On a true reading of the majority judgment in Newhaven on the statutory incompatibility point, the circumstances in each of these cases are such that there is an incompatibility between the statutory purposes for which the land is held and use of that land as a town or village green.
This has the result that the provisions of 2006 Act are, as a matter of the construction of that Act, not applicable in relation to it.
The principle stated in the key passage of the majority judgment at para 93 is expressed in general terms.
The test as stated is not whether the land has been allocated by statute itself for particular statutory purposes, but whether it has been acquired for such purposes (compulsorily or by agreement) and is for the time being so held.
Although the passage refers to land acquired by a statutory undertaker, we agree with Mr Edwards that there is no reason in principle to limit it to statutory undertakers as such, nor has that been argued by the respondents.
That view is supported also by the fact that the majority felt it necessary to find particular reasons to distinguish cases such as New Windsor, the Trap Grounds case and Lewis, all of which involved local authorities rather than statutory undertakers.
Accordingly, the appellants argue with force that the test is directly applicable to the land acquired and held for their respective statutory functions.
The reference in para 93 to the manner in which a statutory undertaker acquired the land is significant.
Acquisition of land by a statutory undertaker by voluntary agreement will typically be by the exercise of general powers conferred by statute on such an undertaker, where the land is thereafter held pursuant to such powers rather than under specific statutory provisions framed by reference to the land itself (as happened to be a feature of the provisions which were applicable in Newhaven itself).
That is also true of land acquired by exercise of powers of compulsory purchase.
In relation to the latter type of case, the majority said in terms that the 2006 Act does not enable the public to acquire by user rights which are incompatible with the continuing use of the land for those statutory purposes (para 93).
On our reading of the majority judgment, it is clear that in relation to both types of case Lord Neuberger and Lord Hodge took the view that an incompatibility between general statutory powers under which land is held by a statutory undertaker (or, we would add, a public authority with powers defined by statute) and the use of such land as a town or village green excludes the operation of the 2006 Act.
This interpretation of the judgment is reinforced by the analysis it contains of the English and Scottish cases on dedication and prescription in relation to rights of way, easements and servitudes and the guidance derived from those cases (see paras 76 to 91): para 47 above.
It is also reinforced by the way in which Lord Neuberger and Lord Hodge distinguished the New Windsor, Trap Grounds and Lewis cases: paras 49 and 50 above.
The respondents in these appeals submit that the reasoning of Lord Neuberger and Lord Hodge is more narrowly confined, and depends upon identifying a conflict between a particular regime governing an area of land specified in the statute itself and the general statutory regime in the 2006 Act.
In support of this interpretation the respondents point to the highly specific nature of the statutory provisions governing the relevant land in Newhaven and to the reference in para 93 to the rule of statutory construction that a general provision does not derogate from a special one (generalia specialibus non derogant).
However, for the reasons we have set out above, this interpretation of the judgment does not stand up to detailed analysis.
Lord Neuberger and Lord Hodge stated only that some assistance could be obtained from consideration of that rule of construction, not that it provided a definitive answer on the issue of statutory incompatibility.
In other words, they treated it as a helpful analogy for the purposes of seeking guidance to answer the question they posed in para 93, just as they treated the English and Scottish cases on prescriptive acquisition as helpful.
The way in which they posed the relevant question in para 93 shows that their reasoning is not limited in the way contended for by the respondents, as does their discussion of the prescriptive acquisition cases and the local authority cases of New Windsor, Trap Grounds and Lewis.
We do not find the construction of the 2006 Act as identified by the wider reasoning of the majority in Newhaven surprising.
It would be a strong thing to find that Parliament intended to allow use of land held by a public authority for good public purposes defined in statute to be stymied by the operation of a subsequent general statute such as the 2006 Act.
There is no indication in that Act, or its predecessor, that it was intended to have such an effect.
Lord Hoffmann in Sunningwell concluded that it could be inferred that Parliament intended to allow for the creation of new rights pursuant to the 1965 Act by reason of the public interest in the preservation of open spaces which had for many years been used for recreational purposes, but in doing so he recognised that [a] balance must be struck between rights attaching to private property and competing public interests of this character (p 359B E).
It is natural to expect that where a public authority is holding land for public purposes defined by statute which are incompatible with the public interest identified by implication from the 1965 Act, and now the 2006 Act, that balance will be affected.
The proper inference as to Parliaments intention is that the general public interest identified by Lord Hoffmann will in such a case be outweighed by the specific public interest which finds expression in the particular statutory powers under which the land is held.
As Lord Neuberger and Lord Hodge appreciated, this general point can be made with particular force in relation to land purchased using compulsory purchase powers set out in statute.
Such powers are generally only created for use in circumstances where an especially strong public interest is engaged, such as could justify the compulsory acquisition of property belonging to others.
It seems highly unlikely that Parliament intended that public interests of such a compelling nature could be defeated by the operation of the general provisions in the 2006 Act.
In construing the 2006 Act it is also significant that it contains no provision pursuant to which a public authority can buy out rights of user of a town or village green arising under that Act in relation to land which it itself owns.
That is so however strong the public interest may now be that it should use the land for public purposes.
Since in such a case the public authority already owns the land, it cannot use any power of compulsory purchase to eradicate inconsistent rights and give effect to the public interest, as would be possible if the land was owned by a third party.
Although section 16 of the 2006 Act makes specific provision for deregistration of a green on application to the appropriate national authority, in relation to land which is more than 200 square metres in area the application must include a proposal to provide suitable replacement land: subsections (2), (3) and (5).
This procedure is available to any owner of registered land, public or private; it is not designed to give effect to the public interest reflected in specific statutory provisions under which the land is held.
Often it will be impossible in practice for a public authority to make a proposal to provide replacement land as required to bring section 16 into operation.
Again, it would be surprising if Parliament had intended to create the possibility that the 2006 Act should in this way be capable of frustrating important public interests expressed in the statutory powers under which land is held by a public authority, when nothing was said about that in the 2006 Act.
In our view, applying section 15 of the 2006 Act as interpreted in the majority judgment in Newhaven, LCC and NHS Property Services can show that there is statutory incompatibility in each of their respective cases.
As regards the land held by LCC pursuant to statutory powers for use for education purposes, two points may be made.
First, so far as concerns the use of Area B as a school playing field, that use engages the statutory duties of LCC in relation to safeguarding children on land used for education purposes.
LCC has to ensure that children can play safely, protected from strangers and from risks to health from dog mess.
The rights claimed pursuant to the registration of the land as a town or village green are incompatible with the statutory regime under which such use of Area B takes place.
Secondly, however, and more generally, such rights are incompatible with the use of any of Areas A, B, C or D for education purposes, including for example construction of new school buildings or playing fields.
It is not necessary for LCC to show that they are currently being used for such purposes, only that they are held for such statutory purposes (see Newhaven, para 96).
The 2006 Act was not intended to foreclose future use of the land for education purposes to which it is already dedicated as a matter of law.
Similar points apply in the Surrey case.
Although the non statutory inspector found against the appellant on the statutory incompatibility issue, the registration authority failed to consider it.
Gilbart J was satisfied that, within the statutory regime applicable in that case, there was no feasible use for health related purposes, and indeed none had been suggested.
The Court of Appeal took a different view, but largely, as we understand it, on the basis that recreational use of the subject land would not inhibit the ability of NHS Property Services to carry out their functions on other land.
We consider that Gilbart J was correct in his assessment on this point.
The issue of incompatibility has to be decided by reference to the statutory regime which is applicable and the statutory purposes for which the land is held, not by reference to how the land happens to be being used at any particular point in time (again, see Newhaven, para 96).
As Lady Arden and Lord Wilson take a different view regarding the effect of the majority judgment in Newhaven, we should briefly explain why, with respect, we are not persuaded by their judgments.
We are all in agreement that the outcome of these appeals turns upon the proper interpretation of the majority judgment in Newhaven.
We cannot accept their interpretation of that judgment.
In our view, although the case might have been decided on narrower grounds, Lord Neuberger and Lord Hodge deliberately posed the relevant question in para 93 in wide terms, specifically in order to state the issue as one of statutory incompatibility as a matter of principle, having regard to the proper interpretation of the relevant statute pursuant to which the land in question is held.
That is why the heading for the relevant section of their judgment is Statutory incompatibility: statutory construction.
They say in terms in para 93, The question of incompatibility is one of statutory construction.
Nowhere do they say it is a matter of statutory construction and an evaluation of the facts regarding the use to which the land has been put.
According to their judgment, the issue of incompatibility is to be determined as a matter of principle, by comparing the statutory purpose for which the land is held with the rights claimed pursuant to the 2006 Act, not by having regard to the actual use to which the authority had put the land thus far or is proposing to put it in future.
We consider that this emerges from the critical para 93, and also from the paragraphs which follow in their judgment.
Thus, in para 94 they identify the relevant incompatibility as that between the 2006 Act and the statutory regime which confers harbour powers on NPP to operate a working harbour.
In para 96, it is to that statutory incompatibility that they refer, not to incompatibility with any use to which NPP had as yet put the land in question or might in fact put it in the foreseeable future.
As a matter of fact, the Beach had not been used for the applicable statutory purposes.
Further, in our opinion, by stating in para 96 that it was not necessary for the parties to lead evidence as to NPPs plans for the future of the harbour in order to ascertain whether there is an incompatibility between the registration of the Beach as a town or village green and the use of the Harbour for the statutory purposes to which we have referred, Lord Neuberger and Lord Hodge were seeking to emphasise, contrary to Lady Ardens and Lord Wilsons interpretation of their judgment, that what matters for statutory incompatibility to exist so as to prevent the application of the 2006 Act is a comparison with the relevant statutory powers under which the land is held, not any factual assessment of how the public authority might in fact be using or proposing to use the land.
The same point can be made about para 97, where Lord Neuberger and Lord Hodge said that it was unnecessary to consider evidence about actual proposed use of the land on the facts, since they were able to determine by looking at the statutory powers that there is a clear incompatibility between NPPs statutory functions in relation to the Harbour, which it continues to operate as a working harbour [ie to hold under the statutory powers referred to in para 94], and the registration of the Beach as a town or village green.
Their discussion at paras 98 to 100 of New Windsor, the Trap Grounds case and Lewis supports the same conclusion.
In each of those cases the relevant land had been held for a very long period without actually being put to use which was inconsistent on the facts with use as a town or village green and without any proposal that it should be put to such use.
The implication from what Lord Neuberger and Lord Hodge say about them is that if it had been shown that the land was held for specific statutory purposes which were incompatible with registration under the 2006 Act, that would have constituted statutory incompatibility which would have prevented registration.
Their treatment of these cases cannot be reconciled with Lady Ardens and Lord Wilsons proposed interpretation of their judgment.
We do not think that para 101 can be reconciled with that proposed interpretation either.
In that paragraph Lord Neuberger and Lord Hodge contrast a case in which a public body might have statutory purposes to which it could in future appropriate the land (but has not yet done so) with the situation in Newhaven itself, where in the relevant period NPP held the Beach for the statutory harbour purposes and as part of a working harbour (ie under the statutory regime referred to in para 94).
In our view they were there emphasising that what matters for a statutory incompatibility defence to arise is that the land in question should be held pursuant to statutory powers which are incompatible with registration as a town or village green.
Nor, with respect, do we think that Lady Arden and Lord Wilson have offered any good answer to the points we have made at paras 61 to 64 above.
We also consider that the reading of Newhaven proposed by Lady Arden and Lord Wilson would undermine the very clear test which Lord Neuberger and Lord Hodge plainly intended to state.
Instead of focusing on the question of the incompatibility of the statutory powers under which the relevant land is held, Lady Arden and Lord Wilson would introduce an additional factual inquiry into the actual use to which the authority is putting the land or proposes to put the land in the foreseeable future.
Thus, Lady Arden and Lord Wilson would adopt from the English case of Westmorland [1958] AC 126 a test of what use could reasonably be foreseen for the land in question, even though Lord Neuberger and Lord Hodge say nothing to support that in the relevant part of their judgment.
They refer to both English and Scottish cases on prescriptive acquisition as being relevant to their assessment of the correct approach to be adopted in interpreting the 2006 Act, and in each case only by way of broad analogy, as they explain at para 91.
The Scottish cases they cite do not employ any such test as in the Westmorland case and are consistent with the clear principled test, based on statutory construction, which we understand Lord Neuberger and Lord Hodge to have laid down.
Future use
Finally, for completeness, we should mention briefly an issue which does not strictly arise within the scope of the appeals, but has been the subject of some discussion.
That is the question whether, notwithstanding registration, there might be scope for use by the appellants of the land for their statutory purposes.
This arises from a suggestion put forward in Lord Carnwaths minority judgment in Newhaven.
He noted that in the Trap Grounds case it had not been necessary to consider the potential conflict between the general village green statutes and more specific statutory regimes, such as under the Harbours Acts.
He said, at para 139: It is at least arguable in my view that registration should be confirmed if the necessary use is established, but with the consequence that the 19th century restrictions are imported subject only to the more specific statutory powers governing the operation of the harbour.
Mr Edwards, supported by Mr Laurence, seeks to build on that tentative suggestion, taken with the principle of equivalence adopted in the Lewis case [2010] 2 AC 70.
As he submits, the Supreme Court accepted that there should be equivalence between the use of the land for lawful sports and pastimes in the qualifying period (in that case subject to concurrent use as a golf course) and the extent of rights vested in local inhabitants after registration.
That approach was taken a stage further by the Court of Appeal in TW Logistics Ltd v Essex County Council [2019] Ch 243, holding that the 19th century statutes, as applied to a registered modern green, are not to be construed as interfering with the rights of the landowner to continue pre existing uses so far as not inconsistent with the uses which led to registration (per Lewison LJ, paras 63 82).
This is not a suitable occasion to examine the scope of the principle of equivalence, so far as it can be relied on to protect existing uses by the landowner.
Lewis was a somewhat special case.
Lord Brown was able to draw on [his] own experience both as a golfer and a walker for over six decades (para 106) to attest to the feasibility of an approach based on give and take in that particular context.
The same approach may not be so easy to apply in other contexts, and as applied to other forms of competing use.
Permission has been granted for an appeal to this court in TW Logistics.
That may, if the appeal proceeds, provide an opportunity for further consideration of this difficult issue.
In any event, those cases were concerned with actual uses by the owners, not with potential uses for statutory purposes for which the land is held, as in the present cases.
In view of our conclusion that the land in each appeal should not have been found to be capable of being registered under the Act, the issue of what uses might have been open to a statutory owner if it were so registered does not arise, and we prefer to say no more about it on this occasion.
Conclusion
For these reasons we would allow the appeals in both cases.
LADY ARDEN: (partly dissenting)
Identifying the difference of view
My views differ from those of Lord Carnwath and Lord Sales on these appeals in an important respect.
My conclusion is that the question of incompatibility between two sets of statutory provisions (on this appeal, the provisions of the Commons Act 2006 (the 2006 Act) and the statute authorising the holding of land by the public authority in question) involves an assessment of the facts as well as a proposition of law.
The fact that a public authority holds land for statutory purposes which are incompatible with the use of the land as a town or village green (TVG), is not of itself sufficient to make the land incapable of being registered under the 2006 Act as a TVG.
It must be shown that the land is in fact also being used pursuant to those powers, or that it is reasonably foreseeable that it will be used pursuant to those powers, in a manner inconsistent with the publics rights on registration as a TVG.
That requirement in my judgment follows from R (Newhaven Port & Properties Ltd) v East Sussex County Council [2015] AC 1547.
References in this judgment to public authorities exclude public authorities which are subject to a statutory duty to carry out a particular function on specified land, identified by statute, where such land is sought to be registered as a TVG.
Such authorities are outside the scope of this judgment.
Identifying the correct approach to questions of statutory inconsistency
As a matter of constitutional principle, courts must approach the statute book on the basis that it forms a coherent whole.
That means that, when interpreting legislation, courts must, in the absence of an indication of some other intention by Parliament, strive to ensure that the provisions work together and apply so far as possible to their fullest extent, such extent being judged according to the intention of Parliament demonstrated principally in the words used. (We have not been shown any other admissible evidence as to Parliaments intention, such as ministerial statements in Hansard.) The courts cannot simply decline to enforce parts of a statute because there may be a conflict with some other statute.
It has to be shown that the part sought to be disapplied is irreconcilable with another part of it.
If the two can stand together there is no statutory irreconcilability or inconsistency: compare, for example, The Tabernacle Permanent Building Society v Knight [1892] AC 298.
One statute cannot be said to be incompatible with another if the two statutes can properly be read together.
So, the test is: can the two statutes in question properly be interpreted so that they stand together and each has the fullest operation in the sense given above?
In Newhaven, as I shall demonstrate by reference to the majority judgment in that case in the next section of this judgment, the point was that there was a risk that the statutory undertakings working harbour would be stymied in its operations if the Beach was held to be a TVG.
It was not a case where a statutory authority has acquired land for a statutory purpose but, at the time of the proposed registration as a TVG, it is not likely that the land will be used for that purpose in the reasonably foreseeable future.
Newhaven and the limits of this Courts decision in that case
The judgments in Newhaven in my judgment should be approached on the basis that they are consistent with the principles explained in para 78 above, even though the members of this Court in that case did not articulate them.
This court should read their decision, if this can properly be done as a matter of statutory interpretation, as leading to the result that where public authority ownership of land and registration as a TVG can co exist, that course will be available.
As a matter again of constitutional principle, land should not be relieved of the burden of an Act of Parliament having (so far as relevant) unqualified application if there is an alternative, properly available interpretation which will lead to the two enactments in question standing together.
On timing, the question whether there is any conflict between public authority powers and TVG legislation must be determined as at the date when the application for registration is made.
At that point in time, the public authority may be holding land it has acquired under statutory powers for a particular purpose for which it is not yet required.
It is not required to apply the land for that purpose and it may decide not to do so and for example to sell the land or use it for some other purpose.
Moreover, even while holding the land for a particular purpose, the local authority may be using it for another purpose because it is not required for the statutory purpose for which it is appropriated at that point in time (Local Government Act 1972, section 120(2)).
The factual scenario in Newhaven was different: the harbour company was already in operation and the beach was liable to be involved in its then current trading operations.
The case shows that incompatibility is not a purely legal matter depending on the existence of statutory powers which if exercised would be inconsistent with use of the land as a TVG.
It is necessary on the facts to be satisfied that that is likely to occur after registration.
It requires a real world assessment of the situation.
The court is not precluded from looking at the facts subsequent to the acquisition of the land any more than the determination as to the reasonableness of a landlords refusal to give a consent under a lease is restricted to the facts known to the parties at the date of the lease (see Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 2180).
Interpreting the decision of this Court in Newhaven
In the Newhaven case, the harbour company (NPP) had a statutory duty to maintain a harbour.
The dispute concerned a tidal beach in one part of the harbour which as it happened was no longer operational.
The Beach had been used for the past 80 years or so by members of the locality.
The issue with which these appeals are concerned is the issue in that case as to whether the Beach could be registered as a TVG.
This court held that the land in issue, namely the Beach, could not be registered as a TVG.
In Newhaven, Lord Neuberger and Lord Hodge jointly gave the leading judgment.
The other members of the Supreme Court agreed with them.
Lord Carnwath also wrote a concurring judgment.
On these appeals, Lord Carnwath and Lord Sales examine the leading judgment in detail.
They conclude that Lord Neuberger and Lord Hodge held that, where a person applies to register as a TVG land which is held for statutory purposes which would be inconsistent with the land also being TVG, the land is not capable of being so registered, and that the question is purely one of statutory construction.
Thus, Lord Neuberger and Lord Hodge formulated the relevant question as, at para 93: does section 15 of the 2006 Act apply to land which has been acquired by a statutory undertaker (whether by voluntary agreement or by powers of compulsory purchase) and which is held for statutory purposes that are inconsistent with its registration as a town or village green?
Having stated that question, Lord Neuberger and Lord Hodge immediately answered it by the following sentence: In our view it does not.
In that sentence, the word it, as I read it, refers to section 15 itself.
The next sentence in the judgment of Lord Neuberger and Lord Hodge states (also at para 93): Where Parliament has conferred on a statutory undertaker powers to acquire land compulsorily and to hold and use that land for defined statutory purposes, the 2006 Act does not enable the public to acquire by user rights which are incompatible with the continuing use of the land for those statutory purposes.
That sentence makes it clear that Lord Neuberger and Lord Hodge regarded use as a critical issue.
That clearly involves fact.
Moreover, the expression continuing use also makes it clear that they regarded the operations of NPP as constituting use which was being perpetuated and that that was so even though the tidal beach which was in issue was in a part of the harbour which was not itself being used.
It is further clear from that sentence, in my judgment, that the Supreme Court was not considering the question what would happen if the relevant use had never started or if the relevant land had become surplus to the obligation or power to carry out any particular activity which had been imposed by Parliament.
We have not been shown any statutory requirement that a public authority should regularly consider the need for any land and if thought fit dispose of land which is not required for some purpose for which it was acquired, so it may end up holding land for which it has no further need.
The local authority could voluntarily appropriate the land to some other purpose but, if it fails to reconsider the use for which it acquired land, or appropriates it to some other use, it is likely that the only basis on which the local authoritys decision or omission to act could be challenged would be on the basis that its decision attained the standard of irrationality, which is a high standard for an applicant to have to meet.
Under the judgment of Lord Carnwath and Lord Sales, that land would remain immune from the accrual of rights leading to registration as a TVG even though there would not in fact be any irreconcilability between registration and the statutory power for which the land was conferred.
It is not clear what on this basis would happen if the local authority accepts that the original purpose is spent and after the application is made decides to appropriate the land to some other statutory purpose.
Furthermore, in Newhaven, para 96, Lord Neuberger and Lord Hodge held: 96.
In this case, which concerns a working harbour, it is not necessary for the parties to lead evidence as to NPPs plans for the future of the Harbour in order to ascertain whether there is an incompatibility between the registration of the Beach as a town or village green and the use of the Harbour for the statutory purposes to which we have referred.
Such registration would clearly impede the use of the adjoining quay to moor vessels.
It would prevent the Harbour authority from dredging the Harbour in a way which affected the enjoyment of the Beach.
It might also restrict NPPs ability to alter the existing breakwater.
All this is apparent without the leading of further evidence.
It follows that they regarded it as important that the harbour in question was a working harbour and that there was a risk of a clash between the registration of the Beach and the use of the harbour for the statutory purposes.
They considered that registration would inhibit the use of the adjoining quay to moor vessels.
It would prevent the harbour authority from dredging the harbour in a way which affected the enjoyment of the Beach and restrict its ability to alter the existing breakwater.
So, I deduce from that paragraph that Lord Neuberger and Lord Hodge also regarded it as important that there was factual evidence establishing the continuing use and the impact of registration on that use.
There had to be real, not theoretical, incompatibility.
Lord Neuberger and Lord Hodge continue at the end of that paragraph to observe: All this is apparent without the leading of further evidence.
The word further confirms that the preceding analysis involved a consideration of the evidence on the ground.
In fact the further evidence appears to have been evidence as to plans to upgrade the harbour and use it as a container terminal: see the judgment of Ouseley J in R (Newhaven Port & Properties Ltd) v East Sussex County Council [2012] 3 WLR 709, para 127.
In para 97, Lord Neuberger and Lord Hodge continue by summarising further matters on which the harbour company relied, but it was not necessary in the light of the conclusion in para 96 to consider those matters.
It is to be noted that in para 97, Lord Neuberger and Lord Hodge refer to an incompatibility between the proposed TVG registration and the statutory functions of NPP, which they add: continues to operate as a working harbour This is an express reference to the state of fact.
It would clearly have been material if the harbour company held the land but had ceased its statutory functions.
In paras 98 to 101, Lord Neuberger and Lord Hodge refer to previous leading cases to show that the question of statutory incompatibility had not previously had to be considered.
But, importantly for my interpretation, they conclude that (at para 100): It was not asserted that the council had acquired and held the land for a specific statutory purpose which would be likely to be impeded if the land were to be registered as a town or village green.
So, in a case concerned with future use, the court must consider if the statutory purpose would be likely to be impeded, not likely to be impeded if invoked.
Lord Neuberger and Lord Hodge clearly envisaged that there would have to be a factual inquiry as to future use and that it would have to be shown that TVG registration would be likely to impede the exercise of those powers.
Lack of impediment can logically be shown either by showing that the local authority has acquired the land for purposes (eg recreational purposes) which are not inconsistent with registration as a TVG, or by showing that there is no realistic likelihood of the land being used for the purposes for which it was acquired.
held: In addition, at para 101 of their judgment, Lord Neuberger and Lord Hodge In our view, therefore, these cases do not assist the respondents.
The ownership of land by a public body, such as a local authority, which has statutory powers that it can apply in future to develop land, is not of itself sufficient to create a statutory incompatibility.
By contrast, in the present case the statutory harbour authority throughout the period of public user of the Beach held the Harbour land for the statutory harbour purposes and as part of a working harbour.
In that paragraph, Lord Neuberger and Lord Hodge addressed the question of a future development of the land.
The mere power to undertake such development would not itself be sufficient to create a statutory incompatibility.
They contrasted that with the position in the Newhaven case.
Lord Neuberger and Lord Hodge again referred to the evidence that the tidal beach was part of the working harbour.
Paragraph 102 dealt with the separate issue of user as of right and para 103 was the summary of the conclusion, which does not take the matter further.
For the avoidance of doubt, I agree that this court should apply statutory incompatibility, the concept sought to be employed in Newhaven, to determine the question of inconsistency between the provisions of the 2006 Act enabling registration of land in issue on these appeals as TVGs and the statutory provisions, also conferred by public general Acts of Parliament, empowering the acquisition and holding of land by the public authorities in both appeals.
However, in my judgment, that concept is as a matter of constitutional principle to be interpreted as I have explained in para 78 above.
Determination of incompatibility where the issue arises from a future use
The use relied on by the local authority in the Lancashire case in relation to Areas A and B is, as in Newhaven, a current use, and my analysis of Newhaven detailed above does not lead to any different conclusion in relation to those Areas from that reached by Lord Carnwath and Lord Sales.
I would accept the submission of Mr Douglas Edwards QC, for Lancashire County Council, that in practice the land could not be used by the primary school currently using it when there was unrestricted public access as this would not be consistent with the schools safeguarding obligations: this may be inferred from the fact that the site is currently fenced.
Schools are responsible for creating and maintaining a safe environment for their pupils.
Mr Edwards submission on this point was not challenged on these appeals.
However, as I shall next explain, where the use is only a use which may occur in the future, my analysis makes it necessary to answer further questions before any conclusion about statutory incompatibility can be reached.
This has a practical impact in relation to Areas C and D in the Lancashire case.
Those Areas have never been used for the statutory purpose of education for which they were acquired and are now held.
That raises the question, what test should apply if the case is only one of possible future use? Must it be shown that it is simply possible that the land may be used for the statutory purpose or must it be shown that it is reasonably likely or foreseeable that it will be so used? These questions did not directly arise in Newhaven.
In answering these questions, I have found assistance in the decision of the House of Lords in British Transport Commission v Westmorland County Council [1958] AC 126, in which a railway company contended that it would have been inconsistent with the statutory powers conferred on it for the public to have a right of way over a bridge spanning the railway line (originally built for private benefit) and that accordingly its predecessor (another statutory company) could not have dedicated it to the public.
In Newhaven, Lord Neuberger and Lord Hodge cited the judgment of Lord Keith of Avonholm in this case as authority for the proposition that incompatibility with an Act of Parliament is a question of fact, at para 87: In British Transport Commission [1958] AC 126, 164 165 Lord Keith of Avonholm commented on Lord Kinnears opinion in Magistrates of Edinburgh, suggesting that it would be going too far to hold that the public could never acquire a right of way over railway property but acknowledging that incompatibility with the conduct of traffic on the railway could bar a public right of passage.
He opined at p 166, that incompatibility was a question of fact and that it was for the statutory undertaker to prove incompatibility.
The other members of the House also treated it as a question of fact (see Viscount Simonds at p 144, Lord Morton of Henryton at p 149, Lord Radcliffe at p 156, Lord Cohen at p 163 and Lord Keith at p 166).
Moreover, they held that, to show compatibility, it was not necessary to show that there were no circumstances in which a conflict could arise.
That would make it impossible for members of the public ever to acquire a public right of way over land belonging to the railway company.
The House also rejected the argument that a statutory company could not grant an easement over a footpath over its railway.
To hold otherwise would be a grave impediment to public amenity (per Lord Radcliffe at p 153).
It was unlikely on the facts that the railway company would ever need to pull the bridge down.
The relevant question was whether a conflict, or incompatibility, was reasonably foreseeable.
Thus, Viscount Simonds (at p 144), Lord Morton (at p 149) and Lord Keith (see p 166) rejected the following test: was it possible that land would be used in future for a certain purpose? They considered that the normal statutory burden should apply and be discharged, namely that it should be shown that the use was reasonably likely to occur.
The House considered the question on a current basis and did not decide whether the critical time was the date of dedication or some other date (see for example pp 144 145).
At all events it did not seek to determine the question as at the date of the incorporation of the statutory company when its statutory powers were conferred.
In my judgment, the test of reasonable foreseeability is the correct test also to apply in this context, ie when asking whether there is incompatibility between registration of land as a TVG and the statutory powers of a public authority in relation to the same land where the relevant use that the public authority might make of the land under those powers is a potential future use which has not yet started.
It is said by Lord Carnwath and Lord Sales that this test is not clear.
It may not be easy to apply on the facts but that is necessarily so if the law applies a solution which is fact dependent rather than drawing a bright line as the majority does.
Lord Neuberger and Lord Hodge refer to the Westmorland case at two points in their judgment.
In the light of their conclusion that the evidence as to current use was sufficient it was not necessary for them to consider it in any further detail, but they would not have cited it if they did not approve of its approach.
If I am right there is no question of the use of land being stymied by the 2006 Act (cf para 61 above).
Circumstances may have moved on and the public authority may no longer require the land it is holding for any particular statutory purpose.
Application of the principles to the facts of the appeals
(1) The Lancashire appeal
The issue of future use of the land arises on the Lancashire appeal in relation to Areas C and D.
The local authority in the Lancashire appeal did not adduce evidence that it was reasonably likely that these Areas would be used for educational purposes in the future.
There had in the past been a plan to relocate a school on this area but that was not proceeded with and there was no substitute.
Moreover, those Areas had never been used for educational purposes.
Accordingly, as I see it, those plots should have been registered as a village green.
The only objection to doing so was one of statutory incompatibility and as I see it, that fails on the facts.
The position is different in relation to Areas A and B which are currently used for educational purposes.
Importantly, as I read the facts, the sites cannot be registered as TVGs and be school playgrounds at the same time for the reason that this would be inconsistent with the schools safeguarding duty.
The school has an obligation to provide outdoor space as a playground under regulation 10 of the School Premises (England) Regulations 2012, and that is its current use.
The inspector did not reach any conclusion on the question of the compatibility in fact of the current use of Areas A and B with their registration as TVGs, and she expressly left open the door to further evidence on incompatibility.
(2) The Surrey appeal
In the Surrey appeal, the result is different because the site in issue lies immediately next to the hospital.
On the basis of my judgment, the correct legal test applying to future use was not applied.
There have been no findings of fact as to whether it is reasonably foreseeable that even now the land will be used for the statutory purposes for which it is currently held.
In those circumstances, in my judgment, this matter should be remitted to the registration authority for a decision on that issue.
Restrictions on TVG registration in the Growth and Infrastructure Act 2013
Lord Carnwath and Lord Sales begin their judgment with an analysis of the development of the law on TVGs since the report of the Royal Commission on Common Land 1955 1958 (1958) (Cmnd 462), chaired by Sir Ivor Jennings QC, which led to the Commons Registration Act 1965.
Undoubtedly that Act and its successor, the 2006 Act, have led to the registration of TVGs at a more significant level than can have been envisaged by the Royal Commission.
Accordingly, it is now an inescapable fact that the actual use of the TVG legislation has, in the light of practical experience and the needs and expectations of local communities up and down the country, eclipsed the original conception of a more limited role for TVG registration.
The clock cannot be turned back.
Moreover, Parliament has essentially given its approval to that use in later legislation.
The Growth and Infrastructure Act 2013 (the 2013 Act) introduced a package of measures designed to restore the balance between the public and landowners but retaining the same basic system of registration.
The three main changes brought about by the 2013 Act in this connection can be summarised, and it will be seen that they were substantial: (1) The period within which a person may apply to register land as a TVG after the landowner has terminated the use by members of the public without permission has been reduced from three years to one year (2006 Act, section 15(3A) as amended). (2) The 2013 Act has inserted a new section 15C into the 2006 Act terminating the publics right to apply to register land as a town or village green after any one of a range of trigger events occurs.
These include an application for planning permission.
The right to apply for registration as a TVG will arise again if a terminating event occurs, namely (in the case of an application for planning permission) the planning application is withdrawn, is refused or expires, or the local planning authority (LPA) does not determine it. (Where the planning application is for a project of public importance under section 293A of the Town and Country Planning Act 1990, the right to make an application to register as a TVG does not arise where the LPA declines to determine it.) (3) Landowners have a new right to deposit statements with the appropriate registration authority with respect to any land and this will have the effect of terminating any existing or accruing rights to register that land as a TVG (2006 Act, section 15A, as amended).
Landowners already had a right to apply to deregister land as a TVG, but comparable land must be offered in exchange (2006 Act, section 16).
Lord Carnwath and Lord Sales are right to say that these changes are not directly relevant, and there is no information about any fall in the number of TVG registrations.
However, these changes are important.
It is open to public authorities to take advantage of these changes (and this is my core answer to the points that Lord Carnwath and Lord Sales make in para 64 above).
They show, among other matters, that Parliament did not consider that there should be some special exemption applying in respect of all publicly held land.
That may be a recognition of the fact that public bodies may be holding land which is surplus to their statutory requirements.
While many statutes confer a power on statutory bodies to acquire and hold land, we have not been shown any provision requiring the body on which the power is conferred to sell it when it becomes clear that the land is not required or is no longer required for the purpose for which it was acquired.
If a public authority took no action to dispose of land it did not need, it might well be difficult to obtain judicial review of its action as irrationality may have to be shown.
Moreover, Parliament took no steps in the 2013 Act to revise the conditions for registration for TVGs.
Judgment of Lord Wilson
Since circulating the first draft of my judgment I have had the benefit of reading the judgment of Lord Wilson.
He agrees with the approach of the Court of Appeal [2018] 2 P & CR 15.
I have great admiration for his judgment and that of Lindblom LJ, with which Jackson and Thirlwall LJJ agreed.
In particular, I agree with the three general points made by Lindblom LJ in para 36 of his judgment.
In a sense my approach might be described as a halfway house between their judgments and that of Lord Carnwath and Lord Sales.
The ten judges who have considered the issues on these appeals have unfortunately been very divided.
For my own part, I do not consider that the view of the Court of Appeal addresses the effect on incompatibility of the possibility of future use of the sites sought to be registered as TVGs, or the intention of Parliament in such cases.
However, if I am wrong on the approach I have taken, I would adopt that of Lord Wilson and the Court of Appeal in preference to that of Lord Carnwath and Lord Sales.
Respectfully, their approach results in introducing into the legislation a blanket exemption for public authorities which Parliament has not itself expressly given.
Parliament has instead provided all landowners with other measures which they can use to protect their position for the future.
Limiting the issue of incompatibility to a desktop exercise of considering the statutory powers of the landowner, without reference to the facts on the ground, runs the risk, to borrow Lord Radcliffes words in British Transport Commission at p 153, of a grave impediment to public amenity.
There will potentially be a loss of access by the public to land which they have used for very many years.
Conclusion
My approach to statutory incompatibility in my judgment strikes a fairer balance between the public interest in the use of land by the public authority for the appropriated statutory purpose and that of the public who are intended by the 2006 Act to have a right of access to recreational spaces than the approach of Lord Carnwath and Lord Sales.
That is my principal answer to the points which they make in paras 61 to 64 and 67 to 71 above and my other responses to those paragraphs appear from this judgment.
My judgment does not as suggested in any way involve frustrating the intention of Parliament since the statutory powers under which the public authority holds the land will prevail if it is shown that there is a current use of the land in exercise of those powers, or that it is reasonably foreseeable that such use will occur (se para 77 above).
Accordingly, I would hold that the appeal in Lancashire should be allowed in part and that in Surrey the appeal should also be allowed on the basis that the matter remitted to the registration authority for a determination of the application in accordance with this judgment.
LORD WILSON: (dissenting)
I would have dismissed both appeals.
Although I hold each of my three colleagues in the majority in the highest esteem, I am driven to suggest that today they make a substantial inroad into the ostensible reach of a statutory provision with inadequate justification.
It is agreed that, in their capacity as education authorities, local authorities, such as the appellant in the Lancashire case, can hold land only for specified statutory purposes referable to education; that health authorities, such as the appellant in the Surrey case, can hold land only for specified statutory purposes referable to health; and that, for example, in their capacity as housing authorities, local authorities can hold land only for specified statutory purposes referable to housing.
If public authorities which hold land for specified statutory purposes are to be immune from any registration of it as a green which would be theoretically incompatible with their purposes, the reach of section 15 of the Commons Act 2006 Act is substantially reduced.
One would expect that, had such been its intention, Parliament would have so provided within the section.
In the absence of any such provision, whence does justification for it come?
It comes, according to todays ruling, from the decision of this court in the Newhaven case, cited in para 1 above, from which the court would in any event be able to depart if necessary.
In my view interpretation of that decision by todays majority is controversial.
The claim in para 11 above that their interpretation represents no more than consolidation of the law is unfortunately not one to which I can subscribe.
The decision in the Newhaven case wrought an exception to the availability of registration under section 15.
It is always dangerous to interpret an exception too widely lest it becomes in effect the rule and the rule becomes in effect the exception.
In the Newhaven case statutes had cast upon the harbour authority, as the owner/operator of the port, specific duties in relation to that particular harbour; and the operational land of that harbour included that particular beach.
An Act of 1847 obliged the authority to maintain and support that harbour.
An Act of 1878 obliged it to keep that harbour open to all for the shipping and unshipping of goods and the embarking and landing of passengers.
Incidental to these obligations were statutory powers, including one in an instrument of 1991 to dredge the foreshore of that harbour.
Were it to exercise its power to dredge the area of the foreshore to the east of the breakwater, the authority would destroy the beach.
It is therefore no surprise to read within the joint judgment of Lord Neuberger and Lord Hodge emphasis on the statutory duties cast upon the authority in relation to that particular harbour; no surprise that, in the opening paragraph they described the relevant point of principle as the interrelationship of the statutory law relating to village greens and other duties imposed by statute (emphasis supplied); and no surprise that, at the outset of the crucial paragraph (namely para 93, set out in para 48 above), in which they set out their reason for allowing the appeal on the relevant point, they stated: The question of incompatibility is one of statutory construction.
What did Lord Neuberger and Lord Hodge mean by statutory construction? They meant conflict between two statutory regimes.
They explained in the same paragraph that, where such conflict existed, some assistance may be obtained from the rule that a general provision does not derogate from a special one , which is set out in Bennion, Statutory Interpretation, 6th ed (2013), p 281: Where the literal meaning of a general enactment covers a situation for which specific provision is made by another enactment contained in an earlier Act, it is presumed that the situation was intended to continue to be dealt with by the specific provision rather than the later general one.
In the next paragraph they proceeded to explain that the specific duties conferred by statutes on the authority in relation to that harbour were incompatible with the general provision in the 2006 Act which, on the face of it, permitted registration of the beach as a green and that therefore the general provision had to give way.
By contrast, statutory provisions which confer power to acquire and hold land, not there identified, for educational and health purposes, such as are in play in the present appeals, cannot be said to be incompatible with the general provision in the 2006 Act which, on the face of it, permits registration of the respective parcels of land as greens.
No reason for the disapplication of section 15 of the 2006 Act is advanced other than the alleged effect of the decision in the Newhaven case.
It is in the light of the above circumstances that I would have dismissed the appeals.
Let me, however, suppose that my understanding of the decision in the Newhaven case is flawed; and that, had I better understood it, its reasoning would extend to the facts in these appeals.
Even in those circumstances the majority falls, so I venture to suggest, into error.
In The King v The Inhabitants of Leake (1833) 5 B and Ad 469 the issue was whether villagers in the fenlands were obliged to repair a road.
If it had been dedicated as a public highway, they were obliged to do so.
The land on which the road had been constructed was owned by commissioners who had bought it pursuant to statutory powers to drain specified fens and to keep them drained.
They had constructed drains on it and, with the excavated earth, had built a wide bank which the villagers had used as a highway for more than 20 years.
In the Court of Kings Bench the villagers contended that any dedication by the commissioners of the road as a public highway would have been inconsistent with their powers.
On behalf of the majority Parke J, later Lord Wensleydale, made clear that the contention should be addressed by means of a practical inquiry on the ground.
He said at p 480: The question then is reduced to this, whether, upon the finding of the jury in this case, the public use of the bank as a road would interfere with the exercise of these powers? The answer was no.
The Leake case demonstrates that for almost 200 years the law of England and Wales in relation to the capacity of a public authority to dedicate its land as a public highway, or indeed as a public footpath, has been to assess its alleged incompatibility with the statutory purposes for which the land is held on a practical, rather than a theoretical, basis.
Such is made clear in the Opinions of the appellate committee of the House of Lords in British Transport Commission v Westmorland County Council [1958] AC 126, cited in para 71 above.
A railway company was authorised by statute to buy land in Kendal for the purposes of operating a railway and to build bridges across it where necessary.
On one of its bridges it built a footpath, which the public had used for more than 20 years.
The question was whether, in the light of the limited statutory purposes for which it could hold land, the company could have dedicated the footpath as a public highway.
Applying the Leake case, the appellate committee held that the answer was to be found by determining whether the use of the footpath by the public was incompatible with the statutory purposes; that incompatibility was a question of fact (p 143); that the test was pragmatic (p 152); that the question was not whether it was conceivable but whether it was reasonably foreseeable that the public use of the footpath would interfere with the companys use of its land in the exercise of its powers for the statutory purposes (p 144); that the burden lay on the company to establish that it was reasonably foreseeable (p 166); and that, by reference to the case stated by the local justices, the company failed to discharge that burden.
In para 78 of their judgment in the Newhaven case Lord Neuberger and Lord Hodge explained the decision in the Westmorland case.
In paras 77 and 91 they stressed that, like other decisions which they examined and which related to the acquisition of prescriptive rights under English and Scots law, the decision applied only by analogy to the statutory registration of a green on land owned pursuant to statutory purposes.
Nevertheless, in a case in which the objection to registration as a green is cast as incompatibility with statutory purposes, there is in my view every reason to assess incompatibility in accordance with the approach adopted in the Leake case and indorsed in the Westmorland case.
I am convinced that in the Newhaven case such was also the view of Lord Neuberger and Lord Hodge, and indeed of Lady Hale and Lord Sumption who agreed with them.
I refer to four passages in the joint judgment.
First, from para 91: It is significant in our view that historically in both English law and Scots law, albeit for different reasons, the passage of time would not give rise to prescriptive acquisition against a public authority, which had acquired land for specified statutory purposes and continued to carry out those purposes, where the user founded on would be incompatible with those purposes. (Emphasis supplied)
Second, from the crucial para 93: Where Parliament has conferred on a statutory undertaker powers to acquire land compulsorily and to hold and use that land for defined statutory purposes, the 2006 Act does not enable the public to acquire by user rights which are incompatible with the continuing use of the land for those statutory purposes. (Emphasis supplied)
Third, the whole of para 96: In this case, which concerns a working harbour, it is not necessary for the parties to lead evidence as to [the authoritys] plans for the future of the Harbour in order to ascertain whether there is an incompatibility between the registration of the Beach as a town or village green and the use of the Harbour for the statutory purposes to which we have referred.
Such registration would clearly impede the use of the adjoining quay to moor vessels.
It would prevent the Harbour authority from dredging the Harbour in a way which affected the enjoyment of the Beach.
It might also restrict [the authoritys] ability to alter the existing breakwater.
All this is apparent without the leading of further evidence.
And fourth, from para 101: The ownership of land by a public body which has statutory powers that it can apply in future to develop land, is not of itself sufficient to create a statutory incompatibility.
By contrast, in the present case the statutory harbour authority throughout the period of public user of the Beach held the Harbour land for the statutory harbour purposes and as part of a working harbour. (Emphasis supplied)
It thus seems clear from the Newhaven case that registration of the beach as a green was there precluded as incompatible with the existing use of the land as a working harbour; and that, in the absence of existing use of the land, the public authority needs to adduce evidence.
What evidence? Evidence which makes it reasonably foreseeable that public use of the land as a green would in practice interfere with a proposed exercise of the authoritys powers in relation to the land for the statutory purposes.
It follows that I respectfully disagree with the suggestion in paras 65 and 66 of the judgment of Lord Carnwath and Lord Sales that incompatibility with statutory purposes should be assessed as a theoretical exercise rather than by means of a practical inquiry into interference with the authoritys existing or proposed future use of the land.
Adopting what I believe to be the correct, practical, approach to the assessment of incompatibility in relation to the present appeals, I agree with the Court of Appeal that neither the education authority nor the health authority has established that public use of its land as a registered green would be likely to be incompatible with its use of it pursuant to its statutory powers.
In the Lancashire case the Inspector conducted the requisite practical assessment, which led her to reject the alleged incompatibility; and, like the Court of Appeal, Ouseley J in the Administrative Court found no fault with her reasoning.
I discern no ground upon which this court might have concluded otherwise.
In the Surrey case the Inspector, while recommending refusal of the application for a different reason later shown to be invalid, also rejected the alleged incompatibility on apparently practical grounds; and the error of law which Gilbart J in the Administrative Court perceived him to have made in assessing it practically rather than as a matter of statutory construction was in my view correctly held by the Court of Appeal to have been no error at all.
It was with complete passivity that, for no less than 20 years, these two public authorities contemplated the recreational use of their land on the part of the public.
Their simple erection at some stage during that period of signs permitting (or for that matter prohibiting) public use would have prevented such use of the land being as of right: Winterburn v Bennett [2016] EWCA Civ 482, [2017] 1 WLR 646.
In such circumstances it is hardly surprising that they both failed to establish its practical incompatibility with their own proposed use of it.
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The issue in the two appeals relates to the circumstances in which statutory incompatibility will defeat an application by a member of the public to register land as a town or village green (a green) under the Commons Act 2006 (the Act) where the land is held by a public authority for statutory purposes.
At issue in the first appeal is land, divided into five areas, adjacent to Moorside Primary School in Lancaster and owned by Lancashire County Council (LCC).
A local resident applied to register the land as a green based on 20 years qualifying use.
LCC objected on the basis that the land was acquired and remains appropriated for education purposes under LCCs statutory powers as education authority.
An inspector appointed by the Secretary of State determined that four of the five areas should be registered.
She was not satisfied that the land was in fact acquired and held for education purposes and, even if it had been, there was no good statutory incompatibility defence available to LCC.
The inspectors determination was upheld by Ouseley J in the High Court on LCCs application for judicial review.
The second appeal concerns a site at Leach Grove Wood in Leatherhead owned by NHS Property Services Ltd (the NHS).
An application was made to register the site as a green, relying on use over a period of 20 years.
An inspector recommended refusal of registration, but the registration authority, Surrey County Council (SCC), did not accept this and registered the land.
On the NHSs application for judicial review in the High Court, Gilbart J distinguished the judgment of Ouseley J and quashed the registration on the basis that SCC had failed properly to consider statutory incompatibility.
The appeals were heard together by the Court of Appeal, which upheld the decision to register in both cases.
LCC and the NHS appealed to the Supreme Court.
By a majority, the Supreme Court allows the appeals in both cases.
Lord Carnwath and Lord Sales give the majority judgment, with which Lady Black agrees.
Lady Arden gives a partly dissenting judgment and Lord Wilson gives a dissenting judgment.
The inspectors finding in the Lancaster case that the land was not acquired and held pursuant to statutory education purposes was inconsistent with the evidence and irrational [33] [34].
Therefore the central issue in both the cases under appeal is the interpretation and application of the statutory
incompatibility ground of decision identified in the majority judgment in the Supreme Court in R (Newhaven Port & Properties Ltd) v East Sussex County Council [2015] UKSC 7 (Newhaven) [43].
The majoritys opinion is that Newhaven authoritatively interpreted the Act to mean that where land is acquired and held for defined statutory purposes by a public authority, the Act does not enable the public to acquire rights over that land by registering it as a green where such registration would be incompatible with those statutory purposes [48].
Here there is an incompatibility between the statutory purposes for which the land is held and use of that land as a green and therefore the Act is not applicable [55].
The test set out in Newhaven is not whether the land has been allocated by statute for particular purposes, but rather whether it has been acquired by the public authority pursuant to its statutory powers and is held for the purposes of those powers, where those purposes are incompatible with registration of the land as a green [56].
The reference to acquisition by both voluntary sale and compulsory purchase is significant, since acquisition by voluntary sale will typically involve the exercise of general statutory powers rather than specific statutory provisions framed by reference to the land itself [57].
This construction of the Act is unsurprising; there is no indication that the general provisions in the Act regarding registration as a green were intended to have the effect of preventing use of land held by a public authority for specific public purposes defined in statute [61].
This general point can be made with particular force in relation to land held pursuant to the exercise of statutory compulsory purchase powers, since such powers are created for use in circumstances where there is an especially strong public interest that land should be used for particular purposes, such as is capable of justifying compelling a land owner to sell their land against their wishes [63].
Applying the Act as interpreted in Newhaven, LCC and the NHS can show that there is statutory incompatibility in each case.
In the Lancaster case, the rights claimed pursuant to the registration of the land as a green are incompatible with the use of the relevant areas for education purposes, including for example use of them as playing fields or for constructing new school buildings.
LCC does not need to show they are currently being used for such purposes, only that they are held for such statutory purposes [65].
Similar points apply in the Surrey case: the issue of incompatibility has to be decided by reference to the statutory purposes for which the land is held, not by reference to how the land happens to be used at a particular point in time [66].
Lady Arden disagrees with the reasoning of the majority.
She would have allowed the appeals save that she would have dismissed the appeal in relation to two of the areas of the Lancashire site and remitted the matter to the registration authority in the Surrey appeal [122].
In her view, the fact that a public authority holds land for statutory purposes that are incompatible with the use of the land as a green is not of itself sufficient to make the land incapable of being registered.
It must be shown that the land is in fact being, or that it is reasonably foreseeable that it will be, used pursuant to those powers in a manner inconsistent with the publics rights on registration as a green [77].
Lord Wilson dissents from the majority and would have dismissed both appeals [123].
The Acts reach is substantially reduced if land held by public authorities for specified statutory purposes is to be immune from registration as a green that could theoretically be incompatible with those purposes [126].
Newhaven was concerned with statutes that conferred specific duties in relation to particular land.
Those specific duties were incompatible with the general provision in the Act which therefore had to give way [131].
In contrast, the present cases involve statutory provisions that confer general powers to acquire and hold unspecified land for education and health purposes and these cannot be said to be incompatible with the provision in the Act [132].
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On 26 October 2010 this Court issued its judgment in Cadder v HM Advocate [2010] UKSC 43, 2010 SLT 1125.
It held that the Crowns reliance on admissions made by an accused without legal advice when detained under section 14 of the Criminal Procedure (Scotland) Act 1995 gave rise to a breach of his right to a fair trial, having regard to the decision of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421.
This was because the 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 European Convention on Human Rights: see Cadder v HM Advocate, para 63.
The evidence that was in question in Cadder had been obtained when the appellant was being questioned while in detention at a police station.
The applicant in Salduz too had been taken into custody before he was interrogated during his detention by police officers of the anti terrorism branch of the Izmir Security Directorate.
But the facts of those cases by no means exhaust the situations in which the prosecution may seek to rely on answers to questions that have been put to the accused by the police.
The Court now has before it four references by judges of the High Court of Justiciary which have been required by the Lord Advocate under paragraph 33 of Schedule 6 to the Scotland Act 1998.
Common to them all is the fact that incriminating answers were given to questions put by the police when the accused did not have access to legal advice.
In three of them the evidence that is objected to was obtained by the police otherwise than by questioning at a police station following detention under section 14 of the 1995 Act.
They can be grouped together and are the subject of this judgment.
The fourth is concerned with the question whether the ratio of the decision in Salduz extends to lines of enquiry to which the accuseds answers to questions while in detention have given rise.
That reference is dealt with in a separate judgment: P v HM Advocate [2011] UKSC 44.
The issues that the first three references raise are (1) whether the right of access to a lawyer prior to police questioning, which was established by Salduz, applies only to questioning which takes place when the person has been taken into police custody; and (2) if the rule applies at some earlier stage, from what moment does it apply.
The first reference is of a case which is the subject of an appeal against conviction.
The second is of a case which is before the Appeal Court in an appeal against a ruling by a sheriff on the admissibility of evidence.
The third is of case which is the subject of a devolution minute which was referred by the trial judge to the Appeal Court under paragraph 9 of Schedule 6 to the Scotland Act 1998.
The cases that are the subject of the second and third references that have not yet gone to trial, so the names of the parties involved have been anonymised.
In each case the reference has been made by the Appeal Court at the request of the Lord Advocate.
The first reference
The appellant in the first case, John Paul Ambrose, was prosecuted on summary complaint at Oban Sheriff Court on a charge of contravening section 5(1)(b) of the Road Traffic Act 1988 as being in charge of a motor vehicle whilst having consumed a level of alcohol in excess of the prescribed limit.
He had been found by two police officers sitting in the passenger seat of a car parked by the roadside.
A female was sitting in the drivers seat.
A member of the public had expressed concerns to the police about them because they were thought to be drunk.
As there was vomit beside the drivers door and the female was seen to be upset, the police officers decided to speak to the appellant.
Having formed the view that he had been drinking, one of the police officers cautioned the appellant but did not give him any specification about the offence which he was suspected of having committed.
The appellant made no reply when cautioned.
He was then asked three questions, to which he gave answers, by the police.
They were as follows: Q Where are the keys for the vehicle? A In my pocket.
Q Do you drive the car? A Yes.
Q Are you going to drive the car? A Ah, well she wisnae well or Aye, well she wisnae well.
The appellant then removed the car keys from his trouser pocket.
He was asked whether he had anything to drink in the last 20 minutes and replied that he had not.
He was then given a roadside breath test which he failed.
He was taken to Oban police station where he gave a breath/alcohol reading that was well in excess of the prescribed limit.
The appellant pled not guilty to the complaint.
He went to trial before a
Sheriff on 31 May 2010 and 2 July 2010.
The evidence of the questions and answers was led without objection from his solicitor.
After the Crown had closed its case the appellants solicitor challenged the admissibility of this evidence on the ground that the police had not informed the appellant of the offence of which he was suspected before he was questioned.
The sheriff repelled this submission.
After hearing evidence from the appellant and a defence witness, he found the appellant guilty.
He was fined 375, was disqualified from driving for two years and had his licence endorsed.
The appellant then lodged an appeal against his conviction.
Among the grounds on which he applied for a stated case was the submission that the act of the Lord Advocate in seeking a conviction in reliance on the evidence of the police interview was incompatible with his right to a fair trial under article 6(1).
Leave to appeal having been refused at the first sift, he appealed to the second sift and then lodged a devolution minute in which it was stated that for the Lord Advocate to support the conviction would be incompatible with his rights under article 6(1) and article 6(3)(c).
In a note which he lodged on 12 October 2010 in support of the appeal he submitted, with reference to the decision in Salduz, that the use of the evidence of the interview was unfair as he did not have access to legal representation before or during the police interview.
On 3 November 2010 leave to appeal was granted at the second sift.
Following a procedural hearing on 26 January 2011 and at the request of the
Lord Advocate, the Appeal Court referred the following question to this court: Whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the appellant conducted under common law caution at the roadside and without the appellant having had access to legal advice was incompatible with the appellants rights under article 6(1) and 6(3)(c) of the European Convention on Human Rights, having regard in particular to the decision of the Supreme Court of the United Kingdom in Cadder v HM Advocate 2010 SLT 1125.
The second reference
The accused in the second case, referred to as M, has been indicted in the
sheriff court on a charge of assault to severe injury, permanent disfigurement and permanent impairment.
Shortly after the assault took place on 30 August 2008, in the course of initial inquiries, the police took the accuseds details from him but allowed him to leave the locus.
On 4 September 2008 however he was traced to his home address where, after administering a common law caution to the effect that he was not required to say anything but that anything he did say might be used in Page4 evidence, a police officer asked a total of seven questions, each of which was answered by the accused.
They were as follows: Q I am investigating a serious assault which happened on Saturday night there, within a bar named [X].
There was a large disturbance in there too.
Were you there? A Yes, aye.
Q Were you involved in the fight? A Aye.
Q Who were you with? A My dad and just boys fae [Y] where I used to work.
Q Were they involved too? A I think so, the other boys started it.
I got punched a couple of times on the eyebrow.
Its still sair.
Q OK, what were you wearing? A Pale blue t shirt, jeans, trainers.
Q OK [M], I will stop there.
I need to speak to you further except it will be recorded in a taped interview format.
Can you be at [Z] Police Office tomorrow night at 8 pm? A Yes.
Q I need to take your t shirt you had on, is that OK? A Aye.
At this point the police officer concluded his questions because he felt that it had become obvious that the accused had some involvement on the incident and that it was not appropriate to carry out an interview there.
The accused attended the police office the next day.
He was then detained and interviewed under section 14 of the 1995 Act, in the course of which he made further admissions.
The accused was indicted for trial, and after sundry procedure he lodged a minute raising the issue whether the Crown had power to lead evidence of the admissions which he had made.
When the minute was argued before the sheriff on 9 November 2010 the Crown conceded that the evidence of the admissions made during the section 14 interview was inadmissible.
But the sheriff ruled that evidence relating to the questions and answers at the accuseds home on 4 September 2008 was admissible.
The accused appealed against that decision to the High Court of Justiciary, contending that by failing to allow him access to legal advice prior to interview and there being no compelling reasons to justify this, his admissions allegedly obtained under caution had been unfairly obtained and were therefore inadmissible.
Following a procedural hearing on 26 January 2011 and at the request of the Lord Advocate, the Appeal Court referred the following question to this court: Whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the accused, conducted under common law caution at his home address and without the accused having had access to legal advice would be incompatible with the accuseds rights under article 6(1) and 6(3)(c) of the European Convention on Human Rights, having regard in particular to the decision of the Supreme Court of the United Kingdom in Cadder v HM Advocate 2010 SLT 1125.
The third reference
The accused in the third case, referred to as G, has been indicted in the High Court of Justiciary with offences including the possession of controlled drugs under the Misuse of Drugs Act 1971 and possession of prohibited firearms and ammunition under the Firearms Act 1968.
The police had obtained a search warrant under the 1971 Act for the search of a flat where on 4 June 2008, having forced entry, they found the accused.
Before commencing the search in terms of the warrant the accused, who had been handcuffed following a struggle, was cautioned in these terms: A systematic search will be carried out in your presence.
I must caution that you are not obliged to say anything or make any comment regarding any article that may be found, but anything you do say will be noted and may be used in evidence.
The accused was then detained and searched.
Prior to being searched he admitted to having drugs in his jeans pocket, from which a bag of brown powder was recovered that was later found to be heroin.
He was then arrested for contravention of section 23(4) of the 1971 Act.
He was not arrested or charged with any other offence in the course of the search of the premises.
During the search he was asked questions about the items which were found.
He was not offered access to legal advice or to a solicitor before being asked these questions.
After the search was concluded he was removed to a police station where he was detained under section 14 of the 1995 Act and again interviewed by the police in connection with alleged offences involving controlled drugs and firearms.
He was not allowed access to legal advice before or during this interview.
The Crown does not seek to rely on answers which the accused gave while he was being interviewed in the police station, but it seeks to rely on the statements and answers which he made at the premises in the course of the search.
They are set out in a schedule which was completed as the search of the flat was carried out.
Without that evidence there would not be sufficient evidence to convict the accused.
The accused has lodged a devolution minute in which he contends that the leading of evidence of the statements and answers which he made at the premises would be incompatible with his Convention right to a fair trial.
The trial judge decided to refer this issue to the Appeal Court under paragraph 9 of Schedule 6 to the Scotland Act 1998.
On 18 January 2011 at the request of the Lord Advocate the Appeal Court referred the following question to this court: Is it incompatible with the Panels Convention rights for the Lord Advocate to lead evidence of his statements and answers made during the course of the search conducted under warrant granted in terms of section 23(3) of the Misuse of Drugs Act 1971 as recorded in the Search Production Schedule?
In each of these three cases the circumstances differ from those that were before the court in Cadder and before the Grand Chamber in Salduz.
The evidence that is objected to was obtained, in Ambroses case before he was taken to the police station for further procedures to be carried out under section 7 of the Road Traffic Act 1988 following his failure of a road side breath test, and in the cases of M and G before they were detained and questioned at a police station under section 14 of the 1995 Act.
It is precisely because the issue that the references raise was not the subject of decision in either case that the courts guidance is now sought by the Lord Advocate.
His position is that three features determine whether an individual has a right to legal advice under article 6 in accordance with the principle in Salduz.
These features are all taken from words used by the Grand Chambers judgment in that case: see paras 55 and 56.
First, he must be a suspect.
Second, he must be in police custody.
Third, he must be the subject of police interrogation.
Unless all three features are present, he has no right of access to legal advice under article 6.
These propositions all assume, of course, that the court finds that article 6(1) was engaged when the incriminating statements were made.
This is because the protection of articles 6(1) and 6(3)(c) is afforded only to those who have been charged, as that word has been interpreted by the Strasbourg court.
Each of these expressions will need to be analysed in the discussion that follows.
Background
Two very important points need, however, to be made at the outset.
The first is that the jurisdiction of this court is limited to a consideration of the devolution issue which is raised by each of these references.
That is plain from the wording of paragraph 33 of Schedule 6 to the Scotland Act 1998 under which the references have been made, but it needs to be emphasised yet again.
The High Court of Justiciary is the court of last resort in all criminal matters in Scotland: see section 124(2) of the Criminal Procedure (Scotland) Act 1995; McInnes v HM Advocate [2010] UKSC 7, 2010 SLT 266, para 5, Fraser v HM Advocate [2011] UKSC 24, 2011 SLT 515, para 11.
It is not our function to rule on how the circumstances referred to in each case would fall to be dealt with under domestic law, although this does form part of the background.
The second point is that a decision by this court that there is a rule that a person who is suspected of an offence but is not yet in custody has a right of access to a lawyer before being questioned by the police unless there are compelling reasons to restrict that right would have far reaching consequences.
There is no such rule in domestic law: see para 22, below.
If that is what Strasbourg requires, then it would be difficult for us to avoid holding that to deny such a person access to a lawyer would be a breach of his rights under articles 6(1) and 6(3)(c) of the Convention.
But the consequences of such a ruling would be profound, as the answers to police questioning in such circumstances would always have to be held in the absence of compelling reasons for restricting access to a lawyer to be inadmissible.
The effect of section 57(2) of the Scotland Act 1998 would be that the Lord Advocate would have no power to lead that evidence.
I agree with Lord Matthew Clarke that this would have serious implications for the investigation of crime by the authorities: see para 116, below.
This suggests that a judgment pointing unequivocally to that conclusion would be required to justify taking that step.
If Strasbourg has not yet spoken clearly enough on this issue, the wiser course must surely be to wait until it has done so.
Section 126(1) of the Scotland Act 1998 provides that the Convention rights has the same meaning as in the Human Rights Act 1998.
Section 2(1) of the Human Rights Act requires this court in determining any question which has arisen in connection with a Convention right to take into account any relevant Strasbourg case law.
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, although the Human Rights Act did not provide that a national court is bound by these decisions, it is obliged to take account of them so far as they are relevant: In the absence of some special circumstances it seems to me that the court should follow any clear and constant jurisprudence of the European Court of Human Rights.
If it does not do so there is at least a possibility that the case will go to that court, which is likely in the ordinary case to follow its own constant jurisprudence.
In R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20 Lord Bingham of Cornhill said that Lord Slynns observations in that case reflected the fact that the Convention is an international instrument, the correct interpretation of which can be expounded only by the Strasbourg court.
From that it followed that a national court should not without strong reason dilute or weaken the effect of the Strasbourg case law.
It was its duty to keep pace with it as it evolved over time.
There is, on the other hand, no obligation on the national court to do more than that.
As Lord Bingham observed, it is open to member states to provide for rights more generous than those guaranteed by the Convention.
But such provision should not be the product of interpretation of the Convention by national courts.
Lord Kerr says that it would be wrong to shelter behind the fact that Strasbourg has not so far spoken and use that as a pretext for refusing to give effect to a right if the right in question is otherwise undeniable: para 130, below.
For reasons that I shall explain later, I do not think that it is undeniable that Strasbourg would hold that any questions put to a person by the police from the moment he becomes a suspect constitute interrogation which cannot lawfully be carried out unless he has access to a lawyer, which is the principle that Lord Kerr derives from his consideration of the mainstream jurisprudence: see para 146, below.
But his suggestion that there is something wrong with what he calls an Ullah type reticence raises an important issue of principle.
It is worth recalling that Lord Binghams observations in Ullah were not his first pronouncements on the approach which he believed should be taken to the Convention.
In Brown v Stott 2001 SC (PC) 43, 59 he said: In interpreting the Convention, as any other treaty, it is generally to be assumed that the parties have included the terms which they wished to include and on which they were able to agree, omitting other terms which they did not wish to include or on which they were not able to agree.
Thus particular regard must be had and reliance placed on the express terms of the Convention, which define the rights and freedoms which the contracting parties have undertaken to secure.
This does not mean that nothing can be implied into the Convention.
The language of the Convention is for the most part so general that some implication of terms is necessary, and the case law of the European Court shows that the court has been willing to imply terms into the Convention when it was judged necessary or plainly right to do so.
But the process of implication is one to be carried out with caution, if the risk is to be averted that the contracting parties may, by judicial interpretation, become bound by obligations which they did not expressly accept and might not have been willing to accept.
As an important constitutional instrument the Convention is to be seen as a living tree capable of growth and expansion within its natural limits (Edwards v Attorney General for Canada ([1930] AC 124) at p 136 per Lord Sankey LC), but those limits will often call for very careful consideration.
The consistency between this passage and what he said in Ullah shows that Lord Bingham saw this as fundamental to a proper understanding of the extent of the jurisdiction given to the domestic courts by Parliament.
Lord Kerr doubts whether Lord Bingham intended that his discussion of the issue should have the effect of acting as an inhibitor on courts of this country giving full effect to Convention rights unless they had been pronounced upon by Strasbourg: para 128, below.
I, for my part, would hesitate to attribute to him an approach to the issue which he did not himself ever express and which, moreover, would be at variance with what he himself actually said.
Lord Binghams point, with which I respectfully agree, was that Parliament never intended to give the courts of this country the power to give a more generous scope to those rights than that which was to be found in the jurisprudence of the Strasbourg court.
To do so would have the effect of changing them from Convention rights, based on the treaty obligation, into free standing rights of the courts own creation.
That is why, the courts task in this case, as I see it, is to identify as best it can where the jurisprudence of the Strasbourg court clearly shows that it stands on this issue.
It is not for this court to expand the scope of the Convention right further than the jurisprudence of the Strasbourg court justifies.
The background in domestic law
The powers of the police to detain a person and to subject him to questioning depend on the category into which the person falls at the time these powers are being exercised.
They differ according to whether the person is a witness, a suspect or an accused.
Where a person is not under suspicion, the police have no power to take him into custody or to compel him to submit to police questioning.
Such a person is classified, at most, as a witness.
A person who is in that category can be asked to provide personal information, such as his name and address.
Further questions may be put as part of a routine investigation into the events that have happened.
So long as he is being questioned as a potential witness rather than as a suspect, the right to protection against self incrimination is not in play.
There is no obligation to advise him of his rights, such as the right to silence or his right to seek legal advice.
As Lord Justice Clerk Thomson said in Chalmers v HM Advocate 1954 JC 66, 81, a person ultimately accused may be interviewed as part of the ordinary routine investigation of the police into the circumstances of the crime.
It would unduly hamper the investigation of crime if the threat of inadmissibility were to tie the hands of the police in asking questions at this stage.
The position changes if the stage is reached when suspicion begins to fall on the person who is being questioned.
Once suspicion has begun to fall on him the need to protect him against self incrimination comes into play.
As Lord Justice General Cooper explained in Chalmers v HM Advocate 1954 JC 66, 78: The theory of our law is that at the stage of initial investigation the police may question anyone with a view to acquiring information which may lead to the detection of the criminal; but that, when the stage has been reached at which suspicion, or more than suspicion, has in their view centred upon some person as the likely perpetrator of the crime, further interrogation of that person becomes very dangerous, and, if carried too far, eg to the point of extracting a confession by what amounts to cross examination, the evidence of that confession will almost certainly be excluded.
It was for a time thought that this passage was to be taken to establish that answers by suspects to police questioning were inadmissible by virtue of the persons position as a person under serious consideration as the perpetrator of the crime.
But, as the law has developed, the position is less easy to define: see Renton and Brown, Criminal Procedure, 6th ed looseleaf (1996), para 24 38.
In Miln v Cullen 1967 JC 21 it was held that the incriminating answers which the driver of a car gave when questioned by police officers who had formed the opinion that he was under the influence of drink were admissible in evidence.
Lord Justice Clerk Grant said at p 25 that the constable, in asking the simple question whether he was the driver, was not merely acting reasonably, properly and fairly but was acting in accordance with the duties incumbent upon him.
Lord Wheatley said at pp 30 31 that it was difficult to define with exactitude when a person becomes a suspect in the eyes of a police officer, as it may vary from a very slight suspicion to a clearly informed one, and that what happened after that had to be judged by the test of fairness.
In Lord Advocates Reference (No 1 of 1983) 1984 JC 52, 58 Lord Justice General Emslie said that Lord Wheatleys statement in Miln v Cullen, at p 31 that in each case the issue is whether the question was in the circumstances a fair one was a sound statement of the law: A suspects self incriminating answers to police questioning will indeed be admissible in evidence unless it can be affirmed that they have been extracted from him by unfair means.
The simple and intelligible test which has worked well in practice is whether what has taken place has been fair or not? (see the opinion of the Lord Justice General (Clyde) in Brown v HM Advocate 1966 SLT 105 at 107).
In each case where the admissibility of answers by a suspect to police questioning becomes an issue it will be necessary to consider the whole relevant circumstances in order to discover whether or not there has been unfairness on the part of the police resulting in the extraction from the suspect of the answers in question.
He went on to say that, where the words interrogation and cross examination were used in the decided cases in discussing unfair tactics on the part of the police, they were to be understood to refer only to improper forms of questioning tainted with an element of bullying or pressure designed to break the will of the suspect or to force from him a confession against his will.
The current position as described in Renton and Brown, para 24 39 is therefore that the fact that the accused was at the time under suspicion or even under arrest is not in itself crucial.
It is merely a circumstance like any other to be taken into account in assessing the fairness of the police questioning.
The legal basis for detaining and questioning a suspect was clarified by section 2 of the Criminal Justice (Scotland) Act 1980 which was consolidated as section 14 of the Criminal Procedure (Scotland) Act 1995.
The background to the legislation was described with characteristic skill and attention to detail by Lord Rodger in Cadder, para 74 86.
As he explained in para 86, 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.
A person may be detained for the purpose of carrying out investigations where a constable has reasonable grounds for suspecting that he has committed or is committing an offence punishable by imprisonment: section 14(1).
Where a person has been detained under section 14(1) a constable may, 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: section 14(7).
The effect of the decision in Cadder is that the Lord Advocate has no power to lead and rely on answers by a detainee who was subjected to questioning by the police while he was without access to legal advice.
In none of the situations described in each of the references was the person who was being questioned a detainee under section 14 of the 1995 Act.
The domestic law test for the admissibility of the answers that were given to the questions put by the police is whether or not there was unfairness on the part of the police.
The fact that the person did not have access to legal advice when being questioned is a circumstance to which the court may have regard in applying the test of fairness, but it is no more than that.
There is no rule in domestic law that says that police questioning of a person without access to legal advice who is suspected of an offence but is not in custody must always be regarded as unfair.
The question is whether a rule to that effect is to be found, with a sufficient degree of clarity, in the jurisprudence of the Strasbourg court.
The reasoning in Salduz
The starting point for an examination of this question must be the reasoning of the Grand Chamber in Salduz.
Some of the propositions that are set out in its judgment are expressed in a way that might suggest that the right of access to a lawyer is not confined to persons who are subjected to police questioning while they are in custody.
Para 55 of the judgment is in these terms: 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.
Read on its own, and without taking full account of the context in which these sentences were written, that paragraph suggests that the features which determine whether access to legal advice is to be provided are (a) that the person is a suspect, and (b) that he is subject to police interrogation.
No mention is made in this paragraph of his being in police custody.
The fact is, however, that the applicant was in police custody when he was interrogated by the police.
The narrative of the facts in paras 12 14 shows that it was not until after he had been taken into custody by police officers from the Anti Terrorism Branch of the Izmir Security Directorate that he was interrogated.
That being so, it is necessary to look elsewhere in the judgment to see whether the court was contemplating anything other than an interrogation in police custody when it came to set out what it did in para 55 of the judgment.
In Part II A of the judgment, under the heading Domestic law, the court referred to legislation in force at the time of the application which provided that anyone suspected or accused of a criminal offence had a right of access to a lawyer from the moment they were taken into police custody.
The reason why this had not been provided to the applicant was that the legislation did not apply to persons accused of offences falling within the jurisdiction of the state security courts, which his offence did.
The challenge, therefore, was to a systematic departure from the right of access to a lawyer which the law gave to everyone else.
In its examination of recent amendments in paras 29 31 of the judgment too its focus was on provisions that deal with juveniles taken into police custody.
That continued to be its focus in its examination of the relevant international law materials in Part IIB.
Chapter 1 of that Part refers to materials from the Council of Europe and the United Nations dealing with procedure in juvenile cases where the child had been deprived of his liberty by means of pre trial detention.
The heading of Chapter 2 is Right of access to a lawyer during police custody.
Reference is made in para 37 of the judgment to rule 93 of the Standard Minimum Rules for the Treatment of Prisoners adopted by the Council of Europe Ministers, which states that an untried prisoner shall be entitled as soon as he is imprisoned to choose his legal representatives and to receive visits from his legal adviser, and, in para 38, to a recommendation of the Committee of Ministers to Member States of the Council of Europe dealing with the right of prisoners to legal advice.
There is no sign here or in its examination of the United Nations materials in paras 41 42 that the Grand Chamber was interested in the position of suspects who were questioned by the police when not in custody.
Nor is there any sign of an international consensus that there is a right of access to a lawyer at that stage.
The part of the judgment which deals with the alleged violation of article 6 of the Convention begins at para 45.
The first section, which is headed Access to a lawyer during police custody, continues to para 63.
It includes para 55, which I have already quoted: see para 26, above.
In para 45 it is stated that the applicants allegation was that his defence rights had been violated as he had been denied access to a lawyer during his police custody.
The parties submissions, as narrated in paras 47 49 were directed to this issue.
There then follows a discussion of the general principles which were applicable to the case: paras 50 55.
In this passage, to which I will return, the court does not, at least in so many words, limit its scrutiny of the principles to what they require in cases where the person concerned is in police custody.
But in the next section, where it applies the principles to the case of applicant, the fact that he was in police custody lies at the heart of the discussion; paras 56 62.
The holding in para 80 states that there had been a violation of the applicants rights under article 6(1) in conjunction with article 6(3)(c) on account of the lack of legal assistance while he was in police custody.
But for the discussion of the relevant principles in paras 50 55, which is not so limited, there would be no doubt at all that the Grand Chambers declaration in the last sentence of para 55 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 was directed to the situation where that interrogation took place while the person was in police custody.
That is the conclusion that one would naturally draw from the context.
The concurring opinions of Judge Bratza and Judge Zagrebelsky lend further support to this conclusion.
Judge Bratza said in para O I2 that, like Judge Zagrebelsky, he thought that the court should have used the opportunity to state in clear terms that the fairness of criminal proceedings under article 6 required that, as a rule, a suspect should be granted legal advice from the moment he is taken into police custody or pre trial detention.
No mention is made in either of these opinions of any rule to the effect that the suspect should be granted legal advice at any earlier stage.
It may be, as Lord Rodger suggested in Cadder, para 70, that what these judges were contemplating was legal assistance for other purposes such as support for an accused who was distressed or to check on the conditions of detention.
Whatever the reason, they were plainly not addressing their remarks to situations such as those described in the references where the questioning took place before the suspect was taken into police custody.
The discussion of the general principles in paras 50 55 is not limited in this way.
As para 50 makes clear, the fact that the applicants case was concerned with pre trial proceedings did not mean that article 6 had no application.
The point is made that the fairness of a trial may be seriously prejudiced by an initial failure to comply with its provisions.
In para 51 reference is made to the right of everyone charged with a criminal offence to be effectively defended by a lawyer, the choice of means of ensuring this being left to the contracting states.
The paragraph ends with a warning that assigning counsel does not in itself ensure the effectiveness of the assistance he may afford an accused.
So far there is nothing to suggest that the Grand Chamber was searching for a basis for a ruling that the right of access to a lawyer arose at a stage before the suspect was taken into police custody.
In para 52 reference is made for the first time to the attitude of the accused at the initial stages of police interrogation and to the fact that article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer at this stage.
No mention is made of where he was assumed to be when he is being questioned, but the cases referred to in the footnote to this paragraph are all cases where the applicant was in custody when he was subjected to interrogation by the police: Murray v United Kingdom (1996) 22 EHRR 29, Brennan v United Kingdom (2001) 34 EHRR 507 and Magee v United Kingdom (2000) 31 EHRR 822.
In para 53 it is stated that the principles outlined in the previous paragraph are also in line with the generally accepted international human rights standards which, as the footnote to this paragraph indicates, are those set out in Part B of the judgment: see para 28, above.
These are said to be at the core of the concept of a fair trial.
Their rationale relates in particular to the protection of an accused against abusive coercion on the part of the authorities.
The language used and the international materials referred to suggest that what the Grand Chamber had in mind here was the need for protection of the accused against abusive coercion while he was in custody.
In para 54 it underlined the importance of the investigation stage for the preparation of criminal proceedings and referred to the fact that the accused often finds himself in a particularly vulnerable position at that stage of the proceedings and to the fact that early access to a lawyer was part of the procedural safeguards to which the court will have particular regard.
The stage in the proceedings that the court had in mind is not specified other than by reference to the accuseds vulnerability.
This is said to be amplified by the fact that legislation in criminal procedure tends to become increasingly complex.
It seems that what the Grand Chamber had in mind here was a stage when the accused was being subjected to detailed questioning of the kind that, under the inquisitorial systems, will invariably take place after the accused has been taken into custody.
This impression is reinforced by the reference in the third last sentence of the paragraph to the recommendations of the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment about the right of a detainee to have access to legal advice as a fundamental safeguard against ill treatment to which, I would infer, it was thought a detainee might be vulnerable.
This analysis of the reasoning of the Grand Chamber in Salduz suggests that the judgment was concerned only with establishing a rule that there was a right of access to a lawyer where the person being interrogated was in police custody.
The alternative view is that in para 55 it recognised a broader principle that the rule applies as soon as the person has been charged so that article 6 is engaged.
This alternative has a certain logical appeal for the reasons that Lord Kerr has identified.
The prejudice suffered by the accused is the same irrespective of the stage at which an incriminating statement is made in answer to questions put by the police.
But the base on which this proposition rests is not that the Convention prohibits absolutely any reliance on incriminating statements.
The privilege against self incrimination is not an absolute right: Murray v United Kingdom (1996) 22 EHRR 29, para 47.
It is primarily concerned with respecting the will of the person to remain silent: Saunders v United Kingdom (1996) 23 EHRR 313, para 68.
Everyone is entitled to respect for the right not to incriminate himself, irrespective of whether or not he is in police custody.
Nevertheless a person can confess if he is willing to do so, and his confession will be admissible if it is truly voluntary.
The underlying principle therefore is that there is a right against self incrimination which in some circumstances must be protected by special measures to protect the person against the risk that a confession may be obtained from him against his will by unfair tactics by the police.
That is why the court recognised in its application of those principles to Salduzs case, as it had already done in para 54, that an interview which takes place in police custody has particular features which require the provision of an especially strong protection to protect the rights of the defence against a forced confession.
It is that aspect of Salduzs case which seems to have informed the whole of the courts judgment.
It seems to me that the Grand Chambers judgment, when taken as a whole, does not indicate with a sufficient degree of clarity or indeed, I would suggest, in any way at all that the ruling in para 55 about incriminating statements made without access to a lawyer applies to questions put by the police before the accused is taken into custody.
The context would have required this to be stated expressly if it was what was intended, as the rule which the judgment laid down can be departed from only where there are compelling reasons to justify its restriction.
It would have had to have been stated precisely to what situations outside police custody the rule was to apply, and it was not.
The jurisprudence since Salduz
The Grand Chambers judgment has, not surprisingly, been referred to many times by the Strasbourg court since the judgment in that case was delivered.
The question is whether there is an indication in any of the cases that the right of access to a lawyer arises, as a rule, as soon as a person whose rights under article 6 are engaged is subject to questioning by the police.
There are passages in some of the cases which indicate that Salduz is regarded as having been concerned only with the need for legal advice while the person was in custody.
In Dayanan v Turkey (application no 7377/03) (unreported) given on 13 October 2009, which is a decision of the Second Section and is available only in French, the applicant was arrested and detained as part of an operation against the Hizbullah.
He was informed of his right to silence and exercised it, as he refused to answer the questions put to him by the police.
It was held nevertheless that there had been a breach of article 6(3)(c) in conjunction with article 6(1) because he did not have access to a lawyer while he was being interrogated.
The court said: 31.
Elle estime que lquit dune procdure pnale requiert dune manire gnrale, aux fins de larticle 6 de la Convention, que le suspect jouisse de la possibilit de se faire assister par un avocat ds le moment de son placement en garde vue ou en dtention provisoire. 32.
Comme le souligne les normes internationales gnralement reconnues, que la Cour accepte et qui encadrent sa jurisprudence, un accus doit, ds quil est priv de libert, pouvoir bnficier de lassistance dun avocat et cela indpendamment des interrogatoires quil subit (pour les textes de droit international pertinents en la matire, voir Salduz, prcit, paras 37 44) The proposition in para 32 that an accused must have access to a lawyer from the moment he is deprived of his liberty (un accus doit, ds quil est priv de libert, pouvoir bnficier de lassistance dun avocat) seems to go further than what the Grand Chamber itself said in Salduz.
It is more in keeping with the concurring opinions of Judge Bratza and Judge Zagrebelesky.
However that may be, the passages which I have quoted indicate the importance that appears to have been attached by Strasbourg to the fact that the person was in police custody when he was being interrogated.
It is especially significant that this is what the court saw the international consensus (les normes internationales gnralement reconnues) to be on this issue.
Three other cases from Turkey are to the same effect.
In Arzu v Turkey (application no 1915/03) (unreported) given on 15 September 2009 the applicant, who was arrested and placed in custody, complained that he had been denied access to a lawyer during the initial stages of the criminal proceedings against him.
The court said that Salduz had considered the grievance of a lack of access to a lawyer whilst in police custody: para 46.
In Duman v Turkey (application no 28439/03) (unreported) given on 23 March 2010 the court said in para 46 that the use of statements obtained at the stage of the police inquiry and the judicial investigation is not inconsistent with article 6(1), provided that the rights of the defence are respected.
On that point the court said that it relied on the basic principles laid down in its judgments, including Salduz, para 55, concerning the notion of a fair procedure.
In Takin v Turkey (application no 5289/06) (unreported) given on 1 February 2011 the applicant complained that he had had no legal assistance before he made his police statement or during his interrogation before the public prosecutor while in custody.
The court observed that it had already examined the issue concerning the lack of legal assistance in police custody in Salduz, paras 56 62.
In all these cases, as in Salduz itself, there was a systemic restriction on access to legal advice by anyone held in police custody in connection with proceedings that were to be taken in the state security courts.
In Pishchalnikov v Russia (application no 7025/04) (unreported) given on 24 September 2009 the applicant, who had been arrested, was interrogated while he was in police custody.
The pattern of the First Sections judgment followed that of the Grand Chamber in Salduz.
It repeated many of the propositions in paras 50 55 of Salduz in its assessment of the case under the heading Restrictions on access to a lawyer in the police custody, and referred in para 71 to the fact that the right to silence and the right not to incriminate oneself are generally recognised international standards which lie at the heart of a fair procedure under article 6.
But, as it was a custody case, it does not examine the question whether these propositions require access to a lawyer at any earlier stage.
In Sharkunov and Mezentsev v Russia (application no 75330/01) (unreported) given on 10 June 2010 the question before the court was again directed to the lack of legal assistance while in police custody and the use at the trial of incriminating statements that had been made at that stage.
In para 97 the court repeated the proposition that was first stated in Salduz, para 55 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.
But once again the police interrogation in the course of which these statements were made took place while the applicant was in police custody.
In Borotyuk v Ukraine (application no 33579/04) (unreported) given on 16 December 2010 the applicant was, once again, in police custody during the pre trial investigation.
Here too the propositions on which the court based its judgment are closely modelled on what the Grand Chamber said in para 55 of Salduz.
In para 79 it summarised the general principles that are to be found there.
It stated that, as a rule, access to a lawyer must be provided as from the first questioning of a suspect by the police, unless it can be demonstrated in the light of the particular circumstances that there are compelling reasons to restrict that right.
As in para 55 of Salduz, no indication is given that the principles are restricted to cases where the accused was in police custody.
But, as in Salduz, that was the background against which the case was heard.
Once again it is unclear whether the general propositions on which the judgment was based must equally be applied, as a rule, to cases where the accused was not in custody when the questioning took place.
Zaichenko v Russia
The First Section had the opportunity to clarify where the court stood on this issue in Zaichenko v Russia (application no 39660/02) (unreported) given on 18 February 2010.
This appears to have been the only case to date in which the complaint was of lack of legal assistance during questioning by the police when the applicant was not in custody.
He was stopped while he was driving home from work and his car was inspected by the police as there had been reports of workers stealing diesel from their service vehicles.
Two cans of diesel were discovered in the car.
The applicant made self incriminating statements in reply to questions put to him by the police at the roadside.
He was charged with stealing the cans, and he was convicted.
His complaint was that he had not been advised of the privilege against self incrimination when he made his admission to the police.
His position at the trial was that he had purchased the diesel at a petrol station and that he did not give this explanation to the police because he felt intimidated and did not have a receipt to prove the purchase.
In its assessment the court set out the general principles that are relevant to a consideration of whether there has been a violation of the right to a fair trial.
It noted that article 6(3)(c) especially might be relevant before a case is sent to trial if and in so far as the fairness of the trial is likely to be seriously prejudiced by a initial failure to comply with its requirements.
In para 36 it recalled, as the Grand Chamber did in Salduz, the proposition that the court set out in Imbrioscia v Switzerland (1993) 17 EHRR 441, para 38 that the manner in which articles 6(1) and 6(3)(c) were to be applied during the preliminary investigation depended on the special features of the proceedings and on the circumstances of the case.
Account was taken in para 37 of the principles set out in Salduz, para 55 and in para 38 of the fact that the right to silence and the right not to incriminate oneself are generally recognised standards which lie at the heart of the notion of a fair procedure.
Para 38 then contains these important propositions which did not receive the same attention in Salduz: The right not to incriminate oneself 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 (see, inter alia, J B v Switzerland, no 31827/96, para 64, ECHR 2001 III).
In this sense the right is closely linked to the presumption of innocence contained in article 6(2) of the Convention.
In examining whether a procedure has extinguished the very essence of the privilege against self incrimination, the Court must examine the nature and degree of the compulsion, the existence of any relevant safeguards in the procedures and the use to which any material so obtained is put (ibid).
Applying these propositions to the applicants case, the court noted in para 42 that in criminal matters article 6 comes into play 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 concerned was officially notified that he would be prosecuted or the date when the preliminary investigations were opened.
Eckle v Germany (1982) 5 EHRR 1, para 73 was referred to, which includes the proposition taken from cases such as Deweer v Belgium (1980) 2 EHRR 439, para 46 that the test as to whether a person has been charged for the purposes of article 6(1) is whether the situation of the person has been substantially affected.
The court concluded that, given the context of the road check and the applicants inability to produce any proof of the diesel purchase at the moment of his questioning by the police, there was a suspicion of theft against him from that moment and that, although he was not yet accused of any criminal offence, his situation in the proceedings at the roadside was substantially affected.
So article 6(1) was engaged at that point.
But the fact that article 6(1) was engaged did not mean that a right of access to a lawyer arose at that point.
The court observed in para 47 that the case was different from previous cases concerning the right to legal assistance in pre trial proceedings.
This was because the applicant was not formally arrested or in police custody but was stopped for a roadside check which was carried out in the presence of two attesting witnesses.
In para 48 it said: Although the applicant in the present case was not free to leave, the Court considers that the circumstances of the case as presented by the parties, and established by the Court, disclose no significant curtailment of the applicants freedom of action, which could be sufficient for activating a requirement for legal assistance already at this stage of the proceedings.
In para 49 it noted that the role of the police in such a situation was to draw up an inspection record and receive the applicants explanation as to the origin of the cans in his car.
Having done so, the police transferred the documents to the inquirer who submitted a report to his superior which prompted him to open a criminal case against the applicant.
In para 51 it held that the absence of legal representation at the roadside check did not violate his right to legal assistance under article 6(3)(c).
In a partly dissenting opinion Judge Spielmann said that the interview took place in circumstances that could in no way be compared to those normally observed during routine road checks and he could not agree that the circumstances of the case disclosed no significant curtailment of the applicants freedom of action such as to require legal assistance.
He did not take issue with the principle formulated in para 48.
His dissent was as to its application to the facts of the case.
Mr Scott for Ambrose submitted that it was wrong to look at the courts reasoning in Salduz through what it decided in Zaichenko.
Mr Shead for M submitted that Zaichenko was so out of line with the other cases, and so hard to reconcile with the basic principles that were stated in Salduz, that it should be regarded as having been wrongly decided.
I would reject these arguments.
The President of the Court, Judge Rozakis, was a member of the Grand Chamber in Salduz, as was Judge Spielmann.
The importance of the question that the case raised, which was whether the ruling in Salduz applied to questioning where the applicant was not in police custody, would not have been overlooked.
The reasoning shows that the reasoning in Salduz was fully taken into account.
The finding in para 48 that the circumstances did not disclose a sufficient curtailment of the applicants freedom of action which could be sufficient for activating a requirement for legal assistance indicates that the court was well aware that it had to give reasons for reaching a different result.
That it did so in the way that it did shows that this is a judgment which must be taken into account in the search for an answer to the question where the jurisprudence of the Strasbourg court stands on the question we have to decide.
Abdurahman v United Kingdom
The question whether the right of access to a lawyer applies at a stage before the person is taken into custody is now before the Strasbourg court in an application by Ismail Abdurahman, application no 40351/09.
He was questioned by the police as a witness in connection with the attempt to detonate four bombs at separate points in the London public transport system two weeks after the bombings that took place on 7 July 2005.
He had been approached by two police officers who took him to a police station.
According to their evidence at the voir dire at the applicants trial, this was with a view to his assisting the police as a potential witness.
They began interviewing him, but after about 45 minutes of questioning they considered that, as a result of the answers that he was giving, he was in danger of incriminating himself and should be cautioned.
On instructions from a senior officer they continued nevertheless to interview him as if he were a witness.
It was not until after he had completed and signed his witness statement, which contained statements that were incriminating and was made without access to legal assistance, that they were told to arrest him and he was then taken into custody.
This case is still awaiting a hearing in Strasbourg.
It has reached the stage of the court posing questions to the parties, which are whether there has been a violation of article 6(1) together with article 6(3)(c) arising from (a) the failure to caution the applicant before he gave his witness statement (Aleksandr Zaichenko v Russia, no 39660/02, 18 February 2010); and/or (b) the failure to provide him with legal assistance before he gave the witness statement? In particular, were the rights of the defence irretrievably prejudiced by the use of the witness statement at trial (Salduz v Turkey [GC], no 36391/02, para 55, 27 November 2008)? It is, of course, too early to say what view will be taken of this case when the facts have been assessed by the court in the light of the relevant principles.
But it is at least likely that its judgment will provide some useful guidance as to the approach that is to be taken to a persons rights under article 6(1) together with article 6(3)(c) where the prosecution seeks to rely on answers given to questions by the police before he is formally taken into custody.
The key issue, so far as the references that are before the court in this case are concerned, is whether, as a rule, access to a lawyer must always be provided when a person is questioned at any stage in the proceedings after he has become a suspect and must be taken to have been charged for the purposes of article 6 (see paras 62 63, below), or whether access to a lawyer is required, as a rule, only where the person has been taken into custody or his freedom of action has been significantly curtailed.
The fact that this application is still pending suggests that, if there was any doubt as to where the jurisprudence of the Strasbourg court stands, it would have been wise to wait for its judgment in Abdurahman before holding that there is a rule that access must be provided in any situation that is not analogous on its facts to that which was before the court in Salduz.
But that is for another day, as the delivery of the judgment in that case cannot be taken to be imminent.
Miranda v Arizona
The Lord Advocate placed considerable weight in support of his argument on the judgment of the Supreme Court of the United States in Miranda v Arizona 384 US 436 (1966).
In that case the Supreme Court held that the prosecution may not use statements, whether incriminatory or exculpatory, stemming from custodial interrogation of a defendant unless it demonstrated the use of procedural safeguards which were sufficient to secure the privilege against self incrimination.
These safeguards require that, unless other fully effective means are devised to inform the accused person of the right to silence and to assure continuous opportunity to exercise it, he must be warned that he has a right to remain silent, that any statement that he does make may be used as evidence against him, that he has the right to consult with an attorney and that, if he cannot afford one, a lawyer will be appointed to represent him.
Custodial interrogation for the purposes of this rule means questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way: p 444.
Miranda has been referred to in a number of individual opinions given by judges of the Strasbourg court.
Judge De Meyer referred to it in his dissenting opinion in Imbrioscia v Switzerland (1993) 17 EHRR 441.
The applicant in Imbrioscia had been questioned several times without access to a lawyer while he was in police custody but the court held, considering the proceedings as a whole, that there had been no breach of article 6(1) read with article 6(3)(c).
Judge De Meyer said that the court had failed to recognise the rules governing the right to legal advice during custodial interrogation which the Supreme Court has summarised in its Miranda judgment and which he said belonged to the very essence of fair trial.
In Murray v United Kingdom (1996) 22 EHRR 29 the applicant had been denied legal advice for 48 hours after he had been taken into custody.
The court held that there had been a violation of article 6(1) read with article 6(3)(c).
The partly dissenting judges, Judge Pettiti, joined by Judge Valticos, and Judge Walsh, joined by Judges Makarczyk and Lhmus, also referred to the Miranda judgment in this context.
Judge Walsh pointed out that the Supreme Court had affirmed that the constitutional protection against self incrimination contained in the Fifth Amendment guarantees to the individual the right to remain silent unless he chooses to speak in the unfettered exercise of his own free will whether during custodial interrogation or in court.
Much more recently, but prior to the Grand Chambers decision in Salduz, Judge Fura Sandstrm joined by Judge Zupani referred to Miranda in Galstyan v Armenia (2007) 50 EHRR 618 when, in para 0 I5, she described the right to be assisted by a lawyer as a bright line rule which nobody should cross and said that its purpose was to neutralise the distinct psychological disadvantage that suspects are under while dealing with the police.
The Strasbourg court has not referred to Miranda in any of its judgments, and Imbrioscia, Murray and Galstyan are the only cases where it has been referred to in a dissenting opinion in the context of what is described in Miranda as custodial interrogation.
But it can be assumed that the court will not have overlooked it in its search for generally accepted international human rights standards.
The dissenting judgments in Imbrioscia and Murray which drew attention to it were given before the Grand Chamber considered the issue in Salduz, and those cases were cited to it in that case.
As T A H M van der Laar and R L de Graaf, Salduz and Miranda: is the US Supreme Court pointing the way? [2011] 3 EHRLR 304, 315 have pointed out, the test that the Strasbourg court described in paras 47 and 48 of Zaichenko when it considered that the applicant was neither formally arrested nor interrogated in police custody and that there was no significant curtailment of his freedom of action echoes the statement in Miranda, p 477 that the rule of access to a lawyer that it describes applies when the suspect is subjected to police interrogation while in custody or otherwise deprived of his freedom of action in any significant way.
It is not unreasonable to think that Miranda and subsequent cases that the ruling in that case have given rise to in the United States will influence the thinking of the Strasbourg court as it develops the principles described in Salduz.
The significance of Miranda is that it follows the custodial approach to the question as to when access to a lawyer is required.
The core of that decision, as der Laar and de Graaf have described it in [2011] EHRLR 304, 310, is that a suspects statement made as a result of interrogation initiated by the interrogating authorities while he is in custody cannot be used in evidence unless the prosecutor can prove that the procedural safeguards that were used were effective enough to secure the suspects right not to incriminate himself.
The underlying reason is that the circumstances in which such an interrogation takes place are inherently intimidating.
As Chief Justice Warren explained at p 445, an understanding of the nature and setting of the in custody interrogation was essential to the courts decision: incommunicado interrogation in a police dominated atmosphere.
But it was noted that an interpretation of the requirement that the right to legal advice arose at an earlier stage would hamper the traditional function of the police in investigating crime.
General on the scene questioning as to facts surrounding the crime or other general questioning of citizens was not affected.
The right to legal advice was held not to extend that far because the compelling atmosphere inherent in the process of in custody interrogation was not necessarily present: Miranda, pp 477 478.
The accused in that position is protected by the rule that only statements voluntarily made are admissible.
I think that there is an indication here about the way the Strasbourg courts jurisprudence may develop, if there are doubts as to the significance of the courts decision in Zaichenko.
Miranda shows that reasons can be given which, at the very least, the court has not yet said are irrelevant for thinking that it would be going too far to hold that there is a rule that there must be access to a lawyer irrespective of whether the person who is being questioned by the police is being held in custody.
The basis for the ruling in Miranda is that police custody or its equivalent creates particular pressures which mean that the persons will is more likely to be overcome when he is being questioned under conditions of that kind.
The observation in Salduz, para 53 that the rationale of the generally recognised international human rights standards relates in particular to the protection of the accused against abusive coercion on the part of the authorities fits in with this line of reasoning.
This feature is likely to be absent when questions are being put at the locus or in the persons home simply with a view to deciding whether the person being questioned is to be treated as a suspect and, as such, to be subjected to further procedures.
The case for police custody or its equivalent
I should like, before stating my conclusions, to say a bit more about why I would hold that in principle the line as to when access to legal advice must be provided before the person is questioned should be drawn as from the moment that he has been taken into police custody, or his freedom of action has been significantly curtailed as it was put in Zaichenko, para 48.
I return to the points I made in para 34, above.
The privilege against self incrimination is not an absolute right: Murray v United Kingdom (1996) 22 EHRR 29, para 47; Brown v Stott 2001 SC (PC) 43, 64, per Lord Steyn.
At p 60 Lord Bingham said that while it could not be doubted that such a right must be implied, there is no treaty provision which expressly governs the effect or extent of what is to be implied.
At p 74 I said that implied rights are open, in principle, to modification or restriction so long as this is not incompatible with the right to a fair trial.
We do know however that the right is primarily concerned with respecting the will of the person to remain silent: see Saunders v United Kingdom (1996) 23 EHRR 313, para 68.
A person is therefore free to speak to the police and to answer questions if he is willing to do so, even after he has been cautioned.
He can provide them with self incriminating answers if he is willing to do this, and his answers will be admissible if they are truly voluntary.
This approach to the problem is familiar in domestic law: see para 22, above.
So long as it is applied the fundamental right under article 6 to a fair trial will be guaranteed.
The test is whether the will of the person to remain silent, if that is his will, has been respected.
Answers cannot be extracted from him by unfair means, and he must be protected against the risk that they may be forced out of him.
It is well understood that in some circumstances merely to caution the person that he has the right to remain silent will not be enough to protect him against the risk of a forced confession.
The paradigm case is where he is in police custody.
In such a situation the circumstances surrounding his questioning are likely to be oppressive and intimidating.
The questioning is likely to be prolonged, and the atmosphere is likely to be coercive.
In such circumstances it is reasonable to assume that he will be vulnerable to having a confession extracted from him against his will and to insist that special measures are needed to ensure that his rights are respected.
As Lord Kerr points out, common experience tells us that a coercive atmosphere can exist independently of custody: para 147, below.
That is why it was recognised in Miranda and in Zaichenko that a persons freedom of action to act as he wishes may be significantly impaired in other circumstances.
But it does not follow that this will be so in every case when the police engage in conversation with a suspect.
Circumstances will vary, and questioning which may become objectionable as the process continues may not be so during its initial stages.
That is why I believe that a more flexible approach to the problem is called for than the rigid principle that Lord Kerr would adopt, which would involve laying down a rule that access to lawyer must always be provided before any police questioning can take place: see para 146, below.
Lord Kerr says in para 148 that there is no reason to suppose that a person questioned by the police while not in detention would not experience the same need to acquiesce in the power of the police to require answers to potentially highly incriminating questions.
The important question, he says, is whether the questions asked are liable to be productive of incriminating answers, not the circumstances in which they are being asked.
That leads him to say that whenever questions of that kind are being put to a suspect they must be asked in the presence of a lawyer.
I do not think that there is any support in the Strasbourg cases, or in such international authorities as we have been shown, for that proposition.
The point that was being made in the Canadian case of R v Grant 2009 SCC 32; [2009] 2 SCR 353 to which he refers in para 147 was that there are situations in which psychological constraint amounting to detention have been recognised: the majority judgment of McLachlin CJ and LeBel, Fish, Abella and Charron JJ at para 30.
These are where the subject is legally required to comply with a direction or command and where there is no such obligation but a reasonable person in the subjects position would feel so obligated.
Not every conversation that takes place between the police and a suspect in which questions are asked is of that character.
A demand or direction by a police officer is one thing.
Questioning under caution is another.
It is understandable that a person who is confronted by a direction or a demand by a police officer to provide information will feel that he has to comply with it.
It is understandable too if the circumstances are such that he feels that he has no real choice in the matter.
That is why the law requires that before questions are put to him by the police the suspect must be cautioned.
In that way a fair balance is struck between the interests of the individual and the public interest in the detection and suppression of crime.
The search for that balance is inherent in the whole of the Convention: Sporrong and Lnnroth v Sweden (1982) 5 EHRR 35, para 69.
The whole point of the caution is to make it clear to the person that he is under no obligation to answer the questions that are being put to him.
The requirement would be pointless if it is to be assumed that he will nevertheless feel, whatever the circumstances, that he has no alternative but to answer them.
Whether the caution is enough to ensure that the person will have a fair trial will depend on the circumstances.
Conclusion
I return to the Lord Advocates submission that three features determine whether an individual has a right to legal advice under article 6 in accordance with the principle in Salduz.
First, he must be a suspect.
Second, he must be in police custody.
Third, he must be the subject of police interrogation.
The submission is that, unless all three features are present, he has no right of access to legal advice under article 6.
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 on 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 an criminal offence, as it was put in Eckle, para 73, it may in some instances take the form of other measures which carry the implication of such an allegation.
In ubinski v Slovenia (application no 19611/04) (unreported) given on 18 January 2007, paras 62 63 the court said that a substantive approach, rather than a formal approach, should be adopted.
It should look behind the appearances and investigate the realities of the procedure in question.
This suggests that the words official notification should not be taken literally, and that events that happened after the moment when the test is to be taken to have been satisfied may inform the answer to the question whether the position of the individual has been substantially affected.
It is obvious that the test will have been satisfied when the individual has been detained and taken into custody.
It must be taken to have been satisfied too where he is subjected to what Salduz, para 52 refers to as the initial stages of police interrogation.
This is because an initial failure to comply with the provisions of article 6 at that stage may seriously prejudice his right to a fair trial.
The moment at which article 6 is engaged when the individual is questioned by the police requires very sensitive handling if protection is to be given to the right not to incriminate oneself.
The mere fact that the individual has been cautioned will not carry the necessary implication.
But, when the surrounding circumstances or the actions that follow immediately afterwards are taken into account, it may well do so.
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): Shabelnik v Ukraine, para 57.
The Lord Advocate submitted that the protection of article 6(3)(c) was not engaged until the individual was actually taken into custody.
But this cannot withstand the emphasis that the Strasbourg court puts on the consequences of an initial failure to comply with its provisions, as in Salduz, para 50; see also Zaichenko v Russia, para 42.
As for the requirement that the individual must be in police custody, I would hold that the Strasbourg court has not said, or at least has not said with a sufficient degree of clarity, that a person who has become a suspect and is not in custody must, as a rule, have access to a lawyer while he is being questioned.
I would attach particular importance to the judgment in Zaichenko v Russia, for the reasons given in para 46, above.
That is not to say that the fact that the individual had no access to legal advice in that situation is of no consequence.
If it was practicable for access to legal advice to be offered, this will be one of the circumstances that should be taken into account in the assessment as to whether the accused was deprived of a fair hearing, as he is entitled to respect for the right not to incriminate himself.
But it is no more than that.
The fact that the incriminating statements were made without access to a lawyer does not of itself mean that the rights of the defence are irretrievably prejudiced, as was held to be the case in Salduz on account of the lack of legal assistance while the applicant was in custody.
The phrase police interrogation appears frequently in the cases where the applicant was detained in custody.
It was suggested that, for the purposes of the rule about access to a lawyer, it means something more than just asking questions of an individual.
These words are, however, extremely fact sensitive.
Any questioning of an individual who has been detained in custody by persons who are referred to in the Strasbourg cases as representing the investigating authorities with the aim of extracting admissions on which proceedings could be founded will amount to interrogation for the purposes of the rule: for a statement to that effect in England, see R v Absolam (1989) 88 Cr App R 332, 336, per Bingham LJ.
The same could be said of questioning that takes place at the roadside or in the persons home, depending on the circumstances.
It is not necessary, if access to a lawyer is needed for the right to a fair trial to remain practical and effective (see Salduz, para 55), that the questioning should amount to an interrogation in the formal sense.
It need not be a detailed and sustained course of questioning.
Questions that the police need to put simply in order to decide what action to take with respect to the person whom they are interviewing are unlikely to fall into this category.
But they are likely to do so when the police have reason to think that they may well elicit an incriminating response from him.
With that introduction, I now turn to the questions that have been referred to this court.
As I understand them, they invite us not only to deal with the situations that they describe as raising issues of principle but also to express our own view as to the answers that the Appeal Court should give on the facts as presented to us in each case.
The answers to the questions referred
The question in Ambroses case is whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the appellant conducted under common law caution at the roadside and without the appellant having had access to legal advice was incompatible with the appellants rights under article 6(1) and 6(3)(c).
I would answer this question in the negative.
Applying the test that I have described in para 62, above, I would hold that Ambrose was charged for the purposes of article 6 when he was cautioned and that the police officer had reason to think that the second and third questions were likely to elicit an incriminating response from him.
This conclusion is supported by the way the question whether the applicant was charged was dealt with in Zaichenko v Russia, para 41, where the court said that, given the context of the road check and the applicants inability to produce proof that he had purchased the diesel, there should have been a suspicion of theft against the applicant at the moment of his questioning by the police.
The context in Ambroses case was that, when he was approached by the police, he was drunk and sitting in the car.
Suspicion that he was committing an offence fell on him as soon as he told the police that the keys were in his pocket.
But I would hold it would be to go further than Strasbourg has gone to hold that the appellant is entitled to a finding that this evidence is inadmissible because, as a rule, access to a lawyer should have been provided to him when he was being subjected to this form of questioning at the roadside.
This leaves open the question whether taking all the circumstances into account it was fair to admit the whole or any part of this evidence.
There may, perhaps, still be room for argument on this point.
So I would leave the decision as to how that question should be answered to the Appeal Court.
The question in Ms case is whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the accused, conducted under common law caution at his home address and without the accused having had access to legal advice was incompatible with the accuseds rights under article 6(1) and 6(3)(c).
I would hold that M was charged for the purposes of article 6 when he was cautioned by the police officer at his home address.
Although he did yet not have enough information as that stage to detain him as a suspect under section 14 of the 1995 Act, his actions were sufficient to carry the implication that the purpose of his visit was to establish whether M was in that category.
Even if that was not so at the moment when M was cautioned, the first question which the police officer put to him carried that implication.
I also think that the police officer had reason to think that the second question that he asked (Were you involved in the fight?) was likely to elicit an incriminating response from him.
But I would answer the question in this reference also in the negative, as it would be to go further than Strasbourg has gone to hold that the accused is entitled to a ruling that this evidence is inadmissible because, as a rule, access to a lawyer should have been provided to him when he was being asked these preliminary questions in his own home with a view to determining what further steps should be taken to deal with him in connection with the offence.
As in Ambroses case, this leaves open the question whether, taking all the circumstances into account, it would be fair to admit the whole or any part of this evidence.
I would leave it to the sheriff to answer that question.
The question in Gs case is whether it is incompatible with the Panels Convention rights for the Lord Advocate to lead evidence of his statements and answers made during the course of the search conducted under warrant granted in terms of section 23(3) of the Misuse of Drugs Act 1971 as recorded in the Search Production Schedule.
The Lord Advocate conceded that G was a suspect from the time of his first admission to possession of a quantity of heroin in his jeans.
In must follow that he had been charged for the purposes of article 6 by the time the police began their search.
The feature of this case which distinguishes it from the other two is that, although G had not yet been formally arrested and or taken into police custody, there was a significant curtailment of his freedom of action.
He was detained and he had been handcuffed.
He was, in effect, in police custody from that moment onwards.
So I would answer the question in the affirmative.
The circumstances were sufficiently coercive for the incriminating answers that he gave to the questions that were put to him without access to legal advice about the items to be found to be inadmissible.
I would hold however that the same result need not follow in every case where questions are put during a police search to a person who is to be taken to have been charged for the purposes of article 6.
It would be to go further than Strasbourg has gone to hold that a person has, as a rule, a Convention right of access to a lawyer before answering any questions put to him in the course of a police search.
It is not because there is a rule to this effect that I would answer the question in the affirmative.
Rather it is because it is plain from the particular circumstances of the case that G was, in effect, a detainee when he was being questioned by the police.
In the absence of such indications of coercion the question, as in the other cases, will be whether, taking all the circumstances into account, it would be fair to admit the whole or any part of the evidence.
I am in full agreement with Lord Hopes judgment in this case and there is
LORD BROWN
comparatively little that I want to say in addition.
Cadder is authority for an absolute rule, derived from the European Court of Human Rightss decision in Salduz v Turkey (2008) 49 EHRR 421, that the Crown cannot lead and rely upon evidence of anything said by an accused without the benefit of legal advice during questioning under detention at a police station.
For convenience I call this the Cadder rule and refer to it as absolute notwithstanding the Courts recognition in Salduz itself (at para 55) that compelling reasons may exceptionally justify denial of access to a lawyer (providing always that such a restriction does not unduly prejudice the defence) since for present purposes those possible exceptional cases can safely be ignored.
The critical issue arising for our determination on these references is whether the Cadder rule applies equally to anything said by an accused in answer to police questioning even before he is detained at a police station, providing only that at the time of such questioning he is already a suspect and charged within the meaning of article 6(1) of the Convention (his situation substantially affected as explained by Lord Hope at para 39).
Although these are, of course, Scottish references and, rather to my regret, we have not had the benefit of any intervention on behalf of English and Welsh prosecuting authorities to assist us as to the legal position south of the border, I cannot but notice that on their face the statutory provisions governing the position in England and Wales sit a little uneasily even with the absolute rule in Cadder, let alone with the substantial extension to that rule now proposed by the respective accused in these references.
Section 76(2) of the Police and Criminal Evidence Act 1984 (PACE) provides: If, in any proceedings where the prosecution proposes to give in evidence a confession made by an accused person, it is represented to the court that the confession was or may have been obtained (a) by oppression of the person who made it; or (b) in consequence of anything said or done which was likely, in the circumstances existing at the time, to render unreliable any confession which might be made by him in consequence thereof, the court shall not allow the confession to be given in evidence against him except in so far as the prosecution proves to the court beyond reasonable doubt that the confession (notwithstanding that it may be true) was not obtained as aforesaid.
By section 82(1) of PACE, confession is defined to include any statement wholly or partly adverse to the person who made it and by section 76(8) oppression is defined to include torture, inhuman or degrading treatment, and the use or threat of violence (whether or not amounting to torture).
The only absolute statutory rule, therefore, is that confessions are inadmissible under PACE if obtained by oppression or in consequence of anything said or done likely to render them unreliable.
Generally speaking the court would not regard a confession elicited during questioning under detention at a police station as unreliable merely because the suspect had not at the time had the benefit of legal advice (unless, of course, by reason of youth or mental frailty or for any other reason the suspect may be regarded as having been particularly vulnerable to such questioning see, for example, R v McGovern (1990) 92 Cr App R 228).
Nevertheless the principle established in Salduz that underlies the Cadder rule is, I apprehend, properly given effect in England and Wales by the appropriate application of sections 58 and 78 of PACE which provide respectively: 58(1) A person arrested and held in custody in a police station or other premises shall be entitled, if he so requests, to consult a solicitor privately at any time. 78(1) In any proceedings the court may refuse to allow evidence on which the prosecution proposes to rely to be given if it appears to the court that, having regard to all the circumstances, including the circumstances in which the evidence was obtained, the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it.
Consistently, therefore, with the operation of the Cadder rule in Scotland, the discretion to exclude evidence under section 78(1) is, I apprehend, routinely exercised in England and Wales in the case of significant and substantial breaches of the right to legal advice conferred by section 58 and the related rights arising under Code C of the Codes of Practice established under PACE.
In England and Wales, however, suspects do not, as I understand it, have a right to free legal advice before their arrest and admission into custody.
The polices only obligation at this earlier stage is to caution the suspect before questioning begins.
Once, however, a decision to arrest is made and once grounds for arrest exist it cannot then be delayed so as to defer the suspects right to legal advice the police are required to stop the questioning and to resume it only at the police station.
On arrival at the police station the detainee must be advised about his right to free legal advice, including a right to speak to a solicitor on the telephone, and he must be asked if he wishes to do so.
Once the interview begins he must again be reminded of his right to free legal advice.
So much for the position obtaining under English law.
Somewhat to my surprise, my own brief judgment in Cadder is sought to be prayed in aid in support of the respondents contention on these references that the principle against self incrimination requires a suspect to be given access to legal advice before he is first questioned whatever may be the circumstances of that questioning providing only that article 6(1) is engaged (as indeed it was held to be engaged even in the situation that arose in Zaichenko v Russia (application no 39660/02) (unreported) (judgment given 18 February 2010) see paras 41 44 of Lord Hopes judgment).
With the best will in the world, however, I cannot recognise my judgment in Cadder as offering the least support for any such contention.
On the contrary, the whole context of that judgment was interrogation in a police station and in the last sentence I was endeavouring to explain the principal considerations which seem to me to underlie the principle against self incrimination, namely the importance of guarding against both inadequate police investigation and the exploitation of vulnerable suspects.
Strasbourgs evident core concern in Salduz (see in particular para 53 of the Courts judgment) is that suspects should be protected against abusive coercion and that miscarriages of justice should be prevented.
Quintessentially such risks arise in the very situation under consideration in Salduz: the interrogation of a terrorist suspect in police custody.
Small wonder that the court (at para 53) saw its decision as in line with the generally recognised international human rights standards, standards which may be seen from the instruments referred to in the footnotes to relate specifically to rights of access to a lawyer during, rather than before, suspects are taken into police custody.
Another decision relied upon by the respondents is that of the Supreme Court of Canada in R v Grant [2009] 2 SCR 353 and true it is that the court there, having given a wide meaning to the concept of detention, concluded on the particular facts of that case (which involved the kerbside questioning of a suspect leading to his being searched and found to be carrying a loaded firearm) that the police had breached section 10(b) of the Canadian Charter of Rights and Freedoms by failing before questioning the suspect to advise him of his right to speak to a lawyer.
Section 10(b) provides: Everyone has the right on arrest or detention . (b) to retain and instruct counsel without delay and to be informed of that right .
Importantly, however, the Supreme Court concluded that, the breach of section 10(b) notwithstanding, the trial judge had been entitled pursuant to section 24(2) of the Charter to admit the incriminating evidence and in the result upheld the conviction.
Section 24(2) provides: Where . a court concludes that evidence was obtained in a manner that infringed or denied any rights or freedoms guaranteed by this Charter, the evidence shall be excluded if it is established that, having regard to all the circumstances, the admission of it in the proceedings would bring the administration of justice into disrepute.
For present purposes, two paragraphs only from the head note to the courts immensely long judgments must suffice: When faced with an application for exclusion under section 24(2), a court must assess and balance the effect of admitting the evidence on societys confidence in the justice system having regard to: (1) the seriousness of the Charter infringing state conduct, (2) the impact of the breach on the Charter protected interests of the accused, and (3) societys interest in the adjudication of the case on its merits.
At the first stage, the court considers the nature of the police conduct that infringed the Charter and led to the discovery of the evidence.
The more severe or deliberate the state conduct that led to the Charter violation, the greater the need for the courts to dissociate themselves from that conduct, by excluding evidence linked to that conduct, in order to preserve public confidence in and ensure state adherence to the rule of law.
The second stage of the inquiry calls for an evaluation of the extent to which the breach actually undermined the interests protected by the infringed right.
The more serious the incursion on these interests, the greater the risk that admission of the evidence would bring the administration of justice into disrepute.
At the third stage, a court asks whether the truth seeking function of the criminal trial process would be better served by admission of the evidence or by its exclusion.
Factors such as the reliability of the evidence and its importance to the Crowns case should be considered at this stage.
The weighing process and the balancing of these concerns is a matter for the trial judge in each case.
Where the trial judge has considered the proper factors, appellate courts should accord considerable deference to his or her ultimate determination.
Here, the gun was discovered as a result of the accuseds statements taken in breach of the Charter.
When the three stage inquiry is applied to the facts of this case, a balancing of the factors favours the admission of the derivative evidence.
The Charter infringing police conduct was neither deliberate nor egregious and there was no suggestion that the accused was the target of racial profiling or other discriminatory police practices.
The officers went too far in detaining the accused and asking him questions, but the point at which an encounter becomes a detention is not always clear and the officers mistake in this case was an understandable one.
Although the impact of the Charter breach on the accuseds protected interests was significant, it was not at the most serious end of the scale.
Finally, the gun was highly reliable evidence and was essential to a determination on the merits.
The balancing mandated by section 24(2) is qualitative in nature and therefore not capable of mathematical precision.
However, when all these concerns are weighed, the courts below did not err in concluding that the admission of the gun into evidence would not, on balance, bring the administration of justice into disrepute.
The significant impact of the breach on the accuseds Charter protected rights weighs strongly in favour of excluding the gun, while the public interest in the adjudication of the case on its merits weighs strongly in favour of its admission.
However, the police officers were operating in circumstances of considerable legal uncertainty, and this tips the balance in favour of admission.
In short, the position in Canada, just as in England and Wales, is that no absolute rule applies to exclude incriminating evidence obtained in breach of a constitutional right to legal advice although it may be supposed that in flagrant cases equivalent to those where the Cadder rule itself would apply directly (where a suspect in police custody is denied access to a lawyer during interrogation) the Canadian courts would invariably strike the section 24(2) balance in the accuseds favour.
It follows from all this that I share Lord Hopes view that the court in Salduz ought not to be understood to be laying down an absolute rule of exclusion with regard to admissions made without the opportunity to take legal advice irrespective of whether or not the suspect was at the time actually in police custody.
The contention that Salduz requires the Cadder rule to be extended in this way to my mind founders on a proper understanding both of what the Strasbourg Court was there saying in the particular factual context of that case, and of the recognised international human rights standards underlying that decision.
It also seems to me inconsistent both with the terms of Judge Bratzas concurring opinion in that case (implicit in which was a recognition that under the majority judgment the very earliest time at which a suspect could be found entitled to legal advice is when he is taken into police custody or pre trial detention) and with Strasbourgs post Salduz jurisprudence (helpfully analysed by Lord Hope in great detail), most notably the judgment in Zaichenko v Russia itself.
Also like Lord Hope (see paras 50 53 above) I find some assistance here in the decision of the Supreme Court of the United States in Miranda v Arizona 384 US 436 (1966).
As Lord Hope observes (at para 53), the significance of Miranda is that it adopts a custodial approach to the question as to when access to a lawyer is required, the fundamental reason being that it is at that point that the circumstances in which [the suspects] interrogation takes place are inherently intimidating, because [of] the compelling atmosphere inherent in the process of in custody interrogation.
As, however, Lord Hope also observes: It was noted that an interpretation of the requirement that the right to legal advice arose at an earlier stage would hamper the traditional function of the police in investigating crime.
I have already indicated (at para 80 above) my own understanding of the central considerations underlying the principle against self incrimination: the importance of guarding against the exploitation of vulnerable suspects and also against inadequate police investigation.
In the intimidating circumstances of custodial interrogation there are undoubtedly some suspects who confess to crimes of which in truth they are innocent.
And undoubtedly too, once a suspect has confessed, the police are likely to become less inclined to pursue other useful avenues of investigation that may identify the actual offender.
Thus it is that miscarriages of justice can occur.
As Miranda suggests, however, the introduction of a right to legal advice (and what, of course, is being contended for here is an absolute right to free legal advice) at some pre custodial stage, so far from encouraging proper police investigation into crime, would in fact tend to inhibit it.
It is, in short, one thing to require of the police that they caution a suspect before questioning him, quite another to require that he be provided with legal assistance as a precondition of any self incriminating answers later becoming admissible in evidence against him.
This is the critical distinction which Zaichenko v Russia so clearly illustrates.
The Court there considered quite separately the applicants article 6 complaints as to (i) legal assistance and (ii) the privilege against self incrimination and the right to remain silent and in the event it found no violation of article 6 (3)(c) in respect of the former but a violation of article 6(1) in respect of the latter (the applicants self incriminatory answers to the polices roadside questioning having been elicited without his first being cautioned).
Like Lord Hope, I too would in the present context give full weight to what has come to be known as the Ullah principle see para 20 of Lord Binghams judgment in R (Ullah) v Special Adjudicator [2004] 2 AC 323.
It would seem to me quite wrong for this court now to interpret article 6 of the Convention as laying down an absolute exclusory rule of evidence that goes any wider than Strasbourg has already clearly decided to be the case.
And whatever else one may say about the Strasbourg jurisprudence, it can hardly be regarded as deciding the present issue clearly in the respondents favour.
In the result I agree with the answers proposed by Lord Hope to the questions posed in the respective references.
Essentially it comes to this.
In the cases of Ambrose and M there is no absolute rule such as that laid down in Cadder which precludes reliance on the evidence in question.
Rather it must be for the trial court to decide just as an English court must decide under section 78(1) of PACE whether the evidence ought fairly to be admitted or excluded.
In Gs case, however, because he was, as Lord Hope puts it (para 71), in effect, in police custody from the time when, following his arrest, he was handcuffed and detained, the Cadder rule should be held to apply to his questioning during the subsequent search.
That said, I also agree with Lord Hope (para 72) that the Cadder rule would by no means routinely apply to exclude answers to questions put to a suspect without his having been given the opportunity to seek legal advice during a search.
That too would be to go further than Strasbourg has yet gone.
LORD DYSON
I agree with the answers proposed by Lord Hope for the reasons that he gives as well as those given by Lord Brown.
In Salduz v Turkey (2008) 49 EHRR 421 (applied by this court in Cadder v HM Advocate [2010] UKSC 43, [2010] SLT 1125), the ECtHR decided that article 6 of the European Convention on Human Rights (the Convention) requires that, as a rule, access to a lawyer should be provided to a suspect when he is interrogated by the police while he is in detention; and that there will usually be a violation of article 6 if incriminating statements made by a suspect during a police interrogation in such circumstances are relied on to secure a conviction.
I shall refer to this as the Salduz principle.
The central question that arises in the present proceedings is whether the Salduz principle also applies to interrogations of a suspect that are conducted before he is placed in detention.
Lord Hope says that there is no sufficiently clear indication in the Strasbourg jurisprudence of how the ECtHR would resolve this question and that we should not apply the Salduz principle to situations to which the ECtHR has not clearly stated that it applies.
Lord Kerr says that (i) even if the ECtHR has not clearly decided whether article 6 requires the Salduz principle to be applied to statements obtained from a suspect when he is not in detention, that is not a sufficient reason for this court to refuse to do so (paras 126 to 130); (ii) to draw a distinction between evidence obtained before and after a suspect is detained is not only arbitrary, it is illogical (para 136); and (iii) in any event, an analysis of the Strasbourg jurisprudence clearly shows that it draws no distinction between the two cases (paras 146 and 148).
It is convenient to start with explaining why I cannot accept Lord Kerrs third proposition, since, if it is clear from the Strasbourg jurisprudence that the Salduz principle applies whether or not the evidence is obtained from the suspect while he is in detention, then the premise on which the judgments of Lord Hope and Lord Brown are based falls away.
As Lord Hope explains at paras 26 to 33, the judgment in Salduz was concerned with whether there was or should be a rule that there was a right of access to a lawyer where the person being interrogated was in police custody.
On its facts, it was a case about a suspect who had been interrogated by the police while he was in custody.
The references in para 53 to generally recognised international human rights standards (which are concerned with the position of suspects who are in custody) and to abusive coercion strongly suggest that the court was only considering the position of suspects who are in custody.
Paras 37 to 44 contains a discussion of the international law materials relating to a suspects right of access to a lawyer during police custody.
Unsurprisingly, the judgment says nothing explicitly about the position of a suspect who is not in custody.
I agree with Lord Hope that the concurring opinions of Judge Bratza and Judge Zagrebelski lend further support to the conclusion that the court was only considering the position of suspects who are in custody.
Lord Kerr says that Salduz is authority for the broad proposition that a suspect is entitled to have access to a lawyer at the investigation stage (because he is in a particularly vulnerable position at that stage of the proceedings) and that there is nothing in the reasoning of the decision to indicate that the investigation stage only begins after the suspect has been detained.
But the judgment should be read as a whole.
In my view, the better interpretation is that, for the reasons I have already given, the court was only addressing the issue of police interrogation of a suspect in custody.
It was making the point that for such a suspect the investigation stage takes place while he is in custody, where there is the risk of abusive coercion and he is in a particularly vulnerable position of making self incriminating statements.
Further, the decision of the First Section in Zaichenko provides clear support for the view that the Strasbourg jurisprudence draws a distinction between the fruits of police questioning of a suspect who is in detention and one who is not.
I agree with the reasons given by Lord Hope at para 46 for rejecting the arguments that Zaichenko was wrongly decided.
I note that Lord Kerr does not suggest that it was wrongly decided.
He analyses the reasoning of Zaichenko closely at paras 24 to 40.
He says that the basis for the courts decision that there had not been a violation of article 6(3)(c) is the cumulative effect of a number of factors (which he identifies at para 33) and that none of them, if taken in isolation, would have been sufficient to support the courts conclusion.
I cannot accept this interpretation of the courts reasoning in Zaichenko.
It is true that at para 46, the court notes at the outset that the applicant waived his right to a lawyer.
But the court went on to give other reasons for its decision at para 47.
It said that the present case is different from previous cases concerning the right to legal assistance in pre trial proceedings (see Salduz. .) because the applicant was not formally arrested or interrogated in police custody.
He was stopped for a roadcheck. (emphasis added).
The court was, therefore, fully alive to the difference between police questioning of a suspect at the roadside and police questioning of a suspect who has been taken into custody.
It was in the context of this difference that the court made express reference to Salduz.
Plainly and explicitly it did not apply the Salduz principle and it gave its reasons for not doing so.
The principal reason was given at para 48 which Lord Kerr has set out at para 160 below.
I agree with Lord Kerr that this paragraph is not easy to follow.
But what is clear is that the court considered that, whatever restrictions faced the suspect when he was being questioned at the roadside, they did not amount to a significant curtailment of [his] freedom of action sufficient to entitle him to legal assistance at this early stage of the proceedings.
This is an essential part of the courts reasoning.
It is clear that the court considered that the fact that the questioning took place before the suspect had been formally arrested or detained was critical.
I conclude, therefore, that the Strasbourg jurisprudence does not clearly show that the Salduz principle applies to statements made by a suspect who is not in detention when he is questioned by the police.
The only case to which our attention has been drawn in which the Salduz principle has been considered in relation to statements made by a suspect who is not in detention is Zaichenko.
For the reasons that I have given, Zaichenko strongly suggests that the Salduz principle does not apply in that situation.
I turn to Lord Kerrs second proposition.
He says that the animation of the right under article 6(1) cannot be determined in terms of geography (para 133) and that it is arbitrary and illogical to hold that a suspect has no right to access to a lawyer if he is questioned by the police until he is taken into custody: the suspect is as likely to make incriminating statements outside as inside a police station and is therefore in equal need of the protection of article 6(3)(c) in both situations.
The essential question is at what stage of the proceedings access to a lawyer should be provided in order to ensure that the right to a fair trial is sufficiently practical and effective for the purposes of article 6(1).
What fairness requires is, to some extent, a matter of judgment.
I accept that opinions may reasonably differ on whether the line for providing a suspect with access to a lawyer should be drawn at the point when the person being questioned becomes a suspect or at the point when he is taken into custody.
I do not doubt that being interrogated by the police anywhere can be an intimidating experience and that a person may make incriminating statements to the police wherever the interrogation takes place.
This can occur in a situation of what the majority of the Canadian Supreme Court described as psychological detention in R v Grant 2009 SCC 32 ; [2009] 2 SCR 353, at para 30.
On the other hand, the arresting of a suspect and placing him in custody is a highly significant step in a criminal investigation.
The suspect cannot now simply walk away from the interrogator.
For most suspects, being questioned after arrest and detention is more intimidating than being questioned in their home or at the roadside.
The weight of the power of the police is more keenly felt inside than outside the police station.
As was said in Miranda v Arizona 384 US 436 (1966) at p 478, there is a compelling atmosphere inherent in the process of in custody interrogation.
No doubt, it is also present to the mind of the suspect that the possibility of abusive coercion is greater inside than outside the police station.
Whether the difference between interrogation inside and outside the police station is sufficient to justify according the suspect access to a lawyer in one situation but not the other is a matter on which opinions may differ.
But I do not see how it can be said to be arbitrary or illogical to recognise that there is a material difference between the two situations.
I can agree with Lord Kerr (para 167) that one should be careful about making assumptions about the Miranda experience or believing that it can be readily transplanted into European jurisprudence.
But this counsel of caution is hardly consistent with the assertion that the adoption of the distinction made in Miranda is arbitrary and illogical.
So what should this court do in these circumstances? This brings me to Lord Kerrs first proposition.
As I have said, to the extent that the ECtHR has spoken on the question at all, Zaichenko contains a clear statement that the Salduz principle does not apply to statements made by a suspect during police questioning while the suspect (i) is not in custody or (ii) is not deprived of his freedom of action in any significant way.
I derive (ii) from para 48.
That paragraph echoes the language of p 477 of Miranda: The principles announced today deal with the protection which must be given to the privilege against self incrimination when the individual is first subjected to police interrogation while in custody at the station or otherwise deprived of his freedom of action in any significant way (emphasis added).
I accept, however, that there is no clear and constant Strasbourg jurisprudence on the point.
So the obligation in section 2 of the Human Rights Act 1998 to take account of judgments of the ECtHR does not compel a decision one way or the other: see R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295 para 26.
Nor is this a case where, although Strasbourg has not expressly decided the point, it can nevertheless clearly be deduced or inferred from decisions of the ECtHR how the court will decide the point if and when it falls to be determined.
Lord Kerr has referred to para 20 of Lord Binghams speech in R (Ullah) v Special Adjudicator [2004] 2 AC 323 and the dictum that the duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more, but certainly no less.
Lord Brown extended this in R (Al Skeini and others) v Secretary of State for Defence [2008] 1 AC 153 at para 106 by saying that Lord Binghams dictum could as well have ended: no less, but certainly no more.
At para 107 Lord Brown said that the Convention should not be construed as reaching any further than the existing Strasbourg jurisprudence clearly shows it to reach.
Lady Hale said much the same at para 90.
This approach was explicitly endorsed in R (Smith) v Oxfordshire Assistant Deputy Coroner [2010] UKSC 29; [2011] 1 AC 1 by Lord Phillips at para 60, Lord Hope at para 93 and Lord Brown at para 147.
But these statements are not entirely apposite where Strasbourg has spoken on an issue, but there is no clear and constant line of authority.
That is the case here because there is only one case in which the ECtHR has expressly decided that the Salduz principle does not apply in relation to the interrogation of a suspect who is not in detention (Zaichenko).
Moreover, despite the view I have expressed earlier in this judgment, I accept that it is arguable that the language of para 55 of the judgment in Salduz can and should be interpreted as holding that the Salduz principle does apply in such circumstances.
So what should a domestic court do in this situation? Recognising that it is our duty to give effect to the domestically enacted Convention rights, I think that the correct approach was suggested at para 199 of the judgment of Lord Mance in Smith: However, it is our duty to give effect to the domestically enacted Convention rights, while taking account of Strasbourg jurisprudence, although caution is particularly apposite where Strasbourg has decided a case directly in point or, perhaps, where there are mixed messages in the existing Strasbourg case law and, as a result, a real judicial choice to be made there about the scope or application of the Convention.
The position here is that Strasbourg has decided a case which is directly in point (Zaichenko).
The most that can be said on behalf of the accused in these three cases is that by reason of (i) the broad terms in which para 55 of the judgment in Salduz is expressed and (ii) the decision in Zaichenko, it is arguable that there are mixed messages in the Strasbourg case law as to whether the Salduz principle applies to evidence obtained from a suspect who has been interrogated without access to a lawyer outside the police station.
To use the words of Lord Mance, it follows that there is a real judicial choice to be made.
Whether fairness requires the Salduz principle to apply in both situations raises questions of policy and judgment on which opinions may reasonably differ and as to which there is no inevitable answer.
To demonstrate this, it is sufficient to contrast the approach of the US Supreme Court in Miranda with that of the Canadian Supreme Court in Grant.
In these circumstances, I consider that caution is particularly apposite and that the domestic court should remind itself that there exists a supranational court whose purpose is to give authoritative and Europe wide rulings on the Convention.
If it were clear, whether from a consideration of the Strasbourg jurisprudence or otherwise, that the Salduz principle applies to statements made by suspects who are not detained or otherwise deprived of their freedom of action in any significant way, then it would be our duty so to hold.
But for the reasons that I have given, it is not clear that this is the case.
In these circumstances, we should hold that the Salduz principle is confined to statements made by suspects who are detained or otherwise deprived of their freedom in any significant way.
LORD MATTHEW CLARKE
I refer to Lord Hopes judgment for his detailed description of the references and the background to them which I gratefully adopt.
In R v Samuel [1988] QB 615 at p 630 Hodgson J, delivering the judgment of the Court of Appeal, described the right of a suspect to consult and instruct a lawyer as one of the most important and fundamental rights of a citizen.
His Lordship did so in the context of section 58(1) of the Police and Criminal Evidence Act 1984 (PACE).
The present references have raised the question as to when, and in what circumstances, such a right emerges as part of Scots law by virtue of the application of Article 6 ECHR.
The Grand Chamber of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421 held 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 (para 55).
In Cadder v HM Advocate 2010 SLT 1125 this court applied that decision to the existing law of Scotland and, in particular, to the operation of the powers of detention of persons then contained in sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995.
As a result of the courts decision in Cadder the Scottish Parliament enacted certain provisions in the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010.
In particular a new section 15A to the 1995 Act was enacted which is in the following terms: 15A Right of suspects to have access to a solicitor (c) (a) (a) (b) (1) This section applies to a person (the suspect) who is detained under section 14 of this Act, attends voluntarily at a police station or other premises or place for the purpose of being questioned by a constable on suspicion of having committed an offence, or is (i) arrested (but not charged) in connection with an offence, and (ii) being detained at a police station or other premises or place for the purpose of being questioned by a constable in connection with the offence. (2) The suspect has the right to have intimation sent to a solicitor of any or all of the following the fact of the suspects (i) detention (ii) attendance at the police station or other premises or place, or (iii) arrest (as the case may be), (b) the police station or other premises or place where the suspect is being detained or is attending, and (c) that the solicitors professional assistance is required by the suspect. (3) The suspect also has the right to have a private consultation with a solicitor (a) before any questioning of the suspect by a constable begins, and (b) at any other time during such questioning. (4) Subsection (3) is subject to subsections (8) and (9). (5) In subsection (3), consultation means consultation by such means as may be appropriate in the circumstances, and includes, for example, consultation by means of telephone. (6) The suspect must be informed of the rights under subsections (2) and (3) (a) without delay, or (b) (a) on arrival at the police station or other premises or place, and (b) in the case where the suspect is detained as mentioned in subsection (1)(a), or arrested as mentioned in subsection (1)(c), after such arrival on detention or arrest, (whether or not, in either case, the suspect has previously been informed of the rights by virtue of this subsection). (7) Where the suspect wishes to exercise a right to have intimation sent under subsection (2), the intimation must be sent by a constable if 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 necessary. (8) In exceptional circumstances, a constable may delay the suspects exercise of the right under subsection (3) so far as it is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders that the questioning of the suspect by a constable begins or continues without the suspect having had a private consultation with a solicitor. (9) Subsection (3) does not apply in relation to the questioning of the suspect by a constable for the purpose of obtaining the information mentioned in section 14(10) of this Act.
Prior to that enactment, and the decision in Cadder, the position was that the courts in Scotland had never recognised a suspects right to have access to a solicitor before or during questioning of him by the police.
The position was, as stated in pre Cadder versions of Renton and Browns Criminal Procedure, 6th edition at para 24 39 as follows: any statement by a suspect in answer to police questions will be inadmissible in evidence at the subsequent trial of that suspect unless it has been obtained fairly, and that all the circumstances of the questioning (apart from whether or not a caution was given to a person accused of a crime) are relevant in so far, and only in so far, as they indicate the presence or absence of unfairness.
That passage continued later: The current situation is that the fact that the accused was at the same time under suspicion or even under arrest is not in itself crucial, but is merely a circumstance like any other to be taken into account in assessing the fairness of the police, in the same way as the fact that he.did not have the services of a solicitor Reference was made to, inter alia, Law v McNicol 1965 JC 32, HM Advocate v Whitelaw 1980 SLT (Notes) 25 and HM Advocate v Anderson 1980 SLT (Notes) 104.
As was also noted in Renton and Brown at para 24 39 There are no legal rules in Scotland governing the questioning of a suspect such as the Judges Rules and Administrative Directions issued by the Home Office.
Nor were there, until the 2010 Act, any provisions similar to those provided in England and Wales under PACE.
In HM Advocate v Cunningham 1939 JC 61 Lord Moncrieff at page 65 noted that after the accused had been charged and had replied, he subsequently received an incidental intimation that he might, if he so desired, require and obtain the assistance of a law agent.
His Lordship continued: I think it would have been desirable that that intimation should have been made formally and should have been made at the very outset before the making of any charge, but I am satisfied that, in not making it, the police officers followed their usual practice and acted with an intention of complete fairness.
Nonetheless, any such practice, in my opinion, ought to be reformed The later full bench decision in Chalmers v HM Advocate 1954 JC 66 gave some support for the view that all answers given by a suspect to a police officer were inadmissible and nothing was said about a suspects right to have a solicitor present when he was being questioned.
Although that decision was never over ruled its influence was considered to have been virtually removed by subsequent case law, concerned, it seems, with rising crime rates, which made the criterion of admissibility, fairness see Lord Advocates Reference (no. 1 of 1983), 1984 JC 52.
The decision in the case of Cadder, in applying the law as set out in Salduz, can be seen as truly innovative as regards what had been understood to be the domestic law of Scotland up until that time.
The present references raise, in the first place, the question as to how far the innovation goes having regard to the relevant Strasbourg jurisprudence.
The focus of the hearing before this court was concerned, to a significant extent, with how the suspects right to access to a lawyer has been defined to date by the Strasbourg court, either expressly, or by necessary implication, whatever other arguments there may be in principle, or policy, for defining it otherwise.
The defence in the cases before us sought to take from the language of the ECtHR, in discussing the right in the decided cases on the topic, a broad approach to its nature and its extent.
They had some basis for doing so having regard to how the court expressed itself in Salduz at para 55 where the Grand Chamber was to the effect 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.
At para 52 of the judgment one finds the following 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.
That language, it was submitted, focused on the status of the person as a suspect when determining his rights rather than his position being that of a person in custody.
Similar language can be seen in previous judgments of the Court.
For example in Panovits v Cyprus (Application No 4268/04) (unreported) given 11 December 2008 the Court, at para 66, observed that the concept of fairness enshrined in Article 6 requires that the accused be given the benefit of the assistance of a lawyer already at the initial stages of police interrogation see also Borotyuk v Ukraine (Application No 33579/04) (unreported) given 16 December 2010 at para 79.
It should, however, be noted that Panovits was a case which concerned the questioning of a child when the child had gone to the police station with his father, as requested by the police, and was thereafter arrested.
Borotyuk was also a custody case.
In Panovits, at para 65, the court, having said that it was reiterating that the right to silence and the right not to incriminate oneself were generally recognised international standards, which lay at the heart of the notion of a fair procedure under Article 6, went on to say: 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.
In Salduz similar remarks were made by the court at paragraph 53: These principles, outlined at para 52 above, are also in line with the generally recognised international human rights standards which are at the core of the concept of a fair trial and whose rationale relates in particular to the protection of the accused against abusive coercion on the part of the authorities.
They also contribute to the prevention of miscarriages of justice and the fulfilment of the aims of Article 6, notably equality of arms between the investigating or prosecuting authorities and the accused.
Those remarks would tend, in my judgement, to support the contention that the focus of the courts concern in Salduz, and other cases, has been in relation to those situations where methods of coercion or oppression might be more readily, and effectively, employed upon a suspect person, namely when his liberty has been curtailed by the authority detaining him.
Significant support for that being the focus of such a rule is to be found in the jurisprudence of the United States, and particularly the seminal decision of the US Supreme Court in Miranda v State of Arizona 384 US 436 (1966), where at p 467, para 23 the court said: Today, then, there can be no doubt that the Fifth Amendment privilege is available outside of criminal court proceedings and serves to protect persons in all settings in which their freedom of action is curtailed in any significant way from being compelled to incriminate themselves.
We have concluded that without proper safeguards the process of in custody interrogation of persons suspected or accused of crime contains inherently compelling pressures which work to undermine the individuals will to resist and to compel him to speak where he would not otherwise do so freely.
In order to combat these pressures and to permit a full opportunity to exercise the privilege against self incrimination, the accused must be adequately and effectively apprised of his rights and the exercise of those rights must be fully honoured.
The court then at pp 478 479, paras 66, 67 defined the right and its extent, together with its rationale in the following way: To summarise, we hold that when an individual is taken into custody or otherwise deprived of his freedom by the authorities in any significant way and is subjected to questioning the privilege against self incrimination is jeopardised.
Procedural safeguards must be employed to protect the privilege and unless other fully effective means are adopted to notify the person of his right of silence and to assure that the exercise of the right will be scrupulously honoured, the following measures are required.
He must be warned prior to any questioning that he has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires.
Opportunity to exercise these rights must be afforded to him throughout the interrogation.
After such warnings have been given, and such opportunity afforded him, the individual may knowingly and intelligently waive these rights and agree to answer questions or make a statement.
But unless and until such warnings and waiver are demonstrated by the prosecution at trial, no evidence obtained as a result of interrogation can be used against him.
The Miranda decision has informed international legal discussion of the right of the suspect to have access to a lawyer, since the decision was given.
Another factor pointing towards the more restrictive extent of the right in question is that the Strasbourg court, in defining it, has done so by referring to the context of what are described as pre trial proceedings, see para 50 of the Salduz judgment.
The person taken into detention who, in due course, may face being tried for a crime, might well be said to be involved, at the stage of any questioning, while detained, to be in pre trial proceedings for the purposes of Article 6.
That that is the context in which the Strasbourg court has been considering the right in question under Article 6 is, I think, supported by what the court had to say recently in Affaire Brusco c France (Requete No 1466/07) (unreported) given 14 October 2010, at para 45: La Cour rappelle galement que la personne place en garde vue a le droit dtre assiste dun avocat ds le dbut de cette mesure ainsi que pendant les interrogatoires, et ce a fortiori lorsquelle na pas t nforme par les autorits de son droit de se taire.
That passage also, to my mind, points to the phrases in Salduz early access to a lawyer and from the first interrogation of a suspect by the police as being references to the earliest point in time after the person is taken into custody with his liberty having been restricted by the investigating authorities.
The reference by the Strasbourg court to equality of arms, at para 53 of its judgment in Salduz, also, in my opinion, supports that approach.
Once a persons liberty is curtailed by the authorities, the balance of power between him and the representatives of the state shifts significantly and, it might be said, requires to be redressed by his having access to a lawyer.
All of these considerations, taken together, with what Lord Hope has to say in his analysis of the Salduz decision, and other Strasbourg jurisprudence, ultimately persuades me that the proper understanding of those decisions is that the right to have access to a lawyer emerges at the point when the suspect is deprived of his liberty of movement, to any material extent, by the investigating authorities and is to be questioned by them.
It follows that I am in agreement with Lord Hope that the Strasbourg jurisprudence, to date, does not support the defence contention in these references that the ECtHR has gone as far as to say that the right emerges as soon as a suspect is to be questioned by the police in whatever circumstances.
As to whether this court should go further than the ECtHR seems to have gone so far, certain important considerations lead me to the conclusion that it should not.
The first is the difficulty that can arise in relation to defining precisely at what point in time someone becomes a suspect, as opposed to being a witness or a detained person.
The second is that the broader version of the right, contended for by the defence in these cases, could have serious implications for the proper investigation of crime by the authorities.
If the police are to be required to ensure that a person who they wish to question about the commission of a crime (in a situation where the circumstances point to the person being a possible suspect) should have access to a lawyer, if he so wishes, then such a requirement could hamper proper and effective investigations in situations which are often dynamic, fast moving and confused.
The unfortunately regular street brawls in city and town centres, or disturbances in crowded places like night clubs, which, on occasions, result in homicide, are simply examples of situations which highlight the problems that might be involved.
In relation to the first of these considerations I note that the limits of the Miranda rights have been, very recently, (16 June 2011) re visited by the US Supreme Court in JDB v North Carolina 564 US 2011.
That case involved the questioning of a 13 year old.
The majority of the court held that the childs age was a relevant factor to be taken into account in addressing the question as to whether he had been in custody at the time of questioning.
The majority did not depart from the test being whether or not the person was in custody at the relevant time and at page 18 of the opinion of the court they directed the state court to address that question, taking account of all of the relevant circumstances of the interrogation, including the childs age at the time.
The disagreement between the majority and minority was with regard to the relevance of the childs age in judging of the question as to whether or not he was in custody at the relevant time.
In giving the dissenting judgment, with which the rest of the minority concurred, Alito J at pp 1 2 said Mirandas custody requirement is based on the proposition that the risk of unconstitutional coercion is heightened when a suspect is placed under formal arrest or is subjected to some functionally equivalent limitation on freedom of movement.
Alito J, then, at page 8 of his judgment, under reference to previous authorities remarked that a core virtue of the Miranda rule has been the clarity and precision of its guidance to police and courts.
Again at page 13 he remarked that a core virtue of Miranda was the ease and clarity of its application.
I am persuaded that the value of clarity and certainty in this area are relevant factors in deciding the extent of the right.
As to the second consideration, I recall what was said by Lord Wheatley in Miln v Cullen 1967 JC 21 at pp 29 30: While the law of Scotland has always very properly regarded fairness to an accused person as being an integral part of the administration of justice, fairness is not a unilateral consideration.
Fairness to the public is also a legitimate consideration, and in so far as police officers in the exercise of their duties are prosecuting and protecting the public interest, it is the function of the Court to seek to provide a proper balance to secure that the rights of individuals are properly preserved, while not hamstringing the police in their investigation of crime with a series of academic vetoes which ignore the realities and practicalities of the situation and discount completely the public interest.
That dictum is, of course, of its time and pre dates the experience of examples of convictions obtained on false confessions which have caused justifiable public concern.
Nevertheless it is difficult, even now, to contradict the substance of what his Lordship said.
As was said by Binnie J in the Canadian case of R v Grant 2009 SCC 32 [2009] 2 SSC 353 at para 180 It is not controversial that in the early stages of a criminal investigation the police must be afforded some flexibility before the lawyers get involved.
The police do have the right to ask questions and they need to seek the co operation of members of the public, including those who turn out to be miscreants.
It seems to me that the balancing of legitimate interests referred to by Lord Wheatley is a further justification for restricting the right to have access to a lawyer to situations in which the suspect is in custody.
The law in formulating a right designed to protect and support a legitimate interest, such as the right to silence, should seek to avoid defining that right in such a way, as to damage, or unduly inhibit another legitimate interest such as the efficient investigation of crime.
The task, which may be a delicate and difficult one, is to produce a result which strikes a rational balance between the two interests.
I consider the balance struck in the US Miranda jurisprudence achieves that end.
For the foregoing reasons I agree entirely with Lord Hope as to the way in which references in the cases of Ambrose and M should be answered.
In relation to these two cases the admissibility or otherwise of the replies to questioning will fall to be determined by the Appeal Court and the trial judge respectively in accordance with the rules as to fairness.
In the passage in his judgment in Miln v Cullen, cited above, Lord Wheatley continued: Even at the stage of routine investigations, where much greater latitude is allowed, fairness is still the test, and that is always a question of circumstances.
As regards Gs case I consider that the right to access to a lawyer, before questioning, arises not only when the suspect is taken into the physical surroundings of a police station.
The focus should be on whether, at the commencement of the proposed questioning, the individuals liberty is significantly restricted by the police.
The location where that occurs is not in itself conclusive.
In relation to rights of this kind matters should be judged in accordance with what the substance of the position is rather than its form.
It follows that I, therefore, also agree with Lord Hope in the way in which the reference in Gs case should be answered.
I also agree with Lord Hope, for the reasons given by him, that the Cadder rule would not necessarily routinely apply to exclude answers to questions, put to a suspect, without his having been given the opportunity to seek legal advice, during a search.
There is no justification in the Strasbourg jurisprudence, as I read it, for the right to be so interpreted.
By way of a footnote I would add this.
Our attention was drawn by the defence, in support of their position, to a Proposal for a Directive of the European Parliament and of the Council on the right of access to a lawyer in criminal proceedings and on the right to communicate upon arrest recently published by the European Commission Brussels, XXX COM (2011) 326/3.
Article 3(1) of the draft of the proposed Directive, attached to that document is in the following terms: 1.
Member States shall ensure that suspects and accused persons are granted access to a lawyer as soon as possible and in any event: (a) before the start of any questioning by the police or other law enforcement authorities; (b) upon carrying out any procedural or evidence gathering act at which the persons presence is required or permitted as a right in accordance with national law, unless this would prejudice the acquisition of evidence; (c) from the outset of deprivation of liberty.
The proposed Article 3 appears to envisage three discrete situations where the right of access to a lawyer should arise.
The authors of the proposal appear to believe that those draft provisions reflect the settled jurisprudence of the Strasbourg court see para 13.
It follows from what I have said above that their apparent understanding of the Strasbourg jurisprudence does not coincide with my own.
LORD KERR
Introduction
The well known aphorism of Lord Bingham in para 20 of R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323 that the duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more, but certainly no less has been given a characteristically stylish twist by Lord Brown in R (Al Skeini and others) v Secretary of State for Defence [2007] UKHL 26; [2008] 1 AC 153 at para 106 where he said that the sentence could as well have ended: no less, but certainly no more.
In keeping with this theme, some judges in this country have evinced what might be described as an Ullah type reticence.
On the basis of this, it is not only considered wrong to attempt to anticipate developments at the supra national level of the Strasbourg court, but there is also the view that we should not go where Strasbourg has not yet gone.
Thus, in the present case Lord Hope says that this courts task is to identify where the jurisprudence of the Strasbourg court clearly shows that it currently stands and that we should not expand the scope of the Convention right further than the current jurisprudence of that court justifies.
Lord Binghams formulation of the principle expressed in para 20 of Ullah was prompted by his consideration of the effect of section 2 of the Human Rights Act 1998 by which the courts of this country are enjoined to take into account Strasbourg case law.
Therefore, said Lord Bingham, although such case law was not strictly binding, where a clear and constant theme of jurisprudence could be detected, it should be followed because the Convention, being an international instrument, had as the authoritative source of its correct interpretation the Strasbourg court.
A refusal to follow this would dilute or weaken the effect of the Strasbourg case law.
I greatly doubt that Lord Bingham contemplated much less intended that his discussion of this issue should have the effect of acting as an inhibitor on courts of this country giving full effect to Convention rights unless they have been pronounced upon by Strasbourg.
I believe that, in the absence of a declaration by the European Court of Human Rights as to the validity of a claim to a Convention right, it is not open to courts of this country to adopt an attitude of agnosticism and refrain from recognising such a right simply because Strasbourg has not spoken.
There are three reasons for this, the first practical, the second a matter of principle and the third the requirement of statute.
It is to be expected, indeed it is to be hoped, that not all debates about the extent of Convention rights will be resolved by Strasbourg.
As a matter of practical reality, it is inevitable that many claims to Convention rights will have to be determined by courts at every level in the United Kingdom without the benefit of unequivocal jurisprudence from ECtHR.
Moreover, as a matter of elementary principle, it is the courts duty to address those issues when they arise, whether or not authoritative guidance from Strasbourg is available.
The great advantage of the Human Rights Act is that it gives citizens of this country direct access to the rights which the Convention enshrines through their enforcement by the courts of this country.
It is therefore the duty of this and every court not only to ascertain where the jurisprudence of the Strasbourg court clearly shows that it currently stands but to resolve the question of whether a claim to a Convention right is viable or not, even where the jurisprudence of the Strasbourg court does not disclose a clear current view.
Finally, section 6 of the Human Rights Act leaves no alternative to courts when called upon to adjudicate on claims made by litigants to a Convention right.
This section makes it unlawful for a public authority, including a court, to act in a way which is incompatible with a Convention right.
That statutory obligation, to be effective, must carry with it the requirement that the court determine if the Convention right has the effect claimed for, whether or not Strasbourg has pronounced upon it.
In this context, it would be particularly unsatisfactory, I believe, if, because of an Ullah type reticence, we should feel constrained not to reach a decision on the arguments advanced by the respondents to these references just because those very arguments are likely to be ventilated on behalf of the applicant in ECtHR in Abdurahman v United Kingdom application no 40351/09 and we cannot say how Strasbourg will react to them.
If the much vaunted dialogue between national courts and Strasbourg is to mean anything, we should surely not feel inhibited from saying what we believe Strasbourg ought to find in relation to those arguments.
Better that than shelter behind the fact that Strasbourg has so far not spoken and use it as a pretext for refusing to give effect to a right that is otherwise undeniable.
I consider that not only is it open to this court to address and deal with those arguments on their merits, it is our duty to do so.
The nature of the right under article 6(1) taken in conjunction with article 6(3)(c)
The true nature of the right under article 6(1), taken in conjunction with article 6(3) (c), can only be ascertained by reference to its underlying purpose.
What is its purpose? The respondents argue that its purpose is that when a person becomes a suspect, because of the significant change in his status that this entails; because of the potential that then arises for him to incriminate himself or to deal with questions in a way that would create disadvantage for him on a subsequent trial; and because of the importance of these considerations in terms of his liability to conviction, the essential protection that professional advice can provide must be available to him.
The right, it is argued, should not be viewed solely as a measure for the protection of the individuals interests.
It is in the interests of society as a whole that those whose guilt or innocence may be determined by reference to admissions that they have made in moments of vulnerability are sufficiently protected so as to allow confidence to be reposed in the reliability of those confessions.
For reasons that I will develop, I consider that these arguments should prevail.
If it has taught us nothing else, recent experience of miscarriage of justice cases has surely alerted us to the potentially decisive importance of evidence about suspects reactions to police questioning, whether it is in what they have said or in what they have failed to say, and to the real risk that convictions based on admissions made without the benefit of legal advice may prove, in the final result, to be wholly unsafe.
The role that a lawyer plays when the suspect is participating in what may be a pivotal moment in the process that ultimately determines his or her guilt is critical.
Thus understood, the animation of the right under article 6(1) cannot be determined in terms of geography.
It does not matter, surely, whether someone is over the threshold of a police station door or just outside it when the critical questions are asked and answered.
And it likewise does not matter whether, at the precise moment that a question is posed, the suspect can be said to be technically in the custody of the police or not.
If that were so, the answer to a question which proved to be the sole basis for his conviction would be efficacious to secure that result if posed an instant after he was taken into custody but not so an instant before.
That seems to me to be a situation too ludicrous to contemplate, much less countenance.
Two supremely relevant, so far as these appeals are concerned, themes run through the jurisprudence of Strasbourg in this area.
The first is that, in assessing whether a trial is fair, regard must be had to the entirety of the proceedings including the questioning of the suspect before trial see, for instance, Imbrioscia v Switzerland (1993) 17 E.H.R.R. 441, Murray v United Kingdom (1996) 22 E.H.R.R. 29; Averill v United Kingdom (2000) 31 E.H.R.R. 839; Magee v United Kingdom (2000) 31 E.H.R.R. 822; and Brennan v United Kingdom (2001) 34 E.H.R.R. 507.
The second theme is 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 a fair trial Poitrimol v France (1993) 18 E.H.R.R. 130 and Demebukov v Bulgaria (Application No 68020/01) (unreported) given 28 February 2008 at para 50.
Taken, as they must be, in combination, these features of a fair trial lead inexorably to the conclusion that where an aspect of the proceedings which may be crucial to their outcome is taking place, effective defence by a lawyer is indispensable.
When one recognises, as Strasbourg jurisprudence has recognised for quite some time, that the entirety of the trial includes that which has gone before the actual proceedings in court, if what has gone before is going to have a determinative influence on the result of the proceedings, it becomes easy to understand why a lawyer is required at the earlier stage.
There is no warrant for the belief that vulnerability descends at the moment that one is taken into custody and that it is absent until that vital moment.
The selection of that moment as the first occasion on which legal representation becomes necessary is not only arbitrary, it is illogical.
The need to have a lawyer is not to be determined on a geographical or temporal basis but according to the significance of what is taking place when the later to be relied on admissions are made.
This much, I believe, is clear from paras 54 and 55 of the judgment in Salduz v Turkey (2008) 49 EHRR 421.
It is worth setting out para 54 to examine its constituent parts and in order to draw together the various strands of guidance that it contains.
This is what the court said in that para: the Court underlines the importance of the investigation stage for the preparation of the criminal proceedings, as the evidence obtained during this stage determines the framework in which the offence charged will be considered at the tria1.
At the same time, an accused often finds himself in a particularly vulnerable position at that stage of the proceedings, the effect of which is amplified by the fact that legislation on criminal procedure tends to become increasingly complex, notably with respect to the rules governing the gathering and use of evidence.
In most cases, this particular vulnerability can only be properly compensated for by the assistance of a lawyer whose task it is, among other things, to help to ensure respect of the right of an accused not to incriminate himself.
This right indeed 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.
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.
In this connection, the Court also notes the recommendations of the CPT [European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment], in which the committee repeatedly stated that the right of a detainee to have access to legal advice is a fundamental safeguard against ill treatment.
Any exception to the enjoyment of this right should be clearly circumscribed and its application strictly limited in time.
These principles are particularly called for in the case of serious charges, for it is in the face of the heaviest penalties that respect for the right to a fair trial is to be ensured to the highest possible degree by democratic societies.
The first question that arises from this passage concerns the meaning of the investigation stage.
That stage is stated to be particularly important for two related reasons.
The first is that evidence obtained at that stage determines the framework in which the offence with which the defendant is charged will be considered at trial.
In other words, evidence obtained during the investigation stage can significantly influence the outcome of the proceedings and on that account it requires close attention as to its reliability.
The second reason is that at that very time (viz when evidence capable of influencing the trials outcome is being obtained) the accused finds himself in a vulnerable position.
It may seem trite to ask why he should be vulnerable at that time but the answer, it seems to me, is both plain and significant.
He is vulnerable because at this investigation stage, evidence which may be instrumental in securing a finding of guilt against him is being obtained and collated.
The way that he reacts during the collection of that evidence may prove to be of critical importance in his subsequent trial.
His vulnerability may be enhanced, moreover, because increasingly complex legislation permits the evidence to be obtained and used in ways that were not previously possible.
I return then to the anterior question.
What is meant by the investigation stage? It must surely include any point or juncture at which evidence which is potentially inculpatory of an accused is being obtained.
This is of especial importance when the investigation stage provides the setting for a statement by the accused person that might incriminate him.
ECtHR recognised in para 54 of Salduz that an incriminating statement might occur at an early stage of the investigation and it was for this reason that early access to a lawyer was considered to be necessary.
That early access is expressly required so that the very essence of the right not to incriminate oneself is not destroyed.
But extinction of the essence of the right, it seems to me, is precisely what may happen if statements tending to incriminate, made without the benefit of legal advice, are admitted in evidence against their maker on his or her trial.
And that conclusion reinforces my view that it is not the place at which admissions are made nor whether the individual making the statements has been detained that is important.
What is important is the use to which such statements may subsequently be put.
The same message is provided by the opening words of para 55 of Salduz: 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.
Once more, it is noteworthy that the court here does not refer to the place at which the first interrogation takes place nor whether the person who is answering questions has been detained.
It is from the moment of the first interrogation that the need for the presence of a lawyer is deemed to be required and that point is chosen because that is precisely when self incriminating statements may begin to be made.
In this connection I should say that I do not construe the judgments of Judge Bratza and Judge Zagrebelsky in Salduz as seeking to link the need for a lawyers presence inextricably with the moment that a suspect is taken into custody.
At O I2 Judge Bratza said: At para 55 of the judgment, the Court states as a general principle that in order for the right to a fair trial to remain sufficiently, practical and effective, article 6 requires that, as a rule, access to a lawyer should be provided, as from the first interrogation of a suspect by the police.
This principle is consistent with the Court's 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.
It is immediately obvious from this passage that Judge Bratzas concern was that the judgment of the court did not go far enough.
It is clear that his assumption was that the first interrogation of a suspect would normally take place after he had been taken into custody.
He felt that to prescribe that the presence of a lawyer was only then required might not be sufficient.
Statements could be made or events could occur which might prove incriminating after the suspect was taken into custody but before the first formal interrogation began.
That was why Judge Bratza suggested that a lawyer was required when the accused was taken into custody.
But his statement to that effect does not betoken a view that the moment that custody begins should be invested with some special significance.
On the contrary, it reflects concern that the suspects vulnerability and his need for a lawyer should not be seen as inevitably coincident with the opening of the formal interview.
Statements made or events occurring before that time are just as likely to require the presence of a lawyer if the fairness of the trial is to be assured.
The cases decided in Strasbourg post Salduz and discussed by Lord Hope in paras 36 40 of his judgment do not appear to me, with respect, to contribute much to the debate except for the case of Borotyuk v Ukraine (Application no. 33579/04).
All of the cases concerned suspects who were already in custody when the questioning began.
Lord Hope has suggested that importance was attached by Strasbourg in some of these cases to the fact that the person was in custody when he was being interrogated.
I do not so read them.
It seems to me that the cases are at least as consistent with the view that the important factor in play was that the interrogation was the occasion when inculpatory statements might be made and on that account a lawyers presence was considered an indispensable concomitant of a fair trial.
In Borotyuk an interesting passage appears at para 79.
There the court said: The Court emphasises 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 (see Poitrimol, cited above, para 34).
As a rule, access to a lawyer should be provided as from the first questioning of a suspect by the police, unless it can be demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
The rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police questioning without access to a lawyer are used to secure a conviction (see Salduz vs Turkey [(2008) 49 EHRR 421], para 55.
Quite apart from the observation that access to a lawyer was deemed necessary as from the first questioning of a suspect, the emphasis in this passage seems to be on the inevitable prejudice that will occur if questioning takes place at a time and in circumstances where incriminating statements might be made.
This, as it seems to me, is entirely consonant with the underlying philosophy of article 6(1) taken in conjunction with article 6(3)(c).
The essential question is: when the questioning is taking place, is the suspect in a position where the advice of a lawyer is essential if a fair trial is to occur.
If he is liable to incriminate himself at that time, a lawyers presence is required so that he may be fully advised as to how he may or should respond to the interrogation.
Likewise, if he requires advice as to how he should react to questioning, for example by giving information that may subsequently emerge at the trial, he needs to have proper guidance.
Remaining silent when a perfectly innocent explanation is available may fatally undermine a subsequently proffered defence.
I would therefore express the principle, to be derived from a consideration of the mainstream Strasbourg jurisprudence, in this way: where a person becomes a suspect, questions thereafter put to him or her that are capable of producing inculpatory evidence constitute interrogation.
Before such interrogation may be lawfully undertaken, the suspect must be informed of his or her right to legal representation and if he or she wishes to have a lawyer present, questions must be asked of the suspect, whether or not he or she is in custody, in the presence of a lawyer.
The Lord Advocate in the present appeal submitted that the touchstone should be the taking into custody of the individual because this marked the start of the coercive atmosphere in which the vulnerability of the suspect was aroused.
I cannot accept that argument.
Common experience tells us that a coercive atmosphere can exist independently of custody.
The subject was also helpfully considered, albeit in a different context, in the Canadian case of R v Grant 2009 SCC 32; [2009] 2 S.C.R. 353.
In that case the Supreme Court of Canada held that what it described as psychological detention such as to give rise to rights under section 9 of the Canadian Charter of Rights and Freedoms was established where an individual has a legal obligation to comply with a restrictive request or demand, or where a reasonable person would conclude by reason of the state conduct that he or she had no choice but to comply.
Although the right under section 9 of the Charter is one that entitles an individual not to be arbitrarily detained or imprisoned, as opposed to the right not to incriminate oneself, the relevance of the decision to the present appeal lies in the courts analysis of when the interaction between a police officer and the person he has stopped and questioned assumes a coercive quality.
At para 30 of the majority judgment of McLachlin CJ and LeBel, Fish, Abella and Charron JJ it was stated: we find that psychological constraint amounting to detention has been recognized in two situations.
The first is where the subject is legally required to comply with a direction or demand, as in the case of a roadside breath sample.
The second is where there is no legal obligation to comply with a restrictive or coercive demand, but a reasonable person in the subject's position would feel so obligated.
The rationale for this second form of psychological detention was explained by Le Dain J. in [R v Therens [1985] 1 SCR 613, 644] as follows: In my opinion, it is not realistic, as a general rule, to regard compliance with a demand or direction by a police officer as truly voluntary, in the sense that the citizen feels that he or she has the choice to obey or not, even where there is in fact a lack of statutory or common law authority for the demand or direction and therefore an absence of criminal liability for failure to comply with it.
Most citizens are not aware of the precise legal limits of police authority.
Rather than risk the application of physical force or prosecution for wilful obstruction, the reasonable person is likely to err on the side of caution, assume lawful authority and comply with the demand.
The element of psychological compulsion, in the form of a reasonable perception of suspension of freedom of choice, is enough to make the restraint of liberty involuntary.
Detention may be effected without the application or threat of application of physical restraint if the person concerned submits or acquiesces in the deprivation of liberty and reasonably believes that the choice to do otherwise does not exist.
There is no reason to suppose that a person questioned by police while not in detention would not experience the same need to acquiesce in the power of the police to require answers to potentially highly incriminating questions.
In as much, therefore, as a coercive atmosphere is required in order to stimulate the need for the protection that a lawyers presence brings, I consider that it is just as likely that this will occur outside a police station as within.
As I have said, the important question is whether the circumstances in which questions are asked are liable to be productive of incriminating answers, not whether those questions are being asked in a police station or whether the suspected person can be said to be in custody.
Zaichenko v Russia
This decision needs to be examined because of the possibly discordant note that it strikes in what I consider to be the clear message of what I have described as the mainstream European jurisprudence on the subject.
The applicant had been stopped by police when driving away from his place of work on 21 February 2001.
He was asked to account for two cans of diesel that were discovered in his car.
He replied that he had poured the fuel from the tank of a service vehicle that he drove as an employee into the containers that the police had found in his car.
He said that he intended to use it for his own personal purposes in other words, he admitted to having stolen it.
A vehicle inspection record was prepared by a police officer at the scene in which it was stated that the applicant had explained that he had poured out the fuel from the company premises.
The applicant signed that document.
He also signed another document entitled explanations in which his statement to the following effect was recorded: Since 1997 I have been employed as a driver by a private company.
On 21 February 2001 I arrived to my workplace at 9 am.
During the day I was repairing my service vehicle.
In the evening I poured out thirty litres of fuel from the tank of my service vehicle.
I have previously brought the cans, ten and twenty litres each, from home.
After work, at around 8 pm, I was driving home in my car and was stopped by the police.
The car was inspected in the presence of the attesting witnesses.
I poured out the fuel for personal use.
On 2 March 2001 an official known as an inquirer compiled a report on the events of 21 February 2001.
It was recorded that the applicant had intentionally stolen thirty litres of diesel from his service vehicle.
The report was stated to have been based on, among other things, the inspection record compiled by the police at the scene and the applicant's written statement.
The accusation section of this statement read, At 8 pm on 21 February 2001 [the applicant] . being at work intentionally stole from his service vehicle the diesel in the amount of thirty litres.
Thereby, he caused to the company pecuniary damage in the amount of 279 roubles.
The applicant appended his signature to the following certificates that appeared at the foot of the statement: I have been informed of the nature of the accusation, the right to have access to the case file, the right to legal representation, the right to make requests and challenge the inquiring authorities' actions. and I have studied the case file and have read this document.
I have no requests or motions.
I do not require legal assistance; this decision is based on reasons unrelated to lack of means.
I will defend myself at the trial.
At his trial the applicant retracted the confession and instead advanced a defence that he had purchased the fuel.
He maintained that evidence of his admissions to police officers when his car was stopped should not have been admitted because he had not been informed of his right against self incrimination.
At para 19 of ECtHRs judgment it is recorded that the appeal court in Russia had decided that the applicant's allegation of self incrimination had been rightly rejected by the trial court as unfounded.
At paras 42 and 43 of its judgment, ECtHR dealt with the question of whether the applicant had been charged during the events of 21 February 2001.
As to that the court said this: 42.
The Court reiterates that in criminal matters, Article 6 of the Convention comes into play as soon as a person is charged; 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 concerned was officially notified that he would be prosecuted or the date when preliminary investigations were opened (see Eckle vs Germany, 15 July 1982, 73, Series A no. 51, and more recently, O'Halloran and Francis vs the United Kingdom [GC], nos. 15809/02 and 25624/02, 35, ECHR 2007. ).
Charge, for the purposes of Article 6 1, may be defined as the official notification given to an individual by the competent authority of an allegation that he has committed a criminal offence, a definition that also corresponds to the test whether the situation of the [person] has been substantially affected (see Shabelnik vs Ukraine, no. 16404/03, 57, 19 February 2009; Deweer vs Belgium, 27 February 1980, 46, Series A no. 35; and Saunders vs the United Kingdom, 17 December 1996, 67 and 74, Reports of Judgments and Decisions 1996 VI).
Given the context of the road check and the applicant's inability to produce any proof of the diesel purchase at the moment of his questioning by the police, the Court considers that there should have been a suspicion of theft against the applicant at that moment. 43.
Applying these principles to the facts of the case, the Court notes that the trial court's use made of the admissions made on 21 February 2001, which led to the institution of criminal proceedings against the applicant and then served for convicting him of theft, is at the heart of the applicant's complaints under Article 6 of the Convention (compare Saunders, cited above, 67 and 74; and Allen vs the United Kingdom (dec.), no. 76574/01, 10 September 2002).
It is also noted that the inspection record itself indicated Article 178 of the RSFSR Code of Criminal Procedure as the legal basis for the inspection (see paragraph 26 above).
Thus, although the applicant was not accused of any criminal offence on 21 February 2001, the proceedings on that date "substantially affected" his situation.
The Court accepts that Article 6 of the Convention was engaged in the present case.
Nor was there any disagreement on this point between the parties.
The substantial effect which prompted the finding that article 6 was engaged appears to comprise the suspicion which the court felt the police must have had that the applicant had been guilty of theft and the fact that the events that occurred at the roadside check led to his subsequent prosecution and conviction.
On that basis the same conclusion (that article 6 is engaged) is irresistible in the three cases involved in these references.
In each of the cases it is clear that, at the time that the relevant admissions were made, the police either did have or should have had a suspicion that the persons to whom they were posing questions were guilty of the offences that were under investigation and that the statements made in answer to those questions were or were likely to be highly incriminating of all three.
But why in Zaichenko, if article 6 was engaged, was the applicant not entitled to the protection of article 6(3)(c), taken in conjunction with article 6(1)? For an answer to this, one must conduct a probe of the later passages of the judgment which, I should confess in advance, has not led me to an entirely clear understanding of the rationale underlying the courts conclusion on the issue.
At para 46 the court said this: 46.
The Court notes at the outset that the applicant only complained that he had not been afforded enough time to contact a lawyer in a nearby town.
The Court cannot but note that, as confirmed by the applicant's representative in his letter to the European Court dated 26 July 2002, both on 21 February and 2 March 2001 the applicant chose not to exercise his right to legal representation with the hope that the court would give him a fair trial even without counsel.
It is difficult to be sure that, in using the phrase, the court cannot but note, the judgment at this point was indicating that, because the applicant had elected not to have legal representation, this was a basis on which it could be concluded that there had not been a violation of article 6(3)(c).
Observations that appear later in the judgment would tend to support that view, however.
In the first instance, the para following (para 47) opens with the word moreover which suggests that the decision of the applicant not to seek legal representation was, at least, one of a number of reasons for the finding that article 6(3)(c) had not been breached.
Secondly, at para 50 of the judgment, the court refers to the applicants election not to seek legal assistance either on 21 February or on 2 March 2001 as a waiver of his right to legal assistance.
Some of the other reasons for finding that there had not been a violation of article 6(3)(c) appear in para 47: 47.
Moreover, the Court observes that the present case is different from previous cases concerning the right to legal assistance in pre trial proceedings because the applicant was not formally arrested or interrogated in police custody.
He was stopped for a road check.
This check and the applicant's self incriminating statements were both carried out and made in public in the presence of two attesting witnesses.
It is true that the trial record contains a statement by the applicant suggesting that the writing down of the inspection record and/or his subsequent statement were started on the spot but were completed in the village of Birofeld.
Nevertheless, the Court concludes on the basis of the materials in the case file that the relevant events, namely the drawing of the inspection record and the taking of the applicant's explanation, were carried out in a direct sequence of events.
The distinction between Zaichenkos case and earlier decisions that is highlighted here viz that the applicant had not been arrested or interrogated while in police custody is not expressly stated to be a reason that alone would warrant a finding that there had not been a violation of article 6(3)(c) taken in conjunction with article 6(1).
It seems to me impossible to say, on the basis of the statements in this paragraph, that ECtHR has concluded that formal arrest and interrogation in custody are essential prerequisites to the invocation of the right.
Rather, it appears that the court treated the cumulative effect of factors that were peculiar to this particular case as the basis for the finding that there had not been a violation of article 6(3)(c).
These factors can be enumerated as follows: (1) the applicant had waived his right to a lawyer and had explicitly stated that he did not want a lawyer to represent him despite having been told on 2 March 2001 that he was entitled to legal representation; (2) he had not been formally arrested or interrogated in police custody; (3) the initial questioning of the applicant took place at a road check and not in any formal setting; (4) the applicant was questioned in a public place with other witnesses present who could attest to a lack of coercion on the part of the police; and (5) the checking of the applicants car and his questioning as to the source of the diesel all occurred as part of a seamless process.
I do not believe that any one of these factors can be elevated to a position of pre eminence nor does it appear to me that it can be said with confidence that any single factor, taken in isolation, would be sufficient to support the finding that there had not been a breach of article 6(3)(c).
The succeeding paragraphs in the judgment repeat the matters dealt with in paras 46 and 47 or expand on them to some extent.
It is not necessary to consider these in any detail but I should mention para 48, if only to say that I have had a little difficulty in following the reasoning that it contains.
It reads: Although the applicant in the present case was not free to leave, the Court considers that the circumstances of the case as presented by the parties, and established by the Court, disclose no significant curtailment of the applicant's freedom of action, which could be sufficient for activating a requirement for legal assistance already at this stage of the proceedings.
It is not immediately clear why someone who was not free to leave the scene could be said not to have had any significant curtailment of his freedom of action.
Be that as it may, it appears to be the case that if the court had found that there had been a significant curtailment of the applicants freedom of action, it would have regarded this as a sufficient basis for a finding of a violation of article 6(3)(c).
What would constitute such a curtailment of freedom of action has not been made clear, however.
Altogether, it is not easy to distil any obvious principle from this paragraph and I would be reluctant to ascribe to it any significance beyond that relevant to the circumstances of the case of Zaichenko itself.
Although ECtHR concluded that Mr Zaichenko had waived his right to legal assistance, it decided that there had not been a waiver of his right not to incriminate himself.
At para 52 the court held that it was incumbent on the police to inform the applicant of the privilege against self incrimination and the right to remain silent.
Their failure to do so at the roadside check before putting questions to him constituted a violation of article 6(1), therefore.
In a partly dissenting opinion, Judge Spielmann (who, as Lord Hope pointed out in para 46 of his judgment, was a member of the Grand Chamber in Salduz) addressed forthrightly the question of when the right to legal representation arose and, relating it directly to the decision in Salduz, came down firmly in favour of what I believe to be the logical position, namely, that it began when police questioning started.
In para 3 of his opinion, Judge Spielmann said: 3.
In Salduz vs Turkey the Court held that as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police (see Salduz vs Turkey [GC], no. 36391/02, 55, ECHR 2008 . ).
The Court also held that the lack of legal assistance during a suspect's interrogation would constitute a restriction of his defence rights and that these rights would in principle be irretrievably prejudiced when incriminating statements, made during police interrogation without access to a lawyer, were used for a conviction.
The Court took a similar approach in the equally important judgment in Panovits (Panovits vs Cyprus, no. 4268/04, 66 and 70 73, 11 December 2008). (original emphasis)
Judge Spielmann also questioned the reasoning of the majority that is contained in para 48 of the courts judgment.
At para 6 he said: 6.
Contrary to what is said in para 48 of the judgment, I cannot agree that the circumstances of the case disclose no significant curtailment of the applicant's freedom of action.
I am of the opinion that those circumstances were sufficient to activate a requirement for legal assistance.
I do not understand Judge Spielmanns dissent necessarily to indicate that there was a divergence of views between him and the majority about the nature of the principle at stake.
The principle which I believe can be said to be common to both is that when a suspect is interrogated by police he is entitled to legal assistance.
Where Judge Spielmann parted company with the majority was in its conclusion as to whether the principle applied.
Because of the accumulation of factors that the court had identified (see para 158 above) and because it concluded that there had not been a curtailment of Mr Zaichenkos freedom of action, it held that the principle did not apply.
Judge Spielmann, by contrast, did not attach the weight to the factors that the majority had considered militated against a finding of violation of article 6(3)(c) and he disagreed (in my view, quite properly) with the suggestion that someone who was not free to leave the scene nevertheless had not suffered any curtailment of his freedom of action.
Miranda v Arizona
As Lord Hope has said in para 52, curtailment of freedom of action carries echoes from Miranda v Arizona 384 US 436 (1966).
And as Lord Hope suggests, it may well be that Miranda will influence the thinking of Strasbourg, it having featured in a number of prominent dissenting judgments in that court already.
But I question whether this will lead to the adoption of the custodial approach to the question as to when access to a lawyer is required.
Curtailment of an individuals freedom of action can arise even when he has not been taken into custody.
The important question must surely be whether the suspect feels constrained to answer the questions posed to him by the police officer.
As the Grant case illustrates, this can arise either because of the manner in which the police officer manages the exchange with the suspect or because of the latters belief that he has no option but to answer the questions put to him.
Quite apart from these considerations, however, I believe that one must be careful about making assumptions about the Miranda experience or believing that it can be readily transplanted into European jurisprudence in any wholesale way.
The implications of that decision must be considered in the context of police practice in the United States of America.
Nothing that has been put before this court establishes that it is common practice in America to ask incriminating questions of persons suspected of a crime other than in custody.
Indeed, it is my understanding that as soon as a person is identified as a suspect, police are trained that they should not ask that person any questions until he or she has been given the Miranda warnings.
Custody was identified in Miranda as one of the features necessary to activate the need for legal representation but custody has been held to mean either that the suspect was under arrest or that his freedom of movement was restrained to an extent associated with a formal arrest Stansbury vs California, 511 US 318 (1994); New York vs Quarles, 467 U.S. 649, 655 (1984).
So it is clear that the rule that custody is required before entitlement to legal representation arises is not inflexible or static and that its underlying rationale is closely associated with the question whether the person questioned feels under constraint to respond.
Hampering police investigation
One of the principal practical arguments advanced against the requirement that a suspect be informed that he is entitled to legal representation before incriminating questions are put to him is that this will hamper police investigations.
The argument is a venerable one.
It has been deployed in reaction to various proposals for safeguards intended to protect suspects rights including the right to have a solicitor present during interviews and the audio recording or the videotaping of interviews.
There is no evidence that the introduction of those measures brought about any widespread impediment to police investigations nor is there, in my view, any convincing evidence that this would be the result of recognising the right of a suspect to be informed that he or she is entitled to legal representation before being required to provide potentially incriminating answers to police questioning.
As the respondents have pointed out, in the final analysis, these cases are about the admissibility of evidence.
There is no legal prohibition on police asking questions of a suspect that may produce incriminating answers.
The legal consequence of doing so without first informing the suspect of his or her right to be legally represented will be, in my opinion, that the answers produced will be inadmissible in evidence unless compelling reasons such as were discussed in para 55 of Salduz exceptionally justify denial of access to a lawyer.
One can anticipate, therefore, that police may decide in appropriate circumstances to proceed with questions in order to further the investigation but have to accept that if they are capable of producing incriminating answers from someone who is a suspect, the replies will be inadmissible.
A balance will always have to be struck between unfettered police investigatory powers and the complete safeguarding of suspects rights.
The history of criminal jurisprudence shows how that balance has been struck in different ways and at different times, reflecting, no doubt, changing attitudes as to what properly reflects contemporary standards.
It is my belief that the proper balance to strike for our times is the one that I have suggested in para 146 above.
Conclusions
For the reasons given in para 153 above, I consider that article 6 of ECHR was engaged in each of the respondents cases at the time that the relevant questions were asked.
I have no doubt that when they were asked those questions each of them was suspected of having committed an offence.
I agree with Lord Hope that the administration of a caution is not necessarily determinative of this issue but, in the particular circumstances of these cases, I do not believe that any other conclusion is possible.
The second and third questions that were put to the respondent, Ambrose, were clearly capable of producing incriminating responses.
In fact they did so and it is evident that the answers have been relied on in order to establish his guilt, (although that might well have been possible simply by proving that he was in the car and in possession of the keys).
In these circumstances, I am of the view that he had a right under article 6(3)(c) taken in conjunction with article 6(1) of ECHR to be informed, after his reply to the first question, that he was entitled to legal representation before answering further questions, and that, absent such a warning, the incriminating answers given by him to the second and third questions were not admissible.
The questions put to the respondent who has been referred to as M, apart from the first question, were also clearly capable of producing incriminatory replies although whether they would in fact be probative of guilt would be a matter for trial, if indeed the answers were held to be admissible.
Since they clearly had the capacity of producing inculpatory responses, however, I consider that the questions put to M at his home, apart from the first question, are inadmissible.
In the case of the respondent referred to as G, for the reasons given by Lord Hope (with which I agree), it is indisputable that, at the time the impugned questions were put to him, he was in custody and, whatever view one takes of the effect of the European jurisprudence, the incriminating answers that he gave are inadmissible.
But, for the same reasons that I have given in the cases of Ambrose and M, I would have held that they were inadmissible, regardless of whether G was in custody at the time that the answers were given.
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In Cadder v HM Advocate [2010] UKSC 43, the Supreme Court held, having regard to the decision of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421, that the Crowns reliance on admissions made by an accused who had no access to a lawyer while he was being questioned as a detainee at a police station was a violation of his rights under Article 6(3)(c), read with Article 6(1) of the European Convention on Human Rights.
The issues in these cases are whether the right of access to a lawyer prior to police questioning, which was established by Salduz, applies only to questioning which takes place when the person has been taken into police custody; and, if the rule applies at some earlier stage, from what moment does it apply.
The accused in the first case, John Paul Ambrose, was prosecuted on a charge of contravening section 5(1)(b) of the Road Traffic Act 1988 as being in charge of a motor vehicle while over the alcohol limit.
He was questioned by two police officers by the roadside, who cautioned him but did not give him any specification about the offence he was suspected of having committed.
In response to their questions, he confirmed that he was in possession of the car keys, and that he might be intending to drive the car.
Breath tests indicated that he was substantially over the prescribed limit.
In his trial the Crown led evidence of the questions and answers at the roadside.
In M, the accused was charged with assault to severe injury, permanent disfigurement and permanent impairment.
A few days after the incident, the police visited him at his home, cautioned him, and asked him a number of questions, in response to which he confirmed his attendance at the locus on the night in question and his involvement in the fight.
He was detained the following day, and questioned further while he was in custody.
At trial, he objected to the Crowns reliance upon the admissions he had made in his home, on the basis that he had not had access to legal advice prior to interview.
In G, the accused was indicted with offences including the possession of controlled drugs under the Misuse of Drugs Act 1971 and possession of prohibited firearms and ammunition under the Firearms Act 1968.
The police had obtained a warrant to search the accuseds flat.
They forced entry and found him there.
He struggled, and was handcuffed and cautioned.
He admitted to having drugs in his pocket, and responded to a number of questions about items found in the flat.
He was subsequently arrested and taken to a police station where he answered further questions.
He objected to the Crowns reliance at trial on the statements he made during the course of the search of the flat.
In each of the three cases, the Appeal Court of the High Court of Justiciary referred to this Court the question whether the act of the Lord Advocate in leading and relying on the evidence in question would be incompatible with the appellants rights under Article 6(1) and (3)(c) of the European Convention on Human Rights.
The Supreme Court, by a majority of 4 to 1, finds that, in the cases of Ambrose and M, the act of the Lord Advocate in leading and relying at the trial on the evidence that was obtained from them in response to police questioning without having had access to legal advice was not incompatible with the Article 6(1) and (3)(c) right; and in the case of G that it was incompatible.
In Ambrose and M, the question whether, taking all the circumstances into account, it would be fair to admit this evidence, is left open for decision by the Appeal Court and Sheriff Court respectively.
Lord Hope gives the leading judgment.
Lord Kerr gives a separate dissenting judgment finding in all three cases that the evidence would be inadmissible.
In each of these three cases, the circumstances differ from those before the Supreme Court in Cadder and before the Grand Chamber in Salduz, in that the evidence in question was obtained through police questioning before the individuals were detained at a police station.
The Supreme Court notes, firstly, that the jurisdiction of this court is limited to a consideration of the devolution issue which is raised by each of these references, and does not extend to ruling on how the circumstances referred to in each case would fall to be dealt with under domestic law.
Secondly, it notes that a decision by this court that there is a rule that a person who is suspected of an offence but is not yet in custody has a right of access to a lawyer before being questioned by the police would have far reaching consequences for the investigation of crime by the authorities.
Therefore, if Strasbourg has not yet spoken clearly on this issue, the court would be wise to wait until it has done so [14 15].
The duty of the domestic court in interpreting the Convention is to keep pace with the Strasbourg case law as it evolves over time.
There is no obligation upon domestic courts to do more than that (R (Ullah) v Special Adjudicator [2004] UKHL 26, para 20 per Lord Bingham of Cornhill) [17].
The courts task in this case is to identify where the Strasbourg court stands on this issue.
It is not for this court to expand the scope of the Convention right further than the jurisprudence of the Strasbourg court justifies [20].
In domestic law, where an individual has not yet been detained under section 14 of the Criminal Procedure (Scotland) Act 1995, the test for the admissibility of answers given to questions put by police is whether or not there was unfairness on the part of the police.
The fact that the person did not have access to legal advice when being questioned is a circumstance to which the court may have regard in applying the test of fairness, but it carries no more weight than that.
There is no rule in domestic law that provides that police questioning of a person without access to legal advice who is suspected of an offence but is not in police custody must always be regarded as unfair.
The question is whether a rule to that effect is to be clearly found in the jurisprudence of the Strasbourg court [25].
The Grand Chamber in Salduz had in mind the need to protect an accused against abusive coercion while in custody.
The judgment appears to have been concerned only with establishing a rule that there was a right of access to a lawyer where the person being interrogated was in police custody [33].
That assessment is supported by subsequent Strasbourg case law, in particular Zaichenko v Russia (Application no.39660/02), the only case to date in which the complaint was of lack of legal assistance during police questioning when the applicant was not in custody [46].
If the Salduz judgment were to apply to statements made by a person in response to police questioning before being taken into custody, the court would have had to have said so expressly.
It did not do so [35].
The privilege against self incrimination is not an absolute right (Murray v United Kingdom (1996) 22 EHRR 29, para 47).
It is primarily concerned with respecting the will of the person to remain silent (Saunders v United Kingdom (1996) 23 EHRR 313, para 68), and a person is free to confess if he is willing to do so.
Police custody or its equivalent creates a need for protection of the accused against abusive coercion.
The same is not the case for questioning at the locus or in a persons home [54].
In principle, the line as to when access to legal advice must be provided before the person is questioned should be drawn as from the moment that he has been taken into police custody, or his freedom of action has been significantly curtailed [55].
The correct starting point when considering whether the persons Convention rights have been breached is to identify the moment at which he is charged for the purposes of Article 6(1); that is whether his situation is substantially affected (Deweer v Belgium (1980) 2 EHRR 439, para 46; Eckle v Germany (1982) 5 EHRR 1, para 73).
That will be the case as soon as the suspicion against him is being seriously investigated and the prosecution case compiled [62].
The fact that a person who has become a suspect and is not in
custody is questioned without access to legal advice will be a relevant factor in the assessment whether the accused was deprived of a fair hearing, but it will be no more than that.
In Ambrose and M, the question is whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning, conducted under common law at the roadside or at the accuseds home, without the accused having had access to legal advice, was incompatible with Article 6(1) and (3)(c).
This is answered in the negative.
Ambrose was charged for the purposes of Article 6 when he was cautioned.
Suspicion that he was committing an offence fell on him as soon as he told the police that the keys were in his pocket [67].
M was charged when he was cautioned by the police officer at his home [69].
But it would be to go further than Strasbourg has gone to hold that the appellants are entitled to a finding that this evidence is inadmissible because, as a rule, access to a lawyer should have been provided to him when he was being subjected to questioning at the roadside [68 & 70].
The question whether, taking all the circumstances into account, it would be fair to admit this evidence, is left open for the Appeal Court and Sheriff Court respectively.
In G, the question whether it is incompatible with his Convention rights for the Lord Advocate to lead evidence of his statements made during the course of the search is answered in the affirmative.
He was charged for the purposes of Article 6 by the time the police began their search.
The difference with this case was that there was a significant curtailment of Gs freedom of action.
He was detained and had been handcuffed, and was, in effect, in police custody from that moment onwards.
The circumstances were, therefore, sufficiently coercive for the incriminating answers that he gave to the questions that were put to him without access to legal advice to be inadmissible [71].
The same result need not, however, follow in every case where questions are put during a police search to a person who is to be take to have been charged for the purposes of Article 6; that, again, would be going further than Strasbourg has gone [72].
Lord Kerr would have found the evidence in question to be inadmissible in all three cases.
It is not open to courts of this country to refrain from recognising a claim to a Convention right simply because Strasbourg has not spoken clearly on the matter [128].
In practice, it is inevitable that many claims to Convention rights will have to be determined by the UK courts without the benefit of unequivocal jurisprudence from Strasbourg.
It is the duty of every domestic court to resolve the question of whether a claim to a Convention right is viable or not, even where the jurisprudence of the Strasbourg court does not disclose a clear current view [129].
As regards the right of access to a lawyer, the selection of the moment of being taken into custody as the first occasion on which legal representation becomes necessary is both arbitrary and illogical.
The judgment in Salduz indicates that the need to have a lawyer is not to be determined on a geographical or temporal basis but according to the significance of what is taking place when the admissions in question are made [136].
The essential question is: when the questioning is taking place, is the suspect in a position where the advice of a lawyer is essential if a fair trial is to occur.
If he is liable to incriminate himself at that time, a lawyers presence is required [145].
The judgment in Zaichenko is not clear, but does not indicate that formal arrest and interrogation in custody are essential prerequisites to the invocation of the right to legal assistance [158].
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The question for decision in this appeal is whether there has been good service of the claim form in this action on the respondent.
This is an appeal against an order of the Court of Appeal (Arden, Longmore and McFarlane LJJ) made on 15 December 2011 in which they set aside the orders of a number of judges and, in particular, an order of Sir Edward Evans Lombe (the judge) made on 28 January 2011 in which he declared, pursuant to CPR 6.37(5)(b) and/or 6.15(2), that the steps taken on 22 October 2009 to bring the claim form to the attention of the respondent amounted to good service of the claim form.
The Court of Appeal held that the judge should not have made that declaration, that various extensions of the validity of the claim form for service should not have been granted, that the respondent had not been properly served with the claim form and that it followed that the claim must be dismissed.
The principal issue in this appeal is whether the Court of Appeal was correct to hold that the judge should not have declared that the events of 22 October 2009 amounted to good service of the claim form.
The claims
As stated in the agreed statement of facts and issues, the underlying claim is for damages for fraud in connection with a contract for the purchase of shares in an Italian company called Gama SpA (Gama), made in March 2002, between the third appellant, as purchaser, and the respondent and Cicines Holdings Ltd (Cicines), as vendors, for a total consideration of US$14m.
The contract expressly provided that it was governed by English law and contained a non exclusive English jurisdiction clause.
The appellants claim that the shares were worthless or worth far less than the amount paid for them.
The claim alleges that the fraud involved corruption on the part of a Mr Haan, a lawyer for the appellants, who acted for them in connection with the sale and is said also to have acted secretly for the respondent without the appellants knowledge.
The claim form in this action was issued on 30 April 2009, following the settlement of an action (the Haan action) by the appellants against Mr Haan and a firm of solicitors (Hammonds) who were said to be vicariously liable for the torts of Mr Haan, in order to recover such part of the moneys paid under the contract as were not recovered in that action.
The background facts are set out in some detail by the judge at paras 2 to 12 of his judgment of 28 January 2011, [2011] EWHC 116 (Ch).
It is not necessary to set them out here, save to note that the action against Mr Haan and Hammonds came to trial on 11 March 2009 and was settled after eight days by a payment by the defendants in that action to the appellants of a sum which included costs.
The claims in this action mirror those in the Haan action, although, if this action were to succeed, credit would presumably have to be given for sums recovered in the Haan action.
The causes of action pleaded in this action are fraudulent misrepresentation and/or conspiracy and/or dishonest assistance and/or unconscionable bargain and/or undue influence, arising out of the alleged bribery and corruption of Mr Haan in order to bring about the contract for the purchase of shares in Gama in March 2002.
They are summarised by the judge at para 19 of his judgment.
The claims were brought against both the respondent and Cicines, but Cicines is not a party to this appeal.
Permission to serve the proceedings out of the jurisdiction and the claimants
attempts to serve them
It follows from the fact that the claim form was issued on 30 April 2009 that its validity for service out of the jurisdiction would expire after six months, on 29 October 2009.
The appellants took no steps for some three and a half months until they instructed counsel to settle the particulars of claim in mid August 2009.
The particulars of claim were signed on 9 September 2009 and on 14 September 2009 an application for permission to serve the proceedings on the respondent outside the jurisdiction was made to Morgan J, without notice to the respondent.
Both the particulars of claim and a detailed skeleton argument were put before the court.
Morgan J was satisfied that there was a good arguable case for service out of the jurisdiction and for the extension of the validity of the claim form.
By an order made on 14 September 2009, he gave permission under CPR 6.36 and 6.37 to serve the claim form and all other documents upon the respondent at an address at Farid Trad Street in Beirut in Lebanon (the Farid Trad Street address).
He extended the time for serving the claim form from 29 October 2009 until 31 December 2009 and, to the extent required, gave permission to serve the claim form and documents by alternative means, namely by personal service of an untranslated copy of all the documents at the Farid Trad Street address.
The evidence before Morgan J comprised the first and second witness statements of Mr Mascarenhas of the appellants solicitors and the first witness statement of the appellants' Lebanese lawyer, Mr Houssami.
The evidence in support of the application included the following.
The address in the claim form was in fact that of the respondents lawyer in Beirut.
The respondents home address was believed to be the Farid Trad Street address, which was the appropriate address for service if he was to be served personally.
That belief was based on what Mr Houssami had been told by individuals not identified in his witness statement and, more importantly, on the fact that he had previously effected service of legal proceedings there in late 2006 or early 2007 by leaving the documents with the respondents wife.
Lebanon was not a party to any bilateral convention on service of judicial documents and, in particular, the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965) (Cmnd 3986) (the Hague Service Convention) did not apply.
Service of originating process through the judicial authorities or the British Consulate would be likely to take several months.
The appellants evidence is that Mr Houssami used a notary to seek to serve the respondent by causing a service agent or clerk to attend at the Farid Trad Street address over a period of four consecutive days between 7 am and 4 pm, which were official working hours.
The respondent could not be located at that address.
The respondent denies that he lived there.
However, on 22 October 2009, an untranslated copy of the claim form, which was in English, together with other relevant documents were delivered to the offices of Mr Azoury, who was the respondents Lebanese lawyer in Beirut.
This was not the method of service authorised by the order of Morgan J, although on the respondent's application to set aside the various orders of the court, including the order of Morgan J, which came before the judge, the appellants contended that it amounted to good service on the respondent under Lebanese law.
However, the Court of Appeal resolved this issue against the appellants, and there is no appeal against that decision.
The appellants continued to try to effect service through diplomatic channels at the Farid Trad Street address.
They also obtained Arabic translations of the documents for service and a request for service out was delivered to the Foreign Process Section of the High Court on 19 November 2009 together with certified translations.
There were some delays and, shortly before a hearing before Sales J on 16 December 2009, the appellants' solicitors were told by the Foreign and Commonwealth Office that service through diplomatic channels in Lebanon might take a further three months from receipt of the documents.
On 16 December Sales J heard a further without notice application and granted a four month extension of the validity of the claim form from 31 December 2009 until 30 April 2010 so as to enable service to take place at the Farid Trad Street address through diplomatic channels.
The use of diplomatic channels caused further delays.
Under cover of a letter dated 11 February 2010, Mr Azoury communicated with the appellants' solicitors and returned the documents received by him on 22 October 2009.
In the letter he noted that the address for service in the order of 14 September 2009, namely the Farid Trad Street address, was not that of the respondent, who had not to his knowledge ever lived there or had any connection with it.
He further said that he had never had instructions to accept service of documents other than in connection with the Lebanese proceedings (referred to in para 15 below) and that the respondent had confirmed that that was the case.
He gave no indication where the respondent could be served.
On 17 February 2010, the appellants solicitors, PCB Litigation (PCB), replied to the letter dated 11 February asserting that Mr Azoury held a general power of attorney to act on behalf of the respondent in any legal proceedings, that the respondent had expressly elected Mr Azourys office as a domicile in the power of attorney and that the proceedings were validly served under Lebanese law.
If that was not accepted, they asked Mr Azoury to provide them with the respondents usual address and to agree a date and time for service on the respondent.
Mr Azoury replied that the general power of attorney could only be used to authorise him to represent the respondent when expressly instructed to do so.
He did however add that the respondent would instruct English solicitors, which he did in the form of M&S Solicitors (M&S).
Correspondence ensued between PCB and M&S during which M&S made it clear that it was the respondents case that he had no obligation to accept service of the proceedings, to make himself available for service or to provide an address for service.
No agreement was reached.
By an application notice dated 22 March 2010, the appellants applied without notice under CPR 6.15 and/or 6.37(5)(b) for an order (1) that the steps already taken to serve the claim form amounted to good service; and/or (2) that the appellants be permitted to serve the claim form and other documents by alternative means, namely upon the respondents English or Lebanese solicitors; and (3) that the time for service of the claim form be extended.
Correspondence between the parties ensued and the application was adjourned by David Richards J.
The adjourned application came on for hearing before Lewison J on 14 April 2010 on notice to M&S, who wrote a detailed letter dated 25 March which was put before the court at their request.
Lewison J made a number of orders on 14 April 2010.
They included, by paragraph 1, (without prejudice to paragraph 2) a further extension of the time for serving the claim form to 30 June 2010 and, by paragraph 2 (without prejudice to paragraph 1) an order permitting the appellants to serve the claim form by alternative means, that is by service on the respondent's English or Lebanese solicitors.
The order extending time for service was made in case the alternative service order was set aside.
In addition the judge adjourned the appellants application for an order that the steps already taken on 22 October 2009 to bring the claim form to the attention of the respondent amounted to good service.
He adjourned that application generally but gave the appellants permission to restore it.
Lewison J gave a short judgment, to which I will refer below, which is of some importance because it was subsequently incorporated in extenso into the judgment of the judge on the subsequent hearing inter partes.
In the event, service was duly effected by alternative means on the respondent's English solicitors in accordance with the order of 14 April 2010 and the respondent acknowledged service on 1 May 2010.
Inter partes hearing
On 21 May 2010 the respondent issued an application to set aside the various orders that had been made in the action.
The application came before the judge, who heard it over four days from 7 December 2010.
He gave judgment on 28 January 2011.
He set out the background facts in detail between paras 1 and 19.
He considered first the respondents application to set aside the order of Morgan J giving permission to serve out of the jurisdiction.
He first rejected the respondents submission that there was no real issue between the parties which it is reasonable for the court to try under CPR 6.37(2).
The respondent relied on two grounds, first that the effect of the settlement of the Haan action was to settle the appellants claims against the respondent and, second, that the claims were time barred.
The judge held at paras 28 and 29 that the settlement agreement did not have that effect.
As to limitation he held that, although the cause of action accrued on 26 March 2002 and would thus be time barred as being more than six years before the issue of the claim form on 30 April 2009, the appellants had a good arguable case that they did not discover the fraud until 26 June 2003 or, alternatively May 2003, and that they could not have discovered it with reasonable diligence before 1 May 2003.
It followed that the judge held that the appellants had a good arguable case that the claims were not time barred when the claim form was issued on 30 April 2009.
The judge discussed this point in detail between paras 30 and 37 of his judgment.
The judge further rejected the respondents case that England was not the forum conveniens and that permission to serve out should be refused under CPR 6.37(3).
The judge discussed this point, again in detail, at paras 38 to 56.
He concluded the point in favour of the appellants.
He noted at para 54 that the appellants had given an undertaking to Morgan J not to pursue the claims in these proceedings in an action in Lebanon, which was both criminal and civil and (as explained by the judge at para 11) included the claims advanced in this action.
None of these issues is relevant to this appeal.
The judge thus did not reach the service issues until para 57 of his judgment.
The respondent applied for orders setting aside the various orders extending time for service of the claim form, by Morgan J from 29 October to 31 December 2009, by Sales J from 31 December 2009 to 30 April 2010 and by Lewison J from 30 April 2010 to 30 June 2010.
He also applied for an order setting aside Lewison Js order permitting service by alternative means on the respondents Lebanese and English lawyers.
The appellants cross applied for a declaration that in the events which had happened there had been good service of the claim form on the respondent and for an order further extending the time to enable the claim form to be served through British Consular channels should the previous extensions of time stand but the order for alternative service made by Lewison J be set aside.
The judge considered first the appellants cross application for a declaration.
This was in effect the restoration of the appellants' application for a declaration that the steps already taken amounted to good service which Lewison J had adjourned.
The judge granted the application and, as stated above, made a declaration, pursuant to CPR 6.37(5)(b) and/or 6.15(2), that the steps taken on 22 October 2009 to bring the claim form to the attention of the respondent amounted to good service of the claim form.
The CPR
The provisions of the CPR that are relevant for present purposes are these: Service of the claim form by an alternative method or at an alternative place 6.15 (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. (3) An application for an order under this rule (a) must be supported by evidence; and (b) may be made without notice. (4) An order under this rule must specify (a) the method or place of service; (b) the date on which the claim form is deemed served; and (c) the period for (i) filing an acknowledgment of service; (ii) filing an admission; or (iii) filing a defence.
Power of the court to dispense with service of the claim form 6.16 (1) The court may dispense with service of a claim form in exceptional circumstances.
Application for permission to serve the claim form out of the jurisdiction 6.37 (5) Where the court gives permission to serve a claim form out of the jurisdiction (b) it may (i) give directions about the method of service; and (ii) give permission for other documents in the proceedings to be served out of the jurisdiction.
Methods of service general provisions 6.40 (1) This rule contains general provisions about the method of service of a claim form or other document on a party out of the jurisdiction.
Where service is to be effected on a party out of the United Kingdom (3) Where a party wishes to serve a claim form or other document on a party out of the United Kingdom, it may be served (a) by any method provided for by (i) rule 6.41 (service in accordance with the Service Regulation); (ii) rule 6.42 (service through foreign governments, judicial authorities and British Consular authorities); or (iii) rule 6.44 (service of claim form or other document on a State); (b) by any method permitted by a Civil Procedure Convention or Treaty; or (c) by any other method permitted by the law of the country in which it is to be served. (4) Nothing in paragraph (3) or in any court order authorises or requires any person to do anything which is contrary to the law of the country where the claim form or other document is to be served.
Service of a claim form 7.5(2) Where the claim form is to be served out of the jurisdiction, the claim form must be served in accordance with Section IV of Part 6 within 6 months of the date of issue.
Extension of time for serving a claim form 7.6 (1) The claimant may apply for an order extending the period for compliance with rule 7.5. (2) The general rule is that an application to extend the time for compliance with rule 7.5 must be made (a) within the period specified by rule 7.5; or (b) where an order has been made under this rule, within the period for service specified by that order. (3) If the claimant applies for an order to extend the time for compliance after the end of the period specified by rule 7.5 or by an order made under this rule, the court may make such an order only if (a) the court has failed to serve the claim form; or (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. (4) An application for an order extending the time for compliance with rule 7.5 (a) must be supported by evidence; and (b) may be made without notice.
As the judge noted at para 66, before him the question was raised whether rule 6.15(2) could be used, as it is used in respect of issues as to service in proceedings where the parties are within the jurisdiction, retrospectively to accept the parties' actions as constituting good service where the defendant is outside the jurisdiction.
It was conceded before this court that rule 6.15(2) can be so used.
For my part, I would accept that that concession was correctly made.
The judge was to my mind correct to hold in para 71 that, just as the power under rule 6.15(1) prospectively to permit alternative service in a service out case is to be found in rule 6.37(5)(b)(i) or is to be implied generally into the rules governing service abroad (because that must have been the intention of the drafter of the 2008 amendments to CPR rule 6), so rule 6.37(5)(b)(i) is to be construed as conferring the power, via rule 6.15(2), retrospectively to validate alternative service in such a case, or such a power is to be implied generally into the rules governing service abroad.
In any event, the contrary was not contended before this court.
In para 72 the judge, in my opinion correctly, added that the power
retrospectively to validate alternative service in a service out case involves consideration of whether events in the foreign country in question were capable of constituting proper service of the proceedings in the sense that the court can be satisfied that the proceedings have been properly brought to the attention of the defendant.
As I will explain, that is an important point in the context of this appeal.
The appellants argument is that the court had power under rule 6.15(2) to make an order that steps already taken to bring the claim form to the attention of the respondent by an alternative method constituted good service.
The steps taken were the delivery of the claim form and other documents, including the particulars of claim, at Mr Azourys office in Beirut on 22 October 2009, which was within the initial six months validity of the claim form.
Orders under rule 6.15(1) and, by implication, also rule 6.15(2) can be made only if there is a good reason to do so.
The question, therefore, is whether there was a good reason to order that the steps taken on 22 October 2009 in Beirut to bring the claim form to the attention of the respondent constituted good service of the claim form upon him.
The judge held that there was.
In doing so, he was not exercising a discretion but was reaching a value judgment based on the evaluation of a number of different factors.
In such a case, the readiness of an appellate court to interfere with the evaluation of the judge will depend upon all the circumstances of the case.
The greater the number of factors to be taken into account, the more reluctant an appellate court should be to interfere with the decision of the judge.
As I see it, in such circumstances an appellate court should only interfere with that decision if satisfied that the judge erred in principle or was wrong in reaching the conclusion which he did.
It is important to note that rule 6.15 applies to authorise service by a method or at a place not otherwise permitted by CPR Part 6.
The starting point is thus that the defendant has not been served by a method or at such a place otherwise so permitted.
It therefore applies in cases (and only in cases) where none of the methods provided in rule 6.40(3), including any other method permitted by the law of the country in which it is to be served (see rule 6.40(3)(c)), has been successfully adopted.
The only bar to the exercise of the discretion under rule 6.15(1) or (2), if otherwise appropriate, is that, by rule 6.40(4), nothing in a court order must authorise any person to do anything which is contrary to the law of the country where the claim form is to be served.
So an order could not be made under rule 6.15(2) in this case if its effect would be contrary to the law of Lebanon.
Although it was held that delivery of the claim form was not permitted service under Lebanese law, it was not suggested or held that delivery of the documents was contrary to Lebanese law or that an order of an English court that such delivery was good service under English law was itself contrary to Lebanese law.
The judgment at first instance
As stated above, the judge set out Lewison Js judgment in extenso.
At para 59 the judge identified the parts of the evidence which had been before Lewison J and he then quoted paras 2 to 4 of the judgment as follows: 2.
The underlying claim raises serious allegations of fraud against the Defendant, Mr Baadarani; who is a Lebanese national.
Attempts have been made to serve via the Consular authorities in the Lebanon in accordance with CPR Part 6, rule 42.
Those attempts have proved very difficult, not least, because there is considerable uncertainty about the method by which service should be effected which, according to the evidence, goes back to a Treaty of the 1920s between the Lebanon and France.
Nonetheless, the claim form and its accompanying documents were, to use a neutral word, delivered to Mr Baadaranis Lebanese lawyer, who holds a power of attorney, which enables him to conduct proceedings, including proceedings in this jurisdiction. on Mr Baadarani's behalf.
That lawyer signed for the papers and retained them for some four months before returning them.
According to the claimant's Lebanese expert, that amounts to good service under Lebanese law.
Nonetheless, Mr Baadarani appears to be denying that he has been properly served and has declined to provide an address for service. 3.
In addition to delivery of those papers to the Lebanese lawyer, Mr Baadarani has instructed a firm of English solicitors called M & S Solicitors Ltd, who have taken up the cudgels on his behalf and so far as the evidence goes, have themselves at least had sight of the claim form and the other relevant documents.
They have written a long letter of 25 March 2010, which has been placed before me and to which Mr Penny, who appears on behalf of the claimant, has quite properly referred.
The points made in that letter have been addressed in the fifth witness statement of Mr Mascarenhas, which I have read. 4.
The purpose of service of proceedings, quite obviously, is to bring proceedings to the notice of a defendant.
It is not about playing technical games.
There is no doubt on the evidence that the defendant is fully aware of the proceedings which are sought to be brought against him, of the nature of the claims made against him and of the seriousness of the allegations.
The provisions of CPR rule 6.37(5) say that the court may, in giving permission to serve out of the jurisdiction: Give directions about the method of service.
That is a quite general provision and, as it seems to me, would ordinarily mean that the court would make directions, which did not involve one of the prescribed methods of service dealt with by rule 6.40 and following.
In other words, it is inherent in rule 6.37(5)(b)(i) that the court may make directions about alternative methods of service.
Where the court is dealing with service of proceedings within the jurisdiction the court also has the power to declare that steps already taken to bring the proceedings to the notice of a defendant should count as good service.
Mr Penny did at one stage submit that the same power applied to service out of the jurisdiction, but in the light of an interchange between him and me he is not pressing that submission and I am not ruling for or against it.
I will adjourn that part of the application notice in case it becomes a live issue at a later date.
In para 60 the judge noted a number of points derived from Lewison Js
judgment which he observed were based, not on the appellants evidence, but on the evidence of Mr Azoury and on the respondents solicitors letter of 25 March 2010.
In particular Lewison J found, not only that Mr Azoury retained the documents delivered on 22 October 2009, but that they or a copy of them had been in the hands of the respondents English lawyers prior to writing their long letter of 25 March 2010.
Lewison J found that the respondent must have been fully aware of the contents of the claim form.
The judge concluded that such a finding of fact seemed to him inevitably to follow from Lewison Js other findings, which, because of their source, were in his judgment unchallengeable.
For present purposes, the critical part of the reasoning of the judge is in paras 73 and 74 of his judgment.
They are in these terms: 73.
In my judgment, the declaration sought by the claimants in this case should be made.
The evidence before Lewison J and before me is sufficient to demonstrate that this is an appropriate case for the use of the power.
The principal reasons for doing so are that the method of service through diplomatic channels in Lebanon has proved impractical and any attempt to pursue it further will lead to unacceptable delay and expense.
B has demonstrated that he is unwilling to co operate with service of the proceedings by disclosing his address in the Lebanon, but, and most importantly, it is clear that B, through his advisers, is fully apprised of the nature of the claim being brought. 74.
The delivery of the claim form and supporting documents to Bs Lebanese lawyer on 22 October 2009, which I have found is to be treated as good service of the proceedings, took place during the initial six month period of validity of the claim form.
Accordingly, my conclusion means that the three orders for extension of the validity of the claim form were unnecessary and I need not deal with the question of whether those orders are to be set aside as the first defendant contends.
Nor need I deal with the claimants application for a yet further extension of that validity.
The judge thus determined the issue of service on the basis that there was good reason for making the declaration sought under CPR rule 6.15(2).
In short he held that there was a good reason to order that the steps taken to deliver the documents to Mr Azourys offices in Beirut on 22 October 2009 and thus to bring the documents to the respondents attention amounted to good service on him.
The Court of Appeal discussion
The respondent appealed to the Court of Appeal against the making of that declaration.
It appears to me that the central question on that appeal ought to have been whether the judge was entitled to make the declaration and that the appeal should have turned on the question whether, having afforded the decision of the judge appropriate respect, the Court of Appeal concluded that he erred in principle or was wrong in reaching the conclusion which he did.
However, that does not seem to have been the focus of the argument in the Court of Appeal.
In the Court of Appeal Longmore LJ, with whom McFarlane and Arden LJJ agreed, first considered and, at paras 5 to 8, rejected the first ground of appeal, which again asserted that England was not the appropriate forum for these proceedings.
The respondent has not sought to argue that point in this court.
As to service, Longmore LJ referred to some of the evidence in detail at paras 11 to 16.
He then referred to the judgment and, in particular, to the declaration at para 17.
At para 18 he said this: It would be unusual (to say the least) for a judge to validate a form of service which was not valid by local law.
It must follow that, although he does not spell it out, the judge must by implication be taken to have decided that the service which took place was valid by Lebanese law because he also decided that he would and should retrospectively validate the service that had taken place.
It was submitted by Mr Freedman QC on behalf of the appellants that the judge did not hold, either expressly or by implication, that the delivery of the documents on 22 October 2009 was good service under Lebanese law.
I would accept Mr Freedmans submission.
The judge did not hold in paras
73 and 74 that there was good service under Lebanese law.
If he had so held, there would have been no need for the declaration granted by the judge because the service would have been good service as service by any other method permitted by the law of the country in which it is to be served (see rule 6.40.(3)(c)), which in this case was of course Lebanon.
As already explained, an order under rule 6.15(2) may only be made where there is a good reason to authorise service by a method or at a place not otherwise permitted by Part 6.
The judge could, therefore, not have made the declaration if he had taken the view that the delivery of the documents on 22 October was good service under Lebanese law.
Moreover, it is in my opinion clear from the first sentence of para 74 that the judge was not holding that the delivery was good service under Lebanese law but that it was to be treated as good service under English law pursuant to CPR 6.15(2).
The question is whether the judge was entitled to hold that there was a good reason to order that the delivery of the documents to Mr Azoury on 22 October 2009 was to be treated as good service.
Whether there was good reason is essentially a matter of fact.
I do not think that it is appropriate to add a gloss to the test by saying that there will only be a good reason in exceptional circumstances.
Under CPR 6.16, the court can only dispense with service of the claim form in exceptional circumstances.
CPR 6.15(1) and, by implication, also 6.15(2) require only a good reason.
It seems to me that in the future, under rule 6.15(2), in a case not involving the Hague Service Convention or a bilateral service treaty, the court should simply ask 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.
This is not a case in which the Hague Service Convention applies or in which there is any bilateral service convention or treaty between the United Kingdom and Lebanon.
In the courts below, the case was argued throughout on that basis and, although there was a hint in the argument before this court that that might not be the case, it was accepted that the appeal should be determined on that basis.
It follows that an alternative service order does not run the risk of subverting the provisions of any such convention or treaty: cf the reasoning of the Court of Appeal in Knauf UK GmbH v British Gypsum Ltd [2002] 1 WLR 907, paras 46 to 59 and Cecil v Bayat [2011] EWCA Civ 135, [2011] 1 WLR 3086, paras 65 to 68 and 113.
In particular, Rix LJ suggested at para 113 of the latter case that it may be that orders permitting alternative service are not unusual in the case of countries with which there are no bilateral treaties for service and where service can take very long periods of up to a year.
I agree.
I say nothing about the position where there is a relevant convention or treaty.
As stated above, in a case of this kind the court should simply ask itself whether, in all the circumstances of the particular case, there is a good reason to make the order sought.
It should not be necessary for the court to spend undue time analysing decisions of judges in previous cases which have depended upon their own facts.
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).
On the other hand, the wording of the rule shows that it is a critical factor.
As the editors of the 2013 edition of the White Book note (vol 1, para 6.15.5), rule 6.15(2) was designed to remedy what were thought to be defects as matters stood before 1 October 2008.
The Court of Appeal had held in Elmes v Hygrade Food Products plc [2001] EWCA Civ 121 that the court had no jurisdiction to order retrospectively that an erroneous method of service already adopted should be allowed to stand as service by an alternative method permitted by the court.
The editors of the White Book add that the particular significance of rule 6.15(2) is that it may enable a claimant to escape the serious consequences that would normally ensue where there has been mis service and, not only has the period for service of the claim form fixed by CPR 7.5 run, but also the relevant limitation period has expired.
Service has a number of purposes but the most important is to my mind to ensure that the contents of the document served, here the claim form, is communicated to the defendant.
In Olafsson v Gissurarson (No 2) [2008] EWCA Civ 152, [2008] 1 WLR 2016, para 55 I said, in a not dissimilar context, that the whole purpose of service is to inform the defendant of the contents of the claim form and the nature of the claimant's case: see eg Barclays Bank of Swaziland Ltd v Hahn [1989] 1 WLR 506, 509 per Lord Brightman, and the definition of service in the glossary to the CPR, which describes it as steps required to bring documents used in court proceedings to a person's attention.
I adhere to that view.
It is plain from paragraph 73 of his judgment quoted above that the judge
took account of a series of factors.
He said that, most importantly, it was clear that the respondent, through his advisers was fully apprised of the nature of the claim being brought.
That was because, as the judge had made clear at para 60, the respondent must have been fully aware of the contents of the claim form as a result of it and the other documents having been delivered to his lawyers on 22 October in Beirut and communicated to his London solicitors and to him.
As Lewison J said at para 4 of his judgment (quoted above): The purpose of service of proceedings, quite obviously, is to bring proceedings to the notice of a defendant.
It is not about playing technical games.
There is no doubt on the evidence that the defendant is fully aware of the proceedings which are sought to be brought against him, of the nature of the claims made against him and of the seriousness of the allegations.
I agree.
In addition the judge had regard to the fact that service through diplomatic channels in Lebanon had proved impractical and that any attempt to pursue it further would lead to unacceptable delay and expense.
Furthermore, the judge noted that the respondent was unwilling to co operate with service of the proceedings by disclosing his address in the Lebanon.
While I accept the submission made on behalf of the respondent that he was not under a duty to disclose his address, his refusal to co operate does seem to me to be a highly relevant factor in deciding whether there was a good reason for treating as good service the delivery of the documents in Beirut within the six months validity of the claim form in circumstances in which the documents came to his knowledge.
It was submitted that the judge did not have regard either to the three and a half month delay between the time the appellants issued the claim form and the time they instructed counsel to settle particulars of claim or to the fact that the claim was time barred.
I would not accept those submissions.
It is true that he did not expressly refer to either point in the part of his judgment dealing with service but I do not think that he can have been unaware of either point.
As to the time bar, the judge was plainly well aware of it.
Indeed, he discussed the limitation defence in detail between paras 30 and 33.
The significance of the time bar defence was in the minds of the parties and the judge throughout.
The judge thought that there was good reason for making an order under rule 6.15(2) notwithstanding that defence and was, in my view, entitled to take that view.
As to the three and a half months delay, the judge must have been aware of it.
It seems to me to be likely that he took the view that, given the difficulties which faced the appellants in serving the claim form, the delay made no difference.
He was entitled to do so.
The critical points were that the documents were delivered within the six months validity of the claim form and brought to the respondents attention and that service via diplomatic channels had proved impracticable.
In these circumstances I do not think that the judge made an error of principle.
He correctly directed himself that the question was whether there was a good reason to order under rule 6.15(2) that the steps already taken to bring the claim form to the attention of the respondent constituted good service.
He answered that question in the affirmative and was entitled to reach that conclusion.
The Court of Appeal did not focus on the reasoning of the judge.
The essential reasoning of the Court of Appeal is set out in the judgment of Longmore LJ at paras 22 to 32.
He considered first (between paras 22 and 28) whether service on Mr Azoury was good service under Lebanese law and concluded at para 29 that it was not.
As I indicated above, the appellants do not challenge that conclusion.
There are five respects in which I respectfully disagree with the conclusions reached by the Court of Appeal.
The first is that referred to in paras 31 and 32 above, namely that the judge did not decide that there had been valid service of the claim form under Lebanese law.
The second is related to the first.
In paras 22 and 23 Longmore LJ said this: 22. [CPR 6.37(5)(b)(i)] authorises the court therefore to make an order for alternative service pursuant to CPR 6.15(1) and also to make such an order with retrospective effect pursuant to CPR 6.15(2).
Nevertheless the exercise of this power is liable to make what is already an exorbitant power still more exorbitant and I am persuaded by Mr Greatorex that it must indeed be exercised cautiously and, as Stanley Burnton LJ said in Cecil v Bayat [2011] 1 WLR 3086, para 65, should be regarded as exceptional.
It would, therefore, usually be inappropriate to validate retrospectively a form of service which was not authorised by an order of an English judge when it was effected and was not good service by local law.
CPR 6.40 permits three methods of service including service through the British Consular authorities and any additional method of service should usually not be necessary.
The fact that CPR 6.40(4) expressly states that nothing in any court order can authorise or require any person to do anything contrary to the law of the country in which the document is to be served does not mean that it can be appropriate to validate a form of service which, while not itself contrary to the local law in the sense of being illegal, is nevertheless not valid by that law.
It follows that a claimant who wishes retrospective validation of a method of service in a foreign country must (save perhaps where there are adequate safeguards which were not present in this case) show that the method of service which is to be retrospectively validated was good service by the local law.
Service on Mr Azoury would not be regarded as good service on Mr Baadarani as a matter of English law merely because Mr Azoury was clothed with a general power of attorney.
Can Mr Freedman show that the position is any different in Lebanese law? 23.
I do not agree that for the court to make an order under rule 6.15(2) is to
make what is already an exorbitant power still more exorbitant.
I recognise of course that service out of the jurisdiction has traditionally been regarded as the exercise of an exorbitant jurisdiction.
That is a consideration which has been of importance in determining whether permission to serve out of the jurisdiction should be granted, although in this regard I agree with the approach set out by Lord Sumption in his judgment.
In any event, in this case, it is now accepted that it was proper to serve the claim form out of the jurisdiction.
The rules as to the method of service set out above seem to me to have the legitimate sensibilities of other states in mind.
It is for that reason that CPR 6.40(4) provides that nothing in CPR 6.40(3) or in any court order authorises or requires any person to do anything which is contrary to the law of the country of service.
I have already expressed my view that the order recognising the delivery of the claim form as alternative service under English law is not contrary to Lebanese law.
Moreover it was not in breach of any convention or treaty but merely recognised that the claim form (and other documents) had been brought to the attention of the respondent.
I do not think, therefore, that in a case not involving the Hague Service Convention or a bilateral service treaty, an order under rule 6.15(2) must be regarded as exceptional or, indeed as suggested in para 29 of Longmore LJs judgment, that there must be a very good reason for it.
As already stated, the CPR do not so provide.
They merely require good reason.
My third reason for disagreeing with the Court of Appeal concerns para 23 of Longmore LJs judgment, where he says that a claimant who wishes the court retrospectively to validate alternative service abroad must (save perhaps where there are adequate safeguards which were not present in this case) show that the method used was good service under the local law.
As noted above, that would render rule 6.15(1) and (2) otiose.
Without the words in brackets, the proposition in para 23 would not be correct.
It is not however clear to me what safeguards the court had in mind.
In any event, for the reasons already stated, Longmore LJ was wrong in my view to suggest that a court needs a very good reason to make an order under rule 6.15(2) where the steps taken did not constitute valid service under local law.
The fourth reason arises out of the Court of Appeals reliance upon the fact that the appellants did not issue the claim form until nearly the end of the limitation period.
At para 29 of his judgment, Longmore LJ stated: 29.
Since, therefore, Mr Azoury had no authority in fact to accept service and since he did not, in any event, purport to do so, the delivery of the claim form and associated documentation to him did not, in my view, constitute good service in Lebanese law.
I do not, therefore, think that the judge should have retrospectively validated that service as alternative service to that directed by Morgan J unless there was very good reason to do so.
The only reason to do so was to avoid the claim becoming time barred, which is not in itself a good reason (let alone an exceptional reason) for preserving a stale claim.
Mr Freedman submits that both personal service and service through diplomatic channels had become impossible, but that impossibility (as to which there was very little evidence) has only arisen as a result of the dilatory way in which the claimants have pursued the English claim.
They were asking for trouble by only issuing their claim form shortly before the limitation expired.
If the claim form had been issued say four years earlier, and a diligent process server had been instructed, Mr Baadarani might well have been served at one of the three address identified by Mr Houssami in his witness statement and the order of Morgan J would have been complied with.
Four years might even have been long enough for diplomatic channels to be effective but it is not suggested that Mr Baadarani could only be served in that manner.
If it really was proving impossible to effect service over that long period, an application for alternative service could still have been made well before the six year period had expired and no retroactive gymnastics would have been necessary.
As I read para 29, the delay prior to the issue of the claim form was a significant part of the reasoning of the Court of Appeal, although, as I understand it, it was not a point taken on behalf of the respondent.
I would accept the submission that (save perhaps in exceptional circumstances) events before the issue of the claim form are not relevant.
The focus of the inquiry on an issue of this kind is not and (so far as I am aware) has never been on events before the issue of the writ or claim form.
The relevant focus is upon the reason why the claim form cannot or could not be served within the period of its validity.
The judge held that there was an issue to be tried on the question whether the appellants claim was time barred.
In resolving the issues of service, the court had therefore to treat the claim form as issued in time.
This brings me to a consideration of the facts and to the fifth respect in which I respectfully disagree with the Court of Appeal.
In para 31 Longmore LJ said this: 31.
In the present case both the evidence of the fact (if it be a fact) that Mr Baadarani did in fact reside at the suggested address and the evidence of the attempt to serve him there was very meagre.
That evidence does not, in my judgment, show that there was such an ineffective attempt at service to constitute a good reason for not serving him at that address in such a way as to justify even an original order for alternative service pursuant to CPR 6.15(1) let alone an order that a form of service unilaterally chosen by the claimants should be deemed to be good service pursuant to CPR 6.15(2).
It appears that the respondent did not in fact reside at the Farid Trad Street address.
However, there is no reason to think that the appellants did not genuinely think that he did.
Moreover there is no evidence that they could have found out what his address was, especially in circumstances where he was refusing to tell them where he lived.
If he did not live at the Farid Trad Street address, further attempts to serve him there would have proved fruitless.
In these circumstances, the judge was entitled to reach the conclusions of fact which he did.
As the judge explained, there were difficulties in serving the claim form, the appellants cannot be blamed for failing to ascertain his address, especially in circumstances in which the respondent instructed his lawyers to refuse to tell the appellants what it was.
Moreover, the claim form was delivered to Mr Azourys office within the period of its validity, with the result that it came to the attention of the respondent.
In all these circumstances he held that there was a good reason to grant the declaration.
In my opinion there is no legitimate basis on which to interfere with that decision.
CONCLUSION
For these reasons I would allow the appeal and restore the declaration made by the judge.
In these circumstances the other issues argued on the appeal do not arise.
LORD SUMPTION (with whom Lord Neuberger, Lord Reed and Lord Carnwath agree)
In his judgment in the Court of Appeal, Longmore LJ described the service of the English Courts process out of the jurisdiction as an exorbitant jurisdiction, which would be made even more exorbitant by retrospectively authorising the mode of service adopted in this case.
This characterisation of the jurisdiction to allow service out is traditional, and was originally based on the notion that the service of proceedings abroad was an assertion of sovereign power over the Defendant and a corresponding interference with the sovereignty of the state in which process was served.
This is no longer a realistic view of the situation.
The adoption in English law of the doctrine of forum non conveniens and the accession by the United Kingdom to a number of conventions regulating the international jurisdiction of national courts, means that in the overwhelming majority of cases where service out is authorised there will have been either a contractual submission to the jurisdiction of the English court or else a substantial connection between the dispute and this country.
Moreover, there is now a far greater measure of practical reciprocity than there once was.
Litigation between residents of different states is a routine incident of modern commercial life.
A jurisdiction similar to that exercised by the English court is now exercised by the courts of many other countries.
The basic principles on which the jurisdiction is exercisable by the English courts are similar to those underlying a number of international jurisdictional conventions, notably the Brussels Convention (and corresponding regulation) and the Lugano Convention.
The characterisation of the service of process abroad as an assertion of sovereignty may have been superficially plausible under the old form of writ (We command you).
But it is, and probably always was, in reality no more than notice of the commencement of proceedings which was necessary to enable the Defendant to decide whether and if so how to respond in his own interest.
It should no longer be necessary to resort to the kind of muscular presumptions against service out which are implicit in adjectives like exorbitant.
The decision is generally a pragmatic one in the interests of the efficient conduct of litigation in an appropriate forum.
For these reasons I cannot share the starting point from which the Court of Appeal approached the present case.
I consider that the appeal should be allowed for the reasons given in the judgment of Lord Clarke.
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This case concerns the circumstances in which a court may make an order retrospectively declaring that steps taken by a claimant to bring a claim form to the attention of a defendant should be treated as good service.
On 30 April 2009, Mr Abela and his two companies brought a claim for damages for fraud against Mr Baadarani in connection with a contract for the purchase of shares in an Italian company which the appellants contend were worthless, or were worth far less than the amount for which they were purchased.
In September 2009, permission was granted for the claim form and all other documents to be served on Mr Baadarani at an address at Farid Trad Street in Beirut, Lebanon.
No relevant bilateral treaty on service of judicial documents existed between the UK and Lebanon, and the Hague Service Convention was not applicable.
Time for serving the claim form was extended until 31 December 2009 and permission was granted, if necessary, to serve Mr Baadarani personally at the Farid Trad Street address.
The appellants gave evidence that they had used a notary to seek to serve Mr Baadarani at the Farid Trad Street address by instructing a service agent or clerk to attend that property over a period of four consecutive days.
Mr Baadarani could not, however, be found.
He denies that he has ever lived at the Farid Trad Street address.
On 22 October 2009 a copy of the claim form and other relevant documents were delivered to the offices of Mr Baadaranis Lebanese lawyer in Beirut, Mr Azoury.
That method of service had not been authorised by the judge and it is accepted it that was not good service under Lebanese law; Mr Azoury said that he had never been given instructions to accept service of documents on behalf of Mr Baadarani save in connection with certain Lebanese proceedings.
Mr Azoury gave no indication of where Mr Baadarani could be served.
Arabic translations of the relevant documents were delivered to the Foreign Process Section of the High Court in November 2009 together with certified translations.
The appellants were informed in December 2009 that service on Mr Baadarani in Lebanon via diplomatic channels could take a further three months.
In April 2010, Lewison J extended time for service of the claim form and granted permission for the claim form to be served on Mr Baadarani by alternative means, namely via his English or Lebanese solicitors.
An application by the appellants that the steps already taken to serve Mr Baadarani be treated as good service was adjourned.
Service was subsequently effected by alternative means on Mr Baadarnis English solicitors in May 2010.
Mr Baadarani applied to set aside the various orders that had been made to extend time for service of the claim form and also sought to set aside the order permitting alternative service via Mr Baadaranis English and Lebanese solicitors.
That application did not need to be determined because Sir Edward Evans Lombe made a declaration at the request of the appellants, pursuant to rules 6.37(5)(b) and/or 6.15(2) of the Civil Procedure Rules (CPR), that the steps taken on 22 October 2009 constituted good service of the claim form.
The Court of Appeal reversed that decision and held that the various extensions of time for service of the claim form should not have been granted.
The claim was, therefore, dismissed.
Mr Abela and the other appellants appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
Lord Clarke gives the leading judgment.
CPR 6.15(2) can be used retrospectively to validate steps taken to serve a claim form even if the defendant is not within the jurisdiction [21, 22].
Orders under CPR 6.15(1) and (2) can be made only if there is good reason to do so.
The judges conclusion that there was a good reason to make an order under 6.15(2) constituted a value judgment based on an evaluation of a number of different factors.
An appellate court should be reluctant to interfere with such a decision [23].
The Court of Appeal was wrong to say that the making of an order under CPR 6.15(2) in a service out case is an exorbitant power.
It is not appropriate to say that such an order may only be made in exceptional circumstances, at any rate in a case in which there is no danger of subverting any international convention or treaty.
The test under CPR 6.15(2) is simply whether there is good reason to make such an order. [33, 34, 45, 53].
CPR 6.15(2) applies only in cases where none of the methods of services permitted by CPR 6.40(3) have been successfully adopted, including any method of service permitted by the law of the country in which the defendant is to be served.
A claimant seeking an order under CPR 6.15(2) is not, therefore, required to show that the method of service used was good service under local law.
The Court of Appeal was, in any event, wrong to say that the judge had concluded that service of the documents on Mr Azoury was good service under Lebanese law; if the judge had reached that conclusion, there would have been no reason for him to make an order under CPR 6.15(2) [24, 32, 46].
The only bar to the use of CPR 6.15(2), if otherwise appropriate, is the rule, under CPR 6.40(4) that nothing in a court order may authorise any person to do anything which is contrary to the law of the country where the claim form is to be served.
Although delivery of the claim form and other documents to Mr Azoury was not good service on Mr Baadarani under Lebanese law, it has not been suggested that it was contrary to Lebanese law [24].
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 CPR 6.15(2).
That is, however, a critical factor.
Service has a number of purposes, but the most important is to ensure that the contents of the document served are communicated to the person served. [36].
The fact that a claimant has delayed before issuing the claim form is not, save perhaps in exceptional circumstances, relevant when determining whether an order should be made under CPR 6.15(2).
The focus must be on the reason why the claim form cannot or could not be served be served within the period of its validity [48].
The judge was entitled to conclude that an order under CPR 6.15(2) was appropriate.
The judge correctly took account of the fact that Mr Baadarani, through his English and Lebanese lawyers, was fully apprised of the nature of the claim being brought against him.
The claim form and other documents were delivered to him within the initial period of validity of the claim form.
He also took account of the fact that service in Lebanon via diplomatic channels had proved impractical and that Mr Baadarani was unwilling to cooperate by disclosing his address to the appellants.
Whilst Mr Baadarani had no obligation to disclose his address, his refusal to cooperate was a highly relevant factor in determining whether there was a good reason to make an order under CPR 6.15(2).
The judge was entitled to take the view that an order under CPR 6.15(2) was appropriate notwithstanding the three and a half month delay between the issue of the claim form and the application for permission to service the claim out of the jurisdiction, and despite the fact that the claim against Mr Baadarani may be time barred [37, 39, 40].
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This appeal is concerned with the operation of the disciplinary procedures for doctors and dentists in the National Health Service, which the Secretary of State for Health introduced over eight years ago.
It raises an important question about the roles of the case investigator and the case manager when handling concerns about a doctors performance.
The relevant procedures
In December 2003 the Secretary of State for Health exercised his powers under section 17 of the National Health Service Act 1977 to give directions called the Restriction of Practice and Exclusion from Work Directions 2003.
These required all NHS bodies to comply with a document which set out new procedures for the initial handling of concerns about doctors and dentists in the NHS (Health Service Circular 2003/12).
Those procedures became parts I and II of the framework for disciplinary procedures for doctors and dentists in the NHS which was agreed by the Department of Health, the British Medical Association and the British Dental Association and was issued in February 2005.
By the Directions on Disciplinary Procedures 2005 the Secretary of State directed all NHS bodies in England and Wales to implement the full version of the framework contained in a document called Maintaining High Professional Standards in the Modern NHS (MHPS).
The principal relevant innovations in MHPS were: (1) An employing trust took on responsibility for disciplining doctors and dentists whom it employed; (2) Doctors and dentists were made subject to the same locally based misconduct procedures as other staff members; (3) The same disciplinary procedures applied to all doctors and dentists employed in the NHS; (4) The new disciplinary procedure replaced the disciplinary procedures contained in circular HC(90)9, which I discuss in paras 16 and 17 below; and (5) There was a single process for dealing with concerns about the professional capability of a doctor or dentist, which tied in with the work of the National Clinical Assessment Authority (NCAA).
This involved the preparation of an action plan to address the concerns about capability.
But if that plan had no realistic chance of success, there would be a capability hearing before a panel.
MHPS recognised the importance of doctors and dentists keeping their skills and knowledge up to date.
It expressed a preference for tackling concerns about the performance of a doctor or dentist by training and other remedial action rather than solely through disciplinary action.
But it did not seek to weaken accountability or avoid disciplinary action where there was genuinely serious misconduct.
It recognised that, where serious concerns were raised, the paramount duty was to protect patients.
MHPS provided that where concerns arose about a practitioners performance, the medical director was to liaise with the head of human resources to decide the appropriate course of action.
This involved the identification of the nature of the problem or concern and consideration whether it could be resolved without resort to formal disciplinary procedures.
Where the concerns related to clinical directors or consultants, the medical director was to be the case manager and was responsible for appointing a case investigator.
It was the task of the case investigator to investigate the allegations or concerns and report within four weeks.
Paragraph 12 of Part I of MHPS stated: The case investigator is responsible for leading the investigation into any allegations or concerns about a practitioner, establishing the facts and reporting the findings.
It was the responsibility of the case investigator to decide what information needed to be gathered and how it should be gathered.
It was envisaged that this could involve both written statements and oral evidence.
The practitioners who were the subject of investigations were entitled to see a list of the people whom the case investigator would interview.
The practitioners were to be given an opportunity to put their view of events to the case investigator and were to have the opportunity to be accompanied when they did so.
The case investigators report was to give the case manager sufficient information to enable him or her to decide whether, among other things: (i) there was a case of misconduct which should be considered by a disciplinary panel; (ii) there were concerns about performance that should be explored by the NCAA; (iii) there was a need to consider restrictions on the practice of the practitioner or his or her exclusion from work; and (iv) there were intractable problems about performance which should be put before a capability panel.
Part III of MHPS provided guidance on conduct hearings and disciplinary procedures.
Every NHS employer was to have a code of conduct or staff rules which set out acceptable standards of behaviour.
Breaches of those rules were to be treated as misconduct.
Issues of misconduct were to be dealt with by the employing NHS body under its own conduct procedures.
Employers were advised to seek the advice of the NCAA particularly in cases of professional misconduct.
In 2005 the NCAA changed its name to the National Clinical Assessment
Service (NCAS) when it became part of the National Patient Safety Agency.
It is now an operating division of the NHS Litigation Authority.
The Trusts implementation of MHPS In March 2007 the West London Mental Health NHS Trust (the Trust)
implemented the Secretary of States directions by introducing a policy for handling concerns about a doctors performance (policy D4A) and by amending the disciplinary policy (D4) which it introduced in July 2001.
The latter policy set out guidance on the conduct of staff in its staff charter (appendix 3 of policy D4).
That guidance included as a value Preserve Confidentiality and stated as example behaviour the following: Uphold the Trusts policies on freedom of and disclosure of information.
Do not abuse knowledge.
Use appropriate private locations for discussions of a personal nature and use e mail correspondence cautiously.
The disciplinary policy (D4), as amended, applied to all of the Trusts employees.
It stated, at para 3.1: It is a fundamental principle of all disciplinary action that employers and managers must act in a way which an objective observer would consider reasonable It provided that the member of staff had to be told in writing of the complaint in advance of any disciplinary hearing (para 3.6) and stated that no formal hearing should be convened until there was sufficient evidence to suggest that there was potentially a case to answer (para 3.8).
In para 13 it identified misconduct which might result in disciplinary action under three categories: minor, serious and gross.
Serious misconduct was defined as misconduct which is not so severe as to warrant dismissal but is too serious to be considered as minor.
In para 13.4.1 it described gross misconduct in the following terms: Some instances of misconduct/poor performance will be so serious as to potentially make any further relationship and trust between the Trust and the employee impossible.
It listed typical examples of such conduct.
In January 2011, after the events which gave rise to disciplinary proceedings in this case, the Trust amended that list with effect from 28 March 2011 to include: serious breaches of information governance with regard to data protection, confidentiality and information security.
The policy also set out in section 15 and appendix 5 a fair blame procedure which could apply when the potential conduct or performance issues do not constitute serious or gross misconduct.
Appendix 6 set out guidance for managers for investigations under the disciplinary policy.
In para 1.1 it stated Before disciplinary action is taken, it is essential to establish the facts through an investigation.
In para 2, it answered the question Why is the investigation important? thus: 2.1 to establish as far as practicable what has happened and why. 2.2 to ensure future decisions are rational and made on the basis of evidence. 2.3 to meet the requirement to demonstrate that natural justice has been observed. 2.4 to form the basis of any case presented to a Disciplinary Panel. 2.5 to ensure decisions made by the trust are capable of scrutiny either through an internal appeal or by an Employment Tribunal or court of law.
The appendix advised the manager carrying out the investigation on how to conduct and record interviews and on the preparation and content of the investigatory report.
Para 5 stated that the investigatory officer would be required to present findings to a formal hearing if there is a prima facie case of misconduct and their report would form the basis of their verbal presentation.
In para 9 the guidance stated that the report should contain conclusions, including whether there was a disciplinary case to answer at a formal hearing.
It stated that the conclusion might suggest whether the misconduct (if proven) could constitute serious or gross misconduct, or whether the Fair Blame procedure should apply.
The report was to have appendices including records of witness interviews and statements (para 10).
Para 11 instructed the investigatory officer to ensure that key witnesses were available for the hearing before the disciplinary panel to enable their evidence to be scrutinised by the employee and the panel.
Policy D4A, which related to doctors and dentists, replaced the disciplinary procedures in circular HC(90)9.
It provided in section 1 that where a serious concern arose about the conduct or capability of a doctor or dentist, the chief executive would appoint a case manager, whose first task was to identify the nature of the problem and assess the seriousness of the issue on the information available.
In deciding how to proceed, the chief executive was to consult the director of human resources, the medical director and the NCAS (para 1.8).
Where it was decided to follow a formal route, the medical director was to appoint an appropriately experienced person as case investigator.
Para 1.13 provided that the case investigator was responsible for leading the investigation into any allegations or concerns about a practitioner, establishing the facts and reporting the findings.
The case investigator was charged with collecting sufficient written statements and oral evidence to establish a case before it was decided whether to convene a disciplinary panel.
He or she had to keep a written record of the investigation, the conclusions reached and the course of action agreed by the director of human resources and the medical director.
The case investigator did not decide on what action should be taken and would not be a member of a disciplinary panel in the case (para 1.14).
The purpose of the investigation was to ascertain the facts in an unbiased manner (para 1.17).
The case investigator was to complete an investigation within four weeks and thereafter to submit a report to the case manager, giving sufficient information to enable the latter to decide, among other things, whether there was a case of misconduct that should be put to a conduct panel (para 1.19).
Part 3 of policy D4A provided that Misconduct matters for doctors and dentists, as for all other staff groups, are dealt with under the trusts disciplinary policy and procedure, D4, but that the Trust was to contact the NCAS for advice before proceeding when the concerns related to a medical practitioner.
Para 3.2 spoke about alleged misconduct being investigated under the Trusts disciplinary policy.
In my view, the succinct provisions in policy D4A relating to the investigation need to be read alongside the provisions relating to investigations in policy D4, and in particular in appendix 6, which I have summarised in para 11 above and which cover the same ground in more detail.
If there are any inconsistencies between the two policies, D4A will govern as the policy specific to doctors and dentists.
Part 4 of policy D4A set out procedures for dealing with concerns about capability, such as incompetent clinical practice, inability to communicate effectively with colleagues and ineffective clinical team working skills.
In short, the policy provided for consultation with the NCAS and, where possible, the remediation of any lack of capability identified in an assessment through an agreed action plan to provide education and support.
Where problems of capability were so serious that no such action plan had a realistic prospect of success, the case manager, informed by the investigation report and the advice of the NCAS, would have to decide whether there should be a capability hearing before a panel (para 4.12).
Such a hearing could result in the termination of the practitioners employment (para 4.23).
Para 4.5 gave guidance on how to proceed where issues of conduct and capability were involved.
It provided: It is inevitable that some cases will cover both conduct and capability issues.
It is recognised that these cases can be complex and difficult to manage.
If a case covers more than one category of problem, they should usually be combined under a capability hearing although there may be occasions where it is necessary to pursue a conduct issue separately.
Although it is for the Trust to decide upon the most appropriate way forward having consulted the NCAS[,] [i]n the event of a dispute the practitioner may make representations to the designated board member.
The individual is also entitled to use the Trusts grievance procedure if they consider that the case has been incorrectly classified.
The new investigative procedures were materially different from those in the previous disciplinary procedure set out in circular HC(90)9.
The earlier procedure involved first a decision by the chairman of a public health authority whether there was a prima facie case against the practitioner.
If the chairman decided that there was a prima facie case but the facts were disputed, the authority responsible for appointing the practitioner could set up an investigating panel, normally of three persons and with a legally qualified chairman who was not an officer of the Department of Health or the authority.
The task of the investigating panel was to establish all the relevant facts of the case (para 11).
The practitioner had a right to appear and be legally represented at the hearing.
A lawyer would adduce the evidence on behalf of the authority; the practitioners lawyer would cross examine the authoritys witnesses; and the practitioner could call his own witnesses, who would be subjected to cross examination.
The investigating panel produced a report, making findings of fact, and determining whether the practitioner was at fault.
The panel was entitled to recommend disciplinary action.
Although policy D4A used similar language to circular HC(90)9 when it spoke of the case investigator establishing the facts, the case investigators role is more limited than that of the investigating panel under circular HC(90)9, which could be described as quasi judicial in nature.
The latter made findings of fact after hearing evidence which would often have been tested by cross examination.
The authority then acted on the facts which the investigating panel had determined.
By contrast, under policies D4A and D4 the case investigator enquires into the facts by interviewing people, and the practitioner is not able to test their accounts of events during the investigation.
The outcome of the investigation is a report on whether there is a prima facie case of misconduct.
Thereafter, if the case manager decides that it is appropriate, the facts are determined at a hearing before a conduct panel, where the practitioner may be represented, test the evidence of the management witnesses, and call his or her own witnesses (policy D4 appendix 8).
The events in this case
Dr Chhabra was first employed by the Trust as a consultant forensic psychiatrist at Broadmoor Hospital, which is a high security unit, on 3 September 2009.
There was a written contract of employment dated 26 October 2009.
Clause 3 of that written contract provided: Whilst it is necessary to set out formal employment arrangements in this contract, we also recognise that you are a senior and professional employee who will usually work unsupervised and frequently have the responsibility for making important judgements and decisions.
It is essential therefore that you and we work in a spirit of mutual trust and confidence.
The clause then listed several mutual obligations, including cooperation and maintaining goodwill.
It was common ground that policies D4 and D4A were incorporated into the contract of employment so far as they were apt for incorporation.
Shortly after her appointment, problems emerged in her relationship with her clinical team.
In October 2009, negative feedback from members of her team caused her line manager to have concerns about her clinical team working skills.
As a result of the continued expression of concerns it was arranged in October 2010 that Dr Chhabra should undergo a 360 appraisal process.
Dr Chhabra contended that her case load had been increased contrary to her agreed job plan and that she had been deprived of the support of a senior house officer and a secretary for a number of months.
Her line manager, Dr Bhattacherjee, warned her that there might be a formal process if people continued to express concerns about her.
In dealing with those issues her line manager took advice from Mr Alan Wishart, the Trusts associate human resources director.
On 1 October 2010 a solicitor of one of Dr Chhabras patients submitted a complaint against her.
On 1 December 2010, Ms Jo Leech, who was the Head of Secure Services Policy at the Department of Health and had previously worked at Broadmoor Hospital, complained that Dr Chhabra had breached patient confidentiality when travelling by train in the company of another doctor on 24 November 2010.
The allegation was that Dr Chhabra, whilst seated opposite Ms Leech in a busy carriage, discussed an incident involving a patient in the secure unit and was reading a medical report on a patient whose name and personal details could be clearly identified.
As a result, the Trust suspended her from work.
After Dr Chhabra brought proceedings seeking an injunction against her suspension, the Trust allowed her to resume her work at another location in March 2011.
Meanwhile, on 15 December 2010 Dr Nicholas Broughton, the Trusts medical director, who was the case manager in relation to the concerns raised about Dr Chhabra, decided to commission an investigation into those concerns.
He appointed Dr Amanda Taylor, a consultant forensic psychiatrist from another trust as case investigator.
He instructed Dr Taylor to investigate the following four matters: (1) The allegation of breach of patient confidentiality during the train journey on 24 November 2010; (2) An allegation that Dr Chhabra had dictated patient reports when travelling on a train; (3) The concerns about Dr Chhabras working relationship with her clinical team; and (4) The solicitors complaint dated 1 October 2010.
After Dr Chhabra expressed concerns that Mr Wishart should not be involved in the investigation, solicitors acting on behalf of the Trust wrote a letter to her solicitors dated 24 February 2011 in which they undertook that Mr Wishart would take no part in the investigation.
Dr Taylor carried out her investigation, which included an interview with Dr Chhabra.
Unknown to Dr Chhabra, Dr Taylor communicated with Mr Wishart during the investigation.
In an email to him dated 29 March 2011, Dr Taylor recorded that Dr Chhabra had admitted the breach of patient confidentiality on the train journey on 24 November 2010 (allegation (1) in para 21 above) and expressed the view that she was unlikely to make the same mistake again.
More significantly, Dr Taylor sent Mr Wishart a draft of her report and Mr Wishart prepared suggested amendments to the draft.
The amendments, which were extensive, had the effect of stiffening the criticism of Dr Chhabra.
Dr Taylor accepted some of the suggested amendments but not others.
Among those she accepted was the characterisation as serious of breaches of confidentiality she had described in her report.
In June 2011 Dr Taylor completed and signed her report.
She found that Dr Chhabra had breached patient confidentiality by having patient documents clearly visible in a public environment during the train journey on 24 November 2010 and by dictating reports, which included patient sensitive information, on a train on other occasions.
She recorded Dr Chhabras admission of those breaches.
Her report also recorded Dr Chhabras unchallenged account that she had not appreciated at the time that her practice compromised patient confidentiality and that she believed that she had ensured that no other passengers were close by when she dictated the reports.
Dr Taylor also reported on an allegation by Dr Chhabras former secretary, which had not been expressly included in her terms of reference, that she had made telephone calls when travelling by train to work in which she had discussed patient information.
Dr Taylor did not make any finding on the accuracy of this allegation but recorded that there was a difference of opinion between Dr Chhabra and her secretary.
In relation to the third concern (in para 21 above), Dr Taylor stated that there were difficulties within Dr Chhabras clinical team which were issues of capability that needed to be addressed.
She concluded that the fourth issue, the solicitors complaint, did not have merit.
On 12 August 2011 Dr Broughton wrote two letters to Dr Chhabras solicitors.
In one, he informed her that he regarded the concerns about her team working to be matters of capability.
He said that he intended to seek the guidance of the NCAS on whether an assessment was needed or whether the Trust would be justified in proceeding to a capability hearing.
In the other letter, Dr Broughton stated that the breaches of confidentiality set out in the investigation report were potentially very serious allegations of misconduct which fell within para 8.4 (sic) of policy D4, and he quoted an extract from para 13.4.1 of the January 2011 revision of policy D4 (para 10 above).
The charges which he proposed to put to a disciplinary panel included not only the admitted breaches of confidentiality but also (i) the allegation, on which Dr Taylor had noted there had been a conflict of opinion, that Dr Chhabra, while travelling by train, had telephoned her secretary to discuss patient related information, and (ii) an allegation, which was not within Dr Taylors remit and on which she had not reported, that Dr Chhabra had breached patient confidentiality by disclosing information via email to her medical protection society and legal advisers.
Dr Broughton expressed the view that the charges were considered to be potential gross misconduct and that dismissal was a possible outcome of the hearing before the disciplinary panel.
He also stated his view that the issues of conduct and capability were unrelated and that the conduct allegations were straightforward and discrete.
Dr Chhabras solicitors objected to the charge of breach of patient confidentiality by disclosing information to her protection society and her legal advisers, which had not been the subject of Dr Taylors investigation.
At their request, the Trust agreed to instruct Dr Taylor to investigate that allegation.
Dr Taylor carried out this further investigation and reported that there was no complaint to answer.
As a result, on 17 January 2012 Dr Broughton informed Dr Chhabra by letter that that charge would not be pursued at the disciplinary hearing.
On 22 December 2011 the Trust referred the teamwork issues (the third matter in para 21 above) to the NCAS.
Dr Chhabra invoked the Trusts grievance procedure to complain about the decision to deal with the breaches of confidentiality in advance of the NCAS assessment.
Mr Wishart prepared the management case for the grievance hearing.
Dr Chhabras grievance was not upheld on first consideration.
The panel accepted that there was a possible relationship between the conduct and capability matters but concluded that issues of capability could be presented in mitigation at a conduct hearing.
It concluded that the decision to separate the conduct matters from the capability matters was appropriate and necessary.
She appealed that decision but her grievance appeal was rejected by letter dated 29 February 2012.
The appeal panel concluded that it was necessary to deal with the conduct matters separately because they were discrete and needed to be determined, whatever was the outcome of the capability process.
On 6 February 2012 a case conference was held to consider the Trusts capability concerns.
The Trust, Dr Chhabra and the NCAS entered into a tripartite agreement under which the Trust referred its concerns to the NCAS for an assessment.
Meanwhile, the disciplinary process continued on a separate track.
A conduct hearing was fixed for 9 March 2012, but that hearing was discharged after Dr Chhabra sought declaratory and injunctive relief from the High Court on 2 March 2012.
That started the legal process which has led to this appeal.
The legal proceedings
On 1 June 2012 Judge McMullen QC, sitting as a judge of the High Court, granted Dr Chhabra a declaration and injunctive relief, preventing the disciplinary panel from investigating the confidentiality concerns as matters of gross misconduct under the Trusts disciplinary policy.
The judge held that Dr Broughton had failed to re assess the gravity of the charges after he received Dr Taylors second report.
The Trust had erred and had breached its contract with Dr Chhabra in treating the matters as gross misconduct for which she could be dismissed.
He also held that Dr Broughton had broken the contract by referring to the conduct panel charges which were not grounded in Dr Taylors report.
The judge also held that the Trust was bound to deal with the matters through the capability procedures under para 4.5 of policy D4A.
He expressed the view that, as Dr Chhabra had admitted her mistakes, the case cried out to be dealt with under the fair blame procedure.
On 25 January 2013 the Court of Appeal (Pill, Jackson and Treacy LJJ) upheld the Trusts appeal and set aside the order of the judge at first instance.
The court held that policies D4 and D4A should be read together and that the applicable rules and procedures had contractual force.
The Trust had a discretion whether to combine capability and conduct issues under para 4.5 of policy D4A. Use of the fair blame procedure was encouraged but the Trust had a power to refer disciplinary matters to a conduct panel.
The case investigators role was to establish and report the available evidence.
The case manager in deciding what action to take was not confined to the findings of fact of the case investigator but could consider complaints supported by evidence reported by the case investigator, even if denied by the practitioner.
The conduct panel would resolve issues of disputed fact.
It was the task of the case manager to exercise judgement as to the seriousness of the misconduct, having regard to the evidence reported and findings made by the case investigator.
The central question was whether the case manager was justified in the circumstances in convening a disciplinary hearing.
The court concluded that Dr Broughton was entitled to regard the breach of confidentiality as a potentially serious offence and as a result was justified in deciding to convene the conduct panel.
Dr Chhabra appeals to this court.
Discussion of the legal challenges
The first and most significant issue is the roles of the case investigator and the case manager.
The procedures, which MHPS envisaged and which the Trust has set out in policy D4A and the amended policy D4, do not give the case investigator a power to determine the facts.
This is, as I have said (paras 16 and 17 above), radically different from the role of the investigating committee under circular HC(90)9.
The aim of the new procedure is to have someone, who can act in an objective and impartial way, investigate the complaints identified by the case manager to discover if there is a prima facie case of a capability issue and/or misconduct.
The case investigator gathers relevant information by interviewing people and reading documents.
The testimony of the interviewees is not tested by the practitioner or his or her representative.
In many cases the case investigator will not be able to resolve disputed issues of fact.
He or she can only record the conflicting accounts of the interviewees and, where appropriate, express views on the issue.
Where, as here, the practitioner admits that she has behaved in a certain way or where there is otherwise undisputed evidence, the case investigator can more readily make findings of fact.
If the case investigator were to conclude that there was no prima facie case of misconduct, there would normally be no basis for the case manager to decide to convene a conduct panel.
But if the report recorded evidence which made such a finding by the case investigator perverse, the case manager would not be bound by that conclusion.
Where the case investigators report makes findings of fact or records evidence capable of amounting to misconduct, the case manager may decide to convene a conduct panel.
The case manager can make his or her own assessment of the evidence which the case investigator records in the report.
The procedure before the panel enables the practitioner to test the evidence in support of the complaint and any findings of fact by the case investigator.
It would introduce an unhelpful inflexibility into the procedures if (i) the case investigator were not able to report evidence of misconduct which was closely related to but not precisely within the terms of reference (as in the former secretarys allegations) or (ii) the case manager were to be limited to considering only the case investigators findings of fact when deciding on further procedure.
Similarly, it would be unduly restrictive to require the case manager to formulate the complaint for consideration by a conduct panel precisely in the terms of the case investigators report.
I do not interpret MHPS or the Trusts policies in D4 and D4A as being so inflexible or restrictive.
The case manager has discretion in the formulation of the matters which are to go before a conduct panel, provided that they are based on the case investigators report and the accompanying materials in appendices of the report, such as the records of witness interviews and statements.
But the procedure does not envisage that the case manager can send to a conduct panel complaints which have not been considered by the case investigator or for which the case investigator has gathered no evidence.
Thus I consider that the Trust was correct in acceding to Dr Chhabras request for a second report from Dr Taylor in relation to the new allegation of breach of confidentiality in her communications with the protection society and her solicitors.
In reaching this view, I am in general agreement with the judgment of the Court of Appeal.
I also agree with the Court of Appeal that Dr Broughton would have been entitled to take the view that there was evidence in Dr Taylors report which could amount to serious misconduct and that he could properly have convened a conduct panel on that basis.
There is no doubt that patient confidentiality is an overriding principle and is central to trust between patients and doctors (General Medical Council, Good Medical Practice (2006) page 5 and paras 21 and 37, Guidance on Confidentiality (2009), para 6).
In my view the evidence in Dr Taylors report on the matters (1) and (2), which I set out in para 21 above, was capable of supporting a complaint of serious misconduct.
Where I respectfully differ from the Court of Appeal is that I consider that there have been a number of irregularities in the proceedings against Dr Chhabra which cumulatively render the convening of the conduct panel unlawful as a material breach of her contract of employment.
I have four concerns about the procedure which the Trust followed.
First, I do not think that the findings of fact and evidence, which Dr Taylor recorded, were capable when taken at their highest of supporting a charge of gross misconduct.
Paragraph 13.4.1 of policy D4 speaks of conduct so serious as to potentially make any further relationship and trust between the Trust and the employee impossible.
This language describes conduct which could involve a repudiatory breach of contract: Dunn v AAH Ltd [2010] IRLR 709, para 6; Wilson v Racher [1974] ICR 428.
There is no material in Dr Taylors report to support the view that the breaches of confidentiality which she recorded, including the former secretarys allegations, were wilful in the sense that they were deliberate breaches of that duty.
In my view they were qualitatively different from a deliberate breach of confidentiality such as speaking to the media about a patient.
Secondly, in reaching the view that Dr Chhabras behaviour could amount to gross misconduct, Dr Broughton founded on the words added to para 13.4.1 with effect from 28 March 2011, after the incidents in this case.
The list of misconduct in para 13.4.1 comprised only typical examples of what the Trust saw as amounting to gross misconduct and was not a comprehensive statement of the concept.
But Dr Broughton relied on the amended provision in support of his view that the complaints might amount to gross misconduct and quoted it in his letter of 12 August 2011 relating to the disciplinary procedure (para 24 above).
Thirdly, I consider that the Trust breached its contract with Dr Chhabra when Mr Wishart continued to take part in the investigatory process in breach of the undertaking which the Trusts solicitors gave in their letter of 24 February 2011 (para 21 above).
In particular, when Mr Wishart proposed extensive amendments to Dr Taylors draft report and Dr Taylor accepted some of them, which strengthened her criticism of Dr Chhabra, the Trust went outside the agreed procedures which had contractual effect.
Policies D4 and D4A established a procedure by which the report was to be the work of the case investigator.
There would generally be no impropriety in a case investigator seeking advice from an employers human resources department, for example on questions of procedure.
I do not think that it is illegitimate for an employer, through its human resources department or a similar function, to assist a case investigator in the presentation of a report, for example to ensure that all necessary matters have been addressed and achieve clarity.
But, in this case, Dr Taylors report was altered in ways which went beyond clarifying its conclusions.
The amendment of the draft report by a member of the employers management which occurred in this case is not within the agreed procedure.
The report had to be the product of the case investigator.
It was not.
Further, the disregard for the undertaking amounted to a breach of the obligation of good faith in the contract of employment.
It was also contrary to para 3.1 of policy D4 as it was behaviour which the objective observer would not consider reasonable: Dr Chhabra had an implied contractual right to a fair process and Mr Wisharts involvement undermined the fairness of the disciplinary process.
Fourthly, Dr Broughton did not re assess the decision in his letter of 12 August 2011 that the matters were considered as potential gross misconduct after he departed from the additional complaint once he had received Dr Taylors second report.
In my view he was obliged to do so under para 3.1 of policy D4: an objective observer would not consider it reasonable to fail to do so.
I am persuaded that the cumulative effect of those irregularities is that it would be unlawful for the Trust to proceed with the disciplinary procedure and that the court should grant relief.
As a general rule it is not appropriate for the courts to intervene to remedy minor irregularities in the course of disciplinary proceedings between employer and employee its role is not the micro management of such proceedings: Kulkarni v Milton Keynes Hospital NHS Foundation Trust [2010] ICR 101, para 22.
Such intervention would produce unnecessary delay and expense.
But in this case the irregularities, particularly the first and third, are of a more serious nature.
I also bear in mind that any common law damages which Dr Chhabra might obtain if she were to succeed in a claim based on those irregularities after her employment were terminated might be very limited: Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2012] 2 AC 22 and Geys v Socit Gnrale [2013] 1 AC 523, para 73, Lord Wilson.
I do not think that the second irregularity on its own could have justified this courts intervention.
I have some doubt whether the fourth irregularity, if it were the only complaint, would in the circumstances have justified injunctive relief.
I acknowledge that Dr Chhabra did not plead Mr Wisharts involvement as a ground of her challenge to the decision either at first instance or in the Court of Appeal.
Had this been the only successful ground of challenge, I would have viewed it as coming too late as the Trust might have led different evidence in answer before Judge McMullen.
But the categorisation of Dr Chhabras conduct as gross misconduct is itself a sufficient ground for injunction.
Further, the facts relating to Mr Wisharts involvement were before Judge McMullen, and in the Court of Appeal Pill LJ discussed them in para 62 of his judgment.
Where I differ from the judge at first instance is that, like the Court of Appeal, I do not consider Mr Wisharts involvement to be a minor irregularity.
Where I differ from the Court of Appeal, is that I do not think that Dr Taylors acceptance of some of his suggested amendments and her good faith materially reduce the seriousness of the procedural irregularity.
I deal briefly with three further submissions which Mr Sutton advanced on behalf of Dr Chhabra.
First, I consider that the Trust was not obliged to consider the operation of the fair blame procedure in appendix 5 of policy D4 (para 10 above) because the Trust was entitled to view the allegations against Dr Chhabra, if established, as constituting serious misconduct.
Secondly, the Trust had a discretion under para 4.5 of policy D4A (para 15 above) whether to combine issues of capability and conduct in a capability hearing.
The Trusts decision that it was appropriate to convene a conduct panel for the discrete complaints about Dr Chhabras conduct was within its discretion.
I construe the guidance in that paragraph, when it speaks of there being occasions when it is necessary to pursue a conduct issue separately, as referring to what is appropriate in the circumstances rather than a test of strict necessity.
Such a test would not be consistent with the subsequent reference to the Trust deciding upon the most appropriate way forward.
It is not necessary for me to decide whether these clauses are apt for incorporation into the contract of employment or are mere guidance.
Thirdly, I consider the irregularity of the proposed inclusion of the additional complaint in the reference to the conduct panel (para 24 above) was cured by the Trusts decision on 17 January 2012 not to pursue that complaint.
I would allow the appeal and substitute for Judge McMullens orders an order restraining the Trust from (a) pursuing any of the confidentiality concerns contained in the Trusts letter of 12 August 2011 as matters of gross misconduct and (b) pursuing any confidentiality concerns without first re starting and completing an investigation under its policy D4A.
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This appeal is concerned with the roles of the case investigator and the case manager when handling concerns about a doctors performance under the disciplinary procedures introduced over eight years ago for doctors and dentists in the National Health Service.
The national policy framework is known as Maintaining High Professional Standards in the Modern NHS (MHPS), which the Trust has implemented through its own policies D4 and D4A. Dr Chhabra was employed by the Trust as a consultant forensic psychiatrist at Broadmoor Hospital, which is a high security unit, on 3 September 2009.
Following concerns about Dr Chhabras performance, Dr Nicholas Broughton, the Trusts medical director and case manager for these concerns, appointed Dr Amanda Taylor, a consultant forensic psychiatrist from another trust, as case investigator on 15 December 2010.
He instructed Dr Taylor to investigate the following: (1) an allegation that Dr Chhabra, travelling on a busy train, discussed an incident involving a patient and read a medical report on a patient whose name and personal details could be clearly seen; (2) an allegation that Dr Chhabra had dictated patient reports when travelling on a train; (3) concerns about Dr Chhabras working relationship with her clinical team; and (4) a complaint from one of Dr Chhabras patients, made through a solicitor.
Dr Taylor found, in her report of June 2011, that Dr Chhabra had breached, and admitted breaching, patient confidentiality (1) by having patient documents clearly visible and (2) by dictating sensitive reports on the train.
She also found that there were difficulties within Dr Chhabras clinical team which were issues of capability that needed to be addressed; and that the solicitors complaint did not have merit.
Her report also recorded Dr Chhabras unchallenged account that she had not appreciated at the time that her practice compromised patient confidentiality and that she believed that she had ensured that no other passengers were close by when she dictated the reports.
Dr Taylor also reported on an allegation by Dr Chhabras former secretary, which had not been expressly included in her terms of reference, that she had made telephone calls when travelling by train to work in which she had discussed patient information.
Dr Taylor did not make any finding on the veracity of this allegation.
In response to a concern raised by Dr Chhabra, the Trust had undertaken that Mr Wishart, its associate human resources director, could take no part in the investigation.
But, unknown to Dr Chhabra, Dr Taylor had communicated with Mr Wishart during the investigation.
Most significantly, Dr Taylor had sent Mr Wishart a draft of her report and Mr Wishart prepared suggested amendments to the draft.
The extensive amendments had stiffened the criticism of Dr Chhabra.
Dr Taylor had accepted some of the suggested amendments but not others.
Among those she had accepted was the characterisation as serious of breaches of confidentiality she had described in her report.
On 12 August 2011 Dr Broughton wrote two letters to Dr Chhabras solicitors.
One informed her that he regarded the concerns about her team working to be matters of capability.
The other stated that he proposed to put to a disciplinary panel not only the admitted breaches of confidentiality but also (i) the allegation, on which Dr Taylor had noted there had been a conflict of opinion, that Dr Chhabra, while travelling by train, had telephoned her secretary to discuss patient related information, and (ii) an allegation, which was not within Dr Taylors remit and on which she had not reported, that Dr Chhabra had breached patient confidentiality by disclosing information via email to her medical protection society and legal advisers.
Dr Broughton expressed the view that the charges were potential gross misconduct and that dismissal was a possible outcome of the hearing before the disciplinary panel.
Dr Chhabras solicitors objected to the charge of breach of patient confidentiality by disclosing information to her protection society and her legal advisers, which had not been the subject of Dr Taylors investigation.
At their request the Trust agreed to instruct Dr Taylor to investigate that allegation.
Dr Taylor carried out this further investigation and reported that there was no complaint to answer.
As a result, on 17 January 2012 Dr Broughton informed Dr Chhabra by letter that that charge would not be pursued at the disciplinary hearing.
On 1 June 2012 Judge McMullen QC granted Dr Chhabra a declaration and injunctive relief preventing the disciplinary panel from investigating the confidentiality concerns, including those not grounded in Dr Taylors report, as matters of gross misconduct.
On 25 January 2013 the Court of Appeal upheld the Trusts appeal.
The case manager was not confined to the findings of fact of the case investigator but could consider complaints supported by evidence reported by the case investigator, even if denied by the practitioner.
The conduct panel would resolve issues of disputed fact.
Dr Broughton was entitled to regard the breach of confidentiality as a potentially serious offence and as a result was justified in deciding to convene the conduct panel.
Dr Chhabra appeals to this court.
The Supreme Court unanimously allows Dr Chhabras appeal and orders the Trust not to pursue any of the confidentiality concerns contained in the Trusts letter of 12 August 2011 as matters of gross misconduct; and not to pursue any confidentiality concerns without first re starting and completing an investigation under its policy D4A.
The first and most significant issue is the roles of the case investigator and the case manager.
The procedures do not allow the case investigator to determine the facts.
Their aim is to have someone, who can act in an objective and impartial way, investigate the complaints identified by the case manager to discover if there is a prima facie case of a capability issue or misconduct.
It would introduce an unhelpful inflexibility into the procedures if (i) the case investigator were not able to report evidence of misconduct which was closely related to but not precisely within the terms of reference (as in the former secretarys allegations) or (ii) the case manager were to be limited to considering only the case investigators findings of fact when deciding on further procedure.
Similarly, it would be unduly restrictive to require the case manager to formulate the complaint for consideration by a conduct panel precisely in the terms of the case investigators report.
Neither MHPS or the Trusts policies in D4 and D4A are so inflexible or restrictive.
But the procedure does not envisage that the case manager can send to a conduct panel complaints not considered by the case investigator or for which the case investigator has gathered no evidence.
The Trust was therefore correct in acceding to Dr Chhabras request for a second report from Dr Taylor in relation to the new allegation of breach of confidentiality in her communications with the protection society and her solicitors.
There were number of irregularities in the proceedings against Dr Chhabra that cumulatively render the convening of the conduct panel unlawful as a material breach of her contract of employment.
First, Dr Taylors findings were not capable, taken at their highest, of supporting a charge of gross misconduct, defined in the policy as so serious as to potentially make any further relationship and trust between the Trust and the employee impossible.
The breaches of confidentiality she recorded, including the former secretarys allegations, were qualitatively different from a deliberate breach of confidentiality such as speaking to the media about a patient.
Secondly, in reaching the view that Dr Chhabras behaviour could amount to gross misconduct, Dr Broughton founded on the words added to para 13.4.1 with effect from 28 March 2011, after the incidents in this case.
The list of misconduct in para 13.4.1 comprised only typical examples of what the Trust saw as amounting to gross misconduct and was not a comprehensive statement of the concept.
But Dr Broughton relied on the amended provision in support of his view that the complaints might amount to gross misconduct and quoted it in his letter of 12 August 2011 relating to the disciplinary procedure.
Thirdly, the Trust breached its contract with Dr Chhabra when Mr Wishart continued to take part in the investigatory process in breach of the undertaking the Trust had given.
In particular, when Mr Wishart proposed extensive amendments to Dr Taylors draft report and Dr Taylor accepted some of them, which strengthened her criticism of Dr Chhabra, the Trust went outside the agreed procedures which had contractual effect in ways going beyond clarifying its conclusions.
The report had to be the product of the case investigator.
It was not.
Further, the disregard for the undertaking amounted to a breach of the obligation of good faith in the contract of employment.
It was also contrary to policy D4s principle that managers act in a way that an objective observer would consider reasonable: Dr Chhabra had an implied contractual right to a fair process, which Mr Wisharts involvement undermined.
Fourthly, Dr Broughton did not re assess the decision in his letter of 12 August 2011 that the matters were considered as potential gross misconduct after he departed from the additional complaint once he had received Dr Taylors second report.
He was obliged to do so under para 3.1 of policy D4: an objective observer would not consider it reasonable to fail to do so.
The cumulative effect of those irregularities is that it would be unlawful for the Trust to proceed with the disciplinary procedure and that the Court should grant relief.
The categorisation of Dr Chhabras conduct as gross misconduct is itself a sufficient ground for injunction.
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This is a more than usually anxious case.
It concerns the death penalty.
The United Kingdom is party to the Thirteenth Protocol to the European Convention on Human Rights (2004).
In its preamble, the contracting states state that they are convinced that everyones right to life is a basic value in a democratic society and that the abolition of the death penalty is essential for the protection of this right and for the full recognition of the inherent dignity of all human beings.
The UK Parliament had already demonstrated this conviction by finally abolishing the death penalty for murder in 1969 and for the few remaining offences to which it applied in 1998.
As Lord Dyson MR put it, in R (Sandiford) v Secretary of State for Foreign and Commonwealth Affairs [2013] EWCA Civ 581; [2013] 1 WLR 2938, the death penalty is (in my view) rightly regarded by the Government as immoral and unacceptable (para 61).
But it is not enough to think the death penalty immoral and unacceptable.
The issue in this case is the legality of the Governments decision to provide mutual legal assistance to the United States in the shape of the product of police enquiries to facilitate the prosecution of the claimants son in the United States for very serious offences, some carrying the death penalty, without seeking assurances that the death penalty would not be imposed or, if imposed, would not be carried out.
What is immoral and unacceptable is not necessarily unlawful.
As judges, our role is to uphold the law.
It is understandable, therefore, that this judgment has taken a long time to emerge, as members of the court hold different views about the current state of the law.
Because of that, I have prepared this short guide to the judgments which follow.
The decision is attacked on two grounds (the questions certified by the Divisional Court are set out at para 19 of Lord Kerrs judgment): (i) it is unlawful at common law for the Government to facilitate the carrying out of the death penalty in a foreign state, not only by deporting or removing a person from the United Kingdom to be tried in that state, but also by providing information which may be used by that state in the trial of a person who is not currently in the United Kingdom; (ii) the decision to provide such information, insofar as it consists of personal data within the meaning of the Data Protection Act 2018 (the 2018 Act), was unlawful under Part 3 of that Act.
The leading judgment in this case is given by Lord Kerr.
It contains a comprehensive account of the facts, the issues, the competing arguments and the relevant national and international materials.
It is essential reading.
The crimes of which the claimants son is accused are the worst of the worst.
Nevertheless, having surveyed the development of the law in great detail, Lord Kerr concludes that the decision was unlawful both at common law and under the 2018 Act.
The majority of the Justices are unable to share his view of the common law.
The reasons for considering that the common law has not (at least yet) developed so far are explained by Lord Reed and Lord Carnwath.
Lord Reed also explains that the decision might be open to challenge on the more conventional ground that it lacked rationality.
He refers to two aspects of the Secretary of States reasoning: first, that prosecution in a foreign state was necessary to ensure that justice is done, even though there is insufficient evidence to prosecute him in the UK for an offence under UK law and UK law might regard his prosecution as an abuse of process; and second that possible execution in the US was regarded as preferable to detention in Guantanamo Bay.
Where the right to life is at stake, even decisions taken under prerogative powers may be subject to more anxious scrutiny than they otherwise would be, given the value which UK law attaches to the sanctity of all human life.
Lord Reed does not express a view on either point.
It is not open to the court to decide the case on this basis, as the claimant did not argue that the decision was irrational for these reasons and the Secretary of State has not had the opportunity of responding to it in this appeal.
The issue of whether the allegations could be tried in the UK has been the subject of separate judicial review proceedings.
The court is, however, unanimous in holding that the decision was unlawful under the 2018 Act.
We have had the benefit, not only of very full argument on the matter from Richard Hermer QC on behalf of the claimant, but also of a very helpful intervention by Gerry Facenna QC on behalf of the Information Commissioner.
The 2018 Act is discussed by Lord Kerr at paras 152 to 159 of his judgment and by Lord Carnwath at paras 207 to 228 of his judgment.
The short point is that, insofar as the information provided, or to be provided, to the US authorities consisted of personal data (which much of it did) the processing of such data by the Secretary of State as data controller required a conscious, contemporaneous consideration of whether the criteria for such processing were met.
Substantial compliance with those criteria, as found by the Divisional Court, is not enough.
It is not in dispute that the Secretary of State, when making the decision in question, did not address his mind to the 2018 Act at all.
There is, moreover, a further point under the 2018 Act (referred to by Lord Carnwath at para 220 of his judgment) which raises the question of whether such processing in these circumstances could ever be lawful.
This question was explored in the argument before us but in the light of our decision on the main point it is unnecessary for us to express a concluded view.
Nevertheless, it is worth some fuller explanation because it would undoubtedly merit further consideration if a similar issue were to arise in future.
Part 3 of the 2018 Act makes provision about the processing of personal data by competent authorities for the law enforcement purposes and implements the European Unions Law Enforcement Directive (Directive (EU) 2016/680) (the LED) (section 1(4)).
That Directive is therefore a legitimate aid to the interpretation of the 2018 Act.
The law enforcement purposes listed in section 31 include the investigation, detection and prosecution of criminal offences.
Chapter 5 of Part 3 deals with the transfer of personal data to third countries or international organisations.
Sections 73 to 76 set out the general conditions which apply to such transfers (section 72(1)(a)).
The data controller cannot transfer personal data unless three conditions are met (section 73(1)(a)).
Condition 3 need not concern us, because Condition 1 was not met and it is arguable that Condition 2 could never be met.
Condition 1 is that the transfer is necessary for any of the law enforcement purposes (section 73(2)).
In Guriev v Community Safety Development (UK) Ltd [2016] EWHC 643 (QB), Warby J held (in the context of restricting the subjects right of access to his personal data) that: The test of necessity is a strict one, requiring any interference with the subjects rights to be proportionate to the gravity of the threat to the public interest (para 45).
The parties agree that the same test applies in this context.
This obviously requires the data controller to address his mind to the proportionality of the transfer.
Condition 2 is that the transfer (a) is based on an adequacy decision of (at that time) the European Commission (see section 74); (b) if not based on an adequacy decision, is based on there being appropriate safeguards; transfers must be documented (see section 75); or (c) if not based on an adequacy decision or appropriate safeguards, is based on special circumstances (see section 76) (section 73(3)).
This transfer was not based on an adequacy decision or on there being appropriate safeguards, because there were none.
In this connection, it is instructive that recital (71) to the LED contemplates among those safeguards that personal data will not be used to request, hand down or execute a death penalty or any form of cruel and inhuman treatment.
In the absence of an adequacy decision or appropriate safeguards, Condition 2 could only be met if there were special circumstances.
Once again, it is instructive that recital (72) to the LED regards these as derogations from its requirements and as such they should be interpreted restrictively and limited to data which are strictly necessary.
A transfer to a third country or international organisation is based on special circumstances if it is necessary for any of the five purposes listed in section 76(1).
Only two could be relevant here: (d) in individual cases for any of the law enforcement purposes; or (e) in individual cases for a legal purpose.
Once again, the test of necessity is a strict one, requiring the controller to address his mind to the proportionality of the transfer.
Crucially, however, section 76(2) provides: But subsection (1)(d) and (e) do not apply if the controller determines that fundamental rights and freedoms of the data subject override the public interest in the transfer.
Once again, this obviously requires the controller to address his mind to the fundamental rights and freedoms of the data subject and to whether they override the public interest in the transfer.
Recital (1) to the LED states that the protection of natural persons in relation to the processing of their personal data is a fundamental right.
Recital (17) makes it clear that the protection it affords should apply to natural persons whatever their nationality or place of residence.
Crucially in this connection, recital (46) states that any restriction on the rights of data subjects must comply with the Charter of Fundamental Rights of the European Union and the European Convention on Human Rights and in particular respect the essence of those rights.
Clearly, therefore, the fundamental rights and freedoms of the data subject referred to in section 76(2) must include the rights protected by the European Convention.
These are to apply even where the data are to be transferred to a third country outside the European Union and whatever the nationality or place of residence of the data subject.
The most fundamental of the rights protected by the European Convention is the right to life.
This is an absolute right, not qualified by the possibility of restrictions or interferences which are necessary in a democratic society.
Article 2.1 prohibits the state from taking anyones life intentionally: the former exception for the death penalty when provided by law has gone following the Sixth and Thirteenth Protocols to the European Convention.
There are three limited exceptions in article 2.2, none of which apply to the infliction of the death penalty as such.
However, article 2.2(a) does allow for a death which results from the infliction of force which is no more than absolutely necessary in defence of any person from unlawful violence.
And recital (73) to the LED acknowledges that there may be an urgent need to transfer personal data to save the life of a person who is in danger of becoming a victim of a criminal offence or in the interest of preventing an imminent perpetration of a crime, including terrorism.
The Government did not engage directly with the argument.
Collectively, these provisions point towards an interpretation of section 76(2) which would not allow the transfer of personal data to facilitate a prosecution which could result in the death penalty; but which would allow such a transfer if it was urgently necessary to save life or prevent an imminent crime.
Had it been necessary, I would have been prepared so to hold.
LORD KERR:
Introduction
Shafee El Sheikh is the son of the appellant, Maha Elgizouli.
Mr El Sheikh and another, Alexanda Kotey, are suspected of involvement in heinous offences committed in Syria.
The enormity of those offences was rightly accepted by Mr Edward Fitzgerald QC who appeared on behalf of Mrs Elgizouli on this appeal.
Indeed, Mrs Elgizouli also admits that these crimes are of the most awful nature.
She accepts without question that her son should face trial for his alleged involvement in those dreadful offences.
But she considers that that trial should take place in this country rather than in the United States of America, where, at the time of the hearing of this appeal, it was contemplated that Mr El Sheikh and Mr Kotey would be tried.
So that there be no doubt as to the monstrous nature of the crimes of which it is claimed Mr El Sheikh and Mr Kotey are guilty, one may refer to the summary of those offences in the witness statement of Mr Graeme Biggar, the Director of National Security in the Home Office.
His account of those crimes has not been disputed by any of the parties to this appeal.
Mr El Sheikh and Mr Kotey are believed to be part of a group which was responsible for extremely grave offences committed against several individuals.
These include the beheadings of 27 men.
The US citizens James Foley, Steven Sotloff and Peter Kassig and the British citizens David Haines and Alan Henning are believed to be amongst those killed.
These killings came to global attention by all, except one, being filmed and posted on the internet.
It is difficult to imagine more horrific murders than those which Mr El Sheikh and Mr Kotey are alleged to have carried out.
It is entirely understandable, therefore, that Mr Biggar should aver that the deaths suffered by those men who were brutally killed have brought untold anguish to their families.
It is equally understandable that the families affected wish to see those responsible brought to justice.
That aim, Mr Biggar says, is strongly supported by HM Government.
It is an aim which must surely be shared by all right thinking members of our society.
The proceedings so far
This appeal raises the issue whether it was lawful for the Secretary of State for the Home Department to provide evidence to the United States that could facilitate the imposition of the death penalty.
The appellant brought a judicial review of the provision of mutual legal assistance (MLA) relating to her son after the Daily Telegraph published a letter from the Secretary of State to the US Attorney General revealing that such assistance had been provided.
The Divisional Court dismissed her claim on the merits, but certified two questions of law of public importance: (i) Whether it is unlawful for the Secretary of State to exercise his power to provide MLA so as to provide evidence to a foreign state that will facilitate the imposition of the death penalty in that state on the individual in respect of whom the evidence is sought; and (ii) Whether (and if so in what circumstances) it is lawful under Part 3 of the Data Protection Act 2018, as interpreted in light of relevant provisions of European Union data protection law, for law enforcement authorities in the UK to transfer personal data to law enforcement authorities abroad for use in capital criminal proceedings.
Jihad in Syria and Mr El Sheikhs suspected involvement
Thousands of extremists wishing to engage in violent jihad have travelled to Syria from around the world.
A significant number of these have joined the Islamic State of Iraq and the Levant (Daesh).
The nature of the conflict in Syria and the presence of these terrorists have made that country a significant source of threat to United Kingdom and United States interests.
The activities of Daesh in Syria have put civilian life there at considerable risk.
They also constitute a wider risk to the stability of the region.
Adherents to the terrorist cause of Daesh have been involved in the most abhorrent of crimes, including murder, rape, kidnap and the enslavement of people.
A number of persons from the United Kingdom have joined Daesh and other terrorist organisations in Syria.
They present particular challenges for this country.
They pose risk to life by (among other things) radicalising, inspiring, enabling or directing potential terrorists in the UK.
The government has responded to this phenomenon in three ways.
In the first place, attempts are made to prevent UK citizens from leaving this country to fight abroad.
Where those attempts are not successful, the government seeks to stop those who have engaged in fighting abroad from returning to the UK, where it is appropriate and lawful to do so per Mr Biggars witness statement.
Where, despite those efforts, terrorists manage to return, a range of measures is deployed designed to minimise the risk that they might present to the public.
The effort to defeat Daesh has resulted in many foreigners who are suspected of having been terrorist fighters being detained by, among others, the Syrian Democratic Forces.
Mr El Sheikh and Mr Kotey were captured by these forces in northern Syria in January 2018.
It is believed that both were members of a notorious group nicknamed the Beatles on account of their British accents.
It is also suspected that this group was responsible for many unspeakable crimes against UK and US citizens.
Since this appeal was heard, the court has been informed that Mr El Sheikh and Mr Kotey have been taken into US custody.
No information has been given as to their current whereabouts.
Although he had been a British citizen, on 22 December 2014 Mr El Sheikh was deprived of his citizenship under section 40(2) of the British Nationality Act 1981.
This provides that the Secretary of State may deprive a person of a citizenship status if satisfied that the deprivation is conducive to the public good.
It may not be ordered, however, if the subject is rendered stateless.
It was determined that Mr El Sheikh was entitled to Sudanese citizenship.
The decision to deprive him of his British citizenship is not under challenge in these proceedings.
The request for mutual legal assistance
A treaty between the governments of the United Kingdom and the United States on mutual legal assistance in criminal matters was made in 1994.
It came into force in 1996.
Under its terms, the governments agreed to provide mutual assistance in the form, inter alios, of documents, records and evidence (article 1(2)(b)) for the purposes of criminal and other proceedings.
Proceedings are defined in article 19 of the treaty as including proceedings related to criminal matters and any measure or step taken in connection with the investigation or prosecution of criminal offences .
In June 2015 the United States made a request to the United Kingdom under the treaty for MLA in respect of a criminal investigation that it was conducting into the activities of terrorists who had a connection with the UK, who were operating in Syria, and who were suspected of involvement in the murders of United States citizens there.
The US request was for materials which had been gathered by UK police as part of a UK investigation into this group.
Two of the offences which the US was investigating (homicide and hostage taking resulting in death) carried the death penalty.
The Rt Hon Theresa May MP, who was then the Home Secretary, was prepared to accede to the mutual legal assistance request.
But, as was customary, she sought a number of assurances from the US.
These were outlined in a letter sent on her behalf to the US Department of Justice on 29 October 2015.
It stated: As you will be aware, the UK will not provide formal mutual legal assistance in cases where the death penalty is a likely or possible punishment without a written assurance from the Requesting State that they would not seek to impose or, if imposed, carry out such penalty.
As two of the offences for which the suspects are sought (homicide and hostage taking) carry the death penalty, we require, as a pre condition to the provision of the assistance requested by you, that you provide a written undertaking that the death penalty will not be sought or imposed or, if imposed, will not be carried out against anyone found guilty of any criminal offence arising from this investigation and/or UK assistance provided.
This request was precisely in line with the long standing policy of steadfast opposition by successive UK governments to the imposition of the death penalty in any circumstances whatever.
The unequivocal terms of the letter are significant.
It is firmly stated that the UK will not provide MLA where the death penalty is a possible punishment without the normal death penalty assurances.
The letter makes it plain that a written undertaking to that effect is required as a pre condition to the supply of the information.
The imperative tone of the letter reflects the circumstance that not only has the death penalty been abolished in this country (capital punishment was suspended for murder in 1965 and finally abolished in 1969 (1973 in Northern Ireland)), governments since then have refused to countenance its imposition on UK citizens.
Moreover, in 2004 the Thirteenth Protocol to the European Convention on Human Rights (ECHR) became binding on the United Kingdom, prohibiting the restoration of the death penalty for as long as the UK is a party to the Convention.
The abhorrence with which our law regards the imposition of this most dire penalty is also reflected in the jurisprudence of the Judicial Committee of the Privy Council which shall be referred to below.
The US response to the Home Secretarys letter was given in a letter from the Department of Justice of 21 March 2016 which said: With regard to potential application of the death penalty to any person found guilty of an offense arising from this investigation, we can respond as follows: While no persons have yet been charged in connection with this conduct, persons charged with offenses arising from such conduct could be subject to the federal death penalty.
The United States provides the assurance that it will introduce no evidence obtained in response to this request in a proceeding against any person for an offense that is subject to the death penalty.
In the event the evidence were to be so introduced, the United States would take a decision not to seek the death penalty, a decision which in the federal system absolutely precludes the death penalty from being imposed.
While, therefore, the evidence actually supplied by the UK would not be directly used in order to seek the death penalty, on the basis of this letter, that penalty could have been sought by recourse to other material which might have been generated as a result of the information which the authorities in this country had provided.
This point was made in a letter from the Home Office dated 10 August 2017: The contents of your letter of 21 March 2016 have been carefully considered.
However, it is our view that the assurance provided in respect of the death penalty falls short of that which was requested In light of this [we invite] you to reconsider your response to our request for assurances as provided by article 3(2) and article 7(3)(a) of the UK US Mutual Legal Assistance Treaty.
As stated in our earlier letter, the UK will not provide mutual legal assistance in cases where the death penalty is a likely or possible punishment without a written assurance that the Requesting State would not seek to impose or, if imposed, would not carry out such a penalty.
As offences for which the suspects are sought carry the death penalty, we require, as a pre condition to the provision of the requested assistance, that you provide a written undertaking that the death penalty will not be sought or imposed or, if imposed will not be carried out against anyone found guilty of any criminal offence arising from this investigation and/or UK assistance provided.
In any event, the assurance proposed by you in March 2016 would, in our view, allow UK assistance to be used for the purposes of another investigation to obtain other evidence which would not be caught by the assurance and which could lead to the death penalty being imposed and carried out.
The UK wishes to provide the widest measure of assistance in this case but regrets that we will only be in a position to accede to your request if you are able to give the undertakings as requested above.
No official response to this letter was received.
It was informally indicated that the assurances sought would not be given.
The terms of the correspondence from the British government are important and significant.
They reflect the deep seated nature of this countrys opposition to the death penalty.
Indeed, it is noteworthy that some of the families of the victims of the alleged depredations of Mr El Sheikh and Mr Kotey have publicly stated that they do not wish to have that penalty imposed upon them.
These considerations, while in no way determinative, are indications as to whether our common law should now be recognised as having developed to the point where there is a right enshrined in the law of this country that our government will not act to facilitate in any way the possibility of the imposition of that most extreme punishment.
Mr El Sheikhs detention in January 2018 marked what Mr Biggar described as a profound shift in the importance of the request for assistance.
As he explained, it brought immediate political reality and urgency to the question of where he could and should be brought to justice.
This prompted greater focus on the request which the British authorities had made for assurances and the reaction of the US Department of Justice to that request.
Importantly also, there had been a change in the administration in America since the original request for assurances had been made.
Mr Biggar explained the significance of this in his witness statement: It was the strong (and publicly stated) view of senior members of the new US administration that those states from which [foreign terrorist fighters] had originally come ought to try those individuals.
The US position was that other states should not assume that it would take up responsibility for non US terrorists apprehended in Syria or Iraq.
In the aftermath of the capture of El Sheikh in January 2018, set against the wider issues of responsibility for [foreign terrorist fighters] in detention in Syria, US representatives strongly reiterated this message to the UK.
The new US administration also had different views on the US military detention facility at Guantanamo Bay.
President Trump had been elected on, among other things, a commitment to reverse his predecessors
decision to close Guantanamo
It was made clear that the strong preference of the US government was that the UK should assume responsibility for Mr El Sheikh and that he should be prosecuted in this country.
The Crown Prosecution Service had determined, however, in January 2016 that the evidence available was not sufficient to warrant charging Mr El Sheikh.
That position was reviewed in February 2018 and it was again concluded that there was insufficient evidence to charge him.
The authorities in the US and the UK decided, however, that there should be a joint review of the prospects of a successful prosecution in either jurisdiction.
This took place in March 2018.
Police officers from the Counter Terrorism Command and specialist prosecutors from the CPS visited the US at the end of March 2018 and were given access to the evidence which the US investigators had gathered.
FBI agents had already visited the UK and had seen and considered the evidence gathered by UK investigators.
At the time of the hearing of the appeal it was not considered feasible to prosecute Mr El Sheikh in this jurisdiction.
That decision by the CPS was the subject of a separate challenge which need not be referred to further here.
The court has learned, however, that, in light of Mr El Sheikhs being in the custody of US authorities, the feasibility of his being tried in this country may be revisited.
Any prosecution of Mr El Sheikh in the US depends critically on the evidence which has been obtained by the British authorities.
According to Mr Biggar, following the meeting between US and UK officials in March 2018, the clear view of the UK officials was that a prosecution of Mr El Sheikh in the US federal court system, which included the UK evidence, represented the only realistic prospect of securing justice for the victims and their relatives.
Despite this, again according to Mr Biggar, senior members of the US administration continued to state their opposition to foreign terrorist fighters, including Mr El Sheikh, being tried in the US.
This reflected the ongoing concern of the US that it should not fall to that country to bring within its criminal justice system those such as Mr El Sheikh for whom it felt other states bore responsibility.
In particular, the US considered that the UK ought to set an example to the wider international community by accepting responsibility for bringing foreign terrorist fighters such as Mr El Sheikh and Mr Kotey to trial.
Another factor that was present to the mind of the British authorities was the prospect that the US might transfer Mr El Sheikh to Guantanamo Bay.
The assessment made in this country was that the US was more likely to do that than to try him in the federal criminal system.
In March 2018, the then Home Secretary visited Washington and spoke to US Attorney General Sessions.
As well as expressing his clear view that all foreign terrorist fighters should be prosecuted in their home countries, the Attorney General referred to them as prisoners of war and suggested that transfer to Guantanamo Bay was therefore appropriate (its purpose, in the Attorney Generals view, being the detention of prisoners of war).
The UK has consistently opposed the regime in Guantanamo Bay.
In this case, an additional consideration, according to Mr Biggar, was that the families of those kidnapped and killed have a strong desire to ensure that those suspected of involvement should be tried before a civilian court.
The UK, he has said, was conscious that a number of families of those killed by terrorist acts in Syria opposed the transfer of those suspected of involvement in those killings to Guantanamo Bay, because they felt that this would end any prospect of securing justice for the murder of their loved ones.
A third consideration was the apprehension that Mr El Sheikh might be released from custody in Syria.
This was not believed to be likely, but it nevertheless played some part in the governments deliberations.
It seems clear, however, that the factor of overwhelming importance was what Mr Biggar described in his witness statement as the strong message from the US administration, relayed directly by US officials as well as through the UK Embassy, that it was strongly opposed to the UK seeking death penalty assurances, in the event that the UK, itself, decided that it could or would not prosecute; and that, if the UK was pressing the US to prosecute because a UK prosecution was not viable.
Mr Biggar has averred that in early March 2018 the UKs lobbying on the death penalty had been described as an irritant by a very senior US official.
This statement is both enlightening and concerning.
It indicates how the UK authorities were coming under (and might become susceptible to) political pressure from the US.
For reasons discussed below that pressure does not appear to have taken into account, much less reflected, either the UKs longstanding policy in this area nor the joint experience of the UK and the US in the request for and the furnishing of such assurances.
The statement also raises questions as to whether pragmatic considerations, at the expense of a principled approach, might begin to influence the UKs reaction to the demand that it should cease its lobbying in relation to the death penalty assurances.
On 16 April 2018, the Office for Security and Counter Terrorism in the Home Office and the UK Central Authority (UKCA) each provided submissions to the then Home Secretary, the Rt Hon Amber Rudd MP, and the Security Minister, the Rt Hon Ben Wallace MP.
UKCA recommended that the Home Secretary should maintain her predecessors decision to accede to the request dated 19 June 2015, but only on the basis that a full death penalty assurance would be provided.
It also suggested that she should endorse the UKCA decision to reject the current direct use death penalty assurance offered by the US. (It should be noted that this submission was made on the premise that the earlier direct use assurance was still available, although UK officials understanding was that later contact with the Department of Justice had cast some doubt on the continued availability of this assurance.)
The Security Minister responded to this advice on 17 April 2018 saying that he agreed with the first recommendation but disagreed with the second.
He indicated that the views of the Foreign Secretary should be sought on whether the assurance, then believed still to be on offer, should be accepted.
The Home Secretary did not consider this submission before she resigned on 29 April.
Mr Wallace had talks with Department of Justice officials on 20 April 2018.
A theme of those exchanges was that senior officials in the US administration did not consider that Mr El Sheikh and Mr Kotey should be tried in the US federal courts.
Mr Wallace was also told that if the US was required to deal with them, their transfer to Guantanamo Bay was more likely if the UK imposed restrictions on the release of information to the US authorities.
The picture which emerges from these exchanges is one of increasing and applied pressure by the US on the UK to minimise any restrictions on the use of the released evidence.
That pressure was two pronged.
First that a trial in the federal courts of America might be refused on the basis that the UK should undertake their trial.
Secondly, that if Mr El Sheikh and Mr Kotey were transferred to the US, the chances of their being incarcerated in Guantanamo Bay increased, if assurances from the US authorities about the use of the evidence were sought.
The US authorities must have known that these indications would put pressure on the UK to dilute or eliminate the request for assurances.
Indeed, it seems highly likely that this was their purpose.
And, as it proved, before long the pressures began to have effect.
Mr Biggars assessment of the exchanges between the Americans and the British was that if the UK wanted to obtain support for a US prosecution, it would be critical that evidence provided by the UK came with the [fewest number] of restrictions possible.
The US authorities position was put bluntly by Attorney General Sessions when he gave evidence at a Senate panel hearing on 25 April 2018.
He expressed disappointment that the British are not willing to try the cases but tend to tell us how to try them and they have certain evidence that we need .
He also indicated that he was supportive of sending Mr El Sheikh and Mr Kotey to Guantanamo Bay.
Inasmuch as this statement might be taken to indicate that the British authorities considered that Mr El Sheikh could have been tried in the UK but preferred to transfer that responsibility to the US, it is plainly wrong.
As pointed out in para 32 above, the CPS had decided that it was not feasible to prosecute Mr El Sheikh in this country and that decision had been confirmed after a review in February 2018.
The Rt Hon Sajid Javid MP became Home Secretary on 30 April 2018.
He spoke to Attorney General Sessions on 4 May 2018.
Mr Biggar gives the following account of the conversation in para 39 of his statement: This was their first conversation and it was regarded as significant that this case was one of the first topics that the US Attorney General raised with the Home Secretary.
The US Attorney General indicated that he was concerned that the UK had said that it was not interested in prosecuting El Sheikh; that the death penalty should not be an issue for the UK and that he did not want the UK to tie his hands in relation to the use of the material.
The US Attorney General also referred favourably to Guantanamo Bay.
The Home Secretary indicated that a formal decision would be taken shortly.
There is no reference in Mr Biggars account of that conversation to the Attorney General having been told of the longstanding practice of the British authorities to seek assurances in relation to the death penalty.
It does not appear that Mr Sessions was told that a decision not to follow that practice would represent a very significant departure from the UKs policy over very many years.
Nor was he told of the Death Penalty Assistance Policy which provides that, in general, where there is a significant risk of the death penalty being imposed, before it is agreed that assistance be provided, assurances should be sought that that penalty will not be imposed. (It is, of course true that the policy does contemplate that in certain exceptional circumstances, the request for assurances may be foregone but the pre eminence of the general rule it appears at para 1 of the policy is testament to how deeply embedded is the practice of seeking assurances.)
In May 2018 the UK ambassador in Washington was asked for his opinion as to the likely reaction of the US authorities if the request for assurances was persisted in.
He replied that Department of Justice career officials would not be surprised; indeed, it is what they would expect.
But he advised that this did not apply to senior political figures in the administration.
His advice continued: Their reaction is likely to be something close to outrage.
They already feel that we are dumping on them a problem for which we should take responsibility.
They have been signalling to us for weeks now that we are in no position to attach any conditions to this.
At best they will think we have tin ears.
At worst, they will wind the President up to complain to the PM and, potentially, to hold a grudge.
We might argue that the UK position on this is well known and that we were simply behaving in a way consistent with our long term policy.
There might be some understanding of this.
But I have to warn that there might also be some damage to the bilateral relationship. (Emphasis added)
In the italicised sentences above, it had been suggested that it could be pointed out that the UK position was not only familiar but that it reflected this countrys longstanding policy.
There is nothing in Mr Biggars statement or in the evidence presented to the Divisional Court to indicate that this suggestion was taken up.
The ambassador considered that seeking death penalty assurances might prompt the US not to pursue a prosecution.
Some officials had suggested as much.
And it would point the way towards transfer to Guantanamo.
If the well established practice of requiring death penalty assurances in all but exceptional cases was not drawn to the attention of the senior political figures in the administration, this is surely surprising.
If their anticipated reaction was one of outrage, is it not to be expected that information about this practice would or, at least, should have been mitigated by a patient and well marshalled account of how this practice had operated in the past? Attorney General Sessions, in his presentation to the Senate panel hearing in April 2018, had portrayed the UK stance as one of unwillingness to try Mr El Sheikh, while seeking to dictate how he should be tried in the US.
That is a portrayal which it should have been easy to correct.
This was not a case of the UK being unwilling to have Mr El Sheikh tried in this jurisdiction.
Rather, it was considered by the CPS, an institution entirely independent of government, that such a trial was not feasible.
Equally, the UK did not seek to dictate how Mr El Sheikh should be tried in the US.
The assurances sought were directed solely to the question of penalty, not the mode of trial.
Indeed, the assurances sought did not even preclude the possibility that the death penalty might be imposed (although that was the preliminary request).
Ultimately, the request was for an undertaking that, if imposed, the death penalty would not be carried out.
The absence of direct evidence as to what passed between senior political figures in the US administration and the UK authorities cannot be deemed to establish that there was a failure on the part of the latter adequately to make the case for acceptance of or the need for compliance with the assurances, however.
There may well have been exchanges which are not referred to in the evidence which was presented to the Divisional Court and relied on before this court.
In any event, it would have been a matter for political judgment as to whether representations along those lines would have been availing.
Absent a glaring and obviously irrational failure on the part of the UK government to make pertinent representations to the US administration, the courts are powerless to intervene.
On 18 May 2018 UKCA made a further submission to ministers.
They maintained their advice that the Home Secretary should continue to require a full death penalty assurance.
In a telling passage in the submission, the following appears: [The need for a comprehensive assurance that the suspects will not be subject to the death penalty] is critical to the consistency with which we apply HMGs policy on Overseas Security and Justice Assistance Were we not to apply this practice to this case, it could undermine all future efforts to secure effective written death penalty assurances from the US authorities for future UK security and justice assistance.
The exception made for the US in this case could also undermine future efforts to secure similar assurances from other countries with which we have a security relationship particularly if as seems likely there is litigation which leads to the disclosure of the level of assurance.
It could leave HMG open to accusations of western hypocrisy and double standards which would undermine HMGs Death Penalty Policy globally, including in the US.
These were formidable arguments in favour of maintaining the long standing policy of the UK and of resisting the pressure from the US authorities.
But, in a note of 24 May 2018, the director of Home Office International declined to accept them: Although it clearly runs the risk of creating a precedent for the future and with other countries, taken in the round I am comfortable that proceeding with no assurances is appropriate in securing justice for the families; notwithstanding the fact [that] we understand the families wish to avoid application of the death penalty.
There appears to me to be an inherent illogicality in this statement.
As the director had observed, the families wished to avoid the application of the death penalty.
Yet, the mooted justification for the decision not to seek assurances concerning the death penalty was the securing [of] justice for the families.
The species of justice that the families wished to have was one where there was not the possibility of the imposition of the death penalty.
The decision not to seek assurances opened up that very possibility.
To fulfil their wishes, it was surely required that the hallowed practice of seeking death penalty assurances be observed.
On 24 May 2018, the Security Minister notified Home Office officials that his final position was to make a strong recommendation, in this exceptional case, that HMG does NOT seek assurances (either full or direct use) around the death penalty, when sharing evidence for a Federal Prosecution only.
The Home Secretarys private secretary confirmed on 29 May that both ministers had concluded that no assurances should be sought from the US.
A meeting took place between the Home Secretary and Attorney General Sessions on 30 May 2018.
Mr Sessions repeated his view that the US should not be left to assume responsibility for other nations terrorist fighters.
He said that if the US were to [be] willing to try Mr El Sheikh in a civilian court as opposed to a military one, he could not see how the US could do that without the UK evidence or without recourse to the death penalty.
Mr Biggar described Mr Javids reaction to this approach in the following passage of his witness statement: It became clear to the Home Secretary during the course of [that] meeting that the position of the US remained unchanged and that there was no prospect of the Attorney General offering any form of undertaking whatsoever.
He assessed that, if he asked for assurances (whether full or partial), it was likely to prompt the sort of outrage he had been advised of, and would damage the prospects of a US criminal prosecution.
He judged that the question of assurances was critical to whether Attorney General Sessions consented in due course to such a prosecution.
Into his calculation about pressing the assurances point during the meeting, he also considered the wider UK government interests at stake, including co operation on security issues and potential damage to the bilateral relationship.
Again, it is not suggested that the Home Secretary raised the point that the seeking of assurances about the death penalty was a traditional feature of this type of exchange.
Nor does it appear to have been suggested that the UK was opposed, as a matter of entrenched principle, to the taking of any step that would facilitate the imposition and carrying out of the death penalty.
One may not assume, however, (largely for the reasons given at para 51 above) that these matters were not drawn to the attention of the Attorney General.
Still less may one assume that it was not decided that it was either pointless or impolitic to do so.
On either basis, the omission to raise these matters, however cursorily surprising, does not warrant judicial interference.
The Home Secretary made it clear, however, that the UK could not provide material to be used in a military court or any process at Guantanamo Bay.
This is somewhat perplexing.
Why was the prospect of detention so much less favourable than the possibility of Mr El Sheikh being executed? This has not been explained.
The day after the Home Secretarys meeting with the American Attorney General, a submission was made by civil servants to the Secretary of State for Foreign and Commonwealth Affairs.
Three options were identified: first, to seek a full death penalty assurance; secondly, to seek a partial death penalty assurance; and thirdly to seek no assurance.
The advice to the Foreign Secretary was to urge the Home Secretary to seek a full assurance.
Seeking comprehensive assurances was consistent, the submission stated, with the general expectations set out in UK policy on overseas security and justice assistance and with all past practice when dealing with US mutual legal assistance requests.
The submission accepted that sharing information without assurances provided the greatest chance that the US would pursue a federal prosecution.
It then continued: A successful prosecution will serve as a deterrent to others and give the public confidence in our ability to see justice served.
However, there are wider national security risks if the prosecution results in execution as this could be used by radicalisers in the UK.
The Home Secretary wrote to the Foreign Secretary on 11 June 2018, indicating that significant attempts had been made to obtain full assurances but that the time had arrived to accede to the request for information without seeking any assurance.
He acknowledged that there was a serious risk that Mr El Sheikh and Mr Kotey would, if prosecuted and convicted, face execution as a direct result of UK assistance.
The Foreign Secretary replied on 20 June 2018.
His letter concluded, On a balanced assessment of the key risks , I agree that as this is a unique and unprecedented case, it is in the UKs national security interests to accede to an MLA request for a criminal prosecution without death penalty assurances for Mr Kotey and Mr El Sheikh.
The Home Secretary duly informed Attorney General Sessions on 22 June 2018 that the UK would not seek death penalty assurances.
Many witness statements were then supplied to the US authorities.
As the Divisional Court has pointed out, however, this does not render the present challenge academic.
Further material may be sought and it is, in any event, entirely possible that the UK would refuse to permit witnesses employed by the state, such as police officers, to travel to the US to give evidence without adequate assurances.
The appellants arguments (i) There is a common law principle that the UK will not give mutual legal assistance where there is a risk that this would lead to the imposition of the death penalty.
The appellant submits that the UK, by signing two death penalty protocols to the ECHR, in 1999 and 2004, is committed to the abolition of the death penalty in all circumstances.
In particular, since the signing of the Sixth Protocol to the European Convention in 1999, the UK has maintained a firm policy of refusing extradition or deportation to countries that impose the death penalty, no matter how serious the offence, and no matter how repellent the offender.
The appellant argues that this is not just some alien obligation imposed on us by the European Court.
To the contrary, the UK has taken that stance as a legal principle and it now forms part of the common law of this country.
That claim is fortified, the appellant claims, by the circumstance that the UK has signed the Second Optional Protocol to the United Nations International Covenant on Civil and Political Rights (ICCPR) on the abolition of the death penalty in December 1989.
It is further suggested that the UK has adopted a policy of not providing evidence that might give rise to the risk of the imposition of the death penalty unless assurances are given by the requesting state that that penalty will not be carried out.
At the Thirteenth Special Session of the UN General Assembly on 19 April 2016, the UK declared: The United Kingdom has a proud history of championing human rights, and we oppose the use of the death penalty in all circumstances as a matter of principle.
The United Kingdom does not provide criminal justice or other assistance that may result in a death sentence being applied.
We will hold international agencies funded by the United Kingdom to account for compliance with that principle and all other human rights obligations.
The appellant points out that the policy of seeking assurances has been repeatedly referred to by UK authorities as the logical consequence of this countrys position of rejecting the death penalty as wrong in all circumstances everywhere.
It was reflected in the statement to the UN in April 2016, and in the Foreign Office recommendation recorded in the UKCA briefing of 18 May 2018 (para 52 above).
The policy accords, the appellant claims, with the obligation imposed on abolitionist states by the ICCPR, as authoritatively interpreted by the Human Rights Committee in its General Comment No 36, para 63, which says, inter alia, that states who are parties to the covenant have an obligation to respect and to ensure the rights of all persons who are subject to its jurisdiction, that is, all persons over whose enjoyment of the right to life it exercises power or effective control.
The appellant argues that the frequently declared policy of the UK government, reflecting as it does the obligation in the ICCPR, to which it has subscribed, gives effect to a principle of law.
That principle is that, in the exercise of its formal powers in the criminal justice field, the government of this country should not act in any way that is directly instrumental in the imposition of the death penalty.
The appellant accepts that, in providing evidence to the United States, the Home Secretary was exercising a prerogative power.
But she argues that that power must be exercised in accordance with the fundamental principles of the common law, the dictates of humanity, and the requirements of international human rights law.
It is argued that the death penalty offends against the evolving requirements of humanity enshrined in the common law.
It is also argued that the death penalty (and any facilitation of it) is contrary to article 10 of the Bill of Rights 1688 which prohibits the infliction of cruel and unusual punishments.
The Bill of Rights is, the appellant says, an always speaking statute and its prohibition of cruel and unusual punishments must be interpreted dynamically in accordance with evolving standards of decency.
For these reasons, the appellant contends that it is an unlawful exercise of public power to impose the death penalty, or knowingly and directly to facilitate its imposition.
(ii) The non facilitation argument
The appellant submits that it cannot be lawful or rational to facilitate a penalty that the UK regards as inhuman.
At para 34 of the Human Rights Committees General Comment No 36 (see para 65 above) it is stated: States parties that abolished the death penalty cannot deport, extradite or otherwise transfer persons to a country in which they are facing criminal charges that carry the death penalty, unless credible and effective assurances against the imposition of the death penalty have been obtained.
The facilitation of inhuman treatment, it is suggested, is contrary to the fundamental principles of the common law and the European Convention.
The appellant accepts that Strasbourg case law on the non facilitation principle has not yet been expressly extended beyond cases involving extradition or expulsion.
It has not yet been applied to cases where the facilitation takes the form of the provision of mutual legal assistance which is likely to contribute causally to the imposition of the death penalty in a foreign state.
But, as a matter of logic, it should be, the appellant says.
If it is wrong to extradite or deport persons who would face execution in the countries to which they are extradited or deported, it is equally wrong to supply information or evidence which would lead to their execution in the country to which the evidence has been provided.
The practical reason for the fact that Strasbourg jurisprudence and the case law of this country founded on the Human Rights Act 1998 (HRA) have not addressed this question is, the appellant says, that the person who invokes Convention protections must be within the jurisdiction of a Convention state at the time of the injustice he complains of.
But this, it is claimed, should not inhibit the development of the common law.
The appellant is herself in this jurisdiction and therefore within the jurisdiction of the Convention.
It might have been argued that, as the close relative of Mr El Sheikh, she could claim to be a victim of a potential breach of her sons right to life (see Rabone v Pennine Care NHS Trust (INQUEST intervening) [2012] UKSC 2; [2012] 2 AC 72).
This is not the basis of the appellants case, however, which is that the common law prohibition on facilitation applies regardless of the location of any individual.
It is therefore not necessary for this court to consider any alternative route under the Convention.
The domestic law principle on which the appellant relies is said to be founded on the duty of the state not knowingly to contribute to the imposition of an inhuman punishment through the exercise of its formal powers.
That duty, it is claimed, cannot rationally or justly be limited to cases where the individual in question is in the UK.
The person who is extradited to face the death penalty is in precisely the same position as he whose execution has been facilitated by the provision of mutual legal assistance.
In both instances there is in play an underlying principle that it is inconsistent with a fundamental common law principle of justice for the government to facilitate the imposition of a cruel and inhuman punishment in a foreign state. (iii) Should the common laws development outstrip the limits of Strasbourg case law?
The Divisional Court held that the HRA set the limits of any development in this area when it gave effect to the European Convention, with the accompanying territorial limits to the application of the Convention.
It then held that it was wrong to develop the common law in a manner not sanctioned by the relevant statutory provisions.
In challenging these conclusions, the appellant argues that the HRA contains no express or considered limitation to the developments of common law principles in respect of the non facilitation of the death penalty.
It is too general a statute to serve such a function.
It is pointed out that in such cases as R (Osborn) v Parole Board [2013] UKSC 61; [2014] AC 1115, Kennedy v Information Comr (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 455 and A v British Broadcasting Corpn (Secretary of State for the Home Department intervening) [2014] UKSC 25; [2015] AC 588 this court has asserted that the HRA does not remove or limit the power of the common law to develop so as to protect fundamental rights.
It was further submitted that the HRA should not be regarded as providing the sum of common law wisdom on the death penalty.
The jurisdictional limits of that Act and the Convention were the product of the way in which the Convention was drafted nearly 70 years ago.
There was no reason, the appellant argued, that domestic principles of public law should not go further, particularly when they give effect to the underlying rationale of the extradition cases, namely that the UK should not make itself complicit in the imposition of the death penalty by positively facilitating it.
The Divisional Court held that the decisions in R (Sandiford) v Secretary of State for Foreign and Commonwealth Affairs [2014] UKSC 44; [2014] 1 WLR 2697 and R (Zagorski) v Secretary of State for Business, Innovation and Skills [2010] EWHC 3110 (Admin); [2011] HRLR 6 presented obstacles to the recognition of the common law right claimed by the appellant.
It was submitted that these decisions were readily distinguishable.
That submission will be considered in the discussion section of this judgment. (iv) Does the US death penalty regime give rise to cruel and inhuman punishment?
Relying on, among other cases, the decision of Pratt v Attorney General of Jamaica [1994] 2 AC 1, the appellant argued that the death penalty regime in the US gave rise to a specific risk of inhuman and cruel punishment.
This was because inevitably execution was delayed many years after the death penalty had been imposed.
Prolonged delay by itself violates the protection against cruel, inhuman or degrading treatment, the appellant argued.
The Divisional Court rejected this argument, observing that the decision in Pratt turned on the interpretation of the Jamaican Constitution and that it did not establish a rule of the common law, either in Jamaica or generally, that particular periods of delay made the enforcement of the death penalty unlawful.
The appellant contended that this constituted a misunderstanding of the Pratt decision.
It was also argued that what was described as the death row phenomenon was contrary to customary international law.
In this context, the appellant relied on article 5 of the Universal Declaration of Human Rights 1948, which provides: No one shall be subjected to torture or to cruel, inhuman or degrading treatment or punishment, and article 7 of the UN International Covenant on Civil and Political Rights and the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment.
Again, these arguments will be considered in the discussion section of this judgment. (v) Does the provision of mutual legal assistance breach the Data Protection Act 2018 (DPA)?
Finally, the appellant argued that the provision of mutual legal assistance in the form of various statements from witnesses etc was in breach of the 2018 Act as interpreted in light of relevant provisions of European Union data protection law.
The DPA was intended to give effect to the UKs obligations under the EU Law Enforcement Directive 2016/680 (the LED).
It was argued that the DPA should be interpreted by reference to the EU Charter of Fundamental Rights (the Charter).
On that basis, the appellant claimed that it was unlawful for law enforcement authorities in the UK to transfer personal data to law enforcement authorities abroad for use in capital criminal proceedings.
It was common ground between the appellant and the respondent that the transfer of material by the Home Secretary to the US in July 2018 pursuant to the mutual legal assistance request involved processing of personal data for a law enforcement purpose by a controller which is a competent authority for the purposes of Part 3 of the Act.
On this account, the appellant claimed, the Home Secretarys decision to transfer personal data to authorities in the US without seeking and obtaining a death penalty assurance was an unlawful breach of (1) the first data protection principle in section 35 of the Act; (2) the second data protection principle in section 36; (3) the provisions governing international transfers of personal data for law enforcement purposes in sections 73 to 76; and (4) the special processing restrictions in section 80.
It is claimed, moreover, that the Home Secretary paid no regard to the duties imposed on him by the 2018 Act.
These arguments will also be considered below.
The respondents case
The respondent submits that there is no support as a matter of ECHR law or international law for the existence of an obligation not to provide legal assistance to another state on the basis that it may be used to charge an individual and then, if convicted and so sentenced, lead to the imposition of the death penalty.
The essence of the appellants case is, the respondent says, that, despite her sons being excluded from the protection of the ECHR/HRA and, having elected to go abroad to engage in terrorist activities, he is nonetheless entitled to rights which extend well beyond any ECHR rights recognised to date.
The second principal submission of the respondent was that there is no recognised common law prohibition on the provision of legal assistance to a foreign state, where such assistance might be used in proceedings leading to the death penalty in that state.
Indeed, the respondent claims, the case law indicates that, aside from those established categories of case in which a duty of care is imposed, there is no general common law duty on the Secretary of State to take positive steps to protect an individuals life from the actions of a third party.
Nor should, the respondent says, the common law be developed to recognise such a contemporaneous principle.
The common law develops incrementally.
The recognition of a right prohibiting the provision of mutual legal assistance to a country whose legal system permits (in appropriate cases) the imposition of the death penalty would not be an incremental change.
Such a development would be a considerable and controversial step.
There were, the respondent claimed, specific reasons for particular caution here: the creation of the prohibition would take effect in the context of a treaty with a state with whom the UK co operates closely and which adheres to the rule of law; the UK is equally a beneficiary of that co operation; the provision of mutual legal assistance relates to extremely serious crimes (with international ramifications); it risked having a significant, adverse impact upon UK relations with a most important international partner, the US (and indeed on relations with any other state which continues to impose the death penalty).
The respondent submitted that the recognition of a common law principle forbidding mutual legal assistance in all circumstances where that might lead to the imposition of the death penalty would carry the prospect of it being applied in a myriad of circumstances with consequences which could not be foretold.
The principle has the potential to be expanded into spheres where it would risk creating real damage, for example, to public protection and national security, as Hughes LJ acknowledged in R v Ahmed (Rangzieb) [2011] EWCA Crim 184; [2011] Crim LR 734.
The respondent poses the questions, what degree of causal connection to the death penalty would suffice? To what forms of cruel, degrading or inhuman treatment would the principle extend would it extend to the provision of assistance in a case in which there were serious concerns about the state of prisons in the foreign jurisdiction?.
These issues, the respondent claims, illustrate that the extension of the common law in the way contended for by the appellant would be no small step and are powerful factors in favour of not extending the common law.
On the question of facilitation, the respondents overarching submission was that there is nothing in the jurisprudence of the ECHR, international law or the common law which supported the notion of an obligation going beyond not removing an individual from within the jurisdiction to another state where there exist substantial grounds for believing the individual will be subject to the death penalty.
The concept of facilitation has not been extended beyond this.
In particular, the respondent relied on the circumstance that the contracting states had ceded to the European Court of Human Rights (ECtHR) a jurisdiction with well defined territorial limits.
Unless an individual was within the jurisdiction of one of the member states of the Council of Europe, he or she was not entitled to have recourse to rights arising under the ECHR.
The domestic transposition of the ECHR into the HRA gave rise to a similar restriction.
In any event, the respondent says, relying on the decision of the Strasbourg court in Khan v United Kingdom (2014) 58 EHRR SE15, the ECtHR does not consider that the substantive protections of the ECHR apply to prevent or control decisions or steps taken by the state (within its jurisdiction) which may expose persons to ill treatment at the hands of a foreign state.
In this connection, the respondent also relied on the decision of this court in Sandiford.
It had been held in that case that there was no general Convention principle that the United Kingdom should take steps within the jurisdiction to avoid exposing persons, even United Kingdom citizens, to injury to rights which they would have if the Convention applied abroad para 23.
On the question of customary international law, the respondent submitted that, while some multilateral international conventions oblige state signatories not to impose the death penalty within their own jurisdictions, this was by no means a universal prescription.
The example of the ICCPR was cited.
Subject to the conditions enshrined in article 6 of that Convention (which provides, inter alia, that no one is to be arbitrarily deprived of life and that the sentence of death may only be imposed in those countries where that penalty has been retained for the most serious crimes) the death penalty continues to be permitted.
The respondent points out that the UN Human Rights Committees (UNHRC) General Comment No 36 (2018) on article 6 ICCPR at para 34 does not stipulate that mutual legal assistance cannot be provided by states where the death penalty has been abolished to states where it remains a possible penalty.
The material part of the relevant paragraph reads, States parties that abolished the death penalty cannot deport, extradite or otherwise transfer persons to a country in which they are facing criminal charges that carry the death penalty, unless credible and effective assurances against the imposition of the death penalty have been obtained.
It is therefore plain, the respondent says, that UNHRC regards the obligations which apply to state parties to the ICCPR that have abolished the death penalty as limited to deportation, extradition or transfer to a state which carries the death penalty.
The omission of mutual legal assistance in this General Comment is reflective, it is claimed, of there being no authority or state practice supporting the extension of the concept of facilitation to the provision of mutual legal assistance in the international law sphere.
The case for the existence of a right under customary international law forbidding the provision of mutual legal assistance without death penalty assurances is, the respondent claims, further undermined by the absence of specific reference to the death penalty in important mutual legal assistance treaties and the absence of any state practice preventing this type of assistance.
In particular, the respondent has referred to the 1994 Treaty on Mutual Legal Assistance in Criminal Matters between the UK and the US (as amended); the Agreement between the US and the European Union (both of which are silent on the question of obtaining death penalty assurances where mutual legal assistance is sought and provided); and the Agreement between the EU and Japan on mutual legal assistance in criminal matters (article 11 of which expressly recognises that the death penalty should be a discretionary rather than a mandatory ground for the refusal of assistance).
Australia has made express reference (in the Mutual Assistance in Criminal Matters Act 1987, as amended, section 8(1A) and (1B)) to the question whether mutual legal assistance should be provided in death penalty cases.
The relevant provisions require that a request by a foreign country for assistance must be refused if it relates to the prosecution or punishment of a person charged with, or convicted of, an offence in respect of which the death penalty may be imposed in the foreign country, unless the Attorney General is of the opinion, having regard to the special circumstances of the case, that the assistance should be granted.
In relation to the argument that the inevitable delay in carrying out a sentence of death gave rise to a distinct basis for concluding that the regime in the US constituted cruel and inhuman punishment, the respondent contended that there was no consensus in international law to support that claim.
Moreover, it was expressly disavowed by the jurisprudence of UNHRC see LaVende v Trinidad and Tobago, (Communication No 554/1993) (unreported) 14 January 1998.
Indeed, said the respondent, the UNHRC had consistently rejected the contention that delay in applying the death penalty amounts to a breach of either article 7 or article 10 of the ICCPR.
Finally on the question of international law, the respondent submitted that, even if any support could be discerned from that source for a prohibition on the provision of mutual legal assistance in circumstances such as arise in the present case, the question of transposition or incorporation into domestic law as a controlling principle of public law provides an insuperable barrier.
Any state obligation under customary international law does not automatically become a domestically enforceable public law obligation.
The constraints on transposition are constitutional.
The translation of a particular international obligation into domestic law was something for Parliament to consider.
It was not one for the courts to impose.
The respondent presented several arguments in reaction to the case made by the appellant on data protection.
It is unnecessary to rehearse all of them here.
In broad summary, the respondent submitted firstly that neither the Charter nor EU law in fact contains the prohibition the appellant claimed arose from the DPA.
Secondly, the respondent says that, whether or not the Home Secretary gave separate consideration to the DPA, there was substantive compliance with its provisions, and it was the substantive lawfulness of the transfer of the information which was critical.
Thirdly, it was common ground between the parties that the transfer of evidence in the present case was outside the scope of EU law.
In particular, on 1 December 2014, the UK exercised its right under article 10(4) of Protocol 36 to the EU Treaties to opt out of acts of the Union in the field of police cooperation and judicial cooperation in criminal matters which have been adopted before the entry into force of the Treaty of Lisbon.
The opt out included the EU US MLA agreement.
Since the opt out, mutual legal assistance between the UK and the US has been governed exclusively by the 1994 Treaty on Mutual Legal Assistance in Criminal Matters between the UK and the US (as amended), the respondent argues.
Different interpretational approaches apply to Part 3 of the DPA depending on whether the LED applies to the processing in question.
Where the LED does apply, the full purposive approach of EU law (including the Charter) will apply to the implementing measures.
Where it does not apply, the LED is of more attenuated relevance, although the respondent accepts that it may still be a legitimate aid to construction as a matter of domestic law.
But this is no warrant for introducing the Charter through the back door.
In any event, the respondent says, the Charter has never been interpreted to
preclude transfer of evidence in a case such as the present.
Article 19(2) provides: No one may be removed, expelled or extradited to a state where there is a serious risk that he or she would be subjected to the death penalty, torture or other inhuman or degrading treatment or punishment.
That formulation simply reflects the jurisprudence of the ECtHR.
It is dealing with a situation in which the individual concerned is within the jurisdiction of the member state and is removed, expelled or extradited.
It does not deal with a situation in which information or evidence is transferred.
As to the appellants claim that the transfer of information offended the first data protection principle in section 35 of the DPA, the respondent argued that the transfer was both lawful and fair as the section required.
It was also necessary in the sense of being necessary for the performance of a task carried for [the law enforcement purpose] by a competent authority section 35(2)(b).
On the appellants argument relating to the various conditions which must be met for the transfer of personal data for law enforcement purposes, the respondent challenged the appellants claim that section 73 established a hierarchy of steps to be taken sequentially by the data controller at least to the extent that it is argued that the final step, namely, where there are special circumstances which justify the transfer, may only be invoked as a last resort.
It is common case that the decision was not based on a European Commission adequacy decision, the first condition under section 73(3).
The second step is to consider whether there were adequate safeguards in place.
The respondent disputes the suggestion that this gave rise to an obligation on the part of the controller to investigate whether adequate safeguards existed, and in all cases refrain from transferring unless it was deemed that the safeguards were inappropriate.
In any event, the respondent says that section 35 of the Act (which deals with sensitive processing) did not apply in the case of Mr El Sheikh.
The respondent disputed that there had been a breach of the second data principle. (It arises where personal data collected for a law enforcement purpose may be processed for any other law enforcement purpose section 36(3)).
Even if the decision to transfer the evidence to the US constituted a different law enforcement purpose, such that the second data protection principle applied, it was patently authorised by law, necessary and proportionate to that other purpose, the respondent argued.
As to the appellants argument based on section 80 of the Act, the respondent submitted that this provision simply did not apply to Mr El Sheikhs case.
Discussion
(i) How the common law develops
Article 10 of the Bill of Rights 1688 prohibits the infliction of cruel and unusual punishments.
Of course, at that time, and for almost three centuries afterwards, the carrying out of the death penalty continued without its being thought to offend article 10.
But, for the reasons set out below, the death penalty is now recognised by the common law as constituting such punishment.
The Bill of Rights may be considered to provide the backdrop to contemporary consideration of whether the facilitation of the imposition of the death penalty is contrary to what should now be recognised as the common law of the United Kingdom.
What is conceived to be cruel and unusual punishment adjusts, like so many other societal perceptions, to changes in the standards and values of society which develop over time with the growth of knowledge and the evolution of attitudinal changes.
The common law of the UK rises to the challenge of those changes.
As long ago as 1800, Lord Kenyon uttered these celebrated words in R v Rusby (1800) 2 Pea 189, 192: The common law, though not to be found in the written records of the realm, yet has been long well known.
It is coeval with civilised society itself, and was formed from time to time by the wisdom of man.
Good sense did not come with the Conquest, or at any other one time, but grew and increased from time to time with the wisdom of mankind.
In A v Secretary of State for the Home Department (No 2) [2005] UKHL 71; [2006] 2 AC 221, para 152, Lord Carswell picked up that theme when he said: We have long ceased to give credence to the fiction that the common law consists of a number of preordained rules which merely require discovery and judicial enunciation.
Two centuries ago Lord Kenyon recognised that in being formed from time to time by the wisdom of man it grew and increased from time to time with the wisdom of mankind: R v Rusby Sir Frederick Pollock referred in 1890 in his Oxford Lectures, p 111 to the freshly growing fabric of the common law and McCardie J spoke in Prager v Blatspiel, Stamp and Heacock Ltd [1924] 1 KB 566, 570 of the demand of an expanding society for an expanding common law.
Similarly, in the US Supreme Court 121 years ago Matthews J said in Hurtado v California (1884) 110 US 516, 531 that: as it was the characteristic principle of the common law to draw its inspiration from every fountain of justice, we are not to assume that the sources of its supply have been exhausted.
On the contrary, we should expect that the new and various experiences of our own situation and system will mould and shape it into new and not less useful forms.
As Peter du Ponceau said of the common law (A Dissertation on the Nature and Extent of the Jurisdiction of the Courts (1824), Preface): Its bounds are unknown; it varies with the successions of ages, and takes its colour from the spirit of the times, the learning of the age, and the temper and disposition of the judges.
It has experienced great changes at different periods, and is destined to experience more.
It is by its very nature uncertain and fluctuating; while to vulgar eyes it appears fixed and stationary.
The common law will not develop in an area where Parliament has legislated definitively.
But that is not the case here.
The HRA does not prevent the common law from upholding rights or obligations that are outside the scope or jurisdiction of the ECHR.
Moreover, nothing can be inferred from the fact that Parliament has not legislated to prohibit the provision of assistance without death penalty assurances.
The respondent makes the point that section 16 of the Crime (Overseas Production Orders) Act 2019 (the 2019 Act) does not require the obtaining of an assurance, only the seeking of one, before designating an agreement under section 52 of the Investigatory Powers Act 2016 (IPA).
But section 52 of the IPA does not concern the transfer of information to another country.
It deals only with the obtaining of information by interception of communications.
It may be considered appropriate for the Secretary of State to designate an agreement without a general assurance, as later a specific assurance can be requested before transferring specific information collected.
This is emphatically not a case of Parliament stepping into the arena.
It has said nothing about the legality of transferring information without a death penalty assurance.
The only relevance of the 2019 Act is, as the appellant has contended, that it shows Parliaments general support for seeking death penalty assurances in the context of MLA.
(ii) ECHR jurisprudence
Development of the common law is not immune from nor does it disavow external influence.
In R (Osborn) v Parole Board [2013] UKSC 61; [2014] AC 1115, this court endorsed the view that the courts of the United Kingdom are able to (and should where appropriate) take account of obligations arising under the ECHR in the development of the common law see per Lord Reed at para 57.
To like effect, the remarks of Lord Mance in Kennedy v Information Comr (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 455, para 46 where he said, Convention rights represent a threshold protection; and, especially in view of the contribution which common lawyers made to the Conventions inception, they may be expected, at least generally even if not always, to reflect and to find their homologue in the common or domestic statute law.
And in Lin v Comr of Police of the Metropolis [2015] EWHC 2484 (QB), applying Kennedy and relying also on Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19; [2015] 1 WLR 1591, Green J at para 51 stated that it was perfectly plain . that the common law, EU law and the Convention can walk side by side when protecting rights.
What then are the external influences which ought to bear on the question whether there should now be recognised a common law principle that the UK government will not facilitate the imposition of the death penalty? First, the jurisprudence of the Strasbourg court. The case law relating to Protocol 13 does not exactly constitute an external influence, since the UK has ratified this in October 2003, with it coming into force on 1 February 2004. (Ratification of Protocol 6, which expressed a general tendency in favour of abolition of the death penalty, had taken place in 1999.
But Protocol 13 is of greater contemporary relevance.)
Protocol 13 in article 1 abolished the death penalty.
Article 2 forbade any derogation from the provisions of the Protocol under article 15 of the Convention and article 3 stipulated that no reservation may be made under article 57 of the Convention in respect of the provisions of the Protocol.
It is therefore a comprehensive charter forbidding the death penalty in all circumstances.
The Protocol was considered by the ECtHR in Al Saadoon v United Kingdom (2010) 51 EHRR 9.
Its nature and extent and the background to its introduction are described in paras 115 118 of the judgment.
These are of significance when considered in the context of the claim that it is now a principle of the common law that there should not be any facilitation of the imposition of the death penalty either by the extradition or deportation of an individual to a foreign country where such a sentence might be carried out or by the provision of legal assistance to such a country where the individual is already located.
The paragraphs therefore merit quotation in full: 115.
The court takes as its starting point the nature of the right not to be subjected to the death penalty.
Judicial execution involves the deliberate and premeditated destruction of a human being by the state authorities.
Whatever the method of execution, the extinction of life involves some physical pain.
In addition, the foreknowledge of death at the hands of the state must inevitably give rise to intense psychological suffering.
The fact that the imposition and use of the death penalty negates fundamental human rights has been recognised by the member states of the Council of Europe.
In the preamble to Protocol No 13 the Contracting States describe themselves as convinced that everyones right to life is a basic value in a democratic society and that the abolition of the death penalty is essential for the protection of this right and for the full recognition of the inherent dignity of all human beings. 116.
Sixty years ago, when the Convention was drafted, the death penalty was not considered to violate international standards.
An exception was therefore included to the right to life, so that article 2(1) provides that No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law.
However, as recorded in the explanatory report to Protocol No 13, there has subsequently been an evolution towards the complete de facto and de jure abolition of the death penalty within the member states of the Council of Europe.
Protocol No 6 to the Convention, which abolishes the death penalty except in respect of acts committed in time of war or of imminent threat of war, was opened for signature on April 28, 1983 and came into force on March 1, 1985.
Following the opening for signature of Protocol No 6, the Parliamentary Assembly of the Council of Europe established a practice whereby it required states wishing to join the Council of Europe to undertake to apply an immediate moratorium on executions, to delete the death penalty from their national legislation and to sign and ratify Protocol No 6.
All the member states of the Council of Europe have now signed Protocol No 6 and all save Russia have ratified it. 117.
In October 1997 the Council of Europe Heads of State and Government called for the universal abolition of the death penalty.
Resolution II adopted at the European Ministerial Conference on Human Rights on 3 November 2000 invited the Committee of Ministers to consider the feasibility of a new additional protocol to the Convention which would exclude the possibility of maintaining the death penalty in respect of acts committed in time of war or of imminent threat of war.
Protocol No 13, which abolishes the death penalty in all circumstances, was opened for signature on May 3, 2002 and entered into force on July 1, 2003.
At the date of adoption of the present judgment, Protocol No 13 has been ratified by 42 member states and signed but not ratified by a further three.
Azerbaijan and Russia are alone in not having signed the Protocol.
It was signed by the United Kingdom on May 3, 2002, ratified on October 10, 2003 and entered into force in respect of that State on February 1, 2004. 118.
The court considers that, in respect of those states which are bound by it, the right under article 1 of Protocol No 13 not to be subjected to the death penalty, which admits of no derogation and applies in all circumstances, ranks along with the rights in articles 2 and 3 as a fundamental right, enshrining one of the basic values of the democratic societies making up the Council of Europe.
As such, its provisions must be strictly construed.
A number of features should be noted from this passage.
First, how attitudes to the death penalty have evolved over the period since the drafting of the Convention, and, indeed since the ratification of Protocol 6.
Secondly, the all embracing reach of Protocol 13.
No derogation from it is permitted.
The right not to be subjected to the death penalty applies in all circumstances.
Thirdly, it is to be regarded as a fundamental right, ranking alongside article 2 (the right to life) and article 3 (the right not to be subject to torture or inhuman or degrading treatment).
Fourthly, the near universal subscription to this charter by the countries which comprise the Council of Europe is testament to the widespread abhorrence to the imposition of the death penalty, whatever the prevailing circumstances or conditions.
The respondent dismissed the relevance of the ECtHR jurisprudence, relying on Khan v United Kingdom (see para 88 above) and Sandiford and Zagorski (para 74 above).
It was submitted that the ECHR/HRA jurisprudence is positively against the concept of the state being responsible for any broader concept of facilitation extending beyond the physical removal of the individual.
Specifically, the case law was said to be against the state being under an obligation not to take steps within its jurisdiction which might expose an individual who is not within the jurisdiction to the risk of treatment that would or might otherwise be contrary to the ECHR.
I will examine those decisions presently but, by way of preliminary comment, one may observe that the purpose of referring to ECtHR jurisprudence is not to suggest that the Strasbourg court has endorsed the notion that there is an extra territorial dimension to the obligation not to facilitate the death penalty.
To the contrary, the significance of the Strasbourg case law and Protocol 13 lies in its illustration of the practically unanimous opposition to the death penalty in any circumstances whatever.
The jurisprudence is thus important and noteworthy as an influencer to the conclusion that the contended for common law right should be recognised, rather than as providing any directly binding decision to that effect.
In Khan at paras 25 and 26, the court said: 25.
A states jurisdictional competence under article 1 is primarily territorial.
However, the court has recognised two principal exceptions to this principle, namely circumstances of state agent authority and control and effective control over an area (see Al Skeini v United Kingdom (2011) 53 EHRR 18, paras 130 141).
In the present case, where the applicant has returned voluntarily to Pakistan, neither of the two principal exceptions to territorial jurisdiction apply.
This is particularly so when he does not complain about the acts of British diplomatic and consular agents in Pakistan and when he remains free to go about his life in the country without any control by agents of the United Kingdom.
He is in a different position, both to the applicants in Al Saadoon (who were in British detention in Iraq and thus, until their handover to the Iraqi authorities, were under British authority and control) and to the individuals in Al Skeini (who had been killed in the course of security operations conduct by British soldiers in South East Iraq). 26.
Moreover, and contrary to the applicants submission, there is no principled reason to distinguish between, on the one hand, someone who was in the jurisdiction of a Contracting State but voluntarily left that jurisdiction and, on the other, someone who was never in the jurisdiction of that state.
Nor is there any support in the courts case law for the applicants argument that the states obligations under article 3 require it to take this article into account when making adverse decisions against individuals, even when those individuals are not within its jurisdiction.
From these passages it is clear that the courts principal preoccupation was with the territorial reach of the Convention, not with opposition to the death penalty.
Likewise, in Sandiford and Zagorski, although in the latter case observations were made concerning the nature of a common law obligation to take positive steps to protect an individuals life from the actions of a third party.
These observations will require close consideration.
In Sandiford, as the respondent in the present case submitted, the appellant had argued unsuccessfully that the UK was obliged to fund legal representation for a person facing a capital charge in Indonesia; or had applied too rigid a policy against doing so.
The Supreme Court concluded that the claimant was not within the jurisdiction of the UK so as to engage any ECHR/HRA rights.
But that is nothing to the present point.
The appellant does not argue that she or her son are entitled to rely directly on a Convention right.
Mr El Sheikh is not within the territorial jurisdiction of the ECHR.
The purpose of referring to ECtHR jurisprudence and Protocol 13 is to demonstrate the almost complete ubiquity of opposition in the countries which comprise the Council of Europe to the imposition of the death penalty in any circumstances whatever.
Observations by Lord Dyson MR in Sandiford when it was before the Court of Appeal ([2013] EWCA Civ 581; [2013] 1 WLR 2938) are, however, worthy of note.
At para 7 of his judgment he said: It is the longstanding policy of the UK to oppose the death penalty in all circumstances as a matter of principle.
Its strategy and policy in relation to the death penalty is set out in the HMG Strategy on Global Abolition of the Death Penalty: 11 October 2010.
The strategy confirms that the goals of the UK government are to increase the number of abolitionist countries or countries where a moratorium exists on the use of the death penalty; to seek further restrictions on the use of the death penalty in countries where it is used and a reduction in the number of executions; and to ensure that EU minimum standards are met in countries which retain the death penalty. (Emphasis added) and at para 61: The death penalty is (in my view) rightly regarded by the government as immoral and unacceptable.
No challenge was made by the respondent to the correctness of these statements.
The appellant therefore submits that they provide powerful support for the recognition of a common law principle that the death penalty should not be facilitated by the government of this country.
I shall examine EU law on this issue later.
But in the meantime, Lord Dyson MRs statement, that one goal of the governments strategy was to ensure that EU minimum standards [were] met in countries which retain the death penalty must be viewed against the background that both EU and ECHR law have a consistent theme, viz that the death penalty is to be condemned and opposed in every circumstance.
How could compliance with that position be reconciled with a decision to provide material to a country which retains the death penalty when the very provision of that material could lead to the imposition of that penalty?
In Zagorski the claimants were citizens of the US who had been sentenced to death in that jurisdiction.
They were due to be executed by lethal injection consisting of an anaesthetic, sodium thiopental, followed by other injections.
They applied for judicial review to challenge the decisions of the Secretary of State for Business, Innovation and Skills refusing to impose a control pursuant to the Export Control Act 2002 on the export of sodium thiopental from the United Kingdom to the United States.
It was held that the claimants were not entitled to the protection of ECHR.
The obligation of the United Kingdom under the Convention did not extend to securing Convention rights to these claimants as they had never been, at any material time, within the territorial jurisdiction of the United Kingdom.
The Divisional Court acknowledged that the common law can act to protect human rights independently of the HRA but there was no general common law duty on the government to take positive steps to protect an individuals life from the actions of a third party.
At para 80 Lloyd Jones J said: I require no persuading that the common law can act to protect human rights quite independently of the Human Rights Act 1998.
However, the extent of such protection and the relationship of the common law to the statutory rights conferred by the Human Rights Act require careful consideration.
For example, beyond the established categories of case where a duty of care is imposed, there is no general, common law duty on Her Majestys Government to take positive steps to protect an individuals life from the actions of a third party.
Moreover, the common law has shown a reluctance to remedy apparent lacunae in the ECHR regime.
The appellant in the present case argues that the ratio in Zagorski was that there was no general common law duty on the Secretary of State to take positive steps to protect an individuals life from the actions of a third party.
Here, by contrast, the position is not one of abstaining from taking an action that could prevent the US from carrying out the death penalty.
In this case the respondent has authorised the provision of assistance which, on his own admission, has created a serious risk that the individuals concerned will, if prosecuted and convicted, face execution as a direct result of UK assistance in this matter.
If there is a common law principle that the UK should not facilitate the carrying out of the death penalty in any circumstances whatever, there should not be a valid distinction between taking positive steps to prevent an execution and taking an action that facilitates the execution.
But it ought to be noted that, although originally the claimants in Zagorski had argued that the common law must step in to impose the fundamental principle of the right to life, where for purely jurisdictional reasons the Human Rights Act does not protect that fundamental right, that argument was substantially modified in the course of the hearing see paras 78 and 79 of the judgment.
At para 83, Lloyd Jones J outlined the change of position of the claimants: Miss Lieven came to accept in her oral submissions that the essence of her case on the common law in this context was that the importance the common law attaches to fundamental rights means that they have to be given very considerable weight in any decision making process where they are in play.
She accepted that that would not mean that a decision refusing to impose a ban on the export of the drug to the United States would necessarily be unlawful.
However, the standards which the court would apply to such a decision would be intensified and an increased level of justification would be required.
It was therefore unnecessary for the court in Zagorski to address the question whether there existed a common law principle that the government should not facilitate the imposition or the execution of the death penalty in a foreign state.
True it is that Lloyd Jones J said (at para 84) that there was no free standing, common law ground for challenging the decisions in issue but that observation must be seen against the modification which the claimants had made to their original case.
I do not consider that Zagorski can be regarded as authority for the proposition that the common law should not now be regarded as having evolved to the point where there should be no facilitation of the death penalty.
Moreover, the case in Zagorski had been framed as one where the court should act to fill what was regarded as a lacuna in ECHR law.
For the reasons given earlier, I consider that the principal significance of Convention jurisprudence is as an indicator of the prevalence throughout the countries of the Council of Europe of settled opposition to the death penalty.
I do not accept that it is an appropriate exercise to seek to identify gaps in ECHR law and then consider whether those should be filled by the development of the common law.
Rather, I believe that the common law should be seen as an autonomous organism, open to external influence but developing on its own initiative rather than in response to perceived deficiencies in other systems of law.
(iii) European Union law
Article 2 of the European Charter provides in para 1 that everyone has the right to life and in para 2 that no one shall be condemned to the death penalty or executed.
The Divisional Court (at para 181 of its judgment) rejected a submission made on behalf of the appellant that the absolute objection to the death penalty contained in the Charter permeates all aspects of EU decision making at both the political and legislative level.
Before this court, the appellant submits that the Divisional Court was wrong to reject her argument as to the effect of EU law.
In addition to the absolute prohibition on the death penalty reflected in various articles in the Charter, the EUs absolute opposition to the death penalty is, the appellant says, reflected in an array of other instruments including: (1) the EU Guidelines on Death Penalty (2013), which set out the EUs strong and unequivocal opposition to the death penalty in all times and in all circumstances; (2) Council Regulation (EC) No 1236/2005 of 27 June 2005 concerning trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment; (3) Parliament and Council Regulation (EU) 2016/2134 of 23 November 2016 concerning trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment (which specifically focuses on the death sentence rather than the generalised prohibition on torture and inhumane treatment); (4) numerous Resolutions of the European Parliament; and (5) recital (71) to the LED, which requires a data controller to take into account that the personal data will not be used to request, hand down or execute a death penalty or any form of cruel and inhuman treatment before transferring data to a foreign law enforcement authority.
On 10 October 2018 the EU and the Council of Europe issued a Joint Declaration marking the European and World Day against the Death Penalty.
The Joint Declaration stated: On the European and World Day against the Death Penalty, the Council of Europe and the European Union (EU) reiterate their strong opposition to capital punishment in all circumstances and for all cases.
The death penalty is an affront to human dignity.
It constitutes cruel, inhuman and degrading treatment and is contrary to the right to life.
The death penalty has no established deterrent effect and it makes judicial errors irreversible Member states should continue taking effective measures to prevent their involvement, however indirect, in the use of the death penalty by third countries, such as by adopting measures that prevent the trade in goods that could
subsequently be used to carry out executions
The reason that the Divisional Court concluded that there was no absolute EU law prohibition against the death penalty was the provision in article 11(1)(b) of the EU Japan MLA agreement.
The Divisional Court considered that this indicated that the existence of the death penalty in Japan is treated as a discretionary, rather than a mandatory, ground for the refusal of assistance para 89.
The appellant submitted that these conclusions were erroneous for the following reasons: (1) Article 11(1)(b) of the EU Japan MLA agreement makes it clear that member states may provide mutual legal assistance in connection with an offence punishable by death under the laws of the requesting state if the requested state and the requesting state agree on the conditions under which the request can be executed.
In other words, it permits member states to make the provision of MLA conditional upon exactly the sort of death penalty assurance which the appellant submits the Home Secretary was required to obtain in this case.
Nothing in the EU Japan MLA agreement qualifies or detracts from the EUs longstanding and consistent stance of absolute opposition to the death penalty in all circumstances. the EU Japan agreement (2) The suggestion that demonstrates that EU law is not absolutely opposed to the death penalty is also inconsistent with: (a) The travaux preparatoires of the agreement, which record that the EUs specific objective in negotiating the agreement was to allow for effective mutual legal assistance but at the same time ensure that evidence transmitted by a member state, could in no circumstances be used to impose a death sentence (b) the European Parliaments resolution of 16 February 2012 on the death penalty in Japan; and (c) the statement of the European Union Delegation to Japan and the Heads of Mission of EU member states dated 6 July 2018, which stated that the European Union is strongly and unequivocally opposed to the use of capital punishment under all circumstances and we aim at its universal abolition and which called on the Japanese Government to abolish capital punishment.
The respondent disputes all of this.
It is submitted that article 11 of the EU Japan MLA agreement leaves it to the discretion of the member state to decide whether to refuse to provide data on the basis that it relates to a capital offence.
Reliance on the travaux preparatoires of the agreement was misguided the respondent says.
The document demonstrates that the EUs line to take in respect of the provision of MLA in a death penalty case was open to negotiation: The aim of a possible agreement between the European Union and Japan on mutual legal assistance would be to enhance and facilitate mutual legal assistance between Japan on the one hand and the 27 member states of the EU on the other hand based, while safeguarding fundamental rights and guaranteeing that the death penalty could not be imposed on the basis of evidence submitted by the EU member states. it has been made clear to Japan that the issue of death penalty/life imprisonment is of crucial importance to the EU.
It appears that a satisfactory solution to this issue could be found in the negotiations.
This, the respondent says, clearly indicates that the arrangement was one that was open to negotiation as regards its implementation.
The respondent also claims that the appellants reliance on the European Parliaments resolution of 16 February 2012 on the death penalty in Japan [AB/99] (para 12.4(2)(b)) and the statement on executions in Japan of the EU Delegation to Japan and the Heads of Mission of EU member states dated 6 July 2018 was misconceived.
These do not constitute a legally binding prohibition on the provision of MLA to Japan in the context of an offence punishable by death.
Reliance on various non binding statements of policy opposition to the death penalty is likewise misconceived, the respondent says.
These do not amount to a legal prohibition on the provision of MLA in a case such as the present.
I find it unnecessary for present purposes to resolve the dispute as to whether the EU Japan agreement precluded completely the provision of MLA.
It is relevant to the data protection issue which I shall turn to later in this judgment.
The context for the present examination of EU law is to assess its influence on the possible development of the common law.
Whether it is technically possible under the EU Japan agreement for mutual legal assistance to be provided without death penalty assurances is not directly germane in this context.
I find it impossible to resist the conclusion that the overwhelming character of EU law is one of settled, unmistakable opposition to the death penalty in every circumstance.
It cannot be irrelevant to the development of our common law that the UK was a member of the EU for more than 40 years.
The influence that EU law in general and its hostility to the death penalty in particular has on a decision as to the current state of the common law is undeniable.
(iv) Delay in carrying out the death penalty
In Pratt v Attorney General for Jamaica [1994] 2 AC 1 the Judicial Committee of the Privy Council held that a state which wished to retain capital punishment must ensure that execution followed as swiftly as practicable after sentence, allowing a reasonable time for appeals.
To execute a prisoner years later, after long delays caused by his legitimate use of all the appellate procedures available, was to subject him to an inhuman or degrading punishment.
The appellant in the present case, drawing on the reasoning in Pratt and observing that the inevitable delay in carrying out any execution of her son after the imposition of the death penalty by a US court was unchallenged, submitted that to facilitate such a process would involve complicity in the infliction of punishment which was cruel and inhuman.
The Divisional Court dealt with the Pratt case at para 86 of its judgment: There is undoubtedly support in international jurisprudence for the contention that prolonged delay in carrying out a sentence of death may be unlawful.
For example, in Pratt v Attorney General of Jamaica [1994] 2 AC 1, the Privy Council held that section 17(2) of the Jamaican Constitution authorised the death penalty but that did not prevent the court investigating the circumstances in which the executive intended to carry out the sentence.
It held that execution should take place as soon as reasonably practicable after sentence; to carry out executions after a delay of 14 years would constitute inhuman punishment contrary to section 17(1) of the Constitution.
But that case turned on the construction of the Jamaican Constitution.
It did not establish a rule of the common law, either in Jamaica or generally, that particular periods of delay made the enforcement of the death penalty unlawful.
The appellant criticised this passage, submitting that in reaching its decision, the Privy Council had to address the question of whether delayed execution was contrary to the common law.
That was necessary in order to establish that the practice of execution after long delay was already unlawful pre independence.
That practice was therefore not rescued by the savings clause in section 17(2) of the Constitution, which only protected from constitutional challenge treatment and punishment that had been lawful prior to independence.
I consider that the appellants submissions on this point must be accepted.
At p 19C D, Lord Griffiths, who delivered the judgment of the Board, said, Prior to independence, applying the English common law, judges in Jamaica would have had the power to stay a long delayed execution (emphasis added).
Lord Griffiths relied on statements to like effect by Lord Diplock in Abbott v Attorney General of Trinidad and Tobago [1979] 1 WLR 1342, 1348 and Lord Templeman in Bell v Director of Public Prosecutions [1985] AC 937, 950.
Moreover, at p 20G H and p 28F G of the judgment, the Board expressly stated that execution after long delay could have been stayed as an abuse of process before independence by the application of common law principles.
Finally, in a telling passage at p 29G H, Lord Griffiths said: There is an instinctive revulsion against the prospect of hanging a man after he has been held under sentence of death for many years.
What gives rise to this instinctive revulsion? The answer can only be our humanity; we regard it as an inhuman act to keep a man facing the agony of execution over a long extended period of time.
The case therefore did not turn on the construction of the Jamaican Constitution, as the Divisional Court held.
On the contrary, it was because the common law before the enactment of the Constitution condemned a long extended period between the passing of a sentence of death and execution that the Jamaican Constitution could not save the situation.
That this was the product of the common law was confirmed in the later case of Guerra v Baptiste [1996] AC 397, 409G H, where the Privy Council again held that the prohibition on execution after long delay was consonant with the tradition of the common law.
And in Henfield v Attorney General of the Commonwealth of the Bahamas [1997] AC 413, 425B C, where a lesser period of three and a half years was deemed inhuman.
That prolonged delay by itself violates the protection against cruel, inhuman or degrading treatment was confirmed by the decision of the Caribbean Court of Justice in the case of Attorney General for Barbados v Boyce [2006] CCJ 1 (AJ), which pronounced that Pratt was rightly decided and that: the practice of keeping persons on death row for inordinate period of time is unacceptable, and infringes constitutional provisions that guarantee humane treatment at para 47.
The same approach has been taken by a number of the highest courts in the Commonwealth India (Singh v State of Punjab (1983) 2 SCR 583, 593); Zimbabwe (Catholic Commission for Justice and Peace in Zimbabwe v Attorney General (2001) AHRLR 248 (ZwSC 1993), paras 119 120) and Uganda (Attorney General v Kigula [2009] UGSC 6, pp 47 48), where three years from confirmation of sentence was regarded to be the maximum period.
(v) Factors favouring recognition of the common law principle
The factors and strands of influence which tell in favour of a common law right not to have ones trial in a foreign state facilitated where there is a prospect that such a trial would lead to the death penalty being carried out may now be assembled and enumerated. 1.
The Bill of Rights, an always speaking statute, forbade cruel and unusual punishment.
It is surely now beyond controversy that the death penalty is regarded by the common law to constitute such punishment. 2.
British contemporary values are reflected in the abolition of the death penalty for murder in 1965 and the resolute refusal of government and Parliament to countenance any change to that position.
The Death Penalty Project (DPP), an intervener in this appeal, has submitted that the UKs consistent and long standing approach to the death penalty is clear and supports the assertion that the death penalty is now regarded by this country as a cruel and unusual punishment.
To that end the DPP points out that for more than 15 years, it has been funded by the Foreign and Commonwealth Offices Human Rights and Democracy Department in its work to promote restriction of the use of the death penalty worldwide.
DPPs work furthers the FCOs Human Rights and Democracy Programme, which lists one of its priority targets to be the abolition of the death penalty abroad.
The FCO recognises that the death penalty is an inhuman punishment and has stated that: Our ambition remains a world free of capital punishment and torture and that: [we] oppose the death penalty in all circumstances as a matter of principle, because we consider that its use undermines human dignity, that there is no conclusive evidence of its deterrent value, and that any miscarriage of justice leading to its imposition is irreversible and irreparable. (Human Rights and Democracy: The 2014 Foreign & Commonwealth Office Report, dated 12 March 2015, Executive Summary, and Human Rights and Democracy: The 2017 Foreign and Commonwealth Report, updated 5 October 2018, chapter 1.) 3.
ECHR jurisprudence.
Although it does not arise directly in this case because of jurisdictional restrictions, it can and should inform the development of the common law see paras 107 124 above.
Moreover, the UKs ratification of the Thirteenth Protocol is an unequivocal statement of this countrys stance on the death penalty.
Developments in international human rights law are significant pointers to the interpretation of the common law.
As Lord Hoffmann said in R v Lyons [2002] UKHL 44; [2003] 1 AC 976, para 27, there is a strong presumption in favour of interpreting English law (whether common law or statute) in a way which does not place the United Kingdom in breach of an international obligation.
And in A v Secretary of State for the Home Department (No 2) [2005] UKHL 71; [2006] 2 AC 221, para 27 Lord Bingham of Cornhill said that where development of the common law is called for, such development should ordinarily be in harmony with the United Kingdoms international obligations and not antithetical to them. 4.
EU jurisprudence.
The European Union has categorically condemned the death penalty as absolutely wrong in all circumstances.
This declamation chimes exactly with UK standards and values as described in the DPPs intervention. 5.
The fundamental illogicality of, on the one hand, refusing to extradite or deport individuals for trial in a foreign state where there was a risk of the imposition of the death penalty, without requisite assurances, and, on the other hand, facilitating such a trial when precisely the same outcome is in prospect without demanding assurances.
The irrationality of this approach can be illustrated by a decision of the Constitutional Court of South Africa Mohamed v President of the Republic of South Africa [2001] ZACC 18.
The court identified a principle of non complicity as a justification for the refusal to extradite without a death penalty assurance.
The court referred to the commitment implicit in the Constitution that South Africa will not be party to the imposition of cruel, inhuman or degrading punishment (para 59).
The rationale was not confined to the fact that the person to be extradited was within the jurisdiction of the courts of South Africa.
It extended to any complicity in the imposition of cruel, inhuman or degrading punishment.
If it is objectionable to be complicit in exposing an individual to the risk of execution by extraditing him, it is surely equally objectionable to be complicit in facilitating that result by providing material which has the same result.
As the appellant submitted, what matters is whether the state whose actions are impugned has, by its actions, established the crucial link in the causal chain that would make possible the execution of the author: per the decision of the UNHRC in Judge v Canada (2005) 40 EHRR SE4, para 10.6.
The anomaly created by the difference in approach was well captured by Professor Christof Heyns, a former UN Special Rapporteur and currently a member of the UNHRC, in Report of the Special Rapporteur on extrajudicial, summary or arbitrary executions, A/70/304, 7 August 2015, para 102: A dilemma emerges when abolitionist states provide assistance to retentionist states in criminal matters and that assistance leads to the use of the death penalty.
Even though the individual facing the death penalty in such cases may never have been in the jurisdiction of the abolitionist state, such assistance could amount to complicity in the death penalty.
The same legal principles apply here as in the case of transfer of persons: states that have abolished capital punishment may not assist in bringing about the death penalty in other countries.
JCPC jurisprudence and case law from Commonwealth countries 6. paras 135 140 above.
Although the cases discussed in this section relate to delays in carrying out execution, rather than objection to the death penalty itself, they carry unmistakable evidence of the growing revulsion for that punishment felt by many throughout the world.
Drawing all these factors together, I believe that the time has arrived where a common law principle should be recognised whereby it is deemed unlawful to facilitate the trial of any individual in a foreign country where, to do so, would put that person in peril of being executed.
This is not a conclusion of the considerable and controversial variety suggested by the respondent.
It is a natural and inevitable extension of the prohibition (in the common law as well as under the HRA) of extradition or deportation without death penalty assurances.
If it appears to be an incremental step, that is only because this is the first time the matter has come before the courts for consideration, largely because the two previous occasions since 2001 on which according to the respondent MLA was provided without a death penalty assurance, that was done without public knowledge and so without the possibility of judicial scrutiny.
I have therefore decided that the combination of the above factors (beginning with the recognition in Pratt that delayed execution was contrary to common law) leads inexorably to the conclusion that it is unlawful at common law for the state to facilitate the execution of the death penalty against its citizens or others within its jurisdiction anywhere in the world.
Law, whether enacted or developed through the common law, if it is operating as it should, must be responsive to societys contemporary needs, standards and values.
It is a commonplace that these are in a state of constant change.
That is an essential part of the human condition and experience.
As a deeper understanding of the human psyche and the enlightenment of society increase with the onward march of education, tolerance and forbearance in relation to our fellow citizens, the law must march step by step with that progress.
I am convinced that the adjustment to the common law which I propose reflects the contemporary standards and values of our society.
There is no evidence that the insistence on assurances in the case of extradition or deportation has led to any rupture in the relations between the two countries.
Moreover, several other countries have required assurances without any evidence of negative consequences (for example, Germanys requiring an assurance before providing MLA for the federal prosecution of Zacarias Moussaoui, one of the 9/11 conspirators).
In any event, the reaction of the US has no bearing on the existence of the common law principle.
Nor is there any warrant for suggesting that the recognition of the proposed common law principle would forbid mutual legal assistance in all circumstances.
It would be applied precisely as is the rule relating to deportation and extradition.
Mutual legal assistance can continue when the appropriate assurances are given.
I likewise do not accept that the principle has the potential to be expanded into spheres where it would risk creating real damage, for example, to public protection and national security.
The principle will only apply in cases where proceedings are either in train or contemplated and where a possible outcome is the infliction of the death penalty.
The free flow of information on matters of public protection and national security between this country and its allies will continue unimpeded.
It is suggested by Lord Carnwath in para 191 of his judgment that there is as yet no established principle (under the common law, the Convention or any other recognised system of law), which prohibits the sharing of information relevant to a criminal prosecution in a non abolitionist country.
Since the passing of the Human Rights Act 1998, there may have been a tendency to see the law in areas touched on by the Convention solely in terms of Convention rights.
But ECHR rights represent a threshold protection; and, although they may be expected to reflect and to find their homologue in the common or domestic statute law, they should not be regarded as an inhibitor to the development of the common law.
Lord Goff of Chieveley in Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 282 284 expressed the view that in the field of freedom of speech there was no difference in principle between English law and article 10 of ECHR.
But, in some areas, the common law may go further than the Convention, and in some contexts it may also be inspired by the ECHR rights and jurisprudence (the protection of privacy being a notable example).
And in time, of course, a synthesis may emerge.
But the natural starting point in any dispute is to begin with domestic law, and it is certainly not to focus exclusively on the Convention rights, without surveying the wider common law scene.
As Toulson LJ said in R (Guardian News and Media Ltd) v City of Westminster Magistrates Court [2012] EWCA Civ 420; [2013] QB 618, 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.
(vi) Customary international law
In his intervention in this case Professor Heyns suggested that there is an emerging norm of customary international law that the death penalty as such is a violation of the absolute right against torture and cruel, inhuman and degrading treatment of punishment, and that a norm against the facilitation of the death penalty follows from that.
Professor Heyns accepts that in order to determine the existence and content of a rule of particular customary international law, it is necessary to ascertain whether there is a general practice among the states concerned that is accepted by them as law among themselves Celiberti de Casariego v Uruguay: (1981) 68 IRL 41, paras 10.1 10.3.
In my opinion, the material on which one could reasonably conclude that there is such a general practice has not been produced.
The arguments advanced by the respondent (and set out between paras 88 and 92 above) do not establish that customary international law is not in the process of evolving to the point where the death penalty as such is a violation of the absolute right against cruel and inhuman punishment.
But those arguments and the material on which they were based are sufficient to cast sufficient doubt on that proposition.
As Professor Heyns has pointed out, the United Nations Special Rapporteur on torture and other cruel, inhuman or degrading treatment or punishment, concluded in 2012: there is an evolving standard whereby states and judiciaries consider the death penalty to be a violation per se of the prohibition of torture or cruel, inhuman or degrading treatment The Special Rapporteur is convinced that a customary norm prohibiting the death penalty under all circumstances, if it has not already emerged, is at least in the process of formation.
Interim Report of the Special Rapporteur on torture and other cruel, inhuman or degrading treatment or punishment, 9 August 2012, (A/67/279), para 72.
In the absence of firm, tangible evidence that the process of evolution has been completed or that there is a general practice such as is referred to in para 144 above, it is impossible to accept the appellants argument based on customary international law.
(vii) Data protection
The starting point on this subject is the agreement between the parties that the provision of material by the Home Secretary to the United States in July 2018 involved processing of personal data for a law enforcement purpose by a controller which is a competent authority for the purposes of Part 3 of the Act.
It is also agreed that the Home Secretary did not expressly consider his duties under the Act.
The respondent argues, however, that there was substantial compliance with the Act.
Section 34 of the DPA provides an overview and general duty of the data controller.
It summarises six data protection principles.
The appellant complains that the first two of these were breached.
So far as relevant to this case they are (i) that the processing of personal data for any law enforcement purposes must be lawful and fair section 35(1) and (ii) that the law enforcement purpose for which personal data is collected on any occasion must be specified, explicit and legitimate section 36(1)(a).
Since I have concluded that the transfer of material to the US authorities without obtaining death penalty assurances was contrary to law, it follows that neither condition can be said to have been met.
The processing of the material was not lawful.
Nor was the law enforcement purpose for which it was collected legitimate, since it was to be used in the prosecution of Mr El Sheikh in a trial where he was at risk of being sentenced to death and executed in consequence.
That purpose cannot be legitimate in light of my view as to the current state of the law of this country.
On that account, it is unnecessary for me to consider the elaborate arguments deployed by the parties on the proper approach to the interpretation of the DPA, beyond paying tribute to the ingenuity of those arguments and the skill with which they were presented.
Sections 73 to 76 set out the general conditions that apply to the transfer of personal data to third countries or international organisations.
A controller may not transfer personal data to a third country or to an international organisation unless the three conditions set out in subsections (2) to (4) of section 73 are met.
The second condition is the relevant one for the purposes of this case.
It is contained in section 73(3) and is in these terms: (3) Condition 2 is that the transfer is based on an adequacy decision (see section (a) 74), (b) if not based on an adequacy decision, is based on there being appropriate safeguards (see section 75), or (c) if not based on an adequacy decision or on there being appropriate safeguards, is based on special circumstances (see section 76).
It is not in dispute that the transfer was not based on an adequacy decision.
In view of my finding in relation to the need to obtain proper death penalty assurances, I am bound to find that the decision to transfer the material to US authorities was not based on there being appropriate safeguards.
Section 76 deals with transfers on the basis of special circumstances.
In material part it provides: (1) A transfer of personal data to a third country or international organisation is based on special circumstances where the transfer is necessary to safeguard the legitimate interests of the data to protect the vital interests of the data subject or (a) another person, (b) subject, (c) for the prevention of an immediate and serious threat to the public security of a member state or a third country, (d) enforcement purposes, or (e) in individual cases for any of the law in individual cases for a legal purpose.
The Divisional Court held that the transfer could be justified on the basis of special circumstances.
The appellant submits that the court was wrong to characterise the transfer as being necessary for any purpose.
Accordingly, the condition in section 76(1) was not met.
Secondly, the appellant submits that, since section 76 refers to a transfer which is based on or takes place in reliance on the existence of special circumstances, conscious and contemporaneous reliance on the gateway by the transferor at the time of the transfer is required and there was no such reliance in this case.
Thirdly, the narrowness of this residual gateway is reinforced by recital (72) to the LED which states that the gateway should be interpreted restrictively and should be limited to data strictly necessary.
I consider that the requirement that the data be limited to that which is strictly necessary behoves the data controller to make an assessment of what, in the context of the DPA, is strictly necessary and, since it is accepted that the Home Secretary did not have regard to his duties as data controller, the special circumstances gateway was not available.
Moreover, it is not enough to say that the data protection provisions were substantially met, where direct, personal evaluation was required.
The appellants final argument in relation to the DPA was based on section 80 (regarding special processing restrictions where, for a law enforcement purpose, a controller transmits or otherwise makes available personal data to an EU recipient or a non EU recipient).
I am inclined to accept the respondents argument that this provision does not apply to Mr El Sheikh but, in light of my other conclusions, it is unnecessary for me to reach a final conclusion on it.
I refrain from making a finding on that argument, therefore.
Conclusions
I have concluded that a common law principle should now be recognised to the effect that it is unlawful to facilitate by the provision of material to be used in the trial of a person in a foreign country where there is a risk that, as a result of those proceedings, that person would be at risk of execution.
On that account the Home Secretary should not have supplied the material to the US authorities in July 2018 without having obtained the customary death penalty assurances.
It matters not that the Home Secretary was exercising a prerogative power.
This court is required by long established law to examine the nature and extent of the prerogative power and to determine whether the respondent has transgressed its limits particularly where the prerogative power may be being used to infringe upon an individuals rights.
The courts have carried out a similar examination in several earlier cases, including Sandiford (considered above) see also the recent decision of this court in the associated cases of R (Miller) v Prime Minister (Lord Advocate intervening) [2019] UKSC 41; [2019] 3 WLR 589, paras 30 32 and, in particular, para 35.
It might be said that the limit on the prerogative is grounded in the private law right to life and freedom from cruel and unusual treatment but this does not mean that a private law claim could be brought against a private individual choosing to give evidence in a death penalty trial, as the focus here is on the public law principle regarding the use of executive powers.
The challenge here may be said to stem from the asserted right that Mr El Sheikh should not be exposed to the risk of having the death penalty imposed on him.
And it is possible to characterise that as a private law right.
But the decision to release papers and other material without obtaining death penalty assurances involves the exercise of the prerogative which is rooted firmly in the public law domain.
If there is recognised a common law principle that the death penalty should not be facilitated (save in wholly exceptional circumstances which I shall discuss in the next paragraph and which do not obtain in this instance), then the exercise of the prerogative must yield to that principle and be exercised in accordance with it.
The restraint on the power to exercise the prerogative in the way that the authorities have done and wish to do in this case derives from such a common law principle, not from the assertion of a private law right.
It lies emphatically therefore in the sphere of public law.
The only circumstances in which I conceive that the common law principle should not apply are these: if the relay of information or intelligence was absolutely necessary as a matter of urgency in order to save lives or to protect the security of the nation, the possibility of facilitating the imposition of the death penalty on someone whose identity or activities would thereby be revealed would be outweighed by those momentous considerations.
There is nothing of the kind here.
No one has suggested that the information was required because of any imminent threat.
Had I not held that it was unlawful to facilitate the trial of a person in a foreign country where there was a risk of his being executed, I would nevertheless have held that facilitating his trial in the US with the attendant and inevitable considerable delay between the passing of the sentence of death and its being carried out would be unlawful.
For the reasons earlier given, the respondent failed to comply with the requirements of a number of the provisions in the DPA.
On that account also his decision to supply the material was unlawful.
It follows that no further assistance should be given for the purpose of any proceedings against Mr El Sheikh in the United States of America without the appropriate death penalty assurances.
LORD REED: (with whom Lady Black and Lord Lloyd Jones agree)
I agree with Lord Carnwath, for the reasons which he gives, and with the other members of the court, that the Secretary of States decision is vitiated by his failure to comply with the requirements of the Data Protection Act 2018.
The second ground of appeal should therefore be upheld, and the appeal must be allowed.
I also agree with Lord Carnwath that the first ground of appeal should be dismissed, for the reasons which he gives, and for also the additional reasons given below.
I regret that I am unable to agree with Lord Kerrs conclusion that individuals (including citizens of foreign states) possess a common law right under English law not to have their trial in a foreign jurisdiction facilitated where there is a prospect that such a trial would lead to the death penalty being carried out.
Out of respect for Lord Kerrs careful judgment, I should briefly explain the additional reasons, besides those given by Lord Carnwath, for my taking a different view.
I fully accept that the common law is subject to judicial development, but such development builds incrementally on existing principles.
That follows from two considerations.
The first is that judicial decisions are normally backward looking in the sense that they decide what the law was at the time which is relevant to the dispute between the parties.
In order to preserve legal certainty, judicial development of the common law must therefore be based on established principles, building on them incrementally rather than making the more dramatic changes which are the prerogative of the legislature.
Following that approach, new rules may be introduced, or existing rules may be reformulated or departed from, but the courts continue to apply principles which formed an established part of the law at the time of the events in question.
The judges are then faithful to their oath to do right to all manner of people after the laws and usages of this Realm.
Secondly, that constraint on judicial law making is also compatible with the pre eminent constitutional role of Parliament in making new law, and with the procedural and institutional limitations which restrict the ability of litigation before the courts to act as an engine of law reform.
The development of the law proposed by Lord Kerr does not appear to me to be an incremental step.
I do not find in the sources cited by Lord Kerr an established principle, of which a right having the characteristics he describes can be regarded as an incremental development, largely for the reasons given by Lord Carnwath.
For example, the principal domestic source on which Lord Kerr relies is article 10 of the Bill of Rights 1688.
That article appears under the heading The Subjects Rights, and states that excessive Baile ought not to be required nor excessive Fines imposed nor cruel and unusual Punishments inflicted.
Its prohibition of cruel and unusual punishments concerns the infliction of punishment by the Crown.
That is not the subject matter of the present case.
Nevertheless, there is no doubt that, as Lord Bingham of Cornhill observed in R (Amin) v Secretary of State for the Home Department [2003] UKHL 51; [2004] 1 AC 653, para 30, [a] profound respect for the sanctity of human life underpins the common law.
There are many areas of the law which reflect that respect, including the criminal law relating to homicide, the law of tort and the law relating to coroners.
The present case is not, however, concerned with a deprivation of life which would constitute a crime or a tort under English law, or would call for a coroners inquest.
It is concerned with a decision by the Secretary of State, taken (it is accepted) in the exercise of prerogative powers, to provide mutual legal assistance to a foreign government, in the form of information concerning a foreign citizen for use in a criminal investigation, and possibly at a trial, in that jurisdiction.
The special feature of the case is that it is possible that the person under investigation may be tried on charges for which the death penalty is an available punishment.
If he were to be convicted of such charges, a trial could result in his judicial execution.
It also appears from the evidence before this court that a prosecution overseas would be reliant on the material provided by the Secretary of State.
The consequence of the Secretary of States decision is therefore to place a person at risk of execution.
In my opinion, Sir James Eadie was correct in submitting on behalf of the Secretary of State that the common law rights and obligations which are relevant to that situation are to be found in public law.
There is however a risk of over simplification if one says, as Sir James put it, that public law goes no further than to recognise that rational and proper judgments have to be made.
It is necessary to bear in mind that the context of a decision, and in particular, its potential implications for the life of the person concerned, may affect the application of the familiar grounds of judicial review of administrative action to which Sir James was referring.
In that regard, it is relevant to consider the idea of a right to life, which is included among the common law constitutional rights listed in De Smiths Judicial Review, 8th ed (2018), eds Woolf et al, para 11 054, and has been discussed in a number of authorities.
Those authorities do not vouch the existence of a right in the sense in which that term is used in the law of obligations, and the idea that there might be a right of that character is absent from leading cases concerned with questions of life and death, such as Airedale NHS Trust v Bland [1993] AC 789, R v Cambridge Health Authority, Ex p B [1995] 1 WLR 898, In re A (Children) (Conjoined Twins: Surgical Separation) [2001] Fam 147 and R (Nicklinson) v Ministry of Justice (CNK Alliance Ltd intervening) [2014] UKSC 38; [2015] AC 657.
Nevertheless, the authorities support the recognition of what might more aptly be described as a value to which the courts attach great significance when exercising their supervisory jurisdiction.
Judicial recognition of the right to life, understood in that sense, can have an important influence on adjudication.
A well known example is the case of R v Secretary of State for the Home Department, Ex p Bugdaycay [1987] AC 514, which concerned the approach which should be adopted to the consideration of applications for asylum, where it was claimed that the asylum seekers life would be at risk if his application were refused.
Lord Bridge of Harwich, in a speech with which the other members of the Appellate Committee expressed agreement, referred to the limitations on judicial review of the exercise of discretion, and continued at p 531: Within those limitations the court must, I think, 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.
The most fundamental of all human rights is the individuals right to life and when an administrative decision under challenge is said to be one which may put the applicants life at risk, the basis of the decision must surely call for the most anxious scrutiny.
To similar effect, Lord Templeman stated at p 537: In my opinion where the result of a flawed decision may imperil life or liberty a special responsibility lies on the court in the examination of the decision making process.
On that basis, the House of Lords carried out a more searching review of the Secretary of States consideration of the facts of the case than would be usual on an application for judicial review.
Another example is the case of R v Cambridge Health Authority, Ex p B [1995] 1 WLR 898, concerned with a challenge to a health authoritys refusal to provide what was argued to be potentially life saving medical treatment.
Sir Thomas Bingham MR, with whom Sir Stephen Brown P and Simon Brown LJ agreed, stated at pp 904 905: [I]t is important that I should state very clearly, as the judge did, that this is a case involving the life of a young patient and that that is a fact which must dominate all considerations of all aspects of the case.
Our society is one in which a very high value is put on human life.
No decision affecting human life is one that can be regarded with other than the greatest seriousness.
This approach is now firmly established.
For example, in R (Sandiford) v Secretary of State for Foreign and Commonwealth Affairs [2014] UKSC 44; [2014] 1 WLR 2697, para 66, Lord Carnwath and Lord Mance stated: Irrationality is a high threshold, but it may be easier than otherwise to surmount in a case involving an imminent risk of death by execution of a British citizen deprived of financial support abroad.
The courts role is given added weight in a context where the right to life is at stake (see R v Secretary of State for the Home Department, Ex p Bugdaycay [1987] AC 514).
A keen scrutiny of the policy and its application must on any view be required in such circumstances.
In the more recent case of Pham v Secretary of State for the Home Department [2015] UKSC 19; [2015] 1 WLR 1591, Bugdaycay was cited as one of a number of authorities demonstrating that the intensity of rationality review depends on the context, and that a more rigorous approach is required when the courts are reviewing the exercise of discretion in contexts where fundamental rights are at stake: see paras 105 106 and 114.
Sir James Eadie submitted that the Secretary of States decision in the present case complied with that standard.
There was, he said, no irrational change of position by the Secretary of State.
The decision was subjected to the most anxious scrutiny.
Sir James also emphasised that the decision was taken in the conduct of foreign affairs, in an area shot through with diplomatic judgement.
This was an area where the courts recognised the institutional competence and democratic legitimacy of the executive.
I fully accept that in reviewing a decision such as that in issue, the court has to take full account of the considerations to which Sir James referred.
I also accept that, contrary to the submission made on behalf of the appellant, the fact that the Secretary of States decision represented a departure from the Governments usual approach in death penalty cases did not in itself render it irrational: the Governments policy in this area was more nuanced than was acknowledged in those submissions.
Postscript
However, I should not leave this matter without observing that, examining the decision with the intense care which its potential consequences require, there are some other aspects which might have given rise to a question as to whether it complied with the common law requirement of rationality, if they had been raised.
I should make it clear that, as these matters were not raised on behalf of the appellant, I do not express any view on them, and they have played no part in my decision as to the outcome of the appeal.
I mention them only because they might be relevant if a similar issue were to come before the Secretary of State on some future occasion.
One such aspect is the Secretary of States conclusion that the provision of the information in question was justified because it was in the interests of justice that Mr El Sheikh should be tried in the United States.
According to a witness statement of Mr Graeme Biggar, a senior official in the Home Office whose statement was said by Sir James to set out the Secretary of States reasoning, the Crown Prosecution Service (the CPS) considered that there was insufficient evidence for a prosecution to take place in the UK, even taking into account the cumulative effect of the evidence available in both the UK and the US.
Against that background, Mr Biggar stated, [t]he Home Secretarys priority was to ensure insofar as possible that Mr El Sheikh faced justice before a criminal court.
The Secretary of State himself wrote, in the relevant letter dated 22 June 2018: The UKs aim is for these individuals to face justice in the most appropriate jurisdiction which maximises our collective chances of a successful prosecution.
To this end the (operationally independent) Counter Terrorism Command of the Metropolitan Police (S015) and Crown Prosecution Service (CPS), have been engaged in a dispassionate assessment of the evidence available and likelihood of prosecution in the UK.
In parallel our investigators have also been working with the FBI to explore the likelihood of prosecution in the US or other jurisdictions Regretfully, as a result of this process, the CPS have determined there is insufficient evidence to prosecute Shafee El Sheikh in the UK Ensuring foreign fighters face justice raises a real challenge for all our jurisdictions, however in this instance we believe a successful federal prosecution in US is more likely to be possible because of differences in your statute book and the restrictions on challenges to the route by which defendants appear in US courts.
The US currently has additional charges for terrorism offences which are not available under UK criminal law, and those offences carry long sentences.
We are therefore committed to assisting the US with a federal prosecution of Alexanda Kotey and Shafee El Sheikh, and after careful consideration I have decided to accede to your current request for mutual legal assistance which is with the UK Central Authority.
This letter implies that the problem faced by the CPS was not merely that there was insufficient evidence to convict Mr El Sheikh of any offence under UK law.
Two other matters were mentioned: the need to create new offences, and possible challenges to the route by which defendants appear in court.
In relation to the second point, Sir James Eadie explained that there was a concern that Mr El Sheikh could challenge the procedure by which he might be brought before a UK court as an abuse of process, on the basis of R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42.
The Secretary of States reasoning appears therefore to be based on the view that the prosecution of a person in a foreign jurisdiction is necessary to ensure that justice is done, notwithstanding that (a) the conduct for which he might be prosecuted does not constitute an offence under the law in force in the UK, (b) there is insufficient evidence to establish that he has committed any offence under UK law, and (c) the law in force in the UK might treat his prosecution as an abuse of process.
A second aspect of the reasoning is that the Secretary of State seemingly regarded the prospect of Mr El Sheikhs possible execution as preferable to the prospect of his detention at Guantanamo Bay.
In relation to that matter, Mr Biggar states: The second issue was the prospect that the US might transfer El Sheikh to Guantanamo Bay The UK has consistently and publicly opposed Guantanamo Bay; and considers that it is a radicalising factor in the UK It was the Home Secretarys assessment in his meeting with the US Attorney General that to press for an assurance would be to imperil the prospect of prosecution (and instead pave the way for a transfer to Guantanamo).
To view the risk of Mr El Sheikhs execution as preferable to the risk of his detention at Guantanamo Bay is understandably described by Lord Kerr as perplexing.
LORD CARNWATH:
I am grateful for Lord Kerrs comprehensive account of the legal and factual background to this troubling case.
Taken with the similarly complete judgment of the Divisional Court, it enables me to express my own views relatively briefly.
The appellants submissions fall under two main headings: (i) Unlawfulness of facilitating the death penalty; (ii) Violations of the Data Protection Act 2018.
In short, I would dismiss the appeal under the first heading, substantially for the reasons given by the Divisional Court; but in agreement with Lord Kerr I would allow the appeal under the second heading.
On the latter issue we have had helpful submissions, not available to the Divisional Court, from Mr Facenna QC on behalf of the Information Commissioner.
Facilitating the death penalty
The citations given by Lord Kerr leave no doubt as to the strength of the opposition to the death penalty in this and many other countries.
The issue is how far that is reflected in a rule of law applicable to the present facts.
Certain principles of law or policy are not in doubt: (i) It is the clear policy of the UK to oppose the death penalty in all circumstances as a matter of principle, to seek to increase the number of abolitionist countries and to seek further restrictions on the use of the death penalty in countries where it is used (see the citations in R (Sandiford) v Secretary of State for Foreign and Commonwealth Affairs [2013] EWCA Civ 581; [2013] 1 WLR 2938 CA, para 7). (ii) Within countries subject to the European Convention on Human Rights the right not to be subjected to the death penalty (article 2 and the Thirteenth Protocol) is now recognised as a fundamental right and as one which admits of no derogation and applies in all circumstances (Al Saadoon v United Kingdom (2010) 51 EHRR 9, para 118). (iii) There is as yet no settled rule of customary international law to like effect (Lord Kerr para 149). (iv) It is an established principle both of the common law and other jurisprudence (including the European Convention) that prolonged delay in carrying out the death penalty (the death row phenomenon) may be unlawful as violating protections against cruel, inhuman or degrading treatment (Pratt v Attorney General of Jamaica [1994] 2 AC 1, Soering v United Kingdom (1989) 11 EHRR 439; and other cases cited by Lord Kerr at paras 138 140).
I agree with Lord Kerr that the Divisional Court in this respect took too narrow a view of the principle. (v) Convention law (under article 2) also prohibits In addition to prohibiting the death penalty in member states, the extradition or deportation of an individual to another state where substantial grounds have been shown for believing that he or she would face a real risk of being subjected to the death penalty there. (Al Saadoon at para 123) The same principle applies under article 3 where there is a real risk of prolonged exposure to the death row phenomenon (Soering at para 111). (vi) To similar effect UN Human Rights Committees (UNHRC) General Comment No 36 (2018) on article 6 of the International Covenant on Civil and Political Rights provides (para 34): States parties that abolished the death penalty cannot deport, extradite or otherwise transfer persons to a country in which they are facing criminal charges that carry the death penalty, unless credible and effective assurances against the imposition of the death penalty have been obtained.
These points are not in dispute.
However, so far as appears from the materials before the court, there is as yet no established principle (under the common law, the European Convention or any other recognised system of law), which prohibits the sharing of information relevant to a criminal prosecution in a non abolitionist country merely because it carries a risk of leading to the death penalty in that country.
Against that background Mr Fitzgerald QC faced an uphill task in seeking to persuade the court that it should now fashion a common law rule to that effect.
He sought to do so, first, by invoking Lord Carswells well known affirmation in A v Secretary of State for the Home Department (No 2) [2005] UKHL 71; [2006] 2 AC 221, para 152, of the evolving character of the common law, citing for example Matthews J in Hurtado v California (1884) 110 US 516, 531: as it was the characteristic principle of the common law to draw its inspiration from every fountain of justice, we are not to assume that the sources of its supply have been exhausted.
On the contrary, we should expect that the new and various experiences of our own situation and system will mould and shape it into new and not less useful forms.
Secondly, he relied on recent statements in this court as to the ability of the common law to respond to developments in European Convention law: R (Osborn) v Parole Board [2013] UKSC 61; [2014] AC 1115, para 57 per Lord Reed; Kennedy v Information Comr (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 445, para 46 per Lord Mance.
Neither reference seems to me to assist his case.
As the Divisional Court said, the power of the courts to develop the common law is not in doubt, but it is a power to be exercised with caution.
The recent statements in this court support the development of the common law in line with the European Convention, but not beyond as here proposed.
So far as concerns Lord Carswells comments in the A case, he was speaking in the context of an issue as to the admissibility of evidence obtained by torture, against a background in which from its very earliest days the common law of England set its face firmly against the use of torture (per Lord Bingham of Cornhill at para 11, citing authorities dating from the 15th century).
As Lord Carswell acknowledged, other members of the House had accepted the view that the common law as it stands would forbid the reception in evidence of any statement obtained by the use of torture.
In that context his proposal represented at most a very limited development of the law.
By contrast, as the Divisional Court pointed out (para 94), the death penalty as such has never attracted the attention of the common law.
It is notable that the developments of the law have come relatively recently, from Parliament or the European Court of Human Rights, rather than the domestic courts.
It was not until 1965 that the death penalty was abolished for murder (Murder (Abolition of Death Penalty) Act 1965); abolition of the penalty for the remaining offences had to wait until the Crime and Disorder Act 1998.
Much more recently Parliament has made express provision in respect of death penalty assurances in one context.
Section 16 of the Crime (Overseas Production Orders) Act 2019, which amends section 52 of the Investigatory Powers Act 2016 (interception of communications in accordance with overseas requests) to provide, in the case of agreements with non abolitionist countries, a prohibition on designation unless the Secretary of State: has sought a written assurance, or written assurances, relating to the non use of information obtained by virtue of the agreement in connection with proceedings for a death penalty offence in the country or territory.
The possible relevance is two fold.
First it confirms that this is an area in which Parliament remains directly involved.
Secondly, where the statute applies, the Secretary of State is required to seek assurances, but there is no specific prohibition on the exchange of material where no such assurance is ultimately obtained.
As regards the European Convention, the right to life under article 2 of the Convention in its original form included an exception for the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law.
It was not until 2004 that the Thirteenth Protocol to the European Convention was adopted excluding the death penalty in all circumstances.
Nor can it be assumed that the domestic courts unaided by Strasbourg would have developed a rule of law corresponding to the Soering principle.
The principle itself was not uncontroversial.
In the later Grand Chamber decision in Chahal v United Kingdom (1997) 23 EHRR 413 there was strong minority support for a more flexible approach when dealing with removal on security grounds.
In a dissenting judgment, seven judges (including the British judge Sir John Freeland) said: We agree with the majority that national security considerations could not be invoked to justify ill treatment at the hands of a Contracting State within its own jurisdiction, and that in that sense the protection afforded by article 3 is absolute in character.
But in our view the situation is different where, as in the present case, only the extra territorial (or indirect) application of the article 3 is at stake.
There, a Contracting State which is contemplating the removal of someone from its jurisdiction to that of another state may legitimately strike a fair balance between, on the one hand, the nature of the threat to its national security interests if the person concerned were to remain and, on the other, the extent of the potential risk of ill
treatment of that person in the state of destination
Under domestic law, powers to deport or extradite are conferred by statute and as such subject to review on public law grounds, including, where the right to life is at stake the anxious scrutiny principle (R v Secretary of State for the Home Department, Ex p Bugdaycay [1987] AC 514).
However, it is difficult to see how, under established common law principles of statutory construction (apart from the European Convention), the discretion conferred on the Secretary of State by the relevant statutes could have been construed as subject to an absolute prohibition on removal by reference to the possible consequences in the receiving state, as opposed to a discretion along the lines of that proposed by the minority in Chahal.
In any event, even if such a common law principle relating to physical removal could be made out, I am unpersuaded that the references given by Mr Fitzgerald could properly lead the court to recognise as part of the common law a broader non facilitation principle: that is a principle (in his words) that it cannot be lawful or rational to facilitate a penalty that we ourselves regard as inhuman.
I take them in turn.
He relies first on the words of Lord Kerr in R (Ismail) v Secretary of State for the Home Department [2016] UKSC 37; [2016] 1 WLR 2814 to describe the basis of the Soering principle: It was because the actions of the UK authorities, in extraditing the applicant to a country where he faced the possibility of suffering the death penalty, facilitated that outcome that a violation of article 3 was held to be present.
In effect, the UK would have been directly instrumental in exposing Soering to the risk of being executed (para 35 emphasis added) As I understand that passage in context, Lord Kerr was giving no more than shorthand description of the basis of the Soering principle, with a view not to extending it, but to distinguishing it as applied to the facts of the case before him.
To similar effect is the reference by the Constitutional Court of South Africa in Mohamed v President of the Republic of South Africa [2001] ZACC 18 to the states commitment under its Constitution not to be party to the imposition of cruel, inhuman or degrading punishment (para 59).
The full paragraph shows that again it was concerned with physical removal rather than other forms of assistance: For the South African government to cooperate with a foreign government to secure the removal of a fugitive from South Africa to a country of which the fugitive is not a national and with which he has no connection other than that he is to be put on trial for his life there, is contrary to the underlying values of our Constitution.
It is inconsistent with the governments obligation to protect the right to life of everyone in South Africa, and it ignores the commitment implicit in the Constitution that South Africa will not be party to the imposition of cruel, inhuman or degrading punishment. (para 59 emphasis added)
The same can be said of Mr Fitzgeralds reference to the UNHRC decision in Judge v Canada (2005) 40 EHRR SE4, para 10.6.
The full paragraph reads: 10.6 For these reasons, the Committee considers that Canada, as a state party which has abolished the death penalty violated the authors right to life under article 6, para 1, by deporting him to the United States, where he is under sentence of death, without ensuring that the death penalty would not be carried out.
The Committee recognizes that Canada did not itself impose the death penalty on the author.
But by deporting him to a country where he was under sentence of death, Canada established the crucial link in the causal chain that would make possible the execution of the author.
Mr Fitzgerald relies on the reference to a causal chain, but that again was in the narrow context of physical removal to a country where he was already under sentence of death.
Finally Mr Fitzgerald relies on the report of the UN Special Rapporteur (Professor Christof Heyns) on extrajudicial, summary or arbitrary executions, A/70/304, 7 August 2015, which states: A dilemma emerges when abolitionist states provide assistance to retentionist states in criminal matters and that assistance leads to the use of the death penalty.
Even though the individual facing the death penalty in such cases may never have been in the jurisdiction of the abolitionist state, such assistance could amount to complicity in the death penalty.
The same legal principles apply here as in the case of transfer of persons: states that have abolished capital punishment may not assist in bringing about the death penalty in other countries. (para 102 emphasis added)
The report goes on (para 106) to refer to the possible need for further guidance on what sort of assistance might constitute unlawful complicity in the death penalty, supported by a non exhaustive list drawn up by OHCHR detailing what assistance might be proximate enough to engage responsibility.
While the earlier passage might be thought to imply a more general principle aimed at any form of assistance, the report does not suggest that it has achieved the status of a binding rule of law by virtue of any legal instrument or judicial pronouncement, national or international.
It is also relevant that we are not here considering facilitation in general, but facilitation by the transfer of information.
The development of a common law rule would have to take account of the fact that, at least as respects the transfer of personal data, Parliament has recently legislated in this field, in the 2018 Act.
That provides a detailed and carefully calibrated regime for the transfer of such information to third countries.
It is difficult to reconcile that scheme with the development of an absolute common law prohibition of transfer of information in defined circumstances.
Notably, even where transfer would otherwise be prohibited, for example because of the lack of appropriate safeguards, transfer may be allowed in special circumstances, including in section 76(1)(c) for the prevention of an immediate and serious threat to the public security of a member state or a third country.
It is not difficult to envisage circumstances where urgent exchange of information with the US security forces might be required relating to an immediate threat to public security, which should not be inhibited by concerns that it might ultimately lead to a risk of the death penalty.
For these reasons I would dismiss the appeal under the first heading.
Data Protection Act 2018
The provisions of the Data Protection Act 2018, which regulates the processing of personal data, are set out and discussed in detail in the Divisional Courts judgment (paras 141ff).
It is not in dispute that the data transmitted to the US authorities include personal data relating to Mr El Sheikh together with personal data relating to any other suspect, to witnesses and possibly others, along with other material not falling within the definition of personal data.
It is also not in dispute that in the course of their consideration of the question whether to provide the US authorities with the material, the UK authorities gave no separate consideration to the requirements of the 2018 Act (Divisional Court paras 141 142).
It is Part 3 of the Act that is of particular relevance in the present case.
As the Divisional Court explains (paras 143, 175), Part 3 is designed to implement the EUs Law Enforcement Directive (Directive (EU) 2016/680) or LED, which accordingly is a legitimate aid to construction.
The appellant argues that the authorities breached the provisions of the 2018 Act in a number of respects.
I propose to turn straight to the arguments that she advances in relation to the provisions governing transfers of personal data to a third country (sections 72 to 78 of Part 3), because it is these provisions which, to my mind, provide the answer to the data protection issues in this case.
Section 73 sets out general principles for such transfers.
It prohibits transfer of personal data unless the three conditions set out in subsections (2) to (4) are met.
Condition 1 is that the transfer is necessary for any of the law enforcement purposes.
It is common ground that the test of necessity is a strict one (Guriev v Community Safety Development (UK) Ltd [2016] EWHC 643 (QB), para 45).
The law enforcement purposes are: the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, including the safeguarding against and the prevention of threats to public security. (section 31)
is based on an adequacy decision (see section
Condition 2 is that: the transfer (a) 74), (b) if not based on an adequacy decision, is based on there being appropriate safeguards (see section 75), or if not based on an adequacy decision or on there (c) being appropriate safeguards, is based on special circumstances (see section 76).
Condition 3 concerns the status of the intended recipient of the data.
There is no dispute that it is satisfied, and it need not concern us further.
It is upon Condition 2 that the argument in the instant case has centred.
Each of the three limbs of this condition directs the reader on to a further section of Part 3.
There was no adequacy decision in this case (Condition 2(a)), so section 74 need not be considered.
However, there is debate as to the applicability of both Condition 2(b) and Condition 2(c), and it is therefore necessary to turn to sections 75 and 76.
Section 75 defines the circumstances in which a transfer is based on there being appropriate safeguards, and sets out procedural requirements which must be complied with, including as to documentation and as to providing information to the Information Commissioner.
Relevant also to appropriate safeguards is recital (71) of the LED: Transfers not based on such an adequacy decision should be allowed only where appropriate safeguards have been provided in a legally binding instrument which ensures the protection of personal data or where the controller has assessed all the circumstances surrounding the data transfer and, on the basis of that assessment, considers that appropriate safeguards with regard to the protection of personal data exist In addition, the controller should take into account that the personal data will not be used to request, hand down or execute a death penalty or any form of cruel and inhuman treatment (Emphasis added)
The Divisional Court rejected the appellants submission based on recital (71) that in the absence of an assurance as to use, the safeguards would necessarily be inadequate.
They said: if this recital were intended to be a red line prohibition it (a) would be expressed clearly as such, (b) would be expressed in imperative terms (must rather than should and not merely take into account), and (c) would be in an article rather than a recital. (para 182)
The court (paras 202ff) also rejected the submission that the section required express consideration of the applicability of the requirements before transfer takes place: What matters is whether, in substance, appropriate safeguards for the protection of the data existed; whether, in other words, the decision proceeded in circumstances where there were appropriate safeguards in place.
It was evident, in the Divisional Courts view, that ministers and officials took account of the potential use of the data in respect of the death penalty: in fact, that was central to the assessment.
The terms on which the data were transferred to the US authorities were set out in the letter under challenge, and the careful consideration by ministers and officials of the question whether to make the transfer in the absence of death penalty assurance met the requirement that the data controller must assess all the circumstances surrounding transfer of that type of personal data to the US as required by section 75(1)(b).
As to the lack of communication with the Information Commissioner as required by section 75(2) the court accepted the submission of counsel for the Secretary of State that a failure in that regard cannot operate to undermine a transfer which in substance is lawful.
Mr Facenna for the Information Commissioner submits that the Divisional Court erred in its understanding of the applicable gateway under sections 73 to 76.
Section 73 requires, as he puts it, conscious and contemporaneous consideration of the statutory tests prior to any transfer taking place.
Further, the record keeping requirement, including the requirement to set out the justification for the transfer (which features in both section 75 and section 76) cannot sensibly be read as requiring no more than ex post facto consideration of whether a transfer was justified.
He submits also that the court was wrong to focus on the extent to which ministers took account of the potential use of the data in respect of the death penalty, and he emphasises the particular reference in the LED to the consideration that the data will not be used to request, hand down or execute a death penalty.
In my view, Mr Facenna is correct to submit that section 73 requires specific consideration by the relevant controller of the statutory tests, including the strict test of necessity.
The clear purpose of the provisions is to set out a structured framework for decision making, with appropriate documentation.
This did not happen in this case, and to that extent there was a clear breach of the Act.
I also agree that the issue under Condition 2 is not what matters the controller took into account, but whether the decision was based on there being appropriate safeguards or (when we come to sections 73(3)(c) and 76) special circumstances.
It is true that recital (71) is no more than an interpretative aid, and that its wording could be clearer.
However, the words will not be used seem to leave little room for discretion.
The expectation is that the appropriate safeguards will be designed to achieve that objective.
That is also consistent with the governments long standing policy of seeking full death penalty assurances in all cases.
Given that in this case the information was transferred without any safeguards at all, I am unable to see how (if the question had been considered) the Secretary of State could have regarded this condition as satisfied.
The Divisional Court was wrong in my view to find otherwise.
The lawfulness of the transfer therefore stands or falls on the special circumstances condition contained in section 73(3)(c).
The circumstances in which a transfer is based on special circumstances are defined in section 76, which, like section 75, also includes procedural requirements.
According to section 76(1), a transfer is based on special circumstances where it is: necessary (a) another person, to protect the vital interests of the data subject or to safeguard the legitimate interests of the data (b) subject, (c) for the prevention of an immediate and serious threat to the public security of a member state or a third country, (d) enforcement purposes, or (e) in individual cases for any of the law in individual cases for a legal purpose.
It is upon paragraphs (d) and (e) that the Secretary of State relies. [L]aw enforcement purposes (paragraph (d)) are defined in section 31, see para 210 above.
A legal purpose (paragraph (e)) includes the purpose of any legal proceedings (including prospective legal proceedings) (section 76(4)(a)).
Paragraphs (d) and (e) do not apply if the controller determines that fundamental rights and freedoms of the data subject override the public interest in the transfer (section 76(2)).
Also relevant to section 76 is recital (72) of the LED, which states: Where no adequacy decision or appropriate safeguards exist, a transfer or a category of transfers could take place only in specific situations, if necessary [inter alia] in an individual case for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, including the safeguarding against and the prevention of threats to public security Those derogations should be interpreted restrictively and should be limited to data strictly necessary.
Such transfers should be documented and should be made available to the supervisory authority on request in order to monitor the lawfulness of the transfer. (Emphasis added)
The Divisional Court held that if necessary the Secretary of State was entitled to rely on the special circumstances condition: 207.
The transfer here was necessary in an individual case for any of the law enforcement purposes (section 76(1)(d)) or, alternatively, in an individual case for a legal purpose: section 76(1)(e).
Given the specific nature of the evidence transferred in the present case it cannot be said to fall within the categories of frequent, massive and structural transfers of person data, or large scale transfers of data (which recital (72) suggests would not be permitted under this head). 208.
The controller had not determined that the fundamental rights and freedoms of the data subject overrode the public interest in the transfer: section 76(2).
Although no specific document was created to meet the requirements of section 76(3) the details of the transfer were documented by UKCA and the justification for the transfer is reflected in various contemporaneous documents.
I agree with Lord Kerr (para 158), in line with the submission of the Information Commissioner, that the Act requires a specific assessment under section 73, and that this did not take place.
Insofar as reliance might be placed on the derogation for the prosecution of criminal offences (recital (72)), the Secretary of State would need to be satisfied that that the transfer of any personal data was strictly necessary for that purpose.
A convenient summary of the thinking at the time is set out in the email of 6 June 2018 from the Home Secretarys private office (referred to by Mr Biggar, para 68): a. He was extremely mindful of the greater imperative of ensuring the prosecution of these individuals.
That must be the highest priority in this instance given their shocking crimes. b. He weighed the decision of seeking assurances against the likelihood of being able to agree them with American counterparts.
Again the priority must be to ensure prosecution in the US system, as there was insufficient evidence for prosecution in the UK. c.
He also judged that by not assisting the US in bringing this to trial, it ran the risk of the two being moved to Guantanamo.
He was aware of the victims families clear wish for a criminal prosecution to take place.
It was his judgment that prosecution was most likely in a US court and therefore this was the best course of action to meet the families wishes. d. Lastly he was mindful of the UKs international obligation to tackle [foreign terrorist fighters].
This course of action was best judged to achieve that commitment.
He felt we must send a clear message that people who commit these acts will be brought to justice, and they cannot be allowed back on the streets to radicalise others.
It is apparent that the decision was based on political expediency, rather than strict necessity under the statutory criteria.
There was no consideration as to whether transfer of personal data as such was required.
There was also a notable lack of any assurance, if the information were made available, as to the prospects of a prosecution in fact taking place in the US.
Given that there was insufficient evidence to prosecute in the UK, it is not clear why the legal position was thought to be any different in the US.
So long as the prospects of any prosecution was uncertain, it would seem premature to say that any particular information was strictly necessary for that purpose.
Of course, if there were no prosecution, concerns about the risk of the death penalty would fall away, but that in itself could not affect the need for the transfer to be justified under the statutory criteria.
As Lady Hale explains, a further issue arises under section 76(2) relating to special circumstances.
Although I would have welcomed fuller argument on the point, I see the force of her comments.
At the least, failure to consider this point is a further reason for holding that the decision cannot stand.
Conclusion
For these reasons I would allow the appeal on the second issue only.
It seems that circumstances may have changed since the hearing of the appeal, in that the Crown Prosecution Service is understood to be reconsidering the possibility of a prosecution in this country.
That would clearly be relevant to any reconsideration of the issues by the Secretary of State, in particular the necessity of the transfer.
I would seek further submissions on the appropriate form of order.
LORD HODGE:
I agree that the appeal must be allowed.
The Secretary of States decision cannot stand because in reaching that decision he did not comply with the requirements of the Data Protection Act 2018 (the 2018 Act).
In this regard I agree with Lady Hale, Lord Reed, Lord Kerr and Lord Carnwath, essentially for the reasons given by Lord Reed and Lord Carnwath.
I see the force of Lady Hales point in relation to section 76(2) of the 2018 Act, but, as it was not fully argued, would reserve my position on it.
But, for the reasons given by Lord Reed and Lord Carnwath, I agree that the first ground of appeal must be dismissed.
I am satisfied that the common law does not recognise a right to life which can be used to bar the Secretary of State, in his exercise of prerogative powers in the conduct of foreign affairs, from providing information to a foreign country concerning a foreign citizen in the context either of mutual legal assistance or the sharing of intelligence.
In the domestic laws of the United Kingdom it is Parliamentary legislation rather than the common law which has created and delimits the right to life by the abolition of the death penalty for all offences and the enactment of the Human Rights Act 1998 (the 1998 Act).
It is in the 1998 Act that the right to life has become part of our domestic laws.
Further protection has been provided, indirectly, by data protection legislation, now the 2018 Act, and, as far as it goes, by section 16 of the Crime (Overseas Production Orders) Act 2019 (the 2019 Act), which amends section 52 of the Investigatory Powers Act 2016.
It is not difficult to envisage circumstances in which the Secretary of State might want to provide intelligence to the government of another country to avert serious loss of life in a planned terrorist attack and that intelligence might expose a person in the custody of the foreign state to criminal charges which may carry the death penalty.
The United Kingdoms international obligation to protect the right to life under article 2 of the European Convention on Human Rights, which section 1 of the 1998 Act introduced into our domestic laws, would, it appears to me, require the Secretary of State to balance the necessity of providing information to save lives against the possibility of facilitating the imposition of the death penalty on that person.
Were the courts to recognise a parallel common law right to life and similar qualifications to that right, that would not be the incremental development of the law building on established principles of the common law; it would amount to judicial legislation.
It is for Parliament to decide whether it wishes to go beyond the amendment which it made in the 2019 Act.
Our public law reflects the very high value which our society places on human life by requiring the courts to adopt an especially intense scrutiny when reviewing the legality of a decision which may imperil a persons life.
Having regard to the arguments advanced in this appeal, that scrutiny involves the review of the exercise of prerogative powers against the common law criterion of reasonableness (in relation to the Secretary of States change of position) and against the requirements which Parliament has imposed in the 2018 Act.
While the appeal fails on the former basis, it succeeds on the latter.
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The appellants son is alleged to have been one of a group of terrorists operating in Syria, involved in the murder of US and British citizens.
In June 2015, the US made a mutual legal assistance (MLA) request to the UK in relation to an investigation into the activities of that group.
The Home Secretary requested an assurance that the information would not be used directly or indirectly in a prosecution that could lead to the imposition of the death penalty.
The US refused to provide a full death penalty assurance.
Ultimately, in June 2018, the Home Secretary agreed to provide the information to the US without requiring any assurance whatever.
The appellant challenged the Home Secretarys decision by way of judicial review.
Her claim was dismissed by the Divisional Court, which certified two questions of law of public importance: (i) whether it is unlawful for the Secretary of State to exercise his power to provide MLA so as to supply evidence to a foreign state that will facilitate the imposition of the death penalty in that state on the individual in respect of whom the evidence is sought; and (ii) whether (and if so in what circumstances) it is lawful under Part 3 of the Data Protection Act 2018 (DPA), as interpreted in the light of relevant principles of EU data protection law, for law enforcement authorities in the UK to transfer personal data to law enforcement authorities abroad for use in capital criminal proceedings.
The Supreme Court allows the appeal.
The majority of the Justices (Lord Reed, Lord Carnwath, Lord Hodge, Lady Black and Lord Lloyd Jones) dismiss the challenge to the decision brought under the common law, but the Court unanimously holds that the decision failed to comply with the DPA.
Lord Kerr would have allowed the appeal on both grounds.
Lady Hales judgment acts as a short guide to the other judgments.
Ground (i): Has the common law evolved to recognise a principle prohibiting the provision of MLA that will facilitate the death penalty? The majority answer this question no.
The reasons for considering that the common law has not developed so far are explained by Lord Reed and Lord Carnwath.
Lord Carnwath finds that the power of the courts to develop the common law must be exercised with caution [193].
The death penalty as such has never attracted the attention of the common law: the key legal developments have come from Parliament and the ECHR, not from the domestic courts [194].
One recent development is section 16 of the Crime (Overseas Production Orders) Act 2019.
This section confirms: (i) that this is an area in which Parliament remains directly involved; and (ii) that, where the Act applies, there is nothing that specifically prohibits the Home Secretary from exchanging material in cases whether they have sought but have not received assurances that the information they
exchange will not be used to facilitate the death penalty.
This suggests that the common law has not developed as suggested by Lord Kerr [195].
Lord Carnwath also finds that powers to deport or extradite under domestic law are subject to review on public law grounds, but are not subject to an absolute prohibition on removal by reference to the possible consequences in the receiving state [198].
Finally, it is difficult to reconcile the DPA scheme with the development of an absolute common law prohibition as advanced by Lord Kerr [205].
Lord Reed agrees with Lord Carnwath for the reasons given in his judgment and for additional reasons.
He finds that the common law is subject to judicial development, but such development must build incrementally on existing principles.
This is necessary to: (i) preserve legal certainty; and (ii) ensure compatibility with the pre eminent constitutional role of Parliament in making new law [170].
The development of the law proposed by Lord Kerr does not seem to Lord Reed to be an incremental step [171].
Lord Reed adds that judicial recognition of the value of life can have an important influence on adjudication in this context.
This is because the courts are required to take a more rigorous approach when reviewing the exercise of discretion where life may be at stake [176 178].
Lord Reed refers to the respondents submissions that the Home Secretarys decision making complied with that higher standard of review [179].
He notes that the Home Secretarys decision might have been open to challenge on the ground that it failed to comply with the common law requirement of rationality, but declines to express a view on this [181 182].
Lord Hodge agrees with Lord Reed and Lord Carnwath that the common law does not recognise a right to life which can be used to prevent the Home Secretary from providing information to a foreign country in the context either of MLA or the sharing of intelligence [231 234].
Lord Kerr underlines the steadfast opposition by successive UK governments to the imposition of the death penalty in any circumstances, and the related long standing policy not to provide MLA unless death penalty assurances are received [26].
He notes that the common law is not immutable but develops over time to reflect the changing values of society [102].
Lord Kerr summarises six factors favouring recognition of the common law principle in question at [141]: (i) the Bill of Rights; (ii) British contemporary values; (iii) European Court of Human Rights (ECHR) jurisprudence (discussed at [107 124]); (iv) EU jurisprudence (discussed at [125 134]); (v) the fundamental illogicality of refusing to extradite or deport individuals for trial where there is a risk of the imposition of the death penalty, on the one hand, and facilitating precisely such an outcome by the provision of MLA without requiring assurances, on the other; and (vi) Judicial Committee of the Privy Council jurisprudence (discussed at [135 140]).
Lord Kerr concludes that a common law principle should be recognised whereby it is deemed unlawful to facilitate the trial of any individual in a foreign country where, to do so, would put that person in peril of being executed [142].
This principle should be disapplied only if MLA is absolutely necessary as a matter of urgency in order to save lives or protect the nations security [164].
Law must be responsive to societys contemporary needs, standards and values, which are in a state of constant change.
That is an essential part of the human condition and experience.
The adjustment to the common law proposed reflects the contemporary standards and values of our society [144].
Ground (ii): Is it lawful under Part 3 of the DPA to transfer personal data to law enforcement authorities abroad for use in capital criminal proceedings? The Court is unanimous in holding that the Home Secretarys decision was unlawful under the DPA.
The DPA requires the data controller to address his mind to the specific requirements of the Act and this was not done.
The DPA is discussed by Lady Hale at [6 15], Lord Kerr at [152 159] and Lord Carnwath at [207 228].
Lady Hale outlines the basic structure of the DPA at [8 12].
She explains that Part 3 of the DPA makes provision about the processing of personal data by competent authorities for law enforcement purposes.
Sections 73 to 76 set out the general conditions that apply to such transfers.
The data controller cannot transfer data unless the three conditions in section 73(1)(a) are met [8].
Condition 1 is that
the transfer is necessary for any of the law enforcement purposes [9].
Condition 2 is that the transfer is (a) based on an adequacy decision of the European Commission; (b) if not based on an adequacy decision, is based on there being appropriate safeguards; or (c) if not based on an adequacy decision or appropriate safeguards, is based on special circumstances [10].
She notes that this transfer was not based on an adequacy decision or appropriate safeguards, because there were none [10].
Nor does the transfer meet the special circumstances requirement: a transfer is based on special circumstances only if it is necessary for any of the five purposes listed in section 76(1).
This condition is not met [12].
Lord Carnwath agrees that there has been a breach of the DPA.
He focuses on the provisions governing transfers of personal data to a third country in sections 72 to 78 of Part 3. section 73 deals specifically with transfers of personal data to a third country and prohibits such transfers unless a number of conditions are met.
As Lady Hale, he notes that Condition 2 is that the transfer must be based on an adequacy decision, or on there being appropriate safeguards, or on special circumstances.
There was no adequacy decision here, hence the discussion centres upon whether there were appropriate safeguards or special circumstances sanctioning the transfer [209 213]. section 75 defines the circumstances in which a transfer is based upon there being appropriate safeguards, discussed at [214 219].
Lord Carnwath concludes that the information in question was transferred without any safeguards at all [220].
The lawfulness of the transfer therefore stands or falls on the special circumstances condition [221].
The circumstances in which a transfer is based on special circumstances are defined in section 76, discussed at [221 224].
Lord Carnwath concludes that the Act requires a specific assessment under the section, and that this did not take place [225].
The decision was based on political expediency, rather than consideration of strict necessity under the statutory criteria [227].
It was consequently unlawful under the DPA.
Lady Hale raises a further issue under section 76(2) DPA, which concerns the special circumstances gateway. section 76(2) provides that: subsection (1)(d) and (e) do not apply if the controller determines that fundamental rights and freedoms of the data subject override the public interest in the transfer [12].
Lady Hale finds that these fundamental rights and freedoms include the rights protected by the European Convention on Human Rights, the most fundamental of which is the right to life [13 14].
This points towards an interpretation of section 76(2) which would not allow the transfer of personal data to facilitate a prosecution which could result in the death penalty [15].
Lord Carnwath sees the force of Lady Hales comments.
He concludes that, at least, failure to consider this point is a further reason for holding that the Home Secretarys decision cannot stand [228].
Lord Hodge also sees the force of Lady Hales comments, but as the point was not fully argued, he reserves his position on it [230].
Lord Kerr agrees that there is a breach of the DPA, but for different reasons.
He notes that it is common ground that provision of MLA involved the processing of personal data falling within Part 3 DPA.
Such processing is only lawful where it complies with the data protection principles in section 34 DPA.
Unlike the other justices, Lord Kerr held, under ground 1, that the transfer of material to the US authorities without obtaining death penalty assurances was contrary to the common law.
He therefore concludes that it follows that the first and second data protection principles in section 34 requiring processing that is lawful and fair are not met [152 153].
Lord Kerr goes on to discuss section 73 DPA [154].
He agrees that there was no adequacy decision and no appropriate safeguards [155].
Transfer on the basis of special circumstances can only occur following an assessment of what is strictly necessary.
Such an assessment was not made [158], hence the transfer of data breached section 73.
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On Saturday 15 June 1974, in the late morning, an army patrol consisting of two military vehicles was travelling towards Benburb, County Tyrone.
The vehicles contained members of the Life Guards regiment.
The lead vehicle had six men on board.
The commander of the patrol, who was travelling in that vehicle, was Dennis Hutchings, the appellant in this case.
As the patrol rounded a left hand bend near a village called Eglish on what was a winding road, a young man came into view, standing on the left hand side of the road.
He appeared to be looking into the hedge at the side of the road.
His name was John Paul Cunningham.
Mr Cunningham appeared startled and confused.
He ran across the road in front of the lead vehicle and climbed a gate into a neighbouring field.
He then ran towards a metal fence which bordered the field.
The patrol came to a halt on the appellants command.
Most of the soldiers dismounted from the vehicles and took up defensive positions.
Three members of the patrol, the appellant and two others, who have been referred to as B and E, pursued Mr Cunningham.
Mr Hutchings and soldier E went towards the same gate that Mr Cunningham had climbed over.
Soldier B went to a gateway further down the road.
A number of shouted commands to Mr Cunningham to stop went unheeded.
It later transpired that he had limited intellectual capacity.
His mental age was judged to be between six and ten years.
In a report by the Historical Enquiries Team (HET) (of which more below at para 9) it was said that he was easily confused and may have had an inherent fear of men in uniform and armoured vehicles.
The case made by the prosecution is that when Mr Cunningham failed to stop, shots were discharged by the appellant and the soldier referred to as B. Mr Cunningham was hit and died at the scene.
At the time that he fell, he was close to the metal fence.
It has been established that he was running towards his home.
HET concluded, after investigation, that he was unarmed; that he was shot while running away from the soldiers; and that there was no evidence that he presented a threat to them or to anyone else.
Background
In 1974 there was much terrorist activity in Northern Ireland.
A large part of that activity was generated by the Provisional Irish Republican Army (PIRA).
There were regular attacks on the security forces, including the British Army.
The attacks frequently involved the use of firearms and explosives.
The Life Guards regiment was responsible in 1974 for security force operations in Cookstown, Dungannon and Armagh and surrounding districts.
Cookstown and Dungannon are in County Tyrone, as are Benburb and Eglish.
Benburb is some 18 miles from Cookstown and about eight miles from Dungannon.
Eglish is a small village that lies between Dungannon and Benburb.
It is about five miles from Dungannon to Eglish and approximately the same distance from Eglish to Benburb.
An army report about the time that Mr Cunningham was killed stated that the threat level in these areas was particularly high.
There were frequent army patrols of the roads between these various locations.
Indeed, in the first two weeks of June 1974 some 38% of shooting incidents in the Life Guards operational zone occurred in the area of Eglish.
One of those attacks resulted in the death of a soldier in the Life Guards regiment.
Two days before Mr Cunningham was killed, members of the Life Guards, under the command of Mr Hutchings, came upon a group of men loading material into a vehicle.
A firefight, as it was described in the reports of the incident, ensued.
Arms and explosives were discovered in the vehicle.
This had occurred about three and a half miles from where Mr Cunningham was killed.
Following the killing of Mr Cunningham, a joint inquiry by the Royal Ulster Constabulary (RUC) and the Royal Military Police took place.
The then Director of Public Prosecutions reviewed the statements that this inquiry generated and decided that there should be no prosecution of any of the military personnel involved.
HET was a body created in 2005 to examine historical offences that were committed during the period of terrorist violence in Northern Ireland and the states reaction to it.
It conducted an inquiry into Mr Cunninghams death.
It concluded that this was an absolute tragedy that should not have happened.
It recommended, however, that no further action be taken in relation to the incident.
In 2015 a new body, the Legacy Investigation Branch, conducted a new investigation into Mr Cunninghams death.
As a result of this, the appellant was arrested and taken to a police station in Northern Ireland where he was interviewed.
He answered no comment to all questions put to him.
He was subsequently charged with two offences: the attempted murder of Mr Cunningham and attempting to cause him grievous bodily harm.
On 20 April 2016, the Director of Public Prosecutions issued a certificate pursuant to section 1 of the Justice and Security (Northern Ireland) Act 2007 directing that the appellant stand trial on these charges by a judge sitting without a jury.
It is accepted that the certificate was issued without prior notice to the appellant.
He was not given an opportunity to make representations as to whether it should be issued.
The material and information which led to the issue of the certificate have not been disclosed to him.
He was not informed of its having been issued until 5 May 2017.
The statutory provisions relating to the issue of certificates and challenges to their
The relevant parts of section 1 of the 2007 Act are these: Issue of certificate (1) This section applies in relation to a person charged with one or more indictable offences (the defendant). (2) The Director of Public Prosecutions for Northern Ireland may issue a certificate that any trial on indictment of the defendant (and of any person committed for trial with the defendant) is to be conducted without a jury if (a) he suspects that any of the following conditions is met, and (b) he is satisfied that in view of this there is a risk that the administration of justice might be impaired if the trial were to be conducted with a jury. (6) Condition 4 is that the offence or any of the offences was committed to any extent (whether directly or indirectly) as a result of, in connection with or in response to religious or political hostility of one person or group of persons towards another person or group of persons. (7) means hostility based to any extent on In subsection (6) religious or political hostility religious belief or political opinion, supposed religious belief or political (a) (b) opinion, or (c) the absence or supposed absence of any, or any particular, religious belief or political opinion. (8) In subsection (6) the references to persons and groups of persons need not include a reference to the defendant or to any victim of the offence or offences.
The breadth of the power to direct that a trial be before a judge without a jury is immediately apparent from these provisions.
The Director need only suspect that one of the stipulated conditions (in this case condition 4) is met and that there is a risk that the administration of justice might be impaired if there was a jury trial.
The circumstances in which such a risk might materialise and the specific nature of the risk or the impairment to the administration of justice which might be occasioned are not specified.
It can only be supposed that these matters were deliberately left open ended.
The type of decision which the Director must take can be of the instinctual, impressionistic kind.
Whilst the Director must of course be able to point to reasons for his decision, one can readily envisage that it may frequently not be based on hard evidence but on unverified intelligence or suspicions, or on general experience.
It may partake of supposition and prediction of a possible outcome, rather than a firm conclusion drawn from established facts.
The need, on occasions, for the Directors decision to depend on intuitive belief rather than studied analysis of evidence is also reflected in the fact that the circumstances covered by condition 4 are extremely wide.
Offences committed to any extent (even if indirectly) in connection with or in response to religious or political hostility of one person or group of persons are covered.
The PIRA campaign in Northern Ireland in the 1970s was based on that organisations political hostility to continuing British rule in that country.
The incident that occurred a few days before Mr Cunningham was killed bore all the hallmarks of a PIRA operation.
When this is considered with the incidence of terrorist activity in the area at the time, it is entirely unsurprising that the Director should have concluded that the offences with which the appellant is charged were connected (directly or indirectly) with or in response to the political hostility of members of PIRA against, as the Director put it in an affidavit, those who believed that Northern Ireland should remain a part of the United Kingdom.
That the soldiers who fired on Mr Cunningham suspected that he was a member of PIRA seems inescapable. (I shall have more to say presently about the Directors reasons for issuing the certificate.)
Section 7 of the Act provides: Limitation on challenge of issue of certificate (1) No court may entertain proceedings for questioning (whether by way of judicial review or otherwise) any decision or purported decision of the Director of Public Prosecutions for Northern Ireland in relation to the issue of a certificate under section 1, except on the grounds of (a) dishonesty, (b) bad faith, or (c) other circumstances (including exceptional circumstances relating to lack of jurisdiction or error of law). exceptional in particular (2) Subsection (1) is subject to section 7(1) of the Human Rights Act 1998 (claim that a public authority has infringed [a] Convention right).
The other exceptional circumstances referred to in sub paragraph (c) of subsection (1) are not specified but they must take their flavour from the preceding provisions to the effect that challenges will be entertained on the grounds of bad faith and dishonesty and from the succeeding words of the sub paragraph, which particularise lack of jurisdiction or error of law.
These are clear indications that, what has been described as the full panoply of judicial review superintendence (see In re Shukers and others applications for judicial review [2004] NIQB 20; [2004] NI 367 at para 25), is generally not available to challenge decisions by the Attorney General or the Director of Public Prosecutions as to the mode of trial for particular cases.
By virtue of section 8(3) of the Act the provisions in sections 1 7 are applied to offences committed before the Act came into force.
The offences with which the appellant has been charged are therefore covered by those provisions.
Counsel for the appellant, Mr Lewis QC, drew our attention to the Explanatory Notes which accompany the 2007 Act.
He pointed out that paragraph 7 of the Notes made it clear that it was anticipated that non jury trial would be ordered in a small number of exceptional cases and claimed that paragraphs 22 and 23, which dealt with condition 4 in section 1(6), indicated that that provision should be construed narrowly.
These paragraphs read: 22.
Condition 4 is set out in subsection (6).
This covers circumstances where the offence occurred as a result of, or in connection with, sectarianism (ie in connection with religious belief or political opinion).
Subsection (7) clarifies that religious belief and political opinion includes their absence and any assumptions made about religious beliefs or political opinions.
Subsection (8) provides that the persons and groups of persons referred to in subsection (6) need not include the defendant or victim. 23.
A case that falls within one of the conditions will not automatically be tried without a jury non jury trial will only happen if the DPP(NI) issues a certificate because he is satisfied that there is a risk that the administration of justice might be impaired.
The judgment of the Divisional Court in the present case (Stephens LJ and Sir John Gillen [2017] NIQB 121) quoted from the Explanatory Notes see para 14.
But at para 34 the court observed that reliance on the Notes had to be approached with some caution, quoting Lord Steyn in R (Westminster City Council) v National Asylum Support Service [2002] 1 WLR 2956 at para 6 where he said that it was impermissible to treat the wishes and desires of the government about the scope of the statutory language as reflecting the will of Parliament.
Mr Lewis criticised this passage of the Divisional Courts judgment, suggesting that it unwarrantably abbreviated the relevant reasoning to be found in the speech of Lord Steyn.
In particular, he focused on statements in para 5 of the speech where Lord Steyn said: In so far as the Explanatory Notes cast light on the objective setting or contextual scene of the statute, and the mischief at which it is aimed, such materials are therefore always admissible aids to construction.
They may be admitted for what logical value they have.
Used for this purpose Explanatory Notes will sometimes be more informative and valuable than reports of the Law Commission or advisory committees, Government green or white papers, and the like.
After all, the connection of Explanatory Notes with the shape of the proposed legislation is closer than pre parliamentary aids which in principle are already treated as admissible: see Cross, Statutory Interpretation, 3rd ed (1995), pp 160 161.
I find it unnecessary to embark on a discussion about the use to which the Explanatory Notes might be put in this instance because I consider that the language of the relevant statutory provisions is perfectly clear.
Those provisions invest the Director of Public Prosecutions with wide powers for the reasons earlier discussed.
If anything, the actual provisions are more precise in their formulation than the Explanatory Notes.
Recourse to the latter is unnecessary for the proper interpretation and application of the pertinent parts of the statute.
As it happens, of course, nothing in the Explanatory Notes detracts from the interpretation to be placed on the statutory provisions, if they are analysed on a purely textual basis.
Mr Lewis suggested that the reference to sectarianism in paragraph 22 of the Notes indicated that condition 4 was designed to cover situations of strife between the different communities in Northern Ireland.
I do not accept that argument.
Sectarianism can, of course, have the connotation of bigoted adherence to a particular sect but that is by no means its only possible meaning.
The qualifying words in paragraph 22 of the Notes, ie in connection with religious belief or political opinion, make it clear that sectarianism, as it is used in the Notes, is sufficiently wide to embrace the circumstances in which Mr Cunningham was killed.
If Mr Hutchings and soldier B fired on Mr Cunningham, believing him to be a member of PIRA, that would be sufficient to satisfy the requirement that the offences which are alleged to be constituted by that shooting were in connection with or in response to political hostility of one person towards another group of persons, namely the British Army.
And if the Director suspected that this was so (as, realistically, he was bound to, and indeed avers that he did), then the first requirement of section 1(2), in so far as it related to condition 4, was met.
Furthermore, if the Director was satisfied that, by reason of this circumstance, there was a risk that the administration of justice might be impaired if the trial were to be conducted with a jury, the second requirement of the subsection would likewise be fulfilled.
Mr Lewis invited this court to consider the legislative history of the 2007 Act, although he accepted that the conditions necessary for admission of ministerial statements, prescribed by the House of Lords in Pepper v Hart [1993] AC 593 were not fulfilled.
It was permissible, indeed necessary, Mr Lewis argued, to look at ministerial statements in order to ascertain the legislative intent of the 2007 Act.
He then took us to a number of statements made by the Parliamentary Under Secretary of State for Northern Ireland, Paul Goggins MP, during the passage through the House of Commons of the Bill that ultimately became the 2007 Act.
The purpose of this exercise was to promote the theory that the powers of the Director of Public Prosecutions under section 1 were confined to cases involving sectarianism in the connotation which Mr Lewis sought to place on it.
I find it unnecessary to set out the passages from Mr Goggins statements to which Mr Lewis referred us.
It is quite clear that the minister was responding to particular issues on which other members of the House had expressed concern.
He did not attempt to outline a comprehensive charter of all the circumstances in which the Directors powers might be invoked.
True it may be that the examples cited by Mr Goggins were of situations that might be described as sectarian in the connotation which Mr Lewis suggested was the correct one, but the minister did not at any point suggest that they were exhaustive of the circumstances in which the Director might exercise his powers under section 1.
In any event, for the reasons given earlier, the legislative intent of the provisions of that section is abundantly clear from its terms.
It is not open to the appellant to put a gloss on that intent by reference to Parliamentary statements which might appear to be at odds with that clear intent.
As to the second requirement of section 1, the Director of Public Prosecutions, Barra McGrory QC, deposed in his first affidavit that, in reaching his decision on that issue, he had taken into account judicial observations in In re Jordans Application and in In re McParlands Application.
On the basis of his consideration of those cases, he pronounced himself satisfied that there was a risk such as is provided for in section 1(2)(b).
The decision in the Court of Appeal in the Jordan case referred to by Mr McGrory is reported at [2014] NICA 76; [2016] NI 116 as In re Jordans Applications for Judicial Review.
Mr McGrory also mentioned the decision of the High Court in that case but it is sufficient, I believe, for present purposes to focus on the judgment of the Court of Appeal delivered by Sir Declan Morgan LCJ.
The case concerned (among other things) the risk of jury bias in an inquest into the shooting of Pearse Jordan by a member of the RUC in 1992.
At para 90 of the judgment the following passage appears: There are formidable difficulties in being satisfied that the insidious nature of bias has been removed in security and terrorist type cases.
It is necessary to confront directly the need to ensure that jury verdicts emerge unconstrained by tribal loyalties.
A coroner must be satisfied that there will be a sensitively constructed distance between prejudice and justice.
The existence of a real risk of a biased juror or jury will outweigh any other factor.
Mere reduction of the risk is insufficient.
The coroner must be satisfied that the steps taken have reduced that risk to a remote or fanciful possibility.
Other factors which, the court considered, should be taken into account by a coroner in seeking to eliminate the risk of bias on the part of the inquest jury were mentioned in the Court of Appeal judgment but they are not directly relevant to the present case.
The important point to be drawn from that decision, in relation to the present case, is that three Court of Appeal judges, all highly experienced in the administration of justice in Northern Ireland, stated unequivocally and unanimously that formidable difficulties attended the need to be satisfied that the risk of bias has been removed in security and terrorist type cases; that the reality that tribal loyalties could imperil the chances of a proper verdict had to be confronted; that the risk of a biased juror was the most important factor to be considered by the coroner; and that the real (as opposed to the remote or fanciful) possibility of jury bias should govern the coroners decision on the question.
Mr Lewis suggested that an inquest and a criminal trial were not analogous in relation to the need to avoid jury bias.
In the former, he suggested, a unanimous verdict was required, whereas a majority verdict could be returned in a criminal trial.
Moreover, the system of empanelling juries introduced by the 2007 Act which abolished the right to peremptory challenge to possible jurors and disclosure of their names and addresses reduced the risk of jury tampering and partisanship.
I do not accept these arguments.
The fact that a majority verdict can be delivered in a criminal trial might reduce the risk of partisan verdicts; there is no reason to suppose that it will eliminate it.
Likewise, the abolition of peremptory challenges and disclosure of jury panel members names and addresses.
On the question of jury tampering (to which, more obviously, these measures were primarily directed) it is right to record that Mr Gerald Simpson QC, who appeared for the Director, confirmed that the possibility of jury tampering was not a concern in this case.
It was the prospect of a partisan outcome to the case which underlay the Directors decision.
The McParland case to which the Director referred is In re an application by Patrick McParland and John McParland for Judicial Review [2008] NIQB 1.
It concerned a challenge to section 10 of the 2007 Act which had inserted a new provision (article 26A) into the Juries (Northern Ireland) Order 1996 (SI 1996/1141) restricting the disclosure of information about jurors.
It was argued that the new arrangements in effect brought about trial of defendants by a secret tribunal and that this constituted a breach of article 6 of the European Convention on Human Rights and Fundamental Freedoms (ECHR) since it infringed the guarantees of a public hearing and of trial within a system containing sufficient guarantees of impartiality.
The Divisional Court rejected that argument.
At para 37, it observed, [t]he existence of the risks identified by the juries sub group of juror intimidation, of partisan juries and of perverse jury verdicts has not been seriously disputed by most commentators .
Discussion of the statutory provisions relating to the issue of certificates
The powers available to the Director of Public Prosecutions are unquestionably far reaching.
It is unsurprising that this should be so.
When one has regard to the difficulties described by the Court of Appeal in Jordan in eliminating the risk of bias and of being confident of having done so, the need for wide ranging powers is obvious.
What were described by that court as tribal loyalties present a particular problem.
These are often difficult to detect and may routinely be disavowed by most of the population.
But experience has shown that they can operate to bring about unexpected, partisan outcomes.
The dangers that they present to the achievement of a scrupulously fair trial are undeniable.
Taking effective precautions against jury bias presents, as the Court of Appeal in Jordan said, formidable difficulties.
These difficulties are particularly acute in cases which involve attacks on the security forces or where members of the security forces have fired on individuals.
Such cases are almost invariably highly charged, and they give rise to strong feelings in both sides of the community.
Apprehension that jury trial in such cases might put the goal of a fair trial in peril is unavoidable.
It is important to focus on the need for a fair trial.
Trial by jury is, of course, the traditional mode of trial for serious criminal offences in the United Kingdom.
It should not be assumed, however, that this is the unique means of achieving fairness in the criminal process.
Indeed, as the Court of Appeals statements in Jordan show, trial by jury can in certain circumstances be antithetical to a fair trial and the only assured means where those circumstances obtain of ensuring that the trial is fair is that it be conducted by a judge sitting without a jury.
So called Diplock trials took place in Northern Ireland between 1973 and 2007.
No one suggests that this mode of trial failed to deliver fairness of process, by reason of the fact that the trial took place before a judge sitting without a jury.
Although article 6 of ECHR (which guarantees a right to a fair trial) is not prayed in aid by the appellant in this case, it is interesting to reflect that it has been held that this article does not require trial by jury.
As the European Commission of Human Rights observed in X and Y v Ireland (Application No 8299/78) (1980) 22 DR 51, para 19, article 6 does not specify trial by jury as one of the elements of a fair hearing in the determination of a criminal charge.
It is, of course, to be remembered that the system of trial introduced as a result of Lord Diplocks report (Report of the Commission to consider legal procedures to deal with terrorist activities in Northern Ireland (1972) (Cmnd 5185)), required the trial judge to give a reasoned judgment if the defendant was convicted.
And that a defendant, upon conviction, was entitled to an automatic right of appeal, not only on points of law but on the factual conclusions reached and inferences drawn by the trial judge.
These remain features of trials without a jury since the 2007 Act section 5(6) and (7).
The statement made by Lord Judge CJ in R v Twomey [2010] 1 WLR 630 at para 10 (relied on by the appellant) that, [i]n this country trial by jury is a hallowed principle of the administration of criminal justice . properly identified as a right, available to be exercised by a defendant unless and until the right is amended or circumscribed by express legislation must be viewed against this background.
In the first place, although the Lord Chief Justice described entitlement to trial by jury as a right, he did not suggest that this was an absolute right; indeed, he accepted that it could be constrained in certain circumstances.
Secondly, and self evidently, the right has in fact been restricted by the express provisions of the 2007 Act.
Finally, where trial by jury would place the fairness of the criminal justice process at risk, the right must yield to the imperative of ensuring that the trial is fair.
In this context, the triangulation of interests identified by Lord Steyn in Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91, at p 118 is pertinent.
He said this about the various interests which are served by a criminal trial: The purpose of the criminal law is to permit everyone to go about their daily lives without fear of harm to person or property.
And it is in the interests of everyone that serious crime should be effectively investigated and prosecuted.
There must be fairness to all sides.
In a criminal case this requires the court to consider a triangulation of interests.
It involves taking into account the position of the accused, the victim and his or her family, and the public.
The requirements of a fair trial are not determined by having regard to a defendants interests exclusively.
As Lord Steyn said, it is in the interests of everyone that serious crime be properly investigated and effectively prosecuted.
Notably, of course, the appellant has not claimed that his trial for the offences with which he is charged will not be fair, if conducted by a judge sitting without a jury.
Such a claim could not be sustained in light of the experience of trials before Diplock courts and of the safeguards which are in place by reason of section 5(6) and (7) of the 2007 Act.
Consideration of the appellants claim that he should not be denied the right to a jury trial must therefore proceed on the basis that he will receive a fair trial or, at least, that if he does not, he will have an automatic right of appeal to the Court of Appeal where any suggestion that there has been unfairness can be fully ventilated and examined.
This incontestable reality influences the approach to be taken, not only to the proper interpretation of section 1 of the 2007 Act, but also to the appellants argument that he was entitled to be given reasons for the issue of the certificate and to be consulted about the Directors proposed course of action before it was decided to issue the certificate.
That is an argument to which I shall turn in paras 53 and following.
The appellant argued that the Director of Public Prosecutions had been wrong in the claim that he made in his first affidavit, that it was the intention of Parliament that section 1(6) of the 2007 Act should be interpreted broadly.
Mr Lewis pointed out that this was at odds with the judgment of the Divisional Court in an earlier Northern Ireland case, Arthurs (Brian and Paula) Application [2010] NIQB 75 where at para 31, Girvan LJ had said, [t]he strong presumption that a right to jury trial is not intended to be taken away will lead to a strict construction of any statutory restriction or limitation on the right to a jury trial.
That statement appears to have been based on an argument addressed to the court by Raza Husain QC, appearing for applicants who challenged the issue by the Director of Public Prosecutions of a certificate that their trial on a series of fraud charges be conducted by a judge without a jury.
Mr Husain had relied on the statement by Lord Judge CJ in a passage in the case of Twomey which appeared later in his judgment from that quoted at para 37 above.
At para 16 of Twomey, Lord Judge CJ had said: The right to trial by jury is so deeply entrenched in our constitution that, unless express statutory language indicates otherwise, the highest possible forensic standard of proof is required to be established before the right is removed.
That is the criminal standard.
Of course, in Twomey the court was dealing with a case where the prosecution was seeking trial without a jury where it was claimed that there was a real danger of jury tampering and that is not the position here.
But, if one proceeds on the premise that section 1(1) of the 2007 Act requires to be strictly or narrowly construed, this does not affect the interpretation which I consider the provision must be given.
The Divisional Court in the present case dealt with this issue at para 41 of its judgment: In our view the assertion of the Director that it was the intention of Parliament to provide that the subsection should be broadly interpreted, whilst it could have been more felicitously worded, does not necessarily contradict the proposition put forward in Arthurs case that it is necessary to construe section 1 narrowly and strictly.
The wording of condition 4 is such that Parliament clearly intended to include a broad reach of circumstances whilst at the same time recognising that any legislation removing jury trial needs to be tightly construed.
There is certainly an argument that, contrary to the Divisional Courts view, the Directors assertion was at odds with what Girvan LJ said in Arthurs.
But whether the Director erred is neither here nor there, provided he acted within the powers actually available to him and provided that, if he did indeed misapprehend the proper approach to the interpretation of section 1, that misapprehension was, in the event, immaterial to the decision that he took.
On the true ambit of the Directors powers, what matters is the interpretation placed on the section by the courts.
And the Divisional Court is unquestionably right that the wording of condition 4 invests the Director with a wide range of powers.
Whether the section requires to be construed narrowly or broadly, the intrinsic breadth of the powers remains intact.
Even if, therefore, the Director was wrong in his assertion that Parliament intended that the section should be interpreted broadly, there is no reason automatically to assume that this led to him exercising his powers in a manner that was not available to him on a proper construction of the provision.
On the facts of this case, it is clear from the reasons that the Director has given for issuing the certificate that he was bound to have made the same decision if he had considered that section 1 required to be construed narrowly.
If, indeed, it was an error on the part of the Director to consider that section 1 should be given a broad interpretation (on which I do not feel it necessary to express an opinion) it cannot be said that such an error would vitiate his decision for the reason that he was certain to reach the same decision, whatever view he took of the appropriate mode of interpretation of section 1.
As to the reasons that he decided to issue the certificate, these were first conveyed to the appellants solicitors in a letter dated 10 May 2017 from the Directors office.
It contained the following passages: I can advise you that the Director suspected that condition 4 in section 1 of the 2007 Act was satisfied on the basis of information provided by the police coupled with a commentary and assessment of that information, an analysis of the facts and circumstances of this case and the advice of senior counsel.
In this way the Director formed the requisite suspicion.
In view of the suspicion which he formed in relation to condition 4, the Director was satisfied that there was a risk that the administration of justice might be impaired if the trial were to be conducted with a jury.
This risk arises from the possibility of a biased juror or jury, having regard to the particular circumstances of this case.
The Director further considered whether the risk to the administration of justice could be mitigated by application to the court to screen the jury, sequester the jury or transfer the trial to a different venue.
The Director was satisfied that there remained a risk that the administration of justice might be impaired on the basis that, even if granted, these measures might not be sufficiently effective in preventing or significantly reducing the potential risk posed to the administration of justice in this case.
One may observe that it is extremely unfortunate that more than a year was allowed to pass before the issue of the certificate was brought to the attention of the appellant and his advisers.
Quite apart from the obvious desirability of informing any defendant promptly of such a significant decision as to the mode of his trial, the challenge to his decision would, presumably, have materialised much sooner and the delay in the trial would have been greatly reduced.
Mr Lewis suggested that the reference in the final paragraph of this letter to sequestration of the jury suggested that the possibility of jury tampering was present to the Directors mind but was not fully articulated.
He argued that this, among other reasons, illustrated the inadequacy of the explanation given as to the basis on which the decision to issue the certificate was taken.
This argument is more germane to the claim that the appellant should have been provided with reasons and been consulted before the decision was made to issue the certificate, an argument which I shall consider in the next section of the judgment.
I should say, however, that I do not accept the argument.
The nature of the risk is plainly stated in the second paragraph quoted above.
It is that the possibility of a biased juror or jury existed.
It might seem unusual to consider the question whether such a risk could be mitigated by sequestering the jury, but it is to be expected that the Director felt it prudent to examine every possibility before deciding to issue the certificate.
It is certainly not untoward that he should advert to this before deciding that the only way in which to avert the risk that the administration of justice would be impaired was by issuing the certificate.
On the question whether the Director acted within his powers, the letter sets out a clear basis on which to conclude that he did.
He formed the necessary suspicion on the basis of information received from the police and commentary on that information.
He also took the advice of senior counsel.
These are all entirely conventional steps to allow him to consider the question whether he suspected that condition 4 was met.
Likewise, the risk that the administration of justice would be impaired was directly addressed by the Director and a clear conclusion was arrived at.
For the reasons given earlier, that conclusion was entirely unsurprising, in light of the circumstances described in the Jordan and McParland cases.
Indeed, it is difficult to envisage how any other view could have been formed.
The reasons for reaching his decision were again set out in two affidavits filed by the Director in the proceedings.
In the first of these, he said that, in arriving at his conclusion, he recognised that there could be no suggestion that a soldier was any part of the sectarian divide in Northern Ireland, nor that he was involved in any proscribed organisation.
He pointed out that the legislative framework makes it clear that references to persons and groups of persons need not include the defendant.
He stated that he suspected that the offence was committed as a result of or in connection with or in response to the political hostility of one person or group of persons towards another person or group of persons; namely in connection with or in response to the political hostility of members (or suspected members) of PIRA towards those who believed that Northern Ireland should remain a part of the United Kingdom.
In other words, the Director followed faithfully the wording and essence of the legislative provisions.
This is completely in keeping with the terms of section 1 of the Act.
On the second limb of section 1(2), the Director deposed that he had taken into account what had been said in the cases of Jordan and McParland and, having considered all the material with which he had been provided and having carefully analysed the facts, and having obtained senior counsels opinion, he was satisfied that there was a risk that the administration of justice might be impaired if the trial were to be conducted with a jury.
All of this is unexceptionable and in compliance with the legislation.
There is no reason to suppose that the Directors approach to the question whether the certificate should be issued was other than as prescribed by the statute. (The second affidavit filed by the Director relates to evidence which, he understood, was to be adduced by the prosecution on the trial of the appellant.
It is not germane to the issues which arise on the appeal.) I have concluded, therefore that the Director acted within the powers conferred on him by the 2007 Act and that the appellants contention to the contrary must fail.
The procedural argument
The principal argument made on behalf of the appellant was that he ought to have been provided with the reasons that the Director of Public Prosecutions was minded to issue a certificate and with the material on which his consideration of that question was based.
Further, it was claimed that the appellant should have been given the opportunity to make representations on whether a certificate should be issued, in advance of any decision on the matter.
Section 7 of the 2007 Act sets the scene for any discussion of this argument.
The exceptionality of a permissible challenge to the decision of the Director is prominent in the terms of the section.
A curtailment of the full spectrum of judicial review challenge was obviously intended.
It was expressly provided that a challenge was only admissible on grounds of bad faith, dishonesty or other exceptional circumstances.
Bad faith and dishonesty clearly do not arise here.
Where, then, does the appellants challenge find its place in the exceptional circumstances category?
Mr Lewis seeks to place it there by reference to what he claims is the fundamental right to a jury trial.
But, for the reasons earlier discussed, this will not do.
The fundamental right is to a fair trial.
There is a right to trial by jury, as Lord Judge CJ said in Twomey, but that alone is not enough to shift the appellants case into a condition of exceptionality particularly in the context of a statute whose very purpose is to prescribe the circumstances in which someone can be denied the right to a jury trial.
This is pre eminently a situation where something is required beyond a claim that there is a right to a jury trial, if the circumstances of the individual case are to be regarded as exceptional.
This point is reinforced by the examples of exceptional circumstances given in section 7(1)(c) of lack of jurisdiction or error of law.
There is no question of lack of jurisdiction here, much less an error of law by the Director in having recourse to the powers that were available to him under section 1.
To come within the rubric exceptional circumstances, it behoves the appellant to be able to point to something which truly distinguishes his case from the general.
I consider that he has failed to do that.
Quite apart from the statutory imperative requiring that there be exceptional circumstances in the absence of bad faith or dishonesty, the decision whether to issue a certificate is obviously one which should not be subject to the full spectrum of conventional judicial review challenge.
Unlike most decisions taken in the public law arena, it is not founded exclusively on the evaluation and weighing of hard evidence.
It will usually be motivated by sensitive information which cannot be disclosed.
It is a decision which the Director of Public Prosecutions must take according to his personal reaction to the material with which he has been presented and his own estimation of the matters at stake.
In sum, a decision to issue a certificate does not readily admit of scrutiny of the reasoning underlying it because it will usually be of the impressionistic and instinctual variety, for the reasons earlier explained.
Many of these factors were in play in the Arthurs and Shuker cases.
Arthurs was a case in which a challenge similar to that involved in the present appeal had been made.
Girvan LJ, delivering the judgment of the Divisional Court, drew an analogy between this species of decisions and decisions whether to prosecute.
At para 25 he brought together various authorities touching on this subject: In its reasoning [in Shuker] the court was heavily influenced by well established limitations on the review of the prosecutorial decisions by the DPP emerging from the authorities such as In re Adams [2001] NI 1, R v Director of Public Prosecutions, Ex p Treadaway The Times 31 October 1997 and R v Director of Public Prosecutions, Ex p Manning [2001] QB 330.
The approach to the judicial review of prosecutorial decisions was subsequently succinctly stated by Lord Bingham and Lord Walker in Sharma v Brown Antoine [2007] 1 WLR 780, 788: It is . well established that judicial review of a prosecutorial decision, although available in principle, is a highly exceptional remedy.
The language of the cases shows a uniform approach: rare in the extreme (R v Inland Revenue Comrs, Ex p Mead [1993] 1 All ER 772, 782); sparingly exercised (R v Director of Public Prosecutions, Ex p C [1995] 1 Cr App R 136, 140); very hesitant (Kostuch v Attorney General of Alberta (1995) 128 DLR (4th) 440, 449); very rare indeed (R (Pepushi) v Crown Prosecution Service [2004] Imm App R 549, para 49); very rarely: R (Bermingham v Director of the Serious Fraud Office [2007] 2 WLR 635, para 63.) In R v Director of Public Prosecutions, Ex p Kebilene [2000] 2 AC 326, 371 Lord Steyn said: My Lords, I would rule that absent dishonesty or mala fides or exceptional circumstances, the decision of the Director to consent to the prosecution of the applicants is not amenable to judicial review.
It is apparent that the statutory language in section 7 is inspired by the principle of exceptionality applicable in the context of prosecutorial decisions.
Section 7 gives statutory recognition to the common law reticence in the scrutiny of decisions made in the field of prosecutorial decision making.
The wording lends support to the contention put forward by Mr Maguire and Mr Perry [counsel for the Director of Public Prosecutions] that a decision made by the Director under section 1 of the 2007 Act is intended to fall within the band of prosecutorial decision making.
The appellant contends that there is a fundamental difference between a decision whether to prosecute and a decision whether to issue a certificate under section 1 of the 2007 Act.
It is submitted that there is no right not to be prosecuted unlike the right to be tried by a jury; that a person facing a decision as to whether he will be charged has not had legal machinery or process instigated against him whereas the decision to remove the right to trial by jury occurs when a person has already been charged and is under the jurisdiction of the court; that an individual under charge has a fundamental right to trial by jury, which the opposing party, the Director of Public Prosecutions, unilaterally changes without recourse to the court; that before a decision to prosecute is made the prosecutor will have given the putative defendant the opportunity on arrest (by way of caution), or at interview (by way of caution and questioning), of making representations as to why he should not be charged; that the decision whether to issue a certificate is statutory whereas a decision to prosecute is non statutory; that the difficult area of public interest is evaluated by the prosecutor when deciding to charge but there is no public interest component to the issue of a certificate under the 2007 Act; and that a decision to prosecute is a procedural step which is not adjudicatory of rights, while the decision to remove the right to a jury trial is adjudicatory.
While some, at least, of these matters point up the differences between the mechanics of a decision whether to prosecute and a determination that the trial should take place before a judge sitting without a jury, they do not signify when one concentrates on the nature of the decision making process.
A prosecutor faced with the task of deciding whether to initiate a prosecution must evaluate material not disclosable to the person who might be charged; similarly, the Director, in deciding whether to issue a certificate, will have recourse to materials which are not revealed to the person who will be affected by it.
A decision whether to prosecute is dependent on an individuals reaction to and judgment on the material available as to the possible outcome of proceeding; likewise, the Directors decision on the possible consequences of proceeding with a trial with a jury.
Both decisions may involve consideration of material which is not only non disclosable but which may be of a highly sensitive nature.
As Girvan LJ said in para 24 of Arthurs, the parallels between the two species of decision are obvious.
Moreover, it can be no coincidence that the 2007 Act, in imposing restrictions on the availability of judicial review adopted the language of Lord Steyn in R v Director of Public Prosecutions, Ex p Kebilene [2000] 2 AC 326, a decision relating to the permissibility of challenge to a decision to prosecute.
In any event, I should say that at least three of the appellants vaunted points of distinction are not, in my view, valid.
First, the question of whether the decision is made on foot of a statutory provision or on a non statutory basis is irrelevant.
Secondly, it is plainly wrong to suggest that there is no public interest in the determination of whether the trial should proceed before a judge without a jury.
To the contrary, it is a critical part of the decision about the issue of a certificate that the Director consider whether the administration of justice would be impaired.
This may have a different focus from the public interest at stake in deciding whether to prosecute but both decisions plainly call on the prosecutors judgment as to where the public interest lies.
Finally, the decision whether to issue a certificate is no more adjudicatory in nature than is the decision to prosecute.
Neither involves a weighing of competing interests in the sense that an individuals wish not to be prosecuted or his wish to be tried by a judge and jury are pitted against the public interest in ensuring that the administration of justice is maintained.
In this case, I can conceive of no circumstances which could be said to be exceptional coming within the use of that term in section 7(1)(c) of the 2007 Act.
This is especially so since it is open to the appellant even now to make representations to the Director of Public Prosecutions.
Mr Simpson, on behalf of the Director, confirmed to this court that if representations were received, these would be considered.
Of course, the appellant complains that effective representations cannot be made in the absence of information about the material on which the Director made his decision and the reasons that he decided as he did.
Quite apart from the statutory prohibition on a challenge to the failure to disclose explanations other than on the limited grounds contained in section 7(1)(c), there are two sound reasons that the appellant should not succeed in this argument.
First, in many cases involving the issue of a certificate, information will have been received by the Director from the police or other members of the security services which must, for obvious reasons, remain confidential.
Secondly, the nature of the decision that the Director takes, as I have already explained, will usually be of an instinctual or impressionistic character, not susceptible of ready articulation.
But the truly important point to make here is that section 1 qualifies, if not indeed removes, the right to trial by a jury.
Hence, the issue of a certificate does not itself remove the right (it is the statute which has done that).
In reality the issue of a certificate under section 1 partakes of a case management decision aimed at ensuring the relevant end result of a fair trial.
Viewed from this perspective, it is of obvious importance that elaborate, protracted challenges to the issue of a certificate under section 1 are wholly to be avoided, where possible.
It is, no doubt, with this consideration in mind that section 7 circumscribed the opportunity for judicial review challenge.
Such challenges have the potential to undermine the objective of the legislation to ensure that trials take place in accordance with the requirements of article 6 of ECHR (both as to fairness and to promptness).
That is not to say that there will never be occasion where some information can be provided which would assist in the making of representations by a person affected by the issue of a certificate.
I refrain from speculation as to how or when such an occasion might arise.
I am entirely satisfied, however, that it does not arise in the present case.
Conclusion
The Divisional Court certified the following question for the opinion of this court: Does a true construction of section 4 of the 2007 Act [this should be condition 4 in section 1(1) of the Act], namely an offence or offences committed to any extent (whether directly or indirectly) as a result of, in connection with or in response to religious or political hostility of one person or group of persons towards another person or group of persons, include a member of the armed forces shooting a person he suspected of being a member of the IRA?
The arguments on the appeal before this court have ranged well beyond the single issue raised in the certified question and, perhaps inevitably, this judgment has also dealt with matters outside its scope.
But, for the reasons that I have given, I would answer the certified question, yes and dismiss the appeal.
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In 1974, there was much terrorist activity in Northern Ireland, a large part of which was generated by the Provisional Irish Republican Army (PIRA).
On 13 June 1974, members of the Life Guards regiment of the British Army, under the command of the appellant, found a group of men loading material into a vehicle.
A firefight ensued and arms and explosives were discovered in the vehicle.
On 15 June 1974, a Life Guards patrol, also led by the appellant, was travelling on a road about 3.5 miles from the location of the firefight.
They saw a man, Mr Cunningham, who appeared startled and confused.
Mr Cunningham climbed a gate into a field and ran towards a fence.
The appellant ordered the patrol to halt and three members, including the appellant, pursued Mr Cunningham.
After shouting a number of commands to stop, the appellant and another soldier fired shots and Mr Cunningham was killed.
It later transpired that he had limited intellectual capacity, that he was unarmed, and that he had been running towards his home.
In 2015, the appellant was charged with the attempted murder of Mr Cunningham and with attempting to cause him grievous bodily harm.
On 20 April 2016, the Director of Public Prosecutions (DPP) issued a certificate pursuant to section 1 of the Justice and Security (Northern Ireland) Act 2007 (the Act) directing that the appellant stand trial by a judge sitting without a jury.
Section 1(2) of the Act provides that the DPP may issue such a certificate if he (a) suspects that any of the relevant conditions are met and (b) is satisfied that in view of this there is a risk that the administration of justice might be impaired if the trial were to be conducted with a jury.
Condition 4 is defined by section 1(6) of the Act: Condition 4 is that the offence or any of the offences was committed to any extent (whether directly or indirectly) as a result of, in connection with or in response to religious or political hostility of one person or group of persons towards another person or group of persons.
Section 7(1) of the Act reads: No court may entertain proceedings for questioning (whether by way of judicial review or otherwise) any decision or purported decision of the Director of Public Prosecutions for Northern Ireland in relation to the issue of a certificate under section 1, except on the grounds of (a) dishonesty, (b) bad faith, or (c) other exceptional circumstances (including in particular exceptional circumstances relating to lack of jurisdiction or error of law).
The appellant was not made aware of the issue of the certificate until 5 May 2017.
He sought to challenge the DPPs decision to issue the certificate by way of judicial review.
He was unsuccessful before the Divisional Court, which certified the question of whether a true construction of condition 4 included a member of the armed forces shooting a person he suspected of being a member of the IRA.
The appellant also seeks to challenge the DPPs decision on procedural grounds, arguing that he ought to have been provided with the reasons that the DPP was minded to issue a certificate and with the material on which his consideration of that question was based.
He also claims that he should have been given the opportunity to make representations on whether a certificate should have been issued in advance of any decision on the matter.
The Supreme Court unanimously dismisses the appeal.
It holds that a true construction of condition 4 does include a member of the armed forces shooting a person he suspected of being a member of the IRA and it rejects the procedural challenges advanced by the appellant.
Lord Kerr writes the judgment.
The breadth of the power under section 1 of the Act is immediately apparent.
The DPP need only suspect that one of the stipulated conditions is met and that there is a risk that the administration of justice might be impaired if there was a jury trial.
These decisions can be of the instinctual, impressionistic kind.
Whilst the DPP must be able to point to reasons for his decision, it may be based on unverified intelligence or suspicions, or on general experience, rather than on hard evidence [13].
The circumstances covered by condition 4 are also extremely wide.
This covers offences committed to any extent (even if indirectly) in connection with or in response to religious or political hostility of one person or group of persons.
The PIRA campaign in Northern Ireland was based on that organisations political hostility to continuing British rule and the incident which occurred a few days before Mr Cunningham was killed bore all the hallmarks of a PIRA operation.
When this is considered, it is entirely unsurprising that the DPP should have concluded that the offences with which the appellant is charged were connected (directly or indirectly) with or in response to the political hostility of PIRA members against those who believe that Northern Ireland should remain a part of the UK [14].
The other exceptional circumstances referred to in section 7(1)(c) of the Act are not specified, but they must take their flavour from the preceding provisions and the succeeding words which particularise lack of jurisdiction and error of law.
These are clear indications that the full panoply of judicial review superintendence is generally not available to challenge decisions under section 1 [16].
There is no need to consider the Explanatory Notes to the Act or the ministerial statements referred to by the appellant because the language of the relevant statutory provisions is clear [20] & [24].
Trial by jury should not be assumed to be the unique means of achieving fairness in the criminal process.
Trial by jury can in certain circumstances be antithetical to a fair trial and the only assured means, where those circumstances obtain, of ensuring that the trial is fair is that it be conducted by a judge sitting without a jury.[34].
Further, although trial by jury has been referred to as a right, it is not an absolute right.
Moreover, the right has been restricted by the express provisions of the Act and must yield to the need to ensure that a trial is fair [37].
Although it has been argued that the DPP erred in stating that section 1(1) should be broadly interpreted, this is irrelevant so long as (a) he acted within his powers and (b) any misapprehension was immaterial to the decision he took.
On the facts of this case, it is clear that the DPP was bound to have made the decision even if he had considered that section 1 had to be construed narrowly [44].
As to whether he acted within his powers, the DPP took proper steps to allow him to consider whether he suspected that condition 4 was met [47].
He also addressed whether there was a risk that the administration of justice would be impaired and his conclusion was entirely unsurprising [48].
As to the procedural argument, section 7 expressly provides that a judicial review challenge is only admissible on grounds of bad faith, dishonesty, or other exceptional circumstances.
This is not a case of bad faith or dishonesty [54].
Whilst the appellant claims that this case falls into the exceptional circumstances category because of the fundamental right to a jury trial, the fundamental right is to a fair trial.
Whilst there is a right to a jury trial, this cannot make this case an exceptional one, particularly in the context of a statute whose purpose is to prescribe the circumstances in which someone can be denied the right to a jury trial [55].
There are no circumstances in this case which could be said to be exceptional within the terms of section 7(1)(c) of the Act [62].
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This appeal is about the distribution of European Structural Funds among the regions of the United Kingdom.
It arises out of the complaint of a number of local authorities in Merseyside and South Yorkshire about the way in which it is proposed to distribute funds allocated to the United Kingdom for the years 2014 to 2020.
The appellants say that they should receive more and other regions correspondingly less.
Article 174 of the Treaty on the Functioning of the European Union requires the European Union to aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions.
Article 175 requires Member States to conduct their economic policy in such a way as to further this objective and the Union to support it by distributions from the European Structural and Investment Funds (or ESI Funds).
These funds are the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund.
For present purposes the most significant of them are the Social Fund and the Regional Development Fund.
The Social Fund was established under article 162 of the Treaty, whose terms identify its purpose: In order to improve employment opportunities for workers in the internal market and to contribute thereby to raising the standard of living, a European Social Fund is hereby established in accordance with the provisions set out below; it shall aim to render the employment of workers easier and to increase their geographical and occupational mobility within the Union, and to facilitate their adaptation to industrial changes and to changes in production systems, in particular through vocational training and retraining.
Article 176 established the Regional Development Fund.
This fund, which is much the largest of the Structural Funds, is intended to help to redress the main regional imbalances in the Union through participation in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions.
The distribution of money from the EU Structural Funds is a shared responsibility of the Commission and the authorities of the Member States.
The Commission is solely responsible for the allocation of funds to each Member State.
The money is then used to co finance programmes, the Union contribution currently varying between 50% and 85% and the rest being met from national budgets.
The expenditure of sums allocated by the Commission within a Member State is jointly determined by the Commission and the Member State.
In the United Kingdom this is the responsibility of the Secretary of State for Business, Innovation and Skills.
Regulation (EU) 1303/2013
Funds are allocated from the EU budget to programmes co financed by the European Structural Funds for successive seven year funding periods.
The transition to a new funding period will commonly involve a measure of disruption.
Funding budgets rise and fall.
Strategic priorities both at Union and at national level change.
The number and definition of the various categories of region entitled to funding support also change.
Statistical tests for funding support, which commonly depend on the relationship between indices of regional development and the corresponding EU averages, may be significantly affected by the accession of new Member States.
There may or may not be transitional provisions to ease the passage from one funding period to the next.
The allocation of funds for programmes co financed by the European Structural Funds for 2014 2020 is governed by Regulation (EU) 1303/2013, which I shall call the 2013 Regulation.
The legal base of the 2013 Regulation is article 177 of the Treaty on the Functioning of the European Union, which requires the European Parliament and the Council to make regulations to define the tasks, priority objectives and the organisation of the Structural Funds.
So far as the current period is concerned, these objectives are summarised in the recitals to the 2013 Regulation.
The overall objective is succinctly expressed in Recital (3).
It is to provide a framework within which the Union and Member States should implement the delivery of smart, sustainable and inclusive growth, while promoting harmonious development of the Union and reducing regional disparities.
This recital reflects one of the main features of the scheme, which is that it has been designed on the footing that there is a close interaction between the reduction of regional imbalances and the promotion of growth generally.
This is reflected in the drafting of the 2013 Regulation, which is directed not just to the reduction of regional disparities but to economic development in its broadest sense.
Under article 89(1) of the 2013 Regulation, the Structural Funds are required to contribute to two missions.
One is the actions of the Union leading to strengthening of its economic, social and territorial cohesion in the broad sense envisaged in article 174 of the Treaty.
The other is the delivery of the Union strategy for smart, sustainable and inclusive growth.
Both missions are to be fulfilled by pursuing two goals identified in article 89(2), namely investment for growth and jobs in Member States and regions, and European territorial co operation.
Of the two goals, the first is much the most important.
Article 91 provides for an overall budget of (in round figures) EUR 322 billion, representing the global resources allocated for the years 2014 2020 to the Social Fund and the Regional Development Fund (together with the Cohesion Fund from which the United Kingdom does not benefit).
Under article 92, 96.33% of this global amount is allocated to the Investment for growth and jobs goal and of this, specified proportions are allocated to three categories of region: less developed, transition and more developed.
The regions in question are standard geographical units used for statistical purposes by the Commission and known as NUTS2 regions (Nomenclature of Territorial Units for Statistics, Level 2).
The categorisation of regions depends on the ratio of their average GDP per capita to that of the Union as a whole: see article 90 of the 2013 Regulation.
Less developed regions have a GDP per capita below 75% of the EU average; transition regions have a GDP per capita between 75% and 90% of the EU average; and more developed regions have a GDP per capita over 90% of the EU average.
To calculate a Member States allocation from the Structural Funds, the Commission notionally allocates an annual amount of funding to each region within that state in accordance with a methodology prescribed for each of the three categories of region by Annex VII of the 2013 Regulation.
In each category, the calculation is based mainly on the regions GDP per capita relative to the EU average.
The Commission uses the resulting figures to calculate an aggregate amount for each of the three categories of region in that Member State.
The sum of the three categories is then allocated to the Member State, plus a sum from the Cohesion Fund in the case of those Member States (not including the United Kingdom) which are supported by that fund.
In contrast to the allocation of Structural Funds among Member States, which is prescribed by the 2013 Regulation in detail, there is no formula for the allocation of funds among regions within Member States.
Instead, what is prescribed is a detailed administrative procedure for arriving at the internal regional allocations under a scheme of shared management involving the Commission, the Member States, and local entities.
The initiative, or right of proposal, belongs to the Member State.
Article 4.4 provides:
Member States, at the appropriate territorial level, in accordance with their institutional, legal and financial framework, and the bodies designated by them for that purpose shall be responsible for preparing and implementing programmes and carrying out their tasks, in partnership with the relevant partners referred to in Article 5, in compliance with this Regulation and the Fund specific rules.
The critical instrument is the Partnership Agreement, which determines the allocation of resources between regions and programmes to be co financed.
It is defined by article 2.20 as a document prepared by a Member State with the involvement of partners in line with the multi level governance approach, which sets out that Member State's strategy, priorities and arrangements for using the ESI Funds in an effective and efficient way so as to pursue the Union strategy for smart, sustainable and inclusive growth, and which is approved by the Commission following assessment and dialogue with the Member State concerned.
The function of the Partnership Agreement is described by Recital (20).
It is to translate the elements set out in the [Common Strategic Framework] into the national context and set out firm commitments to the achievement of Union objectives through the programming of the ESI Funds.
The Partnership Agreement should set out arrangements to ensure alignment with the Union strategy for smart, sustainable and inclusive growth as well as with the Fund specific missions pursuant to their Treaty based objectives, arrangements to ensure effective and efficient implementation of the ESI Funds and arrangements for the partnership principle and an integrated approach to territorial development.
A distinction should be made between the essential elements of the Partnership Agreement which are subject to a Commission decision and other elements which are not subject to the Commission decision and can be amended by the Member State.
The preparation of the Partnership Agreement is governed by article 14.
The agreement shall cover all support from the ESI funds in the Member State
concerned.
It is to be prepared by Member States in dialogue with the
Commission and in accordance with their institutional and legal framework, and then submitted to the Commission in draft by 22 April 2014.
The Commissions functions in relation to the draft are to be found in article 16.
The Commission is required to assess the consistency of the Partnership Agreement with this Regulation and with other Union instruments, and to make observations within three months of submission.
The Member State is required to provide any additional information required of it and to make such revisions as are required in the light of the Commissions observations.
Finally, the Commission must within four months of submission adopt a decision by means of implementing acts, approving all the elements of the Partnership Agreement which are required by the 2013 Regulation to be included.
A similar process governs the Commissions approval of any amendments that may subsequently be proposed by a Member State.
In the absence of specified criteria for the internal allocation of strategic funding, it is clear that the role of the Commission, as a party to the dialogue leading to the submission of the draft Partnership Agreement and the body charged with commenting on and approving it, is not simply to rubber stamp the proposals of Member States.
It calls for a scrutiny of the proposals which is at once expert and exacting.
It constitutes the main machinery of compliance envisaged by the legislator.
It is an important feature of the 2013 Regulation that the criteria to be applied by both the Commission and the Member States in finalising the Partnership Agreement are not based on the amounts calculated by the Commission for each region when arriving at their national allocations.
Indeed, these amounts are not even published, although they can be estimated from the methodology described in Annex VII of the 2013 Regulation.
Nor are allocations within a Member State based, as the Commissions calculations are, on GDP per capita or other measures of deprivation.
Instead, the proposals in the Partnership Agreement are governed by broadly based criteria that are purely qualitative.
Recital (21) declares that Member States should concentrate support to ensure a significant contribution to the achievement of Union objectives in line with their specific national and regional development needs.
The Union objectives are identified by article 9.
The overall objective is to support the Union strategy for smart, sustainable and inclusive growth.
This is defined by article 2.1 as meaning the targets and shared objectives guiding the action of Member States and the Union identified in three documents adopted by the European Council.
The first is the Strategy for Jobs and Growth at Annex I of the Conclusions of the European Council of 17 June 2010.
This identifies a number of Headline Targets, which can be summarised as an increase in the rate of employment, an improvement in the conditions for research and development, a reduction in greenhouse gas emissions, the improvement of educational levels and the promotion of social inclusion.
The second is the Council Recommendation of 13 July 2010 on guidelines for the economic policies of Member States.
These deal with the quality and sustainability of public finances, macroeconomic imbalances, research and development, resource efficiency and the reduction of greenhouse gas emissions, and the business and consumer environment.
The third document is Council Decision 2010/707/EU on guidelines for the employment policies of Member States.
These deal with labour market participation, skills, education and social inclusion.
The thematic objectives mentioned in article 9 are set out in the article itself, which provides as follows: Thematic objectives In order to contribute to the Union strategy for smart, sustainable and inclusive growth as well as the Fund specific missions pursuant to their Treaty based objectives, including economic, social and territorial cohesion, each ESI Fund shall support the following thematic objectives: (1) strengthening research, technological development and innovation; (2) enhancing access to, and use and quality of, ICT; (3) enhancing the competitiveness of SMEs, of the agricultural sector (for the EAFRD) and of the fishery and aquaculture sector (for the EMFF); (4) supporting the shift towards a low carbon economy in all sectors; (5) promoting climate change adaptation, risk prevention and management; (6) preserving and protecting the environment and promoting resource efficiency; (7) promoting sustainable transport and removing bottlenecks in key network infrastructures; (8) promoting sustainable and quality employment and supporting labour mobility; (9) promoting social inclusion, combating poverty and any discrimination; (10) investing in education, training and vocational training for skills and lifelong learning; (11) enhancing institutional capacity of public authorities and stakeholders and efficient public administration.
Thematic objectives shall be translated into priorities that are specific to each of the ESI Funds and are set out in the Fund specific rules.
The thematic objectives are complemented by strategic guiding principles contained in a Common Strategic Framework at Annex I, which provide guidance as to how they are to be achieved, and by certain conditions (ex ante conditionalities) to be satisfied by Member States in relation to each thematic objective, which are identified in articles 18 and 19 and Annex XI.
It will be apparent that, as foreshadowed by Recital (3), not all of the thematic objectives are directly concerned with reducing regional disparities.
A few of these criteria are directed to traditional indices of deprivation such as employment and skill levels.
Most are directed to specific developmental needs such as technical research capacity, training, information technology, business start ups or transport infrastructure, the need for which will vary even among regions with comparable levels of poverty or deprivation.
Some are directed to more general policy objectives with no necessary connection to either deprivation or developmental needs, such as climate change adaptation.
Articles 14 and 15, which lay down the required contents of the Partnership Agreement, closely reflect the objectives identified in article 9 and its incorporated instruments.
The treatment of the United Kingdom NUTS2 regions
There are 37 NUTS2 regions in the United Kingdom.
Thirty are in England, four in Scotland, two in Wales and one in Northern Ireland, which constitutes a region in itself.
In order to understand the way that Merseyside and South Yorkshire have been treated in the current Partnership Agreement, it is necessary to refer to the way that they had been treated in the two previous periods, 2000 2006 and 2007 2013.
In 2000 2006, there were three categories of region called Objective 1, Objective 2 and Objective 3 regions.
Objective 1 corresponded to the current less developed category, comprising regions with a GDP per capita less than 75% of the EU average.
Regions in this category received the most generous funding.
Merseyside and South Yorkshire were both Objective 1 regions in 2000 2006.
The allocations for the next period, 2007 2013, were fixed shortly after the enlargement of the European Union by the admission of ten new members, mostly in Eastern Europe.
The new members had lower levels of GDP per capita, which depressed the EU average and meant that a number of regions which had previously been in the bottom category of development and received the most generous treatment were now in a higher category.
The Regulation for 2007 2013 ((EC) 1083/2006), which I shall call the 2006 Regulation, provided for two main categories of region: convergence regions, which broadly corresponded to the current less developed regions with a GDP per capita less than 75% of the EU average, and competitiveness regions which were above the 75% threshold and broadly corresponded to the current transition and more developed categories.
Article 8 of the 2006 Regulation carved out of the competitiveness category two intermediate categories of region which had previously had a GDP per capita below 75% and would have been particularly badly affected by the move into a higher category.
These came to be known as phasing in regions and phasing out regions, although the terms themselves are not used in the 2013 Regulation.
Phasing out regions were regions which would have been convergence regions in 2007 2013 (the least developed category) but for the expansion of the EU, but moved above the 75% threshold because of the statistical impact of enlargement: see article 8.1.
Phasing in regions were regions which had moved from less than 75% to more than 75% of the EU average GDP per capita and would have done so even without enlargement.
That is their development status had improved.
To ease their passage into the competitiveness category, phasing in and phasing out regions were both eligible for additional financial support on what was described as a transitional and specific basis, over and above the support that they would have received as competitiveness regions.
In the United Kingdom, the only phasing in regions in 2007 2013 were Merseyside and South Yorkshire.
They were entitled under Annex II, para 6(b) of the 2006 Regulation to an allocation of 75% of the 2006 level in 2007, tapering down to the national average level for competitiveness regions by 2011.
The only phasing out region was Highlands & Islands.
It was entitled under Annex II, para. 6(a) to an allocation of 80% of the 2006 level in 2007, tapering down to the national average level of funding support for competitiveness regions in 2013.
The new categorisation for 2014 2020 had three categories, as we have seen.
In effect, the old competitiveness category for regions with a GDP per capita over 75% of the EU average was divided into two new categories, transition and more developed.
According to the Secretary of States evidence, the transition category was devised against the background of tight budgetary constraints to provide an increased level of funding notwithstanding the reduction of the overall budget for the Structural Funds.
But in the course of negotiations in the European Council, the budget for transition regions originally proposed by the Commission was cut, thus reducing the value of the new category to those whom it was intended to benefit.
In the current categorisation, the United Kingdom has two less developed regions, West Wales and Cornwall.
There are 11 transition regions: Northern Ireland; Highlands & Islands in Scotland; and nine English regions including Merseyside and South Yorkshire.
The other 24 regions are all classified as more developed.
The Commissions allocation to the United Kingdom for 2014 2020 represented a 5% reduction at 2011 prices on the allocation for the previous funding period.
The Secretary of States proposals for its allocation were formulated in two stages.
The first covered the distribution of the United Kingdoms national allocation between its four component countries and the second covered allocations to regions within each country.
At each stage the Secretary of States approach was to assess the allocation of each country or region by reference to its allocation for the previous funding period.
This approach was adopted so as to limit as far as possible the scope for disruptive change in the new period.
It was possible because the governments regional allocations for the previous period had been carried out using a basket of economic and social indicators, and the Secretary of State considered that there had been no significant change of the economic and social geography of the country in the interval.
The Secretary of States first decision, which was announced on 26 March 2013, was that each of the four countries comprising the United Kingdom would have its overall allocation reduced by the same proportion, about 5%.
The second decision, which was announced on 27 June 2013, distributed the allocations of each country among its NUTS2 regions.
In the case of Northern Ireland, the allocation automatically followed from the first decision, because it was a region in itself.
For present purposes, the critical points decided on the second occasion were that the nine English transition regions should receive an allocation per year for the current funding period representing an increase of 15.7% (at 2011 prices) on its allocation for 2013, the last year of the previous funding period, while Highlands & Islands (the only Scottish transition region) should receive an allocation per year of 95% of its average annual allocation over the whole of the previous funding period.
The applicants have two fundamental complaints about this way of doing things.
The first complaint is that although the allocation for Merseyside and South Yorkshire had risen by 15.7% from the base year of 2013, this represented a 61% reduction (at 2011 prices) on its allocation for the previous funding period as a whole.
This was because in the previous funding period, although they would otherwise have ranked as competitiveness regions, they had received the special transitional and specific support provided for by article 8 of the 2006 Regulation.
Under the terms of the 2006 Regulation it had tapered down to nil by 2011.
In 2007 2013 as a whole, Merseyside and South Yorkshire had received substantially more than competitiveness regions because of the article 8 funding.
But by taking 2013 as the base year for the uplift of 15.7%, the Secretary of State chose the year in which Merseyside and South Yorkshire had been entitled to no special transitional funding and had received no more than the national average for competitiveness regions.
By comparison, the other English transition regions had received no special article 8 funding in the previous period and their allocations profile in that period had been flat in real terms.
The second complaint is that Merseyside and South Yorkshire have done badly by comparison with Highlands & Islands and Northern Ireland.
This, it is said, is because the first decision had protected the allocations to Scotland and Northern Ireland by guaranteeing them 95% of their allocations in the previous funding period.
Highlands & Islands had then been allowed by the second decision to base the calculation of the 95% on its average annual allocation in the previous period, notwithstanding that, as a phasing out region in the previous period, part of its allocations in 2007 2013 had also represented transitional additional funding tapering down to zero over the period.
In other words, Highlands & Islands was not limited to the relevant proportion of its last and lowest year in 2007 2013.
The net result, the appellants say, was that their regions fared worse than other transition regions in spite of having higher levels of deprivation than most of them.
What they want is a principle of allocation more closely related to levels of relative deprivation.
Preliminary observations
Three points should be made at the outset.
The first is that the Secretary of States allocation is a discretionary decision of a kind which the courts have traditionally been particularly reluctant to disturb.
There is no right answer prescribed by the EU Treaty or the 2013 Regulation to the question how EU Structural Funds should be distributed within a Member State.
There is not even any clear principle on which this should be done.
Instead, the Secretary of State was required to make a complex evaluation of a wide range of overlapping criteria, all of which involved difficult and sometimes technical judgments about matters of social and economic policy.
Secondly, it was a judgment of a particularly delicate kind, involving the distribution of finite resources, including domestic taxpayers funds as well as EU funds, between the four countries and the distinctive regions of the United Kingdom.
In such cases, the Secretary of State is in reality arbitrating between different public interests affecting different parts of our community.
It is an exercise in which the legitimacy of the decision making process depends to a high degree on the fact that ministers are answerable politically to Parliament.
As Lord Hoffmann observed in a lecture given in 2001, Separation of Powers, 7 JR 137 (2002)), at paras 19 20: there are certain areas in which, although the decision is formally justiciable because it involves the interpretation of statute or the common law, the outcome is likely to have an important impact upon public expenditure.
The allocation of public expenditure whether we should spend more or less on defence, health, education, police and so forth, whether at a national or local level is very much a matter for democratic decision.
Furthermore, a court deciding a case which will affect one form of public expenditure for example, impose a burden of expenditure upon education authorities has no way of being able to decide whether such expenditure should or should not have a prior claim over other forms of expenditure.
It may consider that, viewed in isolation, it is fair and reasonable that children in schools should receive certain benefits or financial compensation for not having received other benefits.
But because it can only view the matter in isolation, it has no way of knowing whether this means that other people dependent upon social security, police protection and so on will have to make sacrifices because there is less money for them.
The only people who can make such decisions are the democratically elected bodies who are in charge of the budget as a whole.
This means that even when a case appears to involve no more than the construction of a statute or interpretation of a common law rule, the courts are very circumspect about giving an answer which would materially affect the distribution of public expenditure.
The third preliminary observation is that the disputed allocations are not a matter for the sole decision of the United Kingdom or the Secretary of State as its representative.
Under the 2013 Regulation, the United Kingdom has the right of proposal, but its proposals must be embodied in a Partnership Agreement before they can be adopted.
The Partnership Agreement is made with the Commission, acting as the relevant organ of the European Union.
Once approved by the Commission it is implemented by a Commission decision.
It then takes effect as an instrument of the Union.
At the time when the present proceedings were brought, there was no Partnership Agreement in existence.
There were only proposals which had been announced by the Secretary of State.
At a number of stages (I shall return to this point) these had been prepared in consultation with the Commissions officials.
Ultimately, they were embodied in a draft Partnership Agreement which was submitted by the Secretary of State to the Commission on 22 April 2014.
It is a long, elaborate and highly technical document.
We were referred to it in the form published on the United Kingdom governments website.
The Commission was certainly aware of these proceedings and in general terms of the nature of the appellants complaints, not least because according to Mr Eyres evidence they lobbied the relevant commissioner about them.
The Commission made a number of observations on the draft, which have not been disclosed because the Commission regards them as confidential.
Finally the document was agreed by a Commission decision notified on 29 October 2014, shortly after this appeal was argued.
I make these points not in order to suggest that the present issues are beyond the scope of judicial review in the English courts.
The Secretary of States proposals are amenable to judicial review like any other decision of the executive.
If his proposals were unlawful, he may be obliged to reconsider them and if necessary to propose an amendment.
I am prepared to assume that the Commission would adopt the amendment, as it has indicated that it is in principle willing to do if it is consistent with the objectives of the Funds.
However, the Commissions involvement has a broader significance.
It is, as I have pointed out, the main mechanism of compliance envisaged in the 2013 Regulation.
The Commission is an expert administrative body at arms length from the Secretary of State, with considerable experience of the economic and social issues involved.
It is able to review the economic merits of the Secretary of States judgments and if necessary substitute its own evaluation in a way that is beyond the institutional competence of any court, let alone a national court.
The Commission is evidently satisfied that the Partnership Agreement complies with the 2013 Regulation.
That does not rule out the possibility that it may be equally satisfied with some alternative proposal.
But a national court should be extremely cautious before accepting that a proposal is inconsistent with the 2013 Regulation which the Commission charged with applying it has found to be consistent with it.
Grounds of review
The appellants case is that taking the Secretary of States two decisions together, the allocation to Merseyside and South Yorkshire which resulted was unlawful.
Mr Coppel QC, who appeared for them, submitted that the Secretary of State treated Merseyside and South Yorkshire differently from Northern Ireland and Highlands & Islands when they were for practical purposes in the same position, and in the same way as other English transition regions when they were in a materially different position.
This, he said, was contrary to the general principle of equality in EU law as well as ordinary principles of English public law which require a decision maker to have regard only to legally relevant considerations.
He submits that to make his case good, it is enough to demonstrate that Merseyside and South Yorkshire were comparable to Highlands & Islands or different from the other English transition regions.
The Secretary of State had no discretion or margin of judgment on that question.
His discretion or margin of judgment related only to the question whether the discrimination was objectively justifiable, and according to Mr Coppel QC the Secretary of State has never set out to satisfy that test.
Before turning to the Secretary of States decisions, I should make it clear that I do not accept the rigid scheme of analysis by which Mr Coppel QC seeks to confine us.
The general principle of equality in EU law is that comparable situations are not to be treated differently or different situations comparably without objective justification.
This is not a principle special to the jurisprudence of the European Union.
It is fundamental to any rational system of law, and has been part of English public law since at least the end of the nineteenth century.
As Lord Hoffmann pointed out when delivering the advice of the Privy Council in Matadeen v Pointu [1999] 1 AC 98, para 109: Is it of the essence of democracy that there should be a general justiciable principle of equality? Their Lordships do not doubt that such a principle is one of the building blocks of democracy and necessarily permeates any democratic constitution.
Indeed, their Lordships would go further and say that treating like cases alike and unlike cases differently is a general axiom of rational behaviour.
It is, for example, frequently invoked by the courts in proceedings for judicial review as a ground for holding some administrative act to have been irrational.
Unequal treatment, Baroness Hale explained in Ghaidan v Godin Mendoza [2004] 2 AC 557, para 132, is the reverse of the rational behaviour we now expect of government and the state.
Power must not be exercised arbitrarily.
If distinctions are to be drawn, particularly upon a group basis, it is an important discipline to look for a rational basis for those distinctions.
The two stage process by which courts in discrimination cases distinguish between comparability and objective justification is a useful tool of analysis and probably indispensable in dealing with allegations of discrimination on ground of gender, race or other personal characteristics.
More generally, a rigid distinction between the two stages was implicit in the four stage test proposed by Brooke LJ in Wandsworth London Borough Council v Michalak [2003] 1 WLR 617, para 20, for cases arising under article 14 of the European Convention on Human Rights.
But a tool of analysis should not be transformed into a rule of law.
As Lord Hoffmann pointed out in R (Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173, paras 29 31, the question whether two situations are comparable will often overlap with the question whether the distinction is objectively justifiable: If an analogous situation means that the two cases are not relevantly different (no two cases will ever be exactly the same) then a relevant difference may be the justification for the difference in treatment [T]his division of the reasoning into two stages is artificial.
People don't think that way.
There is a single question: is there enough of a relevant difference between X and Y to justify different treatment? [T]he invocation of the rational and fair minded person (who is, of course, the judge) suggests that the decision as to whether the differences are sufficient to justify a difference in treatment will always be a matter for the judge.
Baroness Hale, making a very similar point in Ghaidan v Godin Mendoza at para 134, deprecated a formulaic approach for precisely this reason.
The problem about Mr Coppel QCs scheme of analysis as applied to the allocation within a Member State of EU Structural Funds is that there is no clear measure of comparability, whether between different regions or between different ways of treating them.
The appellants say that Merseyside, South Yorkshire, Highlands & Islands and Northern Ireland are comparable by virtue of being transition regions under the classification, and that they have been treated differently by virtue of receiving an allocation for 2014 2020 which represents a smaller proportion of what they received in 2007 2013 than the rest.
But neither proposition is coherent in the context of this
particular scheme.
The four regions are transition regions only because they
all have an average GDP per capita between 75% and 90% of the EU average.
But that only means that they are all eligible to participate in the pool of money allocated by the Commission for United Kingdom transition regions.
The mere classification by GDP per capita is consistent with significant differences in other respects which are relevant to the allocation of EU Structural Funding.
The criterion for the allocation is not GDP per capita but contribution to the EUs policy objectives as set out in article 9 and its incorporated instruments.
To paraphrase Lord Hoffmann, there is only one question: is there enough of a relevant difference between Merseyside and South Yorkshire on the one hand and the remaining transition regions on the other to justify any difference in their treatment? The answer to that question may ultimately be for the court, but the nature of the question requires a particularly wide margin of judgment to be allowed to the decision maker.
That is partly because the questions posed by the 2013 Regulation, whether they come under the heading of comparability or justification, call for a complex policy judgment based on a broad range of economic and social factors which the court is not competent to carry out and could not legitimately carry out.
And it is partly because the discretion allowed to Member States and the Commission by the 2013 Regulation is itself very wide, and the courts cannot confine it more narrowly.
There are many solutions consistent with the Regulation, none of which is any more right than the next.
It follows, in my opinion, that the appellants cannot succeed on this appeal simply by pointing to the classification of Merseyside and South Yorkshire as transition regions, and denouncing the outcome of the Secretary of States two decisions as more burdensome to them than to others in the same category.
They must show that there was something unlawful about the process or reasoning by which that outcome was arrived at.
Against that background, I turn to the Secretary of States two decisions.
The first decision
The first decision was to allocate to each of the four countries comprising the United Kingdom 95% of what they had received from the Structural Funds in the previous funding period (at 2011 prices).
Instead of applying the 5% reduction in the United Kingdoms national allocation to the United Kingdom as a whole, he applied it separately to each component country.
The Secretary of States reasons for this decision are explained in a witness statement of Dr Susan Baxter, a senior official in his department.
It is clear from her evidence that Ministers chief concern was that the radical reclassification of European regions in the current Regulation should not lead to an excessively abrupt change in the funding allocated to the United Kingdoms regions.
Although the Commission had not disclosed how much it had allowed for each region when calculating its allocations to Member States, the department was able to estimate the Commissions regional figures from the formula in the 2013 Regulation.
This revealed that if the Secretary of State were to allocate funds to regions according to the same GDP based methodology as the Commission had used to allocate funds to the United Kingdom, England would have received an increase of 7% on its allocation for 2007 2013 (at 2011 prices), with the largest increases going to the south of England.
The three other countries comprising the United Kingdom would have received substantially less than their allocation for 2007 2013: 22% in the case of Wales, 32% in the case of Scotland and 43% in the case of Northern Ireland.
The Secretary of State considered allocating funds within the United Kingdom on this basis, but rejected the idea in order to protect the devolved administrations from sudden and significant cutbacks to funding.
His reasons were described by Dr Baxter as follows: 41.
Ministers were aware that the decision to equalise the cuts meant that there was proportionately less for England than the EUs notional calculation methodology would have rendered.
Accordingly Ministers were fully aware that both (a) that this approach to the allocation of funds (rather than allocation on the basis of the EU Commissions approach) would reduce the amount of money available for regions in England; and (b) that it would limit the funding available for distribution for the Transition regions in England and the allocation for Northern Ireland and Highlands & Islands regions would come out of the transition budget.
However, this was seen in the context of an overall cut in the funding for Northern Ireland and Scotland. 42.
There were a number of reasons for applying the cut equally as between the nations, including: Transparency a decision that was easy for non experts to understand; Simplicity a single number applied to each Devolved Administration; Consistency the same approach was taken to all four
Devolved Administrations; and
Balanced it took account of the status of the Devolved Administrations under the UK's constitutional settlement. 43.
The Government was not, at this stage, looking at the detailed effects at NUTS 2 level.
Ministers were aware that increasing the funding for the Devolved Administrations would mean less for certain regions in England, as allocations had be [sic] made from a set budget category for each category of region.
However, it was decided that this would be dealt with at the next stage of the allocation process and that only the big picture within the UK would be looked at when trying to distribute the cut fairly as between the UK nations.
In these passages, references to the English regions getting less mean less than they would have got if the Secretary of State had replicated the notional regional allocations which it was estimated that the Commission had made.
In my opinion the Secretary of State was entitled to adopt this approach.
The EU Structural Funds are primarily concerned with economic development, which is a devolved responsibility.
It is true that the relevant entity in international law is the United Kingdom, and that, as regards the institutions of the European Union, the United Kingdom is the Member State.
England and the devolved administrations of Scotland, Wales and Northern Ireland have no formal status in the EU legal order.
But it does not follow that their status within the United Kingdom is irrelevant.
EU law is not insensitive to the relationship between Member States and their internal federal or regional units of government and will not necessarily treat regional variations arising from the distribution of constitutional responsibility within a Member State as discriminatory.
In (Case C 428/07) R (Horvath) v Secretary of State for the Environment, Food and Rural Affairs [2009] ECR I 6355, the Court of Justice was concerned with the Memorandum of Understanding between the United Kingdom government and the Scottish Government which assigned to the devolved administration of Scotland responsibility for the implementation of Community law concerning the common agricultural policy.
The relevant EC Regulation empowered Member States to set minimum standards of compliance at national or regional level.
Mr Horvath complained that regulations requiring the maintenance by landowners of public rights of way over agricultural land infringed the Community law principle of equality because equivalent obligations had not been imposed by the devolved administration in Scotland.
The Advocate General, in her Opinion, had advised that differences in the way that Community obligations were implemented by different devolved administrations could not be regarded as discriminatory because they cannot be attributed to the conduct of the same public authority (para 112).
The Grand Chamber reached the same conclusion, but on a broader basis, namely that such differences were inherent in the distribution of responsibility for implementing Community law among distinct territorial units of government within a Member State.
They were therefore no more discriminatory than differences in the way that EU law was implemented by different Member States: 48.
As a preliminary point, it should be pointed out that, in conferring on Member States the responsibility of defining minimum GAEC requirements, the Community legislature gives them the possibility of taking into account the regional differences which exist on their territory. 49.
It should be recalled that, when provisions of the Treaty or of regulations confer power or impose obligations upon the States for the purposes of the implementation of Community law, the question of how the exercise of such powers and the fulfilment of such obligations may be entrusted by Member States to specific national bodies is solely a matter for the constitutional system of each State (Joined Cases 51/71 to 54/71 International Fruit Co and Others [1971] ECR 1107, para 4). 50.
Thus, it is settled case law that each Member State is free to allocate powers internally and to implement Community acts which are not directly applicable by means of measures adopted by regional or local authorities, provided that that allocation of powers enables the Community legal measures in question to be implemented correctly (Case C 156/91 Hansa Fleisch Ernst Mundt [1992] ECR I 5567, para 23). 51.
The Court has, in addition, held that, where a regulation empowers a Member State to take implementing measures, the detailed rules for the exercise of that power are governed by the public law of the Member State in question (see (Case 230/78) Eridania Zuccherifici nazionali and Societ italiana per lindustria degli zuccheri [1979] ECR 2749, para 34, and Case C 313/99 Mulligan and Others [2002] ECR I 5719, para 48). 54.
It must nevertheless be examined whether, in those circumstances, the mere fact that the rules establishing GAEC laid down by the regional authorities of the same Member State differ constitutes discrimination contrary to Community law. 57.
Where, as in the main proceedings, it is the devolved administrations of a Member State which have the power to define the GAEC minimum requirements within the meaning of article 5 of and Annex IV to Regulation No 1782/2003, divergences between the measures provided for by the various administrations cannot, alone, constitute discrimination.
Those measures must, as is clear from para 50 of this judgment, be compatible with the obligations on the Member State in question which stem from that regulation. 58.
In the light of the foregoing, the answer to the second question is that, where the constitutional system of a Member State provides that devolved administrations are to have legislative competence, the mere adoption by those administrations of different GAEC standards under article 5 of and Annex IV to Regulation No 1782/2003 does not constitute discrimination contrary to Community law.
The decision is significant not just for the answer that was given to the particular question posed by the High Court, but because it necessarily followed from the reasoning that the mere fact that the United Kingdom was a unitary state in international law did not mean that regional differences in the way that Community law was applied called for objective justification.
The present case differs from Horvath.
The sole decision maker was the Secretary of State.
It was not the devolved administrations.
However, this seems to me to be a largely formal distinction which avoids the substance of the matter.
The 2013 Regulation requires a Partnership Agreement to be agreed between the Commission and the United Kingdom.
Proposals for inclusion in that agreement are therefore necessarily prepared for submission to the Commission on behalf of the United Kingdom.
But internally, the Secretary of State was entitled to give effect to the wishes of the devolved administrations in areas such as these where they would be constitutionally responsible for implementation, notwithstanding that that might introduce differences between the different countries of the United Kingdom.
Article 5(1) of the 2013 Regulation provides that a Member State must in accordance with its institutional and legal framework organise a partnership with the competent regional and local authorities.
Article 5(2) provides: In accordance with the multi level governance approach, the partners referred to in para 1 shall be involved by Member States in the preparation of Partnership Agreements and progress reports and throughout the preparation and
implementation of programmes
What the Secretary of State did when making his first decision was to treat the four countries comprising the United Kingdom as if they were separate entities for the purpose of implementation of the 2013 Regulation, and to divide the United Kingdoms allocation from the Structural Funds between them on a consistent basis, pro rata to their allocations in the previous funding period.
In my opinion, he was entitled to have regard in this way to the constitutional settlement of the United Kingdom, provided (i) that the basis on which he did so did not unjustifiably discriminate between the four countries, and (ii) that the financial implications for the individual regions of the United Kingdom were consistent with the 2013 Regulation.
The Secretary of States first decision was in my opinion within his margin of judgment in both of these respects.
There is no material before us to suggest that the relative positions of England, Wales, Scotland and Northern Ireland had changed so radically since the last funding period that a distribution between them proportionate to their previous allocations could be regarded as in itself discriminatory.
The argument of Merseyside and South Yorkshire is directed entirely to the financial impact of the decision on individual regions within the four countries, in other words to the second of the two provisos which I have mentioned.
But the first decision did not mean that English transition regions such as Merseyside and South Yorkshire would necessarily fare worse than Highlands & Islands or Northern Ireland.
The appellants do not suggest that the first decision necessarily meant that Highlands & Islands and Northern Ireland would get a larger proportion of the United Kingdoms transition region pot than they would have done if the 5% reduction, instead of being applied to the four countries separately, had been applied to the United Kingdom as a whole.
That would depend on how the allocations to individual regions were dealt with in the second decision, both in Scotland and in England.
Indeed, Mr Eyres, whose witness statements constitute the appellants evidence, says that Merseyside and South Yorkshire assumed in the light of the first decision that they would receive a similar degree of protection to that received by the devolved regions when it came to allocating funds among the regions of England at the second stage.
The appellants evidence is not that the first decision reduced the total amount available for allocation to English transition regions below what it would have been if the 5% reduction had been applied across the United Kingdom as a single entity.
It is that it reduced the total amount below what it would have been if the Secretary of State had simply allocated funds between the regions in accordance with the notional regional allocations made by the Commission when calculating the allocation of the United Kingdom.
But that could not possibly make the first decision unlawful.
This is because under the 2013 Regulation the calculation of national allocations by the Commission depended on a precise formula based primarily on regional GDP per capita, whereas the allocation of the funds within a Member State are based on criteria that are qualitative and altogether wider.
Developmental needs in the respects covered by the thematic objectives cannot be measured simply by reference to general measures of poverty such as GDP per capita.
The Secretary of State cannot therefore have been obliged to replicate the methodology of the Commission or to employ some other GDP based formula in his decision about how to allocate the funds among the regions of the United Kingdom, provided that he respected the thematic objectives and that his proposals were agreed by the Commission in the Partnership Agreement.
It is not suggested that he failed to respect the thematic objectives, and the Partnership Agreement has been agreed by the Commission.
The second decision
The appellants, as I have pointed out, recognised that the first decision did not prevent the Secretary of State from protecting them against a sudden and significant cutback.
Their real target is the Secretary of States second decision in which he failed to do so.
Their complaint is that it did not protect them against a sudden and significant cutback by comparison with the 2007 2013 allocations, because the selection of 2013 as the base year meant that their uplift was based on the year in which their funding in the previous funding period had been lowest.
This was because under article 8.1 and Annex II, para 6(b), their funding had been tapered down by 2013 to the national average level for competitiveness regions.
Moreover, the national average for competitiveness regions was exactly that, an average.
It did not take account of the special needs of those competitiveness regions in the north and midlands of England which were below the average and had relatively low GDP per capita and high levels of deprivation.
The appellants argue that in order to avoid unjustifiable discrimination the Secretary of State should, when making his second decision, have based the uplift of the English transition regions for 2014 2020 on their average allocations over the whole of the previous funding period.
As it was, his decision to use 2013 as the base year discriminated against them, (i) by comparison with other English transition regions, which had had a flat annual allocations profile in the previous period, and (ii) by comparison with Highlands & Islands whose annual allocations for the new period were calculated by reference to the average of its annual allocations in 2007 2013 instead of just 2013. 39.
The Secretary of State did not overlook these factors.
He considered that Merseyside and South Yorkshire were not comparable to other English transition regions or to Highlands & Islands.
I shall deal first with the question of comparability to the other English transition regions.
In her witness statement (at paras 47 55), Dr Baxter says that ministers considered four main options: Option A was to replicate the notional regional allocations made by the Commission in arriving at the national allocation of the United Kingdom.
This would have resulted in allocations which were proportionate to regional GDP per capita, but would have resulted in a significant shift of funding from the north of England to the south.
They considered that there had been no fundamental change in the economic landscape in the last few years such as to justify a shift of allocations of this kind, which would have reduced the funding available for the poorest parts of England.
Officials consulted the Commission.
The Commission said that it would be uncomfortable about the use of their methodology, which had been designed for the calculation of national, not regional allocations.
Option B was to apply a standard uplift to each regions allocations for 2013.
Option C was the same as Option B, but with the allocations of Merseyside and South Yorkshire being based on their average allocations over the whole of the period 2007 2013. (This was already the case for the other English transition regions, whose allocations profile had been flat over the previous funding period).
Option C would have resulted in Merseyside and South Yorkshire receiving a higher allocation than under Option B, but it would have involved a reduction of 22% in the allocations of all English transition regions, including Merseyside and South Yorkshire, compared to 2007 2013.
This was because the high cost of funding Merseyside and South Yorkshire on the basis of their allocations over the whole of the previous funding period would have had to come out of the pot available to transition regions generally.
It was considered that for this reason Option C would be inconsistent with the thinking which lay behind the creation of the transition category for 2014 2020, and would have caused difficulty in agreeing the allocations with the Commission.
This was because the transition category had been specifically introduced to provide enhanced levels of funding for regions at an intermediate stage of development notwithstanding the reduction of the total budget.
Option D was a hybrid scheme using the Commissions notional allocations for all transition regions combined with what is described as a UK specific formula for more developed regions.
For transition regions this would have been the same as Option A. Ministers also considered a fifth method, which involved using a basket of economic indicators together with a suitable safety net.
They thought that there was a strong case for this, but rejected it because, like Option A, it would have produced a large drop in funding for the midlands and north of England, in favour of the south. 40.
As Dr Baxter points out, no solution was wholly satisfactory from every point of view: 48.
Given the funding reductions to the overall programme, and the limitations imposed by the EU Regulations, there was no outcome possible which would not have resulted in funding reductions to some regions.
The advantages and disadvantages of a range of options had to be considered and Ministers had to take a range of considerations into account in determining their preferred solution.
Ministers, she notes, had to make difficult decisions: 87.
Officials presented them with a range of options after undertaking very detailed and comprehensive analysis and Ministers chose those options which they felt in sum were fairest to all.
The available budget was set by the EU and so it was always unlikely that a single option would satisfy all regions.
Giving Merseyside and South Yorkshire a larger allocation would have meant reducing the allocations to the other UK Transition regions.
Decisions over the Transition allocations were particularly problematic as the negotiations in the European Council had resulted in significant cuts to the budget for Transition regions compared to the European Commission proposal.
This level of reduced funding at EU meant that any decision was going to come as a disappointment for some. 41.
The Secretary of State chose Option B, fixing the uplift at 15.7%.
His reasons are described as follows by Dr Baxter: 54.
A key aspect of the decision, of course, was the status of Merseyside and South Yorkshire as phasing in regions for the 2007 2013 period, thus receiving additional payments in 2007, 2008, 2009, 2010 on a specific and transitional basis, as explained above.
Ministers decided to make the allocations using 2013 allocations as a baseline because such a baseline: maintained higher levels of funding in the North of England, where need is greatest; avoided large drops in funding levels as between 2013 and 2014 (even in relation to South Yorkshire and Merseyside); treated all English Transition regions in the same way, whilst taking account of the phased in status of South Yorkshire and Merseyside by basing allocations on the jumping off point from the 2007 2013 allocation; and treated all More Developed regions in the same way. 55.
Had allocations been calculated based on a 2007 2013 average or overall quantum, then Ministers felt that Merseyside and South Yorkshire would have been unduly advantaged in relation to other English Transition areas, in so far as their boosted allocations in the period 2007 2010 were expressly intended to be transitional and specific rather than to be enshrined into future allocations. 42.
In the light of this reasoning it is impossible to say that the Secretary of States decision was outside the broad range of decisions that he could lawfully make.
Merseyside and South Yorkshire had already received additional funding over and above that available to other regions with a GDP per capita exceeding 75% of the EU average during the previous funding period.
Article 8.2 and Annex II, para 6(b) of the 2006 Regulation had provided for the level of funding to taper down to the national average for competitiveness regions by 2011.
Mr Eyres, the appellants witness, says that this had not been enough to lift Merseyside and South Yorkshire into the category of competitiveness regions (in the 2007 2013 categorisation) or the category of more developed regions (in the categorisation of 2014 2020).
That is so, but it misses the point, which is that it was of the essence of the transitional and specific additional funding allowed by article 8 of the 2006 Regulation that it was temporary.
Once it had expired, the 2006 Regulation 43. envisaged in terms that the regions which had benefitted should be funded only at the national average aid intensity level for competitiveness regions.
In the new categorisation for 2014 2020, these regions would be assisted by being included in the intermediate category of transition regions created for regions with a GDP per capita between 75% and 90% of the EU average.
However, the budget for transition regions was tight.
If the Secretary of State had based the uplift in 2014 2020 on the average allocations for the whole of the previous period, the effect would have been to continue the impact of the transitional additional funding provided for the years 2007 2011 into 2014 2020.
This represented a very significant difference between Merseyside and South Yorkshire on the one hand and the other English transition regions on the other.
In practice it is difficult to see what else the Secretary of State could have done.
Unlike pay discrimination cases, where it is possible to level up to match the highest paid, the distribution of EU Structural Funds within each category of regions is a zero sum game.
One regions gain is anothers loss.
Since the fund available for transition regions is ring fenced the additional cost of providing Merseyside and South Yorkshire with allocations based on the whole of the previous period would have had to come out of the allocations of the other English transition regions and would have left all of them with 22% less than they had had in 2007 2013 instead of 15.7% more.
The Secretary of State was entitled to take the view that this would be contrary to the purpose for which this intermediate category had been created.
I do not find it in the least surprising that the Secretary of State anticipated difficulty in getting the Commissions agreement to such a scheme, and I can see no basis on which his judgment of the Commissions likely reaction can be challenged. 44.
Much of the evidence before the court is devoted to a technical and ultimately inconclusive dispute arising from Mr Eyres assertion that if, hypothetically, Merseyside and South Yorkshire had been competitiveness regions in 2007 2013 rather than phasing in regions, they would have received a higher allocation in 2013, and therefore a higher allocation in 2014 2020 as well.
Dr Baxter challenges his methodology and produces alternative figures of her own, based on rerunning the original calculations made for 2007 2013 on Mr Eyres hypothesis.
The value of this exercise is diminished by the fact that both witnesses agree that if Merseyside and South Yorkshire had actually been competitiveness regions in 2013, the methodology used to calculate allocations in 2014 2020 would in fact have been different.
They disagree about what the differences would have been.
It is neither necessary nor possible for a court of review to resolve this issue.
It is not in fact true that Merseyside and South Yorkshire were at the bottom of the transition category.
At 80.14% of the EU average GDP per capita, Merseyside was the third poorest of the nine English transition regions, according to the 45. 46. governments figures, while South Yorkshire at 84.46% was somewhere in the middle of the range.
But it is unquestionably true that the result of the allocations process was to inflict a very large reduction on two of the poorer regions of the United Kingdom.
However, the only way that that problem could have been addressed on a common basis for all transition regions would have been to use a formula based on GDP per capita, as the Commission had done when calculating national allocations, or else some other formula more closely related to measures of poverty and deprivation.
It is impossible for this court to say that the Secretary of State was bound in law to adopt some such formula.
In the first place, under the 2013 Regulation allocations within Member States are not based on GDP per capita and are only to a limited extent based on other measures of deprivation.
Secondly, the evidence is that the Commission when approached discouraged the use of their own methodology as inappropriate to an internal allocation.
And, third, concentration on GDP per capita would have produced an overall shift of funding towards the south which the Secretary of State was entitled to regard as even more anomalous.
I turn to the argument that the appellants allocation was discriminatory by comparison with Highlands & Islands.
It is correct that Highlands & Islands funding was reduced by 5% (at 2011 prices) by comparison with 2007 2013, as against a much larger reduction for Merseyside and South Yorkshire, even though as a phasing out region it had also received transitional additional funding on a tapered basis in the earlier period.
Dr Baxter draws attention to three differences between former phasing in regions like Merseyside and South Yorkshire and a former phasing out region like Highlands & Islands.
As a phasing out region, Highlands & Islands had previously been funded under the convergence objective in recognition of its greater developmental challenges.
Its tapering profile had been more gradual in 2007 2013.
And its co financing rate had been higher (75% against 50% for phasing in regions) so that allocations to it represented better value for money for UK taxpayers.
I doubt whether the different tapering profile really differentiates Highlands & Islands from the two English phasing in regions.
There may be more in the other two points.
So far as the Secretary of State attached weight to these factors, it was very much a matter of judgment for him.
In fact, however, the evidence suggests that the treatment of Highlands & Islands was not due to these factors.
It was the combined result of the first decision, which treated Scotland as a separate territorial unit with its own 5% reduction, and of wishes of the Scottish Government, which naturally preferred to base Highlands & Islands allocations on the average of its annual allocations in the previous period than to limit it to 95% of its 2013 allocation and spend the rest on its more developed regions.
So far as it arose from the treatment of Scotland as a separate territorial unit, I have already explained why I regard that treatment as defensible.
So far as the decision about Highlands & Islands arose from the preferences of the Scottish Government, it seems to me to be the natural and legitimate result of the decentralisation of the United Kingdom under its current constitutional settlement.
No doubt if the 5% reduction had been applied to the United Kingdom as a whole, Highlands & Islands would have got less than in the event they did, and the saving would have left a bit more in the pot for the nine English transition regions.
But there is nothing in the evidence to suggest that the dilemmas affecting allocations to English transitional regions, which I have already discussed, would have been any less acute or that the outcome for Merseyside and South Yorkshire would have been significantly better.
Proportionality 47.
The appellants advance an alternative case based on proportionality, which I can deal with quite shortly, for I agree with the Court of Appeal that it adds nothing to the case based on alleged discrimination.
The appellants say that the effect of the Secretary of States decision was to impose upon them a disproportionate burden.
The problem about this submission is that it fails to answer the question: disproportionate to what? Proportionality is a test for assessing the lawfulness of a decision makers choice between some legal norm and a competing public interest.
Baldly stated, the principle is that where the act of a public authority derogates from some legal standard in pursuit of a recognised but inconsistent public interest, the question arises whether the derogation is worth it.
In this case the only legal standard by which the treatment of Merseyside and South Yorkshire can be regarded as disproportionately onerous to them is provided by the terms of the 2013 Regulation and the principle of equality.
The two regions have no entitlement to support from the Structural Funds except what they can derive from these two sources.
If the Secretary of States decisions are consistent with both, as I consider them to have been, their treatment cannot be regarded as disproportionate.
Lord Mances judgment 48.
I have naturally revisited my views in the light of the judgments of Lord Mance and Lord Carnwath.
To some extent, the differences between us relate to the supposedly anomalous consequences of the first decision, in particular on the different treatment of Merseyside and South Yorkshire on the one hand and Highlands and Islands on the other.
I do not feel that I can usefully add anything to what I have already said about the first decision, which I regard as justifiable.
Two other differences do, however, call for further comment.
The first concerns the purpose of the structural funds, which is central to the analysis of Lord Mance.
The second is his analysis of the relationship between the allocations for 2014 2020 and those of the previous funding period. 49.
We may all agree that the distribution within the United Kingdom of EU structural funds must be consistent with their purpose.
Where I part company with Lord Mance is that he appears to me to take too narrow a view of the purposes of the funds and the means by which those purposes may legitimately be achieved.
The Social Fund is not directly concerned with the reduction of regional imbalances, but with the promotion of employment and geographical and occupational mobility.
The Regional Development Fund is concerned with the reduction of regional imbalances, but not only by the direct improvement of GDP per capita and other measures of deprivation.
The purpose of both funds is to support the action of the Union in these areas.
The action of the Union is guided by the targets and shared objectives referred to in the three Council policy documents of 2010 identified in article 2.1, and summed up generally in the concept of smart, sustainable and inclusive growth.
This concept runs through the whole of the 2013 Regulation, and the thematic objectives in article 9 are mainly directed to promoting it.
They involve a wide range of economic criteria, which will not directly diminish regional divergences, even if they can be expected to do so indirectly in the long term.
Lord Mance and Lord Carnwath both consider that the allocations to Merseyside and South Yorkshire were not based on their actual needs.
But that is a conclusion which they appear to have reached solely by reference to standard measures of deprivation such as GDP per capita.
This assumes that there must necessarily be a close correlation between these measures of relative deprivation and the distribution of EU structural funds.
But since the reduction of such differences is only one purpose of the structural funds, and even that purpose may be achieved indirectly by promoting growth through the thematic objectives, that assumption is on the face of it unjustified. 50.
The second major difference arises out of Lord Mances rejection of the view of both the judge and the Court of Appeal about the justification for taking allocations for 2013 as the reference point for the uplift applied in 2014 2020.
The same point appears to be implicit in the analysis of Lord Carnwath.
In the absence of any complaint about the distribution of allocations in the previous funding period, and in the absence of any material change in the economic geography of the United Kingdom since then, the mere fact that allocations were made for 2014 2020 by reference to those in the previous period is unobjectionable.
The objection is specifically to the choice of 2013 as the reference year.
It is in my opinion clear that it was this decision which accounts for the differences between Merseyside and South Yorkshire on the one hand, and the remaining transition regions in the current funding period on the other.
It was certainly not the decision to reduce the allocations to the four countries comprising the United Kingdom by a flat 5%.
This first decision did not in fact, as Lord Mance suggests, diminish the pot available for the nine English transition regions.
The government could have distributed the overall allocation to the English transition regions in such a way as to ensure that all of them received a flat 5% reduction on their total allocations for the previous period.
It could have distributed them in such a way as to ensure that Merseyside and South Yorkshire received no more than a 5% reduction even if the others did not.
Some such solution is what the appellants say that they hoped and expected would happen after the first decision had been announced.
Their real complaint is that it did not happen.
The reason why it did not is that the purpose of the 2013 Regulation in dividing the former competitiveness category into a transition category and a more developed category was to enable the former to receive an uplift.
The reason why Merseyside and South Yorkshire did worse than that was that their uplift, although the same as that of the other transition regions, was based on the 2013 funding allocation and ignored the fact that they had been receiving tapered transitional funding between 2007 and 2011.
The same problem would have existed, and would have been equally acute, if the 5% reduction in the total funds for distribution had been applied across the whole of the United Kingdom, instead of to each of the four countries separately.
I have set out earlier in this judgment my reasons for agreeing with the courts below that disregarding the tapered transitional funding was justifiable.
Lord Mance disagrees (i) because he considers that the tapered transitional funding which they received under article 8 of the 2006 Regulation in that period should be regarded as no different in character from the rest of their funding in that period; and (ii) because the allocation for the previous period had tapered down to the average for allocations for competitiveness regions, and Merseyside and South Yorkshire were worse off than the average competitiveness region.
The problem about the first of these points is that but for article 8 of the 2006 Regulation, they would have been competitiveness regions in 2007 2013.
The tapered funding was a temporary increase in their allocations designed to ease their path from Objective 1 status in 2000 2006 to competitiveness status in 2007 2013.
Its function could properly be treated as spent by 2013.
The problem about the second point is one that I have already pointed out in another context, namely that it assumes a more precise correlation between relative deprivation and allocations than anything required by the 2013 Regulation.
Conclusion 51.
I would dismiss the appeal.
LORD NEUBERGER: Introductory: the background and the issues 52.
This appeal arises out of a challenge to the decision of the Secretary of State relating to the distribution between various regions of the United Kingdom of money allocated by the European Commission to the UK.
The money in question (the UK allocated funds) emanates from the European Structural Funds, and is payable in respect of the years 2014 2020, pursuant to Regulation (EU) 1303/2013 (the 2013 Regulation). 53.
The background to the appeal is set out by Lord Sumption in paras 2 19, 30 31 and 37 41, and by Lord Mance in paras 113 148 below, and it is unnecessary to repeat much of what they have said.
In particular, the relevant provisions of the 2013 Regulation are explained by Lord Sumption in his paras 5 to 13. 54.
The Secretary of State for Business, Innovation and Skills decided to distribute the UK allocated funds by reference to a two stage process.
First, they were apportioned between each territory (for want of a better word) of the United Kingdom.
This apportionment was effected on the basis that, for 2014, Northern Ireland (which was one region), Wales (which was divided into two regions), Scotland (which was divided into four regions) and England (which was divided into 30 regions) would each receive an annual sum which was 5% less than the they had received in the last year of the previous period, 2013.
This was because the UK allocated funds for 2014 were 5% less than they had been for 2013 (in 2011 prices).
Secondly, the distribution of the English portion between the 30 English regions involved each of the nine English regions designated under the 2013 Regulations as transition regions, (ie regions which have a GDP between 75% and 90% of the average of the 27 EU member states) receiving a 15.7% increase in their distribution over 2013.
It is to be noted in this connection that, while there is practically no freedom to distribute funds allocated by the Commission for transition regions to other regions (and vice versa), there are no specific provisions in the 2013 Regulations as to how the funds allocated for transition regions of a member state should be distributed between those regions. 55.
The grounds upon which the decision of the Secretary of State is challenged can be expressed in a number of ways.
I have found the most helpful approach to analyse the challenge as having four lines of attack, the first two of which are aimed at the procedure whereby the UK allocated funds were distributed amongst the 37 regions of the UK, and the third and fourth of which are aimed at the outcome.
Each of the attacks has been advanced on the grounds of (i) breach of the EU principles of equality or proportionality and/or (ii) breach of domestic public law principles.
However, the essence of each of the attacks is that the process adopted by the Secretary of State and/or the outcome of that process was unlawful on the grounds that it was (i) not in accordance with the 2013 Regulation, and/or (ii) so unreasonable as to be unlawful.
In practice, these two grounds march together very closely, and it is hard to envisage circumstances in which only one of them was satisfied (cf Kennedy v The Charity Commission [2014] UKSC 20, [2014] 2 WLR 808, paras 51 56 in relation to domestic law and Human Rights law). 56.
The four attacks all effectively involve contending that the approach that the Secretary of State adopted to the distribution of the UK allocated funds wrongly failed to have proper regard to the relative economic stages of development of the 37 regions of the UK, or the nine transition regions of England.
It may seem somewhat artificial to treat the attacks as having separate procedural and substantive aspects, but I have found it helpful to consider whether each of the two stages of the process was in accordance with the law as a matter of principle, before addressing the question of whether the outcome of those processes was in accordance with the law.
If the procedure is not in accordance with the law, then it would be very difficult, but probably not inconceivable, for the outcome of the procedure to stand.
On the other hand, if the procedure was lawful, it would nonetheless be quite possible for the outcome to be unlawful.
After all, one could expect a person responsible for the allocation of such funds to consider, where appropriate, the outcome of the procedure which was proposed before finally adopting it.
Such an exercise of distribution may frequently involve a degree of iteration in terms of determining a procedure, considering the outcome, and then adjusting the procedure if appropriate. 57. 58.
The procedural attack on the first stage is based on the proposition that, in the light of the terms of the 2013 Regulation, there can be no justification for apportioning the UK allocated funds on the basis that the four territories, England, Scotland, Wales and Northern Ireland, should each suffer the same reduction in funding from 2013.
Such a division, runs the argument, pays no regard to the disparities in the stages of development between individual regions, or groups of regions, and it is that with which the 2013 Regulation is concerned. 59.
The procedural attack on the second stage is based on the proposition that, by adopting a 2013 baseline for all nine English transition regions, the Secretary of State wrongly disregarded the status of Merseyside and South Yorkshire (regions which for convenience I will call the appellants) as phasing in regions in the previous, 2007 2013, period.
Because of the tapering provisions applicable to such regions during that period, it is said that the appellants are significantly and unjustifiably disadvantaged as against the other seven transition English regions, as those other regions had not been phasing in regions during the 2007 2013 period. 60.
The two attacks on outcome are founded on what are said to be indefensible discrepancies between the 2014 2020 payments to the appellants and those made to a number of other transition regions in the UK.
The first such attack relies in particular on Highlands & Islands in Scotland (as well as on Northern Ireland) and essentially arises from the first procedural stage.
The second attack on outcome focuses on the difference between the appellants and most of the other seven transition regions in England, and arises only from the second procedural stage.
The proper approach for the court to adopt 61.
The courts have no more constitutionally important duty than to hold the executive to account by ensuring that it makes decisions and takes actions in accordance with the law.
And that duty applies to decisions as to allocation of resources just as it applies to any other decision.
However, whether in the context of a domestic judicial review, the Human Rights Act 1998, or EU law, the duty has to be exercised bearing in mind that the executive is the primary decision maker, and that it normally has the information, the contextual appreciation, the expertise and the experience which the court lacks.
The weight to be given to such factors will inevitably depend on all the circumstances.
That is clear from a number of cases, including the decisions of this court in Bank Mellat v Her Majestys Treasury (No 2) [2013] UKSC 39, [2014] AC 700, paras 20 21 and 68 76, and in R (Lord Carlile of Berriew QC) v Secretary of State for the Home Department [2014] UKSC 60, [2014] 3 WLR 1404, paras 19 22, 67 68, and 111, where the judicial review and Human Rights aspects were considered.
In the EU law context, the same sort of point was made in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437, [2012] QB 394, para 200. 62.
The importance of according proper respect to the primary decision making function of the executive is particularly significant in relation to a high level financial decision such as that under consideration in the present case.
That is because it is a decision which the executive is much better equipped to assess than the judiciary, as (i) it involves an allocation of money, a vital and relatively scarce resource, (ii) it could engage a number of different and competing political, economic and social factors, and (iii) it could result in a large number of possible outcomes, none of which would be safe from some telling criticisms or complaints. 63.
Therefore, like Lord Carnwath, I agree with the Court of Appeal that the Secretary of States decision under consideration in this case is in the classic territory where the courts afford the decision maker a wide margin of discretion [2014] EWCA Civ 1080, [2014] PTSR 1387, para 57.
This is a particularly forceful factor in the present case, which concerns a decision which involves the distribution of funds between different parts of the United Kingdom, in respect of which the relevant legislation is very imprecise as to the criteria to be adopted.
I am not so sure that I get much assistance from the test of manifestly wrong (although I acknowledge that it is used by the Court of Justice), unless the expression means that no reasonable government could have taken the decision.
I agree with the thrust of what Lord Sumption says on this aspect in his paras 22 23, but, although there is obvious force in the passage which he quotes from Lord Hoffmanns speech, I think the issue is susceptible to somewhat more subtle and discriminating analysis than might be inferred from reading that passage.
To say that the allocation of public expenditure is very much a matter for democratic decision takes matters very little further at least in connection with a decision made by the executive.
The fact that the legislature assigns such a decision to the executive does not alter the fact that it is the executives decision and not that of the legislature.
In any event, the legislature will obviously have intended the rule of law to apply, so that such a decision, as with any executive decision, must be susceptible to judicial oversight. 64. 65.
Nonetheless, a court should be very slow about interfering with a high level decision as to how to distribute a large sum of money between regions of the UK.
But the degree of restraint which a court should show must depend on the purpose of the allocation, the legal framework pursuant to which the resources are allocated, and the grounds put forward to justify the allocation.
The line between judicial over activism and judicial timidity is sometimes a little hard to tread with confidence, but it is worth remembering that, while judicial bravery and independence are essential, the rule of law is not served by judges failing to accord appropriate respect to the primary policy making and decision making powers of the executive.
Some other preliminary points 66.
Particularly in the light of the differences of opinion in this court, I think it is right to mention that the statutory purpose of the distribution of the UK allocated funds does not appear to me to be by any means solely to reduce imbalances or inequalities between different UK regions.
The 2013 Regulation refers in article 2.1 to three documents adopted by the European Council, which are identified by Lord Sumption in his para 11, and recital (3) states that the Structural Funds are intended to achieve economic growth, promote harmonious development, and reduc[e] regional disparities, which, according to article 89 are to be achieved through strengthening [of the EUs] economic, social and territorial cohesion and the delivery [of] smart, sustainable and inclusive growth, by investing in growth and jobs and working towards EU wide co operation.
Accordingly, while the reduction of inter regional imbalances is an important factor when deciding on distribution, a point which is underlined by article 176 of TFEU (which is directed to cohesion), it is by no means the only factor and it is a long term one.
The 2013 Regulation is concerned not only with articles 174 176, but also article 162 (which is concerned with promoting employment), a point underlined by the thematic objectives in article 9 of the 2013 Regulations, which also demonstrate that economic convergence is simply one of the purposes of the Funds. 67.
Turning to the exercise of distributing the UK allocated funds for the 2014 2020 period, each of the two stages of that exercise was based on the distribution which had taken place in the previous, 2007 2013, period.
This approach was apparently adopted partly for reasons of transparency, convenience and simplicity, but there were two further reasons.
The first was to minimise the risk of a disruptive change in any region or territory in 2014, by ensuring that it did not receive a substantial reduction compared with the payment it received for 2013.
The second reason was that the distribution for the 2007 2013 period had been effected by reference to a number of different indicators, and the Secretary of States view was that there had not been any significant change from 2006/2007 to 2013/2014 in the economic or other relevant differentials between the regions of the UK.
It is significant that there has, rightly in my view, been no challenge to this approach as a matter of broad principle (although, for the reasons discussed below, the two specific stages, and their consequences, are challenged).
To take the payments for the previous period as the baseline may well not be the ideal basis for distribution of funds for the current period, but I find it hard to see how it could be said to be unreasonable, unless it can be shown to be so by reference to specific facts or reasons. 68.
Another point that should be mentioned is that, as Lord Sumption says, the Commission appears to be content with the Secretary of States distribution process, and has, we were told, adopted it.
That is a point which has some traction, particularly in the context of a regulation which envisages (in articles 14 17) that a member states proposed distribution between its regions will be submitted to the Commission for the purpose of its entering into a partnership agreement with the member state, and that, before adopting the proposed agreement the Commission will assess [its] consistency with this Regulation.
However, that does not alter the fact that the courts of this country have a fundamental constitutional duty to apply their view of the law to a decision or action of the executive, when it is challenged.
In addition, of course, the attack made by the appellants is not only based on EU law, but also on domestic common law. 69.
Two other factors deserve comment.
First, the absence of any prior consultation between the Secretary of State and individual regions (as opposed to the devolved governments).
In my view, if such consultation had occurred and the Secretary of State had taken what had been said into account in a reasonable way (even if he had ultimately rejected it), that would have assisted his case.
However, the fact that there were no such consultations does not undermine his case as a matter of principle, although it may, of course, in practice have assisted him in avoiding errors.
In that sense, it makes it easier for the appellants to attack his decision, but in the end the decision has to be assessed on its own merits.
In some circumstances, a failure to consult can of itself render a decision unlawful, but that will, at least normally, only be where there is a specific obligation or commitment to consult (see for instance R (Bhatt Murphy) v The Independent Assessor [2008] EWCA Civ 755).
However, it has not been suggested that such an argument could be advanced here. 70.
Secondly, it is clear from the evidence that a fair amount of thought was involved in the decision making process and four options were considered in relation to the second stage see paras 30 31 and 39 41 of Lord Sumptions judgment.
That is of some assistance to the Secretary of State, because (i) a considered decision deserves more judicial respect than a relatively unconsidered one, and (ii) it underlines the reasons why the court should be very reluctant to overturn the decision.
However, it is not very likely to be a determinative point.
The ultimate decision is either in accordance with the law or it is not.
Furthermore, the fact that the process adopted is better than three others which were rejected merely shows that there are worse processes, not that the adopted process is acceptable.
The procedural attack on the first stage: distribution between the four territories 71.
The first stage of the Secretary of States decision involved distributing the UK allocated funds between the four territories in precisely the proportions which reflected their respective shares in 2013.
Accordingly, as already explained, because the UKs allocation in 2014 2020 was reduced by 5% from what it had been in 2007 2013, each territorys share was reduced by 5%.
This aspect of the decision is attacked by the appellants because (i) it was not based on consideration of the relative economic and development demands and needs of individual regions, or even of the four individual territories, and (ii) it limited the Secretary of States freedom of manoeuvre so far as distributions to individual regions were concerned. 72.
The concern of the appellants, as English regions, is easy to understand.
It is not really in dispute that, if the approach of the Commission to the assessment of the UK allocated funds had simply been reflected by the Secretary of State when effecting the distribution of those funds between the four territories in 2014 2020, England as a whole would have seen an overall increase of about 7% over 2007 2013, whereas Scotland, Wales and Northern Ireland would respectively have seen decreases of around 32%, 22% and 43%.
However, these percentages have been arrived at by retrospective, informal analysis of the sum allocated.
The Commission has been anxious to emphasise that the basis upon which each member states allocation was fixed should not be disclosed and that any guesses as to how the allocations were fixed should be avoided.
In my view, the appellants objection to the first stage adopted by the Secretary of State should be rejected.
In the first place, it is inappropriate to equate the function of the Secretary of State, when deciding how to distribute the UK allocated funds among the regions, with the function of the Commission, when deciding how to allocate the funds among the member states.
The terms of the 2013 Regulation, and the documents to which it refers, are obviously relevant when considering the Secretary of States approach to distribution.
However, in contrast to the position relating to the assessment of the funds to be allocated to a member state, the 2013 Regulation includes no formula as to how those funds should be distributed among the regions of a member state. 73. 74.
Thus, Annex VII to the 2013 Regulation sets out a detailed Allocation Methodology governing the allocation of funds by the Commission among member states.
The allocation is assessed by aggregating a sum for each region, which sum is assessed on a per capita basis, with the per capita amount being greatest for regions with less than 75% of the EU average GDP per capita and least for those with more than 90%, with the transition regions being in the middle (see paragraphs 1 4 of the Annex).
However, this rather precise methodology does not apply to the distribution of those funds within member states.
And the fact that the Commission refuses to say how a member states allocation was determined serves to show that no specific approach by a member state to the distribution of its funds among its regions is encouraged in practice. 75.
There is no provision which expressly limits the freedom of a member state when deciding how to distribute its allocated funds between regions.
It is true that article 176 TFEU refers to redress[ing] the main regional imbalances and structural adjustments of regions whose development is lagging behind, but it does not require convergence and it has nothing to say about timing.
Having said that, in the light of the terms of the 2013 Regulation, I accept that the level of economic development of each of its regions must be a point of real relevance when a member state decides how to distribute its allocated funds between them.
Thus, if it could be shown that it was treated as irrelevant by a state, then the decision would be likely to be held unlawful.
However, as I have sought to explain in para 66 above, it appears clear that a member state is not required to base the distributions of its allocated funds between regions solely by reference to their relative stages of economic development, let alone to their GDP per capita.
Further, the thematic objectives referred to in article 9 of the 2013 Regulation have to be taken into account. 77. 76.
The fact that, by contrast with the detailed directions with regard to allocation between member states, there are no express constraints on member states as to how they should distribute their allocated funds renders it difficult to justify a substantial degree of constraint as to the manner of distribution.
While article 93 of the 2013 Regulation limits transfers between the three types of region, it does nothing to limit transfers between regions of the same type, which again suggests a relatively high degree of freedom when the state is deciding how to distribute allocated funds between regions with the same status.
The fact that such transfers would be notional, as the Commission does not reveal the split between individual regions in its allocation, itself suggests that it cannot have been intended that member states were to be very limited in their scope for deciding how to distribute between regions.
In the course of his impressive judgment, Stewart J said that, essentially for the reasons discussed in paras 73 76 above, the appellants attack on the Secretary of States decision to adopt what I have called the first stage falls at first base [2014] EWHC 232, [2014] LGR 389, para 73.
I agree that those reasons establish that the attack faces an insurmountable problem in so far as it relies on the point that the distribution of payments among the regions of the United Kingdom does not simply reflect their relative state of economic development.
However, it can still be argued that the apportionment between the four territories is arbitrary and inconsistent with the purpose of the 2013 Regulation, because the UK allocated funds were a lump sum for the United Kingdom as a whole, and the apportionment between the four territories pays no regard to the relative claims of the 37 regions of the United Kingdom, and unjustifiably ties the hands of the Secretary of State in relation to the distribution of the funds between those individual regions.
I accept that there is real force in that point, but the decision that the 5% reduction in the United Kingdoms allocation should be visited equally on, or pro rata between, England, Scotland, Wales and Northern Ireland is very much a policy decision, or a politically based decision, which is therefore 78. particularly difficult for a court to evaluate and therefore to criticise, and therefore to condemn.
The decision reflects both the increasingly decentralised nature of UK administration and the political realities of the devolution process.
As I see it, neither of those two features is an illegitimate factor for the Secretary of State to take into account, and neither is a factor whose importance a court is well placed to assess, let alone to dispute.
I agree with Lord Sumption that the decision of the Grand Chamber in (Case C 428/07) R (Horvath) v Secretary of State for the Environment, Food and Rural Affairs [2009] ECR I 6355 supports the notion that the first stage of the decision was justifiable under EU law. 79.
Apportioning the UK allocated funds between the four territories on this pro rata approach based on the 2007 2013 payments may not be a course which most people would expect, or even which many ministers would have adopted.
But I do not consider that it can be said that it is contrary to the 2013 Regulation, particularly as it contains no express restriction as to how nationally allocated funds are distributed; nor do I consider that it could be said to be irrational.
Indeed, I think that there is some force in the point that the Secretary of States view that each territory should be protected in the 2014 2020 period against a substantial overall reduction from the amount it received in the 2007 2013 period accords with the inclusion in Appendix VII of a ceiling on any increase (para 13), and a floor on any decrease (para 16), in a member states allocation in the 2014 2020 period as against the 2007 2013 period.
The procedural attack on the second stage: distribution between English regions 80.
The complaint of the appellants about the second stage of the distribution process is that they should not have been treated in the same way as the other seven English transition regions because, unlike the other seven regions, the appellants were phasing in regions in the 2007 2013 period.
This means that, although the appellants will receive a 15.7% increase in 2014 on what they had received the previous year, they are due to receive in the 2014 2020 period around 61% less than they received over the previous 2007 2013 period, whereas the seven other transition regions will receive rather more in the 2014 2020 period than they received for the 2007 2013 period. 81.
The explanation for the fact that the appellants will receive a year on year increase between 2013 (the last year of the previous period) and 2014 (the first year of the current period), but a substantial overall aggregate decrease between the two periods, is that they were phasing in regions for the 2007 2013 period.
In other words they were regions, which during the 2000 2006 funding period had had GDPs per capita of below 75% of the average of the EU member states (and hence were Objective 1 regions), but by 2007 were no longer in that category, but were competitiveness regions (ie regions having GDPs per capita of between 75 90% of the EU average), owing to their relative economic growth.
This meant that during the 2007 2013 period their allocation of funds had started at a higher level than the other competitiveness regions, which had had GDPs per capita of 75 90% of the average of the member states during the 2000 2006 period (and therefore had been Objective 2 regions in that period).
However, as the name suggests, the level of funds allocated to phasing in regions in 2007 tapered down over the next four years, so that by 2011 it was at the national average level per capita as other competitiveness regions. 83. 82.
By contrast, the seven other English regions were not only competitiveness regions during the 2007 2013 period, but they were effectively in the same category (namely Objective 2 regions) during the 2000 2006 period, as they each had a GDP per capita between 75 90% of the EU average in 2000.
In my view, the attack on the second stage should also be rejected.
The appellants cannot logically invoke the fact that they received more in the 2007 2013 period than other competitiveness regions to justify their being treated more favourably than the other competitiveness regions for the 2014 2020 period.
This is because the only reason that they were treated better in the earlier period was to smooth the passage from having been Objective 1 regions in the 2000 2006 period to being competitiveness regions in the 2007 2013 period.
From 2011, when the tapering stopped, the appellants received aid at the average rate per capita for competitiveness regions between 2011 and 2013, and there is no reason why the Secretary of State should be expected to treat them any differently for the 2014 2020 period.
As Stewart J said in para 78(iii) of his judgment, if the Secretary of State had adopted the approach suggested by the appellants, it would have unduly advantaged the [appellants] in relation to the other English transition regions. 84.
However, the appellants raise a separate argument based on the point that the annual payments for the 2007 2013 period made to the appellants, as phasing in regions, were, exceptionally and unlike the payments to other competitiveness regions, determined by the Commission rather than by the UK government.
Accordingly, runs the argument, using the payment received in 2013 as the base for determining the 2014 payment for each transition region in England involved treating the appellants differently from the other seven English transition regions.
There is undoubted force in this argument, particularly given that (reflecting the UK governments distribution decision in 2006) the 2013 payments to the other transition regions in the north and midlands of England were increased above what they would otherwise have been, owing to the UK governments decision to favour the north and midlands over the south, whereas this did not apply to the 2013 payments to the appellants. 85.
This point has force.
None the less, given (i) the fact that it was a reasonable decision in principle to take the 2013 payments for each region as the basis for calculating the 2014 payments, (ii) the wide margin of discretion accorded to member states when deciding how to distribute allocated funds nationally, (iii) the large number of factors which are potentially relevant, (iv) the long term nature of the aims of the 2013 Regulation and its predecessors, (v) the fact that the Secretary of State appreciated and addressed the level of payment per capita received by the appellants, and (vi) the perceived desirability of maintaining a degree of continuity for each region, I have reached the conclusion that this point should also be rejected.
The relevant Ministers and civil servants in the Department of Business, Innovation and Skills were aware of the fact that the proposed distribution would result in the appellants receiving a relatively low sum per capita when compared with other transition regions, they considered the possibility of increasing the appellants share of the UK allocated funds.
However, they decided that such a course would be unfair on other transition regions, especially as the appellants had fared better than those other regions, as competitiveness regions, thanks to phasing, during the years 2007 2010.
The procedural attacks: summary 86.
For the reasons given in paras 71 85 above, I consider that the appellants attacks on the two stages adopted by the Secretary of State for deciding how to distribute the UK allocated funds in 2014 2020 fail, in so far as they are considered as a matter of principle.
However, as explained in paras 56 60 above, the fact that the procedure adopted by the Secretary of State was defensible in principle is not the end of the matter.
It is still necessary to examine the outcome in the light of the criticisms raised by the appellants.
The attack on outcome: Highlands & Islands and Northern Ireland 87.
The first attack on outcome is primarily based on a comparison between the appellants and the Scottish region of Highlands & Islands, and it largely results from the first stage.
As explained above, although the appellants will receive a 15.7% increase in 2014 on what they had received in 2013, the total amount they are due to receive in the 2014 2020 period would be over 60% less than they received over the previous 2007 2013 period, whereas Highlands & Islands would suffer no decrease in the 2014 2020 period as against the 2007 2013 period.
In actual euros per capita, Highlands & Islands will receive about three times as much as the appellants will receive (around 400 per capita as against around 130 per capita). 88.
The status of the appellants as phasing in regions in the period 2007 2013 is explained in para 81 above.
The status of Highlands & Islands is slightly different.
Like the appellants, it is a transition region under the current, 2014 2020, regime, but, unlike the appellants, it was a phasing out (rather than phasing in) region, during the 2007 2013 period.
This meant that (i) like the appellants, it had been an Objective 1 region, with a GDP per capita of below 75% of the average of the EU member states in the 2000 2006 period, and by 2007 it was no longer in that category, but (ii) unlike the appellants, its exit from the category arose not because of an improvement in GDP per capita, but because of the accession of ten new (and, on average, poorer) member states to the EU between 2000 and 2007.
Accordingly, Highlands & Islands was subject to a rather different tapering regime under the allocation arrangements for 2007 2013, which only reached the level for competitiveness regions in 2013. 89.
On that ground, the courts below considered that it was simply inappropriate to compare Highlands & Islands with the appellants, and therefore that any attack by the appellants on the outcome of the Secretary of States decision based on the Highlands & Islands 2014 2020 payment was misconceived.
That may be right, but, at least if one confines oneself to the reason for, and consequences of, the difference between phasing in and phasing out regions, I am not particularly impressed with that view, because all three regions were competitiveness regions, and any phasing had ended by 2013.
However, the differences in co financing (ie the extent of the domestic contribution, as briefly explained by the Judge in para 50(c) of his judgment) may conceivably justify the view taken by the courts below.
It is unnecessary to decide that rather nice point: even if one assumes that it is relevant that Highlands & Islands had a different status from the appellants in the 2007 2013 period, the difference in outcome between its 2014 2020 aggregate payment and those for the appellants is striking.
As already mentioned, the appellants will receive around 130 per capita, whereas Highlands & Islands will receive around 400 per capita.
This follows from the combination of (i) the fact that Scotland was more favourably treated than England at the first stage, and (ii) the fact that Highlands & Islands is the only transition region in Scotland, and it was thought to be wrong to reduce its 2014 payment to bring it more into line with the English transition regions as that would benefit the other three, richer, regions in Scotland. 90. 91.
A somewhat similar, if less forceful, point can be made by the appellants about Northern Ireland, also a transition region in 2014 2020, which is to receive around 260 per capita in 2014.
Again, it is true that it was a competitiveness region in 2006 2013 period, and therefore was not strictly comparable with the appellants (or with Highlands & Islands), but I doubt that that point has much force (subject to the co financing point referred to at the end of para 89 above).
But, even if it does, the fact that in 2014 Northern Ireland receives twice the amount per capita that the appellants receive is rather striking. 93. 92.
These disparities do give one pause for thought.
Many people in the position of the Secretary of State might well have taken the view that the disparities such as those discussed in paras 90 91 above would have justified making adjustments as between the payments which would otherwise be made to each region, or even reconsidering the whole methodology.
However, bearing in mind the wide margin of discretion which should be accorded to the Secretary of State in the distribution of the funds, I do not consider that this justifies the conclusion that the distribution scheme which he adopted was unlawful.
I start with the point that the disparities arise primarily from the first stage of the distribution process, which, as already mentioned, does not seem to me to be objectionable in principle.
The first stage almost inevitably will result in a degree, and no doubt often a significant degree, of disparity between a region in one territory and a very similar region in another.
The same sort of problem could arise between similarly developed (or undeveloped) regions in different member states.
Particularly bearing in mind that the apportionment of the UK allocated funds between the four territories of the UK was based on a high level political decision which is lawful in principle, it would require a compelling case on the outcome before a court could rule the decision unlawful in practice.
I do not consider that a compelling case has been made. 94.
When considering the disparities relied on by the appellants, it is a mistake to assume that, merely because a region has in 2014 and/or had in 2013 the same status as, or had reached the same stage of economic development as, another region, that the two regions should be accorded a similar level of distribution.
The purpose of distributing the funds is not only to improve the growth, or relative growth, of poorer regions: it is also to achieve the multifarious thematic objectives.
Accordingly, it is dangerous to focus, and inappropriate to focus exclusively, on GDP per capita when comparing different regions. 95.
The selection of a regions GDP per capita figure as governing the appropriate level of payment may well reflect the Commissions overall assessment of the UK allocated funds under the provisions of the 2013 Regulation.
However, as already mentioned, (i) the Regulation has no such provisions in relation to the distribution of the UK allocated funds between individual regions, and (ii) the payments in 2007, on which the 2014 payments are based, were arrived at by reference to a basket of indicators, which were assumed to be equally valid in 2013, on the basis that there had been no significant shift in the social geography of the United Kingdom.
To take obvious examples which are admittedly speculation on my part, Highlands & Islands with its low population density and its meteorological and geographical character must be a relatively expensive region to service, and Northern Ireland has unique social issues. 96.
The danger of focussing on GDP per capita can be demonstrated by comparing two sets of regions which were both English competitiveness regions in 2007 2013 and are both English transition regions in 2014 2020, and have very similar GDP per capita.
First, Devon receives a payment for 2014 2020 of 67 per capita, whereas Cumbria receives 166; secondly, Lincolnshire receives 137 per capita, whereas Tees Valley & Durham receives 280 per capita.
Given that these two examples do, on any view, involve comparing like with like, and that the 2014 payments are based on those for the 2007 2013 period, it underlines the point that the Secretary of State has not based his distribution, even within a territory, simply on the basis of a regions GDP per capita.
Indeed, that is clear from the Secretary of States evidence, which, as mentioned in para 67 above, explains that the distribution for the 2007 2013 period, on which the 2014 payments were based, (i) was not effected simply by reference to a regions GDP per capita but was based on much more material, and (ii) was intentionally loaded in favour of regions in the north and midlands of England as against those in the south (hence Devons payment per capita is much lower than Cumbrias). 97.
Furthermore, as is clear from what I have just said and is discussed more fully in paras 100 103 below, it is not by any means necessarily the case that the appellants would have been treated better, or that Highlands & Islands or Northern Ireland would have been treated worse, than they have been treated, if there had been no first stage.
There are many ways in which the distribution of the UK allocated funds could have been effected. 98.
Particularly in the light of these features, I consider that the Secretary of State was entitled to take the view that, whatever scheme he adopted would prove objectionable to some regions, and that if he adhered to the two stage system he did adopt and made adjustments, that too would cause problems and give rise to complaints.
Accordingly, he was entitled to decide that it was simpler and politically advisable to stick with the scheme and not make adjustments. 99.
This brings one back to the point that the Secretary of States decision involved a substantial measure of political judgment.
Accordingly, his decision to adhere to a distribution scheme which was clear, simple and transparent, rather than one which was nuanced, subjective and complex is one which it is difficult for a court to challenge unless of course the outcome appears to be inconsistent with the 2013 Regulations or simply unreasonable.
When one considers the figures mentioned in paras 90 91 above together with the reasons summarised in paras 94 98 above, it appears to me that it cannot fairly be said that the appellants have managed to establish either ground.
The attack on the outcome: the other English transition regions 100.
The second attack on outcome is based on a comparison between the 2014 payments to the appellants and the other seven English transition regions in the light of their relative stages of economic development.
This attack is effectively based solely on the second stage of the distribution decision in relation to the 2014 2020 period.
In my opinion, the attack should be rejected for very similar reasons to those given in paras 93 99 above.
However, it is fair to say that the starting point, namely the nature of the decision in principle, is somewhat less of a formidable hurdle for the appellants.
The decision how to distribute the UK allocated funds between the English transition regions was a more workaday, relatively less high level political, decision than the first stage decision.
Nonetheless, as already explained, it was a defensible policy decision at least in principle and it must inevitably carry with it a degree of inevitable rough justice. 101.
However, although the initial hurdle may be lower for the appellants attack on the outcome for English transition regions than it is in relation to Highlands & Islands and Northern Ireland, I consider that, when one examines the appellants case on this fourth aspect, it should be rejected. 102.
In a nutshell, the principal criticism raised by the appellants is that, given that he based the 2014 2020 distributions on the distributions in the previous period, the Secretary of State should have assessed the allocation for the English transition regions by reference to the average annual distribution which they received for the 2007 2013 period rather than the 2013 distribution which they received.
On the face of it, at least, I do not consider that the Secretary of States decision on this point can be criticised.
The difference arising from the choice of the 2013 distribution only affects regions which were phasing in regions during the 2007 2013 period, and the appellants are the only English regions which can claim to suffer in this way.
However, there is, at the very least a real argument that it would be wrong to take the benefit of their tapering payments for the years 2007 2013, into account when assessing their 2014 distributions, given that these payments were intended to soften the blow of their having become competitiveness regions, a softening which was intended to be spent by 2013, and therefore, a fortiori, by 2014. 103.
Quite apart from this, as already mentioned, it is apparent that there is no direct or simple correlation between the level of economic development of an English transition region and its 2014 payment, and there is no clear reason to think that the appellants would be better off under another scheme. 104.
The relevant figures for the nine English transition regions are set out in para 55.4.2 of Stewart Js judgment, and I have already discussed some of the figures in para 96 above.
More specifically, the appellants, each of whom receive around 130 per capita during 2014 2020 (123 in the case of South Yorkshire, and 135 in the case of Merseyside), fare better than Devon (67 per capita, as already mentioned), but worse than five of the other six English transition regions, if one looks simply at the payment per capita and the level of the regions GDP per capita.
Ignoring Devon, the other six English transition regions received between (i) slightly more than the appellants, Lincolnshire at 137 per capita, and (ii) a little more than twice as much as the appellants, Tees Valley & Durham at 280 per capita.
Ignoring the two outliers, Devon and Tees Valley & Durham, the figures vary between 137 per capita for Lincolnshire and 167 for Shropshire & Staffordshire.
Lincolnshires GDP per capita is lower than either South Yorkshires or Merseysides, whereas Shropshire & Staffordshires is a little lower than South Yorkshires and somewhat higher than Merseysides. 105.
Ignoring Devon, which receives less per capita because it is in the south (see paras 84 and 96 above), it is noteworthy that Lincolnshire (which in terms of GDP per capita is somewhat worse off than either of the appellants), receives a payment which is very similar on a per capita basis to that of the appellants, whereas Tees Valley & Durham (which in terms of GDP per capita is only slightly lower than Lincolnshire) receives twice as much.
On the other hand, Cumbria (which is richer than any other English transition region) receives a payment per capita significantly more than Lincolnshire. 106.
Thus, the figures demonstrate that there is no reliable correlation between payment per capita and GDP per capita for 2014 2020, even for English regions which were ordinary (ie not phasing in or phasing out) competitiveness regions in 2013 and transition regions in 2014.
That does not mean, of course, that any level of payment for the appellants would be justified.
However, the important point for present purposes is that, on a GDP per capita basis, (i) the appellants plainly fare better than one region, Devon, and, more significantly, fare consistently with another region, Lincolnshire, and (ii) there is nothing like a precise correlation with the 2014 payments per capita. 107.
This analysis of the distributions to the other English transition regions thus leads to the conclusion that criticism of the outcome of the Secretary of States method of distributing the UK allocated funds is not soundly based, if it rests on the presumption that each English transition region (or even each transition region in the north and midlands) should get the same payment per capita, or the same payment per capita adjusted to take account of the regions 2014 GDP per capita.
Indeed, as mentioned in para 96 above, that conclusion is consistent with the Secretary of States evidence, which states that the 2014 payment for transition regions was arrived at by a fixed percentage uplift on the 2013 payment, which itself had been arrived at by reference to a number of different indicators in 2007. 108.
Furthermore, it appears to be very difficult, at least on the evidence in these proceedings, to assess what difference it would have made if the appellants 2014 2020 payments had been determined by reference to what they would have received in 2013, or in the period 2007 2013, had they been ordinary competitiveness regions, rather than phasing in regions.
Conclusion 109.
In these circumstances, I have come to the conclusion that this appeal fails.
I must, however, confess that I have reached this conclusion with some hesitation.
Although I do not agree by any means entirely with the approach adopted by Lord Mance (who places more emphasis than I do on the criteria and limits imposed by the 2013 Regulation on the Commission, when considering a member states freedom of movement when distributing allocated funds) or by Lord Carnwath (who considers that the Secretary of State has a greater duty to justify his distributions between individual regions than I believe is mandated by the 2013 Regulation), I see force in much of their reasoning, and indeed I was at one time persuaded that they had reached the right conclusion. 110.
While I would dismiss this appeal, it is right to re affirm the courts duty to declare that decisions of the executive, whether relating to the distribution of funds or otherwise, are unlawful if they are insufficiently justified or do not accord with the lawful aims or requirements pursuant to which the distributions in question are made.
I appreciate that the decision under consideration in this case was difficult and potentially complex, and that it involved many competing factors, political and social as well as economic.
However, with the expertise and information available to the Secretary of State, one would have hoped for a more sophisticated and considered, and a more consultative, approach to the question of how to apportion such a large sum of money between different regions of the United Kingdom.
I note from the evidence put in by the Secretary of State that it does appear that a much more careful approach was adopted in relation to the distribution for the 2007 2013 period. 111.
In summary, then, while the decision as to how to distribute the UK allocated funds between the 37 regions of the United Kingdom may have been unimpressive in some respects, it was not unlawful.
LORD CLARKE: 112.
I have read the other judgments in this appeal with great interest (and no little admiration).
I have throughout been inclined to agree with Lord Sumption.
It does seem to me that the court should be very reluctant to interfere with decisions of the kind under scrutiny here because they raise questions of policy which are essentially matters for the executive.
I recognise that in an appropriate case it is the duty of the court to interfere.
However, I agree with Lord Neuberger at para 66 that the decisions under review involved a range of different policy considerations and that it cannot fairly be said that the choices made by the Government were unlawful.
Like Lord Neuberger I have had some doubts in the course of the argument, especially in the light of the judgment of Lord Mance.
However, again like Lord Neuberger, I prefer the reasoning of Lord Sumption to that of Lord Mance.
I do not detect any significant difference between the reasoning of Lord Sumption and that of Lord Neuberger.
I agree with them and Lord Hodge that the appeal should be dismissed.
LORD MANCE: (with whom Lady Hale agrees) Introduction 113.
The European Union (EU) has a set of structural and investment funds (the ESI funds), of which the three main elements relate to the Common Agricultural Policy, the Cohesion Fund and the Structural Funds.
The Structural Funds, defined by article 1 of Council Regulation (EC) No 1303/2013, consist of the Regional Development Fund (ERDF) and the somewhat smaller Social Fund (ESF).
The ERDF is established under article 176 TFEU, and the ESF under articles 162 to 164 TFEU.
The EU makes available the Structural Funds on the basis of its overall assessment of each Member States regional development needs, but their allocation within each Member State is, subject to limits, the responsibility of that State.
The EU operates on the basis of seven year budgets, each of which determines the Structural Funds available for the next seven year period.
The budget for the years 2014 2020 was thus agreed in 2013. 114.
On this appeal various local authorities in the Merseyside and South Yorkshire regions challenge the defendant Secretary of States allocation of the Structural Funds within the United Kingdom during the EU budgetary period of 2014 2020.
The challenge focuses on two successive decisions taken by the Secretary of State.
The first was to allocate the funds received in respect of the period 2014 2020 between the individual territories or nations of the United Kingdom (that is England, Scotland, Wales and Northern Ireland) in the same proportions as in the previous seven year period 2007 2013.
The second was to base the allocations for English transitional regions in the period 2014 2020 on the amounts each such region received in 2013 under the scheme in place during that previous seven year period.
These decisions, taken individually or in combination, are alleged to have affected Merseyside and South Yorkshire in a manner which, it is submitted, is not supported by the relevant EU Regulations and involves anomalies and inequalities of treatment which cannot be and have not been justified. 115.
Structural funding is made available by reference to the NUTS level 2 (NUTS 2) regions.
NUTS 2 regions are second tier regions corresponding broadly to large counties in the United Kingdom.
They are defined by the Nomenclature of Territorial Units for Statistics (NUTS 2006/EU27) (NUTS) established pursuant to article 1 and Annex I of regulation (EC) 1059/2003.
There are 30 NUTS 2 regions in England (including Merseyside and South Yorkshire), 4 in Scotland and 2 in Wales while Northern Ireland is a single NUTS 2 region.
For the purposes of structural funding, the EU also identifies categories of NUTS 2 regions.
It determines the total funding which each Member State receives from the ERDF and ESF by reference to its own assessment of regional development needs within each such category.
The categorisation adopted has changed from seven year period to seven year period, as has the extent to which the relevant regulations define at an EU level the amount which each region is to receive, or leave this to the relevant Member State to determine.
All Structural Funds funding has to be co financed or matched by domestic investment in a defined percentage. 116.
The broad purposes for which the Structural Funds are made available are defined in article 174 TFEU in the case of the ERDF and article 162 in the case of the ESF.
Article 174 is part of a title consisting of articles 174 178, headed Economic, Social and Territorial Cohesion.
It provides: In order to promote its overall harmonious development, the Union shall develop and pursue its actions leading to the strengthening of its economic, social and territorial cohesion.
In particular, the Union shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions.
Among the regions concerned, particular attention shall be paid to rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps such as the northernmost regions with very low population density and island, cross border and mountain regions.
Article 176 further provides that the ERDF is intended to help to redress the main regional imbalances in the Union through participation in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions. 117.
Article 162 provides that the ESF is established: In order to improve employment opportunities for workers in the internal market and to contribute thereby to raising the standard of living and that it shall aim to render the employment of workers easier and to increase their geographical and occupational mobility within the Union, and to facilitate their adaptation to industrial changes and to changes in production systems, in particular through vocational training and retraining. 118.
Articles 164 and 178 provide for the European Parliament and Council to adopt implementing regulations relating to, respectively, the ESF and the ERDF, while article 177 confers further more generally worded power to make regulations defining the tasks, priority objectives and organisation of such funds. 2000 2006 119.
During the period 2000 2006 regions were classified in three categories, which have been described as Objectives 1, 2 and 3.
Objective 1 (the most needy) contained five UK regions, namely Cornwall and the Scillys, West Wales and the Valleys, Highlands & Islands, Merseyside and South Yorkshire, plus the whole of Northern Ireland. 2007 2013 120.
During the period 2007 2013, Regulation (EC) No 1083/2006 provided for a different categorisation.
The most needy and the least needy regions were the two main categories, and have been described as respectively convergence and competitiveness regions.
But in between them, under articles 8.1 and 8.2 of the regulation, were two sub categories to which support was allocated on a transitional and specific basis, and these have been described as phasing out and phasing in regions. 121.
Regulation No 1083/2006 determined the precise amounts allocated to particular regions falling within the convergence and the two transitional categories.
All that was left to the United Kingdom was to determine the allocation between competitiveness regions of the funds allocated by the EU to United Kingdom competitiveness regions.
There was no scope for any transfer of funds between categories.
The allocation between competitiveness regions was done on a basis which, because of the use of NUTS 1 as distinct from NUTS 2 criteria and a safety net limiting any reduction by reference to the prior period of 2000 2006 to 6.7%, did not necessarily correspond precisely with but nonetheless reflected (in the words of counsel for the Secretary of State, Mr Jonathan Swift QC) an approximation of each such competitiveness regions economic needs.
The indicators and safety net used by the Government to determine regional allocations within the competitiveness category also had the intended effect of channelling relatively high levels of funding to northern regions, compared with southern regions with similar economic profiles. 122.
Under article 8, read with para 6 of Annex II, of Regulation 1083/2006, the transitional support for phasing out regions was 80% of their individual 2006 per capita aid intensity level in 2007 and a linear reduction thereafter to reach the national average per capita aid intensity level for the Regional competitiveness and employment objective in 2013.
For phasing in regions, it was 75% of their individual 2006 per capita aid intensity level in 2007 and a linear reduction thereafter to reach the national average per capita aid intensity level for the Regional competitiveness and employment objective by 2011. 123.
The purpose of transitional support was thus to smooth the relevant regions movement from the most needy category to full competitiveness by the linear reduction of funding.
However, the final figure, based on the national average per capita aid intensity level for competitiveness regions was necessarily aspirational.
In other words, whether or not any phasing in or phasing out region actually achieved the same level of development as the average for all competitiveness regions was something that could only be determined with time.
There was no guarantee that any of such regions would do so. 124.
In the case of the United Kingdom the convergence regions (those with less than 75% of the GDP of the 25 EU member states) were Cornwall and the Scillys and West Wales and the Valleys.
The only phasing out region (ie with more than 75% of the GDP of the 25 EU member states, but less than 75% of the GDP of the 15 member states) was Highlands & Islands.
The only phasing in regions (those which had been old Objective 1 regions, but with GDP now exceeding 75% of the average of that of the 25 EU Member States) were Merseyside and South Yorkshire. 125.
The linear reduction prescribed by the regulation led both phasing out and phasing in regions to receive a flow of funds tapering sharply downward during the seven year period.
The tapering extended in the case of phasing out regions over the full seven year period, but took in the case of phasing in regions only four years, leading to the receipt of monies based on the national average per capita aid intensity level for competitiveness regions during each of the last three years, 2011 2013.
Taking rounded figures, Merseyside thus received some 161m in 2007, 129m in 2008, 95m in 2009, 60m in 2010 and 23m in each of the three years 2011 to 2012, while South Yorkshire received some 142m in 2007, reducing each year to 52m in 2010 and then remaining stable at 21m in each of the last three years.
The phasing out regions only received monies based on the national average per capita aid intensity level for competitiveness regions in the last year, 2013. 2014 2020 126.
For the period 2014 2020, Regulation (EU) No 1303/2013 applies.
This is expressed to have been made with particular regard to article 177.
Recital 1 records that article 174 TFEU provides that, in order to strengthen its economic, social and territorial cohesion, the Union is to aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands Recital 77 recites that in order to promote the TFEU objectives of economic, social and territorial cohesion, the investment for growth and jobs goal should support all regions and that to provide balanced and gradual support and reflect the level of economic and social development, resources under that goal should be allocated from the ERDF and the ESF among the less developed regions, the transition regions and the more developed regions according to their GDP per capita in relation to the EU 27 average. 127.
The regulation states both common or general principles (article 1) and thematic objectives (article 9) which are to apply to all ESI funds and fund specific, general rules governing the two Structural Funds and the Cohesion Fund (articles 1, 2(4) and 4 and Part 3).
In relation to the Structural Funds, article 89 (the first in Part 3) identifies one mission and two goals to be pursued for the purpose of that mission.
The mission is stated in article 89(1): 89(1).
The Funds shall contribute to developing and pursuing the actions of the Union leading to strengthening of its economic, social and territorial cohesion in accordance with article 174 TFEU.
The actions supported by the Funds shall also contribute to the delivery of the Union strategy for smart, sustainable and inclusive growth.
The goals are defined as follows: 89(2).
For the purpose of the mission referred to in paragraph 1, the following goals shall be pursued: (a) Investment for growth and jobs in Member States and regions, to be supported by the Funds; and (b) European territorial cooperation, to be supported by the ERDF. 128.
The thematic objectives which under article 9 all ESI Funds should support do not alter or detract from the fund specific mission and goals identified in the case of the Structural Funds in Part 3.
On the contrary, article 9 makes clear that they are introduced in order to contribute to the Union strategy for smart, sustainable and inclusive growth as well as the Fund specific missions pursuant to their Treaty based objectives, including economic, social and territorial cohesion They represent, in short, ways in which the fund specific mission and goals may be promoted.
They are identified as strengthening research, technological development and innovation; enhancing access to, and use and quality of ICT; enhancing the competitiveness of SMEs and of the agricultural, fishery and aquaculture sectors; supporting the shift towards a low carbon economy; promoting climate change adaptation, risk prevention and management; preserving and protecting the environment and promoting resource efficiency; promoting sustainable transport and removing bottlenecks in key network infrastructures; promoting sustainable and quality employment and supporting labour mobility; promoting social inclusion, combating poverty and any discrimination; investing in education, training and vocational training for skills and lifelong learning; enhancing institutional capacity of public authorities and stakeholders and efficient public administration.
Article 9 concludes by stating that these thematic objectives are to be translated into priorities that are specific to each of the ESI Funds and are set out in the Fund specific rules. 129.
Article 91 provides that, for the purposes of the mission identified in article 89(1), the resources available for the Structural Funds and the Cohesion Fund are some 322,000m in 2011 prices, 96.33% (some 313,000m) of which is under article 92(1) for the growth and jobs goal, while only 2.75% is under article 92(9) for the territorial cooperation goal. 130.
Critically, for present purposes, article 90 introduces a new three fold categorisation for the period 2014 2020.
This is quite different from the categorisation used in the prior period 2007 2013.
It identifies less developed regions (those with less than 75% of the GDP of the now 27 Member States), transition regions (those with GDP between 75% and 90% of the average of the 27 Member States) and more developed regions (those with more than 90% of the average GDP of the 27 Member States).
Article 90(4) provides for the Commission to decide which regions fall within each category, by a list valid for the whole period 2014 2020. 131.
Further, a fixed percentage of the total resources of 313,000m available for the growth and jobs goal is under article 92(1) allocated to each of the defined categories of region viz 52.45% for less developed regions, 10.24% for transition regions and 15.67% for more developed regions (with 21.19% also going to the Cohesion Fund and 0.44% for additional funding for outermost regions).
The fixed nature of these allocations is identified in article 93.1: The total appropriations allocated to each Member State in respect of less developed regions, transition regions and more developed regions shall not be transferable between those categories of regions.
Article 93.2 gives Member States a very limited possibility of altering these fixed allocations.
It allows the Commission in duly justified circumstances which are linked to the implementation of one or more thematic objectives to accept a Member States proposal to transfer up to 3% of the total appropriation for a category of regions to other categories of regions. 132.
Annex VII prescribes the allocation method for each Member States entitlement in respect of less developed, transition and more developed regions (basically, in each case, the sum of allocations or shares calculated for each of its individual NUTS level 2 regions, on bases taking into account specified factors including GDP).
The total allocated to the United Kingdom for less developed regions was some 2.118 billion, for transition regions some 2.3266 billion and for more developed regions some 5.126 billion.
The Commissions calculations of individual regional needs are not published (though the parties have been able to work out what they approximately were), and they have no domestic application. 133.
The overall funds allocated to the United Kingdom for the period 2014 2020 were (after allowing for inflation) reduced by 5% compared with 2007 2013.
The Secretary of State was under article 93.2 permitted to transfer to the two less developed regions in the United Kingdom, that is Cornwall and the Scillys and West Wales and the Valleys, 3% of the budget which the EU had assigned to transition and more developed regions, and to split the amount so transferred between these two regions, achieving thereby an equal 16% cut in funding compared with the prior seven year period.
The Partnership Agreement 134.
Within the above parameters, it is for the United Kingdom to adopt national rules on the eligibility of expenditure (see Recital 61), by preparing a Partnership Agreement, to be approved by the Commission.
Partnership Agreement is defined in article 2 as: Partnership Agreement means a document prepared by a Member State with the involvement of partners in line with the multi level governance approach, which sets out that Member State's strategy, priorities and arrangements for using the ESI Funds in an effective and efficient way so as to pursue the Union strategy for smart, sustainable and inclusive growth, and which is approved by the Commission following assessment and dialogue with the Member State concerned. 135.
Article 4(4) and 5 provide: 4(4).
Member States, at the appropriate territorial level, in accordance with their institutional, legal and financial framework, and the bodies designated by them for that purpose shall be responsible for preparing and implementing programmes and carrying out their tasks, in partnership with the relevant partners referred to in article 5, in compliance with this Regulation and the Fund specific rules. 5(1).
For the Partnership Agreement and each programme, each Member State shall in accordance with its institutional and legal framework organise a partnership with the competent competent urban and other public authorities; regional and local authorities.
The partnership shall also include the following partners: (a) (b) economic and social partners; and (c) relevant bodies representing civil society, including environmental partners, non governmental organisations, and bodies responsible for promoting social inclusion, gender equality and non discrimination. 136.
Any Partnership Programme prepared for the purposes of articles 4(4) and 5(1) must self evidently comply with, and be prepared on the basis of considerations relevant to, the fund specific mission and goals of the regulation.
It must also comply with more general principles of European and domestic law, including those of equality and rationality.
The present challenges were brought at a stage when the programme submitted by the United Kingdom to the Commission had not yet been approved.
The Commission was kept informed about the challenge, but regarded it as an internal issue for the United Kingdom to resolve.
It stated that, if this Courts ruling required the United Kingdom Government to review the Partnership Agreement after it had been adopted, this could be done through the mechanism of article 16 of the regulation.
Article 16(4) enables a Member State to propose an amendment, whereupon the Commission will carry out a (re )assessment and, where appropriate, adopt a decision within three months.
In the event, the Commission has, since the oral hearing, issued a decision dated 29 October 2014 approving the Partnership Programme proposed by the United Kingdom.
Given the Commissions stance, the United Kingdom Government also, successfully, resisted a claim for disclosure of the communications between it and the Commission about the Partnership Agreement, as not relevant to any issue in this appeal. 137.
No submission has been made to the Supreme Court at any stage that the Commission should be regarded as the judge of the present challenge made to the Secretary of States decisions, or that any decision that the Commission might make, or has now made, approving the Partnership Programme in its present form has or could have any effect on the challenge, if otherwise valid, to such decisions.
Lord Sumptions statements in paras 10 and 24 of his judgment that the Commission is the mechanism of compliance envisaged in the Regulation is not based on any argument which was or could in the circumstances fairly be put before the Court.
I am also unable to accept the further assertion that the Commission is able to review the merits of the Secretary of States value judgments in a way that is beyond the institutional competence of any court.
There is no information at all whether or how the Commission has looked into the subject matter of the present challenges.
The suggestion that it is beyond the institutional competence of any court, let alone a national court to review the merits of the Secretary of States value judgments furthermore begs the question whether the appellants present challenges are to value judgments.
Courts, national and international, have a significant role in reviewing the conformity of administrative decisions with the legislative framework within which they are made.
It is their role to consider the relevance of the considerations on the basis of which such decisions are taken, and their compliance with fundamental principles of equality and rationality.
The Secretary of State and the Commission were both fulfilling administrative functions, the former at the national, the latter at a supranational level.
The issue in detail 138.
The critical issue on this appeal is whether the Secretary of States decisions were in conformity with the legislative framework.
The appellants case on this falls under three heads: (i) the Secretary of State was obliged when making such decisions to take as their basis the relative economic needs and disparities of the regions, but in fact reached the decisions on a different basis; (ii) the decisions were in breach of the general EU principle of equality; (iii) the decisions were in breach of the general EU principle of proportionality. 139.
In relation to (i), the Secretary of State accepts that the underlying purpose of Structural Funds is to reduce development disparities between regions and the Court of Appeal was, in my view correctly, content to assume that the objective of reducing economic disparities was a mandatory relevant consideration and that the Secretary of State was therefore required to have regard to the relative economic needs of the transition regions (para 88).
The fund specific mission of the Structural Funds is under article 89(1) of the regulation the strengthening of economic, social and territorial cohesion in accordance with article 174 TFEU.
This is to be pursued overwhelmingly through the goal of investment for growth and jobs (articles 89(2)(a) and 92(1) of the regulation) with reference to the specified thematic objectives set out in article 9 of the regulation. 140.
In relation to (ii), the Secretary of State accepts that the principle of equality applies.
The Court of Appeal stated the position before it as follows (para 65): 65.
The equal treatment principle requires that comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified: see, for example, the Arcelor Atlantique case [2008] ECR I 9895, para 23.
Justification is not in issue in this case.
Accordingly, the only question is whether there was a failure to treat like cases alike and unlike cases differently.
Later, in para 82, the Court of Appeal again noted that the Secretary of State does not rely on justification, but added: We acknowledge that, as a matter of legal analysis, there is a clear distinction between the fact of differential treatment and its justification.
But in the circumstances of this case, as is clear from the evidence of Dr Baxter the dividing line is not easy to maintain.
I will revert to Dr Baxters evidence later in this judgment. 141.
In relation to (iii), the Secretary of State submits and the Court of Appeal agreed that proportionality can add nothing to a challenge based on the principle of equality or rationality, in the absence of some specific legal standard in the light of which it can gain greater content.
This seems to me correct, and I shall proceed on that basis. 142.
With regard to the two principal grounds which are therefore open to the appellants, the Secretary of State submits that both the challenged decisions involved complex evaluative judgments, which can only attract what may be described as a light standard of review.
Referring to its previous decision in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437, [2012] QB 394, the Court of Appeal said (para 70) that: In principle, the more complex and the more judgment based the decision, the greater the margin of discretion [that] should be afforded to the decision maker.
That too is a proposition which I accept as relevant, in any context where different institutions of the State, the administration and the courts, have different institutional competence and the courts are asked to review the administrations decision making in an area which is with the administrations particular competence.
But that does not apply to, or exclude closer review of, a decision which is based on irrelevant considerations or fails to treat like cases alike.
Further, the lack of prior consultation with the appellants, or with Merseyside and South Yorkshire, and the informality of the process by which the Secretary of State made his decisions, take this case outside the most extreme category of cases in which courts have expressed reluctance judicially to review public funding decisions.
The first decision 143.
Against this background, it is necessary to examine more closely the Secretary of States two impugned decisions.
The first arose as follows.
During the period 2014 2020, the only less developed regions are the two former convergence regions.
Transition regions include not only the three former phasing out and phasing in regions, but also eight former competitiveness regions, including Northern Ireland.
The total EU funding for the ERDF and ESF was divided between the three categories of region as follows.
The total allocated to the United Kingdom for less developed regions was some 2.118 billion, for transition regions some 2.3266 billion and for more developed regions some 5.126 billion. 144.
The overall funds allocated to the United Kingdom for the period 2014 2020 were (after allowing for inflation) reduced by 5% compared with 2007 2013.
The Secretary of State was under article 93.2 permitted to transfer to the two less developed regions in the United Kingdom, that is Cornwall and the Scillys and West Wales and the Valleys, 3% of the budget which the EU had assigned to transition and more developed regions, and to split the amount so transferred between these two regions, achieving thereby an equal 16% cut in funding compared with the prior seven year period.
The Secretary of State then took the amounts allocated to each of the four territorial units making up the United Kingdom that is England, Wales, Scotland and Northern Ireland in the period 2007 2013 and determined that each such territorial unit should receive the same amount as in that period, less a 5% reduction. 145.
At this stage, Dr Baxter confirms in her first witness statement, that Ministers did not consider the split of funding within Scotland or England and that Ministers were aware that increasing the funding for the Devolved Administrations [ie in comparison with that which would have resulted from a region by region assessment] would mean less for certain regions in England, as allocations had to be made from a set budget category for each category of region.
However, it was decided that this would be dealt with at the next stage of the allocation process and that only the big picture within the UK would be looked at when trying to distribute the cut fairly between the UK nations. 146.
The first decision was taken after the Department of Business Innovation and Skills had calculated that an allocation to all United Kingdom regions on a basis similar to that used by the Commission to arrive at the figures set out in para 132 above would lead to England receiving 439m more than in the period 2007 2013, while Wales, Scotland and Northern Ireland would receive, respectively, 494m, 272m and 216m less. 147.
As a result of the first decision: (a) Northern Ireland, a unit consisting of one transition region which had previously been a competitiveness region, received the same as it had received both in 2013 and (because it had been receiving monies on a flat line basis) in each year during the period 2007 2013 less 5%. (b) Highlands & Islands received the yearly average of its total receipts during the period 2007 2013, less 5%.
This was effectively inevitable.
The only other regions in Scotland were competitiveness regions, and the Secretary of State was not likely to (and after discussion with the Scottish Ministers did not) increase their allocation in order to reduce that of Highlands & Islands. (c) The allocation for West Wales and the Valleys was set as described in para 144, with the effect of allocating to the one remaining Welsh region, East Wales, a more developed region, the whole of the remaining amount allocated to Wales.
The second decision 148.
The second decision arose as follows.
Within England there are in all nine transition regions.
Seven of these are former competitiveness regions, and two are former phasing in regions, Merseyside and South Yorkshire.
The Secretary of State determined that, taking the amount that each region has received in the year 2013 (not the annual average it had received over the whole period 2007 2013), each should receive a 20% uplift, reduced by 4.3% for technical assistance and for funding of the national offenders programme, making a final uplift of 15.7%.
Regions in the more developed category received a 5% uplift, reduced again by 4.3% making a 0.7% uplift, while Cornwall and the Scillys received a 16% reduction.
The effects of the two decisions 149.
The combined effect of the two decisions was that, while Northern Ireland was guaranteed an allocation based, albeit not exactly, on an assessment of its actual needs during the prior period and while Highlands & Islands would receive an allocation based on the average of its receipts as a transitional region over the whole of the prior period, Merseyside and South Yorkshire received an allocation which was, in contrast, not referable to any assessment of its actual needs or its average receipts during the prior period, but based on the average of the aid which had been estimated as required by competitiveness regions in the prior period (since that was the basis of Merseysides and South Yorkshires receipt of aid in the year 2013). 150.
By any measure of development and need, however, Merseyside and South Yorkshire still fall well below the average for competitiveness regions.
The indicators of economic development selected by the Government itself for allocating funding in 2007 2013 were per capita business expenditure on research and development, start ups, qualifications, GVA per workforce job, percentages of working age population unemployed or inactive, percentages of working age population without qualifications and with NVQ level 1 qualifications.
Applying such indicators, Merseyside and South Yorkshire are ranked third and sixth most deprived out of the total of 34 regions not falling into the convergence and phasing out categories in 2007 2013.
Using the Commissions methodology, Merseyside and South Yorkshire would have received about 315m and 236m respectively, while on the Governments current approach, they would receive only 202m and 178m respectively, in each case for the whole period 2014 2020.
It is common ground that, even on the basis of the calculation most favourable to the United Kingdom Government that the Secretary of State has been able to support, Merseyside and South Yorkshire would, if their entitlement during the period 2014 2020 were computed as if they had then been competitiveness regions, receive at least 10.3m and 24.1m more than they would be under the Governments present intended allocation.
They submit that the figures would be much greater.
GDP is not of course the only possible measure of any regions entitlement, and Lord Neuberger has identified variations in funding even between regions whose funding was arrived at on a comparable basis.
But the use of inconsistent bases to arrive at the level of funding is on its face likely to lead to distortions, unless it can be justified by considerations relevant under Regulation 1303/2013.
The combined effect of the two decisions was in my view to preclude this. 151.
The further combined effect of the two decisions is that Merseyside and South Yorkshire will as transition regions receive funding calculated, as a matter of substance, on a different basis from that received by other English transition regions which were formerly competitiveness regions.
First, by taking the year 2013 as the base for the seven former English competitiveness regions, the Secretary of State was taking as his base for those seven regions funding which applied in each of the years 2007 2013 and was calculated on a basis with a relationship to each such regions needs and characteristics.
Second, the 2013 base reflected in the case of the seven former competitiveness regions the Governments deliberate policy of favouring northern regions over southern regions, which it was free to adopt in the period 2007 2013 in relation to regions which fell in that period into the competitiveness category. 152.
In contrast, the 2013 base taken for Merseyside and South Yorkshire was derived from an average for United Kingdom competitiveness regions, which these two regions do not match.
Secondly, their 2013 base was pre determined by the EU by Regulation (EC) No 1083/2006.
It was not a figure which was (or could have been) uplifted to cater for the United Kingdom Government policy of favouring northern over southern regions.
Yet on the evidence Merseyside and South Yorkshire are among the neediest of northern regions. 153.
In the light of the above, the appellants are therefore right, I consider, when they observe that (a) the first decision committed a significant part of the transition funding to two particular transition regions (Northern Ireland and Highlands & Islands) on a basis which continued to give, subject only to a 5% reduction, the average level of funding received throughout the whole of the prior seven year period, (b) it did this without regard to the extent to which this would impact on the funding available for the new range of English transition regions (including seven former competitiveness regions) formed by the Commissions re categorisation of regions for the period 2014 2020 and (c) in reality there would be an adverse impact, since effectively preserving the pot for Northern Ireland and Highlands & Islands (less 5%) was bound to diminish the pot available for the nine English transition regions, including not only Merseyside and South Yorkshire, but also seven former competitiveness regions now entitled to enhanced funding as transition regions in the period 2014 2020.
Lord Sumptions contrary view in paras 35 and 50 ignores the reduced size of the pot for the new category of transition regions embracing seven former competitiveness regions, once the previous allocation to Northern Ireland and Highlands & Islands was effectively ring fenced (less 5%), compared with the average funding they received throughout the whole prior seven year period, by the Secretary of States first decision.
As to the second decision, the appellants are also right, in my opinion, in submitting that this allocated monies to Merseyside and South Yorkshire on a basis which, although superficially similar, was in fact fundamentally different from that applied to other English transition regions, as well as Northern Ireland and Highlands & Islands. 154.
In her first witness statement, Dr Baxter identified the reasons for dividing the United Kingdoms Structural Fund allocation between the four territories constituting the United Kingdom.
She stated that they were transparency, simplicity, consistency and a balance taking account of the status of the devolved administrations under the United Kingdoms constitutional settlement.
However, none of these reasons relates directly to the fund specific mission of strengthening economic and social cohesion and the reduction in that connection of development disparities between regions or indeed with delivery of the Union strategy for smart, sustainable and inclusive growth or the thematic objectives introduced to contribute thereto (see paras 126 128 above).
On the contrary, they involve an initial four way division, essentially for political reasons, which operates irrespective of the position in individual regions, and potentially and actually to the detriment of one or more English regions.
Dr Baxters witness statement effectively accepts this (para 145 above).
Regional disparities, and consideration of the mission and goal identified in article 89 of Regulation 1303/2013 were displaced by territorial and political considerations deriving from the United Kingdoms devolution settlements.
In so far as she goes on to suggest that any adverse effect would or might be addressed at the second stage of decision making, I have already noted in para 153(c) that this would not have been practicable and in any event it was not done. 155.
The Secretary of State seeks to make good this approach by reference to his view that there had been no significant change from the years 2006 2007 to the years 2013 2014 in the economic or other relevant differentials between different United Kingdom regions.
Lord Sumption endorses this response in para 35, as does Lord Neuberger in para 67.
But the response could only have been relevant, had the categorisation of and treatment of regions introduced by Regulation No 1303/2013 remained the same as it was in the previous period 2007 2013 under Regulation No 1083/2006.
This was not the case.
A division of total available funding between the four territories of the United Kingdom in the period 2014 2020 in the same totals (less 5%) as had applied throughout the whole period 2007 2013 was bound to lead to anomalies in the light of (a) the re categorisation of regions under Regulation No 1303/2013, (b) the recognition of seven former competitiveness regions as meriting enhanced treatment as transition regions, along with Merseyside and South Yorkshire, and (c) the different bases and levels of funding which different transition regions would necessarily enjoy in the period 2014 2020 compared with the period 2007 2013.
The consistency and balance involved in giving each devolved administration the same amount (less 5%) were in fact bound to lead to inconsistency and imbalance.
Two unlike situations (those existing in the periods 2007 2013 and 2014 2020) were treated alike, in a manner and with results that none of Dr Baxters four reasons justifies. 156.
Reference was made in argument to the Court of Justices decision in (Case C 428/07) R (Horvath) v Secretary of State for Environment, Food and Rural Affairs [2009] ECR I 6355.
But that decision turned on the constitutional settlement involved in devolution.
It was of its essence that the devolved administrations had under the relevant devolution arrangements the primary responsibility for implementing the common agricultural policy, and on that basis the Court of Justice held that divergences between the measures provided for by the various administrations cannot, alone, constitute discrimination (para 57).
In para 56 the Court distinguished discrimination resulting from a measure adopted by that Member State implementing a Community obligation, referring in this regard to its decision in Joined Cases 201/85 and 202/85.
Further, the relevant measure expressly required and permitted Member States to define, at national or regional level, minimum requirements for funding support, a provision which the court interpreted as expressly recognising the possibility for the Member States, to the extent authorised by their constitutional system or public law, to permit regional or local authorities to implement Community law measures, by defining such minimum requirements. 157.
The present case is critically different.
The Structural Funds are allocated to the United Kingdom, primarily to strengthen its social and economic cohesion.
The Secretary of State retains responsibility for the internal allocation of the Structural Funds within the United Kingdom.
That he consulted with the devolved administrations in relation to the decisions which he took does not affect this, or alter his duty to avoid discrimination between those affected by his decisions.
If he chose to divide up the total funding available between territories of the United Kingdom, he was obliged to do so in a way which was consistent with the fund specific mission of cohesion and the goal of growth and jobs set by Regulation No 1303/2013, and would lead to like cases being treated alike, and unlike cases differently, across the whole United Kingdom.
The mathematical division between the four territories of the funding allocated to the United Kingdom for the period 2014 2020 was, as noted in para 155 above, bound to lead to discrepancies detrimental to cohesion, in particular when arrived at in disregard of the re categorisation of regions effected by Regulation No 1303/2013. 158.
The appellants challenge to the Secretary of States decisions, on the basis of the discrepancies to which they lead between the bases of allocation to Merseyside and South Yorkshire and to other regions within the United Kingdom is, I consider, also made good.
All transition regions must in my view be regarded as comparable, and on this basis differences in treatment between them require to be considered and justified.
The Secretary of State appears to have foregone any case of justification in the courts below, but, even if justification is treated as a live issue or an issue which is in the present context inextricably linked with comparability, I do not consider that the difference in treatment has been shown to be legitimate. 159.
Merseyside and South Yorkshire were given an allocation which took as relevant funding they received in 2013 by reference to an average for competitiveness regions, which clearly did not reflect their position or needs.
Highlands & Islands on the other hand received funding based on the average of the tapered funding they received over the whole 2007 2013 period.
They were both transitional regions.
Their funding reduced in each case to the same level in 2013.
Highlands & Islands was admittedly a phasing out region, of whom it could be said that in 2006 their GDP had been less than 75% of that of the original 15 EU Member States.
This could not be said of Merseyside and South Yorkshire and they were only transitional regions because they had been Objective 1 regions in the period 2000 2006.
But, nevertheless, funding in the period 2007 2013 was in each case arranged on the basis that it reduced to the average for competitiveness regions by 2013.
There was no reason to assume, without analysis, that the needs of Highlands & Islands merited a complete preservation (subject only to a 5% reduction) of their average funding in the period 2007 2013, whereas Merseyside and South Yorkshire required no more than the preservation with a 15.7% uplift of their very low level funding in the year 2013, based on an average which did not on any view reflect their actual position.
There is (with respect to Lord Sumptions comment in para 42 about additional funding) no basis for concluding that Merseyside and South Yorkshire received (but Highlands & Islands did not) some sort of uncovenanted bonus through the higher early funding allocated to them during the prior period 2007 2013 which should now be carried forward as a form of debit to their account in respect of the period 2014 2020.
Differences in the co financing received in the period 2007 2013 between phasing out regions (which had only to find 33.33p for every pound of EU funding) and phasing in regions (which had to match EU funding pound for pound) play against rather than for continuing to award Highlands & Islands funding on a more favourable basis than Merseyside and South Yorkshire during the period 2014 2020 when both are now transition regions. 160.
Lord Sumptions reference to additional funding and much of paras 20, 28, 37 and 42 44 of his judgment are focused on a case which was originally advanced by the appellants that Merseyside and South Yorkshire should, like Highlands & Islands, have received funding by reference to an average of what they had received in the period 2007 2013.
However, save to highlight the obvious disparity with the funding of Highlands & Islands, the appellants in their case before the Supreme Court focused on the disparity arising from the use of the base year 2013.
In that respect, in my opinion, the appellants have made good their challenge to the Secretary of States decisions.
There was no good reason for awarding funding on the basis of the same 15.7% uplift over the 2013 level both in relation to English transition regions which had been competitiveness regions and to Merseyside and South Yorkshire which had not been, but whose funding in 2013 had been based on an average which did not reflect their actual position.
Contrary to Dr Baxters statement in para 54 of her first witness statement, the result was not to treat all English Transition regions in the same way, since the nature of the 2013 base differed significantly between them. 161.
Dr Baxter states, in her first witness statement, para 49, that attention was given to the possibility of using, indeed that Ministers did see a strong case for using, a basket of indicators based on the latest economic data to determine the allocations within England during the period 2014 2020, together with applying a suitable safety net.
She says that this option was rejected because it would have led to too great a shift of resources from north to south, and would have had to be countered by a safety net which, she suggests, would have taken one back to the present position.
But an assessment of actual development needs would have avoided the use of 2013 allocations as a base for transition regions, and would have meant that Merseyside and South Yorkshire would have been treated on the same basis as other English transition regions.
Further, in circumstances where, as a matter of general policy, a shift in funding from south to north was desired, that could and would then have been given effect in relation to all English regions, including Merseyside and South Yorkshire.
The actual basis of allocation fails to give Merseyside and South Yorkshire the benefit of any such policy.
Any additional safety net could also have been applied on a basis which affected all English transition regions in like fashion. 162.
In proceeding as he did, therefore, the Secretary of State in my view gave priority to irrelevant considerations (the maintenance in the period 2014 2020 of similar funding, less 5%, for each United Kingdom territory to that which obtained in the period 2007 2013, when the re categorisation of regions during the current period makes the comparison inappropriate), failed to treat like situations alike (although all were transition regions, Merseyside and South Yorkshire were treated quite differently from Northern Ireland and Highlands & Islands) and treated unlike situations alike (by taking 2013 as an appropriate base for funding for all English transition regions, although it had been arrived at in the case of Merseyside and South Yorkshire on a quite different basis bearing no relationship to their actual needs, in contrast to the basis on which it had been arrived at in the case of other transition regions).
Whether the matter is viewed under EU law or at common law, these are manifest flaws which are neither problems of value judgment nor fall within the margin of discretion undoubtedly due when value judgments are in issue. 163.
I would only add that, even if I had arrived at a different view with regard to the legitimacy of the first decision, the discrepancy in the bases on which funding was allocated to different English transition regions would still have led me to conclude that the second decision was illegitimate. 164.
I have also had the benefit of reading the judgment prepared by Lord Carnwath, who reaches the same conclusions as I do and with whose reasoning in paras 176 187 I find myself in substantial agreement. 165.
It follows that, in my opinion, the appeal should be allowed, and the Secretary of State required to reconsider and re determine the allocations between all the transition regions within the United Kingdom in the light of the guidance given in this judgment.
LORD CARNWATH: 166.
I agree with Lord Mance that this appeal should be allowed, substantially for the reasons given by him.
While I agree also with much of Lord Sumptions analysis, I am not persuaded that he provides an adequate answer to the essential complaints made by Mr Coppel QC.
In the circumstances I will confine myself to some comments on the correct general approach, and a short explanation of my reasons for disagreeing with the majority.
General approach 167.
Equal treatment and proportionality are of course well established principles of EU law, but they are not the starting point.
Whether under European or domestic law, such general principles have to be seen in the context of the legislative scheme in question.
I agree with the Court of Appeal (para 57) that these decisions were concerned with matters of broad economic, social and political judgment, for which the objectives were widely defined.
As they said, it is classic territory for affording the decision maker a wide margin of discretion (or appreciation), where the court should only interfere if satisfied that the decisions were manifestly inappropriate or manifestly wrong.
On the other hand, the lack of formality in the decision making process distinguishes the case, for example, from domestic authorities where public funding decisions have been subject to review in Parliament, and the courts have accordingly a very restrictive view of the scope for judicial review (see R v Secretary of State for Environment, Ex p Hammersmith and Fulham London Borough Council [1991] 1 AC 521). 168.
The Court of Appeal referred to the exhaustive review of the relevant European and domestic authorities by all three members of the Court of Appeal in R (Sinclair Collis Ltd) v Secretary of State for Health [2012] QB 169.
I do not find it necessary to analyse the differences of emphasis between the three judgments in that case, nor to enter into discussion about different formulations of the test.
I agree with Lord Neuberger of Abbotsbury MR (para 200): The breadth of the margin of appreciation in relation to any decision thus depends on the circumstances of the case and, in particular, on the identity of the decision maker, the nature of the decision, the reasons for the decision, and the effect of the decision.
Further, because the extent of the breadth cannot be expressed in arithmetical terms, it is not easy to describe in words which have the same meaning to everybody, the precise test to be applied to determine whether, in a particular case, a decision is outside the margin.
It is therefore unsurprising that in different judgments, the same expression is sometimes used to describe different things, and that sometimes different expressions are used to mean the same thing.
As the Court of Appeal said of the present case, the context is one where the treaty and the regulation together confer a wide area of policy choice on both the Commission and the member states, within the objectives set by them.
Further, since responsibility is shared between the European and national agencies, there is no reason for any material differences in the approach of the courts to their respective decisions. 170.
For similar reasons, it is unhelpful in the present context to look for a clear cut distinction between issues of comparability on the one hand and justification on the other.
As the regulation makes clear (and as Mr Coppel QC ultimately accepted), the Secretary of State had a wide discretion as to the factors he could properly take into account in comparing the various regions for the purpose of allocating funds.
This exercise cannot be equated to a simple comparison (as in R (Chester) v Secretary of State for Justice [2014] AC 271) between prisoners and non prisoners, or the issue of equality between men and women (specifically addressed in article 7 of the regulation). 171.
None of the cases relied on by Mr Coppel QC seems to me sufficiently close to the present context to advance his argument for a more stringent test.
For example he cites Franz Egenberger GmbH Molkerei und Trockenwerk v Bundesanstalt fr Landwirtschaft und Ernhrung (Case C 313/04) [2006] ECR I 6331 para 33, for the proposition that the general principle of equality requires that comparable situations must not be treated differently and different situations must not be treated alike unless such treatment is objectively justified.
The case itself related to the narrow issue of where applications for butter import licences should be lodged, and provides no assistance in the present case. 172.
The highpoint of his argument perhaps is in Socit Arcelor Atlantique et Lorraine v Premier Ministre (Case C 127/07) [2008] ECR I 9895, where the equal treatment principle was treated by the European court as applicable to a scheme for trading in greenhouse gas emission allowances.
The issue was whether that principle had been breached by a scheme which applied to the steel sector but not to the plastics or aluminium sectors (para 24).
The court accepted that the emissions from all these activities were in principle in a comparable situation, since they all contributed to greenhouse emissions and were capable of contributing to the functioning of a trading allowance scheme (para 34).
It went on, first, to accept that the different treatment had caused disadvantage to the steel sector (paras 42 44), but, secondly, to hold that it was justifiable (not manifestly less appropriate than other measures), taking account of the broad discretion allowed to the Commission (paras 57 59), and the difficulties of managing a novel and complex scheme with too great a number of participants (paras 60ff). 173.
The case offers some help to Mr Coppel QCs argument, to the extent that even in an area of broad policy discretion the court adopted a three stage analysis comparability, disadvantage, justification.
The margin of discretion was applied only at the last stage.
However, there the issue of comparability turned on a narrow view of the purpose of the scheme, which applied equally to all industrial emissions whatever the form of the industry.
There is no parallel with the much more varied objectives of the present scheme, which allow a broad discretion at all stages, and make it impossible to draw a meaningful distinction between comparability and justification. 174.
The Secretary of State no doubt needed to adopt rational and consistent criteria for his allocations, within the objectives set by the regulation, and he needed to be able to justify those criteria and their application as between the regions.
But nothing is gained for this purpose by treating justification as a separate stage in the legal analysis.
The court must look at the reasoning as a whole to decide whether it was affected by legal error, or otherwise manifestly inappropriate.
Issues of equal or unequal treatment and proportionality may play a part in that assessment, in both European and domestic law (see Kennedy v Charity Commission [2014] UKSC 20, [2014] 2 WLR 808, para 54, per Lord Mance). 175.
The danger of the formulaic approach advocated by Mr Coppel QC is that it may make it more difficult to separate the wood from the trees, and distract attention from the ultimate question, under EU law or domestic law: whether something has gone seriously wrong with the decision making process such as to justify the intervention of the court.
The two decisions 176.
It is unnecessary to repeat Lord Sumptions description of the two decisions.
The essential complaint against the first decision is simply stated.
The decision to start by dividing the UK allocation between the four jurisdictions had the effect of limiting the Secretary of States options to achieve fairness at the second stage, in a way which was not justified by anything in the scheme or objectives set out by the regulation. 177.
The complaint against the second decision turns on the adoption of 2013 as a base for all transition regions.
The appellant authorities from the two regions say that, by taking the 2013 figure as a base for all, the Secretary of State was not comparing like with like.
In the previous round all the other transition regions had been competitiveness regions, but their allocations had been determined by reference to their relative economic and social circumstances, rather than the application of a single formula, and the allocations were constant throughout the period.
By contrast the allocations of the two regions, as phasing in regions, had been determined, not by reference to their relative circumstances, but by a special formula set by the regulations; the last year was based on the national average for all competitiveness regions throughout the UK (regardless of relative strength).
That meant that their last year did not reflect either their own circumstances relative to the other transition regions, nor in particular the extra funding allowed to the north in the previous period, to reflect its greater development needs a balance which had not changed in the interim. 178.
This is explained most clearly in the evidence of Mr Eyres (para 33).
Although the precise methodology for calculating allocations to the competitiveness regions in the previous period had not been disclosed, the government had confirmed that it took account of the greater development needs of the North and Midlands, and, as he understood, it had used a basket of indicators reflecting the relative deprivation of those areas.
Had the allocations for 2013 been calculated on the same basis as the neighbouring regions they would have been allocated far in excess of the amounts resulting from the phasing in formula.
He adds (para 50(3)): The Secretary of State seems to assume that the additional, transitional funding was awarded between 2007 2010, leaving the funding for 2011, 2012 and 2013 as the correct funding allocation for Merseyside and South Yorkshire.
Yet this ignores the fact that the funds allocated in 2011, 2012 and 2013 were significantly below the level for Competitiveness regions in the North and Midlands, which had no protected status.
This is because the allocation for 2013 was based on the 'national average for Competitiveness regions and takes no account of the GDP and high levels of deprivation within individual Competitiveness regions in North and Midlands, including within Merseyside and South Yorkshire themselves (which the Government did take into account when making 2007 2013 allocations to Competiveness regions). 179.
In short, the appellants case can be reduced to two apparent anomalies which required explanation: (a) Alone of all the transition regions in the UK (including Highland & Islands, which had been also subject to a tapered funding regime in the previous period), the two regions were given no protection from a substantial reduction in funding (65%) as compared with the previous period taken as a whole; (b) Alone of all the English transition regions, their funding was fixed by reference to a base which had taken no account of their relative economic and other circumstances in the previous period.
I will take them in turn. 180.
The first, as respects the comparison with Highlands & Islands, was in large part attributable to the prior decision to adopt a two stage process.
In itself there could be no objection to the Secretary of State taking account of the territorial divisions and governance arrangements within the UK.
The provisions of the regulation confer a wide discretion on member states to take account of local structure at all levels.
Although the decisions on funding were not themselves devolved, the devolved administrations had a clear interest in the process, both as partners, and (presumably) as possible sources of co financing. 181.
I note also that no objection was taken on behalf of the two regions to the two stage process at the time of the first decision.
On the contrary Mr Eyres records (para 40) that the Mayor of Liverpool, as Chair also of the Liverpool partnership, wrote to the minister welcoming the decision to amend the EU formula to provide a 95% safety net for devolved areas provided the same principles were applied in England. 182.
However, the judge was wrong with respect to treat this as a socio economic decision by the Secretary of State which thereby absolved him of the need for further comparisons between different parts of the UK (para 72).
That would in my view be contrary to the scheme of the EU regulation (and indeed to the devolution settlement), which gives him responsibility for the fairness and consistency of the distribution as between all the regions in the UK, so far as not predetermined by the Commission.
Rightly, that was not how the case was argued by Mr Swift QC in the Court of Appeal or before us.
As has been seen, his submission, in substance accepted by the Court of Appeal, turned on lack of comparability between phasing in and phasing out regions. 183.
I agree that there were significant differences of detail between the two categories, as explained by Dr Baxter, although it is not clear why some of them were reasons for less favourable treatment for the two regions.
For example, the fact that the co financing regime was more onerous for them seems on its face a point going the other way.
However, none of these points addresses the main complaint.
The reasons which led the Secretary of State to include Highlands & Islands in the 95% safety net by reference to the 2007 2013 funding as a whole, were apparently no less applicable to the two regions.
That indeed was the point made by the Mayor of Liverpool at the time.
Conversely, the main reason which led the Secretary of State to treat the two regions differently in this respect from the other English transition regions (that is, the higher funding for 2007 2013 overall, tapered down to the average competitiveness level) was in principle no less applicable to Highlands & Islands. 184.
As Dr Baxter indicates, the Secretary of State was aware of this apparent discrepancy, but as far as Scotland was concerned he felt constrained (in practice if not in law) by the overall budget envelope that had already been set (para 62 of her witness statement).
The idea of a safety net for the two regions was rejected because of the negative impact on the other transition regions.
That with respect is little more than a statement of the obvious.
If I take from Peter to give to Paul, it will no doubt have an adverse impact on Peter, but that says nothing about the balance of fairness as between the two. 185.
Similar issues arise in respect of the second decision.
Viewed by reference simply to a comparison with the other English transition regions (and ignoring Highlands & Islands), he was entitled to take account of the different funding regime in the previous period.
Since the overall funding for the two regions in that period had been on a more generous basis than for the others, and since that was by definition special and transitional, there was no reason to carry it forward into the exercise for 2014 2020.
Furthermore, if their figure for 2013 had been related in some way to their own circumstances (as was the case with the other transition regions), it might have formed a suitable base for the subsequent period.
However, that was not the case.
The 2013 figure for the two regions (as for Highlands & Islands) reflected the average of all the former competitive regions, a category which had included even the most prosperous regions (that is, those now categorised as more developed). 186.
The Secretary of State was faced with a difficulty in that the transition regions were a new intermediate category, encompassing a relatively wide range of relative development (between 75% and 90% of the EU average).
Had his distribution been based, as in the previous period, on a comparison of economic or other factors, within the scope of the regulation, it would have been very difficult to challenge.
It is perhaps understandable that he preferred a more simple blanket approach to the new category, particularly as his view of the general economic balance had not changed.
However, that could only be justified if he took steps to ensure that the two regions were dealt with on a comparable basis.
His principal reason for his not doing so was, not a view as to the relative needs of the two regions as compared to the others, but again the negative impact for them of a 22% cut where they (and probably the Commission) had expected enhanced levels of funding.
This, by implication, assumed a finite budget for England, in effect predetermined by the first decision. 187.
I conclude that the criticisms made by the two regions of the decision making process, including both decisions, have not been satisfactorily answered.
I do so with some hesitation in view of the risk of over simplification of some very complex issues and material.
It matters not, in my view, whether this is expressed as an issue of unequal treatment or lack of proportionality under European law, or inconsistency and irrationality under domestic law, the anomalies are in my view sufficiently serious to have required explanation which has not been given, and which renders the resulting decisions manifestly inappropriate under EU and domestic principles. 394.
The term manifestly inappropriate in European jurisprudence was traced back by Arden LJ (para 115ff) to R v Minister for Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR I 4023, a case relating to decisions implementing the Common Agricultural Policy.
She showed that it has been treated as applicable also in appropriate cases to decisions of national legislatures or other decision makers (para 129).
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The European Union distributes money from European Structural Funds to Member States in order to promote the overall harmonious development of the EU and in particular to reduce disparities between the levels of development of the various regions and the backwardness of the least favoured regions (Article 174 TFEU).
Funds are allocated in seven year cycles.
The previous two rounds were for 2000 2006 and 2007 2013.
The most recent round was for 2014 2020 and took place pursuant to Regulation (EU) 1303/2013 (the 2013 Regulation).
Regions within Member States are classified based on the relationship between their GDP per head and the EU average, with different categories used in each round.
The European Commission notionally allocates funds to Member States according to a formula based on how many regions in each category they have, but there is no formula setting out how allocations are to be made within Member States.
That decision is jointly determined under a Partnership Agreement which must be proposed by the Member State and approved by the Commission.
In the UK this is the responsibility of the Respondent, the Secretary of State for Business, Innovation and Skills.
In 2000 2006, Merseyside and South Yorkshire were both Objective 1 regions, corresponding to the current less developed category, with a GDP per head less than 75% of the EU average.
They received the most generous level of funding under the UKs Partnership Agreement.
In 2007 2013, there were two principal categories, convergence regions (with a GDP per head less than 75% of the EU average), and competitiveness regions (with a GDP per head greater than 75% of the EU average).
However, the EU average GDP per head decreased due to the accession of 10 new Member States.
There were carved out of the category of competitiveness regions two special categories commonly referred to as phasing out and phasing in regions.
Phasing out regions were regions which would have been convergence regions but moved above the 75% threshold as a result of the reduction of the EU average.
Phasing in regions were regions which moved above the 75% threshold and would have done so in any event.
Merseyside and South Yorkshire were both phasing in regions in 2007 2013.
Highlands & Islands was a phasing out region.
In order to ease the transition to the higher category and the consequent reduction of support, both phasing in and phasing out regions were eligible for additional support from the Commission on a transitional and specific basis.
That support tapered down over the course of the seven year period to the national average level of support for competitiveness regions in 2013.
In 2014 2020, Merseyside and South Yorkshire became transition regions, with a GDP per head between 75% and 90% of the EU average.
The UK received 5% less money overall for 2014 2020 than it had for 2007 2013.
The Secretary of State had to decide how to allocate it.
First, he decided that each of the four countries comprising the UK would have its overall funding reduced by 5% compared with the previous period.
Northern Ireland, a single region, therefore had its funding cut by 5% altogether.
Second, he decided that each
English transition region would receive an allocation per year for 2014 2020 representing an increase of 15.7% on its allocation for 2013, the last year of the previous period.
For Merseyside and South Yorkshire, these decisions resulted in a 61% cut in funding altogether compared with the whole of the 2007 2013 period.
This was because the new allocations were based on allocations for 2013, and therefore took no account of the transitional funding received in the earlier period.
In Scotland, Highland & Islands had its funding cut by 5% altogether.
This was the result of a decision made by the Secretary of State in consultation with the Scottish Ministers.
The Commission has now approved the Secretary of States proposals.
The Appellants say that Merseyside and South Yorkshire have unfairly been treated differently from: (i) the non English transition regions of Northern Ireland and Highland & Islands; and (ii) other English transition regions.
Their arguments failed before Stewart J and in the Court of Appeal.
They now appeal to the Supreme Court.
The Court dismisses the appeal by a 4 3 majority (Lord Mance, Lord Carnwath and Lady Hale dissenting).
Lord Sumption and Lord Neuberger both give reasoned judgments for the majority.
Lord Hodge agrees with Lord Sumption and Lord Clarke agrees with both Lord Sumption and Lord Neuberger.
Lord Mance and Lord Carnwath give dissenting judgments.
Lady Hale agrees with Lord Mance and Lord Carnwath.
The majority judgments Lord Sumption notes that the allocation made by the Secretary of State is amenable to judicial review, but a court should be cautious about intervening because it: (i) was a discretionary decision of a kind courts have traditionally been reluctant to disturb; (ii) involved particularly delicate questions about the distribution of finite domestic and EU resources, in which the legitimacy of the decision making process depends to a high degree on ministers political accountability; and (iii) has been approved by the Commission [21 24].
Lord Neuberger agrees that this is classic territory where executive decisions should be afforded a wide margin of discretion, but emphasises that the fact that a matter is one for democratic decision does not remove the need for judicial oversight [61 65].
Lord Sumption holds that the ultimate question for the court is whether there is enough of a relevant difference between Merseyside and South Yorkshire on the one hand and the remaining transition regions on the other to justify any difference in treatment [25 29].
Lord Neuberger analyses the Appellants objections as comprising two procedural attacks and two outcome attacks [52 60].
As to the first decision, to allocate to each of the UKs four countries 95% of what they had received for the previous period, Lord Sumption says that the Secretary of State did not unjustifiably discriminate.
He was entitled to have regard to the constitutional settlement as between the component countries of the United Kingdom; nothing suggested that any countrys position had significantly changed since the last allocation; and a decision based on broad qualitative considerations rather than purely GDP per head is consistent with the 2013 Regulation [30 36].
Lord Neuberger agrees that it was procedurally legitimate for the Secretary of State to take into account the increasingly decentralised nature of UK administration and the political realities of devolution [75 78].
The disparities in outcome between Merseyside and South Yorkshire on the one hand and Highland & Islands and Northern Ireland on the other give pause for thought, but, bearing in mind the Secretary of States margin of discretion and the relevance of factors other than GDP per head, those disparities do not make the decision unlawful [87 99].
As to the second decision, to use 2013 as a baseline for the 2014 2020 allocations for English transition regions, Lord Sumption and Lord Neuberger both point out that the additional funding given to Merseyside and South Yorkshire in the previous period was transitional and specific and provided to smooth the passage to their being treated as competitiveness regions, so that basing the 2014 2020 allocations on their average allocations for the whole of 2007 2013 would have continued
the impact of that funding beyond the period envisaged [37 44, 80 83].
For Lord Neuberger, there is force to the point that the use of the 2013 baseline deprives Merseyside and South Yorkshire of the uplift given to other northern regions, but this is outweighed by the discretionary and complex context and the legitimacy of the Secretary of States goals [84 85].
As a matter of outcome, he notes that other English transition regions received varying amounts unrelated to their GDP per head and that some allocations were less than or comparable to those of Merseyside and South Yorkshire [100 108].
Overall the Secretary of States approach is less considered and consultative than one would have hoped, but not unlawful [109 111].
The minority judgments Lord Mance and Lord Carnwath observe that the principle that a greater margin of discretion should be afforded where a decision is complex and judgment based does not exclude closer review of a decision which is based on irrelevant considerations or fails to treat like cases alike, particularly in light of the informality of the decision making process and (per Lord Mance) the lack of consultation in this case [142, 167].
Lord Mance explains that the combined effect of the two decisions was that Northern Ireland was guaranteed an allocation based on an assessment of its actual needs over the prior period, Highland & Islands received an allocation based on the average of its receipts as a transition region throughout the prior period, and the other English transition regions received allocations based on previous allocations calculated on the basis of each regions needs, including uplifts for northern regions.
Merseyside and South Yorkshire, by contrast, received allocations without any uplift and not referable to any assessment of their actual needs or receipts over the prior period, even though by any measure they still fall well below the competitiveness region average [149 152].
The Secretary of States decision was unlawful because he took irrelevant considerations into account and treated like cases unalike and unlike cases alike [162].
Lord Carnwath agrees with Lord Mance [166].
He considers it illogical to deny to Merseyside and South Yorkshire the safety net protection given to Highland & Islands on the basis that it would lead to a 22% cut for the other English transition regions [180 186].
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The wedding of the Duke and Duchess of Cambridge on 29 April 2011 attracted vast public interest nationally and internationally.
Managing the crowds presented the Metropolitan Police with a big challenge.
In giving the judgment of the Administrative Court, [2012] EWHC 1947 (Admin), Richards LJ explained the nature of the policing operation, its command structure and planning, in considerable detail.
This was necessary because at the heart of the claims made against the police in these proceedings was a broad challenge that the planning and execution of the policing operation did not make proper allowance for the democratic rights of anti monarchist protestors to express their views in a peaceable way.
For present purposes, the background and circumstances giving rise to the claims may be outlined more shortly.
The police were aware that on the day of the wedding a large number of members of the Royal Family, foreign royalty and other heads of state would be moving around London and that thousands of citizens including children were expected to converge on central London to take part in the days celebrations.
One month earlier, on 26 March 2011, a day of action organised by the TUC had been marred by the actions of outsiders who used the occasion to commit various offences of violence.
There had been similar violent disruption of student protests in November and December 2010, including an attack on the Prince of Waless car.
In the build up to the royal wedding, the police had intelligence that activities aimed at disrupting the celebrations were being planned through social websites.
The threat level from international terrorism at the time was assessed as severe, meaning that an attempted attack was thought to be highly likely.
Thousands of police officers were deployed across the metropolis.
The strategic aims, as set out in briefing materials prepared by the Gold commander with overall responsibility for the safe policing of the event, included to provide a lawful and proportionate policing response to protest, balancing the needs and rights of protesters with those impacted by the protest and to maintain public order.
The same aims were reflected in tactical operational plans prepared by subordinate commanders.
The four appellants were part of a larger group of claimants, but it was agreed before the Court of Appeal that their cases should be treated as test cases.
They were arrested in separate incidents at various places in central London on the grounds that their arrest was reasonably believed by the arresting officers to be necessary to prevent an imminent breach of the peace.
They were taken to four different police stations and later released without charge, once the wedding was over and the police considered that the risk of a breach of the peace had passed.
Their periods of custody ranged from about 2 hours to 5 hours.
The power of the police, or any other citizen, to carry out an arrest to prevent an imminent breach of the peace is ancient, but it remains as relevant today as in times past.
The leading domestic authorities on the subject are the decisions of the House of Lords in Albert v Lavin [1982] AC 546 and R (Laporte) v Chief Constable of Gloucestershire Constabulary [2007] 2 AC 105.
There are important safeguards for the citizen, in order to prevent breach of the peace powers from becoming a recipe for officious and unjustified intervention in other peoples affairs (in Lord Rodgers words in Laporte, at para 62).
The essence of a breach of the peace is violence.
The power to arrest to prevent a breach of the peace which has not yet occurred is confined to a situation in which the person making the arrest reasonably believes that a breach of the peace is likely to occur in the near future (quoting again from Lord Rodger in Laporte, at para 62).
And even where that is so, there may be other ways of preventing its occurrence than by making an arrest; there is only a power of arrest if it is a necessary and proportionate response to the risk.
The Administrative Court rejected the broad complaint that the police adopted an unlawful policy for the policing of the royal wedding.
After close examination of the facts of the individual arrests, it also held that the arresting officers had good grounds to believe that the arrests were necessary in order to prevent the likelihood of an imminent breach of the peace.
It dismissed as unrealistic the argument that lesser measures would have been adequate to meet the degree of risk.
Continuous police supervision was not a feasible option, given the many demands on police resources.
The claims that the police acted unlawfully as a matter of domestic law therefore failed.
Article 5
The appellants also alleged that their detention violated their rights under article 5 of the European Convention on Human Rights, and on this issue alone they were given permission to appeal to the Court of Appeal and subsequently to this court.
The material parts of article 5 for present purposes are the following: 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 arrest or detention of a person for non (b) compliance with the lawful order of a court or in order to secure the fulfilment of any obligation prescribed by law; (c) the lawful arrest or detention of a person effected for the purpose of bringing him before the competent legal authority on reasonable suspicion of having committed an offence or when it is reasonably considered necessary to prevent his committing an offence or fleeing after having done so; 3.
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. 4.
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. 5.
Everyone who has been the victim of arrest or detention in contravention of the provisions of this Article shall have an enforceable right to compensation.
Decision of the Administrative Court
The Administrative Court interpreted the phrase effected for the purpose of bringing him before the competent legal authority in article 5.1(c) as limited in its application to the words immediately following it, that is, for the purpose of bringing the person concerned before the court on reasonable suspicion of having committed an offence, and not applying where the purpose of the arrest was to prevent the commission of an offence.
The court considered that this was the more natural reading of the wording, and that the Strasbourg case law on the point was inconclusive.
For the purposes of the Convention a breach of the peace counts as an offence, despite it not being classified as an offence under English law: Steel v United Kingdom (1998) 28 EHRR 603, paras 46 to 49.
The Administrative Court therefore concluded that the arrests conformed with article 5.1(c).
The police also relied on the wording of article 5.1(b).
Richards LJ commented that that the wording seemed ill suited on its face to cover arrest and detention for the purpose of preventing a future, albeit imminent, breach of the peace, but that it was unnecessary for the court to decide the point and better not to do so: para 187.
Decision of the Court of Appeal
The Court of Appeal agreed with the decision of the Administrative Court in a judgment given by Maurice Kay LJ, [2014] 1 WLR 2152, but not with its reasoning.
The Court of Appeal was strongly influenced by the judgment of the Strasbourg court in Ostendorf v Germany (2013) 34 BHRC 738, which post dated the decision of the Administrative Court.
The Court of Appeal held that it was well established in the Strasbourg jurisprudence that the words for the purpose of bringing him before the competent legal authority govern all the limbs of article 5.1(c) and that English courts should accept that interpretation.
However, it declined to follow the majority view in Ostendorf that article 5.1(c) was incapable of authorising purely preventive detention, notwithstanding the existence of good grounds to believe an offence to be imminent, and that the person concerned must be suspected of having already committed a criminal offence.
On the facts, the Court of Appeal concluded that it was an irresistible inference that the officers who arrested and detained the [appellants] appreciated that, if only by reference to domestic law, the [appellants] could not be lawfully detained beyond the point at which it was reasonably practicable to take them before the magistrates court: para 85.
The court also inferred that as things were in central London on the day of the royal wedding it would not have been practicable to take the appellants before a magistrates court before they were released, but that they would have been taken to court if the situation had deteriorated to the extent that it was necessary to continue their detention to a point in time when it would have been practicable to do so.
The court therefore concluded that that the appellants were arrested and detained for the purpose of bringing [them] before the competent legal authority, if that were to become necessary, so as to prolong their detention on a lawful basis: para 86.
As to article 5.1(b), the Court of Appeal observed that the decision of the majority in Ostendorf had strengthened the argument advanced by the police (para 90), but considered it unnecessary to reach a conclusion on that issue.
The appellants argue that the Court of Appeal was wrong not to follow the interpretation of article 5.1(c) by the Strasbourg court in Ostendorf, and that the process of reasoning by which the Court of Appeal arrived at its finding that the appellants were detained for the purpose of bringing them before the court was artificial and contrived.
They submit that it was plain from the evidence as a whole that the purpose of the appellants arrest and detention was purely preventive.
They also submit that article 5.1(b) was not applicable even on the approach taken by the court in Ostendorf.
The police argue that the Court of Appeal was right to hold that there was a contingent purpose to bring the appellants before the court sufficient to satisfy the requirements of article 5.1(c) and that the appellants detention was also justified under article 5.1(b).
Strasbourg case law
Lawless v Ireland (No 3) (1961) 1 EHRR 15 concerned the internment without trial of IRA members by the Irish government.
The applicant was detained for five months, without being brought before a judge, under legislation which gave to ministers special powers of detention without trial, whenever the government published a proclamation that the powers were necessary to secure the preservation of peace and order.
The government argued that such detention was permitted by the second limb of article 5.1(c), which was not qualified by the words for the purpose of bringing him before the competent legal authority and therefore was also not within article 5.3.
The court rejected this argument, noting that in the French text there is a comma after the passage up to for the purpose of bringing him before the competent legal authority (en vue dtre conduit devant lautorit judiciaire comptente), meaning that this passage qualifies all the categories after the comma.
The court also said (at para 14) that the governments interpretation would permit the arrest and detention of a person suspected of an intent to commit an offence for an unlimited period on the strength merely of an executive decision, and that this, with its implications of arbitrary power, would lead to conclusions repugnant to the fundamental principles of the Convention.
I interpose that two linked points are important to note: the reference to the potential for unlimited detention without judicial oversight and the fundamental objectionableness of arbitrary detention.
The court held that the expression effected for the purpose of bringing him before the competent legal authority qualified every category of arrest or detention referred to in article 5.1(c), and the clause therefore permitted deprivation of liberty only when such deprivation is effected for the purpose of bringing the person arrested or detained before the competent judicial authority, irrespective of whether such person is a person who is reasonably suspected of having committed an offence, or a person whom it is reasonably considered necessary to restrain from committing an offence, or a person whom it is reasonably considered necessary to restrain from absconding after having committed an offence.
The court further held that the purpose of bringing the person before the court might, depending on the circumstances, be either for the purpose of examining the question of deprivation of liberty or for the purpose of deciding on the merits (para 14).
In Brogan v United Kingdom (1988) 11 EHRR 117, the four applicants were arrested and detained under prevention of terrorism legislation on suspicion of being concerned in the commission, preparation or instigation of acts of terrorism.
They were released without charge after periods between four and six days and without having been brought before a magistrate.
The court held that in each case there had been a violation of article 5.3 but not article 5.1.
The court accepted that there was an intention to bring them before a court if sufficient and usable evidence had been obtained during the police investigation following their arrest, and that this was sufficient to satisfy the requirement in article 5.1(c) that the detention was for the purpose of bringing them before the court.
There was no reason to believe that the police investigation was not in good faith or that their detention was for any other reason than to further the investigation by confirming or dispelling the suspicions which grounded their arrest.
In other words, the police were not required to intend to take the applicants to court in the event of there being insufficient evidence after investigation to proceed against them.
In Jecius v Lithuania (2000) 35 EHRR 16, the applicant complained of violation of his article 5 rights in successive periods of detention.
The first period of five weeks was under a broad provision of the criminal code which permitted preventive detention in connection with banditry, criminal association or terrorising a person.
During that period no investigation was carried out and no charge was made.
In holding that preventive detention of the kind found in that case was not permitted by article 5.1(c), the court stated that a person may be detained under that clause only in the context of criminal proceedings for the purpose of bringing him before the competent legal authority on suspicion of his having committed an offence (para 50).
However, as the Court of Appeal observed in this case (para 61), that was plainly not a complete statement of article 5.1(c).
Nicol and Selvanayagam v United Kingdom, (Application No 32213/96) 11 January 2001, provides an example of a case where the court recognised that article 5.1(c) embraces different sets of circumstances.
The applicants took part in an anti fishing protest at an angling match on 28 May 1994.
Their aim was to sabotage the match by throwing twigs in the water close to the anglers hooks so as to disturb the surface, while other protestors sounded horns to frighten the fish.
When they refused to stop, they were arrested.
The custody record gave the reason for their initial detention as to allow a period of calming, and to determine method of processing.
They were later kept in custody in order to take them before the magistrates for the purpose of being bound over to keep the peace.
The court found that their complaint under article 5.1 was manifestly unfounded.
It said that their initial detention was to prevent them from committing an offence and their continued detention was for the purpose of bringing them before the court on suspicion of having committed an offence.
Both the initial arrest and their subsequent detention were therefore compatible with article 5.1(c).
Most recently, Ostendorf raised parallel issues to those in the present case.
The applicant was known to the police as a suspected football hooligan and gang leader.
He travelled by train from Bremen to Frankfurt to attend a match with 30 to 40 other fans, most of whom were known to the police and considered to be hooligans prepared to use violence.
The group went under police surveillance to a pub.
They were told that they would be escorted to the football ground and that any member leaving the group would be arrested.
At the pub the applicant was seen talking to a member of a rival hooligan group.
He remained in the pub when the rest of his group left and was discovered by the police hidden in a locked cubicle in the ladies bathroom.
He gave no plausible explanation why he was there.
The police reasonably concluded that he was trying to evade police surveillance and that he was planning violence.
He was arrested under public security legislation which permitted the police to take a person into custody if necessary to prevent the imminent commission of a criminal or regulatory offence of considerable importance to the general public.
He was taken to a police station and released one hour after the game finished, when it was considered that the risk of violence had passed.
He complained that his arrest and detention violated his rights under article 5.
The Strasbourg court (Fifth Section) unanimously rejected his complaint.
The following paragraph in the leading judgment merits citation in full, not only because it states a central principle but also because it has a direct resonance in the present case: 88.
The court is aware of the importance, in the German legal system, of preventive police custody in order to avert dangers to the life and limb of potential victims or significant material damage, in particular, in situations involving the policing of large groups of people during mass events It reiterates that article 5 cannot be interpreted in such a way as to make it impracticable for the police to fulfil their duties of maintaining order and protecting the public provided that they comply with the underlying principle of article 5, which is to protect the individual from arbitrariness (see Austin v UK (2012) 32 BHRC 618 at para 56).
The court was divided on how to implement that principle.
The majority held that the applicants detention was permitted under article 5.1(b) but not under article 5.1(c).
Conversely, the minority were for holding that it was permitted under article 5.1(c) but not under article 5.1(b).
As to article 5.1(c), the majority held (at paras 82 to 86) that the second part (when it is reasonably considered necessary to prevent his committing an offence) only covers pre trial detention, and not custody for preventive purposes without the person concerned being suspected of having already committed an offence.
Moreover, it held that the purpose of bringing the person before a court must be for the purpose of trial, and not just for the purpose of determining the legality of his preventive detention.
The majority sought to answer the governments argument that on this analysis the second part would add nothing to the first, saying that it was not superfluous since it could cover the detention of a person who had already committed preparatory acts which were themselves punishable in order to prevent him from going on to commit the full offence.
However, that does not fully meet the point, for in the hypothetical case postulated by the majority the applicant would already be suspected of having committed an offence, for which he could be detained under the first part of article 5.1(c).
The minority (Judges Lemmens and Jaderblom) considered that the case law to the effect that preventive detention under article 5.1(c) was permissible only in the context of criminal proceedings, for the purpose of bringing [a person] before the competent legal authority on suspicion of his having committed an offence (Jecius v Lithuania at para 50), derogated without any specific explanation from what the court stated in Lawless, and that it went too far.
In Lawless the court recognised that article 5.1(c) covered three different types of situation.
The judgment in Lawless stated (para 14) that the clause had to be construed in conjunction with article 5.3, with which it formed a whole; and that the obligation to bring a person arrested or detained in any of the circumstances contemplated by article 5.1(c) was for the purpose of examining the question of deprivation of liberty or for the purpose of deciding on the merits.
The minority in Ostendorf said that later case law had unduly restricted the purpose of bringing the detainee before the court to deciding on the merits and had done away with the possible purpose of examining the question of deprivation of liberty.
They favoured returning to Lawless, which did more justice to prevention as a possible justification for a deprivation of liberty than the interpretation followed by the majority.
They said at para 5 of their judgment: An early, prompt release, without any appearance before a judge or judicial officer, may occur frequently in cases of administrative detention for preventive purposes.
Even so, in such a situation it will be enough for the purpose of guaranteeing the rights inherent in article 5 of the convention if the lawfulness of the detention can subsequently be challenged and decided by a court.
Applying that approach to the facts, the minority said that the applicant was detained in order to prevent a brawl in connection with a football match.
They were of the opinion that the police, faced with the situation of a large football event with the assembly of many aggressive supporters in which the applicant appeared and, as assessed by the authorities, planned to instigate fights, could reasonably consider it necessary to arrest and detain him.
He was detained for approximately four hours.
It did not appear that this period exceeded what was required in order to prevent the applicant from fulfilling his intentions.
For those reasons they concluded that his arrest and detention were justifiable under article 5.1(c).
As to article 5.1(b), it is well established in the Strasbourg case law that an obligation prescribed by law within the meaning of the paragraph must be concrete and specific and that a general obligation to comply with the criminal law will not suffice: see, for example, Schwabe v Germany (2011) 59 EHRR 28, paras 70 and 73.
The majority found that the requirement of specificity was satisfied on the facts because the obligation whose fulfilment was secured by the applicants detention was not to arrange a brawl between Bremen and Frankfurt hooligans in the hours before, during and after the football match in the vicinity of Frankfurt.
In the case of a negative obligation, it was necessary and sufficient to show that the applicant had taken clear and positive steps which indicated that he would not fulfil the obligation.
For this purpose it was necessary that the person concerned was made aware of the specific act which he or she was to refrain from committing, and that the person showed himself or herself not willing to refrain from doing so (as the applicant had done by ignoring a police warning).
They added that in the case of a duty not to commit a specific offence at a certain time and place, the obligation must be considered as having been fulfilled for the purposes of article 5.1(b) at the latest at the time when it ceased to exist by lapse of the time at which the offence at issue was to take place.
Judges Lemmens and Jaderblom disagreed, because the legislation under which the applicant was arrested did not specify any obligation which he failed to fulfil.
Although the police specifically ordered him to stay with his group of fans, the statutory obligation not to commit criminal or regulatory offences was in the view of the minority too general for the purpose of article 5.1(b).
The cases on the subject all concerned obligations to perform specific acts.
Things might have been different if the applicant had been the subject of a specific banning order, but that was not the case.
His only legal obligation was the general obligation not to commit certain crimes or regulatory offences.
That general obligation did not become specific and concrete merely because he was reminded of it in the context of a specific football match.
Analysis
The fundamental principle underlying article 5 is the need to protect the individual from arbitrary detention, and an essential part of that protection is timely judicial control, but at the same time article 5 must not be interpreted in such a way as would make it impracticable for the police to perform their duty to maintain public order and protect the lives and property of others.
These twin requirements are not contradictory but complementary, and this is reflected in the statement in Ostendorf cited at para 22 above.
In balancing these twin considerations it is necessary to keep a grasp of reality and the practical implications.
Indeed, this is central to the principle of proportionality, which is not only embedded in article 5 but is part of the common law relating to arrest for breach of the peace.
In Austin v Commissioner of Police of the Metropolis [2009] 1 AC 564 Lord Hope made the point at para 34: I would hold that there is room, even in the case of fundamental rights as to whose application no restriction or limitation is permitted by the Convention, for a pragmatic approach to be taken which takes full account of all the circumstances.
No reference is made in article 5 to the interests of public safety or the protection of public order as one of the cases in which a person may be deprived of his liberty But the importance that must be attached in the context of article 5 to measures taken in the interests of public safety is indicated by article 2 of the Convention, as the lives of persons affected by mob violence may be at risk if measures of crowd control cannot be adopted by the police.
This is a situation where a search for a fair balance is necessary if these competing fundamental rights are to be reconciled with each other.
The ambit that is given to article 5 as to measures of crowd control must, of course, take account of the rights of the individual as well as the interests of the community.
So any steps that are taken must be resorted to in good faith and must be proportionate to the situation which has made the measures necessary.
In this case there was nothing arbitrary about the decisions to arrest, detain and release the appellants.
They were taken in good faith and were proportionate to the situation.
If the police cannot lawfully arrest and detain a person for a relatively short time (too short for it to be practical to take the person before a court) in circumstances where this is reasonably considered to be necessary for the purpose of preventing imminent violence, the practical consequence would be to hamper severely their ability to carry out the difficult task of maintaining public order and safety at mass public events.
This would run counter to the fundamental principles previously identified.
There is, however, a difficult question of law as to how such preventive power can be accommodated within article 5.
The Strasbourg case law on the point is not clear and settled, as is evident from the division of opinions within the Fifth Section in Ostendorf.
Moreover, while this court must take into account the Strasbourg case law, in the final analysis it has a judicial choice to make.
The view of the minority in Ostendorf, that article 5.1(c) is capable of applying in a case of detention for preventive purposes followed by early release (that is, before the person could practicably be brought before a court), is in my opinion correct for a number of reasons.
In the first place I agree with the Administrative Court that the situation fits more naturally within the language of article 5.1(c) than 5.1(b).
On its plain wording article 5.1(c) covers three types of case, the second being when the arrest or detention of a person is reasonably considered necessary to prevent his committing an offence.
There is force in the argument that the interpretation adopted by the majority in Ostendorf collapses the second into the first (reasonable suspicion of having committed an offence) and is inconsistent with Lawless.
It is accepted by the police that English courts should treat Lawless as authoritative, but in that case the court was not concerned with a situation in which the police had every reason to anticipate that the risk necessitating the persons arrest would pass in a relatively short time and there was every likelihood of it ending before the person could as a matter of practicality be brought before a court.
It would be perverse if it were the law that in such circumstances, in order to be lawfully able to detain the person so as to prevent their imminently committing an offence, the police must harbour a purpose of continuing the detention, after the risk had passed, until such time as the person could be brought before a court with a view to being bound over to keep the peace in future.
This would lengthen the period of detention and place an unnecessary burden on court time and police resources.
Some analogy may be drawn with Brogan, in which the court rejected the argument that at the time of the arrest the police must intend to take the arrested person before the court willy nilly, regardless of whether on investigation there was cause to do so.
In order to make coherent sense and achieve the fundamental purpose of article 5, I would read the qualification on the power of arrest or detention under article 5.1(c), contained in the words for the purpose of bringing him before the competent legal authority, as implicitly dependent on the cause for detention continuing long enough for the person to be brought before the court.
I agree therefore with Judges Lemmens and Jederblom in para 5 of their judgment in Ostendorf (cited at para 25 above) that in the case of an early release from detention for preventive purposes, it is enough for guaranteeing the rights inherent in article 5 if the lawfulness of the detention can subsequently be challenged and decided by a court.
I prefer to put the matter that way, rather than as the Court of Appeal did by inferring the existence of a conditional purpose ab initio to take the appellants before the court, although it makes no difference to the result.
I have no disagreement with the Court of Appeal that the appellants would have been brought before a court to determine the legality of their continued detention, if it had been considered necessary to detain them long enough for this to happen.
The case would then have been materially similar to Nicol and Selvanayagam, where the applicants initial detention was preventive and they were later kept in custody and brought before the court to be bound over.
It would be contrary to the spirit and underlying objective of article 5 if the appellants early release placed them in a stronger position to complain of a breach of article 5 than if it had been decided to detain them for longer in order to take them before magistrates to be bound over.
As to article 5.1(b), I am inclined to the same view as the minority in Ostendorf that the obligation has to be much more specific than a general obligation not to commit a criminal offence (or, in this case, a breach of the peace), and that such a general obligation does not acquire the necessary degree of specificity by focusing narrowly on the particular facts or by the person concerned being given a reminder of it in specific circumstances.
There are also practical considerations.
The police may find it necessary to take action to prevent an imminent breach of the peace in circumstances where there is not sufficient time to give a warning.
An example might be a football match where two unruly groups collide and the police see no alternative but to detain them, or the ringleaders on both sides, immediately for what may be quite a short time.
In summary, I would be concerned that in stretching article 5.1(b) beyond its previously recognised ambit the majority found it necessary to impose limitations which in another case might leave the police effectively powerless to step in for the protection of the public.
Conclusion
I would uphold the decision of the lower courts that the appellants arrests and detention were lawful under article 5.1(c) and dismiss the appeals.
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This appeal concerns the arrest and detention of four individuals on 29 April 2011, the day of the wedding of the Duke and Duchess of Cambridge.
The appellants were part of a larger group of claimants but it was agreed before the Court of Appeal that their cases should be treated as test cases [1, 3].
The appellants were arrested in separate incidents at various places in central London on the grounds that their arrest was reasonably believed to be necessary to prevent an imminent breach of the peace.
They were all released without charge once the wedding was over and the police considered the risk of a breach of the peace had been passed.
Their period of custody ranged from 2.5 to 5.5 hours [3].
Complaints regarding the lawfulness of the policy for the policing of the royal wedding and the grounds for, and necessity of, the appellants arrest were dismissed by the Administrative Court and these issues were not in dispute on appeal [5].
The appellants also alleged that their detention violated their rights under article 5 of the European Convention on Human Rights which provides that no one shall be deprived of their liberty save in the certain specific circumstances provided for in subsection (1).
The police argued that the appellants detention was lawful under article 5(1)(b), which allows for the lawful detention of a person in order to secure the fulfilment of any obligation prescribed by law, or under article 5(1)(c), which allows for the detention of a person for the purpose of bringing him before the competent legal authority on reasonable suspicion of having committed an offence or when it is reasonably considered necessary to prevent his committing an offence or fleeing after having done so.
For the purposes of article 5 a breach of the peace counts as an offence, despite not being classified as an offence under English law [8].
The Administrative Court found that the appellants arrest and detention were lawful under article 5(1)(c).
It interpreted the phrase effected for the purpose of bringing him before the competent legal authority as applicable only where the purpose of the arrest was to bring the person before the court on reasonable suspicion of having committed an offence and not where the purpose of the arrest was to prevent a commission of an offence [8].
It felt it was therefore unnecessary to determine whether the arrest was lawful under article 5(1)(b) [9].
The Court of Appeal agreed but for different reasons.
In light of the decision of the Strasbourg court in Ostendorf v Germany (2015) 34 BHRC 738, which post dated the decision of the Administrative Court, it read the phrase effected for the purpose of bringing him before the competent legal authority as applying to the whole of article 5(1)(c).
However, it inferred that the officers who arrested and detained the appellants appreciated the appellants would not be lawfully detained beyond the point at which it was reasonably practicable to take them before the magistrates court.
The appellants had therefore been arrested and detained with the intention of bringing them before the competent legal authority within the meaning of article 5.1(c) [11].
The Supreme Court unanimously dismisses the appeal.
Lord Toulson, with whom the other Justices agree, gives the lead judgment.
The fundamental principle underlying article 5 is the need to protect the individual from arbitrary detention, and an essential part of that protection is timely judicial control.
However, article 5 must not be interpreted in such a way as would make it impracticable for the police to perform their duty to maintain public order and protect the lives and property of others [29].
An appreciation of the reality and practical implications is central to the principle of proportionality embedded in both article 5 and in the common law relating to arrest for breach of the peace [30].
The ability of the police to perform their duty would be severely hampered if they could not lawfully arrest and detain a person for a relatively short time (too short for it to be practical to take the person before a court) [31].
The Strasbourg case law on how such a preventative power can be accommodated within article 5 is not clear and settled and the Strasbourg court in Ostendorf was divided.
Whilst the Supreme Court must take into account the Strasbourg case law, the final decision is the Courts [32].
The Court prefers the view of the minority of the Strasbourg court in Ostendorf that article 5(1)(c) is capable of applying to a case of detention for preventive purposes followed by early release [33].
It would be perverse if the law was such that in order to be lawfully able to detain a person so as to prevent their imminent commission of an offence, the police must harbour a purpose of continuing the detention, after the risk has passed, until such time as the person could be brought before a court with a view to being bound over to keep the peace in the future.
This would lengthen the period of detention and place an unnecessary burden on police resources [36].
Rather, Lord Toulson reads the phrase for the purpose of bringing him before the competent legal authority as implicitly dependent on the cause for detention continuing long enough for the person to be brought before the court.
Early release from detention for preventive purpose will not breach article 5 if the lawfulness of the detention can subsequently be challenged and decided by a court [38].
In respect of article 5(1)(b), the Court also prefers the view of the minority in Ostendorf.
A general obligation not to commit a criminal offence or, in this case, a breach of the peace, is not an obligation prescribed by law for the purposes of article 5(1)(b) as it is not concrete or specific enough.
Such a general obligation does not acquire the necessary degree of specificity by focusing narrowly on the particular facts or by the person concerned being given a reminder of it in specific circumstances.
The police may be required to take action to prevent an imminent breach of the peace where there is insufficient time to give a warning [27, 40].
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Counsel for the respondent, Jonathan Crow QC, boldly asserted at the outset of his submissions that this case is in fact bristling with simplicity.
The issue is certainly a simple one.
The claim is brought by a company (through its liquidators) against its investment bank and broker for breach of the so called Quincecare duty of care.
In Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363, Steyn J held that it was an implied term of the contract between a bank and its customer that the bank would use reasonable skill and care in and about executing the customers orders; this was subject to the conflicting duty to execute those orders promptly so as to avoid causing financial loss to the customer; but there would be liability if the bank executed the order knowing it to be dishonestly given, or shut its eyes to the obvious fact of the dishonesty, or acted recklessly in failing to make such inquiries as an honest and reasonable man would make; and the bank should refrain from executing an order if and for so long as it was put on inquiry by having reasonable grounds for believing that the order was an attempt to misappropriate funds.
The issue in this case is whether such a claim is defeated if the companys instructions were given by the companys Chairman and sole share holder who was the dominant influence over the affairs of the company.
Can his fraud be attributed to the company? And if so, is the claim then defeated, whether on grounds of illegality, of causation, or by an equal and opposite claim against the company in deceit?
The background
The respondent company, Singularis, is a company registered in the Cayman Islands, set up to manage the personal assets of a Saudi Arabian business man, Maan Al Sanea, separately from his business group.
At all times material to this claim, Mr Al Sanea was its sole shareholder, a director and also its chairman, president and treasurer.
There were six other directors, who were reputable people, but did not exercise any influence over the management of the company.
Very extensive powers were delegated to Mr Al Sanea to take decisions on behalf of the company, including signing powers over the companys bank accounts.
The company had a substantial and legitimate business, carried out over a number of years before the relevant events, for which it borrowed substantial sums of money under a variety of funding arrangements.
The appellant, Daiwa, is the London subsidiary of a Japanese investment bank and brokerage firm.
In 2007, it entered into a stock financing arrangement with Singularis.
Daiwa provided Singularis with loan financing to enable it to purchase shares which were the security for the repayment of the loan.
In June 2009, all the shares were sold, the loan was repaid, and Daiwa was left holding a cash surplus for the account of Singularis.
Together with a sum of US$80m deposited by Singularis in June 2009, the total held to Singularis account was approximately US$204m.
Between 12 June and 27 July 2009, Daiwa was instructed by Singularis to make eight payments, totalling approximately US$204,500,000, out of the money held to Singularis account.
Five of those payments were to the Saad Specialist Hospital Company.
Three of them were to or for the benefit of Saad Air (A320 No 2) Ltd and Saad Air (A340 600) Ltd (together, Saad Air).
Those instructions were given with the approval of Mr Al Sanea who, as between Singularis and Daiwa, had authority to give instructions to make the payments.
Daiwa made those payments.
The judge held that each of the payments was indeed a misappropriation of Singularis funds because there was no proper basis for any of them.
There has been no appeal against that finding.
On 20 August 2009, Mr Al Sanea placed Singularis in voluntary liquidation.
On 18 September 2009 the Grand Court of the Cayman Islands made a compulsory winding up order and joint liquidators were appointed.
On 18 July 2014, Singularis, acting through its joint liquidators, brought a claim against Daiwa for the full amount of the payments (less any sums recovered either from Mr Al Sanea or the recipients of the payments).
There were two bases for the claim: (1) dishonest assistance in Mr Al Saneas breach of fiduciary duty in misapplying the companys funds; and (2) breach of the Quincecare duty of care to the company by giving effect to the payment instructions.
In the Chancery Division of the High Court, Rose J dismissed the dishonest assistance claim because Daiwas employees had acted honestly.
However, she upheld the negligence claim, while making a deduction of 25% under the Law Reform (Contributory Negligence) Act 1945 to reflect the contributory fault of Mr Al Sanea and the companys inactive directors, for which the company was responsible: [2017] EWHC 257 (Ch); [2017] Bus LR 1386.
Singularis did not appeal against the dismissal of the dishonest assistance claim.
Daiwa did appeal against the finding of liability on the negligence claim.
The Court of Appeal unanimously dismissed the appeal: [2018] EWCA Civ 84; [2018] 1 WLR 2777.
In brief, it held (1) that Mr Al Saneas fraudulent state of mind could not be attributed to the company; but (2) even if it could, the claim would still have succeeded the banks negligence had caused the loss, it was not defeated by a defence of illegality, or by an equal and opposite claim by the bank for the companys deceit; and (3) the judges finding of 25% contributory negligence was a reasonable one.
Daiwa now appeals to this Court on the question of attribution and its consequences.
Two broad issues arise. (1) When can the actions of a dominant personality, such as Mr Al Sanea, who owns and controls a company, even though there are other directors, be attributed to the company? (2) If they are attributed to the company, is the claim defeated (i) by illegality; (ii) by lack of causation because the banks duty of care does not extend to protecting the company from its own wrongdoing or because the company did not rely upon its performance; or (iii) by an equal and countervailing claim in deceit?
The starting point
The starting point must be the judges findings, none of which is under appeal.
She held that there was no good reason to make the payments to Saad Air and that it was a breach of fiduciary duty for Mr Al Sanea to direct Singularis to make them (para 120).
She also held that the agreement made between Singularis and the hospital to pay the expenses of the hospital was a sham and the five payments were a misappropriation of the companys money by Mr Al Sanea in breach of his fiduciary duty (paras 121 127).
As sole shareholder he was not entitled to ratify the misappropriation of company funds because he must have known that the company was on the verge of insolvency and his duty as director was to act in the best interests of the companys creditors.
This precluded making gratuitous payments to other companies in the Saad group to the detriment of Singularis creditors (paras 128 137).
She went on to hold that Daiwa was in breach of the Quincecare duty on the facts of the case.
Any reasonable banker would have realised that there were many obvious, even glaring, signs that Mr Al Sanea was perpetrating a fraud on the company.
He was clearly using the funds for his own purposes and not for the purpose of benefiting Singularis (para 192).
First, Daiwa was well aware of the dire financial straits in which Mr Al Sanea and the Saad group found themselves at the end of May and in early June 2009 (paras 193 196).
Second, it was aware that Singularis might have other substantial creditors with an interest in the money (para 197).
Third, there was plenty of evidence to put Daiwa on notice that there was something seriously wrong with the way that Mr Al Sanea was operating the Singularis account (para 199).
Fourth, it was alive to the possibility that the agreement with the hospital was a front or a cover rather than a genuine obligation (para 200).
Fifth, there was a striking contrast between the way in which some payment requests were processed and how the disputed payments were handled (para 201).
In short Everyone recognised that the account needed to be closely monitored But no one in fact exercised care or caution or monitored the account themselves and no one checked that anyone else was actually doing any exercising or monitoring either (para 202).
On the basis of those findings, the judge held that there was a clear breach of Daiwas Quincecare duty of care to Singularis.
That is incontrovertible.
The issue for this Court, as in the courts below, is whether Daiwa has any defence to that claim.
The issue of attribution has to be seen in the context of the possible defences to which it might give rise.
Were attribution to be established, Daiwa raises three possible defences.
It is worth giving a brief account of each of these before turning to the question of attribution.
It will be seen that, even if attribution were established, none of them is a very promising basis for denying liability.
Illegality
Both the judge and the Court of Appeal rejected the illegality defence raised by Daiwa on two grounds: first, that Mr Al Saneas fraud could not be attributed to the company ie held to be the companys fraud for this purpose (Rose J, paras 208 to 215; CA, paras 50 to 60); and second, in any event, the test for a successful illegality defence, laid down by this Court in Patel v Mirza [2016] UKSC 42; [2017] AC 467, was not met (Rose J, paras 216 to 220; CA, paras 61 to 67).
Patel v Mirza was a restitution claim.
Mr Patel agreed to pay 620,000 to Mr Mirza on the basis that Mr Mirza would use it to bet on the price of shares using inside information that Mr Mirza expected to receive.
This was a conspiracy to commit the offence of insider dealing contrary to section 52 of the Criminal Justice Act 1993.
However, the inside information was not forthcoming and the bets were never placed.
Mr Patel asked for his money back and Mr Mirza refused.
He argued that the claim was barred by illegality because Mr Patel would have to prove the illegal agreement under which the money was paid in order to prove that the purpose had failed and he should get it back.
A panel of nine Supreme Court Justices was convened to hear the appeal, because of the perceived conflict between the decisions of this Court in Hounga v Allen [2014] UKSC 47; [2014] 1 WLR 2889, Les Laboratoires Servier v Apotex Inc [2014] UKSC 55; [2015] AC 430, and Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23; [2016] AC 1.
By a majority of six to three, the Court rejected the approach of the House of Lords in Tinsley v Milligan [1994] 1 AC 340, which depended on whether or not the claimant had to plead the illegal agreement in order to succeed.
Instead it adopted the approach summed up by Lord Toulson, who gave the leading judgment, at para 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 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.
In that case, it was not contrary to the public interest to allow Mr Mirza to recover the money which he had paid for an illegal purpose but which had not been used for that purpose.
In wanting it back he was seeking to unwind the arrangement, not to profit from it.
In this case, the illegality relied on was, in relation to some of the payments, Mr Al Saneas provision of documents which he knew to be false and, in relation to all of the payments, his breach of his fiduciary duty towards Singularis.
The judge held that the purpose of the prohibition of breach of fiduciary obligation was to protect the company from becoming the victim of the wrongful exercise of power by officers of the company.
That purpose would certainly not be enhanced by preventing the company from getting back the money which had been wrongfully removed from its account.
The purpose of the prohibition of making false statements was both to protect the bank from being deceived and the company from having its funds misappropriated.
Although the purpose of protecting the bank would be enhanced by denial of the claim, that purpose was achieved by ensuring that the bank was only liable to repay the money if the Quincecare duty was breached: that duty struck a careful balance between the interests of the customer and the interests of the bank.
It would not enhance the integrity of the law to undermine that balance by denying the claim on grounds of illegality in a case where, ex hypothesi, the exceptional circumstances needed for the duty to arise and be breached are found to be present. (para 218)
Turning to whether there might be any other relevant public interests, she held that denial of the claim would have a material impact upon the growing reliance on banks and other financial institutions to play an important part in reducing and uncovering financial crime and money laundering.
If a regulated entity could escape from the consequences of failing to identify and prevent financial crime by casting on the customer the illegal conduct of its employees that policy would be undermined (para 219).
Finally, denial of the claim would be an unfair and disproportionate response to any wrongdoing on the part of Singularis.
The possibility of making a deduction for contributory negligence on the customers part enables the court to make a more appropriate adjustment than the rather blunt instrument of the illegality defence (para 220).
The Court of Appeal took the view that there was no error in the judges approach.
Barring Singularis claim would serve to undermine the carefully calibrated Quincecare duty and would not be a proportionate response, particularly where Daiwas breaches were so extensive and the fraud was so obvious (para 66).
Mr John McCaughran QC, who appears for Daiwa, argues that the judge went wrong at each stage of the analysis.
The purpose of the prohibition of deceit is to encourage honest dealing.
The integrity of the legal system is not enhanced by allowing fraudulent companies to recover damages in respect of their fraud.
If this is adequately addressed by the carefully calibrated Quincecare duty, it leaves no room for the application of the illegality defence.
As to the public policy of enlisting banks and financial institutions in the fight against financial crime and money laundering, there already existed important incentives in the regulatory regime for banks and brokers to detect financial crime.
There was no need for a further incentive in the form of a damages claim by the company.
Denying the claim would be a proportionate response to the companys wrongdoing.
Daiwas arguments necessarily depend upon a finding that Mr Al Saneas fraud was the companys fraud, an issue which is discussed later.
But even if it was, in my view the judges conclusion was correct for the reasons she gave.
I should, however, record my reservations about the view expressed by the Court of Appeal as to the role of an appellate court in relation to the illegality defence: that an appellate court should only interfere if the first instance judge has proceeded on an erroneous legal basis, taken into account matters that were legally irrelevant, or failed to take into account matters that were legally relevant (para 65).
Daiwa point out that applying the defence is not akin to the exercise of discretion (citing Lord Neuberger in Patel v Mirza, at para 175) and an appellate court is as well placed to evaluate the arguments as is the trial judge.
It is not necessary to resolve this in order to resolve this appeal and there are cases concerning the illegality defence pending in the Supreme Court where it should not be assumed that this Court will endorse the approach of the Court of Appeal.
Causation
Daiwa argues that, if the fraud is attributed to the company, the companys loss is caused by its own fault and not by the fault of Daiwa.
In Reeves v Comr of Police of the Metropolis [2000] 1 AC 360, at 368, Lord Hoffmann referred to the sound intuition that there is a difference between protecting people against harm caused to them by third parties and protecting them against harm which they inflict upon themselves People of full age and sound understanding must look after themselves and take responsibility for their actions.
This was a case, argues Daiwa, in which the company inflicted the harm upon itself.
Against that, Lord Hoffmann went on to say that This philosophy expresses itself in the fact that a duty to protect a person of full understanding from causing harm to himself is very rare indeed.
But, once it is admitted that this is the rare case in which such a duty is owed, it seems to me self contradictory to say that the breach could not have been a cause of the harm because the victim caused it to himself.
This is just such a case: the purpose of the Quincecare duty is to protect a banks customers from the harm caused by people for whom the customer is, one way or another, responsible.
Hence Mr Crow argues that the loss was caused, not by the dishonesty, but by Daiwas breach of its duty of care.
Had it not been for that breach, the money would still have been in the companys account and available to the liquidators and creditors.
This was not a case where the companys act came after Daiwas breach of duty (unlike Reeves, where the prisoners suicide came after the polices breach of duty).
The fraudulent instruction to Daiwa gave rise to the duty of care which the bank breached, thus causing the loss.
Countervailing claim in deceit
Daiwa argues that because it would have an equal and countervailing claim in deceit against the company, the companys claim in negligence should fail for circularity.
They paid out because of the companys deceit and therefore have a claim against the company for any loss suffered by their exposure to Singularis claim.
This cancels out the companys claim against them for negligence in failing to detect the fraud.
This is a variant of the causation argument and the judge answered it by reference to two decisions of Evans Lombe J in Barings plc v Coopers & Lybrand (No 2) [2002] EWHC 461 (Ch); [2002] 2 BCLC 410 and [2003] EWHC 1319 (Ch); [2003] PNLR 34.
These were proceedings brought by Barings against their auditors for failing to detect the dealings of Mr Nick Leeson which led to the downfall of the bank.
The first decision concerned the allegation of the auditors that they had been deceived by Barings finance director into accepting figures which he knew to be false.
That claim failed on the facts, but had it succeeded, the judge would have held that Barings were vicariously responsible for the deception and this would have defeated the negligence claim.
The second decision concerned the activities of Mr Leeson.
Fraudulent though they were, they did not defeat the banks claim because it was the very duty of the auditors to detect the fraud.
Thus, in this case, the judge held that Daiwa owed Singularis a duty to guard against being misled into paying away Singularis money by just such fraudulent instructions.
Their breach, and not Mr Al Saneas misrepresentations, is the cause of their exposure to the claim for Singularis loss (Rose J, para 228).
Daiwa sought to distinguish Barings on the basis that Barings were merely vicariously liable for Mr Leesons fraud, whereas, if it is right about attribution, in this case the fraud is the fraud of the company itself and not just one of its employees.
The Court of Appeal rejected this argument and upheld the reasoning of the judge: The existence of the fraud was a precondition for Singularis claim based on breach of Daiwas Quincecare duty, and it would be a surprising result if Daiwa, having breached that duty, could escape liability by placing reliance on the existence of the fraud that was itself a pre condition for its liability (CA, para 79).
Attribution
Daiwa argues that, as Singularis was effectively a one man company and Mr Al Sanea was its controlling mind and will, his fraud is to be attributed to the company, with the consequence that its Quincecare claim against Daiwa is defeated, either by illegality, or for lack of causation, or because of an equal and opposite claim for the companys deceit.
To examine such an assertion, it is necessary to go back to basic principles.
The starting point has to be the principle established by the House of Lords in Salomon v A Salomon and Co Ltd [1897] AC 22, that a properly incorporated company has an identity and legal personality quite separate from that of its subscribers, shareholders and directors.
Mr Salomon had established the company, with his family, to buy his boot and shoe manufacturing business at a time when it was solvent.
When it later became insolvent, he was entitled to enforce the debentures granted by the company in part payment of the price and he was not obliged to indemnify the company against the claims of its creditors.
It is also worth recalling the words of Lord Macnaghten, at p 53, that It has become the fashion to call companies of this class one man companies.
That is a taking nickname, but it does not help one much in the way of argument.
Companies being fictional persons, they have of course to act through the medium of real human beings.
So the issue is when the acts and intentions of real human beings are to be treated as the acts and intentions of the company.
The classic exposition is to be found in the Opinion of the Judicial Committee of the Privy Council in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, delivered by Lord Hoffmann.
He identified three levels of attribution (at pp 506 507).
The primary rule is contained in the companys constitution, its articles of association, which will typically say that the decisions of the shareholders or of the board of directors are to be the decision of the company on certain matters.
But this will not cover the whole field of the companys decision making.
For this, the ordinary rules of agency and vicarious liability, which apply to natural persons just as much as to companies, will normally supply the answer.
However there will be some particular rules of law to which neither of these principles supplies the answer.
The question is not then one of metaphysics but of construction of the particular rule in question.
In seeking to establish attribution in this case, Daiwa prays in aid the decision of the House of Lords in Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39; [2009] 1 AC 1391.
The claimant company was owned, controlled and managed by a Mr Stojevic, who had procured the company to engage in frauds upon banks.
The company was sued for deceit by one of the banks and went into liquidation.
The company then brought proceedings against its auditors, alleging that they had been negligent in failing to detect and prevent Mr Stojevics activities.
The auditors applied to strike out the claim on the basis that Mr Stojevics fraud was to be attributed to the company.
The trial judge refused to strike it out, on the basis that such fraud was the very thing that the auditors were employed to detect.
The Court of Appeal held that, as the company had to rely upon the illegality to found its claim, the defence of illegality was made out (this was, of course, before Patel v Mirza).
The House of Lords, by a majority, held that, as Mr Stojevic was the beneficial owner and directing mind and will of the company, knowledge of his fraudulent activities was to be attributed to the company, so the company could not complain that the auditors had failed to detect it.
Lord Mance, dissenting, pointed out that this deprived the companys creditors of a remedy, as it was only the company which could sue the auditors for their negligence.
It appears that what principally divided their lordships was whether the auditors had to have regard to the interests of creditors even though they owed them no duty of care.
Stone & Rolls has prompted much debate and criticism.
It was analysed in detail by a panel of seven Justices of this Court in Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23; [2016] AC 1.
The company and its liquidators brought claims against its directors and others who were alleged to have dishonestly assisted the directors in a conspiracy to defraud the company.
The claim was defended on the basis that the fraud of its directors was attributable to the company which could not then make a claim against the other conspirators relying on its own illegality.
This court held unanimously that where a company has been the victim of wrongdoing by its directors, the wrongdoing of the directors cannot be attributed to the company as a defence to a claim brought against the directors and their co conspirators by the companys liquidator for the loss suffered by the company as a result of the wrongdoing.
The court explained that the key to any question of attribution was always to be found in considerations of the context and the purpose for which the attribution was relevant.
Where the purpose was to apportion responsibility between the company and its agents so as to determine their rights and liabilities to one another, the answer might not be the same as where the purpose was to apportion responsibility between the company and a third party.
Stone & Rolls was a case between a company and a third party.
Lords Toulson and Hodge, after analysing the judgments in detail, reached the conclusion (para 154) that it should be regarded as a case which has no majority ratio decidendi.
It stands as authority for the point which it decided, namely that on the facts of that case no claim lay against the auditors, but nothing more.
Lord Sumption identified three points for which it was authority (para 80), but Lord Neuberger, with whom Lord Clarke and Lord Carnwath agreed, agreed with only two of these (para 26).
The first was that an illegality defence cannot be run by a third party against a company where there are innocent shareholders or directors.
The second was that the defence was available, albeit only on some occasions, where there are no innocent directors or shareholders.
Lord Mance agreed with the first of these but as to the second he commented that it appears [to be] a factually correct representation of the outcome of Stone & Rolls, though the present appeal does not raise the correctness in law of that outcome, which may one day fall for reconsideration (para 50).
Subject to the two points with which he agreed, Lord Neuberger said this: [T]he time has come in my view for us to hold that the decision in Stone & Rolls should as Lord Denning MR graphically put it in relation to another case in In re King, decd [1963] Ch 459, 483, be put on one side in a pile and marked not to be looked at again.
Without disrespect to the thinking and research that went into the reasoning of the five Law Lords in that case, and although persuasive points and observations may be found from each of the individual opinions, it is not in the interests of the future clarity of the law for it to be treated as authoritative or of assistance save as already indicated. (para 30)
Unfortunately, the majoritys acceptance of the second point has been treated as if it established a rule of law that the dishonesty of the controlling mind in a one man company could be attributed to the company with the consequences discussed earlier whatever the context and purpose of the attribution in question.
Thus there was much argument in this case about what was meant by innocent directors and whether this included innocent but inactive directors who should have been paying more attention to what Mr Al Sanea was doing.
The judge found that Singularis was not a one man company in the sense that the phrase was used in Stone & Rolls and Bilta (Rose J, para 212).
The company had a board of reputable people and a substantial business.
There was no evidence to show that the other directors were involved in or aware of Mr Al Saneas actions.
There was no reason why they should have been complicit in his misappropriation of the money (para 189).
The Court of Appeal held that, on those findings of fact, she had made no error of law (CA, para 54).
I agree.
But in any event, in my view, the judge was correct also to say that there is no principle of law that in any proceedings where the company is suing a third party for breach of a duty owed to it by that third party, the fraudulent conduct of a director is to be attributed to the company if it is a one man company.
In her view, what emerged from Bilta was that the answer to any question whether to attribute the knowledge of the fraudulent director to the company is always to be found in consideration of the context and the purpose for which the attribution is relevant (para 182).
I agree and, if that is the guiding principle, then Stone & Rolls can finally be laid to rest.
The context of this case is the breach by the companys investment bank and broker of its Quincecare duty of care towards the company.
The purpose of that duty is to protect the company against just the sort of misappropriation of its funds as took place here.
By definition, this is done by a trusted agent of the company who is authorised to withdraw its money from the account.
To attribute the fraud of that person to the company would be, as the judge put it, to denude the duty of any value in cases where it is most needed (para 184).
If the appellants argument were to be accepted in a case such as this, there would in reality be no Quincecare duty of care or its breach would cease to have consequences.
This would be a retrograde step.
Daiwa makes two further arguments essentially policy arguments against this conclusion.
First, it argues that it is odd if the claim of a company arising out of the dishonest activities of its directing mind and will against a negligent auditor fails (as in Stone & Rolls and in Berg Sons & Co Ltd v Adams [1993] BCLC 1045) but a claim against a negligent bank or broker succeeds.
But (quite apart from the difficulties of Stone & Rolls) this ignores the fact that the duties of auditors are different from the duties of banks and brokers.
The auditors duty is to report on the companys accounts to those having a proprietary interest in the company or concerned with its management and control.
If the company already knows the true position (as in Berg) then the auditors negligence does not cause the loss.
Second, Daiwa argues that the law should not treat a company more favourably than an individual.
In Luscombe v Roberts (1962) 106 SJ 373, a solicitors claim against his negligent accountants failed because he knew that what he was doing transferring money from his clients account into his firms account and using it for his own purposes was wrong.
But companies are different from individuals.
They have their own legal existence and personality separate from that of any of the individuals who own or run them.
The shareholders own the company.
They do not own its assets and a sole shareholder can steal from his own company.
I therefore see nothing in those arguments to detract from the conclusion reached that, for the purpose of the Quincecare duty of care, the fraud of Mr Al Sanea is not to be attributed to the company.
However, even if it were, for the reasons given earlier, none of the defences advanced by Daiwa would succeed.
Conclusion
In reaching this conclusion in such short order, I mean no disrespect to the lengthy arguments of counsel or to the impressive judgments in the courts below.
But Mr Crow was correct to say that this case is bristling with simplicity.
A company with a substantial business traded for some years and ran up debts in doing so.
It also had a substantial sum of money standing to its credit, as a result of its legitimate business activities, with its broker bankers.
When it appeared that the company was running into difficulties, its directing mind and sole shareholder fraudulently deprived the company of that money by directing Daiwa to pay it away.
Daiwa should have realised that something suspicious was going on and suspended payment until it had made reasonable enquiries to satisfy itself that the payments were properly to be made.
The company (and through the company its creditors) has been the victim of Daiwas negligence.
This appeal should be dismissed and the judges order should stand.
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An implied term of the contract between a bank and its customer is that the bank owes a duty of care not to execute the customers order if it knows the order to be dishonestly given, or shuts its eyes to obvious dishonesty, or acts recklessly in failing to make inquiries.
This is known as the Quincecare duty of care, following the 1992 case of Barclays Bank plc v Quincecare Ltd. The issue in this appeal is whether a claim against a bank for breach of the Quincecare duty is defeated if the customer is a company, and the fraudulent payment instructions are given by the companys Chairman and sole shareholder who is the dominating influence over the companys affairs.
The respondent company (Singularis) is registered in the Cayman Islands.
It was set up to manage the personal assets of Mr Maan Al Sanea.
He was the sole shareholder, a director and the chairman, president and treasurer.
There were six other directors but they did not exercise any influence over the management of Singularis.
Sole signing powers over the companys bank accounts rested with Mr Al Sanea.
In 2007 the appellant investment bank (Daiwa) provided Singularis with loan financing for the purchase of shares, which were the security for the repayment of the loan.
In June 2009 the shares were sold, the loan was repaid, and Daiwa held a cash surplus of US$204m for the account of Singularis.
Daiwa complied with instructions from Mr Al Sanea to pay out those funds to third parties.
The payments were a misappropriation of Singularis funds and left Singularis unable to meet the demands of its creditors.
On 18 September 2009 the Grand Court of the Cayman Islands made a compulsory winding up order and joint liquidators were appointed.
On 18 July 2014 Singularis brought a claim against Daiwa for the full amount of the payments on the basis of (1) dishonest assistance in Mr Al Saneas breach of fiduciary duty and (2) breach of the Quincecare duty of care to Singularis by giving effect to the payment instructions.
The High Court dismissed the dishonest assistance claim but held there was a clear breach of the Quincecare duty of care to Singularis, with a deduction of 25% by way of contributory negligence.
Daiwas appeal against the finding of liability on the negligence claim was dismissed.
Daiwa appealed to the Supreme Court.
The Supreme Court unanimously dismisses Daiwas appeal and holds that the High Court order should stand.
Lady Hale gives the only substantive judgment.
Daiwa argued that, as Singularis was effectively a one man company, and Mr Al Sanea its controlling mind and will, his fraud should be attributed to the company, with the result that its Quincecare claim against Daiwa should fail for illegality, lack of causation or because of a countervailing claim for deceit [1].
Lady Hale agrees with the judge that whether or not Mr Al Saneas fraud was attributed to the company, those defences would fail in any event [12]: (i) Illegality The illegality relied on by Daiwa was Mr Al Saneas provision of false documents in relation to the payments and his breach of fiduciary duty towards Singularis.
As the judge found, fiduciary duties are intended to protect a company from becoming the victim of the wrongful exercise of power by the companys officers.
That purpose would not be enhanced by preventing the companys recovery of the money wrongfully removed from its account.
The Quincecare duty strikes a careful balance between the interests of the customer and those of the bank and denying the claim would not enhance the integrity of the law [16].
Denial of the claim would undermine the public interest in requiring banks to play an important part in uncovering financial crime and money laundering [17].
It would also be an unfair and disproportionate response to any wrongdoing on the part of Singularis: the power to make a deduction for contributory negligence enables the court to make a more appropriate adjustment [18].
The judges conclusion on this issue was correct, whether or not the fraud was attributed to the company [21]. (ii) Causation Daiwa argued that if the fraud was attributed to the company, its loss was caused by its own fault and not that of the bank.
However, the purpose of the Quincecare duty is to protect the banks customers from harm caused by people for whom the customer is responsible.
The fraudulent instruction to Daiwa gave rise to the duty of care which Daiwa breached, thus causing the loss [23]. (iii) Countervailing claim in deceit This was a variant of the causation argument.
The judge held that Daiwas breach of duty and not Mr Al Saneas misrepresentations was the cause of Daiwas exposure to the claim for Singularis loss [24].
Attribution Mr Al Saneas fraud should not however be attributed to the company for the purposes of the Quincecare claim.
The basic principle was that a properly incorporated company has an identity and legal personality separate from that of its shareholders and directors.
The company has to act through the medium of real human beings but the acts of those persons are only treated as the acts and intentions of the company in circumstances specified by its constitution, or the ordinary rules of agency and vicarious liability, or other particular rules of law [28].
As the judge noted, the answer to any question whether to attribute the knowledge of a fraudulent director to the company is always to be found in consideration of the context and purpose for which the attribution is relevant [34].
The context in this case is the breach of Daiwas Quincecare duty of care.
To attribute the fraud of a trusted agent of the company to the company would denude the duty of any value in cases where it is most needed and be a retrograde step [35].
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This appeal arises from steps taken by the appellant, Dallah Real Estate and Tourism Holding Company (Dallah), to enforce in England a final award dated 23 June 2006 made in its favour in the sum of US$20,588,040 against the Government of Pakistan (the Government) by an International Chamber of Commerce (ICC) arbitral tribunal sitting in Paris.
The Government has hitherto succeeded in resisting enforcement on the ground that the arbitration agreement was not valid . under the law of the country where the award was made (Arbitration Act 1996, s.103(2)(b), reflecting Article V(I)(a) of the New York Convention), that is under French law.
Dallah now appeals.
The award was made against the Government on the basis that it was a true party to an Agreement dated 10 September 1996 expressed to be made between and signed on behalf of Dallah and Awami Hajj Trust (the Trust).
The Agreement contains an arbitration clause referring disputes or differences between Dallah and the Trust to ICC arbitration.
The tribunal in a first partial award dated 26 June 2001 concluded that the Government was a true party to the Agreement and as such bound by the arbitration clause, and so that the tribunal had jurisdiction to determine Dallahs claim against the Government.
The central issue before the English courts is whether the Government can establish that, applying French law principles, there was no such common intention on the part of the Government and Dallah as would make the Government a party.
Dallah is a member of a group providing services for the Holy Places in Saudi Arabia.
It had had long standing commercial relations with the Government.
By letter dated 15 February 1995, Mr Shezi Nackvi, a senior director in the Dallah group, made a proposal to the Government to provide housing for pilgrims on a 55 year lease with associated financing.
The Government approved the proposal in principle, and a Memorandum of Understanding (MOU) was concluded on 24 July 1995.
Land was to be purchased and housing facilities were to be constructed at a total cost not exceeding US$242 million and the Government was to take a 99 year lease subject to Dallah arranging the necessary financing to be secured by the Borrower designated by THE GOVERNMENT under the Sovereign Guarantee of THE GOVERNMENT.
The lease and financing terms were to be communicated to the Government within 30 days for approval, and Dallah was to supply detailed specifications within 60 days of the date of such approval.
In the event, Dallah in November 1995 acquired a larger and more expensive plot of land than the MOU contemplated, and the timetable was also not maintained.
Further, on 21 January 1996 the President of Pakistan promulgated Ordinance No VII establishing the Trust with effect from 14 February 1996.
Under article 89(2) of the Constitution of Pakistan, an Ordinance so promulgated shall stand repealed at the expiration of four months from its promulgation, although, under the same article, it should before then have been laid before Parliament, upon which it would have taken effect as a bill.
In the event, Parliament appears never to have been involved, but further Ordinances were promulgated to recreate and continue the Trust, viz Ordinance No XLIX of 1996 on a date unknown (presumably prior to 21 May 1996) and No LXXXI of 1996 on 12 August 1996.
Under each Ordinance the Trust was to maintain a fund with a trustee bank, to be financed from contributions and savings by pilgrims (Hujjaj) and philanthropists, as well as by any income from investments or property.
The Ordinances also assigned functions within the Trust to various public officers.
They prescribed, in particular, that the secretary of the Ministry of Religious Affairs (MORA) should act as secretary of the Board of Trustees and (unless some other person of integrity was appointed) as Managing Trustee of the Trust.
On 29 February 1996 Dallah wrote to the secretary of MORA with a revised proposal, increasing the cost to US$345 million to take account of the larger plot purchased, setting out options for a new legal and financial structure and stating: Legal issues In order to comply with the legal requirements of the various entities involved, the structure will be as follows: a) Government of Pakistan to set up AWAMI HAJJ TRUST b) Trust will borrow the US$100 Million from Dallah Albaraka c) Trust will make a down payment of US$100 million to Albaraka d) Trust will enter into a lease to use these buildings during the Hajj period Annex A detailed the financial structure: Loan terms for down payment of US $ 100 Million Approx 30% of project cost Amount: US $ 100 Million Borrower: Awami Hajj Trust
Guarantor: Government of Pakistan
On 3 April 1996 Dallah instructed its lawyers, Orr, Dignam & Co. that the current shape of the transaction involved an agreement to be entered into between Dallah and the Trust on terms which it described.
Further negotiations with the Government led to the signing of the Agreement between Dallah and the Trust on 10 September 1996.
The Agreement reflected the increased cost of $345 million, out of which it provided that: the Trust shall pay a lump sum of U.S. $ 100 [million] . to Dallah by way of advance . subject to (i) Dallah arranging through one of its affiliates a U.S. Dollar 100 [million] Financing Facility for the Trust against a guarantee of the Government of Pakistan, . (iii) A counter guarantee issued by the Trust and Al Baraka Islamic Investment Bank, E.C., Bahrain, . appointed by the Board of Trustees pursuant to Section 8 of the Awami Hajj Trust Ordinance, 1996 in favour of the Government of Pakistan.
Clause 27 provided that: The Trust may assign or transfer its rights and obligations under this Agreement to the Government of Pakistan without the prior consent in writing of Dallah.
The Agreement made no other references to the Government and was in terms introducing and setting out mutual obligations on the part of Dallah and the Trust.
These included the arbitration clause: 23.
Any dispute or difference of any kind whatsoever between the Trust and Dallah arising out of or in connection with this Agreement shall be settled by arbitration held under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris, by three arbitrators appointed under such Rules.
On 6 November 1996 Ms Benazir Bhuttos government fell from power, and was replaced by that of Mr Nawaz Sharif.
No further Ordinance was promulgated, and the Trust accordingly ceased to exist as a legal entity at midnight on 11 December 1996.
It will be necessary to look in detail at correspondence as well as three sets of proceedings in Pakistan which took place during the following years.
Dallah invoked ICC arbitration against the Government on 19 May 1998, nominating Lord Mustill as its arbitrator.
It is common ground that the Government has throughout the arbitration denied being party to any arbitration agreement, maintained a jurisdictional reservation and not done anything to submit to the jurisdiction of the tribunal or waive its sovereign immunity.
The ICC under its Rules appointed Justice Dr Nassim Hasan Shah to act as the Governments arbitrator and Dr Ghaleb Mahmassani to chair the tribunal.
Terms of Reference, in which the Government refused to join, were signed by the arbitrators and Dallah in March 1999 and approved by the ICC in April 1999.
The tribunal issued its first partial award on its own jurisdiction on 26 June 2001.
A second partial award on liability was issued on 19 January 2004 and the final award on 23 June 2006.
Leave to enforce the final award in England was given by Order of Christopher Clarke J dated 9 October 2006 on a without notice application by Dallah.
The Governments application to set aside the leave led to a three day hearing with oral evidence before Aikens J in July 2008.
His judgment setting aside the Order is dated 1 August 2008: [2008] EWHC 1901 (Comm); [2009] 1 All ER (Comm) 505.
A further three day hearing led to the Court of Appeals dismissal of Dallahs appeal on 20 July 2009 ([2009] EWCA Civ 755; [2010] 1 AER 592), against which the present appeal lies.
On 19 August 2009, Dallah filed an application in the French courts for enforcement of the final award, and, on 12 January 2010, it sought a stay of the present appeal pending the outcome of its French application.
On 25 January 2010, the Supreme Court refused such a stay.
On 21 December 2009, the Government applied in France to set aside all three awards.
It was in time to do this, since, under French law, the limitation period for doing so only starts to run one month after official notification of the award bearing an enforcement order.
The issue and the principles governing its resolution
The validity of the arbitration agreement depends in the present case upon whether there existed between Dallah and the Government any relevant arbitration agreement at all.
Dallahs case is that the Government has at all times been an unnamed party to the Agreement containing the arbitration clause.
Before the English courts, this case has been founded on a submission that it was the common intention of the parties that the Government should be such a party to the Agreement.
Before the arbitral tribunal Dallah put the matter differently.
It argued that either the Trust was the alter ego of the Government or the Government was the successor to the Trust or to the rights and obligations which the Trust had under the Agreement prior to its demise.
Neither of these ways of putting the case is now pursued.
Dallah did not argue before Aikens J that the Trust was the Governments alter ego (judgment, para 58, footnote 21), and it merely submitted that, if and so far as the Government behaved as if it were a successor to the Trust, this was relevant to the issue of common intention (judgment, paras 94 96).
The issue regarding the existence of any relevant arbitration agreement falls to be determined by the Supreme Court as a United Kingdom court under provisions of national law which are contained in the Arbitration Act 1996 and reflect Article V(1)(a) of the New York Convention.
The parties submissions before the Supreme Court proceeded on the basis that, under s.103(2)(b) of the 1996 Act and Article V(1)(a) of the Convention, the onus was and is on the Government to prove that it was not party to any such arbitration agreement.
This was so, although the arbitration agreement upon which Dallah relies consists in an arbitration clause in the Agreement which on its face only applies as between Dallah and the Trust.
There was no challenge to, and no attempt to distinguish, the reasoning on this point in Dardana Limited v Yukos Oil Company [2002] EWCA Civ 543; [2002] 1 All ER (Comm) 819, paras 10 12, and I therefore proceed on the same basis as the parties submissions.
S.103(2)(b) and article V(1)(a) raise a number of questions: (a) what is meant by the law of the country where the award was made? (b) what are the provisions of that law as regards the existence and validity of an arbitration agreement? (c) what is the nature of the exercise which an enforcing court must undertake when deciding whether an arbitration agreement existed under such law? and, in particular, (d) what is the relevance of the fact that the arbitral tribunal has itself ruled on the issue of its own jurisdiction? (a) The law of the country where the award was made.
It is common ground that the award was made in France and French law is relevant.
But it is also common ground that this does not mean the French law that would be applied in relation to a purely domestic arbitration.
In relation to an international arbitration, the experts on French law called before Aikens J by Dallah and the Government agreed in their Joint Memorandum (para 2.8) that: Under French law, the existence, validity and effectiveness of an arbitration agreement in an international arbitration . need not be assessed on the basis of a national law, be it the law applicable to the main contract or any other law, and can be determined according to rules of transnational law.
The approach taken in French law appears in decisions of the Court of Appeal of Paris, in particular Menicucci v Mahieux [1976] Rev Crit 507 (13 December 1975) and Coumet et Ducler v Polar Rakennusos a Keythio [1990] Rev Arb 675 (8 March 1990), and later in the decision of the Cour de Cassation (1re Ch.
Civ) (20 December 1993) in Municipalit de Khoms El Mergeb v Dalico [1994] 1 Rev Arb 116, where the court said that: en vertu dune rgle matrielle du droit international de larbitrage, la clause compromissoire est indpendante juridiquement du contrat principal qui la contient directement ou par rfrence et que son existence et son efficacit sapprcient, sous rserve des rgles impratives du droit franais et de lordre public international, daprs la commune volont des parties, sans quil soit ncessaire de se rfrer une loi tatique .
This language suggests that arbitration agreements derive their existence, validity and effect from supra national law, without it being necessary to refer to any national law.
If so, that would not avoid the need to have regard to French law as the law of the country where the award was made under Article V(1)(a) of the Convention and s.103(2)(b) of the 1996 Act.
The Cour de Cassation is, however, a national court, giving a French legal view of international arbitration; and Dallah and the Government agree that the true analysis is that French law recognises transnational principles as potentially applicable to determine the existence, validity and effectiveness of an international arbitration agreement, such principles being part of French law.
As Miss Heilbron QC representing Dallah put it, transnational law is part of French law.
Mr Landau QC representing the Government now accepts this analysis (although in his written case, para 157, he appeared to take issue with it and Aikens J, para 93, in fact disregarded transnational law on the basis that it was not part of French law, but relevant only under French conflict of laws principles and so not within Article V(1)(a) and s.103(2)(b)).
Since the point is common ground, I merely record that Mr Landau referred the Court to Pierre Mayers note on Ducler in KluwerArbitration, explaining the rationale of the Paris Court of Appeal decisions as being to confine the restrictive provisions of article 2061 of the French Civil Code to internal contracts.
He also referred to Fouchard, Gaillard, Goldmans International Commercial Arbitration (1999) (Kluwer), para 440, describing as somewhat unfortunate the terminology used in (French) decisions referring to an arbitration agreement as autonomous from any national law and as having its own effectiveness, and observing that a contract can only be valid by reference to a law that recognises such validity.
Finally, in response to a 1977 commentary, suggesting that the validity of an arbitration clause in an international contract resulted solely from the will of the parties, independently of any reference to the law of the main contract, and to any national law and describing this as the ultimate pinnacle of autonomy, Poudret and Bessons Comparative Law of International Arbitration 2nd ed (2007), para 180 also said that: it is only the first two aspects, i.e. indifference to the fate of the main contract and the possibility of being submitted to a separate law, that flow logically from the principle of separability.
The latter by no means implies that the arbitration agreement is independent of any national law.
The real justification of this regime lies elsewhere: as Philippe Fouchard emphasises in his note on the Menicucci judgment, the aim is to remove the obstacles which certain laws, including French law, bring to the development of international arbitration.
Although the judgment does not say so, this new conception of separability implies abandoning the conflict of laws approach in favour of material rules, which are in reality part of French law and not of any international or transnational system.
We shall see this point with the Dalico judgment.
In the light of the common ground between the parties, it is also unnecessary to engage with the competing representations of international arbitration lucidly discussed in Gaillards Legal Theory of International Arbitration (2010) pp. 13 66.
Whatever the juridical underpinning or autonomy of their role from the viewpoint of international arbitrators, the present case involves an application to enforce in the forum of a national court, subject to principles defined by s.103 of the 1996 Act and Article V of the New York Convention, upon the effect of which there is substantial, though not complete, agreement between the parties now before the Supreme Court. (b) The provisions of that law as regards the existence and validity of an arbitration agreement.
The parties experts on French law were agreed that a French court would apply a test of common intention to an issue of jurisdiction.
Dallahs expert, M. Derains, said this in his written report (p.14): Thus, my Experts opinion is that it is open to an arbitral tribunal seating in Paris in an international arbitration to find that the arbitration agreement is governed by transnational law.
Yet, the arbitrators must also look for the common will of the parties, express or implied, since it is a substantive rule of French law that the Courts will apply when controlling the jurisdiction of the arbitrators.
In para 2.9 of a joint memorandum to which Aikens J referred in paras 85 et seq of his judgment, the experts agreed upon the following statement: Under French law, in order to determine whether an arbitration clause upon which the jurisdiction of an arbitral tribunal is founded extends to a person who is neither a named party nor a signatory to the underlying agreement containing that clause, it is necessary to find out whether all the parties to the arbitration proceedings, including that person, had the common intention (whether express or implied) to be bound by the said agreement and, as a result, by the arbitration clause therein.
The existence of a common intention of the parties is determined in the light of the facts of the case.
To this effect, the courts will consider the involvement and behaviour of all the parties during the negotiation, performance and, if applicable, termination of the underlying agreement.
The experts agreement summarises a jurisprudence constante in the French courts.
The Cour de Cassation endorsed a test of common intention in the case of Dalico (para 14 above).
M. Derains endorsed its application to issues such as that in the present case.
Aikens J had cited to him the leading decisions of the Paris Court of Appeal spelling out the principle in greater detail in a series of cases concerning international arbitrations: Socit Isover Saint Gobain v Socit Dow Chemical [1984] 1 Rev Arb 98 (21 October 1983), Co. tunisienne de Navigation v Socit Comptoir commercial Andr [1990] 3 Rev Arb 675 (28 November 1989) and Orri v Socit des Lubrifiants Elf Aquitaine [1992] Jur Fr 95 (11 January 1990).
In the last case, the Court put the position as follows: Selon les usages du commerce international, la clause compromissoire insre dans un contrat international a une validit et une efficacit propres qui commandent den tendre lapplication aux parties directement impliques dans lexcution du contrat et les litiges qui peuvent en rsulter, ds lors quil est tabli que leur situation contractuelle, leurs activits et les relations commerciales habituelles existent entre les parties font prsumer quelles ont accept la clause darbitrage dont elles connaissaient lexistence et la porte, bien quelles naient pas t signataires du contrat qui la stipulait.
In translation: According to the customary practices of international trade, the arbitration clause inserted into an international contract has its own validity and effectiveness which require that its application be extended to the parties directly involved in the performance of the contract and any disputes which may result therefrom, provided that it is established that their contractual situation, their activities and the normal commercial relations existing between the parties allow it to be presumed that they have accepted the arbitration clause of which they knew the existence and scope, even though they were not signatories of the contract containing it.
This then is the test which must be satisfied before the French court will conclude that a third person is an unnamed party to an international arbitration agreement.
It is difficult to conceive that any more relaxed test would be consistent with justice and reasonable commercial expectations, however international the arbitration or transnational the principles applied.
Aikens J recorded that the experts were also agreed that: (i) when the court is looking for the common intention of all the potential parties to the arbitration agreement, it is seeking to ascertain the subjective intention of each of the parties, through their objective conduct.
The court will consider all the facts of the case, starting at the beginning of the chronology and going on to the end and looking at the facts in the round (para 87); (ii) when a French court is considering the question of the common intention of the parties, it will take into account good faith (para 90); and (iii) under French law a state entering into an arbitration agreement thereby waives its immunity, both from jurisdiction (as under English law: State Immunity Act 1978, s.9(1) and Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2006] EWCA Civ 1529; [2007] QB 886) and (unlike English law) also from execution (para 91).
However the experts disagreed as to whether the last point had any relevance when considering whether a state had entered into such an agreement.
In the light of their conflicting evidence on this point, Aikens J found that: (iv) the correct analysis of French law is that when the court is ascertaining the subjective intention of the potential state party to the arbitration agreement, it will bear in mind the fact that the potential state party to the arbitration agreement would lose its state immunity if it were to become a party to the arbitration agreement (para 91). (c) The nature of the exercise which an enforcing court must undertake when deciding whether an arbitration agreement existed under such law, and (d) the relevance of the fact that the arbitral tribunal has itself ruled on the issue of its own jurisdiction.
These questions are here linked.
Miss Heilbrons primary submission on question (c) is that the only court with any standing to undertake a full examination of the tribunals jurisdiction would be a French court on an application to set aside the award for lack of jurisdiction.
An example of the French courts willingness to do this is provided by Rpublique arabe dEgypte v Southern Pacific Properties Ltd [1986] Ju Fr 75; [1987] Ju Fr 469 (12 July 1984, Paris Court of Appeal and 6 January 1987, Cour de Cassation) (the Pyramids case).
Article 1502 of the French Code of Civil Procedure entitles a French court to refuse to recognise or enforce an arbitral award made in the absence of any arbitration agreement, while article 1504 entitles the court to set aside an award made in France in an international arbitration on the grounds provided in article 1502.
An ICC arbitral tribunal sitting in Paris had held the Arab Republic of Egypt liable as being party to a contract signed between companies in the Southern Pacific group and the Egyptian General Organisation for Tourism and Hotels (EGOTH).
On an application by Egypt to set aside the award, the Court of Cassation held that the Court of Appeal had been entitled under articles 1502 and 1504 de rechercher en droit et en fait tous les elements concernant les vices en question (to examine in law and in fact all the elements relevant to the alleged defects: p 470), and that it had on that basis been up to the Court of Appeal to make up its own mind whether the arbitrators had exceeded their jurisdiction.
In Miss Heilbrons submission, any enforcing court (other than the court of the seat of the arbitration) should adopt a different approach.
It should do no more than review the tribunals jurisdiction and the precedent question whether there was ever any arbitration agreement binding on the Government.
The nature of the suggested review should be flexible and nuanced according to the circumstances.
Here, Miss Heilbron argues that the answer to question (d) militates in favour of a limited review.
She submits that the tribunal had power to consider and rule on its own jurisdiction (Kompetenz Kompetenz or comptence comptence), that it did so after full and close examination, and that its first partial award on jurisdiction should be given strong evidential effect.
In these circumstances, she submits, a court should refuse to become further involved, at least when the tribunals conclusions could be regarded on their face as plausible or reasonably supportable.
At times, Dallah has put its case regarding the first partial award even higher.
In her oral submissions, Miss Heilbron went so far as to suggest that the first partial award was itself an award entitled to recognition and enforcement under the New York Convention.
No application for its recognition or enforcement has in fact been made (the present proceedings concern only the final award), but, quite apart from that, the suggestion carries Dallah nowhere.
First, (in the absence of any agreement to submit the question of arbitrability itself to arbitration) I do not regard the New York Convention as concerned with preliminary awards on jurisdiction.
As Fouchard, Gaillard, Goldmans International Commercial Arbitration, para 654, observes the Convention does not cover the competence competence principle.
Dallah could not satisfy even the conditions of Article IV(1) of the Convention and s.102(1)(b) of the 1996 Act requiring the production of an agreement under which the parties agreed to submit the question of arbitrability to the tribunal let alone resist an application under Article V(1)(a) and s.103(2)(b) on the ground that the parties had never agreed to submit that question to the binding jurisdiction of the tribunal.
Second, Dallahs case quotes extensively from Fouchard, Gaillard, Goldman, para 658, pointing out that arbitral tribunals are free to rule on their own jurisdiction, but ignores the ensuring para 659, which says, pertinently, that: Even today, the competence competence principle is all too often interpreted as empowering the arbitrators to be the sole judges of their jurisdiction.
That would be neither logical nor acceptable.
In fact, the real purpose of the rule is in no way to leave the question of the arbitrators jurisdiction in the hands of the arbitrators alone.
Their jurisdiction must instead be reviewed by the courts if an action is brought to set aside or to enforce the award.
In its written case Dallah also argued that the first partial award gave rise, under English law, to an issue estoppel on the issue of jurisdiction, having regard to the Governments deliberate decision not to institute proceedings in France to challenge the tribunals jurisdiction to make any of its awards.
This was abandoned as a separate point by Miss Heilbron in her oral submissions before the Supreme Court, under reference to the Governments recent application to set aside the tribunals awards in France.
But, in my judgment, the argument based on issue estoppel was always doomed to fail.
A person who denies being party to any relevant arbitration agreement has no obligation to participate in the arbitration or to take any steps in the country of the seat of what he maintains to be an invalid arbitration leading to an invalid award against him.
The party initiating the arbitration must try to enforce the award where it can.
Only then and there is it incumbent on the defendant denying the existence of any valid award to resist enforcement.
Dallahs stance on question (d) cannot therefore be accepted.
Arbitration of the kind with which this appeal is concerned is consensual the manifestation of parties choice to submit present or future issues between them to arbitration.
Arbitrators (like many other decision making bodies) may from time to time find themselves faced with challenges to their role or powers, and have in that event to consider the existence and extent of their authority to decide particular issues involving particular persons.
But, absent specific authority to do this, they cannot by their own decision on such matters create or extend the authority conferred upon them.
Of course, it is possible for parties to agree to submit to arbitrators (as it is possible for them to agree to submit to a court) the very question of arbitrability that is a question arising as to whether they had previously agreed to submit to arbitration (before a different or even the same arbitrators) a substantive issue arising between them.
But such an agreement is not simply rare, it involves specific agreement (indeed clear and unmistakable evidence in the view of the United States Supreme Court in First Options of Chicago, Inc. v Kaplan 514 US 938, 944 (1995) per Breyer J), and, absent any agreement to submit the question of arbitrability itself to arbitration, the court should decide that question just as it would decide any other question that the parties did not submit to arbitration, namely, independently: ibid, per Breyer J, p.943.
Leaving aside the rare case of an agreement to submit the question of arbitrability itself to arbitration, the concept of competence competence is applied in slightly different ways around the world, but it says nothing about judicial review and it appears that every country adhering to the competence competence principle allows some form of judicial review of the arbitrators jurisdictional decision . : China Minmetals Materials Import and Export Co., Ltd. v Chi Mei Corporation 334 F 3d 274, 288 (2003), where some of the nuances (principally relating to the time at which courts review arbitrators jurisdiction) were examined.
In China Minmetals it was again held, following First Options, that under United States law the court must make an independent determination of the agreements validity and therefore of the arbitrability of the dispute, at least in the absence of a waiver precluding the defense: p 289.
English law is well established in the same sense, as Devlin J explained in Christopher Brown Ltd v Genossenschaft sterreichischer [1954] 1 QB 8, 12 13, in a passage quoted in the February 1994 Consultation Paper on Draft Clauses and Schedules of an Arbitration Bill of the DTIs Departmental Advisory Committee (then chaired by Lord Steyn): It is not the law that arbitrators, if their jurisdiction is challenged or questioned, are bound immediately to refuse to act until their jurisdiction has been determined by some court which has power to determine it finally.
Nor is it the law that they are bound to go on without investigating the merits of the challenge and to determine the matter in dispute, leaving the question of their jurisdiction to be held over until it is determined by some court which had power to determine it.
They might then be merely wasting their time and everybody elses.
They are not obliged to take either of those courses.
They are entitled to inquire into the merits of the issue whether they have jurisdiction or not, not for the purpose of reaching any conclusion which will be binding upon the parties because that they cannot do but for the purpose of satisfying themselves as a preliminary matter whether they ought to go on with the arbitration or not.
If it became abundantly clear to them, on looking into the matter, that they obviously had no jurisdiction as, for example, it would be if the submission which was produced was not signed, or not properly executed, or something of that sort, then they might well take the view that they were not going to go on with the hearing at all.
They are entitled, in short, to make their own inquiries in order to determine their own course of action, and the result of that inquiry has no effect whatsoever upon the rights of the parties.
This coincides with the position in French law: paras 20 and 22 above.
An arbitral tribunals decision as to the existence of its own jurisdiction cannot therefore bind a party who has not submitted the question of arbitrability to the tribunal.
This leaves for consideration the nature of the exercise which a court should undertake where there has been no such submission and the court is asked to enforce an award.
Domestically, there is no doubt that, whether or not a partys challenge to the jurisdiction has been raised, argued and decided before the arbitrator, a party who has not submitted to the arbitrators jurisdiction is entitled to a full judicial determination on evidence of an issue of jurisdiction before the English court, on an application made in time for that purpose under s.67 of the Arbitration Act 1996, just as he would be entitled under s.72 if he had taken no part before the arbitrator: see e.g. Azov Shipping Co. v Baltic Shipping Co. [1999] 1 Lloyds Rep 68.
The English and French legal positions thus coincide: see the Pyramids case (para 20 above).
The question is whether the position differs when an English court is asked to enforce a foreign award.
There is an irony about Dallahs stance that any enforcing court, other than the court of the seat, has a restricted role in reviewing an arbitral tribunals jurisdiction.
The concept of transnational arbitration has been advocated in arbitral circles, and was no doubt recognised by French courts, in order so far as possible to underline the autonomy of international arbitration from the seat of arbitration or its national legal system.
What matters in real terms is where an arbitration award can be enforced: see Gaillards Legal Theory of International Arbitration, (op. cit.) Chapter I.
Yet Miss Heilbrons submissions invoke in one and the same breath a transnational view and a view attaching a special and dominant significance to the law of the seat.
They also invite the spectre of dual sets of proceedings, conducted in two different countries (that of the seat and that of enforcement) involving different levels of review in relation to essentially the same issue whether the award should be enforced in the latter country.
It is true that Article V(1)(e) of the Convention and s.103(2)(f) of the 1996 Act recognise the courts of the country in which, or under the law of which an award was made as the courts where an application to set aside or suspend an award may appropriately be made; and also that Article VI and s.103(5) permit a court in any other country where recognition or enforcement of the award is sought to adjourn, if it considers it proper, pending resolution of any such application.
But Article V(1)(a) and s.103(2)(b) are framed as free standing and categoric alternative grounds to Article V(1)(e) of the Convention and s.103(2)(f) for resisting recognition or enforcement.
Neither Article V(1)(a) nor s.103(2)(b) hints at any restriction on the nature of the exercise open, either to the person resisting enforcement or to the court asked to enforce an award, when the validity (sc. existence) of the supposed arbitration agreement is in issue.
The onus may be on the person resisting recognition or enforcement, but the language enables such person to do so by proving (or furnishing proof) of the non existence of any arbitration agreement.
This language points strongly to ordinary judicial determination of that issue.
Nor do Article VI and s.103(5) contain any suggestion that a person resisting recognition or enforcement in one country has any obligation to seek to set aside the award in the other country where it was made.
None of this is in any way surprising.
The very issue is whether the person resisting enforcement had agreed to submit to arbitration in that country.
Such a person has, as I have indicated, no obligation to recognise the tribunals activity or the country where the tribunal conceives itself to be entitled to carry on its activity.
Further, what matters, self evidently, to both parties is the enforceability of the award in the country where enforcement is sought.
Since Dallah has chosen to seek to enforce in England, it does not lie well in its mouth to complain that the Government ought to have taken steps in France.
It is true that successful resistance by the Government to enforcement in England would not have the effect of setting aside the award in France.
But that says nothing about whether there was actually any agreement by the Government to arbitrate in France or about whether the French award would actually prove binding in France if and when that question were to be examined there.
Whether it is binding in France could only be decided in French court proceedings to recognise or enforce, such as those which Dallah has now begun.
I note, however, that an English judgment holding that the award is not valid could prove significant in relation to such proceedings, if French courts recognise any principle similar to the English principle of issue estoppel (as to which see The Sennar (no. 2) [1985] 1 WLR 490).
But that is a matter for the French courts to decide.
The nature of the present exercise is, in my opinion, also unaffected where an arbitral tribunal has either assumed or, after full deliberation, concluded that it had jurisdiction.
There is in law no distinction between these situations.
The tribunals own view of its jurisdiction has no legal or evidential value, when the issue is whether the tribunal had any legitimate authority in relation to the Government at all.
This is so however full was the evidence before it and however carefully deliberated was its conclusion.
It is also so whatever the composition of the tribunal a comment made in view of Dallahs repeated (but no more attractive for that) submission that weight should be given to the tribunals eminence, high standing and great experience.
The scheme of the New York Convention, reflected in ss.101 103 of the 1996 Act may give limited prima facie credit to apparently valid arbitration awards based on apparently valid and applicable arbitration agreements, by throwing on the person resisting enforcement the onus of proving one of the matters set out in Article V(1) and s.103.
But that is as far as it goes in law.
Dallah starts with advantage of service, it does not also start fifteen or thirty love up.
This is not to say that a court seised of an issue under Article V(1)(a) and s.103(2)(b) will not examine, both carefully and with interest, the reasoning and conclusion of an arbitral tribunal which has undertaken a similar examination.
Courts welcome useful assistance.
The correct position is well summarised by the following paragraph which I quote from the Governments written case: 233.
Under s.103(2)(b) of the 1996 Act / Art V.1(a) NYC, when the issue is initial consent to arbitration, the Court must determine for itself whether or not the objecting party actually consented.
The objecting party has the burden of proof, which it may seek to discharge as it sees fit.
In making its determination, the Court may have regard to the reasoning and findings of the alleged arbitral tribunal, if they are helpful, but it is neither bound nor restricted by them.
The application of the above principles
The above principles have already been applied to the facts of this case at two previous instances.
Not surprisingly, therefore, most of the emphasis of Dallahs written case and oral submissions before the Supreme Court was on the submissions of principle which have already been considered.
In the circumstances and in the light of the careful examination of the whole history in the courts below, it is unnecessary to go once again into every detail.
Each of the courts below has paid close attention to the arbitral tribunals reasoning and conclusions, before concluding that the tribunal lacked jurisdiction to make the final award now sought to be enforced.
Their examination of the case took place by reference to the same principles that a French court would, on the expert evidence, apply if and when called upon to examine the existence of an arbitration agreement between Dallah and the Government: see paras 17 20 above.
It took account of the whole history, including the Governments close involvement with and interest in the project from the original proposal onwards, the negotiation and signature of the MOU with the Government, the creation by the Government of the Trust and the re structuring of the project to introduce the Trust, the negotiation and signature of the Agreement between Dallah and the Trust, the subsequent correspondence, the three sets of proceedings in Pakistan and the arbitration proceedings.
The tribunals approach
The arbitral tribunal set out its approach to the issue of jurisdiction in the opening paragraphs of its first partial award.
Dallah and the Government had argued for a single law governing both arbitral jurisdiction and the substance of the issues: the law of Saudi Arabia in Dallahs submission and the law of Pakistan in the Governments.
The tribunal distinguished between jurisdiction and substance, relying on the principle of autonomy of arbitral agreements, and rejected both the suggested national laws.
It held (section III(I)) that: 3.
Judicial as well as Arbitral case law now clearly recognise that, as a result of the principle of autonomy, the rules of law, applicable to an arbitration agreement, may differ from those governing the main contract, and that, in the absence of specific indication by the parties, such rules need not be linked to a particular national law (French Cour de Cassation, 1er civ., Dec. 20, 1993, Dalico), but may consist of those transnational general principles which the Arbitrators would consider to meet the fundamental requirements of justice in international trade.
Dr Justice Shah and Lord Mustill would not endorse without reservation the concept of a transnational procedural law independent of all national laws.
They need not however pursue this, since it makes no difference to the result. 4. in view of the autonomy of the Arbitration Agreement, the Tribunal believes that such Agreement is not to be assessed, as to its existence, validity and scope, neither under the laws of Saudi Arabia nor under those of Pakistan, nor under the rules of any other specific local law connected or not, to the present dispute.
By reason of the international character of the Arbitration Agreement coupled with the choice, under the main Agreement, of institutional arbitration under the ICC Rules without any reference in such Agreement to any national law, the Tribunal will decide on the matter of its jurisdiction and on all issues relating to the validity and scope of the Arbitration Agreement and therefore on whether the Defendant is a party to such Agreement and to this Arbitration, by reference to those transnational general principles and usages reflecting the fundamental requirements of justice in international trade and the concept of good faith in business.
As to what this meant in practice, the tribunal noted (section III(III)(1)) that: a non signatory may be bound by an arbitration agreement, by virtue of any one of a number of legal theories such as representation, assignment, succession, alter ego or the theory of group of companies.
It recorded that Dallahs primary case was that the Trust was an alter ego of the Government, but went on immediately to say that: To arbitrate this disputed issue, the Arbitral Tribunal believes that it is very difficult to reason exclusively on the basis of juristic and abstract legal principles and provisions and to decide such issue by merely relying on general considerations of legal theory.
The tribunal then described the setting up and organisation of the Trust.
It concluded that the rules and regulations provided in the Ordinance did not contain sufficient evidence that would permit it to disregard the Trusts legal entity and to consider that the Trust and the Government are one such entity, and were fully consistent with the general features of the regulations of public entities, and that Such control of the Trust by the Government is not, in itself, sufficiently pertinent to impair the distinct legal personality enjoyed by the Trust or to lead to the disregard of such personality, and therefore to the extension of the Arbitration Agreement from the Trust to the Government.
The tribunal, or Dr Shah and Lord Mustill, added that particular caution must be observed where the party sought to be joined as defendant is a state or state body.
The tribunal continued (section III(III)): 5.
In fact, any reply to the present issue relating to whether or not the Present Defendant is a Party to the Arbitration Agreement depends on the factual circumstances of the case and requires a close scrutiny of the conduct and of the actions of the parties before, during and after the implementation of the main Agreement in order to determine whether the Defendant may be, through its role in the negotiation, performance and termination of such Agreement, considered as a party thereto, and hence to the Arbitration Agreement.
The control exercised by the State over the Trust becomes, within that framework, an element of evidence of the interest and the role that the party exercising such control has in the performance of the agreement concluded by the Trust, and provides the backdrop for understanding the true intentions of the parties. 6.
Arbitral as well as judicial case law has widely recognised that, in international arbitration, the effects of the arbitration clause may extend to parties that did not actually sign the main contract but that were directly involved in the negotiation and performance of such contract, such involvement raising the presumption that the common intention of all parties was that the non signatory party would be a true party to such contract and would be bound by the arbitration agreement.
In the context of the award as a whole, the last paragraph must be a statement by the tribunal of one of the transnational general principles and usages reflecting the fundamental requirements of justice in international trade and the concept of good faith in business, to which the tribunal had earlier referred in section III(I)(4).
In this light, the tribunal examined in turn the position prior to, at signature of, and during performance of the Agreement, and during the period after the Trust lapsed.
At each point, it focused on the Governments conduct.
It considered that it was clearly established that the Trust was organically and operationally under the Governments strict control, that its financial and administrative independence was largely theoretical, and that everything concerning the Agreement was at all times performed by the [Government] concurrently with the Trust and that the Trust functions . reverted back logically to the Government, after the Trust ceased to exist (section III(III)(12 1).
The tribunals examination led it to conclude (para 12 1) that: The Trust, in spite of its distinct legal personality in theory, appears thus in fact and in conduct to have been considered and to have acted as a part and a division of the Defendant to which it is fully assimilated, a temporary instrument that has been created by a political decision of the Defendant for specific activities which the Defendant wanted to perform, and which was cancelled also by a political decision of the Defendant.
Therefore, the Trust appears as having been no more than the alter ego of the Defendant which appears, in substance, as the real party in interest, and therefore as the proper party to the Agreement and to the Arbitration with the Claimant.
The tribunal went on (para 12 2) to say that the Governments behaviour, as in actual fact the party that was involved in the negotiation, implementation and termination of the Agreement . before, during and after the existence of the Trust, shows and proves that the [Government] has always been and considered itself to be a true party to the Agreement .
The tribunal acknowledged (para 13) that Certainly, many of the above mentioned factual elements, if isolated and taken into a fragmented way, may not be construed as sufficiently conclusive for the purpose of this section, but it recorded that Dr Mahmassani believed that, when looked at globally as a whole, such elements constitute a comprehensive set of evidence that may be relied upon to conclude that the Defendant is a true party to the Agreement, and that While joining in this conclusion Dr Shah and Lord Mustill note that they do so with some hesitation, considering that the case lies very close to the line.
In paragraph 14, the tribunal recorded a further divergence of view, with Dr Mahmassani believing that the general principle of good faith comforts the conclusion that the Trust is the alter ego of the Defendant, but Dr Shah and Lord Mustill not convinced that in matters not concerning the conduct of proceedings but rather the identification of those who should be participants in them, a duty of good faith can operate to make someone a party to an arbitration who on other grounds could not be regarded as such.
The tribunals ultimate conclusion on jurisdiction was thus expressed as a finding (in which two of the arbitrators only narrowly concurred) that the Trust was the alter ego of the Government, making the Government a true party to the Agreement.
That, as I have said (para 11 above), is not now Dallahs case.
But Dallah points out that the tribunals reasoning for its ultimate finding, and the lengthy analysis of conduct and events which the tribunal undertook, can be traced back to para 6 of section (III)(III) of its award, where the tribunal identified a test of common intention to be derived from judicial and arbitral case law.
How these strands of thought relate is not to my mind clear.
There is a considerable difference between a finding (and between the evidence relevant to a finding) that one of two contracting parties is the alter ego of a third person and a finding that it was the common intention of the other party to the contract that the third person should be a party to the contract made with the first party.
The former depends on the characteristics and relationship of the first contracting party and the third person.
The latter depends on a common intention on the part of the second contracting party and the third person (and possibly also on the part of the first contracting party, although no one has suggested that the Trust in the present case did not concur in any common intention that Dallah and the Government may be found to have had).
Since the tribunal focused throughout on the Trust and Government and their relationship and conduct, and ended with a conclusion that the former was the alter ego of the latter, it is not clear how far the tribunal was in fact examining or making any finding about any common intention of Dallah and the Government.
If it was, the weight attaching to the finding is diminished by the tribunals failure to focus on Dallahs intention.
The hesitation of two of the arbitrators about the conclusion they reached also suggests the possibility that even a slight difference in the correct analysis of the relevant conduct and events could have led the tribunal overall to a different conclusion.
More fundamentally, if and so far as the tribunal was applying a test of common intention, the test which it expressed in section III(III)(6) differs, potentially significantly, from the principle recognised by the relevant French case law on international arbitration.
Although the tribunal must have viewed its test as a transnational general principle and usage, it appears likely that it also had the French case law in mind.
This is suggested by its use of the words directly involved in and presumption, by its earlier mention of the Dalico case (see para 18 above), and by its letter dated 29 November 2000 written (after the oral hearings before it on jurisdiction) raising the possibility that reasoning embodied in the French Pyramids case might be relevant on the issue of jurisdiction.
In any event, in Dallahs submission, the tribunal applied principles which accord broadly with French law.
But, the French legal test, set out in para 18 above, is that an international arbitration clause be may extended to non signatories directly involved in the performance of a contract: provided that it is established that their contractual situation, their activities and the normal commercial relations existing between the parties allow it to be presumed that they have accepted the arbitration clause of which they knew the existence and scope.
In contrast, under the test stated by the tribunal (para 36 above), direct involvement in the negotiation and performance of the contract is by itself said to raise the presumption of a common intention that the non signatory should be bound.
The tribunals test represents, on its face, a low threshold, which, if correct, would raise a presumption that many third persons were party to contracts deliberately structured so that they were not party.
Asked about the tribunals test, M. Vatier did not consider it accurate enough, adding that the principles adopted were in general the principles that might be adopted in French law.
But they are too general.
I consider that Aikens J was therefore correct to doubt (in para 148) whether the tribunal had applied a test which accords with that recognised under French law.
Analysis of the history
I turn to the conduct of the Government and the events on which the tribunal relied.
As to the Ordinance, the tribunal said that it regarded the Governments organic control of the Trust as an element of evidence as to the true intention of the Defendant to run and control directly and indirectly the activities of the Trust, and to view such Trust as one of its instruments.
Miss Heilbron accepts that Dallah cannot rely on the last ten words.
Dallah is not advancing a case of agency, and the Ordinance does not support a case of agency.
The tribunals comment at this point is on its face also inconsistent with the tribunals earlier references to the normality of the control established by the Ordinance (para 35 above).
As to the negotiations leading up the Agreement, the courts below were in my view correct to observe that the fact that the Government was itself involved in negotiations and in the MOU and remained interested throughout in the project does not itself mean that the Government (or Dallah) intended that the Government should be party to the Agreement deliberately structured so as to be made, after the Trusts creation, between Dallah and the Trust.
It does not appear that a French court would adopt any different attitude to governmental interest and involvement in the affairs of a state entity.
An illustration of the careful analysis required in this context is provided by the decision of the Court of Appeal of Paris in the Pyramids case (above).
Under Heads of Agreement signed by the Egyptian government through its Minister of Tourism, the Egyptian General Organisation for Tourism and Hotels (EGOTH) and the claimant, the government had committed itself to do the necessary work to acquire property near the Pyramids and EGOTH and the claimants undertook to form a company (to be owned 40/60 by EGOTH and the claimants) to develop a tourist centre on such property.
A usufruct over the property was to be given to the company by the government and EGOTH, and the claimants were to be responsible for engineering, construction and architectural services, as well as financing.
Subsequently, EGOTH and the claimants entered into a Supplemental Agreement which defined the project and their obligations and contained an ICC arbitration clause.
Underneath their respective signatures on this agreement, the Minister of Tourism placed the words approved, agreed and ratified by the Minister of Tourism followed by his signature.
A worldwide outcry led to the Egyptian authorities cancelling the project.
The Paris Court of Appeal set aside an arbitral award against the state of Egypt, holding that the words and signature added by the Minister did not mean that the state was a party.
They were added because the Ministry was responsible for supervising tourist sites and approving the creation of economic complexes and the creation, operation and management of hotels, and EGOTH and the claimants had specifically contemplated that their agreement would be subject to such approval.
The added words and signature did not therefore indicate any intention to be bound and so to waive the states immunity.
Here, the structure of the Agreement made clear that the Government was distancing itself from any direct contractual involvement: see per Aikens J, para 129 and Moore Bick LJ, para 32.
The Governments only role under the Agreement (in the absence of any assignment or transfer under clause 27) was to guarantee the Trusts loan obligations and to receive a counter guarantee from the Trust and its trustee bank.
Dallah was throughout this period advised by lawyers, Orr, Dignam & Co. The tribunal confined itself in relation to the Agreement to statements that (a) it was the Government which decided to delegate to the Trust the finalisation, signature and implementation of the Agreement, (b) the Government was contractually involved in the Agreement, as the Government was bound, under Article 2, to give its guarantee and (c) clause 27 authorised the Trust to assign its rights and obligations to the Government without Dallahs prior approval, such a clause being normally used only when the assignee is very closely linked to the assignor or is under its total control . (no doubt true, but on its face irrelevant to the issue).
The delegate and bound tend to beg the issue, and nothing in these statements lends any support to Dallahs case that the Agreement evidences or is even consistent with an intention on the part of either Dallah or the Government that the Government should be party to the Agreement.
Nowhere did the tribunal address the deliberate change in structure and in parties from the MOU to the Agreement, the potential significance of which must have been obvious to Dallah and its lawyers, but which they accepted without demur.
As to performance of the Agreement, between April 1996 and September 1996, exchanges between Dallah and the Ministry of Religious Affairs (MORA) of the Government culminated in agreement that one of Dallahs associate companies, Al Baraka Islamic Investment Bank Ltd., should be appointed trustee bank to manage the Trusts fund as set out in each Ordinance (para 5 above), and in notification by letters dated 30 July and 9 September 1996 of such appointment by the Board of Trustees of the Trust.
In subsequent letters dated 26 September and 4 November 1996, the MORA urged Mr Nackvi of the Dallah/Al Baraka group to give wide publicity to the appointment and to the savings schemes proposed to be floated for the benefit of intending Hujjaj.
By letter dated 22 October 1996 Dallah submitted to the MORA a specimen financing agreement for the Trust (never in fact approved or agreed), under one term of which the Trust would have confirmed that it was under the control of the Government.
The Governments position and involvement in all these respects is clear but understandable, and again adds little if any support to the case for saying that, despite the obvious inference to the contrary deriving from the Agreement itself, any party intended or believed that the Government should be or was party to the Agreement.
The fact that the Trust never itself acquired any assets is neutral, since its acquisition of any property always depended upon the arrangement of financing through Dallah, which never occurred, and its acquisition of other funds was to depend on the savings and philanthropic schemes to be arranged through its trustee bank under the Ordinances, the time for which never came.
It is scarcely surprising that in these circumstances the Trust never itself acquired its own letter paper, and letters recording its activity were, like those reporting decisions of its Board of Trustees, written on MORA letter paper.
At the forefront of Dallahs factual case before the Supreme Court, as below, were exchanges and events subsequent to the Trusts demise.
One letter in particular, dated 19 January 1997, was described in Dallahs written case as playing a pivotal role in, and in Miss Heilbrons oral submissions as key to the differing analyses of the tribunal and the courts below.
The letter was written by Mr Lutfullah Mufti, signing himself simply as Secretary, on MORA letter paper, and faxed to Dallah on 20 January 1997.
It read: Pursuant to the above mentioned Agreement for the leasing of housing facilities in the holy city of Makkah, Kingdom of Saudi Arabia, you were required within ninety (90) days of the execution of the said Agreement to get the detailed specifications and drawings approved by the Trust.
However, since you have failed to submit the specifications and drawings for the approval of the Trust to date you are in breach of a fundamental term of the Agreement which tantamounts to a repudiation of the whole Agreement which repudiation is hereby accepted.
Moreover, the effectiveness of the Agreement was conditional upon your arranging the requisite financing facility amounting to U.S. $100,000,000.00 within thirty (30) days of the execution of the Agreement and your failure to do so has prevented the Agreement from becoming effective and as such there is no Agreement in law.
This is without prejudice to the rights and remedies which may be available to us under the law.
Mr Lutfullah Mufti was secretary of MORA from 26 August 1993 to 19 December 1995 and from 23 December 1996 to 3 June 1998, and it will be recalled that, under each Ordinance, the secretary of MORA was at the same time secretary of the Trust.
Also on 20 January 1997 Mr Mufti verified on oath the contents of a plaint issued in the name of the Trust as plaintiff to bring the first set of Pakistani proceedings against Dallah.
The plaint set out the establishment of the Trust by Ordinance LXXXI of 1996 dated 12 August 1996 as a body having perpetual succession and asserted that Dallah had repudiated the Agreement by failing to submit detailed specifications and drawings within 90 days of the execution of the Agreement which repudiation was accordingly accepted by the plaintiff vide its letter dated 19.01.1997.
The Trust sought a declaration that, in consequence of the accepted repudiation, the Agreement was not binding and is of no consequence upon the rights of the plaintiff and a permanent injunction restraining Dallah from claiming any right against the plaintiff.
By an undated application, also verified by Mr Mufti, the Trust further sought an interlocutory injunction restraining Dallah from representing or holding out itself to have any contractual relation with the applicant on the basis of the aforesaid repudiated Agreement.
Dallah made an application against the Trust for a stay of the Trusts proceedings in favour of arbitration under clause 23 of the Agreement.
The application is missing from the bundle, but a written reply to it was put in on behalf of the Trust.
This averred, in terms consistent with the stance taken in the plaint (though less obviously consistent with the principle of the separability of arbitration clauses), that since the plaintiff has challenged the very validity and existence of the agreement dated 10.09.1996, the instant application is, therefore, not maintainable.
Mr Mufti deposed on oath that allegations evidently made by Dallah against the Trust in its application for a stay were false and that the facts stated in the plaint are true and correct to the best of my knowledge and belief and are reiterated.
In early 1998, the first set of Pakistan proceedings were brought to an end by a judgment which commenced by recording that: Counsel for the defendant had objected at the last date of hearing that Awami Haj Trust was established [under section] 3 of the Awami Haj Trust Ordinance, 1996 but at the time of institution of this suit Ordinance had elapsed, there was no more ordinance in the field and suit has been filed on behalf of same which was formed under the Ordinance after the lapse of Ordinance.
Awami Haj Trust is plaintiff in this suit.
After the lapse of Ordinance, the present plaintiff was no more a legal person in the eye of law.
The judge went on to record and reject the submission of counsel appearing for the Trust that the Trust continued to be able to file suit in respect of things done during the life of the Trust, adding: Moreover the things done during the Ordinance can be sued and can sue by the parent department for which this Ordinance was issued by the government and that was ministry for religious affairs.
Suit should have been filed by the Ministry of religious affairs. [B]efore parting with this Order, I observe that the liabilities and duties against the present defendant can be agitated by the Ministry of Religious affairs government of Pakistan if any.
Since the suit has not been filed by the legal person.
The present plaintiff is no more a plaintiff in the eye of the law.
Suit is dismissed.
Dallah invoked ICC arbitration against the Government on 19 May 1998, on the basis that the Government was party to the Agreement.
Notice of Dallahs request for arbitration was received by the Government on 29 May 1998, and on 2 June 1998 a second Pakistani suit was filed in the Governments name against Dallah, verified once again by Mr Mufti.
Its terms were clearly drawn from those of the first suit, but it started by reciting that the Trust established under Ordinance no. LXXXI of 1996 no longer remained in field after the lapse of the Ordinance after four months, and that The present suit is, therefore, being filed by Pakistan who issued the said Ordinance.
The plaint went on to recite the Agreement, variously referring to the parties to it, to the Trust as a party, to the plaintiff Trust, to the plaintiff and to Dallahs alleged repudiation which repudiation was accordingly accepted by the plaintiff vide its letter dated 19.01.1997.
It further asserted that, on account of such repudiation, the Agreement is no longer binding on the plaintiff and then: 14.
That in January 1997, Awami Hajj Trust instituted a civil suit for declaration and permanent injunction against the defendant which suit was, however, dismissed vide order dated 21.02.1998 on the ground that after the lapse of the Ordinance, Awami Hajj Trust was no more a legal person and it could neither sue or be sued.
The learned civil court, however observed that liabilities and duties against the defendant can be agitated by the Government of Pakistan [sic].
The plaint concluded by praying for a declaratory decree in favour of the plaintiff that the Agreement stands repudiated on account of default of the defendant . and the same, as such, is not binding and is of no consequence upon the rights of the plaintiff and by seeking a permanent injunction restraining Dallah from claiming any right against the plaintiff under the said Agreement or representing or holding out that it has any contractual relationship with the plaintiff.
An interim injunction in the same terms was obtained on 2 June 1998.
On 5 June 1998 the Government, through its advocates, wrote to the ICC informing it of the proceedings and the interim injunction as well as relying on s.35 of the Pakistan Arbitration Act 1940 in support of a contention that any further proceedings in the ICC arbitration would be invalid in the light of the Pakistan proceedings.
Dallah responded to the second set of Pakistan proceedings on 12 June 1998 with an application for a stay for arbitration, asserting that the contract, admitted by the Plaintiff, which is complete, valid and fully effective between the parties, contains the following clause 23 ., which was then set out.
It pointed out, no doubt correctly, that the Governments plaint must be seen as a riposte to the recently notified request for ICC arbitration.
The Government replied on 27 June 1998 to the effect that there is no valid and effective Agreement between the parties.
The application, as such, is incompetent and is liable to be dismissed.
On 15 August 1998 the Governments advocates informed the ICC that the Government has already declined to submit to the jurisdiction of the International Court of Arbitration and spelled out that: There is no contract or any arbitration agreement between our client and Dallah .
The contract and the arbitration agreement referred to by the Claimant were entered into between the Claimant and Awami Hajj Trust.
The Trust has already ceased to exist after expiry of the period of the Ordinance under which it was established.
By a judgment dated 18 September 1998, the judge in the second set of Pakistan proceedings dismissed Dallahs application for a stay for arbitration on the ground that Dallah had neither alleged nor placed on record any instrument of transfer of rights and obligations of the Trust in the name of the [Government], which was not therefore prima facie bound by the Agreement dated 10 September 1996.
Dallah appealed on the ground that the Government was successor to the Trust, but on 14 January 1999 the Government withdrew its suit, as it was apparently entitled to, in view of its commencement of the third set of Pakistani proceedings.
Dallah has disclaimed, both before the tribunal and before the English courts, any suggestion that these short lived and abortive proceedings could give rise to any estoppel on the issue of the tribunals jurisdiction.
But Dallah relies on them in support of its current case of common intention.
In the third set of proceedings the Government claimed against Dallah declarations to the effect, inter alia, that it was not successor to the Trust, had not taken over the Trusts responsibilities and was not a party to the Agreement or any arbitration agreement with Dallah.
The claim was made under s.33 of the Arbitration Act 1940, which entitles a party to an arbitration agreement or any person claiming under such party to claim relief.
Dallahs response was that, since the Government was denying that it was party to an arbitration agreement, it had no locus standi to make the claim.
This response was upheld by judgment dated 19 June 1999, against the Governments argument that the purpose of s.33 was to enable a party alleged to be party to an arbitration agreement to seek the relief it claimed.
An appeal by the Government to the Lahore High Court was dismissed, again on the basis that the Government was not a party to the Agreement or arbitration agreement.
An appeal to the Pakistan Supreme Court has apparently remained unresolved.
No evidence was adduced from Mr Mufti before Aikens J. Aikens J said, in relation to the letter dated 19 January 1997 that, logically Mr Mufti must, in fact, have been writing the letter in his capacity of Secretary to MORA, whatever he may have thought at the time, but Aikens J found it possible to get a clearer indication of the state of mind of the [Government] at this stage by reference to the proceedings begun by Mr Mufti on 20 January 1997 (paras 117, 119).
These indicated, in Aikens Js view, that Mr Mufti thought that the Trust had rights it could enforce, and that there was no intention on the part of the Government to be bound by the Agreement or to step into the shoes of the Trust (para 119).
The Court of Appeal took a slightly different view.
It observed that the fact that, after the Trust ceased to exist, Mr Mufti could not have been writing (as opposed, I add, to purporting to write) as secretary to the Board of Trustees did not necessarily mean that he was writing on behalf of the Government or that the Government viewed itself as a party to the Agreement (Moore Bick LJ, para 36).
Moore Bick LJ continued: If, as I think likely, the letter was written in ignorance that the Trust had ceased to exist, it is almost certain that Dallah was equally unaware of the fact and that it was read and understood as written on behalf of the Trust.
Miss Heilbron challenges this reasoning as regards the Government, and invites attention to the letter on its face and to the Governments stance in the second set of Pakistan proceedings.
But one obvious explanation of the letter, read with the first set of proceedings of which it was clearly the precursor, is that neither Mr Mufti nor indeed Dallah was at that stage conscious of the drastic effect under Pakistan law of the failure to repromulgate the Ordinance.
Even if Mr Mufti was aware of the Trusts demise, he may well have believed (and one may understand why) that this could not affect the Trusts right to litigate matters arising during and out of the Trusts existence which was the stance taken by counsel for the Trust when Dallah eventually realised and pointed out that the Trust had lapsed.
However that may be, it seems clear that Mr Mufti was in January 1997 acting on the basis that and as if the Trust existed.
Further, Dallah clearly cannot have appreciated that the Trust had ceased to exist until a late stage in the course of the first set of Pakistan proceedings.
The arbitral tribunal regarded the letter dated 19 January 1997 as very significant because it confirmed in the clearest way possible that the Defendant [the Government], after the elapse of the Trust, regarded the Agreement with the Claimant as its own and considered itself as a party to such Agreement (para 11 1).
It went on to say that the Governments position in the arbitration: did not deal with the substance and contents of such letter, but was rather limited to a formal and very general challenge of the validity of said letter, on the ground that such letter was absolutely unauthorised, illegal and of no legal effect because all office bearers of the Trust, including the Secretary, had ceased to have any authority to act for the defunct Trust.
Such challenge is however completely unfounded as the signatory of the letter of 19.1.97, Mr Lutfallah Mufti, did not sign such letter in his capacity as official of the Trust, to which anyhow the letter makes no reference at all, but in his capacity as Secretary of the Defendant i.e. the Ministry of Religious Affairs which is an integral part of the Government of Pakistan.
As such, the signatory of the letter engages and binds the Government, as he has continued to bind it during the whole previous period where the Trust was in existence.
Several features of the arbitral tribunals reliance on the letter are notable.
First, the tribunal did not put the letter in its context.
It did not mention the first set of proceedings at all in addressing the letters significance.
In fact, it referred to those proceedings only once in its whole award.
That was much earlier in para 5(c) where it recited three short submissions by the Government With respect to the effect of the legal proceedings in Pakistan.
The first such submission read: The 1st [sic] January 1997 suit : Pakistan was not a party to such suit and as such it is not bound by any observation made by the Court in the said suit instituted by the defunct Trust. (In making this submission, the Government was evidently seeking to rebut a possible argument that it might be bound by the (obiter) observations of the judge in his judgment at the end of the first set of proceedings to the effect that the liabilities and duties against the present defendant can be agitated by the Ministry of Religious affairs government of Pakistan if any.
It has not been, and could not have been suggested in the present proceedings that these observations in any way bind the Government.)
Secondly, the tribunal rejected any idea that Mr Mufti was, when writing the letter, acting in a manner which was absolutely unauthorised, illegal and of no legal effect.
But that, on any view, was precisely what Mr Mufti can be seen, with hindsight, to have been doing, on the same day as the letter was faxed, by commencing the first set of proceedings in the Trusts name.
Thirdly, the tribunals comments on the letter assume that the Government or Mr Mufti on its behalf was aware of the elapse of the Trust and believed that this ended any possibility of the Trust taking any legal stance or proceedings.
That, for reasons I have indicated, cannot have been the case.
He must at least have believed that it was still possible for action to be taken in the Trusts name in respect of matters arising from the Agreement.
Fourth, the tribunal, in this context as in others, did not address Dallahs state of mind, or its objective manifestation an important point when considering a test based on common intention.
The letter dated 19 January 1997 and faxed on 20 January 1997 cannot be read in a vacuum, particularly when the issue is whether the parties shared a common intention, manifested objectively, to treat the Government as a or the real party to the Agreement and arbitration clause.
Read in the objectively established context which I have indicated, it is clear that it was written and intended as a letter setting out the Trusts position by someone who believed that the Trust continued either to exist or at least to have a sufficient existence in law to enable it to take a position on matters arising when the Ordinance was in force.
This is precisely how the plaint of 20 January 1997 put the matter when it said that the repudiation was accordingly accepted by the plaintiff [i.e. the Trust] vide its letter dated 19.01.1997.
It makes no sense to suppose that Mr Mufti on one and the same day sent a letter intended to set out the Governments position and caused proceedings to be issued by the Trust on the basis that the letter was intended to set out the Trusts position.
That Dallah also believed that the Trust continued to exist, certainly in a manner sufficient to enable it to pursue the proceedings, is confirmed by Dallahs application to stay the Trusts proceedings pending arbitration and is also (as I understood her) admitted by Miss Heilbron.
The arbitral tribunal also relied on the second set of Pakistan proceedings and on the Governments letter dated 5 June 1998 to the tribunal.
It saw Mr Muftis verification on oath of the plaint dated 2 June 1998 as an admission providing another piece of evidence to be added to the other pieces, as to the fact that the [Government] has always been and has considered itself a party to the agreement, and the letter as an admission that it was a party to such Agreement and that it could accept repudiation of the Agreement by [Dallah] (para 11 2).
Aikens J and the Court of Appeal did not accept this analysis.
They considered that the second set of proceedings viewed overall was premised on the basis that the Government had succeeded to the Trusts rights and obligations upon the Trusts demise, not that the Government had been a party to it always or at any previous date.
The Government was taking up the suggestion of the judge who, when determining the first set of proceedings, had remarked that the liabilities and duties against the present defendant can be agitated by the Ministry of Religious affairs government of Pakistan if any.
In my opinion this analysis is clearly correct.
If the search is for confirmation of an intention to be or belief that the Government was party to the Agreement throughout, the second set of proceedings does not therefore advance the matter.
Nor does the letter dated 5 June 1998.
This was written to draw express attention to the second set of proceedings, and it recorded and attached a copy of the Pakistan judges injunction in them restraining Dallah from representing or holding out itself to have contractual relations with the applicant on the basis of the disputed contract.
Further, nothing affirmed by the Government during the second set of proceedings or in the letter throws any light on Dallahs intention at any prior date, or therefore assists the case that there was any common intention that the Government should always be party to the Agreement.
If the search is for an admission in or after June1998 that the Agreement or arbitration clause was binding on the Government, this is equally lacking.
The Governments case in the second set of proceedings, and the gist of the injunction and the letter dated 5 June 1998 was that, although the Government could agitate the former Trusts rights and liabilities, the Governments acceptance of Dallahs alleged repudiation meant that the Agreement as such, is not binding and is of no consequence upon the rights of the [Government] (plaint of 20 January 1997).
However questionable the proposition that an accepted repudiation renders the whole agreement (let alone an arbitration clause) not binding, that was the Governments case, and such a case is inconsistent with an intention to be party to the Agreement or agreement clause in or after June 1998.
Further and in any event, a very short time afterwards on 15 August 1998 the Government wrote to the tribunal making clear also its current position that it had never been party to any contract or arbitration agreement with Dallah.
Even if the Government could be treated in June as having made any relevant, short lived admission, it would in context and in the overall course of events be incapable of giving rise to any real inference that the Government had always intended or been intended to be a party to the Agreement.
Finally, the search for a subjective common intention under the principle recognised by the French courts must be undertaken by examining, and so through the prism of, the parties conduct.
Account will in that sense necessarily be taken of good faith.
The tribunal also described the transnational general principles and usages, which it decided to apply, as reflecting the fundamental requirements of justice in international trade and the concept of good faith in business (award, section III (I)(4)), and this must also be true of the principle recognised by the French courts.
As both Aikens J (para 130) and Moore Bick LJ (para 45) said, and in agreement on this point with Justice Dr Shah and Lord Mustill, if conduct interpreted as it would be understood in good faith does not indicate any such common intention, then it is impossible to see how a duty of good faith can operate to make someone a party to an arbitration who on other grounds could not be regarded as such (award, section (III)(III)(14)).
This remains so, whatever comments might or might not be made about the Governments conduct in allowing the Trust to lapse without providing for the position following its lapse.
In my view, the third re examination by this court, in the light of the whole history, of the issue whether the Government was party to the Agreement, and so to its arbitration clause, leads to no different answer to that reached in the courts below.
The arbitral tribunals contrary reasoning is neither conclusive nor on examination persuasive in a contrary sense.
As to the law, it is far from clear that the tribunal was directing its mind to common intention and, if it was, it approached the issue of common intention in terms differing significantly from those which a French court would adopt.
In any event, as to the facts, there are a number of important respects in which the tribunals analysis of the Governments conduct and the course of events cannot be accepted, and this is most notably so in relation to the significance of the letter dated 19 January 1997 and the second set of proceedings in Pakistan.
The upshot is that the course of events does not justify a conclusion that it was Dallahs and the Governments common intention or belief that the Government should be or was a party to the Agreement, when the Agreement was deliberately structured to be, and was agreed, between Dallah and the Trust.
Discretion
Dallah has a fall back argument, which has also failed in both courts below.
It is that s.103(2) of the 1996 Act and Article V(1) of the New York Convention state that Recognition and enforcement of the award may be refused if the person against whom such is sought proves (or furnishes proof of) one of the specified matters.
So, Miss Heilbron submits, it is open to a court which finds that there was no agreement to arbitrate to hold that an award made in purported pursuance of the non existent agreement should nonetheless be enforced.
In Dardana Ltd v Yukos Oil Company [2002] 1 All ER (Comm) 819 I suggested that the word may could not have a purely discretionary force and must in this context have been designed to enable the court to consider other circumstances, which might on some recognisable legal principle affect the prima facie right to have enforcement or recognition refused (paras 8 and 18).
I also suggested as possible examples of such circumstances another agreement or estoppel.
S.103(2) and Article V in fact cover a wide spectrum of potential objections to enforcement or recognition, in relation to some of which it might be easier to invoke such discretion as the word may contains than it could be in any case where the objection is that there was never any applicable arbitration agreement between the parties to the award.
Article II of the Convention and ss.100(2) and 102(1) of the 1996 Act serve to underline the (in any event obviously fundamental) requirement that there should be a valid and existing arbitration agreement behind an award sought to be enforced or recognised.
Absent some fresh circumstance such as another agreement or an estoppel, it would be a remarkable state of affairs if the word may enabled a court to enforce or recognise an award which it found to have been made without jurisdiction, under whatever law it held ought to be recognised and applied to determine that issue.
The factors relied upon by Dallah in support of its suggestion that a discretion should be exercised to enforce the present award amount for the most part to repetition of Dallahs arguments for saying that there was an arbitration agreement binding on the Government, or that an English court should do no more than consider whether there was a plausible or reasonably supportable basis for its case or for the tribunals conclusion that it had jurisdiction.
But Dallah has lost on such points, and it is impossible to re deploy them here.
The application of s.103(2) and Article V(1) must be approached on the basis that there was no arbitration agreement binding on the Government and that the tribunal acted without jurisdiction.
General complaints that the Government did not behave well, unrelated to any known legal principle, are equally unavailing in a context where the Government has proved that it was not party to any arbitration agreement.
There is here no scope for reliance upon any discretion to refuse enforcement which the word may may perhaps in some other contexts provide.
Conclusion
It follows that Aikens J and the Court of Appeal were right in the conclusions they reached and that Dallahs appeal to this Court must be dismissed.
LORD COLLINS Introduction
I agree that this appeal from the excellent judgments of Aikens J [2009] 1 All ER (Comm) 505 and the Court of Appeal [2010] 2 WLR 805 (with Moore Bick and Rix LJJ giving the reasons) should be dismissed.
Because of the international importance of the issues on the appeal, I set out the steps which have led me to that conclusion.
The final award is a Convention award which prima facie is entitled to enforcement in England under the Arbitration Act 1996, section 101(2).
The principal issue is whether the courts below were right to find that the Government has proved that on the proper application of French law (as the law of the country where the award was made, since there is no indication in the Agreement as to the law governing the arbitration agreement), it is not bound by the arbitration agreement.
To avoid any misunderstanding, it is important to dispel at once the mistaken notion (which has, it would appear, gained currency in the international arbitration world) that this is a case in which the courts below have recognised that the arbitral tribunal had correctly applied the correct legal test under French law.
On the contrary, one of the principal questions before all courts in this jurisdiction has been whether the tribunal had applied French law principles correctly or at all.
The main issue involves consideration of these questions: (a) the role of the doctrine that the arbitral tribunal has power to determine its own jurisdiction, or Kompetenz Kompetenz, or comptence comptence; (b) the application of arbitration agreements to non signatories (including States) in French law, and the role of transnational law or rules of law in French law; (c) whether renvoi is permitted under the New York Convention (and therefore the 1996 Act) and whether the application by an English court of a reference by French law to transnational law or rules of law is a case of renvoi.
There is also a subsidiary issue as to whether, even if the Government has proved that it is not bound by the arbitration agreement, the court should exercise its discretion ( enforcement may be refused ) to enforce the award.
By Article V(1)(a) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958: Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) the [arbitration] agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made;
The New York Convention is given effect in the United Kingdom by Part III of the Arbitration Act 1996 (England and Wales and Northern Ireland) and by sections 18 to 22 of the Arbitration (Scotland) Act 2010.
Article V(1)(a) of the New York Convention is transposed in England and Wales and Northern Ireland by section 103 of the 1996 Act, which provides: (1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases. (2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves (b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made;
Although Article V(1)(a) (and section 103(2)(b)) deals expressly only with the case where the arbitration agreement is not valid, the consistent international practice shows that there is no doubt that it also covers the case where a party claims that the agreement is not binding on it because that party was never a party to the arbitration agreement.
Thus in Dardana Ltd v Yukos Oil Co [2002] 2 Lloyds Rep 326 it was accepted by the Court of Appeal that section 103(2)(b) applied in a case where the question was whether a Swedish award was enforceable in England against Yukos on the basis that, although it was not a signatory, it had by its conduct rendered itself an additional party to the contract containing the arbitration agreement.
In Sarhank Group v Oracle Corp, 404 F 3d 657 (2d Cir 2005) the issue, on the enforcement of an Egyptian award, was whether a non signatory parent company was bound by an arbitration agreement on the basis that its subsidiary, which had signed the agreement, was a mere shell; and in China Minmetals Materials Import and Export Co Ltd v Chei Mei Corpn, 334 F 3d 274 (3d Cir 2003) enforcement of a Chinese award was resisted on the ground that the agreement was a forgery.
See also Born, International Commercial Arbitration (2009), pp 2778 2779.
In this case, because there was no indication by the parties of the law to which the arbitration agreement was subject, French law as the law of the country where the award was made, is the applicable law, subject to the relevance of transnational law or transnational rules under French law.
II The applicable principles
Kompetenz Kompetenz or comptence comptence as a general principle
A central part of this appeal concerns the authority to be given to the decision of the arbitral tribunal as to its own jurisdiction, and the relevance in this connection of the doctrine of Kompetenz Kompetenz or comptence comptence.
These terms may be comparatively new but the essence of what they express is old.
The principle was well established in international arbitration under public international law by the 18th century.
In the famous case of The Betsy (1797) the question was raised as to the power of the commissioners under the Mixed Commissions organised under the Jay Treaty between United States and Great Britain of 19 November 1794 to determine their own jurisdiction.
On 26 December 1796 Lord Loughborough LC had a meeting at his house with the American Commissioners and the American Ambassador.
The Lord Chancellor expressed the view that the doubt respecting the authority of the commissioners to settle their own jurisdiction, was absurd; and that they must necessarily decide upon cases being within, or without, their competency: Moore, History and Digest of International Arbitrations to which the United States has been a Party, Vol 1 (1898), p 327.
While the point was under discussion, the American Commissioners filed opinions.
Mr. Christopher Gore, the eminent American Commissioner, said: A power to decide whether a Claim preferred to this Board is within its Jurisdiction, appears to me inherent in its very Constitution, and indispensably necessary to the discharge of any of its duties: Moore, op cit, Vol.3 (1898), p 2278.
The principle has been recognised by the Permanent Court of International Justice and the International Court of Justice: Rosenne, The Law and Practice of the International Court 1920 1996 (3rd ed 1997), Vol II, pp 846 et seq.
In the Advisory Opinion on the Interpretation of the Greco Turkish Agreement (1928) Series B No 16, 20, the Permanent Court of International Justice said: as a general rule, any body possessing jurisdictional powers has the right in the first place itself to determine the extent of its jurisdiction .
In the Nottebohm case (Liechtenstein v Guatemala), 1953 ICJ Rep 111, 119, the International Court of Justice, after referring to the Alabama case in 1872, and the views of the rapporteur of the Hague Convention of 1899 for the Pacific Settlement of International Disputes, said: it has been generally recognised.thatan international tribunal has the right to decide as to its own jurisdiction.
The principle has been recognised also by the European Court of Justice.
In West Tankers Inc v Allianz SpA (formerly Ras Riunione Adriatica di Sicurta SpA) (Case C 185/07) [2009] ECR I 663, [2009] AC 1138, para 57, it referred to the general principle that every court is entitled to examine its own jurisdiction (doctrine of Kompetenz Kompetenz).
The principle that a tribunal has jurisdiction to determine its own jurisdiction does not deal with, or still less answer, the question whether the tribunals determination of its own jurisdiction is subject to review, or, if it is subject to review, what that level of review is or should be.
Thus the International Courts decision on jurisdiction is not subject to recourse, although the State which denies its jurisdiction may decline to take any part at all in the proceedings (as in the Fisheries Jurisdiction cases (Federal Republic of Germany v Iceland; United Kingdom v Iceland), 1972 1974), or to take any further part after it has failed in its objections to the jurisdiction (as in Military and Paramilitary Activities in and against Nicaragua case (Nicaragua v United States, 1986).
By contrast, a decision of an ICSID tribunal (which shall be the judge of its own competence: Article 41(1) of the ICSID Convention) is subject to annulment on the grounds (inter alia) that the tribunal manifestly exceeded its powers (article 52(1)(b)), which includes lack of jurisdiction: Klckner v Cameroon, Decision on Annulment, 2 ICSID Rep 95; Schreuer, The ICSID Convention: A Commentary (2nd ed 2009), pp 943 947.
The principle in international commercial arbitration
So also the principle that a tribunal in an international commercial arbitration has the power to consider its own jurisdiction is no doubt a general principle of law.
It is a principle which is connected with, but not dependant upon, the principle that the arbitration agreement is separate from the contract of which it normally forms a part.
But it does not follow that the tribunal has the exclusive power to determine its own jurisdiction, nor does it follow that the court of the seat may not determine whether the tribunal has jurisdiction before the tribunal has ruled on it.
Nor does it follow that the question of jurisdiction may not be re examined by the supervisory court of the seat in a challenge to the tribunals ruling on jurisdiction.
Still less does it mean that when the award comes to be enforced in another country, the foreign court may not re examine the jurisdiction of the tribunal.
Thus Article 16(1) of the UNCITRAL Model Law on International Commercial Arbitration provides that the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.
But by article 34(2) an arbitral award may be set aside by the court of the seat if an applicant furnishes proof that the agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereon, under the law of the seat (and see also article 36(1)(a)(i)).
Articles V and VI of the European Convention on International Commercial Arbitration of 1961 also preserve the respective rights of the tribunal and of the court to consider the question of the jurisdiction of the arbitrator.
Comparative procedure
Consequently in most national systems, arbitral tribunals are entitled to consider their own jurisdiction, and to do so in the form of an award.
But the last word as to whether or not an alleged arbitral tribunal actually has jurisdiction will lie with a court, either in a challenge brought before the courts of the arbitral seat, where the determination may be set aside or annulled, or in a challenge to recognition or enforcement abroad.
The degree of scrutiny, particularly as regards the factual enquiry, will depend on national law, subject to applicable international conventions.
There was sometimes said to be a rule in German law that an arbitral tribunal had the power to make a final ruling on its jurisdiction without any court control, but if it ever existed, there is no longer any such rule: Poudret and Besson, Comparative Law of International Arbitration (2nd ed 2007), para 457; Born, International Commercial Arbitration, vol I (2009), pp 907 910.
In France the combined effect of articles 1458, 1466 and 1495 of the New Code of Civil Procedure (NCPC) is that, in an international arbitration conducted in France, the tribunal has power to rule on its jurisdiction if it is challenged.
If judicial proceedings are brought in alleged breach of an arbitration agreement the court must declare that it has no jurisdiction unless the jurisdiction agreement is manifestly a nullity: Fouchard, Gaillard, Goldman, International Commercial Arbitration (ed Gaillard and Savage 1999), paras 655, 672; Delvolv, Pointon and Rouche, French Arbitration Law and Practice (2nd ed. 2009), paras 139 et seq, 172 et seq; and eg Soc Laviosa Chimica Mineraria v Soc Afitex, Cour de cassation, 11 February 2009, 2009 Rev Arb 155 (Vu le principe comptence comptence selon lequel il appartient larbitre de statuer par priorit sur sa propre competence).
But the position is different once the arbitral tribunal has ruled on its jurisdiction.
Its decision is not final and can be reviewed by the court hearing an action to set it aside.
The French Cour dappel seised of an action for annulment of an award made in France for lack of jurisdiction, or seised with an issue relating to the jurisdiction of a foreign tribunal or an appeal against an exequatur granted in respect of a foreign award, has the widest power to investigate the facts: Fouchard, Gaillard, Goldman, paras 1605 to 1614; Delvolv, Pointon and Rouche, para 426.
In the Pyramids case (Rpublique Arabe dEgypte v Southern Pacific Properties Ltd, Paris Cour dappel, 12 July 1984 (1985) 10 Yb Comm Arb 113; Cour de cassation, 6 January 1987 (1987) 26 ILM 1004) the question was whether a distinguished tribunal had been entitled to find that Egypt (as opposed to a State owned entity responsible for tourism) was a party to an arbitration agreement.
The Cour dappel said that the arbitral tribunal had no power finally to decide the issue of its jurisdiction; if it decided the issue of the existence or of the validity of the arbitration agreement, nevertheless it only decided this question subject to the decision of the court on an application for the annulment of the award pursuant to article 1504, NCPC.
The Cour de cassation confirmed that the Cour dappel had been entitled de rechercher en droit et en fait tous les elements concernant les vices en question en particulier, il lui appartient dinterprter le contrat pour apprcier elle mme si larbitre a statu sans convention darbitrage. (to examine as a matter of law and as a matter of fact all circumstances relevant to the alleged defects in particular, it is for the court to construe the contract in order to determine itself whether the arbitrator ruled in the absence of an arbitration agreement.)
First Options of Chicago Inc v Kaplan, 514 US 938 (1995) was not an international case.
It concerned the application of the Federal Arbitration Act to an award of an arbitral panel of the Philadelphia Stock Exchange.
The question was whether the federal District Court should independently decide whether the arbitral panel had jurisdiction.
The United States Supreme Court drew a distinction between the case where the parties had agreed to submit the arbitrability question itself to arbitration, and the case where they had not.
In the former case the court should give considerable leeway to the arbitrator, setting aside the award only in certain narrow circumstances, but (at 943, per Breyer J): If, on the other hand, the parties did not agree to submit the arbitrability question itself to arbitration, then the court should decide that question just as it would decide any other question that the parties did not submit to arbitration, namely, independently.
That flowed inexorably from the fact that arbitration was simply a matter of contract between the parties and was a way to resolve those disputes, but only those disputes, that the parties had agreed to submit to arbitration.
This decision was applied in the international context, in connection with the enforcement of a CIETAC award, in China Minmetals Materials Import and Export Co Ltd v Chei Mei Corpn, 334 F 3d 274 (3d Cir 2003) in which Minmetals, a Chinese corporation, sought to enforce a CIETAC award against Chei Mei, a New Jersey corporation.
Chei Mei resisted enforcement on the ground that the contract containing the arbitration clause had been forged.
The tribunal had held that Chei Mei failed to show that the contracts were forged, but that even if its signature and stamp had been forged, it had taken various steps which confirmed its adherence to the arbitration agreement.
The Court of Appeals for the Third Circuit decided that the court asked to enforce an award may determine independently the arbitrability of the dispute.
After an illuminating discussion of the doctrine of comptence comptence and kompetenz kompetenz, it concluded (at 288, citing Park, Determining Arbitral Jurisdiction: Allocation of Tasks Between Courts and Arbitrators (1997) 8 Am Rev Int Arb 133, 140 142) that it appears that every country adhering to the competence competence principle allows some form of judicial review of the arbitrators jurisdictional decision where the party seeking to avoid enforcement of an award argues that no valid arbitration agreement ever existed.
The court said (ibid): After all, a contract cannot give an arbitral body any power, much less the power to determine its own jurisdiction, if the parties never entered into it.
The position in England
Prior to the 1996 Act the leading authority in England was Christopher Brown Ltd v Genossenschaft Osterreichischer [1954] 1 QB 8, in which Devlin J said (at pp 12 13): It is not the law that arbitrators, if their jurisdiction is challenged or questioned, are bound immediately to refuse to act until their jurisdiction has been determined by some court which has power to determine it finally.
Nor is it the law that they are bound to go on without investigating the merits of the challenge and to determine the matter in dispute, leaving the question of their jurisdiction to be held over until it is determined by some court which had power to determine it.
They might then be merely wasting their time and everybody elses.
They are not obliged to take either of those courses.
They are entitled to inquire into the merits of the issue whether they have jurisdiction or not, not for the purpose of reaching any conclusion which will be binding upon the parties because that they cannot do but for the purpose of satisfying themselves as a preliminary matter whether they ought to go on with the arbitration or not.
If it became abundantly clear to them, on looking into the matter, that they obviously had no jurisdiction as, for example, it would be if the submission which was produced was not signed, or not properly executed, or something of that sort, then they might well take the view that they were not going to go on with the hearing at all.
They are entitled, in short, to make their own inquiries in order to determine their own course of action, and the result of that inquiry has no effect whatsoever upon the rights of the parties.
The DTI Departmental Advisory Committee in its February 1994 Report on a draft Arbitration Bill said: [The German] doctrine of Kompetenz Kompetenz resolves logical difficulties in legal systems where the jurisdiction of state courts and the jurisdiction of arbitrators under a valid arbitration agreement are mutually exclusive in legal theory.
In these legal systems, the state courts must dismiss legal proceedings brought in violation of a valid arbitration agreement, thereby retaining no competence over the parties but in the case of an invalid or non existent arbitration agreement, the arbitrators can have no jurisdiction at all.
Who then decides what and in what order in the absence of a suitable doctrine of Kompetenz Kompetenz? In contrast, the courts of most common law countries (including England) merely stay legal proceedings because in legal theory an arbitration agreement can never oust the Courts jurisdiction over the parties; and this logical problem over jurisdiction has not arisen in the same form For these reasons, the law and practice of English arbitration does not require an express doctrine of Kompetenz Kompetenz.
English law achieves the same result as the German doctrine by a different route. [T]he practice of arbitration tribunals determining their own jurisdiction, subject to the final decision of the English Court, has long been settled in England . (Ch III, pp 4 5)
The position in England under the Arbitration Act 1996 as regards arbitrations the seat of which is in England is as follows.
By section 30(1) of the 1996 Act, which is headed Competence of tribunal to rule on its own jurisdiction the arbitral tribunal may rule on its own substantive jurisdiction, including the question whether there is a valid arbitration agreement.
By section 30(2) any such ruling may be challenged (among other circumstances) in accordance with the provisions of the Act.
Section 32 gives the court jurisdiction to determine any preliminary point on jurisdiction but only if made with the agreement of all parties or with the permission of the tribunal, and the court is satisfied (among other conditions) that there is good reason why the matter should be decided by the court.
By section 67 a party to arbitral proceedings may challenge any award of the tribunal as to its substantive jurisdiction but the arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court is pending in relation to an award as to jurisdiction.
The equivalent provisions in Scotland are in the Arbitration (Scotland) Act 2010, Sched 1, Rules 19, 42 (not limited to jurisdiction), and 67.
The consistent practice of the courts in England has been that they will examine or re examine for themselves the jurisdiction of arbitrators.
This can arise in a variety of contexts, including a challenge to the tribunals jurisdiction under section 67 of the 1996 Act, or in an application to stay judicial proceedings on the ground that the parties have agreed to arbitrate.
Thus in Azov Shipping Co v Baltic Shipping Co [1999] 1 Lloyds Rep 68 Rix J decided that where there was a substantial issue of fact as to whether a party had entered into an arbitration agreement, then even if there had already been a full hearing before the arbitrator the court, on a challenge under section 67, should not be in a worse position than the arbitrator for the purpose of determining the challenge.
This decision has been consistently applied at first instance (see, eg, Peterson Farms Inc v C&M Farming Ltd [2004] EWHC 121 (Comm), [2004] 1 Lloyds Rep 603) and is plainly right.
Where there is an application to stay proceedings under section 9 of the 1996 Act, both in international and domestic cases, the court will determine the issue of whether there ever was an agreement to arbitrate: Al Naimi (t/a Buildmaster Construction Services) v Islamic Press Agency [2000] 1 Lloyds Rep 522 (CA) (English arbitration); Albon (t/a NA Carriage Co) v Naza Motor Trading Sdn Bhd (No 4) [2007] EWCA Civ 1124, [2008] 1 Lloyds Rep 1 (Malaysian arbitration).
So also where an injunction was refused restraining an arbitrator from ruling on his own jurisdiction in a Geneva arbitration, the Court of Appeal recognised that the arbitrator could consider the question of his own jurisdiction, but that would only be a first step in determining that question, whether the subsequent steps took place in Switzerland or in England: Weissfisch v Julius [2006] EWCA Civ 218, [2006] 1 Lloyds Rep 716, para 32.
Consequently, in an international commercial arbitration a party which objects to the jurisdiction of the tribunal has two options.
It can challenge the tribunals jurisdiction in the courts of the arbitral seat; and it can resist enforcement in the court before which the award is brought for recognition and enforcement.
These two options are not mutually exclusive, although in some cases a determination by the court of the seat may give rise to an issue estoppel or other preclusive effect in the court in which enforcement is sought.
The fact that jurisdiction can no longer be challenged in the courts of the seat does not preclude consideration of the tribunals jurisdiction by the enforcing court: see, e.g. Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2006] EWCA Civ 1529, [2007] QB 886, para 104; Paklito Investment Ltd v Klockner East Asia Ltd [1993] 2 HKLR 39, 48, per Kaplan J.
The application of the principles in the present case
Dallahs argument is that the enforcing court, faced with a decision by the tribunal that it has jurisdiction, should only conduct a limited review.
The argument is essentially this: (1) The arbitral tribunal remained a competent tribunal to determine its own jurisdiction, whether or not it determined it wrongly. (2) The first partial award was made with jurisdiction i.e. the Kompetenz Kompetenz jurisdiction, even if (on the English courts view) the later awards relating to the merits were subsequently found to be made without substantive jurisdiction. (3) It is universally accepted that an enforcing court cannot review the merits of an award, and a de novo rehearing at the enforcement stage (by contrast with an application to set aside at the seat of the arbitration) adds a fact finding layer to the process which was not envisaged by those drafting the New York Convention and which undermines the finality and efficiency of the system. (4) The review envisaged by the New York Convention is premised on the need to ensure that there is not a grave departure from the basic precepts of international arbitration and fairness and basic concepts of justice. (5) The award is itself an evidential element of the reviewing process, and deference must be given to such an award by the reviewing/enforcing court. (6) The degree of deference may vary according to many factors, for example, the experience of the tribunal or the nature of the underlying decision, such as whether it was one of fact or law or mixed fact and law, and enforcing courts must be particularly wary where, as here, the underlying decision is fact based or a case of mixed fact and law. (7) Where, as here, there is no dispute as to the underlying facts or law such that the decision is one upon which different tribunals can legitimately come to different conclusions, enforcing national courts should be slow to substitute their own interpretation unless it can be shown that the tribunals decision was unsustainable, and this is particularly so where, as in this case, the resisting party has offered no new evidence. (8) In essence the issue in this case is whether the English court should refuse to enforce the award on the basis that its views and interpretation of the same facts, applying the same principles of law, should be preferred to the decision of a former Law Lord and a doyen of international arbitration, a former Chief Justice of Pakistan and an eminent Lebanese lawyer.
Dallah relies in particular on international authorities relating to applications to annul awards on the basis that the matters decided by the arbitral tribunal exceeded the scope of the submission to arbitration: article V(1)(c) of the New York Convention; article 34 of the UNCITRAL Model Law.
In Parsons & Whittemore Overseas Co Inc v Soc Gn de lIndustrie du Papier, 508 F 2d 969 (2d Cir 1974) the Court of Appeals for the Second Circuit, in dealing with an attack on a Convention award based on Article V(1)(c), said (at p 976) that the objecting party must overcome a powerful presumption that the arbitral body acted within its powers.
That statement was applied by the British Columbia Court of Appeal, in a case under article 34 of the Model Law as enacted by the International Commercial Arbitration Act, SBC 1986: Quintette Coal Ltd v Nippon Steel Corpn [1991] 1 WWR 219 (BCCA).
These cases are of no assistance in the context of a challenge based on the initial jurisdiction of the tribunal and in particular when it is said that a party did not agree to arbitration.
Nor is any assistance to be derived from Dallahs concept of deference to the tribunals decision.
There is simply no basis for departing from the plain language of article V(1)(a) as incorporated by section 103(2)(b).
It is true that the trend, both national and international, is to limit reconsideration of the findings of arbitral tribunals, both in fact and in law.
It is also true that the Convention introduced a pro enforcement policy for the recognition and enforcement of arbitral awards.
The New York Convention took a number of significant steps to promote the enforceability of awards.
The Geneva Convention placed upon the party seeking enforcement the burden of proving the conditions necessary for enforcement, one of which was that the award had to have become final in the country in which it was made.
In practice in some countries it was thought that that could be done only by producing an order for leave to enforce (such as an exequatur) and then seeking a similar order in the country in which enforcement was sought, hence the notion of double exequatur (but in England it was decided, as late as 1959, that a foreign order was not required for the enforcement of a Geneva Convention award under the Arbitration Act 1950, section 37: Union Nationale des Co opratives Agricoles des Crales v Robert Catterall & Co Ltd [1959] 2 QB 44).
The New York Convention does not require double exequatur and the burden of proving the grounds for non enforcement is firmly on the party resisting enforcement.
Those grounds are exhaustive.
But article V safeguards fundamental rights including the right of a party which has not agreed to arbitration to object to the jurisdiction of the tribunal.
As van den Berg, The New York Arbitration Convention of 1958 (1981) puts it, at p 265: In fact, the grounds for refusal of enforcement are restricted to causes which may be considered as serious defects in the arbitration and award: the invalidity of the arbitration agreement, the violation of due process, the award extra or ultra petita, the irregularity in the composition of the arbitral tribunal or the arbitral procedure, the non binding force of the award, the setting aside of the award in the country of origin, and the violation of public policy.
In Kanoria v Guinness [2006] 1 Lloyds Rep 701, 706, May LJ said that section 103(2) concerns matters that go to the fundamental structural integrity of the arbitration proceedings.
Nor is there anything to support Dallahs theory that the New York Convention accords primacy to the courts of the arbitral seat, in the sense that the supervisory court should be the only court entitled to carry out a re hearing of the issue of the existence of a valid arbitration agreement; and that the exclusivity of the supervisory court in this regard ensures uniformity of application of the Convention.
There is nothing in the Convention which imposes an obligation on a party seeking to resist an award on the ground of the non existence of an arbitration agreement to challenge the award before the courts of the seat.
It follows that the English court is entitled (and indeed bound) to revisit the question of the tribunals decision on jurisdiction if the party resisting enforcement seeks to prove that there was no arbitration agreement binding upon it under the law of the country where the award was made.
Arbitration agreements and non signatories: groups of companies/State owned
entities and States
One of the most controversial issues in international commercial arbitration is the effect of arbitration agreements on non signatories: among many others see, eg, Hanotiau, Non Signatories in International Arbitration: Lessons from Thirty Years of Case Law, in International Arbitration 2006: Back to Basics? (2007, ed van den Berg), p 341; Park, Non signatories and International Contracts: An Arbitrators Dilemma, in Multiple Party Actions in International Arbitration (ed Macmahon, Permanent Court of Arbitration, 2009), p 1.
The issue has arisen frequently in two contexts: the first is the context of groups of companies where non signatories in the group may seek to take advantage of the arbitration agreement, or where the other party may seek to bind them to it.
The second context is where a State owned entity with separate legal personality is the signatory and it is sought to bind the State to the arbitration agreement.
Arbitration is a consensual process, and in each type of case the result will depend on a combination of (a) the applicable law; (b) the legal principle which that law uses to supply the answer (which may include agency, alter ego, estoppel, third party beneficiary); and (c) the facts of the individual case.
One of the decisions in the field of groups of companies best known internationally is the Dow Chemical case in France, which arose in the context of the setting aside of a French award.
The arbitrators (Professors Sanders, Goldman and Vasseur: (1984) 9 Yb Comm Arb 131) decided that non signatory companies in a group could rely on an arbitration clause in contracts between Isover St Gobain and two Dow Chemical group companies.
The tribunal said that a group of companies constituted one and the same economic reality (une realit conomique unique) of which the tribunal should take account when it ruled on its jurisdiction.
It decided that it was the mutual intention of all parties that the group companies should have been real parties to the agreement.
They relied in particular on the fact that group companies participated in the conclusion, performance and termination of the contract, and on the economic reality and needs of international commerce.
The Paris Cour dappel rejected an application to set aside the award: the effect of the ICC Rules was that the tribunal was bound to take account of the will of the parties and of trade usages; in the light of the agreements and of the documents exchanged in the course of their conclusion and termination, the tribunal had given relevant and consistent reasons for deciding that it was the joint intention of the parties that Dow Chemicals France and Dow Chemical Company had been parties to the agreements (and therefore to the arbitration agreements) although they had not physically signed them.
The court also mentioned that as a subsidiary reason the tribunal had invoked the notion of the group of companies, which had not been seriously disputed by Isover St Gobain: Soc.
Isover Saint Gobain v Soc.
Dow Chemical France, 21 October 1983, 1984 Rev Arb 98.
For other cases see, eg, Redfern and Hunter, International Arbitration (5th ed 2009, ed Blackaby and Partasides), paras 2.44 2.45; Wilske, Shore and Ahrens, The Group of Companies Doctrine Where is it heading? (2006) 17 Am Rev Int Arb 73.
As regards States, the Pyramids case (Rpublique Arabe dEgypte v Southern Pacific Properties Ltd, above, para 89) was also a case of setting aside rather than enforcement of a foreign award.
A company incorporated in Hong Kong (SPP) signed an agreement with an Egyptian state owned entity responsible for tourism (EGOTH).
The contract referred to a pre existing framework contract between the same parties and the Egyptian Government concerning the construction of two tourist centres, one of which was located near the Pyramids.
The contract contained an ICC arbitration clause with Paris as the seat.
The last page of the agreement contained the words approved, agreed and ratified followed by the signature of the Egyptian Minister for Tourism.
After political opposition to the project, the Egyptian authorities cancelled it, and SPP initiated arbitration proceedings against both EGOTH and Egypt.
The arbitral tribunal, with Professor Giorgio Bernini as Chairman, ruled that it had jurisdiction, because, although acceptance of an arbitration clause had to be clear and unequivocal, there was no ambiguity since the Government, in becoming a party to the agreement, could not reasonably have doubted that it would be bound by the arbitration clause contained in it.
The Egyptian Government brought proceedings in France to set aside the award.
The combined effect of articles 1502 and 1504, NCPC, is that the French court may set aside an award made in France in an international arbitration on the ground that there is no arbitration agreement.
The Paris Cour dappel held that the Government was not a party to the arbitration agreement because the words under the Ministers signature were to be read in the light of Egyptian legislation which simply gave the Minister the power to approve construction and in the light of a declaration by the signatories that the obligations assumed by EGOTH would be subject to approval by the relevant government authorities.
Subsequently an ICSID Tribunal found that it had jurisdiction and awarded the claimants $27m: 3 ICSID Rep 131 and 189.
See also the Westland case in the Swiss courts, involving the application of an arbitration agreement in a contract between Westland Helicopters and the Arab Organisation for Industrialisation to the organisations member States: (1991) 16 Yb Comm Arb 174; and Lew, Mistelis and Krll, Comparative International Commercial Arbitration (2003), paras 27 26 et seq; Westland Helicopters Ltd v Arab Organisation for Industrialisation [1995] QB 282.
An example in England of a foreign award prior to the present case is Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2006] EWCA Civ 1529, [2007] QB 886, where the Court of Appeal, after a review of the principal arbitral decisions, confirmed (at para 81 et seq) that a government is not to be taken to be a party to an agreement or to have submitted to arbitration simply because it has put forward a state organisation to contract with a foreign investor.
But on the facts the Government had agreed to ICC arbitration in Denmark.
French law and transnational law
The Joint Memorandum of the experts stated (para 2.8): Under French law, the existence, validity and effectiveness of an arbitration agreement in an international arbitration need not be assessed on the basis of national law, be it the law applicable to the main contract or any other law and can be determined according to rules of transnational law.
To this extent, it is open to an international arbitral tribunal the seat of which is in Paris to find that the arbitration agreement is governed by transnational law.
The notion in French law that an arbitration clause may be valid independently of a reference to national law goes back to the decisions of the Cour de cassation in Hecht v Buismans, 4 July 1972, 1974 Rev Crit 82 and of the Paris Cour dappel in Menicucci v Mahieux, 13 December 1975, 1976 Rev Crit 507: see Fouchard, Gaillard, Goldman, para 418; Poudret and Besson, para 180.
In the Dow Chemical case the Paris Cour dappel (21 October 1983, 1984 Rev Arb 98) said that the arbitral tribunal could decide on its competence without reference to French law, and could rely on the notion of the group of companies as a customary practice in international trade.
In the Dalico case (Municipalit de Khoms El Mergeb v Soc Dalico, 20 December 1993, 1994 Rev Arb 116) the Cour de cassation was concerned with an application to set aside an award in which an arbitral tribunal had upheld the existence and validity of an arbitration clause in a document annexed to a works contract between a Libyan municipal authority and a Danish company (Dalico).
The main contract was subject to Libyan law and stipulated standard terms and conditions, amplified or amended by an annex, which formed part of the contract.
The standard terms and conditions conferred jurisdiction on the Libyan courts, but the annex amended them by providing for international arbitration.
Dalico referred the dispute to arbitration and obtained an award against the Libyan municipal authority.
An action to set aside the award was brought before the Paris Cour dappel.
The court dismissed the application to set aside, relying in particular on the fact that the principle of the autonomy of the arbitration agreement confirms the independence of the arbitration clause, not only from the substantive provisions of the contract to which it relates, but also from a domestic law applicable to that contract.
The court held that the wording of the documents revealed the parties intention to submit their dispute to arbitration.
The Cour de cassation dismissed an appeal, emphasising that the Cour dappel justified its decision in law by establishing the existence of the arbitration agreement without reference to Libyan law, which governed the contract.
The Cour de cassation said, at p 117: en vertu dune rgle matrielle du droit international de larbitrage, la clause compromissoire est indpendante juridiquement du contrat principal qui la contient directement ou par rfrence et que son existence et son efficacit sapprcient, sous rserve des rgles imperatives de droit franais et de lordre public international, daprs la commune volont des parties, sans quil soit ncessaire de se rfrer une loi tatique . (by virtue of a substantive rule of international arbitration, the arbitration agreement is legally independent of the main contract containing or referring to it, and the existence and effectiveness of the arbitration agreement are to be assessed, subject to the mandatory rules of French law and international public policy, on the basis of the parties common intention, there being no need to refer to any national law.).
On this case see Fouchard, Gaillard, Goldman, paras 388, 452.
The fact that the experts were agreed that an arbitral tribunal with a French seat may apply transnational law or transnational rules to the validity of an arbitration agreement does not mean that a French court would not be applying French law or that it is no longer a French arbitration.
It simply means that the arbitration agreement is no longer affected by the idiosyncrasies of local law, and its validity is examined solely by reference to the French conception of international public policy: Fouchard, Gaillard, Goldman, paras 420, 441.
As Poudret and Besson put it (at para 181): The result of this case law is that the arbitration agreement is subjected to a material rule which recognises its validity provided it does not violate international public policy.
Although this has been the subject of controversy, the rule is an international rule of French law and not a transnational rule.
Nor could there be any suggestion that the application of transnational law or transnational rules could displace the applicability in England, under article V(1)(a) of the New York Convention as enacted by section 103(2)(b) of the 1996 Act, of the law of the place where the award is made.
This case does not therefore raise the controversial question of delocalisation of the arbitral process which has been current since the 1950s.
It started with the pioneering work of Professor Berthold Goldman, Professor Pierre Lalive and Professor Clive Schmitthoff, which was mainly devoted to the question of disconnecting the substantive governing law in international commercial arbitration from national substantive law.
It expanded to promotion of the notion that international arbitration is, or should be, free from the controls of national law, or as Lord Mustill put it in SA Coppe Lavalin NV v Ken Ren Chemicals and Fertilizers Ltd [1995] 1 AC 38, 52, a self contained juridical system, by its very nature separate from national systems of law: see, among many others, Lew, Achieving the Dream: Autonomous Arbitration (2006) 22 Arb Int 179; Gaillard, Legal Theory of International Arbitration (2010); Paulsson, Arbitration in Three Dimensions (LSE Law, Society and Economy Working Papers 2/2010); the older material cited in Dicey, Morris and Collins, The Conflict of Laws (14th ed 2006), para 16 032; and the cases on the enforcement in France of awards which have been annulled in the country where they were rendered on the basis that they were international awards which were not integrated in the legal system of that country, e.g. Soc PT Putrabali Adyamulia v Soc Rena Holding, Cour de cassation, 29 June 2007 (2007) 32 Yb Comm Arb 299, and below at para 129.
Non signatories: the principle in French law
One of the odd features of this case is that there is nothing in the experts reports which suggests that there is any relevant difference between French arbitration law in non international cases and the principle in such cases as Dalico.
When counsel was asked at the hearing of this appeal what difference it made, there was no satisfactory answer.
No doubt that is because common intention would serve equally to answer the question in a non international case: cf Loquin, Arbitrage, para 18, in Juris Classeur Procdure Civile, Fasc 1032.
As M Yves Derains (Dallahs expert) put it in his report, the arbitrators may find that the arbitration agreement is governed by transnational law, but the arbitrators must also look for the common will of the parties, express or implied, since it is a substantive rule of French law that the courts will apply when examining the jurisdiction of the arbitrators.
There was, in the event, a large measure of agreement between the experts on French law who appeared before Aikens J, M le Btonnier Vatier for the Government and M Yves Derains for Dallah.
In their Joint Memorandum they agreed that in order to determine whether an arbitration clause upon which the jurisdiction of an arbitral tribunal is founded extends to a person who is neither a named party nor a signatory to the underlying agreement containing that clause, it is necessary to find out whether all the parties to the arbitration proceedings, including that person, had the common intention (whether express or implied) to be bound by the agreement and, as a result, by the arbitration clause; the existence of a common intention of the parties is determined in the light of the facts of the case; the courts will consider the involvement and behaviour of all the parties during the negotiation, performance and, if applicable, termination of the underlying agreement.
When a French court has to determine the existence and effectiveness of an arbitration agreement, and when for these purposes it must decide whether the agreement extends to a party who was neither a signatory nor a named party, it examines all the factual elements necessary to decide whether that agreement is binding upon that person.
The fact that an arbitration agreement is entered into by a State owned entity does not mean that it binds the State, and whether the State is bound depends on the facts in the light of the principles.
The principle as expressed in the jurisprudence of the Paris Cour dappel is as follows: Selon les usages du commerce international, la clause compromissoire insre dans un contrat international a une validit et une efficacit propres qui commandent den tendre lapplication aux parties directement impliques dans lexcution du contrat et les litiges qui peuvent en rsulter, ds lors quil est tabli que leur situation contractuelle, leurs activits et les relations commerciales habituelles existant entre les parties font prsumer quelles ont accept la clause darbitrage dont elles connaissaient lexistence et la porte, bien quelles naient pas t signatoires du contrat qui la stipulait. (According to international usage, an arbitration clause inserted in an international contract has a validity and an effectiveness of its own, such that the clause must be extended to parties directly implicated in the performance of the contract and in any disputes arising out of the contract, provided that it has been established that their respective contractual situations and existing usual commercial relations raise the presumption that they accepted the arbitration clause of whose existence and scope they were aware, irrespective of the fact that they did not sign the contract containing the arbitration agreement.
See Orri v Soc. des Lubrifiants Elf Acquitaine, 11 January 1990, 1991 Rev Arb 95 (affd Cour de cassation, 11 June 1991, 1992 Rev Arb 73, on different grounds); also Socit Korsnas Marma v Soc DurandAuzias, 30 November 1988, 1989 Rev Arb 691; Compagnie tunisienne de navigation (Cotunav) v Soc Comptoir commercial Andr, 28 November 1989, 1990 Rev Arb 675.
The principle applies equally where a non signatory seeks the benefit of an arbitration agreement, as in Dalico itself and in Dow Chemicals.
The common intention of the parties means their subjective intention derived from the objective evidence.
M le Btonnier Vatier, the Governments expert, confirmed in his oral evidence that under French law the court must ascertain the genuine, subjective, intention of each party, but through its objective conduct, and M Yves Derains, Dallahs expert, agreed.
M Derains confirmed that in order for an act (such as the letter of termination) of the Government to have the effect of establishing the subjective intention on the Governments part to be bound by the arbitration agreement, it would have to be a conscious, deliberate act by the government; that anything less than a conscious and deliberate act of the government might make the letter less relevant; and that the letter would not be relevant if it was written by mistake.
Renvoi
The parties were agreed before Aikens J that article V(1)(a) of the New York Convention established two conflict of laws rules.
The first was the primary rule of party autonomy: the parties could choose the law which governed the validity of the arbitration agreement.
In default of that agreement, the law by which to test validity was that of the country where the award to be enforced was made.
Because they were to be treated as uniform conflict of laws rules, the reference to the law of the country where the award was made in article V(1)(a) of the New York Convention and the same words in section 103(2)(b) of the 1996 Act must be directed at that countrys substantive law rules, rather than its conflicts of law rules.
Aikens J also drew support from section 46(2) in Part I of the 1996 Act, which defines the law chosen by the parties as the substantive laws of that country and not its conflict of laws rules, and which was specifically inserted to avoid the problems of renvoi: Mustill & Boyd, Commercial Arbitration, 2001 Companion (2001), p 328.
Aikens J considered that the same approach was intended for section 103(2)(b) in Part III of the 1996 Act, and that he should have regard to French substantive law and not its conflict of laws rules (at para 78) and that the principle of French law that the existence of an arbitration agreement in an international context may be determined by transnational law was a French conflict of laws rule (at para 93).
It is likely that renvoi is excluded from the New York Convention: see van den Berg, The New York Convention of 1958 (1981), p 291.
But it does not follow that for an English court to test the jurisdiction of a Paris tribunal in an international commercial arbitration by reference to the transnational rule which a French court would apply is a case of renvoi.
Renvoi is concerned with what happens when the English court refers an issue to a foreign system of law (here French law) and where under that countrys conflict of laws rules the issue is referred to another countrys law.
That is not the case here.
What French law does is to draw a distinction between domestic arbitrations in France, and international arbitrations in France.
It applies certain rules to the former, and what it describes as transnational law or rules to the latter.
As mentioned above, the applicability of transnational rules or law (and there was no evidence on their content) would not make a difference in this case.
But even if there were a difference, there is not, according to English notions, any reference on to another system of law.
All that French law is doing is distinguishing between purely domestic cases and international cases and applying different rules to the latter.
If a French court would apply different principles in an international case, for an English court to do what a French court would do in these circumstances is not the application of renvoi.
Discretion
The court before which recognition or enforcement is sought has a discretion to recognise or enforce even if the party resisting recognition or enforcement has proved that there was no valid arbitration agreement.
This is apparent from the difference in wording between the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 and the New York Convention.
The Geneva Convention provided (article 1) that, to obtain recognition or enforcement, it was necessary that the award had been made in pursuance of a submission to arbitration which was valid under the law applicable thereto, and contained (article 2) mandatory grounds (shall be refused) for refusal of recognition and enforcement, including the ground that it contained decisions on matters beyond the scope of the submission to arbitration.
Article V(1)(a) of the New York Convention (and section 103(2)(b) of the 1996 Act) provides: Recognition and enforcement of the award may be refused See also van den Berg, p 265; Paulsson, May or Must Under the New York Convention: An Exercise in Syntax and Linguistics (1998) 14 Arb Int 227.
Since section 103(2)(b) gives effect to an international convention, the discretion should be applied in a way which gives effect to the principles behind the Convention.
One example suggested by van den Berg, op cit, p 265, is where the party resisting enforcement is estopped from challenge, which was adopted by Mance LJ in Dardana Ltd v Yukos Oil Co [2002] 2 Lloyds Rep 326, para 8.
But, as Mance LJ emphasised at para 18, there is no arbitrary discretion: the use of the word may was designed to enable the court to consider other circumstances, which might on some recognisable legal principle affect the prima facie right to have an award set aside arising in the cases listed in section 103(2).
See also Kanoria v Guinness [2006] 1 Lloyds Rep 701, para 25 per Lord Phillips CJ.
Another possible example would be where there has been no prejudice to the party resisting enforcement: China Agribusiness Development Corpn v Balli Trading [1998] 2 Lloyds Rep 76.
But it is not easy to see how that could apply to a case where a party had not acceded to an arbitration agreement.
There may, of course, in theory be cases where the English court would refuse to apply a foreign law which makes the arbitration agreement invalid where the foreign law outrages its sense of justice or decency (Scarman Js phrase in In the Estate of Fuld, decd (No 3) [1968] P 675, 698), for example where it is discriminatory or arbitrary.
The application of public policy in the New York Convention (article V(2)(b)) and the 1996 Act (section 103(3)) is limited to the non recognition or enforcement of foreign awards.
But the combination of (a) the use of public policy to refuse to recognise the application of the foreign law and (b) the discretion to recognise or enforce an award even if the arbitration agreement is invalid under the applicable law could be used to avoid the application of a foreign law which is contrary to the courts sense of justice.
Only limited assistance can be obtained from those cases in which awards have been enforced abroad (in particular in France and the United States) notwithstanding that they have been set aside (or supended) in the courts of the seat of arbitration.
In France the leading decisions are Pabalk Ticaret Sirketi v Norsolor, Cour de cassation, 9 October 1984, 1985 Rev Crit 431; Hilmarton Ltd v OTV, Cour de cassation, 23 March 1994 (1995) 20 Yb Comm Arb 663, in which a Swiss award was enforced in France even though it had been set aside in Switzerland: the award rendered in Switzerland is an international award which is not integrated in the legal system of that State, so that it remains in existence even if set aside (at p 665); Rpublique arabe dEgypte v Chromalloy Aero Services, Paris Cour dappel, 14 January 1997 (1997) 22 Yb Comm Arb 691.
Thus in Soc PT Putrabali Adyamulia v Soc Rena Holding, Cour de cassation, 29 June 2007 (2007) 32 Yb Comm Arb 299, an award in an arbitration in England which had been set aside by the English court (see PT Putrabali Adyamulia v Soc Est Epices [2003] 2 Lloyds Rep 700) was enforced in France, on the basis that the award was an international award which did not form part of any national legal order.
Those decisions do not rest on the discretion to allow recognition or enforcement notwithstanding that the award has been set aside by a competent authority of the country in which that award was made (New York Convention, article V(1)(e)).
They rest rather on the power of the enforcing court under the New York Convention, article VII(1), to apply laws which are more generous to enforcement than the rules in the New York Convention: see Born, International Commercial Arbitration (2009), pp 2677 2680; Gaillard, Enforcement of Awards Set Aside in the Country of Origin (1999) 14 ICSID Rev 16; and Yukos Capital SARL v OAO Rosneft, 28 April 2009, Case No 200.005.269/01 Amsterdam Gerechtshof.
In the United States the courts have refused to enforce awards which have been set aside in the State in which the award was made, on the basis that the award does not exist to be enforced if it has been lawfully set aside by a competent authority in that State: Baker Marine (Nigeria) Ltd v Chevron (Nigeria) Ltd, 191 F 3d 194 (2d Cir 1999); TermoRio SA ESP v Electranta SP, 487 F 3d 928 (DC Cir 2007).
But an Egyptian award which had been set aside by the Egyptian court was enforced because the parties had agreed that the award would not be the subject of recourse to the local courts: Chromalloy Aeroservices v Arab Republic of Egypt, 939 F Supp 907 (DDC 1996).
That decision was based both on the discretion in the New York Convention, article V(1) and on the power under article VII(1) (see Karaha Bodas Co v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F 3d 357, 367 (5th Cir 2003)) and whether it was correctly decided was left open in TermoRio SA ESP v Electranta SP, ante, at p 937.
The power to enforce notwithstanding that the award has been set aside in the country of origin does not, of course, arise in this case.
The only basis which Dallah puts forward for the exercise of discretion in its favour is the Governments failure to resort to the French court to set aside the award.
But Moore Bick LJ was plainly right in the present case (at para 61) to say that the failure by the resisting party to take steps to challenge the jurisdiction of the tribunal in the courts of the seat would rarely, if ever, be a ground for exercising the discretion in enforcing an award made without jurisdiction.
There is certainly no basis for exercising the discretion in this case.
III The application of the principles to the appeal
The crucial facts have been set out fully by Lord Mance.
The essential question is whether the Government has proved that there was no common intention (applying the French law principles) that it should be bound by the arbitration agreement.
The essential points which lead to the inevitable conclusion that there was no such common intention are these.
First, throughout the transaction Dallah was advised by a leading firm of lawyers in Pakistan, Orr, Dignam & Co, which was responsible for the drafts of both the Memorandum of Understanding (MoU) which was concluded on 24 July 1995 between Dallah and the Government, and the Agreement of 10 September 1996 (the Agreement) between Dallah and the Trust.
It must go without saying that the firm well understood the difference between an agreement with a State entity, on the one hand, and the State itself, on the other.
Second, there was a clear change in the proposed transaction from an agreement with the State to an agreement with the Trust.
The MoU was expressed to be made between Dallah and the President of the Islamic Republic of Pakistan through the Ministry of Religious Affairs, and it was signed For and on behalf of The President of the Islamic Republic of Pakistan.
It was governed by Saudi Arabian law (clause 23).
It provided for ad hoc arbitration with a Jeddah seat (clause 24), and contained an express waiver of sovereign immunity, including immunity from execution (clause 25).
Third, the Trust was established as a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of property, and may by its name, sue and be sued.
Fourth, the Agreement (including the arbitration agreement) was plainly an agreement between Dallah and the Trust, and the Government was referred to in the Agreement only in its capacity of guarantor of loans to the Trust.
It described the parties as Dallah Real Estate and Tourism Holding Company and Awami Hajj Trust. (which is referred to as having been: established under Section 3 of the Awami Hajj Trust Ordinance, 1996 (Ordinance No VII of 1996) On the signature page, there are two signatories: Dallah and the Awami Hajj Trust.
Shezi Nackvi signed on behalf of Dallah, and Managing Trustee (Zubair Kidwai) signed on behalf of the Trust.
Clause 2 provided for the Trust to pay $100m to Dallah by way of advance, subject to (inter alia) Dallah providing a Financing Facility against a guarantee of the Government of Pakistan and the Trust and the Trustee Bank providing a counter guarantee in favour of the Government of Pakistan.
By clause 27 it was provided: The Trust may assign or transfer its rights and obligations under this Agreement to the Government of Pakistan without the prior consent in writing of Dallah.
The arbitration clause (article 23) related to Any dispute or difference of any kind whatsoever between the Trust and Dallah .
The parties amended the ICC model clause (which reads: All disputes arising out of or in connection with the present contract shall be finally settled), in order to specify the Trust and Dallah.
Fifth, it was the Trust which immediately following the termination letter of 19 January 1997, commenced proceedings against Dallah in Islamabad (the 1997 Pakistan Proceedings).
The proceedings were for a declaration that the Trust had validly accepted Dallahs repudiation of the Agreement between the Trust and Dallah on 19 January 1997.
The contents of the pleading were verified on oath by Mr Muhammad Lutfullah Mufti.
On the same day Mr Lutfullah Mufti made an application in the name of the Trust for an interim injunction restraining Dallah from holding itself out to have any contractual relationship with the Trust.
On 6 March 1997 Dallah filed an application to stay the action, given the existence of an arbitration agreement with the Trust.
The Trust took preliminary objections against this application, among which was that the Trust had challenged the validity and existence of the Agreement.
Mr Lutfullah Mufti, describing himself as Secretary Board of Trustees Awami Hajj Trust/Secretary, Religious Affairs Division, Government of Pakistan swore an affidavit verifying the objections by the Trust to the application.
There are only two serious contra indications.
The first is the fact that the termination latter was written, after the Trust had ceased to exist, by Mr. Lutfullah Mufti (who had been Secretary of the Board of Trustees of the Trust and its Managing Trustee, and who was also from time to time Secretary of the Ministry of Religious Affairs) under the letterhead of the Ministry of Religious Affairs, and signed as Secretary.
There is nothing in the text of the letter to suggest that it was written on behalf of the Government.
On the contrary, as Moore Bick LJ said [2010] 2 WLR 805, para 36 (differing on this point from Aikens J, at para 117) all the internal indications are that it was written on behalf of the Trust.
Thus the opening paragraph reads as follows: Pursuant to the above mentioned Agreement for the leasing of housing facilities in the holy city of Makkah, Kingdom of Saudi Arabia, you were required within ninety (90) days of the execution of the said Agreement to get the detailed specifications and drawings approved by the Trust.
However, since you have failed to submit the specifications and drawings for the approval of the Trust to date you are in breach of a fundamental term of the Agreement which tantamounts to a repudiation of the whole Agreement which repudiation is hereby accepted.
The second contra indication is contained in the fact that the 1998 Pakistan Proceedings were commenced in the name of the Government.
That was because, when the 1997 Pakistan Proceedings were dismissed by the Pakistan court on the ground that the Trust had ceased to exist as of 11 December 1996, the judge said that, on dissolution of the Trust suit should have been filed by the Ministry for Religious Affairs, apparently on the basis that the Government had succeeded to the rights and obligations of the Trust.
On 18 September 1998, the Islamabad judge ruled that the Government was not the legal successor of the Trust, and so not bound by the Agreement or the arbitration agreement.
On 14 January 1999, the Government applied voluntarily to withdraw the suit, which was granted on the same day.
Neither of these two matters, nor the other matters relied on, was sufficient to justify a finding of a common intention that the Government should be bound by the arbitration agreement.
It is true that the principle of common intention in French law was similar to that articulated by the tribunal, but M Le Btonnier Vatiers evidence made clear that there were significant differences.
He accepted that the principles adopted by the tribunal were in general the principles that might be adopted in French law, but they were too general.
That is undoubtedly a valid criticism of the way in which the Tribunal sought to use material from the period prior to termination to justify its conclusion.
The Tribunal first considered the conduct of the Government prior to the execution of the Agreement.
It drew the conclusion that the organic control of the Government over the Trust, although insufficient to lead to the disregard of the separate legal entity of the Trust, constituted nevertheless an element of evidence as to the true intention of the Government to run and control directly and indirectly the activities of the Trust, and to view the Trust as one of its instruments.
The Tribunal next considered the conduct of the Government at the time of execution of the Agreement.
From that it drew the conclusion that the Government was contractually involved in the Agreement, as the Government was bound, under article 2 thereof, to give its guarantee for the financial facility to be raised by [Dallah] and that the Trusts right to assign its rights and obligations to the Government was a provision which was normally used only where the assignee is closely linked to the assignor or is under its total control through ownership, management or otherwise.
The Tribunal considered that during the lifetime of the Agreement the Government continued itself to handle matters relating to the Agreement and to act and conduct itself in a way which confirmed that it regarded the Agreement as its own.
Government officials were actively involved in the implementation of the Agreement.
The Government decided not to re promulgate the Ordinance and therefore put an end to the Trust, and so the very existence of the Trust appeared to have been completely dependent on the Government.
None of these matters could possibly justify a finding that there was a common intention that the Government should be bound by the arbitration agreement.
The crucial finding was that after the dissolution of the Trust, the termination letter of 19 January 1997 was written on Ministry of Religious Affairs letterhead and signed by the Secretary of the Ministry, and confirmed in the clearest way possible that the Government regarded the Agreement with Dallah as its own and considered itself as a party to the Agreement and was entitled to exercise all rights and assume all responsibilities provided for under the Agreement.
The signature of the letter could only be explained as evidence that the Government considered itself a party to the Agreement.
But the Trust had no separate letterhead and it is plain from the surrounding circumstances, and particularly the way in which the 1997 Pakistan proceedings were commenced on behalf of the Trust, and verified by Mr Lutfullah Mufti, that the letter was written on behalf of the Trust and in ignorance of its dissolution.
The tribunal ignored the 1997 Pakistan proceedings, and relied on the 1998 Pakistan proceedings to find that they showed that the Government considered itself as a party to the Agreement.
But it is clear that those proceedings were commenced at the erroneous suggestion of the Pakistan judge and shed no light on whether the parties intended that the Government should be bound by the Agreement or the arbitration agreement.
Consequently on a proper application of French law as mandated by the New York Convention and the 1996 Act there was no material sufficient to justify the tribunals conclusion that the Governments behaviour showed and proved that the Government had always been, and considered itself to be, a true party to the Agreement and therefore to the arbitration agreement.
On the contrary, all of the material up to and including the termination letter shows that the common intention was that the parties were to be Dallah and the Trust.
On the face of the Agreement the parties and the signatories were Dallah and the Trust.
The Governments role was as guarantor, and beneficiary of a counter guarantee.
The assignment clause showed that the Government was not a party.
It permitted the Trust to assign or transfer its rights and obligations under the Agreement to the Government without the prior consent in writing of Dallah.
The arbitration clause related to any dispute between the Trust and Dallah.
The weakness of the conclusion of the tribunal is underlined by this passage in the Award: Certainly, many of the above mentioned factual elements, if isolated and taken into a fragmented way, may not be construed as sufficiently conclusive for the purpose of this section.
However, Dr Mahmassani believes that when all the relevant factual elements are looked into globally as a whole, such elements constitute a comprehensive set of evidence that may be relied upon to conclude that the Defendant is a true party to the Agreement with the Claimant and therefore a proper party to the dispute that has arisen with the Claimant under the present arbitration proceedings.
Whilst joining in this conclusion Dr Shah and Lord Mustill note that they do so with some hesitation, considering that the case lies very close to the line.
Aikens J rejected the argument that the discretion should be exercised in favour of enforcement because of the Governments failure to challenge the award in the French courts: Dallah had not submitted that the Government was estopped from challenging the jurisdiction of the tribunal; and the discretion would not be exercised where, as in this case, there was something unsound in the fundamental structural integrity of the ICC arbitration proceedings, namely that the Government did not agree to be bound by the arbitration agreement in clause 23 of the Agreement.
There was no error of principle and the Court of Appeal was right not to interfere with the judges exercise of discretion.
LORD HOPE
The essential question in this case, as Lord Mance and Lord Collins explain in paras 2 and 132 of their judgments, is whether the Government of Pakistan has proved that there was no common intention (applying French law principles) between it and Dallah that it should be bound by the arbitration agreement.
This is a matter which goes to the root of the question whether there was jurisdiction to make the award.
As such, it must be for the court to determine.
It cannot be left to the determination of the arbitrators.
For the reasons set out in the opinions of Lord Mance and Lord Collins, I agree that the facts point inevitably to the conclusion that there was no such common intention.
As Lord Mance says in para 66, the agreement was deliberately structured to be, and was agreed, between Dallah and the Trust.
I also agree that the Court of Appeal was right not to interfere with the judges exercise of his discretion to refuse enforcement of the award.
I too would dismiss the appeal.
LORD SAVILLE
In his judgment Lord Mance has set out in detail the facts of this case and no purpose would be served by repeating them in this judgment.
The case concerns an application by Dallah Real Estate and Tourism Holding Company to enforce in this country an ICC arbitration award dated 23rd June 2006 against the Ministry of Religious Affairs of the Government of Pakistan.
The amount of the award was US$20,588,040.
The application was opposed by the Ministry of Religious Affairs on the grounds that there was no arbitration agreement between the parties, so that the award was unenforceable.
The award was a New York Convention Award within the meaning of Section 100 of the Arbitration Act 1996 and was made in Paris.
Section 103(1) of the Arbitration Act 1996 provides that recognition and enforcement of a New York Convention Award shall not be refused except in the following cases.
The following sub sections set out the cases in question.
Section 103(2) contains a number of these cases and provides that recognition or enforcement of the award may be refused if the person against whom it is invoked proves (so far as the case relevant to these proceedings is concerned) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made.(Section 103(2) (b)) (emphases added).
The arbitrators considered the question of their jurisdiction before dealing with the merits of the claim and concluded that the Ministry of Religious Affairs of the Government of Pakistan was party to an arbitration agreement with Dallah Real Estate and Tourism Holding Company, for the reasons contained in what they described as a Partial Award dated 26th June 2001.
It was common ground that the question whether or not the Ministry of Religious Affairs was a party to the arbitration agreement relied upon by Dallah Real Estate and Tourism Holding Company, under which the ICC award was made, was to be determined under Section 103(2)(b) of the Arbitration Act 1996, and that the law to be applied was French law, being the law of the place where the award was made.
After a trial, during which both parties tendered expert evidence on French law, Aikens J (as he then was) held that the Ministry of Religious Affairs was not party to the arbitration agreement and refused to enforce the award.
The Court of Appeal upheld his decision.
Dallah Real Estate and Tourism Holding Company now appeal to the Supreme Court.
In their written case Dallah Real Estate and Tourism Holding Company submitted that the first issue for resolution by the Supreme Court concerned the nature and standard of review to be undertaken by an enforcing court when considering recognition and enforcement of a New York Convention award; and further submitted that the court should accord a high degree of deference and weight to the award of the arbitrators that there was an arbitration agreement between the parties.
In the present case the arbitrators have made a ruling, as they were doubtless entitled to do under the doctrine of kompetenz kompetenz, that there was an arbitration agreement between the parties, so that they were able to hear and decide the merits of the case, which they then proceeded to do.
However, under Section 103 of the Arbitration Act 1996 (as under the New York Convention itself) the person against whom the award was invoked has the right to seek to prove that there was no arbitration agreement between the parties, so that in fact the arbitrators had no power to make an award.
The question at issue before the court, therefore, was whether the person challenging the enforcement of the award could prove there was no such agreement.
In these circumstances, I am of the view that to take as the starting point the ruling made by the arbitrators and to give that ruling some special status is to beg the question at issue, for this approach necessarily assumes that the parties have, to some extent at least, agreed that the arbitrators have power to make a binding ruling that affects their rights and obligations; for without some such agreement such a ruling cannot have any status at all.
As the Departmental Advisory Committee on Arbitration Law put it in paragraph 1.38 of its 1996 Report on the Arbitration Bill, an arbitral tribunal may rule on its own jurisdiction but cannot be the final arbiter of jurisdiction, for this would provide a classic case of pulling oneself up by ones own bootstraps.
In my judgment therefore, the starting point cannot be a review of the decision of the arbitrators that there was an arbitration agreement between the parties.
Indeed no question of a review arises at any stage.
The starting point in this case must be an independent investigation by the court of the question whether the person challenging the enforcement of the award can prove that he was not a party to the arbitration agreement under which the award was made.
The findings of fact made by the arbitrators and their view of the law can in no sense bind the court, though of course the court may find it useful to see how the arbitrators dealt with the question.
Whether the arbitrators had jurisdiction is a matter that in enforcement proceedings the court must consider for itself.
I accept, as an accurate summary of the legal position, the way it was put in the written case of the Ministry of Religious Affairs: Under s103(2)(b) of the 1996 Act / Art V.1(a) NYC, when the issue is initial consent to arbitration, the Court must determine for itself whether or not the objecting party actually consented.
The objecting party has the burden of proof, which it may seek to discharge as it sees fit.
In making its determination, the Court may have regard to the reasoning and findings of the alleged arbitral tribunal, if they are helpful, but it is neither bound nor restricted by them.
In short, as was held in China Minmetals Materials Import and Export Co Ltd v Chi Mei Corporation (2003) 334 F3d 274, a decision of the United States Court of Appeals (3rd Circuit), the court must make an independent determination of the question whether there was an arbitration agreement between the parties.
In the present case, for the reasons given by Lord Mance and Lord Collins (and the courts below), the Ministry of Religious Affairs has succeeded in showing that no arbitration agreement existed to which it was party and that there were no other grounds for enforcing the award.
I would accordingly dismiss this appeal.
LORD CLARKE
I agree that this appeal should be dismissed for the reasons given by the other members of the court.
Both Lord Mance and Lord Collins have analysed the relevant principles so fully and so expertly that it would be inappropriate self indulgence for me to attempt a detailed analysis of my own.
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The central issue on this appeal is whether the Government of Pakistan was a party to and bound by an arbitration agreement, so that an award made by an arbitral tribunal under that agreement can be enforced against the Government of Pakistan in the United Kingdom.
The appellant company (Dallah) is a member of a group providing services for the Holy Places in Saudi Arabia.
In July 1995, it concluded a Memorandum of Understanding with the respondent Government (the Government) for the provision by Dallah of housing for pilgrims.
In January 1996 the Awami Hajj Trust (the Trust) was established and subsequently continued by various ordinances of the President of Pakistan.
In September 1996, after Dallah put forward a revised proposal which differed from the Memorandum of Understanding and after further negotiations with the Government, an agreement between Dallah and the Trust was signed (the Agreement).
The Agreement contained an arbitration clause, whereby any dispute between Dallah and the Trust arising out of the Agreement was to be settled by arbitration.
In December 1996, the ordinances lapsed and were not renewed, and Trust ceased to exist as a legal entity.
Dallah invoked arbitration against the Government in May 1998.
On 23 June 2006 an International Chamber of Commerce arbitral tribunal sitting in Paris made an award in favour of Dallah in the sum of US$20,588,040 against the Government.
Dallah applied to the High Court in England for leave to enforce the award in this country.
The award was an award within the meaning of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.
Article V(1)(a) of the Convention and s.103 of the Arbitration Act 1996, which transposes Article V(1)(a) in the UK, provide that enforcement of an award may be refused if the arbitration agreement was not valid under the applicable law, which is the case, in particular, if the person against whom enforcement is sought was not a party to the agreement.
The applicable law was in this case French law, where the arbitral tribunal sat and made its award.
The High Court held that the Government was not a party to the Agreement or therefore to the arbitration agreement and refused leave to enforce the award.
The Court of Appeal upheld the decision and Dallah appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
It holds that the Government was not a party to the arbitration agreement.
An initial issue was the status and weight of the arbitral tribunals own decision that it had jurisdiction, based on its conclusion that the Government was a party to the Agreement and so to the arbitration agreement.
The Supreme Court, while recognising that a tribunal has jurisdiction to determine its own jurisdiction for its own purposes, held that a court, whether within the country where the tribunal is located or within a foreign country where an attempt is made to enforce the award, can and must revisit the question of jurisdiction.
The arbitral tribunal could only have jurisdiction by consent, and could not give itself jurisdiction, if there was no relevant consent under the applicable law.
Whether consent exists is an issue subject to ordinary judicial determination.
Article V of the Convention safeguards the right of a party which has not agreed to arbitration to object to the jurisdiction of the tribunal.
The language of Article V(1)(a) of the Convention and s.103(2)(b) of the 1996 Act requires the English court to revisit the tribunals decision on jurisdiction where the person resisting enforcement maintains that it was not party to any relevant arbitration agreement under the applicable law. [26] [31]; [79] [104] The central issue in the case was whether the Government could establish that, applying French law principles, there was no common intention on the part of the Government and Dallah, such as would make the Government a party to the Agreement.
The Court held that the Government had established that there was no such common intention, having regard amongst other matters to: The clear change in the proposed transaction from an agreement with the Government (the Government was a party to the initial Memorandum of Understanding) to an agreement with the Trust. [134] The deliberate structuring of the Agreement to be between Dallah and the Trust: the Governments only role under the Agreement was to guarantee the Trusts loan obligations and to receive a counter guarantee from the Trust.
Further, Dallah was throughout the transaction advised by lawyers who must have understood the difference between an agreement with a State entity and an agreement with the State itself. [42] [43]; [133] [136] The fact that the Trust was established as a body corporate capable of holding property and of suing and being sued. [135] The fact that it was the Trust which commenced proceedings against Dallah in Pakistan in 1997. [137] A final issue in the case concerned the nature and existence of any discretion to be found in Article V(1) and s.103(2), which provide that recognition or enforcement of the award may be refused if the arbitration agreement is proved to be invalid.
Dallah submitted that even if the Government could prove that it is not bound by the Agreement, the Court should exercise its discretion under Article V(1) and s.103(2) to enforce the award.
The Court refused to do this, saying that, in the absence of some fresh circumstance such as another agreement, it would be remarkable if the word may enabled a court to recognise or enforce an award which it found to have been made without jurisdiction. [68]
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This appeal is about the proper approach of the courts where the defendant to a claim for possession of his home raises a defence of unlawful discrimination, contrary to the Equality Act 2010, by the claimant landlord.
In particular, the issue is whether the courts are entitled to take the same summary approach to such a defence, where the claimant is a social landlord, as they can normally take to a defence asserting that eviction by a public authority would breach the right to respect for the defendants home, which is protected by article 8 of the European Convention on Human Rights.
Do the principles applicable to article 8 defences, laid down by the Supreme Court in Manchester City Council v Pinnock [2010] UKSC 45, [2011] 2 AC 104 (Pinnock) and Hounslow London Borough Council v Powell [2011] UKSC 8, [2011] 2 AC 186 (Powell) also apply to discrimination defences?
The issue could arise, whichever of the characteristics protected by the Equality Act 2010 is relied upon by the defendant to support a discrimination defence, and whatever the type of discrimination complained of.
However, this case is concerned with the protected characteristic of disability, which can raise different equality issues from those raised by a claim of, say, sex or race discrimination.
Whereas treating a man equally with a woman usually means treating him in the same way as a woman is treated, treating a disabled person equally with a non disabled person may mean treating him differently from a non disabled person.
This is in order to ensure that he can play a full part in society despite his disabilities.
This case
The appellant is a 47 year old man who has been diagnosed with Prolonged Duress Stress Disorder or Complex Post Traumatic Stress Disorder.
This is the result of sustained physical and emotional abuse by his parents when he was a child, exacerbated by his having been failed by the system.
Disability is one of the protected characteristics listed in section 4 of the Equality Act 2010.
The basic definition of disability is contained in section 6, which provides that a person has a disability if (a) he has a physical or mental impairment, and (b) the impairment has a substantial and long term adverse effect upon his ability to carry out normal day to day activities.
This is fleshed out by Schedule 1 to the Act and by the Equality Act 2010 (Disability) Regulations 2010.
It is not in dispute that the appellants mental ill health is so chronic and severe that he falls within this definition.
The appellant became homeless in 2010.
In June, the local housing authority in the district where he lives (the council) accepted that it owed him a duty, under section 193(2) of the Housing Act 1996, to secure that accommodation was available to him.
The council had an agreement with a housing association, Flourish, that it would grant tenancies to people to whom the council owed duties under the 1996 Act.
Pursuant to that agreement, in August 2010, a one bed roomed ground floor flat in Glastonbury was let to the appellant on a weekly periodic tenancy.
The duty to secure accommodation for a homeless person under section 193(2) of the 1996 Act is not intended to last indefinitely.
Broadly speaking, it comes to an end if he obtains accommodation elsewhere or if he refuses an offer of suitable accommodation elsewhere, in particular if he refuses a final offer of social housing under Part 6 of the 1996 Act (section 193(7)).
The appellant joined the councils choice based scheme for the allocation of social housing, known as Homefinder Somerset, and over the next nine months various attempts were made to find an acceptable home for him.
He put in bids for two properties in Wells, but later withdrew these because he associated Wells with his childhood abuse.
Another bid for a property in Wells was unsuccessful.
He successfully bid for a property in Meare, Glastonbury but then declined this as it was too far from his GP.
He declined to bid for two more properties, one in Wells and one in Glastonbury, which he was told were open for bids.
And he objected to three more bids, one in Wells and two in Street, which the council placed on his behalf.
His community psychiatric nurse supported the objection to Wells and so the bid was withdrawn.
In March 2011, the council wrote to him formally making a final offer of one of the properties in Street.
He declined to accept this.
Hence in April the council wrote notifying him that it considered that its duty under section 193 had been discharged.
He requested a review under section 202 of the 1996 Act.
The review upheld the original decision that the property was suitable for him and in the same letter the council told him that it would be terminating the provision of temporary accommodation for him in the Glastonbury flat.
Accordingly, Flourish served a notice to quit, expiring on 21 August 2011; and on 15 September, it issued a claim for possession in the Yeovil County Court.
At the first hearing on 20 October 2011, this was adjourned for the appellant to obtain legal representation.
When the case returned to the county court on 15 December, District Judge Smith had before him the first report of a Chartered Psychologist, Mr Callow, whom the appellant had consulted for the purpose of these proceedings.
He had examined the appellant twice and administered a variety of psychometric tests.
He described the appellant as very vulnerable and desperately in need of intensive therapy to help him overcome the traumas from which he had suffered.
He also supported the appellants claim that he could not live in Street, because of its associations with his childhood.
The district judge gave a short judgment in which he took the view (i) that on the issue of whether the proposed possession order was proportionate for the purpose of article 8, it falls just beyond the line of its being sufficiently clear that I can say that it cannot apply (para 24); and (ii) that he did not rule out the Equality Act defence, but I think there will be formidable problems in maintaining it (para 26).
He concluded that we are going to have a contested hearing about it not later than the end of January when all these issues can be established (para 27).
Hence he ordered the appellant to file and serve a defence, made provision for the service of any witness statements, and listed the claim for a hearing on 26 January 2012.
The defence filed that same day raised three defences: disability discrimination, article 8 and a public law defence based primarily on breach of the public sector equality duty.
Mr Callow made a second report, dated 23 January 2012, confirming his opinion that the appellant suffers from a disability within the meaning of the Equality Act and that the accommodation in Street was unsuitable for him because of that disability.
However, when the case came back before District Judge Smith on 26 January 2012, he ordered that it be transferred to Bristol County Court for hearing as soon as possible, with a longer time estimate because of the issues raised under the Equality Act.
In the meantime, on 15 December the appellant had also made a fresh homelessness application to the council.
This was rejected in April 2012, on the ground that he was intentionally homeless.
But in July that decision was overturned on review and the council therefore accepted again that it owed him the duty under section 193(2) of the 1996 Act.
By this time Flourish had merged with two other housing associations to form Aster Communities, which became the appellants landlord.
Bristol County Court had listed the case for a two day trial on 18 July 2012 and Mr Callow had prepared a third report on 2 July 2012.
In this he stated that we are not dealing here with a man who thinks and behaves in a reasonable and socially acceptable way but with someone who is profoundly mentally ill and who needs help.
Given the councils change of view, the trial was vacated on Asters application and the case adjourned by consent with liberty to restore.
In September 2012, Aster wrote to the appellant offering him a starter tenancy of a property in the same road in Glastonbury as his current accommodation.
Another property in Glastonbury was also available for him, but the appellant did not wish to apply for that.
On 27 September 2012 he declined the offer of the property in the same road.
In October 2012, the council wrote to notify the appellant of their decision that their duty to him was discharged because 10.
12. 11.
Later that month, Aster applied to reinstate the claim for possession.
Although the case had previously been set down for a full trial, this time it was listed for a preliminary hearing to decide whether or not a proportionality and/or Equality Act 2010 defence can be raised.
That hearing was originally listed for February 2013 and Mr Callow made a further report dated 11 February 2013.
In this he stated that, it is impossible to say definitively that [the appellants] inaction and/or failure was wholly attributable to his condition, but I would say that his condition seems likely to have played a major part in this inaction and/or failure.
There was insufficient time available in February and so the case was adjourned until June 2013 when it came before His Honour Judge Denyer QC.
He heard legal argument over a day on 6 June 2013 and gave judgment on 7 June.
Judge Denyer prefaced his account of the facts with a reference to the role of the court in an appeal against a local authoritys decisions under Part 7 of the 1996 Act, pointing out that in such cases the court was exercising a function not dissimilar to that of the Administrative Court in judicial review (para 2).
He returned to this point in his conclusions, where he referred to what is a quasi judicial review claim or defence, as here (para 16, emphasis supplied).
After setting out the facts, he observed that the defendant raises no conventional landlord and tenant type defence, but raises effectively public law defences (para 8).
He went on to say that Whether the defence is viewed pursuant to the Equality Act 2010 or pursuant to article 8 or both, the approach outlined by the Court of Appeal to such defences in the case of Thurrock Borough Council v West [2012] EWCA Civ 1435; [2013] HLR 69 is the appropriate starting point (para 9).
He cited extensively from that case, which summarises the principles to be gleaned from Pinnock and Powell and some later Court of Appeal cases.
The threshold for establishing an arguable case that a local authority is acting disproportionately and so in breach of article 8 where repossession would otherwise be lawful is a high one and would be met only in a small proportion of cases (para 10).
Both article 8 and section 15 of the Equality Act involved a consideration of proportionality.
It was necessary therefore to go back to Thurrock, the crucial point being effectively the presumption in favour of proportionality when a public authority is exercising its housing functions (para 15).
The actions of the local authority were entirely reasonable and the action of the claimants could in no wise be characterised as unreasonable or disproportionate and certainly not actuated by any malevolent response to the defendants disability (para 16).
Hence there was no arguable defence and the claimants were entitled to possession. 13.
Judge Denyer granted permission to appeal on whether the discrimination defence should be treated in the same way as an article 8 defence.
That appeal was dismissed by Cranston J, on the ground that the usual structured approach to proportionality issues in discrimination claims should not apply because of the context, which was the homelessness duties of local authorities.
The same reasons, given in Pinnock and Powell, for rejecting the structured approach to an article 8 defence applied to a discrimination defence (para 33). 14.
A further appeal to the Court of Appeal was also dismissed: [2014] EWCA Civ 1081, [2014] 1 WLR 3980.
It held that the approach to proportionality was the same under the Equality Act as it was under article 8 (para 27) and the weight to be given to the interests of a social landlord was no different (para 29).
For a tenant to succeed in a disability discrimination case he will have to show some considerable hardship which he cannot fairly be asked to bear (para 37).
There was no difference between a social landlord acting on the instructions of a local housing authority and the local housing authority itself (para 46).
The Equality Act 2010 15.
The scheme of the Equality Act 2010 is to define what is meant by discrimination and then to define the circumstances in which such discrimination is unlawful.
The Act prohibits both direct and indirect discrimination against disabled persons in the same way that it prohibits discrimination against persons with the other characteristics protected by the Act.
But it also contains two types of discrimination which are specific to persons with a disability.
It is discrimination to fail to comply with the specific duties to make the reasonable adjustments which are required by the Act in particular contexts (section 21(2)).
There is also a more general concept of disability discrimination defined by section 15: (1) A person (A) discriminates against a disabled person (B) if (a) A treats B unfavourably because of something arising in consequence of Bs disability, and (b) A cannot show that the treatment is a proportionate means of achieving a legitimate aim. (2) Subsection (1) does not apply if A shows that A did not know, and could not reasonably have been expected to know, that B had the disability. 17. 16.
Under section 35(1)(b), A person (A) who manages premises must not discriminate against a person (B) who occupies the premises by evicting B (or taking steps for the purpose of securing Bs eviction).
The eviction is unfavourable treatment for the purpose of section 15.
It was held by the House of Lords in Lewisham London Borough Council v Malcolm [2008] AC 1399 that it might therefore be unlawful to evict a disabled person even though the disabled person had no other claim to remain in the property.
As Lord Bingham explained: Parliament has enacted that discriminatory acts proscribed by the [Disability Discrimination Act 1995] are unlawful.
The courts cannot be required to give legal effect to acts proscribed as unlawful (para 19).
The same would, of course, apply to an eviction which was unlawfully discriminatory on other grounds, such as race or sex.
Hence, as the Court of Appeal in this case correctly said (para 2), if the appellant succeeds in his defence that bringing the proceedings amounted to discrimination against him by reason of his disability, in breach of section 15, the court could not make a possession order. 18.
Where section 15 is raised, therefore, and assuming that the defendant is in fact disabled within the meaning of the Act, there are two key questions: (a) whether the eviction is because of something arising in consequence of Bs disability; this was a reformulation from that in the Disability Discrimination Act 1995, intended to make it clear that where something arising in consequence of the disability was the reason for the unfavourable treatment, the landlord (or other provider) would have to justify that treatment; there was no need for a comparison with how it would treat any other person; it might have to behave differently towards a disabled tenant from the way in which it would behave towards a non disabled tenant; and if so (b) whether the landlord can show that the unfavourable treatment is a proportionate means of achieving a legitimate aim. 19.
Also relevant is section 136, headed Burden of Proof: (1) This section applies to any proceedings relating to a contravention of this Act. (2) If there are facts from which the court could decide, in the absence of any other explanation, that a person (A) contravened the provision concerned, the court must hold that the contravention occurred. (3) But subsection (2) does not apply if A shows that A did not contravene the provision.
Thus, for example, if there are facts from which the court could conclude that an eviction was because of something arising in consequence of a persons disability then it would be for the alleged discriminator to prove that it was not.
If he could not do so, the burden would then be upon him to show that it was nevertheless a proportionate means of achieving a legitimate aim.
Article 8 20.
The Supreme Court cases of Pinnock and Powell were the culmination of a long process of dialogue between the highest courts in the United Kingdom and the European Court of Human Rights in Strasbourg as to the extent to which the protection given to a persons home under article 8 of the European Convention applied to social housing which the occupier had no right to occupy in domestic law.
In Manchester City Council v Pinnock [2011] 2 AC 104, the Supreme Court held that article 8 does apply to a possession action brought by a local authority against a tenant who has no other right to remain in the property.
If an article 8 defence is raised, therefore, the court has to determine whether it would be proportionate to make the order (para 49).
However, the aims of making such an order are, first, to vindicate the local authoritys property rights, and secondly, to enable the authority to comply with its statutory duties in the allocation and management of the housing stock available to it (para 52), including, for example, 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 many cases there might also be other cogent reasons, such as the need to remove a source of nuisance to neighbours, to support the proportionality of dispossessing the occupiers. 21.
These twin aims should be a given which did not have to be explained or justified by the authority, unless it wanted to establish some further reason in the particular case (para 53).
In virtually every case there will be a strong case for saying that the possession order would be a proportionate means of achieving those aims (para 54).
As a general rule, therefore, article 8 should only be considered if it is expressly raised by or on behalf of a residential occupier and initially should be considered summarily and only allowed to proceed if, were the facts alleged to be made out, it might make a difference (para 61).
However, the court agreed with the Equality and Human Rights Commission that proportionality was more likely to be relevant in respect of occupants who are vulnerable as a result of mental illness, physical or learning disability, poor health or frailty (para 64).
The effect might justify granting an extended period for possession, suspending the order or even refusing it altogether (para 62). 22.
Pinnock concerned a demoted tenancy that is a formerly secure local authority tenancy which had been demoted because of anti social behaviour.
In Hounslow London Borough Council v Powell [2011] 2 AC 186, the same principles were applied to introductory tenancies and to accommodation provided under a local authoritys duties towards the homeless.
There was nothing in Part 7 of the 1996 Act which prevented a court from refusing to make a possession order if it would not be proportionate to do so (para 39).
Nevertheless, the court would only have to consider the proportionality issue if it had been raised by the occupier and it has crossed the high threshold of being seriously arguable (para 33).
Otherwise the court could dispose of it summarily.
Are there any differences between article 8 and section 15? 23.
The courts below took the view that whatever differences there may be between the rights contained in article 8 and section 15, they were not such as to require a different approach to evictions from social housing.
Both depended on proportionality.
The twin aims were in most cases overwhelming (Court of Appeal, para 27).
There was no rational basis for saying that the weight to be given to the social landlords interest is somehow diminished where the tenant is relying on disability discrimination (para 29).
These propositions, attractive though they may appear, require some examination. 24.
The first and most obvious difference between article 8 and the Equality Act is that section 35 of the Equality Act applies to both private and public sector landlords, whereas only public authorities are obliged by section 6(1) of the Human Rights Act 1998 to act compatibly with the Convention rights. (It has been assumed for the purpose of this case that social landlords providing accommodation to enable local authorities to fulfil their duties towards the homeless are public authorities.) Thus no landlord, public or private can adopt a discriminatory policy towards eviction, for example, by evicting a black person where they would not evict a white.
Thus also no landlord, public or private, can evict a disabled tenant because of something arising in consequence of [his] disability unless the landlord can show that this is a proportionate means of achieving a legitimate aim. 25.
This tells us that the substantive right to equal treatment protected by the Equality Act is different from the substantive right which is protected by article 8.
All occupiers have a right to respect for their home.
Parliament has expressly provided for an extra right to equal treatment for people to be protected against direct or indirect discrimination in relation to eviction.
Parliament has further expressly provided, in sections 15 and 35, for disabled people to have rights in respect of the accommodation which they occupy which are different from and extra to the rights of non disabled people.
Landlords may be required to accommodate, or to continue to accommodate, a disabled person when they would not be required to accommodate, or continue to accommodate, a non disabled person. 26.
This extra right is consistent with the obligations which the United Kingdom has now undertaken under the United Nations Convention on the Rights of Persons with Disabilities.
This defines discrimination on the basis of disability to include the denial of reasonable accommodation (article 2).
States Parties are required, not only to prohibit all discrimination on the basis of disability, but also In order to promote equality and eliminate discrimination, [to] take all appropriate steps to ensure that reasonable accommodation is provided (article 5(2) and (3)).
By reasonable accommodation is meant adjustment to meet the particular needs of a disabled person. 27.
This is not an absolute obligation.
The landlord is entitled to evict a disabled tenant if he can show that this is a proportionate means of achieving a legitimate aim.
The wording in section 15, and elsewhere in the Equality Act, is not the same as that in article 8, where the public authority has to show that its interference is necessary in a democratic society for one of the specific purposes listed there, but they have come to be interpreted in the same way. 28.
The concept of proportionality contained in section 15 is undoubtedly derived from European Union law, which is the source of much of our anti discrimination legislation.
Three elements were explained by Mummery LJ in R (Elias) v Secretary of State for Defence [2006] 1 WLR 3213, at para 165: First, is the objective sufficiently important to justify limiting a fundamental right? Secondly, is the measure rationally connected to the objective? Thirdly, are the means chosen no more than is necessary to accomplish the objective? This three fold formulation was drawn from the Privy Council case of de Freitas v Permanent Secretary of the Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69, 80, which was itself derived from the Canadian case of R v Oakes [1986] 1 SCR 103.
However, as Lord Reed explained in Bank Mellat v Her Majestys Treasury (No 2) [2013] UKSC 39, [2014] AC 700, para 68 et seq, this concept of proportionality, which has found its way into both the law of the European Union and the European Convention on Human Rights, has always contained a fourth element.
This is the importance, at the end of the exercise, of the overall balance between the ends and the means: there are some situations in which the ends, however meritorious, cannot justify the only means which is capable of achieving them.
As the European Court of Justice put it in R v Minister for Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR I 4023, the disadvantages caused must not be disproportionate to the aims pursued; or as Lord Reed himself put it in Bank Mellat, para 74, 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.
In Pinnock and Powell, the Supreme Court rejected this structured approach to proportionality where article 8 was the only defence that could be raised in answer to a possession claim by a social landlord.
As Lord Hope explained in Powell, para 41, . in the context of a statutory regime which has been deliberately designed by Parliament, for sound reasons of social policy, so as not to provide the occupier with a secure tenancy [the structured approach] would be wholly inappropriate .
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 29. 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. 30.
In the great majority of cases, the court is simply not equipped to judge the weight of an individuals right to respect for her home against the weight of the interests of the whole community for whom the authority has to manage its limited housing resources (para 35).
It simply does not follow that, because those twin aims will almost always trump any right to respect which is due to the occupiers home, they will also trump the occupiers equality rights.
Equality rights prohibit both direct and indirect discrimination, as well as the special concept of disability discrimination.
But they all have the same aim, which is to secure equality of treatment, by prohibiting inequality of treatment on grounds of a protected characteristic.
Thus, save as expressly provided, there is no defence to direct discrimination.
No landlord is allowed to evict a black tenant in circumstances where he would not evict a white tenant.
The fact that the landlord is thereby vindicating his property rights is neither here nor there.
No landlord is allowed to adopt a lettings or eviction policy which indirectly discriminates against black people, unless he can show that it is a proportionate means of achieving some independent aim.
The aim of vindicating his property rights would indeed be a given, but is scarcely likely to be sufficient to justify a discriminatory provision, criterion or practice. 31.
No landlord is allowed to evict a disabled tenant because of something arising in consequence of the disability, unless he can show eviction to be a proportionate means of achieving a legitimate aim.
He is thus obliged to be more considerate towards a disabled tenant than he is towards a non disabled one.
The structured approach to proportionality asks whether there is any lesser measure which might achieve the landlords aims.
It also requires a balance to be struck between the seriousness of the impact upon the tenant and the importance of the landlords aims.
People with disabilities are entitled to have due allowance made for the consequences of their disability (Malcolm, para 61).
It certainly cannot be taken for granted that the first of the twin aims will almost invariably trump that right.
Even where social housing is involved, the general considerations involved in the second of the twin aims may on occasions have to give way to the equality rights of the occupier and in particular to the equality rights of a particular disabled person.
The impact of being required to move from this particular place upon this particular disabled person may be such that it is not outweighed by the benefits to the local authority or social landlord of being able to regain possession. 32.
As the Equality and Human Rights Commission have pointed out, the public policy considerations applicable to the general run of social housing cases are also different from the public policy considerations applicable to Equality Act claims.
As Etherton LJ explained in Thurrock, para 25, the reasons why the threshold is so high lie in the public policy and public benefit inherent in the functions of the housing authority in dealing with its housing stock, a precious and limited public resource.
That public policy and public benefit has to be weighed against the public policy and public benefit inherent in the Equality Act, aiming as it does to secure equal treatment and thus equal respect for the human dignity of all people, irrespective of their race, their gender, their sexual orientation, their religion or belief, or, in particular their disability.
When a disability discrimination defence is raised, the question is not simply whether the social landlord is entitled to recover the property in order to fulfil its or the local authoritys public housing functions, but also whether the landlord or the local authority has done all that can reasonably be expected of it to accommodate the consequences of the disabled persons disability and whether, at the end of the day, the twin aims are sufficient to outweigh the effect upon the disabled person.
These are questions which a court is well equipped to address. 33.
A further difference between article 8 and Equality Act cases is that the Equality Act contains express provisions relating to the burden of proof.
The general position under the Human Rights Act is that, once an interference with the protected right is established, the burden shifts to the public authority to prove that the interference is justified.
However, in Pinnock and Powell the Supreme Court held that, in possession actions brought by social landlords against tenants who otherwise had no right to remain in the property, it could be taken for granted that the landlord was acting in pursuance of the twin aims and that to do so was proportionate in the great majority of cases.
Requiring it to plead and prove this would be burdensome and futile (Pinnock, para 53, citing Lord Binghams observation to this effect in Kay v Lambeth London Borough Council [2006] 2 AC 465, para 29).
I am prepared to accept that, in possession actions brought by social landlords against tenants who otherwise have no right to remain in the property, it can generally be taken for granted that the landlord is acting in pursuance of the twin aims; and further that those twin aims are entitled to weigh heavily in a proportionality exercise.
However, as already explained, that is not by itself enough to counter a discrimination defence.
Once facts are established that could give rise to a discrimination claim, the burden shifts to the landlord to prove otherwise.
This will depend upon the particular type of discrimination alleged.
If it is a claim (or defence) of direct discrimination, for example that a disabled person has been evicted when a non disabled person in the same or similar circumstances has not, then the landlord would have to show that 34. the disability was not the reason for the difference in treatment.
If it is a claim of indirect discrimination, for example that the landlord has imposed a requirement upon its tenants which puts disabled tenants at a particular disadvantage, then the landlord would have to show that there was a good independent reason for the requirement.
If it is a claim of disability discrimination under section 15, then the landlord would have to show that there was no less drastic means of solving the problem and that the effect upon the occupier was outweighed by the advantages.
The express burden of proof provisions in the Equality Act cannot simply be ignored because there are some elements in the proportionality exercise which can be taken for granted.
Summary disposal 35.
Possession actions are governed by Part 55 of the Civil Procedure Rules.
A claim will be allocated a fixed return date for hearing between four and eight weeks after it is issued.
Given the huge volume of such claims, they are normally listed in batches on the basis that they will take only a few minutes each.
At that hearing the court will either decide the claim or, in the event that it is genuinely disputed on grounds that appear to be substantial (CPR 55.8(2)), will allocate it to a track and give case management directions.
Thus the case can be summarily disposed of at the first hearing.
Nor is there anything to prevent the court deciding to dispose of it summarily at a later hearing.
As the Court of Appeal pointed out (para 42), the court can deal with possession claims summarily without the summary judgment provisions of CPR Part 24 being invoked.
Hence claims where the only defence is article 8 will be dealt with summarily unless the case raised by the occupier has crossed the high threshold of being seriously arguable (Powell, paras 33, 34). 36.
There may also be cases where a discrimination defence is so lacking in substance that summary disposal is merited.
The test is whether the claim is genuinely disputed on grounds that appear to be substantial.
I agree with Lord Neuberger (para 59) that the case could be summarily disposed of if the landlord could show (i) that the defendant had no real prospect of proving that he was disabled within the meaning of the Act; or (ii) that it was plain that possession was not being sought because of something arising in consequence of his disability; or (iii) that bringing and enforcing the claim were plainly a proportionate means of achieving a legitimate aim.
Like him, I suspect that such cases will be rare.
The course taken at the outset of this case by District Judge Smith was, in my view, the entirely proper course to take on the information which was then available to him.
The question now is whether the course taken by Judge Denyer QC, in summarily disposing of the case (albeit after a day of legal argument), was the proper one to take in the circumstances as they then were.
Summary disposal in this case? 37.
It is very easy to understand why Judge Denyer reached the conclusion that he did.
The local authority had accepted that the appellant was a vulnerable person in priority need and he had been allocated this accommodation accordingly.
Numerous attempts had been made to find permanent accommodation which was acceptable to him.
Eventually the authority concluded that he had refused a final offer of suitable accommodation.
Hence these proceedings were begun.
However, he then made a fresh application and the authority acknowledged, on review, that he had not become homeless intentionally.
This was because it accepted that the alternative accommodation was not suitable because of his disability.
Hence the proceedings were stayed.
Then a fresh offer was made of accommodation in the very street where he was living.
How could it possibly be disproportionate to require him to move into that? 38.
There are, however, two problems with Judge Denyers approach.
The first is that he appears to have regarded his role as akin to the role of the county court judge in homelessness appeals under section 204 of the 1996 Act, in other words, as akin to a judicial review role.
It is, however, clear that in possession actions generally, and in discrimination cases in particular, the role of the court is not akin to judicial review.
It has to undertake the proportionality exercise itself.
The second problem is that he regarded the proportionality exercise under section 15 as the same as the proportionality exercise under article 8.
For the reasons given earlier, it cannot be exactly the same.
While some things can be taken for granted, and some cases may be so clear that summary disposal is warranted, the issues are not all the same.
In this particular case, the first issue was whether the appellants inability even to take up an offer of accommodation in the same street was something which arose out of his mental illness.
Mr Callows evidence raised a substantial case that it was.
If he was right about that (and of course his evidence could have been challenged), then the next question was whether there was any lesser action that could have been taken and, if there was not, whether the harm to the appellant of forcing him to move was outweighed by the benefit to the landlord, the local authority, to the other homeless people in the area, and to the public generally, of being able to obtain possession of this particular property.
The landlord might very well have been able to show that it was.
There may have been good reasons why it was not practicable to leave the appellant where he was and put the alternative accommodation in 39. 40. 41. the same road to the use to which it was wished to put his flat.
But in my view the time which Judge Denyer devoted to this case ought to have been spent on considering the merits of the appellants defence rather than listening to a days legal argument devoted to whether to do that.
I am afraid, therefore, that I cannot be satisfied that the outcome would have been the same had he considered the defence on its merits and so, had matters remained as they then were, I would have allowed this appeal and sent it back so that those merits could be properly explored.
I recognise, however, that things have moved on since then.
There would not only be little point, but also some injustice, in sending the case back for a hearing, the result of which would be inevitable.
Those later events are recounted in Lord Wilsons judgment and I agree with him that they would inevitably result in a possession order now being made.
In those circumstances, it would not only be unjust to the respondent and the building owners, but also no kindness to the appellant, to prolong matters further.
I would therefore dismiss this appeal.
LORD NEUBERGER: 42.
I have had the benefit of reading in draft the judgments of Lady Hale and Lord Wilson. 43.
As to the law, Lady Hale has fully set out the relevant statutory material at paras 15 to 22.
I agree with her that the Court of Appeal, Cranston J and Judge Denyer QC were wrong to hold that, in relation to a claim for possession of residential premises, a court should take the same approach to a defence raising an argument of unlawful discrimination under section 35(1)(b) of the Equality Act 2010 Act (the 2010 Act) as to a defence based on article 8 of the European Convention on Human Rights (the Convention). 44.
However, this does not mean that the court cannot summarily make an order for possession against a residential occupier who raises an unlawful discrimination defence.
Indeed, on the facts of this case as they now are, I agree with Lord Wilson that the summary order for possession made by Judge Denyer should not be disturbed.
I turn first to the law.
In three successive cases, Harrow London Borough Council v Qazi [2003] UKHL 43; [2004] 1 AC 983, Kay v Lambeth London Borough Council [2006] UKHL 10; [2006] 2 AC 465, and Doherty v 45. 46. 47.
Birmingham City Council [2008] UKHL 57; [2009] AC 367, the House of Lords held that a residential occupier, who had no right to occupy his home in domestic law, could never succeed in relying on article 8 of the Convention (article 8) to resist an order for possession in favour of a public authority land owner, on the ground that it would be disproportionate in his particular circumstances.
This conclusion was expressed thus by Lord Hope in Kay at para 110: a defence which does not challenge the law under which the possession order is sought as being incompatible with article 8 but is based only on the occupier's personal circumstances should be struck out.
To much the same effect, he observed that, where the defence did not challenge the compatibility of the legislation with the Convention, then if the requirements of the law have been established and the right to recover possession is unqualified, the defendant would not be entitled to raise an article 8 proportionality defence.
In Pinnock, however, the Supreme Court accepted that this conclusion had been decisively rejected by the Strasbourg court.
In Pinnock and the subsequent case of Powell, the Supreme Court accordingly restated the law in relation to the issue.
In those two decisions, this court laid down the approach which should be adopted by first instance judges to claims for possession of residential property where the defendant raised a defence that, in the light of article 8 of the Convention, it would be disproportionate to require him to vacate his home even though he had no domestic right to remain there.
As Lord Hope explained in Powell at paras 33 and 35, [t]he 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, and that the threshold for raising an arguable case on proportionality was a high one which would succeed in only a small proportion of cases. 48.
As Lord Hope explained in Powell, para 36, 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 authority's ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
Accordingly, as he went on to say in the next paragraph, 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. 49.
So far as procedure is concerned, this court observed in Pinnock at para 61, that if an article 8 point is raised, the court should initially consider it summarily, and if, as will no doubt often be the case, the court is satisfied that, even if the facts relied on are made out, the point would not succeed, it should be dismissed.
Lord Phillips expressed the same view in Powell at para 92, when he said that 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 and that it was extremely unlikely that the defendant will be in a position to do this. 50.
The question of principle raised by this appeal is whether the same approach is appropriate where the defence raised is based on unlawful discrimination under the 2010 Act. 51.
The facts that (i) the landlord is vindicating its property rights by seeking possession and (ii) the landlord has to take into account competing demands from other potential or actual occupiers of residential accommodation are plainly very telling points when weighed against the article 8 rights of a public sector occupier with no domestic law right to be in occupation.
After all, every residential occupier of property, at least if it is owned by a public authority, is entitled to the benefit of article 8, and there are domestic statutes which bestow a measure of protection on residential tenants of public sector landlords.
It is therefore to be presumed, at least in the general run of cases, that Parliament has decided how the right to respect for an occupiers home is to be balanced against a public sector owners right to possession.
Accordingly, it must be very much for the occupier to raise and make out a proportionality defence to a claim for possession of his home, and it will be a very unusual case where such a defence could succeed.
It follows that, in the great majority of cases, the court will be able, at a preliminary stage, to hold that a defendants proportionality argument should be rejected simply on the ground that, even if all the facts which he relies on are made out, he would fail. 52. 53.
The position is different in a case where a defendant relies on section 35(1)(b) of the 2010 Act (section 35(1)(b)).
That is neatly illustrated by the point that, unlike in the cases cited in para 45 above in relation to article 8, it would be inconceivable that a court could have held that an occupier of residential property could not rely on his particular circumstances to justify a defence under section 35(1)(b) to a claim for possession once his landlord had established a right to possession. (That may appear at first sight to be a questionable proposition in the light of the majority view in Lewisham London Borough Council v Malcolm [2008] UKHL 43; [2008] AC 1399 subsequently reversed by the 2010 Act but that was, on analysis, concerned with a rather different point). 54.
The defence afforded by article 8, as considered in Pinnock and Powell, applies to an occupier of residential property against whom possession is sought by a public sector landlord.
The defence afforded by section 35(1)(b), by contrast, extends to occupiers of any type of property against whom possession is sought by any landlord provided, of course, that the occupier is a disabled person.
While the marked distinction in the ambit of the two provisions does not automatically undermine the notion that the same substantive and procedural principles apply to possession claims where the two types of defence are raised, it certainly negatives the notion that they should be expected to be the same. 55.
More specifically, although both types of defence involve the court considering the proportionality of making an order for possession, the protection afforded by section 35(1)(b) is plainly stronger than the protection afforded by article 8.
Section 35(1)(b) provides a particular degree of protection to a limited class of occupiers of property, who are considered by Parliament to deserve special protection.
The protection concerned is founded on a desire to avoid a specific wrong in a number of fields, not just in relation to occupation of property, namely discrimination against disabled persons.
Further, once the possibility of discrimination is made out, the burden of proof is firmly on the landlord to show that there was no discrimination contrary to section 15(1)(a), or that an order for possession is proportionate under section 15(1)(b), of the 2010 Act see section 136 of that Act.
Additionally, the proportionality exercise under section 15(1)(b) involves focussing on a very specific issue, namely the justification for discrimination. 56.
All this is very different from the home related, but otherwise far less specific and targeted, article 8 defence.
Thus, the protection afforded by section 35(1)(b) is an extra, and a more specific, stronger, right afforded to disabled occupiers over and above the article 8 right.
It is also worth mentioning that this conclusion ties in with what was said in Pinnock at para 64, namely that as suggested by the Equality and Human Rights Commission, proportionality is more likely to be a relevant issue in respect of occupants who are vulnerable as a result of mental illness, physical or learning disability, poor health or frailty, and that the issue may also require the local authority to explain why they are not securing alternative accommodation in such cases.
In other words, where the occupier is disabled, it is significantly less unlikely than in the normal run of cases that an article 8 defence might succeed. 57.
As Lady Hale says, the difference between the article 8 defence to possession and a defence under section 35(1)(b) is further underlined by the fact that, in relation to an article 8 proportionality defence, the Supreme Court has expressly rejected the applicability of the sort of structured approach which has been held to be generally appropriate to a disability discrimination proportionality defence (and which there is no reason not to apply where proportionality under section 15(1)(b) is in issue in a possession action) compare Powell at para 34 per Lord Hope and R (Elias) v Secretary of State for Defence [2006] 1 WLR 3213, para 165 per Mummery LJ. 58.
Accordingly, it appears to me clear that it is wrong to equiparate, either procedurally or substantively, a defence under section 35(1)(b) to a possession action with a defence under article 8 to a possession action.
Provided that a defendant establishes that the landlord is (or at a summary stage, may well be) seeking to evict him because of something arising in consequence of [his] disability, the landlord faces a significantly more difficult task in having to establish proportionality than does a landlord who faces an article 8 defence. 59.
That does not, however, mean that a landlord whose possession claim is met with a defence to the effect that possession is being sought because of something arising in consequence of [the defendants] disability, cannot seek or obtain summary judgment for possession.
Possession could be ordered summarily if the landlord could establish that (i) the defendant had no real prospect of establishing that he was under a disability, (ii) in any event, it was plain that possession was not being sought because of something arising in consequence of [the] disability, or (iii) in any event, the claim and its enforcement plainly represented a proportionate means of achieving a legitimate aim. 60.
The problem for a landlord seeking summary judgment for possession in such a case would not be one of principle, but one of practice.
Each of the three types of issue referred to in the immediately preceding paragraph would often give rise to disputed facts or assessments, eg whether the defendant suffers from a physical or mental disability, whether it has led to the possession claim, and where the proportionality balance comes down.
Summary judgment is not normally a sensible or adequate procedure to deal with such disputes, which normally require disclosure of documents, and oral and/or expert evidence tested by cross examination.
There will no doubt be cases where a landlord facing a section 35(1)(b) defence may be well advised to seek summary judgment, but they would, I suspect, be relatively rare. 61.
Turning to the facts of this case, it is fair to say that the claimant landlord had a fairly strong case before Judge Denyer QC even though it seems clear that (i) the defendant tenant is a person suffering from a disability and (ii) the claimant is seeking possession because of something arising in consequence of [the defendants] disability.
The history as summarised by Lady Hale suggests that the claimant and the local housing authority had gone out of their way to accommodate the defendant, and that, if there had been a full hearing, a judge may very well have reached the same conclusion as was reached by Judge Denyer QC at a summary stage. 62.
However, for the reasons given by Lady Hale and myself, Judge Denyer QC misdirected himself in holding that he should approach the defendants section 35(1)(b) defence in the same way as if it had been an article 8 defence.
In those circumstances, the appeal against his decision ought to be allowed, unless we could be satisfied that either (i) had the judge applied the right test, namely the threefold approach identified by Mummery LJ in Elias at para 165, he could only properly have reached the same conclusion as he did, namely that an order for possession should be made, or (ii) if the claim was now remitted to the county court, it is effectively inevitable that an order for possession would be made after a full hearing before a judge. 63.
For the reasons given so cogently by Lord Wilson, I am of the view that this is a case where the second of those two alternatives applies.
I would therefore dismiss this appeal.
LORD WILSON: 64.
In substantial agreement with the legal analysis offered by Lady Hale and Lord Neuberger I conclude as follows: (a) The normal procedure of the court in addressing a defence under section 35(1)(b) of the 2010 Act to an action for possession should not be equated with its normal procedure in addressing a defence to such an action under Article 8 of the Convention. (b) Where a defence is raised under section 35(1)(b) to an action for possession, there should be no presumption that the action is fit for summary disposal.
On the contrary rule 55.8(2) of the CPR calls for a careful evaluation at that initial stage whether the claim is genuinely disputed on grounds which appear to be substantial. (c) Where such a defence is raised, the court should adopt a four stage structured approach to the claimants attempt to show, pursuant to section 15(1)(b) of the 2010 Act, that the steps which it is taking for the purpose of securing the defendants eviction are a proportionate means of achieving a legitimate aim. 65.
I consider however that the appeal should be dismissed on the basis that, although it would be conducted in accordance with the guidance which Lady Hale and Lord Neuberger have given, the full trial would inevitably result in a further order for possession against the defendant.
In my opinion the claimant is correct to submit that there is no real dispute of fact, with the result that there is no inhibition on the ability of an appellate court even at this stage to form a clear view of the proper result. 66.
The situation of the defendant is deeply tragic.
The evidence is that he is highly intelligent and gifted but that his disorder has disabled him from engaging in the therapy which he needs and from cooperating with many of those, particularly of those in authority, who seek to help him.
Attempts to improve his situation are therefore locked.
Sadly the law can do little to unlock them.
But he has the support of a close friend and advocate; of Mr Callow, a distinguished chartered psychologist; and of the inestimable Shelter, which represents him.
Granted also what appears to be the continued goodwill of the local housing authority (Mendip) and its acceptance that, even if the defendants appeal were dismissed, it would nevertheless owe him the limited duties set out in section 190(2) of the 1996 Act, there is some hope that, between them, they can spark a positive response within the defendant.
In that he has a mental impairment which has a substantial and long term adverse effect on his ability to carry out normal day to day activities, the defendant has a disability within the meaning of section 6 of the 2010 Act.
In that the claimant is taking steps for the purpose of securing his eviction from the flat in Glastonbury, it is treating him unfavourably within the meaning of section 15(1)(a) of that Act.
In that its claim is founded on his refusal of Mendips final offer of accommodation within the meaning of section 193(7) of the 1996 Act and that, as Mr Callow has explained, his refusal is attributable to his psychological inability to make a decision, the cause of the unfavourable treatment is something arising in consequence of [his] disability within the meaning of section 15(1)(a) of the 2010 Act.
One may therefore confidently conclude that, at any full trial, the only issue would be 67. whether the claimant can show that the steps which it is taking for the purpose of securing the defendants eviction are a proportionate means of achieving a legitimate aim within the meaning of section 15(1)(b) of that Act. 68.
The structured approach requires attention to be given, first, to the claimants aims or objectives in taking the steps for the purpose of securing the defendants eviction.
In the Pinnock case, cited at para 20 above, Lord Neuberger MR, indicated on behalf of this court, at para 52, that one aim of a possession action would be the vindication of the claimants ownership rights and that a second aim of a possession action brought by a housing authority would usually be to enable it to comply with its duties in relation to the distribution and management of its housing stock.
Adapted to the facts of this case, in which the action is not brought by Mendip, the housing authority, but by a registered social landlord which has agreed with Mendip to let accommodation at its request to those whom Mendip is obliged (or elects) to accommodate under Part VII of the 1996 Act, the usual second aim, if it were to exist in the present case, would be to enable Mendip to comply with its duties (and to exercise its powers) through its agreement with the claimant to provide accommodation to homeless persons under the 1996 Act.
In the Pinnock case Lord Neuberger MR added, at para 53, that, in relation to an Article 8 defence, the twin aims can be a given and, at para 34 above, Lady Hale accepts that, in relation to a defence under section 35(1)(b) of the 2010 Act, they can also be a given.
In its Reply to the Defence the claimant expressly invoked the usual second aim.
It did so in the following terms: 70. 69.
In remaining in occupation, the Defendant is preventing other applicants for housing assistance whom the Council has determined it does owe a duty to from enjoying the better standard of accommodation which the Council could secure for them by requesting the Claimant to accommodate them temporarily in the Property.
But the Reply was filed more than two years ago.
Events have supervened.
The usual second aim no longer exists in the present case and, were there to be a full trial, should therefore on no account be accepted as a given.
It has been replaced by an aim which is even more compelling: for the claimant now urgently needs vacant possession of the flat occupied by the defendant (Flat One) in order to comply with its own legal obligations. 71.
Material to the above effect has, without controversy, been put before this court, as it was before the Court of Appeal, and, were there to be a full trial, the claimant would no doubt be permitted to amend its Reply in order to plead it.
There is nothing to indicate that the claimants proposed averments are disputed so in all likelihood it would not even have to prove them.
They are to the following effect: (a) Flat One is one of eight flats in a building in Glastonbury. (b) At all material times the freehold of the building has been held by a small property company, subject to a mortgage. (c) The claimants interest in the flats has been as a leaseholder, namely under eight separate fixed term leases.
The claimant entered into the leases in order to perform its agreement with Mendip to provide temporary accommodation to those whom Mendip was required (or elected) to accommodate under Part VII.
In August 2010, at Mendips request, the claimant let Flat One to the defendant under a weekly tenancy.
On 18 July 2011, following Mendips conclusion, upon review, that it had ceased to be subject to a duty to secure accommodation for him, the claimant served him with notice to quit effective from 21 August 2011.
The appeal proceeds on the basis that the notice to quit validly terminated his tenancy. (d) (e) The fixed terms of the claimants leases of the eight flats expired on dates no later than February 2014 and thereafter it held them on monthly tenancies. (f) Early in 2014 Mendip informed the claimant that, for reasons of policy, it had decided no longer to request it to provide accommodation in the building for those whom it was required (or elected) to accommodate under Part VII. (g) Coincidentally and at about the same time, the freeholder, under pressure from its mortgagee, determined to sell the building with vacant possession. (h) In April 2014 the claimant served on the freeholder notice to quit seven of the eight flats but, because of the pending appeal, not Flat One. (i) On 1 May 2014, however, the freeholder served on the claimant notice to quit Flat One, effective from 30 June 2014.
Since then the claimant has had no interest in Flat One, save that the freeholder has granted to it a licence to enforce the possession order made by Judge Denyer QC if and when it can. 72. (j) The claimants breach, to date, of its obligation to give vacant possession to the freeholder of Flat One appears to have disabled the latter from selling the building to a buyer who has been ready to purchase it with vacant possession.
In this regard the claimant is at risk of a claim by the freeholder for damages.
It was in his short oral reply on the defendants behalf that Mr Luba reminded this court that, no doubt after consultation with Mendip, the claimant had made an offer to the defendant of a flat along the very street on which the building is situated; and, he then raised the question why the claimant could not accommodate the intended occupant of Flat One in the flat along the street because, if such could be achieved, it would enable the defendant to continue to occupy Flat One.
It seems clear, however, that the claimant does not intend to place another occupant in Flat One: Mendip no longer wishes to place a homeless person there and the claimant no longer has the right to allow anyone to occupy it. 73.
The structured approach requires attention to be given, second, to the existence or otherwise of a rational connection between the claimants objectives and the defendants eviction (upon which the conclusion must be that it exists) and, third, to whether the eviction is no more than is necessary to accomplish them (upon which the conclusion must be that it is indeed no more than is necessary).
But there is a fourth element to which the structured approach requires that attention be given.
For the eviction may be proportionate to the claimants objectives without being proportionate in the necessary wider sense.
Section 15(1)(b) of the 2010 Act requires the claimant to show that the eviction strikes a fair balance between its need to accomplish its objectives and the disadvantages thereby caused to the defendant as a disabled person. 74.
So the focus turns at last upon the defendant, in relation to whom the relevant facts are as follows: (a) The defendant began to occupy Flat One in August 2010.
It was intended to be temporary accommodation because it was provided pursuant to Mendips duty to him under section 193 of the 1996 Act. (b) By the date of any full trial he will have remained in occupation of Flat One for almost five years. (c) Efforts to place the defendant in permanent accommodation owned or procured by Mendip began as soon as he began to occupy Flat One.
Mendip operates a system whereby those eligible for social housing can bid for available properties, as can Mendip on their behalf. (e) (d) Between the summer 2010 and March 2011 eleven properties in Mendips area were canvassed for possible occupation by the defendant.
In relation to ten of them, either he declined to bid; or he told Mendip not to bid on his behalf; or he withdrew his bid; or, after his bid had been accepted, he rejected the property.
But it seems that, in the light of his disability, all 11 of them were unsuitable for him for one reason or another.
In his Defence dated 22 December 2011 to the claim for possession the defendant asserted that he required to continue to occupy Flat One only for so long as it would take to find more permanent suitable accommodation in a suitable area having regard to his disability.
In September 2012 the claimant offered to the defendant a starter tenancy of the flat situated along the same street as the building.
The fact is that this flat was suitable for him.
According to Mr Callow, it was the defendants state of mind which prevented him from accepting it.
Having previously reversed its original decision to this effect, Mendip thereupon again decided that its duty to the defendant under section 193 of the 1996 Act was discharged.
Represented at this stage by Shelter, the defendant did not request a review of the decision pursuant to section 202 because he could not dispute that the flat situated along the same street had been suitable for him. (f) 75. 76. (g) As recently as 11 June 2014, Shelter, by letter, reiterated to the claimant that the surest way in which it would secure vacant possession of Flat One prior to the expiry, which was then imminent, of the freeholders notice to quit would be for it immediately to make or procure an offer of suitable alternative accommodation to him. (i) (h) But, at the hearing before this court, the stance taken on behalf of the defendant inevitably changed.
Change was inevitable because, in that the defendant had been unable to accept the suitable accommodation along the street, there were no grounds for considering that there was any change in his condition which might enable him at this stage to accept other suitable accommodation.
The stance became as follows: This is a case where therapy was and is required.
Pending receipt of this, moves to evict [the defendant] ought not to be made.
It is unclear whether, and if so when and for how long, the defendant has undergone therapy.
In December 2011 Mr Callow commented that he had seldom seen someone more in need of therapy than the defendant and in July 2012 he added that the defendant had needed therapy for many years.
There is no evidence that the defendant has embarked or, as would be a fairer description, has been able to embark on therapy since Mr Callow made his comments.
So the question arises: no eviction prior to receipt of therapy means eviction when? In the light of the above my view is that, no doubt with the utmost reluctance, the judge at any full trial of the action would feel bound to conclude that the eviction would strike a fair balance between the claimants need to accomplish its objectives and the disadvantages thereby caused to the defendant; that therefore the eviction would be a proportionate means of achieving a legitimate aim; and that, by securing his eviction, the claimant would therefore not be discriminating against him.
In January 2013 the defendants close friend and advocate wrote that the legal issues surrounding his housing, economy and care were causing him severe stress.
No doubt they have continued to do so.
So my postscript is that it would not even be a kindness to the defendant to prolong the current action by a remission of it for a full trial of which the result is a foregone conclusion.
LORD CLARKE AND LORD HUGHES: 77.
We agree that the relevant principles are those stated by Lady Hale, Lord Neuberger and Lord Wilson.
We also agree that the appeal should be dismissed, essentially for the reasons given by Lord Wilson. of his refusal of suitable accommodation.
He did not seek a review of that decision.
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The issue in this appeal is the proper approach of the courts when a defendant to a claim for possession of his home raises a defence of unlawful discrimination by the landlord, contrary to the Equality Act 2010 (the EA); in particular, whether such defences may be dealt with in the same way as defences alleging a breach of the rights to respect for the home protected by Article 8 of the European Convention on Human Rights.
The appellant is a 47 year old man.
He has chronic and severe mental ill health amounting to a disability for the purposes of the EA.
He became homeless in 2010 and under the Housing Act 1996 the local housing authority was under a duty to secure accommodation for him.
That duty would cease if he refused an offer of suitable accommodation elsewhere.
The appellant was placed in a flat in a building in Glastonbury leased by the respondent housing association and numerous attempts were made to find an acceptable home for his permanent occupation over the next nine months.
He refused them all so in April 2011 the local authority notified him that the duty to house him had been discharged.
The respondent served notice on him to quit the flat and issued a claim for possession.
The appellants defence was that a possession order would (i) amount to disability discrimination and (ii) breach his Article 8 rights, and it was supported by medical evidence of his vulnerability and need for intensive therapy.
During the course of the proceedings the local authority came under a duty to house him again after the appellant made a fresh homelessness application in December 2011.
The duty ended after he was offered, but refused, an offer of a property in the same road as the flat, in which he was still living.
The respondent applied to reinstate the proceedings and a preliminary hearing took place in June 2013 in the Bristol County Court to decide whether or not the appellant could raise his defence.
The judge took the same approach to both grounds and held summarily that neither defence was arguable.
The appellants appeals from this decision were dismissed in the courts below.
In May 2014 the freeholder of the building in which the appellant has his flat served notice to quit on the respondent.
The respondent is therefore now in breach of its legal obligation to give vacant possession of the flat so that the building can be sold.
The Supreme Court unanimously dismisses the appeal.
Lady Hale, Lord Neuberger and Lord Wilson give substantive judgments stating the applicable principles and holding that the judge misdirected himself in adopting the same approach to the defence of disability discrimination as to the alleged
breach of Article 8.
However, for the reasons given by Lord Wilson, supervening events mean that the matter should not be remitted to the court below, as an order for possession is now inevitable.
A complaint of disability discrimination under s 15 EA in response to an eviction raises two key questions: (i) whether the eviction is because of something arising in consequence of the complainants disability; and (ii) whether the landlord can show that the eviction is a proportionate means of achieving a legitimate aim [18].
A court considering whether an eviction is proportionate when a defence under Article 8 is raised can assume that an order would meet the legitimate aims of vindicating a local authoritys property rights and of enabling the authority to comply with its statutory duties in the allocation and management of the housing stock available to it.
In virtually every case there will be a strong case for finding that the possession order would be a proportionate means of achieving those aims.
Thus as a general rule the defence should be considered summarily and only be allowed to proceed if it crosses the high threshold of being seriously arguable [20 22, 52].
The substantive right to equal treatment protected by the EA is different from and extra to the Article 8 right: it applies to private as well as public landlords; it prohibits discriminatory treatment, for example, by evicting a black person where a white person would not be evicted; and it grants additional rights to disabled people to reasonable adjustments to meet their particular needs.
It cannot be taken for granted that the aim of vindicating the landlords property rights will almost invariably make an eviction proportionate: the protection afforded by s 35(1)(b) EA is plainly stronger than that given by Article 8 [31, 55 58].
The burden will be on the landlord to show that there were no less drastic means available and that the effect on the occupier was outweighed by the advantages [34].
Summary disposal may still be appropriate, but not in cases where a claim is genuinely disputed on grounds that appear to be substantial, where disclosure or expert evidence might be required [36, 60].
In the appellants case, the judge misdirected himself and adopted the wrong approach.
He should have undertaken the proportionality assessment himself in relation to each defence, and he wrongly regarded this exercise as the same for the discrimination defence as for the Article 8 defence [38].
There was no point however in allowing the appeal and remitting it to the county court.
The notice to quit that has since been served by the freeholder of the building means that the respondent is in breach of its legal obligations and leaves the freeholder unable to proceed with the proposed sale [71].
The appellants disability has also caused him to refuse undeniably suitable accommodation in the same street and there is no evidence that he has embarked on the therapy that is said to be necessary to allow him to accept the need for change [74].
These supervening events mean that a possession order would be inevitable.
It would be unjust to the respondent and the freeholders and no kindness to the appellant to prolong matters further [41, 75 76].
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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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This appeal is concerned with Stamp Duty Land Tax (SDLT), which was introduced by the Finance Act 2003 (the FA 2003) to replace Stamp Duty, a tax on written instruments which had been the subject of many successful tax avoidance schemes.
The principal question in the appeal is whether Project Blue Ltd (PBL) is due to pay SDLT of 50m arising out of its purchase from the Ministry of Defence (the MoD) of the former Chelsea Barracks in Chelsea Bridge Road, London.
Since its enactment, the FA 2003 has been amended on several occasions.
This appeal is concerned with that Act as it existed on 31 January 2008.
Two issues lie at the heart of the appeal.
The first concerns the relationship between section 45 of the FA 2003, which provides what is often called sub-sale relief where there is a transfer of rights to a contract for a land transaction which is to be completed by a conveyance, and section 71A of that Act, which creates exemptions for alternative property finance which complies with the prohibition of usury in Sharia law.
The first issue does not arise in relation to transactions after 24 March 2011 because of an amendment to section 45(3) of the FA 2003 which was made by the Finance Act 2011, to which I refer in para 33 below.
The second issue concerns the correct interpretation of the anti-avoidance provisions in section 75A of the FA 2003, which was introduced by the Finance Act 2007.
If the anti- avoidance provisions do not apply to the transactions, PBL is not liable to pay the SDLT which HMRC claims; if they do apply, there is a dispute over the amount of SDLT which is due and who was or is liable to pay it.
PBL purchased the Chelsea Barracks through a sealed bid deadline tender process for the price of 959m and exchanged contracts with the Secretary of State for Defence on 5 April 2007.
A 20% deposit was paid on exchange of contracts and the balance of the price was to be paid in four equal instalments.
Completion of the purchase was postponed by the contract until 31 January 2008 to allow the MoD to re-house the troops from the barracks.
The principal shareholder in PBL was Qatari Diar Real Estate Investment Company (QD), which was owned by the Qatari Investment Authority, a sovereign wealth fund owned by the Qatari government.
QD provided the funding for the initial deposit but PBL required to obtain finance for the purchase of the barracks from Qatari Bank Masraf al Rayan (MAR), a Qatari financial institution which provided a portfolio of Sharia-compliant products, and which syndicated the finance for the purchase.
Financial institutions, which seek to comply with the Islamic prohibition on usury, have adopted structures for financing deals which do not involve lending in return for interest and the taking of security for the repayment of the borrowed sums and interest by means of a mortgage.
One such form of Sharia -compliant financing, known as Ijara finance, was used to fund the purchase of the barracks.
PBLs written case (paras 14 and 15) contains a convenient summary of the paradigm forms of Ijara arrangements, which I quote in full: 14.
Such transactions are likely to occur in one of two categories of case.
In the first, the counterparty wishes to acquire a property from a third party and requires funding to enable it to do so.
The financial institution buys the property from the third party, leases it to the counterparty and, at the same time, grants the counterparty an option to acquire the financial institutions interest at a later stage.
In the event that the counterparty has some, but insufficient, capital to acquire the property, each party can take an undivided share in the land; and the rent charged by the financial institution takes account of its reduced interest.
15.
In the second case, the counterparty already owns the property but wishes to obtain funds to use for another purpose.
In this case the Ijara involves the counterparty selling his own interest in the property to the financial institution and taking a lease back, together with an option to repurchase.
HMRC in para 44 of their written case described the two situations in which Ijara finance was used in essentially similar terms and stated (as is clearly the case) that section 71A was drafted with those situations in mind.
The funding of the purchase of the barracks was an adaptation of the first of the two categories.
I set out the transactions in the following steps so as to assist understanding of the arguments which follow in relation to the tax consequences of the transaction: (1) 5 April 2007: PBL and the MoD entered into a contract to purchase the barracks.
(2) 29 January 2008: PBL contracted to sub-sell the freehold to MAR.
(3) 29 January 2008: MAR agreed to lease the barracks back to PBL.
(4) 31 January 2008: On completion, (a) MAR and PBL entered into call and put options respectively entitling or requiring PBL to repurchase the freehold in the barracks; (b) the MoD conveyed the freehold in the barracks to PBL; (c) PBL conveyed the freehold in the barracks to MAR, and (d) immediately after that, MAR leased the barracks back to PBL.
On 1 February 2008 PBL granted a 999-year lease to its subsidiary, Project Blue Developments Ltd (PBDL) with call and put options for the purchase of the freehold, but that transaction is not relevant to this appeal.
As will be seen, it is not disputed that stages 4(b) and (c) brought into play the sub-sale relief provided by section 45 of the FA 2003, while it is contested whether stage 4(c) engaged the exemption for alternative property finance which section 71A(2) of the Act provides.
This is the first of the two principal issues mentioned in para 2 above.
On 1 February 2008, Clifford Chance LLP submitted a notification Disclosure of Tax Avoidance Scheme in accordance with the Stamp Duty Land Tax Avoidance (Prescribed Descriptions of Arrangements) Regulations (SI 2005/1868).
The notification stated: No SDLT is payable by [PBL] on the sale from [the MoD] to [PBL] by virtue of sub-sale relief under section 45(3) Finance Act 2003.
No SDLT is payable by [MAR] on the sale of the property from [PBL] to [MAR] by virtue of alternative property finance relief under section 71A(2) Finance Act 2003.
Such a notification is not an acknowledgement that the arrangements were entered into for the purpose of tax avoidance.
Arrangements are notifiable under section 306(1) of the Finance Act 2004 if they enable, or might be expected to enable, any person to obtain a tax advantage and are such that one of the main benefits that might be expected to arise from the arrangements is the obtaining of that advantage.
The focus of the statutory provision is on the consequences of the arrangements and not on the intention of the parties who enter into them.
On 22 February 2008 several land transaction returns were filed in relation to these transactions.
Three are relevant to this appeal.
First, a return lodged on behalf of PBL, which related to the completion on 31 January 2008 of the contract of 5 April 2007 between the MoD and PBL, claimed that there was no liability to SDLT because of the sub-sale relief in section 45(3) of the FA 2003.
Secondly, a return lodged on behalf of MAR related to the completion on 31 January 2008 of the sale agreement between PBL and MAR dated 29 January 2008.
The consideration was stated to be 1.25 billion, which was the Sterling equivalent of US$2,467,875,000 which was specified in the sale agreement.
In the return MAR claimed alternative property finance relief under section 71A of the FA 2003.
Thirdly, a return was filed relating to the grant by MAR of a lease to PBL on 31 January 2008.
Again, alternative property finance relief was claimed under section 71A. The consequence was that the taxpayers claimed that nobody incurred a liability to SDLT as a result of the completion of those transactions.
HMRC opened an inquiry into the SDLT returns which had been submitted in relation to these transactions.
In relation to the first return, which was lodged on behalf of PBL, HMRC concluded the inquiry by a closure notice contained in a letter dated 13 July 2011, which amended that return by adjusting the amount of SDLT due from 0 to 38.36m.
This sum is the SDLT which would be due on the completion of the sale by the MoD to PBL for the consideration of 959m if that were a chargeable transaction.
PBL now argues that HMRC were not empowered to amend that return as they did.
I discuss this challenge under the heading The wrong return challenge in paras 81-84 below.
HMRC did not require any amendment to the other land transaction returns as a result of their inquiry.
But when PBL appealed the amendment of the return, HMRC successfully applied to amend its case to increase the amount of SDLT due from 38.36m to 50m.
This was because the total consideration which MAR agreed to provide to PBL was 1.25 billion, and, at first sight at least, 50m would be the tax due on that transaction.
I discuss those figures in greater detail below.
The sale contract which PBL and MAR entered into on 29 January 2008 involved payments by instalments which were subject to contingencies (clause 4.1 and 4.2).
The fourth tranche of consideration, which was US$378,670,740 payable on 31 January 2011, was never paid because the arrangement was terminated on 1 March 2010.
This is relevant to the dispute about the actual consideration and PBLs human rights challenge which I consider in paras 57-80 below.
The Finance Act 2003
Part 4 of the FA 2003 introduced SDLT into British tax law.
It is a tax on land transactions (section 42(1)).
A land transaction is any acquisition of a chargeable interest (section 43(1)); and a chargeable interest is defined (in section 48(1)) as including an estate, interest, right or power in or over land in the United Kingdom other than an exempt interest.
A security interest, which is an interest or right (other than a rentcharge) held for the purpose of securing the payment of money or the performance of any other obligation (section 48(3)), is an exempt interest (section 48(2)).
Thus, in relation to land purchases and conventional property funding arrangements in the United Kingdom, the tax is levied on the acquisition of chargeable interests, such as freehold or leasehold interests in land, while security interests, including those which secure the financing of such acquisitions, are exempted.
When persons enter into a contract for a land transaction under which the transaction is to be completed by a conveyance, section 44(2) provides that they are not regarded as entering into a land transaction by reason of entering into the contract.
Thus steps (1) and (2) in para 5 above would not of themselves give rise to any liability to SDLT.
Instead, if the transaction is completed without previously having been substantially performed, the contract and the transaction effected on completion are treated as parts of a single land transaction, whose effective date is the date of completion (section 44(3)).
If the contract is not completed but is substantially performed (for example, if the purchaser takes possession of the subject matter of the contract or a substantial amount of the consideration is paid) the contract is treated as if it were the transaction provided for in the contract and its effective date is when the contract is substantially performed (section 44(4) and (5)).
It is common ground in this appeal that section 45, which creates sub-sale relief by modifying the operation of section 44, applies in relation to the completion of the two contracts for the sale of the barracks (steps (1) and (2) in para 5 above) to prevent a charge to tax on the completion of the contract between the MoD and PBL at step 4(b) in para 5 above.
Section 45 (as amended by section 49 of and paragraph 2 of Schedule 10 to the Finance (No 2) Act 2005) provides: (a) (b) (2) The transferee is not regarded as entering into a land transaction by reason of the transfer of rights, but section 44 (contract and conveyance) has effect in accordance with the following provisions of this section.
(3) That section applies as if there were a contract for a land transaction (a secondary contract) under which - the transferee is the purchaser, and the consideration for the transaction is - (i) so much of the consideration under the original contract as is referable to the subject- matter of the transfer of rights and is to be given (directly or indirectly) by the transferee or a person connected with him, and (ii) rights.
the consideration given for the transfer of The substantial performance or completion of the original contract at the same time as, and in connection with, the substantial performance or completion of the secondary contract shall be disregarded except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of subsection (3) of section 73 (alternative property finance: land sold to financial institution and re-sold to individual).
The consequence of the tailpiece of section 45(3) was that the completion of the contract between the MoD and PBL for the purchase of the barracks was disregarded.
Section 71A
The FA 2003 as originally enacted contained an exemption for Ijara financing in section 72.
Section 71A was added in April 2005 by section 94 of and paragraph 2 of Schedule 8 to the Finance Act 2005 and applies in place of section 72, except in relation to land in Scotland, to which sections 72 and 72A apply.
Section 71A(1) sets out the scope of the section; it provides: (1) This section applies where arrangements are entered into between a person and a financial institution under which - (a) the institution purchases a major interest in land or an undivided share of a major interest in land (the first transaction), (b) where the interest purchased is an undivided share, the major interest is held on trust for the institution and the person as beneficial tenants in common, (c) the institution (or the person holding the land on trust as mentioned in paragraph (b)) grants to the person out of the major interest a lease (if the major interest is freehold) or a sub-lease (if the major interest is leasehold) (the second transaction), and (d) the institution and the person enter into an agreement under which the person has a right to require the institution or its successor in title to transfer to the person (in one transaction or a series of transactions) the whole interest purchased by the institution under the first transaction.
The section therefore has the scope to cover the contracts between PBL and MAR at steps (2), (3) and (4)(a) in para 5 above.
The section then spells out the exemptions which it confers on Ijara arrangements as follows.
First, subsection (2) exempts the first transaction (the institutions purchase of a major interest in land) if the vendor is the counterparty to the arrangement with the financial institution (or is another financial institution which has provided Ijara finance to that person).
It provides: (2) The first transaction is exempt from charge if the vendor is - (a) the person, or (b) another financial institution by whom the interest was acquired under arrangements of the kind mentioned in subsection (1) entered into between it and the person.
Secondly, subsection (3) exempts from charge the grant of the lease of the subjects to the counterparty by providing: The second transaction is exempt from charge if the provisions of this Part relating to the first transaction are complied with (including the payment of any tax chargeable).
Thirdly, subsections (4), (5) and (7) exempt from charge the re-conveyance by the financial institution of the major interest in land to the counterparty.
They provide: (4) Any transfer to the person that results from the exercise of the right mentioned in subsection (1)(d) (a further transaction) is exempt from charge if - the provisions of this Part relating to the first and (a) second transactions are complied with, and (b) the further transaction - at all times between the second transaction and (i) the interest purchased under the first transaction is held by a financial institution so far as not transferred by a previous further transaction, and (ii) second transaction is held by the person.
the lease or sub-lease granted under the (5) The agreement mentioned in subsection (1)(d) is not to be treated - (a) as substantially performed unless and until the whole interest purchased by the institution under the first transaction has been transferred (and accordingly section 44(5) does not apply), or (b) 46 (options and rights of pre-emption).
as a distinct land transaction by virtue of section (7) A further transaction that is exempt from charge by virtue of subsection (4) is not a notifiable transaction unless the transaction involves the transfer to the person of the whole interest purchased by the institution under the first transaction, so far as not transferred by a previous further transaction.
Section 71A therefore reflects the two paradigm forms of Ijara finance set out in para 4 above.
First, if the financial institution purchases the property from a third party, that transaction is not exempted under subsection (2) and the financial institution pays SDLT on completion or the substantial performance of that contract; but the lease to the party who is being financed and the eventual transfer of the interest by the financial institution to that party on repayment of the financing are exempt under subsections (3) and (4) respectively.
Secondly, if the financial institution purchases the property from the counterparty whom it is financing, subsection (2) applies to exempt the transfer of the major interest in land to the financial institution and subsections (3) and (4) exempt the second transaction (the lease) and the further transaction (the re-transfer of the major interest in land to the counterparty).
Because the arrangements for financing the purchase of the barracks involved PBL completing its purchase and its sale of the barracks to MAR on the same day in a connected transaction, PBL, as I have said, claimed sub-sale relief under section 45(3).
Because MAR had purchased the barracks from PBL in the context of an Ijara arrangement, it claimed exemption under section 71A(2) for that purchase and a claim was also submitted on behalf of PBL for exemption under section 71A(3) for the lease to PBL.
When HMRC amended PBLs return to assert a liability to pay SDLT of 38.36m, PBL appealed to the First-tier Tribunal (the FTT).
Before the FTT the parties agreed that the combined effect of sections 45(3) and 71A was to exclude any liability to SDLT on the part of PBL or MAR in relation to the transactions unless the anti-avoidance provisions of section 75A applied to the transactions.
The arguments before the FTT therefore concentrated on the meaning and application of section 75A, to which I turn later in this judgment.
But when the appeal came before the Upper Tribunal (the UT), PBL changed its position.
It continued to argue that it was not liable for SDLT on its purchase of the barracks from the MoD because of its entitlement to sub-sale relief under section 45(3).
But it now argued that MAR was not entitled to exemption on its purchase of the barracks under section 71A(2) (para 14 above) because, on a proper understanding of the related provisions of the FA 2003, PBL was not the vendor of the barracks to MAR under that subsection.
The tailpiece of section 45(3) (para 12 above) required that the completion of the sale by the MoD to PBL be disregarded and that tax was due on the notional contract created by section 45(3).
Giving effect to that disregard and the notional contract meant that the vendor of the barracks was the MoD, and not PBL.
The exemption in section 71A(2) therefore did not apply and MAR would have been liable to pay SDLT on the purchase price of 1.25 billion, if HMRC had not failed to so determine or to assess MAR within the six-year time limit since the transaction.
This argument did not succeed before the UT (Morgan J and Judge Nowlan).
Morgan J, with whom Judge Nowlan agreed in relation to section 71A held, at para 43, that the purpose of the section was to equate the position of a provider of an alternative form of finance (such as MAR), who acquires a chargeable interest, with the position of a funder who acquires a security interest (which is an exempt interest).
He relied on section 45(5A) which I discuss in para 32 below, in interpreting the vendor in para 71A(2) as referring to PBL but also pointed out that his interpretation promoted the purpose of section 71A. If PBL were correct in its submission, SDLT would be paid on the level of funding provided by the financial institution and not on the price paid by the borrower for the land.
He acknowledged that his interpretation meant that neither PBL or MAR was liable to pay SDLT in respect of the transactions unless section 75A applied, but considered the legislation to be flawed at the relevant time because the tailpiece of section 45(3) did not contain an exception to the disregard where the sub-sale was exempt from a charge under section 71A.
The Court of Appeal (Patten, Lewison and Underhill LJJ) [2018] 1 WLR 368 disagreed with the Upper Tribunals interpretation of the relationship between section 45(3) and section 71A. Patten LJ began by observing, at para 28, that HMRCs approach by its reliance on section 75A produced a particularly inapt and harsh result because PBL would have to pay SDLT on the larger sum which MAR provided to it rather than on the purchase price which it paid to the MoD. Secondly, he held that PBL could not be the vendor in section 71A(2) because, as a result of the disregard of the transaction between the MoD and PBL in the tailpiece of section 45(3), the only contract by which MAR acquired the barracks for SDLT purposes was the secondary contract under that subsection.
He referred to the Court of Appeals earlier judgment in DV3 RS LP v Revenue and Customs Comrs [2014] 1 WLR 1136 (DV3) in support of his analysis: vendor in section 71A(2) must be a reference to the person from whom MAR purchased the barracks; that person could not be PBL as, by virtue of the disregard, it had no chargeable interest so as to be regarded as entering into the secondary contract, which under section 45(3) was a contract for a land transaction.
He rejected Mr Gammies submission on behalf of HMRC that section 71A was not addressing land transactions in the SDLT world but was framed to address transactions in the real world, and also his submission relying on section 45(5A).
Thirdly, he considered that the scheme of section 71A was to limit SDLT in all cases to a single charge on the acquisition of the property from the third party vendor, whether the acquirer was the financial institution or its customer.
Fourthly, he thought that it was unlikely that Parliament had intended to leave transactions, which fell within both of sections 45(3) and 71A, exempt from any SDLT charge and to have dealt with the problem by the anti-avoidance provisions of section 75A, which was introduced over a year later.
The vendor under section 71A(2) was therefore the MoD, and not PBL, with the result that that subsection did not exempt MAR from the charge.
Lewison LJ added two further points.
First, he disagreed with the approach of the Upper Tribunal which equated the position of MAR with a traditional lender and saw the aim of section 71A as being that SDLT was to be paid by purchasers and not financiers.
As under an Ijara arrangement the financial institution owned the asset for the duration of the lease, it was not surprising that it should be liable to pay SDLT on the purchase.
Secondly, because section 75A did not apply until 20 months after section 71A had taken effect, the result of HMRCs approach was that no SDLT would have been payable on transactions which combined sub-sale relief and the section 71A exemption in that period.
This provided a very strong context which made it inappropriate to apply an extended meaning of vendor in section 45(5A): para 49.
I recognise the difficulty in interpreting the legislation which has been subjected to repeated incremental amendments and additions since 2003, as Parliament has struggled to optimise this new tax.
But I have come to the conclusion that the Upper Tribunal was correct in concluding that PBL was the vendor under section 71A(2) and therefore that MARs purchase of the barracks from PBL was exempt from SDLT for the following four reasons.
First, it is in my view significant that Parliament has chosen, when describing the alternative property finance transactions to be exempted from charge in section 71A, and also in sections 72, 72A and 73, not to use the language of land transaction and chargeable interest but to use what Mr Gammie described as the language of real world transactions.
Parliament also adopted this practice in paragraphs 2-4 of Schedule 3, which exempt specified transactions from charge.
Thus in section 71A(1)(a) the first transaction is described as the purchase of a major interest in land and in subsection (1)(c) the second transaction is described as the granting of a lease out of the major interest.
This contrasts with the language of sections 42-45 which are concerned with the statutory constructs of land transactions, contracts for land transactions, and the acquisition and disposal of chargeable interests.
As descriptions of real world transactions the provisions of section 71A match the paradigm descriptions of Ijara arrangements in para 4 above so that in the first example, when the financial institution purchases the property from a third party and then finances its customers acquisition by means of a lease and a contract to purchase, the institution pays SDLT on its purchase but not on the financing arrangements which follow, whereas in the second example, where the financial institution purchases the property from its customer, that purchase and the subsequent transactions are exempt.
The distinctive treatment of the two examples is achieved by section 71A(2) which exempts the first transaction from charge if the vendor is the customer of the financial institution (or a financial institution which has previously provided Ijara finance to that customer).
It appears to me that in enacting the section using real world terms, Parliament has sought to describe the two paradigms of Ijara finance.
In the second example, in which subsection (2) exempts the first transaction, the customer may have purchased the major interest in land and paid SDLT on that purchase, or he may have received the major interest in land as a gift or through inheritance and therefore have incurred no charge to SDLT.
It is not relevant to the application of section 71A(2) to ask whether or not the customer has incurred a liability to pay SDLT before entering into the Ijara arrangement.
Subsection (2) requires one only to ask the real world question: who sold the major interest in land to the financial institution? If the answer to that question is the customer, no charge to SDLT would arise.
In the present case, if one asks, who sold the barracks to MAR?, the answer is PBL.
Secondly, this approach is consistent with the aim of section 71A, which the UT identified, of seeking to equate Ijara financing with conventional lending in the United Kingdom by taxing the purchaser of the property and exempting the financier.
In conventional lending, security interests are exempt in all circumstances (section 48(2)).
Section 71A operates as a self-contained statutory regime to achieve this result.
As was stated in the Explanatory Notes to the original clauses 72 and 73 of the Finance Bill 2003 the aim was to place the amount of tax due on purchases by means of Islamic financing on a level footing with the amount due for purchases with conventional mortgage products.
Thus in the case where the financial institution purchases from its customer, the whole transaction may be seen as the equivalent of a security transaction.
In the case where the financial institution purchases from a third party, that purchase may be seen as a precursor of the equivalent of a security transaction effected by the lease and the conferring on the customer of the right to buy the property from the financial institution.
Thirdly, there is nothing within section 71A which suggests that the exemption in subsection (2) will not apply when the sale by the customer to the financial institution is a sub-sale which takes place contemporaneously and in connection with the customers purchase of the major interest in land.
What Parliament appears to have overlooked at the outset is the possibility of the combination of sub-sale relief with the exemption of Ijara arrangements.
Fourthly, this interpretation has the benefit (subject to the operation in particular cases of section 75A which I discuss below) that, where the financial institution purchases the property from its customer, SDLT will not be charged on the amount which the financial institution provides its customer, which may in many circumstances be significantly less than the purchase price of the property, for example where the customer has provided a proportion of the purchase price of the land from its own resources.
In some cases, as here, the amount which the financial institution contracts to provide may be significantly more than the purchase price of the property which the customer has paid.
It is of note that the interpretation of section 71A(2) which the Court of Appeal has favoured in the context of a sub-sale has the effect of imposing a tax charge by reference to the amount which the financial institution provides the customer.
This would not achieve the level footing which the section was designed to achieve.
In DV3 the Court of Appeal was addressing relief under paragraph 10 of Schedule 15 to the FA 2003 which was available when a person transfers a chargeable interest to a partnership of which he is a partner.
In that case the partner (A) purchased a lease from an insurance company (C) and transferred the lease to a newly created partnership (B) of which A and four others were the partners.
Both contracts were completed on the same day.
A claimed sub-sale relief under section 45(3) and also relief for B (the partnership) under paragraph 10 of Schedule 15.
The claim for the Schedule 15 relief failed because the section 45(3) disregard prevented A from acquiring a chargeable interest from C, and paragraph 10 of Schedule 15 applies only if a partner transfers a chargeable interest to a partnership.
Lewison LJ, when discussing the definition of land transaction in section 43(1), stated, at para 23: the fact that B acquires a chargeable interest as the result of an instrument giving effect to a transaction between him and A does not necessarily entail the proposition that the interest in As hands was itself a chargeable interest.
If there is no land transaction, there cannot have been the acquisition of a chargeable interest.
He continued at para 30: Paragraph 10 of Schedule 15 to the 2003 Act is not so much concerned with the acquisition of a chargeable interest by a partnership as the transfer by a partner of a chargeable interest.
It looks at a transaction from the perspective of the transferor.
It seems to me to be clear that a partner cannot transfer a chargeable interest to a partnership unless he has a chargeable interest to transfer.
HMRC accept as correct the Court of Appeals analysis in DV3 but argue that the case casts no light on the correct interpretation of section 71A(2) because it is irrelevant to the operation of that subsection whether the completion of the sale from the MoD to PBL was a land transaction for the purpose of SDLT with the result that PBL acquired a chargeable interest.
Equally, it is irrelevant to the interpretation of section 71A(2) whether or not the transaction between the customer and the financial institution is a land transaction.
When the FA 2003 spoke of the vendor in section 71A and in the equivalent subsections in the other sections exempting alternative property finance, it was referring to the vendor in the real world transaction of the sale of the major interest in land.
It was not concerned with whether or not the real world transaction was a land transaction for the purposes of SDLT.
Accordingly, HMRC submit that section 43(4), which defines vendor in relation to a land transaction in Part 4 of the FA 2003 as the person disposing of the subject-matter of the transaction is not in point.
For the reason set out in paras 24 and 25 above, I agree.
It follows that the disregard in the tailpiece of section 45(3) has no bearing on the operation of section 71A(2).
A consideration which influenced the Court of Appeal in reaching its view on section 71A(2) was that Parliament could not have intended to leave transactions which involved a sub-sale financed by an Ijara arrangement (and thus fell within both section 45(3) and section 71A) free of charge for over one year before it introduced the anti-avoidance provision of section 75A. I see the force of this point; it is without question a legitimate method of purposive statutory construction that one should seek to avoid absurd or unlikely results.
But SDLT was a new tax created by the FA 2003 and, as I have said, required repeated amendments to make it effective.
It is not surprising that lacunas may have existed in the early years of a new tax.
In the early years of the tax, Parliament enacted amendments to close identified lacunas caused by the combination of sub-sale relief and exemptions.
Thus section 45(5A) was inserted into the FA 2003 by section 296 of and paragraph 5 of Schedule 39 to the Finance Act 2004.
It provided: In relation to a land transaction treated as taking place by virtue of subsection (3) - (a) references in Schedule 7 (group relief) to the vendor shall be read as references to the vendor under the original contract; (b) other references in this Part to the vendor shall be read, where the context permits, as referring to either the vendor under the original contract or the transferor.
This provision would not have needed to define the vendor for the purpose of group relief in para (a) as it did if, consistently with the Court of Appeals reasoning, the disregard in the tailpiece to section 45(3) operated already to make the vendor a reference to the vendor under the original contract.
Similarly, the insertion by the Finance (No 2) Act 2005 into the tailpiece of section 45(3) of the words of exception (ie except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of subsection (3) of section 73 (alternative property finance: land sold to financial institution and re-sold to individual)) would not have been required to impose a charge to SDLT.
If the Court of Appeal were correct in holding that the vendor in section 71A(2) had to have a chargeable interest and that the tailpiece of section 45(3) prevented it from having such an interest, sections 72(2), 72A(2) and 73(2), which are similarly worded, would operate in the same way in the context of a sub-sale so that the vendor in each case could not be the customer.
The parties have not explained to the court what prompted each of the various amendments, but Parliament may have been responding to particular schemes which had the effect of avoiding SDLT.
HMRC explained in their written case that section 75A, which the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006 (SI 2006/3237) and section 71 of the Finance Act 2007 inserted into the FA 2003, was a response to the formulation of tax avoidance schemes which combined reliefs (including sub-sale relief) and exemptions in ways which Parliament had not intended.
As will be clear when I turn to section 75A, it has a very broad ambit.
The problem of tax avoidance by combining sub-sale relief and the exemptions for the various forms alternative property finance was capable of a more focussed resolution.
While subsequent amendments are not a legitimate tool in ascertaining prior parliamentary intention, it is relevant to note that the problem of the combination of the sub-sale relief and those exemptions was eventually resolved by a simple expedient.
In section 82 of and paragraph 2 of Schedule 21 to the Finance Act 2011 Parliament amended the exception in the tailpiece of section 45(3) to read: except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of any of sections 71A to 73 (which relate to alternative property finance) (new wording emphasised).
This amendment, like those referred to in para 32, would not have been needed to create a charge to SDLT if the interpretation which the Court of Appeal favoured were correct.
The courts adopt a purposive approach to the interpretation of taxing statutes following the guidance of the House of Lords in Barclays Mercantile Business Finance Ltd v Mawson (Inspector of Taxes) [2005] 1 AC 684.
In accordance with that guidance, summarised by Lord Nicholls of Birkenhead at para 32, the court asks itself two questions.
First, it must determine the nature of the transaction to which a statutory provision is intended to apply; and secondly it must decide whether the actual transaction answers to the statutory description.
If I am correct about the self- contained nature of the provisions of section 71A, the answer to the first question is that the exemption in section 71A(2) applies to the first transaction of the Ijara arrangement in section 71A(1) where the customer sells a major interest in land to the financial institution.
The question whether PBLs sale of the barracks to MAR answers that description is answered in the affirmative.
A purposive construction will not always operate in favour of HMRC and against the taxpayer as MacNiven v Westmoreland Investments Ltd [2003] 1 AC 311 shows.
Similarly, if there are lacunas in a statutory regime which enable tax avoidance, a purposive interpretation may not always remove them as the Court of Appeals judgment in Mayes v Revenue and Customs Comrs [2011] STC 1269 shows.
I therefore conclude that, but for section 75A, the combination of the operation of sub-sale relief under section 45(2) and (3) and the exemption under section 71A(2) relieved the sale by the MoD to PBL and exempted the sale by PBL to MAR from a charge to SDLT.
An argument against this approach, which has attracted Lord Briggs, is that section 71A(2) must be construed as exempting a transaction which would otherwise be a chargeable transaction under Part 4.
The only transaction which is so chargeable, so the argument goes, is the completion of the notional secondary contract which section 45(3) creates, and section 45(5A)(b) gives instructions on the identification of the vendor in the notional land transaction.
Because the identification of the vendor in section 45(5A)(b) depends on the context in which the word is used and that context would give rise to the avoidance of tax if vendor referred to the transferee because the combination of sub-sale relief and section 71A(2) would exempt both transactions, it is argued that the vendor in section 71A(2) must refer to the original vendor, ie the MoD. I do not agree.
In relation to the first point, the statement that a transaction is exempt from charge, such as that in section 71A(2) referring to the first transaction, is an unqualified statement that a transaction of that description is free from a liability to pay the tax.
That exclusion of liability is not removed if, for some extraneous reason such as the operation of sub-sale relief under section 45, the transaction in question would not have imposed a liability to SDLT: viz the first of my four reasons (paras 24 and 25 above).
If that is correct, the second argument does not arise because operation of the exemption does not depend on section 45(5A)(b).
In any event, if section 45(5A)(b) were relevant, (a) the context of the use of the word vendor was in relation to real world transactions and (b) the history of the amendment of the FA 2003 in the years before the transactions were carried out on 31 January 2008 suggests that HMRC were struggling to respond to schemes which exploited lacunas in the legislation.
In that context the existence of a loophole in the tax legislation would not militate against the interpretation which I favour.
This is not to say that a contextual construction of a statutory provision may not have regard to the consequences of a particular interpretation and lead one to prefer another interpretation, especially when the former interpretation would have absurd or unreasonable results.
It is simply to say that in the early years of SDLT Parliament created a patchwork of provisions, which, for a while, allowed a transaction, which combined sub-sale relief and Ijara arrangements, what Lord Briggs correctly calls an unintended tax holiday.
I recognise that the exclusion by the Finance (No 2) Act 2005 of the completion or substantial performance of the first contract from the section 45(3) disregard when the secondary contract would give rise to an exempt transaction under section 73(3) suggests that the draftsman in 2005 sought to impose a charge on the first transaction under section 73 while not addressing a similar problem in section 71A. But that indication of intention at that time is not sufficient in my view to outweigh the factors which have persuaded me to regard section 71A, which had been introduced earlier in 2005, as a self-contained statutory regime which confers exemption on real world transactions.
Further, the different treatment in section 45(3) of the similarly-worded exemptions in sections 71A and 73 at the time of the relevant transactions has the result, on Lord Briggs approach which is focussed on avoiding tax loss, that vendor is interpreted differently under sections 71A(2) and 73(2).
While section 45(5A)(b) may allow such an interpretation, I find HMRCs explanation of a patchwork of provisions and a lacuna a more persuasive explanation of the relevant provisions as they were then.
Because, as a result of the combination of sections 45 and 71A(2), there is no SDLT charge on the sales between the MoD and PBL and between PBL and MAR, it is necessary to consider the correct interpretation and application of section 75A, to which I now turn.
Section 75A
(i) Whether and if so how it applies
Section 75A is headed Anti-avoidance and provides: (1) This section applies where - (a) one person (V) disposes of a chargeable interest and another person (P) acquires either it or a chargeable interest deriving from it, (b) a number of transactions (including the disposal and acquisition) are involved in connection with the disposal and acquisition (the scheme transactions), and (c) the sum of the amounts of stamp duty land tax payable in respect of the scheme transactions is less than the amount that would be payable on a notional land transaction effecting the acquisition of Vs chargeable interest by P on its disposal by V. In subsection (1) transaction includes, in particular - (a) a non-land transaction, (2) any kind of arrangement whether or not it could an agreement, offer or undertaking not to take (b) specified action, (c) otherwise be described as a transaction, and (d) acquisition by P of the chargeable interest.
a transaction which takes place after the (3) The scheme transactions may include, for example - the acquisition by P of a lease deriving from a a sub-sale to a third person; the grant of a lease to a third person subject to a (a) freehold owned or formerly owned by V; (b) (c) right to terminate; (d) take some other action; the exercise of a right to terminate a lease or to (4) Where this section applies - (a) any of the scheme transactions which is a land transaction shall be disregarded for the purposes of this Part, but (b) there shall be a notional land transaction for the purposes of this Part effecting the acquisition of Vs chargeable interest by P on its disposal by V. (5) The chargeable consideration on the notional transaction mentioned in subsections (1)(c) and (4)(b) is the largest amount (or aggregate amount) - (a) given by or on behalf of any one person by way of consideration for the scheme transactions, or (b) received by or on behalf of V (or a person connected with V within the meaning of section 839 of the Taxes Act 1988) by way of consideration for the scheme transactions.
(6) The effective date of the notional transaction is - the last date of completion for the scheme (a) transactions, or if earlier, the last date on which a contract in (b) respect of the scheme transactions is substantially performed.
(7) This section does not apply where subsection (1)(c) is satisfied only by reason of - (a) (b) sections 71A to 73, or a provision of Schedule 9.
The breadth of section 75A was implicitly acknowledged by Parliament which in section 75C(11) and (12) empowered the Treasury to make an order, including an order with retrospective effect, which provides that section 75A is not to apply in specified circumstances.
PBLs first argument, that section 75A could not apply because it had not been established that the parties entered into the transactions for the purpose of tax avoidance, failed before the FTT, the UT and the Court of Appeal.
In my view the tribunals and the Court of Appeal reached the correct conclusion.
The heading of the section, Anti-avoidance, is the only indication in the section which could support PBLs contention.
The heading is relevant to assist an understanding as to the mischief which the provision addresses, but it says nothing as to the motives of the parties to the scheme transactions.
There is nothing in the body of the section which expressly or inferentially refers to motivation.
The provision was enacted to counter tax avoidance which resulted from the use of a number of transactions to effect the disposal and acquisition of a chargeable interest.
It is sufficient for the operation of the section that tax avoidance, in the sense of a reduced liability or no liability to SDLT, resulted from the series of transactions which the parties put in place, whatever their motive for transacting in that manner.
This is clear from subsection (1)(c) which compares the amount of SDLT payable in respect of the actual transactions against what would be payable under the notional land transaction in section 75A(4), by which P acquired Vs chargeable interest on its disposal by V.
Section 75A does not identify who is V and who is P in relation to the transactions to which the section applies.
As there is a number of transactions, it is possible that more than one person may be V and more than one person may be P. But Parliament has not conferred a discretion on HMRC to select whom they wish to treat as V or P. HMRC do not contend otherwise.
In Vestey v Inland Revenue Comrs (Nos 1 and 2) [1980] AC 1170, in which the Revenue contended that they had a discretion to select whom among a class of beneficiaries it should assess as liable to tax, Lord Wilberforce identified the following principles as fundamental objections to that contention, at p 1172: Taxes are imposed upon subjects by Parliament.
A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined.
A proposition that whether a subject is to be taxed or not, or, if he is, the amount of his liability, is to be decided (even though within a limit) by an administrative body represents a radical departure from constitutional principle.
It is necessary therefore for the courts to analyse the words of a broadly-worded anti- avoidance provision to identify the persons on whom Parliament has imposed this charge to tax.
The words of section 75A by themselves do not disclose who is V and who is P in a particular case.
But the mischief which the provision addresses and the context of the provision within Part 4 of the FA 2003 provide the answer.
The court adopts the purposive approach which the House of Lords sanctioned in Barclays Mercantile Business Finance Ltd, to which I have referred in para 34 above.
The explanatory notes on clause 70 of the Finance Bill 2007 explained that the provision was introduced to counter avoidance schemes which have been developed to avoid payment of SDLT.
It appears to be drafted in deliberately broad terms to catch a wide range of arrangements which result in tax loss.
The examples of scheme transactions which are set out in subsection (3), although merely examples, give an indication of some at least of the targets of the provision.
The task is to identify where the tax loss has occurred as a result of the adoption of the scheme transactions in relation to the disposal and acquisition of the relevant interest or interests in land.
This in turn involves identifying the person on whom the tax charge would have fallen if there had not been the scheme transactions to which subsection (1)(b) refers and which exploited a loophole in the statutory provisions.
It is clear from (i) subsection (1)(a), which refers to P acquiring either Vs chargeable interest or a chargeable interest deriving from it, and (ii) subsection (3)(a), which refers to the acquisition by P of a lease deriving from a freehold owned or formerly owned by V (emphasis added), that the section may operate not only when P acquires the chargeable interest directly from V but also when P acquires a chargeable interest, such as a lease, which is derived from a chargeable interest which V formerly owned.
Thus the section can cover a series of transactions by which V disposes of its chargeable interest which comes to be acquired by another person and P ultimately acquires a chargeable interest derived from it from that other person.
Turning to the application of the section to the transactions in this case, it is agreed by the parties that V in subsection (1)(a) is the MoD; its chargeable interest was the freehold in the Chelsea Barracks.
I agree.
In the course of the scheme transactions, PBL did not acquire a chargeable interest, the freehold, when the contract between the MoD and it was completed on 31 January 2008 because the transaction fell to be disregarded under section 45(3); on the same day MAR acquired a chargeable interest, again the freehold, when its contract with PBL was implemented as a result of the completion of the notional transaction in section 45(3); and, on the same day, PBL acquired a chargeable interest, the lease, from MAR.
The put and call options were designed to enable PBL to re-acquire the freehold in the barracks, a result which was the ultimate aim of the series of transactions summarised in para 5 above.
But those options did not result in the acquisition of a chargeable interest on 31 January 2008.
They were nevertheless a scheme transaction within subsection (1)(b) because they were involved in connection with the disposal and acquisition of a chargeable interest and subsection (2)(d) includes within the definition of transaction under subsection (1) a transaction which takes place after P acquires the chargeable interest.
They are part of the context in which the scheme transactions, which led to Ps acquisition of a chargeable interest on 31 January 2008, fall to be analysed as they were the final stage of the transactions by which MAR was to finance PBLs acquisition of the freehold in the barracks.
If the court were to confine its attention to subsection (1)(a) alone, either MAR or PBL could be P, the former because it acquired a chargeable interest on its acquisition of the freehold in the barracks and the latter because it acquired the lease of the barracks from MAR.
But the court cannot so confine its attention.
It must go on to analyse how the scheme transactions gave rise to the loss of tax.
In the real world the nature of the transaction is clear: PBL acquired the barracks with the benefit of finance from MAR.
The sub-sale to MAR and the lease back to PBL were transactions involved in connection with the disposal by MoD of its chargeable interest, the freehold in the barracks, and the acquisition by PBL of its chargeable interest, the leasehold interest.
The loophole which has enabled the avoidance of tax is the combination of sub-sale relief under section 45(3) with the exemption conferred on Ijara financing when the customer of the financial institution sells its freehold interest in land to the institution and then leases back the land.
The simple means of removing the loophole, which Parliament eventually identified in 2011, was to exclude from the disregard in the tailpiece of section 45(3) a case where the secondary contract was exempt because of sections 71A to 73.
Thus it was PBL which obtained the benefit of the avoidance of tax in relation to the completion of its contract with MoD.
I recognise that the method which Parliament subsequently chose to remove the tax loss cannot be decisive.
There might have been other ways of removing the tax loss.
For example, it might have been possible to amend section 71A(2) to remove the exemption of the sale transaction between the customer and the financial institution if the vendor had benefited from the section 45(3) disregard and thereby impose the burden on the financial institution.
But, as Judge Nowlan stated in his impressive judgment (para 137), it is appropriate to have regard to the overall structure of SDLT which seeks to impose the tax on purchasers and not financiers.
The amendment of section 45(3) rather than section 71A(2) had the advantage of preserving this structure by keeping intact the exemption of the two paradigms of Ijara financing to which I referred in para 4 above.
If the opportunity for tax avoidance were removed by amending section 71A(2), the consequence would be that SDLT would be paid on the price which the financial institution paid its customer in the context of the Ijara financing which, as I have said, might differ significantly from the purchase price of the major interest in land.
Thus I conclude, like Judge Nowlan, that the error obviously lay in the failure to disapply the section 45(3) disregard, an error which benefited PBL.
Taking a purposive approach to the interpretation of section 75A, therefore, I conclude that PBL is P; and, because the completion of the contract between the MoD and PBL is disregarded under section 45(3), the chargeable interest which PBL acquires in section 75A(1) is the lease which it received from MAR.
The parties advanced two alternative approaches to the identification of P, which I comment on briefly to explain why I cannot accept either approach.
First, PBL submits that the court should adopt a sequential approach and identify as P the first person who acquires a chargeable interest.
As the completion of the MoD-PBL contract is disregarded under section 45(3), MAR is that person.
But there is no justification in the wording of section 75A for the adoption of a sequential approach, when applying the section to the transactions which in fact took place, which stops the search at the first person to acquire a chargeable interest.
One would thereby remove from consideration the leaseback and the grant of the options which were part of the contractual scheme which the section is designed to address.
That approach appears to me to be inconsistent with the purpose of section 75A, which is to prevent a tax loss which otherwise would occur because of the totality of the connected transactions which have taken place in the real world.
Secondly, HMRC submit that MAR could not be P because section 75A(7) disapplies section 75A if subsection (1)(c) is satisfied only by reason of sections 71A to 73.
HMRC argues that, from MARs perspective, the only reason why MAR did not incur liability to SDLT on its acquisition of the freehold interest in the barracks from PBL was because of the exemption in section 71A. That may be so; but it is irrelevant.
Subsection (1)(c) does not look at the question from the perspective of a party to one of the transactions.
It sets up a comparison between the sum of SDLT payable on all of the connected transactions and that payable on the notional transaction.
Subsection (7) would disapply section 75A in relation to the transactions in para 5 above only if the section 71A exemption were the sole reason why the amounts of SDLT payable on those transactions is less than the amount payable on the notional transaction.
The first of those transactions was the completion of the MoD-PBL contract and the reason why the sum payable on that transaction was nil was because of the section 45(3) disregard.
Thus subsection (7) would not disapply section 75A.
PBL advanced a refinement of this approach in its written case, namely that if one adds up all of the SDLT which would have been charged if there had been no sub-sale relief and no exemption for the Ijara finance, it is only the section 71A exemption which takes the tax due on the scheme transactions below that due on the notional transaction in the subsection (1)(c) balance.
Subject to its challenge on the quantum of the charge on the notional transaction, which I discuss below, PBL presents the sums payable on the four transactions in para 5 above, if there were no sub-sale relief and no section 71A exemption, as follows: (i) 38.36m in respect of the MoD-PBL transfer; (ii) 50m in respect of the PBL-MAR transfer; (iii) 16.41m in respect of the lease granted by MAR to PBL; and (iv) 0 for the option to purchase, A total of 104.77m If 50m is payable for the notional transaction, PBL argues that it is only the section 71A exemption (50m plus 16.41m) which takes the sums payable in respect of those transactions below the sum payable on the notional transaction (ie 104.77m - 66.41m = 38.36m).
I do not accept this approach.
I consider that the purpose of subsection (7)(a) is to exclude the application of section 75A where the only cause of the tax loss which the section counters is the exemptions available under sections 71A to 73.
Those alternative property finance provisions involve a series of transactions which otherwise might themselves be scheme transactions under section 75A(1)(b) and it is clearly not the purpose of the section to strike at transactions which go no further than to achieve the intended exemption of alternative property finance.
Where, as here, the combined effect of section 45(3) and section 71A is to diminish the SDLT payable below that payable on the notional transaction, section 75A must take effect.
I conclude (i) that PBL is P under section 75A(1)(a), (ii) that the requirements of subsection (1)(b) also are met because the scheme transactions are those listed in para 5(4) above, and (iii) addressing the first side of the balance which subsection (1)(c) mandates, that the sum of SDLT payable in respect of the scheme transactions is nil.
It is then necessary to consider the other side of the subsection (1)(c) balance.
It will be recalled that subsection (4) requires that the scheme transactions which are land transactions be disregarded and establishes in their place a notional transaction by which P acquires Vs chargeable interest on its disposal by V. That notional transaction involves PBL acquiring MoDs freehold interest in the barracks.
Under subsection (6) the effective date of that notional transaction is 31 January 2008.
I turn then to the chargeable consideration on this notional transaction.
ii) The actual consideration
Subsection (5) provides, so far as relevant, that the chargeable consideration on the notional transaction is the largest amount (or aggregate amount) given by any one person for the scheme transactions.
HMRC assert that that sum is the 1.25 billion which was the purchase price which MAR contracted to pay to PBL for the purchase of the freehold in the barracks.
SDLT, which is chargeable at 4% on that figure, results in a liability of 50m.
PBL contests this.
It points out that the Ijara arrangement was brought to an end on 1 March 2010, at a time when the fourth tranche of the consideration under the PBL-MAR sale agreement (US$378,670,740) had not been paid.
Before the FTT, PBL argued that MAR had therefore given consideration of only 970m and not the higher figure of 1.25 billion.
PBL now asserts that the sterling equivalent of the amount which it had drawn down was approximately 847m, because paragraph 9 of Schedule 4 to the FA 2003 requires the sterling equivalent to be calculated at the effective date of the transaction (ie 31 January 2008).
The higher figure of 970m was, PBL asserts, based on an erroneous calculation of the sterling equivalent of each of the US$ draw downs on its own draw down date.
If the consideration which MAR actually paid to PBL for the conveyance to it of the freehold in the barracks was only 847m, the largest amount given by one person for the scheme transactions was the 959m paid by PBL to the MoD.
In my view it is not necessary for this court to determine what is the correct sterling equivalent of the sums which MAR actually paid to PBL as I am persuaded, for the reasons set out below, that HMRC are correct that the consideration for MARs purchase of the barracks from PBL was 1.25 billion, but that PBL may claim a refund for the part of that consideration which was never paid.
Mr Gammie does not dispute that it was open to PBL to make that claim.
PBL asserts that it made that claim after the FTT handed down its decision.
The starting point is paragraph 1(1) of Schedule 4 to the FA 2003 which defines the chargeable consideration in these terms: The chargeable consideration for a transaction is, except as otherwise expressly provided, any consideration in money or moneys worth given for the subject-matter of the transaction, directly or indirectly, by the purchaser or a person connected with him.
This provision might appear, by itself, to support PBLs case.
But section 51 addresses contingent consideration.
It provides so far as relevant: (1) Where the whole or part of the chargeable consideration for a transaction is contingent, the amount or value of the consideration shall be determined for the purposes of this Part on the assumption that the outcome of the contingency will be such that the consideration is payable or, as the case may be, does not cease to be payable.
(4) This section has effect subject to - section 80 (adjustment where contingency ceases or consideration is ascertained)
Section 80, which provides for the adjustment of a return where a contingency ceases or the consideration is ascertained, provides so far as relevant (as amended by sections 299 and 326 of and Schedule 42 to the Finance Act 2004): (1) Where section 51 (contingent, uncertain or unascertained consideration) applies in relation to a transaction and - in the case of contingent consideration, the (a) contingency occurs or it becomes clear that it will not occur, or (b) in the case of uncertain or unascertained consideration, an amount relevant to the calculation of the consideration, or any instalment of consideration, becomes ascertained, the following provisions have effect to require or permit reconsideration of how this Part applies to the transaction (and to any transaction in relation to which it is a linked transaction).
(2) If the effect of the new information is that a transaction becomes notifiable, or that additional tax is payable in respect of a transaction or that tax is payable where none was payable before - (a) within 30 days.
(4) If the effect of the new information is that less tax is payable in respect of a transaction than has already been paid - the purchaser must make a return to [HMRC] the purchaser may, within the period allowed for (a) amendment of the land transaction return, amend the return accordingly; after the end of that period he may (if the land (b) transaction return is not so amended) make a claim to [HMRC] for repayment of the amount overpaid.
(Emphasis added in sections (2)(a) and 4(a) & (b))
PBL submits that because section 51 is subject to section 80 and section 80 requires reconsideration of the manner in which the SDLT code applies, it was incumbent upon HMRC or the courts to amend the land transaction return to reflect the actual chargeable consideration and thus the SDLT payable.
On that basis PBL asserts that the FTT erred in allowing HMRC to amend their statement of case to claim that the amount of SDLT which was payable was 50m.
But this is to mis- read section 80.
Subsection (1) speaks of the following provisions having effect to require or permit reconsideration.
The use of the disjunctive conjunction is significant.
Subsection (2) requires the purchaser to make a return where tax has been underpaid; but subsection (4), which applies where tax is overpaid, permits the taxpayer to amend the return or to claim the repayment.
This statutory asymmetry has the effect that section 51 operates to tax the contingent consideration and, under section 80, the taxpayer has to take the initiative to obtain repayment if new information shows that less tax is payable than has been paid.
There is no scope for the application of the Bwllfla principle, that where facts are available they are to be preferred to prophecies (Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426), where Parliament has laid down the process by which the correct amount of SDLT which is payable is ascertained.
I conclude therefore that, subject to the human rights challenge, HMRC are correct in their assertion that the chargeable consideration for the notional transaction (section 75A(4) and (5)) is 1.25 billion and the SDLT due thereon is 50m.
HMRCs calculation of that sum as the SDLT due is however subject to the right to claim under section 80.
PBL recorded in its written case (footnote 134) that it made such a claim shortly after the decision of the FTT and that HMRC opened an inquiry into that claim, which has been left in abeyance pending the outcome of this appeal.
As HMRC has not addressed this matter, I need say no more.
(iii) Section 75B and the human rights challenge
In the UT Morgan J interpreted section 75B, to which I will turn, as enabling the tribunal to determine that the chargeable consideration on the notional transaction under section 75A was the 959m which PBL had paid the MoD for the freehold of the barracks and not the 1.25 billion which MAR had contracted to pay to PBL.
PBL accepts that on a black-letter reading of section 75B, where the financial institution provides more finance than the price which the customer pays for the land, the section 75A charge on the notional transaction will take account of the whole of the amount payable for the chargeable interest which the financial institution acquires.
But it asserts that the manner in which section 75B is drafted indirectly discriminates against those of Islamic faith who may be expected to adopt Sharia financing techniques.
Under conventional mortgage financing, SDLT would have been payable on the consideration for PBLs acquisition of the freehold in the barracks from the MoD (959m) and the security transaction would have been exempt, notwithstanding that the financial institution had provided additional finance.
By contrast, if Sharia compliant finance is obtained, the additional sums provided by the financial institution would be subjected to the SDLT charge.
PBL argues that the transactions fall within the ambit of article 9 of the European Convention on Human Rights (ECHR) (in particular the freedom to manifest ones religion) and of Article 1 of Protocol 1 (A1P1) (the entitlement to the peaceful enjoyment of ones property and the right not to be deprived of ones possessions except in the public interest).
Article 14 of the ECHR requires public authorities to secure the enjoyment of such rights and freedoms without discrimination on a ground such as religion.
PBL submits that section 3(1) of the Human Rights Act 1998 requires the court to interpret section 75B in a manner which is compatible with article 14 read with article 9 and A1P1, and so to eliminate discrimination against those of the Islamic faith.
Section 75B provides (so far as relevant): (1) In calculating the chargeable consideration on the notional transaction for the purposes of section 75A(5), consideration for a transaction shall be ignored if or in so far as the transaction is merely incidental to the transfer of the chargeable interest from V to P. (2) A transaction is not incidental to the transfer of the chargeable interest from V to P - (a) if or in so far as it forms part of a process, or series of transactions, by which the transfer is effected, or (c) if it is of a kind specified in section 75A(3).
(3) A transaction may, in particular, be incidental if or in so far as it is undertaken only for a purpose relating to - the construction of a building on property to (a) which the chargeable interest relates, the sale or supply of anything other than land, or (b) (c) a loan to P secured by a mortgage, or any other provision of finance to enable P, or another person, to pay for part of a process, or series of transactions, by which the chargeable interest transfers from V to P. In subsection (3) - (a) paragraph (a) is subject to subsection (2)(a) to (c), (b) paragraph (b) is subject to subsection (2)(a) and (c), and (c) paragraph (c) is subject to subsection (2)(a) to (c).
(4) (5) The exclusion required by subsection (1) shall be effected by way of just and reasonable apportionment if necessary.
In this section a reference to the transfer of a chargeable (6) interest from V to P includes a reference to a disposal by V of an interest acquired by P.
Absent the question of ECHR compatibility, I am satisfied that section 75B does not assist PBL.
Morgan J in the UT sought to use section 75B to avoid what he saw as an unreasonable result by two means.
First, he accepted PBLs submission that subsections (1) and (6) refer to the acquisition by P of the chargeable interest disposed of by V and that interest in this case could only be the freehold as V (the MoD) did not dispose of the leasehold.
Thus the only transfer which was relevant in section 75B was the transfer of the freehold from the MoD to PBL, to which the sub-sale by PBL to MAR was incidental.
Secondly, he interpreted the words in so far as in subsection (1) as authorising the apportionment of the consideration which MAR provided to PBL for the freehold between (a) the sum which reimbursed PBL for the price which it paid the MoD for the freehold and (b) the sum which MAR agreed to provide to enable PBL to pay any SDLT which was due and to fund other expenditure.
He referred to PBLs submission that one could achieve this by reading into subsection (1) after the words in so far as the additional words the payment of the consideration or but said that it was not necessary to do so.
I disagree on both points, for reasons which are essentially the same as those which Judge Nowlan advanced.
In my view both section 75A and section 75B are difficult provisions to interpret and to apply to particular transactions.
In summary, section 75A has been drafted in broad terms to catch a range of tax avoidance schemes and prevent unintended tax losses by the use within a series of transactions of a combination of reliefs and exemptions; and section 75B reduces the chargeable consideration of the notional transaction in section 75A(4) by excluding incidental transactions in that series of transactions from the section 75A(5) calculation.
Looking at the matter in more detail, one starts with the chargeable consideration on the notional transaction in section 75A(5), which is calculated by reference to the scheme transactions which are the actual transfer or transfers by which a chargeable interest moves from V to P or P acquires a chargeable interest deriving from it (section 75A(1)(a)).
That chargeable consideration, as I have said, is the largest amount (or aggregate amount) given by any one person by way of consideration for the scheme transactions.
Section 75B is framed to remove from those actual transactions (ie the scheme transactions of section 75A(1)(b)) any transactions which in accordance with its provisions are to be treated as incidental.
To achieve this, the reference in section 75B(1) to the transfer of the chargeable interest from V to P is a reference to the actual transfer or transfers which are the subject of section 75A(1)(a) and (b).
Support for this view comes from (a) subsection (6) and (b) subsection (2).
Subsection (6) (a reference to the transfer of a chargeable interest from V to P includes a reference to a disposal by V of an interest acquired by P) makes clear that subsection (1) covers a case where P acquires from another party the interest which V has disposed of.
Thus section 75B could be applied to the circumstance where, within the scheme transactions, V sold the freehold in land to B who sold on that freehold to P. Subsection (2) is framed to place limits on the scope of subsection (1).
Subsection (2)(a), which provides that a transaction is not incidental if or in so far as it forms part of a process or series of transactions, by which the transfer is effected, is a reference to the scheme transactions in section 75A(1)(b) in so far as they form part of the process by which the relevant disposal and acquisition or acquisitions are made.
Subsection (2)(c) provides that a transaction is not incidental if it is of a kind specified in section 75A(3).
That includes (in section 75A(3)(a)) the acquisition by P of a lease deriving from a freehold owned or formerly owned by V and (in section 75A(3)(b)) a sub-sale to a third person.
To give effect to subsection (2) and achieve coherence both within section 75B and between that section and section 75A, the transfer of the chargeable interest from V to P in section 75B(1) and (6) must extend to the transactions to which section 75A(1)(a) and (b) and (3) refer, including the sub-sale to the third person under section 75A(3)(b) (ie PBLs sale to MAR) and the acquisition by P of an interest derived from the chargeable interest which V has disposed of under section 75A(3)(a) (ie the leasehold interest which MAR gave to PBL).
This interpretation is wholly consistent with the purpose of section 75B which is to reduce the consideration given for the transactions in section 75A(1)(b) which are to be taken into account in the section 75A(5) calculation of the consideration on the notional transaction.
I therefore conclude that the transactions which transfer the chargeable interest from V to P in section 75B(1) include both the sub-sale to MAR and the grant by MAR of the lease to PBL.
I am also not persuaded by the second argument which Morgan J favoured, namely that the words in so far as in section 75B(1) required the tribunal to apportion the 1.25 billion consideration which MAR paid between the purchase price of the barracks and other finance.
Those words in subsection (1) appear to be addressing a composite transaction which in part is necessary for the disposal and acquisition, to which section 75A(1)(a) refers, and in part serves some other, incidental, purpose, such as any of those identified in subsection (3).
That cannot assist PBL in this case because of the overriding effect of subsection (2).
It is arguable that subsection (2)(a) may not provide an answer, for as PBL points out, it uses the same if and in so far as formulation as subsection (1).
But subsection (2)(c) is unqualified and prevents the sub-sale to MAR from being incidental because that transaction was of a kind specified in section 75A(3), ie a sub-sale to a third person.
Any appeal to the terms of section 75B(3)(c) is excluded by subsection (4)(c) which overrides it by the operation of the exclusion in subsection (2)(a) and (c).
I therefore conclude that the 1.25 billion consideration which MAR contracted to pay to PBL is the relevant consideration under section 75A(5)(a) unless section 3 of the Human Rights Act 1998 requires the court to adopt a more expansive interpretation of incidental transactions in section75B(1).
PBLs argument in support of its challenge under article 14 of the ECHR (para 66 above) is that if a conventional lender were to advance sums to its customer in excess of the purchase price of the land, the purchaser would pay SDLT on the purchase price and the financiers security interest would be disregarded under section 48.
In a section 75A exercise, section 75B(3)(c) would treat the security transaction (a transaction undertaken only for a purpose relating to - a loan to P secured by a mortgage) as incidental to the transfer of the land from the seller to the customer and therefore outside the calculation of the chargeable consideration for the notional transaction under section 75A(5).
But if, as in this case, the financial institution using an Ijara arrangement were to provide funds in excess of the purchase price, section 75A(5) would operate to penalise it by using the larger funding as the measure of the chargeable consideration on the notional transaction.
This, says PBL, amounts to unjustified discrimination on the ground of religion contrary to article 14 read with article 9 of the ECHR and A1P1.
As I have said, PBL invites the court to read into section 75B(1) the words the payment of the consideration or after in so far as so as to enable the consideration given by the financial institution for the purchase of land from its customer at the first step of an Ijara arrangement to be allocated proportionately between the funding of the land purchase on the one hand and the funding of other expenditure by the customer on the other so that only the former would count towards the chargeable consideration on the notional transaction under section 75A(5).
The FTT did not have to consider the merits of this challenge because it concluded that PBL had not established that it had entered into the Sharia compliant financing for religious reasons and that it had therefore not proved that it suffered discrimination on the ground of religion.
Neither the UT nor the Court of Appeal had to address the argument because the UT by the presiding members casting vote held that the chargeable consideration was 959m and the Court of Appeal held that section 75A did not apply.
I note in passing however that, but for the expiry of a time limit for HMRC, the Court of Appeals decision would have imposed a liability on MAR of 50m on the chargeable consideration of 1.25 billion, and in accordance with standard practice in Ijara arrangements the charge would have fallen on PBL by means of a tax indemnity.
I have come to the view that this court does not need to consider the ECHR challenge in detail because the matter can be determined on the simple bases (a) that any discriminatory effect is objectively justified and (b) that, in any event, PBL is not a victim.
There is in this case no need to delve into the question whether the FTT was correct in holding that it had not been established that there was any discriminatory treatment.
If one were, for the sake of argument, to accept that section 75A had had the potential to give rise to indirect discrimination on the prohibited ground of religion, in cases where the financial institution using Sharia compliant financing had provided funds to its customer beyond what was needed to fund the purchase of land, one would still need to consider whether the provision giving rise to the discriminatory treatment was objectively justified.
HMRC advances as justification (a) the need to frame section 75A in broad terms to deal with the lacunas which were giving rise to tax loss and (b) the safety valve created by section 75C(11) and (12) which empowers the Treasury to disapply section 75A in specified circumstances, including making provision with retrospective effect.
Thus HMRC argue that if the provision were shown to give rise to a systemic or frequent infringement of ECHR rights, Parliament had provided the mechanism by which such infringements could be avoided.
In addition, section 75A(7) disapplies section 75A where the requirements of subsection (1)(c) are satisfied only because of the use of alternative property finance.
Paradigm forms of Ijara arrangements are therefore protected.
It is the tax loss occasioned by the combination of sub-sale relief and the alternative property finance which has given rise to the section 75A(5) charge in this case.
That circumstance cannot recur after section 45(3) was amended in 2011.
There is no evidence of any widespread use before 2011 of Ijara arrangements by means of a sub-sale to the financial institution and involving the provision of funds in excess of the purchase price of the land, as occurred in this case.
And it is that combination which is the basis of the allegation of discrimination.
The fact that a broadly worded provision may on occasion have a harsh effect on an alternative property finance transaction which is structured in a particular way is not sufficient to establish unjustified discrimination under article 14 of the ECHR.
In any event, it is not disputed that PBL has a claim under section 80 for the repayment of any amount which is overpaid.
If, as appears to be the case, the sterling equivalent of the consideration, which MAR actually paid to PBL for the barracks before the Ijara arrangement was brought to an end, was less than the 959m which PBL paid to the MoD, it is the latter figure which is the chargeable consideration under section 75A(5)(a).
In that event, PBL is paying no more than it would have paid if it had used a conventional form of loan financing.
It is therefore not a victim of discriminatory treatment.
interpretation of section 75B for which PBL argues.
I therefore do not accept that article 14 of the ECHR can support the Procedural challenges
(a) The wrong return challenge
PBL submits that HMRC are in any event not entitled to pursue their claim for the SDLT because they had no power to amend the SDLT return, lodged on its behalf, relating to the completion of the contract of 5 April 2007 between the MoD and PBL (para 7 above), because it was not a return relating to the notional transaction under section 75A.
PBL argues that the return, which referred to the section 45(3) disregard, was not strictly necessary but was submitted on its behalf in order to have the purchase of the barracks entered onto the Land Register.
It submits that HMRC, while entitled to inquire into that return under section 76 of and paragraph 12 of Schedule 10 to the FA 2003 in relation to the sale by the MoD to PBL, had no power to amend the return in order to impose a liability to SDLT on the separate, notional transaction.
The only avenues which had been open to HMRC to impose a liability to SDLT on the notional transaction, it submits, were to make a determination under paragraph 25 of Schedule 10, because no return had been lodged in respect of the notional transaction, or to make a discovery assessment under paragraph 28 of that Schedule.
As the six-year time limit for either the determination or the assessment had now expired, HMRC could no longer seek payment of any SDLT due on a notional transaction.
I do not accept that submission.
The answer lies in the terms of paragraph 13 of Schedule 10, which sets out the scope of the inquiry which HMRC can make under paragraph 12 of that Schedule, and HMRCs powers on completion of the inquiry under paragraph 23.
Paragraph 13 provides so far as relevant: (1) An inquiry extends to anything contained in the return, or required to be contained in the return, that relates - to the question whether tax is chargeable in (a) respect of the transaction, or (b) to the amount of tax so chargeable.
The relevant information contained in the return included information about the sale of the barracks by the MoD to PBL.
To my mind, the fact that the information in the return was provided to HMRC in relation to a transaction (the MoD-PBL sale), which was to be disregarded under both section 45(3) and section 75A(4), does not limit the scope of the inquiry.
HMRC were entitled to inquire into the tax consequences of that sale.
The powers of HMRC on completion of the inquiry are set out in paragraph 23 of Schedule 10 which provides: (1) An inquiry under paragraph 12 is completed when [HMRC] by notice (a closure notice) inform the purchaser that they have completed their inquiries and state their conclusions.
(2) A closure notice must either - state that in the opinion of [HMRC] no (a) amendment of the return is required, or (b) make the amendments of the return required to give effect to their conclusions.
HMRC were entitled to inquire into that sale and, on ascertaining that it was a part of a series of transactions which gave rise to a section 75A charge, to amend the return to reflect the tax due on the notional freehold acquisition under section 75A(5).
Any obligation on PBL to submit a return in relation to the notional transaction does not limit the scope of HMRCs power to inquire into the MoD-PBL sale or their power to amend the return under paragraph 23.
I therefore reject this procedural challenge.
(b) Case management challenges
It is not the normal practice of this court to review case management decisions of the FTT which have been upheld by the Upper Tribunal as involving no error of law.
Having rejected the argument that HMRC were not entitled to amend PBLs SDLT return in relation to the purchase of the freehold from the MoD, it is not necessary to decide whether the FTT should have granted PBL permission to amend its notice of appeal to put forward that argument.
The other procedural challenge is PBLs challenge to the FTTs decision to allow HMRC to amend its case to argue that the chargeable consideration was 1.25 billion and not 959m.
It is hard to see how the FTT could have decided otherwise.
Under paragraph 22(3) of the Stamp Duty Land Tax (Appeals) Regulations 2004 (SI 2004/1363) the FTT is bound to increase the amounts of tax due if the taxpayer has been undercharged: see (by way of analogy in relation to section 50(7) of the Taxes Management Act 1970) Glaxo Group Ltd v Inland Revenue Comrs [1996] STC 191.
But, again, having reached the view that PBL has a claim for repayment of overpaid SDLT under section 80, there is no need to address this case management decision.
A different approach?
Before the hearing, the court drew the attention of counsel to the Observations in Bulletin No 78 to Emmet and Farrand on Title (September 2016).
The authors there suggested that the courts might have found a simpler solution to the issues raised in this case if they had had regard to the equitable maxim that The test of a mortgage is in substance, not form.
If a transaction is in substance a mortgage, equity will treat it as such, even if it is dressed up in some other guise, as by the documents being cast in the form of an absolute conveyance (Megarry and Wade, The Law of Real Property, 8th ed (2012), para 25.085).
The authors suggested that the transfer of the Chelsea barracks to MAR in the Ijara transaction should be viewed in English law as a mortgage, with the result that PBL should have been registered as proprietor of the freehold and have paid SDLT on its purchase and MAR should have been registered as the proprietor of a charge, a security interest exempt from SDLT under section 48.
Both HMRC and PBL submitted written observations in response to this request.
Neither party disputed that Ijara was a method of financing PBLs purchase and development of the Chelsea barracks.
Indeed, the Ministry of Defence had accepted that the Ijara was in the nature of a mortgage and this was reflected in the Deed of Clarification entered into between the Secretary of State for Defence, PBL and Qatari Diar Real Estate Investment Co. But the purpose of this clarification was to ensure that the provisions in the contract of sale between the MoD and PBL providing for overage in the event of a sale on by PBL would not apply to the sale to MAR.
Neither party accepts that, for this or any other reason, the transactions between PBL and MAR were in substance a mortgage and should be treated as such.
They were real transactions, albeit inextricably linked, and intended to take effect in accordance with their terms, and there is no reason for this court to treat them any differently.
In particular, there is no need to protect the interests of PBL, as there used to be to protect the interests of mortgagors who might otherwise be prevented from recovering their property.
Furthermore, if the effect of treating these linked transactions as a mortgage were that the rental payments made by PBL were to be regarded as interest on money advanced to finance the purchase and development, this would run counter to their whole purpose, which was to comply with the Islamic prohibition of lending money at interest.
As PBL argues, the issue of the substance of a transaction is a fact sensitive matter and the burden of proving that the substance is other than the form falls upon the party suggesting it.
In the Upper Tribunal, Morgan J was alive to the possibility that in some circumstances, a transaction which takes the form of an absolute transfer coupled with an option for the transferor to re-acquire the property from the transferee can be analysed as being in substance a funding transaction under which the transferee has advanced funds to the transferor and so that the transfer is by way of security only (para 26).
But no-one had suggested that before the tribunal and further evidence would have been necessary had they done so.
In those circumstances, and where neither party supports the alternative approach, it would be quite unfair of this court to pursue it.
In any event, whatever might be the case in other contexts, it is clear from the terms of FA 2003 that Parliament did not intend to confer exemption from SDLT on an Ijara transaction by treating it as the creation of a security interest under section 48, but instead conferred exemptions under section 71A by recognising the substance of each of the three transactions within an Ijara.
Thus, it would be contrary to the legislative scheme in FA 2003 to treat MAR as exempt under section 48 on the basis that it had acquired a security interest.
That is a sufficient answer to the point.
Conclusion
Stamp Duty Land Tax (SDLT) is a relatively new tax, designed to generate broadly the same revenue stream as its venerable predecessor, Stamp Duty, which had become so easily avoided that it had acquired the unhappy reputation, among those who could afford skilled advice, of being a voluntary tax.
Introduced in Part 4 of the Finance Act 2003, SDLT was designed around a wholly new conceptual approach to the identification of the chargeable event in a sale of land.
Generally speaking it was no longer the stamping of a conveyance, but rather the completion or substantial performance of a contract for the sale of an interest in land in the UK, which Part 4 calls a land transaction.
It was hoped that this new start would close off many of the loopholes through which advisers had previously been able to guide their clients.
It is no surprise that, in its infancy, SDLT proved to have its own I would allow the appeal.
unintended loopholes.
During its first decade it has therefore been the subject of frequent tweaking and revision.
Land may be sold and purchased by a chain of contracts, all made before the completion of any of them.
This may occur for example in a rising market, where the first buyer B turns the property to a subsequent buyer C, for an immediate profit derived from the higher price payable under the second contract.
The second contract is usually called a sub-sale.
The first and second contracts may be completed by a transfer by the original seller A to C, or by simultaneous transfers from A to B and from B to C. The second contract may be a separate contract of sale, or an assignment to C of Bs rights under the first contract.
The SDLT scheme is designed to avoid double taxation of sub-sales, that is charging the completion of both the AB purchase and the BC purchase or assignment to a full charge to tax.
It does so by taxing neither the AB nor the BC purchase separately, but rather by taxing an artificial deemed land transaction, constituted by the notional completion of what is called a secondary contract, which contains elements of both.
This treatment of sub-sales appears in section 45.
Using the ABC example, section 45(3) tells you that the purchaser under the secondary contract is C, and that the consideration is a combination of the consideration payable under the AB and BC purchases.
Subsection (5A) rather enigmatically explains that the identity of the vendor under the deemed land transaction to which the secondary contract gives rise is either A or B, depending on the statutory context in which it matters.
It was never the objective of Stamp Duty, and is not the objective of SDLT, that it should tax the financing of the purchase of land.
In the UK this is usually done by lending at interest on the security of a mortgage.
Mortgages are exempt from SDLT.
But an increasing number of the purchasers of land in the UK finance their acquisition by forms of finance which do not offend against the Sharia prohibition of usury (a prohibition once applied in Christendom, but abolished in the UK in the early 19th century).
This may be because the purchaser is an individual of the Muslim faith, or (as here) because the purchaser wished to use a finance institution which itself carries on its business in accordance with Sharia principles.
Sharia law does not prohibit the taking of security, but it does forbid the payment of interest in connection with the lending of money.
Over time a variety of alternative financing structures were developed, in which the commercial return to the finance house was provided by something other than the payment of interest on a loan.
In the present case the structure chosen, called Ijara, involved the acquisition of the freehold interest in property by the finance house (the bank), its lease to the finance customer (the customer), and the grant of put and call options which would enable the customer to acquire the freehold reversion from the bank.
The commercial return for the bank lay initially in the rentals payable under the lease, and then (once exercised) in the amount payable under the options, which in effect capitalised the outstanding rental stream under the lease.
Originally the lease and the transfer of the freehold under the options were exempted from SDLT by section 72 of the Finance Act 2003, later replaced, for land in England, by section 71A.
The acquisition of the freehold by the bank was also exempted by section 71A(2), if but only if the vendor under that transaction was the customer.
Thus if the customer had already purchased the property (and paid SDLT on that purchase), or inherited it, but wished to refinance by an Ijara structure, the first relevant finance transaction would be a sale of the property by the customer to the bank.
It needed to be exempted from tax if the objective of making Ijara finance free from SDLT was to be achieved.
Conversely, if the finance was being provided to fund the purchase, then the first relevant transaction would be the purchase of the property, usually by the bank direct from the third party seller.
In that case there was no reason to exempt that purchase from SDLT.
Although the bank had to pay the tax, the customer would indemnify the bank under a tax indemnity included in the terms of the Ijara financing.
Viewed separately, the provisions for relief from the double taxation of sub- sale chains and for the exemption of alternative Sharia-compliant financing structures broadly achieved their objectives.
All the intractable problems in the present case, which have divided the courts below, and divide the members of this court, derive from a structure for the simultaneous purchase of land and its Sharia- compliant financing which also involves a sub-sale.
For particular reasons concerned with the nature of the marketing of Chelsea Barracks, and the desire of its seller, the Ministry of Defence (MOD), for a delayed completion, the Sharia compliant finance house (MAR) selected by the buying customer PBL could not make the original purchase from MOD.
Instead PBL contracted to purchase from MOD, with MAR as a sub-purchaser.
The result of using a sub-sale in connection with Ijara financing was that, for SDLT purposes, the MOD / PBL and the PBL / MAR transactions were both replaced by a secondary contract by reason of section 45(3), the completion of which gave rise to a land transaction which would have been chargeable to SDLT, unless excluded from charge under section 71A(2) because it was part of Sharia compliant alternative financing.
That much is common ground.
The critical question on this appeal is whether that land transaction was exempted from a charge to SDLT by section 71A(2) of the Finance Act 2003.
Lord Hodge thinks that it was exempt, with the result that the series of transactions which began with the transfer by MOD to PBL and ended with the lease by MAR to PBL, coupled with the put and call options, was entirely tax-free, subject only to the effect of section 75A. If that were the effect of section 71A(2) then I would agree with all his conclusions as to the consequences, and with all his reasons for those conclusions.
I also agree with his conclusion that the transactions are not to be treated as giving rise to a loan on mortgage security.
In my view however the transfer to MAR was not exempt, because PBL was not the vendor under the relevant land transaction within the combined meaning of sections 45(5A)(b) and 71A(2).
The vendor was MOD.
Thus the condition in section 71A(2)(a) was not satisfied.
MAR was therefore chargeable to SDLT on its purchase of Chelsea Barracks.
In that respect I agree with the conclusion of the Court of Appeal, although my reasoning is not the same as theirs.
In setting out my own reasons I gratefully adopt Lord Hodges summary of the facts, and do not need to set out again the relevant statutory provisions.
The operative parts of section 71A are subsections (2), (3) and (4).
Each of them exempts from charge to tax specific land transactions.
Each has specific conditions which must be satisfied, even if the conditions of the gateway into section 71A, in subsection (1), are all satisfied, as they were in this case.
But the common feature of subsections (2), (3) and (4) is that they apply, if at all, only to land transactions which would otherwise be chargeable under Part 4.
In an ordinary Ijara financing which satisfied the gateway conditions in subsection (1), the purchase of the major interest by the institution (called the first transaction in subsection (1)(a)) would itself be a chargeable land transaction, regardless whether the vendor was the person to whom the lease was to be granted, or a third party.
It would then be exempted under section 71A(2) only if the vendor was that person.
The identity of the vendor would be readily apparent.
It would be the person disposing of the subject-matter of the transaction: see section 43(4).
In the context of a purchase effected (as here) by a Land Registry Transfer, it would be the transferor under that transfer.
In the present case, but for the matter I am about to describe, that would have been PBL.
But where, as here, the purchase by the institution takes place under a contract by way of a sub-sale to which section 45(1) applies, then the institution is not treated as having entered a land transaction at all by virtue of that purchase, let alone a chargeable land transaction: see section 45(2).
This is because the agreement to purchase is a transfer of rights within the meaning of the last sentence of section 45(1) and the institution is the transferee.
The ordinary consequence of the completion of that purchase laid down by section 44(3) (namely that the contract and its completion is treated as a single land transaction) is displaced by section 45(2) and (3).
The contract is replaced by the statutory construct called a secondary contract under which the transferee institution is the purchaser, but the vendor is not identified.
The secondary contract is not, on its own, a land transaction but, when it is completed by a conveyance, the secondary contract and its completion are together treated as a land transaction: see again section 44(3).
I will call it, for short, the completed secondary contract.
The identity of the vendor under that land transaction, wherever it matters elsewhere in Part 4, is regulated by section 45(5A)(b).
The reference to the vendor in section 71A(2) is plainly within the contemplation of the phrase other references in this Part to the vendor in section 45(5A)(b).
Thus, where there is a sub-sale, the vendor under section 71A(2) is either the vendor under the original contract (here MOD) or the transferor under the transfer of rights (here PBL), depending on the context.
The relevant context, for present purposes, is a sub-sale under section 43, coupled with an Ijara finance structure compliant with section 71A(1), and the determination whether exemption is to be available under section 71A(2) for the completed secondary contract.
In this context it is plain that this is the relevant land transaction, by analogy with the reference in the tail-piece to section 45(3) to exemption in section 73(3).
It speaks of a case where the secondary contract gives rise to a land transaction that is exempt from charge by virtue of subsection (3) of section 73.
That section exempts another kind of alternative finance structure.
In a section 45 context, the scheme of Part 4 treats the alternative contract, rather than the real world contract which it replaces, as giving rise to the land transaction qualifying (or not qualifying as the case may be) for exemption under section 73.
The same must be true of section 71A, which confers exemption in a very similar way.
So, what choice, as between MOD and PBL is permitted by this context? There are considerations which may be said to pull both ways.
In favour of PBL is the fact that it was the vendor under the real world contract by which MAR agreed to buy the Barracks, and the transferor under the Land Registry transfer by which the freehold interest was actually transferred to MAR.
In favour of MOD is the fact that, if the completion of the original contract between MOD and PBL is to be disregarded under section 45(3), then PBL never received from MOD the chargeable interest which is deemed to be transferred to MAR by the completion of the secondary contract.
Thus the person disposing of that chargeable interest (the subject matter of the transaction under section 43(4)) can only have been MOD, so that MOD is the only candidate as vendor in this context, under section 45(5A).
The first of these considerations persuaded the Upper Tribunal, where the issue first arose for decision.
The second persuaded the Court of Appeal.
In this court the main battle between counsel has centred on the question whether the relevant context is one which calls to be resolved by a real world or an SDLT-world analysis.
In my view neither of those ways of looking at the matter is decisively better than the other.
The issue arises precisely at the point where the two worlds collide.
Treating either MOD or PBL as vendor may loosely be said to be permitted by the context, if the contest is simply between those parallel worlds.
Section 71A(1) sets out what appear to be real world conditions for the exemption of Ijara finance structures from SDLT.
But the land transaction which either is or is not to be exempted by section 71A(2) is a pure SDLT construct, namely that notional land transaction to which the secondary contract imposed by section 43 gives rise.
But there cannot be two vendors, nor is the taxpayer or HMRC free to choose between two available permitted candidates.
The application of section 45(5A) to the context of section 71A(2) must produce a single answer in each case, although the context will not always lead to the same result.
In my opinion there is a much more powerful third factor which provides a decisive answer to that question, namely an appreciation of the consequences.
If the vendor is to be PBL then, subject only to section 75A, the combined sub-sale and Ijara financing means that the whole transactional structure by which Chelsea Barracks was purchased from MOD is exempted from SDLT.
By contrast, if MOD is to be the vendor, there is a single charge to SDLT.
The first outcome cannot have been one which Parliament intended.
The second outcome accords with the overall purpose of Part 4 to charge SDLT on purchases of land in the UK, with the avoidance of double taxation on a sub-sale, and with the general objective of section 71A, namely to exempt those who use Sharia compliant alternative finance from incurring SDLT where finance by a loan on mortgage security would not do so.
A choice, under section 45(5A) which, in this context, produces an unintended tax holiday for all the participants in the purchase, viewed as a whole, is simply not one permitted by the context, where the alternative choice produces a result broadly in accordance with the purpose of the legislation.
I must now address some of the contrary arguments.
The first is that a statutory requirement to have regard to the context does not permit regard to be had to the consequences.
I respectfully disagree.
A hallmark of the modern contextual approach to the construction of a contract is that a choice which produces a result which the parties cannot have intended is to be rejected if there is a less unsatisfactory alternative.
I can see no reason why the same approach is inapplicable to the construction of a statute.
On the contrary it is frequently used: see Bennion on Statutory Interpretation, section 9.6, In re British Concrete Pipe Associations Agreement [1983] 1 All ER 203, per Sir John Donaldson MR at p 205 and, in the context of a taxing statute, Fry v Inland Revenue Comrs [1959] Ch 86, per Romer LJ at p 105.
The only distinction in the present case is that the need to make a contextual choice is expressly required by the plain meaning of the statute itself, namely section 45(5A)(b).
But that is a distinction without a difference.
The second, and main, argument is that section 71A itself commands a real- world approach to the identification of the vendor, because the transaction looking for a vendor in subsection (2) is the first transaction described in real world terms by subsection (1)(a).
Since it is the same first transaction which is exempted by subsection (2) then any issue as to the satisfaction of the vendor condition must be addressed by a real world test as to who is the vendor, treating the first transaction as the real world sale by PBL to MAR, not the notional land transaction to which the secondary contract gives rise.
This argument treats section 45(5A) as not being engaged at all, because it is not the completed secondary contract that is looking for a vendor.
This is the argument which has persuaded Lord Hodge.
I agree that both subsections (1)(a) and (2) describe the same transaction.
That is the clear purpose of linking them by a common definition.
But in my view the use of that link works the other way.
Subsection (2) is plainly designed, and is only of any use, to exempt from tax land transactions which would otherwise be chargeable to SDLT.
Usually they will be real world transactions but, in the present case because of the sub-sale, the relevant land transaction is a statutory construct, namely the completed secondary contract.
If subsection (2) is not dealing with that land transaction, but some different transaction, then it simply misses its target altogether.
If that is right, then the effect of the linking definition is that section 71A(1)(a) must also be dealing in this context with the completed secondary contract, if its language will bear that construction.
There is nothing in the language of section 71A(1) which makes subsection (1)(a) inapposite as a reference to the completed secondary contract, where that is what section 45 requires.
Subsection (1) speaks of arrangements under which certain transactions take place.
Where (as here) the relevant arrangements include provision for a simultaneous sub-sale, then the first transaction to which SDLT might otherwise be chargeable is necessarily a completed secondary contract.
Focus on the very similar language of section 73 is compelling.
Section 73(1) also speaks of arrangements under which transactions take place.
In fact the second transaction there described always takes place by way of sub-sale (because the same interest is the subject matter of both), so that the second transaction being exempted from charge by section 73(3) will always be a completed secondary contract.
And this is what section 45(3) says in unambiguous express terms when it refers to section 73(3).
For this real world argument to have real force it would be necessary to re- write section 71A(2) as follows: The first transaction and any land transaction to which a secondary contract gives rise where the first transaction is by way of sub-sale is exempt from charge if the vendor under the first transaction is But it makes no sense to re-write the subsection in that way just to produce a result which gives rise to an unintended tax holiday, if the ordinary meaning of the words enacted does no such thing.
The next argument is that there cannot be a choice of the vendor under the original contract (here MOD) because, where there is a simultaneous sub-sale, the effect of section 45(3) is to disregard the original contract altogether, including its vendor.
There are in my view two objections to that argument.
The first is that section 45(3) does not require the original contract itself to be disregarded, but only its substantial performance or completion.
The contract itself remains visible, together with its vendor.
The second more serious objection is that section 45(5A) assumes that the vendor under the original contract remains an available choice, precisely where section 43(3) brings a completed secondary contract into deemed existence, and disregards the performance or completion of the original contract.
Indeed it is only where there is a completed (or performed) secondary contract that it was thought necessary to provide a special means for the identification of its vendor.
It may be suggested that, under section 45(3), there can be both a completed secondary contract and a performed or completed original contract which is not disregarded, for example where the two are not simultaneous and connected, or where section 73(3) applies, but this is not why section 45(5A) was introduced.
Its main target was precisely the unintended potential tax holiday which would arise where there was a sub-sale, because of a disregard of the original completed contract and an exemption for the sub-sale, eg because of the simultaneous potential application of group relief.
It is next said that what I have described as the compelling consequences in terms of an unintended tax holiday do not arise, because section 75A comes to the rescue of the public purse.
I accept that, if need be, it does so on the facts of this case, which occurred after it came into force.
But 20 months passed between the introduction of section 45(5A) and section 75A, during which, if facts such as these did give rise to a tax holiday, the Revenue was entirely unprotected.
There are in my view powerful reasons why the construction and application of section 45(5A) should be undertaken without reference to the fact that, much later, section 75A floated into view, as a plank in a shipwreck.
First, the exercise of construction and application of section 45(5A) ought to be based upon a perception of the intention of Parliament when enacting it.
That is, by the same token, why the re-casting of section 45(3) in 2011, in a way that solved the present difficulties by removing the disregard of the completed original contract where the sub-sale was exempted by section 71A, cannot be prayed in aid in interpreting section 45 in its earlier form.
Secondly, the impetus for enacting section 75A was not a perception that sections 45(3) and 71A, working together, produced a tax holiday.
Section 75A was, by its title, primarily designed to deal with tax avoidance schemes, although I accept that it was cast in wide enough terms to provide the Revenue with a rescue from the tax holiday to which linking Ijara finance to a sub-sale might give rise.
Thirdly it is counter-intuitive, to say the least, to adopt a construction and application of section 45(5A) which then gives rise to a further set of difficulties in the application of section 75A, when there is an alternative approach that does nothing of the kind.
This is, in my view, an a fortiori case where section 45(5A) expressly requires that choice to be made.
Fourthly, if a construction of sections 45(5A) and 71A(2) before the introduction of section 75A does not produce an unintended tax holiday, then there is no reason why the earlier sections need be re-interpreted in the light of section 75A.
A rather different and more detailed objection to the identification of MOD as the vendor under section 71A(2) is that its effect is to charge the wrong taxpayer with the wrong amount of tax.
By this the proponents mean that the policy objectives of a single charge to tax, based upon the real purchase price for the Barracks, with Ijara structures being altogether exempt, would only truly be satisfied if PBL rather than MAR was liable, and SDLT was payable as a percentage of the price paid to MOD, rather than the inflated price stated in the PBL / MAR agreement, which was driven by financing considerations.
This is precisely what the amendments to section 45 made in 2011 now do achieve.
Even the section 75A solution charges the right taxpayer, albeit still with the wrong amount of tax.
This objection has significant force at first sight but there are compensating matters which in my view largely deflate its effect.
Dealing first with the identity of the taxpayer, an ordinary Ijara structure to finance a purchase imposes SDLT on the bank rather than on the customer.
This is because the first relevant land transaction is a purchase by the bank from the third party seller.
Section 71A(2) does not apply because the vendor is not the customer.
There is no sub-sale, because (as is common ground) a purchase followed by a lease does not trigger section 45.
In commercial reality, (as in the present case) the customer ends up footing the tax bill, because the bank takes a tax indemnity from the customer.
The Ijara structure to which the exemption in section 71A(2) typically applies is a re-finance by a customer who has already purchased the property and paid SDLT on completion.
There is, again, no sub-sale.
An interpretation and application of section 45(5A) in a sub-sale context so as to charge SDLT on the bank therefore imposes the same consequence of taxing the bank as does an ordinary Ijara structure to finance a purchase where there is no sub-sale.
In both cases, the usual tax indemnity imposes the ultimate tax burden on the customer.
In the present case the evidence suggests that the sub-sale route was chosen because MOD decided to use a sealed bid process in which MAR would have found it difficult to participate, and because MOD wanted a delayed completion, while it re-billeted the troops in the Barracks.
These are relatively unusual fact-specific matters which ought not to affect the issues of construction.
The reason why, in the present case, the tax payable was (at least initially) greater than the specified percentage of the price payable to MOD is because MAR and PBL chose to include within the financing a large amount over and above that purchase price, structured as part of the purchase price payable by MAR to PBL on the sub-sale.
The main element in the excess appears to have been the deferred payment of amounts needed by PBL to make early rental payments under the lease from MAR.
Their commercial effect, in cash flow terms, was to give PBL an initial rent holiday, in broadly the same way as is often achieved under conventional mortgaged-backed finance by the bank lending an additional amount above the purchase price to fund early payments of interest.
It is possible, although the evidence does not so state in terms, that this at least could have been a reason for constructing the Ijara finance by way of sub-sale, because the excess finance amounts could hardly have been payable to MOD, if MAR had purchased directly.
After 2011 it would attract no additional SDLT if achieved by way of sub-sale, because the original purchase (here between MOD and PBL) would not be disregarded, and section 71A(2) would exempt the completed secondary contract.
Before 2011, taxation of this additional finance amount appears to have been inevitable, whether by treating MOD as the vendor under section 71A(2), or under section 75A.
This is, again, not an ordinary consequence of Sharia compliant financing.
Where the finance amount is less than the full purchase price, a shared ownership structure was usually adopted, with different tax treatment which the court did not need to investigate.
The Ijara structure used here was applied where the whole purchase price was being financed.
In such cases the amount of tax paid by the bank will not differ substantially from the tax which would have been payable on the price paid to the third party seller.
Ironically, substantially the same result may yet ensue here, because the Ijara structure was terminated early, before most of the excess finance amount had been paid.
In such circumstances it is common ground that Part 4 permits a claim for repayment of the excess tax from the Revenue.
This is because SDLT is paid up-front on contingent consideration on an assumption that the contingency will occur, and then reclaimed if it does not.
In conclusion therefore, I have not been persuaded by any of the objections to construing and applying sections 45 and 71A of the Act in a way which, in the unusual context of a sub-sale coupled with an Ijara financing structure, leads to SDLT being payable by MAR on the consideration payable under the completed secondary contract by which it acquired a chargeable interest in the Chelsea barracks under a chargeable land transaction, and all the other transactional parts of the structure being either disregarded or exempt.
Of the only two interpretations of the relevant statutory provisions (from which I would exclude section 75A for the reasons given), that is the one which broadly achieves, rather than wholly frustrates, what must have been the underlying purpose of Part 4 in the relevant context.
If MAR cannot now be made to pay, which the Revenue do not accept, and this leads to the shocking consequence that the public purse gets nothing from this large transaction by way of SDLT, that will only be because, in the words of Mr Thomas QC for PBL, the Revenue have been relentlessly pursuing the wrong taxpayer.
It is a sad irony that, at all stages until the appeal to the Upper Tribunal, both parties appear to have thought that the only candidate as the taxpayer was PBL, but it is of no consequence to the outcome.
In my view the Court of Appeal reached the right answer, and I would therefore dismiss the appeal.
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In 2007 the Respondent (PBL) purchased the former Chelsea Barracks in London from the Ministry of Defence (MoD) for 959m.
In order make the purchase, PBL obtained finance from a Qatari Bank, Masraf al Rayan (MAR), which specialises in Islamic finance.
Islamic finance seeks to comply with Sharia law, which forbids the payment of interest in connection with the lending of money.
In this case, the Sharia compliant funding model used is known as Ijara finance.
On 5 April 2007, PBL and the MoD entered into a contract to purchase the barracks.
On 29 January 2008, PBL contracted to sub sell the freehold to MAR.
Also on 29 January 2008, MAR agreed to lease the barracks back to PBL.
Upon completion, on 31 January 2008, the following occurred: (a) MAR and PBL entered into put and call options respectively requiring or entitling PBL to repurchase the freehold in the barracks; (b) the MoD conveyed the freehold in the barracks to PBL; (c) PBL conveyed the freehold in the barracks to MAR, and (d) immediately after that, MAR leased the barracks back to PBL.
On 22 February 2008, PBL lodged a tax return in relation to the contract between it and MoD and claimed that there was no liability to Stamp Duty Land Tax (SDLT) because of the sub sale relief provision in s45(3) of the Finance Act 2003 (FA 2003).
A return lodged by MAR relating to the sale agreement between PBL and MAR claimed alternative property finance relief under s71A of FA 2003.
Section 71A relief was also claimed in relation to the lease by MAR to PBL on 31 January 2008.
Consequently, the parties to the scheme transactions claimed that nobody incurred a liability to SDLT.
The Appellants (HMRC) challenged the return made by PBL and issued a closure notice which amended the amount of SDLT due from 0 to 38.36m (the sum which would have been due on the sale by the MoD to PBL if that were a chargeable transaction).
PBL appealed to the First tier Tribunal (FTT).
In the FTT, HMRC successfully applied to amend its case to increase the amount of SDLT due from 38.36m to 50m (based on the total consideration which MAR agreed to provide PBL).
Upon appeal to the Upper Tribunal (UT), PBL changed its position and argued that MAR was not entitled to s71A relief because, on a proper understanding of the related provisions of the FA 2003, MoD was the vendor of the barracks in terms of s71A(2).
However, the UT concluded that PBL was the vendor.
The Court of Appeal (CoA) found, amongst other things, that the vendor was MoD, and not PBL, with the result that s71A(2) did not exempt MAR from charge.
The CoA found that PBL could not be the vendor due to s45(3) which disregarded the contract between MoD and PBL for the purchase of the barracks.
As a result of this disregard, PBL had no chargeable interest so as to be regarded as entering into the sub sale contract with MAR.
The principal question in the appeal to the Supreme Court is whether PBL is due to pay SDLT of 50m arising out of its purchase from the MoD.
The appeal is allowed.
Lord Hodge gives the majority judgment with which Lady Hale, Lord Hughes and Lord Lloyd Jones agree.
Lord Briggs gives a dissenting judgment [93 129].
The UT correctly concluded that PBL was the vendor under s71A(2) and therefore that MARs purchase of the barracks from PBL was exempt from SDLT [23].
Various reasons support this finding.
For instance, there is nothing within s71A which suggests that the exemption in s71A(2) will not apply when the sale by the customer to the financial institution is a sub sale which takes place contemporaneously and in connection with the customers purchase of the major interest in land [24 28].
The disregard in the tailpiece of s45(3) has no bearing on the operation of s71A(2)[30].
In this case, but for s75A (a general and broadly drafted anti avoidance provision [44 45]), the combination of the sub sale relief under s45(2) and s45(3) and the exemption under s71A(2) relieved the sale by the MoD to PBL and exempted the sale by PBL to MAR from a charge to SDLT [34 35].
It is unsurprising that s75A was only introduced over one year after the combination of s45 and s71A could operate in this way.
S75A was enacted by Parliament to close such lacunas [31 33].
In this case, the party referred to as V in s75A is the MoD [46].
Looking at s75 as a whole, and taking a purposive approach to interpretation, P as referred to in s75A is PBL.
PBL did not obtain a chargeable interest on 31 January 2008 because the contract between it and the MoD fell to be disregarded under s45(3).
PBL acquired its chargeable interest, a leasehold interest, following the sub sale to MAR and the lease back to PBL.
These transactions were transactions involved in connection with the disposal by MoD of its chargeable interest (s75A(1)(b)) [46 49].
S75A(1)(c) requires that the sum of the amounts of SDLT payable in respect of the scheme transactions (which in this case is nil) is less than the amount that would be payable on a notional land transaction effecting the acquisition of Vs chargeable interest by P on its disposal by V.
In this case, the relevant notional land transaction involves PBL acquiring MoDs interest in the barracks [56].
S75A(5) provides that the chargeable consideration on the notional transaction is the largest amount (or aggregate amount) given by any one person for the scheme transactions.
HMRC correctly asserted that the relevant sum is 1.25bn (the purchase price which MAR contracted to pay to PBL).
SDLT due thereon is 50m (although this is subject to PBLs right to make a claim under s80 of FA 2003) [57 64].
S75B does not assist PBL.
This section operates by excluding incidental transactions from the calculation of the chargeable consideration on the notional transaction for the purposes of s75A(5).
However, s75B(2) and s75B(6) support the conclusion that both the sub sale to MAR and the grant by MAR of the lease to PBL are included in the transactions which transfer the chargeable interest from V to P for the purposes of s75A(5)[68 72].
Therefore, the 1.25 billion consideration which MAR contracted to pay to PBL is the relevant consideration under s75A(5)(a)[73].
PBL also argued that s75A(5) and s75B read together indirectly discriminates against those of Islamic faith (who may be expected to adopt Sharia financing techniques) contrary to the European Convention on Human Rights [66; 74].
This matter can be determined on the simple bases (a) that any discriminatory effect is objectively justified and (b) that, in any event, PBL is not a victim [75 80].
Various procedural challenges by PBL are also rejected [81 86].
Finally, a different approach suggested in Emmet and Farrand on Title whereby the transfer of the Chelsea barracks to MAR in the Ijara transaction should be viewed in English law as a mortgage such that MAR should have been registered as the proprietor of a charge (which is exempt from SDLT) would be contrary to the legislative scheme in FA 2003 [87 91].
In Lord Briggs view, the transfer from PBL to MAR was not exempt under s71A(2) because PBL was not the vendor under the relevant land transaction within the combined meaning of sections 45(5A)(b) and 71A(2).
The vendor was the MoD [101].
Lord Briggs considers that this analysis achieves rather than wholly frustrates the underlying purpose of the relevant provisions, namely to charge land transactions involving sub sales or Islamic finance to a single charge to SDLT, rather than there being no charge at all.
The contrary result cannot be what Parliament intended [109], at a time when there was no recourse to s75A [129].
In response, Lord Hodge notes that Lord Briggs approach results in different interpretations of vendor under s71A(2) and s73(2).
He finds HMRCs explanation of a patchwork of provisions and a lacuna (remedied by s75A) more persuasive [36 38].
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This appeal from the Court of Session arises from an accident of an everyday kind, but raises a number of issues of practical importance relating to the Personal Protective Equipment at Work Regulations 1992 (the PPE Regulations) (SI 1992/2966) and the Management of Health and Safety at Work Regulations 1999 (the Management Regulations) (SI 1999/3242), to employers liability at common law, and to expert evidence in this field.
The accident
The appellant, Miss Kennedy, was employed by the respondents, Cordia (Services) LLP (Cordia), as a home carer in Glasgow.
Cordia are wholly owned by Glasgow City Council, and provide home care services on its behalf.
Those services were previously provided by the Council itself.
Miss Kennedys principal duty was to visit individuals in their homes and to provide them with personal care.
At about 8 pm on 18 December 2010 Miss Kennedy was required to visit an elderly lady, Mrs Craig, who was terminally ill and incontinent, at her home in order to provide her with palliative and personal care.
The visit was one of a series of visits carried out by Miss Kennedy during her shift.
She travelled to Mrs Craigs house after visiting another client.
There had been severe wintry conditions in central Scotland for a number of weeks prior to that date, with snow and ice lying on the ground.
Miss Kennedy was driven to the house by a colleague, who parked her car close to a public footpath leading to the house.
The footpath was on a slope, and was covered in fresh snow overlying ice.
It had not been gritted or salted.
Miss Kennedy was wearing flat boots with ridged soles.
After taking a few steps along the footpath, she slipped and fell to the ground, injuring her wrist.
Risk assessments and precautions
Cordia were aware of the risk that their home carers might slip and fall on snow and ice when travelling to and from clients houses in winter.
On average, four such accidents had been reported to them, or to their predecessors the Council, during each year since 2005.
During 2010 there were 16 such accidents.
Cordia were also aware of the snowy and icy conditions on the night in question, as those conditions had persisted for weeks.
In 2005 the Council carried out a risk assessment in relation to home care services and client care.
It covered risks involved in travelling to and from work locations.
The assessment noted the risk of sprains, cuts, broken limbs, fractures and head injuries from slips and falls in inclement weather.
The current preventive and protective measures were noted as being the provision of a hazard awareness booklet and instruction on appropriate footwear.
The risk was assessed, using the risk rating scale appended to the guidance document Guide to Occupational Health and Safety Management Systems published by the British Standards Institution (BS 8800:2004).
The resultant assessment was that the risk was tolerable, on the basis that the severity of harm, and its likelihood, were respectively categorised under the scale as harmful and highly unlikely.
The assessment of the risk as tolerable, in terms of the British Standard, implied that it had been reduced to the lowest level that was reasonably practicable, and that no additional controls were required.
A further risk assessment was carried out by Cordia in July 2010.
It did not expressly consider the risk of injury from slips and falls in inclement weather, but was otherwise in similar terms to the 2005 assessment.
Neither assessment considered the possible provision of personal protective equipment (PPE), such as non slip attachments for footwear.
Miss Kennedy underwent an induction programme of a kind which usually included a discussion of slips and falls on ice in winter, and the importance of wearing appropriate footwear.
A hazard awareness booklet provided to employees stated that extra care should be taken when walking to and from work locations in inclement weather, and that staff should ensure that safe adequate footwear was worn.
What constituted safe adequate footwear was left to the judgment of the individual employee.
The evidence of the expert witnesses
Evidence was led on behalf of Miss Kennedy, under objection, from a consulting engineer, Mr Lenford Greasly.
His qualifications included a degree in engineering and a diploma in safety and hygiene.
He was a chartered member of the Institute of Safety and Health, and an associate member of the UK Slip Resistance Group.
He was a former member of the Health and Safety Executive, in which he had worked as an Inspector of Factories.
He had held senior management positions in industry, in areas including health and safety.
He had worked for many years as an engineering consultant advising companies on health and safety, including carrying out slip testing and advising on the adequacy of risk assessments.
He had carried out or revised between 50 and 100 risk assessments.
In a report which he had prepared, Mr Greasly referred to the relevant legislation and to advice published by the HSE, including advice concerning reducing the risk of slips on ice and snow by providing anti slip footwear.
In that regard, there was advice to consider finding out what footwear other similar businesses were using and whether it worked.
Mr Greaslys report described various types of anti slip attachment which had been available for some years at a modest cost, and which were said to increase grip in icy conditions.
He cited several published papers reporting on research into the slipperiness of footwear on icy and other surfaces, and the effect on slip resistance of using different types of sole and different types of attachment.
These included an American study which showed a reduction in falls of 90% among elderly people who wore attachments sold under the trade name Yaktrax.
He described his own experience of using Yaktrax, and said that he had found them helpful in increasing traction in icy conditions.
His report also included evidence that a number of employers whose staff had to work outdoors in snow and ice had provided them with anti slip attachments.
They included Royal Mail and a number of local authorities.
He concluded that such attachments reduced the risk of slipping on snow or ice, and that Cordia could have investigated the adequacy of such devices and provided Miss Kennedy with them.
At para 4.9, he stated: [Cordia] made a risk assessment but the identified preventative measures relied exclusively on the employee, via information and instruction, when dealing with inclement conditions.
In a supplementary report, Mr Greasly noted the information which had been provided by Cordia about the number of home carers who slipped and fell on snow and ice each year.
In the light of that information, he referred to the PPE Regulations, stating at paras 3.11 3.12: 3.11.
The Personal Protective Equipment at Work Regulations 1992 address the supply and use of PPE.
At regulation 4(1) it states Every employer shall ensure that suitable personal protective equipment is provided to his employees who may be exposed to a risk to their health or safety while at work except where and to the extent that such risk has been adequately controlled by other means which are equally or more effective. 3.12.
The risk of slipping on ice and snow was not controlled by other means, the controls that [Cordia] indicate were undertaken were informative; the risk of slipping on slippery surfaces (as identified by [Cordia]) remained.
Mr Greasly also referred to further published research.
He concluded that the research showed that the use of appropriate anti slip devices would help to avoid slips and falls.
He expressed the opinion that, had Miss Kennedy worn such devices then, on the balance of probabilities, the risk of her falling on ice and snow would have been reduced and might have been eliminated.
He also included information that at least six Scottish local authorities (including one to which he had referred in his earlier report) provided their home carers with anti slip attachments, although in two cases the practice had been introduced after 2010.
Mr Greasly expanded upon his reports in his oral evidence.
He explained how, in engineering terms, anti slip attachments reduced the risk of slipping.
Asked whether the wearing of such attachments would have any effect in the conditions experienced by Miss Kennedy, he replied that it ought to, as it would increase grip.
In cross examination, he is recorded as having assented to the suggestion that he could not say whether Yaktrax would have made any difference to Miss Kennedy on the occasion in question.
In re examination, however, he expressed puzzlement at that answer, and said that it was likely to have reduced and maybe eliminated the risk.
More generally, he accepted that different types of device were more or less effective in different conditions.
The provision of such equipment would however reduce the risk.
It was for the employer to determine the particular device which was most suitable.
Mr Greasly was critical of the omission from the 2010 risk assessment of a consideration of slips and falls in inclement weather.
He was also critical of the categorisation of the risk of slipping and falling as tolerable.
Evidence was led on behalf of Cordia from their health and safety manager, Miss Rodger, who had prepared the 2005 risk assessment on the basis of the British Standard and had been responsible for the preparation of its 2010 successor.
She was questioned, in particular, about the categorisation of the risk of slipping and falling as tolerable rather than substantial.
In terms of the British Standard, the latter categorisation would have led to the conclusion that work should not be started until the risk had been reduced, and that considerable resources might have to be allocated to reduce the risk.
Miss Rodger accepted that a slip could produce injuries which were properly categorised as harmful, such as fractures and head injuries, and also accepted, in the light of the annual statistics referred to in para 5 above, that it was a dead cert that someone was going to fall on snow and ice.
She accepted that the risk involved in the activity being carried out by Miss Kennedy on the occasion in question was therefore substantial, in the absence of measures to control the risk.
She also accepted that it would be apparent to any employer, applying his mind to this activity on the day in question, that there was a substantial risk of injury, in the absence of controls.
She nevertheless maintained that the advice to wear safe and adequate footwear reduced the risk as far as was reasonably practicable.
She confirmed that Cordia had not given any consideration to the provision of footwear or attachments.
The proceedings in the Outer House
Miss Kennedy commenced proceedings in the Court of Session, and the case proceeded to a proof restricted to the issue of liability.
The Lord Ordinary, Lord McEwan, found Cordia liable under the PPE Regulations, the Management Regulations, and the common law: [2013] CSOH 130.
The Lord Ordinary accepted Miss Kennedys evidence, including her evidence that, if provided with attachments for her boots, she would have worn them on the night in question.
He commented that it was of some importance that she and her colleague were under an urgent and important duty to an elderly sick lady.
He also accepted the evidence of Mr Greasly, which he regarded as consistent: in particular, he did not consider that what he said in cross examination had departed from his evidence in chief or in re examination.
His summary of Mr Greaslys evidence included the following passages: 16.
He then looked at the risk assessments.
Agreeing in general with the later evidence of Miss Rodger, he said account had to be taken of controls to overcome hazards before any rating could be arrived at.
However, he said that in his opinion the measures specified did not reduce the risk.
Personal Protective Equipment (PPE) should have been provided.
He was critical of the omission of inclement weather in [the 2010 risk assessment].
Such weather did not cease to be a hazard and simply to rate the risk as tolerable did not take account of changes in the risk when seriously adverse weather could and did occur that winter.
This risk could be eliminated altogether by not going to the house, but accepting the need to go, the employer (his emphasis) should choose and supply the correct footwear which was available at that time.
That was not done.
Being asked again about research papers he said some were surveys and some were lists.
He agreed that icy and snowy surfaces varied and shoe attachments varied in their reaction to these.
He described in detail how Yaktrax performed and how he had used his own set for 18 months in snow and ice.
He said that they reduced the risk although there was no one answer to the problem.
Everyone still had to take care.
Had he done a risk assessment for Miss Kennedys job he would have assessed the risk as likely and the severity as harmful.
It was for the employer to find out what PPE was best and in his opinion they should have provided Yaktrax or some other type of fitting.
. under reference to the [British Standard], he said that
the assessment of the risk should have been substantial.
Slipping and falling could give a variety of serious injuries.
What the employer had to do was reduce or eliminate the risk.
That would have been done if Yaktrax had been provided. 20.
The Lord Ordinary repelled an objection which had been made to Mr Greaslys evidence on the ground that he did not have any relevant special skill, experience or learning.
In that regard, the Lord Ordinary had earlier commented that Mr Greasly had detailed knowledge of the correct approach to compiling risk assessments, and was justified in the conclusion he drew from the published papers.
In dealing with the objection, he stated at para 43: His [Mr Greaslys] many general qualifications are listed in his two reports .
He has given evidence on many occasions.
He is a member of a group with particular interests in slipping at work.
He demonstrated a detailed knowledge of a number of international papers on the subject of slipping and personal protective equipment relating to footwear.
The real issue is whether he was in a position to provide expertise in areas of health and safety at work which would not be within the knowledge of the court.
In my view he clearly has the qualifications and gives such evidence here.
He will be treated therefore as an expert witness. 21.
Having dealt with objections to the evidence, the Lord Ordinary then stated his findings on the evidence.
In the light of the evidence of Mr Greasly, he made the following findings: 47.
The following emerges.
He had been to the locus.
The conditions required some form of shoe add on.
Yaktrax was but one model available on the market at the time (it should be noted that Miss Kennedys case does not depend solely on Yaktrax.
She said she would have worn an add on if she had been given one). 48.
Importantly I accept his criticism of the risk assessments given in his evidence (see para 4.9 of [the first report, quoted in para 10 above]) and he was clear in his evidence and reports that regulation 4 [of the PPE Regulations] was also breached (see eg paras 3.11 and 3.12 in [the supplementary report, quoted in para 11 above]).
He spoke to the availability of a number of devices to fit to footwear at the relevant time.
It is not necessary to dwell at any length on the various studies or indeed to express my own view of them.
In my opinion they present a consistent picture with the American one being particularly helpful.
The Lord Ordinary was critical of the reliability of Miss Rodgers evidence.
He stated that her evidence lacked a clear explanation of her conclusion that the risk of home carers slipping was tolerable rather than substantial.
He commented that her failure to consider the provision of PPE had resulted in the breach of duty in all areas.
Considering first the Management Regulations, on the basis that a risk assessment was logically anterior to the taking of safety precautions, the Lord Ordinary concluded that both assessments had been unsatisfactory.
Given Miss Rodgers acceptance that a fall on ice was likely and that any resultant injury could be harmful, the risk should have been assessed as substantial rather than tolerable.
The precautions in place, in the form of advice to wear safe and adequate footwear, were inadequate.
There was no specific advice as to what might constitute such footwear, and no checking or assessment of what was worn.
In those circumstances, the risk assessment had not been suitable and sufficient, as required by regulation 3(1).
Considering next the PPE Regulations, the Lord Ordinary concluded that in the light of Mr Greaslys evidence about the availability of relatively simple precautions to reduce the risk, and the absence of any consideration of PPE by Cordia, it could not be said that the risk had been adequately controlled by other means which were equally or more effective.
There was therefore a breach of regulation 4(1).
Considering next the common law, the Lord Ordinary stated: 72.
For the same reasons I find [Cordia] also liable at common law.
In the face of an obvious and continuing risk they provided no safe footwear.
There is no evidence they checked what was being worn.
There was no evidence of any system of working or reporting in when staff had to go out in the extreme weather and walk on snow and ice.
The proceedings in the Inner House
The Lord Ordinarys decision was reversed by an Extra Division of the Inner House (Lady Smith, Lord Brodie and Lord Clarke): [2014] CSIH 76; 2015 SC 154.
The Extra Division considered that the Lord Ordinary had erred in five respects.
First, in relation to Mr Greaslys evidence, Lord Brodie, giving the leading judgment, stated that he should not have been allowed to give the evidence summarised by the Lord Ordinary at paras 16, 20, 21, 47 and 48 of his opinion, quoted at paras 19 and 21 above.
The Lord Ordinary abdicated his role as decision maker.
The dispute that had to be resolved was something the Lord Ordinary was fully equipped to do without any instruction or advice; it was squarely within his province as judicial decision maker.
No additional expertise was required.
Health and safety was not an area of expertise, since it was not a recognised body of science or experience.
The other members of the court agreed.
Lord Clarke commented that the Lord Ordinarys approach was simply to accept that the evidence of Mr Greasly determined the question for him.
Paragraph 43 of the Lord Ordinarys opinion (quoted at para 20 above) demonstrated a shifting of his responsibility for deciding the issues before him to Mr Greasly.
Secondly, a failure to comply with the Management Regulations could not be a direct cause of injury.
The regulations did not impose any duty to take precautions.
Lady Smith considered that Cordias risk assessment had in any event complied with the regulations, but did not explain her reasons for reaching that conclusion.
The other members of the Extra Division did not express any opinion on the question.
Thirdly, regulation 4(1) of the PPE Regulations did not apply to the circumstances of the accident.
The regulations were concerned with risks to which workers were exposed which were created or increased by the nature of their work.
But the risk to which Miss Kennedy was exposed was not of that kind.
This point was explained most clearly by Lord Clarke.
Like Lord Brodie and Lady Smith, he construed the regulations as being concerned with risks caused by the nature of the task performed by the employee.
He regarded that task, in the case of Miss Kennedy, as being confined to the administration of care to her clients, and not as encompassing her journeys to their homes.
On that basis, he considered that the carrying out of Miss Kennedys duties as a home carer did not create the risk of her slipping somewhere en route to carrying out those duties because of ice or snow on that route.
The regulations were in his view designed to deal with risks in circumstances where the employer had a degree of control over the employee, the place of work and the performance of the task which had to be carried out.
The risk of Miss Kennedys slipping on ice and snow, on the other hand, was not materially different from that to which any member of the public was exposed when making their way around Glasgow for whatever reason at the relevant time.
In any event, as it appeared to the Extra Division, on the Lord Ordinarys findings the risk of slipping was adequately controlled.
There was little evidence as to the likely efficacy of unspecified attachments over the range of underfoot conditions that Miss Kennedy could have been expected to encounter.
It could not even be said on the evidence that wearing attachments would have made any material difference on the pathway on which Miss Kennedy fell.
The Extra Division were also critical of the Lord Ordinarys statement that the direction of the law was to level safety upwards.
Lord Brodie remarked that the Lord Ordinary had cited no authority for his observation, while Lord Clarke asked whether the Lord Ordinarys words were meant to reflect an aspect of public policy or some supposed legal principle, and commented that they betrayed a failure to recognise that the law did not impose on an employer a generalised duty to ensure the safety of his employees.
Fourthly, in relation to the common law case, it was said that the Lord Ordinary had failed to address the necessary basic questions identified by Lord President Dunedin in Morton v William Dixon Ltd 1909 SC 807, 809: Where the negligence of the employer consists of what I may call a fault of omission, I think it is absolutely necessary that the proof of that fault of omission should be one of two kinds, either to shew that the thing which he did not do was a thing which was commonly done by other persons in like circumstances, or to shew that it was a thing which was so obviously wanted that it would be folly in anyone to neglect to provide it.
It could not be said that either requirement of Lord Dunedins formula was satisfied.
The Lord Ordinary had also failed to consider whether it would be fair, just and reasonable to find there to be a duty of care of the scope contended for, in accordance with Caparo Industries plc v Dickman [1990] 2 AC 605, 617 618.
Had he done so, he could not have failed to reject the contention that Cordia were under a common law duty to determine what their competent adult employees should wear on their feet when negotiating the streets of Glasgow.
Fifthly, it was said that the Lord Ordinary was not entitled to find Cordia liable, in any event, because he had made no finding that the wearing of attachments would necessarily have prevented Miss Kennedys fall.
He had, it was said, not taken a view on the passages in the cross examination of Mr Greasly in which he conceded that he could not say that Yaktrax would have made any difference.
Mr Greaslys evidence
We shall begin by considering the issues arising in relation to Mr Greaslys evidence.
The use of expert witnesses, who in Scottish practice have traditionally been described as skilled witnesses, can provide significant benefits to the court in determining legal disputes.
There is a degree of commonality of approach between jurisdictions which adopt similar methods of fact finding.
Thus Scots law has drawn on the experience of other jurisdictions both as to the admissibility of skilled evidence and in relation to the duties of expert witnesses.
There are also concerns about the use of skilled witnesses, some of which may have lain behind the Extra Divisions approach in this case.
Walker and Walker, in The Law of Evidence in Scotland, 4th ed (2015) (at para 16.3.11), record concerns about the excessive use of experts in litigation in other jurisdictions, and refer to Lord Cullens proposal to restrict the number of skilled witnesses in his Review of Outer House Business in 1995.
More recently, the Law Commission of England and Wales in its report, Expert evidence in criminal proceedings in England and Wales, Law Com No 325 (2011), has recorded concerns (i) that an expert witness might have an excessive influence on lay fact finders, (ii) whether in criminal cases the defence will have the resources to test the underlying basis of an experts evidence and (iii) that experts may not achieve the impartiality for which their role calls.
In our view, judges who frequently decide civil cases should through their experience be less likely than juries to be unduly influenced by skilled witnesses, but an advocate in a civil case may face difficulties in testing the evidence of an expert unless assisted by expert advice.
The need to regulate such evidence remains.
In this case, the Extra Divisions principal concerns about Mr Greaslys
evidence were that he had expressed opinions on what Cordia should have done that involved questions of law, which it was the task of the court to decide and that, in any event, most of his evidence was unnecessary: see para 27 above.
Lord Clarke in his concurring opinion expressed concerns, more generally, about the unnecessary proliferation of allegedly expert reports in personal injury cases.
The Extra Division articulated their more general concern in their finding (in para 4 of Lady Smiths opinion, paras 15 and 16 of Lord Brodies opinion and para 40 of Lord Clarkes opinion) that the health and safety practice of employers could not be the subject matter of expert evidence, either because it was a legal question within the knowledge of the court or because it was not a recognised body of science or experience, which was suitably acknowledged as being useful and reliable, and which could properly form the basis of opinions capable of being subjected to forensic evaluation.
Counsel for Cordia conceded at the outset of this appeal that so general an assertion was not correct and accepted that health and safety practice could properly be the subject of expert evidence.
We think that that concession was correctly made.
Before expressing our views on Mr Greaslys evidence in this appeal, we look at expert evidence more generally to provide the context for our conclusions.
The case law on the Scots law of evidence to which counsel referred included both civil and criminal cases.
We refer to both in this judgment but are mindful that the Scots law of criminal evidence, including expert evidence in criminal trials, lies within the competence of the High Court of Justiciary and not this court.
In this judgment therefore the criminal cases only provide context for our consideration of the law of evidence in civil cases.
The evidence of skilled witnesses
In our view four matters fall to be addressed in the use of expert evidence.
They are (i) the admissibility of such evidence, (ii) the responsibility of a partys legal team to make sure that the expert keeps to his or her role of giving the court useful information, (iii) the courts policing of the performance of the experts duties, and (iv) economy in litigation.
The first is the most directly relevant in this appeal.
But the others also arise out of either the parties submissions or the Extra Divisions concerns and we address them briefly.
(i) Admissibility
Skilled witnesses, unlike other witnesses, can give evidence of their opinions to assist the court.
This gives rise to threshold questions of the admissibility of expert evidence.
An example of opinion evidence is whether Miss Kennedy would have been less likely to fall if she had been wearing anti slip attachments on her footwear.
Experts can and often do give evidence of fact as well as opinion evidence.
A skilled witness, like any non expert witness, can give evidence of what he or she has observed if it is relevant to a fact in issue.
An example of such evidence in this case is Mr Greaslys evidence of the slope of the pavement on which Miss Kennedy lost her footing.
There are no special rules governing the admissibility of such factual evidence from a skilled witness.
Unlike other witnesses, a skilled witness may also give evidence based on his or her knowledge and experience of a subject matter, drawing on the work of others, such as the findings of published research or the pooled knowledge of a team of people with whom he or she works.
Such evidence also gives rise to threshold questions of admissibility, and the special rules that govern the admissibility of expert opinion evidence also cover such expert evidence of fact.
There are many examples of skilled witnesses giving evidence of fact of that nature.
Thus Dickson on Evidence, Griersons ed (1887) at section 397 referred to Gibson v Pollock (1848) 11 D 343, a case in which the court admitted evidence of practice in dog coursing to determine whether the owner or nominator of a dog was entitled to a prize on its success.
Similarly, when an engineer describes how a machine is configured and works or how a motorway is built, he is giving skilled evidence of factual matters, in which he or she draws on knowledge that is not derived solely from personal observation or its equivalent.
An expert in the social and political conditions in a foreign country who gives evidence to an immigration judge also gives skilled evidence of fact.
It is common in Scottish criminal trials for the misuse of drugs for the Crown to adduce the evidence of a policeman who has the experience and knowledge to describe the quantities of drugs that people tend to keep for personal use rather than for supply to others.
Recently, in Myers, Brangman and Cox v The Queen [2015] UKPC 40; [2015] 3 WLR 1145, the Judicial Committee of the Privy Council approved of the use of police officers, who had special training and considerable experience of the practices of criminal gangs, to give evidence on the culture of gangs, their places of association and the signs that gang members used to associate themselves with particular gangs.
In giving such factual evidence a skilled witness can draw on the general body of knowledge and understanding in which he or she is skilled, including the work and literature of others.
But Lord Hughes, in delivering the advice of the Board at para 58, warned that care must be taken that simple, and not necessarily balanced, anecdotal evidence is not permitted to assume the robe of expertise.
To avoid this, the skilled witness must set out his or her qualifications, by training and experience, to give expert evidence and also say from where he or she has obtained information, if it is not based on his or her own observations and experience.
Counsel agreed that the South Australian case of R v Bonython (1984) 38 SASR 45 gave relevant guidance on admissibility of expert opinion evidence.
We agree.
In that case King CJ at pp 46 47 stated: Before admitting the opinion of a witness into evidence as expert testimony, the judge must consider and decide two questions.
The first is whether the subject matter of the opinion falls within the class of subjects upon which expert testimony is permissible.
This first question may be divided into two parts: (a) whether the subject matter of the opinion is such that a person without instruction or experience in the area of knowledge or human experience would be able to form a sound judgment on the matter without the assistance of witnesses possessing special knowledge or experience in the area, and (b) whether the subject matter of the opinion forms part of a body of knowledge or experience which is sufficiently organized or recognized to be accepted as a reliable body of knowledge or experience, a special acquaintance with which by the witness would render his opinion of assistance to the court.
The second question is whether the witness has acquired by study or experience sufficient knowledge of the subject to render his opinion of value in resolving the issues before the court.
In Bonython the court was addressing opinion evidence.
As we have said, a skilled person can give expert factual evidence either by itself or in combination with opinion evidence.
There are in our view four considerations which govern the admissibility of skilled evidence: (i) whether the proposed skilled evidence will assist the court in its task; (ii) whether the witness has the necessary knowledge and experience; (iii) whether the witness is impartial in his or her presentation and assessment of the evidence; and (iv) whether there is a reliable body of knowledge or experience to underpin the experts evidence.
All four considerations apply to opinion evidence, although, as we state below, when the first consideration is applied to opinion evidence the threshold is the necessity of such evidence.
The four considerations also apply to skilled evidence of fact, where the skilled witness draws on the knowledge and experience of others rather than or in addition to personal observation or its equivalent.
We examine each consideration in turn.
Assisting the court: It is for the court to decide whether expert evidence is needed, when the admissibility of that evidence is challenged.
In R v Turner [1975] QB 834, a case which concerned the admissibility of opinion evidence, which Professor Davidson cites in his textbook on Evidence (2007) at para 11.04, Lawton LJ stated at p 841: If on the proven facts a judge or jury can form their own conclusions without help, then the opinion of an expert is unnecessary.
In Wilson v Her Majestys Advocate 2009 JC 336, which also concerned opinion evidence, the High Court of Justiciary, in an opinion delivered by Lord Wheatley, stated the test thus (at para 58): [T]he subject matter under discussion must be necessary for the proper resolution of the dispute, and be such that a judge or jury without instruction or advice in the particular area of knowledge or experience would be unable to reach a sound conclusion without the help of a witness who had such specialised knowledge or experience.
Most of the Scottish case law on, and academic discussion of, expert evidence has focused on opinion evidence to the exclusion of skilled evidence of fact.
In our view, the test for the admissibility of the latter form of evidence cannot be strict necessity as, otherwise, the court could be deprived of the benefit of a skilled witness who collates and presents to the court in an efficient manner the knowledge of others in his or her field of expertise.
There may be circumstances in which a court could determine a fact in issue without an expert collation of relevant facts if the parties called many factual witnesses at great expense and thus a strict necessity test would not be met.
In Daubert v Merrell Dow Pharmaceuticals Inc (1993) 509 US 579, the United States Supreme Court referred to rule 702 of the Federal Rules of Evidence, which in our view is consistent with the approach of Scots law in relation to skilled evidence of fact.
The rule, which Justice Blackmun quoted at p 588, states: If scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.
The advantage of the formula in this rule is that it avoids an over rigid interpretation of necessity, where a skilled witness is put forward to present relevant factual evidence in an efficient manner rather than to give an opinion explaining the factual evidence of others.
If skilled evidence of fact would be likely to assist the efficient determination of the case, the judge should admit it.
An expert must explain the basis of his or her evidence when it is not personal observation or sensation; mere assertion or bare ipse dixit carries little weight, as the Lord President (Cooper) famously stated in Davie v Magistrates of Edinburgh 1953 SC 34, 40.
If anything, the suggestion that an unsubstantiated ipse dixit carries little weight is understated; in our view such evidence is worthless.
Wessels JA stated the matter well in the Supreme Court of South Africa (Appellate Division) in Coopers (South Africa) (Pty) Ltd v Deutsche Gesellschaft fr Schdlingsbekmpfung mbH 1976 (3) SA 352, 371: [A]n experts opinion represents his reasoned conclusion based on certain facts or data, which are either common cause, or established by his own evidence or that of some other competent witness.
Except possibly where it is not controverted, an experts bald statement of his opinion is not of any real assistance.
Proper evaluation of the opinion can only be undertaken if the process of reasoning which led to the conclusion, including the premises from which the reasoning proceeds, are disclosed by the expert.
As Lord Prosser pithily stated in Dingley v Chief Constable, Strathclyde Police 1998 SC 548, 604: As with judicial or other opinions, what carries weight is the reasoning, not the conclusion.
In Davie the Lord President at p 40 observed that expert witnesses cannot
usurp the functions of the jury or judge sitting as a jury.
Recently, in Pora v The Queen [2015] UKPC 9; [2016] 1 Cr App R 3, para 24, the Judicial Committee of the Privy Council in an appeal from New Zealand, stated: It is the duty of an expert witness to provide material on which a court can form its own conclusions on relevant issues.
On occasions that may involve the witness expressing an opinion about whether, for instance, an individual suffered from a particular condition or vulnerability.
The expert witness should be careful to recognise, however, the need to avoid supplanting the courts role as the ultimate decision maker on matters that are central to the outcome of the case.
Thus, while on occasion in order to avoid elusive language the skilled witness may have to express his or her views in a way that addresses the ultimate issue before the court, expert assistance does not extend to supplanting the court as the decision maker.
The fact finding judge cannot delegate the decision making role to the expert.
The witnesss knowledge and expertise: The skilled witness must demonstrate to the court that he or she has relevant knowledge and experience to give either factual evidence, which is not based exclusively on personal observation or sensation, or opinion evidence.
Where the skilled witness establishes such knowledge and experience, he or she can draw on the general body of knowledge and understanding of the relevant expertise: Myers, Brangman and Cox (above) at para 63.
Impartiality and other duties: If a party proffers an expert report which on its face does not comply with the recognised duties of a skilled witness to be independent and impartial, the court may exclude the evidence as inadmissible: Toth v Jarman [2006] EWCA Civ 1028; [2006] 4 All ER 1276, paras 100 102.
In Field v Leeds City Council [2000] 1 EGLR 54, the Court of Appeal upheld the decision of a district judge, who, having ordered the Council to provide an independent surveyors report, excluded at an interim hearing the evidence of a surveyor whom the Council proposed to lead in evidence on the ground that his impartiality had not been demonstrated.
It is unlikely that the court could make such a prior ruling on admissibility in those Scottish procedures in which there is as yet no judicial case management.
But the requirement of independence and impartiality is in our view one of admissibility rather than merely the weight of the evidence.
The Scottish courts have adopted the guidance of Cresswell J on an experts duties in The Ikarian Reefer [1993] 2 Lloyds Rep 68 in both civil and criminal matters: see Lord Caplan in Elf Caledonia Ltd v London Bridge Engineering Ltd September 2, 1997 (unreported) at pp 225 227 and Wilson v Her Majestys Advocate (above) at paras 59 and 60.
We quote Cresswell Js summary (at pp 81 82) omitting only case citations: The duties and responsibilities of expert witnesses in civil cases include the following: 1.
Expert evidence presented to the court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation. 2.
An expert witness should provide independent assistance to the court by way of objective unbiased opinion in relation to matters within his expertise.
An expert witness in the High Court should never assume the role of an advocate. 3.
An expert witness should state the facts or assumption on which his opinion is based.
He should not omit to consider material facts which could detract from his concluded opinion. 4.
An expert witness should make it clear when a particular question or issue falls outside his expertise. 5.
If an experts opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one.
In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report. 6.
If, after exchange of reports, an expert witness changes his view on a material matter having read the other sides experts report or for any other reason, such change of view should be communicated (through legal representatives) to the other side without delay and when appropriate to the court. 7.
Where expert evidence refers to photographs, plans, calculations, analyses, measurements, survey reports or other similar documents, these must be provided to the opposite party at the same time as the exchange of reports.
In Wilson v Her Majestys Advocate (at paras 59 and 60) the High Court of
Justiciary quoted the first four duties and added the requirement that an expert witness should in particular explain why any material relevant to his conclusions is ignored or regarded as unimportant.
In Elf Caledonia Ltd, Lord Caplan quoted Cresswell Js guidance more fully.
In our view, Cresswell Js guidance should be applied in the Scottish courts in civil cases, making such allowance as is necessary to accommodate different procedures.
It is implicit that the seventh duty applies only in relation to items to which the opposite party does not already have access.
Reliable body of knowledge or experience: What amounts to a reliable body of knowledge or experience depends on the subject matter of the proposed skilled evidence.
In Davie v Magistrates of Edinburgh the question for the court was whether blasting operations in the construction of a sewer had damaged the pursuers building and the relevant expertise included civil engineering and mining engineering.
In Myers, Brangman and Cox, as we have said, the subject matter was the activities of criminal gangs; a policemans evidence, which was the product of training courses and long term personal experience as an officer serving with a body of officers who had built up a body of learning, was admitted as factual evidence of the practices of such gangs.
In many cases where the subject matter of the proposed expert evidence is within a recognised scientific discipline, it will be easy for the court to be satisfied about the reliability of the relevant body of knowledge.
There is more difficulty where the science or body of knowledge is not widely recognised.
Walker and Walker at para 16.3.5 refer to an obiter dictum in Lord Eassies opinion in Mearns v Smedvig Ltd 1999 SC 243 in support of their proposition that: A party seeking to lead a witness with purported knowledge or experience outwith generally recognised fields would need to set up by investigation and evidence not only the qualifications and expertise of the individual skilled witness, but the methodology and validity of that field of knowledge or science.
We agree with that proposition, which is supported in Scotland and in other jurisdictions by the courts refusal to accept the evidence of an expert whose methodology is not based on any established body of knowledge.
Thus in Young v Her Majestys Advocate 2014 SLT 21, the High Court refused to admit evidence of case linkage analysis because it was the subject of only relatively recent academic research and a methodology which was not yet sufficiently developed that it could be treated as reliable.
See also, for example, R v Gilfoyle [2001] 2 Cr App R 5, in which the English Court of Appeal (Criminal Division) refused to admit expert evidence on psychological autopsy for several reasons, including that the expert had not embarked on the exercise in question before and also that there were no criteria by reference to which the court could test the quality of his opinions and no substantial body of academic writing approving his methodology.
The court also observed that the psychologists views were based on one sided information and doubted that the assessment of levels of happiness or unhappiness was a task for an expert rather than jurors.
(ii) Making sure that the expert performs his or her role
It falls in the first instance to counsel and solicitors who propose to adduce the evidence of a skilled witness to assess whether the proposed witness has the necessary expertise and whether his or her evidence is otherwise admissible.
It is also their role to make sure that the proposed witness is aware of the duties imposed on an expert witness.
The legal team also should disclose to the expert all of the relevant factual material which they intend should contribute to the experts evidence in addition to his or her own pre existing knowledge.
That should include not only material which supports their clients case but also material, of which they are aware, that points in the other direction, viz the courts concerns about one sided information in R v Gilfoyle.
The skilled witness should take into account and disclose in the written report the relevant factual evidence so provided.
(iii) Policing the performance of an experts duties
It is not the normal practice of the Scottish courts to hold preliminary hearings or proofs on the admissibility of the evidence of skilled witnesses.
Considerations of cost and practicability may often make such a course unattractive.
Where the court has significant powers of case management, as in certain actions based on clinical negligence or relating to catastrophic injuries (Rules of the Court of Session 1994 as amended (RCS) Chapter 42A), commercial actions (RCS Chapter 47), and intellectual property actions (RCS Chapter 55), a judge can address concerns about the evidence in the report by a skilled witness at a case management hearing and discuss with counsel how they are to be resolved.
Wider opportunities for such case management in personal injury actions are likely to result from the implementation of Lord Gills Civil Courts Review.
In many cases it may not be possible to iron out all difficulties before the proof.
A party may object to part or all of a skilled witnesss evidence at the start and during the course of a proof, as occurred in this case.
In the absence of objection, the judge should, when assessing whether and to what extent to give weight to the evidence, test the evidence to ascertain that it complies with the four considerations which we have set out in para 38 above and is otherwise sound.
In McTear v Imperial Tobacco Ltd 2005 2 SC 1, para 5.17 Lord Nimmo Smith usefully described the judges role in these terms: [I]t is necessary to consider with care, in respect of each of the expert witnesses, to what extent he was aware of and observed his function.
I must decide what did or did not lie within his field of expertise, and not have regard to any expression of opinion on a matter which lay outwith that field.
Where published literature was put to a witness, I can only have regard to such of it as lay within his field of expertise, and then only to such passages as were expressly referred to.
Above all, the purpose of leading the evidence of any of the expert witnesses should have been to impart to me special knowledge of subject matter, including published material, lying within the witnesss field of expertise, so as to enable me to form my own judgment about that subject matter and the conclusions to be drawn from it.
Lord Brodie referred to this passage in his opinion at para 11.
It is not necessary in this appeal to determine how far a court should have regard to published material put to or cited by a skilled witness which is not within his or her core expertise.
Much may depend on the nature of the experts area of practice, which may or may not involve some working knowledge of related disciplines, and on the centrality of the published material to the matter which the court has to decide: see, for example, Main v McAndrew Wormald Ltd 1988 SLT 141 and, on the analogous question of a medical practitioner consulting another specialist, M v Kennedy 1993 SC 115.
(iv) Economy in litigation
In recent years there have been many statements of concern in many jurisdictions about the disproportionate cost of civil litigation.
Scotland is no exception.
Those concerns include the use of expert witnesses.
In the responses to consultation in the Scottish Civil Courts Review some respondents, including the Scottish Legal Aid Board, expressed their concern about the increased reliance on experts in litigation and the consequent cost (Report of the Scottish Civil Courts Review (2009) vol 1, chapter 9, para 64).
The latter concern was also discussed in the Taylor Review of Expenses and Funding of Civil Litigation in Scotland (2013), chapter 3, paras 59 95.
Cordia in this case challenge what they describe in their written case as the largely uncontrolled proliferation of experts.
Case management offers a means by which the court can encourage parties to avoid leading evidence on matters which are not contentious, for example by agreeing a statement of fact which explains background matters, which are not the subject of written pleadings, to the court.
There may be matters which can readily be agreed, thereby allowing parties experts to concentrate on contentious matters.
Solicitors with expertise in personal injury actions may use such statements as the basis for agreed evidence in other actions and thereby save expense.
Where that is not possible, a court which has case management powers may require experts to exchange opinions, confer and prepare a report which identifies matters of agreement and reasons for any continued disagreement.
It can also ascertain the scope for joint instruction of a single expert, and (where it possesses the necessary powers) can exclude expert reports and evidence.
Courts also possess powers in relation to expenses which can be used to discourage the excessive use of expert evidence.
Nothing that we say in this judgment questions the legitimacy of the underlying concern about reducing the expense of litigation.
Expert evidence in this case
With those general comments we turn to Mr Greaslys evidence in this case.
We have summarised his qualifications and his evidence in paras 9 to 14 above.
There were matters in Mr Greaslys reports to which Cordia did not take exception.
Lord Brodie acknowledged that there were matters of fact which were admissible, such as his description of the locus, including his measurements of the gradients, and his evidence of availability on the market of anti slip attachments to footwear.
But there were other factual matters which were admissible because they were relevant and might assist a judge, and against which Cordia did not persist in their challenge in this court.
They included: (i) information on the prevention or reduction of risks of tripping and slipping from publications by the Construction Industry Research and Information Association, by the HSE and from the HSE website; (ii) research literature on the effectiveness of different types of footwear and devices to resist slipping and on the circumstances in which people suffer falls; (iii) HSE guidance on the PPE Regulations which provided evidence of good health and safety practice in relation to dangers posed by the weather when people have to work out of doors; and (iv) working out of doors with anti slip devices. the practices of named public bodies in providing their employees Cordia maintained their challenge to his evidence of the effect of Yaktrax, based on his own use of them, and his oral explanation of how anti slip attachments reduced the risk of slipping, which was based on his knowledge of engineering.
But these were also factual matters, which he had the experience and qualifications to describe.
In our view, the Lord Ordinary did not err in admitting all of this factual evidence.
Similarly, it was relevant to the courts task to hear evidence on health and safety practice in complying with the Management Regulations and the PPE Regulations.
The expansion of the statutory duties imposed on employers in the field of health and safety has given rise to a body of knowledge and experience in this field, which, as we explain later in this judgment, creates the context in which the court has to assess an employers performance of its common law duty of care.
The Lord Ordinary was entitled to accept Mr Greaslys experience in carrying out and advising his clients on risk assessments as a proper basis for his giving of such evidence.
The Extra Division had two other major criticisms of Mr Greaslys evidence.
One was that he was inadmissibly giving his opinion on matters of law.
The other, which was based on the well known dictum of Oliver J in Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384, 402, a case of solicitors negligence, was that an experts opinion of what he would have done in the circumstances did not assist the court, and was therefore inadmissible.
The former objection may properly be made to Mr Greaslys statements that it was for Cordia to consider the range of footwear and attachments that were available (main report para 3.74) and that it was for Cordia to take steps to reduce the risk as far as was reasonably practicable (main report para 4.11).
They appear at first sight to be statements of opinion on Cordias legal duty, which would not be admissible before lay fact finders and should be avoided.
An experienced judge however could readily treat the statements as the opinions of a skilled witness as to health and safety practice, based on the Management Regulations and the PPE Regulations and on HSE guidance, and make up his own mind on the legal question.
The Lord Ordinary (at para 48 of his opinion) interpreted passages in Mr Greaslys supplementary report as expressing an opinion that Cordia had breached their statutory duty.
If that were a correct interpretation of what Mr Greasly had said, those passages of his evidence were not admissible.
But, as we shall explain, that does not undermine the Lord Ordinarys decision, because he applied his own mind to the central legal issues.
We are not persuaded by the latter objection.
There may be cases where the opinion of a professional as to what he or she would have done in a given circumstance is of only limited weight in the courts assessment of a claim for professional negligence, as in Hett, Stubbs.
But we see no reason why the Lord Ordinary should not have found helpful the reasoned view of a person experienced in carrying out risk assessments on the rating of risks within a risk assessment.
Cordia assessed the risk of injury such as sprains or fractures when travelling to and from work locations to be tolerable, applying a British Standard with which a judge might not be familiar but which was relevant to a consideration of proper practice.
Mr Greasly opined that in wintry conditions the risk should have been assessed as substantial.
His evidence provided a basis for the Lord Ordinary to weigh up the opposing views when deciding whether Cordia had suitably and sufficiently evaluated the risks and identified the measures needed to protect health and safety.
We have difficulty in seeing how Miss Kennedys counsel could have presented her case on these matters by legal submissions alone.
Mr Greasly not only collated the factual material to which we have referred but also gave opinion evidence on how the relevant risk assessment should have been carried out.
The Lord Ordinary held (in para 43 of his opinion) that Mr Greasly had the necessary experience to give such evidence about health and safety at work.
In our view the circumstances of this case are therefore materially different from Hawkes v Southwark London Borough Council (unreported) 20 February 1998 in which Aldous LJ was critical of the plaintiff for calling an expert engineering witness unnecessarily.
When Cordia responded to an invitation from this court to submit a note identifying the specific passages in Mr Greaslys reports to which they objected, they identified passages which raised the issues which we have discussed above.
They also objected to several statements of the obvious, such as that anti slip attachments with spiked steel projections must help increase traction in snow and ice and so reduce the risk of slipping.
But these statements were a small part of Mr Greaslys narrative and are not objectionable.
It would be different if the sum and substance of an experts report were blindingly obvious.
Such a report would be inadmissible because it would not assist the court.
In summary, the Extra Division erred in treating much of the factual material in Mr Greaslys report as inadmissible on the basis that it was not skilled evidence that assisted the court.
The Extra Division also erred in excluding his evidence on how he would have carried out the risk assessment.
As we have said, his expressions of opinion as to what Cordia should have done were capable of being interpreted as legal opinions that Cordia had breached statutory regulations and thus objectionable.
But the Lord Ordinary applied his own mind to the legal questions which he had to decide: see our discussion of this part of his opinion in paras 21 25 above.
As in this case, it may on occasion be expedient to instruct a witness with general health and safety experience to give skilled evidence on a specific question of health and safety practice which he or she may not have encountered in the past.
Such a witness may have to conduct research into how the particular risk might have been reduced or avoided.
Whether or not the witness has sufficient experience and knowledge to give skilled evidence is a matter which can be explored either through case management or in cross examination.
In this case Mr Greasly included in his evidence material, which his instructing solicitors had provided to him, relating to the practices of other employers obtained from freedom of information requests.
The solicitors themselves did not give evidence.
In such circumstances, it is, as a matter of fairness, incumbent on the solicitors to disclose to the skilled witness and to the other parties in the litigation the relevant material which they have assembled, whether or not it supports their case.
It is not clear in this case whether there was any undisclosed material.
We observe that in this case there was no suggestion that Miss Kennedys advisers had adopted an uneconomic approach to the litigation.
Her proof consisted of two witnesses: herself and Mr Greasly.
The Framework Directive
We turn next to the issues of substantive law which are raised in the appeal.
Before considering the regulations which were relied upon, it is helpful to consider their background in EU law, partly because the regulations have to be construed as far as possible so as to give effect to EU law, and also in view of the Extra Divisions criticism of the Lord Ordinarys remarks about the direction of the law being to level safety upwards.
Article 153 of the Treaty on the Functioning of the European Union requires the EU to support and complement the activities of the member states in a number of fields, including improvement in particular of the working environment to protect workers health and safety, and permits the European Parliament and Council to adopt Directives for that purpose.
It is clear from the case law of the Court of Justice that article 153, and in particular the concepts of working environment, safety and health, are not to be interpreted restrictively: see, for example, United Kingdom v Council of the European Union (Case C 84/94) [1996] ECR I 5755, para 15.
It was under the predecessor of article 153, namely article 118a of the EEC Treaty, that the Council adopted Directive 89/391/EEC of 12 June 1989 on the introduction of measures to encourage improvements in the safety and health of workers at work (the Framework Directive).
In the preamble, the recitals refer repeatedly to improving safety and health in the working environment, and to harmonising the relevant national laws, so that competition is not at the expense of safety and health.
As the Lord Ordinary correctly stated, safety is to be levelled upwards.
As we shall explain, the Framework Directive provides a basis for daughter Directives addressing particular aspects of health and safety at work.
It is necessary to refer to only a few of the articles of the Framework Directive itself.
Article 1(1) states that the object of the Directive is to introduce measures to encourage improvements in the safety and health of workers at work.
To that end, according to article 1(2), it contains general principles and general guidelines for the implementation of those principles.
Article 1(3) provides that the Directive is without prejudice to existing or future national and Community provisions which are more favourable to protection of the safety and health of workers at work.
Under article 4(1), member states are required to take the necessary steps to ensure that employers and others are subject to the legal provisions necessary for the implementation of the Directive.
Article 5(1) provides that the employer shall have a duty to ensure the safety and health of workers in every aspect related to the work.
Article 5(4) permits member states to provide for the exclusion or limitation of employers responsibility where occurrences are due to unusual and unforeseeable circumstances, beyond the employers control, or to exceptional events, the consequences of which could not have been avoided despite the exercise of all due care.
Article 6(1) provides that, within the context of his responsibilities, the employer shall take the measures necessary for the safety and health protection of workers, and shall aim to improve existing situations.
Article 6(2) sets out the general principles of prevention which are to form the basis of the measures taken under paragraph 1.
They include: evaluating the risks which cannot be avoided; (a) avoiding risks; (b) . (h) giving collective protective measures priority over individual protective measures; and (i) giving appropriate instructions to the workers.
These principles are fundamental to the panoply of daughter Directives, and to the legislation transposing them into domestic law.
Where possible, risk is to be avoided rather than reduced; means of collective protection are to be preferred to means of individual protection (such as PPE); and merely giving instructions to the workers is to be the last resort.
Another fundamental principle is the assessment of risk.
That principle is set out in article 6(3)(a), and is especially relevant to the present case.
It requires the employer to evaluate the risks to the safety and health of workers, and provides that Subsequent to this evaluation and as necessary, the preventive measures and the working and production methods implemented by the employer must: assure an improvement in the level of protection afforded to workers with regard to safety and health.
Finally, in relation to the Framework Directive, article 16(1) requires the Council to adopt individual Directives in the areas listed in the annex, including personal protective equipment.
In terms of article 16(3), the provisions of the Framework Directive are to apply in full to all the areas covered by the individual Directives, without prejudice to more stringent or specific provisions contained in those Directives.
The PPE Directive
One of the individual Directives, within the meaning of article 16 of the Framework Directive, is Directive 89/656/EEC of 30 November 1989 on the minimum health and safety requirements for the use by workers of personal protective equipment at the workplace (the PPE Directive).
It again has its legal basis in article 118a of the EEC Treaty.
Article 1 explains that the Directive lays down minimum requirements for PPE used by workers at work.
PPE is defined by article 2(1) as meaning all equipment designed to be worn or held by the worker to protect him against one or more hazards likely to endanger his safety and health at work, and any addition or accessory designed to meet this objective.
Article 3 lays down a general rule that Personal protective equipment shall be used when the risks cannot be avoided or sufficiently limited by technical means of collective protection or by measures, methods or procedures of work organization.
Article 6(1) requires member states to ensure that rules are established for the use of PPE, and refers to the annexes to the Directive as a guide.
Annex I includes the risk of slipping, falling over in a specimen risk survey table for the use of PPE.
Annex II sets out a non exhaustive guide list of items of PPE, including Removable spikes for ice, snow or slippery flooring.
Annex III sets out a non exhaustive guide list of activities and sectors of activity which may require the provision of PPE, including, under the category of weatherproof clothing, Work in the open air in rain and cold weather.
The Management Regulations
The Management Regulations are intended primarily to implement the Framework Directive.
Regulation 3(1) provides: Every employer shall make a suitable and sufficient assessment of (a) the risks to the health and safety of his employees to which they are exposed whilst they are at work; for the purpose of identifying the measures he needs to take to comply with the requirements and prohibitions imposed upon
him by or under the relevant statutory provisions
The statutory provisions referred to in regulation 3(1) are those contained in Part I of the Health and Safety at Work etc Act 1974 (the 1974 Act) and regulations made under section 15 of that Act: see section 53(1).
Both the Management Regulations and the PPE Regulations were made under section 15 of the 1974 Act.
Regulation 4 of the Management Regulations provides that where an employer implements any preventive and protective measures, he shall do so on the basis of the principles specified in Schedule 1 to the Regulations.
Those principles are derived from article 6(2) of the Framework Directive and are in almost identical terms.
In relation to civil liability, section 47(2) of the 1974 Act provided at the relevant time, prior to its amendment by section 69 of the Enterprise and Regulatory Reform Act 2013, that breach of a duty imposed by health and safety regulations (ie regulations made under section 15) shall, so far as it causes damage, be actionable except in so far as the regulations provide otherwise.
Regulation 22 of the Management Regulations, as it stood at the relevant time, provided that breach of a duty imposed on an employer by the Regulations did not confer a right of action in any civil proceedings in so far as the duty applied for the protection of a third party (ie someone other than an employee).
The Regulations therefore contained no bar to liability towards an employee, subject to the requirement imposed by section 47(2) that the breach of duty causes damage.
The importance of a suitable and sufficient risk assessment was explained by the Court of Appeal in the case of Allison v London Underground Ltd [2008] EWCA Civ 71; [2008] ICR 719.
Smith LJ observed at para 58 that insufficient judicial attention had been given to risk assessments in the years since the duty to conduct them was first introduced.
She suggested that that was because judges recognised that a failure to carry out a sufficient and suitable risk assessment was never the direct cause of an injury: the inadequacy of a risk assessment could only ever be an indirect cause.
Judicial decisions had tended to focus on the breach of duty which led directly to the injury.
But to focus on the adequacy of the precautions actually taken without first considering the adequacy of the risk assessment was, she suggested, putting the cart before the horse.
Risk assessments were meant to be an exercise by which the employer examined and evaluated all the risks entailed in his operations and took steps to remove or minimise those risks.
They should, she said, be a blueprint for action.
She added at para 59, cited by the Lord Ordinary in the present case, that the most logical way to approach a question as to the adequacy of the precautions taken by an employer was through a consideration of the suitability and sufficiency of the risk assessment.
We respectfully agree.
The application of the Management Regulations in the present case
As we have explained, the Extra Division did not consider closely whether Cordia had complied with their duties under the Management Regulations, or reach any conclusion on that question.
This court should however do so.
It is clear from the evidence that Miss Kennedy was exposed to a risk to her health and safety whilst she was at work, namely the risk of slipping and falling on snow and ice while travelling between clients houses.
That risk was obvious as a matter of common sense, and was in any event within Cordias knowledge, given their previous experience of the incidence of home carers suffering such accidents each year.
The risk was identified, in general terms, in the 2005 risk assessment.
Although it was not explicitly addressed in the 2010 risk assessment, risks of that general nature were again identified.
Considering the risk of slipping in accordance with the general principles set out in Schedule 1 to the Regulations, and adopted from article 6(2) of the Framework Directive, it could not be avoided: for wholly understandable reasons, it was Cordias position that the individuals who were dependent on the services of the home carers had to be visited if at all possible.
The risk therefore had to be evaluated and addressed in accordance with those principles, which set out a hierarchical order in which the measures necessary to protect health and safety should be considered.
Was there, then, a sufficient evaluation of the risk, and of the necessary measures? In relation to these matters, the Lord Ordinarys conclusion was based on findings which he was entitled to make on the evidence, and on a proper understanding of the law.
As he noted, the risk of a home carer slipping on snow or ice while at work, on the way to a clients home, was accepted to be likely a dead cert, as Miss Rodger put it.
It was also accepted that the injuries which might be sustained included fractures and head injuries, and were therefore potentially serious.
No consideration, however, was given to the possibility of individual protective measures, before relying on the measure of last resort, namely giving appropriate instructions to employees.
Even then, the instructions given, in the form of advice to wear appropriate footwear, provided no specification of what might be appropriate.
In these circumstances, the Lord Ordinary was entitled to conclude that there had been a breach of regulation 3(1).
The PPE Regulations
The PPE Regulations are intended to implement the PPE Directive.
Regulation 2(1) defines personal protective equipment (PPE) as meaning all equipment (including clothing affording protection against the weather) which is intended to be worn or held by a person at work and which protects him against one or more risks to his health or safety, and any addition or accessory designed to meet that objective.
We should record that no reliance has been placed in these proceedings on regulation 3(2), which excludes the application of the regulations in respect of PPE which is (d) personal protective equipment used for protection while travelling on a road within the meaning (in England and Wales) of section 192(1) of the Road Traffic Act 1988, and (in Scotland) of section 151 of the Roads (Scotland) Act 1984.
Regulation 4(1) is particularly relevant to the present case.
It provides: Every employer shall ensure that suitable personal protective equipment is provided to his employees who may be exposed to a risk to their health or safety while at work except where and to the extent that such risk has been adequately controlled by other means which are equally or more effective.
In terms of regulation 4(3), as amended, PPE is not suitable unless, amongst other things, (a) it is appropriate for the risk or risks involved, the conditions at the place where exposure to the risk may occur, and the period for which it is worn, and (d) so far as is practicable, it is effective to prevent or adequately control the risk or risks involved without increasing overall risk.
Regulation 6 imposes a further duty to carry out a risk assessment.
In terms of regulation 6(1), before choosing any PPE which by virtue of regulation 4 he is required to ensure is provided, an employer must ensure that an assessment is made to determine whether the PPE he intends will be provided is suitable.
In terms of article 6(2), the assessment must include, among other things: (a) an assessment of any risk or risks to health or safety which have not been avoided by other means; (b) the definition of the characteristics which personal protective equipment must have in order to be effective against the risks referred to in sub paragraph (a) of this paragraph, taking into account any risks which the equipment itself may create; (c) comparison of the characteristics of the personal protective equipment available with the characteristics referred to in sub paragraph (b) of this paragraph.
Finally, in relation to the provisions of the PPE Regulations, the Extra Division considered the Lord Ordinarys approach to be inconsistent with regulations 8 and 10.
Regulation 8 provides: Where an employer or self employed person is required, by virtue of regulation 4, to ensure personal protective equipment is provided, he shall also ensure that appropriate accommodation is provided for that personal protective equipment when it is not being used.
Regulation 10 provides, so far as material: (1) Every employer shall take all reasonable steps to ensure that any personal protective equipment provided to his employees by virtue of regulation 4(1) is properly used. (4) Every employee and self employed person who has been provided with personal protective equipment by virtue of regulation 4 shall take all reasonable steps to ensure that it is returned to the accommodation provided for it after use.
The application of the PPE Regulations in the present case
As we have explained, the Lord Ordinary was entitled to find that there had been a failure to carry out a suitable and sufficient risk assessment.
Such an assessment would have involved specific consideration of the possibility of individual protective measures to reduce the risk of home carers slipping and falling on snow and ice.
Had that possibility been considered, the Lord Ordinary found that a number of devices were available which would have been suitable to reduce the risk.
Since none was provided, it followed that there was a breach of regulation 4(1) of the PPE Regulations.
The Extra Division put forward a number of arguments in support of their conclusion that the Regulations had no application in the circumstances of the present case.
First, they pointed out that regulation 4(1) is concerned with risks to which employees are exposed while at work.
They inferred that the risks in question must be created or increased by the nature of the work.
Lord Brodie considered that this construction was consistent with article 1(1) of the Framework Directive, which described the object of the Directive as being to introduce measures to encourage improvements in the safety and health of workers at work.
Similarly, article 1(1) of the PPE Directive stated that the Directive laid down minimum requirements for PPE used by workers at work.
Reliance was also placed on the reference in article 2(1) to hazards likely to endanger his safety and health at work, and to the general rule set out in article 3, quoted in para 84 above.
Lord Brodie said that he took from this language that the concern of the PPE Regulations was the risks to which the worker was exposed at work which arose specifically from that work, as opposed to risks to which a worker might be exposed in the same way as members of the public.
It was in the former circumstances that the employer might be supposed to have the requisite knowledge and means to control the risk through the hierarchy of measures set out in article 6(2) of the Framework Directive and Schedule 1 to the Management Regulations.
We do not find these arguments persuasive.
An employee is at work, for the purposes of both the Management Regulations and the PPE Regulations, throughout the time when she is in the course of her employment: section 52(1)(b) of the 1974 Act.
The point is illustrated by the facts of Robb v Salamis (M & I) Ltd [2006] UKHL 56; 2007 SC (HL) 71; [2007] ICR 175.
Miss Kennedy in particular, as a home carer, was at work when she was travelling between the home of one client and that of another in order to provide them with care.
Indeed, travelling from one clients home to anothers was an integral part of her work.
The meaning of the words while at work in regulation 4(1) of the PPE Regulations (and of the equivalent words, whilst they are at work, in regulation 3(1) of the Management Regulations) is plain.
They mean that the employee must be exposed to the risk during the time when she is at work, that is to say, during the time when she is in the course of her employment.
They refer to the time when she is exposed to the risk, not to the cause of the risk.
That conclusion as to the construction of the Regulations would not be affected even if, as the Extra Division considered, the Directives were to be construed as having a narrower application.
As article 1(3) of the Framework Directive makes clear, the Directives do not exclude the adoption of national measures which provide greater protection.
The PPE Directive in particular lays down minimum requirements: article 1(1).
It has been noted in earlier cases that the domestic Regulations are in some respects of wider scope than the Directives (see, for example, Hide v The Steeplechase Co (Cheltenham) Ltd [2013] EWCA Civ 545; [2014] ICR 326).
But the Directives are not in any case confined to risks arising specifically from the nature of the activities which the worker carries out, as opposed to risks arising from the natural environment to which the worker is exposed while at work.
Article 5(1) of the Framework Directive requires the employer to ensure the safety and health of workers in every aspect related to the work.
Article 5(4) makes it clear that the employers obligations are not confined to risks arising from matters within his control: member states are permitted to exclude or limit employers responsibility only where occurrences are due to unusual and unforeseeable circumstances, beyond the employers control, or to exceptional events, the consequences of which could not have been avoided despite the exercise of all due care.
The obligation imposed by article 6(3)(a) applies to all risks to the safety and health of workers: Commission of the European Communities v Italian Republic (Case C 49/00) [2001] ECR I 8575, para 12.
As we have explained, Annex II to the PPE Directive includes Removable spikes for ice, snow in its non exhaustive guide list of items of PPE, while Annex III includes Work in the open air in rain and cold weather in its non exhaustive guide list of activities and sectors of activity which may require the provision of PPE.
As we have explained, the Extra Division also considered the Lord Ordinarys approach to be inconsistent with regulations 8 and 10 of the PPE Regulations.
We do not agree.
Regulation 8 requires the employer to ensure that appropriate accommodation is provided for the PPE when it is not being used.
Lord Brodie reasoned that, since the employer could only make accommodation available in places or situations where he could exercise control, regulation 8 suggested that the risks with which the Regulations were concerned were similarly confined.
With respect, that does not follow.
Protective clothing, for example, often has to be provided precisely because the employer cannot control the places or situations in which the clothing is to be worn (as, for example, in Henser Leather v Securicor Cash Services Ltd [2002] EWCA Civ 816 and Taylor v Chief Constable of Hampshire Police [2013] EWCA Civ 496; [2013] ICR 1150).
It also has to be borne in mind that there may be situations in which the most appropriate place for PPE to be accommodated when it is not in use will be in the employees home or vehicle.
In such a situation, the employer might fulfil its duty under regulation 8 by arranging with the employee for the PPE to be accommodated there.
So far as regulation 10 is concerned, it requires the employer to take all reasonable steps to ensure that any PPE provided to his employees is properly used, and is returned to the accommodation provided for it after use.
The Extra Division appear to have considered that it would be difficult to apply or enforce those obligations in situations where the risk was not created by the nature of the task carried out by the employee.
We do not share that concern.
Evidently, the implications of a duty to take all reasonable steps depend on the circumstances.
Where, for example, the PPE is intended to be used in situations where the employee cannot reasonably be subject to immediate supervision, the duty to take all reasonable steps will not require such supervision, but may be satisfied by less onerous measures, such as adequate training and instruction.
There remains the Extra Divisions conclusion that there was in any event no obligation to provide PPE in the present case, since on the Lord Ordinarys findings the risk of slipping was adequately controlled by other means which were equally or more effective, as required by regulation 4(1) of the PPE Regulations.
In that regard, the Extra Division considered that there was little evidence as to the likely efficacy of attachments over the range of underfoot conditions that Miss Kennedy could have been expected to encounter.
We are unable to reconcile the Extra Divisions conclusion with the Lord Ordinarys findings.
In relation to the exception to regulation 4(1), he noted that the onus was on the employer to establish that the exception was made out.
He found, in the first place, that the evidence about the precautions in place, in the form of training, was vague and unsatisfactory.
As he commented, that in itself showed that the precautions taken could not be regarded as adequate control by other means.
Furthermore, he accepted Mr Greaslys evidence about the availability of PPE which would reduce the risk.
His reasoning reflects the evidence and a proper understanding of the law.
The evidence established that anti slipping attachments were available at a modest cost; that they were used by other employers to address the risk of their employees slipping and falling on footpaths covered in snow and ice; that there was a body of research demonstrating that their use reduced the risk of slipping in wintry conditions; and that Mr Greaslys own experience was that the attachments which he had used had made a difference.
His evidence, which the Lord Ordinary accepted, was that, had Miss Kennedy worn such devices, on a balance of probabilities the risk of her falling on ice and snow would have been reduced and might have been eliminated.
As against that, Cordia had given no consideration to the matter.
In those circumstances, we can see no basis in the Lord Ordinarys findings, or in the evidence, for finding that the exception in regulation 4(1) had been made out.
Common law liability
It may be helpful at the outset to address a general point arising from the opinions of the Extra Division.
They contain numerous comments to the effect that it is unreasonable to suggest that Miss Kennedys employer should have provided her with special footwear designed to reduce the risk of her slipping and falling, since she was in the same position as any other member of the public travelling on foot in wintry conditions.
It was in that context that the Extra Division stressed the necessary basic questions identified by Lord President Dunedin in Morton v William Dixon Ltd, and referred to the Caparo test: see para 32 above.
One can understand the Extra Divisions concern that the law should not be excessively paternalistic.
Miss Kennedy was not, however, in the same position as an ordinary member of the public going about her own affairs.
It was her duty, as someone employed by Cordia as a home carer, to visit clients in their homes in different parts of the city on a freezing winters evening despite the hazardous conditions underfoot.
Unlike an ordinary member of the public, she could not choose to stay indoors and avoid the risk of slipping and falling on the snow and ice.
Unlike an ordinary member of the public, she could not choose where or when she went.
She could not keep to roads and pavements which had been cleared or treated.
She could not decide to avoid the untreated footpath leading to Mrs Craigs door.
Unlike an ordinary member of the public, she was obliged to act in accordance with the instructions given to her by her employers: employers who were able, and indeed obliged under statute, to consider the risks to her safety while she was at work and the means by which those risks might be reduced.
In those circumstances, to base ones view of the common law on the premise that Miss Kennedy was in all relevant respects in the same position as an ordinary member of the public is a mistake.
Furthermore, the common law relating to employers liability was not definitively stated by Lord Dunedin in Morton v William Dixon Ltd. As long ago as 1959, Lord Keith of Avonholm devoted his speech in Cavanagh v Ulster Weaving Co Ltd [1960] AC 145 to the clarification of Lord Dunedins dictum.
He observed that the ruling principle was that an employer was bound to take reasonable care for the safety of his workmen, and all other rules or formulas must be taken subject to that principle (a point which had earlier been made, in relation to Lord Dunedins dictum, by Lord Normand in Paris v Stepney Borough Council [1951] AC 367, 382 and by Lord Reid in Morris v West Hartlepool Steam Navigation Co Ltd [1956] AC 552, 571, amongst others).
He added that Lord Dunedin could not have intended to depart from or modify that fundamental principle.
Both in that case and in Brown v Rolls Royce Ltd 1960 SC (HL) 22; [1960] 1 WLR 210 Lord Keith emphasised that Lord Dunedin was laying down no proposition of law.
The context in which the common law of employers liability has to be applied has changed since 1909, when Morton v William Dixon Ltd was decided.
As Smith LJ observed in Threlfall v Kingston upon Hull City Council [2010] EWCA Civ 1147; [2011] ICR 209, para 35 (quoted by the Lord Ordinary in the present case), in more recent times it has become generally recognised that a reasonably prudent employer will conduct a risk assessment in connection with its operations so that it can take suitable precautions to avoid injury to its employees.
In many circumstances, as in those of the present case, a statutory duty to conduct such an assessment has been imposed.
The requirement to carry out such an assessment, whether statutory or not, forms the context in which the employer has to take precautions in the exercise of reasonable care for the safety of its employees.
That is because the whole point of a risk assessment is to identify whether the particular operation gives rise to any risk to safety and, if so, what is the extent of that risk, and what can and should be done to minimise or eradicate the risk.
The duty to carry out such an assessment is therefore, as Lord Walker of Gestingthorpe said in Fytche v Wincanton Logistics plc [2004] UKHL 31; [2004] ICR 975, para 49, logically anterior to determining what precautions a reasonable employer would have taken in order to fulfil his common law duty of care.
It follows that the employers duty is no longer confined to taking such precautions as are commonly taken or, as Lord Dunedin put it, such other precautions as are so obviously wanted that it would be folly in anyone to neglect to provide them.
A negligent omission can result from a failure to seek out knowledge of risks which are not in themselves obvious.
A less outdated formulation of the employers common law duty of care can be found in Baker v Quantum Clothing Group Ltd [2011] UKSC 17; [2011] 1 WLR 1003, para 9.
In the present case, Cordia were aware of a history of accidents each year due to their home carers slipping on snow and ice, and they were aware that the consequences of such accidents were potentially serious.
Quite apart from the duty to carry out a risk assessment, those circumstances were themselves sufficient to lead an employer taking reasonable care for the safety of its employees to inquire into possible means of reducing that risk.
Had such inquiries been made, or a proper risk assessment carried out, the implication of the evidence accepted by the Lord Ordinary is that Cordia would have learned that attachments were available, at a modest cost, which had been found to be effective in reducing the risk, and had been provided by a number of other employers to employees in a similar position.
In those circumstances, the Lord Ordinary was entitled to conclude that Cordia were negligent in failing to provide Miss Kennedy with such attachments.
It is necessary only to add that the familiar threefold test set out by Lord Bridge of Harwich in Caparo is not relevant in this context, as counsel for Cordia acknowledged.
That test is concerned with the imposition of a duty of care in novel circumstances.
There is no doubt that an employer owes a duty of care towards its employees.
The question in the present case is not whether a duty of care existed, but whether it was fulfilled.
Causation
It remains to consider the Extra Divisions conclusion that the Lord Ordinary was not entitled to find Cordia liable in the absence of any explicit finding that Miss Kennedys injury had been caused by any breach of duty on their part.
The question is not, of course, whether Miss Kennedys injury would necessarily have been prevented: as in other civil contexts, the matter has to be decided on a balance of probabilities.
The Lord Ordinary made no express findings in relation to causation, other than that he accepted Miss Kennedys evidence that she would have used anti slip attachments if they had been provided to her.
The question therefore is whether, in the light of the other findings which were made, the only reasonable inference which could be drawn was that Cordias breach of their duties caused or made a material contribution to Miss Kennedys accident.
So far as the Management Regulations are concerned, the breach of regulation 3(1) resulted in a failure to provide protective equipment, in breach of the PPE Regulations.
The issue of causation therefore turns on the consequences of the latter breach.
So far as the PPE Regulations are concerned, the finding that there was a breach of regulation 4(1) implies that there was a failure to ensure that suitable equipment was provided.
As we have explained, equipment is suitable only if so far as is practicable, it is effective to prevent or adequately control the risk or risks involved: regulation 4(3)(d).
It follows from that definition that the equipment need not necessarily prevent the risk, but it must, as a minimum, adequately control the risk so far as is practicable.
The concept of suitability thus contains a causal component.
The Regulations do not define adequately, but it can be inferred from the EU legislation (including the requirement under article 5(1) of the Framework Directive that the employer shall have a duty to ensure the safety and health of workers) that a risk will not be adequately controlled unless injury is highly unlikely.
Bearing in mind that the PPE Regulations should not be construed in such a way as to reduce pre existing levels of protection, that conclusion is also supported by case law on the previous domestic law.
For example, in the case of Rogers v George Blair & Co Ltd (1971) 11 KIR 391, which concerned the duty to provide suitable goggles under section 65 of the Factories Act 1965, Salmon LJ stated at p 395: The protection, to be suitable, need not make it impossible for the accident to happen, but it must make it highly unlikely.
It follows that where an employee has been injured as a result of being exposed to a risk against which she should have been protected by the provision of PPE, and it is established that she would have used PPE if it had been provided, it will normally be reasonable to infer that the failure to provide the PPE made a material contribution to the causation of the injury.
Such an inference is reasonable because the PPE which the employer failed to provide would, by definition, have prevented the risk or rendered injury highly unlikely, so far as practicable.
Such an inference would not, of course, be appropriate if the cause of the accident was unconnected with the risk against which the employee should have been protected.
In the present case, there was no suggestion that it would not have been practicable to provide equipment which was effective to prevent or adequately control the risk or risks involved, and the evidence of Mr Greasly was to the contrary effect.
In the circumstances, the only inference which could reasonably have been drawn was that the breach of regulation 4(1) had caused or materially contributed to the accident, and that Cordia were therefore liable to Miss Kennedy under the PPE Regulations.
If, on the other hand, the Lord Ordinarys finding of a breach of regulation 4(1) of the PPE Regulations is left out of account, and one focuses solely upon his finding of a breach of a common law duty of care, then the position in relation to causation is more problematical.
Given that the Lord Ordinary accepted Mr Greaslys evidence about the slip resistance of the attachments which he had experienced using, it might perhaps have been inferred as a matter of common sense that Cordias failure to provide such attachments was a material cause of Miss Kennedys accident (cf Drake v Harbour [2008] EWCA Civ 25, para 28).
It cannot, however, be said that the Lord Ordinary would necessarily have reached that conclusion.
His opinion does not contain any explicit consideration of the matter, or articulate any conclusion.
In those circumstances, it is difficult to maintain that there was a proper foundation for his decision that Cordia were liable in damages at common law.
That conclusion is however of no practical significance, given that Cordia are liable in any event under the 1992 Regulations.
Conclusion
For these reasons, we would allow the appeal.
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The appellant was employed as a home carer by the respondents.
Her work involved visiting clients in their homes and providing personal care.
On 18 December 2010, at around 8pm, she was required to visit an elderly lady.
There had been severe wintry conditions in central Scotland for several weeks, with snow and ice lying on the ground.
The appellant was driven to the house by a colleague, who parked her car close to a public footpath leading to the house.
The footpath was on a slope, and was covered with fresh snow overlying ice.
It had not been gritted or salted.
The appellant was wearing flat boots with ridged soles.
After taking a few steps, she slipped and fell, injuring her wrist.
The Lord Ordinary, relying on expert evidence, found the respondents liable for the appellants injury on the basis that they did not provide her with protective footwear.
The Lord Ordinarys decision was reversed by an Extra Division of the Inner House.
The appellants appeal to the Supreme Court concerned the admissibility of evidence given by the expert witness, and whether the respondents had been in breach of their statutory duties or negligent.
The Supreme Court unanimously allows Ms Kennedys appeal.
Lord Reed and Lord Hodge (with whom Lady Hale, Lord Wilson and Lord Toulson agree) give the judgment of the court.
Lord Reed and Lord Hodge provide guidance on the evidence of skilled witnesses under Scots law, addressing (i) admissibility [39 56]; (ii) the responsibilities of a partys legal team [57]; (iii) the courts policing of the performance of the experts duties [58 59]; and (iv) economy in litigation [60 61].
In the present case, the expert witness had experience and qualifications in health and safety [9].
His evidence on factual matters was relevant and admissible.
He had the necessary experience and qualifications to explain how anti slip attachments reduced the risk of slipping [62 63].
His evidence on health and safety practice was relevant [64].
Whilst some of his statements might appear to be inadmissible expressions of opinion on the respondents legal duties, an experienced judge could treat the statements as opinions as to health and safety practice, and make up his own mind on the legal questions [66].
The witnesss evidence provided a basis for the Lord Ordinary to determine whether the defenders had suitably and sufficiently evaluated the risks and identified the measures needed to protect health and safety [67].
The statutory case was based first on the Management of Health and Safety at Work Regulations 1999 (the Management Regulations), which implement Directive 89/391/EEC (the Framework Directive), and under regulation 3(1) require a suitable and sufficient risk assessment to be carried out [85 89], and secondly on the Personal Protective Equipment at Work Regulations 1992 (the PPE
Regulations), which implement Directive 89/656/EEC (the PPE Directive), and under regulation 4(1) require suitable personal protective equipment to be provided to employees who may be exposed to a risk to their health or safety while at work except to the extent that such risk has been adequately controlled by other means which are equally or more effective [93 97].
The most logical way to approach the issues was through a consideration of the suitability and sufficiency of the risk assessment [89].
The appellant was exposed to a risk of slipping and falling on snow and ice which was obvious and was within the knowledge of the respondents, who had previous experience of home carers suffering such accidents each year.
The risk had been identified in a 2005 assessment, and risks of that general nature were also identified in a 2010 assessment [90].
No consideration had been given to the possibility of personal protective equipment.
The precautions taken, in the form of advice to wear appropriate footwear, did not specify what might be appropriate.
The Lord Ordinary was entitled to conclude that there had been a breach of regulation 3(1) of the Management Regulations [92].
The appellant was at work whilst she was travelling between the home of one client and that of another in order to provide them with care.
Contrary to the view of the Extra Division, the words while at work in regulation 4(1) of the PPE Regulations, and whilst they are at work in regulation 3(1) of the Management Regulations, mean that the employee must be exposed to the risk during the time when she is at work.
They do not refer to the cause of the risk [100].
The Directives encompass not only risks arising specifically from the nature of the activities which the worker carries out, but also risks arising from the natural environment to which the worker is exposed whilst at work [102].
The Lord Ordinary found that anti slip attachments were available which would have been suitable to reduce the risk of home carers slipping and falling on ice, and that the risk was not adequately controlled by other means which were equally or more effective.
He was therefore entitled to conclude that there had been a breach of regulation 4(1) of the PPE Regulations [106].
In relation to the common law case, it was a mistake to view the appellant as being in the same position as an ordinary member of the public.
She was required to visit clients in their homes in hazardous weather conditions, whether or not the roads and footpaths in question had been treated.
Her employers were able (and obliged by statute) to consider the risks to her safety and the means by which those risks could be reduced [108].
A reasonably prudent employer would conduct a risk assessment so as to take suitable precautions to avoid injury to its employees.
The duty to carry out a risk assessment was logically anterior to determining what precautions a reasonable employer would take to fulfil its common law duty of care [110].
The respondents were aware of a history of accidents each year and were aware that the consequences were potentially serious.
Those circumstances were sufficient to require an employer taking reasonable care for the safety of its employees to inquire into possible means of reducing the risk.
Upon such inquiry, or the carrying out of a proper risk assessment, on the evidence accepted by the Lord Ordinary the respondents would have learnt that attachments were available at a modest cost to reduce the risk, and had been used by other employers in a similar position.
The Lord Ordinary was entitled to conclude that the respondents were negligent in failing to provide the appellant with such attachments [112 113].
The Lord Ordinary made no express findings as to causation, other than that the appellant would have used attachments if they had been provided.
The concept of suitability, under regulation 4(1) of the PPE Regulations, contained a causal component: the equipment must adequately control the risk so far as was practicable.
A risk would not be adequately controlled unless injury was highly unlikely [118].
In the circumstances, it was reasonable to infer that the failure to provide the anti slip attachments caused or materially contributed to the accident [119].
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This appeal is concerned with the obligations under the Equality Act 2010 of a charity which has been set up to provide housing in Stamford Hill in Hackney for a disadvantaged group, the observant Orthodox Jewish community comprising, in particular, the Haredi community.
The charity is the second respondent, Agudas Israel Housing Association Ltd (AIHA).
Its charitable objective is to make social housing available primarily for members of the Orthodox Jewish community.
Such is the surplus of demand for social housing from the members of that community, as compared with the properties which AIHA has available, that in practice all of AIHAs properties are allocated to members of the Orthodox Jewish community.
The first respondent is a local housing authority, Hackney London Borough Council (the Council).
AIHA makes properties available to the Council, as they become vacant, to house persons who have applied to the Council for social housing and who have been identified by the Council as having a priority need for such housing.
The properties provided by AIHA constitute about 1% of the stock of social housing available to the Council.
In relation to the Council, there is a large surplus of demand for social housing as compared with the supply available, so applicants for social housing can spend long periods waiting for suitable properties to become available.
The Council does not have any right to compel AIHA to take tenants who do not fall within the scope of AIHAs charitable objective and its selection criteria.
The Council therefore nominates applicants for social housing with AIHA who fall within those criteria.
In practice, this means that the Council only nominates members of the Orthodox Jewish community to be housed in property owned by AIHA.
The principal appellant (the appellant) is a single mother with four small children: twin daughters and two sons, both of whom have autism and one of whom is also a party to the proceedings.
She was on the Councils list for social housing and had been identified by the Council as having priority need to be housed in a larger property.
She is not from the Orthodox Jewish community and so has been unable to gain access to the properties let by AIHA.
While the appellant was waiting to be allocated a suitable property by the Council, large properties owned by AIHA which would have been suitable for her became vacant and were allocated by AIHA to families from the Orthodox Jewish community who had also been identified by the Council as having priority needs.
The appellant had to wait longer than them to be allocated a suitable property by the Council from its other social housing resources, as they became available.
The appellant commenced proceedings against the Council and AIHA in 2018 complaining that this involved unlawful conduct on their part in various respects.
In particular, she complains that there has been unlawful direct discrimination against her on grounds of her religion and on grounds of her race.
Her claim was dismissed by the Divisional Court (Lindblom LJ and Sir Kenneth Parker) in a judgment dated 4 February 2019: [2019] EWHC 139 (Admin); [2019] PTSR 985.
Her appeal was dismissed by the Court of Appeal (Lewison and King LJJ and Sir Stephen Richards) in a judgment dated 27 June 2019: [2019] EWCA Civ 1099; [2019] PTSR 2272.
In the course of the proceedings, the appellants claims have been somewhat
refined.
For the purposes of the appeal to this court, the issues to be decided relate to the lawfulness of the conduct of AIHA.
The Council accepts that if AIHA engaged in unlawful discrimination against the appellant by its allocation policy, then the Council cannot lawfully maintain its nomination arrangements with AIHA.
But there is no distinct legal claim against the Council which does not turn upon the underlying substantive question of whether AIHA acted lawfully or not.
Accordingly, in what follows, the focus is entirely on the claims against AIHA.
The relevant claims brought by the appellant against AIHA were based on the prohibition of direct discrimination on grounds of race or religion by any person in the provision of services, as contained in the Equality Act 2010 (the 2010 Act).
AIHA relied on defences set out in section 158 and section 193 of the 2010 Act.
Section 158 provides for an exemption from unlawfulness for positive action to address needs or disadvantages experienced by persons which are connected to a protected characteristic.
Section 193 provides an exemption for the activities of charities under defined conditions.
AIHA accepts that it distinguishes between applicants for its housing on the grounds of religion and that, subject to the statutory defences, this would constitute unlawful direct discrimination contrary to the relevant provisions of the 2010 Act.
AIHA denies that it discriminates between applicants on grounds of their race.
Mr Ian Wise QC, for the appellant, in his skeleton argument for the hearing in the Divisional Court, indicated to the court that since discrimination on grounds of religion was admitted by AIHA, it might be unnecessary to decide if AIHA discriminated on grounds of race.
The Divisional Court took Mr Wise at his word and focused its analysis on the appellants claim of unlawful discrimination on grounds of religion.
It made no finding as to whether there was discrimination on grounds of race. (This is subject to one narrow point which the Divisional Court did deal with, which is no longer a live issue between the parties: the court dealt with a submission on the part of the appellant to the effect that AIHA was not entitled to rely on a defence under section 193 of the 2010 Act by reason of section 194(2) of that Act.
Section 194(2) provides that a charity may not avail itself of a defence under section 193 if it discriminates on grounds of race, in the sense of colour.
The Divisional Court found that AIHA does not discriminate between applicants for housing on grounds of colour and by the time of the hearings in the Court of Appeal and in this court this was common ground.)
Although the Divisional Court had been invited by Mr Wise not to deal with the allegation of discrimination on grounds of race if it was unnecessary to do so and hence did not make findings about that part of the case, on the appellants appeal to the Court of Appeal this was made into a point of criticism.
Further, for the first time in his reply skeleton argument in the Court of Appeal, Mr Wise referred to Council Directive 2000/43/EC of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin (the Race Directive).
At that stage, the Race Directive was relied on as a potential aid to interpretation of section 193 of the 2010 Act.
This was not on the footing that the appellant had rights under it as against AIHA on the findings made by the Divisional Court (which involved only discrimination on grounds of religion, which does not fall within the scope of the Race Directive), but on the basis that others might have rights under the Directive where there was discrimination on grounds of race and that these rights ought to be reflected in the interpretation of section 193, by virtue of the principle of sympathetic construction of national legislation articulated by the European Court of Justice (now the Court of Justice of the European Union: I will refer to it as the CJEU in both phases of its existence) in Marleasing SA v La Comercial Internacional De Alimentacion SA (Case C 106/89) [1990] ECR I 4135; [1992] 1 CMLR 305 (Marleasing).
The Court of Appeal rejected this argument (para 54).
Since the appellant could not show that she had suffered discrimination on grounds of race within the scope of the Race Directive, she could not benefit from the special interpretive obligation arising from the Marleasing case.
Similarly, since the appellant had not shown that her case fell within the scope of EU law, she could not rely on the right against discrimination set out in article 21 of the Charter of Fundamental Rights of the European Union (the CFR).
On the appeal to this court, the appellants position shifted again.
At the hearing, Mr Wise applied to the court for permission to introduce a new argument for the appellant.
According to this argument, Mr Wise invites the court to find that the appellant was in fact affected by direct discrimination by AIHA on grounds of race or ethnic origin, contrary to the Race Directive.
He submits that the appellant was subject to direct discrimination on grounds of ethnic origin which was the same as that found by this court, by a majority, to have occurred in R (E) v Governing Body of JFS (United Synagogue intervening) [2009] UKSC 15; [2010] 2 AC 728 (JFS) in the context of the application of domestic anti discrimination legislation, and that this means that she must be taken to have been subjected to direct discrimination on grounds of race or ethnic origin for the purposes of the Race Directive.
On that basis, Mr Wise submits that either section 193 must be read so as to be compatible with the appellants rights under the Race Directive in accordance with the Marleasing principle of sympathetic construction or, if that cannot be done, it should be disapplied altogether by virtue of the principle of direct effect of EU law.
It is very unusual for this court to grant permission for a wholly new argument to be introduced at this stage.
Moreover, since it is a new argument based on a legal instrument (the Race Directive) which was not pleaded by the appellant in her grounds of claim, Mr Wise should have made an application to amend those grounds, which (if allowed) would also have led to AIHA and the Council having the right to amend their grounds of defence to meet the new claim.
As it is, the court was not presented by Mr Wise with any formal or clear statement of the new claim which he wished to introduce.
This was highly unsatisfactory.
It only emerged from the answer given by Mr Wise to a question by the court during his submissions in reply that this new case for the appellant did not involve any complaint of indirect discrimination by AIHA on grounds of race or ethnic origin.
Also, the court did not have the benefit of a formally pleaded defence to the appellants new claim based on the Race Directive, which meant that possible defences had to be explored in submissions without a clear and proper focus.
Also, to state the obvious, the court did not have the benefit of an examination of the new claim and those defences by the lower courts.
Furthermore, the appellant should have made a formal application for permission to amend her grounds of claim and to raise the new argument in this court well in advance, rather than leaving it to be raised at the hearing, thereby taking up time which was set aside for the substantive arguments on the appeal.
Despite these points, however, Mr Sam Grodzinski QC for AIHA made no strong objection to the introduction of this new case for the appellant at this late stage.
He was confident that he was in a position to meet it without difficulty.
Mr Matt Hutchings QC for the Council likewise made no strong objection.
Having regard to their position, the court gave provisional permission at the hearing for Mr Wise to develop the new case for the appellant.
The court reserved its position as to the possibility of refusing permission if, after hearing how the argument was developed, it considered that it had been advanced in a way which was unfair to AIHA or the Council.
In the event, given the narrow basis on which Mr Wise sought to develop the new claim based on the Race Directive, the court considers that it is appropriate to confirm the permission given provisionally at the hearing.
I will, therefore, address the appellants new claim based on the Race Directive along with her claim based on the 2010 Act.
Two final matters should be mentioned in this introduction.
Although at an early stage in the proceedings AIHA disputed that it carries out functions which have a sufficient public element to make it amenable to judicial review, it now accepts that it does.
But AIHA does not accept that it is a public authority by virtue of carrying out functions of a public nature within the meaning of section 6(3)(b) of the Human Rights Act 1998 (the HRA).
Accordingly, AIHA does not accept that it has any obligation arising under section 6(1) of the HRA to act compatibly with Convention rights of the appellant or other applicants for housing.
In her pleaded case and in her submissions in the Divisional Court and in the Court of Appeal, the appellant did not assert any claim against AIHA under section 6(1) of the HRA on the basis that it was a public authority within the meaning of that Act, and no such issue was included in the agreed Statement of Facts and Issues for the appeal.
In his printed case for the appeal in this court, Mr Wise did include an argument to that effect.
However, in the event he did not make any application for permission to introduce it, so it is not necessary to say anything about it.
The EU legislative context
The Race Directive enshrines the principle of equal treatment, described in article 2 as meaning that there shall be no direct or indirect discrimination based on racial or ethnic origin.
Article 3 provides that the Directive applies to to all persons, as regards both the public and private sectors in relation to a number of matters, including at article 3(1)(h): access to and supply of goods and services which are available to the public, including housing.
Recital (17) to the Race Directive states: The prohibition of discrimination should be without prejudice to the maintenance or adoption of measures intended to prevent or compensate for disadvantages suffered by a group of persons of a particular racial or ethnic origin, and such measures may permit organisations of persons of a particular racial or ethnic origin where their main object is the promotion of the special needs of those persons.
Article 5 makes provision to allow for the objective set out in recital (17), as follows: With a view to ensuring full equality in practice, the principle of equal treatment shall not prevent any member state from maintaining or adopting specific measures to prevent or compensate for disadvantages linked to racial or ethnic origin.
Article 21 of the CFR prohibits any discrimination based on a number of grounds, including race, colour, ethnic or social origin and religion or belief.
Article 51 of the CFR states that it applies to member states only when they are implementing Union law.
The domestic legislative context
The 2010 Act makes various forms of discrimination unlawful.
Direct discrimination is defined by section 13(1) of the Act: 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.
The relevant protected characteristics are set out in section 4.
They include race and religion or belief.
The meaning of these concepts is explained in sections 9 and 10, respectively.
Race includes colour, nationality and ethnic or national origins.
By contrast with the position in relation to indirect discrimination (defined in section 19 of the 2010 Act), there is no general defence of justification in relation to direct discrimination on the basis of these protected characteristics; but so far as is relevant for present purposes, particular defences are set out in sections 158 and 193.
Service providers and persons exercising public functions are prohibited from discriminating, whether directly or indirectly: section 29.
Section 158 is headed Positive action: general.
So far as relevant, it provides: (1) This section applies if a person (P) reasonably thinks that (a) persons who share a protected characteristic suffer a disadvantage connected to the characteristic, (b) persons who share a protected characteristic have needs that are different from the needs of persons who do not share it, or (c) participation in an activity by persons who share a protected characteristic is disproportionately low. (2) This Act does not prohibit P from taking any action which is a proportionate means of achieving the aim of (a) enabling or encouraging persons who share the protected characteristic to overcome or minimise that disadvantage, (b) meeting those needs, or (c) enabling or encouraging persons who share the protected characteristic to participate in that activity. (4) This section does not apply to (a) action within section 159(3)
Section 159 is headed Positive action: recruitment and promotion.
It provides a defence where action is taken on the grounds of a protected characteristic to overcome disadvantages a person with that characteristic may face in obtaining employment or promotion.
Section 159(3) provides: That action is treating a person (A) more favourably in connection with recruitment or promotion than another person (B) because A has the protected characteristic but B does not.
Section 193 provides: (1) A person does not contravene this Act only by restricting the provision of benefits to persons who share a protected characteristic if the person acts in pursuance of a charitable (a) instrument, and the provision of the benefits is within subsection (b) (2). (2) The provision of benefits is within this subsection if it is a proportionate means of achieving a legitimate (a) aim, or (b) for a disadvantage characteristic. for the purpose of preventing or compensating the protected linked
The Equality and Human Rights Commission (EHRC) has the power to issue codes of guidance.
The court must take any such code into account in any way in which it appears to the court to be relevant: section 15(4)(b) of the Equality Act 2006.
Section 3(1) of the HRA states that [s]o far as it is possible to do so, primary legislation must be read and given effect in a way which is compatible with the Convention rights.
The Convention rights are those set out in the European Convention on Human Rights (the ECHR), as contained in Schedule 1 to the HRA.
They include article 8 (right to respect for private and family life and the home), article 9 (freedom of thought, conscience and religion) and article 14 (prohibition 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.
In this case, AIHA relies on defences under section 158, section 193(2)(a) and section 193(2)(b) of the 2010 Act.
Success on any of these will mean that the appellants claim fails.
Factual background
The Council is a local housing authority with statutory functions in relation to the allocation of social housing.
As well as allocating its own stock of social housing, it also discharges its functions by nominating applicants for social housing to properties owned by independent housing associations such as AIHA.
The Council assesses applications for social housing using a points based system which is based on need.
AIHA is a charitable housing association, established in 1986.
In order to qualify as a charity, its activities must be for the public benefit: see section 4 of the Charities Act 2011 (the Charities Act).
It is registered with the Regulator of Social Housing of England as a private registered provider of social housing under Part 2 of the Housing and Regeneration Act 2008.
It owns property in Hackney, principally in parts of the borough which are inhabited by members of the Orthodox Jewish community.
AIHAs charitable objects are set out in its rules, which state: A2 The Association is formed for the benefit of the community.
Its object shall be to carry on for the benefit of the community (and primarily for the benefit of the Orthodox Jewish Community): A2.1 the business of providing housing, accommodation, and assistance to help house people and associated facilities and amenities for poor people or for the relief of the aged, disabled, handicapped (whether physically or mentally) or chronically sick people.
A2.2 any other charitable object that can be carried out by an Industrial and Provident Society registered as a social landlord with the Corporation.
AIHA has its own Allocations and Lettings Manual separate from the Councils allocation scheme.
The manual states that AIHAs primary aim is to house members of the Orthodox Jewish Community.
AIHA operates its own waiting list for its properties, but pursuant to an agreement with the Council the Council has nomination rights in respect of a significant proportion of properties owned by AIHA which become available for occupation.
AIHAs criteria for selection are similar to those used by the Council, and are likewise based on need.
AIHA owns 470 properties in Hackney.
They amount to 1% of the overall number of 47,000 units of general social needs housing in the Councils area.
AIHAs lettings each year are on average less than 1% of social housing lettings arranged by the Council.
The Orthodox Jewish community tend to have large families and so have a greater need, as a community, for larger properties, including those with four bedrooms.
AIHAs stock of social housing has been developed with that in mind, so it has a proportionately greater share of the stock of larger properties available for social housing in Hackney.
Applicants nominated by the Council for a property owned by AIHA also have to satisfy AIHAs own selection criteria.
Properties available for social housing are advertised on a portal on the Councils website.
The advertisements on the portal in respect of properties owned by AIHA reflect AIHAs selection criteria under current market conditions and state: Consideration only to the Orthodox Jewish community.
The appellants two sons with autism, now aged nine and five, display very challenging behaviour.
In July 2018, the appellant gave birth to twin girls.
The appellant is not a member of the Orthodox Jewish community.
She grew up and lives in Hackney and embraces the diversity of the local community.
The family were assessed by the Council as falling within the group having the highest need for re housing under its scheme for the allocation of social housing in the borough.
In 2017 the appellant brought judicial review proceedings against the Council, in which she claimed that she and her sons were housed in inadequate accommodation.
In consequence, the appellant and her sons were re housed in better temporary accommodation.
The proceedings were settled in October 2017 on terms which included the Council agreeing to offer the appellant its next available unit of suitable social housing.
Following the birth of her daughters, the appellant was moved to the offer list for a four bedroom property.
Despite the Councils recognition of the familys need for suitable social housing, no offer of a suitable property was made by the time the case came before the Divisional Court.
During the same period, at least six four bedroom properties owned by AIHA became available and were advertised by the Council.
However, because of AIHAs practice of only letting its properties to members of the Orthodox Jewish community, the Council did not put the appellant forward for consideration; nor did the appellant apply directly to AIHA.
Fortunately, between the hearing in the Divisional Court and the hearing in the Court of Appeal another four bedroom property became available to the Council and was allocated to the appellant.
Accordingly, the appellant and her family are now housed in suitable accommodation.
Extensive evidence about the problems faced by the Orthodox Jewish community in Hackney, and the need for it to gather together in Stamford Hill, was reviewed by the Divisional Court.
It made a number of important findings relevant for the discussion below which are not challenged on this appeal: (1) Social housing is under severe pressure in the Councils area, with demand far exceeding supply (para 19). (2) Although the Jewish population in the United Kingdom is contracting and the average age is increasing, the strictly Orthodox Jewish Haredi community is growing at 4% per year, with 34% of Jews in Hackney aged 14 or under.
Strictly Orthodox Jews are more likely to experience poverty and deprivation than other mainstream Jewish families.
Jewish households in Hackney (which are comprised mainly of Haredi Jews) are much more likely to be in socially rented accommodation (35%) than the general Jewish population (9%). 25% of them live in overcrowded conditions, compared to 8% of the general Jewish population.
Most of the Haredi community are unwilling to live outside Stamford Hill, where AIHAs properties are located, and so tend not to bid for social housing elsewhere in the Councils area.
Nearly all of the Haredi community in social housing within Hackney are tenants of AIHA.
Roughly 2% of applicants for social housing in Hackney self identify as Orthodox Jews (para 31). (3) The Orthodox Jewish community has a particular need for larger properties because of their large family sizes.
Self identifying Orthodox Jews represent an increasing proportion of housing applicants as the number of bedrooms increases.
Although they are only a small proportion of the families seeking one , two or three bedroom properties, in May 2018 they were 66 out of 459 families wanting four bedrooms, 32 out of 64 wanting five bedrooms, and 29 out of 35 wanting six bedrooms (para 32). (4) Witnesses emphasised the fact that Orthodox Judaism is not a lifestyle but a way of life, and that living as a community is a central part of this.
Members of the Orthodox Jewish community need to remain proximate to that community, even if it means foregoing improved living conditions, bigger houses, or proper housing at all (para 34).
The Divisional Court made these comments about the community (para 64): there are very high levels of poverty and deprivation, with associated low levels of home ownership.
On the evidence before us, we are satisfied that there is a strong correlation between the evidenced poverty and deprivation and the religion.
This is explained in part by the way of life, especially affecting educational and employment opportunities, which is characteristic of the Orthodox Jewish community. (5) The Orthodox Jewish community is subjected to anti Semitism, including racially aggravated harassment and assaults, criminal damage to property and verbal abuse (para 33).
Volunteer security patrols in Stamford Hill, known as the Shomrim, provide physical reassurance and help to deter anti Semitic incidents, thereby fostering a sense of security within the community.
The Divisional Court referred to widespread and increasing overt anti Semitism in society and an increase in reported anti Semitic crime; and to the way in which the traditional Orthodox Jewish clothing worn by the Haredi community heightens the exposure to anti Semitism and to related criminality (para 66).
The court found that the community had a need to live together in relatively close proximity with a view to reducing apprehension and anxiety regarding personal security, anti Semitic abuse and crime (para 67). (6) The Orthodox Jewish community face prejudice when trying to rent properties in the private sector, on account of their appearance, language and religion (para 66). (7) The properties owned by AIHA are designed specifically for Orthodox Jewish religious needs whereby the tenants are able to follow the tenets of their faith and the rules relating to the Sabbath.
AIHA provides facilities such as kosher kitchens, an absence of television aerials, Shabbos locks on the estate, and mezuzahs on communal doors.
The Divisional Court acknowledged that these features are normative, rather than essential.
At para 69 the court said, we would accept that, standing alone, they would be unlikely to be sufficient to justify the challenged discrimination.
However, we do not believe that they should be entirely discounted. (8) The Orthodox Jewish community has a particular need to live close to community facilities, such as schools, synagogues and suitable shops (paras 34 and 68). (9) The Orthodox Jewish community in Hackney faces particular problems of overcrowding.
The Divisional Court said (para 70): there was evidence in data from 2015 which showed that the average number of occupants of Orthodox Jewish households in Stamford Hill was 6.3, in contrast to the average for the whole of Hackney of 2.43, and for the UK of 2.38.
In our view, this evidence demonstrates a particular need in the Orthodox Jewish community for property, which is likely to be in very short supply, that would accommodate substantially larger families, and that would significantly reduce the particular and intensified risk to such families of eviction from overcrowded accommodation.
The evidence shows that, if a situation arose in which AIHA had a surplus of properties as against the needs of the Orthodox Jewish community for social housing, it would allocate the surplus properties to families from outside that community.
It is in this sense that AIHA has as its charitable objective and the purpose of its allocation policy the aim of primarily meeting the needs of the Orthodox Jewish community.
However, there is no surplus of supply of properties as against the needs of that community at present, nor is there likely to be one in the foreseeable future.
As regards the question whether AIHA discriminates on grounds of race, although the Divisional Court made no relevant finding for present purposes, in the context of its discussion of section 194(2) of the 2010 Act (at para 86) it accepted the evidence of the principal witness for AIHA, as follows: In her evidence Mrs Cymerman Symons MBE stated that AIHA did not discriminate according to ethnic background.
AIHAs housing applicants come from a variety of ethnic backgrounds.
She continued at para 28 of her second witness statement: Our sole criterion is that the applicants are of the Orthodox Jewish faith.
This is certainly not an issue of race; it is purely about religious observance.
We respond to people from many ethnic backgrounds.
The common factor is a commitment to the Orthodox Jewish way of life.
This evidence has not been challenged.
It is corroborated by the relevant documents produced by AIHA.
The application form used by AIHA simply asks, in a box marked Personal circumstances, Would you describe yourself as Orthodox Jewish, strictly observant of Shabbath and Kashrut? and for details of which synagogue is attended and the school attended by children of the family.
The application pack also includes a section for provision of details of ethnic origin which is stated to be solely for monitoring purposes, as is common form, and to assist AIHA in the development of its equal opportunities policy.
The judgment of the Divisional Court
The Divisional Court considered section 158 and section 193 of the 2010 Act in turn, in the light of the findings it had made.
As to section 158, the court reasoned in a series of steps which are not now disputed, as follows: (i) The disadvantages faced by Orthodox Jews are real and substantial; (ii) Those disadvantages are connected with the religion of Orthodox Judaism; (iii) The needs of members of the Orthodox Jewish community are different from those who are not members of it.
They have a relevant need to live relatively close to each other, with a view to reducing apprehension and anxiety regarding personal security, anti Semitic abuse and crime.
They also have a need for community facilities, including schools, synagogues and shops, as well as special features of accommodation.
They also have a need for property that will accommodate substantially larger families; and (iv) AIHAs arrangements for allocating housing, which place Orthodox Jews in a primary position, enable them both to avoid the disadvantages and to meet the needs referred to.
The remaining question in relation to section 158 was whether AIHAs arrangements for allocating housing enabled members of the Orthodox Jewish community to avoid the identified disadvantages and meet the identified needs in a proportionate manner.
On this, the Divisional Court directed itself by reference to the guidance given by Baroness Hale of Richmond in Aster Communities Ltd (formerly Flourish Homes Ltd) v Akerman Livingstone [2015] UKSC 15; [2015] AC 1399, at para 28.
The case concerned a complaint of discrimination on grounds of disability, contrary to section 15 of the 2010 Act.
Under section 15(1)(b), a person does not act unlawfully if he can show that the treatment in question is a proportionate means of achieving a legitimate aim: this is similar to the defence in section 158(2) and identical to the defence in section 193(2)(a) of the 2010 Act, which are at issue in the present appeal.
Baroness Hale explained that the concept of proportionality as used in domestic anti discrimination law is derived from EU law.
It requires application of a structured approach in relation to the measure in question, involving four stages: First, is the objective sufficiently important to justify limiting a fundamental right? Secondly, is the measure rationally connected to the objective? Thirdly, are the means chosen no more than is necessary to accomplish the objective? And, fourth: As the Court of Justice of the European Communities put it in R v Minister for Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR 1 4023, para 13, the disadvantages caused must not be disproportionate to the aims pursued: or as Lord Reed JSC put it in the Bank Mellat case [Bank Mellat v HM Treasury (No 2)] [2014] AC 700, 791, para 74, 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.
The Divisional Court observed that this approach to the question of proportionality in section 158 was reinforced by the explanatory notes for that provision and the relevant guidance given in the statutory code of practice promulgated by the EHRC (the EHRC code of practice).
The explanatory notes to section 158 state (paragraph 512): The extent to which it is proportionate to take positive action measures which may result in people not having the relevant characteristic being treated less favourably will depend, among other things, on the seriousness of the relevant disadvantage, the extremity of need or under representation and the availability of other means of countering them.
This provision will need to be interpreted in accordance with European law which limits the extent to which the kind of action it permits will be allowed.
Paragraph 10.22 of the EHRC code of practice states: The seriousness of the relevant disadvantage, the degree to which the need is different and the extent of the low participation in the particular activity will need to be balanced against the impact of the action on other protected groups, and the relative disadvantage, need or participation of these groups.
At paragraph 5.32, the EHRC code of practice also refers to the derivation in EU law of the concept of proportionality in section 158.
Applying this approach, the Divisional Court held that the allocation policy of AIHA was a proportionate means to achieve aims falling within section 158(2)(a) and (b).
At para 73 the court rejected the submission of Mr Wise that AIHAs allocation policy was to be regarded as an illegitimate and disproportionate blanket prohibition against letting properties to persons from outside the Orthodox Jewish community.
The court referred to the fact that the policy allowed for allocation to persons from outside the community, should circumstances permit.
It said: AIHAs charitable objectives permit and oblige it to accord primary benefit to members of the Orthodox Jewish community.
There is no unqualified restriction of benefits to members of that community, nor absolute exclusion of non members.
AIHA currently has over 700 applicants on its waiting list.
It has a total housing stock of 470 homes in Hackney, but the crucial consideration in this context is that, over the seven year period from 2011 to 2018, only 89 general needs properties became available for allocation, a marginal availability of only about 12 to 13 properties each year, with a huge imbalance between supply and demand.
There is no evidence that that imbalance is likely to decrease markedly in the foreseeable future.
At the same time there is an acute imbalance between supply and demand for social housing in Hackney generally.
About 13,000 households are currently registered under [the Councils] scheme for the allocation of social housing.
In 2016, [the Council] allocated only 1,229 properties for social housing.
Again, there is no evidence that the imbalance is likely to decrease markedly in the foreseeable future.
The Divisional Court found (para 74) that the reason why, in practice, AIHA allocated its properties to members of the Orthodox Jewish community was clear.
Given the limited availability to, and pressing demand from, that community, if AIHA were to allocate any of its properties to non members, it would seriously dilute the number of properties available to Orthodox Jews, and would fundamentally undermine its charitable objective of giving primary position, in a meaningful, as distinct from formalistic, sense to Orthodox Jews.
At para 75 the Divisional Court said: We also conclude that AIHAs arrangements are justified as proportionate under section 158.
For the reasons we have already given, the disadvantages and needs of the Orthodox Jewish community are many and compelling.
They are also in many instances very closely related to the matter of housing accommodation.
We recognise the needs of other applicants for social housing, but, in the particular market conditions to which we have referred, AIHAs arrangements are proportionate in addressing the needs and disadvantages of the Orthodox Jewish community, notwithstanding the fact that in those market conditions, a non member cannot realistically expect AIHA to allocate to him or her any property that becomes available.
At para 76 the court referred back to its finding that members of the Orthodox Jewish community in Hackney have a particular need for larger accommodation and observed that given the acute scarcity of such accommodation, it is readily understandable, and proportionate, that such properties are allocated to members of the Orthodox Jewish community who have need of the accommodation.
At para 77 the court rejected a further submission by Mr Wise, that AIHAs allocation policy constituted unlawful positive discrimination rather than legitimate positive action falling within section 158.
For this distinction, Mr Wise referred to paragraph 10.7 of the EHRC code of practice.
The court pointed out that the EHRC code of practice stated that positive action in favour of a preferred group might well cause disadvantage to persons outside that group, but that the advantages to the preferred group might well outweigh the disadvantages, and thus be proportionate.
The court added: In this case it is self evident that the allocation of particular accommodation to a member of the Orthodox Jewish community may well disadvantage an individual non member who may have a priority need for such accommodation.
However, the relevant question, which we have dealt with above, is whether the arrangements, viewed as a whole and in the light of relevant market circumstances, address the disadvantages and needs of the Orthodox Jewish community in a manner that outweighs the disadvantage to non members of that community.
The Divisional Court emphasised, at para 78, that its conclusion was reached in the context of AIHA being a small provider of social housing with only 1% of the general needs housing in the Councils area and its lettings running at less than 1% of social housing lettings in the Councils area each year (see para 29 above).
The court said that it could not be assumed that the same conclusion would be reached in the case of a service provider with a large share of the available properties.
At paras 79 to 83 the court addressed a further argument of Mr Wise, in which he sought to draw an analogy with the judgment of the CJEU in Briheche v Ministre de lIntrieur (Case C 319/03) [2004] ECR I 8807; [2005] 1 CMLR 4 (Briheche).
That case was concerned with application of Council Directive 76/207/EEC of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions (the Equal Treatment Directive).
Article 2(4) of that Directive allows a member state to engage in forms of positive discrimination in the area of employment in relation to recruitment and promotion, but in Briheche and other authorities the CJEU laid down restrictive conditions for the application of that provision.
I discuss Briheche and the Equal Treatment Directive below.
Here it suffices to say that the Divisional Court held (para 83) that the text, context and object of article 2(4) of that Directive were different from section 158 of the 2010 Act and that Briheche does not provide relevant guidance in relation to the application of section 158 or section 193 of the 2010 Act.
As regards section 193 of the 2010 Act, the Divisional Court reasoned as follows: (1) AIHA did not discriminate on the ground of colour (hence section 194(2) of the 2010 Act had no application); (2) The specific protected characteristic, on the basis of which AIHA discriminated, was the religion of Orthodox Judaism; (3) AIHAs arrangements for allocating housing were authorised by or in line with its charitable instrument; and were therefore made in pursuance of it within the meaning of section 193(1)(a) (paras 93 to 101).
This is now common ground; (4) For the same reasons as underpinned its conclusion in relation to section 158, AIHAs arrangements were a proportionate means of achieving a legitimate aim (section 193(2)(a)) and were for the purpose of preventing or compensating for disadvantages linked to the protected characteristic (section 193(2)(b)) (paras 103 and 104).
The judgment of the Court of Appeal
In the Court of Appeal, Mr Wise for the appellant submitted that the Divisional Court had erred in its proportionality assessment under section 158 and section 193 of the 2010 Act.
Since, as was then common ground, the express requirements of section 193(2)(b) were satisfied and that provision is capable of providing a complete defence for AIHA and does not in terms depend upon a proportionality assessment, a new question arose for debate which had not been considered by the Divisional Court, namely whether section 193(2)(b) contained any requirement of proportionality.
Mr Wise submitted that it did, for three reasons: (i) in the present context, article 14 of the ECHR, read with article 8 or article 9 of the ECHR, means that any positive action which involves discrimination has to be justified as being proportionate to some legitimate aim, and section 3(1) of the HRA means that section 193(2)(b) must be read and given effect in a way which is compatible with the appellants rights and those of her family under article 14; (ii) in some cases covered by section 193(2)(b) the Race Directive would apply; in those cases a proportionality requirement would be applicable as a matter of general EU law; and as a result of the interpretive obligation set out in Marleasing, section 193(2)(b) should be construed as containing such a requirement; and (iii) to interpret section 193(2)(b) as not containing a proportionality requirement would produce absurd consequences.
Lewison LJ gave the substantive judgment, with which King LJ and Sir Stephen Richards agreed.
Lewison LJ summarised the findings and analysis of the Divisional Court.
At paras 34 to 62 he rejected Mr Wises submissions for the implication of a proportionality test into section 193(2)(b).
This meant that the appellants appeal could not succeed.
As to Mr Wises submission (i), Lewison LJ held by reference to domestic authority including, in particular, R (H) v Ealing London Borough Council [2017] EWCA Civ 1127; [2018] PTSR 541, that AIHAs allocation policy did not fall within the ambit of article 8 of the ECHR, nor did it fall within the ambit of article 9, so article 14 had no application (paras 44 52).
Even if article 14 did apply, it was not possible to read a proportionality requirement into section 193(2)(b) by virtue of section 3(1) of the HRA.
Section 193(2)(b) had to be read in the context of the scheme of the 2010 Act and in light of its juxtaposition with section 193(2)(a).
To read a proportionality requirement into sub paragraph (b) of section 193(2) would make it redundant and hence, in effect, would disapply it, which would not be permissible under section 3(1) of the HRA.
This was explained at para 53, where Lewison LJ said: The reason is a simple one.
Section 193(2)(a) permits discrimination where it is a proportionate means of achieving a legitimate aim.
Section 193(2)(b) does not contain the proportionality assessment required under section 193(2)(a).
It is a necessary part of Mr Wises argument in support of the imposition of a proportionality requirement in section 193(2)(b) that preventing or compensating for a disadvantage linked to a protected characteristic might not be a legitimate aim.
If it were a legitimate aim, it would already be covered by section 193(2)(a).
So section 193(2)(b), read as Mr Wise proposes, would be entirely redundant.
In the course of the argument Mr Wise accepted this; and also agreed that preventing or compensating for a disadvantage linked to a protected characteristic would be a legitimate aim.
So he accepted that his interpretation made section 193(2)(b) redundant.
That, to my mind, is a powerful reason why that interpretation cannot be right.
As regards Mr Wises submission (ii), Lewison LJ held (para 54) that since the case had proceeded on the footing that AIHA had discriminated against the appellant on grounds of religion, which did not fall within the Race Directive, the appellant was not able to show that the Marleasing principle of sympathetic construction was applicable to allow or require any change to the ordinary meaning of section 193(2)(b).
It was not open to the appellant to say that in some case other than her own there might be a conflict between section 193(2)(b) and rights under the Race Directive, where EU law might trump the domestic provision (either in the sense of requiring a conforming interpretation to be adopted pursuant to the Marleasing principle or in the sense of requiring the disapplication of the domestic provision by giving direct effect to rights under the Directive), and then indirectly to seek to take the benefit of EU law in her case, although no relevant rights of hers under EU law were in issue.
Lewison LJ also rejected Mr Wises submission (iii) (paras 55 61).
There was no absurdity in construing section 193(2)(b) as bearing its ordinary meaning, with no proportionality requirement.
It could not be said to be absurd that section 193(1), read with section 193(2)(b), provided a defence for a charitable institution in fulfilling its charitable objects which, ex hypothesi (by virtue of the Charities Act), must be for the public benefit.
The contrast between section 193(2)(a) (which incorporates a proportionality test) and section 193(2)(b) (which does not) is striking and deliberate.
Where the 2010 Act requires a proportionality requirement, as it does in a number of provisions, it says so in terms.
The absence of such a requirement from section 193(2)(b) must be taken to be a deliberate policy choice by Parliament, and was well within the legislatures margin of appreciation.
The explanatory notes for the 2010 Act and the EHRC code of practice supported this conclusion.
Lewison LJ also held (para 52) that even if section 193(2)(b) were interpreted as importing a proportionality requirement, then for reasons given later in his judgment in relation to section 158 and section 193(2)(a) of the 2010 Act, that requirement was satisfied.
In relation to all these provisions, the Divisional Court was entitled to find that AIHAs allocation policy was a proportionate means of achieving a legitimate aim.
Although by reason of his conclusion regarding the interpretation of section 193(2)(b) Lewison LJ held that the appeal should be dismissed, he also went on to consider Mr Wises submission that AIHAs allocation policy could not be regarded as proportionate for the purposes of sections 158 and 193 of the 2010 Act.
At paras 63 68 Lewison LJ referred to the leading authorities on the role of an appeal court in considering a proportionality assessment by a lower court.
This passage merits quotation in full: 63.
In In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911, the Supreme Court considered the role of an appeal court in an appeal which involves a challenge to a lower courts appraisal of proportionality.
Lord Neuberger of Abbotsbury said at para 88: If, after reviewing the judges judgment and any relevant evidence, the appellate court considers that the judge approached the question of proportionality correctly as a matter of law and reached a decision which he was entitled to reach, then the appellate court will not interfere.
If, on the other hand, after such a review, the appellate court considers that the judge made a significant error of principle in reaching his conclusion or reached a conclusion he should not have reached, then, and only then, will the appellate court reconsider the issue for itself if it can properly do so (as remitting the issue results in expense and delay, and is often pointless). 64.
He added that an appeal court should only interfere where the lower courts assessment of proportionality was wrong; and then went on to explain what he meant by that.
Lord Wilson and Lord Clarke of Stone cum Ebony agreed with Lord Neuberger. 65.
In R (R) v Chief Constable of Greater Manchester Police [2018] UKSC 47; [2018] 1 WLR 4079, the Supreme Court added a qualification to this approach.
Lord Carnwath (with whom the other Justices agreed) said at para 64: In conclusion, the references cited above show clearly in my view that to limit intervention to a significant error of principle is too narrow an approach, at least if it is taken as implying that the appellate court has to point to a specific principle whether of law, policy or practice which has been infringed by the judgment of the court below.
The decision may be wrong, not because of some specific error of principle in that narrow sense, but because of an identifiable flaw in the judges reasoning, such as a gap in logic, a lack of consistency, or a failure to take account of some material factor, which undermines the cogency of the conclusion.
However, it is equally clear that, for the decision to be wrong under CPR rule 52.11(3), it is not enough that the appellate court might have arrived at a different evaluation.
As Elias LJ said in R (C) v Secretary of State for Work and Pensions [2016] PTSR 1344, para 34: the appeal court does not second guess the first instance judge.
It does not carry out the balancing task afresh as though it were rehearing the case but must adopt a traditional function of review, asking whether the decision of the judge below was wrong 66.
It is not enough simply to demonstrate an error or flaw in reasoning.
It must be such as to undermine the cogency of the conclusion.
Accordingly, if there is no such error or flaw, the appeal court should not make its own assessment of proportionality. 67.
There are two further points that I should make, in view of some of Mr Wises criticisms of the Divisional Court.
First, an appeal court is bound, unless there is compelling reason to the contrary, to assume that the lower court has taken the whole of the evidence into its consideration: Henderson v Foxworth Investments Ltd [2014] UKSC 41; [2014] 1 WLR 2600, para 48; ACLBDD Holdings Ltd v Staechelin [2019] EWCA Civ 817; [2019] 3 All ER 429, para 31.
Second, an appeal court should be reluctant to interfere with a lower courts findings of fact, even where those findings are based on written rather than oral evidence.
Having referred to earlier cases dealing with findings of fact made at trial after hearing oral evidence, Lord Kerr of Tonaghmore explained in In re DBs Application for Judicial Review [2017] UKSC 7; [2017] NI 301, para 80: The statements in all of these cases and, of course, in McGraddie itself [McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477, paras 1 3 per Lord Reed] were made in relation to trials where oral evidence had been given.
On one view, the situation is different where factual findings and the inferences drawn from them are made on the basis of affidavit evidence and consideration of contemporaneous documents.
But the vivid expression in Anderson [Anderson v City of Bessemer (1985) 470 US 564, 574 575] that the first instance trial should be seen as the main event rather than a try out on the road has resonance even for a case which does not involve oral testimony.
A first instance judgment provides a template on which criticisms are focused and the assessment of factual issues by an appellate court can be a very different exercise in the appeal setting than during the trial.
Impressions formed by a judge approaching the matter for the first time may be more reliable than a concentration on the inevitable attack on the validity of conclusions that he or she has reached which is a feature of an appeal founded on a challenge to factual findings.
The case for reticence on the part of the appellate court, while perhaps not as strong in a case where no oral evidence has been given, remains cogent.
In the present appeal, I consider that the Court of Appeal should have evinced a greater reluctance in reversing the judges findings than they appear to have done. 68.
Those observations have particular force in the present case, where the Divisional Court were presented with a mass of demographic and sociological evidence from multiple reputable sources.
In the following section of his judgment (paras 69 88), Lewison LJ followed this approach.
He rejected Mr Wises submissions that the Divisional Court had failed to conduct a proper balancing exercise, comparing the detriments of AIHAs allocations policy for non members of the Orthodox Jewish community with the benefits sought to be achieved for that community.
The Divisional Court had correctly directed itself by reference to the judgment of Baroness Hale in the Akerman Livingstone case.
It analysed the position in accordance with propositions to be drawn from the judgment of Baroness Hale in R (Coll) v Secretary of State for Justice [2017] UKSC 40; [2017] 1 WLR 2093, at para 42, by assessing whether there was a disadvantage for non members of the Orthodox Jewish community, considering how significant that disadvantage was and considering what might be done to meet that disadvantage.
At para 87 Lewison LJ summarised the analysis of the Divisional Court: (i) The disadvantage to non members of the Orthodox Jewish community was the withdrawal of 1% of the potentially available units of accommodation. (ii) The scale of that disadvantage was minuscule. (iii) The needs of the Orthodox Jewish community linked to the relevant protected characteristic were many and compelling. (iv) The allocation of properties to non members of the Orthodox Jewish community would fundamentally undermine AIHAs charitable objectives.
Thus there was no more limited way of achieving the legitimate aim. (v) Weighing these factors together, AIHAs allocation policy was proportionate.
In Lewison LJs judgment, there was no flaw in this analysis which would entitle an appeal court to intervene.
Accordingly, the appeal in relation to AIHA was dismissed for these reasons as well.
The issues on the appeal to this court
The parties identified the following issues for determination on the appeal: In order for AIHA to be able to rely on section 193(2)(b) of the 2010 (1) Act, does it have to show that its arrangements are proportionate, whether pursuant to EU law or the HRA? (2) In so far as is relevant to issue (1) above, is the allocation of social housing a matter that falls within the ambit of article 8 of the ECHR for the purposes of a discrimination claim under article 14 of the ECHR? (3) Do AIHAs arrangements amount to impermissible positive discrimination as opposed to permissible positive action for the purposes of section 158 and/or section 193 of the 2010 Act? (4) Were the courts below entitled to conclude that AIHAs arrangements are a proportionate means of achieving the aims referred to in either section 158(2) or section 193(2) of the 2010 Act? To these must now be added a fifth issue: (5) Did AIHAs allocation policy involve direct discrimination on grounds of race or ethnic origin, contrary to the Race Directive? This may have implications for issue (1) above.
Mr Wise also submits that the appellant has rights under the Race Directive which would require that section 193(2)(b) of the 2010 Act should be disapplied if it conflicts with the requirements of that Directive.
Since the outcome of the appeal depends on whether the Divisional Courts holding regarding the proportionality of AIHAs allocation policy for the purposes of sections 158 and 193(2)(a) of the 2010 Act should be overruled, I will consider issues (3) and (4) first.
Issue (3) is a dimension of the general question of proportionality raised in issue (4), so I will address them together.
Then it is convenient to address issue (5).
Finally, I will turn to issues (1) and (2).
Issues (3) and (4): the proportionality of AIHAs allocation policy
Mr Wise submits that, as explained in the Akerman Livingstone case, the relevant test of proportionality is that to be found in EU law and says that the Divisional Court erred in discounting the Briheche judgment as relevant guidance.
On this appeal, Mr Wise relies on Briheche and a number of other judgments of the CJEU which he submits show that positive discrimination is only permissible under EU law if its object is equality of opportunity for a disadvantaged group rather than equality of outcome; where a disadvantaged person is given priority only in circumstances where an objective assessment has been carried out to compare their position with that of a person who does not share the relevant characteristic and the positions are found to be equivalent, so that the relevant characteristic is taken into account only as a tie break at the end of that process; and where the policy in question has a safety valve to allow priority in exceptional cases for a person who does not share the relevant characteristic.
In this case, however, the Divisional Court did not assess proportionality in this way.
Mr Wise submits that AIHAs policy on allocation cannot be regarded as proportionate according to this standard.
It is concerned with equality of outcome rather than equality of opportunity; AIHA does not conduct assessments of the needs of non members of the Orthodox Jewish community who might apply for social housing to compare them with the needs of members of that community; AIHA does not treat membership of the Orthodox Jewish community as a final tie break, where an assessment of the needs of an applicant for social housing who is not a member of the community as compared with those of an applicant who is a member shows that they are broadly equivalent; and AIHAs policy does not include a safety valve to allow a property to be allocated to a non member of the Orthodox Jewish community in preference to members of the community in exceptional circumstances.
The judgments of the CJEU relied on by Mr Wise are those in Kalanke v Freie Hansestadt Bremen (Case C 450/93) [1996] All ER (EC) 66 (Kalanke); Marschall v Land Nordrhein Westfalen (Case C 409/95) [1997] All ER (EC) 865 (Marschall); In re Badeck (Case C 158/97) [2000] All ER (EC) 289 (Badeck); Abrahamsson v Fogelqvist (Case C 407/98) [2002] ICR 932 (Abrahamsson); Lommers v Minister van Landbouw, Natuurbeheer en Visserij (Case C 476/99) [2004] 2 CMLR 49 (Lommers); Briheche; and Cresco Investigation GmbH v Achatzi (Case C 193/17) [2019] 2 CMLR 20, Grand Chamber (Cresco).
He also relies on the judgment of the EFTA Court in EFTA Surveillance Authority v Norway (Case E 1/02) [2003] 1 CMLR 23 (the EFTA Surveillance case).
I do not accept Mr Wises submission based on these cases.
There is no
general doctrine of positive discrimination in EU law, which is subject to the limitations for which Mr Wise contends.
The judgments in these cases addressed the specific requirements arising under legislative instruments which are not applicable in the present case, in particular the Equal Treatment Directive.
Article 2(1) of the Equal Treatment Directive states that the principle of equal treatment means that there shall be no discrimination whatsoever on grounds of sex either directly or indirectly.
Article 2(4) provides that the Directive: shall be without prejudice to measures to promote equal opportunity for men and women, in particular by removing existing inequalities which affect women's opportunities.
In Kalanke the CJEU held that German legislation which provided for the automatic promotion of a woman who had the same qualifications as a man, where there was under representation of women, was incompatible with the Equal Treatment Directive.
National rules which guaranteed women absolute and unconditional priority for appointment or promotion go beyond promoting equal opportunities and fall outside what is permitted by article 2(4): para 22.
This was confirmed by the CJEU in Marschall (para 32), but the court held there that such a national rule which contained a saving clause which guaranteed that male candidates would be the subject of an objective assessment which would take account of all relevant criteria and would override the priority accorded to female candidates where the assessment indicated the male candidate was better would be acceptable under article 2(4): paras 33 and 35.
The under represented sex could thus only be given priority by a national rule where there was an objective assessment of the respective relevant qualities of male and female candidates and the rule operated as a tie breaker where that assessment showed that they were equally qualified to do the job: see also Badeck, paras 15 23; Abrahamsson, paras 60 62; Lommers, paras 38 39; Briheche, para 23; and the EFTA Surveillance case, para 45.
As the CJEU pointed out in Briheche at para 24 (reiterating a point made in Lommers, para 39): Those conditions are guided by the fact that, in determining the scope of any derogation from an individual right such as the equal treatment of men and women laid down by the Directive, due regard must be had to the principle of proportionality, which requires that derogations must remain within the limits of what is appropriate and necessary in order to achieve the aim in view and that the principle of equal treatment be reconciled as far as possible with the requirements of the aim thus pursued.
This is a conventional approach to the proportionality principle.
As the statement of the principle in Akerman Livingstone makes clear, proportionality analysis requires identification of a legitimate aim and then an assessment whether a measure taken to promote that aim is proportionate in its effects in pursuing it, having regard to other interests at stake.
For present purposes, what is significant about the Equal Treatment Directive is that article 2(4) identifies the aim which is to be regarded as a legitimate basis for departing from the general obligation of equal treatment imposed by article 2(1), namely promotion of equality of opportunity in employment rather than equality of outcome.
In the judgments referred to, rules of national law were held to be compatible with the Directive if limited to securing equality of opportunity but were held to be incompatible if they went beyond promotion of equality of opportunity and sought to achieve equality of outcome in terms of equal representation of men and women in the workforce.
This tells one nothing of any significance about the proper approach to proportionality in the context of section 158 and section 193(2)(a) of the 2010 Act.
In fact, separate provision is made in the 2010 Act, in section 159, governing positive action in relation to employment.
In each of section 158 and section 193(2)(a), the range of permissible legitimate aims is wider than the legitimate aim specified in article 2(4) of the Equal Treatment Directive and includes seeking to achieve particular outcomes, ie enabling persons who share the protected characteristic to overcome or minimise disadvantages they suffer which are connected to the characteristic or to meet needs particular to persons with the protected characteristic, in the case of section 158; or any legitimate aim in the case of section 193(2)(a) (which includes aims recognised as legitimate under section 158).
Accordingly, the correct question, as the Divisional Court and the Court of Appeal rightly appreciated, is whether AIHAs allocation policy is a measure which is proportionate to promoting such aims in relation to ameliorating the position of members of the Orthodox Jewish community.
Those aims relate to improving outcomes for that community, not merely equality of opportunity of the more limited kind discussed in the cases on the Equal Treatment Directive.
The judgment of the Grand Chamber of the CJEU in Cresco is more relevant.
That addressed the application of article 21 of the CFR and Directive 2000/78 establishing a general framework for equal treatment in employment and occupation (the Framework Directive).
Article 2 of the Framework Directive states that the principle of equal treatment shall mean that there shall be no direct or indirect discrimination as regards employment and occupation on a range of grounds referred to in article 1, including religion or belief.
Article 7, headed Positive action, provides in para 1: With a view to ensuring full equality in practice, the principle of equal treatment shall not prevent any member state from maintaining or adopting specific measures to prevent or compensate for disadvantages linked to any of the grounds referred to in article 1.
The terms of article 7(1) are materially different from those of article 2(4) of the Equal Treatment Directive, and are closer to section 158 and section 193 of the 2010 Act.
Cresco concerned Austrian legislation which provided that for members of specified Christian churches Good Friday was a public holiday, with the result that if they worked on that day they should be paid a supplement.
Non Christians were not entitled to treat Good Friday as a day of holiday and were not entitled to any supplement for working that day; nor were any religious days of other religions treated as public holidays for them.
A non Christian who worked for a private company complained that this was incompatible with article 21 of the CFR and with the Framework Directive.
At paras 62 68 the Grand Chamber dealt with an argument by the Austrian Government that the law treating Good Friday as a public holiday for members of Christian churches was justified pursuant to article 7(1) of the Framework Directive, and rejected it.
The Grand Chamber observed (para 63) that, in light of article 7(1), the principle of equal treatment in the Directive does not prevent a member state from retaining or adopting, in order to ensure full equality in practice, specific measures to prevent or compensate for disadvantages linked to any of the grounds referred to in article 1.
The Grand Chamber also noted (para 64) that article 7(1) is designed to authorise measures which, although discriminatory in appearance, are in fact intended to eliminate or reduce actual instances of inequality which may exist in society.
The objectives of ensuring full equality in practice and the elimination or reduction of instances of inequality are very different from the more limited objective of securing equality of opportunity referred to in article 2(4) of the Equal Treatment Directive.
They are objectives which can include efforts to achieve equality of outcomes as well as equality of opportunity, to use the distinction urged on us by Mr Wise.
At para 65, the Grand Chamber affirmed that a conventional proportionality analysis applies in relation to such aims (referring in that regard to Lommers, para 39): in determining the scope of any derogation from an individual right such as equal treatment, due regard must be had to the principle of proportionality, which requires that derogations remain within the limits of what is appropriate and necessary in order to achieve the aim in view and that the principle of equal treatment be reconciled as far as possible
with the requirements of the aim thus pursued
Applying the principle of proportionality, the Grand Chamber held (paras 66 68) that since there was no corresponding designation of important festivals of other religions as public holidays the law in issue went further than was necessary to compensate for the alleged disadvantage suffered by employees who are members of Christian churches and subject to a religious duty not to work on Good Friday.
Accordingly, the Grand Chamber in Cresco confirmed at para 65 the point made above about the conventional operation of the proportionality principle in the context of anti discrimination legislation.
The guidance in Cresco is relevant in relation to the analogous provisions in section 158 and section 193 of the 2010 Act.
It confirms that the conventional approach adopted by the Divisional Court and the Court of Appeal on the question of proportionality was correct.
The Divisional Court directed itself correctly as to the proportionality test to be applied.
It made appropriate findings on the evidence before it regarding the needs of the Orthodox Jewish community connected to their religion and the disadvantages to which they were subject on grounds of their religion.
It found that the AIHA allocation policy was a legitimate and proportionate means of meeting those needs and of seeking to correct for those disadvantages.
I would endorse the observations of Lewison LJ at paras 63 68 (quoted at para 56 above) about the proper approach for an appellate court when reviewing a finding of proportionality or disproportionality of a measure such as AIHAs allocation policy.
Mr Wise did not suggest this approach was wrong.
Since the Divisional Court gave itself a correct self direction as to the test to be applied, its conclusion that AIHAs allocation policy is a proportionate means of pursuing the legitimate aims identified can only be set aside if the appeal court comes to the view that its conclusion was wrong in the relevant sense.
It is not sufficient that an appellate court might think it would have arrived at a different conclusion had it been considering the matter for the first time.
Although the word wrong is taken from what is now CPR Part 52.21, which is concerned with the powers of the Court of Appeal and certain other appellate courts, but not the Supreme Court, the arguments for a limited role for an appellate court are of general application and the same approach applies at this level.
It would be a recipe for confusion if this court applied a different standard of review on appeal than that applied by the Court of Appeal.
It is for that reason that I have dealt with the Divisional Courts judgment on the question of proportionality at some length.
I agree with Lewison LJs assessment at paras 69 88 (see para 57 above) that there is no proper basis on which an appellate court could interfere with the Divisional Courts conclusion that AIHAs allocation policy is a measure which is proportionate to legitimate aims.
Not only was that a conclusion which the Divisional Court was entitled to reach, I agree with it.
Two particular points should be mentioned.
First, AIHAs allocation policy operates as a direct counter to discrimination suffered by the Orthodox Jewish community in seeking to obtain housing in the private sector.
The Divisional Court properly weighed up the effect of the policy in addressing needs of the Orthodox Jewish community connected with their religion and in correcting for disadvantages suffered by that community.
Lewison LJ forcefully made this point at para 79 when rejecting criticisms made by Mr Wise: It is, with respect, obvious why discrimination against the Orthodox Jewish community in accessing private sector housing is ameliorated by a housing association that gives members of that community preference.
The extent of the amelioration may be impossible to assess with any precision, but that does not cast doubt on the fact that amelioration there is.
Nor do I accept the criticism that the Divisional Court failed to assess the disadvantage occasioned to other groups who did not share the relevant protected characteristic.
On the basis of the Divisional Courts findings, the effect of AIHAs allocation policy (taken at its most restrictive) is to withdraw from the pool of potentially available properties for letting 1% of units.
The remaining 99% are potentially available to persons who do not share the relevant protected characteristic.
Thus the disadvantage to those persons is minuscule.
Even if one concentrates on larger units, where AIHA has a larger share of units, Orthodox Jews are disproportionately represented among applicants for such units.
As far as the smaller units are concerned, the evidence is that many of them are also used to house large families.
I do not regard this criticism as well founded.
Secondly, Lewison LJ rightly rejected (at paras 84 85) a further criticism made by Mr Wise, that the Divisional Court was wrong to dismiss his argument that AIHAs allocation policy was an illegitimate blanket policy.
There is some flexibility in the policy as it is formulated, in that it allows for AIHA to allocate properties to non members of the Orthodox Jewish community if AIHA has properties surplus to the demand from that community.
However, in circumstances in which demand from that community far exceeds supply, allocation to non members is not a realistic prospect in the foreseeable future.
As Lewison LJ pointed out, the market circumstances are such that AIHAs allocation policy (in combination with the limited number of properties AIHA owns) does not achieve the aim of meeting the needs of the Orthodox Jewish community in Hackney, but only goes some way towards achieving that aim.
There are still many Orthodox Jews in Hackney whom AIHA cannot accommodate and who still suffer the disadvantages associated with the relevant protected characteristic.
Unless and until the aim of elimination of such disadvantages is achieved, it would be proportionate for AIHA to operate a simple blanket policy to allocate its properties to members of the Orthodox Jewish community as a means of promoting that legitimate aim.
So even though market circumstances give AIHAs policy, in practice, a blanket effect, that does not show that it is a measure which is disproportionate to that aim.
Mr Wise criticised the Divisional Court and the Court of Appeal for their focus on the minuscule impact of AIHAs allocation policy.
He said that the impact on the appellant could not be so described, since she had had to wait almost 18 months for a suitable property while at least six four bedroom properties owned by AIHA became available and were advertised by the Council for members of the Orthodox Jewish community.
In my view, there is nothing in this criticism.
The Divisional Court and the Court of Appeal rightly took account of the small impact of AIHAs allocation policy on the group of persons outside the Orthodox Jewish community when assessing its proportionality with reference to its aim.
It was proportionate for AIHA to adopt an allocation policy which aimed to meet the particular needs and alleviate the particular disadvantages experienced by members of the Orthodox Jewish community, as a group, in connection with their religion.
In assessing the proportionality of the policy in the light of that aim, the courts below were entitled to weigh the benefits for that community as a group as compared with the disadvantages experienced by other groups as a result, rather than by comparing the benefits for that community with the disadvantage suffered by one person drawn from those other groups falling outside the policy.
Positive action pursuant to section 158 has to address needs or disadvantages experienced in connection with a protected characteristic, and so contemplates that a group based approach may be adopted, defined by reference to one of the protected characteristics as shared with others (such as gender, disability or religion).
Similarly, in the context of section 193, charities typically focus the benefits they aim to provide on defined groups.
Charitable status is a way of recruiting private benevolence for the public good (subject to the public benefit test in the Charities Act), and charities focus on providing for particular groups since that is what motivates private individuals to give money, where they feel a particular link to or concern for the groups in question.
It is for the public benefit that private benevolence should be encouraged for projects which supplement welfare and other benefits provided by the state, even though those projects do not confer benefits across the board.
Accordingly, Parliament contemplated that the proportionality of measures falling within section 158 and section 193 should be assessed on a group basis, by comparing the advantages for groups covered by the measure in question with the disadvantages for groups falling outside it.
This point is reinforced by the guidance on the question of proportionality under section 158 of the 2010 Act contained in the EHRC code of practice at para 10.22: The seriousness of the relevant disadvantage, the degree to which the need is different and the extent of the low participation in the particular activity will need to be balanced against the impact of the action on other protected groups, and the relative disadvantage, need or participation of these groups.
In this context, the proportionality assessment would be distorted by simply
taking the worst affected individual who is not covered by the measure and comparing her with the most favourably affected individual who is covered by it.
That is in effect what Mr Wise seeks to do by comparing the appellant with a member of the Orthodox Jewish community, out of the many in need, who happened to be fortunate in having one of AIHAs properties assigned to them in the relevant period.
The House of Lords in R (Ahmad) v Newham London Borough Council [2009] UKHL 14; [2009] PTSR 632 considered a broadly analogous context when assessing whether a local housing authoritys scheme made under section 167(2) of the Housing Act 1996 (as amended) for determining priority for allocation of social housing based on placing individuals within broad need based categories rather than on individualised, fine grained comparative assessment of needs was irrational, and held that it was not.
Baroness Hale and Lord Neuberger of Abbotsbury, who gave the principal speeches, emphasised the dangers of distorting the analysis by seeking to compare the situation and needs of the claimant with those of a general category, in circumstances where it was legitimate for the authority to adopt a group based approach to allocation of housing: see paras 15 (Baroness Hale) and 46 48 and 60 62 (Lord Neuberger).
In R (XC) v Southwark London Borough Council [2017] EWHC 736 (Admin); [2017] HLR 24 Garnham J relied on these observations in deciding that a particular category based feature of a local housing authoritys housing priority scheme (to award additional points to persons in working households or who provide community services) was a proportionate means of achieving legitimate objectives (the creation of sustainable and balanced communities and encouraging residents to make a contribution to the local community), so as to provide a defence to a claim of indirect discrimination under section 19 of the 2010 Act.
The claimant suffered from disabilities which meant that she could not work.
Having regard to the observations in Ahmad, Garnham J held that the priority scheme in issue was the least intrusive measure which could be used without unacceptably compromising the chosen objectives and that it struck a fair balance between securing the objectives and its effects on the claimants rights: paras 85 99.
As he pointed out (para 92): Determining those matters in the context of housing allocation schemes is especially difficult.
Every tweak to the scheme to benefit one individual or one class of applicant is likely to have an adverse effect on another; every exception to the operation At para 98 he said: of a preference may damage the achievement of the objective.
The court inevitably concentrates on the circumstances of the claimant in front of it and it is easy to recognise the disadvantage that a claimant may suffer.
But the local authority has to consider the position of all applicants and the court can have only the most attenuated understanding of their position.
I can see no measure less intrusive, less likely to be detrimental to the claimant, which would not undermine the legitimate objective identified by the council and to which I have referred above.
To extend the class of volunteers to include all those who, like the claimant, provide some measure of care for others living in other accommodation would inevitably reduce the ability of the council to cater for those who benefit from the reasonable preferences provided for by the scheme.
To extend the class of working households to include those who cannot work because of the type of disabilities suffered by the claimant would inevitably conflict with the legitimate preference to be given to those in work.
The wider the class the less valuable the benefit of being within it.
So also in the present case, if AIHA changed its allocation policy to bring in people who are not members of the Orthodox Jewish community, that would inevitably dilute the impact it could have on addressing the needs and disadvantages experienced by that community in connection with their faith.
In light of the unmet need for social housing for that community and the small impact on other groups, the Divisional Court was entitled to conclude that it was proportionate for AIHA to focus its efforts on that community without diluting its beneficial impact for that community in the way for which Mr Wise contends.
In the context of state provision of social welfare benefits, it is well established that it is generally a legitimate approach and in accordance with the principle of proportionality for the state to use bright line criteria to govern their availability: see eg R (RJM) v Secretary of State for Work and Pensions (Equality and Human Rights Commission intervening) [2008] UKHL 63; [2009] 1 AC 311; Carson v United Kingdom (2010) 51 EHRR 13, para 62; and R (Tigere) v Secretary of State for Business, Innovation and Skills (Just for Kids Law intervening) [2015] UKSC 57; [2015] 1 WLR 3820.
That is to say, the state is entitled to focus provision of social welfare benefits on a particular group, and hence exclude other groups, even though there may be little or no difference at the margins in terms of need between some particular individual in the first group and another particular individual in the excluded groups.
Use of bright line criteria in this way is justified because it minimises the costs of administration of a social welfare scheme; it may be the best way of ensuring that resources are efficiently directed to the group which, overall, needs them most; it can reduce delay in the provision of benefits; and it provides clear and transparent rules which can be applied accurately and consistently, thereby eliminating the need for invidious comparisons of individual cases in all their variety, with the risk of arbitrariness in outcomes which that may involve.
Lord Sumption and Lord Reed explained these points in Tigere, which concerned a challenge to the proportionality of rules which restricted the availability of student loans in the case of non nationals to those who had settled immigration status, in a general discussion of proportionality and bright line rules at paras 88 91 (albeit in their conclusion on the facts of that case they were in a minority): 88.
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. 89.
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 [the European Court of Human Rights] is sensitive to considerations of practicality, especially in a case where the Convention [the ECHR] 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 [51 EHRR 13], 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 [(2011) 54 EHRR 21] at para 49.
And by this court to an allegation of discrimination in the formulation of rules governing the benefit cap: R (SG) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] 1 WLR 1449, para 15 (Lord Reed JSC). 90.
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) [2005] QB 145, para 72, Frster v Hoofddirectie van de Informatie Beheer Groep (Case C 158/07) [2009] All ER (EC) 399, para 56.
As Advocate General Geelhoed acknowledged in considering these very Regulations in Bidar [R (Bidar) v Ealing London Borough Council (Case C 209/03) [2005] QB 812], 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. 91.
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.
These points apply a fortiori in relation to a proportionality assessment in respect of a measure taken by a charity, such as AIHAs allocation policy.
A charity is a private body which does not have the same responsibility as the state for ensuring equal treatment of citizens, so if the state is entitled to use bright line criteria for distribution of social welfare benefits still more will that be true for a charity.
Moreover, charities do not have the same resources as the state, so if the state is entitled to use bright line criteria for distribution of benefits, still more will that be true for a charity.
It is in the public interest that charities should be able to minimise their costs of administration.
That is in order to ensure that maximum resources are made available to address the problems which charities seek to alleviate and since otherwise charitable giving may be deterred, if donors feel excessive amounts of what they give will be spent on administration rather than actually helping people in need.
The aims of minimising wastage of resources on administration and encouraging charitable giving are themselves legitimate objectives to be brought into account in the assessment of proportionality.
Mr Wise maintained that there are examples of other faith or ethnicity based housing associations (he cited three) having allocation policies which do not require them to provide housing exclusively to members of the relevant religious or ethnic community, and that there is no evidence that the aims or essential nature of these housing associations, which are presumably operating in similarly demanding market conditions to AIHA, have been unacceptably compromised thereby.
However, there was no evidence about how these housing associations manage the tension between their faith or ethnicity based focus for provision of social housing and provision for other groups, no evidence that these three examples were in any way representative of the sector as a whole, and no evidence that the problems faced by the groups they seek to help or the market conditions in their areas are equivalent to those which AIHA has to address.
Therefore, I did not find Mr Wises attempt to rely on these examples at all persuasive.
Each case must depend on its own facts.
The Divisional Court was entitled to make the assessment that if AIHA relaxed its allocation criteria it would dilute its ability to address the problems faced by the Orthodox Jewish community to an unacceptable degree.
Mr Wise made vague references to the possibility that AIHA could allocate more properties to non members of that community whilst still maintaining assistance for the community, but he did not propose any concrete solution, let alone a viable one, to resolve that dilemma.
In my judgment, for the reasons given above, the appellants grounds of
appeal in relation to issues (3) and (4) fail.
The consequence is that her appeal as a whole should be dismissed.
Issue (5): The Race Directive
The Race Directive requires discrimination on grounds of race or ethnic origin to be made unlawful, including in particular in relation to housing.
Mr Wise submits that the JFS case shows that AIHAs allocation policy involved direct discrimination on grounds of ethnic origin.
Mr Grodzinski has a short response to this new claim by the appellant: AIHAs allocation policy involves differentiation on grounds of religious observance, which is not prohibited by the Race Directive; it does not involve discrimination on grounds of race or ethnic origin; the facts in the JFS case were materially different.
In my view, Mr Grodzinski is right about this.
The JFS case concerned a complaint that the admissions criteria adopted by the Jewish Free School involved unlawful direct discrimination on grounds of ethnic origin contrary to the Race Relations Act 1976, one of the pieces of anti discrimination legislation which was replaced by the 2010 Act.
Only children who were recognised as Jewish according to the Office of the Chief Rabbi could be admitted, such recognition being based on matrilineal descent from a Jewish mother or one who had been converted in accordance with the tenets of Orthodox Judaism.
There was no requirement of practice of the Jewish faith.
The school refused to accept a child whose mother had undergone conversion to non Orthodox Judaism, which was not recognised by the Office of the Chief Rabbi.
By a majority, this court held that the test of matrilineal descent applied by the school was a test of ethnic origin and that therefore the schools policy involved direct discrimination on racial grounds contrary to the 1976 Act, which defined such grounds to include ethnic or national origins.
As Lord Phillips of Worth Matravers explained at para 13, [i]n deciding what were the grounds for discrimination it is necessary to address simply the question of the factual criteria that determined the decision made by the discriminator.
The motive of the discriminator for the discrimination in issue is irrelevant.
In JFS the court considered and affirmed the guidance given by Lord Fraser of Tullybelton in Mandla (Sewa Singh) v Dowell Lee [1983] 2 AC 548, 562 regarding the meaning of an ethnic group in this context, as set out by Lord Phillips at para 28.
The criteria set out by Lord Fraser include two essential conditions (that the group should have a long shared history and a cultural tradition of its own) and a number of other relevant factors; and he stated, [p]rovided a person who joins the group feels himself or herself to be a member of it, and is accepted by other members, then he is, for the purposes of [the 1976 Act], a member.
In JFS this court recognised that one could define Jews as an ethnic group by reference to these general criteria without reference to matrilineal descent, but it was concerned with the particular question whether the matrilineal test applied by the school involved discrimination on grounds of ethnic origins, including as against persons who regarded themselves as Jews (as the mother and father of the child did): see, eg, paras 30 31, 33, and 43 46, where Lord Phillips, in the majority, distinguishes the criterion of matrilineal ethnic origin at issue in the case from whether someone is a member of what he describes as a Mandla Jewish ethnic group.
Lord Phillips and the majority held that the application of that criterion by the school (as distinct from a criterion by reference to a Mandla Jewish ethnic group) involved direct discrimination on grounds of ethnic origin.
Baroness Hale, also in the majority, emphasised at para 66 that the child was not excluded from the school by reason of his religious beliefs, but by reason of his ethnic origins, because his mother was not recognised as Jewish by the Office of the Chief Rabbi.
For the new claim based on the Race Directive, Mr Wise submits that the JFS decision establishes that the criterion used by AIHA that an applicant for its properties should be a member of the Orthodox Jewish community involves discrimination on grounds of ethnic origin, and that this holds true for the concept of ethnic origin in the Race Directive itself.
In my view, however, this submission cannot be sustained on the facts of this case.
Unlike in the JFS case, AIHA did not make its selection on the grounds of a persons Jewish matrilineal descent, but on the grounds of whether they engage in Orthodox Jewish religious observance: see paras 37 38 above.
Discrimination on grounds of religious belief or religious observance is not prohibited by the Race Directive.
Since the new claim was introduced so late in the day, there has been no evidence put forward and no examination by the courts below regarding whether persons who engage in Orthodox Jewish religious observance might, by virtue of that, be regarded as part of some wider and differently constituted Mandla Jewish ethnic group according to Lord Frasers guidelines.
It is possible that they might, but the question is not a straightforward one.
Evidence would be required in relation to it, for instance to explore the extent that such persons would be accepted by other Jews (Orthodox or non Orthodox) to be part of their ethnic group or might be perceived as such by non Jews.
Mr Wise was not given permission to introduce such a case.
A range of legal issues would arise if an attempt were made to present such a case in future.
These would include whether the concept of ethnic origin in the Race Directive is the same as in the 1976 Act and, now, the 2010 Act; whether a defence existed under article 5 of the Race Directive which, by contrast with the more limited positive discrimination provision in the Equal Treatment Directive, is in similar wide terms to the positive discrimination provision in the Framework Directive considered in Cresco and discussed above (and, for the reasons given above, it is likely that AIHA would have a good defence under article 5); whether the Race Directive can have horizontal effect in relation to a private body like AIHA (see Cresco, paras 72 73); whether it is possible to interpret provisions of domestic legislation compatibly with the Directive pursuant to the Marleasing interpretive obligation (see Cresco, para 74); and whether article 21 of the CFR might create rights on which a claimant could rely (see Cresco, paras 75 78).
It is not appropriate to say anything further about these issues in this judgment.
Issues (1) and (2): interpretation of section 193(2)(b) and the ambit of article 8
As mentioned above, it is common ground that in applying its allocation policy AIHA acts in pursuance of its charitable instrument, so that section 193(1)(a) of the 2010 Act is satisfied, and also that it provides benefits to persons who shared a protected characteristic (ie religion) for the purpose of preventing or compensating for a disadvantage linked to the protected characteristic, in the language of section 193(2)(b).
The Court of Appeal held that there is no implied additional requirement in section 193(2)(b) that a charity should have to persuade a court that the measures it takes within section 193(2)(b) are proportionate.
Although it is my view that the appeal should be dismissed for the reasons given above in relation to issues (3) (5), we should also address the interpretation of section 193(2)(b), which was the main ground on which the Court of Appeal dismissed the appellants appeal.
In my opinion, this does not require us to reach a concluded view on the ambit of article 8 of the ECHR in the present context, for the purposes of application of article 14.
That is because, even if article 14 is applicable, I consider that the Court of Appeal was right to construe section 193(2)(b) in the way it did, as not being dependent on a proportionality assessment to be conducted by the court.
There are two reasons for this.
For the purposes of analysis, I will make the assumption that AIHAs allocation policy falls within the ambit of article 8 so that article 14 is applicable.
First, I accept Mr Grodzinskis submission that by section 193(1) read with section 193(2)(b), Parliament has itself established a regime which is proportionate and compatible with article 14.
Secondly, even if that is not the case, I agree with Lewison LJ that it is not possible under section 3(1) of the HRA to read an additional proportionality requirement into section 193(2)(b).
In relation to both arguments it is relevant to trace the legislative history.
Charities have been subject to legal regulation for a very long time.
In particular, charitable status is limited to bodies which provide public benefits of specified kinds.
By virtue of section 2(1) of the Charities Act, to be charitable a purpose has to fall within section 3(1) of the Act and has to be for the public benefit, as set out in section 4 of the Act.
Charitable purposes include the prevention or relief of poverty, the advancement of religion and the relief of those in need because of youth, age, ill health, disability, financial hardship or other disadvantage: sub paragraphs (a), (c) and (j) of section 3(1), respectively.
The Charity Commission exercises regulatory oversight in relation to the activities of charities, to ensure, among other things, that the public benefit requirement is satisfied: see the discussion in R (Independent Schools Council) v Charity Commission for England and Wales [2011] UKUT 421 (TCC); [2012] Ch 214.
The public benefit requirement will not be satisfied if a charitys activities have unduly detrimental wider effects in society: see the Independent Schools Council case, in particular at paras 64 and 105 106.
The Sex Discrimination Act 1975 made forms of discrimination on grounds of sex unlawful, but section 43(1) set out an exemption for charities in relation to an act which was done to give effect to a provision in a charitable instrument for conferring benefits on persons of one sex only.
The Race Relations Act 1976, which made forms of discrimination on grounds of race unlawful, contained a similar exemption.
In 2008, section 43 of the 1975 Act was amended by the Sex Discrimination (Amendment of Legislation) Regulations 2008 (SI 2008/963) by the addition of subsection (2A), which provided that subsection (1) should not apply to specified types of discrimination unless the conferral of benefits is (a) a proportionate means of achieving a legitimate aim, or (b) for the purpose of preventing or compensating for a disadvantage linked to sex.
This was the forerunner of what became section 193(2) of the 2010 Act.
The Explanatory Memorandum for the Regulations stated that this provision was introduced to give effect in domestic law to Council Directive 2004/113/EC, implementing the principle of equal treatment between men and women in the access to and supply of goods and services (the Gender Directive).
The amendment was introduced while consultation on the terms of what became the 2010 Act was in progress.
Recital (16) to the Gender Directive states: Differences in treatment may be accepted only if they are justified by a legitimate aim.
A legitimate aim may, for example, be the protection of victims of sex related violence (in cases such as the establishment of single sex shelters), reasons of privacy and decency (in cases such as the provision of accommodation by a person in a part of that persons home), the promotion of gender equality or of the interests of men or women (for example single sex voluntary bodies), the freedom of association (in cases of membership of single sex private clubs), and the organisation of sporting activities (for example single sex sports events).
Any limitation should nevertheless be appropriate and necessary in accordance with the criteria derived from case law of the Court of Justice of the European Communities.
In terms similar to those of article 7 of the Framework Directive and article 5 of the Race Directive, article 6 of the Gender Directive provides: With a view to ensuring full equality in practice between men and women, the principle of equal treatment shall not prevent any member state from maintaining or adopting specific measures to prevent or compensate for disadvantages linked to sex.
While the 2010 Act was a Bill, Parliaments Joint Committee on Human Rights sent a letter to the Government dated 2 June 2009 raising a number of queries about the Bill, including about the clause which became section 193.
The Governments response by letter dated 19 June 2009 explained that the exemptions from anti discrimination law for charities were to be tightened up in the new provision in line with the model already adopted in relation to sex discrimination, so that it would no longer be sufficient for them to discriminate if their charitable instrument allowed for this; now a charity would also need to show that it was justified in discriminating.
This would be achieved if it could show that such discrimination is objectively justified (ie under section 193(2)(a)) or is intended to prevent or compensate for disadvantage linked to the protected characteristic in question (ie under section 193(2)(b)).
It is clear from this that in proposing the provision in section 193(2) the government intended sub paragraphs (a) and (b) to serve as distinct conditions for the operation of the charitable exemption and that it considered that satisfaction of either of them would constitute justification for discrimination which would meet the requirements of EU law under the Race Directive and the Gender Directive.
Under the Race Directive (see recital (17) and article 5) and the Gender Directive (see recital (16) and article 6) it is contemplated that positive action to help disadvantaged sections of the population may be taken by bodies created for that purpose.
In the English context, these obviously include charities.
The general regime for regulation of charities in English law limits charitable status by reference to defined public goods as set out in section 3 of the Charities Act and, by application of the public benefit test in section 4, ensures that the benefits to be provided by a charity are balanced against any detriment from its activities.
Thus, as a result of this regulatory regime, the requirement in section 193(1)(a) of the 2010 Act that the person seeking to benefit from the exemption in section 193 has to act in pursuance of a charitable instrument imposes substantive requirements that the acts in question promote the public interest.
This point is emphasised in the guidance on section 193 in the EHRC code of practice, at para 13.35: The public benefit test that all charities must satisfy to gain charitable status may assist, but it will not guarantee that any such restriction meets either of the tests specified in the Act.
The Charity Commission for England and Wales and the Scottish Charity Regulator will consider the likely impact of any restriction on beneficiaries in the charitable instrument, and whether such restriction can be justified, in assessing whether the aims of a charity meet the public benefit test.
The effect of subsection (2)(b) is to ensure in addition that, in order to be exempt, the provision of benefits is for the purpose of preventing or compensating for a disadvantage linked to the relevant protected characteristic.
In the context of general anti discrimination legislation as contained in the 2010 Act, it was abundantly obvious that issues would arise under both EU law and article 14 of the ECHR in relation to activities falling within section 193.
Parliament, acting with the benefit of the explanation from the government referred to above, must be taken to have made the assessment that by this combination of conditions the regime it enacted in the 2010 Act satisfied the requirement of proportionality for the purposes of EU law.
It must equally be taken to have considered that the regime satisfied the requirement of proportionality for the purposes of the ECHR, in particular as it arises under article 14.
This has the benefit for charities that, where they rely on the section 193(2)(b) limb of the exemption, they do not have to produce a separate proportionality justification of their own if challenged.
This means that their resources will not have to be used up in this way in meeting challenges which might be brought against them, and since section 193(2)(b) provides a defence with bright line characteristics it is likely to protect them from challenges being brought which can be seen will not succeed.
In this way, this limb of the exemption in section 193, as framed, helps to ensure that the scarce resources of charities are channelled through to those who need them, rather than being diverted to meet costs of administration, legal proceedings and threats of legal proceedings.
It is also relevant that this is achieved against the background that it is the states, not charities, responsibility to provide essential welfare benefits for all who need them.
It is easier to say that Parliament has struck a fair and proportionate balance between the needs of charities (and, more particularly, those who benefit from their activities) and the general interests of the sections of the public who do not so benefit, where those general interests are met out of state resources where there is pressing need.
The margin of appreciation to be afforded to Parliament when it has sought to strike a balance between competing interests varies depending on context.
Where, as here, Parliament has had its attention directed to the competing interests and to the need for the regime it enacts to strike a balance which is fair and proportionate and has plainly legislated with a view to satisfying that requirement, the margin of appreciation will tend to be wider.
A court should accord weight to the judgment made by the democratic legislature on a subject where different views regarding what constitutes a fair balance can reasonably be entertained.
The context here is provision of social benefits of various kinds, to be provided by charities out of the scarce resources available to them.
When the state provides social welfare benefits, the margin of appreciation afforded to Parliament is wide.
Its judgment will be respected in relation to general measures of economic or social strategy unless manifestly without reasonable foundation: see eg Humphreys v Revenue and Customs Comrs [2012] UKSC 18; [2012] 1 WLR 1545, para 19 (Baroness Hale); R (SG) v Secretary of State for Work and Pensions (Child Poverty Action Group and Another intervening) [2015] UKSC 16; [2015] 1 WLR 1449, para 11 (Lord Reed); Gilham v Ministry of Justice [2019] UKSC 44; [2019] 1 WLR 5905, para 34 (Baroness Hale).
I accept Mr Grodzinskis submission that this is also the relevant margin of appreciation to be applied in the context of the exemption for charities from the general anti discrimination rules in the 2010 Act.
The underlying issue, of allocation of scarce resources to meet a range of needs, is similar to that which is relevant in the context of welfare benefits provided by the state.
Allowing the state a wide margin of appreciation in the latter context recognises the legitimacy of such decisions of social and economic policy being taken by a body which has democratic authority and the responsibility for raising taxes and deciding how they are spent.
It is also a matter of social and economic policy for Parliament to decide how best to stimulate private benevolence which will allow charities to supplement state provision of welfare benefits.
The degree to which charities are given freedom to pursue objectives which their donors regard as important affects the extent to which donors will provide private resources to supplement provision by the state.
If donors are not given reasonable assurance that what they give will reach the persons they intend to benefit, they will not give at all.
It was a legitimate policy choice by Parliament to fashion the exemption for charities under the section 193(2)(b) limb of section 193 in the way it did, as a relatively bright line rule which would give that assurance to donors.
In my judgment, having regard to the relevant margin of appreciation, the fact that charitable provision supplements basic social welfare provision by the state, the general regulation of charities to ensure they provide public benefits, the desirability of ensuring that the resources of charities are not diverted from being used to meet social needs and the way in which Parliament has carefully and deliberately framed the section 193(2)(b) limb of the exemption to meet the proportionality tests in EU law and under the ECHR, that limb of the exemption satisfies the proportionality requirement across the range of cases in which it applies.
There is, therefore, clearly no basis on which it would be appropriate for the court to seek to imply into that provision an additional requirement that proportionality should be demonstrated separately by a charity in every, or any, case falling within it.
Even if I were wrong in that conclusion, I agree with Lewison LJ (para 53) that it is not possible, as that term is used in section 3(1) of the HRA, to read and give effect to section 193(2)(b) by implying into it an additional proportionality requirement.
To do so would make section 193(2)(b) redundant, since then a charity could always in a case covered by that provision rely on the section 193(2)(a) limb of the exemption.
The point made by Lewison LJ is strongly reinforced by consideration of the legislative history, set out above.
It is clear from the terms of section 193(2) and from that history that Parliament intended the two limbs to be separate and distinct, and that there should be no additional proportionality requirement in section 193(2)(b).
To import such a requirement would undermine a fundamental feature of that provision and would go against the grain of what Parliament intended; therefore, section 3(1) of the HRA does not allow section 193(2)(b) to be read and given effect in this way: see Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, in particular at para 33 (Lord Nicholls of Birkenhead) and paras 113 114 and 121 124 (Lord Rodger of Earlsferry).
This point is reinforced by the fact that where Parliament intended a proportionality requirement to apply in any provision of the 2010 Act it clearly said so: see also the express provisions setting out a proportionality requirement in sections 13(2), 19(2), 158(2) and 159.
The omission of such a requirement from section 193(2)(b) was a deliberate choice by Parliament which constituted a fundamental feature of the legislation.
The same reasoning prevents the court from interpreting section 193(2)(b) as including a proportionality requirement by reason of the Marleasing interpretive obligation in EU law.
As with section 3(1) of the HRA, that obligation only requires and permits a sympathetic construction of national legislation to be adopted so as to produce compatibility with EU law when it is possible for the national legislation to be interpreted in that way.
The analogy with section 3(1) of the HRA is a close one and the boundaries of the interpretive obligation are essentially the same: see Ghaidan v Godin Mendoza, paras 45 (Lord Steyn), 122 (Lord Rodger) and 145 (Baroness Hale).
In any event, to the extent that Mr Wise sought to rely on the Race Directive and the Marleasing interpretive obligation, his submission fails for the reasons alluded to by Lewison LJ at para 54.
No right of the appellant was engaged under the Race Directive, as I have also concluded under issue (5) above.
It is true that, as Lewison LJ noted, other people in other circumstances might have rights under that Directive which are affected by a charitys actions taken in reliance on section 193(2)(b); but that does not assist the appellant in her case.
The proper approach to construction is that legislation should be read and given effect in a particular case according to its ordinary meaning, unless the person who is affected by it can show that this would be incompatible with their Convention rights under the HRA or some provision of EU law as applied to their case.
Only then do the special interpretive obligations under section 3(1) of the HRA or under the Marleasing principle come into play to authorise the court to search for a conforming interpretation at variance with the ordinary meaning of the legislation.
This means that the same legislative provision might be given a different interpretation in different cases, depending on whether Convention rights or EU law are applicable in the case or not.
Although at first glance this might seem odd, in fact it is not.
It simply reflects the fact that in the one case circumstances are such that an additional interpretive obligation has to be taken into account, but in the other case no such obligation is in play: see R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189, para 1 (Lord Bingham of Cornhill), paras 9 and 12 15 (Lord Rodger) and para 52 (Lord Brown of Eaton under Heywood); and Gingi v Secretary of State for Work and Pensions [2001] EWCA Civ 1685; [2002] 1 CMLR 20, paras 41 47 per Arden LJ (as she then was).
If the position were otherwise, Convention rights and rights under EU law would be given disproportionate effect in domestic law, and statutory interpretation would become an exercise in the imaginative construction of theoretical cases in which such rights might be in issue in order to change the interpretation of legislation in cases where they are not.
Like Lewison LJ, I have no hesitation in rejecting Mr Wises further argument that it is necessary to imply a proportionality requirement into section 193(2)(b) to avoid absurdity.
As explained above, there is nothing absurd about the way in which Parliament has framed the section 193(2)(b) limb of the exemption for charities.
Having reached the conclusion that the interpretation of section 193(2)(b) is clear whether or not article 14 of the ECHR is applicable, it is not necessary to reach a view on issue (2) (whether the current circumstances fall within the ambit of article 8).
It has often been observed that the question of what falls within the ambit of article 8 and other Convention rights so as to bring article 14 into operation is a difficult and rather opaque area: see the review of the authorities in R (Joint Council for the Welfare of Immigrants) v Secretary of State for the Home Department [2020] EWCA Civ 542, paras 97 111 (Hickinbottom LJ).
I think this question should be left to be decided in another case where it may be determinative.
We were not taken to all the relevant authorities and there was little debate before us on this issue, so I do not think we should venture to try to make any definitive statement about it.
However, this should not be taken as endorsement of the conclusion of the Court of Appeal that the present case falls outside the ambit of article 8.
A number of factors might be relevant in relation to that issue.
The fact that the appellant and her children were already housed, on which the Court of Appeal placed weight, is one.
But I have reservations whether that factor is necessarily determinative in circumstances where the adequacy of the living accommodation available to them as a family, as compared with others, is in issue.
On the other hand, it is also potentially relevant that AIHA is not part of the state and that no case has been made out that it is a public authority within the meaning of section 6 of the HRA, so that what is in issue is the ambit of article 8 so far as concerns positive obligations of the state under that provision to intervene in relationships between private persons.
It might be argued that this makes the connection with article 8 more tenuous, and that such a tenuous connection is not sufficient.
I think that we should leave the point open in this case.
Conclusion
For the reasons given above, I would dismiss the appeal.
In summary, the judgment of the Divisional Court on the issue of proportionality, in so far as it is relevant to the statutory defences in sections 158 and 193 of the 2010 Act, cannot be faulted.
Accordingly, those defences have rightly been found to apply in relation to AIHA.
Further and in any event, the Court of Appeal was right to conclude that, on its proper interpretation, the statutory defence based on section 193(2)(b) of the 2010 Act does not include an implied requirement of proportionality.
Accordingly, the Court of Appeal was right to conclude that AIHA benefited from that defence, whatever the position on the issue of proportionality.
The appellants new claim based on the Race Directive fails.
LADY ARDEN:
The Court of Appeal in this case was careful to hold that in relation to the issue as to the proportionality of AIHAs allocation policy the Divisional Court was entitled to make its evaluation of the relevant factors and that there was no basis on which its evaluation could be set aside (per Lewison LJ at paras 63 to 68) for the reasons which Lewison LJ gave.
Lord Sales, giving the first judgment in this case, endorses that conclusion, as do I.
Lord Sales then sets out the reasons why he agrees with the Divisional Court at paras 76 to 88.
What falls from my Lord is illuminating and valuable, but it does not in my judgment diminish the importance of the point made by Lewison LJ that the evaluation made by the Divisional Court was one which they were entitled to make and could not be set aside on appeal.
The point made by Lewison LJ is not changed by the fact that the appellate court might have reached some other conclusion, nor yet by the fact that the appellate court would have reached the same conclusion.
The function of the appellate court is simply one of review.
It follows that it is not necessary for this court to express its own view, nor can its view alter the conclusion arrived at by the Divisional Court.
Indeed, I would at least in the generality of cases, agree with Lewison LJ at para 66 of his judgment that if the court at first instance makes no error and there is no flaw in its judgment, the appellate court should not make its own assessment of proportionality.
There may be exceptional circumstances when it is necessary to do so but for my part it has not been suggested that this case was one of them.
On that basis, I agree with the judgment of Lord Sales.
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This appeal is about the application of anti discrimination law to charities, where they are established to provide benefits (in this case, social housing) for particular groups which are the subject of their charitable objectives.
The relevant anti discrimination laws are contained in the Equality Act 2010 and Council Directive 2000/43/EC of 29 June 2000 (the Race Directive).
The charitable objective of Agudas Israel Housing Association Ltd (the Housing Charity) is to make social housing available primarily for members of the Orthodox Jewish community in Hackney, in particular the Haredi community.
It makes properties available via an online portal operated by Hackney London Borough Council (the Council), which is open to applicants for social housing whom the Council has identified as having a priority need.
The Council cannot compel the Housing Charity to take tenants who do not fall within scope of its charitable objective and its selection criteria.
This, combined with a significant surplus of need for social housing on the part of the Orthodox Jewish community, means that in practice the Council only nominates and the Housing Charity only accepts members of that community for the Housing Charitys properties.
The social housing provided by the Housing Charity makes up less than 1% of the social housing available in Hackney.
The principal appellant (the appellant) is a single mother with four small children, two of whom have autism.
The Council identified the appellant as having a priority need for social housing in a larger property, and she has now been housed by the Council in such a property.
However, she had to wait longer to be allocated suitable housing as she is not a member of the Orthodox Jewish community and so larger properties owned by the Housing Charity which became vacant were not available to her.
She issued proceedings against the Council and the Housing Charity, alleging that she had thereby suffered unlawful direct discrimination on grounds of race or religion contrary to the Equality Act 2010.
The Divisional Court dismissed the claim and the Court of Appeal dismissed her appeal.
The appellant now appeals to this Court.
She was given permission to add to her claim based on the Equality Act 2010 a new claim that the allocation policy of the Housing Charity contravened the Race Directive by unlawfully discriminating against her on the grounds of race or ethnic origin.
The appeal turns on whether the Housing Charity acted unlawfully or not in restricting access to its stock of social housing.
The Supreme Court unanimously dismisses the appeal.
Lord Sales gives the main judgment (with which Lord Reed, Lord Kerr and Lord Kitchen agree).
Lady Arden gives a concurring judgment.
Equality Act 2010 The Equality Act 2010 makes it unlawful to discriminate directly against any person on the basis of certain characteristics, known as protected characteristics.
These include race and religion or belief [17] [18].
However, the Act sets out exemptions where certain actions will not be considered as unlawful direct discrimination.
Section 158 provides one such exemption where positive action addresses in a proportionate manner needs or disadvantages connected to a protected characteristic [19].
Section 193 sets out two further exemptions.
Section 193(2)(a) permits charities to restrict benefits to those with a protected characteristic if that restriction is a proportionate means of achieving a legitimate aim and section 193(2)(b) permits charities to restrict benefits to those who share a protected characteristic if the restriction seeks to prevent or compensate for a disadvantage linked to the characteristic [21].
Lord Sales upholds the lower courts findings that the Housing Charitys allocation policy is proportionate and lawful under sections 158 and 193(2)(a) of the Equality Act 2010.
A proportionality assessment first requires the identification of a legitimate aim and, secondly, consideration of whether the measures taken to promote that aim are proportionate, having regard to other interests at stake [65].
The dispute in this case centres on what constitutes a legitimate aim [60] [72].
As found by the Divisional Court and the Court of Appeal, the legitimate aims here include the minimisation of disadvantages which are connected to the Haredi communitys religious identity and counteracting discrimination which they suffer, including in the private housing market, and the fulfilment of relevant needs which are particular to that community [66].
The Housing Charity was entitled to adopt a clear and strict rule about who could and could not apply for its social housing, which meant that it was made available just for members of the Orthodox Jewish community, to ensure that its charitable activities were focused on that community, so that its activities did in fact fulfil its charitable objective to alleviate the problems of that community [76] [87].
Lord Sales holds that the Divisional Court correctly considered the Housing Charitys allocation policy in the light of the applicable legal framework and, accordingly, was entitled to find it to be proportionate and lawful under these statutory exemptions.
Lord Sales makes his own assessment of proportionality [76] [87], which is in agreement with that of the Divisional Court [73].
Lord Sales holds that, in any event, the Court of Appeal was right to say that the Divisional Courts finding of proportionality could only be set aside if it had misdirected itself or reached a decision which was wrong.
Applying this approach, he holds that the Divisional Court had been entitled to make this finding, with the result that its decision should be upheld on appeal [74] [75].
In her concurring judgment, Lady Arden emphasises that an appellate court should generally not make its own assessment of proportionality in such circumstances [120], and with this caveat she agrees with the judgment of Lord Sales [121].
As regards the exemption in section 193(2)(b), the Court dismisses the argument for the appellants that the provision is subject to an implied proportionality requirement.
There is no sound basis on which such a requirement could be read into the provision [97].
First, even on the assumption that the case is within the ambit of Article 8 of the European Convention on Human Rights (the ECHR), on the right to respect for private and family life, so that Article 14 of the ECHR (non discrimination) is applicable, any proportionality requirement inherent in that provision is satisfied by the structure of section 193 itself; Parliament was entitled to create a clear rule applicable to charities in the interests of conserving their resources for use in fulfilling their charitable objectives, having regard, among other things, to the regulation of charities under the Charities Act 2011 to ensure they operate in the public interest and the wide margin of appreciation accorded to Parliament, as the body with democratic authority, in setting social and economic policy, including encouragement for giving to charity [97] [110].
Secondly, on the same assumption that the case falls within the ambit of Article 8 of the ECHR, even if the structure of section 193 itself did not satisfy any relevant proportionality standard, the drafting of the provision and the policy underlying it are so clear that it would not be possible to read into it an additional proportionality requirement [111] [115].
In the circumstances, therefore, it is not necessary to resolve the question whether the case falls within the ambit of Article 8 of the ECHR and the Court prefers to leave that issue open [96, 116].
Section 193(2)(b) should be applied according to its express terms.
It is common ground that, on this basis, the requirements of section 193(2)(b) are satisfied in this case [50].
Even if a proportionality
requirement could be read into the provision, it follows from the decision regarding proportionality in relation to section 158 and section 193(2)(a) that it would have been satisfied [55, 88].
The Race Directive The Race Directive provides that discrimination on grounds of race or ethnic origin must be unlawful, particularly in relation to housing [89].
The Court finds that the Housing Charity is not in contravention of this directive for the simple reason that its allocation policy differentiates on the basis of religious observance and not race or ethnic origin [89] [90].
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This appeal concerns the supposed principle that reflective loss cannot be recovered.
Before describing the factual background, or entering into the details of the legal issues, it may be helpful to begin by considering some basic principles of our law.
Introduction
It is not uncommon for two persons, A and B, to suffer loss as a result of the conduct of a third person, C.
If that conduct was in breach of an obligation owed by C to A, then A will in principle have a cause of action against C.
If the conduct was also in breach of an obligation owed by C to B, then B will also have a cause of action against C. A and B are both at liberty to sue C whenever they please, subject to rules as to limitation and prescription, and C is normally liable to compensate them both for the loss which they have suffered.
If A obtains and enforces a pecuniary award against C, and some time later B also seeks a similar award but C is unable to pay it, then in principle that is Bs misfortune.
However, where C is insolvent at the time when the first claim is made against him, the law of insolvency protects the position of both A and B by imposing a regime for the distribution of Cs assets among his creditors which ensures that they are treated equally, after the claims of secured or preferred creditors have been met.
The position can become more complicated where A and B have concurrent claims in respect of losses which are inter related in such a way that a payment by C to one of them will have the practical effect of remedying the loss suffered by the other.
The general position in situations of that kind was described by Brandon J in The Halcyon Skies [1977] QB 14, 32: There is no reason, as a matter of law, why two different persons should not have concurrent rights of recovery, based on different causes of action, in respect of what is in substance the same debt.
The court will not allow double recovery or, in a case of insolvency, double proof against the insolvent estate: The Liverpool (No 2) [1963] P 64.
Subject to this, however, either of the two persons is entitled to enforce his right independently of the other.
The principle that double recovery should be avoided does not prevent a claimant from bringing proceedings for the recovery of his loss.
But the court will have to consider how to avoid double recovery in situations where the issue is properly before it.
Procedurally, that may occur in a number of ways.
For example, both claimants may bring proceedings concurrently, or the wrongdoer may raise the issue by way of defence to proceedings brought by one claimant, and join the other potential claimant as a defendant, or the court may itself direct the claimant to notify the other potential claimant so that he has an opportunity to intervene (as explained in In re Gerald Cooper Chemicals Ltd [1978] Ch 262, 268 269).
The principle that double recovery should be avoided does not deflect the law from compensating both claimants, but affects the remedial route by which the law achieves that objective.
There are a number of ways in which the law can avoid double recovery, or double proof in insolvency, where concurrent rights of recovery might otherwise have that result.
In some circumstances, priority is given to the cause of action held by one person, and the claim of the other person is excluded so far as may be necessary to avoid double recovery.
The rationale in such cases is that, by directly achieving its remedial objective in respect of the person who is permitted to bring the prior claim, the law indirectly achieves that objective in respect of the person whose claim is excluded.
That was the approach adopted, for example, in the decision cited by Brandon J, The Liverpool (No 2) [1963] P 64.
In that case, a port authority sought to prove against an insolvent fund, established to meet the liabilities of the owners of one vessel, the Liverpool, for the cost of clearing the wreck of another, the Ousel, which had been damaged in a collision for which the Liverpool was responsible.
The authority also made a statutory claim for the same cost against the owners of the Ousel, and they in turn sought to prove for that amount against the fund.
The Court of Appeal held that the claim of the authority against the fund should be given priority over that of the owners of the Ousel, since the authority was actually out of pocket, while the claim of the owners of the Ousel against the fund should be disallowed.
It also observed that it would be consonant with justice and good sense that, in the event that the authority sought to recover also from the owners of the Ousel (for any balance remaining after it had received a dividend out of the fund), it would have to give credit for the amount that it had already recovered.
In that way, the owners of the Ousel benefited from the authoritys recovery from the fund to the same extent as they would have done if their claim against the fund had been allowed.
A similar approach, in the context of concurrent claims arising out of the breach of a construction contract, can be seen in Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518, 595.
There are also circumstances in which the law finds other means of avoiding double recovery, such as subrogation (as discussed, for example, in Gould v Vaggelas [1984] HCA 68; (1984) 157 CLR 215), or the imposition on one claimant of an obligation to account to the other out of the damages which the former has received (as, for example, in OSullivan v Williams [1992] 3 All ER 385).
The most suitable approach to adopt in a particular case will depend upon its circumstances.
This appeal is concerned with a particular type of situation in which two persons, A and B, suffer loss as a result of the conduct of a third person, C.
The situation in question is one in which A is a company, B is a creditor of that company, and Bs loss is consequential upon the loss suffered by A, because Cs conduct has rendered A insolvent and unable to pay its debt to B.
The fact that a claim lies at the instance of a company rather than a natural person, or some other kind of legal entity, does not in itself affect the claimants entitlement to be compensated for wrongs done to it.
Nor does it usually affect the rights of other persons, legal or natural, with concurrent claims.
There is, however, one highly specific exception to that general rule.
It was decided in the case of Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 that a shareholder cannot bring a claim in respect of a diminution in the value of his shareholding, or a reduction in the distributions which he receives by virtue of his shareholding, which is merely the result of a loss suffered by the company in consequence of a wrong done to it by the defendant, even if the defendants conduct also involved the commission of a wrong against the shareholder, and even if no proceedings have been brought by the company.
As appears from that summary, the decision in Prudential established a rule of company law, applying specifically to companies and their shareholders in the particular circumstances described, and having no wider ambit.
The rule in Prudential, as I shall refer to it, is distinct from the general principle of the law of damages that double recovery should be avoided.
In particular, one consequence of the rule is that, where it applies, the shareholders claim against the wrongdoer is excluded even if the company does not pursue its own right of action, and there is accordingly no risk of double recovery.
That aspect of the rule is understandable on the basis of the reasoning in Prudential, since its rationale is that, where it applies, the shareholder does not suffer a loss which is recognised in law as having an existence distinct from the companys loss.
On that basis, a claim by the shareholder is barred by the principle of company law known as the rule in Foss v Harbottle (1843) 2 Hare 461: a rule which (put shortly) states that the only person who can seek relief for an injury done to a company, where the company has a cause of action, is the company itself.
Putting matters broadly at this stage, in Johnson v Gore Wood & Co [2002] 2 AC 1 the House of Lords purported to follow Prudential, but the reasoning of some members of the Appellate Committee was not clearly confined to circumstances of the kind with which Prudential was concerned.
In particular, the reasoning of Lord Millett, which proved particularly influential in subsequent cases, advanced a number of other justifications for the exclusion of the shareholders claim whenever the company had a concurrent claim available to it, of wider scope than the approach adopted in Prudential.
The decision in Johnson has been interpreted in later cases as establishing a principle, generally referred to as the reflective loss principle, whose legal basis and scope are controversial.
This supposed principle has been applied to claims brought by a claimant in the capacity of a creditor of a company, where he also held shares in it, and the company had a concurrent claim.
In the present case, the Court of Appeal held that the principle applied to a claim brought by an ordinary creditor of a company (who was not a shareholder), where the company had a concurrent claim.
In the present appeal, the court is invited to clarify, and if necessary depart from, the approach adopted in Johnson, and to overrule some later authorities.
It is also necessary for the court to examine the rationale and effect of the decision in Prudential, in order to consider the reasoning in Johnson and the later cases.
The present appeal
The appeal is brought against an order of the Court of Appeal (Lewison, Lindblom and Flaux LJJ), allowing an appeal against an order made by Knowles J in the Commercial Court.
In summary, an application was made to Knowles J to set aside an order giving permission for service of proceedings on the respondent, Mr Sevilleja, out of the jurisdiction.
One of the arguments advanced by Mr Sevilleja in support of his application was that the appellant, Marex, did not have a good arguable case against him because the losses which Marex was seeking to recover were reflective of loss suffered by two companies which had concurrent claims against him, and were therefore not open to Marex to claim.
The judge held that Marex had a good arguable case that its claim was not precluded by the reflective loss principle, and therefore dismissed Mr Sevillejas application: [2017] EWHC 918 (Comm); [2017] 4 WLR 105.
On appeal, the Court of Appeal accepted that the reflective loss principle applied to about 90% of Marexs claim: [2018] EWCA Civ 1468; [2019] QB 173.
The effect of the Court of Appeals decision is that although Marexs permission to serve out was not set aside, it can pursue its claim only as regards the 10% of its alleged losses which were conceded not to be reflective.
The facts
It is common ground that, for the purposes of the present proceedings, the facts must be taken to be as alleged by Marex in its particulars of claim and supporting documents.
On that basis, the material facts which, it should be made clear, are disputed by Mr Sevilleja can be summarised as follows.
Mr Sevilleja was the owner and controller of two companies incorporated in the British Virgin Islands (the BVI), Creative Finance Ltd and Cosmorex Ltd (the Companies), which he used as vehicles for trading in foreign exchange.
Marex brought proceedings against the Companies in the Commercial Court for amounts due to it under contracts which it had entered into with them.
Following a trial before Field J in April 2013, Marex obtained judgment against the Companies for more than US$5.5m.
It was also awarded costs which were later agreed at 1.65m.
Field J provided the parties with a confidential draft of his judgment on 19 July 2013, the judgment being handed down and orders for payment made on 25 July 2013.
Over a few days starting on or shortly after 19 July 2013, Mr Sevilleja procured that more than US$9.5m was transferred offshore from the Companies London accounts and placed under his personal control.
By the end of August 2013, the Companies disclosed assets of US$4,329.48.
The object of the transfers was to ensure that Marex did not receive payment of the amounts owed by the Companies.
In procuring the transfers, Mr Sevilleja acted in breach of duties owed to the Companies.
The Companies were placed into insolvent voluntary liquidation in the BVI by Mr Sevilleja in December 2013, with alleged debts exceeding US$30m owed to Mr Sevilleja and persons and entities associated with him or controlled by him.
Marex was the only non insider creditor.
According to Marex, the liquidator has been paid a retainer, and has been indemnified against his fees and expenses, by an entity controlled by Mr Sevilleja or associated with him.
The liquidation process has effectively been on hold.
The liquidator has not taken any steps to investigate the Companies missing funds or to investigate the claims submitted to him, including claims submitted by Marex.
Nor has he issued any proceedings against Mr Sevilleja.
Marex refers in its pleadings to proceedings in the United States, where the court, after hearing evidence, refused to recognise the BVI liquidation as a main proceeding under Chapter 15 of the US Bankruptcy Code.
It described the liquidation as a device to thwart enforcement of a $5m judgment against the [Companies] that Marex won in the courts of England and the most blatant effort to hinder, delay and defraud a creditor this Court has ever seen: In re Creative Finance Ltd (In Liquidation) et al, (2016) 543 BR 498, p 502 (United States Bankruptcy Court for the Southern District of New York).
It also found that [f]rom beginning to end, Sevillejas tactics were a paradigmatic example of bad faith, and the Liquidators actions and inaction facilitated them (p 503).
Mr Sevilleja was found to be guilty of attempting (unfortunately, successfully) to control a BVI liquidator, who was supposed to act as an independent fiduciary, by the purse strings [and] depriving the Liquidator of the resources he needed to properly do his job (p 513).
In the present claim against Mr Sevilleja, Marex seeks damages in tort for (1) inducing or procuring the violation of its rights under the judgment and order of Field J dated 25 July 2013, and (2) intentionally causing it to suffer loss by unlawful means.
The amounts claimed are (1) the amount of the judgment debt, interest and costs awarded by Field J, less an amount recovered in US proceedings concerning the bankruptcy of a company which was indebted to the Companies, and (2) costs incurred by Marex in the US proceedings and in other attempts to obtain payment of the judgment debt.
Mr Sevilleja concedes that those costs fall outside the scope of the reflective loss principle.
The issues in the appeal are agreed by the parties to be the following: 1.
Whether the No Reflective Loss Rule applies in the case of claims by company creditors, where their claims are in respect of loss suffered as unsecured creditors, and not solely to claims by shareholders. 2.
Whether there is any and if so what scope for the court to permit proceedings claiming for losses which are prima facie within the No Reflective Loss Rule, where there would otherwise be injustice to the claimant through inability to recover, or practical difficulty in recovering, genuine losses intentionally inflicted on the claimant by the defendant in breach of duty both to the claimant and to a company with which the claimant has a connection, and where the losses are felt by the claimant through the claimant's connection with the company.
Prudential Assurance v Newman Industries (No 2)
Although incorporated companies have long existed, it was only towards the end of the 19th century that the independent legal personality of the company was conclusively established by the decision of the House of Lords in Salomon v A Salomon & Co Ltd [1897] AC 22.
During the 20th century, the implications of corporate personality for rights of property, and for the nature of a shareholders interest, were addressed by the courts in a series of cases, including Macaura v Northern Assurance Co Ltd [1925] AC 619 and Short v Treasury Comrs [1948] 1 KB 116, affirmed [1948] AC 534.
In more recent times, the courts have had to consider the position where a shareholder seeks to recover damages in respect of a diminution in the value of his shareholding or in the distributions received from the company, resulting from a loss suffered by the company in respect of which the company has its own cause of action.
The issue appears to have arisen for the first time in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2).
The case concerned a situation where the directors of a company were alleged to have made a fraudulent misrepresentation in a circular distributed to its shareholders, so as to induce them to approve the purchase of assets at an overvalue from another company in which the directors were interested.
Prudential, which was a minority shareholder in the company, brought a personal and a derivative action against the directors, claiming that they had committed the tort of conspiracy against the company and its members.
In relation to the personal claim, the Court of Appeal (Cumming Bruce, Templeman and Brightman LJJ) concluded that, where a company and its shareholders had suffered wrongs which resulted in a loss to the company and a fall in the value of its shares, a shareholder could not bring a personal action against the wrongdoer.
The court devoted most of its judgment to the derivative action, and dealt with the personal action relatively briefly.
It approached the issue on the basis that the directors had acted in breach of their obligations to the shareholders (p 222), and that the loss suffered by the company had brought about a fall in the value of its shares.
It recorded at p 222 that no facts were relied upon in support of the personal claim which were not relied upon in support of the derivative claim.
It also expressed the opinion, at pp 223 224, that the plaintiffs were never concerned to recover in the personal action, and were only interested in it as a means of circumventing the rule in Foss v Harbottle, which stood directly in the way of a derivative action.
Nevertheless, it dealt with the personal action on the basis of general principles rather than on its particular facts; and the courts decision was treated by the House of Lords in Johnson as establishing principles of general application, which Lord Bingham of Cornhill set out at pp 35 36 (see para 41 below).
The court disallowed Prudentials claim on the ground that it had not suffered any personal loss.
It stated at pp 222 223: But what he [the shareholder] cannot do is to recover damages merely because the company in which he is interested has suffered damage.
He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a loss is merely a reflection of the loss suffered by the company.
As that passage makes clear, the decision was concerned only with a diminution in the value of shares or in distributions, suffered by a shareholder merely because the company had itself suffered actionable damage.
It was not concerned with other losses suffered by a shareholder, or with situations where the company had not suffered any actionable loss.
The court explained its reasoning as follows, at p 223: The shareholder does not suffer any personal loss.
His only loss is through the company, in the diminution in the value of the net assets of the company .
The plaintiffs shares are merely a right of participation in the company on the terms of the articles of association.
The shares themselves, his right of participation, are not directly affected by the wrongdoing.
The plaintiff still holds all the shares as his own absolutely unencumbered property.
That reasoning requires elaboration.
It is unrealistic to assert as a matter of fact that the shareholder does not suffer any personal loss: ex hypothesi, there has been a fall in the value of his shares.
It is not immediately obvious what it means to say that his only loss is through the company.
It is, however, possible to explain the courts decision, particularly in the light of later passages in the judgment.
As I understand its reasoning, what the court meant, put shortly, was that where a company suffers actionable loss, and that loss results in a fall in the value of its shares (or in its distributions), the fall in share value (or in distributions) is not a loss which the law recognises as being separate and distinct from the loss sustained by the company.
It is for that reason that it does not give rise to an independent claim to damages on the part of the shareholders.
The court provided at p 223 an illustration of its approach: Suppose that the sole asset of a company is a cash box containing 100,000.
The company has an issued share capital of 100 shares, of which 99 are held by the plaintiff.
The plaintiff holds the key of the cash box.
The defendant by a fraudulent misrepresentation persuades the plaintiff to part with the key.
The defendant then robs the company of all its money.
The effect of the fraud and the subsequent robbery, assuming that the defendant successfully flees with his plunder, is (i) to denude the company of all its assets; and (ii) to reduce the sale value of the plaintiffs shares from a figure approaching 100,000 to nil.
There are two wrongs, the deceit practised on the plaintiff and the robbery of the company.
But the deceit on the plaintiff causes the plaintiff no loss which is separate and distinct from the loss to the company The plaintiff obviously cannot recover personally some 100,000 damages in addition to the 100,000 damages recoverable by the company. (Emphasis added) The court also made it clear that the companys failure to recover its loss would not open the door to recovery by the shareholder, asking rhetorically how the failure of the company to pursue its claim could entitle the shareholder to recover the loss for himself.
The cash box example has been criticised for its artificiality.
Certainly, by envisaging a company whose only asset was cash, the court greatly simplified a situation which, in real life, is likely to be more complex.
But the point being made has a rationale in real life as well as in the simplified example.
The starting point is the nature of a share, and the attributes which render it valuable.
A share is not a proportionate part of a companys assets: Short v Treasury Comrs.
Nor does it confer on the shareholder any legal or equitable interest in the companys assets: Macaura v Northern Assurance Co Ltd. As the court stated in Prudential, a share is a right of participation in the company on the terms of the articles of association.
The articles normally confer on a shareholder a number of rights, including a right to vote on resolutions at general meetings, a right to participate in the distributions which the company makes out of its profits, and a right to share in its surplus assets in the event of its winding up.
Where a company suffers a loss, that loss may affect its current distributions or the amount retained and invested in order to pay for future distributions (or, if the company is wound up, the surplus, if any, available for distribution among the shareholders).
Since the value of a companys shares is commonly calculated on the basis of anticipated future distributions, it is possible that a loss may result in a fall in the value of the shares.
That is, however, far from being an inevitable consequence: companies vary greatly, and the value of their shares can fluctuate upwards or downwards in response to a wide variety of factors.
In the case of a small private company, there is likely to be a close correlation between losses suffered by the company and the value of its shares.
In the case of a large public company whose shares are traded on a stock market, on the other hand, a loss may have little or no impact on its share value.
If there is an impact on share value, it will reflect what Lord Millett described in Johnson [2002] 2 AC 1, 62 as market sentiment, and will not necessarily be equivalent to the companys loss.
If the companys loss does not affect the value of its shares, then there is no claim (or at least no sustainable claim) available to a shareholder, and in principle the problem addressed in Prudential does not arise.
A problem only arises where, as in Prudential, a shareholder claims that the companys loss has had a knock on effect on the value of his shares.
Considering, then, the situation where a company suffers actionable loss as the result of wrongdoing, the company then acquires a right of action.
If the companys loss results (or is claimed to result) in a fall in the value of its shares, then, but for the rule in Prudential, the shareholder would simultaneously acquire a concurrent right of action.
The purpose of an award of damages to the company is to restore it to the position in which it would have been if the wrongdoing had not occurred.
In circumstances where an award which restores the companys position to what it would have been if the wrongdoing had not occurred would also restore the value of the shares, the only remedy which the law would require to provide, in order to achieve its remedial objectives of compensating both the company and its shareholders, would be an award of damages to the company.
For the shareholders to have a personal right of action, in addition to the companys right of action, would in those circumstances exceed what was necessary for the law to achieve those objectives, and would give rise to a problem of double recovery.
Most of the cases in which the rule in Prudential has been applied (but not Prudential itself) have concerned small private companies, where those circumstances are likely to have existed.
As I have explained, however, there are also circumstances where there may not be a close correlation between the companys loss and any fall in share value.
The avoidance of double recovery cannot, therefore, be sufficient in itself to justify the rule in Prudential.
That conclusion is also supported by another point.
What if the company fails to pursue a right of action which, in the opinion of a shareholder, ought to be pursued, or compromises its claim for an amount which, in the opinion of a shareholder, is less than its full value? If that opinion is shared by a majority of the shareholders, then the companys articles will normally enable them to direct the companys course of action by passing a suitable resolution at a general meeting.
Even if the shareholder finds himself in a minority, he has a variety of remedies available to him, including the bringing of a derivative action on the companys behalf, equitable relief from unfairly prejudicial conduct, or a winding up on the just and equitable ground, if (put shortly) those in control of the company are abusing their powers.
But what if the companys powers of management are not being abused, and a majority of shareholders approve of the companys decision not to pursue the claim, or its decision to enter into a settlement? Should the minority shareholder not then be able to pursue a personal action?
In Prudential, the court answered that question in the negative, stating at p
224 that the rule in Foss v Harbottle would be subverted if the shareholder could pursue a personal action.
The rule, as stated in Edwards v Halliwell [1950] 2 All ER 1064 and restated in Prudential at pp 210 211, has two aspects.
The first is that the proper plaintiff in an action in respect of a wrong alleged to be done to a corporation is, prima facie, the corporation.
As was explained in Prudential at p 210, one of the consequences of that aspect of the rule is that a shareholder cannot, as a general rule, bring an action against a wrongdoer to recover damages or secure other relief for an injury done to the company.
The second aspect of the rule is that [w]here the alleged wrong is a transaction which might be made binding on the corporation and on all its members by a simple majority of the members, no individual member of the corporation is allowed to maintain an action in respect of that matter because, if the majority confirms the transaction, cadit quaestio [the question falls]; or, if the majority challenges the transaction, there is no valid reason why the company should not sue.
This second aspect of the rule reflects the fact that the management of a companys affairs is entrusted to the decision making organs established by its articles of association, subject to the exceptional remedies mentioned in para 34 above.
When a shareholder invests in a company, he therefore entrusts the company ultimately, a majority of the members voting in a general meeting with the right to decide how his investment is to be protected.
As the court stated in Prudential at p 224: When the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company and that he can only exercise his influence over the fortunes of the company by the exercise of his voting rights in general meeting.
Accordingly, in a situation where a shareholder claims that his shares have fallen in value as a result of a loss suffered by the company, and the company has a right of action in respect of that loss, the shareholder can exercise such rights of control over its decision making as have been granted to him by the articles of association.
These normally provide for the ultimate control of the companys affairs by a majority of the shareholders voting at a general meeting.
A minority shareholder has other remedies available to him if the companys management is acting improperly, including a derivative action and an application for relief against unfairly prejudicial conduct.
As the court observed in Prudential, to allow the shareholder in addition to pursue a personal action would subvert the rule in Foss v Harbottle.
This is not merely a theoretical concern.
Examples of the use of personal actions, post Johnson, to circumvent the rule in Foss v Harbottle are discussed in paras 52 53 below.
The existence of concurrent claims could also result in the shareholders preventing the companys management from dealing with its claim in the way they considered appropriate in the best interests of the company, thereby undermining the rule in Foss v Harbottle.
That could occur, for example, where the companys management wanted to compromise the companys claim but were prevented from doing so by the shareholders refusal to enter into a settlement with the wrongdoer.
One can envisage other situations where the existence of concurrent claims could result in the shareholders acting contrary to the companys interests, for example where the wrongdoers assets were inadequate to satisfy both claims.
But the effect of the rule in Foss v Harbottle, as the court said in Prudential at p 224, is that [the shareholder] accepts the fact that the value of his investment follows the fortunes of the company.
It is for that reason that the rule in Prudential has been said to recognise the unity of economic interests which bind a shareholder and his company: Townsing v Jenton Overseas Investment Pte Ltd [2007] SGCA 13; [2008] 1 LRC 231, para 77.
In addition to arguments based on Foss v Harbottle, there are also pragmatic
advantages in a clear rule that only the company can pursue a right of action in circumstances falling within the ambit of the decision in Prudential.
As Lord Hutton commented in Johnson at p 55, the rule in Prudential has the advantage of establishing a clear principle, rather than leaving the protection of creditors and other shareholders of the company to be given by a judge in the complexities of a trial.
Those complexities should not be underestimated.
Even without the complications arising from the existence of concurrent claims, it would not be straightforward to establish the extent, if any, to which a fall in the value of a companys shares was attributable to a loss that it had suffered as a consequence of the defendants wrongdoing.
But the existence of a concurrent claim by the company would add another dimension to the difficulties.
It would be necessary, for example, to take account of the fact that the wrongdoing had resulted in the companys acquiring an asset, namely its right of action against the defendant, which might have offset any detrimental effect of the wrongdoing on the value of his shares.
It would also be necessary to consider the question of double recovery, and how it should be addressed both procedurally and substantively.
Those issues might have to be addressed in the context of a proliferation of claims, possibly in different proceedings, at different times, and in different jurisdictions.
They would also arise in a context where there might well be conflicts of interest between the shareholder and the companys directors, its liquidator, other shareholders, and creditors.
In summary, therefore, Prudential decided that a diminution in the value of a shareholding or in distributions to shareholders, which is merely the result of a loss suffered by the company in consequence of a wrong done to it by the defendant, is not in the eyes of the law damage which is separate and distinct from the damage suffered by the company, and is therefore not recoverable.
Where there is no recoverable loss, it follows that the shareholder cannot bring a claim, whether or not the companys cause of action is pursued.
The decision had no application to losses suffered by a shareholder which were distinct from the companys loss or to situations where the company had no cause of action.
Johnson v Gore Wood & Co
The decision in Prudential was considered by the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1.
The case concerned alleged negligence on the part of solicitors acting for a private company, which caused it to suffer losses.
The company brought proceedings against the solicitors, which were settled during the sixth week of the trial for a very substantial proportion of the sum claimed, as Lord Bingham explained at p 18.
Mr Johnson, who owned virtually all the shares in the company and was its managing director, then brought proceedings against the solicitors in which he alleged that they had also acted in breach of a duty owed to him personally, and that he had suffered personal losses.
The claim was struck out as an abuse of process.
Mr Johnson appealed against the striking out of his claim, and the defendants cross appealed to have certain heads of loss struck out on the ground that Mr Johnson was seeking to recover for damage which had been suffered by the company.
It is only the latter aspect of the case which needs to be considered.
Lord Bingham stated at pp 35 36 that the authorities supported the following statement of principle: (1) Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss.
No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholders shareholding where that merely reflects the loss suffered by the company.
A claim will not lie by a shareholder to make good a loss which would be made good if the companys assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss.
So much is clear from Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, particularly at pp 222 223, Heron International [Heron International Ltd v Lord Grade [1983] BCLC 244], particularly at pp 261 262, George Fischer [George Fischer (Great Britain) Ltd v Multi Construction Ltd [1995] 1 BCLC 260], particularly at pp 266 and 270 271, Gerber [Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443] and Stein v Blake [[1998] 1 All ER 724], particularly at pp 726 729. (2) Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding.
This is supported by Lee v Sheard [1956] 1 QB 192, 195 196, George Fischer and Gerber. (3) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other.
I take this to be the effect of Lee v Sheard, at pp 195 196, Heron International, particularly at p 262, R P Howard [RP Howard Ltd v Woodman Matthews & Co [1983] BCLC 117], particularly at p 123, Gerber and Stein v Blake, particularly at p 726.
I do not think the observations of Leggatt LJ in Barings [Barings plc v Coopers & Lybrand [1997] 1 BCLC 427] at p 435B and of the Court of Appeal of New Zealand in Christensen v Scott [1996] 1 NZLR 273 at p 280, lines 25 35, can be reconciled with this statement of principle.
In Lord Binghams proposition (1), the first sentence is a statement of the rule in Foss v Harbottle.
The second sentence encapsulates the reasoning in Prudential, and explains why, in the circumstances described, a shareholder who is suing in that capacity and no other cannot bring a claim consistently with the rule in Foss v Harbottle.
The third sentence should not be understood as limiting the rule in Prudential to cases where there is an exact correlation between the companys loss and the fall in share value.
As was explained at paras 32 38 above, it is possible to envisage cases where there is not a precise correlation, and where recovery by the company might not therefore fully replenish the value of its shares, but where the rule in Prudential would nevertheless apply.
Lord Binghams proposition (2), stating that a shareholder can sue for reflective loss where the company has no cause of action, on the authority of Lee v Sheard, George Fischer (Great Britain) Ltd v Multi Construction Ltd and Gerber Garment Technology Inc v Lectra Systems Ltd, merits closer consideration.
In Lee v Sheard the plaintiff was a company director and shareholder who earned his living by working for the company and being remunerated by distributions out of its profits.
He suffered injuries in a road accident for which the defendant was responsible.
He was unable to work while he recovered from his injuries, and as a result there was a fall in the companys profits, which led to a reduction in the distributions paid to him.
He recovered damages for his loss of earnings.
The company had no cause of action against the negligent driver.
This was not, therefore, a case concerned with concurrent claims.
The plaintiffs loss of earnings took the form of a reduction in distributions, but it was not merely a reflection of the loss suffered by the company, in the phrase used in Prudential (para 26 above).
He, not the company, had been injured in the road accident.
He, not the company, was entitled to recover damages for his loss.
In George Fischer (Great Britain) Ltd v Multi Construction Ltd, the defendant entered into a contract with the plaintiff company (the shareholder) to install equipment at the premises of one of its subsidiaries (the company).
When the equipment proved defective, causing the company to suffer a loss of profits, the shareholder was held to be entitled to damages for breach of contract in respect of the loss which it had suffered as a result of the companys reduced profits.
That was another case where the wrong was committed against the shareholder, not the company.
Since the company had no cause of action, there was no reason why the shareholder should not recover its loss by means of an award of damages, in accordance with ordinary principles.
Similar observations apply to Gerber Garment Technology Inc v Lectra Systems Ltd. The plaintiff company was the owner of a patent which was infringed, causing it to suffer a loss of income.
As the commercial exploitation of the patent was carried on by its subsidiary, the plaintiffs loss of income took the form of a reduction in the distributions it received from its subsidiary.
But it was the plaintiff, not its subsidiary, whose patent was infringed, and which suffered a loss of income to which its ownership of the patent entitled it.
Lord Binghams proposition (3), stating (put shortly) that a shareholder can sue to recover a loss which is separate and distinct from that suffered by the company, reflects the fact that the shareholders loss, where it does not consist merely of a fall in the value of his shareholding, or in the distributions which he receives by virtue of his shareholding, does not fall within the ambit of the rule in Prudential.
This proposition also makes it clear that the rule renders certain heads of loss irrecoverable, rather than barring a cause of action as such.
Lord Bingham went on to explain how courts should apply the relevant principles: On the one hand the court must respect the principle of company autonomy, ensure that the companys creditors are not prejudiced by the action of individual shareholders and ensure that a party does not recover compensation for a loss which another party has suffered.
On the other, the court must be astute to ensure that the party who has in fact suffered loss is not arbitrarily denied fair compensation. (p 36) The aims identified in the first sentence respecting the principle of company autonomy, ensuring that the companys creditors are not prejudiced by the action of individual shareholders, and ensuring that a party does not recover compensation for a loss which another party has suffered are all objectives or consequences of the rule in Foss v Harbottle, and are consistent with the decision in Prudential.
The second sentence reflects the fact that deciding whether a loss falls within the scope of the rule may call for the exercise of judgement.
Before turning to Lord Binghams treatment of the losses claimed, it is necessary to consider Lord Milletts speech, which lies at the origin of the expansion of the supposed reflective loss principle in the subsequent case law.
Lord Millett began by discussing the relationship between the companys assets and the value of its shares.
A share, he said at p 62, represents a proportionate part of the companys net assets, and if these are depleted the diminution in its assets will be reflected in the diminution in the value of the shares.
But a share is not a proportionate part of the companys net assets: see Macaura.
The idea that a diminution in the value of a companys net assets will be reflected in the value of the shares is therefore not an axiomatic truth, as was noted in para 32 above.
The rule in Prudential is not premised on any necessary relationship between a companys assets and the value of its shares (or its distributions).
Approaching the matter on the basis which he had described, Lord Millett observed at p 62 that the problem which arose, where the company suffered loss caused by the breach of a duty owed to it, and a shareholder claimed to have suffered a consequent diminution in the value of his shareholding or in distributions, caused by the breach of a duty owed to it by the same wrongdoer, was the risk of double recovery, on the one hand, or a risk to the companys creditors through the depletion of its assets, on the other: If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders.
Neither course can be permitted Justice to the defendant requires the exclusion of one claim or the other; protection of the interests of the companys creditors requires that it is the company which is allowed to recover to the exclusion of the shareholder.
As explained at para 33 above, the principle that double recovery should be avoided is not in itself a satisfactory explanation of the rule in Prudential.
As was explained at paras 34 37 above, the unique position in which a shareholder stands in relation to his company, reflected in the rule in Foss v Harbottle, is a critical part of the explanation.
In addition, as was explained at para 38 above, there are pragmatic advantages in adopting a clear rule.
However, by treating the avoidance of double recovery a principle of wider application as sufficient to justify the decision in Prudential, Lord Millett paved the way for the expansion of the supposed reflective loss principle beyond the narrow ambit of the rule in Prudential.
One problem with reasoning based on the avoidance of double recovery is that the principle is one of the law of damages.
It does not deny the existence of the shareholders loss, as the rule in Prudential does, where the loss falls within its ambit, but on the contrary is premised on the recognition of that loss.
Applying an approach based on the avoidance of double recovery, it is therefore possible for a shareholder to bring a personal action based on a loss which would fall within the ambit of the decision in Prudential, and to obtain a remedy which that decision would have barred to him, provided the relief that he seeks is not an award of damages in his own favour.
This device has been exploited in a number of cases subsequent to Johnson, in ways which circumvent the rule in Foss v Harbottle: a rule which is not confined to actions for damages but also applies to other remedies, as explained at para 35 above.
For example, in Peak Hotels and Resorts Ltd v Tarek Investments Ltd [2015] EWHC 3048 (Ch), the judge considered it arguable that the reflective loss principle, as explained by Lord Millett in Johnson, did not bar proceedings by a shareholder, who complained of a fall in the value of his shares resulting from loss suffered by the company in respect of which the company had its own cause of action, where the relief that he sought was not damages but a mandatory injunction requiring the defendant to restore property to the company.
A similar view was taken in Latin American Investments Ltd v Maroil Trading Inc [2017] EWHC 1254 (Comm), where the shareholder complained of a fall in the value of its shares resulting from a breach of obligations owed to the company, which also involved a breach of contractual obligations owed to itself.
It responded to the argument that its claim was for reflective loss by seeking an order for the payment of the contractual damages not to itself but to the company.
A further example is Xie Zhikun v Xio GP Ltd, Cayman Islands Court of Appeal, unreported, 14 November 2018.
Summarising complex facts, in that case the shareholder applied for a quia timet injunction to prevent the breach of fiduciary duties owed both to the company and to himself, which would cause the company to suffer loss, and would consequently affect the value of his interest in it.
Sir Bernard Rix JA observed at para 66 that he did not see how, other than perhaps in terms of pure formalism the present case differs from a derivative action.
Those cases demonstrate how right the Court of Appeal was in Prudential in considering that the rule established in that case, based on the absence of separate and distinct loss, was necessary in order to avoid the circumvention of the rule in Foss v Harbottle.
The exception to that rule is the derivative action.
Whether a shareholder can bring such an action depends on whether the relevant conditions are satisfied.
The most obvious difficulty with the avoidance of double recovery, as an explanation of the judgment in Prudential, is perhaps its unrealistic assumption that there is a universal and necessary relationship between changes in a companys net assets and changes in its share value.
Another serious problem is its inability to explain why the shareholder cannot be permitted to pursue a claim against a wrongdoer where the company has declined to pursue its claim or has settled it at an undervalue, and the risk of double recovery is therefore eliminated in whole or in part.
In addressing this point, Lord Millett relied on a number of arguments, none of which, with respect, appears to me to be persuasive.
The first was based on causation.
Lord Millett stated at p 66 that, if the company chooses not to exercise its remedy, the loss to the shareholder is caused by the companys decision not to pursue its remedy and not by the defendants wrongdoing.
The same reasoning, he added, applies if the company settles for less than it might have done.
The logic of the argument is that it is impossible for the shareholder to suffer a loss caused by the wrongdoer, since his actions result in the companys loss being balanced by a right of action of equivalent value, so that its net assets are unaffected.
It is only if the company fails to enforce its right of action that the shareholder can suffer a loss, and his loss will in that event be caused by the company.
That reasoning might be contrasted with the logic of the argument based on the avoidance of double recovery, namely that the companys loss results in the shareholders suffering an equivalent loss, because their shares represent the companys net assets.
As Lord Hutton observed in Johnson at p 54, causation does not provide a satisfactory explanation.
One difficulty is that the failure of the company to sue the wrongdoer, or its decision to settle with him for less than the full value of its claim, may be the result of its impecuniosity, caused by the defendants wrongdoing.
In those circumstances, the companys failure to recover its loss can hardly be regarded as interposing a novus actus interveniens between the defendants wrongdoing and the shareholders loss.
Furthermore, in an economic tort case, where the shareholders claim is based on an allegation that the wrongdoer committed the wrongdoing with the intention of causing the shareholder to suffer loss, it is bizarre to say that the loss which the defendant intended to cause, and which ensued from his wrongdoing, was nevertheless not caused by what he did.
In addition to the causation argument, Lord Millett put forward at p 66 two
other reasons, which he described as policy considerations, for excluding the shareholders claim where the company had settled its claim.
The first was that the personal interests of the directors might otherwise conflict with their fiduciary duty to the company.
Presumably Lord Millett was envisaging a situation where the directors were also shareholders, and might be tempted to settle the companys claim at an undervalue, or fail to pursue it altogether, in order to recover the balance of the loss for their personal benefit.
This reasoning does not, however, explain why shareholders are generally prevented from pursuing a claim for a fall in share value which is consequential on the companys loss, when the company has its own cause of action: the principle is not confined to shareholders who are also directors.
Nor is it apparent why, having prohibited directors from acting in breach of their fiduciary duties, the law should also impose a disability on shareholders (who normally owe the company no such duties) as an additional, indirect, and indiscriminate safeguard.
The second policy consideration was that it would be difficult for a liquidator to settle claims against wrongdoers for the benefit of the companys creditors, if the wrongdoers remained exposed to further claims brought by the shareholders: the conduct of the companys claims would effectively be taken out of the liquidators hands.
This point is addressed by the rule in Prudential, consistently with the underlying rule in Foss v Harbottle, as was explained in para 37 above.
The most serious difficulty with the approach favoured by Lord Millett is that the possibility of double recovery can arise where concurrent claims exist at the instance of companies and of persons who have suffered loss otherwise than as shareholders.
As will be explained, Lord Milletts approach has been interpreted in subsequent cases as extending to such persons the same categorical exclusion of claims as he applied to shareholders.
That is not the position on the approach adopted in Prudential: the loss suffered by a creditor, for example, when he cannot recover a debt owed to him by a company because of losses which it has incurred, stands in a different relationship to the companys loss from the loss sustained by a shareholder whose shares have fallen in value, and raises different issues.
This is discussed at paras 62 63 and 84 85 below.
Lord Millett went on to express the opinion that the concept of reflective loss extended beyond the diminution of the value of shares and the loss of dividends, stating at p 66 (omitting the citation): [I]t extends to all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds.
All transactions or putative transactions between the company and its shareholders must be disregarded.
Payment to the one diminishes the assets of the other.
In economic terms, the shareholder has two pockets, and cannot hold the defendant liable for his inability to transfer money from one pocket to the other. (Emphasis added) It appears from the passage cited in para 62 below that those observations may have been intended to apply only to payments receivable by shareholders in that capacity, in which case they correctly recognise that distributions can take other forms besides the payment of dividends.
However, the words that I have italicised repeat a point made earlier on p 66, when Lord Millett said: The test is not whether the company could have made a claim in respect of the loss in question; the question is whether, treating the company and the shareholder as one for this purpose, the shareholders loss is franked by that of the company. (Emphasis added) These passages appear to suggest that the separate legal personalities of the company and its shareholder are to be disregarded in this context.
That would provide a simple explanation of why the company and its shareholders cannot have concurrent claims, but would also introduce an important exception to the fundamental principle in Salomon v A Salomon & Co Ltd, with potentially significant ramifications.
That issue was not discussed.
Millett continued at p 67: In words which have had a particular influence on later developments, Lord The same applies to other payments which the company would have made if it had had the necessary funds even if the plaintiff would have received them qua employee and not qua shareholder and even if he would have had a legal claim to be paid.
His loss is still an indirect and reflective loss which is included in the companys claim.
This is not altogether easy to follow.
Lord Milletts reasoning in the preceding passage, cited (first) in para 61 above, is not transferable to persons whose claims are not brought as shareholders, but, for example, as employees or creditors of the company.
As Lord Millett had indicated, a company may be regarded in economic terms as the alter ego of its shareholders.
It cannot be regarded as the alter ego of its creditors or employees, or of shareholders whose claims are brought in the capacity of creditors or employees.
If Lord Millett meant that all claims against a wrongdoer in respect of amounts which the company would have paid to the claimant if it had had the necessary funds must be excluded where the company also has a cause of action, then I would respectfully regard the dictum as going further than was necessary for the decision of the appeal, and as being mistaken.
For example, one might envisage a situation in which a creditor of a company has entered into a contract with the wrongdoer, the performance of which would have preserved the companys solvency, and the wrongdoer then breaches the contract and also his duties to the company, rendering it insolvent and unable to pay the debt it owes to the creditor.
If the creditor sues the wrongdoer for breach of contract, he is entitled to damages.
The fact that the company also has a cause of action is no reason why the creditor should be deprived of the benefit of his contract.
In the event that any issue of double recovery arises, it will need to be addressed; but that possibility is no reason for barring the creditors claim, regardless of whether any such issue arises in the particular case.
Where the creditors claim against the wrongdoer is based on tort, it is equally important that he should not be deprived of the protection afforded by the law of tort, merely because the debt in question is owed to him by a company rather than a natural person.
Turning to the remaining speeches in Johnson, Lord Goff of Chieveley agreed with Lord Milletts analysis.
Lord Cooke of Thorndon accepted the correctness of the decision in Prudential, and agreed that the English authorities cited by Lord Bingham supported the three propositions which he had stated.
He also concurred in the order proposed by Lord Bingham.
On the other hand, some of his observations (at pp 45 and 47) suggest that he regarded the avoidance of double recovery and of prejudice to creditors as the critical considerations.
Lord Hutton also emphasised those considerations (at p 54).
He considered that the Prudential principle should be upheld, although he was critical of the reasoning in that case in so far as it denied that the shareholder had suffered a personal loss.
The decision on the facts of Johnson is also important.
The House of Lords concluded that two of the heads of loss should be struck out.
The first of these was a claim for the fall in the value of Mr Johnsons shareholding in the company.
Its being struck out followed from Lord Binghams proposition (1).
The second was a claim for loss in respect of the value of a pension policy set up by the company for Mr Johnsons benefit.
Since the striking out of this head of loss has featured prominently in the subsequent case law, it is necessary to consider the matter in some detail.
Mr Johnson claimed that he had suffered loss as a result of the companys failure to make payments into the policy which it would have made out of its profits if it had not suffered the losses caused by the defendants.
It was not suggested in any of the speeches, or in the judgment of the court below ([1999] BCC 474), that the company was under any obligation to Mr Johnson to pay the pension contributions.
That aspect of his claim was not, therefore, brought as a creditor of the company.
It appears, instead, that the pension contributions were a form of distribution of the companys profits to its 99% shareholder: an alternative to the payment of dividends or bonuses.
Lord Bingham dealt with this aspect of the case extremely briefly: an indication that he did not regard it as raising any issue which he had not already addressed in his discussion of shareholders claims.
He stated at p 36: [T]his claim relates to payments which the company would have made into a pension fund for Mr Johnson: I think it plain that this claim is merely a reflection of the companys loss and I would strike it out.
The other members of the House agreed.
There is no indication in the speeches, other than possibly in the passage in Lord Milletts speech cited at para 62 above, that the Appellate Committee intended, in its treatment of this element of Mr Johnsons claim, to suggest that the principle which excluded a shareholders claim for a diminution in the value of his shares or in the distributions which he received should also apply to claims brought otherwise than in the capacity of a shareholder.
Lord Bingham clearly intended that the principle which he had explained should be confined to claims brought in that capacity: see the second sentence of his proposition (1), cited in para 41 above.
His conclusion that this head of loss should be struck out was consistent with the application of that proposition.
In summary, Johnson gives authoritative support to the decision in
Prudential that a shareholder is normally unable to sue for the recovery of a diminution in the value of his shareholding or in the distributions he receives as a shareholder, which flows from loss suffered by the company, for the recovery of which it has a cause of action, even if it has declined or failed to make good that loss.
Lord Binghams speech is consistent with the reasoning in Prudential.
On the other hand, the reasoning in the other speeches, especially that of Lord Millett, departs from the reasoning in Prudential and should not be followed.
Later cases
Johnson has been followed by a multitude of cases in which litigants, usually relying on the speech of Lord Millett, have sought either to establish exceptions to the general principles laid down by Lord Bingham, or to establish that the rule against the recovery of reflective loss extends more widely than Johnson had determined.
One of the issues which remained controversial was whether, notwithstanding Lord Binghams analysis, there were circumstances in which a shareholder could recover for loss which flowed from the companys loss where the company had a cause of action but failed to pursue it.
In Giles v Rhind [2003] Ch 618 the Court of Appeal decided that such
circumstances existed.
The claimant was a former company director who was also a shareholder in the company.
He brought proceedings against a defendant who had conducted a business in competition with that of the company, in breach of contractual obligations owed to both the claimant and the company.
The companys action for damages had been discontinued due to its inability to find security for costs, as a result of impecuniosity caused by the defendants wrongdoing.
The terms on which the action was discontinued precluded the company from bringing any further proceedings in relation to its claim.
The claimant sought to recover for a variety of losses, including the loss of the value of his shares.
The Court of Appeal allowed the claim to proceed to trial.
It considered that it would be unjust to allow a wrongdoer to defeat a claim by shareholders on the basis that the claim was trumped by a right of action held by the company which his own wrongful conduct had prevented the company from pursuing.
It concluded that the reflective loss principle, in so far as it was relevant, did not apply in those circumstances.
One can sympathise with the Court of Appeals sense of the unattractiveness of the defendants position, but the fact that a wrongdoer has unmeritoriously avoided his liability in damages to A is not a reason for requiring him to pay damages to B. The basis of the decisions in Prudential and Johnson is that a shareholder, whose shares have fallen in value as the consequence of loss suffered by the company for the recovery of which it has a cause of action, has not suffered a recoverable loss.
That conclusion does not depend on whether the company is financially able to bring proceedings or not.
If the shareholder has not suffered a recoverable loss, he has no claim for damages, regardless of whether, or why, the company may have failed to pursue its own cause of action.
The same criticism applies to the later decision in Perry v Day [2004] EWHC 3372 (Ch); [2005] 2 BCLC 405, where the court followed Giles v Rhind in a situation where the wrongdoer had abused his powers as a director of the company so as to prevent it from bringing a claim under which it could have recovered its loss.
The solution which company law provides, in a situation of that kind, is the derivative action.
Gardner v Parker
A question left in doubt by Lord Milletts speech in Johnson was how widely the bar on the recovery of reflective loss applied.
That issue came before the Court of Appeal in Gardner v Parker [2004] EWCA Civ 781; [2004] 2 BCLC 554.
The claim was brought by the assignee of rights of action held by a company (the shareholder) which was both a shareholder and a creditor of a second company (the company), against a defendant who was a director of both the shareholder and the company.
He was alleged to have sold the companys principal assets at an undervalue to another entity in which he had an interest, rendering the company insolvent, and preventing the shareholder from recovering the debt which the company owed it.
In so acting, the defendant had acted in breach of fiduciary duties owed separately to the shareholder and to the company as a director of both of them.
The shareholder then sought to recover in respect of the fall in the value of its shareholding, and also in respect of the loss arising from its inability to obtain repayment of the debt.
Proceedings brought by another of the companys creditors against the purchaser of the companys assets had been resolved by a settlement, to which the company, acting by receivers appointed by that creditor over its property, and the defendant, were both party.
Under the settlement, a payment was made to that creditor, and the defendant was released from all claims which the company might have against him (other than claims vested solely in its liquidators; but the company was not in liquidation).
The Court of Appeal considered three questions.
The first was whether the reflective loss principle applied where the wrongdoing took the form of a breach of fiduciary duty rather than the breach of a duty arising under the common law.
The court held that it did, following its earlier decision in Shaker v Al Bedrawi [2003] Ch 350.
That aspect of the decision is not challenged in the present appeal.
The second question was whether the exception established in Giles v Rhind ought to be extended to a situation in which the company had disabled itself, under a settlement with the wrongdoer, from bringing proceedings against him for the recovery of its loss.
The court held that it should not.
As I have explained, I would hold that no such exception exists.
The third question was whether the reflective loss principle applied to a claim arising from a creditors inability to recover a debt owed to it by a company in which the creditor was a shareholder.
The court held that it did, relying on the treatment of the claim for loss of pension in Johnsons case, and applying Lord Milletts dictum, cited at para 62 above.
Neuberger LJ stated at para 70: It is clear from those observations, and indeed from that aspect of the decision, in Johnsons case that the rule against reflective loss is not limited to claims brought by a shareholder in his capacity as such; it would also apply to him in his capacity as an employee of the company with a right (or even an expectation) of receiving contributions to his pension fund.
On that basis, there is no logical reason why it should not apply to a shareholder in his capacity as a creditor of the company expecting repayment of his debt.
The claim brought as a creditor was therefore dismissed.
Taking this reasoning to its logical conclusion, Neuberger LJ added (ibid) that the same reasoning should apply even where the employee or creditor was not also a shareholder.
As was explained in paras 65 66 above, on the facts of Johnson the claim in respect of lost pension contributions was a claim for a loss of distributions, brought by Mr Johnson in the capacity of a shareholder.
It therefore fell within the scope of the reasoning in Prudential, and Lord Binghams proposition (1).
The claim brought by the creditor shareholder in Gardner v Parker did not fall within the scope of that reasoning, or Lord Binghams proposition.
It should not have been barred as reflective loss.
The court might have had to consider the avoidance of double recovery, applying the general principles discussed in paras 2 7 above, if that issue had been raised; but it was not.
The cases since Gardner v Parker have followed the approach adopted in that case.
The supposed reflective loss principle has been treated as being based primarily on the avoidance of double recovery and the protection of a companys unsecured creditors, and as being applicable in all situations where there are concurrent claims and one of the claimants is a company.
So understood, the reflective loss principle, as Sir Bernard Rix JA observed in Xie Zhikun at para 95, seems to be extending its scope wider and wider.
Sir Bernard added at para 96 that a number of distinguished judges have commented on the uncertainties and difficulties of the reflective loss doctrine.
Professor Andrew Tettenborn has rightly warned that [t]oday it promises to distort large areas of the ordinary law of obligations: Creditors and Reflective Loss: A Bar Too Far? (2019) 135 Law Quarterly Review 182.
The decision of the Court of Appeal in the present case, applying the approach laid down by Lord Millett in Johnson and by the Court of Appeal in Gardner v Parker, confirms that threat.
It is the first case in this jurisdiction in which the reflective loss principle has been applied to a claimant which is purely a creditor of a company.
The extension of the principle to such cases has the potential to have a significant impact on the law and on commercial life.
The possibility of the further extension of the principle to creditors of natural persons, which the Court of Appeal considered, indicates the extent to which it has become difficult to confine.
As the scope of the principle has expanded, so have the volume of litigation and the level of uncertainty.
Other jurisdictions
Almost 40 years have passed since Prudential was decided.
The decisions in that case and in Johnson have been followed throughout much of the common law world, albeit sometimes on the basis of different reasoning.
Without attempting an exhaustive survey, they have, for example, been followed in Australia (see, for example, Chen v Karandonis [2002] NSWCA 412 and Hodges v Waters (No 7) (2015) 232 FCR 97); in the Cayman Islands (see Xie Zhikun v Xio GP Ltd, Cayman Islands Court of Appeal, unreported, 14 November 2018, and Primeo Fund v Bank of Bermuda (Cayman) Ltd, Court of Appeal of the Cayman Islands, 13 June 2019); in Hong Kong (see, for example, Waddington Ltd v Thomas [2008] HKCU 1381; [2009] 2 BCLC 82, where Lord Milletts approach in Johnson was followed, in a judgment delivered by Lord Millett NPJ, and Giles v Rhind was doubted and not followed); in Ireland (see, for example, Alico Life International Ltd v Thema International Fund plc [2016] IEHC 363, where the court followed the reasoning in Prudential, and of Lord Bingham in Johnson, and rejected the reasoning in Christensen v Scott [1996] 1 NZLR 273); in Jersey (Freeman v Ansbacher Trustees (Jersey) Ltd [2009] JRC 003; JLR 1, where the principle was treated, consistently with the reasoning in Prudential, as an aspect of the rule in Foss v Harbottle); and in Singapore (see, for example, Townsing v Jenton Overseas Investment Pte Ltd [2007] SGCA 13; [2008] 1 LRC 231, where the principle was explained as an aspect of the rule in Foss v Harbottle, and the reasoning in Christensen was rejected).
Summary
Summarising the discussion to this point, it is necessary to distinguish between (1) cases where claims are brought by a shareholder in respect of loss which he has suffered in that capacity, in the form of a diminution in share value or in distributions, which is the consequence of loss sustained by the company, in respect of which the company has a cause of action against the same wrongdoer, and (2) cases where claims are brought, whether by a shareholder or by anyone else, in respect of loss which does not fall within that description, but where the company has a right of action in respect of substantially the same loss.
In cases of the first kind, the shareholder cannot bring proceedings in respect of the companys loss, since he has no legal or equitable interest in the companys assets: Macaura and Short v Treasury Comrs.
It is only the company which has a cause of action in respect of its loss: Foss v Harbottle.
However, depending on the circumstances, it is possible that the companys loss may result (or, at least, may be claimed to result) in a fall in the value of its shares.
Its shareholders may therefore claim to have suffered a loss as a consequence of the companys loss.
Depending on the circumstances, the companys recovery of its loss may have the effect of restoring the value of the shares.
In such circumstances, the only remedy which the law requires to provide, in order to achieve its remedial objectives of compensating both the company and its shareholders, is an award of damages to the company.
There may, however, be circumstances where the companys right of action is not sufficient to ensure that the value of the shares is fully replenished.
One example is where the markets valuation of the shares is not a simple reflection of the companys net assets, as discussed at para 32 above.
Another is where the company fails to pursue a right of action which, in the opinion of a shareholder, ought to have been pursued, or compromises its claim for an amount which, in the opinion of a shareholder, is less than its full value.
But the effect of the rule in Foss v Harbottle is that the shareholder has entrusted the management of the companys right of action to its decision making organs, including, ultimately, the majority of members voting in general meeting.
If such a decision is taken otherwise than in the proper exercise of the relevant powers, then the law provides the shareholder with a number of remedies, including a derivative action, and equitable relief from unfairly prejudicial conduct.
As explained at paras 34 37 above, the companys control over its own cause of action would be compromised, and the rule in Foss v Harbottle could be circumvented, if the shareholder could bring a personal action for a fall in share value consequent on the companys loss, where the company had a concurrent right of action in respect of its loss.
The same arguments apply to distributions which a shareholder might have received from the company if it had not sustained the loss (such as the pension contributions in Johnson).
The critical point is that the shareholder has not suffered a loss which is regarded by the law as being separate and distinct from the companys loss, and therefore has no claim to recover it.
As a shareholder (and unlike a creditor or an employee), he does, however, have a variety of other rights which may be relevant in a context of this kind, including the right to bring a derivative claim to enforce the companys rights if the relevant conditions are met, and the right to seek relief in respect of unfairly prejudicial conduct of the companys affairs.
The position is different in cases of the second kind.
One can take as an example cases where claims are brought in respect of loss suffered in the capacity of a creditor of the company.
The arguments which arise in the case of a shareholder have no application.
There is no analogous relationship between a creditor and the company.
There is no correlation between the value of the companys assets or profits and the value of the creditors debt, analogous to the relationship on which a shareholder bases his claim for a fall in share value.
The inverted commas around the word value, when applied to a debt, reflect the fact that it is a different kind of entity from a share.
Where a company suffers a loss, it is possible that its shareholders may also suffer a consequential loss in respect of the value of their shares, but its creditors will not suffer any loss so long as the company remains solvent.
Even where a loss causes the company to become insolvent, or occurs while it is insolvent, its shareholders and its creditors are not affected in the same way, either temporally or causally.
In an insolvency, the shareholders will recover only a pro rata share of the companys surplus assets, if any.
The value of their shares will reflect the value of that interest.
The extent to which the companys loss may affect a creditors recovery of his debt, on the other hand, will depend not only on the companys assets but also on the value of any security possessed by the creditor, on the rules governing the priority of debts, and on the manner in which the liquidation is conducted (for example, whether proceedings are brought by the liquidator against persons from whom funds might be ingathered, and whether such proceedings are successful).
Most importantly, even where the companys loss results in the creditor also suffering a loss, he does not suffer the loss in the capacity of a shareholder, and his pursuit of a claim in respect of that loss cannot therefore give rise to any conflict with the rule in Foss v Harbottle.
The potential concern that arises in relation to claims brought by creditors is not, therefore, the rule in Foss v Harbottle.
On the other hand, the principle that double recovery should be avoided may be relevant, although it is not necessarily engaged merely because the company and the creditor have concurrent claims against the same defendant.
In International Leisure Ltd v First National Trustee Co UK Ltd [2013] Ch 346, for example, the principle was not engaged where the company and a secured creditor had concurrent claims against an administrative receiver whom the creditor had appointed, since the company could only claim in respect of any loss remaining after the secured creditor had been paid in full.
Where the risk of double recovery arises, how it should be avoided will depend on the circumstances.
It should be borne in mind that the avoidance of double recovery does not entail that the companys claim must be given priority.
Nor, contrary to the view expressed in a number of authorities, including the decision of the Court of Appeal in the present case, does the pari passu principle entail that the companys claim must be given priority.
That principle requires that, in a winding up, a companys assets must be distributed rateably among its ordinary creditors.
The proceeds of its recovery from a wrongdoer will form part of its assets available for distribution (subject to the claims of secured and preferred creditors).
But the pari passu principle does not give the company, or its liquidator, a preferential claim on the assets of the wrongdoer, over the claim of any other person with rights against the wrongdoer, even if that claimant is also a creditor of the company.
In other words, the pari passu principle may restrict a creditor of an insolvent company to the receipt of a dividend on the amount which the company owes him, but it does not prevent him from enforcing his own right to recover damages from a third party, or confer on the companys right against the third party an automatic priority.
In the event that the third party cannot satisfy all the claims made against him, the position will be regulated by the law of (his) insolvency.
It is also necessary to consider whether double recovery may properly be
avoided by other means than the prioritising of one claim over the other, such as those mentioned in paras 5 7 above.
The judgments of Gibbs CJ and Brennan J in Gould v Vaggelas [1984] HCA 68; (1984) 157 CLR 215, at pp 229 and 258 259 respectively, raise the possibility that subrogation, in particular, may provide a solution to issues of double recovery arising in connection with creditors claims.
That question has not, however, been discussed in the present proceedings, and I express no view upon it.
I would therefore reaffirm the approach adopted in Prudential and by Lord
Bingham in Johnson, and depart from the reasoning in the other speeches in that case, and in later authorities, so far as it is inconsistent with the foregoing.
It follows that Giles v Rhind, Perry v Day and Gardner v Parker were wrongly decided.
The rule in Prudential is limited to claims by shareholders that, as a result of actionable loss suffered by their company, the value of their shares, or of the distributions they receive as shareholders, has been diminished.
Other claims, whether by shareholders or anyone else, should be dealt with in the ordinary way.
The present case
In the light of the foregoing discussion, the present case can be addressed relatively briefly.
As explained earlier, Marex obtained judgment against the Companies for US$5.5m.
Following the circulation of the judgment in draft, Mr Sevilleja is alleged to have stripped the Companies of their assets, rendering them insolvent.
That action is alleged to have involved the commission of economic torts against Marex, as well as a breach of fiduciary duties owed by Mr Sevilleja to the Companies.
Three issues arose before the Court of Appeal.
The first was whether the reflective loss principle applied to creditors as well as shareholders.
Knowles J had held that it did not.
No authority, he said, compelled him to apply the principle to cases of knowingly procuring a third party to act in violation of a creditors rights, or intentionally causing loss to a creditor by unlawful means directed against a debtor company.
The Court of Appeal disagreed.
In a careful judgment, Flaux LJ accepted that the rationale of the decision in Prudential was that a personal action by a shareholder would subvert the rule in Foss v Harbottle, and that if the rule against reflective loss had rested there, it would only apply to claims by shareholders.
However, he correctly noted that the scope of the rule had been expanded in Gardner v Parker, following the approach of Lord Millett in Johnson.
The second issue was whether the Giles v Rhind exception applied.
The Court of Appeal held that it did not: it was a narrow exception which applied only where the companys claim was barred by law as a result of the defendants wrongdoing, rather than merely prevented on the facts.
The third issue was whether the reflective loss doctrine applied to intentional torts.
The court held that it did.
It also granted Marex permission to appeal, in order, as Lewison LJ explained at para 71, to enable this court to consider the coherence of the law in the current state of the authorities.
The appeal concerns only the first and second issues.
For the reasons I have explained, the rule in Prudential has no application to the present case, since it does not concern a shareholder.
That disposes of the first issue.
It also disposes of the second, since no question arises of a possible exception.
In any event, as I have explained, there is no Giles v Rhind exception.
It follows that Marex should be permitted to pursue the entirety of its claim.
The court has not been addressed on the issue of double recovery, in so far as it might arise in relation to Marexs claim.
That issue may or may not arise on the facts of the case, bearing in mind that no claim has yet been brought against Mr Sevilleja on behalf of the Companies, and that Marex maintains that the other debts supposedly owed by the Companies are not genuine, and that the liquidation is merely part of Mr Sevillejas scheme to defeat its claim.
If the issue of double recovery does arise, the court will need to consider it in the light of the discussion at paras 2 7 and 86 88 above.
Conclusion
For the foregoing reasons, I would allow the appeal.
LORD HODGE: (agreeing with Lord Reed)
I agree for the reasons given by Lord Reed that this appeal should be allowed.
There is no disagreement within the court that the expansion of the so called principle that reflective loss cannot be recovered has had unwelcome and unjustifiable effects on the law and that, if the facts alleged by Marex are established in this case, the exclusion of the bulk of its claim would result in a great injustice.
But because there is a division of view as to whether a shareholder can recover damages for the diminution in value of its shareholding in a company or for the loss of distributions which the company would have paid to it in circumstances where a wrong has been done both to the company and to the shareholder, I wish to add a few comments about the central role of company law in the Court of Appeals judgment in the Prudential case which is the fons et origo of the principle.
In my view the problems and uncertainties which have emerged in the law have arisen because the principle of reflective loss has broken from its moorings in company law.
In the Prudential case the Court of Appeals discussion of Prudentials personal claim comprised merely three pages of a long judgment, which was principally concerned with its derivative claim, and that discussion should be read in the context of the judgment as a whole.
The discussion of the personal claim followed a longer discussion of Prudentials derivative action which Newman opposed as being contrary to the interests of the company (p 211).
In its discussion of the rule in Foss v Harbottle the Court of Appeal (p 210F G) referred to the classic definition of the rule in the judgment of Jenkins LJ in Edwards v Halliwell [1950] 2 All ER 1064, which I quote in part: (1) The proper plaintiff in an action in respect of a wrong alleged to be done to a corporation is, prima facie, the corporation. (2) Where the alleged wrong is a transaction which might be made binding on the corporation and on all its members by a simple majority of the members, no individual member of the corporation is allowed to maintain an action in respect of that matter because, if the majority confirms the transaction, cadit quaestio; or, if the majority challenges the transaction, there is no valid reason why the company should not sue The Court went on to state that the rule did not operate where the alleged wrong was ultra vires the company or if the transaction could be sanctioned only by a special majority of the members of the company and that there was an exception to the rule if those in control of the company committed a fraud on a minority of shareholders.
When the Court of Appeal turned to consider Prudentials personal action it held that the directors in advising the shareholders to support the resolution approving the impugned transaction owed the shareholders a duty to give advice in good faith and not fraudulently.
It continued: It is also correct that if directors convene a meeting on the basis of a fraudulent circular, a shareholder will have a right of action to recover any loss which he has been personally caused in consequence of the fraudulent circular; this might include the expense of attending the meeting. (p 222G H) The Court of Appeal in so stating clearly recognised that the allegedly fraudulent circular, on which Prudential founded its personal claim, could give rise to a right of action in damages by the shareholder.
That was the context in which the Court made the centrally important statement, which Lord Reed quotes at para 26 above but which bears repeating: But what he [the shareholder] cannot do is to recover damages merely because the company in which he is interested has suffered damage.
He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a loss is merely a reflection of the loss suffered by the company. (pp 222 223)
This exclusion, as Lord Reed has stated, relates only to the diminution in value of shares or in distributions which the shareholder suffers in his capacity as a shareholder as a result of the company having itself suffered actionable damage.
When a shareholder pursues a personal claim against a wrongdoer in another capacity, such as guarantor or creditor of the company, the exclusion has no application.
The Courts reasoning on p 223, which Lord Reed has quoted at paras 27 and 29 above, has been criticised because the stark assertion, that the shareholder does not suffer any personal loss by the diminution in the value of its shares or of the distributions which it received, cannot be taken at face value clearly the shareholder suffers economic loss and because the example of a non trading company whose only asset was a cash box containing 100,000 is an oversimplification.
But the reasoning is nonetheless clear where the Court asserts (a) that the deceit on the shareholder causes the shareholder no loss which is separate and distinct from the loss to the company (p 223), (b) that when the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company and that he can only exercise his influence over the fortunes of the company by the exercise of his voting rights in general meeting (p 224), and (c) that [a] personal action would subvert the rule in Foss v Harbottle, a rule which operates fairly by preserving the rights of the majority (p 224).
I agree with Lord Reed (para 28 above) that what the Court was saying is that where a company suffers a loss as a result of wrongdoing and that loss is reflected to some extent in a fall in the value of its shares or in its distributions, the fall in the share value or in the distributions is not a loss which the law recognises as being separate and distinct from the loss sustained by the company.
That is the full extent of the principle of reflective loss which the Prudential case established.
It was not articulated as a general principle to be applied in other contexts; it is a rule of company law arising from the nature of the shareholders investment and participation in a limited company and excludes a shareholders claim made in its capacity as shareholder.
As this Court has been invited to review the principle of reflective loss it is appropriate to ask whether this rule as formulated by Lord Reed in para 28 above from his analysis of the Prudential case is supported by principle.
In my view, the Court of Appeals articulation of the rule in the Prudential case was a principled development of company law which should be maintained.
Investment in or conducting a business through the medium of a limited company brings advantages to the shareholder, principally in the form of limited liability, which is a consequence of the separate personality of the company: Salomon v A Salomon & Co Ltd [1897] AC 22.
As the Court of Appeal stated in Prudential (p 224), [t]he company is liable for its contracts and torts; the shareholder has no such liability.
The company owns its assets and the shareholders have no legal or equitable interest in and are not part owners of those assets: Macaura v Northern Assurance Co Ltd [1925] AC 619, 626 per Lord Buckmaster, 630 per Lord Sumner and 633 per Lord Wrenbury; Short v Treasury Comrs [1948] 1 KB 116, 122 per Evershed MR.
A shareholding in a company confers a right of participation in the affairs of the company in accordance with the terms of the companys articles of association, often in the form of voting on resolutions at general meetings, and it entitles the shareholder to ensure that other shareholders comply with the rules imposed on them by the articles of association: Companies Act 2006 (the 2006 Act) section 33(1).
A shareholder in an unfair prejudice application under section 994 of the 2006 Act can also invoke equity to protect it from unfairness by restraining the exercise by another shareholder of its legal rights which are contrary to the understandings reached or promises made: In re A Company (No 00709 of 1992) (ONeill v Phillips) [1999] 1 WLR 1092.
It is a significant principle of company law that, in the absence of agreement to the contrary such as that expressed in the terms of a share issue, shares confer the same rights and impose the same liabilities: see for example section 284 of the 2006 Act and Birch v Cropper (1889) 14 App Cas 525, 543 per Lord MacNaghten.
A shareholding will usually entitle its holder to participate in the success of the companys enterprise by receiving distributions from the company out of its profits and to receive a return of its capital and a proportionate share of any surplus assets of the company on its winding up: Macaura (above) 626 627 per Lord Buckmaster; Birch v Cropper (above) 543.
A share confers rights in a company as well as rights against a company.
The shareholders as a body have certain characteristics of proprietorship of the company to the extent that they exercise ultimate control over the direction of a company through their votes in general meetings and have a claim to its surplus assets on a winding up.
But as the Short v Treasury Comrs case has shown, they are not part owners of the undertaking.
Investment in a limited liability company through a shareholding often involves the separation of management of the company from the ownership of its shares.
This facilitates the transfer of the members interests as, absent contractual restrictions, shares in a public company can be bought and sold without requiring the consent of others.
Investment in a company by means of a shareholding can also bring disadvantages.
A minority shareholder is liable to be outvoted by other shareholders, who form a majority in a vote at a general meeting of the company, in decisions concerning the company.
The shareholder in a large company normally leaves it to the Board to make decisions about the business of the company, including whether to sue a wrongdoer for a wrong done to the company.
A minority shareholder would have to obtain the support of the holders of sufficient numbers of shares to create a majority in order to force the directors to adopt a policy towards the companys business which the Board did not support.
Further, unless the shareholder can sell its shareholding to a third party, there are restrictions on the ways in which it can realise its investment in the company in order to protect the interests of the companys creditors.
In particular, the shareholders entitlement to receive money from the company on its winding up is postponed to the claims of the creditors of the company: Insolvency Act 1986, sections 107 and 143(1).
The characteristics of a shareholding as a means of participation in a companys enterprise which are most directly relevant in the context of this appeal are the default rule of equality among shareholders and the postponement of the shareholders entitlements on a winding up to the claims of the companys creditors.
Against this background, the laws refusal to recognise the diminution in value of a shareholding or the reduction or loss of a distribution, which is the consequence of the company suffering loss as a result of wrongdoing against it, as being separate and distinct from the companys loss is a principled development of company law.
It excludes the possibility of double recovery.
It avoids a scramble between shareholders to establish their private claims against a wrongdoer in case the wrongdoer does not have sufficient accessible assets to meet those claims.
It thereby upholds the default position of equality among shareholders in their participation in the companys enterprise: each shareholders investment follows the fortunes of the company.
It maintains the rights of the majority of the shareholders, as the Court of Appeal stated in Prudential at p 224.
And it preserves the interests of the companys creditors by maintaining the priority of their claims over those of the shareholders in the event of a winding up.
It may well be, as Lord Sales reasons, that the law can achieve some protection of those interests by other means such as case management and equitable subrogation.
But the creation of a bright line legal rule, as the Court of Appeal did in the Prudential case, is principled.
That judgment has stood for almost 39 years; it was upheld by the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1; and it has been adopted in other common law countries.
We should not depart from it now.
LORD SALES: (with whom Lady Hale and Lord Kitchin agree)
Introduction
The facts in this case are relatively simple.
The legal issues are more complex.
By its claim form in these proceedings Marex claims damages against Mr Sevilleja for inducing or procuring violation of Marexs rights under the judgment of 25 July 2013 (based on the principle first recognised in Lumley v Gye (1853) 2 E & B 216: I will refer to this as the Lumley v Gye claim) and for intentionally causing loss to Marex by unlawful means (based on the principle recognised in OBG Ltd v Allan [2007] UKHL 21; [2008] AC 1 (OBG): I will refer to this as the OBG claim), by dissipating the assets of the Companies.
The judge found that, subject to the issue of reflected loss, these claims are arguable and suitable for service out of the jurisdiction.
There has been no appeal to challenge this aspect of the judges conclusions.
This appeal is concerned with a distinct argument for Mr Sevilleja, that the loss suffered by Marex reflected the loss suffered by the Companies as a result of his alleged unlawful actions and that reflective loss of this kind is irrecoverable.
The result, says Mr Sevilleja, is that Marex is unable to contend that it has any completed cause of action in tort (save in respect of certain costs incurred by Marex in trying to obtain payment of the judgment debt).
He contends that there is a principle established by the decision of the Court of Appeal in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 (Prudential) and the decision of the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1 (Johnson) which precludes recovery of reflective loss of this kind (the reflective loss principle).
The judge did not accept this argument.
Mr Sevilleja appealed to the Court of Appeal to challenge this part of the judges reasoning.
Marex filed a respondents notice by which it submitted that if, contrary to its primary case, the reflective loss principle is applicable, its claims against Mr Sevilleja fell within the exception to that principle established by the decision in Giles v Rhind [2002] EWCA Civ 1428; [2003] Ch 618.
In that case the Court of Appeal held that there is an exception to the reflective loss principle in certain circumstances where the action of the defendant who has unlawfully abstracted funds from a company makes it impossible for a claim to be pursued by the company itself.
The Court of Appeal allowed Mr Sevillejas appeal and rejected Marexs submission based on Giles v Rhind.
Marex now appeals to this court with permission granted by the Court of Appeal with the object of providing this court with the opportunity to review the scope of the reflective loss principle and the exception to it identified in Giles v Rhind.
In view of the significance of the case, this court granted permission to the All Party Parliamentary Group on Fair Business Banking (the APP Group) to intervene by oral and written submissions in support of Marexs appeal.
The first part of the appeal is concerned with the question whether the reflective loss principle applies to preclude recovery where the claimant is an unsecured creditor of the relevant company, but is not a shareholder in that company, where each of the creditor and the company has its own cause of action against a third party defendant in respect of the same wrongful conduct by him.
However, in order to answer that question it is necessary to examine what justification there is for the reflective loss principle in a shareholder case as well.
It is therefore necessary to examine whether the reasoning in Prudential, a shareholder case, can be sustained as a matter of principle.
It is only if one subjects to critical examination the rationale for the reflective loss principle as stated in Prudential that one can see whether that rationale extends to cover a creditor case.
This court has been convened as an enlarged panel with the object of examining the rationale for the reflective loss principle and the coherence of the law in this area.
The APP Group placed material before us which argued that the law had made a wrong turn in the Prudential case.
I have come to the same conclusion as Lord Reed and the majority that Marexs appeal should be allowed.
But my reasoning differs from theirs.
It may be helpful if I give a brief outline of where the differences lie.
Lord Reed says that the reflective loss principle is justified in a shareholder case but that the rationale for it does not extend to cover a creditor case.
On his account, the reflective loss principle laid down in Prudential is a rule of law: the court deems that the loss suffered by a shareholder in relation to diminution in the value of shares or loss of dividends simply is to be regarded as irrecoverable in a case where the company has a parallel claim against the third party defendant (paras 9, 28 39 and 52).
Lord Hodge likewise says that the Court of Appeal in Prudential laid down a rule of law (paras 99, 100 and 108) that loss suffered by a shareholder is regarded as irrecoverable.
Since it is a rule of law that the shareholder is deemed not to have suffered a loss different from that suffered by the company, it is not a matter of evidence whether he has or has not in fact suffered such a loss.
It follows that, apart from this deeming effect, the reflective loss principle is not concerned with the issue of double recoverability against the third party defendant.
By contrast, in my opinion the Court of Appeal in Prudential did not lay down a rule of law that a shareholder with a claim against a third party defendant in parallel with, and reflective of, a claim by the company against the same defendant simply had to be deemed to suffer no different loss of his own which he could recover, whatever the true position on the facts.
It did not purport to do so.
Rather, the court set out reasoning why it thought the shareholder in such a case in fact suffered no loss.
But as I explain below, that reasoning cannot be supported.
There clearly are some cases where the shareholder does suffer a loss which is different from the loss suffered by the company.
In the face of this difficulty with the reasoning in Prudential, I do not think it is appropriate to re characterise the courts decision as one laying down a new rule which simply deems that loss suffered by the shareholder to be irrecoverable as a matter of law.
If a shareholder has a valid cause of action against the third party defendant in respect of different loss which he has in fact suffered, it is not open to a court to rule it out as a matter of judicial fiat.
This means that, in common with many other courts and judges, I consider that the issue of double recovery is of importance in relation to shareholder claims as well as in relation to creditor claims.
That was clearly the view of four of the law lords in Johnson, who said so in terms: see Lord Reeds discussion above of the speech of Lord Millett (with whom Lord Goff of Chieveley agreed) and [2002] 2 AC 1, 45D E and 47E per Lord Cooke of Thorndon and 54H 55D per Lord Hutton.
I do not read Lord Binghams speech as discounting the relevance of this factor in a shareholder case.
The idea of reflective loss was employed by the Court of Appeal in Prudential as a way of addressing a number of points which the court grouped together.
Some aspects of the idea are valid, but some are not.
It is necessary to analyse with care what exactly is in issue when any specific proposition of law is advanced and is said to be justified on the basis of a principle relating to reflective loss.
The reflective loss principle and other principles
In the case note cited by Lord Reed at para 77, Professor Tettenborn has likened the reflective loss principle to some ghastly legal Japanese knotweed whose tentacles have spread alarmingly and which threatens to distort large areas of the ordinary law of obligations: 135 LQR 182, 183.
The Court of Appeal in this case loyally sought to identify and follow through the rationale of the reflective loss principle first identified and relied upon in the Prudential case, but in my opinion its decision shows how the reasoning in that case leads to an unprincipled and unattractive terminus.
In granting permission to appeal to this court, the Court of Appeal has invited us to consider the conceptual basis and extent of the reflective loss principle.
That requires consideration of principles of law which long predate 1981, when the judgment in Prudential was handed down.
In another article placed before the court, Alan Steinfeld QC contends that [t]he law took a seriously wrong turn when in Prudential the court elevated what was a relatively simple everyday problem concerned with an assessment of damages into a principle of causation; he urges that this court should now think it over and wonder why it was ever thought to be necessary or just to have this rule at all: (2016) 22 Trusts & Trustees 277, at 285.
Before turning to examine the authorities, it is relevant to have in mind some very basic points.
A company is a legal person distinct from its shareholders, which has its own assets which are distinct from theirs.
A share in a company is an item of property owned by the shareholder, which is distinct from the assets owned by the company.
Typically, or at least very often, a share in a company has a market value which reflects the markets estimation of the future business prospects of the company, not what its net asset position happens to be at any given point in time.
There is no simple correspondence between the value of a 1% shareholding and 1% of the net assets of the company.
This is true both in respect of a company whose shares are publicly traded and in respect of a small private company.
In that regard, I respectfully disagree with the observation by Lord Millett in Johnson [2002] 2 AC 1, at 62A B, where he said that a share represents a proportionate part of the companys net assets, and if these are depleted the diminution in its assets will be reflected in the diminution in the value of the shares and stated that in the case of a small private company whose net assets are diminished the correspondence with the diminution in the value of the shares is exact.
The shares in both public and private companies are marketable and their value reflects the view of the relevant market about the future prospects of the company; it is just that in the former case it might be easier to identify the market value.
I expand on this below.
A company which is wronged acquires its own cause of action in respect of that wrong.
That cause of action is a chose in action which is the property of the company.
What the company does with it is a matter for decision by the relevant organs of the company; a shareholder has no right to seek to vindicate the companys cause of action: Foss v Harbottle (1843) 2 Hare 461 and Prudential [1982] Ch 204, 224.
That is subject to an exception if the wrongdoer has control of the relevant decision making organs of the company, in which case a court may authorise a shareholder to bring a derivative action on behalf of the company.
Litigation is an expensive enterprise, especially if lost, and can have negative consequences on trading relationships and business reputation.
It is not to be embarked upon lightly and, subject to the exception to the rule, whether a company should take on the risks of litigation is a matter to be decided by the relevant decision making organs of the company.
A person may act in ways such that several people acquire causes of action against him.
Sometimes, the same actions by that person may give rise to causes of action vested in different people, such as when he owes different people duties of care in respect of the same activity a type of case discussed in Barings plc v Coopers & Lybrand [1997] 1 BCLC 427 (Barings) and in Johnson or where he breaches a duty owed to one person with the intention of harming another, in circumstances where the other person acquires his own right of action pursuant to the principle in the OBG case.
The law lays down no general principle to govern the order in which people who have causes of action against the wrongdoer should sue to vindicate their rights against him.
Each may seek to sue and execute any judgment he obtains without regard to the impact that may have on the rights of others.
That is, of course, subject to any obligation a claimant may have assumed in relation to those others.
But a shareholder in a company does not, by becoming a shareholder, assume any obligation to anyone else (whether the company itself, other shareholders in the company or creditors of the company) to the effect that he will stay his hand as regards vindication of his personal rights of action against a defendant in order to safeguard theirs.
For example, if a shareholder in a company is run over by a driver employed by the company acting in the course of his employment, the shareholder is entitled to sue to obtain damages from the company even though by doing so he might diminish the ability of the company to pay a dividend to shareholders or to meet its obligations to its creditors.
Similarly, if a shareholder and a company each have their own cause of action against a third party defendant, the shareholder is entitled to seek to sue and obtain recovery from that defendant in the usual way, even though by doing so he may reduce the capacity of the defendant to satisfy the companys claim and hence might diminish the ability of the company to pay a dividend or pay its creditors.
The shareholder does not violate the pari passu principle by proceeding in this way, because the vindication of his own cause of action is not subject to that principle at the stage at which he brings his claim.
If the third party defendant is insolvent, then during the insolvency process the shareholders claim and those of everyone else against the defendant will be subject to that principle and any other insolvency rules which are applicable.
The insolvency rules constitute a regime for securing fair outcomes as between competing claimants, if there is a risk that the defendant will not be able to meet the claims of all.
There is, therefore, no obvious need to create an a priori solution such as that which the reflective loss principle attempts to provide by means of a crude bright line rule to exclude a shareholders claim.
As explained below, if the company and a shareholder have overlapping claims against a third party defendant, there is scope at trial (if an action is brought) or in the insolvency process for the relationship between those claims to be worked out in a practical way which secures overall justice for all those parties.
Arising from the concept of the company as a society or societas of its members and from the history of company law in the law of partnership, it is recognised that shareholders may be subject to certain obligations owed to their fellow shareholders other than those expressly stated in the articles of association: see In re A Company (No 00709 of 1992) (ONeill v Phillips) [1999] 1 WLR 1092, 1098 1099 (Lord Hoffmann).
These obligations are concerned with the way in which the companys affairs are managed when the shareholders act together, requiring that they use their powers as set out in the articles of association for proper purposes and in good faith for the benefit of the company as a whole: see eg Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656, 671, per Lindley MR; Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286, CA.
Such obligations do not extend to limiting the ability of a shareholder to take action to vindicate any cause of action he may himself have sounding in damages against a third party defendant.
A general obligation of good faith of this kind does not require that the shareholder should regard himself as deprived of his property in the form of such a cause of action.
A defendant may owe obligations in contract or tort to the shareholder owner of a company where breach of those obligations results in loss to the shareholder which is suffered in the form of a reduction in the value of its shares in the company or a diminution of dividends which it receives.
There is no inherent conceptual difficulty about recovery of damages in respect of loss suffered in that way: see Lee v Sheard [1956] 1 QB 192, George Fischer (Great Britain) Ltd v Multi Construction Ltd [1995] 1 BCLC 260 and Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443 (Gerber).
In such cases, the usual rules of contract or tort apply: the claimant shareholder is to be put in the same position as if the contract had been complied with or the tort had not been committed.
A defendant may owe obligations to the shareholder owner of a company which are similar to those owed to the company itself.
This was the situation addressed in Barings, in which it was alleged that auditors had undertaken a duty owed to the parent shareholder company to audit its subsidiary with reasonable care and also a duty owed to the subsidiary to similar effect.
I discuss this case below.
The Court of Appeal declined to rule out the parents claim on the basis of the reflective loss principle.
If the auditors failed to exercise reasonable care, that would constitute a breach of the duty owed to the parent and at the same time a breach of the duty owed to the subsidiary.
Each of them would have a cause of action.
The subsidiary could sue for losses which it suffered as a result (these might include, for example, loss of its property flowing from a failure by the auditors to detect defalcations or unauthorised loss making trading).
The parent could sue for the different losses which it suffered as a result (these might include a reduction in the value of the shares it owned or a loss of dividends from the subsidiary).
It is difficult to see why the fact that the subsidiary has its own claim for a different loss should preclude the parent from being able to vindicate its own right of action in respect of the loss which it has suffered.
In this latter type of case there is no difference from the position described in para 128 above, save that in assessing the loss actually suffered by the parent one would have to bring into account the fact that by reason of the auditors lack of care the subsidiary would also have acquired its own cause of action against them.
That would be an asset of the subsidiary to be set against its losses.
Depending on the facts, it might be that the existence or vindication of that cause of action would prevent the parent from suffering any loss itself; but that would turn on the evidence in the case and could not simply be assumed.
Suppose that the subsidiary in this scenario waived its claim, or settled it for only a fraction of its value, or came to lose it by limitation arising through the lapse of time.
That would in no way remove the parents cause of action, assuming the parent had sued within the limitation period.
The auditors undertook a separate duty of care owed to the parent to safeguard the parent against losses which it would suffer if the duty was not satisfied and it might indeed have suffered loss.
Subject to any argument about novus actus interveniens, the abandonment by the subsidiary of its claim, or its compromise or loss of that claim, would just affect the extent of the loss which the parent might be able to show it had suffered.
In discussing the authorities, it is relevant to call attention to what I regard as unhelpfully slippery and imprecise language which has been used in them.
Judges have talked about loss suffered by a shareholder in his personal capacity which reflects the loss suffered by a company.
This is a rather deceptive word.
Where the company suffers loss and this affects the value of shares in it, there is obviously some relationship between the loss suffered by the company and the loss suffered by a shareholder, so that in a loose sense it might be said that the latter loss reflects the former.
But the loss suffered by the shareholder is not the same as the loss suffered by the company.
There is no necessary, direct correlation between the two.
The loss suffered by the shareholder does not reflect the loss suffered by the company, in the stricter sense of there being a one to one correspondence between them.
These different senses of the word reflects have been conflated.
A similar point may be made about references in the cases to whether the loss suffered by the shareholder is separate and distinct from the loss suffered by the company.
In a loose sense of that phrase, it is not; but in a strict sense, it may be.
The reflective loss principle was first identified and relied upon in the judgment of the Court of Appeal in Prudential in 1981.
It is striking that this occurred so late in the development of the law, despite the existence of joint stock companies for a very long time and the passage of more than 80 years after the decision of the House of Lords clarifying the position of companies in Salomon v A Salomon & Co Ltd [1897] AC 22.
The relevant facts in Prudential can be summarised as follows.
The claimant, Prudential, held 3.2% of the issued ordinary shares in Newman Industries (Newman), a company whose shares were quoted on the stock exchange.
Mr Bartlett was the chairman and chief executive of Newman and Mr Laughton was a non executive director and its vice chairman.
They were also associated with another company, TPG.
Prudentials case was that Mr Bartlett and Mr Laughton conspired to make fraudulent statements to the board and shareholders of Newman by means of which they induced Newman, acting by its board and by its shareholders voting in general meeting (which was required to approve the transaction), to purchase assets of TPG at a price higher than their true value; and that by reason of that overpayment the value of Newmans shares was reduced.
In fact, however, the market value of shares in Newman had increased after the transaction (as pointed out by Mr Richard Scott QC, counsel for Mr Bartlett and Mr Laughton at first instance: [1981] Ch 257, 265E) and Prudential had not pleaded particulars of its loss and did not adduce any evidence to show that the market value of shares in Newman had been in any way detrimentally affected by the alleged overpayment (as Mr Scott QC energetically emphasised in his submissions at first instance: [1981] Ch 257, 265E F, 271G, 273A, 273D F and 285D).
Prudential adduced no expert evidence in relation to the impact, if any, of the overpayment on the market value of shares in Newman and no evidence in relation to market expectations regarding the performance of Newman and whether such expectations were in any way affected by the overpayment.
Prudential brought a claim against Mr Bartlett and Mr Laughton in its own capacity as shareholder for damages for the diminution in value of its shares (and also claiming to represent other shareholders with similar claims), and also sought to bring a derivative action against them in the name of Newman in respect of the loss which it suffered in the form of the overpayment for the assets of TPG.
Since proof of loss was a necessary element of Prudentials cause of action based on conspiracy, Mr Scotts submission was that Prudential had failed to establish that it had any cause of action of its own against Mr Bartlett and Mr Laughton.
Mr Caplan QC, counsel for Prudential, made it clear that Prudentials main objective was to pursue a derivative claim on behalf of Newman and indicated that if that claim succeeded Prudential would not be seeking any damages in respect of its own alleged cause of action in conspiracy: [1981] Ch 257, 278H 279C; noted by Vinelott J at p 328C. Prudentials position on this serves to underline that in respect of its own cause of action it entirely relied on the loss suffered by the company, rather than seeking to prove any different loss suffered by itself.
Vinelott J found at trial that Prudentials case was made out on the facts and held that Prudential was entitled to sue in its own right for loss which it maintained it had suffered in respect of the diminution in value of its shares in Newman and was also entitled to bring a derivative action on behalf of Newman, under the exception to the rule in Foss v Harbottle: [1981] Ch 257.
As regards Prudentials own cause of action (and the representative claim it made on behalf of other shareholders), the judge was prepared to assume that the overpayment to TPG to acquire the relevant assets had caused a reduction in the value of shares in Newman, despite the absence of evidence about whether the overpayment had had any effect on their value: [1981] Ch 257, 302E 303D.
He directed an inquiry as to the amount of the damages.
Mr Bartlett and Mr Laughton appealed.
By the time of the hearing in the Court of Appeal, Mr Scott had ceased to act for them and they appeared as litigants in person.
The Court of Appeal upheld certain of the judges findings of fact to the effect that Mr Bartlett and Mr Laughton had made fraudulent statements which induced Newman to buy the assets of TPG at an overvalue (though this was only in the sum of 45,000 rather than 445,000 as had been found by the judge).
However, the court held that Prudential had no cause of action in its own right, because it was seeking to recover damages in respect of the loss in value of its shares in Newman on the basis that Newman had suffered damage, which claim fell foul of the reflective loss principle.
The court also held that the judge ought to have held a trial of a preliminary issue of whether this was an appropriate case for a derivative action in the name of Newman; however, as the full trial of that claim had taken place and Newman had indicated that it would take the benefit of an order in its favour, in the particular circumstances of the case it was not necessary to determine whether Prudential had been entitled to bring a derivative action.
Both aspects of the courts judgment are significant for the present discussion.
Again, Prudentials main objective was to succeed on the derivative claim, rather than on its own cause of action (referred to as its personal claim).
The court was scathing about Prudentials pleadings, which it described as vague and obscure and confused ([1982] Ch 204, 225 226), and the whole presentation of its case.
As a prelude to the relevant part of the courts reasoning on reflective loss, it noted ([1982] Ch 204, 222D): Counsel for the plaintiffs [Mr Caplan QC] agreed before us that no facts are relied upon in support of the personal claim which are not relied upon in support of the derivative claim.
Thus, at this stage, Mr Caplan was not seeking to argue in relation to Prudentials personal claim that any finding could be made that Prudential had suffered any loss in the value of its shares in Newman different from the part of Newmans own loss which was proportionate to Prudentials shareholding in Newman.
This position no doubt reflected the points made by Mr Scott at first instance, that Newman had not given particulars of any different or distinct loss of its own and had not adduced any evidence about such loss at trial.
The Court of Appeal was not prepared to make the assumption which Vinelott J had made regarding different loss suffered by Prudential, in the absence of a properly pleaded case and evidence in support.
By reason of Mr Caplans position at the hearing in the Court of Appeal, there was no need for the court to deal with the point which had been debated at first instance.
In view of the importance of the judgment in Prudential as the foundation for the reflective loss principle and the adoption of the reasoning in it in Johnson, it is necessary to set out the courts reasoning at some length ([1982] Ch 204, 222E 224D): Vinelott J upheld the plaintiffs personal claim He began with the proposition, which accorded with his findings, that Newman had been induced by fraud to approve an agreement under which Newman paid more (he thought about 445,000 more) than the value of the assets acquired and thus 445,000 more than it needed to pay; therefore Newmans indebtedness to its bankers immediately after the transaction (about 5m) was 445,000 more than it would have been but for the fraud; therefore the fraud caused a reduction in net profits, which must have affected the quoted price of Newman shares; therefore, the plaintiffs suffered some damage in consequence of the conspiracy and that was sufficient to complete the cause of action, the quantum of damages being left to an inquiry.
In our judgment the personal claim is misconceived.
It is of course correct, as the judge found and Mr Bartlett did not dispute, that he and Mr Laughton, in advising the shareholders to support the resolution approving the agreement, owed the shareholders a duty to give such advice in good faith and not fraudulently.
It is also correct that if directors convene a meeting on the basis of a fraudulent circular, a shareholder will have a right of action to recover any loss which he has been personally caused in consequence of the fraudulent circular; this might include the expense of attending the meeting.
But what he cannot do is to recover damages merely because the company in which he is interested has suffered damage.
He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a loss is merely a reflection of the loss suffered by the company.
The shareholder does not suffer any personal loss.
His only loss is through the company, in the diminution in the value of the net assets of the company, in which he has (say) a 3% shareholding.
The plaintiffs shares are merely a right of participation in the company on the terms of the articles of association.
The shares themselves, his right of participation, are not directly affected by the wrongdoing.
The plaintiff still holds all the shares as his own absolutely unencumbered property.
The deceit practised upon the plaintiff does not affect the shares; it merely enables the defendant to rob the company.
A simple illustration will prove the logic of this approach.
Suppose that the sole asset of a company is a cash box containing 100,000.
The company has an issued share capital of 100 shares, of which 99 are held by the plaintiff.
The plaintiff holds the key of the cash box.
The defendant by a fraudulent misrepresentation persuades the plaintiff to part with the key.
The defendant then robs the company of all its money.
The effect of the fraud and the subsequent robbery, assuming that the defendant successfully flees with his plunder, is (i) to denude the company of all its assets; and (ii) to reduce the sale value of the plaintiff's shares from a figure approaching 100,000 to nil.
There are two wrongs, the deceit practised on the plaintiff and the robbery of the company.
But the deceit on the plaintiff causes the plaintiff no loss which is separate and distinct from the loss to the company.
The deceit was merely a step in the robbery.
The plaintiff obviously cannot recover personally some 100,000 damages in addition to the 100,000 damages recoverable by the company.
Counsel for the plaintiffs sought to answer this objection by agreeing that there cannot be double recovery from the defendants, but suggesting that the personal action will lie if the companys remedy is for some reason not pursued.
But how can the failure of the company to pursue its remedy against the robber entitle the shareholder to recover for himself? What happens if the robbery takes place in year 1, the shareholder sues in year 2, and the company makes up its mind in year 3 to pursue its remedy? Is the shareholders action stayed, if still on foot? Supposing judgment has already been recovered by the shareholder and satisfied, what then? A personal action could have the most unexpected consequences.
If a company with assets of 500m and an issued share capital of 50m were defrauded of 500,000 the effect on dividends and share prices would not be discernible.
If a company with assets of 10m were defrauded, there would be no effect on share prices until the fraud was discovered; if it were first reported that the company had been defrauded of 500,000 and subsequently reported that the company had discovered oil in property acquired by the company as part of the fraud and later still reported that the initial loss to the company could not have exceeded 50,000, the effect on share prices would be bewildering and the effect on dividends would either be negligible or beneficial.
The plaintiffs in this action were never concerned to recover in the personal action.
The plaintiffs were only interested in the personal action as a means of circumventing the rule in Foss v Harbottle.
The plaintiffs succeeded.
A personal action would subvert the rule in Foss v Harbottle and that rule is not merely a tiresome procedural obstacle placed in the path of a shareholder by a legalistic judiciary.
The rule is the consequence of the fact that a corporation is a separate legal entity.
Other consequences are limited liability and limited rights.
The company is liable for its contracts and torts; the shareholder has no such liability.
The company acquires causes of action for breaches of contract and for torts which damage the company.
No cause of action vests in the shareholder.
When the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company and that he can only exercise his influence over the fortunes of the company by the exercise of his voting rights in general meeting.
The law confers on him the right to ensure that the company observes the limitations of its memorandum of association and the right to ensure that other shareholders observe the rule, imposed upon them by the articles of association.
If it is right that the law has conferred or should in certain restricted circumstances confer further rights on a shareholder the scope and consequences of such further rights require careful consideration.
In this case it is neither necessary nor desirable to draw any general conclusions.
This reasoning of the Court of Appeal was a new departure in the case.
At first instance it appears to have been common ground that (a) the loss suffered by a shareholder could not simply be equated with a proportionate part of the loss suffered by the company and (b) in order for the shareholder to have his own cause of action in tort (where damage was the gist of the action), it was necessary to show that there had been a diminution in the value of his shares by reason of the wrongdoing: for Mr Scotts argument on behalf of the defendants, see the references above; for Mr Caplans argument for Prudential, see [1981] Ch 257, 265B and 278F H; and for the judges ruling that Prudential had made out its claim that there had been a diminution in the value of its shareholding, which was not equivalent to a proportionate part of the loss suffered by the company, see [1981] Ch 257, 302E 303D.
Further, by setting out reasoning which seemed to cover every case involving loss by a shareholder and loss by a company which are related, including those where they are not the same, the court went further than it needed to do and further than was justified on the case as presented to it: see para 137 above.
As noted above, the rule in Foss v Harbottle is to the effect that where a company has a cause of action, it is for the relevant organs of the company to decide whether to sue upon it.
In the present case, on the facts as alleged by Marex, the Companies have their own causes of action against Mr Sevilleja in respect of misappropriation of their money by him.
Marex has no right to sue in relation to those causes of action; nor would recovery by Marex in relation to its cause of action affect the ability of the Companies to recover the full extent of their losses in relation to their causes of action.
There is no great difficulty in answering the questions posed by the Court of Appeal in Prudential when this distinction is borne in mind.
Since the Companies are now in liquidation the relevant organ of the Companies is the liquidator, who is an officer subject to the control of the courts in the BVI.
It is for him to decide whether to prosecute such claims as the Companies may have against Mr Sevilleja, taking into account the resources available for that.
I see no reason to question the good faith of the present liquidator, who is an insolvency practitioner from a reputable firm.
This is not a case in which the relevant organ of a company is under the control of the wrongdoer against whom the company has a cause of action, so there is no question of the exception to the rule in Foss v Harbottle being applicable.
In the Court of Appeal, Flaux LJ said, there is no evidence that there is anything preventing a claim against Mr Sevilleja by the present or another liquidator or preventing Marex from taking an assignment of the Companies claim (para 60).
However, Marex does not seek to sue Mr Sevilleja to vindicate the Companies causes of action against Mr Sevilleja, but to vindicate what it maintains are its own causes of action against him comprising the Lumley v Gye claim and the OBG claim.
The Court of Appeal in Prudential regarded the personal claim by Prudential in respect of the diminution in the value of its shares in Newman as misconceived and an illegitimate attempt to circumvent the rule in Foss v Harbottle.
The cause of action relied upon was conspiracy, and no facts were relied on in support of the personal claim that were not relied on in support of the derivative claim.
Further, as appears from the passage above, the courts view was that Prudential was never concerned to recover in the personal action, but was only interested in it as a means of circumventing the rule in Foss v Harbottle ([1982] Ch 204, 223H 224A).
There was, therefore, no real focus on the independent nature of the causes of action which Prudential might have had in its personal capacity.
In the final part of the passage quoted above, I respectfully consider that the court conflated the rationale for the rule in Foss v Harbottle with the rationale for the reflective loss principle, and assumed as correct what was actually in question (namely, whether a personal action would in fact subvert the rule in Foss v Harbottle); while at the same time the court left open the possibility that the law might confer further rights on a shareholder.
Thus, the court did not address the possibility that a shareholder might have a personal cause of action based on intentional infliction of harm by unlawful means as illustrated by the OBG case, which would depend upon the shareholder establishing additional facts which would not be relevant to the companys own cause of action (ie that there was deliberate action by the wrongdoer, unlawful as against an intermediate party the company but aimed at inflicting harm on the shareholder).
Be that as it may, earlier in the passage quoted the court offered reasons of a general nature to justify the introduction of the reflective loss principle.
I have already noted that the court went further in its reasoning than it needed to do, on the case as presented to it by Prudential.
There is no report of any argument which led it to do this.
Since Mr Caplan for Prudential had made the concession referred to above and Mr Bartlett and Mr Laughton were representing themselves, it must be doubted that the court had the benefit of rigorous argument on this issue.
With respect, I do not consider that the courts reasoning is sustainable.
Again, it conflates something which is undoubtedly correct (a shareholder cannot recover damages merely because the company in which he is interested has suffered damage: of course not, because the mere fact that the company suffers damage does not create a cause of action for the shareholder), with something which is highly questionable (a shareholder cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a loss is merely a reflection of the loss suffered by the company.
The shareholder does not suffer any personal loss).
In fact, however, the third party defendants actions may include elements which, in combination with his unlawful action vis vis the company, give rise to a cause of action vested in the shareholder.
That may be so if the defendant has acted with the intention of using his unlawful actions vis vis the company to harm the shareholder, so as to give rise to a cause of action vested personally in the shareholder for the tort of intentional infliction of harm by unlawful means as discussed in the OBG case (see also JT Stratford & Son v Lindley [1965] AC 269, noted by Lord Hoffmann at para 48 in the OBG case, regarding the ability of a claimant to rely on breaches or threatened breaches by a defendant of contractual duties owed by the defendant to a third party as the relevant unlawful means for the purposes of this tort, if the defendant acted with the requisite intention of harming the claimant).
Furthermore, the shareholder may well have suffered loss as a result of the commission of that tort (particularly in the form of a reduction in the market value of his shares or a reduction in dividend payments) which is different from, and does not have a simple one to one correspondence with, the loss suffered by the company itself.
The reasoning in relation to the cash box example is in my view flawed.
Companies come in many varieties and there are several methodologies for valuing their shares, which may be more or less appropriate in a particular case depending on the context.
The cash box example assumes a company which is not trading and has no liabilities, where the market value of the shares is equivalent to the value of the assets in the cash box.
I will return to this example below, but for the purposes of analysis it should be emphasised that this is an unusual scenario.
In the case of a trading company, especially one whose shares are quoted and freely traded on a public exchange, common valuation methodologies for shares include application of price/earnings ratios and discounted cashflow models.
What is important for the calculation of value under these methodologies is the future income or profits of the company, not its current net asset position (see Charles Mitchell, Shareholders Claims for Reflective Loss (2004) 120 LQR 457, 475 478).
A company may be predicted to have strong prospects of future income or future profits which may support a high valuation of its shares; and that may be so even though its net asset value is relatively low.
Often, the predicted future income or profits of a trading company will reflect a judgment about its capacity to enter into new contracts in the future, which are not yet reflected in its balance sheet.
When a person buys a share in a trading company in the market, he pays both for a capital asset (the share itself, which he can sell the next day if he chooses) and for the right to participate in the future commercial performance of the company.
In this sense, the Court of Appeal in Prudential was right to say that [w]hen the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company; but in my view it was wrong to conflate this with the erroneous idea implicit in the cash box example that the shareholders interest and the value of his shares is confined to a right to participate in the assets of the company as they happen to stand at any given point of time.
It is only on this basis that the court could say in relation to that example that two wrongs were committed (one against the shareholder and one against the company), yet the wrong against the shareholder plaintiff causes the plaintiff no loss which is separate and distinct from the loss to the company.
The court states this proposition as if it is a logical conclusion applicable in all cases, whereas the question whether the shareholder suffers a different loss of his own is a matter of fact.
In the more typical case, the position may well be that the shareholder suffers a different loss with reference to the value of his shares in the company whose assets have been stolen. (Even if the company has a claim against the defendant wrongdoer for loss of profits as well as loss of assets, the recoverable profits which might be awarded as compensation by a court are not necessarily the same as the markets estimation of future profits which supports the market value of a share in that company: see in that regard the comments by Waller LJ in Giles v Rhind, para 28).
This point has been made in the scholarly literature and later cases in particular Christensen v Scott [1996] 1 NZLR 273 (NZCA), at 280 per Thomas J, delivering the judgment of the court, and Gerber [1997] RPC 443, 475 and 479 (per Hobhouse LJ) and 482 483 (per Hutchinson LJ) as reviewed in Mitchell (2004) 120 LQR 457.
Mitchell rightly criticises the explanation in Prudential as (p 459): an indefensibly narrow view of the value inherent in shares.
No one would dispute that shares are valuable because they are contractual rights of participation in a company, but it does not follow from this they have no other value and if one accepts that shares are also valuable as property which generates income and can be sold to others, then one must conclude that a shareholder suffers a personal loss when the value of his shares or the amount of dividends he receives goes down. (Joyce Lee Suet Lin, Barring Recovery for Diminution in Value of Shares on the Reflective Loss Principle [2007] CLJ 537, 539 552, also points out that the value of the shares in a company may well be different from the net assets of the company.)
In my view, the Court of Appeal in Prudential was right to say that Prudential had no good cause of action in respect of the diminution in value of its shares in Newman; but this was for a different, and narrower, reason than the one it gave.
As explained above, at the hearing in the Court of Appeal Prudentials only argument was that it was entitled to say that it sustained damage in relation to the value of its shares equivalent to that part of the loss suffered by Newman which was proportionate to its shareholding in Newman.
It did not attempt to establish that there had in fact been a fall in the market value of its shareholding and had adduced no evidence to that effect.
On the case as presented by Prudential, the Court of Appeal was right to hold that Prudential had failed to show that it had suffered any loss which was different from the loss suffered by Newman.
The distinction drawn by the court between Prudentials personal claim and the claim a shareholder might have to recover loss he has personally been caused when acting on his own behalf in consequence of a fraudulent circular, such as the expense of attending the meeting, is a valid one.
By contrast, by reason of the way in which it presented its personal claim, Prudential had failed to show that it had suffered any loss in respect of the value of its shareholding and so could not establish that it had any cause of action.
Its attempt to say that it had suffered loss equivalent to a proportionate share of Newmans loss was rightly dismissed by the Court of Appeal.
That loss, on which Prudential sought to rely for the purposes of its personal claim, was not loss in respect of which it had any cause of action.
The only person with a cause of action in relation to that loss was the company, Newman.
What, then, is to happen in a case where the actions of a third party defendant constitute two wrongs (one as against the company and one as against the shareholder) with different loss in each case, so that the company and the shareholder each have their own distinct fully established cause of action against him?
In principle, as mentioned above, if a person has a cause of action against another he is entitled to bring proceedings to vindicate his rights.
He may proceed as quickly as he chooses and with a view to maximising his prospects of securing recovery from the defendant.
If he is a shareholder with a personal cause of action, nothing in the articles of association constitutes a promise by him that he will not act to vindicate his own personal rights against a defendant against whom the company also has its own cause of action; and there is no other obligation to that effect arising out of his membership of the company.
It is sometimes said that in a case where a wrong is done to the company which has an impact on the value of its shares, in circumstances capable of giving rise to independent causes of action for the company and for a shareholder, the shareholders claim fails for reasons of causation.
It is suggested that the cause of the loss suffered by the shareholder in the form of diminution in the value of his shares or loss of dividend payments which would otherwise have been made to him is not the wrong committed by the defendant wrongdoer, but the decision of the company not to sue to recover in respect of the loss it has suffered: Gerber [1997] RPC 443, 471 per Hobhouse LJ; Johnson [2002] 2 AC 1, 66 per Lord Millett; Giles v Rhind, para 78 per Chadwick LJ.
In my view, this reasoning cannot be sustained.
As explained above, the loss suffered by the shareholder is not the same as the loss suffered by the company, and it does not follow that eventual recovery by the company will have the effect of eliminating the loss suffered by the shareholder.
As Charles Mitchell points out in his article, (2004) 120 LQR 457, 469 470, the causation argument begs the important question.
It presupposes that the shareholder will suffer a reflective loss when the company decides not to pursue its remedy, because the shareholder cannot recover this loss for himself.
The argument does not show why the shareholder should be disabled from claiming in the first place.
The absence of any necessary correspondence between the loss to a shareholder and the loss to the company which follows from a wrong done to the company which also forms part of a parallel wrong done to the shareholder can be demonstrated in various ways.
Knowledge in the market that the company had been made a victim of the wrong might have the effect of undermining market confidence in its management, thereby reducing the market value of shares in it even if the company made a full recovery of what it had lost.
Further, in other cases, the timing of recovery by the company may be important.
If a wrong done to the company were instantaneously and automatically corrected, a shareholder might suffer no diminution in the value of his shares as a result of that wrong.
But that is not the real world.
The law has to address the real world, not an imaginary one (see eg Gould v Vaggelas (1984) 157 CLR 215, 225 per Gibbs CJ; 232 per Murphy J; 242 and 244 246 per Wilson J).
In reality, a shareholder may be able to prove that, but for the defendants wrongful actions which gave rise to independent causes of action vested in the company and in the shareholder respectively, he would have been paid a dividend or his shares would have had a higher value which he could have realised in the market.
It does not follow that if the company sues to vindicate its rights and is successful years later in obtaining a judgment against the third party defendant and in obtaining execution of that judgment that it would, in the changed circumstances then prevailing, choose then to make the same dividend payment it would have made previously but for the defendants wrongdoing.
Nor does it follow that the value of the shares held will automatically be restored to what it would have been previously but for the defendants wrongdoing.
The companys prospects, as judged by the market, may be radically different at the later point in time.
Or the shareholder may already have sold the shares at a price discounted for uncertainty regarding possible recovery by the company.
In many cases the companys recovery of its loss will not have the effect of restoring the value of the shares.
Since the companys recovery may not put the shareholder back in the position he would have been in but for the defendants wrongdoing, it cannot be said that it is the decision of the company whether to sue or not which has a determinative causative effect in relation to whether the shareholder suffers loss as a result of such wrongdoing.
Further and in any event, whether the company decides to sue, compromise or waive its rights in respect of the cause of action with which it is vested as a result of the defendants wrongdoing is res inter alios acta so far as concerns the entitlement of the shareholder to sue in relation to the separate cause of action vested in him as a result of that wrongdoing.
The company does not control what the shareholder may do in relation to vindicating his own cause of action.
He is entitled to sue in relation to his own cause of action if he thinks he can prove he has suffered a loss.
If the company makes recovery in respect of its loss, that may have an effect on the extent of the loss suffered by the shareholder, but may well not eliminate it.
If the company decides to settle its claim for less than its whole value or decides not to sue, that does not affect the entitlement of the shareholder to sue on his own cause of action in respect of the loss suffered by him as a result of the defendants wrongdoing.
As Peter Watts observes in his case note on Johnson in (2001) 117 LQR 388, at p 391: It is difficult to see that the firm [Gore Wood, the defendant firm of solicitors which had advised both the company and the shareholder] could be relieved from its obligation to the shareholder by laying the blame for the shareholders not being indemnified on the companys having settled its claim, an outcome achieved only with the firms concurrence.
In particular, in relation to a claim based on OBG, where the defendant has acted with the intention of harming the shareholder claimant and has succeeded, it would be contrary to justice to hold that the claimant cannot sue the defendant in relation to his cause of action just because the company has decided not to pursue its own cause of action.
In fact, if the company foregoes recovery in respect of the wrong done to it, the effect may be to make it easier for the shareholder to establish the extent of his loss and to meet another objection to his claim, to which I now turn.
As a matter of basic justice, the defendant ought not to be liable twice for the same loss, once to a shareholder with a personal claim and again to the company.
But in the situation under review the wrongs and also the losses suffered by the claimant shareholder and the company respectively are different.
The claimant and the company each have distinct causes of action of their own.
The company can recover for its losses, eg depletion of its assets stolen by the defendant and consequential loss of profits.
The claimant can recover for diminution in the value of his shares, which is a function of how the market values them, and for loss of dividends he might have received but for the wrong in relation to himself.
These losses may have some relationship to the losses suffered by the company, but are not the same as those losses.
The loss suffered by the company as a result of theft of its assets may represent a substantial loss of the working capital it needs to generate future profits; and if so, that may have an effect on the value which the market places on shares in the company (but, contrary to what is said to be demonstrated by the cash box example, the loss will be different from that suffered by the shareholder and there is unlikely to be direct correspondence between what the company has lost and the reduction in the value of the shareholders shares).
On the other hand, the loss suffered by the company might be insignificant in terms of any effect on its ability to generate profits in future, in which case the impact on share value might be practically nothing.
If, after the wrongdoing of the defendant, the company is still trading and the claimant shareholder has not sold his shares, he retains shares of some worth in the market which reflects, among other things, the value of the companys own claims against the defendant.
In my view, the claimant would then be entitled to claim damages in respect of the reduced market value of his shares due to the wrong against him committed by the defendant (by the means of or in parallel with his commission of a wrong against the company), ie their market value absent the wrong done to the company (and to the shareholder) less their actual current market value, reflecting among other things the companys claims against the defendant.
Accordingly, it can be said that in such a case due allowance in respect of the companys claims against the defendant is reflected in what is recoverable by the claimant.
It does not, then, seem to me to be unjust to allow both the claimant and the company to pursue their separate claims for their different losses against the defendant.
In the cash box example given in Prudential, in the case of an inert, non trading company, the market would presumably value each share as equivalent to a proportionate part of the assets of the company, namely the cash in the cash box.
The result would be that the loss suffered by the claimant personally would be directly reduced pound for pound by the companys own claim against the defendant, so there would be no question of the defendant being liable twice over for the same loss (if for some reason the company does not sue, the claimants loss will not have been reduced and he would be able to pursue his own cause of action: see paras 131 and 154 above).
In more typical situations, the relationship between the companys loss and the claimants loss will not be direct like this, but due allowance for the companys potential to make recovery for its losses (albeit possibly discounted to a degree to allow for the hazards of litigation) will still be reflected in the calculation of the claimants loss.
One could also envisage a situation in which, after the defendants wrongdoing, a claimant shareholder decided to sell his shares in the company, and in consequence of that wrongdoing received a lesser price than he otherwise would have done.
In that case the claimant could recover for the crystallised loss he has suffered by way of the diminution in the shares value due to the wrong committed by the defendant.
Lord Millett appears to have contemplated that this might be so, since in explaining Stein v Blake [1998] 1 All ER 724 in Johnson he emphasised that the shareholder had not disposed of his shares in the company: [2002] 2 AC 1, 64B.
In Heron International Ltd v Lord Grade [1983] BCLC 244 the Court of Appeal would have been prepared to distinguish Prudential and allow shareholders to sue for damages in a situation where breaches of fiduciary duty by a companys directors caused a diminution in the value of its assets resulting in a reduction in the value of its shares as sold by the shareholders in the market, albeit on the facts this had not occurred and would not occur: see p 262a h; and see Lin [2007] CLJ 537, 554.
In this situation, what the claimant has received for his shares by selling them in the market will have reflected the markets view of the value of the companys claims against the defendant (alongside its other assets and its general trading prospects).
The companys claims against the defendant will have been brought into account for the credit of the defendant in this way, to the extent that they are material to valuing the claimants loss, and it would not be unjust to allow the claimant to recover the full amount of his crystallised loss.
It should not make any difference to the position whether the claimant has sold his shares or has decided to retain them. (In Johnson the House of Lords held that the claimant shareholder was entitled to claim in respect of his loss of a 12.5% shareholding in the company, transferred to a lender as security for a loan which, by reason of his lack of funds attributable to the defendants wrongdoing, he was unable to redeem: [2002] 2 AC 1, 37A: presumably the value of what the claimant had lost would reflect the value which the relevant market would place upon the company as a company having amongst its assets its own cause of action against the defendant.)
Moreover, if there remains a concern about the risk of the defendant being liable twice over by virtue of the relationship between the companys loss and the loss suffered by the claimant shareholder, that has to be balanced against a concern that if one excludes the liability of the defendant to the claimant, then the claimant may well be undercompensated in respect of a real and different loss which he has suffered as a result of the defendants wrong against him.
The claimant would have to prove on the balance of probabilities that he has indeed suffered a loss which is different from the loss suffered by the company.
If he can do so, then given the choice between ensuring that the claimant is fully compensated for the wrong done to him and eliminating any risk that the defendant might have to pay excessive compensation, I consider that the choice should be in favour of giving priority to protecting the interests of the innocent claimant rather than to giving priority to protecting the interests of the wrongdoing defendant.
Compare Wattss case note on Johnson in (2001) 117 LQR 388, at 390: referring to a case where a defendant has given the same promise of performance to the company and the shareholder, he says If, as a fact, a promisor has undertaken obligations which might contemplate its having a double liability upon default, it is not plain that the law should be unduly concerned; and Lin [2007] CLJ 537, 556, makes the same point.
In the context of a claim based on OBG (and also, in the context of a claim by a creditor of the company, as discussed below, based on Lumley v Gye) the wrongdoer has likewise engaged in deliberate conduct which engages the right of the claimant shareholder to sue him alongside any right of action the company might have.
In some cases, the relationship between the loss suffered by the company and the loss suffered by the claimant shareholder may be more direct.
Perhaps the cash stolen in the cash box example was being earmarked by the company for payment of a dividend to shareholders, and in stealing it the defendant had the requisite intention to harm the claimant shareholder (as required for an OBG type claim by him) by depriving him of his share of the dividend.
Two points may be made about this.
First, it would still be the case that the claimant has a distinct cause of action against the defendant in respect of losses suffered personally by him, assessed by reference to what would have happened if the defendant had committed no wrong.
The claimants case would be that if the cash had remained in the cash box, the company would in fact have chosen to distribute it by way of payment of a dividend.
The fact that the company, when actually faced with the loss of the cash, might decide not to pursue its own cause of action against the defendant does not undermine that case; and if the company so decides, any concern regarding double liability of the defendant is thereby removed.
Even if the company decided to pursue its own claim as well, that would not necessarily undermine the claimants case either.
If and when the company makes recovery for its loss, circumstances will be different and it may be that the company will not at that stage decide to use the money so recovered to make any dividend payment.
So the claimant will again have suffered a real loss which would not be eliminated by the award of a remedy to the company.
Secondly, the court can take steps to manage the coincidence of claims by the claimant and by the company by procedural means.
For instance, it could, if it were thought necessary, direct the claimant to give the company notice of the claim he is bringing against the defendant so that the company can choose to join in the proceedings and bring its own claim if it wants to.
The court could then work through the interaction of the two claims, in so far as there is found to be any concrete and relevant relationship between them, in a pragmatic way with full information as the proceedings progress.
For example, if it became clear that the company would recover in the proceedings the money stolen from the cash box and would use it to make a belated dividend payment, as it had intended to do previously, the claimants own loss might be reduced to the value to be ascribed to being deprived of the money for a period of time, rather than altogether.
Alternatively, if the money recovered by the company was going to be retained by it, the claimant would have to give credit for any increase in the market value of his shares attributable to the fact that the companys assets will have been swelled to that extent.
This is an aspect of working out the application of the principle of compensation in the light of what is known by the time of the judicial decision: cf Golden Strait Corpn v Nippon Yusen Kubishika Kaisa (The Golden Victory) [2007] UKHL 12; [2007] 2 AC 353; Gould v Vaggelas (1984) 157 CLR 215, in particular at 254 255 per Brennan J.
Courts considering the issue prior to the decision in Johnson considered that procedural ways of managing the coincidence of claims would generally be possible (even if not available in every case) and appropriate: Christensen v Scott [1996] 1 NZLR 273, 281; Barings [1997] 1 BCLC 427, 435; see also Mitchell (2004) 120 LQR 457, 465; and Lin [2007] CLJ 537, 554 555.
Similarly, at first instance in Prudential, Vinelott J (who, unlike the Court of Appeal, was confronted with the argument that there would be situations in which a shareholder had a cause of action and suffered a loss different from that suffered by the company) proposed as a procedural solution that the company might be joined as a defendant in such cases: [1981] Ch 257, 328B E.
If the company is joined as a party and does not advance its own claim at trial, it may be estopped from doing so in later proceedings.
On the other hand, if the company does wish to pursue its claim, it may be beneficial in case management terms to allow the companys claim to be tried first or at the same time as the shareholders claim, since then the extent of the companys recovery can be brought into account when valuing the loss suffered by the shareholder claimant.
A procedural approach allows for nuanced adjustment of the vindication of parallel claims in the light of all relevant evidence about the circumstances regarding the interests of the company and the shareholder.
The court can ensure that there is no double recovery and that the shareholder by his action does not deprive the company of sums properly due to it.
The decision of the High Court of Australia in Gould v Vaggelas, discussed below, provides an example of how a court can work through the practical implications where a company and its shareholders both have claims against the same defendant and where the liquidator of the company fails to take steps to vindicate its claim against the defendant.
Similarly, in In re Gerald Cooper Chemicals Ltd [1978] Ch 262, Templeman J envisaged that a procedural solution would be appropriate for managing the coincidence of claims in respect of carrying on the business of a company with intent to defraud creditors, in contravention of section 332 of the Companies Act 1948 (see now sections 213 and 214 of the Insolvency Act 1986), available both to the liquidator of the company and to a supplier/creditor dealing with it, as against persons involved in carrying on its business: pp 268 269.
To avoid the defendants being placed in double jeopardy for the loss, the liquidator was to be informed of a claim brought by the supplier/creditor to allow the liquidator the option of bringing a claim himself.
In reviewing the statutory insolvency regime and making recommendations, the Cork Committee emphasised the desirability of flexibility for courts with regard to beneficiaries in relation to awards in respect of what are now sections 213 and 214 of the 1986 Act, in view of the diversity of situations which can arise: Insolvency Law and Practice, Report of the Review Committee (1982) (Cmnd 8558), para 1797.
A focus on procedural solutions also emerges in the decision of the Court of Appeal of Singapore in Townsing v Jenton Overseas Investment Pte Ltd [2007] SGCA 13; [2008] 1 LRC 231.
This concerned a misapplication of funds of a company by its director in breach of his fiduciary duty owed to the company and also in breach of duty which he owed directly to the shareholder owner of that company.
The shareholder sued the director for loss which it had suffered as a result of the wrong done to it, claiming that the loss was equivalent to the amount of the funds of the company which had been misapplied.
Thus in its action, much as happened in the Prudential case in the Court of Appeal, the shareholder simply equated the loss it suffered with the loss suffered by the company and made no attempt to identify a different loss: para 29.
The courts judgment has to be read with this in mind.
In these circumstances the court decided that the reflective loss principle accepted in Johnson should apply in Singapore, in preference to the position set out in Christensen v Scott: paras 77 79.
This was on the basis that (in light of the way in which the shareholder presented its claim and following Lord Millett in Johnson at [2002] AC 1, 66 67) there was a unity of the economic interests of a shareholder and his company; that the no reflective loss rule is a variant of the proper plaintiff rule in Foss v Harbottle; and that it protects against the risk of double recovery and prejudice to the creditors and shareholders of the company.
In my opinion, for reasons set out above, the unity of interests point and the proper plaintiff point do not support the reflective loss principle, insofar as it is sought to be applied in relation to a different loss suffered by a shareholder in relation to which he has his own cause of action.
As to protection against the risk of double recovery and prejudice to shareholders and creditors, the court recognised that these points could be met by procedural means, such as by the shareholder obtaining an undertaking from the liquidator of the company that it would not sue on the wrong done to it: paras 85 86.
At para 85 the court also noted with approval that in Christensen the court was prepared to deal with the problem of double recovery in several ways, such as staying one proceeding or staying execution against one or other of the parties.
Since the appellant director had not pleaded the reflective loss principle as a defence to a claim by the shareholder, he had deprived the shareholder of procedural opportunities of this kind by which it might have met such a defence and he was not permitted to introduce the plea for the first time on the appeal.
The reflective loss principle was not treated as a rule of law which had the effect of stipulating that the shareholder could not be regarded as suffering any loss at all.
Are there any reasons of public policy why the shareholders cause of action should be eliminated altogether in order to ensure priority for the companys claim? Lord Reed says (para 38), with reference to the speech of Lord Hutton in Johnson, that there are pragmatic advantages which justify having a rule of law that a shareholder cannot sue to recover his own loss.
However, as I set out below, none of the other law lords in Johnson agreed with Lord Hutton.
In my view, there are no sound reasons why the shareholders personal cause of action should be eliminated in this way.
The cause of action is personal, so there is no reason why it should be subjected to the collective decision making procedures which apply when the company decides what to do in relation to any cause of action it may have.
The shareholders cause of action falls outside the rule in Foss v Harbottle.
To say he is to be denied being able to vindicate his own cause of action by reason of his position as shareholder in the company seems to me to erode the principle of the separate legal personality of the company established in the Salomon case without good justification.
There is no question of the shareholder being entitled to recover damages due to the company in respect of the companys own cause of action and in that way reducing the assets of the company which are available for paying its creditors or distributing to its shareholders.
It is, however, possible that if the claimant shareholder sues to vindicate his personal cause of action and succeeds in making recovery from the defendant wrongdoer, that may so diminish the defendants fund of assets that when the company sues to vindicate its cause of action against him, it is unable to make full recovery in respect of its claim.
That may mean that the companys shareholders and creditors lose out.
But in my view, this is not a reason to prevent the claimant shareholder from recovering in respect of his cause of action.
As observed above, he owes no duty to the company, its creditors or the other shareholders to hold off from seeking to vindicate his own rights.
The risk that those other persons might suffer if he acts to vindicate his rights is simply a risk inherent in the general situation where a defendant has liabilities owed to different persons.
The shareholder is exposed to the same risk in reverse, if the company obtains judgment and execution before the shareholder vindicates his rights.
Moreover, these types of risk can be managed by procedural means and also fall to be addressed by the law of insolvency, so there is no sound basis for recognition of a principle of reflective loss on these grounds.
There is also no good reason of public policy why a shareholders personal right of action should be deprived of effect in order to protect the wrongdoing defendant: see para 159 above.
It is true that adoption of the rule of law identified by Lord Reed and Lord Hodge would eliminate the need for debate about the interaction of the companys cause of action and the shareholders cause of action, and in that way would reduce complexity.
Bright line rules have that effect.
But the rule only achieves this by deeming that the shareholder has suffered no loss, when in fact he has, and deeming that the shareholder does not have a cause of action, when according to ordinary common law principles he should have.
In my respectful opinion, the rule would therefore produce simplicity at the cost of working serious injustice in relation to a shareholder who (apart from the rule) has a good cause of action and has suffered loss which is real and is different from any loss suffered by the company.
Common law courts are used to working through complex situations in nuanced and pragmatic ways, to achieve practical justice.
In my opinion, the fact that the interaction between the companys cause of action in respect of its loss and the shareholders cause of action in respect of his own loss gives rise to complexity is more a reason for not adopting a crude bright line rule which will inevitably produce injustice, and requiring instead that the position be fully explored case by case in the light of all the facts, with the benefit of expert evidence in relation to valuation of shares and with due sensitivity to the procedural options which are available.
In Christensen v Scott the New Zealand Court of Appeal, sitting as a five judge court, declined to apply the reflective loss principle.
The defendants were chartered accountants and solicitors who acted for the claimants personally in advising them on channelling their assets into a company taking a lease of farmland.
The defendants came to act for the company as well.
The claimants alleged that negligence on the part of the defendants meant that the consent of the landlords mortgagees was not obtained, nor was a caveat registered against the title.
Consequently the land was lost and the company failed.
The companys claim against the defendants was settled by the liquidator for a sum alleged by the plaintiffs to be totally inadequate.
The Court of Appeal held that the personal claims of the claimants should not be struck out before trial.
Thomas J, giving the judgment of the court, said at pp 280 281: We do not need to enter upon a close examination of the [Prudential] decision.
It has attracted not insignificant and, at times, critical comment.
See eg LCB Gower, Gowers Principles of Modern Company Law, 5th ed (1992), pp 647 653; LS Sealy, Problems of Standing, Pleading and Proof in Corporate Litigation (ed BG Pettit), p 1, esp pp 6 10; and MJ Sterling, The Theory and Policy of Shareholder Actions in Tort (1987) 50 MLR 468, esp pp 470 474.
It may be accepted that the Court of Appeal was correct, however, in concluding that a member has no right to sue directly in respect of a breach of duty owed to the company or in respect of a tort committed against the company.
Such claims can only be brought by the company itself or by a member in a derivative action under an exception to the rule in Foss v Harbottle (1843) 2 Hare 461.
But this is not necessarily to exclude a claim brought by a party, who may also be a member, to whom a separate duty is owed and who suffers a personal loss as a result of a breach of that duty.
Where such a party, irrespective that he or she is a member, has personal rights and these rights are invaded, the rule in Foss v Harbottle is irrelevant.
Nor would the claim necessarily have the calamitous consequences predicted by counsel in respect of the concept of corporate personality and limited liability.
The loss arises not from a breach of the duty owed to the company but from a breach of duty owed to the individuals.
The individual is simply suing to vindicate his own right or redress a wrong done to him or her giving rise to a personal loss.
We consider, therefore, that it is certainly arguable that, where there is an independent duty owed to the plaintiff and a breach of that duty occurs, the resulting loss may be recovered by the plaintiff.
The fact that the loss may also be suffered by the company does not mean that it is not also a personal loss to the individual.
Indeed, the diminution in the value of Mr and Mrs Christensens shares in the company is by definition a personal loss and not a corporate loss.
The loss suffered by the company is the loss of the lease and the profit which would have been obtained from harvesting the potato crop.
That loss is reflected in the diminution in the value of Mr and Mrs Christensens shares.
They can no longer realise their shares at the value they enjoyed prior to the alleged default of their accountants and solicitors. (For a discussion of the policy issues which arise in considering these questions, see Sterling, at pp 474 491.) In circumstances of this kind the possibility that the company and the member may seek to hold the same party liable for the same loss may pose a difficulty.
Double recovery, of course, cannot be permitted.
The problem does not arise in this case, however, as the company has chosen to settle its claim.
Peat Marwick and McCaw Lewis accepted a compromise in the knowledge that Mr and Mrs Christensens claim was outstanding.
It may well be, as was acknowledged by Mr Pidgeon in the course of argument, that an allowance will need to be made for the amount already paid to the liquidator in settlement of the companys claim.
It is to be acknowledged, however, that the problem of double recovery may well arise in other cases.
No doubt, such a possibility is most likely with smaller private companies where the interrelationship between the company, the directors and the shareholders may give rise to independent duties on the part of the professional advisers involved.
But the situation where one defendant owes a duty to two persons who suffer a common loss is not unknown in the law, and it will need to be examined in this context.
It may be found that there is no necessary reason why the companys loss should take precedence over the loss of the individuals who are owed a separate duty of care.
To meet the problem of double recovery in such circumstances it will be necessary to evolve principles to determine which party or parties will be able to seek or obtain recovery.
A stay of one proceeding may be required.
Judgment, with a stay of execution against one or other of the parties, may be in order.
An obligation to account in whole or in part may be appropriate.
The interest of creditors who may benefit if one party recovers and not the other may require consideration.
As the problem of double recovery does not arise in this case, however, it is preferable to leave an examination of these issues to a case where that problem is squarely in point.
Essentially, Mr and Mrs Christensen are alleging that as a result of Peat Marwick and McCaw Lewiss breach of duty owed to them personally they suffered a personal loss, that is, a reduction in the value of their assets.
Their assets in this case had been channelled into their company.
Thus, it is arguable that the diminution in the value of their shareholding is the measure of that loss.
It may well be that when the evidence is heard it will be apparent that Mr and Mrs Christensens claim is inflated, but that is a matter for the trial.
We are not prepared to hold at this stage that they do not have an arguable case to recover damages for the breach of an acknowledged duty.
It will be clear from what I have said about Prudential that I consider that there is considerable force in this reasoning.
The law as stated in Christensen v Scott was in substance affirmed by Leggatt LJ in Barings [1997] 1 BCLC 427, 435.
That case was concerned with negligence of auditors in relation to the audit of a subsidiary company, in relation to which they were alleged to owe a similar duty of care to both that company and its ultimate parent company.
The Court of Appeal held that the parent companys claim against the auditors was an arguable claim fit for service out of the jurisdiction and that the Prudential case provided no answer to it.
I find the decision of the High Court of Australia in Gould v Vaggelas helpful in relation to the issues which arise on this appeal.
That case concerned the purchase by a company of a holiday resort business as a result of fraudulent representations by the vendors regarding its trading history and prospects made to the claimant shareholders/controllers of the company.
Induced by those fraudulent representations, the claimant shareholders entered into transactions which had the practical effect that they lent the company $733,212.12 to enable it to pay part of the purchase price to the vendors; they also mortgaged certain properties of theirs to the vendors and provided the vendors with personal guarantees in respect of outstanding parts of the purchase price which were to be paid by the company over a period of time after completion.
Later, as the business faltered, the claimant shareholders lent the company further sums to enable it to continue trading.
It was found by the trial judge and by a majority in the High Court that the claimant shareholders acted reasonably and without knowledge of the fraud when providing this further lending to support the business.
The business eventually failed, the mortgaged properties were lost and the claimant shareholders incurred a substantial liability under their personal guarantees.
The company did not repay them the sums they had lent it.
The claimant shareholders came to realise that they had been deceived.
In their own right they sued the vendors in deceit, claiming as damages the original sum lent to the company for the purchase, the further sums lent by them to support its continued trading, the value of the securities lost by reason of the failure of the company to repay the bank lending and the amount they had to pay under the guarantees they had given.
The liquidator of the company, which had its own right of action against the defendants in deceit for being induced to purchase the business, for want of resources originally chose not to commence proceedings against the defendants and only issued a claim against them after the decision at first instance on the claimant shareholders claim.
The trial judge awarded the claimant shareholders the damages claimed by them.
His decision was overturned by the Full Court on appeal as regards the damages claimed, but on further appeal to the High Court his decision was upheld by a majority.
The losses suffered by the claimant shareholders in providing the company with funds to acquire the business and to keep it trading were recoverable even though the company had its own claim against the vendors in respect of the price it paid (using the funds provided by the shareholders) and the sums it spent (using funds provided by the shareholders) to keep the business going.
The approach of the majority in the Full Court to identify the claimant shareholders with the company was disapproved: see pp 240 241, 256 257 and 264.
The shareholders had suffered personal losses in respect of which they were entitled to damages from the vendors notwithstanding that the company had its own parallel claim against the vendors.
Although the Prudential case was referred to, only Dawson J in a minority opinion and without any critical examination of the reasoning in the case thought that the claimant shareholders claim should be excluded by reason of the reflective loss principle: pp 269 270.
On the other hand, Gibbs CJ (p 220), Murphy J (pp 231 232), Wilson J (pp 245 246) and Brennan J (p 253) all treated Prudential as distinguishable, because the claimant shareholders sued in their personal capacity for losses suffered by them by spending their own resources in reliance on the fraudulent representations made to them, and not on behalf of the company in respect of its loss.
This is in line with my own view regarding the Prudential decision: para 148 above.
Although on the facts the company was funded by debt rather than equity (other than to a negligible extent), according to the reasoning by the majority I do not think that it would have made any difference to the right of recovery of the claimant shareholders if they had been induced to fund the companys purchase and continued trading by subscribing for shares in it rather than lending it money.
That is the view taken in Spencer Bower and Handley, Actionable Misrepresentation, 5th ed (2014), para 12.26: it is pointed out that issues of double recovery can be addressed by treating the defendant as subrogated to the shareholders rights to the extent that the defendant satisfies a judgment which they obtain against him, in a manner similar to the solution proposed in the case of a creditor in Gould v Vaggelas itself (see below).
The majority recognised that in principle the claimant shareholders had to bring into account as a credit the value of their rights against the company as shareholders and creditors, but on the facts the companys only value and only means of repaying them depended on its vindicating its own claim against the vendors, which in view of the conduct of the liquidator and as events had transpired had to be treated as nil.
See pp 226 229 per Gibbs CJ (focusing on the rights of the claimant shareholders as creditors of the company); p 232 per Murphy J (referring both to the value of the shareholders shares and of their rights as creditors of the company); p 246 per Wilson J (focusing on their rights as creditors, but to be assessed at an earlier point in time when he considered they became aware of the fraud); pp 254 258 per Brennan J (focusing on their rights as creditors).
Johnson v Gore Wood
However, the leading English authority is now the decision of the House of Lords in Johnson.
The case is primarily concerned with other issues, of abuse of process and estoppel by convention.
It appears that there was only comparatively limited argument about the reflective loss principle and it seems that it was not suggested that Prudential was wrongly decided by reference to that principle, only that it was distinguishable.
A difficulty with the case is that the law lords produced separate speeches in which the reasoning on the subject of reflective loss is materially different.
Although on various other issues which arose in the case (including on the question of abuse of process, on which the case is the leading authority) agreement was expressed with the reasoning of Lord Bingham, no member of the appellate committee expressed agreement with his reasoning in relation to the issue of reflective loss.
Lord Bingham and Lord Millett, in their separate speeches, accepted the approach and reasoning in Prudential without question.
However, there was in fact no agreement between them on the reasoning applicable in relation to the reflective loss issue, nor any majority for any particular analysis.
Therefore, I do not think that the case can be regarded as authority for the special rule of law identified by Lord Reed and Lord Hodge.
It is necessary to examine the relevant reasoning in the separate speeches on its merits in each case to determine what weight it should be given.
The one point on which at least four of the law lords were agreed (and Lord Bingham as well, as I read his speech) was that the issues of double recoverability and prejudice to creditors were relevant factors driving the application of the reflective loss principle: see para 119 above.
For present purposes the facts can be summarised as follows.
The claimant, Mr Johnson, was a businessman who conducted certain of his business affairs through a company, W Ltd, in which he held all but two of the shares.
On behalf of W Ltd he instructed the defendant firm of solicitors, GW, in connection with the purchase of land for development.
W Ltd had an option to purchase the land, and GW were instructed to serve a notice exercising the option.
Service of the notice was followed by a dispute as to its validity and consequent legal proceedings which resulted in an order for specific performance against the vendor.
The need for legal proceedings meant there was a long delay before completion of the conveyance and the property market collapsed in the interim, with the result that W Ltd suffered a loss of profit on its development project; W Ltd also suffered the loss of legal expenses from having to litigate in a lengthy trial against the vendor, who was legally aided.
W Ltd claimed against GW that they had breached a duty of care owed to W Ltd to ensure that the notice to exercise the option was served in such a way as to avoid argument regarding its validity.
Mr Johnson also alleged in correspondence that GW owed him personally a duty of care to like effect and intimated that he would in due course claim to recover damages.
W Ltd commenced proceedings, but for particular reasons Mr Johnson held off bringing his own claim at the same time.
GW settled W Ltds claim.
After that, Mr Johnson commenced his personal claim against them.
GW applied to strike out his claim on grounds of abuse of process and in reliance on the reflective loss principle.
The House of Lords held that Mr Johnson had committed no abuse of process.
By application of the reflective loss principle it struck out certain heads of damages claimed by Mr Johnson, but allowed his claim to proceed in relation to other heads of claim.
Lord Bingham addressed the reflective loss principle at [2002] 2 AC 1, 35 37.
After the passage quoted by Lord Reed at para 41 above, Lord Bingham continued: These principles do not resolve the crucial decision which a court must make on a strike out application, whether on the facts pleaded a shareholders claim is sustainable in principle, nor the decision which the trial court must make, whether on the facts proved the shareholders claim should be upheld.
On the one hand the court must respect the principle of company autonomy, ensure that the companys creditors are not prejudiced by the action of individual shareholders and ensure that a party does not recover compensation for a loss which another party has suffered.
On the other, the court must be astute to ensure that the party who has in fact suffered loss is not arbitrarily denied fair compensation.
The problem can be resolved only by close scrutiny of the pleadings at the strike out stage and all the proven facts at the trial stage: the object is to ascertain whether the loss claimed appears to be or is one which would be made good if the company had enforced its full rights against the party responsible, and whether (to use the language of [Prudential] [1982] Ch 204, 223) the loss claimed is merely a reflection of the loss suffered by the company.
In some cases the answer will be clear, as where the shareholder claims the loss of dividend or a diminution in the value of a shareholding attributable solely to depletion of the companys assets, or a loss unrelated to the business of the company.
In other cases, inevitably, a finer judgment will be called for.
At the strike out stage any reasonable doubt must be resolved in favour of the claimant.
I turn to consider the heads of claim now pleaded by Mr Johnson. (1) Collector Piece Video Ltd and Adfocus Ltd. The claim is for sums which Mr Johnson, acting on GWs advice, invested in these companies and lost.
This claim is unobjectionable in principle, as Mr Steinfeld came close to accepting. (2) Cost of personal borrowings: loan capital and interest.
The claim is for sums which Mr Johnson claims he was obliged to borrow at punitive rates of interest to fund his personal outgoings and those of his businesses.
Both the ingredients and the quantum of this claim will call for close examination, among other things to be sure that it is not a disguised claim for loss of dividend, but it cannot at this stage be struck out as bad on its face.
The same is true of Mr Johnsons claims for bank interest and charges and mortgage charges and interest (which will raise obvious questions of remoteness). (3) Diminution in value of Mr Johnsons pension and majority shareholding in WWH.
In part this claim relates to payments which the company would have made into a pension fund for Mr Johnson: I think it plain that this claim is merely a reflection of the companys loss and I would strike it out.
In part the claim relates to enhancement of the value of Mr Johnsons pension if the payments had been duly made.
I do not regard this part of the claim as objectionable in principle.
An alternative claim, based on the supposition that the company would not have made the pension payments, that its assets would thereby have been increased and that the value of Mr Johnsons shareholding would thereby have been enhanced, is also a reflection of the companys loss and I would strike it out. (4) Loss of 12.5% of Mr Johnsons shareholding in WWH.
Mr Johnson claims that he transferred these shares to a lender as security for a loan and that because of his lack of funds, caused by GWs breach of duty, he was unable to buy them back.
This claim is not in my view objectionable in principle. (5) Additional tax liability.
If proved, this is a personal loss and I would not strike it out.
With respect to Lord Bingham, he takes the reasoning of the Court of Appeal in Prudential to be correct without subjecting it to critical examination.
The authorities the effect of which he summarises essentially did the same, save for Christensen v Scott and Barings.
In my view, following as they do the reasoning in Prudential, Lord Binghams propositions inaccurately equate the loss suffered by a company and the loss in the value of its shares (or from non payment of a dividend) suffered by a shareholder.
Lord Goff agreed with the analysis of Lord Millett on this part of the case.
In my view, the reasoning of Lord Millett again assumes, without questioning it, that the reasoning in Prudential is correct and he inaccurately equates the loss suffered by a company and the loss suffered by the shareholder.
Lord Milletts discussion of the reflective loss principle begins by noting that a companys cause of action is its property for it to decide what to do with, that shares in a company are the property of the shareholder, and if he suffers loss as a result of an actionable wrong done to him, then prima facie he alone can sue and the company cannot ([2002] 2 AC 1, 61 62).
He goes on at p 62: On the other hand, although a share is an identifiable piece of property which belongs to the shareholder and has an ascertainable value, it also represents a proportionate part of the companys net assets, and if these are depleted the diminution in its assets will be reflected in the diminution in the value of the shares.
The correspondence may not be exact, especially in the case of a company whose shares are publicly traded, since their value depends on market sentiment.
But in the case of a small private company like this company, the correspondence is exact.
Lord Milletts comment regarding a company whose shares are publicly traded recognises that, contrary to the suggestion in Prudential, there is no necessary correspondence between the value of shares in the hands of a shareholder and the value of the companys assets.
However, he did not subject the reasoning in Prudential to critical examination in the light of this.
His comment regarding the correspondence between the value of shares in a small private company and its net assets reflects the reasoning in the Prudential case.
This is made clear a little further on, when Lord Millett sets out the passage in that judgment dealing with the cash box example: [2002] 2 AC 1, 62 63.
This is fundamental to Lord Milletts whole approach in his speech.
As stated above, however, I do not consider that this reasoning can be supported.
When it is appreciated that a shareholder has his own cause of action in respect of a loss which is not identical with the loss suffered by the company, as a matter of principle it is not possible to treat the shareholders cause of action as something eliminated by virtue of the fact that the company has its own cause of action in respect of loss which it suffers.
Lord Millett points out that the problem of corresponding loss which he postulated causes no difficulty if the company has a cause of action in respect of that loss, but the shareholder does not; or if the shareholder has a cause of action in respect of it, but the company does not ([2002] 2 AC 1, 62B D).
He continues [2002] 2 AC 1, 62D F: The position is, however, different where the company suffers loss caused by the breach of a duty owed both to the company and to the shareholder.
In such a case the shareholders loss, in so far as this is measured by the diminution in value of his shareholding or the loss of dividends, merely reflects the loss suffered by the company in respect of which the company has its own cause of action.
If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders.
Neither course can be permitted.
This is a matter of principle; there is no discretion involved.
Justice to the defendant requires the exclusion of one claim or the other; protection of the interests of the companys creditors requires that it is the company which is allowed to recover to the exclusion of the shareholder.
This reasoning is predicated on the loss suffered by the company and the loss suffered by the shareholder being identical, as is also made clear by his citation of the cash box example in Prudential as the principal authority in support of his statement of principle ([2002] 2 AC 1, 62G 63D).
In my respectful opinion, that is a false premise.
The same false premise is evident again in Lord Milletts treatment of his own previous judgment in Stein v Blake.
The case concerned the misappropriation of assets belonging to certain companies (the old companies) by a director, where the claimant shareholder alleged that the director also owed a duty to him personally and that he had suffered loss.
The Court of Appeal affirmed the decision that the claim should be struck out.
Lord Millett explained ([2002] 2 AC 1, 64A D): The problem [for the plaintiff] was that the only conduct relied upon as constituting a breach of that duty was the misappropriation of assets belonging to the old companies, so that the only loss suffered by the plaintiff consisted of the diminution in the value of his shareholding which reflected the depletion of the assets of the old companies.
The old companies had their own cause of action to recover their loss, and the plaintiffs own loss would be fully remedied by the restitution to the companies of the value of the misappropriated assets.
It was not alleged that the plaintiff had been induced or compelled to dispose of his shares in the companies; he still had them.
If he were allowed to recover for the diminution in their value, and the companies for the depletion of their assets, there would be double recovery.
Moreover, if the action were allowed to proceed and the plaintiff were to recover for the lost value of his shares, the defendants ability to meet any judgment which the old companies or their liquidators might obtain against him would be impaired to the prejudice of their creditors.
The plaintiff would have obtained by a judgment of the court the very same extraction of value from the old companies at the expense of their creditors as the defendant was alleged to have obtained by fraud.
The court assumed that if the old companies recovered in respect of their loss, the claimants loss would be fully remedied.
But that would only be so if the loss was identical.
Since the losses were not identical, double recovery would not necessarily follow from allowing the claimant to bring his personal claim.
Also, as I have sought to explain, he would have to give credit for the effect on the value of his shares due to the old companies having their own causes of action against the defendant.
There was no principled reason why the claimant should not be entitled to seek to vindicate his own cause of action against the defendant.
That would not prevent the old companies from obtaining recovery in respect of their cause of action and their loss.
In my opinion, the same false premise underlies Lord Milletts criticism of the decisions in Barings and in Christensen v Scott.
In respect of the latter, he said that he could not accept the reasoning of Thomas J ([2002] 2 AC 1, 66B C): It is of course correct that the diminution in the value of the plaintiffs shares was by definition a personal loss and not the companys loss, but that is not the point.
The point is that it merely reflected the diminution of the companys assets.
The test is not whether the company could have made a claim in respect of the loss in question; the question is whether, treating the company and the shareholder as one for this purpose, the shareholders loss is franked by that of the company.
If so, such reflected loss is recoverable by the company and not by the shareholders.
However, with respect, I consider that the error is Lord Milletts.
The claimants personal loss did not merely reflect the companys loss; it was not identical with that loss, and the company could not make a claim in respect of the loss which the claimants had suffered.
There is no good reason to treat the company and the shareholder as one for the purpose of working out who could sue for the losses in question, since there is not a single loss.
Similarly, for the reasons given above, I do not think that Lord Milletts further reliance on the causation point ([2002] 2 AC 1, 66D E) can be supported.
Lord Millett continued at [2002] 2 AC 1, 66F G: But there is more to it than causation.
The disallowance of the shareholders claim in respect of reflective loss is driven by policy considerations.
In my opinion, these preclude the shareholder from going behind the settlement of the companys claim.
If he were allowed to do so then, if the companys action were brought by its directors, they would be placed in a position where their interest conflicted with their duty; while if it were brought by the liquidator, it would make it difficult for him to settle the action and would effectively take the conduct of the litigation out of his hands.
I do not consider that these policy considerations can justify the reflective loss principle.
Again, the underlying point is that the company and the shareholder each have their own cause of action and that the loss suffered by the company and the loss suffered by the shareholder are not one and the same.
If the company settles its claim, the shareholder will have to give appropriate credit for that to the extent that it has reduced his loss (which might or might not be significant, depending on the facts of the case).
In bringing his claim he would not go behind nor undo the settlement of the companys claim.
If the shareholder is also a director of the company, that could give rise to a conflict of interest and duty in deciding how the company should prosecute its claim; but as pointed out by Mitchell (2004) 120 LQR 457, 470, there will be cases which do not involve shareholders who are directors.
In any event, company law has procedures for coping with similar conflicts of interest and duty on the part of directors and this point does not amount to a good reason to eliminate the shareholders properly constituted cause of action.
If a director has been run over by an employee of the company or has a contract claim against it, one would not say that he was prevented from suing the company because he would thereby be placed in a position where his interests and those of the company would conflict.
If exposed to the possibility of claims by a shareholder and a company, a defendant would still have an interest to settle with the liquidator of the company in order to cap his liability to the company and there is no good reason why the liquidator, by his conduct of the companys claim, should be able to defeat a viable cause of action vested in the shareholder.
In my view, the same flawed premise underlies the following two paragraphs in Lord Milletts speech, which have particular relevance in the context of the present appeal concerning the application of the reflective loss principle to claims brought by a creditor of a company ([2002] 2 AC 1, 66G 67C): Reflective loss extends beyond the diminution of the value of the shares; it extends to the loss of dividends (specifically mentioned in [Prudential]) and all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds.
All transactions or putative transactions between the company and its shareholders must be disregarded.
Payment to the one diminishes the assets of the other.
In economic terms, the shareholder has two pockets, and cannot hold the defendant liable for his inability to transfer money from one pocket to the other.
In principle, the company and the shareholder cannot together recover more than the shareholder would have recovered if he had carried on business in his own name instead of through the medium of a company.
On the other hand, he is entitled (subject to the rules on remoteness of damage) to recover in respect of a loss which he has sustained by reason of his inability to have recourse to the companys funds and which the company would not have sustained itself.
The same applies to other payments which the company would have made if it had had the necessary funds even if the plaintiff would have received them qua employee and not qua shareholder and even if he would have had a legal claim to be paid.
His loss is still an indirect and reflective loss which is included in the companys claim.
The plaintiffs primary claim lies against the company, and the existence of the liability does not increase the total recoverable by the company, for this already includes the amount necessary to enable the company to meet it.
The analogy with a shareholder with two pockets does not give appropriate recognition to the separate legal personality of a company, as emphasised in the Salomon case.
The analogy assumes, incorrectly, that the loss suffered by the company is identical with the loss suffered by the shareholder.
Starting from that assumption, Lord Millett would extend the reflective loss principle to prevent recovery from a wrongdoing defendant by a creditor of the company who suffers the loss of being unable to recover what he is owed by the company as a result of the wrong done at the same time by the defendant to him and the company.
His speech therefore provides support for Mr Sevillejas case on this appeal.
I will discuss the position of creditors after finishing this discussion of Johnson.
Lord Cooke stated that he had difficulty with the part of Lord Binghams speech dealing with the recoverability of damages by Mr Johnson on his personal claim against GW.
Although he was at pains not to criticise the decision in Prudential ([2002] 2 AC 1, 43A and 45F), he observed that the cash box illustration was not helpful in the Johnson case because it does not envisage any loss except of the companys 100,000 ([2002] 2 AC 1, 42G 43B).
In other words, the illustration proceeds on the basis that the companys loss and the shareholders loss are identical, as was also true of the analysis in Stein v Blake.
Lord Cooke agreed that the English authorities cited by Lord Bingham supported the three propositions stated by him.
Nonetheless, Lord Cooke was not willing to dismiss the statement of the law by Thomas J in Christensen v Scott and pointed out that Leggatt LJ in Barings and Hobhouse LJ in Gerber (at [1997] RPC 443, 475) had regarded it as in line with English legal principles.
Lord Cooke observed that the court in Christensen v Scott had been guarded in its approach and he stated that if a client is suing his own solicitor, it would appear that only the problems of double recovery or prejudice to the companys creditors would justify denying or limiting the right to recover personal damages which, on ordinary principles of foreseeability, would otherwise arise ([2002] 2 AC 1, 45D E; also 47E and 48B).
Despite his reservations about Lord Binghams reasoning, however, Lord Cooke was prepared to agree the order proposed by him, as were the other members of the appellate committee ([2002] 2 AC 1, 48B E).
Lord Hutton also agreed with the order proposed by Lord Bingham, but his analysis was different from the others.
Lord Hutton noted that the basis on which Prudential had been distinguished by Hobhouse LJ in Gerber (on the footing that the shareholder claimants in Prudential did not have an individual cause of action) was invalid, since the Court of Appeal considered that they did have such a cause of action (however, see para 148 above); contrary to the view of Hobhouse LJ in Gerber, Lord Hutton stated (correctly, in my view) that the ruling against the shareholder claimants in Prudential could not be explained on the ground of causation; and he agreed (again correctly, in my view) with the court in Christensen v Scott that the shareholders could be regarded as suffering a personal loss caused by breach of duty of the defendant, different from the loss of the company, and considered that the reasoning in Prudential on this point was open to criticism ([2002] 2 AC 1, 54).
However, he stated that there is a need to ensure that there is no double recovery and that creditors and the other shareholders of the company are protected: [2002] 2 AC 1, 54H 55D.
On that basis, faced with the conflict between Prudential and Christensen v Scott, Lord Hutton preferred to endorse the approach in Prudential despite the flaws in its reasoning, since it provided a bright line rule to debar a shareholder from bringing a claim without the need for the complexities of a trial to examine the extent of overlap between the loss of the claimant shareholder and the loss of the company.
A bright line rule of this character would ensure that there would be no double recovery and that the creditors and other shareholders would be protected; it would also avoid the possibility of conflicts of interest between directors and some shareholders or between liquidator and some shareholders: [2002] 2 AC 1, 55C G.
I disagree with this last step in the reasoning of Lord Hutton.
None of the other law lords endorsed this.
The problem, as I see it, is that the factors mentioned by Lord Hutton do not justify depriving a claimant shareholder who has suffered a loss different from the loss suffered by the company of what Lord Hutton accepted would otherwise be a perfectly valid cause of action in his own right.
I also agree with Mitchells criticism of Lord Huttons bright line approach, that it proves too much, in that it would prevent recovery by a shareholder even if there is no policy reason to support this, eg in a case where the company itself never had a cause of action against the defendant: (2004) 120 LQR 457, 460.
It is a very strong thing for a bright line rule to be introduced in the common law as a matter of policy to preclude what are otherwise, according to ordinary common law principles, valid causes of action; especially on the basis of the very summary explanation given by Lord Hutton.
Whilst, as noted above, it would allow for simple and speedy resolution of disputes, the price to be paid for that is too high.
The effect of Lord Huttons bright line rule would be disproportionate and arbitrary.
So long as there is any degree of overlap between the companys loss and the shareholders loss, however small the degree of overlap and however large the shareholders loss might be, it seems that the shareholders claim must fail in limine.
And this is so even though, as explained above, the claimant shareholders loss would be calculated after due allowance for the effect of rights of action which the company would have against the wrongdoing defendant and even though the law has other techniques available to deal with issues of conflict of interest which might arise.
It is also a rule which, in my view, gives undue priority to the interests of other shareholders and creditors of the company in circumstances where the claimant shareholder is not subject to any obligation to subordinate his interest in vindicating his personal rights to their interests.
Insolvency law is a regime which already makes appropriate provision to cater for the possibility that the defendant does not have sufficient assets to meet all claims against him, and there is no good policy basis for recognition of the reflective loss principle at common law to supplement that regime.
Further, there will be cases where there is in fact no difficulty in the defendant being able to meet all claims.
In summary, in my respectful opinion the reasoning in Johnson, in so far as it endorses the reflective loss principle as a principle debarring shareholders from recovery of personal loss which is different from the loss suffered by the company, ought not to be followed.
The reasoning of Lords Bingham, Goff and Millett purports to be based on the logic in the Prudential case, which on critical examination is not sustainable.
The reasoning of Lord Hutton relies on a policy based bright line exclusionary rule which is not justified.
The reasoning of Lord Cooke is suspended uneasily between the majority and Lord Hutton.
Lord Cooke endorsed the decision in Prudential (and in my opinion was right to do so as to the result: para 148 above), albeit he was unwilling to disclaim the judgment in Christensen v Scott (even though the reasoning in the two cases cannot be reconciled, a fact which he was not prepared to acknowledge); and to the extent that, like Lord Hutton, he emphasised that there should not be double recovery and that the companys other shareholders and creditors should be protected, in my view he gave insufficient attention to the ways in which the law already allows for the risk of double recovery to be taken into account and did not explain why the interests of the companys other shareholders and creditors should take priority over the interests of the claimant shareholder suing to vindicate a personal cause of action.
Lord Reed points out (para 78) that the decisions in Prudential and Johnson have been followed in other common law jurisdictions.
However, whilst there is some variation in the reasoning which is deployed, the courts in those jurisdictions have not given Prudential and Johnson the same interpretation as Lord Reed gives them.
To a substantial degree they have regarded them as being concerned with the issues of double recovery and protection of the interests of creditors and other shareholders of the company, which I have addressed above: see eg the discussion at para 164 above of the judgment of the Court of Appeal of Singapore in Townsing v Jenton Overseas Investment Pte Ltd. This is not surprising, given that in Johnson Lords Millett, Goff, Cooke and Hutton all identified these as the important issues by reference to which the reflective loss principle fell to be justified, and Lord Bingham (as I read his speech) did not dispute this.
Flaux LJ in his judgment in the Court of Appeal in the present case at para 32 distilled a four fold justification for the reflective loss principle, principally derived from the speech of Lord Millett in Johnson: (i) the need to avoid double recovery by the claimant shareholder and the company from the defendant; (ii) causation, in the sense that if the company chooses not to claim against the wrongdoer, the loss to the claimant is caused by the companys decision not by the defendants wrongdoing ([2002] 2 AC 1, 66; also per Chadwick LJ in Giles v Rhind, para 78); (iii) the public policy of avoiding conflicts of interest, particularly that if the claimant had a separate right to claim it would discourage the company from making settlements; and (iv) the need to preserve company autonomy and avoid prejudice to minority shareholders and other creditors.
In my opinion, none of these considerations in fact provides a viable justification for the reflective loss principle.
Points (i) and (ii) reflect Lord Milletts incorrect view that the loss suffered by the company is the same as the loss suffered by the shareholder (to the extent of his shareholding), and ignore the ways in which the law takes account of the need to avoid double recovery by other means.
Point (iii) also reflects Lord Milletts view regarding the identity of the loss suffered by the company and the loss suffered by the shareholder, and ignores the availability of other mechanisms to deal with conflicts of interest on the part of directors and the interest that a defendant would have in settling with a company which makes a claim in parallel with a personal claim made by a shareholder.
Point (iv) again reflects Lord Milletts view regarding identity of loss; it ignores the fact that company autonomy (safeguarded by the rule in Foss v Harbottle) remains in place as regards any cause of action vested in the company; and it gives undue weight to protection of other shareholders and other creditors.
The reflective loss principle and claims by creditors of the company
The discussion above indicates that the reflective loss principle as stated in Prudential is a flimsy foundation on which to build outwards into other areas of the law, and particularly when it is sought to be deployed in answer to Marexs claim in the present case.
Marex was not a shareholder in the Companies, but their creditor.
In my view this means that there is even less reason for saying that its interest in obtaining recovery directly from Mr Sevilleja should be eliminated by virtue of the fact that the Companies also have claims against him.
A creditor of a company has not chosen to be in a position where he is required to follow the fortunes of the company in the same way as a shareholder.
Subject to the company having sufficient assets, whether the creditor gets paid or not does not depend on the decision of the directors, as payment of a dividend to a shareholder does: when armed with a court judgment the creditor can execute it against the assets of the company.
Moreover, there is a clear mechanism available to meet the problem of possible double recovery against the defendant in respect of the loss suffered by Marex and the loss suffered by the Companies.
To the extent that Marex sues Mr Sevilleja and obtains recovery from him for the judgment sum, Mr Sevilleja can be subrogated to Marexs rights against the Companies or allowed a right of reimbursement in respect of them.
If Marexs debtor had been an individual and Mr Sevilleja had stolen all his assets with a view to preventing him paying the debt due to Marex, it would be possible for Marex to bring an OBG claim against him, in line with the part of the judgment of Robin Knowles J which is not under appeal.
Also, in line with that part of the judges judgment, Marex would arguably have been able to bring a Lumley v Gye claim against him.
By his tortious actions, Mr Sevilleja would have made himself, in a practical sense, jointly and severally liable with the individual debtor in respect of the amount of the unpaid debt and Marex could sue either or both of them.
Marex would not be required to sue the individual debtor to make him bankrupt and then seek to procure his trustee in bankruptcy to pursue Mr Sevilleja in the hope that a recovery would eventually lead to it receiving a dividend in the bankruptcy (after deduction of the trustees fees).
Mr Sevillejas torts in respect of Marex would create a direct nexus between them of such force that Marexs rights against him would not have to be postponed behind any proof in the individual debtors bankruptcy in this way.
To the extent that the individual debtor or Mr Sevilleja paid the money due, Marex would have to give credit in pursuing the other.
To the extent that Mr Sevilleja paid Marex a sum representing money owed by the individual debtor (which he would have had to pay Marex had Mr Sevilleja not stolen all his assets), the justice of the case would require that the individual debtor should give credit for that when suing Mr Sevilleja in relation to the theft.
In my view, this outcome could readily be achieved in a case involving an individual debtor.
The question which arises, therefore, is whether the fact that Marexs debtor is a company rather than an individual should make any difference.
In my view, there is no good reason why it should.
Mr Sevillejas position would be protected if Marex assigned its rights against the Companies to him, to the extent any payment he made to Marex was in respect of the debts owed.
Alternatively, if by making payment in respect of the Companies debts to Marex Mr Sevilleja was able to discharge them, he would have a right of reimbursement against the Companies, as they are the primary obligee in respect of the debt obligations: Moule v Garrett (1872) LR 7 Ex 101; Duncan Fox & Co v North & South Wales Bank (1880) 6 App Cas 1, 10 per Lord Selborne LC; Goff & Jones, The Law of Unjust Enrichment, 9th ed (2016), paras 19 19 to 19 21.
If Mr Sevilleja seeks to compromise Marexs claim, he could make it a term of their agreement that he takes an assignment of Marexs rights as creditor.
Absent such agreement, a court ruling on Marexs claim against him could impose as a condition for the grant of relief that Marex should assign its rights to him to an appropriate extent or that it should acknowledge his payment as discharging the debt to that extent, thereby bringing into effect a right of reimbursement in favour of Mr Sevilleja pursuant to Moule v Garrett.
Even if these mechanisms were not pursued and payment by Mr Sevilleja did not discharge the debts of the Companies, in my view Mr Sevilleja would have a right to be subrogated to an appropriate extent to the rights of Marex as against the Companies.
In my opinion, this would in fact be the simplest and most appropriate solution.
Subrogation is a flexible equitable remedy which would be available in this case for basic reasons of equity and natural justice similar to those which underlie the rule in Moule v Garrett, in order to ensure that neither the Companies (if Marex did not sue them on the debts) nor Marex (if it did sue them on the debts) would receive a windfall enrichment by virtue of the payment by Mr Sevilleja of the judgment sum or part thereof: see Banque Financire de la Cit v Parc (Battersea) Ltd [1999] 1 AC 221 and Swynson Ltd v Lowick Rose LLP (formerly Hurst Morrison Thomson LLP) [2017] UKSC 32; [2018] AC 313, paras 18 19 per Lord Sumption; and C Mitchell and S Watterson, Subrogation Law and Practice (2007), paras 1.01 to 1.03, 1.07 and 1.08.
Again, the decision of the High Court in Gould v Vaggelas provides a helpful illustration.
The case was concerned with a situation in which a company owed money to creditors (who happened to be shareholders, but who sued the defendants relying on their capacity as creditors of the company), which the company had been prevented from repaying by reason of losses suffered as a result of a deceit practised on it by the defendants.
As Brennan J put it at p 253: The [claimants] loss is the loss suffered by a creditor of the company which, apart from its cause of action in deceit, is worthless.
The position was in my view analogous to that in the present case.
The High Court held that the claimants were entitled to sue the defendants to vindicate their personal rights in respect of the loss suffered by them as a result of the failure of the company to repay the loans.
The justices who directly considered the question of what would happen if the defendants paid the claimants the equivalent of the money owed to them by the company while claims against the defendants by the company remained on foot were clear that the justice of the case would require that the claimants could not take the benefit of sums which the company might later be able to repay: see p 246 per Wilson J and pp 258 259 per Brennan J. Gibbs CJ at p 229 referred to the possibility of there being a right of subrogation for the defendants should the company later be able to pay back the loans.
The most considered discussion was that by Brennan J, who observed that since satisfaction of the claimants judgment against the defendant would not discharge the company from liability for the companys debt, a right of reimbursement under the principle in Moule v Garrett would not arise; but said that the defendant would be subrogated to the claimants rights against the company in respect of the loans (p 259).
Save that, as indicated above, I think there would be ways in which the principle in Moule v Garrett might be brought into operation, I agree with Brennan Js analysis.
Turning to address the four considerations identified by Flaux LJ at para 32 of his judgment, this time in the context of liability in respect of a claim by a creditor of a company, I do not consider that they justify excluding Marexs claim against Mr Sevilleja, even if (contrary to my view above) they might have force in respect of a claimant shareholders claim.
Point (i) (the need to avoid double recovery) is satisfied by recognising that Mr Sevilleja will have a right to be subrogated to Marexs right of action against the Companies, to the extent that he makes a payment referable to the debts they owe Marex.
Point (ii) (absence of causation, because the claimants rights depend on the companys decision) has no force, because Marexs right to seek payment from the Companies had already accrued and was not dependent on a choice to be made by the Companies.
Mr Sevillejas wrongdoing clearly caused loss to Marex because it prevented Marex from being able to execute a judgment in respect of the judgment sum against the Companies assets.
Point (iii) (avoidance of conflicts of interest and discouraging settlements by the company) similarly has no force.
The Companies were obliged to pay Marex to satisfy its accrued rights against them, so it was out of the hands of their directors and not a matter of discretion whether they should do so or not.
If the liquidator of the Companies seeks a compromise of their claims against Mr Sevilleja, it is open to Mr Sevilleja to bargain for protection against double liability if Marex is also successful in obtaining payment from him.
Point (iv) (preservation of company autonomy and avoidance of prejudice to minority shareholders and other creditors) also cannot justify dismissing Marexs claim.
The Companies have no autonomy to exercise as regards the debt claim against them, and have no right or power of control in respect of Marexs own property in the form of its rights of action against Mr Sevilleja.
If the Companies had been insolvent at the time of Mr Sevillejas wrongdoing so that, but for his actions, Marex would only have received, say, 50% of the value of what was due to it, its claim for damages against Mr Sevilleja would be limited to that amount.
It is not apparent that minority shareholders or other creditors of the Companies would suffer unacceptable detriment from allowing Marex to proceed directly against Mr Sevilleja.
In any event, as explained above, there is no rule which governs the order in which people can seek to vindicate their rights against others; and even less than in the case of a shareholder can it be said that an ordinary creditor of a company has undertaken not to seek to enforce his rights against the wrongdoing defendant in order to safeguard the interests of the shareholders and other creditors of that company.
There is an additional consideration in respect of point (iv) which arises on the facts of this case which I should mention, albeit I prefer to state the reasons why Marexs appeal should succeed in more general terms.
It appears that Mr Sevilleja is very wealthy and both for that reason and because there is no indication that the liquidator proposes to pursue the Companies claims against him, it does not seem that there is any real risk that the creditors of the Companies will in fact find themselves less well off if Marexs claim against him is allowed to proceed than they would otherwise have been.
There is support from Lord Milletts speech in Johnson (at [2002] 2 AC 1, 66G 67C, quoted above) for Mr Sevillejas submission that the reflective loss principle precludes a claim against him by Marex, as a creditor of the Companies, in respect of loss suffered by Marex as a result of the non payment by the Companies of the judgment sum.
Lord Bingham also arguably provides implicit support for Mr Sevillejas submission, in that he struck out Mr Johnsons claim under head (3) for payments which the company would have made into a pension fund for his benefit.
It seems that these would have been discretionary, non contractual payments for Mr Johnsons benefit as part of his remuneration, not payments by way of dividend.
Lord Bingham did not suggest that it would make a difference if these payments constituted remuneration to which Mr Johnson was contractually entitled.
There is also support for Mr Sevillejas submission in the judgment of Neuberger LJ in Gardner v Parker [2004] EWCA Civ 781; [2004] 2 BCLC 554, with which Mance LJ and Bodey J agreed.
The case concerned the claim of a company (BDC), as assigned to the claimant in the proceedings, against its sole director, Mr Parker.
BDCs principal assets were a 9% shareholding in another company, S Ltd (of which Mr Parker was also the sole director and in which he held 91% of the shares), and a debt of 799,000 owed to BDC by S Ltd. The claimant alleged that, in breach of the fiduciary duties he owed to BDC and S Ltd, Mr Parker procured the sale by S Ltd of its principal asset at an undervalue to another company in which Mr Parker had an interest; that his purpose in doing so was to extract from S Ltd its most valuable asset to the detriment of BDC or to damage BDC; and that as a consequence of the sale S Ltd became insolvent.
It was pleaded that, as a consequence, the value of BDCs 9% shareholding in S Ltd was reduced to nil and the value of the loan due from S Ltd was also reduced to nil.
Neuberger LJ held that the losses claimed by BDC in its capacity as creditor of S Ltd were caught by the reflective loss principle, as were BDCs claims in its capacity as shareholder in S Ltd, with the result that it could not claim in respect of them: paras 35 and 67 75.
Neuberger LJ relied on the speeches of Lord Bingham and, in particular, Lord Millett in Johnson.
Proceeding on the basis of the reasoning in those speeches, Neuberger LJ observed that there was no logical reason why the reflective loss principle should not apply to a shareholder in his capacity as a creditor of the company and added that it is hard to see why the [reflective loss principle] should not apply to a claim brought by a creditor (or indeed, an employee) of the company concerned, even if he is not a shareholder (para 70).
According to Neuberger LJ, the creditor would not be without remedies; he can put the company into liquidation (if that has not already happened) and can either fund a claim by the liquidator against the defendant or, as Mr Gardner did in relation to BDC, he can take an assignment of the companys claim (para 74).
Neuberger LJ observed that the arguments for the claimant were more consistent with the approach in Christensen v Scott, but that decision had been disapproved in Johnson.
Accordingly, in his view, although the claimants arguments were not without force, although not without difficulties either, they could only be accepted at the highest level if it was thought appropriate to reconsider the reflective loss principle (para 75).
The Court of Appeal in the present case followed these authorities in respect of Marexs claims, based as they are on its being a creditor of the Companies.
In this court, it is open to us to re examine them from the point of view of principle, rather than to treat them as binding authority.
In my judgment, the foundation in the reasoning of Lord Bingham and Lord Millett regarding the reflective loss principle in respect of shareholder claimants is not sustainable.
I would not follow Johnson in so far as it endorsed the reflective loss principle identified in Prudential in relation to claims by shareholder claimants.
But even if the principle is to be preserved in relation to such claimants, the questionable nature of the justification for it means that it is appropriate for this court to stand back and ask afresh whether it can be justified as a principle to exclude otherwise valid claims made by a person who is a creditor of the company.
We are not trapped by Prudential and the speeches of Lord Bingham and Lord Millett in Johnson in the way in which the Court of Appeal in Gardner v Parker felt that it was bound by their reasoning.
For the reasons given above, I would hold that the reflective loss principle, if it exists, does not apply in the present case.
The exception in Giles v Rhind
In view of my conclusion that the reflective loss principle does not apply in this case, the question regarding the ambit of the exception to that principle which was identified in Giles v Rhind does not arise.
However, it is worth pointing out that the exception was identified in an effort to achieve practical justice against the backdrop of an assumption that the reflective loss principle stated in Prudential was valid.
If Prudential is held to lay down a bright line rule of law deeming reflective loss not to be a loss, whatever the true position on the facts, and that bright line rule is endorsed, cases such as Giles v Rhind, exemplifying the dissonance between the rule and practical justice on the facts, will continue to arise.
This will put pressure on the acceptability of the rule itself.
Conclusion
For the reasons set out above, I would allow Marexs appeal and permit it to proceed with its OBG claim and Lumley v Gye claim directly against Mr Sevilleja.
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The respondent, Mr Sevilleja, owned and controlled two companies (the Companies) incorporated in the British Virgin Islands (BVI).
The appellant, Marex Financial Ltd (Marex), brought proceedings against the Companies for sums due under contract.
After a trial in the Commercial Court before Field J, Marex obtained judgment for over US$5.5 million, plus costs of1.65 million.
On 19 July 2013, Field J gave the parties a confidential draft of his judgment, due to be handed down six days later.
From 19 July 2013, Mr Sevilleja allegedly procured the offshore transfer of over US$9.5 million from the Companies London accounts into his personal control.
By the end of August 2013, the Companies assets were just US$4,329.48, such that Marex could not receive payment of its judgment debt and costs.
In December 2013, Mr Sevilleja placed the Companies into liquidation in the BVI, their alleged debts exceeding US$30 million.
Marex is the only creditor not connected to Mr Sevilleja.
According to Marex, the liquidation process is effectively on hold, with the liquidator failing to investigate claims submitted to him, to locate Marexs missing funds, or to issue proceedings against Mr Sevilleja.
In the present proceedings, Marex seeks damages from Mr Sevilleja in tort for (1) inducing or procuring the violation of its rights under Field Js judgment and orders, and (2) intentionally causing it to suffer loss by unlawful means.
The sums claimed are (1) the judgment debt, interest and costs awarded by Field J, less an amount Marex recovered in US proceedings, and (2) costs incurred by Marex in its attempts to obtain payment.
Mr Sevilleja contends that Marexs claim in respect of (1) is barred by the reflective loss principle.
That contention was upheld by the Court of Appeal.
The Supreme Court unanimously allows the appeal.
The leading judgment is given by Lord Reed, with whom Lady Black and Lord Lloyd Jones agree.
Lord Hodge gives a separate judgment agreeing with the reasoning of Lord Reed.
Lord Sales delivers a separate judgment, with which Lady Hale and Lord Kitchin agree, allowing the appeal on a wider basis.
After explaining relevant general principles of law [2 13], and the background to the appeal [14 22], Lord Reed examines the decisions which are said to have established the reflective loss principle, namely Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 [23 39] and Johnson v Gore Wood & Co [2002] 2 AC 1 [40 67].
He concludes that Prudential laid down a rule of company law: a diminution in the value of a shareholding or in distributions to shareholders, which is merely the result
of a loss suffered by the company in consequence of a wrong done to it by the defendant, is not in the eyes of the law damage which is separate and distinct from the damage suffered by the company, and is therefore not recoverable.
The rule is based on the rule in Foss v Harbottle (1843) 2 Hare 461, which would be subverted if the shareholder could pursue a personal action in those circumstances [35 39].
That understanding of the rule is consistent with the speech of Lord Bingham in Johnson.
Lord Milletts speech, however, treated the reflective loss principle as a wider principle of the law of damages, based on the avoidance of double recovery [61 63].
Lord Reed then reviews subsequent cases in which the reflective loss principle as explained by Lord Millett has developed, including Giles v Rhind [2002] EWCA Civ 1428, Perry v Day [2004] EWHC 3372 (Ch), and Gardner v Parker [2004] EWCA Civ 781 [68 77].
This examination makes clear the need to distinguish (1) cases where claims are brought by a shareholder in respect of loss which he has suffered in that capacity, in the form of a diminution in share value or in distributions, which is the consequence of loss sustained by the company, in respect of which the company has a cause of action against the same wrongdoer, and (2) cases where claims are brought, whether by a shareholder or by anyone else, in respect of loss which does not fall within that description, but where the company has a right of action in respect of substantially the same loss [80].
The first kind of case is barred by the rule in Prudential, regardless of whether the company recovers its loss in full [80 83].
In the second kind of case, recovery is permissible in principle, although it may be necessary to avoid double recovery [84 88].
In light of this, Lord Reed holds that the reasoning in Johnson (other than that of Lord Bingham) should be departed from, and that Giles, Perry and Gardner were wrongly decided [89].
The rule in Prudential does not apply to Marex, which is a creditor of the Companies, not a shareholder [92].
Lord Hodge agrees with Lord Reeds reasons, noting that the panel was in agreement that the reflective loss principle has been expanded too greatly and would cause injustice if applied to Marexs situation [95].
Lord Hodge also points out the central role of company law in the Court of Appeals judgment in Prudential, and how the reflective loss principles departure from those foundations has given rise to problems and uncertainties in the law [95 108].
The bright line rule has a principled basis in company law and ought not to be departed from now [109].
Lord Sales concludes that Marexs appeal should be allowed, but for reasons differing from those of the majority [116].
The majority see the reflective loss principle, per Prudential, to be a rule of law deeming a shareholders loss by reduction in value of their shares or dividends to be irrecoverable where the company has a parallel claim.
However, in Lord Saless view, Prudential did not lay down a rule that would exclude a shareholders recovery where, factually, the loss was different from that of the company.
The court in Prudential set out reasoning why it thought a shareholder in such a case had suffered no separate loss, but this is not sustainable [117 118].
The governing principle is indeed avoidance of double recovery, as was the view of the Law Lords in Johnson (contra Lord Reed) [119].
Lord Sales criticises the authorities use of the word reflective as being unhelpful.
Although there is necessarily a relationship between a companys loss and the reduction in share values that it causes, the loss suffered by the shareholder is not the same as the loss suffered by the company and there is no one to one correspondence between the two [132].
The Court of Appeal in Prudential conflated the rationale for the rule in Foss v Harbottle with that for the reflective loss principle and assumed that a personal action would subvert the rule.
That is not the case [142].
A shareholder ought not to be prevented from pursuing a valid personal cause of action; double recovery can be prevented by other means [149 155].
Lord Sales therefore questions the justification for the reflective loss principle and whether it should still be recognised [194].
Even if the principle is accepted, it should not be extended to cover a case involving loss suffered by a creditor of the company.
There are better ways to avoid double recovery in such a situation, such as by according the wrongdoer a right of subrogation to the extent he pays the creditor sums in respect of the debt owed by the company [198 205].
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The case of Seldon v Clarkson Wright and Jakes [2012] UKSC 16, which was heard alongside this case, concerned direct discrimination on the ground of age.
In that case there was no issue that the application of a mandatory retirement age constituted direct age discrimination.
The issue was how it might be justified.
This case concerns indirect discrimination on the ground of age.
Mr Homer appeals against the holding of the Court of Appeal that there was no such discrimination in his case.
The Chief Constable appeals against the holding that, if there was such discrimination, it could not be justified.
The proceedings
Mr Homer retired from the police force in October 1995 at the age of 51 with the rank of Detective Inspector.
He immediately began work with the Police National Legal Database (PNLD) as a legal adviser.
The PNLD provides legal advice and other resources to police forces and other organisations in the criminal justice system.
When he was appointed, a law degree or equivalent was not essential if the post holder had exceptional experience/skills in criminal law, combined with a lesser qualification in law.
This he was deemed to have by virtue of the experience gained and examinations passed in the police force.
After his appointment, the criteria were changed so that a law degree became an essential qualification for first appointment, but this did not immediately affect him.
The requirement was never applied to him, nor was he told that the possession of a law degree was an issue of concern to his employers, until the matters giving rise to these proceedings.
The PNLD experienced problems in attracting enough suitably qualified candidates and concluded that this was because the staff were comparatively underpaid and there was no formal career structure.
They were advised to create a new career structure with opportunities for progression and more competitive salaries.
At the same time they were advised that it was important to retain current employees and that they continued to be instrumental in the development and expansion of the database.
In 2005, therefore, the PNLD introduced a new grading structure with three thresholds above the starting grade.
In order to reach the third threshold it was necessary to have a law degree or similar fully completed.
In 2006, Mr Homer was regraded to the first and second thresholds, but not to the third, as he did not have a law degree, although he met the criteria in all other respects.
The evidence of the business director of the PNLD was that she supported Mr Homers application for the third threshold but felt constrained by the rules to deny it to him.
She supported his internal appeal against the decision but it was rejected in May 2006.
By then, he was aged 62.
The normal retirement age in the PNLD was 65, although employment might be extended for a year at a time subject to satisfactory medical reports and fulfilling other criteria not expected of people below the age of 65.
Mr Homer would reach the age of 65 in February 2009.
It was the expectation of both sides that he would retire then.
If he were to undertake a law degree by part time study it would take him at least four years.
The earliest he could have graduated would have been the summer of 2010, after his normal retirement date.
In any event, it was unlikely that he would have obtained a place on a course starting in September 2006 if he only applied in May 2006.
Mr Homer appealed against the rejection of his internal appeal in August 2006.
The Employment Equality (Age) Regulations 2006 (SI 2006/1031) came into force on 1 October 2006.
His further appeal was rejected in November 2006.
In December he issued a formal grievance, asking to be treated as a transitional exception, but the respondent did not hold the required meetings, and the grievance was eventually rejected in August 2007.
In April 2007 he issued these proceedings in the Employment Tribunal (ET) complaining of unlawful age discrimination.
In January 2008, the ET held that Mr Homer was indirectly discriminated against on grounds of age and that this was not objectively justified.
However, the Employment Appeal Tribunal (EAT) held that he had not been indirectly discriminated against on grounds of age, although if he had been, it would not have been justified: [2009] ICR 223.
The Court of Appeal dismissed both his appeal and the respondents cross appeal: [2010] EWCA Civ 419, [2010] ICR 987.
The same issues arise on the appeal to this Court.
The law
The Employment Equality (Age) Regulations 2006 were the means by which the United Kingdom transposed into UK law the requirements of Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation.
According to article 1, the purpose of the Directive is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the Member States the principle of equal treatment.
Article 2 explains what this means.
The portions dealing with indirect discrimination are as follows: 1.
For the purposes of this Directive, the 'principle of equal treatment' shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in article 1. 2.
For the purposes of paragraph 1: . (b) indirect discrimination shall be taken to occur where an apparently neutral provision, criterion or practice would put persons having . a particular age . at a particular disadvantage compared with other persons unless: (i) that provision, criterion or practice is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary, .
This is transposed by regulation 3 of the Age Regulations as follows: (1) For the purposes of these Regulations, a person (A) discriminates against another person (B) if . (b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same age group as B, but (i) which puts or would put persons of the same age group as B at a particular disadvantage when compared with other persons, and (ii) which puts B at that disadvantage, and A cannot show the . provision, criterion or practice to be a proportionate means of achieving a legitimate aim. (2) A comparison of Bs case with that of another person under paragraph (1) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other. (3) In this regulation (a) age group means a group of persons defined by reference to age, whether by reference to a particular age or a range of ages; and .
Unlike the case of direct discrimination, with which Seldon is concerned, it is not suggested that regulation 3 does not properly transpose the Directive into UK law.
The question is simply how it applies in this case.
Regulation 7 defines the relevant unlawful acts of discrimination: (2) It is unlawful for an employer, in relation to a person whom he employs at an establishment in Great Britain, to discriminate against that person (a) in the terms of employment which he affords him; (b) in the opportunities which he affords him for promotion, a transfer, training or receiving any other benefit; (c) by refusing to afford him, or deliberately not affording him, any such opportunity; or (d) by dismissing him, or subjecting him to any other detriment.
It is common ground that the failure to allow Mr Homer across the third threshold falls within the regulation.
The discrimination issue
The ET found that the appropriate age group was people aged 60 to 65, who would not be able to obtain a law degree before they retired [15].
That group was put at a particular disadvantage compared with people younger than that, because they were prevented from reaching the third threshold and the status and benefits associated with it [18].
The claimant was put at a disadvantage because he could not achieve the qualification (and therefore the status) before he retired.
The ET noted that it was not argued that he was put at a disadvantage because fewer people in his age group had law degrees [18].
The EAT and Court of Appeal were however persuaded that what put Mr Homer at a disadvantage was not his age but his impending retirement.
Had it not been for that, he would have been able to obtain a degree and reach the third threshold.
As Mr Lewis argues on behalf of the respondent, the key words in regulation 3(1)(b) are puts at.
What is it that puts him at or causes the disadvantage complained of? It is the fact that he is due to leave work within a few years.
Regulation 3(2) requires that the relevant circumstances in the complainants case must be the same, or not materially different, from the circumstances in the case of the persons with whom he is compared.
So, argues Mr Lewis, you have to build the relevant circumstance into the comparator group also, in this case the proximity of leaving work.
So Mr Homer must be compared with anyone else who is nearing the end of his employment for whatever reason.
Anyone who was contemplating leaving within a similar period whether for family reasons or some other reason would face the same difficulty.
That is what puts him at a disadvantage and not the age group to which he belongs.
Indeed, what Mr Homer is arguing for would put people of his age group at an advantage compared with younger people, because they would be able to get the benefits of the third threshold without having a law degree when others would not.
This argument involves taking the particular disadvantage which is suffered by a particular age group for a reason which is related to their age and equating it with a similar disadvantage which is suffered by others but for a completely different reason unrelated to their age.
If it were translated into other contexts it would have alarming consequences for the law of discrimination generally.
Take, for example, a requirement that employees in a particular job must have a beard.
This puts women at a particular disadvantage because very few of them are able to grow a beard.
But the argument leaves sex out of account and says that it is the inability to grow a beard which puts women at a particular disadvantage and so they must be compared with other people who for whatever reason, whether it be illness or immaturity, are unable to grow a beard.
Ironically, it is perhaps easier to make the argument under the current formulation of the concept of indirect discrimination, which is now also to be found in the Equality Act 2010.
Previous formulations relied upon disparate impact so that if there was a significant disparity in the proportion of men affected by a requirement who could comply with it and the proportion of women who could do so, then that constituted indirect discrimination.
But, as Mr Allen points out on behalf of Mr Homer, the new formulation was not intended to make it more difficult to establish indirect discrimination: quite the reverse (see the helpful account of Sir Bob Hepple in Equality: the New Legal Framework, Hart 2011, pp 64 to 68).
It was intended to do away with the need for statistical comparisons where no statistics might exist.
It was intended to do away with the complexities involved in identifying those who could comply and those who could not and how great the disparity had to be.
Now all that is needed is a particular disadvantage when compared with other people who do not share the characteristic in question.
It was not intended to lead us to ignore the fact that certain protected characteristics are more likely to be associated with particular disadvantages.
In any event, it cannot be right to equate leaving work because of impending retirement with other reasons for doing so.
They are materially different.
A person who leaves work for family reasons or takes early retirement generally has some choice in the matter.
Indeed, she may factor into her decision whether it would be advisable to obtain the law degree and with it the higher grading before doing so.
A person who is coming up against the mandatory retirement age does not have the same choice.
Any extension depends upon the decision of the employer which cannot be depended upon at the relevant time.
At the relevant time for this case, regulation 30 of the Age Regulations provided that the decision to retire an employee at the age of 65 did not need to be justified.
Hence, as Mr Allen puts it, this is a case of running up against the buffers of a mandatory retirement age rather than a matter of choice.
Nor is this a question of asking for more favourable treatment for people of their age.
It obviously has to be possible to cure the discrimination in a non discriminatory way.
In London Underground Ltd v Edwards (No 2) [1999] ICR 494, for example, the new rosters for underground train drivers were held to be indirectly discriminatory because all the men could comply with them but not all the women could do so: it was a striking fact that not a single man was disadvantaged despite the overwhelming preponderance of men in the pool of train drivers affected.
The reason, of course, was that the new rosters had a greater impact upon single parents and single parents are predominantly (though not exclusively) female.
But the problem could be solved, not by making an exception for the women, but by making arrangements for single parents of whatever sex.
This problem could have been solved by making arrangements for people appointed before the new criterion was introduced.
Ingenious though the argument put forward by Mr Lewis is, therefore, to my mind it is too ingenious.
The law of indirect discrimination is an attempt to level the playing field by subjecting to scrutiny requirements which look neutral on their face but in reality work to the comparative disadvantage of people with a I would therefore allow Mr Homers appeal on this point. particular protected characteristic.
A requirement which works to the comparative disadvantage of a person approaching compulsory retirement age is indirectly discriminatory on grounds of age.
There is, as Lord Justice Maurice Kay acknowledged, unreality in differentiating between age and retirement [34].
Put simply, the reason for the disadvantage was that people in this age group did not have time to acquire a law degree.
And the reason why they did not have time to acquire a law degree was that they were soon to reach the age of retirement.
The resulting scrutiny may ultimately lead to the conclusion that the requirement can be justified.
But if it cannot, then it can be modified so as to remove the disadvantage.
Justification
The approach to the justification of what would otherwise be indirect discrimination is well settled.
A provision, criterion or practice is justified if the employer can show that it is a proportionate means of achieving a legitimate aim.
The range of aims which can justify indirect discrimination on any ground is wider than the aims which can, in the case of age discrimination, justify direct discrimination.
It is not limited to the social policy or other objectives derived from article 6(1), 4(1) and 2(5) of the Directive, but can encompass a real need on the part of the employers business: Bilka Kaufhaus GmbH v Weber von Hartz, Case 170/84, [1987] ICR 110.
As Mummery LJ explained in R (Elias) v Secretary of State for Defence [2006] EWCA Civ 1293, [2006] 1 WLR 3213, at [151]: . the objective of the measure in question must correspond to a real need and the means used must be appropriate with a view to achieving the objective and be necessary to that end.
So it is necessary to weigh the need against the seriousness of the detriment to the disadvantaged group.
He went on, at [165], to commend the three stage test for determining proportionality derived from de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69, 80: First, is the objective sufficiently important to justify limiting a fundamental right? Secondly, is the measure rationally connected to the objective? Thirdly, are the means chosen no more than is necessary to accomplish the objective? As the Court of Appeal held in Hardy & Hansons plc v Lax [2005] EWCA Civ 846, [2005] ICR 1565 [31, 32], it is not enough that a reasonable employer might think the criterion justified.
The tribunal itself has to weigh the real needs of the undertaking, against the discriminatory effects of the requirement.
The ET found that the aim of requiring a law degree was to facilitate the recruitment and retention of staff of appropriate calibre within the PNLD.
It is not disputed that this was a legitimate aim.
When it comes to considering proportionality, however, it is necessary to distinguish the aim of recruitment from the aim of retention.
It is also necessary to distinguish the aim of retaining newly or recently recruited staff, who stand to benefit from the opportunity of career progression, and the aim of retaining existing staff, who were recruited under a different system, and who may or may not be motivated to stay by such an incentive.
It was clearly important to the developing organisation to retain the skills and expertise of its existing highly valued staff, including Mr Homer.
This means, as the EAT pointed out, that it was necessary to distinguish between the justification of the criteria for recruitment and the justification of the criteria for the thresholds above that, and in particular the third threshold.
The ET (perhaps in reliance on the IDS handbook on age discrimination) regarded the terms appropriate, necessary and proportionate as equally interchangeable [29, 31].
It is clear from the European and domestic jurisprudence cited above that this is not correct.
Although the regulation refers only to a proportionate means of achieving a legitimate aim, this has to be read in the light of the Directive which it implements.
To be proportionate, a measure has to be both an appropriate means of achieving the legitimate aim and (reasonably) necessary in order to do so.
Some measures may simply be inappropriate to the aim in question: thus, for example, the aim of rewarding experience is not achieved by age related pay scales which apply irrespective of experience (Hennigs v Eisenbahn Bundesamt; Land Berlin v Mai, Joined Cases C 297/10 and C 298/10 [2011] European Court Reports); the aim of making it easier to recruit young people is not achieved by a measure which applies long after the employees have ceased to be young (Kckdeveci v Swedex GmbH & Co KG, Case C 555/07, [2011] 2 CMLR 703).
So it has to be asked whether requiring existing employees to have a law degree before they can achieve the highest grade is appropriate to the aims of recruiting and retaining new staff or retaining existing staff within the organisation.
The EAT expressed some scepticism about this [45, 46].
A measure may be appropriate to achieving the aim but go further than is (reasonably) necessary in order to do so and thus be disproportionate.
The EAT suggested that what has to be justified is the discriminatory effect of the unacceptable criterion [44].
Mr Lewis points out that this is incorrect: both the Directive and the Regulations require that the criterion itself be justified rather than that its discriminatory effect be justified (there may well be a difference here between justification under the anti discrimination law derived from the European Union and the justification of discrimination in the enjoyment of convention rights under the European Convention of Human Rights).
Part of the assessment of whether the criterion can be justified entails a comparison of the impact of that criterion upon the affected group as against the importance of the aim to the employer.
That comparison was lacking, both in the ET and in the EAT.
Mr Homer (and anyone else in his position, had there been someone) was not being sacked or downgraded for not having a law degree.
He was merely being denied the additional benefits associated with being at the highest grade.
The most important benefit in practice is likely to have been the impact upon his final salary and thus upon the retirement pension to which he became entitled.
So it has to be asked whether it was reasonably necessary in order to achieve the legitimate aims of the scheme to deny those benefits to people in his position? The ET did not ask itself that question.
To some extent the answer depends upon whether there were non discriminatory alternatives available.
It is not clear whether the ET were suggesting that an exception should have been made for Mr Homer (who was on any view an exceptional case) or whether they were suggesting that the criterion should have been modified to include qualifications other than law degrees.
As the EAT said, an ad hominem exception may be the right answer in personnel management terms but it is not the answer to a discrimination claim.
Any exception has to be made for everyone who is adversely affected by the rule.
Grandfather clauses preserving the existing status and seniority, with attendant benefits, of existing employees are not at all uncommon when salary structures are revised.
So it is relevant to ask whether such a clause could have represented a more proportionate means of achieving the legitimate aims of the organisation.
On the other hand, what is in issue here is not preserving existing benefits but affording entry to a newly created higher grade.
As the ET did not approach the question of justification in a suitably structured way, and ask itself all the right questions, the case should be remitted on the issue of justification.
We cannot be clear that if they had asked the right questions they would have reached the same conclusion, although it is possible that they would have done so.
However, as the EAT pointed out, there is nothing to stop the Chief Constable deciding to make a personal exception for Mr Homer, quite independently of his age discrimination claim (provided of course that it can be done without discriminating against someone else on a prohibited ground).
This litigation has been pursued in a friendly spirit and it is to be hoped that it might be resolved in similar vein.
It was important to establish the principles in a new area which many still find counter intuitive.
It is not long ago that it was taken for granted that age was a relevant criterion in deciding how long people should be allowed to go on working.
Now that has to be justified.
The same is true of apparently neutral criteria which have an adverse impact upon people of a particular age.
But both the Age Regulations and the Equality Act recognise that difficult balances have to be struck between the competing interests of different age groups.
We all have a lot of learning to do.
LORD HOPE
For the reasons that Lady Hale gives, with which I entirely agree, I would allow this appeal.
Mr Lewis QC for the Chief Constable made much of the point that it was Mr Homers own decision to retire when he reached the normal retirement age of 65 and not stay on so that he could get the benefit of his law degree.
But I do not think that it follows that his age had no bearing on the issue.
The time available to complete the law degree and get the benefits that would flow from it was inevitably linked to the age of the person concerned.
The effect of the measure was bound to vary from person to person, but I do not see this as a reason for saying that it did not discriminate against Mr Homer on account of his age.
The number of years that he had left to him before he could reasonably expect to retire meant that his age had a direct bearing on whether he would be disadvantaged by the requirement.
He was, in effect, being forced to work on beyond the normal retirement age so that he could obtain the benefit.
This was, in itself, indirectly discriminatory.
It was submitted that to exclude Mr Homer from the requirement to obtain a law degree would be to give him a benefit that was not available to others.
It is true that this would have meant that he would not have to go to the trouble of studying and preparing for the examinations.
Nor would he have to wait until he had passed the examinations before he got the benefit.
But I cannot accept that discrimination on the grounds of age can be regarded as justified simply because eliminating it would put others at a disadvantage that is not related to their age.
Any reversal of a discriminatory rule or practice that does not treat everyone equally is likely to have an impact on others which, from their point of view, may seem to be to their disadvantage.
This is especially so in the case of age discrimination, where a measure that affects some will inevitably affect others differently.
We all grow older as we progress through life.
Age is a characteristic which changes with time.
A disadvantage to others which is unrelated to their age will not be a ground in itself for holding that the age related discrimination of the person who complains of it must be regarded as justified.
That removing the discrimination would have this effect on others may, however, have a bearing on the issue of justification when it is looked at more broadly.
This is because it leads to the question whether there were other ways of dealing with the requirement of enhanced qualification.
The answers to that question may show that the discrimination could have been avoided without giving rise to any effects which were objectionable.
But the question whether there was a more proportionate way of doing this was not explored by the Employment Tribunal.
I agree with Lady Hale that the case must be remitted to it for a further consideration of that issue.
LORD MANCE
My initial reaction was that the case advanced by the appellant Mr Homer was counter intuitive (a word which Lady Hale uses in para 27).
But, having read her judgments in this case as well as in Seldon v Clarkson Wright and Jakes, I am fully persuaded that my initial reaction was wrong, and that the present case involved indirect discrimination on grounds of age, basically for the reasons she gives in paras 1 to 18.
The key to the resolution of Mr Homers claim therefore lies in the issue of justification, which must be remitted for further consideration by the Employment Tribunal as Lady Hale says in para 26.
In relation to that issue, I have difficulty about any suggestion that the Chief Constable should have made a personal exception for Mr Homer quite outside his age discrimination claim (Lady Hale, para 26) or make a modification of the provision, criterion or practice [requiring a law degree] for the appellants age group (Maurice Kay LJs phrase in the Court of Appeal, para 38).
The problem about such suggestions was identified by Elias J in the Employment Appeal Tribunal, para 49, when he held that the Tribunal was not correct to say if indeed it was intending to say that the discrimination should have been avoided by making a personal exception of the claimant.
He explained: If the imposition of the criterion of a law degree resulted in unjustified indirect discrimination, because the discriminatory effect was disproportionate to the aim, then all adversely affected by the rule must be treated equally.
That may well have had the consequence that only the claimant might qualify, but it is not the same as creating an ad hominem exception for him.
In other words, if (as the Tribunal appears to have concluded) there was no objective need for an employee as experienced, skilled and knowledgeable as Mr Homer to have had a law degree in order to qualify at the third threshold, then there may have been employees, with more than five years to go to retirement and so with sufficient years ahead in which to complete a law degree, whose experience, skill and knowledge would also have made such a requirement unnecessary.
An exception for Mr Homer personally, or a general exception for employees within four or five years of retirement age, could have discriminated unjustifiably against such younger employees on grounds of age.
No doubt, this is an aspect which the Tribunal will wish to consider, among others, in relation to the issue of justification.
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This case concerns the scope of indirect discrimination on the ground of age.
It was heard alongside the case of Seldon v Clarkson Wright and Jakes [2012] UKSC 16 which concerned the scope for justification of direct discrimination on the ground of age.
Mr Homer began working for the Police National Legal Database (PNLD) as a legal advisor in 1995 at the age of 51.
When he was appointed the role did not require a law degree or equivalent if the post holder had exceptional experience or skills in criminal law combined with a lesser qualification in law.
Mr Homer fell within this latter category.
PNLD began to experience problems in attracting suitable people for the role of legal advisor.
In 2005 the organisation introduced a new grading structure to improve career progression and offer more competitive salaries.
The new structure provided for three promotion thresholds above the starting grade, the third and final of which requiring a law degree.
In 2006 Mr Homer was graded under the new system as reaching the first and second thresholds but not the third.
Because of his previous skills and experience he was, under the old grading structure, effectively at the top grade.
In order to reach the third and highest threshold under the new structure Mr Homer would have been required to study for a law degree part time alongside his work.
This would take four years to complete.
At this time Mr Homer was 62 years old and, being due to retire at 65, would have been unable to reach or benefit from being at the third threshold before leaving the employment.
His various internal appeals and grievances were dismissed and, in April 2007, he issued proceedings under the Employment Equality (Age) Regulations 2006, SI 2006/1031 (the Age Regulations) which came into force in October 2006.
Regulation 7 of the Age Regulations (which have since been repealed but substantially re enacted under the Equality Act 2010) makes it unlawful for an employer to discriminate against employees such as Mr Homer in respect of, amongst other things, opportunities for promotion or receiving of other benefits.
Regulation 3 provides that indirect discrimination occurs when a person (A) applies to another person (B) a provision, criterion or practice which he applies to persons not of the same age group as B, but which puts persons of the same age group as B at a particular disadvantage when compared with other persons, and which puts B at that disadvantage and A cannot show the . provision, criterion or practice to be a proportionate means of achieving a legitimate aim.
In contrast to the Seldon case, it was accepted that regulation 3 had properly transposed article 2(2)(b) of Council Directive 2000/78/EC on equal treatment in employment and occupation into UK law in cases of indirect age discrimination.
In January 2008 the Employment Tribunal found that the appropriate age group was employees aged between 60 and 65 as these persons would have been unable to obtain any real benefit from obtaining a law degree before retiring.
It went on to hold that Mr Homer had been indirectly discriminated against on the ground of age and that this was not objectively justifiable on the facts.
The Employment Appeal Tribunal held that there had been no indirect discrimination, but that if there had been then it would not be objectively justified.
The Court of Appeal dismissed Mr Homers appeal against the first finding, and dismissed the Respondents cross appeal against the second finding.
Both findings were then appealed to the Supreme Court.
The Supreme Court unanimously allows Mr Homers appeal on the first issue, finding that he was indirectly discriminated against by the Respondent.
The Court remits the case to the Employment Tribunal to reconsider the issue of justification.
Lady Hale gives the lead judgment with which all other members of the Court agree.
Lord Hope and Lord Mance add some comments of their own.
The Employment Appeal Tribunal and the Court of Appeal had been persuaded by the argument that Mr Homer was put at a disadvantage, not by his age but by his impending retirement [12].
It was accepted that his retirement was what prevented him from gaining any real benefit from acquiring a law degree.
What put B at a particular disadvantage was not his age as such but the fact that he was due to leave employment within four years, his position being comparable with any other employees nearing the end of their employment for whatever reason.
The Supreme Court disagrees with that analysis.
Its flaw is to ignore the fact that persons in the position of Mr Homer were disadvantaged because of a reason (retirement) that directly related to their age.
Persons similarly disadvantaged for reasons not related to their age would not fall within the scope of the Age Regulations and were not the intended recipients of its protection [13].
The form of words used under the Age Regulations was intended to make it more straightforward to establish claims of indirect discrimination with claimants simply having to establish that they in particular, and persons of their age group in general, were, in fact, disadvantaged when compared with other persons [14].
In any event, there are material differences between leaving work because of impending retirement and other reasons for doing so [15].
The law on indirect discrimination is an attempt to level the playing field by subjecting to scrutiny requirements which look neutral on their face but in reality work to the comparative disadvantage of people with a particular protected characteristic. [17].
As to justification, the issue is to be remitted to the Employment Tribunal for consideration in the light of the Supreme Courts findings.
The range of aims capable of justifying indirect discrimination is greater that those available in the context of direct discrimination (see Seldon v Clarkson Wright and Jakes [2012] UKSC 16) [19].
In particular, a real business need on the part of the employer alone may be sufficient.
In addition to pursuing a legitimate aim, the treatment must be proportionate which means it is both an appropriate means of achieving the legitimate aim and (reasonably) necessary in order to do so. [22].
It is the criterion itself that must be justified as opposed to its discriminatory effects on the individual [23]; however part of that assessment includes comparing the likely impact of the criterion on the affected group as against the importance of the aim to the employer [24].
It is noted that Mr Homer was not dismissed or downgraded for not having a law degree, but was simply denied the additional benefits attaching to the newly introduced third threshold.
The question was whether it was reasonably necessary in order to achieve the legitimate aims of the scheme to deny those benefits to people in his position [24].
It was not clear whether the Employment Tribunal had been suggesting a specific exception for Mr Homer alone: that was not an appropriate response to a discrimination claim.
There has to be some way of modifying the criterion for everyone adversely affected but without introducing discrimination against another group [16, 25].
Lord Hope addresses the argument made that exempting Mr Homer from the third threshold requirements would unfairly advantage persons of Mr Homers age group.
He does not accept that discrimination on grounds of age can be regarded as justified simply because eliminating it would put others at a disadvantage which is not related to their age [30].
Lord Mance however expresses some concern about the possibility of making an exemption for Mr Homer personally or for all those persons in the same age group as him, on the basis that it might unjustifiably discriminate against younger employees on the ground of their age [36].
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These two cases raise a number of important issues in relation to the detention pending deportation of foreign national prisoners (FNPs) following the completion of their sentences of imprisonment.
Section 3(5)(a) of the Immigration Act 1971 (the 1971 Act) provides that a person who is not a British citizen is liable to deportation from the United Kingdom if the Secretary of State deems his deportation to be conducive to the public good.
Schedule 3 to the 1971 Act provides in certain specified circumstances for the detention of such a person pending his deportation.
Walumba Lumba is a citizen of the Democratic Republic of Congo (DRC) who entered the UK on 10 April 1994.
He was convicted of a number of offences culminating in an offence of wounding with intent for which he was sentenced to 4 years imprisonment on 12 January 2004.
On 3 April 2006, the Secretary of State informed Mr Lumba of his intention to deport him under section 3(5)(a) of the 1971 Act.
He was due to be released from prison on 23 June 2006, but by letter dated 22 June 2006 was notified that he was to be detained pending deportation.
He left the United Kingdom voluntarily on 13 February 2011.
Kadian Mighty is a citizen of Jamaica.
He arrived in the United Kingdom on 4 December 1992 and was given 6 months leave to enter as a visitor.
Thereafter, he made various unsuccessful applications for leave to remain.
On 10 February 2003, however, he was granted indefinite leave to remain.
He had been convicted of a number of offences, including possession of a Class A drug with intent to supply, for which on 27 June 2003, he was sentenced to 42 months imprisonment.
Following his release on licence, he committed a driving offence and was recalled to prison.
He was finally released on 31 March 2006.
On 10 May 2006, the Secretary of State informed Mr Mighty of his intention to deport him under section 3(5)(a) of the 1971 Act.
On 19 May 2006, he was detained pending deportation because he was likely to abscond and his release was not conducive to the public good.
He was released on bail on 28 July 2008.
Schedule 3 of the 1971 Act provides, so far as material: 2. (1) Where a recommendation for deportation made by a court is in force in respect of any person, and that person is not detained in pursuance of the sentence or order of any court, he shall, unless the court by which the recommendation is made otherwise directs, or a direction is given under sub paragraph (1A) below, be detained pending the making of a deportation order in pursuance of the recommendation, unless the Secretary of State directs him to be released pending further consideration of his case or he is released on bail. (1A) Where (a) a recommendation for deportation made by a court on conviction of a person is in force in respect of him; and (b) he appeals against his conviction or against that recommendation, the powers that the court determining the appeal may exercise include power to direct him to be released without setting aside the recommendation. (2) Where notice has been given to a person in accordance with regulations under section 105 of the Nationality, Immigration and Asylum Act 2002 (notice of decision) of a decision to make a deportation order against him, and he is not detained in pursuance of the sentence or order of a court, he may be detained under the authority of the Secretary of State pending the making of the deportation order. (3) Where a deportation order is in force against any person, he may be detained under the authority of the Secretary of State pending his removal or departure from the United Kingdom (and if already detained by virtue of sub paragraph (1) or (2) above when the order is made, shall continue to be detained unless he is released on bail or the Secretary of State directs otherwise).
Between April 2006 and 9 September 2008, the Secretary of States published policy on detention of FNPs under her immigration powers was that there was a presumption in favour of release, although detention could be justified in some circumstances.
In fact, during this period the Secretary of State applied a quite different unpublished policy which was described as a near blanket ban by the Secretary of State, Ms Jacqui Smith, to the Prime Minister, Gordon Brown, on 19 September 2007 in a document entitled Bail Proposal for Foreign National Prisoners in which she said: Since April 2006, the BIA [(the Border and Immigration Agency)] has been applying a near blanket ban on release, regardless of whether removal can be achieved and the level of risk to the public linked to the nature of the FNPs original offence.
By currently having no discretion to grant bail, the BIA has to regularly transfer FNPs around the Estate.
On 9 September 2008, the Secretary of State published a policy which included a presumption of detention and withdrew all references to a presumption of release.
On 22 January 2009, following the decision of Davis J in the current proceedings, this policy was amended again to omit the reference to a presumption of detention and substitute a policy in favour of release from detention.
It will be necessary to describe the policies and practices adopted from time to time in more detail later in this judgment.
The proceedings
Mr Lumba issued proceedings on 18 October 2007.
He challenged the lawfulness of his detention on the grounds that he was no longer being detained pending deportation and that his continued detention was in breach of the principles stated by Woolf J in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles).
He also claimed a declaration that his detention was unlawful, a mandatory order that he be released and damages.
On 4 July 2008, Collins J gave an interlocutory judgment on part of the claim: [2008] EWHC 2090 (Admin).
He did not make a decision in relation to Mr Lumbas past detention and reserved for a further hearing inter alia the questions of whether the operation of an unpublished policy had been unlawful and the past detention had been unlawful as a consequence.
On 28 July 2008, Mr Lumbas claim was joined to four other cases in which the same points arose.
One of these was the claim of Mr Mighty which had been issued on 29 May 2008.
The five cases were heard by Davis J on 11 14 November 2008.
In an impressive judgment given on 19 December 2008 [2008] EWHC 3166 (Admin), he granted the claimants declarations that (i) paragraph 2 of Schedule 3 to the 1971 Act prohibits the Secretary of State from operating any policy in relation to the detention of FNPs which contains a presumption in favour of detention and (ii) it was unlawful for the Secretary of State to operate the policy introduced in April 2006 in that it was not sufficiently published or accessible until its publication on 9 September 2008.
He dismissed the other claims, in particular the claims for damages for unlawful detention.
The appellants appealed and the Secretary of State cross appealed against the first declaration.
In a judgment of the court delivered by Stanley Burnton LJ, the Court of Appeal (Lord Neuberger MR, Carnwath and Stanley Burnton LJJ) ([2010] 1 WLR 2168) allowed the cross appeal and set aside the first declaration.
They also varied the second declaration.
Otherwise the appeals were dismissed.
The issues
The principal issues are as follows. (i) Were the detention policies that were applied to the appellants after April 2006 unlawful because (a) they were blanket policies (para 21 below) and/or (b) they were inconsistent with the published policies (para 26 below) and/or (c) they were not published policies (paras 27 38 below) and/or (d) they contained a presumption in favour of detention (paras 40 55 below)? (ii) If unlawful policies were applied to the appellants, was their detention unlawful in consequence (paras 56 89)? (iii) If their detention was unlawful, are the appellants entitled to more than nominal damages (paras 90 101 below)? (iv) Is Mr Lumba entitled to damages for unlawful detention on the grounds that, in his case, there has been a breach of the Hardial Singh principles? (paras 102 148 below) (v) Are the appellants entitled to an award of exemplary damages (paras 150 168 below)? The policies in more detail
The published policies
The presumption of release had been entrenched in the Secretary of States published policies since at least 1991.
It appeared in the White Paper Fairer, Faster and Firmer: a Modern Approach to Immigration and Asylum (1998) (Cm 4018), which was published in 1998 and again in 2002 in the White Paper Secure Borders, Safe Haven: Integration Diversity in Modern Britain (2002) (Cm 5387) which stated at para 4.76: Our 1998 White paper set out the criteria by which Immigration Act powers of detention were exercised and confirmed that the starting point in all cases was a presumption in favour of granting temporary admission or release.
The criteria were modified in March 2000 to include detention at Oakington Reception Centre if it appeared that a claimants asylum application could be decided quickly.
The modified criteria and the general presumption remain in place.
Chapter 38 of the Operational Enforcement Manual (OEM), which was a published document in force until April 2008, stated in its introductory section that the 1998 White Paper confirmed that there was a presumption in favour of temporary admission or release and that, whenever possible, we would use alternatives to detention.
Para 38.3 stated: 1.
There is a presumption in favour of temporary admission or temporary release. 2.
There must be strong grounds for believing that a person will not comply with conditions of temporary admission or temporary release for detention to be justified. 3.
All reasonable alternatives to detention must be considered before detention is authorised.
Identical wording was contained in Chapter 55 of the Enforcement Instructions and Guidance (EIG) which replaced Chapter 38 of the OEM and came into force on 19 June 2008.
On 9 September 2008, Chapter 55 of the EIG was amended.
With regard to FNPs, para 55.1.2 stated: Due to the clear imperative to protect the public from harm and the particular risk of absconding in these cases, the presumption in favour of temporary admission or temporary release does not apply where the deportation criteria are met.
Instead the person will normally be detained, provided detention is, and continues to be lawful.
The EIG then gave guidance to caseworkers as to the factors which might make further detention unlawful.
In particular, it stated that the presumption of detention will be displaced where legally the person cannot or can no longer be detained because detention would exceed the period reasonably necessary for the purpose of removal.
Following the decision of Davis J in the current proceedings, on 22 January 2009 this policy was changed again so as to replace a presumption in favour of detention with a presumption in favour of release from detention.
The unpublished policies
The true picture during the period from April 2006 until September 2008 was very different.
Following the public disclosure on 25 April 2006 that 1,013 FNPs had been released from prison before consideration had been given to the question of whether they should have been deported, the Secretary of State adopted a new policy which he did not publish.
I have already referred at para 5 above to the description of it contained in the 19 September 2007 Bail Proposal as a near blanket ban.
The policy of blanket detention admitted of exceptions only on compassionate grounds.
No formal guidance was given to caseworkers to give effect to this policy until on 8 November 2007 they were issued with a document (known as Cullen 1) which set out criteria and guidance for the identification and release of FNPs who were considered to pose the lowest risks to the public and the lowest risks of absconding.
Cullen 1 was not published to the outside world.
It led at most to the release of a handful of FNPs.
In March 2008, an amended guidance document (known as Cullen 2) was issued to the caseworkers.
It too was not published to the outside world.
Attached to Cullen 1 and Cullen 2 was an extensive list of offences entitled List of recorded crimes where release from immigration detention or at the end of custody will not be appropriate.
In practice, almost all FNPs who had been sentenced to imprisonment were likely to have committed one or more of such offences.
Both Mr Lumba and Mr Mighty had done so.
The evidence of David Wood, Strategic Director of the Criminality and Detention Group, was that between December 2006 and July 2008, 15 FNPs were released from detention.
On 22 May 2008, the existence of an unpublished policy or practice was belatedly disclosed by the Secretary of State to Mitting J after he had given judgment in the case of R (Ashori) v Secretary of State for the Home Department [2008] EWHC 1460 (Admin).
More detail as to the circumstances in which the policy came to be disclosed is given by Davis J at paras 21 to 26 of his judgment.
The unpublished policies were applied to Mr Lumba and Mr Mighty
It is now common ground that the unpublished policies were applied to the two appellants throughout their detention.
It is, therefore, unnecessary to consider para 203 of the judgment of Davis J (where the judge stated that there was nothing to show that Mr Lumba was detained by application of the unpublished policy) or para 100 of the judgment of the Court of Appeal which upheld Davis J on this point.
Were these policies unlawful?
Here too, there is little dispute between the parties.
Mr Beloff QC rightly accepts as correct three propositions in relation to a policy.
First, it must not be a blanket policy admitting of no possibility of exceptions.
Secondly, if unpublished, it must not be inconsistent with any published policy.
Thirdly, it should be published if it will inform discretionary decisions in respect of which the potential object of those decisions has a right to make representations.
As regards the first of these propositions, 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.
Davis J held that the unpublished policy was not a blanket policy.
The Court of Appeal disagreed.
Basing themselves on the review by David Wood of the failure to publish a revised FNP detention policy following the April 2006 crisis approved on 3 August 2009, the Court of Appeal concluded that the policy, as applied at least from the time of Cullen 1 in November 2007, effectively operated on a blanket basis rather than (as held by the judge) one of presumption.
I agree with this assessment by the Court of Appeal but would go further.
It seems clear to me that a blanket policy was also applied from April 2006 until the introduction of Cullen 1 in November 2007.
During this earlier period, the only exceptions made to the policy of universal detention were on compassionate grounds and these were few and far between.
Importantly, there were no releases on the basis of Hardial Singh principles.
Indeed, Cullen 1 represented a modest relaxation of the previous position.
It is convenient to introduce the Hardial Singh principles at this stage, since they infuse much of the debate on the issues that arise on this appeal.
It is common ground that my statement in R (I) v Secretary of State for the Home Department [2002] EWCA Civ 888, [2003] INLR 196 para 46 correctly encapsulates the principles as follows: (i) The Secretary of State must intend to deport the person and can only use the power to detain for that purpose; (ii) The deportee may only be detained for a period that is reasonable in all the circumstances; (iii) If, before the expiry of the reasonable period, it becomes apparent that the Secretary of State will not be able to effect deportation within a reasonable period, he should not seek to exercise the power of detention; (iv) The Secretary of State should act with reasonable diligence and expedition to effect removal.
Lord Phillips says that the first two of these principles cannot properly be derived from Hardial Singh.
Since their correctness has not been put in issue by the parties to these appeals, I propose to deal with the points shortly.
As regards the first principle, I consider that Woolf J was saying unambiguously that the detention must be for the purpose of facilitating the deportation.
The passage quoted by Lord Phillips includes the following: as the power is given in order to enable the machinery of deportation to be carried out I regard the power of detention as being impliedly limited to a period which is reasonably necessary for that purpose(emphasis added).
The first principle is plainly derived from what Woolf J said.
As for the second principle, in my view this too is properly derived from Hardial Singh.
Woolf J said that (i) the power of detention is limited to a period reasonably necessary for the purpose (as I would say) of facilitating deportation; (ii) what is reasonable depends on the circumstances of the particular case; and (iii) the power to detain ceases where it is apparent that deportation will not be possible within a reasonable period.
It is clear at least from (iii) that Woolf J was not saying that a person can be detained indefinitely provided that the Secretary of State is doing all she reasonably can to effect the deportation.
It seems to me that, in relation to both the first and second principles, Lord Phillips is suggesting a different interpretation of paragraph 2(3) of Schedule 3 to the 1971 Act from that enunciated by Woolf J.
I do not agree with this interpretation.
But what is perhaps of more importance in the context of these appeals is that in my view it is not appropriate to depart from a decision which has been followed repeatedly for almost 30 years unless it is obviously wrong (which I do not believe to be the case), still less to do so without the benefit of adversarial argument.
As regards the second proposition accepted by Mr Beloff, a decision maker must follow his published policy (and not some different unpublished policy) unless there are good reasons for not doing so.
The principle that policy must be consistently applied is not in doubt: see Wade and Forsyth Administrative Law, 10th ed (2009) p 316.
As it is put in De Smiths Judicial Review, 6th ed (2007) at para 12 039: there is an independent duty of consistent application of policies, which is based on the principle of equal implementation of laws, non discrimination and the lack of arbitrariness.
The decision of the Court of Appeal in R (Nadarajah) v Secretary of State for the Home Department [2003] EWCA Civ 1768, [2004] INLR 139 is a good illustration of the principle.
At para 68, Lord Phillips MR, giving the judgment of the court, said that the Secretary of State could not rely on an aspect of his unpublished policy to render lawful that which was at odds with his published policy.
As for the third proposition, the Court of Appeal dealt with the issue of whether there is a general rule of law that policies must be published at paras 70 to 79 of their judgment.
Disagreeing with Davis J, they concluded that there is no such general rule and said that the fact that the appellants were detained pursuant to unpublished policies was not in itself a reason for holding that the decisions to detain them were unlawful.
Mr Beloff did not feel able to support this conclusion.
It is unfortunate that the Court of Appeal embarked on this topic at all, since it was not before them and was not, therefore, the subject of argument or citation of authority.
As the point is of general importance, I need to say why in my view the judge was right and the Court of Appeal were wrong on this issue both as a matter of common law and ECHR law.
The Court of Appeal referred to a statement of Sedley LJ in R v Secretary of State for Education and Employment Ex P Begbie [2000] 1 WLR 1115, 1132C that there were cogent objections to the operation of undisclosed policies affecting individuals entitlements or expectations and said at para 72 that they had no difficulty in accepting this as (no more than) a statement of good administrative practice.
They also said that the judge was wrong to rely on Sunday Times v United Kingdom (1979) 2 EHRR 245 and criticised the reasoning in Nadarajah at paras 64 67 which relied on the Sunday Times case in support of the proposition that a relevant policy is part of the law that must be accessible, so as to enable those affected by it reasonably to foresee the consequences of their actions.
At para 73, they said that the relevant passage in the judgment of the ECtHR at para 49 of the judgment in the Sunday Times case is not, as we read it, about policy as such, but is rather directed to the need for accessibility and precision, as requirements of law in the strict sense.
They went on to say that, in the present context, the requirement for an accessible and precise statement of the relevant law is satisfied by paragraph 2 of Schedule 3 to the 1971 Act, taken with the Hardial Singh guidelines.
In short, policy is not the same as law (para 57).
In support for their conclusion, they referred to what Laws LJ said in R (SK Zimbabwe) v Secretary of State for the Home Department [2008] EWCA Civ 1204; [2009] 1 WLR 1527, para 33.
In that case, the Secretary of State had failed to carry out regular reviews following detention, as required by the Detention Centre Rules.
As regards the requirement that any deprivation of liberty be in accordance with a procedure prescribed by law in article 5(1) of the ECHR, Laws LJ said that this was to ensure that any interference is not random and arbitrary, but governed by clear pre existing rules.
He continued: Here the rules are the Hardial Singh principles.
Their fulfilment in any given case saves a detention from the vice of arbitrariness.
A system of regular monitoring is, no doubt, a highly desirable means of seeing that the principles are indeed fulfilled.
But it is not itself one of those principles.
But all that the Hardial Singh principles do is that which article 5(1)(f) does: they require that the power to detain be exercised reasonably and for the prescribed purpose of facilitating deportation.
The requirements of the 1971 Act and the Hardial Singh principles are not the only applicable law.
Indeed, as Mr Fordham QC points out, the Hardial Singh principles reflect the basic public law duties to act consistently with the statutory purpose (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997, 1030B D) and reasonably in the Wednesbury sense (Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223).
But they are not exhaustive.
If they were exhaustive, there could be no room for the public law duty of adherence to published policy, which was rightly acknowledged by the Court of Appeal at paras 51, 52 and 58 of their judgment.
I therefore accept the submission of Mr Husain QC and Mr Fordham that the Court of Appeals criticisms of Nadarajah were misplaced.
I should interpolate that there is in any event an obvious difference between rules which require the review of a detention to be undertaken at prescribed intervals and rules which prescribe the criteria by which a person is to be released or to be subjected to continuing detention.
The fact that a policy states that only persons of a specified category will be considered for release is at least as substantively important as the Hardial Singh principles which determine, for example, that a person may not be detained for an unreasonable period.
There is further support in the ECtHR jurisprudence for the proposition that paragraph 2 of Schedule 3 to the 1971 Act and the Hardial Singh principles are not exhaustive of the law.
In Medvedyev v France (Appln no 3394/03, 29 March 2010), the Grand Chamber said at para 80: where deprivation of liberty is concerned it is particularly important that the general principle of legal certainty be satisfied.
It is therefore essential that the conditions for deprivation of liberty under domestic and/or international law be clearly defined.
The case of Gillan v United Kingdom (2010) 50 EHRR 45 concerned the stop and search powers conferred on the police by the Terrorism Act 2000.
For present purposes, the relevant issue was whether the powers were in accordance with the law within the meaning of article 8(2) of the ECHR.
A Code of Practice was issued by the Secretary of State to guide police officers in the exercise of their powers of stop and search.
The ECtHR said: 77Consequently, 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.
The ECtHR noted at para 83 that the Code of Practice governs essentially the mode in which the stop and search is carried out, rather than providing any restriction on the officers decision to stop and search.
That decision is, as the House of Lords made clear, one based exclusively on the hunch or professional intuition of the officer concerned.
In the opinion of the court, there was a clear risk of arbitrariness in the grant of such a broad discretion to the police officer.
At para 87, they concluded that, despite the existence of the Code of Practice, the statutory powers were not in accordance with the law because they were neither sufficiently circumscribed nor subject to adequate legal safeguards against abuse.
The rule of law calls for a transparent statement by the executive of the circumstances in which the broad statutory criteria will be exercised.
Just as arrest and surveillance powers need to be transparently identified through codes of practice and immigration powers need to be transparently identified through the immigration rules, so too the immigration detention powers need to be transparently identified through formulated policy statements.
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: see In re Findlay [1985] AC 318, 338E.
There is a correlative right to know what that currently existing policy is, so that the individual can make relevant representations in relation to it.
In R (Anufrijeva) v Secretary of State for the Home Department [2003] UKHL 36, [2004] 1 AC 604, para 26 Lord Steyn said: Notice of a decision is required before it can have the character of a determination with legal effect because the individual concerned must be in a position to challenge the decision in the courts if he or she wishes to do so.
This is not a technical rule.
It is simply an application of the right of access to justice.
Precisely the same is true of a detention policy.
Notice is required so that the individual knows the criteria that are being applied and is able to challenge an adverse decision.
I would endorse the statement made by Stanley Burnton J in R (Salih) v Secretary of State for the Home Department [2003] EWHC 2273 at para 52 that 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.
At para 72 of the judgment of the Court of Appeal in the present case, this statement was distinguished on the basis that it was made in the quite different context of the Secretary of States decision to withhold from the individuals concerned an internal policy relating to a statutory scheme designed for their benefit.
This is not a satisfactory ground of distinction.
The terms of a scheme which imposes penalties or other detriments are at least as important as one which confers benefits.
As Mr Fordham puts it: why should it be impermissible to keep secret a policy of compensating those who have been unlawfully detained, but permissible to keep secret a policy which prescribes the criteria for their detention in the first place?
There was a real need to publish the detention policies in the present context.
As Mr Husain points out, the Cullen policies provided that certain non serious offenders could be considered for release.
The failure to publish these policies meant that individuals who may have been wrongly assessed as having committed a crime that rendered them ineligible for release would remain detained, when in fact, had the policy been published, representations could have been made that they had a case for release.
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.
For all these reasons, the policies which were applied to Mr Lumba and Mr Mighty were unlawful.
But Mr Husain submits (with the support of Mr Rabinder Singh QC and Mr Fordham) that the policies were also unlawful because they included a presumption of detention.
Presumption of detention
Davis J held at paras 114 to 116 of his judgment that the provisions of paragraph 2 of Schedule 3 to the 1971 Act operate to prevent the Secretary of State from operating a policy of a presumption in favour of detention of FNPs pending deportation.
He applied R (Sedrati) v Secretary of State for the Home Department [2001] EWHC 210 (Admin) in which, by consent, Moses J had granted a declaration that the terms of paragraph 2 of Schedule 3 do not create a presumption in favour of detention upon completion of the sentence.
On the Secretary of States cross appeal against the declaration, the Court of Appeal said at para 65: . . there is no reason in principle why paragraph 2.1 of Schedule 3 to the 1971 Act, which clearly does require continued detention unless the Secretary of State otherwise orders (i.e. a presumption of detention), should not be construed as a presumption of detention pending deportation.
Equally, the Secretary of State may lawfully adopt a policy for the purposes of paragraph 2(2) or (3) that involves a presumption.
A presumption that those who have committed serious crimes (e.g. most of those listed in Cullen 1 and 2) should be detained is unobjectionable.
They went on at para 66 to say that for these reasons the declaration granted by Moses J was wrong and allowed the Secretary of States cross appeal.
Mr Husain, supported by Mr Singh and Mr Fordham, say that the judge was right and the Court of Appeal wrong on this issue.
The primary case advanced by Mr Husain is that the policy that was applied between April 2006 and September 2008 was not properly described as a presumptive policy at all, but rather was a blanket policy.
But whether that is right or not, Mr Lumba continued to be detained between September 2008 (when the Secretary of State published a policy in favour of detention) and 22 January 2009 (when the order of Davis J was implemented).
It follows that even if, as I have accepted, the Court of Appeal was justified in holding that the policy was a blanket policy until September 2008, the presumption of liberty issue is of more than academic interest in this appeal.
It is important at the outset to define clearly what a presumption means in this context.
It is the Secretary of States case that paragraph 2 of Schedule 3 to the 1971 Act permits the operation of a policy in which she states that a FNP will normally be detained in certain prescribed circumstances.
Such a policy serves as a guide to the caseworkers who make the decisions on the ground and as an indication to the FNPs of what they can normally expect in the circumstances specified in the policy.
I shall refer to such a policy as normal practice.
It need not, and usually does not say anything about the burden of proof.
Normal practice is to be distinguished from presumptions in the strict sense.
Phipson on Evidence 17th ed (2009) at 6 16 to 6 31 categorises presumptions in this sense into rebuttable presumptions of law, irrebuttable presumptions of law and rebuttable presumptions of fact.
Such a presumption usually regulates the burden of proof in legal proceedings.
Thus, a presumption that a deprivation of liberty is unlawful regulates the burden of proof in relation to that issue: the burden is on the detainer to show that there was a power to detain.
I shall refer to a presumption in the strict sense as a legal presumption.
The distinction between normal practice and a legal presumption is fundamental to the present issue.
The fact that in legal proceedings the burden of proving a certain issue is allocated to one party rather than the other does not assist in deciding whether the Secretary of State may, in principle, lawfully give guidance that when certain factors are present, the decision should normally be to detain.
This distinction was not articulated in the courts below.
A further preliminary point needs to be made.
The legality of a decision may be considered at two stages: first at the administrative stage when the decision is taken and secondly, if the decision is challenged, at the stage of legal proceedings.
At the administrative stage, the individual against whom the decision is taken often plays no part.
It is not appropriate to talk of a burden of proof at this stage: see, for example, R v Lichniak [2003] 1 AC 903 at para 16 per Lord Bingham.
At the stage of legal proceedings, the Secretary of State rightly accepts that the burden of proof is on her to justify the detention.
This has long been established: Allen v Wright (1838) 8 C & P 522 and Lord Atkins dissenting speech in Liversidge v Anderson [1942] AC 206, 245 every detention is prima facie unlawful and that it is for a person directing imprisonment to justify his act.
Mr Husain submits that there is a presumption of liberty both under the jurisprudence of the ECtHR or at common law.
I shall start with the jurisprudence on article 5 of the ECHR which Mr Husain submits establishes that there is such a presumption.
He refers to Ilijkov v Bulgaria (Application No 33977/96) (unreported) 26 July 2001 where the ECtHR said: 84.
The court reiterates that continued detention can be justified in a given case only if there are specific indications of a genuine requirement of public interest which, notwithstanding the presumption of innocence, outweighs the rule of respect for individual liberty.
Any system of mandatory detention on remand is per se incompatible with article 5(3) of the Convention.
Where the law provides for a presumption in respect of factors relevant to the grounds for continued detention. the existence of the concrete facts outweighing the rule of respect for individual liberty must be nevertheless convincingly demonstrated. 85.
Moreover, the court considers that it was incumbent on the authorities to establish those relevant facts.
Shifting the burden of proof to the detained person in such matters is tantamount to overturning the rule of article 5 of the Convention, a provision which makes detention an exceptional departure from the right to liberty and one that is only permissible in exhaustively enumerated and strictly defined cases.
This was a decision in relation to an alleged violation of article 5(3) which provides: 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.
Mr Husain submits that, although these principles were articulated in the context of detention pending trial, they are more widely applicable as expressions of the right to liberty protected by article 5: see also Bykov v Russia (Application No 4378/02, 10 March 2009) at para 61 and Bordikov v Russia (Application no 921/03, 9 October 2009) at para 88.
However, these cases only concern legal presumptions that regulate burdens of proof in legal proceedings.
They are not concerned with normal practice contained in a policy of the kind with which these appeals are concerned.
In Ilijkov, the national courts rejected a series of applications for bail pending trial.
They did so relying on the Bulgarian Code of Criminal Procedure, which provided that, for certain crimes, detention on remand was mandatory in the absence of exceptional circumstances.
The ECtHR held that the initial decision to detain was lawful, but that the continuing application of the presumption of detention by the national judicial authorities was unlawful (paras 78 9 and 87).
The case was not concerned with the lawfulness of any decision to detain taken at an administrative stage.
It is clear from para 84 of the judgment that the court held that there was a breach of article 5(3).
There is, however, no provision in article 5(1)(f) corresponding with article 5(3) and there is nothing to indicate that the court intended its ruling in relation to article 5(1)(c) and 5(3) to apply to article 5(1)(f).
The decisions in Bykov and Bordikov do not advance the argument.
Para 61 of the judgment in Bykov merely reiterates what the court has repeatedly said in relation to article 5(3).
The reference to the presumption of release under article 5 is a reference to the second limb of article 5(3).
The case is concerned with the decisions of judicial authorities and not administrative decision makers.
Similarly, para 88 of the judgment in Bordikov makes it clear that the court in that case too was only concerned with the decisions of the courts.
The principal ECtHR authority on article 5(1)(f) is Saadi v UK (2008) 47 EHRR 427.
The applicant sought judicial review of the decision to detain him for a short period while his asylum claim was being subject to fast track processing.
The decision was made pursuant to a policy under which all asylum claimants falling within defined criteria (usually by nationality) were normally detained at Oakington while their claims were determined in an accelerated process.
This was a normal practice case and not a case about legal presumptions.
The ECtHR held inter alia that deprivation of liberty must not be arbitrary.
It must comply with the substantive and procedural rules of national law and the detention must be in good faith.
At para 69, the court said: 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.
And at para 72: Similarly, where a person has been detained under article 5(1)(f), the Grand Chamber, interpreting the second limb of this sub paragraph, held that, as long as a person was being detained with a view to deportation, that is, as long as action [was] being taken with a view to deportation, there was no requirement that the detention be reasonably considered necessary, for example, to prevent the person concerned from committing an offence or fleeing.
The Grand Chamber further held in Chahal (1997) 23 EHRR 413 that the principle of proportionality applied to detention under article 5(1)(f) only to the extent that the detention should not continue for
an unreasonable length of time
It was this statement which led the Court of Appeal to conclude at para 62 that a national law that authorises detention with a view to deportation may be compatible with article 5 even if it imposes a presumption of detention pending deportation.
It is not clear in what sense the Court of Appeal was using the phrase presumption of detention in this passage.
But if it is construed as a reference to normal practice, I agree with it, provided that it requires the Government to justify the detention with reasons that are closely connected to the statutory purpose of effecting deportation.
I turn to the position at common law.
It is not in dispute that the right to liberty is of fundamental importance and that the courts should strictly and narrowly construe general statutory powers whose exercise restricts fundamental common law rights and/or constitutes the commission of a tort.
The Court of Appeal said at para 63 that there is no rule of our domestic law that precludes the application of a presumption in favour of detention pending deportation, subject, of course, to the limitations in Ex P Hardial Singh [1984] 1 WLR 704, none of which involves consideration of risk of reoffending or absconding.
Such risks, they said, are relevant to the reasonableness of the period during which it is lawful to detain a FNP, but the absence of such a risk does not of itself render detention unlawful.
If by presumption in favour of detention the Court of Appeal meant the normal practice as to the circumstances in which a FNP will be detained, then I would agree with them, provided that it is understood that (i) the Hardial Singh principles are observed and (ii) each case is considered individually.
The Court of Appeal set aside the declaration granted by Davis J. They were right to do so.
For the reasons I have given, it is lawful for the Secretary of State to operate a policy which sets out the practice that she will normally follow in deciding whether or not to detain FNPs pending their deportation provided that the criteria that I have set out at para 53 above are satisfied.
Such a policy is not prohibited by paragraph 2 of Schedule 3 to the 1971 Act.
The Court of Appeal also held at para 66 that the declaration granted by Moses J in Sedrati [2001] EWHC Admin 418 was wrong in law.
I find this somewhat puzzling.
The declaration stated that the terms of paragraph 2 of Schedule 3 do not create a presumption in favour of detention.
Whatever the position may be in relation to paragraph 2(1) and the parenthesis in paragraph 2(3), paragraph 2(2) and the remainder of paragraph 2(3) do not create any presumption at all.
They simply give the Secretary of State a discretion to detain.
In relation to paragraph 2(2) and (3), therefore, so far as it goes, the declaration granted by Moses J is correct.
Were the detentions unlawful?
In summary, the appellants case is that their claims in false imprisonment should have succeeded: the Secretary of States unlawful unpublished policy which operated between April 2006 and September 2008 influenced the initial decisions to detain them and the subsequent decisions to continue to detain them.
Davis J accepted the argument advanced on behalf of the Secretary of State that, where the unlawful policy was of no causative effect because the claimants could and would have been lawfully detained if the published policy had been applied, their detention was not unlawful.
The Court of Appeal agreed.
They distinguished Christie v Leachinsky [1947] AC 573 and Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 on the footing that in those cases there was no lawful authority to detain the plaintiff.
In the present case, however, they said at para 87: there is no doubt that the statutory powers relied on by the Secretary of State were apt for the purpose, and the case is not based on the breach of any specific regulation on which the legality of detention was dependent.
Rather it is about the manner in which the power was exercised.
And at para 89: The mere existence of an internal, unpublished policy or practice at variance with, and more disadvantageous to the FNP than, the published policy will not render a decision to detain unlawful.
It must be shown that the unpublished policy was applied to him.
Even then, it must be shown that the application of the policy was material to the decision.
If the decision to detain him was inevitable, the application of the policy is immaterial, and the decision is not liable to be set aside as unlawful.
In short, since Mr Lumba and Mr Mighty would inevitably have been detained even if the published policy had been applied to them, their detentions were lawful.
The court therefore applied what it is convenient to call the causation test.
Davis J and the Court of Appeal were right to hold that the detention of the appellants would have been inevitable in the light of the risk of absconding and re offending that they both posed.
This appeal therefore raises the important question of whether it was right to apply the causation test and for that reason to hold that the detentions were lawful.
A somewhat similar problem arose in R (SK Zimbabwe) v Secretary of State for the Home Department.
In that case the unlawfulness lay in the failure of the Secretary of State to comply with her policy which prescribed the procedural requirements for reviews of FNPs who are already in detention.
The present case concerns the substantive requirements for the initial detention of FNPs as well as their continued detention.
What follows is to a considerable extent based on the submissions of Mr Husain.
The introduction of a causation test in the tort of false imprisonment is contrary to principle both as a matter of the law of trespass to the person and as a matter of administrative law.
Neither body of law recognises any defence of causation so as to render lawful what is in fact an unlawful authority to detain, by reference to how the executive could and would have acted if it had acted lawfully, as opposed to how it did in fact act.
The causation test entails the surprising proposition that the detention of a person pursuant to a decision which is vitiated by a public law error is nevertheless to be regarded as having been lawfully authorised because a decision to detain could have been made which was not so vitiated.
In my view, the law of false imprisonment does not permit history to be rewritten in this way.
The Court of Appeal were right to say at para 89 that the mere existence of an unlawful policy is not sufficient to establish that any particular exercise of a statutory discretion is unlawful.
The decision to detain and/or continue detention will not be vitiated on the grounds of an unlawful policy unless the policy has been applied or at least taken into account by the decision maker.
But this does not shed any light on the correctness of the causation test.
Trespassory torts (such as false imprisonment) are actionable per se regardless of whether the victim suffers any harm.
An action lies even if the victim does not know that he was imprisoned: see, for example, Murray v Ministry of Defence [1988] 1 WLR 692, 703A where Lord Griffiths refused to redefine the tort of false imprisonment so as to require knowledge of the confinement or harm because The law attaches supreme importance to the liberty of the individual and if he suffers a wrongful interference with that liberty it should remain actionable even without proof of special damage.
By contrast, an action on the case (of which a claim in negligence is the paradigm example) regards damage as the essence of the wrong.
All this is elementary, but it needs to be articulated since it demonstrates that there is no place for a causation test here.
All that a claimant has to prove in order to establish false imprisonment is that he was directly and intentionally imprisoned by the defendant, whereupon the burden shifts to the defendant to show that there was lawful justification for doing so.
As Lord Bridge said in R v Deputy Governor of Parkhurst Prison, Ex p Hague [1992] 1 AC 58, 162C D: The tort of false imprisonment has two ingredients: the fact of imprisonment and the absence of lawful authority to justify it.
The causation test shifts the focus of the tort on to the question of how the defendant would have acted on the hypothesis of a lawful self direction, rather than on the claimants right not in fact to be unlawfully detained.
There is no warrant for this.
A purported lawful authority to detain may be impugned either because the defendant acted in excess of jurisdiction (in the narrow sense of jurisdiction) or because such jurisdiction was wrongly exercised.
Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 established that both species of error render an executive act ultra vires, unlawful and a nullity.
In the present context, there is in principle no difference between (i) a detention which is unlawful because there was no statutory power to detain and (ii) a detention which is unlawful because the decision to detain, although authorised by statute, was made in breach of a rule of public law.
For example, if the decision to detain is unreasonable in the Wednesbury sense, it is unlawful and a nullity.
The importance of Anisminic is that it established that there was a single category of errors of law, all of which rendered a decision ultra vires: see Boddington v British Transport Police [1999] 2 AC 143, 158D E.
Mr Beloff submits that there are inherent problems in what I consider to be the correct and principled approach.
First, it fails to take account of the nature or extent of the public law error.
For example, he suggests that it treats for the purposes of liability as equally unlawful a decision to detain made by an official one grade lower than that specified in the detention policy (but which is otherwise unimpeachable) and a decision to detain for which there is no statutory authority at all.
Secondly, it allows what is in essence a public law challenge to be made under the guise of a private law action without any of the procedural safeguards which apply in a judicial review application.
In particular, the normal time limits for judicial review proceedings are circumvented.
Thirdly, judicial review is a discretionary remedy.
A minor public law error may result in no substantive relief being granted at all in judicial review proceedings, whereas a claimant can bring proceedings for false imprisonment as of right.
I do not consider that these arguments undermine what I have referred to as the correct and principled approach.
As regards Mr Beloffs first point, the error must be one which is material in public law terms.
It is not every breach of public law that is sufficient to give rise to a cause of action in false imprisonment.
In the present context, the breach of public law must bear on and be relevant to the decision to detain.
Thus, for example, a decision to detain made by an official of a different grade from that specified in a detention policy would not found a claim in false imprisonment.
Nor too would a decision to detain a person under conditions different from those described in the policy.
Errors of this kind do not bear on the decision to detain.
They are not capable of affecting the decision to detain or not to detain.
Lord Walker and Lord Hope would prefer the more demanding test of the wrongful use of a statutory power amounting to an abuse of power.
It is true that the phrase abuse of power is used in certain contexts in public law.
For example, it has been held that the court will in a proper case decide whether to frustrate the legitimate expectation of a substantial benefit is so unfair that to take a different course will amount to an abuse of power: see R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213 para 57.
In that context, the phrase abuse of power denotes a degree of unfairness.
It is not clear to me in what sense the phrase abuse of power is being suggested in the present context.
Suppose that a detention policy states that no FNP who has been sentenced to less than 12 months imprisonment is to remain in detention pending deportation for more than 6 months.
Suppose further that, by an administrative oversight, a FNP who has been sentenced to 9 months imprisonment is detained for 12 months.
There can be little doubt that the FNP would have a good claim for substantial damages for false imprisonment in respect of the period of 6 months when he should not have been detained.
It would be odd to say that his detention during that period was the result of an abuse of power.
I would say that the FNP would be the victim of a material public law error.
The error was one which was relevant to the decision to detain him.
It was capable of affecting the decision to continue to detain him and did in fact do so.
As for Mr. Beloffs other points, such force as they have derives from the fact that the detention in these cases is unlawful because it is vitiated by a public law error.
The significance and effect of that error cannot be affected by the fortuity that it is also possible for a victim to challenge the decision by judicial review proceedings (which are subject to tighter time limits than private law causes of action) and that judicial review is a discretionary remedy.
It is well established that a defendant can rely on a public law error as a defence to civil proceedings and that he does not need to obtain judicial review as a condition for defending the proceedings: see, for example, Wandsworth London Borough Council v Winder [1985] AC 461.
The same applies in the context of criminal proceedings: see Boddington v British Transport Police [1999] 2 AC 143.
Mr Beloff submits that the position of a claimant who relies on a public law error to found his cause of action and a defendant can sensibly be differentiated.
But it is difficult to see how or why.
I can see that at first sight it might seem counter intuitive to hold that the tort of false imprisonment is committed by the unlawful exercise of the power to detain in circumstances where it is certain that the claimant could and would have been detained if the power had been exercised lawfully.
But the ingredients of the tort are clear.
There must be a detention and the absence of lawful authority to justify it.
Where the detainer is a public authority, it must have the power to detain and the power must be lawfully exercised.
Where the power has not been lawfully exercised, it is nothing to the point that it could have been lawfully exercised.
If the power could and would have been lawfully exercised, that is a powerful reason for concluding that the detainee has suffered no loss and is entitled to no more than nominal damages.
But that is not a reason for holding that the tort has not been committed.
Both Mr Husain and Mr Beloff have referred to much authority.
I shall refer to some of it.
But there is nothing in the cases which shows that the conclusion which I consider is dictated by principle is questionable, still less that it is wrong.
Mr Husain relies on dicta of Lord Diplock in Holgate Mohamed v Duke [1984] AC 437.
Lord Diplock recognised that a claim for false imprisonment may be made out where police powers of arrest are unlawfully exercised by reference to common law principles.
The statutory power for an arrest without warrant (section 2(4) of the Criminal Law Act 1967)) made it a condition precedent that the constable should have reasonable cause to suspect the person to be guilty of the arrestable offence in respect of which the arrest was being made.
On the facts, the condition precedent was made out.
Lord Diplock said at p 443B that this left the officer with an executive discretion whether to arrest or not.
The lawfulness of the way in which the discretion had been exercised could not be challenged except on Wednesbury grounds.
He then continued: The Wednesbury principlesare applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought. (emphasis added)
Lord Diplock then applied the Wednesbury principles and concluded that the officers action was not unlawful.
It follows that his comments about false imprisonment were obiter dicta.
Nevertheless, it is clear that, if he had concluded that the officer had exercised his statutory discretion unlawfully, Lord Diplock would have held that he was liable in tort for false imprisonment.
I accept, however, that these are no more than dicta, albeit from a source of high authority, and that the issue does not seem to have been the subject of much if any argument in the House of Lords.
Other authorities relied on by Mr Husain as rejecting the causation test include Christie v Leachinsky [1947] AC 573, Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 and Langley v Liverpool City Council [2006] 1 WLR 375.
In addition, Mr Singh relies on Cooper v The Board of Works for the Wandsworth District (1863) 14 C.B. (N.S) 180.
In Christie v Leachinsky, Viscount Simon explained that where an arrest was unlawful because it did not comply with the procedural requirements imposed by the common lawcommunication of the true and good ground of arrest to the detaineethere would be a false imprisonment notwithstanding that the arrest could have been effected in a proper manner.
At p 588H he said: I entertain no doubt that in the present case the appellants are not exonerated from liability for false imprisonment by satisfying the judge that they had a reasonable suspicion that the respondent had been guilty of theft or of receiving stolen goods knowing they had been stolen, when they never told the respondent that this was the ground of his arrest.
Instead of doing so, they gave a different ground which, as Christie admitted, was not a good excuse for arresting him at all.
Mr Beloff submits that this case should be distinguished on the basis that it concerned the giving of reasons for detention which was a condition precedent to a lawful arrest.
He argues that it says nothing about the causation test in cases where the alleged error is not a failure to satisfy a condition precedent.
I do not see why the failure to provide a detainee with the reasons for the arrest should be regarded as a failure to satisfy a condition precedent to lawful arrest rather than an unlawful exercise of the power to arrest.
In any event, it would be remarkable if the question whether a cause of action in false imprisonment exists should depend on such fine distinctions of classification.
More fundamentally, such distinctions have no justification in the light of Anisminic.
In Roberts v Chief Constable of the Cheshire Constabulary, the Court of Appeal held that a failure by the custody officer to conduct a review as required by section 40 of the Police and Criminal Evidence Act 1984 rendered the plaintiffs continued detention unlawful until the next review.
The defence was raised that the plaintiff could only prove false imprisonment if he could show that, if the review had been carried out at the appropriate time, he would have been released.
This causation defence was rejected by Clarke LJ (with whom Stuart Smith and Schiemann LJJ agreed) at p 667B as being nothing to the point.
Mr Beloff emphasises the fact that the plaintiff was not being detained in accordance with the relevant statutory provisions and that the statute stipulated an express condition precedent to the lawful continuation of the detention, namely a review of detention, and that condition was not satisfied.
This argument has no more force than Mr Beloffs corresponding argument in relation to Christie.
Langley v Liverpool City Council [2006] 1 WLR 375 concerned child protection.
The Court of Appeal held that a constable who had wrongfully removed a child under section 46 of the Children Act 1989 was liable in false imprisonment.
He should instead have facilitated the exercise of a different power of removal through the execution of an emergency protection order (EPO) obtained by the local authority under section 44 of the 1989 Act.
I gave the main judgment (with which Thorpe and Lloyd LJJ agreed).
I held (para 32) that the power to remove a child under section 46 can be exercised even where an EPO is in force.
I said (para 36) that where a police officer knows that an EPO is in force, he should not exercise the power of removing a child under section 46 unless there are compelling reasons to do so.
On the facts of the case, there were no compelling reasons for the constable to exercise the section 46 power.
The constable was in error in failing to ask himself whether there were compelling reasons why he should invoke section 46 rather than leave it to the council to execute the EPO.
I held, therefore, that the removal of the child was unlawful.
It was not in issue that, if the removal of the child was unlawful, the Chief Constable was liable to the child in false imprisonment.
Mr Beloff submits that the effect of my reasoning was that the constable had no jurisdiction (in the narrow pre Anisminic sense) to do what he did.
As an EPO was in force, it was in effect mandatory to invoke section 44 rather than section 46.
I do not accept this analysis.
I drew a clear distinction between the existence of the statutory authority to use the section 46 powers (which the constable had) and the exercise of those powers (which was wrongful on the facts of that case).
In Cooper v The Board of Works for the Wandsworth District 14 CB (NS) 180, the defendant board had the statutory power to demolish a house that was in the course of construction.
It was held that this power was subject to the common law qualification that it should not be exercised without giving the builder notice and an opportunity to be heard.
It was held that the board had exercised its statutory power unlawfully and that the builder was entitled to damages for trespass to property.
But I agree with Mr Beloff that this decision does not shed any light on the question whether detention pursuant to an unlawful exercise of a power to detain is itself unlawful.
As Byles J put it at p 195, the board contravened the words of the statute.
In effect, therefore, the court held that the decision to demolish the house was one which the board had no jurisdiction to make in the narrow pre Anisminic sense.
I should deal with the authorities relied on by Mr Beloff.
In R (Saadi) v Secretary of State for the Home Department [2002] 1 WLR 3131 as I have set out at para 50 above, the issue was whether the policy of detaining certain categories of asylum seekers whose claims could be processed quickly at the Oakington detention centre was lawful.
The House of Lords held that it was.
At first instance, Collins J had also considered the fact that when detaining the claimants the Home Office had used standard forms which did not reflect the new policy, and that therefore the true reasons for the detention had not been given.
Collins J said that this did not affect the lawfulness of the detention.
Lord Slynn at para 48 agreed that the failure to give the right reason for detention and the giving of no or wrong reasons did not in the end affect the legality of the detention.
But para 48 is not part of the ratio of the decision of the House.
In any event, in so far as it was argued at all that the giving of untrue reasons for the detention rendered the detention unlawful, the Secretary of State did not advance a causation defence and contend that the giving of untrue reasons was immaterial because the true reasons were lawful.
In Nadarajah v Secretary of State for the Home Department [2004] INLR 139, the Secretary of States published policy was that, if legal proceedings were initiated, removal would not be treated as imminent even if it otherwise was.
The Secretary of State also had an unpublished policy, namely that information that proceedings were about to be initiated would be disregarded, however credible that information might be.
At paras 68 and 69 of the judgment of Lord Phillips MR, the Court of Appeal said that the Secretary of State could not rely on the unpublished policy as rendering lawful that which was, on the face of it, at odds with his policy, as made public and for that reason the detention of N was unlawful.
There is no hint of the causation test here.
But the court went on to say that, if Ns solicitors had been aware of the unpublished policy, they would have instituted proceedings sooner.
N therefore suffered because his solicitor could not foresee the consequences of her conduct and his detention did not satisfy the requirement of lawfulness imposed by article 5(1)(f) of the ECHR.
I accept that this was a causation point.
But it was unnecessary for the court to adopt this additional reason for holding that the detention was unlawful.
Further, it requires a huge leap to argue from this that the causation test must be satisfied as an element of the tort of false imprisonment.
In short, neither Saadi nor Nadarajah bears the weight that Mr Beloff seeks to place on them.
Recognising that the court might reject the causation test, Mr Beloff suggested a number of alternative approaches.
The first is that false imprisonment should be confined to no authority cases ie cases in which there was in fact no authority to detain, without recourse to the legal fiction that, because of a public law error, an authority to detain which was in fact given should be treated as if it had no legal effect because it was ultra vires.
The second is that detention should be vitiated only by pre Anisminic error of law.
The third is that vitiating circumstances should be restricted to bad faith and improper purpose.
The fourth is that authority to detain should be vitiated only by failure to have regard to a material consideration which had an effect on the detention.
The fifth is that it should be a requirement that the claimant shall have successfully applied in judicial review proceedings for the decision to detain to be quashed.
The first two of these suggestions seek to put the clock back to the pre Anisminic era.
For reasons given earlier, this is unwarranted.
As regards the third and fourth suggestions, I have accepted at paras 68 and 69 above that the detention must be vitiated by an error which is material in public law terms and have attempted to explain there what I mean by that.
The fifth seeks unjustifiably to impose a procedural hurdle where none currently exists either at common law or in statute.
To accede to this suggestion would be to engage in an unacceptable exercise of judicial legislation.
To summarise, therefore, in cases such as these, all that the claimant has to do is to prove that he was detained.
The Secretary of State must prove that the detention was justified in law.
She cannot do this by showing that, although the decision to detain was tainted by public law error in the sense that I have described, a decision to detain free from error could and would have been made.
Overall conclusion on liability on the basis that the policies applied were unlawful
I conclude, therefore, that since it is common ground that the unlawful policies in force between April 2006 and September 2008 were applied to Mr Lumba and Mr Mighty, they were unlawfully detained and their claims in false imprisonment must succeed.
I turn to consider the assessment of damages.
Compensatory or nominal damages?
Having found that there was no liability in false imprisonment, the Court of Appeal did not need to decide whether the claimants were entitled to damages.
They did, however, say at para 96: If, on the evidence, it was clear that, even assuming a lawful consideration, there was no realistic possibility of a different decision having been reached, and no realistic possibility of earlier release, then we do not see why that should not be reflected in an award of nominal damages only.
Mr Husain and Mr Westgate submit that, even if it was inevitable that the appellants would have been detained if the statutory power to detain had been lawfully exercised, they are nevertheless entitled to substantial and not merely nominal damages.
They emphasise that false imprisonment is a tort of strict liability which is actionable without proof of special damage.
The focus is on the claimants right rather than the culpability of the defendants conduct.
They rely on two authorities in support of their argument.
The first is Roberts v Chief Constable of the Cheshire Constabulary to which I have already referred at para 75 above.
The plaintiff issued proceedings for false imprisonment arising from his detention by the police between 5.25 a.m. (when his detention should have been reviewed as required by statute) and 7.45 a.m. the same morning when it was reviewed and his continued detention authorised.
It was found by the judge that the detention between 5.25 a.m. and 7.45 a.m. was unlawful, but that, if a review had taken place at 5.25 a.m., his continued detention would have been authorised.
The judge awarded the plaintiff 500.
The defendants appeal on both liability and damages was dismissed by the Court of Appeal.
Clarke LJ gave the leading judgment.
He said at p 668 D that there was an infringement of the plaintiffs legitimate right to have his case reviewed and that, although the outcome may not have been affected by the failure to review in time, this infringement cannot be regarded as a purely nominal matter or a matter compensatable by entirely nominal damages.
There are rules, the police must stick to them.
He added at p 668G: As a matter of general principle such a plaintiff is entitled to be put into the position in which he would have been if the tort had not been committed.
It is therefore important to analyse what the tort is.
The plaintiffs claim was not for damages for breach of duty to carry out a review at 5.25 a.m. but for false imprisonment.
As I tried to explain earlier, the reason why the continued detention was unlawful was that no review was carried out.
The wrong was not, however, the failure to carry out the review but the continued detention.
If the wrong had not been committed the plaintiff would not have been detained between 5.25 a.m. and 7.45 a.m.
I do not consider that this case was correctly decided on the issue of damages.
I agree that the plaintiff was entitled to be put into the position in which he would have been if the tort of false imprisonment had not been committed.
But I do not agree that, if the tort had not been committed, the plaintiff would not have been detained between 5.25 a.m. and 7.45 a.m.
On the judges findings, if the tort had not been committed, he would have been detained during this period.
It seems to me that the fallacy in the analysis in Roberts is that it draws no distinction between a detainee who would have remained in detention if the review had been carried out (and therefore no tort committed) and a detainee who would not have remained in detention if the review had been carried out.
But the position of the two detainees is fundamentally different.
The first has suffered no loss because he would have remained in detention whether the tort was committed or not.
The second has suffered real loss because, if the tort had not been committed, he would not have remained in detention.
The second authority relied on in support of the appellants case is Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883.
It was held there that it is no answer to a claim in conversion of goods for a defendant to say that the goods were or would have been subsequently converted by a third party: see the discussion by Lord Nicholls at paras 81 to 84 of his speech.
But questions of causation in relation to cases of successive conversion by different tortfeasors have no application in the present context.
The question here is simply whether, on the hypothesis under consideration, the victims of the false imprisonment have suffered any loss which should be compensated in more than nominal damages.
Exemplary damages apart, the purpose of damages is to compensate the victims of civil wrongs for the loss and damage that the wrongs have caused.
If the power to detain had been exercised by the application of lawful policies, and on the assumption that the Hardial Singh principles had been properly applied (an issue which I discuss at paras 129 148 below), it is inevitable that the appellants would have been detained.
In short, they suffered no loss or damage as a result of the unlawful exercise of the power to detain.
They should receive no more than nominal damages.
I should add that this approach is consistent with the observation by Lord Griffiths in Murray v Ministry of Defence [1988] 1WLR 692, 703A B: if a person is unaware that he has been falsely imprisoned and has suffered no harm, he can normally expect to recover no more than nominal damages.
Vindicatory damages
Mr Westgate submits that, if the appellants are entitled to no more than nominal damages, then they should also be awarded vindicatory damages.
It has been said that the award of compensatory damages can serve a vindicatory purpose: see, for example, Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] AC 962 per Lord Scott at para 22 and Lord Rodger at para 60.
But vindicatory damages serve a wider purpose than simply to compensate a successful claimant.
The phrase vindicatory damages seems to have been coined by Sharma CJ in the Court of Appeal of Trinidad and Tobago in Attorney General of Trinidad and Tobago v Ramanoop as a head of loss in claims for breach of constitutionally protected rights and freedoms: see address given by the President of the Caribbean Court of Justice to a Symposium entitled Current Developments in Caribbean Community Law in Port of Spain on 9 November 2009.
Lord Collins has traced the history of the use of the phrase in other contexts.
The concept of vindicatory damages was explained and endorsed by the Privy Council in the appeal in the Ramanoop case [2005] UKPC 15, [2006] 1 AC 328.
Lord Nicholls said: 18.
When exercising this constitutional jurisdiction the court is concerned to uphold, or vindicate, the constitutional right which has been contravened.
A declaration by the court will articulate the fact of the violation, but in most cases more will be required than words.
If the person wronged has suffered damage, the court may award him compensation.
The comparable common law measure of damages will often be a useful guide in assessing the amount of this compensation.
But this measure is no more than a guide because the award of compensation under section 14 is discretionary and, moreover, the violation of constitutional right will not always be coterminous with the cause of action at law. 19.
An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter further breaches.
All these elements had a place in this additional award.
Redress in section 14 is apt to encompass such an award if the court considers it is required having regard to all the circumstances.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
It will be seen, therefore, that the Privy Council endorsed the principle of vindicatory damages for violation of constitutional rights.
Should this principle be extended further? In Ashley at para 22 Lord Scott obiter said that vindicatory damages might be awarded for the tort of battery or trespass to the person by the police resulting in the death of the victim.
But the issue in that case was whether a claimant should be allowed to continue with an action in order to establish whether an assault had been committed, where there could be no award of further compensatory damages because these had already been paid in full as a result of a concession by the police.
Lord Scotts view that vindicatory damages have a role in the compensation for civil wrongs and the breach of ECHR rights was endorsed, at least to some extent, in Mosley v News Group Newspapers Ltd [2008] EWHC 1777 (QB).
In awarding damages for breach of the claimants right to privacy, after recognising the compensatory nature of damages for infringements of privacy, Eady J said at paras 216 7 that there was another factor which probably had to be taken into account, namely vindication to mark the infringement of the right.
It is one thing to say that the award of compensatory damages, whether substantial or nominal, serves a vindicatory purpose: in addition to compensating a claimants loss, it vindicates the right that has been infringed.
It is another to award a claimant an additional award, not in order to punish the wrongdoer, but to reflect the special nature of the wrong.
As Lord Nicholls made clear in Ramanoop, discretionary vindicatory damages may be awarded for breach of the Constitution of Trinidad and Tobago in order to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach and deter further breaches.
It is a big leap to apply this reasoning to any private claim against the executive.
McGregor on Damages 18th ed (2009) states at para 42 009 that It cannot be said to be established that the infringement of a right can in our law lead to an award of vindicatory damages.
After referring in particular to the appeals to the Privy Council from Caribbean countries, the paragraph continues: the cases are therefore far removed from tortious claims at home under the common law.
I agree with these observations.
I should add that the reference by Lord Nicholls to reflecting public outrage shows how closely linked vindicatory damages are to punitive and exemplary damages.
The implications of awarding vindicatory damages in the present case would be far reaching.
Undesirable uncertainty would result.
If they were awarded here, then they could in principle be awarded in any case involving a battery or false imprisonment by an arm of the state.
Indeed, why limit it to such torts? And why limit it to torts committed by the state? I see no justification for letting such an unruly horse loose on our law.
In my view, the purpose of vindicating a claimants common law rights is sufficiently met by (i) an award of compensatory damages, including (in the case of strict liability torts) nominal damages where no substantial loss is proved, (ii) where appropriate, a declaration in suitable terms and (iii) again, where appropriate, an award of exemplary damages.
There is no justification for awarding vindicatory damages for false imprisonment to any of the FNPs.
Application of Hardial Singh principles to the appeal of Mr Lumba
In addition to the issues that are raised which are common to both appeals, it is submitted on behalf of Mr Lumba (but not Mr Mighty) that his detention is unlawful on the grounds that there has been a breach of the Hardial Singh principles.
This part of the appeal raises a number of points about the reach of those principles.
I refer to the encapsulation of the principles set out in my judgment in R (I) [2003] INLR 196 at para 22 above.
A convenient starting point is to determine whether, and if so when, there is a realistic prospect that deportation will take place.
As I said at para 47 of my judgment in R (I), there may be situations where, although a reasonable period has not yet expired, it becomes clear that the Secretary of State will not be able to deport the detained person within a period that is reasonable in all the circumstances, having regard in particular to time that the person has already spent in detention.
I deal below with the factors which are relevant to a determination of a reasonable period.
But if there is no realistic prospect that deportation will take place within a reasonable time, then continued detention is unlawful.
How long is a reasonable period? At para 48 of my judgment in R (I), I said: It is not possible or desirable to produce an exhaustive list of all the circumstances that are, or may be, relevant to the question of how long it is reasonable for the Secretary of State to detain a person pending deportation pursuant to paragraph 2(3) of Schedule 3 to the Immigration Act 1971.
But in my view, they include at least: the length of the period of detention; the nature of the obstacles which stand in the path of the Secretary of State preventing a deportation; the diligence, speed and effectiveness of the steps taken by the Secretary of State to surmount such obstacles; the conditions in which the detained person is being kept; the effect of detention on him and his family; the risk that if he is released from detention he will abscond; and the danger that, if released, he will commit criminal offences.
So far as I am aware, subject to the following qualifications, the relevance of these factors has not been questioned.
The qualifications are first that the relevance of the risk of offending on release is challenged on behalf of the appellants in the present case.
Secondly, the nature of the obstacles begs two questions that have been raised on this appeal, namely what is the relevance, if any, of delays attributable to the fact that a detained person (i) is challenging the decision to deport him by appeal or judicial review and will generally not be deported until his challenges have been determined; and (ii) has refused to return voluntarily to his country of origin?
Risk of re offending
Mr Husain accepts that, where there is a risk that the detained person will abscond, the risk of re offending is relevant to the assessment of the duration of detention that is reasonably necessary to effect deportation.
But he submits that, where there is no real risk of absconding, the risk of re offending cannot of itself justify detention.
Where there is no such risk, detention is not necessary to facilitate deportation, because it will be possible to effect the deportation without the need for detention.
The underlying purpose of the power to detain is not to prevent the commission of criminal offences, but to facilitate the implementation of a deportation order.
I have some difficulty in understanding why the risk of re offending is a relevant factor in a case where there is a risk of absconding, but not otherwise.
It seems to me that it is possible to construe the power to detain either (more narrowly) as a power which may only be exercised to further the object of facilitating a deportation, or (more broadly) as a power which may also be exercised to further the object which it is sought to achieve by a deportation, namely, in the present case, that of removing an offender whose presence is not conducive to the public good.
The distinction between these two objects was clearly drawn by the Court of Appeal in R (A) v Secretary of State for the Home Department [2007] EWCA Civ 804.
Toulson LJ said at para 55: A risk of offending if the person is not detained is an additional relevant factor, the strength of which would depend on the magnitude of the risk, by which I include both the likelihood of it occurring and the potential gravity of the consequences.
Mr Drabble submitted that the purpose of the power of detention was not for the protection of public safety.
In my view, that is over simplistic.
The purpose of the power of deportation is to remove a person who is not entitled to be in the United Kingdom and whose continued presence would not be conducive to the public good.
If the reason why his presence would not be conducive to the public good is because he has a propensity to commit serious offences, protection of the public from that risk is the purpose of the deportation order and must be a relevant consideration when determining the reasonableness of detaining him pending his removal or departure.
Para 78 of Keene LJs judgment is to similar effect.
I acknowledge that the principle that statutory powers should be interpreted in a way which is least restrictive of liberty if that is possible would tend to support the narrower interpretation.
But I think that the Court of Appeal was right in R (A) to adopt the interpretation which gives effect to the purpose underlying the power to deport and which the power to detain is intended to facilitate.
Perhaps a simpler way of reaching the same conclusion is to say, as Simon Brown LJ said in R (I) at para 29, that the period which is reasonable will depend on the circumstances of the particular case and the likelihood or otherwise of the detainee re offending is an obviously relevant circumstance.
But the risk of re offending is a relevant factor even if the appellants are right in saying that it is relevant only when there is also a risk of absconding.
As Lord Rodger pointed out in argument, if a person re offends there is a risk that he will abscond so as to evade arrest or if he is arrested that he will be prosecuted and receive a custodial sentence.
Either way, his re offending will impede his deportation.
The risk of re offending is, therefore, a relevant factor.
Delay attributable to challenges to deportation
Mr Beloff submits that the time taken to resolve legal challenges brought by an individual against deportation should generally be left out of account in considering whether a reasonable period of detention has elapsed.
He concedes that this general rule should be subject to two qualifications: (i) if the Secretary of State has caused delay in the resolution of the legal challenge, then that time may be taken into account; and (ii) the time during which a legal challenge is being resolved should be taken into account if removal is not possible for reasons unrelated to the legal challenge.
I shall call this general rule the exclusionary rule.
In support of this submission, Mr Beloff makes the following points.
First, it is the individuals choice to challenge the removal and, if the time taken to resolve legal challenges were taken into account, the length of detention would be outside the control of the Secretary of State and would be entirely within the control of the detained person.
Secondly, if the position were otherwise, those who (if at large) would be a danger to the public or who would be likely to thwart a deportation order by absconding, would be able to increase their prospects of release by pursuing every conceivable point by way of legal challenges and by doing everything possible to delay the legal process.
Thirdly, if the legality of detention is capable of depending on the merits of a challenge to the decision to deport, it will be necessary for the High Court to decide for itself the merits of the underlying challenge, in advance of consideration of the case by the specialist tribunal appointed by Parliament to undertake that task.
That is undesirable.
At para 102 of their judgment, the Court of Appeal said: In our judgment, the fact that a FNP is refusing to return voluntarily, or is refusing to cooperate in his return (for example, by refusing to apply for an emergency travel document, as initially did WL) is relevant to the assessment of the legality of his continued detention: see R (A) v Secretary of State for the Home Department [2007] EWCA Civ 804.
So is the fact that the period of his detention had been increased, and his deportation postponed by his pursuit of appeals and judicial review proceedings seeking to challenge his deportation order or his application for asylum or leave to remain, particularly if his applications and appeals are obviously unmeritorious.
In our judgment, as a matter of principle, a FNP cannot complain of the prolongation of his detention if it is caused by his own conduct.
It is not clear whether the Court of Appeal were accepting the exclusionary rule in its entirety.
To say that the fact that the length of the detention is attributable to the pursuit of legal proceedings is relevant to the assessment of the legality of the detention suggests a rejection of the exclusionary rule.
But to say that FNPs cannot complain of the prolongation of their detention caused by their own conduct suggests an acceptance of it.
The question of the relevance of the pursuit of legal proceedings has been considered in a number of authorities.
I do not propose to analyse them.
None is binding on this court.
The discussion of the issue which I have found most helpful is that of Davis J in R (Abdi) v Secretary of State for the Home Department [2009] EWHC 1324 (Admin).
In that case, the exclusionary rule (with the same two exceptions) was urged on the court on behalf of the Secretary of State.
In rejecting it, Davis J pointed out at para 25 of his judgment, that it was undesirable, where the core question is an assessment of what is reasonable in all the circumstances, to be astute to look for mandatory restrictions or rules in what ought to be a fact specific exercise.
I agree.
The Hardial Singh principles should not be applied rigidly or mechanically.
There are several problems with the exclusionary rule.
First, it seems to require the exclusion of consideration of the individual circumstances of an applicant pending what may be a long appellate process.
Suppose two FNPs who both embark on a meritorious appeal process which takes a number of years.
The only difference between them is that A poses a very high risk of absconding and re offending and B poses a very low risk.
If the exclusionary rule is applied, no difference can be drawn between them from the time proceedings are commenced.
In both cases, the several years during which they are detained while the appeal process is continuing are to be disregarded in assessing whether the period of detention is reasonable.
Or suppose that the effect of detention on A is to cause serious damage to his health or that of members of his family, whereas there is no such effect in the case of B. I can see no warrant for such a mechanistic approach to the determination of what is reasonable in all the circumstances.
Secondly, the exclusionary rule seems to involve the exclusion from consideration of any delays occurring within the appeal process which are not the fault of the applicant or (as is conceded by Mr Beloff) the Secretary of State.
I see no reason why such delays, for example, delays on the part of the tribunal or court, should be disregarded in a determination of whether the period of detention is reasonable.
Thirdly, the consequence of the exclusionary rule is that a person can be detained for many years while pursuing a prima facie meritorious appeal but he cannot by judicial review or habeas corpus challenge his detention on Hardial Singh or related article 5(1)(f) of the ECHR principles.
It precludes such judicial scrutiny (i) however long the detention and appeals have lasted and (ii) regardless of the effects of prolonged detention on the detainee, provided that (iii) the appeals are being diligently pursued and there is no concurrent independent reason why deportation cannot be effected.
I accept the submission of Mr Husain that bail is not a sufficient answer to the fundamental objection that the exclusionary rule constitutes an impermissible restriction on judicial oversight of the legality of administrative detention.
Paragraph 29 of Schedule 2 to the 1971 Act gives the First Tier Tribunal power to grant bail pending an appeal, but this is subject to the restrictions stated in paragraph 30.
Paragraph 30(1) provides that an appellant shall not be released under paragraph 29 without the consent of the Secretary of State if removal directions are currently in force.
There is nothing in the schedule which requires the tribunal to apply the Hardial Singh principles in deciding whether or not to grant bail and, in particular, to have regard to the past and likely future length of a detention.
Bail is not a determination of the legality of detention, whether at common law or for article 5(4) purposes.
Fourthly, the exclusionary rule is inconsistent with the decision of the ECtHR in Chahal v United Kingdom (1996) 23 EHRR 413.
In deciding whether the detention complied with the requirements of article 5(1)(f), the court had regard to the length of the detention, including the time taken for the various domestic proceedings to be completed: see paras 114, 115 and 123 of the judgment of the court.
There is a close analogy between the Hardial Singh principles and the article 5 requirement that detention for the purposes of deportation must not be of excessive duration.
I would reject Mr Beloffs in terrorem argument that, unless the exclusionary rule applies, detained FNPs will be able to procure their release from detention by the simple expedient of pursuing hopeless legal challenges.
Time taken in the pursuit of hopeless challenges should be given minimal weight in the computation of a reasonable period of detention.
Nor do I accept that it is undesirable (or indeed unduly difficult) to identify hopeless or abusive challenges.
There exist statutory mechanisms to curb unmeritorious appeals.
If a claim is clearly unfounded, certification under section 94(2) of the Nationality, Immigration and Asylum Act 2002 precludes an in country appeal.
If a claim relies on a matter which could have been raised earlier in response to an earlier immigration decision or in response to a one stop notice, certification under section 96 of the 2002 Act precludes any appeal at all.
In any event, a court considering the legality of a detention will often be able to assess the prima facie merits of an appeal.
Where, as in the case of Mr Lumba, there have been orders for reconsideration, or where there has been a grant of permission to appeal to the Court of Appeal, the court will easily recognise that the challenge has some merit.
Conversely, there may be one or more determinations from immigration judges dismissing claims as wholly lacking in credibility.
To summarise, I would reject the exclusionary rule.
If a detained person is pursuing a hopeless legal challenge and that is the only reason why he is not being deported, his detention during the challenge should be given minimal weight in assessing what is a reasonable period of detention in all the circumstances.
On the other hand, the fact that a meritorious appeal is being pursued does not mean that the period of detention during the appeal should necessarily be taken into account in its entirety for the benefit of the detained person.
Indeed, Mr Husain does not go so far as to submit that there is any automatic rule, regardless of the risks of absconding and/or re offending, which would compel an appellants release if the appeals process lasted a very long time through no fault of the appellant.
He submits that the weight to be given to time spent detained during appeals is fact sensitive.
This accords with the approach of Davis J in Abdi and I agree with it.
The risks of absconding and re offending are always of paramount importance, since if a person absconds, he will frustrate the deportation for which purpose he was detained in the first place.
But it is clearly right that, in determining whether a period of detention has become unreasonable in all the circumstances, much more weight should be given to detention during a period when the detained person is pursuing a meritorious appeal than to detention during a period when he is pursuing a hopeless one.
Non cooperation with return
The most common examples of non cooperation are (i) a refusal by a person who does not have a valid passport to cooperate with the obtaining of travel documents to enable him to return and (ii) a persons refusal to avail himself of one of the Home Office schemes by which he may leave the United Kingdom voluntarily.
Most of the discussion in the cases has centred on (ii).
It is common ground that a refusal to return voluntarily is relevant to an assessment of what is a reasonable period of detention if a risk of absconding can properly be inferred from the refusal.
But I would warn against the danger of drawing an inference of risk of absconding in every case.
It is always necessary to have regard to the history and particular circumstances of the detained person.
What is, however, in issue is whether a failure to return voluntarily can of itself justify a period of detention which would otherwise be unreasonable and therefore unlawful.
In R (I), I said in the Court of Appeal: 50.
As regards the significance of the appellants refusal of voluntary repatriation, there appears to be agreement between Simon Brown LJ and Mummery LJ that this is a relevant circumstance, but Mummery LJ considers that it is decisively adverse to the appellant, whereas Simon Brown LJ considers that it is of relatively limited relevance on the facts of the present case.
I too consider that it is a relevant circumstance, but in my judgment it is of little weight. [Counsel for the Secretary of State] submits that a refusal to leave voluntarily is relevant for two reasons.
First, the detained person has control over the fact of his detention: if he decided to leave voluntarily, he would not be detained.
Secondly, the refusal indicates that he would abscond if released from detention.
It is this second feature which has weighed heavily with Mummery LJ. 51.
I cannot accept that the first of [the Secretary of States] reasons is relevant.
Of course, if the appellant were to leave voluntarily, he would cease to be detained.
But in my judgment, the mere fact (without more) that a detained person refuses the offer of voluntary repatriation cannot make reasonable a period of detention which would otherwise be unreasonable.
If [the Secretary of State] were right, the refusal of an offer of voluntary repatriation would justify as reasonable any period of detention, no matter how long, provided that the Secretary of State was doing his best to effect the deportation. 52.
I turn to [the Secretary of States] second reason.
I accept that if it is right to infer from the refusal of an offer of voluntary repatriation that a detained person is likely to abscond when released from detention, then the refusal of voluntary repatriation is relevant to the reasonableness of the duration of a detention.
In that event, the refusal of voluntary repatriation is no more than evidence of a relevant circumstance namely the likelihood that the detained person will abscond if released. 53.
But there are two important points to be made.
First, the relevance of the likelihood of absconding, if proved, should not be overstated.
Carried to its logical conclusion, it could become a trump card that carried the day for the Secretary of State in every case where such a risk was made out regardless of all other considerations, not least the length of the period of detention.
That would be a wholly unacceptable outcome where human liberty is at stake. 54.
Secondly, it is for the Secretary of State to satisfy the court that it is right to infer from the refusal by a detained person of an offer of voluntary repatriation that, if released, he will abscond.
There will no doubt be many cases where the court will be persuaded to draw such an inference.
I am not, however, satisfied that this is such a case.
It is not at all surprising that this appellant has refused voluntary repatriation.
He has not yet exhausted the asylum process, which, if successful, would permit him to remain in the United Kingdom.
In these circumstances, why should one infer from the refusal of voluntary repatriation that, if released, he would abscond? In my judgment, the most that can be said is that there is a risk that if he is released the appellant will abscond.
But that can be said of most cases.
I do not consider that the fact that he has refused the offer of voluntary repatriation adds materially to the evidence that such risk is present in the instance case.
Simon Brown LJ adopted a somewhat different approach at para 31.
He said that, since in Hardial Singh Woolf J had regarded it as a factor in the applicants favour that he was quite prepared to go to India, he could not see why the converse should not be relevant.
The court should not ignore entirely the applicants ability to end his detention by returning home voluntarily.
The point was considered again by the Court of Appeal in R (A) Somalia v Secretary of State for the Home Department [2007] EWCA Civ 804 Toulson LJ (with whom Longmore LJ agreed) said: 54.
I accept the submission on behalf of the Home Secretary that where there is a risk of absconding and a refusal to accept voluntary repatriation, those are bound to be very important factors, and likely often to be decisive factors, in determining the reasonableness of a persons detention, provided that deportation is the genuine purpose of the detention.
The risk of absconding is important because it threatens to defeat the purpose for which the deportation order was made.
The refusal of voluntary repatriation is important not only as evidence of the risk of absconding, but also because there is a big difference between administrative detention in circumstances where there is no immediate prospect of the detainee being able to return to his country of origin and detention in circumstances where he could return there at once.
In the latter case the loss of liberty involved in the individuals continued detention is a product of his own making.
Keene LJ said at para 79: I am not persuaded by Mr Giffin that the refusal by this detainee to return to Somalia voluntarily when it was possible to do so is some sort of trump card.
On this I see the force of what was said by Dyson LJ in R (I) at paragraph 52, namely that the main significance of such a refusal may often lie in the evidence it provides of a likelihood of the individual absconding if released.
After all, if there is in a particular case no real risk of his absconding, how could detention be justified in order to achieve deportation, just because he has refused voluntary return? The Home Office in such a case, ex hypothesi, would be able to lay hands on him whenever it wished to put the deportation order into effect.
Detention would not be necessary in order to fulfil the deportation order.
Having said that, I do not regard such a refusal to return as wholly irrelevant in its own right or as having a relevance solely in terms of the risk of absconding.
It is relevant that the individual could avoid detention by his voluntary act.
But I do not accept that such a refusal is of the fundamental
importance contended for by the Secretary of State
It is necessary to distinguish between cases where return to the country of origin is possible and those where it is not.
Where return is not possible for reasons which are extraneous to the person detained, the fact that he is not willing to return voluntarily cannot be held against him since his refusal has no causal effect.
But what if return would be possible, but the detained person is not willing to go? Here it is necessary to consider whether the detained person has issued proceedings challenging his deportation.
If he has done so, then it is entirely reasonable that he should remain in the United Kingdom pending the determination of those proceedings (unless the proceedings are an abuse).
In those circumstances his refusal to accept an offer of voluntary return is irrelevant.
The purpose of voluntary return is not to encourage foreign nationals to return to their countries of origin where, if their legal challenges succeed, it is likely to have been demonstrated that they would face a risk of persecution within the meaning of the Convention and Protocol relating to the Status of Refugees (1951) (Cmd 9171) and (1967) (Cmnd 3906) or treatment contrary to article 3 of the ECHR.
Rather, it is to facilitate removal where that is justified because the FNPs have not proved that they would face the relevant risk on return.
In accepting voluntary return, the individual forfeits all legal rights to remain in the United Kingdom.
He should not be penalised for seeking to vindicate his ECHR or Refugee Convention rights and be faced with the choice of abandoning those rights or facing a longer detention than he would face if he had not been offered voluntary return.
What about those who have no outstanding legal challenges? Here, the fact that the detained person has refused voluntary return should not be regarded as a trump card which enables the Secretary of State to continue to detain until deportation can be effected, whenever that may be.
That is because otherwise, as I said at para 51 of my judgment in R (I), the refusal of an offer of voluntary repatriation would justify as reasonable any period of detention, no matter how long, provided that the Secretary of State was doing his best to effect the deportation.
If the refusal of voluntary return has any relevance in such cases even if a risk of absconding cannot be inferred from the refusal, it must be limited.
That was the view of Simon Brown LJ in R (I) and Keene LJ in R (A) and I agree with them.
The appeal of Mr Lumba
I can now turn to the particular case of Mr Lumba.
He entered the United Kingdom unlawfully on 10 April 1994 and claimed asylum on the same day.
His claim was refused on 20 February 2000.
He was, however, granted exceptional leave to remain until 20 February 2004.
He has a bad criminal record which includes convictions for assault occasioning actual bodily harm (six months imprisonment); two offences of using threatening and abusive behaviour (twelve months probation); two offences of shoplifting (non custodial sentences); assault occasioning actual bodily harm (six months imprisonment); assaulting a constable (four months imprisonment); and wounding with intent contrary to section 18 of the Offences Against the Person Act 1861 (4 years imprisonment).
He married MP, another national of the Democratic Republic of Congo (DRC).
Their son, PAS, was born on 5 July 2003.
As I have already said, on 3 April 2006, the Secretary of State decided to deport Mr Lumba.
Notwithstanding that his son is a British citizen, the Secretary of State also decided to deport his wife and son, although the orders against them were subsequently revoked.
He was notified of the decision to detain him under the 1971 Act on 22 June 2006, the day before his release date.
His first detention review was in February 2007.
He appealed against the decision to deport him.
On 7 September 2006, while the appeal was still pending, he refused to attend a travel document interview with the immigration authorities to facilitate his return to the DRC.
His appeal against deportation was dismissed by the Asylum and Immigration Tribunal (AIT) on 15 December 2006.
In about January 2007, he was transferred from prison to Dover Immigration Removal Centre, since when he remained in detention.
On 1 March 2007, he attended an interview with an immigration officer at which he explained that his passport was missing.
He was asked to complete an application for an Emergency Travel Document (ETD) but refused to do so, stating that he did not wish to be returned to the DRC because the problem which formed the initial basis of his asylum claim is still true.
By 20 March 2007, the Secretary of States caseworkers had discovered that they had a copy of Mr Lumbas passport on file.
His indefinite leave to remain was terminated only after service on him of the signed deportation order on 21 March 2007.
The discovery of the copy of his passport on file obviated the need for his cooperation in completing a travel document application.
On 29 March, a completed application for an ETD, accompanied by copies of his passport and identity card, was sent to the Embassy of the DRC.
The Embassy claimed to have lost the initial application and the application for an ETD was resubmitted on 26 April 2007.
The application was granted by the DRC Embassy on 25 July 2007 and on the following day directions were set for Mr Lumbas removal from the United Kingdom on 20 August 2007.
On 15 August 2007, his new solicitors submitted fresh representations challenging his deportation.
These noted that a country guidance case (BK (DRC)) concerning the safety of returns to the DRC of failed asylum seekers/ deportees was to be heard by the AIT on 17 September 2007.
On 16 August 2007, the Secretary of State refused to treat those representations as a fresh asylum claim and on the following day, Mr Lumba issued judicial review proceedings challenging that refusal.
On 14 September 2007, these proceedings were stayed by consent until the outcome of the pending country guidance case before the AIT was known.
On 23 October 2007, Mr Lumba issued the claim for judicial review challenging his detention which has given rise to the present appeal.
On 18 December 2007, the AIT promulgated its determination in BK (Democratic Republic of Congo) v Secretary of State for the Home Department and decided that failed asylum seekers were not, as such, at risk in the DRC: [2007] UKAIT 98.
Mr Lumba made applications for bail on 23 January 2008, 4 February 2008 and 4 March 2008.
They were all rejected by the immigration judge principally on the ground that there was a real risk that if he was released he would re offend.
On 23 April 2008, permission was granted to appeal the AITs decision in BK (DRC) to the Court of Appeal.
Mr Lumbas claim for judicial review in respect of his detention was heard by Collins J on 4 July 2008.
His judgment is reported at [2008] EWHC 2090 (Admin).
He concluded that the detention was lawful on Hardial Singh principles and that it would continue to be so until the Court of Appeal gave judgment in BK (DRC), on the assumption that judgment was given by the end of December 2008.
In fact judgment was given by the Court of Appeal on 3 December 2008 after the hearing before Davis J, but before he gave judgment: [2008] EWCA Civ 1322.
Davis J agreed with the reasoning and conclusion of Collins J as to the lawfulness of the detention.
The findings made by Davis J are set out in full by the Court of Appeal at para 99 of their judgment.
There is no need to repeat them in this judgment.
In summary, Davis J said at para 203 that (i) Mr Lumba posed a high risk of absconding and a high risk of serious reoffending; (ii) at all stages there was a prospect of removing him within a reasonable period; and (iii) there had been no lack of due expedition on the part of the Secretary of State.
On 11 February 2009, Mr Lumbas solicitors made fresh representations on his behalf to the Secretary of State, and applied for the revocation of the deportation order.
They said that his marriage had broken down and that he was seeking contact with his son.
He relied on article 8 of the ECHR.
This application was rejected by the Secretary of State on 1 July 2009.
Mr Lumba appealed on 8 July 2009.
The appeal was dismissed by the AIT on 28 September 2009.
A reconsideration was ordered by a senior immigration judge on 26 October 2009.
At the reconsideration, the Secretary of State conceded that the original tribunal had erred in law.
By a judgment given on 19 February 2010, the Court of Appeal dismissed Mr Lumbas appeals against the decisions of Collins J and Davis J. The Court of Appeal said at para 100 that they had seen nothing to justify interfering with Davis Js findings at para 203 of his judgment.
They said in relation to the application of the Hardial Singh principles that the real attack was on the judgment of Collins J.
There had been no material error in the approach or conclusions of Collins J who had taken into account the high risk of absconding and re offending, the fact that Mr Lumba could have returned to the DRC voluntarily, and that his deportation had been delayed by his pursuit of several unsuccessful applications for asylum or leave to remain and appeals against their refusal.
The Court of Appeal had been asked to consider the period which had elapsed since the judgment of Davis J and subsequent evidence, including a psychiatric report, and to determine the legality of Mr Lumbas current detention in the light of it.
They said at para 108 that it would be inappropriate for them to consider as a first instance decision whether Mr Lumbas mental condition rendered his continued detention unlawful.
Apart from that, they said that: having reviewed the history of [Mr Lumbas] detention and the reasons given for continuing it, and for the refusals of bail, and his several hitherto unmeritorious appeals and applications, we are satisfied that his detention for the purposes of his deportation continues to be lawful.
On behalf of Mr Lumba it is submitted that the Court of Appeal should have concluded that his detention was unreasonably long by the time of the hearing before Collins J on 4 July 2008; alternatively by the time of the hearing before Davis J on 11 14 November 2008; alternatively by the time of the hearing before them between 30 November and 2 December 2009.
By the time of the appeal, of particular importance were the facts that (i) Mr Lumba had been in detention for 41 months; (ii) he could not be deported while he was pursuing his appeal against the Secretary of States refusal to revoke the deportation order; and (iii) there was evidence from the Croydon Mental Health Team and consultant psychiatrist Dr Dinakaran which showed that the risk of re offending and psychotic relapse could be managed in the community.
Mr Lumba has now been in detention for 54 months.
At first sight, his detention seems to have been of unreasonable duration.
There must come a time when, however grave the risk of absconding and however the grave the risk of serious offending, it ceases to be lawful to detain a person pending deportation.
Moreover, in certain respects the courts below have not applied the Hardial Singh principles correctly.
In particular, they have wrongly regarded the fact that Mr Lumba has been able to delay his deportation by pursuing applications and appeals which, thus far, have been unsuccessful as being relevant to the assessment of a reasonable period of detention.
It has not been suggested by the Secretary of State that any of these applications or appeals have been hopeless and abusive.
For the reasons given above, the fact that the applications and appeals delayed the deportation should have been regarded as irrelevant.
The courts below also appear to have taken into account Mr Lumbas refusal of voluntary return without making it clear how this is relevant to the assessment of a reasonable period.
As I have said, it is of limited relevance as a free standing reason (see paras 122 128 above).
It would be legitimate to infer from the refusal of voluntary return that there is a risk of absconding.
But it is not clear that Collins J or Davis J drew such an inference in this case.
Mr Husain submits that it was incumbent on the Court of Appeal to consider the legality of the continuing executive detention by reference to the situation current at the time of the appeal and that they erred in failing to do so.
He says that they should have considered what the prospects were of removal within a reasonable period.
I accept that, where the facts are the same as they were before the first instance judge and the only difference is the passage of further time, there is no reason why the Court of Appeal should not decide for themselves whether a continuing detention is unlawful.
I also accept that, where there is fresh evidence, the Court of Appeal are entitled to apply the Hardial Singh principles and consider for themselves on the basis of all the up to date material whether a continuing detention is lawful.
Indeed, that was the course that the Court of Appeal took in R (I).
But there are some circumstances where that course is not appropriate.
In the present case, the Court of Appeal took the view that such a course was inappropriate.
They said at para 108 that they should not embark on a first instance decision on matters, such as whether the deportation order should be revoked on account of [Mr Lumbas] mental condition, that Parliament has entrusted to a specialist tribunal.
That was an entirely proper reason for the Court of Appeal not making a first instance decision in this case.
Mr Husain submits that the Supreme Court should allow Mr Lumbas appeal.
I would allow the appeal of both appellants for the generic reasons that I have stated earlier.
But I would not decide whether the detention of Mr. Lumba for almost 56 months was in breach of the Hardial Singh principles.
The reasons which led the Court of Appeal to refuse to make a first instance decision apply with even greater force in an appeal to the Supreme Court.
It is only in the most exceptional case that this court should embark on a task that is normally to be performed by a court of first instance.
In view of the passage of further time since the decision of the Court of Appeal as well as the fact that the courts below failed to apply the Hardial Singh principles correctly, I would remit Mr Lumbas claim for damages for breach of those principles to the High Court for reconsideration in the light of all the evidence as to the current position.
The case of Mr Mighty
As I have already said, Mr Mighty was detained between 19 May 2006 and 28 July 2008.
He issued proceedings on 29 May 2008 alleging that his detention was for longer than a reasonable period and inter alia that, on a proper application of the Hardial Singh principles, he should have been released.
His Hardial Singh case was rejected by Davis J.
There was no appeal on this aspect of the case to the Court of Appeal and the point has not been raised on behalf of Mr Mighty before this court.
Exemplary damages
The relevant principles are not in doubt.
Exemplary damages may be awarded in three categories of case: see per Lord Devlin in Rookes v Barnard [1964] AC 1129.
The category which is relevant for present purposes is that there has been an arbitrary and outrageous use of executive power (p 1223) and oppressive, arbitrary or unconstitutional action by servants of the government (p 1226).
In this category of case, the purpose of exemplary damages is to restrain the gross misuse of power: see AB v South West Water Services Ltd [1993] QB 507, 529F per Sir Thomas Bingham MR.
It must be shown that the conscious wrongdoing by a defendant is so outrageous, his disregard of the plaintiffs rights so contumelious, that something more [than compensatory damages] is needed to show that the law will not tolerate such behaviour as a remedy of last resort: see per Lord Nicholls Kuddus v Chief Constable of Leicestershire Constabulary [2002] 2 AC 122 at para 63.
Both Davis J and the Court of Appeal addressed the question of exemplary damages, although in view of their findings on the issue of liability, it was not necessary for them to do so.
Davis J said at para 205 of his judgment that: I add, briefly, that, even if I had concluded there was unlawful detention in any of these cases justifying an award of damages, I would not in any event have awarded exemplary damages on the footing of unconstitutional, oppressive or arbitrary conduct, in so far as sought.
While the Home Office has, to put it mildly, not covered itself in glory in this whole matter of the new policy, I think the failings were in essence one of failing, promptly and directly, to confront and address a perceived legal difficulty: whether through concerns at being bearers of unwelcome news to the Ministers or through an instinct for ducking an apparently intractable problem or through institutional inertia or some other reason, I cannot really say.
I am not prepared, however, to conclude on the material before me that there was a conscious decision within the Home Office to operate tacitly an unpublished policy, known to be highly suspect, in the hope it would not be uncovered or, if it was uncovered, against a plan, if the courts intervened, to present that reversal as being due solely to the courts or the Human Rights Act.
In my view what happened here, in any of these five cases, cannot fairly, I think, be described as sufficiently outrageous to justify an award of exemplary damages.
In any event, I emphasise that individual consideration was given to the cases of each of the claimants.
By the time of the appeal, the Secretary of State had disclosed more material than was before the judge.
The Court of Appeal said that, even taking account of the additional material, they agreed with the assessment of the judge.
They said: 122.
We give weight to that assessment by the judge at the end of his very careful and comprehensive judgment.
It also accords with our own view, even taking account of the additional material which has been disclosed.
We consider that there was a failure, which to put it very mildly indeed, was very regrettable, on the part of the department to face up to the basic problem that the published policy had not caught up with the much more restrictive approach implicit in ministerial statements on the subject.
However, we find it difficult to describe such conduct as unconstitutional, oppressive or arbitrary, in circumstances where the Home Secretary had an undoubted power to detain for the purposes in question, and it has been held that on the facts of the case he could lawfully have exercised that power with the same effect; at any rate, if it can be so described, these circumstances mean that the conduct is at the less serious end of unconstitutional, oppressive or arbitrary.
We also bear in mind also that the claimants had the right to apply for bail to an independent tribunal, at which it was possible for the continuing reasonableness of their detention to be challenged.
An award of exemplary damages would be an unwarranted windfall for them, and it would have little punitive effect since it will not be borne by those most directly responsible.
Rather it would be a drain on public resources which in itself is unlikely to add significantly to the remedial effect of a declaration of unlawfulness. 123.
Moreover, it is difficult to see on what basis exemplary damages could be assessed in lead cases such as these.
The conduct of the Home Secretary complained of in the present case was common to a large number of detainees who have brought proceedings against him.
The selection of lead claimants such as [Mr Lumba] and [Mr Mighty] does not depend on the merits of their individual cases, which have not been assessed other than for the purposes of the grant of permission to apply for judicial review or permission to appeal.
Other claimants may have equally or even more meritorious claims to damages, and if appropriate exemplary damages, than the present claimants.
There would be no principled basis, therefore, to restrict an award of exemplary damages to the present lead claimants.
If an award of exemplary damages is made to the present lead claimants, a similar award would have to be made in every case.
Exemplary damages are assessed by reference to the conduct of the tortfeasor.
The court would, we think, have to assess an appropriate sum as exemplary damages and divide it between all successful claimants.
But we do not know how many successful claimants there will ultimately be.
These considerations demonstrate that exemplary damages, in a case such as the present, may be ill suited to be a remedy in judicial review proceedings, and would be in the present cases.
Yet further material has been disclosed by the Secretary of State since the hearing before the Court of Appeal.
Mr Westgate submits that it can now be seen that this is indeed one of those exceptional cases where awards of exemplary damages are merited.
His submissions are detailed and elaborate.
I shall endeavour to concentrate on the essential points.
He submits that the conditions for an award of exemplary damages have been established because (i) from April 2006 until September 2008 the Secretary of State operated a hidden blanket policy which did not give effect to the Hardial Singh principles; (ii) the Secretary of State actively discouraged disclosure of her true detention policy with the consequence that the integrity of written reasons for detention was compromised; (iii) there was a deliberate decision not to publish the hidden policy; and (iv) the Secretary of State and/or her officials knew that, or were reckless as to whether, their actions were unlawful, preferring for political reasons to leave it to the courts to remedy the illegality.
In addition, Mr Westgate submits that the Secretary of State in this litigation has fallen short of the duties of candour owed to the courts in that (v) the courts have been intentionally or recklessly misled by the Secretary of States officials; (vi) elementary safeguards necessary to promote compliance with a public authoritys duty of candour in judicial review proceedings have not been observed: in particular, the Deputy Chief of Staff of the Chief Executive of the UK Border Agency was selected as the person responsible for overseeing disclosure, when the responsibility for disclosure was that of the Treasury Solicitor; and (vii) there remain significant lacunae in the disclosure.
I find it convenient to take (i) to (iv) together.
I have already referred at paras 16 39 above to the hidden blanket policy which did not give effect to the Hardial Singh principles.
There is no doubt that such a policy was operated between April 2006 and November 2007 when a slight relaxation was effected by the introduction of Cullen 1.
To a large extent, the policy that was applied until September 2008 was a blanket policy.
It certainly remained a hidden policy during the whole period.
But that of itself comes nowhere near being sufficient to justify an award of exemplary damages.
It is the reasons why the policy was not published that are the matters of real concern.
There is undoubtedly evidence to support submissions (ii) to (iv).
I shall refer to some of it.
A more detailed description of the internal material relating to the period between April 2006 and September 2008 that was disclosed to Davis J appears at para 43 of his judgment.
At least from 17 May 2006, senior officers within the Home Office, including lawyers of the Home Office Legal Advisers Branch (HOLAB), expressed concern to, among others, Lin Homer (Chief Executive of the Border and Immigration Agency) (BIA) that the policy was unlawful on the grounds that it did not satisfy the Hardial Singh principles and that it differed from the published policy.
Thus, for example, on 20 July 2006, Ms Rogerson (Head of Policy for the BIA) said in an email we are increasingly vulnerable and we should probably publish revised criteria.
She suggested that they should review the criteria and consider being prepared to release FNPs in some cases, with public protection as a priority.
She added that Ministers preferred position may be to continue to detain all FNPs and let immigration judges take any hit which is to be had by releasing on bail.
On 19 January 2007, Joy Munro (Deputy Director, Border Control) wrote to Ms Rogerson asking for written evidence of the lawfulness of detaining FNPs whom they were unable to remove.
She referred to there being unrest in the CCD about the power in law to detain some of those held if they are not removable.
Ms Rogerson replied: We shouldnt be dealing with thisor any such policy discussionson email in this way.
I believe a meeting would be the most profitable way forward.
On 13 March 2007, Stephen Braviner Roman of HOLAB wrote to Ken Sutton (Deputy Director of the Immigration and Nationality Directorate) saying: if the courts were to find we had not been following our policy in these cases we would face criticism, but also claims for compensation.
He also referred to the fact that Simon Harker (from the Treasury Solicitors Department) had pointed out that they have a duty of candour to the court and cannot mislead.
First hand evidence of the attitude of the Secretary of State herself is to be found in an email dated 16 July 2007 sent to Lin Homer in response to a draft bail proposal: Is this an issue primarily about legal vulnerability rather than capacity? If so, what is the reason for worrying about this now? Have we been threatened with legal action?
This prompted a series of internal emails, some of which referred to the test case of R (A) (Somalia) v Secretary of State for the Home Department [2007] EWCA Civ 804.
In an email dated 17 July 2007, Mr Braviner Roman referred to the impending hearing and said that there was an on going legal vulnerability.
If it materialised, we would face a liability in damages as well as severe criticism if it was said that we have maintained a policy of detaining people which was unlawful (as opposed to having a lawful policy but just getting it wrong on the facts from time to time, which is inevitable).
But the unpublished policy was not disclosed in that litigation.
The response to the Secretary of States question was given in an email dated 19 July 2007 which stated that the issue was one of legal vulnerability.
To this the Private Secretary of the Secretary of State replied that there did not seem to be a strong enough or immediate enough reason to be releasing or not detaining people at this point.
A further insight into the thinking of the senior officers can be derived from the draft policy submission that had been circulated in May 2007.
It referred to the legal advice that the Secretary of State was open to legal challenge for the reasons to which I have earlier referred.
It also said: if we were to lose a test case, we could present any change in FNP detention practice as having been forced on us by the courts.
I agree with what Davis J said about this document at para 43.12 of his judgment: That may or may not be good politics: but it is deplorable practice, especially when it is seen that almost from day one the new unpublished policy was perceived in virtually all quarters within the department to be at least legally vulnerable and in some quarters positively to be untenable and legally invalid.
The tone of this draft is further confirmed by the subsequent comments that the longer the delay the more likely it would be that a court judgment would force us to pay out significant sums in compensation to FNPs whose detention was held to be unlawful as well as exposing the department to criticism in the media and to reputational damage.
Mr Westgate is able to point to clear evidence that caseworkers were directed to conceal the true reason for detention, namely the unpublished policy, and to give other reasons which appeared to conform with the published policy.
This material was disclosed seven days before the start of the hearing before the Court of Appeal.
It comprises an exchange of emails in relation to a Liverpool case.
On 21 March 2007, Philip Muirhead of the Criminal Casework Directorate (CCD) in Liverpool said of the FNP under consideration that there was no valid reason to detain him.
Nichola Samuel, a lawyer of HOLAB, said that if detention was appropriate in that case, this suggested that they were applying a different policy, ie that all FNPs should be detained pending deportation.
Gareth Lloyd (Assistant Director of the CCD) responded that he had an email from Mandie Campbell (Director of CCD) telling me that we must detain all FNPs until removal.
In an email dated 22 March 2007, Mr Lloyd said that this was not only a Liverpool issue and in an email sent on the following day, he said: We just detain as instructed and choose the most defendable option in our opinion.
From the above, it seems to me to be clear that there was a deliberate decision not to publish the hidden policy.
The material that has now been disclosed suggests that the assessment made by Davis J at para 205 may have been somewhat generous to the Secretary of State and her senior officials.
It is true that they did not know and could not have known that the policy that was being applied was bound to be struck down as unlawful, but they certainly knew that it was vulnerable to legal challenge and that it did not accord with the published policy.
Nevertheless, the question remains whether, regrettable though the behaviour of the Secretary of State and her senior officials may have been, it was sufficiently outrageous and sufficiently unconstitutional, oppressive or arbitrary to merit awards of exemplary damages.
I approach this question without regard to the allegations of lack of candour in the litigation.
This is because the role of exemplary damages is to punish the commission of the underlying tort and not the subsequent conduct of the litigation.
Any disapproval of the conduct of the litigation can be marked by an appropriate order for costs or by an increased award of (compensatory) aggravated damages: Thompson v Commissioner of Police of the Metropolis [1998] QB 498, 517D per Lord Woolf MR.
Whether the high threshold for the award of exemplary damages has been crossed in any particular case is ultimately a matter of judgment.
Opinions can reasonably differ on whether a defendants conduct has been so outrageous and so unconstitutional, oppressive or arbitrary as to justify the imposition of the penalty of exemplary damages.
An appellate court should not interfere with the judgment of the court below unless that judgment is plainly wrong.
On the material that was before him, Davis J was entitled to reach the conclusion that he reached.
In my view, the Court of Appeal were also entitled to reach the conclusion that they reached on the more extensive material that was before them.
Both the judge and the Court of Appeal applied the correct test.
In particular, the Court of Appeal were right to place some weight on the fact that the Secretary of State had the statutory power to detain the appellants pending deportation and that, although she in fact exercised that power unlawfully, she could have done so lawfully.
They were also right to say that, if her conduct is properly to be described as unconstitutional, oppressive or arbitrary, it was at the less serious end of the scale.
It is material that there is no suggestion that officials acted for ulterior motives or out of malice towards the appellants.
Nevertheless, there was a deliberate decision taken at the highest level to conceal the policy that was being applied and to apply a policy which, to put it at its lowest, the Secretary of State and her senior officials knew was vulnerable to legal challenge.
For political reasons, it was convenient to take a risk as to the lawfulness of the policy that was being applied and blame the courts if the policy was declared to be unlawful.
The Court of Appeal identified at para 123 of their judgment a further point which militated against awards of exemplary damages to the appellants.
Where there is more than one victim of a tortfeasors conduct, one award of damages should be made which should be shared between the victims, rather than separate awards of exemplary damages for each individual: see Riches v News Group Newspapers Ltd [1986] QB 256.
This is because the purpose of the award is to punish conduct rather than compensate the claimants.
In Riches, the victims of the tort were a small class who were all before the court.
But where (as in the present case) there is potentially a large number of claimants and they are not all before the court, it is not appropriate to make an award of exemplary damages: see AB v South West Water Services Ltd [1993] QB 507, 527B D per Stuart Smith LJ and p 531D E per Sir Thomas Bingham MR.
Unless all the claims are quantified by the court at the same time, how is the court to fix and apportion that punitive element of the damages? If the assessments are made separately at different times for different claimants, how is the court to know that the overall punishment is appropriate? The Court of Appeal were right to regard this a further reason why it was not appropriate to award exemplary damages in the present case.
There is yet one further point.
It is unsatisfactory and unfair to award exemplary damages where the basis for the claim is a number of serious allegations against named officials and Government Ministers of arbitrary and outrageous use of executive power and those persons have not been heard and their answers to the allegations have not been tested in evidence.
In a private law action, they would almost certainly have been called to give evidence.
But oral evidence is rarely adduced in judicial review proceedings and, understandably, it was not adduced in the present case.
Overall conclusion
I would, therefore, allow these appeals.
For the reasons that I have given, the Secretary of State is liable to both appellants in the tort of false imprisonment on the narrow ground that she unlawfully exercised the statutory power to detain them pending deportation because she applied an unpublished policy which was inconsistent with her published policy.
The appellants are, however, only entitled to nominal damages because, if the Secretary of State had acted lawfully and applied her published policy, it is inevitable that both appellants would have been detained.
As regards the discrete question whether the detention of Mr Lumba was in any event unlawful on the grounds of a breach of the Hardial Singh principles, I would remit this to a High Court judge.
Finally, neither appellant is entitled to exemplary damages.
LORD HOPE
In agreement with Lord Walker, Lady Hale, Lord Collins, Lord Kerr and Lord Dyson I would hold that the Secretary of State is liable to the appellants in the tort of false imprisonment because she applied to them an unpublished policy which was inconsistent with her published policy, and I too would remit to a High Court judge the question whether Mr Lumbas detention was unlawful as being in breach of the Hardial Singh principles.
As I am anxious to avoid adding to the length of the courts judgment, I shall simply say that I am in full agreement with all the reasons that Lord Dyson has given on these issues except that I do not have the same difficulty as he has with the use of the phrase abuse of power by Lord Walker (see para 69, above).
There are only three points on which I wish to comment.
First, as Lord Phillips has noted (see para 258, below), it was common ground in these appeals that Lord Dyson correctly summarised the effect of Woolf Js judgment in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704.
Nevertheless he has indicated that he does not consider that the first and second principles that Lord Dyson has extracted from it can properly be derived from what Woolf J said in that judgment.
For my part, I think that Lord Dysons summary, which he has taken from his judgment in R (I) v Secretary of State for the Home Department [2003] INLR 196, para 46, is accurate and I would endorse it.
We can, of course, read what Woolf J said for ourselves, and there are no doubt various ways of expressing what Lord Dyson has taken from it.
The essential point, as Lady Hale has explained (see para 199, below), is that the detention must be for the statutory purposes of making or implementing a deportation order and for no other purpose.
Lord Phillips says that he can see no justification for reading the terms of the statute in this way, that it places an unjustified restriction on the Secretary of States power of detention and that he does not believe that Woolf J intended to say what Lord Dyson has attributed to him.
He would read Hardial Singh as concerned only with the length of time that was reasonably necessary to effect deportation and not the purpose of the detention.
I am unable, with respect, to agree with this interpretation of Woolf Js judgment.
There are two points that need to be considered.
The first is, what do the words that Woolf J used actually mean? The second is whether, if they have the meaning that Lord Dyson has attributed to them, this limitation on the statutory power can properly be read into the statute.
As to the first point, in the second sentence of the relevant paragraph (see para 262 of Lord Phillipss judgment) Woolf J makes it plain that in his view the statutory power can only authorise detention if the individual is being detained pending the making of a deportation order or pending his removal and for no other purpose.
I think that his judgment could not be clearer on this issue, and that Lord Dyson has captured the essential points that Woolf J made accurately in his summary.
As for the second, it must be recognised that until now Woolf Js statement of the limitations to the statutory power has never been questioned.
I think that there are good reasons for this.
To confine the limitation to the period of the detention only and release the Secretary of State from the limitation as to purpose which Woolf J identified would greatly reduce the protection which, as I read it, his judgment was designed to give to the detainee.
For obvious reasons that, if it were to happen, would be regrettable.
It would, as Lord Phillips indicates in para 269, enable the Secretary of State to exercise the power to detain simply because he believed that the detainee would, if released, pose a threat to national security.
I do not think that article 5(1)(f) of the European Convention on Human Rights permits this interpretation of the statutory power.
If Parliament had intended that the power to detain could be used for a purpose other than the making or effecting of a deportation order, it would have had to have said this expressly and it has not done so.
It is hard also to see how the limitation as to time which Lord Phillips accepts can be read into the statute can be tested without having regard to the purpose for which the detainee is being held.
The limitation as to time and the limitation as to purpose are really two sides of the same coin.
They cannot be separated from each other.
I think that Woolf J was right to recognise this and that there are sound reasons for all that he said about the limitations that must be understood to qualify the statutory power.
Second, I cannot accept Lord Phillipss conclusion that the application of the secret policy did not render the detention of the appellants unlawful.
The basis for that view is that, if the published policy had been applied they would have been detained anyway and that, had they challenged their continued detention, they would have had no legitimate expectation of obtaining an order for their release.
This is the causation argument which, for the reasons Lord Dyson gives in paras 62 68 with which I agree, he rejects.
The key point, as I see it, are that we are dealing in this case with the tort of false imprisonment.
Torts of this kind are actionable per se regardless of whether the individual suffers any harm.
While not every breach of public law will give rise to a cause of action on this ground, the history of this case shows that there was here a serious abuse of power which was relevant to the circumstances of the appellants detention.
If the rule of law is to be sustained, the detention must be held to have been unlawful.
The appellants were being detained without regard to the purpose for which the Secretary of State was authorised to exercise the power by the statute.
The court must insist that powers of detention are exercised according to law.
If they are not, those who have abused their powers must accept the consequences.
It is no answer for them to say that they could, had they put their mind to it, have achieved the same result lawfully by other means.
Third, I agree that this is not a case for exemplary damages.
But, for the reasons given by Lord Walker and Lady Hale, I would hold that the breach of the appellants fundamental rights that has occurred in these cases should not be marked by an award only of nominal damages.
An award on ordinary compensatory principles is, of course, out of the question.
It is plain that the appellants would not have had any prospect of being released from detention if the Secretary of State had acted lawfully.
So they cannot point to any quantifiable loss or damage which requires to be compensated.
But the conduct of the officials in this case amounted, as Lord Walker says (see para 194, below), to a serious abuse of power and it was deplorable.
It is not enough merely to declare that this was so.
Something more is required, and I think that this is best done by making an award of damages that is not merely nominal.
The principles on which damages for breaches of fundamental rights are to be assessed in situations such as this are not greatly developed, as Elias CJ pointed out in the Supreme Court of New Zealand in Taunoa and others v Attorney General and another [2007] 5 LRC 680, para 108.
But some guidance is available from judgments which the Judicial Committee of the Privy Council has given where a constitutional right has been infringed.
In Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 Lord Nicholls of Birkenhead added his own words to those of the Board in Harrikissoon v Attorney General of Trinidad and Tobago [1980] AC 265 as to how an award of damages should be assessed in such a case.
In para 18 he observed that when exercising its constitutional jurisdiction the court is concerned to uphold, or to vindicate, the constitutional right.
In para 19 he said that an award, not necessarily of substantial size, might be needed to reflect the sense of public outrage, emphasise the gravity of the breach and deter further breaches.
The law on this matter is still in the process of being worked out, so I should like to say just a little more about it.
Although such an award is likely in financial terms to cover much the same ground as an award by way of punishment in the sense of retribution, punishment in that sense is not its object.
The expressions punitive damages or exemplary damages are therefore best avoided.
Allowance must be made for the importance of the right and the gravity of the breach in the assessment of any award.
Its purpose is to recognise the importance of the right to the individual, not to punish the executive.
It involves an assertion that the right is a valuable one as to whose enforcement the complainant has an interest.
Any award of damages is bound, to some extent at least, to act as a deterrent against further breaches.
The fact that it may be expected to do so is something to which it is proper to have regard.
As for the amount to be awarded, an award is referred to as a conventional award when it is incapable of being calculated arithmetically as there is no pecuniary guideline which can point the way to a correct assessment: Lim Poh Choo v Camden and Islington Area Health Authority [1980] AC 174, 189G H, per Lord Scarman.
In most cases the sum to be awarded can be derived from experience and from awards in similar cases: Ward v James [1966] 1 QB 273, 303, per Lord Denning MR.
But that cannot be said of this case.
So I would turn for guidance to what Lord Bingham of Cornhill said in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309, para 8.
The conventional award that he had in mind in that case to mark the injury and loss due to the unwanted child was not, and was not intended, to be compensatory.
It was not the product of calculation, nor was it derived from awards in other similar cases.
But it was not a nominal, let alone a derisory, award.
Its purpose was to afford some measure of recognition of the wrong done.
In agreement with Lord Steyn, I regarded the idea of a conventional award under the tort system in that case as contrary to principle: Rees v Darlington Memorial Hospital NHS Trust paras 46, 70 77.
But I do not think that it is open to the same objection in the present context.
In this case the factors referred to by Lord Nicholls in Ramanoop must be the primary consideration.
There must be some recognition of the gravity of the breach of the fundamental right which resulted in false imprisonment, and account should be taken of the deterrent effect of an award lest there be the possibility of further breaches.
But account should also be taken of the underlying facts and circumstances which indicate that it should not be more than a modest one.
It should do no more than afford some recognition of the wrong done, without being nominal or derisory.
Lord Walker has suggested that an award of 1,000 to each appellant would be appropriate.
We have no yardstick by which that sum can be measured to test its accuracy.
Given the purpose of the award, I see no reason to disagree with his assessment although I, for my part, would have arrived at a substantially lower figure.
LORD WALKER
The issue on which Lord Brown differs from Lord Dyson is one of high importance and great difficulty.
Its high importance is obvious.
Lord Dyson cites Lord Bridge in R v Deputy Governor of Parkhurst Prison Ex p Hague [1992] 1AC 58, 162, The tort of false imprisonment has two ingredients: the fact of imprisonment and the absence of lawful authority to justify it.
It is a species of trespass to the person and as such a tort actionable without the need for proof of special damage.
The notion that no more than nominal damages should ever be awarded for false imprisonment by the executive arm of government sits uncomfortably with the pride that English law has taken for centuries in protecting the liberty of the subject against arbitrary executive action.
It would in Lord Browns view seriously devalue the whole concept of false imprisonment.
The difference of opinion between two Justices with so much expert knowledge in the field of public law, on a point of such high importance, demonstrates its difficulty.
I hardly need say that it is with diffidence that I make any contribution to the debate.
Lord Browns approach to the solution to the problem is to distinguish between cases where there is no lawful authority to detain a person (including cases where a precondition to lawful detention has not been satisfied) and cases where there is a power to detain, but in the exercise of that power the decision maker has been in breach of some public law duty.
In cases (or at any rate some cases) of the flawed exercise of a power to detain there is (so the argument goes) no false imprisonment at all, and so the question of awarding damages, whether nominal or otherwise, simply does not arise.
This solution has considerable attractions.
The proposed distinction is based on the difference between the existence (or rather non existence) of a lawful authority to detain, and a defective exercise of an authority which does exist: see the observations of Lord Brown in R (Khadir) v Secretary of State for the Home Department [2006] 1AC 207, para 33.
The difficulty that I feel is whether the distinction, though clear enough in theory, can cope with the variety and complexity of the problems that arise in practice, as illustrated by the numerous decided cases cited to the court.
I also have difficulty (or perhaps this is another way of putting the same point) in reconciling the basic existence/exercise distinction with the four categories which Lord Brown extracts from his analysis of successful claims for false imprisonment by executive action.
His four categories are (1) no power to detain; (2) failure to satisfy a precondition to exercising the power to detain; (3) detention beyond the scope of the power to detain; and (4) power to detain limited by published official policy.
The distinction is clear enough in extreme cases.
R v Governor of Brockhill Prison Ex p Evans (No 2) [2001] 2AC 19 was a case (in Lord Browns category (1)) in which there was simply no lawful authority for the claimants detention after the date of expiration of her term of imprisonment, when properly adjusted for time spent on remand (the complicated statutory provisions as to allowances for multiple periods spent on remand had been misinterpreted).
At or near the other extreme was the breach of a public law duty to see that an asylum seeker detained at a detention centre received a medical examination within 24 hours.
The omission to provide a medical examination was an administrative failing but it did not render the detention unlawful: R (HK (Turkey)) v Secretary of State for the Home Department [2007] EWCA Civ 1357.
Lord Brown supplements his category (1) by category (2) so as to let in a range of cases in which there is for the time being no lawful authority to detain because some precondition has not been satisfied.
A well known example of this is Christie v Leachinsky [1947] AC 573, where a man arrested without a warrant was not correctly informed of the offence which gave rise to the power of arrest without a warrant.
Moreover categories (1) and (2) must be expanded to cover cases in which detention, although initially lawful, has become unlawful because of a failure to carry out some procedure or satisfy some condition of precedent fact required by statute.
A procedural example is Roberts v Chief Constable of the Cheshire Constabulary [1999] 1WLR 662, where the provisions of the Police and Criminal Evidence Act 1984 required detention in police custody to be reviewed every six hours.
The claimant had been detained at 11.25pm and the police officers failure to review his detention by 5.25 am on the next day made his detention unlawful until it was reviewed (and his detention continued) at 7.45 am, and the Court of Appeal refused to overturn or reduce the award of 500 damages, even though it accepted that his detention would have continued if a review had been carried out at the right time.
By contrast in R (Saadi) v Secretary of State for the Home Department [2002] 1WLR 3131 the statement of incorrect and inappropriate reasons on an official form handed to detained asylum seekers was not treated as a failure to satisfy a condition precedent affecting the legality of their continued detention.
The distinction between these two cases is that the relevant statutes were interpreted in one case as imposing a condition which had to be satisfied if continued detention was to be lawful, and as not imposing such a condition in the other case.
It is, as Laws LJ emphasised in R (SK (Zimbabwe)) v Secretary of State for the Home Department [2009] 1WLR 1527, paras 21 and 25, an issue of statutory construction.
In that case the Court of Appeal held that compliance with rule 9 of the Detention Centre Rules 2001 (calling for a monthly review of detention with written reasons given to the detained person) was not a precondition to the continuation of lawful detention. (See Laws LJ at paras 31 35 and Keene LJ agreeing, with some hesitation, at para 47.)
Lord Browns category (3) is detention beyond the scope of the relevant power.
Laws LJ in SK (Zimbabwe), para 21, referred to the reach of the power.
These expressions, as I understand them, approximate to the object or purpose for which Parliament has conferred the power.
The importance of the statutory purpose has been recognised since Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 and (as Lord Dyson notes in para 30 of his judgment) the Hardial Singh principles (see R v Governor of Durham Prison Ex p Hardial Singh [1984] 1 WLR 704) reflect the application of the wide general principle of not deviating from the statutory purpose to the particular field of the detention of foreign nationals pending deportation.
Woolf J made this clear in Hardial Singh itself at p 706.
The wide general principle of not deviating from the statutory purpose is of such fundamental importance in public law that it can be seen as going to the existence of the power, rather than merely to its exercise.
In law the power exists only for the purposes for which Parliament has conferred it on the executive.
In Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97, 113, the Privy Council put it very simply: If removal is not pending . the director has no power at all.
So I would see Lord Browns category (3) as fitting reasonably comfortably into his basic existence/exercise classification.
Determining the purpose for which Parliament has conferred a power is also a process of statutory construction.
That process should not, in my opinion, be minutely elaborated.
I entirely accept the exposition of the Hardial Singh principles by Dyson LJ (as he then was) in R (I) v Secretary of State for the Home Department [2003] INLR 196, para 46.
It goes no further than spelling out clearly what is necessarily implicit in the purpose of detention with a view to deportation, and it has been widely cited and followed.
I have more of a problem in seeing Langley v Liverpool City Council [2006] 1 WLR 375 as a case where the police departed from the statutory purpose in exercising their power of removal under section 46 of the Children Act 1989 when an emergency protection order under section 44 of that Act had already been made.
The purpose of both statutory powers (one conferred on the police, the other on the court) was child protection in an emergency situation.
I regard Langley as a finely balanced decision in which the Court of Appeal held that well intentioned police action, directed to child protection and taken under pressure of circumstances, was nevertheless an unlawful manner of exercising the section 46 power.
Thorpe LJ (at para 79) reached that conclusion with some reluctance.
It is with Lord Browns category (4), however, that I have the greatest difficulty.
Here the issues are concerned with official policies how rigid or flexible they may be, whether and in how much detail they should be published, whether (in these appeals) a policy with a presumption towards detention is permissible.
Official decision makers need policies for obvious reasons.
Although decisions in the field of immigration law are all taken in the name of the Secretary of State, only a tiny handful of cases are actually decided by the Secretary of State personally.
Decisions are taken by a small army of officials at different levels, and they need guidance in order to achieve consistency in decision making.
Members of the public, or those of the public liable to be affected, should know where they stand, and so they are entitled to know, at least in general terms, the content of the official policies.
This is not a matter of being faithful to the purposes of statutory powers, but of seeing that they are exercised consistently and fairly.
There is a helpful discussion of these points in the judgment of the Court of Appeal in these appeals, prepared by Stanley Burnton LJ, at paras 53 58.
It is here that Lord Diplocks dictum in Holgate Mohammed v Duke [1984] AC 437 calls for consideration.
In a passage (at p.444) quoted by both Lord Brown and Lord Dyson, Lord Diplock expressed the view that Wednesbury principles are applicable to determining the lawfulness of the exercise of a statutory power of arrest not only in proceedings for judicial review but also in an action for damages for false imprisonment.
As Lord Dyson says, there seems to have been little argument on this point in the House of Lords.
Nor has there been much discussion of it in later authorities.
It was cited and followed by the Court of Appeal in D v Home Office (Bail for Immigration Detainees intervening) [2006] 1 WLR 1003 (see especially Brooke LJ at para 111).
In SK (Zimbabwe), Holgate Mohammed was cited by counsel but not referred to in the judgments in the Court of Appeal.
Holgate Mohammed and D v Home Office (Bail for Immigration Detainees intervening) were both discussed at some length in the Court of Appeal in these appeals (paras 50 52, and, in relation to causation, paras 82 84).
The Court of Appeal rightly regarded itself as bound by the latter decision.
This court is not bound to follow the Court of Appeals acceptance of Lord Diplocks dictum, and for my part I would refrain from giving it unequivocal approval.
Mr Beloff QC (appearing for the Secretary of State in this court) put forward some persuasive submissions in favour of an alternative approach.
They are noted in paras 76 and 86 of Lord Dysons judgment.
The first two submissions would make a qualification or exception, for the purposes of a private law claim for damages for false imprisonment, to the Anisminic equation of any significant public law error with lack of jurisdiction (see Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147).
Lord Dyson, in para 87, dismisses these in a single sentence as putting the clock back to pre Anisminic days.
With great respect, I think there may be more to be said about it.
Anisminic was one of the seminal cases in the development of modern public law.
But its full implications are still open to debate.
The context in which it equated wrongful exercise of jurisdiction with excess of jurisdiction (the courts response to an ouster clause in the Foreign Compensation Act 1950) was far removed from a private law claim for damages for false imprisonment.
It is a big step to extend the principle to a claim for damages for false imprisonment, where a defendant may have his professional reputation at stake and may not enjoy the procedural protections which attend judicial review (strict time limits, and the discretionary nature of the remedy granted).
I would prefer a more demanding test, that in a case where an extant statutory power to detain has been wrongly used there would be a private law claim only if the misuse amounted to an abuse of power (including but not limited to cases of misfeasance or other conscious misuse of power).
However, it is in my opinion unnecessary to decide the point in these appeals because the conduct of officials, including some senior officials, of the Home Office between April 2006 and September 2008 amounted to a serious abuse of power.
Lord Dyson has in paras 154 165 of his judgment described in restrained language how senior officials were well aware of the risk (indeed the likelihood) of challenge and decided to run the risk, (including the proposal to let immigration judges take any hit), and how further damaging facts were disclosed by stages, some before Davis J, some before the Court of Appeal, and some only in this Court.
Wherever the line is to be drawn (if, as I think, a line does need to be drawn between public law errors in detention policies which do or do not give rise to an action for false imprisonment) these appeals must in my view fall on the wrong side of the line from the Secretary of States point of view.
I agree with Lord Dyson (paras 165 168) that despite the deplorable official conduct this is not a case for exemplary damages.
But in my view it is not a case for nominal damages either.
Apart from cases concerned with constitutional rights in the Caribbean, (the line of authority starts with Attorney General of St Christophers, Nevis and Anguilla v Reynolds [1980] AC 637), the common law has always recognised that an award of more than nominal damages should be made to vindicate an assault on an individuals person or reputation, even if the claimant can prove no special damage. (See Mayne & McGregor on Damages, 18th ed. (2009) paras 42 008 to 009).
In these appeals, each claimant had a very bad criminal record and would undoubtedly have been kept in custody under the Secretary of States published policies.
They cannot therefore establish a claim to special damages.
But the argument on causation does not completely defeat their claims.
I would award each claimant the sum of 1,000 damages.
I would remit the case of Mr Lumba as Lord Dyson proposes.
On every point on which I have not expressed disagreement or doubt I am in respectful agreement with the judgment of Lord Dyson.
LADY HALE
I agree entirely with Lord Brown that far and away the most important issue in this case, as it is in the case of SK (Zimbabwe) [2009] 1 WLR 1527, is whether the breach of a public law duty on the part of the person authorising detention is capable of rendering that detention unlawful.
If it is, the second question is which breaches of public law duties have that consequence; and the third question is whether it makes any difference that the person authorising the detention both could and would have done so lawfully, without breaching the public law duty in question, had the point been drawn to his attention.
If that does not make a difference to liability, a fourth question is whether the fact that the person detained both could and would have been lawfully detained is of any relevance to the assessment of his damages for false imprisonment.
But I differ from Lord Brown in his view that the answer to the last of these questions should govern the answer to the first, second or third question: in other words, that if we take the view that no compensatory damages are payable in a case such as this it should follow that there is no liability in the first place.
Forcefully and attractively though that argument is made, it does put the cart before the horse.
It also fails to acknowledge that false imprisonment is a trespass to the person, actionable per se without proof that the claimant has suffered any harm for which the law would normally grant compensation.
As to the first question, this is a stronger case than is still before the Court in SK (Zimbabwe) because the illegality alleged (and now admitted) went to the criteria for detention rather than to the procedure for authorising it.
The statutory power to detain under paragraph 2(2) and (3) of schedule 3 to the Immigration Act 1971 (quoted by Lord Dyson at paragraph 4 of his judgment) is, on its face, very broad.
Provided that the detainee has been notified of a decision to make a deportation order against him, and he is not detained in pursuance of the sentence or order of a court, he may be detained pending the actual making of the order (para 2(2)).
Once the deportation order is made, he may be detained pending his removal or departure from the United Kingdom (para 2(3)).
However, since at least the case of R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704, it has been recognised that there are limitations implicit in these powers: the detention must be for the statutory purpose of making or implementing a deportation order and for no other purpose; hence it cannot be continued once it becomes clear that it will not be possible to effect deportation within a reasonable period; the Secretary of State must act with reasonable diligence and expedition to bring this about; and in any event the detention cannot continue for longer than a period which is reasonable in all the circumstances.
These limitations were devised long before the Human Rights Act and have been accepted without question ever since.
They stem from the long established principle of United Kingdom public law that statutory powers must be used for the purpose for which they were conferred and not for some other purpose: Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997.
They were not inspired by article 5(1)(f) of the European Convention for the Protection of Human Rights and Fundamental Freedoms and it does not follow that, because detention would be permissible under article 5(1)(f), it is also permissible under United Kingdom law.
The last restriction referred to above has not hitherto been questioned but it is the most questionable, for the Secretary of State may genuinely be doing all that she can to effect deportation, and deportation may still be a realistic possibility, but even so the deportee may have been detained for so long that it is no longer lawful to keep him there.
That this has never until now been questioned indicates how strong are the objections to indefinite detention by order of the executive.
But it undoubtedly gives rise to some difficult questions, as is amply shown by Lord Dysons discussion, in paragraphs 102 to 128 of his judgment, of the matters to be taken into account in deciding whether or not the period of detention is reasonable.
In addition to such substantive limitations, the law has also imposed procedural requirements upon apparently open ended statutory powers.
In common with Lord Dyson, I do not think that it matters whether these are characterised as implied conditions precedent or implied procedural requirements.
The effect is the same.
The best known example is Cooper v Wandsworth Board of Works (1863) 14 CB (NS) 180, 143 ER 414.
The Board had power to alter or demolish a house if the builder had not given 7 days notice of his intention to build.
The Court held that the common law imposed upon the Board a requirement to notify the builder before they decided to demolish the house, so that he could present arguments why they should not.
As the Board had not given the builder such an opportunity before demolishing the house, they were liable to him in damages for trespass.
It is true that Byles J founded his opinion partly on the basis that the Board had also failed in their express statutory duty to notify the builder of their demolition order: but the majority based their opinions on the broader principle that he had a right to be heard before the order was made: in other words, there were public law duties inherent in the apparently open ended statutory power.
Another example of the same principle is Christie v Leachinsky [1947] AC 573 where the common law implied a duty, when exercising a power of arrest, to tell the arrested person the power under which he was being arrested, so that he might know whether or not he could resist arrest.
Once again, the police were liable in false imprisonment.
The question is whether the same principles apply where the requirement in question is the duty, imposed by the common law, for the Secretary of State and his officials to comply with a published policy, unless there is good reason not to do so.
As I understand it, Lord Brown accepts that they may indeed do so, for he agrees that if the published policy further narrows and defines the circumstances in which the power will be exercisable, the Secretary of State may not lawfully depart from that.
It is on that basis that he considers R (Nadarajah) v Secretary of State for the Home Department [2004] INLR 139 to have been correctly decided.
Support for the proposition that the ordinary requirement to observe public law duties may restrict the lawful exercise of a statutory (or common law) power which would otherwise authorise a trespass can be found in the dictum of Lord Diplock in Holgate Mohammed v Duke [1984] 1 AC 437, 443, quoted by Lord Dyson at para 73 of his judgment.
On the face of it, this was a lawful arrest.
The argument was that the police officer had arrested the claimant for the wrong reason: to get her to confess.
There can be little doubt that, had the House of Lords concluded that this was indeed an impermissible consideration, they would have held that the arrest was unlawful and that the claimant was entitled to the damages she sought.
This was, after all, an action for damages for false imprisonment in which the claimant had succeeded in the county court.
If the House had thought that she would not have been entitled to damages in any event, it would surely have said so.
I agree with Lord Walker that it is not necessary to hold that every single departure from policy, or even failure in the decision making process, attracts these consequences in order to hold that they apply in this case.
The discrepancy between what the policy said should happen in these cases and what was actually happening is stark.
The claimants were being dealt with, not under the published, lawful policy, but under an unpublished, unlawful policy or practice.
Yet it is difficult not to have some sympathy for the officials involved.
The Government had been hit by a perfect storm in April 2006 when the popular press discovered that foreign national prisoners were being released after serving their sentences without any consideration being given to whether or not they should be deported.
It had cost the then Home Secretary his job.
The immediate answer was not to let any of them go.
This was at odds with the published policy, which presumed against the use of detention powers.
Officials knew this and they also knew that the policy needed amendment.
But they found it very difficult to devise a policy for publication which would be both lawful and acceptable to ministers.
Ministers wanted a near blanket ban on release, whereas the law requires some flexibility to respond to the circumstances of the particular case.
So the situation dragged on for many, many months.
These are just the sort of circumstances, where both Ministers and their civil servants are under pressure to do what they may know to be wrong, in which the courts must be vigilant to ensure that their decisions are taken in accordance with the law.
To borrow from the civil servants correspondence, the courts must be prepared to take the hit even if they are not.
The law requires that decisions to detain should be made on rational grounds and in an open and transparent way and not in accordance with arbitrary rules laid down by Government and operated in secret.
One of the most disturbing features of this sorry tale is that the case handling officials had to give reasons for their decisions which were not what their real reasons were.
The European Convention on Human Rights and the Strasbourg Court have not imposed the same requirements of proportionality upon detention with a view to deportation under article 5(1)(f) as they have upon detention under other provisions in article 5(1).
But any deprivation of liberty has to be in accordance with a procedure prescribed by law.
Unless the law has certain essential characteristics, there is a risk that detentions may be arbitrary.
That is why the open ended common law power to detain people who lack the capacity to make decisions for themselves on grounds of necessity was found incompatible with article 5(1)(e): see L v United Kingdom (2005) 40 EHRR 32.
There is every reason to think that Strasbourg would find a secret policy which presumed in favour of the detention of every foreign national prisoner open to the same objections.
The common law is just as respectful of the liberty of the person, and just as distrustful of arbitrary and secret decision making by officials acting on behalf of Government, as is the Convention.
I would therefore answer yes to the first question.
I would also answer the second question in the way proposed by Lord Dyson.
In other words, the breach of public law duty must be material to the decision to detain and not to some other aspect of the detention and it must be capable of affecting the result which is not the same as saying that the result would have been different had there been no breach.
The third question is whether it makes any difference that, in these particular cases, if the officials had been operating the published policy they both could and would have authorised the detention of these appellants.
This would not normally make any difference.
In Christie v Leachinsky, the officers could have made a lawful arrest and only chose to make an unlawful arrest for convenience, but they were still liable for false imprisonment.
In Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662, the custody officer could have reviewed the case when he should have done and would no doubt have authorised the continued detention then, but there was still liability in false imprisonment.
For all the reasons given by Lord Dyson, there is no basis for drawing a distinction according to the reason why the detention is unlawful, permitting what has been referred to as a causation defence in some cases but not in others.
The most difficult question is whether this should make any difference to the measure of damages awarded.
I quite agree with Lord Brown that the importance of strict adherence to the law when depriving people of their liberty should not be devalued.
Awarding the same measure of damages, irrespective of whether or not the person could and would have been lawfully detained, serves to reinforce the importance of this principle.
Also, if no distinction, according to the reason why the detention is unlawful, is to be drawn in relation to the second question, there should be no such distinction in relation to damages.
If we are to hold that a person who could and inevitably would have been detained lawfully had the correct criteria or procedures been applied is not to be compensated for the loss of liberty, then this must apply irrespective of the reason why depriving him of his liberty was unlawful.
We cannot single out these public law cases for special treatment.
In most cases of false imprisonment, the problem will not arise, because the detainer does not have a choice between acting lawfully and acting unlawfully.
The prison governor in R v Governor of Brockhill Prison, Ex p Evans (No 2) [2001] 2 AC 19 had no power to detain the prisoner beyond the properly calculated term of her imprisonment: the fact that he was acting in compliance with the law as it had previously been thought to be was neither here nor there.
The police officer in Langley v Liverpool City Council [2006] 1 WLR 375 had, as the Court of Appeal found in what I agree with Lord Walker was a finely balanced decision, no power to use his power to take a child into police protection under section 46 of the Children Act 1989 when the child could and should have been protected by social workers implementing an emergency protection order under section 44.
The immigration officers in Kuchenmeister v Home Office [1958] 1 QB 496 had no power to detain the claimant in such a way as to prevent his transiting from one aircraft to another at London airport.
However, where the defendant has failed to comply with a procedural requirement, there is always the possibility that the deed might have been done lawfully.
But the whole point of procedural requirements, such as those in Cooper v Wandsworth Board of Works or Christie v Leachinsky, is that the person whose rights are being infringed should have an opportunity of challenging this.
So it will rarely be possible to be confident that, had the correct procedure been followed, the outcome would have been the same.
Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 is an example where it was possible.
This case is another, because it would appear that, had the decision makers applied the published, lawful policy rather than the unpublished, unlawful policy, they would inevitably have reached the same conclusion.
Insofar as damages for false imprisonment are meant to compensate for the loss of liberty, it is difficult to see why a claimant should be compensated for the loss of something which he would never have enjoyed.
But, left to myself, I would not regard this as the end of the story.
Trespass, whether to person or property, has always been actionable per se, without proof of anything which the law regards as damage.
The tort is complete when a direct interference with person or property without lawful justification is established.
Usually, there will also be some harm done which the wrongdoer must remedy, either by damages or in some other way.
Take, for example, the case of the neighbour who put a row of ridge tiles on his neighbours roof.
They did no harm to the roof; they did not diminish the value of the house in any way; indeed many might think them an enhancement; but the claimant did not want them there and successfully sued for trespass.
The obvious remedy was to remove the tiles or pay the cost of the claimants doing so.
But suppose there is no such harm.
The claimant has nevertheless been done wrong.
Let us also assume, as is the case here, that the circumstances are not such as to attract punitive or exemplary damages.
Is our law not capable of finding some way of vindicating the claimants rights and the importance of the principles involved? A way which does not purport to compensate him for harm or to punish the defendant for wrongdoing but simply to mark the laws recognition that a wrong has been done?
As Lord Collins explains, the concept of vindicatory damages has been developed in some Commonwealth countries with written constitutions enshrining certain fundamental rights and principles and containing broadly worded powers to afford constitutional redress (and also in New Zealand, which has no written Constitution but does have a Bill of Rights: Taunoa v Attorney General [2008] 1 NZLR 429).
In an early article on the Canadian Charter, Damages as a remedy for infringement of the Canadian Charter of Rights and Freedoms (1984) 62(4) Canadian Bar Review 517, Marilyn Pilkington argued that an award of damages under section 24(1) of the Charter should not be limited by the common law principles of compensation.
In a proper case it might be designed to deter repetition of the breach, or to punish those responsible or to reward those who expose it.
In Attorney General of St Christopher, Nevis and Anguilla v Reynolds [1980] AC 607, the Privy Council upheld a modest award of exemplary damages for breach of a constitutional right.
But there can be a middle course between compensatory and exemplary damages.
In Jorsingh v Attorney General (1997) 52 WIR 501, de la Bastide CJ and Sharma JA in the Court of Appeal of Trinidad and Tobago both said, albeit obiter, that the remedies available under section 14(2) of the Constitution were not limited by common law principles.
Sharma JA said, at p 512, that The court is mandated to do whatever it thinks appropriate for the purpose of enforcing or securing the enforcement of any of the provisions dealing with the fundamental rights.
Not only can the court enlarge old remedies; it can invent new ones as well, if that is what it takes or is necessary in an appropriate case to secure and vindicate the rights breached.
Since then, the concept of vindicatory damages for breach of constitutional rights has been recognised by the Judicial Committee of the Privy Council, in Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328 and Merson v Cartright and Attorney General [2005] UKPC 38 (Bahamas); applied to breach of constitutional provisions other than the fundamental rights and freedoms, in Fraser v Judicial and Legal Services Commission [2008] UKPC 25 (St Lucia) and Inniss v Attorney General [2008] UKPC 42 (St Kitts), which involved the dismissal of respectively a magistrate and a High Court registrar in breach of the procedures laid down in the Constitution; and applied to the breach of fundamental rights in Takitota v Attorney General [2009] UKPC 11 (Bahamas), where the Board quoted from Lord Nicholls in Ramanoop, at para 19: An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter future breaches.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided .
We are not here concerned with a written constitution with a broadly drawn power to grant constitutional redress.
But neither are we concerned with a statutory provision, such as section 8(3) and (4) of the Human Rights Act 1998, with a narrowly drawn power to award damages.
We are concerned with a decision taken at the highest level of Government to detain certain people irrespective of the statutory purpose of the power to detain.
The common law has shown itself capable of growing and adapting to meet new situations.
It has recently invented the concept of a conventional sum to mark the invasion of important rights even though no compensatory damages are payable.
In the view of the majority of the House of Lords in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309, there were sound reasons of public policy why damages should not be recoverable for the cost of bringing up a healthy child born as a result of a negligent sterilisation.
Nevertheless, an award limited to the stress and trauma associated with the pregnancy and birth was insufficient to mark the legal wrong which had been done to the mother.
This should be marked by a fixed, non negligible, conventional sum (in that case 15,000).
Rees was concerned with the rights to bodily integrity and personal autonomy, the right to limit ones family and to live ones life in the way planned: see Lord Bingham of Cornhill at paragraph 8.
These are important rights indeed.
But no one can deny that the right to be free from arbitrary imprisonment by the state is of fundamental constitutional importance in this country.
It is not the less important because we do not have a written constitution.
It is a right which the law should be able to vindicate in some way, irrespective of whether compensatable harm has been suffered or the conduct of the authorities has been so egregious as to merit exemplary damages.
Left to myself, therefore, I would mark the false imprisonment in these cases with a modest conventional sum, perhaps 500 rather than the 1000 suggested by Lord Walker, designed to recognise that the claimants fundamental constitutional rights have been breached by the state and to encourage all concerned to avoid anything like it happening again.
In reality, this may well be what was happening in the older cases of false imprisonment, before the assessment of damages became such a refined science.
I therefore agree, and (subject to the additional points made above) for the reasons given by Lord Dyson, that both these appeals should be allowed.
When considering what was a reasonable period for which to detain Mr Lumba in accordance with the Hardial Singh principles, however, I would stress that his psychiatric condition must be among the factors to be taken into account.
LORD COLLINS
I agree with Lord Dyson that the appeals should be allowed, substantially for the reasons which he gives.
This is a case in which on any view there has been a breach of duty by the executive in the exercise of its power of detention.
Fundamental rights are in play.
Chapter 39 of Magna Carta (1215) said that no free man shall be seized or imprisoned except by the law of the land and the Statute of Westminster (1354) provided that no man of what state or condition he be, shall be imprisoned without being brought in answer by due process of the law.
That the liberty of the subject is a fundamental constitutional principle hardly needs the great authority of Sir Thomas Bingham MR (see In re S C (Mental Patient: Habeas Corpus) [1996] QB 599, 603) to support it, but it is worth recalling what he said in his book The Rule of Law (2010), at p 10, about the fundamental provisions of Magna Carta: These are words which should be inscribed on the stationery of the Home Office.
The evidence shows that concern was expressed in the Home Office from an early stage about the lawfulness of the policy, and that a deliberate decision was taken to continue an unlawful policy.
As Lord Dyson says, caseworkers were directed to conceal the true reason for detention, namely the unpublished policy, and to give other reasons which appeared to conform with the published policy.
Home Office officials recognised that Ministers preferred position may be to continue to detain all FNPs and let the immigration judges take any hit which is to be had by releasing on bail.
The draft policy submission circulated in May 2007 recommended a change in policy, but also set out continued detention as one of the options, recognising that legal advisers considered that the department would lose on any legal challenge.
The draft added: we could present any change in our approach as having been forced on us by the courts.
I am satisfied that the serious breach of public law in this case has the result that the detention of the appellants was unlawful.
Any other result would negate the rule of law.
Christie v Leachinsky [1947] AC 573 shows that where an arrest was unlawful because it did not comply with the requirements imposed by the common law there would be a false imprisonment even if the arrest could have been effected in a proper manner.
Holgate Mohammed v Duke [1984] AC 437, 443, is high authority for the proposition that breach of principles of public law can found an action at common law for damages for false imprisonment.
Are they entitled to more than nominal damages? In particular are they entitled to vindicatory damages? The expression vindicatory damages has been in common use in the context of proceedings for violation of constitutional rights since Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328 and Merson v Cartright and Attorney General [2005] UKPC 38.
It would seem that the expression had its origin in the United States, where it was sometimes used as a synonym for exemplary or punitive damages (e.g. Cole v Tucker, 6 Tex 266 (1851); Blair Iron & Coal Co v Lloyd, 3 WNC 103 (Pa (1874)), but at other times used to mean damages designed to vindicate a right but which were compensatory in nature (e.g. McBride v McLaughlin, 5 Watts 375 (Pa 1836); Hallmark v Stillings, 648 SW 2d 230 (Mo 1983)).
In England the expression first emerged in a sense somewhat different from, but in a sense related to, that in which it is now used.
In Broome v Cassell & Co Ltd [1972] AC 1027, 1071, Lord Hailsham of Marylebone LC said: In actions of defamation and in any other actions where damages for loss of reputation are involved, the principle of restitutio in integrum has necessarily an even more highly subjective element.
Such actions involve a money award which may put the plaintiff in a purely financial sense in a much stronger position than he was before the wrong.
Not merely can he recover the estimated sum of his past and future losses, but, in case the libel, driven underground, emerges from its lurking place at some future date, he must be able to point to a sum awarded by a jury sufficient to convince a bystander of the baselessness of the charge.
As Windeyer J well said in Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 115, 150: It seems to me that, properly speaking, a man defamed does not get compensation for his damaged reputation.
He gets damages because he was injured in his reputation, that is simply because he was publicly defamed.
For this reason, compensation by damages operates in two waysas a vindication of the plaintiff to the public and as consolation to him for a wrong done.
Compensation is here a solatium rather than a monetary recompense for harm measurable in money.
See also, e.g. Sutcliffe v Pressdram Ltd [1991] 1 QB 153; Rantzen v Mirror Group Newspapers (1986) Ltd [1994] QB 670; Purnell v Business F1 Magazine Ltd [2007] EWCA Civ 744, [2008] 1 WLR 1.
Any consideration of the Privy Council decisions on vindicatory damages must be prefaced by three points.
First, they were concerned with alleged violations of constitutional rights.
Second, the constitutions contained provision in relation to such violations for redress (Trinidad and Tobago, section 14(1) (without prejudice to any other action which is lawfully available); Bahamas, article 28(1) (but not if adequate means of redress are available under any other law), or relief together with such remedy as the court considers appropriate (Saint Christopher & Nevis, section 96(1), (3); Saint Lucia, section 105(1), (3)).
Third, although the distinction has sometimes been blurred (as perhaps in Takitota v Attorney General [2009] UKPC 11, 13), the decisions are concerned with two heads of damage, compensatory damages and vindicatory damages.
In Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328, at 18 19 Lord Nicholls, speaking for the Board, dealt with both heads of damages in this way: [18] When exercising this constitutional jurisdiction the court is concerned to uphold, or vindicate, the constitutional right which has been contravened.
A declaration by the court will articulate the fact of the violation, but in most cases more will be required than words.
If the person wronged has suffered damage, the court may award him compensation.
The comparable common law measure of damages will often be a useful guide in assessing the amount of this compensation.
But this measure is no more than a guide because the award of compensation under section 14 is discretionary and, moreover, the violation of the constitutional right will not always be coterminous with the cause of action at law. [19] An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter further breaches.
All these elements have a place in this additional award.
Redress in section 14 is apt to encompass such an award if the court considers it is required having regard to all the circumstances.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
In Merson v Cartright and Attorney General [2005] UKPC 38 the gravity of police misconduct was such as to attract an award of $100,000 for violations of the Constitution in addition to $90,000 in damages for assault, battery and false imprisonment, and $90,000 for malicious prosecution.
It was held by the Privy Council that the awards were not duplicative.
Lord Scott said (at 18): The purpose of a vindicatory award is not a punitive purpose.
It is not to teach the executive not to misbehave.
The purpose is to vindicate the right of the complainant to carry on his or her life in the Bahamas free from unjustified executive interference, mistreatment or oppression.
The sum appropriate to be awarded to achieve this purpose will depend upon the nature of the particular infringement and the circumstances relating to that infringement.
It will be a sum at the discretion of the trial judge.
In some cases a suitable declaration may suffice to vindicate the right; in other cases an award of damages, including substantial damages, may seem to be necessary.
A vindicatory award of $50,000 was made in Inniss v Attorney General [2008] UKPC 42.
In Subiah v Attorney General of Trinidad and Tobago [2008] UKPC 47, at 11 Lord Bingham noted that when deciding whether to award vindicatory damages, the answer is likely to be influenced by the quantum of the compensatory award, as also by the gravity of the constitutional violation in question to the extent that this is not already reflected in the compensatory award.
See also Durity v Attorney General of Trinidad and Tobago [2008] UKPC 59, 35.
But in Suratt v Attorney General of Trinidad and Tobago (No 2) [2008] UKPC 38 and James v Attorney General of Trinidad and Tobago [2010] UKPC 23 declaratory relief was sufficient.
The availability of damages for constitutional wrongs, and in particular, exemplary or vindicatory damages, is, or has been, controversial in many countries.
In the United States, nominal damages can be awarded for the deprivation of a constitutional right without proof of actual injury, but substantial damages can be awarded only to compensate for actual injury: e.g. Elkins v District of Columbia, 710 F Supp 2d 53, 63 64 (DDC 2010), citing Carey v Piphus, 435 US 247 (1978); Memphis Community School District v Stachura, 477 US 299 (1986).
In Ntandazeli Fose v Minister of Safety and Security in the Constitutional Court of South Africa [1998] 1 LRC 198 Ackermann J considered whether appropriate relief for infringements of the Interim Constitution of South Africa justified, in addition to compensatory damages for assault, an award for vindication of the rights and for punitive damages.
After a full account of the law in other countries he said that he had considerable doubts whether, even where the infringement of the right caused no damage, an award of constitutional damages in order to vindicate the right would be appropriate, and suggested that the court might conclude that a declaratory order combined with a suitable order for costs would be a sufficiently appropriate remedy to vindicate the right even in the absence of an award of damages.
But in any event there was no place for constitutional punitive damages: 68, 69.
In Taunoa v Attorney General [2008] 1 NZLR 429 the Supreme Court of New Zealand was more sympathetic to vindicatory damages.
Elias CJ said (at para 109) that damages in such cases should be limited to what is adequate to mark any additional wrong in the breach and, where appropriate, to deter future breaches.
See also Tipping J at 317 (the interests of the victim require the court to consider what compensation is due, but society is a victim also, and the court must consider also what is necessary by way of vindication to protect fundamental rights and freedoms); also Blanchard J at 258; McGrath J at 370.
The most recent consideration of the question was by the Supreme Court of Canada in Vancouver (City of) v Ward [2010] 2 SCR 28, in relation to damages for breach of the Canadian Charter of Rights and Freedoms.
McLachlin CJ said that Charter damages had the functions of compensation, vindication and deterrence.
By vindication she meant the affirmation of constitutional values, focusing on the harm which breach of the Charter did to society.
The fact that the claimant had not suffered personal loss did not preclude an award of damages where the objectives of vindication or deterrence clearly called for an award, and the view that constitutional damages were only available for pecuniary or physical loss had been widely rejected in other constitutional democracies: 28, 30.
The present claims are not, of course, for constitutional damages.
Exemplary damages are available where the executive has acted in a way which is oppressive, arbitrary or unconstitutional.
In Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29, [2002] 2 AC 122, 63 Lord Nicholls said: The availability of exemplary damages has played a significant role in buttressing civil liberties, in claims for false imprisonment and wrongful arrest.
From time to time cases do arise where awards of compensatory damages are perceived as inadequate.
The nature of the defendants conduct calls for a further response from the courts.
On occasion conscious wrongdoing by a defendant is so outrageous, his disregard for the plaintiffs rights so contumelious, that something more is needed to show that the law will not tolerate such behaviour.
Without an award of exemplary damages, justice will not have been done.
Exemplary damages, as a remedy of last resort, fill what would otherwise be a regrettable lacuna.
But this is not a case for exemplary damages falling within the first head of Rookes v Barnard [1964] AC 1129.
Nor do I consider that the concept of vindicatory damages should be introduced into the law of tort.
In truth, despite the suggestions to the contrary in the Privy Council in Ramanoop and Merson, vindicatory damages are akin to punitive or exemplary damages (as in Attorney General of St Christopher, Nevis and Anguilla v Reynolds [1980] AC 607).
In Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] AC 962 the question was whether there was an abuse of process to allow a claim against the police for the wrongful death of James Ashley to proceed where the police admitted liability for all damages.
The House of Lords held by a majority that for the claim to proceed was not an abuse.
Lord Scott (obiter) suggested that the claim should proceed in order that vindicatory damages could be available.
He referred to Lord Hopes observation in Chester v Afshar [2004] UKLH 41, [2005] 1 AC 134, 87 that the function of the law is to enable rights to be vindicated and to provide remedies when duties have been breached.
Lord Scott said at para 22: Although the principal aim of an award of compensatory damages is to compensate the claimant for loss suffered, there is no reason in principle why an award of compensatory damages should not also fulfil a vindicatory purpose.
But it is difficult to see how compensatory damages can could ever fulfil a vindicatory purpose in a case of alleged assault where liability for the assault were denied and a trial of that issue never took place.
Damages awarded for the purpose of vindication are essentially rights centred, awarded in order to demonstrate that the right in question should not have been infringed at all.
In Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 the Privy Council upheld an award of vindicatory damages in respect of serious misbehaviour by a police officer towards the claimant.
These were not exemplary damages; they were not awarded for any punitive purpose.
They were awarded, as it was put in Merson v Cartwright [2005] UKPC 38, another case in which the Privy Council upheld an award of vindicatory damages, in order to vindicate the right of the complainant to carry on his or her life in the Bahamas free from unjustified executive interference, mistreatment or oppression: para 18.
The rights that had been infringed in the Ramanoop case and in Merson v Cartwright were constitutional rights guaranteed by the respective constitutions of the countries in question.
But the right to life, now guaranteed by article 2 of the European Convention [on Human Rights] and incorporated into our domestic law by the Human Rights Act 1998, is at least equivalent to the constitutional rights for infringement of which vindicatory damages were awarded in Ramanoop and Merson v Cartwright.
But what Lord Hope said in Chester v Afshar was not said in the context of damages, and it seems clear that neither Lord Bingham nor Lord Rodger agreed.
In particular Lord Rodger said that the right to bodily integrity was protected by the tort actionable per se of trespass to the person, where the law vindicates that right by awarding nominal damages (para 60).
To make a separate award for vindicatory damages is to confuse the purpose of damages awards with the nature of the award.
A declaration, or an award of nominal damages, may itself have a vindicatory purpose and effect.
So too a conventional award of damages may serve a vindicatory purpose.
That is the basis of Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309.
As a result of a failed sterilisation negligently performed, the claimant gave birth to a child.
The House of Lords held by a majority that although the health authority was not liable to compensate for the childs upbringing, compensation in respect of stress, trauma and the costs associated with pregnancy and birth were recoverable.
In addition the claimant was awarded an additional sum of 15,000 of which Lord Bingham said: [the] award would not be, and would not be intended to be, compensatory.
It would not be the product of calculation.
But it would not be a nominal, let alone a derisory, award.
It would afford some measure of recognition of the wrong done (para 8).
See also Lords Nicholls, Millett, and Scott: at 17, 123, 148, and the critical views expressed in McGregor, Damages 18th ed (2009), paras 35 29735 299.
Neither the minority dicta in Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] 1 AC 962 nor the award in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309 justify a conclusion that there is a separate head of vindicatory damages in English law.
Consequently I do not consider that there is any basis in the present law for such an award.
Nor do I consider that there is a basis in policy for the creation of a head of vindicatory damages at common law, distinct from the existing law of compensatory or exemplary damages.
I would therefore restrict the remedy in this case to nominal damages for the reasons given by Lord Dyson.
LORD KERR
For the reasons given by Lord Dyson, with which I agree, I too would allow this appeal.
A causation test
False imprisonment is established if there has been a detention and an absence of lawful authority justifying it.
The question whether lawful authority exists is to be determined according to an objective standard.
It either exists or it does not.
It is for this elementary but also fundamental reason that a causation test can have no place in the decision whether imprisonment is false or lawful.
By a causation test in this context I mean a test which involves an examination of whether the persons held in custody could have been lawfully detained.
The fact that a person could have been lawfully detained says nothing on the question whether he was lawfully detained.
The Court of Appeal in the present case decided that, since the claimants could have been detained lawfully had the published policy been applied to them, the fact that an unpublished and unlawful policy was in fact applied was immaterial.
With great respect, this cannot be right.
The unpublished policy was employed in the decision to detain the appellants.
It was clearly material to the decision to detain.
Indeed, it was the foundation for that decision.
An ex post facto conclusion that, had the proper policy been applied, the appellants would have been lawfully detained cannot alter that essential fact.
The inevitability of the finding that the detention was unlawful can be illustrated in this way.
If, some hours after making the decision to detain the appellants (based on the application of the unpublished policy), it was recognised that this did not constitute a legal basis on which they could be held, could their detention be said to be lawful before any consideration was given to whether the application of the published policy would have led to the same result? Surely, at the moment that it became clear that there was no lawful authority for the detention and before any alternative basis on which they might be detained was considered, their detention was unlawful.
It is, I believe, important to recognise that lawful detention has two aspects.
First the decision to detain must be lawful in the sense that it has a sound legal basis and, secondly, it must justify the detention.
This second aspect has found expression in a large number of judgments, perhaps most succinctly in the speech of Lord Hope in R v Governor of Brockhill Prison Ex p Evans (No 2) [2001] 2 AC 19, 32 D where he said it is of the essence of the tort of false imprisonment that the imprisonment is without lawful justification.
It seems to me to be self evident that the justification must relate to the basis on which the detainer has purported to act, and not depend on some abstract grounds wholly different from the actual reasons for detaining.
As Mr Husain QC put it, the emphasis here must be on the right of the detained person not to be detained other than on a lawful basis which justifies the detention.
Detention cannot be justified on some putative basis, unrelated to the actual reasons for it, on which the detention might retrospectively be said to be warranted.
Simply because some ground for lawfully detaining may exist but has not been resorted to by the detaining authority, the detention cannot be said, on that account, to be lawful.
This point was clearly made in Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662.
In that case the plaintiff had been lawfully arrested and detained in a police cell.
A review of his detention as required by statute was not carried out within the prescribed time.
At p 667 B the submission of counsel for the Chief Constable was recorded as being that if circumstances existed which were or would be sufficient to justify continued detention the plaintiff could not fairly be said to be detained without lawful excuse.
That submission was roundly and, in my view, rightly rejected, Clarke LJ saying, As I see it, it is nothing to the point to say that the detention would have been lawful if a review had been carried out or that there were grounds which would have justified continued detention.
Likewise it is nothing to the point in this case that if the decision had been taken on the basis of the published policy, it would have been immune from challenge.
As Professor Cane put it in The Temporal Element in Law (2001) 117 LQR 5, 7 imprisonment can never be justified unless actually [as opposed to hypothetically] authorised by law. (The emphasis and the words enclosed in square brackets are mine).
The matter might be considered on the following hypothetical basis.
Suppose that there were two policies, one lawful published policy for the detention of foreign national prisoners sentenced to more than 5 years imprisonment, the other an unlawful secret policy for detention of those sentenced to more than 2 years imprisonment.
On the respondents case an individual detained under the second policy, who would have been detained under the first policy if it had been applied, has not been detained unlawfully.
I do not consider that such an argument is viable.
A policy may lawfully be devised for the purpose of dealing generally with a regularly occurring species of case but it must always be possible to depart from the policy if the circumstances of an individual case warrant it.
As the author of Wade & Forsyth on Administrative Law 10th ed (2009) at page 270 states: It is a fundamental rule for the exercise of discretionary power that discretion must be brought to bear on every case: each one must be considered on its own merits and decided as the public interest requires at the time.
In the mooted example, consideration would be given to departing from a policy which is different from that which the individual is entitled to have applied to him.
The possible justification for departing from the policy would be considered on a different basis from that which ought properly to determine the question.
This is, in my view, impermissible in public law terms.
A minister exercising his discretion by applying a published policy is acting lawfully.
But if the policy which is applied is unlawful, the exercise of discretion is unlawful.
The individual has not had applied to his case the proper exercise of discretion to which he is entitled.
The application of an unlawful policy will therefore ipso facto render the decision to detain unlawful.
In this context, I consider that it matters not whether the decision is said to be in violation of a public law principle or ultra vires the power to make the decision.
To draw such a distinction would mark a radical departure from how error of law has long been understood.
Again, a short extract from Wade & Forsyth at p 255 makes the point decisively: Void or voidable was a distinction which could formerly be applied without difficulty to the basic distinction between action which was ultra vires and action which was liable to be quashed for error of law on the face of the record.
That distinction no longer survives since the House of Lords [in Anisminic and subsequent cases] declared all error of law to be ultra vires.
The nature of the public law breach required to invalidate the detention
In R (SK Zimbabwe) v Secretary of State for the Home Department [2009] 1 WLR 1527 it was accepted by the appellant that not every type of public law breach, committed after an initially valid detention, would render continued detention unlawful.
On the present appeal the argument on behalf of the detained persons is put thus: a public law error that bears directly on the decision to detain will mean that the authority for detention is ultra vires and unlawful, and will sound in false imprisonment.
But breaches which have no direct bearing on the decision to detain do not have that effect.
Since, therefore, for instance, statutory obligations to permit a detainee to consult with his legal advisers (Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763) or to be provided with food or clothing, or to be held in certain conditions (R v Deputy Governor of Parkhurst Prison Ex p Hague [1992] 1 AC 58) did not bear on the legality of detention, breach of those obligations did not render detention unlawful nor did it give rise to a claim for false imprisonment.
Lord Walker has analysed the existence/exercise of power to detain dichotomy in a way that I find compelling.
This has led him to the conclusion that the essential test as to the validity of continued detention which is said to be beyond the scope of the power to detain is whether there has been a departure from the statutory purpose.
Again, I find his reasoning on this wholly convincing.
I do not agree, however, that it is necessary to establish abuse of power in order to show that the decision is beyond the scope of the power to detain, if by abuse of power it is meant that some deliberate misuse of power is required.
If a review of a persons detention was inadvertently overlooked and it subsequently became clear that, had the review taken place, he would certainly have been released, it surely could not be suggested that the detention that had in the meantime occurred did not constitute false imprisonment.
The statutory purpose of the power to detain foreign nationals after the expiry of their sentence is to facilitate their deportation. (In this connection I agree fully with Lord Dyson in his analysis of the Hardial Singh (R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704) principles and with what he had to say about those principles in R (I) v Secretary of State for the Home Department [2002] EWCA Civ 888, [2003] INLR 196 para 46.) Where the statutory purpose no longer exists, the power to detain falls away.
The means of ascertaining whether the statutory purpose remains achievable is the system of review.
Where that system is operated on the basis of a policy, it is of obvious and critical importance that the policy be transparent and that those who may be detained on foot of it have the opportunity to make informed representations on its application.
Breach of a public law duty which has the effect of undermining the achievement of the statutory purpose will therefore, in my opinion, render the continued detention invalid.
A claim of false imprisonment is the natural, indeed inevitable, entitlement of a person whose detention is no longer justified.
Since the appellants in the present case were detained by the operation of a secret, unpublished policy, an effective system of review of the justification for their detention was not possible.
As a consequence their detention could no longer be said to be justified.
As it seems to me, this approach approximates to the way in which the case was put for the appellants but links it more closely to the vital consideration of the statutory purpose of the power to detain.
Does the award of nominal damages devalue the tort of false imprisonment?
As various members of the court have pointed out, the fact that false imprisonment is a species of trespass to the person and is actionable without proof of special damage must be carefully taken into account in deciding whether nominal damages can ever be considered appropriate.
The impact of a finding that the State has been guilty of false imprisonment (whether or not it is also ordered to pay compensation) should not be underestimated, however.
Such a finding has the effect, in the words of Lady Hale, of mark[ing] the laws recognition that a wrong has been done.
And it is in the unambiguous recognition and declaration by the law that an individual has been falsely imprisoned that the essential value of the entitlement to assert that claim lies.
I do not believe, therefore, that the award of nominal damages will, of itself and as a matter of automatic consequence, bring about a devaluation of the tort.
On the question whether the award of nominal damages or some other measure of compensation is required in false imprisonment claims, I believe that a distinction is clearly merited between those cases where it is plain that the detainees would have been released and those where it can be shown that they would have been lawfully detained, had the correct procedures been followed.
Because false imprisonment is a trespassory tort, it is said that the vindicatory dimension to the assessment of compensation is important.
I shall examine that claim presently but, whatever may be said about its correctness, it is surely right that the actual impact on the individual who has been falsely imprisoned (or perhaps more importantly, the impact that could have been avoided) should feature prominently in the assessment of the appropriate amount of compensation.
Traditionally, the primary function of damages has been to compensate the individual for the loss that he or she has suffered (compensatory damages).
More recently the concept of restitutionary damages has been recognised where damages for the tort are measured according to the gain that the defendant has obtained or the value that the right infringed might have had to the claimant where, for instance, unknown to the claimant, the defendant has used the claimants property.
This category of damages is not relevant here.
A third type of damages (vindicatory damages) may be.
In a number of recent decisions the Judicial Committee of the Privy Council has awarded what might be classified as vindicatory damages where there has been a breach of constitutional rights.
Attorney General for Trinidad and Tobago v Ramanoop [2006] 1 AC 328 is perhaps the leading of these cases.
At para 19 Lord Nicholls, delivering the judgment of the Committee, said : An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach and deter further breaches.
All these elements have a place in this additional award.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
Lord Nicholls recognition that this type of award covered much the same ground as that involved in exemplary or punitive damages is reflected in the more recent decision of the Privy Council in Takitota v Attorney General [2009] UKPC 11 where, at para 15, Lord Carswell said : it would not be appropriate to make an award both by way of exemplary damages and for breach of constitutional rights.
When the vindicatory function of the latter head of damages has been discharged, with the element of deterrence that a substantial award carries with it, the purpose of exemplary damages has largely been achieved.
For the reasons given by Lord Dyson an award of exemplary damages is not warranted in these cases.
If there is any scope for the award of vindicatory damages where exemplary damages are not appropriate, it must be, in my opinion, very limited indeed.
Such an award could only be justified where the declaration that a claimants right has been infringed provides insufficiently emphatic recognition of the seriousness of the defendants default.
That situation does not arise here.
The defendants failures have been thoroughly examined and exposed.
A finding that those failures have led to the false imprisonment of the appellants constitutes a fully adequate acknowledgement of the defendants default.
Since the appellants would have been lawfully detained if the published policy had been applied to them, I agree that no more than a nominal award of damages is appropriate in their cases.
DISSENTING JUDGMENTS LORD PHILLIPS
Introduction
The appellants are foreign nationals who have served sentences of imprisonment in this country (FNPs) They were detained pursuant to Schedule 3 of the Immigration Act 1971 (Schedule 3).
They challenge the legality of their detention.
At the times of the decisions to detain them there existed a policy published by the Secretary of State setting out the circumstances in which her power to detain immigrants would be exercised.
Had the decision maker applied this policy he would have detained each of the appellants.
In the event, however, he decided to detain each by the application of a policy which Mr Beloff QC for the Secretary of State has conceded was unlawful.
Whether the lawful or unlawful policy had been applied the decision would have been the same.
The principal common issues raised by these appeals are first whether, in these circumstances, the detention of each of the appellants was unlawful; secondly whether, if it was unlawful, the result was that the detention of each of the appellants constituted the tort of false imprisonment and; if so, thirdly, whether and on what basis the appellants are entitled to damages.
I have placed the words lawful and unlawful in parentheses because these appeals raise the question of whether there is a material difference between a policy, or a decision, or an act which is unlawful because it violates principles of public law and a policy, or a decision, or an act which is unlawful because it is ultra vires.
In the case of Mr Lumba there is a second issue.
This is whether his detention was or became unlawful because it infringed what have become known as the Hardial Singh principles which date back to the decision of Woolf J in the case of that name over a quarter of a century ago.
Lord Dyson at para 22 of his judgment rightly states that it has been common ground in these appeals that he correctly summarised the effect of Hardial Singh in the four principles which he set out in R (I) v the Secretary of State for the Home Department [2003] INLR 196.
As I shall explain I have reservations about the first two principles which, so far as I am aware, have never been the subject of debate.
Lord Dyson has set out the relevant facts and statutory provisions and I can turn immediately to the common issues raised by these appeals.
Lord Dyson has held that the Secretary of State committed the tort of false imprisonment in relation to each appellant because the decision to detain him was reached in violation of public law.
The violation was the failure to apply the Secretary of States published policy and the application of a policy to which there were various objections of public law.
He has concluded that, because the reasoning offended the requirements of public law, the acts that the decision maker decided upon were beyond his powers, or ultra vires.
I have come to a different conclusion.
I propose in this judgment to address the following questions.
First, what restrictions are implicit, as a matter of statutory interpretation, in the power to detain conferred on the Secretary of State by Schedule 3? Second, what were the policies published by the Secretary of State in relation to the detention of immigrants? Third, what were the practical implications of those policies? Fourth, what were the legal implications of those policies? Fifth, was the detention of each of the appellants contrary to those policies? Sixth, what were the defects in the policy applied when deciding whether the appellants should be detained? Seventh, what were the circumstances in which this policy was applied? Eighth, did the application of that policy render the detention of the appellants unlawful? If so, ninth, are the appellants entitled to damages for false imprisonment?
Implied limitations on the power to detain conferred by Schedule 3
I refer to the four principles that Lord Dyson states at para 22 of his judgment are derived from Hardial Singh.
The third and fourth principles were an essential part of the reasoning that led Woolf J to the decision that he reached in that case.
They are not open to question.
This is not true of the first two.
The first is that the Secretary of State must intend to deport the person and can only use the power to detain for that purpose.
Lord Dyson explains that by this he means that the power to detain must be exercised for the prescribed purpose of facilitating deportation.
The second principle is that the deportee may only be detained for a period that is reasonable in all the circumstances.
Neither of these principles was stated in these terms in Hardial Singh, although I accept that they are possible interpretations of the words used by Woolf J. Neither of these principles was essential to the conclusion that he reached.
I do not myself consider that either principle can properly be derived from his judgment.
The applicant in Hardial Singh sought a writ of habeas corpus.
He was an Indian who had entered the United Kingdom lawfully and been granted indefinite leave to remain.
He had been convicted of offences of burglary and been sentenced to a total of two years imprisonment.
Before he was due to be released he was served with a deportation order on behalf of the Secretary of State.
He was due for release on 20 July 1983 but was then detained by the Secretary of State pursuant to paragraph 2(3) of Schedule 3.
The reason given for his detention was the risk that, if released, he would abscond.
Because of delay on the part of the Secretary of State in making arrangements for his return to India he was still detained in December 1983.
In these circumstances Woolf J, at p 706, said this about the power of detention under Schedule 3: Although the power which is given to the Secretary of State in paragraph 2 to detain individuals is not subject to any express limitation of time, I am quite satisfied that it is subject to limitations.
First of all, it can only authorise detention if the individual is being detained in one case pending the making of a deportation order and, in the other case, pending his removal.
It cannot be used for any other purpose.
Second, as the power is given in order to enable the machinery of deportation to be carried out, I regard the power of detention as being impliedly limited to a period which is reasonably necessary for that purpose.
The period which is reasonable will depend on the circumstances of the particular case.
What is more, if there is a situation where it is apparent to the Secretary of State that he is not going to be able to operate the machinery provided in the Act for removing persons who are intended to be deported within a reasonable period, it seems to me that it would be wrong for the Secretary of State to seek to exercise his power of detention.
In addition, I would regard it as implicit that the Secretary of State should exercise all reasonable expedition to ensure that the steps are taken which will be necessary to ensure the removal of the individual within a reasonable time.
There is a degree of ambiguity in the earlier part of this passage.
Pending the making of a deportation order is not a purpose.
Nor is pending his removal.
What then did Woolf J mean when he said that the power to remove cannot be used for any other purpose? He goes on to say that the power is given to enable the machinery of deportation to be carried out and that the power of detention is limited to such period as is reasonably necessary for that purpose.
If one takes these two passages together it is possible to interpret Woolf J as saying that you can only detain a person for the purpose of facilitating deportation, as Lord Dyson has done.
It is, however, also possible to read him as saying that you can only detain a person while you are pursuing the objective of deporting him and that is how I interpret what he said.
I believe that the interpretation given by Lord Dyson places an unjustified restriction on the Secretary of States power of detention.
It is obvious that detention will almost always make the practical task of deporting the detainee easier to arrange.
Most deportees will be in this country through choice and cannot reasonably be expected to do anything to facilitate their deportation even if they do not try actively to prevent this.
It is open to the Secretary of State to detain a person in order to facilitate his deportation and this is often the, or one of the, reasons for doing so.
But, as I shall explain, I do not consider that detention of a deportee will only be lawful if used for this purpose.
The second principle identified by Lord Dyson is that the deportee may only be detained for a period that is reasonable in all the circumstances.
This I understand to be derived from Woolf Js statement The period which is reasonable will depend upon all the circumstances.
But that sentence was immediately preceded by the statement that the power to detain was impliedly limited to a period that was reasonably necessary for the purpose of enabling the machinery of deportation to be carried out.
Thus I believe that the circumstances that Woolf J had in mind were restricted to those that related to the task of effecting deportation.
I am fortified in this belief by the fact that Woolf J went on to cite R v Governor of Richmond Remand Centre, Ex p Asghar [1971] 1 WLR 129.
In that case the Secretary of State had detained two persons who were awaiting removal with the object that they should testify in a pending criminal trial.
Lord Parker CJ rejected the suggestion that the detention could be justified as reasonable in these circumstances, stating at p 132 it does seem to me that while a reasonable time is contemplated between the giving of the directions and the final removal, that is a reasonable time necessary to effect the physical removal.
In Hardial Singh Woolf J was concerned only with the length of time that was reasonably necessary to effect deportation and the relationship that this bore to the power to detain.
He was not concerned with the question of whether there were further implied restrictions on the power to detain during that period.
The extent of the power to detain pending deportation was an important, albeit not the most important, issue in Chahal v United Kingdom where the nature of the domestic proceedings is apparent from the judgment of the European Court of Human Rights when the case reached Strasbourg (1996) 23 EHRR 413.
Mr Chahal was a Sikh separatist leader who had been granted indefinite leave to remain in the United Kingdom.
On 14 August 1990 the Secretary of State decided that he ought to be deported because his continued presence in the United Kingdom was unconducive to the public good for reasons of national security and other reasons of a political nature, namely the international fight against terrorism.
Two days later he was served with a notice of intention to deport.
He was then detained pursuant to Schedule 3 and remained in detention up to the time of the judgment of the Strasbourg Court.
During this time he pursued an unsuccessful attempt to be granted asylum.
He also, by an application for judicial review, challenged his proposed deportation on the ground that this would violate article 3 of the Convention because it would expose him to the risk of torture and persecution if returned to India.
He was unsuccessful in the Divisional Court and the Court of Appeal and was refused leave to appeal to the House of Lords.
He then applied to Strasbourg, alleging breaches of articles 3 and 5 of the Convention.
In November 1995, while he was awaiting a hearing at Strasbourg, he challenged his continued detention by seeking from the Divisional Court a writ of habeas corpus and judicial review.
The Secretary of State opposed his application on the grounds that he could not safely be released because of the substantial threat that he posed to national security.
It does not appear to have been suggested that his lengthy detention was necessary to facilitate his deportation.
His application was refused on the ground that there was no reason to believe that the Secretary of State did not have good reason for his apprehension.
MacPherson J ruled that the detention per se was plainly lawful because the Secretary of State [had] the power to detain an individual who [was] the subject of a decision to make a deportation order ( para 43).
It is relevant to see how the Strasbourg Court addressed this matter, if only because any interpretation of Schedule 3 must, if possible, be compatible with the requirements of the Convention.
Article 5(1) of the Convention provides, in so far as material: 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: (f) the lawful arrest or detentionof a person against whom action is being taken with a view to deportation The court said this as to the effect of that provision: 112.
The court recalls that it is not in dispute that Mr Chahal has been detained with a view to deportation within the meaning of article 5(1)(f).
Article 5(1)(f) does not demand that the detention of a person against whom action is being taken with a view to deportation be reasonably considered necessary, for example to prevent his committing an offence or fleeing; in this respect article 5(1)(f) provides a different level of protection from article 5(1)(c).
Indeed all that is required under this provision is that action is being taken with a view to deportation.
It is therefore immaterial, for the purposes of article 5(1)(f), whether the underlying decision to expel can be justified under national or Convention law. 113.
The court recalls, however, that any deprivation of liberty under article 5(1)(f) will be justified only for as long as deportation proceedings are in progress.
If such proceedings are not prosecuted with due diligence, the detention will cease to be permissible under article 5(1)(f).
These observations echo the Hardial Singh principles, as I would interpret them.
The court went on to consider whether the asylum proceedings, which had delayed the stage at which Mr Chahal would have been deported, had taken an excessive length of time, and concluded that they had not.
This indicates that the Strasbourg Court, when considering the time reasonably needed for deportation, accepted that this would be prolonged by delay reasonably attributable to attempts to obtain asylum.
The court then considered the requirement that the detention should be lawful.
It observed at para 119 that there was no doubt that it was lawful under national law but that, because of the extremely long period during which Mr Chahal had been detained it was also necessary to consider whether there existed sufficient guarantees against arbitrariness.
At para 122 the court concluded that the domestic procedure under which Mr Chahals appeal against deportation had been considered by an advisory panel provided an adequate guarantee that there were at least prima facie grounds for believing that if Mr Chahal were at liberty, national security would be put at risk and thus, that the executive had not acted arbitrarily when it ordered him to be kept in detention.
I am not able to accept that under domestic law it had been an implicit requirement of Schedule 3 that Mr Chahals detention was necessary to facilitate his deportation.
Provided that he was being detained with a view to his removal as soon as reasonably possible I consider that the Secretary of State was entitled to detain him pending that removal on the ground that he would pose a terrorist threat if released.
The Hardial Singh principles were applied by analogy by the Judicial Committee of the Privy Council when considering the legitimacy under Hong Kong legislation of the detention of four boat people from Vietnam in Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97.
Tens of thousands of these people had arrived unlawfully in Hong Kong.
They were steadily being repatriated, but this was taking a long time.
Section 2 of the Immigration (Amendment) Ordinance 1991 added to the relevant legislation a provision designed expressly to deal with this situation: The detention of a person under this section shall not be unlawful by reason of the period of the detention if that period is reasonable having regard to all the circumstances affecting that persons detention, including (a) in the case of a person being detained pending a decision under section 13A(1) to grant or refuse him permission to remain in Hong Kong as a refugee (i) the number of persons being detained pending decisions under section 13A(1) whether to grant or refuse them such permission; and (ii) the manpower and financial resources allocated to carry out the work involved in making all such decisions; (b) in the case of a person being detained pending his removal from Hong Kong (i) the extent to which it is possible to make arrangements to effect his removal; and (ii) whether or not the person has declined arrangements made or proposed for his removal. (p 106).
Lord Browne Wilkinson, giving the advice of the Board, said this, at p 111, under the heading The Hardial Singh principles: Section 13D(1) confers a power to detain a Vietnamese migrant pending his removal from Hong Kong.
Their Lordships have no doubt that in conferring such a power to interfere with individual liberty, the legislature intended that such power could only be exercised reasonably and that accordingly it was implicitly so limited.
The principles enunciated by Woolf J in the Hardial Singh case [1984] 1 WLR 704 are statements of the limitations on a statutory power of detention pending removal.
In the absence of contrary indications in the statute which confers the power to detain pending removal their Lordships agree with the principles stated by Woolf J. First, the power can only be exercised during the period necessary, in all the circumstances of the particular case, to effect removal.
Secondly, if it becomes clear that removal is not going to be possible within a reasonable time, further detention is not authorised.
Thirdly, the person seeking to exercise the power of detention must take all reasonable steps within his power to ensure the removal within a reasonable time.
This accords with my reading of Hardial Singh.
His Lordship went on to say, however: Their Lordships are unable to agree with the Court of Appeal of Hong Kong that there is any conflict between the Hardial Singh principles and the provisions of section 13D. Section 13D(1A), which was inserted in 1991, expressly envisages that the exercise of the power of detention conferred by section 13D(1) will be unlawful if the period of detention is unreasonable.
It expressly provides that The detentionshall not be unlawful by reason of the period of the detention if that period is reasonable having regard to (Emphasis added.) What section 13D(1A) does is to provide expressly that, in deciding whether or not the period is reasonable, regard shall be had to all the circumstances including (in the case of a person detained pending his removal from Hong Kong) the extent to which it is possible to make arrangements to effect his removal and whether or not the person has declined arrangements made or proposed for his removal.
Therefore the subsection is expressly based on the requirement that detention must be reasonable in all the circumstances (the Hardial Singh principles) but imposes specific requirements that in judging such reasonableness those two factors are to be taken into account.
The shorthand summary of the Hardial Singh principles as detention must be reasonable in all the circumstances was made in the context of those circumstances that affected the time reasonably necessary to effect removal and, just as in the case of Hardial Singh itself, I would restrict its ambit to those circumstances.
This I believe was, and remained, the understanding of some, at least, of the judges dealing with claims in respect of the detention of immigrants in the Administrative Court.
Thus in R (Konan) v Secretary of State for the Home Department [2004] EWHC 22 (Admin) Collins J, who had appeared as counsel in Hardial Singh, held at para 21: The power to detain pending removal is not dependent on a fear of absconding or of any other misconduct by the person in question.
Provided it is exercised for the purpose of removal, it is lawful.
It must be exercised reasonably, but reasonableness in this context relates to whether removal can be achieved within a reasonable time: see R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 and Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97 as applied in R (Saadi) v Secretary of State for the Home Department [[2002] 1 WLR 356].
R (Saadi) v Secretary of State for the Home Department [2001] EWCA Civ 1512; [2002] 1 WLR 356 raised the question of the legality of the detention at Oakington Reception Centre for up to 10 days of aliens seeking leave to enter whose cases appeared susceptible of speedy processing.
The power to detain that was relied on was that afforded by paragraph 16(1) of Schedule 2 to the 1971 Act.
Paragraph 2 provides that an immigration officer may examine any person arriving in the United Kingdom to determine whether he should be given leave to enter.
Paragraph 16(1) provides: A person who may be required to submit to examination under paragraph 2 above may be detained under the authority of an immigration officer pending his examination and pending a decision to give or refuse him leave to enter.
The Court of Appeal, in a judgment which I delivered, considered both the scope of the power to detain afforded by this paragraph and the effect of article 5(1)(f) of the Human Rights Convention.
As to the former the court made the following observations: 14.
Collins J concluded that the only limitation on the power to detain pending examination and the decision whether to grant or refuse leave to enter is that the detention must be for a reasonable time.
For the Secretary of State, the Attorney General supported this conclusion.
He argued that the power to detain persisted for so long as was reasonably necessary to conduct the examination and to reach a decision whether or not to grant leave to enter.
As a matter of statutory interpretation we accept this submission.
Were it not correct, the power to grant temporary admission would also be liable to come to an end before an examination could reasonably be completed and a decision whether to grant or refuse leave to enter reasonably be taken. 15.
We are not aware that it has ever been the policy of the Secretary of State that applicants for leave to enter should be detained pending the decision of their applications, however long that might take.
A more liberal policy has been adopted whereby he has approved the exercise of the power to grant temporary admission in place of detention.
If the basis upon which immigration officers are detaining asylum seekers at Oakington is in conflict with this policy, then, under established principles of public law, they are acting unlawfully.
As to the Convention the court held: 66.
We consider that the test of proportionality required by article 5(1)(f) requires the Court simply to consider whether the process of considering an asylum application, or arranging a deportation, has gone on too long to justify the detention of the person concerned having regard to the conditions in which the person is detained and any special circumstances affecting him or her.
Applying that test no disproportionality is demonstrated in this case.
This was not a test of proportionality that the Strasbourg Court had laid down in Chahal and it received no support from that Court when Saadi reached it, as I shall show.
Giving the only reasoned speech in a unanimous decision of the House of Lords [2002] UKHL 41; [2002] 1 WLR 3131 Lord Slynn of Hadley referred at para 18 to a statement by the Oakington Project Manager that he accepted that an important consideration in relation to detention powers was that no detention should be longer than reasonably necessary.
Lord Slynn went on to express the view at para 22: As the judge and the Court of Appeal stressed, paragraph 16 of Schedule 2 gives power to detain pending examination and a decision; that in my view means for the period up to the time when the examination is concluded and a decision taken.
There is no qualification that the Secretary of State must show that it is necessary to detain for the purposes of examination in that the examination could not otherwise be carried out since applicants would run away.
Nor is it limited to those who cannot for whatever reason appropriately be granted temporary admission.
The period of detention in order to arrive at a decision must however be reasonable in all the circumstances.
The last sentence reflected Government policy, as accepted by the Project Manager.
One of the applicants in Saadi took his case to Strasbourg (2008) 47 EHRR 427.
He claimed that his detention at Oakington had infringed article 5(1)(f).
Liberty, and other interveners, contended that a test of necessity and proportionality should be applied to article 5(1)(f), so that an asylum seeker could only be detained if, but for such detention, he would attempt to effect an unauthorised entry into the country.
The Grand Chamber rejected this submission.
Dealing first with the interpretation of the express provisions of article 5(1)(f) it said: 64.
Whilst the general rule set out in article 5(1) is that everyone has the right to liberty, article 5(1)(f) provides an exception to that general rule, permitting states to control the liberty of aliens in an immigration context.
As the court has remarked before, subject to their obligations under the Convention, states enjoy an undeniable sovereign right to control aliens entry into and residence in their territory.
It is a necessary adjunct to this right that states are permitted to detain would be immigrants who have applied for permission to enter, whether by way of asylum or not.
It is evident from the tenor of the judgment in Amuur that the detention of potential immigrants, including asylum seekers, is capable of being compatible with article 5(1)(f). 65.
On this point, the Grand Chamber agrees with the Court of Appeal, the House of Lords and the Chamber, that until a state has authorised entry to the country, any entry is unauthorised and the detention of a person who wishes to effect entry and who needs but does not yet have authorisation to do so, can be, without any distortion of language, to prevent his effecting an unauthorised entry.
It does not accept that, as soon as an asylum seeker has surrendered himself to the immigration authorities, he is seeking to effect an authorised entry, with the result that detention cannot be justified under the first limb of article 5(1)(f).
To interpret the first limb of article 5(1)(f) as permitting detention only of a person who is shown to be trying to evade entry restrictions would be to place too narrow a construction on the terms of the provision and on the power of the state to exercise its undeniable right of control referred to above.
As to the argument that a test of proportionality applied to the detention, the Court, referring to Chahal, held: 72.
Similarly, where a person has been detained under article 5(1)(f), the Grand Chamber, interpreting the second limb of this sub paragraph, held that, as long as a person was being detained with a view to deportation, that is, as long as action [was] being taken with a view to deportation, there was no requirement that the detention be reasonably considered necessary, for example to prevent the person concerned from committing an offence or fleeing.
The Grand Chamber further held in Chahal that the principle of proportionality applied to detention under article 5(1)(f) only to the extent that the detention should not continue for an unreasonable length of time; thus, it held that [A]ny deprivation of liberty under article 5(1)(f) will be justified only for as long as deportation proceedings are in progress.
If such proceedings are not prosecuted with due diligence, the detention will cease to be permissible. 73.
With regard to the foregoing, the court considers that the principle that detention should not be arbitrary must apply to detention under the first limb of article 5(1)(f) in the same manner as it applies to detention under the second limb.
Since states enjoy the right to control equally an aliens entry into and residence in their country (see the cases cited in para 63 above), it would be artificial to apply a different proportionality test to cases of detention at the point of entry than that which applies to deportation, extradition or expulsion of a person already in the country. 74.
To avoid being branded as arbitrary, therefore, such detention must be carried out in good faith; it must be closely connected to the purpose of preventing unauthorised entry of the person to the country; the place and conditions of detention should be appropriate, bearing in mind that: [T]he measure is applicable not to those who have committed criminal offences but to aliens who, often fearing for their lives, have fled from their own country; and the length of the detention should not exceed that reasonably required for the purpose pursued.
This passage reinforces the conclusions of the court in Chahal.
Where a person is detained pending deportation, the only proportionality requirement that Strasbourg imposes, if indeed it is right so to describe it, is that the detention should not be for longer than is reasonably necessary to effect the deportation.
Added to this, however, is the important requirement that the exercise of the power to detain must not be arbitrary.
Applying this principle the European Commission of Human Rights held manifestly inadmissible an application of infringement of article 5 by a man who had been detained for five years while he used every means to avoid extradition to Hong Kong.
See Osman v United Kingdom (Application No 15933/89) (unreported) 14 January 1991.
The most recent pronouncement of the Grand Chamber on article 5(1)(f) is to be found in A v United Kingdom (2009) 49 EHRR 625, where it was held that article 5(1)(f) did not justify detention of the famous Belmarsh detainees.
At para 164 the Grand Chamber stated: To avoid being branded as arbitrary, detention under article 5(1)(f) must be carried out in good faith; it must be closely connected to the ground of detention relied on by the Government; the place and conditions of detention should be appropriate; and the length of the detention should not exceed that reasonably required for the purpose pursued.
Against this background of Strasbourg jurisprudence, I return to domestic consideration of the Hardial Singh principles.
In R(I) v Secretary of State for the Home Department [2003] INLR 196 the appellant was an Afghani asylum seeker who had been given exceptional leave to remain.
He was then convicted of indecent assaults and sentenced to 3 years imprisonment with a recommendation for deportation.
The Secretary of State made a deportation order and detained him pursuant to paragraph 2(3) of Schedule 3 from February 2001 to May 2002.
The delay occurred because practical difficulties had caused the Secretary of State to cease removing nationals to that country.
He claimed that his further detention was unlawful as there was no reasonable possibility of his being deported within a reasonable period.
This raised the question of how such a reasonable period fell to be calculated.
Simon Brown LJ addressed three issues of principle that had arisen.
The first was the relevance of the fact that he was likely to go to ground and re offend if released.
His counsel contended that this was irrelevant to the question of whether removal would be possible within a reasonable time.
Simon Brown LJ disagreed.
He held at para 29: The likelihood or otherwise of the detainee absconding and/or re offending seems to me to be an obviously relevant circumstance.
If, say, one could predict with a high degree of certainty that, upon release, the detainee would commit murder or mayhem, that to my mind would justify allowing the Secretary of State a substantially longer period of time within which to arrange the detainees removal abroad.
The second issue was whether it was relevant that the appellant refused to accept voluntary repatriation.
Simon Brown LJ held that it was.
The third issue was whether the calculation of the reasonable period should take account of the fact that the appellant had been making asylum applications.
Simon Brown LJ held that it should not, because it would not have been possible to deport him in any event.
The conclusion that he formed at para 37 was that because the Secretary of State could not establish more than a hope of being able to remove him by the summer substantially more in the way of a risk of re offending (and not merely a risk of absconding) than exists here would in my judgment be necessary to have justified continuing his detention for an indeterminate further period.
Mummery LJ gave a short dissent on the facts rather than the applicable principles.
Dyson LJ agreed with Simon Brown LJ.
He set out the four principles that he derived from Hardial Singh in the same form as he has in his judgment in the present case.
He then made the following observations about the application of those principles. 47.
Principles (ii) and (iii) are conceptually distinct.
Principle (ii) is that the Secretary of State may not lawfully detain a person pending removal for longer than a reasonable period.
Once a reasonable period has expired, the detained person must be released.
But there may be circumstances where, although a reasonable period has not yet expired, it becomes clear that the Secretary of State will not be able to deport the detained person within a reasonable period.
In that event, principle (iii) applies.
Thus, once it becomes apparent that the Secretary of State will not be able to effect the deportation within a reasonable period, the detention becomes unlawful even if the reasonable period has not yet expired. 48.
It is not possible or desirable to produce an exhaustive list of all the circumstances that are, or may be, relevant to the question of how long it is reasonable for the Secretary of State to detain a person pending deportation pursuant to paragraph 2(3) of Schedule 3 to the Immigration Act 1971.
But in my view they include at least: the length of the period of detention; the nature of the obstacles which stand in the path of the Secretary of State preventing a deportation; the diligence, speed and effectiveness of the steps taken by the Secretary of State to surmount such obstacles; the conditions in which the detained person is being kept; the effect of detention on him and his family; the risk that if he is released from detention he will abscond; and the danger that, if released, he will commit criminal offences. 49.
Simon Brown LJ has identified the three main points of principle which were in issue in the present appeal, namely, the risk of absconding and reoffending, the appellants refusal to accept voluntary repatriation, and the asylum claim and appeal.
As I have already stated, the risk of absconding and offending or reoffending is relevant to the reasonableness of the length of a detention pending deportation.
It is, as Simon Brown LJ says an obviously relevant circumstance (at para 29): see also per Lord Phillips of Worth Matravers MR in R v (Saadi) v Secretary of State for the Home Department [2001] EWCA Civ 1512, [2002] 1 WLR 356, at paras 65 67.
I have accepted that it is possible to derive Lord Dysons first two principles from the language used by Woolf J in Hardial Singh, and explained why I would not do so.
The passage from the judgment of the Court of Appeal in Saadi that he cites was dealing with the effect of article 5(1)(f) of the Convention and, as I have shown, advanced a test of proportionality which Strasbourg did not endorse.
The problems that have been raised by these appeals suggest that Strasbourg may have had very good reason not to do so.
The conceptual difficulty inherent in the first two principles identified by Lord Dyson is apparent in the passage that he has quoted at para 107 from the judgment of Toulson LJ in A.
If the risk of re offending can be the determinant factor in deciding how long it is reasonable to detain a FNP why should it not be the determinant, or even the sole reason for detaining him in the first place? Why should it be a pre condition to the power to detain that its use is to facilitate deportation, even if this is not the real reason for detention, as in the case of Chahal? It is that logical inconsistency that underlies the challenge that is made on behalf of Mr Lumba in the present case to the legitimacy of having regard to the risk of his re offending.
The interpretation that I would give to the power to detain conferred by the 1971 Act is as follows.
The scheme of the Act is simple, and reflects article 5(1)(f) of the Convention.
The Secretary of State is not required to permit an immigrant who has unlawfully entered this country to roam free.
Schedule 3 permits her to detain the immigrant for as long as she reasonably requires in order to decide whether he should have leave to enter.
If he is not given leave to enter she may detain him for as long as she reasonably requires to effect his deportation, provided always that deportation is a practical possibility.
If the 1971 Act confers powers as wide as this on the Secretary of State, she has not availed herself of them.
She adopted a policy under which, on her calculation, only 1.5% of those who were liable to detention under her immigration powers were actually detained, see para 285 below.
Having chosen to discriminate between those whom she detains and those whom she does not, she is subject to the established principles of public law in choosing between the two.
It is these principles which constrain the exercise of her power to detain rather than restrictions to be implied into the 1971 Act as a matter of statutory interpretation.
They include the obligation to act rationally, an obligation also imposed by article 5 of the Convention.
It is rational and lawful to detain a FNP pending deportation to prevent his re offending or because he would pose a security risk if at large, just as it is rational and lawful to detain him because of the risk of his absconding.
Public law principles include the restraint that a published policy imposes on executive action, a topic that I am about to consider.
As I shall show, the guidance published by the Secretary of State includes a requirement to comply with Lord Dysons first two principles, so that to that extent their enunciation has been self fulfilling.
The policies published by the Secretary of State in relation to the detention of immigrants.
Lord Dyson has referred to the two White Papers in which in 1998 and 2002 the Secretary of State published her policies in relation to detention.
The first of these, Fairer, Faster, Firmer informed the reader at the beginning of Chapter 12 dealing with Detention that at any one time, only about 1.5% of those liable to detention under immigration powers were actually detained.
The White Paper dealt with the criteria to be adopted in identifying this small minority of immigrants who were to be detained.
FNPs awaiting deportation will have formed only a tiny proportion of those liable to detention under those powers.
It is, perhaps, not surprising that the White Paper predominantly addressed the position of the vast majority of immigrants who were not criminals.
Thus, in the passage quoted by Lord Dyson at para 11 of his judgment the White Paper spoke of a presumption in favour of granting temporary admission or release, terms that were not appropriate to those recommended for deportation.
In dealing with Detention Criteria at 12.3 the White Paper identified three circumstances where detention would normally be justified.
The first was where there was a reasonable belief that the individual would fail to keep to the terms of temporary admission or temporary release.
The second was to clarify a persons identity and the basis of their claim on entry.
The third was where removal was imminent.
12.11 dealt with detention in relation to removals.
It focussed entirely on detention to facilitate removals.
Nothing in that White Paper gave any suggestion that those awaiting deportation might be detained because of concern as to the way they might behave if permitted to be at large.
There was no focus on the provisions of Schedule 3.
These comments are equally true of the second White Paper, Secure Borders, Safe Haven, save that this had the following statement in para 4.80 under the heading Serious Criminals: We will explore what more we can do, as other countries have done, to stop serious criminals abusing our asylum system by seeking to remain in the UK having completed a custodial sentence.
There is there no indication that such criminals would be liable to detention pending deportation.
The two White Papers dealt in broad terms with detention.
They were supplemented by Chapter 38, headed Detention and Temporary Release, of the Operational Enforcement Manual, which was a published document, available to the public on the internet.
The court was provided with the version that was current in April 2006.
This included guidance on the law as it was understood to be.
Para 38.1.1.1 gave the following summary of the effect of article 5 and the domestic case law: (a) The relevant power to detain must only be used for the specific purpose for which it is authorised.
This means that a person may only be detained under immigration powers for the purpose of preventing his unauthorised entry or with a view to his removal (not necessarily deportation).
Detention for other purposes, where detention is not for the purposes of preventing unauthorised entry or effecting removal of the individual concerned, is not compatible with article 5 and would be unlawful in domestic law; (b) The detention may only continue for a period that is reasonable in all the circumstances; (c) If before the expiry of the reasonable period it becomes apparent that the purpose of the power, for example, removal, cannot be effected within that reasonable period, the power to detain should not be exercised ; and (d) The detaining authority (be it the immigration officer or the Secretary of State), should act with reasonable diligence and expedition to effect removal (or whatever the purpose of the power in question is).
This summary of the law reflected aspects of the decision of the Court of Appeal in I with which I have differed.
None the less the principles that it expounded were consonant with the general policy of the Secretary of State that there was a presumption against detention.
Para 38.3 set out the factors that influenced a decision to detain.
Those in favour of detention were all matters that bore on the likelihood that the individual would abscond or go to ground if not detained.
The manual set out the contents of a standard form IS9IR.
This set out 6 possible reasons for detention, with instructions that the Immigration Officer should tick the relevant reasons.
In contrast to the general focus on the likelihood of absconding, one of these stated Your release is not considered conducive to the public good.
Factors forming the basis of the reasons also had to be ticked.
These included You are excluded from the United Kingdom at the personal direction of the Secretary of State.
You are detained for reasons of national security, the reasons are/will be set out in another letter.
Your previously unacceptable character, conduct or associates.
Para 38.5.2 was headed Authority to detain persons subject to deportation action.
It summarised the effect of Schedule 3 and required that decisions whether to detain pursuant to the provisions of the Schedule should be made at senior caseworker level in CCT.
No specific guidance was given, however, as to the criteria that should be applied when making those decisions.
In summary, the general message of these published policies was that detention should be used sparingly and, in the case of detention pending removal or deportation, only where necessary to facilitate this in order to prevent individuals from absconding or otherwise evading the immigration system.
Officials were instructed that the law was as held by the Court of Appeal in I and, in particular, that detention could only continue for a period that was reasonable in all the circumstances.
Form IS9IR raised, however, the possibility that detention could be used for reasons of national security or where the individuals previous character, conduct or associates were unacceptable.
Despite this, there was no specific guidance as to the approach to be adopted to criminals whom the Secretary of State had decided to deport.
Not only was it open to the Secretary of State to decide to deport, and to detain pending deportation, criminals in respect of whom the court had made no recommendation, she also had to decide whether to accept recommendations for deportation made by the courts.
Under paragraph 2(1) of Schedule 3 those subject to a recommendation remained detained pending the Secretary of States decision whether to deport them unless released by the court or granted bail pursuant to section 54 of the Immigration and Asylum Act 1999, which came into force in February 2003.
It may have been thought that paragraph 2(1) created a presumption in favour of detention of FNPs pending deportation but in R (Sedrati) v Secretary of State for the Home Department [2001] EWHC Admin 418, with the agreement of counsel for the Secretary of State, Moses J made a declaration that there was no such presumption.
What then, under the Secretary of States published policies, was the position of FNPs whom the Secretary of State decided to deport? It seems to me that many of these were likely to tick the boxes of those who, exceptionally, could properly be detained in accordance with those policies.
They were in this country because this was where they had chosen to live.
They had committed offences that had led the Secretary of State to conclude that their continued presence was no longer conducive to the public good.
Most would be unlikely willingly to submit to deportation.
There would be a risk both of re offending and of absconding.
As Lord Dyson has explained at paras 14 and 15 of his judgment, on 9 September 2008 the Enforcement Instructions and Guidance, which had replaced the Operational Enforcement Manual, was amended so as to lay down a presumption in favour of detaining immigrants where the deportation criteria were met in order to protect the public from harm and the particular risk of absconding in these cases.
I agree with the Court of Appeal and with Lord Dyson that this amendment to her policy was one that it was open to the Secretary of State to make.
However, Davis J, at first instance, ruled to the contrary and this led the Secretary of State to withdraw this amendment.
The UK Borders Act 2007 has since made provision by section 32 for automatic deportation of foreign criminals in specified circumstances.
Section 36 requires the Secretary of State to exercise a power of detention of those being deported under section 32 unless in the circumstances the Secretary of State considers it inappropriate.
These provisions were not in force at the time of the events that have given rise to these appeals.
There is thus a picture of a series of changes to policy, and of legislation, that has been influenced by decisions of the courts, not all of which have been sound.
The practical implications of the policies
Under this heading I propose to consider the practical implications of complying with the Secretary of States published policies, including her directions as to the effect of article 5 and our domestic case law.
Compliance with the Hardial Singh guidelines, even as I have interpreted them, gives rise to some practical difficulties.
Detention pending deportation is permissible for a lengthy period provided that the Secretary of State is taking reasonable steps to effect deportation and provided that there is a reasonable prospect that deportation will be possible.
It is the latter proviso that raises particular difficulties for the possibility of deportation may vary from time to time.
R (Khadir) v Secretary of State for the Home Department [2005] UKHL 39; [2006] 1 AC 207 illustrates this problem.
In the case of each detainee it is necessary to keep the practicability of deportation under review.
This problem is made more difficult if there is a requirement to detain for no longer than is reasonable in all the circumstances, where those circumstances include the nature of the crimes committed by the FNP and the degree of risk of re offending.
The assessment of what period of detention is reasonable in all the circumstances is not an easy one and there will inevitably be cases where, if subjected to judicial review, it will be held not to have been correctly answered.
Furthermore the material circumstances are likely to be subject to frequent change, so that frequent reviews will be necessary.
This last fact was reflected by the requirements in relation to Detention reviews imposed under para 38.8 of the Operational Enforcement Manual which lie at the heart of the appeal in SK (Zimbabwe).
Where there are concerns about the risk of absconding, it may be possible to meet these by measures which fall short of detention.
The Secretary of State may release a FNP who is subject to deportation under a restriction order setting out terms as to residence, employment or occupation and reporting to the police pursuant to paragraph 2(5) of Schedule 3.
The court has the same power in respect of those recommended for deportation under paragraphs 4 to 6 of Schedule 3.
Detainees also have the right to apply for bail.
In para 12.8 of Fairer, Faster, Firmer the Government explained that it believed that there should be a more extensive judicial element in the detention process and proposed that this should be by way of bail hearings, commenting on the resource implications that this would have.
Para 4.83 of Secure Borders, Safe Haven stated that Part III of the Immigration and Asylum Act 1999 had created a complex system of automatic bail hearings at specific points in a persons detention, that this had never been brought into force and that most of it was to be repealed.
There is now a comprehensive statutory scheme for release on bail produced through a series of amendments to Schedule 2 to the 1971 Act.
All of this illustrates the practical problems implicit in the implementation of a regime that attempts to give effect to the policy of using the power to detain only as a last resort.
Despite efforts to implement this policy there will inevitably be cases where individuals are detained when, under the policy, they should not be.
The question arises of whether those who find themselves in this position are entitled to claim damages for false imprisonment.
What are the legal implications of the Secretary of States published policies?
The appellants in this case should have been detained had the Secretary of States published policy been applied.
They claim to be entitled to damages for false imprisonment because those considering their cases reached the right conclusions by applying the wrong policy.
Their complaint is as to the manner in which the decisions to detain them were taken, not as to the substance of those decisions.
Thus, the question of the legal effect of the Secretary of States published policies is not directly in issue.
Nonetheless, underlying the appellants case is the premise that it would not have been lawful for the Secretary of State to reach a decision that was in conflict with her published policy.
For this reason she was required to reach her decision by applying her published policy, not some other policy.
It follows that it is material to consider the effect of the Secretary of States published policies.
I agree with Lord Dyson that, under principles of public law, it was necessary for the Secretary of State to have policies in relation to the exercise of her powers of detention of immigrants and that those policies had to be published.
This necessity springs from the standards of administration that public law requires and by the requirement of article 5 that detention should be lawful and not arbitrary.
Decisions as to the detention of immigrants had to be taken by a very large number of officials in relation to tens of thousands of immigrants.
Unless there were uniformly applied practices, decisions would be inconsistent and arbitrary.
Established principles of public law also required that the Secretary of States policies should be published.
Immigrants needed to be able to ascertain her policies in order to know whether or not the decisions that affected them were open to challenge.
What is the effect of a decision to take action that falls within a power conferred by statute but which conflicts with a published policy as to the manner in which that power will be exercised? This is no easy question.
It overlaps with the question of the nature and effect of a legitimate expectation.
Is a decision that is contrary to policy unlawful, so that action taken pursuant to it is ultra vires? If so a published policy has the same effect as delegated legislation.
Is this result dictated by the jurisprudence that has its origin in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147? Mr Husain QC for the appellants submitted that it is.
He relied on the oft cited catalogue of matters rendering the decision of a tribunal void propounded by Lord Reid in Anisminic at p 171.
This included: It may have refused to take into account something which it was required to take into account.
Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account.
The words that I have emphasised are significant.
Lord Reids proposition cannot necessarily be extended to the situation where the decision maker fails to have regard to his own policy.
Anisminic is, however, only the start of the story.
The effect of Anisminic was the subject of observations by Lord Diplock, which have been treated as authoritative.
In In re Racal Communications Ltd [1981] AC 374, at pp 382 383 he described Anisminic as a legal landmark.
It established that when Parliament conferred on an administrative authority the power to decide particular questions defined by the Act conferring the power, and the authority asked itself and answered the wrong question, it did something that the Act did not empower and its decision was a nullity.
In OReilly v Mackman [1983] 2 AC 237, at p 278 he observed that if a tribunal mistook the law it must have asked itself the wrong question and one that it had no jurisdiction to determine, so that its decision was a nullity.
In R v Hull University Visitor, Ex p Page [1993] AC 682, at pp 701 702 Lord Browne Wilkinson endorsed his comment, adding that any error of law made by an administrative tribunal or inferior court in reaching its decision could be quashed for error of law.
Earlier at p 701 he had observed that it was to be taken that Parliament had only conferred the decision making power on the basis that it was to be exercised on the correct legal basis with the effect that an error of law rendered the decision ultra vires.
This reasoning cannot readily be extended to a decision which departs from executive policy.
It would be totally unrealistic to postulate that when Parliament passes an Act conferring a discretionary power it does so with the intention that if the decision maker publishes a policy in relation to the exercise of that power he will abide by that policy unless he has good reason not to do so.
In Boddington v British Transport Police [1999] 2 AC 143 the House of Lords took Anisminic a significant step further.
The issue was whether the appellant could raise by way of defence to a criminal charge a contention that the bye law, or an administrative decision taken under it, pursuant to which he was prosecuted, was ultra vires.
Lord Irvine of Lairg LC, giving the leading speech, said at p 155 that an order made by the Secretary of State in the purported exercise of a statutory power would be regarded as void ab initio if it had been made in bad faith, or as a result of taking into account an irrelevant, or ignoring a relevant, consideration.
At p 158 he said: The Anisminic decision established, contrary to previous thinking that there might be error of law within jurisdiction, that there was a single category of errors of law, all of which rendered a decision ultra vires.
No distinction is to be drawn between a patent (or substantive) error of law or a latent (or procedural) error of law.
Lord Irvine added, at p 159: Also, in my judgment the distinction between orders which are substantively invalid and orders which are procedurally invalid is not a practical distinction which is capable of being maintained in a principled way across the broad range of administrative action.
Other members of the House were not prepared to reject the possibility that an ultra vires act might have legal consequences before its invalidity was recognised by the court: see Lord Browne Wilkinson, at p 164 and Lord Slynn, at p 165.
Boddington no longer judged the vires of the exercise of a discretionary power by the assumed intention of Parliament.
It held that if a decision was vitiated by procedural impropriety it was ultra vires and a nullity.
In the light of Boddington these appeals raise two issues: (i) is a decision of the Secretary of State that, without good reason, conflicts with her published policy outside her powers, so that it is a nullity? (ii) is a decision reached by the Secretary of State by the application of a policy that conflicts with her published policy a nullity, even if the decision itself accords with her published policy? I am currently concerned with the first question.
The proposition underlying the appellants case is that if a minister, without good reason, acts in a way that is contrary to her published policy she acts outside her powers.
Her action is unlawful and can found a claim for damages if it infringes a private law right.
It is time to look at the law relating to policy and legitimate expectation.
Where a public authority gives an undertaking to an individual that a discretionary power will be used in a particular way, this creates a legitimate expectation in the individual that the authority will comply with that undertaking.
The courts will require the authority to give due consideration to that legitimate expectation when exercising its power: see R (Bibi) v Newham London Borough Council [2001] EWCA Civ 607; [2002] 1 WLR 237.
In an extreme case the courts can require the authority to comply with its undertaking: see R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213.
The same principle applies where a minister publishes a policy that sets out the way in which he intends to exercise a discretionary power.
This also creates a legitimate expectation in those affected by the power as to the manner in which it will be exercised.
In either case the court can intervene in performance of its duty to ensure that the executive acts fairly and does not abuse the powers conferred on it by Parliament.
These principles have quite often been applied in relation to immigration decisions.
I have already quoted my invocation of them in Saadi: see para 271 above.
Lord Dyson at para 85 has referred to my judgment in Nadarajah v Secretary of State for the Home Department [2003] EWCA Civ 1768.
In that case the Court of Appeal held that Ns detention was unlawful because it was in conflict with the Secretary of States policy.
The court further held that as the detention was contrary to law, it infringed article 5(1)(f) of the Convention.
The Court had earlier stated at para 15 that the consequence of these findings would be that N would be entitled to damages for unlawful detention.
The Secretary of State had sought to show that Ns detention was not contrary to his policy.
He had not challenged the proposition that if the detention was contrary to his policy it would be unlawful, nor that this would lead to liability in damages.
There was no discussion of the nature and effect of the doctrine of legitimate expectation in the context of detention under the 1971 Act.
There was, however, a sequel to the case in which the nature of the doctrine of legitimate expectation received detailed consideration.
The development of the law of legitimate expectation was pellucidly set out at some length by Laws LJ, giving the only reasoned judgment in the Court of Appeal in R (Nadarajah) v Secretary of State for the Home Department, [2005] EWCA Civ 1363, a decision which, amazingly, does not seem to have found its way into the law reports.
At the end of his judgment, in paras 68 and 69, Laws LJ set out his conclusions on the principles to be derived from these authorities.
This merits citation at length: The search for principle surely starts with the theme that is current through the legitimate expectation cases.
It may be expressed thus.
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.
In my judgment this is a legal standard which, although not found in terms in the European Convention on Human Rights, takes its place alongside such rights as fair trial, and no punishment without law.
That being so there is every reason to articulate the limits of this requirement to describe what may count as good reason to depart from it as we have come to articulate the limits of other constitutional principles overtly found in the European Convention.
Accordingly a public bodys promise or practice as to future conduct may only be denied, and thus the standard I have expressed may only be departed from, in circumstances where to do so is the public bodys legal duty, or is otherwise, to use a now familiar vocabulary, a proportionate response (of which the court is the judge, or the last judge) having regard to a legitimate aim pursued by the public body in the public interest.
The principle that good administration requires public authorities to be held to their promises would be undermined if the law did not insist that any failure or refusal to comply is objectively justified as a proportionate measure in the circumstances.
This approach makes no distinction between procedural and substantive expectations.
Nor should it.
The dichotomy between procedure and substance has nothing to say about the reach of the duty of good administration.
Of course there will be cases where the public body in question justifiably concludes that its statutory duty (it will be statutory in nearly every case) requires it to override an expectation of substantive benefit which it has itself generated.
So also there will be cases where a procedural benefit may justifiably be overridden.
The difference between the two is not a difference of to a principle.
Statutory duty may perhaps more often dictate the frustration of a substantive expectation.
Otherwise the question in either case will be whether denial of the expectation is in the circumstances proportionate legitimate aim pursued.
Proportionality will be judged, as it is generally to be judged, by the respective force of the competing interests arising in the case.
Thus where the representation relied on amounts to an unambiguous promise; where there is detrimental reliance; where the promise is made to an individual or specific group; these are instances where denial of the expectation is likely to be harder to justify as a proportionate measure.
On the other hand where the government decision maker is concerned to raise wide ranging or macro political issues of policy, the expectations enforcement in the courts will encounter a steeper climb.
All these considerations, whatever their direction, are pointers not rules.
The balance between an individual's fair treatment in particular circumstances, and the vindication of other ends having a proper claim on the public interest (which is the essential dilemma posed by the law of legitimate expectation) is not precisely calculable, its measurement not exact.
This passage in Laws LJs judgment was obiter, as is my approval of it as setting out a compelling analysis of the law.
I have, however, some concerns as to the consequences of this extension of the principles of judicial review if a ministers unjustified failure to comply with his policy is to be treated as an unlawful act that subjects him to potential liabilities in private law independently of the discretionary remedies of judicial review.
The facts of this case illustrate my concern.
Assume that I am correct in concluding that Schedule 3 gives the Secretary of State wide ranging powers to detain those who are illegally in this country, whether pending the processing of their applications for permission to enter or pending their removal when such applications have been refused.
The Secretary of State did not choose to exercise those powers to their full extent.
The policy of only detaining immigrants as a last resort is a benevolent policy.
That policy carries with it, however, as I have explained, the risk that, as a result of erroneous decisions in the application of a difficult test, some immigrants may be detained in breach of that policy.
Not all would agree that it is fair that they should be entitled to compensation, in the form of damages for false imprisonment, on the same scale as those whose detention falls outside any statutory power.
Notwithstanding these concerns, I have concluded that the detention of a person in circumstances where, under the Secretary of States published policies he should not have been detained, was both a violation of principles of public law and unlawful so as to exclude any justification for the detention under article 5(1)(f) of the Convention and to give rise to liability for false imprisonment.
Was the detention of each of the appellants contrary to the Secretary of States published policies?
On this question all members of the court are agreed.
Each of the appellants, by reason of the risk of re offending and of absconding, fell into the exceptional category of those who were liable to detention under the Secretary of States published policies.
Had the decision maker applied those policies each of the appellants would have been detained.
On this topic I have nothing to add to the judgment of Lord Dyson.
What were the defects in the policy applied when deciding whether the appellants should be detained?
Mr Beloff conceded that the policy, which I shall call the secret policy, applied by the decision maker when deciding to detain the appellants was unlawful on three counts.
The meaning of the word unlawful in this context needs clarification.
It is not having a policy but implementing a policy that may infringe the law.
A policy can be described as unlawful if action taken pursuant to it will, or may, be unlawful under private or public law.
The first reason why the policy that was applied was unlawful was that it was a blanket policy.
It brooked of no exceptions save rare ones that might be made for compassionate reasons.
It was a blanket policy in that it was applied to any FNP recommended for deportation.
Thus it paid no regard to the severity of the offence for which the FNP had been convicted nor to the likelihood and consequence of his re offending.
In this I do not consider that it was open to objection on public law grounds.
On my interpretation of Schedule 3 it was open to the Secretary of State to decide her own criteria for determining those she wished to detain pending deportation.
Secondly the policy was a blanket policy in that it gave no scope for the application of discretion, save on compassionate grounds.
I do not consider that this was objectionable on public law grounds.
There is a principle of public law that a minister who is granted a discretionary power must not improperly fetter the exercise of his discretion.
In a case such as this, however, a minister has to lay down a firm policy in order to ensure consistency of decision making.
The Secretary of State was laying down an exception to the general rule that there was a presumption against detention.
I can see no reason why she should not lay down a policy under which all those whom she chose to deport should be detained pending their deportation save in circumstances where there were compassionate reasons for departing from the policy.
Where the secret policy was objectionable was that it was to be applied without consideration of whether detention would violate the Hardial Singh principles.
Under the secret policy FNPs were liable to be detained even if they were nationals of a country to which deportation was not a practical possibility.
Thus application of the secret policy would, in some cases, result in detention that was outside the power conferred by the 1971 Act.
The second reason why Mr Beloff conceded that the secret policy was unlawful was that it was inconsistent with the Secretary of States published policy.
Inasmuch as the application of the secret policy would result in the detention of some who would not have been detained on the application of the published policy it was plainly open to objection on this ground.
The third reason why Mr Beloff conceded that the secret policy was unlawful was that it was secret.
This concession was also properly made, for the reasons given by Lord Dyson.
What were the circumstances in which the secret policy was applied?
Lord Dyson has summarised the circumstances in which the secret policy was applied.
Lord Walker and Lord Collins have described these as a serious abuse of power.
Lady Hale has expressed some sympathy for the predicament in which the civil servants found themselves.
Having considered the voluminous discovery, some of it very belated, I share both the concern expressed by Lord Walker and Lord Collins and the sympathy expressed by Lady Hale.
It was clear to officials that the Secretary of State wished all FNPs to be deported, and to be detained pending deportation.
They were concerned at the legality of such a policy, particularly because it conflicted with the published policy.
There was a protracted period preparing and circulating draft advices to ministers in which each of a lengthy circulation list was given the chance to comment.
Many did, whereupon the draft would be re circulated.
There seems to have been a reluctance to grasp the nettle of presenting advice that would be unpalatable.
There were considerable delays caused by the perceived need to obtain counsels opinion.
The picture is of bureaucracy at its worst with the best proving constantly the enemy of the good.
The lamentable fact is that approximately two years elapsed between the identification of the need to publish a revised policy on detention and the publication of such a policy in the new Enforcement Instructions and Guidance in September 2008.
Although it was suggested that ministers might favour a policy that would appear to make the courts responsible for the release from detention of FNPs, this course was neither advocated nor adopted.
There was muddle galore, but I am not persuaded having considered the considerable discovery that there was a deliberate attempt to deceive the courts as to the policy that was being applied.
Did the application of the secret policy render the detention of the appellants unlawful?
It is now accepted by the Secretary of State that the decision maker in the case of each of the appellants decided that he should be detained by applying to him the secret policy.
The power to detain that he purported to apply was that conferred by Schedule 3.
Had the appellants been persons whose deportation would not be possible within a reasonable period, so that they fell outside the lawful application of Schedule 3, the application of the secret policy would have resulted in their detention none the less.
Had the appellants been persons whose detention would have conflicted with the Secretary of States published policy, so that their detention would be unlawful under the principles of public law discussed above, the application of the secret policy would have resulted in their detention none the less.
In the event each appellant fell within the group of FNPs for whom detention was appropriate, indeed inevitable, if the Secretary of States published policy was applied to them.
Was their detention none the less unlawful because of the process of reasoning that had brought it about? Mr Husain submits that it was.
The Court of Appeal held that it was not, because the application of the secret policy was not material; it produced the result that would have been produced had the right policy been applied.
This is I believe a novel question, not to be answered by the simple answer that the detention was unlawful because the decision that produced it was unlawful.
It is also a complex question because of the novel feature of the existence of a published policy that would have predetermined the decisions in relation to the two appellants had it been applied.
It is helpful to unpick the secret policy and consider its effect if each objection to it had been the only objection.
I take first the objection that it was a blanket policy.
Imagine the Secretary of State had publicly announced that all FNPs who were given deportation orders would henceforth be detained pending deportation, subject to exceptions on compassionate grounds.
The application of this policy would have been objectionable in that it would have resulted in the detention of those FNPs whose deportation would not be possible within a reasonable period.
Would this fact have rendered unlawful the detention of the majority of FNPs whose deportation was possible? I see no reason of principle why it should.
Next I take the objection that the policy was in conflict with the published policy.
Had the secret policy not been secret, this objection would have melted away.
The public policy would simply have been publicly altered.
This would not have been objectionable.
What of the objection that the policy was secret? Had this been the only objection to it I do not see how this could have availed the appellants.
They were already subject to a policy that would result in their detention.
They had no legitimate expectation of being permitted to remain at large.
If the secret policy had extended the category of those FNPs who would be detained, those who, without knowing it, were brought within the category of detainees might have had cause to object to their detention, but I do not see how those who were going to be detained under the previous published policy could legitimately complain.
If none of the individual objections to the secret policy would have afforded the appellants legitimate grounds for challenging their detention, does the position change when the objections are considered cumulatively? I can see no reason why it should.
Both logically and intuitively my conclusion is that the introduction of the secret policy gave those whose detention resulted from it cause to challenge the legality of their detention, but not those whose legitimate expectation was that they would be detained under the application of the published policy.
This was also the reaction of those officials who questioned the application of the secret policy.
Their concern was that those whose detention infringed the Hardial Singh guidelines or the published policy would have claims for illegal detention, not that every detainee would have such a claim.
I now turn to some of the authorities relied upon by the appellants to see how they bear on the unusual problem raised by these appeals.
In Christie v Leachinsky [1947] AC 573 the plaintiff, who claimed damages for false imprisonment, had been arrested by police officers on a charge of unlawful possession under the Liverpool Corporation Act 1921.
That Act did not give a power to arrest for this offence.
The defendants raised by way of defence a plea that, at the time of the arrest they reasonably suspected him of receiving stolen goods, which provided a valid ground for his arrest.
The House of Lords held that this was no defence as at the time of his arrest he had been given a different ground of arrest.
This decision is normally cited for the proposition that an arrest will be unlawful if the person arrested is not told the reason for his arrest at the time that he is arrested.
It is also authority for the proposition that if a person is arrested for a reason which is not a valid statutory ground of arrest it is no defence to an action for false imprisonment that he could have been validly arrested on alternative grounds.
I do not see that this decision bears on the very different facts of the present case.
In Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 the Court of Appeal held that detention by the police without the review required by section 40(1)(b) of the Police and Criminal Evidence Act 1984 was unlawful and the fact that, if the review had taken place authorised detention would have continued was no answer to a claim for substantial damages for false imprisonment.
That decision has no bearing on the issue that I am considering, which is whether the detention of the appellants was unlawful.
In Langley v Liverpool District Council [2005] EWCA Civ 1173; [2006] 1 WLR 375 a constable had purported to exercise a discretionary power under the Children Act 1989 in removing a child from its family.
The Court of Appeal held that his exercise of discretion had been wrongful in that, in the circumstances prevailing, it ran counter to the statutory scheme.
It followed that the removal of the child was unlawful and the constable had committed the tort of false imprisonment.
I have found this decision of no assistance in deciding whether, on the unusual facts of this case, the detention of the appellants was unlawful.
One of the cornerstones of the appellants case was the speech of Lord Diplock, with which all other members of the House agreed, in Holgate Mohammed v Duke [1984] AC 437.
A police officer had arrested the plaintiff on suspicion of the theft of jewellery.
He did so pursuant to section 2(4) of the Criminal Law Act 1967, which gave him a discretionary power to arrest her.
She alleged, however, that the exercise of this power had been unlawful because, when deciding whether to exercise his discretion the officer had been influenced by a consideration which was irrelevant, namely the likelihood that the fact that she had been arrested would be more likely to induce her to confess to her crime when interviewed.
Lord Diplock held that this consideration was not irrelevant to the proper exercise of the officers discretion.
It was a matter to which he could legitimately have regard having regard to the objectives of the statutory power to arrest.
Thus the comments upon which the appellants have relied were obiter.
Those comments, at p 443 of Lord Diplocks speech, were as follows: The Wednesbury principles, as they are usually referred to, are applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought.
The first of the Wednesbury principles is that the discretion must be exercised in good faith.
The judge in the county court expressly found that Detective Constable Offin in effecting the initial arrest acted in good faith.
He thought that he was making a proper use of his power of arrest.
So his exercise of that power by arresting Mrs Holgate Mohammed was lawful, unless it can be shown to have been unreasonable under Wednesbury principles, of which the principle that is germane to the instant case is: He [sc the exerciser of the discretion] must exclude from his consideration matters which are irrelevant to what he has to consider.
The way in which the appellants argue that this passage impacts on the facts of the present case is, as I understand it, as follows.
The decision to detain the appellants was taken by application of the secret policy.
This infringed the Wednesbury principles because it failed to have regard to relevant considerations, namely whether the Hardial Singh principles precluded detention and whether the appellants detention complied with the published policy.
The answer given by the Court of Appeal to this point is that, so far as the appellants were concerned, the failure to consider these matters was not material because, had they been considered, the conclusion would have been that neither matter posed an impediment to the appellants detention and had they been considered the decision would inevitably have been the same.
The approach of the Court of Appeal involves a refinement of the Wednesbury principles.
It is an application of the following reasoning of May LJ in R v Broadcasting Complaints Commissioner, Ex p Owen [1985] QB 1153, 1177: Where the reasons given by a statutory body for taking or not taking a particular course of action are not mixed and can clearly be disentangled, but where the court is quite satisfied that even though one reason may be bad in law, nevertheless the statutory body would have reached precisely the same decision on the other valid reasons, then this court will not interfere by way of judicial review.
I believe that at least in this new area of the effect of public policy, the approach of the Court of Appeal is a sound one.
Where a minister publishes a policy as to the circumstances in which he will exercise a statutory power and then he or his officials apply a different policy which results in the exercise of that power in circumstances which range wider than those published, I do not consider that those whose cases fell within the published policy can automatically contend that the application of the power to them has been unlawful.
If the facts are that no reasonable decision maker applying the published policy could have done other than reach the decision which the decision maker arrived at, the fact that he applied a more expansive, but unpublished, policy when reaching his decision will not invalidate that decision.
For these reasons, which accord I believe with the reasoning of both the Court of Appeal and Lord Brown, I have concluded that the application of the secret policy did not render the detention of the appellants unlawful.
Damages
In view of my conclusions on liability, the issue of damages does not arise.
Had I agreed with Lord Dyson on liability, I would have shared his approach to damages.
I also endorse Lord Collins conclusions in relation to vindicatory damages.
Reviews
A word about reviews.
If the majority are correct in concluding that the application of the secret policy rendered all decisions taken pursuant to it unlawful, then it seems to me that the moment that the secret policy was applied to reviews of the lawfulness of those detained, their continued detention would have been rendered unlawful, even if they were lawfully detained under the published policy before the secret policy was introduced and even if they remained subject to detention within the terms of the published policy.
This would be an extraordinary result.
MR LUMBAS HARDIAL SINGH APPEAL
Mr Lumba has now voluntarily left the country, but the question remains of whether his detention became unlawful in the period before he left.
Because of the view that I take of the scope of the Hardial Singh principles, I find the issues in relation to this part of Mr Lumbas appeal easier to resolve than has Lord Dyson.
The lengthy period during which Mr Lumba was detained largely resulted from his own efforts to avoid deportation.
For most of the period his deportation had been a practical possibility.
The Secretary of State had not been dragging her feet in her effort to deport Mr Lumba.
I agree with the Court of Appeal that Mr Lumba could not be heard to say that it was impossible to deport him within a reasonable time when the difficulty in doing so resulted from his own attempts to avoid deportation and not from extrinsic problems in effecting his deportation.
On my view of the interpretation of Schedule 3, whether Mr Lumba posed a risk of re offending was not relevant to the period for which he could lawfully be detained.
It seems to me that para 107 of Lord Dysons judgment lends support to my belief that the power to detain is not dependent upon an object of the detention being to facilitate deportation.
The question remains, however, in Mr Lumbas case of whether his continued detention, having particular regard to his mental condition, remained consistent with the Secretary of States published policy.
He has now voluntarily left the country, but if the issue of the lawfulness of his detention is to be pursued I agree with Lord Dyson that this is a matter to be considered by the Administrative Court on remission.
Subject to this, for the reasons that I have given I would dismiss these appeals.
LORD BROWN (with whom Lord Rodger agrees)
Amongst the many issues to be decided on these appeals far and away the most important concerns the true nature of the tort of false imprisonment.
Lord Dyson having set out all the relevant facts and the detailed legal context in which the many issues here arise for determination, I shall proceed without more to what I recognise is to be a dissenting judgment on this crucial question.
Freedom from executive detention is arguably the most fundamental right of all.
Thus Lord Bingham of Cornhill in his 2002 Romanes lecture.
The tort of false imprisonment is, of course, the remedy provided by law for the violation of this freedom, for the unlawful deprivation of a persons liberty.
The outcome of the appeals proposed by the majority of the court is to hold the appellants and, indeed, a large number of others similarly placed to have been unlawfully detained, in many instances for a period of years, and yet to compensate them by no more than a nominal award of damages.
They are to be held unlawfully detained because, in his (or her) exercise of the undoubted power to detain them, the Secretary of State breached certain public law duties.
But they are to be awarded only nominal damages because, whatever approach had been taken to the exercise of the detaining power, the appellants must inevitably have been detained in any event.
Whilst I share to the full the majoritys conclusion that it would be quite wrong in the circumstances of these cases to award the appellants any substantial compensation in respect of their detention, for my part I would reach that conclusion by a very different route.
I would hold that a public law breach of duty in the course of exercising an executive power of detention does not invariably, and did not here, result in the subsequent detention itself being unlawful in short, that these appellants were not the victims of false imprisonment.
Naturally I recognise the beguiling simplicity and apparent purity of the majoritys approach.
Ever since the House of Lords decision in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, decisions made within the decision makers jurisdiction but containing a public law error have generally been regarded as precisely equivalent to decisions made entirely without jurisdiction.
Thus, it is said, a decision to detain which is flawed by a public law error is ultra vires and the detention which follows is necessarily unauthorised and therefore unlawful.
Logically, indeed, this must be so however minor the public law error involved in the making of the decision and however inevitable it is that the decision to detain would have been made in any event. (At one stage in the argument Mr Husain QC for the appellants accepted that some public law failures might be too inconsequential to require this conclusion but unsurprisingly he was unable to formulate any test by which to determine such cases and, indeed, he had argued before this court on behalf of the appellant in R (SK (Zimbabwe)) v Secretary of State for the Home Department [2009] 1WLR 1527 that false imprisonment must follow inexorably even from periodic failures to comply with the Secretary of States self imposed monthly review process.) Given, moreover, that the tort of false imprisonment is actionable per se that it is of the essence of the tort of false imprisonment that the imprisonment is without lawful justification (Lord Hope in R v Governor of Brockhill Prison ex parte Evans [2001] 2 AC 19, 32) logic also suggests that the notion of nominal damages should have no part to play in determining the compensation payable.
Why should someone imprisoned without lawful justification be paid nominal damages only? If the answer is that they would have been imprisoned anyway, under the same power and in just the same way, then in reality the Court is saying that the tort may be committed merely in a technical way.
I have to say that such an approach would to my mind seriously devalue the whole concept of false imprisonment.
It is true that in Murray v Ministry of Defence [1988] 1 WLR 692, whilst confirming that an action for false imprisonment lies even if the detainee does not know that he has been imprisoned, Lord Griffiths added (p703 A B): If a person is unaware that he has been falsely imprisoned and has suffered no harm, he can normally expect to recover no more than nominal damages.
In my opinion, however, there is a very real difference between a detainee who is in fact unaware of being under physical restraint (perhaps because he is asleep or because he simply does not know that the door has been locked) and a detainee who is fully aware of his loss of freedom.
To award the latter nominal damages only, on the basis that, even had he been dealt with lawfully he would still have been deprived of his freedom anyway, is really to say that he was in truth rightly in detention.
That seems to me very different from saying that he was wrongly imprisoned but happily unaware of it.
I have difficulty, therefore, with Lord Dysons criticism (at paras 92 and 93) of the passage on damages in Clarke LJs judgment in Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662, 668.
To compensate (or rather to deny compensation) on the basis that the detainee has suffered no loss because he would have remained in detention whether the tort was committed or not is in my opinion the very negation of the tort: it is to hold that the detainee was at one and the same time both rightly and wrongly imprisoned.
Search as one may in the judgments both of the Court of Appeal and of the House of Lords in Christie v Leachinsky (respectively [1946] KB 124 and [1947] AC 573), there is no hint of a suggestion that the false imprisonment which followed upon the unlawful arrest in that case might properly attract only a nominal award of damages.
I do not say that those falsely imprisoned should be compensated identically irrespective of how deserving they were of liberty rather than restraint during the relevant period of detention; I do say, however, that rather than hold a detainee simultaneously both rightly detained and falsely imprisoned, the law should instead recognise that, notwithstanding a flaw in the decision making process such as to involve the breach of a public law duty, the decision maker has not in those circumstances committed the tort of false imprisonment.
A court which speaks with two voices risks bringing the law into disrepute.
Is this court then bound by established law to reach so unsatisfactory a conclusion as the majority of the court suggest: tortious liability but for nominal damages only? To my mind it is not.
Assuming that a power to detain exists, that any preconditions to its exercise have been satisfied and any limitations upon its scope observed, I know of no case which holds the detainee to have been falsely imprisoned merely because, in the course of exercising the power, the decision maker committed some public law breach of duty.
On the contrary, and to my mind hardly surprisingly, the courts have consistently shied away from such a conclusion as is amply and consistently demonstrated by the series of Court of Appeal judgments in this very line of cases.
Such was the decision of the Court of Appeal (Laws, Keene and Longmore LJJ) in SK (Zimbabwe), the Court of Appeal (Lord Neuberger of Abbotsbury MR, Carnwath and Stanley Burnton LJJ) in the cases from which the present appeals are brought, and the Court of Appeal (Maurice Kay, Longmore and Black LJJ) more recently still in Anam v Secretary of State for the Home Department [2010] EWCA Civ 1140.
In Anam, indeed, Black LJ in giving the leading judgment characterised the appellants argument thus at para 17: At its most radical, the submission advanced by [counsel] is that a failure by the Secretary of State to apply his published policy in making a decision to detain necessarily renders that decision a nullity and the resulting detention unlawful.
Have all these Lords Justices, many of them distinguished public law jurists, lost sight of the clear and basic principles of public law which, it is said, necessarily compel such a radical conclusion?
So far from the authorities supporting such a surprising conclusion they can and should, I suggest, be analysed rather to the following effect. (1) False imprisonment is the inescapable result of detention absent any power to detain R v Governor of Brockhill Prison (No 2) Ex p Evans [2001] 2 AC 19 is itself a good illustration of this basic proposition: the appellant having been kept in prison beyond the date when her custodial sentence, properly calculated, expired, there could hardly have been a clearer case of false imprisonment.
Such would also be the position were someone arrested for a non arrestable offence.
Analysed in the way I analysed the power of detention under Schedule 2 to the Immigration Act 1971 (directly analogous to the Schedule 3 power under consideration in these appeals) in R (Khadir) v Secretary of State for the Home Department [2006] 1 AC 207, these are cases not about the exercise of the power, but rather about its existence. (2) The tort of false imprisonment is committed too if someone is detained in breach of a condition precedent to the existence of the detention power.
Christie v Leachinsky [1947] AC 573 illustrates the common laws imposition of such a condition precedent: a right of arrest only arises when the citizen is told why he is being arrested.
Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 illustrates the imposition of such a precondition by statute (in that case the requirement for review as a precondition of continued detention beyond six hours).
R v Secretary of State for the Home Department Ex p Khawaja [1984] AC 74 provides another such illustration, the House of Lords there deciding that the power to detain and remove an immigrant as an illegal entrant under Schedule 2 to the 1971 Act was dependent upon establishing such illegality as a precedent fact. (3) Detention beyond the scope of a detaining power similarly constitutes false imprisonment.
For example, the limitations imposed by the courts following Woolf Js decision in R v Governor of Durham Prison Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles) undoubtedly operate to constrain the power of detention under paragraph 2 of Schedule 3 and it has long been recognised that detention in breach of the Hardial Singh principles gives rise to tortious liability. (Categories 2 and 3, I recognise, may not always be easily distinguishable.
It could, for example, be said that the first Hardial Singh principle constitutes a precondition for the exercise of the detention power.
It has seemed to me nonetheless worth attempting the distinction.) I would accept too that in certain circumstances a power of detention may (4) be narrowed by a published policy as to how it will be exercised.
The Court of Appeals decision in R (Nadarajah) v Secretary of State for the Home Department [2004] INLR 139 is, I think, an illustration of that in the present context.
The Secretary of State had in that case adopted a published policy which in substance narrowed the grounds on which the detaining power (in that case under schedule 2 to the 1971 Act) would be exercisable (the stated policy there being to release anyone whose removal was not imminent).
Certainly it is on that basis alone that I would regard Nadarajah as correctly decided.
And it must, of course, be recognised that, as with any other statement of policy (a policy being, by definition, no more than an advance indication of how it is proposed to exercise the particular discretionary power in question) it is always open to the holder of the power to change that policy see, for example, in relation to the Immigration Rules themselves, MO (Nigeria) v Secretary of State for the Home Department [2009] 1 WLR 1230.
Every false imprisonment case on which the appellant relies can, in my opinion, be seen to fall within one or other of the above four categories.
Besides those already mentioned, two cases in particular call for brief special mention.
Kuchenmeister v Home Office [1958] 1 QB 496 concerned a German national who landed at Heathrow en route to Dublin.
The immigration officers, instead of refusing him leave to land (as they had been instructed to do), detained him at the airport until it was too late for him to catch the Dublin flight.
Holding him to have been wrongfully imprisoned, Barry J said this (p 512): His liberty was restricted to a greater degree than the immigration authorities were entitled to restrict it under [the particular power they sought to rely upon].
The fact that they might have restricted his mobility by employing the powers conferred upon them by other articles of the Order seems to me to be immaterial.
It is no answer, when a man says I have been unlawfully arrested without a warrant, to say Well, had I (the person making the arrest) taken the trouble to go and ask for a warrant, I would undoubtedly have got it.
That would be no answer to a claim for unlawful arrest.
Similarly here, although the [immigration officers] could have detained the plaintiff by refusing him leave to land, that does not entitle them to detain him on the grounds on which they did.
The case was to my mind correctly decided and can be seen to fall squarely under the first of the above four categories: the immigration officers simply had no power to restrict the plaintiffs movements in the way they did.
Langley v Liverpool City Council [2006] 1 WLR 375 concerned a child in obvious need of protection.
Two relevant powers existed, respectively under sections 44 and 46 of the Children Act 1989.
Section 44 provides for the grant of an emergency protection order (EPO) authorising the council to remove a child into the care of foster carers; section 46 gives the police power to take a child into police protection.
The police officer there having removed the child in purported exercise of his power under section 46, the Court of Appeal held that he had been wrong to do so and accordingly that the child had been falsely imprisoned.
Dyson LJ in giving the leading judgment said that the statutory scheme clearly accords primacy to section 44 [which] is sanctioned by the court and . involves a more elaborate, sophisticated and complete process than removal under section 46 (para 38); that section 46 should be invoked only where it is not practicable to execute an EPO (para 40); and that in the result, albeit the officer had jurisdiction to remove [the child] pursuant to section 46, he could not lawfully invoke that power unless there were compelling reasons for exercising this power when, to his knowledge, an EPO was in force which authorised the council to remove [the child] into the care of foster carers (paras 44 and 46).
Again, I have no difficulty in accepting the correctness of this decision: just as the Hardial Singh line of cases imposed restrictions upon the power of detention under the 1971 Act, so the court in Langley thought it right to place a limitation upon the scope of the section 46 power.
The case falls neatly into category 3 (or perhaps into category 2, on the basis that the impracticality of executing a concurrent EPO was held to be a precondition to the lawful exercise of the section 46 power).
In what circumstances, then, does the breach of a public law duty in the exercise of a power to detain result in the detainee being falsely imprisoned? I have already indicated, at paragraph 347(4) above, one such circumstance, namely when the Secretary of State by his published policy indicates that he will not exercise his power to its fullest extent but rather will confine its exercise within certain limits (for example, as in Nadarajah, by releasing anyone whose removal is not imminent).
Such a published policy, unless and until it is changed, as a matter of public law requires the decision maker to decide cases (subject always to reasoned exceptions) in accordance with it.
It is my clear present view (subject to any further argument on the point) that SK (Zimbabwe) provides a good illustration of circumstances where, the breach of a public law duty notwithstanding, the detainee should not be regarded as falsely imprisoned.
The Secretary of State there breached what was his undoubted public law duty to review all detention cases monthly in accordance with his published policy on procedure.
As it seems to me, however, it is one thing to breach a policy under which a detainee is entitled to be released; quite another to breach a policy under which he is entitled merely to be reviewed for release.
Whereas the former will result in false imprisonment, the latter will not.
Obviously, if the detainee on review would have been entitled to be released under the Hardial Singh principles (or, if more favourable, the published policy statements) then he has a claim for false imprisonment.
But the claim in those circumstances arises from his continued detention beyond the date of such entitlement, not from the failure to review his case.
What, however, is the position in a case like the present when the Secretary of States breach of public law duty consists of applying, in place of his published policy, an unpublished policy less favourable to those subject to the detaining power? On the appellants case, of course, that automatically results in the false imprisonment of every single detainee whose continued detention has been considered under the wrong policy, irrespective of whether or not they would have had the least prospect of release whatever policy had been applied.
Applying the wrong policy, the argument runs, means that the Secretary of State failed to have regard to a material consideration, instead had regard to an immaterial consideration, and therefore reached his decision in an unlawful manner.
This renders it a nullity with the result that there was no lawful authority for the ensuing detention.
The closest this thesis comes to finding high level support in the authorities is in a much quoted dictum of Lord Diplock in Holgate Mohammed v Duke [1984] 1 AC 437.
Following Mrs Holgate Mohammeds arrest on suspicion of theft and her detention for six hours at a police station for questioning, she was found at first instance to have been wrongfully arrested and was awarded 1,000.
This was on the basis that the arresting officer, in deciding that there would be a better prospect of her confessing if she were arrested and detained rather than merely interviewed under caution, wrongfully exercised his power of arrest.
Upholding the Court of Appeals decision to allow the Chief Constables appeal, the House of Lords held that the better prospect of the plaintiff confessing her guilt if arrested and questioned at a police station was in fact a relevant matter so that the arrest was not after all unlawful.
In the course of the only reasoned speech, Lord Diplock (at p443) observed that, the condition precedent to the officers powers of arrest and detention having been fulfilled by his having reasonable cause to suspect the plaintiff to be guilty of an arrestable offence, this left him with an executive discretion whether to arrest her or not.
It is the next passage in the speech that is so strongly relied upon by the appellants: Since this is an executive discretion expressly conferred by statute upon a public officer, the constable making the arrest, the lawfulness of the way in which he has exercised it in a particular case cannot be questioned in any court of law except upon those principles laid down by Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, that have become too familiar to call for repetitious citation.
The Wednesbury principles, as they are usually referred to, are applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought.
Lord Diplock then noted that amongst the Wednesbury principles was that whoever exercises the discretion must (in Lord Greenes words) exclude from his consideration matters which are irrelevant to what he has to consider.
It is, to my mind, critical to a proper understanding of Lord Diplocks speech to recognise that the relevant matter in question there, the matter which the judge at first instance held the officer to have wrongly taken into consideration, was a consideration clearly decisive of the way he had exercised his discretion.
The whole reason for the officer exercising his power to arrest and detain the plaintiff was so that she would then be more likely to confess.
If that had been an unlawful consideration, nothing could be clearer than that without it the officer would not have exercised the power at all.
In short, on the facts of the case, the power would have been exercised for an improper reason and the resultant detention necessarily unlawful.
Certainly it would in my opinion be quite wrong to regard the case as authority for any wider proposition, least of all a thesis so absolute and unsatisfactory as that contended for here.
There had been no argument on the point: the Chief Constable was not even called upon.
Small wonder that in the quarter century following, despite the hugely increased scope of public law challenges, not a single case appears to have held an arrested detainee falsely imprisoned on Wednesbury grounds save where the arresting officer acted either in bad faith or for an improper purpose.
Perhaps the way to put the point is this.
Classically most public law challenges go to the decision making process rather than to the substance of the decision taken.
The substantive decision is for the public body and not for the court to take and generally a successful challenge requires that the impugned decision be taken afresh.
Obviously, if the substantive decision reached is outside the powers conferred upon the public body purporting to make it (ultra vires in the traditional, literal sense), then it must be nullified.
So too if it is irrational in the public law (Wednesbury) sense i.e. outside the range of permissible decisions which the public body is empowered to make.
But if, as here, the challenge is to the process whereby decisions to continue a detainees detention were taken or, indeed, as in SK (Zimbabwe), if what is challenged is a failure to take decisions (as often as promised by the policy) as to whether a detainees detention should continue then the appropriate remedy is to require the decision maker to act lawfully: to re decide decisions that resulted from a flawed decision making process or, as in SK (Zimbabwe), to take decisions that earlier the decision maker had omitted to take.
It simply does not follow from a flawed decision making process that the detainees continued detention immediately thereupon becomes unlawful so as to make him a victim of false imprisonment until a fresh decision comes later to be lawfully taken so that, for example, a detainee whose detention is reviewed every second month instead of monthly as the published policy dictates, alternates yo yo like between lawful detention and false imprisonment.
Nor does it seem to me that the absolutist approach to the consequences of public law error espoused here by the majority of the Court has received universal endorsement over recent years.
The decision of the House of Lords in Boddington v British Transport Police [1999] 2 AC 143 is often cited as a modern example of the Anisminic principle being applied in the ordinary course of proceedings (there in the context of a criminal trial).
But there are important dicta in the judgments which expressly leave open the question whether legal consequences may nonetheless follow from unlawful action.
Consider this passage from the speech of Lord Slynn of Hadley, an acknowledged master in the field of public law: In our jurisdiction the effect of invalidity may not be relied on if limitation periods have expired or if the court in its discretion refuses relief, albeit considering that the Act is invalid.
These situations are of course different from those where a court has pronounced subordinate legislation or an administrative act to be unlawful or where the presumption in favour of their legality has been overruled by a court of competent jurisdiction.
But even in these cases I consider that the question whether the acts or byelaws are to be treated as having at no time had any effect in law is not one which has been fully explored and is not one on which it is necessary to rule in this appeal and I prefer to express no view upon it.
The cases referred to in Wade & Forsyth, Administrative Law, 7th ed. (1997), pp.323 324, 342 344 lead the authors to the view that nullity is relative rather than an absolute concept (p.343) and that void is meaningless in any absolute sense.
Its meaning is relative.
This may all be rather imprecise but the law in this area has developed in a pragmatic way on a case by case basis. (p.165 C F) (Wade & Forsyth, now in its tenth edition (2010), continues to recognise the relativity of the concept of nullity in this context.) All I am saying is that if the law is to continue to develop in this area in a pragmatic way on a case by case basis, then in this particular case it should expressly recognise that not every decision to detain affected by a public law breach necessarily carries in its wake an unanswerable claim for false imprisonment.
That said, I readily acknowledge that the power of executive detention is one to be exercised with the greatest care and sensitivity and that it is of the first importance that those who exercise it should be ever mindful not merely of the legal limits of the power but also of such public law duties as surround its proper exercise.
Where, as here, a wrong and less favourable policy has been applied in deciding whether a person should be, or continue to be, detained, I accept that it must be for the Secretary of State as decision maker to establish that this breach of his or her public law duty did not in fact prejudice the detainee.
In short, it is for the Secretary of State in these circumstances, in order to avoid liability for the tort of false imprisonment, to establish that the detainee would have been detained in any event even, that is, had the lawful published policy been followed.
Assuming, however, that the inevitability of detention in any event can be established, it seems to me nothing short of absurd to hold the tort of false imprisonment nevertheless made out.
After all, had a detainee in such circumstances sought to challenge his continued detention by judicial review (or habeas corpus), the court would have been likely to grant declaratory relief only, declining in its discretion to order the detainees release.
Assuming, indeed, that the Secretary of States lawful policy in effect dictates the detainees detention, why, one wonders, would a decision to release him not itself be in breach of the Secretary of States public law duty?
Given, as the Court of Appeal held, and as I understand each member of this court to accept, that there was no realistic prospect whatever of these appellants having been released even had the Secretary of State applied his more favourable published policy, it follows that for my part, whilst, of course, deeply regretting the public law breaches of which the Secretary of State was here guilty, I would dismiss the appeals.
The bulk of this judgment was written upon my understanding that the essential choice facing the court was between (a) no false imprisonment and (b) false imprisonment but nominal damages only.
It now appears that some members of the court favour a third outcome: (c) false imprisonment with damages of perhaps 500 1,000 by way of a vindicatory or conventional award.
Describe such an award how one will, to my mind it cannot sensibly be justified here.
Is the court really to award substantial damages to those conceded to have been rightly detained? I have made clear my difficulties with a nominal award of damages.
A substantial award would appear to me more objectionable still.
Lord Hope (at para 177 of his judgment) refers to Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 a constitutional challenge based upon some quite appalling misbehaviour by a police officer (Lord Nicholls at para 2) and calls here for some recognition of the gravity of the breach of the fundamental right which resulted in false imprisonment.
Properly critical though our judgments may be of the conduct of Home Office officials in these and similar cases, I find it quite impossible to recognise in them any breach (grave or otherwise) of the detainees fundamental rights.
The detainees, I can only repeat, were rightly detained and it would have been wrong to release them.
Save insofar as this judgment indicates the area of my disagreement with Lord Dysons judgment, I wish to say that I am in respectful agreement with it and feel unable to add anything of value on the various other issues arising for decision.
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The main issue in this appeal is whether, and if so which and in what circumstances, breaches of public law are capable of rendering unlawful the detention of foreign national prisoners (FNPs) pending their deportation.
Section 3(5)(a) of the Immigration Act 1971 (the 1971 Act) confers on the Secretary of State for the Home Department a power to deport foreign nationals.
Schedule 3 of the 1971 Act empowers the Secretary of State, in certain specified circumstances, to detain foreign nationals pending deportation.
From at least 1991, the Secretary of State had maintained a published policy on the application of the power to detain.
This policy presumed in favour of release whilst justifying detention in some circumstances.
However, following adverse publicity in April 2006, the Secretary of State adopted a new policy which was not published.
Between April 2006 and September 2008, the Secretary of State applied this unpublished policy which imposed a near blanket ban on release of FNPs.
On 9 September 2008, the Secretary of State amended the published policy to replace all references to a presumption of release with a presumption of detention.
However, on 22 January 2009, following the decision of Davis J in the current proceedings, the published policy was amended again to omit references to a presumption of detention.
Walumba Lumba is a citizen of the Democratic Republic of Congo.
He entered the UK unlawfully in April 1994.
He was later convicted of a number of offences and was sentenced to 4 years imprisonment for wounding with intent on 12 January 2004.
On 3 April 2006, the Secretary of State informed Mr Lumba of the intention to deport him.
He was due to be released from prison in June 2006, but was informed that he was to be detained pending deportation.
He left the United Kingdom voluntarily on 13 February 2011.
Kadian Mighty is a citizen of Jamaica.
He was granted indefinite leave to remain in the UK in February 2003.
On 27 June 2003 he was sentenced to 42 months imprisonment for possession of a Class A drug with intent to supply.
On 10 May 2006, the Secretary of State informed Mr Mighty of the intention to deport him.
On 19 May 2006, he was detained pending deportation.
However, he was released on bail on 28 July 2008.
Mr Lumba issued proceedings on 18 October 2007 claiming a declaration that his detention was unlawful and damages.
His case was joined with that of Mr Mighty who had issued proceedings on 29 May 2008.
In addition, Mr Lumba, who remained in detention until his departure from the United Kingdom, challenged the reasonableness of the duration of his detention and sought a mandatory order that he be released.
At first instance ([2008] EWHC 3166 (Admin)), Davis J granted declarations to the effect that it was unlawful for the Secretary of State to operate an unpublished policy which presumed in favour of detention.
He dismissed the other claims, including the claims for damages for unlawful detention.
The appellants appealed and the Secretary of State cross appealed on the issue of the presumption of detention.
The Court of Appeal (Lord Neuberger MR, Carnwath and Stanley Burnton LJJ) allowed the cross appeal but otherwise dismissed the appeals ([2010] 1 WLR 2168).
The Supreme Court, by a majority, allows the appeals.
Lord Dyson gives the lead judgment.
The majority hold that the Secretary of State is liable to both appellants in the tort of false imprisonment as the statutory power to detain them was exercised in breach of public law duties (Lords Phillips, Brown and Rodger dissenting).
The appellants are, however, only entitled to nominal damages assessed at 1 (Lords Hope, Walker and Lady Hale
dissenting).
They are not entitled to exemplary damages.
The court remits to the High Court the question whether Mr Lumba was detained for longer than a reasonable period in breach of the principles in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles).
The court considers five issues: (1) whether the unpublished policy maintained by the Secretary of State between April 2006 and September 2008 is unlawful on grounds of public law error; (2) if so, whether detention on the basis of such a policy is unlawful in circumstances where the appellants would have been lawfully detained in any event; (3) if so, whether the appellants are entitled to recover more than nominal damages; (4) whether the appellants are entitled to an award of exemplary damages; and (5) in the case of Walumba Lumba, whether there has been a breach of the Hardial Singh principles.
The requirements of public law The court holds unanimously that it is lawful for the Secretary of State to operate a policy which sets out the practice that she will normally follow in deciding whether or not to detain FNPs pending their deportation, provided that the requirements of public law, Hardial Singh and Article 5(1)(f) of the ECHR are respected: [40] [55].
However, as regards the application of the statutory power to detain, it is unlawful in public law for the Secretary of State to maintain an unpublished policy which is inconsistent with her published policy and which applies a near blanket ban on the release of FNPs: [26] [38].
Such a policy was applied to the appellants between April 2006 and September 2008: [21].
Liability in false imprisonment Breach of a public law duty on the part of the person authorising detention is capable of rendering that detention unlawful and did render it unlawful in this case: [62] [88], [198] [207], [221].
Trespassory torts (such as false imprisonment) are actionable per se regardless of whether the victim suffers any harm.
Accordingly, by a majority, the court holds that the fact that the appellants would have lawfully been detained in any event does not affect the Secretary of States liability in false imprisonment: [62], [64] [88], [197], [208] [211], [221], [239] [247].
Lords Phillips and Brown (with whom Lord Rodger agrees) dissent and hold that because the appellants would have been lawfully detained the Secretary of State is not liable to them in false imprisonment: [319] [334], [343] [360].
Damages By a majority, the court holds that the fact that the appellants would have been lawfully detained is relevant to damages rather than to liability.
Since the appellants have suffered no loss they should recover no more than nominal damages of 1: [90] [96].
They are not additionally entitled to damages to vindicate the importance of the right and the seriousness of the infringement: [97] [101], [222] [237], [253] [256] (Lords Hope, Walker and Lady Hale dissenting: [176] [180], [195], [212] [217]).
Further, the court holds unanimously that the appellants are not entitled to exemplary damages: [150] [169].
Reasonableness of the length of detention under the Hardial Singh principles As regards the assessment of whether a reasonable period of detention has elapsed, the court unanimously holds that the risk of reoffending and the legal challenges pursued by the detainee are relevant.
The relevance of a refusal to voluntarily return is limited: [106] [128].
It is for a court of first instance to decide whether Mr Lumbas detention for almost 56 months was in breach of the Hardial Singh principles.
Accordingly, his claim is remitted to the High Court: [129] [148].
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This appeal raises the issue whether the daily vessel operating expenses of shipowners incurred while they were negotiating to reduce the ransom demands of pirates should be allowed in general average ie whether those expenses should be shared proportionately between all those whose property and entitlements were imperilled as a result of that seizure or whether they must be borne by the shipowner alone.
General average and the York Antwerp Rules
General average refers to the system of maritime law by which sacrifices of property made, and loss and expenditure incurred, as a direct result of actions taken for the purpose of preserving a common maritime adventure from peril are rateably shared between all those whose property is at risk in the adventure.
The principle of rateable sharing of such losses between parties to a maritime adventure appears to date back at least to the law of the Rhodians.
Having been adopted by the Romans, it passed on a customary basis into European sea laws of the Middle Ages, and thence into modern European Codes.
It appears that the expression general average started to be used in English judgments around the end of the 18th century and was first authoritatively discussed judicially in this country by Lawrence J in Birkley v Presgrave (1801) 1 East 220, 228 229.
It was first recognised statutorily in section 66 of the Marine Insurance Act 1906.
The York Antwerp Rules are an internationally agreed sets of rules, the first set (under that name) propounded in 1877, since when they have gone through a number of versions.
The latest version was agreed in 2016.
The Rules are designed to achieve uniformity in ascertaining which losses fall within the principle, in determining the method of calculating those losses, and in deciding how they are to be shared.
Although internationally agreed between relevant expert and interested bodies, the Rules are not the subject of English legislation or international convention, and they derive legal force only through contractual incorporation.
In the present case the 1974 version of the Rules was contractually incorporated into the relevant carriage contract.
I will refer to that version as the Rules.
The Rules are in English and French, and for the most part I shall confine myself to the English version.
The Rules are introduced by a Rule of Interpretation, which states that: In the adjustment of general average the following lettered and numbered Rules shall apply to the exclusion of any Law and Practice inconsistent therewith.
Except as provided by the numbered Rules, general average shall be adjusted according to the lettered Rules.
The seven lettered Rules are shortly expressed and are plainly intended to be of general application, whereas most of the 22 numbered Rules are lengthier, a few of them much lengthier.
Three of the lettered Rules are of particular relevance to this appeal, namely Rules A, C, and F. Rule A is in these terms: There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.
Rule C provides: Rule F states: Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average.
Loss or damage sustained by the ship or cargo through delay, whether on the voyage or subsequently, such as demurrage, and any indirect loss whatsoever, such as loss of market, shall not be admitted as general average.
Any extra expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided.
The numbered Rules play no part in these proceedings, save that some reliance has been placed on Rule XI.
That Rule is concerned with Wages and Maintenance of Crew and other expenses bearing up for and in a Port of Refuge etc, and is the second longest of the Rules.
It provides among other things for crew wages and maintenance to be recoverable in general average where Rule XI applies.
The factual background
On 29 January 2009 the chemical carrier MV Longchamp (the vessel) was transiting the Gulf of Aden on a voyage from Rafnes, Norway, to Go Dau, Vietnam, laden with a cargo of 2,728.732 metric tons of Vinyl Chloride Monomer in bulk (the cargo).
The cargo was carried under a bill of lading dated 6 January 2009 which stated on its face that General Average, if any, shall be settled in accordance with the York Antwerp Rules 1974.
At 06.40, seven heavily armed pirates boarded the vessel.
The pirates commanded the master to alter course towards the bay of Eyl, Somalia, where she arrived and dropped anchor at 10.36 on 31 January 2009.
At 14.05 on 30 January 2009 a negotiator for the pirates boarded the vessel and demanded a ransom of US$6m.
The vessels owners (the owners) had meanwhile formed a crisis management team who had set a target settlement figure of US$1.5m.
On 2 February 2009 an initial offer of US$373,000 was put to the pirates.
Negotiations between the pirates negotiators and the owners crisis management team continued over the following seven weeks with various offers and counter offers being made.
Eventually on 22 March 2009, after a negotiation period of 51 days, a ransom was agreed in the amount of US$1.85m.
On 27 March 2009 the ransom sum was delivered by being dropped at sea.
At 07.36 on 28 March 2009 the pirates disembarked and at 08.00 that day the vessel continued her voyage.
It is accepted that the US$1.85m ransom payment itself can be allowed under Rule A.
It is also accepted that the costs and expenses of the negotiator in relation to the ransom, Captain Ganz, and the costs and expenses of his special advisers, NYA International, are allowable.
There was a dispute about the allowability of a sum of around US$20,640 in respect of media expenses but that is no longer challenged by the cargo interests.
The essential issue on this appeal is whether the vessel operating expenses incurred during the period of negotiation (the negotiation period expenses) are allowable in general average under Rule F.
Those sums are: (1) US$75,724.80 for crew wages paid to the crew. (2) US$70,058.70 for high risk area bonus paid to the crew by reason of the fact that the vessel was detained within the Gulf of Aden.
These are additional wages which the crew were entitled to under their contract of employment whilst at sea within a high risk area. (3) US$3,315 for crew maintenance (ie food and supplies). (4) US$11,115.45 for bunkers consumed.
In this judgment, I shall treat the aggregate sum as being US$160,000.
The procedural history
The average adjuster, Mr Robin Aggersbury of Stichling Hahn Hilbrich, considered that the negotiation period expenses were allowable under Rule F on the basis that they were incurred during a negotiation period of about 51 days which enabled an amount of US$4,150,000 [to be] saved in the common interest of all property owners concerned, which would otherwise have been recoverable as per Rule A.
The 51 day period to which he referred was, as explained above, from 30 January to 22 March 2009.
The cargo was valued at destination at US$787,186 and the value of the vessel was assessed at US$3,947,096; so cargo interests were liable for 14.44% of the total general average expenditure.
Following publication of the adjustment, the cargo interests requested and obtained a report (the Report) from the Advisory Committee of the Association of Average Adjusters.
The Report set out the facts in considerable detail, and concluded, by a majority of four members to one, that the negotiation period expenses did not fall within Rule F.
The cargo interests had previously made payments on an account of general average, but following the publication of the adjustment they issued proceedings challenging (in accordance with the Report) the adjusters conclusion that the negotiation period expenses fell within Rule F, and seeking an appropriate repayment.
The arguments of the parties
The owners argument involves the following steps.
First, it is rightly common ground that the US$1.85m ransom paid to the pirates for the release of the vessel was expenditure which was a general average act within Rule A.
Secondly, the negotiation period expenses claimed fell within the expression expense incurred by the owners within Rule F. Thirdly, those expenses were incurred in place of another expense, namely the US$4.15m saved as a result of the negotiations.
Fourthly, those expenses, being US$160,000, are less than the general average expense avoided, namely the US$4.15m (and for the sake of simplicity I will treat this as the saving, although the actual saving was somewhat less by virtue of expenses such as those paid to Captain Ganz and NYA).
Fifthly, it follows from this that the negotiation period expenses are properly allowable under Rule F.
The cargo interests raise a number of points in answer to this argument, and those points (which I shall take in a slightly different order from that in which they were argued in this court or discussed by Hamblen LJ in his judgment) are as follows: a) The ransom saved was not allowable. b) The ransom saved was not another expense. c) The negotiation period expenses were not incurred with the necessary intention. d) The negotiation period expenses are not extra expense. e) The negotiation period expenses would or may have been incurred anyway. f) The negotiation period expenses are irrecoverable by virtue of Rule C or (by implication) Rule XI.
I shall consider those arguments in turn, although it is the first and second arguments which justify particular consideration partly because they are the most difficult points and partly they are issues on which my view differs from that of the Court of Appeal.
It would not have been reasonable to accept the initial ransom demand
The cargo interests first contention is based on the proposition that it would not have been reasonable for the owners to have accepted the pirates initial ransom demand for US$6m.
On that basis, it is said that a payment of US$6m (or, more accurately, the saving of US$4.15m) would not have been expenditure reasonably incurred within Rule A, and therefore cannot qualify as an expense which would have been allowable as general average in Rule F.
The judge accepted that, in order to succeed in its claim under Rule F, the owners would have to establish that it would have been reasonable for them to have accepted the pirates initial demand, but decided that, in all the circumstances, it would have been reasonable for the owners to have paid US$6m ransom.
The Court of Appeal agreed with the judges analysis of the legal position, and declined to interfere with his conclusion that it would have been reasonable of the owners to have met the pirates initial demand.
It is a difficult question whether the Court of Appeal ought to have concluded that the judge was entitled to conclude that it would have been reasonable for the ship owner to have paid the pirates the US$6m which they initially demanded.
While an appellate court should be slow to interfere with a trial judges finding of fact, this was not a finding of primary fact.
And, at least on the face of it, one would have thought that it would have required very unusual circumstances for a ship owner not to try and negotiate with pirates who had made such a very high demand.
Further, the evidence suggests that no ship owner accepted an initial demand made by Somali pirates and that their demands were generally pitched on the basis that they would be substantially reduced by negotiation.
On the other hand, one must beware of the perils of wisdom of hindsight, and it is right to bear in mind that there was a wounded sailor on the vessel and that the cargo was perishable.
In my opinion, it is not necessary to resolve this difficult issue, because I do not consider that the judge or the Court of Appeal were correct in assuming that the owners had to establish that it would have been reasonable to accept the pirates initial demand in order to justify the contention that the negotiation period expenses were allowable under Rule F. One does not need to examine the wording of the Rules to appreciate that the assumption made by the courts below would lead to very odd results, as explained by Hamblen LJ at [2016] Bus LR 1285, paras 62 to 64.
It would mean that, if a ship owner incurs an expense to avoid paying a reasonable sum, he can in principle recover under Rule F, whereas if he incurs expense to avoid paying an unreasonable sum (ie a larger sum), he cannot recover.
The more obvious his duty to mitigate, and the greater the likely benefits of such mitigation, the less likely he would be to be able to recover.
Such a state of affairs (apparently known to cognoscenti as the Hudson conundrum, after the writer who first described it) would be a remarkable result.
Fortunately, examination of the wording of Rules A, C and F shows that it does not arise.
Where I part company with the judge and the Court of Appeal is in relation to their view that the reference in Rule F to another expense which would have been allowable as general average is to an expense whose quantum is such that it would have qualified as a claim under Rule A.
In my opinion, the reference to an expense which would have been allowable is to an expense of a nature which would have been allowable.
First, the word allowable in Rule F naturally takes one to Rule C, where the similar word allowed is used, rather than Rule A, where there is no reference to anything being allowed (the same point applies to the French version admissible in Rule F and admis in Rule C).
Unlike Rule A, Rule C is concerned purely with the type of expense, and not with quantum.
Secondly, the opening part of Rule F is unlikely to be concerned with quantum, as that is dealt with in the closing part, which imposes a cap on a sum recoverable under Rule F, namely only up to the amount of the general average expense avoided.
Thirdly, the interpretation assumed in the courts below imposes an unnecessary fetter on the allowability of an extra expense, as there is already a reasonable fetter in the concluding part of Rule F. Fourthly, the interpretation I favour produces an entirely rational outcome: whenever an expense is incurred to avoid a sum of a type which would be allowable, that expense would be allowable, but only to the extent that it does not exceed the sum avoided.
Applying that reasoning to this case, and subject to the discussion below as to the cargo interests other arguments, the US$160,000 falls within Rule F. The US$160,000 was incurred in order to avoid paying a US$6m ransom (or, more accurately, a ransom of around US$4m more than the ransom actually paid), and as the ransom was an allowable expense in principle, the US$160,000 therefore falls within Rule F, subject to the appellant establishing that it would have been reasonable to have paid a ransom of around US$2.4m (ie the ransom it did pay plus the US$160,000 together with the further expenses such as those paid to Captain Ganz and NYA).
If the judge was even arguably entitled to reach the conclusion that paying a US$6m ransom was reasonable, it must have been reasonable to pay a ransom well under half that figure.
Even if the analysis in para 19 above were not right, I would have reached the same conclusion.
As pointed out by Lord Sumption in the course of the argument, where an unreasonably high sum is expended, there would be no reason not to hold that Rule F applied, albeit only to the extent of a reasonable sum, on the basis that the greater includes the less.
Thus, if (contrary to the analysis in para 19 above), Rule F only applied where a sum was reasonably incurred, and in this case the judge had concluded that the maximum reasonable ransom would have been US$4m, then Rule F would have applied to US$4m of the US$6m ransom.
The reduction in ransom was not an alternative course of action
I turn then to the second contention raised by cargo interests, which was the ground on which they succeeded in the Court of Appeal.
That contention is that the negotiation period expenses do not fall within Rule F, because the payment of a reduced ransom of US$1.85m was not an alternative course of action to the payment of the ransom originally demanded, namely US$6m: it was merely a variant.
This contention involves arguing that to trigger Rule F, it is not enough for a claimant to incur expense in achieving a result which costs less than what an allowable item would otherwise have cost: the expense must be incurred to achieve a result which involves replacing that allowable item with a different and cheaper item.
As Lord Mance expressed it during the argument, this argument involves saying that Rule F applies only where some means is adopted to complete the adventure, and that means is different from that which might normally be expected.
The notion that Rule F is only engaged in a case where the claimant achieves an alternative course of action in that sense was said by Hamblen LJ at [2016] Bus LR 1285, paras 38 to 40 to be supported by passages in the two leading books in English on general average.
In paras F.01 and F.29, the editors of Lowndes & Rudolf, The Law of General Average and the York Antwerp Rules, 14th ed (2013) write: As the name implies, substituted expenses are the expenses incurred in respect of a course of action undertaken as an alternative to or in substitution for the expense that would be allowable as general average.
For this rule to have any application there must have been an alternative course which, if adopted, would have involved expenditure which could properly be charged to general average.
In Hudson & Harvey, The York Antwerp Rules: The Principles and Practice of General Average Adjustment, 3rd ed (2010), para 11.33, there is this: Although Rule F is phrased in terms which refer to the incurring of the expense, its application in practice presupposes a choice between two (and sometimes more) different courses of action.
I am not convinced that, as a matter of language, those passages support the conclusion that Rule F can only be invoked when the claimant has taken an alternative course of action, but I accept that the prevailing view among the writers on the subject, and among those who work in the field, of general average may well be as Hamblen LJ suggested.
Thus, it certainly seems to have been assumed to be the generally accepted position by Hoffmann LJ in his striking dissenting judgment in Marida Ltd v Oswal Steel (The Bijela) [1993] 1 Lloyds Rep 411, where, at p 423 he quotes with approval a passage from the 11th ed (1990) of Lowndes & Rudolf which is identical to that quoted by Hamblen LJ from the 14th ed.
However, the law cannot be decided by what is understood among writers and practitioners in the relevant field (or even by views expressed by Hoffmann LJ in a dissenting judgment, especially in a case where the point did not strictly arise and does not appear to have been argued).
Experience shows that in many areas of practical and professional endeavour generally accepted points of principle and practice, when tested in court, sometimes turn out to be unsustainable.
I accept that it may be right for a court to have regard to practices which have developed and principles which have been adopted by practitioners, but they cannot determine the outcome when the issue is ultimately one of law.
Further, as the opinions of the average adjuster and of the majority of the Advisory Committee of the Association of Average Adjusters in this case demonstrate, there is certainly no question of there being a universal view on the issue.
Turning to the language of Rule F, I consider that this alternative course of action contention goes nowhere.
Even if one accepts that the extra expense must involve an alternative course of action, it seems to me that the owners claim satisfies that requirement.
It appears to me that (ignoring other sums for present purposes) the right analysis of the owners claim is that it is for (i) US$1.85m under Rule A and (ii) US$160,000 under Rule F, on the basis that (i) the US$1.85m, as a reasonable sum paid to ransom the vessel and the cargo, is admittedly within Rule A, and (ii) the US$160,000, as negotiation period expenses, represents extra expense incurred in place of the US$4.15m, the amount by which the ransom was reduced.
On that basis, as I see it, the incurring of the US$160,000 did represent an alternative course of action, in the sense that the cargo interests use that expression, from the payment of the US$4.15m: the former involved incurring vessel operating expenses whereas the latter involved paying a ransom.
There is an alternative analysis of the owners claim, which is that it should be treated as being for a single sum of US$2.01m, namely the US$1.85m ransom actually paid plus the US$160,000 negotiation period expenses, under Rule F on the basis that this combined sum was extra expense incurred in place of the US$6m originally demanded.
However, I do not see how that helps the cargo interests.
Logically, their argument on this basis should be that the US$1.85m is disallowable under Rule F as it was not an alternative course of action from paying the originally demanded US$6m ransom, but the negotiation period expenses are recoverable under Rule F, as they did involve an alternative course of action which is precisely the opposite of the cargo interests actual case, and indeed a nonsensical result.
Accordingly, the cargo interests second contention cannot simply be based on the wording of Rule F. Their contention, as I see it, must be that the expenses incurred in negotiating a reduction in the cost of an allowable item do not fall within Rule F because the reduction in the cost of an allowable item which would be paid for anyway, and which falls within Rule A, cannot be within the scope of Rule F.
I do not find it easy to see how one can get that out of the words of Rule A or Rule F.
I suppose that one could take the analysis in para 27 above and argue that it works perfectly well where, as a result of the negotiation, an alternative course of action, within the restrictive use of that expression as urged by the cargo interests, was taken.
However, given the problem identified in para 27 above with such an approach where the reduced sum is not such an alternative course of action, I am very dubious whether the approach can be justified anyway.
Given that the Rules represent an international arrangement, it is particularly inappropriate to adopt an approach to their interpretation which involves reading in any words or qualification.
As already mentioned, it appears to me that, as a matter of ordinary language, Rule F applies to the negotiation period expenses for the reasons given in para 26 above.
To imply some qualification such as the requirement that those expenses must have been incurred so as to achieve an alternative course of action appears to me to be very dangerous.
In the same way as an international convention or treaty, the Rules should be interpreted by a United Kingdom court unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation, to quote Lord Wilberforce in James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152.
As Lord Hobhouse said in King v Bristow Helicopters Ltd [2002] 2 AC 628, para 148, in relation to an article in the Warsaw Convention, it is the unadorned language of the article to which attention must be directed.
Quite apart from this, the cargo interests second contention appears to me to lead to difficulties and potential anomalies in practice.
Thus, there would be difficulties about deciding whether a particular variant was an alternative course of action.
Towage to destination, extra costs of arranging dry docking with cargo on board, overtime worked on repair or cargo operations (at least sometimes), and (historically) air freight instead of sea freight for spare parts were examples given by the respondents of alternative courses of action (mostly taken from Lowndes & Rudolf, op cit).
But it is hard to see where the line is to be drawn.
The difficulties about deciding whether overtime payments qualify is plain from reading Lowndes & Rudolf, op cit, para F.25; in addition, overtime payments are enhanced payments for the same work whose cost would have been recoverable under Rule A in any event.
And if air freight can qualify if it is incurred instead of sea freight, it is hard to see much logic in disqualifying sea freight at a lower rate negotiated with a new party on a different type of vessel.
Further, given that, on the cargo interests case, negotiation period expenses could not be claimed if they were incurred as a result of negotiating a reduction in the cost of repair with one shipyard, what would the position be if the negotiations were with a competing shipyard and/or in respect of a novel and different way of effecting the repairs?
It also appears to me to be somewhat inconsistent in terms of logic that (as has been agreed between the parties in this case) the costs and expenses of Captain Ganz and NYA are subject to general average whereas the negotiation period expenses are not.
It is clear that the costs and expenses claimed by and paid to Captain Ganz and NYA included costs and expenses attributable to the negotiations with the pirates (for instance, hotel bills for most of the 51 day period).
They can only be justified on the basis that they were referable to the negotiations to reduce the ransom, in the sense that they were incurred solely because of the negotiations taking place.
Accordingly, if they are claimable, it is hard to understand why the negotiation period expenses should not also be claimable.
At [2016] Bus LR 1285, para 47, Hamblen LJ suggested that there were a number of anomalies if the negotiation period expenses were allowable.
First, he mentioned the difficulty of establishing that the expenses would not have been incurred even if the initial demand for US$6m ransom had been accepted.
I doubt that that problem would arise in most cases where the vessel operating costs are said to fall within Rule F, and it may well arise in some cases where it would be common ground that Rule F would apply.
In any event, it is for the claimant in each case to establish, on the balance of probabilities, that the delay caused by the negotiation would not have occurred if there had been no negotiation.
Secondly, he said that, in a case such as this there could be no entitlement to claim vessel operating costs as Rule F expenses until a demand had been made.
I agree, but fail to see why it is an anomaly.
Thirdly, Hamblen LJ pointed out that, in the absence of a demand, eg if there were simply negotiations, it might be hard to say when, or even whether, Rule F was engaged.
I accept that there may be ransom cases where it is hard to determine at what precise point Rule F is engaged, but it would, I think, be a rare case where at some point early in the negotiations the pirates did not come up with a figure.
Anyway, I suspect that point could apply to cases where Rule F is undoubtedly engaged.
Quite apart from that, I do not accept that the fact that there may be difficulties for claimants in a few other ransom cases is a reason for holding that Rule F is not engaged in this case.
More broadly, if (as appears to me to be appropriate) one views Rule F simply as entitling a claimant to claim in respect of an expense successfully incurred for the purpose of mitigating a loss, it seems to me that none of these points should give rise to concerns.
The cargo interests other arguments
The cargo interests third contention is that, in order to be recoverable under Rule F, the negotiation period expenses must be shown to have been consciously and intentionally incurred by the owners, and there was no evidence that the owners or their agent had consciously decided to incur those expenses in order to reduce the ransom payable to the pirates.
Indeed, Hamblen LJ said at [2016] Bus LR 1285, para 43 that it does not appear that the owners ever considered that they faced a choice and that there was no evidence to suggest that they ever considered choosing between paying the ransom on demand and paying a lesser sum following negotiation.
Accordingly, runs the argument, the owners cannot recover under Rule F as they never made a conscious choice between paying the US$6m ransom initially demanded by the pirates or negotiating with the pirates.
I do not accept that contention.
The question whether one expense has been incurred in place of another expense must be assessed objectively.
In this case, it is clear (and must have been clear at the time) that negotiations were (and would be) needed if the ransom was to be reduced, that such negotiations took (and would take) time, and that the passage of time resulted in the negotiation period expenses (and would result in expenses of that nature) being incurred.
As the negotiations resulted in the ransom being reduced, it seems to me that, subject to any other argument, it must follow that the expenses incurred as a result of those negotiations were incurred in place of the US$4.15m saved (or that the expenses incurred plus the US$1.85m actual ransom were incurred in place of the original US$6m ransom demand).
The cargo interests further contend that the negotiation period expenses were not extra expense within the meaning of that word in Rule F.
This contention is based on the proposition that, in order to qualify as extra expense, an expense would have to be of a nature which would not normally have been incurred in response to the peril threatening the adventure.
I can see no reason for giving the word extra such a restrictive meaning.
First, it is not its natural contextual meaning, which, in my view, is simply an expense which would not otherwise have been incurred (but for the saving of the other expense).
Secondly, such a meaning is supported by the contrast with the word extraordinary in Rule A.
Thirdly, such a restrictive meaning lies unhappily with the French equivalent adjective, which is supplmentaire.
I take some comfort from, but do not rely on, the fact that the word extra in Rule F has now been replaced, in later versions of the Rules, by the word additional.
The cargo interests next contention is that the delay which led to the negotiation period expenses may well have occurred even if the owners had agreed to the pirates initial demand of US$6m.
For instance, if the owners had accepted the US$6m, the pirates may have thought that they had pitched their initial demand too low, and would have increased it, leading to further negotiations and consequent delay.
That is of course a possibility.
However, it is inherent in the judges conclusion that he considered it more likely than not that the vessel and cargo would have been released promptly if the US$6m ransom demand had been accepted and paid.
That was the sort of finding (albeit an implied finding, but necessarily so, in his conclusion) with which an appellate court should be very slow to interfere.
And in this case it appears to me that we should clearly not question it: it was an eminently defensible finding.
It is clear that a delay of some period would be inevitable as a result of the negotiations, and it is clear that the 51 days (between the initial demand of US$6m and the final agreement at US$1.85m) was inevitable as a result of the negotiations; on the other hand, to put it at its very lowest, it is not unlikely that none of the 51 days delay would have been suffered if the US$6m demand had been met.
The cargo interests final contention is that, as Rule C excludes from general average expenditure which is an indirect loss including demurrage, and/or because Rule XI includes crew wages and maintenance where it applies, the claim in the present case must fail.
In my opinion, there is nothing in that point.
I accept that the negotiation period expenses, if consequential on a general average act, would have fallen within the exclusion in Rule C of loss sustained through delay, but I do not accept that it follows that they must therefore fall outside Rule F. Rule C applies to expenses and other sums claimed by way of general average as consequences of a general average act (as defined by Rule A).
It does not apply to expenses covered by Rule F, which is concerned with sums which are expended or lost in mitigating or avoiding the sums which would otherwise be claimable as general average.
By definition, sums recoverable under Rule F are not themselves allowable in general average, but are alternatives to sums which would be allowable.
One can understand why, as a matter of policy, demurrage and similar indirect liabilities are not recoverable as general average, but it does not follow that such indirect liabilities should be irrecoverable if they are expended in order to mitigate what would otherwise be a larger general average claim.
As for the cargo interests reliance on Rule XI, I find it hard to see why the fact that vessel operating expenses are specifically allowed in one specific type of case, means that it should be presumed that they are excluded from every other type of case.
In any event, the Rules start by saying that the lettered Rules apply save where the numbered Rules apply, and that makes it particularly difficult to justify the notion that a specific allowance in a numbered Rule should impliedly rule out such an allowance in a lettered Rule.
Indeed, I understood the cargo interests in this case to accept that vessel operating costs would be recoverable in a case where Rule F did apply (subject to their Rule C argument considered in para 37 above), and that seems to be consistent with what is said in the two books on general average to which I have referred.
I agree with the judgment of Lord Neuberger.
Conclusion
For these reasons, I would allow this appeal and restore the decision of the deputy judge.
LORD SUMPTION: (with whom Lord Hodge and Lord Clarke agree)
The York Antwerp Rules have a status in shipping law similar to that of the Uniform Customs and Practices in the law relating to documentary credits.
They depend wholly on contractual incorporation for their binding force.
But they are designed to create a body of principle applicable internationally in a uniform way, although incorporated in shipping agreements of different kinds, governed by different laws.
It will therefore rarely if ever be appropriate to imply matter into them which is not apparent from the natural meaning of the words, unless the implication is necessary to make them workable or intelligible or to avoid absurdity.
Rule F is simplicity itself.
It provides for the allowance of expenditure which is not allowable as general average expenditure but has successfully mitigated expenditure or sacrifice which would have been allowable as general average.
The cost of maintaining the ship and crew during a period of delay which would not have occurred but for the peril but was necessary to enable the ransom to be reduced, is deemed to be general average up to the amount of the reduction.
I appreciate that the practice of most average adjusters has been to disallow such expenditure.
In the absence of a comprehensive body of case law (general average rarely reaches the courts), adjusters have adopted a variety of practices or rules of thumb to supplement the Rules.
This is perhaps inevitable, but such practices are not law and there is a tendency in this field for them to lose sight of the basic concepts expressed in the Rules themselves.
I suspect that this particular practice has been influenced by the second paragraph of Rule C and the limited scope of application of Rule XI.
But the second paragraph of Rule C serves to limit the permissible heads of general average expenditure so as to exclude delay.
There is no textual, indeed no rational reason why it should be taken to limit the permissible heads of expenditure which although not general average expenditure successfully mitigates something else that is.
As for Rule XI, like the other numbered rules, that is a specific rule relating to ships entering a port or place of refuge, which does not impinge upon the general principles set out in the lettered rules, as applied to other situations.
In my opinion, the appeal should be allowed.
I agree that the appeal should be allowed for the reasons given by Lord LORD CLARKE:
Neuberger and Lord Sumption.
LORD MANCE: (dissenting)
Although a general average case was the origin of the English Commercial Court, general average cases are few and far between.
The correct resolution of the present case has divided both general average practitioners and the courts, and the number of issues raised has tended to multiply as the case has progressed.
The core question is simple.
Where a vessel with its cargo has been seized by pirates, and the owners over a period succeed in negotiating down an initial ransom demand, can the owners include in general average not merely the ransom payment ultimately made, but also vessel and crew costs totalling US$160,213.95 incurred during the period of negotiation (the negotiation period expenses).
The vessel MV Longchamp was boarded by pirates at 06.40 hours on 29 January 2009.
A ransom demand of US$6m was made by the pirates at 14.05 on 30 January 2009 and was rejected by the owners as too high on 31 January 2009.
The vessel had by then been taken to a position off Eyl on the coast of Somalia.
Thereafter, negotiations took place lasting until 18.25 on 22 March 2009, when the pirates accepted the owners last offer of US$1.85m.
The ransom was dropped at sea off Eyl on 27 March and the vessel was released to proceed on her voyage at 07.36 on 28 March 2009.
The negotiation was in practice conducted by the owners.
The negotiation period to which the relevant expenses relate runs from 14.05 on 30 January to 08.25 on 22 March 2009.
The relevant bill of lading provided for any general average to be adjusted according to the York Antwerp Rules 1974.
The ransom payment and the costs of specialist negotiators are accepted as direct general average costs, falling within Rule A of those Rules.
The question is whether the negotiation period expenses fall to be included in general average under Rule F, reading: Any extra expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided.
The owners case is that: (i) if they had paid the US$6m ransom initially demanded, that would have been allowable as general average within the meaning of Rule F; (ii) instead of doing this, they entered into successful negotiations; (iii) the resulting reduction in the ransom payable from US$6m to US$1.85m avoided general average expense of US$4.15m; and (iv) the negotiation period expenses totalling US$160,213.95 can and should be treated as an extra expense incurred in place of the general average expense of US$4.15m avoided.
Before the deputy judge, Mr Stephen Hofmeyr QC [2015] 1 Lloyds Rep 76, the focus was on point (i), whether the US$6m would, if paid, have been allowable as general average.
He held that it would have been.
The Court of Appeal agreed with the judge on this point.
But it focused on a different aspect, whether Rule F was in principle applicable when all that had occurred was negotiation, in the event a long, rather than a short negotiation, but not an alternative course of action by which expenditure different in kind was incurred.
In the Court of Appeals view, this was not a case of extra expense being incurred in place of another expense, but a case where the owners had no real choice or true alternative to pursue (per Hamblen LJ [2016] Bus LR 1285, paras 51 53) and there was only one course of action open namely to treat with the pirates however long that might take (per Sir Timothy Lloyd, para 99).
I have considerable sympathy with the Court of Appeals instinct that Rule F was not designed with the present situation in mind.
The classic circumstances in which it is treated as applying are cases where there is one obvious or natural course of action open to the owners following a general average event, but there is also some different action, which might if taken lead to a more generally beneficial outcome overall.
This, it is common ground that Rule F in the 1974 Rules embraces situations where, instead of undergoing repairs in a port of refuge, the vessel is towed as is to destination, or the cargo is forwarded on another vessel, or, where, instead of discharging cargo in order to undertake dry docking and repair, extra equipment is obtained to enable dry docking and repair without such discharging.
In the Canadian case of Western Canada Steamship Co Ltd v Canadian Commercial Corp [1960] 2 Lloyds Rep 313, decided in an era when sea transport was the norm, the cost of airfreighting a new propeller shaft from Wales to Singapore was allowed on the same basis.
However, it is also clear that Rule F can apply in situations where the general average expense avoided would have been allowable under one of the numbered rules, setting out various specific situations in which various types of vessel or crewing costs are in principle recoverable as general average.
In short, the focus of Rule F seems to me to have been correctly identified by Hoffmann LJ in Marida Ltd v Oswal Steel (The Bijela) [1993] 1 Lloyds Rep 411, 421, when he quoted with approval the then most recent edition of Lowndes & Rudolf on General Average and the York Antwerp Rules (11th ed (1990), p 144), as saying that the substituted expenses must be: an alternative to, or in substitution for what might prima facie be thought of as being the normal or standard means of dealing with a given situation.
Hoffmann LJ went on (p 422) to leave open the question whether under Rule F the course of conduct giving rise to the substituted expense should have fallen outside the obligations contained in the contract of affreightment or whether it is sufficient that the expenditure was a less usual and more [sic] expensive way by which the owner complied with his contractual obligation, eg to repair the ship.
He concluded by noting that Lowndes & Rudolf suggest that expenditure of the latter kind could fall within the Rule, but that Rule F certainly contemplates that there was a practical alternative by which the adventure could have been completed.
The cargo interests conceded in their written case, and I am prepared for present purposes to accept, that this does not exclude all possibility that Rule F might cover a situation in which, by some unusual or non standard step, the owners are able to replace or reduce in amount an expense of one kind by incurring a lesser expense of the same kind.
It does not however seem to me necessary to go even that far in the present case, since what is submitted is that the owners have, by incurring negotiation period expenses, consisting of vessel and crew costs, avoided a different kind of expense, namely extra ransom costs.
What is however clear on any view is that Rule F is not intended to cover general average situations in which owners simply do what would in the ordinary course be expected of them in the interests of the common adventure.
Where this is the position, the expenses incurred will be admissible, potentially, as the direct consequence of the general average act, allowable as general average under the first paragraph of Rule C, unless they are excluded as loss or damage incurred through delay under the second paragraph of Rule C. One qualification to this is however significant.
Even if expenses would otherwise be excluded as loss or damage incurred through delay, they may nevertheless be admitted if they fall within one of the numbered heads.
Rule XI(a) in particular covers costs of crew and vessels fuel and stores during the prolongation of a voyage occasioned by a vessel entering a port or place of refuge or returning to her loading port or place in circumstances falling within Rule X(a).
Rule XI(b) covers, broadly, crew costs when a vessel has entered or been detained in any port of place in consequence of, or for repairs following, a general average event.
It is unnecessary to examine the precise ambit of these provisions.
What matters is that they constitute very specific qualifications of the exclusion by the second paragraph of Rule C of loss or damage through delay.
There is no equivalent qualification which could cover the present case.
Hence the owners reliance on Rule F.
In order to bring the case within Rule F, the owners have to show and the onus is on them both as a matter of general principle and specifically under Rule E that they incurred extra expense, that this was in place of another expense and that that other expense would have been allowable as general average; and, once they have done that, the extra expense is only allowable up to the amount of the general average expense avoided.
I have little difficulty with accepting the negotiation period expenses as an extra expense in the sense that they were over and above anything that would, taking Mr Hofmeyr QCs words ([2015] 1 Lloyds Rep 76, para 89), ordinarily have been incurred on such a voyage.
I have already covered what may have been contemplated in Rule F by the use of the phrase in place of another expense.
Rule F only applies if the other expense would have been allowable as general average and subject to the condition that the extra or substituted expense is allowable only up to the amount of the general average expense avoided by not incurring that other expense.
Viewing Rule F as a whole, it is clear that the owners must show that, had they incurred the other expense, the costs it would have involved could validly have been treated as general average their right to include extra or substituted expenses as general average being limited under Rule F by the extent to which the hypothetical other expense could have been so treated.
The last sentence of para 19 of Lord Neubergers judgment accepts this.
It seems therefore of only academic interest to debate whether the same conclusion would flow from the words would have been allowable as general average by themselves.
For my part, however, I consider that it would have done.
The word allowable must take one back to the requirements of Rule A as well as Rule C. Rule A apart, there would be no indication what is meant by general average or an expense allowable in general average.
The onus placed under Rule E on any party claiming in general average to show that the loss or expense claimed is properly allowable as general average must carry one back to Rule A as well as C.
In this connection, it is also notable that the French word used throughout Rules C, E and F (admis, admise, admission or admissible) has in each case the same root.
The Hudson conundrum, to which Lord Neuberger refers (para 18 above), does not lead to any different conclusion.
In most, if not all, circumstances in which Rule F applies, there will be a prima facie or standard course of action to be taken in the face of the general average event, but the owners will, by adopting some unusual means, have arrived at an alternative solution to further the common adventure.
In such cases, the other paying parties will be hard pressed to suggest that the prima facie or standard reaction would have been unreasonable.
There is a parallel here with the duty to mitigate, which is not lightly to be imposed or treated as broken.
The Court of Appeal ([2016] Bus LR 1285, paras 73 74) was in this respect right in my view to agree with the deputy judges general conclusion of principle ([2015] 1 Lloyds Rep 73, para 77) that the hypothetical other expense must be one which would have been reasonably incurred in a sense interpreted and applied with a sufficient degree of latitude to give rule F practical effect.
In many cases, the differences between the two courses (the standard and that adopted) may not be large, and both may easily be reconciled as reasonable reactions.
Rule F is also careful, by its concluding words, to recognise that the extra expense may not be less than that which would have resulted from taking the standard course.
In such a case, Rule F performs the valuable function of allowing recovery up to the amount which would have been recoverable had the standard course been adopted.
Turning specifically to an unusual situation like the present: if there is no course at all open to take, the expenses of which would have been allowable as general average, then matters must run their course.
If a ransom is demanded and paid in an amount which is unreasonable to pay, the only amount allowable in general average will be whatever lesser amount it would have been reasonable, after negotiation, to pay.
If the negotiation period expenses are regarded as an extra expense incurred in place of the amount of the ransom avoided by the negotiation, they can be recoverable at most only so far as the negotiation avoided the making of a ransom payment which it would have been reasonable to pay.
On no view is there any basis for reading into the clear language of Rule F an entirely artificial assumption that, when judging whether the other expense would have been allowable as general average, the possibility of incurring the extra expense in place of that other expense must be ignored.
To do so would be flatly contrary to the language and evident intent of Rule F. The reasoning and decision of the House of Lords in Marida Ltd v Oswal Steel (The Bijela) [1994] 1 WLR 615 turned on the very different wording of Rules X(b) and XIV, under which the express assumption in Rule XIV that such [temporary] repairs had not been effected there could be, and fell to be, read into Rule X(b) when considering what repair expenses would have been necessary and allowed in general average for the purposes of Rules X(b) and XIV, read together.
Both the courts below have in this case concluded that it would have been reasonable for the owners to accept and pay the first ransom demand of US$6m.
The Court of Appeal has however decided the case against the owners on the basis that they faced no real choice but to negotiate, however long the negotiation might take.
There is to my mind a tension between the two strands of the Court of Appeals reasoning.
If it would have been reasonable to accept and pay the first demand, then the owners were on the face of it taking a stand by seeking an even more reasonable deal in the interests of all concerned in the common adventure.
It is not apparent that Rule F could not extend to such a course, if, as here, it involved the owners in some expense in the form of additional crew and vessel expenses.
But I find even more difficult the joint conclusion of both courts below that it would have been reasonable for the owners to meet the first ransom demand.
The deputy judge found difficulty in seeing how any ransom payment could be described as reasonable: [2015] 1 Lloyds Rep 76, para 98.
He said: At least in one sense, no ransom payment could ever be described as reasonable.
Pirates are criminals engaged in extortion and their demands are unlawful and deplorable.
How can a payment extorted by pirates be described as reasonable? In my view, it cannot.
The idea of a reasonable ransom is radically misconceived and the term an oxymoron.
That is however to look at the point from only one direction.
The relevant viewpoint is that of the unfortunate victims involved in a common adventure.
From their viewpoint, there must be some ransom demands to which it is reasonable and others to which it is unreasonable to respond.
Even the deputy judge appeared prepared to accept that the latter would include a ransom demand well in excess of the value of the vessel and cargo.
However, this was as far as the deputy judge was prepared to go.
Leaving aside exceptional circumstances, where the value of the ransom demanded clearly exceeded the value of the property involved in the venture, he thought it obvious that it would not be reasonable to say that an owner under an obligation to proceed with due despatch had not reasonably incurred a ransom paid.
He went on, at para 99: Even if it may be said that, by January 2009, a pattern of dealing between Somali pirates and shipowners had developed, as described by David Steel J in Masefield AG v Amlin Corporate Member Ltd (The Bunga Melati Dua) [2010] 2 All ER 593 [2010] 1 Lloyds Rep 509 at paras 19, 23, 25 and 26 (affirmed on appeal: [2011] 1 Lloyds Rep 630; [2011] 1 WLR 2012), such a pattern would not remove the potential for unreasonable, irrational and illogical behaviour.
In support, the deputy judge said that negotiation was an uncertain process and it was not possible to state with reasonable certainty when the ransom demand was made that the amount of the ransom would inevitably be significantly reduced by the process of negotiation (para 100).
Whether or not it is possible to state with reasonable certainty that a negotiation will achieve significant success cannot however be the test of whether or not negotiation should reasonably be essayed.
The deputy judge also derived comfort from his conclusion on this point from the consideration that natural justice requires that all should contribute to the substituted expenses incurred (para 103).
A difficulty about this observation is that nothing in Rule F could enable cargo interests to recover any matching loss or damage that they might suffer from the delay during negotiations.
The cargo was in fact perishable, even though in the event it survived the rigours it underwent without apparent deterioration.
As the Court of Appeal correctly recognised in this connection (para 51), whether or not an item falls within general average depends on the proper interpretation of the York Antwerp Rules.
They represent a balanced framework, negotiated over time between all interests involved.
As I have already observed, the Court of Appeals reasoning involves a potential tension between the approaches taken to the scope of Rule F and to the issue of the reasonableness of paying the initial ransom demand.
In the former context, Hamblen LJ said this [2016] Bus LR 1285, paras 43 46: 43.
Some support for the cargo interests approach is to be found in the evidence.
Thus, it does not appear that the owners ever considered that they faced a choice.
The owners crisis management and negotiation team were set up before any ransom demand had been made.
From the outset the goal was to negotiate to obtain release of the vessel upon payment of a ransom, but in a reduced amount.
There is no evidence to suggest that they ever considered choosing between paying the ransom on demand and paying a lesser sum following negotiation. 44.
This is also borne out by the advisory committees stated experience, which is that in all Somali piracy cases the same course of action is taken, namely to negotiate and pay a reduced ransom leading to release of the vessel.
Again it does not appear that there is considered to be a choice of payment on demand. 45.
In my judgment this failure to recognise that there is a choice reflects the reality, which is that payment on demand is simply a different way of going about the same course of action and not a true alternative course of action.
Whether or not the ransom is paid on demand there will still be a negotiation, there will still be delay, there will still be the incurring of vessel and crew running costs during the period of delay.
In either case the same expenses will be incurred; the difference is only in their extent. 46.
In this case, for example, there was a period of delay between the hijacking and the first ransom demand.
Even if that first demand had been accepted, it does not follow that it would have been agreed.
As the majority of the advisory committee state, the unprecedented acceptance of the ransom on demand may well have been met by a demand from the pirates for a still higher figure.
Even if that was not the case, it would still have been necessary to negotiate and agree matters relating to place and method of payment and to the release of vessel and crew.
Thus in this case it is to be noted that there was a period of six days between the agreement of the ransom and the release of the vessel.
In the latter context, however, Hamblen LJ said, at paras 77 84: 77.
The cargo interests contend that the judge was wrong to conclude that payment on demand would have been reasonable and that account should have been taken (but was not) of the following matters: (1) The established modus operandi for Somali pirates as at the date of the hijacking, namely invariably to negotiate down the amount of the ransom demanded over a period of time with little or no risk to cargo or crew. (2) In the experience of the majority of the advisory committee, the negotiation period is common in all piracy cases and there is always a period of negotiation before a vessel is released and it is the normal means of dealing with such situations. (3) The minority member accepted that there was a reasonable period of customary negotiation and that clearly, the ransom amount initially demanded cannot automatically be allowed in general average. (4) The position adopted by the owners in their skeleton argument at trial, That is not to say that paying the first demanded ransom is ever likely in fact to be a reasonable course of action.
In reality, where there is the option of entering into negotiations with pirates, it will almost always be the right thing to do. 78.
They submit that if proper regard is had to these matters it should be concluded that it would be unreasonable to pay the originally demanded ransom without even attempting to negotiate the amount of the ransom payment, contrary to the established practice, and that the judge was wrong to conclude otherwise.
They further submit that payment on demand would be an artificial invention. 79.
The owners do not accept that there is satisfactory evidence to establish the matters sought to be relied upon by the cargo interests, but that in any event they do not render payment of the full ransom demand unreasonable. 80.
The owners accept that the evidence at that time was that Somali pirates would release a vessel upon payment of a ransom.
As they point out, that being so, the sooner the ransom was paid, the quicker the vessel would be released and the vessel, cargo and crew removed from danger. 81.
In my judgment, if, as stated in the Masefield case [2010] 2 All ER 593, the safest, most timely and effective means to secure the release of a ship and crew was to pay a ransom, it follows that the most safe, timely and effective means of so doing is to pay as soon as possible.
It may be that the general practice was to try to negotiate the ransom down, but that does not mean that it would be unreasonable to pay the ransom straight away so as to avert the very real danger to vessel, cargo and crew as quickly and effectively as possible.
Nor can a course of action which procures such real and tangible benefits be regarded as an artificial invention. 82.
Further, in my judgment the reasons given by the judge are all cogent and compelling reasons for concluding that payment of the initial ransom sum would have been reasonable. 83.
Further reasons for supporting that conclusion include the following: (1) The effect of the delay involved in seeking to negotiate a lower ransom is to keep the vessel, cargo and crew in peril, with all the risks of saying no to pirates, who are violent, armed criminals. (2) The vessel and cargo were under the control of the pirates.
As such, there were obvious dangers should there be a storm or other peril of the sea. (3) The owners knew that there had been a firefight during the capture of the vessel and that a crew member had been wounded. (4) Although, as matters turned out, the pirates main negotiator was said to be a calm, rational communicator who never resorted to threats or other coercive tactics, the owners had no reason to assume that. (5) This was just one of many known unknowns facing the owners. 84.
For all these reasons I conclude that it cannot be shown that the judge was wrong to find that payment of the initial ransom demand would have been reasonable.
It follows that I would dismiss the appeal on this issue.
I note that, after the quotation from the Masefield case [2010] 2 All ER 593 in para 81 of Hamblen LJs judgment, the words to pay a ransom are not a correct citation.
The actual words in the Masefield judgment were to negotiate and subsequently pay a ransom.
The cargo interests rely on the apparent acceptance both by the deputy judge ([2015] 1 Lloyds Rep 76, para 99, quoted in para 61 above) and by the Court of Appeal ([2016] Bus LR 1285, paras 43, 44, 46 and 81) of a general practice to negotiate any ransom demand down over a period.
The owners object that there is no evidence justifying any such conclusion.
But their own skeleton argument for the trial stated that: This is not to say that paying the first demanded ransom is ever likely in fact to be a reasonable course of action.
In reality, where there is the option of entering into negotiations with pirates, it will almost always be the right thing to do.
But when considering the allowability in GA of the costs of the negotiation, the relevant alternative scenario to be considered is the one in which there is no negotiation possible/available.
The last sentence reflects the owners then case, which relied on a suggested analogy with the reasoning of the House of Lords in The Bijela, discussed in para 58 above.
The trial in the present case was a Commercial Court trial on the documents.
It seems clear that the deputy judge treated himself as entitled to rely on all the material before him when considering the factual position, including the statements in the Masefield case and the Report of the Advisory Committee of the Association of Average Adjusters on the present case, which he summarised at some length, while recording that it was common ground that it was not binding on the court.
I see no reason to regard either the deputy judge or the Court of Appeal as having erred in this respect.
David Steel Js judgment in the Masefield case noted ([2010] 2 All ER 593, para 14) that the initial ransom demand in that case of US$2m in August 2008 was all of a piece with the process of Somali hijacking.
Fortunately the process of negotiating such a demand and making an agreed payment had invariably led to the release of all vessels involved.
Against that background, I did not understand it to be controversial that the actual prospects of recovery of the cargo as at 18 September 2008 were good.
Other relevant factors on the issue of reasonableness are that the range of potential values as assessed at the time was between US$5m and US$7m (with US$5.4m being later established as the correct figure).
A demand of US$6m self evidently exhausted or very nearly exhausted all interests involved.
Further, any indication of agreement to pay anything like the initial demand would almost inevitably have fed a suspicion on the pirates part that they had demanded far too little, and would have complicated matters then and for the future.
In contrast, and in the light of the past experience of other shipowners whose vessels had been seized by Somalian pirates, there was on the face of it every reason to give effect to what was evidently the present owners immediate reaction, that is to hire experienced negotiators and engage on a time consuming and painstaking process of negotiation.
In reaching a conclusion that it would have been reasonable for the owners to capitulate in response to the very first demand, the courts below were making an evaluative judgment on the basis of documentary evidence and material.
This is not a situation in which their evaluation commands a large inherent advantage, compared with that which the Supreme Court is in a position to make, although of course it merits weight and it is for the cargo interests to show that it was wrong.
In the light of all the circumstances, the cargo interests have satisfied me that it was wrong.
I am unable to accept the evaluative judgment reached by both courts below to the effect that it would have been reasonable for the owners to pay the initial ransom, and that, had they done so, they could have required the full US$6m to be treated as general average.
The reasoning of the courts below appears to me contrary to all the relevant indications as to how the owners actually acted and would have been expected to act.
It is clear that the owners never contemplated the sort of remarkable capitulation that payment of the initial ransom would have involved, and that it would have taken them and other shipowners into uncharted territory, as opposed to a relatively familiar negotiation process, had they ever done so.
They would in my opinion clearly have been acting unreasonably in the circumstances had they done so.
The case has been fought and decided on the basis that this is the critical issue.
No alternative case has been advanced to the effect that negotiations would or might have led to a settlement at some lesser figure which might have covered some, no doubt lesser figure of negotiation period expenses.
Lord Neuberger notes (para 20 above) that the actual negotiation period expenses claimed of US$160,000 would have been covered (together with the negotiators expenses) by a ransom payment of around US$2.4m.
That is mathematically correct.
But it does not reflect the reality which has to be addressed.
It postulates immediate agreement on or about 30 January 2009 on a ransom of US$2.4m.
Yet, even in early March 2009 the pirates were still looking for a ransom of US$3m, reduced on 2 March 2009 to US$2m.
Depending on where one dates and places a reasonable settlement at a reasonable settlement figure, it is clear that, on this basis, any recoverable negotiation period expenses would be considerably reduced below the US$160,000 odd claimed.
The case has not been put on a basis which required or allows now for any such hypothetical exercise (of assessing when and at what figure below US$6m a reasonable settlement could have been achieved) to be undertaken.
The owners have established that Rule F is in principle capable of applying to negotiation period expenses, which may well be the principle which this litigation is about.
But I do not think that they have established on the facts that they have any claim on the only factual basis on which the case has been put.
I would therefore dismiss this appeal, albeit for reasons different from those given by the Court of Appeal.
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On 29 January 2009, the chemical carrier mv LONGCHAMP (the vessel) was transiting the Gulf of Aden.
Pirates boarded the vessel and ordered its course to be altered towards the Bay of Eyl, Somalia.
After seven weeks of negotiations, the crisis management team formed by the vessels owners (the Appellants) agreed a ransom in the amount of US $1.85m (the initial demand had been for US$6m).
The cargo on the vessel was carried by the cargo interests (the Respondents) under a bill of lading which stated on its face that General Average, if any, shall be settled in accordance with the York Antwerp Rules 1974 (the Rules).
General Average refers to the system of maritime law by which sacrifices of property made, and loss and expenditure incurred, as a direct result of actions taken for preserving a common maritime adventure from peril, are rateably shared between all those whose property is at risk.
The Rules are internationally agreed and derive legal force through contractual incorporation.
They aim to achieve uniformity in ascertaining whether losses fall within the principle of general average, the method of calculating those losses and deciding how they are to be shared.
The essential issue in this appeal was whether the vessel operating expenses incurred during the period of negotiation (the negotiation period expenses) were allowable in general average under Rule F of the Rules which provides that any extra expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided.
An adjudicator found that the negotiation period expenses fell within Rule F.
The Respondents challenge to the adjudicators decision was dismissed in the Commercial Court.
The Court of Appeal allowed the Respondents subsequent appeal.
The Appeal is allowed.
Lord Neuberger gives the lead judgment with which Lord Clarke, Lord Sumption and Lord Hodge agree.
Lord Sumption gives a concurring judgment.
Lord Mance dissents on the facts.
The Appellants submitted that the negotiation period expenses fell within the expression expense incurred by the owners within Rule F and those expenses were incurred in place of another expense (i.e. the $4.15m saved as a result of the negotiations with the pirates).
Further, the negotiation period expenses were less than the general average expense avoided and it thereby followed that they were properly allowable under Rule F [14].
The Court found that the Judge and Court of Appeal incorrectly assumed that the owners had to establish that it would have been reasonable to accept the pirates initial demand in order to justify the contention that the negotiation period expenses were allowable under Rule F. Such an assumption would lead to very odd results.
It would mean that, if a ship owner incurs an expense to avoid paying a reasonable sum, he can in principle recover under Rule F, whereas if he incurs expense to avoid paying an unreasonable sum (i.e. a larger sum), he cannot recover [18].
Further, the reference in Rule F to another expense which would have been allowable as general average does not mean an expense whose quantum is such that it would have qualified as a claim under Rule A of the Rules (which refers to extraordinary sacrifice or expenditure) [19].
Therefore, subject to the Respondents other arguments, the negotiation period expenses fell under Rule F as they were incurred to avoid paying $6m [20].
The Respondents submitted that the negotiation period expenses did not fall within Rule F because the payment of reduced ransom of $1.85m was not an alternative course of action to the payment of the ransom originally demanded but was merely a variant [22].
The Court found that the incurring of the negotiation period expenses did represent an alternative course of action from the payment of the $4.15m (the amount by which the ransom was reduced).
The former involved incurring vessel operating expenses and the latter involved paying a ransom [26].
To imply some qualification such as the requirement that the negotiation period expenses must be incurred so as to achieve an alternative course of action was very dangerous [29].
The Rules are an international arrangement and should be interpreted in the same way as an international convention or treaty, unconstrained by technical rules of English law or by English legal precedent, on broadly accepted general principles [29].
The Respondents raised four further points.
Firstly, they contended that the Appellants could not recover under Rule F as they had never made a conscious and intentional choice between paying the $6m ransom initially demanded or negotiating [33].
The Court held that the question of whether one expense has been incurred in the place of another expense must be assessed objectively [34].
Secondly, the Respondents contended that the negotiation period expenses were not extra expenses within the meaning of Rule F. The Court found that there was no reason for restrictively interpreting the word extra so as to require an expense to be of a nature which would not normally have been incurred in response to the peril threatening the adventure [35].
Thirdly, the Respondents contended that the negotiation period expenses may have been incurred even if the owners had agreed to the pirates initial demand.
However, the Judge considered that it was more likely than not that the vessel would have been released promptly if the $6m demand had been accepted.
It was not appropriate for the Supreme Court to interfere with this finding of the Judge [36].
Finally, the Respondents contended that because Rule C of the Rules excludes indirect loss from general average expenditure and/or because Rule IX includes crew wages and maintenance where it applies, the claim in the present case must fail.
The Court held that even though negotiation period expenses fall within Rule C it does not follow that they fall outside Rule F. By definition, sums recoverable under Rule F are not themselves allowable in general average, but are alternatives to sums which would be allowable [37].
Further, in terms of Rule IX, the Court did not agree that because vessel operating expenses were specifically allowed in one type of case that it should be presumed that they are excluded from every other type of case [38].
Both the lead judgment by Lord Neuberger [25] and the concurring judgment by Lord Sumption [42] observed that a variety of practices have been developed by practitioners in relation to the Rules but that the law cannot be determined by reference to these practices.
In his dissenting judgment [45 68], Lord Mance concluded that whilst the Appellants had established that Rule F is in principle capable of applying to negotiation period expenses, they had not established on the only factual basis on which their case had been put that they had a claim under Rule F [68].
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These two appeals were heard together by the Court of Appeal and raise common issues as to the scope of the principle in Ruiz Zambrano v Office national de lemploi (Case C 34/09) [2012] QB 265 (Zambrano).
In Zambrano, the Court of Justice of the European Union (the CJEU) held that a third country (ie non member state) national parent (TCN parent), of a Union citizen child resident in Union territory, was entitled to a right of residence to avoid the child being deprived of the genuine enjoyment of the substance of their Union citizenship rights on removal of the TCN parent.
The principle extends to dependents who are not children, and has been applied even where the Union citizen has not exercised their right of free movement.
The right of residence is a derivative right, that is, one derived from the dependent Union citizen.
A key to this derivative right is the deprivation of the benefits of the Union citizenship as a result of the Union citizen being compelled, by the TCNs departure, to leave Union territory.
This case is about the nature or intensity of that compulsion.
The derivative residence right was implemented in UK law by regulation 15A(4A) of the Immigration (European Economic Area) Regulations 2006.
At the material time, this provided a TCN, P, with a derivative right to reside where: (a) P is the primary carer of a British Citizen (the relevant British citizen); (b) Kingdom; and (c) the relevant British citizen would be unable to reside in the UK or in another EEA State if P were required to leave.
the relevant British citizen is residing in the United
So the relevant wording of the domestic legislation is unable to reside.
These words must be interpreted so far as possible compatibly with EU law.
This depends upon the jurisprudence of the CJEU.
In the first appeal, the appellant, Mr Nilay Patel, for whom Mr Thomas Roe QC appears, is a TCN with no right to remain in the UK.
He has Indian nationality.
He cares for his parents, both of whom are British citizens and both of whom are ill.
His father suffers from end stage kidney disease and needs dialysis for some eight hours per day.
Mr Patel, though not medically qualified, is able through training and experience to administer this.
His mother is also ill and immobile.
Mr Patels case is that that his parents are dependent on him.
The First tier Tribunal (FTT) accepted that they were dependent on him.
However, it could not be said with confidence that the medication required for the dialysis which Mr Patel performed for his father was available in India.
The FTT found that in those circumstances his father would not in fact return with his son but would remain in the UK and be provided with a social services care package and appropriate medical treatment, although this might not give him the same quality of life as he would have if Mr Patel continued to provide him with dialysis and other primary care in his own home.
Mr Patels subsequent appeals to the Upper Tribunal (UT) and the Court of Appeal were similarly unsuccessful.
Mr Patel had sought to establish a right to remain under article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention) but his claim was dismissed.
On this appeal, Mr Roe submits that, in determining whether the parents would be compelled to leave, the tribunals and Court of Appeal approached the issue of compulsion with excessive rigidity and should have taken into account that Mr Patels father could not be treated in the UK with the same level of care if Mr Patel were no longer here.
In the second appeal, Mr Shah, a Pakistani national, is the primary carer of his infant son, who is a British citizen.
His wife also has British nationality.
Mr and Mrs Shah and their son all live together.
Mrs Shah is in full time work outside the home to earn an income for the family.
While she is at work, the son remains with Mr Shah, who has no right to live or work in the UK.
If Mr Shah were to return to Pakistan, Mrs Shah, on the findings of the FTT, would not remain in the UK but would accompany her husband to Pakistan, and the child would have no option but to go too.
In those circumstances the FTT and UT in Mr Shahs case found that the child would be compelled to leave Union territory and that Mr Shah was, therefore, entitled to a derivative residence card.
The Court of Appeal came to a different conclusion.
They considered that Mrs Shah would be able to look after their son in the UK and so the requirement for compulsion to leave the UK was not satisfied.
Zambrano jurisprudence
The CJEU has effectively adopted an incremental approach to the development of the derived right of residence in a member state that may be enjoyed by a TCN, taking one step at a time in a number of cases which it has decided.
It has consolidated much of that jurisprudence in the recent case of KA v Belgium (Case C 82/16) [2018] 3 CMLR 28, which was decided after the Court of Appeal gave its judgment.
This court can therefore go to that case, although the facts are not relevant as they concern the compatibility with EU law of entry bans on TCN carers of Union citizen children.
The case considered the application of article 20 of the Treaty on the Functioning of the European Union (the TFEU), and articles 7 and 24 of the Charter of Fundamental Rights of the European Union (the Charter), and so it is convenient to set those provisions out first.
Article 20 TFEU provides: Article 20 (ex article 17 TEC) 1.
Citizenship of the Union is hereby established.
Every person holding the nationality of a member state shall be a citizen of the Union.
Citizenship of the Union shall be additional to and not replace national citizenship. 2.
Citizens of the Union shall enjoy the rights and be subject to the duties provided for in the Treaties.
They shall have, inter alia: the right to move and reside freely within the a) territory of the member states;
The right to EU citizenship is, therefore, a Treaty right.
It lies at the heart of the European legal architecture.
In UK law, prominence is not generally given to the distinction between citizenship of, and nationality within, the UK.
The concept of EU citizenship is perhaps more easily understood in the context of countries where the borders have altered or been created in recent times, and the population includes peoples of different nationalities, such as Romania.
The purport of the TFEU is that a person may have both EU citizenship and member state nationality.
EU citizenship is a Treaty right and it is to be anticipated that it may be treated as a dynamic concept.
This court has held that article 20 does not confer any rights on a TCN: R (Agyarko) v Secretary of State for the Home Department [2017] 1 WLR 823, para 62.
Articles 7 and 24 of the Charter provide: Article 7 Respect for private and family life Everyone has the right to respect for his or her private and family life, home and communications.
Article 24 The rights of the child 1.
Children shall have the right to such protection and care as is necessary for their well being.
They may express their views freely.
Such views shall be taken into consideration on matters which concern them in accordance with their age and maturity. 2.
In all actions relating to children, whether taken by public authorities or private institutions, the childs best interests must be a primary consideration.
Article 7 reflects article 8 of the Convention.
Article 24 does not, however, have an equivalent standalone right in the Convention although the best interests of the child may require to be considered in appropriate cases under specific articles, such as article 8.
Needless to say, adults cannot rely on article 24.
There is a further right in article 25 of the Charter.
This sets out the rights of the elderly and provides that: The Union recognises and respects the rights of the elderly to lead a life of dignity and independence and to participate in social and cultural life.
Passing to the CJEUs analysis in KA [2018] 3 CMLR 28, it is also convenient to set out its own summary of the relevant holdings in para 76 of its judgment, which was as follows: It follows from paras 64 to 75 of this judgment that article 20 TFEU must be interpreted as meaning that: where the Union citizen is an adult, a relationship of dependency, capable of justifying the grant to the third country national concerned of a derived right of residence under article 20 TFEU, is conceivable only in exceptional cases, where, in the light of all the relevant circumstances, any form of separation of the individual concerned from the member of his family on whom he is dependent is not possible; where the Union citizen is a minor, the assessment of the existence of such a relationship of dependency must be based on consideration, in the best interests of the child, of all the specific circumstances, including the age of the child, the childs physical and emotional development, the extent of his emotional ties to each of his parents, and the risks which separation from the third country national parent might entail for that childs equilibrium.
The existence of a family link with that third country national, whether natural or legal, is not sufficient, and cohabitation with that third country national is not necessary, in order to establish such a relationship of dependency.
Importantly, the CJEU drew a distinction between the case of a Union citizen
who is an adult and one who is a child.
The CJEUs process of reasoning leading up to the conclusions in para 76 began with article 20 TFEU.
The CJEU emphasised the importance of the right to Union citizenship, being a Treaty right.
The CJEU explained that a TCN might acquire a purely derived right of residence if their removal might deprive a Union citizen of the benefits of their Union citizenship [2018] 3 CMLR 28: 47.
It must be recalled, first, that, in accordance with the courts settled case law, article 20 TFEU confers on every individual who is a national of a member state citizenship of the Union, which is intended to be the fundamental status of nationals of the member states (see, inter alia, Grzelczyk v Centre public daide sociale Ottignies Louvain la Neuve (Case C 184/99) [2002] ICR 566, para 31; Ruiz Zambrano, para 41 and Rendn Marn v Administracin del Estado (Case C 165/14) [2017] QB 495, para 69 and the case law cited). 48.
Citizenship of the Union confers on each Union citizen a primary and individual right to move and reside freely within the territory of the member states, subject to the limitations and restrictions laid down by the Treaty and the measures adopted for their implementation (Rendn Marn, para 70 and the case law cited).
In that context, the court has held that article 20 TFEU 49. precludes national measures, including decisions refusing a right of residence to the family members of a Union citizen, which have the effect of depriving Union citizens of the genuine enjoyment of the substance of the rights conferred by virtue of their status (Ruiz Zambrano, para 42; O v Maahanmuuttovirasto (Joined Cases C 356/11 and C 357/11) [2013] Fam 203, para 45 and Chavez Vilchez v Raad van bestuur van de Sociale verzekeringsbank (Case C 133/15) [2018] QB 103, para 61). 50.
On the other hand, the Treaty provisions on citizenship of the Union do not confer any autonomous right on third country nationals.
Any rights conferred on third country nationals are not autonomous rights of those nationals but rights derived from those enjoyed by a Union citizen.
The purpose and justification of those derived rights are based on the fact that a refusal to allow them would be such as to interfere, in particular, with a Union citizens freedom of movement (Chavez Vilchez, para 62 and the case law cited).
The CJEU explained that in very specific situations a TCN may have a right of residence if the Union citizen would otherwise be obliged to leave Union territory.
Those limits are very important in considering these appeals because Charter rights are not engaged unless an EU law right is triggered.
As stated, the TCNs derived right of residence is only given in order that the Union citizens rights should be effective.
That would be the limit of the entitlement under EU law of the TCN to reside in the Union.
Moreover, there must be a relationship of dependency between the Union citizen and the TCN: 51.
In this connection, the court has previously held that there are very specific situations in which, despite the fact that secondary law on the right of residence of third country nationals does not apply and the Union citizen concerned has not made use of his freedom of movement, a right of residence must nevertheless be granted to a third country national who is a family member of that Union citizen, since the effectiveness of Union citizenship would otherwise be undermined, if, as a consequence of refusal of such a right, that citizen would be obliged in practice to leave the territory of the European Union as a whole, thus depriving him of the genuine enjoyment of the substance of the rights conferred by that status (see, to that effect, Ruiz Zambrano, paras 43 and 44 and Chavez Vilchez, para 63). 52.
However, a refusal to grant a right of residence to a third country national is liable to undermine the effectiveness of Union citizenship only if there exists, between that third country national and the Union citizen who is a family member, a relationship of dependency of such a nature that it would lead to the Union citizen being compelled to accompany the third country national concerned and to leave the territory of the European Union as a whole (see, to that effect, Dereci v Bundesministerium fr Inneres (Case C 256/11) [2012] All ER (EC) 373, paras 65 to 67; O, para 56 and Chavez Vilchez, para 69).
The distinction noted between dependence in the case of an adult Union citizen and that of a Union citizen child is then explored.
A TCN could have a relationship of dependency with an adult Union citizen capable of justifying a derived right of residence under article 20 TFEU only in exceptional circumstances [2018] 3 CMLR 28: 65.
As regards, first, the cases in the main proceedings where the respective applicants are KA, MZ and BA, it must, at the outset, be emphasised that, unlike minors and a fortiori minors who are young children, such as the Union citizens concerned in the case that gave rise to the judgment Ruiz Zambrano, an adult is, as a general rule, capable of living an independent existence apart from the members of his family.
It follows that the identification of a relationship between two adult members of the same family as a relationship of dependency, capable of giving rise to a derived right of residence under article 20 TFEU, is conceivable only in exceptional cases, where, having regard to all the relevant circumstances, there could be no form of separation of the individual concerned from the member of his family on whom he is dependent. (Emphasis added)
Mr David Blundell, who appeared for the Secretary of State, emphasises that in order for a TCN to have a derived right pursuant to article 20 TFEU the case must fall within one of the categories of very specific situations discussed in KA and the circumstances must be such that if the TCN is removed the Union citizen would in fact depart with them.
These points are illustrated by a case to which the CJEU had already referred, namely Dereci v Bundesministerium fr Inneres (Case C 256/11) [2012] All ER (EC) 373.
In that case, Mr Dereci, a Turkish national, applied for a residence permit to live in Austria so that he could live there with his Austrian wife and had three children.
He applied for a residence permit, but this was refused.
The CJEU held that the refusal would not breach EU law so long as it did not deprive his family of the genuine enjoyment of the substance of their rights, which was a question for the referring court to determine.
The Union citizen children lived with their mother and so were not emotionally dependent on Mr Dereci, although he gave them financial support.
It was not enough that it was desirable for him to live with his wife and family for economic reasons or reasons of family unification [2012] All ER (EC) 373: 66. [It follows that] the criterion relating to the denial of the genuine enjoyment of the substance of the rights conferred by virtue of European Union citizen status refers to situations in which the Union citizen has, in fact, to leave not only the territory of the member state of which he is a national but also the territory of the Union as a whole. 67.
That criterion is specific in character inasmuch as it relates to situations in which, although subordinate legislation on the right of residence of third country nationals is not applicable, a right of residence may not, exceptionally, be refused to a third country national, who is a family member of a member state national, as the effectiveness of Union citizenship enjoyed by that national would otherwise be undermined. 68.
Consequently, the mere fact that it might appear desirable to a national of a member state, for economic reasons or in order to keep his family together in the territory of the Union, for the members of his family who do not have the nationality of a member state to be able to reside with him in the territory of the Union, is not sufficient in itself to support the view that the Union citizen will be forced to leave Union territory if such a right is not granted.
The CJEU held that any interference with Mr Derecis right to a family life would have to be raised under the Convention, not the Charter.
The CJEU held that the Charter right to respect for private and family life did not extend further than the Convention in any event.
Nor did the Charter extend the application of EU law beyond the powers of the Union because of article 51(1), which so provides.
The CJEU did not discuss the jurisprudence of the European Court of Human Rights on this point, but this court has already held, on the basis of that jurisprudence, that article 8 does not give non settled TCNs a general right to avoid the application of immigration control (see R (Agyarko) v Secretary of State for the Home Department [2017] 1 WLR 823).
Thus, the CJEU went on to hold [2012] All ER (EC) 373: 70.
As a preliminary point, it must be observed that in so far as article 7 of the Charter of Fundamental Rights of the European Union (the Charter), concerning respect for private and family life, contains rights which correspond to rights guaranteed by article 8(1) of the [Convention], the meaning and scope of article 7 of the Charter are to be the same as those laid down by article 8(1) of the [Convention], as interpreted by the case law of the European Court of Human Rights (McB v E (Case C 400/10PPU) [2011] Fam 364, para 53). 71.
However, it must be borne in mind that the provisions of the Charter are, according to article 51(1) thereof, addressed to the member states only when they are implementing European Union law.
Under article 51(2), the Charter does not extend the field of application of European Union law beyond the powers of the Union, and it does not establish any new power or task for the Union, or modify powers and tasks as defined in the Treaties.
Accordingly, the court is called upon to interpret, in the light of the Charter, the law of the European Union within the limits of the powers conferred on it (McB, para 51, see also criminal proceedings against Gueye (X intervening) (Joined Cases C 483/09 and C 1/10) [2012] 1 WLR 2672, para 69). 72.
Thus, in the present case, if the referring court considers, in the light of the circumstances of the disputes in the main proceedings, that the situation of the applicants in the main proceedings is covered by European Union law, it must examine whether the refusal of their right of residence undermines the right to respect for private and family life provided for in article 7 of the Charter.
On the other hand, if it takes the view that that situation is not covered by European Union law, it must undertake that examination in the light of article 8(1) of the [Convention].
Mr Blundell placed considerable reliance on Dereci in relation to the Patel appeal.
He submits that in the light of the evidence the required level of compulsion to leave under Zambrano was not reached because it can only be said that it is desirable that Mr Patel should reside in the UK to be with his parents.
His father could be given treatment in the UK in the absence of his son, albeit not in the comfort of his own home and among his family.
The rights of Mr Patels parents under the Charter could not extend the right conferred by EU law: see article 51(2) of the Charter, summarised in para 16 above, and see also R (HC) v Secretary of State for Work and Pensions (The AIRE Centre intervening) [2017] 3 WLR 1486 (especially at paras 27 to 28).
Therefore, the appellant was not entitled to a derivative residence card.
Mr Roes response to that was to rely on the parents right to family life and their rights under article 25 of the Charter.
He contends that they should have been given greater weight.
He relies on the decision in Chavez Vilchez v Raad van bestuur van de Sociale verbekeringsbank (Case C 133/15) [2018] QB 103 (Chavez Vilchez), which was decided shortly before the Court of Appeal decided these appeals.
That decision relates to a Union child and, as explained, different considerations apply to a child.
The CJEU relied on Dereci in both Chavez Vilchez (paras 63 and 69 of the judgment) and KA (see para 16 of this judgment) as one of the authorities for the requirement of compulsion, so it is clear that Dereci remains unqualified by its decisions in Chavez Vilchez and KA.
Moreover, the Charter cannot extend the application of EU law, which imposes limits on entitlement to derivative residence rights, as explained above.
What lies at the heart of the Zambrano jurisprudence is the requirement that the Union citizen would be compelled to leave Union territory if the TCN, with whom the Union citizen has a relationship of dependency, is removed.
As the CJEU held in O v Maahanmuuttovirasto (Joined Cases C 356/11 and C 357/11) [2013] Fam 203, it is the role of the national court to determine whether the removal of the TCN carer would actually cause the Union citizen to leave the Union.
In this case, the FTT found against Mr Patel and concluded that his father would not accompany him to India.
That means that, unless Chavez Vilchez adopts a different approach to compulsion, Mr Patels appeal must fail.
There is no question of his being able to establish any interference with his Convention right to respect for his private and family life as he has failed already in that regard.
As explained, in KA, the CJEU drew a distinction between an adult Union citizen and a Union citizen who is a child.
In the case of children, it is first necessary to determine who the primary carer is, and whether there is a relationship of dependency with the TCN or the national parent. 70.
As regards, on the other hand, the actions in the main proceedings brought by MJ, NNN, OIO and RI, it must be recalled that the court has already held that factors of relevance, for the purposes of determining whether a refusal to grant a derived right of residence to a third country national parent of a child who is a Union citizen means that that child is deprived of the genuine enjoyment of the substance of the rights conferred on him by that status, by compelling that child, in practice, to accompany the parent and therefore leave the territory of the European Union as a whole, include the question of who has custody of the child and whether that child is legally, financially or emotionally dependent on the third country national parent (see, to that effect, Chavez Vilchez, para 68 and the case law cited). 71.
More particularly, in order to assess the risk that a particular child, who is a Union citizen, might be compelled to leave the territory of the European Union and thereby be deprived of the genuine enjoyment of the substance of the rights conferred on him by article 20 TFEU if the childs third country national parent were to be refused a right of residence in the member state concerned, it is important to determine, in each case at issue in the main proceedings, which parent is the primary carer of the child and whether there is in fact a relationship of dependency between the child and the third country national parent.
As part of that assessment, the competent authorities must take account of the right to respect for family life, as stated in article 7 of the Charter, that article requiring to be read in conjunction with the obligation to take into consideration the best interests of the child, recognised in article 24(2) of the Charter (Chavez Vilchez, para 70). 72.
The fact that the other parent, where that parent is a Union citizen, is actually able and willing to assume sole responsibility for the primary day to day care of the child is a relevant factor, but it is not in itself a sufficient ground for a conclusion that there is not, between the third country national parent and the child, such a relationship of dependency that the child would be compelled to leave the territory of the European Union if a right of residence were refused to that third country national.
In reaching such a conclusion, account must be taken, in the best interests of the child concerned, of all the specific circumstances, including the age of the child, the childs physical and emotional development, the extent of his emotional ties both to the Union citizen parent and to the third country national parent, and the risks which separation from the latter might entail for that childs equilibrium (Chavez Vilchez, para 71). 73.
Accordingly, the fact that the third country national parent lives with the minor child who is a Union citizen is one of the relevant factors to be taken into consideration in order to determine whether there is a relationship of dependency between them, but is not a prerequisite (see, to that effect, O, para 54). 74.
On the other hand, the mere fact that it might appear desirable to a national of a member state, for economic reasons or in order to keep his family together in the territory of the Union, for the members of his family who do not have the nationality of a member state to be able to reside with him in the territory of the European Union, is not sufficient in itself to support the view that the Union citizen will be compelled to leave the territory of the European Union if such a right is not granted (see, to that effect, Dereci, para 68 and O, para 52).
It is not necessary to cite further passages from KA.
It will be observed that in KA the CJEU drew on its earlier decision in Chavez Vilchez.
That case concerned several TCN mothers, whose children were Dutch and who claimed a derivative right to reside in The Netherlands.
The Dutch Government rejected these claims on the basis that the fathers of the children were also Dutch.
Some of the fathers had a degree of involvement in their childs upbringing but they lived apart from the childs mother and were not the primary carer.
The CJEU held that it was not a sufficient answer to the mothers claim for residence that the father could in theory become the childs carer.
The Dutch court had to assess whether the child would be compelled to leave the Union, and in making that decision the national court had to take into account all the circumstances, including the best interests of the child.
The CJEU held [2018] QB 103: 70.
In this case, in order to assess the risk that a particular child, who is a Union citizen, might be compelled to leave the territory of the European Union and thereby be deprived of the genuine enjoyment of the substance of the rights conferred on him by article 20 TFEU if the childs third country national parent were to be refused a right of residence in the member state concerned, it is important to determine, in each case, which parent is the primary carer of the child and whether there is in fact a relationship of dependency between the child and the third country national parent.
As part of that assessment, the competent authorities must take account of the right to respect for family life, as stated in article 7 of the Charter of Fundamental Rights of the European Union, that article requiring to be read in conjunction with the obligation to take into consideration the best interests of the child, recognised in article 24(2) of that Charter. 71.
For the purposes of such an assessment, the fact that the other parent, a Union citizen, is actually able and willing to assume sole responsibility for the primary day to day care of the child is a relevant factor, but it is not in itself a sufficient ground for a conclusion that there is not, between the third country national parent and the child, such a relationship of dependency that the child would be compelled to leave the territory of the European Union if a right of residence were refused to that third country national.
In reaching such a conclusion, account must be taken, in the best interests of the child concerned, of all the specific circumstances, including the age of the child, the childs physical and emotional development, the extent of his emotional ties both to the Union citizen parent and to the third country national parent, and the risks which separation from the latter might entail for that childs equilibrium.
The final sentence of para 71 of the CJEUs judgment in Chavez Vilchez identifies the matters which the national court must take into account when deciding whether the requirement for compulsion is fulfilled.
Chavez Vilchez has to be read in the light of the particular facts before the CJEU, which were of separated parents where the Union citizen parent was not the primary carer and where the national court might well conclude that, having regard to the childs best interests and the extent of their ties to their mother, the relevant relationship of dependency on the mother was made out.
There is no direct analogy with a case, such as the Shah appeal, where the family is living together.
In that situation, where the TCN is the primary carer and the parent with whom the child has the relevant relationship of dependency and the Union parent will stay with them so as to keep the family together, it will be in the childs best interests to remain with both parents.
Because Mr Shah was the primary carer, the need for a relationship of dependency with the TCN was fulfilled.
Moreover, the quality of that relationship is under the jurisprudence of the CJEU a relevant factor in determining whether the child is compelled to leave the jurisdiction (see Chavez Vilchez, para 71; KA, para 70).
It is argued that the reference to the need to consider the childs best interests points to a shift in the law, and that the CJEU refined or diminished the requirement that there has to be compulsion to leave the Union.
It is said that that diminution would enable consideration to be given to desirability of the family remaining together and to respect for family life, even in the case of adults.
In that way, in judging when a person was compelled to leave the Union, regard would be had to a persons family life and what he would have to do to maintain that family life.
I do not consider that this deduction can be made.
In Chavez Vilchez, the CJEU were concerned with the case of a child and it is clear from KA that the case of a child is quite separate from that of an adult and that in the case of an adult it will only be in exceptional circumstances that a TCN will have a derivative right of residence by reference to a relationship of dependency with an adult Union citizen.
An adult Union citizen does not have a right to have his family life taken into account if this would diminish the requirement to show compulsion to leave.
It must be recalled that in KA the CJEU effectively reaffirmed the need to show compulsion even after making it clear that the decision in Chavez Vilchez was good law.
Accordingly, Chavez Vilchez does not relax the level of compulsion required in the case of adults, and thus provides no assistance to Mr Patel, whose appeal must therefore fail.
Nor does Chavez Vilchez in fact have any impact on the Shah appeal.
The outcome of that appeal depends on the findings of fact by the FTT and on whether the Court of Appeal correctly identified the relevant findings for the purposes of the test of compulsion.
The FTT found as a fact that Mr Shah was the primary carer of his infant son and that he, rather than the mother, had by far the greater role in his sons life (para 15).
Accordingly, the child had the relevant relationship of dependency with Mr Shah.
The FTT was entitled to make this finding on the facts, because the mothers evidence that Mr Shah was the primary carer of her child and that she could not assume full responsibility for him because she worked full time was not challenged.
The mothers evidence that if Mr Shah was not allowed to stay in this country they would move as a family was also unchallenged.
The FTT went on to reach what it called an inescapable conclusion that the son would have to leave with his parents and that accordingly the requirement for compulsion was met.
The Court of Appeal [2018] 1 WLR 5245, however, introduced into the question of whether the son was compelled to leave the fact that the mothers decision to leave was her own choice, and that she, like her husband, would have been perfectly capable of looking after the child (para 79).
The Court of Appeal considered that it followed that there was no question of compulsion.
Mr Blundell sought to uphold this conclusion, submitting that the mother simply wished to keep the family together and that reliance on a desire for family reunification was on the authorities not sufficient to justify a derivative right of residence (see Dereci, para 68; O, para 52; and KA, para 74).
I do not accept that submission.
The overarching question is whether the son would be compelled to leave by reason of his relationship of dependency with his father.
In answering that question, the court is required to take account, in the best interests of the child concerned, of all the specific circumstances, including the age of the child, the childs physical and emotional development, the extent of his emotional ties both to the Union citizen parent and to the third country national parent, and the risks which separation from the latter might entail for that childs equilibrium (Chavez Vilchez, para 71).
The test of compulsion is thus a practical test to be applied to the actual facts and not to a theoretical set of facts.
As explained in para 28 of this judgment, on the FTTs findings, the son would be compelled to leave with his father, who was his primary carer.
That was sufficient compulsion for the purposes of the Zambrano test.
There is an obvious difference between this situation of compulsion on the child and impermissible reliance on the right to respect for family life or on the desirability of keeping the family together as a ground for obtaining a derivative residence card.
It follows that the Court of Appeal was wrong in this case to bring the question of the mothers choice into the assessment of compulsion.
It is likewise not relevant, contrary to the submission of Mr Blundell, that, had Mrs Shah remained in the UK with the child, Mr Shah could have had no derivative right of residence.
On the facts as found by the FTT, the relevant relationship of dependency with Mr Shah was made out and that was not going to happen.
In those circumstances I consider that the Court of Appeal made an error of law when it treated as determinative what could happen to Mr and Mrs Shahs son if the father left the UK, rather than what the FTT had found would happen in that event.
In other words, it was not open in law to the Court of Appeal to hold that Mr Shah had no derivative right of residence because the mother could remain with the child in the UK even if the father was removed.
For these reasons I would allow the Shah appeal and dismiss the Patel appeal.
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These two appeals raise common issues regarding the scope of the Ruiz Zambrano v Office national de lemploi (Case C 34/09) [2012] QB 265 (Zambrano) principle.
Zambrano states that a non member state national (TCN) parent of a European Union (EU) citizen child resident within the EU is entitled to reside in the EU.
This is solely to avoid the EU citizen child being deprived of the substance of their Union citizenship rights on removal of the TCN parent from the EU [1].
The first appeal is Mr Patels.
Mr Patel is an Indian national who has no right to remain in the UK.
He cares for his parents, who are British citizens.
Mr Patel has been trained to help with his fathers kidney dialysis, and he cares for his immobile mother.
Mr Patels parents are reliant on him.
The medication required for dialysis may not be available in India.
The First tier Tribunal (FTT) found that Mr Patels father would not return to India with Mr Patel; instead, he would continue to receive medical treatment in the UK, although that would not give him the same quality of life as Mr Patels care.
Mr Patel was unsuccessful in invoking the Zambrano principle in the FTT, the Upper Tribunal (UT) and Court of Appeal (CA) [5].
Mr Patel appeals.
The second appeal is Mr Shahs.
Mr Shah is a Pakistani national.
He is the primary carer of his British citizen infant son.
Mr Shahs wife is also a British national.
Mr and Mrs Shah live with their son.
Mrs Shah works full time.
Whilst Mrs Shah works, Mr Shah cares for their son.
The FTT found that if Mr Shah were to return to Pakistan, Mrs Shah would not remain in the UK; she would accompany her husband to Pakistan.
Their child would also leave the UK.
As a result, the FTT and UT found that Mr Shah was entitled to remain.
The CA disagreed and held that Mrs Shah could look after the son in the UK; the requirement for compulsion to leave the UK was therefore not satisfied [6].
Mr Shah appeals.
The Supreme Court unanimously allows Mr Shahs appeal and dismisses Mr Patels appeal.
Lady Arden writes the sole judgment [33].
Article 20 of the Treaty on the Functioning of the European Union (TFEU) provides for a right to EU citizenship.
This lies at the heart of the EU legal architecture [9].
Article 20 alone does not confer any rights on a TCN (see R (Agyarko v Secretary of State for the Home Department [2017] 1 WLR 623) [10].
However, the CJEU in KA v Belgium (Case C 82/16) [2018] 3 CMLR 28 (KA) emphasised the importance of the right to EU citizenship and stated that a TCN might acquire a derived right of residence if their removal could deprive an EU citizen of their citizenship rights (KA, paras 47 50)
The TCNs derived right of residence is only provided to ensure that the EU citizens rights are effective.
This limits the entitlement of a TCN to reside in the EU.
There must be a relationship of dependency between the EU citizen and the TCN [16].
KA draws a distinction between the case of an EU citizen who is an adult and one who is a child (KA, para 76) [13] [14], [23].
A TCN can have a relationship of dependency with an adult EU citizen sufficient to justify a derived right of residence only in exceptional circumstances (quoting KA, para 65) [17].
What lies at the heart of the Zambrano jurisprudence is the requirement that the EU citizen be compelled to leave the EU territory if the TCN, with whom the EU citizen has a relationship of dependency, is removed [22].
With that context, the judgment examines Mr Patel and Mr Shahs respective cases in turn.
Regarding Mr Patel, the FTT concluded that Mr Patels father would not accompany him to India.
Unless Mr Patel could argue that some case law from the CJEU, including Chavez Vilchez v Raad van Bestuur van de Sociale verzekeringsbank (Case C 133/15) [2018] QB 103 (Chavez Vilchez), relaxes the level of compulsion required in the case of adults, and thus provides assistance to Mr Patel, his appeal must fail.
However, any possible qualification Chavez Vilchez makes to the general principle of compulsion does not apply in the case of adults.
Chavez Vilchez is about children.
KA makes clear that children and adults are treated separately and a TCN will only have a derivative right of residence by reference to a dependant relationship with an adult EU citizen in exceptional circumstances.
Chavez Vilchez does not relax the level of compulsion required in the case of adults.
It is of no assistance to Mr Patel.
His appeal must fail as his parents would not be compelled to leave the UK [27].
Chavez Vilchez does not impact Mr Shahs appeal.
That appeal depends on the FTTs findings of fact and whether the CA correctly identified the relevant findings for the purposes of the compulsion test.
The FTT found that Mr Shah was the primary carer of his son; as such, the child had the relevant relationship of dependency with Mr Shah.
Further, Mrs Shahs evidence was that if Mr Shah were removed from the UK then the family would move out of the EU.
This was accepted by the FTT, who held that it was an inescapable conclusion that the son would have to leave with his parents.
Therefore, the FTT found the requirement of compulsion was met [28].
The CA used the fact that Mrs Shahs decision to leave the EU was voluntary and she could look after the child without Mr Shah to justify holding that there was no question of compulsion [29].
The Supreme Court disagreed.
The overarching question is whether the son would be compelled to leave with his father, who was his primary carer, because of his dependency on his father.
In answering that question, the Supreme Court had to take into account the childs bests interests and his relationship with each parent, as explained in Chavez Vilchez, para 71.
The compulsion test is practical.
It is to be applied to the actual facts.
The FTT found the son would be compelled to leave.
That is sufficient compulsion for the purposes of Zambrano [30].
Therefore, Mr Shahs appeal was allowed [32] [33].
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By these proceedings, a mother seeks to prevent a father from publishing a book about his life containing certain passages which she considers risk causing psychological harm to their son who is now aged 12.
Mother and son now live in the United States of America and so the family court in England and Wales has no jurisdiction to grant orders protecting the childs welfare.
Instead, these proceedings have been brought in his name, originally by his mother and now by his godfather as his litigation friend, alleging that publication would constitute a tort against him.
The tort in question is that recognised in the case of Wilkinson v Downton [1897] 2 QB 57 and generally known as intentionally causing physical or psychological harm.
What, then, is the proper scope of the tort in the modern law? In particular, can it ever be used to prevent a person from publishing true information about himself?
As the object of the proceedings has been to protect the child from harm, all the parties have until now been anonymous, as has the country where the child now lives.
This court has decided that the tort does not have the scope contended for on the childs behalf and hence that the book may be published including the specific passages to which objection is taken.
This means that the book will inevitably be published in the very near future.
In those circumstances there can be no justification for keeping secret the information contained in the book.
This includes, obviously, the authors name and also the country where mother and son are now living.
The book, however, uses pseudonyms for both the mother and the child and so this judgment will continue to do so.
But this court is now able to describe the book and its contents more fully than the lower courts were able to do.
In this way, the reasons why both the mother and the father have been motivated to act as they have should become much clearer than perhaps they have been hitherto.
The book
The father is James Rhodes, the concert pianist, author and television filmmaker.
The book is entitled Instrumental.
The author believes that music has, quite literally saved my life and, I believe, the lives of countless others.
It has provided company where there is none, understanding where there is confusion, comfort where there is distress, and sheer, unpolluted energy where there is a hollow shell of brokenness and fatigue.
He wants to communicate some of what music can do, by providing a sound track to the story of his life.
And woven throughout is going to be my life story.
Because its a story that provides proof that music is the answer to the unanswerable.
The basis for my conviction about that is that I would not exist, let alone exist productively, solidly and, on occasion, happily without music.
So the book juxtaposes descriptions of particular pieces of music, why he has chosen them, what they mean to him, and the composers who wrote them, with episodes of autobiography.
He wants the reader to listen to the 20 music tracks while reading the chapters to which they relate.
Thus far, there would be nothing for anyone to worry about.
But the authors life has been a shocking one.
And this is because, as he explains in the first of the passages to which exception is taken, I was used, fucked, broken, toyed with and violated from the age of six.
Over and over for years and years.
In the second of those passages, he explains how he was groomed and abused by Mr Lee, the boxing coach at his first prep school, and how wrong it is to call what happened to him abuse: Abuse.
What a word.
Rape is better.
Abuse is when you tell a traffic warden to fuck off.
It isnt abuse when a 40 year old man forces his cock inside a six year old boys ass.
That doesnt even come close to abuse.
That is aggressive rape.
It leads to multiple surgeries, scars (inside and out), tics, OCD, depression, suicidal ideation, vigorous self harm, alcoholism, drug addiction, the most fucked up of sexual hang ups, gender confusion (you look like a girl, are you sure youre not a little girl?), sexuality confusion, paranoia, mistrust, compulsive lying, eating disorders, PTSD, DID (the shinier name for multiple personality disorder) and so on and on and on.
I went, literally overnight, from a dancing, spinning, gigglingly alive kid who was enjoying the safety and adventure of a new school, to a walled off, cement shoed, lights out automaton.
It was immediate and shocking, like happily walking down a sunny path and suddenly having a trapdoor open and dump you into a freezing cold lake.
You want to know how to rip the child out of a child? Fuck him.
Fuck him repeatedly.
Hit him.
Hold him down and shove things inside him.
Tell him things about himself that can only be true in the youngest of minds before logic and reason are fully formed and they will take hold of him and become an integral, unquestioned part of his being.
He describes how he learnt to dissociate himself from what was happening, to block it out of his memory, how when he moved to other schools he had learnt to offer sexual favours to older boys and teachers in return for sweets and other treats.
He gives a searing account of the physical harms he suffered as a result of the years of rape and of the psychological effects, which made it hard for him to form relationships and left him with an enduring sense of shame and self loathing.
He recounts the ups and downs of his adult life: a year at Edinburgh University filled with drugs and alcohol, leading to his first admission to a psychiatric hospital; a year working and sobering up in Paris; three years studying psychology at University College London, leading to a highly successful career as a salesman in financial publishing; meeting and marrying the mother, whom he calls Jane, an American novelist then living in London; making a perfect home with her.
He is kind about his wife The poor thing didnt stand a chance and hard upon himself: Ive honestly no idea what I was thinking, beyond that rather sad hope that if I continued to do what normal people did then I would somehow become normal.
But the idea that a man like me could not only get married, but maintain, nurture, commit to a marriage was fucking ridiculous.
My whole concept of love was skewed.
Then their child, whom he calls Jack, was born: My son was and is a miracle.
There is nothing I will experience in my life that will ever match the incandescent atomic bomb of love which exploded in me when he was born.
He wanted to be a perfect father, but I dont think that I will ever be able to make my peace with the fact that the ripples of my past became tidal waves when he was born.
His past had installed an unshakeable belief that all children suffer through childhood in the most abominable ways and that nothing and no one can protect them from it.
Eventually, he looked for professional help from a charity specialising in helping victims of child sexual abuse and was told that he must tell his wife about the abuse.
So he did.
Their child was then four years old.
It is, apparently, very common for the world to spin completely off its axis when your child approaches the age you were when the abuse began.
Instead of returning to drink and drugs he resorted to self harm: Thats the thing about cutting not only do you get high, but you can express your disgust at yourself and the world, control the pain yourself, enjoy the ritual, the endorphins, the seedy, gritty self violence privately and hurt no one other than yourself.
But his wife found out and he was persuaded to go into hospital again.
Among the passages which have not been challenged is a graphic account of the effect of the psychotropic drugs which he was forced to take in hospital.
He tried to commit suicide, escaped from the hospital, planned a second attempt at suicide but rang his wife for a last word with his son, and was persuaded to meet her.
So he was returned to hospital.
He worked hard at being a model patient so that he could be let out.
But it was not a cure.
Even out of hospital, off meds, physically present for my family, I was a ghost.
A friend offered him a life line, treatment in a hospital in the United States, where he spent two months.
By the end of it I had, miraculously, stopped hating myself quite so much.
Id put on weight, cleared away a lot of the wreckage of the past, repaired some relationships and found a way to live with myself that, most days, left me relatively calm and composed.
There is a moving passage about rebuilding his relationship with his son: Thats the weird thing about kids they have a capacity for forgiveness that most adults can only aspire to.
He has always loved me it was inbuilt and immutable and I him.
After a few weeks of playing, singing, hanging out, we felt absolutely connected and back to normal.
But the marriage could not be repaired.
Mother and father agreed to a trial separation and he moved out.
Things started to get more and more wobbly, not helped by his going to the police for the first time in the hope of exorcising some of the past horrors, where he found the process brutal, shaming, vile.
He began self harming once more.
Eventually, the mother decided to move back to the United States.
Once again, he is generous: She had, understandably and justifiably, had enough.
There had been so much destruction, so much uncertainty and pain, and clearly Jane had decided that Jacks needs had to come first.
She was a mother first and foremost and not some patron saint of lost causes.
They got into a routine.
He would go over there twice a year, she would bring him over here twice a year, they would Skype twice a week.
Interwoven with this painful story is the story of his relationship with music.
He discovered music, specifically, Bachs Chaconne for solo violin in D minor, transcribed for piano by Busoni, while still at the preparatory school where he was being so brutally abused: that piece became my safe place.
Any time I felt anxious (any time I was awake) it was going round in my head.
Its rhythms were being tapped out, its voices played again and again, altered, explored, experimented with.
I dove inside it as if it were some kind of musical maze and wandered around happily lost.
It set me up for life; without it I would have died years ago, Ive no doubt.
But with it, and with all the other music that it led me to discover, it acted like a force field that only the most toxic and brutal pain could penetrate.
At his next preparatory school he largely taught himself to read music and play the piano.
At Harrow, he had his first proper teacher, who was awesome.
He discovered that literally the only thing in the universe I realised I wanted was to travel the world, alone, playing the piano in concert halls.
Then he gave it up during the ten years of university, building a career and getting married.
But after his son was born and the demons returned, I looked for distractions.
I looked for a way out that didnt involve homicide or suicide.
He found it in music.
He set about building a business partnership with the agent of the greatest pianist in the world, but was persuaded instead to train as a pianist himself.
He worked hard.
And when he had begun to resort to self harm, he decided to organise his first public concert.
He rented a hall on the South Bank, the hall was filled, and the concert went well: I realise that all those fantasies about giving concerts that I had as a kid, that kept me alive and safe in my head, were accurate.
It really is that powerful.
And I knew I wanted to do it forever.
No matter what.
Then the suicidal ideas and attempts and hospitalisation took over.
But a friend visiting him in hospital brought him an iPod nano loaded with music inside a giant bottle of shampoo (toiletries being the only gifts allowed).
Once again music was his salvation.
It persuaded him to do what he needed to do to get out.
After separating from his wife, he started to get more involved in the piano again.
And in a caf he met the man who was to become his manager.
Together they arranged for him to record his first CD, Razor Blades, Little Pills and Big Pianos.
He found a sponsor to enable him to concentrate on his music.
He did a documentary about Chopin for the BBC.
His manager arranged concerts at the Roundhouse and the Queen Elizabeth Hall.
Together they devised a new sort of concert, in which the pianist talked about the music, the composer and what it meant to him, in an informal way quite unlike the usual classical music concert.
It was a success.
Through his manager he met the woman who was to become his second wife.
The concerts led to some press interest, including an interview with the Sunday Times in which he mentioned the abuse which had happened at school.
This prompted the head of the junior school in his first school, who had known that something was wrong but not what it was, to get in touch and to provide a police statement.
Mr Lee was found, still coaching small boys boxing, and prosecuted.
But he died before he could stand trial: Maybe one day I will forgive Mr Lee.
Thats much likelier to happen if I find a way to forgive myself.
But the truth, for me at any rate, is that the sexual abuse of children rarely, if ever, ends in forgiveness.
It leads only to self blame, visceral, self directed rage and shame But shining a light on topics like this is hugely important.
And getting hundreds of supportive and grateful messages from people who had also gone through similar experiences was an indicator to me that it needs to be talked about even more.
From then his career went from strength to strength.
There have been many concerts, all over the world.
There have been four more albums.
There was a television series for Sky Arts, Piano Man.
There was even talk, though it came to nothing, of his appearing in the Royal Variety Show.
He and his manager had found a new and different way of presenting classical music to the world and it worked.
There have been bad times since as well as good times Sadly I am only ever two weeks away from a locked ward but the overall message is one of hope: I lost my childhood but gained a child.
I lost a marriage but gained a soulmate.
I lost my way but gained a career and a fourth or fifth chance at a life which is second to none.
These proceedings
During their divorce, the mother and father agreed to include the following recital, recital K, in a residence and contact order made in London on 15 June 2009: And upon the parties agreeing to use their best endeavours to protect the child from any information concerning the past previous history of either parent which would have a detrimental effect upon the childs
well being
A first draft of the book was sent to the publishers in December 2013.
In February 2014 it was leaked to the mother and some changes were made as a result, including the use of pseudonyms for mother and child.
The mother did not consider that those changes had gone far enough.
In June 2014, she launched these proceedings on behalf of the child, claiming against the father and the publishers an injunction prohibiting publication without the deletion of a large number of passages.
The causes of action alleged were misuse of private information, negligence and the intentional infliction of harm.
An anonymity order was made at the same time, prohibiting the publication of any information which might lead to the identification of the child as a party to the proceedings or the subject of the information to which the proceedings related.
All parties have since filed evidence but there have been no findings on the factual matters in dispute.
The mother has filed a report from Dr Christine Tizzard, a consultant child psychologist who interviewed the child in June 2014.
Her opinion was that he is likely to suffer severe emotional distress and psychological harm in the event that he is exposed to the material in the publication.
The child has been diagnosed with Aspergers syndrome, attention deficit hyperactivity disorder, dyspraxia and dysgraphia.
He qualifies for an Individualised Educational Program in the United States and receives specialist support and counselling.
In her view, the information in the book would be inappropriate for any 11 year old child to read and have access to, but it would be even more devastating for this child, because of his difficulties in processing information: his psychological schemas are not malleable, he receives information in a literal way and is unable to conceptualise it in an alternative way, and he would view himself as responsible for some of his fathers distress and an extension of his father.
He is already prone to self harm and emotional outbursts and these would probably increase.
Both parties accept that it is most unlikely that the child will come into possession of the book itself.
The publishers plan to publish it in hard copy in the UK and much of the rest of the English speaking world, and to retail it in shops and on line, but there are no plans at present to publish it in the USA.
It will also be available for purchase as an e book.
The father accepts that knowing what happened to him would upset and embarrass the child, but not that it will be harmful if dealt with in the right way and at the right time.
The bare bones of his story have already appeared in articles and interviews which are available on line.
The mother is concerned that the child who is proud of his father, has googled him in the past.
If he did so in future he would be likely to come across reviews and references to the book.
The application for an interim injunction came before Bean J in private in July 2014.
His judgment has not been published.
He dismissed the application and struck the proceedings out on the basis that the child had no cause of action in tort against the father or the publishers.
He said that there was no precedent for an order preventing a person from publishing their life story for fear of its causing psychiatric harm to a vulnerable person, nor should there be.
He held that a cause of action under Wilkinson v Downton did not extend beyond false or threatening words.
The childs appeal was heard in August 2014 and judgment given in October: [2014] EWCA Civ 1277.
The Court of Appeal held that there was no claim in misuse of private information or in negligence, but that the claim for intentionally causing harm should go for trial.
The factual issues would be the fathers intention in publishing the book, the level of harm which the child was likely to suffer and the cause of such harm.
The leading judgment was given by Arden LJ.
She held that the action under Wilkinson v Downton was not limited to false or intimidatory statements, but she considered other ways in which the tort might be kept within acceptable limits.
She said that it was inconceivable that the law would render all intentional statements which cause psychiatric harm actionable in damages.
In some cases a person may have to tell bad news which is liable to cause psychiatric harm.
But there may be many ways in which the court could draw the line between acceptable intentional statements or acts which cause psychiatric harm, and those which are actionable under this head (para 68).
She added (para 69) that it had to be shown that the act was unjustified in the sense that the defendant was not entitled to do it vis vis the particular claimant (original emphasis).
Thus she met the objection that many disturbing publications may foreseeably cause psychiatric harm to someone of sufficient vulnerability by treating the cause of action as confined to the person at whom the act was directed, and therefore the question of justification was similarly confined.
Arden LJ had noted at the outset of her judgment that the book was dedicated to the child, and the fact that the father had accepted a responsibility to use his best endeavours to ensure that OPO is protected from harmful information was sufficient in her judgment to mean that there is no justification for his words, if they are likely to produce psychiatric harm.
As to the mental element of the tort, Arden LJ held that the necessary intent to cause harm could be imputed to the father, since he was aware of the psychiatric evidence about the harm which his son would be likely suffer if he read some of the contents of the book.
She said, correctly, that there was a consistent line of authority from Wilkinson v Downton that even if a person did not intend to cause such harm, an intent to do so could be imputed to him if that was the likely consequence.
In a short concurring judgment Jackson LJ said that for a statement to give rise to liability under Wilkinson v Downton it need not be false.
Rather, it must meet the essential characteristics that the statement is unjustified and that the defendant intends to cause or is reckless about causing physical or psychiatric injury to the claimant.
Jackson LJ considered that the following facts were sufficient to establish that the claimant had a good prospect of success for the purposes of granting an interlocutory injunction: The book contained graphic descriptions of the abuse which the i) appellant had suffered and his incidents of self harm. ii) Those passages were likely to be quoted by reviewers or newspapers who serialised the book. iii) On the uncontradicted expert evidence those passages were likely to cause psychological harm to the claimant. iv) The book was dedicated to the claimant and partly addressed to him. v) The appellant knew of the risks posed to the claimant because of his vulnerabilities and had for that reason subscribed to Recital K. McFarlane LJ agreed with both judgments.
The form of order was the subject of a supplemental judgment after a further hearing in private.
The court granted an interim injunction, restraining the defendants from making generally available to the public by any means all or any part of the information referred to in Confidential Schedule 2 to this Order (the information) whether by publishing the particular extracts identified in Confidential Schedule 3 or by publishing any substantially similar words to like effect.
Confidential Schedule 2 reads thus: Information referred to in the Order (1) The information or purported information that the respondents intended to publish in a book entitled Instrumental (the Book) (extracts of which are particularised in Confidential Schedule 3) which give graphic accounts of the First defendants account of sexual abuse he suffered as a child; his suicidal thoughts and attempts; his history of and treatment for mental illness and incidents of self harming; his thoughts about killing the appellant; his fears that the appellant would also be a victim of sexual abuse and linking this account to the appellant. (2) Any information liable to or which might lead to the identification of the appellant (whether directly or indirectly) as the subject of these proceedings or the material referred to above.
In the judgment about the form of order Arden LJ emphasised the use of word
graphic in the order, which she explained as follows: We take the word graphic to mean vividly descriptive.
In judging what is vividly descriptive, we have borne in mind that the person to be protected is a vulnerable child.
In these circumstances, we consider that what should be injuncted is that which we consider to be seriously liable to being understood by a child as vividly descriptive so as to be disturbing.
Confidential Schedule 3 contains some 40 extracts from the book.
Some fall within the general description in Confidential Schedule 2 as explained by Arden LJ and some do not.
By no means all the passages in the book which might be thought to fall within that general description are included.
Nowhere in the listed extracts or in the current version of the book is there mention of thoughts about killing the child.
Some of the quotations in paras 3 to 15 above are among the 40 extracts listed; many are not.
The prohibition does not relate to information contained in the book apart from the Confidential Schedules or contained in the public judgment of the court.
Nor does it apply to any material which had been placed in the public domain before 1 September 2014 and either appeared on the internet in the fathers name in a form and on a site accessible at 1 September 2014 or was attributed to the father and contained in a national television programme transmitted in England within the previous 12 months.
The trial of the action was listed for April 2015.
The father and the publishers contend that on the agreed facts the child has no cause of action against them.
Wilkinson v Downton
Mr Downton secured a place for himself in legal history by a misconceived practical joke.
He thought that it would be a cause of harmless amusement among the clientele of the Albion public house in Limehouse to tell the landlords wife, Mrs Wilkinson, a false tale that her husband had fractured his legs in an accident while on his way back from a race meeting and that he had sent a message to ask for her help to get him home.
It cost her 1 shilling and 10 pence to send her son and another helper on this fools errand, but a matter of far greater concern was the effect on her health.
She suffered severe shock to her nervous system, which manifested itself in vomiting and weeks of physical suffering.
Mrs Wilkinson had not shown any previous sign of predisposition to nervous shock.
She and her husband sued Mr Downton, and the matter came to trial before Wright J and a jury.
Recovery of the transport costs incurred in response to Mr Wilkinsons supposed request for help presented no legal difficulty.
Such costs were recoverable as damages for deceit.
The jury assessed damages for the illness caused to Mrs Wilkinson by her nervous shock (together with her husbands claim for the resulting loss of her services) at 100, but the legal basis for making such an award was problematic.
Wright J rejected the argument that damages for deceit could include an award for Mrs Wilkinsons suffering, because the essence of liability for deceit was that a maker of a false representation, intended to be acted upon, was liable to make good any loss naturally resulting from the representee acting on it, but the illness suffered by Mrs Wilkinson was not a consequence of her acting on what she was told.
It was simply a consequence of the shock brought about by the news reported to her.
Wright J held, at pp 58 59, that a cause of action could be stated in law where a defendant has wilfully done an act calculated to cause physical harm to the plaintiff that is to say, to infringe her legal right to personal safety, and has in fact thereby caused physical harm to her.
He continued That proposition without more appears to me to state a good cause of action, there being no justification alleged for the act.
This wilful injuria is in law malicious, although no malicious purpose to cause the harm which was caused nor any motive of spite is imputed to the defendant.
This compact statement of law contained a number of key features.
First, he identified the plaintiffs protected interest as her legal right to personal safety.
Secondly, he identified the defendants act as wilful.
Thirdly, he described the act as calculated to cause physical harm to the plaintiff.
Fourthly, he noted the absence of any alleged justification.
Fifthly, he characterised the wilful injuria as in law malicious despite the absence of any purpose (ie desire) to cause the harm which was caused.
Having stated the law in that way, Wright J then considered whether it covered Mrs Wilkinsons claim.
He held that it did.
He said: One question is whether the defendants act was so plainly calculated to produce some effect of the kind which was produced that an intention to produce it ought to be imputed to the defendant, regard being had to the fact that the effect was produced on a person proved to be in an ordinary state of health and mind.
I think that it was.
It is difficult to imagine that such a statement, made suddenly and with apparent seriousness, could fail to produce grave effects under the circumstances upon any but an exceptionally indifferent person, and
therefore an intention to produce such an effect must be imputed
This passage removes any doubt that Wright J was using the word calculated in the sense of likely to have an effect of the kind which was produced, and that the result was taken in law to be intended by a process of imputation.
The work of modern scholars is helpful to understanding Wright Js judgment by placing it in its historical context.
The latter part of the 19th century was a formative period in the law of tort, as in other areas of the common law.
There was a movement towards general principles of liability for intentional or malicious torts, as there was also for negligence. (See Professor Oliphants chapter, The Structure of the Intentional Torts, in Emerging Issues in Tort Law, 2007, edited by Professor Neyers and others.) The first edition of Pollock on Torts was published in 1887.
In it he began his discussion of principles by stating it as a general proposition of English law that it is a wrong to do wilful harm to ones neighbour without lawful justification (p 21).
He acknowledged that this was a modern principle for which there was no express authority, but he reasoned that as the modern law of negligence enforced the duty of fellow citizens to observe in varying circumstances an appropriate measure of prudence to avoid causing harm to one another, much more must there exist, whether it be so expressed in the books or not, the negative duty of not doing wilful harm; subject, as all general duties must be subject, to the necessary exceptions (p 22).
In later editions he cited an obiter dictum of Bowen LJ in Skinner & Co v Shew & Co [1893] 1 Ch 413, 422 that at common law there was a cause of action whenever one person did damage to another wilfully and intentionally, and without just cause or excuse.
Wright J was familiar with Pollock on Torts and he referred to the 4th edition in Wilkinson v Downton at p 60.
The word maliciously was much used both in the law of tort and in criminal law.
In the famous case of Mogul Steamship Co Ltd v McGregor, Gow & Co (in which the plaintiffs complained about being kept out of the conference of shipowners trading between China and London) Bowen LJ said that the word had an accurate meaning, well known to the law as well as a popular and less precise signification.
As a legal term it meant an intention to do an act which is wrongful, to the detriment of another: (1889) 23 QBD 598, 612.
He continued, at p 613: Now, intentionally to do that which is calculated in the ordinary course of events to damage, and which does, in fact, damage another in that other persons property or trade, is actionable if done without just cause or excuse.
Such intentional action when done without just cause or excuse is what the law calls a malicious wrong (see Bromage v Prosser (1825) 4 B & C 247; Capital and Counties Bank v Henty (1882) 7 App Cas 741, 772, per Lord Blackburn).
In Bromage v Prosser Bayley J distinguished malice in law, inferred from the defendants intentional interference with the plaintiffs rights, from malice in fact (p 255).
In the Mogul Steamship case Bowen LJ held that the defendants had just cause to act as they did, because they were free to carry on their trade freely to their best advantage, and the House of Lords agreed [1892] AC 25.
Just as absence of actual ill will was not a defence if the defendants act wilfully interfered with an interest of the plaintiff which carried a right to legal protection, conversely the existence of ill will was held not to be enough to create a cause of action in the absence of such a right.
This was the ratio decidendi in the celebrated case of Mayor of Bradford v Pickles [1895] AC 587, from which it followed that insofar as Bowen LJ suggested that any act of interference with anothers trade was prima facie unlawful his dictum was too wide.
The chief source of water supplied for the citizens of Bradford was a collection of springs on land owned by the corporation at the foot of a hillside on the outskirts of the city.
Above that land was a tract owned by Mr Pickles, and the springs were fed by water flowing underground from Mr Pickless land.
Mr Pickles embarked on the work of sinking a shaft on his land which had the effect of altering the flow of water and reducing the volume which fed the springs.
The corporation brought proceedings for an injunction to restrain him from doing the work.
The pleader alleged that he was acting maliciously.
It was argued that he was not acting for the improvement of his own land, but that he simply intended to deprive the corporation of water which it would otherwise have received, with the motive of forcing it to buy him out at a price satisfactory to himself.
The corporation was granted an interim injunction at first instance, but the injunction was set aside by the Court of Appeal (Lord Herschell, LC, and Lindley and AL Smith LJJ, [1895] 1 Ch 145) and the Court of Appeals judgment was upheld by the House of Lords.
It was held that Mr Pickles had acted throughout in accordance with his legal rights.
The corporation had no legal right to the flow of water from his land and, that being so, his motives were irrelevant.
Lord Halsbury LC said at p 594: This is not a case in which the state of mind of the person doing the act can affect the right to do it.
If it was a lawful act, however ill the motive might be, he had a right to do it.
If it was an unlawful act, however good his motive might be, he would have no right to do it.
Motives and intentions in such a question as is now before your Lordships seem to me to be absolutely irrelevant.
All this would have been familiar to Wright J. Shortly before he gave judgment in Wilkinson v Downton he had been summoned with other judges to give his opinion to the House of Lords in the famous case of Allen v Flood [1898] AC 1.
He delivered his judgment in Wilkinson v Downton on 8 May 1897 and his opinion in Allen v Flood on 3 June 1897.
In his opinion in Allen v Flood, at [1898] AC 63, he said that in circumstances where: there was not otherwise any wrong or injuria, it follows that there could not be malice in the ordinary legal sense of that term, as compendiously stating the wilful infringement of a legal right or breach of a legal duty without matter of legal justification or excuse: upon which may be cited Bromage v Prosser [and other authorities].
These and other authorities show that in general wherever the term malice or maliciously forms part of a statement of a cause of action or of a crime, it imports not an inference of motive to be found by the jury, but a conclusion of law which follows on a finding that the defendant has violated a right and has done so knowingly, unless he shows some overriding justification.
Lord Herschell said in his judgment in Allen v Flood at p 124: More than one of the learned judges who were summoned refers with approval to the definition of malice by Bayley J in the case of Bromage v Prosser: Malice in common acceptation of the term means ill will against a person, but in its legal sense it means a wrongful act done intentionally without just cause or excuse.
It will be observed that this definition eliminates motive altogether.
It is interesting to compare and contrast Wright Js opinion in Allen v Flood with his judgment in Wilkinson v Downton.
In his opinion in Allen v Flood Wright J made the point (as the House of Lords had held in Mayor of Bradford v Pickles) that if the defendants conduct did not interfere with any right of the plaintiff, malice in its popular meaning would not be enough to create a wrong or injuria.
But in Wilkinson v Downton he treated the defendants wilfulness in telling a deliberate falsehood as an element of the injuria.
The two approaches were not incompatible, for it is perfectly possible for the law to recognise an interest deserving some form of legal protection, but to require an appropriate degree of fault for an interference with it to constitute a legal injuria; the appropriate fault element may vary, typically between negligence and intention (although they are not the only possibilities); and the measure of protection provided by the law may vary as between different types of interest (be it a persons property, trade or personal safety).
In Wilkinson v Downton Wright J identified the plaintiffs protected interest as her right to personal safety.
There may be good reasons of social policy for the law to treat a person who deliberately does something which causes another to suffer physical or psychological injury or illness by telling them a false story (Wilkinson v Downton) more harshly than one who carelessly passes on false information.
In the passage cited above from his opinion in Allen v Flood, Wright J referred to cases where malice forms part of a statement of a cause of action or of a crime.
In relation to the criminal law, Professor Mark Lunney has drawn attention in an illuminating article, Practical joking and its penalty: Wilkinson v Downton in context (2002) 10 Tort Law Review 168, 178, to the decision of the Court of Crown Cases Reserved in R v Martin (1881) 8 QBD 54.
The defendant caused panic in a theatre by barricading an exit door and extinguishing the gas lighting.
In the resulting confusion several people were seriously injured.
His conduct was intended as a prank, but any sane person would have realised that it was dangerous.
The court upheld his conviction for unlawfully and maliciously inflicting grievous bodily harm, contrary to section 20 of the Offences Against the Person Act 1861.
Lord Coleridge CJ said (at p 58): The prisoner must be taken to have intended the natural consequences of that which he did.
He acted unlawfully and maliciously, not that he had any personal malice against the particular individuals injured, but in the sense of doing an unlawful act calculated to injure Stephen J said (also at p 58) that: if the prisoner did that which he did as a mere piece of foolish mischief unlawfully and without excuse, he did it wilfully, that is, maliciously, within the meaning of the statute.
There is a striking parallel between the language and reasoning in R v Martin and in Wilkinson v Downton.
Wright Js proposition that the injuria was in law malicious, despite the absence of any malicious purpose or motive of spite contained a clear echo of the criminal law.
Historically the doctrine of imputed intention, that is to say that a person is to be taken as a matter of law to intend the natural and probable consequences of his acts, survived in the criminal law as late as the decision of the House of Lords in DPP v Smith [1961] AC 290.
The decision surprised most criminal lawyers and was described by Professor Glanville Williams in his Textbook of the Criminal Law, (1st ed) (1978), p 61, as the most criticised judgment ever to be delivered by an English court.
The doctrine was abolished by section 8 of the Criminal Justice Act 1967.
This states: A court or jury, in determining whether a person has committed an offence, (a) shall not be bound in law to infer that he intended or foresaw a result of his actions by reason only of its being a natural and probable consequence of those actions; but (b) shall decide whether he did intend or foresee that result by reference to all the evidence, drawing such inferences from the evidence as appear proper in the circumstances.
The final matter which Wright J addressed in his judgment in Wilkinson v Downton was whether the effect on Mrs Wilkinson of the report about her husband was, to use the ordinary phrase, too remote to be regarded in law as a consequence for which the defendant is answerable.
Having expressed the view that it was difficult to imagine that such a report could fail to produce grave effects, unsurprisingly he said that apart from authority he would hold that it was not too remote.
He then considered two authorities advanced for the proposition that illness through mental shock is a too remote or unnatural consequence of an injuria to entitle the plaintiff to recover in a case where damage is a necessary part of the cause of action: Victorian Railways Commissioners v Coultas (1888) 13 App Cas 222 and Allsop v Allsop (1860) 5 H & N 534, approved by the House of Lords in Lynch v Knight (1861) 9 HL Cas 577.
In Victorian Railways Commissioners v Coultas the plaintiff narrowly escaped serious injury at a level crossing.
She was a passenger in a buggy driven by her brother.
The gate keeper negligently opened the gates for them to cross when a train was approaching.
There was no collision, but the plaintiff was found by a jury to have suffered illness as a result of the shock of seeing the train approaching and thinking that they were going to be killed.
The Privy Council held that mere sudden terror unaccompanied by actual physical injury could not in such circumstances be considered a consequence which in the ordinary course would flow from the negligence of the gate keeper.
Wright J declined to follow that authority.
He observed that it had been doubted by the Court of Appeal (Pugh v London, Brighton and South Coast Railway Co [1896] 2 QB 248, 250, per Lord Esher MR) and had been rejected in Ireland (Bell v Great Northern Railway Co of Ireland (1890) 26 LR Ir 428, per Palles CB) and by the Supreme Court of New York (Mitchell v Rochester Railway Co (1896) 151 NY Rep 107, cited by Pollock).
He did not go further and express the view that it was wrong, but it was unnecessary for him to do so, for he also described the case as not in point since there was not in that case any element of wilful wrong.
Allsop v Allsop was a case of illness allegedly caused by a slanderous imputation of unchastity to a married woman.
The woman heard the slander at third hand.
It was held that the woman could not claim special damages for her illness in an action for slander against the originator of the slander.
Wright J took a narrow view of the case as an authority on the type of damages recoverable in an action for slander.
He said that to adopt it as a rule of general application that illness resulting from a false statement could never give rise to a claim for damages would be difficult or impossible to defend.
Wright Js essential reasoning is clear, once the terms that he used are properly understood.
He did not attempt to define physical harm of a psychiatric nature, but on the facts it was unnecessary for him to say more than he did.
We have analysed his reasoning at some length because of the uncertainty to which it has given rise.
Subsequent case law
Wilkinson v Downton has been a source of much discussion and debate in legal textbooks and academic articles but seldom invoked in practice.
This may be due to the development of the law of negligence in the area of recognised illness resulting from nervous shock.
But a distinctive feature of the present case is that the courts below have held that there is no arguable case against the father in negligence (applying Barrett v Enfield London Borough Council [2001] 2 AC 550), and the claimant has therefore been constrained to rely on Wilkinson v Downton.
Wilkinson v Downton was considered by the Divisional Court (Kennedy and Phillimore JJ) in Dulieu v White & Sons [1901] 2 KB 669.
The plaintiff was working behind the bar at the Bonner Arms in Bethnal Green when an employee of the defendant negligently drove a horse drawn van into the room where she was.
She was pregnant at the time and claimed damages for illness allegedly resulting from her severe shock.
The defendant pleaded that the damages claimed were too remote.
The issue came before the Divisional Court on a demurrer.
The court rejected the defence and declined to follow Victorian Railways Commissioners v Coultas.
The judges observed that the decision of the Privy Council was entitled to great respect but was no more binding on the court than it was on the Exchequer Division in Ireland.
Kennedy J put to one side cases of wilful wrong doing, such as Wilkinson v Downton, as perhaps involving special considerations.
In cases of negligence, he said that he was inclined to limit liability to injury from shock arising from a reasonable fear of immediate personal injury to oneself.
Phillimore J, at p 683, said that he agreed with the decision of Wright J in Wilkinson v Downton that everyone has a right to his personal safety, and that it is a tort to destroy this safety by wilfully false statements and thereby to cause a physical injury to the sufferer.
From that and other authorities he drew the principle that terror wrongfully induced and inducing physical mischief gives a cause of action.
Wilkinson v Downton was approved by the Court of Appeal in Janvier v Sweeney [1919] 2 KB 316.
The plaintiff was a French woman engaged to a German who was interned in the Isle of Man during World War 1.
She lived as the paid companion of another woman who had a house in Mayfair.
The defendants were an ex police officer who ran a private detective agency and his assistant.
The first defendant wanted to inspect surreptitiously some letters written to the plaintiffs employer.
In July 1917 he sent his assistant to see the plaintiff and trick her into cooperating by pretending that he was a police officer and that she was suspected of corresponding with a German spy.
She claimed that this caused her to suffer severe shock resulting in a period of nervous illness.
She sued for damages and won.
On the appeal it was conceded that the threatening conduct found by the jury would amount to an actionable wrong if damage which the law recognised could be shown to have flowed directly from it.
But it was argued that the plaintiffs illness was too remote in law and that Wilkinson v Downton was wrongly decided.
The court approved the reasoning of Wright J and the statement of Phillimore J in Dulieu v White that terror wrongfully induced and inducing physical mischief gives a cause of action.
Duke LJ described Janvier v Sweeney as a stronger case than Wilkinson v Downton because there was an intention to terrify the plaintiff for the purpose of attaining an unlawful object.
There appear to have been no reported cases in this country on Wilkinson v Downton for the next 70 years or so.
In the last 25 years it has had a modest resurgence in the context of harassment: Khorasandjian v Bush [1993] QB 727; Wong v Parkside Health NHS Trust [2001] EWCA Civ 1721, [2003] 3 All ER 932; Wainwright v Home Office [2001] EWCA Civ 2081, [2002] QB 1334 (CA), [2003] UKHL 53, [2004] 2 AC 406 (HL).
In Khorasandjian v Bush the plaintiff obtained an injunction, in reliance on Wilkinson v Downton and Janvier v Sweeney, to prevent a former partner from making threatening phone calls.
Dillon LJ (with whom Rose LJ agreed) described those authorities as establishing that false words or verbal threats calculated to cause, uttered with the knowledge that they are likely to cause, and actually causing physical injury to the person to whom they are uttered are actionable (p 735). (This was a direct quotation from the headnote in Janvier v Sweeney.) Dillon LJ interpreted injury in the sense of recognisable psychiatric illness with or without psychosomatic symptoms, as distinct from mere emotional distress (p 736).
In Wong v Parkside Health NHS Trust the claimant sued her former employer for post traumatic stress resulting from alleged harassment at her place of work.
Hale LJ, giving the judgment of the court, said that it followed from Wright Js formulation in Wilkinson v Downton that although the tort is commonly labelled intentional infliction of harm, it was not necessary to prove actual (subjective) intention to injure; it was sufficient to prove that the conduct was calculated to do so in the sense of being deliberate conduct which was likely in the nature of things to cause injury (para 10).
As explained above, Hale LJ was correct that this was indeed the effect of Wright Js formulation, which the Court of Appeal endorsed in Janvier v Sweeney.
Whether it should be endorsed by this court is a different question.
Hale LJ also confirmed the view expressed in Khorasandjian v Bush that for liability to arise under Wilkinson v Downton there must be physical harm or recognised psychiatric illness.
The interesting question is whether it should be sufficient to establish conduct intended to cause severe alarm or distress falling short of a recognised psychiatric illness but in fact causing the latter.
This question was touched on in Wainwright v Home Office.
In Wainwright v Home Office a young adult who suffered from cerebral palsy and severe arrested social and intellectual development was wrongly subjected by prison officers to a strip search, which was carried out in a particularly humiliating fashion.
He was greatly distressed by the episode and was subsequently diagnosed as suffering post traumatic stress disorder.
He claimed damages under Wilkinson v Downton.
It was argued on his behalf that the ambit of harm covered by the tort should extend beyond cases of recognised physical or psychiatric injury and should include distress of the kind which was the natural consequence of the prison officers treatment of him.
In the Court of Appeal Lord Woolf CJ said that he had no difficulty with the statement in Salmond & Heuston on Torts, (21st ed) (1996), p 215, that one who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is liable for such emotional distress, provided that bodily harm results from it: [2002] QB 1334, para 49. (This statement was taken from the American Law Institute, Restatement of the Law, Torts, (2nd ed) (1965), section 46.) But the trial judge had not made any finding that there was such intention or recklessness, and for that reason Lord Woolf held that the claim failed.
Buxton LJ agreed that the claim failed on the facts, but he disagreed with the formulation in Salmond & Heuston.
He considered that the headnote in Janvier v Sweeney, adopted by Dillon LJ in Khorasandjian v Bush, came as close as it is possible to do to a general statement of the rule in Wilkinson v Downton (para 79).
But if that was not correct, he held that the rule must be limited to Wright Js statement that the defendants act was so clearly likely to produce an effect of the kind that occurred that an intention to produce it should be imputed to him (objective recklessness).
The reformulation in Khorasandjian v Bush required subjective recklessness as to the causation of physical injury in the sense of recognisable psychiatric distress.
Intention or recklessness merely as to severe emotional distress, from which bodily harm happened to result, was not enough.
Buxton LJ regarded the court in Wongs case as treating the two formulations as equivalent in their effect.
In the House of Lords the principal judgment was given by Lord Hoffmann.
His analysis of Wilkinson v Downton was that Wright J was prevented by the decision of the Privy Council in Victorian Railway Commissioners v Coultas from finding in negligence, and Wright J devised a concept of imputed intention which sailed as close to negligence as he felt that he could; that it was not entirely clear what he meant by finding that the defendant intended to cause injury; but that by the time of Janvier v Sweeney the law was able comfortably to accommodate the facts of Wilkinson v Downton, since the court in Dulieu v White had declined to follow Victorian Railway Commissioners v Coultas. (See paras 44, 37 and 39 to 40.)
This interesting reconstruction shows the pitfalls of interpreting a decision more than a century earlier without a full understanding of jurisprudence and common legal terminology of the earlier period.
The concept of imputed intention was certainly not a novel concept devised by Wright J to get around a perceived stumbling block in the law of negligence.
The concept was in the mainstream of legal thinking at that time.
Moreover there is no reason for supposing that Wright J would have felt obliged to follow the decision of the Privy Council unless he could find a means of distinguishing it.
He pointed out that it had been doubted by the Court of Appeal, was inconsistent with a decision of the Court of Appeal in Ireland and had been criticised in the USA and by Pollock.
Just as Kennedy and Phillimore JJ said in Dulieu v White that they were not bound by the decision of the Privy Council, Wright J would have known that he was not bound to follow it as a matter of precedent (and respect for it would have been reduced by the comments of the eminent judges, Lord Esher and Palles, CB, who had either doubted it or judged it to be wrong).
There is no reason to suppose that Wright J was being artful when he described the Privy Councils decision as not in point because it did not involve wilful wrongdoing.
His reasoning may seem unclear to modern readers, but it would not have been unclear to those familiar at the time with his use of the terms malicious, calculated and imputed.
It is also incorrect to suggest that after Dulieu v White the law would have comfortably accommodated the facts of Wilkinson v Downton within the law of nervous shock caused by negligence.
Kennedy Js judgment in Dulieu v White would have limited a cause of action in negligence for damages for nervous shock to cases in which the nervous shock resulted from fear for the plaintiffs own personal safety, which would not have included Mrs Wilkinsons case, since her fear was for her husband.
This limitation was disapproved by a majority of the Court of Appeal in Hambrook v Stokes Brothers [1925] 1 KB 141 (Sargant LJ dissenting) and was finally put to rest in McLoughlin v OBrian [1983] 1 AC 410.
In any event negligence and intent are very different fault elements and there are principled reasons for differentiating between the bases (and possible extent) of liability for causing personal injury in either case.
Lord Hoffmann rejected the argument on behalf of Mr Wainwright that there should be liability under Wilkinson v Downton for distress, not amounting to recognised psychiatric injury, on the basis of imputed intent.
He said at para 45: If one is going to draw a principled distinction which justifies abandoning the rule that damages for mere distress are not recoverable, imputed intention will not do.
The defendant must actually have acted in a way which he knew to be unjustifiable and either intended to cause harm or at least acted without caring whether he caused harm or not.
Lord Hoffmann said that he read Lord Woolfs judgment as suggesting a willingness to accept such a principle, but that the facts did not support it.
As we read Lord Woolfs judgment, the proposition from Salmond & Heuston which he was willing to accept was slightly different.
It was that damages should be recoverable only in cases where the claimant suffered recognised bodily or psychiatric injury (and not mere emotional distress), but that in order to be entitled to damages for such injury it should be sufficient to show that the injury resulted from severe emotional distress which was intentionally or recklessly caused by the defendants outrageous conduct.
Lord Hoffmann was open to the idea that compensation should be available in cases where there was a genuine intention to cause distress, but he added a strong note of caution.
He observed that in institutions and workplaces all over the country, people constantly say and do things with the intention of causing distress and humiliation to others.
This, he said at para 46, shows lack of consideration and appalling manners but I am not sure that the right way to deal with it is always by litigation.
He referred also to the Protection from Harassment Act 1997, which provides a remedy in damages for a course of conduct amounting to harassment.
He observed that the requirement of a course of conduct showed that Parliament was conscious that it might not be in the public interest to allow the law to be set in motion for one boorish incident, and that it might be that any development of the common law should show similar caution (para 46).
Lord Hoffmann concluded that Wilkinson v Downton as an authority did not provide a remedy for distress falling short of recognised psychiatric injury, and that in so far as there might be a remedy for distress (without psychiatric injury) intentionally caused, the necessary intention was not established (para 47).
Other common law jurisdictions
Most common law jurisdictions have adopted Wilkinson v Downton.
In Australia it was cited with approval by the High Court in Bunyan v Jordan (1937) 57 CLR 1.
Despite some later cases in which the courts have tended to treat it as subsumed within the law of negligence, Spigelman CJ in the New South Wales Court of Appeal treated it as an intentional tort in Nationwide News Pty Ltd v Naidu [2007] NSWCA 377, paras 71 72.
It has also been followed in New Zealand (Stevenson v Basham [1922] NZLR 225; Bradley v Wingnut Films Ltd [1993] 1 NZLR 415), Ireland (Sullivan v Boylan [2013] IEHC 104) and Hong Kong (Wong Kwai Fun v Li Fung [1994] 1 HKC 549).
In the USA and Canada there has been significant further development.
The American Law Institutes Restatement of the Law: Torts (2nd ed) (1965), section 46(1) stated: One who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress, and if bodily harm to the other results from it, for such bodily harm. 45 states accepted this definition and others adopted a modified version of it. (See R Fraker, Reformulating Outrage: a critical analysis of the problematic tort of IEED (2008) 61 Vand L Rev 983.) In the Restatement (Third) of Torts: Liability for Physical and Emotional Harm (2012) the wording of section 46 is marginally different but the meaning is unchanged: An actor who by extreme and outrageous conduct intentionally or recklessly causes severe emotional harm to another is subject to liability for that emotional harm and, if the emotional harm causes bodily harm, also for the bodily harm.
The commentary to the current version states: The outrage tort originated as a catchall to permit recovery in the narrow instance when an actors conduct exceeded all permissible bounds of a civilized society but an existing tort claim was unavailable.
This tort potentially encompasses a broad swath of behaviour and can easily, but often inappropriately, be added as a supplement to a suit in which the gravamen is another tort or a statutory violation.
The intent requirement is satisfied when an actor knows that conduct is substantially certain to cause harm.
Because emotional harm is often a predictable outcome of otherwise legitimate conduct, such as terminating an employee, liability for this tort could be expansive.
Courts have played an especially critical role in cabining this tort by requiring extreme and outrageous conduct and severe emotional harm.
A great deal of conduct may cause emotional harm, but the requisite conduct for this claim extreme and outrageous describes a very small slice of human behaviour.
The requirement that the resulting harm be severe further limits claims.
These limits are essential in preventing this tort from being so broad as to intrude on important countervailing policies, while permitting its judicious use for the occasions when it is appropriate.
In Canada it is settled law that The tort of intentional infliction of mental distress or shock has three elements: (1) an act or statement that is extreme, flagrant or outrageous; (2) the act or statement is calculated to produce harm; and (3) the act or statement causes harm (High Parklane Consulting Inc v Lewis (2007) Can LII 410, para 31, per Perell J).
This three limbed test is derived from a line of earlier authorities including particularly the decision of McLachlin J, sitting as she then was in the British Columbia Supreme Court, in Rahemtulla v Vanfed Credit Union [1984] 3 WWR 296.
In that case the plaintiff was harassed at work, falsely accused of theft in threatening circumstances and summarily dismissed without proper cause in a humiliating fashion.
The defendant submitted that to be liable for wilful infliction of nervous shock its conduct must be outrageous.
McLachlin J said, at para 52: This submission appears to be founded on the distinction drawn in American cases between mere insult, which is not actionable, and extreme and outrageous conduct which is: Linden: Canadian Tort Law (3rd ed) (1982), p 48.
While this distinction appears not to have been expressly adopted in the Canadian and Commonwealth cases, the conduct considered in the leading authorities such as Wilkinson v Downton, and Janvier v Sweeney, was in fact flagrant and extreme.
Moreover, it is difficult to accept that the courts should protect persons from every practical joke or unkind comment.
McLachlin J said that assuming that only flagrant and extreme conduct inflicting mental suffering was actionable, the defendants conduct could be so described.
She identified the two further ingredients of the tort as being: that the conduct was plainly calculated to produce some effect of the kind which was produced (quoting from Wright Js judgment in Wilkinson v Downton), and that the conduct produced provable illness.
She found that the conduct was plainly calculated to cause profound distress because it was clearly foreseeable.
Since that decision the courts have followed the approach of imputing the necessary intention where severe emotional distress was foreseeable (see Professor Denise Raumes chapter, The Role of Intention in the Tort in Wilkinson v Downton, in Emerging Issues in Tort Law).
Analysis
The order made by the Court of Appeal was novel in two respects.
The material which the appellant was banned from publishing was not deceptive or intimidatory but autobiographical; and the ban was principally directed, not to the substance of the autobiographical material, but to the vivid form of language used to communicate it.
The appeal therefore raises important questions about freedom of speech and about the nature and limits of liability under Wilkinson v Downton.
In Wilkinson v Downton Wright J recognised that wilful infringement of the right to personal safety was a tort.
It has three elements: a conduct element, a mental element and a consequence element.
The issues in this case relate to the first and second elements.
It is common ground that the consequence required for liability is physical harm or recognised psychiatric illness.
In Wainwright v Home Office Lord Hoffmann discussed and left open (with expressions of caution) the question whether intentional causation of severe distress might be actionable, but no one in this case has suggested that it is.
The conduct element requires words or conduct directed towards the claimant for which there is no justification or reasonable excuse, and the burden of proof is on the claimant.
We are concerned in this case with the curtailment of freedom of speech, which gives rise to its own particular considerations.
We agree with the approach of the Court of Appeal in regarding the tort as confined to those towards whom the relevant words or conduct were directed, but they may be a group.
A person who shouts fire in a cinema, when there is no fire, is addressing himself to the audience.
In the present case the Court of Appeal treated the publication of the book as conduct directed towards the claimant and considered that the question of justification had therefore to be judged vis vis him.
In this respect we consider that they erred.
The book is for a wide audience and the question of justification has to be considered accordingly, not in relation to the claimant in isolation.
In point of fact, the fathers case is that although the book is dedicated to the claimant, he would not expect him to see it until he is much older.
Arden LJ said that the father could not be heard to say that he did not intend the book to reach the child, since it was dedicated to him and some parts of it are addressed to him.
We have only found one passage addressed to him, which is in the acknowledgments, but more fundamentally we do not understand why the appellant may not be heard to say that the book is not intended for his eyes at this stage of his life.
Arden LJ also held that there could be no justification for the publication if it was likely to cause psychiatric harm to him.
That approach excluded consideration of the wider question of justification based on the legitimate interest of the defendant in telling his story to the world at large in the way in which he wishes to tell it, and the corresponding interest of the public in hearing his story.
When those factors are taken into account, as they must be, the only proper conclusion is that there is every justification for the publication.
A person who has suffered in the way that the appellant has suffered, and has struggled to cope with the consequences of his suffering in the way that he has struggled, has the right to tell the world about it.
And there is a corresponding public interest in others being able to listen to his life story in all its searing detail.
Of course vulnerable children need to be protected as far as reasonably practicable from exposure to material which would harm them, but the right way of doing so is not to expand Wilkinson v Downton to ban the publication of a work of general interest.
But in pointing out the general interest attaching to this publication, we do not mean to suggest that there needs to be some identifiable general interest in the subject matter of a publication for it to be justified within the meaning of Wilkinson v Downton.
Freedom to report the truth is a basic right to which the law gives a very high level of protection. (See, for example, Napier v Pressdram Ltd [2009] EWCA Civ 443, [2010] 1 WLR 934, para 42.) It is difficult to envisage any circumstances in which speech which is not deceptive, threatening or possibly abusive, could give rise to liability in tort for wilful infringement of anothers right to personal safety.
The right to report the truth is justification in itself.
That is not to say that the right of disclosure is absolute, for a person may owe a duty to treat information as private or confidential.
But there is no general law prohibiting the publication of facts which will cause distress to another, even if that is the persons intention.
The question whether (and, if so, in what circumstances) liability under Wilkinson v Downton might arise from words which are not deceptive or threatening, but are abusive, has not so far arisen and does not arise for consideration in this case.
The Court of Appeal recognised that the appellant had a right to tell his story, but they held for the purposes of an interlocutory injunction that it was arguably unjustifiable for him to do so in graphic language.
The injunction permits publication of the book only in a bowdlerised version.
This presents problems both as a matter of principle and in the form of the injunction.
As to the former, the books revelation of what it meant to the appellant to undergo his experience of abuse as a child, and how it has continued to affect him throughout his life, is communicated through the brutal language which he uses.
His writing contains dark descriptions of emotional hell, self hatred and rage, as can be seen in the extracts which we have set out.
The reader gains an insight into his pain but also his resilience and achievements.
To lighten the darkness would reduce its effect.
The court has taken editorial control over the manner in which the appellants story is expressed.
A right to convey information to the public carries with it a right to choose the language in which it is expressed in order to convey the information most effectively. (See Campbell v MGN Ltd [2004] UKHL 22, [2004] 2 AC 457, para 59, and In re Guardian News and Media Ltd [2010] UKSC 1, [2010] 2 AC 697, para 63)
The problem with the form of the injunction is that Schedule 2 defines the information which it is forbidden to publish not only by reference to its substantive content, but also by the descriptive quality of being graphic.
What is sufficiently graphic to fall within the ban is a matter of impression.
The amplification of graphic in the courts supplementary judgment as meaning seriously liable to being understood by a child as vividly descriptive so as to be disturbing similarly lacks the clarity and certainty which an injunction properly requires.
Any injunction must be framed in terms sufficiently specific to leave no uncertainty about what the affected person is or is not allowed to do.
The principle has been stated in many cases and nowhere more clearly than by Lord Nicholls in Attorney General v Punch Ltd [2002] UKHL 50, [2003] 1 AC 1046 at para 35: An interlocutory injunction, like any other injunction, must be expressed in terms which are clear and certain.
The injunction must define precisely what acts are prohibited.
The court must ensure that the language of its order makes plain what is permitted and what is prohibited.
This is a well established, soundly based principle.
A person should not be put at risk of being in contempt of court by an ambiguous prohibition, or a prohibition the scope of which is obviously open to dispute.
Our conclusion that the publication of the appellants book is not within the scope of the conduct element of the tort is enough to decide this case.
However, the issue of the mental element required for the tort has been argued before us and it is right that we should address it.
The Court of Appeal found that the necessary intention could be imputed to the appellant.
The court cannot be criticised for doing so, since it was bound by previous decisions of the court which upheld that approach (in particular, Janvier v Sweeney and Wong v Parkside Health NHS Trust).
There is a critical difference, not always recognised in the authorities, between imputing the existence of an intention as a matter of law and inferring the existence of an intention as a matter of fact.
Imputation of an intention by operation of a rule of law is a vestige of a previous age and has no proper role in the modern law of tort.
It is unsound in principle.
It was abolished in the criminal law nearly 50 years ago and its continued survival in the tort of wilful infringement of the right to personal safety is unjustifiable.
It required the intervention of Parliament to expunge it from the criminal law, but that was only because of the retrograde decision in DPP v Smith.
The doctrine was created by the courts and it is high time now for this court to declare its demise.
The abolition of imputed intent clears the way to proper consideration of two important questions about the mental element of this particular tort.
First, where a recognised psychiatric illness is the product of severe mental or emotional distress, a) is it necessary that the defendant should have intended to cause illness or b) is it sufficient that he intended to cause severe distress which in fact results in recognisable illness? Option b) is close to the version stated by Salmond & Heuston which attracted Lord Woolf in Wainwright v Home Office.
Secondly, is recklessness sufficient and, if so, how is recklessness to be defined for this purpose? Recklessness is a word capable of different shades of meaning.
In everyday usage it may include thoughtlessness about the likely consequences in circumstances where there is an obvious high risk, or in other words gross negligence.
In R v G [2003] UKHL 50, [2004] 1 AC 1034, the House of Lords construed recklessly in the Criminal Damage Act 1971 as meaning that A person acts recklessly with respect to a result when he is aware of a risk that it will occur; and it is, in the circumstances known to him, unreasonable to take the risk.
The House of Lords based its interpretation on the definition proposed by the Law Commission in clause 18(c) of the Criminal Code Bill annexed to its Report on Criminal Law: A Criminal Code for England and Wales and Draft Criminal Code Bill, Vol 1 (Law Com No 177, 1989).
A similar definition of recklessness was included in a draft Bill for reforming the law of offences against the person, which the Government published in 1998 but did not take forward.
The Law Commission has repeated its proposal in a scoping consultation paper on Reform of Offences against the Person (LCCP 217, 2015).
The exact wording of its proposed definition is: A person acts recklessly with respect to a result if he is aware of a risk that it will occur and it is unreasonable to take that risk having regard to the circumstances as he knows or believes them to be.
In thinking about these questions it is pertinent to consider the practical implications.
Suppose that a hostage taker demands money from the family of the hostage (H) for his safe release, or that a blackmailer threatens harm to a person unless the family of the victim (V) meets his demands.
The wife or parent of H or V suffers severe distress causing them to develop a recognised psychiatric illness.
We doubt that anyone would dispute that in those circumstances the hostage taker or blackmailer ought to be held liable for the consequences of his evil conduct.
There would be no difficulty in inferring as a matter of fact that he intended to cause severe distress to the claimant; it was the means of trying to achieve his demand.
But the wrongdoer may not have had the intention to cause psychiatric illness, and he may well have given no thought to its likelihood.
Compare that scenario with an example at the other end of the spectrum.
The defendant has a dispute with his neighbour.
Tempers become flared and he makes a deliberately insulting remark.
He intends it to be upsetting, but he does not anticipate or intend that the neighbour will suffer severe emotional distress.
Unfortunately the episode and in particular the insult have that effect, and the distress leads to a recognised form of psychiatric illness.
It would be disproportionate to hold the defendant liable when he never intended to cause the neighbour to be seriously upset.
Our answer to the first question is that of option (b) (para 83 above).
Our answer to the second question is not to include recklessness in the definition of the mental element.
To hold that the necessary mental element is intention to cause physical harm or severe mental or emotional distress strikes a just balance.
It would lead to liability in the examples in para 85 but not in the example in para 86.
It means that a person who actually intends to cause another to suffer severe mental or emotional distress (which should not be understated) bears the risk of legal liability if the deliberately inflicted severe distress causes the other to suffer a recognised psychiatric illness.
A loose analogy may be drawn with the egg shell skull doctrine, which has an established place in the law of tort.
This formulation of the mental element is preferable to including recklessness as an alternative to intention.
Recklessness was not a term used in Wilkinson v Downton or Janvier v Sweeney and it presents problems of definition.
The Law Commissions definition would be clear, but it would not cover the example of the hostage taker or the blackmailer, because it would require proof of actual foresight of the risk of the claimant suffering psychiatric illness.
It would be possible to limit liability for the tort to cases in which the defendants conduct was extreme, flagrant or outrageous, as in Canada.
But this argument has not so far been advanced in this country, and, although Arden LJ adverted to it as a possibility, the appellant has not sought to pursue it.
We are inclined to the view, which is necessarily obiter, that the tort is sufficiently contained by the combination of a) the conduct element requiring words or conduct directed at the claimant for which there is no justification or excuse, b) the mental element requiring an intention to cause at least severe mental or emotional distress, and c) the consequence element requiring physical harm or recognised psychiatric illness.
In the present case there is no basis for supposing that the appellant has an actual intention to cause psychiatric harm or severe mental or emotional distress to the claimant.
We conclude that there is no arguable case that the publication of the book would constitute the requisite conduct element of the tort or that the appellant has the requisite mental element.
On both grounds the appeal must be allowed and the order of Bean J restored.
LORD NEUBERGER: (with whom Lord Wilson agrees)
I agree that this appeal should be allowed for the reasons given by Lady Hale and Lord Toulson.
Because the issue involved is of importance and could raise some points of difficulty in other cases, I add some remarks of my own.
There are various familiar circumstances in which a defendant can be liable to a claimant as a result of a statement made by the defendant.
Examples include a statement which is unlawful statutorily, a breach of contract, defamatory, a breach of duty because of a pre existing relationship, and a statement which amounts to misuse of information or a breach of the claimants confidence, copyright, or right to privacy.
This appeal concerns the circumstances in which a claimant has a cause of action for distress or psychiatric illness which he suffers as a result of a statement made by the defendant, where the statement would not otherwise give rise to a claim.
It is a fundamental issue, and, particularly given the importance attached to both freedom of expression and human dignity, it can raise questions which are difficult to resolve.
Having said that, the answer to the question whether there is a valid claim in the present case appears to me to be quite plain.
The facts of this case are fully set out by Lady Hale and Lord Toulson in paras 1 30 above.
I agree that the interlocutory injunction granted by the Court of Appeal was flawed for two reasons.
First, there should have been no injunction at all, because the claimants claim to restrain publication of the defendants book had no prospects of success.
Secondly, the terms of the injunction were flawed both conceptually and procedurally.
The claimants claim had no prospects of success because publication of the defendants book would plainly not have given rise to a cause of action in his favour.
It is true that the claimant is the defendants son and is psychologically vulnerable, and it was argued in the Court of Appeal that this relationship gave rise to a duty of care on the part of the defendant which publication of the book would breach.
However, as the Court of Appeal rightly held, that argument cannot assist the claimant in this case see the reasoning of Arden LJ at [2014] EWCA Civ 1277, paras 48 57, upholding the conclusion of Bean J at first instance on this aspect.
There is, rightly, no appeal on that ground.
Once that ground is disposed of, it appears to me that the books contents simply have nothing to do with the claimant, at least from a legal perspective.
The book describes the defendants searing experiences of sexual abuse as a boy and its consequential effects.
It is true, that the book is dedicated to the claimant and it expresses fears about the claimant being at risk of abuse as a child, but the furthest that that point could go would be to negative the idea that the defendant could have been unaware of the fact that the contents of the book would come to the claimants attention at some point (which was unsurprisingly not in issue anyway).
While I agree that many people would regard the book as being in some respects in the public interest, it is not necessary to decide this appeal on that ground.
Unless it is necessary to do so, I am unenthusiastic about deciding whether a book, or any other work, should be published by reference to a judges assessment of the importance of the publication to the public or even to the writer.
In the present case, I do not consider that it would make any difference if the experiences which the defendant describes could be shown to have been invented, or if the book had been written as a novel by someone who had not been sexually abused.
It is true that the book contained material which some people might find offensive, in terms of what was described and how it was expressed, but free speech includes not only the inoffensive but the irritating, the contentious, the eccentric, the heretical, the unwelcome and the provocative provided it does not tend to provoke violence see Redmond Bate v Director of Public Prosecutions (1999) 7 BHRC 375, para 20, per Sedley LJ.
As he memorably added, [f]reedom only to speak inoffensively is not worth having.
Quite apart from this, it would, I think, be an inappropriate restriction on freedom of expression, an unacceptable form of judicial censorship, if a court could restrain publication of a book written by a defendant, whose contents could otherwise be freely promulgated, only refer in general and unobjectionable terms to the claimant, and are neither intended nor expected by the defendant to harm the claimant, simply because the claimant might suffer psychological harm if he got to read it (or extracts from it).
Whatever the nature and ingredients of the tort whose origin can be traced to Wilkinson v Downton [1897] 2 QB 57, it therefore cannot possibly apply in this case.
And that, at least in a narrow sense, is in my view the beginning and the end of this case.
As to the terms of the injunction, the Court of Appeal accepted that the defendant should be entitled to describe the ordeals which he had undergone.
However, they decided that he could not publish certain specified passages in his book or any other accounts of his ordeals in so far as those accounts were graphic, a description which was explained by Arden LJ as meaning seriously liable to being understood by a child as vividly descriptive so as to be disturbing.
There are two problems with such a form of injunction.
First, it treats the terms in which events are described in the book as detachable from the inclusion of the events themselves.
Freedom of expression extends not merely to what is said but also to how it is said.
Whether a communication is made orally or in writing, the manner or style in which it is expressed can have a very substantial effect on what is actually conveyed to the listener or reader.
One cannot realistically detach style from content in law any more than one can do so in literature or linguistic philosophy.
I agree with what is said in para 78 above in this connection.
The second problem with the form of injunction granted by the Court of Appeal is that it is insufficiently specific, and in that connection there is nothing which I wish to add to what is said in para 79 above.
It would not, however, be right to leave matters there, in the light of the decision in Wilkinson (on which the Court of Appeal relied) and the subsequent cases in this and other common law jurisdictions, discussed by Lady Hale and Lord Toulson in paras 51 71 above.
In Wilkinson, the defendant was held liable to a plaintiff for severe mental distress caused to her by an untrue statement, which was misconceivedly intended as a cruel joke, namely that her husband had suffered serious injuries in an accident.
The way in which the trial judge, Wright J, expressed himself in his judgment must, like all statements, be seen in its context, and that context is illuminatingly explained in paras 34 50 above.
Given that there was a valid claim in that case and there is none in this case, it raises the question as to the characterisation of the tort in question, which could perhaps be characterised as the tort of making distressing statements.
The tort has been identified as terror wrongfully induced and inducing physical mischief (see Dulieu v White & Sons [1901] 2 KB 669, 683 and Janvier v Sweeney [1919] 2 KB 316, 322).
However, I am not happy with that characterisation, as it lumps together physical actions and statements, it begs the question by the use of the word wrongful, and it is limited to terror, and, as explained below, I would leave open whether physical mischief is a necessary ingredient.
While I would certainly accept that an action not otherwise tortious which causes a claimant distress could give rise to a cause of action, I would be reluctant to decide definitively that liability for distressing actions and distressing words should be subject to the same rules, at this stage at any rate.
There is of course a substantial overlap between words and actions: after all, words can threaten or promise actions, and freedom of expression can in some respects extend to actions as well as words.
And, in the light of what I say below, it might be the case that the tort of making distressing statements is to be limited to statements which are the verbal equivalent of physical assaults.
However, there are relevant differences between words and actions.
The reasons for a difference in legal treatment between liability for actions and liability for words were identified by Lord Reid, Lord Devlin and Lord Pearce in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, 482 483, 516 519 and 534 respectively.
In order to decide when a statement, which is not otherwise tortious, and which causes a claimant distress, should be capable of founding a cause of action, it is necessary to bear in mind five points, some of which are in tension.
First, that there must be circumstances in which such a cause of action should exist: the facts of Wilkinson and Janvier make that point good.
Secondly, given the importance of freedom of expression, which includes the need to avoid constraining ordinary (even much offensive) discourse, it is vital that the boundaries of the cause of action are relatively narrow.
Thirdly, because of the importance of legal certainty, particularly in the area of what people can say, the tort should be defined as clearly as possible.
Fourthly, in the light of the almost literally infinite permutations of possible human interactions, it is realistic to proceed on the basis that it may well be that no set of parameters can be devised which would cater for absolutely every possibility.
Fifthly, given all these factors, there will almost inevitably be aspects of the parameters on which it would be wrong to express a concluded view, and to let the law develop in a characteristic common law way, namely on a case by case basis.
In other words, the tort exists, and should be defined narrowly and as clearly as possible, but it would be dangerous to say categorically that each ingredient of the tort must always be present.
Nonetheless, it seems to me that it is worth identifying what are, at least normally, and hopefully almost always, the essential ingredients of the tort.
Wilkinson and Janvier were cases where the statement made by the defendant was untrue, gratuitous, intended to distress the plaintiff, directed at the plaintiff, and caused the plaintiff serious distress amounting to psychiatric illness.
Clearly, where all these ingredients are present, the tort would be established, but the question is whether they are all strictly required.
First, if it is possible at all, it will be a very rare case where a statement which is not untrue could give rise to a claim, save, perhaps where the statement was a threat or (possibly) an insult.
Sometimes, a threat will be unlawful anyway: for instance a threat of immediate assault or a blackmail.
In some cases there is statutory liability for an offensive statement.
Thus, a statement may be covered by the Protection from Harassment Act 1997 (as amended) which provides for both civil remedies (section 3) and criminal liability (sections 2, 2A, 4, 4A).
Similarly Part IV of the Family Law Act 1996 (as amended) allows a court to make an order to protect an individual from molestation, and provides that the breach of such an order is a criminal offence.
Harassment requires a course of action, so I do not think that a one off statement could be caught by the 1997 Act.
Section 4A of the Public Order Act 1986 (added by the Public Order Act 1994) provides that it is an offence to use threatening, abusive or insulting words or behaviour which causes harassment, alarm or distress and which is intended to have that effect.
However, section 4A only creates a criminal offence, and it does not apply where the words are used by a person inside a dwelling and the person who is harassed, alarmed or distressed is also inside that or another dwelling.
Further, section 1 of the Malicious Communications Act 1988 criminalises communications which are grossly offensive, a threat or known to be false if at least one of the purposes is to cause distress or anxiety, unless the sender had reasonable grounds, but it does not appear to give rise to civil liability.
And section 127 of the Communications Act 2003 criminalises electronic sending of grossly offensive or menacing messages, or false messages for the purpose of causing annoyance, inconvenience or needless anxiety to another, but it is limited to electronic communications and appears to give rise to no civil liability.
I do not consider that this is a case where it can be said that Parliament has intervened in such terms that the common law should, as it were, keep out.
After all, Parliament has not legislated so as to cover, or to suggest disapproval of, claims in tort based on one off distressing statements as in Wilkinson and Janvier.
On the contrary, the last 20 years have seen legislation which actually suggests that the legislature considers it appropriate for the courts to be involved, albeit in relatively limited and extreme cases, where words are used offensively.
This does not, of course, mean that every untruthful statement, threat or insult could give rise to a claim.
Because of the importance of freedom of expression and of the law not impeding ordinary discourse, there must be a second and demanding requirement which has to be satisfied before liability can attach to an untruth, an insult or a threat which was intended to, and did, cause distress, but would not otherwise be civilly actionable.
Lady Hale and Lord Toulson have suggested a test of justification or reasonable excuse in paras 74 76 above, and I have used the adjective gratuitous in para 106 above.
Neither description is ideal as it can be said to be question begging (virtually every threat, untruth or insult can be said to be unjustified, inexcusable and gratuitous), and it involves a subjective assessment.
There may be something to be said for the adjectives outrageous, flagrant or extreme, which seem to have been applied by the US and Canadian courts (discussed in paras 69 71 above).
Of course, even with a test of outrageousness a subjective judgment will be involved to some extent, but that cannot be avoided.
As mentioned, it seems to me to be vital that the tort does not interfere with the give and take of ordinary human discourse (including unpleasant, heated arguments, whether in domestic, social, business or other contexts, sometimes involving the trading of insults or threats), or with normal, including trenchant, journalism and other writing.
Inevitably, whether a particular statement is gratuitous must depend on the context.
An unprompted statement made simply because the defendant wanted to say it or because he was inspired by malice, as in Janvier, or something very close to malice, as in Wilkinson, may be different from the same statement made in the course of a heated argument, especially if provoked by a series of wounding statements by the defendant.
Similarly, it would be wrong for this tort to be invoked to justify relief against a polemic op ed newspaper article or a strongly worded and antipathetic biography, save in the most unusual circumstances.
The tort should not somehow be used to extend or supplement the law of defamation.
Thirdly, I consider that there must be an intention on the part of the defendant to cause the claimant distress.
This requirement might seem at first sight to be too narrow, not least because it might appear that it would not have caught the defendant in Wilkinson: he merely intended his cruel statement as a joke.
However, the fact that a statement is intended to be a joke is not inconsistent with the notion that it was intended to upset.
How, it might be asked rhetorically, could Mr Downton not have intended to cause the apparently happily married Mrs Wilkinson significant distress by falsely telling her that her husband had been very seriously injured? That was the very purpose of the so called joke.
There are statements (and indeed actions) whose consequences or potential consequences are so obvious that the perpetrator cannot realistically say that those consequences were unintended.
Intentionality may seem to be a fairly strict requirement, as it excludes not merely negligently harmful statements, but also recklessly harmful statements.
However, in agreement with Lady Hale and Lord Toulson, I consider that recklessness is not enough.
In truth, I doubt it would add much.
Further, in practice, recklessness is a somewhat tricky concept.
Quite apart from this, bearing in mind the importance of freedom of expression and of the law not sticking its nose into human discourse except where necessary, it appears to me that the line should be drawn at intentionality.
I am inclined to think that distressing the claimant has to be the primary purpose, but I do not consider that it need be the sole purpose.
The degree of distress which is actually intended must be significant, and not trivial, and it can amount to feelings such as despair, misery, terror, fear or even serious worry.
But it plainly does not have to amount to a recognised psychiatric disease (even if such disease is an essential ingredient, as to which see below).
It is, I think, hard to be more specific than that.
Fourthly, the statement must, I think, be directed at the claimant in order to be tortious.
In most cases this will add nothing to the requirements already mentioned.
However, I would have thought that a statement which is aimed at upsetting a large group of addressees, without any particular individual (or relatively small group of individuals) in mind, should not be caught.
Then there is the question as to whether a claimant can only bring an action if he suffers distress to a sufficient degree to amount to a recognised illness or condition (whether psychological or physiological assuming that the distinction is a valid one).
Like Lord Hoffmann in Wainwright v Home Office [2003] UKHL 53, [2004] 2 AC 406, I consider that there is much to be said for the view that the class of potential claimants should not be limited to those who can establish that they suffered from a recognised psychiatric illness as a result of the actionable statement of the defendant.
Such a limitation seems to have been imposed by Kennedy J at pp 672 673 in Dulieu, when he referred to terror which operates through parts of the physical organism to produce bodily illness.
However, that was a case involving a negligent act, and, as already explained, I am unconvinced that it involved the same tort as Wilkinson, although it was relied on by Kennedy J.
It would seem that the reasoning in Dulieu was consistent with the principle that damages for distress in negligence are only recoverable for a recognisable psychiatric illness and not merely for grief and sorrow, as Lord Denning MR put it in Hinz v Berry [1970] 2 QB 40, 42 43, an approach which was followed by Lord Bridge of Harwich in McLoughlin v O'Brian [1983] 1 AC 410, 437.
This limitation appears to have been imposed in cases of negligence as a matter of policy, and it has been justified in a number of cases on the ground that grief and distress are part of normal life, whereas psychiatric illness is not see eg McLoughlin at p 431 per Lord Bridge and White v Chief Constable of South Yorkshire Police [1999] 2 AC 455, 465 per Lord Griffiths.
The Australian High Court has justified the rule by reference to the undesirability of encouraging litigation see Tame v New South Wales (2002) 211 CLR 317, para 194 per Gummow and Kirby JJ.
However, in some negligence cases, it appears that damages for distress falling short of psychiatric illness may be recoverable see the observations of Brooke LJ in Robinson v St Helens Metropolitan Borough Council [2002] EWCA Civ 1099, paras 36 37.
And, as is pointed out in McGregor on Damages (19th ed) (2014), paras 5 012 and 5 013, injury to feelings is taken into account when assessing general damages in claims, by way of example, for assault, invasion of privacy, malicious prosecution and defamation.
As I see it, therefore, there is plainly a powerful case for saying that, in relation to the instant tort, liability for distressing statements, where intent to cause distress is an essential ingredient, it should be enough for the claimant to establish that he suffered significant distress as a result of the defendants statement.
It is not entirely easy to see why, if an intention to cause the claimant significant distress is an ingredient of the tort and is enough to establish the tort in principle, the claimant should have to establish that he suffered something more serious than significant distress before he can recover any compensation.
Further, the narrow restrictions on the tort should ensure that it is rarely invoked anyway.
In the light of article 10 of the European Convention on Human Rights, it is appropriate to consider the jurisprudence of the Strasbourg court.
This is a case which involves a purely common law issue, but the common law should be generally consistent with the Convention and it would be arrogant to assume that there may be no assistance to be gained from the Strasbourg jurisprudence see Lord Reeds illuminating analysis in R (Osborn) v Parole Board [2013] UKSC 61, [2014] AC 1115, paras 56 63.
In that connection, there have been a number of cases where the Strasbourg court has been called on to rule on the compatibility of a ruling of a national court or tribunal that an offensive statement was unlawful.
A number of those decisions were summarised in R (Gaunt) v Office of Communications [2011] EWCA Civ 692, [2011] 1 WLR 2355, paras 25 30.
They all involved statements made in public, but some of them involved statements which had been held unlawful because they were personally insulting.
I do not think that these cases take matters much further for present purposes, other than to confirm the vital nature of freedom of expression, the consequent requirement to establish that there is a cause of action convincingly, the importance of taking into account the context, and the need for proportionality both in deciding whether there is a cause of action and in determining the sanction.
The final point I should make is that this case has been argued in this court on the basis that the issue between the parties has to be resolved according to English law, rather than the law of the US, where the claimant resides.
It may well be that that is right (as the Court of Appeal held), or that, even if United States law is in fact applicable, it is the same as our law.
In all these circumstances, it seems to me clear, even at this interlocutory stage, that the claimants case plainly fails all but one of the requirements of the tort on which it is said to be based.
While there is some (disputed) evidence that they could cause the claimant serious distress, the contents of the defendants book are not untrue, threatening or insulting, they are not gratuitous or unjustified, let alone outrageous, they are not directed at the claimant, and they are not intended to distress the claimant.
Accordingly, I have no hesitation in agreeing that the appeal should be allowed, and the order of Bean J striking out the claim restored.
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The Appellant (the Father), James Rhodes, is a concert pianist, author and television film maker.
He has written a book titled Instrumental, which he is hoping to publish, and it is aimed at providing a sound track to the story of his life.
It includes searing accounts of the physical and sexual abuse and rape inflicted on him from the age of six by the boxing coach at his school.
It goes on to chart his subsequent resorting to drink, drugs, self harm, attempts at suicide as well as his time in psychiatric hospital culminating in his redemption through learning, listening to and playing music.
The book also refers to his first marriage, to an American novelist then living in London (the Mother), and the child they had together (the Son) to whom the book is dedicated.
The Mother and Father divorced some years ago.
During the divorce, they made a residence and contact order in London on 15 June 2009.
This included a recital by which the Mother and Father agreed to use their best endeavours to protect the Son from any information concerning the past previous history of either parent which would have a detrimental effect upon the childs well being.
The Mother and Son now live overseas.
The Son has been diagnosed with Aspergers syndrome, attention deficit hyperactivity order, dyspraxia and dysgraphia.
A first draft of the book, sent to the publishers in December 2013, was leaked to the Mother in February 2014.
Some changes were made, such as the use of pseudonyms.
However, the Mother wanted more significant changes as she was concerned that the book would cause psychological harm to the Son, now aged 11, if he came to read it.
In June 2014, she brought proceedings (later taken over by the Sons godfather), on behalf of the Son, on various grounds seeking an injunction prohibiting publication or the deletion of a large number of passages.
She adduced evidence from a consultant child psychologist whose opinion was that the Son was likely to suffer severe emotional distress and psychological harm if exposed to the material in the book because of his difficulties in processing information.
In July 2014, Bean J in the High Court dismissed the application for an interim injunction.
In October 2014, the Court of Appeal reversed the High Court, finding that only the claim for intentionally causing harm under the tort in Wilkinson v Downton should go to trial.
It also granted an interim injunction restraining the Father from publishing certain information such as, for example, graphic accounts ofsexual abuse he suffered as a child.
The Father appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
Lady Hale and Lord Toulson (with whom Lord Clarke and Lord Wilson agree) deliver the judgment of the Court.
Lord Neuberger (with whom Lord Wilson agrees) gives a concurring judgment.
Lady Hale and Lord Toulson consider the domestic case law [31 67] and other common law authorities [68 71] in relation to the tort in Wilkinson v Downton.
It consists of three elements: (1) a conduct element; (2) a mental element; and, (3) a consequence element.
Only (1) and (2) are issues in this case [73].
The conduct element requires words or conduct directed towards the claimant for which there was no justification or reasonable excuse, and the burden of proof is on the claimant [74].
In this case, there is every justification for the publication.
The Father has the right to tell the world about his story.
The law places a very high value on freedom of speech.
The right to disclosure is not absolute because a person may, for example, owe a duty to treat information as confidential, but there is no general law prohibiting the publication of facts which will distress another person.
It is hard to envisage any case where words which are not deceptive, threatening or (possibly) abusive could be actionable under the tort recognised in Wilkinson v Downton [75 77].
In addition, the injunction prohibiting graphic language was wrong in principle and in form; it is insufficiently clear what graphic means and, in any event, a right to convey information to the public includes a right to choose the language in which it is expressed in order to convey the information most effectively [78 79].
The required mental element is an intention to cause physical harm or severe mental or emotional distress.
Recklessness is not enough [87].
In this case, there is no evidence that the Father intends to cause psychiatric harm or severe mental or emotional distress to his Son [89], and there is no justification for imputing an intention to cause harm on the basis of harm being foreseeable.
Intention is a matter of fact.
It may be inferred in an appropriate case from the evidence, but is not to be imputed as a matter of law [81 82].
There is no real prospect of establishing either the conduct element or the mental element of the tort [90].
Lord Neuberger allows the appeal for the same reasons.
It would be an inappropriate restriction on freedom of expression to restrain publication of a book simply because another, to whom the book is not directed, might suffer psychological harm from reading it [97].
He adds some further remarks as to the scope of the tort in Wilkinson v Downton [101 121].
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In November 1999 Mr Alexander Gibson was appointed as managing director of Grays Timber Products Ltd (Timber Products), a wholly owned subsidiary of Grays Group Ltd (Group).
He also became a director of Group.
He entered into a written service agreement with Timber Products and was also party to a subscription and shareholders agreement (the subscription agreement) under which he paid 50,000 to take up ordinary shares (amounting to about 6% of the issued ordinary capital) in Group.
In November 2003 all the issued ordinary shares in Group were acquired by an outside purchaser, Jewson Ltd (Jewson) for 6m, about 5.4m of which was paid in cash.
Under the terms of the subscription agreement (to which Group and shareholders owning over four fifths of its ordinary shares were parties) Mr Gibson became entitled to a disproportionately large part of the consideration paid by Jewson just over 1.4m, whereas a rateable part would have been just under 0.4m.
The issue for the Court is whether the difference between these two sums is (as HM Revenue & Customs HMRC contend) taxable as employment income of Mr Gibson, subject to income tax and national insurance contribution (NIC), or is (as Mr Gibson contends) taxable as a chargeable gain subject to capital gains tax.
The claim for income tax and NIC is primarily against Timber Products as Mr Gibsons employer at the time, but if it succeeds the burden will fall on Mr Gibson and others who have covenanted with Jewson to bear those liabilities.
That issue depends primarily on the correct construction and application of Chapter 3D of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) as inserted by the Finance Act 2003, Schedule 22.
Chapter 3D consists of only three sections which are, by comparison with other chapters in Part 7 of ITEPA 2003 (as amended), relatively simple and straightforward.
They are as follows: CHAPTER 3D Securities Disposed of for More Than Market Value 446X Application of this Chapter This Chapter applies if (a) (b) employment related securities are disposed of by an associated person so that no associated person is any longer beneficially entitled to them, and the disposal is for a consideration which exceeds the market value of the employment related securities at the time of the disposal. 446Y Amount treated as income (1) Where this Chapter applies the amount determined under subsection (3) counts as employment income of the employee for the relevant tax year. (2) The relevant tax year is the tax year in which the disposal occurs. (3) The amount is CD MV DA. where CD is the amount of the consideration given on the disposal, MV is the market value of the employment related securities at the time of the disposal, and DA is the amount of any expenses incurred in connection with the disposal. 446Z Definitions (1) In this Chapter market value has the meaning indicated in section 421(1). (2) For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of the consideration given for anything.
In this Chapter the employee, and employment related securities, have the meaning indicated in section 421B(8).
In this Chapter associated person has the meaning indicated in section 421C. (3) (4) It is common ground that Mr Gibsons shares were employment related securities.
He was an associated person and no issue arises as to any other associated person.
The main area of controversy is market value, which is defined by reference to the Taxation of Chargeable Gains Act 1992.
However Chapter 3D forms part of a complex code with fairly deep and tangled legislative roots.
Many of the submissions made on behalf of Timber Products (which has been the appellant at every stage in these proceedings) relied on the need for the expression market value to be given a uniform meaning throughout the different chapters comprised in Part 7 of ITEPA 2003.
It is therefore appropriate to attempt at least an outline sketch of Chapter 3Ds larger context, without going far into complexities which are not directly relevant.
Part 7 of ITEPA 2003 is headed Employment income: income and exemptions relating to securities.
Its provisions reflect three different, and to some extent conflicting, legislative purposes.
First there is Parliaments recognition that it is good for the economy, and for social cohesion, for employees to own shares in the company for which they work.
Various forms of incentive schemes are therefore encouraged by favourable tax treatment (those in force in 2003 are covered in Chapters 6 to 9 inclusive of Part 7).
Second, if arrangements of this sort are to act as effective long term incentives, the benefits which they confer have to be made contingent, in one way or another, on satisfactory performance.
This creates a problem because it runs counter to the general principle that employee benefits are taxable as emoluments only if they can be converted into money, but that if convertible they should be taxed when first acquired.
That principle was stated by Lord Radcliffe in Abbott v Philbin [1961] AC 352, 379: I think that the conferring of a right of this kind as an incident of service is a profit or perquisite which is taxable as such in the year of receipt, so long as the right itself can fairly be given a monetary value, and it is no more relevant for this purpose whether the option is exercised or not in that year, than it would be if the advantage received were in the form of some tangible form of commercial property.
That was a case about share options, which are now dealt with separately in Chapter 5, but it illustrates the general approach that applied in the days when the taxation of employee benefits was very much simpler than it is now.
The principle of taxing an employee as soon as he received a right or opportunity which might or might not prove valuable to him, depending on future events, was an uncertain exercise which might turn out to be unfair either to the individual employee or to the public purse.
At first the uncertainty was eased by extra statutory concessions.
But Parliament soon recognised that in many cases the only satisfactory solution was to wait and see, and to charge tax on some chargeable event (an expression which recurs throughout Part 7) either instead of, or in addition to, a charge on the employees original acquisition of rights.
That inevitably led to opportunities for tax avoidance.
The ingenuity of lawyers and accountants made full use of the wait and see principle embodied in these changes in order to find ways of avoiding or reducing the tax charge on a chargeable event, which might be the occasion on which an employees shares became freely disposable (Chapter 2) or the occasion of the exercise of conversion rights (Chapter 3).
The third legislative purpose is to eliminate opportunities for unacceptable tax avoidance.
Much of the complication of the provisions in Part 7 (and especially Chapters 3A, 3B, 3C and 3D) is directed to counteracting artificial tax avoidance.
There is a further layer of complication in provisions which regulate the inevitable overlaps between different chapters.
It is regrettable that ITEPA 2003, which came into force on 6 April 2003 and was intended to rewrite income tax law (as affecting employment and pensions) in plain English, was almost at once overtaken by massive amendments which are in anything but plain English.
This case is, it seems, the first case concerned with any of the provisions of Part 7.
Timber Products appeal from a revised determination dated 3 November 2005 was dismissed by a single Special Commissioner (Mr Demack) by a written decision released on 21 March 2007.
Timber Products appeal to an Extra Division of the Inner House of the Court of Session (Lord Kingarth and Lord Mackay of Drumadoon, Lord Osborne dissenting) was dismissed on 13 February 2009.
The reasoning of the majority of the Inner House was rather different from that of the Special Commissioner, and counsel for Timber Products has sought to deploy further arguments in this Court.
The subscription agreement and the sale agreement
The facts relevant to this appeal are set out in some detail in the decisions of the Special Commissioner and the Inner House (especially the judgment of Lord Osborne).
Those decisions are readily accessible, being reported together at [2009] STC 889.
I need not therefore add a lot of detail to the brief summary at the beginning of this judgment.
But I must give a fuller account of the subscription agreement entered into in 1999 and the sale agreement dated 29 November 2003, especially as they affected Mr Gibsons shares in Group.
The subscription agreement was not dated but was signed at different dates between 2 December and 18 December 1999.
The parties to it were (1) Group (2) Mr Gibson and (3) Mr J R Nicholson (who owned about 60% of the ordinary shares) and other shareholders who (together with Mr Nicholson) owned about 84% of the ordinary shares.
Recital (B) provided: Mr Gibson wishes to subscribe up to 14,465 ordinary shares of 1 each in the share capital of [Group] and [Group] has agreed to issue such shares to him on the terms and conditions set out below.
Clause 3 provided for what was to happen to the shares if Mr Gibsons employment ended while he still owned them.
If he was dismissed for a serious breach of contract, he was to sell them back to Group for 50,000.
If he resigned voluntarily (with no element of constructive dismissal) he was to sell back to Group all his shares for a consideration representing 74% of their net asset value (the net asset value of the whole company being taken to be not less than 1.3m) together with 25% of the amount by which the net asset value (of the whole company) exceeded the target net asset value (defined as 1.3m with an indexed escalation of 0.08m for each complete year, but subject to a possible adjustment for newly paid up preference shares).
If Mr Gibsons service terminated in other circumstances (including death or incapacity) clause 3.2.3 provided for all but one of his shares to be sold back under a similar formula, but with Mr Gibson receiving 50% of the growth in net assets.
None of these provisions was put into effect, since Mr Gibson was still in service when Jewson took over Group.
But the evident intention that Mr Gibson should participate disproportionately in growth in net assets occurring during his period of service was also reflected in clause 4.2.1, which did take effect on Jewsons takeover of Group more than two years into Mr Gibsons service.
Clause 4.2.1 was as follows: In the event of a Shares Disposal taking place on or after the second anniversary of the Completion Date, Mr Gibson shall sell and the Shareholders shall procure that [Group] or that the purchaser in terms of the Shares Disposal shall purchase Mr Gibsons Shares at a price equal to the aggregate of the sums calculated in accordance with (i) and (ii) below.
Item (i) was, in the event, 50,000.
Item (ii) was one third of D (E+F), that is (D) the consideration (6m) less the total of (E) the target net asset value of the company at the date of the disposal (approximately 1.46m) and (F) item (i) (0.05m).
The total consideration was therefore about 1.5m.
HMRCs revised notice of determination proceeded on the basis that this sum exceeded the statutory market value of the shares by 1,059,737, and that the latter sum attracted income tax and NIC.
Initially HMRC relied on Chapter 4 of Part 7 of ITEPA 2003, and only later on Chapter 3D, which led to an adjustment as mentioned in paras 1 and 50 of the Special Commissioners decision.
Clause 4.2.2 contained similar provisions applying on a sale of Groups business.
Clause 5 provided for Mr Gibson to obtain an additional payment in consideration of his shares if a buy back took place under clause 3.2.3 and there was a takeover of Group or its business within eighteen months of the buy back.
These provisions were extremely complicated and did not take effect.
It is sufficient to say that they reflected the same approach as in clause 4.2.1 and 4.2.2.
The underlying purpose of clauses 3.2.2, 3.2.3, 4.2.1, 4.2.2 and 5.2 is set out in clause 6.1: The Shareholders acknowledge and accept that Mr Gibson is to become an executive director of [Timber Products] and shareholder of [Group] on the agreement that, if by reason of his efforts as such an executive director, Net Asset Value plus the Notional Goodwill exceeds the Target Net Asset Value on a return of his investment by share buy back or the Consideration exceeds the Target Net Asset Value on a return of his investment on a sale, he will in certain circumstances and in accordance with clauses 3 and 4 be entitled to an agreed extra payment in addition to the return of his initial investment and, on such a sale, disproportionately greater than the amounts received by other shareholders or (sic) his percentage of the equity share capital of [Group].
Further provisions in clause 6 ensured that these rights were not to be prejudiced by any distribution or reduction of Groups assets.
By Clause 7.1 Mr Gibson warranted not to dispose of or encumber any of his shares otherwise than in accordance with the subscription agreement or the articles of Group.
Clause 7.3 provided that in the event of a breach of that warranty his service contract and directorships could be terminated.
It also provided that this should be the sole rights or remedies of the Shareholders and [Group] arising from such breach.
Clause 9 provided that the agreement, and rights and obligations under it, should not be assignable.
By clause 11.1 the agreement was to be governed by the law of Scotland.
Clause 11.2 provided: The provisions of this Agreement shall prevail over the Articles (and any other Articles of Association of [Group] subsequently amending or replacing the same) such that if there is any conflict between the two the provisions of this Agreement shall prevail and rule to the exclusion of any such conflicting provisions of the Articles or such other Articles of Association.
The subscription agreement provided for Group to adopt new articles of association in a form scheduled to the agreement, and they were duly adopted on 9 December 1999.
These provided for the redemption of all the companys A preference shares not later than 31 March 2000.
They also referred expressly to the 14,465 ordinary shares to be issued to Mr Gibson (freeing them from pre emption rights on their issue).
They did not however confer any other special rights on these shares.
Under para 5(a) and (b) of the articles ordinary shares participated pari passu in income and return of capital.
During 2000 Mr Gibson acquired a further 258 ordinary shares under the pre emption provisions in the articles.
These seem to have been accepted as constituting part of Mr Gibsons shares for the purposes of the subscription agreement, despite their apparent exclusion under the definition in clause 1.
The sale agreement was made on 29 November 2003 between (1) Mr Nicholson, Mr Gibson and five other holders of Group ordinary shares and (2) Jewson.
Clause 3.2.1 provided for the cash consideration of 5,403,219 to be paid to the vendors solicitors as their agents who are hereby authorised to receive the same whose receipt shall be a complete discharge to the Purchaser who shall not be obliged to enquire as to the distribution thereof.
By clause 3.2.2 Elbora Ltd, one of the holders of ordinary shares, was to receive 500,000 loan notes issued by Jewson.
Clause 3.2.3 provided for a retention of 96,781.
The agreement contained numerous warranties, covenants and indemnities.
In particular clause 4A provided for the retention in respect of potential NIC liability, and clause 9 and schedule 9 made further provision for potential PAYE income tax and NIC in respect of Mr Gibson.
By clause 3.4 and schedule 1 Mr Gibson was to receive 1,451,172 for his shares.
The other shareholders received sums proportionate (as between themselves) to their respective holdings (except that Elbora Ltd received less because of the loan notes).
In a disclosure letter dated 29 November 2003 the vendors gave information about the subscription agreement (among other matters).
The letter stated, However, this agreement is to be terminated at completion.
Market Value
As already noted, Part 7 of ITEPA 2003 incorporates the statutory definition of market value for capital gains tax purposes.
That definition is in sections 272 and 273 of the Taxation of Chargeable Gains Act 1992 which are (so far as relevant) as follows: 272 Valuation: general (1) In this Act market value in relation to any assets means the price which those assets might reasonably be expected to fetch on a sale in the open market. (2) In estimating the market value of any assets no reduction shall be made in the estimate on account of the estimate being made on the assumption that the whole of the assets is to be placed on the market at one and the same time. 273 Unquoted shares and securities (1) The provisions of subsection (3) below shall have effect in any case where, in relation to an asset to which this section applies, there falls to be determined by virtue of section 272(1) the price which the asset might reasonably be expected to fetch on a sale in the open market. (2) The assets to which this section applies are shares and securities which are not quoted on a recognised stock exchange at the time as at which their market value for the purposes of tax on chargeable gains falls to be determined. (3) For the purposes of a determination falling within subsection (1) above, it shall be assumed that, in the open market which is postulated for the purposes of that determination, there is available to any prospective purchaser of the asset in question all the information which a prudent prospective purchaser of the asset might reasonably require if he were proposing to purchase it from a willing vendor by private treaty and at arms length.
The definition in section 272 can be traced back to section 44 of the Finance Act 1965 and from there to the estate duty valuation provisions in section 7(5) of the Finance Act 1894.
Both sides referred to many of the leading cases on the estate duty definition, including Attorney General v Jameson [1905] 2 IR 218, Salvesens Trustees v Inland Revenue Comrs 1930 SLT 387, Inland Revenue Comrs v Crossman [1937] AC 26 (in which the House of Lords was divided by three to two) and Lynall v Inland Revenue Comrs [1972] AC 680 (in which Crossman was challenged but unanimously upheld on the wider issue, but the taxpayer succeeded on the narrower issue as to access to information, so leading to the rule now embodied in section 273 of the 1992 Act).
Reference was also made to Inland Revenue Comrs v Gray [1994] STC 360, which was concerned with the same definition as used for the purposes of capital transfer tax (now inheritance tax).
All these cases, apart from Gray, were concerned with the valuation of shares in private companies where the articles contained restrictions on transfer and rights of pre emption.
There is not, as it seems to me, much difference in the general conclusions which the parties seek to draw from these authorities.
It is not therefore necessary to multiply citations.
It is sufficient to repeat two passages which were quoted with approval in Lynall (by Lord Reid at p 693 and Lord Pearson at p 704 respectively).
The first is from the judgment of Holmes LJ in Jameson at p 239: The Attorney General and the defendants agree in saying that in this case there cannot be an actual sale in open market.
Therefore, argues the former, we must assume that there is no restriction of any kind on the disposition of the shares and estimate that [sic] would be given therefor by a purchaser, who upon registration would have complete control over them.
My objection to this mode of ascertaining the value is that the property bought in the imaginary sale would be a different property from that which Henry Jameson held at the time of his death.
The defendants, on the other hand, contend that the only sale possible is a sale at which the highest price would be 100 per share, and that this ought to be the estimated value.
My objection is that this estimate is not based on a sale in open market as required by the Act.
Being unable to accept either solution, I go back to my own, which is in strict accordance with the language of the section.
I assume that there is such a sale of the shares as is contemplated by article 11, the effect of which would be to place the purchaser in the same position as that occupied by Henry Jameson.
An expert would have no difficulty in estimating their value on this basis.
It would be less than the Crown claims, and more than the defendants offer; but I believe that it would be arrived at in accordance not only with the language of the Act, but with the methods usually employed in valuing property.
The second is from the judgment of Lord Fleming in Salvesen at p 391: The Act of Parliament requires, however, that the assumed sale, which is to guide the Commissioners in estimating the value, is to take place in the open market.
Under these circumstances I think that there is no escape from the conclusion that any restrictions which prevent the shares being sold in an open market must be disregarded so far as the assumed sale under section 7(5) of the Act of 1894 is concerned.
But, on the other hand, the terms of that subsection do not require or authorise the Commissioners to disregard such restrictions in considering the nature and value of the subject which the hypothetical buyer acquires at the assumed sale.
Though he is deemed to buy in an open and unrestricted market, he buys a share which, after it is transferred to him, is subject to all the conditions in the articles of association, including the restrictions on the right of transfer, and this circumstance may affect the price which he would be willing to offer.
The importance of identifying precisely the property to be valued was emphasised in Crossman (especially by Viscount Hailsham LC at pp 39 40 and Lord Blanesburgh at pp 49 50) and this emphasis is reflected in many of the later cases.
It is the first major point of controversy in this appeal: are Mr Gibsons ordinary shares to be valued simply as ordinary shares whose rights are set out in the articles, or are his special rights under clause 4 of the subscription agreement to be taken into account as if they were set out in the articles? (This difference has been described in argument as the difference between intrinsic and extrinsic rights, and that terminology will serve, at least as shorthand.) The second major point of controversy is: if Mr Gibsons special rights are treated as intrinsic in the shares to be valued, what effect (if any) do they have on the valuation exercise? Are they to be treated as enuring for the benefit of the hypothetical purchaser, or are they to be disregarded as being, even though intrinsic, exclusively personal to Mr Gibson, and worthless to anyone else?
Intrinsic and extrinsic rights
The first of these controversies has two strands.
One is concerned with shareholder rights as a matter of company law.
The other is concerned with the language used in different chapters of Part 7 which, it is argued (especially because of the statutes emphasis on market value having the same meaning throughout Part 7) demonstrates that Parliament must have intended to extend the field of relevant material beyond what would conventionally be regarded as intrinsic shareholder rights.
This is a difficult and intricate argument and it is probably best to start off with company law (though even that area is not, in this case, without its difficulties)
In Crossman (at pp 40, 51 and 66) the Lord Chancellor and Lord Blanesburgh (in the majority) and Lord Russell of Killowen (dissenting) all referred to Farwell Js classic definition (in Borlands Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279, 288) of a share as consisting partly of mutual obligations entered into by all the shareholders (at the same time Lord Blanesburgh emphasised at p 51 that it is still one indivisible piece of property).
The shareholders mutual obligations are normally set out transparently in the articles of association, and Groups new articles (even though adopted in accordance with the subscription agreement) said nothing about special rights attaching to Mr Gibsons shares on their disposal.
Mr Sherry (for Timber Products) argued that the rights attaching to shares might be found in arrangements made outside a companys articles.
They could be found, he submitted, in a shareholders agreement or in the terms on which shares were issued.
He relied on the observations of Lord Hoffmann in ONeill v Phillips [1999] 1 WLR 1092, 1098: First, a company is an association of persons for an economic purpose, usually entered into with legal advice and some degree of formality.
The terms of the association are contained in the articles of association and sometimes in collateral agreements between the shareholders.
Lord Hoffmann also stated at p 1101: But there may be later promises, by words or conduct, which it would be unfair to allow a member to ignore.
Nor is it necessary that such promises should be independently enforceable as a matter of contract.
A promise may be binding as a matter of justice and equity although for one reason or another (for example, because in favour of a third party) it would not be enforceable in law.
Mr Sherry also relied on the decision of the Court of Appeal in Harman v BML Group Ltd [1994] 2 BCLC 674.
In that case Dillon LJ, in a single extempore judgment with which Leggatt and Henry LJJ agreed, made the general observation (at p 678) that a shareholders agreement signed by all the shareholders attaching rights to shares must have the same effect as if the rights had been set out as class rights in the articles.
But it seems reasonably clear from the report (at p 675) that in that case the division of the share capital into A and B shares, and some of the rights attached to those respective shares, were set out in the articles.
In my opinion these passages give Mr Sherry only limited assistance.
In ONeill v Phillips Lord Hoffmann was addressing the equitable nature of the courts jurisdiction under section 459 of the Companies Act 1985 to counteract unfair treatment of minority shareholders.
He was not addressing the subject of contractual share rights capable of enuring for the benefit of third parties.
The context of Harman v BML Group Ltd was the courts discretionary jurisdiction under section 371 of the Companies Act 1985 to order the holding of a general meeting.
Moreover in the present case not all the shareholders were parties to the subscription agreement.
Mr Sherry also placed reliance on clause 11.2 of the subscription agreement, which states that its provisions shall prevail over the articles (and any further articles amending or replacing the current articles).
However there is House of Lords authority that a provision in a shareholders agreement excluding or restricting the companys statutory power to amend its articles is a nullity: Russell v Northern Bank Development Corpn Ltd [1992] 1 WLR 588, mentioned by Nigel Doran in (2007) 888 Tax Journal 10.
That case concerned an agreement to which the company in question had also been made a party.
The House of Lords held that it could take effect only as a personal contract.
Lord Jauncey of Tullichettle (with whom the rest of the Appellate Committee agreed), at p 593, quoted Lord Davey in Welton v Saffery [1897] AC 299, 331: Of course, individual shareholders may deal with their own interests by contract in such way as they may think fit.
But such contracts, whether made by all or some only of the shareholders, would create personal obligations, or an exceptio personalis against themselves only, and would not become a regulation of the company, or be binding on the transferees of the parties to it, or upon new or non assenting shareholders.
Unfortunately Russell v Northern Bank Development Corpn Ltd was not cited or referred to in the course of argument.
It is a decision which has attracted a good deal of discussion as to its extent: see for instance [1992] CLJ 437 (Sealey), [1994] CLJ 343 (Ferran), (1993) 109 LQR 210 (Shapira), 553 (Davenport).
If it were likely to be decisive of this appeal, it would not be satisfactory for the Court to decide the case without inviting further written submissions as to its significance.
Leaving that strand of Mr Sherrys argument on one side for the present, I come to the other strand, which relies on the use of the expression market value in chapters of Part 7 other than Chapter 3D, that is Chapter 2 (restricted securities), Chapter 3 (convertible securities), Chapter 3A (securities with artificially depressed market value) and Chapter 3B (securities with artificially enhanced market value).
All these chapters describe the relevant restriction, conversion right or value shifting mechanism in the most general terms, which would include extrinsic arrangements: see sections 423(1)(a), 436, 446A(2) and 446K(2).
But they also proceed on the footing that that restriction, conversion right or value shifting mechanism affects the market value of the securities in question: see sections 428(2), 431(1), 441(6) and (7), 442(5), 446C(2), 446D(1), 446E(3) 446F(4), 446G(1) and (2), 446H(3), 446I(3) and 446L(6).
In all these contexts the restriction, conversion right or value shifting mechanism cannot, it seems to me, be dismissed as something collateral or personal to the particular employee and irrelevant to the valuation.
This point was not referred to in the judgments in the Court of Session.
Mr Sherry told the Court that it was raised below but as he did not appear in the Court of Session he could not give a detailed account of what happened.
Nevertheless it is a point of law which needs to be considered.
It is a very puzzling feature of the legislation, and the confusion is increased by the official answers to frequently asked questions published by HMRCs predecessor in 2003 (and made available to taxpayers and their advisers until 2005).
Question 1(k) and its answer were: Q: Market value is now based on the CGT definition.
Does this mean that personal restrictions on the share no longer have to be taken into account in arriving at its value? A: no. Even where there is, for example, a restriction on sale the shares must be valued as if that restriction would still apply to their hypothetical purchaser.
It is the asset (as it is) that is being valued, not some other unrestricted asset.
Question 1(m) and its answer were: Q: The Inland Revenue has confirmed that market value will take into account personal rights and restrictions and not just those rights and restrictions attaching to the shares.
Can you confirm that this interpretation of market value will be applied consistently throughout Schedule 22 [to the Finance Act 2003] and that you will not adopt a different interpretation for each Chapter of Part 7? A: Market value will be determined on a consistent basis throughout Chapters 1 to 5 of Part 7.
Mr Johnston QC (appearing for HMRC in this Court, as he did in the Court of Session) was unable to explain or defend these answers.
He said that they were not clear, but to my mind they are perfectly clear and, on HMRCs case, clearly wrong.
In the respondents printed case Mr Johnston sought to meet the difficulty by submitting that throughout Part 7 market value has the same meaning, but that the particular asset being valued is not the same under each chapter.
He did not accept that there is any inconsistency in treating extrinsic rights as relevant to valuation under Chapters 2, 3, 3A and 3B but as irrelevant to valuation under Chapter 3D. (Chapter 3C is an exceptional case because the fact that shares are not fully paid up must be an intrinsic matter: see sections 446Q(3), 446R(2) and 446T(2).)
One possible reason for the difficulties in applying Part 7 consistently is the very wide definition of securities in section 420(1).
It includes not only shares and debentures but also (in paras (c), (d), (f) and (g)) a wide variety of contractual choses in action under financial instruments.
Some chapters of Part 7 also refer to interests in securities (defined in section 420(8)).
The distinction between intrinsic and extrinsic rights is much less obvious when some of these extended meanings of securities are in play.
That may help to explain why Part 7 is so difficult, but it does not solve the difficulties.
The principle that tax is to be charged only by clear words may be less potent than it was, but it is still relevant to the construction of taxing statutes.
I am left in real doubt as to whether Parliament has, in Part 7 of ITEPA 2003, enacted a scheme which draws a coherent and consistent distinction between intrinsic and extrinsic rights attaching to shares and other financial instruments.
For that reason I think it unnecessary to invite further submissions on Russell v Northern Bank Development Corpn Ltd. But that is not the end of the matter, since some rights, even if properly described as intrinsic to the property to be valued, are nevertheless worthless to the hypothetical purchaser posited by the statutory definition of market value.
So I go on to the second point of controversy, that is whether Mr Gibsons rights under the subscription agreement, even if assumed to be, or treated as, intrinsic, produce the result that Timber Products contends for.
It is implicit in that contention that on their acquisition by Jewson each of Mr Gibsons shares had a market value about three times greater than each of the shares owned by the other shareholders.
Standing in the shareholders shoes
That would be a very surprising result.
Jewson agreed to buy Group for 6m less a retention, and all the ordinary shares which it acquired were of equal value to it.
It was not concerned with the division of the sale price between the vendors (clause 3.2.1 of the sale agreement) except so far as it might involve adverse tax consequences to Groups subsidiary, Timber Products (clause 4A, clause 9 and schedule 9 of the sale agreement).
The same would have been true of any other open market purchaser.
Mr Gibsons special rights were peculiar to his position as a director of Group and managing director of Timber Products, as was clearly acknowledged in clause 6.1 of the subscription agreement.
His rights were not assignable (clause 9 of the subscription agreement).
These rights would have been personal to Mr Gibson even if they had been set out expressly in the new articles adopted by Group when the subscription agreement was entered into.
A right can be personal even though it is intrinsic in the sense previously discussed, since class rights can be enjoyed by a class with only one member.
Such rights were quite common in the articles of family estate companies formed during the 1930s with a view to saving estate duty.
There is an illustration in Dymonds Death Duties, 10th edition (1946) p.61 of a man who owned all the A shares of an estate company, the B shares being held by other members of his family.
The A shares were entitled, during his lifetime, to dividends of up to 150% in priority to the B shares; on the deceaseds death they became 6% non participating preference shares.
This device was blocked by section 46 of the Finance Act 1940, but until then it avoided estate duty because the A shares had little value on the deceaseds death.
The Estate Duty Office accepted that the special rights that he had during his lifetime could not be attributed to the hypothetical open market vendor, and could not benefit the hypothetical open market purchaser, on the notional sale on the deceaseds death posited by section 7(5) of the Finance Act 1894.
Mr Sherry argued that Mr Gibsons special rights must be taken into account and treated as enuring for the benefit of the hypothetical vendor.
In the Court of Session Lord Osborne accepted that submission (para 46) but I respectfully consider that he went on to undermine his own conclusion when he referred (para 47) to clause 6.1 of the subscription agreement.
That clause made it plain that Mr Gibson was to get a special price for his shares, not because the shares themselves had a special value, but in recognition of his personal services as managing director.
Lord Kingarth (paras 67 and 68) recognised the significance of clause 6.1 and considered that Mr Gibsons rights were personal rights that did not attach to the shares.
Lord Mackay of Drumadoon (paras 87 89) took the same, or a very similar, view.
I am in substantial agreement with the majority of the Court of Session, except that I would reach the same conclusion even if the rights did in some sense attach to Mr Gibsons shares: whether attached or unattached, they were of no value to the hypothetical purchaser, and he would pay the hypothetical vendor nothing extra on account of them.
Mr Sherrys argument on this point relied on the homely metaphor which judges have often used, of asking what the hypothetical purchaser would pay to stand in the shoes of the hypothetical vendor.
The first use of this expression seems to have been by Lord Ashbourne C and Fitzgibbon LJ in Jameson at pp 227 and 230.
The point of the metaphor, I think, is to emphasise that the valuer is concerned with the position of the hypothetical purchaser immediately after the notional sale, rather than worrying about how that sale could take place (perhaps in contravention of the companys articles, which was the real point of dispute in Jameson).
There is nothing in the speeches to suggest that the hypothetical purchaser was to be presumed to be a male member of the Jameson family in order to facilitate a transfer under article 18 of the articles of John Jameson & Son Ltd.
Mr Sherry also relied on the decision of the Court of Appeal in Alexander v Inland Revenue Comrs (1991) 64 TC 59.
That was a case about valuation of a flat for the purposes of capital transfer tax on the death of Mrs Alexander.
She had bought a flat in the Barbican under the right to buy provisions of the Housing Act 1980 at the discounted price of 35,400, representing a discount of 24,600.
She died within a year.
The flat was (both before and after her death) subject to a charge to repay all or part of the discount if the flat was assigned within five years of its acquisition.
This liability would not be triggered by an assent in favour of a beneficiary under the deceaseds will or intestacy.
Her executor contended for a valuation of 35,400, deducting the full discount.
The Inland Revenues valuer contended for a reduced deduction of about 13,000, reflecting his assessment of the likelihood of an actual sale during the remainder of the five year period.
There was a procedural issue as to whether the matter should be determined by the Lands Tribunal or the Special Commissioners.
The Court of Appeal remitted the case to the Lands Tribunal but gave a clear direction as to the valuation principle to be applied.
Its decision would have given some support to the appellant if it had directed that the notional sale of Mrs Alexanders flat must for valuation purposes be treated as having triggered an immediate liability for the full 24,600 under the Housing Act charge.
But that was not the direction.
It was that the notional sale should not be treated as triggering the repayment liability, but that the hypothetical purchaser would be in the position of having to pay off the charge if he made an assignment during the remainder of the five year period (see Ralph Gibson LJ at pp 70 72 and Nicholls LJ at pp 75 76).
The implications of the hypothesis of a sale are not to be taken too far.
Ralph Gibson LJ, at p 73, referred to what Lord Guest had said in In re Sutherland, decd [1963] AC 235, 262: The purpose of section 7(5) . is to value the property.
It does not as Lord Evershed said require you to assume that the sale . has occurred.
It simply prescribes, as the criterion for value, price in the open market as between a willing seller and a willing buyer, which is a familiar basis for valuation.
Similarly, in this case, the valuation does not have to take account of the actual sale of Mr Gibsons shares at a special price enhanced for reasons related to Mr Gibsons special position as managing director.
Mr Sherry asked permission to raise an entirely new argument, set out in para 12 of his printed case, to the effect that the subscription agreement constituted an employment related security in its own right.
This argument would have represented a wholly novel approach to the case and would have occupied some time in oral argument.
The Court would not have had the benefit of the views of the Court of Session on it.
The Court decided that it would not be right to entertain this argument, which seems to fall far short of the test (for admission of an entirely new point on a final appeal) laid down in Brady v Brady [1989] AC 755.
For these reasons I would dismiss the appeal.
I express the hope that Parliament may find time to review the complex and obscure provisions of Part 7 of ITEPA 2003.
LORD HOPE
I accept with gratitude Lord Walkers summary of the facts of this case and of the statutory provisions which have given rise to this appeal.
As he has said, it is common ground that Mr Gibsons shares were employment related securities within the meaning indicated by section 421B(8) of ITEPA 2003 as inserted by section 140 of and Schedule 22 to the Finance Act 2003, that he was an associated person within the meaning indicated in section 421C and that no other associated person was beneficially entitled to those shares after they had been acquired by Jewson.
The question is whether his disposal of those shares was for a consideration that exceeded their market value at the time of the disposal, with the result that Chapter 3D of Part 7 of ITEPA 2003 applies to the transaction.
The argument in the Inner House of the Court of Session concentrated on the question whether the market value of the shares falls to be assessed by reference to the price that Mr Gibson was entitled to receive for his shares or by reference to the price that Jewson had to pay to acquire them.
This, as Lord Walker has explained in paras 25 and 26, is the first point of controversy in this appeal.
The second point of controversy, which was not discussed by the judges of the Extra Division in their opinions, was whether the way the concept of market value is dealt with elsewhere in Part 7 of ITEPA 2003 indicates that Mr Gibsons right on a disposal of the shares to a disproportionately large part of the price paid by Jewson must be taken into account in assessing their market value.
Mr Sherry for Mr Gibson sought permission to raise a third argument.
This was that, if the subscription agreement created rights which were not part and parcel of the shares issued to Mr Gibson, it should be treated as an employment related security in its own right and that giving effect to its provisions did not give rise to a payment in excess of its market value for the purposes of Chapter 3D.
Mr Sherry said that in the Extra Division Lord Mackay of Drumadoon had in substance adopted this approach: 2009 SLT 307, para 90.
It is true that Lord Mackay said there that payment of the enhanced amount to Mr Gibson was the equivalent of the settlement of a debt due under the subscription agreement.
But the consequences of that approach were not explored below, and they are not at all easy to determine.
The argument that Mr Sherry sought to develop on this point is not one that can properly be raised for the first time in this court.
There was a division of opinion in the Inner House on the first question.
Lord Osborne said that the formula which was described in clause 4.2.1 of the subscription agreement should be seen as conferring rights on Mr Gibsons shares as regards the payment to be received on their disposal, and that the effect of the sale agreement was that the purchaser specifically agreed with each and every vendor that the payments specified in column (3) of schedule 1 would be made to the appropriate vendor: paras 46 49.
I agree with these propositions as far as they go.
But I think, with respect, that this approach fails to address the crucial question under section 272 of the Taxation of Chargeable Gains Act 1992 which defines the expression market value.
In estimating the market value attention must be focussed on the asset that requires to be valued.
In this case it is the rights attached to the shares acquired by the purchaser, no more and no less.
I agree with the majority that what has to be considered, to determine their market value for the purposes of the statute, is what the hypothetical purchaser would pay to acquire those rights at the relevant date: Lord Kingarth at para 59 and Lord Mackay of Drumadoon at para 87.
Mr Gibsons right to an enhanced payment had a value to him, but that right was not the subject of the transaction as it did not transmit to the purchaser.
What the purchaser acquired and paid for was the rights attached to the shares themselves and nothing else.
Mr Gibsons rights under the subscription agreement between him and the other shareholders who were parties to it were given effect when the transaction was entered into, but for the purposes of section 446X of ITEPA 2003 they must be disregarded.
Mr Sherry submitted that the rights which Mr Gibson had under the subscription agreement were close enough to being class rights and that, even if that was not so, they attached to the shares for the time being as the terms on which they were issued to him.
The fact that the subscription agreement had been approved by a special resolution that was passed at an extraordinary meeting was also significant.
The holders of 83.8 per cent of the issued share capital, who were the parties to the subscription agreement, were in a position to secure the passing of that resolution, and it was inevitable that the purchaser would pay Mr Gibson a share of the price which satisfied his entitlement under that agreement.
The practical result of these arrangements was that no purchaser would be able to acquire the share capital of the company without seeing that the subscription agreement was satisfied or brought to an end.
Attractively put though his argument was, it seemed to me to miss the point.
No doubt Mr Gibson was assured that he would be entitled upon a sale of the companys share capital to the enhanced price that the subscription agreement provided for.
But that was, in essence, because of the agreement entered into between him and the other 83.8 per cent shareholders.
It was for this reason that the terms agreed with the purchaser extended to how the price was to be divided up between the shareholders.
They were designed to give effect to the rights enjoyed by Mr Gibson.
But those rights, which were extinguished by the payment which Mr Gibson received, were not part of the assets acquired by the purchaser.
The authorities on which Mr Sherry relied did not seem to me to meet this fundamental objection to this part of his argument.
In Attorney General v Jameson [1905] 2 IR 218, 226 227 the question was what market value should be attached to shares in a private company on the death of the shareholder.
The directors had power under the articles of association to refuse to register a transfer and there was a right of pre emption in favour of the other members of the company.
The argument was that the shares should be deemed to be sold subject to these conditions and restrictions, but it was rejected.
The court held that the shares should be valued at the price that they would fetch in the open market on the terms that the purchaser would stand in the shoes of the deceased in other words, that he would take the shares subject to the restrictions and conditions on transfer in terms of the articles.
Mr Sherry said that this reasoning should be extended to the terms on which the shares were issued to Mr Gibson, to reflect their value to the holder of the shares.
But the terms on which the shares were issued to Mr Gibson were personal to him.
They were not provided for in the articles of association of the company and they were of no interest to a hypothetical purchaser.
In Salvesen's Trustees v Inland Revenue Comrs 1930 SLT 387, in which the same point was contended for by the taxpayer, Lord Fleming followed the decision in Attorney General v Jameson.
As he said at p 391, if the taxpayer was right, it would mean that there could not be a real sale in the open market at all.
The shares should be valued at the price which they would fetch if sold in the open market on the terms that the purchaser would be entitled to be registered as the holder of the shares and should take and hold them subject to the provisions in the articles.
Those decisions were approved and applied in Inland Revenue Comrs v Crossman [1937] AC 26 and the same reasoning was adopted in In re Lynall, decd [1972] AC 680.
Mr Sherry said that in the light of these decisions and the others mentioned by Lord Walker the hypothetical purchaser must be assumed to have had the benefit of the rights vested in Mr Gibson under the subscription agreement at the time of the transaction, whether or not they were real or personal.
But I do not find anything in these cases that supports that approach.
It is the terms subject to which the purchaser will take and hold the shares that must be considered.
In this case they did not include Mr Gibsons rights under the subscription agreement, as they were extinguished on settlement of the transaction.
Their purpose was to enable Mr Gibson to enhance the benefits available to him in recognition of his services as managing director of Timber Products.
That purpose was served when he received the enhanced share of the consideration that he was entitled to.
All the shares in Group that Jewson acquired were of equal value to them from and after the date of settlement.
Mr Sherrys alternative argument was that the provisions which were substituted by the Finance Act 2003 for those that were originally enacted in ITEPA 2003 were to be read as a code and that the expression market value should be applied consistently throughout Part 7.
He said that the definitions of restricted securities and restricted interest in securities for the purposes of Chapter 2 in the substituted section 423 indicated that Parliament must have had in mind that restrictions and conditions outside the articles could affect their market value.
This was because section 423(1) provides: For the purposes of this Chapter employment related securities are restricted securities or a restricted interest in securities if (a) there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) applies, and (b) the market value of the employment related securities is less than it would be but for that provision.
He drew attention to the width of this definition.
Furthermore, the calculation of the amount of the charge under that Chapter that section 428 takes account of what the market value of the employment related securities would be immediately after the chargeable event but for any restrictions: section 428(2).
This provision, said Mr Sherry, indicated that it was to be assumed for the purposes of this calculation that restrictions outside the articles as well as those contained within them could affect market value.
He submitted that this approach should be carried forward consistently into Chapters 3, 3A, 3B, 3C and 3D.
For example, section 436, which defines convertible securities for the purposes of Chapter 3, refers to a contract, agreement, arrangement or condition which makes provision for the conversion of the securities, which must be taken to be something found in the governing instrument and outside the articles.
As in Chapter 2, this approach was carried through into the charging provisions under this Chapter: sections 437, 440.
He sought to draw support for this reading of the substituted provisions from the answers to the frequently asked questions that Lord Walker has quoted in para 34.
The Finance Act 2003 received the Royal Assent on 10 July 2003 and they were published on or about that date.
The key points were that personal restrictions were to be taken into account and that market value would be determined on a consistent basis throughout Chapters 1 to 5 of Part 7.
He submitted that post enactment official statements of that kind could be taken into account as persuasive authority as to the meaning of these provisions: Bennion, Statutory Interpretation, 4th ed (2002), section 232; R v Montila [2004] UKHL 50, [2004] 1 WLR 3141, para 40; Chief Constable of Cumbria v Wright [2006] EWHC 3574 (Admin), [2007] 1 WLR 1407, para 17.
But, as Lloyd Jones J said in Chief Constable of Cumbria v Wright, para 17, it is for the courts to interpret legislation, not the executive.
Mr Johnston QC for the respondents said that the answers on which Mr Sherry sought to rely, which he accepted could not be reconciled with his argument, were not accurate.
The point which mattered in this case was that, while the definition of market value was to be applied consistently, the property to be valued under each Chapter varied.
The answers had been withdrawn towards the end of 2005 and replaced by a manual dealing with the taxation of employment related securities from which the points made in the answers were absent.
He invited the court not to attach a great deal of weight to them.
I agree.
I do not think that the points that they make are sufficiently precisely framed to amount to an official statement on the particular issue that arises in this case to carry the persuasive authority that the statement in Bennion contemplates.
The provisions that are set out in the various Chapters that appear in Part 7 of ITEPA 2003 are complex, and it is not easy to draw conclusions as to how the charging provisions in each Chapter are to be applied if the overall aim is to achieve consistency.
I am in any event not persuaded that it would be right to approach these provisions on the basis that the overriding consideration is that each Chapter should be applied consistently with all the others.
As the commentator on the Finance Act 2003 in Current Law Statutes observed, if there is any theme in the Act it is one of anti avoidance and the closing down of perceived tax loopholes.
This suggests that the correct approach is to take each Chapter according to its own terms without trying to draw conclusions from the way the common definition of market value is applied elsewhere in Part 7.
I would adopt that approach.
It is worth noting too that the interval between the enactment of ITEPA 2003, which received the Royal Assent on 6 March 2003, and the enactment of the Finance Act 2003 was very short.
ITEPA 2003 was a product of the Tax Law Rewrite Project, which was set up specifically to rewrite most direct legislation in user friendly language.
It is regrettable that the substituted provisions in the Finance Act 2003 depart from that approach.
That, however, was probably inevitable if the Revenue was to achieve the aim of combating tax mitigation planning which is plain from these provisions.
As for Chapter 3D, which is the only Chapter with which we need to concern ourselves in this case, it is as Lord Walker said in para 2 relatively simple and straightforward.
I see no escape from the conclusion that the enhanced payment that Mr Gibson received was caught by it and that it is taxable accordingly.
For these reasons, and those given by Lord Walker with which I am in full agreement, I would dismiss this appeal and affirm the Extra Divisions interlocutor.
LORD RODGER, LORD BROWN AND LORD KERR
We are in complete agreement with the judgments of Lord Hope and Lord Walker and, for the reasons that they give, we too would dismiss the appeal.
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The main controversy in the appeal was whether, under the test laid out in section 446X of ITEPA, the disposal of the shares had been for a price which exceeded the market value of the shares at the time of the disposal [2].
If so, then the excess (less the costs associated with completing the transaction) would be treated as employment income [2].
ITEPA 2003 had adopted the definition of market value set out in capital gains tax legislation [22].
This required consideration of what a hypothetical purchaser would pay to acquire the rights attached to the shares [49].
Two questions emerged: (1) whether Gs shares were to be valued simply as shares whose rights were set out in Grays Groups articles of association, or whether his special rights under the subscription agreement were to be taken into account as if they were set out in the articles and (2) if the latter, what effect those special rights had on the valuation exercise [25].
The first question could be divided into two parts: (a) whether the special rights should be taken as attaching to the shares as a matter of company law and (b) whether Part 7 of ITEPA, which also dealt with other financial instruments, should be taken as consistently requiring such special rights to be taken into account in the assessment of market value [26].
On (a), shareholders mutual obligations were normally set out in the companys articles of association, and Grays Groups articles said nothing about special rights attaching to Gs shares on their disposal [27].
A clause in the subscription agreement did state that the agreements provisions should prevail over the articles, but there was a previous House of Lords case which suggested that such a provision would have no effect [31].
That case had not been cited in argument before the court, and might require further legal submissions, but was not decisive owing to the conclusions reached on other points [32].
On (b), elsewhere in Part 7 of ITEPA, in relation to other financial instruments, similar special rights did affect the market value of the asset in question [33].
The principle that tax is to be charged only by clear words was less potent than it had been, but was still relevant to interpreting tax laws.
There was real doubt as to whether Parliament, in Part 7 of ITEPA, had enacted a scheme which drew a coherent distinction between the treatment of rights attaching to shares and those attaching to other financial instruments [37].
The appeal was dismissed on the second question.
When P purchased Grays Group Ltd, it was not concerned with the division of the sale price between the vendors, except in so far as that might have adverse tax consequences for Timber Products [38].
Whether it was right to say that Gs special rights did in some sense attach to the shares or not, those rights had no value to the hypothetical purchaser [40, 49].
They were rights personal to G [51] and were extinguished by the payment which G received [50].
The valuation did not have to take account of the actual sale of Gs shares at a special price enhanced for reasons relating to Gs special position as managing director [43].
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Act) provide as follows: Sections (1) and (2) of section 123 of the Insolvency Act 1986 (the 1986 (1) A company is deemed unable to pay its debts (a) [non compliance with a statutory demand for a debt exceeding 750 presently due] (b) to (d) [unsatisfied execution on judgment debt in terms appropriate to England and Wales, Scotland and Northern Ireland respectively] (e) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due. (2) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the companys assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
A company in the situation described in subsection (1)(e) is often said to be cash flow insolvent.
A company in the situation described in subsection (2) is often said to be balance sheet insolvent, but that expression is not to be taken literally.
It is a convenient shorthand expression, but a companys statutory balance sheet, properly prepared in accordance with the requirements of company law, may omit some contingent assets or some contingent liabilities.
There is no statutory provision which links section 123(2) of the 1986 Act to the detailed provisions of the Companies Act 2006 as to the form and contents of a companys financial statements.
This appeal is concerned with the construction and effect of section 123(1)(e) and (2) as incorporated into the documentation of an issue of loan notes.
The statutory provisions were incorporated, with some small modifications, into the conditions applicable to loan notes issued in the course of a securitisation transaction comprising a portfolio of non conforming mortgage loans secured on residential property in the United Kingdom.
The issuer is Eurosail UK 2007 3BL plc (Eurosail), one of many similar single purpose entities (SPEs) set up by the Lehman Brothers group (but off the balance sheet of any of that groups companies) not long before its collapse.
Eurosail is the principal respondent to this appeal, and it has a cross appeal on a subs idiary issue.
The other respondent appearing before this court, BNY Corporate Trustee Services Ltd (the Trustee) is part of the BNY Mellon Group.
It is the trustee for the holders (Noteholders) of loan notes of various classes issued by Eurosail.
It has adopted a neutral attitude in the proceedings (as explained in its written case), and has not appeared by counsel before this court.
But it will, in the event that the appeal succeeds and the cross appeal fails, have an important judgment to make as to material prejudice to the Noteholders interests.
In 2007 Eurosail (described in the documentation as the Issuer) acquired a portfolio of mortgage loans, secured on residential property in England and Scotland and denominated in sterling, to the principal amount of approximately 650m.
Most of the mortgages were regarded as non conforming in that they did not meet the lending requirements of building societies and banks.
This purchase was funded by the issue on 16 July 2007 of loan notes in five principal classes (A, B, C, D and E) comprising 14 different subclasses, some denominated in sterling, some in US dollars and some in euros.
In the designation of the classes a indicated that the loan was denominated in euros, b US dollars and c pounds sterling.
The senior (class A) notes were divided into three sub classes, denominated in one of the three currencies, designated and issued as follows: A1b A1c A2a A2b A2c A3a A3c US$200,000,000 102,500,000 64,500,000 US$100,000,000 63,000,000 215,000,000 64,500,000 The B, C, D and E Notes were issued in smaller amounts, with variations in currency but no subclasses having different priorities as between themselves.
There were also some notes designated as ETc revenue backed notes.
The total sum raised was just under 660,000,000.
After payment of costs and expenses of the issue the initial surplus of assets over prospective liabilities (if taken at face value) was quite small.
The provisions of section 123(1) and (2) of the 1986 Act are incorporated into an important provision in the co nditions of issue of the Notes (the Conditions).
Condition 9(a) (events of default) provides that the Trustee may on the occurrence of any of five specified events (an Event of Default) serve on Eurosail a written notice (an Enforcement Notice) declaring the Notes to be due and repayable.
In some circumstances the Trustee is obliged to serve such a notice.
In the absence of an Event of Default the A1 Notes were repayable in 2027 at latest (in fact they have already been repaid, as have the revenue backed notes).
All the other Notes are repayable in 2045 at latest.
The Events of Default include (Condition 9(a)(iii)): The Issuer, otherwise than for the purposes of such amalgamation or reconstruction as is referred to in sub paragraph (iv) below, ceasing or, through or consequent upon an official action of the Board of Directors of the Issuer, threatens to cease to carry on business or a substantial part of its business or being unable to pay its debts as and when they fall due or, within the meaning of section 123(1) or (2) (as if the words it is proved to the satisfaction of the court did not appear in section 123(2) of the Insolvency Act 1986 (as that section may be amended from time to time), being deemed unable to pay its debts Under a proviso to Condition 9(a), an occurrence falling within sub paragraph (iii) counts as an Event of Default only if the Trustee certifies to Eurosail that it is, in the Trustees sole opinion, materially prejudicial to the interests of the Noteholders.
The service of an Enforcement Notice would have immediate and far reaching consequences for all the Noteholders (o ther than the A1 and ETc Noteholders, whose Notes have already been fully redeemed).
As described in more detail below, an Enforcement Notice shifts their rights from the regime prescribed in Condition 2(g) (priority of payments prior to enforcement) to the regime prescribed in Condition 2(h) (priority of payments post enforcement).
Under the latter regime Noteholders of Class A3 (A3 Noteholders) rank pari passu with Noteholders of Cla ss A2 (A2 Noteholders) for repayment of principal.
That is in contrast with the present regime, under which A2 and A3 A2 payments (clause 2(g)(vi)) but Noteholders rank pari passu for interest Noteholders have priority over A3 Noteholders in receiving repayments of principal out of funds representing principal sums received on the redemption of mortgages in the portfolio (those funds being included in the definition of Actual Redemption Funds in the preamble to the Conditions): Condition 5(b)(i)(2) and (3).
It is in these circumstances that the construction of section 123(2) of the 1986 Act, as incorporated into Condition 9(a)(iii), has assumed such importance.
Eurosail, together with those of the A2 Noteholders who appeared below, succeeded before Sir Andrew Morritt C [2010] EWHC 2005 (Ch), [2011] 1 WLR 1200, and the Court of Appeal [2011] EWCA Civ 227, [2011] 1 WLR 2524.
The Court of Appeal considered that section 123(2) should be interpreted broadly and in line with standards of commercial probity: A balance has to be drawn between the right of an honest and prudent businessman, who is prepared to work hard, to continue to trade out of his difficulties if he can genuinely see a light at the end of the tunnel, and the corresponding obligation to put up the shutters, when, by continuing to trade, he would be doing so at the expense of his creditors and in hose business considerations which a reasonable businessman is expected to observe. disregard of t (That is a quotation from paragraph 216 of the Report of the Review Committee on Insolvency Law and Practice (1982) (Cmnd 8558), better known as the Cork Report, reflecting the view of Professor Goode; this passage is quoted in para 54 of the judgment of Lord Neuberger MR in the Court of Appeal).
The appellant A3 Noteholders say that this passage is not in point.
They have argued for a much stricter construction.
They have emphasised that a companys inability to pay its debts is no more than a precondition to the exercise of the courts jurisdiction, which is discretionary, to make a winding up order or an administration order.
The precondition to be satisfied should be, they have argued, transparent and certain, leaving scope for the exercise of discretion on the hearing of the petition.
There has also been argument as to whether the statutory text (as incorporated in an amended form, and also allowing for possible future legislative amendment) must bear the same meaning as it would in actual winding up proceedings, or whether it can and should, as incorporated, take account of the commercial context of the Conditions.
Those, in outline summary, are the positions of the opposing parties on the appeal.
The cross appeal, which is relevant only if the appeal is successful, is concerned with the so called Post Enforcement Call Option (PECO) which is a subsidiary (but technically important) part of the securitisation transaction.
Before going further into the complexities of the appeal I would comment that the image invoked by Professor Goode of an honest and prudent trader working hard to turn his business round relates, as was pointed out by Mr Moss QC for the appellants, to the law of insolvency as it applies to individuals.
Even if translated into corporate terms, it has very little bearing on the situation in which Eurosail now finds itself.
Its present financial position and future prospects are not matters for which Eurosail and its managers merit either praise or criticism, since those matters are almost entirely out of their control.
They depend on three imponderables: first, (since the currency and interest rate hedging arrangements with the Lehman Brothers group have failed, leaving Eurosail with a claim in its insolvency) the movements of the US dollar and the euro relative to the pound sterling; secondly, movements in LIBOR or equivalent interest rates on loans denominated in those three currencies; and thirdly, the performance of the United Kingdom economy in general, and the United Kingdom residential property market in particular, as influencing the performance of the mortgage portfolio.
The transaction documents
The legal documents relating to the securitisation issue are, as Lord Neuberger MR put it, regrettably and forbiddingly voluminous.
Apart from the Conditions themselves there was a formal trust deed made between the Trustee and Eurosail, a Liquidity Facility Agreem ent, currency swaps agreements, a Fixed/Floating Swap Agreement, a BBR Swap Agreement and other agreements relating to administrative matters (there is a full list of transaction documents in the definition of that expression in the preamble to the Conditions).
Several expressions used in the Conditions involve a paperchase to other documents in order to find their definitions.
Mr Moss opened the documents very lightly, moving rapidly from Condition 9(a)(iii) to concentrate his submissions on the construction of section 123(1) and (2) of the 1986 Act.
Mr Dicker QC (for Eurosail) went into the Conditions more fully to pave the way for his contextual arguments.
Without pre judging those arguments I think it is necessary, if only in order to appreciate the consequences of the opposing arguments, to have an outline understanding of how the SPE (which counsel concurred in describing as a closed system or wrapper) operated before the collapse of Lehman Brothers, of how it operates now (after the collapse of Lehman Brothers but before any Enforcement Notice), and of how it would operate after the service of an Enforcement Notice.
Interest is payable on all unredeemed Notes quarterly in arrears, the first payment having been made on 13 September 2007.
The annual rate of interest is linked to LIBOR or its dollar or euro equivalents (Condition 4(c)(i)), exceeding that rate by a margin (the Relevant Margin as defined in the preamble) which varies from 0.07% for A1b Notes to 4% for E Notes.
Mortgage interest received by Eurosail (the principal component in the Available Revenue Fund) cascades down the metaphorical waterfall set out in the 24 sub paragraphs of Condition 2(g) (priority of payments prior to enforcement).
The first claims on the income stream are for remuneration, charges and expenses; then (sub paragraph (iv)) sums due to the Liquidity Facility Provider, and (sub paragraph (v), but only until the collapse of Lehman Brothers) sums payable under or in connection with the Fixed/Floating Swap Agreement and the BBR Swap Agreement (but not any currency swaps).
Payments to currency swaps counterparties were linked to interest payments to particular classes of Noteholders, so that payments to counterparties in respect of A Noteholders come into the provision for payment of interest to those Noteholders, which is made pari passu as between all the A sub classes (Condition 2(g)(vi)).
The next priority (Condition 2(g)(vii)) was for payment off of any A Principal Deficiency (another expression defined in the preamble), but in practice such a deficiency could arise only if all the junior classes of Notes had become valueless.
Next in the waterfall come similar groups of provisions for payment of interest, sums due to the currency swaps counterparties (and any B Principal Deficiency) in respect of B Notes (Condition 2(g)(viii) and (ix)) and so on for all the other classes (Condition 2(g)(x) to (xv)).
On 15 September 2008 Lehman Brothers Holdings Inc (LBHI), the guarantor of the swaps counterparty, Lehman Brothers Special Financing Ltd (LBSF) filed for Chapter 11 bankruptcy, as did LBSF on 3 October 2008.
The swaps were terminated on 13 November 2009.
Eurosail has made a claim against LBHIs and LBSFs bankrupt estates for about $221,000,000.
At the time of the hearings below, the claim had not been admitted and no distribution has been made in respect of it.
During the last three years sterling has depreciated significantly against both the euro and the dollar, but the prevailing low level of interest rates has resulted in a surplus (excess spread) of mortgage interest received by Eurosail, which has enabled it to continue to pay in full the interest on all the outstanding Notes of every class.
In the meantime, both before and after the collapse of Lehman Brothers, Eurosail received principal sums from time to time as principal secured by the mortgages was repaid, either by way of partial or total redemption by mortgagors, or by enforcement of the security against mortgagors who were in default.
These sums have been and are at present applied under Condition 5(b)(i) as Actual Redemption Funds, on each date for payment of interest, in repaying the principal of the Notes in the order of priority A1 (now fully repaid), A2, A3, B, and so on.
There is a proviso to Condition 5(b) under which the order of priority may be altered.
The first possible variation (proviso (A)) applies if all the A1 and A2 Notes have been redeemed and other (favourable) specified conditions are satisfied: the A3 to E1c Notes then rank pari passu.
Conversely, under the other variation (proviso (B)), which applies if there is an A Principal Deficiency, priority is granted to the A Notes as a single class ranking pari passu.
Events of default are regulated by Condition 9.
The events specified in t in Condition 9(a) are, apart from that alre ady set out (para 5 above): defaul payment for three business days of any principal or interest due on any of the Notes; breach by Eurosail of any of its obligations and failure to remedy the breach the breach given by the Trustee; the (if remediable) for 14 days after notice of making of an order or resolution for the winding up of Eurosail, otherwise than for an approved amalgamation or reconstruction; and the initiation of insolvency or ious administration proceedings, or the levying of execution (subject to var qualifications which it is unnecessary to set out in detail).
If the Event of Default is an event under Condition 9(a)(iii) or a breach of
Eurosails obligations, there is a further requirement that the Trustee shall have certified to Eurosail that such event is, in its sole opinion, materially prejudicial to the interests of the Noteholders.
For this purpose the Trustee may under the trust deed (as recorded in Condition 2(c)) have regard only to (i) the interests of the A Noteholders if, in the Trustees sole opinion, there is a conflict between the interests of the A Noteholders (or any Class thereof) and the interests of the B Noteholders, the C Noteholders, the D Noteholders and/or the E Noteholders.
This provision does not indicate how the Trustee is to exercise its discretion in the event of a conflict (such as there now potentially is) between the interests of the A2 Noteholders and the A3 Noteholders.
If there is an Event of Default (and, in the cases just mentioned, it is materia lly prejudicial) the Trustee may at its discretion serve an Enforcement Notice on Eurosail.
Moreover it is obliged to do so if requested or directed (i) by holders of at least 25% of the outstanding Most Senior Class of Notes (defined as meaning the A Noteholders, rather than a subclass of them) or (ii) by an extraordinary resolution of the holders of that class.
This court was not shown any evidence, and did not hear any submissions, as to whether either of those requirements would be likely to be satisfied in practice.
On service of the Enforcement Notice the Notes become immediately due and payable and the Noteholders security becomes enforceable (Condition 9(b)).
Thereupon the order of priority shifts fro m that in Condition 2(g) to that in Condition 2(h).
It is unnecessary to go through all the detail of Condition 2(h).
The all important change is that under Condition 2(h)(v) the available funds are applicable to pay pari passu and pro rata (1) all amounts of interest and principal then due and payable on the A1c Notes, the A2c Notes and the A3c Notes and (2) [subject to provisions about currency swaps that have now lapsed] any interest and principal then due and payable on the A1b Notes, the A2a Notes, the A2b Notes and the A3a Notes, respectively.
In practical terms, the A2 Notes would no longer have priority, in terms of principal, to the A3 Notes.
The opening words of condition 2(h) express the Trustees obligation as being to make payments to the extent of the funds available to [Eurosail] and from the proceeds of enforcement of the Security (with exceptions that need not be detailed).
The penultimate provisio n of Condition 2(h) provides: The Noteholders have full recourse to [Eurosail] in respect of the payments prescribed above and accordingly are entitled to bring a claim under English law, subject to the Trust Deed, for the full amount of such payments in accordance with Condition 10 (Enforcement of Notes).
Mr Dicker did not challenge Mr Mosss submission that the opening words do not contradict the penultimate provision, and that seems to be correct.
The opening words are directed to the Trustees obligations, not to those of Eurosail.
Condition 5(j) contains the PECO (Post Enforcement Call Option) which is the subject of the cross appeal.
This option (which has been given effect to as a separate written agreement between the Trustee and a company named or referred to as OptionCo) is regarded in the industry as a means of achieving the effect of limited recourse without the adverse tax consequences that would then have followed from a simple express non recourse provision.
The operative part of Clause 5(j) is as follows: All of the Noteholders will, at the request of the holder of the Post Enforcement Call Option, sell all (but not som e only) of their holdings of the Notes to the holder of the Post Enforcement Call Option, pursuant to the option granted to it by the Trustee (as agent for the Noteholders) to acquire all (but not some only) of the Notes (plus accrued interest thereon), for the consideration of one euro cent per Euro Note outstanding, one dollar cent per Dollar Note outstanding and one penny per Sterling Note outstanding (and for these purposes, each Global Note shall be one Note) in the event that the Security for the Notes is enforced, at any time after the date on which the Trustee determines that the proceeds of such enforcement are insufficient, after payment of all other claims ranking higher in priority to the Notes and pro rata payment of all claims ranking in ter the application of any such equal priority to the Notes and af proceeds to the Notes under the Deed of Charge, to pay any further principal and interest and any other amounts whatsoever due in respect of the Notes.
Bankruptcy remoteness
Bankruptcy remoteness was the expression used by Standard & Poors credit rating agency, and generally in the industry, to describe one criterion for a SPE to obtain a satisfactory credit rating for its loan notes (see European Legal Criteria for Structured Finance Transactions published by Standard & Poors (28 August 2008), and the comments of the Chancellor [2011] 1 WLR 1200, para 8 and Lord Neuberger of Abbotsbury MR [2011] 1 WLR 2524, para 28).
This is not the place to consider either the reliability of the credit rating agencies judgments on Notes secured by sub prime mortgages, or the influence that their judgments seem to have had in the market (caused, some have suggested, by the industrys general inability to comprehend the risks inherent in its own creations).
But the notion of bankruptcy remoteness, even if imperfectly understood, underlay many features of the Conditions and the arrangements of which they formed part.
In developing his contextual argument that this court should (if necessary)
mould the meaning of section 123(1) and (2), as incorporated into Condition 9(a)(3) so as to take account of commercial realities, Mr Dicker drew particular attention to five features of the arrangements.
They are set out and discussed in section B2 of Eurosails case.
Most of them have been mentioned already, at least in passing, but it may be helpful to bring them together in summary form.
They are relevant not only (arguably) to the issue of construction but also (without room for argument) to determining the likely length of deferment of Eurosails long term liabilities under the Conditions, in the absence of an Event of Default which triggers an Enforcement Notice.
These points are covered at some length in the witness statements of Mr Mark Filer, a director of Wilmington Trust SP Services (London) Ltd, Eurosails corporate services provider.
The five salient features of the Conditions and the supporting documentation bearing on the likely deferment of Eurosails obligations in respect of principal and interest are as follows: (1) Condition 2(g) defines Eurosails obligations for payment of interest on the Notes (after remuneration, charges and expenses) in terms of the Available Revenue Fund (see para 12 above).
If that source is insufficient for payment of interest on any of the Junior Notes (that is, those which are not A Notes) the obligation is deferred (while accruing interest) under Condition 6(i) and (j), if necessary until the final redemption date in 2045. (2) Temporary shortages of income can be provided for by the Liquidity Facility (reimbursements to which have a high order of priority under Condition 2(g)(iv)). (3) As to principal, redemption of Notes (other than the redeemed A1 Notes and the revenue backed Notes) is not due until 2045.
Until then redemption is limited to the Actual Redemption Funds (as defined in the preamble) which are applied in the appropriate order of priority under Condition 5(b) (see para 14 above). (4) Any loss of principal resulting from default on mortgages is termed a Principal Deficiency and is recorded in the Principal Deficiency Ledger (the detailed provisions as to this are found not in the Conditions but in Clauses 8 and 9 of the Cash/B ond Administration Agreement).
If there is surplus income from the mortgage payments, the excess spread can be used to reduce or eliminate any Principal Deficiency on whatever is the highest ranking class of Notes with a deficiency.
Recoupment of a Principal Deficiency takes priority to the payment of interest on lower ranking Notes (see para 12 above). (5) Finally there is the PECO, which is intended to produce the same, or a similar result as an express limited recourse provision (see paras 18 and 19 above).
The legislation
This court was taken to the legislative history of sections 122 and 123 of the 1986 Act, and it will be necessary to refer to it in some detail.
But it may be better to start with the sections themselves.
The 1986 Act was a consolidating statute which gave effect to the amendments made by the Insolvency Act 1985.
Section 122(1), as amended, provides seven cases in which a company may be wound up by the court, of which the most important are the last two: (f) the company is unable to pay its debts, (g) the court is of the opinion that company should be wound up. it is just and equitable that the Section 123(1) then sets out five cases (stated or summarised in para 1 above) in which a company is deemed unable to pay its debts.
The four cases in paragraphs (a) to (d) of section 123(1) are true deeming provisions.
A companys non compliance with a statutory demand, or non satisfaction of execution of a judgment debt, is a matter that can be proved quite simply, usually by a single short witness statement.
If proved, it establishes the courts jurisdiction to make a winding up order, even if the company is in fact well able to pay its debts.
If however a debt which has been made the subject of a statutory demand is disputed on reasonable grounds, the petitioner is adopting what has been called a high risk strategy, and the petition may be dismissed with indemnity costs: In Re a Company 12209 of 1991 [1992] BCLC 865, 868 (Hoffmann J).
Section 123(1)(e) is significantly different in form: if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.
This is not what would usually be described as a deeming provision.
It does not treat proof of a single specific default by a company as conclusive of the general issue of its inability to pay its debts.
Instead it goes to that very issue.
It may open up for inquiry a much wider range of factual matters, on which there may be conflicting evidence.
The range is wider because section 123(1)(e) focuses not on a single debt (which under paragraphs (a) to (d) has necessarily accrued due) but on all the companys debts as they fall due (words which look to the future as well as to the present).
The words as they fall due did not appear in the legislation until the Insolvency Act 1985.
Similarly the express reference in section 123(2) to the test of the value of the companys assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities did not appear before the Insolvency Act 1985.
In the present case both the Chancellor and the Court of Appeal treated the present legislative provisions as materially different from those previously in force: [2011] 1 WLR 1200, para 24; [2011] 1 WLR 2524, para 53.
Yet when this point was raised during the passage of the Insolvency Bill in 1985, the government spokesman in House of Lords, Lord Lucas of Chilworth, stated: Commons Amendment No 458 gives effect to the way in which the courts have interpreted section 518 of the Companies Act [1985]; that was previously section [223] of the 1948 Act.
We are not seeking to amend the law by this amendment; merely to give effect to that interpretation by the courts, namely, that section 518 contains both a cash flow and a balance sheet test.
Hansard (HL Debates, 23 October 1985, col 1247) In these circumstances it is necessary to look quite closely at the legislative history.
In considering it I have derived great assistance from a variety of academic commentary, including an article by Dr Peter Walton, Inability to pay debts: beyond the point of no return? [2013] JBL 212.
The starting point is sections 79 and 80 of the Companies Act 1862 (25 & 26 Vict, c 89), the general structure of which is similar to that of sections 122 and 123 of the 1986 Act.
Section 80(4) of the 1862 Act stated the test simply as: tisfaction of the court that the Whenever it is proved to the sa company is unable to pay its debts.
However, it is to be noted that under section 158, once a winding up order had been made, all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as is possible, of the value of all such debts or claims as may be subject to any contingency or sound only in damages, or for some other reason do not bear a certain value.
So a contingent or prospective creditor could not present a petition, but if another creditor presented a petition and secured a winding up order, contingent and prospective liabilities were admitted to proof.
In In Re European Life Assurance Society (1869) LR 9 Eq 122 Sir William
James V C dismissed a petition for the winding up of a company which had issued large numbers of life policies and annuity contracts, and appeared to be in financial difficulties.
In an extempore judgment he decided, with very little reasoning, that (p127) inability to pay debt solutely due.
He then proceeded to consider at greater length, but to dismiss, the alternative just and equitable ground in section 79(5) of the Companies Act 1862.
As to this ground he said at p128: s must refer to debts ab And in my view of the law of the case it would be just and equitable to wind up a company like this assurance company if it were made out to my satisfaction that it is, not in any technical sense but, plainly and commercially insolvent that is to say, that its assets are such, and its existing liabilities are such, as to make it reasonably certain as to make the court feel satisfied that the existing and probable assets would be insufficient to meet the existing liabilities.
I take it that the court has nothing whatever to do with any question of future liabilities, that it has nothing whatever to do with the question of the probability whether any business which the company may carry on tomorrow or hereafter will be profitable or unprofitable.
That is a matter for those who may choose to be the customers of the company and for the shareholder to consider. 13 Page So here, it seems, the Vice Chancellor was applying a balance sheet test, but only to existing liabilities, in the context of the just and equitable ground.
He did not refer to any of the authorities that had been cited.
It may be unfortunate that his judgment has come to be regarded as a leading case.
Shortly afterwards the law was changed in relation to life offices by the Life Assurance Companies Act 1870 (33 & 34 Vict, c 61), which was effectively the beginning of the modern statutory regulation of life assurance.
There was no general change until section 28 of the Companies Act 1907, which made an amendment which was then consolidated by the Companies (Consolidation) Act 1908.
The latter provided in section 130(iv) that a company should be deemed to be unable to pay its debts: if it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.
The amendment made by the Companies Act 1907 was introduced on the recommendation of the Loreburn Committee (Report of the Company Law Amendment Committee) (1906) (Cd 3052), para 43, which was influenced by section 21 of the Life Assurance Comp anies Act 1870.
The amendment is described by Dr Walton [2013] JBL 212, 228 as an abbreviated version of section 21.
But there is not a very close parallel, since section 21 referred to a life office being insolvent (meaning, apparently, balance sheet insolvent) rather than its being unable to pay its debts.
But the admission of contingent and prospective liabilities, and especially long term liabilities, must tend to focus attention on balance sheet considerations.
Thus in In Re Capital Annuities Ltd [1979] 1 WLR 170, 185, Slade J observed: From 1907 onwards, therefore, one species of inability to pay its debts specifically recognised by the legislature as a ground for the making of a windi ompany incorporated under the Companies Acts was the possession of assets ng, contingent and prospective insufficient to meet its existi liabilities. ng up order in respect of any c Essentially the same wording appeared in section 223(d) of the Companies Act 1948 and in section 518(e) of the Companies Act 1985.
Two cases decided under section 223(d) call for mention.
The first is In Re a Company (also referred to as Bond Jewellers) [1986] BCLC 261, decided by Nourse J on 21 December 1983.
Like In Re European Life Assurance Society, it was an extempore judgment given without citation of authority, in order to avoid delay, but it has been much cited.
It was referred to in both Houses of Parliament during the committee stages of the Insolvency Bill.
It concerned a tenant company with a propensity for postponing payment of its debts until threatened with litigation.
Nourse J felt unable to make an order under section 223(d), and considered, but ultimately did not make an order, on the just and equitable ground in section 222(f).
The case is of interest as illustrating (at p 263) that the phrase as they fall due, although not part of the statutory text, was understood to be implicit in section 223(d).
It is also of interest for the judges observation on the second point in section 223(d) (now embodied, in different words, in section 123(2) of the 1986 Act): into account the contingent and Counsel says that if I take prospective liabilities of the company, it is clearly insolvent in balance sheet terms.
So indeed it is if I treat the loans made by the associated companies as loans which are currently repaya ble.
However, what I am required to do is to take into account the contingent and prospective liabilities.
That cannot mean that I must simply add them up and strike a balance against assets.
In regard to prospective liabilities I must principally consider whether, and if so when, they are likely to become present liabilities.
The second case, Byblos Bank SAL v Al Khudhairy [1987] BCLC 232, was a considered judgment of Nicholls LJ (with whom Slade and Neill LJJ agreed) delivered after 11 days of argument.
It concerned the disputed validity of the appointment of a receiver in June 1985, before either the Companies Act 1985 or the Insolvency Act 1985 was in force.
The ostensible ground for appointment of the receiver was not made out, but the bank relied on a new ground, section 223(d).
Nicholls LJ observed (p 247): Construing this section first without reference to authority, it seems to me plain that, in a case where none of the deeming paras (a), (b) or (c) is applicable, what is contemplated is evidence of (and, if necessary, an investigation into) the present capacity of a company to pay all its debts.
If a debt presently payable is not paid because of lack of means, that will normally suffice to prove that the company is unable to pay its debts.
That will be so even if, on an assessment of all the assets and liabilities of the company, there is a surplus of assets over liabilities.
That is trite law.
It is equally trite to observe that the fact that a company can meet all its presently payable debts is not necessarily the end of the matter, because para (d) requires account to be taken of contingent and prospective liabilities.
Take the simple, if extreme, case of a company whose liabilities consist of an obligation to repay a loan of 100,000 one year hence, and whose only assets are worth 10,000.
It is obvious that, taking into account its future liabilities, such a company does not have the present capacity to pay its debts and as such it is unable to pay its debts.
In Nicholls LJ then referred to Re European Life Assurance Society LR 9 Eq 122, including the passage quoted at para 28 above, and commented (p 248): the judgment of James V C in In my view the exercise described by James V C is the exercise required to be done under section 223 (now section 518 of the 1985 Act).
He also referred to the decisions of Slade J in In Re Capital Annuities Ltd [1979] 1 WLR 170 and Nourse J in In Re A Company [1986] BCLC 261 as consistent with the views he had expressed.
In my view these authorities go quite a long way to establishing that neither the notion of paying debts as they fall due, nor the notion of balance sheet insolvency, was unfamiliar before the enactment of the Insolvency Act 1985.
But petitions by contingent or prospective creditors have been rare even after the repeal in 1986 of the standard requirement for such a creditor to provide security for costs.
One reason for that is no doubt the difficulty of quantifying contingent and prospective liabilities to the satisfaction of the court.
Another may be the fact that well advised commercial lenders will insist on contractual conditions under which deferred liabilities are accelerated in th e event of the borrower getting into financial difficulties.
The far reaching reforms effected by the Insolvency Acts of 1985 and 1986, together with related subordinate legislation, were influenced by the report of the Cork Committee, published in 1982.
One of its recommendations (para 535) was that the sole ground upon which the court may make an insolvency order in respect of a debtor, whether individual or corporate, will be that the debtor is unable to pay his or its debts.
The Committee proposed three cases in which the debtor would be deemed to be insolvent and unable to pay his or its debts.
The first two corresponded to the cases in section 123(1)(a) to (d) of the 1986 Act.
The third case was: (c) Where the applicant is a contingent or prospective creditor to whom the debtor is or may become indebted in a sum of not less than the prescribed amount, being a debt not yet presently due and payable, and it is proved to the satisfaction of the court that the ultimate repayment of the debt is in jeopardy because the debtors liabilities, including contingent and prospective liabilities, exceed the debtors assets.
This proposal limited the balance sheet insolvency test to applications by contingent or prospective creditors whereas the Byblos Bank case suggested that it was also relevant to the payment of debts as they fall due.
That point was noted by Briggs J in his perceptive judgment In Re Cheyne Finance plc (No 2) [2008] Bus LR 1562.
He referred at paras 42 43 to similar language (as they become due) used in Australian companies legislation, which until 1992 had a single test based on an inability to pay debts as they become due a phrase which looks to the future, as Griffith CJ said in Bank of Australasia v Hall (1907) 4 CLR 1514, 1527.
There is a good deal of later Australian authority, mentioned in the judgment of Briggs J, to the same effect.
In Re Cheyne Finance Plc (No 2) was concerned with a security trust deed
which (in contrast to Condition 9(a)(iii) in the present appeal) incorporated into its rms of section 123(1), but not section definition of insolvency event the te 123(2).
It was therefore necessary to was consider how far section 123(1)(e) concerned, not only with debts that were immediately payable, but also with those that would be payable in the future.
Briggs J decided, rightly in my view, that that is what section 123(1)(e) requires (para 56): In my judgment, the effect of the alterations to the insolvency test made in 1985 and now found in section 123 of the 1986 Act was to replace in the commercial solvency test now in section 123(1)(e), one futurity requirement, name ontingent and prospective liabilities, with another more flexible and fact sensitive requirement encapsulated in the new phrase as they fall due. ly to include c Briggs J considered (para 35), again rightly in my view, that the Byblos Bank case was a case about ability to pay debts as they became due, but that the Court of Appeal recognised that balance sheet insolvency is not irrelevant to that issue.
The practical effect of section 123
There is no doubt that, as a matter of form, the statutory test for a company being unable to pay its debts is materially different (as the Chancellor and the Court of Appeal observed) from the position under the Companies Act 1985.
Section 123(1)(e) introduced the words as they fall due and section 123(2) has introduced a direct reference to a companys assets and liabilities.
These two provisions, both labelled as deeming provisions (though neither is obviously of that character) stand side by side in section 123(1)(e) and section 123(2) with no indication of how they are to interact.
It seems likely that part of the explanation lies in the history of the passage through Parliament of the Insolvency Bill in 1985, and the lengthy and interrupted process of review and consultation which had preceded it.
This process began as long ago as October 1976 when the Secretary of State announced his intention of setting up what became the Review Committee chaired by Mr (later Sir) Kenneth rim report in October 1979 (after a change of Cork.
It produced an inte government) and its final report in 1982.
The whole protracted process is described by Professor Ian Fletcher QC in his Law of Insolvency 4th ed (2009), pp 16 22.
He explains how there was no official reaction to the final report until a spate of financial scandals early in 1984: At relatively short notice the government White Paper, referred to above, was published in February 1984 together with an indication that legislation was imminent.
In consequence, very little time was allowed for interested parties to submit comments before the drafting of the Insolvency Bill was embarked upon, and the Bill itself was introduced in the House of Lords on 10 December 1984.
This regrettable mishandling of the period of preparation for the first major overhaul of insolvency law for over 100 years cannot but be lamented.
The inadequate manner in which consultation was conducted, coupled with the near total lack of any form of public debate about the issues of policy and principle at the heart of any radical recasting of insolvency law, were an inauspicious prelude to what was to become a most contentious and confused episode of legislative history.
Thereby, what ought to have been a largely non controversial, non Party Bill became the subject of highly dramatic proceedings before both Houses, and also in Committee, and damage was unquestionably inflicted upon the ultimate quality of a highly technical piece of legislation whose detailed provisions were but vaguely understood by all but a minority of those participating in its enactment, but whose social and econom ic importance was nonetheless immense.
The Bills deficiencies, due to haste in tary preparation, together with the vicissitudes of the parliamen 18 Page process, resulted in a quite exceptional number of amendments being tabled to the Insolvency Bill, estimated to have approached 1,200 by the time of Royal Assent.
A high proportion of these amendments were tabled by the Government itself, and many were adopted virtually without debate during the closing stages of proceedings. (para 1 034)
Despite the difference of form, the provisions of section 123(1) and (2) should in my view be seen, as the Government spokesman in the House of Lords indicated, as making little significant change in the law.
The changes in form served, in my view, to underline that the cash flow test is concerned, not simply with the petitioners own presently due debt, nor only with other presently due debt owed by the company, but also with debts falling due from time to time in the reasonably near future.
What is the reasonably near future, for this purpose, will depend on all the circumstances, but especially on the nature of the companys business.
That is consistent with Bond Jewellers, Byblos Bank and Cheyne Finance.
The express reference to assets and liabilities is in my view a practical recognition that once the court has to move beyond the reasonably near future (the length of which depends, again, on all the circumstances) any attempt to apply a cash flow test will become completely speculative, and a comparison of present future liabilities (discounted for contingencies and assets with present and deferment) becomes the only sensible test.
But it is still very far from an exact test, and the burden of proof must be on the party which asserts balance sheet insolvency.
The omission from Condition 9(a)(iii) of the reference to proof to the satisfaction of the court cannot alter that.
Whether or not the test of balance sheet insolvency is satisfied must depend on the available evidence as to the circ umstances of the particular case.
The circumstances of Eurosails business, so far as it can be said to have a business at all, are quite unlike those of a compan trading activities. y engaged in normal There are no decisions to be made about choice of suppliers, stock levels, pricing policy, the raising of new capital, or other matters such as would constantly engage the attention of a trading companys board of directors.
Instead Eurosail is (in Mr Mosss phrase) in a closed system with some resemblance to a life office which is no longer accepting new business.
The only important management decision that could possibly be made would be to attempt to arrange new hedging cover in place of that which was lost when Lehman Brothers collapsed.
To that extent Eurosails present assets should be a better guide to its ability to meet its long term liabilities than would be the case with a company actively engaged in trading.
But against that, the three imponderable factors identified in para 9 above c urrency movements, interest rates and the United Kingdom economy and housing market are and always have been outside its control.
Over the period of more than 30 years until the final redemption date in 2045, they are a matter of speculation rather than calculation and prediction on any scientific basis.
At first instance the Chancellor started with three propositions derived from the case law (paras 29 to 32): that the assets to be valued are the present assets of the company; that contingent and prospective liabilities are not to be taken at their full face value; and that: Taking account of must be recognised in the context of the overall question posed by the subsection, namely whether the company is to be deemed to be insolvent because the amount of its liabilities exceeds the value of its assets.
This will involve consideration of the relevant facts of the case, including when the prospective liability falls due, whether it is payable in sterling or some other currency, what assets will be available to meet it and what if any provision is made for the allocation of losses in relation to those assets. (para 32) He then set out four reasons (paras 34 to 37) for concluding (para 38) that the value of Eurosails assets exceeded its liabilities, having taken account of its contingent and prospective liabilities to such extent as appears to be necessary at this stage.
In the Court of Appeal Lord Neuberger MR did not disagree with anything in the Chancellors judgment so far as it related to statutory construction.
He did however go further in his detailed discussion of section 123(2).
He observed (para 44): In practical terms, it would be rather extraordinary if section 123(2) was satisfied every time a companys liabilities exceeded the value of its assets.
Many companies which are solvent and successful, and many companies early on in their lives, would be deemed unable to pay their debts if this was the meaning of section 123(2).
Indeed, the issuer is a good example of this: its assets only just exceeded its liabilities when it was formed, and it was more than possible that, even if things went well, it would fall from time to time within the ambit of section 123(2) if the appellants are right as to the meaning of that provision.
Lord Neuberger MR developed this at paras 47 to 49 of his judgment: 47.
More generally, I find it hard to discern any conceivable policy reason why a company should be at risk of being wound up simply because the aggregate value (however calculated) of its liabilities exceeds that of its assets.
Many companies in that position are successful and creditworthy, and cannot in any way be characterised as unable to pay [their] debts.
Such a mechanistic, even artificial, reason for permitting a creditor to present a petition to wind up a company could, in my view, only be justified if the words of section 123(2) compelled that conclusion, and in my opinion they do not. 48.
In my view, the purpose of section 123(2) has been accurately characterised by Professor Sir Roy Goode in Principles of Corporate Insolvency Law, 3rd ed (2005).
Having referred to section 123(1)(e) as being the cash flow test and to section 123(2) as being the balance sheet test, he said this, at para 4 06: the only relevant test [for If the cash flow test were insolvency] then current and short term creditors would in effect be paid at the expense of creditors to whom liabilities were incurred after the company had reached the point of no return because of an incurable deficiency in its assets. 49.
In my judgment, both the purpose and the applicable test of section 123(2) are accurately encapsulated in that brief passage.
Toulson LJ agreed with Lord Neuberger MR but expressed himself in a more guarded way.
He agreed that Professor Sir Roy Goode had rightly discerned the underlying policy (para 115) but added (para 119) that Professor Goodes reference to a company having reached the point of no return because of an incurable deficiency in its assets illuminates the purpose of the subsection but does not purport to be a paraphrase of it.
He continued: Essentially, section 123(2) requires the court to make a judgment whether it has been established that, looking at the companys assets its prospective and contingent and making proper allowance for liabilities, it cannot reasonably be expected to be able to meet those liabilities.
If so, it will be deemed insolvent although it is currently able to pay its debts as they fall due.
The more distant the liabilities, the harder this will be to establish.
I agree with what Toulson LJ said here, and with great respect to Lord Neuberger MR I consider that the point of no return should not pass into common usage as a paraphrase of the effect of section 123(2).
But in the case of a companys liabilities that can as matters now stand be deferred for over 30 years, and where the company is (without any permanent increase in its borrowings) paying its debts as they fall due, the court should proceed with the greatest caution in deciding that the company is in a state of balance sheet insolvency under section 123(2).
Reasoning in the courts below
Sir Andrew Morritt C, having set out some general propositions as to the effect of section 123 (1)(e) and (2) (in paras 29 to 32 of his judgment, summarized above), rejected the A3 Noteholders submission that Eurosail was plainly insolvent for the purposes of section 123(2) as applied by Condition 9(a)(iii).
He relied on four points, set out in paras 34 to 37 of his judgment.
First, Eurosails claims in the insolvencies of LBHI and LBSF, though not admitted, could not be ignored.
The secondary market indicated that the claim was worth 35% to 37% of US$221m (that is, a value of the order of 60m).
Second, a large part of the total deficiency that was claimed to exist was due to conversion into sterling at the prevailing spot rate of liabilities not due for payment until 2045.
Third, the future liabilities were fully funded in the limited sense that deficiencies resulting from mortgage defaults reduced Eurosails liability to the Noteholders through the operation of the Principal Deficiency Ledger.
Fourth, the Chancellor was able to infer that a calculation of the then present values of assets and liabilities would not show a deficiency, since Eurosail was well able to pay its debts as they fell due, there was no deficiency on the Principal Deficiency Ledger, and projected redemptions of each class of A Notes were in advance of the maturity dates.
In the Court of Appeal counsel appearing for the A2 Noteholders did not feel able to give complete support to the Chancellors second point, and Lord Neuberger MR accepted (para 67) the submission of counsel for the appellants: As Mr Sheldon [then appearing for the A3 Noteholders] said, one has to value a future or contingent liability in a foreign currency at the present exchange rate.
By definition, that is the present sterling market value of the liability.
I would also respectfully question the Chancellors third point.
The Chancellor had earlier in his judgment, at para 13, referred to clause 8 of the Cash/Bond Administration Agreement, which provides for the maintenance of Principal Deficiency Ledgers.
That seems to be the basis of his point about liabilities being self cancelling.
But clause 8 seems to be concerned with no more than an accountancy exercise, not with a permanent extinction of liabilities.
It operates to nal redemption date, if circumstances defer liabilities for principal until the fi require, and provided that an Enforcement Notice is not given in the meantime.
But Condition 2(h) provides for Eurosail to be liable on a full recourse basis post enforcement, as already noted (para 18 above).
Lord Neuberger MR did not accept that a forecast deficiency based on then current exchange rates could be dismissed as entirely speculative.
He started (para 63) from Eurosails audited accounts for the year ending 30 November 2009, which showed a net liability of 74.557m.
He noted (paras 63 to 74) that this figure required two substantial amendments (one for the Lehman Brothers claim, and the other for the full recourse factor) which, ironically and coincidentally, virtually cancel each other out (para 69).
So his final discussion and conclusion (paras 75 to 83) starts with an assumed deficiency of the order of 75m.
Against that Lord Neuberger MR set three factors.
The first was that a deficiency of 75m, with an aggregate principal sum of just over 420m outstanding on the mortgages, was less than 17% of the assets.
Secondly, the deficit was largely based on the assumption that exchange rates would remain constant (para 76): Of course, they are as likely to move in an adverse direction as they are to move in a favourable direction, but the volatility of those rates tell against the appellants given that they have to establish that the issuer has reached the point of no return.
Thirdly, the court was looking a long way ahead (para 78): Not only do all the unredeemed notes have a final redemption date in 2045, but it appears from the evidence that the weighted average term of the remaining mortgages is in the region of 18 years, and the rate of early redemption has slowed significantly and is likely, according to expert assessment, to remain low for the time being.
Lord Neuberger MR accepted that there was a real possibility that, if no Enforcement Notice was served, events might turn out to the disadvantage of the A3 Noteholders (para 79): However, as mentioned, a future or contingent creditor of a company can very often show that he would be better off if the company were wound up rather than being permitted to carry on business.
In a commercially sensible legal system that cannot of itself justify the creditor seeking to wind up the company.
Toulson and Wilson LJJ agreed with this reasoning.
Toulson LJ emphasised the importance of the liabilities being distant in time (para 119, quoted in para 42 above).
The appeal was therefore dismissed, as was the cross appeal.
Conclusions
The crucial issue, to my mind, is how far the Court of Appeals conclusion depended on the point of no return test.
For reasons already mentioned, I consider that that is not the correct test, if and in so far as it goes beyond the need for a petitioner to satisfy the court, on the balance of probabilities, that a company has insufficient assets to be able to meet all its liabilities, including prospective and contingent liabilities.
If it means no more than that, it is unhelpful, except as illuminating (as Toulson LJ put it) the purpose of section 123(2).
In my view the Court of Appeal would have reached the same conclusion without reference to any point of no return test; and I would myself reach the same conclusion.
Eurosails ability or inability to pay all its debts, present or future, may not be finally determined until much closer to 2045, that is more than 30 years from now.
The complex documentation under which the loan notes were issued contains several mechanisms (identified in para 22(1) to (4) above, the PECO being disregarded for present purposes) for ensuring that liabilities in respect of principal are, if necessary, deferred until the final redemption date, unless the post enforcement regime comes into operation.
The movements of currencies and interest rates in the mean time, if not entirely speculative, are incapable of prediction with any confidence.
The court cannot be satisfied that there will eventually be a deficiency.
I would therefore dismiss the appeal.
I would also dismiss the cross appeal, for the same reasons as were given by the Chancellor and the Court of Appeal.
It is onsider Mr Dickers arguments based on suppose not necessary to c d inconsistencies and commercial realities, except to say that they would have encountered serious difficulties in the light of this courts decision in Enviroco Ltd v Farstad Supply A/S [2011] UKSC 16, [2011] 1 WLR 921: see the judgment of Lord Collins of Mapesbury, with which the other members of the court agreed, at paras 51 and 52.
The loan notes documentation did indeed contain some provisions (identified in paras 128 to 134 of Eurosails case) which are inconsistent with the post enforcement regime being triggered by a temporary deficiency of assets.
But the court might well have taken the view, on documents of such complexity, that the draftsman had simply failed to grasp all its many and various implications, and that it was not for the court to rewrite the documents for the parties.
LORD HOPE
I would dismiss the appeal for the reasons given by Lord Walker.
I would also dismiss the cross appeal, which concerns the effect of the PECO on the application of section 123(2) of the 1986 Act as in corporated into Condition 9(a)(iii).
The question which it raises no longer needs to be answered as th e Noteholders appeal on the question whether Eurosail (the Issuer) was unable to pay its debts was not successful.
But Sir Andrew Morritt C [2011] 1 WLR 122 gave his view on it in paras 39 44 of his judgment, and so too did Lord Neuberger MR in the Court of Appeal [2011] 1 WLR 2524 in paras 84 100.
A PECO is widely used in securitisation transactions of the kind that was entered into in this case, and we have been told that the question is of some importance to the securitisation market more generally.
So it is appropriate that we should give our reasons for agreeing with the Chancellor and the Court of Appeal that it has no effect on the way the liability of the Issuer to the Noteholders for the purposes of the default provision in Condition 9(a)(iii) is to be calculated.
The Trustee entered into a PECO Agreement on behalf of the Noteholders on 16 July 2007, which is the same date as that on which the Notes were issued.
By Clause 3.1 it granted an option to a company called Eurosail Options Ltd (referred to in the Agreement as OptionCo): to acquire all (but not some only) of the Notes (plus accrued interest thereon) in the event that the Security for the Notes is enforced and the Trustee, after the payment of the proceeds of such enforcement, determines that the proceeds of such enforcement are insufficient, after payment of all claims ranking in priority to or pari passu with the Notes pursuant to the Deed of Charge, to pay in full all principal and/or interest and any other amounts whatsoever due in respect of the Notes.
The Trustee shall promptly after the Security is enforced and the proceeds of such enforcement are paid, make a determination of whether or not there is such an insufficiency.
If the Trustee determines that there is such an insufficiency the Trustee shall forthwith give notice (the In sufficiency Notice) of such determination to OptionCo and the Issuer.
Clause 3.1 has to be read together with Condition 5(j) (see para 19, above), which provides that each Noteholder will, on the exercise of the option conferred on OptionCo, sell to the company the whole of his holding of notes for the nominal consideration for which the PECO provides.
It also has to be read together with the Event of Default described in Condition 9(a)(iii): see para 5, above.
Under that provision a default occurs, among other things, in the event of the Issuer: being unable to pay its debts as and when they fall due or, within the meaning of section 123(1) or (2) (as if the words it is proved to the satisfaction of the court did not appear in section 123(2)) of the Insolvency Act 1986 (as that section may be amended from time to time), being deemed unable to pay its debts.
The Prospectus at p 26 contains this explanation of the effect of these provisions, under the heading Considerations related to the Instruments, for prospective purchasers: Although the Instruments will be full recourse obligations of the Issuer, upon enforcement of the security for the Instruments, the Trustee will, in practice, have recourse only to the Loans and Collateral Security, and to any other assets of the Issuer then in
existence as described in this document
The purpose of a PECO is to achieve bankruptcy remoteness for the issuer.
Its aim is to prevent the issuer from being susceptible to insolvent winding up proceedings by ensuring so far as possible that, if its assets prove to be insufficient the issuer will not instigate bankruptcy to meet its liabilities, a director of proceedings in respect of it.
Bankruptcy remoteness is one of the criteria used by the rating agencies which issuers of notes seek to satisfy so that their instruments will achieve the highest possible credit rating.
That criterion is satisfied in other jurisdictions by provisions which limit the rights of noteholders against the issuer to the value of the issuers assets.
Until recent tax legislation altered the position, limited recourse provisions of that kind gave rise to UK stamp duty reserve tax at the rate of 1.5% of the amount subscribed for them.
As the Chancellor explained in para 40, the PECO is designed to achieve the same result as limited recourse provisions, but without the adverse tax consequences.
The Issuer accepts that, as a matter of contract, the liabilities were unlimited in recourse.
But it maintains that the commercial reality was that the liabilities alleged to be the debts that the issuer was unable to pay to the Noteholder were liabilities which it would never have to meet.
In the event that the assets of the Issuer were exhausted, any claim that the Noteholder had against the Issuer would be assigned to the option holder.
That, it is said, would bring an end to the claim.
So it would be wrong to treat the Issuer ion 123(2) as as falling within sect incorporated into Condition 9(a)(iii) on the ground that it was unable to pay its debts, as in practice it was never intended or expected that the liabilities would be paid except out of the underlying assets available to the Issuer.
The soundness of this approach depends however on whether, in law, the the Issuer to the Noteholder.
In answering this PECO affects the liability of question it is important to appreciate that the question is not whether the Issuer should actually be wound up on the grounds described in section 123(2), but whether its financial position is such that it falls within that subsection for the purposes of the default provision in C ondition 9(a)(iii).
The answer to that question is to be found by examining the wording of the Condition in the context of the provisions of the transaction documents as a whole.
Does the PECO in any way alter the conclusion that would otherwise be drawn that the Issuers assets were less than its liabilities and that it was unable to pay its debts?
The Chancellor based his judgment that it did not on the wording of section 123(2), as amended for the purposes of Condition 9(a)(iii).
He held that if, in the application of that subsection the court concluded that the value of the companys assets was less than the amount of its liabilities, taking into account its contingent and prospective liabilities, the PECO had no effect on those liabilities at all: para 43.
As he put it, the liabilities of the Issuer remain the same, whether or not there is a PECO or, if there is, whether or not the call option has been exercised.
Unless and until the option holder releases the Issuer from all further liability, which it is under no obligation to do, the liability of the Issuer is unaffected.
Lord Neuberger reached the same conclusion, but for fuller reasons: see paras 92 97.
He said that, reading the relevant provisions of the documents together, they established that the Issuers liability to the Noteholders was to be treated as a liability of full recourse at least until the security was enforced and, arguably, until the option was exercised and the transfer to the option holder was completed.
There was the statement in the Prospectus mentioned in para 54, above.
It suggested a two stage process, under which the Issuers liability was treated initially as full recourse and liability would become limited recourse only on enforcement of the security.
There was the closing part of clause 6.7 of the Deed of Charge which, having restricted the ability of the Trustee to enforce the Noteholders rights on enforcement of the Security beyond the Issuers assets, provided that this shall not apply to and shall not limit the obligations of the Issuer to the [Noteholders] under the Instruments and this Deed.
And there was the provision in Condition 2(h), which stated in terms that the Noteholders had full recourse to the Issuer in respect of payments due and that they were entitled to bring a claim under English law for the full amount of such payments.
Finally Lord Neuberger referred to the wording of Condition 9(a)(iii) itself.
It was hard to see why any reference should be made in that Condition to section 123(2) if the Noteholders rights against the Issuer were not to be treated as full recourse until the enforcement of the security.
He also said that there was nothing commercially insensible in the conclusion that, for the purpose of Condition 9(a)(iii), the Noteholders rights against the Issuer were treated as being of full recourse, notwithstanding the PECO: para 100.
The A3 Noteholders submit that the key operative provision is Clause 3.1 of the PECO itself.
It makes it plain that it does not have the effect of limiting the liability of the Issuer in respect of the Notes to the value of the Issuers assets.
Its reference to there being an insufficiency of assets after enforcement to meet whatever is due in respect of the Notes is a clear indication that it contemplates that the amount of the liabilities that the Notes have created must be capable of exceeding the value of the assets of the Issuer.
Then there is the time at which the option is exercisable.
It is not said to have any operative effect at all prior to enforcement of the security.
So at all times prior to its exercise the Noteholders remain entitled to payment in accordance with the Conditions.
And even when exercised all it does is provide a mechanism by which the right to be paid under the Notes is assigned to OptionCo.
As the Issuer relies on commercial reality rather than legal form, the legal effect of the documents is not really in dispute.
The common intention of the parties is said by the Issuer to be quite different.
Its argument is that, as inclusion of a PECO rather than a contractual limited recourse provision was done solely for tax reasons, it was not intended or unders tood to alter the commercial nature, effect and operation of the asset backed securitisation.
As a matter of contract the liabilities were unlimited in recourse.
As a matter of commercial substance and in valent of a provision by which the rights of practice, they were the equi Noteholders were expressly limited.
The Issuers case is that its future obligations to pay principal under the Notes should be taken into account only to the extent that its assets were sufficient to pay for them.
As Mr Dicker QC for the Issuer put it at the end of his argument, legal fo rm should not triumph over commercial substance.
distinguish the intended commercial effect of these provisions from their legal effect in this way.
The exercise that Condition 9(a)(iii) predicates is the quantification of the amount of the Issuers assets and liabilities in order to determine whether there has been an Event of Default.
The legal effect and the commerc ial effect of the PECO, on its true analysis, both point in the same direction.
It has no effect, for the purpose of that quantification, on the amount of the Issuers liabilities.
To limit those liabilities as the Issuer contends would contradict the parties clearly expressed commercial intention as found in the contractual documents.
The fact that the economic result of the PECO may be the same as if the Noteholders right of recourse had been limited to the Issuers assets is beside the point.
It can be expected to achieve bankruptcy remoteness as effectively.
But it would not be in accordance with the true meaning of the documents to treat the two methods as if they had the same effect in law.
Page I do not think that it is possible to
when the provisions are open to different interpretations.
The court should adopt the more, rather than the less, commercial construction: Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900.
But, for the reasons given by the Chancellor and Lord Neuberger MR, the meaning to be given to the language that the parties used in this case is not open to doubt.
The suggestion that to give effect to that meaning is to surrender to legal form over commercial substance amounts, in effect, to an invitation to depart from the settled role of commercial good sense.
Its role is to find out what the par ties meant when they entered into the arrangement, not to replace it with something which is not to be found in the language of the documents at all.
The ultimate aim in construing provisions of the kind that are in issue in this case, as it is when construing any contract, is to determine what the parties meant by the language that they have used.
Commercial good sense has a role to play
|
Interest bearing loan notes (the notes) to the value of 660m were issued to certain companies (the Noteholders) by a special purpose vehicle formed by the Lehman Brothers group, Eurosail UK 2007 3BL (the Issuer).
The Issuer used the issue of the notes to fund the purchase of a portfolio of mortgage loans, to the value of 650m, secured on residential property in the United Kingdom.
The notes were issued in 5 principal classes in order of priority for repayment.
Those classes run from A through to E, and comprise a total of 14 sub classes.
The A notes hold highest priority, are of the highest value, and are designated either A1, A2 or A3.
The final redemption date of the lowest priority notes is in 2045.
The terms governing the issue of the notes (the Conditions) provide that in the event of an Event of Default, an Enforcement Notice may be served by the trustee of the Noteholders rights, namely BNY Corporate Trustee Services Ltd (the Trustee).
If the Issuer becomes unable to pay its debts under the terms of section 123 of the Insolvency Act 1986 (the 1986 Act), that would constitute an Event of Default.
That section provides that a company is deemed unable to pay its debts, first, if it is unable to pay those debts as they fall due or, secondly, if the value of the companys assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
The former is often referred to as the cash flow test, and the latter as the balance sheet test.
The effect of section 123 was incorporated into the Conditions.
Further, on the date on which the notes were issued, on behalf of the Noteholders the Trustee entered into an agreement (PECO) with another company (OptionCo).
OptionCo was granted the option to purchase all of the notes from the Noteholders, plus the accrued interest, for a nominal consideration in the event that the Trustee determines that the Issuer is unable to pay its debts under section 123.
The intended effect of this was that, in the event that the assets of the Issuer were exhausted, the remaining claims of the Noteholders against the Issuer would be assigned to OptionCo, and the Issuer would not be regarded as unable to pay its debts.
The Issuer had entered into swap agreements with two of Lehman Brothers companies, with the consequence that when the latter became insolvent the Issuer suffered a significant deficiency in its net asset position, though it continued to pay its debts.
The holders of the A1 and certain other of the notes had been repaid by this time.
The A2 Noteholders were to have priority over A3 Noteholders in receiving repayments of principal out of sums raised by the Issuer from the redemption of mortgages in the portfolio, though those two groups would rank equally for repayment of interest.
However, a finding that the Issuer was unable to pay its debts, and the consequent issuing of an Enforcement Notice, would alter this position significantly: all notes would become immediately due and payable and, importantly, A2 and A3 Noteholders would rank equally for repayment of principal.
Against that background, though adopting a neutral position, the Trustee commenced these proceedings to seek a determination of whether the difficulties suffered by the Issuer constituted an Event of Default on the basis that it was unable to pay its debts within the meaning of section 123 of the 1986 Act.
This appeal is therefore concerned with the construction of section 123.
The Issuer and certain of the A2 Noteholders successfully argued in both the High Court and the Court of Appeal that the Issuer was not unable to pay its debts within the meaning of section 123.
The Appellants, who are A3 Noteholders, argue to the contrary, and seek a stricter construction of section 123 than that which was applied by the lower courts.
By way of cross appeal the Issuer renews its argument, rejected by the Court of Appeal, that in the event that the Issuer was otherwise deemed unable to pay its debts under section 123, the effect of the PECO should serve to alter that conclusion.
The Supreme Court unanimously dismisses the appeals and the Issuers cross appeal.
Lord Walker, with whom Lord Mance, Lord Sumption and Lord Carnwath agree, gives the lead judgment.
Lord Hope gives a concurring judgment.
Having regard to previous relevant legislation, to the authorities pertaining to those provisions and to section 123 of the 1986 Act itself, the enactment of section 123 should be seen as having made little significant change in the law.
The changes in form therein emphasise that the cash flow test is concerned with debts falling due from time to time in the reasonably near future, in addition to those debts presently due.
What is to be regarded as the reasonably near future will depend on the circumstances at hand, but especially the nature of the companys business [37].
However, once one moves beyond the reasonably near future, any attempt to apply the cash flow test will become completely speculative.
In that situation, a comparison of present assets with present and future liabilities, the latter having been discounted to account for contingencies and deferment of payments, becomes the only sensible test.
That is the reason for the inclusion of the balance sheet test in section 123, though it is still very far from an exact test.
It is for the party asserting balance sheet insolvency to establish insolvency of that nature [37].
Whether or not the balance sheet test of insolvency is satisfied must depend on the available evidence as to the circumstances of the particular case.
In that regard, the Issuer is not engaged in normal, on going trading activities, and therefore its present assets should be a better guide to its ability to meet its long term liabilities.
Against that, the impact of factors relevant to its business in the period until the final redemption rate in 2045, such as currency movements, interest rates and the economy and housing market of the United Kingdom, must be considered.
However, they are a matter of speculation rather than calculation or prediction on a scientific basis [38, 49].
As the Issuers liabilities can, as matters stand, be deferred until 2045, and as it is currently paying its debts as they fall due, the Court should proceed with the greatest caution in deciding that it is in a state of balance sheet insolvency [42].
Its ability to pay all its debts, present or future, may not be finally determined until much closer to 2045.
The Conditions contain several mechanisms to ensure that liabilities in respect of principal can be deferred until that date.
That being so, the Court cannot be satisfied that there will eventually be an inability on the part of the Issuer to pay its debts [49].
Though it is not required to decide the point because the appeal is dismissed, PECO agreements are of importance to the securitisation market.
So the Court gives reasons for its decision to dismiss the cross appeal [51].
In that regard, the intended legal and commercial effects of the PECO, having regard to the wording of the documents pertaining to the transaction as a whole, point in the same direction: they do not affect the quantification of the Issuers liabilities.
The meaning to be given to the language used by the parties on this point is not open to doubt.
It would not be consistent with commercial good sense to depart from it [64].
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Payment Protection Insurance (or PPI) is sold to borrowers to cover the repayment of specified borrowings upon the occurrence of an insured event, generally sickness, accidental injury, or unemployment.
In its report, Market Investigation into Payment Protection Insurance (29 January 2009), the Competition Commission recorded that PPI was commonly sold as part of a package with the loan itself, and in those cases usually provided for a single premium to be paid upfront at the time of the transaction and added to the amount borrowed.
Commissions payable to intermediaries were high, typically between 50 and 80 per cent of gross written premium for policies sold in connection with a personal loan.
These levels of commission were much higher than those payable for introducing the loan itself, which meant that a large proportion of the profits of loan brokers was derived from selling PPI policies.
The Commission found that the market for PPI sold as a package with loans was characterised by limited competition and low levels of substitutability, and that these factors resulted in high premiums relative to what would be expected in a well functioning market.
They made a number of recommendations, including a prohibition of selling PPI in a package with the loan and a prohibition on single premium policies.
These recommendations have since been adopted.
Sections 140A to 140D of the Consumer Credit Act 1974 confer wide powers on the court to reopen unfair credit transactions.
This appeal is about the application of those provisions to a PPI policy issued in 2006 to Mrs Susan Plevin. 3.
Mrs Plevin was then a widowed college lecturer of fifty nine living in her own house, with a mortgage and various unsecured personal debts.
She responded to an unsolicited leaflet put through her letter box by an independent credit broker called LLP Processing (UK) Ltd, which has since gone into liquidation.
They offered to arrange the refinancing of her existing liabilities at a competitive rate of interest over a long term, secured on her home.
She telephoned LLP and told them that she was interested in borrowing money to pay off her existing debts and fund some home improvements.
During the call, LLP completed an internal form called a Demands and Needs Statement on the basis of information provided by her.
They then proposed that she should borrow 34,000 from Paragon Personal Finance Ltd, repayable in instalments over ten years, and take out PPI for five years with Norwich Union.
The PPI premium was 5,780, which was payable at the outset and added to the amount of the loan making a total borrowing of 39,780.
Paragon was one of eleven lenders with whom LLP had arrangements to introduce clients.
These arrangements allowed them to input details of the proposed loan into a Paragon computer system and obtain a preliminary indication of whether the transaction was likely to be acceptable.
Each lender had an arrangement with a designated insurer who underwrote PPI policies associated with its loans.
Norwich Union was the insurer designated by Paragon. 5. 4.
After the telephone conversation, LLP sent Mrs Plevin a letter recording their proposal, and quoting a premium for PPI cover at 5,780.
It enclosed a Key Facts document describing the insurance cover, a Borrower Information Guide produced by the Finance Industry Standards Association (FISA) and an application form.
The application form, which Mrs Plevin completed and dated 6 March 2006, recorded brief details of her income and outgoings, including her current mortgage, and that she wished to borrow 34,000 and buy a PPI policy.
The form was returned to LLP.
Subsequently, she was telephoned by an employee of Paragon.
This call was made in accordance with a standard internal procedure and was known as a speak with.
It resulted in the generation within Paragon of a computerised form headed Money Laundering Details.
The body of the form confirms what the title would lead one to expect, namely that it is concerned with satisfying Paragons obligations under the money laundering legislation and regulations.
It established Mrs Plevins identity, that she had applied for the loan in the amount stated in the application form, the purpose for which she required it and the amount and date of the first payment.
It also confirmed that no upfront application fee had been charged by LLP, which would have been contrary to the FISA code of practice.
The speak with was not intended to appraise the suitability of the transaction for Mrs Plevins purposes.
On 21 March 2006, Paragon sent her a copy of the credit agreement, the PPI certificate and four cheques, three of which were payable to her designated creditors and the fourth to her personally.
These were the only instances of direct contact between Mrs Plevin and Paragon. 6.
Of the 5,780 premium, 71.8% was taken in commissions from the premium before it was remitted by Paragon to Norwich Union.
LLP received 1,870 and Paragon retained 2,280.
The net sum of 1,630 was then remitted by Paragon to Norwich Union.
The FISA borrowers guide told Mrs Plevin that commission is paid by the lending company.
But neither the amount of the commission nor the identity of the recipients was disclosed.
Sections 140A to 140C: General considerations 7.
These provisions were added to the Consumer Credit Act 1974 by sections 19 22 of the Consumer Credit Act 2006.
They replaced provisions which had conferred a limited power to reopen extortionate credit bargains (sections 137 140 of the 1974 Act) but set too high a bar to debtors and sureties wishing to challenge the terms of their agreements.
The new provisions came into force on 6 April 2007, after the agreement with Mrs Plevin was made, but they apply by virtue of the transitional provisions of Schedule 3 of the Act.
Section 140A provides, so far as relevant, as follows: 8. 140A Unfair relationships between creditors and debtors (1) The court may make an order under section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following (a) any of the terms of the agreement or of any related agreement; (b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement; (c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement). (2) In deciding whether to make a determination under this section the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor). (3) For the purposes of this section the court shall (except to the extent that it is not appropriate to do so) treat anything done (or not done) by, or on behalf of, or in relation to, an associate 9. or a former associate of the creditor as if done (or not done) by, or on behalf of, or in relation to, the creditor.
Section 140B(9) provides that where the debtor (or a surety) alleges that the relationship is unfair, it is for the creditor to prove that it is not.
Section 140B lists the orders which a court may make if it finds the debtor creditor relationship to be unfair including, under subsection (1)(a) an order requiring the creditor to repay (in whole or in part) any sum paid by the debtor . by virtue of the agreement or any related agreement. 10.
Section 140A is deliberately framed in wide terms with very little in the way of guidance about the criteria for its application, such as is to be found in other provisions of the Act conferring discretionary powers on the courts.
It is not possible to state a precise or universal test for its application, which must depend on the courts judgment of all the relevant facts.
Some general points may, however, be made.
First, what must be unfair is the relationship between the debtor and the creditor.
In a case like the present one, where the terms themselves are not intrinsically unfair, this will often be because the relationship is so one sided as substantially to limit the debtors ability to choose.
Secondly, although the court is concerned with hardship to the debtor, subsection 140A(2) envisages that matters relating to the creditor or the debtor may also be relevant.
There may be features of the transaction which operate harshly against the debtor but it does not necessarily follow that the relationship is unfair.
These features may be required in order to protect what the court regards as a legitimate interest of the creditor.
Thirdly, the alleged unfairness must arise from one of the three categories of cause listed at sub paras (a) to (c).
Fourthly, the great majority of relationships between commercial lenders and private borrowers are probably characterised by large differences of financial knowledge and expertise.
It is an inherently unequal relationship.
But it cannot have been Parliaments intention that the generality of such relationships should be liable to be reopened for that reason alone.
The proceedings 11.
In January 2009, Mrs Plevin brought proceedings against LLP and Paragon.
As against LLP, she claimed damages or equitable compensation on the basis that they were in breach of their duties as her fiduciary agents.
Nothing more needs to be said about that.
The claim against LLP was settled in 2010 for 3,000, which was ultimately paid from the Financial Services Compensation Scheme.
As against Paragon, the pleaded case was described by Recorder Yip QC as grossly over complicated (para 11), but the issues were narrowed in the course of the trial and some of them fell away in the light of the Recorders findings of fact.
The main point taken on Mrs Plevins behalf, and the only one still in issue, is that so far as it related to the PPI policy Mrs Plevins relationship with Paragon was unfair within the meaning of section 140A(1)(c) of the Consumer Credit Act, because of something done (or not done) by, or on behalf of, the creditor.
The unfairness was said to arise from (i) the non disclosure of the amount of the commissions, (ii) the failure of any of those involved to assess and advise upon the suitability of the PPI for her needs, given that it covered only half the term of the loan, that she had no dependents, that she already had life insurance and that her terms of employment included generous sickness and redundancy benefits.
So far as these two matters represented defaults on the part of LLP, Mrs Plevins case was that LLP committed the defaults on behalf of Paragon.
The regulatory framework 12.
The sale and administration of general insurance and non investment life business is now a heavily regulated field.
The conduct of insurance intermediaries is governed by a statutory scheme which implements the Directive 2002/92/EC on Insurance Mediation.
The relevant parts of the scheme were at the time of this transaction contained in the Insurance Conduct of Business Rules (ICOB) made by the Financial Services Authority under powers conferred by the Financial Services and Markets Act 2000.
These rules created duties owed directly by the provider of the service to the insured, actionable under what was then section 150 of the Act.
I shall refer to them in the form in which they stood at the time of Mrs Plevins transaction. 13.
For the purpose of the rules an insurance intermediary means any natural or legal person who, for remuneration, takes up or pursues insurance mediation.
Insurance mediation includes the activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts (article 2 of the Directive).
In this case, both LLP and Paragon acted as insurance intermediaries, LLP because it proposed the PPI policy to Mrs Plevin and carried out work preparatory to its conclusion, and Paragon because it arranged the contract with Norwich Union pursuant to its existing arrangements with them.
However, the rules do not necessarily apply to all insurance intermediaries involved in a particular transaction.
ICOB 1.2.3(2) provides: Where there is a chain of insurance intermediaries between the insurer and the customer, ICOB applies only to the insurance intermediary in contact with the customer.
The question who is in contact with the customer may admit of more than one answer, depending on what the relevant ICOB obligation is and who performed the corresponding function.
For most purposes, the intermediary in contact with Mrs Plevin in this case was LLP.
The only direct contact that she had with Paragon before the contract was concluded consisted in the speak with. 15.
Non disclosure of the commission arrangements 14.
Article 12 of the Insurance Mediation Directive requires the disclosure by an insurance intermediary of certain minimum categories of information, which do not include commissions.
The disclosure requirements under the ICOB rules are more extensive.
ICOB 4.6.1 requires the disclosure by an insurance intermediary which is not itself an insurer of commissions receivable by it or its associates, but only to commercial customers and then only if the customer asks for the information.
The ICOB rules do not require an insurance intermediary to volunteer the amount or even the existence of commissions, or to disclose this information even on request to a non commercial customer.
The only disclosure obligations owed to non commercial customers are those arising under the general law.
ICOB 4.6.2 points out that where the insurance intermediary is the agent of the insured, he may have an obligation under the general law to tell a customer of whatever description about commissions if asked, but it imposes no corresponding statutory obligation.
It is clear that the absence of a statutory obligation to disclose commissions to a non commercial customer resulted from a considered policy of the Financial Services Authority.
The Authoritys Consultation Paper No 160, published in December 2002, at para 11.7 gave two reasons why it thought that commission disclosure may not be necessary.
The first was that the purchase of insurance was different from the purchase of investments, because when the customer is laying out money for investment he needs to know how much of his money is being invested, whereas when he is buying an insurance contract he knows what he is getting because the premium and the cover are disclosed.
In effect, the Authority was saying that commissions in an insurance transaction are simply a marketing cost of the supplier, like the cost of advertising or employing a sales force, and are no more relevant than any other part of its costs.
The Authoritys second reason was that customers tend to shop around for insurance and can compare policies and spot poor value products.
Where (as in this case) insurance was sold as part of a package with other services, the scope for shopping around is diminished, but consumers would be sufficiently protected by requiring the premium to be separately disclosed.
It added that commissions were not always straightforward to calculate, especially when there was a number of intermediaries involved, and that their disclosure might cause confusion or information overload.
In its Consultation Paper No 187 (June 2003) reporting on the outcome of the consultation, the Authority maintained its position. 16.
The current leading case on the relationship between section 140A and the ICOB rules is the decision of the Court of Appeal in Harrison v Black Horse Ltd [2012] Lloyds Rep IR 521.
The Court of Appeal considered an application by a borrower under section 140A to recover the single premium paid on a PPI policy sold with a loan.
There was no credit broker involved.
The borrower dealt directly with the lender, who acted as an intermediary with the insurer.
The commission taken by the lender was 87%.
Tomlinson LJ, delivering the only reasoned judgment, described this level of commission as quite startling, adding that there would be many who would regard it as unacceptable conduct on the part of lending institutions to have profited in this way.
But he declined to find that the relationship was thereby rendered unfair, because the lender had committed no breach of the ICOB rules either in charging the commission or in failing to disclose it.
At para 58, he said: the touchstone must in my view be the standard imposed by the regulatory authorities pursuant to their statutory duties, not resort to a visceral instinct that the relevant conduct is beyond the Pale, In that regard it is clear that the ICOB regime, after due consultation and consideration, does not require the disclosure of the receipt of commission.
It would be an anomalous result if a lender was obliged to disclose receipt of a commission in order to escape a finding of unfairness under section 140A of the Act but yet not obliged to disclose it pursuant to the statutorily imposed regulatory framework under which it operates.
The result of this decision was that in the present case both the Recorder and the Court of Appeal were bound to dismiss Mrs Plevins claim so far as it was based on non disclosure of the commission.
The Court of Appeal expressed dismay at this outcome.
In my opinion, the dismay was justified.
I think that Harrison was wrongly decided. 17.
The view which a court takes of the fairness or unfairness of a debtor creditor relationship may legitimately be influenced by the standard of commercial conduct reasonably to be expected of the creditor.
The ICOB rules are some evidence of what that standard is.
But they cannot be determinative of the question posed by section 140A, because they are doing different things.
The fundamental difference is that the ICOB rules impose obligations on insurers 18. and insurance intermediaries.
Section 140A, by comparison, does not impose any obligation and is not concerned with the question whether the creditor or anyone else is in breach of a duty.
It is concerned with the question whether the creditors relationship with the debtor was unfair.
It may be unfair for a variety of reasons, which do not have to involve a breach of duty.
There are other differences, which flow from this.
The ICOB rules impose a minimum standard of conduct applicable in a wide range of situations, enforceable by action and sounding in damages.
Section 140A introduces a broader test of fairness applied to the particular debtor creditor relationship, which may lead to the transaction being reopened as a matter of judicial discretion.
The standard of conduct required of practitioners by the ICOB rules is laid down in advance by the Financial Services Authority (now the Financial Conduct Authority), whereas the standard of fairness in a debtor creditor relationship is a matter for the court, on which it must make its own assessment.
Most of the ICOB rules, including those relating to the disclosure of commission, impose hard edged requirements, whereas the question of fairness involves a large element of forensic judgment.
It follows that the question whether the debtor creditor relationship is fair cannot be the same as the question whether the creditor has complied with the ICOB rules, and the facts which may be relevant to answer it are manifestly different.
An altogether wider range of considerations may be relevant to the fairness of the relationship, most of which would not be relevant to the application of the rules.
They include the characteristics of the borrower, her sophistication or vulnerability, the facts which she could reasonably be expected to know or assume, the range of choices available to her, and the degree to which the creditor was or should have been aware of these matters.
I turn therefore to the question whether the non disclosure of the commissions payable out of Mrs Plevins PPI premium made her relationship with Paragon unfair.
In my opinion, it did.
A sufficiently extreme inequality of knowledge and understanding is a classic source of unfairness in any relationship between a creditor and a non commercial debtor.
It is a question of degree.
Mrs Plevin must be taken to have known that some commission would be payable to intermediaries out of the premium before it reached the insurer.
The fact was stated in the FISA borrowers guide and, given that she was not paying LLP for their services, there was no other way that they could have been remunerated.
But at some point commissions may become so large that the relationship cannot be regarded as fair if the customer is kept in ignorance.
At what point is difficult to say, but wherever the tipping point may lie the commissions paid in this case are a long way beyond it.
Mrs Plevins evidence, as recorded by the Recorder, was that if she had known that 71.8% of the premium would be paid out in commissions, she would have certainly questioned this.
I do not find that evidence surprising.
The information was of critical relevance.
Of course, had she shopped around, she would not necessarily have got better terms.
As the Competition Commissions report suggests, this was not a competitive market.
But Mrs Plevin did not have to take PPI at all.
Any reasonable person in her position who was told that more than two thirds of the premium was going to intermediaries, would be bound to question whether the insurance represented value for money, and whether it was a sensible transaction to enter into.
The fact that she was left in ignorance in my opinion made the relationship unfair. 19.
The next question is whether that state of affairs arose from something done or not done by or on behalf of Paragon.
For this purpose it is enough to consider the acts or omissions of Paragon itself, without exploring the conduct of others acting on its behalf.
Paragon owed no legal duty to Mrs Plevin under the ICOB rules to disclose the commissions and, not being her agent or adviser, they owed no such duty under the general law either.
However, as I have already pointed out, the question which arises under section 140A(1)(c) is not whether there was a legal duty to disclose the commissions.
It is whether the unfairness arising from their non disclosure was due to something done or not done by Paragon.
Where the creditor has done a positive act which makes the relationship unfair, this gives rise to no particular conceptual difficulty.
But the concept of causing a relationship to be unfair by not doing something is more problematical.
It necessarily implies that the Act treats the creditor as being responsible for the unfairness which results from his inaction, even if that responsibility falls short of a legal duty.
What is it that engages that responsibility? Bearing in mind the breadth of section 140A and the incidence of the burden of proof according to section 140B(9), the creditor must normally be regarded as responsible for an omission making his relationship with the debtor unfair if he fails to take such steps as (i) it would be reasonable to expect the creditor or someone acting on his behalf to take in the interests of fairness, and (ii) would have removed the source of that unfairness or mitigated its consequences so that the relationship as a whole can no longer be regarded as unfair. 20.
On that footing, I think it clear that the unfairness which arose from the non disclosure of the amount of the commissions was the responsibility of Paragon.
Paragon were the only party who must necessarily have known the size of both commissions.
They could have disclosed them to Mrs Plevin.
Given its significance for her decision, I consider that in the interests of fairness it would have been reasonable to expect them to do so.
Had they done so this particular source of unfairness would have been removed because Mrs Plevin would then have been able to make a properly informed judgment about the value of the PPI policy.
This is sufficiently demonstrated by her evidence that she would have questioned the commissions if she had known about them, even if the evidence does not establish what decision she would ultimately have made.
Failure to assess the suitability of PPI for Mrs Plevins needs 21.
ICOB 4.3.1 provides: Requirements for suitability (1) An insurance intermediary must take reasonable steps to ensure that, if in the course of insurance mediation activities it makes any personal recommendation to a customer to buy or sell a non investment insurance contract, the personal recommendation is suitable for the customer's demands and needs at the time the personal recommendation is made. (2) The personal recommendation in (1) must be based on the scope of the service disclosed in accordance with ICOB 4.2.8 R(6). (3) An insurance intermediary may make a personal recommendation of a non investment insurance contract that does not meet all of the customer's demands and needs, provided that: there is no non investment insurance contract within the insurance intermediary's scope, as determined by ICOB 4.2.8 R(6), that meets all of the customer's demands and needs; and the insurance intermediary identifies to the customer, at the point at which the personal recommendation is made, the demands and needs that are not met by the contract that it personally recommends. 22.
ICOB 4.3.2 provides: Information about the customers demands and needs In assessing the customer's demands and needs, the insurance intermediary must: (1) seek such information about the customer's circumstances and objectives as might reasonably be expected to be relevant in enabling the insurance intermediary to identify the customer's requirements.
This must include any facts that would affect the type of insurance recommended, such as any relevant existing insurance; (2) have regard to any relevant details about the customer that are readily available and accessible to the insurance intermediary, for example, in respect of other contracts of insurance on which the insurance intermediary has provided advice or information; and (3) explain to the customer his duty to disclose all circumstances material to the insurance and the consequences of any failure to make such a disclosure, both before the non investment insurance contract commences and throughout the duration of the contract; and take account of the information that the customer discloses. 23.
The obligation under ICOB 4.3.1 and 4.3.2 arises where a personal recommendation to buy an insurance contract is made by an insurance intermediary.
For that purpose, the relevant intermediary in Mrs Plevins case was LLP, which was the only party that made a personal recommendation to her.
Moreover, LLP was the only intermediary in the chain in contact with her for this purpose.
It follows that ICOB 4.3.1 applied in this transaction only to LLP.
It did not apply to Paragon.
Nor did Paragon owe any other legal duty to assess Mrs Plevins needs and advise her on the suitability of PPI for her. 24.
The Recorder thought that that was the end of the matter and dismissed this part of Mrs Plevins claim along with the rest of it.
I think that that was an error.
Two further questions arose.
The first was whether it was reasonable in the interests of fairness to expect Paragon to assess Mrs Plevins needs themselves, notwithstanding the absence of any legal obligation to do so.
Neither the Recorder nor the Court of Appeal addressed that question because they were bound by Harrison to treat the absence of a regulatory duty as conclusive.
The second question, which arose whether or not Harrison was rightly decided, was whether in the relevant respects LLP, who undoubtedly did have a regulatory duty to assess Mrs Plevins needs, were acting on behalf of Paragon for the purpose of section 140A(1)(c). 25.
I approach both questions on the footing that beyond a point, inequality of financial expertise as between the debtor and the creditor is capable of making their relationship unfair.
The provision to a financially unsophisticated debtor of bad advice or no advice about the suitability of a relatively complex product like PPI will commonly result in a one sided relationship substantially limiting the debtors ability to choose.
I shall assume for present purposes that that was true of Mrs Plevins case, although the Recorder made no findings of fact about it. 26.
Even on that assumption, however, I consider that Paragon could not reasonably have been expected in the interests of fairness to conduct their own needs assessment and give Mrs Plevin advice about it.
Although the absence of a regulatory duty is not conclusive, in this particular context it is highly relevant.
In relation to the disclosure of commissions, the ICOB rules impose no duty on any one.
By comparison it does impose a duty to assess and advise upon the suitability of the product, but assigns that duty to LLP as the party dealing directly with the customer.
I do not think that Paragon could reasonably have been expected to perform a function which the relevant statutory code of regulation expressly assigned to someone else. 27.
The real question is therefore the second one, namely whether the acts or omissions of LLP were done (or not done) on behalf of Paragon.
The Court of Appeal [2014] Bus LR 553 considered that they were.
Briggs LJ, in a judgment with which Moses and Beatson LJJ agreed, accepted an argument advanced on behalf of Mrs Plevin which he summarised as follows: 48.
For Mrs Plevin, Mr. Strachan submitted that the phrase on behalf of was designed to bring within the purview of the court's consideration any relevant act or omission by a person who, in a non technical sense, would be viewed by the man on the Clapham omnibus as having played some part in the bringing about of the credit agreement for the creditor.
Thus it typically applied to any intermediary paid a commission for introducing the customer to the creditor, or (which may be the same thing) procuring the business represented by the credit agreement (and any related agreement) for the creditor.
Thus it applied to the acts and omissions of any intermediary, whether acting as agent for the creditor or as a mere broker without an agency relationship with either party to the credit agreement, at least where the broker received commission from (or via) the creditor. 49.
Put shortly, the difference between the rival submissions is that Mr Elliott submitted that on behalf of is designed only to capture conduct (including omissions) for which the creditor can be said to bear or share some responsibility, whereas Mr Strachan submits that it captures all conduct beneficial to the creditor, in the sense that it played some material part in the bringing about of the transaction giving rise to the allegedly unfair relationship.
Proof that the person whose conduct is prayed in aid received a commission from, or via, the creditor brings on board the whole of that person's conduct, within section 140A(1)(c) 28.
Briggs LJs reason for preferring Mr Strachans argument was, in summary, that any limitation of section 140A(1)(c) to acts or omissions for which the creditor was personally or vicariously responsible would imply that the subsection extended only to breaches of duty under the ICOB rules or the general law.
Since the creditor would be legally liable for those anyway, even without section 140A, Mr Elliotts argument would give section 140A very little additional effect.
Briggs LJ considered that unfairness did not have to arise from a breach of duty.
He therefore rejected what he called the narrower view of the words by or behalf of the creditor advanced on behalf of Paragon.
I am afraid that I do not understand this.
What limited section 140A(1)(c) to cases of breach of duty was not Mr Elliotts argument, but the decision of the Court of Appeal in Harrison that the ICOB rules were the touchstone of unfairness.
It will be apparent from what I have already said that I agree with Briggs LJ that unfairness in section 140A does not have to involve a breach of duty.
But I do not follow why it should be thought inconsistent with that to limit section 140A(1)(c) to cases where the relevant act or omission engages the responsibility of the creditor.
If the section is limited in that way, the creditor is still responsible for acts or omissions making the relationship unfair, whether or not it is also a breach of duty. envisage a relationship between the creditor and the person whose acts or omissions have made the relationship unfair.
If it had been intended to extend the sub paragraph to any conduct beneficial to the creditor or contributing to bringing about the transaction, irrespective of that persons relationship with the creditor, it would have been easy enough to say so, and very strange to use the language which the legislator actually employed.
In their ordinary and natural meaning the words on behalf of import agency, which is how the courts have ordinarily construed them: see Gaspet Ltd v Elliss (Inspector of Taxes) [1985] 1 WLR 1214, 1220 (Peter Gibson J); Clixby v Pountney (Inspector of Taxes) [1968] Ch 719, at paras 728 729 (Cross J).
I would accept that a special statutory or contractual context may require the phrase on behalf of to be read more widely as meaning in the place of, or for the benefit of or in the interests of: see R (Cherwell District Council) v First Secretary of State [2005] 1 WLR 1128 at para. 56 (Chadwick LJ); R(S) v Social Security Commissioner [2010] PTSR 1785, at paras 27 28; Rochdale Metropolitan Borough Council v Dixon [2012] PTSR 1336, at paras 49 50 (Rix J).
But there is nothing in the present statutory context to suggest any of these wider meanings, and much that is inconsistent with them.
In the first place, the full phrase is by or on behalf of the creditor.
In other words, acts or omissions on behalf of the creditor are treated as equivalent to acts or omissions by the creditor.
They refer to things done or not done either by the creditor itself, or by someone else whose acts or omissions engaged the creditors responsibility as if the creditor had done or not done it itself.
They indicate as clearly as language can do that sub paragraph (c) applies only where the thing is done or not done by someone whose acts or omissions engage the responsibility of the creditor.
They are used in the same sense throughout the Consumer Credit Act whenever it refers to some act such as the execution of a document or the receipt of a notice or the occurrence of any other act which the legislator intends to engage the responsibility of the creditor. 31.
Secondly, the Consumer Credit Act makes extensive use of the technique of imputing responsibility to the creditor for the acts or omissions of other parties who are not (or not necessarily) the creditors agents.
But when it does this it invariably does it in express and clear terms.
A notable example appears in section 140A itself.
Subsection (3) is ancillary to subsection (1)(c).
It provides that things done or not done by an associate or former associate of the creditor are to be treated as if they were done or not done by, or on behalf of, or in relation to, the creditor.
An associate includes certain categories of relative or, in relation to a body corporate, its controller or another body corporate under common control: see section 184.
This provision is pointless except on the footing that otherwise subsection (1)(c) would have been confined to the acts of the creditor or his agents.
More generally, section 56 provides that where antecedent negotiations for a debtor creditor supplier agreement are conducted by a credit broker or the supplier, the negotiations are deemed to be conducted by the negotiator in the capacity of agent of the creditor as well as in his actual capacity.
The result is that the debtors statutory rights of withdrawal from prospective agreements, cancellation and rescission may arise on account of the conduct of the negotiator whether or not he was the creditors agent: see sections 57, 67, 69, 73 and 102.
Sections 56 and 140A(3) provide for a deemed agency, even in a case where there is no actual one.
Section 75 does not provide for a deemed agency, but it imposes liability under a debtor creditor supplier agreement for the misrepresentations and breaches of contract of the supplier.
These provisions are there because without them the creditors responsibility would be engaged only by its own acts or omissions or those of its agents.
None of them is applicable to the present case.
Sections 56 and 75 apply only to debtor creditor supplier agreements, and not to agreements for unrestricted use credit like the one that Mrs Plevin entered into.
Nor has any remotely comparable legislative technique been adopted in section 140A, except for the acts or omissions of associates or agents of associates, a category which does not include LLP. 32.
Finally, if the simple words by, or on behalf of, the creditor in section 140A(1)(c) extend beyond agency relationships and deemed agency relationships, there are no coherent criteria, statutory or otherwise, by which to determine what if any connection is required between the creditor and acts or omissions causing the unfairness.
This may be illustrated by the difficulty which Briggs LJ had in formulating his test.
At paragraph 49 of his judgment, he appears to say that no connection is required between the creditor and the person whose acts or omission cause the unfairness, provided that the latters conduct played some material part in bringing about of the transaction.
At paragraph 48 it is suggested that that person must have played some part in bringing about the transaction for the creditor.
If that is the test, it is quite unclear what relationship short of agency constitutes doing or not doing something for him.
In both paragraphs, it is suggested that this would be established by the intermediarys receipt of a commission from, or via, the creditor.
If it is enough that the intermediary must have contributed to the conclusion of the transaction for the creditor, it is unclear what relationship with the creditor short of agency that implies. 33.
The difficulty of applying these formulae can be seen when Briggs LJ comes to explain why his test is satisfied in the present case.
He appears to have regarded LLP as having become closely involved in the transaction on the creditors side (para 59).
This is not correct.
LLP was not only not the agent of Paragon.
It was the agent of Mrs Plevin, as her pleadings correctly assert.
LLP was not on the creditors side and could not have been consistently 34. with its status as the debtors agent.
LLPs only relationship with Paragon consisted in the facility that they must have arranged with Paragon (and ten other lenders) to introduce its principals to them.
No doubt it was in Paragons interest to do more business, but even in a non technical sense that does not amount to acting for Paragon or becoming involved on Paragons side.
It is, moreover, important not to lose sight of the particular function of LLP which is relevant for present purposes, namely assessing Mrs Plevins needs and advising on the suitability of the product.
That was what was said to have been done on behalf of of Paragon for the purpose of the section.
But it was not even in the loosest sense a function that they performed for or for the benefit of Paragon.
It was a function which they performed, however defectively, for the sole benefit of Mrs Plevin.
The only basis on which the contrary is asserted by Briggs LJ is that LLP received a commission from (or via) the creditor.
But even that is not correct.
LLP received their commission on the PPI policy from Norwich Union, arguably at the expense of Mrs Plevin if one assumes that it increased the premium.
Paragon merely accounted for the commission out of Mrs Plevins loan moneys before remitting the net sum to Norwich Union.
The practice by which the agent of a consumer of financial services is remunerated by the supplier of those services has often been criticised.
It is, however, an almost universal feature of the business, and it is of the utmost legal and commercial importance to maintain the principle that the source of the commission has no bearing on the identity of the person for whom the intermediary is acting or the nature of his functions.
I conclude that the Court of Appeal was wrong to say that the acts or omissions of LLP were capable of making Mrs Plevins relationship with Paragon unfair.
Nor do I accept that this conclusion frustrates the purpose of section 140A, even in part.
The fact that section 140A is intended to protect the debtor does not dispense the court from considering what degree of protection was intended; nor does it mean that the legislator cannot have intended to protect the interests of the creditor in a situation for which he was not responsible.
Once the decision in Harrison is discarded, the section can be seen to give extensive protection to the debtor extending beyond the right to enforce the creditors legal duties, in any situation where the creditor or his associates (or their agents) have made the relationship unfair.
The voluntary codes 35.
I should, finally, refer to two voluntary codes of conduct which assumed some importance in the judgment of the Court of Appeal.
Paragon and LLP were both members of FISA, and Paragon was also a member of the Finance & Leasing Association (FLA).
Both associations publish voluntary codes.
They are the FLA Lending Code (2004) and the FISA Codes and Disciplinary Procedures (as at March 2006).
The Court of Appeal considered that the effect of these codes was to create a shared responsibility for assessing Mrs Plevins needs and the suitability of the PPI policy, and remitted the case to the County Court for a trial of the question whether that responsibility was engaged. 36.
The FLA and FISA codes are lending codes.
They are primarily concerned with responsible lending standards, i.e. with ensuring that borrowers do not borrow beyond their means, with avoiding high pressure salesmanship and with the provision of proper documentation, and so on, although they also contain provisions relating to the sale of associated insurance products, to which I shall return.
The main significance of the codes in the present context is that they envisage some responsibility on the part of the creditor for the conduct of at least some intermediaries.
Section 5.3 of the FLA code provides that the creditor will monitor the activities of any credit broker that it deals with and that in particular it will require them to follow either the FLA Code or the FISA code and refuse to deal with any who fail do so or are dishonest or incompetent.
This focuses attention on the FISA code, which was the one to which LLP subscribed.
Unfortunately the FISA code is at critical points rather obscure.
It defines intermediaries in the widest terms as including any person or firm involved in the procurement of business.
But the substantive provisions of the FISA code refer not to intermediaries tout court, but to supporting or subordinate intermediaries, or Members and their Intermediaries, without defining what makes an intermediary a Members intermediary or a supporting or subordinate intermediary.
It is therefore far from clear whether these provisions extend to the conduct of an intermediary such as LLP which was not the agent of the creditor or in some way tied to the creditor.
I will assume, without deciding, that they do.
On that footing, the relevant provisions of the FISA code are sections 2 and 19.
Section 2 provides that where a member accepts business from a supporting or subordinate Intermediary it will ensure that the intermediary complies with the code.
The particular obligations spelled out in the following sections are generally imposed on Members and their Intermediaries.
These include section 19, which provides: 37.
Members and their Intermediaries will not use sales techniques relating to optional insurance products such as payment protection policies which might encourage consumers to take out such cover in inappropriate circumstances.
In complying with this requirement, Members and their Intermediaries shall have regard to the consumers circumstances and have particular regard to restrictions or exclusions contained within the relevant insurance policy. 39. 38.
The difficulty about the Court of Appeals approach to the codes is that they were proceeding on the footing of a broad construction of the words by or on behalf of the creditor, which required little if any connection between the creditor and the source of the unfairness.
But it follows from the construction of section 140A which I have proposed in the preceding parts of this judgment that the codes are relevant to the operation of that section only if their effect is to make an intermediary in the position of LLP the agent of the creditor.
That is plainly not their effect.
In the first place, the codes have no legal status except as between the associations and their members.
They have no statutory force.
They formed no part of the contractual distribution of responsibilities.
In its covering letter of 21 March 2006 to Mrs Plevin, Paragon informed her that they were members of FLA and FISA and followed their lending codes, but the codes themselves were not communicated to Mrs Plevin and there is no evidence that she was aware of their contents.
The most that can be said about them is that they may be some evidence of what constitutes reasonable standards of commercial conduct in this field.
This was in fact the sole purpose for which Mrs Plevins counsel relied upon them before the Recorder.
Secondly, the terms of the codes do not in my view justify the Court of Appeals conclusion that they envisaged a shared responsibility for dealings with the customer.
Not all lending transactions governed by the codes are introduced by intermediaries.
In many cases the lender deals directly with the debtor.
Where the FISA code imposes an obligation on Members and their Intermediaries, it is not requiring both of them to comply in every case thereby duplicating every function covered in the code.
A more natural reading, more consonant with the regulatory background (in particular ICOB 1.2.3) is that the obligation is imposed on whichever of them performs the relevant function.
In the case of the obligation under section 19 of the FISA code to tailor the sales technique used to sell optional insurance products to the customers circumstances, the relevant function was performed by LLP as the intermediary who was dealing directly with Mrs Plevin at the relevant stage of the transaction.
Where it is the intermediary who performs the relevant function, the creditors obligation under the FISA code is to satisfy itself that the intermediary complies with the code.
This does not mean that the creditor has to verify compliance in each individual transaction.
It means, as is clear from section 5 of the FLA code, that the creditor will satisfy itself about the general standard to which the intermediary conducts its business.
Any related agreement 40.
I record for completeness that Mrs Plevin did not rely on the reference to any related agreement in section 140A(1)(c) either in the courts below or (after some initial hesitation) before us.
We have not therefore heard argument on whether the PPI policy was a related agreement for the purpose of sections 19 and 140C(4), or in what if any respects its terms were themselves the cause of unfairness.
Conclusion 41.
My conclusion that the non disclosure of the amount of the commissions made Paragons relationship with Mrs Plevin unfair is enough to justify the reopening of the transaction under section 140A.
It is, however, the only basis on which the transaction can be reopened.
It follows that the appeal must be dismissed, although for reasons different from those given by the Court of Appeal, but that the case must be remitted to the Manchester County Court to decide what if any relief under section 140B should be ordered unless that can be agreed.
Paragraph 2 of the Court of Appeals order of 17 March 2014, which remitted the case for rehearing generally, will be varied accordingly. 29.
This particular misconception on the part of the Court of Appeal seems to me to have distracted them from the language of the section and its place in the broader scheme of the Act.
These seem to me to be very clear.
Section 140A was undoubtedly intended to introduce a broad definition of unfairness, in place of the narrowly framed provisions which had previously governed extortionate credit bargains.
That much is clear from section 140A(1)(c), whose effect is to extend the concept of unfairness beyond cases where the terms or the way that the creditor applied them makes the relationship unfair.
Under that subsection, it extends to any case whatever in which human action (or inaction) produces unfairness.
The only limitation on the extreme breadth of sub paragraph (c) is that the action or inaction in question must be by or on behalf of the creditor.
Putting the matter at its very lowest, those words 30.
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Payment protection insurance (PPI) is sold to borrowers to cover the repayment of specific borrowing on the occurrence of an insured event, such as accidental injury.
PPI used to be sold to borrowers as part of a package with the loan itself, with a single premium paid upfront and added to the amount borrowed.
A high commission would be paid to intermediaries.
Mrs Plevin took out a personal loan through LLP Processing (UK) Ltd (LLP).
LLP proposed that she borrow 34,000 from Paragon Personal Finance Ltd (Paragon), repayable in instalments over ten years, and that she take out PPI for five years with Norwich Union, Paragons designated insurer.
The PPI premium of 5,780 was payable at the outset and added to the amount of the loan. 71.8% of the premium was taken in commission: LLP retained 1,870 and Paragon retained 2,280.
The Financial Industry Standards Association guide which LLP gave to Mrs Plevin told her that commission is paid by the lending company, but she was not told the amount of the commission or the identity of the recipients.
Sections 140A to 140D of the Consumer Credit Act 1974 apply to Mrs Plevins loan and PPI.
They allow a court to reopen a credit agreement which is unfair because of any of the terms of the agreement or a related agreement, the way in which the creditor has exercised or enforced his rights, or any other thing done (or not done) by, or on behalf of, the creditor (s 140A(1)(c)).
Mrs Plevin argues that the relationship between herself and Paragon was unfair under s 140A(1)(c) because of (i) the non disclosure of the commissions and (ii) the failure of anyone involved to advise on the suitability of the PPI for her needs.
Insofar as LLP committed these defaults, she says it did so on behalf of Paragon.
The Insurance Conduct of Business Rules (ICOB Rules) are the statutory rules which regulate the insurance industry.
They do not require insurance intermediaries to disclose commissions to their customers.
They do require an insurance intermediary which makes a personal recommendation to a customer to buy an insurance contract to take reasonable steps to ensure that the recommendation is suitable for the customers demands and needs.
Both the Manchester County Court and the Court of Appeal held that the non disclosure of the commission by LLP and Paragon and the failure by Paragon to assess the suitability of PPI for Mrs Plevin did not make the relationship unfair, because they were bound to do so by Harrison v Black Horse Ltd [2012] Lloyds Rep IR 521, where the presence or absence of a regulatory duty under the ICOB Rules had been treated as conclusive.
The Court of Appeal in this case also held that LLPs failure to conduct a needs assessment of Mrs Plevin, in breach of the ICOB Rules, was something done by or on behalf of Paragon which made its relationship with Mrs Plevin unfair.
The Supreme Court unanimously dismisses the appeal, but for reasons different from those given by the Court of Appeal.
Lord Sumption delivers the sole judgment.
He holds that the non disclosure of the amount of commissions and the identity of the recipients did make Mrs Plevins relationship with Paragon unfair under s 140A(1)(c) of the Consumer Credit Act 1974, but the failure to conduct a needs assessment of Mrs Plevin did not.
The case is remitted to the Manchester County Court to decide what if any relief under s 140B should be ordered unless that can be agreed.
The non disclosure of the commissions The Court of Appeals decision in Harrison v Black Horse Ltd [2012] Lloyds Rep IR 521 was wrong.
The ICOB Rules are hard edged, imposing a minimum standard of conduct applicable in a wide range of situations and providing for damages in the event of breach, whereas s 140A of the Consumer Credit Act 1974 introduces a broader test of fairness which is a matter for the courts judgment and which potentially takes into account a much wider range of factors.
They are asking different questions [14 17].
Applying s 140A, Lord Sumption concludes that the non disclosure of the commissions did make the relationship between Paragon and Mrs Plevin unfair.
At some point, the commissions may become so large that the relationship cannot be regarded as fair if the customer is kept in ignorance.
This case lay far beyond the tipping point.
Mrs Plevin would have questioned whether the PPI represented value for money if she had been aware of the commission amounts and might not have taken out PPI at all [18].
This unfairness was the responsibility of Paragon, the only party which knew the size of both commissions [19 20].
Failure to assess the suitability of PPI insurance for Mrs Plevins needs Paragons own failure to conduct their own needs assessment of Mrs Plevin did not make its relationship with her unfair.
The absence of a regulatory duty under the ICOB Rules was not conclusive, but it was highly relevant: Paragon could not reasonably be expected to perform a duty which the relevant statutory code assigned to someone else, namely LLP [26].
LLPs failure to conduct a needs assessment of Mrs Plevin could not be treated as something done by or on behalf of Paragon, because LLP was not acting as Paragons agent.
The ordinary and natural meaning of the words on behalf of imports agency, and that is how the courts have ordinarily construed them.
Nothing in this case demands a broader interpretation.
The phrase by or on behalf of suggests that the act or omission must be done by the creditor itself, or by someone else whose acts and omissions engage the creditors responsibility as if the creditor had done or not done it itself.
Further, the Consumer Credit Act 1974 makes extensive use of the technique of imputing responsibility to the creditor for the acts or omissions of other parties who are not (or not necessarily) the creditors agents, including in s 140A(3), and when it does so, it does so in clear terms.
Finally, there would be no coherent criteria for determining what connection other than agency would be required between the creditor and the acts or omissions causing the unfairness [27 34].
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This is a reference made by the Attorney General for England and Wales (the Attorney General) under section 112 of the Government of Wales Act 2006 (the 2006 Act) for a determination on whether sections 6 and 9 of the Local Government Byelaws (Wales) Bill 2012 are within the legislative competence of the National Assembly for Wales (the Assembly).
The background to the reference
Following a referendum held in 1997, the Government of Wales Act 1998 (the 1998 Act) set out the initial devolution settlement for Wales.
This included the establishment of the Assembly, a body corporate which had the legal responsibility for discharging the devolved executive and legislative functions.
Sections 21 and 22 of the 1998 Act governed the functions of the Assembly, and they included provisions for transferring functions vested in a Minister of the Crown to the Assembly, by Order in Council.
Schedule 2 to the 1998 Act set out the fields of functions which were to be devolved to the Assembly in the first such Order in Council, including [t]he environment and [l]ocal government.
The first Order in Council making such provision was the National Assembly for Wales (Transfer of Functions) Order 1999, SI 1999 No 672 (the 1999 Order).
The Assemblys legislative powers were limited, and a White Paper, Better Governance for Wales (Cm 6582) published in June 2005, proposed increasing those powers in three respects: (i) giving the Assembly wider powers to make subordinate legislation; (ii) allowing the United Kingdom Parliament (Parliament) to confer enhanced legislative powers on the Assembly in relation to specified matters in devolved fields; and (iii) following a referendum, enabling the Assembly to make laws in all devolved fields without recourse to Parliament.
These proposals were adopted by Parliament, and implemented by the 2006 Act.
Part 1 of the 2006 Act re-enacts many of the provisions of the 1998 Act, but it omits any reference to the Assembly being a corporate body.
Section 45 establishes the Welsh Assembly Government, which comprises the First Minister, the Welsh Ministers, the Counsel General to the Welsh Assembly Government and the Deputy Welsh Ministers.
Section 46 provides for the First Minister to be appointed by Her Majesty.
Sections 48 and 50 confer on the First Minister the power to appoint, with the approval of Her Majesty, the Welsh Ministers and the Deputy Welsh Ministers from among the Assembly members.
Sections 56 to 92 make provision about the functions of the First Minister, the Welsh Ministers, and the Counsel General.
Part 3 of, and Schedule 5 to, the 2006 Act contain what were anticipated to be transitional provisions regarding the Assemblys powers with effect from the day after the Assembly election in 2007.
They were intended to be replaced by the Assembly Act provisions, contained in Part 4 of, and Schedule 7 to, the 2006 Act.
These provisions are intended, inter alia, to give the Assembly primary legislative powers for certain areas, and are provided by section 105 to come into force pursuant to an order made by Welsh Ministers following a referendum.
That referendum duly took place, and the Welsh Ministers duly made the order contemplated, as a consequence of which the provisions of Part 3 and Schedule 5 lapsed, and the provisions of Part 4 and Schedule 7 took effect, on 5 May 2011.
As a result of this, the Assembly has power to make primary legislation, which powers are delimited by provisions which identified the extent of the Assemblys legislative competence.
If there is an issue as to whether a Bill, or a provision in a Bill, passed by the Assembly exceeds that competence, the issue can be referred to this court under the terms of section 112 of the 2006 Act.
The first Bill to be passed by the Assembly under its new power was the Local Government Byelaws (Wales) Bill 2012 (the Bill), the aim of which is to simplify procedures for making and enforcing local authority byelaws in Wales.
Certain provisions of the Bill, in particular section 6 and section 91, are intended to remove the need for the confirmation of byelaws by the Welsh Ministers or by the Secretary of State.
Section 6 (through Part 1 of Schedule 1 to the Bill) refers to certain specific enactments (the scheduled enactments) which currently require confirmation, and section 9 would empower the Welsh Ministers to add to those enactments.
The Secretary of States consent to the inclusion of these two sections in the Bill was sought.
She was prepared to agree to section 6 of the Bill (section 6), because she was content to give up her right to confirm byelaws made under the specific provisions identified in Part 1 of Schedule 1 to the Bill, but she was not prepared to agree to the inclusion of section 9 of the Bill (section 9).
The Assembly nonetheless proceeded to pass the Bill with sections 6 and 9 in their 1 What would be, or become, sections of a Statute enacted by the UK Parliament are conventionally referred to as clauses in the Bill until it becomes a Statute.
However, in this judgment, I follow the language used in Standing Orders 26 and 26A of the National Assembly for Wales (June 2012), which deal with Acts of the Assembly, and refer to sections of a Bill.
original form.
The Attorney General then referred to this court the question whether sections 6 and 9 were outwith the Assemblys legislative competence.
The parties who were identified as respondents to the reference were (i) the National Assembly for Wales Commission, representing the Assembly, and (ii) the Counsel General, both of whom appeared before us.
The Assembly was represented by Mr Rhodri Williams QC, with Ms Rebecca Stickler, and the Counsel General, Mr Theodore Huckle QC, was assisted by Mr Clive Lewis QC.
The Attorney General for Northern Ireland, Mr John Larkin QC (who appeared with Mr David McAlister) also appeared, having been permitted to intervene, as the issues raised by this reference have potential implications for the extent of the legislative competence of the Northern Ireland Assembly under the Northern Ireland Act 1998.
I propose first to explain the position (under the Local Government Act 1972 and the 1999 Order) relating to the confirmation of many of the byelaws identified in Schedule 1 to the Bill, following which I will identify the relevant provisions of the Bill and of the 2006 Act.
Having set the scene, as it were, I will then discuss certain preliminary issues, following which I will address the central issue on this reference.
Finally, I must deal with certain procedural issues which have arisen on this reference.
The Local Government Act 1972 and the 1999 Order
The power to make byelaws is conferred by a host of statutes, mostly on local authorities and similar bodies.
Many of those statutes contain specific provisions whereby a byelaw must be confirmed by some other body or person (normally the Secretary of State or another Minister of the Crown), but many do not.
The Local Government Act 1972 (the 1972 Act), as its long title states, includes many provisions concerning local government and the functions of local authorities in England and Wales.
Section 236 of the 1972 Act (section 236) is entitled Procedure, etc, for byelaws.
Subsection (1) explains that, subject to certain exceptions (irrelevant for present purposes), the section appl[ies] to byelaws to be made by a local authority under this Act and to byelaws made by a local authority under any other enactment and conferring on the authority a power to make byelaws and for which specific provision is not otherwise made.
Section 236(3) sets out the technical requirements for a local authority making a byelaw (under its common seal or, where there is no seal, under the hands and seals of two members).
Subsections (3), (4) and (5) of section 236 make reference to confirmation of a byelaw, and subsection (7) states that [t]he confirming authority may confirm, or refuse to confirm, any byelaw submitted under this section.
Crucially for present purposes, section 236(11) is in these terms: In this section the expression the confirming authority means the authority or person, if any, specified in the enactment (including any enactment in this Act) under which the byelaws are made, as the authority or person by whom the byelaws are to be confirmed, or if no authority or person is so specified, means the Secretary of State.
The effect of this provision is that, where a statutory provision giving the local authority the power or duty to make the byelaw either so provides or is silent as to the existence or identity of a confirmatory body or person, before any byelaw made under that provision by a local authority can be effective, the Secretary of State has to confirm the byelaw.
The National Assembly for Wales (Transfer of Functions) Order 1999
The 1998 Act provided in section 22(1) that: Her Majesty may by Order in Council (a) provide for the transfer to the Assembly of any function so far as exercisable by a Minister of the Crown in relation to Wales, (b) direct that any function so far as so exercisable shall be exercisable by the Assembly concurrently with the Minister of the Crown, or (c) direct that any function so far as exercisable by a Minister of the Crown in relation to Wales shall be exercisable by the Minister only with the agreement of, or after consultation with, the Assembly.
The 1999 Order was made pursuant to that provision, and was concerned with transferring a large number of functions of Ministers of the Crown to the Assembly.
It did this by identifying each specific function which was to be so transferred.
In some cases, there had to be qualifications to, and in other cases there had to be exceptions from or variations to, the transfer of functions.
Thus, article 2 of the 1999 Order is to this effect: Schedule 1 to this Order shall have effect as follows (a) except as provided [below], all functions of a Minister of the Crown under the enactments specified in Schedule 1 are, so far as exercisable in relation to Wales, transferred to the Assembly; (b) where so directed in Schedule 1 functions exercisable by a Minister of the Crown shall, so far as exercisable in relation to Wales, be exercisable by the Assembly concurrently with the Minister; (c) it is directed that (except in the case of functions which are exercisable by the Assembly jointly with a Minister of the Crown) ..
Schedule 1 to the 1999 Order sets out Enactments Conferring Functions Transferred by Article 2.
The list of those enactments includes the 1972 Act, in respect of which it is expressly directed that the functions of the Secretary of State under section 236(11) shall be exercisable by the Assembly concurrently with the Secretary of State.
The Local Government Byelaws (Wales) Bill 2012
Section 1 is entitled Overview, and it is in these terms, so far as relevant: This Act - (a) reforms procedures for making byelaws in Wales, including removing a requirement for confirmation of byelaws by the Welsh Ministers; .
(d) restates for Wales a general power to make byelaws.
Section 2 delimits the powers of a county or county borough to make byelaws, which must be for the good rule and government of the whole or any part of its area or to prevent nuisances in its area.
Section 3 defines legislating councils, which extends to counties, county borough councils, community councils, National Park authorities in Wales, and the Countryside Council for Wales.
Sections 4 and 5 deal with the powers of legislating authorities and the Welsh Ministers to revoke byelaws.
Section 6 is entitled Byelaws not requiring confirmation, and the first two subsections are in these terms: (1) This section applies to byelaws made by a legislating authority under the enactments listed in Part 1 of Schedule 1 .
(2) Before it makes a byelaw, an authority must (a) publish on the authoritys website an initial written statement which describes the issue which the authority thinks may be addressed by making a byelaw; (b) consult any person who the authority thinks is likely to be interested in, or affected by, the issue.
The remaining six subsections set out the procedural requirements which a legislating authority must then satisfy before making a byelaw not requiring confirmation.
These requirements include considering responses to the subsection (2) consultations, publishing on its website a further statement, followed by notice of the intention to make the byelaw, and then the draft byelaw, ensuring that the draft byelaw is available for inspection to those who want to see it, and making the byelaw within six months of the date of the notice of intention.
Part 1 of Schedule 1 to the Bill has the same heading as section 6, and sets out what I call the scheduled enactments, which are specific sections of certain statutes, including a number of sections in respect of which it is common ground between all parties that section 236(11), as varied by the 1999 Order, applies.
Most of these sections are in the Public Health Act 1936, and they include, for example, byelaw-making powers in relation to preventing the occurrence of nuisances from snow, filth, dust, ashes and rubbish (section 81), for regulation of sanitary conveniences (section 87), for regulating management of, and charges for, the use of mortuaries and post-mortem rooms (section 198), and regulating baths, washhouses, swimming baths and bathing places (section 223).
Section 7 is concerned with Byelaws requiring confirmation, which subsection (1) explains are byelaws made by a legislating authority under any enactment other than those listed in Part 1 of Schedule 1, subject to exceptions set out in subsection (2), namely to the extent that the statutory power under which a particular byelaw is made makes different provision in relation to the requisite procedure.
Subsections (3) to (9) then set out procedures which have to be followed by the legislating authority, which are similar to those in subsections (2) to (7) of Section 6.
Subsections (10) to (12) of section 7 provide as follows: (10) The confirming authority may confirm, or refuse to confirm, any byelaw submitted to it under this section.
(11) For the purposes of this Act, the confirming authority is (a) the person specified in the enactment under which the byelaws are made as the person who is to confirm the byelaws, or (b) if no person is specified, the Welsh Ministers.
(12) The functions of the Welsh Ministers under subsection (11)(b) are exercisable concurrently with the Secretary of State.
Section 8 is concerned with formalities for making byelaws.
Section 9 is headed Power to amend Part 1 of Schedule 1, and is in these terms: The Welsh Ministers may by order amend Part 1 of Schedule 1 by adding to or subtracting from the list of enactments, or by amending the type of authority that may make byelaws without confirmation.
Sections 10 and 11 are concerned with enforcement of byelaws, and sections 12 to 16 (and Part 2 of Schedule 1) with fixed penalty notices.
Sections 18 to 23 are headed Miscellaneous and general, and only section 20, which is entitled Consequential amendments and incorporates Schedule 2, needs to be mentioned.
Schedule 2 sets out a number of Minor and consequential amendments to other statutes.
Paragraph 9(3) amends section 236, effectively limiting its ambit in local authorities to England.
Paragraph 17 amends the 1999 Order, inter alia, by deleting the words directing that the functions of the Secretary of State under section 236(11) shall be exercisable by the Assembly concurrently with the Secretary of State.
The question whether any of the provisions of the Bill are within the competence of the Assembly must be judged by reference to the 2006 Act, to which I now turn.
The Government of Wales Act 2006
The provisions of the 2006 Act which are directly relevant for present purposes are in Part 4 and Schedule 7.
The provisions which are of central importance are section 108, and paragraph 1 of Part 2, and paragraph 6 of Part 3, of Schedule 7.
Section 108 is entitled Legislative competence and subsections (1) to (3) provide as follows: (1) Subject to the provisions of this Part, an Act of the Assembly may make any provision that could be made by an Act of Parliament.
(2) An Act of the Assembly is not law so far as any provision of the Act is outside the Assemblys legislative competence.
(3) A provision of an Act of the Assembly is within the Assemblys legislative competence only if it falls within subsection (4) or (5).
It is common ground that subsections (4) and (5) present no problems for the Bill in the present case.
Subsection (4) requires every provision in an Act of the Assembly to relate to one or more of the subjects listed in Part 1 of Schedule 7, which every provision in the Bill does.
Subsection (6) states: (6) But a provision which falls within subsection (4) or (5) is outside the Assemblys legislative competence if (a) it breaches any of the restrictions in Part 2 of Schedule 7, having regard to any exception in Part 3 of that Schedule from those restrictions, . .
Part 2 of Schedule 7 is headed General Restrictions, and the first of those restrictions is in paragraph 1, which is headed Functions of a Minister of the Crown, and is in these terms: (1) A provision of an Act of the Assembly cannot remove or modify, or confer power by subordinate legislation to remove or modify, any pre-commencement function of a Minister of the Crown.
(3) In this Schedule pre-commencement function means a function which is exercisable by a Minister of the Crown before [5 May 2011].
Part 3 of Schedule 7 is headed Exceptions from Part 2, the first of which is in paragraph 6, which has a very similar heading to paragraph 1 of Part 2, and states: (1) Part 2 does not prevent a provision of an Act of the Assembly removing or modifying, or conferring power by subordinate legislation to remove or modify, any pre-commencement function of a Minister of the Crown if (a) the Secretary of State consents to the provision, or (b) the provision is incidental to, or consequential on, any other provision contained in the Act of the Assembly.
I must also refer to section 112(1), which explains how this reference arises.
It empowers the Counsel General or the Attorney General to refer the question whether a Bill, or any provision of a Bill, would be within the Assemblys legislative competence to the Supreme Court for decision.
Pending such a reference, a Bill cannot be given Royal Assent see section 115.
It is also appropriate to refer to section 154, which provides: (1) This section applies to (b) any provision of an Act of the Assembly, or a Bill for such an Act, which could be read in such a way as to be outside the Assemblys legislative competence, (2) The provision is to be read as narrowly as is required for it to be within competence or within the powers, if such a reading is possible, and is to have effect accordingly .
Preliminary issues: the meaning of concurrently
While the central issue on this reference is whether section 6 and section 9 are outside the legislative competence of the Assembly, there are two preliminary points which have been debated and which need to be resolved before turning to that central issue.
First, there is the question of what is meant by the direction in the 1999 Order that the functions of the Secretary of State under section 236(11) shall be exercisable by the Assembly concurrently with the Secretary of State.
Three possible interpretations were aired.
The first interpretation, which arose in argument, is that the Assembly is to exercise each of the functions, but needs the Secretary of States agreement before it does so.
The second and third interpretations both involve the Assembly and the Secretary of State each having the right to exercise the functions.
The second interpretation, favoured by Mr Williams for the Assembly, is that, in relation to any particular function, it is, as a matter of law, only the Assembly or, as the case may be, the Secretary of State who can exercise the function.
The third interpretation, favoured by Mr Jonathan Swift QC (who appeared with Ms Joanne Clement for the Attorney General) and by the Counsel General, is that, subject to the normal public law principle of rationality, it is open to either the Secretary of State or the Assembly to exercise any of the functions.
I have reached the clear conclusion that the third of these interpretations is correct.
First, the natural meaning of concurrently in a provision such as the 1999 Order, which involves two persons or entities having concurrent functions, is that they each have the right to exercise the functions separately.
The primary meaning of the word concurrent is running with rather than agreeing.
And it would involve implying some qualification to the provision, if only one of the two persons or entities could exercise any particular function.
Indeed, if each function could only be exercised by the Assembly or the Secretary of State, it would be the antithesis of their having concurrent power.
Secondly, the notion that the Assembly can exercise any of the functions, but only with the consent of the Secretary of State, would effectively mean that there is no difference between concurrent functions and joint functions.
That is unlikely as the 1999 Order refers in a number of places to joint exercise of functions, including in article 2(c).
That point is reinforced when one looks at section 22(1) of the 1998 Act, under which the 1999 Order was made: subsection (b) deals with concurrently exercisable functions, and subsection (c) is concerned with functions exercisable by the Secretary of State with the agreement of the Assembly.
Thirdly, Craies on Legislation 10th ed, (2012) supports the notion that the concept of concurrent power to exercise functions has an established meaning in legislation.
At para 3.12.6, it is stated that [w]here a function is vested in two Ministers concurrently, either may perform it, acting alone, on any occasion.
While no case law is cited in support of this proposition, such an unequivocal statement in a respected book on the subject deserves respect, and is likely to be familiar to those responsible for drafting statutes.
Fourthly, it seems far more sensible and consistent with the purpose of the Welsh devolution legislation to conclude that it was intended that the Assembly and the Secretary of State were each intended to have the power to exercise the concurrent functions, and that it was to be left to their good sense to decide which should exercise a particular function in a particular case.
As Lord Carnwath said during argument, the courts should only be involved where normal public law principles justify quashing a particular exercise of a function on the ground that it should not have been exercised by the particular person or entity.
Preliminary issues: does any question of legislative competence arise?
The Attorney General for Northern Ireland contends that the instant reference is, in effect, misconceived, at least in relation to section 6, because that section would not have the effect which the Attorney General contends, namely removing any right vested in the Secretary of State to confirm byelaws.
He puts this point in two ways.
The first way in which the argument is put is that Section 6 itself does not remove any right.
I will discuss that point when considering the central issue on this reference.
However, even if it is right, it could be no more than a technical point, as there can be no doubt but that paragraphs 9 and 17 of Schedule 2 to the Bill indubitably remove the Secretary of States right to confirm byelaws under section 236(11).
Accordingly, the first way of putting the Attorney General for Northern Irelands point goes nowhere in substantive terms (albeit that it has some relevance to the central issue, and it gives rise to a procedural point which Lord Hope discusses in his judgment).
The second way in which the Attorney General for Northern Ireland puts his case is that section 236(11) states in terms that it applies only to those byelaws for which there is no statutory provision for confirmation by someone other than the Secretary of State.
Accordingly, runs the argument, section 236(11) specifically contemplates, and therefore effectively permits, a subsequent statutory provision conferring the confirmatory function, in respect of any byelaw to which section 236(11) currently applies, on some other person or entity.
This argument is ingenious, but I would reject it.
It seems to me clear that the effect of section 236(11) was to confer a function on the Secretary of State, and the Bill, if it becomes an Act, will remove that function from the Secretary of State in relation to the scheduled enactments, and accordingly, paragraph 1 of Part 2 of Schedule 7 to the 2006 Act appears to be engaged.
The fact that the function concerned was conferred by a default statutory provision, which specifically envisages that there may be legislation which transfers the function to someone else, does not alter the fact that the confirmatory function of the Secretary of State falls within the ambit of paragraph 1(3) of Part 2 of Schedule 7.
The central issue on this reference: Section 6 of the Bill
It is common ground between the original parties to this reference that section 6 is within paragraph 1 of Part 2 of Schedule 7 to the 2006 Act, in that it would have the effect of remov[ing] [a] pre-commencement function of a Minister of the Crown, namely the Secretary of States role in confirming (or refusing to confirm) byelaws made under the statutory provisions which are (i) scheduled enactments, and (ii) provisions to which section 236(11) applies.
On that basis the only issue is whether, as the Counsel General contends (with the support of Mr Williams and the Attorney General for Northern Ireland), the section can be saved on the basis that, in so far as it would remove the pre- commencement function, it would be within paragraph 6(1)(b) of Part 3 of Schedule 7 to the 2006 Act, as it is incidental to, or consequential on, [an] other provision contained in the [Bill].
However, as already mentioned, the Attorney General for Northern Ireland challenges the otherwise agreed proposition that section 6 would remove the Secretary of States confirmatory role under section 236(11) in relation to any scheduled enactments.
He makes the point that section 1 only refers to the confirmatory powers of the Welsh Ministers, not to the Secretary of States powers, and that no part of section 6 refers to his powers either.
In my view, this point highlights the way in which the Bill is structured, and, more importantly for present purposes, it tends to support the argument advanced by the Counsel General, namely that the removal by the Bill of the Secretary of States power to confirm byelaws under section 236(11) is indeed incidental to, or consequential on one of the principal purposes of section 6 of the Bill, which is, as section 1 states, to remove the requirement for confirmation by the Welsh Ministers, as part of the overall streamlining and modernising of the way in which byelaws are made in Wales.
The answer to the question whether a particular provision in an enactment is incidental to, or consequential on another provision, obviously turns on the facts of the particular case.
The answer may to some extent be a question of fact and degree, and it should turn on substance rather than form, although, of course, in any well drafted Bill, the substance will be reflected in the form, at least in relation to that sort of question.
Assistance on the point may be gleaned from what was said in this court in Martin v Most [2010] UKSC 10; [2010] SC (UKSC) 40, about paragraph 3(1)(a) of Schedule 4 to the Scotland Act 1998, which permits the Scottish Parliament to modify the law on reserved matters if, inter alia, the modification is incidental to, or consequential on, provision made which does not relate to reserved matters.
There is a close similarity between those words and the words in paragraph 6(1)(b) of Part 3 of Schedule 7 to the 2006 Act, and the two provisions are concerned with similar material.
However, they are found in different statutes, and one must therefore be wary of assuming that they have precisely the same effect, as context is so crucially important when interpreting any expression, perhaps particularly an expression as potentially fact-sensitive as incidental to, or consequential on.
Nonetheless, I consider that the approach adopted in that case is of assistance here.
In a brief passage at [2010] UKSC 10, paragraph 40, Lord Hope described a point as important in explaining why it was not incidental or consequential on provisions found elsewhere in the enactment.
Lord Rodger described certain amendments as falling within paragraph 3(1)(a) of Schedule 4 to the Scotland Act 1998, if they raise[d] no separate issue of principle, and were safely stowed away in a schedule in paragraph 93.
He referred back to that observation at paragraph 128, where he described paragraph 3(1)(a) of Schedule 4 to the Scotland Act 1998 as intended to cover the kinds of minor modifications which are obviously necessary to give effect to a piece of devolved legislation, but which raise no separate issue of principle.
He contrasted them with other provisions which were independent and deal with distinct aspects of the situation.
Section 6 of the Bill plainly is intended to have the effect of removing the need for confirmation by the Welsh Ministers of any byelaw made under the scheduled enactments.
That is a primary purpose of the Bill, as is clear from reading the provisions quoted above, both in itself and for the purpose of streamlining and modernising the making of byelaws.
I consider that, applying the approach of Lord Hope and Lord Rodger in Martin v Most [2010] UKSC 10, the removal of the Secretary of States confirmatory powers by the Bill in relation to the scheduled enactments would be incidental to, and consequential on, this primary purpose.
In summary form, I reach this conclusion because of the following combination of circumstances, of which points (i) and (iv) are particularly telling.
(i) The primary purpose of the Bill cannot be achieved without that removal, (ii) the Secretary of States confirmatory power is concurrent with that of the Welsh Ministers, (iii) the confirmatory power arises from what is in effect a fall-back provision, (iv) the scheduled enactments relate to byelaws in respect of which the Secretary of State is very unlikely indeed ever to exercise his confirmatory power, (v) section 7 of the Bill reinforces this conclusion, and (vi) the contrary view would risk depriving paragraph 6(1)(b) of Part 3 of Schedule 7 to the 2006 Act of any real effect.
The first of these reasons is obvious.
One of the streamlining and modernising purposes of the Bill would be undermined if the Secretary of States confirmatory function remained in respect of any of the scheduled enactments.
There would be no point in removing the Welsh Ministers confirmatory function in relation to the scheduled enactments unless the Secretary of States concurrent function was also disposed of.
Indeed, the notion that the Assembly would intend to remove the Welsh Ministers confirmatory function while retaining that of the Secretary of State is bizarre.
Secondly, there is attraction in the point that the Secretary of States confirmatory function has become redundant on the basis that, as Lord Clarke put it, the enactment by the Assembly of section 6(1) amounted to a blanket confirmation in advance by the Welsh Ministers of any future byelaw made under the scheduled enactments, provided the procedures laid down by sections 6(2) to (8) are complied with.
While a blanket confirmation in advance of any byelaw cannot be a valid exercise of the Welsh Ministers confirmatory function, the argument highlights the oddity of the Secretary of States confirmatory power surviving the removal of the Welsh Ministers confirmatory power.
Thirdly, there is the fact that the confirmatory function bestowed on the Secretary of State by section 236(11) is really a default function.
The confirmatory function is only given to the Secretary of State if no other statute (including one passed after the 1972 Act) confers the function on any other body or person.
To my mind, that feature tends to support the notion that it is not, to use Lord Hopes word in Martin v Most [2010] UKSC 10, paragraph 40, an important function.
Thus, the point made by the Attorney General for Northern Ireland assists my conclusion.
Fourthly, and most crucially, the scheduled enactments concern byelaws whose nature is such that it would be for the Welsh Ministers, rather than the Secretary of State, to confirm them.
This is because they are very much directed to local, small-scale (but important) issues.
That point is strongly supported by the fact that it appears that, since the 1999 Order came into force, it has always been the Welsh Ministers, rather than the Secretary of State, who have exercised the confirmatory function in relation to byelaws made under any of the scheduled enactments.
It seems to me that, in those circumstances, given the purpose of section 6, and the purpose of the Bill as explained in section 1, it would be positively perverse if the Secretary of State should retain the confirmatory function when the Welsh Ministers have disclaimed their confirmatory function.
It was not suggested by Mr Swift that there were any circumstances envisaged by the Secretary of State in which she would wish to exercise her confirmatory function in relation to the scheduled enactments.
In practical terms, this conclusion is supported by the fact that the only reason the Secretary of State did not consent to section 6 had nothing to do with the contents of that section or of Schedule 1, but with the inclusion of section 9 in the Bill.
Fifthly, as pointed out by Lord Reed, the provisions of section 7 of the Bill give some support for this conclusion.
It establishes new concurrent powers in relation to byelaws (other than the scheduled enactments) which previously fell within section 236(11).
Where subsections (11)(b) and (12) of section 7 apply, the confirmatory power of the Welsh Ministers is exercisable concurrently with that of the Secretary of State.
This reinforces the argument that the Secretary of States confirmatory function under section 236(11) is redundant as a result of the enactment of sections 6 and 7.
Finally, it is important, as the Counsel General argued, to arrive at a conclusion which gives a provision such as paragraph 6(1)(b) of Part 3 of Schedule 7 to the 2006 Act some real effect.
It is difficult to think of circumstances in which it would have effect if it does not apply to section 6.
Mr Swift suggested that, if it did not apply to section 6, it could still apply in a case where the Assembly abolished a statutory provision for byelaws altogether.
I do not find that very persuasive.
First, if he is right in the present case, it suggests that the provision can apply in a more extreme type of case than the present case, but not in the present case.
Secondly, I am not convinced that it would be necessary to remove a power to confirm byelaws in relation to a given activity if the power to make byelaws in relation to that activity was abolished.
The central issue on this reference: section 9 of the Bill
Section 9 of the Bill would have the effect of enabling the Welsh Ministers to add to (and to subtract from) the scheduled enactments, which would then become subject to the section 6 procedure, rather than the section 7 procedure.
As already explained, the crucial difference for present purposes between the two procedures is the requirement under section 7 for confirmation of the byelaw by Welsh Ministers and/or the Secretary of State or other Minister of the Crown (depending on the statutory provision under which the byelaw is made) see, in particular, section 7(10) to (12).
The Attorney Generals argument is that section 9 would confer power on the Welsh Ministers by subordinate legislation to remove or modify pre- commencement function[s] of a Minister of the Crown.
Accordingly, he argues, by virtue of section 108(6)(a) of, and paragraph 1(1) of Part 2 of Schedule 7 to, the 2006 Act, the section is outside the legislative competence of the Assembly.
If section 9 is to be interpreted as giving the Welsh Ministers power to add to the scheduled enactments any enactment which gives the Secretary of State or another Minister of the Crown a confirmatory function in relation to byelaws, then I would accept that argument.
However, there could be no objection to the section, if the scope of the power it would confer on the Welsh Ministers was limited to byelaws made under enactments which currently satisfy one of two requirements.
Those requirements are that the enactment concerned (i) identifies the Welsh Ministers, and not a Minister of the Crown, as having the confirmatory power, or (ii) identifies a Minister of the Crown as having the confirmatory power, but the removal of that power would be incidental or consequential within the meaning of paragraph 6(1)(b) of Part 3 of Schedule 7 to the 2006 Act.
The basis for requirement (i) is self-evident, and the basis for requirement (ii) is the same as that for concluding that section 6 is within the legislative competence of the Assembly.
Although it is perfectly true that there are no express words in section 9 which limit its scope in this way, I am satisfied that it does have such a limited effect.
That is because of the simple legal principle, identified by Lord Reed, embodied in the Latin maxim nemo dat quod non habet.
Given that the jurisdiction of the Assembly is limited to removing, or delegating the power to remove, functions of Ministers of the Crown when the removal satisfies the requirements of paragraph 6(1)(b) of Part 3 of Schedule 7 to the 2006 Act, the Assembly cannot confer a wider power on Welsh Ministers.
Accordingly, the wide words of section 9 must be read as being circumscribed in their scope so as to render the section valid.
The same conclusion can be arrived at by invoking section 154(2) of the 2006 Act.
It would not be permissible to invoke that statutory provision if it was inconsistent with the plain words of section 9.
However, it would, in my view, be permissible to invoke it to limit the apparently unlimited and general effect of that briefly expressed section.
Such an interpretation is consistent with the thrust of the Bill as a whole, and it does not conflict with any other provision in the Bill.
And that point is reinforced by the fact that all the currently scheduled enactments satisfy requirements (i) or (ii).
Some procedural issues
I have read in draft the judgment to be given by Lord Hope.
He discusses certain practical issues in paragraphs 85 to 100, and I agree with what he says.
I should add that I also agree with his further observations at paragraphs 71 to 84.
Conclusion
For these reasons, I would make a declaration on the reference that the Assembly had the legislative competence to enact sections 6 and 9 of the Bill.
It should be added that, although this is a successful outcome for the Assembly and the Counsel General, it cannot be regarded as a setback in practical terms for the Secretary of State.
Somewhat curiously, the conclusion I have reached as to the effect of section 9 is one which reflects the terms on which she was prepared to give her consent to Section 6 of the Bill.
It is also right to say that, standing back, and considering the general purpose of the 2006 Act and the 1999 Order, this appears to be a sensible conclusion.
As Lord Carnwath said, the desirability of streamlining and modernising the system for making byelaws is reflected in section 236A of the 1972 Act, which only applies to England, and was inserted by section 129 of the Local Government and Public Involvement in Health Act 2007.
A similar system of modernising and streamlining the system in Wales is hard to object to.
And, if that system removes the confirmatory function of the Secretary of State, or other Ministers of the Crown, but only where (i) the function is concurrently exercisable with Welsh Ministers, and (ii) the byelaws concerned would probably always be for the Welsh Ministers to confirm, it would be entirely consistent with the general thrust of the extended powers given to the Assembly and Welsh Ministers by Part 4 of, and Schedule 7 to, the 2006 Act.
Finally, it is right to record that various other issues were canvassed in the written and oral arguments.
They included the proper approach to the interpretation of the 2006 Act as a constitutional enactment, and whether certain statutory provisions mentioned in Part 1 of Schedule 1 were governed by section 236(11).
Given my conclusions on the issues considered in this judgment, it is unnecessary to determine those other issues, and it therefore seems to me appropriate to leave them to be resolved if and when it is necessary to do so in a future appeal or reference.
LORD HOPE (with whom Lord Clarke, Lord Reed and Lord Carnwath agree)
I add this supplement to Lord Neubergers judgment, with which I am in full agreement, in order to do two things.
The first is to make some general observations on the approach to issues about the legislative competence of the National Assembly for Wales in the light of the Scottish experience.
The second is to provide guidance on some matters of practice which require clarification in the light of the way this reference has been dealt with.
Background
The making of this reference to the Supreme Court is a significant event in Welsh law.
The Local Government Byelaws (Wales) Bill 2012 is the first Bill to have been passed by the Assembly.
That in itself is important, as it has provided the Assembly with the first opportunity to put into practice its power to make laws.
That power was given to it by section 107(1) of the Government of Wales Act 2006 (the 2006 Act) upon the coming into force on 5 May 2011 of the Assembly Act provisions in Part 4 of the Act.
Now there is the making of the reference.
This is an even more significant milestone than, in the words of Lady Cosgrove, the case of A v Scottish Ministers [2002] SC (PC) 63 was for Scotland: see para 2.
In that case the first Act of the Scottish Parliament, the Mental Health (Public Safety and Appeals) (Scotland) Act 1999, received the Royal Assent 13 days after the Bill had been introduced in the Parliament as a matter of urgency.
A restricted patient who was being detained in the State Hospital then challenged the Parliaments legislative competence on the ground that the Act was incompatible with his Convention rights.
It took nearly two years before, after working its way through the devolution issues procedure, the challenge was finally dismissed by the Judicial Committee of the Privy Council.
Here use is being made, for the first time, of the power that is given by section 112 of the 2006 Act to the Counsel General or the Attorney General to refer the question whether a Bill would be within the Assemblys legislative competence to the Supreme Court for decision before it is submitted for Royal Assent under section 115.
A similar provision was included in section 33 of the Scotland Act 1998 (the 1998 Act) to ensure that the Lord Advocate and the law officers of the United Kingdom Government were content that Bills of the Scottish Parliament were within competence before they were submitted for Royal Assent under section 32 by the Presiding Officer.
The Scottish Parliament has passed many Bills since that Act came into force.
But none of them has been challenged before enactment by any of the relevant law officers.
So there has not yet been an occasion for the making use in relation to any of its Bills of the power under section 33 for pre-legislative scrutiny.
The reason why a reference has been made in this case, in contrast to the lack of use of the equivalent provision in Scotland, is likely to lie in differences between the systems that have been used to devolve legislative power to the devolved legislatures from the United Kingdom Parliament at Westminster and executive power to the devolved governments from Ministers of the United Kingdom Government.
Under the Scottish system, the general power to make laws conferred on the Scottish Parliament by section 28 is subject to section 29 of the 1998 Act, which provides that an Act of the Scottish Parliament is outside its competence so far as, among other things, it relates to matters reserved to Westminster or is in breach of the restrictions in Schedule 4.
A list of the reserved matters is set out in Schedule 5 to the 1998 Act.
These provisions were accompanied by a general transfer of functions conferred on Ministers of the Crown to the Scottish Ministers by section 53, so far as these functions are exercisable within devolved competence.
This difference of approach can be illustrated by comparing the restrictions on the powers of the Assembly under Part 2 of Schedule 7 to the 2006 Act, read together with the exceptions in Part 3, with the restrictions on the powers of the Scottish Parliament under Schedule 4 to the 1998 Act.
The Assembly cannot remove or modify, or confer power by subordinate legislation to remove or modify, any pre-commencement function of the Minster of the Crown unless (a) the Secretary of State consents to the provision or (b) the provision is incidental to, or consequential on, any other provision contained in the Act of the Assembly: paragraph 1 of Part 2 read together with paragraphs 6(1)(a) and (b) of Part 3.
The phrase incidental to, or consequential on is used in paragraph 3(1)(a) of Schedule 4 to the 1998 Act, which provides that the restriction on the power of the Scottish Parliament to modify, or confer power by subordinate legislation to modify, the law on reserved matters does not apply to modifications which are incidental to, or consequential on, provision made (whether by virtue of the Act in question or another enactment) which does not relate to reserved matters.
But there is no reference here or anywhere else in the 1998 Act which defines devolved competence differently, to removing a pre-commencement function of a Minister of the Crown.
A proper understanding of the effect of Schedule 7 to the 2006 Act, and of paragraph 6(1)(b) of Part 3 in particular, is of central importance to the resolution of the issue raised by this reference.
So I think that it was entirely proper for the Attorney General to refer sections 6 and 9 of the Bill to this court for pre- legislative scrutiny under section 112 rather than raise the issue after its enactment as a devolution issue under section 149 and Schedule 9.
Any delay in the submitting of a Bill which has been passed by the Assembly for Royal Assent is, of course, to be regretted.
It was with that in mind that the hearing was given the earliest possible date in the courts programme.
But it is to be hoped that it will be more than compensated for by the benefits that will come from the removal of uncertainty at the first opportunity as to whether sections 6 and 9 are within legislative competence.
General principles
It may be helpful to restate, in the Welsh context, some principles of general application that have guided the court when dealing with issues about the legislative competence of the Scottish Parliament.
First, the question whether a Bill of the Assembly is within its legislative competence is a question of law which, if the issue is referred to it, the court must decide.
The judicial function in this regard has been carefully structured.
It is not for the judges to say whether legislation on any particular issue is better made by the Assembly or by the Parliament of the United Kingdom at Westminster.
How that issue is to be dealt with has already been addressed by the United Kingdom Parliament.
It must be determined according to the particular rules that section 108 of the 2006 Act and Schedule 7 have laid down.
Those rules, just like any other rules, have to be interpreted.
It is for the court to say what the rules mean and how, in a case such as this, they must be applied in order to resolve the issue whether the measure in question was within competence.
Second, the question whether the Bill is within competence must be determined simply by examining the provisions by which the scheme of devolution has been laid out.
That is not to say that this will always be a simple exercise.
But, as Lord Walker observed in Martin v Most [2010] UKSC 10; 2010 SC (UKSC) 40, para 44 when discussing the system of devolution for Scotland, the task of the United Kingdom Parliament in relation to Wales was to define the legislative competence of the Assembly, while itself continuing as the sovereign legislature of the United Kingdom.
It 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, the terms of which the 2006 Act was designed to set out.
Reference was made in the course of the argument in the present case to the fact that the 2006 Act was a constitutional enactment.
It was, of course, an Act of great constitutional significance, and its significance has been enhanced by the coming into operation of Schedule 7.
But I do not think that this description, in itself, can be taken to be a guide to its interpretation.
The rules to which the court must apply in order to give effect to it are those laid down by the statute, and the statute must be interpreted like any other statute.
But the purpose of the Act has informed the statutory language, and it is proper to have regard to it if help is needed as to what the words mean.
Third, the question whether measures passed under devolved powers by the legislatures in Wales, Scotland and Northern Ireland are amenable to judicial review, and if so on what grounds, was considered in AXA General Insurance Company Ltd v Lord Advocate [2011] UKSC 46, [2012] 1 AC 868.
The court in that case had the benefit of submissions by the Counsel General.
It was common ground that, while there are some differences of detail between the 2006 Act and the corresponding legislation for Scotland and Northern Ireland, these differences do not matter for that purpose.
The essential nature of the legislatures that the devolution statutes have created in each case is the same.
But it has not been suggested that the Bill is the result of an unreasonable, irrational and arbitrary exercise of the Assemblys legislative authority.
This case is concerned only with the question whether the Bill is outside competence under the provisions laid down by the statute.
In the light of these principles the issue at the heart of the argument about section 6 of the Bill resolves itself into a simple question: what is meant by the phrase incidental to, or consequential on in paragraph 6(1)(b) of Part 3 of Schedule 7 to the 2006 Act? Section 6 would have the effect of removing a pre- commencement function of a Minister of the Crown.
According to the rules that section 108 read together with Part 2 of Schedule 7 have laid down, a provision of an Act of the Assembly cannot do this unless it falls within one of the exceptions in paragraph 6 of Part 3.
I agree with Lord Neuberger that section 6 falls within the exception in paragraph 6(1)(b).
The words incidental to, or consequential on, any other provision contained in the Act of the Assembly make it clear that the interpretative exercise to which it points is one of comparison.
How significant is the removal of the pre-commencement function, when it is seen in the context of the Act as a whole? If the removal has an end and purpose of its own, that will be one thing.
It will be outside competence.
If its purpose or effect is merely subsidiary to something else in the Act, and its consequence when it is put into effect can be seen to be minor or unimportant in the context of the Act as a whole, that will be another.
It can then be regarded as merely incidental to, or consequential on, the purpose that the Bill seeks to achieve.
The provision in question meets this test.
So it is within competence.
I also agree with what he says about section 9.
On the face of it, the power that it gives to add or subtract from the list of enactments is open-ended.
This, no doubt, is why the UK Government has thought it right to raise the question whether it too is within competence.
But it falls to be read as narrowly as is required for it to be within competence, if such a reading is possible, and to have effect accordingly: see section 154(2).
That can be done by reading it in a way that brings it within the exception in paragraph 6(1)(b) of Part 3 of Schedule 7.
The Assembly does not have legislative competence to confer on the Welsh Ministers powers that are wider than those which have been given to it by the 2006 Act.
So it will be open to the Welsh Ministers to add to the list of enactments in Part 1 of Schedule 1 to the Bill by removing a pre-commencement function of a Minister of the Crown without the consent of the Secretary of State only if it meets the test in paragraph 6(1)(b).
I see no difficulty in reading section 9 in this way, and in holding that the power is to have effect subject to that limitation.
So it too is within competence.
Practice
The method which the Attorney General used for the bringing of this reference was to file a Notice of Appeal in the form for applications for permission to appeal or appeals which is described as Form 1 in UKSC Practice Direction 7.3.2 and its Annex.
It named the National Assembly for Wales as the only respondent and its Chief Legal Advisor, on whom the Notice of Appeal was served, as its solicitor.
The Counsel General for Wales and the Attorney General for Northern Ireland were later joined as respondents at their own request.
The use of this procedure raises two questions.
The first is as to the correct procedure that should be adopted under Rule 41 of the Supreme Court Rules 2009 and Practice Direction 10 for the making of a reference under section 112 of the 2006 Act and its counterparts in Scotland and Northern Ireland.
The second has two parts.
First, was it appropriate for the Assembly to be called as a respondent to these proceedings? Second, what are the circumstances in which the Assembly, although not called as respondent, would have standing to appear in proceedings which raise questions as to the legislative competence of one of its enactments?
The only previous example of a reference being made to the Supreme Court of a Bill passed by a devolved legislature is a reference that was made by the Attorney General for Northern Ireland in 2011.
As was noted in AXA General Insurance Co Ltd v Lord Advocate [2012] 1 AC 868, para 15, he referred the question whether the Damages (Asbestos-related Conditions) (Northern Ireland) Bill was within the competence of the Northern Ireland Assembly for pre- enactment scrutiny under section 11 of the Northern Ireland Act 1998.
He too used Form 1 for this purpose and the reference was served on the Northern Ireland Assembly, which was named on the form as the only respondent.
The Northern Ireland Assembly responded by serving a notice of objection indicating its opposition to the grounds of the reference.
It used the form which is described as Form 3 in Practice Direction 7.3.2 and its Annex.
But the reference was withdrawn before the hearing of the appeal in AXA took place.
So there was no opportunity for a discussion of the procedural issues in that case.
(a) the reference procedure
Rule 41 of the Supreme Court Rules 2009 (SI 2009/1603 (L17)) provides: (2) A reference made by the relevant officer is made by filing the reference and by serving a copy on any other relevant officer who is not already a party and who has a potential interest in the proceedings.
[emphasis added] (3) A reference must state the question or issue to be decided by the Court.
(4) The Registrar shall give notice of the question or issue to the appropriate relevant officer where that officer is not already a party to any proceedings.
Rule 3(2) of the Supreme Court Rules defines the expression relevant officer as meaning, in relation to proceedings in England and Wales, the Attorney General and, in relation to proceedings that particularly affect Wales, the Counsel General to the Welsh Assembly Government.
The procedure to be used in cases which raise devolution issues is dealt with in Practice Direction 10.
It is pointed out in Practice Direction 10.1.3 that such a case can reach the Supreme Court in four ways, one of which is by way of a reference by a relevant officer.
Practice Direction 10.1.4 repeats the definition of the expression relevant officer which is set out in Rule 3(2).
The four ways in which a devolution issue may reach the Supreme Court are then dealt with under four separate headings.
Practice Direction 10.2, under the heading references of a question by a relevant officer, states: 10.2.1 A reference of a question by a relevant officer is made by filing the reference, and serving a copy on any other relevant officer who is not already a party and who has a potential interest in the proceedings, within any time limits specified by the relevant statute.
[emphasis added] 10.2.2 The reference should state the question to be determined with respect to the proposed Order in Council, proposed Assembly Measure or Bill to which the reference relates; whether it applies to the whole Order in Council, proposed Assembly Measure or Bill or to a provision of it, and the reference shall have annexed to it a copy of the Order in Council, Assembly Measure or Bill to which it relates.
10.2.3 Any relevant officer (other than the one making the reference) who wishes to participate in the proceedings shall within 7 days of service of the reference on him notify the Registrar and the other parties.
Any relevant officer who gives notice automatically becomes a respondent to the proceedings.
As these provisions make clear, the reference should be served on any other relevant officer.
Those words are to be read together with the definition of the expression relevant officer in Rule 3(2) and Practice Direction 10.1.4.
There ought not to have been any room for doubt that, in the case of a reference by the Attorney General of a Bill of the National Assembly for Wales, the Counsel General had a potential interest in the proceedings.
So the reference should have been served on him.
It should not have been served on the Assembly which is not referred to in any of these provisions.
It is not a relevant officer.
It should also be noted that, in contrast to what is set out in the part of Practice Direction 10 which deals with appeals to the Supreme Court (see Practice Direction 10.3.5), the procedure set out in Practice Direction 10.2 does not lay down any particular form for use in such proceedings: see also Practice Direction 10.4.1 for references by courts and Practice Direction 10.5.1 for direct references by a law officer.
These Practice Directions do not refer to Form 1.
That form is designed for use only for notices of appeal and applications for permission to appeal.
As the wording of Practice Direction 7.3.2 makes clear, it is not designed for use in the case of references.
Counsel for the Attorney General submitted that these provisions fail to identify who is the respondent to a section 112 reference, and that there is a lack of coherence in the combination of Rule 41 and Practice Direction 10.
I do not think that this does justice to the provisions which I have quoted.
They require service of the reference on any other relevant officer, and they provide that he will automatically become a respondent to the proceedings if he notifies the Registrar that he wishes to participate in them.
The phrase any other relevant officer reflects the fact that section 112 does not state that there must be a respondent to a reference that is made under it.
Circumstances can be envisaged where that would not be appropriate.
It would, for example, be open to the Counsel General, to make a reference of a question about legislative competency in which no other relevant officer has an interest on the ground, for example, that a provision was incompatible with the Convention rights: see section 108(6)(c).
The court will, of course, benefit from the argument of a contradictor.
But it is not in a position to compel the appearance of a law officer who does not wish to participate.
What it seeks to ensure is that any other relevant officer is notified.
What then happens is up to the relevant officer.
It should be understood therefore (a) that proceedings on a reference under section 112 of the 2006 Act and its counterparts in Scotland and Northern Ireland are proceedings sui generis and (b) that they should be served on, and only on, any other relevant officer in his capacity as a relevant officer, not as a respondent.
He will become a respondent if, and only if, he notifies the Registrar that he wishes to participate.
There is no requirement for the reference to be served on the National Assembly, although Practice Direction 10.2.6 states that it must be notified.
Notification also should be given to the Clerk of the Assembly appointed under section 26.
This is because it is her function to submit the Bill for Royal Assent under section 115.
She may not do this if a reference has been made and not yet disposed of by the Supreme Court: section 115(2).
The Presiding Officer has the same function in Scotland, and is under the same prohibition, with regard to Acts of the Scottish Parliament under section 32(2) of the 1998 Act; see, as regards Northern Ireland, section 11(2) of the Northern Ireland Act 1998.
No form has been laid down for use in the case of references.
So it is open to the law officer or court, on making the reference, to adopt whatever style and layout is thought to be most appropriate in the circumstances.
The Registrar must however be provided with the following information for administrative purposes: (a) the names, addresses and contact details of the party making the reference and his legal representatives; (b) the names, addresses and contact details of any relevant officer on whom the reference has been served and his legal representatives; and (c) similar details of any person who has been notified.
These details should be set out in a covering document, to which the reference and any accompanying documents should be attached.
The Practice Directions are kept under continuous review and amended from time as required.
Amendments are needed to take account of changes in the systems for devolution.
For example, references to a Measure of the National Assembly for Wales in Practice Direction 10 are no longer appropriate as Part 3 of the 2006 Act has ceased to have effect.
They will need to be deleted.
Changes will be needed to take account of a new system for appeals to the Supreme Court in devolution questions arising in criminal cases under the Scotland Act 2012 which are classified as compatibility issues.
Account will be also have to be taken of the points mentioned in this judgment.
A revised version of the Practice Directions will be issued in due course.
(b) participation of the Assembly
The 2006 Act confers no legal personality on the National Assembly for Wales.
Instead the National Assembly for Wales Commission was established by section 27, which does have legal personality.
The Commission has the duty of providing the Assembly with the property, staff and premises required for its purposes: section 27(5).
Further provisions about the Commission are set out in Schedule 2 to the 2006 Act.
Among them is paragraph 4 which sets out its powers.
These include, in particular, entering into contracts, charging for goods and services, investing sums not immediately required for its functions and accepting gifts: paragraph 4(2).
There is no indication either in section 27 itself or in the Schedule that it was contemplated that either the Assembly or the Commission should have the right to institute, defend or appear in legal proceedings in which the legislative competence of a Bill passed by the Assembly was under scrutiny.
Section 112(1) of the 2006 Act confers the function of referring a question about legislative competence on the Counsel General or the Attorney General.
The Counsel General represents the interests of the Welsh Ministers on the one hand and the Attorney General represents the interests of the Ministers of the Crown on the other.
So their positions under this provision can be regarded as reciprocal.
Each can be taken to have the right to appear in proceedings raised by the other, which he can exercise if he wishes to do so.
References to the right of the Counsel General to bring and defend proceedings are also to be found in Schedule 9: see, for example, paragraphs 4, 13, 14 and 30.
No reference is made anywhere in such terms to the Assembly or the Commission.
In Adams v Advocate General 2003 SC 171 a challenge was made by way of a petition for judicial review to the validity of the Protection of Wild Mammals (Scotland) Act 2002, which was an Act of the Scottish Parliament.
Among the questions raised was whether the Act was outside the Parliaments legislative competence.
The Advocate General for Scotland lodged answers in which she contended that the Scottish Parliament was the appropriate respondent and that, since proceedings instituted against the Parliament must be instituted against the Parliamentary corporation in terms of section 40(1) of the 1998 Act, the corporation ought to have been called as respondent.
Lord Nimmo Smith rejected this contention: see para 31.
He said that the proceedings were not proceedings against the Parliament within the meaning of section 40(1), as by the stage when they were brought the Act had passed out of its hands.
Appearing as a contradictor did not appear to be one of the corporations functions, and it was clear from the scheme of the Act that the Lord Advocate, as the Scottish law officer acting in the public interest, was the appropriate person to perform that role.
I would apply the same reasoning to a case where the challenge to legislative competence was made after a Bill had been enacted and become an Act of the Assembly.
The situation in this case is different, as the Bill is still in the hands of the Clerk.
So it cannot be said to have passed out of the hands of the Assembly.
But the more important point is that appearing as a contradictor to a challenge of that kind is not one of the Commissions functions under the 2006 Act.
The way that Act has set out its functions and those of the Counsel General must be respected.
The appropriate person to represent the public interest in resisting a challenge of that kind is the Counsel General, whose functions include making appropriate representations about any matter affecting Wales: section 62.
The scope that is given to him by that section makes any intervention by the Assembly or the Commission in such proceedings unnecessary.
This is not to say that the Assembly or the Commission may not have standing to appear in proceedings in which such questions are raised.
There may be cases where the views of the Assembly or the Commission, one way or the other, might be of assistance.
In that event the court would be willing to give permission to these bodies, or either of them, to intervene under Rule 26 if it was asked to do so.
This should not be regarded, however, as detracting from the rule that the appropriate person on whom such proceedings should be served is the Counsel General or, if the proceedings are brought by the Counsel General, the Attorney General.
Conclusion
For the reasons given by Lord Neuberger, I would determine this reference by declaring that sections 6 and 9 of the Local Government Byelaws (Wales) Bill 2012 are within the legislative competence of the Assembly.
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Following a referendum, various provisions of the Government of Wales Act 2006 (the 2006 Act) came into force on 5 May 2011.
These provisions gave the National Assembly for Wales (the Assembly) primary legislative competence in certain areas [5].
If there is an issue as to whether a Bill, or a provision in a Bill, passed by the Assembly exceeds legislative competence, the issue can be referred to the Supreme Court [6].
The Local Government Byelaws (Wales) Bill 2012 (the Bill) was the first Bill to be enacted by the Assembly under these new powers.
The aim of the Bill is to simplify procedures for making and enforcing local authority byelaws in Wales [7].
Certain provisions of the Bill are intended to remove the need for the confirmation of byelaws by the Welsh Ministers and by the Secretary of State [8].
This need arises by virtue of the Local Government Act 1972 (the 1972 Act) and the National Assembly for Wales (Transfer of Functions) Order 1999 (the 1999 Order).
The effect of section 236(11) of the 1972 Act is that, where a statutory provision giving a local authority the power or duty to make the byelaw either so provides or is silent as to the existence or identity of a confirmatory body or person, before any byelaw made under that provision by a local authority can be effective, the Secretary of State has to confirm the byelaw [16].
Schedule 1 to the 1999 Order provides that the functions of the Secretary of State under section 236(11) of the 1972 Act shall be exercisable by the Assembly concurrently with the Secretary of State [20].
The Attorney General referred to the Supreme Court the question whether sections 6 and 9 of the Bill were within the Assemblys legislative competence [1].
Section 6 of the Bill (through Part 1 of Schedule 1 to the Bill) removes the need for the confirmation of byelaws under certain specific enactments (the scheduled enactments) which currently require confirmation under section 236(11) of the 1972 Act.
Section 9 would empower the Welsh Ministers to add to the scheduled enactments [8].
The specific issue in relation to sections 6 and 9 was whether either section removed the Secretary of States role in confirming (or refusing to confirm) byelaws made under statutory provisions which are (i) scheduled enactments, and (ii) provisions to which section 236(11) applies.
If either section removed this role, they would be beyond the legislative competence of the Assembly, unless they were incidental to, or consequential on another provision contained in the Bill [46].
The Supreme Court unanimously declares that the Assembly had the legislative competence to enact sections 6 and 9 of the Bill.
Lord Neuberger gives the leading judgment.
Lord Hope gives guidance on some matters of practice regarding the making of such references.
Section 6 is within the legislative competence of the Assembly [66],[83].
The removal of the Secretary of States confirmatory powers in relation to the scheduled enactments would be incidental to, and consequential on, the primary purpose of removing the need for confirmation by the Welsh Ministers of any byelaw made under the scheduled enactments [52],[53].
The primary purpose of the Bill cannot be achieved without that removal [54].
The Secretary of States confirmatory power is concurrent with that of the Welsh Ministers [55].
It is open to either the Secretary of State or the Assembly to exercise any functions which are exercisable concurrently [37].
Where a function is vested in two Ministers concurrently, either may perform it, acting alone, on any occasion [40].
It is far more sensible and consistent with the purpose of the Welsh Government legislation to conclude that the Assembly and the Secretary of State were each intended to have the power to exercise the concurrent functions, and that it was to be left to their good sense to decide which should exercise a particular function in a particular case [41].
The confirmatory power is only given to the Secretary of State if no other statute (including one passed after the 1972 Act) confers the function on any other body or person, which supports the notion that it is not an important function [56].
The scheduled enactments relate to byelaws in respect of which the Secretary of State is very unlikely ever to exercise his confirmatory power [57].
Section 9 is within the legislative competence of the Assembly [66],[84].
Section 9 has a limited effect, because the jurisdiction of the Assembly is limited to removing, or delegating the power to remove, functions of the Secretary of State where this would be incidental to, or consequential on, the purpose of removing the need for confirmation by the Welsh Ministers of any byelaw made under the scheduled enactments, and the Assembly cannot therefore bestow wider powers than this on the Welsh Ministers [63].
The same conclusion can be arrived at by invoking section 154(2) of the 2006 Act, which provides that a provision of a Bill which could be read in a way as to be outside the Assemblys legislative competence is to be read as narrowly as is required for it to be within that competence [64].
The outcome of this reference is in favour of the Assembly, but it cannot be regarded as a setback in practical terms for the Secretary of State, because the conclusion the Supreme Court has reached as to the effect of section 9 of the Bill is one which reflects the terms on which the Secretary of State was prepared to give consent to section 6 of the Bill [67].
The outcome is also entirely consistent with the general thrust of the extended powers given to the Welsh Ministers by the 2006 Act [68].
Guidance on matters of practice In terms of the relevant rules and practice direction, the reference should not have been served on the Assembly.
Rather, it should have been served on the Counsel General in his capacity as a relevant officer having a potential interest in the proceedings.
He can then become a respondent if he notifies the Registrar that he wishes to participate [90],[93].
As no form has been laid down for use in the case of references (as opposed to appeals) involving devolution issues, it is open to the referring law officer or court to adopt whatever style and layout is thought to be most appropriate in the circumstances.
The Registrar must however be provided with certain information for administrative purposes [94].
Appearing as a contradictor to a challenge to the legislative competence of a Bill or an Act of the Assembly is not one of the Assembly Commissions functions under the 2006 Act.
The appropriate person to represent the public interest in resisting such a challenge is the Counsel General.
There may however be cases in which the court will allow the Assembly or the Assembly Commission to participate as an intervener [99],[100].
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A limited company not in liquidation cannot lawfully return capital to its shareholders except by way of a reduction of capital approved by the court.
Profits may be distributed to shareholders (normally by way of dividend) but only out of distributable profits computed in accordance with the complicated provisions of the Companies Act 2006 (replacing similar provisions in the Companies Act 1985).
Whether a transaction amounts to an unlawful distribution of capital is not simply a matter of form.
As Hoffmann J said in Aveling Barford Ltd v Perion Ltd [1989] BCLC 626, 631, Whether or not the transaction is a distribution to shareholders does not depend exclusively on what the parties choose to call it.
The court looks at the substance rather than the outward appearance.
Similarly Pennycuick J observed in Ridge Securities Ltd v Inland Revenue Commissioners [1964] 1 WLR 479, 495, A company can only lawfully deal with its assets in furtherance of its objects.
The corporators may take assets out of the company by way of dividend, or, with the leave of the court, by way of reduction of capital, or in a winding-up.
They may of course acquire them for full consideration.
They cannot take assets out of the company by way of voluntary distribution, however described, and if they attempt to do so, the distribution is ultra vires the company.
The sole issue in this appeal is whether there may have been an unlawful distribution of capital when the appellant company, Progress Property Company Ltd (PPC), sold the whole issued share capital of a wholly-owned subsidiary, YMS Properties (No. 1) Ltd (YMS1) to another company, Moorgarth Group Ltd (Moorgarth).
All these companies were indirectly controlled by Dr Cristo Wiese, a South African investor.
The facts have not yet been fully established, which is why the issue must be stated in this inconclusive way.
PPC was originally called Tradegro (UK) Property Holdings Ltd and has since changed its name to BLN Property Company Ltd. Moorgarth was originally called Foldfree Ltd. But it is simplest to use the names used by Mummery LJ in his judgment in the Court of Appeal.
The transaction between PPC and Moorgarth has been vigorously attacked by the appellant PPC on the ground that it was (as must be assumed for the purposes of this appeal) at an undervalue (PPC says, a gross undervalue).
YMS1, a company whose net assets might on PPCs most ambitious case have been worth as much as 4m, was sold for little more than 60,000.
But the attack has been stoutly resisted on the ground that (as is now no longer in dispute) Mr Cornus Moore (Dr Wieses right-hand man, and a director of both PPC and Moorgarth) genuinely believed that the sale of the shares in YMS1 was at market value.
It is also to be assumed for the purposes of this appeal that Mr Moore was in breach of duty in failing to realise that the transaction was in fact a sale at an undervalue.
Had this appeal been allowed, the correctness of these undetermined assumptions (and also issues of valuation and quantum) might have had to be decided in further proceedings.
The facts
The scale of the undervaluation alleged by PPC, in a transaction negotiated between experienced businessmen advised by experienced surveyors, solicitors and accountants, is truly remarkable.
It suggests that the circumstances were such as to call for close enquiry; and the deputy judge, Mr David Donaldson QC, did enquire into them closely in the course of a fourteen-day trial of this action (together with two other actions in which there has been no appeal).
The deputy judges task in fact-finding was difficult, as he found Mr Charles Price, the individual indirectly interested (as a minority shareholder in PPC and as prospective purchaser of the majority holding) in the disposal of the YMS1 shares, to be an unreliable witness.
PPCs failure to call as a witness its solicitor, Mr Gerber, added to the deputy judges difficulties in making full and clear findings of fact.
He dismissed the action on the basis that it could not succeed even if there had been an unintentional sale at an undervalue, and even if Mr Moore was in breach of duty in failing to recognise it.
The Court of Appeal (Mummery, Toulson and Elias LJJ) [2009] EWCA Civ 629, [2010] 1 BCLC 1 unanimously upheld the deputy judges dismissal of the action.
In doing so Mummery LJ (with whom Toulson and Elias LJJ concurred) did not find it necessary to go far into the factual circumstances.
He summarised the essential facts with admirable brevity in paras 6 and 12 of his judgment: The sale and purchase agreement was made on 20 October 2003 at an agreed price of 63,225.72.
The sale price was calculated on the basis of the open market value of the YMS1 properties (11.83m), from which there was subtracted liabilities for creditors approaching 8m and the sum of 4m in respect of a repairing liability.
The subtraction of 4m was made in the belief that PPC had given an indemnity or counter-indemnity under which that liability would ultimately fall on PPC.
As part of the transaction that liability of PPC was to be released.
In fact, it turned out that there was no such indemnity liability and there was nothing from which PPC could be released.
In consequence there was no 4m to subtract from the value of the YMS1 properties.
There was no justification for the reduction in the sale price.
So it was said that the sale of the shares was at a gross undervalue. . . .
There was no dispute before the deputy judge that Mr Moore genuinely believed that the price of the shares in YMS1 sold by PPC to Moorgarth was their market value.
It was not alleged that there was any intention on his part to prefer Moorgarth or to commit a fraud on the creditors of PPC.
He acted in the honest belief that the sale of the shares in YMS1 was a commercial transaction.
I am reluctant to expand on Mummery LJs summary unless there is a good reason to do so.
But in an appeal which is centrally concerned with the substance and reality of the impugned transaction, I think it is appropriate to set out some of the deputy judges findings of fact in rather more detail.
They help to answer some (but not all) of the questions prompted by Mummery LJs summary.
At the material time (roughly April to October 2003) Dr Wieses investments included interests in the value (or down-market) sector of the United Kingdom retail market.
He indirectly controlled (through Brown & Jackson Plc B & J) two retail chains, Poundstretcher and Your More Store.
These businesses (especially Your More Store) were not flourishing, and in the early months of 2003 he took various steps intended to improve their prosperity.
Your More Store Limited (YMS), which ran Your More Store and two other retail businesses, became a subsidiary of Tradegro (UK) Ltd (Tradegro), another company controlled by Dr Wiese.
Mr Carel Stassen was appointed as managing director of YMS and became a minority shareholder in YMS.
Mr Price was appointed as managing director of PPC, which was at that time a wholly-owned subsidiary of Tradegro.
Mr Price became the holder of 24.9% of the shares in PPC, leaving Tradegro with 75.1%.
The freehold interest in the Your More Store premises was vested in a company called YMS Properties (No. 2) Ltd (YMS2).
YMS2 was a wholly-owned subsidiary of YMS1, which was a wholly-owned subsidiary of PPC.
In the short term YMS continued to occupy its retail premises informally, without any leases from YMS2.
There was a similar reorganization of the Poundstretcher business.
YMSs informal occupation of the retail premises did not last long.
An essential part of Mr Prices task was to manage and raise finance from YMS2s property portfolio.
Mr Price embarked on negotiations with Nationwide Building Society (Nationwide) and on 2 May 2003 Nationwide entered into a facilities agreement to advance funds of more than 20m secured on the YMS and Poundstretcher freeholds.
But Nationwide insisted that formal leases, with tenants covenants including full repairing and insurance obligations, should be entered into between YMS2 as landlord and YMS as tenant and between the corresponding Poundstretcher companies.
The deputy judge summarised the resulting situation in paras 8 and 9 of his judgment: This posed a problem.
The properties in the portfolio, and in particular those occupied by YMS, were in significant disrepair.
A survey produced by independent surveyors GRD in early 2003 estimated the existing cost of repairs to the YMS properties at more than 4.6m.
YMS, whose trading position was already parlous, was in no position to shoulder a liability of this magnitude, and Mr Stassen refused to agree.
Moreover, the execution of FRI leases would at a stroke bring about a substantial increase in the value of the [freeholds the judge wrote leases but this must have been a slip] compared with the vacant possession value at which they currently stood in the books of YMS1.
As all parties recognised, commercial logic and indeed fairness required that the costs of this benefit should not rest with YMS.
It might be that no serious problem would arise so long as both the freeholds and YMS remained within the [Tradegro] group (though a question might still be posed as a result of the minority interests of Mr Stassen and Mr Price in, respectively, YMS and PPC), but that position was always open to change.
In the event, YMS did sign FRI leases.
Mr Stassen did not however agree to this course until he had obtained an assurance from Mr Moore, with the approval of Dr Wiese, that YMS would be given an indemnity against the costs it might be required to incur in satisfying the repairing liability.
At that stage there was a falling out between Mr Price and Dr Wieses management team, and in July 2003 Dr Wiese gave six months notice to terminate the arrangements with Mr Price.
But during the next two months there were negotiations which led to an agreement for Mr Price to acquire Tradegros 75.1% shareholding in PPC.
The agreed terms were quite complex and were embodied in a share purchase agreement (the SPA), the parties to which were (1) Wigmore Street Investments Ltd (WSIL), then called Real Estate Property Corporation Ltd, a Bermuda company controlled by Mr Price, as purchaser and (2) Tradegro as vendor.
The dispute in this appeal is not concerned with the sale of the PPC shares themselves, but with a preliminary step provided for in clause 4.1 of the SPA, that is, the sale by PPC, before completion of the SPA, of the whole share capital of YMS1 to Moorgarth (a direct subsidiary of Tradegro).
The deputy judge commented (in para 12 of his judgment) on how matters stood as the negotiations progressed: Since ownership of the freeholds would now move out of the [Tradegro] group, it became imperative to honour Mr Moores assurance to Mr Stassen that YMS would be given an indemnity against the FRI liability.
Logic also suggested that in the new circumstances the ultimate liability should pass to the new owner of YMS2.
Consistent with this, the running document entitled Summary of principal commercial terms passing between the parties indicated that (1) a deed of indemnity was being discussed between Tradegro and YMS (2) there was broad agreement on the provision of a counter-indemnity by PPC.
The same applied to the [Poundstretcher] properties.
His comment about what logic suggested must have been directed at the position before the change of plan (embodied in clause 4.1 of the SPA) to extract the YMS freeholds from PPC before the sale of its shares was completed.
There would have been no logic in PPC accepting ultimate responsibility for an unquantifiable liability for repairs to dilapidated YMS properties that it was not going to own.
What happened instead, and gave rise to the issue in this appeal, was the extraction of the YMS freeholds by the sale of YMS1 by PPC to Moorgarth at the price of 63,225.72.
This took place under a simple written agreement entered into on 20 October 2003.
It was negotiated mainly by two solicitors, Mr Gerber instructed by Mr Price on behalf of PPC and Mr Emmett instructed by Mr Moore on behalf of Moorgarth.
The agreement was signed by Mr Paul Clarke (who was a director of both PPC and Moorgarth) on behalf of both companies.
He signed it after a board meeting of the directors of PPC attended by Mr Clarke in person and by Mr Price by telephone.
On the same day Tradegro and its overseas holding company gave a formal release of PPC from any possible liability under the supposed indemnity or counter-indemnity.
That liability had never actually come into existence, though it had been much discussed.
The deputy judges judgment (paras 13 to 31) gives a detailed account of the fairly hectic negotiations leading up to 20 October 2003, and of the events of that day.
That is for the present sufficient, and perhaps more than sufficient, as to the factual findings made at first instance in relation to the issue of sale at an undervalue.
To recapitulate, that there was a sale at an undervalue is an undetermined assumption made for the purposes of this appeal, as is Mr Moores breach of duty, but his genuine belief in an arms length sale is common ground.
I shall return to the facts briefly at the end of this judgment.
The authorities
PPCs case, as finally formulated at first instance, relied not on section 263 of the Companies Act 1985 (now replaced by sections 829 and 830 of the Companies Act 2006) but on what Mummery LJ referred to (para 23) as the common law rule: The common law rule devised for the protection of the creditors of a company is well settled: a distribution of a companys assets to a shareholder, except in accordance with specific statutory procedures, such as a winding up of the company, is a return of capital, which is unlawful and ultra vires the company.
The rule is essentially a judge-made rule, almost as old as company law itself, derived from the fundamental principles embodied in the statutes by which Parliament has permitted companies to be incorporated with limited liability.
Mummery LJs reference to ultra vires must be understood in the wider and looser sense of the term identified in Rolled Steel Products (Holdings) Ltd v British Steel Corporation [1986] Ch 246 at 276-278 (Slade LJ) and 302 (Browne-Wilkinson LJ).
But in this appeal there is no difference between the parties as to the narrower and wider meanings of ultra vires in the company law context.
Whether a transaction infringes the common law rule is a matter of substance, not form.
The label attached to the transaction by the parties is not decisive.
That is a theme running through the authorities, including Ridge Securities Ltd v Inland Revenue Commissions [1964] 1 WLR 479 and Aveling Barford Ltd v Perion Ltd [1989] BCLC 626 to which I have already referred.
I shall take some of the best-known cases in chronological order.
Ridge Securities was concerned with a complicated and artificial tax- avoidance scheme carried out at a time when companies were still subject to income tax (rather than corporation tax).
Pennycuick J (at p493), upheld the Special Commissioners disallowance of payments of interest grotesquely out of proportion to the principal amounts secured as not being interest within the meaning of section 169 of the Income Tax Act 1952.
That was simply a point of construction on the taxing statute.
More radically, Pennycuick J also dealt with a company law point not raised before the Special Commissioners, and held that the payments of so-called interest were in fact gratuitous (and so unlawful) dispositions of the companys money.
In the crucial passage ([1964] 1 WLR 479, 495, set out at para 1 above) the words however described are important.
Re Halt Garage (1964) Ltd [1982] 3 All ER 1016 was, on its facts, at the other extreme from Ridge Securities as regards the sophistication of the parties involved and the outlandishness of the impugned transaction.
The company owned what was essentially a husband-and-wife business running a garage near Woburn Sands.
From 1964 the couple worked very hard to build up the business, which included recovering broken-down vehicles from the newly-opened M1.
They paid themselves modest remuneration as directors.
But unfortunately in 1967 the wife became seriously ill and they decided to move to the Isle of Wight.
They tried to sell the business but repeatedly failed to do so, and at one stage the husband was commuting between the Isle of Wight and Bedfordshire in an attempt to look after his invalid wife and the ailing business.
Other misfortunes followed and the company went into insolvent liquidation in 1971.
The liquidator challenged the propriety of directors remuneration paid to the husband and wife during the companys decline.
Oliver J upheld the husbands remuneration but reluctantly disallowed most of the wifes last two years remuneration.
He observed (at 1043) The real question is, were these payments genuinely directors remuneration? If your intention is to make a gift out of the capital of the company, you do not alter the nature of that by giving it another label and calling it remuneration.
That was, with respect, hardly apt on the facts of the case.
The evidence suggested that the couple knew little about company law and took the advice of their accountant.
But the case does show that if the label of remuneration does not square with the facts, the facts will prevail and the result may be an unlawful distribution, even if the directors in question intended no impropriety.
Later in his judgment Oliver J recognized that, observing (at 1044): In the absence of any evidence of actual motive, the court must, I think, look at the matter objectively and apply the standard of reasonableness.
In Aveling Barford Ltd v Perion Ltd [1989] BCLC 626 a Singapore businessman, Dr Lee, who indirectly owned and controlled Aveling Barford, procured the sale by it to Perion (a Jersey company also controlled by Dr Lee) of a country house and 18 acres of land at Grantham, formerly used as an employees social and sports club.
This property had development potential and had been valued by Strutt and Parker at 650,000 and by Humberts (for prospective mortgagees) at 1,150,000.
The price on the sale to Perion was 350,000 (with a provision of doubtful authenticity for 400,000 overage if the property sold for over 800,000 within a year).
In the event it was sold within a year for over 1.5m.
That was the context in which Hoffmann J made the observations set out in para 1 above.
The need to look at substance rather than form also extended to Dr Lees being treated as the real shareholder in Aveling Barford and the real purchaser of the land: Hoffmann J made a passing reference to this at p632 but it was not an issue in the case.
Hoffmann J referred to Ridge Securities and Halt Garage and concluded (at 633) with an instructive passage referring to Rolled Steel: It is clear however that Slade LJ excepted from his general principle cases which he described as involving a fraud on creditors (see . . .
[1986] Ch246 at 296).
As an example of such a case, he cited Re Halt Garage.
Counsel for the defendants said that frauds on creditors meant transactions entered into when the company was insolvent.
In this case Aveling Barford was not at the relevant time insolvent.
But I do not think that the phrase was intended to have such a narrow meaning.
The rule that capital may not be returned to shareholders is a rule for the protection of creditors and the evasion of that rule falls within what I think Slade LJ had in mind when he spoke of a fraud on creditors.
There is certainly nothing in his judgment to suggest that he disapproved of the actual decisions in Re Halt Garage or Ridge Securities.
As for the transaction not being a sham, I accept that it was in law a sale.
The false dressing it wore was that of a sale at arms length or at market value.
It was the fact that it was known and intended to be a sale at an undervalue which made it an unlawful distribution.
Hoffmann Js acceptance that the sale was not a sham, but was a transaction in a false dressing, has an obvious parallel in developments which were taking place at the same time in landlord and tenant law.
In Street v Mountford [1985] AC 809 Lord Templeman famously struck down an artificial arrangement designed to avoid a tenancy protected by the Rent Acts.
He declared (at 825) that the court should be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rent Acts.
But three years later in Antoniades v Villiers [1990] 1 AC 417, 462 Lord Templeman said that it would have been more accurate to have used the word pretence, and the rest of the Appellate Committee took the same line (Lord Bridge at 454 an attempt to disguise the true character of the agreement; Lord Ackner at 466 the substance and reality of the transaction . . .
he sought vigorously to disguise them; Lord Oliver at 467 an air of total unreality about these documents ; Lord Jauncey at 477 mere dressing up in an endeavour to clothe the agreement with a legal character which it would not otherwise have possessed).
Antoniades v Villiers was decided before Aveling Barford and Hoffmann J may well have had it in mind when writing his judgment.
There is however one obvious difference between the typical case of a disguised company distribution and the typical case of a tenancy disguised as a licence in order to avoid the Rent Acts.
There is no identity of interest between the landlord and the putative licensee quite the reverse and the latter agrees to enter an artificial arrangement, against his or her interest, because of the weak bargaining position of anyone looking for affordable accommodation in an overcrowded city.
In the disguised company distribution case, by contrast, the same human beings are usually interested directly or indirectly, on both sides of the corporate manoeuvring: Dr Lee in Aveling Barford, anonymous financiers in Ridge Securities.
The fact that the same individuals are interested on both sides is not of course, by itself, a cause for alarm, since company reconstructions are carried out for all sorts of entirely proper purposes (and now have the benefit of sections 845 and 846 of the Companies Act 2006).
The point to which I draw attention is simply that where there is a degree of identity of interest between both sides to a corporate transaction, both sides are likely to be in agreement as to its real purpose and its true nature and substance.
A question of characterisation
The essential issue then, is how the sale by PPC of its shareholding in YMS is to be characterised.
That is how it was put by Sir Owen Dixon CJ in Davis Investments Pty Ltd v Commissioner of Stamp Duties (New South Wales) (1957) 100 CLR 392, 406 (a case about a company reorganisation effected at book value in which the High Court of Australia were divided on what was ultimately an issue of construction on a stamp duty statute).
The same expression was used by Buxton LJ in MacPherson v European Strategic Bureau Ltd [2000] 2 BCLC 683, para 59.
The deputy judge did not ask himself (or answer) that precise question.
But he did (at paras 39-41) roundly reject the submission made on behalf of PPC that there is an unlawful return of capital whenever the company has entered into a transaction with a shareholder which results in a transfer of value not covered by distributable profits, and regardless of the purpose of the transaction.
A relentlessly objective rule of that sort would be oppressive and unworkable.
It would tend to cast doubt on any transaction between a company and a shareholder, even if negotiated at arms length and in perfect good faith, whenever the company proved, with hindsight, to have got significantly the worse of the transaction.
In the Court of Appeal Mummery LJ developed the deputy judges line of thought into a more rounded conclusion (para 30): In this case the deputy judge noted that it had been accepted by PPC that the sale was entered into in the belief on the part of the director, Mr Moore, that the agreed price was at market value.
In those circumstances there was no knowledge or intention that the shares should be disposed of at an undervalue.
There was no reason to doubt the genuineness of the transaction as a commercial sale of the YMS1 shares.
This was so, even though it appeared that the sale price was calculated on the basis of the value of the properties that was misunderstood by all concerned.
In seeking to undermine that conclusion Mr Collings QC (for PPC) argued strenuously that an objective approach is called for.
The same general line is taken in a recent article by Dr Eva Micheler commenting on the Court of Appeals decision, Disguised Returns of Capital An Arms Length Approach, [2010] CLJ 151.
This interesting article refers to a number of cases not cited to this court or to the courts below, and argues for what the author calls an arms length approach.
If there were a stark choice between a subjective and an objective approach, the least unsatisfactory choice would be to opt for the latter.
But in cases of this sort the courts real task is to inquire into the true purpose and substance of the impugned transaction.
That calls for an investigation of all the relevant facts, which sometimes include the state of mind of the human beings who are orchestrating the corporate activity.
Sometimes their states of mind are totally irrelevant.
A distribution described as a dividend but actually paid out of capital is unlawful, however technical the error and however well-meaning the directors who paid it.
The same is true of a payment which is on analysis the equivalent of a dividend, such as the unusual cases (mentioned by Dr Micheler) of In re Walters Deed of Guarantee [1933] Ch 321 (claim by guarantor of preference dividends) and Barclays Bank plc v British & Commonwealth Holdings plc [1996] 1 BCLC 1 (claim for damages for contractual breach of scheme for redemption of shares).
Where there is a challenge to the propriety of a directors remuneration the test is objective (Halt Garage), but probably subject in practice to what has been called, in a recent Scottish case, a margin of appreciation: Clydebank Football Club Ltd v Steedman 2002 SLT 109, para 76 (discussed further below).
If a controlling shareholder simply treats a company as his own property, as the domineering master-builder did in In re George Newman & Co Ltd [1895] 1 Ch 674, his state of mind (and that of his fellow-directors) is irrelevant.
It does not matter whether they were consciously in breach of duty, or just woefully ignorant of their duties.
What they do is enough by itself to establish the unlawful character of the transaction.
The participants subjective intentions are however sometimes relevant, and a distribution disguised as an arms length commercial transaction is the paradigm example.
If a company sells to a shareholder at a low value assets which are difficult to value precisely, but which are potentially very valuable, the transaction may call for close scrutiny, and the companys financial position, and the actual motives and intentions of the directors, will be highly relevant.
There may be questions to be asked as to whether the company was under financial pressure compelling it to sell at an inopportune time, as to what advice was taken, how the market was tested, and how the terms of the deal were negotiated.
If the conclusion is that it was a genuine arms length transaction then it will stand, even if it may, with hindsight, appear to have been a bad bargain.
If it was an improper attempt to extract value by the pretence of an arms length sale, it will be held unlawful.
But either conclusion will depend on a realistic assessment of all the relevant facts, not simply a retrospective valuation exercise in isolation from all other inquiries.
Pretence is often a badge of a bad conscience.
Any attempt to dress up a transaction as something different from what it is is likely to provoke suspicion.
In Aveling Barford there were suspicious factors, such as Dr Lees surprising evidence that he was ignorant of the Humberts valuation, and the dubious authenticity of the overage document.
But in the end the disparity between the valuations and the sale price of the land was sufficient, by itself, to satisfy Hoffmann J that the transaction could not stand.
The right approach is in my opinion well illustrated by the careful judgment of Lord Hamilton in Clydebank Football Club Ltd v Steedman 2002 SLT 109.
It is an example of the problems which can arise with football clubs owned by limited companies, where some small shareholders see the club as essentially a community enterprise, and other more commercially-minded shareholders are concerned with what they see as underused premises ripe for profitable redevelopment.
The facts are complicated, and the main issue was on section 320 of the Companies Act 1985 (approval by company in general meeting of acquisition of non-cash asset by director or connected person).
But the judge also dealt with a claim under section 263 (unlawful distribution).
He held that the sale of the clubs derelict ground at Kilbowie Park, and another site originally purchased under an abortive plan for a new ground, was a genuine arms-length sale even though effected at a price 165,000 less than the value as eventually determined by the court after hearing expert evidence.
In para 76 Lord Hamilton said: It is also clear, in my view, that a mere arithmetical difference between the consideration given for the asset or assets and the figure or figures at which it or they are in subsequent proceedings valued retrospectively will not of itself mean that there has been a distribution.
If the transaction is genuinely conceived of and effected as an exchange for value and the difference ultimately found does not reflect a payment manifestly beyond any possible justifiable reward for that in respect of which allegedly it is paid, does not give rise to an exchange at a gross undervalue and is not otherwise unreasonably large, there will not to any extent be a dressed up return of capital.
In assessing the adequacy of the consideration, a margin of appreciation may properly be allowed.
The words quoted by Lord Hamilton are from Halt Garage and Aveling Barford.
In para 79 Lord Hamilton said: It is plain, in my view, that directors are liable only if it is established that in effecting the unlawful distribution they were in breach of their fiduciary duties (or possibly of contractual obligations, though that does not arise in the present case).
Whether or not they were so in breach will involve consideration not only of whether or not the directors knew at the time that what they were doing was unlawful but also of their state of knowledge at that time of the material facts.
In reviewing the then authorities Vaughan Williams J in Re Kingston Cotton Mill Co (No 2) said at [1896] 1 Ch, p347: In no one of [the cases cited] can I find that directors were held liable unless the payments were made with actual knowledge that the funds of the company were being misappropriated or with knowledge of the facts that established the misappropriation.
Although this case went to the Court of Appeal, this aspect of the decision was not quarrelled with (see [1896] 2 Ch 279).
I agree with both those passages.
In this case there are concurrent findings that the sale of YMS1 to Moorgarth was a genuine commercial sale.
The contrary was not pleaded or put to Mr Moore in cross-examination.
I would dismiss this appeal.
The facts briefly revisited
Although the deputy judge refrained from making any findings about the true value of the YMS freeholds, he set out a good deal of information about valuations in the latter part of his judgment (paras 78 and following, dealing with a tax indemnity claim).
Crucially, he recorded, at para 80, that the figure of 11.83m in the DTZ valuation of September 2003 explicitly refrained from considering or taking account of the covenant strength of YMS and the state of repair of the property.
The valuation disregarding those matters was no doubt prepared on that basis on instructions, and it seems almost certain that if those matters had been taken into account, it would have been much lower.
One retrospective valuation produced a figure of just under 8m, and in 2006 Mr Farr, instructed by Tradegro, produced a figure of 5.85m (the deputy judge described this as sitting at an extreme end of pessimism).
In October 2003 YMS1s liabilities to Nationwide and Tradegro totalled about 7.6m, according to the minutes of the PPC board meeting on 20 October 2003 (Mummery LJ, para 6, says approaching 8m).
So a figure approaching 8m for the true value of the YMS freeholds was the break-even point for whether or not YMS1 had any positive value, in the absence of large-scale financial support from elsewhere in the Tradegro group so as to enable YMS to perform its extensive repairing obligations.
In the absence of such financial support the disrepair was a black hole making the DTZ figure of 11.83m unsupportable, and the non-existence of a counter-indemnity from PPC was totally irrelevant.
So long as PPC owned the YMS freeholds, it owned property which had been overvalued (on instructions) by about 4m.
On this analysis the sale negotiated between Mr Price and Mr Moore, two experienced businessmen, was not at a gross undervalue, and perhaps not at an undervalue at all.
But the dismissal of this appeal means that these matters will not be the subject of any further adjudication by the court.
I gratefully adopt the statement of the facts contained in Lord Walkers judgment, and I agree with his reasoning and conclusions.
I write only to underline aspects of the facts which make this, in my view, both an odd case and one in which the suggestion that the relevant transaction should be re-categorised as an illegitimate distribution of capital at common law is particularly artificial and unappealing.
The question is whether the agreement dated 20 October 2003 involved a return of capital by PPC to its shareholder TUK through TUKs subsidiary Moorgarth (it being common ground that no relevant distinction exists in this context between TUK and Moorgarth).
PPC submits that the value of its freehold properties was some 11.83 million, from which fell to be deducted some 8 million for creditors, leaving a net value on the face of it in the region of 4 million.
PPC further submits that Moorgarth and so Tradegro were aware of these facts through Mr Cornus Moore, then a director of TUK, PPC and Moorgarth.
The appeal comes before us on the hypothesis that these submissions can be made good, although they are in issue.
As explained by the deputy judge, Mr David Donaldson QC, in his judgment dated 15 October 2008, the reason for a net purchase price of only 63,225.72 appears from a Summary of principal commercial terms and from minutes for a board meeting of PPC held on 20 October 2003 to approve the sale.
The summary was prepared before the idea of stripping YMS1 and YMS2 out of PPC had emerged.
It indicated that a deed of indemnity was being discussed between TUK and YMS and that there was broad agreement that PPC should provide TUK with a (back-to-back) counter-indemnity.
The minutes were prepared after it had been decided that YMS1 and YMS2 should be stripped out of PPC, to explain the basis of the agreement by which this was achieved.
Clause 2.2 of the minutes, drafted by solicitors, reads: It was further noted that the Company had previously agreed to counter indemnify [TUK] in respect of TUKs indemnity to Your More Store Ltd. (YMS) in relation to the repairing obligations referred to in paragraph 2.1 and it was a precondition of the Sale that TUK (which is Foldfrees parent company) release the Company from those indemnity obligations.
Copies of deeds under which TUK had agreed to indemnify YMS in respect of those repairing obligations were produced to the meeting and its contents noted.
Consistently with this, the agreement itself recites (clause 4.1.4) that on completion: the Purchaser shall hand over to the Seller: (a) a certified copy of a deed of indemnity executed by [TUK] and Tradegro Limited in favour of [YMS]; and (b) a deed in favour of the Seller executed by [TUK] and Tradegro Limited under which the Seller is released from any and all liabilities to [TUK] and Tradegro Limited and [they] waive any and all rights and/or claims which they may have against the Seller under or arising out of repairing obligations in respect of properties owned by [YMS2] ..
The stated indemnity by TUK to YMS would have ensured that YMS did not suffer loss through having entered into the full repairing and insuring (FRI) leases in order to assist YMS2 to raise money, while PPCs counter-indemnity to TUK ensured that PPC as owner of YMS1, and through it of YMS2, did not benefit from YMSs willingness to do this.
The indemnity and counter-indemnity were valued at around 4 million.
When YMS1 and YMS2 were stripped out of PPC, PPCs counter-indemnity could either have been maintained in place, in which case the amount payable for YMS1 would have had to be around 4 million, or the counter-indemnity could have been released, in which case TUK/Moorgarth would be entitled to credit for its value (around 4 million).
The latter course was chosen, which explains why the actual net payment to be made under the agreement dated 20 October 2003 was only 63,225.72.
The illogicality, noted perceptively by the deputy judge, is that the credit for release of the counter- indemnity, which in fact was a credit due between TUK/Moorgarth and PPC, was expressed as if it reduced the value of YMS1, with which it had nothing in reality to do.
At trial PPC accepted that Mr Moore genuinely believed in the existence of TUKs indemnity to YMS and of PPCs counter-indemnity to TUK.
But it was by the time of trial conceded by TUK/Moorgarth that they could not establish the existence of either TUKs indemnity or PPCs counter-indemnity.
I confess to some surprise at this concession, and also at the absence of any suggestion of an estoppel, based in particular on the minutes to which I have referred.
But the concession must be accepted, and PPC seeks to build on it by arguing that, although Mr Moore in fact believed in the existence of both the indemnity and the counter-indemnity, he should have appreciated that they did not exist.
This is not an attractive submission, in circumstances where the judge disbelieved Mr Price when he denied any knowledge of and agreement to the minutes of 20 October 2003.
The judge thus found, in effect, that Mr Price was willing for the transaction to go ahead on a basis which he knew to be incorrect.
There appear to be two possible explanations for this attitude.
One is that Mr Price took it because he thought that the whole transaction, including the sale of PPC to his own company, would not have gone ahead on any other basis.
(In parenthesis, I note that Mr Collings did not controvert Mr McGhees answer during oral submissions, to the effect that, had the transactions relating to PPC and YMS1 not proceeded on the basis that the indemnity and counter-indemnity already existed as TUK/Moorgarth believed, TUK/Moorgarth could have insisted on their being put into express form, as a pre-condition to any such transactions proceeding.) The other, appearing clearly from the exchange of notes by the parties after the oral hearing, is that any increase in the amount of the price payable by Moorgarth to PPC for YMS1 would, under the terms of clause 5.6 of the agreement dated 3 October 2003 for the sale of TUKs 75.1% shareholding in PPC to WSIL, simply have resulted in an equivalent increase in the consideration payable by WSIL to TUK for such shares with the two increases, in commercial terms, cancelling each other out precisely.
However, Mr Collings for PPC submits that this is irrelevant.
The Court must look only at PPC and its position as a separate legal entity.
On this basis, the question now before the Court is one of characterisation.
Did the agreement between PPC and Moorgarth involve a distribution of PPCs capital to TUK through Moorgarth? This is a question of substance (or of examining the essence of the agreement, as the New Zealand Court of Appeal put it in Jenkins v Harbour View Courts Ltd. [1966] 1 NZLR 1).
It is not necessarily answered by the way in which the parties have expressed themselves.
Like Lord Walker, I would not go so far as Mr McGhee QC for Moorgarth in his submission that the ultimate test is always one of the directors (subjective) motives in effecting the transaction.
The courts will not second-guess companies with regard to the appropriateness or wisdom of the terms of any transaction (see e.g. re Halt Garage (1964) Ltd. [1982] 3 AER 1016.
But there may come a point at which, looking at all the relevant factors, an agreement cannot be regarded as involving in substance anything other than a return or distribution of capital, whatever the label attached to it by its parties.
I do not regard Aveling Barford Ltd v Perion Ltd [1989] BCLC 626 as inconsistent with this.
The facts in that case made it possible to speak of knowledge and intention to sell at an undervalue, but that does not mean that such knowledge or intention are always necessary factors.
In the present case, it is however unnecessary in my view to go further into such areas.
Here, the expressed justification for the payment to PPC of only 63,225.72 consisted in PPCs stated liability to TUK under the counter-indemnity stated to have been given by PPC to TUK.
It was illogical to treat that liability as reducing the value of YMS1.
The court can and must look at the substance of what happened.
The amount payable by Moorgarth to PPC was reduced by reference to an independent liability supposed to exist against a somewhat complicated commercial background in which Mr Moore believed PPC to have such liability to TUK under a counter-indemnity.
The fact that Mr Price, PPCs managing director, did not believe this can be put aside as irrelevant.
He was not a director of TUK or Moorgarth and Mr Collings QC for PPC stated explicitly that PPCs case depends upon attributing to both Moorgarth and PPC the knowledge (about the absence of any indemnity or counter-indemnity) which it is said that Mr Moore had or should have had as a director of both companies.
That, he said, was what made the agreement between PPC and Moorgarth one under which PPC was distributing assets at an undervalue.
Thus, he accepted that a shareholder (like TUK/Moorgarth) might agree to buy, at what it believed to be a fair price, even though the company selling knew or ought to know that the asset being sold was under-valued on the sale.
I will proceed on this basis, namely that it is essential, at least in circumstances such as the present, to attribute to both seller and buyer at least notice of the circumstances involving the alleged undervalue.
I need not examine whether it is correct as a general proposition that a companys rights to challenge a transaction as involving a disposition at an under-value necessarily depend upon establishing knowledge or notice of such circumstances by both parties to the transaction, or that they depend upon establishing fault on the part of a director, still less a common director.
The argument before us did not examine any such general proposition.
On the facts found by the judge, I am unable to accept PPCs case that the agreement between PPC and Moorgarth can or should be treated as involving an element of distribution of capital.
First, even putting aside the telling points made in the last two paragraphs of Lord Walkers judgment regarding the probable weakness of YMSs covenant, I cannot see how as a matter of substance it can be said that YMS1 was sold at an under-value.
The reason why only 63,225.72 was paid by Moorgarth was unrelated to any view that YMS1 had a net value less than about 4 million.
The reason was that PPC (not YMS1) was seen as having independent counter-indemnity obligations to TUK, which fell to reduce (in effect by agreed set-off) any net sum otherwise payable by Moorgarth to PPC on account of the value of YMS1.
In so far as PPCs obligations to TUK were seen or presented as reducing the value of YMS1, that was, as the deputy judge said, illogical.
The court must look at the real position, not at the parties illogical presentation of the position in an agreement which, read in context, makes clear what was actually happening and motivating the parties.
Second, with regard to the value attached as between PPC and Moorgarth to the release of PPCs supposed counter-indemnity, directors can make mistakes about the nature or extent of liabilities attaching to their companies, and can accept or settle supposed liabilities, even though they ought to have known or could have done better.
Their acceptance or settlement of such supposed liabilities remains just that, even though it may have been ill-advised or unwise.
It does not axiomatically fall to be re-categorised as a distribution of capital, even if it is in relation to a shareholder.
Accordingly, if one assumes that Mr Moore as a director ought to have known that PPC had not in fact entered into the counter-indemnity which he believed had been entered into, it does not follow that the release of the supposed counter-indemnity should be regarded as a distribution of capital.
This point alone is in my view sufficient to answer PPCs present case.
Third, the way PPC has chosen to put its case depends, as I have said, upon the knowledge which it is said that Mr Moore ought to have acquired, being treated as knowledge that he ought to have had as a director of TUK/Moorgarth.
I would not, as presently advised, accept this.
As a director of TUK and Moorgarth, Mr Moore achieved all that was in their interests.
He achieved a recognition and recital of the existence of the indemnity and counter-indemnity in which he believed, and on that basis a credit in the region of 4 million, reducing the net payment to PPC for YMS1 and YMS2 to 63,225.72.
If the agreement of 20 October 2003 stands, Mr Moore therefore achieved for TUK and Moorgarth what it was, from the time when the FRI leases were executed, always understood that they would receive.
Only if the agreement fails, might it sensibly be said that he was in breach of duty to TUK and Moorgarth.
But it is circular to start with an assumption which depends upon the agreement failing.
Viewing the position overall, PPCs current case depends upon re- categorising an understandable commercial agreement, involving on its face the giving of value for the release of a counter-indemnity, which Moorgarth genuinely believed to exist and the acknowledgement of which was made a pre-condition to the agreement, and treating it as an entirely different nature of transaction.
The case is very far from any previous case in which any such exercise has ever been undertaken, and I see no basis for any such re-categorisation.
We have read the judgments of Lord Walker and Lord Mance and we agree that, for the reasons they give, this appeal should be dismissed.
The essential question in this case is whether, on the assumed facts, the sale by the appellant to the respondent of the whole issued share capital of a wholly owned subsidiary of the appellant was in truth an unlawful distribution of capital dressed up as a sale.
I agree with Lord Walker and Lord Mance that, for the reasons they give, it was not.
It follows that I agree that the appeal should be dismissed.
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The issue in this appeal is whether there may have been an unlawful distribution of capital to a shareholder when the Appellant (PPC) sold the whole issued share capital of a wholly owned subsidiary YMS Properties (No 1) Ltd (YMS1) to the Respondent (Moorgarth).
PPC and Moorgarth were both subsidiaries of Tradegro (UK) Ltd (Tradegro).
It was accepted that Mr Moore, a director of both PPC and Moorgarth, had genuinely believed that the sale of the shares was at market value.
However PPC later claimed that the sale had been at an undervalue.
The appeal raises a question as to the approach to be taken to establishing whether there has been an unlawful distribution of capital by a company.
The factual background to the sale lies in the corporate structure being used to carry on the business of another company, called simply YMS Limited (YMS), which at the relevant time had also become a subsidiary of Tradegro.
Mr Price was appointed as managing director of PPC and became holder of 24.9% of its shares.
Tradegro retained 75.1% of PPCs shares.
The freehold interests in the properties from which YMS traded were held by another company, YMS Properties (No 2) Ltd (YMS2).
YMS2 was a wholly owned subsidiary of YMS1, which was itself a wholly owned subsidiary of PPC.
YMS occupied the properties on an informal basis.
YMS2s property portfolio was used as security to borrow money.
The lender insisted that formal leases be entered into between YMS2 (as holder of the freeholds) and YMS (as occupiers of the properties).
These were to include full repairing and insuring obligations on the tenants.
The properties were in significant disrepair at the time.
The cost of repairs was estimated at 4.6m and YMS was not able to bear that liability.
It therefore sought an assurance that it would be given an indemnity against the costs which it might have to pay to satisfy the repairing liability to YMS2.
Although it received that assurance, no indemnity or counter indemnity was ever entered into.
Later, following a falling out of those involved in managing the business, it was agreed that Mr Price should acquire Tradegros 75.1% holding of PPC.
A preliminary step was to be the sale by PPC of the whole share capital of YMS1 to Moorgarth, another subsidiary of Tradegro.
In effect, the YMS properties were being extracted from PPC prior to its sale to Mr Price.
On 20 October 2003, PPC agreed to sell the whole issued share capital of YMS1 to Moorgarth for 63,225.72.
The sale price was calculated on the basis of the open market value of the YMS1 properties (said to be 11.83m), less liabilities for creditors approaching 8m and the sum of 4m in respect of repairing obligations.
The deduction of 4m was made in the belief that PPC had given an indemnity or a counter indemnity in respect of YMSs repairing liabilities under the leases, under which that liability would ultimately fall on PPC.
As part of the sale by PPC to Moorgarth, PPCs liability under that indemnity or counter indemnity was to be released.
In fact, there was no indemnity or counter indemnity.
PPC (now under the control of its new owner) claimed that the sale was at an undervalue, by as much as 4m, and was in breach of the common law rule against unlawful distributions of capital.
It was not, however, disputed that Mr Moore, a director of both PCC and Moorgarth at the time the sale was negotiated, genuinely believed that the sale of the shares was at market value.
The claim was dismissed in the High Court and by the Court of Appeal.
The Supreme Court unanimously dismisses the appeal.
Lord Walker gives the main judgment.
Lord Mance agrees with it, but issues a separate judgment.
Lords Phillips, Collins and Clarke agree with both.
Lord Walker holds that that whether a transaction infringes the common law rule against unlawful distributions is a matter of substance and not form.
The label attached by the parties is not decisive: [16].
The essential issue was how the sale is to be characterised: [24].
PPC argued that the court should adopt an objective approach, so that there is an unlawful distribution whenever a company enters into a transaction with a shareholder which results in a transfer of value not covered by distributable profits, regardless of the purpose of the transaction.
Such a relentlessly objective rule would be oppressive and unworkable.
It would tend to cast doubt on any transaction between a company and a shareholder, even if negotiated at arms length and in perfect good faith, whenever the company proved, with hindsight, to have got significantly the worse of the transaction: [24].
The courts task is to inquire into the true purpose and substance of the transaction.
That calls for an investigation of all the relevant facts, which sometimes include the state of mind of the human beings involved: [27].
Sometimes their states of mind are totally irrelevant.
They will be irrelevant, for example, where a distribution described as a dividend is actually paid out of capital.
Where there is a challenge to the level of directors remuneration, the test is objective but probably subject to a margin of appreciation: [28].
The participants subjective intentions are, however, sometimes relevant.
Something said to be an arms length commercial transaction is the paradigm example: [29].
If the transaction was a genuine arms length transaction then it will stand, even if it may, with hindsight, appear to have been a bad bargain for the company.
If, however, it was an improper attempt to extract value from the company by the pretence of an arms length sale, it will be held unlawful.
Deciding which category the transaction falls into will depend on a realistic assessment of all the relevant facts, not simply a retrospective valuation exercise in isolation from all other inquiries: [29].
Here there were findings by the Deputy Judge and the Court of Appeal that this was a genuine commercial sale.
The appeal was therefore dismissed: [33].
Lord Mance agreed with Lord Walkers reasoning and conclusions.
The courts will not second guess companies with regard to the appropriateness or wisdom of the terms of any transaction.
There may, however, come a point at which, looking at all the relevant factors, an agreement cannot be regarded as involving in substance anything other than a return or distribution of capital, whatever label the parties attach to it: [42].
That was not the position here: [45].
It could not be said that YMS1 was sold at an undervalue.
The reason why only 63,225.72 was paid to PPC was not related to the question of the net value of the YMS properties.
It was because PPC itself was seen as having independent counter indemnity obligations to Tradegro which would reduce any sum payable by Moorgarth to PPC (such as the purchase price for YMS1 shares): [45].
Directors can make mistakes about the extent of liabilities attaching to their companies.
Even if ill advised or unwise, it does not follow that settlement of such a liability must be re categorised as a distribution of capital, even if it is in relation to a shareholder: [46].
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Almost all long leases of flats contain an obligation on the landlord (or a service company) to provide services, such as repairing the exterior and common parts of the block, and a concomitant obligation on the tenants to pay service charges, ie a specified proportion of the cost of providing such services.
The right of a landlord to recover such service charges obviously depends on the terms of the particular lease, but, since 1972, Parliament has imposed certain statutory requirements and restrictions on a landlord, which impinge on its ability to recover service charges.
The current statutory requirements are contained in the Landlord and Tenant Act 1985 (the 1985 Act), which has been frequently amended, most relevantly for present purposes by the Commonhold and Leasehold Reform Act 2002 (the 2002 Act).
All references hereafter to sections are to sections of the 1985 Act as amended, unless the contrary is stated.
Section 20(1) provides that unless certain consultation requirements are (a) complied with by the landlord (or service company), or (b) dispensed with by the Leasehold Valuation Tribunal (LVT), the landlord cannot recover more than a specified sum in respect of works for which the service charge would otherwise be greater.
The issue on this appeal concerns the width and flexibility of the LVTs jurisdiction to dispense with the consultation requirements, and the principles upon which that jurisdiction should be exercised.
The statutory provisions
Sections 18 to 30 are in a portion of the 1985 Act headed Service charges.
Section 18 is headed Meaning of service charge and relevant costs.
Subsection (1) defines service charge as being an amount payable by a tenant of a dwelling for repairs, maintenance the whole or part of which varies according to the relevant costs.
Section 18(2) defines relevant costs as the costs incurred in connection with the matters for which the service charge is payable.
Section 19 is headed Limitation of service charges: reasonableness.
Subsection (1) provides that relevant costs shall be taken into account in determining the amount of a service charge (a) only to the extent that they are reasonably incurred, and (b) only if the works are of a reasonable standard.
Section 20 is headed Limitation of service charges: consultation
requirements, and section 20ZA is headed Consultation requirements: supplementary.
By virtue of section 20(3), (4)(a) and (5) and section 20ZA(2), section 20 applies where the cost of qualifying works exceed an appropriate amount set by regulations.
Regulation 6 of the Service Charges (Consultation Requirements) (England) Regulations 2003, SI 2003/1987 (the 2003 Regulations) sets that amount at a sum which results in the service charge contribution of any tenant to the cost of the relevant works being more than 250.
The centrally relevant provisions for present purposes are to be found in sections 20(1) and 20ZA(1).
Section 20(1) states that:
[T]he relevant contributions of the tenants are limited in accordance with subsection (6) unless the consultation requirements have been either a) b) complied with in relation to the works , or dispensed with in relation to the works by (or on appeal from) a [LVT].
Section 20ZA(1) provides that: Where an application is made to [an LVT] for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works , the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements.
Section 20(2) defines relevant contribution as being, in effect, the amount due under the service charge provisions in respect of the works, and section 20(7) limits the contribution to 250 per flat see regulation 6 of the 2003 Regulations.
The consultation requirements are defined in section 20ZA(4) as being requirements prescribed by regulations, which section 20ZA(5) states may in particular include provisions requiring the landlord to take certain steps.
Those steps include providing details of the proposed works to the tenants, obtaining estimates, inviting the tenants to propose possible bidders, and having regard to the tenants observations on the proposed works and estimates.
The consultation requirements applicable in the present case are contained in Part 2 of Schedule 4 to the 2003 Regulations.
A summary of those requirements were helpfully agreed between the parties in the following terms (which I have slightly abbreviated): Stage 1: Notice of intention to do the works Notice must be given to each tenant and any tenants association, describing the works, or saying where and when a description may be inspected, stating the reasons for the works, specifying where and when observations and nominations for possible contractors should be sent, allowing at least 30 days.
The landlord must have regard to those observations.
Stage 2: Estimates The landlord must seek estimates for the works, including from any nominee identified by any tenants or the association.
Stage 3: Notices about Estimates The landlord must issue a statement to tenants and the association, with two or more estimates, a summary of the observations, and its responses.
Any nominees estimate must be included.
The statement must say where and when estimates may be inspected, and where and by when observations can be sent, allowing at least 30 days.
The landlord must have regard to such observations.
Stage 4: Notification of reasons Unless the chosen contractor is a nominee or submitted the lowest estimate, the landlord must, within 21 days of contracting, give a statement to each tenant and the association of its reasons, or specifying where and when such a statement may be inspected.
Sections 20A to 20C set out certain further Limitation[s] of service charges, and sections 21 to 23A give rights to tenants and impose obligations on landlords with respect to the provision of information about service charges.
Sections 26 to 30 contain other ancillary provisions with regard to service charges.
The factual background
Queens Mansions (the building) is a building in Muswell Hill, north London, the freehold of which is owned by Daejan Investments Ltd (Daejan), the appellant in this appeal.
The building consists of shops on the ground floor and seven flats on the upper floors.
Five of the seven flats are held under long leases, and each of those leases is held by a respondent to this appeal (collectively the respondents).
Each lease includes an obligation on the landlord to provide services, including the repair and decoration of the structure, exterior, and common parts of the building.
Each lease also includes an obligation on the tenant to pay a specified fixed proportion of the cost of providing, inter alia, the services which the landlord is obliged to provide.
The five respondents were, at all material times, members of the Queens Mansions Residents Association (QMRA), which is chaired by Ms Marks, who is the partner of one of the respondents.
The building is managed by Highdorn Co Ltd, In his judgment at para 98, Lord Wilson has given a fairly full account as to which, like Daejan, is part of the Freshwater group of companies, and which carries on business under the name of Freshwater Property Management (FPM).
By early 2005, it was clear that major works were required to the building, and, in February that year, FPM told the respondents and QMRA that Daejan intended to carry out such works.
Three weeks later, FPM sent QMRA a specification in respect of the proposed works.
Thereafter, pursuant to a request from Ms Marks, FPM appointed Robert Edward Associates (REA), who had been advising QMRA on the proposed works, as contract administrator.
what then happened.
A briefer summary is as follows.
REA prepared a fresh specification, which was sent to QMRA and the respondents on 30 August 2005, a few weeks after a stage 1 notice of intention to carry out works had been sent, on 6 July 2005.
This specification was then the subject of discussion with Ms Marks, some of whose observations were then incorporated into the specification.
Following that, tenders were sought, and priced tenders were received by REA from four contractors.
In a fairly full report sent to the respondents on 6 February 2006, REA stated that two of those tenders appeared to be the most competitive.
One was from Rosewood Building Contractors (Rosewood), who had quoted 453,980 for a 24 week contract period; the other was from Mitre Construction Ltd (Mitre), who had quoted 421,000 for a 32 week contract period, although its tender did not comply entirely with the tender directions.
The respondents and QMRA were only provided with the priced specification submitted by Mitre and not that submitted by Rosewood.
During 2006, Ms Marks was pressing FPM for the opportunity to inspect the priced tenders, and, although this request had not yet been satisfied, FPM was indicating a preference for instructing Mitre.
In the meantime, in a letter of 14 July 2006, Ms Marks made a large number of fairly detailed points about the proposed Works to FPM, making it clear that those points were provisional until she had seen all the priced tenders.
FPM purportedly served Stage 3 notices on QMRA and the respondents on 14 June and on 28 July 2006, each of which stated when the priced estimates could be inspected.
However, such estimates were not available for inspection by the respondents or QMRA until 31 July 2006.
Before the estimates were inspected, the respondents and QMRA were informed by Daejan (orally on 8 August and by letter two days later) that the contract for the proposed works had been awarded to Mitre, and, at least by implication, that the statutory consultation process had accordingly ended.
It appears that this information was, in fact, inaccurate, but it was never corrected.
Despite this, there were some further communications between Ms Marks and FPM about the proposed works.
It appears that it was, in fact, only on 11 September 2006 that Daejan contracted for the proposed works (the Works) with Mitre, and this was formally communicated to the respondents and QMRA 16 days later.
On 3 October 2006, Mitre started carrying out the Works, and completed them, albeit apparently late and not without criticisms from the respondents and QMRA.
The procedural history
On 14 July 2006, four of the respondents applied to the LVT for a determination of the service charges payable under their respective leases for the period between 1994 and 2007 (as they were entitled to do under section 27A).
Those proceedings were concerned with the respondents allegations of failures on the part of Daejan in relation to (i) the provision of services over 14 years, and (ii) the Works.
Inevitably, a number of issues and sub issues were raised.
Of those issues, only one is directly relevant to the present appeal.
It is what the LVT called Issue 10, which was whether Daejan had complied with the requirements of part 2 of Schedule 4 to the 2003 Regulations (the Requirements) in relation to the Works.
Following a hearing and determination on a preliminary point, there was an eight day hearing which took place in disconnected periods between February and November 2007 (partly explained by illness of counsel).
Thereafter, the LVT (Miss A Seifert FCI Arb, Mr MA Matthews FRICS and Mr LG Packer MA MPhil) issued its decision on 11 March 2008 Case Reference LON/00AP/LSC/2006/0246.
Crucially for present purposes, the LVT concluded on Issue 10 that Daejan had failed to comply with the stage 3 Requirements in two respects.
First, neither of the purported stage 3 notices contained any summary of observations.
Secondly, the estimates were not available for inspection as stated [in either notice], and were only inspected on 11 August.
It is also worth mentioning that the LVT considered, under what it called Issue 11, a number of criticisms of the Works, which were being carried out during the hearing, and dismissed almost all of them.
There was then a further, one day, hearing before the LVT, devoted to the issue of whether the Requirements should be dispensed with in relation to the Works pursuant to sections 20(1)(b) and 20ZA(1).
Daejan relied on the fact that, if it had been free to enforce the service charge provisions in all the leases held by the respondents, it would be entitled to recover just under 280,000 in total from the respondents by way of service charge payments in respect of the Works, whereas, if no dispensation was granted, it would be limited to recovering service charges of 250 per respondent in respect of the Works, ie a total of 1,250.
On 8 August 2008, the LVT issued its decision that it should not dispense with the Requirements in relation to the Works LON/00AP/LSC/2007/0076.
The LVT observed in para 98 that it was matter of speculation what comments may or may not have been made by Ms Marks and [the respondents] and how this may have influenced the carrying out of the major works had they had the opportunity to comment having seen all the estimates.
It had earlier said in paras 86 87 that the failure by Daejan to comply with the [Requirements] [had] caused substantial prejudice to the respondents, and that it was a matter of great concern to Ms Marks that Daejan had not provided copies of all the estimates.
The LVT continued at para 90: the cutting short of the consultation period, by indicating that the decision had been made to award the contract to Mitre removed from the leaseholders the opportunity to make observations on the estimates to which landlord was obliged to have regard.
This opportunity to make informed comment on these matters was central to the consultation process.
It had been stressed in correspondence how important this was to the leaseholders.
The LVT concluded in paras 96 98 that: Although this was not a case where the landlord made no attempt to comply with the Regulations, and some extra statutory consultation was carried out this did not make good the landlord's omission in failing to provide the estimates and an opportunity to make observations.
The Tribunal considers that the fact that they did not have this opportunity amounts to significant prejudice.
The LVT then referred at para 99 to a proposal from Daejan that if, contrary to [its] submissions, the Tribunal considered that there has been prejudice to the [respondents], the Tribunal should consider the fair figure to compensate [them] for any prejudice, such sum to be deducted from the cost of the eventual charge when calculating the service charges for the [W]orks.
During the course of the hearing, Daejan had proposed a deduction of 50,000, which it had described as more than generous, but which had not been accepted by the respondents.
The LVT rejected this proposal at para 101, saying that there was no explanation of [how] the figure of 50,000 could be regarded as generous or as sufficient compensation for the prejudice suffered.
It also said at para 103 that the offer does not alter the existence of substantial prejudice to the leaseholders.
Daejan appealed to the Upper Tribunal (Lands Chamber) (Carnwath LJ and Mr NJ Rose FRICS), which rejected the appeal [2009] UKUT 233 (LC), [2010] 2 P&CR 116.
The Upper Tribunal agreed with the LVT that Daejan had failed to comply with the stage 3 Requirements in the two respects identified by the LVT.
However, the Upper Tribunal considered that the failure to include a summary of observations in the stage 3 notice was a relatively minor breach, which caused no prejudice to the respondents, as there [was] no reason to think that [it] would have assisted them, because they all knew what observations Daejan had received about the proposed works see paras 47 48.
Daejans more important failure, according to the Upper Tribunal in para 52, was the fact that the consultation process was for all practical purposes curtailed, a finding which had been open to the LVT.
The Upper Tribunal was, however, troubled by the LVTs finding that the respondents had suffered any consequential prejudice.
Only one specific item was seen to be of any weight, namely the respondents preference for Rosewood over Mitre, but, as the Upper Tribunal pointed out, this was based on evidence two years after the event, and it was hard to see why it could not have been raised by the respondents during the period of consultation which Daejan had allowed.
Nonetheless, at para 61, the Upper Tribunal said that the LVT was entitled to regard this as a [case involving a] serious breach, rather than a technical or excusable oversight, as the respondents right to make further representations [at stage 3] was nullified.
The Upper Tribunal also said that it was not for the respondents to show prejudice, but for Daejan to show that they had suffered no prejudice, as a result of Daejans default, and that, in that connection, it was enough that there was a realistic possibility that further representations might have influenced Daejans decision to engage Mitre rather than Rosewood.
The Upper Tribunal said that it had not found this an easy case, because the evidence of actual prejudice is weak.
Nonetheless, at para 62, it decided that, as the LVT was the primary decision maker, its decision to reject Daejans application to dispense with the Requirements in relation to the Works should be respected, as it was a view which the LVT had been entitled to arrive at.
Daejan was given permission to appeal to the Court of Appeal, on terms that it would not seek its costs if the appeal succeeded.
The court (Sedley, Pitchford and Gross LJJ) dismissed the appeal, for reasons principally given by Gross LJ [2011] EWCA Civ 38, [2011] 1 WLR 2330.
In his judgment, Gross LJ concentrated on what he considered to have been the three principal points which had been debated.
First, he held in para 59 that the financial effect of the grant or refusal of dispensation [on the individual landlord and tenants] is an irrelevant consideration when exercising the discretion under section 20ZA(1).
Secondly, in paras 66 67, he held that the LVT had not erred in treating Daejan more harshly than if it had been a landlord controlled or owned by the lessees.
Thirdly, in para 72, Gross LJ accepted Daejans contention that significant prejudice to the tenants is a consideration of first importance in exercising the dispensatory discretion under section 20ZA(1).
However, in the following paragraph, Gross LJ said that Daejans failure in this case constituted a serious failing and did cause the respondents serious prejudice, and he echoed the LVT and Upper Tribunal in saying that this was not a technical, minor or excusable oversight.
He also said that the LVT was entitled not to speculate on what would have happened if there had been no breach, on the ground that the respondents loss of opportunity (to make further representations and have them considered) itself amount[ed] to significant prejudice.
In para 76, in agreement with the Upper Tribunal, Gross LJ doubted that the LVT would have been entitled to accede to Daejans offer to reduce the chargeable amount by 50,000, and that, anyway, the LVT was entitled to reject that proposal.
Sedley LJ delivered a short concurring judgment, and Pitchford LJ agreed with both judgments.
Daejan was given permission to appeal to this court on terms similar to those which were imposed when permission was given to appeal to the Court of Appeal.
The issues on this appeal
In the light of the arguments which have been addressed to us, it appears to me that three questions of principle arise, and need to be answered, before deciding how to resolve this appeal.
Those questions are: (i) The proper approach to be adopted on an application under section 20ZA(1) to dispense with compliance with the Requirements; (ii) Whether the decision on such an application must be binary, or whether the LVT can grant a section 20(1)(b) dispensation on terms; (iii) The approach to be adopted when prejudice is alleged by tenants owing to the landlords failure to comply with the Requirements.
I propose to consider those three questions (which inevitably overlap to some
extent) in turn, and then to address the resolution of this appeal.
The proper approach to dispensing under section 20ZA(1)
Section 20ZA(1) gives little specific guidance as to how an LVT is to exercise its jurisdiction to dispense with all or any of the [Requirements] in a particular case.
The only express stipulation is that the LVT must be satisfied that it is reasonable to do so.
There is obvious value in identifying the proper approach to the exercise of this jurisdiction, as it is important that decisions on this topic are reasonably consistent and reasonably predictable.
Otherwise, there is a real risk that the law will be brought into disrepute, and that landlords and tenants will not be able to receive clear or reliable advice as to how this jurisdiction will be exercised.
However, the very fact that section 20ZA(1) is expressed as it is means that it would be inappropriate to interpret it as imposing any fetter on the LVTs exercise of the jurisdiction beyond what can be gathered from the 1985 Act itself, and any other relevant admissible material.
Further, the circumstances in which a section 20ZA(1) application is made could be almost infinitely various, so any principles that can be derived should not be regarded as representing rigid rules.
So I turn to consider section 20ZA(1) in its statutory context.
It seems clear that sections 19 to 20ZA are directed towards ensuring that tenants of flats are not required (i) to pay for unnecessary services or services which are provided to a defective standard, and (ii) to pay more than they should for services which are necessary and are provided to an acceptable standard.
The former purpose is encapsulated in section 19(1)(b) and the latter in section 19(1)(a).
The following two sections, namely sections 20 and 20ZA appear to me to be intended to reinforce, and to give practical effect to, those two purposes.
This view is confirmed by the titles to those two sections, which echo the title of section 19.
Thus, the obligation to consult the tenants in advance about proposed works goes to the issue of the appropriateness of those works, and the obligations to obtain more than one estimate and to consult about them go to both the quality and the cost of the proposed works.
Mr Rainey QC and Mr Fieldsend for the respondents point out that sometimes the tenants may want the landlord to accept a more expensive quote, for instance because they consider it will lead to a better or quicker job being done.
I agree, but I do not consider that it invalidates my conclusion: loss suffered as a result of building work or repairs being carried out to a lower standard or more slowly is something for which courts routinely assess financial compensation.
Given that the purpose of the Requirements is to ensure that the tenants are protected from (i) paying for inappropriate works or (ii) paying more than would be appropriate, it seems to me that the issue on which the LVT should focus when entertaining an application by a landlord under section 20ZA(1) must be the extent, if any, to which the tenants were prejudiced in either respect by the failure of the landlord to comply with the Requirements.
Thus, in a case where it was common ground that the extent, quality and cost of the works were in no way affected by the landlords failure to comply with the Requirements, I find it hard to see why the dispensation should not be granted (at least in the absence of some very good reason): in such a case the tenants would be in precisely the position that the legislation intended them to be ie as if the Requirements had been complied with.
I do not accept the view that a dispensation should be refused in such a case solely because the landlord seriously breached, or departed from, the Requirements.
That view could only be justified on the grounds that adherence to the Requirements was an end in itself, or that the dispensing jurisdiction was a punitive or exemplary exercise.
The Requirements are a means to an end, not an end in themselves, and the end to which they are directed is the protection of tenants in relation to service charges, to the extent identified above.
After all, the Requirements leave untouched the fact that it is the landlord who decides what works need to be done, when they are to be done, who they are to be done by, and what amount is to be paid for them.
Furthermore, it does not seem to be convenient or sensible to distinguish in this context, as the LVT, Upper Tribunal and Court of Appeal all thought appropriate, between a serious failing and a technical, minor or excusable oversight, save in relation to the prejudice it causes.
Such a distinction could lead to an unpredictable outcome, as it would involve a subjective assessment of the nature of the breach, and could often also depend on the view one took of the state of mind or degree of culpability of the landlord.
Sometimes such questions are, of course, central to the enquiry a court has to carry out, but I think it unlikely that it was the sort of exercise which Parliament had in mind when enacting section 20ZA(1).
The predecessor of section 20ZA(1), namely the original section 20(9), stated that the power (vested at that time in the County Court rather than the LVT) to dispense with the Requirements was to be exercised if it was satisfied that the landlord acted reasonably.
When Parliament replaced that provision with section 20ZA(1) in 2002, it presumably intended a different test to be applied.
The distinction could also, I think, often lead to uncertainty.
Views as to the gravity of a landlords failure to comply with the Requirements could vary from one LVT to another.
And questions could arise as to the relevance of certain factors, such as the landlords state of mind.
The present case provides an example of the possible uncertainties.
In para 99 of his judgment, Lord Wilson understandably expresses a very unfavourable view of Daejans failure in this case.
However, to some people it might seem that Daejans failure in the present case was not a serious failing, given that (i) the evidence of any resulting prejudice to the respondents is weak, (ii) Daejan adhered fully to stages 1 and 2, and to a significant extent to stage 3, (iii) Daejan did consult the respondents, through both REA and FPM, (iv) Daejan did some things which went beyond the Requirements (eg employing REA at Ms Markss request), and (v) Daejan did give summary details of the tenders even though it did not accord the respondents sight of the tenders themselves.
So, too, views may differ as to whether Daejan should be blamed for not taking up the time of the LVT with attempts to excuse its failures, and as to whether it was an innocent misunderstanding or flagrant incompetence which caused Daejans representatives to tell the LVT that the contract had been placed with Mitre weeks before it had been. (None of those points undermines the basic fact that there was an undoubted failure by Daejan to comply with the Requirements).
I also consider that the distinction favoured in the tribunals below could lead to inappropriate outcomes.
One can, for instance, easily conceive of a situation where a minor or excusable oversight could cause severe prejudice, and one where a gross breach causes the tenants no prejudice.
For instance, where the landlord miscalculates by a day, and places a contract for works a few hours before receiving some very telling criticisms about the proposed works or costings.
Or, on the other hand, where the landlord fails to get more than one estimate despite being reminded by the tenants, but there is only one contractor competent to carry out undoubtedly necessary works.
In their respective judgments, the LVT, the Upper Tribunal and the Court of Appeal also emphasised the importance of real prejudice to the tenants flowing from the landlords breach of the Requirements, and in that they were right.
That is the main, indeed normally, the sole question for the LVT when considering how to exercise its jurisdiction in accordance with section 20ZA(1).
And it is fair to the courts below to add that where the landlord is guilty of a serious failing it is more likely to result in real prejudice to the tenants than where the landlord has been guilty of a technical, minor or excusable oversight.
It also follows from this analysis that I consider that Daejan is wrong in its contention that the financial consequences to the landlord of not granting a dispensation is a relevant factor when the LVT is considering how to exercise its jurisdiction under sections 20(1)(b) and 20ZA(1).
In that, I agree with the views of the courts below (although it can be said that such consequences are often inversely reflective of the relevant prejudice to the tenants, which is, as already mentioned, centrally important).
It also seems to me that the nature of the landlord is not a relevant factor either, and I think that was the view of the Court of Appeal as well.
As already indicated, I do not agree with the courts below in so far as they support the proposition that sections 20 and 20ZA were included for the purpose of transparency and accountability, if by that it is intended to add anything to the two purposes identified in section 19(1)(a) and (b).
It is true that that proposition may arguably receive some support from Lewison J in Paddington Basin Developments Ltd v West End Quay Ltd [2010] EWHC 833 (Ch), [2010] 1 WLR 2735, para 26.
However, I consider that there are no grounds for treating the obligations in sections 20 and 20ZA as doing any more than providing practical support for the two purposes identified in section 19(1).
The sections are not concerned with public law issues or public duties, so there is no justification for treating consultation or transparency as appropriate ends in themselves.
Is the LVT faced with a binary choice on a section 20ZA(1) application?
The respondents contend that, on an application under section 20ZA(1), the LVT has to choose between two simple alternatives: it must either dispense with the Requirements unconditionally or refuse to dispense with the Requirements.
If this argument is correct, then as the Upper Tribunal held, and the Court of Appeal thought probable, it would not have been possible for the LVT in this case to grant Daejans section 20ZA(1) application on the terms offered by Daejan, namely to reduce the aggregate of the sum payable by the respondents in respect of the Works by 50,000.
In my view, the LVT is not so constrained when exercising its jurisdiction under section 20ZA(1): it has power to grant a dispensation on such terms as it thinks fit provided, of course, that any such terms are appropriate in their nature and their effect.
In the absence of clear words precluding the LVT imposing terms, I consider that one would expect it to have power to impose appropriate terms as a condition of exercising its power of dispensation.
The circumstances in which an application could be made are, as already mentioned, potentially almost infinitely various, and, given the purpose of sections 20 and 20ZA, it seems unlikely that the LVTs powers could have been intended to be as limited as the respondents suggest.
More detailed consideration of the circumstances in which the jurisdiction can be invoked confirms this conclusion.
It is clear that a landlord may ask for a dispensation in advance.
The most obvious cases would be where it was necessary to carry out some works very urgently, or where it only became apparent that it was necessary to carry out some works while contractors were already on site carrying out other work.
In such cases, it would be odd if, for instance, the LVT could not dispense with the Requirements on terms which required the landlord, for instance, (i) to convene a meeting of the tenants at short notice to explain and discuss the necessary works, or (ii) to comply with stage 1 and/or stage 3, but with (for example) 5 days instead of 30 days for the tenants to reply.
Further, consider a case where a landlord carried out works costing, say, 1m, and failed to comply with the Requirements to a small extent (eg in accidentally not having regard to an observation), and the tenants establish that the works might well have cost, at the most, 25,000 more as a result of the failure.
It would seem grossly disproportionate to refuse the landlord a dispensation, but, equally, it would seem rather unfair on the tenants to grant a dispensation without reducing the recoverable sum by 25,000.
In some cases, such a reduction could be achieved by the tenants invoking section 19(1)(b), but there is no necessary equivalence between a reduction which might have been achieved if the Requirements had been strictly adhered to and a deduction which would be granted under section 19(1)(b) see the next section of this judgment.
Accordingly, where it is appropriate to do so, it seems clear to me that the LVT can impose conditions on the grant of a dispensation under section 20(1)(b).
In effect, the LVT would be concluding that, applying the approach laid down in section 20ZA(1), it would be reasonable to grant a dispensation, but only if the landlord accepts certain conditions.
In the example just given, the condition would be that the landlord agrees to reduce the recoverable cost of the works from 1m to 975,000.
I also consider that the LVT would have power to impose a condition as to
costs eg that the landlord pays the tenants reasonable costs incurred in connection with the landlords application under section 20ZA(1).
It is true that the powers of the LVT to make an actual order for costs are very limited.
The effect of para 10 of Schedule 12 to the 2002 Act is that the LVT can only award costs (in a limited amount) (i) where an application is dismissed on the ground that it is frivolous, vexatious or an abuse of process, or (ii) where the applicant has acted frivolously, vexatiously, abusively, disruptively or otherwise unreasonably in connection with the proceedings.
However, in my view, that does not preclude the LVT from imposing, as a condition for dispensing with all or any of the Requirements under section 20(1)(b), a term that the landlord pays the costs incurred by the tenants in resisting the landlords application for such dispensation.
The condition would be a term on which the LVT granted the statutory indulgence of a dispensation to the landlord, not a free standing order for costs, which is what para 10 of Schedule 12 to the 2002 Act is concerned with.
To put it another way, the LVT would require the landlord to pay the tenants costs on the ground that it would not consider it reasonable to dispense with the Requirements unless such a term was imposed.
The case law relating to the approach of courts to the grant to tenants of relief from forfeiture of their leases is instructive in this connection.
Where a landlord forfeits a lease, a tenant is entitled to seek relief from forfeiture.
When the court grants relief from forfeiture, it will often do so on terms that the tenant pays the costs of the landlord in connection with the tenants application for relief, at least in so far as the landlord has acted reasonably see eg Egerton v Jones [1939] 2 KB 702, 705 706, 709.
However, if and in so far as the landlord opposes the tenants application for relief unreasonably, it will not recover its costs, and may even find itself paying the tenants costs, as in Howard v Fanshawe [1895] 2 Ch 581, 592.
As Mr Dowding QC, for Daejan, pointed out, in Factors (Sundries) Ltd v Miller [1952] 2 All ER 630, the tenant was legally aided and the court was precluded by statute from making an order for costs against him, but the Court of Appeal held that there was nonetheless jurisdiction to require him to pay the landlords costs as a condition of being granted relief from forfeiture.
As Somervell LJ explained it at 633D F, the liability under such a condition was not an order to pay costs in the ordinary sense, but a payment of a sum equal to the costs as a condition of relief.
Like a party seeking a dispensation under section 20(1)(b), a party seeking relief from forfeiture is claiming what can be characterised as an indulgence from a tribunal at the expense of another party.
Accordingly, in so far as the other party reasonably incurs costs in considering the claim, and arguing whether it should be granted, and, if so, on what terms, it seems appropriate that the first party should pay those costs as a term of being accorded the indulgence.
The correct approach to prejudice to the tenants
Where a landlord has failed to comply with the Requirements, there may often be a dispute as to whether, and if so to what extent, the tenants would relevantly suffer if an unconditional dispensation was accorded. (I add the word relevantly, because the tenants can always contend that they will suffer a disadvantage if a dispensation is accorded; however, as explained above, the only disadvantage of which they could legitimately complain is one which they would not have suffered if the Requirements had been fully complied with, but which they will suffer if an unconditional dispensation were granted.)
It was suggested by Mr Rainey QC and Mr Fieldsend that the determination of such a question would often involve a very difficult exercise (or an invidious exercise in speculation as Gross LJ put it at para 73(iv) in the Court of Appeal) and would frequently be unfair on the tenants.
It may occasionally involve a difficult exercise, but the fact that an assessment is difficult has never been regarded as a valid reason for the court refusing to carry it out (although in some cases disproportionality may be a good reason for such a refusal).
While each case must, inevitably, be decided on its particular facts, I do not think that many cases should give rise to great difficulties.
As to the contention that my conclusion would place an unfair burden on tenants where the LVT is considering prejudice, it is true that, while the legal burden of proof would be, and would remain throughout, on the landlord, the factual burden of identifying some relevant prejudice that they would or might have suffered would be on the tenants.
However, given that the landlord will have failed to comply with the Requirements, the landlord can scarcely complain if the LVT views the tenants arguments sympathetically, for instance by resolving in their favour any doubts as to whether the works would have cost less (or, for instance, that some of the works would not have been carried out or would have been carried out in a different way), if the tenants had been given a proper opportunity to make their points.
As Lord Sumption said during the argument, if the tenants show that, because of the landlords non compliance with the Requirements, they were unable to make a reasonable point which, if adopted, would have been likely to have reduced the costs of the works or to have resulted in some other advantage, the LVT would be likely to proceed on the assumption that the point would have been accepted by the landlord.
Further, the more egregious the landlords failure, the more readily an LVT would be likely to accept that the tenants had suffered prejudice.
The LVT should be sympathetic to the tenants not merely because the landlord is in default of its statutory duty to the tenants, and the LVT is deciding whether to grant the landlord a dispensation.
Such an approach is also justified because the LVT is having to undertake the exercise of reconstructing what would have happened, and it is because of the landlords failure to comply with its duty to the tenants that it is having to do so.
For the same reasons, the LVT should not be too ready to deprive the tenants of the costs of investigating relevant prejudice, or seeking to establish that they would suffer such prejudice.
This does not mean that LVT should uncritically accept any suggested prejudice, however far fetched, or that the tenants and their advisers should have carte blanche as to recovering their costs of investigating, or seeking to establish, prejudice.
But, once the tenants have shown a credible case for prejudice, the LVT should look to the landlord to rebut it.
And, save where the expenditure is self evidently unreasonable, it would be for the landlord to show that any costs incurred by the tenants were unreasonably incurred before it could avoid being required to repay as a term of dispensing with the Requirements.
Apart from the fact that the LVT should be sympathetic to any points they may raise, it is worth remembering that the tenants complaint will normally be, as in this case, that they were not given the requisite opportunity to make representations about proposed works to the landlord.
Accordingly, it does not appear onerous to suggest that the tenants have an obligation to identify what they would have said, given that their complaint is that they have been deprived of the opportunity to say it.
Indeed, in most cases, they will be better off, as, knowing how the works have progressed, they will have the added benefit of wisdom of hindsight to assist them before the LVT, and they are likely to have their costs of consulting a surveyor and/or solicitor paid by the landlord.
Overview of the analysis so far
Before turning to the disposition of this appeal, it is worth considering the effect of the conclusions I have reached so far.
If a landlord fails to comply with the Requirements in connection with qualifying works, then it must get a dispensation under section 20(1)(b) if it is to recover service charges in respect of those works in a sum greater than the statutory minimum.
Insofar as the tenants will suffer relevant prejudice as a result of the landlords failure, the LVT should, at least in the absence of some good reason to the contrary, effectively require the landlord to reduce the amount claimed as service charges to compensate the tenants fully for that prejudice.
That outcome seems fair on the face of it, as the tenants will be in the same position as if the Requirements have been satisfied, and they will not be getting something of a windfall.
On the approach adopted by the courts below, as the Upper Tribunal said at the very end of its judgment, requiring the landlord to limit the recoverable service charge to the statutory minimum in a case such as this may be thought to be disproportionately damaging to the landlord, and disproportionately advantageous to the lessees.
That criticism could not, it seems to me, be fairly made of the conclusion I have reached.
However, drilling a little deeper, if matters rested there, the simple conclusion described in para 71 could be too favourable to the landlord.
It might fairly be said that it would enable a landlord to buy its way out of having failed to comply with the Requirements.
However, that concern is, I believe, answered by the significant disadvantages which a landlord would face if it fails to comply with the Requirements.
I have in mind that the landlord would have (i) to pay its own costs of making and pursuing an application to the LVT for a section 20(1)(b) dispensation, (ii) to pay the tenants reasonable costs in connection of investigating and challenging that application, (iii) to accord the tenants a reduction to compensate fully for any relevant prejudice, knowing that the LVT will adopt a sympathetic (albeit not unrealistically sympathetic) attitude to the tenants on that issue.
All in all, it appears to me that the conclusions which I have reached, taken together, will result in (i) the power to dispense with the Requirements being exercised in a proportionate way consistent with their purpose, and (ii) a fair balance between (a) ensuring that tenants do not receive a windfall because the power is exercised too sparingly and (b) ensuring that landlords are not cavalier, or worse, about adhering to the Requirements because the power is exercised too loosely.
The resolution of this appeal
Turning now to this case, I consider that the LVT, the Upper Tribunal, and the Court of Appeal adopted the wrong approach to Daejans section 20ZA(1) application.
That is because (i) they took into account the gravity (as they saw it) of the failure to comply with stage 3 of the Requirements, not only in the prejudice it may have caused to the tenants, but as a free standing matter, (ii) they considered that the mere possibility of prejudice, apparently however speculative, and in the absence of any evidence to support its existence, would be enough to preclude the grant of a dispensation, and (iii) (in the case of the Upper Tribunal and the Court of Appeal) they did not consider (or doubted) that it was open to the LVT to grant a dispensation on terms, and (in the case of the LVT) they did not address the question whether the 50,000 offered by Daejan exceeded any relevant prejudice which the tenants could establish.
In adopting their approach, the courts below based themselves in part on the reasoning in the Upper Tribunals decision in Camden London Borough Council v Leaseholders of 37 Flats at 30 40 Grafton Way (LRX/185/2006).
That case may have been rightly decided, but, if so, it was for the wrong reasons.
As explained above, the correct question which the LVT should have asked itself was, whether the respondents would suffer any relevant prejudice, and, if so, what relevant prejudice, as a result of Daejans failure, if the section 20(1)(b) dispensation was granted unconditionally.
On the basis of the evidence before the LVT, it seems to me, substantially in agreement with the Upper Tribunal, that it is highly questionable whether any such prejudice at all would have been suffered.
The only specific prejudice identified by the Upper Tribunal was in relation to what the LVT called in para 98 of its decision a matter of speculation, namely that the respondents lost the opportunity of making out the case for using Rosewood to carry out the Works, rather than Mitre.
Mr Rainey QC and Mr Fieldsend make the additional points that (i) the respondents were deprived of their right to be consulted properly, and (ii) it was difficult for the respondents to identify any relevant prejudice that they would suffer if Daejan was entitled to recover a service charge based on the full cost of the Works.
I have already dealt with these points in general terms.
As to (i), the right to be consulted in accordance with sections 20 and 20ZA is not a free standing right.
As to (ii), difficulty is not a good argument in itself, and the LVT should in any event be sympathetic to the respondents on any credible allegation of relevant prejudice.
In any event, it is clear from the first decision of the LVT that, even after Daejans and the respondents respective experts had met and agreed a number of items, there were still many items of dispute which were contested by the respondents before the LVT on issue 11: the respondents were therefore well able to identify any complaints they had in relation to the Works.
That leaves the issue whether it is possible for this court to conclude that the 50,000 offer by Daejan was sufficient to compensate the tenants for any relevant prejudice they suffered in this case.
Given that the LVT did not address this issue properly, there is, at least on the face of it, a strong case for saying that that is an issue which should be remitted, on the ground that we cannot fairly decide it.
However, on closer examination of the facts, I am of the view that we can fairly decide the issue, and that we should therefore do so.
This view is based on two reasons, which, when taken together, seem to me to establish that it would be pointless to remit the case.
First, the tenants do not appear to have identified to the LVT any relevant prejudice which they suffered, or may have suffered, as a result of Daejans failure to comply with the Requirements.
As mentioned, the Upper Tribunal described the evidence of any such prejudice as weak.
In this court, no contention as to the existence of possible relevant prejudice was advanced by Mr Rainey QC or Mr Fieldsend, save that they suggested that (i) Rosewood may have agreed to carry out the Works for some 11,000 less than the contract sum ultimately agreed with Mitre, and (ii) they relied on the fact that Mitre overran the six month contract substantially.
As to (i), I am not sure where the 11,000 comes from, but it is substantially less than the 50,000 offered by Daejan.
As to (ii), I would have thought that the prejudice has to be measured as at the date of the breach of the Requirements, and anyway there was no attempt to show that Rosewood would have been any quicker or to quantify any prejudice.
Secondly, the tenants had been given a substantial opportunity to comment on the proposed works, and took full advantage of that opportunity.
REAs detailed tender report of February 2006 was based on Mitres detailed tender, and resulted in a very detailed response from Ms Marks in July 2006.
I agree with Mr Dowding QC that it is hard to see what further submissions or suggestions the respondents could have presented if Daejan had complied fully with the Requirements.
Again, no argument appears to have been advanced at any level of these proceedings on behalf of the tenants that any specific points, which had not been made, would or might have been made if Daejan had fully complied with the Requirements.
There appears to have been no evidence called before the LVT, and no suggestion made to the LVT, the Upper Tribunal or the Court of Appeal or indeed this court, to support the contention that the tenants suffered relevant prejudice worth as much as 50,000 as a result of Daejans failure to comply with the Requirements.
If they were to justify resisting the LVT accepting Daejans proposal, it was, in my I would accordingly allow this appeal, set aside the orders below, and grant the judgment, incumbent on the tenants to advance some credible evidence and some rational argument which established that they had suffered, or at least may well have suffered such relevant prejudice.
Accordingly, although there was an undoubted, albeit partial, failure by Daejan to comply with stage 3 of the Requirements, the relevant prejudice to the respondents of granting the dispensation could not be higher than the 50,000 discount offered by Daejan.
The fact that the 50,000 can fairly be said to have been plucked out of the air is irrelevant: the essential point is that it exceeds any possible relevant prejudice which, on the evidence and arguments put before it, the LVT could have concluded that the respondents would suffer if an unqualified dispensation were granted.
In those circumstances, as there are no other relevant factors in this case, it seems to me that the LVT ought to have decided that Daejans application for a dispensation under section 20(1)(b) should be granted on terms that (i) the respondents aggregate liability to pay for the Works be reduced (presumably on a pro rata basis) by 50,000, and (ii) Daejan pay the reasonable costs of the respondents in so far as they reasonably tested its claim for a dispensation and reasonably canvassed any relevant prejudice which they might suffer.
dispensation under section 20(1)(b) on the terms indicated.
LORD HOPE (dissenting)
I am, with respect, unable to agree with the approach that Lord Neuberger has
taken to this case.
I think that the issues which I wish to raise are sufficiently important to justify taking a second look at what he says.
They also affect how I think this appeal should be disposed of.
The fundamental point of principle to which I would attach greater importance is that the issues to which section 20ZA(1) of the Landlord and Tenant Act 1985, as amended, directs attention have been entrusted by the statute to an expert tribunal.
The leasehold valuation tribunal (the LVT) amply qualifies for that description, both in respect of the expertise and experience of its members and in respect of its familiarity with the subject matter.
Questions such as whether or not a landlords breach or departure from the consultation requirements was serious or was technical, minor or excusable (see para 47, above) are questions of fact and degree.
Questions of that kind are best left to its judgment.
So too are questions as to whether a breach or departure is sufficiently serious to justify refusal of a dispensation or whether an offer to reduce the chargeable amount is acceptable.
The wording of section 20ZA(1) adopts this approach.
It is open ended and unqualified.
It leaves these matters to the tribunals determination.
This is an area of tribunal law and practice where it has been recognised, out of respect for the tribunals expertise, that judicial restraint should be exercised: see Lady Hales observations in Cooke v Secretary of State for Social Security [2002] 3 All ER 279, paras 15 17 and R (Cart) v Upper Tribunal (Public Law Project Intervening) [2011] UKSC 28, [2012] 1 AC 663, para 49; Ravat v Halliburton Manufacturing and Services Ltd [2012] UKSC 1; [2012] ICR 389, para 35.
The context for the exercise of that restraint is usually a challenge to the lawfulness of the decision on the ground, for example, that it was based on an error of law.
In my opinion, however, judicial restraint is just as much in point where, as here, an appellate court is prescribing limits on the way the expert tribunal is to perform the tasks as to issues of fact that have been delegated to it by the statute.
I would be reluctant, therefore, to rule out the possibility that a LVT may
lawfully refuse dispensation simply on the ground of the seriousness of the breach or departure.
It is true that the end to which the consultation requirements are directed is the protection of tenants in relation to service charges.
But I do not agree that there is a factual burden on the tenants in every case to identify some element of relevant prejudice (by which I understand Lord Neuberger to mean financial prejudice or other disadvantage that can be quantified) that they would or might suffer if dispensation were to be given before it would be open to the LVT to refuse to dispense: see paras 67 69.
I can accept that it would almost always be appropriate for the tribunal to require the tenants to provide some indication of the respects, if any, in which they would be prejudiced.
That would, of course, be so if the breach or departure appeared to be technical, minor or excusable.
It would be necessary then for some relevant prejudice to be inquired into and identified.
So too as cases are encountered on an ascending scale of gravity.
But I do not think that it is fanciful to assume that there could be extreme cases where the breach or departure was so serious, or so flagrant, that it would on that ground alone not be reasonable, as section 20ZA(1) puts it, to dispense with the consultation requirements.
In my opinion it should be, and is, open to the tribunal to take that view in the interests of preserving the integrity of the legislation, and to do so without conducting any such inquiry.
For these reasons I am unable to agree with the conclusion in para 47 that the LVT, the Upper Tribunal and the Court of Appeal were wrong to hold that it should be open to the LVT to distinguish, in the exercise of its judgment, between breaches or departures according to their level of seriousness, without having first to consider the amount of prejudice they may cause or may have caused.
Of course, these two things may run together.
But I do not think that it would be right for us in this court, relatively remote as we are from the day to day business of the tribunals, to hold that to separate the two can never be appropriate.
It seems to me that this rather more cautious, less prescriptive, approach is consistent with the conclusion that is reached in para 74, that the power to dispense with the consultation requirements should be exercised in a proportionate way that is consistent with their purpose.
It is also more consistent with the language of the section, which does not place any limits on the way the tribunal may exercise the power that is given to it to make the determination.
All it says is that the tribunal must be satisfied that it is reasonable to dispense with the requirements.
I would hold that judicial restraint has a part to play, too, in an examination of the question whether the LVT was entitled to decline to accept Daejans offer to reduce the chargeable amount by 50,000.
It rejected the proposal on the ground that there was no explanation of how that figure could be regarded as generous or as sufficient compensation for the prejudice suffered.
Neither the Upper Tribunal nor the Court of Appeal thought it right to reverse the LVT on this point, holding that it was entitled to reject the proposal.
I agree that the essential point is that the figure suggested should exceed, or at least be commensurate with, any possible prejudice which the respondents would suffer if an unqualified dispensation were to be granted: see para 84.
The LVT did not express its reasoning in that way.
But I am not prepared to assume from this that the proposal was rejected simply because it was a figure plucked out of the air.
The question whether or not an explanation was required from Daejan was one for the judgment of the expert tribunal.
It was for it, after all, to decide whether or not to accept the proposal.
It was for it to determine, as a matter of fact, whether it had been properly quantified.
I am not persuaded that its decision to reject the proposal was based on an error of law that would entitle this court to interfere with it.
As Lord Wilson says in para 117, it was entitled in its discretion to decline to accept a reduction without knowing the proportion which it bore to the overall cost of the works.
For these reasons, and for those given by Lord Wilson with which I am in full agreement, I would dismiss the appeal and affirm the order of the Court of Appeal.
LORD WILSON (dissenting)
I respectfully disagree with central aspects of the exposition by Lord Neuberger of the principles to be applied by the LVT in its determination of an application that it should dispense with one or more of the Requirements specified in the Schedules to the 2003 Regulations.
I have had greater hesitation about the proper disposal of the actual appeal but I have concluded that this court should dismiss it.
When in 2002 it inserted into the 1985 Act the new section 20 and the additional section 20ZA, and when it accepted the 2003 Regulations made thereunder, Parliament made various provisions about a landlords consultation with a tenant in relation to proposed works of a specified character for which, through the service charge, the tenant would later be required to pay.
On the face of them, the provisions seem to impact severely upon the landlord; and the severity is in my view testament to the importance which Parliament attached to his compliance with the Requirements.
Thus dispensation with them is available only if the LVT is satisfied (ie by the landlord) that it is reasonable to grant it (section 20ZA(1)); even if so satisfied, the LVT has a discretion in that, under that subsection, it then may grant the dispensation; and, in the absence of compliance or dispensation, the contribution of the tenant to the cost of such works is limited to 250 irrespective of the size of the cost (section 20(1)(3) and (5) and Regulation 6).
Lord Neubergers conclusion at para 47 that the gravity of the landlords non compliance with the Requirements is relevant to dispensation not of itself but only insofar as it causes financial prejudice to the tenant seems to me to subvert Parliaments intention.
The concern which he expresses at paras 47 and 48 about the difficulties which would confront the LVT in making reasonably consistent assessments of the gravity of breaches is not one which I share.
His conclusion at para 50 that real prejudice to the tenant should normally be the sole consideration for the LVT seems to me to depart from the width of the criterion (reasonable) which Parliament has specified.
His inevitable further conclusion at para 67 that the factual burden lies on the tenant to prove such prejudice seems to me, as a matter of reality, to reverse the burden of proof which Parliament has identified.
And in my view the hypothetical exercise in which his conclusions require the parties to engage (and upon which they require the LVT to adjudicate) fails to recognise the complications which often attend a comparison of, for example, one estimate with another in terms not just of overall cost but of individual costings, of the proposed starting date for the works, of the period of the works to which the rival contractors will commit themselves and of their perceived capacity to perform the works satisfactorily.
Whether the burden which Lord Neuberger casts upon the tenant is one which he can often discharge seems to me to be very doubtful.
First, however, I wish in the following respects to amplify the summary of the facts helpfully given by Lord Neuberger at paras 14 to 22: In August 2005, in response to Daejans stage 1 notice, four of the five (a) respondents nominated Rosewood as their preferred contractor.
In its report to Daejan dated 30 November 2005, REA, the contract (b) administrator, (i) analysed the four tenders which Daejan had received and appended a comparative schedule of the individual costings of three of them, including Rosewood; (ii) noted that Rosewood had offered to reduce its quotation from 454,000 to 432,000, which therefore became only 11,000 higher than that of the contractor, namely Mitre, for which Daejan had at all times indicated a provisional preference; (iii) observed that the contract period proposed by Rosewood was 24 weeks, whereas that proposed by Mitre was 32 weeks; (iv) indicated that the choice was between Rosewood and Mitre; (v) suggested that Rosewoods tender was the most complete and possibly the more realistic; (vi) said that it could vouch for Rosewood as a quality contractor but that Daejan could presumably vouch analogously for Mitre; and (vii) concluded that, were it to reduce its contract period to 24 weeks (which indeed it subsequently did), Mitre should be awarded the contract.
In February 2006 Daejan forwarded to the respondents copies of (c) Mitres tender and of REAs report on the tenders. (d) But the respondents also wanted to see a copy of Rosewoods tender.
Apart from reference to it in the schedule of individual costings, REAs report had made only general observations upon its tender over one page. (e) On five separate occasions between January and July 2006 the respondents in vain asked Daejan for a copy of Rosewoods tender. (f) Daejan admits that its first stage 3 notice, dated 14 June 2006, did not comply with some of the Requirements.
Its main defect was to fail to refer to Rosewoods tender in breach of para 4(8) of Part 2 of Schedule 4. (g) So Daejan served a second stage 3 notice dated 28 July 2006.
In the notice Daejan said (as required by para 4(5)(c)) that Rosewoods tender was available for inspection.
Moreover, in accordance with para 4(10)(c)(iii) and regulation 2(1), which require that a tenant be allowed 30 days in which to make observations, it also stated that, subject to any observations made by the respondents, it proposed to award the contract to Mitre but that it would not do so prior to 31 August 2006. (h) Meanwhile, on 17 July 2006, four of the respondents had applied to the LVT for a determination of their liability to pay service charges to Daejan for each year since 1994.
For the then current year, namely 2006, the respondents explained in their application that the issue related to major works costing 600,000 and that one of the questions for determination by the tribunal would be was the consultation process properly carried out? (i) At the LVTs pre trial review, held on 8 August 2006, there was a remarkable development: for Daejans solicitor announced that the contract had already been awarded to Mitre.
By letter to Daejan, written later that day, the respondents referred to the solicitors announcement and protested about it. (j) Daejan wrote two letters to the respondents dated 10 August 2006.
It did not deny that its solicitor had made the announcement.
On the contrary, in one letter it appeared to confirm that Mitre had been awarded the contract.
In the other letter, however, it said only that Mitre would be awarded the contract. (k) It transpires that Daejan awarded the contract to Mitre only on 11 September 2006.
But it had made clear to the respondents on 8 and 10 August that it had made its decision to do so.
Thereafter, and although on 11 August they finally received a copy of Rosewoods 50 page tender, the respondents reasonably concluded (as the LVT found) that it would be futile for them to accede to Daejans previous invitation to make observations prior to 31 August.
Indeed Daejan never suggested otherwise.
Thus, to speak plainly, Daejan aborted the stage 3 consultation.
Having correctly invited the respondents to make observations by 31 August 2006, it made clear on and after 8 August that the decision had been made.
Even more extraordinarily, Daejan made it clear at a hearing before a tribunal which was beginning to investigate whether, among other things, it had consulted the respondents in compliance with the Requirements.
In my view the LVT was clearly entitled to conclude that the opportunity for the respondents to make informed observations on the rival tenders prior to 31 August had been central to the consultation process.
Notwithstanding positive aspects of the earlier stages of the consultation to which Lord Neuberger refers at para 48, the sudden termination of the process, which Daejan never sought to reverse nor even to explain, represented, as both of the tribunals and the Court of Appeal all concluded, serious non compliance with the Requirements.
In my view therefore this appeal requires the court to consider the LVTs proper treatment of serious non compliance with the Requirements when invited to dispense with them.
What financial prejudice did the respondents suffer from Daejans termination of their opportunity to make submissions, in particular, of course, submissions in favour of Rosewood? Albeit without access to Rosewoods tender, they had already made extensive submissions.
The LVT concluded that the REA report had raised numerous points which might have been clarified by the respondents access to all the relevant tenders.
It was an unsurprising conclusion.
Nevertheless the Upper Tribunal was correct to observe that the LVT had not elaborated upon it.
Moreover, at all four stages of these proceedings, Daejan has been at pains to make the point that, in their evidence before the LVT, the respondents never identified specific aspects of Rosewoods tender to which, had the consultation not been terminated, they would have referred in their intended observations.
In that this is an appeal on a point of law from, originally, the exercise of a discretionary jurisdiction, it is worthwhile to note that, in its conclusions, the LVT expressly addressed the point before concluding that it was speculative.
But it remains Daejans strongest point.
If, as Lord Neuberger considers, the respondents are now to be told that, when they opposed the dispensation, the initial burden had been on them to prove that the termination caused significant financial prejudice to them, the conclusion must indeed be that they failed to discharge it.
But is the gravity of non compliance relevant to whether dispensation is reasonable irrespective of consequential financial prejudice?
In giving a negative answer to this question Lord Neuberger refers to what one might call the basic jurisdiction, conferred on the LVT by sections 19 and 27A of the 1985 Act, to determine the limit of a service charge by reference to whether the underlying costs were reasonably incurred by the landlord and whether the services thereby provided, or the works thereby carried out, were of a reasonable standard.
He suggests at paras 42 and 52 that the Requirements set out in section 20 and in the 2003 Regulations are intended only to reinforce the purposes behind sections 19 and 27A and to give practical support to them; and he proceeds to suggest at para 44 that the LVT should therefore focus upon whether non compliance with the Requirements has led the landlord to incur costs in an unreasonable amount or to incur them in the provision of services, or in the carrying out of works, which fell below a reasonable standard, in other words upon whether the non compliance has in that sense caused prejudice to the tenant.
With great respect, I consider that the legislative history of the Requirements for consultation runs counter to the above suggestion.
What I have described as the basic jurisdiction, now exercised under sections 19 and 27A of the 1985 Act, originated in section 124(1) of the Housing Act 1974 through its insertion of section 91A into the Housing Finance Act 1972.
The jurisdiction was then conferred only on the High Court or the county court; it applied only to flats and to certain types of tenancy; but otherwise it was described in terminology quite similar to the present (section 91A(3)).
It was by the same insertion that Parliament introduced an embryonic requirement for consultation (section 91A(1)).
That subsection provided that, in case of any dispute about the recoverability of a service charge thereunder, evidence of the views of the tenant obtained during the requisite consultation should be admitted.
There was no express provision about the effect of a landlords failure to conduct the consultation; but it was clearly intended that a tenant could also deploy such a failure in a dispute with the landlord before a court which was exercising the basic jurisdiction to determine whether an amount or a standard was reasonable.
In other words the section inserted in 1974 into the 1972 Act made the link which Lord Neuberger perceives in the current legislation.
But Parliament replaced section 91A of the 1972 Act by provisions contained in Schedule 19 to the Housing Act 1980.
By paragraphs 2 and 3, it reiterated the basic jurisdiction.
By paragraph 5, it amplified the Requirements for consultation.
By paragraph 4, it provided that, unless the Requirements had been complied with or dispensed with, the excess of a landlords costs above a prescribed amount should not be recoverable through the service charge.
And, by paragraph 6, it provided that, if satisfied that the landlord acted reasonably, the court had power to dispense with a Requirement.
The pattern of provisions contained in paras 1 to 6 of schedule 19 to the 1980 Act has broadly been maintained to date.
Those paragraphs were replaced by sections 18 to 20 of the Landlord and Tenant Act 1985.
The basic jurisdiction was then placed into section 19.
The consultation jurisdiction was then placed into section 20; and, by subsection (5), the threshold criterion for exercise of the power to grant dispensation with the Requirements, namely that the landlord acted reasonably, was retained.
By section 151 of the Commonhold and Leasehold Reform Act 2002, the consultation jurisdiction was changed into its present form by the substitution of section 20, the insertion of section 20ZA and the making thereunder of the 2003 Regulations.
In order to underline the distinction between the basic jurisdiction in section 19 and the consultation jurisdiction in section 20, the headnote of the former referred to reasonableness whereas that of the latter referred to consultation requirements.
The pattern of provisions introduced by the 1980 Act and maintained to date is important for present purposes.
For the link which Lord Neuberger perceives in the current legislation seems to me to have been broken by that Act.
Non compliance with a Requirement for consultation was no longer simply a factor to be weighed in the exercise of the basic jurisdiction.
An independent sanction was attached to it, namely that, unless the Requirement was dispensed with, the costs incurred by the landlord in the specified circumstances and above the statutory limit were irrecoverable through the service charge.
They were irrecoverable even if they had been reasonably incurred and had been incurred in the provision of services, or in the carrying out of works, to a reasonable standard, ie even if there was no scope for them to be disallowed in the exercise of the basic jurisdiction.
Even if, in that respect, the tenant had suffered no prejudice, they were irrecoverable.
Such was the free standing importance which Parliament has for 33 years attached to compliance with the Requirements.
I therefore agree with the analysis of Lewison J in Paddington Basin Developments Ltd v West End Quay Estate Management Ltd [2010] EWHC 833 (Ch), [2010] 1 WLR 2735, at para 26 as follows: [T] here are two separate strands to the policy underlying the regulation of service charges.
Parliament gave two types of protection to tenants.
First, they are protected by section 19 from having to pay excessive and unreasonable service charges or charges for work and services that are not carried out to a reasonable standard.
Second, even if service charges are reasonable in amount, reasonably incurred and are for work and services that are provided to a reasonable standard, they will not be recoverable above the statutory maximum if they relate to qualifying works or a qualifying long term agreement and the consultation process has not been complied with or dispensed with.
It follows that the consultation provisions are imposed for an additional reason; namely, to ensure a degree of transparency and accountability when a landlord decides to undertake qualifying works or enter into a qualifying long term agreement.
As Robert Walker LJ observed in Martin & Seale v Maryland Estates Ltd (1999) 32 HLR 116, 125 in relation to a previous version of the consultation requirements: Parliament has recognised that it is of great concern to tenants, and a potential cause of great friction between landlord and tenants, that tenants may not know what is going on, what is being done, ultimately at their expense.
The statutory changes wrought by the 2002 Act, which, together with the Regulations, came into force in 2003, not only enabled the LVT to exercise each of the service charge jurisdictions but altered the threshold criterion for exercise of the power to grant dispensation with the Requirements.
The criterion was no longer whether the landlord had acted reasonably but whether it was reasonable to dispense with the requirements (section 20ZA(1), as inserted into the 1985 Act).
The new criterion was therefore wider and, no doubt, more favourable to the landlord.
It certainly included appraisal of any financial prejudice suffered by the tenant as a result of the non compliance, being an aspect which could be said only with great difficulty, if at all, to have been embraced in the old criterion.
On any view the focus of the old criterion had been the gravity of the landlords non compliance.
What, however, I find impossible to conclude is that the change in effect banished consideration of what had previously been the focus: the words of the new criterion are inapt to yield such a conclusion.
In August 2002, just after the 2002 Act had received royal assent, the Office of the Deputy Prime Minister published a consultation paper in relation to a draft of the Regulations, entitled Revised Procedures for Consulting Service Charge Payers about Service Charges.
In Chapter 4 it explained: 3.
The dispensation procedure is intended to cover situations where consultation was not practicable (eg for emergency works) and to avoid penalising landlords for minor breaches of procedure which do not adversely effect service charge payers interests. [Emphasis supplied] The paragraph tends to confirm my view that substantial non compliance with the Requirements is, without more, intended to entitle the LVT, in the exercise of its discretion, to refuse to dispense with them in order, in Lord Hopes phrase at para 91, to preserve the integrity of the legislation.
Lord Neuberger points out at para 46 that the Requirements leave untouched the fact that it is the landlord who decides what works should be done and what amount should be paid for them.
What, however, the Requirements recognise is surely the more significant fact that most if not all of that amount is likely to be recoverable from the tenant.
In Camden London Borough Council v The Leaseholders of 37 Flats at 30 40 Grafton Way LRX/185/2006 30 June 2008, the Lands Tribunal (George Bartlett QC, President, and NJ Rose FRICS) dismissed Camdens appeal against the LVTs refusal to dispense with the stage 3 Requirements.
Camden had prepared the requisite statement, including the offer to afford inspection of the tenders, but had failed to send it to the tenants and had proceeded to enter into the contract.
The Lands Tribunal, at para 35, described Camdens error as gross.
I agree; and I do not perceive much difference between a landlords total failure to send the statement and its sending a statement which, after 11 days, it deprives of all further significance.
The Lands Tribunal concluded: The extent to which, had [the tenants] been told of the estimates, [they] would have wished to examine them and make observations upon them can only be a matter of speculation.
The fact is that they did not have the opportunity and this amounted to significant prejudice.
The above analysis by the Lands Tribunal in the Grafton Way case, namely that a substantial failure of a landlord to consult in compliance with the Requirements could, in itself, amount to significant prejudice to a tenant, was adopted by the Court of Appeal in the present case (Gross LJ [2011] 1 WLR 2330, para 73 (iii)).
For reasons already given, I am not persuaded that a failure of that gravity needs to be described as amounting to prejudice to the tenant.
I consider, with respect, that it is reasonable for Lord Neuberger to adopt a narrower definition of the word prejudice, to be calculated only in monetary terms and by reference to the likely ultimate outcome of a duly conducted consultation.
But the semantics are unimportant.
I believe that, along with any prejudice in that narrower sense (which I accept will often be a matter of prime importance), the LVT should weigh the gravity of the non compliance with a Requirement in determining whether to dispense with it.
In the present case the LVT did so.
The LVT also proceeded to reject Daejans contention that it was relevant for it to consider the size of the difference between the amounts recoverable from the respondents in the event of dispensation on the one hand and of its refusal on the other.
Here too the LVT made no error.
In this respect I agree with Lord Neuberger at para 51 that the size of the difference is irrelevant.
It remains only to consider whether the LVT fell into error in its rejection of Daejans offer to accept the attachment to a grant of dispensation of a condition that it should reduce the cost of the works to be charged to the respondents by 50,000.
I agree with Lord Neuberger that it is open to the LVT to attach a condition of that character; and I regard it as valuable for the LVT that this court should so rule.
In making provision for the consequences of non compliance with the Requirements, Parliament will have had in mind the established ability of a court or tribunal to attach conditions to its exercise of a discretion: for example a condition that undertakings be given by an applicant before it grants a freezing order; or a condition which (so this court was told) the LVT itself already sometimes attaches to the grant of an adjournment, namely that the applicant for it, whom the tribunal has no power actually to order to pay the costs thrown away, should nevertheless do so.
Lord Neuberger also explains at para 56 that urgent applications for dispensation in advance of carrying out the works may be particularly suited to be granted on conditions.
Nevertheless I regard the exercise of the jurisdiction to attach a condition to the grant of dispensation with a Requirement as not being without difficulty.
Consequential prejudice to the respondents in the narrow sense of that word will sometimes arise not from works which might have been done more cheaply but, for example, from works which, for good reason, should have been conducted at somewhat greater expense or which were conducted over an unreasonably long period or which did not extend to everything that was reasonably required to be done; prejudice of that sort may be hard to quantify in monetary terms.
My own view, namely that the gravity of the non compliance remains relevant independently of prejudice, makes the identification of an appropriate figure harder still.
So it seems to me that, as Lord Hope suggests in paras 88 and 93, considerable latitude is to be afforded to the LVT, as the specialist decision maker, in relation to its determination whether to accept a landlords offer or to reject it outright or, in rejecting it, to identify some higher figure which, if offered, it would accept as a condition of a grant of dispensation.
Appeals from these aspects of the exercise of the LVTs discretion should not lightly be permitted to proceed.
Had the LVT in the present case concluded that it had no jurisdiction to incorporate Daejans offer into a condition attached to a grant of dispensation, it would have made an error of law which would have required re exercise of its discretion at an appellate level.
But it did not so conclude.
It was the Upper Tribunal which, at para 40, wrongly concluded that the LVT had no such jurisdiction; and it was the Court of Appeal which, at para 76(i), overcautiously doubted whether the jurisdiction existed.
Before the LVT, by contrast, the parties agreed that it existed and the LVT proceeded on that basis.
It is important to note that, having embarked on the works in October 2007, Mitre was still engaged upon them at the time of the LVTs hearing of Daejans application for dispensation in March 2008 and probably at the time of its decision in August 2008.
The evidence does not permit a conclusion to be drawn about the reasons for the overrun.
At all events the LVTs expressed reason for rejecting Daejans offer of a reduction of 50,000 was that it was impossible to assess it in the light of the cost of the works already undertaken and of the estimated cost of the works still to be undertaken, as to neither of which had Daejan adduced evidence.
The gravity of Daejans non compliance with the Requirements made the LVTs appraisal of any offer extremely difficult.
But it was in any event entitled, in its discretion, to decline to accept the offered reduction without knowing the proportion which it bore to the overall cost of the works.
After receiving the parties submissions as to the form of order and costs, Lord Neuberger gave the following judgment with which Lord Hope, Lord Clarke, Lord Wilson and Lord Sumption agreed.
Trinity Term [2013] UKSC 54 On appeal from: [2011] EWCA Civ 38 JUDGMENT Daejan Investments Limited (Appellant) v Benson and others (Respondents) (no. 2) before Lord Neuberger, President Lord Hope, Deputy President Lord Clarke Lord Wilson Lord Sumption JUDGMENT GIVEN ON 24 July 2013 Heard on 4 December 2012 Appellant Nicholas Dowding QC Stephen Jourdan QC (Instructed by GSC Solicitors LLP) 1st 4th Respondents Philip Rainey QC Jonathan Upton (Instructed by Excello Law Limited) 5th Respondent James Fieldsend (Instructed by Jaffe Porter Crossick LLP) LORD NEUBERGER (with whom Lord Hope, Lord Clarke, Lord Wilson and Lord Sumption agree) 1.
On 6 March 2013, by a majority of three to two, this Court allowed an appeal brought by Daejan Investments Ltd (Daejan) against the decision of the Court of Appeal, which had unanimously upheld a decision of the Upper Tribunal (Lands Chamber) (the UT), which had in turn upheld a decision of the Leasehold Valuation Tribunal (the LVT).
The effect of the decisions below was that Daejan was not entitled to a dispensation under section 20ZA(1) of the Landlord and Tenant Act 1985 (the 1985 Act), as amended, which it had sought from the LVT, to enable it to recover any payment by way of service charges from the respondent tenants, in respect of the cost of certain works of repair (the works) which it had carried out to a block of flats.
In our decision, we decided that Daejan was entitled to such a dispensation 2. (a dispensation), albeit on terms.
The effect of our decision is that, notwithstanding its failure to comply with some of the procedural steps set out in Part 2 of Schedule 4 to the Service Charges (Consultation Requirements) (England) Regulations 2003 (SI 2003/1987) (the Regulations), Daejan is entitled to recover service charges in respect of the cost of the works from the respondents, subject to (i) a deduction of 50,000 and (ii) terms as to costs. 3.
The issues which now arise between the parties concern the details of the consequential order (the Order) which the Court should make as a result.
In order to deal with those issues, it is unnecessary to set out the factual history, the relevant law, the procedural background, or the reasons for the decision, as they are fully set out in our earlier judgment (the main judgment) [2013] UKSC 14, [2013] 1 WLR 854. 4.
The parties are agreed that the Order should contain the following provisions: i. A statement that Daejans appeal is allowed; ii.
A statement that the decisions of the LVT, the UT and the Court of Appeal are set aside; iii.
A direction that, as a condition of the dispensation, Daejan is to pay the reasonable costs of the respondents: (a) already incurred in the proceedings in the LVT, albeit that the scope of this direction is in dispute; (b) which may be incurred in their being determined by the LVT if and to the extent that the [LVT] determines that the costs of that application were reasonably incurred; iv.
A direction (subject to the wording) that, as a condition of the dispensation, Daejans costs of applying for a dispensation (or of any appeal in that connection) cannot be claimed back through service charges; vs A direction that, subject to an argument in relation to part of those costs, there be no order for costs in this Court and in the Court of Appeal (save that Daejan does not seek to recover 3,000 it was ordered to pay to the Access to Justice Foundation); vi.
A direction that, if the dispensation is effective and Daejan is able to recover the cost of the works, the liability of each respondent to pay by way of service charge is reduced by an agreed sum, to reflect the 50,000 deduction; vii.
A direction that the proceedings be restored before the LVT for the costs issues under sub para (iii) to be determined. 5.
The parties are not agreed about a number of other terms of the Order, and the purpose of this judgment is to deal with those disputed terms.
In their written submissions, the respondents suggest that our decision on some of the points which divide the parties may be relied on in future cases where a landlord seeks a dispensation.
Partly for that reason, and partly because the submissions raise a number of issues, some of which are not straightforward, it is right not merely to give our decision on the terms of the Order, but also our reasons, in the form of this brief judgment, for that decision. 6.
To get one point out of the way, there is an arid argument as to whether the provisions which Daejan must comply with in order to obtain the dispensation (i.e. under paras 4(iii), (iv) and (vi) above) are terms or conditions.
Nothing hangs on this, although it is probably preferable to call them conditions, which is the description which I shall adopt.
The important point is that, unless and until Daejan has complied with the conditions in so far as they require compliance, it is not entitled to give effect to the dispensation and to recover the service charges the subject of these proceedings. 7.
The first issue concerns the point touched on in para 4(iii)(a) above.
It has three aspects. (i) Daejan contends that the respondents are only entitled to their costs in the LVT insofar as those costs were incurred in reasonably testing [Daejans] claim for dispensation or in reasonably canvassing any prejudice which [the respondents] might suffer, whereas the respondents contend that their costs should be recoverable from Daejan insofar as they were incurred in reasonably investigating and establishing non compliance with the Regulations, investigating or seeking to establish prejudice, and investigating and challenging [Daejans] application for dispensation. (ii) The respondents also contend that the Order should provide that these costs are not limited to those incurred after the issue of Daejans application for a dispensation. (iii) The respondents further contend that the Order should state that these costs can include costs incurred in connection with the hearing which resulted in the earlier determination referred to in para 24 of the main judgment. 8.
On analysis, there is, in truth, little, if any, difference between the two formulations, but that of the respondents is to be preferred.
As to (i), the respondents wording spells things out more fully and leaves less room for argument.
It is true that Daejans wording follows para 85 of the main judgment, but the meaning of the respondents wording is quite consistent with what is said in that paragraph.
So far as (ii) is concerned, the only objection to the respondents proposal is that it amounts to surplusage: an order for costs in relation to proceedings is not limited to costs incurred after the proceedings start.
However, as Daejan opposes the respondents proposal, it should be adopted to ensure there can be no dispute.
As to (iii), at first sight it may appear surprising that the respondents can claim as costs in relation to the issue decided in a later determination (viz. that mentioned in para 26 of the main judgment) expenditure incurred on issues decided in an earlier determination.
However, as Daejan appears to accept, although there were two determinations, at least some of the evidence and the arguments in relation to the first were important and relevant in relation to the second determination. 9.
The second issue between the parties is touched on in para 4(v) above.
Daejan says that there should be no order for costs in the UT, in the Court of Appeal and in this Court, whereas the respondents contend that they should be able to recover their costs from Daejan in all three tribunals insofar as they fall within the scope of the form of order they have proposed as quoted in point (i) in para 7 above (and which is accepted in relation to the LVT costs see para 8 above). 10.
It is not open to Daejan to seek any costs in the Court of Appeal or in this Court, as it was granted permission to appeal to each court on terms that it did not seek its costs (see paras 33 and 37 of the main judgment).
That was for the very good reason that Daejan, as a large landlord, had a significant interest in the issue in this case being conclusively determined, whereas the respondents had no such interest.
When one adds to that point the fact that it was Daejans default which ultimately caused these appeals to be necessary, and the fact that the decision of this Court can be said to have represented a change in what the law was perceived to be, it seems right that Daejan should not claim its costs in the UT any more than in the Court of Appeal or in this Court. 11.
However, although one must have some sympathy for the respondents, it would not be appropriate to go further by making any order in their favour so far as the costs in the UT, the Court of Appeal or the Supreme Court are concerned.
In the absence of special circumstances, Daejan can fairly say that the normal order for costs in a case where the ultimate appeal court decides in favour of one party (the successful party) is that that party recovers all its costs from the opposing party.
In this case, there are undoubtedly two special factors, namely (i) the successful party only succeeded on the basis that it should have succeeded at first instance on terms that it paid some of the opposing partys costs (see paras 59 64, 73(ii) and 85(ii) of the main judgment, and paras 7 and 8 above), and (ii) the successful party is precluded from seeking its costs in this Court and the Court of Appeal (see paras 33 and 37 of the main judgment). 12.
In these circumstances, to deprive Daejan of its costs of the hearing before the UT (in addition to the Court of Appeal and this Court) could be said to be generous to the respondents, although, for the reasons briefly given in para 10, it is appropriate in this case.
However, it would not be right to make an order for costs in the UT or higher courts which was more favourable to the respondents than no order for costs. 13.
It is said by the respondents that they acted reasonably in resisting Daejans successive appeals.
That is true, but Daejan also acted reasonably in pursuing the appeals, and, unlike the respondents, Daejan was ultimately successful. 14.
It is also true that Daejan has to pay a large proportion of the respondents costs before the LVT, even though it obtained the dispensation it was seeking, but that is because it was asking for an indulgence from the LVT (as explained in paras 58 64 of the main judgment).
However, the appeals concerned a point of law, namely the correct approach to a dispensation application by a landlord who had failed to comply with the Regulations, and it was a point on which, ultimately, Daejan won and the respondents lost.
Prima facie, therefore, Daejan should have its costs of the appeals, but, as explained in para 10, the correct order in respect of the appeal costs is that there be no order. 15.
It is also argued by the respondents that, as Daejan raised the argument at all levels of appeal that the financial consequences to it of refusing a dispensation represented a relevant factor when deciding whether to grant it a dispensation, the fact that this argument failed should be reflected in any order for costs on the appeals.
In arguments about costs, it is normally inappropriate to single out a particular strand of argument (in this instance, prejudice to the landlord) in connection with what is in reality a single point (the principles applicable to granting a dispensation), particularly on an appeal, where no question of the cost of particular evidence arises.
This case is no exception.
Furthermore, while prejudice to the landlord was rejected as a relevant factor, it does represent the windfall to the tenants which is relevant (see para 51 and 71 of the main judgment). 16.
This leads to the third issue.
As a result of the conclusion on the second issue, Daejan is entitled to recover any costs which it has paid to the respondents in respect of the UT or Court of Appeal hearings.
However, the respondents should be entitled, despite Daejans objection to the contrary, to a direction for a stay on any order that they repay these costs, while the parties await the decision of the LVT as to the sums which Daejan should be required to pay to them pursuant to the order referred to in para 4(iii) above, with a view to setting off any such costs liabilities against each other.
However, if the respondents unreasonably delay matters being determined by the LVT, Daejan has the right to apply to the LVT to lift this stay. 17.
The fourth issue arises from an argument about the wording of the provision which gives effect to the term described in para 4(iv) above.
Daejan suggests that it is not to include in the service charge costs its costs of applying for dispensation in the [LVT] or its costs of appealing from a refusal of that dispensation.
The respondents proposal is that it should be the costs which Daejan incurred in resisting a determination that it had failed to comply with the Regulations or in respect of its application for dispensation.
Daejans formulation is arguably too narrow, and the respondents formulation could apply to any application in the future.
The appropriate form of words is that Daejan must not include in the service charge costs its costs of (i) resisting the respondents application for a determination that it had failed to comply with the Regulations, (ii) supporting its application for dispensation (including any costs it has to pay to the respondents), or (iii) appealing from a refusal of that dispensation. 18.
The fifth issue arises from the respondents request for a direction under section 20C(1) of the 1985 Act (section 20C) in connection with the costs incurred by Daejan in relation to its application for a dispensation.
Section 20C permits a tenant to apply for an order that all or any of the costs incurred by the landlord in connection with proceedings before a court, [LVT], or [UT], are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge .
At first sight, there seems little point in including such a direction, given the agreement to the provision set out in para 4(iv), and discussed in para 17 above.
However, as the respondents point out, the agreed provision in para 4(iv) is, strictly speaking at least, no more than a condition imposed on Daejan as a term of granting it the dispensation it seeks.
In theory, Daejan might not take up the dispensation.
Accordingly, as it would be wrong for Daejan to seek to include the costs involved in a future service charge demand, the order sought by the respondents under section 20C should be granted. 19.
Sixthly, the respondents wish the Order to record that any dispensation will take effect on the date on which Daejan complies with the conditions set out in para 4(iii).
At first sight, the question of when the dispensation takes effect may well not matter, and, if it does, it should be determined as and when the reason for which it matters is identified.
This point appears to be linked to another issue. 20.
That is the seventh issue which divides the parties.
It arises from the fact that the lease under which each respondent holds his or its flat from Daejan provides for interest on late payments of money due under the lease at the rate of 14% per annum.
The respondents seek to be released from liability for this interest in relation to the service charges which Daejan anticipates recovering in the light of the main judgment. 21.
There is no need for the respondents to seek a release of this liability to pay contractual interest.
It seems clear from the wording of section 20(1)(b) of the 1985 Act (which applies in this case and limits the service charge contribution as explained in para 10 of the main judgment unless the consultation requirements have been .,. complied with) that, where that provision applies, the date on which any service charge would fall due (the due date) must be the later of (i) the date when the service charge would fall contractually due in the absence of any statutory restriction, and (ii) the date when any dispensation becomes effective.
And, in this case, the due date must be the day on which the conditions imposed on Daejan for the grant of the dispensation are complied with. 22.
This means that interest will only start to run on the service charges the subject of these proceedings once the costs payable by Daejan in accordance with para 4(iii) above have been determined and, if appropriate, paid (within fourteen days of the determination).
It may well be that the costs will be less than the costs already paid to the respondents in relation to the orders for costs made on the appeals in the courts below (see para 16 above), and therefore no payment will be due from Daejan to the respondents.
However, that would not undermine the point made in para 21 above: until the conditions on which the dispensation is granted are known and quantified, there is no operative dispensation, and time does not begin to run for interest. 23.
If the respondents were to delay paying Daejan the service charges assessed in accordance with the Order (beyond fourteen days, to allow time to organise payment) once the dispensation becomes operative, there would (at least in the absence of special facts which have not so far arisen) be no basis for depriving Daejan of its contractual right to claim interest at 14% per annum. 24.
Accordingly, the Order should include a provision to deal with the sixth and seventh issues.
That provision should state that the dispensation will take effect once all conditions subject to which the dispensation is granted have been determined (and, where appropriate, satisfied), and that interest pursuant to the terms of the respondents leases can only run from a date fourteen days after the dispensation takes effect. 25.
The eighth issue relates to the agreed remission of the matter to the LVT, referred to in para 4(vii) above.
The respondents wish the remission to be to the same panel as heard the proceedings and gave the decisions referred to in paras 23 28 of the main judgment (the original panel), whereas Daejan argues for a different panel.
There is possible advantages in having the original panel, given that it heard this matter, including evidence and arguments, over more than eight days, but the benefit is likely to be slight as that hearing was some time ago, and a different panel would have the benefit of two very full decisions of the original panel.
There is nothing in Daejans argument that the original panel would be, or would appear to be, inappropriate because its decision has been reversed.
The reversal was based on an issue of law, and does not cast doubt on the panels ability to determine the issues which are now to be determined, if they cannot be agreed. 26.
The correct direction to give in this connection is simply to remit the issues, which remain to be determined as a result of the Order, to the LVT, on the basis that it can be, but need not be, the same panel who heard the proceedings in 2007 and 2008.
This is on the basis that there may be some value in the original panel hearing the matter, but it is unlikely to be very advantageous, and that there may be difficulties in getting the original panel to reconvene. 27.
The parties can no doubt now agree a form of order which reflects what they have agreed as augmented by what we have decided in this further judgment.
I conclude that the LVT made no error of law in refusing Daejans application for dispensation with the Requirements; that the Upper Tribunal and the Court of Appeal were correct in determining not to set its refusal aside; and that this court should determine likewise.
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Provisions in the Landlord and Tenant Act 1985 (the 1985 Act) and the Service Charges (Consultation requirements) (England) Regulations 2003 (SI 2003/1987) impose statutory requirements and restrictions on a landlord, which impinge on its ability to recover service charges from tenants, typically of flats in a block of flats.
Unless certain consultation requirements (the Requirements), which can be conveniently divided into four stages, are complied with by the landlord, or dispensed with by the Leasehold Valuation Tribunal (the LVT), the landlord cannot recover more than 250 from each tenant in respect of works for which the service charge would otherwise be greater.
Section 20ZA(1) of the 1985 Act provides that the LVT may dispense with the Requirements if satisfied that it is reasonable to do so.
The issue on this appeal concerns the width and flexibility of the LVTs jurisdiction to dispense with the Requirements, and the principles upon which that jurisdiction should be exercised.
Daejan Investments Limited (Daejan) is the owner of the freehold of Queens Mansions (the Building).
The Building is managed by Highdorn Co Ltd, which carries on business under the name of Freshwater Property Management (FPM).
Five of the seven flats in the building are held under long leases, each of which is held by a respondent to this appeal (collectively the respondents).
Each lease includes an obligation on the tenant to pay a specified fixed proportion of the cost of providing, among other things, the services which the landlord is obliged to provide, which include the repair of the structure, exterior and common parts of the building.
The respondents were, at all material times, members of the Queens Mansions Residents Association (QMRA).
In 2005, FPM sent QMRA a specification in respect of proposed works to the building (the Works), and appointed Robert Edward Associates (REA) as contract administrator.
REA sent to QMRA and the respondents a notice of intention to carry out the Works, and provided estimates for them, thereby complying with stages 1 and 2 of the Requirements.
REA informed the respondents and QMRA that two tenders appeared to be the most competitive: one from Rosewood Building Contractors (Rosewood); the other from Mitre Construction Ltd (Mitre).
The respondents and QMRA were only provided with the priced specification submitted by Mitre.
Daejan contracted for the Works with Mitre, but in so doing failed to comply with the third of the four stages of the Requirements, which required, among other things, Daejan to issue a statement to QMRA with a summary of observations on the estimates, its responses to them, and notice of where they would be available for inspection.
Daejan requested the LVT to grant it dispensation from the Requirements, so that Daejan would be entitled to recover just under 280,000 in total from the respondents, as opposed to 1,250 in the absence of dispensation.
During the course of the proceedings, Daejan proposed a 50,000 deduction to the 280,000.
The LVT regarded Daejans failure as a serious breach of the Requirements, which amounted to serious prejudice to the respondents.
Accordingly, the LVT refused dispensation.
The Upper Tribunal and the Court of Appeal agreed with this refusal.
The Supreme Court, by a majority of three to two (Lord Hope and Lord Wilson dissenting), allows the appeal, granting Daejan dispensation from the Requirements on terms that (i) the respondents aggregate
liability to pay for the works be reduced by 50,000, and (ii) Daejan pay the reasonable costs of the respondents in relation to the proceedings before the LVT.
Lord Neuberger gives the majority judgment.
The correct question in this case was whether, if dispensation was granted, the respondents would suffer any relevant prejudice, and, if so, what relevant prejudice, as a result of Daejans failure to comply with the Requirements.
It is highly questionable whether any such prejudice would have been suffered.
The only specific prejudice was a matter of speculation, namely that the respondents lost the opportunity of making out the case for using Rosewood to carry out the Works, rather than Mitre [77].
Although there was a partial failure by Daejan to comply with the third stage of the Requirements, the relevant prejudice to the respondents could not be higher than the 50,000 effectively offered by Daejan [84].
It would be pointless to remit to the LVT the issue as to whether the 50,000 was sufficient compensation [80].
The purpose of the Requirements is to ensure that tenants are protected from paying for inappropriate works, or paying more than would be appropriate.
In considering dispensation requests, the LVT should focus on whether the tenants were prejudiced in either respect by the failure of the landlord to comply with the Requirements [44].
The Requirements are a means to the end of the protection of tenants in relation to service charges [46].
There is no justification for treating consultation and transparency as appropriate ends in themselves [52].
The right to be consulted is not a free standing right [78].
As regards compliance with the Requirements, it is neither convenient nor sensible to distinguish between a serious failing, and a minor oversight, save in relation to the prejudice it causes.
Such a distinction could lead to uncertainty, and to inappropriate and unpredictable outcomes [47] [49].
The LVT has power to grant dispensation on appropriate terms [54], and can impose conditions on the grant of dispensation [58], including a condition as to costs that the landlord pays the tenants reasonable costs incurred in connection with the dispensation application [59] [61].
Where a landlord has failed to comply with the Requirements, there may often be a dispute as to whether the tenants would relevantly suffer if an unconditional dispensation was granted [65].
While the legal burden is on the landlord throughout, the factual burden of identifying some relevant prejudice is on the tenants [67].
They have an obligation to identify what they would have said, given that their complaint is that they have been deprived of the opportunity to say it [69].
Once the tenants have shown a credible case for prejudice, the LVT should look to the landlord to rebut it and should be sympathetic to the tenants case [68].
Insofar as the tenants will suffer relevant prejudice, the LVT should, in the absence of some good reason to the contrary, effectively require the landlord to reduce the amount claimed to compensate the tenants fully for that prejudice.
This is a fair outcome, as the tenants will be in the same position as if the Requirements have been satisfied [71].
This conclusion does not enable a landlord to buy its way out of having failed to comply with the Requirements, because a landlord faces significant disadvantages for non compliance [73].
This conclusion achieves a fair balance between ensuring that tenants do not receive a windfall, and that landlords are not cavalier about observing the Requirements strictly [74].
The minority considers that the LVT should weigh the gravity of the non compliance with the Requirements in determining whether to grant dispensation [111].
This includes distinguishing between breaches or departures according to their level of seriousness, without having first to consider the amount of prejudice they may cause or may have caused [92].
The legislative history of the Requirements suggests that the gravity of non compliance is relevant [103] [109].
Substantial non compliance with the Requirements entitles the LVT to refuse to grant dispensation [91],[110].
Daejans termination of the consultation process represented serious non compliance with the Requirements [99].
Questions as to the gravity of non compliance are questions of fact and degree best left to the judgment of the LVT [88].
Judicial restraint should be exercised by an appellate court where it is prescribing limits on the way an expert tribunal is to perform its functions [89].
The LVTs decision to reject the 50,000 proposal was not based on an error of law that would entitle the Supreme Court to interfere with it [94],[117].
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This appeal relates to personal independence payment, which is a non means tested allowance paid to certain people with long term health problems or disability.
The appeals focus is upon one of the markers used to determine whether a claimants ability to live his or her daily life is limited, by his or her physical or mental condition, to such an extent as to generate an entitlement to personal independence payment (PIP).
Various daily living activities are examined as markers, and the one in question here is engaging with other people face to face.
The general scheme of the Welfare Reform Act 2012 and the Social Security
(Personal Independence Payment) Regulations 2013
PIP is dealt with in Part 4 of the Welfare Reform Act 2012 (the Act).
Section 77 introduces the allowance and establishes that a person may be entitled to one or both of its two components, namely the daily living component and the mobility component.
This case is concerned with the daily living component.
Entitlement is dealt with in section 78, which also points the way to other relevant provisions contained in Part 4 and in the regulations made under it.
The component can be paid at either the standard rate (which is what is in question here) or, for those whose ability is more limited, the higher enhanced rate.
By section 78(1), there are two requirements which the claimant must satisfy in order to be entitled to the daily living component at the standard rate, namely the requirement in section 78(1)(a) (which I will refer to as the limited ability requirement), and the required period condition in section 78(1)(b).
So far as is material, the section reads: 78.
Daily living component (1) A person is entitled to the daily living component at the standard rate if (a) the persons ability to carry out daily living activities is limited by the persons physical or mental condition; and the person meets the required period (b) condition. [entitlement to enhanced rate] (2) [meaning of standard and enhanced rate] (3) In this Part daily living activities means such (4) activities as may be prescribed for the purposes of this section. (5) See sections 80 and 81 for provision about determining (a) whether the requirements of subsection (1)(a) or (2)(a) above are met; (b) whether a person meets the required period condition for the purposes of subsection (1)(b) or (2)(b) above. (6) This section is subject to the provisions of this Part, or regulations under it, relating to entitlement to
the daily living component
Section 80 provides that the question whether a persons ability to carry out daily living activities is limited by the persons physical or mental condition (the limited ability requirement in section 78(1)(a)) is to be determined in accordance with regulations, and that the regulations must provide for that question to be determined, except in prescribed circumstances, on the basis of an assessment (or repeated assessments) of the person.
The question of whether the person meets the required period condition for the purposes of section 78(1)(b) is similarly to be determined in accordance with regulations.
The Social Security (Personal Independence Payment) Regulations 2013 (the Regulations) prescribe the activities which are daily living activities for section 78 as those set out in column 1 of the table in Part 2 of Schedule 1 to the Regulations.
The table lists ten activities.
Column 2 focuses in some detail on the ability of the claimant (referred to throughout the Regulations as C) to carry out each activity, on a scale ranging from being able to carry out the activity unaided to being unable to do it.
For example, activity 1 in the list is Preparing food, and there are six levels of ability in column 2 ranging from a. Can prepare and cook a simple meal unaided to f. Cannot prepare and cook food.
Each sub paragraph in column 2 is called a descriptor.
In column 3, points are attributed, according to the level of ability measured by the descriptors; the greater the difficulty experienced by the claimant, the greater the number of points awarded.
So, a claimant who can prepare and cook a simple meal unaided has no points attributed, whereas, at the other end of the scale, eight points are attributed where the claimant cannot prepare and cook food.
There are gradations between the two; for example, a claimant who needs prompting to be able to prepare or cook a simple meal has two points attributed, as does a claimant who needs to use an aid or appliance to do so.
The same ascending scale of difficulty, reflected in increasing numbers of points, can be seen in relation to each of the activities in the table.
Regulation 5 provides that the points attributed for each activity in the table are added together and, if the total is at least eight but less than 12, the claimant has limited ability to carry out daily living activities, and is entitled to PIP at the standard rate, whereas if the total is 12 points or more, the claimant will be classed as having severely limited ability and is entitled to the enhanced rate.
Regulation 4(2A) provides some more detail as to how the assessment of ability is approached, providing that: C is to be assessed as satisfying a descriptor only if C can do so safely; to an acceptable standard; repeatedly; and (a) (b) (c) (d) within a reasonable time period.
Regulation 4(4) defines these concepts as follows: repeatedly means as often as the activity being (a) safely means in a manner unlikely to cause harm to C or to another person, either during or after completion of the activity; (b) assessed is reasonably required to be completed; and (c) reasonable time period means no more than twice as long as the maximum period that a person without a physical or mental condition which limits that persons ability to carry out the activity in question would normally take to complete that activity.
The assessment of the claimant is more than just a snapshot of ability, given that the required period condition has to be satisfied, see section 78(1)(b).
Section 81 dictates the shape of the regulations about this condition, providing (so far as material) that they: must provide for the question of whether a person meets the required period condition to be determined by reference to (a) whether, as respects every time in the previous three months, it is likely that if the relevant ability had been assessed at that time that ability would have been determined to be limited by the person's physical or mental condition; and (b) whether, as respects every time in the next nine months, it is likely that if the relevant ability were to be assessed at that time that ability would be determined to be limited by the persons physical or mental condition.
For present purposes, the relevant ability is, of course, the ability to carry out daily living activities (section 81(2)).
Section 81(3) deals with the reckoning of the periods of three and nine months, providing that the previous three months means the three months ending with the prescribed date and the next nine months means the nine months beginning with the day after that date.
The Regulations make provision as required by section 81, including establishing what the prescribed date is, and also dealing with further issues to do with the required period.
The detail does not matter for the issue presently under consideration.
What is important is to recognise that it is not just the claimants situation on one day of assessment that is under consideration, but his or her situation over a period of 12 months.
Furthermore, it is clear from the Regulations that some degree of fluctuation in the claimants presentation is anticipated.
Regulation 7, which is entitled Scoring: further provision, sets out how to choose which descriptor applies to a claimant in relation to each activity in the table.
It involves looking to see which descriptors are satisfied on over 50% of the days of the required period, and from that information, working out which descriptor is to be applied.
Regulation 7(1)(a) (which deals with the most straightforward situation) will serve as an example; it provides that where one descriptor is satisfied on over 50% of the days of the required period that descriptor applies to the claimant.
The provision under consideration in the present case
It is Activity 9 in the table in Part 2 of Schedule 1 to the Regulations which gives rise to the issues in this appeal.
In relation to this activity, the table provides: Column 1 Activity 9.
Engaging with other people face to face.
Column 3 Points 0 2 4 8 Column 2 Descriptors a. Can engage with other people unaided. b. Needs prompting to be able to engage with other people. c. Needs social support to be able to engage with other people. d. Cannot engage with other people due to such engagement causing either (i) overwhelming psychological distress to the claimant; or (ii) the claimant to exhibit behaviour which would result in a substantial risk of harm to the claimant or another person.
Difficulty has arisen over descriptor 9c, and in particular over what is meant by social support, and how it differs from prompting in descriptor 9b so as to justify descriptor 9c attracting four points, whereas descriptor 9b only attracts two points.
A subsidiary issue that arises is whether social support only covers help given whilst actually engaging with other people face to face, or whether help given in advance is also relevant.
Definitions are provided for the purpose of Schedule 1 by Part 1 of the Schedule, including the following: In this Schedule aided means with (a) (b) the use of an aid or appliance; or supervision, prompting or assistance; assistance means physical intervention by another person and does not include speech; communication support means support from a person trained or experienced in communicating with people with specific communication needs, including interpreting verbal information into a non verbal form and vice versa; engage socially means interact with others in a contextually and (a) socially appropriate manner; (b) understand body language; and establish relationships; (c) prompting means reminding, encouraging or explaining by another person; psychological distress means distress related to an enduring mental health condition or an intellectual or cognitive impairment; social support means support from a person trained or experienced in assisting people to engage in social situations; supervision means the continuous presence of another person for the purpose of ensuring Cs safety; unaided means without (a) (b) the use of an aid or appliance; or supervision, prompting or assistance.
There is no definition of engaging with other people face to face or of engage.
As can be seen, Part 1 provides, instead, a definition of engage socially, a term which does not appear anywhere else in the Schedule.
It is thought that this is an error, arising when Activity 9, which was originally entitled engaging socially, was refined following consultation on the provisions.
The settled position in the tribunals (endorsed by the Court of Appeal in Hickey v Secretary of State for Work and Pensions [2018] EWCA Civ 851; [2018] 4 WLR 71, para 9) is that factors set out in relation to engaging socially are nevertheless relevant to the consideration of a persons ability to engage with other people face to face, and there does not appear to be any reason to disrupt that approach.
The context in which the present issues arise
The respondent is a man in his forties.
He made a claim for PIP relying, inter alia, upon the effects that his mental health has upon his ability to engage with other people.
When his claim was refused because he had not been awarded the required eight points, he appealed unsuccessfully to the First tier Tribunal (FTT).
A central issue in the appeal was the number of points that should be attributed to him under Activity 9.
The FTT considered that the decision maker had correctly found him to fall within descriptor 9b (prompting), rather than 9c (social support).
Explaining this, the FTT Judge simply said: Two points have been awarded in respect of 9b.
From the activities of daily living and our findings in fact above we consider that this is the appropriate descriptor.
The appellant did not require social support as defined to be able to engage with other people nor did engaging with other people cause him overwhelming psychological distress or to exhibit behaviour which would result in a substantial risk of harm to himself or another person.
Two points are due as awarded.
The respondent appealed to the Upper Tribunal, contending that he should have been awarded four points under 9c, which would have qualified him to receive PIP.
The appeal was allowed on the basis that the FTT had given an inadequate explanation of why 9b had been selected rather than 9c, and that it had failed to make adequate findings of fact going to that issue.
The Upper Tribunal judge remitted the case to the FTT for rehearing, providing directions as to how the tribunal should approach Activity 9.
The essence of the directions might be said to be as follows: i) what is envisaged as social support is emotional or moral support and perhaps also physical support, and other interventions which could include everything in the definition of prompting provided it can only be accepted by the claimant if given by a qualified person; ii) qualified people are those who are trained or experienced in assisting people to engage in social situations and friends or family can come within that category; iii) support.
the qualified person needs to be present or available to provide the
The Secretary of State appealed to the Inner House of the Court of Session.
The Upper Tribunals decision to set aside the FTTs determination and to remit the matter for rehearing was not challenged, but the directions which were to govern the FTTs approach were.
The grounds of appeal were that the Upper Tribunal should have directed the FTT that the social support must be contemporaneous with the social engagement being supported, and that social support requires something more substantial than prompting.
The Inner House refused the appeal.
It rejected the argument that the support had to be contemporaneous with the social engagement, considering that there might be situations in which a qualified person could provide sufficient support in anticipation of the claimant meeting people face to face, without the supporter actually having to be present during the meeting.
However, although there was, in the Inner Houses view, no justification for a requirement that the support must be given during or immediately before the engagement, there did have to be a temporal or causal link of some sort between the help given and the activity in respect of which the help is needed (para 51 of the Inner Houses opinion).
As to the nature of social support, the Secretary of States position was encapsulated by the Inner House in this way (at para 53 of its opinion): the exercise suggested is, in effect, to treat prompting and social support as mutually exclusive, deduct everything that amounts to prompting and see what, if anything, you are left with which, if sufficient in quantity, might amount to social support.
This approach had found favour with a number of Upper Tribunal judges (in CPIP/1861/2015 UKUT(AAC) (unreported) 12 April 2016; CSPIP/203/2015 and CSPIP/210/2015 UKUT (AAC) (unreported) 11 March 2016; AH v Secretary of State for Work and Pensions [2016] UKUT 276 (AAC); EG v Secretary of State for Work and Pensions [2017] UKUT 101 (AAC)).
In the view of the Inner House, however, the Secretary of States approach failed to recognise the potential for overlap between the prompting and the social support categories (para 54 ibid).
It held that they are not mutually exclusive categories.
As the Inner House saw it, the critical distinction between descriptor 9b prompting and descriptor 9c support lay not in a difference in the nature of the help provided but in the fact that, with social support, there is a necessity for the help to come from a person trained or experienced in assisting people to engage in social situations (para 55).
Having given the example of psychological support given by someone trained in psychology, which would clearly count as social support, it went on to say: But there may be cases where the support is in the nature of encouragement or explanation but, because of the claimants mental state, will only be effective if delivered by someone who is trained or experienced in delivering that type of support to that individual.
In such a case there will not be a qualitative difference in the help given, but the help can be regarded as support because of the necessity for it to be provided by someone trained or experienced in delivering it.
The Inner House slightly modified the Upper Tribunal judges direction to the FTT, setting out its own formulation, at para 56, as follows: Encouragement or any other sort of prompting can qualify as social support if, to render it effective or to increase its effectiveness, it requires to be delivered by someone trained or experienced in assisting people to engage in social situations.
The case was remitted to the FTT for determination in accordance with the guidance given in the Inner Houses opinion.
The Secretary of State then appealed to this court, challenging the Inner Houses interpretation of social support (termed by the parties the qualitative issue), and its conclusion that it need not be contemporaneous with the engagement being supported (the timing issue).
The respondent, who made his claim for PIP in February 2015, meanwhile continues to await the factual findings and ruling in the FTT that is necessary to resolve whether or not he is entitled to any payment.
He maintains that the Inner Houses ruling is substantially correct.
Mind was given permission to intervene and has provided helpful submissions, both in writing and orally.
It considers the respondents position in relation to the timing issue to be correct, but invites the court not to decide that issue, on the basis that it is unnecessary and undesirable to do so in the circumstances of this case.
It concentrates its submissions on the qualitative issue, aligning itself with the respondent and the courts below.
The Secretary of States argument: the qualitative issue
Contrary to the position taken below, in this court the Secretary of State accepts that social support for the purposes of descriptor 9c may consist of prompting, but submits that the prompting involved in social support is different by virtue of the fact that, in accordance with the definition of social support, the support needed has to be support from a person trained or experienced in assisting people to engage in social situations.
If a person trained or experienced were to be narrowly construed, denoting someone who has such training or experience by virtue of their professional training or occupational history, there would be no difficulty in identifying situations within 9c, but the Secretary of State adheres to the assurance given during the consultation process that a friend or family member who knows the claimant well, and can offer support, can also be included as a relevantly experienced person.
So, the Secretary of State submits, the key feature that distinguishes social support is that, as it is put in the written case: the help needs to be given by [the] trained or experienced person by reason of their training or experience.
Familiarity is not enough.
The Secretary of States concern (as articulated in the written case) is that the Inner Houses direction risks generating confusion: between the persons who require support from a person because of their relevant experience (which might include experience gained in the course of being friends or family), and those who require support from a friend or family member solely because of that relationship It is very common for a person to only respond well to someone they know and trust.
However, the need for help from someone familiar or trusted on its own does not turn prompting into social support.
There will be a qualitative difference, the Secretary of State says, in the help given by a helper using his or her training or experience as opposed to other help.
The trained or experienced person will understand what is lacking in the claimants social engagement and be able to overcome this, or enable the claimant to do so, whereas an inexperienced person would not necessarily be able to see what was lacking, anticipate a difficulty, or know how to remedy it.
Discussion: the qualitative issue
The difference between the Secretary of States interpretation and that of the Inner House (supported by the respondent and the intervener) is somewhat nebulous, and appears as if it might, in fact, be limited.
Rather than risk confusing the issue by indulging in a comparison of the two positions, it might be better to return directly to the text of Activity 9.
It is well to bear in mind, when considering the ambit of the various limbs of Activity 9, that engaging with people face to face is an activity that can take many differing forms.
As was pointed out in the course of oral argument, face to face interactions will range from engagements such as formal interviews and medical examinations to establishing and furthering close personal relationships.
Similarly, the sort of assistance that enables the engagement to occur will take many differing forms.
The obvious starting point, in determining which of the Activity 9 descriptors applies, is to establish what help the particular person needs in order to be able to engage with other people face to face, remembering that this is not about the help the person is actually receiving, but about the help that they need, although the one may of course inform the other.
It is worth stressing that the provisions are not concerned with support that the person would like to have, or would appreciate as generally comforting; the particular support has to be needed to enable the activity to take place.
Having assembled the facts in this way, one can start to consider whether the help needed is of a type that falls within the ambit of social support for the purposes of descriptor 9c.
Early in the oral argument, the Secretary of State sought to confine the scope of social support by adopting a rather technical construction of the Activity 9 descriptors.
The starting point was that descriptor 9a concerns a person who can engage with other people unaided.
The submission flowing from this had the following elements: it can be inferred that, in contrast to those within 9a who can manage i) unaided, claimants falling within 9b and 9c all need to be aided; ii) aided is a term defined in Part 1 of the Schedule (see para 13 above), and involves the use of an aid or appliance, or supervision, prompting or assistance; iii) iv) is meant by social support in 9c. so 9b and 9c claimants will all require aid in one of these forms;
and other forms of support are therefore irrelevant in considering what
There are difficulties with this proposed interpretation, but there is nothing to be gained in elaborating them.
It suffices to say that, in my view, such a narrow and technical approach would introduce an unwarranted limitation of the broad word support which has been used in descriptor 9c.
This would be inconsistent with the governments objectives in introducing the new disability benefit provisions, including PIP, which included simplifying matters, and creating a benefit that was easier to understand, and reached those in need of extra support to live independently and participate in everyday life.
In practice, support might take many forms, responding, no doubt, to the varied needs of claimants, and the varied forms of face to face engagement.
The examples provided by Mind underline the wide variation in the help people have/require in order to engage with other people.
Prompting is one form of support, as is now accepted, but there will be other forms, and they may well not fall within the definition of aided.
The use of an aid or appliance might not often be relevant, supervision is about ensuring safety rather than directed at Activity 9, and the only other form of aid included in the definition is assistance which means physical intervention not includ[ing] speech, and might play a part, but is unlikely to sweep up all other available forms of support.
I would accordingly reject the argument that only support that falls within the definition of aid is relevant, although acknowledging that a consideration of the various forms of prompting and of the other sorts of aid identified in the Regulations could assist in lending some colour to the concept of support.
I return, therefore, to the central question of what differentiates the claimant who needs social support and is entitled to four points under descriptor 9c, from the claimant who is only entitled to two points, because he or she only needs prompting in the form covered by descriptor 9b.
It is inherent in the scheme that, broadly speaking, descriptor 9c reflects a greater degree of disability than descriptor 9b, so attracting increased points.
Responding to the greater degree of disability requires the attention not just of another person (as in the case of prompting simpliciter), but of a person trained or experienced in assisting people to engage in social situations.
That is what differentiates prompting for the purposes of 9b from prompting which is social support for the purposes of 9c.
And where the support takes a form other than prompting, it will similarly only qualify for 9c if the claimant needs it to come from a person so trained or experienced.
The Secretary of States anxiety that the provision will be taken to include the sort of confidence boosting and reassurance that occurs in most close relationships can be allayed by keeping the focus very firmly on the twin requirements of necessity and relevant training or experience.
Applied in the family/friends setting, to qualify for points under 9c, the claimant has to need support from someone who is not just familiar with him or her, but who is also experienced in assisting engagement in social situations.
It is the training/experience of the helper upon which the claimant depends in order to enable the face to face engagement with others to take place, not simply the close and comforting relationship that may exist between the claimant and the helper.
Having dispatched the idea that prompting can never constitute social support, the words of descriptor 9c, taken with the definition of social support, clearly define the ambit of the category and distinguish it from descriptor 9b.
There is no need to complicate them.
As the Inner House observed in para 55 of its opinion (see the passage quoted at para 20 above), the nature of the support provided might not differ between 9b and 9c.
What brings the claimant into 9c rather than 9b is that, to be able to engage with others, he or she needs that support to come from someone trained or experienced in assisting people to engage in social situations.
As the Inner House helpfully put it, the support will only be effective if delivered by someone who is trained or experienced.
I would express a word of caution about the Inner Houses statement (at para 56) that help can qualify as social support if, to render it effective or to increase its effectiveness (my italics), it requires to be delivered by a trained or experienced person.
It is useful to ask oneself what is required to render help effective in enabling the social engagement to take place, as I have observed in my preceding paragraph.
But I cannot endorse the addition of the italicised words.
Descriptor 9c revolves around what the claimant needs, and need is not a relative term.
The claimant either needs or does not need trained/experienced help in order to be able to engage with other people.
If only trained/experienced help will be effective in achieving the objective, the claimant can be said to need it.
If what could be called, for want of a better shorthand, lay help would enable the claimant to engage, the claimant does not fall within 9c, but might fall within 9b.
And, of course, if not even trained/experienced help would work, the claimant might fall within 9d.
There will, inevitably, be cases in which it is not immediately evident whether descriptor 9c applies, and it is only after scrutinising the facts particularly carefully that the decision maker will be able to reach a determination.
Although the provision is concerned with the help the claimant needs, rather than with the help which he or she is actually getting in practice, it seems likely that, in many family/friends cases, someone will already be carrying out the supportive role in face to face engagements.
Where this is so, the assessment/decision making process will be assisted by looking at the elements of the support that they actually provide, how they have come to know what to do, whether or not the sort of help that they provide could be provided by any well meaning friend or family member, and what additional help (if any) is required.
Exploring these issues will no doubt be a sensitive task.
Mind points out that people often struggle to convey the relevant information or they put it in terms which are misunderstood.
Claimants are likely to be handling their applications for PIP themselves, or with assistance only from family and friends.
Here, for example, the respondent and his partner attended the hearing before the FTT, both gave evidence, and the partner acted as the respondents representative.
During the application process, whether it be upon the first request for payment or in the tribunal system upon appeal, it may be necessary to probe what is being said in support of the claim so as to establish the elements of the help that is required to enable the face to face engagement to take place and the characteristics of the person who will need to provide it in order for it to be effective.
By way of example, if a claimant says, I need to have someone I trust with me when I meet people face to face, a number of questions are likely to be required to follow this up, and to determine whether the claimant comes within descriptor 9b or 9c.
Everything will depend on the facts of the particular case, but they might include questions (sensitively put, of course) such as why is that?, who would you trust in that role?, what sort of things could they do to help you engage?, how would they know what to do?, what would happen if that person was not there?
The Secretary of States argument: the timing issue
The Secretary of State submits that social support needs to be contemporaneous with the face to face engagement being supported, and that it does not include help provided in advance of it.
The contrary interpretation would, submits the Secretary of State, leave matters so open that it would inevitably generate inconsistencies and arbitrariness in decision making.
The reasons given in support of the narrow approach include: i) The assessment is a calibration of the claimants functional limitations at the date of the claim with the application of the qualifying periods; it is an assessment of actual disability during the activity. ii) Descriptor 9c uses the present tense: needs.
This suggests presence during the activity, for example to do the reminding, encouraging or explaining involved in prompting. iii) Supporting the face to face engagement requires that the supporter perceives the full context of the engagement and has the ability to react to what is done by the person with whom the claimant is seeking to engage. iv) Descriptor 9c is concerned with an intensity of need on the part of the claimant (as reflected in the need for a trained/experienced supporter) which is such as to make it unrealistic to contemplate sufficient support being given without the supporter actually being present during the engagement. v) Social support would be in an anomalous position if it could occur in advance of the engagement, whereas other descriptors require support to be contemporaneous.
The Secretary of State invites comparison with, for example, communication support (relevant to Activity 7) which it is submitted would, by its nature, have to be provided at the time of the communication. vi) It would be very difficult to apply the provision if support in advance would qualify.
How would the moral, social and emotional support which is an ordinary incident of family relationships and friendships, be distinguished from assistance that would qualify for 9c? vii) As for psychological support, the Secretary of State would say that it is not within the scope of social support at all, but if it were, the problem would be to know how far back one should go, and whether to include counselling sessions the day before the engagement, or a week before, or a year before.
Discussion: the timing issue
It might be helpful to consider the timing issue having in mind some examples of the practical ways in which a person can be helped to engage face to face with others.
Given that no findings of fact have yet been made in relation to the respondents circumstances, it is desirable to avoid focusing particularly on him, but in the course of his counsels submissions, examples were given of the sort of support that an experienced family member might give.
Preparation might occur prior to the engagement which enables it to occur without, for example, overwhelming psychological distress.
One technique that can be deployed is to look together, in advance of the meeting, at the worst case scenario.
During the meeting, with knowledge of the claimant, the supporter can watch out for things that are known to trigger his or her anxiety, and redirect the conversation.
Where memory is a problem, the supporter can remind the claimant of things they have forgotten.
Private signs of reassurance can be given where required.
And, where required, the supporter might recognise the need to remove the person from the meeting.
It is important to remember that each claimant is an individual with individual needs, and that different techniques might help in different cases, or at different times in the life of the same person.
It seems to me that the Secretary of States insistence on it being necessary for the supporter to be present with the claimant during the face to face engagement would stand in the way of other means of support which work for the particular claimant, and would also be likely to impede attempts to improve the claimants abilities to handle matters without support at all, or with diminished support.
It is not difficult to contemplate a situation in which the trained or experienced supporter is aiming to make progress so that a claimant, who initially cannot manage without the supporter physically present during the face to face engagement, learns in stages to manage with the supporter at the door of the room, next door, leaving the building for a short period during the meeting, bringing the claimant to the meeting and collecting him after it, and so on.
Discussion before (and possibly after) engagements, and also practical exercises, might be deployed, in order to equip the claimant to deal with encounters without the physical presence of the supporter.
At some point in the progress, the claimant will cease to qualify under 9c, but, looking at things entirely practically, rather than legalistically, it would be hard to say that, in all cases, from the moment in the continuum when the supporter is no longer in the room with the claimant, he no longer needs social support to be able to engage with people.
It is also relevant to consider the sensitivity of some of the face to face engagements that a claimant may need to undertake.
Social support by physical presence with a claimant during a medical examination, or what was called during the hearing a romantic engagement, might be counter productive, whereas social support which did not involve actual presence might enable the claimant to engage when that would not otherwise have been possible.
For example, it is easy to contemplate that the claimant and the experienced supporter might have a discussion in advance of a medical examination, going through every element of the procedure and exploring how the claimant might respond to it, the claimant might then allow him or herself to be accompanied to the door of the consultation room and given into the care of the doctor or nurse, and the necessary continuing reassurance might come from the knowledge that the supporter was nearby in the waiting room.
It is undesirable to construe the provision in a way that runs counter to these sorts of considerations, unless that is dictated by the provision itself, or by something in its legal context.
There is nothing in the wording of descriptor 9c, or the definition of social support, to require actual presence of the supporter during the engagement, nor yet to require that the support is timed to coincide with the engagement, rather than being provided in advance, or indeed afterwards.
The use of the present tense (needs) does not carry the Secretary of State this far.
It does dictate that the claimant actually needs the support as respects every time over the course of the 12 months made relevant by the required period condition (see para 9 above).
The need has to be a continuing one, not one that has been addressed or otherwise ceased, and I would certainly agree with the Inner House when they said (para 49) that descriptor 9c (and for that matter descriptor 9b) would not apply to a case: where, as a result of a successful psychiatric or psychological intervention in the past, the person being assessed was now able to engage with other people satisfactorily and without further help.
He would not be able to say, on the strength of that previous intervention, that he continued to fall within Activity 9, descriptor c.
But the requirement that there should be a current need at all relevant times does not, of itself, exclude the possibility of assistance given outside the confines of the engagement itself.
This is perhaps most easily demonstrated by an example: if social support includes, say, advice and discussion prior to a face to face engagement, it could perfectly properly be said of a claimant, who can only engage if that sort of help is provided, that he needs social support.
The Secretary of States interpretation would only be made out if social support is confined to that which is provided on the spot, and there is nothing in the definition of it to confine it in that way.
In the absence of express wording dictating contemporaneity, the Secretary of States argument must depend upon inferences drawn from elsewhere in the Regulations and/or from the likely circumstances of claimants.
Comparisons with other daily living activities where presence is required during the activity are unhelpful, in my view, because all the various activities are different in nature, and the ways of overcoming difficulties in carrying them out will inevitably be different.
Nor am I persuaded by the submissions based upon the intensity of the claimants need and the supposed need for the supporter to perceive and react to the engagement as it unfolds.
Sometimes these factors will dictate that the supporter can only provide effective help if actually present, but I see no reason to assume that this will always be the case, and no reason to limit the scope of descriptor 9c so as to exclude cases where support is required from a person trained or experienced in assisting people to engage in social situations but which do not fall within this model.
In short, I do not consider that descriptor 9c is limited to cases where a claimant needs social support actually during the face to face engagement.
Given that social support is likely to take many different forms, depending on the individual needs of the claimant, it is undesirable to attempt to prescribe, in the abstract, which other forms of support will be sufficient.
It will be a question of fact and degree, and is something that will have to be worked out on a case by case basis, by those with expertise in making assessments and decisions in relation to claims, keeping the wording of the provision firmly in mind.
I am hopeful that it will prove possible to do this without the Secretary of States fears of inconsistent and arbitrary decisions being realised.
Before concluding, I should say something about the Inner Houses acceptance that what was required was a temporal or causal link of some sort between the help given and the activity in respect of which the help is needed (para 51).
This is not a formulation that should, in my view, be adopted.
A detailed explanation of why not is unlikely to be of assistance, and one illustration of the problem will perhaps suffice.
The formulation contemplates two separate ways in which the requisite link could exist, expressed as alternatives, namely a link by virtue of timing (temporal link) and a link by virtue of being instrumental in securing the engagement (causal link).
It is difficult to envisage how support which is linked in time to a face to face engagement but has no causal link to what occurs could have any relevance.
Sometimes, explaining and elaborating upon a provision confuses rather than assists, and this might be one of those situations.
The answer is more likely to be found, in any given case, by close attention to the words of descriptor 9c, as defined in the Regulations, and to the required period condition.
This exercise, paying close attention in particular to the requirement that the claimant needs the support (see para 43 above), should serve to confine the scope of descriptor 9c within appropriate time boundaries.
Conclusion
I would allow the appeal in the limited sense that I would interpret the relevant legal provisions slightly differently from the Inner House, as I have explained above.
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This appeal concerns the assessment of claimants for personal independence payment (PIP), a non means tested allowance paid to certain people with long term health problems or disability.
The appeals focus is on one of the markers used to determine the extent to which the ability of claimants to carry out daily living activities is limited by their physical or mental condition.
The particular activity in question is engaging with other people face to face and the issue is the interpretation of descriptor 9c found in Part 2 of Schedule 1 to the Social Security (Personal Independence Payment) Regulations 2013 (the Regulations).
The Regulations are made under Part 4 of the Welfare Reform Act 2012 (the Act).
Descriptor 9c reads: Needs social support to be able to engage with other people.
The respondent is a man in his forties.
He made a claim for PIP in February 2015.
His entitlement to the daily living component of the allowance at the standard rate depended on whether he satisfied descriptor 9c, which would give him 4 points towards the required score of at least 8 points overall under regulation 5.
His claim was rejected on the ground that his ability to engage with other people face to face only satisfied descriptor 9b, Needs prompting to be able to engage with other people, which gave him a score of 2 points.
The respondent appealed unsuccessfully to the First tier Tribunal (FTT).
His appeal to the Upper Tribunal was allowed on the ground that the FTT had given an inadequate explanation of why he satisfied descriptor 9b rather than 9c.
The case was remitted to the FTT for rehearing and directions were given as to the interpretation of descriptor 9c.
The appellant Secretary of State appealed to the Inner House of the Court of Session in relation to the directions.
The Inner House refused the appeal while modifying some of the directions.
The Secretary of State appealed to the Supreme Court.
Before the Supreme Court the Secretary of State accepted that the social support required for descriptor 9c may consist of prompting, as with 9b, but for this descriptor the support had to be from a person trained or experienced in assisting people to engage in social situations.
Whilst he accepted that a friend or family member who knows the claimant well could have the relevant training or experience, he argued that a need for help simply from someone familiar or trusted was not sufficient (the qualitative issue).
He also argued that the social support needed to be contemporaneous with the face to face engagement, ie that the person offering the social support had to be physically present (the timing issue).
The Supreme Court unanimously allows the appeal in the limited sense of interpreting the relevant legal provisions differently from the Inner House.
The respondents claim will now return to the FTT for determination in accordance with this interpretation.
The judgment is given by Lady Black.
The qualitative issue The activity of engaging with people face to face can take many differing forms, as can the form of the assistance that is needed for the claimants engagement to occur [29 30].
A narrow and technical approach to the words social support in descriptor 9c is unwarranted; it is inconsistent with the governments objective of creating a benefit which is easier to understand and reaches those who need extra support to live independently and participate in everyday life [32].
What brings the claimant within descriptor 9c rather than 9b is that, to be able to engage with others, he or she needs the support to come from someone trained or experienced in assisting people to engage in social situations i.e. the support will only be effective if delivered by someone who is not just familiar with the claimant, but also trained/experienced in assisting engagement in social situations [34 35].
Careful scrutiny of the facts will sometimes be necessary in order to determine whether descriptor 9c applies, including probing the information provided by sensitive questions [38] and, where support is already being provided by family/friends, exploring how they have come to know what to do, whether that help could come from any well meaning friend or family member, and what additional help (if any) is required [37].
The timing issue It is helpful to consider examples of practical ways in which a person can be helped to engage face to face with others.
For instance, preparation prior to the engagement might avoid overwhelming psychological distress, and, during the engagement, a supporter might be able to give the claimant reminders, direct the conversation away from topics that trigger anxiety, give private signs of reassurance, or recognise the need to remove the claimant from the meeting [40].
The Secretary of States insistence on it being necessary for the supporter to be present at the engagement would stand in the way of means of support which do not involve physical presence and would be likely to impede attempts to improve the claimants abilities to handle matters in future with less support [41].
It would be undesirable to construe descriptor 9c in a way that runs counter to these considerations, and there is nothing in the wording of the descriptor to require that.
The word needs indicates a continuing need, to be found as respects every time over the 12 month period made relevant by s 81 of the Act, but it does not, of itself, exclude the possibility of assistance outside the confines of the engagement [43] and nor is there anything else to dictate such an interpretation [45].
Given that social support is likely to take many different forms, depending on the individual needs of the claimant, it is undesirable to attempt to prescribe in the abstract which other forms of support will be sufficient.
It will be a question of fact and degree [46], addressed with close attention to the words of the descriptor and the required period condition [48].
The Inner Houses acceptance that a temporal or causal link was required between the help given and the activity should not be adopted.
It is difficult to see how support which is linked in time to a face to face engagement but has no causal link to what occurs could have any relevance [47].
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The appellant is the chair of the Chagos Refugees Group.
The Group represents Chagossians whose removal from the British Indian Overseas Territory (the Chagos Islands BIOT) and resettlement elsewhere was procured by the United Kingdom government in the years 1971 to 1973.
The circumstances have generated much national and now also international litigation.
The sad history has been told on a number of occasions.
It suffices to mention Chagos Islanders v The Attorney General [2003] EWHC 2222 (QB), R (Bancoult) Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61; [2009] AC 453 and most recently in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 4) [2016] UKSC 35; [2017] AC 300.
Following the last two decisions, it remains prohibited, under the BIOT Constitution and Immigration Orders 2004, for Chagossians to return to BIOT.
Since the last judgment, the United Kingdom government has on 16 November 2016 announced its decision to maintain the ban on resettlement, after a study carried out by KPMG published on 31 January 2015.
That decision is itself the subject of further judicial review proceedings.
The present appeal concerns the establishing for BIOT of a marine reserve to be known as the Marine Protected Area by Proclamation No 1 of 2010.
The Proclamation was issued by Mr Colin Roberts, Commissioner for BIOT, acting in pursuance of instructions given by Her Majesty through a Secretary of State.
The Marine Protected Area (MPA) was established in a 200 mile Environment (Protection and Preservation) Zone (EPPZ) which had existed since Proclamation No 1 of 2003 dated 17 September 2003.
Proclamation No 1 of 2010 said (para 2) that, within the MPA: Her Majesty will exercise sovereign rights and jurisdiction enjoyed under international law, including the United Nations Convention on the Law of the Sea, with regard to the protection and preservation of the environment of the [MPA].
The detailed legislation and regulations governing the said [MPA] and the implications for fishing and other activities in the [MPA] and the Territory will be addressed in future legislation of the Territory.
The creation of the MPA was accompanied by a statement issued by the respondent, stating that it will include a no take marine reserve where commercial fishing will be banned.
No fresh legislation or regulations relating to fishing were in the event issued or necessary.
Fishing was already controlled.
From 1984 it was controlled within the three mile territorial waters and the contiguous zone which extended a further nine miles (to 12 miles from shore) under Proclamation No 8 of 1984 and the Fishery Limits Ordinance 1984.
Control was subject to a power (exercised on 21 February 1985) to designate Mauritius for the purpose of enabling fishing traditionally carried on within those limits.
Proclamation No 1 of 1991 and the Fisheries (Conservation and Management) Ordinance 1991 (the 1991 Ordinance) established a Fisheries Conservation and Management Zone extending 200 miles from shore, within which a fee carrying licence was required for any fishing.
The Mauritian government was, however, informed that a limited number of licences would continue to be offered free of charge in view of the traditional fishing interests of Mauritius in the waters surrounding BIOT.
Proclamation No 1 of 2003 establishing the EPPZ had no impact on fishing.
The 1991 Ordinance was superseded by similarly entitled Ordinances in 1998 and then 2007, under which the licensing system was continued.
The majority of fishing from Mauritius was inshore fishing carried out by the Talbot Fishing Company, owned by the Talbot brothers, one of whom was Chagossian.
Their vessels were flagged to Mauritius until 2006 or 2007, when for economic reasons they were reflagged to Madagascar and the Comoros.
A number of regular crew members on these boats were Chagossians.
After the establishing of the MPA, and the accompanying announcement, the achievement of a no take reserve or zone was in practice accomplished by allowing existing licences to expire and by not issuing any fresh licences to the Talbot vessels or other vessels from outside BIOT for inshore or other fishing in the MPA.
The present challenge has two limbs.
One is that the decision to create the MPA had an improper ulterior motive, namely to make resettlement by the Chagossians impracticable.
The other is that the consultation preceding the decision was flawed by a failure to disclose the arguable existence on the part of Mauritius of inshore fishing rights (ie within the 12 mile limit from shore).
Both challenges are associated with the enforcement of a no take zone by the refusal since 2009 of fishing licences, since the impracticality of resettlement is said to derive from the loss by Chagossians of occupational skills and possibilities, now and at any future time when resettlement might be contemplated.
At the core of the appellants case on improper purpose is a document published by The Guardian on 2 December 2010 and by The Telegraph on 4 February 2011, purporting to be a communication or cable sent on 15 May 2009 by the United States Embassy in London to departments of the US Federal Government in Washington, to elements in its military command structure and to its Embassy in Port Louis, Mauritius.
The cable is recorded as having been passed to The Telegraph (and was presumably also passed to The Guardian) by Wikileaks.
Its text purports to be a record, by a United States political counsellor, evidently a Mr Richard Mills, of conversation at a meeting on 12 May at the Foreign Office, London with Mr Roberts, Ms Joanne Yeadon, the Administrator for BIOT, and Mr Ashley Smith, the Ministry of Defences Assistant Head of International Policy and Planning.
It also purports to refer to some previous meetings and a subsequent conversation involving Ms Yeadon.
It starts with a one paragraph summary and ends with two paragraphs of comment, and contains 12 paragraphs of purported record in between.
Reliance is placed on passages in it, which it is submitted show, or could be used to suggest, that Mr Roberts, Commissioner for BIOT, had and disclosed an improper motive in relation to the creation of the MPA.
It is common ground that there was in fact a meeting between US officials and Mr Roberts and Ms Yeadon at the Foreign Office on 12 May 2009.
The present proceedings took an unfortunate turn in this respect before the Administrative Court (Richards LJ and Mitting J).
Burnton LJ had on 25 July 2012 given permission for Mr Roberts and Ms Yeadon to be cross examined on the purported cable, acknowledging that it must have been obtained unlawfully and in probability by committing an offence under US law, but saying: I do not see how the present claim can be fairly or justly determined without resolving the allegation made by the [appellant], based on the Wikileaks documents, as to what transpired at the meeting of 12 May 2009, and more widely whether at least one of the motives for the creation of the MPA was the desire to prevent resettlement.
Before the Administrative Court, objections were made to the use of the cable in cross examination of Mr Roberts.
One objection, which did not find favour with the Administrative Court (and which is not live before the Supreme Court), was that the Official Secrets Act and the UK governments policy of neither confirm nor deny (NCND) in relation to documents of this nature meant that Mr Roberts should not be required to answer questions relating to the purported cable.
In relation to this objection, the Court ruled that Mr Roberts could be questioned on an assumption that the cable was what it purported to be, and that it would be open to the appellant at the end of the hearing to invite the Court to accept it as an accurate record of the meeting, and to rely on it evidentially.
Various questions were put to Mr Roberts and answered on that basis, before Mr Kovats QC for the respondent asked for and obtained further time overnight to consider the position.
The other objection was that use of the cable would be contrary to the principle of inviolability of the US missions diplomatic archive in breach of articles 24 and 27(2) of the Vienna Convention on Diplomatic Relations 1961, given effect in the United Kingdom by section 2(1) of the Diplomatic Privileges Act 1964.
This further objection only occurred to the respondent during the second day.
It was therefore only made the subject of submissions on the third day.
This led to the first ruling being effectively over taken, by a further ruling that it would not be open to the appellant to invite the court to treat the cable as genuine or to find that it contained an accurate record of the meeting and that any further cross examination should proceed on that basis, without any suggestion that the purported cable was genuine.
Mr Pleming applied for, but was refused immediate permission to appeal that ruling.
In these circumstances, he indicated that he had no further cross examination of Mr Roberts, and on the next day conducted a cross examination of Ms Yeadon, limited as directed by the Courts ruling.
By a judgment dated 11 June 2013, the Administrative Court rejected the appellants case both in so far as it was based on improper purpose and in so far as it was based on failure to disclose the arguable existence of Mauritian fishing rights.
The Court of Appeal (the Master of the Rolls, Gloster and Vos LJJ) [2014] 1 WLR 2921 reached the same overall conclusions, but after taking a different view of the admissibility of the purported cable.
It held that, since the cable had already been disclosed to the world by a third party, admitting it in evidence would not have violated the US London missions diplomatic archive.
The Court of Appeal had therefore to consider whether the exclusion of the cable from use before the Administrative Court would or could have made any difference to that Courts decision on the issue of improper purpose.
By a judgment given 23 May 2014, it decided against the appellant on both this issue and the issue relating to the omission of reference to arguable Mauritian fishing rights.
The Supreme Court by order dated 7 July 2016 gave permission to appeal on the issue of improper purpose and directed that the application for permission to appeal on the issue relating to the omission of reference to arguable Mauritian fishing rights be listed for hearing with the appeal to follow if permission is granted.
The respondent has in turn challenged the correctness of the Court of Appeals conclusion that use of the cable would not have contravened article 24 and/or 27(2) of the Vienna Convention.
The admissibility of the cable
I will take this issue first.
In order to give some context to articles 24 and 27(2), the whole of articles 24, 25 and 27 of the Vienna Convention on Diplomatic Relations are set out: Article 24 The archives and documents of the mission shall be inviolable at any time and wherever they may be.
Article 25 The receiving State shall accord full facilities for the performance of the functions of the mission.
Article 27 1.
The receiving State shall permit and protect free communication on the part of the mission for all official purposes.
In communicating with the Government and the other missions and consulates of the sending State, wherever situated, the mission may employ all appropriate means, including diplomatic couriers and messages in code or cipher.
However, the mission may install and use a wireless transmitter only with the consent of the receiving State. 2.
The official correspondence of the mission shall be inviolable.
Official correspondence means all correspondence relating to the mission and its functions. 3.
The diplomatic bag shall not be opened or detained. 4.
The packages constituting the diplomatic bag must bear visible external marks of their character and may contain only diplomatic documents or articles intended for official use. 5.
The diplomatic courier, who shall be provided with an official document indicating his status and the number of packages constituting the diplomatic bag, shall be protected by the receiving State in the performance of his functions.
He shall enjoy person inviolability and shall not be liable to any form of arrest or detention. 6.
The sending State or the mission may designate diplomatic couriers ad hoc.
In such cases the provisions of paragraph 5 of this article shall also apply, except that the immunities therein mentioned shall cease to apply when such a courier has delivered to the consignee the diplomatic bag in his charge. 7.
A diplomatic bag may be entrusted to the captain of a commercial aircraft scheduled to land at an authorized port of entry.
He shall be provided with an official document indicating the number of packages constituting the bag but he shall not be considered to be a diplomatic courier.
The mission may send one of its members to take possession of the diplomatic bag directly and freely from the captain of the aircraft.
The submissions on inviolability under these provisions range widely.
They cover the nature of the archive, its location, the circumstances in which material originating from the archive may continue inviolable and the reach of the concept of inviolability itself.
As to the nature of the archive, Professor Denza concludes in Diplomatic Law, Commentary on the Vienna Convention on Diplomatic Relations (4th ed) (2016), at p 161, that, instead of trying to list all modern methods of information storage, it is probably better simply to rely on the clear intention of article 24 to cover all physical items storing information.
Writing jointly in Satows Diplomatic Practice (7th ed, edited by Sir Ivor Roberts) (2017), at p 238, para 13.31, Professor Denza and Joanne Foakes, former Legal Counsellor to the Foreign and Commonwealth Office, say, after noting that the term archives is not defined in the 1961 Vienna Convention: but it is normally understood to cover any form of storage of information or records in words or pictures and to include modern forms of storage such as tapes, sound recordings and films, or computer disks.
That can be readily accepted, as can be the proposition that copies taken of documents which are part of the archive must necessarily also be inviolable.
As to location, Mr Kovats on behalf of the respondent points to the words at any time and wherever they may be in article 24, and to commentaries by Professor Eileen Denza in her work, cited above, pp 158 159, and by Professor Rosalyn Higgins (as she then was) in Problems and Process: International Law and how we use it (OUP) (1995), pp 88 89.
Professor Denza observes that the words quoted mean that archives not on the premises of the mission and not in the custody of a member of the mission are entitled to inviolability, and that: If archives fall into the hands of the receiving State after being lost or stolen they must therefore be returned forthwith and may not be used in legal proceedings or for any other purpose of the receiving State.
Professor Higgins wrote: Article 24 stipulates that the archives and documents shall be inviolable at any time and wherever they may be.
It is clear that this last phrase is meant to cover circumstances where a building other than embassy premises is used for storage of the archives; and also the circumstances in which an archived document has been, for example, taken there by a member of the Secretariat staff for overnight work or even inadvertently left by him on the train or in a restaurant.
What would happen if the Secretariat member, or a diplomat, took an overseas trip, and mislaid the document while abroad? The English High Court [in the Tin Council case: International Law Reports Vol 77 (1988) pp 107 145 at pp 122 123] was disturbed by the idea that wherever located could, on the face of it, mean even in Australia or Japan.
It is true that an English court is not likely to be in a position to enforce the inviolability of a document from the authorities of another country where that particular document happens to be located.
But it is entirely another thing to say that, because a document happens to be outside the jurisdiction, an English court is thereby entitled to treat it, in matters that do fall within its own competence, as non archival and thus without benefit of such inviolability as it is in a position to bestow.
Again, so long as the document can be said to constitute part of the archive, a point to which I shall return, these statements appear not only authoritative in their sources, but convincing.
As will appear, they also receive support from Shearson Lehman Bros Inc v Maclaine, Watson and Co Ltd; International Tin Council (Intervener) (No 2) [1988] 1 WLR 16.
That is the House of Lords judgment in the Tin Council case, to the first instance decision in which Professor Higgins referred.
The House in that case on any view accepted that there were some circumstances in which a document which was part of an archive, but for some reason no longer physically within the archive, remains inviolable.
This brings me to the circumstances in which material originating from the archive may continue inviolable and the reach of the concept of inviolability itself.
The appellant, whose case on this aspect was presented by Professor Robert McCorquodale, submits that the word inviolable, read in the context of the Convention, does not embrace inadmissibility.
In his submission, the concept is directed at some degree of interference, of a more or less forceful nature, and this limited sense is the only sense which applies in all the places where the concept is deployed.
The submission corresponds with the approach taken by the Court of Appeal, which picked up the characteristically trenchant view of Dr F A Mann, that Inviolability, let it be stated once more, simply means freedom from official interferences.
Official correspondence of the mission over the removal of which the receiving state has had no control can be freely used in judicial proceedings.
See Inviolability and Other Problems of the Vienna Convention on Diplomatic Relations in Further Studies in International Law, (1990) pp 326 327 and also [1988] 104 LQR, p 178.
But Professor McCorquodales submission does not allow for the fact that a concept may embrace different shades of meaning according to the particular context in which it is deployed.
The meaning of inviolability in the context of use of archive material in evidence was in fact the very subject of the House of Lords judgment in the Tin Council case.
The issue arose there under article 7(1) of the International Tin Council (Immunities and Privileges) Order 1972, whereby it was provided: The council shall have the like inviolability of official archives as in accordance with the 1961 Convention Articles is accorded in respect of the official archives of a diplomatic mission.
The Tin Council intervened in civil proceedings between private parties, relying on article 7(1) as rendering inadmissible various documents that the parties were proposing to adduce in evidence.
The House was in these circumstances asked to address the operation of article 7(1) on various Agreed Assumptions of Fact set out in a document so entitled.
One such assumption was that a Tin Council document was supplied to a third party by an officer or other staff member of the Tin Council without any authority.
Mr Kentridge QC submitted that article 24 of the Vienna Convention and article 7(1) of the 1972 Order only afforded protection against executive or judicial action by the host state, so that, even if a document was stolen, or otherwise obtained by improper means, from a diplomatic mission, inviolability could not be relied on to prevent the thief or other violator from putting it in evidence.
Lord Bridge, giving the sole fully reasoned judgment in the House, rejected this submission, saying (p 27F) that: The underlying purpose of the inviolability conferred is to protect the privacy of diplomatic communications.
If that privacy is violated by a citizen, it would be wholly inimical to the underlying purpose that the judicial authorities of the host state should countenance the violation by permitting the violator, or anyone who receives the document from the violator, to make use of the document in judicial proceedings.
The House went on to limit this to circumstances in which the third party receiving the document was aware of the absence of any authority to pass it to him (p 29B C).
To a limited extent therefore, the Tin Council succeeded in establishing that its documents would have inviolability, precluding their use in civil proceedings.
This was part of the ratio of the House of Lords decision, as appears at p 31D E, even though Lord Bridge went on to add that In the event the rejection of that [Mr Kentridges] argument turns out to be of minimal significance in the context of the overall dispute.
The Canadian case of Rex v Rose An Dig 1946, Case No 76, p 161 was cited to the House in the Tin Council case, but not referred to by Lord Bridge in his judgment.
Rose was convicted of furnishing secret material to the Soviet Embassy in reliance on documents stolen from the Embassy archive by a defector.
Roses claim that the stolen documents used against him were immune from use was rejected, on the grounds that such a claim could not be admitted where the recognition of such immunity was inconsistent with the fundamental right of self preservation belonging to a State or where the executive had impliedly refused to recognise such immunity.
The absence of inviolability in cases where state security is involved has a pedigree going back to the extraordinary Cellamare conspiracy in 1718 by Antonio dei Giudice, Prince of Cellamare and Ambassador of Spain to France, to kidnap and depose Philippe dOrlans, Regent of France, and replace him as Regent by Philip V of Spain: see Martens, Causes clbres du droit des gens, I, p 149.
Rex v Rose is nonetheless controversial, and, more importantly for present purposes, neither of the grounds on which it rests applies to this case.
In his LQR article, cited above, Dr Mann was taking direct issue with the House of Lords rejection in the Tin Council case of Mr Kentridges submission.
The Court of Appeal was in my opinion bound to reject Dr Manns analysis, and I see no reason for adopting it.
I also consider that the Court of Appeal was incorrect to identify Dr Manns analysis as representing the weight of opinion (para 64).
Professor Denza says, at p 189, that: As regards use of the correspondence as evidence, article 27.2 may be regarded as duplicating the protection under article 24 of the Convention which gives inviolability to the archives and documents of the mission wherever they may be.
Professor Jean Salmon of The Free University, Brussels, describes F A Manns view as regards article 27(2), in Further Studies in international law (OUP) (1990), p 226, as une vue trop restrictive de linviolabilit: Manuel de Droit Diplomatique (1994), p 244.
The quotation from Professor Higgins, set out in para 12 above does not fit well with Dr Manns approach.
S E Nahlik, Development of Diplomatic Law, Selected Problems, 222(III) Recueil des Cours (1990), 291 292 and B S Murty, The International Law of Diplomacy: The Diplomatic Instrument and World Order (1989) at p 382 comment critically on Rex v Rose, while J Wouters, S Duquet & K Meuwissen, The Vienna Conventions on Diplomatic and Consular Relations (OUP, 2013) at para 28.4.5.1 state, citing Professor Salmon, that: The inviolability of diplomatic/consular archives and documents entails that they cannot be opened, searched, or requisitioned without consent, and cannot be used as evidence.
In Fayed v Al Tajir [1988] QB 712 the de facto head, later Ambassador, of the Embassy of the United Arab Emirates in London was sued by Mr Fayed in respect of an Embassy communication addressed to an Embassy counsellor.
For unclear reasons diplomatic immunity was waived, but the question remained whether the document could be used in court.
The Court of Appeal held that the document enjoyed immunity from use, and the dispute was non justiciable.
Kerr LJ noted at p 736C E that the judge in Rex v Rose had concluded that diplomatic documents generally enjoyed inviolability, so anticipating the use of that term in the Vienna Convention, and that he had expressed the concept of inviolability at p 646 in wide terms: International law creates a presumption of law that documents coming from an embassy have a diplomatic character and that every court of justice must refuse to acknowledge jurisdiction or competence with regard to them.
Kerr LJ also noted that this conclusion was supported by Denza on Diplomatic Law (1976), p 110.
At p 736F G, he distinguished the actual decision in Rex v Rose as having been reached on the basis that a citizen could not invoke immunity in litigation with his own government and on the basis of the principle said to derive from the Cellamare conspiracy, neither of which bases had any relevance in Fayed v Al Tajir.
In principle, therefore, inviolability of documents which are part of the mission archive under articles 24 and 27(2) extends to make it impermissible to use such documents or copies in a domestic court of the host country, at any event absent extraordinary circumstances such as those of the Cellamare conspiracy or Rex v Rose and absent express waiver of the inviolability by the mission state.
But the application of this principle to any particular document is subject to two qualifications.
First, the document must constitute or remain part of the mission archive, and, second, its contents must not have become so widely disseminated in the public domain as to destroy any confidentiality or inviolability that could sensibly attach to it.
These two qualifications may sometimes, but certainly not always, coincide.
Taking the first, in the present case, there is no indication from where the Wikileaks document emanates, but there is no suggestion that it is likely to have emanated from the United States Embassy in London.
It was sent both to the State Department in Washington and elsewhere.
There is no indication that the United States Embassy in London attached any reservation to or placed any limitation on the use or distribution of the cable by the State Department or any other authority to whom the cable went.
The cable was simply classified as Confidential.
In these circumstances, once the document reached the State Department or any other addressee, it was, so far as appears and in the form in which it was there held, a document in the custody of the Federal Government of the United States or that other authority, and not part of the London Embassy archive.
Bearing in mind the probability that the Wikileaks cable was extracted from the State Department or some other unknown foreign location to which it had been remitted for information and use there, it is not therefore established, even as a matter of probability that the cable remained part of the archive of the London mission, when it was so extracted.
On that simple basis, the Wikileaks cable was available for use and admissible as evidence of its contents in the present proceedings.
I therefore arrive as the same conclusion on this point as the Court of Appeal, albeit for different reasons.
Taking, second, the possibility of loss of inviolability due to a document from the mission archive coming into the public domain, I have come to the conclusion that this must in principle be possible, even in circumstances where the document can be shown to have been wrongly extracted from the mission archive.
Whether it has occurred in any particular case will however depend on the context as well as the extent and circumstances of the dissemination.
That seems to me to follow by analogy with the reasoning concerning the protection afforded by the law to confidential material (as opposed to that afforded on grounds of privacy and/or human rights) in cases such as Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 and PJS v News Group Newspapers Ltd [2016] UKSC 26; [2016] AC 1081, see also Passmore on Privilege, paras 7 039 and 7 042.
In the present case, the cable has been put into the public domain by the Wikileaks publication and the newspaper articles which followed, in circumstances for which the appellant has no responsibility.
In my opinion, the cable has as a result lost its inviolability, for all purposes including its use in cross examination or evidence in the present proceedings.
On that ground, I would therefore reach the same conclusion as the Court of Appeal expressed in para 64 of its judgment.
The allegation of improper purpose
On the above basis, the question arising is whether the Court of Appeal was right to conclude that the Administrative Courts ruling that the cable was not available for use or admissible had no material effect on the proceedings and was not a ground for allowing the appeal.
The Court of Appeal, after reviewing all the material available, including the cable, the evidence given and the Administrative Courts findings, concluded (para 93) that even if the cable had been admitted in evidence, the court would have decided that the MPA was not actuated by the improper motive of intending to create an effective long term way to prevent Chagossians and their descendants from resettling in the BIOT.
A little earlier in its judgment, in para 89, the Court said that it did not accept that there is a realistic possibility that the [Administrative Courts] assessment of the evidence of Mr Roberts and Ms Yeadon would have been affected if the cable had been formally admitted as an authentic document; that in reaching this conclusion, it had borne in mind the need to exercise caution in denying relief on the ground that the legally correct approach would have made no difference to the outcome; but that it was satisfied that the admission of the cable in evidence would have made no difference.
Before the Supreme Court, criticism was directed at the Court of Appeal for formulating its conclusions in terms of what would, rather than could have made a difference.
Reference was made to well known authorities on the test applicable in cases of breach of natural justice (or unfairness) by public authorities, including Malloch v Aberdeen Corpn [1971] 1 WLR 1578 and R (Cotton) v Chief Constable of the Thames Valley Police [1990] IRLR 344, paras 59 60, per Bingham LJ.
Reference was also made to the discussion, without decision, on the test applicable on an application to the Supreme Court to set aside a prior judgment of its own in Bancoult (No 4), cited in para 1 of this judgment.
The precise test must depend on the context, including, in particular, how well placed the court is to judge the effect of any unfairness.
In the present case, the complaint is of lack of opportunity for full cross examination and for the trial court to weigh the evidence it heard in the light of the cable, treating the cable as admissible.
In these circumstances, I am prepared for present purposes to accept that the appropriate question is whether the admission of the cable for use in these ways could have made a difference.
However, I also consider that this is in substance how the Court of Appeal approached the issue.
The conclusion it reached (see para 22 above) was that there was no realistic possibility that the [Administrative Courts] assessment of the evidence of Mr Roberts and Ms Yeadon would have been affected if the cable had been formally admitted in evidence as an authentic document.
Its statement at the end of para 89 that the admission of the cable in evidence would have made no difference must be read, in context, as a shorthand resum of this conclusion.
A conclusion that there was no realistic possibility that the assessment would have been affected amounts, in substance, to a conclusion that the admission of the cable could not realistically have made a difference.
Nonetheless, it is incumbent upon the Supreme Court to consider for itself whether the Court of Appeal erred in reaching that conclusion.
The Administrative Court undertook in paras 53 to 77 of its judgment a full and careful review of the genesis and development of and decision to announce the MPA and a no take zone, which the Court of Appeal accurately summarised as follows: to Professor Sheppard, 75.
The catalyst for making the MPA was a proposal made in July 2007 by an American environmental group, Pew Environmental Group, the environmental adviser for the BIOT.
On 5 May 2009, Mr Roberts submitted a briefing note to the Secretary of State which explained the benefits of the proposal.
These included that, because of the absence of a settled population and the strict environmental regime already in force, the BIOT was one of the few places in which a large scale approach to conservation was possible; and it offered great scope for scientific and climate change research.
The Secretary of States reaction was enthusiastic.
His private secretary emailed Mr Roberts to say that the Secretary of State was fired up after the meeting and enthusiastic to press ahead with the proposal. 76.
This was followed by a meeting to discuss the proposal with US Embassy officials on 12 May 2009.
This is the crucial meeting the gist of which was purportedly summarised in the copy cable dated 15 May 2009.
Both Mr Roberts and Ms Yeadon attended the meeting and were cross examined about it.
Mr Roberts denied making any reference to Man Fridays.
He said that he recognised that the declaration of an MPA, if entrenched, would create a serious obstacle to resettlement.
Ms Yeadon also denied that Mr Roberts had used the words Man Fridays or that he had said that establishing a marine park would put paid to resettlement claims.
The Divisional Court said (para 61) that it found Ms Yeadon to be an impressive and truthful witness.
Having referred to an important note of a meeting held on 25 March 2009, the court said at para 63: as Ms Yeadon understood, at official level, HM Government regarded the resettlement issue as settled by the 2004 Order, subject only to the pending decision of the Strasbourg Court (this is a reference to the claimants application which was eventually dismissed by the ECtHR on 20 December 2012: see para 7 above). 77.
By a note dated 29 October 2009, Ms Yeadon proposed to Mr Roberts and the Secretary of State that consultation on the proposal to declare an MPA be launched on 10 November.
Under the heading Risks, she noted that the risk of an aggressive reaction from the Chagossians and their supporters was high and said: they may claim that we are establishing a Marine Protected Area in order to ensure that they can never return to BIOT.
This is not the case .
The court said (para 65) that it was satisfied that in this passage Ms Yeadon again stated what she genuinely believed: that the proposal to establish an MPA was not to ensure that the Chagossians could never return. 78.
In a note dated 30 March 2010, Ms Yeadon proposed that the Secretary of State should publish the report on consultation and declare his belief that an MPA should be established, but only after further work had been done.
There followed a flurry of emails between officials.
The Secretary of State did not accept Ms Yeadons advice.
On 1 April, he announced the creation of an MPA in the BIOT which included a no take Marine Reserve where commercial fishing would be banned.
Mr Roberts duly made the proclamation on 1 April. 79.
The Divisional Court expressed its conclusion on the improper motive point in these terms: 74.
This material makes it clear that it was the personal decision of the Foreign Secretary to declare an MPA on 1 April 2010, against the advice of his officials.
There is no evidence that, in doing so, he was motivated to any extent by an intention to create an effective long term way to prevent Chagossians and their descendants from resettling in the BIOT.
His Private Secretary could hardly have written on 7 May 2009, the day after the presentation of the proposal by Professor Sheppard to him, that he was really fired up about this if the proposal was presented as a cynical ploy to frustrate Chagossian ambitions.
It is obvious that he was responding to a proposal presented by a man, Professor Sheppard, who was keen to see it adopted and put into effect for scientific and conservation purposes only.
Later, on 31 March 2010, when the Foreign Secretary made the decision to go ahead immediately, the decision had nothing to do with Chagossian ambitions.
The decision to override official advice can best be understood in the political context: Parliament was about to be dissolved.
The Foreign Secretary no doubt believed that the decision would redound to the credit of the Government and, perhaps, to his own credit.
It would do so the more if a decision with immediate effect was taken.
Officials thought that this would create difficulties but it was the Foreign Secretarys prerogative to override their reservations and make the decision which he did.
There is simply no ground to suspect, let alone to believe or to find proved, that the Foreign Secretary was motivated by the improper purpose for which the claimant contends. 75.
It is significant that the Foreign Secretarys announcement contained the caveat which always accompanied public and private statements by officials: that the decision was subject to the pending judgment of the Strasbourg Court.
Unless there was some deep plot to frustrate an adverse judgment, of which there is no evidence at all, this fact alone demonstrates that no sensible official in the FCO could have believed that the establishment of an MPA would fulfil the improper purpose alleged.
Nor could it have done.
The proclamation made by Mr Roberts on 1 April 2010 stated that: legislation and regulations The detailed governing the said Marine Protected Area and the implications for fishing and other activities in the Marine Protected Area and the territory will be addressed in future legislation of the territory.
The only step taken since then has been to allow fishing licences current at 1 April 2010 to expire and to issue no more.
What prevents the return of Chagossians to the islands is the 2004 Order, not the MPA.
If, at some future date, HM Government decided or was constrained by a judgment of a court to permit resettlement or the resumption of fishing by Chagossians, nothing in the measures so far taken would prevent it or even make it more difficult to achieve. 76.
For the claimants case on improper purpose to be right a truly remarkable set of circumstances would have to have existed.
Somewhere deep in government a long term decision would have to have been taken to frustrate Chagossian ambitions by promoting the MPA.
Both the administrator of the territory in which it was to be declared, Ms Yeadon, and the person who made the decision, the Foreign Secretary, would have to have been kept in ignorance of the true purpose.
Someone Mr Roberts? would have been the only relevant official to have known the truth.
He, and whoever else was privy to the secret, must then have decided to promote a measure which could not achieve their purpose, for the reasons explained above, while explaining to all concerned that the MPA would have to be reconsidered in the light of an adverse judgment of the Strasbourg Court.
Those circumstances would provide an unconvincing plot for a novel.
They cannot found a finding for the claimant on this issue. 80.
In order to test Mr Plemings submission that the effect of the Divisional Courts ruling was to deprive him of the opportunity of properly testing the evidence of the witnesses, it is necessary to see what cross examination he was able to undertake.
During day 1 and day 2 of the hearing, Mr Pleming cross examined Mr Roberts extensively about the meeting of 12 May 2009 by reference to various documents, including the cable.
Although Mr Roberts was not prepared to answer questions as to whether the contents of the cable were accurate (because of the NCND policy), nevertheless he answered questions as to what he might or might not have said at the meeting: see day 1 pp 155 to 169 and day 2 at pp 9 to 41.
Mr Pleming confirmed to the court that his general purpose in cross examining on the cable, paragraph by paragraph, was to establish its general accuracy by reference to relatively uncontroversial passages in it. 81.
Despite his repeated reliance on the NCND policy, Mr Roberts gave extensive evidence of what was discussed at the meeting on 12 May.
For example, in relation to one passage from the cable, he said: I can confirm that the general content and sense of the issues that you have just read out is consistent with the discussion we were having with the United States at the time.
In relation to another passage, he said: I dont recall what language I would have used at the time but it would have been consistent with the general position that we were trying to set out to the United States. 82.
At p 36 on day 2, Mr Roberts accepted that he did say to the US officials that the establishment of an MPA would in effect put paid to the resettlement claims.
He said that this was a recognition of a reality that, if the MPA was entrenched (ie a law which would be impossible or difficult to repeal), this would be a serious obstacle to resettlement.
He denied that he had said anything about footprints or Man Fridays: that was not the nature of the conversation.
Mr Pleming sought to persuade the court to give a ruling as to whether Mr Roberts should be required to answer questions about the accuracy of the contents of the cable.
Mitting J asked whether it was necessary to have this debate, since Mr Roberts had accepted that a consequence of establishing an MPA would be that the hopes of the Chagossians to return would be thwarted.
Richards LJ was not sure how much more Mr Roberts could say.
He had indicated why he declined to answer the ultimate question; but he had answered all the intermediate questions. 83.
The court did not make any final ruling at this stage and Mr Pleming continued with his cross examination of Mr Roberts by reference to the cable: see day 2 pp 78 to 80.
He put it to Mr Roberts that his purpose was to use the MPA to prevent or kill off the claims for resettlement; and that this policy shines out of the record of that meeting and is not a policy you would want to put in written form so that it could ever be seen by the Chagossians or in any litigation.
Mr Roberts replied: No, I reject that suggestion entirely.
I do not believe it is possible to keep a policy of that significance quiet.
It is worth underlining some points about the history which arise from this account.
First, the whole idea of an MPA and a no take zone was generated by independent environmental activity.
An American environmental group, Pew, made the initial proposal to Professor Charles Sheppard, BIOTs independent environmental adviser, in July 2007.
This led on 22 April 2008 to discussions between Pew and Ms Yeadon about the creation of an MPA, in which there would be a no take zone.
On the same day, the Chagos Conservation Network, whose founders included Pew and Professor Sheppard, held its inaugural meeting at the Linnean Society, and expressed the view that there should be a no take zone within BIOT waters.
On February 2009, The Independent reported in an article that the Chagos Conservation Trust, the RSPB, the Zoological Society of London and Pew were launching a plan for an MPA, which would be compatible with defence interests and would offer a possibility that some Chagossians might return as environmental wardens; a marine biologist from York University was reported as describing the attitude of the British government towards the Chagos Islands up to that time as one of benign neglect; and the British government itself was reported as saying it would work with the international environmental and scientific community to develop further the preservation of the unique environment. (The Mauritian governments response to this article was that the Chagos Islands were under its sovereignty, so that its consent would be required.)
Second, it is clear that, from the outset, the relevant decision maker was to be the Secretary of State for Foreign and Commonwealth Affairs, Mr David Miliband, in person, not the civil servants who were directly or indirectly reporting to or advising him.
Mr Miliband was first briefed on the idea of an MPA by a six and a half page note from Mr Roberts dated 5 May 2009.
This was in terms to which no objection is or could be taken, and was followed up by a meeting with Mr Roberts and Professor Sheppard.
The note identified and examined the numerous benefits and wide range of potential beneficiaries of an MPA.
The benefits fell under the heads of conservation, climate change, scientific [research], development, reputational/political and security (the last being explained by Mr Roberts in a witness statement dated 1 May 2012 as relating to control of illegal, unregulated and unreported fishing).
The note went on to examine risks.
In that connection, it identified Mauritian sovereignty claims and a side deal done at the time of excision which gave Mauritius the right to apply for fishing licences free of charge, the Chagossian movements and the US military.
The US military were not thought likely to oppose, and the note expressed confidence that reassurances could be given that they would not experience any rise in the security risk, impediment to freedom of manoeuvres or significant increase in environmental regulation.
In relation to the Chagossian movements, the note said: Their plans for resettlement are based on the establishment of an economy based on fishing and tourism.
In the specific context of BIOT this would be incompatible with a marine reserve.
They are therefore hostile to the proposal, unless the right of return comes with it.
They have expressed unrealistic hopes that the reserve would create permanent resident employment based on the outer islands for Chagossians.
Assuming we win in Strasbourg [as in the event occurred], we should be aiming to calm down the resettlement debate.
Creating a reserve will not achieve this, but it could create a context for a raft of measures designed to weaken the movement.
This could include: presenting new evidence about the precariousness of any settlement (climate change, rising sea levels, known coastal defences costs on Diego Garcia) activating the environmental lobby contributing to the establishment of community institutions in the UK and possibly elsewhere committing to an annual visit for representatives of the communities to the outer islands on All Saints Day inclusion of a Chagossian representative in the reserve government. [an irrelevant redaction]
It is not suggested that this note was other than an objective assessment of the proposal, or that it contains or suggests any improper motivation.
As the Administrative Court stated (para 77), the only collateral factor relating to Chagossian ambitions which it shows is that the proposal might, in various ways, permit the Government to calm down the resettlement debate and attract support for the Governments position from the environmental lobby.
The Administrative Court went on: This could not have the effect of creating an effective long term way to prevent resettlement and Mr Pleming rightly conceded that it would not taint a decision genuinely to further environmental and scientific purposes.
That remains the position before the Supreme Court.
The note was followed up by a meeting between the Secretary of State, Mr Roberts and Professor Sheppard, which was on the evidence principally devoted to a slide show by Professor Sheppard showing the environmental benefits of an MPA.
As a result of the note and meeting, Mr Miliband was fired up by the proposal and enthusiastic to press ahead.
Thirdly, the meeting a week later between Mr Roberts, Ms Yeadon and representatives of the United States Embassy was aimed at briefing a United States counsellor (Mr Richard Mills) interested in knowing more about the Chagos Islands position, no doubt as it related to the United States concerns identified in the note dated 5 May 2009.
In his initial summary in para 1 of the cable, its author recorded Mr Roberts as saying that the BIOTs former inhabitants would find it difficult, if not impossible to pursue their claim for resettlement on the islands if the entire Chagos Archipelago were a marine reserve.
The ensuing paragraphs included the following: 7.
Roberts stated that according to the HGMs [sic] current thinking on a reserve, there would be no human footprints or Man Fridays on the BIOTs uninhabited islands.
He asserted that establishing a marine park would, in effect, put paid to resettlement claims of the archipelagos former residents The final paragraph of comment included this: 15.
Establishing a marine reserve might indeed, as FCOs Roberts stated, be the most effective long term way to prevent any of the Chagos Islands former inhabitants or their descendants from resettling in the BIOT.
Accepting the Wikileaks memorandum as a genuine record of the meeting, it must be seen in that context.
What would have concerned the United States were the consequences of an MPA, not the motivation.
Further, the opening and the final two paragraphs are evidently comment or attempted summary by Mr Mills, while it is the intermediate paragraphs that purport to record the actual course of the discussion.
In the case of The Guardian report of the cable, the intermediate paragraphs have interposed what are evidently journalistic captions.
I note at this point Lord Kerrs suggestion (paras 84 and 86) that US military needs provided no reason for Mr Roberts and Ms Yeadon to assure the Americans, or ask them to confirm their requirement, that no resettlement would occur elsewhere in the BIOT.
The obvious question which Lord Kerr considers to arise in this regard was not raised before the Supreme Court.
But the answer is clear.
The original exchange of notes between the United States and United Kingdom in 1966 provided that all of the BIOT be set aside for defence purposes and that any significant change of the BIOTs status that could impact the BIOTs strategic use would require US consent.
Hence also, Mr Roberts statement in this connection in his note dated 5 May 2009 that We expect we will have our work cut out to reassure the US military that creation of a reserve will not result in trouble for them.
Trouble could be any rise in the security risk, any impediment to the freedom of manoeuvre, or any significant raising of the bar in terms of environmental regulation.
Lord Kerr himself says in para 88 that the theme that the MPA would prevent any resettlement of the islands . certainly preoccupied the Americans in May 2009.
In November 2009 a consultation was launched in respect of the proposal.
The motivation for the proposal was explained as being environmental and scientific, and various options were presented for public consideration.
The consultation process ended in early March.
The proposal then returned to the political arena, where the same picture of independent decision making by the Secretary of State emerges as nearly a year before.
This concluded with Mr Miliband instructing Mr Roberts as Commissioner for BIOT to issue Proclamation No 1 of 2010 (para 2 above), and with an FCO statement dated 1 April 2010 to the effect that This will include a no take marine reserve where commercial fishing will be banned.
More specifically, the events leading to this decision were as follows.
A submission dated 30 March 2010 from Ms Yeadon had discussed how best to progress the proposal.
In it, Ms Yeadon pointed to likely opposition and possible international moves by the Mauritian government and advised that, rather than any immediate decision, more time should be taken to work through the various issues and a positive, but not definitive, announcement should be made.
However, at 18.06 on the same day, Mr Milibands office informed Ms Yeadon that Mr Milibands inclination [was] to be bolder and actually to decide to go ahead.
At 8.30 next morning, Mr John Murton, at that time, it appears, the British High Commissioner in Mauritius, commented that he had no idea whether Mr Miliband would follow the recommendations of the day before, but that, if he went for the MPA immediately, they would face problems.
Shortly before 11.47 next day, Mr Milibands office informed Ms Yeadon by telephone that Mr Miliband was minded to ask Mr Roberts to declare an MPA and a full no take zone, that no final decision has yet been taken, and that he would like to find some way of mitigating the Mauritian reaction.
An internal email reaction by Mr Roberts at 12.07 proposed to give Mr Miliband a clearer steer.
This led to an immediate rejection by another civil servant, Mr Andrew Allen, who at 12.31 stated his view that this approach risks deciding (and being seen to decide) policy on the hoof for political time tabling reasons rather than on the basis of expert advice and public consultation and was a very different approach to the one recommended the day before, which Mr Miliband was still considering.
The reference to political time tabling is a clear reference to the general election due not later than five years after 5 May 2005, and in fact announced on 6 April 2010 for 6 May 2010.
Mr Allens view was endorsed by Mr John Murton at 12.45, with the additional comment that while Obviously the Foreign Secretary is free to make whatever decision he chooses to declare the MPA today could have very significant negative consequences for the bilateral relationship with Mauritius, where an announcement of general elections was also expected, that same day, where ministers were uncontactable as a result and where the prime minister would greatly resent our timing.
Mr Murton thought that there might be a market for a proposal to work with Mauritius as a privileged partner on management issues etc prior to a final decision on an MPA.
These exchanges led to the preparation of a further note from Ms Yeadon addressed to Mr Roberts, and, when finalised, evidently also forwarded to the Secretary of State.
The note reported the views expressed and repeated the previous days recommendation against any rapid decision.
Mr Miliband did not accept the advice tendered on 30 and 31 March 2010.
He said he had carefully considered it and given serious thought to the different possible options.
But his decision was to instruct Mr Roberts to declare the full MPA on 1 April 2010.
In these circumstances, the present issue can be approached, as the courts below have done, at two different levels.
The first involves considering whether there is any real likelihood or risk that the Administrative Courts assessment of Mr Roberts and/or Ms Yeadons motivation would have been different if the Administrative Court had permitted further cross examination on the Wikileaks memorandum and had accepted that memorandum as evidence of what its contents purport to record.
The second is whether there is any real likelihood or risk that any improper motivation on the part of Mr Roberts and/or Ms Yeadon affected the ultimate decision maker (Mr Miliband) or his decision.
As to the first level, the Administrative Court heard both Mr Roberts and Ms Yeadon being cross examined on the most important passages of the cable, particularly the summary in the first and last paragraphs and the purported recital of actual discussion in para 7.
Mr Roberts accepted that he said words to the effect that it was governmental policy that there should be no human footprint on the Chagos Islands (other of course than Diego Garcia), embracing within that term absence of scientific or wardens offices, temporary workers as well as resettlement.
He accepted that he had said that establishing an MPA would in effect put paid to resettlement claims, but explained that this was recognition of a reality that the Chagossians themselves had originally raised and that it only related to an MPA entrenched by law.
He said that entrenchment was in the event never pursued, and that the proposal for an MPA was at the time always subject to the outcome of the proceedings in Strasbourg.
Ms Yeadon on the other hand denied that Mr Roberts had said that establishing an MPA would in effect put paid to resettlement claims.
Resettlement was, in her view, already precluded by the 2004 Order (subject only to the pending decision of the Strasbourg Court), a point on which the Administrative Court accepted her evidence, finding it to be supported in a note of a meeting of 25 March 2009 between Mr Roberts, Ms Yeadon and a Chagossian delegation including the appellant and their solicitor, Mr Gifford.
Both Mr Roberts and Ms Yeadon were adamant that Mr Roberts had not used, and would never have used, the highly emotive words Man (or Men) Fridays.
The first tier question in these circumstances is whether further cross examination might have led to more material favourable to the appellants case of improper motivation on the part of Mr Roberts and/or Ms Yeadon and whether admission of the cable in evidence to counterbalance the evidence of Mr Roberts and Ms Yeadon might have led the Administrative Court to accept that either or both was, when advancing the proposal for an MPA, improperly motivated by the desire to prevent resettlement.
As to this question, the extensive evidence given by Mr Roberts about the meeting on 12 May and Ms Yeadons own evidence give a picture which is generally and substantially consistent with that presented by the cable.
In my opinion, Lord Kerrs references to an account or statements inconsistent with, or directly contrary to or flatly contradict[ing] or in obvious conflict (paras 91, 92, 94 and 107) are not borne out by comparison of the evidence and the cable.
That too was how the Court of Appeal evidently saw the position: see its paras 80 to 82 quoted in para 24 above; and see also para 37 above.
When it came to considering whether the Foreign Office representatives had some ulterior motive in their proposal for an MPA, the Administrative Court was also impressed by the evidence of Mr Roberts and Ms Yeadon.
It is true that it did not directly address the contradiction between their evidence on the question whether Mr Roberts had said that an MPA would put paid to resettlement.
But it accepted that a wish to preclude resettlement was not part of Ms Yeadons motivation, because she regarded resettlement as off the table anyway as a result of the 2004 Order, and it must also have accepted Mr Roberts evidence that what he was explaining to the United States counsellor was the practical consequences of an MPA, which is what would have been of interest to Mr Mills, rather than its motivation.
It is difficult to see what further cross examination by reference to Mr Mills memorandum could have achieved.
It is also difficult to think that admission of the memorandum, without more, would have outweighed the impression which the Court obtained from the oral evidence it heard.
The memorandum is at the very lowest ambiguous as to whether the references to resettlement were uttered in circumstances indicating that they had a role in motivating the proposal for an MPA.
On the face of it, it seems very unlikely that a British civil servant would have disclosed an improper motivation of this nature, rather than have been outlining the practical consequences of an MPA which is what would have concerned the Americans.
It is equally difficult to think that the Administrative Court could have concluded, by reference either to further cross examination or to the cable itself, that Mr Roberts in fact used the phrase Man Fridays, which he and Ms Yeadon adamantly denied that he would ever have used.
The phrase had already had considerable currency, including in court judgments, and was well known known in British circles as infamous.
Lord Kerr in para 97 notes the Court of Appeals reference in para 82 of its judgment to the fact that Mr Pleming QC was not permitted to put to Mr Roberts the ultimate question.
This the Court of Appeal identified as being whether the cable was accurate, before continuing but Mr Roberts had answered all the intermediate questions.
Lord Kerr treats the ultimate question as being whether [Mr Roberts] had an explanation for the fact that he was recorded as having made certain statements which he denied having uttered.
However, as to this, Mr Roberts was not party to the cable, and had, by his answers to the intermediate questions, given the only explanation that he could be expected to give about any differences, namely that the cable was wrong.
Even more importantly in this connection, it is difficult to see that the Administrative Court could have been assisted in its task on the central issue, even if it had concluded that the phrase Man Fridays was used.
In these circumstances, I do not consider that it has been shown that the Court of Appeal erred in concluding that neither further cross examination on the cable nor the cable itself, if admitted as evidence, would have led to any different outcome before the Administrative Court.
Assuming that the test should be whether this could realistically have led to any different outcome, the answer would still, in my opinion, be negative.
Let me assume however that this is wrong, and that Mr Roberts and/or Ms Yeadon did have and voice to the United States Embassy officials an illegitimate motive for the proposal for an MPA.
The second level question then arises whether there is or can be any conceivable basis for thinking that this affected the ultimate decision maker, Mr Miliband, or his decision.
In my opinion, the answer to this is even more clearly in the negative.
The Administrative Courts conclusion in para 74, summarised in para 91 of the Court of Appeals judgment was that it was clear that it was the personal decision of the Foreign Secretary to declare an MPA on 1 April 2010, against the advice of his officials. and that this can best be understood in the political context: Parliament was about to be dissolved.
The Foreign Secretary no doubt believed that the decision would redound to the credit of the Government and, perhaps, to his own credit.
It would do so the more if a decision with immediate effect was taken.
The documentation and exchanges available all show that the proposal was put up by civil servants to the Secretary of State.
Bearing in mind its nature and context, this was bound to occur.
It was put up in appropriate terms without any suggestion of any improper motive, both initially in May 2009 and ultimately in March 2010.
The documentation and exchanges also show that he made his decision of 31 March 2010 on that basis, against his civil servants recommendation to give the proposal further thought and attention.
Any suggestion that further cross examination of Mr Roberts and/or Ms Yeadon or the admission of the cable as evidence of its contents might have led the Administrative Court to conclude that Mr Miliband was motivated in his enthusiasm, not by his assessment of the merits of the proposal as such, but by extraneous considerations relating to a desire to make return difficult for the Chagossians, finds no basis in the documentation or exchanges and has to my mind no plausibility at all.
There is no basis whatever for impugning Mr Milibands motivation.
There is in particular no basis for suggesting that he may have connived at or joined with Mr Roberts and/or Ms Yeadon in a collusive exercise of documenting an objective decision making process, while at the same time pursuing and concealing an illicit agenda.
The final matter for consideration on this basis is whether any relevance could attach to improper motivation on the part of one or more civil servants, when there is no indication whatever that it shaped or in any way influenced ministerial thinking.
The answer must in my opinion be negative.
If the Secretary of State as the ultimate decision maker, the actual decision making process and the decision were unaffected by an improper motive held by a civil servant, on a proposal bound because of its significance to be put up to the Secretary of State, the decision can and should stand by itself.
That would on all the evidence be the present position, even if one assumes that the cable discloses, or would if deployed have led to a conclusion, that there was, some improper motivation on the part of Mr Roberts and/or Ms Yeadon in (or after) May 2009.
Mr Pleming QC submits that an opposite conclusion flows from a form of reconfiguration of the principle in Carltona Ltd v Commissioners of Works [1943] 2 All ER 560, and that the Secretary of State can be fixed with the knowledge, motives and considerations of civil servants when relying on them unless he proves otherwise.
The problem with that submission is that, even if one or more civil servants had improper motives or considerations in mind, Mr Miliband did not rely on any decision or conduct of those civil servants to which such motives and considerations had any relevance.
The relevant civil servants were, as stated, bound to put the matter before the Secretary of State.
They did so in proper terms, ultimately counselling against any immediate decision to declare an MPA and no take zone.
The Secretary of State rejected their recommendation, and made his own decision.
Carltona does not have any bearing on this situation.
It stands for the proposition that ministerial powers are commonly delegable and that, where this is the case and delegation occurs, the decision of an authorised official falls to be treated as the decision of the minister.
Here, therefore, it may readily be accepted that, if a Minister were simply to rely on a civil servant, in effect to take a decision in the Ministers name, then it would be the knowledge, motives and considerations held by and influencing the civil servant that would be relevant.
A ministerial decision may also be vulnerable to challenge if taken in ignorance of or on the basis of some mistake as to some material factor.
Similarly, if a ministerial decision is arrived at by a collective decision making process involving a minister and his departmental civil servants, it may well be impossible to separate the ultimate ministerial decision from the knowledge and motives of civil servants involved in its preparation: see eg Bushell v Secretary of State for the Environment [1981] AC 75, 95 96, per Lord Diplock.
But these are situations very far from the present case.
In the present case, far from the relevant decision being taken by an official on behalf of the minister or being a collective decision, it is clear that the minister, Mr Miliband, took his own decision on the relevant matters.
His civil servants put the matter up to him in terms to which no objection is taken as such, he formed his own strong views on the basis of the material put before him and he made the relevant decision.
In these circumstances it is his state of mind that is critical, not that of his civil servants.
I note here Lord Kerrs suggestion that the Secretary of States decision could be regarded as having been reached without regard to material factors or considerations if taken in ignorance of a concealed reason for the recommendation on which he acted (para 117) and/or without awareness of the view of the civil servants that the MPA would eliminate the chances of resettlement of the Chagos Islands, contrary to the advice on which he in fact acted (para 118).
Neither of these points was part of the applicants case before the Supreme Court, which focused on the existence of an allegedly improper motive on the part of Mr Roberts and/or Ms Yeadon.
Reliance on their suggested views as material information which should have been made available to the Secretary of State is a quite different matter.
If this were sufficient to undermine a ministerial decision, then logically any irrelevant misconception possessed by any civil servant at any level in the civil service hierarchy in relation to any proposal ultimately reaching Cabinet level could undermine a Cabinet decision.
There is in any event no basis for regarding any such views as material, since the appeal has been conducted on the basis that the creation of the MPA could not have the effect of creating an effective long term way to prevent resettlement: see para 28 above.
The only suggested reason why an MPA or no take zone might preclude resettlement was that it would deprive Chagossians of an important source of food and livelihood.
But this is not an objection deriving from the establishment of an MPA, but from a policy, reversible at any time, of refusing fishing licences.
For these reasons, I would hold that no basis exists on which the Supreme Court would be justified in reaching a different conclusion to that reached in the Court of Appeal, upholding the Administrative Court, though for different reasons, on the point.
Fishing rights
The position in respect of this adjourned application for permission to appeal is unusual.
I say at the outset that I consider that permission to appeal should be given.
But permission to raise the issue of Mauritian fishing rights at all was only given by the Administrative Court on the limited basis that the appellant does not contend in these proceedings that the traditional or historical fishing rights relied on are legally enforceable, so that the question whether there are enforceable rights under international law would not arise for decision.
The appellants case, as explained by Mr Pleming before the Administrative Court, was simply that there is credible evidence that HMG gave an undertaking to the Government of Mauritius which has subsequently been evidenced by preferential treatment for Mauritius registered vessels, and that this was an important part of the background yet was not put before consultees, who were in consequence misled.
The Administrative Court held the appellant to that position, and Mr Pleming has not sought to resile from it before the Court of Appeal or Supreme Court.
Further, he made clear that before the Supreme Court the only fishing rights relied on are Mauritian fishing rights.
That means (and it is unnecessary to attempt any precise definition) fishing rights enjoyed by Mauritian registered and, quite probably, owned vessels, on which in practice Chagossians are often also found as crew.
Yet, since the Court of Appeals judgment in May 2014, an arbitration between the Republic of Mauritius and the United Kingdom under Annex VII of the United Nations Convention on the Law of the Sea (UNCLOS) has concluded in an award dated 18 March 2015, finding, inter alia: that the United Kingdoms undertaking to ensure that fishing rights in the Chagos Archipelago would remain available to Mauritius as far as practicable is legally binding insofar as it relates to the territorial sea.
During the course of the hearing before the Supreme Court, the Government put before the Court a statement that: HM Government is committed to implementing the Dispositif made in 2015 following Arbitration between the UK and Mauritius over the Marine Protected Zone (MPA) around the British Indian Overseas Territory (BIOT).
In line with the Dispositif, the UK will continue to work with Mauritius to agree the best way to meet our obligation to ensure fishing rights in the territorial sea remain available to Mauritius, so far as practicable.
The Arbitral Award did not require the termination of the MPA but the UK will continue to approach discussions with an open mind about the best way to ensure proper conservation management of this unique marine environment.
It therefore appears that, at the international level, the fishing rights, the arguable existence of which the appellant claims should have been recognised in the consultation paper, have not only been held to exist, but are rights, to which so far as they have been held to exist, the United Kingdom is committed to giving effect.
In these circumstances, it is possible to wonder what further purpose these proceedings might have, since it is on these rights that the appellants objections to the MPA and/or no take zone centre.
Ostensibly, the appellants case is that, if there was improper motivation and/or a failure properly to consult about arguable fishing rights, the MPA and no take zone should be declared to have been invalidly declared.
But Mr Pleming indicated at the outset of the hearing before the Supreme Court that, at any rate in relation to the latter failure if accepted, it would be possible for a court to limit any invalidity to the extent of the arguable fishing rights.
A later draft declaration which Mr Pleming submitted showed that, if it were feasible to contemplate a declaration of limited invalidity, the identification of what was involved in Mauritian fishing rights could still be controversial.
That is however, as already indicated, another matter.
I would accept that, if there was a failure properly to consult about arguable fishing rights, that could lead to a declaration of limited validity.
In parenthesis, I add that the case based on improper motivation can also be related to fishing rights, since the reason why it is suggested that an MPA or no take zone might preclude resettlement is that it would deprive Chagossians of an important source of food and livelihood.
I would therefore also have been attracted by (but do not, in the light of my conclusion in para 49 above, need to consider further) the suggestion that improper motivation might also have led to a limited declaration.
Further, in either case, I would be minded to accept the Secretary of States case that any declaration could be related and limited to the no take zone, rather than the MPA.
Mr Pleming objected that this was a new point, only raised by the Secretary of State after the hearing.
But it is a pure point of law and the Administrative Court itself pointed out in para 75 of its judgment that the restrictions on fishing did not derive from the MPA itself.
On the contrary, the MPA stated that the implications for fishing would be addressed in future legislation, and the only actual step taken regarding fishing was to allow existing fishing licences to expire and to withhold further fishing licences.
The appellants real complaint can therefore be identified as being to the current policy, in so far as it has been to refuse fishing licences giving effect to the Mauritian fishing rights now recognised by the UNCLOS tribunals award.
That is essentially a limited complaint, which could, it seems to me, appropriately be addressed by a limited declaration as to the invalidity of such a policy of refusal.
I must however revert to the case as it stands, however artificially, before the Supreme Court, on the basis that the appellants only complaint is that there was, at the time of the consultation, credible evidence that the United Kingdom had given an undertaking to the Government of Mauritius to permit Mauritian fishing in the territorial waters of the Chagos Islands (free of charge), that these arguable rights should have been mentioned, that the consultation process was defective accordingly and that the MPA, or (for reasons I have indicated) at least the no take zone, was invalid, at least to the extent that it excluded Mauritian fishing.
The UNCLOS tribunal in its award found that the United Kingdom was in breach of its obligations under UNCLOS article 2(3) (sovereignty over the territorial sea is exercised subject to the Convention and to other rules of international law) and article 56(2), which reads, less ambiguously: In exercising its rights and performing its duties under this Convention in the exclusive economic zone, the coastal State shall have due regard to the rights and duties of other States and shall act in a manner compatible with the provisions of this Convention.
The breaches so found concerned the relationship between the United Kingdom and Mauritius.
It was the tribunals view that, after a second meeting between United Kingdom and Mauritian representatives on 21 July 2009, there remained outstanding a number of unanswered issues, as well as information that the United Kingdom promised to provide to Mauritius, but that, despite this, the United Kingdom had in March 2010 elected to press ahead with the final approval and proclamation of the MPA without providing any convincing explanation for the urgency with which it did this on 31 March and 1 April 2010.
The issues of both law and fact before the tribunal were, therefore, very different from that now before the Supreme Court, which is narrowly focused on the adequacy of the public consultation.
It is unnecessary to go back in detail over all the issues which were considered in the courts below.
I can summarise the position as it emerges, in my opinion, from the evidence and documents as follows.
First, the actual extent of inshore fishing by Mauritian vessels in territorial waters, after the Chagossians left and until the no take zone affected licensing, was always limited, but it was significant for those involved, including the owners and Chagossian crew members.
The principal vessels involved were those of the Talbot brothers.
Secondly, there was credible evidence in the United Kingdom Governments possession (though not all of it necessarily available to Mr Roberts or Ms Yeadon) as to the existence of Mauritian fishing rights dating back to undertakings given in 1965.
However, thirdly, extensive legal advice (for which privilege has not been waived) was taken on this subject during the period January to November 2009, and, on the basis of that advice, both Mr Roberts and Ms Yeadon understood that Mauritius did not have legal rights to fish in BIOT territorial waters, which prevented the United Kingdom Government from establishing an MPA, including a complete no take zone.
Fourthly, for that reason, after considering the position and receiving legal advice Mr Roberts and Ms Yeadon did not believe that Mauritius or the Chagossians had, or might have had, any such rights, and Ms Yeadon in particular saw the 1965 undertaking as being of a political, not legal, nature; and, as a result, no reference was made in the consultation document to any such rights.
Fifthly, despite the appellants reliance on a paper prepared by Professor Brownlie for and read at a United Kingdom Mauritius meeting in January 2009, containing at most only a fleeting suggestion of such rights, Mauritius never really advanced such rights with any clarity at any time throughout 2009 to March 2010, referring instead constantly to its sovereignty claim and refusing on that basis to engage with any consultation.
In particular, it made no suggestion of any such rights in the second United Kingdom Mauritius meeting in July 2009 or in a submission to the House of Lords in February 2010.
The Administrative Court correctly so concluded (para 158).
Sixthly, Mauritius had the opportunity of responding to the consultation and making the point that it had fishing rights, but did not avail itself of this.
Chagossians and others also had the opportunity of responding, and some did: i) Mr Gifford and Chagossians resident in Crawley made representations against any no take ban in the territorial waters, on a basis summarised as follows: Very limited fishing anyway, so limited environmental benefit from a ban.
Could have significant consequences for the Chagossians.
What effect on the Chagossian community? Should not be possible to use MPA as a way of entrenching no right of abode.
Inconsistent, as far as concerns fishing, with the law of the sea (UNCLOS). ii) The Diego Garcian Society also representing Chagossians wrote in favour of: 4th option, a no take marine reserve for the whole of the territorial waters and EPPZ/FCMZ with exceptions for certain types of pelagic fishery (eg tuna) and artisanal fishing by Diego Garcians and other Chagossian fishing projects only. iii) The members of the Chagos Refugees Group, led by the appellant and joined by Mr Gifford as their lawyer submitted that the consultation process was premature (and flawed) as putting the cart before the horse, inter alia, because it needed to be with the consent of the Chagossians, rather than pushed ahead unilaterally, because the sovereignty of Mauritius was also involved and because: [There] Are fishing rights which they need in their sea. and Need human rights first wrong to come before ECHR judgment.
The Divisional Court observed (para 160): The potential impact of an MPA on commercial fishing was squarely raised and must have been obvious to all concerned.
The responses from fishing interests show that the impact was clearly understood.
If anyone wished to raise an argument that a ban on fishing would be incompatible with Mauritian fishing rights, they were free to do so.
Against that background, the omission of express reference to the point in the consultation document itself is in our view a matter of no significance.
It did not affect the fairness of the consultation or the validity of the MPA decision taken following that consultation.
The Court of Appeal rejected the appeal on this ground, largely for the same reasons given by the Divisional Court (para 108), and specifically agreed with the last two sentences quoted above (para 111).
The case open to the appellant is that there was credible evidence of Mauritian fishing rights, deriving from an undertaking given by the United Kingdom Government to the Government of Mauritius and subsequently evidenced by preferential treatment given to Mauritius registered or owned vessels.
Approaching this case in the light of the matters which I have mentioned, I have no hesitation in agreeing with the assessment of both courts below that the absence of any mention of such evidence or of the arguable fishing rights to which it related does not undermine the consultation, make it unfair or justify setting it or any decision consequent upon it aside.
It was obvious, as the Court of Appeal also said (para 112), that at least one of the options would affect inshore fishing, and threaten the livelihood of vessels which had previously been licensed to fish in territorial waters.
It was open to Mauritius or anyone affected to raise this objection in response to the consultation.
Mauritius notably did not respond at all.
Others made various points about the option of a no take ban in territorial waters and/or the loss of alleged fishing rights.
It would be wholly inappropriate to treat the consultation process as invalid, when the party to whom the alleged rights belonged (the Republic of Mauritius) had full opportunity of asserting them in response to the consultation, and when others indirectly involved actually took advantage of the opportunity of raising them.
Finally, there is also no reason to believe that the ultimate decision would or could have been any different, if the consultation had specifically drawn attention to the possible existence of such fishing rights.
Conclusion
For these reasons, I would grant permission to appeal on the issue of fishing rights, but dismiss the appeal both on the issue of improper motivation and on the issue arising from the failure to mention the possible Mauritian inshore fishing rights in the consultation document before the decision to declare an MPA and a no take zone.
I repeat that the latter issue has been before the Supreme Court solely on the basis that there was convincing evidence that such Mauritian fishing rights existed.
The significance of the finding in the UNCLOS tribunals arbitration award dated 18 March 2015 that such fishing rights do actually exist is not before us.
In particular, whether that finding is capable of having any and if so what effect in domestic law, as regards either the MPA or the no take zone is not before us.
LORD SUMPTION: (with whom Lord Neuberger, Lord Clarke and Lord Reed agree)
I agree with the disposal proposed by Lord Mance and with his reasons.
I add a judgment of my own to address the status and use in evidence of information about the contents of diplomatic correspondence which has come into the hands of third parties.
This question is the subject of the Secretary of States cross appeal, and raises points of some general importance.
The leaking of governmental documents and their widespread distribution through the internet is a phenomenon of our time.
The status of leaked documents in the public domain is an issue which is likely to recur.
The basis in modern international law for the protection of the documents of a diplomatic mission is article 24 of the Vienna Convention on Diplomatic Relations (1961), which provides that the archives and documents of the diplomatic mission shall be inviolable at any time and wherever they may be.
Article 27.2, which provides for the inviolability of the official correspondence of the mission, was added (as part of an article about freedom of communication) in order to deal with the problem of the interception en route of communications not made by diplomatic courier or diplomatic bag, which would not necessarily be part of the missions archives or documents at the time of interception: see ILC Yearbook 1958, i, 143, paras 34 35, and Denza, Diplomatic Law, 4th ed (2016), 189 190.
These provisions have the force of law by statute in the United Kingdom, under the Diplomatic Privileges Act 1964.
Any issue of this kind is likely to give rise to two fundamental questions.
The first is how a document is to be identified as part of archives and documents of a diplomatic mission.
The second is what it means to describe such a document as inviolate.
Traditionally, the protection accorded to a missions documents was viewed as a particular aspect of the inviolability of its premises and the diplomatic bag, and of the immunities of diplomatic couriers.
This was why, upon a cessation of diplomatic relations, when the premises of the mission would become entitled to a lesser degree of protection, the practice was to destroy the missions archives or entrust them to a protecting power as the diplomats left.
As a general rule, the movable property of a mission was protected only so far as it was located on its premises, and indeed this is still the position today: see article 22.3 of the Convention.
Before the Vienna Convention came into force in 1964, the status of a missions archives located outside diplomatic premises was therefore uncertain.
To resolve that uncertainty, the words at any time and wherever they may be were added to article 24 at the United Nations Conference on Diplomatic Intercourse and Immunities which approved the final text of the Convention.
The archives and documents of a mission were now to be protected as such and not only by virtue of their presence in a protected location or in protected hands.
As the French delegate explained when introducing the amendment, the object was to establish clearly the absolute inviolability of the missions archives and documents as such, and not merely as part of the furniture of the mission: Official Records, i, (1962), 148 (para 2).
A diplomatic mission is not a separate legal entity.
Its archives and documents belong to the sending state.
But the protection of article 24 is limited to the archives and documents of the mission.
It does not extend to those of any other organ of the sending state.
The latter may be protected by other rules of law: for example by the criminal law, the law of confidence or the law of copyright.
But they are not protected by the Vienna Convention.
Against that background, what is it that identifies a document as belonging to the archives or documents of the mission, as opposed to some other organ of the sending state? (I will return below to the particular problems raised by their unauthorised possession by third parties).
The test is not their location, for they are protected wherever they may be.
It must necessarily be whether they are under the control of the missions personnel, as opposed to other agents of the sending state.
The draftsmen of article 24 were thinking in terms of physical documents.
But retrievable electronic files are also documents and may be part of an archive.
The same protection therefore applies to them, provided that access to them is under the control of the missions personnel, whether directly or by virtue of the terms on which the mission transmitted the document to another governmental entity.
This appeal is not the occasion for determining the exact circumstances in which a mission will be treated as having control over a document by virtue of the terms on which it transmits it, because there is no suggestion that the US diplomatic cable was released on terms.
The relevant point for present purposes is that because the designation of a document as that of the mission depends on control, its origin and content is in itself irrelevant.
Thus the archives and documents of a mission may include original or copy documents which emanate from some other organ of the sending state or from a third party, in which case so far as they are under the control of the missions personnel they will enjoy the same protection as the missions internally generated documents.
Correspondingly, copy documents or originals emanating from the mission may be found in the archives of another organ of the state (say, its foreign ministry) where they will not enjoy the protection of article 24.
Inviolability is a term variously used in the Convention about diplomatic premises (articles 22, 30), documents (articles 24, 30), official correspondence (article 27), diplomatic personnel (articles 27, 29, 31, 38, 40) and personal property (article 30).
But it is a protean word, whose meaning is necessarily sensitive to its context and purpose.
It used to be thought that all diplomatic privileges and immunities reflected the extra territorial character of a foreign sovereign and, by extension, of its diplomatic representatives.
But in the modern law, its justification is pragmatic and wholly functional.
In the words of the fourth recital to the Convention, it is intended to ensure the efficient performance of the functions of diplomatic missions as representing States.
It has been recognised ever since Vattel (Droit des Gens, Bk IV, 123), the first writer to deal with the question, that the basis of the rule of international law is that the confidentiality of diplomatic papers and correspondence is necessary to an ambassadors ability to perform his functions of communicating with the sovereign who sent him and reporting on conditions in the country to which he is posted.
The purpose of article 24 in protecting a missions archives qua archives, and not as mere items of property, is to protect the confidentiality of the missions work, without which it is conceived that it cannot effectively represent the sending state.
In particular, it is to protect the privacy of diplomatic communications: Shearson Lehman Bros Inc v Maclaine Watson & Co (International Tin Council intervener) (No 2) [1988] 1 WLR 16, 27G (Lord Bridge).
The confidentiality of such documents does not depend on their particular contents or subject matter, which is not a matter which a domestic court could properly examine, but on their status as part of the archives and documents of a diplomatic mission protected by article 24 of the Convention.
Dr F A Mann, a notable opponent of the larger claims of international law in the domestic legal world, was of the opinion that the inviolability of a missions archives and documents served only to protect them from interference by the receiving state, for example by seizing them or allowing them to be the subject of compulsory legal process: Inviolability and other Problems of the Vienna Convention on Diplomatic Relations, Further Studies in International Law (1990), 326 338.
A rather similar view was put forward at the United Nations Conference preceding the adoption of the Convention, as a reason for rejecting the addition of the words wherever they may be, but it is clear that this objection did not find favour with the majority: see Official Records, i (1962), 149, 150 (paras 9, 22).
The Court of Appeal, however, appear (paras 39 42, 58 61) to have adopted it in the present case.
I agree with Lord Mance that so narrow an approach is not supported by the generality of commentators.
It is also, in my view, inconsistent with the concept of inviolability.
Whatever may be involved in that concept, it is clear that article 24 is not only concerned with the duties of the receiving state but describes the status of a missions archives and documents erga omnes.
It is the obligation of the receiving state to give effect to that status.
That obligation, extends beyond simply refraining from violating it itself.
As the International Law Commission observed in its report of 1957 to the United Nations General Assembly, the receiving State is obliged to respect the inviolability itself and to prevent its infringement by other parties: ILC Yearbook 1957, ii, 137.
It was on this basis that the International Court of Justice held in US Diplomatic and Consular Staff in Tehran (1980) ICJ Rep, 3, at paras 61 63, 66 67, 69, 77 that the failure of the government of Iran to intervene to prevent or terminate the occupation of the US embassy in Tehran by militants was a violation not only of articles 22 (premises) and 29 (diplomatic agents), which impose express obligations on the receiving state to protect against action by third parties, but also of article 24 (archives and documents), which contains no express provision of that kind.
I make this point in order to correct what I regard as an error of the Court of Appeal.
But it is not decisive of the present appeal, which is concerned with the legitimacy of a court receiving into evidence a document emanating from the archives and documents of a diplomatic mission.
If this is a violation of article 24, the violation does not consist only in the receiving state failing to protect the archives and documents against third party action.
The court is itself an organ of the receiving state, and the violation consists also in its receipt and use of the material.
No one doubts that if the document has been communicated to a third party with the actual or ostensible authority of the responsible personnel of the mission, any immunity in respect of it is lost.
In the form communicated, it is no longer the missions document: Shearson Lehman Bros Inc v Maclaine Watson & Co (International Tin Council intervener) (No 2) [1988] 1 WLR 16, 27 28.
But what if the document, or more plausibly a copy of the document or information about it, has come into the hands of a third party without authority? Subject to an important reservation (see below) I think that in that case there is a violation if the courts of the receiving state receive it in evidence.
This is not, as is sometimes suggested, because of the words wherever they may be.
They have a different purpose, as I have explained.
It is because of what is involved in the notion of inviolability, and in the receiving states obligation to give effect to it.
The real objection is to the receiving state employing them for a purpose inconsistent with their confidential status.
Article 25 of the Convention, which is not one of the articles scheduled to the Diplomatic Privileges Act but informs the interpretation of those that are, requires the receiving state to accord full facilities for the performance of the functions of the mission.
As Professor Denza observes (Diplomatic Law, 4th ed (2016), 170), article 25 is not an additional source of rights but an ancillary provision intended to make effective those facilities which are assured by other provisions of the Convention.
Thus it has been held that as a matter of public international law it prevents the courts of the receiving state from acting in such manner as to obstruct the mission in carrying out its functions, for example by permitting the judicial enforcement of judgments against embassy property: Alcom Ltd v Republic of Colombia [1984] AC 580, 599.
A similar view was expressed by the German Constitutional Court in the Philippine Embassy Bank Account Case (1977) 46 BVerfGE 342, 395, 397 398 and by the United States District Court for the District of Columbia in Liberian Eastern Timber Corp v Government of the Republic of Liberia (1987) 89 ILR 360, 363.
In my opinion, similar considerations apply to the reception in evidence by the courts of the receiving state of confidential documents obtained directly or indirectly through a violation of a missions archives and documents.
Article 24 gives effect to the confidential status of these documents, which is necessary to the functioning of the mission.
Their inviolability necessarily imports that the state will take reasonable steps to prevent the violation of that status and will not itself be party to its violation.
In Rose v The King [1947] 3 DLR 618, a decision of the Appellate Division of the Supreme Court of Quebec, the appellant had been convicted on charges of conspiracy with (among others) members of the embassy of the Soviet Union in Ottawa to violate the provisions of the Official Secrets Act.
The evidence against him had included documents abstracted by a defector without authority from the files of the Russian military attach and delivered to the Canadian government.
The appeal was dismissed on the controversial ground that diplomatic immunity was subject to an exception for cases where embassy personnel had conspired against the security of the receiving state.
But, subject to this supposed exception, Bissonnette J, in a judgment with which the rest of the court concurred, considered that as a matter of customary international law no court had jurisdiction or competence to take cognizance of documents emanating from a foreign embassy without the consent of the sending state.
At p 646, he observed: International law creates a presumption of law that documents coming from an embassy have a diplomatic character and that every court of justice must refuse to acknowledge jurisdiction or competence in regard to them.
Fayed v Al Tajir [1988] QB 712 was a decision of the Court of Appeal in England in a defamation action.
The defendant, who was described as the de facto ambassador of the United Arab Emirates in London, had made the statements complained of in internal correspondence of the embassy, copied to the foreign minister.
The relevant letter was subsequently communicated to the plaintiff by its recipient, a counsellor at the embassy, without authority.
The issue was held to be non justiciable, and the letter subject to absolute privilege.
But Kerr LJ (with whom Croom Johnson LJ agreed) considered that the letter was also protected by article 24 of the Vienna Convention.
In Shearson Lehman Bros Inc v Maclaine Watson & Co (International Tin Council intervener) (No 2) [1988] 1 WLR 16, the House of Lords considered the deployment in evidence of copies of documents of the International Tin Council which had been obtained by third parties.
By statute, the Councils official archives enjoyed the same protection as those of a diplomatic mission.
The Appellate Committee held that the question depended on whether the third party had obtained them with the authority of the Council or in circumstances where he could reasonably assume authority.
On the assumption that a document forming part of the Councils archives had been communicated to the third party without authority, Lord Bridge (with whom the rest of the Appellate Committee agreed) held at p 27G H that it would be wholly inimical to the underlying purpose that the judicial authorities of the host state should countenance the violation by permitting the violator, or any one who receives the document from the violator, to make use of the document in judicial proceedings.
Cases in other jurisdictions are rare, but it may be noted that the German Federal Court has applied a similar principle to evidence derived from the monitoring of telephone lines contrary to the corresponding principle of the Vienna Convention on Consular Relations (1963): BGHSt 36, 396 (4.4.1990).
There is, however, a reservation of some importance which follows from the nature of the protection accorded by article 24 of the Convention, as I have analysed it.
It concerns documents which, although indirectly obtained without authority from the archives and documents of a mission, have entered the public domain.
By that I mean that they have been disclosed not simply to a few people or in circumstances where it would take some significant effort on the part of others to discover their contents, but that they are freely available to any one who cares to know.
This was not a question considered in any of the cases cited in the previous paragraph, and may not have arisen on the facts.
In principle, as I have explained, article 24 protects documents under the control of the mission, but not documents which never were or are no longer under its control.
The extension of the protection to documents under a missions control which (or the contents of which) have come into the hands of third parties without authority is necessary in order make article 24 effective by preserving the confidentiality of unlawfully communicated documents in accordance with the articles purpose.
The English courts cannot, consistently with the privileges and immunities of a diplomatic mission, allow themselves to be made the instrument by which that confidentiality is destroyed.
But once the documents have been published to the world, it has already been destroyed.
There is nothing left to be preserved of the interest protected by article 24.
It is arguable that where a document has been put into the public domain by the very person who has violated the archives and documents of the mission, he should not be allowed to rely on the fact, although the difficulties of the argument have often been pointed out, for example by Lord Goff in Attorney General v Guardian Newspapers (No 2) 1990] 1 AC 109, 286 287.
But that is a refinement which does not arise on the facts in the present appeal, and I need not consider it further.
The Secretary of States cross appeal faces, as it seems to me, two distinct and equally insuperable difficulties.
The first is that, although the cable relied upon by Mr Bancoult must have emanated directly or indirectly from a US government source, the Secretary of State is unable to establish that it was obtained by Wikileaks, and through them by The Guardian and The Telegraph, from the archives of the US embassy in London as opposed to some other unprotected organ of the US government.
He has not therefore established the essential factual foundation for reliance on article 24 of the Vienna Convention.
Secondly, even if the cable had come from the archives of the US embassy, the document has entered the public domain.
Mr Bancoult was not party to the leaking of the cable and has not put it in the public domain.
He has merely made use of what is now the common knowledge of any one who cares to interest himself in these matters.
In my opinion it cannot possibly be a violation of the US embassys archives or documents for Mr Bancoult to make use in litigation of the common knowledge of mankind simply because it was once confidential to the US embassy in London.
Nor could it be a violation for the English courts to take cognizance of a document which has escaped from the control of the US embassy and whose confidential status long ago came to an end.
It was suggested to us that even if there was no remaining confidence in the document or its contents, the missions archives and documents would be violated by making findings about its authenticity, since those findings would inevitably increase their interest and value.
For the same reason it was suggested that to do this without the consent of the sending state would amount to the exercise of compulsion.
I do not accept this.
If the contents of the document are no longer protected from public scrutiny because they are in the public domain, I cannot see that any greater protection can attach to inferences drawn from those same contents, whether about its authenticity or anything else.
albeit for reasons somewhat different from those of the Court of Appeal.
In those circumstances, I would dismiss the Secretary of States cross appeal, LORD KERR: (dissenting) Improper motive
(i) Background
The only legitimate purpose for introducing a marine protected area (MPA) around the Chagos Islands was to protect marine life.
If it could be demonstrated that this was not the reason that it was introduced, or that there was a collateral purpose for its introduction, the establishment of an MPA would be unlawful.
It is a centrepiece of the appellants case that his counsel was denied the opportunity to pursue a line of cross examination that would have revealed an ulterior motive for the MPA.
This claim prompts the need for a careful examination of the circumstances in which Mr Plemings cross examination of Mr Roberts and Ms Yeadon before the Divisional Court was curtailed.
It is also necessary to look closely at how this matter was considered by the Court of Appeal.
The appellant also argues, however, that the refusal to admit a critical item of evidence meant that the Divisional Court did not assess that evidence for its potential to undermine the case for the respondent.
Before considering these arguments, one must be clear about the importance of that item of evidence, a cable which, the appellant claims, was sent on 15 May 2009 by the United States Embassy in London to departments of the US Federal Government in Washington.
That cable, it is claimed, contained a record of what was said at a meeting on 12 May 2009 between a United States political counsellor, Mr Richard Mills, and Mr Colin Roberts, Head of Overseas Territories Directorate, Commissioner for British Indian Ocean Territory (BIOT) and Ms Joanne Yeadon, Administrator of BIOT and Mr Ashley Smith, the Ministry of Defences Assistant Head of International Policy and Planning.
As the Court of Appeal said (at para 10 of its judgment), the cable is the only near contemporaneous record of the meeting.
It purports to have been composed three days after the meeting took place.
If it is authentic, or, perhaps more pertinently, if there is no reason to doubt its authenticity, it is, at least potentially, a significant source of evidence about the reasons for making the MPA.
The first paragraph of the cable stated that a senior Foreign and Commonwealth Office official (Mr Roberts) had assured his American counterparts that the establishment of the MPA would in no way impinge on the US governments use of the British Indian Ocean Territory (BIOT).
In that context, Mr Roberts is said to have asserted that the BIOTs former inhabitants [the Chagos Islanders] would find it difficult, if not impossible, to pursue their claim for resettlement on the islands if the entire Chagos Archipelago were a marine reserve.
It is, of course, understandable that Mr Roberts would want to make it clear that the establishment of the MPA would not affect Americas use of BIOT as a military base.
But, whether that also required the statement that the Chagos Islanders would find it difficult to resettle if the entire Chagos Archipelago became a marine reserve is more imponderable.
After all, many of the islands in the archipelago were not required by the US for their military activities in the area.
The obvious question arises, therefore, why it was necessary to state that the MPA would have the effect of preventing resettlement in any of the islands.
It has been pointed out that this issue was not raised in argument in the Supreme Court.
That, as it seems to me, is beside the point.
The unalterable fact is that no evidence has been produced which established that the entire archipelago was required for American military activities.
What was at stake here was the denial of the opportunity to the Chagos Islanders to return to their ancestral homeland and whether that denial was required in order to achieve the reasonable requirements of the USA.
That circumstance should concern this court, whether or not it was raised in argument, when we are asked to consider the impact which the introduction of the cable in evidence might have had on the outcome of the proceedings before the Divisional Court.
There was no evidence that the continuation of military activities required the depopulation of all the islands.
In those circumstances, the reason that the civil servants advised the minister to make a MPA was highly relevant.
It is therefore not only legitimate for, it is required of, a court examining the reasons for making the MPA to address the question whether the minister has been properly appraised of all material factors.
If it was wholly unnecessary to keep uninhabited the islands other than Diego Garcia, the motives of the civil servants in recommending that course were directly relevant to the question of why they had advocated the establishment of the MPA.
Was it to frustrate any further campaign to allow the Chagos Islanders to return to their homeland? To dismiss and treat as irrelevant this consideration simply because it did not feature in the appellants argument cannot be right.
It has been pointed out that, in the original exchange of notes between the United States and United Kingdom in 1966 it was stipulated that all of the BIOT be set aside for defence purposes and that any significant change of the BIOTs status that could impact the BIOTs strategic use would require US consent.
But what of that? Here we are examining the motivation for the recommendation of the establishment of an MPA.
Was it for the purpose of protecting marine life? Or was it in order to ensure that the Chagossians campaign could go no further and that the Americans desire to have all the BIOT preserved for their use (assuming that that desire had persisted since 1966) would be fulfilled? It is no answer to the charge of improper motive as to the reasons for advocating the establishment of the MPA, that this chimed with the wishes of the USA.
At para 7 of the cable, Mr Roberts is recorded as saying that a way had to be found to get through the various Chagossian lobbies.
He is said to have admitted that the British government was under pressure from the Chagos Islanders to permit resettlement of the outer islands.
Further, Mr Roberts is recorded as having observed that, according to the British governments current thinking, there would be no human footprints and no Man Fridays on BIOTs uninhabited islands.
In the words of the cable, Mr Roberts asserted that establishing a marine park would, in effect, put paid to resettlement claims of the archipelagos former residents.
When it was suggested by the Americans present at the meeting that the advocates of Chagossian resettlement continued vigorously to press their case, Mr Roberts replied that the UKs environmental lobby was far more powerful than the Chagossians.
Comment by the author of the cable is littered with observations about the possible resettlement of the Chagos Islands.
Reference is made to the possible appeal by the Chagossians to the European Court of Human Rights (ECtHR) and the British governments assurance that this would be firmly resisted.
This is the pervasive theme of the meeting.
And the cable also stated that after the meeting had ended, Ms Yeadon urged US embassy officials to affirm that the US government required the entire BIOT for defence purposes.
She is recorded as having said that making this point would be the best rejoinder to the Chagossians assertion that partial settlement of the outer islands would have no impact on the use of Diego Garcia.
This is important.
There is no evidence that America did need the entire BIOT.
Why, if she did, did Ms Yeadon urge the US government to make this claim, if not in order to thwart the Chagos Islanders aspiration to return to at least part of their homeland?
The final two paragraphs of the cable contain significant observations in relation to the importance placed on the possibility of resettlement.
These are the relevant passages from those paragraphs: Regardless of the outcome of the ECtHR case, however, the Chagossians and their advocates, including the All Party Parliamentary Group on Chagos Islands (APPG), will continue to press their case in the court of public opinion.
Their strategy is to publicise what they characterise as the plight of the so called Chagossian diaspora, thereby galvanising public opinion and, in their best case scenario, causing the government to change course and allow a right of return.
They would point to the governments recent retreat on the issue of Gurkha veterans right to settle in the UK as a model We do not doubt the current governments resolve to prevent the resettlement of the islands former inhabitants, although as FCO Parliamentary Under Secretary Gillian Merron noted in an April parliamentary debate, FCO will continue to organise and fund visits to the territory by the Chagossians.
We are not as sanguine as the FCOs Yeadon, however, that the Conservatives would oppose a right of return.
Indeed, MP Keith Simpson, the Conservatives Shadow Minister, Foreign Affairs, stated in the same April parliamentary debate in which Merron spoke, that HMG should take into account what I suspect is the all party view that the rights of the Chagossian people should be recognised, and that there should at the very least be a timetable for the return of those people at least to the outer islands, if not the inner islands.
Establishing a marine reserve might, indeed, as the FCOs Roberts stated, be the most effective long term way to prevent any of the Chagos Islanders former inhabitants or their descendants from resettling in the BIOT.
It is plain, as I have said, that a dominant theme of the meeting was that the establishment of the MPA would prevent any resettlement of the islands.
It certainly preoccupied the Americans and it was a recurring refrain in the assurances that Mr Roberts and Ms Yeadon are said to have given.
Viewed in isolation, the cable certainly creates a suspicion that this was a motivating factor in the decision to declare an MPA.
The Divisional Court concluded that the cable was not admissible in evidence.
It nevertheless permitted Mr Pleming to cross examine Mr Roberts and Ms Yeadon about its contents on the basis that its authenticity was assumed but not established.
The Court of Appeal considered that the cable was admissible but held that, even if it had been admitted, it would have made no difference to the conclusion of the Divisional Court that improper motive had not been established.
The arguments about admissibility have been fully canvassed in the judgments of Lord Mance and Lord Sumption and need not be repeated here.
I agree with Lord Mance that it has not been established that the cable remained part of the archive of the London mission and, on that account, that the status of inviolability can no longer be claimed.
I also agree with Lord Sumption that it cannot be a violation of the US embassys archives to use in litigation a document which has entered the public domain.
One must keep in mind that the exclusion of the cable had two distinct effects.
First, it restricted the cross examination of Mr Roberts and Ms Yeadon.
It was not possible to challenge them on the basis that the document was genuine and was to be taken as having recorded their statements at the meeting and, in Ms Yeadons case, subsequently.
Being able to confront a witness with statements that she or he previously made which are inconsistent with their testimony is one of the most important forensic tools in the cross examiners armoury.
Technically, Mr Pleming was bound by the answers given by the witnesses to questions based on the cables contents.
This would not have been the case if the cable had been admitted in evidence.
It has been suggested that the evidence given by Mr Roberts about the meeting on 12 May and Ms Yeadons own evidence give a picture which is generally and substantially consistent with that presented by the cable.
Much of the evidence that they gave coincides with the contents of the cable, it is true.
But in crucial areas it is incontestably inconsistent.
It is not in the least surprising that much of the evidence from the civil servants and the contents of the cable were found to coincide.
Indeed, it was part of Mr Plemings admitted strategy to point to that coincidence in order to establish the cables authenticity.
But to imply that there were not highly significant differences, differences which, moreover, touched on the very issue at stake in this case, is unrealistic.
Mr Roberts denied using the expression, Man Fridays.
Ms Yeadon denied that Mr Roberts had said that establishing an MPA would in effect put paid to resettlement claims.
This is directly contrary to the contents of the cable.
Indeed, it is directly contrary to the evidence of Mr Roberts himself, for he is recorded as having accepted that he did say to the US officials that the establishment of an MPA would in effect put paid to the resettlement claims.
The opportunity to exploit these differences if the cable had been admitted in evidence, as it should have been, cannot be airily dismissed.
The entire cursus of the cross examination (and consequently the conclusions that might have been reached on the critical issue) could have been radically different.
The second consequence of excluding the cable from evidence was that it did not rank as independent material with the potential to act as a significant counterweight to the FCO witnesses testimony.
If the Divisional Court had admitted the cable in evidence, it would have to be pitted as an item of evidence which was in many respects directly contrary to the testimony of Mr Roberts and Ms Yeadon.
The court would have been required to assess the veracity and reliability of their claims against the contemporaneous evidence provided by the cable.
As it was, the Divisional Court merely theorised about whether Mr Plemings cross examination would have been more effective if the cable had been admitted in evidence.
It did not consider the cables contents for their capacity to discredit the testimony of the two FCO witnesses.
(ii) The curtailing of cross examination
Dealing with the impact of the exclusion of the cable from evidence, the Court of Appeal said at para 88: [Our] outline of the cross examination of both witnesses does not capture its full flavour.
It was extensive and searching.
In our judgment, Mr Pleming was not disadvantaged by not being able to put questions on the basis that the cable was authentic and a true record of what was said at the meeting of 12 May 2009.
He tested the evidence of Mr Roberts and Ms Yeadon on the basis of the cable.
It is true that he was not able to put questions like: have you any explanation for the fact that you are recorded as having said X when you deny having said it? But it is unrealistic to suppose that, if Mr Pleming had been able to put such questions, this would have materially affected the thrust or course of the cross examination or of the answers that were given.
The Divisional Court was right to say that the dividing line between questions which its ruling permitted and those which it did not permit was fine.
In our judgment, the inhibition on Mr Plemings questions can have had no material effect on the course or the outcome of the cross examination.
Mr Pleming was able to, and did in fact, explore the accuracy of the contents of the cable with both witnesses.
In particular, he probed the purpose of the MPA and whether what was purportedly recorded in the cable as having been said had in fact been said.
It is true that there was extensive cross examination of Mr Roberts and Ms Yeadon based on the contents of the cable.
The difference between probing witnesses accounts and confronting them with admissible evidence which flatly contradicts their accounts should not be underestimated, however.
As the Court of Appeal observed (in para 80 of its judgment), Mr Roberts refused to answer questions as to whether the contents of the cable were accurate.
This was in reliance on the governments policy of neither confirm nor deny (NCND) policy.
It appears to have been accepted without demur by the Divisional Court and the Court of Appeal that NCND justified this stance.
For my part, I would not be disposed to accept that this policy could be resorted to in order to avoid answering a relevant question with which the court was required to deal.
Given that the Divisional Court had decided that the authenticity of the cable should be assumed, it appears to me that Mr Roberts should have been required to answer as to whether what was recorded in the cable faithfully recorded what had taken place.
As it happens, of course, Mr Roberts did address the question whether some parts of the cable were accurate see para 81 of the Court of Appeals judgment.
What is clear, in my view, is that Mr Roberts could not have relied on NCND if the cable had been admitted in evidence.
Nor could he have refused to deal with what the Court of Appeal described in para 82 of its judgment as the ultimate question: whether he had an explanation for the fact that he was recorded as having made certain statements which he denied having uttered.
In deciding whether being required to answer such a question could have made a difference to the outcome of the Divisional Court case, one must consider the range of possible responses that might have been given. (In this context, Lord Mance has accepted for the purposes of the appeal that the appropriate question is whether the admission of the cable could have made a difference see para 23 of his judgment.
For reasons that I will give later in this judgment, I consider that this is indubitably the correct test in this instance.)
If one imagines that Mr Roberts answer to the ultimate question was that he had no explanation, or even, when pressed, that the cable was indeed accurate and that he recanted his initial disavowal of what he was recorded as having said, it is not difficult to conclude that this could have made a significant difference to the courts assessment of him as a reliable witness.
The Court of Appeal did not consider the range of possible responses that Mr Roberts might have given to this question.
In my opinion, it should have done.
And if it had done, it could not have reached the conclusion that it did.
(iii) The capacity of the cable to counter the FCO evidence
The Court of Appeal dealt cryptically with the second issue, namely, the status of the cable as independent material with the potential to act as a counterweight to the FCO witnesses testimony.
At para 89, the court said, [w]e do not accept that there is a realistic possibility that the courts assessment of the evidence of Mr Roberts and Ms Yeadon would have been affected if the cable had been formally admitted in evidence as an authentic document.
Case law emphasises the importance of documentary evidence in assessing the credibility of oral witnesses.
In Onassis v Vergottis [1968] 2 Lloyds Rep 403 Lord Pearce, having reviewed the various reasons that a witnesss oral testimony might not be credible, stated, all these problems compendiously are entailed when a judge assesses the credibility of a witness; they are all part of one judicial process.
And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.
In Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 Lloyds Rep 1, 57 Robert Goff LJ made this observation: It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence reference to the objective facts and documents, to the witnesses motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth.
That approach was approved by the Privy Council in Grace Shipping Inc v CF Sharp & Co (Malaya) Pte Ltd [1987] 1 Lloyds Rep 207 and applied in a number of subsequent cases.
For example, in Goodman v Faber Prest Steel [2013] EWCA Civ 153, the Court of Appeal held that the trial judge had erred in accepting a personal injury claimants evidence of pain without dealing with contradictory documentary evidence and explaining why the claimants evidence was to be preferred.
Moore Bick LJ applied the approach of Robert Goff LJ and stated that memory often plays tricks and even a confident witness who honestly believes in the accuracy of his recollection may be mistaken.
That is why in such cases the court looks to other evidence to see to what extent it supports or undermines what the witness says and for that purpose contemporary documents often provide a valuable guide to the truth.
He concluded that: [O]ne is left with the clear impression that [the judge] was swayed by Mr Goodmans performance in the witness box into disregarding the important documentary evidence bearing on what had become the central question in the case.
It may have been open to her to prefer what he had said in the witness box, but if she was minded to do so it was incumbent on her to deal with the documentary evidence and explain why Mr Goodmans oral evidence was to be preferred.
It is not to be suggested that the Divisional Court ignored or disregarded the important documentary evidence which the cable constituted.
But if it had admitted the cable in evidence, as should have happened, the contrast between some of its contents and the evidence of Mr Roberts and Ms Yeadon would have been starker.
The need to confront the discrepancy between the two could not have been avoided.
Although said in relation to commercial litigation, I consider that the observations of Leggatt J in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm), paras 15 22 have much to commend them.
In particular, his statement at para 22 appears to me to be especially apt: the best approach for a judge to adopt is, in my view, to place little if any reliance at all on witnesses recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.
This does not mean that oral testimony serves no useful purpose though its utility is often disproportionate to its length.
But its value lies largely, as I see it, in the opportunity which cross examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events.
Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.
The intellectual exercise on which the Divisional Court was engaged in evaluating the evidence of Mr Roberts and Ms Yeadon, having refused to admit the cable in evidence, was quite different from that on which it would have had to embark if the evidence had been received.
By refusing to admit the evidence, the court effectively had confined its role to an assessment of how well the witnesses had withstood cross examination.
If the cable had been admitted, the discrepancies between the contents of the cable and their testimony would have had to be considered objectively, while keeping in mind all the adjurations as to the likelihood of contemporaneous documentary evidence being intrinsically more reliable.
If the Divisional Court had admitted the cable in evidence, what were the possible consequences? If it had concluded, as well it might, that it was inherently unlikely that the cable would have recorded Mr Roberts as having said there would be no human footprints and no Man Fridays on BIOTs uninhabited islands, unless he had actually used those words, what impact would that have had on his believability? These were striking expressions.
Indeed, Ms Yeadon said that, if they had been used, she would have been shocked.
Could they have been fabricated by the author of the cable? Why should they have been? If the cable had been admitted and was therefore a freestanding item of evidence, it is at least possible that the Divisional Court would have decided that it was unlikely that the person who composed the cable would have fabricated those phrases and attributed them directly to Mr Roberts.
And, if it was concluded that this was unlikely, what effect would that have on Mr Roberts credibility in light of his denial of having used them?
When the Court of Appeal came to consider what difference the admission in evidence of the cable might have made, the question for them should have been whether a different outcome was possible, not whether that would have happened or even whether it was likely. (I will explain presently why I consider that the possibility of a different result was the correct test.) The Court of Appeal, however, seems to have considered various possible formulations at different points of its judgment.
At para 89 it twice stated that it was unrealistic to suggest that the court would have reached a different conclusion, had the evidence been admitted.
Later in the same paragraph the court said that it had borne in mind that a legally correct approach would have made no difference to the outcome: see, for example, R v Chief Constable of the Thames Valley Police, Ex p Cotton [1990] IRLR 344, per Bingham LJ at para 60.
These statements suggest that the appeal court considered that, unless the admission of the cable would have made a difference, as opposed to whether it could have done so, a review of the Divisional Courts decision would not be appropriate.
I do not consider that this is the correct test and I turn now to that issue.
(iv) The correct test
In Malloch v Aberdeen Corpn [1971] 1 WLR 1578, the appellant had been dismissed from his employment as a teacher by a motion passed by an education committee.
He claimed that he had not been given a fair hearing and that, if he had been permitted to make representations, it was possible that some members of the committee would not have voted in favour of his dismissal. (The motion required to be carried by a two thirds majority).
The House of Lords held that teachers in Scotland had in general a right to be heard before they were dismissed and, since, in view of the ambiguity of the regulations by reason of which the appellant had been dismissed, he might have had an arguable case before the committee and might have influenced sufficient members to vote against his dismissal.
The committee was in breach of duty in denying him a hearing and the resolution and dismissal were accordingly unlawful.
At 1582H Lord Reid dealt with an argument that affording the appellant a hearing would have made no difference.
He said: it was argued that to have afforded a hearing to the appellant before dismissing him would have been a useless formality because whatever he might have said could have made no difference.
If that could be clearly demonstrated it might be a good answer.
But I need not decide that because there was here, I think, a substantial possibility that a sufficient number of the committee might have been persuaded not to vote for the appellants dismissal.
The substantial possibility that the Divisional Court would have reached a different conclusion if Mr Roberts evidence had taken a different turn as a consequence of his having to address and answer the ultimate question cannot be dismissed, in my opinion.
Moreover, if the court had been required to confront the obvious conflict between Mr Roberts and Ms Yeadons evidence and that contained in the cable, again there was a distinct possibility that it would have been concluded that the frustration of the campaign by the Chagossians to resettle the outlying islands was, at least, a collateral purpose in the civil servants recommendation to the minister that the MPA be established.
Lord Mance has said that the test to be applied in deciding whether a different outcome could or would have eventuated must depend on the context, including, in particular, how well placed the court is to judge the effect of any unfairness para 23. Perhaps.
I would observe, however, that if the court cannot with confidence judge the measure of unfairness to the affected individual, this should surely impel the adoption of the could rather than the would test.
Unless one could be confident that unfairness would not accrue, I find it difficult to see how it could be otherwise.
As noted at para 106 above, the Court of Appeal suggested that the proper manner of dealing with the question was to ask whether a legally correct approach would have made no difference to the outcome.
In relation to this case, that means that one should ask the question, if the Divisional Court had admitted the cable in evidence and if it had permitted cross examination on the basis that it was in evidence, would this not have affected the outcome.
On one view, this partakes of the application of a could test, and, in effect, this is how Lord Mance considers that the Court of Appeal dealt with the issue.
For the reasons given earlier, I do not agree.
Even if that had been the Court of Appeals approach, however, I could not agree with the conclusion that it reached.
What might have happened, as opposed to what would have happened involves consideration of a different range of imponderables.
Deciding what would have happened involves the decision maker in imposing, to some extent at least, his or her own view as to what ought to have happened.
By contrast, deciding what might have happened requires the decision maker to envisage a range of possibilities and to decide whether any one of those might have been chosen by the original decider, if the position before him or her had been as it has now been found to obtain.
The Court of Appeal did not review the range of possible outcomes that might have accrued if the cable had been admitted in evidence or if Mr Pleming had been permitted to press on with this cross examination to demand an explanation as to why the civil servants evidence differed from its contents.
In my opinion, that was central to a proper examination of the issue.
(v) The genesis and development of the MPA
It is true, as Lord Mance points out in para 25 of his judgment, that the whole idea of an MPA and a no take zone came from Pew, an American environmental group.
It is also true, again as stated by Lord Mance, that David Miliband, the then Secretary of State for Foreign and Commonwealth Affairs, was the relevant decision maker as to whether the MPA should be established.
The circumstance that it was the minister, and not the civil servants who were advising him, who would ultimately decide whether the MPA would be made does not, of itself, dispose of the question whether there was a collateral motive in the advocacy of the scheme by Mr Roberts and Ms Yeadon.
In his note of 5 May 2009 to Mr Miliband, Mr Roberts referred to the Chagos Islanders plans for resettlement.
He was bound to do so because this was an obvious aspect to be taken into account, in the event that an MPA was declared.
The note contains a significant passage on this question (quoted by Lord Mance at para 27): Assuming we win in Strasbourg, we should be aiming to calm down the resettlement debate.
Creating a reserve will not achieve this, but it could create a context for a raft of measures designed to weaken the movement.
This statement is to be contrasted with what Mr Roberts is quoted in para 7 of the cable as having said during the meeting with American officials some seven days later.
At that meeting he is recorded as having claimed that British government thinking was that there would be no human footprints and no Man Fridays on BIOTs uninhabited islands.
He is also recorded as having asserted that establishing a marine park would, in effect, put paid to resettlement claims of the archipelagos former residents.
So, although he told the minister that the MPA would not calm down the resettlement debate, he was telling the Americans that the resettlement claims would be effectively extinguished.
And, of course, in further contrast to what the minister was being led to believe would be the effect of the MPA on the Chagossians hopes of resettlement, Ms Yeadon was recorded in the cable as encouraging US embassy officials to affirm that the US government required the entire BIOT for defence purposes so as to nullify the Chagossians assertion that partial settlement of the outer islands would have no impact on the use of Diego Garcia.
The circumstance that the decision to make the MPA rested with the minister does not immunise the process by which that decision was made from the possible taint of improper motive.
If those who advised the minister were actuated by such a motive but tailored their advice to the minister so as to conceal it, the fact that the minister took the decision does not render the underlying collateral purpose of no consequence.
The contrast between the advice given to the minister and the contents of the cable incidentally reinforces the need for an unrestrained cross examination of the witnesses, particularly because, as Lord Mance observed in para 40, the Divisional Court did not address the contradiction in the evidence of Mr Roberts and that of Ms Yeadon as to whether the former did in fact say that an MPA would put paid to resettlement.
Lord Mance has suggested (in paras 41 43) that even if Mr Roberts and/or Ms Yeadon had an improper motive, there is no conceivable reason to conclude that this affected the ultimate decision maker.
I am afraid that I cannot agree.
True it is, as the Court of Appeal observed in para 91 of its judgment, that the decision was personal to the Foreign Secretary.
True it may also be, as the Court of Appeal found, that the Foreign Secretary believed that the declaration of an MPA would redound to the credit of the government and, perhaps, to his own credit, although I am not at all clear as to the evidence on which the court drew to support that conclusion.
But, if the minister had been aware that the civil servants were recommending the establishment of an MPA with the covert purpose of ensuring that the Chagos Islanders ambition to return to their homeland would never be fulfilled, can it be said that his decision would be immune from challenge? Surely not.
It is not a question of reconfiguring the principle in Carltona Ltd v Commissioners of Works [1943] 2 All ER 560 so as to fix the Secretary of State with the knowledge, motives and considerations of civil servants.
Rather it is whether a decision of the Secretary of State, taken in ignorance of a concealed reason for the recommendation on which he acted, can be regarded as lawful.
In my judgment, a decision taken on a recommendation made to him without knowledge of the true reasons that it was made, cannot be upheld on the basis that it was a decision made without regard to material factors.
On the premise that the advice to the Foreign Secretary was fashioned so as to withhold from him the true motivation for it, his decision is impeachable because he was deprived of the opportunity to consider all relevant circumstances and, on that account, it could not stand.
Again, it is suggested that this was not argued on behalf of the appellant before this court.
For the reasons given earlier, I do not accept that this is a basis on which the point may be ignored, if it has validity.
Lord Mance has stated, however, that the withholding of such information, if it were deemed sufficient to undermine a ministerial decision, would lead logically to the conclusion that any irrelevant misconception possessed by any civil servant at any level in the civil service hierarchy in relation to any proposal ultimately reaching Cabinet level could undermine a Cabinet decision. para 48.
With much regret, I must register my profound disagreement with this statement.
In the first place, if the appellants case is made good, the purpose of Mr Roberts and Ms Yeadon was not the product of a misconception.
It was the outworking of a strategy to promote the establishment of the MPA for an ulterior motive.
A minister whose imprimatur was required to endorse the advice given would surely need to be aware of the true motive for recommending the course that he had been advised to follow, in order that his decision be immune from challenge.
There is no logical connection between the withholding of vital, relevant information from a decision maker and his failure to be aware of a misconception on the part of those advising him.
The fact that the Foreign Secretary rejected the proposal that he should consult on the proposal is nothing to the point, in my opinion.
He decided to proceed with the MPA on the basis of advice that it would not, of itself, eliminate the chances of resettlement of the Chagos Islands.
If, contrary to that advice, it was the view of the civil servants that the MPA would achieve precisely that aim, the minister should have been aware of it.
Not being informed of it meant that he was not in a position to take all material considerations into account.
I consider, therefore, that the Court of Appeal should have recognised that there was a substantial possibility that, not only would the Divisional Court have taken a different view of the evidence of Mr Roberts and Ms Yeadon, if they had admitted the cable and the case had proceeded to its conventional conclusion, but that there was an equally substantial possibility that it would have concluded that the Foreign Secretarys decision could be impugned because it was taken on a misapprehension of the true facts and circumstances.
For these reasons, I would have allowed the appeal and ordered that the matter be remitted for hearing before a Divisional Court with the direction that it be reconsidered on the basis that the cable was admissible in evidence.
Fishing rights
I agree with Lord Mance on the issue of fishing rights.
LADY HALE:
This case is of huge importance to the Chagossians in their campaign to be permitted to re settle in their islands and to fish in the waters surrounding them.
On the substance of the appeal, I agree with Lord Kerr that we cannot be confident that the findings of the Divisional Court would have been the same had the Wikileaks cable been admitted into evidence and counsel been permitted to cross examine the FCO officials upon it.
The crucial legal issue in the case is therefore the admissibility of the cable, which is a matter of considerable importance both nationally and internationally.
I agree with both Lord Mance and Lord Sumption that inviolable in articles 24 and 27(2) of the Vienna Convention on Diplomatic Relations in general means, among other things, that the archives and documents (article 24) and the official correspondence (article 27(2)) of the mission cannot generally be admitted in evidence, at least in the courts of the receiving state, because to do so would interfere in the privacy of the communications of the mission, both internally and with its sending government.
The question, therefore, is when such inviolability is lost.
In Lord Mances view, the cable did not remain part of the archive of the London mission once it had been remitted to the State Department or some other location for information and use there (para 20).
It is indeed very probable that the leak did not take place from the mission but from elsewhere in the United States government.
Nevertheless, as the main purpose of the inviolability rule is to allow the mission to communicate in confidence with the sending government, documents emanating from a mission must retain their confidentiality and consequent inviolability in some circumstances.
Lord Sumption agrees with Lord Mance but bases this on the principle of control.
Documents, he says, are inviolable if they are under the control of the missions personnel, as opposed to other agents of the sending state (para 68).
I can agree with this only if it is understood that control includes the restrictions placed by the sending mission (and for that matter the sending state communicating with the mission) on the further transmission and use of the document.
It is my understanding of civil service practice in this country that the initiator of a document decides upon the appropriate level of confidentiality and marks the document accordingly.
Other persons within government who receive the document are bound to respect that marking. (Cabinet Office, Government Security Classifications, April 2014, eg para 28.) It is reasonable to assume that other countries have similar practices in their intra governmental communications.
It cannot be the case that a diplomatic communication loses its inviolability once it has left the mission.
The concept of control must include the restrictions placed by the sending mission on the dissemination of the communication, subject to the directions of their superiors in the sending state.
In both versions of the Wikileaks cable which we have one published in the Guardian and one in the Daily Telegraph it was classified Confidential by Political Counsellor Richard Mills for reasons 1.4b and d (whatever they may be).
That indicates a rather low level of control exercised over the document, which obviously found its way into many hands before it was acquired and put into the public domain by Wikileaks.
Whatever may be the position in relation to other documents passing between a mission and their sending department, it seems clear in this case that whatever control there had initially been exercised over this document, it was lost even before it was put into the public domain.
I therefore agree that it was no longer inviolable and should have been admitted in evidence in this case.
As Lord Kerr has explained, its contents were such that they could have made a difference to the result.
I would therefore have allowed this appeal.
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The Appellant is the chair of the Chagos Refugees Group.
He represents residents of the Chagos Archipelago in the British Indian Ocean Territory (BIOT) who were removed and resettled elsewhere by the British Government between 1971 and 1973 and were prevented from returning.
Following earlier proceedings, it remains prohibited under the BIOT Constitution and Immigration Orders 2004, for Chagossians to return to BIOT.
In these proceedings the Appellant challenged the decision of the Respondent to establish a marine protected area (MPA) in which there would also be no fishing in April 2010 in BIOT.
This led to an end of commercial fishing carried on by Chagossians in the waters surrounding BIOT.
The Appellants challenge before the Supreme Court had two limbs: (i) the Respondents decision was motivated by the improper ulterior motive of making future resettlement by the Chagossians impracticable, and (ii) the consultation which preceded the decision was flawed by a failure to disclose the arguable existence, on the part of Mauritius, of inshore fishing rights (i.e. within a 12 mile limit from the BIOT shore).
A sub issue within limb (i) concerned the admissibility of a document which formed the core of the Appellants case.
The document, which was published by The Guardian on 2 December 2010 and The Telegraph on 4 February 2011, purported to be a communication cable sent on 15 May 2009 by the US Embassy in London to departments of the US Federal Government in Washington DC, to elements in the US military command structure and to the US Embassy in Mauritius.
The cable is recorded as having been sent to the newspapers by Wikileaks.
It claims to be a record of conversations between employees (Mr Roberts and Ms Yeadon) of the Foreign and Commonwealth Office (FCO) and US officials.
In the Administrative Court, permission was initially given to cross examine Mr Roberts on the cable.
This was to be on the assumption that the cable was what it purported to be and that it would be open to the Appellant, at the end of the hearing, to submit that it was an accurate record of the meeting and that the Court should rely on it evidentially.
Various questions were put to Mr Roberts on that basis.
Following further submissions from the Respondent concerning the inviolability of the US missions diplomatic archive under the Vienna Convention on Diplomatic Relations 1961 (VCDR) and the Diplomatic Privileges Act 1964, the Administrative Court reversed its position.
The Appellant was no longer able to invite the Court to treat the cable as genuine.
Further cross examination of Mr Roberts and Ms Yeadon was to proceed on that basis.
The Court of Appeal considered that the cable should have been admissible but that its exclusion before the Administrative Court would not or could not have made any difference to that courts conclusions on improper purpose.
The Supreme Court unanimously holds that the cable should have been admitted into evidence before the Administrative Court.
Lord Mance and Lord Sumption (with whom Lord Neuberger, Lord Kerr,
Lord Clarke, and Lord Reed agree) and Lady Hale write concurring judgments on the issue of the admissibility of the cable.
A majority of the Court led by Lord Mance with whom Lord Neuberger, Lord Clarke, Lord Sumption and Lord Reed agree, dismisses the appeal on limb (i).
The exclusion of the cable by the Administrative Court could have had no material effect on the outcome regarding improper motive.
Lord Kerr and Lady Hale dissent on limb (i) of the appeal.
The Court unanimously dismisses the appeal on limb (ii).
Admissibility of the Cable In his judgment Lord Mance holds that the cable had lost its inviolability, for all purposes, including its use in cross examination or evidence in the present proceedings [21 and 90].
The inviolability of documents which are part of a mission archive under arts 24 and 27(2) of the VCDR makes it impermissible to use such documents (or copies) in a domestic court of the host country, absent extraordinary circumstances such as state security, or express waiver from the mission state [17 and 20].
This principle is subject to two qualifications: (a) the document must constitute and remain part of the mission archive, and (b) its contents must not have become so widely disseminated in the public domain so as to destroy any confidentiality or inviolability that could sensibly attach to it.
Regarding (a), in the present case, once the cable reached the State Department or any other addressee, the copy in their hands became a document in the custody of the US Federal Government and not part of the London Embassy archive.
As a matter of probability, the cable was extracted from the State Department or one of the foreign locations to which it had been transmitted.
On that basis the cable is admissible [20].
Regarding (b), it is in principle possible for a document to lose inviolability where it comes into the public domain, even in circumstances where the document has been wrongly extracted from the mission.
The cable has been put into the public domain by the Wikileaks publication and the newspaper articles which followed, in circumstances for which the Appellant has no responsibility.
On that ground, the cable would also be admissible [21].
In his judgment, Lord Sumption concludes that a document is part of the archives of a diplomatic mission when it is under the control of the missions personnel, as opposed to other agents of the sending state, whether directly or by virtue of the terms on which the mission transmitted the document to another governmental entity.
The documents origin and contents are irrelevant to that issue [68].
The confidentiality and inviolability of such documents depends not on their subject matter or contents but on their status as part of the archives or documents of a diplomatic mission, protected by art 24 of VCDR [69].
It is the obligation of the receiving state to give effect to that status, which includes preventing its infringement by other parties.
Thus, a court as an organ of the state would violate art 24 if it received and used material from the archives of a mission which came into the hands of a third party without authority [70 71].
This is subject to a reservation.
Documents obtained from the archives of a mission without authority but which have entered the public domain and are freely available have already had their confidentiality destroyed.
A court would not be an instrument of the destruction of its confidentiality by using it in that circumstance [74 75].
The Respondents cross appeal on this issue faces two distinct difficulties (a) the cable did not emanate from the US mission in London and (b) the document has entered the public domain [76].
Lady Hale agrees with both Lord Mance and Lord Sumption that the inviolability of the archives, documents and official correspondence of a mission means that they cannot generally be admitted in evidence under arts 24 and 27(2) of VCDR [124].
However, Lady Hale introduces the qualification to the judgments given by Lord Mance and Lord Sumption that documents emanating from a mission must retain their confidentiality and consequent inviolability in some circumstances, the main purpose of the inviolability rule being to allow the mission to communicate in confidence with the sending government [125]; and that control must include restrictions placed by the sending mission on the further transmission and use of the document, such as markings of confidentiality [126 127].
However, in this case, whatever control was initially exercised over the document, it had found its way into many hands and was lost even before it was put into the public domain by Wikileaks.
As such, it was no longer inviolable and should have been admitted in evidence: [127 128].
Improper Motive Lord Mance (with whom Lord Neuberger, Lord Clarke, Lord Sumption and Lord Reed agree) concludes that the Court of Appeal was correct to conclude that the Administrative Courts ruling that the cable was inadmissible had no material effect on the outcome of proceedings and was not a ground for allowing the appeal or for concluding that the motivation for creating the MPA was improper [49].
The appropriate test is whether the admission of the cable for use in cross examination and to weigh against other evidence could have made a difference (however, the precise test must depend on the context, including how well placed the court is to judge the effect of any unfairness) [23 24].
This is in substance how the Court of Appeal approached the issue [24].
The Administrative Court undertook a full and careful review of the genesis and development of, and decision to announce, the MPA and no take zone [24].
Neither further cross examination on the cable, nor the cable itself admitted as evidence, would have led to any different outcome before the Administrative Court [42].
The Administrative Court heard cross examination of Mr Roberts and Ms Yeadon on important passages of the cable [37].
Both gave evidence that was generally and substantially consistent with the cable [39].
The cable is at the very lowest ambiguous as to whether references to resettlement were uttered in circumstances indicating that they had a role in motivating the proposal for an MPA.
It seems very unlikely that a British civil servant would have disclosed an improper motivation of this nature, rather than outlining the practical consequences of an MPA which is what would have concerned the Americans [40].
Furthermore, even if Mr Roberts and/or Ms Yeadon did have and voice illegitimate motives for the proposal for an MPA, this was not apparent and there is no conceivable basis for thinking that this affected the ultimate decision to create the MPA, which was taken personally by the Respondent after presentation to him on a basis to which no objection is taken [43 49].
Lord Kerr (with whom Lady Hale agrees) dissents on the issue of improper motive.
They would have allowed the appeal and remitted the case on limb (i).
They consider that the Court of Appeal should have recognised that there was a substantial possibility that the Administrative Court would have taken a different view of the evidence of Mr Roberts and Ms Yeadon if they had admitted the cable and the case had proceeded to its conventional conclusion [121 and 128].
The correct test to be applied by the Court of Appeal is what might have happened if the cable was admitted in evidence not what would have happened [106 112].
The exclusion of the cable restricted the cross examination of Mr Roberts and Ms Yeadon because it was not possible to challenge their testimony where it was inconsistent, on the basis that the document was genuine [91].
Excluding the cable from evidence also meant that it did not rank as independent material and as a significant counterweight to the FCO witnesses testimony [93].
Further, there was an equally substantial possibility that the Court of Appeal would have concluded that the Respondents decision could be impugned because it was taken on a misapprehension of the true facts and circumstances [121].
Fishing Rights Lord Mance (with whom all of the other Justices agree) considers that permission to appeal should be given on this issue, but the appeal dismissed [50 and 63].
The absence of any mention of Mauritian fishing rights, whether by reference to an undertaking given by the UK Government and preferential treatment of Mauritian registered or owned vessels or evidence about such rights, does not undermine the Governments consultation so as to justify setting it aside.
The creation of a no fishing MPA would obviously affect inshore fishing and threaten the livelihood of vessels which had previously been licensed to fish in territorial waters.
It was open to Mauritius to raise this objection in response to the consultation, but it did not.
It would be inappropriate to treat the consultation process as invalid when the party to whom the rights allegedly belonged had full opportunity to assert them.
There is also no reason to believe that the ultimate decision would or could have been any different if the consultation had specifically drawn attention to the possible existence of Mauritian fishing rights [62 and 122].
The UN Convention on the Law of the Sea arbitral tribunals finding that such fishing rights do actually exist and their effect in domestic law, as regards the MPA or no take zone, was not relied on or capable of being relied on before the Supreme Court or relevant to the issues arising [50 57, 63].
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The issue to which this appeal gives rise is whether the landlord of a block of flats is entitled, without breach of covenant, to grant a licence to a lessee to carry out work which, but for the licence, would breach a covenant in the lease of his or her flat, where the leases of the other flats require the landlord to enforce such covenants at the request and cost of any one of the other lessees.
As the Court of Appeal observed, such covenants are common and so the issue is an important one.
This particular dispute concerns the leases of the flats in 11 13 Randolph Crescent in Maida Vale.
The leases are, in all relevant respects, in substantially the same form and each of them contains an absolute covenant, clause 2.7, which prevents the lessee from cutting into any roofs, walls, ceilings or service media.
They also contain a landlords covenant, clause 3.19, requiring it to enforce, at the request and cost of any lessee, certain covenants in the leases held by the other lessees, including any covenant of a similar nature to clause 2.7.
It is accepted that such clauses are commonly found in the leases of flats located in apartment blocks.
The question is whether the grant by the landlord to a lessee of a licence to carry out an activity falling within clause 2.7 amounts to a breach of clause 3.19 of its agreements with all of the other lessees.
The leases
11 13 Randolph Crescent comprises what were originally two mid terrace houses, but it is now a single block separated into nine flats.
It formed part of the Church Commissioners Maida Vale estate.
In the 1980s the Church Commissioners granted long leases to purchasers of the flats.
The term of each of the leases was 125 years from 24 June 1981.
Two of the leases (those of flats 11G and 11H) are now held by the respondent, Dr Julia Duval.
A third lease (that of flat 13RC) is held by Mrs Martha Winfield.
By a transfer dated 17 June 1986 the freehold of the building was transferred to the appellant landlord.
The landlord is also the management company.
All of the shares in the landlord are owned by the leaseholders of the flats, as the leases themselves require.
The lease of each flat demises the internal parts of the flat including all internal non load bearing, non dividing walls; one half (severed vertically) of internal, non load bearing, dividing walls; the internal surfaces of external walls and of load bearing walls; the floor and horizontal structures underneath the floor; the ceiling of the flat, but not the horizontal structures immediately above it; and conduits exclusively serving the flat.
But the lease expressly excludes, among other things, the outer and load bearing walls of the building; load bearing or structural columns and beams; the external surfaces of window frames; and any conduits not exclusively serving the flat.
The lessees obligations are set out in clause 2.
They include covenants to pay the reserved rents and service charges (clause 2.1 and the third schedule); covenants to repair, clean and decorate the demised premises (clauses 2.4 and 2.5); covenants to permit the landlords agents to enter the premises and, among other things, construct any building or erection on any land adjoining or neighbouring the building or the demised premises (clause 2.8); and covenants aimed at securing that the lessees of the flats, and they alone, hold shares in the management company, that is to say the landlord (clause 2.10.4).
Clause 2.6 is concerned with alterations, improvements and additions and reads: Not without the previous written consent of the Landlord to erect any structure pipe partition wire or post upon the Demised Premises nor make or suffer to be made any alteration or improvement in or addition to the Demised Premises.
This is therefore a covenant which is qualified by reference to the landlords consent.
However, by operation of section 19(2) of the Landlord and Tenant Act 1927, such consent is not to be unreasonably withheld.
Clause 2.7 is entitled waste and reads: Not to commit or permit or suffer any waste spoil or destruction in or upon the Demised Premises nor cut maim or injure or suffer to be cut maimed or injured any roof wall or ceiling within or enclosing the Demised Premises or any sewers drains pipes radiators ventilators wires and cables therein and not to obstruct but leave accessible at all times all casings or coverings of Conduits serving the Demised Premises and other parts of the Building.
In contrast to clause 2.6, this is an absolute covenant.
There are two further aspects of it that I must mention at this stage.
First, there may be thought to be a degree of overlap between the activities to which it refers and those the subject of clause 2.6.
For example, improvements and alterations, which are the subject of clause 2.6, may involve removing and replacing radiators, wiring, cabling and the like, and these are activities which are specifically mentioned in clause 2.7.
The common approach of the parties was that clause 2.7 therefore sets boundaries to the activities that fall within clause 2.6.
In other words, any activity which falls within the scope of clause 2.7 is necessarily outside the scope of clause 2.6.
That is of course one possible interpretation of the relationship between them.
But it is not the only one and for reasons to which I will come, it is not one which I favour.
Secondly, although not qualified by reference to the landlords consent, it is common ground that, as between the landlord and the lessee, the landlord has the power to license what would otherwise be a breach of this covenant.
But, as the Court of Appeal emphasised, it does not follow that by doing so the landlord will not be in breach of a collateral contract as between the landlord and another lessee.
Here, and as will become clear, Dr Duval contends that there is such a collateral contract and that by granting such a licence the landlord will be acting in breach of its terms, and in particular clause 3.19.
Clause 2.14.2 requires the lessee to pay to the landlord all costs, charges and expenses it incurs on any application by the lessee for any licence or consent in connection with the lease.
The fifth schedule to each lease contains various rules and regulations about the use of the property with which the lessee must comply.
These include prohibitions on allowing rubbish to accumulate in the flat, playing musical instruments at certain times of day, hanging clothes outside the flat, placing window boxes on external windowsills, and parking cars in any yard, garden or driveway of the building.
The landlords covenants are set out in clause 3.
They include a covenant that the lessee shall have quiet enjoyment of the demised premises (clause 3.1); a covenant to maintain and keep in good and substantial repair the main structure of the building and all of the conduits and ducts in the building (save for those which exclusively serve any of the demised premises) (clause 3.3); covenants to maintain, cleanse and keep in good and substantial repair the common parts of the building (clause 3.4); and covenants periodically to decorate the building and the common parts (clauses 3.5 and 3.6).
Clause 3.19 is of particular importance and reads: every lease of a residential unit in the Building hereafter granted by the Landlord at a premium shall contain regulations to be observed by the tenant thereof in similar terms to those contained in the Fifth Schedule hereto and also covenants of a similar nature to those contained in clauses 2 and 3 of this Lease AND at the request of the Tenant and subject to payment by the Tenant of (and provision beforehand of security for) the costs of the Landlord on a complete indemnity basis to enforce any covenants entered into with the Landlord by a tenant of any residential unit in the Building of a similar nature to those contained in clause 2 of this Lease.
The dispute and the judgments below
In the spring of 2015, Mrs Winfield approached the landlords managing agents for a licence to carry out proposed works to flat 13RC.
These works would involve, among other things, removing a substantial part of a load bearing wall at basement level.
It was common ground that they would amount to a breach of clause 2.7 of Mrs Winfields lease if not specifically authorised by the landlord.
Progress was made towards the agreement of a licence but, the proposed works having come to the attention of Dr Duval and her husband and they having objected, the licence was refused.
However, following presentations by the engineers and architects acting for Mrs Winfield, the landlord reconsidered the matter and, having done so, decided it was minded to grant a licence, subject to Mrs Winfield securing adequate insurance.
In December 2015 and then again in February 2016, Dr Duval asked the
landlord to secure an undertaking from Mrs Winfield not to act in contravention of clause 2.7 of her lease by cutting or maiming any of the load bearing or structural walls within flat 13RC.
On both occasions, Dr Duval said that the landlord would be indemnified if legal action became necessary.
On 12 May 2016 Dr Duval began these proceedings by issuing a claim form against the landlord seeking, among other things, a declaration that the landlord did not possess the power to permit Mrs Winfield to act in breach of clause 2.7 of her lease.
The proceedings came on for trial before Deputy District Judge Chambers who held that, on the proper interpretation of clause 3.19 of the lease, the landlord had no power to waive any of the covenants in clause 2 without the prior consent of all of the lessees of the flats in the building, and made declarations and orders to that effect.
An appeal by the landlord was allowed by Judge Parfitt, sitting in the Central London County Court, by order dated 27 July 2017.
In broad terms he held that the landlord had the power to license works that would otherwise amount to a breach of clause 2.7 of the lease; that if such works were licensed they would not amount to a breach of covenant; and that, once licensed, such works could not be the subject of enforcement action pursuant to clause 3.19.
A further appeal by Dr Duval to the Court of Appeal was allowed for the reasons set out by that court in its judgment handed down on 18 October 2018 ([2018] EWCA Civ 2298; [2019] Ch 357).
Lewison LJ, with whom Newey LJ and Sir Stephen Richards agreed, explained that the landlord had made two promises in clause 3.19.
The first was a promise that every lease of a residential unit in the building granted at a premium would contain covenants similar to those in clauses 2 and 3, so including covenants similar to those in clauses 2.7 and 3.19.
The second was a promise to enforce the covenants at the request and expense of a lessee.
This was a contingent obligation, the relevant contingency being the lessees request and the provision of security.
If the contingency arose then the landlords obligation was triggered.
Lewison LJ proceeded on the assumption that the contingency had not arisen on the facts in the present case and we must do the same.
Lewison LJ then answered the question of principle set out at para 1 above in the negative.
He held that if the landlord were to grant to a lessee such as Mrs Winfield a licence to do something that would otherwise be a breach of any of the absolute covenants in clause 2.7 of her lease, it would be committing a breach of its agreement with the lessee of each other flat in the building who enjoyed the benefit of clause 3.19.
This was, he thought, implicit in clause 3.19, and it would be the case not only where, at the date of the licence, the other lessee had already made the request and provided the necessary security called for by clause 3.19, but also where the obligation under that clause remained contingent.
The Court of Appeal therefore made a declaration to the effect that the waiver by the landlord of a breach of the covenant in clause 2.7 by a lessee or the grant of a licence to commit what would otherwise be a breach of that covenant would amount to a breach of clause 3.19 of the leases held by all of the other lessees in the building.
This appeal
On this further appeal the landlord contends that, although the Court of Appeal identified the right question, it failed to answer it correctly.
In particular, the Court of Appeal failed properly to construe the terms of the leases in their context; failed properly to analyse whether the term it implied satisfied the relevant test for the implication of terms; and ended up with a commercially unworkable scheme, which was not that which was contemplated by the parties to the leases when they were granted, and which is a recipe for chaos and conflict in multi tenanted buildings.
Dr Duval responds that the Court of Appeal arrived at the right conclusion.
Her primary case is that clause 3.19, on its proper construction, precludes the landlord from granting a licence to any lessee to do anything that would otherwise amount to a breach of an absolute covenant in that lessees lease, including clause 2.7.
Her secondary case is that it is implicit in each lease that the landlord will not put it out of its power to comply with a request under clause 3.19.
She submits that upon its proper interpretation or by way of implication clause 3.19 obliges the landlord to enforce all of the covenants to which it refers and provides a mechanism whereby a lessee can compel the landlord to take legal action if necessary.
By contrast, she continues, the interpretation contended for by Mrs Winfield would remove any meaningful distinction between clauses 2.6 and 2.7 and would allow the landlord to put it out of its power to perform its obligations to other lessees under clause 3.19 of each of their leases.
The parties therefore disagree fundamentally about the proper interpretation of the terms in the leases which Dr Duval and Mrs Winfield hold.
Accordingly, the starting point must be to construe those terms in context, that is to say to ascertain the meaning which they would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties to each lease in the situation in which they were when the terms of those leases were agreed.
Once the process of construing the express words is complete, the issue of an implied term falls to be considered.
The rationale for this two stage approach was explained by Lord Neuberger of Abbotsbury in Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742, paras 27 and 28: until one has worked out what the parties have expressly agreed, it is difficult to see how one can decide whether a term should be implied into a contract and, if so, what it is.
The background
There are in my view certain aspects of the background which are highly relevant to the exercise of interpretation which must be carried out.
The first is that each lease is a long term contract, having a term of 125 years from 24 June 1981, and was acquired for a substantial premium.
The parties to each lease would therefore have been well aware that, from the time of its grant, it was a readily marketable and extremely valuable asset.
They would also have understood that it would be in the interests of each lessee to maintain his or her flat so as to retain and perhaps enhance that value.
Secondly and importantly, the parties would have appreciated that over the lifetime of the lease it would inevitably be necessary for works to be carried out to each of the flats.
Those works would include the routine repair and replacement of the plumbing, drainage, wiring and heating systems of each flat as necessary or thought desirable from time to time.
They would also have been well aware that the lessees might at any time wish to modernise their flats or refurbish them to reflect changing tastes and fashions; or to incorporate technological developments and improvements relating to, for example, the supply of services such as water, gas and electricity, the provision of heating, or the transmission and reception of data for telecommunications, the internet or television.
Thirdly, the parties would have understood that routine improvements and modifications of this kind would be unlikely to impinge on the other lessees or affect adversely the wider structure or fabric of the building and that it would be entirely sensible for the landlord to be in a position, where appropriate, to give permission to the lessees from time to time to allow such works to take place.
Fourthly, the parties must have appreciated the desirability of the landlord retaining, in the interests of all of the lessees, not just the reversionary interest in the flats but also the rights in possession of the common parts of the building such as the stairwells, lobbies, corridors and the outer and load bearing walls; and similarly, the important and active role the landlord would play in managing the building and fulfilling its obligations under the covenants to which I have referred in para 14 above.
Clauses 2.6 and 2.7 interpretation
Against this background I come to clauses 2.6 and 2.7.
As I have mentioned, it was the common approach of the parties (and the Court of Appeal apparently accepted) that clause 2.7 sets the boundaries of clause 2.6.
To take an example, a routine rewiring of one room in a flat would necessarily involve cutting a wire and a wall.
On the parties interpretation, an activity such as this would fall within the scope of clause 2.7 and so would necessarily be outside the scope of clause 2.6.
Indeed, it is difficult to think of any alteration or improvement within the apparent scope of clause 2.6 which would not involve some cutting of a wall, pipe or wire.
It seems to me to be most unlikely that the parties intended that routine works of this kind should fall within the scope of clause 2.7 and so outside the scope of clause 2.6 with the consequence that the landlord could, however unreasonably, withhold its consent.
It is much more likely, in my opinion, that the parties intended the two provisions to be read together in the context of the lease and the leasehold scheme for the building as a whole.
On that approach it becomes clear that the two clauses are directed at different kinds of activity.
Clause 2.6 is concerned with routine improvements and alterations by a lessee to his or her flat, these being activities that all lessees would expect to be able to carry out, subject to the approval of the landlord.
By contrast, clause 2.7 is directed at activities in the nature of waste, spoil or destruction which go beyond routine alterations and improvements and are intrinsically such that they may be damaging to or destructive of the building.
It seems to me that this concept of waste, spoil or destruction should also be treated as qualifying the covenants not to cut, maim or injure referred to in the rest of the clause.
In my opinion and in the context of this clause these words do not extend to cutting which is not itself destructive and is no more than incidental to works of normal alteration or improvement, such as are contemplated under clause 2.6.
Support for this view may be found in F W Woolworth and Co Ltd v Lambert [1937] Ch 37.
There the Court of Appeal considered the proper interpretation of two covenants in the lease of a shop, one being a covenant by the lessee not to make any alterations to the demised premises without the consent of the landlord and the other being an absolute covenant by the lessee not to commit any waste, spoil or destruction on the demised premises or any part of it.
The court construed the absolute covenant in such a way as not to conflict with the qualified covenant.
As Romer LJ explained at p 60, it was necessary to exclude from the operation of the absolute covenant anything which fell within the qualified covenant, not the other way around.
It must also be remembered that the landlord is subject to other restrictions
on its ability to license a lessee to make alterations to his or her flat and in my opinion this provides further support for the interpretation of clauses 2.6 and 2.7 which I would hold to be correct.
First, each lessee enjoys the benefit of a covenant for quiet enjoyment, that is to say a covenant that the lessees possession of his or her own flat will not be substantially interfered with by the landlord or anyone claiming under the landlord.
This protects the right of all of the lessees to use their flats in ordinary and lawful ways.
So, for example, regular excessive noise generated by one lessee may constitute a substantial interference with the ordinary enjoyment of the premises of another lessee: Southwark London Borough Council v Mills [2001] 1 AC 1, per Lord Hoffmann at pp 10A 11C; per Lord Millett at p 23B D.
Secondly, the landlord must not derogate from its grant.
As Lord Millett explained in Southwark v Mills at p 23F, the principle underpinning this obligation and the covenant of quiet enjoyment is much the same: a man may not give with one hand and take away with the other.
In order to determine whether a specific act or omission on the part of the landlord constitutes a derogation from grant, it is obviously necessary to establish the extent of the grant.
Here the first schedule of Dr Duvals leases contain, for example, rights of way and passage to and from the demised premises (para 2); the free passage and running of water, soil, gas, electricity and other services in and through the conduits that pass through the building (para 4); and the right to adjacent and lateral support and to shelter and protection from adjoining premises (para 5).
Were the landlord to permit a neighbouring lessee to cut into a load bearing wall in such a way as to remove or substantially interfere with the support it offered to either of Dr Duvals flats, it would, in my opinion, constitute a clear derogation from her grant.
Thirdly, each of the lessees is entitled to be protected against nuisance, that is to say, in this context, the doing of something to or in a neighbouring or nearby flat which constitutes an unreasonable interference with the utility of his or her own flat.
The primary defendant in such a case is the lessee who causes the nuisance by doing the act in question, but the landlord will be liable if it has authorised the lessee to commit that nuisance: Southwark v Mills at p 15D F per Lord Hoffmann, pp 21H 22B per Lord Millett.
Finally, the landlord has covenanted with the lessee in the terms of clause 3 of the lease.
I have referred to this clause earlier in this judgment.
Of particular importance here are the covenants to maintain and keep in good and substantial repair the structure of the building including the foundations, main walls, roofs, doors and window frames and conduits (clause 3.3); to maintain, cleanse and keep in good and substantial repair the common parts of the building (clause 3.4); to decorate the outside of the building and inner common parts (clauses 3.5 and 3.6); and to keep the common parts clean and properly lit (clause 3.7).
Clause 3.19 interpretation
As the Court of Appeal observed, clause 3.19 has two parts.
The first is a promise by the landlord that every lease of a flat in the building granted by the landlord at a premium from that point in time will contain covenants of a similar nature to those contained in clauses 2 and 3 of the lease.
The Court of Appeal emphasised and I agree that a covenant is a legally binding obligation and so the landlord promised that each lease granted thereafter would contain similar legally binding obligations on the lessee.
The landlord also promised that each lease would contain a covenant similar to clause 3.19; that is to say a promise by the landlord that it would enforce covenants of a similar nature to those contained in clause 2, provided the relevant conditions were satisfied.
The second part of clause 3.19 is a promise by the landlord that it will, at the request of a lessee and subject to the provision of the required security and the promise to pay the landlords costs on an indemnity basis, enforce any covenant entered into by another lessee which is of a similar nature to any of the covenants contained in clause 2 of the lease of the complainant lessee.
The landlord points out that clause 3.19 does not say that the covenants in each lease must be the same; it says they must be of a similar nature.
This, says the landlord, accommodates the possibility that it has, on occasion and at the request of one of the lessees, agreed to a limited departure from the terms of clause 2.7.
Turning to the second part of clause 3.19, the landlord emphasises that this is conditional.
The objecting lessee must make a request and agree to pay the costs of the landlord on an indemnity basis and provide appropriate security.
What the landlord has to do, once those conditions have been satisfied, is to enforce similar covenants in the lease of the lessee who proposes to carry out or is carrying out the work the subject of the objection.
However, the landlord continues, clause 3.19 only allows a valid request for enforcement to be made so long as it remains legally possible for the landlord to take legal action.
The parties cannot have contemplated the landlord could be obliged to take action against a lessee who would have a complete defence to that action, for example because the landlord had authorised the activity complained of in advance.
The landlord also contends that, if a lessee applies for a licence to do what would, without the licence, be a breach of covenant, the lessee does not, simply by making that request, commit or threaten to commit a breach in respect of which the landlord can take enforcement action, and so there is no basis for another lessee to make a clause 3.19 request.
If, on the other hand, there is a breach or threatened breach in relation to which a landlord can take legal action, and another lessee satisfies the various conditions to which I have referred, the landlord cannot then unilaterally waive the breach or authorise the threatened breach.
At that stage the landlord is made subject to the control of the objecting lessee, who has accepted the risk of proceedings.
Dr Duval responds and the Court of Appeal accepted that clause 3.19 provides a mechanism whereby every lessee knows that, if one lessee carries out or threatens to carry out an act in breach of a covenant by which it has agreed to be bound then any of the other lessees can require the landlord to take action to enforce that covenant.
This, says Dr Duval, is important because, in contrast to a letting scheme where a buildings lessees are given rights inter se so that each may enforce the covenants in each of the leases against each other, enforcement of the covenants of the leases of the units in this block can only take place by the landlord.
Further, Dr Duval continues, the inclusion of clause 3.19 in each lease provides a practical way of ensuring that all lessees know the principles and rules upon which the building will be operated and occupied.
Dr Duval accepts that, absent clause 3.19, the landlord and lessee would be free to agree a waiver of an absolute covenant or a licence to carry out a piece of work that would otherwise amount to a breach of its terms, but contends that in this case and as a result of the inclusion of clause 3.19 in each of the leases, any such waiver is precluded unless all of the other lessees agree to waive their rights.
Put another way, by undertaking to enforce the covenants of the lease, the landlord has undertaken not to do the opposite, namely to license breaches of covenant.
She argues that, were it otherwise, clause 3.19 would be ineffective.
In my opinion Dr Duval is right to say that, in the first part of clause 3.19, the landlord made a promise that every lease of a residential unit in the building granted by the landlord at a premium would contain covenants similar to those in clauses 2 and 3.
In other words, each lessee knew that every other lessee would be bound by similar covenants to those contained in clauses 2.6 and 2.7, and further, that each lease would contain a covenant similar to clause 3.19, that is to say a covenant by the landlord to enforce the covenants in the lease of every other lessee upon request and the provision of security for the landlords costs.
As Lewison LJ put it at para 16 of his judgment: From the perspective of a lessee who is paying a premium for the grant of a long lease, the combination of these two promises would be taken to mean that the lessee could be sure that upon request (and the provision of security) the landlord would enforce the covenants by which each lessee had agreed to be bound.
Those covenants would be in the form in which they appear in the leases as granted; and would have the practical effect that their appearance in that form was designed to have.
That brings me to the critical question, namely whether the landlord can license, at the request of a lessee, structural work which falls within the scope of clause 2.7 and which, absent a licence from the landlord, would amount to a breach of that clause.
I agree that clause 3.19 does not say expressly that the landlord cannot give a lessee permission to carry out structural work falling within the scope of clause 2.7, so it must now be considered whether this is nevertheless implicit in clause 3.19.
Implied term
It is well established that a party who undertakes a contingent or conditional
obligation may, depending upon the circumstances, be under a further obligation not to prevent the contingency from occurring; or from putting it out of his power to discharge the obligation if and when the contingency arises.
The principle was explained in these terms by Lord Alverstone CJ in Ogdens v Nelson [1903] 2 KB 287, 296: It is, I think, clearly established as a general proposition that where two persons have entered into a contract, the performance of which on one or both sides is to extend over a period of time, each contracting party is bound to abstain from doing anything which will prevent him from fulfilling the obligations which he has undertaken to discharge; further, that, where a person has undertaken to carry on a business, out of the profits of which he has undertaken to pay certain moneys as a consideration for the contract to the other party to the contract, he must not by his own act or default disable and incapacitate himself from further carrying on such business.
The principle is well illustrated by cases involving breaches of contracts to marry.
In Short v Stone (1846) 8 QB 358 the defendant agreed to marry the claimant within a reasonable time after request.
He broke that agreement by marrying somebody else before the request had been made, and in that way put it out of his power to comply with the request, if it were made.
In Caines v Smith (1847) 15 M & W 189 the defendant acted in breach of his promise to marry the claimant by marrying another woman, and it was no answer that the claimant had not asked the defendant to fulfil his promise before issuing proceedings.
characterised the principle as: In Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701, 717 Lord Atkin a positive rule of the law of contract that conduct of either promiser or promisee which can be said to amount to himself of his own motion bringing about the impossibility of performance is in itself a breach.
If A promises to marry B and before performance of that contract marries C, A is not sued for breach of an implied contract not to marry anyone else, but for breach of his contract to marry B.
Founding herself on these authorities, Dr Duval sought to characterise as a rule of law the proposition that, where two persons have entered into a contract, the performance of which on both sides is to extend over a period of time, each contracting party is bound to abstain from doing anything which will prevent him from fulfilling the obligations he has undertaken to discharge; and similarly, the proposition that, where one party has undertaken a contingent obligation, he will do nothing to prevent the contingency occurring, or from putting it out of his power to comply with the obligation when the contingency arises.
In my view, however, propositions such as these are, at least in general, more properly regarded as implied terms because, where appropriate, they involve the interpolation of terms to deal with matters for which the parties themselves have made no express provision.
Thus, for example, in Stirling v Maitland (1864) 5 B & S 840, 852, 122 ER 1043, 1047, Cockburn CJ said: I look on the law to be that, if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative.
As we have seen, in Southern Foundries v Shirlaw, Lord Atkin characterised this principle as a rule of law.
But Viscount Maugham (at pp 712 713) adopted an implied term approach.
He explained that it was not a rigid rule but one capable of qualification in any particular case; and, in the particular circumstances of that case, the implication should be taken to extend only to direct acts of a party and not to the indirect and unforeseen consequences which might follow from acts which, on the face of them, did not necessarily or even probably alter the state of circumstances under which alone the arrangement could be operative.
So too Lord Romer (at pp 730 731), Lord Wright (at p 723) and Lord Porter (at pp 741 742) preferred an implied term analysis.
Similarly, in Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 the parties agreed that if a party introduced by the respondent should buy two cinemas for a sum in excess of a certain figure, the appellants would pay him a commission on the completion of the sale.
The respondent alleged that he was entitled to his commission because he had introduced persons who were ready and willing to purchase the cinemas on the terms on which the appellants were willing to sell, even though no such sale took place.
In the particular circumstances of that case the House of Lords held there was no room in the contract for an implied term that the appellants would not dispose of the cinemas themselves in a way which would prevent the respondent from earning his commission.
The correct approach to the implication of terms was recently stated by Lord Neuberger, with whom Lord Sumption, Lord Hodge and Lord Clarke agreed, in Marks and Spencer plc v BNP Paribas, paras 14 32.
It is sufficient for present purposes to note first, that the express terms of the contract must be construed before one can consider any question of implication; secondly, that the term to be implied must be necessary to give business efficacy to the contract or so obvious that it goes without saying; and thirdly, that the term to be implied must be capable of clear expression.
A way of assessing whether a term is necessary to give business efficacy to a contract is to consider whether, without the term, the contract would lack commercial or practical coherence.
In this case Lewison LJ identified, at para 27 of his judgment, the term that Dr Duval argues is implicit in her lease as a promise by the landlord not to put it out of its power to enforce clause 2.7 in the leases of other lessees by licensing what would otherwise be a breach of it.
I agree with Lewison LJ that this is, in substance, the term that Dr Duval seeks to imply and, in my view and for the reasons I will now explain, he was also right to find that such a term must be implied in her lease.
The purpose of the covenants in clauses 2 and 3.19 is primarily to provide protection to all of the lessees of the flats in the building.
Each of those lessees would have known that every other lessee was and would continue to be subject to the same or similar obligations and, in particular, to the qualified covenant in clause 2.6 and the absolute covenant in clause 2.7.
Each lessee would also have known that, under clause 3.19, the landlord would, upon satisfaction of the necessary conditions, enforce those obligations.
Clause 3.19 would therefore have been understood by every lessee to perform an important protective function.
What is more and as the landlord accepts, the first obligation in clause 3.19 is a continuing one with the consequence that the landlord is required to keep in place in every lease covenants of a similar nature to those in clause 2, including clauses 2.6 and 2.7.
If a lessee threatens to carry out or has carried out an activity in breach of clauses 2.6 or 2.7 then, at the request of another lessee and on the provision of security, the landlord is obliged by the second part of clause 3.19 to take enforcement action.
In my view it necessarily follows that the landlord will not put it out of its
power to enforce clause 2.7 in the lease of the offending lessee by licensing the activity that would otherwise be a breach of that clause.
The clause is an absolute covenant and, under clause 3.19, the complainant lessee is entitled, on provision of security, to require the landlord to enforce it as an absolute covenant.
As Lewison LJ said at para 27 of his judgment, it would not give practical content to the obligation if the landlord had the right to vary or modify the absolute covenant or to authorise what would otherwise be a breach of it.
As I have mentioned, the landlord has abandoned on this further appeal a submission it made to the Court of Appeal that it could authorise a breach by a lessee of clause 2.7 at any time.
It now only argues that it can authorise such a breach up to the moment that an objecting lessee has asked it to take enforcement action and provided the necessary security.
It also contends that clause 3.19 allows a valid request for enforcement to be made for so long as it remains legally possible for it to take legal action and not thereafter.
The parties cannot have contemplated that the landlord would be obliged to take action against another lessee who would have a complete defence.
I cannot accept these submissions.
I recognise that if a landlord waives its right to complain of an activity by a lessee in breach of clause 2.7 it cannot subsequently bring a claim against that lessee for breach of the covenant.
But that does not mean to say that the landlord has not acted in breach of its obligation under clause 3.19 to another lessee.
In my view it would be uncommercial and incoherent to say, as the landlord does, that clause 3.19 can be deprived of practical effect if it manages to give a lessee consent to carry out work in breach of clause 2.7 before another lessee makes an enforcement request and provides the necessary security.
The parties cannot have intended that a valuable right in the objecting lessees lease could be defeated depending upon who manages to act first, the landlord or that lessee.
The landlord also argues that, over the lifetime of the leases, it was inevitable that each lessee would wish from time to time to carry out repairs, renovations or improvements falling within the scope of clause 2.7.
Those works might not impinge in any way on neighbouring flats; or on the landlords retained interest in possession of the load bearing walls, the structural columns and beams, the external surfaces of the building and the common parts such as the stairwells, lobbies and corridors.
The parties to the original leases must also have appreciated the obvious desirability of allowing the landlord, after proper consideration of the proposals, to grant a consent for works of that kind to be carried out.
Yet, the landlord continues, on the interpretation contended for by Dr Duval, it would be precluded from licensing any such works unless each and every other lessee has expressly consented to them.
It would also deprive the landlord of the opportunity to control the activities of a lessee which might impinge upon its own interests in possession in the building, and would place that power in the hands of all of the other lessees.
Further and importantly, says the landlord, it would confer on each of those other lessees the power to veto repairs, renovations or improvements, however capricious or unreasonable his or her intentions in doing so might be.
Moreover, in a large block of flats the landlord might struggle to obtain a response from all of the other lessees, so frustrating its ability to consent to the works without leaving itself open to a claim for breach of the terms of the other leases.
The flaw in this submission, as it seems to me, is that it is founded upon a misapprehension of the scope of clauses 2.6 and 2.7.
I do not accept that clause 2.7 extends to the kind of routine repairs, renovations and alterations which the landlord describes.
Those alterations fall within the scope of clause 2.6 and so the landlord can give its permission for them to be carried out.
By contrast, clause 2.7 is directed to more fundamental works which go beyond routine alterations and improvements and are intrinsically such that they may be damaging to or destructive of the building.
These are the kinds of work which it is entirely reasonable to suppose should not be carried out without the consent of all of the other lessees.
The present case provides a good example.
The work that Mrs Winfield wished to carry out would have involved, among other things, cutting into and removing a substantial portion of a load bearing wall at basement level and excluded from the demise of her flat.
In my view the parties were right to agree that this work would fall within the scope of clause 2.7 and it seems to me to be entirely appropriate that works of this kind should require the consent of the other lessees, including Dr Duval.
Conclusion
For all of these reasons, I would dismiss this appeal.
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11 13 Randolph Crescent is a block of nine flats in Maida Vale, London.
Two of the leases are held by the respondent, Dr Julia Duval, and a third lease is held by Mrs Martha Winfield.
The term of each lease is 125 years from 24 June 1981.
The appellant landlord owns the freehold of the building and is also the management company.
All of the shares in the landlord company are owned by the leaseholders of the flats.
The leases are, in all relevant respects, in substantially the same form.
Each of them contains a covenant, clause 2.6, which prevents the lessee from making any alteration or improvement in, or addition to, the premises demised by the lease without the prior written consent of the landlord.
By the operation of a statutory provision, that consent cannot be unreasonably withheld.
Each lease also contains an absolute covenant, clause 2.7, which prevents the lessee from cutting into any roofs, walls, ceilings or service media.
In addition, clause 3.19 of each lease requires the landlord to enforce, at the request and cost of any lessee, certain covenants in the leases held by the other lessees, including any covenant of a similar nature to clause 2.7.
In 2015, Mrs Winfield sought a licence from the landlord to carry out works to her flat.
The proposed works involved removing a substantial part of a load bearing wall at basement level.
The licence was refused after the proposal came to the attention of Dr Duval and her husband.
However, following presentations by engineers and architects acting for Mrs Winfield, the landlord decided it was minded to grant a licence, subject to Mrs Winfield securing adequate insurance.
Dr Duval then issued proceedings against the landlord, seeking a declaration that the landlord did not possess the power to permit Mrs Winfield to act in breach of clause 2.7 of her lease.
Deputy District Judge Chambers held that, on the proper interpretation of clause 3.19, the landlord had no power to waive any of the covenants in clause 2 without the prior consent of all of the lessees of the flats in the building.
An appeal by the landlord was allowed by the Central London County Court.
Dr Duval then appealed, successfully, to the Court of Appeal.
The landlord now appeals to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Kitchin gives the sole judgment, with which Lady Hale, Lord Carnwath, Lady Black and Lord Sales agree.
The starting point is to construe the terms of the leases in context [25].
There are certain aspects of the background which are highly relevant.
First, each lease is a long term contract and was acquired for a substantial premium [27].
Secondly and importantly, the parties would have appreciated that over the lifetime of the lease it would inevitably be necessary for works to be carried out to each flat [28].
Thirdly, the parties would have understood that routine improvements and modifications would be unlikely to impinge on the other lessees, or affect adversely the wider structure or fabric of the building, and that it
would be entirely sensible for the landlord to be in a position to permit such works from time to time [29].
Fourthly, the parties must have appreciated the desirability of the landlord retaining not just the reversionary interest in the flats but also the rights in possession of the common parts of the building.
Similarly, the parties must have appreciated the important and active role the landlord would play in managing the building and fulfilling its obligations under each lease [30].
Clauses 2.6 and 2.7 are directed at different kinds of activity.
Clause 2.6 is concerned with routine improvements and alterations by a lessee to his or her flat, these being activities that all lessees would expect to be able to carry out, subject to the approval of the landlord.
By contrast, clause 2.7 is directed at activities in the nature of waste, spoil or destruction which go beyond routine alterations and improvements and are intrinsically such that they may be damaging to or destructive of the building.
This concept of waste, spoil or destruction should also be treated as qualifying the covenants not to cut, maim or injure referred to in the rest of the clause.
In the context of this clause these words do not extend to cutting which is not itself destructive and is no more than incidental to works of normal alteration or improvement, such as are contemplated under clause 2.6.
This interpretation is supported by F W Woolworth and Co Ltd v Lambert [1937] 1 Ch 37 [32].
It must also be remembered that the landlord is subject to other restrictions on its ability to license alterations to a lessees flat.
First, each lessee enjoys the benefit of a covenant for quiet enjoyment [33].
Secondly, the landlord must not derogate from its grant [34].
Thirdly, each of the lessees is entitled to be protected against nuisance [35].
Finally, the landlord has covenanted with the lessee in the terms of clause 3 of the lease, which includes, for example, a covenant to maintain the structure of the building [36].
The critical question is whether the landlord can license structural work which falls within the scope of clause 2.7 and which would otherwise be a breach of that clause.
Clause 3.19 does not say expressly that the landlord cannot give a lessee permission to carry out such work, so it must be considered whether this is nevertheless implicit in clause 3.19 [43].
It is well established that a party who undertakes a contingent or conditional obligation may, depending upon the circumstances, be under a further obligation not to prevent the contingency from occurring or from putting it out of his power to discharge the obligation if and when the contingency arises [44].
The principle is well illustrated by cases involving breaches of contracts to marry, and implied terms can arise from it [45 50].
There is an implied term in Dr Duvals lease: a promise by the landlord not to put it out of its power to enforce clause 2.7 in the leases of other lessees by licensing what would otherwise be a breach of it [52].
That necessarily follows from a consideration of the purpose of the covenants in clauses 2 and 3.19 and the content of the obligations in clause 3.19.
Clause 2.7 is an absolute covenant and, under clause 3.19, the complainant lessee is entitled, on provision of security, to require the landlord to enforce it as an absolute covenant.
It would not give practical content to the obligation if the landlord had the right to vary or modify the absolute covenant or to authorise what would otherwise be a breach of it [53 55].
Further, it would be uncommercial and incoherent to say that clause 3.19 can be deprived of practical effect if the landlord manages to give a lessee consent to carry out work in breach of clause 2.7 before another lessee makes an enforcement request and provides the necessary security.
The parties cannot have intended that a valuable right in the objecting lessees lease could be defeated depending upon who manages to act first, the landlord or that lessee [57].
Clause 2.7 is directed at works which go beyond routine alterations and improvements and are intrinsically such that they may be damaging to or destructive of the building.
It is entirely appropriate that works of the kind Mrs Winfield wished to carry out should require the consent of the other lessees, including Dr Duval [59].
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By its judgment in this appeal dated 24 March 2010 the Supreme Court referred to the Court of Justice five questions regarding the nature and assessment of the concept of paid annual leave in articles 7 of Council Directives 93/104/EC and 2003/88/EC and clause 3 of the European Agreement annexed to and intended to be implemented under Council Directive 2000/79/EC (the Aviation Directive).
The Court of Justice by its judgment dated 15 September 2011 gave its response: British Airways plc v Williams (Case C 155/10) [2012] ICR 847.
The parties are now at odds as to its consequences for the dispute between them.
Clause 3 of the European Agreement reads: (1) Mobile staff in civil aviation are entitled to paid annual leave of at least four weeks, in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice. (2) The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated."
In the United Kingdom, The Civil Aviation (Working Time) Regulations 2004 (SI 2004/756) (the Aviation Regulations) were introduced to comply with this countrys obligations to give effect to Directive 2000/79/EC.
The Aviation Regulations provide:
(1) A crew member is entitled to paid annual leave of at least four weeks, or a proportion of four weeks in respect of a period of employment of less than one year. (2) Leave to which a crew member is entitled under this regulation (a) may be taken in instalments; (b) may not be replaced by a payment in lieu, except where the crew member's employment is terminated. 4.
As the Supreme Court explained in its judgment dated 24 March 2010 the Aviation Regulations are part of a wider complex of legislation requiring paid annual leave, starting with a general requirement introduced by Directive 93/104/EC (the Working Time Directive).
The Working Time Directive excluded various sectors, including air transport.
Further, when the Working Time Directive was implemented by the Working Time Regulations 1998 (SI 1998/1833) (the Working Time Regulations), these made specific reference to sections 221 to 224 (and by implication sections 234 to 235) of the Employment Rights Act 1996, which contain a detailed scheme (originally introduced in the context of redundancy pay) for ascertaining a weeks pay in the cases of employments with and without normal working hours.
In contrast, the Aviation Regulations neither contain nor refer to any such scheme.
They leave the concept of paid annual leave undefined.
Hence, the issues arising in this appeal.
The appellants are British Airways pilots.
Their terms of employment, negotiated by their union, British Air Line Pilots Association (BALPA), are found in a Memorandum of Agreement (MOA) which requires them to take 30 days annual leave and entitles them to take a further two weeks leave, save in the case of pilots with a Gatwick base, who are obliged to take 35 days holiday and are entitled to a further seven days of leave.
The MOA provides for pilots to receive (a) a fixed annual sum, plus two supplementary payments varying according to the time spent flying, consisting of (b) the Flying Pay Supplement (FPS) paid at 10 per flying hour and (c) the Time Away from Base allowance (TAFB) paid at 2.73 per hour.
British Airways explains that TAFB was introduced to replace meal allowances, sundries and the Gatwick Duty Allowance and to be increased in accordance with the UK Retail Prices Index for Catering Restaurant Meals.
Her Majestys Revenue and Customs attitude is that the TAFB is over generous and that 18% of it is taxable, in effect as pure remuneration.
The history of the case to date
When the appeal first came before the Supreme Court, British Airways primary submission was that the United Kingdom legislator, by omitting to introduce any detailed scheme for the calculation of paid annual leave like that provided under the Working Time Regulations, must be taken to have left this to be determined by collective or individual agreement between the parties, whatever might be the effect of the Aviation Directive.
The Supreme Court was not at that time persuaded by this submission, and thought it likely to be possible to construe the Aviation Regulations to reflect what meaning the Aviation Directive might have.
Hence, the reference made to the Court of Justice.
British Airways second submission was that the Aviation Directive was to like effect, leaving the calculation of paid annual leave to collective or individual agreement between the parties.
Its third submission, if this was wrong, was that the only constraint imposed by the Directive was that pay during annual leave must not be so low as to prevent or inhibit the taking of leave.
Finally, it submitted that the fixed annual sum (a) above constituted the pilots normal pay and was sufficiently comparable to remuneration received while working to satisfy the requirement for paid annual leave.
The questions referred to the Court of Justice by the Supreme Court were in these circumstances: (1) Under (a) articles 7 of Council Directives 93/104/EC and 2003/88/EC and (b) clause 3 of the European Agreement annexed to the Council Directive 2000/79/EC: (i) to what, if any, extent does European law define or lay down any requirements as to the nature and/or level of the payments required to be made in respect of periods of paid annual leave; and (ii) to what, if any, extent may member states determine how such payments are to be calculated? (2) In particular, is it sufficient that, under national law and/or practice and/or under the collective agreements and/or contractual arrangements negotiated between employers and workers, the payment made enables and encourages the worker to take and to enjoy, in the fullest sense of these words, his or her annual leave; and does not involve any sensible risk that the worker will not do so? (3) Or is it required that the pay should either (a) correspond precisely with or (b) be broadly comparable to the worker's "normal" pay? Further, in the event of an affirmative answer to question (3)(a) or (b): (4) Is the relevant measure or comparison: (a) pay that the worker would have earned during the particular leave period if he or she had been working, instead of on leave, or (b) pay which he or she was earning during some other, and if so what, period when he or she was working? (5) How should "normal" or "comparable" pay be assessed in circumstances where: (a) a worker's remuneration while working is supplemented if and to the extent that he or she engages in a particular activity; (b) where there is an annual or other limit on the extent to which, or time during which, the worker may engage in that activity, and that limit has been already exceeded or almost exceeded at the time(s) when annual leave is taken, so that the worker would not in fact have been permitted to engage in that activity had he been working, instead of on leave?
The Court of Justice gave a compendious answer.
It ruled (para 31) that article 7 of Directive 2003/88/EC and clause 3 of the European Agreement: must be interpreted as meaning that an airline pilot is entitled, during his annual leave, not only to the maintenance of his basic salary, but also, first, to all the components intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment and in respect of which a monetary amount, included in the calculation of his total remuneration, is provided and, second, to all the elements relating to his personal and professional status as an airline pilot.
It is for the national court to assess whether the various components comprising that worker's total remuneration meet those criteria.
The Court of Justices reasoning makes clear that it was ruling against British Airways on questions (2), (3) and (5)(a): 20 The purpose of the requirement of payment for that leave is to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work 21 remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond to the normal remuneration received by the worker.
It also follows that an allowance, the amount of which is just sufficient to ensure that there is no serious risk that the worker will not take his leave, will not satisfy the requirements of European Union law.
The court went on, in further answer, to say that where, as here, pay was structured to involve several components, a specific analysis was required (para 22), because (para 23): that structure cannot affect the worker's right to enjoy, during his period of rest and relaxation, economic conditions which are comparable to those relating to the exercise of his employment and 24 Accordingly, any inconvenient aspect [sic] which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment and in respect of which a monetary amount is provided which is included in the calculation of the worker's total remuneration, such as, in the case of airline pilots, the time spent flying, must necessarily be taken into account for the purposes of the amount to which the worker is entitled during his annual leave. 25 By contrast, the components of the worker's total remuneration which are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the tasks which the worker is required to carry out under his contract of employment, such as costs connected with the time that pilots have to spend away from base, need not be taken into account in the calculation of the payment to be made during annual leave. 26 In that regard, it is for the national court to assess the intrinsic link between the various components which make up the total remuneration of the worker and the performance of the tasks which he is required to carry out under his contract of employment.
That assessment must be carried out on the basis of an average over a reference period which is judged to be representative and in the light of the principle established by the case law , according to which Directive 2003/88 treats entitlement to annual leave and to a payment on that account as being two aspects of a single right. 27 That stated, it must also be pointed out that the court has already held that an employee, working as a purser for an airline company and transferred, by reason of her pregnancy, temporarily to ground work, was entitled, during her temporary transfer, not only to maintenance of her basic salary but also to pay components or supplementary allowances relating to her professional status as an employee.
Accordingly, allowances relating to her seniority, her length of service and her professional qualifications had to be maintained: see, to that effect, Parviainen v Finnair Oyj (Case C 471/08) [2011] ICR 99; [2010] ECR I 6529, para 73.
That case law also applies to a pregnant worker who has been granted leave from work: see Gassmayr v Bundesminister fr Wissenschaft und Forschung (Case C 194/08) [2010] ECR I 6281, para 65. 28 It follows that, in addition to the components of the total remuneration set out in para 24 of the present judgment, all those which relate to the personal and professional status of an airline pilot must be maintained during that worker's paid annual leave.
The court ended its reasoning by repeating that It is for the national court to assess whether the various components comprising that worker's total remuneration meet those criteria (para 31).
The court therefore drew a distinction relevant to TAFB between, on the one hand, remuneration, including remuneration based on personal or professional status, for all activities whether basic or inconvenient undertaken during employment (para 24) and, on the other hand, payments intended exclusively to cover occasional or ancillary costs (para 25) costs which would not of course be incurred during holiday periods.
The court made clear in para 26 that it is for the national court to assess into which of the two categories identified in paras 24 and 25 any payment fell.
When it went on in para 26 to state that That assessment must be carried out on the basis of an average over a reference period which is judged to be representative, the most natural reading of the statement is that the court understood that this assessment was also something that the national court could and would judge for itself.
The courts reasoning in para 26 further indicates that it contemplated an average over a reference period judged to be representative of normal working and remuneration, rather, therefore, than a calculation based on what the employee might have earned during the holiday period, had she or he then been working.
The concept of a reference period judged to be representative recognises the exercise of judgment inherent in words like representative and normal.
The Court of Justice was not prescriptive as to what might or might not constitute a representative period.
The court did not expressly address the question how far a member state or national court might adopt a standard period, applicable to a range of employees, like that required under sections 221 to 226 of the Employment Rights Act 1996.
Different British Airways pilots may earn different supplementary amounts of FPS (or TAFB) according to their different flying patterns during different periods.
This could no doubt be one factor to bear in mind in arriving at any reference period, whether for pilots generally or for a particular pilot.
Further, the court did not specifically answer question (5)(b), which is potentially relevant since Regulation 9 of the Aviation regulations provides: in any month (a) no person shall act as a crew member during the course of his working time, if during the period of 12 months expiring at the end of month before the month in question the aggregate block flying time of that person exceeds 900 hours; and (b) no crew member employed by him shall have a total annual working time of more than 2,000 hours during the period of 12 months expiring at the end of the month before the month in question".
If a reference period of the previous 10 or 11 months at work were taken, a pilot might in that period have exhausted his or her permitted 900 hours.
If an average is in such circumstances to be calculated including all 900 hours, the pilot would (as he or she arguably should) receive paid holiday pay higher than that receivable by a pilot who had only flown 800 hours in the same 10 or 11 months.
The current issues
In the light of the Court of Justices judgment, the appellants submit that (i) each of their claims can and should now be remitted to the Employment Tribunal for assessment by that tribunal of a representative period and of the relevant remuneration earned during that period, and that (ii) such remuneration should include not merely basic pay and FPS, but also 18% of TAFB.
British Airways, on the other hand, submits that (i) the Aviation Regulations are too unspecific to give effect to the Aviation Directive, in the absence of any relevant legislative scheme, and (ii) that the whole of the TAFB should be excluded from remuneration for the purposes of any calculation.
It is common ground that clause 3 of the European Agreement annexed to the Aviation Directive does not have direct effect against British Airways.
In Dominguez v Centre Informatique du Centre Ouest Atlantique (Case C 282/19) [2012] ICR D23, the Court of Justice treated the equivalently worded article 7 of the Working Time Directive as directly effective against the State.
But British Airways is not an emanation of the State.
Clause 3 of the European Agreement can only therefore be invoked against British Airways if it has been effectively implemented at domestic level.
In support of its first, general submission, British Airways thus argues that this has not occurred; that the concept of an average over a reference period which is judged to be representative is open ended and so open to differing assessments that implementation of the Aviation Directive in national law requires legislation; and that the mere echoing in regulation 4(1) of the phrase paid annual leave which appears in clause 3 is insufficient for effective implementation of the Directive.
At the European legal level, British Airways invokes the principle of legal certainty; at the domestic level, it submits that no possibility exists of interpreting the Aviation Regulations as implementing the Aviation Directive effectively, pursuant to the well established duty to interpret domestic legislation so far as possible in a manner conforming with any obligations imposed by a Directive: see, inter alia, Marleasing SA v La Comercial Internacional de Alimentacin SA (Case C 106/89)[1990] ECR I 4135 and Pfeiffer v Deutsches Rotes Kreuz, Kreisverband Waldshut eV (Joined Cases C 397 403/01) [2005] ICR 1307, paras 109 120.
The impossibility of a conforming interpretation is reinforced, British Airways submits, by the consideration that the Merchant Shipping (Hours of Work) Regulations 2002 (SI 2002/2125), although not directly in issue, provide (in regulation 12) for the same entitlement to paid annual leave, but go on to provide not for civil liability, but for criminal liability in the event of any contravention of regulation 12.
British Airways argue that the need for legal certainty and the obstacles to any form of interpretive solution are all the greater when the concept of paid annual leave has, albeit in the context of other Regulations, penal implications.
British Airways invokes in this connection the principle that the interpretive obligation recognised in cases such as Marleasing should not be used with the effect of determining or aggravating domestic criminal liability: Criminal Proceedings against Kolpinghuis Nijmegen BV (Case 80/86) [1987] ECR 3969, para 14 and Criminal Proceedings against Arcaro (Case C 168/95) [1997] All ER (EC) 82, para 42.
British Airways notes that the present situation has only arisen because pilots have been successful in the Court of Justice in challenging the parties collective agreement in the MOA, according to which basic pay was to be taken as the measure of paid annual leave and increments in basic pay were from time to time negotiated.
Had the Court of Justice restricted the payment required during annual leave to basic pay or allowed the parties to do so, there would have been no problem in knowing what the Directive required or in giving effect to it at national level.
As it is, however, British Airways submits, the requirements of the Directive, as explained by the court, require a detailed legislative scheme, which is not found in the Aviation Regulations and could not be supplied by an employment tribunal.
Finally, British Airways seeks to gain support for its case from the absence in regulation 18 of the Aviation Regulations of any explicit power in the employment tribunal to assess or award compensation for paid annual leave.
That, British Airways submits, is precisely because no one conceived that paid annual leave could, under the Aviation Regulations, mean anything other than basic pay, as had been collectively agreed by the MOA.
Now that it is clear that it means more, the absence of any such power confirms the absence of any legislative scheme regarding paid annual leave sufficient to implement the Aviation Directive or to have any domestic effect.
Analysis on issue of uncertainty and domestic effect
I do not accept British Airways submissions.
Their foundation is the open endedness of the exercise of judgment inherent in the concept of an average over a reference period which is judged to be representative.
The domestic legislator may well have assumed, as British Airways submits, that the assessment of paid annual leave would be a simple matter, with any problems being resolved by collective agreement.
The more sophisticated assessment now revealed to be necessary and the absence of any collective agreement leave scope for differences of view about the period to be taken.
On the other hand, a general legislative scheme of the sort that British Airways maintains to be required could itself have risked being over prescriptive.
Be that as it may, the legislator chose in the Aviation Regulations simply to repeat the relevant language of the Aviation Directive.
The Court of Justice having explained the principles behind article 7 of the Working Time Directive and clause 3 of the European Agreement, the same principles must be taken to have been intended to govern the same wording where it appears in regulation 4 of the Aviation Regulations.
The solution, in my opinion, is that, in these circumstances and in the absence of any other means of ascertaining a representative reference period, the choice of a reference period is in the first instance for British Airways to make.
This is a choice to be made by British Airways within the parameters of what can (reasonably) be judged to be representative.
Failing such a choice, British Airways cannot complain if a court or tribunal takes its own view of what best represents a representative period in the case of an individual employee who brings a case to it.
This in my opinion matches the Court of Justices own expectations: see para 13 above.
It would be surprising if domestic courts or tribunals were to conclude that they could not give effect to a domestic article using identical language to the Aviation Directive in the way in which the Court of Justice contemplated that the language of the Directive envisages.
This is reinforced by the Court of Justices conclusion that, in a context where the employer is the State, article 7 is directly effective (and so, by necessary implication, sufficiently certain for that purpose).
I am unimpressed by the submission that, on the basis that the same approach is to be transposed to the same language in the Merchant Shipping (Hours of Work) Regulations 2002, the result would be to expose employers to criminal liability for failing to make an appropriate choice within uncertain parameters.
So long as an employers choice is within those parameters, no problem arises, and, if a bona fide choice were to fall outside such parameters, the likelihood of a criminal prosecution would appear remote.
If the problem were to prove a real one, then the difference between the present regulations and those imposing criminal liability might itself also require a different approach to the issue of enforceability if it arose in the latter context.
I am also unimpressed by the submission that regulation 18 militates against or prevents a conclusion that, in the absence of a choice by British Airways, the employment tribunal can make its own assessment of an average over a reference period which is judged to be representative.
Regulation 18 provides: Remedies 18.(1) A crew member may present a complaint to an employment tribunal that his employer has refused to permit him to exercise any right he has under regulation 4, 5(1), (4), 7(1) or 7(2)(b). (2) An employment tribunal shall not consider a complaint under this regulation unless it is presented (a) before the end of the period of three months beginning with the date on which it is alleged (i) that the exercise of the right should have been permitted (or in the case of a rest period or annual leave extending over more than one day, the date on which it should have been permitted to begin), or (ii) the payment under regulation 4(2)(b) should have been made; as the case may be; 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. (3) Where an employment tribunal finds a complaint under regulation 4, 5(1), (4), 7(1) or 7(2)(b) well founded, the tribunal (a) shall make a declaration to that effect; and (b) may make an award of compensation to be paid by the employer to the crew member. (4) The amount of the compensation shall be such as the tribunal considers just and equitable in all the circumstances having regard to (a) the employer's default in refusing to permit the crew member to exercise his right; and (b) any loss sustained by the crew member which is attributable to the matters complained of.
British Airways submission is that regulation 18(1) only contemplates complaints based on a refusal to permit an employee to take paid annual leave, not complaints about the level of payment for such leave.
The only reference to a complaint based on failure to make a payment is in regulation 18(2)(a)(ii).
There it is linked to a failure on termination of employment to make a payment in lieu of leave under regulation 4(2)(b), and that is a payment which is based necessarily on an assessment of what the employee would have earned during a defined period.
British Airways contrasts this position with that under certain other regulations, such as the Working Time Regulations 1998.
Regulation 16 of the Working Time Regulations entitles a worker to be paid at the rate of a weeks pay in respect of each week of the annual leave required under regulation 13 and regulation 30 (Remedies) goes on specifically to deal in regulation 30(1)(a)(i) with refusal to permit a worker to exercise any right he has under regulation 13, and in regulation 30(1)(b) with failure to pay him the whole or any part of any amount due to him under regulation . 16(1), while regulation 30(5) provides that, where an employment tribunal finds such a failure, it shall order the employer to pay to the worker the amount which it finds to be due to him.
It is true that the Aviation Regulations, unlike the Working Time Regulations, do not explicitly address complaints relating to the payments for annual leave.
But it is our duty to read the domestic Regulations so far as possible to give effect to the Aviation Directive, as interpreted by the Court of Justice.
Regulation 18(1) contemplates complaints where an employer has refused to permit the exercise of any right that an employee has under regulation 4.
Regulation 18(4) enables an employment tribunal to award such compensation as it considers just and equitable in all the circumstances having regard to the employers default in refusing to permit the crew member to exercise his right.
The concept of refusal to permit the exercise of a right can extend to cover refusal to permit the crew member an appropriate payment as part of the right to paid annual leave.
The employment tribunal can on the like basis make such award as it considers just and equitable to compensate for such refusal.
The implication of British Airways present submissions is that any complaint that a pilot might have can and would lie not against British Airways, but at most against the United Kingdom, for failure to implement the Aviation Directive effectively at the domestic level.
I note that this would itself involve the pilot invoking a forum, presumably a court, which would then have to determine as against the State the appropriate parameters of a period judged to be representative of the pilots normal pay the very exercise that British Airways submits is so uncertain that it cannot be undertaken by the employment tribunal.
For the reasons I have given, I do not accept British Airways submissions, and conclude accordingly that the claims should be remitted to the Employment Tribunal for further consideration of the appropriate payments to be made to the pilots in respect of the periods of paid annual leave in issue.
The appellants submit that the Supreme Court can and should without more conclude that the pilots remuneration includes 18% of the sums paid by way of TAFB.
But the 18% is no more than the percentage which Her Majestys Revenue and Customs regards as taxable.
The Revenues attitude for tax purposes is presently irrelevant.
It amounts at best to a third partys view on an issue to be determined independently by the employment tribunal.
Even if the Revenues attitude for tax purposes were relevant, it is not in any event clear on what basis the Revenue arrived at its attitude, or by reference to what considerations.
In contrast, British Airways relies upon the test stated by the Court of Justice in its para 25, which excludes from remuneration relevant to the calculation of holiday pay, components of pay which are intended exclusively to cover costs.
British Airways stresses the word intended.
Within such components, the Court of Justice expressly included costs connected with the time that pilots have to spend away from base.
The question arising is therefore whether the payments by way of TAFB were intended exclusively to cover costs.
Although British Airways submits that the Supreme Court can or should itself determine the answer to this question, we do not have the material to do so in the agreed statement of facts or elsewhere.
Even the history of TAFB given by British Airways as summarised in para 5 above is no more than its statement of the position.
It must be for the employment tribunal to consider and determine upon what basis TAFB was agreed and paid during any relevant period.
As to the precise test, the concept intended exclusively to cover costs requires attention to be focused on the real basis on which the TAFB payments were made.
If they were payments that were made genuinely and exclusively to cover costs, that would, at least prima facie, be the end of the matter.
The appellants case appears to be that, although they were designated as being for the exclusive purpose of covering costs, they were in fact more than some or all pilots might actually need for or spend on costs, and that the Revenue has, in effect, seen through the description to a reality which the Supreme Court, or an employment tribunal, should also recognise.
As Mr Jeans QC for British Airways accepted, there could no doubt come a point at which it was obvious that payments nominally made to cover costs were not required, or were not going to be required, in their entirety, to match actual costs.
An employer who in such circumstances continued to make such payments in their full amount could then no longer maintain that they were genuinely and exclusively intended to cover costs.
But, in using the phrase intended exclusively to cover costs, it does not appear that the Court of Justice contemplated any detailed evaluation of the precise need for or reasonableness of payments which were so intended.
What matters is whether there was a genuine intention in agreeing and making such payments that they should go exclusively to cover costs.
It is on that the employment tribunal should in my opinion focus.
Hilary Term [2010] UKSC 16 On appeal from: [2009] EWCA Civ 281 JUDGMENT British Airways plc (Respondents) v Williams (Appellant) and others before Lord Walker Lady Hale Lord Brown Lord Mance Lord Clarke JUDGMENT GIVEN ON 24 March 2010 Heard on 24 and 25 February 2010 Appellant Jane McNeill QC Michael Ford (Instructed by Thompsons Solicitors) Respondent Christopher Jeans QC Andrew Short (Instructed by Baker and Mackenzie LLP) LORD MANCE (delivering the judgment of the court) The relevant law 1.
This appeal concerns the concept of paid annual leave for crew members employed in civil aviation appearing in regulation 4 of The Civil Aviation (Working Time) Regulations 2004 (SI 2004 no. 756) (the Aviation Regulations).
These Regulations were introduced under s.2(2) of the European Communities Act 1972 to comply with the United Kingdoms obligations under Council Directive 2000/79/EC of 27 November 2000 (the Aviation Directive), the purpose of which was in turn to implement the European Agreement on the organisation of working time of mobile staff in civil aviation dated 22 March 2000 (the European Agreement) annexed to the Directive. 2.
Clause 3 of the European Agreement reads: 1.
Mobile staff in civil aviation are entitled to paid annual leave of at least four weeks, in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice. 2.
The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated. 3.
The Aviation Regulations provide: 4. (1) A crew member is entitled to paid annual leave of at least four weeks, or a proportion of four weeks in respect of a period of employment of less than one year. (2) Leave to which a crew member is entitled under this regulation (a) may be taken in instalments; (b) may not be replaced by a payment in lieu, except where the crew members employment is terminated. 4.
The Aviation Regulations and Directive are part of a wider complex of legislation requiring paid annual leave.
Council Directive 93/104/EC of 23 November 1993 (the Working Time Directive) introduced a general requirement that Member States take measures to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice (article 7(1)).
But it excepted various mobile sectors of activity, viz air, rail, road, sea, inland waterway and lake transport, sea fishing, other work at sea and the activities of doctors in training (article 1(3)), and further stated that its provisions should not apply where other Community instruments contain more specific requirements concerning certain occupations or occupational activities (article 14). 5.
The Working Time Directive was implemented domestically, with exceptions matching those of the Directive, by the Working Time Regulations 1998 (SI 1998 no. 1833) (the Working Time Regulations).
These Regulations (as amended by the Working Time (Amendment) Regulations 2001 (SI 2001 no. 3256)) provide that a worker is entitled to four weeks annual leave in each leave year (regulation 13) and entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13 at the rate of a weeks pay in respect of each week of leave (regulation 16(1)).
Regulations 16(2) and (3) make ss.221 to 224 (and by implication also, it has been held, ss.234 235) of the Employment Rights Act 1996 applicable to the determination of the amount of a weeks pay for the purposes of regulation 16.
Ss.221 to 224 contain a detailed scheme (originally introduced in the context of redundancy pay) for ascertaining a weeks pay in the cases of employments with and without normal working hours.
The scheme includes provisions governing the differing situations of remuneration varying (s.221(3)) and not varying (s.221(2)) with the amount of work done and of remuneration varying according to the times of day or days of the week in which work is required to be done (s.222); as well as provisions governing employments with no normal working hours (s.224).
Where the remuneration varies according to the amount, time or hours of work, the computation of weekly pay falls to be derived from an examination of an average position over a defined period of twelve weeks preceding the relevant calculation date, itself defined (ss.221(3), 222 and 224).
Under s.234, in the case of an employee who is entitled to overtime pay when employed for more than a fixed number of hours in a week, the employees normal working hours are the number of hours so fixed unless the contract also fixes a number of hours of overtime which the employer is bound to provide and the worker bound to work, in which case, the employees normal working hours consist in the total number of fixed hours (so excluding any voluntary overtime): Tarmac Roadstone Holdings Ltd. v Peacock [1973] ICR 273 (CA); the same interpretation of s.234 has been applied to a claim under Regulation 16 of the Working Time Regulations: Bamsey v Albon Engineering and Manufacturing plc [2004] EWCA Civ 359; [2004] ICR 1083 (CA). 6.
The exceptions from the Working Time Directive were in due course addressed.
Council Directive 1999/63/EC of 21 June 1999 gave effect to a European Agreement dated 30 September 1998 entitling non fishing seafarers to paid annual leave on the same basis as was in 2000 provided for mobile staff in civil aviation (paragraph 2 above).
This was in turn given domestic effect by The Merchant Shipping (Hours of Work) Regulations 2002 (SI 2002 no. 2125) (the non fishing Seafarers Regulations), in language identical as regards paid annual leave to that of the Aviation Regulations (paragraph 3 above), with the substitution of the word seafarer for crew member (regulation 12 ). 7.
Directive 2000/34/EC of 22 June 2000 extended the application of the Working Time Directive to all sectors of activity, excluding seafarers as defined in Council Directive 1999/63/EC, and gave Member States until 1 August 2003 to achieve this.
However, it also replaced article 14 of the Working Time Directive with a provision that that Directive should not apply where other Community instruments contain more specific requirements relating to the organisation of working time for certain occupations or occupational activities.
With effect from 2 August 2004, the Working Time Directive as extended and amended has been replaced by a consolidated Working Time Directive 2003/88/EC of 4 November 2003, but article 7 remains in identical terms to article 7 of the original Working Time Directive of 1993. 8.
The Aviation Directive of 27 November 2000 was a specific Community instrument within article 14 of the Working Time Directive and was, as stated, implemented domestically in 2004 by the Aviation Regulations.
The extension of the Working Time Directive in its original and consolidated form to other mobile workers was further implemented domestically by inter alia The Merchant Shipping (Working Time: Inland Waterways) Regulations 2003 (SI 2003 no. 3049) made 23 December 2003 and The Fishing Vessels (Working Time: Sea fishermen) Regulations 2004 (SI 2004 no. 1713) made 16 August 2004.
In these two sets of Regulations, governing inland waterway workers and sea fishermen, regulation 11(1) entitles such workers to (or, in the case of the latter, to at least) four weeks annual leave and to be paid in respect of any such leave at the rate of a weeks pay in respect of each week of leave.
They go on to apply ss.221 to 224 for the purpose of determining the amount of a weeks pay for the purposes of the right to four weeks paid annual leave, and to define the relevant calculation date for the purposes of the twelve week period as the first day of the period of leave in question.
They also provide specifically for a worker to be able to complain of failure to pay any amount due under regulation 11(1). 9.
In contrast, neither the non fishing Seafarers Regulations of 2002 nor the Aviation Regulations made 13 April 2004 contain any detailed provisions which either define the nature or amount of the payment to be made during annual leave or apply ss.221 to 224 of the 1996 Act for that purpose.
Nor do they provide specifically for the consequences of failure to pay for annual leave (though the Aviation Regulations entitle a worker to complain of a refusal to permit him to exercise any right to paid annual leave, while the non fishing Seafarers Regulations make contravention by an employer of regulation 12, entitling seafarers to paid annual leave of at least four weeks, a criminal offence).
These domestic distinctions can only have been deliberate.
It is common ground now that ss.221 to 224 cannot apply to aviation crew members.
This appeal therefore turns on the meaning of the phrase paid annual leave, which is all that the United Kingdom legislator has relevantly enacted.
The phrase cannot of course be construed in a vacuum.
The Aviation Directive is not directly applicable, certainly not against British Airways which is not an emanation of the state.
But it is our duty, as far as possible, to construe the phrase in the domestic Regulations consistently with any requirement inherent in the identical phrase used in clause 3(1) of the European Agreement to which Member States are required to give effect by the Aviation Directive: see e.g. Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C 106/89) [1990] ECR I 4135, paragraph 8; Pfeiffer v Deutsches Rotes Kreuz, Kreisverband Waldshut eV (Cases C 397 404/01) [2004] ECR I 8835, paragraphs 111 113 and, most recently, Seda Kckdeveci v Swedex GmbH & Co. KG, (Case C 555/07) (judgment of 19 January 2010) paragraphs 44 48. 10.
Strictly, the European Agreement is an agreement between private associations representing airlines on the one hand and aviation workers on the other.
As such, its meaning might be capable of being influenced by the circumstances in which it was negotiated, any travaux prparatoires and even statements made during its negotiation.
But no evidence of that nature was put before the Employment Tribunal which considered the present case, and all that the Tribunal records (paragraph 37) is that the issue of holiday pay was not high on the agenda of those representing the interests of aviation workers when the Agreement was reached.
The reality is that clause 3 of the European Agreement adopted identical wording to article 7 of the Working Time Directive.
The natural inference is that it was intended to have the same effect in law and there is nothing to suggest the contrary.
The facts 11.
The factual context in which the phrase paid annual leave has presently to be understood and applied is as follows.
The appellants are pilots employed by British Airways plc.
In practice the terms of their employment were and are negotiated with British Airways by the pilots union, British Air Line Pilots Association (BALPA).
These terms are currently found in a Memorandum of Agreement (MOA) dated 1 April 2005.
The Court understands that, for present purposes, the terms of this MOA mirror those applicable under previous similar agreements going back to before 2000.
Under the MOA (and consistently with the Aviation Directive and Regulations) British Airways pilots are required to take 30 days annual leave and are entitled to take a further two weeks leave, save for pilots with a Gatwick base who are obliged to take 35 days holiday and are entitled to a further seven days of leave. 12.
Under the MOA, read with collectively agreed bidline rules, pilots remuneration includes three components relevant to this case.
The first consists of a fixed annual sum.
The second and third consist of supplementary payments varying according to time spent flying (the Flying Pay Supplement or FPS, paid at 10.00 per planned flying hour) and time spent away from base (the Time Away from Base Allowance or TAFB, paid at 2.73 per hour).
The whole of the FPS is remuneration and taxable. 82% at the relevant time of the TAFB is treated as having been paid on account of expenses, so that only 18% is treated as remuneration and taxable. 13.
There are limits to the FPS and TAFB which a pilot or other crew member can earn.
Regulation 9 of the Aviation Regulations requires every employer to ensure that: in any month (a) no person employed by him shall act as a crew member during the course of his working time, if during the period of 12 months expiring at the end of month before the month in question the aggregate block flying time of that person exceeds 900 hours; and (b) no crew member employed by him shall have a total annual working time of more than 2,000 hours during the period of 12 months expiring at the end of the month before the month in question. 14.
The amount of time a pilot spends flying will depend upon his or her route and roster.
It could typically be about 15 days a month.
The Court has been given a schedule of payments made to the first appellant, Ms Williams.
This indicates that, in the calendar year 2006, she took 25 working days leave in periods of between one and eight days in five different months, and received total fixed pay of 96,452.36, total FPS of 8,510 and total taxable TAFB of 1,038.49.
Total FPS of 8,510 is indicative (at 10 an hour) of 851 flying hours.
If that is so, then, had Ms Williams continued to fly at this rate during leave periods, it appears that she would or might have exceeded the maximum permitted annual number of 900 flying hours.
Total taxable TAFB of 1,038.49 gives total TAFB of 5,769.39 (1,038.49 x 100 18: see paragraph 12 above), indicative of 2,113 hours away from base.
Again, had Ms Williams continued to fly during leave periods, it appears that she would or might have exceeded the maximum total annual working time of 2,000 hours.
However, whether this be so or not in her case in relation to FPS or TAFB, a crew member could clearly be in this position in practice, i.e. in a position where during the 12 month period prior to taking any particular leave, he or she had already completed all or almost all of his or her permitted annual flying or working time.
The issue and submissions 15.
It is common ground that, upon a true construction of the MOA and so as a matter of contract, the payment to be made in respect of annual leave is based on the first component of remuneration only, that is the fixed annual sum.
The question is whether this was and is permissible under the Aviation Regulations, interpreted in the light of the Aviation Directive.
This question was first raised in 2005 following the introduction of the Aviation Regulations on 13 April 2004.
The Court understands that it has been raised not merely by British Airways pilots, but also by other airlines pilots and other aviation crew under contractual arrangements not before the Court.
Before the Employment Tribunal and Employment Appeal Tribunal, the appellants argued, successfully, that they were entitled under European and domestic law to payment at a weekly rate based on all three components of remuneration (which both Tribunals said should be calculated by analogy with ss.221 4, despite the inapplicability of these sections).
The Court of Appeal accepted British Airways contrary case under both European and domestic law. 16.
British Airways case operates at various levels: (i) British Airways first submission is that (a) the United Kingdom legislator must be taken (when deciding not to enact any detailed provisions to define the nature or amount of the payment to be made during annual leave or to apply ss.221 to 224 of the 1996 Act: see paragraph 9 above) to have intended that the amount of any payment to be made to aviation workers (and non fishing seafarers) in respect of their annual leave should be determined by collective or individual contractual agreement between the relevant parties; and (b) the domestic legislative intention being in this respect clear, it must prevail, whatever the effect may be of the Aviation Directive. (ii) Second, however, if and to the extent that, contrary to the first submission, the meaning of the Aviation Regulations can be derived from the Aviation Directive, British Airways submits that the Aviation Directive is to the same effect. (iii) (a) Third, British Airways qualifies its first two submissions only to the extent that it accepts that the payment for annual leave could not, under domestic or European law, be so low as to prevent or inhibit the taking of leave.
Pay during weeks of annual leave at the rate of 96,452 per annum or 1,854.85 per week could hardly be said to fall within this qualification.
Accordingly, British Airways contends that the contractual arrangements between them and their pilots are legitimate. (b) The appellants contrary submission of law is that the Aviation Directive requires the payment in respect of annual leave of normal remuneration in order to ensure that the worker is on leave in a position which is comparable to that when he or she is at work. (c) There is however disagreement about what this would mean in circumstances such as the present.
In particular, on that basis of what periods is normality or any comparison to be established? And on the basis of what hypotheses? The latter question is relevant where, as may well be the case here, the worker was subject to annual limits which would have precluded him or her from undertaking particular work and receiving particular payments additional to his or her basic salary. (iv) Fourth, British Airways submits (in response to this submission by the appellants) that, if the phrase paid annual leave involves payment of normal or comparable remuneration, then, in the present case, payment in respect of annual leave based on the fixed annual remuneration to which pilots are entitled satisfies this requirement. 17.
The Court is not presently persuaded by British Airways first submission.
Of course, whether domestic legislation is capable of being interpreted consistently with the meaning of the Directive will or may depend upon what that meaning is.
But, bearing in mind the possible meanings which appear, the Courts present view is that it is likely to be possible to construe the Regulations so as to comply with whatever meaning the Directive may have, even if the domestic position would otherwise be that for which British Airways contends by its submission at (i)(a) above.
This is so, even though the determination of the relevant weekly rate will pose difficulties for the employment tribunals who will have to engage with this exercise, in circumstances where there is no detailed scheme and ss.221 to 224 of the 1996 Act do not apply. 18.
British Airways second and third submissions raise questions regarding (a) the meaning of the phrase paid annual leave in the Aviation Directive and (b) the extent of the freedom for national legislation and/or practice to lay down conditions for entitlement to, and granting of, such leave [i.e. paid annual leave].
The determination of these questions is in the Supreme Courts view necessary for the resolution of this appeal.
There are statements in the Court of Justices recent case law (discussed below) which, on their face, are adverse to British Airways second and third submissions (paragraph 16(ii) and (iii)(a) above) and favour the appellants case that the Aviation Directive requires payment of normal or comparable remuneration (paragraph 16(iii)(b) above).
But these statements were made in very different contexts to the present, and, further, do not specifically address the point identified in paragraph 16(iii)(c) above.
The position in a case such as the present is not in the Supreme Courts view acte clair and the Supreme Court therefore makes this reference.
Analysis 19.
In case it may assist the Court of Justice, the Supreme Court adds these observations.
British Airways submits that the concept of paid annual leave is to be understood in the context in which the Working Time and Aviation Directives were enacted, namely the promotion of the health and safety of workers.
That context appears from United Kingdom v Council of the European Union (Case C 84/94) [1996] ECR I 5755; [1997] ICR 443.
The Court of Justice there upheld (save in one presently immaterial respect relating to Sunday working) the validity of the adoption of the Working Time Directive under article 118a of the European Community Treaty.
Article 118a entitled the Council, by qualified majority voting, to adopt by means of Directives, minimum requirements for gradual implementation to encourage improvements, especially in the working environment, as regards the health and safety of workers. (Subsequent to the Treaty of Nice, the relevant article became article 137, entitling the Community to support and complement the activities of Member States in the fields of, inter alia, improvement in particular of the working environment to protect workers health and safety.
It is, since the Treaty of Lisbon, article 153 in similar terms.) In R(BECTU) v Secretary of State for Trade and Industry (Case C 173/99) [2001] ECR I 4881; [2001] ICR 1152, the Court of Justice again stressed the importance of the general principles of protection of the health and safety of workers and the aim of ensuring effective protection of health and safety (paragraphs 40 and 44), when holding impermissible a provision of the then Working Time Regulations, according to which no entitlement to paid annual leave arose until an employee had been continuously employed for 13 weeks.
The entitlement to paid annual leave was a particularly important principle of Community social law from which there can be no derogations (paragraph 43) and the Directive did not allow Member States either to make subject to any preconditions or to exclude the very existence of a right granted to all workers (paragraphs 53 and 55).
Recital (11) to the Aviation Directive of 27 November 2000 confirms (unsurprisingly) that its objectives are precisely the same as those of the Working Time Directive, viz. to protect workers health and safety. 20.
British Airways submits that paid annual leave therefore requires payment at a level which ensures that annual leave can be taken and enjoyed, that is payment which does not frustrate or undermine the purpose of the relevant Working Time or Aviation Directive.
The Supreme Court would agree that the present arrangements with pilots employed by British Airways could not be regarded as posing any such risk to their health or safety.
There is no suggestion that they do or could prevent or deter pilots or crew members from taking annual leave (even to the limited extent that they are free not to do so).
On the contrary, the Employment Tribunal referred (paragraph 38) to a consensus that British Airways pilots not based at Gatwick do in practice take the extra two weeks voluntary leave to which they are entitled. 21.
British Airways also points out that, in United Kingdom v Council, the Court of Justice referred to Member States freedom to lay down detailed implementing provisions in general terms, when it said in paragraph 47 that: Once the Council has found that it is necessary to improve the existing level of protection as regards the health and safety of workers and to harmonize the conditions in this area while maintaining the improvements made, achievement of that objective through the imposition of minimum requirements necessarily presupposes Community wide action, which otherwise, as in this case, leaves the enactment of the detailed implementing provisions required largely to the Member States. 22.
Recital (12) to the Aviation Directive also indicates that Member States are to be free to define any terms used in the annexed European Agreement in accordance with national law and practice, providing that the definitions are consistent with the Agreement.
In British Airways submission, the freedom to enact detailed implementing provisions and the freedom to leave matters to national practice allow Member States either to introduce detailed provisions along the lines of ss.221 to 224 of the 1996 Act or to leave it to contracting parties to agree on terms as regards pay, so long as these do not frustrate or undermine the taking and enjoyment of annual leave. 23.
The appellants, in relation to this latter point, rely upon further statements in BECTU as indicating a narrow view of Member States discretion under clause 3 of the Aviation Directive.
In his opinion in that case, Advocate General Tizzano said at paragraph 34: It is not of course my intention to deny that the expression in question means that reference must be made to national legislation and therefore that the Member States enjoy some latitude in defining the arrangements for enjoyment of the right to leave.
In particular, as the Commission also points out, the reference is intended to allow the Member States to provide a legislative framework governing the organisational and procedural aspects of the taking of leave, such as planning holiday periods, the possibility that a worker may have to give advance notice to the employer of the period in which he intends to take leave, the requirement of a minimum period of employment before leave can be taken, the criteria for proportional calculation of annual leave entitlement where the employment relationship is of less than one year, and so forth.
But these are precisely measures intended to determine the 'conditions for entitlement to, and granting of, leave and as such are allowed by the Directive.
What, on the other hand, does not seem to be allowed by the Directive is for national legislation and/or practice to operate with absolutely (or almost) no restrictions and to go so far as to prevent that right from even arising in certain cases.
The Court of Justice referred to this passage in its judgment (paragraph 24. 53): The expression 'in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice must therefore be construed as referring only to the arrangements for paid annual leave adopted in the various Member States.
As the Advocate General observed in paragraph 34 of his Opinion, although they are free to lay down, in their domestic legislation, conditions for the exercise and implementation of the right to paid annual leave, by prescribing the specific circumstances in which workers may exercise that right, which is theirs in respect of all the periods of work completed, Member States are not entitled to make the existence of that right, which derives directly from Directive 93/104, subject to any preconditions whatsoever. 25.
British Airways point out that both these passages were specifically directed to explaining why the Directive did not permit Member States to remove entirely any right to paid annual leave in particular circumstances.
They were not concerned with the permissibility of defining paid annual leave or of leaving it to parties to define, in a way which does not undermine its taking or its enjoyment. 26.
The appellants submit, however, that the Court of Justices later case law contains statements establishing that paid annual leave must now be regarded as having achieved a closely defined autonomous European meaning: any payment in respect of annual leave must correspond with the employees normal remuneration in order to ensure that the worker is, when on leave, in a position which is comparable to that when he or she is at work.
They rely on statements to this effect in the Court of Justices judgments in Robinson Steele v RD Retail Services Ltd. (Cases C 131 and 257/04) [2006] ECR I 2531; [2006] ICR 932, paragraphs 50 and 57 to 59 and in Stringer v Revenue and Customs Commissioner (Case C 520/06) [R (D) v Secretary of State for the Home Department [2005] EWHC 728 (Admin) 2009] ECR I 179; [2009] ICR 932, paragraphs 57 to 62.
In Robinson Steele, the Court of Justice repeated that Member States must ensure that the detailed national implementing rules take account of the limits flowing from the Directive itself (paragraph 57) and went on: 58 The Directive treats entitlement to annual leave and to a payment on that account as being two aspects of a single right.
The purpose of the requirement of payment for that leave is to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work. 59 Accordingly, without prejudice to more favourable provisions under article 15 of the Directive, the point at which the payment for annual leave is made must be fixed in such a way that, during that leave, the worker is, as regards remuneration, put in a position comparable to periods of work. 27.
This was, however, again said in a very different context from the present.
Part payments, ostensibly for holiday pay, were staggered over the corresponding annual period of work and paid together with remuneration for work done, leaving nothing specifically payable in respect of the weeks of leave.
Further, the Court allowed such staggered payments, where transparently and comprehensibly attributable to annual leave, to be set off against the claim for holiday pay.
An earlier statement (in paragraph 50) that workers must receive their normal remuneration for that period of rest was also said in a very different context.
There had been agreement to attribute to holiday pay part of a sum which had previously been being paid as remuneration for work; the remuneration paid for work done was in other words being effectively reduced, by an amount attributed to the (staggered) holiday pay. 28.
In Stringer, paragraphs 57 to 62, the Court of Justice cited Robinson Steele as authority that the expression paid annual leave means that, for the duration of annual leave , remuneration must be maintained and that, in other words, workers must receive their normal remuneration for that period of rest (paragraphs 58 and 61), and explained this on the basis that the purpose was to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work (paragraph 60).
Two points however arise.
First, once again, the context was quite different from the present.
The issue in Stringer was whether employees absent on sick leave throughout an entire leave year were entitled to take their leave after the end of that year or, (since their employment had in fact terminated) to receive payment in lieu.
In that context, the Court repeated the statements in BECTU (paragraphs 53 and 55: see paragraph 19 above) that Member States are not entitled to exclude, or make subject to any preconditions, the very existence of a right deriving from the Directive. 29.
Second, the Court of Justices use of the word comparable in Stringer is itself to be compared with the Advocate Generals suggestion (in paragraphs 90 91 of her opinion) that a worker should receive an allowance in lieu equivalent to that of his normal pay.
The choice of the wording comparable to periods of work to explain the concept of normal remuneration was no doubt deliberate.
On one view, it indicates that the Court of Justice had in mind a relationship between pay while working and pay in respect of annual leave which was or could be more general and looser than the equivalence which the Advocate General would have favoured.
In a sense, of course, even very different things are usually capable of a comparison, which will highlight the differences.
The Court of Justice cannot have meant comparison in this sense.
Nonetheless, it may have meant comparable in the sense of roughly similar (although this still leaves for consideration whether the right comparison was with pay which the worker could have earned if he or she had been working instead of on leave, or was earning during some other and. if so what, period) or it may, perhaps, have meant sufficiently similar to achieve the aim of the Directive, that is ensuring that employees could and would take and enjoy a restful or at all events restorative annual leave.
The questions referred 30. these questions: In these circumstances, the Supreme Court refers to the Court of Justice (ii) (i) Under (a) articles 7 of Council Directives 93/104/EC and 2003/88/EC and (b) clause 3 of the European Agreement annexed to the Council Directive 2000/79/EC: (1) to what, if any, extent does European law define or lay down any requirements as to the nature and/or level of the payments required to be made in respect of periods of paid annual leave; and (2) to what, if any, extent may Member States determine how such payments are to be calculated? In particular, is it sufficient that, under national law and/or practice and/or under the collective agreements and/or contractual arrangements negotiated between employers and workers, the payment made enables and encourages the worker to take and to enjoy, in the fullest sense of these words, his or her annual leave; and does not involve any sensible risk that the worker will not do so? (iii) Or is it required that the pay should either (a) correspond precisely with or (b) be broadly comparable to the workers normal pay? Further, in the event of an affirmative answer to question (iii)(a) or (b): (iv) Is the relevant measure or comparison (a) pay that the worker would have earned during the particular leave period if he or she had been working, instead of on leave, or (b) pay which he or she was earning during some other, and if so what, period when he or she was working? (v) How should normal or comparable pay be assessed in circumstances where (a) a workers remuneration while working is supplemented if and to the extent that he or she engages in a particular activity; (b) where there is an annual or other limit on the extent to which, or time during which, the worker may engage in that activity, and that limit has been already exceeded or almost exceeded at the time(s) when annual leave is taken, so that the worker would not in fact have been permitted to engage in that activity had he been working, instead of on leave? On this basis, I would also remit the issues relating to TAFB to the employment tribunal, together with those relating to paid annual leave to which para 27 above refers.
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The appeal concerns the nature and assessment of paid annual leave required by the Civil Aviation (Working Time) Regulations 2004 (the Regulations).
The appellants are pilots employed by the respondent (British Airways).
Their terms of employment are found in a Memorandum of Agreement (MOA).
The MOA provides for pilots to receive a fixed annual sum plus two supplementary payments varying according to the time spent flying, namely the Flying Pay Supplement (FPS) of 10 per flying hour and the Time Away From Base allowance (TAFB) paid at 2.73 per hour.
TAFB was introduced in place of meal allowances and to cover other costs.
Pilots are taxed on 18% of TAFB as the tax authorities regard it as providing more than needed purely for costs.
The two supplementary payments are subject to limits because pilots are limited to a number of permissible hours flying or on duty each year.
The MOA requires pilots to take a certain period of annual leave and entitles them to take periods of additional leave.
When on leave, pilots are paid the basic fixed pay.
Pilots are required to receive paid annual leave under the Regulations, which implemented the provisions of Council Directive 2000/79/EC (the Aviation Directive).
The appellants brought claims against British Airways arguing that pursuant to the Regulations, they were entitled to both the supplementary payments as well as the fixed annual sum as part of their paid annual leave.
They succeeded in the Employment Tribunal and the Employment Appeal Tribunal, but the Court of Appeal allowed British Airways appeal.
In 2010 the Supreme Court heard the appellants appeal against that judgment, and decided it was under a duty to refer five questions concerning the interpretation of the relevant European law on the meaning of paid annual leave to the Court of Justice of the European Union (CJEU) (British Airways plc v Williams [2010] UKSC 16).
The CJEU gave its response in a judgment dated 15 September 2011 (British Airways v Williams (Case C 155/10) [2012] ICR 847).
The matter thereafter returned to the Supreme Court to rule on its consequences for the dispute between the parties.
The Supreme Court, in the light of the judgment of the CJEU, unanimously remits the appellants claims to the Employment Tribunal for further consideration of the appropriate payments to be made to them in respect of periods of paid annual leave.
The judgment is given by Lord Mance.
The CJEU had ruled that the purpose of the requirement for paid annual leave in the Aviation Directive was to put the worker in a position which was, as regards remuneration, comparable to periods of work.
A specific analysis of the various components of a workers pay was required.
Any aspect which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment .such as, in the case of airline pilots, the time spent flying was to be taken into account.
By contrast, components intended exclusively to cover occasional or ancillary costs arising at the time of performance need not be.
It was for the national court to assess whether the various components comprising the workers total remuneration met those criteria, such assessment to be carried out on the basis of an average over a reference period which was judged to be representative [9 14].
The appellants argued that their claims should now be remitted to the Employment Tribunal for assessment, and that their remuneration on leave should include basic pay, FPS and 18% of TAFB.
British Airways, however, submitted that the Regulations were too unspecific to give effect to the Aviation Directive and the requirement for an average over a reference period which is judged to be representative required a detailed legislative scheme which could not by supplied by an employment tribunal [15 19].
The wording of regulation 4 of the Regulations was taken from article 7 of the Aviation Directive.
The same principles must govern the wording of both.
If British Airways choice of a representative reference period was not acceptable to an individual pilot, a court or tribunal could take its own view.
Even though the Regulations did not expressly address complaints relating to the payment of annual leave, complaint to a court was in fact permitted by Regulation 18(1) in respect of a refusal by an employer to permit the exercise of any right enjoyed by the employee under Regulation 4 and compensation could be awarded under Regulation 18(4) [20 27].
As for the proportion (if any) of TAFB to be included in paid annual leave, the test stated by the CJEU excluded sums intended exclusively to cover costs.
The Supreme Court did not have the material before it to determine the real basis for the payment of TAFB and British Airways genuine intention would need to be considered by the employment tribunal.
The attitude of the tax authorities was irrelevant [28 32].
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The issue on this appeal is whether the appellant, Airtours Holidays Transport Ltd (formerly MyTravel Group plc), is entitled to recover, by way of input tax, Value Added Tax (VAT) charged by PricewaterhouseCoopers LLP in respect of services provided by PwC and paid for by Airtours.
The factual and procedural background
In October 2002, Airtours, which had borrowed money from around 80 financial institutions, and had further liabilities, was in serious financial difficulties, and sought refinancing from the Institutions to enable it to restructure.
It was suggested to Airtours that it should commission an accountants report to satisfy the Banks that its restructuring proposals were viable.
The Institutions were agreeable to this, and two firms were approached, and, pursuant to a decision in which both the Institutions and Airtours were involved, PwC were appointed to produce a report (the Report).
The original terms under which PwC were appointed were contained in a letter dated 5 November 2002 (the Letter), which was addressed To the Engaging Institutions, and headed Silver Group plc [a code name for Airtours] and its subsidiaries .
The Letter contained a number of provisions, including the following: Para 1, which confirmed that PwC had been retained by the Institutions as defined in para [4] to provide the Services, which were set out in an Appendix to the Letter, and as I shall refer to them.
They included items such as Current trading position, historic cash utilisation, Review of accounting policies and issues, and Budget for year to 30 September 2003.
Para 4, which stated that the Report was for the sole use of the Institutions who have expressly agreed to this letter by countersigning below, and that the information and advice given by PwC could be passed to the Institutions, to whom PwC were prepared to assume a duty of care if they countersigned the letter.
Para 6, which recorded a request you had made that PwC assist in providing information to the institutions providing facilities to [Airtours].
Para 7, which referred to the work being carried out in phases, and referred to Airtours likely requests for facility extensions Para 8, which stated that Information and advice produced from this engagement is to be addressed to the Engaging Institutions with a copy to the directors of [Airtours], with the exception of any part of the report prepared exclusively or confidentially for the Engaging Institutions.
Paras 9, under which PwC accepted that they had a duty of care to the Engaging Institutions.
Para 10, under which [y]ou accept that the aggregate limit referred to in paragraph 9 of our Terms and Conditions applies to our liability to [Airtours] and the Engaging Institutions.
Para 12, which provided that [y]ou have requested us to undertake a review of [Airtours] as set out below.
Our work is required by the Institutions in considering the level of facilities granted to [Airtours].
Paras 13 18, which described the scope of these Services, including the phasing, the limitations, and the extent of the work to be done.
Para 19, which provided that a draft of our findings will be available for discussion with management by a specified date, and on a subsequent date with the Engaging Institutions.
Para 22, which stated that [Airtours] will be responsible for our fees, expenses and disbursements incurred in carrying out our work .
Para 25, which provided that [o]ur terms are that a retainer of 200,000 be payable on the commencement of our work and that weekly invoices will be rendered to [Airtours and] are payable on submission.
Para 26, which stated that [t]he attached terms and conditions (the Terms and Conditions) set out the duties of each party in respect of the Services.
The Terms and Conditions provide that among other matters: i) [Airtours] will indemnify us against claims brought by any third party.
For the avoidance of doubt, the reference to you in clause 10 of the Terms and Conditions (and only in that clause) refers to [Airtours] and not the Engaging Institutions ii) our aggregate liability to [Airtours], the Engaging Institutions and any other third party will be limited in accordance with clause 9.4 of the Terms and Conditions iii) the Engaging Institutions and [Airtours] both agree to all the terms contained in the Contract.
The Letter included countersigning pages for the Engaging Institutions, which, inter alia, confirmed (i) that the foregoing properly sets out the arrangements agreed between us, and we agree to the terms contained in this Letter and the attached Terms and Conditions and (ii) that [Airtours] has authorised the Engaging Institutions to disclose to you all relevant matters concerning [its] affairs and its bank accounts.
The Letter also contained a countersigning page for Airtours which, inter alia, contained a confirmation in the same form as (i), and also confirmed that PwC would have full access to its books, and that PwC could disclose all aspects of [Airtours] affairs to the Engaging Institutions.
The Terms and Conditions (the Terms) referred to in the Letter were in a standard form.
The Terms started by providing that they applied to the Services, and together with the Letter constituted the Contract, and I shall adopt that definition.
The Terms then stated that [f]or the avoidance of doubt we and our refers to [PwC], and you and your refers to the entity or entities on whose behalf the [Letter] was acknowledged and accepted.
The Terms then included the following provisions: Clause 2, which required you to ensure that all information provided is accurate, that any reports will be based on information provided by you, and states that we will not be required to direct your affairs.
Clause 3, under which you agree to pay our fees promptly .
Clause 9.4, which limited PwCs liability for loss or damage suffered by you, and 9.5, where the Letter is signed by more than one party, this limit will be allocated between them.
Clause 10, which provided that [y]ou agree to indemnify us to the fullest extent permitted by law against all liabilities, losses, claims, demands and expenses arising out of or in connection with your breach of any of the terms of the Contract .
Clause 12, subclause 1 of which provided that either of us may terminate the Contract upon the expiry of 30 days notice; the clause contained other provisions for determination, including in subclause 5 a right for PwC to terminate if we do not receive payment from you of any invoice within 30 days of the due date.
PwC carried out work pursuant to the Contract, ie they provided the Services pursuant to the Letter and the Terms, and carried out further, similar, work pursuant to similarly worded contracts, which for present purposes can conveniently be treated as part of the Contract.
That work was, according to the First tier Tribunal wide ranging and highly technical and involved liaising with and making representations to various parties, and carrying out a strategic review of [Airtours] business and creating what was termed an entity priority model [2009] UKFTT 256 (TC), para 2.
In due course, PwC produced a Report, which satisfied the Institutions.
In accordance with para 25 of the Letter, Airtours paid PwC a retainer of 200,000 when the work began, and thereafter PwC invoiced Airtours for their fees, which Airtours then paid.
In addition, Airtours paid PwC VAT in the form of output tax on these sums.
Airtours then sought to deduct that VAT as input tax in its VAT returns for the relevant periods.
The respondents, the Commissioners of HM Revenue and Customs, challenged Airtours right to do so.
While they accepted that the Contract was of commercial benefit to Airtours, they contended that PwCs services under the Contract were not supplied to Airtours, and, as a result, Airtours was not entitled to deduct the VAT on PwCs fees as input tax.
The First tier Tribunal found for Airtours, in very summary terms on the basis that all that was required to establish its case was that it had obtained anything at all that was used for the purpose of his business and a supply of a service may consist of a right to have the service supplied to a third party [2009] UKFTT 256 (TC), para 26.
The Upper Tribunal allowed the Commissioners appeal, holding that the Contract was one in which the Engaging Institutions contracted with PwC to supply services which they needed for the purposes of their own businesses, and Airtours contracted with PwC to pay its fees, rather than one in which Airtours received something of value from PwC to be used for the purpose of its business in return for its payment [2010] UKUT 404 (TCC), para 24.
By a majority, the Court of Appeal dismissed Airtours appeal [2015] STC 61.
All members of the Court of Appeal agreed that the issue turned on the interpretation of the Contract.
In agreement with the Upper Tribunal, Moore Bick and Vos LJJ held that the effect of the Contract was that PwCs services thereunder were provided to the Engaging Institutions, and not to Airtours.
Dissenting, Gloster LJ concluded at para 46 that as a matter of construction of the Contract, and on analysis of the economic realities of the surrounding commercial arrangements, the appellant had a contractual right to require that the Services as described in the [Letter] were provided.
The statutory provisions
The law relating to payment and recovery of VAT in the United Kingdom is contained in the Value Added Tax Act 1994, which was intended to reflect the provisions of certain EC Directives, most notably EC Council Directive 67/227 (on the harmonisation of legislation of member states concerning turnover taxes) (the First Directive) and EC Council Directive 77/388 (on the harmonisation of the laws of the member states relating to turnover taxes Common system of value added tax: uniform basis of assessment) (the Sixth Directive).
The current EU provisions relating to VAT and the recovery of input tax are contained in Council Directive 2006/112/EC (the Principal VAT Directive).
Article 1(2) of the Principal VAT Directive (originally as article 2 of the First Directive) describes the basic system of VAT: The principle of the common system of VAT entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, however many transactions take place in the production and distribution process before the stage at which the tax is charged.
On each transaction, VAT, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of VAT borne directly by the various cost components.
The common system of VAT shall be applied up to and including the retail trade stage.
VAT is charged on supplies of goods and services for consideration see article 2(1) of the Principal VAT Directive (formerly article 2 of the Sixth Directive).
And, as article 63 of the Principal VAT Directive states, VAT becomes chargeable when a supply takes place.
Articles 14(1) and 24 of the Principal VAT Directive (formerly articles 5 and 6 of the Sixth Directive), reflected in section 5 of, and Schedule 4 to, the 1994 Act, define the concepts of supply of goods and supply of services respectively, in the following terms; Supply of goods shall mean the transfer of the right to dispose of tangible property as owner.
Supply of services shall mean any transaction which does not constitute a supply of goods.
Article 73 of the Principal VAT Directive (formerly article 11 of the Sixth Directive), reflected in section 19 of the 1994 Act, defines, so far as relevant, the taxable amount as: in respect of the supply of goods or services everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party,
Article 168 of the Principal VAT Directive (formerly article 17(2) of the Sixth Directive), reflected in sections 24(1), 24(2), 26(1) and 26(2) of the 1994 Act, allows a taxable person the right, [i]n so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, to deduct VAT due or paid in respect of supplies to him of goods or services carried out or to be carried out by another taxable person.
So far as the provisions of the 1994 Act are concerned, they must, of course, be interpreted as far as possible so as to comply with the current Directive, and it is accepted that, at least for present purposes, they do so.
Whether it is right to decide this appeal by reference to the Principal VAT Directive or the 1994 Act is therefore a wholly academic point.
However, the strictly correct approach must be to decide it by reference to the 1994 Act, but only on the basis that that Act cannot be interpreted without reference to the Principal VAT Directive, and must, if at all possible, be interpreted so as to be consistent with that Directive.
The centrally relevant provisions of the 1994 Act are in sections 24 to 26.
Section 24(1) defines input tax as, inter alia, VAT on the supply to [a taxable person] of any goods or services which are used or to be used for a business carried on by him.
Section 25(2) entitles a taxable person to deduct so much of his input tax as is allowable under section 26 from any output tax that is due from him.
Section 26(1) and (2) provides that the amount of allowable input tax is that which is attributable to supplies made or to be made by the taxable person in the course or furtherance of his business [including] taxable supplies.
The issues on this appeal in summary
In order for the VAT charged by PWC and paid by Airtours to be reclaimable as input tax, it must be VAT on the supply to [Airtours] of any goods or services.
There is no doubt that there was in this case a supply of services (and no supply of goods), namely the provision by PwC of the Services as defined in the Letter.
The issue is whether the supply of such services was to Airtours.
The concept of a supply is not only fundamental to the VAT system; it is an autonomous concept of the EU wide VAT system.
In the present appeal, the issue whether there has been a supply of services by PwC to Airtours gives rise to two principal questions.
The first question is whether, under the terms of the Contract, PwC agreed with Airtours that it would supply services, and in particular to provide the Report.
If the answer to that question is yes, then the Commissioners accept that there has been a supply of services to Airtours, and that this appeal must be allowed, subject to a question of apportionment.
On the other hand, if the answer to that first question is no, then the Commissioners contend that this appeal must be dismissed, but Airtours contends that its appeal should still succeed, subject, again to a question of apportionment.
In effect, on this second point, Airtours argues that, in order to show that it received a supply of services from PwC for the purposes of VAT, it does not have to show that it had a contractual right to require the Services to be provided to the Institutions by PwC.
The first question: was there a contractual obligation to supply?
The first question, then, is whether, on the true construction of the Contract, PwC contracted to supply services to Airtours.
There is no doubt that the Contract imposes an obligation on PwC to supply services to the Institutions.
The issue is whether PwC agreed, in addition, with Airtours that they would supply those services.
Thus, it is enough for Airtours purposes if it can establish that PwC were under a contractual obligation to Airtours to supply services, such as providing the Report, to the Institutions.
Airtours does not have to show that PwC were under a contractual obligation to supply any services directly to Airtours.
Not least because the Terms are in a standard form, which has been poorly adapted, and whose provisions are inconsistently drafted, the issue whether PwC had a contractual obligation to Airtours to provide the Services to the Institutions is not entirely easy.
Nonetheless, I have reached the clear conclusion that PwCs commitment to provide the services as described in the Contract was a contractual commitment to the Engaging Institutions, and not to Airtours.
First, the Letter is addressed To the Engaging Institutions, and not to Airtours.
Secondly, para 1 states in terms that it is those Institutions who have retained PwC: there is no suggestion that Airtours had done so, or that there was some residual contractual duty to Airtours.
Thirdly, para 4 provides that any reports are for the sole use of [those] institutions which had countersigned, and again there is nothing about Airtours.
Fourthly, para 7, with its reference to [Airtours] likely requests for facility extensions is also more consistent with the Commissioners case.
The reference also highlights the risk of conflict if PwC were contracting with Airtours as well as the Banks, but this point is weakened by the evidence before the FTT to the effect that the current practice of PwC would be to contract with both borrower and lender.
Fifthly, para 8 of the Letter states that the Report is to be provided to the Institutions, and not only is Airtours merely to be provided with a copy, but that copy can be redacted.
While none of that is logically inconsistent with PwCs contract being with Airtours, its thrust is more consistent with the opposite.
The obligation to provide a copy of any Report to the directors of Airtours is perfectly consistent with PwCs contractual obligations being to the Institutions alone, as they would want to discuss any Report with Airtours, and would therefore not want Airtours to be excluded from seeing the Report pursuant to the terms of para 4.
Sixthly, paras 9 and 10 of the Letter recognise a duty of care on the part of PwC to the Institutions, but does not acknowledge one to Airtours, but it is fair to say that the weight to be given to this point is weakened by the terms of para 26(ii).
Seventhly, para 11 reinforces this point as it excludes any duty of care or liability to any other party.
If that excludes any duty of care to Airtours, it lies uneasily with the notion that PwC has a contractual obligation to Airtours; if it does not exclude any duty of care to Airtours, then it reinforces the point made in respect of paras 9 and 10.
Eighthly, para 12 refers to PwCs work being required by the Institutions, and no suggestion that it was required by Airtours; while that is not inconsistent with the notion that there is also a contractual obligation to Airtours, it is rather an odd provision if there was.
It is true that in para 19 of the Letter PwC agreed to discuss any draft report with Airtours management, but that is quite consistent with the Contract being with the Institutions alone: a discussion with Airtours before a discussion with the Institutions would obviously be desirable from the Institutions perspective.
Para 22 records the fact that Airtours would pay for PwCs work, but, in so far as such a provision is included in the Letter, it was needed to protect the Institutions as much as PwC, and the same applies to para 26(i) which records that Airtours would indemnify PwC against third party claims.
Para 26(ii) referred to PwCs liability to Airtours, but there could clearly be tortious liability.
Para 26(iii) was plainly not concerned with imposing any liability on PwC beyond what was in the preceding provisions.
As for the fact that Airtours countersigned the Letter in the terms that it did, it appears to me that Airtours had to sign in order to be bound by paras 22 (payment of PwCs fees) and 26 (indemnity and limitation of liability), as well as clauses 2, 3, 9 and 10 of the Terms.
In any event, I find it hard to accept the suggestion that the fact that Airtours countersigned, and was required by PwC to countersign, the Letter in the terms that it did had the effect of imposing on PwC obligations to Airtours which would not otherwise have arisen from the provisions of the Letter.
Turning to the Terms, they were on a standard printed form, and it is therefore unsurprising that they are not always easy to apply to the provisions contained in the Letter.
The statement in the opening part of the Terms that you refers to the entity or entities on whose behalf the Letter was acknowledged and accepted is neutral, because, as just explained, by countersigning the Letter, Airtours had agreed to pay PwCs fees and to give PwC an indemnity, and it had also agreed to a cap on any potential liability to it which PwC might have, as set out in the Letter.
The provisions of clause 2 of the Terms are such that the reference to you more naturally refers to Airtours probably as well as the Institutions.
In the light of the provisions of paras 22, 25 and 26(i) of the Letter, there can be no doubt but that the references to you in clauses 3 and 10 of the Terms (concerned with the payment of PwCs fees and with an indemnity to PwC) are reference to Airtours alone.
The you in clause 9 appears to apply to the Institutions and Airtours.
Clause 12 of the Terms, which applies to determination and refers to either of us being able to determine, appears to envisage two parties to the Contract, and, if that is right, they must be the Institutions and PwC, although payment from you in clause 12.5 must mean payment from Airtours.
Confining myself for the moment to the express words of the Contract, it appears to me that the Commissioners are correct, and there is no obligation on PwC, as a matter of contract, to Airtours to provide the Services whether to the Institutions or to Airtours.
The position appears pretty clear if one confines oneself to the Letter: PwCs obligation to provide the Services set out in the Appendix is owed solely to the Institutions, and Airtours is only a party for the purpose of agreeing to pay PwCs fees, to provide PwC with an indemnity, and to acknowledge the cap on any damages for which PwC may be liable.
The Terms are, without doubt, less clear, but there is nothing in them which supports the notion that they were intended to widen PwCs duties beyond what was in the Letter.
In any event, the notion that the Terms can give the meaning of you in the Letter any different meaning from that which it naturally has on the face of the Letter is fatally undermined by the fact that the Terms are contained in a standard form, and, even more, by the fact that you in the Terms clearly has different meanings in different places.
Looking at the matter more broadly, Airtours argues that when one considers the commercial background, it should be accepted that PwC had a contractual duty to Airtours to provide the Institutions with the Services (and in particular the Report).
In that connection, Airtours points to the facts that (i) it was plainly in Airtours interest that the Services were provided, (ii) Airtours was to pay for the Services, (iii) Airtours initiated the idea of having the Report and were involved in the selection of PwC, (iv) Airtours was a party to the Letter through countersigning it, and (v) Airtours took on liabilities to PwC in the Letter.
This argument has obvious attraction, but I cannot accept it.
I do not consider that these five factors can be successfully invoked either in order to interpret the Contract so as to impose a contractual duty on PwC to Airtours to supply the information to the Institutions, or in order to imply such a duty on PwC.
Factors (iv), and (v) are plain from the face of the Letter, and I do not see that they can carry things further, once one has analysed the provisions of the Letter and the Terms.
Factor (iii) takes matters little further at least on its own, although it could fairly be said to be supportive of Airtours case in a general sort of way.
By contrast, factor (ii), the fact that Airtours, rather than the Institutions, was to pay PwC for the services, can fairly be said to raise a prima facie expectation in a reader of the Letter that PwC would owe a duty to Airtours to provide those services.
However, it is not, at least of itself, a particularly powerful point.
So long as the Institutions wanted the services, PwC would have been obliged to them to provide them.
And, if the Institutions no longer wanted the services, there is no reason to think that Airtours would still have wanted them, especially as it would have had to pay for them.
And it is not as if Airtours was agreeing to pay for work which would not be done: payment was to be in arrears except for the 200,000 retainer.
Lord Carnwath, whose judgment I have seen in draft form, relies in particular on the retainer of 200,000 which Airtours agreed to pay under para 25 of the Letter.
While I see how the liability to pay this retainer can be said to be the high point of Airtours case, it does not cause me to change my view.
The liability to pay the initial 200,000 does not seem to me to be different in principle for present purposes from any other payment which Airtours agreed to pay under para 25.
Apart from that, the parties would have appreciated that it was very unlikely that PwC would not carry out 200,000s worth of work before any possibility of their ceasing work arose.
The Report was being prepared under considerable time pressure, as is clear from the background facts and from para 19, under which the interim report had to be available for the engaging institutions six days after signature, and indeed the Letter was signed three days after it had taken effect.
In addition, the termination provisions in clause 12 of the Terms limited the circumstances in which PwC could cease their work.
As for factor (i), Airtours interest in having a Report produced for the Institutions, I accept that it means that one would not be at all surprised if PwCs contractual obligation to supply the Services to the Institutions extended to Airtours, but it does not in any way compel such a conclusion as a matter of commercial sense, logic or law.
Like factor (ii), it does no more than raise a prima facie expectation in the reader of the Contract.
In these circumstances, I do not consider that the five factors mentioned in para 32 above assist Airtours.
So far as interpretation of the Contract is concerned, there is the initial difficulty that it is hard to see how the wording of the Letter and the Terms can give rise to an express contractual duty on the part of PwC to Airtours in the light of the analysis in paras 24 to 31 above.
As to the possibility of implying such a duty, I cannot see how the proposed implied term can fairly be said to satisfy either of the two tests recently affirmed in Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] 3 WLR 1843, paras 18 and 21, namely that it is necessary for business efficacy or that it is so obvious that it went without saying.
Apart from the factors mentioned in para 32 above, it does not seem to me that there is much else which assists on the interpretation of the Contract for present purposes.
It is true that the evidence before the FTT supported the notion that, at any rate at the time of the hearing in the FTT, one would have expected an agreement such as the Contract to involve PwC agreeing to provide the Services to Airtours, as well as to the Institutions.
However, I do not think that that can be of any, or at any rate of much, weight.
First, we are concerned with a contract made in 2002, and the FTT hearing was several years later.
Secondly, the evidence did not support a universal practice, or general understanding, let alone a professional duty, for an accountant to contract with the borrower as well as the lender in a case such as this.
So, at best from Airtours point of view, one is left with the possibility that PwC and Airtours may have believed that the Contract was being made with Airtours as well as the Institutions (although it is fair to emphasise that I do not think that the evidence went nearly as far as that).
However, it is very well established that the understandings of the parties themselves at the time they entered into a written contract is wholly inadmissible when the issue is one of interpretation, as opposed to rectification, of the document.
Further, I do not consider that this is an appeal where it would be right to give particular weight to the findings of a Tribunal.
In the end, we are concerned with the interpretation of a document, and it is well established that that is a matter of law, not fact, in the courts of all parts of the United Kingdom.
Of course, when there are relevant findings of primary fact (or even, at least in some cases, of secondary fact) relevant to interpretation, a Tribunals finding will deserve particular respect, but that does not arise in this case.
Furthermore, in any event, my conclusion as to the meaning of the Contract is consistent with the view of the specialist UT, which formed its own view, because it concluded that the FTT (also a specialist tribunal) had erred in law.
Accordingly, in agreement with the UT and the majority of the Court of Appeal, I consider that Airtours is wrong on the first question, and, as the Commissioners contend, PwC had no contractual obligation to Airtours to supply the Services to it or to the Institutions.
That means that it is necessary to address the second question.
The second question: was there nonetheless a supply?
Even if Airtours were not contractually entitled to require PwC to provide the Services to the Institutions, it remains the fact that it was plainly in Airtours commercial interest that those services be provided.
That, it may be said, is evident not merely from the background (namely that the provision of the Services was intended to facilitate the restructuring of Airtours borrowing) and from the face of the Letter (given that Airtours undertook to pay PwC for providing those services).
Indeed, I do not think that Mr Scorey QC exaggerated Airtours case when he described PwCs work pursuant to the Contract as important to Airtours very survival.
In those circumstances, it is argued on behalf of Airtours that, even if it was not contractually entitled to have the Services provided to the Institutions, the facts that (i) it had a substantial commercial interest in those services being provided by PwC to the Institutions, and (ii) it not merely countersigned the Contract pursuant to which they were provided, but thereby agreed to pay PwC for the Services, lead to the conclusion that the Services were supplied to Airtours (as well as to the Institutions).
Some support for that proposition may arguably be found in the speech of Lord Millett in Customs and Excise Comrs v Redrow Group Plc [1999] 1 WLR 408, 418G, where he said [o]nce the taxpayer has identified the payment the question to be asked is: did he obtain anything anything at all used or to be used for the purposes of his business in return for that payment?.
If one takes that question at face value, then it can be said with some force that Airtours obtained a substantial benefit from paying PwCs invoices, namely the potential (and, as it turned out, the eventual actual) financial support of the Institutions for its restructuring.
However, Lord Milletts observation cannot be taken at face value.
As Lord Reed explained in Revenue and Customs Comrs v Loyalty Management UK Ltd [2013] STC 784, paras 66 67: 66. [T]he speeches in Redrow should not be interpreted in a manner which would conflict with the principle, stated by the Court of Justice in the present case, that consideration of economic realities is a fundamental criterion for the application of VAT. [T]he judgments in Redrow cannot have been intended to suggest otherwise.
On the contrary, the emphasis placed upon the fact that the estate agents were instructed and paid by Redrow, and had no authority to go beyond Redrows instructions, and upon the fact that the object of the scheme was to promote Redrows sales, indicates that the House had the economic reality of the scheme clearly in mind.
When, therefore, Lord Millett asked, Did he obtain anything anything at all used or to be used for the purposes of his business in return for that payment?, [that question] should be understood as being concerned with a realistic appreciation of the transactions in question. 67.
Reflecting the point just made, it is also necessary to bear in mind that consideration paid in respect of the provision of a supply of goods or services to a third party may sometimes constitute third party consideration for that supply, either in whole or in part.
The speeches in Redrow should not be understood as excluding that possibility.
Economic reality being what it is, commercial businesses do not usually pay suppliers unless they themselves are the recipient of the supply for which they are paying (even if it may involve the provision of goods or services to a third party), but that possibility cannot be excluded a priori.
A business may, for example, meet the cost of a supply of which it cannot realistically be regarded as the recipient in order to discharge an obligation owed to the recipient or to a third party.
In such a situation, the correct analysis is likely to be that the payment constitutes third party consideration for the supply.
Lord Hope made the same point in para 110 in remarks which are perhaps particularly germane for present purposes: I think that Lord Millett went too far [at p 418G] when he said that the question to be asked is whether the taxpayer obtained anything anything at all used or to be used for the purposes of his business in return for that payment.
Payment for the mere discharge of an obligation owed to a third party will not, as he may be taken to have suggested, give rise to the right to claim a deduction.
A case where the taxpayer pays for a service which consists of the supply of goods or services to a third party requires a more careful and sensitive analysis, having regard to the economic realities of the transaction when looked at as a whole.
This approach appears to me to reflect the approach of the Supreme Court in the subsequent case of WHA Ltd v Revenue and Customs Comrs [2013] UKSC 24; [2013] STC 943 where at para 27, Lord Reed said that [t]he contractual position is not conclusive of the taxable supplies being made as between the various participants in these arrangements, but it is the most useful starting point.
He then went on in paras 30 to 38 to analyse the series of transactions, and in para 39, he explained that the tribunal had concluded that the reality is quite different from that which the contractual documentation suggested.
Effectively, Lord Reed agreed with this, and assessed the VAT consequences by reference to the reality.
In other words, as I said in Secret Hotels2 Ltd v Revenue and Customs Comrs [2014] STC 937, para 35, when assessing the VAT consequences of a particular contractual arrangement, the court should, at least normally, characterise the relationships by reference to the contracts and then consider whether that characterisation is vitiated by [any relevant] facts.
The same approach was adopted by the Court of Justice in Revenue and Customs Comrs v Loyalty Management UK Ltd and Baxi Group Ltd (Joined Cases C 53/09 and C 55/09) [2010] STC 265, paras 39 and 40, where they stated, citing previous judgments, that consideration of economic realities is a fundamental criterion for the application of the common system of VAT, and added that that issue involved consideration of the nature of the transactions carried out in the particular case.
To much the same effect, in Tolsma v Inspecteur der Omzetbelasting Leeuwarden (Case C 16/93) [1994] STC 509, para 14, the Court of Justice said that a supply of services is effected for consideration only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, which it explained as meaning the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient.
In the context of the supply of goods, the Court made the same point in Primback Ltd v Customs and Excise Comrs (Case C 34/99) [2001] 1 WLR 1693, para 25, where it described the determining factor as the existence of an agreement between the parties for reciprocal performance, the payment received by the one, being the real and effective counter value for the goods furnished to the other.
In Revenue and Customs Comrs v Newey (Case C 653/11) [2013] STC 2432, para 40, the Court of Justice again emphasised that that a supply of services is effected for consideration, within the meaning of article 2(1) of [the Sixth] directive, and hence is taxable, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient.
In para 41, the court went on to explain that the supply of services is therefore objective in nature and applies without regard to the purpose or results of the transactions concerned and without its being necessary for the tax authorities to carry out inquiries to determine the intention of the taxable person.
The court then observed in paras 42 43 that consideration of economic and commercial realities is a fundamental criterion for the application of the common system of VAT and that the contractual position normally reflects the economic and commercial reality of the transactions.
An exception to the normal rule that the contractual relationship is central was then identified by the court as being where those contractual terms constitute a purely artificial arrangement which does not correspond with the economic and commercial reality of the transactions (para 45).
From these domestic and Court of Justice judgments, it appears clear that, where the person who pays the supplier is not entitled under the contractual documentation to receive any services from the supplier, then, unless the documentation does not reflect the economic reality, the payer has no right to reclaim by way of input tax the VAT in respect of the payment to the supplier.
On this analysis, it appears to me that, subject to considering a further way in which Airtours case is put, it also fails on the second question.
The Contract, consisting of the Letter and the Terms, did reflect the economic reality, and was not in any way an artificial arrangement.
It is true that Airtours benefitted from the Contract, but the benefit which it was getting was not so much the Services from PwC, but the enhanced possibility of funding from the Institutions for its restructuring (a possibility which eventuated into reality thanks, to a substantial extent, to the Report).
And it was to improve the prospects of such refinancing that Airtours was prepared to pay for the provision of the Report.
On behalf of Airtours, it is suggested that this conclusion is inconsistent with the notion of fiscal neutrality, as the consequence of Airtours appeal in this case failing is that VAT paid as output tax is not reclaimable as input tax.
However, as Advocate General Sharpston observed in Finanzamt Frankfurt am Main V Hchst v Deutsche Bank AG (Case C 44/11) [2012] STC 1951, para 60 in connection with exemptions, fiscal neutrality is not a fundamental principle or a rule of primary law which can condition the validity of an exemption but a principle of interpretation, to be applied concurrently with and as a limitation on the principle of strict interpretation of exemptions.
In any event, as Mr Thomas says on behalf of the Commissioners, I would not accept the argument is well founded.
It assumes that all output tax should, in principle, be reclaimable as input tax, no matter who was invoiced and who paid it, whereas article 168 (set out in para 17 above) clearly limits such a right to output tax paid in respect of supplies to him of services : therefore, where the services in respect of which he paid VAT were not supplied to the person who paid the VAT, no right to reclaim that output tax can arise.
To put the point another way, fiscal neutrality cannot be invoked to invent a supply where there is none.
Consistently with this, although the VAT Directives contemplate that the consideration itself may be paid by either the recipient of or a third party to the supply or a combination of the two (see para 15 above and HMRC v Loyalty Management UK Ltd, para 67, per Lord Reed), they also contemplate that VAT on a supply will be the subject of an invoice directed to the recipient of the supply (see the Principal VAT Directive, articles 220(1) and 226(5)) and will be potentially deductible by him once paid as input tax (article 168) although it appears that, in this case, the Institutions, being largely exempt, would not have been able to deduct any input tax which had been invoiced to and paid by them.
In this context, Mr Scorey also raised a somewhat wider point, namely that, if contrary to his submission, PwC had contracted to, and did, provide services only to the Institutions, there could be no supply at all by PwC for VAT purposes because there was no reciprocal performance by the Institutions for those services.
He contrasted the circumstance in which A contracts with and undertakes to pay B to supply a service to C, where there is reciprocity of obligation between A and B, with a contractual arrangement in which C, while undertaking no obligation to pay B, receives a service from B and procures that A will pay for it.
In short, he contended that because the Institutions were under no obligation to pay PwC for the services, there had been no relevant supply.
I do not accept this argument, which amounts to an assertion that the reference to third party consideration in article 73 of the Principal VAT Directive is limited to consideration such as a guarantee which exists alongside the liability of the recipient of the goods or services.
The Court of Justice has spoken of reciprocal performance as a critical component of the concept of supply, but it has never confined the consideration to that provided by the recipient of the supply.
Thus in Tolsma at para 14, the court stated: a supply of services is effected for consideration and hence is taxable, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient.
van Financin
This formulation demonstrates the need for a direct link between the service provided and the consideration received which the court had previously articulated in Staatssecretaris v Association Coperatieve Aardappelenbewaarplaats GA (Case C 154/80) [1981] ECR 445, para 12, Apple and Pear Development Council v Customs and Excise Comrs (Case C 02/86) [1988] STC 221, paras 11 and 12, and Staatssecretaris van Financin v Hong Kong Trade Development Council (Case C 89/91) [1982] ECR 1277, para 10.
The Court of Justices later statements of the test have followed Tolsma in not requiring the recipient of the services under the arrangement itself to be the provider of the consideration or to have legal responsibility for its provision see Primback Ltd, para 25 and Newey, para 40, and see also Dixons Retail plc v Revenue and Customs Comrs (Case C 492/12) [2014] Ch 326, paras 31 and 32.
When the Court of Justice speaks of reciprocal performance it is looking at the matter from perspective of the supplier of the services and it requires that under the legal arrangement the supplier receives remuneration for the service which it has performed.
It is not necessary that the recipient of the service is legally responsible to the supplier for payment of the remuneration; it suffices that the arrangement is for a third party to provide the consideration.
Were it otherwise, taxpayers could structure their transactions so as to escape liability to pay VAT, so long as they could meet the economic reality test.
When this court has discussed third party consideration in what is now article 73 of the Principal VAT Directive it has similarly not restricted it to consideration provided alongside, or in performance of, a legal obligation of the recipient see WHA Ltd, para 56 per Lord Reed, in which the garage provided a service to the insured car driver but the insurer alone was responsible for remunerating the garage, and Loyalty Management UK Ltd, para 67 per Lord Reed.
Finally, it is also said that the fact that PwC did not contract with Airtours to provide the Services to the Institutions is a very small point on which the present decision should turn.
The answer to that was provided by Lord Reed in WHA Ltd, para 26, where he said that decisions about the application of the VAT system are highly dependent upon the factual situations involved.
A small modification of the facts can render the legal solution in one case inapplicable to another.
Conclusion
For these reasons, I would dismiss Airtours appeal.
LORD CLARKE: (dissenting) (with whom Lord Carnwath agrees)
I agree with Lord Carnwath that this appeal should be allowed, both for the reasons he gives and, in particular, for the reasons given by Gloster LJ in her dissenting judgment in the Court of Appeal.
The principal reason why I have reached a different conclusion from that of Lord Neuberger is that it seems to me that his approach is too narrow in that, while it focuses on the relationship between PwC and the Banks, it gives too little attention to the legal relationship between PwC and Airtours and to the economic realities of that relationship.
The same is in my opinion true of the approach of the majority of the Court of Appeal.
Gloster LJ set out the relevant principles, in my opinion correctly, in her para 37.
It is convenient to set out here the basic principles without repeating the extensive citations of recent authority, including in particular in the Supreme Court.
Using Gloster LJs sub paragraphs, those principles are these: i) Consideration of economic realities is a fundamental criterion for the application of the common system of VAT as regards the identification of the person to whom services are supplied. ii) Decisions about the application of the VAT system are highly dependent upon the factual situations involved.
Thus a small modification of the facts can render the legal solution in one case inapplicable to another. iii) The case law of the CJEU indicates that, when determining the relevant supply in which a taxable person engages, regard must be had to all the circumstances in which the transaction or combination of transactions takes place.
In cases where a scheme operates through a construct of contractual relationships, it is necessary to look at the matter as a whole in order to determine its economic reality.
Thus the relevant contracts have to be understood in the wider context of the totality of the arrangements between the various participants. iv) The terms of any contract between the parties, whilst an important factor to be taken into account in deciding whether a supply of services has been made, are not necessarily determinative of whether as a matter of economic reality taxable supplies are being made as between any particular participants in the arrangements.
That may be particularly so where certain contractual terms do not wholly reflect the economic and commercial reality of the transactions.
However, the contractual position is generally the most useful starting point for the VAT analysis. v) There may, as a matter of analysis, be two or more distinct supplies within the same transaction.
Moreover, a single course of conduct by one party may constitute two or more supplies to different persons.
Once the taxpayer has identified the payment the question to be asked is: did he obtain anything anything at all used or to be used for the purposes of his business in return for that payment? This will normally consist of the supply of goods or services to the taxpayer.
But it may equally well consist of the right to have goods delivered or services rendered to a third party.
The grant of such a right is itself a supply of services.
In one case (Redrow) the taxpayer did not merely derive a benefit from the services which the agents supplied to the householders and for which it paid.
It chose the agents and instructed them.
In return for the payment of their fees it obtained a contractual right to have the householders homes valued and marketed, to monitor the agents performance and maintain pressure for a quick sale, and to override any alteration in the agents instructions which the householders might be minded to give.
Everything which the agents did was done at the taxpayers request and in accordance with its instructions and, in the events which happened, at its expense.
The doing of those acts constituted a supply of services to the taxpayer.
The services obtained by the taxpayer were different.
They consisted of the right to have the householders home valued and marketed in accordance with the taxpayer's instructions.
Unless the householder sold his home and completed the purchase of a Redrow home, however, the taxpayer was not liable for the agent's fees and paid no input tax, so there was nothing in respect of which a claim to deduction could be made.
What must await events was not the identity of the party to whom the services were rendered, for different services were rendered to each; but which of the parties was liable to pay for the services rendered to him and so bear the burden of the tax in respect of which a claim to deduction might arise. vi) However, the mere fact that the taxpayer has paid for the service does not necessarily mean that it has been supplied to him.
Consideration of economic realities is a fundamental criterion for the application of VAT.
Thus substance and reality remain critical.
What is required is a realistic appreciation of the transactions in question.
Consideration paid in respect of the provision of a supply of goods or services to a third party may sometimes constitute third party consideration for that supply, either in whole or in part.
Economic reality being what it is, commercial businesses do not usually pay suppliers unless they themselves are the recipient of the supply for which they are paying (even if it may involve the provision of goods or services to a third party), but that possibility cannot be excluded a priori.
A business may, for example, meet the cost of a supply of which it cannot realistically be regarded as the recipient in order to discharge an obligation owed to the recipient or to a third party.
In such a situation, the correct analysis is likely to be that the payment constitutes third party consideration for the supply.
A case where the taxpayer pays for a service which consists of the supply of goods or services to a third party requires a more careful and sensitive analysis, having regard to the economic realities of the transaction when looked at as a whole.
It may lead to the conclusion that it was solely third party consideration, or it may not.
Having set out those principles (and the references which support them) Gloster LJ, in my opinion correctly, described the real issue as being whether, on the primary facts found by the FTT, which were in essence not in dispute, the arrangements between the Banks, PwC and Airtours as a matter of law, involved the supply of services to Airtours or merely third party consideration provided by Airtours for services rendered to the Banks alone.
In para 41 Gloster LJ expressed the view that this case, like Customs and Excise Comrs v Redrow Group plc [1999] 1 WLR 408 (Redrow), is a case where two distinct supplies of services were being provided by PwC within the same overall transaction.
She noted the caveats articulated by Lord Reed and Lord Hope in Revenue and Customs Comrs v Loyalty Management UK Ltd [2013] UKSC 15; [2013] STC 784 (LMUK (SC)) and recognized, both that every case has to be approached on its own particular facts, and that it may be dangerous to draw analogies between the facts of two different cases which may appear superficially similar.
However, she concluded that, although there are obvious differences between the facts of Redrow and those of the present case, the principles identified in Redrow, and confirmed in LMUK (SC), support the analysis that in the present case PwC was making two distinct supplies in both directions (see per Lord Hope in LMUK (SC) at para 89), that is both to the Banks and to Airtours.
I agree.
I also agree with her description of the two distinct supplies in para 42: i) The supply by PwC to [Airtours] of the service of having PwC, after appropriate liaison with the [Airtours] directors and senior management, review, monitor, and validate (if appropriate) its financial statements, budgets, financial performance, EPM, arrangements with the CAA etc and report on such matters to the [Banks].
That supply of the service of liaison, review etc, and reporting to the [Banks] was provided to [Airtours] pursuant to the Contract which conferred a contractual right on [Airtours] to have such work carried out for the purposes of PwC reporting to the [Banks].
As Lord Millett pointed out in Redrow at 418G, the grant of such a right (ie the right to have services rendered to a third party) is itself a supply of services.
The supply of that service, pursuant to the Contract, was for a consideration payable by the appellant. ii) The supply by PwC to the [Banks] of the service of reporting on, monitoring and advising in relation to [Airtours] financial statements, budgets, financial performance, EPM, arrangements with the CAA etc in other words the provision to them of the Services as defined in the Engagement Letters in order to enable the [Banks] to decide whether to continue their credit facilities to [Airtours].
This supply was also made pursuant to the Contract but it was made in circumstances in which the [Banks] incurred no liability or contractual obligation to PwC to pay for the supply.
Gloster LJ went on to analyse first the Contract and then the economic realities and concluded that both led to the same conclusion, namely that to treat the Banks as the only entities supplied with the services of PwC was much too narrow a view.
I agree.
Airtours was at least as much a beneficiary of the services provided by PwC as were the Banks.
The particular factors (all included in Gloster LJs analysis of the Contract in paras 44 53 and of the wider economic realities in paras 54 55) which have persuaded me that her analysis is correct are these.
While I am not sure that I would go so far as saying that the words you and your as used in the Contract always include Airtours (although it is certainly arguable that they do), that is not to my mind critical.
I agree with Gloster LJ (in her para 46) that, as a matter of construction of the Contract, and on analysis of the economic realities of the surrounding commercial arrangements, the appellant had a contractual right to require [her emphasis] that the Services, which were described in the various Engagement Letters and which both the [Banks] and [Airtours] had agreed, were indeed provided by PwC to the [Banks].
I further agree with Gloster LJ in her para 47 that it is wrong to say that there was no provision in the Contract to support Airtours assertion that it had a right to require PwC to provide services to the Banks and that Airtours under the tripartite arrangement was simply to make payment to PwC for the provision of services to the Engaging Institutions.
As Gloster LJ put it, that approach disregards the reciprocal obligations entered into on the part of each of Airtours and PwC under the Contract and the commercial reality of the arrangements.
Again as she put it, the absence of an express term specifically stating that Airtours had a right to insist on PwC providing the Services to the Banks is irrelevant.
The clear and necessary implication from the express terms of the Contract is that Airtours had such a right.
I agree with these conclusions in Gloster LJs para 48: Although it may have been the case that PwC was originally approached by the [Banks] it is clear from the facts as found by the FTT that [Airtours] not only had positively to consent to the appointment of PwC but also that it had an input into the decision to choose PwC rather than another firm. [Airtours] also had to agree that PwC would have unrestricted access to its books and records and that [Airtours] directors and senior management would positively co operate with PwC in the provision of information; see for example the appellants confirmation of the November 2002 Letter of Engagement and paragraph 2 of the Terms and Conditions.
As reflected in both para 6 and para 12 of the November 2002 Letter of Engagement, the commercial reality was that one of the contracting parties requesting PwC to carry out the work was indeed [Airtours] itself.
If [Airtours] had not joined in the request and agreed to PwCs appointment, and the scope of its work, the assignment would have taken a very different form since PwC would have had no contractual right to access to [Airtours] books and records or to cooperation from its directors and senior management.
It is also relevant in this context that the evidence showed that at each stage the scope of the work to be carried out by PwC was agreed by all three parties, namely [Airtours], the [Banks] and PwC. Thus although a distinction can be drawn with the factual scenario in Redrow where the taxpayer itself selected and gave instructions to the estate agents, which could not be countermanded by the house owners those factors are not sufficient in my judgment to prevent their being two distinctive services in the present case.
As Gloster LJ put it in her para 49, while of course the Banks required the provision of the Services (as defined) for the purposes of their business in order to inform their decision as to whether to continue financial facilities to Airtours, Airtours itself also clearly required PwC to provide the Services (as defined) to the Banks for the purposes of Airtours own business in order to persuade the Banks and other financial institutions to continue the loan facilities to Airtours and to ensure that its bonding arrangements with the CAA were maintained.
Unless the Services were provided to the Banks, Airtours had little hope of obtaining any extension of its facilities.
A good report by PwC was critical to Airtours future relationship with the Banks and thus to its future more generally.
It is true that PwCs report might have been damaging to Airtours interests but, as Gloster LJ put it at the end of her para 49, it necessarily had to take that risk.
In truth the value of PwCs services was as great to Airtours as it was to the Banks.
Hence the part played by Airtours in the selection of PwC and a number of important aspects of the letter of engagement and terms and conditions, which are set out in some detail by Lord Neuberger and Gloster LJ.
It is common ground that the Contract was a tripartite agreement.
It is true that para 4 of the letter of engagement provided that PwCs report and letters were for the sole use of the Banks and that it expressly provided that PwC would assume a duty of care to the Banks provided that they individually agreed to it.
Paragraph 8 provided that information and advice would be information and advice would be addressed to the Banks with a copy to the directors of the Group, with the exception of any part of the report prepared exclusively or confidentially for the Banks.
Moreover, it is also true that para 9 expressly provided the PwC had a duty of care to the Banks relating to the contents of the Phase 1 report.
I do not however read any of those provisions as negativing a duty of care owed to Airtours.
On the contrary, para 4 seems to me to cater only for the Banks and the purpose of making information and advice, other than that prepared exclusively or confidentially for the Banks, available to Airtours can surely only have been to allow Airtours to rely upon it.
As I see it, the only purpose of the clause was to exclude specific confidential matter.
Paragraph 10 expressly contemplated the possibility of PwCs liability to Airtours because it expressly provided for a limitation of it.
There would have been no need for a provision limiting liability if no duty of care was owed to Airtours.
Paragraphs 12 to 16 set out the scope of PwCs services, which identified the extensive basis of the contribution to be made by Airtours.
Indeed, paras 15 and 16 included express provisions requiring Airtours management to provide information and to be responsible in specific respect.
Airtours was also of course responsible for PwCs fees.
Further, there were these important provisions in paragraph 26 under the heading Terms and Conditions: 26.
The attached terms and conditions (the Terms and Conditions have been agreed between the parties and set out the duties of each party in respect of the Services.
The Terms and Conditions provide among other matters: i) ii) the Group will indemnify us against claims brought by any third party.
For the avoidance of doubt, the reference to you in clause 10 of the Terms and Conditions (and only in that clause) refers to the Group and not the [Banks]; and our aggregate liability to the Group, the [Banks] and any other third party to whom we later agree to assume a duty of care taken together, whether in contract, negligence or any other tort, will be limited in accordance with clause 9.4 of the Terms and Conditions.
For this purpose, our liability in respect of Phase 1 of the Services will in no circumstances exceed 10m.
In the event that you request and we agree to provide services beyond Phase 1, the financial limit of our aggregate liability will increase to 25m in respect of the Services and any additional services we provide to you. iii) The Letter of Engagement and the Terms and Conditions are together referred to as the Contract, and evidence the entire agreement between the parties.
For the avoidance of doubt, the [Banks] and the Group both agree to all the terms contained in the Contract.
Those provisions strongly support the conclusion that it was agreed that PwC owed a duty of care both to the Banks and to Airtours, as one would expect in the light of the substantive obligations of PwC in a Contract which was for the benefit of both Airtours and the Banks.
These conclusions are essentially the same as those set out by Gloster LJ in her paras 50 to 53.
See in particular the first sentence of para 50 and also the last sentence of para 51, where she said that it seemed to her to be inconceivable that Airtours did not have an implied correlative contractual right to insist upon due and proper performance by PwC of its obligations under the contract.
I also agree with her conclusion to similar effect in para 52.
If this conclusion is correct, as I believe it to be, it follows from HMRCs concession referred to in para 22 of Lord Neubergers judgment, that there has been a supply of services to by PwC to Airtours as well as to the Banks.
Having correctly considered first the contractual position, Gloster LJ turned to the wider economic realities of the situation.
For the reasons I have already given, I agree with her that, as she put it in her para 55, as part of the exercise of looking at the economic reality as to whether a supply was made to a taxpayer, it is relevant to see what, if any, value the taxpayer obtained from the alleged supply.
I also agree with her that there is no doubt that, on the evidence as accepted by the FTT, PwCs review, monitoring and (in the event) endorsement of the appellants financial statements, projections and financial position, PwCs liaison with the appellants directors and senior management and its assistance in securing the consequential continuing financial support of the Engaging Institutions, was intended to play, and did indeed play, a critical role in the maintenance of the appellants licence with the CAA and therefore the survival of its business.
As she says, put another way, Airtours right to have PwC carry out this work provided real additional value to Airtours in its struggle for financial survival.
The presentation to the Banks of Airtours own figures, without review or validation by an independent third party such as PwC, would have been highly unlikely in the circumstances to have satisfied the Banks and other financial institutions, which were considering the possible continuation of credit facilities.
Finally, I agree with Gloster LJ that the arrangements between the parties, affording as they did the undoubted consequential benefits to Airtours, clearly involved the supply of economically valuable services to the appellant by PwC as well as the provision of distinct services to the Banks.
For these reasons I would allow the appeal.
LORD CARNWATH: (dissenting) (with whom Lord Clarke agrees)
I gratefully adopt Lord Neubergers exposition of the facts and law.
I regret that I am unable to agree with his conclusion.
Since I understand that I am in a minority, I will state my reasons briefly, particularly as, like Lord Clarke, I am in general agreement with the much fuller reasoning of Gloster LJ in the Court of Appeal.
The issue in short is whether the payments made by Airtours were simply third party consideration for services provided by PwC exclusively to the Banks, or whether they were at the same time consideration for services provided to Airtours itself.
As the extracts cited by Lord Neuberger (paras 44 46) make clear, the contractual position is a useful starting point, but not necessarily conclusive; in the words of Lord Hope in Revenue and Customs Comrs v Loyalty Management UK Ltd [2013] STC 784, para 110, such a case requires a more careful and sensitive analysis, having regard to the economic realities of the transaction when looked at as a whole.
To rest on a narrow legalistic approach to the construction of the contract seems particularly inappropriate in a case where the distinction between services to Airtours and services to the Banks is unlikely to have been seen as of any practical significance to the parties, and probably for that reason was not addressed in detail in that contract.
Nor was it ever put to the test.
Once PwC had been engaged, there was never any question of its not completing its task, with the co operation of both Airtours and the Banks, and for the benefit of both.
A hypothetical analysis of how the contract might have been given effect in circumstances which were never contemplated and never happened, seems a sterile exercise.
As Lord Reed points out in the Loyalty Management case at para 67, the normal expectation is that a commercial business paying a supplier is paying for a right to something, even if that something is a supply to another party.
In the present case, that expectation is reinforced by a number of considerations: i) In October 2002 Airtours was in serious financial difficulties and needed something done quickly to ensure its own commercial survival.
PWCs involvement was essential to the achievement of that objective, and Airtours was willing to pay for it.
It was entitled to expect a correlative commitment from PwC, and, had the issue arisen, it is hard to see any reason why it would have been resisted. ii) The letter of engagement seems to me to acknowledge (as was the fact) that Airtours were party to the request to PwC to provide the services.
I agree with the First tier Tribunal and Gloster LJ that you in para 6 (request for assistance) and 12 (request to undertake a review) includes Airtours.
This is apparent from para 26(i) which limits you to the Group in respect of clause 10 of the terms (indemnity), thereby implying that elsewhere it refers to both the Group and the Engaging institutions. iii) Although the terms of the contract are in some respects equivocal, it is not in dispute that Airtours was a fully contracting party.
It is possible, but in my view artificial, to read that as limited to its obligations to pay and indemnify.
The terms of its confirmation letter (taken with para 30 of the principal engagement letter), make clear that it was accepting the terms of [PwCs] engagement as set out in that letter.
This implies that PwC was engaged to Airtours, no less than to the Banks.
The strongest pointer in this direction, in my view, lies in the provisions for the timetable (clause 19).
It is clear that timing for the initial work was critical and very tight.
The first agreement was signed on 5 November 2002, but the commencement of the work was fixed for 2 November, three days earlier.
The first draft of findings was to be available for discussion with Airtours management on 15 November, and with the Banks on the 18 November.
Timing for later phases were to be agreed before each phase commences. (That must in my view imply agreement with both Airtours and the Bank, since the co operation of both would be essential to the fulfilment of any agreed timetable; and I see no reason why any such agreed timetable should not be envisaged as open to enforcement by either party.)
The first payment by Airtours, a retainer of 200,000, had to be made on commencement.
It is legitimate to ask what would have happened if, having paid its 200,000 on 2 November in the expectation of receiving a draft PwC report 13 days later, Airtours had been faced with a failure by PwC to do anything.
On Lord Neubergers interpretation of the contract it would have had no enforceable right of any kind.
I find that impossible to accept, either as a matter of ordinary contractual construction, or still less of economic reality.
The timetable in clause 19 was part of the obligations undertaken by PwC under the contract.
There is nothing in the contract to suggest that the obligation was not enforceable by Airtours as a party to the contract.
Commercial sense clearly dictates that it should be so.
For these reasons, in addition to those given by Lord Clarke, I would have allowed the appeal.
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In October 2002, Airtours Holidays Transport Ltd (Airtours) was in serious financial difficulties.
It was suggested to Airtours that it should commission an accountants report to satisfy the 80 or so banks and other financial institutions (the Institutions) from which it had borrowed money that its proposed restructuring and refinancing proposals were viable.
The Institutions were agreeable to this.
Subsequently, pursuant to a decision in which both the Institutions and Airtours were involved, PwC were appointed to produce a report (the Report).
The original terms of PwCs appointment were set out in a letter dated 5 November 2002 addressed to the Engaging Institutions (the Letter) and attached terms and conditions (together, the Contract).
The Contract provided that Airtours was to pay PwCs fees for producing the Report and related work, and Airtours duly did so in due course.
Airtours also paid PwC VAT in the form of output tax on those payments.
Airtours then sought to deduct that VAT as input tax in its VAT returns for the relevant periods.
HMRC challenged Airtours ability to do so.
While HMRC accepted that the Contract was of commercial benefit to Airtours, they contended that Airtours was not entitled to deduct the VAT on PwCs fees as input tax because PwCs services under the Contract were not supplied to Airtours.
Airtours appealed to the First tier Tribunal, who found for Airtours.
The Upper Tribunal allowed HMRCs appeal.
The Court of Appeal dismissed Airtours appeal.
Airtours now appeals to the Supreme Court.
The Supreme Court dismisses Airtours appeal by a majority of 3 to 2.
Lord Neuberger gives the leading judgment, with which Lord Mance and Lord Hodge agree.
Lord Carnwath and Lord Clarke both give dissenting judgments.
In order for the VAT charged by PwC and paid by Airtours to be reclaimable as input tax, it must be VAT on the supply to [Airtours] of any goods or services [19].
The issue of whether there has been a supply of services by PwC to Airtours gives rise to two principal questions [20].
The first is whether PwC agreed, under the terms of the Contract, to supply services, and in particular to provide the Report [21].
HMRC accept that, if the answer to that question is yes, the appeal must be allowed.
PwCs commitment to provide the services described in the Contract was a contractual commitment to the Engaging Institutions, and not to Airtours [23], for the following reasons: (i) the Letter is addressed To the Engaging Institutions, and not to Airtours [24]; (ii) paragraph 1 of the Letter provides that the Institutions had retained PwC; there is no suggestion that Airtours had done so [24]; (iii) paragraph 4 of the Letter provides that any reports are for the sole use of [those] institutions [24]; (iv) paragraph 8 of the Letter states that the Report is to be provided to the Institutions and Airtours is only to be provided with a copy, which can be redacted [25]; (v) paragraphs 9 and 10 of the Letter recognise a duty of care on the part of PwC to the Institutions, but does not acknowledge one to Airtours; further, paragraph 11 excludes any duty of care or liability to any other party [26].
While Airtours did countersign the Letter, it had to do so in order to be bound by certain provisions, such as those relating to the payment of PwCs fees [28].
The fact that Airtours, rather than the Institutions, was to pay PwC for the services, can be fairly said to raise a prima facie expectation that PwC would owe a duty to Airtours to provide those services.
However, the Institutions wanted the services; there is no indication Airtours would have still paid for those services had that not been the case [35].
The same can be said of Airtours argument that its interest in having a report produced for the Institutions indicates there was a supply of services to it [37].
The second question arises from Airtours argument that, in any event, in order to succeed on this appeal, it does not have to show that it had a contractual right to require the services under the Contract to be provided to the Institutions by PwC to succeed.
Rather, Airtours argues that the facts that (i) it had a substantial commercial interest in the services being provided by PwC and (ii) it not merely countersigned the Contract but thereby agreed to pay PwC for the services, justify the conclusion that the services were supplied to Airtours, as well as the Institutions [43].
Airtours relies on Lord Milletts statement in Commissioners of Customs and Excise v Redrow Group Plc [1999] 1 WLR 408 that the question to be asked is whether the taxpayer obtained anything anything at all used or to be used for the purposes of his business, but this has to be read in the light of later cases [44 45].
As subsequent authority has clarified, that statement should be interpreted consistently with the established approach of focusing on economic realities as the fundamental criterion for the application of VAT [45].
It is clear from domestic and European Court of Justice judgments that, where the person who pays the supplier is not entitled under the contractual document to receive any services from the supplier, then, unless the documentation does not reflect the economic reality, the payer has no right to reclaim by way of input tax the VAT in respect of the payment to the supplier [50].
Lord Clarke and Lord Carnwath each give judgments dissenting on the analysis of both the Contract and the commercial reality of the relationship between Airtours and PwC. Lord Clarke concludes that, in this case, PwC was making two distinct supplies, one to Airtours, and another to the Institutions [64 5].
Lord Carnwath considers that it is inappropriate to resolve the appeal on a narrow legalistic approach to construction of the Contract, particularly where the distinction between services to Airtours and services to the Institutions is unlikely to have been seen as of any practical significance to the parties [81].
He further considers that the argument that Airtours, having paid a 200,000 retainer to PwC, did not have an enforceable right, is an impossible one to accept, either as a matter of contractual construction or as a matter of economic reality [84].
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These appeals are concerned with applications made by foreign nationals, residing unlawfully in the UK, for leave to remain here as the partners of British citizens with whom they have formed relationships during the period of their unlawful residence.
The appellants rely primarily on the duty imposed on the Secretary of State by the Human Rights Act 1998 to act compatibly with the right to respect for family life guaranteed by article 8 of the ECHR.
In each case, the Secretary of State concluded that the appellant did not qualify for leave to remain under the applicable provisions of Appendix FM to the Immigration Rules (the Rules), and that, applying the Immigration Directorate Instructions, Family Members Under the Immigration Rules, Section FM 1.0, Partner & ECHR Article 8 Guidance (the Instructions), there were no exceptional circumstances warranting the grant of leave to remain outside the Rules.
The appeals focus primarily on (1) paragraph EX.1(b) of Appendix FM, which imposes on applicants for leave to remain as a partner, where the applicant is in the UK in breach of immigration laws, a requirement that there are insurmountable obstacles to family life with that partner continuing outside the UK; and (2) a requirement in the Instructions that there must be exceptional circumstances for leave to remain to be granted in such cases outside the Rules.
They also raise an issue under EU law, relating to the effect of the judgment of the Court of Justice in Ruiz Zambrano v Office national de lemploi (Case C-34/09) [2012] QB 265, as well as some other issues under domestic law.
Rules and Instructions
It may be helpful to begin by explaining the nature and status of the Rules and the Instructions.
Decision-making in relation to immigration, as in relation to other areas of government, is not exhaustively regulated by legislation.
It involves the exercise of discretion and the making of evaluative judgments.
In such a situation, it is usual, and legitimate, for the Secretary of State to adopt administrative policies in order to guide decision-making, and to issue instructions to officials.
Unusually, in the context of immigration Parliament has enacted legislation under which it exercises oversight of these aspects of administrative decision-making.
Section 3(2) of the Immigration Act 1971 requires the Secretary of State to lay before Parliament statements of the rules, or 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.
The Rules are subject to Parliamentary approval, and are published as House of Commons papers.
Their legal significance was reflected, at the time of the proceedings with which these appeals are concerned, in the fact that an appeal could be brought against an immigration decision on the ground that it was not in accordance with the Rules: Nationality, Immigration and Asylum Act 2002, section 84(1)(a).
Section 86(3) of the 2002 Act also included the Rules in the law to which the tribunal must have regard when determining an appeal.
The Secretary of State also has a discretionary power under the 1971 Act to grant leave to enter or remain in the UK even where leave would not be given under the Rules: R (Munir) v Secretary of State for the Home Department [2012] UKSC 32; [2012] 1 WLR 2192, para 44.
The manner in which that discretion is exercised may be the subject of a policy, which may be expressed in guidance to the Secretary of States officials.
The discretion may also be converted into an obligation where the duty of the Secretary of State to act compatibility with Convention rights is applicable.
Giving effect to Convention rights
In the exercise of her functions under the 1971 Act, including the making of rules and the giving of instructions, the Secretary of State has always been under a duty to comply with requirements imposed by the common law: notably, to act consistently with the intentions of Parliament, and to exercise her powers in accordance with the law and in a rational manner.
The Human Rights Act additionally imposed on the Secretary of State a statutory duty not to act incompatibly with Convention rights, including the right guaranteed by article 8.
The same duty is also imposed on tribunals and courts considering an appeal against the decision of the Secretary of State, but their role does not absolve the Secretary of State of her own duty to act compatibly with Convention rights.
Unlike the ECHR itself, which imposes a duty under international law on the United Kingdom as a contracting party, and is therefore not concerned with failures to comply with Convention rights by one organ of the state which are fully corrected by another, the Act imposes a duty on every public authority, subject to specified exceptions.
The fact that an act of a public authority may be subject to review by the courts, and therefore does not in itself inevitably result in a breach of the Convention, does not mean that the act cannot be incompatible with Convention rights.
Such a reading of the Act would deprive it of most of its content, since virtually all acts of public authorities are susceptible to appeal or review before the courts.
It would therefore be inconsistent with the intention of Parliament.
How the Secretary of State ensures that her acts in the exercise of her functions under the 1971 Act are compatible with Convention rights is, in principle, a matter for her.
The Secretary of States initial response to the entry into force of the material provisions of the Human Rights Act in October 2000 was to insert into the Rules a direction to officials to carry out their duties in compliance with the provisions of that Act (rule 2).
As the Home Office noted in 2012, however, there was no change to the family life part of the Rules to reflect any consideration of proportionality under article 8, and there has been no attempt since to align the rules with developing article 8 case law (Statement of Intent: Family Migration, Home Office, June 2012).
The Rules frequently offered no more than broad guidance as to how discretion was to be exercised in different typical situations.
In that situation, it was primarily through the exercise of her residual discretion to deal with cases outside the Rules that the Secretary of State sought to comply with article 8.
That is no longer true.
Over time, increasing emphasis has been placed on certainty rather than discretion, on predictability rather than flexibility, on detail rather than broad guidance, and on ease and economy of administration.
The increased numbers of applications, the increasing complexity of the system, and the increasing use of modern technology for its administration, have necessitated increasingly detailed Rules and instructions.
In some areas, the apparent aim is for the decision-making process to involve as little discretion or judgment as can be achieved consistently with the duty to respect Convention rights.
The present context appears to be an example, as explained below.
The position was different at the time when the House of Lords decided the leading case of Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167.
At that time, the Rules did not reflect an assessment of the proportionality of decision-making in relation to article 8.
In that context, Lord Bingham of Cornhill said at para 6 that the rule under which the appellant failed to qualify for leave to remain was unobjectionable, but that her failure to qualify under the Rules was the point at which to begin, not end, consideration of her claim under article 8.
The Rules with which this appeal is concerned form part of the Secretary of States response to Huang.
They were included in the Statement of Changes in Immigration Rules published in June 2012 (HC 194), and laid before Parliament pursuant to section 3(2) of the 1971 Act.
The new rules set out in that Statement were the subject of debates in both Houses of Parliament, as well as being examined by the Secondary Legislation Scrutiny Committee of the House of Lords.
They came into force on 9 July 2012.
Their rationale was explained in the Home Office documents which accompanied the Statement of Changes, comprising the Statement of Intent: Family Migration, and the Statement by the Home Office, Grounds of Compatibility with Article 8 of the European Convention on Human Rights.
The Statement of Intent announced that the changes to the Rules would comprehensively reform the approach taken towards ECHR article 8 in immigration cases (para 10).
They would achieve this by themselves reflecting an assessment of all the factors relevant to the application of article 8: The new rules will reflect fully the factors which can weigh for or against an article 8 claim.
They will set proportionate requirements that reflect, as a matter of public policy, the Governments and Parliaments view of how individual rights to respect for private or family life should be qualified in the public interest to safeguard the economic well-being of the UK by controlling immigration and to protect the public from foreign criminals.
This will mean that failure to meet the requirements of the rules will normally mean failure to establish an article 8 claim to enter or remain in the UK, and no grant of leave on that basis.
(para 7) In consequence, if an applicant failed to meet the requirements of the new Rules, it should only be in genuinely exceptional circumstances that refusing them leave and removing them from the UK would breach article 8 (para 11).
One particular respect in which the new rules were to reflect an article 8 assessment concerned family life established when the parties knew one or both of them lacked a valid basis of stay in the UK.
The fact that family life established in those circumstances carries less weight under Strasbourg case law ... is reflected in the new Immigration Rules (para 32).
The Statement of Intent also explained that the new rules were intended to result in a change of approach on the part of the courts.
In the past, it was said, the lack of a clear public policy framework had effectively left the courts to develop public policy (para 30).
They could not give due weight to the Governments and Parliaments view, because they did not know what it was (para 37).
The new Rules were intended to fill this public policy vacuum by setting out the Secretary of States position on proportionality and to meet the democratic deficit by seeking Parliaments agreement to her policy (para 38).
The Statement on Grounds of Compatibility with Article 8 of the European Convention on Human Rights was intended to address issues arising under article 8 in relation to the new rules.
It explained that the current rules did not provide a comprehensive framework for considering family life, and that currently family life applications are first considered under the Rules and, if the application does not meet the requirements of the Rules, the decision-maker then considers whether the decision is compatible with A8 [and, if not,] ... leave is granted outside the Rules (para 3).
It acknowledged that this two-stage approach had one advantageous consequence: A policy of keeping proportionality decisions outside of the Rules can be helpful in forming the basis of an argument that the Rules can never be incompatible with the ECHR.
(para 16) The Statement also noted, however, the serious disadvantages which had flowed from that approach.
The approach adopted in Huang, in requiring the compatibility of individual decisions with article 8 to be considered on a case-by-case basis, rather than assessing the compatibility of the Rules themselves with article 8, has led to unpredictability and inconsistency which are anathema to good administration (para 11).
The conclusion drawn was that it would be better if proportionality were determined according to provisions in the Rules (para 18).
The thinking behind the new rules, therefore, was that if the Rules are proportionate, a decision taken in accordance with the Rules will, other than in exceptional cases, be compatible with A8 (para 20).
As a result, the role of the courts should shift from reviewing the proportionality of individual administrative decisions to reviewing the proportionality of the Rules (para 22).
Appendix FM
Appendix FM, Family Members, begins with a general statement which explains that it sets out the requirements to be met by those seeking to enter or remain in the UK on the basis of their family life with a person who is a British citizen, is settled in the UK, or is in the UK with limited leave as a refugee or person granted humanitarian protection (para GEN.1.1).
It is said to reflect how, under article 8, the balance will be struck between the right to respect for private and family life and the legitimate aims listed in article 8(2).
The Appendix nevertheless contemplates that the Rules will not cover all the circumstances in which a person may have a valid claim to enter or remain in the UK as a result of his or her article 8 rights.
Paragraphs GEN.1.10 and GEN.1.11 both make provision for situations where an applicant does not meet the requirements of this Appendix as a partner or parent but the decision-maker grants entry clearance or leave to enter or remain outside the Rules on article 8 grounds.
Section R-LTRP sets out the requirements for limited leave to remain as a partner.
Certain requirements apply in all cases: for example, that the applicant meets suitability requirements relating to such matters as his or her criminal record.
Other requirements depend on the applicants circumstances.
In particular, under paragraph R-LTRP.1.1(d), the applicant must not be in the UK on temporary admission or temporary release, or in breach of immigration laws (disregarding an overstay of 28 days or less), unless paragraph EX.1 applies.
That paragraph applies if either of two conditions is satisfied.
The first applies to persons applying for leave to remain as parents, and is not relevant to the present appeals.
The second applies to persons, such as the appellants, who apply for leave to remain as partners: (b) the applicant has a genuine and subsisting relationship with a partner who is in the UK and is a British citizen, settled in the UK or in the UK with refugee leave or humanitarian protection, and there are insurmountable obstacles to family life with that partner continuing outside the UK.
At the time when the present cases were considered, the Rules did not define the expression insurmountable obstacles.
A definition was however introduced with effect from 28 July 2014, when paragraph EX.2 was inserted into Appendix FM by the Statement of Changes in Immigration Rules (HC 532, 2014): For the purposes of paragraph EX.1(b) insurmountable obstacles means the very significant difficulties which would be faced by the applicant or their partner in continuing their family life together outside the UK and which could not be overcome or would entail very serious hardship for the applicant or their partner.
Paragraph EX.2 applies only to applications decided on or after 28 July 2014.
The Instructions
The Instructions, in the version effective from 9 July 2012 which was in force when these cases were before the Secretary of State and the courts below, state that failure to meet the requirements of the Rules will normally mean failure to establish an article 8 claim (para 1.1).
There is a statement, in relation to applications for leave to enter or remain as a partner on the basis of family life, that if the applicant does not meet the requirements of the Rules, the application should be refused (para 3).
That statement is, however, implicitly qualified by later provisions.
In relation to the eligibility requirements relating to immigration status, the Instructions state that, for leave to remain, the applicant must not have overstayed by more than 28 days, unless paragraph EX.1 applies (para 3.2.4).
Provision is made for exceptional circumstances which prevented the applicant from applying within the first 28 days of overstaying.
In relation to assessing whether there are insurmountable obstacles, as required by paragraph EX.1(b), the Instructions direct the decision maker to consider the seriousness of the difficulties which the applicant and his or her partner would face in continuing their family life outside the UK, and whether they entail something that could not (or could not reasonably be expected to) be overcome, even with a degree of hardship for one or more of the individuals concerned (para 3.2.7c).
Relevant factors are said to include the ability of the parties to enter and stay lawfully in the country concerned; cultural and religious barriers; and the impact of a mental or physical disability.
In relation to the second of these, the Instructions reiterate that the barrier must be one which either cannot be overcome or which it is unreasonable to expect a person to overcome.
The Instructions state that although refusal of an application will normally be appropriate where the applicant does not meet the requirements of the Rules, leave can be granted outside the Rules where exceptional circumstances apply.
In that regard, the Instructions state: Exceptional does not mean unusual or unique.
Whilst all cases are to some extent unique, those unique factors do not generally render them exceptional.
For example, a case is not exceptional just because the criteria set out in EX.1.
of Appendix FM have been missed by a small margin.
Instead, exceptional means circumstances in which refusal would result in unjustifiably harsh consequences for the individual such that refusal of the application would not be proportionate.
That is likely to be the case only very rarely.
(para 3.2.7d) In determining whether there are exceptional circumstances, the decision maker is instructed to consider all relevant factors.
Some examples are given: The circumstances around the applicants entry to the UK and the proportion of the time they have been in the UK legally as opposed to illegally.
Did they form their relationship with their partner at a time when they had no immigration status or this was precarious? Family life which involves the applicant putting down roots in the UK in the full knowledge that their stay here is unlawful or precarious, should be given less weight, when balanced against the factors weighing in favour of removal, than family life formed by a person lawfully present in the UK.
It is also pointed out that cumulative factors should be considered.
In particular, although under the Rules family life and private life are considered separately, when considering whether there are exceptional circumstances both private and family life can be taken into account.
The facts: Agyarko
Ms Agyarko is a national of Ghana.
She entered the UK as a visitor in 2003, when she was aged 40.
Her leave to enter expired later that year.
She has nevertheless remained in the UK ever since.
Following the expiry of her leave to enter she began a relationship with Mr Benette, a naturalised British citizen of Liberian origin who has lived in the UK for almost all his life and is in full time employment.
They married by proxy under Ghanaian customary law in 2012.
They live together.
They have no children together.
Ms Agyarko has three children living in Ghana, but has not visited them since 2003.
In September 2012 Ms Agyarko applied for leave to remain in the UK.
Her application conceded that her case fell outside the Rules, and submitted that it was an appropriate case for the grant of discretionary leave, consistently with article 8.
It was said that she was settled in the UK and had developed strong social ties there, that her family ties in Ghana had been weakened by her long absence and that most of her friends there had moved abroad.
The application disclosed that she had a mother, three children by a former husband, and two siblings living in Ghana.
The effect of removal to Ghana upon her family life was addressed in the following terms: Our client and her husband would be seriously disadvantaged in the sense that she may be separated from him and therefore the family life that they have established in the United Kingdom would be interrupted.
Most disturbingly our client is likely to face an inordinate delay in obtaining an entry clearance to the UK if she were asked to do so and there is also a risk that her application would be refused due to the fact that she is a previous overstayer.
The application was refused by a notice of decision dated 7 October 2013.
The decision considered separately whether Ms Agyarko qualified for leave to remain under the partner route provisions of Appendix FM (ie Section R-LTRP) or under the private life provisions of the Rules (which are not in issue in these appeals), and whether her application gave rise to any exceptional circumstances which might warrant consideration of a grant of leave outside the Rules pursuant to article 8.
fulfil paragraph EX.1(b): In relation to Appendix FM, the decision stated that Ms Agyarko failed to You have a genuine and subsisting relationship with your British partner.
Whilst it is acknowledged that your partner has lived in the UK all his life and is in employment here, this does not mean that you are unable to live together in Ghana.
Although relocating there together may cause a degree of hardship for your British partner, the Secretary of State has not seen any evidence to suggest that there are any insurmountable obstacles preventing you from continuing your relationship in Ghana.
The application under the partner route was therefore refused.
Ms Agyarko was also found to fail to qualify for leave to remain on the basis of her private life.
Finally, the decision stated that it had been considered whether the application raised any exceptional circumstances which, consistently with article 8, might warrant consideration of a grant of leave to remain outside the requirements of the Rules.
It had been decided that it did not.
The refusal of Ms Agyarkos application was not appealable.
She sought permission to apply for judicial review of the Secretary of States decision, but that was refused by the Upper Tribunal.
She was granted permission to appeal to the Court of Appeal against that refusal, but her appeal was dismissed.
The judgment of the court is considered below.
The facts: Ikuga
Ms Ikuga is a national of Nigeria.
She lived there until she entered the UK as a visitor in 2008, when she was aged 33.
Her leave to enter expired in 2009.
She has nevertheless remained in the UK ever since.
At some point following the expiry of her leave to enter, she began a relationship with Mr Ijiekhuamhen, a British citizen.
They have never married, and have no children together.
It should be recorded that, in the course of this appeal, Ms Ikuga claimed that she was granted an extension of her leave to enter in 2010.
That has not been verified.
In September 2012 Ms Ikuga applied for leave to remain in the UK on the basis that her removal to Nigeria would be in breach of article 8.
It was said by the solicitors acting on her behalf that she cohabited with her partner, Mr Ijiekhuamhen, and that they had been trying to conceive a child, but that due to her medical issues this had been very difficult.
The letter also said that their relationship could not be maintained and enjoyed in Nigeria as she is trying to conceive, and that Mr Ijiekhuamhen had been responsible for her medical bills while she was receiving private medical treatment.
The letter also referred to her close relationship with her sister and her children, who lived in the UK, and with Mr Ijiekhuamhens daughter, who lived with her mother but visited her father.
It was said that Ms Ikuga had no family ties in Nigeria, and that most of her friends were now settled in the UK.
It was also said that Ms Ikuga had been a regular visitor to the UK without breaching its immigration rules until she was taken seriously ill and admitted to hospital in September 2009.
A supporting letter from Mr Ijiekhuamhen gave a different address from that given by Ms Ikuga.
He stated that they had lived together at his address for two years, that she was still not well, and that she relied on him for assistance with her daily needs.
He did all the washing, cooking and shopping, and above all he maintained her financially and was her major carer.
He had a full time job in the UK and could not leave the UK for Nigeria.
He also stated that no-one else could provide the care Ms Ikuga needed, and that there was no medical care for her needs in Nigeria.
Medical documentation submitted with included correspondence from Lewisham Hospital and Kings College Hospital, dating from 2010 and 2011, indicating that Ms Ikuga had a prolonged admission in 2009, during which she was treated in the intensive care unit, and that she underwent further investigations and treatment as a private patient during 2010 and 2011.
There was also a letter from a consultant haematologist dated 19 January 2010, giving a provisional diagnosis that Ms Ikuga suffered from Adult Stills disease, and stating that she had been referred to a consultant rheumatologist, and a letter from a consultant rheumatologist dated 2 December 2010, stating that Ms Ikuga had musculo-skeletal pains and intermittent muscle weakness, with a likely diagnosis of an auto-immune organising pneumonia as part of an anti-synthetase syndrome, or alternatively of Adult Stills disease.
In response to the application, the Secretary of State requested documentary evidence that Ms Ikuga had been living with her partner, and letters from a GP or consultant detailing her current medical condition, her current medication or treatment, and her ability to travel.
She was informed that, if she failed to provide the additional information requested, her application would be decided on the basis of the information currently available.
the application
In their response, dated 24 October 2013, Ms Ikugas solicitors submitted a household bill addressed to both herself and Mr Ijiekhuamhen at the address which he had given, and a print-out dated 24 October 2013 of Ms Ikugas GP records, which recorded the hospital admission in 2009, investigations during 2009 and 2010, and consultations during 2012 in respect of tonsillitis and fertility problems.
The most recent entry was dated 3 August 2012, and related to a skin rash.
The application was refused by a notice of decision dated 29 October 2013.
The decision addressed the issues in the same order as that in Ms Agyarkos case.
In relation to the partner route, it stated that Ms Ikuga had provided no evidence to show that she had been living at the same address as Mr Ijiekhuamhen.
She did not therefore have a partner as defined in Appendix FM.
Ms Ikuga was also found to fail to qualify for leave to remain on the basis of her private life.
Finally, the decision stated that it had been considered whether the application raised any exceptional circumstances which, consistently with article 8, might warrant consideration of a grant of leave to remain outside the requirements of the Rules.
It had been decided that it did not.
Although she claimed to be suffering from medical conditions, she had been unable to provide any documentary evidence to show any recent conditions or treatment.
Her claimed conditions had therefore been deemed not to be life threatening, or compelling and compassionate enough to grant leave outside the Rules.
Ms Ikuga was refused permission to apply for judicial review of the Secretary of States decision.
Although the Upper Tribunal judge accepted that there had been a failure to give proper consideration to the question whether Ms Ikuga and Mr Ijiekhuamhen lived together, he considered that her application for leave to remain was bound to fail in any event.
Under the Rules, she would have to establish insurmountable obstacles within the meaning of paragraph EX.1(b), but the matters put forward on her behalf could not possibly persuade any decision-maker that there were insurmountable obstacles to family life continuing in Nigeria.
In that regard, the judge observed that the fact that Ms Ikugas partner would have to change jobs was not an insurmountable obstacle; nor was Ms Ikugas wish to continue fertility treatment in the UK.
An application outside the Rules was also bound to fail: the matters put forward did not come close to establishing that it would be unjustifiably harsh to require her to return.
An argument founded on Chikwamba v Secretary of State for the Home Department [2008] UKHL 40; [2008] 1 WLR 1420 was not capable of succeeding on the facts of the case.
Ms Ikuga was granted permission to appeal to the Court of Appeal, where her appeal was heard together with that of Ms Agyarko, and was likewise dismissed.
The judgment of the Court of Appeal
The Court of Appeal dismissed the appeals for reasons given in the judgment of Sales LJ, with which Longmore and Gloster LJJ agreed.
Sales LJ considered first an argument based on the phrase insurmountable obstacles, used in paragraph EX.1(b) of Appendix FM.
Sales LJ accepted that the phrase was intended to have the same meaning as in the jurisprudence of the European Court of Human Rights, where it originated.
It imposed a stringent test, illustrated by Jeunesse v The Netherlands (2015) 60 EHRR 17, para 117, where the court found that there were no insurmountable obstacles to the applicants family settling in Suriname, although they would experience a degree of hardship if forced to do so.
It was to be interpreted, both in the European case law and in the Rules, in a sensible and practical rather than a purely literal way.
On the facts of Ms Agyarkos case, the Secretary of States conclusion that there were no insurmountable obstacles to relocation, and that paragraph EX.1(b) was therefore not met, was not irrational: The statement made in Mrs Agyarkos letter of application of 26 September 2012 that she may be separated from her husband was very weak, and was not supported by any evidence which might lead to the conclusion that insurmountable obstacles existed to them pursuing their family life together overseas.
There was no witness statement from Mrs Agyarko or Mr Benette to explain what obstacles might exist.
The mere facts that Mr Benette is a British citizen, has lived all his life in the United Kingdom and has a job here - and hence might find it difficult and might be reluctant to relocate to Ghana to continue their family life there - could not constitute insurmountable obstacles to his doing so.
(para 25) On the facts of Ms Ikugas case, Sales LJ agreed with the Upper Tribunal judges assessment that the factors relied upon by Mrs Ikuga could not possibly persuade any decision-maker that there were insurmountable obstacles to family life continuing in Nigeria, within the meaning of [paragraph EX.1(b)] (para 50).
The alternative argument in each case was that the refusal to grant leave to remain outside the Rules was in breach of article 8.
It was argued that it was disproportionate to remove each of the appellants in circumstances where her husband or partner would have to follow her overseas if they wished to continue their family life together, especially when he was a British citizen; or, alternatively, because an out-of-country application for leave to enter would inevitably be granted, so that her removal served no good purpose.
In relation to the latter argument, reliance was placed on the case of Chikwamba.
These arguments were rejected.
In the case of Ms Agyarko, Sales LJ stated that, since her family life was established in the knowledge that she had no right to be in the UK and was therefore precarious in the sense in which that term had been used in the European and domestic case law, it was only if her case was exceptional for some reason that she would be able to establish a violation of article 8.
On the facts of Ms Agyarkos case, Sales LJ considered that there were no exceptional circumstances.
The fact that Ms Agyarkos spouse was a British citizen did not make the case exceptional: several of the European cases in which applications were rejected had involved a partner or spouse who was a national of the state from which the applicant was to be removed.
So far as Chikwamba was concerned, the House of Lords had found that there would be a violation of article 8 if the applicant for leave to remain in that case were removed from the UK and forced to make an out-of-country application for leave to enter which would clearly be successful, in circumstances where the interference with her family life could not be said to serve any good purpose.
In Sales LJs view, Ms Agyarkos case was very far from a Chikwamba type of case.
She had not asked the Secretary of State to consider whether leave to remain should be granted on the basis of Chikwamba.
This was not an argument of such obviousness that the Secretary of State had been obliged to consider it regardless of whether it was mentioned.
Accordingly, the Secretary of State could not be said to have erred in law in failing to grant leave to remain on that basis.
In any event, the materials submitted by Ms Agyarko did not demonstrate that an out-of-country application for leave to enter would succeed.
On the contrary, the information provided about her and Mr Benettes financial circumstances, for example, indicated that she had no income and that he earned less than the minimum income requirement specified in Appendix FM.
Sales LJ considered that the Secretary of States decision letter in the case of Ms Agyarko left something to be desired regarding the clarity of the reasoning, but had addressed the substance of her case under the Rules.
There was no arguable case for leave to be granted outside the Rules which required to be addressed separately.
In relation to Ms Ikugas appeal in respect of refusal of leave to remain outside the Rules on the basis of article 8, Sales LJ again considered that the Upper Tribunal judges assessment could not be faulted.
Ms Ikugas case involved precarious family life, with no children.
No compelling medical circumstances had been shown to exist.
The claim for leave to remain had not been put to the Secretary of State on the basis of Chikwamba, and in any event no materials were submitted which might show that leave to enter would have to be granted under Appendix FM if applied for.
Although the Secretary of State had not considered the issue on the correct factual basis as regards Ms Ikugas relationship with her partner, this was very far from being a case in which exceptional circumstances could be found to exist, even on a correct understanding of the facts.
Even if Ms Ikugas application were remitted to be reconsidered by the Secretary of State on the footing that Ms Ikuga and Mr Ijiekhuamhen cohabited and had a genuine subsisting relationship, there was no prospect whatever that the outcome would be a grant of leave to remain.
The present appeals
The issues raised in the appeals can be summarised as follows: (1) What is the correct approach to the application of article 8 to the removal of a non-settled migrant? (2) How is the insurmountable obstacles requirement in paragraph EX.1(b) of Appendix FM to be interpreted, prior to the 2014 changes to the Rules? Is it in accordance with article 8? (3) How should precariousness be interpreted, and what role does it play in the article 8 assessment? (4) Is the question whether there are exceptional circumstances one which the Secretary of State can properly ask when considering whether to grant leave to remain outside the Rules to a non-settled migrant with a precarious family life? (5) Is Appendix FM unlawful under EU law, or under section 1(1) of the 1971 Act, insofar as it is based on the expectation that a British citizen with a non-national partner can relocate to the partners country of origin unless there are insurmountable obstacles to their doing so? (6) Were the Secretary of States decisions lawful on the facts?
The correct approach to the removal of non-settled migrants
The European Court of Human Rights has considered in a number of judgments the application of article 8 to the removal of non-settled migrants (that is, those without a right of residence) who have developed a family life with a partner while residing unlawfully in the host state.
In Jeunesse v Netherlands, the Grand Chamber analysed the situation of such a person, consistently with earlier judgments of the court, as raising the question whether the authorities of the host country were under a duty, pursuant to article 8, to grant the person the necessary permission to enable her to exercise her right to family life on their territory.
The situation was thus analysed not as one in which the host country was interfering with the persons right to respect for her private and family life, raising the question whether the interference was justified under article 8(2).
Instead, the situation was analysed as one in which the person was effectively asserting that her right to respect for her private and family life, under article 8(1), imposed on the host country an obligation to permit her to continue to reside there, and the question was whether such an obligation was indeed imposed.
In the light of this approach, counsel for the Secretary of State submitted that the refusal of leave to remain in the UK to persons unlawfully resident here should similarly be analysed as raising the question whether the state is under a positive obligation to permit the applicant to remain in the UK rather than whether the refusal of the application can be justified under article 8(2).
As the European court has noted, the boundary between cases best analysed in terms of positive obligations, and those best analysed in terms of negative obligations, can be difficult to draw.
As this court explained in its judgment in Hesham Ali (Iraq) v Secretary of State for the Home Department [2016] UKSC 60; [2016] 1 WLR 4799, para 32, the mode of analysis is unlikely to be of substantial importance in the present context.
Ultimately, whether the case is considered to concern a positive or a negative obligation, the question for the European court is whether a fair balance has been struck.
As was explained in Hesham Ali at paras 47- 49, that question is determined under our domestic law by applying the structured approach to proportionality which has been followed since Huang.
Insurmountable obstacles
In Jeunesse, the Grand Chamber identified, consistently with earlier judgments of the court, a number of factors to be taken into account in assessing the proportionality under article 8 of the removal of non-settled migrants from a contracting state in which they have family members.
Relevant factors were said to include the extent to which family life would effectively be ruptured, the extent of the ties in the contracting state, whether there were insurmountable obstacles in the way of the family living in the country of origin of the non-national concerned, and whether there were factors of immigration control (for example, a history of breaches of immigration law) or considerations of public order weighing in favour of exclusion (para 107).
It appears that the European court intends the words insurmountable obstacles to be understood in a practical and realistic sense, rather than as referring solely to obstacles which make it literally impossible for the family to live together in the country of origin of the non-national concerned.
In some cases, the court has used other expressions which make that clearer: for example, referring to un obstacle majeur (Sen v The Netherlands (2003) 36 EHRR 7, para 40), or to major impediments (Tuquabo-Tekle v The Netherlands [2006] 1 FLR 798, para 48), or to the test of insurmountable obstacles or major impediments (IAA v United Kingdom (2016) 62 EHRR SE 19, paras 40 and 44), or asking itself whether the family could realistically be expected to move (Sezen v The Netherlands (2006) 43 EHRR 30, para 47).
Insurmountable obstacles is, however, the expression employed by the Grand Chamber; and the courts application of it indicates that it is a stringent test.
In Jeunesse, for example, there were said to be no insurmountable obstacles to the relocation of the family to Suriname, although the children, the eldest of whom was at secondary school, were Dutch nationals who had lived there all their lives, had never visited Suriname, and would experience a degree of hardship if forced to move, and the applicants partner was in full-time employment in the Netherlands: see paras 117 and 119.
Domestically, the expression insurmountable obstacles appears in paragraph EX.1(b) of Appendix FM to the Rules.
As explained in para 15 above, that paragraph applies in cases where an applicant for leave to remain under the partner route is in the UK in breach of immigration laws, and requires that there should be insurmountable obstacles to family life with that partner continuing outside the UK.
The expression insurmountable obstacles is now defined by paragraph EX.2 as meaning very significant difficulties which would be faced by the applicant or their partner in continuing their family life together outside the UK and which could not be overcome or would entail very serious hardship for the applicant or their partner.
That definition appears to me to be consistent with the meaning which can be derived from the Strasbourg case law.
As explained in para 16 above, paragraph EX.2 was not introduced until after the dates of the decisions in the present cases.
Prior to the insertion of that definition, it would nevertheless be reasonable to infer, consistently with the Secretary of States statutory duty to act compatibly with Convention rights, that the expression was intended to bear the same meaning in the Rules as in the Strasbourg case law from which it was derived.
I would therefore interpret it as bearing the same meaning as is now set out in paragraph EX.2.
By virtue of paragraph EX.1(b), insurmountable obstacles are treated as a requirement for the grant of leave under the Rules in cases to which that paragraph applies.
Accordingly, interpreting the expression in the same sense as in the Strasbourg case law, leave to remain would not normally be granted in cases where an applicant for leave to remain under the partner route was in the UK in breach of immigration laws, unless the applicant or their partner would face very serious difficulties in continuing their family life together outside the UK, which could not be overcome or would entail very serious hardship.
Even in a case where such difficulties do not exist, however, leave to remain can nevertheless be granted outside the Rules in exceptional circumstances, in accordance with the Instructions: that is to say, in circumstances in which refusal would result in unjustifiably harsh consequences for the individual such that refusal of the application would not be proportionate.
Is that situation compatible with article 8?
In considering that question, it is important to appreciate that the Rules are not simply the product of a legal analysis: they are not intended to be a summary of the Strasbourg case law on article 8.
As was explained at para 10 above, they are statements of the practice to be followed, which are approved by Parliament, and are based on the Secretary of States policy as to how individual rights under article 8 should be balanced against the competing public interests.
They are designed to operate on the basis that decisions taken in accordance with them are compatible with article 8 in all but exceptional cases.
The Secretary of State is in principle entitled to have a policy of the kind which underpins the Rules.
While the European court has provided guidance as to factors which should be taken into account, it has acknowledged that the weight to be attached to the competing considerations, in striking a fair balance, falls within the margin of appreciation of the national authorities, subject to supervision at the European level.
The margin of appreciation of national authorities is not unlimited, but it is nevertheless real and important.
Immigration control is an intensely political issue, on which differing views are held within the contracting states, and as between those states.
The ECHR has therefore to be applied in a manner which is capable of accommodating different approaches, within limits.
Under the constitutional arrangements existing within the UK, the courts can review the compatibility of decision-making in relation to immigration with the Convention rights, but the authorities responsible for determining policy in relation to immigration, within the limits of the national margin of appreciation, are the Secretary of State and Parliament.
The Rules therefore reflect the responsible Ministers assessment, at a general level, of the relative weight of the competing factors when striking a fair balance under article 8.
The courts can review that general assessment in the event that the decision-making process is challenged as being incompatible with Convention rights or based on an erroneous understanding of the law, but they have to bear in mind the Secretary of States constitutional responsibility for policy in this area, and the endorsement of the Rules by Parliament.
It is also the function of the courts to consider individual cases which come before them on appeal or by way of judicial review, and that will require them to consider how the balance is struck in individual cases.
In doing so, they have to take the Secretary of States policy into account and to attach considerable weight to it at a general level, as well as considering all the factors which are relevant to the particular case.
This was explained in Hesham Ali at paras 44-46, 50 and 53.
The Secretary of States view that the public interest in the removal of persons who are in the UK in breach of immigration laws is, in all but exceptional circumstances, sufficiently compelling to outweigh the individuals interest in family life with a partner in the UK, unless there are insurmountable obstacles to family life with that partner continuing outside the UK, is challenged in these proceedings as being too stringent to be compatible with article 8.
It is argued that the Secretary of State has treated insurmountable obstacles as a test applicable to persons in the UK in breach of immigration laws, whereas the European court treats it as a relevant factor in relation to non-settled migrants.
That is true, but it does not mean that the Secretary of States test is incompatible with article 8.
As has been explained, the Rules are not a summary of the European courts case law, but a statement of the Secretary of States policy.
That policy is qualified by the scope allowed for leave to remain to be granted outside the Rules.
If the applicant or his or her partner would face very significant difficulties in continuing their family life together outside the UK, which could not be overcome or would entail very serious hardship, then the insurmountable obstacles test will be met, and leave will be granted under the Rules.
If that test is not met, but the refusal of the application would result in unjustifiably harsh consequences, such that refusal would not be proportionate, then leave will be granted outside the Rules on the basis that there are exceptional circumstances.
In the absence of either insurmountable obstacles or exceptional circumstances as defined, however, it is not apparent why it should be incompatible with article 8 for leave to be refused.
The Rules and Instructions are therefore compatible with article 8.
That is not, of course, to say that decisions applying the Rules and Instructions in individual cases will necessarily be compatible with article 8: that is a question which, if a decision is challenged, must be determined independently by the court or tribunal in the light of the particular circumstances of each case.
Precariousness
In Jeunesse, the Grand Chamber said, consistently with earlier judgments of the court, that an important consideration when assessing the proportionality under article 8 of the removal of non-settled migrants from a contracting state in which they have family members, is whether family life was created at a time when the persons involved were aware that the immigration status of one of them was such that the persistence of that family life within the host state would from the outset be precarious.
Where this is the case, the court said, it is likely only to be in exceptional circumstances that the removal of the non-national family member will constitute a violation of article 8 (para 108).
Domestically, officials who are determining whether there are exceptional circumstances as defined in the Instructions, and whether leave to remain should therefore be granted outside the Rules, are directed by the Instructions to consider all relevant factors, including whether the applicant [formed] their relationship with their partner at a time when they had no immigration status or this was precarious.
They are instructed: Family life which involves the applicant putting down roots in the UK in the full knowledge that their stay here is unlawful or precarious, should be given less weight, when balanced against the factors weighing in favour of removal, than family life formed by a person lawfully present in the UK.
That instruction is consistent with the case law of the European court, such as its judgment in Jeunesse.
As the instruction makes clear, precariousness is not a preliminary hurdle to be overcome.
Rather, the fact that family life has been established by an applicant in the full knowledge that his stay in the UK was unlawful or precarious affects the weight to be attached to it in the balancing exercise.
Whether the applicant is in the UK unlawfully, or is entitled to remain in the UK only temporarily, however, the significance of this consideration depends on what the outcome of immigration control might otherwise be.
For example, if an applicant would otherwise be automatically deported as a foreign criminal, then the weight of the public interest in his or her removal will generally be very considerable.
If, on the other hand, an applicant - even if residing in the UK unlawfully - was otherwise certain to be granted leave to enter, at least if an application were made from outside the UK, then there might be no public interest in his or her removal.
The point is illustrated by the decision in Chikwamba v Secretary of State for the Home Department.
It is also necessary to bear in mind that the cogency of the public interest in the removal of a person living in the UK unlawfully is liable to diminish - or, looking at the matter from the opposite perspective, the weight to be given to precarious family life is liable to increase - if there is a protracted delay in the enforcement of immigration control.
This point was made by Lord Bingham and Lord Brown of Eaton-under-Heywood in EB (Kosovo) v Secretary of State for the Home Department [2008] UKHL 41; [2009] AC 1159, paras 15 and 37.
It is also illustrated by the judgment of the European court in Jeunesse.
Finally, in relation to this matter, the reference in the instruction to full knowledge that their stay here is unlawful or precarious is also consistent with the case law of the European court, which refers to the persons concerned being aware that the persistence of family life in the host state would be precarious from the outset (as in Jeunesse, para 108).
One can, for example, envisage circumstances in which people might be under a reasonable misapprehension as to their ability to maintain a family life in the UK, and in which a less stringent approach might therefore be appropriate.
Exceptional circumstances
As explained in para 49 above, the European court has said that, in cases concerned with precarious family life, it is likely only to be in exceptional circumstances that the removal of the non-national family member will constitute a violation of article 8.
That reflects the weight attached to the contracting states right to control their borders, as an attribute of their sovereignty, and the limited weight which is generally attached to family life established in the full knowledge that its continuation in the contracting state is unlawful or precarious.
The court has repeatedly acknowledged that a state is entitled, as a matter of well-established international law, and subject to its treaty obligations, to control the entry of non- nationals into its territory and their residence there (Jeunesse, para 100).
As the court has made clear, the Convention is not intended to undermine that right by enabling non-nationals to evade immigration control by establishing a family life while present in the host state unlawfully or temporarily, and then presenting it with a fait accompli.
On the contrary, where confronted with a fait accompli the removal of the non-national family member by the authorities would be incompatible with article 8 only in exceptional circumstances (Jeunesse, para 114).
That statement reflects the strength of the claim which will normally be required, if the contracting states interest in immigration control is to be outweighed.
In the Jeunesse case, for example, the Dutch authorities tolerance of the applicants unlawful presence in that country for a very prolonged period, during which she developed strong family and social ties there, led the court to conclude that the circumstances were exceptional and that a fair balance had not been struck (paras 121-122).
As the court put it, in view of the particular circumstances of the case, it was questionable whether general immigration considerations could be regarded as sufficient justification for refusing the applicant residence in the host state (para 121).
The European courts use of the phrase exceptional circumstances in this context was considered by the Court of Appeal in MF (Nigeria) v Secretary of State for the Home Department [2013] EWCA Civ 1192; [2014] 1 WLR 544.
Lord Dyson MR, giving the judgment of the court, said: In our view, that is not to say that a test of exceptionality is being applied.
Rather it is that, in approaching the question of whether removal is a proportionate interference with an individuals article 8 rights, the scales are heavily weighted in favour of deportation and something very compelling (which will be exceptional) is required to outweigh the public interest in removal.
(para 42) Cases are not, therefore, to be approached by searching for a unique or unusual feature, and in its absence rejecting the application without further examination.
Rather, as the Master of the Rolls made clear, the test is one of proportionality.
The reference to exceptional circumstances in the European case law means that, in cases involving precarious family life, something very compelling ... is required to outweigh the public interest, applying a proportionality test.
The Court of Appeal went on to apply that approach to the interpretation of the Rules concerning the deportation of foreign criminals, where the same phrase appears; and their approach was approved by this court, in that context, in Hesham Ali.
That approach is also appropriate when a court or tribunal is considering whether a refusal of leave to remain is compatible with article 8 in the context of precarious family life.
Ultimately, it has to decide whether the refusal is proportionate in the particular case before it, balancing the strength of the public interest in the removal of the person in question against the impact on private and family life.
In doing so, it should give appropriate weight to the Secretary of States policy, expressed in the Rules and the Instructions, that the public interest in immigration control can be outweighed, when considering an application for leave to remain brought by a person in the UK in breach of immigration laws, only where there are insurmountable obstacles or exceptional circumstances as defined.
It must also consider all factors relevant to the specific case in question, including, where relevant, the matters discussed in paras 51-52 above.
The critical issue will generally be whether, giving due weight to the strength of the public interest in the removal of the person in the case before it, the article 8 claim is sufficiently strong to outweigh it.
In general, in cases concerned with precarious family life, a very strong or compelling claim is required to outweigh the public interest in immigration control.
The expression exceptional circumstances appears in a number of places in the Rules and the Instructions.
Its use in the part of the Rules concerned with the deportation of foreign offenders was considered in Hesham Ali.
In the present context, as has been explained, it appears in the Instructions dealing with the grant of leave to remain in the UK outside the Rules.
Its use is challenged on the basis that the Secretary of State cannot lawfully impose a requirement that there should be exceptional circumstances, having regard to the opinion of the Appellate Committee of the House of Lords in Huang.
As was explained in para 8 above, the case of Huang was decided at a time when the Rules had not been revised to reflect the requirements of article 8.
Instead, the Secretary of State operated arrangements under which effect was given to article 8 outside the Rules.
Lord Bingham, giving the opinion of the Committee, observed that the ultimate question for the appellate immigration authority was whether the refusal of leave to enter or remain, in circumstances where the life of the family could not reasonably be expected to be enjoyed elsewhere, taking full account of all considerations weighing in favour of the refusal, prejudiced the family life of the applicant in a manner sufficiently serious to amount to a breach of article 8.
If the answer to that question was affirmative, then the refusal was unlawful.
He added: It is not necessary that the appellate immigration authority, directing itself along the lines indicated in this opinion, need ask in addition whether the case meets a test of exceptionality.
The suggestion that it should is based on an observation of Lord Bingham in Razgar [R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27; [2004] 2 AC 368], para 20.
He was there expressing an expectation, shared with the Immigration Appeal Tribunal, that the number of claimants not covered by the rules and supplementary directions but entitled to succeed under article 8 would be a very small minority.
That is still his expectation.
But he was not purporting to lay down a legal test.
(para 20)
It remains the position that the ultimate question is how a fair balance should be struck between the competing public and individual interests involved, applying a proportionality test.
The Rules and Instructions in issue in the present case do not depart from that position.
The Secretary of State has not imposed a test of exceptionality, in the sense which Lord Bingham had in mind: that is to say, a requirement that the case should exhibit some highly unusual feature, over and above the application of the test of proportionality.
On the contrary, she has defined the word exceptional, as already explained, as meaning circumstances in which refusal would result in unjustifiably harsh consequences for the individual such that the refusal of the application would not be proportionate.
So understood, the provision in the Instructions that leave can be granted outside the Rules where exceptional circumstances apply involves the application of the test of proportionality to the circumstances of the individual case, and cannot be regarded as incompatible with article 8.
That conclusion is fortified by the express statement in the Instructions that exceptional does not mean unusual or unique: see para 19 above.
EU and British citizenship
It was submitted on behalf of the appellants that it was unlawful under EU law for the Secretary of State to adopt Rules and Instructions which took as their premise that the British partner of a non-national could relocate to the non-nationals country of origin, in the absence of insurmountable obstacles or exceptional circumstances.
The practical result, it was submitted, was to place pressure on an EU citizen to reside outside the EU, contrary to the judgment of the Court of Justice in Ruiz Zambrano.
Although this submission was not advanced before the Court of Appeal, this court will nevertheless address it.
The appellants British partners enjoy, under article 20 TFEU, the status of Union citizen, and may therefore rely on the rights pertaining to that status, including the right to move and reside freely within the territory of the member states, subject to the limitations and restrictions laid down by the Treaty and the measures adopted for its implementation.
Article 20 precludes national measures which have the effect of depriving Union citizens of the genuine enjoyment of the substance of the rights conferred by virtue of their status as Union citizens.
On the other hand, the Treaty provisions on citizenship of the Union do not confer any autonomous right on third- country nationals.
Any rights conferred on third-country nationals are derived from those enjoyed by the Union citizen.
The purpose and justification of those derived rights are based on the fact that a refusal to allow them would interfere with the Union citizens freedom of movement: Secretary of State for the Home Department v CS (Case C-304/14), judgment of 13 September 2016, paras 24-28.
In that connection, the Court of Justice has held: that there are very specific situations in which, despite the fact that the secondary law on the right of residence of third-country nationals does not apply and the Union citizen concerned has not made use of his freedom of movement, a right of residence must nevertheless be granted to a third-country national who is a family member of his since the effectiveness of citizenship of the Union would otherwise be undermined, if, as a consequence of refusal of such a right, that citizen would be obliged in practice to leave the territory of the European Union as a whole, thus denying him the genuine enjoyment of the substance of the rights conferred by virtue of his status.
(Secretary of State for the Home Department v CS, para 29)
The Courts case law indicates the specificity of the situations in question.
The case of Ruiz Zambrano concerned the refusal of a right of residence and a work permit in a member state to the third-country parents of dependent minor children who were citizens of that state, with the inevitable consequence that the parents would have to leave the EU and the children would have to accompany their parents.
The principle established in that case has been applied and developed in other cases concerned with third-country parents of minor dependent children, such as Alokpa and Moudoulou v Ministre du Travail, de lEmploi et de lImmigration (Case C- 86/12), judgment of 10 October 2013, and Secretary of State for the Home Department v CS.
Those judgments can be distinguished from others in which the same relationship of complete dependence between the EU citizen and the third-country national was not present.
The case of Dereci v Bundesministerium fr Inneres (Case C-256/11) [2011] ECR I-11315, concerned the refusal of a residence permit to a third-country national who had entered Austria unlawfully, married an Austrian citizen, and had three minor children who were Austrian citizens.
His challenge to the refusal of the residence permit on the basis of Ruiz Zambrano was rejected by the Grand Chamber.
It derived from Ruiz Zambrano that the criterion relating to the denial of the genuine enjoyment of the substance of the rights conferred by virtue of EU citizen status refers to situations in which the Union citizen has, in fact, to leave not only the territory of the member state of which he is a national but also the territory of the Union as a whole (para 66).
That criterion was not satisfied on the facts of Dereci, since the refusal of the residence permit to the third-country national would not necessitate the rest of the family leaving the EU: the children and their mother could remain in Austria without him.
The Grand Chamber stated: Consequently, the mere fact that it might appear desirable to a national of a member state, for economic reasons or in order to keep his family together in the territory of the Union, for the members of his family who do not have the nationality of a member state to be able to reside with him in the territory of the Union, is not sufficient in itself to support the view that the Union citizen will be forced to leave Union territory if such a right is not granted.
(para 68) As the court made clear, that finding was distinct from the consideration of the case under article 8 of the ECHR or, if applicable, the corresponding provision (article 7) of the Charter of Fundamental Rights.
That approach was also applied in Iida v Stadt Ulm (Case C-40/11), judgment of 8 November 2012, and Ymeraga v Ministre du Travail, de lEmploi et de lImmigration (Case C-87/12), judgment of 8 May 2013.
The first of these cases concerned, like Dereci, a third-country national who had married an EU citizen and had a minor child who was likewise an EU citizen.
The second case was concerned with family reunification: it was brought by a naturalised citizen of Luxembourg whose complaint was that his Kosovan parents and brothers were unable to join him there.
In both cases, arguments based on article 20 TFEU were rejected.
In the light of these cases, this ground of challenge to the Rules and Instructions cannot be upheld.
In the event that a situation were to arise in which the refusal of a third-country nationals application for leave to remain in the UK would force his or her British partner to leave the EU, in breach of article 20 TFEU, such a situation could be addressed under the Rules as one where there were insurmountable obstacles, or in any event under the Instructions as one where there were exceptional circumstances.
Typically, however, as in the present cases, the British citizen would not be forced to leave the EU, any more than in the case of Dereci, and the third-country national would not, therefore, derive any rights from article 20.
Counsel also referred to the right of a British citizen, under section 1(1) of the 1971 Act, to live in ... the United Kingdom without let or hindrance except such as may be required under and in accordance with this Act to enable their right to be established or as may be otherwise lawfully imposed on any person.
This does not advance the argument.
The entitlement conferred by section 1(1) is an important right, but it does not entitle a British citizen to insist that his or her non-national partner should also be entitled to live in the UK, when that partner may lawfully be refused leave to enter or remain.
The Secretary of States decisions on the facts
Having concluded that the Rules and Instructions applied in these cases were consistent with the proper application of article 8, and having rejected the ground of challenge based on EU law, it remains to consider whether the Secretary of States decisions on the facts were otherwise lawful.
Considering first whether the decision in the case of Ms Agyarko was compatible with article 8, the court has to bear in mind that this was a case of precarious family life, and that therefore, having regard to the Strasbourg case law, a very strong or compelling claim was required to outweigh the public interest in immigration control.
The court has also to give due weight to the Secretary of States policy, expressed in the Rules and the Instructions, that the public interest in immigration control can be outweighed, when considering an application for leave to remain under the partner route brought by a person in the UK in breach of immigration laws, only where there are insurmountable obstacles or exceptional circumstances as defined.
There was no evidence placed before the Secretary of State on which a conclusion that there were insurmountable obstacles to relocation in Ghana could reasonably have been reached.
There was nothing to suggest that there were exceptional circumstances as defined in the Instructions, that is to say, circumstances in which refusal would result in unjustifiably harsh consequences for the individual such that the refusal of the application would not be proportionate.
Considering all relevant factors, Ms Agyarkos claim could not be regarded as very strong or compelling.
Nor was there anything to indicate that Ms Agyarko might come within the scope of Chikwamba.
Counsel pointed out that some parts of Ms Agyarkos notice of decision were in similar terms to Ms Ikugas, with only factual details differing from one to the other.
The use of standard forms of words was criticised as formulaic, and as being inconsistent with anxious scrutiny.
It was also pointed out that the decision in relation to the issue of exceptional circumstances contained no reference to any specific aspects of Ms Agyarkos application.
It is true that the decision was briefly expressed and, in relation to the issue of exceptional circumstances, did not discuss the matters raised in the application.
The notice of decision nevertheless addressed the relevant issues in Ms Agyarkos case, demonstrated that the most important points put forward on her behalf (her length of residence in the UK, her weakened family ties to Ghana, her relationship with her husband, his British citizenship, his full-time employment in the UK, and the difficulties which he might encounter in relocating to Ghana) had been considered, and explained why, notwithstanding those points, her application was refused.
The use of standardised reasons is characteristic of modern decision-making practices in fields of public administration where large numbers of applications can be processed more efficiently by employing information technology, using decision templates, drop-down menus and other software.
It is also often designed to facilitate internal auditing and management processes.
The potential implications of this development for the law relating to the giving of reasons have not been considered in these appeals; nor has the manner in which the decision notices in question were produced.
For present purposes, it is sufficient to say that the use of standard phrases is not in itself legally objectionable, provided the reasons given continue to explain adequately why the decision has been taken.
Ms Ikugas application under the partner route was refused on the ground that she had provided no evidence to show that she had been living at the same address as Mr Ijiekhuamhen.
It is accepted that that decision was erroneous: Ms Ikuga had in fact provided evidence that she and Mr Ijiekhuamhen lived at the same address.
It follows that the Secretary of State has not yet considered Ms Ikugas case on a correct understanding of all the material facts.
In those circumstances, it would usually follow that the Secretary of States decision should be quashed, and the application re-considered.
The courts jurisdiction to quash being discretionary, however, it is open to it to decline to quash if satisfied that the decision, if re-taken, would inevitably be the same.
It was on that basis that the Upper Tribunal and the Court of Appeal declined to grant permission to apply for judicial review.
In relation to this matter, this court has no basis for interfering with the decision of the specialist judge of the Upper Tribunal, affirmed by the Court of Appeal.
So far as the application under the Rules was concerned, the judge correctly identified that Ms Ikuga would have to satisfy the insurmountable obstacles test in paragraph EX.1(b), and explained convincingly why she could not do so on the basis of the information which she had placed before the Secretary of State: see the summary of his reasoning at para 32 above, and the summary of the material which Ms Ikuga had provided, at paras 26-28 and 30 above.
Nothing in the discussion of that test in this judgment places in question his conclusion, with which the Court of Appeal agreed, that the test could not possibly be met on the basis put forward on Ms Ikugas behalf: in summary, that her partner was in full-time employment in the UK, and she was undergoing fertility treatment.
So far as leave to remain was sought outside the Rules, there is similarly nothing in this judgment which undermines his conclusion, with which the Court of Appeal agreed, that Ms Ikuga had not put forward anything which might constitute exceptional circumstances as defined in the Instructions, that is to say, unjustifiably harsh consequences for the individual such that the refusal of the application would not be proportionate.
Conclusion
For these reasons, I would dismiss the appeals.
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These proceedings relate to applications made by two foreign nationals, Ms Agyarko and Ms Ikuga, residing unlawfully in the UK, for leave to remain in the UK as partners of British citizens with whom they have formed relationships during the period of their unlawful residence.
The Secretary of States decision in each case was that the applicant did not qualify for leave to remain under Immigration Rules (the Rules).
Paragraph EX.1(b) of Appendix FM of the Rules required applicants to have a genuine subsisting relationship with a partner who is in the UK and is a British citizen, and for there to be insurmountable obstacles to family life with that partner continuing outside the UK.
The Secretary of State found that no evidence had been provided of insurmountable obstacles in either case, and that in the case of Ms Ikuga she had not provided evidence of a shared address in order to show she that had a partner within the meaning of the Rules.
The Immigration Directorate Instructions (the Instructions) state that where an applicant does not meet the requirement of the Rules, leave can be granted outside the Rules where exceptional circumstances apply, in order to ensure compatibility with the applicants rights under article 8 of the European Convention on Human Rights.
The Secretary of State found that there were no exceptional circumstances in the case of either applicant to warrant consideration of a grant of leave outside the Rules.
Both Ms Agyarko and Ms Ikuga sought permission to apply for judicial review of the Secretary of States decisions.
In each case permission was refused by the Upper Tribunal, and the Court of Appeal upheld that refusal.
The Supreme Court unanimously dismisses the appeals.
Lord Reed gives the judgment, with which the rest of the Court agrees.
The Secretary of States decisions on the facts were lawful.
The ultimate question in article 8 cases is whether a fair balance has been struck between the competing public and individual interests involved, applying a proportionality test.
The Rules and Instructions do not depart from that position, and are compatible with article 8.
It is within the margin of appreciation for the Secretary of State to adopt policies which set out the weight to be attached to the competing considerations in striking a fair balance, including that family life established while the applicants stay in the UK is known to be unlawful or precarious should be given less weight, when balanced against the factors weighing in favour of removal, than family life formed by a person lawfully present in the UK [46 53].
Although the requirement of insurmountable obstacles to a continuing relationship is a stringent test to be met, rather than one relevant factor to be taken in account, this does not make it incompatible with article 8.
The phrase insurmountable obstacles was not defined by the Rules when the present cases were considered, but it is reasonable to infer that it was intended to have the same meaning as in the jurisprudence of the European Court of Human Rights.
It imposed a stringent test and was to be interpreted in a sensible and practical way rather than as referring solely to obstacles which make it literally impossible for the family to live together in the applicants country of origin.
This is consistent with the guidance on assessing insurmountable obstacles contained in the Instructions, and the definition of that phrase introduced subsequently in the Rules, effective from 28 July 2014 [42 48].
The exceptional circumstances question is also one that the Secretary of State may legitimately ask.
Appendix FM is said to reflect how the balance will be struck under article 8 between the right to respect for private and family life, and the legitimate aims listed in article 8(2), so that if an applicant fails to meet the requirements of the Rules it should only be in genuinely exceptional circumstances that refusing them leave and removing them from the UK would breach article 8.
The Instructions state that exceptional does not mean unusual or unique, but means circumstances in which refusal would result in unjustifiably harsh consequences for the individual such that refusal of the application would not be proportionate.
This is an application of a test of proportionality, consistent with the references to exceptional circumstances in European case law and cannot be regarded as incompatible with article 8 [54 60].
On the facts of each case, there was no basis to challenge the conclusions of the Upper Tribunal judge, that no evidence was placed before the Secretary of State from which the conclusion could be reached that there were insurmountable obstacles to each applicants relationship continuing in their countries of origin.
Although in the case of Ms Ikuga the case was considered on an erroneous basis of fact that she was not in a genuine relationship, the insurmountable obstacles test was bound to fail in any event.
Further, neither applicant had put forward anything which might constitute exceptional circumstances as defined in the Instructions.
There was also an argument, advanced for the first time on appeal, that refusal of leave to remain served no good purpose because the applicants were otherwise certain to be granted leave to enter if the application was made from outside the UK.
There was nothing to suggest that this would be the case for either appellant. [69 74].
The effect of refusal of leave in the applicants cases was not a breach of EU law.
The Secretary of States decisions in these cases did not compel an EU citizen to reside outside the EU.
These cases fell outside the situations of dependency to which the Zambrano principle of EU law applies [61 68].
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The appellant (Onur), a Turkish corporation, appeals against orders made by Patten LJ in the Court of Appeal on 21 January 2016.
An understanding of the nature of his orders requires reference to the following summary of the background.
(a) On 22 May 2014 Rose J, [2015] 1 BCLC 89, gave judgment against Onur in favour of the respondent (Goldtrail), a UK company in liquidation, in the sum of 3.64m plus interest.
(b) On 15 December 2014 Floyd LJ granted permission to Onur to appeal to the Court of Appeal against the order of Rose J on the basis that the appeal had a real prospect of success.
(c) On 11 June 2015 Floyd LJ, by way of variation of an earlier order for the imposition of conditions upon the continuation of Onurs appeal, made it conditional, among other things, upon Onurs payment into court (or provision of other security for it) of 3.64m by 9 July 2015.
(d) On 29 October 2015, in the absence of any payment into court (or provision of other security), Goldtrail applied for an order dismissing Onurs appeal and on 7 December 2015 Onur cross-applied for an order that the condition for payment into court be discharged on the ground that it could not comply with it and that the effect of dismissing the appeal by reference to it would be to stifle the appeal.
(e) At the hearing before Patten LJ on 14 January 2016 of the application and cross-application referred to at (d), Goldtrail, in disputing that the condition for payment was such as to stifle Onurs appeal, relied in particular on the financial relationship between Onur and its wealthy owner, Mr Bagana.
As explained by Patten LJ in his reserved judgment dated 21 January 2016, his orders were first to dismiss Onurs cross-application and thereupon to grant Goldtrails application for an order that, by reason of Onurs failure to comply with the condition imposed on 11 June 2015, its appeal should be dismissed.
In the above circumstances this court is asked to address the principles by reference to which the Court of Appeal should determine an application by a respondent/claimant that, as a condition of any appeal to it, the appellant/defendant should pay into court (or otherwise secure payment of) part or all of the judgment sum awarded against it in the court below; and in particular to identify the principles by reference to which it should appraise a respondents contention that an appellants financial relationship with a wealthy third party is such as to defeat its complaint that such a condition would stifle its appeal.
In the event there has been little dispute between the parties as to the principles which the Court of Appeal should apply.
The more lively issue has been whether Patten LJ can be seen to have applied those principles in reaching his conclusions first that Onurs relationship with Mr Bagana was such as to defeat its complaint that the condition for payment would stifle the appeal; second that the condition should therefore remain in being; and third that, in the absence of compliance (or proposed compliance) with it, Onurs appeal should therefore be dismissed.
THE SUBSTANTIVE DISPUTE
Prior to its liquidation, Goldtrail was a holiday tour company which had been wholly owned by Mr Aydin.
Onur is a Turkish airline, largely owned by Mr Bagana.
In the proceedings before Rose J Goldtrail, by its liquidator, sued Onur in relation to two agreements and, irrelevantly for present purposes, sued other defendants in relation to other agreements.
The claim against Onur arose out of the latters aspiration to cause Goldtrail to buy seats for its tourists on Onurs flights between the UK and Turkey.
Such was the context of agreements that Mr Bagana would buy 50% of Mr Aydins shares in Goldtrail for 1m (which he paid) and that Onur would pay 3.64m (which it paid) to another company owned by Mr Aydin for its purported brokerage of an agreement by Goldtrail with Onur to buy a specified number of seats on its flights.
Rose J found that, properly analysed, the payment of 3.64m represented consideration for Goldtrails agreement to buy the seats; that, in breach of his fiduciary duty to Goldtrail, Mr Aydin had diverted receipt of Onurs payment away from Goldtrail to his other company; that Onur had dishonestly assisted Mr Aydin in thus defrauding Goldtrail; and that it should pay damages to it in that sum.
ONURS APPEAL
In January 2015, following the grant on paper of permission to Onur to appeal against the order of Rose J, Goldtrail applied for the imposition of conditions.
It was too late for it to apply under Rule 52.3(7)(b) (now Rule 52.6(2)(b)) of the Civil Procedure Rules for the actual permission to be made subject to conditions.
It therefore applied under Rule 52.9(1)(c) (now Rule 52.18(1)(c)) for the court to exercise its discretion to impose conditions upon which an appeal may be brought.
Paragraph (2) of Rule 52.9 (now Rule 52.18(2)) provided that the court should exercise its powers under para (1) only where there was a compelling reason for doing so.
By its application, Goldtrail requested conditions that Onur should pay or secure 600k under interim orders for costs made by Rose J; should provide security for Goldtrails costs of the appeal in the sum of 150k; and in particular should pay into court the sum of 3.64m which Rose J had awarded to it by way of damages.
In response Onur entered no substantive challenge to the request for the first two conditions.
The dispute related to the requested payment into court of the judgment sum.
Goldtrail relied on the agreed fact that in October 2014, after 22 years of flying its aircraft to the UK, Onur had ceased to do so; and Goldtrail submitted that, since Onur was likely to have no other assets even temporarily in England and Wales, there was a compelling reason for the judgment sum to be secured.
Onurs response was that its decision to cease flights to the UK had been taken for operational reasons and that there was no evidence that it had taken steps or would take steps to obstruct enforcement of the judgment in the event of the dismissal of its appeal.
What at that time Onur did not allege was that the disputed condition would stifle its appeal.
By an order on paper dated 7 April 2015 Floyd LJ imposed the disputed condition.
Onur exercised its right to cause him to reconsider his decision at the hearing which took place on 11 June 2015.
Although in his judgment Floyd LJ expressed a willingness to assume that there was a respectable commercial explanation for the cessation of Onurs flights to the UK, he maintained his earlier conclusion that there was a compelling reason for imposing the condition.
Upon Onurs continuation of the appeal, he therefore imposed the condition that it should pay into court (or otherwise secure payment of) 3.64m by 9 July 2015.
On 14 July 2015, by then in breach of the condition, Onur applied for variation of it so as to permit it to make the payment into court by seven monthly instalments.
On 27 July 2015 Floyd LJ on paper refused the application but shortly before 21 October 2015, when pursuant to Onurs request he was due to reconsider it at a hearing, Onur changed its stance.
Its new contention was that the condition for payment of the judgment sum into court was a breach of its rights under the European Convention on Human Rights and was unlawful and that therefore the payment would not be made.
So Floyd LJ dismissed the application for variation and directed that Goldtrails oral request for the consequential dismissal of Onurs appeal be made by formal application.
Thus it was that on 14 January 2016 Patten LJ heard not only the anticipated application by Goldtrail for dismissal of the appeal but also a cross-application by Onur dated 7 December 2015 for discharge of the condition for payment into court of the judgment sum on the ground - asserted for the first time - that its continuation in force would stifle the appeal.
The relevant findings, observations and conclusions of Patten LJ in his judgment dated 21 January 2016 were as follows: In 2013 he lent US $28m to Onur.
(a) Mr Bagana was extremely wealthy and had, for example, given evidence to Rose J that 5m was not a significant outlay for himself personally.
(b) He directly held 3.67% of the shares in Onur and held 81.19% of the shares in a company which held a further 92% of the shares in Onur.
(c) Between 2008 and 2011 Onur had paid substantial dividends to him, which he had lent back to it, secured against its assets.
(d) (e) By 2014 his loan account with Onur had increased to $68m.
(f) For some reason Onur had guaranteed debts owed to him by another shareholder.
(g) As Onurs largest secured creditor, Mr Bagana was in a position to decide which of Onurs unsecured debts should be paid and at what time.
(h) He had a more than usually close relationship with Onur and effectively controlled its financial affairs.
(i) According to Onurs Chief Financial Officer, Mr Bagana had said that he would contemplate making further loans to Onur only in exceptional circumstances to enable it to make commercial payments necessary to keep it in business.
(j) With Mr Baganas support Onur was able to continue to trade.
(k) Even had it been difficult for Onur to make the payment into court out of cash generated from its trading activities, it could have done so with his support.
(l) Mr Bagana had decided not to fund the payment by Onur.
(m) Were the court able to take his financial position into account in assessing Onurs ability to make the payment into court, its application to discharge the condition could not succeed.
(n) In exceptional circumstances the ability of a company to have access to funds from a third party could be taken into account in assessing the likelihood that it could make a payment into court.
(o) To take it into account would not be the same as to oblige that third party to comply with a condition imposed on a company.
(p) exceptional.
(q) Onur had failed to establish that the condition for payment into court would stifle its appeal.
(r) So Onurs cross-application failed and, in that it had resolved not to satisfy the condition, its appeal should be dismissed.
In the light of all the above features the circumstances were
PRINCIPLES
To stifle an appeal is to prevent an appellant from bringing it or continuing it.
If an appellant has permission to bring an appeal, it is wrong to impose a condition which has the effect of preventing him from bringing it or continuing it.
It is as if, on an application of summary judgment, the court were to grant leave to the defendant to defend the claim and then to attach a condition for payment which he could not satisfy.
In the words of Lord Diplock in M V Yorke Motors v Edwards [1982] 1 WLR 444 at 449B: that would be a wrongful exercise of discretion, because it would be tantamount to giving judgment for the plaintiff notwithstanding the courts opinion that there was an issue or question in dispute which ought to be tried.
Application of article 6 of the European Convention on Human Rights (being an article which confers its rights on companies as well as on human beings) yields the same conclusion.
The article does not require a member state to institute a court of appeal but, if it does so, it must ensure that litigants in that court enjoy its fundamental guarantees: Delcourt v Belgium (1970) 1 EHRR 355.
There will seldom be a fair hearing within article 6 if a court which has permitted a litigant to bring an appeal then, by indirect means, does not permit him to bring it.
There is a variety of situations in which a party submits that the effect of granting or refusing an application would be to stifle his continued participation in the proceedings.
He may do so, for example, as a claimant of a specified character, in response to an application by (a) a defendant for him to provide security for costs; or (b) as a defendant, in response to an application by the claimant for summary judgment in which the latter contends, as a fall-back, that, were leave to be given to defend the claim, it should be subject to a condition that the sum claimed be paid into court; or (c) as a party who has without good reason failed to comply with an order, in response to an application by the other for an order for him to make a payment into court; or (d) as an appellant, in response to an application by the respondent (as in the present case) that, as a condition of the appeal, he should provide security for the costs of it; or (e) as a former defendant now an appellant, in support of his application (as in the present case) that orders against him for payment of the judgment debt or costs be stayed pending his appeal; or (f) as a former defendant now an appellant, in response to an application by the respondent (as in the present case) that he should, as a condition of the appeal, pay the judgment debt into court.
There is a qualitative difference between imposing a condition which requires a defendant/appellant to provide security for the future costs of the claimant/respondent and one which requires him to pay into court the sum awarded against him.
The effect of the former is that, were his appeal to be dismissed, the burden of expenditure to be incurred by the claimant/respondent in resisting the appeal would not be borne by him.
The effect of the latter is, by contrast, even more beneficial for the claimant/respondent.
It is that, in the event (again) of the dismissal of the defendants appeal, the judgment sum would be there, as it were upon a tray, for the claimant to sweep into his pocket without his needing to undertake any attempt to enforce the courts order for payment of it.
No doubt a court asked to impose a condition for the payment into court of the sum awarded will have well in mind that extra advantage for the claimant and corresponding disadvantage for the defendant.
But a partys participation in proceedings can be as much stifled by an order for security for costs as by an order for payment into court of the sum claimed or awarded.
So it is without further reference to that distinction that one may proceed to address the circumstances in which an order can be said to stifle the continuation by an appellant of an appeal.
There is no doubt - indeed it is agreed - that, if the proposed condition is otherwise appropriate, the objection that it would stifle the continuation of the appeal represents a contention which needs to be established by the appellant and indeed, although it is hypothetical, to be established on the balance of probabilities: for the respondent to the appeal can hardly be expected to establish matters relating to the reality of the appellants financial situation of which he probably knows little.
But, for all practical purposes, courts can proceed on the basis that, were it to be established that it would probably stifle the appeal, the condition should not be imposed.
It is clear that, even when the appellant appears to have no realisable assets of its own with which to satisfy it, a condition for payment will not stifle its appeal if it can raise the required sum.
As Brandon LJ said in the Court of Appeal in the Yorke Motors case, cited with approval by Lord Diplock at 449H: The fact that the man has no capital of his own does not mean that he cannot raise any capital; he may have friends, he may have business associates, he may have relatives, all of whom can help him in his hour of need.
It seems that, in particular and as exemplified by the present case, difficult issues have surrounded the ability of a corporate appellant, without apparent assets of its own, to raise money from its controlling shareholder (or some other person closely associated with it); and this is the context of what follows.
When, in response to the claim of a corporate appellant that a condition would stifle its appeal, the respondent suggests that the appellant can raise money from its controlling shareholder, the court needs to be cautious.
The shareholders distinct legal personality (which has always to be respected save where he has sought to abuse the distinction: Prest v Prest [2013] UKSC 34, [2013] 2 AC 415, 487, para 34) must remain in the forefront of its analysis.
The question should never be: can the shareholder raise the money? The question should always be: can the company raise the money?
So one turns to the leading authority of the Court of Appeal in this area, namely Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065, [2002] CP Rep 21, which Onur contends to be, in part, erroneous in principle.
In the Hammond Suddard case the respondent solicitors sued the appellant company for unpaid fees and it counterclaimed for damages for negligence.
The claim succeeded and in effect the counterclaim failed.
The appellant obtained permission to appeal.
It unsuccessfully sought a stay of execution of the orders made by the judge on the basis that, were they to be enforced, its appeal would be stifled.
The respondents sought the imposition of conditions upon the permission to appeal.
They sought a condition for provision of security for the costs of the appeal, which the appellant conceded to be appropriate.
But they also sought a condition of payment into court of the judgment debt and of the sums awarded under interim orders for costs, to which, analogously, the appellant objected that its consequence would be to stifle its appeal.
The appellant had been incorporated in the British Virgin Islands and was owned by trustees on discretionary trusts for an unidentified but apparently wealthy family.
The appellant had, so it said, no assets.
But could it raise from its beneficial owners a sum equal to the judgment debt and costs in order to enable it to make the payment into court? If so, there was a compelling reason within the meaning of Rule 52.9(2) for imposing the condition sought by the respondents.
In the Hammond Suddard case the judgment of the court was delivered by my Lord, Lord Clarke (Clarke LJ, as he then was), on behalf of himself and Wall J (as he then was).
Having observed, at (1) of para 41, that it would be difficult for the respondents to exercise the normal mechanisms of enforcement against the appellant and, at (2), that the appellant had had access to resources which had enabled it to secure representation of the highest quality in the proceedings to date, the court concluded, at (3): There is no convincing evidence that the appellant does not either have the resources or have access to resources which would enable it to pay the judgment debt and costs as ordered.
No criticism has been directed at the above conclusion.
It was an impeccable summary of the courts reason for acceding to the respondents application.
The court proceeded, at para 41(4), to find that the appellants disclosure of its financial affairs had been inadequate.
But then, at the end of the subparagraph, it added an observation in relation to the appellant: It has wealthy owners and there is no evidence that, if they were minded to do so, they could not pay the judgment debt including the outstanding orders for costs.
Indeed, in para 43, the court added a second observation to the same effect: Thus we see nothing unjust in providing the trust which owns the appellant with a choice.
If it is in the interests of the appellant for the appeal to continue, the trust must procure payment of the current orders.
I am driven to the view that Onur is right to criticise the phraseology of the courts two additional observations.
Their intended meaning may well have been, as Goldtrail suggests, that the appellant had failed to establish that funds with which the company could make the payment into court would not be made available to it by its beneficial owners.
But, strictly speaking, it was wrong for the court to express its reasoning in terms of whether they could themselves make that payment.
In Socit Gnrale SA v Saad Trading, Contracting and Financial Services Co [2012] EWCA Civ 695 the Court of Appeal was required to determine applications by Socit Gnrale SA (the bank), which was the respondent to appeals which the two appellants had been permitted to bring against orders made against each of them for payment to the bank of US$49m.
The first appellant (Saad) was a limited Saudi Arabian partnership and the second appellant (Mr Al- Sanea) was a general partner of Saad and owned 90% of its share capital.
One of the banks applications was for a condition to be imposed upon the continuation of each of the appeals that the appellants should pay the award of US$49m into court; to which the appellants each responded that any order for payment into court would stifle their appeals.
The courts conclusion, explained in the judgment of Aikens LJ with which Rimer LJ agreed, was that a condition, which it proceeded to impose, for their joint and several payment into court of (only) $5m would not stifle their appeals.
In reaching this conclusion Aikens LJ punctiliously addressed the factors identified by the court as relevant in the Hammond Suddard case.
Nothing turns on his analysis of why Mr Al-Sanea had failed to make good his contention that his appeal would be stifled.
In relation, however, to the analogous contention of Saad, Aikens LJ addressed the additional observation which that court had made in para 41(4).
At paras 54 and 55 of his judgment Aikens LJ said that it was difficult to judge the legitimacy of imposing upon a company a the question was whether Saad had a wealthy owner who could not, if i) minded to do so, make the payment into court on its behalf; ii) condition which would effectively require an owner to fund it; iii) but the courts additional observation in the Hammond Suddard case had been clear; iv) exceptional circumstances; and v) the answer had to be that such a condition should be imposed only in the circumstances of the present case were exceptional.
Possibly ham-strung by the doctrine of precedent, the court in the Socit Gnrale case evidently considered it best to treat the first additional observation in the Hammond Suddard case by consigning it to that over-used store-room in the mansion of the law which is designated as exceptional circumstances.
Such a criterion is on any view dangerous because it is not, on the face of it, linked to its context: see Norris v Government of United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487, para 56.
It sets a snare 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: H (H) v Deputy Prosecutor of the Italian Republic, Genoa (Official Solicitor intervening) [2012] UKSC 25, [2013] 1 AC 338, para 161.
Having, however, an unconstrained ability to reject the phraseology of the additional observations, we in this court have no need to approve the superimposition upon the relevant criterion of a test of exceptional circumstances which neither party before the court seeks to defend.
In this context the criterion is: Has the appellant company established on the balance of probabilities that no such funds would be made available to it, whether by its owner or by some other closely associated person, as would enable it to satisfy the requested condition?
The criterion is simple.
Its application is likely to be far from simple.
The considerable forensic disadvantage suffered by an appellant which is required, as a condition of the appeal, to pay the judgment sum (or even just part of it) into court is likely to lead the company to dispute its imposition tooth and nail.
The company may even have resolved that, were the condition to be imposed, it would, even if able to satisfy it, prefer to breach it and to suffer the dismissal of the appeal than to satisfy it and to continue the appeal.
In cases, therefore, in which the respondent to the appeal suggests that the necessary funds would be made available to the company by, say, its owner, the court can expect to receive an emphatic refutation of the suggestion both by the company and, perhaps in particular, by the owner.
The court should therefore not take the refutation at face value.
It should judge the probable availability of the funds by reference to the underlying realities of the companys financial position; and by reference to all aspects of its relationship with its owner, including, obviously, the extent to which he is directing (and has directed) its affairs and is supporting (and has supported) it in financial terms.
APPLICATION TO THE PRESENT CASE
There has been lively argument before the court as to whether, in making the orders under appeal, Patten LJ must be taken to have concluded, in accordance with the correct criterion, that Onur had failed to establish that Mr Bagana would not make 3.64m available to it in order to enable it to comply with any order for its payment into court.
There are grounds for thinking that such a conclusion might have been open to him.
Mr Bagana signed a statement admitted by Rose J into evidence, in which, so Onur tells this court, he admitted that he was responsible for its overall operation and made the ultimate decisions referable to it; and Patten LJ made findings accordingly.
Moreover Mr Baganas massive recent loans to Onur to enable it to continue to trade were on any view of substantial relevance to the probability of a further, modest advance.
Oddly no statement was filed on behalf of Onur by Mr Bagana himself but the Chief Financial Officers evidence was that he would contemplate making further advances only to enable Onur to make commercial payments necessary in order to keep itself in business.
This second- hand assertion called for careful scrutiny.
But, in circumstances in which Patten LJ concluded that it seems clear to me that Mr Bagana has decided not to fund the payment by the company, I am driven to the view that this court cannot proceed on the basis that Onurs application for discharge of the condition was refused by reference to the correct criterion.
Goldtrail submits with force that Patten LJ meant to conclude only that, up until that point, Mr Bagana had declined to fund the payment and that the evidence in support of any wider conclusion was far too thin.
It further submits that for Patten LJ to have found that Mr Bagana had made a final decision never to fund it would be inconsistent with his refusal of Onurs application.
Unfortunately, however, I cannot accept the further submission.
The key to the proper construction of his judgment is that, following a lengthy quotation from the judgment of Aikens LJ in the Socit Gnrale case, Patten LJ concluded that the circumstances of the present case were exceptional.
In other words he was proceeding by reference to the Court of Appeals misconception, born of the additional observations in the Hammond Suddard case and developed in the Socit Gnrale case, that in exceptional circumstances an order for a party, without apparent assets of its own, to make a payment into court could be justified by whether another person probably could advance the necessary funds to it irrespective of whether he probably would do so.
So I would allow Onurs appeal and remit both applications to Patten LJ for him to determine Onurs application for discharge of the condition by reference to the correct criterion.
I should record that Goldtrail put forward to him an alternative argument against discharge; of course he had no need to address it but he may now need to do so.
I have reached a different conclusion from that arrived at by Lord Wilson.
I am not persuaded that Patten LJ materially misstated the relevant principles or arrived at the wrong conclusion.
It is important to put his decision in context.
The issue throughout has been whether there was a compelling reason for imposing a condition upon which an appeal may be brought under what were then CPR 52.9(1)(c) and (2).
Before the case came before Patten LJ it had a long history, largely before Floyd LJ.
As Lord Wilson explains, at no stage when the issues were before Floyd LJ did Onur contend that payment of the judgment sum of 3.4m (or the provision of security in lieu) would or might stifle the appeal.
Instead it advanced a whole series of mutually inconsistent explanations, in response to which Floyd LJ made a series of orders and gave a number of judgments, notably on 11 June, 27 July and 21 October 2015.
Onurs applications included an application for permission to pay the judgment sum in monthly instalments of 500,000.
Floyd LJ rejected that application on the papers, giving clear reasons, on 27 July 2015.
His reasons included this passage, quoted in para 14 of his judgment given on 21 October 2015: There is no explanation of how these sums will be funded.
If [the appellants] are now contending that the imposition of the order would stifle the appeal, the evidence falls far short of showing that to be the case.
It is well settled that a party who wishes so to contend must show that he has explored all means of providing the necessary security.
Floyd LJ added that the appellants had a right to renew the application orally and that he would consider any further evidence that became available.
Floyd LJ added in para 15 of his judgment on 21 October that he had hoped to make it clear by that set of reasons that the appellants appeared to be what he called shuffling around to a position where they were saying that the payment of the sums of money placed unacceptable strains on their ability to conduct business, so much so that it was an interference with their right to appeal that the order should be enforced in its full amount.
They did not however take that step.
In para 17 Floyd LJ said that on 19 October, which was two days earlier, the appellants did not deal with the previous history but served a witness statement with only one paragraph as follows: Board of Onur Air is of the opinion that this decision, [which Floyd LJ assumed was a reference to his order that the judgment sum be paid into court] is unlawful and against the principles laid down by the European Court of Human Rights.
Therefore, the foresaid sum will not be paid.
The striking feature of that statement is that Onur was not even then saying that payment of 3.4m (or the provision of security in lieu) would or might stifle the appeal.
Reliance upon Onurs human rights was a wholly new point on the part of Onur.
For various reasons which are not material to this appeal Floyd LJ said in para 20 that the whole history of the appeal was very unsatisfactory but that he was very reluctant to strike out an appeal for which permission has been given without giving the appellants one final chance of explaining the position.
He added: If it is now their position that they are so inhibited by the order for payment of the judgment sum that it is stifling their ability to appeal, then they should say so.
I appreciate that is not something which they have so far said.
They have had ample opportunity, it might be said, to put forward every argument, but stifling of the appeal is one matter which they have thus far declined to put forward.
It may be that they are embarrassed by what was apparently said to Rose J about the fact, as Mr Gurbuz said in evidence, that the company was of such a size that 5m was not a large sum of money.
Whatever the reason for their silence, it seems to me that they ought to come forward with their evidence now.
In order to give Onur one last chance Floyd LJ directed that any application for a final order on the appeal should be made on notice to the appellants and that appropriate opportunity should be given to both sides to file evidence in relation to it.
He added that it may be that not much further evidence was required from the respondents but that he was very anxious that the appeal should not be disposed of without a proper application on notice for the precise order which Goldtrail now sought.
The matter then came before Patten LJ, who gave judgment on 21 January 2016.
There were before Patten LJ an application on the part of Goldtrail for an order dismissing the appeal and for orders for payment of the judgment sum and interest.
That would of course involve a removal of the stay.
Onur opposed those applications and issued a new application under CPR 3.1(7) for the variation of the 11 June order by removal of the condition requiring payment into court of the judgment sum.
It did so, as Patten LJ put it in para 15, for the first time on the ground that the payment of that sum was now beyond the means of the company and its payment would stifle the appeal.
Patten LJ considered first the application under CPR 3.1(7).
I will do the same.
Patten LJ considered the position in some detail between paras 16 et seq and concludes in para 21 that Onurs Chief Financial Officer said in a statement dated 8 January 2016 that there had been a net increase in current liabilities of US$10m and that the net forecast for 2015 was between US$15 and US$16.5 m, that Onurs shortfall remained serious and that this was being managed by postponing current debt.
Patten LJ summarised the position thus in para 22: Ms Erguven says that Onur has been unable to negotiate extended finance from banks and that existing lenders have either frozen or closed existing facilities.
In these circumstances, the company has no means to pay the judgment debt.
One would expect that, in these circumstances, Onur would have been forced to cease trading but this is obviously not the case and the evidence indicates that the airline continues to operate in Europe and has entered into new contracts, for example, with Bulgarian Air.
An analysis of the financial information carried out by the liquidators of Goldtrail and set out in the witness statement of Mr Oakley-Smith recognises the difficulties faced by Onurs business in the present climate but identifies a continuing source of funding from Mr Hamit Cankut Bagana who is the Chairman of Onur and its controlling shareholder.
According to Ms Erguvens most recent witness statement, Mr Bagana has a direct shareholding of 3.67% of Onur but owns 81.19% of a company called Ten Tour Turizm Endustri ve Ticaret Anonim Sirket which in turn owns 92% of the shares in Onur.
Patten LJ continued as follows: 23.
The analysis carried out by Mr Oakley-Smith of the 2013 and 2014 accounts suggests that Mr Bagana is the primary source of funding for the company.
His evidence at the trial before Rose J was that he paid 1m to Mr Aydin as part of the agreement with Onur.
He lent the company $28m in 2013.
In the 2014 accounts this is shown as having increased to $68m.
As part of these arrangements, it appears that Onur has given guarantees to Mr Bagana in respect of debts due to him from one of the other shareholders although the reasons for this are not explained.
Of more significance is that in the period from 2008 to 2011 substantial dividends were paid by Onur to Mr Bagana and then loaned back to the company and secured against its assets in subsequent years.
Mr Bagana therefore appears to have removed equity from the company and to have used the money to establish himself as a secured creditor.
His position as the companys largest single (and secured) creditor has put him into the position where he can effectively decide which of the unsecured debts should be paid and when.
This is confirmed by Ms Erguven in her second witness statement where she says that: I can confirm that Mr Bagana is fully aware of the position that Onur Air finds itself in in relation to the payment of the Judgment Sum into court as a condition of the continuation of the Appeal.
He has made it clear that he would only contemplate considering the possibility of advancing further amounts to Onur Air in the most exceptional circumstances if they were commercial payments strictly and immediately necessary in order to keep Onur Air in business due to the already significant indebtedness of the company to him and the deteriorating financial condition of the company.
Mr Bagana has made it clear to the management of Onur Air that he believes that if the court were to strike out the appeal on the grounds that he, as a shareholder, had failed to lend money to Onur Air to enable it to pay the Judgment Sum into court, that would be a breach of his and Onur Airs rights under the European Convention of Human Rights.
24.
The liquidators evidence is that Mr Bagana is an extremely wealthy man who said to Rose J in his evidence that he did not regard 5m as a significant outlay for himself personally.
Ms Erguvens response to this is that she is unable to comment on his alleged wealth and business activities.
25.
Some of the argument has centred on whether the financial information produced by Onur justifies its alleged belief that it is unable to pay the 3.64m and that, to be made to do so, would lead to the stifling of the appeal.
Mr Gibbon cautioned me against attempting to second guess the assessment of the financial state and prospects of the company made by its own directors and officers and I am obviously alive to those difficulties.
But even taking Ms Erguvens assessment at face value, it is apparent that a decision has been taken that Onur is able to continue to trade with the support of Mr Bagana and that it could, with that financial support, have made the 3.64m payment even if it would have been in difficulties in generating sufficient cash for that purpose from its trading activities.
It seems clear to me that Mr Bagana has decided not to fund the payment by the company and if I can take his financial position into account in assessing Onurs ability to satisfy the condition either prior to 9 July 2015 or thereafter then the CPR 3.1 (7) application to vary cannot succeed.
There is no evidential basis for concluding that the condition could not have been complied with or that, if complied with, it would stifle the appeal.
26.
Mr Gibbon submitted that it could only be in exceptional circumstances that the court would take into account on this kind of application the financial position of a third party such as Mr Bagana.
To do so risks blurring the distinction between a company and its shareholders or other funders which the law habitually respects.
But it is clear as a matter of authority that the ability of third parties to fund the company may be relevant in appropriate cases and that there is no jurisdictional bar to the court taking their position into account in determining whether an allegation of stifling has been made out.
There is, I think, an obvious distinction between whether such a third party can be said to be under any sort of obligation as a result of an order made against the company and whether, in considering the likelihood of the company being able to make a potential payment, its access to third party funding should be taken into account.
Patten LJ then referred to Socit Gnrale SA v Saad Trading, Contracting and Financial Services Co [2011] EWCA Civ 695 and to a decision of the Court of Appeal in Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065; [2002] CP Rep 21, where I gave the judgment of the court, which comprised myself and Wall J.
In the light of the submissions in this case, I recognise that my formulation of the principles is not entirely accurate.
The basic principle is that stated by Brandon LJ with the approval of Lord Diplock in M V Yorke Motors v Edwards [1982] 1 WLR 444 at 449H (as quoted by Lord Wilson): The fact that the man has no capital of his own does not mean that he cannot raise any capital; he may have friends, he may have business associates, he may have relatives, all of whom can help him in his hour of need.
The cases show that in a case such as this the burden is on the person (or entity concerned) to show that he cannot find relevant capital to support him.
Wilson in his para 21: In Hammond Suddard I tried to make that clear in para 41(3) quoted by Lord There is no convincing evidence that the appellant does not either have the resources or have access to resources which would enable it to pay the judgment debt and costs as ordered.
I adhere to that principle.
So the question here is whether Onur either has the resources or access to resources to pay the sum of 3.64m.
The statements of principle which I recognise went too far are those referred to in my paras 41(4) and 43 as identified by Lord Wilson in his para 22 above.
In para 41(4) I added, of the appellant: It has wealthy owners and there is no evidence that, if they were minded to do so, they could not pay the judgment debt, including the outstanding orders for costs.
In similar vein I said this in para 43: Thus we see nothing unjust in providing the trust which owns the appellant with a choice.
If it is in the interests of the appellant for the appeal to continue, the trust must procure the payment of the current orders.
I am also of the view that, in so far as the Court of Appeal went further in Socit Gnrale SA v Saad Trading, Contracting and Financial Services Co [2012] EWCA Civ 695, it went too far.
In short, where the relevant company does not have appropriate resources of its own and the question is whether it has access to the resources of others, the question is whether the company would (not could) have had access to the resources.
The onus that it would not is on the company concerned.
On the facts of this case, the question is whether Onur has shown on the balance of probabilities that it did not have access to the relevant resources.
On the basis that the only resources available to Onur were through Mr Bagana, the question is whether, on the balance of probabilities he would have provided the funds.
As I see it, the strength of Goldtrails case is this.
Onur at no stage focused on this precise point.
As Lord Carnwath puts it in para 48, there was no direct evidence from Mr Bagana on the point.
In short, he does not address the question whether he would have declined to provide funds to Onur.
Again, as Lord Carnwath puts it, the only relevant evidence on the point was that of Onurs Chief Financial Officer that Mr Bagana would contemplate making further loans to Onur but only in exceptional circumstances [to enable it to make] commercial payments necessary to keep [it] in business.
I agree with Lord Carnwath that the evidence falls far short of establishing that the condition would in fact stifle the appeal.
I would only add that there has been no suggestion until very recently that the condition would stifle the appeal and that the new aspect of Onurs case is not so I would dismiss the appeal.
much that the appeal would be stifled as reliance on its human rights, which is not explained and is far-fetched in the extreme.
I gratefully adopt Lord Wilsons exposition of the facts and of the law, which was in effect common ground by the end of the hearing.
Although Patten LJ (faithfully applying the authorities binding on him) may have misstated the law in some respects, I agree with Lord Clarke that these were not ultimately material to his determination.
In any event, where an error such as this may have occurred, particularly one resulting from previous case law binding on the lower courts, the interests of justice require us in my view to avoid adding unnecessarily to the delay and expense borne by the parties.
Our rules do not require us to remit the case to the lower court if we are in as good a position to decide it ourselves.
This in my view is such a case.
All the evidence is before us.
I strongly agree with Lord Wilson that the court should not take even an emphatic refutation by the company or the owner at face value.
As he says: it should judge the probable availability of the funds by reference to the underlying realities of the companys financial position; and by reference to all aspects of its relationship with its owner.
Applying that approach to the present case, particularly against the background described by Lord Clarke, I have no doubt that Patten LJ would have arrived at the same conclusion, and I would do the same.
There was no direct evidence from Mr Bagana himself.
Although Patten LJ accepted that he had decided not to fund the payment by Onur, I take that to be no more than his inference from its opposition to the order.
There is no direct evidence of such a decision.
The only relevant evidence was that of Onurs Chief Financial Officer that Mr Bagana would contemplate making further loans to Onur, but only in exceptional circumstances [to enable it to make] commercial payments necessary to keep [it] in business, and that he regarded the courts requirement of such support as infringing his human rights.
The latter suggestion is of course nonsense, since there is no doubt as to his ability to fund the company if he wishes.
As to why he does not regard the present case as sufficiently exceptional, there is no explanation.
This in my view falls far short of proving, on the balance of probabilities, that the condition would in fact stifle the appeal.
Lord Wilson does not suggest otherwise.
In these circumstances, no other reason having been given for remitting the case, I would uphold Patten LJs order and dismiss the appeal.
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The appellant is a Turkish airline, largely owned by Mr Bagana.
Prior to its liquidation, the respondent was a holiday tour company which had been wholly owned by Mr Aydin.
The respondent, by its liquidator, sued the appellant in relation to two agreements between the parties.
Rose J held that the appellant had dishonestly assisted Mr Aydin in defrauding the respondent and that it should pay damages to it in the sum of 3.64 million.
The appellant was granted permission to appeal to the Court of Appeal against the order of Rose J.
By an application made under then Rule 52.9(1)(c) of the Civil Procedure Rules, the respondent requested that the court should impose on the appellant a number of conditions for the continuation of its appeal.
One requested condition was that the appellant should pay into court the sum of 3.64 million which Rose J had awarded to the respondent, on the basis that the appellant was likely to have no other assets even temporarily in England and Wales.
The appellant disputed the imposition of this condition, but it did not allege that the disputed condition would stifle its appeal.
By order dated 11 June 2015, Floyd LJ concluded that there was a compelling reason for imposing a condition and required that the appellant, as a condition for the continuation of its appeal, pay into the court (or otherwise secure payment of) 3.64 million by 9 July 2015.
The appellant did not pay the sum into court.
On 14 January 2016 Patten LJ heard the anticipated application by the respondent for dismissal of the appeal, together with a cross application by the appellant for discharge of the condition on the ground that payment of that sum was now beyond its means and its continuation would stifle the appellants appeal.
Patten LJ held that the appellants appeal should be dismissed on the grounds that in exceptional circumstances the ability of a third party to provide funds, in this case Mr Bagana, could be taken into account in assessing the likelihood that a company could make a payment into court.
Patten LJ stated that Mr Bagana has decided not to fund the payment by the company and concluded that the appellant had not established that the condition for payment would stifle its appeal.
The appellant alleges that Patten LJ erred in his application of the relevant principles and in concluding that its relationship with Mr Bagana was such as to defeat its complaint that the condition for payment would stifle the appeal.
The Supreme Court by a majority of 3 to 2 allows Onur Air Taimacilik As appeal.
It remits both applications to Patten LJ to determine the appellants application for discharge of the condition by reference to the correct criterion [26].
Lord Wilson gives the lead majority judgment, with which Lord Neuberger and Lord Hodge agree.
Lord Clarke and Lord Carnwath give dissenting judgments.
Principles To stifle an appeal is to impose a condition which prevents an appellant from bringing it or continuing it.
If an appellant has permission to bring an appeal, it is wrong to impose a condition which has the effect of preventing him from bringing it or continuing it.
For the purposes of Article 6 of the European Convention on Human Rights, there will seldom be a fair hearing if a court which has permitted a litigant to bring an appeal then, by indirect means, does not permit him to bring it [12].
The appellant must establish on the balance of probabilities that a proposed condition would stifle the continuation of its appeal [15].
The courts can proceed on the basis that, were it to be established that the condition would probably stifle the appeal, the condition should not be imposed [16].
Even if an appellant appears to have no realisable assets, a condition for payment will not stifle its appeal if it can raise the sum [17].
However, the court must be cautious in respect of a suggestion that a corporate appellant can raise money from its controlling shareholder.
The shareholders distinct legal personality must remain in the forefront of its analysis.
The question should always be whether the company can raise the money and never whether the shareholder can raise the money [18].
The criterion which should be applied is as follows: Has the appellant company established on the balance of probabilities that no such funds would be made available to it, whether by its owner or by some other closely associated person, as would enable it to satisfy the requested condition? [23].
Where a company and/or its owner denies that the necessary funds would be made available to the company, the court should not take that assertion at face value.
It should judge the probable availability of the funds by reference to the underlying realities of the companys financial position and to its relationship with its owner, including the extent to which he is directing its affairs and is supporting it in financial terms [24].
Application of principles to the present case The appellants application for discharge of the condition was refused by reference to the incorrect criterion.
Patten LJ proceeded by reference to the Court of Appeals misconception in Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2011] EWCA Civ 2065 and Societe Generale SA v Saad Trading, Contracting and Financial Services Co and Al Sanea [2012] EWCA Civ 695, that in exceptional circumstances an order for a party, without apparent assets of its own, to make a payment into court could be justified by whether another person probably could advance the necessary funds to it irrespective of whether he probably would do so [25].
Dissenting Judgments Lord Clarke and Lord Carnwath would have dismissed the appeal.
Patten LJ did not materially misstate the relevant principles or arrive at the wrong conclusion [27, 46].
Where a company does not have resources of its own and the issue is whether it has access to the resources of others, the question is whether the company would (not could) have had access to the resources [42].
There was no direct evidence from Mr Bagana on the question of whether he would have declined to provide funds.
The evidence falls far short of establishing that the condition would stifle the appeal [44, 48].
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This is the judgment of the court.
This case is about the proper approach to deciding who has been responsible for harming a child in proceedings taken to protect that child, and others in the family, from harm.
It raises profound issues: on the one hand, children need to be protected from harm; but on the other hand, both they and their families need to be protected from the injustice and potential damage to their whole futures done by removing children from a parent who is not, in fact, responsible for causing them any harm at all.
The facts of this case present us with that dilemma in an unusually stark form.
The facts
Because we have decided to allow this appeal and send the case back to be decided afresh, we should say only enough about the facts to explain how the dilemma arises.
We shall use pseudonyms for the two children concerned, one who has been harmed and one who has not.
Jason was born on 19 May 2007.
On 15 June 2007, when he was just four weeks old, he was found to have bruising on his arms and face, which the doctors immediately thought was caused non accidentally and not, as the mother suggested, by the baby pinching himself or sleeping on his dummy.
Jason has not lived with his family since then, although he has had frequent and good quality contact with his mother.
Jason was living with his mother and father at the time and described by the doctors as thriving.
Both parents said that it was the father who had got up to attend to the baby when he woke up on the morning when the bruises were noticed.
The mother took the baby to the clinic that morning and pointed them out to the health visitor.
It was not possible to give precise timing for the bruises but it was not suggested that they were old or of different ages.
They could have been inflicted by both parents, but the judge found it more likely that only one of them had inflicted them.
The bruises had not been there for so long, nor would they have caused the baby such pain and distress, that the other parent must have known that he was being harmed.
This was not, therefore, a case where one parent had failed to protect the child from harm caused by the other.
It was, colloquially, a pure whodunit.
The other child is William, born on 12 July 2008, while the proceedings to protect Jason were in train.
By then the parents had separated, although they were still in touch with one another.
The father had stopped visiting Jason, had withdrawn from co operation with the social workers and with his solicitors, and played no further part in the proceedings.
He has parental responsibility for Jason but not for William.
William was removed from his mother shortly after birth and placed with the same foster carer as his brother.
He has never been harmed.
The case for removing him from his mother rests on the likelihood of his being harmed in the future if he is returned to her.
The law
In this country we take the removal of children from their families extremely seriously.
The Children Act 1989 was passed almost a decade before the Human Rights Act 1998, but its provisions were informed by the United Kingdoms obligations under article 8 and article 6 of the European Convention on Human Rights.
These affect both the test and the process for intervening in the family lives of children and their parents.
As to the test, it is not enough that the social workers, the experts or the court think that a child would be better off living with another family.
That would be social engineering of a kind which is not permitted in a democratic society.
The jurisprudence of the European Court of Human Rights requires that there be a pressing social need for intervention and that the intervention be proportionate to that need.
Before the court can consider what would be best for the child, therefore, section 31(2) of the 1989 Act requires that it be satisfied of the so called threshold conditions: (a) that the child concerned is suffering, or is likely to suffer, significant harm; and (b) that the harm, or likelihood of harm, is attributable to (i) the care given to the child, or likely to be given to him if the order were not made, not being what it would be reasonable to expect a parent to give to him; or (ii) the childs being beyond parental control.
The leading case on the interpretation of these conditions is the decision of the House of Lords in Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563.
Three propositions were established which have not been questioned since.
First, it is not enough that the court suspects that a child may have suffered significant harm or that there was a real possibility that he did.
If the case is based on actual harm, the court must be satisfied on the balance of probabilities that the child was actually harmed.
Second, if the case is based on the likelihood of future harm, the court must be satisfied on the balance of probabilities that the facts upon which that prediction was based did actually happen.
It is not enough that they may have done so or that there was a real possibility that they did.
Third, however, if the case is based on the likelihood of future harm, the court does not have to be satisfied that such harm is more likely than not to happen.
It is enough that there is a real possibility, a possibility that cannot sensibly be ignored having regard to the nature and gravity of the feared harm in the particular case (per Lord Nicholls of Birkenhead, at p 585F).
Thus the law has drawn a clear distinction between probability as it applies to past facts and probability as it applies to future predictions.
Past facts must be proved to have happened on the balance of probabilities, that is, that it is more likely than not that they did happen.
Predictions about future facts need only be based upon a degree of likelihood that they will happen which is sufficient to justify preventive action.
This will depend upon the nature and gravity of the harm: a lesser degree of likelihood that the child will be killed will justify immediate preventive action than the degree of likelihood that the child will not be sent to school.
The House of Lords was invited to revisit the standard of proof of past facts in Re B (Children) (Care Proceedings: Standard of Proof) [2008] UKHL 35, [2009] AC 11, where the judge had been unable to decide whether the alleged abuse had taken place.
The suggestion that it would be sufficient if there were a real possibility that the child had been abused was unanimously rejected.
The House also reaffirmed that the standard of proof of past facts was the simple balance of probabilities, no more and no less.
The problem had arisen, as Lord Hoffmann explained, because of dicta which suggested that the standard of proof might vary with the gravity of the misconduct alleged or even the seriousness of the consequences for the person concerned (para 5).
He pointed out that the cases in which such statements were made fell into three categories.
In the first were cases which the law classed as civil but in which the criminal standard was appropriate.
Into this category came sex offender orders and anti social behaviour orders: see B v Chief Constable of Avon and Somerset Constabulary [2001] 1 WLR 340 and R (McCann) v Crown Court at Manchester [2002] UKHL 39, [2003] 1 AC 787.
In the second were cases which were not about the standard of proof at all, but about the quality of evidence.
If an event is inherently improbable, it may take better evidence to persuade the judge that it has happened than would be required if the event were a commonplace.
This was what Lord Nicholls was discussing in Re H (Minors), above, at p 586.
Yet, despite the care that Lord Nicholls had taken to explain that having regard to the inherent probabilities did not mean that the standard of proof was higher, others had referred to a heightened standard of proof where the allegations were serious.
In the third category, therefore, were cases in which the judges were simply confused about whether they were talking about the standard of proof or the role of inherent probabilities in deciding whether it had been discharged.
Apart from cases in the first category, therefore, the time has come to say, once and for all, that there is only one civil standard of proof and that is proof that that the fact in issue more probably occurred than not (para 13).
This did, of course, leave a role for inherent probabilities in considering whether it was more likely than not that an event had taken place.
But, as Lord Hoffmann went on to point out at para 15, there was no necessary connection between seriousness and inherent probability: It would be absurd to suggest that the tribunal must in all cases assume that serious conduct is unlikely to have occurred.
In many cases, the other evidence will show that it was all too likely.
If, for example, it is clear that a child was assaulted by one or other of two people, it would make no sense to start ones reasoning by saying that assaulting children is a serious matter and therefore neither of them is likely to have done so.
The fact is that one of them did and the question for the tribunal is simply whether it is more probable that one rather than the other was the perpetrator.
Lady Hale made the same point, at para 73: It may be unlikely that any person looking after a baby would take him by the wrist and swing him against the wall, causing multiple fractures and other injuries.
But once the evidence is clear that that is indeed what has happened to the child, it ceases to be improbable.
Someone looking after the child at the relevant time must have done it.
The inherent improbability of the event has no relevance to deciding who that was.
The simple balance of probabilities test should be applied.
None of the parties in this case has invited the Supreme Court to depart from those observations, nor have they supported the comment made in the Court of Appeal that Re B was a sweeping departure from the earlier authorities in the House of Lords in relation to child abuse, most obviously the case of Re H ([2009] EWCA Civ 1048, para 14).
All are agreed that Re B reaffirmed the principles adopted in Re H while rejecting the nostrum, the more serious the allegation, the more cogent the evidence needed to prove it, which had become a commonplace but was a misinterpretation of what Lord Nicholls had in fact said.
Re B was not a new departure in any context.
Lord Hoffmann was merely repeating with emphasis what he had said in Secretary of State for the Home Department v Rehman [2001] UKHL 47, [2003] 1 AC 153, at para 55.
A differently constituted House of Lords applied the same approach in Re D (Secretary of State for Northern Ireland intervening) [2008] UKHL 33, [2008] 1 WLR 1499.
In Re B, the House also declined an invitation to overrule the decision of the Court of Appeal in Re M and R (Minors) (Sexual Abuse: Expert Evidence) [1996] 4 All ER 239.
This was concerned with the stage after the court is satisfied that the threshold has been crossed.
The court has then to decide what order, if any, to make.
The welfare of the child is the paramount consideration: 1989 Act, s 1(1).
In deciding whether or not to make a care or supervision order, the court must have regard in particular to the so called checklist of factors: 1989 Act, s 1(3), (4).
These include (e) any harm which he has suffered or is at risk of suffering.
In Re M and R, the Court of Appeal determined that section 1(3)(e) should be interpreted in the same way as section 31(2)(a).
The court must reach a decision based on facts, not on suspicion or doubts.
Butler Sloss LJ said this: [Counsels] point was that if there is a real possibility of harm in the past, then it must follow (if nothing is done) that there is a risk of harm in the future.
To our minds, however, this proposition contains a non sequitur.
The fact that there might have been harm in the past does not establish the risk of harm in the future.
The very highest it can be put is that what might possibly have happened in the past means that there may possibly be a risk of the same thing happening in the future.
Section 1(3)(e), however, does not deal with what might possibly have happened or what future risk there may possibly be.
It speaks in terms of what has happened or what is at risk of happening.
Thus, what the court must do (when the matter is in issue) is to decide whether the evidence establishes harm or the risk of harm.
In agreeing with this approach in Re B, at para 56, Lady Hale commented that in such a case, as indicated by Butler Sloss LJ , the risk is not an actual risk to the child but a risk that the judge has got it wrong.
We are all fallible human beings, very capable of getting things wrong.
But until it has been shown that we have, it has not been shown that the child is in fact at any risk at all.
Re M and R was also approved by Lord Nicholls in Re O and another (Minors) (Care: Preliminary Hearing) [2003] UKHL 18, [2004] 1 AC 523, a case to which we shall return.
The House in Re B also recognised that courts and local authorities have different roles to play in protecting children from harm.
It is worth re emphasising this, given the understandable concerns in the wake of the Baby P case that social workers and other professionals were not being sufficiently active in their protective role, and the resulting increase in the numbers of care proceedings.
Social workers are the detectives.
They amass a great deal of information about a child and his family.
They assess risk factors.
They devise plans.
They put the evidence which they have assembled before a court and ask for an order.
Article 6 of the European Convention on Human Rights requires that In the determination of his civil rights and obligations, . everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.
The court subjects the evidence of the local authority to critical scrutiny, finds what the facts are, makes predictions based upon the facts, and balances a range of considerations in deciding what will be best for the child.
We should no more expect every case which a local authority brings to court to result in an order than we should expect every prosecution brought by the CPS to result in a conviction.
The standard of proof may be different, but the roles of the social workers and the prosecutors are similar.
They bring to court those cases where there is a good case to answer.
It is for the court to decide whether the case is made out.
If every child protection case were to result in an order, it would mean either that local authorities were not bringing enough cases to court or that the courts were not subjecting those cases to a sufficiently rigorous scrutiny.
The whodunit problem
So far the position is plain.
But the threshold criteria do not in terms require that the person whose parental responsibility for the child is to be interfered with or even taken away by the order be responsible for the harm which the child has suffered or is likely to suffer in the future.
It requires simply that the harm, or likelihood of harm, is attributable to the care given to the child, or likely to be given to him if the order were not made, not being what it would be reasonable to expect a parent to give to him.
Clearly, the object is to limit intervention to certain kinds of harm harm which should not happen if a child is being looked after properly.
But is it also intended to limit intervention to cases where the person whose rights are to be interfered with bears some responsibility for the harm?
It cannot have been intended that a parent whose child has been harmed as a result of a lack of proper care in a hospital or at school should be at risk of losing her child.
The problem could be approached through the welfare test, because removal from home would not be in the best interests of such a child.
However, because of the risk of social engineering, the threshold criteria were meant to screen out those cases where the family should not be put at any risk of intervention.
Hence attention has focussed on the attributability criterion.
In the case confusingly reported in the Law Reports as Lancashire County Council v B [2000] 2 AC 147, but in the All England Law Reports as Lancashire County Council v A [2000] 2 All ER 97, the House of Lords considered what is meant by the care given to the child.
Does it mean only the care given by the parents or primary carers or does it mean the care given by anyone who plays a part in the childs care? Lord Nicholls, with whom Lord Slynn, Lord Nolan and Lord Hoffmann agreed, found that it referred primarily to the former.
But if, as in that case, the care of the child was shared between two households and the judge could not decide which was responsible for the harm suffered by the child, the phrase is apt to embrace not merely the care given by the parents or other primary carers; it is apt to embrace the care given by any of the carers (p 166).
Thus the criteria were satisfied in respect of a child, A, who had been injured, even though this might have been attributable to the care she had received from her childminder rather than from her parents.
Lord Clyde put the test in this helpful way, at p 169C, with the same result: That the harm must be attributable to the care given to the child requires that the harm must be attributable to the acts or omissions of someone who has the care of the child and the acts or omissions must occur in the course of the exercise of that care.
To have the care of a child comprises more than being in a position where a duty of care towards the child may exist.
It involves the undertaking of the task of looking after the child.
However, it is worth noting that the Court of Appeal had confirmed that the criteria were not satisfied in respect of the childminders child, B, because he had not been harmed at all.
The only basis for suggesting that there was any likelihood of harm to him was the possibility that his mother had harmed the other child and that had not been proved: Re H applied.
The local authority did not appeal against this.
Re O and another (Minors)(Care: Preliminary Hearing) [2003] UKHL 18, [2004] 1 AC 523 was concerned with the more common problem, where the child has been harmed at the hands of one of his parents but the court cannot decide which.
The attributability condition was satisfied.
Furthermore, when considering the welfare test, the court had to proceed on the basis that the child was at risk.
Lord Nicholls, with whom all other members of the Committee agreed, said this, at para 27: Quite simply, it would be grotesque if such a case had to proceed at the welfare stage on the footing that, because neither parent, considered individually, has been proved to be the perpetrator, therefore the child is not at risk from either of them.
This would be grotesque because it would mean the court would proceed on the footing that neither parent represents a risk even though one or other of them was the perpetrator of the harm in question.
Lord Nicholls went on, at para 32, to give the following guidance, on the assumption that the hearing would be split into a fact finding and a disposal stage and that each might be heard by a different judge: the . the judge at the disposal hearing will take into account any views expressed by the judge at the preliminary hearing on the likelihood that one carer was or was not the perpetrator, or a perpetrator, of injuries.
Depending on the inflicted circumstances, these views may be of considerable value in deciding the outcome of the application: for instance, whether the child should be rehabilitated with his mother.
In Re B, Lady Hale commented as follows at para 61: The decisions in In re H, Lancashire County Council v B [2000] 2 AC 147, and In re O [2004] 1 AC 523 fit together as a coherent whole.
The court must first be satisfied that the harm or likelihood of harm exists.
Once that is established, . ,the court has to decide what outcome will be best for the child.
It is very much easier to decide upon a solution if the relative responsibility of the childs carers for the harm which she or another child has suffered can also be established.
But the court cannot shut its eyes to the undoubted harm which has been suffered simply because it does not know who was responsible.
The real answers to the dilemma posed by those
cases lie elsewhere first, in a proper approach to the standard of
proof, and second, in ensuring that the same judge hears the whole case.
Split hearings are one thing; split judging is quite another.
We are told that practice has now changed and that, barring accidents, the same judge does conduct both parts of a split hearing.
Nevertheless, the main object of splitting the hearing is to enable facts to be found.
If the threshold is not crossed, the case can be dismissed at that stage.
If it is crossed, the professionals can base both their assessments and their further work with the family upon the facts found.
It is not at all uncommon for parents to become much more open with the professionals when faced with the judges clear findings based upon what the evidence shows.
Hence there should always be a judgment to explain his findings at that stage.
These proceedings
It was necessary to give the above account of the development of the law in order to understand what happened in these proceedings.
The case was originally identified as suitable for a split hearing; then it was decided to hold a composite hearing; but for regrettable practical reasons, the hearing was split once more.
By that stage, the father was playing no part, but for some unknown reason the local authority decided not to issue a witness summons to require his attendance.
That is regrettable because the judge might well have found it easier to make clear findings had he given evidence.
The mother played a full part in the proceedings and in the assessments, but only accepted that the bruises were non accidentally caused after the possibility of a blood disorder had effectively been ruled out.
The judge heard evidence over three days in January 2008 and three further days in March.
She handed down a detailed judgment in note form on 3 April.
This was before the House of Lords decision in Re B.
At the outset, under the heading Test, she directed herself as follows: The test I have applied in relation to these findings is that set out in the House of Lords case of [Re H] of 1996.
The standard of proof I apply is on the balance of probability.
The allegations in this case are very serious indeed and in many respects are also very unusual.
When I apply the appropriate standard of proof, it has to be based on evidence of reliability and cogency equivalent to the gravity of the allegations.
She then listed five questions, three of which are relevant to the issue before this Court: first, whether the child had suffered non accidental injury; second whether the perpetrator could be identified; and third even if the perpetrator cannot be identified, can either of the parents be excluded as a perpetrator? However, having concluded that the injuries were non accidental, she did not in terms ask herself whether she could identify the perpetrator.
She simply listed the various factors which she took into account in relation to each parent.
She indicated at the outset of her list relating to the father that there is a high index of suspicion in relation to the father and concluded that he could not be ruled out.
There was no such index in relation to the mother but for a variety of reasons the judge also concluded that the mother could not be ruled out.
The final hearing was listed for 5 June but could not proceed.
As suggested in Re O, the judge was invited to give an indication of the relative likelihood of father or mother being responsible for the injuries, in order to assist with the assessment process.
In oral exchanges she indicated that it was more likely that the father was the perpetrator than the mother.
In a written Adjunct to Judgment she explained that Invidious though it is to be too specific, but to help further assessments, I am prepared to say that I feel it 60% likely that the father injured the child and 40% likely that it was the mother.
The final hearing eventually took place before the same judge in December 2008 with judgment in January 2009.
Part of the reason for the delay was that the mother had been unwell following the birth of her second child, William, in July.
At the final hearing, the judge was invited to revisit her findings in the light of Re B, in which judgment was given on 11 June 2008.
She declined to say that her finding meant that the father was the perpetrator of the injuries.
She observed that: When one is deciding these issues, a judge frequently reluctantly comes to the conclusion that he cannot decide who is to blame between two parents or among more than two people who have had care of the child over the relevant period.
However, although unable to form a definitive decision to the requisite standard, a judge can still have an impression, falling short of a finding, that the propensity of the parties and the surrounding circumstances make it more likely that it was one party than another.
Hence the mother was not absolved as a really possible or likely perpetrator.
This meant that the threshold was crossed, not only in relation to the child who had suffered harm, but also in relation to the child who had not.
The fact that there was a real possibility that she had caused the injuries to Jason meant that there was a real possibility that she would injure William.
After considering the welfare factors she concluded that the mothers vulnerable personality was such that she would need therapy in order to make the necessary changes so that she could provide a safe and stable upbringing for the children.
Their lives could not be put on hold in the meantime.
Hence the judge approved the care plan to place them both for adoption and made care and placement orders in respect of both children.
She did, however, give the mother permission to appeal but this was not included in the original order drawn up by the court.
Lord Justice Wall also gave permission to appeal, observing that the case provides a useful opportunity for the Court of Appeal to resolve a point which has arisen following the decision of the House of Lords in Re B, namely (1) if only parents are in the frame for having injured a child but (2) the judge cannot as between parents identify the perpetrator of the injuries, can that judge (3) apportion likely responsibility between them? Before the Court of Appeal, however, this was not the main issue.
It was argued that, following Re B, the test for identifying the perpetrator was the balance of probabilities and that the effect of the Adjunct to judgment was that this judge had in fact identified the father.
The appeal was dismissed: [2009] EWCA Civ 1048.
Identifying the perpetrator: the standard of proof
The first question listed in the statement of facts and issues is whether it is now settled law that the test to be applied to the identification of perpetrators is the balance of probabilities.
The parties are agreed that it is and they are right.
It is correct, as the Court of Appeal observed, that Re B was not directly concerned with the identification of perpetrators but with whether the child had been harmed.
However, the observations of Lord Hoffmann and Lady Hale, quoted at paragraph 12 above, make it clear that the same approach is to be applied to the identification of perpetrators as to any other factual issue in the case.
This issue shows quite clearly that there is no necessary connection between the seriousness of an allegation and the improbability that it has taken place.
The test is the balance of probabilities, nothing more and nothing less.
Of course, it may be difficult for the judge to decide, even on the balance of probabilities, who has caused the harm to the child.
There is no obligation to do so.
As we have already seen, unlike a finding of harm, it is not a necessary ingredient of the threshold criteria.
As Lord Justice Wall put it in Re D (Care Proceedings: Preliminary Hearings) [2009] EWCA Civ 472, [2009] 2 FLR 668, at para 12, judges should not strain to identify the perpetrator as a result of the decision in Re B: If an individual perpetrator can be properly identified on the balance of probabilities, then . it is the judges duty to identify him or her.
But the judge should not start from the premise that it will only be in an exceptional case that it will not be possible to make such an identification.
There are particular benefits in making such a finding in this context, especially where there is a split hearing.
Miss Frances Judd QC, on behalf of the childrens guardian in this case, has stressed that the guardian would rather have a finding on the balance of probabilities than no finding at all.
There are many reasons for this.
The main reason is that it will promote clarity in identifying the future risks to the child and the strategies necessary to protect him from them.
For example, a different care plan may be indicated if there is a risk that the parent in question will ill treat or abuse the child from the plan that may be indicated if there is a risk that she will be vulnerable to relationships with men who may ill treat or abuse the child.
Another important reason is that it will enable the professionals to work with the parent and other members of the family on the basis of the judges findings.
As the Court of Appeal said in Re K (Non Accidental Injuries: Perpetrator: New Evidence) [2004] EWCA Civ 1181, [2005] 1 FLR 285, at para 55: It is paradigmatic of such cases that the perpetrator denies responsibility and that those close to or emotionally engaged with the perpetrator likewise deny any knowledge of how the injuries occurred.
Any process, which encourages or facilitates frankness, is, accordingly, in our view, to be welcomed in principle.
Often, it is not only the parents, but the grandparents and other members of the family, who may be the best resource to protect the child in the future but who are understandably reluctant to accept that someone close to them could be responsible for injuring a child.
Once that fact is brought home to them by a clear finding based upon the evidence, they may be able to work with the professionals to keep the child within the family.
Re K also suggested, at para 56, that there would be long term benefits for the child, whatever the outcome of the proceedings: . we are also of the view that it is in the public interest that children have the right, as they grow into adulthood, to know the truth about who injured them when they were children, and why.
Children who are removed from their parents as a result of non accidental injuries have in due course to come to terms with the fact that one or both of their parents injured them.
This is a heavy burden for any child to bear.
In principle, children need to know the truth if the truth can be ascertained.
If the judge cannot identify a perpetrator?
The second and third questions in the statement of facts and issues ask whether judges should refrain from seeking to identify perpetrators at all if they are unable to do so on the civil standard and whether they should now be discouraged from expressing a view on the comparative likelihood as between possible perpetrators.
These appear to be linked but they are distinct.
As to the second, if the judge cannot identify a perpetrator or perpetrators, it is still important to identify the pool of possible perpetrators.
Sometimes this will be necessary in order to fulfil the attributability criterion.
If the harm has been caused by someone outside the home or family, for example at school or in hospital or by a stranger, then it is not attributable to the parental care unless it would have been reasonable to expect a parent to have prevented it.
Sometimes it will desirable for the same reasons as those given above.
It will help to identify the real risks to the child and the steps needed to protect him.
It will help the professionals in working with the family.
And it will be of value to the child in the long run.
In North Yorkshire County Council v SA [2003] EWCA Civ 839, [2003] 2 FLR 849, the child had suffered non accidental injury on two occasions.
Four people had looked after the child during the relevant time for the more recent injury and a large number of people might have been responsible for the older injury.
The Court of Appeal held that the judge had been wrong to apply a no possibility test when identifying the pool of possible perpetrators.
This was far too wide.
Dame Elizabeth Butler Sloss P, at para 26, preferred a test of a likelihood or real possibility.
Miss Susan Grocott QC, for the local authority, has suggested that this is where confusion has crept in, because in Re H this test was adopted in relation to the prediction of the likelihood of future harm for the purpose of the threshold criteria.
It was not intended as a test for identification of possible perpetrators.
That may be so, but there are real advantages in adopting this approach.
The cases are littered with references to a finding of exculpation or to ruling out a particular person as responsible for the harm suffered.
This is, as the President indicated, to set the bar far too high.
It suggests that parents and other carers are expected to prove their innocence beyond reasonable doubt.
If the evidence is not such as to establish responsibility on the balance of probabilities it should nevertheless be such as to establish whether there is a real possibility that a particular person was involved.
When looking at how best to protect the child and provide for his future, the judge will have to consider the strength of that possibility as part of the overall circumstances of the case.
As to the third question, times have changed since Re O.
Barring unforeseen accidents, the same judge will preside over both parts of the hearing.
While it is helpful to have a finding as to who caused the injuries if such a finding can be made, the guardians view is that it is positively unhelpful to have the sort of indication of percentages that the judge was invited to give in this case.
Lord Justice Thorpe suggested, [2009] EWCA Civ 1048, para 17, that judges should be cautious about amplifying a judgment in which they have been unable to identify a perpetrator: better to leave it thus.
We agree.
The unasked question
If the judge can identify a perpetrator on the balance of probabilities, what is to be done about the risk that he may be wrong and that some one else was in fact responsible? We are indeed all fallible human beings.
We can make mistakes, however hard we try to pay careful attention to the quality of the evidence before us and reach findings which are rationally based upon it.
However, once the court has identified a perpetrator, the risk is not a proven risk to the child but a risk that the judge has got it wrong.
Logically and sensibly, although the judge cannot discount that risk while continuing to hear the case, he cannot use it to conclude that there is a proven risk to the child.
But all the evidence (if accepted by the judge) relating to all the risk factors that the judge has identified remains relevant in deciding what will be best for the child.
And he must remain alive to the possibility of mistake and be prepared to think again if evidence emerges which casts new light on the evidence which led to the earlier findings.
It is now well settled that a judge in care proceedings is entitled to revisit an earlier identification of the perpetrator if fresh evidence warrants this (and this Court saw an example of this in the recent case of Re I (A Child) [2009] UKSC 10).
The guardian also submits that the professionals will find it easier to work with this approach.
It is important not to exaggerate the extent of the problem.
It only really arises in split hearings, which were not originally envisaged when the Children Act was passed.
In a single hearing the judge will know what findings of fact have to be made to support his conclusions both as to the threshold and as to the future welfare of the child.
Moreover, cases rarely come as neatly packaged as this one does.
In most cases, the injuries are such that, even if one parent was not responsible for causing them, she was undoubtedly responsible for failing to protect the child from the person who did cause them.
In many cases, there are other risks to the child besides the risk of physical injury.
The evidence which is relevant to identifying the perpetrator will also be relevant to identifying the other risks to the child and to assessing what will be best for him in the future.
But clearly the steps needed to protect against some risks will be different from the steps needed to protect against others.
And the overall calculus of what will be best for the child in the future will be affected by the nature and extent of the identified risks.
There are many, many factors bearing upon the childs best interests and the identification of risks is only one of them.
The conclusion in this case
We have every sympathy for the judge, who was only repeating the mantra which many other judges at every level had repeated in the past.
But it is clear that she did misdirect herself on the standard of proof at the fact finding hearing.
Because she later said that she had simply been unable to decide, we do not think that we can accept the invitation of Mr Anthony Hayden QC, on behalf of the mother, to treat her Adjunct to judgment as a finding that the father was the perpetrator.
That was not what she thought she was doing.
However, that was an ex post facto rationalisation on her part.
We cannot know what finding she would have made had she directed herself correctly in the first place.
It is only right, for the sake of these children and their mother, that they should have the whole case put before a different judge who can decide the matter on the right basis.
There is a further reason to remit the case.
The judge found the threshold crossed in relation to William on the basis that there was a real possibility that the mother had injured Jason.
That, as already explained, is not a permissible approach to a finding of likelihood of future harm.
It was established in Re H and confirmed in Re O, that a prediction of future harm has to be based upon findings of actual fact made on the balance of probabilities.
It is only once those facts have been found that the degree of likelihood of future events becomes the real possibility test adopted in Re H. It might have been open to the judge to find the threshold crossed in relation to William on a different basis, but she did not do so.
The case may look very different now that the mothers life has moved on and in the mean time, thankfully, the children have been well protected from harm.
The appeal is therefore allowed and the case remitted for a complete rehearing before a different judge.
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The case concerns the proper approach to deciding who has been responsible for harming a child in proceedings taken to protect that child, and others in the family, from harm and the consequences of such a decision.
At a fact finding hearing, the judge decided that either the mother or the father had injured their baby boy.
He had therefore suffered significant harm attributable to a lack of reasonable parental care, as required by section 31(2) of the Children Act 1989.
The judge did not ask herself which parent was responsible, although she expressed the view that it was 60% likely that the father had injured the child and 40% likely that the mother had.
The mother and father were separated and the father played no part in the proceedings.
At the later welfare hearing, the judge approved the placement of the child for adoption, together with his younger brother, who had been born during the proceedings and placed with foster parents soon after birth.
The mother, who had maintained contact and developed a good relationship with the children, appealed.
The Supreme Court unanimously allows the appeal and remits the case for a complete rehearing before a different judge.
The judgment of the Court was given by Lady Hale. [48] [50]
It is now settled law that the standard of proof in care proceedings is the balance of probabilities, as set out in Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 and confirmed in Re B (Children) (Care Proceedings: Standard of Proof) [2008] UKHL 35, [2009] AC 11. [8] [13] It is clear from the observations of Lord Hoffman and Lady Hale in Re B that the same approach is to be applied to the identification of perpetrators as to any other factual issue in the case.
It was incorrect to apply a heightened standard consistent with the gravity of the allegations. [34] There is no obligation for a judge to decide who has caused the harm to the child, as long as that harm is attributable to someone having care of the child, although he should do so if the evidence warrants this.
In a split hearing, there may be particular benefits of making such a finding, mainly because it will promote clarity in identifying the future risks to the child and the strategies necessary to protect him from them. [35] [38] Where a specific perpetrator cannot be identified, a judge should still, where possible, identify a pool of possible perpetrators.
The test for doing so is the likelihood or real possibility that a particular person was involved.
A person does not have to prove their innocence to be left out of account[40] [43] Where a judge has been unable to identify a perpetrator, it is positively unhelpful to have the sort of indication of percentages that the judge gave in this case. [44] If the judge is able to identify a perpetrator on the balance of probabilities, all the evidence accepted by the judge which is relevant to identifying the risks to the child remains relevant to deciding where his
best interests will lie.
The court must also be alive to the possibility that the finding who the perpetrator was is wrong and be prepared to revise it in the light of later evidence. [46] [47] In the circumstances of this case the judge had misdirected herself on the standard of proof in the fact finding hearing.
In those circumstances the case ought to be remitted in whole to a different judge who can decide the matter on the right basis. [48] The decision to remove the second child, who had never been harmed, must also be remitted for rehearing.
The judge had held that there was a risk of future harm to him because there was a real possibility that the mother had injured the older child.
It was held in Re H that this is not the correct approach: predictions of future harm must be based on proven findings of fact. [49]
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This appeal concerns the proper interpretation and effect of section 4(1) of the Explosive Substances Act 1883 (section 4(1) and the 1883 Act, respectively).
This provides in material part as follows: Any person who makes or knowingly has in his possession or under his control any explosive substance, under such circumstances as to give rise to a reasonable suspicion that he is not making it or does not have it in his possession or under his control for a lawful object, shall, unless he can show that he made it or had it in his possession or under his control for a
lawful object, be guilty of an offence
As originally enacted, section 4(1) provided that a person convicted of this offence was liable to penal servitude for a term not exceeding 14 years, or to imprisonment for a term not exceeding two years with or without hard labour.
Currently, the maximum sentence is imprisonment for life.
The Court of Appeal certified the following point of law of general public importance: for the purposes of section 4(1) can personal experimentation or own private education, absent some ulterior unlawful purpose, be regarded as a lawful object?
Factual background and the proceedings below
The appellant is aged 22 and has no convictions.
He was diagnosed with Autism Spectrum Disorder as a child.
In April 2018 he was living in a terraced house in Coventry with his mother.
The appellant had been purchasing quantities of chemicals online.
His explanation for this is that he had from a young age developed an obsessive interest in things military.
He became interested in bomb disposal after watching the film The Hurt Locker about a US bomb disposal unit in Iraq and wanted to understand how explosives worked and to experiment with them.
On 24 April 2018 a search warrant was executed at the house.
The chemicals the appellant had purchased were found in a garden shed which he used as a laboratory.
The appellant had managed to make a small quantity, of the order of about 10 grams or less, of Hexamethylene Triperoxide Diamine (HMTD) from Hydrogen Peroxide, Hexamine and Citric Acid.
HMTD is a sensitive primary high explosive that can easily be detonated.
According to the Statement of Facts and Issues for the appeal, such a small amount of HMTD potentially carries a risk of insubstantial injury or damage.
It should also be noted that the appellant might only have used part of this quantity at any one time when experimenting with it.
The HMTD was found in the form of a powdery substance in a petri dish in the shed and in another in the appellants bedroom.
Material found in the appellants bedroom and on his computer included manuals for making explosives, notes on the making of HMTD and a video downloaded to his mobile telephone of a demonstration of the making of HMTD.
Over the previous months the appellant had made explosive substances with other chemicals on about six or seven occasions.
By means of homemade initiators made from fairy lights filled with firework powder or by means of a mobile telephone signal, he had detonated or attempted to detonate these substances in his back garden and had made a video record of this on his mobile telephone.
According to his explanation, his plan was to conduct similar experiments with the HMTD he had made.
The appellant was interviewed by the police over many days.
He admitted his actions and gave the explanations referred to above.
He was charged with a number of offences, including six counts of having possession of information likely to be useful for an act of terrorism contrary to section 58 of the Terrorism Act 2000.
The two relevant charges on the indictment for present purposes are in identical terms, as counts 1 and 2, as follows: STATEMENT OF OFFENCE MAKING OR POSSESSION OF EXPLOSIVE UNDER SUSPICIOUS CIRCUMSTANCES, contrary to section 4(1) of the Explosive Substances Act 1883 PARTICULARS OF OFFENCE CHEZ COPELAND on 24 day of April 2018 knowingly had in his possession or under his control a certain explosive substance, namely [HMTD], in such circumstances as to give rise to a reasonable suspicion that he had not made it for a lawful object.
As this court pointed out at the hearing, and as counsel on both sides agreed, this charge is in defective form.
It elides the two limbs of section 4(1), ie (1) making any explosive substance under circumstances giving rise to a reasonable suspicion that the defendant is not making it for a lawful object and (2) knowingly having in his possession or control any explosive substance under circumstances giving rise to a reasonable suspicion that he does not have it in his possession or control for a lawful object.
Mr Louis Mably QC, for the Crown, gave an undertaking to amend the charge so as to replace the words after reasonable suspicion with the phrase that he did not have it in his possession or under his control for a lawful object.
Mr Paul Bogan QC, for the appellant, accepted that this amendment would not cause any prejudice to the appellant and said it would not be resisted.
On the particular facts of this case, the alteration makes no material difference, since the appellants defence would be the same whether he was charged under limb (1) or limb (2), namely that he had both made the HMTD and had it in his possession with a view to experimentation and self education regarding its manufacture and properties, by conducting detonations with it in the garden of his home.
The appeal therefore proceeded on the basis that the indictment could be taken to refer to limb (2) of the offence.
The appellants defence statement in relation to counts 1 and 2 on the indictment was as follows: It is the defence case that: 1.
The circumstances do not give rise to the reasonable suspicion that the defendant had not made [the HMTD] for a lawful object; and 2.
The defendant made it for a lawful object.
The defendant has a longstanding obsession with the armed forces and has collected military paraphernalia over many years.
More recently, and inspired by the film The Hurt Locker, he has been interested in explosives.
In pursuit of this interest he has researched manuals and recipes on the internet.
He sought to understand how explosives could be made and acquired certain chemicals to do so.
He experimented with the chemicals and caused small explosions to be made in the back garden of his home.
His own ambition to join the armed forces has been thwarted by a diagnosis of Autism Spectrum Disorder when aged around 14 years.
He had regularly engaged in role play, dressing and purporting to behave as a member of the armed forces.
The condition of Autism Spectrum Disorder has manifested itself in interests and hobbies becoming obsessional and, in the context of explosives, an obsessional need to understand how explosives work.
By way of an addendum, in the appellants written submissions at first instance it was asserted that, For the avoidance of doubt the defendants object or objects encompass interest, education and experimentation.
On 23 October 2018 a preparatory hearing took place before His Honour Judge Wall QC in the Crown Court at Birmingham, at which it was agreed that he should determine, among other things, whether the potential defence to counts 1 and 2 on the indictment could amount to a defence in law.
The judge ruled that the appellants proposed defence that he made the HMTD and had it in his possession for a lawful object, being experimentation and self education, was not good in law, holding that he was bound to reach that conclusion by the decision of the Court of Appeal in R v Riding [2009] EWCA Crim 892.
This ruling meant that the judge proposed that he would direct the jury accordingly and would exclude evidence and prevent submissions directed to trying to support that part of the defence case.
The appellant appealed to the Court of Appeal, Criminal Division (Sir Brian Leveson P, Elisabeth Laing and Whipple JJ).
The appeal was dismissed: [2019] EWCA 36 (Crim).
Like Judge Wall QC, the Court of Appeal considered that it was bound by R v Riding to reach the conclusion that the appellants proposed defence under section 4(1) was bad in law.
The court certified the point of law set out above at para 3.
The statutory context
The Offences Against the Person Act 1861 (the 1861 Act) consolidated various enactments in England and Ireland relating to offences against the person, including the offences of destroying or damaging a building with gunpowder or other explosive substance, with intent to murder (section 12, now repealed), unlawfully and maliciously causing bodily injury by gunpowder or other explosive substance (section 28), unlawfully and maliciously causing gunpowder or other explosive substance to explode etc, with intent to do grievous bodily harm to some person (section 29), placing gunpowder or other explosive substance near a building etc, with intent to do bodily injury to any person (section 30) and making or having possession of gunpowder or any explosive substance etc, with intent by means thereof to commit any of the felonies set out in the Act (section 64).
In parallel with these primary provisions of the criminal law, the Explosive Substances Act 1875 (the 1875 Act) amended the previous regulatory regime in relation to such substances.
Although the Act uses the term gunpowder in its operative provisions, by virtue of section 3 this term also covers other explosive substances.
Section 4 provided that gunpowder should not be manufactured except at a lawfully existing factory or one licensed under the Act, [p]rovided that nothing in this section shall apply to the making of a small quantity of gunpowder for the purpose of chemical experiment and not for practical use or sale.
Section 5 provided that gunpowder should only be kept at certain approved places including places licensed under the Act, subject to a proviso that it should not apply to (among others) a person keeping for his private use and not for sale gunpowder to an amount not exceeding on the same premises 30 pounds.
Thus, the 1875 Act recognised that possession of small quantities (or, in the case of section 5, a comparatively large quantity) of explosive substances for private use for experimentation or otherwise could be legitimate and would not require regulation.
In fact, there is a long and well established tradition of individuals pursuing self education via private experimentation in a range of fields, including with chemicals and explosives.
The 1875 Act acknowledged and made allowance for such practices.
The penalties for breach of the regulatory provisions in the 1875 Act were at a much lower level than the penalties in respect of the primary criminal provisions in the 1861 Act and the 1883 Act, underlining the distinction between those primary criminal provisions and the regulatory offences.
The 1883 Act was a measure passed by Parliament at great speed as a reaction to fears of Irish nationalist terrorism, and in light of a concern that the offences in the 1861 Act did not provide sufficient protection for the public.
The 1883 Act created the new offences of unlawfully and maliciously causing an explosion likely to endanger life (section 2); acting unlawfully and maliciously with intent to cause an explosion likely to endanger life or cause serious injury to property (section 3(a)); unlawfully and maliciously making any explosive substance or having it in possession or under control with intent to endanger life or cause serious injury to property (section 3(b)); and the offence in section 4(1).
The 1883 Act applies to Scotland: section 9.
Section 9(1) provides a very wide definition of explosive substance: The expression explosive substance shall be deemed to include any materials for making any explosive substance; also any apparatus, machine, implement, or materials used, or intended to be used, or adapted for causing, or aiding in causing, any explosion in or with any explosive substance; also any part of any such apparatus, machine or implement.
In relation to the offence in section 4(1), section 4(2) provided that the
accused and their spouse should be competent to give evidence for the defence (this at a time when according to the ordinary law the accused and their spouse could not give evidence).
Parliament considered that, for the accused to have a fair and effective opportunity of availing himself of the defence in section 4(1) of showing that he had made the explosive substance or had in in his possession or under his control for a lawful object, he and his spouse should have the opportunity of giving evidence about that at trial.
The regulatory regime in relation to explosives is now contained primarily in the Explosives Regulations 2014 (the Regulations).
The Explanatory Memorandum published with the Regulations and Guidance in relation to the Regulations issued by the Health and Safety Executive in 2014 make it clear that it continues to be expected that private individuals may manufacture explosives and have them in their possession for their own private use.
The Explanatory Memorandum referred at para 7.1 to the explosives sector being fragmented and diverse, ranging from the storage and manufacture of large amounts of highly energetic and flammable material to individual hobbyists.
See also the section of the Explosive Regulations 2014 Safety Provisions Guidance at para 9: Duty holders such as employers, private individuals and other people manufacturing explosives, storing larger quantities of explosives or storing explosives that present higher hazards or greater risks of initiation should use the relevant subsector guidance to supplement the guidance in this document.
And para 13: Explosives for work, personal and recreational use [The Regulations apply] to explosives operations 13. whether they are for work or non work purposes.
They therefore apply to anyone storing explosives for personal recreational use, or to voluntary clubs or societies storing explosives (examples include storage for firework displays, bonfire processions or re enactment events).
Authorities
In R v Fegan (1984) 78 Cr App R 189, a decision of 1971, the Court of Criminal Appeal in Northern Ireland considered the meaning and effect of section 4(1).
Lord MacDermott CJ, delivering the judgment of the court, explained that section 4(1) illustrates a means of meeting a legislative problem, of how to curb a grave evil which postulates a guilty mind or mental element on the part of offenders, when proof of that guilty mind or mental element is likely to be a matter of inherent difficulty (p 191).
In other words, section 4(1) was enacted because Parliament was not satisfied that the existing offences in the 1861 Act and the other offences created by the 1883 Act, involving as they did the need to prove a specific mental element, were sufficient fully to meet the risk posed by the making or possession of explosives.
As Lord MacDermott CJ explained (p 191): Section 4(1) of the Act of 1883 may be said to proceed by way of compromise.
It does not make it an offence to possess explosive substances for an unlawful purpose, nor does it create an absolute offence by prohibiting the mere possession of explosive substances.
Instead, its two limbs provide for a dual enquiry (1) Was the person charged knowingly in possession under such circumstances as to give rise to a reasonable suspicion that his possession was not for a lawful object? and (2) if the answer to (1) is in the affirmative, has the person charged shown that his possession was for a lawful object? If the answer to (1) is in the affirmative and the answer to (2) in the negative a conviction follows; otherwise there must be an acquittal.
The first limb allows for a conviction on reasonable suspicion.
The second allows what may be very much a subjective defence, with the accused and his or her spouse permitted by section 4(2) (as an exception to the then existing law) to give evidence on oath as ordinary witnesses. (Emphasis in original)
The appellant in Fegan was a young Roman Catholic man married to a Protestant woman, who by reason of his religion was subjected to threats of serious violence in the Protestant area in which he lived and told to move out of the district.
The appellant acquired a pistol and live ammunition, maintaining that he did so to protect himself and his family.
He was charged with a number of offences and was convicted at trial on three counts: possession of the pistol without holding a firearm certificate; possession of the ammunition without holding a firearm certificate; and possession of explosive substances (the pistol and the ammunition) under such circumstances as to give rise to a reasonable suspicion that he did not have them in his possession for a lawful object, contrary to section 4(1).
He appealed against his conviction on the section 4(1) count.
His appeal was allowed.
The Court of Appeal found that the jury had clearly been entitled to find that limb (1) of the offence had been made out by the prosecution, but there had been a misdirection because the trial judge had not properly directed them regarding the possibility of a defence under limb (2), in relation to which there was evidence on which the jury could have found for the appellant.
The court made it clear that a person may have a lawful object for the purposes of section 4(1) even though his possession of the explosive substances in question is in breach of regulatory offences (p 194): A, for example, borrows a shot gun to shoot birds despoiling his orchard.
He has no certificate or other authority for possessing the gun and his possession is unlawful.
To say that his object cannot be lawful is to confuse possession and purpose A firearm in lawful possession may undoubtedly be possessed for an unlawful object and there seems to be no good reason why the converse should not be true.
The court also explained that the words possession for a lawful object in limb (2) should be construed as meaning possession for a lawful object and no other: The defence cannot have been meant to exonerate the possessor of a firearm for a lawful object if his possession was also for an unlawful object.
Again, as a matter of construction, a defence under the second limb of section 4(1) cannot be made by the possessor proving that he had no unlawful object.
The onus resting on him is specific and positive.
He has to show possession for a lawful object. (p 194) Finally, the court gave guidance regarding the limits of the concept of lawful object in a case where self defence is relied upon as the relevant object: Possession of a firearm for the purpose of protecting the possessor or his wife or family from acts of violence may be possession for a lawful object.
But the lawfulness of such a purpose cannot be founded on a mere fancy, or on some aggressive motive.
The threatened danger must be reasonably and genuinely anticipated, must appear reasonably imminent, and must be of a nature which could not reasonably be met by more pacific means.
A lawful object in this particular field therefore falls within a strictly limited category and cannot be such as to justify going beyond what the law may allow in meeting the situation of danger which the possessor of the firearm reasonably and genuinely apprehends.
One does not, for example, possess a firearm for a lawful object if the true purpose is merely to stop threats or insults or the like. (p 194)
Accordingly, possession with the general object of using the items for self defence should the need arise was capable of being possession for a lawful object for the purposes of limb (2) of section 4(1).
This was so, even though the availability of a defence of self defence, should the pistol ever be used by the appellant, would depend upon the particular circumstances in which it was so used, including consideration whether use of it was a proportionate reaction to the specific threat experienced at the time and whether there were other means of avoiding that threat.
No one could know in advance whether those conditions would be satisfied or not.
There was no challenge to the correctness of any part of this reasoning.
Fegan was followed by the Criminal Division of the Court of Appeal of England and Wales (Lord Lane CJ, McCowan and Leggatt JJ) in Attorney Generals Reference (No 2 of 1983) [1984] QB 456.
The accused, whose property had been attacked and damaged by rioters, and fearing that it would be attacked again, made some petrol bombs, which he intended to use purely to repulse raiders from his property.
A prosecution submission that self defence could not constitute a defence to an offence under section 4(1) was dismissed by the trial judge, and the jury acquitted the accused.
The Attorney General referred for the courts opinion the question whether self defence could be a defence to an offence under that provision.
The court endorsed the reasoning in Fegans case and held that self defence could constitute a lawful object for the purposes of section 4(1).
It noted that, as was common ground, the accused had committed offences contrary to provisions of the 1875 Act by making and possessing explosive substances.
However, the court held that a person in danger may arm himself for his own protection, if the exigency arises, although in so doing he may commit other offences (p 471).
The court said, In our judgment, approaching a priori the words lawful object it might well seem open to a defendant to say, My lawful object is self defence.
The fact that in manufacturing and storing the petrol bombs the respondent committed offences under the Act of 1875 did not necessarily involve that when he made them his object in doing so was not lawful The object or purpose or end for which the petrol bombs were made was not itself rendered unlawful by the fact that it could not be fulfilled except by unlawful means.
The fact that the commission of other offences was unavoidable did not result in any of them becoming one of the respondents objects. (p 470)
The court answered the point of law referred to it by saying that the defence under limb (2) of section 4(1) is available if the accused can satisfy the jury on the balance of probabilities that his object was to protect himself or his family or his property against imminent apprehended attack and to do so by means which he believed were no more than reasonably necessary to meet the force used by the attackers (p 471).
The court so concluded, even though the question whether the defence of self defence would eventually be available if the accused happened to make use of the petrol bombs would depend upon the particular circumstances in which they were used.
Thus, as in Fegans case, the courts ruling was based on the idea of self defence as a general object of the accused, even though a defence of self defence might not in fact be made out if the accused ever came to be charged with offences arising from actual use of the petrol bombs.
In R v Riding [2009] EWCA Crim 892; 2009 WL 1096 171, the Criminal Division of the Court of Appeal of England and Wales (Hughes LJ, King J and Judge Radford) again considered section 4(1).
The appellant made a pipe bomb and kept it at his home.
He was convicted of the offence of making an explosive substance, contrary to section 4(1).
He appealed against his conviction on grounds which included that the trial judge was wrong to hold that it could not be a lawful object to make the pipe bomb that he did out of no more than curiosity to see whether he could do it.
The contention of the appellant was that for the purposes of section 4(1) a lawful object is the absence of any object which is criminal (para 8).
The Court of Appeal rejected that submission.
It rightly held that section 4(1) provides that if a person is found in possession of or has made an explosive substance in circumstances in which there is a reasonable suspicion that there is no lawful object, it is an offence unless there was in fact some affirmative object which was lawful (para 10); lawful object in limb (2) of section 4(1) does not mean the absence of criminal purpose, but rather requires the accused to identify a positive object which is lawful (para 12).
The court followed what Lord MacDermott CJ said about this in Fegans case: the onus resting on the accused is specific but positive.
He has to show possession for a lawful object (para 12, quoting from the passage set out above).
Discussion
In my view, the structure of section 4(1) is clear.
If, under limb (1), the
prosecution proves circumstances as to give rise to reasonable suspicion that the making or possession/control of an explosive substance which is in issue is not for a lawful object, that gives rise to a specific onus on the accused under limb (2) to identify the specific object or purpose for which he made the substance or had it in his possession/control.
The burden of proof at the limb (2) stage is on the accused, and the standard of proof is the balance of probabilities.
The object or purpose so identified by the accused under limb (2) has to be lawful in the place in which it is to be carried into effect: see R v Berry [1985] AC 246.
In the present case, that was in England and lawful has the usual sense of that term in English law, namely that the object in question is not an object or purpose which is made unlawful by the common law or statute.
As it was put by Sir Robert Megarry V C in Malone v Metropolitan Police Comr [1979] Ch 344, 357: England is not a country where everything is forbidden except what is expressly permitted: it is a country where everything is permitted except what is expressly forbidden.
There is no other sensible criterion of lawfulness to be applied.
Nothing said in any of the authorities referred to above suggests otherwise.
Moreover, the general requirement that the criminal law should be clear and give fair notice to an individual of the boundaries of what he may do without attracting criminal liability supports this interpretation: a person should not be penalised except under clear law, sometimes called the principle against doubtful penalisation: see Bennion on Statutory Interpretation, 7th ed (2019) (D Bailey and L Norbury, eds), section 27.1.
As explained in Fegans case and Attorney Generals Reference (No 2 of 1983), the fact that the making or possession of the substance may involve the commission of regulatory offences does not prevent an accused who seeks to make out a defence under limb (2) of section 4(1) from relying on an object at a more general level which is lawful.
If an accused does identify a specific object for which he made the substance or had it in his possession/control, which is lawful in the requisite sense, issue will be joined on that at trial.
The prosecution may seek to show that this was not in fact his object, or that it was not his sole object and that his object, as correctly understood, included an unlawful element.
For example, as indicated in Fegans case, if the accused had not been put in fear of a reasonably imminent risk of serious physical harm such as might be capable of providing a justification for use of the pistol, there would not be a sufficient connection between his possession of the pistol and any use of it in his reasonable contemplation which could be lawful.
In my view, it would also be open to the prosecution to meet the defence under limb (2) by seeking to show that pursuit of the object specified by the accused, although the object might be lawful in a general sense, would involve such obvious risk to other people or their property from use of the explosive substance that the inference should be drawn that the object of the accused was mixed, and not wholly lawful in the sense indicated in Fegans case.
If the accused knew that his proposed use of the explosive substance in his possession would injure others or cause damage to their property or was reckless regarding the risk of this, the ostensibly lawful object identified by him would be tainted by the unlawfulness inherent in his pursuit of that object.
Typically, these would be matters to be explored at trial.
In Ridings case at para 12 the Court of Appeal, having approved and adopted what had been said by Lord MacDermott CJ, continued by saying Mere curiosity simply could not be a lawful object in the making of a lethal pipe bomb and observed that the appellant did not have a lawful object for making the bomb.
The court therefore dismissed the appellants appeal against conviction in relation to the section 4(1) offence.
This conclusion was correct on the facts of the case.
The trial judge and the Court of Appeal explained that there was no need for the appellant to use an explosive substance to satisfy his curiosity whether he could successfully construct a pipe bomb: instead of filling it with gunpowder, he could have used an inert substance such as sand, which would equally have demonstrated whether or not he was capable of constructing it (para 3).
He had constructed the pipe bomb in the spring of 2006, a considerable time before it was found in his possession, and had not attempted to detonate it (para 3).
It was not part of his case that he had made the pipe bomb in order to see if he could make it explode.
The courts statement that [m]ere curiosity simply could not be a lawful object in the making of a lethal pipe bomb has to be read in this context.
Unfortunately, however, that statement was taken as having wider significance by Judge Wall QC and the Court of Appeal in the judgments below in the present case.
The critical part of the reasoning of the Court of Appeal is at paras 42 and 43: 42.
In summary, we conclude that Riding was not decided per incuriam the various cases relied on by the applicant.
The outcome in Riding would have been the same, even if the court had been shown those cases.
In any event, we agree with Riding.
We accept that a person in possession of explosives must show, on balance of probabilities, that he or she has an affirmative or positive object for possessing those explosives.
We reject the proposition that an absence of unlawful purpose is the same thing as a lawful purpose.
We conclude that on a proper interpretation, section 4 requires that the defence is only made out when the person in possession of the explosives can show that the way in which those explosives will be used is itself lawful.
That means, the person must be able to show both, first, the use to which the explosives will be put and second, that such a use is lawful. 43.
We come then to the applicants case that he possessed these explosives out of curiosity, or because he wished to experiment with them.
Consistent with Riding, we reject the proposition that curiosity or experimentation is a lawful object.
The fact that a person is curious or wishes to experiment may be an explanation for why that person has accumulated the explosives; but it says nothing about his continued possession of them and the use to which they will be put.
Indeed, it would be perfectly possible, if unattractive, to argue that explosives were detonated, with potential loss to life and limb, out of mere curiosity or in order to experiment.
These are not objects in and of themselves; they are not uses to which explosives may be put; they are just explanations for past actions.
With respect, I consider that the court fell into error in its reasoning in the latter part of para 42 and in para 43.
Experimentation and self education, including to satisfy ones curiosity in relation to the subject of investigation, are lawful objects.
As a matter of ordinary language, they are objects every bit as much as self defence is an object.
That is true as a general proposition.
It is particularly true in relation to section 4(1), enacted against the background of the 1875 Act, which in sections 4 and 5 recognised the lawfulness and legitimacy of individuals making or possessing quantities of explosives for the purposes of private experimentation and other private use.
In the first part of para 42, the Court of Appeal rehearsed the analysis correctly set out in Ridings case.
But in the latter part of para 42, the court set the bar to be cleared by an accused under limb (2) of section 4(1) rather too high, when it said that he must show that the way in which [the explosives in his possession] will be used is itself lawful.
In my judgment, the accused does not have to identify precisely how the explosives will be used in future and that this will be lawful.
To require that would be inconsistent with Fegans case and Attorney Generals Reference (No 2 of 1983), in which it was held that the accused only had to identify a relatively general object for which the explosive substances were to be used, which object was lawful (ie self defence), and that it was in the reasonable contemplation of the accused that the explosive substances might be required for that purpose and could lawfully be used for that purpose.
As noted above, the defendants in those cases could not demonstrate precisely how the substances might come to be used; nor could it be guaranteed that if and when they were used, such use would necessarily be lawful.
In my view, in para 43 the Court of Appeal erred by treating the statement in Ridings case that [m]ere curiosity simply could not be a lawful object in the making of a lethal pipe bomb as, in effect, a proposition of law rather than a statement regarding the position on the facts in that case; and in rejecting the idea that experimentation or self education can be objects for the purposes of section 4(1).
In my judgment, they clearly can be objects for the purposes of that provision, as a matter of the ordinary use of language.
The word object is synonymous with purpose, and similarly has a relatively general meaning.
The object or purpose for which something is done is distinct from the precise conditions under which it might be done.
Moreover, Parliament must have contemplated that that is how an accused or their spouse, speaking naturally when giving evidence pursuant to section 4(2) of the 1883 Act, would be likely to express themselves when giving an explanation in the witness box of the kind which it considered they should have the opportunity to present by way of defence under limb (2) of section 4(1).
In line with the approach in Attorney Generals Reference (No 2 of 1983), the word object is to be given its natural meaning as a matter of ordinary language.
In Berrys case, Lord Roskill, in giving the only substantive speech in the appellate committee, emphasised that the term object as used in section 4(1) is an ordinary English word, and accordingly was to be given its ordinary meaning so that unlawful object is synonymous with an unlawful purpose or an unlawful intent ([1985] AC 246, 254).
There is nothing unlawful about experimentation and self education as objects, in themselves, so they are capable of being lawful objects within the meaning of section 4(1).
Further examples can be given to illustrate the intended meaning of lawful object in section 4(1): see para 40 below.
In the penultimate sentence of para 43 of its judgment the Court of Appeal called attention to a case of mixed objects.
In my view, contrary to that of the Court of Appeal, the example given does not show that experimentation cannot be an object for the purposes of section 4(1).
Rather it provides an illustration that, as contemplated in Fegans case, in a case of mixed objects where one of the objects is unlawful or in a case where unlawfulness taints the potentially lawful object on which the accused seeks to rely in his defence, the defence under limb (2) will fail.
Whether that is so in a particular case will usually be a matter to be determined on the evidence at trial.
Mr Mably sought to supplement the reasoning of the Court of Appeal.
He submitted that Judge Wall QC was right at the preparatory hearing to disallow presentation by the appellant at trial of his proposed defence under limb (2) of section 4(1) by reference to the objects of experimentation and self education, because in his defence statement he had not given a detailed account of how he proposed to use the HMTD such as would demonstrate that his detonation of it in his back garden would not cause harm to other people or damage to their property.
I do not accept that submission.
Section 4(1) has general application.
It can apply in the case of a teacher in the chemistry department of a school or university, or a person in a commercial research laboratory, who makes explosive substances or has them in his possession.
If a charge were brought against such a person under section 4(1) and the prosecution was able to surmount the relatively low hurdle in limb (1) of the provision, the accused would be entitled to defend himself under limb (2) by proving that his object in making or keeping the substances was experimentation, education or research.
It is apt to describe each of those as an object, as a matter of ordinary use of language.
It might be the case that the accused had no developed and precise plan in mind as to how he proposed using the substance for those purposes, but that would not disable him from presenting a defence under limb (2).
The absence of a precise plan as to how the substance was to be used in the course of pursuing those purposes might be a relevant matter to be taken into account at trial.
But it would be for the jury to assess, on the evidence at trial, whether the defence was made out despite the absence of precise details as to proposed use.
That view is supported by the approach taken to the lawful object of self defence in Fegans case and Attorney Generals Reference (No 2 of 1983), as explained above.
For his defence under limb (2), the appellant only had to establish that he proposed using the HMTD in his possession for the lawful objects of experimentation and self education.
The term lawful object in limb (2) does not require specification of the precise way in which the substance in question will be used by the accused.
The appellants proposed defence was that he intended to use the HMTD in small amounts to produce insignificant detonations of the order to be expected from a simple domestic firework, ie at a level which was lawful.
It was possible that he could have achieved this, or that he genuinely believed that he could, as he had done using other explosive substances on previous occasions.
Therefore his defence under limb (2) should have been allowed to be presented at trial, rather than being ruled out at the preliminary hearing.
In parts of his submissions, Mr Mably appeared to be taking what amounted
to a pleading point.
He said that the appellants defence statement did not give sufficient details of how he proposed using the HMTD in his experiments.
As I understood the submission, this point was made by Mr Mably in support of his general argument regarding the meaning of lawful object in section 4(1), which I have addressed above.
However, to the extent that he was seeking to make a different point, as a distinct complaint about a want of particularity in the defence statement, that is not within the scope of the issues which arise on this appeal.
In any event, in my view the defence statement gave fair notice to the prosecution of the defence which the appellant proposed to present at trial, in accordance with the requirements of section 6A of the Criminal Procedure and Investigations Act 1996.
Conclusion
For the reasons given above, I would allow the appeal.
I would answer the question certified by the Court of Appeal in the affirmative.
LORD LLOYD JONES AND LORD HAMBLEN: (dissenting)
We regret that we are unable to agree with the decision of the majority.
Counts 1 and 2 of the indictment charge the appellant with the offence of making or possession of an explosive under suspicious circumstances contrary to section 4(1) of the Explosive Substances Act 1883.
During the course of argument before this court, a defect in the drafting of the particulars of offence having been identified, the parties agreed that we should approach this appeal on the basis that the particulars of the offence on each count allege that the appellant knowingly had in his possession or under his control an explosive substance in such circumstances as to give rise to a reasonable suspicion that it was not in his possession for a lawful object.
Mr Mably QC for the respondent told us that an application will be made to the Crown Court to amend the particulars of offence in each count accordingly.
Mr Bogan QC for the appellant was also content that we should proceed on the basis of the defence statement as presently drafted because it would still reflect the substance of the defence.
We will do so and we will limit our discussion to the offence committed in cases of possession.
The scheme of the offence created by section 4(1) is that the prosecution is required to prove that the defendant was in possession of an explosive in circumstances giving rise to a reasonable suspicion that the defendant did not have the explosive in his possession for a lawful object.
If that is established, it is for the defendant to prove that he had it in his possession for an object which was lawful.
In the present case the Court of Appeal noted (at para 37) that a reasonable suspicion is enough for the offence to be made out and continued: This accords with common sense, because possessing or controlling explosives is dangerous (see Riding at para 10) and so it is understandable that the criminal law should be engaged in cases of reasonable suspicion, it not necessarily being possible for the prosecution to establish the precise object.
The obvious purpose of the statute is to protect human life and property from harm by explosions.
In the present case, each count alleges the possession by the appellant of HMTD, a sensitive primary high explosive that can easily be detonated from a spark, friction or impact and which has no commercial applications.
The respondent contends that the circumstances give rise to a reasonable suspicion that he did not possess it for a lawful object.
The appellant contends that he can rely on the statutory defence under section 4(1) as he can show that he had it in his possession for a lawful object.
In particular, he maintains that, he was in possession as a result of an obsessional interest in the armed forces and a need to understand how explosives work and that his object or objects encompassed interest, education and experimentation.
This is summarised in the certified question which asks: For the purposes of section 4(1) of the Explosive Substances Act 1883 can personal experimentation or own private education, absent some ulterior unlawful purpose, be regarded as a lawful object?
Whether the appellants possession of HMTD may have been, quite independently of section 4(1), unlawful, for example under the Explosives Regulations 2014, is irrelevant for present purposes.
A person in possession of an explosive in suspicious circumstances does not commit an offence contrary to section 4(1) if he can show on the balance of probabilities that he was in possession for a lawful object.
The defence may be available even if the possession is otherwise unlawful.
In R v Fegan (1971) 78 Cr App R 189, Court of Appeal of Northern Ireland, Lord MacDermott CJ accepted as correct a concession that a firearm held without certificate, permit or other authority might be possessed for a lawful object for the purposes of section 4(1).
The Lord Chief Justice observed (at p 194): A firearm in lawful possession may undoubtedly be possessed for an unlawful object and there seems no good reason why the converse should not be equally true.
The defence turns on the defendants object in having the explosive in his possession.
It would be insufficient, in order to make out a defence under section 4(1),
for a defendant to establish that he was not in possession of an explosive for a purpose which was unlawful.
He must show that he was in possession for a lawful purpose.
That is the natural meaning of the words in the statute and it was the interpretation adopted by the Court of Appeal of Northern Ireland in Fegan where Lord MacDermott observed, at p 194: as a matter of construction, a defence under the second limb of section 4(1) cannot be made by the possessor proving that he had no unlawful object.
The onus resting on him is specific but positive.
He has to show possession for a lawful object.
Similarly, in R v Riding [2009] EWCA Crim 892 the Court of Appeal Criminal Division held that lawful object does not mean the absence of a criminal purpose.
It is necessary to identify a positive object which is lawful.
Hughes LJ referred in this regard to Attorney Generals Reference (No 2 of 1983) [1984] QB 456, where the defendant had made petrol bombs.
The Court of Appeal in that case had been prepared to accept that self defence against rioters was capable of amounting to a lawful object, at least if the defendant could demonstrate that that was his sole object and that the means adopted were no more than he believed to be reasonably necessary.
However, as Hughes LJ observed in Riding (at para 12), It is plain that the court took the view that the defendant could only be within the defence if the necessary immediacy of danger and reasonableness of the response was present.
There was no question of the possession of the petrol bombs being lawful unless some criminal purpose for them existed.
In the present case it has been made clear on behalf of the appellant, both in the defence statement and in the appellants written case, that it was never his case that the mere absence of an unlawful object could suffice to establish the statutory defence.
Indeed, Mr Bogan on behalf of the appellant has accepted that a generic and unspecified plea or a passive plea of having no unlawful object could not succeed as it would rob the tribunal of the ability to make findings as to what was the true object and whether it was lawful or unlawful.
Against this background, the central issue in this appeal is whether the explanation provided in the defence statement ie that the appellant had explosives in his possession for the purpose of personal experimentation or private education, is capable of being a sufficient lawful object within section 4(1).
The trial judge and the Court of Appeal held that it was not.
We agree with them.
The statutory defence requires proof, on the balance of probabilities, of both (1) the object of the possession of the explosive substance and (2) that that object is lawful.
The natural meaning of the word object is a reason for doing something, or the result you wish to achieve by doing it (Cambridge English Dictionary).
It involves identification of what you wish to do and why.
We agree with the Court of Appeal (at para 42) that in the present context that means showing the use to which the explosives will be put.
It also necessarily involves identifying that use with sufficient particularity to show that the use may be lawful.
In our view, to say that something is done for ones own private education is not a sufficient object for the purposes of the section 4(1) defence, as it does not identify the use to which the explosives will be put in order to provide such education.
Similarly, personal experimentation is not a sufficient object for this purpose as, although it identifies in very general terms what is to be done with the explosives, it does not identify any purpose for so doing.
This accords with the decision of the Court of Appeal in Riding.
There, the defendant had made a pipe bomb which he kept in his home.
He was convicted of making an explosive substance contrary to section 4(1).
He appealed on the ground that the trial judge had been wrong to hold that it could not be a lawful object that, as he claimed, he made the pipe bomb out of no more than curiosity to see whether he could do it.
Dismissing the appeal, Hughes LJ observed (at para 12): Mere curiosity simply could not be a lawful object in the making of a lethal pipe bomb.
It would indeed be very remarkable indeed if it could. [Counsel for the appellant] was frank enough to accept that if the statute had used the words good reason instead of lawful object the defendant could not have established that he had good reason for making the bomb.
We are entirely satisfied that he did not have a lawful object for it either.
Furthermore, as the Court of Appeal pointed out in the present case (at para 42), the defence is only made out when the person in possession of the explosives can show that the way in which those explosives was intended to be used is itself lawful.
It is not enough to show that it may be lawful.
Even if it were accepted that personal experimentation for the purpose of ones own private education may be an object, this does not describe with any particularity how the experimentation is to be carried out in a manner which is lawful.
At the defence statement stage, it is necessary to identify a use which could be found to be lawful.
This requires, at the very least, some details to be provided of the nature of the proposed experimentation or use.
In this case, for example, it was apparently envisaged that experimentation would take the form of detonations of the explosives in the appellants back garden. (It is the prosecution case that over the months prior to his arrest the appellant had made explosive substances with other chemicals on approximately six or seven occasions, had detonated or had attempted to detonate those explosive substances in his back garden by means either of homemade initiators made from fairy lights filled with firework powder or by means of a mobile telephone, and had made video recordings of these detonations or attempted detonations on his mobile telephone.) Such detonations involve an obvious risk of causing injury and damage to property and causing a public nuisance.
For such experimentation to be capable of being lawful it would be necessary to particularise how it was to be carried out so as to avoid any such risk or how it would otherwise be lawful.
Defence statements are meant to set out particulars of the matters of fact intended to be relied upon for the purposes of a defence (section 6A of the Criminal Procedure and Investigations Act 1996).
We consider that the vague and generalised statements referring to personal experimentation and private education, whether considered individually or taken together, fail to provide sufficient particularity of how these claimed objects were to be carried out lawfully.
The self defence cases, Fegan and Attorney Generals Reference (No 2 of 1983), referred to above are distinguishable.
In those cases what was accepted as capable of constituting a lawful object was use for purposes of self defence in circumstances where the necessary immediacy of danger and reasonableness of the response were present (see Riding per Hughes LJ at para 12, cited above).
In Fegan and in Attorney Generals Reference (No 2 of 1983) the claimed object was intended use to meet a future contingency which use could be sufficiently defined by reference to the limits of lawful self defence.
That necessarily involved the assertion that the explosive substances would only be used in circumstances where the defendant believed that it was necessary to use force and that the amount of force used was reasonable.
In the present case, by contrast, no lawful use of the explosives within the statutory provision is identified.
Reliance on personal experimentation and own private education gives no sufficient indication of the use to which it was intended the explosives should be put, nor does it permit any assessment of its lawfulness.
For these reasons we consider that the judge was correct in his conclusion that the explanation set out in the defence statement was not capable of amounting to a lawful object within section 4(1).
We would answer the certified point of law as follows: For the purposes of section 4(1) of the Explosive Substances Act 1883, personal experimentation or own private education, absent some ulterior unlawful purpose, cannot be regarded as a lawful object.
We would accordingly dismiss the appeal.
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The appellant is 22 years old and, prior to these proceedings, had no convictions.
He was diagnosed with Autism Spectrum Disorder as a child and, in 2018, he was living with his mother.
He began purchasing quantities of chemicals online.
According to his account, this was because he had an obsessive interest in military matters, including bomb disposal.
He claimed that he had acquired the chemicals because he wished to understand how explosives worked and to experiment with them.
A search warrant was executed at the appellants home on 24 April 2018, where it was found that he had managed to make a small quantity (about 10 grams or less) of a sensitive primary explosive, Hexamethylene Triperoxide Diamine (HMTD).
He also possessed manuals for making explosives, notes on making HMTD and a video on his mobile phone demonstrating the making of HMTD.
When interviewed by the police, the appellant admitted his actions in acquiring chemicals and making explosives, and gave the explanation above.
He was subsequently charged with certain offences, including two counts under section 4(1) of the Explosive Substances Act 1883 (1883 Act).
As clarified in the course of the appeal, these counts are that the appellant knowingly had HMTD in his possession or under his control, in such circumstances as to give rise to a reasonable suspicion that he did not possess or control it for a lawful object.
There is a defence if the accused can show that in fact he had the explosive substance in his possession or control for a lawful object which he identifies.
In his defence statement, the appellant maintained that he had made the HMTD for a lawful object, namely interest, education and experimentation.
The appellant said that he had made other explosives and used them to create small explosions in the garden of his house without causing harm, and he intended to do the same with the HMTD.
At a preparatory hearing in the Crown Court at Birmingham, HH Judge Wall QC held that he was bound by Court of Appeal authority, R v Riding [2009] EWCA Crim 892, to find that experimentation and self education did not amount to a lawful object for the purpose of section 4(1).
Accordingly, the judge ruled in advance of trial that the appellants proposed defence was bad in law.
The appellant appealed unsuccessfully to the Court of Appeal, who considered themselves similarly bound.
The court certified the following point of law of general public importance: for the purposes of section 4(1) of the 1883 Act, can personal experimentation or own private education, absent some ulterior unlawful purpose, be regarded as a lawful object?
By a majority, the Supreme Court allows the appeal.
Lord Sales gives the majority judgment, with which Lord Reed and Lord Carnwath agree.
Lord Lloyd Jones and Lord Hamblen deliver a joint dissenting judgment.
The majority examines the 1883 Act in light of other amendments to the criminal law around the same time, namely the Offences Against the Person Act 1861 (1861 Act) and the regulatory Explosive Substances Act 1875 (the 1875 Act) [14 15].
The 1883 Act was passed by Parliament with great speed due to fears around Irish nationalism and a perception that the 1861 Act, in particular, did not provide sufficiently for protection of the public [16].
The current regulatory regime is now primarily contained in the Explosives Regulations 2014, which like the 1875 Act before them, make clear that it is expected that private individuals, including hobbyists, may manufacture and keep explosives for their own private use [18].
In R v Fegan (1984) 78 Cr App R 189, the Court of Criminal Appeal in Northern Ireland explained that section 4(1) had been passed to address perceived deficiencies in other offences.
These required proof of a specific mental element, and so were inadequate to guard against the risk of making or possessing explosives.
The appellant, Fegan, acquired a firearm and ammunition (which qualified as explosive substances for the purpose of the 1883 Act) to protect himself and his family from threats against their safety and was convicted of an offence under section 4(1) of the 1883 Act.
His appeal was successful, on the basis that although he had no licence for the possession of the firearm and ammunition, nonetheless he possessed them for a lawful purpose, i.e. to defend himself and his family [19 22].
Fegan was followed on similar facts in Attorney Generals Riding, the Criminal Division of the Court of Appeal of England and Wales held that in the particular circumstances of that case, curiosity did not qualify as a lawful object for the possession of a home made pipe bomb [26].
Under section 4(1), it is for a defendant to prove on the balance of probabilities that he had possession or control of an explosive substance for a lawful object.
In English law, a purpose is lawful unless it is made unlawful by statute or the common law.
A lawful object may, however, be tainted by an ulterior, unlawful purpose, including by knowledge or recklessness of a risk of injury or damage; but these would be matters to be explored on the evidence at trial [27 29].
The decision in Riding was correct on its facts, because the defence of the accused in that case was that he acted out of curiosity to see if he could construct a pipe bomb but he did not need to use real explosives for that; and it was no part of his defence that he had wanted to experiment by making it explode.
The decision does not provide an answer in the different circumstances of the present case and was misinterpreted in the courts below.
Experimentation and self education are objects within the ordinary meaning of that term and are capable of being lawful objects for the purposes of section 4(1).
This view is reinforced by the background against which section 4(1) was enacted, including the 1875 Act, under which possession of explosive substances for private experimentation and use was regarded as lawful and legitimate [30 33], [35].
The Court of Appeal was wrong to conclude that the appellant was obliged to specify more precisely than he had done how the explosives would be used and that this would be lawful.
The Court of Appeals reasoning was inconsistent with the Fegan and Attorney Generals was lawful [34].
As there is nothing unlawful about experimentation and self education as objects in themselves, they are capable of being lawful objects [37].
There is no requirement in law that a defence statement in relation to a charge under section 4(1) has to give a more detailed account of the proposed use of the explosive substance than that provided by the appellant [39].
The appellant ought to have been permitted to present his defence at trial [41], [43].
Lord Lloyd Jones and Lord Hamblen dissent from the majoritys reasoning and would dismiss the appeal.
They take the view, in common with the courts below, that personal experimentation and private education cannot in law amount to lawful objects within the meaning of section 4(1) [51].
The word object refers to the reason for doing something, or the result you wish to achieve by doing it.
As such, the Court of Appeal was correct to hold that, to make out the defence, a defendant is required to show the use to which the explosive substance is to be put, and to do so with sufficient particularity to demonstrate that that use is lawful [52]. education and personal experimentation is not enough, as the Court of Appeal previously held in Riding [54].
The defence is only made out if it is shown that the way in which the explosives were intended to be used is lawful.
It is not enough to show that it may be lawful.
A defence statement in response to a charge under section 4(1) should elaborate upon this and provide some details of the intended use.
In the present case the
appellant envisaged that experimentation would take the form of detonations of the explosives in his back garden, carrying an obvious risk of causing injury, damage to property, and a public nuisance.
It was necessary to particularise how this would be carried out so as to avoid any such risk or would otherwise be lawful.
Vague and general statements referring to personal experimentation or private education were insufficient and did not show how that was to be carried out lawfully [55].
Finally, Fegan and Attorney Generals was plausibly raised in each.
In contrast, in the present case no lawful use is identified, and the claimed objects neither give sufficient indication of the use to which the explosives are to be put, nor do they permit assessment of the lawfulness of any such use [56].
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The issue in this case is whether the Secretary of State for Work and Pensions can continue to recoup Social Fund loans and benefit overpayments by deduction from current benefit payments during the moratorium period after the making of a Debt Relief Order (DRO) under Part 7A of the Insolvency Act 1986.
The present state of the law is untidy, to say the least.
Cranston J in the High Court and a majority of the Court of Appeal (Smith and Toulson LJJ) have held in this case that the Secretary of State cannot continue to make these deductions: [2010] EWHC 2162 (Admin), [2010] BPIR 1389 and [2010] EWCA Civ 1431, [2011] 1 WLR 1723.
But Keene J in the High Court has held that such deductions can continue to be made between the making of a bankruptcy order and the bankrupts discharge from bankruptcy: R v Secretary of State for Social Security, Ex p Taylor and Chapman [1997] BPIR 505.
The House of Lords has reached the same conclusion in the context of the rather different Scottish bankruptcy law: Mulvey v Secretary of State for Social Security 1997 SC (HL) 105.
Once a bankrupt is discharged, however, the Court of Appeal has held that the liability to repay the Secretary of State is also discharged: R (Balding) v Secretary of State for Work and Pensions [2007] EWCA Civ 1327, [2008] 1 WLR 564.
The Secretary of State would like to introduce coherence into the scheme in two ways: firstly by assimilating the position during the moratorium after a DRO with the position after a bankruptcy order; and secondly by reversing Balding, so that the debt can continue to be recouped after a bankrupts discharge.
Ideally, the same would apply at the end of the DRO moratorium period.
The claimants, on the other hand, would ideally introduce coherence by holding that the Secretary of States deduction power does not survive the making either of a DRO or of a bankruptcy order.
Balding was correctly decided and the same principle applies at the end of the moratorium period.
The facts
The facts of the two test cases before us are typical of many.
Mrs Payne was made a Social Fund loan of 843 in September 2007 in order to replace her washing machine and cooker.
The Secretary of State did not start to recover this by deduction from her benefits at that stage.
But in August 2009, she obtained a DRO listing the loan among her qualifying debts.
When she informed the Secretary of State of this, he began deducting 23.59 per week from her income support, although this was reduced in December to 11.64 per week.
These proceedings for judicial review of the legality of the deductions were begun in March 2010.
In August 2010, the one year moratorium period came to an end and the debt was discharged.
Ms Cooper is in receipt of incapacity benefit and disability living allowance.
In August 2009, the Secretary of State determined that she had been overpaid incapacity benefit in the sum of 1,195.07 and in December 2009 he began recovering this from her by deducting 128.44 from her benefits every four weeks.
In January 2010, Ms Cooper obtained a DRO which listed the overpayment as one of her qualifying debts.
In March 2010, she too began proceedings to challenge the continued deductions from her benefits.
In January 2011, the one year moratorium ended and the debt was discharged.
The power to deduct
The Secretary of State is entitled to recover benefits which have been overpaid because of misrepresentation or non disclosure: Social Security Administration Act 1992 (SSAA), section 71(1).
Before he can do so, the erroneous award of benefit must have been reversed or varied on appeal, or revised or superseded by a fresh award under section 9 or 10 of the Social Security Act 1998: SSAA, section 71(5A).
Amounts recoverable under section 71(1) may, without prejudice to any other method of recovery, be recovered by deduction from prescribed benefits: SSAA, section 71(8).
All kinds of benefits, whether contributory or non contributory, income related or payable irrespective of means, are prescribed: see Social Security (Payments on account, Overpayments and Recovery) Regulations 1988, SI 1988/664, reg 15.
However, not only is this without prejudice to any other method of recovery, but it is also expressly provided that overpayments can be recovered by execution issued from the county court as if they were payable under an order of that court (and equivalent provision is made for Scotland): SSAA, section 71(10).
Section 71 is also applied with modifications to overpayments from the Social Fund: SSAA, section 71ZA.
In the same way, if a Social Fund award is recoverable that is, a loan then Without prejudice to any other method of recovery, the Secretary of State may recover an award by deduction from prescribed benefits: SSAA, section 78(2).
Equivalent provision is made for the recovery of any amount of housing benefit paid in excess of entitlement: SSAA, section 75(4).
Her Majestys Revenue and Customs (HMRC) also have equivalent powers to recover overpayments of working tax credit and child tax credit by deduction from payments of any tax credit: Tax Credits Act 2002, section 29(4).
We are told that considerable sums of money owed to HMRC, the Secretary of State and other public bodies are listed in DROs.
The figures quoted to us were respectively nearly 9m to HMRC, nearly 8m to the Secretary of State, of which over 6m was in respect of Social Fund loans, and 20.7m to other public bodies.
Whether these include other debts as well as loans, overpaid benefits and tax credits was not clear.
Nor were we told how much has currently to be written off at the end of the moratorium period.
Debt Relief Orders
To put it shortly, debt relief orders (DROs) are a new and simplified way of wiping the slate clean for debtors who are too poor to go bankrupt.
As Toulson LJ explained in the Court of Appeal, they were the product of two consultation papers: the first was issued by the Department for Constitutional Affairs in 2004, entitled A Choice of Paths Better options to manage over indebtedness and multiple debt.
This proposed a new scheme for people with no income, no assets who were unable to pay their debts.
The second was issued by the Insolvency Service in 2005, entitled Relief for the Indebted An Alternative to Bankruptcy, and suggested criteria for such a scheme and how it was intended to operate.
The new scheme was introduced into the Insolvency Act by the Tribunals, Courts and Enforcement Act 2007 and came into force in February 2009.
Application is made, not to a court, but to the official receiver through a qualified intermediary (such as a specialist debt adviser): Insolvency Act (IA) 1986, section 251B.
The debtor must fulfil certain prescribed conditions: IA 1986, section 251C(5), Schedule 4ZA, Insolvency Rules (SI 1986/1925), Part 5A, and Insolvency Proceedings (Monetary Limits) Order 1986 (SI 1986/1996), as amended.
For example, her monthly surplus income must not exceed the prescribed amount, currently 50; the total value of her property (leaving out such things as clothes, furniture and household equipment, tools of the trade and a modest domestic motor vehicle) must not exceed the prescribed amount, currently 300; and her overall indebtedness must not exceed the prescribed amount (currently 15,000).
To avoid people repeatedly running up debts and having them wiped out by an order, it is not possible to get another DRO within six years.
The DRO is made in respect of qualifying debts.
A debt qualifies if it is for a liquidated sum payable either immediately or at some certain future time and is not excluded: IA 1986, section 251A(2).
It does not qualify to the extent that it is secured: IA 1986, section 251A(3).
Excluded debts are those which are prescribed in the Insolvency Rules 1986, rule 5A.2.
These include student loans but do not include Social Fund loans or overpaid benefits.
It is not suggested that the liability to repay these is not a debt for the purpose of section 251A.
The application has to list the debts to which the debtor is subject at the date of the application: section 251B(2)(a).
The official receiver can ask for further information from the debtor but does not at this stage give notice to the creditors.
When the order is made, it must list the debts which the official receiver is satisfied were qualifying debts at the application date: section 251E(3).
When the order is made, a moratorium commences on the effective date for a debt relief order in relation to each qualifying debt specified in the order: IA section 251G(1).
What does the moratorium mean? This is governed by section 251G(2): During the moratorium, the creditor to whom a specified qualifying debt is owed (a) has no remedy in respect of the debt, and (b) may not (i) commence a creditors petition in respect of the debt, or (ii) otherwise commence any action or other legal proceedings against the debtor for the debt, except with the permission of the court and on such terms as the court may impose.
During the moratorium period, the creditors may object to the making of the order, or the inclusion of a debt in the order, or the details of the debt specified in the order: IA 1986, section 251K.
The official receiver has power to revoke or amend the order: IA 1986, section 251L.
If the order continues throughout the moratorium period of one year (which may be extended in certain circumstances), the debtor is discharged from all the qualifying debts specified in the order: IA 1986, section 251I(1).
This does not apply to debts incurred as a result of fraud or if a court later revokes the DRO: IA 1986, section 251I(3), (5).
Otherwise the slate is wiped clean.
On the face of it, then, as Social Fund loans and benefit overpayments have not been excluded from the qualifying debts, the creditor has no remedy in respect of them during the moratorium period and they are discharged after it has run its course.
The issue, therefore, is whether recovery by deduction from benefits (or tax credits) is a remedy in respect of the debt for this purpose.
To understand the argument that it is not, it is necessary to turn to the authorities under the bankruptcy regime.
The authorities
They begin with Bradley Hole v Cusen [1953] 1 QB 300.
The creditor was a tenant of rent controlled premises who had been charged too much rent by his landlord.
Section 14(1) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920 provided that the overpaid rent was recoverable by the tenant and may, without prejudice to any other method of recovery, be deducted by the tenant . from any rent . payable by him to the landlord .
The landlord went bankrupt and the trustee in bankruptcy claimed to be entitled to the full amount of the recoverable rent since the bankruptcy from the tenant.
The trustee argued that the claim in respect of overpaid rent had been converted into a right to prove the debt in the bankruptcy any other method of recovery was barred by the predecessor to what is now section 285(3) of the Insolvency Act 1986: After the making of a bankruptcy order no person who is a creditor of the bankrupt in respect of a debt provable in the bankruptcy shall (a) have any remedy against the property or person of the bankrupt in respect of that debt, or (b) before the discharge of the bankrupt, commence any action or other legal proceedings against the bankrupt except with the leave of the court and on such terms as the court may impose.
The Court of Appeal rejected that argument.
The property passed to the trustee in the same plight and condition in which it was in the bankrupts hands and that included the right of the tenant to live there rent free until the overpaid rent had been recouped.
The tenants rights included the right to be considered as having paid rent in advance up to the amount of the excess.
The argument was repeated in R v Secretary of State for Social Security, Ex p Taylor and Chapman [1997] BPIR 505.
Like the respondents in this case, the applicants were respectively the recipient of a Social Fund loan and a claimant who had been overpaid benefit.
Both were declared bankrupt.
After that, the Secretary of State began to recover the loan and overpayment by deduction from their current benefits.
They argued that he was unable to do so because of section 285(3) of the Insolvency Act: the right of deduction was a remedy against the property or person of the bankrupt in respect of that debt.
Keene J took the view that Bradley Hole applied.
The tenant was not exercising a remedy against the property of the landlord but simply refraining from making a payment to which the pre existing debt would be a defence if he were sued.
Even if that were not so, the Secretary of State was not seeking to go against the property of the bankrupt.
Their entitlement was only to the net amount of benefit after deduction of the loan or overpayment and not to the full amount.
Taylor and Chapman was decided after the decision of the Inner House in the Scottish case of Mulvey v Secretary of State for Social Security 1996 SC 8 and before the decision of the House of Lords in that case 1997 SC(HL) 105.
Keene J saw considerable force in the approach of Lord Clyde, to the effect that the right to recover by deduction was but one element in the calculation of the benefit to which the claimant was entitled.
This approach has been characterised by the Secretary of State in this case as the net entitlement principle.
Mulvey was a case about loans from the Social Fund which were being repaid by deduction from the claimants income support when her estate was sequestrated under the Scottish bankruptcy laws.
The claimant argued that continuing to make the deductions amounted to an attempt to set off a pre sequestration debt against a post sequestration obligation, which was impermissible at common law.
So their Lordships were not concerned with the interpretation of a statutory provision such as section 285(3) of the IA 1986.
There appears to be no exact equivalent in the Bankruptcy (Scotland) Act 1985 and certainly none was discussed in either the Inner House or the House of Lords.
Section 37 of the 1985 Act limits the rights of creditors shortly before and after the sequestration, but not in the same sort of terms as sections 251G and 285(3) of the IA 1986.
Section 32(5) prohibits diligence against the debtor against the after sequestration income, which is preserved for her under section 32(1), in respect of debts from which she will be released when discharged from the bankruptcy.
In the House of Lords, Lord Jauncey remarked that By no stretch of the imagination could the respondents exercise of his statutory right be described as diligence for the purpose of the law of Scotland (1997 SC (HL) 105, at 109F).
Nor would it be right to apply the common law rule: The deductions made by the respondent were not, as in the normal case of compensation in bankruptcy, a result of the bankruptcy, but were made in pursuance of a statutory scheme which was already in operation at the time of sequestration and with which the permanent trustee can have no concern.
Prior to sequestration, the appellant had no right to receive by way of income support benefit more than her gross entitlement under deduction of such sum as had been notified to her by the respondent prior to payment of the award by the respondent.
This was the result of the statutory scheme and she could not have demanded more.
Mr Sheldon QC, for the Secretary of State, understandably places some weight on the net entitlement principle there enunciated by Lord Jauncey.
For completeness, although it is concerned with what happens at the end of the process, we should consider R (Balding) v Secretary of State for Work and Pensions [2007] EWHC 759 (Admin), [2007] 1 WLR 1805, [2008] EWCA Civ 1327, [2008] 1 WLR 564, decided in the Divisional Court after the House of Lords decision in Mulvey.
Section 281 of the IA 1986 provides that (with qualifications which have no bearing on the case) . where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts, .
The question, therefore, was whether the claimants liability to repay overpaid benefit was a bankruptcy debt.
Section 382(1)(a) defines this, inter alia, as any debt or liability to which he is subject at the commencement of the bankruptcy.
Section 382(3) gives a very wide meaning to debt or liability, it being immaterial whether it is present or future, certain or contingent, liquidated or unliquidated, or capable of being ascertained by fixed rules or as a matter of opinion (compare the definition of a qualifying debt for the purpose of the DRO scheme, at para 9 above).
Section 382(4), except in so far as the context otherwise requires, defines liability to mean a liability to pay money or moneys worth, including any liability under an enactment .
Not surprisingly, both the Divisional Court and the Court of Appeal held that the liability to repay was a bankruptcy debt.
In doing so, Davis J had this to say of the net entitlement argument (para 46): [Counsels] approach in any event seems to assume that the individual is only ever entitled to the net benefit after deduction.
But in my view that is not right.
That will no doubt be so if the Secretary of State has actually elected as he did in this case to recoup the overpaid benefit by deduction at source from subsequent prescribed benefits.
But the Secretary of State may in other cases decide to effect recovery by other means.
As I see it, the liability to repay cannot be said to be not a bankruptcy debt (as defined) if one form of recovery . is adopted but can be a bankruptcy debt if another form of recovery is adopted.
The liability arising under section 71 of the 1992 Act, upon determination made prior to bankruptcy, either is or is not on a subsequent bankruptcy a bankruptcy debt, as defined.
In my view, it is.
The Court of Appeal agreed for the same reasons.
It followed that the debt was wiped out when the bankrupt was discharged.
The argument
For the Secretary of State, Mr Sheldon does not argue that the liability to repay under SSAA section 71(1) and its equivalents is not a qualifying debt (that point would in any event have been better taken by challenging its inclusion in the list before the official receiver and then the court).
He argues that the right of recovery under SSAA section 71(8) is not a remedy in respect of the debt for the purpose of the moratorium in section 251G(2).
He argues for a coherent and harmonious approach to the construction of the bankruptcy and DRO schemes, which are to be found within the same legislation.
He points to a long list of similarities between the two regimes.
The statutory power of deduction is not a remedy but an adjustment to the level of benefit which the claimant is entitled to receive.
She is only ever entitled to the net sum.
The overpayment is to be regarded as payment in advance of future benefit.
Bradley Hole and Taylor and Chapman were rightly decided and Mulvey reaches the same result.
He also argues that Balding was wrongly decided.
Where the Secretary of State elects to recover by deduction, it is not a debt or liability to pay but an adjustment to the amount of benefit to which she is entitled because of the net entitlement principle.
Lord Jauncey left the point open in Mulvey at p 109E.
The broad definition of a liability in section 382(4) can be qualified because the policy imperatives mean that the context otherwise requires.
Mr Drabble QC, for the respondent claimants, challenges the so called net entitlement principle as a heresy.
Only if the overpayment is being recouped from current payment of the same benefit is it even possible to regard it as an advance payment of the current benefit.
But loans and overpayments can be recouped from a wide range of wholly unrelated benefits, which may have come into payment long after the liability was incurred, of which the loan or overpayment cannot possibly be regarded as a payment in advance.
The natural meaning of remedy clearly encompasses the power to deduct.
If need be, bankruptcy can be distinguished.
Firstly the wording of section 285(3) is different it refers to any remedy against the property or person of the bankrupt in respect of that debt.
Secondly, the purpose of the moratorium in the DRO scheme is different from the purpose of the period between order and discharge in bankruptcy.
In bankruptcy, the purpose is for the trustee to gather in all the assets of the bankrupt and distribute the proceeds equitably among the creditors.
In the DRO, there is no trustee, there are no assets to be distributed, and there is no potential dividend for the creditors.
The moratorium is simply there because the creditors have not had an opportunity to dispute the amount or the inclusion of their debt before the order is made and also because there may be other inquiries and challenges to the order.
It was these distinctions which persuaded the majority of the Court of Appeal to uphold the decision of Cranston J to distinguish the two.
Finally, Balding is clearly rightly decided.
The same liability cannot either be a debt or not be a debt according to the method of recovery chosen by the creditor from time to time.
Whether or not there is a prescribed benefit from which to deduct the liability, whether or not the Secretary of State chooses to make those deductions, the Secretary of State is always free to enforce the liability by other means.
If he does so, it is plainly a bankruptcy debt and will be wiped out when the bankruptcy is discharged.
The liability is also a qualifying debt for the DRO scheme and also wiped out when the moratorium has run its course.
Discussion
This Court is in the fortunate position of being able to adopt a coherent approach which it would have been difficult for the courts below to achieve.
In my view, there is no such thing as the so called net entitlement principle.
The claimant to any kind of social security benefit has a statutory entitlement to the amount of benefit which she is awarded by the Secretary of State or a tribunal.
The members of this Court are, for example, statutorily entitled to the state retirement pension should they choose to claim it.
Some claimants may have a prior liability to repay previously overpaid benefits, whether of the same or an entirely different kind, or they may have taken out a Social Fund loan which they are liable to repay.
By no stretch of the imagination does a Social Fund loan to buy a cooker amount to an advance payment of retirement pension to which the claimant later becomes entitled.
It could more plausibly be regarded as an advance payment of future income support.
But at the point when the loan is made and the liability to repay arises it cannot be known whether the claimant will continue to be reliant on income support.
She may get a job, marry a rich man, or win the lottery.
The liability to repay arises independently of her entitlement to any benefit from which the Secretary of State may later decide to recoup it.
In any ordinary use of language, the power to recover the debt by deduction from benefit is a remedy in respect of the debt.
Moreover, if self help remedies such as this were not included in the concept of a remedy, it is difficult to see why both section 251G(2)(b) and section 285(3)(b) specifically prohibit the use of court proceedings to enforce the debt.
They would be otiose if the only remedies contemplated by the prohibition of any remedy were court proceedings.
There is no sense in a scheme which prohibits recovery of the liability by one method but allows it by another.
Furthermore, I do not see any reason to distinguish between the DRO scheme and bankruptcy in this respect.
There is a minor difference between the language of section 251G(2) and section 285(3) but this is readily explicable by the antiquity of the latter provision.
It can be traced back to the time when remedies against the person of the debtor were universally applicable (and not restricted to certain statutory creditors as they are today).
There is, as the majority of the Court of Appeal pointed out, a major difference between the purpose of the waiting periods in each scheme.
But this does not affect the analysis of the nature of the liability to repay and of the Secretary of States power to recoup.
It is just as much a remedy against the property of the bankrupt as it is a remedy in respect of a debt listed in a DRO.
For my part, therefore, I would hold that Taylor and Chapman was wrongly decided.
The Secretary of State loses the power to recoup overpayments and Social Fund loans on the making of a bankruptcy order just as he does on the making of a DRO.
This result is inconsistent with the result reached in Mulvey.
But Mulvey depended on the Scottish common law of bankruptcy together with the Bankruptcy (Scotland) Act 1985, which has no exact equivalent of the English provisions with which we are concerned.
In those circumstances, it cannot be for this Court in an English case to over turn the decision of the House of Lords in a Scottish case.
We can merely place a question mark against that element in the reasoning which has been referred to as the net entitlement principle.
Nor is it necessary for us to question the decision of the Court of Appeal in Bradley Hole.
In that context, it makes some sense to regard the overpayment as giving the tenant the right to live rent free in the property until the overpayment is exhausted, a right to which the landlords and thus the trustees right to the reversion is subject.
The analogy was drawn with the deserted wifes personal right to continue to live in the former matrimonial home (a right recognised by the Court of Appeal in Bendall v McWhirter [1952] 2 QB 466 which survived the denial of her so called equity against third parties in National Provincial Bank Ltd v Ainsworth [1965] AC 1175).
Finally, it is clear that Balding was rightly decided and that the principle applies equally to the DRO scheme.
It is worth noting, therefore, that the impact of this decision is not as great as might have been thought.
All those liabilities to repay overpaid benefits, tax credits and Social Fund loans listed in DROs (see para 6 above) will in any event be wiped out at the end of the moratorium period.
We are talking about the power to continue to deduct during that period.
The sums involved, though not insignificant, will be much less than the total of the liabilities involved.
It would, of course, be open to the Government to promote delegated legislation to exclude these liabilities from the definition of qualifying debts in the DRO scheme altogether (and, indeed, to seek corresponding amendment to section 382 with regard to bankruptcy debt), but that would raise policy issues which are not for this Court.
I would therefore dismiss the appeal.
LORD BROWN
I am in full agreement with Lady Hales judgment.
Its logic appears irresistible and its conclusion inevitable.
One might have preferred to arrive at the contrary view: as Lord Mance points out (para 44), larger social security benefits will now be payable to those made bankrupt or subject to a DRO scheme than they would otherwise have received and, indeed, the Social Fund (a fund of limited resource designed to be replenished by repayment and thereby enabled to provide financial assistance to others in particular need) will be diminished.
But a contrary view could only be reached by torturing the statutory language and by creating or reinforcing absurd and anomalous distinctions both between the DRO and bankruptcy regimes and between the debtors situation respectively before and after the end of the moratorium period/discharge from bankruptcy.
As both Lady Hale (para 26) and Lord Mance (para 44) observe, it must now be for Government to consider whether or not to achieve a different result by amending legislation.
It will hardly be surprising if they do.
LORD MANCE
It is with some misgivings that I concur in the dismissal of this appeal.
Viewing the statutory provisions in the abstract, I would find no difficulty in doing this.
Against the background of relevant prior authority, I do, however, doubt whether the legislator can have contemplated the result at which the Supreme Court now finds itself obliged to arrive.
The result will create apparent anomalies as between different recipients of social security benefit and may cost the Exchequer, or potential beneficiaries of the limited Social Fund, quite dearly.
It may necessitate legislative reconsideration for the future.
The relevant prior authority relates primarily to the context of bankruptcy.
There is, as Lady Hale says at para 23, no real reason to distinguish between the provisions applicable in that context and in the present context of a debt relief order (DRO).
For bankruptcy purposes, it is clear that a liability to refund an overpayment of social security benefits or to refund a Social Fund loan constitutes a bankruptcy debt within the extended meaning of section 382 of the Insolvency Act 1986.
Under section 382(4) that meaning includes both debt and liabilities and in particular any liability under an enactment, and so, on the face of it, covers a liability to repay overpaid social security benefits or a Social Fund loan.
The DRO scheme, introduced as section 251A et seq of the same Act by the Tribunals, Courts and Enforcement Act 2007, applies to a more limited class of qualifying debts, defined as meaning a debt which is for a liquidated sum payable either immediately or at some certain future time and which is not an excluded debt.
However, as Lady Hale notes at paras 9 and 19, the Secretary of State has not suggested that a liability to repay an overpayment of social security benefits or to refund a Social Fund loan is not a qualifying debt within that definition.
On that basis, essentially the same question arises in respect of both bankruptcy and a DRO.
Where the Secretary of State is recovering an overpayment or loan by deductions up to the permitted limits from future prescribed benefits as and when these become payable, is the Secretary of State able to continue to do so after the onset of bankruptcy or the making of a DRO? The argument against any such ability is that the making of any such deduction would involve the exercise of a remedy in respect of the debt, contrary in the case of bankruptcy to section 285(3) or in the case of a DRO to section 251G(2) of the 1986 Act.
As a matter of language and logic, the argument is difficult to resist.
In law, the making of deductions is no more than one way in which the Secretary of State may recoup such an overpayment or loan.
The payment of future social security benefits depends on the circumstances from time to time, as does the making of deductions.
The commencement of bankruptcy or the making of a DRO does not exclude all possibility that some other means of recoupment might become available.
Each deduction is separate from any prior deduction, even if the Secretary of State has given prior notice of an intention to make continuing deductions from future payments of social security benefits.
For this reason, viewing the statutory wording by itself, I agree that its natural effect is, as explained by Lady Hale, that in making each and any deduction the Secretary of State is exercising a remedy in respect of the debt constituted by the overpayment or loan.
However, the 1986 Act and the DRO scheme introduced in 2007 should be seen against the background of any relevant prior authority.
In Bradley Hole v Cusen [1953] 1 QB 300 the Court of Appeal was concerned with a tenants right to recover overpaid rent.
Section 14(1) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920 made such overpaid rent recoverable without prejudice to any other method of recovery by deduction from any rent payable by him to the landlord.
The rent recoverable was clearly a debt.
But the landlord went bankrupt, and the predecessor of section 285(3) of the 1986 Act precluded the tenant from having any remedy in respect of that debt after the making of the bankruptcy order.
Could the tenant continue to deduct the overpaid rent from the rent otherwise due after the making of the bankruptcy order? The Court held that he could, suggesting that the overpayment could be regarded as the payment of rent in advance.
As Lady Hale recounts in paras 14 15, in R v Secretary of State for Social Security, Ex p Taylor and Chapman [1997] BPIR 505, Keene J applied parallel reasoning under section 285(3) of the 1986 Act in relation to deductions from social security benefits in respect of prior overpayments of benefit and an unpaid Social Fund loan.
Moreover, this was after Lord Clyde in the Inner House had in Mulvey v Secretary of State for Social Security referred to the right to recover by deduction as but one element in the calculation of benefit which the claimant was to receive: 1996 SC 8 (Ct of Sess), 15G 16A; and Lord Clydes approach appears to me to have received full endorsement in the House of Lords at 1997 SC(HL) 105, 109F H in the passage from Lord Jaunceys speech quoted by Lady Hale in para 16.
It is of interest to note that Lord Jauncey went on expressly to invoke in support of his analysis the case of Bradley Hole v Cusen: p 110A B. Further, Lord Jauncey found it unnecessary in deciding the position during the bankruptcy to determine what the position might be when the bankrupt came to be discharged (p 109E).
In the light of these authorities, there is a considerable case for saying that Parliament, when it enacted the DRO scheme in 2007, must have had in mind that, during bankruptcy and by parity of reasoning during the running of a DRO scheme, deductions in respect of any prior overpayment or un repaid Social Fund loan could continue to be made, as before, without infringing the rule that no remedy may be exercised in respect of any outstanding debt.
In reality, the Court of Appeal in Bradley Hole was adopting a beneficent fiction, when it spoke of the overpayment there as a payment of rent in advance.
The fiction had in that case the particular attraction that the overpayment was of rent, and it was being deducted from future rent.
But in law the overpayment was a debt, which the tenant was free to recover in any way he could and which he could have recovered as a debt, even if for some reason it proved not to be covered by or capable of deduction from future rent.
Nevertheless, the tenants choice to make deductions on a continuing basis was sufficient to persuade the Court of Appeal to treat the overpayment as a payment of rent in advance.
So here also, it would be possible to say that the Secretary of States choice to make deductions on a continuing basis entitles the court to treat the outstanding debts, arising from prior overpayments and unpaid Social Fund loan amounts, as payments on account of future social security benefits.
However, I do not think it either sensible or possible to focus solely on what might be a possible solution in relation to the position during the currency of a bankruptcy or a DRO.
It seems to me necessary also to consider the position which would exist on discharge from bankruptcy and at the end of the moratorium period.
In each case, that normally occurs after one year: see sections 279(1) and 251H(1) respectively.
The statutory language is in this context framed in terms of release or discharge from debts.
In particular, on discharge of a bankrupt the bankrupt is released from all bankruptcy debts under section 281(1), and as at the end of the moratorium period a person subject to a DRO scheme is discharged from all outstanding DRO debts under section 251I(1).
Accordingly, unless it can be said that no such debt exists in either case, the position remains incoherent if the analysis set out in para 39 above is accepted.
The debtor would remain subject to deductions during the currency of the bankruptcy or DRO scheme, but would be released or discharged from the outstanding balance after one year when it ended.
I do not think that we can overlook the potential incongruity, even though the House appears to have been prepared to do so in Mulvey.
In R (Balding) v Secretary of State for Work and Pensions [2007] EWHC 759 (Admin), [2007] 1 WLR 1805, [2008] EWCA Civ 1327, [2008] 1 WLR 564, the Divisional Court and the Court of Appeal concluded that the existence of a bankruptcy debt could not depend upon whether or not the creditor was choosing to recover it by deduction from social security benefits.
Further, in the present case, the Secretary of State has accepted that there is an outstanding debt within the scope of the DRO.
We would have to overrule Balding and to hold that the Secretary of States concession was wrong, before we could conclude that the right to deduct survived the discharge from bankruptcy or the end of the moratorium period under a DRO.
I see no real basis on which we would do this.
The beneficent fiction of a payment in advance cannot be stretched to the point of a conclusion that no debt at all exists.
Nor can a debt exist for some purposes (recovery other than by way of deduction), but not exist in so far as it is recovered by deductions.
A position whereby deductions can continue to be made during the currency of a bankruptcy or moratorium period, but the remainder of the outstanding debt is extinguished at its conclusion has little to commend it.
I am forced to the conclusion that the natural meaning of the statutes must be given effect.
I reach this conclusion with misgivings, as I said at the outset.
It will mean that those who have received overpayments or failed to repay Social Fund loans, but have become bankrupt or subject to a DRO scheme, will now receive larger social security benefit payments larger than they did prior to the bankruptcy or DRO and larger also than the social security benefits received by persons subject to such deductions who have avoided bankruptcy or a DRO scheme; it will also diminish the amount available in the limited Social Fund for the benefit of all potential claimants on that Fund.
It must be questionable whether any of this is sensible or desirable, but that is a matter for the legislature to consider, if it wishes.
LORD WILSON
I agree that the appeal should be dismissed for the reasons given by Lady Hale but I wish also to associate myself with the remarks made by Lord Brown and Lord Mance in their concurring judgments.
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The issue in the case is whether the Secretary of State can continue to recoup Social Fund loans and overpayment of benefits by deduction from current benefit payments during the moratorium period after the making of a Debt Relief Order (DRO) under Part 7A of the Insolvency Act 1986 (the IA).
Mrs Payne obtained a Social Fund budgeting loan in September 2007.
In August 2009, she obtained a DRO listing the loan among her qualifying debts.
When she notified the Secretary of State, he began making deductions from her income support.
In August 2010, the moratorium period came to an end and the debt was discharged.
Ms Cooper incurred an overpayment of benefit.
In December 2009 the Secretary of State began making deductions from her incapacity benefit in order to recover the overpayment.
In January 2010, Ms Cooper obtained a DRO which listed the overpayment as one of her qualifying debts.
Section 251G(2)(a) of the IA provides that during the moratorium the creditor to whom a specified qualifying debt is owed has no remedy in respect of the debt.
Mrs Payne and Ms Cooper brought judicial review proceedings challenging the lawfulness of the deductions made after the making of the DROs; their cases were consolidated.
Cranston J at first instance found in their favour, holding that the power to make deductions from current benefits ceased to be available when Mrs Payne and Ms Cooper obtained the DROs.
A majority of the Court of Appeal (Smith and Toulson LJJ) confirmed the High Courts decision.
The Secretary of State appealed.
In the context of bankruptcy, the High Court has held that such deductions can continue to be made between the making of the bankruptcy order and the bankrupts discharge from bankruptcy: R v Secretary of State for Social Security, Ex p Taylor and Chapman [1997] BPIR 505.
The House of Lords reached the same conclusion in the context of Scottish bankruptcy law: Mulvey v Secretary of State for Social Security 1997 SC (HL) 105.
Once a bankrupt is discharged, however, the Court of Appeal has held that the liability to repay the Secretary of State is also discharged: R (Balding) v Secretary of State for Work and Pensions [2007] EWCA Civ 1327.
The Supreme Court unanimously dismisses the appeal.
The leading judgment was given by Lady Hale, with whom the other justices agreed (Lord Brown and Lord Mance adding short concurring judgments).
The Court holds that there is no such thing as the net entitlement principle.
The claimant has a statutory entitlement to the amount of benefit which she is awarded.
The liability to repay arises independently of her entitlement to any benefit from which the Secretary may later decide to recoup it [21].
The power to recover the debt by deduction from benefit is a remedy in respect of a debt which may not be exercised during the moratorium, according to section 251G(2) of the IA [22], [34].
The Court sees no reason to distinguish between the DRO scheme and bankruptcy in this respect.
The Court considers that Taylor and Chapman was wrongly decided.
The Secretary of State loses the power to recoup overpayments and Social Fund loans on the making of a bankruptcy order just as he does on the making of a DRO [23].
The Court affirms Balding and finds that the principle equally applies to the DRO scheme.
All the liabilities to repay overpaid benefits, tax credits and Social Fund loans listed in DROs will in any event be wiped out at the end of the moratorium period [26].
The Court comments that it would be open to the Government to promote delegated legislation to exclude these liabilities from the definition of qualifying debts in the DRO scheme and to seek equivalent legislative amendment of the the bankruptcy scheme.
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This appeal concerns an application made by the appellant, Professor Shanks OBE FRS FREng, for compensation under section 40 of the Patents Act 1977 (the 1977 Act) on the basis that the patents for an invention which he made in 1982 have been of outstanding benefit to his employer, the third respondent, Unilever UK Central Resources Ltd (CRL), and that he is entitled to a fair share of that benefit.
The appeal raises important issues concerning the circumstances in which such compensation may be awarded and how the amount of that compensation is to be determined.
The facts
Professor Shanks was employed by CRL from May 1982 to October 1986 and was assigned to its Colworth research laboratories in Bedfordshire.
He initially received a salary of 18,000 per annum and a Volvo car.
His brief was to develop biosensors for use in process control and process engineering.
In July 1982 Professor Shanks visited Professor Anthony Turner and Professor John Higgins at Cranfield University and there he learned of the work they were carrying out into the use of biosensors for monitoring diabetes.
As a result of this visit Professor Shanks became interested in the possibility of using re-usable or disposable devices incorporating biosensors for diagnostic applications and in a report dated 1 August 1982 entitled Report on new opportunities afforded by electronic sensors he identified a number of new product opportunities, one of which was a limited re-use or disposable sensor for monitoring glucose, insulin or immunoglobulin levels in diabetics.
It was at about this time that Professor Shanks conceived his invention.
He had often observed how a droplet of liquid placed on the edge of the glass plates of a liquid crystal display (LCD) was drawn by capillary action into the 10-micron gap between them, and he realised the same phenomenon would occur with other liquids such as blood or urine.
He also appreciated how it could be used with etched or printed planar electrodes and enzyme electrochemical techniques he had seen at Cranfield, and in this way provide a system for measuring the glucose concentration in blood, serum or urine.
In October 1982 Professor Shanks built the first prototype of his invention at home using Mylar film and slides from his daughters toy microscope kit, and bulldog clips to hold the assembly together.
It has since become known as the Electrochemical Capillary Fill Device or ECFD.
He also developed a similar system which uses fluorescence rather than conductivity and this has become known as the Fluorescent Capillary Fill Device or FCFD.
CRL at that time employed all of the Unilever groups UK-based research staff.
It was not a trading company and was a wholly owned subsidiary of Unilever plc.
Unilever plc and Unilever NV were parallel parent companies of the Unilever group and were listed on the London and Amsterdam stock exchanges respectively, but the business of the group was run as a single entity.
Save where from the context otherwise appears, I will refer to the Unilever group as Unilever.
It is accepted by Professor Shanks that the rights to his inventions belonged to CRL from the outset pursuant to section 39(1) of the 1977 Act.
CRL assigned all these rights to Unilever plc for 100.
Unilever plc retained the rights for the UK, Australia and Canada but assigned the rights for elsewhere in Europe, Japan and the USA to Unilever NV, again for 100.
Unilever NV later assigned the rights for the USA to a company which later became Unilever Patent Holdings BV.
On 13 June 1984 Unilever plc filed UK patent application 8415018 (the priority application).
It was entitled Devices for Use in Chemical Test Procedures and was directed to both the ECFD and the FCFD technologies.
Professor Shanks was named as inventor.
On 12 June 1985 European patent application 0170375 was filed claiming priority from the priority application.
It related only to the ECFD technology and was filed by Unilever plc for the UK and by Unilever NV for various other contracting states.
Corresponding patent applications were filed in Australia, Canada, Japan and the USA.
It was in relation to the patents which were granted on all of these applications (the Shanks patents) that Professor Shanks made the application for compensation which is the subject of these proceedings.
Unilever was not itself interested in developing a business in the field of glucose testing for this would have required it to compete with companies which were established in this therapeutic sector.
Consequently, relatively little was done to develop the ECFD technology after the end of 1984.
Indeed, it was regarded by Unilever as far from a key technology.
Instead, until 1986, Unilever and Professor Shanks focused on the FCFD technology which had potential application in areas of relevance to Unilevers existing businesses.
Professor Shanks left Unilever in October 1986 and in October 1987 Unilever sold the FCFD technology, and the patents it held relating to it, to Ares-Serono Inc. Ares-Serono also took an option on the ECFD technology but did not exercise it.
In the years that followed Unilever carried out a good deal of work in the field of pregnancy and fertility testing where it developed commercially successful products.
Nevertheless, some research into glucose testing was carried out from 1987 to 1994 and, based primarily upon the work of Professor Brian Birch, Unilever applied for and was granted further patents (the Birch patents).
It also maintained the Shanks patents.
The glucose testing market expanded considerably in the late 1990s and 2000s, however; and biosensors incorporating the ECFD technology played an important role in this.
Indeed, the ECFD technology eventually appeared in most glucose testing products.
It also became apparent that, although not vital, it was a technology that most of the significant companies in the field were willing to pay millions of pounds to use.
Unilever never considered licensing of patent rights to be a key part of its business.
Its main purpose in having patents was to use them to protect its existing commercial activities.
Cross-licensing of unexploited patents was of secondary importance and out-licensing was of even less interest.
Consequently, the resources it devoted to the activity of out-licensing were relatively limited and, in most cases, the prospective licensees of the Shanks patents contacted Unilever and initiated licensing discussions themselves.
However, as I have mentioned, Unilever did keep the Shanks patents in force and it needed significant effort and skill to conduct the licensing negotiations, albeit not to the extent a dedicated licensing team would have provided.
In the end seven licences (or sets of licences) of the Shanks patents were granted by Unilever for a total consideration of about 20.3m.
The hearing officer thought this figure should be discounted to reflect the inclusion of the Birch patents in all but one of the licences, producing a net figure attributable to the Shanks patents of about 19.55m.
In 1994 management responsibility for the Shanks and Birch patents (and various other patents) was transferred to Unipath, another Unilever company.
In addition, Unipath took on the bulk of Unilevers medical diagnostics business, including its commercially successful products in the fields of pregnancy and fertility testing.
In 2001 Unipath and the Shanks and the Birch patents (and the benefit of the licences under these patents) were sold to Inverness Medical Innovations, Inc (IMI).
The hearing officer found that, of the price paid by IMI, about 5m was attributable to the Shanks patents.
Unilevers total earnings from the Shanks patents therefore amounted to around 24.55m.
The hearing officer estimated that Unilever had incurred costs in prosecuting, maintaining and licensing the patents of about 250,000.
It followed that Unilevers net benefit from the patents was about 24.3m which the hearing officer rounded down to 24m.
The history of the proceedings
Professor Shanks made his application for compensation on 9 June 2006.
It came on for hearing before Mr Julyan Elbro, the hearing officer acting for the Comptroller General of Patents (the Comptroller), in March 2012.
The hearing lasted for nine days between March and May of that year.
On 21 June 2013 the hearing officer issued his decision: BL O/259/13.
He found that, having regard to the size and nature of Unilevers business, the benefit provided by the Shanks patents fell short of being outstanding.
The hearing officer went on to consider what a fair share of the benefit would have been had he considered it to be outstanding.
He had regard to the various matters set out in section 41 of the 1977 Act and concluded that 5% would have been appropriate, amounting to about 1.2m.
He declined to increase this figure to take into account the time value of money.
Professor Shanks appealed to the High Court against the hearing officers decision.
The appeal was heard by Arnold J and he gave judgment on 23 May 2014: [2014] EWHC 1647 (Pat); [2014] RPC 29.
He dismissed the appeal, holding that the hearing officer had made no error of principle in finding that the Shanks patents were not of outstanding benefit to Unilever.
However, he continued, had he come to the opposite conclusion, he would have found that a fair share of the benefit would have been only 3%.
He also held that it was not appropriate to take into account the time value of money and that in assessing the benefit of the Shanks patents to Unilever, the sums it had received should be discounted to reflect the payment of corporation tax.
An appeal to the Court of Appeal was also dismissed: Shanks v Unilever plc (No 2) [2017] EWCA Civ 2; [2017] Bus LR 883; [2017] RPC 15.
The court (Patten, Briggs and Sales LJJ) agreed with Arnold J that the hearing officer had made no error of principle in considering the issue of outstanding benefit.
However, the court unanimously overturned Arnold Js finding in relation to the deduction of corporation tax and, by a majority (Briggs and Sales LJJ), held that there would be cases where the change in the value of money over time would have to be recognised in determining whether the benefit was outstanding, and that it was likely to be relevant in assessing what amounted to a fair share of that benefit.
The issues
This further appeal now gives rise to the following issues: i) What are the principles governing the assessment of outstanding benefit to an employer and did the hearing officer apply them correctly? ii) How should a fair share of an outstanding benefit be assessed and were the hearing officer and Arnold J wrong in their assessment?
I must also consider whether, in assessing what amounts to a fair share of an outstanding benefit, it is appropriate to take into account the time value of money and any liability of the employer for tax.
The legal framework
Employees inventions are addressed in sections 39 to 43 of the 1977 Act.
These provisions have been amended by the Patents Act 2004 but only in relation to patents applied for after 1 January 2005.
We are therefore concerned in this appeal with these sections in their form prior to their amendment by the Patents Act 2004.
Section 39 deals with the right to an invention made by an employee: 39(1) Notwithstanding anything in any rule of law, an invention made by an employee shall, as between him and his employer, be taken to belong to his employer for the purposes of this Act and all other purposes if - (a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties; or (b) the invention was made in the course of the duties of the employee and, at the time of making the invention, because of the nature of his duties and the particular responsibilities arising from the nature of his duties he had a special obligation to further the interests of the employers undertaking.
(2) Any other invention made by an employee shall, as between him and his employer, be taken for those purposes to belong to the employee.
There have been cases where it has been difficult to decide whether an invention belongs to an inventor or his employer, but this is not one of them.
As I have mentioned, there has never been any dispute between the parties that the invention described in European patent application 0170375 belonged to CRL, as Professor Shanks employer, from the outset, whether under paragraph (a) or (b) of subsection (1) of section 39.
He was, as the hearing officer held, employed to invent.
Section 40 then makes provision for the payment of compensation to an employee in particular circumstances.
In its unamended form it reads, so far as relevant: 40(1) Where it appears to the court or the comptroller on an application made by an employee within the prescribed period that the employee has made an invention belonging to the employer for which a patent has been granted, that the patent is (having regard among other things to the size and nature of the employers undertaking) of outstanding benefit to the employer and that by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer, the court or the comptroller may award him such compensation of an amount determined under section 41 below.
(2) Where it appears to the court or the comptroller on an application made by an employee within the prescribed period that - a patent has been granted for an invention made (a) by and belonging to the employee; (b) his rights in the invention, or in any patent or application for a patent for the invention, have since the appointed day been assigned to the employer or an exclusive licence under the patent or application has since the appointed day been granted to the employer; (c) the benefit derived by the employee from the contract of assignment, assignation or grant or any ancillary contract (the relevant contract) is inadequate in relation to the benefit derived by the employer from the patent; and (d) by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer in addition to the benefit derived from the relevant contract; the court or the comptroller may award him such compensation of an amount determined under section 41 below.
Section 40 therefore deals with two different cases.
In the first, the invention belongs to the employer from the outset.
In the second, the invention belongs initially to the employee but his or her rights in the invention or any patent or patent application for the invention are subsequently assigned or exclusively licensed to the employer.
In this appeal we are concerned with the first and so section 40(1).
In such a case the employee may be awarded compensation if the invention is of outstanding benefit to the employer.
Of relevance to both cases are section 43(4) which provides that references to a patent and to a patent being granted are references to a patent and its being granted whether under the law of the United Kingdom or the law in force in any other country or under any treaty or international convention; and section 43(7) which provides that benefit means benefit in money or moneys worth.
The key amendment introduced by the Patents Act 2004 makes compensation payable when the invention (and not just the patent) has been of outstanding benefit.
The amount of compensation is to be determined in accordance with section 41.
In its unamended form this reads, so far as relevant: 41(1) An award of compensation to an employee under section 40(1) or (2) above in relation to a patent for an invention shall be such as will secure for the employee a fair share (having regard to all the circumstances) of the benefit which the employer has derived, or may reasonably be expected to derive, from the patent or from the assignment, assignation or grant to a person connected with the employer of the property or any right in the invention or the property in, or any right in or under, an application for that patent.
(2) For the purposes of subsection (1) above the amount of any benefit derived or expected to be derived by an employer from the assignment, assignation or grant of - (a) the property in, or any right in or under, a patent for the invention or an application for such a patent; or (b) the property or any right in the invention; to a person connected with him shall be taken to be the amount which could reasonably be expected to be so derived by the employer if that person had not been connected with him.
(4) In determining the fair share of the benefit to be secured for an employee in respect of a patent for an invention which has always belonged to an employer, the court or the comptroller shall, among other things, take the following matters into account, that is to say - (a) the nature of the employees duties, his remuneration and the other advantages he derives or has derived from his employment or has derived in relation to the invention under this Act; (b) devoted to making the invention; the effort and skill which the employee has (c) the effort and skill which any other person has devoted to making the invention jointly with the employee concerned, and the advice and other assistance contributed by any other employee who is not a joint inventor of the invention; and (d) the contribution made by the employer to the making, developing and working of the invention by the provision of advice, facilities and other assistance, by the provision of opportunities and by his managerial and commercial skill and activities.
Section 43(8) provides that section 533 of the Income and Corporation Taxes Act 1970 is to apply for determining for the purpose of section 41(2) whether one person is connected with another.
Entitlement to compensation
An employee who makes an invention which belongs to his employer from the outset and for which a patent has been granted is therefore entitled to compensation if he or she establishes: first, that the patent is, having regard among other things to the size and nature of the employers undertaking, of outstanding benefit to the employer; and secondly, that, by reason of these matters, it is just that he or she be awarded compensation.
Who is the employer?
The starting point for the assessment of whether an employee is entitled to compensation is therefore the identification of the employer.
There can be no doubt that, at least in the ordinary case, Parliament intended the term employer to mean the inventors actual employer.
Section 39 deals with the ownership of the invention as between the inventor and his or her employer and requires a consideration of the employees duties; section 40 provides for the compensation of employees for certain inventions which may belong initially either to the employer or to the employee and, in an appropriate case, the payment of that compensation by the employer to the employee; and section 41 deals with the assessment of the compensation.
In all three cases the employer is the inventors actual employer.
What is the benefit?
The next task is to identify the benefit in the hands of the employer.
This is not explained in section 40(1) which deals with an invention which has always belonged to the employer; nor is it explained in section 40(2) which deals with an invention which initially belonged to the employee.
But section 41(1) makes clear that in both cases it is the benefit which the inventors actual employer has derived or may reasonably be expected to derive from the patent, or from the assignment or grant to a person connected with him of any right in the invention or patent or patent application for the invention.
Section 41(1) is complemented by section 41(2) which deals further with a disposal to a connected person.
This was considered by the Court of Appeal at an earlier stage of these proceedings on an appeal from a decision of Mann J: [2009] EWHC 3164 (Ch); [2010] RPC 11.
The Court of Appeal (Longmore LJ, Jacob LJ and Kitchin J) held ([2010] EWCA Civ 1283; [2011] RPC 12) that, in assessing the benefit derived or expected to be derived by an employer from an assignment of the patent to a person connected with him, the court must consider the position of the actual employer and the benefit which the assignee has in fact gained or is expected to gain.
There is also one curious feature of section 41(2) which it is convenient to mention at this point.
It says it has effect for the purposes of section 41(1) but makes no mention of section 40.
Nevertheless, for the legislative scheme to operate effectively, section 41(2) must also have effect for the purposes of section 40 and, in my opinion, it is to be interpreted in that way.
As for the assessment of the benefit of the patent, there is no dispute that it means the benefit in the hands of the employer after deduction of any costs to the employer of securing that benefit.
Is the benefit outstanding?
I now turn to the meaning of the word outstanding in the expression outstanding benefit.
In GEC Avionics Ltds Patent [1992] RPC 107, 115, Mr Vivian, for the Comptroller, noted that the statute did not use words such as significant or substantial and said the benefit must be something out of the ordinary and not such as one would normally expect to arise from the results of the duties that the employee is paid for.
The employee failed to establish the patent was of outstanding benefit because the employer had received substantial orders for equipment not employing the invention well after its merits were known.
In British Steel PLCs Patent [1992] RPC 117, 122, Dr Ferdinando, for the Comptroller, thought the word outstanding implied a superlative.
The patent related to an improved valve for controlling the flow of molten metal which was used by the employer at only one site and on one machine.
The claim for compensation was rejected because the employee failed to establish a number of the benefits for which he contended, and because the hearing officer felt constrained by the way the case was presented to assess the proven benefit against all of the profits and the whole turnover of the employer, of which it represented only a very small percentage.
In Memco-Med Ltds Patent [1992] RPC 403, 414, Aldous J indicated that he did not disagree with the approaches of these hearing officers and said that the word outstanding denoted something special and required the benefit to be more than substantial or good.
The case concerned a patent relating to an improved unit for preventing the doors from closing on a person getting into or out of a lift.
Sales of the improved unit were of great importance but were all made to one customer and the evidence suggested that the business relationship between the employer and that customer would have been the same whether or not a patent had been granted.
So, once again, the claim failed.
In Kelly and Chiu v GE Healthcare Ltd [2009] EWHC 181 (Pat); [2009] RPC 12 Floyd J reviewed all of these authorities and, at para 60(iv), summarised the position as he saw it in these terms: Outstanding means something special or out of the ordinary and more than substantial, significant or good.
The benefit must be something more than one would normally expect to arise from the duties for which the employee is paid.
The Kelly case is of particular interest because the patents in issue were found to be of outstanding benefit to the claimants employer, Amersham, which was subsequently taken over by GE Healthcare Ltd, the defendant.
The facts were striking in that, had the patents not existed, Amersham would have faced a financial crisis whereas, with the patents, its business was transformed.
The commercial embodiment of the invention of the patents was an imaging agent which cost a little under 2.5m to develop but, with the protection afforded by the patents, achieved sales between 1993 and 2007 having a total value in excess of 1.3 billion.
In my view these cases are all helpful to a point as illustrations of circumstances which were found to fall each side of the line.
But at the end of the day they provide no substitute for the statutory test which requires the benefit to be outstanding.
This is an ordinary English word meaning exceptional or such as to stand out and it refers here to the benefit (in terms of money or moneys worth) of the patent to the employer rather than the degree of inventiveness of the employee.
It is, however, both a relative and qualitative term and so I must now consider the context in which the question is to be asked and answered.
Put another way, in relation to what must the benefit from the patent be outstanding? Which factors may be taken into account in making that assessment?
Here the 1977 Act provides some guidance.
It says that the court must have regard among other things to the size and nature of the employers undertaking.
But this gives rise to two further questions which were the subject of a good deal of argument before us.
What is the employers undertaking for this purpose? And what is the relevance of that undertakings size and nature?
The employers undertaking
In this context I understand the word undertaking to mean simply a unit or entity which carries on a business activity, and here the undertaking of interest is that of the company or other entity which employs the inventor.
In many cases the identification of that undertaking will be comparatively straightforward.
It will be the whole or, if it is divided into economic units, the relevant unit of the employers business.
So, as Aldous J observed in Memco-Med at p 414 and I agree, the undertaking may be the whole or a division of the employers business.
We are concerned in this appeal with a different and more difficult case, however.
It is one in which CRL is part of a larger group of companies and where the work carried out by CRLs researchers was exploited by that larger group as a whole.
This gives rise to the question whether the relevant undertaking is CRL or the whole or a part of the larger group of which it forms a part, Unilever.
The hearing officer rejected the submission made on behalf of Professor Shanks that the employers undertaking was CRL.
He said at para 196: In the event, on the facts of this case I find that the reality of the situation is that described by the defendants: regardless of how the various companies in the Unilever group have been structured, researchers at Colworth (employed by CRL) were doing work which was going to be exploited by the group as a whole.
Indeed, it is notable that the whole benefit from the Shanks patents was generated by licensing activity operated out of the central Unilever companies.
Having regard to the size and nature of the employers undertaking therefore requires me to have regard to whether the benefit from the patents is outstanding in the context of the Unilever group as a whole.
Arnold J and the Court of Appeal agreed with the hearing officer.
Patten LJ explained at paras 33 and 34 that an assessment of what constituted the undertaking based upon the economic and business realities of the employers organisation was the correct approach.
He continued that if one took what he described as a strictly legal approach to the interpretation of the statute it could be said that the employer was CRL but he rejected this as a possible conclusion for two reasons: first, that if what he called the strict legal approach were to govern section 40(1) then it must also apply to section 41(1) with the consequence that the benefit derived from the patents would be limited to the nominal payments CRL received upon their assignment and would not include the sums subsequently received by other companies in the group from licence fees and the sale of Unipath.
Secondly, the earlier decision of the Court of Appeal in this case was, in his opinion, only consistent with treating CRLs undertaking as including the other group companies that received these payments.
He pointed out that the work carried out by the employees of CRL was intended to enure for the benefit of Unilever as a whole and that he could see no answer to the reasoning of the hearing officer and his conclusion that the relevant undertaking in this case was or included Unilever plc and Unilever NV.
Upon this further appeal Mr Patrick Green QC, for Professor Shanks, submits that the hearing officer and the courts below lost sight of the fact that CRL was Professor Shanks employer and that the entire Unilever group could not sensibly be described as CRLs undertaking.
Mr Daniel Alexander QC, for Unilever, commends the hearing officers reasoning.
He submits that it is unreal to treat CRL as the relevant undertaking because it never generated any material revenues, was not the beneficiary of the royalties in question and is and was simply a service company for the Unilever group.
Neither of these interpretations is without difficulty.
The submission for Professor Shanks faces the problem that CRL has in reality received no more than a nominal benefit from the patents and certainly nothing that could be described as outstanding.
As Mr Alexander fairly says, the real benefits have been received by other Unilever companies.
A partial answer to this is provided by section 41(2) which deems the benefit derived from the assignment of a patent to a connected person to be the benefit which could reasonably be expected to be derived if that person had not been connected.
True it is that section 41(2) does not in terms apply to section 40(1) but, as I have said, I think it must be interpreted in that way.
This is still not a complete answer, however, for the deeming provision does not, on the face of it, apply to the benefit from other patents arising from the work at CRL against which the benefits from the patents in issue may be judged.
Mr Green embraces this result, arguing that CRLs actual profits were at most about 2m per year and that judged against this figure, the 24.3m earned from the Shanks patents is plainly outstanding.
But that, so it seems to me, is not comparing like with like.
It would artificially and unfairly elevate the benefit to CRL from the Shanks patents in relation to any benefit it derived in other ways.
The interpretation for which Unilever contends and which was accepted by the hearing officer and on appeal focuses on the phrase the employers undertaking in section 40(1).
This, so it is said, is perfectly apt to describe the larger entity of which CRL is a part, that is to say, the whole Unilever group.
But the problem with this interpretation is that it strips the phrase from its context.
The subsection as a whole is concerned with the benefit of the patent to the employer and the assessment of whether that benefit is, in the hands of the employer, outstanding.
Consideration of the size and nature of the employers undertaking is therefore tethered to this assessment.
It is not, on the face of it, an inquiry into the value of the benefit to the group of which the employer is a part relative to other unrelated aspects of the groups business.
In my judgement the correct approach to the application of section 40 and the one that does least violence to its language lies between these extremes.
It is to look at the commercial reality of the situation but to do so, in a case such as the present, from the perspective of the inventors employer.
Where, as here, a group company operates a research facility for the benefit of the whole group and the work results in patents which are assigned to other group members for their benefit, the focus of the inquiry into whether any one of those patents is of outstanding benefit to the company must be the extent of the benefit of that patent to the group and how that compares with the benefits derived by the group from other patents for inventions arising from the research carried out by that company.
This gives practical and commercial effect to the language of section 41 and involves a comparison of like with like.
Furthermore, it is, in my opinion, the approach which sits most comfortably with the next aspect of the analysis, namely the relevance of the size and nature of the employers undertaking.
The relevance of size and nature of the employers undertaking
Before the Court of Appeal, Unilevers central argument on the issue of outstanding benefit was that 24.3m, though not inconsiderable, was dwarfed by the turnover and profits of Unilever as a whole.
As Patten LJ recorded at para 26 of his judgment, Unilever makes a wide range of products from Viennetta ice-cream to deodorants which generate billions of pounds in sales and hundreds of millions of pounds in profits over the life of the patents which relate to them.
It was accepted that the rate of return on many if not most of these patents was much lower than on the Shanks patents but that was said not to be enough to make the benefit of the Shanks patents outstanding when regard was had to the size and nature of Unilevers business.
This submission found an echo in Mr Alexanders submissions to this court for he took us to a graph of Unilevers profits between 1984 and 2004 against which a plot of the royalty income from the Shanks and Birch patents, displayed on the same scale, was so close to the base line as to be indistinguishable from it.
Mr Green characterised this submission before the courts below and in this court as too big to pay.
He argued that, were it to be accepted, it would be all but impossible for an employee to establish that the benefit from a patent to a business such as that of Unilever was outstanding and this would be manifestly unjust to employee inventors.
This found favour with the Court of Appeal to a point.
As Patten LJ explained at para 28, outstanding benefit cannot be determined simply by comparing the income derived from a patent with the overall turnover and profitability of the employers undertaking.
But it raises the more fundamental question as to the relevance of the size and nature of an undertaking to the assessment of whether the benefit to it from a patent is outstanding and how these factors should be taken into account.
In my judgement there is no single answer to this question.
Many different aspects of the size and nature of the employers business may be relevant to the enquiry.
For example, the benefit may be more than would normally have been expected to arise from the duties for which the employee was paid; it may have been arrived at without any risk to the business; it may represent an extraordinarily high rate of return; or it may have been the opportunity to develop a new line of business or to engage in unforeseen licensing opportunities.
In the circumstances of this case and for the reasons I have given, a highly material consideration must be the extent of the benefit of the Shanks patents to the Unilever group and how that compares with the benefits the group derived from other patents resulting from the work carried out at CRL.
In some cases it may be possible to see that a patent has been of outstanding benefit to an employer by looking at the size and profitability of the whole business.
In the Kelly case (see paras 37-38 above), for example, the benefits of patent protection went far beyond anything which one would normally expect to arise from the sort of work the employees were doing.
The patents protected Amershams business from generic competition and allowed it to make major deals; and sales of the patented product accounted for a large proportion of its profits.
In short, the patents transformed its business.
Similarly, as Patten LJ explained at para 28, a straightforward comparison of profitability may be sufficient, in the case of a smaller company, to show an outstanding benefit without recourse to wider considerations of the scope of an employees duties or the expectations the employer may have had about the anticipated level of return.
I also recognise that a large undertaking may be able to exert greater leverage than a smaller undertaking when negotiating licence fees.
This was a matter to which the hearing officer referred in para 207 of his judgment.
There he explained and I agree that a particular sum might represent an excellent return for a small undertaking but might not be so regarded by a large undertaking which was in a position to spend substantial sums on litigation to enforce its rights.
Much the same might apply to sales of a patented product.
A large undertaking might be able to harness its goodwill and sales force in a way that a smaller undertaking could not do.
These would be appropriate matters to take into account.
On the other hand, I think a tribunal should be very cautious before accepting a submission that a patent has not been of outstanding benefit to an employer simply because it has had no significant impact on its overall profitability or the value of all of its sales.
Those profits and sales may have been generated by a range of different products which have nothing to do with the technology the subject of the patent; the parts of the business responsible for them may not have contributed to any commercial success of the patented invention; and they may be a very poor guide to whether the benefit the employer has derived from the patent is out of the ordinary.
Indeed, I find it very hard to see how a failure materially to affect the aggregated sales value or overall profitability of the business could, in and of itself, justify a finding that the benefit of a patent has not been outstanding.
Tax and the assessment of benefit
Arnold J accepted a submission by Unilever that in assessing the benefit it received from the Shanks patents, it was necessary to take into account the amount of tax which it had to pay, and in doing so he placed some reliance on the decision in Celanese International Corpn v BP Chemicals Ltd [1999] RPC 203.
There Laddie J held that, in the context of an account of profits derived by a defendant from infringement of a patent, the defendant could only be required to pay over its net profits after payment of corporation tax.
The Court of Appeal disagreed with Arnold Js approach and so do I. Section 40(1) is concerned with the assessment of the benefit of the patent to the employer and whether that benefit is outstanding.
This exercise is quite different from an assessment of the profits which a defendant has made from its infringing activities and which it has been ordered to disgorge.
In this case Dr Osborn, Unilevers expert on this issue, quantified the appropriate reduction to be applied to the benefit Unilever had derived from the patents at 30% on the basis that this was the average rate of corporation tax which it had to pay in the relevant period, as calculated from its accounts.
Mr Alexander, for Unilever, submitted that Dr Osborns analysis was reasonable and proportionate and that revenues which had to be paid over in tax, such that they could not be enjoyed by Unilever, could not count as a benefit.
I find myself unable to accept Mr Alexanders submission for it seems to me artificially to reduce the size of the benefit before deciding how much compensation should be paid to the employee.
In my judgement the first step is to quantify the benefit and the next is to decide how much compensation would secure for the employee a fair share of it.
The employee must account for any tax due on that share and the employer must account for any tax due on the balance.
The approach for which Mr Alexander contends, on the other hand, would mean that the employer has only to pay to the employee a share of the benefit net of tax but can take the benefit of any available relief from tax in respect of the moneys he has paid, whilst the employee will be liable to account for tax on the moneys that he or she has received.
In my judgement the former approach is both fairer and consonant with the legislative purpose of these provisions.
It follows that Patten LJ was right to say at para 43 of his judgment that the incidence of tax is a consequence of the benefit rather than a part of it.
Assessment of the benefit net of tax would require in every case an investigation of the employers tax position including, among other things, any losses rolled forward.
The time value of money
Unilever received payments of licence fees under the Shanks patents over the period from 1996 to 2004 and it received the part of the purchase price of Unipath attributable to the Shanks patents in 2001.
Professor Shanks made his application for compensation on 9 June 2006.
Professor Shanks contends and, indeed, has always contended that Unilever has had the use of the moneys it derived from the Shanks patents ever since it received them and that this should be taken into account.
As Arnold J noted, Professor Shanks did not rely upon this contention before him as a basis for challenging the hearing officers decision as to whether the benefit was outstanding.
In my judgement he was right to take that course.
The mere passage of time cannot turn a patent which was not an outstanding benefit into one which was.
However, he did rely on it to increase the size of the benefit of which he should receive a fair share or, to put it another way, to increase the size of his share if he was successful in overturning the hearing officers decision on the issue of outstanding benefit.
That remains the position on this appeal and it is convenient to address it now.
The hearing officer rejected Professor Shanks argument on the basis that there was not enough evidence before him to justify an increase.
The evidence was in his view too speculative.
On appeal, Arnold J held that the time value of the money which Unilever had received was not a benefit derived from the Shanks patents within the meaning of section 41(1).
He reasoned that the definition of benefit in section 43(7) coupled with the terms of section 41(1) pointed to the assessment being made as of the date the money was received; that the time value of money was not a benefit Unilever derived from the Shanks patents; that if the time value of money were treated as a relevant benefit the enquiry would have no temporal end; that Professor Shanks could have brought the claim earlier than he did; and that, it being common ground that the Comptroller could not award interest, an award reflecting the time value of money would be inconsistent with the statutory scheme.
On further appeal to the Court of Appeal, Patten LJ held, like Arnold J, that the benefit under section 41(1) was limited to direct receipts from the exploitation of the patent rights and did not include any allowance for the fact that the employer had had the benefit of those receipts for a period of time prior to an award under that section.
However, Briggs LJ, with whom Sales LJ agreed on this issue, came to the contrary conclusion.
He explained, at para 73, that he would expect the time value of money (or its change in real value over time due to inflation) to be relevant in the quantification of the inventors fair share under section 41(1) because of the deleterious effect on the real value of money of the likely substantial time between the employers receipt of the benefit and the making of the order for payment at the end of the proceedings.
Mr Alexander, for Unilever, now submits that the approach taken by Patten LJ and Arnold J is the correct one for the reasons they gave and because it is clear, simple and practical, and that the alternative, though theoretically attractive in some respects, would introduce disproportionate complexity, would drive up the costs of proceedings and would actively reward an inventor who delays in bringing a claim, just as Professor Shanks did in this case.
In my judgement Mr Alexander was correct to describe the approach contended for by Professor Shanks as attractive, though I would not for my part characterise that attraction as theoretical.
To the contrary, it seems to me to be the approach which accords with justice and common sense.
Professor Shanks seeks an award which reflects the fact that, on the assumption he prevails on the other limbs of his appeal, he has for many years been kept out of a fair share of the benefit Unilever has derived from the Shanks patents.
Nor, with great respect, am I persuaded by the reasoning of Arnold J or that of Patten LJ on appeal.
That reasoning has at its heart the proposition that the time value of the money that Unilever has received is neither a benefit nor derived from the Shanks patents.
I disagree.
I see no reason why the time value of money cannot be a benefit derived from a patent within the meaning of section 41(1).
Unilever has had the benefit of the licence fees and other moneys derived from the Shanks patents ever since they were paid.
Another legitimate approach, which amounts to the same thing, is that of the majority in the Court of Appeal.
On the assumption that he wins on the issue of outstanding benefit, Professor Shanks is entitled to an uplift because the fair share of the benefit should in this case reflect the deleterious effect on the real value of money of the substantial time between Unilevers receipt of the licence fees and other moneys and its making of any payment of compensation.
Turning now to Arnold Js other reasons for rejecting this part of Professor Shanks case, the inquiry under section 41(1) will in this case end at the time the order for payment is made.
In other cases, in assessing benefit, it may be necessary to look forward.
But that is specifically contemplated by section 41(1) which makes clear that, in an appropriate case, an award must be such as to secure for the employee a fair share of the benefit which the employer may reasonably be expected to derive from the patent.
I also reject the suggestion that the approach Professor Shanks contends for would cut across the statutory scheme.
It is true that the Comptroller has no power to award interest.
But that is not what Professor Shanks seeks and in my opinion there is nothing in the scheme which bars the Comptroller from having regard to the impact of inflation in assessing the benefit or what amounts to a fair share of it.
As for complexity and delay, there is nothing unduly complex about an assessment of the impact of time on the real value of money; nor should the possibility of an uplift encourage delay, for if in any case the employee has delayed unduly, the Comptroller would no doubt take that into account in carrying out his assessment.
In this case there is no finding by the hearing officer that Professor Shanks was unreasonably slow to make his application; nor can he be criticised for his conduct of the proceedings.
In my judgement, and on the assumption he is otherwise successful on his appeal, fairness demands that his award of compensation should reflect the detrimental effect of time on the value of money.
Was the benefit outstanding?
The hearing officer carried out his assessment of the appropriate characterisation of the benefit of the Shanks patents to Unilever by considering that benefit in a number of ways.
He looked at it in the light of Unilevers overall profits and turnover, by reference to patents in general, in the context of Unilevers licensing activities, in the light of Unilevers patent activities and finally, as compared to Unilevers activities in general.
In the course of this analysis the hearing officer made a series of findings and observations which are to my mind rather striking.
He held that there was an extreme disparity in numerical terms between the benefit Unilever received and the regular salary and 100 assignment fee that Professor Shanks was paid.
He observed that there was scant evidence before him of Unilevers other licensing activities and that he had been provided with no example of another licensing deal which had provided Unilever with an income at or above the level of the Shanks patents.
He found that the Shanks patents had produced a very high rate of return; that Unilever had made a very small effort to commercialise Professor Shanks invention; that Unilevers licensing efforts were serious but not exceptional; and that Unilever had generated the benefit it derived from the Shanks patents at no significant risk.
In drawing his conclusions, he held that the benefit was a substantial and significant one in monetary terms, and that in comparison with the benefit to Unilever of other patents, it did stand out.
In my opinion all of these matters point strongly to the conclusion that the Shanks patents were an outstanding benefit to CRL having regard to the size and nature of its undertaking as I would hold these features must be understood.
How then did the hearing officer arrive at his conclusion that they were not? I think the key aspects of his reasoning may be summarised as follows.
Looking first at Unilevers profits and turnover, the hearing officer agreed with Professor Shanks that it was simplistic to look simply at the figures for the overall turnover or profits of the undertaking and to say that a given benefit was only a small percentage of that.
He explained that a relatively modest sum might represent an excellent return for a small company but would not do so for a larger entity, such as Unilever, which by its nature, for example being able to contemplate greater expenditure on litigation, could secure a higher return in a negotiation.
Ultimately, he continued, it was a matter of considering the benefit in the overall context and making an assessment as to whether it was outstanding.
Turning next to the benefit of the Shanks patents in relation to patents in general, the hearing officer explained that there was expert evidence before him on this issue but he found none of it of much assistance.
Instead he reasoned that the assessment had to be carried out in the context of the employers undertaking and that he found it hard to see how a benefit of a relatively modest sum of, say, 50,000 could be considered an outstanding benefit in the context of Unilevers overall budget.
This was followed by a consideration of the benefit to Unilever of the Shanks patents in the context of its licensing activities.
Here the hearing officer recognised that the Shanks patents did stand out in terms of the licensing income they generated but thought that it did not follow that the benefit was outstanding.
How the benefit was obtained was, in his view, irrelevant.
What mattered was whether the benefit was outstanding in the context of the undertaking as a whole.
The hearing officer then considered the benefit to Unilever of the Shanks patents in light of Unilevers broader patent activities.
Here he referred to the evidence of Dr Mulder who held the position of Vice President Patents at Unilever.
Some years earlier Dr Mulder had attempted to value Unilevers patents but he accepted in the course of his cross examination that his analysis did not produce a value of the patents in monetary terms but rather in terms of the value of product sales to which they related.
He was therefore unable to identify any other patent which was more beneficial to Unilever than the Shanks patents.
Finally, the hearing officer compared the benefits from the Shanks patents with the benefits generated by its other activities and referred in this connection to the unchallenged evidence of Dr Mulder that Unilever had a number of highly successful products, such as Viennetta ice cream, spreads and deodorants, and that these generated an income of many billions of pounds and many hundreds of millions of pounds of profit over the lifetime of the patents which protected them.
He said this gave some indication of the sorts of sums that could be of great benefit to Unilever and they were an order of magnitude greater than the benefit derived from the Shanks patents.
The hearing officer expressed his conclusions in these terms: 222.
Considering the totality of the evidence, I was left with a clear impression.
The benefit provided by the Shanks patents was a substantial and significant one in money terms - the sort of sum that Unilever would, on the evidence, worry about Furthermore, in comparison to the benefit from other patents to Unilever, from the evidence before me it does, in Mr Emanuels words stand out.
But Unilever makes profits at an order of magnitude greater on other inventions - albeit primarily by manufacture and at a much lower rate of return than was provided by the Shanks patents.
Further, this is not such a case as Kelly, where Floyd J held that without the patents in that case, Amersham would have faced a crisis.
There was no suggestion from either party that the Shanks patents were crucial to Unilevers success.
223.
In my view, taking account of the size and nature of Unilevers business, the benefit provided by the Shanks patents falls short of being outstanding.
Did the hearing officer make an error of principle in assessing the benefit?
It is apparent from the summary in the immediately foregoing section that a central and essential part of the hearing officers reasoning was that Unilever generated a vast income and commensurate profits from the manufacture and sale of products such as ice cream, spreads and deodorants which had the benefit of patent protection, and that this income and these profits were an order of magnitude greater than the benefits Unilever derived from the Shanks patents.
The hearing officer clearly thought that this was highly relevant because he said in terms that it gave an indication of the sorts of benefits generated by highly successful products and so the sorts of sums which could be considered of great benefit to Unilever.
This is also apparent from his conclusion, for in referring to profits an order of magnitude greater on other inventions, the hearing officer was referring to the overall profits made by Unilever from the manufacture and sale of these products.
There are in my view a number of problems with these aspects of the hearing officers analysis.
First, he adopted the wrong starting point.
Professor Shanks was employed by CRL, and CRL operated a research facility for the Unilever group.
CRLs undertaking for the purposes of section 40 of the 1977 Act was the business of generating inventions and providing those inventions and the patents which protected them to Unilever for use in connection with its business.
It was to the size and nature of this undertaking, among other things, that the hearing officer was required by section 40 to have regard in assessing the nature of the benefit to CRL and Unilever of any such patent.
Instead the hearing officer took CRLs undertaking to be the whole of the Unilever group and this pervaded the whole of his evaluation.
In my judgement that was wrong in principle.
Secondly and irrespective of his starting point and the extent of CRLs undertaking, the hearing officers particular focus upon the overall turnover and profits generated by Unilever, as illustrated by the size of its business in making and selling ice cream, spreads and deodorants, was in my view misdirected.
The success of these products could no doubt be attributed to a range of factors including quality, branding and pricing.
It is also true that they were protected at least to some degree by patent families which related to the processes by which they were made or aspects of the technology which they contained.
But, as the hearing officer himself acknowledged, only a proportion of the sale price of any product could be attributed to any patent protection, and Unilevers attempts to assess the value of these other patents failed.
Indeed, the hearing officer recognised that, in terms of the benefit which Unilevers patents had generated, the Shanks patents stood out.
Thirdly, it cannot be said that the size and success of Unilevers business as a whole played any material part in securing the benefit it has enjoyed from the Shanks patents.
That benefit was generated by licensing or selling its patent rights, not by harnessing its manufacturing capacity, its sales and distribution facilities or its goodwill.
The licence fees, which constituted the main part of the benefit, were paid by licensees who, with one exception, approached Unilever.
It is true that Unilevers licensing personnel negotiated those licences with skill and serious effort but its costs of doing so were modest and taken into account, and the hearing officer made no finding to the effect that the royalty rates were boosted by the application of Unilevers financial muscle or the threat of legal proceedings.
These were matters he failed properly to take into account.
Fourthly, the hearing officer appeared rightly to disavow an approach which involved assessing the extent and nature of the benefit derived from a patent simply by comparing it to the patent owners overall turnover or profits.
But he also indicated these matters might be relevant if, for example, an undertakings size enabled it to exert greater leverage.
Yet, having apparently rejected such an approach, he then adopted it.
There was no justification here for simply weighing the sums Unilever generated from the Shanks patents against the size of its turnover and overall profitability in products such as Viennetta ice cream, spreads and deodorants and yet this formed an important part of his assessment.
I am conscious that the decision of the hearing officer on this issue necessarily involved an evaluation and it is of course well established that an appellate court should be very cautious in differing from such an evaluation unless it involves an error of principle: see, for example, Biogen Inc v Medeva plc [1997] RPC 1, 45 per Lord Hoffmann.
That is particularly so where the decision is that of a specialist tribunal.
What constitutes an error of principle was considered most recently by Lord Hodge in Actavis Group PTC EHF v ICOS Corpn [2019] UKSC 15; [2019] Bus LR 1318, paras 80-81.
As he there explained, such an error is not confined to an error as to the law but extends to certain types of error in the application of a legal standard to the facts in an evaluation of those facts.
A legal error might involve asking the wrong question, failing to take into account relevant matters or taking into account irrelevant matters.
In the absence of such an error, the appeal court would be justified in differing from a tribunals assessment if it were to reach the view that the tribunals conclusion was outside the bounds within which reasonable disagreement was possible.
I am satisfied that, for the reasons given in paras 79-82 above, the hearing officer was wrong in principle and that Arnold J on appeal and the Court of Appeal on further appeal wrongly failed so to hold.
Further, having regard to the fundamental nature of these errors, the decision of the hearing officer must be set aside.
I have considered whether it is necessary to remit this appeal for a rehearing but I have concluded it is not, for it seems to me to be clear how the hearing officer would or ought to have decided this issue had he directed himself correctly.
I would add that this is a conclusion at which I am relieved to arrive in the light of the time these proceedings have taken and the costs that must have been incurred.
In summary and as I have foreshadowed, Professor Shanks made his invention using his own initiative for his brief was to work in the area of biosensors for process control and process engineering and he was made to understand that he should not stray too far from it.
He built the first prototype of his invention in October 1982, some five months after he had joined CRL.
This would have been a new product area for Unilever but it was a development which the group did not, in the hearing officers terminology, get behind and push.
It was regarded as far from a key technology and it was one into which Unilever made only a modest investment.
It is true that Unilever patented and maintained a patent portfolio which protected it and in due course expended significant effort and skill in the licensing negotiations.
But the rewards it enjoyed were substantial and significant, were generated at no significant risk, reflected a very high rate of return, and stood out in comparison with the benefit Unilever derived from other patents.
What was more, they could not be attributed to the deployment or application of Unilevers wider business assets or infrastructure; nor were they found to be the consequence of any leverage Unilever could exert because of its size.
In short, the benefit Unilever enjoyed from the Shanks patents was outstanding within the meaning of section 40 of the 1977 Act.
Fair share
Section 41 of the 1977 Act says that an award of compensation to an employee under section 40(1) or (2) shall be such as will secure for the employee a fair share, having regard to all the circumstances, of the benefit which the employer has derived or may be reasonably expected to derive from the patent.
Section 41(4) then specifies that various matters must be taken into account.
In assessing what would have been a fair share of the benefit Unilever had derived from the Shanks patents, the hearing officer duly addressed each of the matters set out in section 41(4).
In so doing he had regard to the nature of Professor Shanks duties and that he was employed to invent; Professor Shanks remuneration, which was commensurate with his level of responsibility; the effort and skill Professor Shanks expended in making the invention; the contribution made by Unilever to the making, developing and working of the invention; and Unilevers licensing effort which, the hearing officer observed, was serious but not exceptional.
The hearing officer also had regard to the evidence before him about the percentage award rates in company and university employee compensation schemes.
Having regard to all of these matters, the results of a literature review and the parties submissions, he held that 5% would have been the appropriate fair share of the benefit, had it been outstanding.
On appeal, Arnold J came to the conclusion that an important factor in Unilevers ability to extract licence fees was the fact that it could afford to bring proceedings for patent infringement and pursue them to a conclusion, and that the hearing officer had wrongly failed to take this into account.
In these circumstances he thought that it would not be right to award to Professor Shanks a percentage of the benefit which was higher than the 3% awarded to the inventors in the Kelly case, and that this would have been the fair share of the benefit to award to Professor Shanks, had that benefit been outstanding.
On further appeal, the Court of Appeal did not need to address this issue and did not do so.
Professor Shanks now contends that Arnold J had no proper basis for reducing the share of the benefit to 3% and that even 5% is too low, for it fails properly to take into account that he conceived the invention outside and in addition to his assigned role; that the licence fees generated by the patent represented an entirely new income stream for Unilever; and that he made the invention and the patent was exploited at no risk to Unilever.
He argues that between 10% and 20% of the benefit would represent a fair share.
In my judgement Arnold J was wrong to find that 3% represented a fair share of the benefit Unilever enjoyed from the Shanks patents.
The hearing officer had well in mind the size of Unilevers business and the nature of the licensing negotiations yet he did not make a finding that it secured the licence rates it did because it could afford to bring and pursue infringement proceedings against the prospective licensees.
The absence of such a finding is not at all surprising.
Unilever had no manufacturing business it needed to protect and, with one exception, the discussions were initiated by the prospective licensees.
In substance, these were negotiations between willing licensors and willing licensees.
Arnold J therefore had no basis for reducing the percentage from 5% to 3%.
I am not persuaded by Professor Shanks other arguments, however.
The hearing officer found that the invention was made in the course of his contractual duties, although its subject matter was not the main focus of his work.
Moreover, as the hearing officer also found, Professor Shanks was employed to invent and, in making the invention, did what he was employed to do.
I accept that the patent generated a new stream of income for Unilever, but it did not do so without its input.
To the contrary, it was brought to fruition by Unilevers negotiation of the licences, and that is something in which Professor Shanks played no part.
Finally, it is true that Unilever made only a relatively small effort to commercialise the invention and exploited the Shanks patents at no real risk to itself, but these were matters which the hearing officer took into account in arriving at his figure of 5%.
I am satisfied that the hearing officer made no error in the way he approached this issue and it would not be appropriate to interfere with the conclusion to which he came.
It only remains to apply to the 5% share of the 24m an uplift to reflect the impact of time on the value of money.
Professor Shanks invites us to take 1999 as the median year in which Unilever received the benefit and then to take into account the effect of inflation using the Bank of England calculator.
I did not detect any substantive objection from Unilever to this methodology and I think it is a reasonable and fair way to proceed.
This produces a figure of about 2m at an average inflation rate of 2.8%.
In my judgement the fair share of that benefit to which Professor Shanks is entitled is therefore 2m.
Conclusion
For these reasons I would allow Professor Shanks appeal.
In my judgement the Shanks patents were of outstanding benefit to Unilever and CRL and Professor Shanks is entitled to a fair share of that benefit amounting to 2m.
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From 1982 to 1986, Professor Shanks (the appellant) was employed by Unilever UK Central Resources Ltd (CRL).
CRL employed the UK based research staff of the Unilever group of companies (Unilever).
It was not a trading company and was a wholly owned subsidiary of Unilever plc.
While employed by CRL, Professor Shanks conceived an invention, the rights to which belonged to CRL from the outset under the Patents Act 1977 (the 1977 Act).
CRL assigned those rights to Unilever plc for 100.
Unilever was later granted various patents relating to the invention (the Shanks patents).
Over time, Unilever derived a net benefit from the Shanks patents of approximately 24.3 million.
On 9 June 2006, Professor Shanks applied for compensation under section 40 of the 1977 Act on the basis that the Shanks patents had been of outstanding benefit to CRL and that he was entitled to a fair share of that benefit.
On 21 June 2013, the hearing officer acting for the Comptroller General of Patents (the Comptroller) found that, having regard to the size and nature of Unilevers business, the benefit provided by the Shanks patents fell short of being outstanding.
Professor Shanks appealed to the High Court and Mr Justice Arnold dismissed the appeal.
Professor Shanks then appealed to the Court of Appeal.
That appeal succeeded in part, but the Court of Appeal found that Professor Shanks was not entitled to compensation.
Professor Shanks now appeals to the Supreme Court.
The Supreme Court allows the appeal.
Lord Kitchin gives the sole judgment, with which the other Justices agree.
An employee who makes an invention which belongs to his or her employer from the outset and for which a patent has been granted is entitled to compensation if he or she establishes: first, that the patent is, having regard among other things to the size and nature of the employers undertaking, of outstanding benefit to the employer; and secondly, that, by reason of these matters, it is just that he or she be awarded compensation [30].
At least in the ordinary case, Parliament intended the term employer to mean the inventors actual employer [31].
The relevant benefit is the benefit the inventors actual employer has derived or may reasonably be expected to derive from the patent, or from the assignment or grant to a person connected with him of any right in the invention, patent or patent application [32].
In assessing the benefit derived or expected to be derived by an employer from an assignment of the patent to a person connected with the employer (the circumstances of this case), the court must consider the position of the actual employer and the benefit which the assignee has in fact gained or is expected to gain [33].
Previous cases on applications for inventor compensation are helpful to a point, but they provide no substitute for the statutory test, which requires the benefit to be outstanding.
That is an ordinary English word meaning exceptional or such as to stand out and it refers to the benefit (in terms of money or moneys worth) of the patent to the employer rather than the degree of inventiveness of the employee.
It is, however, both a relative and qualitative term and the context must be considered [39].
An undertaking is a unit or entity which carries on a business activity, and here the undertaking to be considered is that of the company or other entity which employs the inventor [41].
The correct approach in identifying the relevant undertaking is to look at the commercial reality of the situation.
Where a group company operates a research facility for the benefit of the whole group and the work results in patents which are assigned to other group members for their benefit, the focus of the inquiry into whether any one of those patents is of outstanding benefit to the company must be the extent of the benefit of that patent to the group and how that compares with the benefits derived by the group from other patents for inventions arising from the research carried out by that company [48].
A highly material consideration is the extent of the benefit of the Shanks patents to the Unilever group and how that compares with the benefits the group derived from other patents resulting from the work carried out at CRL [51].
The court should take into account matters such as the fact that a large undertaking might be able to harness its goodwill and sales force in a way that a smaller undertaking could not do [53].
However, a tribunal should be very cautious before accepting a submission that a patent has not been of outstanding benefit to an employer simply because it has had no significant impact on its overall profitability or the value of all of its sales [54].
As to the relevance of tax, the employee must account for any tax due on his or her fair share and the employer must account for any tax due on the balance.
This approach is consonant with the legislative purpose of the provisions of the 1977 Act and is fairer than an approach which requires the employer to pay the employee a share of the benefit net of tax [58].
Separately, if the benefit is outstanding, then the fair share of the benefit should reflect the deleterious effect on the real value of money of the substantial time between Unilevers receipt of the licence fees and other moneys and its making of any payment of compensation [66].
The 1977 Act does not bar the Comptroller from having regard to the impact of inflation.
This approach is not unduly complex and should not encourage delay [67].
The hearing officers assessment of the benefit of the Shanks patents was flawed.
First, he adopted the wrong starting point.
CRLs undertaking for the purposes of section 40 was the business of generating inventions and providing those inventions and the patents which protected them to Unilever for use in connection with its business [79].
Secondly, the hearing officers particular focus upon the overall turnover and profits generated by Unilever was misdirected [80].
Thirdly, it cannot be said that the size and success of Unilevers business as a whole played any material part in securing the benefit it has enjoyed from the Shanks patents, and the hearing officer failed to take into account relevant matters [81].
Fourthly, the hearing officer wrongly adopted an approach which involved assessing the extent and nature of the benefit derived from a patent simply by comparing it to the patent owners overall turnover or profits [82].
The hearing officers decision must be set aside [84].
The benefit Unilever enjoyed from the Shanks patents was outstanding within the meaning of section 40 [85].
Mr Justice Arnold was wrong to find that 3% would have represented a fair share of the benefit Unilever enjoyed from the Shanks patents [90].
It would not be appropriate to interfere with the hearing officers conclusion that 5% would have been a fair share [91].
The fair share to which Professor Shanks is entitled is 2m and the appeal is allowed [92 93].
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Information is the key to sound decision making, to accountability and development; it underpins democracy and assists in combatting poverty, oppression, corruption, prejudice and inefficiency.
Administrators, judges, arbitrators, and persons conducting inquiries and investigations depend upon it; likewise the press, NGOs and individuals concerned to report on issues of public interest.
Unwillingness to disclose information may arise through habits of secrecy or reasons of self protection.
But information can be genuinely private, confidential or sensitive, and these interests merit respect in their own right and, in the case of those who depend on information to fulfil their functions, because this may not otherwise be forthcoming.
These competing considerations, and the balance between them, lie behind the issues on this appeal.
This appeal concerns the relationship between the Charity Commission, a public authority responsible for inquiries in relation to which it requires information from third parties, and the press, concerned to understand and report on the Charity Commissions performance of its role.
It also concerns the relationship between the Freedom of Information Act 2000 (the FOIA) and the statutory and common law position regarding the disclosure of information outside the scope of the FOIA.
The FOIA provides a framework within which there are rights to be informed, on request, about the existence of, and to have communicated, information held by any public authority.
But the framework is not all embracing.
First, these rights do not apply at all in cases which are described as absolute exemptions (see sections 2(1)(a) and 2(1)(b)) and are subject to a large number of other carefully developed qualifications.
Second, as the other side of this coin, section 78 of the FOIA specifies that nothing in it is to be taken to limit the powers of a public authority to disclose information held by it.
In the present case, Mr Kennedy, an experienced journalist with The Times, has been long concerned to investigate and understand more about three inquiries conducted under the Charities Act 1993 by the Charity Commission in relation to an appeal (The Mariam Appeal) founded by Mr George Galloway MP in 1998 and operated until 2003.
He views the two brief reports by the Charity Commission on these inquiries as leaving significantly unclear the basis upon which the Commission conducted the inquiries, the information on which it acted, its communications with other public authorities and its conclusions.
On 8 June 2007 he made corresponding requests for disclosure of documentation by the Charity Commission under the FOIA.
In response, the Charity Commission points to an absolute exemption contained in section 32(2) of the FOIA.
This exempts the Charity Commission from any duty to disclose any document placed in its custody or created by it for the purposes of an inquiry which it has in the public interest conducted in the exercise of its functions.
The Charity Commission submits that this exemption lasts until the document is destroyed or, if the document is one that ought to be publicly preserved, that it lasts for up to 30 (or in future 20) years under the Public Records Act 1958, section 3 as amended for the future by the Constitutional Reform and Governance Act 2010, section 45(1).
Section 32 is a section dealing with information held by courts and persons conducting an inquiry or arbitration.
Its intention was not that such information should not be disclosed.
Its intention was to take such information outside the FOIA.
Any question as to its disclosure was to be addressed under the different and more specific schemes and mechanisms which govern the operations of and disclosure by courts, arbitrators or persons conducting inquiries.
With regard to the Charity Commission the relevant scheme and mechanism is found in the Charities Act 1993, as amended by the Charities Act 2006 (since replaced by the Charities Act 2011), the construction of which is informed by a background of general common law principles.
In the present case, the focus has, however, been on the FOIA as if it were an exhaustive scheme.
The argument has been, in effect, that, unless a prima facie right to disclosure can be found in the FOIA, United Kingdom law must be defective, and in breach of what is said to be the true interpretation of article 10 of the European Convention on Human Rights.
But that misreads the statutory scheme, and omits to take into account the statutory and common law position to which, in the light of sections 32 and 78 in particular, attention must be addressed.
The Court of Appeal thus correctly held in R (Guardian News and Media Ltd) v City of Westminster Magistrates Court (Article 19 intervening) [2012] EWCA Civ 420, [2013] QB 618 that it was quite wrong to infer from the exclusion by section 32 of court documents from the FOIA that Parliament intended to preclude the court from permitting a non party to have access to such documents if the court considered such access to be appropriate under the open justice principle (para 74).
That was a case concerning court documents, but the same general point applies to inquiry documents: section 32 is no answer to any power which the holder of an inquiry may have to disclose, or which the court may have to order disclosure in respect of, inquiry documents outside section 32.
In the present case, Mr Kennedys claim to disclosure by the Charity Commission has only ever been pursued by reference to the FOIA.
At the outset, before it referred to section 32, the Charity Commission did on 4 July 2007 explain in a little detail the factors which it saw as relevant to any issue of disclosure.
It said: There is a strong public interest in the Commission being able to carry out its functions which is expressly recognised by the [FOIA] in section 31(2)(f) (h).
Section 31 exempts from disclosure information which, if released, would prejudice the Commissions functions in protecting charities against misconduct or mismanagement (whether by trustees or other persons) in their administration, protecting the property of charities from loss or misapplication and recovering the property of charities.
The Commission relies very much on the co operation of and liaison with a variety of third parties in undertaking these functions and routine disclosure of regulatory communication between the Commission and these parties would adversely affect the Commission in its work.
The competing public interest is for transparency of the decisions and reasons for them so as to promote public confidence in charities.
This is tempered by the need for confidentiality in the exchange of information.
In my view, at this time, balance of the public interest weighs more strongly with securing the Commissions ability to carry out its functions efficiently and therefore lies in withholding the information.
Outside the FOIA, and in particular if this had been the response given to a claim for disclosure under the Commissions Charities Act powers and duties, the response could have been tested by judicial review on ordinary public law principles.
Instead, Mr Kennedys claim was and has only ever been put on the basis that the FOIA must be construed or remodelled so as to give him a claim under that Act.
In these circumstances, the issues directly arising on this appeal are limited.
The first is whether section 32(2) contains, as a matter of ordinary construction, an absolute exemption which continues after the end of an inquiry.
Mr Philip Coppel QC representing Mr Kennedy submits that it does not.
That failing, he relies, second, on what he describes as a current direction of travel of Strasbourg case law for a proposition that article 10 of the Convention imposes a positive duty of disclosure on public authorities, at least towards public watchdogs like the press, in respect of material of genuine public interest, subject to the exemptions permitted by article 10(2).
On that basis, and in the light of the duty in section 3 of the Human Rights Act 1998 to interpret primary legislation so far as it is possible to do so . in a way which is compatible with the Convention rights, he submits that section 32 should be read down so that the absolute exemption ceases with the end of the relevant inquiry.
Alternatively, taking up a point put by the Court, he submits that the absolute exemption should from that moment be read as a qualified exemption (requiring a general balancing of the competing public interests), along the lines provided by section 2(2)(b) of the FOIA.
Thirdly, all those submissions failing, he submits that the Court should make a declaration of incompatibility in respect of section 32(2).
Fourthly, however, despite the limitations in the way in which the case has been presented, it will, for reasons already indicated, be appropriate and necessary to consider the statutory and common law position outside the scope of the FOIA.
As I have stated, the effect of section 32 is not to close those off, but rather to require attention to be directed to them.
In a judgment dated 20 March 2012 differing from the First tier Tribunal, the Court of Appeal accepted that section 32 applied and dismissed Mr Kennedys claim accordingly.
The present appeal is brought against that dismissal.
For reasons contained in paras 24 to 42, Mr Kennedys appeal falls in my opinion to be dismissed, even if Mr Kennedys case on the scope of article 10 is to be accepted at its highest.
But, for completeness, I consider article 10 in paras 43 to 100, while para 101 states my overall conclusions on the issues argued.
The background in more detail
The bulk of the information which Mr Kennedy seeks is to be found in documents prepared by other public authorities or private persons or bodies for the purposes of the Charity Commission inquiry.
The information requested also includes some pre existing documents and communications between the Charity Commission, other public authorities, other entities and Mr Galloway himself.
The information is all of potential public interest.
The First tier Tribunal accepted this in a report dated 18 November 2011 made at the Court of Appeals request in this case.
The First tier Tribunal was not however concerned with the question, which it left entirely open, whether the information should in the public interest be disclosed it decided that section 32 should be read down so as to cease to apply after the end of the inquiry, because the rights and interests of the Charity Commission and others co operating with it in the inquiry would be fully protected by the suite of other exemptions in Part II of FOIA.
The information also concerns a high profile and, to use Mr Kennedys word, controversial MP.
It concerns a public appeal on behalf of an organisation which the Commission (confirming Mr Kennedys prior suspicions) found to be a charity which should have been, but was not, registered and operated under the Charities Act 1993 as amended.
Investigations by Mr Kennedy himself led to the first Charity Commission inquiry in June 2003.
This was in turn followed by a second inquiry in November 2003 and (in the light of reports published by the UN Independent Inquiry Committee and US Senate Committee on Homeland Security and Governmental Affairs Permanent Sub committee on Investigations in October 2005) a third inquiry in December 2005.
The report on the first and second inquiries confirmed Mr Kennedys belief that appeal monies had been used by Mr Galloway on travel and political campaigning to end the sanctions against Iraq and found that other monies had been received by other trustees as unauthorised benefits in the form of salary payments.
Mr Kennedy maintains that these uses of funds were contrary to Mr Galloways original stated aim that appeal funds would be used first to treat Miss Mariam Hamza and thereafter to treat other Iraqi children also suffering from leukaemia, and that the inquiries, when holding that such use fell within or advanced the charitys purposes, failed properly to address this aspect.
He also maintains that, in closing the inquiries without taking or proposing further action, the Charity Commission showed a lack of interest in investigating what had become of the appeal funds.
The report on the third inquiry found that the source of some of the appeal funds consisted in monies paid in connection with contracts which breached the UN sanctions against Iraq.
This occurred in circumstances where one trustee (Mr Zureikat) knew and Mr Galloway may also have known of the connection, a statement which Mr Kennedy understandably wishes to probe.
Mr Galloway denounced this report, as containing sloppy, misleading and partial passages which could have been cleared up, if the Commission had bothered to interview me during the course of its inquiry.
But a Commission spokesman subsequently informed Mr Kennedy that Mr Galloway, although giving written answers to questions posed, had failed to take up an offer of a meeting.
Mr Kennedy wishes to follow up this discrepancy.
More generally, Mr Kennedy says that the very brief and unspecific nature of the two Commission reports and the conclusions reached, basically to leave matters as they were, raise questions about the manner in which the Charity Commission performed one of its central functions.
The Charity Commission, supported by the Secretary of State for Justice as well as by the Information Commissioner as interveners, maintains that Mr Kennedys requests relate to information which enjoys absolute exemption from disclosure under section 32 read with section 2(3) of the FOIA.
Other possible heads (such as sections 27, 31, 40, 41 and 42: see paras 17 to 21 below), upon which the Charity Commission would, if necessary, have resisted disclosure of some or all of the material sought under the FOIA, have not therefore been adjudicated upon.
As noted in para 11 above, the First tier Tribunal was not instructed to, and did not, address the question whether the information should be disclosed on a balancing of the relevant public and private interests under such heads.
Mr Kennedy has in fact refined his requests so as expressly to disclaim any wish to see information received from or given to a foreign state or international organisation as well as any information in respect of which the House of Commons claims exemption under section 34.
The statute law
Section 1 of the FOIA provides a general right to request, be informed of the existence of and have communicated information held by a public authority, but the right has effect subject to sections 2, 12 and 14.
Section 2 provides: 2.
In respect of any information which is exempt information by virtue of any provision of Part II, section 1(1)(b) does not apply if or to the extent that (a) the information is exempt information by virtue of a provision conferring absolute exemption, or (b) in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.
Section 12 enables limits to be set to the costs which public authorities are bound to incur in complying with any request for information, and different amounts may be set in relation to different cases.
Section 19 requires every public authority to adopt, maintain, review and publish information about its scheme for the publication of information.
Part II (sections 21 to 44) lists a series of classes of exempt information, some absolute, some not.
Section 2(3) lists the sections in Part II which are to be regarded as conferring absolute exemption.
Among these is section 32: 32. (l) Information held by a public authority is exempt information if it is held only by virtue of being contained in (a) any document filed with, or otherwise placed in the custody of, a court for the purposes of proceedings in a particular cause or matter, (b) any document served upon, or by, a public authority for the purposes of proceedings in a particular cause or matter, or (c) any document created by (i) a court, or (ii) a member of the administrative staff of a court, for the purposes of proceedings in a particular cause or matter. (2) Information held by a public authority is exempt information if it is held only by virtue of being contained in (a) any document placed in the custody of a person conducting an inquiry or arbitration, for the purposes of the inquiry or arbitration, or (b) any document created by a person conducting an inquiry or arbitration, for the purposes of the inquiry or arbitration.
Other classes of absolutely exempt information include: under section 21, information reasonably accessible to the applicant otherwise than under the Act; under section 23, information directly or indirectly supplied by or relating to the Security and Secret Intelligence Services, the Government Communications Headquarters, the special forces and a list of tribunals and other authorities associated with security matters; under section 34, information where necessary to avoid an infringement of the privileges of either House of Parliament; and, under section 41, information obtained by the public authority from any other person (including another public authority), where the disclosure of the information to the public would constitute a breach of confidence actionable by that or any other person.
Part II makes further provision for exempt (but not absolutely exempt) information, viz: under sections 24 to 26, information required for safeguarding national security and potentially prejudicial to the British Islands or any colonys defence; under sections 27 and 28, information potentially prejudicial to the United Kingdoms international relations, and relations between the devolved administrations; under section 29, for information potentially prejudicial to the United Kingdoms and any such administrations economic interests, and under section 35, information relating to the formulation of government policy and the effective conduct of public affairs.
Section 31 concerns information, not absolutely exempt, described as relating to law enforcement: 31. (1) Information which is not exempt information by virtue of section 30 is exempt information if its disclosure under this Act would, or would be likely to, prejudice (a) the prevention or detection of crime, (b) the apprehension or prosecution of offenders, (c) the administration of justice, (d) the assessment or collection of any tax or duty or of any imposition of a similar nature, (e) the operation of the immigration controls, (f) the maintenance of security and good order in prisons or in other institutions where persons are lawfully detained, (g) the exercise by any public authority of its functions for any of the purposes specified in subsection (2), (h) any civil proceedings which are brought by or on behalf of a public authority and arise out of an investigation conducted, for any of the purposes specified in subsection (2), by or on behalf of the authority by virtue of Her Majesty's prerogative or by virtue of powers conferred by or under an enactment, or (i) any inquiry held under the Fatal Accidents and Sudden Deaths Inquiries (Scotland) Act 1976 to the extent that the inquiry arises out of an investigation conducted, for any of the purposes specified in subsection (2), by or on behalf of the authority by virtue of Her Majesty's prerogative or by virtue of powers conferred by or under an enactment. (2) The purposes referred to in subsection (1)(g) to (i) are (a) the purpose of ascertaining whether any person has failed to comply with the law, (b) the purpose of ascertaining whether any person is responsible for any conduct which is improper, (c) the purpose of ascertaining whether circumstances which would justify regulatory action in pursuance of any enactment exist or may arise, (d) the purpose of ascertaining a person's fitness or competence in relation to the management of bodies corporate or in relation to any profession or other activity which he is, or seeks to become, authorised to carry on, (e) the purpose of ascertaining the cause of an accident, (f) the purpose of protecting charities against misconduct or mismanagement (whether by trustees or other persons) in their administration, (g) the purpose of protecting the property of charities from loss or misapplication, (h) the purpose of recovering the property of charities, (i) the purpose of securing the health, safety and welfare of persons at work, and (j) the purpose of protecting persons other than persons at work against risk to health or safety arising out of or in connection with the actions of persons at work.
Sections 40 (a part absolute exemption under section 2(3)(f)) and 42 (a non absolute exemption) provide: 40 (1) Any information to which a request for information relates is exempt information if it constitutes personal data of which the applicant is the data subject. (2) Any information to which a request for information relates is also exempt information if (a) it constitutes personal data which do not fall within subsection (l), and (b) either the first or the second condition below is satisfied. 42. (l) Information in respect of which a claim to legal professional privilege or, in Scotland, to confidentiality of communications could be maintained in legal proceedings is exempt information.
The Charity Commission was at the material times subject to the Charities Act 1993 (since replaced by the Charities Act 2011).
The 1993 Act, as amended, provided: 1B (1) The Commission has the objectives set out in subsection (2). (2) The objectives are 1 The public confidence objective. 2 The public benefit objective. 3 The compliance objective. 4 The charitable resources objective. 5 The accountability objective. (3) Those objectives are defined as follows 1 The public confidence objective is to increase public trust and confidence in charities. 2 The public benefit objective is to promote awareness and understanding of the operation of the public benefit requirement. 3 The compliance objective is to promote compliance by charity trustees with their legal obligations in exercising control and management of the administration of their charities. 4 The charitable resources objective is to promote the effective use of charitable resources. 5 The accountability objective is to enhance the accountability of charities to donors, beneficiaries and the general public. 1C (1) The Commission has the general functions set out in subsection (2). (2) The general functions are 1 Determining whether institutions are or are not charities. 2 Encouraging and facilitating the better administration of charities. 3 Identifying and investigating apparent misconduct or mismanagement in the administration of charities and taking remedial or protective action in connection with misconduct or mismanagement therein. 4 Determining whether public collections certificates should be issued, and remain in force, in respect of public charitable collections. 5 Obtaining, evaluating and disseminating information in connection with the performance of any of the Commission's functions or meeting any of its objectives. 6 Giving information or advice, or making proposals, to any Minister of the Crown on matters relating to any of the Commission's functions or meeting any of its objectives. 1D (1) The Commission has the general duties set out in subsection (2). (2) . 4 In performing its functions the Commission must, so far as relevant, have regard to the principles of best regulatory practice (including the principles under which regulatory activities should be proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed). 1E (1) The Commission has power to do anything which is calculated to facilitate, or is conducive or incidental to, the performance of any of its functions or general duties. 8 (1) The Commission may from time to time institute inquiries with regard to charities or a particular charity or class of charities, either generally or for particular purposes, but no such inquiry shall extend to any exempt charity except where this has been requested by its principal regulator. (2) The Commission may either conduct such an inquiry itself or appoint a person to conduct it and make a report to the Commission. (6) Where an inquiry has been held under this section, [the Commission] may either (a) cause the report of the person conducting the inquiry, or such other statement of the results of the inquiry as the Commission thinks fit, to be printed and published, or (b) publish any such report or statement in some other way which is calculated in the Commission's opinion to bring it to the attention of persons who may wish to make representations to the Commission about the action to be taken. 10A (1) Subject to subsections (2) and (3) below, the Commission may disclose to any relevant public authority any information received by the Commission in connection with any of the Commission's functions (a) if the disclosure is made for the purpose of enabling or assisting the relevant public authority to discharge any of its functions, or (b) if the information so disclosed is otherwise relevant to the discharge of any of the functions of the relevant public authority. (2) In the case of information disclosed to the Commission under section 10(1) above, the Commission's power to disclose the information under subsection (1) above is exercisable subject to any express restriction subject to which the information was disclosed to the Commission. (3) Subsection (2) above does not apply in relation to Revenue and Customs information disclosed to the Commission under section 10(1) above; but any such information may not be further disclosed (whether under subsection (1) above or otherwise) except with the consent of the Commissioners for Her Majesty's Revenue and Customs. (4) Any responsible person who discloses information in contravention of subsection (3) above is guilty of an offence . (5) lt is a defence for a responsible person charged with an offence under subsection (4) above of disclosing information to prove that he reasonably believed (a) that the disclosure was lawful, or (b) that the information had already and lawfully been made available to the public. (7) ln this section responsible person means a person who is or was (a) a member of the Commission, (b) a member of the staff of the Commission, (c) a person acting on behalf of the Commission or a member of the staff of the Commission, or (d) a member of a committee established by the Commission.
Article 10 (Freedom of expression) of the Human Rights Convention scheduled to the Human Rights Act 1998 reads: 1.
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.
This article shall not prevent states from requiring the licensing of broadcasting, television or cinema enterprises. 2.
The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.
The construction of section 32 of the FOIA
The first issue identified in para 9 above turns on whether the phrase in section 32(1) FOIA for the purposes of proceedings in a particular cause or matter and in section 32(2) for the purposes of the inquiry or arbitration represents a current or an historical condition for absolute exemption.
More fully, do the relevant purposes relate to the time at which the request for disclosure is made and the document is held by the court or by the inquiry or arbitrator(s), as the case may be? Or do they relate to the earlier time at which the document was (in the case of a court) filed with or otherwise placed in its custody or served upon or by the relevant public authority or created by a member of the courts administrative staff or (in the case of an inquiry or arbitration) placed in the custody of, or created by, the person conducting the inquiry or arbitration? The Court of Appeal held the latter: the absolute exemption exists by reference to historical, rather than current, purposes.
Mr Coppel accepts that there can be no distinction in this respect between section 32(1) and section 32(2).
The concession was in my opinion plainly correct.
The phrases relating to the relevant purposes are similarly placed and must on the face of it have been intended to attach to the same point in time.
The practical impact of the phrases is, of course, somewhat different in each case.
In the case of a court, the rules of court and (in the case of superior courts) the exercise of the courts inherent jurisdiction mean that the court can at any time during or after the conclusion of proceedings hear and adjudicate upon applications for the release or disclosure of documents held in court or by court staff.
The court will undertake a broad exercise, balancing the factors for and against public disclosure of court documents.
In the case of an arbitration, there is a strong contractual presumption in favour of confidentiality and against non disclosure.
But this may be overridden by a court where necessary to protect a partys rights against a third party or in other exceptional circumstances where justice requires: see e g Ali Shipping Corpn v Shipyard Trogir [1997] EWCA Civ 3054, [1999] 1 WLR 314; Department of Economic Policy and Development of the City of Moscow v Bankers Trust Co [2004] EWCA Civ 314, [2005] QB 207.
In contrast, in the case of an inquiry by a public authority like the Charity Commission, the position depends upon the type of inquiry and the relevant statutory provisions under which it is held.
A public authority which has held an inquiry may not of course continue to function or exist; the inquiry documents may then be held by a relevant Ministry within whose sphere the inquiry took place, and the relevant ministerial powers would then arise for consideration.
But it is unnecessary to consider this situation in this case.
Here the Charity Commission continues to exist, and was at the relevant time subject to the Charities Act 1993 as amended (since replaced by the Charities Act 2011).
I shall consider the implications of this below.
For present purposes, however, what is important is that section 32 treats all such inquiries in similar fashion to court and arbitration proceedings; all are subject to the same absolute exemption from disclosure under the FOIA.
Coming therefore directly to the interpretation under ordinary principles of section 32, the critical phrase (for the purposes of .) is repeated in relation to and placed at the end of each head of documents identified.
It follows and, read naturally, qualifies each such head: that is, in the case of a court, any document filed or otherwise placed or served or created and, in the case of an inquiry or arbitration, any document placed or created.
To read the phrase as referring back to the initial words of each subsection Information held is, literally, far fetched.
Had that been meant, the draftsman could and would surely have simplified each subsection, by inserting the phrase once only in each subsection, immediately after the words Information held . or, less neatly, after the words if it is held .
The comma which appears in each of subsections (2)(a) and (b) is explained by the interposition in those subsections of the words conducting an inquiry or arbitration between placed in the custody of a person and the phrase for the purposes of the inquiry or arbitration.
It makes clear that the last phrase qualifies placed or created and not conducting.
In the absence of any equivalent words to conducting an inquiry or arbitration in subsection (1), no such comma was necessary or appropriate.
As to the more general merits of the rival constructions, a conclusion that, immediately after the end of any court proceedings, arbitration or inquiry a previously absolute exemption ceases to have effect would, for the reason set out in para 6 above, run contrary to the general scheme of section 32, particularly obviously so in relation to court and arbitration proceedings, but also in relation to inquiries.
It would furthermore create an evident internal anomaly within the FOIA.
The information would cease to enjoy any form of exemption under section 32 as soon as the court proceedings, inquiry or arbitration ended.
From that moment, the information would not even enjoy the benefit of a balancing of the public interest in disclosure against other interests provided by section 2(2)(b).
Further, no ordinary principle of construction could lead to a reading whereby the continuing absolute exemption provided by section 32 was converted into an ordinary exemption within section 2(2)(b) with effect from the close of the relevant court proceedings, arbitration or inquiry.
Other sections, notably section 31 (law enforcement), section 40 (personal information) and section 41 (information provided in confidence), would afford only limited grounds for refusing disclosure (in contrast to the general position otherwise applicable to, at least, court and arbitration documents: see para 26 above).
Some assistance, marginal rather than decisive, as to Parliaments likely understanding when it enacted section 32 is to be found in Part VI of the FOIA.
Under section 62(1), a record becomes a historical record at the end of 30 years (or now by amendment 20 years) beginning with the year of its creation.
Under section 63(1): Information contained in a historical record cannot be exempt information by virtue of section 28, 30(1), 32, 33, 35, 36, 37(1)(a), 42 or 43.
The natural inference is that it was contemplated that information falling within section 32 would continue to be exempt for 30 years.
It is unlikely that the reference to section 32 was included simply to cover the possible existence of documents from court, arbitration or inquiry proceedings rivalling in length those in Jarndyce v Jarndyce or cases where a court, arbitration or inquiry considers documents themselves over 30 years old.
Attention was drawn to the Inquiries Act 2005, which has since 2005 modified the application of section 32 in relation to some inquiries, though not those of the type undertaken by the Charity Commission.
It enables Ministers to set up formal, independent inquiries relating to particular events which have caused or have potential to cause public concern, or where there is public concern that particular events may have occurred.
Not all inquiries fall into this category and there is no statutory requirement on a Minister to use the 2005 Act even if they do.
Where it is used, section 41(1)(b) provides for rules dealing with the return or keeping, after the end of an inquiry, of documents given to or created by the inquiry, while section 18(3) provides that section 32(2) of the FOIA does not apply in relation to information contained in documents passed to and held by a public authority pursuant to rules made under section 41(1)(b) of the 2005 Act.
On this formulation section 32(2) would still apply to documents created by the person conducting the 2005 Act inquiry: see section 32(2)(b).
But documents placed in the inquirys custody for inquiry purposes would potentially be disclosable under the FOIA.
Section 19(1) and (3) of the 2005 Act contain the Acts own regime enabling restrictions to be imposed by the relevant Minister or the chairman of the inquiry on disclosure or publication of evidence or documents given, produced or provided to an inquiry, where conducive to the inquiry fulfilling its terms of reference or necessary in the public interest.
Section 19(4) specifies particular matters which are to be taken into account when considering whether any and what restrictions should be imposed.
They reflect potentially competing interests naturally relevant to any such decision: on the one hand, the allaying of public concern and, on the other, any risk of harm or damage, by disclosure or publication; confidentiality; impairment of the efficiency or effectiveness of the inquiry; and cost.
Restrictions so imposed may continue in force indefinitely: section 20(5), but this is subject to a provision that, after the end of the inquiry, disclosure restrictions do not apply to a public authority in relation to information held by the authority otherwise than as a result of the breach of any such restrictions: section 20(6).
The scheme of the Inquiries Act 2005 was therefore deliberately different from that which, as a matter of straightforward construction, applies under the FOIA in respect of a Charity Commission inquiry.
As a matter of law, the position under the 2005 Act cannot affect the proper construction of the earlier FOIA in relation to Charity Commission inquiries.
Nor, pace Lord Wilsons views in para 193, can Parliaments passing in 2005 of the Inquiries Act throw any light on what section 32 of the FOIA was intended to achieve regarding inquiries in 2000 when the 2005 Act was never conceived, let alone enacted.
But, even if this were not so, the contrast would reinforce, rather than undermine, the conclusion reached regarding Charity Commission inquiries.
Further, the contrast does not of itself mean that the position in relation to Charity Commission inquiries is unsatisfactory.
It is, I repeat, necessary to look at the entire picture, which means not looking only at section 32 of the FOIA, but looking also at the statutory and common law position in respect of Charity Commission inquiries apart from section 32.
In summary, as a matter of ordinary common law construction, the construction is clear: section 32 was intended to provide an absolute exemption which would not cease abruptly at the end of the court, arbitration or inquiry proceedings, but would continue until the relevant documents became historical records; that however does not mean that the information held by the Charity Commission as a result of its inquiries may not be required to be disclosed outside section 32 under other statutory and/or common law powers preserved by section 78 of the FOIA.
Is article 10 of the Convention relevant when construing section 32?
It is at this point that Mr Coppel, on behalf of Mr Kennedy, submits that, if the position on ordinary principles of construction is as stated in the previous paragraph, then section 32(2) must be read down to comply with article 10; in particular, that on that basis section 3 of the 1998 Act requires the exemption provided by section 32 to be read as ending at the same moment as the court, arbitration or inquiry proceedings, so that it only covers documentation held currently for the purposes of such proceedings.
A possible variant of this submission (though not one which Mr Coppel actually explored) might be that the exemption should end at that moment only in the case of inquiry proceedings, while continuing thereafter in the case of court and arbitration proceedings.
Further, if such reading down is not possible, Mr Coppel submits that a declaration of incompatibility is called for.
I cannot accept any of these submissions.
First, to move directly to article 10 is, as I have already indicated, mistaken.
Section 32 leaves open the statutory and common law position regarding disclosure outside the FOIA, and that directs attention to the Charities Act.
If the Charities Act entitles Mr Kennedy to disclosure or puts him in a position no less favourable regarding disclosure than that which should, in Mr Coppels submission, be provided under article 10, then there can be no basis for submissions that section 32 requires reading down in the light of or is inconsistent with article 10.
Second, even if the Charities Act, read by itself, appeared on its face not fully to satisfy any rights to information which Mr Kennedy may enjoy under article 10, it does not follow that the fault lies in section 32, or that section 32 can or should be remoulded by the courts to provide such rights.
On the contrary, in view of the clarity of the absolute exemption in section 32, the focus would be on the Charities Act and it would be necessary to read it as catering for the relevant article 10 rights.
As will appear from what I say later (in paras 43 56 below) about the language of the Charities Act, there would be no difficulty about doing this.
Lord Wilson doubts whether such a scheme would even comply with the Convention, going so far as to suggest that it would not be prescribed by law (para 199).
I cannot accept this, and it would I believe have some remarkable (and far reaching) consequences.
One obvious problem about Lord Wilsons approach is that his treatment of the Charities Act scheme is inconsistent with his treatment of court documents.
In his paras 175 and 192, Lord Wilson holds up the position regarding court documents as a model.
On his own analysis of the Charities Act position, the scheme regarding disclosure of court documents ought to be regarded as even less compliant with the principle that any such scheme must be in accordance with law.
The courts discretion regarding documents not on the court file is not channelled by any published objectives, functions and duties comparable to those present in the Charities Act.
The court is simply guided by the general principle of open justice and must act in accordance with any applicable Convention rights.
This inconsistency leads into another more basic objection to Lord Wilsons approach, one of general importance to the role of the Convention rights in the United Kingdom.
The development of common law discretions, to meet Convention requirements and subject to control by judicial review, has become a fruitful feature of United Kingdom jurisprudence.
It is illustrated at the highest level by cases like Doherty v Birmingham City Council [2008] UKHL 57, [2009] AC 367, paras 55, 70, 84 84 and 133 135 welcomed by the European Court of Human Rights in Kay v United Kingdom [2011] HLR 13, para 73 and by Manchester City Council v Pinnock [2010] UKSC 45, [2011] 2 AC 104, para 73.
In those cases the House of Lords and Supreme Court modelled a common law discretion to meet the needs of article 8.
No distinction can be drawn in the present context between the general nature of articles 8 and 10, each specifying prima facie rights in substantially over lapping terms in their respective paragraphs 1 subject to qualifications identified in their paragraphs 2.
On Lord Wilsons approach this development of common law discretions to meet Convention requirements would be vulnerable to the reproach that there was no specific scheme nothing which could count as prescribed by law.
There are, of course, situations in which, for reasons of consistency or accountability, the manner in which a discretion will be exercised needs to be spelled out in some form.
But that is not so in the present context, as Lord Wilsons own endorsement of the position regarding court and arbitration documents indicates.
Third, Mr Coppel seeks to meet the points made in paras 35 and 36 above by a submission that the FOIA must be regarded as the means by which the United Kingdom gives effect to any article 10 right which Mr Kennedy has; that it covers the field and confers a general entitlement to access to recorded information held by public authorities, while preserving limited other statutory rights under sections 21, 39 and 40 through which access is also routed; and that, if the FOIA fails in this way to give effect to any article 10 right or does so inappropriately, it interferes with the right and must be read down.
But there is no basis for this submission there is no reason why any article 10 rights which Mr Kennedy may have need to be protected by any particular statute or route.
Far from the FOIA being the route by which the United Kingdom has chosen to give effect to any rights to receive information which Mr Kennedy may have, it is clear that the United Kingdom Parliament has determined that any such rights should be located and enforced elsewhere.
That is the intended effect of section 32, read with section 78.
To recapitulate: in view of the clarity of the absolute exemption in section 32 and the provisions of section 78, the focus must be on the Charities Act; and if (contrary to conclusion in paras 57 100 below) Mr Kennedy has prima facie rights which are engaged under article 10(1), then it would be necessary to read the Charities Act compatibly with and as giving effect to such rights; and, further, there would be no difficulty about doing this.
As I read his judgment (paras 225 to 233, especially para 229), Lord Carnwath does not disagree with any of these points.
The difficulty he identifies is not that for which Mr Coppel argued (as set out in para 227 of Lord Carnwaths judgment) and not that the Charities Act cannot be read to give effect to any article 10 rights.
It is that this appears to him a less advantageous approach than one which re writes the FOIA, section 32 in particular (see his paras 231 to 233).
However, it is not a courts role to discard the scheme established by Parliament, simply because it may (in Lord Carnwaths view) involve a more cumbersome means of enforcing Convention rights than Parliament has established elsewhere.
Fourth, I do not consider that article 10 would prove to add anything or anything significant to such rights to disclosure as could be enforced under the Charities Act without reference to article 10.
I explain why below (in paras 43 56).
I also note in this connection (para 49) that Lord Carnwath himself is influenced in his interpretation of the scope of article 10 by the view that it accords with recognised principles of domestic law (his para 218).
Fifth, and for good measure, even if all these points are put on one side, I would not have accepted Mr Coppels submission that section 32 could or should in some way be read down in the light of article 10.
Reading down section 32(2) so that it ceased to apply at the end of any inquiry would mean that the public interest test applicable under section 2(2)(b) of the FOIA would not apply.
Section 2(2) as a whole only applies to information which is exempt.
If article 10 were to mean that section 32(2) should be read down so as to cease to apply after an inquiry closes, then section 2(2) would at that point also cease to apply to the relevant information.
A belated submission was made (after a post hearing question from the Court raised the point) that both sections 2(2) and 32(2) might be manipulated, so that after the close of an inquiry the previous absolute exemption provided by section 32 would become a qualified exemption within section 2(2)(b).
That too would depart from the statutory scheme, and run contrary to the grain of the legislation.
It follows that, even if it were to be held (contrary to my conclusions) that Mr Kennedy has article 10 rights which are not catered for in any way, the most that could be contemplated would be a general declaration of incompatibility.
Conclusion
It follows from the above that Mr Kennedys claim, which has been made and argued on the basis that section 32 of the FOIA can and should be read down to have a meaning contrary to that which Parliament clearly intended, must fail.
It also follows from the above that no basis exists for any declaration of incompatibility with article 10 of the Convention.
In the succeeding paragraphs I will however consider, obiter though it may be, the position regarding Mr Kennedys actual remedies with regard to first the Charities Act and then article 10.
The Charities Act 1993
The provisions of the Charities Act 1993, set out in para 22 above, identify the Charity Commissions objectives, functions and duties in terms which make clear the importance of the public interest in the operations of both the Commission and the charities which it regulates.
The first (public confidence) objective given to the Commission is to increase public trust and confidence in charities, while the fifth and last is to enhance the accountability of charities to, inter alia, the general public.
The Commissions general functions include obtaining, evaluating and disseminating information in connection with the performance of any of its functions or meeting any of its objectives.
As its first general duty, the Commission must, in performing its functions, act in a way (a) which is compatible with its objectives, and (b) which it considers most appropriate for the purpose of meeting those objectives; and, as its fourth such duty, in performing its functions, [it] must, so far as relevant, have regard to the principles of best regulatory practice (including the principles under which regulatory activities should be . accountable, . [and] transparent .).
The significance of these objectives, functions and duties is not affected by the specific provision in section 8(6), whereby the Commission has a choice in which of two ways it publishes the report of the person conducting an inquiry or a statement of the results of the inquiry.
The choice must be made in the light of the Commissions objectives, functions and duties.
Similarly, the significance of those objectives, functions and duties is not affected by the power given in section 10A(1) to disclose to any other public authority information received in connection with the Commissions performance of its functions.
Section 10A addresses situations in which disclosure is made for purposes not in the performance of the Commissions own functions.
It does not touch the breadth of the Commissions own objectives, functions and duties.
The Charity Commissions objectives of increasing public trust and confidence in charities and enhancing the accountability of charities to the general public link directly into its function of disseminating information in connection with the performance of its functions and its duty to have regard to the principle that regulatory activities should be proportionate, accountable, consistent and transparent.
Its objectives, functions and duties are in their scope and practical application in my view comparable to any that might arise under article 10, taking Mr Coppels most expansive interpretation of the scope of that article.
Mr Coppel recognises that, if article 10 is engaged and imposes on public authorities, at least towards public watchdogs, a duty of disclosure in respect of information over which such public authorities have an information monopoly, the duty involved is no more than a prima facie duty, subject to qualifications as envisaged by article 10(2).
In fulfilling its objectives, functions and duties under the 1993 Act, including by conducting and publicising the outcome of any inquiry it holds, the Commission must in my opinion direct itself along lines which are no less favourable to someone in Mr Kennedys position seeking information in order to scrutinise and report on the Commissions performance.
On either basis, the real issue will be whether the public interests in disclosure are outweighed by public or private interests mirroring those identified in article 10(2).
This is reinforced by the importance attaching to openness of proceedings and reasoning under general common law principles in the present area, which constitutes background to the correct interpretation and application of the Charities Act.
Since the passing of the Human Rights Act 1998, there has too often been a tendency to see the law in areas touched on by the Convention solely in terms of the Convention rights.
But the Convention rights represent a threshold protection; and, especially in view of the contribution which common lawyers made to the Conventions inception, they may be expected, at least generally even if not always, to reflect and to find their homologue in the common or domestic statute law.
Not surprisingly, therefore, Lord Goff of Chieveley in Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 282 284 and the House in Derbyshire County Council v The Times Newspapers Ltd [1993] AC 534, 551E both expressed the view that in the field of freedom of speech there was no difference in principle between English law and article 10.
In some areas, the common law may go further than the Convention, and in some contexts it may also be inspired by the Convention rights and jurisprudence (the protection of privacy being a notable example).
And in time, of course, a synthesis may emerge.
But the natural starting point in any dispute is to start with domestic law, and it is certainly not to focus exclusively on the Convention rights, without surveying the wider common law scene.
As Toulson LJ also said in the Guardian News and Media case, 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.
Greater focus in domestic litigation on the domestic legal position might also have the incidental benefit that less time was taken in domestic courts seeking to interpret and reconcile different judgments (often only given by individual sections of the European Court of Human Rights) in a way which that Court itself, not being bound by any doctrine of precedent, would not itself undertake.
In the present case, the meaning and significance which I attach to the provisions of the Charities Act is in my view underpinned by a common law presumption in favour of openness in a context such as the present.
In this respect, court proceedings and inquiries have more in common with each other than they do with arbitration proceedings between parties who have contracted to resolve issues between them on the well understood assumption that their proceedings will be private and confidential.
Starting with court proceedings, common law principles of open justice have been held to require the disclosure to a newspaper for serious journalistic purposes of documents placed before a judge and referred to in open court, absent good reasons to the contrary: see R (Guardian News and Media Ltd) v City of Westminster Magistrates Court [2013] EWCA Civ 420, [2013] QB 618.
The proceedings in issue there were for extradition to the United States of two British citizens on corruption charges, the documents were affidavits, witness statements and correspondence, and the newspaper wanted to see them in order to understand the full course of the proceedings, and to report on them in order to stimulate informed debate about the way in which the justice system deals with suspected international corruption and the system for extradition of British subjects to the USA (para 76).
The Court of Appeal held that the principle of open justice applicable to court proceedings required disclosure of the documents sought, unless outweighed by strong countervailing arguments, which, in the event, it also held was not the case.
The present appeal concerns not proceedings before a court, but an inquiry conducted by the Charity Commission in relation to a charity, and the inquiry proceedings were not conducted in public.
We are not being asked to say that that was wrong, or that court and inquiry proceedings are subject to the same principles of open justice.
I agree with Lord Carnwath (paras 243 and 244) that court and inquiry proceedings cannot automatically be assimilated in this connection.
Had the issue been whether the inquiry proceedings should be conducted in public, we would have had to look at cases such as Crampton v Secretary of State for Health (9 July 1993) (Court of Appeal (Civil Division) Transcript No 824 of 1993), R (Wagstaff) v Secretary of State for Health [2001] 1 WLR 292 and R (Persey) v Secretary of State for the Environment, Food and Rural Affairs [2003] QB 794; [2002] EWHC 371 (Admin), which suggest that it is always very much a matter of context.
At one end of the spectrum are inquiries aimed at establishing the truth and maintaining or restoring public confidence on matters of great public importance, factors militating in favour of a public inquiry.
But many inquiries lie elsewhere on the spectrum.
The present appeal concerns a different issue: to what extent should the Commission disclose further information concerning inquiries on which it has already published reports under section 8(6) of the Charities Act, and in relation to which Mr Kennedy has raised significant unanswered questions of real public interest? We are concerned with a situation where both the Charities Act and the Charity Commission in publishing its report under the Act recognise that the public has a legitimate interest in being informed about the relevant inquiries.
That must mean properly informed.
The Charity Commission recognised that this was a case for public reports, and such reports must account properly to the public for the conduct and outcome of the inquiries.
Here, Mr Kennedy has shown that important questions arise from the inquiries and reports relating not only to the subject matter and outcome of the inquiries, but also to the Charity Commissions conduct of the inquiries.
The proper functioning and regulation of charities is a matter of great public importance and legitimate interest.
The public interest in openness in relation to these questions is demonstrated positively by the objectives, the functions and, importantly, the duties given to and imposed on the Charity Commission under the Charities Act.
The present request for further disclosure is made by a journalist in the light of the powerful public interest in the subject matter to enable there to be appropriate public scrutiny and awareness of the adequacy of the functioning and regulation of a particular charity.
It is in these circumstances a request to which the Charity Commission should in my opinion accede in the public interest, except so far as the public interest in disclosure is demonstrably outweighed by any countervailing arguments that may be advanced.
I do not read Lord Carnwaths and my judgments as differing in any essential respect on these points.
Although (for reasons given in the next section of this judgment: paras 57 96 below) I cannot share his conclusion that the direction of travel of Strasbourg case law has now reached its destination, I do however note his view that no reason has been put forward for regarding that approach as involving any fundamental departure from domestic law principles (para 219).
The countervailing arguments that can be envisaged against disclosure of particular information will of course differ in nature and weight, according to whether one is considering court or inquiry documents, and in the latter case according to the nature of the inquiry.
A Charity Commission inquiry is likely to depend upon information being provided by third parties.
The Commission has powers to require the provision of accounts, statements, copies of documents and the attendance of persons to give evidence or produce such documents: section 8(3) of the Charities Act.
But it may depend upon co operation and liaison with third parties and the gathering of confidential information.
In the present case, some of the information sought may also be sensitive information bearing on matters of national security or international affairs, although Mr Kennedy has restricted his request in this respect (para 15 above).
All such considerations can and would need to be taken into account, as the Charity Commission in its letter dated 4 July 2007 (para 8 above) identified, but they are no reason why the balancing exercise should not be undertaken.
Again, if one makes an assumption that disclosure could in principle be required under article 10, there is no reason to think that it would be on any basis or be likely to lead to any outcome more favourable from Mr Kennedys viewpoint.
The same considerations would fall to be taken into account, the same balancing exercise performed and there is no basis for thinking that the outcome should or would differ.
I do not therefore agree with Jacob LJs comment in the Court of Appeal (para 48) that Parliament must simply [have] overlooked that a court has machinery for the release of documents subsequent to (or indeed during) legal proceedings whereas an inquiry or arbitration does not and that that may well have been a blunder which needs looking at.
That overlooks the statutory scheme of the FOIA and the Charities Act.
It also fails to give due weight to the courts power to ensure disclosure by the Charity Commission in accordance with its duties of openness and transparency.
Again, I find it difficult to think that there would be any significant difference in the nature or outcome of a courts scrutiny of any decision by the Commission to withhold disclosure of information needed in order properly to understand a report issued after a Charities Act inquiry, whether such scrutiny be based solely on the Charity Commissions objectives, functions and duties under the Charities Act or whether it can also be based on article 10, read in the width that Mr Coppel invites.
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.
The nature of judicial review in every case depends upon the context.
The change in this respect was heralded by Lord Bridge of Harwich said 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.
This was taken up by Court of Appeal in R v Ministry of Defence, Ex p Smith [1996] QB 517, 554, a pre Human Rights Act case, where Sir Thomas Bingham MR accepted counsels proposition that The more substantial the interference with human rights, the more the court will require by way of justification before it is satisfied that the decision is reasonable in the sense outlined above (viz, within the range of responses open to a reasonable decision maker).
The European Court of Human Rights still concluded that the courts had in that case set the level of scrutiny too low on the particular facts: Smith and Grady v United Kingdom (2000) 31 EHRR 620.
The common law has however continued to evolve.
As Lord Phillips of Worth Matravers MR said in R (Q) v Secretary of State for the Home Department [2003] EWCA Civ 364, [2004] QB 36, para 112:The common law of judicial review in England and Wales has not stood still in recent years.
Starting from the received checklist of justiciable errors set out by Lord Diplock in the CCSU case [1985] AC 374, the courts (as Lord Diplock himself anticipated they would) have developed an issue sensitive scale of intervention to enable them to perform their constitutional function in an increasingly complex polity.
They continue to abstain from merits review in effect, retaking the decision on the facts but in appropriate classes of case they will today look very closely at the process by which facts have been ascertained and at the logic of the inferences drawn from them.
In IBA Health Ltd v Office of Fair Trading [2004] EWCA Civ 142, [2004] ICR 1364, in a judgment with which I agreed, Carnwath LJ said (at paras 90 92): 90. the CAT [Competition Appeal Tribunal] was right to observe that their approach should reflect the specific context in which they had been created as a specialised tribunal (paras 220); but they were wrong to suggest that this permitted them to discard established case law relating to reasonableness in administrative law, in favour of the ordinary and natural meaning of that word (para 225).
Their instinctive wish for a more flexible approach than Wednesbury would have found more solid support in the textbook discussions of the subject, which emphasise the flexibility of the legal concept of reasonableness dependent on the statutory context (see de Smith para 13 055ff The intensity of review; cf Wade and Forsyth, p 364ff The standard of reasonableness, and the comments of Lord Lowry in R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696, 765ff). 91.Thus, at one end of the spectrum, a low intensity of review is applied to cases involving issues depending essentially on political judgment (de Smith para 13 056 7).
Examples are R v Secretary of State, Ex p Nottinghamshire County Council [1986] AC 240, and R v Secretary of State, Ex p Hammersmith and Fulham London Borough Council [1991] 1 AC 521, where the decisions related to a matter of national economic policy, and the court would not intervene outside of the extremes of bad faith, improper motive or manifest absurdity ([1991] 1 AC, per Lord Bridge of Harwich, at pp 596 597).
At the other end of the spectrum are decisions infringing fundamental rights where unreasonableness is not equated with absurdity or perversity, and a lower threshold of unreasonableness is used: "Review is stricter and the courts ask the question posed by the majority in Brind, namely, whether a reasonable Secretary of State, on the material before him, could conclude that the interference with freedom of expression was justifiable. (de Smith para 13 060, citing Ex p Brind [1991] 1 AC 696, 751, per Lord Ackner)." 92.A further factor relevant to the intensity of review is whether the issue before the Tribunal is one properly within the province of the court.
As has often been said, judges are not equipped by training or experience or furnished with the requisite knowledge or advice to decide issues depending on administrative or political judgment: see Ex p Brind [1991] 1 AC at 767, per Lord Lowry.
On the other hand where the question is the fairness of a procedure adopted by a decision maker, the court has been more willing to intervene: such questions are to be answered not by reference to Wednesbury unreasonableness, but in accordance with the principles of fair procedure which have been developed over the years and of which the courts are the author and sole judge (R v Panel on Take overs and Mergers, Ex p Guinness plc [1990] 1 QB 146, 184, per Lloyd LJ).
More recently, the same process was carried further by emphasising that the remedy of judicial review is in appropriate cases apt to cover issues of fact as well as law see the cases referred to in para 38 above.
As Professor Paul Craig has shown (see e.g.
The Nature of Reasonableness (2013) 66 CLP 131), 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 of benefits and disadvantages.
There seems no reason why such factors should not be relevant in judicial review even outside the scope of Convention and EU law.
Whatever the context, the court deploying them must be aware that they overlap potentially and that the intensity with which they are applied is heavily dependent on the context.
In the context of fundamental rights, it is a truism that the scrutiny is likely to be more intense than where other interests are involved.
But that proportionality itself is not always equated with intense scrutiny was clearly identified by Lord Bingham of Cornhill CJ in R v Secretary of State for Health, Ex p Eastside Cheese Co [1999] 3 CMLR 123, paras 41 49, which Laws and Arden LJJ and Lord Neuberger MR cited and discussed at paras 21, 133 and 196 200 in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437, [2012] QB 394, a case in which the general considerations governing proportionality were treated as relevantly identical under EU and Convention law (paras 54, 147 and 192 194).
As Lord Bingham explained, at para 47, proportionality review may itself be limited in context to examining whether the exercise of a power involved some manifest error or a clear excess of the bounds of discretion a point taken up and amplified in the Sinclair Collis case, at paras 126 134 and 203 by Arden LJ and by Lord Neuberger; see also Edward and Lane on European Union Law (2013), para 2.32.
Speaking generally, it may be true (as Laws J said in a passage also quoted by Lord Bingham from R v Ministry of Agriculture, Fisheries and Food, Ex p First City Trading [1997] 1 CMLR 250, 278 279) that Wednesbury and European review are two different models one looser, one tighter of the same juridical concept, which is the imposition of compulsory standards on decision makers so as to secure the repudiation of arbitrary power.
But the right approach is now surely to recognise, as de Smiths Judicial Review,7th ed (2013), para 11 028 suggests, that it is inappropriate to treat all cases of judicial review together under a general but vague principle of reasonableness, and preferable to look for the underlying tenet or principle which indicates the basis on which the court should approach any administrative law challenge in a particular situation.
Among the categories of situation identified in de Smith are those where a common law right or constitutional principle is in issue.
In the present case, the issue concerns the principles of accountability and transparency, which are contained in the Charities Act and reinforced by common law considerations and which have particular relevance in relation to a report by which the Charity Commission makes to explain to the public its conduct and the outcome of an inquiry undertaken in the public interest.
The Charity Commissions response to a request for disclosure of information is in the light of the above circumscribed by its statutory objectives, functions and duties.
If, as here, the information is of genuine public interest and is requested for important journalistic purposes, the Charity Commission must show some persuasive countervailing considerations to outweigh the strong prima facie case that the information should be disclosed.
In any proceedings for judicial review of a refusal by the Charity Commission to give effect to such a request, it would be necessary for the court to place itself so far as possible in the same position as the Charity Commission, including perhaps by inspecting the material sought.
Only in that way could it undertake any review to ascertain whether the relevant interests had been properly balanced.
The interests involved and the balancing exercise would be of a nature with which the court is familiar and accustomed to evaluate and undertake.
The Charity Commissions own evaluation would have weight, as it would under article 10.
But the Charity Commissions objectives, functions and duties under the Charities Act and the nature and importance of the interests involved limit the scope of the response open to the Charity Commission in respect of any particular request.
I therefore doubt whether there could or would be any real difference in the outcome of any judicial review of a Charity Commission refusal to disclose information, whether this was conducted under article 10, as Mr Coppel submits that it should be, or not.
Article 10 in detail
In the light of the conclusions which I have already expressed, the answer to the question whether or not Mr Kennedys claim to disclosure by the Charity Commission engages article 10 cannot affect the outcome of this appeal.
But I shall consider this question (I fear at some length) for completeness and in deference to the detailed citation of authority and submissions we have heard upon it.
On its face, article 10 is concerned with the receipt, holding, expression or imparting of thoughts, opinions, information, ideas, beliefs.
It is concerned with freedom to receive information, freedom of thought and freedom of expression.
It does not impose on anyone an obligation to express him or itself or to impart information.
The Charity Commission submits that this represents the correct analysis.
Mr Kennedy submits that the Strasbourg case law has taken a direction of travel, towards a destination which should now be regarded as reached.
Mr Kennedys case is that article 10(1) confers a positive right to receive information from public authorities, and, it follows, a correlative obligation on public authorities to impart information, unless the withholding of the information can be and is justified under article 10(2).
If this right and obligation is not general, then (he submits) it is at least a right and obligation which arises or exists in any sphere which a state has chosen to regulate by a Freedom of Information Act.
The Strasbourg jurisprudence is neither clear nor easy to reconcile.
In Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28, [2010] 2 AC 269 Lord Rodger said famously: Argentoratum locutum: iudicium finitum Strasbourg has spoken, the case is closed.
In the present case, Strasbourg has spoken on a number of occasions to apparently different effects.
Further, a number of these occasions are Grand Chamber decisions, which do contain apparently clear cut statements of principle.
But they are surrounded by individual section decisions, which appear to suggest that at least some members of the Court disagree with and wish to move on from the Grand Chamber statements of principle.
If that is a correct reading, then it may be unfortunate that the relevant sections did not prefer to release the matter before them to a Grand Chamber.
It is not helpful for national courts seeking to take into account the jurisprudence of the European Court of Human Rights to have different section decisions pointing in directions inconsistent with Grand Chamber authority without clear explanation.
Whatever the reason for the present state of authority in Strasbourg, we have, without over concentrating on individual decisions, to do our best to understand the underlying principles, as we have done in previous cases: see, for instance, in relation to the meaning of jurisdiction under article 1: R (Al Skeini) v Secretary of State for Defence [2007] UKHL 26, [2008] AC 153, R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29, [2011] 1 AC 1 and Smith v Ministry of Defence (JUSTICE intervening) [2013] UKSC 41, [2014] 1 AC 52; to the scope of the operational duty to safeguard life under article 2: Rabone v Pennine Care NHS Trust (INQUEST intervening) [2012] UKSC 2, [2012] 2 AC 72; and to the circumstances in which and basis on which damages should be awarded to prisoners the need for whose further detention was not promptly reviewed following the expiry of their tariff period: R (Sturnham) v Parole Board [2013] UKSC 23, [2013] 2 AC 254.
The early Strasbourg case law
The present appeal in fact represents the second time in two years that this Court has had to consider Strasbourg jurisprudence in this area.
The first was in British Broadcasting Corpn v Sugar (decd) (No 2) [2012] UKSC 4, [2012] 1 WLR 439 decided on 15 February 2012.
However Mr Coppel submits that Strasbourg case law has further developed, even since then.
Sugar was a case where it could be said that Mr Sugars claim to access BBC information was potentially in conflict with the BBCs own freedom of journalistic expression.
But that is not material when considering whether Mr Sugars claim even engaged article 10.
Lord Brown gave his reason for a negative answer on that point in some detail in paras 86 to 102, with which I expressly agreed in para 113. (Lord Wilson, while not disagreeing, was less categorical on the point in para 58, so that the reasoning on it cannot be regarded as part of the ratio.)
Lord Brown identified four Strasbourg cases as establishing that, in the circumstances before the Strasbourg Court in each of such cases, article 10 involved no positive right of access to information, nor any obligation on the State to impart such information.
The four cases were Leander v Sweden (1987) 9 EHRR 433, Gaskin v United Kingdom (1989) 12 EHRR 36, Guerra v Italy (1998) 26 EHRR 357 and Roche v United Kingdom (2005) 42 EHRR 599.
In Leander Mr Leander sought information about national security concerns about him which had led to him being refused a permanent position in a naval museum.
The claim was addressed primarily to article 8 (right to personal life), under which the withholding of information was held justified.
Under article 10 the Court said simply: 74.
The Court observes that the right to freedom to receive information basically prohibits a Government from restricting a person from receiving information that others wish or may be willing to impart to him.
Article 10 does not, in circumstances such as those of the present case, confer on the individual a right of access to a register containing information on his personal position, nor does it embody an obligation on the Government to impart such information to the individual.
I do not subscribe to the view taken by Lord Wilson (para 178) that this was the answer to a narrow, ostensibly a pedantic, question of the sort against which the court in Strasbourg often sets its face.
The Grand Chamber did not see the matter in such terms.
It was giving a serious answer to an important question, which defines the role of the Convention in this area.
The Convention establishes fundamental standards, but there are limits to the ideal systems upon which it insists, and the Grand Chamber was making clear that article 10 does not go so far as to impose a positive duty of disclosure on Member States at the European level.
In Gaskin the Court held a refusal of access to personal information about a persons childhood as a foster child unjustified under article 8, and rejected any claim under article 10 in the circumstances of the [present] case for essentially the same reason as it had in Leander, which it followed.
In Guerra the Grand Chamber consisting of 20 judges (including the present President) held that it was a breach of article 8 to fail to supply the applicants with environmental information (even though this had not been requested) relating to their exposure to chemical emissions from a nearby factory.
But it said of article 10: The Court reiterates that freedom to receive information, referred to in para 2 of article l0 of the Convention, basically prohibits a government from restricting a person from receiving information that others wish or may be willing to impart to him (see the Leander v Sweden judgment . ) That freedom cannot be construed as imposing on a state, in circumstances such as those of the present case, positive obligations to collect and disseminate information of its own motion.
Only a minority of 7 of the 20 judges added as a coda that there might under some different circumstances prove to be a positive obligation on a state to make available information to the public.
In Roche the claimant sought disclosure of records of gas tests at Porton Down in which he had participated 20 years before and to which he now attributed certain medical conditions.
The Grand Chamber held that article 8 gave him a positive right to such information, but said of article 10: 172.
The Court reiterates its conclusion in Leander v Sweden para 74 and in Gaskin para 52 and, more recently, confirmed in Guerra para 53, that the freedom to receive information prohibits a government from restricting a person from receiving information that others wish or may be willing to impart to him and that that freedom cannot be construed as imposing on a state, in circumstances such as those of the present case, positive obligations to . disseminate information of its own motion.
It sees no reason not to apply this established jurisprudence.
Thus far, the Strasbourg case law supports the Charity Commissions submission that article 10 does not give positive rights to require, or positive obligations to make, disclosure of information.
Three of the cases (Leander, Gaskin and Roche) concerned private information, in respect of which the Court held that such a right could arise under article 8.
In all these cases, the Court did not go on to leave open the position under article 10 or to say that it raised no separate question.
Rather, it made clear that no right arose in the circumstances under article 10.
A claim for disclosure by a defendant of private information held regarding the claimant starts from a strong basis.
If such a claim can only be put under article 8, there is no obvious reason to suppose that a claim for other non private information is generally possible under article 10.
As to the fourth case, Guerra, the emissions were toxic in a manner breaching article 8, the information about them was not itself private or personal, and the complaint about non disclosure was initially only made under article 10.
The case is therefore direct authority as to the continuing application of the principle stated in Leander to non personal information under that article.
The applicants successful claim under article 8 was added before the Court (paras 41 and 46), and was not made on the basis that the environmental information in question was private or personal, but on the basis that withholding it from the applicants prevented them from assessing the risks they ran by continuing to live where they did (para 60)
It is also of particular interest to note that in summarising the legal position under article 10 in Roche, quoted in para 66 above, the Grand Chamber deliberately omitted the word collect which was present in the original of the passage which it cited from its prior decision in Guerra.
The Grand Chamber was thus making clear that, even where the information was readily available for disclosure, there was no general duty to disclose.
Mr Kennedy relies however on a number of subsequent cases as establishing, first, a different direction of travel, and, now, he submits, a different end point.
The first three, Matky v Czech Republic (Application No 19101/03) (unreported) given 10 July 2006, Trsasg a Szabadsagjogokert v Hungary (2009) 53 EHRR 130, Kenedi v Hungary (2009) 27 BHRC 335, were considered by Lord Brown in Sugar and I can do no better than quote his analysis of them, with which I agreed in that case, at para 113.
He said: 90.
I come then to the first of the trilogy of cases on which the appellant so strongly relies: the Matky case.
The complainant there was seeking, against the background of a general right to information under the Czech legal system, access to documentation concerning the construction of a new nuclear power station and in particular was challenging a requirement of the domestic legislation (article 133 of the Building Act ) that a request for information had to be justified.
The Court accepted that the rejection of his request constituted an interference with the complainants right to receive information.
But it held that the decision could not be considered arbitrary, recognised that Contracting States enjoy a certain margin of appreciation in this area and unanimously rejected the complaint as manifestly ill founded. 91.The Matky case seems accordingly an unpromising foundation upon which to build any significant departure from what may be called the Roche approach to the freedom to receive information protected by article 10. 92.
Nevertheless, in Trsasg (the second in the appellants trilogy of cases) it was to the Matky case that the Second Section of the Court referred as (the sole) authority for the proposition that, the Leander line of authority notwithstanding, the Court has recently advanced towards a broader interpretation of the notion of freedom to receive information and thereby towards the recognition of a right of access to information.
In Trsasg the court upheld a complaint by the Hungarian Civil Liberties Union that a refusal by the Constitutional Court to grant them access to an MPs pending complaint as to the constitutionality of certain proposed amendments to the Criminal Code breached its article 10 right to receive information.
The Government having accepted that there had been an interference with the applicants article 10 rights, Mr Eicke relies in particular upon the following passage in the Courts judgment: [The Court] considers that the present case essentially concerns an interference by virtue of the censorial power of an information monopoly with the exercise of the functions of a social watchdog, like the press, rather than a denial of a general right of access to official documents .
Moreover, the states obligations in matters of freedom of the press include the elimination of barriers to the exercise of press functions where, in issues of public interest, such barriers exist solely because of an information monopoly held by the authorities (para 36). 93.
Kenedi, the third in the trilogy of cases, was decided just four months after Trsasg, also by the Second Section of the Court (including six of the same seven judges who had decided Trsasg).
The applicant there was a historian specialising in the functioning of the secret services of dictatorships.
Although a succession of domestic court judgments had held him to be entitled to access to various documents for research purposes, the Ministry had refused to disclose them.
Once again, hardly surprisingly in this case, the government conceded that there had been an interference with the applicants article 10 rights.
The Court 27 BHRC 335, para 45, had no difficulty in finding in the result a violation of article 10: the Court cannot but conclude that the obstinate reluctance of the respondent states authorities to comply with the execution orders was in defiance of domestic law and tantamount to arbitrariness.
The conclusion in BBC v Sugar
Lord Browns conclusion in relation to the impact of the trio of cases relied upon by the claimant in Sugar was that: 94.
In my judgment these three cases fall far short of establishing that an individuals article 10(1) freedom to receive information is interfered with whenever, as in the present case, a public authority, acting consistently with the domestic legislation governing the nature and extent of its obligations to disclose information, refuses access to documents.
Of course, every public authority has in one sense the censorial power of an information monopoly in respect of its own internal documents.
But that consideration alone cannot give rise to a prima facie interference with article 10 rights whenever the disclosure of such documents is refused.
Such a view would conflict squarely with the Roche approach.
The applicants difficulty here is not that Mr Sugar was not exercising the functions of a social watchdog, like the press. (Perhaps he was.) The Jewish Chronicle would be in no different or better position.
The applicants difficulty to my mind is rather that article 10 creates no general right to freedom of information and where, as here, the legislation expressly limits such right to information held otherwise than for the purposes of journalism, it is not interfered with when access is refused to documents which are held for journalistic purposes.
Some points are worth underlining in relation to Trsasg.
First, the Second Sections reference to the Court having recently advanced towards a broader interpretation of the notion of freedom to receive information was, firstly, weakly based: see Lord Browns analysis at para 91, secondly, clearly aspirational and tentative and, thirdly, not part of the essential reasoning for the Courts decision this is evident from the fact that the Court began its next para 36 with the words In any event, .
Second, in point of fact, the Hungarian Government accepted in Trsasg that article 10 was engaged (para 18), and it was on that basis that the Court went straight to the question whether there has been an interference and in that connection said that even measures which merely make access to information more cumbersome may amount to interference (para 26).
Third, in introducing its decision on the question which thus arose whether the interference with this admitted right was justified, the Second Section used the dramatic metaphor of the censorial power of an information monopoly (para 36).
The context helps understand why such dramatic language was appropriate.
Disclosure of the information requested had been refused by the domestic courts on the ground that this was essential to protect personal data.
But, as the Court noted, the claimant had expressly restricted his application to information . without the personal data of its author (para 37).
In addition, the Court found, it was quite implausible that any reference to the private life of the MP, hence to a protected private sphere, could be discerned from his constitutional complaint.
In short, the domestic courts had arrived at a decision to refuse disclosure which was not sustainable under domestic law.
The breach of article 10 followed this.
Kenedi was also a case where there had been a breach of a domestic law duty of disclosure, in that case by the executive failing to give effect to court orders.
Again, the breach of article 10 followed.
Further Strasbourg case law
Since the Supreme Courts decision in Sugar, there have been four further Strasbourg decisions upon which Mr Kennedy relies as requiring a different analysis to that adopted in Lord Browns judgment.
They are Gillberg v Sweden (2012) 34 BHRC 247, Shapovalov v Ukraine (Application No 45835/05) (unreported) given 31 July 2012, Youth Initiative for Human Rights v Serbia (Application No 48135/06) (unreported) given 25 June 2013 and, finally, sterreichische Vereinigung zur Erhaltung, Strkung und Schaffung v Austria (Application No 39534/07) (unreported) given 28 November 2013.
The last (for economy, the sterreichische case) was decided after the oral hearing of the present appeal and the Court received written submissions upon it.
All four cases were concerned with information which was not personal.
Gillberg was an unusual case.
Under the Swedish equivalent of the FOIA, Professor Gillberg was ordered by the Administrative Court of Appeal to allow the claimants (K, a sociologist, and E, a paediatrician) to have access for research purposes to a file belonging to Gothenburg University but held by Professor Gillberg.
He refused such access, the file was instead destroyed by three of his colleagues, and he was prosecuted.
He claimed that the Administrative Court and criminal proceedings breached his rights under articles 8 and 10.
The Grand Chamber repeated that: 83.
The right to receive and impart information explicitly forms part of the right to freedom of expression under article 10.
That right basically prohibits a Government from restricting a person from receiving information that others wish or may be willing to impart to him (see, for example, Leander v Sweden ., para 74, and Gaskin v United Kingdom .para 52) 84.
In the present case the applicant was not prevented from receiving and imparting information or in any other way prevented from exercising his positive right to freedom of expression.
He argued that he had a negative right within the meaning of article l0 to refuse to make the disputed research material available, and that consequently his conviction was in violation of article l0 of the Convention.
As to this suggested negative right, the Court expressed no view, saying merely: 86.
The Court does not rule out that a negative right to freedom of expression is protected under article 10 of the Convention, but finds that this issue should be properly addressed in the circumstances of a given case.
Turning on this basis to the actual issue and circumstances, the Court said: 92. the Court considers that the crucial question can be narrowed down to whether the applicant, as a public employee, had an independent negative right within the meaning of article l0 of the Convention not to make the research material available, although the material did not belong to him but to his public employer, the University of Gothenburg, and despite the fact that his public employer the university actually intended to comply with the final judgments of the Administrative Court of Appeal granting K and E access to its research material on various conditions, but was prevented from so doing because the applicant refused to make it available. 93.
In the Court's view, finding that the applicant had such a right under article l0 of the Convention would run counter to the property rights of the University of Gothenburg.
It would also impinge on K's and E's rights under article 10, as granted by the Administrative Court of Appeal, to receive information in the form of access to the public documents concerned, and on their rights under article 6 to have the final judgments of the Administrative Court of Appeal implemented.
Gillberg is therefore a case in which the Court reiterated with approval the general principle identified in Leander.
At the same time, however, it suggested in the second sentence of para 93 that domestic rights to receive information could give rise to an entitlement under article 10.
Shapovalov is to like effect.
A Ukrainian journalist claimed that he had (contrary to the Ukranian Information Act 1992) been refused access by administrative authorities during the 2004 elections to certain information and meetings.
He relied on article 6 because the Ukrainian courts had wrongly failed on procedural grounds to consider the merits of his complaints.
The Court upheld that complaint.
He also relied on article 10 because of the administrative authorities interference with his access.
The Government made no submissions on the merits of this complaint, but the Court rejected it on the ground that there was no evidence of interference with his performance of his journalistic activity.
Again, the case was one where there was a domestic right to information.
In Youth Initiative the complaint concerned a refusal by the Serbian intelligence agency to provide the complainant with information as to how many people had been the subject of electronic surveillance by the agency.
The Serbian Information Commissioner whose role was to ensure the observance of the Serbian Freedom of Information Act 2004: para 25 had decided that this should be disclosed.
The Serbian Government objected that article 10 did not guarantee a general right of access to information and the applicant did not anyway need the information.
The Second Section rejected these objections with references to Trsasg, recalling that the notion of freedom of information embraces a right of access to information (para 20), and stating that the applicant NGO was exercising a role as a public watchdog of similar importance to that of the press and warranted similar Convention protection to that afforded to the press (para 20).
On the merits, after referring to the Serbian Information Commissioners order, the Second Section held that there had been an interference, analogous to that in Trsasg (para 24).
In para 25 the Court noted that the Information Commissioner had decided that the information should be provided and found the intelligence agencys assertion that it did not hold the information unpersuasive in view of the nature of that information (the number of people subjected to electronic surveillance by that agency in 2005) and the agencys initial response (viz, to rely on a public interest exception in the Serbian Act of 2004, which the Information Commissioner had not accepted as justifying non disclosure).
The Youth Initiative case is, therefore, another in a line of cases where the European Court of Human Rights has recognised a complaint under article 10 of the Convention following from a failure to give effect to a domestic right to disclosure of information.
In the context of EU law, we were also referred to a comparable complaint in Thesing, Bloomberg Finance Ltd v European Central Bank (ECB) (Case T 590/10) (unreported) 29 November 2012.
There the General Court was concerned with the right to access ECB documents provided by article 1 of Decision 2004/258/EC.
The applicant sought to rely on article 11 of the Charter of Fundamental Rights (mirroring in this respect article 10 of the Convention) and on the Strasbourg case law, including Trsasg, Kenedi and Gillberg.
They failed because the General Court held that the ECB had been entitled to invoke an exception contained in article 4 of Decision 2004/258/EC.
The decision therefore adds nothing of present relevance.
Finally, in the sterreichische case, all agricultural and forest land transactions in Austria required approval by local and regional authorities (in the Tyrol, the Tyrol Real Property Transactions Commission), the aim being to preserve land for agriculture and forestry and avoid the proliferation of second homes.
The application association was formed to promote sound agricultural and forest property ownership and sought from the Tyrol Commission (in anonymised form and against reimbursement of costs) all decisions it had issued since 1 January 2000.
It relied upon the Tyrol Access to Information Act and submitted that the Commissions decisions concerned civil rights within article 6 of the Convention, and should therefore be made public (para 8).
The Commission based its refusal on submissions that the decisions were not information within the Act, but decisions on the basis of legal arguments, comparable to giving legal advice, as well as on an exemption in the Act for situations where excessive resources would be required to provide the information sought.
The Austrian Constitutional Court rejected the associations complaint.
It held first that neither under article 10 nor under Austrian law was there any positive duty of states to collect and disseminate information of their own motion.
Secondly, it accepted the Commissions case that the compilation, anonymisation and disclosure of paper copies of decisions over a period of some years fell outside any duty to disclose information under the Act and would excessively impinge on the Commissions performance of its duties.
Thirdly, it added that, in so far as the applicant might implicitly be relying on article 6, the Strasbourg case law did not guarantee the right to obtain anonymised decisions over a lengthy period, and Austrian law only required access to the judgments delivered by the highest courts which dealt with important legal issues.
Before the European Court of Human Rights, First Section, the application was addressed under the heading of article 10.
But the applicants case was that decisions of judicial bodies such as the Commission should be publicly accessible (para 28) and that interests in the rule of law and due process argued in favour of making decisions by judicial authorities available to the public (para 29).
The Austrian Governments case was, first, that article 10 imposes no positive obligation on a state to collect and disseminate information itself, second, that a refusal to provide anonymised copies of all decisions over a lengthy period did not in any event constitute an interference with rights under article 10, and, third, that a right to be provided with such decisions could not be inferred from article 6 (para 31).
Finally, it also argued that, if article 10 was engaged, the refusal was justified, as serving legitimate aims (protection of confidential information and preservation of the Commissions proper functioning).
The First Sections judgment is surprising in the nature and brevity of its treatment of the issue whether there was an interference under article 10(1).
Essentially, the First Section did no more than cite previous jurisprudence (including Trsasg) establishing the social watchdog role of the press and other non governmental organisations like the applicant gathering information, and then added: Consequently, there has been an interference with the applicant associations right to receive and to impart information as enshrined in article 10(1) of the Convention (see Trsasg ., para 28; see also Kenedi ., para 43).
This reasoning fails to address any of the statements of general principle found in Leander, Guerra, Roche and Gillberg.
It does not indicate why the First Section thought those statements inapplicable, whether it was suggesting some alternative general principle applicable to social watchdogs, or whether (perhaps) it was acting on the basis that, despite the Austrian Constitutional Courts contrary view, there was a domestic right to the information which it was entitled to recognise, even though the Austrian Constitutional Court had wrongly failed to do so (see e.g. the Grand Chambers apparent reasoning in Gillberg: paras 75 76 above).
The First Sections silence when considering article 10(1) is the more surprising when one comes to its reasoning under article 10(2).
Here (in para 41) the First Section does refer expressly to the principle in Leander that In the specific context of access to information, the Court has held that the right to receive information basically prohibits a Government from preventing a person from receiving information that others wished or were willing to impart, as well as to the principle in Guerra that the right to receive information cannot be construed as imposing on a state positive obligations to collect and disseminate information of its own motion.
But those were decisions under article 10(1).
Yet the First Section deals with them only under article 10(2), and goes on to say that in Trsasg the Court noted that it had recently advanced towards a broader interpretation of the notion of the freedom to receive information and thereby towards the recognition of a right of access to information.
Quite apart from the fact that advances do not always achieve their goal, the First Section did not address the weakness of the basis and reasoning of the statement in Trsasg (para 69 above), or the fact that it was no more than a Section decision to be compared with a considerable number of weighty Grand Chamber decisions, or any way in which the general Grand Chamber statements might be reconciled with Trsasg.
Later in its reasoning on justification, the First Section (in para 46) said that Given that the Commission is a public authority deciding disputes over civil rights within the meaning of article 6 of the Convention . which are, moreover, of considerable public interest, the Court finds it striking that none of the Commissions decisions was published, whether in an electronic database or in any other form, and that consequently much of the Commissions anticipated difficulty in providing copies of numerous decisions over a lengthy period was generated by its own choice.
On that basis, it concluded that the Commissions complete refusal to give [the applicant] access to any of its decisions was disproportionate (para 47), and held that there had been a violation of article 10.
So one explanation of the sterreichische case may be that the implicit finding of violation of article 6 was critical.
Analysis of position under article 10
What to make of the Strasbourg case law in the light of the above is not easy.
One possible view is the various Section decisions open a way around the Grand Chamber statements of principle in circumstances where domestic law recognises or the European Court of Human Rights concludes that it should, if properly applied, have recognised, a domestic duty on the public authority to disclose the information.
The sterreichische case might perhaps be suggested to fit into this pattern, though it does not appear to have represented any part of the First Sections thinking.
Alternatively, the sterreichische case may be regarded as a special case, influenced by what were, on the First Sections reasoning, the Commissions clear breaches of article 6.
That said, the logic is not very apparent of a principle according to which the engagement of article 10(1) depends upon whether domestic law happens to recognise a duty on the relevant public authority to provide the information.
To deal at this point with an argument raised by Mr Clayton, it is in procedural law entirely understandable that, even though the Convention confers no right to have a domestic appeal, where a domestic right of appeal is in law provided, then it must comply with article 6.
But that is because the existence of the domestic right of appeal necessarily means that there are further proceedings to which article 6 applies.
Here, if article 10 involves no duty on a public authority to disclose information, no reason appears why the existence of a domestic duty should mean any more than that the domestic legislator has chosen to go further than the Convention.
No reason appears why the additional duty which the domestic legislator chose to introduce should necessarily become or engage an article 10(1) duty of disclosure.
However, putting aside the point made in para 90, if the explanation of the Section decisions is that they turn on the existence of a domestic duty to disclose, then I think it unlikely that they could affect the outcome of any request addressed by Mr Kennedy to the Charity Commission under the Charities Act.
Either there is no domestic duty of this nature, in which case article 10(1) does not, on the basis of the Grand Chamber decisions, give rise to one.
Or there is a domestic duty of this nature, in which case article 10(1) seems to me unlikely to add anything to it in the present case since I have already concluded that the Charity Commissions domestic statutory duties should offer a path to disclosure no less favourable to a journalist such as Mr Kennedy than any available under article 10.
If, alternatively, the explanation of the sterreichische case is that it turned on the existence of breaches of article 6, no such breaches have been relied on in this case, but, for reasons already indicated, I do attach significance to the importance of the principles of accountability and transparency as they apply to reports of inquiries under the Charities Act, and I consider that the Act, read in the light of these principles, is likely to go at least as far as any reliance which could have been placed by Mr Kennedy on article 6, or article 10 as informed by article 6, could have taken him.
Mr Coppel argues for a more radical analysis than I have discussed in paras 88 to 90.
He argues that the Section decisions show that a right to receive information can arise under article 10, without any domestic right to the information.
If necessary, he accepts a restriction of the right to a member of the press like Mr Kennedy or any other social watchdog.
It is true that, in Trsasg and Youth Initiative, where the complainants were interested NGOs, the Court used language stressing the vital role of such social watchdogs, likening them to the press.
But, as Lord Brown noted in Sugar at para 94, the occupation of such a role cannot sensibly represent any sort of formal pre condition, before breach of a domestic duty of disclosure engages article 10(1).
Many organisations and individuals, including those seeking information for research or historical or personal or family purposes, may have legitimate and understandable interests in enforcing a domestic right to information.
In reality, therefore, Mr Coppels more radical argument resolves itself into a submission that a general duty to disclose is engaged under article 10(1) by any claim based on public interest.
On that basis, however, the statements of principle in the Grand Chamber decisions are history.
Had it been decisive for the outcome of this appeal, I would have considered that, in the present unsatisfactory state of the Strasbourg case law, the Grand Chamber statements on article 10 should continue to be regarded as reflecting a valid general principle, applicable at least in cases where the relevant public authority is under no domestic duty of disclosure.
The Grand Chamber statements are underpinned not only by the way in which article 10(1) is worded, but by the consideration that the contrary view that article 10(1) contains a prima facie duty of disclosure of all matters of public interest leads to a proposition that no national regulation of such disclosure is required at all, before such a duty arises.
Article 10 would itself become a European wide Freedom of Information law.
But it would be a law lacking the specific provisions and qualifications which are in practice debated and fashioned by national legislatures according to national conditions and are set out in national Freedom of Information statutes.
Mr Coppel recognised that the logic of his case is that article 10 must involve a general duty of disclosure such as mentioned in paras 93 94, irrespective of the existence of any freedom of information legislation.
But he contends that, where such legislation exists, it should be the vehicle for any rights contained in article 10.
The Media Legal Defence Initiative and the Campaign for Freedom of Information, interveners before the Supreme Court, suggest a more nuanced analysis, according to which article 10 should only be treated as engaged once a state has enacted a domestic freedom of information statute providing a general right of access to information and so occupied the field.
Then and only then could article 10 be deployed to check and control whether the right of access corresponded with that which, they submit, is required by article 10.
I see no basis for either Mr Coppels or the interveners half way approach.
I start from the position that there is no reason why any article 10 rights must be found and satisfied in and only in the FOIA.
They may be satisfied by a scheme which operates in some situations under the FOIA and in others under the principles which govern the conduct of courts, arbitration tribunals and those holding inquiries outside the FOIA.
Secondly, and for similar reasons, references to a general right of access and to occupying the field are unhelpful metaphors in relation to areas which the FOIA deliberately exempts.
The only relevant sense in which the exemptions provided by the FOIA are touched by that Act is that they are exempted from its operation.
It would be no different if the Act had been framed to cover specific situations which did not cover the present.
I would add that, on either approach, it would seem that article 10 would operate as a general control on the appropriateness of exemptions in the FOIA.
This becomes even more striking once one realises that it would also extend to other absolute exemptions provided by the FOIA.
These include information directly or indirectly supplied by or relating to the Security and Secret Intelligence Services, the Government Communications Headquarters, the special forces and a list of tribunals and other authorities associated with security matters: see para 18 above.
General international legal principles
Mr Coppel also submitted that general international legal principles and other instruments supported an interpretation of article 10 as introducing a positive right to receive and a correlative duty to impart information.
He referred, inter alia, to: i) article 19 of the Universal Declaration of Human Rights, 1948, providing: Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers; ii) article 19 of the International Covenant on Civil and Political Rights (ICCPR), adopted 1966 and in force in 1976, providing: 1.
Everyone shall have the right to hold opinions without interference. 2.
Everyone shall have the right to freedom of expression; this right shall include freedom to seek, receive and impart information and ideas of all kinds, regardless of frontiers, either orally, in writing or in print, in the form of art, or through any other media of his choice; iii) article 13(1) of the Inter American Convention on Human Rights (IACHR), adopted 1969 and in force 1978, providing: Everyone has the right of freedom of thought and expression.
This right includes freedom to seek, receive, and impart information and ideas of all kinds, regardless of frontiers, either orally, in writing, in print, in the form of art, or through any other medium of one's choice.
The Inter American Court of Human Rights has in its jurisprudence interpreted article 13(1) as conferring a positive right to receive and a positive duty to impart information: Reyes v Chile (2006) IACHR, 19 September 2006, followed in Lund v Brazil (2010) IACHR, 24 November 2010.
There is a particularly full examination of this aspect in paras 75 to 107 of Reyes v Chile.
At para 77, the Court found that by expressly stipulating the right to seek and receive information, article 13 of the Convention protects the right of all individuals to request access to state held information, with the exceptions permitted by the restrictions established in the Convention.
The word seek is one which appears in all three international instruments cited in the preceding paragraph, and not in article 10 of the European Convention on Human Rights agreed in 1950.
As Clayton and Tomlinson note in their work The Law of Human Rights, 2nd ed (2009), para 15.03, article 10 defines the right in language which is weaker than that of article 19 of the ICCPR.
Various academic commentators have suggested that the difference should not be regarded as material.
But it is worth noting that the original draft of article 10 prepared by the Committee of Experts provided a right to seek, receive and impart information ideas, and that, in the light of its presence in the prior Universal Declaration of Human Rights, some significance must attach to the subsequent omission of the word from article 10.
The IACHR in Reyes v Chile, para 81, also referred to prior recommendations of the Council of Europes Parliamentary Assembly and Committee dating back to 1970, 1982 and 1998, advocating, for example, a duty on public authorities to make available information on matters of public interest within reasonable limits and expressing the goal of the pursuit of an open information policy.
But the present issue is not whether these are appropriate general aspirations, but whether article 10 contains a concrete decision to give general effect to them at an international level enforceable without any more specific measure and without any controlling qualifications and limitations at that level.
The European Court of Human Rights case law, analysed above, does not to my mind support this.
Ullah no more, but certainly no less
Against the possibility of the Supreme Court concluding that the Strasbourg case law does not clearly or sufficiently lead in the direction invited by Mr Kennedys case, Mr Richard Clayton QC for The Media Legal Defence Initiative and The Campaign for Freedom of Information invited us to strike out alone.
He submitted that the case could be a suitable one in which to revisit the approach associated with the words no more, but certainly no less used by Lord Bingham in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20 in relation to national courts duty to keep pace with Strasbourg case law.
I would decline that invitation.
I see no basis for differing domestically from the Grand Chamber statements about the scope of article 10 and no need to expand the domestic article 10 rights, having regard to the domestic scheme of the Charities Act.
Overall Conclusions
The only claim that Mr Kennedy has made is for disclosure under section 32.
He has pursued this claim as a matter of common law interpretation and, in the alternative, on the basis that section 32 must be read down in the light of article 10 of the Convention.
Alternatively, he has claimed a declaration that section 32 is incompatible with article 10.
My conclusions are in summary that: i) Mr Kennedys case is not entitled to succeed on the claims he has pursued by reference to section 32 of the FOIA: see in particular paras 34, 35 41 and 42 above. ii) But that is not because of any conclusion that he has no right to the disclosure sought: see paras 35 41. iii) He fails in the claims he had up to this point made because a) the scheme of section 32 read in this case with the Charities Act 1993 is clear (paras 34 and 35 40), and b) the route by which he may, after an appropriate balancing exercise, be entitled to disclosure, is not under or by virtue of some process of remodelling of section 32, but is under the Charities Act construed in the light of common law principles (paras 40 and 43 52) and/or in the light of article 10 of the Human Rights Convention (paras 36 39), if and so far as that article may be engaged (as to which see paras 55 98). iv) Construed without reference to article 10, the Charities Act should be read as putting Mr Kennedy in no less favourable position regarding the obtaining of such disclosure than he would be in on his case that article 10 by itself imposes on public authorities a general duty of disclosure of information (paras 40 and 43 52). v) I do not consider that article 10 does contain so general a duty (paras 97 98), but, in the circumstances, that conclusion is academic.
LORD TOULSON (with whom Lord Neuberger and Lord Clarke agree)
The first issue concerns the construction of section 32(2) of FOIA, leaving aside the Human Rights Act 1998 and the European Convention.
The section has been set out by Lord Mance at para 17.
The issue was succinctly summarised by Mr Philip Coppel QC in his written case as being whether the phrase for the purposes of the inquiry or arbitration in section 32(2)(a) is to be interpreted as linked to the immediately preceding words placed in the custody of a person conducting an inquiry or arbitration or as linked to the opening words of the subsection information held by a public authority.
Whichever construction is right, the same must apply to section 32(1) and to section 32(2)(b).
I agree with Lord Mance and the courts below that the first interpretation is right.
As Lord Mance says, it is the more natural reading.
If the alternative construction were right, most of the language of paragraphs (a) and (b) would be otiose.
The drafter could have stated much more simply that information held by a public authority is exempt information if it is held only for the purposes of an inquiry or arbitration.
I agree also that this conclusion is reinforced by the provision in section 63(1), set out by Lord Mance at para 30, that information contained in a historical record cannot be exempt information by virtue of section 32.
A document does not become a historical record until 20 years (originally 30 years) have passed from the year of its creation; section 62(1).
It is unreal to suppose that this provision was aimed at the remote possibility of an inquiry continuing for more than 30 years or involving documents more than 30 years old.
The strong inference is that a document provided to or created by a person conducting an inquiry or arbitration is to remain within the section 32 exemption until the end of the specified period.
If his argument on the first issue failed, Mr Coppel submitted that section 32(2) should be read down so as to cease to apply on the conclusion of the inquiry or arbitration, pursuant to the requirements of the Human Rights Act and article 10 of the European Convention.
This is a more difficult issue.
The difficulty arises in part because the argument for Mr Kennedy began on a wrong footing by Mr Coppel submitting that without FOIA the Charity Commission would have no power to provide Mr Kennedy with information of the kind which he seeks.
The Charity Commission and the Secretary of State disagree and draw attention to the statement in section 78 that nothing in the Act is to be taken to limit the powers of a public authority to disclose information held by it.
I am clear that they are right on this point.
Every public body exists for the service of the public, notwithstanding that it may owe particular duties to individual members of the public which may limit what it can properly make public.
The duties of a hospital trust to a patient are an obvious example.
There may also be other reasons, apart from duties of confidentiality, why it would not be in the public interest or would be unduly burdensome for a public body to disclose matters to the public, but the idea that, as a general proposition, a public body needs particular authority to provide information about its activities to the public is misconceived.
In this case there is an important additional dimension.
We are concerned with a public body carrying out a statutory inquiry into matters of legitimate public concern.
Over several decades it has become increasingly common for public bodies or sometimes individuals to be given statutory responsibility for conducting such inquiries.
They are part of the constitutional landscape.
Subject to any relevant statutory provisions, a judicial body has an inherent jurisdiction to determine its own procedures (Attorney General v Leveller Magazine Ltd [1979] AC 440).
The same applies to a public body carrying out a statutory inquiry.
It has long been recognised that judicial processes should be open to public scrutiny unless and to the extent that there are valid countervailing reasons.
This is the open justice principle.
The reasons for it have been stated on many occasions.
Letting in the light is the best way of keeping those responsible for exercising the judicial power of the state up to the mark and for maintaining public confidence: Scott v Scott [1913] AC 417; R (Guardian News and Media Ltd) v City of Westminster Magistrates Court (Article 19 intervening)[2012] EWCA Civ 420; [2013] QB 618.
Before discussing the question whether and to what extent the same principle is applicable in relation to statutory inquiries, it is relevant to understand the reasoning in Guardian News (about which Lord Carnwath has made some observations in para 235 of his judgment), particularly since one of the arguments concerned section 32 of FOIA.
The case concerned documents which were provided to a district judge before the hearing of extradition proceedings, but which were not read out in court although some of them were referred to by counsel.
The Divisional Court held that the judge had no power to allow the press to have access to the documents: [2010] EWHC 3376 (Admin), [2011] 1 WLR 1173.
Part of its reasoning (at paras 53 54) was that FOIA had put in place a regime for obtaining access to documents held by public authorities and that it would be strange if a request for information which was specifically exempted under the Act could be made at common law or under article 10.
The Court of Appeal took a different approach.
It started with the proposition that open justice is a principle at the heart of our system of justice and vital to the rule of law.
It explained why it is a necessary accompaniment of the rule of law (at para 1).
Society depends on the judges to act as guardians of the rule of law, but who is to guard the guardians and how can the public have confidence in them? 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.
For that proposition the court cited Scott v Scott and other authority.
The principle has never been absolute because it may be outweighed by countervailing factors.
There is no standard formula for determining how strong the countervailing factor or factors must be.
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 material in advancing that purpose and, conversely, any risk of harm which access to the documents may cause to the legitimate interests of others. (See Guardian News at para 85.)
There may be many reasons why public access to certain information about the court proceedings should be denied, limited or postponed.
The information may be confidential; it may relate to a person with a particular vulnerability; its disclosure might impede the judicial process; it may concern allegations against other persons which have not been explored and could be potentially damaging to them; it may be of such peripheral, if any, relevance to the judicial process that it would be disproportionate to require its disclosure; and these are only a few examples.
The court held in Guardian News that the open justice principle applies, broadly speaking, to all tribunals exercising the judicial power of the State. (The same expression is used in section 32(4)(a) of FOIA, which defines a court as including any tribunal or body exercising the judicial power of the State.) The fundamental reasons for the open justice principle are of general application to any such body, although its practical operation may vary according to the nature of the work of a particular judicial body.
In contrast with the view expressed by the Divisional Court about the exemption of court documents from the provisions of FOIA, the Court of Appeal considered that the exclusion was both unsurprising and irrelevant.
Under the Act the Information Commissioner is made responsible for taking decisions about whether a public body should be ordered to produce a document to a party requesting it.
The Information Commissioners decision is subject to appeal to a tribunal, whose decision is then subject to the possibility of further appeals to the Upper Tribunal and on to the Court of Appeal.
It would be odd if the question whether a court should allow access to a document lodged with the court should be determined in such a roundabout way.
However, there was a more fundamental objection to the Divisional Courts approach, which is relevant also in the present case.
As the Court of Appeal said (at paras 73 74), although the sovereignty of Parliament means that the responsibility of the courts for determining the scope of the open justice principle may be affected by an Act of Parliament, Parliament should not be taken to have legislated so as to limit or control the way in which the court decides such a question unless the language of the statute makes it plain beyond possible doubt that this was Parliaments intention.
It would therefore be quite wrong to infer from the exclusion of court documents from FOIA that Parliament intended to preclude the court from permitting a non party to have access to such documents, if the court considered such access to be proper under the open justice principle.
The Administrative Courts observation that no good reason had been shown why the checks and balances contained in the Act should be overridden by the common law was to approach the matter from the wrong direction.
The question, rather, was whether the Act demonstrated unequivocally an intention to preclude the courts from determining in a particular case how the open justice principle should be applied.
In the present case we have been referred to Hansard, which shows that the Government positively intended not to interfere with the courts exercise of the power to determine what information should be made available to the public about judicial proceedings, and that it viewed statutory inquiries in the same way as judicial proceedings.
I do not consider this to be relevant or admissible for the purposes of construing section 32, which is unambiguous; but it is relevant background material when considering whether questions of disclosure of information about statutory inquiries are properly a matter for the courts, applying the common law.
During the Committee stage in the House of Commons, amendments were moved which would have converted the blanket exemptions in section 32(1) and (2) into qualified exemptions (applicable if disclosure under the Act would be likely to cause prejudice to the judicial proceedings, inquiry or arbitration), but they were withdrawn after the Minister, Mr David Lock MP, explained the Governments objection to them (Hansard, (HC Debs Standing Committee B), 25 January 2000, cols 281 282): Essentially this is an issue of separation of powers.
The courts control the documents that are before them and it is right that our judges should decide what should be disclosed.
Although the courts are not covered by the Bill, according to it court records may be held on a courts behalf by public authorities Statutory inquiries have a status similar to courts, and their records are usually held by the Department that established the inquiry.
The clause therefore ensures that the courts can continue to determine what information is to be disclosed, and that such matters are decided by the courts and fall within their jurisdiction, rather than the jurisdiction of this legislation.
Of course, it is not to be assumed that such information will not be disclosed merely because the Bill will not require it to be disclosed.
Such information is controlled by the courts, which constitute a separate regime.
The courts have their own rules, and they will decide if and when court records are to be disclosed.
The Government do not believe that the Freedom of Information Bill should circumvent the power of the courts to determine their disclosure policy.
The issue is the separation of powers, and the jurisdiction to determine the information the court should provide will be left to the courts themselves.
In a court case, it is for judges and courts to determine when it is appropriate for court records to be disclosed.
Should the principle of openness as a general matter be held to apply to statutory inquiries? This involves two linked considerations: whether it is right that judicial proceedings and statutory inquiries should be regarded as analogous for this purpose or, to put it another way, whether the reasons for the judicial process to be open to public scrutiny apply similarly to statutory inquiries; and whether the court in answering that question would be crossing onto territory which should be left to Parliament.
An inquiry is defined for the purposes of section 32 by subsection (4)(c) as meaning any inquiry or hearing held under any provision contained in, or made under, an enactment.
Although such inquiries and hearings may vary considerably in nature and scope, it is fair to describe the conduct of them as a quasi judicial function.
That doubtless explains why Parliament considered their status to be similar, as the Minister stated in the passage cited above, and the treatment of the records of judicial proceedings and records of statutory inquiries in section 32(1) and (2) is materially identical.
Just as Parliament by excluding courts and court records from the provisions of the Act did not intend that such records should be shrouded in secrecy, but left it to the courts to rule on what should be disclosed, so in the case of a statutory inquiry Parliament decided to leave it to the public body to rule on what should be disclosed, balancing the public interest in its decision being open to proper public scrutiny against any countervailing factors, but the exercise of such power must be amenable to review by the court.
The considerations which underlie the open justice principle in relation to judicial proceedings apply also to those charged by Parliament with responsibility for conducting quasi judicial inquiries and hearings.
How is an unenlightened public to have confidence that the responsibilities for conducting quasi judicial inquiries are properly discharged?
The application of the open justice principle may vary considerably according to the nature and subject matter of the inquiry.
A statutory inquiry may not necessarily involve a hearing.
It may, for example, be conducted through interviews or on paper or both.
It may involve information or evidence being given in confidence.
The subject matter may be of much greater public interest or importance in some cases than in others.
These are all valid considerations but, as I say, they go to the application and not the existence of the principle.
In each case it is necessary to have close regard to the purpose and provisions of the relevant statute.
Lord Mance is therefore right to place the emphasis which he has on the provisions of the Charities Act, particularly in paras 43 to 45 of his judgment.
No useful purpose would be served by my repeating or paraphrasing his analysis of those provisions.
As he says at the end of para 45 and the beginning of para 47, the meaning and significance which he attaches to those provisions (and with which I agree) are consistent with and indeed underpinned by common law principles.
Lord Carnwath has drawn attention to the absence of direct authority for applying common law principles to a body like the Charity Commission which is the creature of a modern statute, by which its functions and powers are precisely defined; but the supervision of inquiries by the courts is a product of the common law, except insofar as there is a relevant statutory provision.
Such enactments may go into greater or less detail about how an inquiry is to be conducted.
The Inquiries Act 2005 contains detailed provisions about the conduct of an inquiry under that Act.
Other Acts which provide for inquiries may be less detailed.
To the extent that an enactment contains provisions about the disclosure of documents or information, such provisions have the force of law.
But to the extent that Parliament has not done so, it must be for the statutory body to decide questions of disclosure, subject to the supervision of the court.
I do not see the absence of a prior statement by the courts that in general the principle of openness should apply, subject to any statutory provisions and subject to any countervailing reasons, as a convincing reason for not saying so now.
Principles of natural justice have been developed by the courts as a matter of common law and do not depend on being contained in a statutory code.
As with natural justice, so with open justice.
The power of disclosure of information about a statutory inquiry by the responsible public authority must be exercised in the public interest.
It is not therefore necessary to look for a particular statutory requirement of disclosure.
Rather, the question in any particular case is whether there is good reason for not allowing public access to information which would provide enlightenment about the process of the inquiry and reasons for the outcome of the inquiry.
I do not understand there to be any disagreement between the members of the court about the desirability that information about statutory inquiries should be available to the public, unless there are reasons to the contrary.
The disagreement is about the proper means of achieving that result.
Lord Carnwath would achieve it by reference to article 10 and by reading section 32(2) in a manner contrary to Parliaments intention.
For my part, I see no reason why the courts should not regard inquiry documents as having similar status to court documents, as Parliament intended, and applying similar principles.
That approach is not undemocratic and does not usurp the function of Parliament.
Lord Wilson considers that Parliament cannot have thought about what it was doing in enacting section 32(2) and that the subsection needs to be read down in order for the UK to be in compliance with article 10.
It sometimes happens that the only sensible inference to be drawn regarding a legislative provision is that there was an oversight in the drafting process, but that is not the case here (as Hansard confirms).
Parliament could, if it chose, have dealt with the question of access to inquiry documents in a different way, but in my judgment we should respect the fact that it chose to deal with them in the same way as court documents.
The result is entirely workable; the common law is fully capable of protecting sufficiently whatever rights under article 10 Mr Kennedy may have.
Given that a decision by a public authority about disclosure of information or documents regarding a statutory inquiry is capable of judicial review, what should be the standard of review? The normal standard applied by a court reviewing a decision of a statutory body is whether it was unreasonable in the Wednesbury sense (ie beyond rational justification), but we are not here concerned with a decision as to the outcome of the inquiry.
We are concerned with its transparency.
If there is a challenge to the High Court against a refusal of disclosure by a lower court or tribunal, the High Court would decide for itself the question whether the open justice principle required disclosure.
Guardian News provides an example.
I do not see a good reason for adopting a different approach in the case of a statutory inquiry, but the court should give due weight to the decision and, more particularly, the reasons given by the public authority (in the same way that it would to the decision and reasons of a lower court or tribunal).
The reason for the High Court deciding itself whether the open justice principle requires disclosure of the relevant information is linked to the reason for the principle.
It is in the interests of public confidence that the higher court should exercise its own judgment in the matter and that information which it considers ought to be disclosed is disclosed.
The analysis set out above is based on common law principles and not on article 10, which in my view adds nothing to the common law in the present context.
This is not surprising.
What we now term human rights law and public law has developed through our common law over a long period of time.
The process has quickened since the end of World War II in response to the growth of bureaucratic powers on the part of the state and the creation of multitudinous administrative agencies affecting many aspects of the citizens daily life.
The growth of the state has presented the courts with new challenges to which they have responded by a process of gradual adaption and development of the common law to meet current needs.
This has always been the way of the common law and it has not ceased on the enactment of the Human Rights Act 1998, although since then there has sometimes been a baleful and unnecessary tendency to overlook the common law.
It needs to be emphasised that it was not the purpose of the Human Rights Act that the common law should become an ossuary.
In the present case the inquiries which the Charity Commission conducted, under section 8 of the Charities Act 1993, into the operations of a charity formed by Mr George Galloway MP were of significant public interest.
At the end of the inquiries the Commission published its conclusions, but the information provided as to its reasons for the findings which it made and, more particularly, did not make, was sparse.
As a journalist, Mr Kennedy had good cause to want to probe further.
It is possible that the Charity Commission may have had reasons for not wishing to divulge any further information, but such is the course which the proceedings have taken that it is impossible to tell at this stage.
I regard it as unfortunate that Mr Kennedys request for further information was based solely on FOIA.
I have considerable disquiet that Mr Kennedy has been unable to learn more about the Charity Commissions inquiries and reasons for its conclusions, and I should like, if possible, for there to be a proper exploration whether the Charity Commission should provide more.
I am clear that this could be done through the common law, but it cannot be done through FOIA unless section 32(2) can properly be circumvented.
I agree with Lord Mance that if article 10 applies in the present case, it is fulfilled by the domestic law. (It should generally not be difficult to tell whether the information sought is within section 32(2) because the statutory definition of an inquiry is clear.
However, if for any reason the applicant was in doubt, he could ask the public authority to say whether it contended that the information was within section 32(2) and to explain its reason for saying so.
If so, the public authority could not then complain about the applicant following the route of judicial review.)
Lord Carnwath considers that article 10 would afford the advantage to Mr Kennedy that article 32(2) could be read down and Mr Kennedy would then have a simpler and cheaper mechanism for trying to obtain the information which he seeks.
That supposes that judicial review is not an adequate remedy.
In my view it is.
It was the remedy used in Guardian News and would be the remedy in any case where there is a challenge to a refusal of disclosure of information by a court below the level of the High Court or by a tribunal.
I do not see it as inappropriate for the same remedy to be available in relation to a statutory inquiry.
There are other reasons why I consider that it would be wrong to read down section 32(2) in the way for which Mr Kennedy contends.
First, it would go against the grain of FOIA to override section 32(2) in circumstances which Parliament considered the matter should be for the courts and where there is a remedy through the courts.
Secondly, to read down section 32(2) in the manner proposed would have other undesirable consequences.
Mr James Eadie QC rightly pointed out that under the construction proposed section 32(2) would not be reduced from an absolute exemption to a qualified exception, subject to a general public interest test (such as would be applied by a court), but would cease to have effect altogether at the end of the inquiry.
Section 2 brings in a public interest test where there is a relevant exemption, but it is not a ground of exemption in itself.
The only exemptions which would apply would be other specific exemptions in the Act but they do not cover all the ground which would be covered by a public interest test.
For example, inquiry records or court records may include material detrimental to a persons reputation which the court or inquiry did not investigate on grounds of relevance.
A court would have an obvious discretion not to order the disclosure of such material.
In Guardian News the court referred in paras 65 to 66 to a decision of the Court of Appeals for the Second Circuit (Winter, Calabresi and Cabranes CJJ) in United States v Amodeo (1995) 71 F 3d 1044 in which this point was discussed.
The approach of the US court was summarised by the Court of Appeal at para 66: The court commented that many statements and documents generated in federal litigation actually have little or no bearing on the exercise of judicial power because the temptation to leave no stone unturned in the search for evidence material to a judicial proceeding turns up a vast amount of not only irrelevant but also unreliable material.
Unlimited access to every item turned up in the course of litigation could cause serious harm to innocent people.
The court conclude that the weight to be given to the presumption of access must be governed by the role of the material at issue in the exercise of judicial power and the resultant value of such information to those monitoring the federal courts.
An English court would be expected to perform a similar exercise, but I cannot see how the Information Commissioner would be able to do so if section 32(2) were read down in the way for which Mr Coppel contends.
That is because the specific exemptions in FOIA do not give the Information Commissioner such a broad power.
In short, the common law approach, which I consider to be sound in principle, runs with the grain of FOIA; it does not involve countermanding Parliaments decision to exclude inquiry documents from the scope of the Act; and it is consistent with the judgment of Parliament that in this context statutory inquiries should be viewed in the same way as judicial proceedings.
It also produces a more just result, because a court is able to exercise a broad judgment about where the public interest lies in infinitely variable circumstances whereas the Information Commissioner would not have such a power.
On a point of detail, the parallel which Mr Coppel drew with inquiries under the Inquiries Act 2005 does not assist him.
He pointed out that under section 18(3) of the Inquiries Act, the exemption from FOIA under section 32(2) ceases to apply when the chairman at the end of the inquiry passes the inquiry documents to the relevant public department under the Inquiry Rules 2006, rule 18(1)(b).
Mr Coppel argued that it was an unjustifiable anomaly that section 32(2) of FOIA should remain in force after the conclusion of other public inquiries.
This argument seemed attractive at first, but it fails to take account of other relevant provisions of the Inquiries Act.
Under section 19 the chairman may impose a restriction order on the disclosure or publication of any evidence or documents given to an inquiry.
The section sets out the matters to which the chairman must have regard in deciding whether to make such an order, including any risk of harm or damage which may be avoided or reduced by the order.
Under section 20, such a restriction continues in force indefinitely, subject to provisions of that section which include a power given to the relevant minister to revoke or vary the order after the end of the inquiry.
In short, full provision is made for public interest considerations.
In view of the approach which I have taken, I can deal shortly with the Strasbourg decisions on which Mr Coppel has relied.
They have been comprehensively analysed by Lord Mance.
Since this court reviewed the Strasbourg jurisprudence on article 10 in British Broadcasting Corpn v Sugar (No 2) [2012] UKSC 4; [2012] 1 WLR 439, there have been four further Strasbourg decisions on which Mr Coppel relies: Gillberg v Sweden (2012) 34 BHRC 247, Shapovalov v Ukraine (Application No 45835/05) (unreported) given 31 July 2012, Youth Initiative for Human Rights v Serbia (Application No 48135/06) (unreported), given 25 June 2013 and sterreichische Vereinigung zur Erhaltung, Strkung und Schaffung v Austria (Application No 39534/07) (unreported) given 28 November 2013.
In the last of those cases, the First Section (at paragraph 41) highlighted among the courts earlier decisions the case of Trsasg v Hungary (2009) 53 EHRR 130, observing that the court had advanced from cases like Leander v Sweden (1987) 9 EHRR 433 towards a broader interpretation of the notion of the freedom to receive information and thereby towards a recognition of a right of access to information.
It drew a parallel in this context with the case law on the freedom of the press and the need for the most careful scrutinywhen authorities enjoying an information monopoly interfered with the exercise of the function of a social watchdog.
What is so far lacking from the more recent Strasbourg decisions, with respect, is a consistent and clearly reasoned analysis of the right to receive and impart information within the meaning of article 10, particularly in the light of the earlier Grand Chamber decisions.
Mr Coppel submits that the courts direction of travel is clear, but the metaphor suggests that the route and destination are undetermined.
If article 10 is to be understood as founding a right of access to information held by a public body, which the public body is neither required to provide under its domestic law nor is willing to provide, there is a clear need to determine the principle or principles by reference to which a court is to decide whether such a right exists in a particular case and what are its limits.
To take the latest case, Osterreichische Vereinigung concerned information about decisions of a commission described as a judicial body (at para 28).
In considering whether there had been an interference with the applicants rights under article 10, the court said that the applicant association had a watchdog role similar to that of the press, that it was involved in the legitimate gathering of information of public interest and that there had consequently been an interference with its right to receive and impart information under article 10 (paras 34 to 36).
In considering whether the interference was justified, the court considered it striking that the commission was a public authority deciding disputes over civil rights but that none of its decisions was published in any form.
The court concluded that its complete refusal to give access to any of its decisions was disproportionate (paras 46 to 47).
On one interpretation the scope of the decision is extremely broad.
Most information held by a public authority will be of some public interest, and article 10 would apply to any of it if a journalist, researcher or public interest group wanted access in order to generate a public debate, unless the authority could justify withholding it under the imprecise language of article 10.2.
Alternatively, the case could be seen more narrowly as essentially a case about open justice.
Like Lord Mance (at para 88) I cannot see the logic of using the existence of a duty of disclosure in domestic law as a platform on which to erect a duty under article 10, as distinct from article 6.
As to the more radical suggestion that article 10 gives rise to a prima facie duty of disclosure of any information held by a public body which the applicant seeks in order to promote a public debate, this is flatly contradictory to the Grand Chamber decision in Leander.
As Lord Mance has commented, it would amount to a European freedom of information law established on an undefined basis without the normal checks and balances to be expected in the case of freedom of information legislation introduced by a State after public consultation and debate.
If the Leander principle is to be abrogated, or modified, in favour of an interpretation of article 10 which makes disclosure of information by a public body in some circumstances obligatory, it seems to me with respect that what the new interpretation would require is a clear, high level exegesis of the salient principle and its essential components.
It is, however, unnecessary to say more in this case, because I see nothing in the Strasbourg jurisprudence which is inconsistent with what I have said regarding English domestic law.
I agree with the conclusions of Lord Mance and I would dismiss this appeal for the same reasons.
Like him, I emphasise that this conclusion does not mean that English courts lack the power to order a public body which has carried out a statutory inquiry into matters of public interest to provide such access to a journalist as may be proper for the exercise of their watchdog function, taking into account the relevant circumstances.
It would be open to Mr Kennedy now to make a fresh request to the Charity Commission on the basis of this judgment.
It would then be for the Administrative Court to consider any objection by the Charity Commission based on delay, but in considering such objection the court would need to take into account all the circumstances.
Mention was briefly made in argument about the three month time limit imposed under CPR 54.5(1), but that is after the grounds for the application have arisen, which would be after any refusal of Mr Kennedys request.
There could of course be argument that he should have made his first request on a different basis (as I would hold).
Whether that should bar the claim from proceeding would be a matter for the court considering the application, but on the facts as they presently appear it would seem harsh that the claim should be barred not because of any delay on Mr Kennedys part in seeking the information but because of legal uncertainty about the correct route.
LORD SUMPTION (with whom Lord Neuberger and Lord Clarke agree)
I agree that this appeal should be dismissed, for the reasons given by Lord Mance and Lord Toulson.
The Freedom of Information Act 2000 was a landmark enactment of great constitutional significance for the United Kingdom.
It introduced a new regime governing the disclosure of information held by public authorities.
It created a prima facie right to the disclosure of all such information, save insofar as that right was qualified by the terms of the Act or the information in question was exempt.
The qualifications and exemptions embody a careful balance between the public interest considerations militating for and against disclosure.
The Act contains an administrative framework for striking that balance in cases where it is not determined by the Act itself.
The whole scheme operates under judicial supervision, through a system of statutory appeals.
The right to receive information under article 10 of the Human Rights Convention has generated a number of decisions of the European Court of Human Rights, which take a variety of inconsistent positions for reasons that are not always apparent from the judgments.
The more authoritative of these decisions, and the ones more consonant with the scheme and language of the Convention, are authority for the proposition that article 10 recognises a right in the citizen not to be impeded by the state in the exercise of such right of access to information as he may already have under domestic law.
It does not itself create such a right of access.
Other decisions, while ostensibly acknowledging the authority of the principle set out in these cases, appear to point towards a different and inconsistent view, namely that there may be a positive obligation on the part of the state to impart information under article 10, and a corresponding right in the citizen to receive it.
However if (contrary to my view) there is a Convention right to receive information from public authorities which would not otherwise be available, no decision of the European Court of Human Rights suggests that it can be absolute or exercisable irrespective of the public interest.
Accordingly, since disclosure under the Freedom of Information Act depends upon an assessment of the public interest, it is difficult to discern any basis on which the scheme as such can be regarded incompatible with the Convention, whichever of the two approaches is correct.
Of course, the Strasbourg court may decide that the statutory scheme is compatible, but that particular decisions under it are not.
But this case is concerned with the compatibility of the scheme, not the particular decision.
The basis on which it is suggested that the scheme may not be compatible is that section 32, if it is to be construed as applying beyond the duration of the inquiry, is an absolute exemption more extensive than anything required to avoid disrupting the actual conduct of the inquiry.
If this criticism is to carry any weight, what the critics have to say is that the application of section 32 forecloses any examination of the public interest in disclosure.
But such a criticism would plainly be misconceived.
The exemptions in the Act are of two kinds.
There are, first of all, exemptions which reflect Parliaments judgment that the public interest requires information in some categories never to be disclosable under the Act.
Exemptions of this kind include those under section 23 (information supplied by or relating to bodies dealing with national security), section 34 (information whose disclosure would infringe Parliamentary privilege) and section 41 (information received by a public authority under a legally enforceable confidence).
The second category of exemption in the Act comprises cases where the Act does not need to provide for access to the information because there are other means of obtaining it on appropriate conditions for the protection of the public interest.
Such exemptions include those in section 21 (information available by other means) and the section with which we are presently concerned, section 32, dealing with information held by a court or by virtue of having been supplied to an inquiry or arbitration,
The point about section 32 is that it deals with a category of information which did not need to be covered by the Act, because it was already the law that information in this category was information for which there was an entitlement if the public interest required it.
Leaving aside the rather special (and for present purposes irrelevant) case of documents held by virtue of having been supplied to an arbitration, the relevant principles of law are to be found in rules of court and in the powers and duties of public authorities holding documents supplied to an inquiry, as those powers and duties have been interpreted by the Courts and applied in accordance with general principles of public law.
It cannot plausibly be suggested that this corpus of law fails to meet the requirements of article 10 of the Convention that any restrictions on the right recognised in article 10(1) should be prescribed by law.
Its continued operation side by side with the statutory scheme under the Freedom of Information Act is expressly preserved by section 78 of that Act.
This section overtly recognises that the Act is not a complete code but applies in conjunction with other rules of English law dealing with disclosure.
Much of the forensic force of the Appellants argument arises from the implicit (and occasionally explicit) assumption that there could be no proper reason in the public interest for denying Mr Kennedy the information that he seeks.
Therefore, it is suggested, the law is not giving proper effect to the public interest because it is putting unnecessary legal or procedural obstacles in Mr Kennedys way.
I reject this suggestion.
It is true that there is a legitimate public interest in the disclosure of information relevant to the performance of the Charity Commissions inquiry functions, and to this inquiry in particular.
But the Charity Commission has never been asked to disclose the information under its general powers.
It has only been asked to disclose it under a particular statute from which the information in question is absolutely exempt.
This is not just a procedural nicety.
If the Commission had been asked to disclose under its general powers, it would have had to consider the public interest considerations for and against disclosure which were relevant to the performance of its statutory functions under the Charities Act.
Its assessment of these matters would in principle have been reviewable by the court.
In fact, it has never been called upon to carry out this assessment, because Mr Kennedy chose to call for the information under an enactment which did not apply to the information which he wanted.
We cannot know what the decision of the Charity Commission would have been if they had been required to exercise their powers under the Charities Act.
We know nothing about the contents or the source of the information in the documents held by the Commission, or the basis on which it was obtained, apart from the limited facts which can be inferred from its report, the schedule of documents and the evidence in these proceedings.
Because this appeal is concerned only with the effect of section 32, and the Convention so far as it bears on section 32, none of this material has been relevant and we have not seen it.
It cannot necessarily be assumed that if Mr Kennedy had asked for disclosure under the Charity Commissions general powers, the resulting decision would have been favourable to him.
It might or might not have been.
No one has disputed that section 32 applies in this case if the exemption for which it provides extends beyond the duration of the inquiry.
We are therefore presumably concerned with information which the Commission holds only by virtue of its having been given to the Charity Commission for the purposes of the inquiry.
That information presumably emanates from persons or bodies who are not themselves public authorities.
Otherwise it would have been disclosable by those authorities under other provisions of the Freedom of Information Act.
While other statutory qualifications or exemptions might have in that event been relevant, section 32 would not have been.
The information is therefore likely to have been supplied to the Commission by private entities or possibly by foreign public authorities, and supplied only for the inquiry, not for any other purpose.
The inference from the Commissions report is that a significant part of it came from foreign entities, and therefore could not have been obtained under the Commissions power to requisition information under section 9 of the Charities Act.
In its letter of 4 July 2007, the Commission showed that it was well aware of the public interest for transparency of the decisions and reasons for them, so as to promote public confidence in charities.
But it considered at that time that its dependence on the co operation of third parties in carrying out its inquiry meant that that particular public interest was outweighed by the competing public interest in its being able to discover the relevant facts.
The importance of encouraging voluntary co operation with an inquiry by those possessing relevant information is a recognised public interest which may be highly relevant to the question whether it should be further disclosed: see Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627, 637 638 (Lord Diplock).
The statements made in the Commissions letter may or may not prove to be its final position.
But the point made there cannot be brushed aside.
LORD WILSON
In April 2003, shortly before he became its Investigations Editor, Mr Kennedy wrote an article for The Times about the Mariam Appeal (the appeal) which had been founded in 1998 by Mr George Galloway and which had recently closed down.
In 2003 Mr Galloway was a high profile Member of Parliament, as he is again today.
He had for many years been an outspoken critic of the economic sanctions imposed by the United Nations upon the regime of Saddam Hussein in Iraq.
He had contended that one of their consequences had been to deprive Iraqi citizens of necessary medical treatment.
The objects of the appeal, as stated in its constitution, had been to provide medical assistance to the Iraqi people, to highlight the causes of an epidemic of cancer in Iraq and to arrange for the medical treatment outside Iraq of certain Iraqi children.
The appeal had been named after Mariam Hamza, a young Iraqi girl who was suffering from leukaemia.
In his article in April 2003 Mr Kennedy alleged that money donated by the public to the appeal had been improperly used to fund visits by Mr Galloway to Iraq and elsewhere and to support political campaigns against the UN sanctions and against Israel.
A reader of the article seems to have referred it to the Attorney General, who, as an officer of the Crown, has a long standing role as the protector of charities.
The Attorney referred it on to the Charity Commission (the Commission).
In 2003 the Commission was governed by the Charities Act 1993 (the 1993 Act), which was later amended by the Charities Act 2006 and which has now been replaced by the Charities Act 2011.
The Commission has five objectives, of which the first is to increase public trust and confidence in charities, the third is to promote compliance by charity trustees with their legal obligations of control and management and the fifth is to enhance the accountability of charities to donors, beneficiaries and the general public (section 1B(2) of the 1993 Act, as amended).
The Commission has five general functions, of which the third includes the investigation of apparent misconduct in the administration of charities and the fifth includes the dissemination of information in connection with the performance of its other functions and the pursuit of its objectives (section 1C(2)).
The Commission has six general duties, of which the fourth is that, in performing its functions, it should have regard to the principles of best regulatory practice, including those of accountability and transparency (section 1D(2)).
The Commission also has power to institute an inquiry with regard to a particular charity: section 8 of the 1993 Act.
In June 2003 it instituted an inquiry into the application of the money raised by the appeal between March 1998 and April 1999.
In November 2003 it instituted a second inquiry into the application of the money raised by the appeal throughout its years of operation.
The two inquiries were combined.
In June 2004, pursuant to its power under section 8(6)(a) of the 1993 Act, the Commission published its statement of the results of the two inquiries.
In the statement, which was very short, it expressed the following conclusions: (a) that the objects of the appeal had been charitable and that, in the light of the size of its income, it should have been registered with the Commission as a charity but that the founders of the appeal had acted on legal advice to the contrary and so were unaware that they had created a charity; (b) (c) (d) (e) (f) (g) (h) (i) that, apart from members of the public, the major donors to the appeal had been the United Arab Emirates, someone in Saudi Arabia and a Jordanian citizen, namely Mr Zureikat; that Mr Galloway had confirmed that the appeal did not produce profit and loss accounts or balance sheets; that the Commission had been unable to obtain all the financial records of the appeal; that Mr Galloway had explained that, when in 2001 the chairmanship of the appeal had been transferred from himself to Mr Zureikat, he had sent the records to him in Jordan and Iraq and was unable to retrieve them; that Mr Galloway had assured it that all monies received by him out of the funds of the appeal had related to expenses incurred by him when he had been chairman of it; that two of the trustees had received salaries out of appeal funds in breach of trust but that their work had been of value to the appeal and no one had acted in bad faith in that regard, with the result that the Commission would not be taking steps to recover the salaries; that funds had been used to further political activities, in particular the campaign against the sanctions, but that the activities had been ancillary to the purposes of the appeal in that the trustees might reasonably have considered that they might secure treatment for sick children; and that, not only because the appeal had closed down but also because the political activities had been ancillary to its purposes and its records had been difficult to obtain, it was not proportionate for the Commission to pursue its inquiries further.
Mr Kennedy did not immediately seek information about the statement published in June 2004.
Later, however, he sought information designed to elucidate issues, raised by the statement, in relation to the way in which the funds of the appeal had been deployed (with particular reference to para 5(d), (e), (g) and (h) above) and to the way in which the Commission had conducted its inquiries (with particular reference to para 5(h) and (i) above).
The UN Oil for Food Programme, which ran from 1996 to 2003, enabled the Iraqi state to sell oil in return for payments made into an account controlled by the UN from which Iraq was entitled to draw only for the purchase of food and other humanitarian related goods.
In 2005 reports by the UN and by the US Senate concluded that the programme had attracted improper payments of commissions to, or at the direction of, members of the Iraqi government by Iraqi companies keen to be allowed to participate in sales either of the oil or of the humanitarian related goods; and that the appeal had received donations which represented some of these improper payments.
Thus in December 2005 the Commission instituted a third inquiry into the appeal under section 8 of the 1993 Act.
In June 2007 it published a statement of the results of this inquiry under section 8(6).
In the statement, which was even shorter than the first, the Commission said that it had examined a large body of sensitive evidence obtained from international sources.
It added that it had directed the five known members of the executive committee of the appeal, whom it took to be its trustees, to answer questions and that, while the three members resident in the UK (including Mr Galloway) had done so, the two resident abroad (including Mr Zureikat) had not done so.
The Commission then proceeded to express the following conclusions: (a) (b) (c) (d) (e) that the funds known to have been paid into the appeal totalled 1,468,000, of which Mr Zureikat had donated over 448,000; that, of the funds donated by Mr Zureikat, about 300,000 represented his improper receipt of commissions referable to the Oil for Food programme; that Mr Galloway and the other trustees resident in the UK denied all knowledge of the source of Mr Zureikats donations; that, although unaware that they had created a charity, the trustees should have been aware that they had created a trust, which required them to be vigilant in accepting large donations, particularly from overseas; that, in breach of their duty of care, the trustees had failed to make sufficient inquiries into the source of Mr Zureikats donations; (f) (g) that Mr Galloway himself, however, may have known of the connection between the appeal and the programme (by which the Commission appears to have meant that, despite his denial, he may have known the source of Mr Zureikats donations); and that the Commission had liaised with other agencies in relation to possible illegality surrounding Mr Zureikats donations but, in the light of the closure of the appeal in 2003 and the distribution of all its funds, it proposed to take no further action.
On the date of publication of this second statement Mr Kennedy made his request for information to the Commission under the Freedom of Information Act 2000 (the FOIA).
He considered that the statement was surprisingly short and extremely unsatisfactory.
He took the view that Mr Galloways possible misconduct in relation to the appeal was a matter of considerable public importance and that the material said to justify the serious allegations made against him had not been identified.
Mr Galloway, for his part, was equally critical of the statement.
He announced that its conclusion that the appeal had received improper funds was palpably false and that parts of it were sloppy, misleading and partial and would have been corrected if the Commission had bothered to interview him.
The Commission later responded that Mr Galloway had declined its invitation to interview him.
At an early stage of the protracted litigation to which it has given rise, Mr Kennedy confined his request for information to the following four classes of documents: (a) (b) (c) (d) those which explained the Commissions conclusion that Mr Galloway may have known that Iraqi bodies were funding the appeal; those by which it had invited Mr Galloway to explain his position and by which he had responded; those which had passed between it and other public authorities; and those which cast light on the reason for the institution and continuation of each of the three inquiries.
All members of this court agree that, in principle, the Commissions two statements raise questions of considerable public importance and that Mr Kennedys confined request would assist in answering them.
What was the extent of the breach of duty on the part of Mr Galloway, a public figure and a Member of Parliament, in relation to the well publicised appeal? Could the doubt about his knowledge of the source of Mr Zureikats donations reasonably have been resolved in one way or the other? What was the reason for the Commissions apparent failure to interview Mr Galloway? Did the Commission conduct the inquiries with sufficient rigour? Were other parts of the statements, for example their treatment of his expenses and of the funding of political activities, unduly indulgent towards Mr Galloway? To the extent that they were unduly indulgent, why so?
In making his confined request Mr Kennedy was careful to acknowledge, first, that parts of the information sought might attract absolute exemption under the FOIA (for example to the extent that it was covered by Parliamentary privilege under section 34 or represented either personal information under parts of section 40 or information provided in confidence under section 41); and, second, that other parts of it might fall within some of the qualified exemptions set out in the FOIA and, if so, would require the weighing of the rival public interests pursuant to section 2(2).
Indeed, when the Commission came to prepare a schedule of the documents held in connection with the inquiries (which it said were held in 25 lever arch files, as well, in part, as electronically), it indicated, in relation to each document, the exemption or exemptions prescribed by the FOIA on which it proposed, if necessary, to rely.
Among the indicated exemptions was one which it ascribed to every document, namely that provided by section 31 of the FOIA.
The effect of section 31(1)(g), read together with section 31(2)(b), (c) and (f), is to raise a qualified exemption in relation to information of which disclosure would be likely to prejudice the Commissions exercise of its functions for the purpose of ascertaining whether anyone has been guilty of improper conduct in relation to a charity or whether the circumstances justify regulatory action or for the purpose of protecting the administration of charities from mismanagement.
So it is an important exemption reflective of the public interest that the Commission should function effectively.
In its evidence the Commission argued that substantial disclosure to Mr Kennedy would forfeit the confidence of those who had cooperated, or might otherwise cooperate, with its inquiries and so would prejudice the future exercise of its functions for the specified purposes.
One might have anticipated lively argument on behalf of the Commission in that respect, as in others, had it to date been necessary to proceed to consider the qualified exemptions.
But the argument which finds favour with the majority of the members of this court is that section 32(2) of the FOIA provides an absolute exemption from disclosure at any rate under the FOIA of any of the information in any of the documents held in the lever arch files, apart from that contained in about seven documents which the Commission received or created following the end of the third inquiry and which have therefore already been disclosed.
The four steps in the argument are (1) that all the other information is contained in documents placed in the Commissions custody, or created by it, for the purposes of the three inquiries; (2) that the Commission holds the information only by virtue of its being so contained; (3) that, on the application to section 32(2) of conventional canons of construction, facts (1) and (2) satisfy its requirements; and (4) that the rights of Mr Kennedy under article 10 of the European Convention on Human Rights (the ECHR) are not such as, under section 3(1) of the Human Rights Act 1998 (the 1998 Act), to require that, so far as possible, section 32(2) be construed differently so as to be compatible with them.
In my view the closest scrutiny needs to be given to the only debateable step in the argument, which is step (4).
Were that step valid, the result would be that, instead of a document by document inquiry into the applicability of other absolute exemptions, or of qualified exemptions followed (if applicable) by the weighing of public interests under section 2(2), a blanket exemption from disclosure under the FOIA is thrown over the entire information.
Every part of it would be exempt from disclosure under the FOIA irrespective of its nature; of the degree of legitimate public interest which its disclosure might generate or help to satisfy; and of the degree of harm (if any) which its disclosure might precipitate.
The Commission stresses that the information would not be exempt from disclosure under the FOIA for ever.
Following 30 years (reduced to 20 years but not in respect of a record created prior to 2013) from the year in which it was created, a record becomes a historical record, information in which is not exempt under section 32 of the FOIA: see sections 62(1) and 63(1).
But, in this regard, one must also have an eye to the Public Records Act 1958.
The effect of section 3(4) of the 1958 Act is that, by the end of that period of 30 years, such documents relating to the inquiries as still exist will have been transferred by the Commission to The National Archives.
But not all the documents currently in the 25 lever arch files will then still exist: for, pursuant to section 3(1) of the 1958 Act, the Commission will have arranged for the selection of the documents which in its view merit permanent preservation in The National Archives and, pursuant to section 3(6), it will have caused the remainder to be destroyed.
It is unreal to suggest that, subject to any continuing exemptions, likely access to some of the information after 30 years would satisfactorily meet the public interest, which Mr Kennedy aspires to satisfy, in the conduct of a public figure in relation to a charity and in the quality of the Commissions supervision of it.
The suggested exemption from disclosure at any rate under the FOIA of the information in the Commissions documents for a generation is even more startling when attention is paid to the laws treatment of disclosure of two other classes of documents addressed by section 32.
First, court records.
A court is not a public authority for the purposes of the Act.
But, particularly if it is or has been a party to court proceedings, a public authority is likely to hold copies of documents filed with the court, or created by the court, for the purposes of such proceedings.
Information thus held by a public authority enjoys absolute exemption from disclosure: section 32(1).
But the court itself will also hold copies of those documents.
Thus, by way of counter balance to the exemption from disclosure of such information if held by a public authority, there is the right of the citizen to obtain copies of specified documents from the court file (rule 5.4C(1), Civil Procedure Rules 1998) and the power of the court to permit him to obtain copies of, in effect, all other documents on the file (rule 5.4C(2)).
The citizens right and the courts power are each exercisable at any stage, whether while the proceedings are pending or following their conclusion.
Second, records of inquiries held under the Inquiries Act 2005 (the 2005 Act).
Section 32(2) of the FOIA applies to information contained in documents placed in the custody of, or created by, a person conducting an inquiry held under any statutory provision: section 32(4)(c).
By contrast with the Commissions inquiries, held under section 8 of the 1993 Act, inquiries are sometimes held at the direction of a minister, within terms of reference set out by him, under the 2005 Act.
At the end of such an inquiry, its chairman must cause documents given to, or created by, the inquiry to be passed to, and held by, the minister: see rule 18(1)(b), Inquiry Rules 2006 (SI 2006/1838).
Section 18(3) of the 2005 Act provides that section 32(2) of the FOIA does not apply in relation to information contained in documents thus passed to, and held by, the minister (being a public authority).
It is true that, under section 19 of the 2005 Act, the minister and the chairman may each, prior to the end of the inquiry, impose restrictions on the disclosure of material provided to it if they consider them conducive to the fulfilment of the inquirys terms of reference or necessary in the public interest: subsections (1), (2) and 3(b).
Importantly, however, the restrictions do not, subject to an irrelevant exception, apply to disclosure by the minister himself (or by any other public authority holding any of the material) following the end of the inquiry: section 20(6).
Parliament has therefore seen fit to remove the absolute exemption under section 32(2) of the FOIA from material created or produced for an inquiry held under the 2005 Act once it has come to an end and to allow disclosure of it thereafter to be governed by the suite of qualified exemptions and of the other absolute exemptions set out in the FOIA.
In opposing Mr Kennedys appeal, the Commission has been unable to explain why the disclosure of material referable to statutory inquiries held otherwise than under the 2005 Act should apparently be governed so differently.
In my view the difficult question is whether Mr Kennedy has human rights apt enough and strong enough to repel the apparent obstruction of him, and therefore of his readers, by section 32(2) of the FOIA from addressing the concerns which I have identified through disclosure under that Act.
The right under article 10 of the ECHR is to freedom of expression, including freedom to hold opinions and to receive and impart information and ideas without interference by public authority.
So the receipt of information is expressly included within the right.
The right has to be without interference by public authority.
These words have given rise to a narrow, ostensibly a pedantic, question of the sort against which the court in Strasbourg often sets its face: is the public authority basically restrained from interfering only with a persons receipt of information from another private person willing to impart it (the Leander approach) or does the restraint extend to interference with, in other words to obstruction of, a persons receipt of information from the public authority itself (the wider approach)? A purely textual answer, with particular concentration on the word freedom, might favour the narrow approach.
That answer would also respect the negative phraseology of the public authoritys obligation, whereas the opposite answer would give rise to a positive obligation of what, subject to whatever interpretation may be placed upon paragraph 2 of the article, might prove to be of substantial proportions.
Nevertheless a brief reflection on the nature of freedom of expression suggests difficulties with the narrow approach.
Without freedom to receive certain information, there is no freedom to proceed to express it; and a persons freedom to express the information is likely to carry much greater value for the public if the person holding the information is unwilling to impart it to him.
In his illuminating and appropriately cautious discussion of these tensions in Freedom of Speech, 2nd ed (2005), Professor Barendt states, at p 110, that the link between freedom of expression and freedom of information is undeniable.
Indeed, if efficacy is to be given to the right to freedom of expression, there is no reason to consider that information held by a public authority (whether relevant to itself or to a private person or, as in the present case, to both) is of lesser significance to it than information held by a private person.
On the contrary.
It is with these difficulties that the European Court of Human Rights (the ECtHR) has recently been required to wrestle.
Lord Mance has charted the iteration by the ECtHR in 1987 of what it described as the basic scope of the right to receive information under article 10 in the Leander case and of its reiteration in the Gaskin, Guerra and Roche cases (all cited by him in para 63 above).
The trouble is that, apart from that of Guerra, the cases were all in some quarters controversially subjected to principal analysis under article 8 instead of under article 10, with the result that the treatment of article 10 was extremely short.
Even in the Guerra case it was article 8 which won the day for those living under the polluted Italian skies who had complained that their right to receive information about the attendant risks had been violated.
They had however cast their claim primarily under article 10 and so in their case there was fuller treatment of article 10 than in the other cases.
It is within that fuller treatment that the first straws in the wind can be discerned.
First, a majority of the Commission of the ECtHR had considered that a positive obligation on the state under article 10 to ensure a right to receive information could not be excluded in principle and, in the light of the environmental dangers, had arisen in the present case (paras 42 and 47 of the Commissions opinion, set out in para 36 of the ECtHRs judgment).
Indeed that majority had gone further by suggesting that the states obligation under article 10 was to collect relevant information as well as to impart what it already held (para 49 of its opinion).
As a preface to its rejection of that opinion the ECtHR, by a majority, recognised but of course distinguished cases in which the general public had a right to receive information as a corollary of the specific journalistic function of imparting information on matters of public interest; then, prior to turning to article 8, it explained its disagreement with the Commission but specifically with regard to the suggested obligation to collect and disseminate information (para 53).
In separate opinions one judge of the ECtHR agreed with the Commissions analysis of the scope of article 10 and six others explained that their disagreement with it applied only to the authoritys suggested obligation to collect information rather than to impart what it already held.
All this was being said back in 1998.
From these early straws it is necessary to chart the ECtHRs incremental development of the wider approach in no less than six decisions over the last five years.
First, the Trsasg case, cited by Lord Mance in para 71 above.
I agree with him at para 74 that its significance is lessened by Hungarys concession that article 10 was engaged.
I cannot accept however that the ECtHR was setting itself up as some further Hungarian appellate court and holding only that the court of appeal there had misapplied its Data Act.
The ECtHR, at paras 35 to 38: (a) cited the Leander case; (b) asserted, albeit without much basis, that the court had recently advanced towards a broader interpretation of article 10; (c) distinguished the Guerra case on the basis that there the request had been for the state to collect information rather than to disclose what it already held; (d) held that, in requesting the constitutional court to disclose the MPs complaint, the civil liberties union was acting, like the media, as a social watchdog seeking to generate informed public debate; and concluded that, in refusing the request, the constitutional court, which had a monopoly over the information, had unnecessarily obstructed that debate. (e)
Second, the Kenedi case, also cited in para 71 above.
The historians complaint under Article 10 was upheld on the basis that Hungarys protracted obstruction of his request for information about the functioning of its security service in the 1960s had not been prescribed by law.
For present purposes the significance of the case lies in the ECtHRs statement, at para 43, that access to original documentary sources for legitimate historical research was an essential element of the right to freedom of expression, for which it cited the Trsasg case.
Third, the Gillberg case, cited in para 76 above.
The applicant complained that his criminal conviction for misuse of public office, namely for disobeying court orders that the material collected by his university in its study of a mental disorder should be disclosed to K and E, somehow violated his rights under article 10.
The complaint was so bizarre that, in rejecting it, the Grand Chamber had no need to attend to the recent widening of the ambit of the article in aid of the generation of important debate by social watchdogs.
At para 83 it set out the Leander approach but more significantly noted at para 93 that K and E had rights to receive the material under article 10 upon which the applicants suggested right would impinge.
Fourth, the Shapovalov case, also cited in para 76 above.
The journalist complained that his rights under article 10 had been violated by Ukraines refusal to disclose the arrangements made by its electoral commission for the controversial elections in 2004.
The ECtHR rejected his complaint on the basis that, in one way and another, he had already been given access to information about the arrangements.
The significance of the decision, made by a different section of the court (over which, as it happens, the current president of the entire court was then presiding), lies in its citation (at para 68) of the Trsasg case for the proposition that the nondisclosure of information of public interest might disable public watchdogs from playing their vital role.
Fifth, the Youth Initiative case, also cited in para 76 above.
The complaint under article 10 was upheld on the basis that, in defying a domestic order to inform the applicant of the number of people subjected to electronic surveillance in 2005, Serbias interference with its rights had not been in accordance with law.
The residual significance of the ECtHRs decision lies in the attention which, underlined in a concurring opinion, it gave at para 13 to a statement in 2011, entitled General Comment No 34, of the UN Human Rights Committee that a parallel article (article 19 of the International Covenant on Civil and Political Rights) included a right of access by the media to information of public interest held by public bodies; and in the approval which, at para 20, the court gave to the assertion in the Trsasg case of that same principle in favour of public watchdogs for the purposes of article 10.
And sixth, and most importantly, the sterreichische case, also cited in para 76 above.
There, four months ago, the ECtHR reminded itself of the Leander approach; noted however the recognition in the Trsasg case of the courts recent advancement towards the broader approach; observed that information could not be imparted unless it had been gathered; accepted that the purpose behind transfers of land in the Tyrol was a subject of general interest; described the applicant as a social watchdog in that regard; held that the applicant had rights under article 10 with which the refusal of the Regional Tyrol Commission to disclose its decisions on appeal from the local commissions had interfered; and concluded that, although it was prescribed by Austrian law, the interference was unnecessary in that it was a blanket refusal to disclose any of the regional commissions decisions.
I cannot subscribe to the view that the development of article 10 which was in effect initiated in the Trsasg case has somehow been irregular.
The wider approach is not in conflict with the basic Leander approach: it is a dynamic extension of it.
The judgment in the Trsasg case is not some arguably rogue decision which, unless and until squarely validated by the Grand Chamber, should be put to one side.
Its importance was quickly and generally recognised.
Within a year of its delivery the European Commission For Democracy Through Law (the Venice Commission) had hailed it as a landmark decision on the relation between freedom to information and the Convention (Opinion No 548/2009, 14 December 2009); and, in giving the judgment of the Court of Appeal in Independent News and Media Ltd v A [2010] EWCA Civ 343, [2010] 1 WLR 2262, Lord Judge CJ had, at para 42, specifically endorsed that description of it.
In his judgment in the Sugar case, cited by Lord Mance at para 61 above, Lord Brown of Eaton under Heywood, with whom Lord Mance had agreed at para 113, had rejected at para 94 the proposition that, in the light in particular of the Trsasg case, Mr Sugar had had any right under article 10 to disclosure by the BBC of a report held by it for journalistic purposes.
But, as Lord Brown had proceeded to demonstrate at paras 98 to 102, interference by the BBC with any possible right of Mr Sugar under article 10 had clearly been justified; and that was the basis on which, at para 58, I had associated myself with the rejection of Mr Sugars invocation of article 10.
In the light of the judgments of the ECtHR delivered following this courts decision in the Sugar case, in particular in the sterreichische case, this court should now in my view confidently conclude that a right to require an unwilling public authority to disclose information can arise under article 10.
In no sense does this betoken some indiscriminate exposure of sensitive information held by public authorities to general scrutiny.
The jurisprudence of the ECtHR, of which this court must always take account and which in my view it should in this instance adopt, is no more than that in some circumstances article 10 requires disclosure.
In what circumstances? These will fall to be more clearly identified in the time honoured way as, in both courts, the contours of the right are tested within particular proceedings.
The evolution of the right out of freedom of expression clearly justifies the stress laid by the ECtHR on the need for the subject matter of the request to be of public importance.
No doubt it also explains the importance attached by that court to the status of the applicant as a social watchdog; whether that status should be a pre requisite of the engagement of the right or whether it should fall to be weighed in assessing the proportionality of any restriction of it remains to be seen.
Equally references in the ECtHR to the monopoly of the public authority over the information may need to find their logical place within the analysis: thus, in the absence of a monopoly, an authoritys non disclosure may not amount to an interference.
Where the article is engaged and where interference is established, the inquiry will turn to justification under para 2.
If refusal of disclosure has been made in accordance with an elaborate statutory scheme, such as the FOIA, the public authority will have no difficulty in establishing that the restriction has been prescribed by law; and the live argument will surround its necessity in a democratic society, in relation to which the line drawn by Parliament, if susceptible of coherent explanation, will command a substantial margin of appreciation in the ECtHR and considerable respect in the domestic courts.
Irrespective of its precise contours, the right to require a public authority to disclose information under article 10 applies to Mr Kennedys claim against the Commission.
Mr Kennedy can tick all the boxes to which I have referred.
I will spend no time before concluding that a blanket prohibition on his receipt of any of the information for 30 years would be disproportionate to any legitimate aim; and, but for the argument to which I must now turn, this court should proceed to consider whether, pursuant to section 3 of the 1998 Act, it is possible to read section 32(2) of the FOIA so as to escape any such blanket prohibition.
I confess to some surprise at the solution to this appeal which the majority of the members of this court now devise.
As Lord Mance explains in para 6 above, their solution lies in interpreting the intention of Parliament in including the 30 year prohibition within section 32 of the FOIA as being not that the documents should necessarily be exempt from disclosure for 30 years but that their disclosure should be regulated, otherwise than under the FOIA, by the different and more specific schemes and mechanisms which govern the operations of, and disclosure by, courts, arbitrators and persons conducting inquiries.
In relation to documents filed in, or created by, courts, or served in connection with proceedings in courts, there is no difficulty in subscribing to Lord Mances interpretation.
In that, as I have explained in para 175 above, courts are not subject to the FOIA and naturally have their own system for regulating disclosure of documents on their files, it is clearly undesirable that those seeking court documents of which copies happen to have come into the possession of public authorities should be entitled to require the latter to make disclosure under a different regime, namely the FOIA, which might prove less restrictive, or for that matter more restrictive, than it would be if made pursuant to a determination of the court.
Hence subsection (1) of section 32 of the FOIA.
But what was the Parliamentary intention behind subsection (2)? How much thought can have gone into its conclusion that, in the words of the Minister quoted by Lord Toulson at para 120 above, statutory inquiries have a status similar to courts and therefore that information in inquiry documents should, by subsection (2), be swept into the exemption aptly made in subsection (1) in respect of information in court documents?
In searching for what are said to be the more specific schemes and mechanisms which govern disclosure by persons conducting inquiries (for in the present case we can ignore arbitrators), let me first address inquiries under the 2005 Act.
In relation to them, there is no scheme, apart from the FOIA, which governs disclosure following the end of an inquiry.
What governs their disclosure is the FOIA.
In providing in section 18(3) of the 2005 Act that, when, following the end of an inquiry, the chairman passes the documents to the minister who established it, the 30 year prohibition ceases to apply, Parliament was not recognising that the FOIA did not apply to disclosure of them.
On the contrary, it was recognising that the FOIA did apply to them in every respect until that point and that, save in respect of the 30 year prohibition which beyond that point could not be justified, it should continue to apply to them.
The analogous provision in section 20(6) of the 2005 Act, namely that restrictions on disclosure imposed by the minister or the chairman prior to the end of the inquiry should not thereafter have effect, reflects the same thinking: namely that, in the absence of justification for non disclosure under the specific provisions of the FOIA, the documents then fell to be disclosed thereunder.
So the regime for disclosure in respect of inquiries conducted under the 2005 Act entirely undermines the conclusion that disclosure referable to inquiries is not to be governed by the FOIA; and of course the regime is precisely that for which Mr Kennedy contends in relation to inquiries conducted otherwise than under the 2005 Act.
In para 33 above Lord Mance responds that Parliaments perception in 2005 of a need to disapply the 30 year prohibition in relation to disclosure of documents following the end of inquiries conducted under the new Act sheds no light on its perception in 2000.
But his observation raises two linked questions.
If Parliament had addressed the point in 2000, on what basis might its perception have been different? And, if in 2005 some other adequate scheme for disclosure was available, why did it perceive a need to disapply the prohibition and to cause disclosure to be governed by the other, specific provisions of the FOIA?
What, then, is suggested to be the more specific scheme and mechanism which governs disclosure by persons, such as the Commission, who conduct inquiries otherwise than under the 2005 Act? In respect of the Commission the scheme is said to lie within the 1993 Act, augmented by the common law.
If so, one might expect to find it in section 8 of the 1993 Act, which defines the powers of the Commission in its conduct of inquiries and which does, at subsection (6), address a degree of publication in that regard.
But it is only a report, or another statement of the results, of the inquiry which the subsection permits or possibly obliges the Commission to publish.
The subsection does not address the disclosure of documents held by the Commission for the purpose of the inquiry.
Section 10A provides for disclosure of a broader category of information by the Commission, which would no doubt include information obtained for the purposes of an inquiry; but that section provides for disclosure only to public authorities.
The result is that there is no specific scheme for disclosure of such information to private citizens at all.
The scheme is instead said to lie in the overall definitions of the Commissions objectives, functions and duties in sections 1B, 1C and 1D of the 1993 Act: in particular in its objective of increasing public confidence in charities (section 1B(3)1); in its general function of disseminating information in connection with the performance of its functions (section 1C(2)5); and in its duty to have regard to the need for transparency of regulatory activities in the performance of its functions (section 1D (2) (4)).
It has never been suggested to Mr Kennedy, whether by the Commission itself in its initial responses to his request for information under the FOIA in 2007 or later through solicitors, that his request should be made otherwise than under the FOIA.
On the contrary the stance of the Commission has been that the FOIA indeed governed his request and that its terms precluded accession to it.
There did come a time, apparently in the Court of Appeal, when counsel for the Commission began to argue, as they have continued to argue in this court, that, when read with section 78 of the FOIA, sections IC and ID of the 1993 Act conferred a residual power on the Commission to disclose documents.
But counsel have never accepted that the Commission was under any duty in this regard or that the circumstances of Mr Kennedys request might be such as to attract exercise of the suggested power in his favour.
The majority of my colleagues in this court proceed to introduce the suggestion that the scheme for disclosure which they discern in sections 1C and 1D of the 1993 Act is underpinned by the common law principle of open justice which, in an eloquent judgment delivered when he was a member of the Court of Appeal, Lord Toulson invoked in explaining why journalists were entitled to disclosure by a magistrates court of witness statements and correspondence to which reference had been made at a hearing of applications for extradition orders: see R (Guardian News and Media Ltd) v City of Westminster Magistrates Court cited in para 47 above.
The result, according to the majority, is that, confronted with a request such as that of Mr Kennedy for disclosure of the material in the exercise of its functions and in the performance of its duties under sections 1C and 1D of the 1993 Act, the Commission has a duty to accede to it in the absence of persuasive countervailing considerations (Lord Mance, at paras 49 and 56); and that a refusal to disclose could be the subject of challenge in the form of judicial review by a High Court judge, who should adjust the level of his scrutiny so as to accord with the principles of accountability and transparency contained in the 1993 Act (Lord Mance, at para 55).
In my view the scheme identified by the majority for disclosure by the commission outside the FOIA is profoundly unsatisfactory.
With respect, it can scarcely be described as a scheme at all and there is certainly no example of its prior operation or other recognition of its existence.
Compare it with the scheme under the FOIA which, apart from the apparent prohibition for 30 years, identifies an elaborate raft of prescribed situations in which the Commission is entitled, or subject to the weighing of rival interests may be entitled, to refuse disclosure; and under which a refusal can be countered by application to an expert, namely the Information Commissioner, who takes the decision for himself (section 50(1)) and whose decision can be challenged on points of law or even of fact by an expert tribunal (section 58(1)) and in effect without risk as to costs.
Although the majority of my colleagues reject Mr Kennedys assertion that he has rights under article 10 which are engaged by his request for disclosure by the Commission, they proceed to suggest that his entitlement to disclosure otherwise than under the FOIA would be likely to be as extensive as any entitlement under article 10 (Lord Mance, paras 45, 50, 56, 92 and 101(iv)).
The suggested scheme otherwise than under the FOIA is so vague and generalised that I regard the determination thereunder of any request for disclosure as impossible to predict.
It may be that, in practice, the Commission and, on judicial review, the High Court judge would reach for the helpful prescriptions in the FOIA and, in effect, work in its shadow.
But if, as I consider, Mr Kennedys rights under article 10 are engaged by his request, I even have doubts whether any refusal to disclose a document otherwise than under the FOIA could be justified under para 2 of the article.
For restrictions on the exercise of his rights under article 10 must be prescribed by law, which in the words of the ECtHR, must be adequately accessible and foreseeable, that is, formulated with sufficient precision to enable the individual if need be with appropriate advice to regulate his conduct (Gillan and Quinton v United Kingdom (2010) 50 EHRR 1105).
It is possible that the so called scheme for disclosure otherwise than under the FOIA might fail that test.
Lord Mance suggests at para 37 that, if that scheme failed the test, so would the scheme for disclosure of court documents at the direction of a judge: but the adequacy of a broadly discretionary power may be very different when exercised by a judge with no axe to grind rather than, albeit subject at any rate in theory to judicial review, by an executive authority requested to disclose documents which may justify criticism of it.
Although on the majoritys analysis of the reach of article 10 this problem does not arise, on my analysis it does arise.
My doubts in this regard fortify my firm conclusion that, including in the interests of the Commission, it is important that, if possible, requests for disclosure of information obtained for the purposes of an inquiry should be determined under the FOIA, subject of course to the overarching requirement in para 2 of the article that any refusal should be necessary in a democratic society.
The problem is, of course, the absolute exemption from disclosure apparently cast over such information by section 32(2) until, at the expiry of 30 years, it becomes a historical record.
I agree with Lord Mance, for the reasons which he gives at para 28 above, that the natural construction of the subsection is to that effect.
The alternative construction is that the subsection governs only information held for the purposes of the inquiry with the result that, once the inquiry has been concluded, the subsection no longer governs it.
The alternative construction is wrong.
But it is arguable.
The Court of Appeal considered that, as a matter of grammar, the subsection was at least ambiguous and the alternative construction of it might even be preferable (Ward LJ, para 21, [2011] EWCA Civ 367, [2012] 1 WLR 3524).
In granting permission for the alternative construction to be argued in the present appeal, this court provisionally endorsed its arguability.
In paras 223 to 233 below Lord Carnwath stresses the muscularity of the power given to courts under section 3 of the 1998 Act to read primary legislation in a way which is compatible with rights under the ECHR.
For the reasons which he there gives, I would read the subsection in accordance with the unnatural, alternative, construction with the result that, following the end of the Commissions inquiries, it had no effect and that, at long last, Mr Kennedys request should begin to be appraised by reference to the application to the Commissions documents of the other, elaborate, provisions set out by Parliament in the FOIA.
So I would have allowed the appeal.
LORD CARNWATH
Summary
In agreement with Lord Wilson, I would allow the appeal.
I would uphold the view of the Information Tribunal, supported by recent Strasbourg cases, that section 32(2) as interpreted by the Charity Commission involved a disproportionate interference with Mr Kennedys rights under article 10; but that the section can and should be read down under section 3 of the Human Rights Act 1998 (HRA) to avoid that effect.
I shall comment also on the alternative common law or open justice approach, which, though now adopted by the majority, was unsupported by any of the parties before us, in my view for good reasons.
The course of the case
The case has had a tortuous history.
It began with Mr Kennedys request to the Charity Commission as long ago as 8 June 2007.
It has arrived at the Supreme Court more than six years later, after detailed consideration by the Information Commissioner, the Information Tribunal (twice), the High Court, and the Court of Appeal (twice).
During that time the parties have had to adapt their arguments to a frequently changing legal landscape.
Important court decisions here and in Strasbourg have opened up new directions of thought or closed off others.
These changes have continued up to and beyond the hearing in this court.
After the close of the hearing, a new decision of the Strasbourg court (the Austrian case) has led to the need for further submissions to add to the voluminous bundles already before the court.
Against that difficult background, it is particularly important for us not to lose sight of what the case is about in terms of merits.
The public interest of the information sought by Mr Kennedy, and the legitimacy of his reasons as a journalist for seeking it, are not in dispute.
Nor in my view has any convincing policy reason been put forward for a blanket exemption, as contended for by the Charity Commission.
In the first Court of Appeal judgment (12 May 2011) [2012] 1 WLR 3524, para 47, Jacob LJ spoke of his reluctance to adopt the Commissions construction which allows all information deployed in the inquiry to be kept secret for 30 years after the end of the inquiry, regardless of the contents of the information, the harmlessness of disclosure or even the positive public interest in disclosure.
Although like his colleagues he felt constrained by what he called the identity of section 32(1) and section 32(2), he commented: Clearly and obviously Parliament was treating documents deployed in legal proceedings before a court in exactly the same way as those deployed in an inquiry.
It simply overlooked that a court has machinery for the release of documents subsequent to (or indeed during) legal proceedings whereas an inquiry or arbitration does not.
That may well have been a blunder which needs looking at (para 48).
At that stage the judgment had been restricted to interpretation of FOIA itself, and the arguments that had been advanced under article 10 of the Convention the Court considered could not be decided on the material before it.
The court took the very unusual step of remitting the case to the tribunal to report on the article 10 issue, more particularly whether section 32(2) should be read down under HRA section 3 so that the exemption that it provides from disclosure of information ends upon the termination of the relevant statutory inquiry.
The court accepted that the failure to take the point at the previous tribunal had been understandable, given that the judgments of the Strasbourg Court upon which Mr Coppel now relied (Trsasg a Szabadsagjogokert v Hungary (2009) 53 EHRR 130 and Kenedi v Hungary (2009) 27 BHRC 335) had been delivered only at or about the time of the tribunal hearing and not reported until later.
Further, the point was one of general public interest and the present case was an ideal one for it to be tested (per Ward LJ para 45).
By that time strong encouragement had been given in the Court of Appeal for the view that Trsasg represented a significant change of direction in the Strasbourg jurisprudence.
In Independent News and Media Ltd v A [2010] EWCA Civ 343, [2010] 1 WLR 2262, Lord Judge CJ noted that the decision appeared to point the way to a wider scope for article 10, at least where the media are involved and genuine public interest is raised (para 41).
In British Broadcasting Corpn v Sugar (No 2) Moses LJ described the case as a landmark decision on freedom to information (his emphasis), showing that article 10 may be invoked not only by those who seek to give information but also by those who seek to receive it (para 76).
That view of the recent Strasbourg case law was followed after full argument by the very experienced tribunal in its report to the Court of Appeal (fairly described by Etherton LJ as an excellent, clear and comprehensive analysis).
It followed a two day hearing in October 2011, including both evidence and legal submissions.
Echoing Jacob LJ they concluded that a construction of section 32(2), which in effect allowed the state to prevent the disclosure of information for 30 years or more regardless of the nature of the information or the public interest in disclosure, amounted in the circumstances to an interference with Mr Kennedy's right to freedom of expression.
That conclusion was reinforced by a detailed consideration of the classes of documents which were in issue, and the evidence they had heard on them (paras 47 54).
They also held that such interference could not be justified under article 10(2).
They accepted Mr Coppels arguments that the Charity Commissions construction of section 32 produced a paradigm of a disproportionate measure, which failed adequately to balance the interests of society with those of individuals and groups; that the interests of those affected were adequately protected by the suite of exemptions in Part II of FOIA; and that the public interest in disclosure of such information clearly outweighs any interest in it being withheld (paras 56 64), and that it was possible without strained construction to read the words of section 32(2) so that the exemption ends upon the termination of the statutory inquiry (paras 71 72).
By the time that report had reached the Court of Appeal, it had been overtaken by the decision of this court in BBC v Sugar, handed down only a few days before the restored hearing.
The Court of Appeal held that they were bound by that decision to conclude that article 10 had no application.
It followed that the Convention issues on which the tribunal had been asked to report were no longer open to Mr Kennedy.
It was unnecessary therefore for the Court of Appeal to consider the tribunals conclusions on the merits of the case, assuming article 10 had applied.
It is against that background that the appeal has come before this court on the issues of principle under FOIA and article 10, one issue being whether we should revisit the reasoning in BBC v Sugar in the light of later developments.
Notwithstanding the position forced on the Court of Appeal by the Supreme Court decision, the conclusions of the tribunal remain in my view of considerable importance to the present appeal.
If we were to hold that the tribunal had been right in its conclusion that article 10 applied, its view that section 32(2) involved a disproportionate interference with that right under article 10(2) should carry great weight.
In principle that was a matter of factual judgment for the expert tribunal, from which appeal to the courts lies only on grounds of illegality or irrationality.
Subject to the legal issues now before us, we have heard no argument that the tribunals conclusions on article 10(2) were not soundly based on the material before them.
At the lowest they establish a strong prima facie case that, for the purposes of the Human Rights Act, the Charity Commissions approach involved a breach of Mr Kennedys Convention rights.
The Human Rights Act 1998
The arguments about the scope of article 10 must be seen in their correct legal context.
It is not our task to determine that issue authoritatively as a matter of Convention law.
That is for the Strasbourg court.
Our role is one of domestic law, as defined by the Human Rights Act.
Under the Act Convention rights, as defined by reference to articles of the Convention (section 1(1)), are to be given effect for certain specific purposes.
They include: i) ii) Interpretation (section 3(1)) Legislation must so far as it is possible to do so be read and given effect in a way compatible with Convention rights.
Incompatibility (section 4) If a court is satisfied that a provision of primary legislation is incompatible with a Convention right it may make a declaration to that effect.
Further action is then a matter for Ministers and Parliament (section 10). iii) Acts of public authorities (section 6(1)) It is unlawful for a public authority to act in a way which is incompatible with a Convention right.
If the court finds that a public authority has so acted, it has wide powers to provide an appropriate remedy (section 8).
The relevance of the Strasbourg cases
In deciding the scope of Convention rights for these purposes we are not bound by Strasbourg decisions.
Our duty is simply to take (them) into account (section 2(1)).
The same duty applies to decisions of the former Commission and of the Committee of Ministers.
The Act does not distinguish for this purpose between decisions at different levels of the hierarchy.
It is left to the domestic court to determine the weight to be given to any particular decision.
How to do so, as Lord Mance explains in para 60, has been discussed in a number of recent judgments of this court, most recently in R (Sturnham) v Parole Board [2013] UKSC 23, [2013] 2 AC 254).
Grand Chamber decisions, of course, generally carry greater weight, but so may a consistent sequence of decisions at section level, or decisions which show a clear direction of travel.
There is a continuing debate as to what taking account means in practical terms.
Under the so called Ullah principle (in the words of Lord Bingham: R (Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 AC 323, para 20): The duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more, but certainly no less.
That formulation does not purport to offer any guidance as to how to determine the position under the Strasbourg jurisprudence, where the particular issue before the domestic courts has not been the subject of direct decision.
Ullah itself was such a case.
It concerned the courts approach to a so called foreign case, that is one where it was claimed that the conduct of the state in removing a person from its territory (whether by expulsion or extradition) to another territory (would) lead to a violation of the person's Convention rights in that other territory (per Lord Bingham, para 9).
In Ullah the right in question was article 9 (right to religion), which had not in that context been the subject of a decision of the Strasbourg court.
But the House felt able to determine that question by reference to principles derived from decisions relating to other Convention rights. (see E Bjorge, The Courts and the ECHR: A Principled Approach to the Strasbourg Jurisprudence (2013) 72(2) CLJ 289, for a useful discussion of Lord Binghams formulation in the context of the findings in the case, and of later statements by Lord Bingham, judicial and extra judicial.)
In R (Gentle) v Prime Minister [2008] UKHL 20, [2008] 1 AC 1356, paras 56 57, Lady Hale was guided by what she could reasonably foresee would be decided by the Strasbourg court.
Similarly, in Ambrose v Harris [2011] UKSC 43, [2011] 1 WLR 2435, para 88, Lord Dyson looked for a sufficiently clear indication in [the] Strasbourg jurisprudence of how the European court would resolve the question.
There can, however, be no single working rule, since the nature of cases and the state of the relevant jurisprudence may vary greatly.
In any event, the flexibility implied by the taking into account formula absolves the domestic court of the need to arrive at a definitive view of how the matter would be decided in Europe, where the current state of the jurisprudence makes that unrealistic.
Other policy factors may also come into play.
In the present case we are faced with a novel state of affairs.
Until the decision in Trsasg (2009) there was an apparently settled position, confirmed by a series of Grand Chamber decision including Leander v Sweden (1987) 9 EHRR 433 and culminating in Roche v United Kingdom (2005) 42 EHRR 600, that article 10 imposed no positive obligation on the state to disclose information not otherwise available.
That was hardly surprising.
As Lord Mance pointed out (para 98), article 10 is on its face drafted in narrower terms than the corresponding article 19 of the Universal Declaration, and other comparable provisions, which include a specific right to seek rather than merely impart and receive information.
Against that background Trsasg at first sight represents an unexpected departure.
It begins with a powerful affirmation of the importance of the rights of the press, but which is said to be based on the courts consistent practice: 26.
The Court has consistently recognised that the public has a right to receive information of general interest.
Its case law in this field has been developed in relation to press freedom which serves to impart information and ideas on such matters In this connection, the most careful scrutiny on the part of the Court is called for when the measures taken by the national authority are capable of discouraging the participation of the press, one of society's watchdogs, in the public debate on matters of legitimate public concern, even measures which merely make access to information more cumbersome. 27 .
In view of the interest protected by article 10, the law cannot allow arbitrary restrictions which may become a form of indirect censorship should the authorities create obstacles to the gathering of information.
For example, the latter activity is an essential preparatory step in journalism and is an inherent, protected part of press freedom (emphasis added, citations omitted).
Having referred to the restrictive view of article 10 taken in earlier case such as Leander v Sweden, it continued: Nevertheless, the Court has recently advanced towards a broader interpretation of the notion of freedom to receive information and thereby towards the recognition of a right of access to information (para 35).
Depending on ones point of view, Trsasg could have been seen as a landmark decision, or as an aberration by a single section of the court.
In any event, it is difficult to see how on its own it could have led a domestic court, applying any of the tests outlined above, to adopt a different approach from that apparently established by the Grand Chamber decisions.
By the time of this courts consideration of Sugar, notwithstanding a further decision to like effect of the same section (Kenedi), the position in the view of the majority had not changed.
However, as explained by Lord Mance, matters have now moved on.
Trsasg has been treated as authoritative in three further decisions, culminating in the very recent Austrian case.
Admittedly they remain decisions at section level, which have not yet been reviewed by the Grand Chamber.
But Mr Coppel can rely on them as indicating a general direction of travel away from a strict application of article 10, at least in cases involving journalists or other watchdogs seeking information of genuine public interest.
He can also point to the fact that this line of approach has now been adopted by three sections (First, Second and Fifth) involving more than 20 judges, including (in Shapovalov) the current President (Judge Spielmann).
Headcounts can be misleading.
But they appear to imply a substantial body of opinion within the court prepared to depart from the narrow principle apparently established by the Grand Chamber cases.
I do not dissent from Lord Mances criticisms of some of the reasoning in these cases, but the general direction of travel, pending a contrary decision of the Grand Chamber, in my view is clear.
In these circumstances the domestic court has two options.
It can either stand by the earlier Grand Chamber jurisprudence pending reconsideration at that level, or it can decide to follow the new approach indicated by the section decisions.
In choosing between them it will bear in mind that the latter course will deprive the government itself of the chance of seeking to have the issue tested before the Grand Chamber, since the government has no separate right of petition in Strasbourg.
In some cases this will be a good reason for taking the more conservative approach.
However, it is not the only factor in play.
Account must also be taken of the unfairness to the claimant and the interests he represents of denying or delaying an immediate domestic remedy to which he is apparently entitled under the most recent Strasbourg case law.
In my view, the court may also take account of how far the new approach accords with recognised principles of domestic law.
The governments wish to challenge a new direction of travel in the Grand Chamber carries less weight if that direction is one which has already been taken by domestic law.
In the present case, the balance in my view strongly favours the claimant.
I respectfully agree with Lord Wilsons analysis of the Strasbourg cases and the confident conclusions he draws from them.
But even if I were not able to go so far, we can in my view reasonably foresee (in Lady Hales words) how the case would be decided in Strasbourg at least at section level.
It is enough for this purpose that the direction of travel of the recent cases gives clear support to the general approach of the First tier Tribunal, and certainly that there is nothing in them to indicate that Strasbourg would adopt a narrower view.
Further, no reason has been put forward for regarding that approach as involving any fundamental departure from domestic law principles.
Indeed, on the majoritys view of the open justice principle, it is not a matter of keeping pace with Strasbourg; rather the reverse.
Finally, given the importance of the case to Mr Kennedy and the public interest which he represents, it would be wrong to delay yet further the resolution of this issue to enable the case to move through the Strasbourg system, with no certainty as to whether or when it might find its way to the Grand Chamber.
I therefore approach the other issues in the case on the basis that the decision of the First tier Tribunal is in accordance with the relevant Strasbourg jurisprudence; and that there is therefore at least a strong prima facie case that, for the purposes of the Human Rights Act, the Charity Commissions decision was in breach of Mr Kennedys Convention rights.
Construction of section 32
Can section 32 be construed so as to give effect to Mr Kennedys article 10 rights, either (i) on ordinary principles of statutory construction or (ii) by reading down under HRA section 3? On (i) I have nothing to add to what Lord Mance has said (paras 24 34).
I agree with him, and with the Court of Appeal, that this ground of appeal must fail.
On ordinary principles, having regard to the structure and context of section 32, subsections (1) and (2) must be read consistently with each other.
Once section 3 is brought into play, Mr Coppels case is more persuasive.
He is right, in my view, to say that it is possible to read the exemption in section 32(2) itself as limited to the period of the inquiry, as indeed the tribunal held.
Indeed, if one takes subsection (2) on its own, that is arguably the more natural reading.
The use of the present tense appears to direct attention at the holding of documents in the custody of, or created by, the person conducting the inquiry, for that limited purpose, rather than for longer term retention once the purposes of the inquiry have ceased.
That reading involves no undue violence to the wording of that subsection taken on its own.
It is only when the subsection is read in the context of the section as a whole, and of its place in the legislative scheme, that conventional principles require a different view to be taken.
But possibility is all that section 3 requires.
One suggested reason for rejecting Mr Coppels submission is because of its effect on the relationship of section 32 with section 2.
That section provides a general public interest exception to the rights of disclosure under section 1, save in the case of absolute exemptions, in relation to which section 1 rights are excluded altogether.
If section 32(2) is read down in the way proposed, it would remain a provision conferring an absolute exemption, albeit severely limited in time, and therefore the public interest defence would have no application even after the exemption had ceased to apply.
I am not convinced that this by itself is a sufficient answer under section 3.
What is required is a possible construction.
I accept that it must be reasonably possible, so that the scheme of the legislation remains workable.
But that does not necessarily require a construction which would achieve the most coherent legislative scheme, or indeed the one which the legislature intended.
As the tribunal noted, section 3 is far reaching (see the valuable summary of the principles proposed by counsel in Vodafone 2 v Revenue and Customs [2010] Ch 77, paras 37 38).
Furthermore there is no reason to think that the absence of a public interest defence under section 2 would upset the balance of the statute.
The tribunal was evidently satisfied that even apart from section 2 there were sufficient safeguards under the other more specific exemptions.
The result would in my view be consistent with the fundamental features, or the grain of the legislative scheme: see Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, 572, per Lord Nicholls.
As I said in Thomas v Bridgend County Borough Council [2011] EWCA Civ 862, [2012] QB 512, in relation to the operation of section 3 in the context of the Land Compensation Act 1973: The precise form of wording required to give effect to the claimants' rights is not critical: Ghaidan v Godin Mendoza para 35, per Lord Nicholls,).
The court is not required to redraft the statute with the precision of a parliamentary draftsman, nor to solve all the problems which it may create in other factual situations (para 68)
The respondents have a more fundamental response to Mr Coppels argument.
Section 3 does not come into play unless the legislation requires adjustment to make it compatible with Convention rights.
They rely on the words of Lord Woolf CJ in Poplar Housing and Regeneration Community Association Ltd v Donoghue [2001] EWCA Civ 595, [2002] QB 48, para 75: Unless the legislation would otherwise be in breach of the Convention section 3 can be ignored (so courts should always first ascertain whether, absent section 3, there would be any breach of the Convention).
In principle with respect that seems to me correct.
There is no need to read down a single provision, if the legislation as a whole can be read and applied in a compatible way.
In the present statutory context, they argue, there is no need to depart from the ordinary construction of section 32.
It provides an absolute exemption only to the duty to disclose under FOIA, but it does not constrain any right to information under article 10.
Assuming such a right is established, it gives rise to an independent duty enforceable under HRA section 6.
FOIA section 78 in terms provides that nothing in the Act is to be taken as limiting the powers of a public authority to disclose information held by it.
Thus, in the absence of anything in the Charity Commissions own legislation which limits their power to comply with article 10, section 6 requires them to do so.
They point to the Commissions general functions which include disseminating information in connection with the performance of any of [their] functions (1993 Act section 1C); their regulatory activities must be accountable and transparent (section 1D), and they have a general power to do anything calculated to facilitate or conducive or incidental to the performance of their functions (section 1E).
These general provisions, it is said, are amply sufficient to provide a legislative basis for compliance with any disclosure obligations imposed on them under the HRA.
Mr Coppels answer, as I understand it, is that general statutory powers of this kind cannot be relied on to supplant the detailed and restrictive legislative scheme of information powers conferred by Part II of the Act.
This (by section 8) implicitly limits their power of disclosure in relation to inquiries to the making of reports under that section.
He points by analogy to cases such as Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1, where it was held that the incidental powers conferred by section 111 of the Local Government Act 1972 could not be used to override a specific set of statutory provisions dealing with the same subject matter.
Mr Clayton, for the first interveners, submits that the respondents approach is highly artificial, since there had never been any suggestion that an application under other powers would have been treated differently, and such an argument if accepted would severely limit the scope of HRA section 3.
He makes the further point that, according to Trsasg (see above), interference with article 10 may be established by measures which merely make access to information more cumbersome.
A solution which depends on enforcement through the ordinary courts is clearly more cumbersome than the simple, cost free right to recourse to the Information Commissioner.
I have found this a difficult issue to resolve.
Section 32(2) exempts the Charity Commission from duties of disclosure under FOIA, but does not exclude any obligations they may have had under other legislation.
To the extent that refusal of information resulted in a breach of article 10, Mr Kennedy had his remedy by action under HRA section 6.
This would not have been restricted to ordinary judicial review principles.
The court would have had power to investigate the facts, to the same extent as the tribunal, and would have been able to adapt its ordinary procedures for that purpose: see Manchester City Council v Pinnock [2010] UKSC 45, [2011] 2 AC 104, para 28.
On one view, there is no need to adapt section 32(2) when a comparable remedy was and is available to Mr Kennedy under other legislation.
I have come to the conclusion, however, that this is too narrow a view.
It seems to me clear that the scheme established by FOIA was intended to be a comprehensive, albeit not necessarily exhaustive, legislative code governing duties of disclosure by the public authorities to which it applied.
It is entitled: An Act to make provision for the disclosure of information held by public authorities The preceding White Paper (Your Right to Know: The Government's Proposals for a Freedom of Information Act (Cm 3818)(1997)) stated that its purpose was to create a general statutory right of access to official records and information (para 1.2) and that it should have very wide application applying across the public sector as a whole, at national, regional and local level (para 2.1).
Further it was designed to create rights for the public, enforceable by a simple, specialist and generally cost free procedure, rather than simply discretionary powers enforceable by the ordinary courts only on conventional public law principles.
In considering whether the legislation is compatible with the Convention rights for the purpose of section 3, we should direct attention to the legislative code as so established by the Act, rather than to powers or remedies which may be available from other legal sources.
Furthermore, I agree with Mr Clayton that recourse to the courts, even given the flexibility allowed by the developing principles to which Lord Mance refers, remains more cumbersome (and more costly) than the specialised procedures provided by the Act.
In so far as it is permissible to take policy considerations into account, I see advantage in an interpretation which allows such cases to be dealt with through the specialist bodies established by the Act, rather than the ordinary courts.
I am impressed also by the lack of any apparent policy reason for extending the full exemption under section 32 to public inquiries of this kind.
Lord Toulson (para 120) has quoted the statement made to Parliament by David Lock MP, Parliamentary Secretary, (Hansard, (HC Debs) Standing Committee B 25, January 2000, cols 281 282).
To my mind this provides no support for the majoritys approach.
The passage provides a readily understandable explanation of the exemption provided for court records, based on the separation of powers, and the acknowledged jurisdiction of the courts to determine what documents should be disclosed.
But not so for statutory inquiries.
The only explanation given is that they have a status similar to courts, and their records are usually held by the Department that established the inquiry.
The first part of that sentence begs the relevant question and the second involves a non sequitur.
It certainly gives no indication of what powers it was thought the courts would have to direct disclosure, or indeed how separation of powers comes into it.
The Ministers statement seems to me if anything to confirm Jacob LJs view, at [2012] 1 WLR 3524, 3541, that no account had been taken of the lack of any formal machinery for the release of inquiry documents comparable to that of the courts.
Accordingly, I would decide this issue in favour of the claimant, and uphold the decision of the tribunal.
It follows that, on the issues which have been argued before us, the appeal should succeed.
The common law alternative
On the basis of my conclusion on the points raised by the parties, the alternative approach becomes redundant.
I approach it with caution, conscious that, because it is not before us for decision and was not supported by any of the parties, we have not had the advantage of full argument.
The foundation of this approach (and the stimulus for its introduction into the arguments before this court) lay in the judgments of 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, in which the exemption for court documents under FOIA section 32 was held not to preclude the court from permitting a non party to have access to such documents if the court considered access appropriate under the open justice principle (para 74).
I have no reason to doubt the authority of the Guardian News case itself as applied to the ordinary courts, with which it was concerned, although I would not wish to pre judge any counter arguments which may be raised in a future case in this court. (The Court of Appeal reversed the decision of a strong Divisional Court).
The cases to which Toulson LJ referred were about courts.
Although he treated the same principle as applying broadly speaking to all tribunals exercising the judicial power of the state (para 70), he gave no authority for that extension.
Even assuming that wider proposition is correct, the Charity Commission cannot in my view be said to be exercising the judicial functions of the state.
Indeed as Lord Toulson points out, FOIA itself draws a distinction between tribunals or bodies exercising judicial power of the State and statutory inquiries (section 32(4)(a)(c)) Although he categorises the latter as involving a quasi judicial function, he gives no further authority or explanation for the use of that somewhat imprecise and outmoded expression: see Wade and Forsyth, Administrative Law, 10th ed (2009), pp 35, 407; R v Commission for Racial Equality, Ex p Hillingdon London Borough Council [1982] AC 779, 787 F G, per Lord Diplock.
The Charity Commission is the creation of a modern statute, by which its functions and powers are precisely defined.
As the heading to the relevant group of sections indicates, section 8 is part of the Charity Commissions information powers, the primary purpose of which is to enable it to carry out its responsibilities for the supervision of charities.
Its role is administrative, rather than judicial, albeit subject to ordinary public law principles of fairness and due process.
Furthermore, such authority as there is points against any general presumption that open justice principles applicable to the courts apply also to the various forms of statutory or non statutory inquiry.
The issues in an analogous context were discussed in detail by the Divisional Court in R (Persey) v Secretary of State for the Environment, Food and Rural Affairs [2002] EWHC 371 (Admin), [2003] QB 794.
The court upheld the Secretary of States decision that the inquiries into the 2001 outbreaks of foot and mouth disease should be held in private.
Applying the approach of Sir Thomas Bingham MR in Crampton v Secretary of State (unreported) 9 July 1993, CAT no 824 of 1993, and distinguishing R (Wagstaff) v Secretary of State for Health [2001] 1 WLR 292, the court held that there was no legal presumption that such an inquiry should be held in public (see also de Smiths Judicial Review, 7th ed (2013), para 1 104).
As Simon Brown LJ said: Inquiries come in all shapes and sizes and it would be wrong to suppose that a single model a full scale public inquiry should be seen as the invariable panacea for all ills (para 42).
The Charity Commissions powers similarly allow for inquiries in all shapes and sizes; they may be inquiries with regard to charities or a particular charity or class of charities, either generally or for particular purposes (1993 Act section 8(1)).
The Act lays down no relevant requirements as to the form of the inquiries, or as to the involvement of the public.
It has not been suggested that open justice principles require the inquiries themselves to be held in public, as would be the normal rule for courts.
Indeed this comparison, with respect, discloses a basic fallacy in the alternative approach.
The foundation of the Guardian News decision lies in the strong constitutional principle that courts sit in public.
It is no surprise that the starting point of Toulson LJs judgment is a quotation from the great case of Scott v Scott [1913] AC 417, in which that principle was set in stone.
It is not a large step from that principle to hold that papers supplied to the judge for the purpose of an open hearing should in principle be made available to the public, absent good reasons to the contrary.
For statutory inquiries, such as those conducted by the Charity Commission, there is no such underlying principle that they should sit in public.
The essential foundation that is needed for application of the Guardian News approach is wholly absent.
This is not to say that the courts might not in due course develop a more general principle of openness, applicable also to different forms of statutory inquiry.
But that would involve a significant extension to the existing law arguably a bolder leap into the unknown than the modest step we are being asked to take (after full argument) in relation to article 10.
In my view there is nothing in the Guardian News case, or any other existing authority to support the view that common law principles relating to disclosure of documents in the courts can be transferred directly to inquiries.
It must depend on the statutory or other legal framework within which the particular inquiry is established.
In the context of the Charities Act, the particular form of publicity envisaged by the Act is the publication of a report under section 8, but the Commission is given a discretion as to its form.
As has been seen, I agree that the functions conferred by 1993 Act, sections 1B 1E, not only give the Charity Commission powers to provide information of the kind sought by Mr Kennedy, but also give effect to a general principle of transparency.
However, principles of transparency need to be balanced against other policy issues peculiarly within the competence of the Commission, rather than the courts.
For example, the Commission was clearly entitled in my view (in their letter of 4 July 2007) to give weight to the need to protect its relations with third parties on whose co operation it relies.
I find it difficult to accept the proposition that these general powers are comparable to Mr Coppels most expansive interpretation of article 10.
I see no fair comparison between the broad set of powers conferred by those sections, and the specific and enforceable rights conferred by FOIA or article 10.
Finally, I turn to Lord Mances discussion (para 51ff) of the principles which a judicial review court would apply to an application for disclosure of inquiry documents.
It appears to be an important part of his reasoning that these could give a claimant in the position of Mr Kennedy remedies at least comparable to those available, on Mr Coppels argument, under FOIA.
On this topic, anything we say must be provisional, pending an appropriate application for judicial review coming before the courts.
The limits of the courts powers in such circumstances are best determined in the context of an actual case where the issue arises for decision after full argument.
However, it is appropriate that I should make some comment.
First, it is important to be clear as to the nature of the alternative procedures which are under comparison.
On the view I take of article 10 and HRA section 3, the applicant would have a right under FOIA to a two stage process of independent, cost free, specialist review of the Charity Commissions decision, on fact and law, first by the Information Commissioner, and then by the First tier Tribunal (FOIA sections 50, 58).
If on the other hand I am wrong about the ability of the court to read down section 32, so that remedies under FOIA are excluded, Mr Kennedys article 10 rights could be asserted in court by an application for judicial review under the HRA.
Under the HRA, as I have said, the claimant would have a right to full merits review by the court, again on fact and law.
The courts function in such a case is to decide for itself whether the decision was in accordance with Convention rights; it is not a purely reviewing function (see Huang v Secretary of State for Home Department [2007] UKHL 11; [2007] 2 AC 167, para 11, per Lord Bingham).
Such proceedings for judicial review would incidentally provide an opportunity to test the scope of any related common law rights.
By contrast, under the alternative common law approach, which eschews reliance on article 10, the applicant would be entitled only to judicial review on conventional administrative law principles, subject to the ordinary incidents as respects fees and costs.
As Lord Mance points out, there is authority for a closer or more intense form of review (or anxious scrutiny) in some contexts, particularly where fundamental human rights (such as the right to life) or constitutional principles are at stake.
However, even in cases to which it applies, as appears from the words of Lord Phillips MR, (R (Q) v Secretary of State for the Home Department [2003] EWCA Civ 364, [2004] QB 26, para 112) cited by Lord Mance (para 52), the role of the courts is often more about process than merits.
Lord Mance also quotes my own discussion of the developing principles as I saw them in 2004, in IBA Health Ltd v Office of Fair Trading [2004] EWCA Civ 142 [2004] ICR 1364, para 88ff.
Ten years on that statement holds good in my view, but the jurisprudential basis for the more flexible approach, and its practical consequences in different legal and factual contexts, remain uncertain and open to debate (see de Smith op cit paras 11 086ff and the many authorities and academic texts there cited).
In particular, it is at best uncertain to what extent the proportionality test, which is an essential feature of article 10(2) as interpreted by the Strasbourg court, has become part of domestic public law (see de Smith paras 11 073ff).
For the moment, and pending more detailed argument in a case where the issue arises directly for decision, I remain unpersuaded that domestic judicial review, even adopting the most flexible view of the developing jurisprudence, can achieve the same practical effect in a case such as the present as full merits review under FOIA or the HRA.
In conclusion, for the reasons stated above, and in respectful disagreement with the majority, I would have allowed the appeal.
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The appellant, Mr Kennedy, is a journalist with The Times.
On 8 June 2007 he made a request to the Charity Commission under the Freedom of Information Act 2000 (the FOIA) for disclosure of information concerning three inquiries conducted by the Charity Commission between 2003 and 2005 into the Mariam Appeal, which was launched by Mr George Galloway in connection with the sanctions imposed on Iraq following the first Gulf War.
The Charity Commission refused Mr Kennedys request on the ground that the information was subject to an absolute exemption from disclosure contained in section 32(2) of the FOIA.
The Court of Appeal, overturning the decision of the Information Tribunal, held that the absolute exemption applied and dismissed Mr Kennedys request.
The issues before the Supreme Court on Mr Kennedys appeal are: (a) whether section 32(2) of the FOIA contains, as a matter of ordinary statutory construction, an absolute exemption which continues after the end of an inquiry; and (b) if it does contain such an absolute exemption, whether that is compatible with Mr Kennedys rights under article 10 of the European Convention on Human Rights (the Convention).
If section 32(2) were not so compatible, the following further issues would arise: (c) in the light of the duty in section 3 of the Human Rights Act 1998 to interpret primary legislation so far as it is possible to do so in a way which is compatible with the Convention rights, should section 32 be read down so that either: (i) the absolute exemption ceases with the end of the relevant inquiry; or (ii) it contains only a qualified exemption (requiring a general balancing of the competing public interests) rather than an absolute exemption; and (d) if it is not possible to interpret section 32(2) in a manner that is compatible with the Convention, whether the Supreme Court should make a declaration of incompatibility. [9]
Lord Mance and Lord Toulson give the leading judgments with which a majority of the court agrees.
Lord Sumption gives a concurring judgment.
Lord Wilson and Lord Carnwath give dissenting judgments.
As a matter of ordinary statutory construction, section 32(2) of the FOIA imposes an absolute exemption from disclosure that lasts until the relevant information is destroyed or for up to 30 (or in future 20) years under the Public Records Act 1958 (Lord Mance at [24 34], Lord Toulson at [102 104]).
Mr Kennedy is not assisted by his reliance on the Convention as, in respect of his ability to obtain information, the Charities Act 1993 and the common law put Mr Kennedy in no less favourable position than he would be in if article 10 of the Convention were engaged (Lord Mance at [35 41], Lord Toulson at [105 132]).
In any event, article 10 does not impose a freestanding positive duty of disclosure on public authorities (Lord Mance at [57 100]).
Ordinary statutory construction The more natural interpretation of section 32(2) is that the absolute exemption continues after the end of the relevant inquiry.
The words for the purposes of the inquiry or arbitration qualify the immediately preceding words in 32(2)(a) and (32)(2)(b) and refer to the original purpose for which the relevant documents were placed in the custody of, or were created by, a person conducting an inquiry.
They do not refer to the purpose for
which a public authority holds the documents at the time of a request for information. (Lord Mance at [24 28], Lord Toulson at [102 103]) The more natural interpretation is also a better fit with the scheme of the FOIA.
Under section 62(1), a record becomes a historical record at the end of 30 years.
Under section 63(1), information contained in a historical record cannot be exempt information by virtue of section 32.
The natural inference is that information falling within section 32 would continue to be exempt for 30 years rather than cease to be exempt at the conclusion of an inquiry. (Lord Mance at [29 30], Lord Toulson at [104]) The relevance of Article 10 of the Convention The effect of section 32 is to take information falling within the absolute exemption outside the scope of the FOIA disclosure regime.
The FOIA was never intended to determine whether or not such information should be disclosed.
Instead, any question as to its disclosure will be governed by other rules of statute and common law.
If the law otherwise entitles Mr Kennedy to disclosure or puts him in a position no less favourable regarding disclosure than that which could be provided under article 10, then there can be no basis for reading down section 32 or concluding it is inconsistent with article 10. (Lord Mance at [6 8, 35 42], Lord Toulson at [106]) Disclosure outside the FOIA In Lord Mances opinion, the Charity Commission has the power to disclose information to the public concerning inquiries on which it has published reports, both in pursuit of its statutory objective under the Charities Act 1993 (since replaced with the Charities Act 2011) of increasing public trust in, and the accountability of, charities, and under general common law duties of openness and transparency on public authorities.
The exercise of that power will be subject to judicial review.
Given the importance of the principles of openness and transparency, courts will apply a very high standard of review to any decision not to disclose information in answer to questions of real public interest raised by a journalist in relation to inquiries on which the Charity Commission has published reports, and would take into account similar factors and provide a no less favourable standard of protection for a person seeking information, as any review under article 10 of the Convention. [43 56] In Lord Toulsons opinion, open justice is a fundamental principle of common law.
Judicial processes should be open to public scrutiny, unless and to the extent, that there are good reasons for secrecy.
Letting in the light, is the best way of keeping those exercising the judicial power of the state, up to the mark and for maintaining public confidence.
These underlying considerations apply also to any quasi judicial inquiries and hearings, such as an inquiry conducted by the Charity Commission, though the application of such principles will vary according to context.
In conducting any judicial review of a decision not to disclose information, the High Court should exercise its own judgment on whether the open justice principle requires disclosure. [109 132] The scope of the right to receive information under article 10 Had it been necessary for the resolution of the appeal, the Supreme Court would have concluded that article 10 did not contain a freestanding right to receive information from public authorities.
The recent developments in the case law of the European Court of Human Rights relied on by Mr Kennedy were not sufficient to justify a departure from the principle clearly established in a series of Grand Chamber decisions on article 10. (Lord Mance at [57 100]) Dissenting judgments Lord Wilson [160 201] and Lord Carnwath [202 248] would have allowed the appeal on the basis that Mr Kennedy had a right to receive the requested information under article 10 of the Convention.
Lord Wilson and Lord Carnwath would read down s 32(2) such that the absolute exemption expired at the end of the relevant inquiry.
This would preserve the FOIA as the mechanism for obtaining information, which they considered would offer a number of advantages to a person seeking information compared with a judicial review procedure.
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This is the judgment of the court.
The appellant, Mr Zoumbas, challenges a decision by the Secretary of State for the Home Department dated 4 October 2011 that he did not qualify for asylum or humanitarian protection and that his further representations were not a fresh human rights claim under paragraph 353 of the Immigration Rules.
He challenged the Secretary of States decision for the manner in which she dealt with the best interests of his children in the light of the decision of this court in ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166.
He was unsuccessful in his judicial review application before both the Lord Ordinary, Lady Clark of Calton, and an Extra Division of the Inner House of the Court of Session.
The judicial review application and this appeal are concerned only with the fifth of the questions which Lord Bingham of Cornhill set out in para 17 of his speech in R (Razgar) v Secretary of State for the Home Department [2004] 2 AC 368.
That is, in this case, whether the interference with the family life of Mr Zoumbas family unit by his removal to the Republic of Congo was proportionate to the legitimate public end which the Secretary of State sought to achieve.
Before this court Mr Zoumbas made his challenge in three parts.
First, he submitted that the Secretary of State had erred by failing to have regard to the interests of his children as a primary consideration in the proportionality assessment under article 8 of the European Convention on Human Rights (ECHR).
This entailed, he submitted, a breach of the Secretary of States duty under section 55 of the Borders, Citizenship and Immigration Act 2009 (the 2009 Act), which required her to make arrangements for ensuring that her functions in relation to immigration were discharged having regard to the need to safeguard and promote the welfare of children who are in the United Kingdom.
He suggested that this amounted to punishing the children for their parents poor immigration history.
Secondly, he criticised the Secretary of States findings in relation to the best interests of the children.
He asserted that (i) she had failed to make clear findings, (ii) it was irrational to conclude that the childrens best interests would be served by their removal to the Republic of Congo, (iii) she had failed to carry out a careful examination of their best interests, and (iv) the findings assumed that he and his wife would be returned to the Congo.
Thirdly, in a submission which depended on the success of either or both of the first and second submissions, he argued that the Secretary of State had erred in concluding under paragraph 353 of the Immigration Rules that further representations made by him did not have a realistic prospect of success before an immigration judge.
The facts
Mr Zoumbas and his wife have an unedifying immigration history.
They are citizens of the Republic of Congo.
He entered the United Kingdom illegally on 27 May 2001 using a French passport that did not belong to him.
He claimed asylum and was granted temporary admission.
The woman who became his wife entered the United Kingdom on 30 July 2002 using a forged French passport.
She also claimed asylum.
Their claims for asylum were refused and her appeal was dismissed.
On 7 November 2003 they married.
Mrs Zoumbas initiated an appeal under article 8 ECHR, which was refused.
Mr Zoumbas appeal against the refusal of his asylum claim was also refused.
Their eldest child, Angemarcel Massengo Fleury, was born on 27 April 2004.
On 8 April 2005 Mr Zoumbas was considered for the family indefinite leave to remain exercise but was found not to be eligible.
In October 2005 Mrs Zoumbas and Angemarcel were detained and removed to the Republic of Congo.
That same month, Mr Zoumbas failed to report to the immigration authorities and was treated as an absconder.
For several months the authorities did not know his whereabouts.
On 31 March 2006 Mrs Zoumbas and Angemarcel returned to the United Kingdom illegally using passports and a residence permit that did not belong to them.
Mrs Zoumbas claimed asylum again and named her husband and Angemarcel as dependents in her claim.
In about August 2006 Mr Zoumbas started to report to the immigration authorities again.
On 25 May 2006 the Secretary of State refused Mrs Zoumbas asylum claim.
She appealed but her appeal was dismissed on 24 July 2006.
She was granted a statutory review of her appeal but on 3 July 2007 the First tier Tribunal refused her appeal after a reconsideration hearing.
On 3 February 2007 Mrs Zoumbas gave birth to a daughter, Rosangel Shekma Massengo Fleury, and on 14 April 2011 she gave birth to another daughter, Shaun Keziah Massengo Fleury.
Mr and Mrs Zoumbas did not have permission to work.
They received state benefits because Mr Zoumbas claimed that he was destitute.
But between September 2008 and April 2010 credits of 27,693.75 from unidentified sources were paid into bank accounts of Mrs Zoumbas and of the older two children.
On 22 June 2010 Mr Zoumbas submitted further representations in which he asserted that there had been a change of circumstances because he, his wife and his children had been in the United Kingdom for several years and had established a family and private life which should be respected under article 8 ECHR.
Documents which accompanied his representations showed that the eldest child, Angemarcel, was at primary school, that Mrs Zoumbas was attending college, and that they were members of a church, all in Glasgow.
By letter dated 4 October 2011 the Secretary of State intimated to Mr Zoumbas her decision that his representations did not qualify him for asylum or humanitarian protection and that he did not merit a grant of limited leave to enter or remain in the United Kingdom.
She also held that his submissions would not amount to a fresh claim under paragraph 353 of the Immigration Rules because they did not create a realistic prospect of success before an immigration judge.
Mr Zoumbas has challenged that decision in his application for judicial review.
The legal framework
In their written case counsel for Mr Zoumbas set out legal principles which were relevant in this case and which they derived from three decisions of this court, namely ZH (Tanzania) (above), H v Lord Advocate 2012 SC (UKSC) 308 and H(H) v Deputy Prosecutor of the Italian Republic [2013] 1 AC 338.
Those principles are not in doubt and Ms Drummond on behalf of the Secretary of State did not challenge them.
We paraphrase them as follows: (1) The best interests of a child are an integral part of the proportionality assessment under article 8 ECHR; In making that assessment, the best interests of a child must be a (2) primary consideration, although not always the only primary consideration; and the childs best interests do not of themselves have the status of the paramount consideration; (3) Although the best interests of a child can be outweighed by the cumulative effect of other considerations, no other consideration can be treated as inherently more significant; (4) While different judges might approach the question of the best interests of a child in different ways, it is important to ask oneself the right questions in an orderly manner in order to avoid the risk that the best interests of a child might be undervalued when other important considerations were in play; (5) It is important to have a clear idea of a childs circumstances and of what is in a childs best interests before one asks oneself whether those interests are outweighed by the force of other considerations; (6) To that end there is no substitute for a careful examination of all relevant factors when the interests of a child are involved in an article 8 assessment; and (7) A child must not be blamed for matters for which he or she is not responsible, such as the conduct of a parent.
These principles arise from the United Kingdoms international obligations under the United Nations Convention on the Rights of the Child, and in particular article 3.1 which provides: 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.
That general principle of international law has influenced the way in which the Strasbourg court has interpreted the ECHR: Neulinger v Switzerland (2010) 28 BHRC 706, para 131.
Mr Lindsay for Mr Zoumbas also founded on a statement in the judgment of Lord Kerr of Tonaghmore in ZH (Tanzania) at para 46 in support of the proposition that what is determined to be in a childs best interests should customarily dictate the outcome of cases and that it will require considerations of substantial moment to permit a different result.
In our view, it is important to note that Lord Kerrs formulation spoke of dictating the outcome of cases such as the present and that in ZH (Tanzania) the court was dealing with children who were British citizens.
In that case the children by virtue of their nationality had significant benefits, including a right of abode and rights to future education and healthcare in this country, which the children in this case, as citizens of the Republic of Congo, do not.
The benefits of British citizenship are an important factor in assessing whether it is reasonable to expect a child with such citizenship to live in another country.
Moreover in H(H) Lord Kerr explained (at para 145) that what he was seeking to say was that no factor should be given greater weight than the interests of a child.
See the third principle above.
We would seek to add to the seven principles the following comments.
First, the decision maker is required to assess the proportionality of the interference with private and family life in the particular circumstances in which the decision is made.
The evaluative exercise in assessing the proportionality of a measure under article 8 ECHR excludes any hard edged or bright line rule to be applied to the generality of cases: EB (Kosovo) v Secretary of State for the Home Department [2009] AC 1159, per Lord Bingham at para 12.
Secondly, as Lord Mance pointed out in H(H) (at para 98) the decision maker must evaluate the childs best interests and in some cases they may point only marginally in one, rather than another, direction.
Thirdly, as the case of H(H) shows in the context of extradition, there may be circumstances in which the weight of another primary consideration can tip the balance and make the interference proportionate even where it has very severe consequences for children.
In that case an Italian prosecutor issued a European arrest warrant seeking the surrender of a person who had earlier broken his bail conditions by leaving Italy and ultimately seeking safe haven in the United Kingdom and had been convicted of very serious crimes.
This court held that the treaty obligations of the United Kingdom to extradite him prevailed over his childrens best interests.
The third principle in para 10 above is subject to the first and second qualifications and may, depending on the circumstances, be subject to the third.
But in our view, it is not likely that a court would reach in the context of an immigration decision what Lord Wilson described in H(H) (at para 172) as the firm if bleak conclusion in that case, which separated young children from their parents.
The decision letter
In the letter of 4 October 2011, Ms G Dickin, the official acting on behalf of
the Secretary of State, summarised Mr Zoumbas submissions and listed the documents which he had produced in its support.
She considered the first four questions which Lord Bingham set out in R (Razgar) at para 17.
She held that Mr Zoumbas had established a private life and a family life in the United Kingdom and that his removal would interfere with his private and family life.
It was implicit in her discussion that article 8 ECHR was engaged.
She then concluded that the interference would be in accordance with the law and in pursuit of the legitimate aim of maintaining effective immigration control.
She introduced the consideration of the proportionality of the interference with the words: Below is a consideration of why any interference is proportionate to the permissible aim.
She then referred to the familys unlawful residence and the fact that Mr Zoumbas and his wife had established their family life in the full knowledge that they both had no legal right to reside in the United Kingdom and could be removed at any time.
She summarised the appalling immigration history of Mr and Mrs Zoumbas and the familys receipt of state benefits while receiving the unidentified credits which I have mentioned.
She considered in turn the proportionality of the interference with Mr Zoumbas private and family life before discussing the article 8 rights of any family members who were not party to the proceedings in accordance with the guidance which the House of Lords gave in Beoku Betts v Secretary of State for the Home Department [2009] AC 115.
She concluded that there was no evidence of family ties in the United Kingdom other than Mr Zoumbas wife and children who would be removed to the Congo with him, thus preserving his family life.
She then addressed the Secretary of States obligation under section 55 of the 2009 Act to carry out her functions in a way which has regard to the need to safeguard and promote the welfare of children in the United Kingdom.
She made it clear that the interests of the three children had been taken into account in the assessment of the proportionality of the interference with private and family life.
She stated: Full consideration has been given to the best interests of your three children, which is a primary consideration in the evaluation of the proportionality of a decision to remove a family.
It is noted that you have not provided any information which pertains specifically to the best interests of your three children.
A new immigration judge would conclude that although health care and education in Congo may not be of the same standard as in the United Kingdom, the childrens best interests will be to remain with their parents and raised in their own culture.
Furthermore, if you return together there is no reason to believe that relocation to Congo would have a particularly detrimental effect on your children.
She concluded that the balance of the competing interests was in favour of the familys removal (a) because of the need to maintain effective immigration control, (b) because they had built up a family life in the United Kingdom when their residence was precarious, and (c) because the immigration history involved findings of fabricated asylum claims, deception, fraud and absconding.
Discussion of the challenges
We are satisfied that there is no substance in the first of Mr Zoumbas challenges which we have summarised in para 3 above.
It rests on a mistaken construction of the Secretary of States letter.
There has been no failure to consider the best interests of Mr and Mrs Zoumbas children in the article 8 proportionality exercise.
Mr Lindsay accepted that the status of the well being of the children as a primary consideration did not require the Secretary of State in every case to consider the childrens best interests first and then to address other considerations which might outweigh those interests.
There is nothing to bar the official who acts for the Secretary of State from considering the various issues, including the proportionality exercise under article 8 ECHR before drafting the decision letter.
The official set out the Secretary of States conclusion before explaining the reasons for that conclusion.
It is important to read the decision letter as a whole and to analyse the substance of the decision.
It is a misreading of the letter to assert, as Mr Lindsay did, that the Secretary of State had made a decision on proportionality before addressing the well being of the children.
The consideration of the childrens best interests was, as the letter stated (para 17 above), a primary consideration in the proportionality exercise.
Mr Lindsay submitted in his written case that this appeal raised an issue of general public importance because the structure of the decision letter was one which the Secretary of State frequently used.
Ms Drummond understandably submitted in her written case that there was no issue of general public importance.
Be that as it may, the appeal demonstrates a misunderstanding of the effect of the decision in ZH (Tanzania) which can usefully be corrected.
If officials in the Home Department who draft such decision letters are
using a template to give structure to the articulation of their decisions, we see nothing wrong with a template that provides for the statement of the Secretary of States conclusion to be followed by her reasoning.
What is important, as Lord Mance said in H(H) at para 98, is that the interests of the children must be at the forefront of the decision makers mind.
In this context the fourth, fifth and sixth principles which we have listed in para 10 above are relevant.
That leads us to consider the second of Mr Lindsays challenges.
We are not persuaded that there is any lack of clarity in the Secretary of States findings on the childrens best interests or any indication that there had not been a careful examination of those interests.
The decision letter sets out the Secretary of States conclusions briefly.
But that does not give rise in this case to any inference that there has not been careful consideration.
The substance of Mr Lindsays complaint was that the Secretary of State either had not considered or had failed to record her findings on matters which were disclosed in the documents lodged in support of Mr Zoumbas claim.
Those matters were (a) that the children were born in the United Kingdom, (b) that they were English speakers and saw themselves as British, (c) that they had integrated well into the community in Glasgow, (d) that the eldest child was doing well at school, and (e) that two of the three children had never been to the Congo.
In our view, the Secretary of State does not have to record and deal with every piece of evidence in her decision letter.
The decision maker was clearly aware that the children were born in the United Kingdom as it is recorded on the fourth page of the decision letter.
The letter also recorded that the children were aged seven years, four years, and five months respectively and referred to the evidence that the eldest child was at primary school.
The decision maker would also have been aware from the narrative of the familys immigration history that two of the children had not been to the Republic of Congo.
There is no irrationality in the conclusion that it was in the childrens best interests to go with their parents to the Republic of Congo.
No doubt it would have been possible to have stated that, other things being equal, it was in the best interests of the children that they and their parents stayed in the United Kingdom so that they could obtain such benefits as health care and education which the decision maker recognised might be of a higher standard than would be available in the Congo.
But other things were not equal.
They were not British citizens.
They had no right to future education and health care in this country.
They were part of a close knit family with highly educated parents and were of an age when their emotional needs could only be fully met within the immediate family unit.
Such integration as had occurred into United Kingdom society would have been predominantly in the context of that family unit.
Most significantly, the decision maker concluded that they could be removed to the Republic of Congo in the care of their parents without serious detriment to their well being.
We agree with Lady Dorrians succinct summary of the position in para 18 of the Inner Houses opinion.
Finally, we see no substance in the criticism that the assessment of the childrens best interests was flawed because it assumed that their parents would be removed to the Republic of Congo.
It must be recalled that the decision maker began by stating the conclusion and then set out the reasoning.
It was legitimate for the decision maker to ask herself first whether it would have been proportionate to remove the parents if they had no children and then, in considering the best interests of the children in the proportionality exercise, ask whether their well being altered that provisional balance.
When one has regard to the age of the children, the nature and extent of their integration into United Kingdom society, the close family unit in which they lived and their Congolese citizenship, the matters on which Mr Lindsay relied did not create such a strong case for the children that their interest in remaining in the United Kingdom could have outweighed the considerations on which the decision maker relied in striking the balance in the proportionality exercise (paras 17 and 18 above).
The assessment of the childrens best interests must be read in the context of the decision letter as a whole.
As we have not upheld either of the first or second challenges, the third challenge cannot succeed.
We therefore dismiss the appeal.
the content of any template for decision letters.
But we venture the view that challenges, such as this one, would be less likely if her advisers were to express the test in the way in which it was expressed in ZH (Tanzania) and to expand the explanation of the separate consideration that was given to the interests of the children.
It is of course the task of the Secretary of State and not this court to decide
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Delivering the Courts judgment, Lord Hodge sets out seven principles relevant in the case [10], which counsel for Mr Zoumbas had enumerated.
He notes that Lord Kerrs formulation spoke of dictating the outcome of cases such as ZH, and in that case the Court was dealing with British citizens, unlike the children in this case.
The benefits of British citizenship are an important factor in assessing whether it is reasonable to expect a child with such citizenship to live in another country.
Moreover, Lord Kerr had explained that what he was seeking to say was that no factor should be given greater weight than the interests of a child [12].
Further, the decision maker is required to assess the proportionality of the interference in the particular circumstances in which the decision is made an evaluative exercise that excludes any hard edged or bright line general rule [13].
In this case, the Secretary of State accepted that Mr Zoumbas had established a private life and a family life in the UK.
She then concluded that the interference would be in accordance with the law and in pursuit of the legitimate aim of maintaining effective immigration control [14], having referred to the familys unlawful residence, the fact that family life had been established in the full knowledge that they had no right to reside in the UK and could be removed at any time, and the couples appalling immigration history and the unidentified bank credits [15].
Family life would be preserved as the whole family would be removed with Mr Zoumbas [16].
The first part of Mr Zoumbas challenge rests on a mistaken construction of the decision letter.
It had been accepted that the status of the well being the children as a primary consideration did not mean that it had in every case to be considered first with other possible countervailing issues considered thereafter.
It is important to read the letter as a whole and to analyse the substance of the decision [19].
There is nothing wrong with the Secretary of States use of a template letter in which her conclusion is followed by her reasoning what is important is that the best interests of the children are at the forefront of the decision makers mind [21].
That the conclusions on best interests are set out briefly does not mean they were not considered carefully, and the Secretary of State does not need to record and deal with every piece of evidence in her letter [22 23].
The Court suggests that challenges such as the present would be less likely if her advisers were to express the test in the way it was expressed in ZH (Tanzania), and to expand the explanation of the separate consideration given to the interests of the children [28].
As for the second part of the challenge, it would be possible to conclude, other things being equal, that it would be in the childrens best interests to stay in the UK.
But other things are not equal, including that the children are not British citizens [24].
The Court rejected the criticism that the assessment of best interests was flawed because it assumed that the parents would be removed.
It was legitimate for the decision maker to ask herself first whether it would have been proportionate to remove the parents if they had no children and then, in considering the best interests of the children in the proportionality exercise, ask whether their well being altered that provisional balance [25].
The third part of the challenge cannot succeed, the first two parts having failed [26].
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For some years The Times and other media organisations have taken a close interest in investigating and reporting on allegations that the police and child protection authorities have failed adequately to confront a pattern of crime involving the sexual exploitation of vulnerable young teenage girls by older men.
It need hardly be said that this is a subject of serious public concern.
It has given rise to a number of government ordered national inquiries, a review of standards of protection in childrens homes, and substantial changes in the procedures of the police and prosecuting authorities for handling such cases.
There have also been a number of prosecutions.
This appeal arises out of the trial of nine men on exceptionally serious charges involving organised child sex grooming and child prostitution in the Oxford area over a period of eight years.
The men were arrested in March 2012 by Thames Valley Police after a long running investigation known as Operation Bullfinch.
They were tried before His Honour Judge Rook QC at the Central Criminal Court between 7 January and 14 May 2013 on an indictment charging rape and conspiracy to rape children, trafficking and child prostitution.
On 14 May 2013, seven of them were convicted.
The trial attracted considerable publicity in the national and local press and in the broadcast media.
Public interest in it was accentuated and prolonged by the perception that the victims of the men convicted had not originally been taken seriously by the police or Oxfordshire social services, and had not received the protection to which they were entitled.
The appellant, who has been referred to in these proceedings as PNM, is a prominent figure in the Oxford area.
He was arrested at about the same time as the nine and was released on bail on terms (among others) that he surrender his passport.
The reason for his arrest was that one of the complainants had told the police that she had been abused by a man with the same, very common, first name.
However, she failed to pick him out at an identity parade.
He was later told by the police that he would be released from arrest without charge but that the case would be kept under review.
That remains the position.
Police investigations are continuing, but PNM has never been charged with any offence, and there is no present reason to believe that he ever will be.
The question at issue on this appeal is whether an injunction should issue to prevent The Times and the Oxford Mail from publishing information identifying PNM as someone who had been arrested, bailed, his passport impounded and then de arrested in connection with Operation Bullfinch, or as someone suspected by the police of being involved in sexual offences against children.
The position of the two newspapers is that they wish to publish this information, identifying PNM, but that what they publish about these matters will be confined to material derived from the proceedings at the trial.
An injunction was originally granted under section 4(2) of the Contempt of Court Act 1981, at a preliminary hearing before the magistrates shortly after PNMs arrest.
Section 4(2) empowers the court in any legal proceedings held in public where it appears to be necessary for avoiding a substantial risk of prejudice to the administration of justice in those proceedings, or in any other proceedings pending or imminent, order that the publication of any report of the proceedings, or any part of the proceedings, be postponed for such period as the court thinks necessary for that purpose.
The magistrates order prohibited the disclosure of any information which might identify PNM as the subject of pending criminal proceedings until such time as he was charged with an offence.
At the trial, evidence was given of the exploitation of six girls who at the relevant time were aged between 11 and 15.
One of the girls was the complainant whose statements to the police had led to PNMs arrest.
On 25 January 2013, immediately before she was due to give her evidence, PNM applied for a further order under section 4(2).
At that time, he was still on bail.
His application was heard in open court, and in the course of it the fact of PNMs arrest and the serious offences of which he was suspected were discussed.
The prosecution agreed that it was inevitable that the complainant would refer to PNM in the course of her evidence.
The judge made an order postponing publication of any information which might identify him as the person referred to by that complainant, on the ground that there was a significant risk that his right to a fair trial might be prejudiced.
On 4 February 2013, after the complainant had finished giving her evidence, Judge Rook varied the order of 25 January so as to prohibit the publication of any report which referred to evidence which might identify or tend to identify PNM until a decision had been made whether or not to charge him.
A significant part of the relevant complainants evidence related to her abuse by a man, whom I shall call X, with the same first name as PNM.
In her evidence in chief, she said that when she was 13 years old she had been taken on a number of occasions over a period of about six months by one or other of the defendants to a flat, where she had had sex with X. She only ever referred to him by his first name and does not appear to have known his surname.
She gave a detailed description of him.
She referred to the identity parade but said that she did not recognise X and did not think that he was there.
These matters also arose several times in the course of her cross examination by counsel for the various defendants.
Subsequently, PNM was referred to on a number of occasions.
A police officer gave evidence that PNM had participated in an identity parade but had not been identified.
There was also evidence referring to PNMs involvement by at least one of the defendants.
In their closing speeches, both prosecuting and defence counsel referred to the alleged involvement of X on the footing that the complainant had been referring to PNM, identifying him by his full name.
In In re Guardian News and Media Ltd [2010] 2 AC 697, para 66, Lord Rodger of Earlsferry, speaking of the publication of the names of defendants in advance of criminal trials, observed: In allowing this, the law proceeds on the basis that most members of the public understand that, even when charged with an offence, you are innocent unless and until proved guilty in a court of law.
That understanding can be expected to apply, a fortiori, if you are someone whom the prosecuting authorities are not even in a position to charge with an offence and bring to court.
The law must of course take the presumption of innocence as its starting point, and experience suggests that as a general rule the public understand that there is a difference between allegation and proof.
But Lord Rodgers observation cannot be treated as a legal presumption, let alone a conclusive one.
The conclusions that the public may draw from evidence and submissions at a criminal trial in open court will differ from case to case, depending on, among other things, the gravity of the allegations, the character of the evidence and the extent of the publicity surrounding the trial.
It would be foolish for any court to ignore the extreme sensitivity of public opinion in current circumstances to allegations of the sexual abuse of children and the concerns about the safety of children generally to which those allegations give rise.
I have summarised in general terms in para 7 above the way in which the involvement of X and PNM were treated at the trial at the Central Criminal Court.
In my opinion, the present appeal must be approached on the footing that there is a real risk that a person knowing of these matters would conclude that PNM had sexually abused the complainant notwithstanding that he had never been charged with any offence.
There were three applications to Judge Rook to lift the section 4(2) order.
The first two were made by The Times on 8 and 15 May 2013, towards the end of the trial.
On 16 May 2013, the judge declined to lift the order.
Some of the matters relating to X which had been raised at the trial were referred to in open court during these applications.
The judges ruling, which was itself subject to his section 4(2) order, also referred to them.
The situation changed on 25 July 2013, when the police notified PNM that he would be released from arrest without charge, but that the case would be kept under review.
In the light of the polices letter, on 25 September 2013, The Times and the Oxford Mail applied again to Judge Rook on the ground that there were now no pending or imminent proceedings against PNM which could be prejudiced by publication.
On 14 October 2013 the Judge circulated a draft ruling stating that he proposed to lift the order.
But he never formally did so, presumably because the matter moved to the High Court.
On 15 October 2013, immediately after receiving Judge Rooks draft ruling, PNM applied to Tugendhat J in the High Court for an interim injunction restraining publication of any information liable to identify PNM as (i) a person arrested, released on bail or released without charge in connection with the investigation of offences against children, (ii) the subject of the section 4(2) orders made by Judge Rook, or (iii) the claimant in the High Court proceedings.
The basis of the application was that the order was necessary to protect PNM against the misuse of private information and the infringement of his right to private and family life protected by article 8 of the European Convention on Human Rights.
A draft claim form was put before Tugendhat J, and issued a week later on 22 October 2013.
The Judge dismissed the application in a reserved judgment delivered on 22 October ([2013] EWHC 3177 QBD).
The Court of Appeal (Lord Dyson MR, Sharp and Vos LJJ) dismissed an appeal ([2014] EWCA Civ 1132).
Meanwhile the status quo is being preserved by the continuation of Judge Rooks section 4(2) order.
The law
With limited exceptions, the English courts administer judgment in public, at hearings which anyone may attend within the limits of the courts capacity and which the press may report.
In the leading case, Scott v Scott [1913] AC 417, public hearings were described by Lord Loreburn (p 445) as the inveterate rule and the historical record bears this out.
In the common law courts the practice can be dated back to the origins of the court system.
As Lord Atkinson observed in the same case at p 463, this may produce inconvenience and even injustice to individuals: The hearing of a case in public may be, and often is, no doubt, painful, humiliating, or deterrent both to parties and witnesses, and in many cases, especially those of a criminal nature, the details may be so indecent as to tend to injure public morals, but all this is tolerated and endured, because it is felt that in public trial is to found, on the whole, the best security for the pure, impartial, and efficient administration of justice, the best means for winning for it public confidence and respect.
The justification for the principle of open justice was given by Lord Atkinson in this passage, and has been repeated by many judges since, namely the value of public scrutiny as a guarantor of the quality of justice.
This is also the rationale of the right to a public hearing protected by the European Convention on Human Rights.
It is a means whereby confidence in the courts can be maintained: B and P v United Kingdom, (2001) 34 EHRR 19, at para 36.
Its significance has if anything increased in an age which attaches growing importance to the public accountability of public officers and institutions and to the availability of information about the performance of their functions.
The principle of open justice has, however, never been absolute.
There have been highly specific historic exceptions, such as the matrimonial jurisdiction inherited from the ecclesiastical courts, the old jurisdiction in lunacy and wardship and interlocutory hearings in chambers, where private hearings had become traditional.
Some of these exceptions persist.
Others have been superseded by statute, notably in cases involving children.
More generally, the courts have an inherent power to sit in private where it is necessary for the proper administration of justice: Scott v Scott, supra, at p 446 (Lord Loreburn); Attorney General v Leveller Magazine Ltd [1979] AC 440, 457 (Viscount Dilhorne).
Traditionally, the power was exercised mainly in cases where open justice would have been no justice at all, for example because the dispute related to trade secrets or some other subject matter which would have been destroyed by a public hearing, or where the physical or other risks to a party or a witness might make it impossible for the proceedings to be held at all.
The inherent power of the courts extends to making orders for the conduct of the proceedings in a way which will prevent the disclosure in open court of the names of parties or witnesses or of other matters, and it is well established that this may be a preferable alternative to the more drastic course of sitting in private: see R v Socialist Worker Printers and Publishers Ltd, Ex p Attorney General [1975] QB 637, 652; Attorney General v Leveller Magazine Ltd [1979] AC 440, 451 452 (Lord Diplock), 458 (Viscount Dilhorne), 464 (Lord Edmund Davies).
Orders controlling the conduct of proceedings in court in this way remain available in civil proceedings whenever the court considers non disclosure necessary in order to protect the interests of that party or witness: CPR rule 39.2(4).
In criminal proceedings, the common law power to withhold the identity of witnesses from a defendant was abolished by section 1(2) of the Criminal Evidence (Witness Anonymity) Act 2008, and replaced by rules now contained in sections 86 90 of the Coroners and Justice Act 2009.
But the court retains the power which it has always possessed to allow evidence to be given in such a way that the identity of a witness or other matters is not more widely disclosed in open court, if the interests of justice require it.
Where a court directs that proceedings before it are to be conducted in such a way as to withhold any matter, section 11 of the Contempt of Court Act 1981 allows it to make ancillary orders preventing their disclosure out of court.
Measures of this kind have consistently been treated by the European Court of Human Rights as consistent with article 6 of the Convention if they are necessary to protect the interests of the proper administration of justice: Doorson v The Netherlands (1996) 22 EHRR 330, para 71; V v United Kingdom (1999) 30 EHRR 121, para 87; cf A v British Broadcasting Corpn [2015] AC 588, paras 44 45 (Lord Reed).
But necessity remains the touchstone of this jurisdiction.
In R v Legal Aid Board, Ex p Kaim Todner [1999] QB 966, 977, Lord Woolf MR, delivering the judgment of the Court of Appeal, warned against the natural tendency for the general principle to be eroded and for exceptions to grow by accretion as exceptions are applied by analogy to existing cases.
Lord Woolfs warning was endorsed by the House of Lords in In re S (Identification: Restrictions on Publication) [2005] 1 AC 593, para 29 (Lord Steyn).
More recently, two factors have combined to broaden the scope of the exceptions to the open justice rule and the frequency of their application.
One is the growing volume of civil and criminal litigation raising issues of national security.
This calls for no comment on the present appeal.
The other is the recognition of a number of rights derived from the European Convention on Human Rights, which the courts as public authorities are bound by section 6 of the Human Rights Act 1998 to respect.
The Convention right most often engaged in such cases is the right under article 8 to respect for private and family life.
Article 8 rights are heavily qualified by the Convention itself, and even when they are made good they must be balanced in a publication case against the right to freedom of expression protected by article 10.
But other Convention rights may occasionally be engaged which are practically unqualified, such as the right to life under article 2 and to protection against serious ill treatment under article 3: A v British Broadcasting Corpn [2015] AC 588.
These countervailing interests have become significant, not just because they have come to be recognised as legal rights, but because the resonance of what used to be reported only in the press and the broadcasting media has been greatly magnified in the age of the internet and social media.
As Lord Diplock pointed out in Attorney General v Leveller Magazine Ltd [1979] AC 440, 449 450, the principle of open justice has two aspects: As respects proceedings in the court itself it requires that they should be held in open court to which the press and public are admitted and that, in criminal cases at any rate, all evidence communicated to the court is communicated publicly.
As respects the publication to a wider public of fair and accurate reports of proceedings that have taken place in court the principle requires that nothing should be done to discourage this.
The distinction between these two aspects is not always recognised in the case law, but it is of some importance in the present case.
There is no issue on this appeal about the way in which the criminal trial and the applications under section 4(2) of the Contempt of Court Act were conducted.
Judge Rook sat in public throughout.
All of the relevant matters were disclosed in open court.
No measures were taken to prevent parties or witnesses or those referred to at the trial from being identifiable to those members of the public who exercised their right to be present in court.
This appeal is concerned with the question whether matters exposed at a public criminal trial may be reported in the media.
It has been recognised for many years that press reporting of legal proceedings is an extension of the concept of open justice, and is inseparable from it.
In reporting what has been said and done at a public trial, the media serve as the eyes and ears of a wider public which would be absolutely entitled to attend but for purely practical reasons cannot do so.
In Edmonton Journal v Alberta (Attorney General) [1989] 2 SCR 1326 Cory J, delivering the leading judgment in the Supreme Court of Canada, observed that Listeners and readers, members of the public have a right to information pertaining to public institutions and particularly the courts.
Here the press plays a fundamentally important role.
It is exceedingly difficult for many, if not most, people to attend a court trial Those who cannot attend rely in large measure upon the press to inform them about court proceedings the nature of the evidence that was called, the arguments presented, the comments made by the trial judge It is only through the press that most individuals can really learn of what is transpiring in the courts.
They as listeners or readers have a right to receive this information.
Only then can they make an assessment of the institution.
Discussion of court cases and constructive criticism of court proceedings is dependent upon the receipt by the public of information as to what transpired in court.
Practically speaking, this information can only be obtained from the newspapers or other media.
For this reason, restrictions on the reporting of what has happened in open court give rise to additional considerations over and above those which arise when it is sought to receive material in private or to conceal it behind initials or pseudonyms in the course of an open trial.
Arrangements for the conduct of the hearing itself fall within the courts general power to control its own proceedings.
They may result in some information not being available to be reported.
But in Convention terms they are more likely to engage article 6 than article 10.
Reporting restrictions are different.
The material is there to be seen and heard, but may not be reported.
This is direct press censorship.
The limits on permissible reporting of public legal proceedings are set by the law of contempt, the law of defamation and the law protecting the Convention rights.
The present appeal turns on the last category, but it is I think instructive to refer first to the law of contempt and defamation.
Both of them are contexts in which the law has longer experience and a more defined policy about the use of the courts peremptory powers to restrain in advance the publication of proceedings in open court.
The inherent power of the court at common law to sit in private or anonymise material deployed in open court has never extended to imposing reporting restrictions on what happens in open court.
Any power to do that must be found in legislation: Independent Publishing Co Ltd v Attorney General of Trinidad and Tobago [2005] 1 AC 190.
There is a substantial number of statutory restrictions on the reporting of court proceedings.
With very limited exceptions, all of them are concerned either (i) to protect the administration of justice itself by preventing the reporting of matters likely to prejudice the fairness of proceedings or to deter parties, witnesses or victims of crime from participating in them; or (ii) protecting children and young persons or other particularly vulnerable groups.
Category (i) includes the automatic statutory restriction on the publication of material identifying the victims of sexual offences; pre trial and preparatory hearings in criminal proceedings; and allocation or sending proceedings in Magistrates Courts.
However, much the most significant enactment in category (i) is the Contempt of Court Act 1981.
The Act makes it a contempt of court to publish anything which creates a substantial risk that the course of justice will be seriously impeded or prejudiced, but is subject to an important exception for fair, accurate and contemporaneous reports of legal proceedings held in public: see sections 1, 2 and 4(1).
Specific reporting restrictions may be imposed by the court under section 4(2) of the Act if it is satisfied that there is a substantial risk of prejudice to the administration of justice either in the proceedings in which the order is made or in other proceedings which are pending or imminent.
However, the power is limited to postponing publication for such period as the court thinks necessary for that purpose, generally until the conclusion of the relevant proceedings.
The most significant enactments in category (ii) are the automatic restriction in section 49 of the Children and Young Persons Act 1933 (as amended) and the discretionary restriction in section 45 of the Youth Justice and Criminal Evidence Act 1999, on the reporting of material likely to identify children and young persons concerned in criminal proceedings.
In both Acts the protection is limited to a child or young person who is a defendant, witness or victim.
There are corresponding discretionary restrictions in section 39 of the Children and Young Persons Act (as amended) on identifying children and young persons the subject of family proceedings.
However, except in the case of under 18 defendants in criminal proceedings, there are no statutory restrictions on the reporting of material deployed in open court which may identify a person alleged to have committed offences.
Significantly, the few statutory restrictions on the reporting of allegations and investigations of alleged criminal offences automatically lapse upon the commencement of proceedings: see section 141F of the Education Act 2002 (allegations of criminal offences by teachers against pupils) and, once it comes into force, section 44 of the Youth and Criminal Evidence Act 1999 (children and young persons the subject of criminal investigations).
The dependence of this area of law on statute and the extent of statutory intervention mean that it is fair to speak of a statutory scheme occupying the ground to the exclusion of discretions arising from the common law or the courts inherent powers.
Lord Steyn made this point with the concurrence of the rest of the Appellate Committee in In re S, at p 604: Given the number of statutory exceptions, it needs to be said clearly and unambiguously that the court has no power to create by a process of analogy, except in the most compelling circumstances, further exceptions to the general principle of open justice.
Turning to the law of defamation, section 14 of the Defamation Act 1996 provides that a fair, accurate and contemporaneous report of court proceedings held in public is absolutely privileged, and that a report published as soon as practicable after any relevant reporting restrictions have been lifted is to be treated as contemporaneous.
The privilege does not cover the whole ground, because disputes may arise as to whether a report is fair and accurate, and the media may have a legitimate interest in publishing reports of material derived from court proceedings but not contemporaneously.
However, the invariable rule since the decision in Bonnard v Perryman [1891] 2 Ch 269 has been that even where absolute privilege is not available or its availability is in dispute, the court will not grant an interlocutory injunction in advance of publication if the defendant asserts that he will plead justification, unless, exceptionally, the court is satisfied that the defence is bound to fail.
The rule originated in the division between the functions of judge and jury, the question of libel or no libel being exclusively for the jury.
But in its modern form, its function is to balance the freedom of the press and the right of the claimant to protect his reputation, by confining the plaintiff to the post publication remedies to which he may prove himself entitled at a trial.
The media are at liberty to publish if they are willing to take the risk of liability in damages.
Articles 8 and 10 of the European Convention on Human Rights Convention provide: ARTICLE 8 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 wellbeing 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.
ARTICLE 10 Freedom of expression 1.
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.
This article shall not prevent states from requiring the licensing of broadcasting, television or cinema enterprises. 2.
The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.
In Campbell v MGN Ltd [2004] 2 AC 457, the House of Lords expanded the scope of the equitable action for breach of confidence by absorbing into it the values underlying articles 8 and 10 of the European Convention on Human Rights, thus effectively recognising a qualified common law right of privacy.
The Appellate Committee was divided on the availability of the right in the circumstances of that case, but was agreed that the right was in principle engaged if in respect of the disclosed facts the person in question had a reasonable expectation of privacy.
The test was whether a reasonable person of ordinary sensibilities, if placed in the same situation as the subject of the disclosure, rather than the recipient, would find the disclosure offensive.
The protection of reputation is the primary function of the law of defamation.
But although the ambit of the right of privacy is wider, it provides an alternative means of protecting reputation which is available even when the matters published are true.
In its current form, the cause of action for invasion of a claimants right to private and family life is relatively new to English law.
It originates in the incorporation into our law of the Human Rights Convention.
But once the court is satisfied that that right is engaged, it must be balanced against a public interest in freedom of the press.
That interest is not new.
Although now protected by article 10 of the Convention, it corresponds to a common law right which has been recognised since the 18th century.
In Campbell v MGN, supra, at para 55, Lord Hoffmann described the balance between these competing values in language that has frequently been adopted since that case was decided: Both reflect important civilised values, but, as often happens, neither can be given effect in full measure without restricting the other.
How are they to be reconciled in a particular case? There is in my view no question of automatic priority.
Nor is there a presumption in favour of one rather than the other.
The question is rather the extent to which it is necessary to qualify the one right in order to protect the underlying value which is protected by the other.
And the extent of the qualification must be proportionate to the need Campbell did not involve a pre emptive injunction against the press, nor did it involve the reporting of court proceedings.
But in In re S, supra, which involved both of these things, Lord Steyn adopted Lord Hoffmanns approach, and summarised the principles in four points at para 17: First, neither article has as such precedence over the other.
Secondly, where the values under 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.
For convenience I will call this the ultimate balancing test.
These two decisions are the principal English authorities for an approach to the balancing exercise which is fact specific rather than being dependent on any a priori hierarchy of rights.
On some facts, the claimants article 8 rights may be entitled to very little weight.
On some facts, the public interest in the publication in the media may be slight or non existent.
Nonetheless, in deciding what weight to give to the right of the press to publish proceedings in open court, the courts cannot, simply because the issues arise under the heading private and family life, part company with principles governing the pre emptive restraint of media publication which have been accepted by the common law for many years in the cognate areas of contempt of court and defamation, and are reflected in a substantial and consistent body of statute law as well as in the jurisprudence on article 10 of the Human Rights Convention.
Nor, in practice, have they sought to do so.
The point may be illustrated by the decision in In re S itself.
S was a child aged five whose mother had been indicted for the murder of his brother.
Ss guardian brought proceedings in the Family Division in support of a claim for an order preventing (i) the publication of material likely to identify S, and (ii) the publication in any report of the mothers trial of her name or that of the deceased brother or of material (such as photographs) likely to identify them.
The issue was whether an order in terms of (ii) should be qualified by a proviso that it was not to prevent the publication of a report of any part of the murder trial which was held in public.
The application was based on the childs right to private and family life.
It was a strong case on the facts, for there was psychiatric evidence that persistent publicity surrounding the trial would be significantly harmful to section Nonetheless, the courts below held that the proviso must be included, and the House of Lords affirmed their decision.
Lord Steyn delivered the only reasoned speech.
His reasoning on the main issue can be summarised in four points.
First, he drew attention, in a passage from which I have quoted at para 18 above, to the significance of open justice both at common law and in the jurisprudence of the European Court of Human Rights.
Secondly, he pointed out that although there were many statutory exceptions to that principle founded on countervailing public and private interests, none of them applied in the case before them.
In particular, section 39 of the Children and Young Persons Act 1933, which as it then stood covered much of the ground now covered by section 45 of the Youth Justice and Criminal Evidence Act 1999, was limited to protecting children and young persons concerned in the mothers trial as defendant, witness or victim.
Lord Steyn was unwilling to introduce a wider exception to the open justice principle by what he called a process of accretion and analogy.
Third, while the impact of publicity attending the trial would be extremely painful, S was not himself involved in the trial and the impact on him was essentially indirect.
At para 26, Lord Steyn observed: This is an application for an injunction beyond the scope of section 39, the remedy provided by Parliament to protect juveniles directly affected by criminal proceedings.
No such injunction has in the past been granted under the inherent jurisdiction or under the provisions of the ECHR.
There is no decision of the Strasbourg court granting injunctive relief to non parties, juvenile or adult, in respect of publication of criminal proceedings.
Moreover, the Convention on the Rights of the Child, which entered into force on 2 September 1990, protects the privacy of children directly involved in criminal proceedings, but does not protect the privacy of children if they are only indirectly affected by criminal trials: articles 17 and 40.2(vii); see also Geraldine Van Bueren, The International Law on the Rights of the Child (1995), pp 141 and 182.
The verdict of experience appears to be that such a development is a step too far.
Fourth, if harm arising indirectly was enough to justify a pre emptive order, it would be difficult to set rational boundaries on the jurisdiction.
At paras 32 33, he said about this: First, while counsel for the child wanted to confine a ruling to the grant of an injunction restraining publication to protect a child , that will not do.
The jurisdiction under the ECHR could equally be invoked by an adult non party faced with possible damaging publicity as a result of a trial of a parent, child or spouse.
Adult non parties to a criminal trial must therefore be added to the prospective pool of applicants who could apply for such injunctions.
This would confront newspapers with an ever wider spectrum of potentially costly proceedings and would seriously inhibit the freedom of the press to report criminal trials.
Secondly, if such an injunction were to be granted in this case, it cannot be assumed that relief will only be sought in future in respect of the name of a defendant and a photograph of the defendant and the victim.
It is easy to visualise circumstances in which attempts will be made to enjoin publicity of, for example, the gruesome circumstances of a crime.
The process of piling exception upon exception to the principle of open justice would be encouraged and would gain in momentum.
In In re Trinity Mirror (A intervening) [2008] QB 770, the defendant pleaded guilty in the Crown Court to 20 counts of making or possessing child pornography.
No direction was made for withholding the defendants identity in court, but the Crown Court made an order in the interest of the defendants children prohibiting any publication in the media of material identifying him or his children.
The Court of Appeal held that the Crown Court had no power to make such an order.
But they also held that it would have been an inappropriate order even in the High Court, which did have jurisdiction.
Sir Igor Judge P, delivering the judgment of the Court, observed (para 32) that it was impossible to over emphasise the importance to be attached to the ability of the media to report criminal trials.
In simple terms this represents the embodiment of the principle of open justice in a free country.
He went on to say, at para 33: It is sad, but true, that the criminal activities of a parent can bring misery, shame, and disadvantage to their innocent children.
Innocent parents suffer from the criminal activities of their sons and daughters.
Husbands and wives and partners all suffer in the same way.
All this represents the further consequences of crime, adding to the list of its victims.
Everyone appreciates the risk that innocent children may suffer prejudice and damage when a parent is convicted of a serious offence However we accept the validity of the simple but telling proposition put by the court reporter to Judge McKinnon on 2 April 2007, that there is nothing in this case to distinguish the plight of the defendants children from that of a massive group of children of persons convicted of offences relating to child pornography.
If the court were to uphold this ruling so as to protect the rights of the defendants children under article 8, it would be countenancing a substantial erosion of the principle of open justice, to the overwhelming disadvantage of public confidence in the criminal justice system, the free reporting of criminal trials and the proper identification of those convicted and sentenced in them.
Such an order cannot begin to be contemplated unless the circumstances are indeed properly to be described as exceptional.
In re British Broadcasting Corporation.
In re Attorney Generals Reference (No 3 of 1999) [2010] 1 AC 145 was another case arising out of an application by a defendant in criminal proceedings for an order restraining publication of material identifying him.
A man referred to in the speeches as D had been charged with rape on the strength of DNA evidence, but acquitted on the judges direction after that evidence had been ruled inadmissible.
That ruling had subsequently been held on a reference by the Attorney General to be wrong.
Although he was at risk of being retried, there were no pending or imminent proceedings against him which could found an order under section 4(2) of the Contempt of Court Act 1981.
In those circumstances, the BBC wished to make a programme about the functioning of the criminal justice system, focussing on controversial acquittals, including Ds.
The use of the material deployed at his trial and at the hearing of the reference would inevitably tend to suggest that he was guilty.
Short of acquittal at a retrial, he had no means of vindicating his reputation since the facts derived from that source were true.
Lord Hope (with whom Lord Phillips, Lord Walker and Lord Neuberger agreed) considered (para 13) that the only possible basis for an order preventing D from being identified was article 8 of the Convention.
In his view proceedings at the trial, being public, gave rise to no legitimate expectation of privacy.
But he held that article 8 of the Convention was nevertheless engaged because the link between his DNA and the rape was personal information which would suggest to the public that he was guilty: see paras 6, 20, 22.
That consideration was, however, substantially outweighed by the right of the media to publish and the right of the public to receive information about the functioning of the criminal justice system.
The fullest treatment of the balance between articles 8 and 10 appears in the speech of Lord Brown (with whom the rest of the Appellate Committee agreed).
He considered that subject to Ds article 8 rights and to the law of defamation, the BBC was entitled to publish material questioning the merits of Ds acquittal: paras 59 60, 63.
He attached very little weight to Ds article 8 rights because, as he observed at para 68, to say that his article 8 rights were interfered with by the unlawful retention and use of his sample is one thing; to assert that in consequence he must be entitled to anonymity in respect of the subsequent criminal process is quite another.
In In re Guardian News and Media Ltd [2010] 2 AC 697 five claimants challenged the lawfulness of Treasury directions freezing their assets under the Terrorism (United Nations Measures) Order 2006 on the ground that they were suspected of facilitating terrorism.
The Supreme Court set aside anonymity orders made in their favour, whose effect was to prohibit any report of the proceedings that enabled them to be identified.
The orders had been sought on the ground that disclosure of the fact that they were suspected of facilitating terrorism would cause some people to assume that the suspicion was justified, and would violate their article 8 rights.
In particular, one of them, M, claimed that his reputation and his and his familys relations with his local community would be seriously damaged.
The judgment of the Court was delivered by Lord Rodger.
He applied the test derived from Lord Hoffmanns speech in Campbell v MGN Ltd [2004] 2 AC 457 at paras 55 56 and the judgment of the European Court of Human Rights in Von Hannover v Germany [2004] 40 EHRR, paras 57, 76, namely whether the publication of a report sufficiently contributes to a question of legitimate public interest to justify any curtailment of his and his familys right to private and family life: para 52.
In Von Hannover there had been no public interest in the publication of photographs of Princess Caroline in the course of her ordinary daily pursuits.
Lord Rodger concluded that the operation of the freezing order system for those suspected of facilitating terrorism was a matter of legitimate public interest, and that any damage to the applicants right to private and family life was incidental.
At para 73, he said: Although it has effects on the individuals private life, the purpose of a freezing order is public: it is to prevent the individual concerned from transferring funds to people who have nothing to do with his family life.
So this is not a situation where the press are wanting to publish a story about some aspect of an individuals private life, whether trivial or significant.
Rather, they are being prevented from publishing a complete account of an important public matter involving this particular individual, for fear of the incidental effect that it would have on Ms private and family life.
A v British Broadcasting Corpn [2015] AC 588 was an appeal from Scotland, which is relied upon by PNM as marking a change of approach.
A was a foreign national who had served a sentence of imprisonment for sexual offences against a child.
The Home Secretary had served notice of her intention to deport him.
He appealed against that decision on the ground that his deportation would violate his rights under articles 2 and 3 of the Convention, because if he returned to his country of origin he would be at risk of death or ill treatment at the hands of people who knew the nature of his offences.
Directions had been made at an early stage of the proceedings to enable A to conduct them using initials instead of his name, and an ancillary order had been made under section 11 of the Contempt of Court Act 1981 to prohibit his identification out of court.
The appeal failed, one of the principal grounds being that these measures would prevent him from being identifiable after his return to his country of origin.
The Supreme Court dismissed the BBCs application to lift the order on the ground that although there was a legitimate public interest in publication, it would not only have violated his article 2 and 3 rights but would have subverted the basis of the decision to authorise his deportation, thereby undermining the administration of justice.
The decision itself therefore turned on very particular facts.
But the general approach of Lord Reed (with whom the rest of the committee agreed) was very similar to that of Lord Rodger in In re Guardian News and Media Ltd, whose statement of the test he adopted (para 48).
In the hierarchy of Convention rights, articles 2 and 3 stand very high, but Lord Reed was prepared to accept (para 41) that a lesser interest such as serious commercial damage would be enough to justify an order in a case where there was no public interest in publication.
In most of the recent decisions of this Court the question has arisen whether the open justice principle may be satisfied without adversely affecting the claimants Convention rights by permitting proceedings in court to be reported but without disclosing his name.
The test which has been applied in answering it is whether the public interest served by publishing the facts extended to publishing the name.
In practice, where the court is satisfied that there is a real public interest in publication, that interest has generally extended to publication of the name.
This is because the anonymised reporting of issues of legitimate public concern are less likely to interest the public and therefore to provoke discussion.
As Lord Steyn observed in In re S, at para 34, from a newspapers point of view a report of a sensational trial without revealing the identity of the defendant would be a very much disembodied trial.
If the newspapers choose not to contest such an injunction, they are less likely to give prominence to reports of the trial.
Certainly, readers will be less interested and editors will act accordingly.
Informed debate about criminal justice will suffer.
Whats in a name?, Lord Rodger memorably asked in In re Guardian News and Media Ltd, before answering his own question, at para 63, in the following terms: A lot, the press would answer.
This is because stories about particular individuals are simply much more attractive to readers than stories about unidentified people.
It is just human nature.
And this is why, of course, even when reporting major disasters, journalists usually look for a story about how particular individuals are affected.
Writing stories which capture the attention of readers is a matter of reporting technique, and the European court holds that article 10 protects not only the substance of ideas and information but also the form in which they are conveyed: News Verlags GmbH & Co KG v Austria (2000) 31 EHRR 246, 256, para 39 More succinctly, Lord Hoffmann observed in Campbell v MGN Ltd [2004] 2 AC 457, 474, para 59, judges are not newspaper editors.
See also Lord Hope of Craighead in In re British Broadcasting Corpn [2010] 1 AC 145 , para 25.
This is not just a matter of deference to editorial independence.
The judges are recognising that editors know best how to present material in a way that will interest the readers of their particular publication and so help them to absorb the information.
A requirement to report it in some austere, abstract form, devoid of much of its human interest, could well mean that the report would not be read and the information would not be passed on.
Ultimately, such an approach could threaten the viability of newspapers and magazines, which can only inform the public if they attract enough readers and make enough money to survive.
The public interest in the administration of justice may be sufficiently served as far as lawyers are concerned by a discussion which focusses on the issues and ignores the personalities, but the target audience of the press is likely to be different and to have a different interest in the proceedings, which will not be satisfied by an anonymised version of the judgment.
In the general run of cases there is nothing to stop the press from supplying the more full blooded account which their readers want.
Cf In re British Broadcasting Corporation.
In re Attorney Generals Reference (No 3 of 1999), at paras 25 26 (Lord Hope), 56, 66 (Lord Brown).
None of this means that if there is a sufficient public interest in reporting the proceedings there must necessarily be a sufficient public interest in identifying the individual involved.
The identity of those involved may be wholly marginal to the public interest engaged.
Thus Lord Reed remarked of the Scottish case of Devine v Secretary of State for Scotland (unreported, 22 January 1993), in which soldiers who had been deployed to end a prison siege were allowed to give evidence from behind a screen, that their appearance and identities were of such peripheral, if any, relevance to the judicial process that it would have been disproportionate to require their disclosure: A v British Broadcasting Corpn, at para 39.
In other cases, the identity of the person involved may be more central to the point of public interest, but outweighed by the public interest in the administration of justice.
This was why publication of the name was prohibited in A v British Broadcasting Corpn.
Another example in a rather different context is R (C) v Secretary of State for Justice (Media Lawyers Association intervening) [2016] 1 WLR 444, a difficult case involving the disclosure via judicial proceedings of highly personal clinical data concerning psychiatric patients serving sentences of imprisonment, which would have undermined confidential clinical relationships and thereby reduced the efficacy of the system for judicial oversight of the Home Secretarys decisions.
Application to the present case
The nature of the article that The Times and the Oxford Mail wish to publish has varied over the period since the section 4(2) order was first sought.
The current position of The Times was explained in an e mail sent shortly before the application to Tugendhat J.
It is that they wish to report the court proceedings concerning the imposition and lifting of the section 4(2) order in an article which will focus on issues relating to open justice.
In particular, it will focus on the position of persons not party to proceedings about whom allegations are made in those proceedings, the extent of the protection which the law gives to those who are facing imminent or pending criminal proceedings and the challenges of reporting criminal proceedings where such issues arise.
They have said that they propose to identify PNM because this would make the piece considerably more engaging and meaningful for our readers, but that any report would make clear that he had been released from police bail and was not facing imminent or pending proceedings.
The position of the Oxford Mail was set out in a letter of the same date and is similar.
They added: We consider that the recent proceedings involving your client during which these issues were carefully explored in open court on several occasions, and in respect of which a detailed ruling was handed down, provide a very vivid illustration of how these issues are treated by the courts.
It is our wish to explain these proceedings fully and fairly.
I mention these matters because the limited nature of the proposed publication was relied upon by the two newspapers as part of their case against the making of the order sought.
They are not, however, critical to the issue before us.
If no order is made, the two newspapers, and indeed other media organisations, will be at liberty, subject to the law of defamation, to publish anything that was said and done at the trial at the Central Criminal Court, and the appeal must be approached on that basis.
After an impeccable summary of the relevant legal principles, Tugendhat J began his assessment of the balance between the divergent interests involved with an assessment of PNMs interest in restricting the reporting of the trial so far as it related to him.
He accepted that there would be some members of the public who would equate suspicion with guilt and that there was some risk that PNM and members of his family, including his children, would be subject to some unpleasant behaviour, possibly amounting to harassment.
He also acknowledged that, not being a defendant in the trial, he would have no means of clearing his name if the media confined themselves to fair, accurate and contemporaneous reporting attracting absolute privilege.
However, he considered that the significance of these facts was diminished by two factors.
First, he approached the case on the footing set out in Lord Rodgers observation in In re Guardian News and Media, at para 66, namely that members of the public generally will understand the difference between suspicion and guilt.
Secondly, he thought that because of its public nature, some knowledge of what had been said about him at the trial would spread among those who knew him personally or by name, so that restrictions on press reporting would be of little if any benefit to him or his family.
Indeed, the prohibition of media reporting might lead to the circulation of ill informed or misleading versions of what was said that would aggravate PNMs situation.
By comparison, he considered that there was the highest public interest in the allegations of child abuse, which were the subject of continuing police investigations.
The reports would be likely to make an important contribution to the knowledge of the public and to informed debate about the administration of justice.
Publication might also encourage witnesses to come forward, or lend significance to the fact if they did not come forward.
In these circumstances, he thought that the case was not materially different from In re section Under section 12(3) of the Human Rights Act 1998, the judge could not make the order unless satisfied that PNM was likely to succeed at a trial.
He concluded that PNMs claim was likely to fail.
The legal basis of the judges analysis was challenged in only two respects.
First, it was argued on PNMs behalf that the decision of this court in A v British Broadcasting Corpn had modified the approach to such applications in a way which made the analysis in In re S less relevant.
Secondly, it was suggested that in adopting Lord Rodgers observations in In re Guardian News and Media about the publics ability to distinguish between suspicion and guilt, the judge had applied a legal presumption which was not warranted.
I have explained in para 28 above why I reject the first of these arguments.
I also reject the second.
Lord Rodger was describing the basis on which English law (unlike, say, German law) allows the publication of the identities of persons charged with offences in advance of their trial.
No doubt this also represents the publics reaction in the generality of cases.
But Lord Rodger was not putting this last point forward as a legal presumption to be applied irrespective of the circumstances, let alone an irrebuttable one.
Nor have the courts subsequently proceeded as if he was, as the analysis of the facts in In re British Broadcasting Corporation: In re Attorney Generals Reference (No 3 of 1999) demonstrates.
Read as a whole, this part of Tugendhat Js judgment was doing no more than saying that while some members of the public would equate suspicion with guilt, most would not.
In my opinion, Tugendhat J committed no error of law, and his conclusion was one that he was entitled to reach.
Left to myself, I might have been less sanguine than he was about the reaction of the public to the way in which PNM featured in the trial.
But that would have made no difference to the conclusion, for the following reasons: (1) PNMs application is not that the trial should be conducted so as to withhold his identity.
If it had been, the considerations urged by Lord Kerr and Lord Wilson in their judgments in this case, might have had considerable force.
But it is now too late for that.
PNMs application is to prohibit the reporting, however fair or accurate, of certain matters which were discussed at a public trial.
These are not matters in respect of which PNM can have had any reasonable expectation of privacy.
The contrast between this situation and the case where a newspaper responds to a tip off about intensely personal information such as a claimants participation in private drug rehabilitation sessions could hardly be more stark. (2) That is not the end of PNMs article 8 right, because he is entitled to rely on the impact which publication would have on his relations with his family and their relations with the community in which he lives.
I do not underestimate that impact.
There is force in the judges observation that the public nature of the trial, combined with the notoriety of the case, especially in the Oxford area, means that some people will know of the allegations about PNM in any event.
But whether that be so or not, the impact on PNMs family life of what was said about him at the trial is no different in kind from the impact of many disagreeable statements which may be made about individuals at a high profile criminal trial.
A defendant at such a trial may be acquitted, possibly on an issue of admissibility, after bruising disclosures have been made about him at the trial.
Within the limits of professional propriety, a witness may have his integrity attacked in cross examination.
He may be accused by other witnesses of lying or even of having committed the offence himself.
All of these matters may be exposed in public under the cloak of the absolute immunity of counsel and witnesses from civil liability, and reported under the protection of the absolute privilege from liability for defamation for fair, accurate and contemporaneous publication.
The immunity and the privilege reflect the laws conviction that the collateral impact that this process has on those affected is part of the price to be paid for open justice and the freedom of the press to report fairly and accurately on judicial proceedings held in public. (3) The impact on PNMs family life is indirect and incidental, in the same way as the impact on the claimants family life in In re S and on Ms family life in In re Guardian News and Media Ltd. Neither PNM nor his family participated in any capacity at the trial, and nothing that was said at the trial related to his family.
But it is also indirect and incidental in a different and perhaps more fundamental sense.
PNM is seeking to restrain reporting of the proceedings in order to protect his reputation.
A party is entitled to invoke the right of privacy to protect his reputation but, as I have explained, there is no reasonable expectation of privacy in relation to proceedings in open court.
The only claim available to PNM is based on the adverse impact on his family life which will follow indirectly from the damage to his reputation.
It is clear that in an action for defamation no injunction would issue to prevent the publication of a fair and accurate report of what was said about PNM in the proceedings.
It would be both privileged and justified.
In the context of the publication of proceedings in open court, it would be incoherent for the law to refuse an injunction to prevent damage to PNMs reputation directly, while granting it to prevent the collateral impact on his family life in precisely the same circumstances.
It would also, as Lord Steyn pointed out in In re S, make it particularly difficult to distinguish the many other cases in which judicial proceedings generate damaging or distressing collateral publicity for those not directly involved. (4) I would not rule out the possibility of a pre emptive injunction in a case where the information was private or there was no sufficiently substantial public interest in publication.
But in relation to the reporting of public court proceedings such cases are likely to be rare.
This is clearly not such a case.
The sexual abuse of children, especially on an organised basis, is a subject of great public concern.
The processes by which such cases are investigated and brought to trial are matters of legitimate public interest.
The criticisms made of the police and social services inevitably reinforce the public interest in this particular case.
The use of section 4(2) of the Contempt of Court Act 1981 to postpone the reporting of aspects of a public trial is justified by the need to protect the interests of justice, but it is nonetheless a proper matter for debate which the media are entitled to raise. (5) Does the public interest extend to PNMs identity? This case differs from earlier cases in which the same question has arisen because the order sought by PNM would not prevent the identification of a party to the criminal proceedings or even of a witness.
To my mind that makes it even more difficult to justify an injunction, for reasons which I have given.
But in any event I do not think it can be a relevant distinction.
The policy which permits media reporting of judicial proceedings does not depend on the person adversely affected by the publicity being a participant in the proceedings.
It depends on (i) the right of the public to be informed about a significant public act of the state, and (ii) the laws recognition that, within the limits imposed by the law of defamation, the way in which the story is presented is a matter of editorial judgment, in which the desire to increase the interest of the story by giving it a human face is a legitimate consideration.
PNMs identity is not a peripheral or irrelevant feature of this particular story.
I conclude with two points.
The first is that the only question before us is whether a pre emptive interlocutory injunction should issue.
Nothing that I have said should be taken to limit the range of remedies that may be available after publication if the rights of the claimant are found to have been violated.
The second is that restrictions on the reporting of proceedings in open court are particularly difficult to justify.
It may in some cases be easier to justify managing the trial in a way which avoids the identification of those with a sufficient claim to anonymity.
Applications for anonymity in the courtroom will generally raise many issues other than the impact on the applicant or his family.
They will include the fairness of the trial, the nature of the issues, and the existence and extent of any legitimate public interest in the applicants identity.
I am in no position to suggest that such an application would have succeeded in PNMs case, if it had been made.
But if there is a solution to the problem of collateral damage to those not directly involved in criminal proceedings, that is where it is to be found.
I would dismiss the appeal.
The parties have agreed that in those
circumstances the anonymity order made by this court on 17 January 2017 undersection 4(2) of the Contempt Court Act 1981 should be revoked and that the Appellant may be referred to in the title of the proceedings by his name, Tariq Khuja.
LORD KERR AND LORD WILSON: (dissenting)
We would have allowed the appeal.
Subject to what we regard as a controversial presumption, the legal framework within which PNMs application for an injunction fell to be considered is not in dispute.
The law required Tugendhat J to appraise the competing rights of, on the one hand, the press and the public under article 10 of the European Convention and, on the other, of PNM and his family under article 8.
That appraisal had to take place on the basis that neither right was in principle stronger than the other and that a decision as to which should prevail required first an intense focus on their comparative importance in the particular circumstances and then an assessment of the proportionality of the interference with each of them which the grant or refusal of the injunction would represent: see the propositions of Lord Steyn in the S case at para 17, quoted by Lord Sumption at para 22 above.
If this approach was followed, there would be no danger that grant of the injunction would establish some further legal exception to the principle of open justice; and the risk referred to by Lord Woolf MR in the Kaim Todner case, cited at para 14 above, of an insidious growth by accretion of exceptions which would erode the general principle, would not materialise.
The judges task was therefore to evaluate the strength of the rival considerations.
If there was no legal error in his approach to the task, the Court of Appeal would have been right to have dismissed PNMs appeal.
We have come to the conclusion, however, that, through no fault of his own, he did fall into error.
The controversial presumption to which we have referred originates in the judgment of Lord Rodger in the Guardian case, cited by Lord Sumption at para 8 above.
Lord Rodger, who was delivering the judgment of this court, referred at para 66 to the freedom of the press to publish the identity of a person charged with an offence.
He then observed: In allowing this, the law proceeds on the basis that most members of the public understand that, even when charged with an offence, you are innocent unless and until proved guilty in a court of law.
That understanding can be expected to apply, a fortiori, if you are someone whom the prosecuting authorities are not even in a position to charge with an offence and bring to court.
Lord Rodgers observation in the Guardian case could not have been clearer: it was that the law proceeds on the basis that most people understand that persons charged with an offence and even more obviously persons not or not yet charged with an offence but simply arrested on suspicion of it are innocent until their guilt has been established.
So Tugendhat J proceeded on that basis.
He quoted para 66 of Lord Rodgers judgment and said that I approach the case on [that] footing.
In her judgment in the Court of Appeal, with which Lord Dyson MR and Vos LJ agreed, Sharp LJ correctly observed that the assumption or (as she elsewhere described it) the presumption set out in para 66 of Lord Rodgers judgment was the basis upon which the judge proceeded.
Sharp LJ thereupon proceeded to explain why, in her view, Tugendhat J had been entitled to proceed on that basis.
She said at para 38: The approach to the open justice principle which guided the judge has been settled at the highest level In my view, the appellants argument ignores a fundamental part of that approach, which is that most members of the public understand the presumption of innocence and are able to distinguish between the position of someone who has been (merely) arrested, someone who has been charged, and someone who has been convicted of a criminal offence.
Once that is understood, it follows that the effect of disclosing the fact of the appellants arrest on his article 8 rights is significantly more limited than [counsel for PNM] contends.
To the extent that in this passage Sharp LJ was suggesting that most members of the public would not regard PNMs arrest as indicative of guilt, not only would the effect on him of its publication be significantly more limited but his case under article 8 would largely fall away.
Lord Sumption suggests in para 33 above that in para 66 of the Guardian case Lord Rodger was not articulating a legal presumption to be applied irrespective of the circumstances but merely explaining the basis on which English law allows publication in advance of trial of the names of those charged with offences.
We cannot agree.
The statement that the law proceeds on the basis surely means at least that, absent good reason for departing from it, the courts should act on the principle that most people believe that someone charged with an offence, and still more someone not charged with an offence but simply arrested on suspicion of it, is innocent until proved guilty.
If the law does not proceed on that basis, the courts inquiry into the attitude of members of the public to those charged with criminal offences or merely arrested on suspicion of them would be at large.
Its conduct of the inquiry would require investigation and evidence.
The statement of Lord Rodger can be interpreted only as indicating that investigation and the adduction of evidence are not needed.
His statement plainly partakes of a legal presumption.
We consider it necessary both to confront the fact that Lord Rodger articulated a presumption and then critically to examine it.
This is necessary since, in our judgment, Tugendhat J applied the asserted presumption and his application of it was endorsed by the Court of Appeal.
If, as we believe to be the case, the asserted presumption can be shown to have no proper legal foundation, both courts would have fallen into error and the evaluative exercise would fall to be conducted again.
So our question becomes: on what grounds did Lord Rodger adopt and purport to cast as a presumption the proposition that most members of the public understand that a person who has been merely charged with an offence, and, even more obviously, a person who has been simply arrested on suspicion of an offence, is innocent until proved guilty? Lord Rodger cited no authority for the proposition.
Indeed, he referred to no evidence in support of it.
No such evidence had been adduced in those proceedings.
We find that we cannot answer our question.
We have no difficulty in accepting the proposition that most people understand that the law does not regard as guilty a man who has been no more than arrested or even charged.
That, however, is distinctly different from saying that most people do not themselves regard him as guilty.
Yet this is assuredly the proposition which is the subject of Lord Rodgers asserted presumption.
The respondents have not filed evidence in support of the proposition that most members of the public would not regard as guilty of sexual abuse a man whom they learned to have been arrested on suspicion of it.
They can hardly be criticised for not doing so: for there appeared already to be a legal presumption to that effect.
Nor did PNM file contrary evidence in attempted rebuttal of it.
It is important, however, to put the absence of such evidence in context.
His application was only for an interim injunction and was made in the circumstances of great urgency explained by Lord Sumption at para 11 above.
On an interim application, while the court is disabled by section 12(3) of the 1998 Act from granting an injunction unless satisfied that the applicant is likely to secure an injunction at the full hearing, its approach is as preliminary as is the requested order.
Plainly there is increasing concern, judicial and extra judicial, about the effect upon an innocent persons reputation of publication of the fact of his arrest.
In the second volume of the report of his Inquiry into the Culture, Practices and Ethics of the Press dated 29 November 2012, HC 780 11, Leveson LJ referred at para 3.25 to the case of Mr Christopher Jefferies, addressed in Attorney General v MGN Ltd [2011] EWHC 2074 (Admin); [2012] 1 WLR 2408.
Mr Jefferies was exposed as having been arrested on suspicion of murder.
He was later demonstrated to have been innocent of it but meanwhile he had been subjected to a protracted campaign of vilification in the press, which had led him to leave his home and to change his appearance.
Although in that case the press had committed contempt of court and had published actionable libels about Mr Jefferies, the significance of the case for present purposes lies in the ease with which arrest may generally be associated with guilt.
In the event Leveson LJ recommended at para 2.39 that, save in exceptional and clearly defined circumstances, the police should not release the names or identifying details of those who are arrested or suspected of a crime.
On 4 March 2013 Treacy LJ and Tugendhat J issued a paper entitled Contempt of Court.
A Judicial Response to Law Commission Consultation Paper No 209.
They made clear that it reflected the views of the President of the Queens Bench Division, the Senior Presiding Judge, Leveson and Goldring LJJ and other senior judges.
They observed at para 5: The police arrest many people who are never charged.
If there were a policy that the police should consistently publish the fact that a person has been arrested, in many cases that information would attract substantial publicity, causing irremediable damage to the persons reputation. (Emphasis supplied) They proceeded to indorse the recommendation made by Leveson LJ in para 2.39 of his report.
On 31 October 2016 Sir Richard Henriques, a former High Court judge, made a report entitled An Independent Review of the Metropolitan Police Services handling of non recent sexual offence investigations alleged against persons of public prominence.
Sir Richard said at para 1.67: I consider it most unlikely that a Government will protect the anonymity of suspects pre charge.
To do so would enrage the popular press whose circulation would suffer.
Present arrangements, however, have caused the most dreadful unhappiness and distress to numerous suspects, their families, friends and supporters.
Those consequences were avoidable by protecting anonymity.
Nobody is safe from false accusation and damaging exposure under present arrangements.
A reputation built on a lifetime of public service or popular entertainment can be extinguished in an instant.
I sincerely believe that statutory protection of anonymity pre charge is essential in a fair system.
Only days prior to the date of Sir Richards report Cobb J had given judgment in Rotherham Metropolitan Borough Council v M [2016] EWHC 2660 (Fam).
Rotherham had made a teenage girl a ward of court and had secured interim injunctions that four named men should not associate with her.
It had alleged that they had been sexually exploiting her.
None of the four men had been charged with any offence in relation to her but two of them had been arrested in that connection and they remained on police bail.
In the event, however, Rotherham decided that it would not be able to substantiate its allegations against any of the four men and Cobb J acceded to its application that the injunctions be discharged.
Rotherham also sought an indefinite extension of interim reporting restriction orders against identification not only of the girl but also of the four men.
Times Newspapers Ltd, also the first respondent to the present appeal, opposed extension of the orders insofar as they related to the four men.
Cobb J said at para 39: I next ask myself what is the public interest in naming these four men in the press as persons against whom injunction proceedings were once brought, interim injunctions (without evidence being tested) once made, but in respect of whom in the end no findings were sought, let alone made.
In my judgment there is no, or if any, negligible, such public interest On the other hand, there is a substantial risk that, given the strength of feeling in Rotherham and elsewhere about those who engage in child sexual exploitation and similar offences, they would be perceived to be perpetrators or likely perpetrators, and pilloried and/or targeted in their communities if they were known to have been under suspicion in this way.
Then Cobb J quoted from a leading article in The Times on 19 October 2016 as follows: False rape and abuse accusations can inflict terrible damage on the reputations, prospects and health of those accused.
For all the presumption of innocence, mud sticks.
In the end Cobb J concluded that the restriction orders against identification of the men should be continued indefinitely.
He said at para 46: I have reached the firm conclusion that there is no true public interest in naming the four associated males, against whom, in the end, no findings have been sought or made. [Their] article 8 rights would be in my judgment significantly violated were they to be publicly exposed in the media as having been implicated to a greater or lesser degree, but not proved to be engaged, in this type of offending.
These observations seem to us to show great insight and to resonate strongly with the facts of the present case.
Nor should this court spurn the opportunity to derive insight from decisions in other jurisdictions, in particular in the courts of Canada.
It is clear that in the law of Canada the principles of free expression and of open justice, enshrined in sections 2(b) and 11(d) of the Canadian Charter of Rights and Freedoms, have the central importance with which they are invested in the law of England and Wales.
But the privacy rights of those suspected or accused, but not convicted, of grave crimes are not undermined by any presumption analogous to the controversial presumption articulated by Lord Rodger.
The result is that they are afforded significantly greater value and they not infrequently prevail.
Thus in BG v The Queen in Right of The Province of British Columbia (2002) BCSC 1417 the Supreme Court of British Columbia prohibited, until the conclusion of the proceedings, identification of school staff accused of abusing boys in an action brought by them in later life against the school.
The judge held at para 38 that protection of innocent people was a social value of superordinate importance which, were they to suffer irreparable harm to their reputation, would justify overriding the general principle of open justice; at para 41 that, accused of being paedophiles, the staff had been put in the category of persons most condemned and reviled by society; and at para 53 that, were they to be publicly identified, they would suffer irreparable harm before they had had any opportunity to rebut the accusations.
Two years later, after the action had been dismissed, the Court of Appeal was required to decide whether a prohibition against identifying the complainants (as opposed to the staff) had rightly been discharged.
In his judgment at (2004) BCCA 345 para 26, Finch CJ cited substantial authority in support of his proposition that replacing the names of certain parties with initials relates only to a sliver of information and minimally impairs the openness of judicial proceedings.
Irrespective of whether, by our standards, it goes too far, the proposition articulated by the Chief Justice highlights the chasm, which we would be unwise to ignore, between the approach taken by Tugendhat J to the determination of PNMs application and that which would be taken to the determination of an analogous application in a highly respected fellow jurisdiction.
In R v Henry (2009) BCCA 86 the same Court of Appeal had granted permission to Mr Henry to reopen his appeal against conviction for offences of sexual assault.
His case was to be that Mr X, who had already been convicted of other assaults, had instead been the perpetrator of the assaults for which he, Mr Henry, had been convicted.
The court prohibited public identification of Mr X until determination of the appeal.
Newbury JA observed at para 17 that the public interest in the openness of trials and in the administration of justice was not diminished by withholding his identification and she concluded as follows: If our society takes seriously the proposition that a person in Mr Xs position is presumed innocent until proven guilty, it seems to me that the deleterious effects, both on his privacy interests and on the administration of justice, of the publication of his name do outweigh the public interest in knowing that fact.
So there the presumption of innocence, instead of precipitating a conclusion that the public would generally act by reference to it and that there was thus no need for injunctive intervention, prompted the opposite conclusion, namely that intervention was necessary in order to make the presumption as effective in the street as it would be in the court room.
Albeit with natural hesitation, we conclude that there was no basis for the presumption articulated by Lord Rodger in para 66 of the Guardian case and that accordingly Tugendhat J fell into error in dismissing PNMs application on foot of it.
The balancing exercise needs to be conducted again.
The newspapers strongly argue that the subject matter of the proposed publications extends beyond the arrest of PNM on suspicion of sexual offences against children in that it extends to the part which his name played in criminal proceedings open to the public.
There is no doubt that the naming of him in the criminal trial creates a powerful extra dimension to the public interest in the proposed publications.
But it is worthwhile to reflect on the circumstances in which he came to be named in the trial.
First, he was named in the course of the successful application which on 25 January 2013 he made to the judge for continuation of the order under section 4(2) of the 1981 Act.
Then, in the course of the evidence, he was named by a police officer as not having been identified in the course of an identification procedure.
After his name had thus been introduced into the evidence, it was mentioned very occasionally by counsel during the succeeding months of the trial.
In assessing the strength of the public interest in unrestricted reporting of what was said at the trial, it is not, so we suggest, irrelevant that PNMs name first figured there in the context of his successful application for a temporary prohibition against identification and thereafter mostly by reason of evidence indicative of his innocence.
In Von Hannover v Germany (2004) 40 EHRR 1 the European Court of Human Rights held that, in allowing publication in the press of articles, and in particular of photographs, which described and depicted aspects of the daily life of Princess Caroline of Monaco, Germany had breached her rights under article 8 of the convention.
It concluded at para 76: the decisive factor in balancing the protection of private life against freedom of expression should lie in the contribution that the published photos and articles make to a debate of general interest.
It is clear in the instant case that they made no such contribution In the present case the newspapers argue that the debate of general interest surrounds the power of the court to postpone publication of a report of part of its proceedings under section 4(2) of the 1981 Act.
What, then, is suggested to be the contribution to that debate which identification of PNM would make? By email dated 8 October 2013, Times Newspapers Ltd offered its answer: We wish to identify your Client in our reporting since this would make the piece considerably more engaging and meaningful for our readers.
We would not quarrel with this.
It accords with the observations made by Lord Rodger in the Guardian case when in para 63 he answered Romeos question about the significance of a name.
But, against the public interest that the proposed piece about section 4(2) would be considerably more engaging and meaningful, this court needed first to recognise the risk to PNM that his identification would generate a widespread belief not only that he was guilty of crimes which understandably attract an extreme degree of public outrage but also that he had so far evaded punishment for them; and then, in consequence, to balance the risk of profound harm to the reputational, social, emotional and even physical aspects of his private and family life, notwithstanding that he is presumed by the law to be innocent and has had no opportunity to address in public the offences of which at one time the police suspected him to be guilty.
At the end of this only interim inquiry, our view is that the scales have descended heavily in favour of PNMs rights under article 8; that he was likely to have established his right to an injunction against identification at full trial; and, with great respect to our colleagues, that they are wrong today to be dismissing his appeal.
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This appeal arises out of the trial of nine men on charges involving organised child sex grooming and child prostitution in the Oxford area as part of Thames Valley Polices Operation Bullfinch.
On 14 May 2013 seven of the men were convicted.
The appellant is a prominent figure in the Oxford area, who was arrested at about the same time as the nine and was released on bail.
The reason for his arrest was that one of the complainants had told the police that she had been abused by a man with the same, very common, first name.
She failed, however, to pick him out at an identity parade.
He was later told by police that he would be released from arrest without charge, but that the case would be kept under review.
That remains the position.
The Times and the Oxford Mail wish to publish information identifying the appellant as someone who had been arrested, bailed, his passport impounded and then de arrested in connection with Operation Bullfinch, or as someone suspected by the police of being involved in sexual offences against children.
Magistrates originally granted an injunction shortly after the appellants arrest, prohibiting the disclosure of any information which might identify the appellant until such time as he was charged with an offence.
At trial the judge made an order which ultimately prohibited the publication of any report which referred to evidence which might identify or tend to identify the appellant until a decision had been made whether or not to charge him.
A significant part of the relevant complainants evidence related to a man who shares the appellants first name.
The appellant was also referred to a number of times in the course of the trial: in a police officers evidence of his attendance at an identity parade; in the evidence of at least one of the defendants; and in the closing speeches of prosecuting and defence counsel.
After the police released the appellant from arrest without charge, the newspapers applied to lift the order on the ground that there were now no pending or imminent proceedings against the appellant which might be prejudiced by publication.
The judge circulated a draft ruling stating that he proposed to lift the order, but never formally did so.
The matter moved to the High Court where the appellant applied for an interim injunction restraining publication, on the basis that it was necessary to protect him against the misuse of private information and the infringement of his right to private and family life protected by article 8 of the European Convention on Human Rights (ECHR).
The judge dismissed the application, and the Court of Appeal dismissed the appellants subsequent appeal.
By a majority of 5 to 2, the Supreme Court dismisses the appeal.
Lord Sumption gives the judgment, with which Lord Neuberger, Lady Hale, Lord Clarke and Lord Reed agree.
Lord Kerr and Lord Wilson write a joint dissenting judgment.
With limited exceptions, the English courts administer judgments in public, at hearings which any member of the public may attend and which the press may report [12].
The limits on permissible reporting of public legal proceedings are set by the law of contempt, defamation and the law protecting ECHR rights [17].
The present appeal turns on the last category.
In Campbell v MGN Ltd, the House of Lords expanded the scope of the equitable action for breach of confidence by absorbing into it the values underlying articles 8 (right to respect for private and family life) and 10 (freedom of expression) of the ECHR.
This effectively recognised a qualified common law right of privacy [21].
The legal basis of the judges analysis was challenged in two respects.
Firstly, it was argued that the decision of the Supreme Court in A v British Broadcasting Corporation marked a new approach to the balancing test between competing rights laid out in In re S (Identification: Restrictions on Publication).
In A the Court had dismissed the BBCs application to lift an order prohibiting identification of a deportee who had been convicted of child sex offences because it would not only have violated his article 2 and 3 ECHR rights, but would have also subverted the basis of the decision to authorise his deportation.
That argument fails in the present case because while A turned on very particular facts, the general approach adopted in Lord Reeds leading judgment was in fact very similar to that of Lord Rodger in In re Guardian News and Media Ltd [28, 33].
The second argument was that in adopting Lord Rodgers observations in In re Guardian News and Media Ltd about the publics ability to distinguish between suspicion and guilt, the judge had applied a legal presumption which was not warranted.
This also fails: Lord Rodger was not presenting this as a legal presumption to be applied irrespective of the circumstances.
This part of the judges reasoning was doing no more than saying that while some members of the public would equate suspicion with guilt, most would not [33].
The judge committed no error of law, and was entitled to reach the conclusion that he did [34].
The appellant seeks to prohibit the reporting of matters discussed at public trial.
These are not matters about which he can have had any reasonable expectation of privacy [34(1)].
The impact on the appellants family life is indirect and incidental: neither he nor his family participated in any capacity at trial, and nothing that was said at trial related to his family.
It would be incoherent for the law to refuse an injunction to prevent damage to the appellants reputation directly, while granting it to prevent the collateral impact on his family life in the same circumstances [34(3)].
Lord Sumption would not, however, rule out the possibility of a pre emptive injunction in a case where the information was private or there was no sufficiently substantial public interest in publication.
Such cases will be rare in relation to the reporting of public court proceedings [34(4)].
The public interest in allowing the press reporting of court proceedings extends to the appellants identity.
The policy which permits media reporting on judicial proceedings depends on (i) the right of the public to be informed about a significant public act of the state, and (ii) the laws recognition that the way in which the story is presented is a matter of editorial judgment.
The appellants identity is not an irrelevant feature of this particular story [34(5)].
In their dissenting judgment, Lord Kerr and Lord Wilson consider that the judge had erred in his approach to balancing the strength of the rival considerations [39].
They take the view that Lord Rodger was stating a legal presumption that courts should act on the basis that most people believe that someone charged with an offence is innocent until proven guilty [44 5], but that he had offered no evidence or authority to support such a presumption.
Lord Kerr and Lord Wilson conclude that there was no basis for the presumption and, accordingly, the judge erred in dismissing the appellants application because of it.
Their Lordships also indicate that, under article 8, it is likely that the appellant would have established his right to an injunction at full trial [59].
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This appeal raises a short issue as to the requirements for valid service of a completion notice so as to bring a newly completed building within liability for non domestic rates.
The statutory framework
Liability for non domestic rates depends on a property being entered as a hereditament in the rating list.
The completion notice procedure, under section 46A of and Schedule 4A to the Local Government Finance Act 1988, as inserted, (the Act) provides a mechanism whereby a new building, which has not yet been occupied, may be brought into the rating list.
Subject to any appeal, a validly served completion notice has the effect that the building to which it relates is deemed to have been completed on the date specified in the notice.
It is then shown in the rating list as a separate hereditament (or hereditaments), and is valued as if it were complete (section 46A(2)).
Once the building is so shown in the rating list, its owner (or its occupier if it becomes occupied) becomes liable to an assessment for non domestic rates.
The procedure is set out in Schedule 4A. Paragraph 1(1) of Schedule 4A provides that, if it comes to the notice of a billing authority that the work remaining to be done on a new building in its area can reasonably be expected to be completed within three months, it shall (unless the valuation officer directs otherwise) serve on the owner of the building a notice, known as a completion notice.
Paragraph 1(2) contains a similar provision in respect of a new building that has been completed.
The completion notice must (a) specify the building to which it relates and (b) state the day which the billing authority proposes as the completion day (para 2(1)).
In the case of a building which has yet to be completed, the completion day proposed should be: [s]uch day, not later than three months from and including the day on which the notice is served, as the authority considers is a day by which the building can reasonably be expected to be completed. (para 2(2)) In the case of a building which appears to have been completed, it should be the day on which the notice is served (para 2(3)).
A person on whom the completion notice is served may appeal to the Valuation Tribunal on the ground that the relevant building has not been or cannot reasonably be expected to be completed by the day stated in the notice (para 4(1)).
Where an appeal is not withdrawn or dismissed, the completion day shall be such day as the tribunal shall determine (para 4(2)).
An appeal must be brought within 28 days after the date on which the appellant received the completion notice (Non Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 (SI 2009/2268) regulation 19(1), made under paragraph 8(2)(a) of Schedule 11 to the Act).
Paragraph 8, which deals with service, provides: Without prejudice to any other mode of service, a completion notice may be served on a person (a) by sending it in a prepaid registered letter, or by the recorded delivery service, addressed to that person at his usual or last known place of abode or, in a case where an address for service has been given by that person, at that address; in the case of an incorporated company or body, (b) by delivering it to the secretary or clerk of the company or body at their registered or principal office or sending it in a prepaid registered letter or by the recorded delivery service addressed to the secretary or clerk of the company or body at that office; or (c) where the name or address of that person cannot be ascertained after reasonable inquiry, by addressing it to him by the description of owner of the building (describing it) to which the notice relates and by affixing it to some conspicuous part of the building.
General provision for the service of statutory notices by local authorities is also made by section 233 of the Local Government Act 1972.
In particular it provides: (7) If the name or address of any owner, lessee or occupier of land to or on whom any document mentioned in subsection (1) above is to be given or served cannot after reasonable inquiry be ascertained, the document may be given or served either by leaving it in the hands of a person who is or appears to be resident or employed on the land or by leaving it conspicuously affixed to some building or object on the land.
As to the date of service, under such statutory provisions, section 7 of the Interpretation Act 1978 provides: Where an Act authorises or requires any document to be served by post (whether the expression serve or the expression give or send or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.
Factual background
In January 2009 the respondent (UKI) began the redevelopment of a building at 1 Kingsway to provide 130,000 sq ft of office space.
In February 2012 the appellant council informed UKIs agents that it intended to serve a completion notice specifying a completion date of 1 June 2012.
It asked the agents to confirm the identity of the owner of the building, but the agents declined to do so without obtaining instructions from their client which were not forthcoming.
At that time the building was managed by Eco FM (Eco) under a contract with UKI, but Eco had no authority to accept service of documents on its behalf.
On 5 March 2012, the council delivered a completion notice by hand to the building, specifying 1 June 2012 as the completion date.
The notice was addressed to the Owner, 1 Kingsway, London WC2B 6AN.
It was given to a receptionist employed by Eco, who scanned and emailed a copy of the notice to UKI.
It was received by UKI not later than 12 March 2012.
On 29 March 2012 an appeal was lodged by UKIs agents against the completion notice, purportedly on behalf of Eco, on the grounds (inter alia) that the service of the notice was invalid.
On 7 May 2013, the premises were brought into the list with a rateable value of 2,750,000 with effect (as subsequently corrected) from 1 June 2012.
This was met by a proposal on behalf of UKI that the entry be deleted.
The proposal was not accepted by the valuation officer and was transmitted to the Valuation Tribunal for determination on appeal.
The appeals against both the completion notice and the inclusion of the premises in the list were consolidated and heard by the Valuation Tribunal (President Graham Zellick QC), which allowed the appeal.
That decision was reversed by the Upper Tribunal (Deputy President Martin Rodger QC) [2015] RA 433 but re instated by the Court of Appeal (Gloster, Macur, and King LJJ) [2017] PTSR 1606.
The Court of Appeal (para 37) recorded as common ground: i) that the state of the premises at the relevant time was such that, but for the deeming effect of a completion notice, the premises could not have been entered in the rating list; ii) that the name and address of UKI as owner of the building could have been ascertained by the council by reasonable inquiry, notwithstanding the fact that UKI had instructed the agents not to divulge its name.
Accordingly, the council could not rely on the means of service on the premises permitted by paragraph 8(c) of Schedule 4A to the Act, or section 233(7) of the Local Government Act 1972.
The issue for this court, as identified in the agreed statement of facts and issues, is whether the completion notice was validly served on the date that it was received by UKI, in circumstances where: i) it was not delivered directly to UKI by the council, but passed through the hands of the receptionist employed by Eco, who was not authorised for that purpose by either party; ii) it was received by UKI in electronic rather than paper form.
Service the authorities
It is common ground that, by virtue of the opening words of paragraph 8 of Schedule 4A to the Act, the three specific methods there set out do not exclude other methods of service available under the general law.
There is no serious dispute as to what that entails.
In Sun Alliance and London Assurance Co Ltd v Hayman [1975] 1 WLR 177, 185 CA (a case under the Landlord and Tenant Act 1954), Lord Salmon said: According to the ordinary and natural use of English words, giving a notice means causing a notice to be received.
Therefore, any requirement in a statute or a contract for the giving of a notice can be complied with only by causing the notice to be actually received unless the context or some statutory or contractual provision otherwise provides (No distinction is drawn in the cases between serving and giving a notice: see Kinch v Bullard [1999] 1 WLR 423, 426G.) To similar effect in Tadema Holdings Ltd v Ferguson (1999) 32 HLR 866, 873, Peter Gibson LJ said (in a case relating to service of a notice under the Housing Act 1988): Serve is an ordinary English word connoting the delivery of a document to a particular person.
Specific statutory provisions such as paragraph 8 are designed, not to exclude other methods, but rather to protect the server from the risk of non delivery.
As was said by Slade LJ in Galinski v McHugh (1988) 57 P & CR 359 (in relation to a similar service provision in the Landlord and Tenant Act 1927 section 23(1)): This is a subsection appearing in an Act which contains a number of provisions requiring the giving of notice by one person to another and correspondingly entitling that other person to receive it.
In our judgment, the object of its inclusion . is not to protect the person upon whom the right to receive the notice is conferred by other statutory provisions.
On the contrary, section 23(1) is intended to assist the person who is obliged to serve the notice, by offering him choices of mode of service which will be deemed to be valid service, even if in the event the intended recipient does not in fact receive it. (p 365, original emphasis)
Indirect service
More controversial, and relevant in the present case, is whether it matters that the notice reaches the intended recipient, not directly or through an agent authorised for that purpose, but by the action of a third party.
On this point we were referred to an observation (obiter) of Sir Robert Megarry V C in Townsends Carriers Ltd v Pfizer Ltd (1977) 33 P & CR 361.
That concerned a break option in a lease exercisable by either party upon the giving of written notice to the other.
The premises were used by U Ltd, an associated company of the defendant, and correspondence relating to rent demands and other matters had been between that company and WT Ltd, an associated company of the claimant.
It was held that a notice given by U Ltd to WT Ltd was valid, on the basis of an assumed general agency arising from past conduct, even though neither company was expressly authorised for that purpose.
The Vice Chancellor also noted but rejected an argument that the relevant clause required the tenant to give notice to the landlord, and that, although the landlord had ultimately received the notice, no notice had ever been given to the landlord as such.
He said: I do not think that a requirement to give notice is one that excludes the indirect giving of notice.
The question is whether the notice has been given, not whether it has been given directly.
If the notice emanates from the giver and reaches the ultimate recipient, I do not think that it matters if it has passed through more hands than one in transit. (p 366)
Electronic communication
The other main issue in this appeal is whether it matters that the notice was received by UKI in electronic form.
We were referred to no direct authority on service of a scanned copy of a notice by email.
However, Mr Kokelaar for the council relied on two earlier authorities in which delivery of notices by fax was accepted as valid.
In Hastie & Jenkerson v McMahon [1990] 1 WLR 1575 the Court of Appeal accepted that service of a list of documents by fax was valid service for the purposes of a consent order in civil proceedings under the Rules of the Supreme Court.
In the leading judgment, Woolf LJ said: . are there any legal reasons why advantage should not be taken of the progress in technology which fax represents to enable documents to be served by fax, assuming that this is not contrary to any of the Rules of the Supreme Court? The purpose of serving a document is to ensure that its contents are available to the recipient and whether the document is served in the conventional way or by fax the result is exactly the same. [Counsel] on behalf of the defendant submits that what is transmitted by fax is not the document but an electronic message.
However, this submission fails to distinguish between the method of transmission and the result of the transmission by fax.
What is produced by the transmission of the message by fax, admittedly using the recipients machine and paper, is the document which the other party intended should be served.
What is required is that a legible copy of the document should be in the possession of the party to be served.
This fax achieves.
I therefore conclude that service by fax can be good service subject to any requirement of the order requiring service of a particular document and any requirement of the Rules of the Supreme Court. (pp 1579 1580).
I emphasise that if a document is served by a means for which neither the rule nor statute provides, there will only be good service if it be proved that the document, in a complete and legible state, has indeed been received by the intended recipient.
I realise that transmission of documents by fax is a relatively recent development.
If, in a particular case, what emerges from the recipients fax machine is not, or may not be, complete or is not wholly legible, a court will be justified in concluding that the document has not been properly served. (p 1585) Agreeing, Glidewell LJ added: The third member of the court Lloyd LJ, while not dissenting, expressed some misgivings.
He would have preferred to wait for consideration of the question by the Supreme Court Procedure Committee.
As he said, while it is easy enough for courts to give a benevolent construction to the rules to take account of some new contrivance, such as the telex machine or the fax, it is not so easy to see what the repercussions will be, and what other consequential amendments to the rules may be required (p 1586).
The other authority to which we were referred on this point was PNC Telecom plc v Thomas [2003] BCC 202.
Sir Andrew Morritt V C held that a letter sent by fax constituted a validly deposited notice to convene an extraordinary general meeting under section 368 of the Companies Act 1985.
The Vice Chancellor noted that by that time the Electronic Communications Act 2000 (2000 Act) enabled specific modifications to be made to authorise communication by electronic means under existing statutes, including the Companies Act.
Some such modifications had been made, but not in respect of section 368.
Counsel before him had been unable to indicate the basis on which some of these provisions had been singled out for amendment but others not (para 14).
In any event, he did not think that the 2000 Act could be regarded as designed to introduce fax as a permitted means of communication for that had been done on a case by case basis over the preceding 30 years or so (para 16).
Among other authorities he referred to the words of Woolf LJ set out above.
He also noted with agreement observations of Laddie J in Inland Revenue Comrs v Conbeer [1996] BCC 189, on the potential advantages of delivery by fax in terms of reliability and speed.
He saw no reason why fax transmission should not give rise to a valid deposit under section 368, in circumstances where no one had been misled or disadvantaged, and the ultimate result is exactly the same as if it had been transmitted in person or by post (para 22).
The principal dispute on this part of the case is whether these authorities can be relied on as extending to a copy sent by email, having regard in particular to the provisions made in that respect by the 2000 Act.
Section 8 empowers Ministers to make regulations to modify primary and secondary legislation for the purpose of authorising or facilitating the use of electronic communications.
Electronic communication is widely defined as including any form of communication transmitted while in an electronic form (section 15(1)).
In respect of non domestic rates (and council tax) specific regulations have been made for the use of electronic billing in certain circumstances, and subject to particular restrictions: see the Council Tax and Non Domestic Rating (Electronic Communications) (England) Order 2003 (SI 2003/2604).
Thus for example provision is made for the service of certain forms of notice to be given to a person by sending the notice by electronic communication to such address as may be notified by that person for that purpose (see article 4).
No such modification has been made in respect of completion notices.
The judgments below
In the Valuation Tribunal (at para 38), the President thought that, even accepting the formulation by Peter Gibson LJ in the Tadema Holdings case (para 15 above), there had been no delivery of the actual notice to the owner.
In his view intended recipients were entitled to receive the original of any formal notice, in the absence of an expression of willingness to accept electronic service.
The Upper Tribunal took a different view.
The Deputy President found it difficult to accept that: in a case where the vital information has successfully been imparted to the person who needs to receive it, and that person has acted on it by exercising the right of appeal, the need for discipline and regularity in the exercise of the statutory power should be sufficiently powerful considerations to require that the recipients liability be determined on the basis that the information had never been received. (para 46) Unlike the President he did not see that this approach offended any public interest consideration.
Referring to the dicta in the Townsends Carriers case, he said: If the mode of service selected by the billing authority achieves its objective I find it very difficult to see why the public interest or the interests of justice to which the President referred should render service legally effective in some cases but ineffective in others.
In my judgment a document which arrives in the hands of the intended recipient by an unorthodox route has still been served (para 47) In sending on the notice to UKI, the receptionist had been doing no more than one would expect of a responsible employee of a company engaged to manage the building (para 48).
He dealt more shortly with the issue of electronic communication, saying simply that, there being no dispute that the electronic copy had been received, he could see no justification for distinguishing between notices in different forms (para 49).
The Court of Appeals conclusion turned principally on what they understood to be the natural or normal usage of the statutory language.
As Gloster LJ said; The relevant statutory requirements of section 46A of and paragraph 1 of Schedule 4A to the 1988 Act for present purposes are: (a) that the billing authority (b) shall serve the required completion notice (c) on the owner of the building.
For the billing authority merely to leave the notice with a third party, not authorised to accept service of the notice on the owners behalf, or, indeed, to effect service on the authoritys behalf, in the hope, or with the intention, that the notice will somehow be brought to the attention of the owner, and where a copy of the notice or its contents are in fact subsequently communicated to the owner by the third party, does not, on any natural or normal usage of the words serve and on, constitute service on the owner by the authority.
In other words, the concept of service on the owner by the authority in paragraph 1 of Schedule 4A to the 1988 Act cannot be construed as including effectively all methods of communication or transmission, which ultimately result in the information in the notice (or the notice itself) being brought to the attention of, or delivered to, the owner, in circumstances where the information in the document, or the document itself, has been communicated to the owner by a third party who is not authorised either to accept, or effect, service . (para 44)
She also attached weight to the statutory context: it is a taxing statute which imposes rating liability on a property owner on an assumed basis.
The timetable for a taxpayer to raise an appeal against the completion notice is strict and is based upon the date upon which it received the completion notice.
In those circumstances there are obvious policy considerations which point to a need for certainty and precision as to the date of service (para 49)
On the question of indirect service she did not think that the observations of Sir Robert Megarry V C could be treated as of general application: It is clear from subsequent cases that Megarry V Cs dictum has not been generally applied to justify an expansion of the concept of service to embrace all situations where ultimately the person on whom the relevant notice or document ought to be served has come to know of the contents of the notice, irrespective of whether he or his authorised agent have actually been served.
Thus, for example, in Fagan v Knowsley Metropolitan Borough Council (1985) 50 P & CR 363 this court rejected the application of the dictum in circumstances where what was relevant was the mandatory statutory code for service under section 30 of the Compulsory Purchase Act 1965.
The fact that the service provisions were mandatory in that case does not detract from UKIs submission that what has to be considered in each case is what are the necessary requirements for service under the relevant statutory scheme.
Likewise, a number of cases have emphasised the well established principle that service on a solicitor who does not have authority to accept service of the particular notice on behalf of his client is not valid service on that party.
Glen International Ltd v Triplerose Ltd [2007] L & TR 28; [2007] EWCA Civ 388 makes clear that the Townsends case can be distinguished as being a decision on the particular facts (see para 22) rather than laying down any generally applicable principle.
In the Glen International Ltd, the Court of Appeal did not go on to consider whether the solicitors had passed a copy of the notice to their client.
But it is implicit in that judgment that onward transmission would not have rendered ineffective service effective. (paras 51 52) On the issue of electronic communication, while inclining to a different view from that of the Upper Tribunal, she preferred to leave the matter undetermined in the absence of more detailed submissions on the statutory regime (para 54).
The submissions in this court
For the council, Mr Kokelaar adopts the reasoning of the Upper Tribunal, as supported by the authorities to which I have referred.
In summary, he submits, the words serve and service in Schedule 4A should be given their ordinary meaning, that is delivery of a document to a particular person.
Under general principles, a notice (under statute or contract) is regarded as having been served if it has been received by the intended recipient.
In this case the notice was received by UKI and served its statutory purpose of communicating to UKI the completion date proposed by the council, and it was acted upon by UKI.
As in Townsends Carriers the fact that it passed through the hands of the receptionist did not invalidate service.
Alternatively, the receptionist must be taken as having been impliedly authorised to pass it on to UKI.
In relation to service by email, the reasoning of the authorities on service by fax is indistinguishable.
There is nothing in Schedule 4A, or in the 2000 Act, to exclude service of a completion notice by electronic means, where the ultimate result is exactly the same as if a hard copy had been transmitted in person or by post.
For UKI Mr Kolinsky QC supports the reasoning of Gloster LJ in the Court of Appeal.
In particular he adopts her three stage analysis of the relevant provision, arguing that the council failed at the first stage, that is the requirement for service on the owner by the billing authority.
Whatever method is adopted, it must be the authority itself (acting through its officers) which effects the service.
Service through a third party, which is neither the owners agent nor duly authorised to act on the authoritys behalf, is not service on the owner by the authority.
Further, Mr Kolinsky submits that the involvement of the Eco receptionist broke the necessary chain of causation.
Mr Kokelaars suggestion that the receptionist had implied authority to act for the council was misplaced, having regard to the detailed statutory scheme governing delegation of local authority functions.
It would have been different if for example the council had used a process server under its contractual control to carry out personal service.
Use of such a method might be authorised as incidental to the authoritys functions under section 111(1) of the Local Government Act 1972, without involving any unlawful delegation.
He relies on statements by the Court of Appeal as to the permissible use of contractors or agents under that section, in Crdit Suisse v Allerdale Borough Council [1997] QB 306, 359G per Hobhouse LJ.
Mr Kolinsky also repeats Gloster LJs emphasis on the need for certainty in a taxing statute.
In that context he relies on paragraph 2(3) of Schedule 4A to the Act where (in relation to a completed building) the authority is required to specify the date of service as the date from which liability is to begin.
There can be no such certainty if the council has no control over the process by which the notice reaches the recipient.
On the issue of electronic communication, he points to the fact that ministerial intervention was considered necessary to authorise the use of such communication in some aspects of the non domestic rating scheme, while no such intervention was made in respect of completion notices.
This carefully drawn scheme would be otiose if there existed some common law rule permitting the use of electronic service as a generality.
Further the limitation of electronic service to cases where the ratepayer had assented by providing an address for electronic service would make no sense if the authority were able to serve without the ratepayers consent.
Discussion
The method of attempted service adopted by the council was far from ideal.
As already noted, the purpose of specific provisions such as paragraph 8 is to provide reliable methods of service and to minimise the risk to the council of non delivery.
Given that, as is now accepted, the name and address of the owner could have been discovered by reasonable inquiry, it is not clear why this was not done.
We have had no satisfactory explanation for this failure, nor indeed for the failure to take corrective action when the objection to service was raised.
Nothing in this judgment should be taken as detracting from the good sense of the Presidents observation (Valuation Tribunal, para 43): In practice, billing authorities would be well advised to secure the protection afforded by paragraph 8 and not serve outside those provisions unless confident that the circumstances are such that good service will be effected.
However, the two legal issues on which the judges below disagreed are of some general importance and merit consideration by this court.
Hence the grant of permission to appeal.
Indirect service
The difference between the Upper Tribunal and the Court of Appeal comes down to a narrow point.
The Upper Tribunal thought that, since the notice issued by the council reached the hands of the intended recipient, it mattered not that the route was unorthodox.
Gloster LJ thought that this approach failed to give effect to the concept of service on the owner by the authority (emphasis added).
For my part I would accept that the means by which the notice arrives at its destination is not wholly immaterial.
In itself the reference to the billing authority is simply to identify the body responsible for service; it says nothing about how that is to be done.
The real issue, as I see it, adopting the words of Lord Salmon in the Sun Alliance case, is whether the authority caused the notice to be received by UKI.
In other words there must be a sufficient causal connection between the authoritys actions and the receipt of the notice by the recipient.
Mr Kolinsky appeared implicitly to accept that analysis, but he submitted that the chain of causation was broken by the interposition of a third party in the form of the Eco receptionist.
He challenged Mr Kokelaars suggestion that the receptionist was given implied authority to serve the notice, at least in any formal sense.
To that extent I would agree with him; but it is unnecessary and unrealistic in my view to introduce concepts of agency or statutory delegation into this simple sequence of events.
As the Deputy President accepted, the Eco receptionist, on receiving from the council officer a hand delivered notice addressed to the Owner, did no more than would reasonably be expected of a responsible employee in that position: that is, pass on the notice to the person to whom it was addressed.
It was the natural consequence of the councils actions.
Mr Kolinsky objected that the receptionist was not under the control of the council, as would have been for example a process server acting under contract.
However, causation does not necessarily depend on control.
Mr Kokelaar countered with the example of a notice correctly addressed, but mistakenly delivered to a neighbouring address and then passed on by the occupant to the intended recipient.
Like him I see no reason why that should not be treated as effective service under ordinary principles of causation, even though the friendly neighbour was not under the control of either party.
This approach to indirect service is consistent with that of Sir Robert Megarry V C in the Townsends Carriers case.
I would agree with Gloster LJ (see para 29 above) that his words cannot be read as intended to embrace all situations where ultimately the intended recipient has come to know of the contents of the notice.
There needs to be actual receipt of the notice, and a sufficient causal link with the actions of the council.
Of the cases to which she referred, Fagan v Knowsley Metropolitan Borough Council provides no assistance, because, as she acknowledged, it was concerned with a mandatory statutory code.
More pertinent perhaps is her reference to cases relating to service of notice on solicitors.
As she says, service of a notice on a solicitor who does not have his clients authority to accept service of the particular notice is not in itself valid service.
She cited Glen International which concerned service of a notice by the landlord in relation to leasehold enfranchisement.
It is true that, having found that the tenants solicitor on whom the notice was served had no authority to accept it, the court did not go on to inquire whether the notice was in fact passed on to the tenant.
It is also true, as Gloster LJ noted, that Townsends Carriers case was referred to as a decision on the particular facts, but that seems to have been on the agency issue.
There is no indication that the case was used to support an argument based on indirect service; nor indeed that there was any evidence that the solicitor had passed on the actual notice, nor any reasonable expectation that he would do so.
That situation is readily distinguishable in my view from the purely mechanical role played by the receptionist in this case.
A further argument against the Upper Tribunals approach was the potential uncertainty it leaves as to the date of service.
As Mr Kolinsky points out, it may be important not only for both parties, but also for the valuation officer, to be able to identify the date of service with precision.
Thus, in respect of a building which appears to have been completed, the date of service must be identified in the notice (paragraph 2(3)), and, subject to appeal, is treated as the completion day so triggering liability to rates.
In respect of a building yet to be completed the proposed completion day must be not later than three months from and including the date of service (Schedule 4A, paragraph 2(2)).
The difficulty with this argument, in my view, is that some uncertainty in this respect is inherent in the legislation, in which neither the methods of service, nor the dates of service in different circumstances, are exhaustively defined.
The simple answer for the authority may be that, where the date of service is critical, it is able to choose a statutory method which eliminates or minimises the risk of the notice being rendered invalid by failure to specify the correct date of service.
If it chooses a non statutory method it must bear that risk.
The risk of prejudice to the owner is limited, since outside the statutory grounds service depends on actual receipt by the intended recipient, and the time for appeal is also related to receipt.
Electronic communication
In spite of the misgivings expressed by Lloyd LJ in the Hastie case, it does not appear that the reasoning of the majority has been questioned in any subsequent cases, before or since the enactment of the 2000 Act.
Notably it was applied in the PNC Telecom case notwithstanding the recognition that modifications had been made under the 2000 Act to other parts of the Companies Act 1985.
Although those cases were concerned specifically with fax transmission of a copy of the relevant notice, no good reason has been suggested for distinguishing that from transmission by email as in this case.
Given that this was the state of the general law immediately preceding the enactment of the 2000 Act, Parliament must be taken to have legislated against that background.
Mr Kolinsky would need to point to some provision of that Act which expressly or impliedly restricts the previous law, or overall inconsistency sufficient to overcome the general presumption that Parliament does not intend to change the common law (see Bennion on Statutory Interpretation sections 25.6, 25.8).
In my view he was unable to do so.
Nor did he refer to any authority to support such a submission.
It is not enough that the new law may overlap in certain respects with the general law.
The purpose of the 2000 Act, as stated in its long title, was to make provision to facilitate the use of electronic communications .
There is nothing to indicate an intention to cut down the existing law.
Against the background of the detailed scheme established by or under the 2000 Act, it may seem anomalous that the same result may be achieved in some cases by more informal means.
However, the purpose of the Act and Orders made under it is to provide a clear and certain basis for the routine use of such methods by authorities.
That purpose is not undermined by a conclusion that under general principles, and on the particular facts of this case, the notice was successfully served.
Conclusion
For these reasons, in respectful disagreement with the Court of Appeal, I would allow the appeal and restore the order of the Upper Tribunal.
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Liability for non domestic rates depends on a property being entered as a hereditament in the rating list.
Section 46A of and Schedule 4A to the Local Government Finance Act 1988 (the 1988 Act) create a completion notice procedure, by which a new building that has not yet been occupied may be brought into the rating list.
Where a completion notice has been validly served the building to which it relates is deemed to have been completed on the date specified in the notice.
It is then shown in the rating list as a separate hereditament, valued as if it were complete, and its owner or occupier becomes liable to an assessment for non domestic rates.
In January 2009, the respondent (UKI) began the redevelopment of a building at 1 Kingsway.
In February 2012, the appellant council informed UKIs agents that it intended to serve a completion notice specifying a completion date of 1 June 2012.
The building was being managed by Eco FM (Eco), under a contract with UKI, but Eco had no authority to accept service on UKIs behalf.
On 5 March 2012, the council delivered a completion notice by hand to the building, specifying 1 June 2012 as the completion date.
It was addressed to Owner, 1 Kingsway, London WC2B 6AN.
It was given to a receptionist employed by Eco, who scanned and emailed a copy of the notice to UKI, which received it by no later than 12 March 2012.
On 29 March 2012, an appeal was lodged by UKIs agents against the completion notice, on behalf of Eco, on the grounds that the service of the notice was invalid because it was not served on UKI but on the receptionist for Eco.
On 7 May 2013, the premises were brought into the rating list with effect from 1 June 2012.
UKI proposed that the entry be deleted due to invalid service, but this was not accepted by the valuation officer.
The Valuation Tribunal allowed the appeal against the completion notice and the inclusion of the premises in the rating list.
The Upper Tribunal reversed that decision, but it was re instated by the Court of Appeal.
The issue for the Supreme Court is whether the completion notice was validly served on the date it was received by UKI, in circumstances where: (i) it was not delivered directly but passed through the hands of Ecos receptionist, who was not authorised for that purpose by either party; and (ii) it was received in electronic, rather than paper form.
Indirect service
The Supreme Court unanimously allows the appeal and restores the order of the Upper Tribunal.
Lord Carnwath gives the lead judgment.
(i) The means of service prescribed by the statute are not exclusive.
Under ordinary principles the real issue is whether the council caused the notice to be received by UKI [36].
Regarding the interposition of a third party, in the form of the Eco receptionist, it is unnecessary and unrealistic to introduce concepts of agency or statutory delegation.
As the Upper tribunal observed, the Eco receptionist did no more than would reasonably be expected of a responsible employee in that position.
It was the natural consequence of the councils actions [37].
Causation does not depend on control.
For example, if a notice is correctly addressed, but mistakenly delivered to a neighbour who passes it on to the intended recipient, there is no reason why that should not be treated as effective service under ordinary principles of causation, even though that neighbour was not under the control of either party [38].
Arguments about possible uncertainty are not persuasive, since some uncertainty in this respect is inherent in the legislation, in which neither the methods of service nor the dates of service in different circumstances are exhaustively defined.
Where the date of service is critical, a billing authority may choose a statutory method of service that eliminates or minimises the risk of invalidity by failure to specify the correct date of service.
If it chooses a non statutory method, it must bear that risk.
The risk of prejudice to the building owner is limited, as outside the statutory methods service depends on actual receipt by the intended recipient [42 43]. (ii) Electronic communication Before the enactment of the Electronic Communications Act 2000 (the 2000 Act), the state of the law was such that service by fax was valid.
There is no good reason for distinguishing transmission by fax from transmission by email as in this case.
Parliament must be taken to have legislated against that background.
The respondent has not been able to indicate any provision of the 2000 Act that expressly or impliedly restricts the previous law, nor an overall inconsistency sufficient to overcome the general presumption that Parliament does not intend to change the common law [44 45].
The purpose of the 2000 Act and Orders made under it is to provide a clear and certain basis for the routine use of electronic methods by authorities.
That purpose is not undermined by a conclusion that under general principles, and on the particular facts of this case, the notice was successfully served by email.
Therefore, the property was correctly brought into the rating list with effect from 1 June 2012 [46].
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The issue raised on this appeal and cross appeal is whether three products manufactured by the Actavis group of companies (Actavis) would infringe a patent whose proprietor is Eli Lilly & Company (Lilly), namely European Patent (UK) No 1 313 508 (the Patent), and its corresponding designations in France, Italy and Spain.
This judgment was circulated in draft to the parties legal representatives in the normal way on 5 July 2017, on the basis that it would be handed down a week later.
On the following day, just after midday, Actaviss solicitors emailed the Court expressing concern about the potential prejudice which their clients could suffer if they did not know of the outcome of this appeal until 12 July.
Not least because publication of our decision could have an effect on the share prices of Actavis or Lilly or both of them, the Court proposed to the parties respective solicitors that we should announce our decision at once, while maintaining the intention, in accordance with this Courts usual practice, to hand down the judgment a week after circulation of the draft.
This was agreed by both solicitors, and accordingly on 7 July at 11.30 am, the following announcement appeared on the Courts website: The Supreme Court allows Eli Lillys appeal and holds that Actaviss products directly infringe Eli Lillys patent in the United Kingdom, France, Italy and Spain.
The Court dismisses Actaviss cross appeal on the basis that if its products did not directly infringe, they would indirectly infringe to the extent held by the Court of Appeal.
Accordingly, these are technically the reasons for those conclusions.
The factual and technical background
The factual background
Pemetrexed is a chemical which has been known for some time to have therapeutic effects on cancerous tumours.
However, when used for that purpose on its own, pemetrexed can often have seriously damaging, sometimes even fatal, side effects.
Accordingly, its use as an anti cancer drug was effectively precluded in practice.
The essential disclosure of the Patent was that the damaging side effects could largely be avoided if a compound called pemetrexed disodium was administered together with vitamin B12.
This has enabled pemetrexed disodium to be used for treatment in the form of a medicament which includes the vitamin.
Such a medicament has been successfully marketed, under the brand name Alimta, by Lilly since 2004.
The Patent primarily claims the use of pemetrexed disodium in the manufacture of a medicament for use in combination with vitamin B12 (and, optionally, folic acid) for the treatment of cancer.
Pemetrexed itself is a member of a class of chemicals known as antifolates, and its molecular structure is shown below, with C, N, O and H being respectively the chemical symbols for carbon, nitrogen, oxygen and hydrogen; and the unallocated points on the chains and the rings being carbon.
The presence of the two CO2H units results in pemetrexed being an acid (hence it is also known as pemetrexed diacid), or as it is sometimes called, a free acid.
When pemetrexed is dissolved in water, the hydrogens in those two units separate from the rest of the molecule as positively charged entities, protons, and the rest of the molecule becomes a negatively charged entity called an anion.
The structure of pemetrexed disodium is similar except that, instead of the two CO2H units, it has two CO2Na units (Na being the symbol for sodium).
Pemetrexed disodium dissolves in water, where the two sodiums separate from the rest of the molecule as positively charged entities called cations, and the rest of the molecule becomes an anion.
Because it is the pemetrexed anion which is of interest, the sodium cation is often referred to as a counter ion.
A substance such as pemetrexed disodium, where the acidic hydrogens have been replaced, is known chemically as a salt.
Although one might have thought that the actual invention should have been characterised as a disclosure that pemetrexed could be administered safely if it was combined in a medicament with vitamin B12, the claimed invention in the Patent is, as mentioned in para 4 above, the manufacture of such a medicament.
This formulation was required by the then prevailing law contained in article 52(4) of the European Patent Convention 1973 (EPC 1973), which prohibited from patentability any method of treatment of humans or animals.
This led to inventions which otherwise might have been expected to be expressed as being new therapeutic treatments being cast as manufacturing claims.
Such claims are known as Swiss form claims, and they were illuminatingly discussed by Kitchin J in Ranbaxy (UK) Ltd v Astrazeneca AB [2011] FSR 45, paras 42 to 60.
As he explained, the prohibition was substantially modified in article 53 in the European Patent Convention 2000 (EPC 2000), but that modification had not come into force when Lilly applied for the Patent.
Actaviss proposed products involve pemetrexed compounds being used together with vitamin B12 for cancer treatment.
However, rather than pemetrexed disodium, the active ingredient in those products (the Actavis products) is (a) pemetrexed diacid, (b) pemetrexed ditromethamine, or (c) pemetrexed dipotassium.
In other words, rather than including the disodium salt referred to in claim 1 of the Patent, the Actavis products include as the active ingredient (a) pemetrexed itself (ie the free acid), or pemetrexed with the hydrogens on the two CO2H units replaced by (b) tromethamine, or (c) potassium.
Actavis contend that, because they intend to use the Actavis products which do not include pemetrexed disodium, the claims of the Patent, which are expressed as involving the use of pemetrexed disodium, would not be infringed.
By contrast, Lilly contends that there would be either direct or indirect infringement of the Patent if Actavis launch any of the Actavis products on the market in the UK or in France, Italy, or Spain.
The allegation of direct infringement is based simply on the proposition that marketing or use of the Actavis products would infringe the Patent; indirect infringement is said to arise because pemetrexed disodium is claimed to be involved in the preparation of the Actavis products before they are administered.
After a four day trial, Arnold J decided that none of the Actavis products would directly or indirectly infringe the Patent in the UK or in France, Italy or Spain [2015] Bus LR 154; [2015] RPC 6.
The Court of Appeal allowed Lillys appeal to the limited extent of holding that there would be indirect infringement in the four jurisdictions, but they agreed with the Judge that there would be no direct infringement [2015] Bus LR 1068.
Lilly appeals against the rejection of its case that there would be direct infringement, and Actavis cross appeal against the rejection of their case that there would be no indirect infringement.
As Floyd LJ explained in the Court of Appeal, the appeal raises the issue of the correct approach under UK law (and the law of the three other states) to the interpretation of patent claims, and in particular the requirement of EPC 2000 to take account of equivalents, and also the extent to which it is permissible to make use of the prosecution history of a patent when determining its scope.
The issue on the cross appeal is rather more fact specific, namely whether the application of the law of contributory infringement justifies a finding of indirect infringement in this case.
It is appropriate to start by setting out the relevant provisions of the Patent and the knowledge of its assumed addressee, topics on which my account is largely taken from the clear judgment of Floyd LJ in the Court of Appeal.
I will then turn to the issue of direct infringement, which involves considering the proper approach to that issue generally, and also the relevance of the prosecution history.
I will then consider the position in the three other states and finally I will address the issue of indirect infringement.
The specification and claims in the Patent
The Patent is entitled Combination containing an antifolate and methylmalonic acid lowering agent, and it has a claimed priority date of 30 June 2000.
The specification begins at para [0001] by stating that [p]otentially, life threatening toxicity remains a major limitation to the optimal administration of antifolates.
It then explains at para [0002] that antifolates work by inhibiting anti folate requiring enzymes by competing with reduced folates for binding sites on those enzymes.
The specification identifies several antifolate drugs as being in development, including Lillys branded product Alimta.
The specification then explains at para [0003] that a limitation to the development of these drugs is that they may be associated with substantial toxicity, including mortality, for some patients.
These toxicity effects had led to the abandonment of the development of some antifolates.
In para [0004] the specification explains that previous work had been done on the use of folic acid as a treatment for toxicity in this area.
It also records work on vitamin B12 as a predictor of cytotoxic events.
The specification then states in para [0005]: Surprisingly and unexpectedly, we have now discovered that certain toxic effects such as mortality and non hematologic events, such as skin rashes and fatigue, caused by antifolates, as a class, can be significantly reduced by the presence of a methylmalonic acid lowering agent as vitamin B12, without adverse adversely affecting therapeutic efficacy.
The present invention thus generally relates to a use in the manufacture of a medicament for improving the therapeutic utility of antifolate drugs by administering to the host undergoing treatment with a methylmalonic acid lowering agent as vitamin B12.
Para [0006] of the specification continues: Additionally, we have discovered that the combination of a methylmalonic acid lowering agent as vitamin B12 and folic acid synergistically reduces the toxic events associated with the administration of antifolate drugs.
Although, the treatment and prevention of cardiovascular disease with folic acid in combination with vitamin B12 is known, the use of the combination for the treatment of toxicity associated with the administration of antifolate drugs was unknown heretofore.
These early, general statements are made in relation to antifolates as a class.
However, at para [0010] the specification says, in what is known as a consistory clause, that the invention: specifically provides the use of the antifolate pemetrexed disodium in the manufacture of a medicament for use in combination therapy for inhibiting tumour growth in mammals wherein said medicament is to be administered in combination with a methylmalonic acid lowering agent selected from vitamin B12 and pharmaceutical derivatives thereof.
Having referred specifically to pemetrexed disodium, the specification reverts to generality at para [0016], where it states: The current invention concerns the discovery that administration of a methylmalonic acid lowering agent such as vitamin B12 or a pharmaceutical derivative thereof, in combination with an antifolate drug such as pemetrexed disodium reduces the toxicity of the said antifolate drug.
Para [0022] contains a definition: The terms antifolate and antifolate drug generally refer to a chemical compound which inhibits at least one key folate requiring enzyme of the thymidine or purine biosynthetic pathways . by competing with reduced folates for binding sites of these enzymes.
The antifolate or antifolate drug for use in this invention is Pemetrexed Disodium (ALIMTA), as manufactured by Eli Lilly & Co.
The invention is then illustrated by reference to a number of examples relating to animal and human tests, in which the only antifolate used is pemetrexed disodium.
At para [0035] the specification states that animals were treated with pemetrexed disodium (ALIMTA) (100 mg/kg or 150 mg/kg) once daily by intraperitoneal injection alone or along with folic acid.
The specification also indicates at para [0044] that, in a typical clinical evaluation using cancer patients, the antifolate is to be administered in four doses over a two week period by rapid intravenous injection.
Turning to the claims, it is only necessary for present purposes to refer to claims 1 and 12, which are in these terms: 1.
Use of pemetrexed disodium in the manufacture of a medicament for use in combination therapy for inhibiting tumour growth in mammals wherein said medicament is to be administered in combination with vitamin B12 or a pharmaceutical derivative thereof [which it then specifies]. 12.
A product containing pemetrexed disodium, vitamin B12 or a pharmaceutical derivative thereof said pharmaceutical derivative [which it again specifies], and, optionally, a folic binding protein binding agent selected from [a specified group of chemicals including folic acid], as a combined preparation for the simultaneous, separate or sequential use in inhibiting tumour growth.
The notional addressee of the Patent
A patent is interpreted on the basis that it is addressed to a person or group of persons who is or are likely to have a practical interest in the claimed invention, ie through the eyes of a person or persons skilled in the article There is now no challenge to the Judges conclusion that the notional addressee of the Patent would be a group consisting of an oncologist and a chemist, a conclusion upheld by the Court of Appeal.
The Judge found that the common general knowledge of an oncologist as at the relevant time, 2001/2002, included the following: i) Antifolates were used in cancer chemotherapy, but their use caused toxic side effects which it would be desirable to avoid or reduce. ii) Pemetrexed was the subject of clinical trials for use in chemotherapy, and it targeted multiple enzymes and was administered intravenously. iii) The only form of pemetrexed which had been shown to be effective and safe to any extent was pemetrexed disodium, which was manufactured by Lilly under the trade mark Alimta. iv) The characteristics of both vitamin B12 and folic acid were well understood, and it was well known that there were many different safe and effective forms of both available.
The Judge also concluded that oncologists did not think about drugs such as pemetrexed in their ionic form, nor did they consider issues regarding the choice of counter ion or the effect, if any, of counter ions on the efficacy, safety or other properties of the drug.
This was the province of the chemist and, because the properties of different salt forms and free acids were difficult to predict, a chemist would need to address any such issue by conducting experiments.
The Judge made the following findings as to the common general knowledge of a chemist as at 2001/2002: i) Where a drug is or is based on an acid, different salts of the parent acid can be formed by reacting it with a complementary base or acid.
The salt will often have different properties from the parent acid, and different salts will often have different properties from each other.
So, salt screening is a routine but important exercise in determining the most suitable form of a drug. ii) The facts set out in paras 5 and 6 above. iii) Solid salts consist of the anions and cations regularly arranged in a fixed lattice structure.
Because the cations and anions are present in fixed proportions and in fixed relative positions it is possible to speak meaningfully of the salt as being present in solid form. iv) When a salt is dissolved in water, the ions dissociate, forming free cations and anions in solution.
Although the salt ceases to exist, it is common to refer to a salt solution or a salt in solution. v) The salt form can have a significant impact on the effectiveness of a drug in that it can modify many aspects of the drug. vi) When considering a drug for intravenous chemotherapy, the solubility of the salt form is crucial, as good solubility is an indicator of how likely it is that the drug will be absorbed in the gut. vii) But if a salt is too soluble, it cannot be made in solid form. viii) In general, there can be many dead ends and false leads when attempting to prepare salts of a parent molecule for the first time. ix) One cannot predict (a) whether one could make a particular salt form of a parent molecule, (b) what its properties would be once it was made or (c) whether it would affect the efficacy of the drug.
The Judge made specific findings about a chemists state of knowledge about three types of salts and about free acids: i) Sodium was generally the preferred counter ion, and so would be first choice.
Sodium salts generally were not toxic, and would be expected to be reasonably soluble, but they were not always easy to make. ii) Potassium salts were also generally soluble, but there were exceptions.
There were concerns about the potential toxicity of such salts, which was particularly significant if large quantities of the drug were involved. iii) There were only a small handful of examples of tromethamine salts being used in 2001.
It was known that tromethamine salts might well be too soluble, so one would not be able to make and harvest the solid form.
In principle, the acidic parent molecule could be administered in the iv) form of the free acid.
But it was often necessary to change from the free acid to a salt form for various reasons including solubility.
Direct infringement
In a nutshell, the rival contentions are these.
Lilly argues that the Actavis products infringe the Patent because they are medicaments to be used as a treatment for cancer consisting of pemetrexed diacid, or a pemetrexed salt, with vitamin B12, which represents the essence of the teaching and claim of the Patent.
By contrast, Actavis argues that their products do not infringe because the claims of the Patent are limited to a specific pemetrexed salt, namely pemetrexed disodium, and the Actavis products contain either pemetrexed diacid or different pemetrexed salts.
The legislative context
The domestic provision governing direct patent infringement is section 60(1) of the Patents Act 1977.
However, section 130(7) declares that certain provisions of that Act, including section 60, are so framed as to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of the European Patent Convention have in the territories to which [that Convention applies].
Accordingly, it is common ground that it is appropriate to consider the present case by reference to the EPC 2000.
Article 69(1) EPC 2000 provides that [t]he extent of the protection conferred by a European patent shall be determined by the claims, although it is followed by another sentence, namely [n]evertheless, the description and drawings shall be used to interpret the claims.
As a matter of ordinary language, it is quite clear that the only type of pemetrexed compound to which the Patents claims expressly extend is pemetrexed disodium.
One only needs to read claim 1 and claim 12 to justify that: as a matter of ordinary language, pemetrexed disodium means that particular salt, and no other salt, let alone the free acid.
If the first few words of each claim were not enough to make this good, the contrast between the specific reference to pemetrexed disodium and the wider reference to vitamin B12 or a pharmaceutical derivative thereof underlines the point.
As Floyd LJ said, this conclusion is also supported by what is said in the specification eg in paras [0010] and [0022] quoted above.
It is fair to say that para [0016] could be said to point the other way, but it is far too weak a basis for even arguing that the Patents claims extend, as a matter of language, to pemetrexed compounds other than pemetrexed sodium.
In these circumstances, The Protocol on the Interpretation of article 69 as amended in 2000 (the Protocol) is crucial to Lillys contention that the scope of protection afforded by the Patent extends to the Actavis products.
The Protocol provides: Article 1 General principles Article 69 should not be interpreted as meaning that the extent of the protection conferred by a European patent is to be understood as that defined by the strict, literal meaning of the wording used in the claims, the description and drawings being employed only for the purpose of resolving an ambiguity found in the claims.
Nor should it be taken to mean that the claims serve only as a guideline and that the actual protection conferred may extend to what, from a consideration of the description and drawings by a person skilled in the art, the patent proprietor has contemplated.
On the contrary, it is to be interpreted as defining a position between these extremes which combines a fair protection for the patent proprietor with a reasonable degree of legal certainty for third parties.
Article 2 Equivalents For the purpose of determining the extent of protection conferred by a European patent, due account shall be taken of any element which is equivalent to an element specified in the claims.
The original Protocol was agreed in 1973; the amendments made in 2000 effected very slight modifications to what is now article 1, and introduced article 2 for the first time.
The drafting of the Protocol bears all the hallmarks of the product of a compromise agreement.
This is unsurprising.
There is an inevitable conflict between the desirability of giving an inventor an appropriate degree of protection in a particular case and the need for clarity of principle as to the extent of such protection generally; and, of course, there is an unavoidable tension between the appropriateness of giving an inventor a monopoly and the public interest in maximising competition.
In addition, the EPC 2000 and the Protocol apply in many different states which have different traditions and approaches in relation to the law of patents.
In that connection, as the Supreme Court observed in Schtz (UK) Ltd v Werit (UK) Ltd (Nos 1 to 3) [2013] Bus LR 565; [2013] RPC 16, para 40, complete consistency of approach between different national courts of the EPC states is not a feasible or realistic possibility at the moment, but nonetheless it is sensible for national courts at least to learn from each other and to seek to move towards, rather than away from, each others approaches.
More specifically, two points appear to be clear from the Protocol.
The first, which can be deduced from article 1, is that the scope of protection afforded to a patentee is not to be limited by the literal meaning of the claims.
However, it is not at all clear how far a court is permitted to move away from the literal meaning.
I do not consider that the last part of the first sentence of article 1 only enables the description (ie the specification) and the drawings to be taken into account when interpreting the claims, in cases where the claims would otherwise be ambiguous.
Any doubt about this must be put to rest by the second and third sentences, which make it clear to my mind that that would be too narrow a reading.
However, it is very hard to be confident how far they were intended to permit a court to go beyond the actual language of a claim when interpreting a claim.
Secondly, it is apparent from article 2 that there is at least potentially a difference between interpreting a claim and the extent of the protection afforded by a claim, and, when considering the extent of such protection, equivalents must be taken into account, but no guidance is given as to precisely what constitutes an equivalent or how equivalents are to be taken into account.
The question of how far one can go outside the wording of a claim to enable the patentee to enjoy protection against products or processes which are not within the ambit of the actual language, construed in accordance with ordinary principles of interpretation, has been considered in three significant UK cases and in a number of significant cases decided in the courts of other Convention states.
The domestic case law
The UK case of Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183 was decided under the previous, purely domestic, legislation, the Patents Act 1949.
At pp 242 to 243, Lord Diplock deprecated the notion that there were two types of infringement, textual infringement and infringement of the pith and marrow of the invention, and said that there was a single cause of action, which involved asking the question: He continued: whether persons with practical knowledge and experience of the kind of work in which the invention was intended to be used, would understand that strict compliance with a particular descriptive word or phrase appearing in a claim was intended by the patentee to be an essential requirement of the invention so that any variant would fall outside the monopoly claimed, even though it could have no material effect upon the way the invention worked.
The question, of course, does not arise where the variant would in fact have a material effect upon the way the invention worked.
Nor does it arise unless at the date of publication of the specification it would be obvious to the informed reader that this was so.
Where it is not obvious, in the light of then existing knowledge, the reader is entitled to assume that the patentee thought at the time of the specification that he had good reason for limiting his monopoly so strictly and had intended to do so, even though subsequent work by him or others in the field of the invention might show the limitation to have been unnecessary.
It is to be answered in the negative only when it would be apparent to any reader skilled in the art that a particular descriptive word or phrase used in a claim cannot have been intended by a patentee, who was also skilled in the art, to exclude minor variants which, to the knowledge of both him and the readers to whom the patent was addressed, could have no material effect upon the way in which the invention worked.
In that case, the patent was for a novel type of galvanised steel lintel, which the relevant claim described as including a rear support back plate extending vertically from a horizontal plate.
The allegedly infringing article included a rear support member which was inclined between 6 degrees and 8 degrees from the vertical.
Overruling the Court of Appeals decision that this meant that there was no infringement, Lord Diplock said at p 244, that it would have been: obvious to a builder familiar with ordinary building operations that the description of a lintel in the form of a weight bearing box girder of which the back plate was referred to as extending vertically from one of the two horizontal plates to join the other, could not have been intended to exclude lintels in which the back plate although not positioned at precisely 90 degree to both horizontal plates was close enough to 90 degree to make no material difference to the way the lintel worked when used in building operations.
He then added this: No plausible reason has been advanced why any rational patentee should want to place so narrow a limitation on his invention.
On the contrary, to do so would render his monopoly for practical purposes worthless, since any imitator could avoid it and take all the benefit of the invention by the simple expedient of positioning the back plate a degree or two from the exact vertical.
A few years later, Hoffmann J (as he then was) gave judgment in Improver Corpn v Remington Consumer Products Ltd [1990] FSR 181.
The case concerned a patent for a depilator, known as the Epilady, which worked by trapping hairs in a rotating coiled helical spring, and the alleged infringement worked in very much the same way save that, instead of a spring, it used a slotted rubber rod.
The case had already gone on an interlocutory issue to the Court of Appeal, where it was held that Lord Diplocks approach in Catnic [1982] RPC 183 was consistent with the 1977 Act, the EPC 1973 and the Protocol as it then was see [1989] RPC 69.
At [1990] FSR 181, 189, Hoffmann J suggested the following approach, largely based on his reading of the reasoning in Catnic [1982] RPC 183, 242 to 243: If the issue was whether a feature embodied in an alleged infringement which fell outside the primary, literal or a contextual meaning of a descriptive word or phrase in the claim (a variant) was nevertheless within its language as properly interpreted, the court should ask itself the following three questions: (1) Does the variant have a material effect upon the way the invention works? If yes, the variant is outside the claim.
If no (2) Would this (ie that the variant had no material effect) have been obvious at the date of publication of the patent to a reader skilled in the art? If no, the variant is outside the claim.
If yes (3) Would the reader skilled in the art nevertheless have understood from the language of the claim that the patentee intended that strict compliance with the primary meaning was an essential requirement of the invention? If yes, the variant is outside the claim.
On the other hand, a negative answer to the last question would lead to the conclusion that the patentee was intending the word or phrase to have not a literal, but a figurative meaning (the figure being a form of synecdoche or metonymy) denoting a class of things which included the variant and the literal meaning, the latter being perhaps the most perfect, best known or striking example of the class.
Hoffmann J then proceeded to apply those three questions to the facts of the case before him.
He held that the first two questions were to be answered in the patentees favour and then turned to the third question.
On that question, he held that the patentee failed for the reasons he gave at p 197, namely that [t]he rubber rod is not an approximation to a helical spring, that the spring [cannot] be regarded as an inessential or the change from metal spring to rubber rod as a minor variant, and that it could be appreciated that the patentee would wish to restrict his claim to helical springs as [i]t would be obvious that the rubber had problems of hysteresis which might be very difficult to overcome.
Thereafter, for the next 15 years or so, this three stage approach was almost routinely applied by judges in UK patent infringement cases, where the three Improver questions were subsequently renamed the three Protocol questions see Wheatley v Drillsafe Ltd [2001] RPC 7, para 23.
Lord Hoffmann (as he had by then become) addressed the issue again in his speech in Kirin Amgen Inc v Hoechst Marion Roussel Ltd [2005] RPC 9, where one of the issues was whether a protein manufactured by gene activation infringed a patent relating to production of the same protein by recombinant DNA technology.
At paras 27 to 35, Lord Hoffmann discussed the English rules of construction.
At paras 30 to 32 he effectively equated Lord Diplocks approach to patents in Catnic [1982] RPC 183, 243 with purposive construction of commercial contracts.
At para 34, he said that [t]he question is always what the person skilled in the art would have understood the patentee to be using the language of the claim to mean.
And for this purpose, the language he has chosen is usually of critical importance.
Lord Hoffmann then turned to the doctrine of equivalents, which he explained in para 37 had been developed in the United States courts and allow[ed] the patentee to extend his monopoly beyond his claims, so as to prevent the unscrupulous copyist [from making] unimportant and insubstantial changes and substitutions in the patent which, though adding nothing, would be enough to take the copied matter outside the claim, and hence outside the reach of law, quoting Jackson J in Graver Tank & Manufacturing Co Inc v Linde Air Products Co 339 US 605, 607 (1950).
Lord Hoffmann expressed concern that once the monopoly had been allowed to escape from the terms of the claims, it is not easy to know where its limits should be drawn, and concluded that, rather than adhering to literalism and adopting the doctrine, the solution was to adopt a principle of construction which actually gave effect to what the person skilled in the art would have understood the patentee to be claiming, as Lord Diplock had done in Catnic [1982] RPC 183.
He also said that article 69 EPC 2000 firmly shuts the door on any doctrine which extends protection outside the claims (see at paras 39 and 42 to 44).
Having considered the issue in the three preceding paragraphs of his speech, at para 48 Lord Hoffmann stated that the approach adopted by Lord Diplock was precisely in accordance with the Protocol, as it was intended to give the patentee the full extent, but no more than the full extent, of the monopoly which a reasonable person skilled in the art, reading the claims in context, would think he was intending to claim.
He concluded his discussion by quoting with approval the passages quoted above from Catnic [1983] RPC 183, 243 and Improver [1990] FSR 181, 189, and saying in para 52 that the principle of purposive construction as Lord Diplock and he had explained it, gave effect to the requirements of the Protocol and was the bedrock of patent construction, universally applicable, whereas the Protocol or Improver questions were simply guidelines for applying that principle to equivalents , more useful in some cases than in others.
The approach in the courts of other EPC states
In Germany, the Bundesgerichtshof has stated that a variant will infringe if (i) it solves the problem underlying the invention with modified but objectively equivalent means, (ii) this would be recognised by the person skilled in the relevant art, and (iii) that person focus[sing] on the essential meaning of the technical teaching protected in the patent would regard the variant as being equivalent to the solution offered by the invention see Case No X ZR 168/00, 2002 GRUR 519 (Schneidmesser I), para 30. (It is worth noting that in paras 36 to 38 of its judgment in that case, the Bundesgerichtshof expressly considered the approach which had been adopted in Catnic [1982] RPC 183 and Improver [1990] FSR 181.) Judge Meier Beck of the Bundesgerichtshof, writing extra judicially (The Scope of Patent Protection The Test for Determining Equivalence (2005) 36 IIC 339, 342 to 343) has suggested that the second step involves asking whether the person skilled in the art, using his specialist knowledge, [would be] able to find the modified means at the priority date as having the same effect, which he then says has the meaning that no inventive step is needed.
That seems to be supported by what was said by the Bundesgerichtshof in Case No X ZR 156/97, 1999 GRUR 977, (Rumschild), paras II.2(c)(aa) and III.1.
Further guidance as to the German approach to equivalents was very recently given by the Munich Oberlandesgericht, upholding the decision of the Landgericht, in Case No 6 U 3039/16 (Eli Lilly & Co v ratiopharm GmbH), when considering whether pemetrexed ditromethamine infringed the German equivalent of the Patent in this case.
At para II.B.3(a), the Oberlandesgericht said that in order for an embodiment that deviates from the literal meaning of the claim to be within the scope of protection, generally three requirements must be met.
The first was that the embodiment must solve the problem underlying the invention with means that are indeed modified, but are objectively equivalent.
The second requirement was that the expertise of the person skilled in the art must enable him to discover the modified embodiment with its divergent means to be equivalent.
Thirdly, the thought processes that the person skilled in the art has to perform in order to do so must be oriented on the meaning of the teaching protected in the claim.
In para II.B.3(b)(aa), the Oberlandesgericht suggested that the decisive factor was what individual effects the features according to the patent provide in order to attain the object underlying the claims and whether these effects are achieved through other means by the [allegedly infringing] embodiment.
The court added that the doctrine of equivalence would apply to an embodiment if it not only essentially achieves the entire effect of the invention, but specifically also achieves the effect that the feature, which has not been literally implemented, is supposed to achieve.
French law, according to the expert witnesses in this case, applies the doctrine of equivalents where the variant is different in form but perform[s] the same function as the invention, but only where the function [claimed in the patent] is a new one.
This seems to be supported by Azma and Galloux, Droit de la proprit industrielle, 7th ed (2012), which distinguishes at p 442 between two categories of patents.
The first category is those which in general terms claim the means that provide for a particular function (moyens gnraux), or as Arnold J put it in para 160 of his judgment, claims which cover general means.
The second category is patents which indicate the particular means which infer such function (moyens particuliers), or claims which are narrowly worded to cover specific means as Arnold J expressed it.
The doctrine is only normally applicable to the first category of claims.
Arnold J added in para 160 that the categorisation of a patent for this purpose may depend in part on what was known at the priority date see the decisions of the Cour de Cassation in Appeal S 09 15668 Institut Pasteur v Chiron Healthcare, 23 November 2010 and of the Paris Tribunal de Grande Instance in Case 09/01863 Mundipharma Laboratories GmbH v Sandoz SAS, 2 July 2010.
As Arnold J also explained in para 159 of his judgment, there is no need for the claim to be unclear or for it to be widely worded for the doctrine of equivalents to be invoked in the French court.
Thus, in the decision of the Cour de Cassation in Appeal No 06 17915 B2M Industries v Acome, 20 November 2007, the function of the particular integer that was said to be infringed pursuant to an equivalent was held to be novel, and therefore because the means that was said to be equivalent to that integer performed the same function and produced the result sought by the invention the means was equivalent to that integer, to quote from para 161 of Arnold Js judgment.
In the Italian courts, the expert witnesses in this case agreed that a variant would be held to infringe if (i) it reproduced the inventive core of the patent and (ii) it was an obvious variation, although (iii) the fact that the variant included some modifications which were not obvious and/or the fact that the variant does not include some of the elements of the patent claim does not necessarily prevent the variant infringing see per Arnold J at para 171 of his judgment.
This analysis is supported by the Corte di Cassazione decisions in Case No 257, Forel SpA v Lisec (13 January 2004), Case No 30234, Barilla GER Fratelli SpA v Pastifico Fazion SpA (30 December 2012) and Case No 622, Entsorga Italia Srl v Ecodeco Srl (11 January 2013).
At any rate at local appellate level, Spanish courts appear to have effectively adopted the approach embodied in the three questions suggested by Hoffmann J in Improver [1990] FSR 181 see for instance Laboratorios Cinfa SA v Eli Lilly & Co Ltd (Olanzapine) Court of Appeal of Barcelona judgment no 8/2008, 17 January 2008.
Following circulation of this judgment in draft, Actavis referred us to a decision of the Spanish Tribunal Supremo Lundbeck v Cinfa, no 223/2015, 29 April 2015.
In the closely reasoned section ELEVEN of its judgment, the Tribunal Supremo (i) recorded the fact that none of the parties challenged the approach of the Court below which applied the three Improver questions (para 5), (ii) stated that the real issue in the case centred on the second question (para 6), (iii) cast some doubt on the applicability of the Improver questions in Spanish law (para 10), (iv) disapproved the notion that the test for obviousness in patentability is necessarily applicable to the second Improver question (paras 10 and 14), (v) disapproved the notion that, for the second Improver question to be answered yes, the skilled person must be absolutely certain that the variant would work successfully in resolving the technical problem faced by the patented invention (paras 11 and 12), (vi) preferred instead, a test of easy to see or comprehend and a degree of predictability (paras 11 and 18), which involves a high probability, rather than a reasonable expectation that the variant would work (paras 15 and 18), and (vii) concluded on this basis that the Court of Appeal was right to rule that the allegedly infringing products in that case did not infringe (paras 18 and 19).
As for the Netherlands, helpful guidance may be found in a lecture given in 2016 by Judge Kalden, the head of the IP division in the Court of Appeal in The Hague Article 69 EPC the Scylla and Charybdis of the European Patent Convention Which route did the Dutch courts take? (2016 Symposium German Bundespatentgericht).
She said that, although there have been subtle changes of emphasis in its decisions, the Supreme Court tends to focus on the inventive concept in order to prevent a too literal interpretation of the claims, which could do injustice to fair protection for the patentee (or lead to an unnecessary broad interpretation).
She also explained that the doctrine of equivalents applies if (i) the variant is foreseeable at the priority date, (ii) the inventive concept is sufficiently broad to cover [the] variant, (iii) the variant makes use of and thus benefits from the inventive concept, and (iv) reasonable legal certainty [is not thereby] unduly compromised.
She added that, despite the first condition: Variants that are not foreseeable at the priority date may well, due to later developments, become an obvious variant at a later date.
This may happen in case of a pioneer invention, where at the priority date the full breadth of the possible applications could or has not been fully recognised and therefore was not sufficiently taken into account when drafting a claim.
Another possibility is that a new technique becomes available after the patent was granted, which makes available an obvious variant.
It would be harsh and contrary to fair protection for the patentee to deny him the right to attack those, again provided such variant falls within the inventive concept and reasonable legal certainty is taken into account.
So infringement by equivalence is not limited to foreseeable variants only.
It may be of some significance that the product which Hoffmann J concluded in Improver [1990] FSR 181 was non infringing was held by the German, Italian and Dutch courts to infringe.
Of course, the fact that courts of two states reach different conclusions on the same issue does not of itself mean that there is a difference in the law of those states, let alone that one court is wrong and the other right: the evidence may be different, and there may be issues of judgment on which reasonable judges could differ.
However, consideration of the judgments in those three other courts does suggest a difference of approach.
Thus, in Germany, the Dsseldorf Oberlandesgericht based its conclusion on the propositions that a person skilled in the art will not interpret the coil spring as a spring, but as an elastic body with gaps . as it is obvious that the helical spring is not used as a spring per se, and that its only essential function, which was shared by the allegedly infringing products slitted rubber rod, was that it could enter between adjacent areas of the body (walls), and that the walls must approach it up to clamping it see Epilady Germany II (1993) 24 IIC 838.
In Italy, the Milan District Court held that there was infringement because the slitted rubber rod had structural characteristics which enabled it to perform the same function in the same way as the coiled spring referred to in the patent in suit see Epilady Italy (1992) Giur Ann Dir Ind, Case No 2823.
In the Netherlands, the Gerechtshof upheld the first instance decision that the allegedly infringing device embodies an application of the patented invention, on the grounds that the hair engaging component [ie the slitted rubber rod] of the device is a mechanical equivalent of the helical spring specified in the patent claims, and the rod was not state of the art in the field of depilatory devices Epilady Netherlands III (1993) 24 IIC 832, paras 9 and 11.
The proper approach to infringement claims
Any patent system must strike a balance between the two competing factors referred to at the end of article 1 of the Protocol, namely a fair protection for the patent proprietor [and] a reasonable degree of legal certainty for third parties.
The balance cannot be struck on an ad hoc case by case basis without any guiding principles, as that would mean that there was no legal certainty.
On the other hand, striking the balance by adopting a normal approach to interpretation would risk depriving patentees of a proper measure of protection; as explained in paras 37 to 39 and 52 above, that is clear from the approach of all the courts which considered the Epilady patent, where it could not seriously have been suggested that, as a matter of language, a slotted rubber rod falls within the expression helical metal spring, even if one was construing those words in the context of the claim in the patent in suit.
But, if one departs from ordinary language, it is necessary to have some guidance or to draw some lines, as Lord Hoffmann implied in Kirin Amgen [2005] RPC 9, para 37.
That is why he promulgated his three questions in Improver [1990] FSR 181, 189.
By means of an extended version of the ordinary concept of construction or interpretation, Hoffmann J explained how our domestic law, as laid down in Catnic [1982] RPC 183, implements article 2 of the Protocol and thus, as I see it, how it gives effect to the doctrine of equivalents.
That approach was (perhaps unsurprisingly) then adopted in Kirin Amgen [2005] RPC 9.
In my view, notwithstanding what Lord Diplock said in Catnic [1982] RPC 183, 242, a problem of infringement is best approached by addressing two issues, each of which is to be considered through the eyes of the notional addressee of the patent in suit, ie the person skilled in the relevant article Those issues are: (i) does the variant infringe any of the claims as a matter of normal interpretation; and, if not, (ii) does the variant nonetheless infringe because it varies from the invention in a way or ways which is or are immaterial? If the answer to either issue is yes, there is an infringement; otherwise, there is not.
Such an approach complies with article 2 of the Protocol, as issue (ii) squarely raises the principle of equivalents, but limits its ambit to those variants which contain immaterial variations from the invention.
It is also apparent that the two issues comply with article 1 of the Protocol in that they involve balancing the competing interests of the patentee and of clarity, just as much as they seek to balance the encouragement of inventions and their disclosure with the need for a competitive market.
In my view, issue (i) self evidently raises a question of interpretation, whereas issue (ii) raises a question which would normally have to be answered by reference to the facts and expert evidence.
In Kirin Amgen [2005] RPC 9, Lord Hoffmann, following his approach in Improver [1990] FSR 181 (which itself had followed Lord Diplocks analysis in Catnic [1982] RPC 183) effectively conflated the two issues, and indicated that the conflated issue involved a question of interpretation.
I have considerable difficulties with the notion that there is a single conflated, or compound, issue, and, even if that notion is correct, that that issue raises a question of interpretation.
Indeed, in my view, to characterise the issue as a single question of interpretation is wrong in principle, and unsurprisingly, therefore, can lead to error.
While normal principles of interpretation could, I think, accommodate the notion that vertically extended to an item which was not at precisely 90 to another item, I do not see how such principles could possibly lead to the conclusion that a slotted rubber rod was within the expression helical metal spring.
As Hoffmann J said in Improver [1990] FSR 181, 197, the angle of the support member [in the allegedly infringing product in Catnic [1982] RPC 183] can be regarded as an approximation to the vertical, but [t]he rubber rod is not an approximation to a helical spring.
The problem with treating the issue as one of normal interpretation is thus that that point alone may be thought to have been sufficient to put an end to the patentees infringement argument on facts such as those in Improver [1990] FSR 181, and there would seem to have been little purpose in going through the three questions in that case.
I had wondered whether the question whether issue (ii) truly involves a question of interpretation raised what was merely an arid issue of categorisation.
However, I have concluded that that nettle needs to be grasped, because, so long as the issue is treated as one of interpretation, it will lead to a risk of wrong results in patent infringement cases and it will also lead to a risk of confusing the law relating to the interpretation of documents.
In my opinion, issue (ii) involves not merely identifying what the words of a claim would mean in their context to the notional addressee, but also considering the extent if any to which the scope of protection afforded by the claim should extend beyond that meaning.
As Sir Hugh Laddie wrote in his instructive article Kirin Amgen The End of Equivalents in England? (2009) 40 IIC 3, para 68, [t]he Protocol is not concerned with the rules of construction of claims but with determining the scope of protection.
I might add that the notion of a product or process which infringes despite an immaterial variation from the invention as claimed is by no means new to domestic patent law.
That point is convincingly demonstrated by Sir Hugh in his article at paras 33 to 39.
Thus, in Walton v Potter & Horsfall (1843) 1 WPC 585, Tindal CJ told the jury that they had to decide whether the defendants product was perfectly distinct from the patented product, or whether it varied only in certain circumstances, which are not material to the principle and substance of the invention.
And Lord Cairns LC in Clark v Adie (1877) 2 App Cas 315, 320, referred to the alleged infringer having really taken and adopted the substance of the instrument patented, and having taken in substance the pith and marrow of the invention.
The patents in these cases included relatively primitive forms of claim, but that does not undermine the fact that our domestic law has long recognised that an immaterial variation does not get an infringer off the hook.
Particularly in the light of what he said in Catnic [1983] RPC 183, 242, it is worth mentioning that Lord Diplock himself in Beecham Group Ltd v Bristol Laboratories Ltd [1978] RPC 153, 200 rejected a submission that [t]he increasing particularity with which claims are drafted has made the doctrine [of pith and marrow] obsolete, and said that the doctrine still remains a part of patent law.
Turning to the two issues identified in para 54 above, issue (i), as already mentioned, involves solving a problem of interpretation, which is familiar to all lawyers concerned with construing documents.
While the answer in a particular case is by no means always easy to work out, the applicable principles are tolerably clear, and were recently affirmed by Lord Hodge in Wood v Capita Insurance Services Ltd [2017] 2 WLR 1095, paras 8 to 15.
In the present case, there is no doubt that, according to normal principles of interpreting documents, the Actavis products do not infringe the Patent, as in no sensible way can pemetrexed free acid, pemetrexed ditromethamine, or pemetrexed dipotassium mean, ie be said to fall within the expression, pemetrexed disodium in claim 1 of the Patent, any more than a slotted rubber rod can be said to be within the expression a helical metal spring in the claim in the Improver patent.
According to normal principles of interpreting documents, then, this would be the end of the matter.
However, the second issue poses more difficulties of principle: what is it that makes a variation immaterial? In that connection, I consider that Hoffmann Js three questions in Improver [1990] FSR 181 provide helpful assistance, a view supported by the fact explained in paras 44 to 52 above that similar but not identical tests have been adopted in other EPC jurisdictions.
However, each of the three questions requires some exegesis, and, particularly the second question, some reformulation.
The first Improver question, which asks whether the variant has a material effect on the way in which the invention works, seems generally satisfactory.
It is a question which was framed in the context of a mechanical patent, and is not wholly aptly expressed for every type of case.
However, in practice, the question as framed by Hoffmann J, with its emphasis on how the invention works, should correctly involve the court focussing on the the problem underlying the invention, the inventive core, or the inventive concept as it has been variously termed in other jurisdictions.
In effect, the question is whether the variant achieves the same result in substantially the same way as the invention.
If the answer to that question is no, then it would plainly be inappropriate to conclude that it could infringe.
If, by contrast, the answer is yes, then it provides a sound initial basis for concluding that the variant may infringe, but the answer should not be the end of the matter.
The second Improver question is more problematic.
In my view, it imposes too high a burden on the patentee to ask whether it would have been obvious to the notional addressee that the variant would have no material effect on the way in which the invention works, given that it requires the addressee to figure out for himself whether the variant would work.
The facts of the present case serve to make that proposition good.
As Floyd LJ explained in para 65 of his judgment below, because a chemist would not be able to predict the effect of [a] substitution [for the sodium counter ion] without testing at least the solubility of the [active ingredient in the Actavis products], it followed that predicting in advance whether any particular counter ion would work was not possible, and therefore that the second Improver test could not be answered yes.
However, as mentioned in para 25(i) above, salt screening is a routine exercise in determining suitability, and as Floyd LJ said, the chemist would be reasonably confident that he would come up with a substitute for the sodium counter ion.
In those circumstances, given that the inventive concept of the patent is the manufacture of a medicament which enables the pemetrexed anion to be administered with vitamin B12, it appears to me that application of the second Improver question fails to accord a fair protection for the patent proprietor as required by article 1 of the Protocol.
In my opinion, the second question is better expressed as asking whether, on being told what the variant does, the notional addressee would consider it obvious that it achieved substantially the same result in substantially the same way as the invention.
In other words, it seems to me that the second Improver question should be asked on the assumption that the notional addressee knows that the variant works to the extent that it actually does work.
That, I think, would be a fair basis on which to proceed in terms of balancing the factors identified in article 1 of the Protocol, and it is, I think, consistent with the approach of the German, Italian and Dutch courts.
It is also consistent with the fact that the notional addressee is told (in the patent itself) what the invention does.
This reformulated second question should also apply to variants which rely on, or are based on, developments which have occurred since the priority date, even though the notional addressee is treated as considering the second question as at the priority date.
Such an approach is supported by the desirability of both consistency of approach and pragmatic justice.
It seems right in principle to have the same question, including the same assumption (ie that the variant works) for all cases.
As to pragmatism, the point is touched on by Judge Kalden in the passage quoted at the end of para 51 above: while the notional addressee may answer the reformulated second question affirmatively even where the variant was unforeseeable at the priority date, he is less likely to do so than in relation to a variant which was unforeseeable as at that date.
The second test applied by the German courts, as I understand it, at least sometimes appears to require the variation not to be inventive, but I am not sure that that is an appropriate requirement, although it is unnecessary to decide that point on this appeal.
If the variation represents an inventive step, while it may render it less likely that the patentee will succeed on the second reformulated question, I find it hard to see why that alone should prevent the resultant variant from infringing the original invention.
It may entitle the infringer to a new patent, in the same way as the invention of a novel use for a patented invention can itself be patented, but like such a novel use I see no reason why the variant should not infringe the original patent.
Having said that, it should be added that the German version of the second test will, I suspect, usually produce the same result as the reformulated second question.
The third Improver question as expressed by Hoffmann J is whether the notional addressee would have understood from the language of the claim that the patentee intended that strict compliance with the primary meaning was an essential requirement of the invention.
That is in my view an acceptable test, provided that it is properly applied.
In that connection, I would make four points.
First, although the language of the claim is important, consideration of the third question certainly does not exclude the specification of the patent and all the knowledge and expertise which the notional addressee is assumed to have.
Secondly, the fact that the language of the claim does not on any sensible reading cover the variant is certainly not enough to justify holding that the patentee does not satisfy the third question.
Hence, the fact that the rubber rod in Improver [1990] FSR 181 could not possibly be said to be an approximation to a helical spring (to quote from p 197) was not the end of the infringement issue even in Hoffmann Js view: indeed, as I have already pointed out, it was because the rubber rod could not possibly be said to be a helical spring that the allegedly infringing product was a variant and the patentee needed to invoke the three Improver questions.
Thirdly, when considering the third question, it is appropriate to ask whether the component at issue is an essential part of the invention, but that is not the same thing as asking if it is an essential part of the overall product or process of which the inventive concept is part.
So, in Improver [1990] FSR 181, 197, Hoffmann J may have been (and I mean may have been) wrong to reject the notion that the spring could be regarded as an inessential: while it was undoubtedly essential to the functioning of the Epilady, the correct question was whether the spring would have been regarded by the addressee as essential to the inventive concept, or inventive core, of the patent in suit.
Fourthly, when one is considering a variant which would have been obvious at the date of infringement rather than at the priority date, it is, as explained in para 63 above, necessary to imbue the notional addressee with rather more information than he might have had at the priority date.
In these circumstances, given the weight that has been given by courts in this jurisdiction (and indeed in some other jurisdictions) to the three Improver questions, I think it must be right for this court to express in our own words our reformulated version of those questions.
In doing so, it is right to emphasise, as Lord Hoffmann did in Kirin Amgen [2005] RPC 9, para 52, that these questions are guidelines, not strict rules (as indeed the Oberlandesgericht indicated in Case No 6 U 3039/16, when saying that it was generally true that three requirements must be met).
While the language of some or all of the questions may sometimes have to be adapted to apply more aptly to the specific facts of a particular case, the three reformulated questions are as follows: i) Notwithstanding that it is not within the literal meaning of the relevant claim(s) of the patent, does the variant achieve substantially the same result in substantially the same way as the invention, ie the inventive concept revealed by the patent? ii) Would it be obvious to the person skilled in the art, reading the patent at the priority date, but knowing that the variant achieves substantially the same result as the invention, that it does so in substantially the same way as the invention? iii) Would such a reader of the patent have concluded that the patentee nonetheless intended that strict compliance with the literal meaning of the relevant claim(s) of the patent was an essential requirement of the invention? In order to establish infringement in a case where there is no literal infringement, a patentee would have to establish that the answer to the first two questions was yes and that the answer to the third question was no.
Provisional conclusion on direct infringement in the UK
Given that the Actavis products do not infringe on the basis of a normal interpretation of claim 1 of the Patent, it is necessary to consider whether they represent an immaterial variation on that claim.
I propose to address that issue initially disregarding the prosecution history, and having reached a provisional conclusion, I will then address that history and its effect on the provisional conclusion.
In my view, application in the present case of the three questions just identified results in the conclusion that the Actavis products infringe.
So far as the first question is concerned, there can be no doubt but that those products work in the same way as the invention: they all ultimately involve a medicament containing the pemetrexed anion and vitamin B12.
Thus, they achieve substantially the same result in substantially the same way as the invention.
Indeed, as in the Court of Appeal, Actavis realistically accept that the first question is to be answered yes.
As to the second question, it seems to me clear that the notional addressee of the Patent would appreciate (and would have appreciated as at the priority date) that each of the Actavis products would work in precisely the same way as pemetrexed disodium when included in a medicament with vitamin B12.
When it comes to different versions of pemetrexed medicaments, it is clear that the use of a free acid, and of ditromethamine and dipotassium salts was in each case well established as at the priority date see para 26(ii) to (iv) above.
Furthermore, the notional addressee of the Patent would regard investigating whether pemetrexed free acid, pemetrexed ditromethamine or pemetrexed dipotassium worked as a purely routine exercise see para 25(i) above.
The reason why I differ from the Court of Appeal and Arnold J on this second question is that, in accordance with the second question as formulated in Improver [1990] FSR 181, 189, they considered that the notional addressee should not be treated as knowing that the Actavis products did in fact work at all, whereas, as explained above, that seems to me to involve too strict a test.
Turning to the third question, the Court of Appeal considered that the notional addressee would understand that the patent was clearly limited to the disodium salt, and did not extend to the diacid, or the dipotassium or ditromethamine salts.
They based this conclusion on the fact that the specification of the Patent contains a number of passages (eg in Para [0022] of the specification, quoted in para 19 above) which refer to anti folates and the like and other passages which refer to pemetrexed disodium, which is a highly specific chemical compound, and the fact that the claim is limited to pemetrexed disodium would therefore lead the notional addressee to conclude that the claim is indeed intended to be so limited (see paras 71 and 72 of Floyd LJs judgment).
In my opinion, the Court of Appeal adopted an approach which places too much weight on the words of the claim and not enough weight on article 2 of the Protocol (and it is only right to add that, in doing so, they were, like Arnold J at first instance, following Lord Hoffmanns guidance in Kirin Amgen [2005] RPC 9).
Thus, when considering the third test, Floyd LJ made the point at para 72(ii) of his judgment that there is no obvious leeway as a matter of language for giving it a broad as opposed to a narrow construction.
That seems to me to demonstrate the risk of treating the issue raised by the third question as being one of normal interpretation. (Another way of looking at the point is, in the language of Sir Hugh Laddie, that it involves wrongly conflating the issue of interpretation with the issue of scope of protection.) As already explained, if it was a decisive point it would make a nonsense of asking the three questions: if one cannot depart from the language of the claim when considering those questions, what is the point of the questions in the first place?
More specifically, I do not agree with the Court of Appeals view that, because the specification referred to anti folates and anti folate drugs, the fact that the claims were limited to pemetrexed disodium means that the drafter of the Patent would have been understood to intend that the other pemetrexed compounds would not infringe.
As Mr Mitcheson QC contended in his well argued case, the point is neutral because there is no reference to pemetrexed salts as a class in the specification, and the contrast therefore does not help on the question whether pemetrexed salts other than pemetrexed disodium were intended to be excluded.
Further, contrary to the Court of Appeals reasoning, I would have thought that if the specification had not referred to anti folates but had only referred to pemetrexed disodium, that would have been a more powerful indication that the patentee was intending to limit himself to pemetrexed disodium.
The very fact that the specification teaches that there are other anti folate drugs which have a similar effect to pemetrexed disodium (coupled with the fact that it was generally known that cations other than sodium could be successfully used with anti folates) highlights a point similar to that made by Lord Diplock in Catnic [1982] RPC 183, 244, namely No plausible reason has been advanced why any rational patentee should want to place so narrow a limitation on his invention as to limit the scope of protection afforded by the Patent to pemetrexed disodium a telling but not always conclusive point.
Additionally, there is no teaching in the specification which relates to the relevance or importance of the sodium cation.
Looking at matters more broadly, the addressee of the Patent would, as I see it, understand that the reason why the claims were limited to the disodium salt was because that was the only pemetrexed salt on which the experiments described in the specification had been carried out.
However, it does not follow that the patentee did not intend any other pemetrexed salts to infringe: the suggestion confuses the disclosure of the specification of a patent with the scope of protection afforded by its claims.
Particularly given the facts set out in para 25 above, it seems to me very unlikely that the notional addressee would have concluded that the patentee could have intended to exclude any pemetrexed salts other than pemetrexed disodium, or indeed pemetrexed free acid, from the scope of protection.
Accordingly, I would conclude that, subject to considering the prosecution history, the Actavis products infringe claim 1 of the Patent.
The effect of the prosecution history
The application for the patent was filed at the EPO in June 2001, and it contained claims directed to a method of treatment, claims in Swiss form, and purpose related product claims.
In January 2003, Dr Burnside, Lillys patent attorney, filed a revised set of claims which omitted the method of treatment claims.
Claims 1 and 2 were as follows: 1.
Use of a methylmalonic acid lowering agent in the preparation of a medicament useful in lowering the mammalian toxicity associated with an antifolate, and the medicament is administered in combination with an antifolate. 2.
Use of a methylmalonic acid lowering agent in the preparation of a medicament useful in lowering the mammalian toxicity associated with an antifolate, and the medicament is administered in combination with an antifolate and a FBP binding agent.
Claim 10 was a dependent claim wherein the antifolate is ALIMTA.
As Floyd LJ said, these claims are in the reverse order from the claims ultimately granted (as they start with the use of the methylmalonic lowering agent rather than pemetrexed disodium), but nothing hangs on that.
The essential point is that these claims were entirely general as to the identity of the antifolate.
In March 2004, the EPO examiner wrote raising various objections including some under articles 83 and 84 EPC 2000 (disclosure and clarity).
The clarity and lack of disclosure objections were that the claims related to too many possible combinations of compounds by using general expressions such as antifolate, methylmalonic acid lowering agent and FBP binding agent.
Moreover, the examiner was concerned that the claims covered all compounds having these characteristics or properties, whereas the application provided support and disclosure for only a very limited number of such compounds.
Dr Burnside replied in a letter of December 2004, under cover of which he filed new claims 1 and 2, this time starting with the use of the antifolate, now limited to pemetrexed in these terms: 1.
Use of pemetrexed in the manufacture of a medicament for use in combination therapy for inhibiting tumour growth in mammals wherein said medicament is to be administered in combination with vitamin B12 or a pharmaceutical derivative thereof. 2.
Use according to claim 1 wherein said medicament is to be administered in combination with vitamin B12 or a pharmaceutical derivative thereof and a folic binding protein binding agent [which was then defined].
In support of these new claims, Dr Burnside said that, in order to expedite the application proceeding to grant, Lilly had elected to amend the claims so as to reflect more closely the specific examples provided.
However, he added, the amendments were made without prejudice to Lillys right to obtain protection for other patentable subject matter in one or more divisional applications.
Notwithstanding these amendments, in May 2005 the EPO examiner formally objected to the admissibility of the new claims.
He contended that the amendments introduced subject matter beyond the content of the originally filed documents, contrary to article 123(2) EPC 2000.
Thus, he said, the inclusion in claim 1 of use of pemetrexed . and similar provisions in other claims did not find any basis in the application documents as filed.
According to the examiner, pemetrexed was a distinct compound from pemetrexed disodium. (This is supported by the Chemical Abstracts Service Registry, where the pemetrexed is recorded as being the free diacid.) The patent does contain one mention of the term pemetrexed at para [0004] of the specification, followed by a Lilly reference number which shows it to be pemetrexed disodium.
It was therefore, at best, uncertain as to what the term pemetrexed on its own was intended to refer.
Dr Burnside replied in March 2006 by a letter under cover of which he filed new claims, which this time were limited to pemetrexed disodium, and are now embodied in the claims of the Patent as set out in para 21 above.
Dr Burnside said: The Claims have been amended to refer to the preferred embodiment, the use of pemetrexed disodium (ALIMTA) as manufactured by Eli Lilly and Company, as the antifolate drug.
The Claims have also been amended to incorporate the list of vitamin B12 derivatives set out on p 7 lines 6 7 of the application as filed.
The EPO examiner accepted the claims in this form, and the application proceeded to grant.
Actavis contends that the prosecution history, as summarised in paras 76 to 80 above, makes it clear that the claims of the Patent should be interpreted as being limited to pemetrexed disodium not only as a matter of language, but in the sense that the use of any other pemetrexed compound, including other pemetrexed salts and the free acid, could not infringe.
This contention gives rise to two issues.
The first is one of relatively general application, namely whether and if so when it is permissible to have recourse to the prosecution history of a patent when considering whether a variant infringes that patent.
The second issue is whether the prosecution history of the Patent in this case alters the provisional conclusion reached in para 75 above.
So far as the first issue is concerned, Lord Hoffmann said in Kirin Amgen [2005] RPC 9, para 35: The courts of the United Kingdom, the Netherlands and Germany certainly discourage, if they do not actually prohibit, use of the patent office file in aid of construction.
There are good reasons: the meaning of the patent should not change according to whether or not the person skilled in the art has access to the file and in any case life is too short for the limited assistance which it can provide.
It is however frequently impossible to know without access, not merely to the file but to the private thoughts of the patentee and his advisors as well, what the reason was for some apparently inexplicable limitation in the extent of the monopoly claimed.
In the absence of good reason to the contrary, it would be wrong to depart from what was said by the House of Lords.
It is said by Actavis that there is good reason to depart from what Lord Hoffmann said on the ground that he was wrong in his description of the German and Dutch approaches to this issue, and that anyway he failed to have regard to the jurisprudence of other European courts.
In my view, Lord Hoffmann was right about the approach of the German and Dutch courts to this issue.
Thus, the Bundesgerichtshof, in a decision involving the German equivalent of the instant Patent, Case No X ZR 29/15 (Eli Lilly v Actavis Group PTC), paras 39 40, stated that it is permissible to use statements made by the applicant [and the examiner] during the grant procedure as an indication of how the person skilled in the art understands the subject matter of the patent but such indications cannot be readily used as the sole basis for construction.
And in Ciba Geigy AG v Ot Optics BV (1995) 28 IIC 748, the Dutch Supreme Court said that a court will only be justified in using clarifying information from the public part of the granting file, when it holds that even after the average person skilled in the art has considered the description and the drawings, it is still open to question how the contents of the claims must be interpreted.
It is argued by Actavis that this limited approach to the circumstances in which reference can be made to the prosecution file may be more restrictive than the approach adopted in France, Italy, and Spain, as analysed by Arnold J.
Thus, he said in para 162 of his judgment, that the Cour dAppel observed in Case No 08/00882, Hewlett Packard GmbH v Agilent Technologies Deutschland GmbH (27 January 2010) that the patentee who amended its clauses to give them a limited scope may not, without putting the safety of third parties at risk, claim that the amendments were not necessary, nor that the limited claims have the same scope as the broader claims.
However, the court in that case had already decided on the natural meaning of the patent, and the contents of the file were merely being invoked to confirm the decision.
The position in Italy, according to Arnold J in para 174 of his judgment, is that there is no doctrine of prosecution history estoppel and there is no clear rule as to the relevance, if any, of the prosecution history as an aid to the interpretation of claims.
In Spain there is a doctrine of actos propios, which as Arnold J explained in para 184, is the doctrine of ones own acts, but it only justifies relying on the prosecution file in relation to statements which are unequivocal, clear, precise, conclusive, undoubted and [do] not reflect any kind of ambiguity.
While the French courts appear to be more ready to refer to the prosecution file on issues of interpretation or scope than the German or Dutch courts, it is unclear how much, if any, difference there is in outcome.
The position in relation to the Italian courts is more unclear, and it may well be that the effect of the approach of the Spanish courts is the same in outcome as that of the German and Dutch courts.
In those circumstances, particularly as it may be inevitable that there is a degree of difference in the approach of different national courts on such an issue, there is nothing in the French, Italian, or Spanish jurisprudence which causes me to depart from the conclusion expressed by Lord Hoffmann.
In my judgment, it is appropriate for the UK courts to adopt a sceptical, but not absolutist, attitude to a suggestion that the contents of the prosecution file of a patent should be referred to when considering a question of interpretation or infringement, along substantially the same lines as the German and Dutch courts.
It is tempting to exclude the file on the basis that anyone concerned about, or affected by, a patent should be entitled to rely on its contents without searching other records such as the prosecution file, as a matter of both principle and practicality.
However, given that the contents of the file are publicly available (by virtue of article 128 EPC 2000) and (at least according to what we were told) are unlikely to be extensive, there will be occasions when justice may fairly be said to require reference to be made to the contents of the file.
However, not least in the light of the wording of article 69 EPC 2000, which is discussed above, the circumstances in which a court can rely on the prosecution history to determine the extent of protection or scope of a patent must be limited.
While it would be arrogant to exclude the existence of any other circumstances, my current view is that reference to the file would only be appropriate where (i) the point at issue is truly unclear if one confines oneself to the specification and claims of the patent, and the contents of the file unambiguously resolve the point, or (ii) it would be contrary to the public interest for the contents of the file to be ignored.
The first type of circumstance is, I hope, self explanatory; the second would be exemplified by a case where the patentee had made it clear to the EPO that he was not seeking to contend that his patent, if granted, would extend its scope to the sort of variant which he now claims infringes.
Turning to the second issue, I do not consider that the contents of the prosecution file in this case justify departing from the provisional conclusion expressed in para 75 above.
It seems to me clear that the reason why the examiner considered that the claims in the patent should be limited to pemetrexed disodium was because the teaching in the specification did not expressly extend to any other anti folates.
It is unnecessary to decide the issue, but, at least as at present advised, I am inclined to think that the examiner was wrong in taking that view.
Indeed, in the course of his well presented argument for Actavis, Mr Alexander QC seemed to accept that Lilly could have expressed its claims more widely than it did (albeit that this was not a point which was carefully explored).
However, even if the examiner was right or at least justified in taking the stance that he did, I do not consider that that consideration can have any bearing on the question whether any pemetrexed salts other than pemetrexed disodium should be within the scope of the patent pursuant to the doctrine of equivalents.
The whole point of the doctrine is that it entitles a patentee to contend that the scope of protection afforded by the patent extends beyond the ambit of its claims as construed according to normal principles of interpretation.
This point was well made by the Dutch Court of Appeals in Boston Scientific Ireland Ltd v Cordis Europa NV 01/639 (unreported) 3 July 2003, when they held that the contents of the prosecution file were of no assistance, as they related to a concern which the examiner had expressed about added matter which went to disclosure, whereas that had no relevance to the point at issue which was the scope of the claim which properly included equivalents.
I draw comfort from the fact that neither party was able to refer to a case where a French or Spanish Court had relied upon the patentees response to a disclosure or added matter objection by the examining officer as being relevant to the scope of claim.
It is true that the Madrid Appeal Court in Inmobiliaria Masife SL v Vale y Tino SA (decision 268/2013) (unreported) 27 September 2013 held that a patentee was bound by an exclusion which he had agreed during prosecution but that was to overcome an objection of the examiner based on the prior art, a very different point.
I draw even greater comfort from the fact that the Bundesgerichtshof reached the same conclusion on this very issue in relation to the German equivalent of the Patent in this case in Case No X ZR 29/15 (Eli Lilly v Actavis Group PTC), para 72.
Direct infringement in France, Italy and Spain
Having concluded that the Actavis products directly infringe the Patent as a matter of UK law, it is necessary to consider whether the same result obtains under French, Italian and Spanish law.
In my judgment, direct infringement is established in those jurisdictions as well.
Turning first to French law, it appears to me that the answer to the question of direct infringement ultimately turns on whether the Patent in this case falls into the moyens gnraux category or the moyens particuliers category, because, as discussed in para 46 above, the doctrine of equivalents is apparently only applicable to patent claims in the former category.
With some diffidence, I have reached a different conclusion from Arnold J on this issue and have concluded that the Patent in this case falls into the former category.
It is of course true that an appellate court should be very slow indeed to differ from the trial judge on a question of fact.
However, the notion that the resolution of a dispute as to foreign law involves a factual finding rather than a legal conclusion is somewhat artificial, and in any event, the Judge did not hear any oral evidence from the expert foreign law witnesses.
We are therefore in as good a position as he was to analyse the effect of the evidence as to foreign law.
The Judge considered that the Patent in this case represents a moyen particulier, because pemetrexed disodium was the relevant means and the Patent did not reveal it having a novel function: it merely revealed a new and better way in which its function could be achieved.
To my mind the better analysis is that the Patent discloses that pemetrexed disodium could be used for a function for which it could not previously have been satisfactorily or safely used in practice; specifically, that pemetrexed disodium could be used with vitamin B12 to achieve an end which could not have been achieved by either chemical on its own, pemetrexed disodium because of its harmful side effects and vitamin B12 because it would not have worked.
The essential point, as I see it, is that the Patent revealed for the first time the existence of a combined means which functioned in a certain way, namely to alleviate certain cancers without serious side effects.
It would be different if the overall function of the combination of the two chemicals had not been new.
Support for this conclusion appears in the book referred to in para 46 above, Droit de la proprit industrielle, whose two authors were the expert witnesses on French law in this case.
At para 719, p 443, they wrote when the claim is over a combination of means for which global function is novel, any combination of means with a different structure but achieving the same global function is a priori equivalent and thus infringing.
That passage was effectively applied by the Cour de Cassation in Appeal P08 14741, Diffusion Equipements Loisirs v Helge, 15 September 2009.
As to Italian law, Arnold J said at paras 178 and 179 of his judgment that he had concluded that the Actavis products did not infringe the Italian designation of the Patent on two grounds.
The first (which he only accepted with some hesitation) was because on its face the patent clearly demonstrated a conscious intention of the patentee to limit the claims to pemetrexed disodium.
The second ground was because if there was any doubt about that, it was amply confirmed by the prosecution history.
It is clear that (as one would expect) the Italian courts accept the doctrine of equivalents, and accordingly for the reasons given in paras 70 to 74 above, I would reject the first ground; and, for the reasons given in paras 91 to 93 above, I would reject the second ground also.
So far as Spanish law is concerned, it is common ground that the Spanish courts have followed the United Kingdom approach, which leads to the difficult question whether one should assume that they would follow this decision in modifying the Improver questions and in particular the second question.
I incline to the view that judicial comity would tend to suggest that the Spanish courts would follow this court in modifying the Improver questions, not least because this appears to render the UK courts and therefore the Spanish courts more consistent with the German and Dutch courts, and no more inconsistent with the French and Italian courts.
In a written note dated 10 July 2017, Actavis applied for what would amount to a reconsideration of the conclusion expressed in para 97 above, on the ground that the reasoning of the Spanish Tribunal Supremo in the Lundbeck decision, discussed in para 50 above, should lead to the opposite conclusion, namely that marketing Actaviss products in Spain would not infringe the Patent.
In my view, it is too late for Actavis to raise such an argument.
Lilly had sought to rely on the Lundbeck decision in its written case in this appeal, and Actavis had objected on the ground that the decision had been given after the Court of Appeal decision in these proceedings.
It seems to me that in these circumstances it would be wrong to permit Actavis to raise the Lundbeck decision to support their case, especially as they are seeking to do so after knowing the result of this appeal and the reasons for that result.
I am unimpressed by Actaviss argument that their application is nonetheless justified because the reasoning in para 97 above was not raised on this appeal.
Actaviss written case stated that Spanish law has been directly modelled on Catnic and Improver, and in paras 182 and 187 of his judgment on this case Arnold J effectively treated the Improver questions as part of Spanish law.
It appears to me that the conclusion that, if the UK Supreme Court modifies the Improver questions, the Spanish courts would adopt any such modification, was therefore within the scope of the argument raised in this Court.
Furthermore, I consider that it would be wrong for Actavis to be permitted to raise a new ground in support of their contention that their products would not infringe in Spain, after publication of our decision, which was done with their consent and at their instigation following receipt of our draft judgment which concluded that their products would infringe in Spain.
It is not as if Actavis had come across new information since they had agreed to that publication.
It is true that, as explained in para 2 above, Actaviss solicitors wrote to the Court very shortly after they received the draft judgment, but thereafter they had nearly a full 24 hours within which they could have withdrawn their agreement to publication of our decision.
In any event, there is obvious force in the simple point that, having agreed to publication of the decision in advance of the handing down of the judgment, they have to take the consequences.
I do not suggest that, in every case where the decision is published with the consent of the parties after they have seen the draft judgment, it would be impossible for either party to invite the court to change the decision, or any aspect of it.
However, it seems to me that, in the absence of a good reason, the interests of finality and certainty should prevail, and I do not consider that Actavis have come up with a good enough reason in this case.
It is right to add that I am by no means convinced that, even if we had permitted Actavis to re argue their case in relation to Spain, on the basis of the Lundbeck decision, I would have reached a different conclusion from that expressed in para 97 above.
Quite what constitutes a degree of predictability or a high probability when it comes to assessing whether the notional addressee would expect the variant to work must be fact sensitive.
Further, if, as seems likely but not, I accept, certain, the German, Dutch, French and Italian courts would all hold that Actaviss products infringed, there would have been much to be said for the view, which I have already expressed, that the Spanish courts would follow suit.
Accordingly, I would hold that the French, Italian and Spanish designations of the Patent are also directly infringed by the Actavis products.
Indirect infringement
In these circumstances, Actaviss cross appeal, which seeks to challenge the Court of Appeals conclusion that its products indirectly infringed does not, I think, arise in the sense that it has no practical effect on the parties (other, perhaps, than on the issue of costs).
However, as the point was fully argued, gave rise to a disagreement between the Court of Appeal and the trial judge, and can be dealt with shortly, it is appropriate to consider it.
Indirect infringement is provided for in section 60(2) of the 1977 Act, and it states that a person infringes a patent if, without the patentees consent, he supplies or offers to supply in the United Kingdom to someone not authorised by the patentee with any of the means, relating to an essential element of the invention, for putting the invention into effect when he knows, or it is obvious to a reasonable person in the circumstances, that those means are suitable for putting, and are intended to put, the invention into effect.
The reason why Lilly contends that, even if they did not directly infringe, the Actavis products would indirectly infringe is because, when they are supplied to a doctor or a pharmacist, they are, as Actavis would know, dissolved in a saline solution in order to enable them to be administered to patients.
Saline is a solution of common salt, ie sodium chloride, in water, and when common salt is dissolved in water, it separates into sodium cations and chloride anions.
Accordingly, when one of Actaviss products, say that containing pemetrexed dipotassium, is dissolved in saline, the solution contains pemetrexed anions and potassium cations plus sodium cations and chloride anions.
In those circumstances, argues Lilly, even if pemetrexed dipotassium would not of itself infringe if it was administered with vitamin B12, at least provided that the ratio of sodium ions to pemetrexed ions was at least 2:1, there will be infringement when it is administered in saline solution, because the solution which is administered will contain pemetrexed disodium.
The Court of Appeal, disagreeing with the Judge, acceded to Lillys argument on this point.
Actavis argue that a solution consisting of, or including, pemetrexed ions and sodium ions is not within the expression pemetrexed disodium in the Patent, because it is limited to the solid, or crystalline, chemical.
I agree with Floyd LJ in rejecting that argument.
There is no reason to think that the patentee intended to limit the expression in that way; quite the contrary.
It is clear that solubility was an important issue, and indeed that was one of the two main reasons on which Actavis rested their contention that their products did not infringe, as discussed in paras 24 to 25, 59, and 66 above.
Further, and even more in point, as Floyd LJ said, in the passages quoted in para 19 above the specification made it clear that references to pemetrexed disodium extended to that chemical in solution.
Actavis also argue that there is an inconsistency between the Court of Appeal holding, when considering direct infringement, that the notional addressee could not be assumed to know that pemetrexed dipotassium would dissolve, and holding, when considering indirect infringement, that pemetrexed dipotassium did in fact dissolve.
Even if I had not concluded that the notional addressee should be treated as knowing that pemetrexed dipotassium could dissolve, I would have rejected that argument which seems to me to involve a non sequitur.
By the time that they were ready to market their products, Actavis knew perfectly well that they were all soluble.
Actavis further argue that a solution of pemetrexed dipotassium dissolved in saline does not in any event contain pemetrexed disodium within the meaning of that term in the Patent; it is simply pemetrexed dipotassium dissolved in saline.
In my view that is a bad point.
If dissolving pemetrexed disodium in an aqueous solution of potassium chloride can be said to result in a solution containing pemetrexed disodium (as Actaviss argument impliedly accepts), then it must follow as a matter of elementary chemical logic that dissolving pemetrexed dipotassium in saline also result in a solution which contains pemetrexed disodium: the two solutions are chemically identical, as each would consist of potassium and sodium cations and chloride and pemetrexed anions in water.
Actavis additionally argue that it is irrational to hold that there could be indirect infringement because it would all depend on the solvent in which the Actavis product is dissolved, and, even if that solvent was saline, it would depend on the proportion of sodium ions and pemetrexed ions in the solution which would vary by reference to the weight of the patient.
The fact that infringement may depend on the nature of solvent and the relative amounts of ions in the solution does not seem to me to be irrational.
It is simply a result of the extent of the scope of protection afforded by the patent given that (as determined by the Court of Appeal) its claims are limited to pemetrexed disodium, which, when dissolved in water produces two sodium cations to every one pemetrexed anion.
Finally, Actavis argue that, rather than being used in the manufacture of a medicament as described in claim 1 of the Patent, pemetrexed disodium is part of the medicament.
Like the Court of Appeal, I do not agree.
The pemetrexed disodium comes into the manufacturing process rather later than it would if the original medicament included pemetrexed disodium rather than pemetrexed dipotassium, but that cannot alter the fact that, before it is administered to the patient, the medicament includes pemetrexed disodium and vitamin B12.
Accordingly, I would uphold the Court of Appeals determination that Actavis are liable to Lilly for indirect infringement in the United Kingdom with respect to their products if Actavis know, or it is obvious in the circumstances, that ultimate users will dilute in saline or at least Actavis would be liable for indirect infringement if they were not liable for direct infringement.
The Court of Appeal said that this conclusion would apply equally to France, Italy, and Spain, and there is no challenge to that from Actavis.
Conclusion
For these reasons, I would (i) allow Lillys appeal in direct infringement and hold that the Actavis products infringe the Patent in the United Kingdom, and also in France, Italy and Spain, (ii) dismiss Actaviss cross appeal on the basis that if its products did not directly infringe, they would indirectly infringe to the extent held by the Court of Appeal.
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The appeal concerns whether three products manufactured by the Actavis group of companies (Actavis) would infringe a patent whose proprietor is Eli Lilly & Company (Lilly), namely European Patent (UK) No 1 313 508 and its corresponding designations in France, Italy and Spain.
The patent relates to the use of the chemical pemetrexed.
This has therapeutic effects on cancerous tumours, but, when used on its own it can have seriously damaging side effects.
The Patent discloses that these side effects can largely be avoided if a compound called pemetrexed disodium is administered together with vitamin B12.
Such a medicament has been successfully marketed, under the brand name Alimta, by Lilly since 2004.
Actavis proposed products (the Actavis products) involve pemetrexed compounds being used together with vitamin B12 for cancer treatment; however, rather than pemetrexed disodium, the active ingredient is (a) pemetrexed diacid; (b) pemetrexed ditromethamine, or (c) pemetrexed dipotassium.
Actavis contend that because they intend to use the Actavis products which do not include pemetrexed disodium, the claims of the Patent would not be infringed.
At trial, Arnold J decided that none of the Actavis products would directly or indirectly infringe the Patent in the UK, or in France, Italy or Spain [2015] RPC 6.
The Court of Appeal allowed Lillys appeal to the limited extent of holding that there would be indirect infringement in the four jurisdictions, but agreed with the Judge that there would be no direct infringement [2015] Bus LR 68.
Lilly appeals to the Supreme Court against the holding that there would be direct infringement and Actavis cross appeal against the holding that there would be no indirect infringement.
The appeal raises the issue of the correct approach to the interpretation of patent claims, and the requirement of the European Patent Convention 2000 (EPC) to take account of so called equivalents.
It also raises the issue of the extent to which it is permissible to make use of the prosecution history of a patent when determining its scope.
The issue on the cross appeal is whether the application of the law of contributory infringement would justify a finding of indirect infringement in this case.
The Supreme Court unanimously allows Lillys appeal and holds that the Actavis products would infringe the Patent in the United Kingdom, and in France, Italy and Spain.
Actavis cross appeal is unanimously dismissed, so that, if its products would not directly infringe, they would indirectly infringe as held by the Court of Appeal.
On direct infringement, Article 1 of the Protocol on the Interpretation of Article 69(1) EPC provides that the scope of protection afforded to a patentee is not to be limited by the literal meaning of the claims.
Article 2 provides that there can be a difference between the interpreted scope of a claim and the scope of protection afforded by it, and when considering the scope of protection equivalents must be taken in to account [33 34].
Further guidance is needed to guide a court through this exercise [53].
Whether an item directly infringes a patent is best approached by addressing two questions through the eyes of the notional addressee of the patent, i.e. the person skilled in the relevant art, namely: 1.
Does the item infringe any of the claims as a matter of normal interpretation; and if not, 2.
Although the item may be characterised as a variant, does it nonetheless infringe because it varies from the invention in a way which is immaterial? If the answer to either question is yes, there is an infringement; otherwise there is not [54].
On question 1, according to normal principles of interpretation the Actavis products do not infringe the Patent [58].
Question 2 raises the issue of equivalents and poses a more difficult question of principle [59].
The following questions should be considered by a court as a guide to the question of materiality [66]: 1.
Notwithstanding that it is not within the literal meaning of the relevant claim(s) of the patent, does the variant achieve substantially the same result in substantially the same way as the invention, i.e. the inventive concept revealed by the patent? 2.
Would it be obvious to the person skilled in the art, reading the patent at the priority date, but knowing that the variant achieves substantially the same result as the invention, that it does so in substantially the same way as the invention? 3.
Would such a reader of the patent have concluded that the patentee nonetheless intended strict compliance with the literal meaning of the relevant claim(s) of the patent was an essential requirement of the invention? To establish infringement where there is no literal infringement, a patentee would have to establish that the answer to the first two questions was yes and the answer to the third was no [66].
The Actavis products directly infringe the Patent [68].
They all involve a medicament containing the pemetrexed anion and vitamin B12, and achieve substantially the same result in substantially the same way as the invention.
Once he or she knew that the Actavis products achieved substantially the same result as the invention, the notional addressee of the Patent would have thought it obvious that this was so, particularly as he or she would have regarded investigating whether pemetrexed free acid, pemetrexed ditromethamine or pemetrexed dipotassium worked as a routine exercise [69].
On the third question, the Court of Appeal had placed too much weight on the words of the claim.
It is very unlikely that the notional addressee would have concluded that the patentee could have intended to exclude any pemetrexed salts other than pemetrexed disodium from the scope of protection [70 74].
Direct infringement is also established under French, Spanish and Italian law [92 102].
Recourse to the contents of the prosecution file by a UK court will only be appropriate in limited circumstances, particularly if they clearly resolve a genuine ambiguity in the patent or it would be contrary to the public interest to disregard the file [87 88].
The contents of the file do not justify departing from the conclusion in this case [89].
In the circumstances, Actavis cross appeal does not arise.
However, the Supreme Court would have upheld the Court of Appeals determination that Actavis are liable to Lilly for indirect infringement in the United Kingdom [103 112].
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Recitals 4, 5 and 7, taken together with Article 1, of Council Directive 2003/9/EC (the Reception Directive), encapsulate its purpose.
They respectively provide: The recitals (4) The establishment of minimum standards for the reception of asylum seekers is a further step towards a European asylum policy. (5) This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union.
In particular, this Directive seeks to ensure full respect for human dignity and to promote the application of Articles 1 and 18 of the said Charter [inviolability of human dignity and the guarantee of the right to asylum with due respect to the Geneva Convention 28 July 1951 and the Protocol of 31 January 1967 relating to the status of refugees] (7) Minimum standards for the reception of asylum seekers that will normally suffice to ensure them a dignified standard of living and comparable living conditions in all Member States should be laid down.
Article 1 Purpose The purpose of this Directive is to lay down minimum standards for the reception of asylum seekers in Member States.
Notwithstanding the seemingly clear terms of these provisions, the appellant in these cases argues that where an asylum seeker makes a second application for asylum after his first application has been finally rejected, he is not entitled to the benefits that are conferred by the Reception Directive.
Those benefits include (in Article 11) certain provisions in relation to entitlement to be employed while awaiting the outcome of an asylum application.
The Secretary of States argument was rejected by the Court of Appeal (Regina (ZO (Somalia) and others) v Secretary of State for the Home Department [2009] 1 WLR 2477, [2009] EWCA Civ 442) in its judgment delivered on 20 May 2009, allowing appeals by ZO (Somalia) and MM (Burma) from a decision of HH Judge Mackie QC of 25 June 2008.
The Court of Appeal had also dismissed an appeal by the Secretary of State from a decision of Blake J of 11 December 2008 in the case of DT (Eritrea).
Originally the appellant had appealed to this court against all three decisions of the Court of Appeal.
Subsequently, however, DT was granted indefinite leave to remain in this country and, with the agreement of all the parties, the Secretary of State was permitted to withdraw the appeal in that case.
The facts and history of proceedings
ZO is a Somali national who arrived in the United Kingdom in 2003.
She applied for asylum.
That application was refused on 17 February 2004.
A number of challenges were made to that refusal but the last of these finally foundered towards the end of 2004.
On 31 March 2005 the Immigration Appeal Tribunal issued its determination in the case of NM and others (Lone Women Ashraf) (Somalia) CG [2005] UKIAT 00076.
On 9 May 2005, solicitors acting on behalf of ZO made further submissions to the Secretary of State based on the IATs determination in the NM case.
It was contended that this amounted to a fresh claim for asylum within the meaning of rule 353 of the Immigration Rules.
AT the time of the hearing of this appeal, the Secretary of State had yet to decide whether leave to enter the UK should be given to ZO or whether the further submissions made on her behalf constitute a fresh claim.
On 27 February 2007 ZO was granted permission to apply for judicial review to challenge the delay in dealing with her further submissions.
On 5 June 2007 she wrote to the Secretary of State asking for permission to work.
She advanced this claim on the grounds of hardship and suggested that, if it could not be granted, she would seek priority for her application for judicial review.
The Secretary of State refused to prioritise consideration of ZOs further submissions and on 31 August 2007 refused permission to work.
ZO renewed her application for permission to work on 8 October 2007, referring to rule 360 of the Immigration Rules (which deals with applications for permission to work) but this was rejected on 15 October 2007, on the ground that her application for asylum had been refused on 17 February 2004.
Prompted by consideration of the decision of the High Court in R (FH) v Home Secretary [2007] EWHC 1571 (Admin), ZO conceded the ground of her application in relation to delay but in November 2007 she was given permission to amend the judicial review proceedings in order to challenge the refusal of permission to work under rule 360 of the Immigration Rules.
The gravamen of the grounds of this latter challenge was that she had made an asylum claim on 9 May 2005.
At an oral hearing on 30 January 2008, Stanley Burnton J set aside the grant of permission on the delay ground and refused permission to apply for judicial review on the Secretary of States refusal of consent to her taking up employment.
She was subsequently given permission to appeal the dismissal of her application in relation to the employment ground and by a consent order of 7 May 2008, the Court of Appeal granted permission to apply for judicial review.
This was the application that was subsequently heard and dismissed by HH Judge Mackie QC.
MM is a Burmese national who made an application for asylum after he arrived in the United Kingdom in 2004.
That application was refused and all attempts to challenge the refusal had failed by March 2005.
On 9 May 2005 he also made further submissions which, he said, amounted to a fresh claim based on new evidence.
Again in his case the Secretary of State has not yet decided whether to grant MM leave to enter the United Kingdom or whether he has made a fresh claim for asylum.
On 27 July 2007 MM wrote to the Secretary of State asking for permission to work and referring to rule 360.
This application was refused on 26 September.
On 25 October 2007 MM applied for judicial review to challenge the delay in considering his further submissions and to challenge the refusal of permission to work.
As in the case of ZO he based this on the circumstance that he had made an asylum application some 2 years and 5 months previously.
On 10 March 2008, applying the decision in FH, the High Court refused permission to apply for judicial review on the delay ground but granted permission on the refusal of consent to take up employment.
This application was also dismissed by Judge Mackie and allowed by the Court of Appeal.
The issues
On the hearing of the appeal to this court two principal issues were identified.
The first was whether Article 11 of the Reception Directive applies to a person who has had an application for asylum in the United Kingdom finally determined against him when he makes a further application for asylum.
Article 11 (2) of the Reception Directive is the critical provision in this instance.
It provides: If a decision at first instance has not been taken within one year of the presentation of an application for asylum and this delay cannot be attributed to the applicant, Member States shall decide the conditions for granting access to the labour market for the applicant.
The second main issue was whether this court should make a request of the Court of Justice for the European Union under Article 267 of the Treaty on the Functioning of the European Union (TFEU) for a preliminary ruling on the proper interpretation of the Reception Directive, in particular whether it is a measure intended to cover only the first application for asylum made by an individual to a Member State.
A subsidiary argument was made in the printed case for MM and supported by ZO in her printed case.
It was contended that, even if the Secretary of States claimed interpretation of the Reception Directive was accepted, the policy of refusing permission to work was in violation of Article 8 of the European Convention on Human Rights and Fundamental Freedoms.
Blake J had dealt with this argument in the case of DT.
He held that the Secretary of States policy was unlawful as an unjustified interference with the right to respect for a private life.
The Court of Appeal did not address the Article 8 issue because of its conclusion on the reach of the Reception Directive.
Notwithstanding this, Mr Fordham QC for MM submitted that this court should deal with the Article 8 argument and uphold the reasoning of Blake J.
The court indicated that, if we required argument on the Article 8 point, an opportunity would be given to present it.
In the event, however, since we have reached the same conclusion as did the Court of Appeal on the interpretation of the Reception Directive, this is not necessary.
The case for the Secretary of State
For the appellant Mr Tam QC submitted that the clear purpose of the Reception Directive was to devise minimum standards for those who were received by Member States for the first time as asylum seekers.
He drew particular attention to the use of the expression reception in Article 1 and the title of the Directive.
This, he said, indicated that the Directive was concerned with the initial encounter between the asylum seeker and the receiving State.
That this was its purpose was reinforced by consideration of the corresponding words in some of the other Community languages, for example, opvang, accueil, aufnahme, accoglienza, acogida which translated to acceptance, reception or welcome.
Mr Tams second argument was that the Directive had a settled meaning at the time of its adoption.
That meaning could not be influenced by subsequent EU measures such as Directive 2004/83/EC of 29 April 2004 (the Qualifications Directive), Council Directive 2005/85/EC of 1 December 2005 (the Procedures Directive) or Council Regulation 343/2003/EC (the Dublin Regulation) adopted on 18 February 2003.
The Court of Appeal had been wrong, Mr Tam said, to have had regard to these subsequent measures in reaching a conclusion on the interpretation to be applied to the Reception Directive.
Mr Tam also argued that support for the interpretation that he advanced was to be found in various of the specific provisions of the Reception Directive.
He suggested that, if the literal interpretation that the respondents contended for was adopted, a number of anomalies in the application of those provisions would be produced.
He further claimed that the scheme that the Directive contained for dealing with abuse was inapt for repeat applications.
If the Reception Directive was held to apply to such applications there was no effective mechanism to deal with abuse of the system.
The enactment of the Directives, the Immigration Rules and the Dublin Regulation
The Reception Directive was made pursuant to the power conferred by Article 63 (1) (b) of the Treaty Establishing the European Community (TEC).
Article 63 was introduced to the TEC by the Treaty of Amsterdam which was concluded on 2 October 1997 and came into force on 1 May 1999.
So far as is material, Article 63 provides: The Council, acting in accordance with the procedure referred to in Article 67, shall, within a period of five years after the entry into force of the Treaty of Amsterdam, adopt: 1. measures on asylum, in accordance with the Geneva Convention of 28 July 1951 and the Protocol of 31 January 1967 relating to the status of refugees and other relevant treaties, within the following areas: (a) criteria and mechanisms for determining which Member State is responsible for considering an application for asylum submitted by a national of a third country in one of the Member States, (b) minimum standards on the reception of asylum seekers in Member States, (c) minimum standards with respect to the qualification of nationals of third countries as refugees, (d) minimum standards on procedures in Member States for granting or withdrawing refugee status;
Quite clearly, a comprehensive charter dealing with the various aspects of asylum applications was contemplated.
This circumstance alone suggests that an identity of purpose for all the measures adopted to implement the proposed scheme was to be expected and, as we shall see, this conclusion is reinforced by examining the legislative history of those measures.
The Reception Directive was adopted on 27 January 2003 and by Article 26 (1) it was required to be transposed into national law by 6 February 2005.
Immigration Rules intended to implement the Directive were laid before Parliament on 11 January 2005.
Rules 360 and 360A provide: 360 An asylum Applicant may apply to the Secretary of State for permission to take up employment which shall not include permission to become self employed or to engage in a business or professional activity if a decision at first instance has not been taken on the Applicant's asylum application within one year of the date on which it was recorded.
The Secretary of State shall only consider such an application if, in his opinion, any delay in reaching a decision at first instance cannot be attributed to the Applicant. 360A If an asylum Applicant is granted permission to take up employment under Rule 360 this shall only be until such time as his asylum application has been finally determined.
Rules 353 and 353A of the Immigration Rules deal with the question of whether submissions made after an asylum claim has been refused should be treated as a fresh claim.
They provide: 353 When a human rights or asylum claim has been refused or withdrawn or treated as withdrawn under paragraph 333C of these Rules 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: had not already been considered; and (i) (ii) taken together with the previously considered material, created a realistic prospect of success, notwithstanding its rejection.
This paragraph does not apply to claims made overseas. 353A Consideration of further submissions shall be subject to the procedures set out in these Rules.
An Applicant who has made further submissions shall not be removed before the Secretary of State has considered the submissions under paragraph 353 or otherwise.
This paragraph does not apply to submissions made overseas.
The Secretary of State does not treat as an asylum seeker a person who has made a new application for asylum until that application has been accepted as a fresh claim.
Once it is accepted, however, the asylum seeker enjoys the same rights of appeal as those given to a person whose first claim for asylum in this country has been rejected.
He is also given the right to apply for permission to work (PTW).
The Enforcement Instructions and Guidance Manual (the manual) issued by the Secretary of State provides in paragraph 23.10.4: Permission to work Fresh claims If a failed asylum seeker makes a fresh asylum claim then provided it is accepted as a fresh claim the procedures set out above should be followed, i.e. the Claimant will be entitled to apply for PTW provided he satisfies the criteria in Paragraph 360 of the Rules, otherwise any request for PTW would be a mandatory refusal.
If the new asylum claim is not accepted as a fresh claim the person will have no entitlement to apply for PTW.
As a matter of general practice the Secretary of State does not make a preliminary decision on whether a repeat application constitutes a fresh claim.
Instead, the decision on whether the new application is to be treated as a fresh claim is made at the same time as the decision to either allow or reject the claim.
On this account, the Court of Appeal unsurprisingly decided that paragraph 23.10.4 was unlikely to benefit a subsequent asylum seeker.
It was also concluded that the fact that para 23.10.4 of the manual gives the potential benefit of article 11 to a subsequent asylum seeker whose claim has been accepted as a fresh claim does not assist in the interpretation of the Reception Directive.
A short time after the adoption of the Reception Directive, on 18 February 2003, the Dublin Regulation was adopted.
This established the criteria and mechanisms for determining which Member State should have the responsibility of examining an asylum application lodged in one of the Member States by a third country national.
It came into force on 17 March 2003.
The Qualification Directive was adopted on 29 April 2004.
It prescribed minimum standards for the qualification and status of third country nationals or stateless persons as refugees or as persons who otherwise need international protection and the content of the protection to be granted to them.
The Procedures Directive was adopted on 1 December 2005.
As Mr Tam pointed out, this was some ten months after the Reception Directive was required to be transposed into national law.
The Procedures Directive set out minimum standards on procedures in Member States for granting and withdrawing refugee status.
The interpretation of application for asylum in the Reception and Procedures
Directives
Article 2 of the Reception Directive contains definitions of the expressions, application for asylum and applicant or asylum seeker as follows: (b) 'application for asylum' shall mean the application made by a third country national or a stateless person which can be understood as a request for international protection from a Member State, under the Geneva Convention.
Any application for international protection is presumed to be an application for asylum unless a third country national or a stateless person explicitly requests another kind of protection that can be applied for separately; (c) 'applicant' or 'asylum seeker' shall mean a third country national or a stateless person who has made an application for asylum in respect of which a final decision has not yet been taken;
Virtually identical definitions are contained in Article 2 of the Procedures Directive: (b) "application" or "application for asylum" means an application made by a third country national or stateless person which can be understood as a request for international protection from a Member State under the Geneva Convention.
Any application for international protection is presumed to be an application for asylum, unless the person concerned explicitly requests another kind of protection that can be applied for separately; (c) "applicant" or "applicant for asylum" means a third country national or stateless person who has made an application for asylum in respect of which a final decision has not yet been taken;
There can be no doubt that subsequent applications for asylum come within the definitions contained in Article 2 of the Procedures Directive and Mr Tam did not seek to argue otherwise.
Subsequent applications are mentioned in recital 15 of the Procedures Directive and in Articles 7 (2), 23 (4) (h), 32, 34 and 39 (1) (c).
It is clear that the scheme of the Directive is workable only if the definition covers repeat applications.
In particular, Article 32 gives power to Member States to undertake a preliminary examination of a subsequent application in order to ascertain whether new elements or findings have arisen or have been presented by the applicant which touch on the question whether he or she qualifies as a refugee.
This unquestionably means that a subsequent application is an application for asylum within the meaning given to that term in Article 2 (b).
On the Secretary of States case, the expression application for asylum must be given a markedly different meaning in the Reception Directive from that in the Procedures Directive.
Mr Tam seeks to dismiss this apparent anomaly by suggesting that the purpose of each of the Directives is quite different.
By way of preliminary observation on this claim, one may note that, if it is correct, it is surprising that the draftsman of the later measure did not employ a different formulation for the definitions of the terms application for asylum and applicant for asylum from those used in the Reception Directive.
If Mr Tam is right, using almost identical language was, at best, highly misleading.
But it is even more surprising, if the Reception Directive was not intended to apply to subsequent applications, that the text of the Directive did not make it unequivocally clear that these would not be covered.
It is in any event clear that the purpose of both Directives (and, incidentally the Qualification Directive and the Dublin Regulation) is the same.
Apart from mirroring the definitions contained in Article 2 of the Reception Directive, the critical recitals in the Procedures Directive bear a striking resemblance to those in the Reception Directive.
While Mr Tam may be right that, as a matter of general principle, later legislation should not operate to change the established meaning of an earlier enactment, the manner in which the later legislation is framed may provide an insight into the proper interpretation of the earlier instrument.
Whatever may be said on this matter on a theoretical basis, however, the matter is put beyond any doubt by an examination of the legislative history of the two measures.
Much was made by Mr Tam of the fact that the Procedures Directive was a much later instrument than the Reception Directive but it is quite clear that both Directives shared if not an exactly time coincident genesis at least a broadly common ancestry.
In fact, the proposal for a Council Directive on minimum standards on procedures in Member States for granting and withdrawing refugee status was first made on 20 September 2000 whereas the proposal for the Reception Directive was published in the Official Journal of the European Union on 31 July 2001 (Official Journal 213E, 31/07/2001 P. 0286 0295).
The proposal for the Reception Directive contained an overview of the standards that the Directive would be designed to cover.
Among these were the reception conditions that should be granted, in principle, at all stages and in all kinds of asylum procedures (the emphasis has been added).
The most significant portion of the proposal document, however, is found in the part that deals with definitions.
The proposed definition for application for asylum is in broadly similar terms to those that ultimately were enacted.
The proposal for Article 2 (c) is particularly illuminating.
It is in these terms: Applicant or applicant for asylum means a third country national or a stateless person who has made an application for asylum in respect of which a final decision has not yet been taken.
A final decision is a decision in respect of which all possible remedies under Council Directive //EC [on minimum standards on procedures in Member States for granting and withdrawing refugee status] have been exhausted;
From this it is indisputably clear that it had always been intended not only that the definitions of applicant for asylum in both Directives should be congruent with one another but also that an application should not be regarded as having been subject to a final decision until all possible remedies had been pursued and determined.
This can only mean that subsequent applications would fall within the purview of the definitions of application for asylum and asylum seeker in the Reception Directive.
If further proof that this was so was needed, it is provided in a document which sets out the suggested amendments of the proposal document.
Amendment 114 deals with Article 2 (c).
It states: (c) Applicant means a third country national or a stateless person who has made an application for asylum or another form of international protection in respect of which a final decision has not yet been taken.
A final decision is a decision in respect of which all possible remedies have been exhausted (original emphasis but underlining added).
I therefore conclude that an application for asylum in the Reception Directive must be interpreted to include a subsequent application made after an original application has been determined and that the term asylum seeker should be construed accordingly to include a person who makes such a subsequent application.
This conclusion seems to me to chime well with the spirit of the recitals to the Directive, particularly recital 7.
The Directive seeks to set minimum standards for the reception of asylum seekers that will normally suffice to ensure them a dignified standard of living.
It would be, in my view, anomalous and untoward that an applicant who makes a subsequent application after his first application has been finally disposed of should be denied access to standards that are no more than the minimum to permit him to live with some measure of dignity.
Moreover, if the Directive was found not to apply to subsequent applications for asylum this would give rise to a surprising incongruity.
First time applications for asylum made long after an asylum seeker arrived in this country would be governed by the Directive but a perfectly genuine applicant who makes a subsequent application, perhaps within a relatively short time of arrival, would be denied the benefits that it affords.
Article 3 applies the Directive to all third country nationals and stateless persons who make an application for asylum at the border or in the territory of a Member State.
It is clear, therefore, that a person who has been in the United Kingdom for some time can apply for asylum and, on the interpretation that the appellant espouses, such a person would be entitled to the benefits of the Reception Directive whereas an applicant who has made an application immediately on arrival would lose those benefits forever after the first application has been determined.
The Court of Appeal considered that the strongest argument in favour of the interpretation advanced by the Secretary of State was that the word reception had been used so prominently in the Directive.
I have therefore considered that argument carefully but, as Mr Fordham pointed out, one can be received, or have an application received, or return to reception more than once.
The Directive stipulates what must happen when one is received into the asylum system.
There is nothing unusual or untoward in the notion that one can be received into that system on more than one occasion.
I do not consider that the corresponding words of the other Community languages on this point detract from that conclusion.
One can be received, accepted or even welcomed several times.
I would therefore dismiss the appeals.
Since, however, much of the argument for the appellant was devoted to the anomalies that, it was said, would arise if the Reception Directive was held to apply to subsequent applications, it is right that I should deal, albeit briefly, with those claims.
By way of preamble, however, I should observe that, while seeking to deduce the purpose of an item of legislation from claimed difficulties that its literal implementation will involve is not an illegitimate exercise, it is one that must be approached with caution.
Where a different purpose from that canvassed is unmistakably clear from, for instance, the text of the instrument and its enacting history, supposed problems that may arise from giving effect to that purpose cannot be permitted to frustrate the intention of the legislative body.
The claimed anomalies
Articles 5 and 6 of the Reception Directive deal respectively with information and documentation that must be given to an applicant for asylum.
Mr Tam pointed out that there is no reference in either article to subsequent applications and it is therefore to be supposed that, if the Reception Directive applies to these, the same information and documentation will have to be provided on each occasion.
In order to assess the administrative burden that Mr Tam suggests will thereby be cast on the Home Department, it is necessary to look at the actual provisions.
Article 5 is in the following terms: Article 5 Information 1.
Member States shall inform asylum seekers, within a reasonable time not exceeding fifteen days after they have lodged their application for asylum with the competent authority, of at least any established benefits and of the obligations with which they must comply relating to reception conditions.
Member States shall ensure that applicants are provided with information on organisations or groups of persons that provide specific legal assistance and organisations that might be able to help or inform them concerning the available reception conditions, including health care. 2.
Member States shall ensure that the information referred to in paragraph 1 is in writing and, as far as possible, in a language that the applicants may reasonably be supposed to understand.
Where appropriate, this information may also be supplied orally.
The information that is required to be provided under this Article is likely to be of a routine nature and one may reasonably anticipate that in most cases it will involve no more than issuing precisely the same material as was provided when the first application was made.
Presumably, it could be conveniently held on file and generated more or less automatically on receipt of a second or subsequent application.
On that basis, it is difficult to accept that this would impose a substantial logistical burden on the authorities.
In any event, it is not in dispute that subsequent applicants for asylum must be provided with information under Article 10 (1) (a) of the Procedures Directive which provides: 1.
With respect to the procedures provided for in Chapter III, Member States shall ensure that all applicants for asylum enjoy the following guarantees: (a) they shall be informed in a language which they may reasonably be supposed to understand of the procedure to be followed and of their rights and obligations during the procedure and the possible consequences of not complying with their obligations and not cooperating with the authorities.
They shall be informed of the time frame, as well as the means at their disposal for fulfilling the obligation to submit the elements as referred to in Article 4 of Directive 2004/83/EC.
This information shall be given in time to enable them to exercise the rights guaranteed in this Directive and to comply with the obligations described in Article 11;
To have to provide the further information that Article 5 of the Reception Directive requires does not seem to me to be a significant encumbrance.
There has to be a relay of information in any event.
The extra material that has to be provided will in most cases have been prepared already.
In those circumstances, I find it impossible to accept that the requirement to supply the Article 5 information again could be described as an anomaly.
Moreover, as Mr Fordham put it, a renewed entitlement to information is not in the least absurd.
If it is considered that the provision of the information on the first application for asylum is vital, why should it not be considered important on subsequent applications?
Article 6 of the Reception Directive provides: Documentation 1.
Member States shall ensure that, within three days after an application is lodged with the competent authority, the applicant is provided with a document issued in his or her own name certifying his or her status as an asylum seeker or testifying that he or she is allowed to stay in the territory of the Member State while his or her application is pending or being examined.
If the holder is not free to move within all or a part of the territory of the Member State, the document shall also certify this fact. 2.
Member States may exclude application of this Article when the asylum seeker is in detention and during the examination of an application for asylum made at the border or within the context of a procedure to decide on the right of the applicant legally to enter the territory of a Member State.
In specific cases, during the examination of an application for asylum, Member States may provide applicants with other evidence equivalent to the document referred to in paragraph 1. 3.
The document referred to in paragraph 1 need not certify the identity of the asylum seeker. 4.
Member States shall adopt the necessary measures to provide asylum seekers with the document referred to in paragraph 1, which must be valid for as long as they are authorised to remain in the territory of the Member State concerned or at the border thereof. 5.
Member States may provide asylum seekers with a travel document when serious humanitarian reasons arise that require their presence in another State.
The provision of a document that confirms the holder as an asylum seeker is obviously important to any applicant for asylum.
Without it, he or she is liable to be removed from the jurisdiction.
So far from being anomalous that this should be provided to someone who has made a subsequent application for asylum, it seems to me that, in order to forestall removal, the availability of such a document is imperative so that the applicants continued entitlement to remain in the jurisdiction may be established.
I do not therefore accept that the need to provide documentation under Article 6 on subsequent applications can be characterised as irregular or anomalous.
Furthermore, there is no requirement under the Procedures Directive to supply the documentation specified by Article 6 of the Reception Directive.
Plainly, an asylum seeker who makes a subsequent application must be entitled to remain in the jurisdiction in which the application is made until the procedures provided for in the Procedures Directive have been completed.
This is a clear indication that Article 6 of the Reception Directive was intended to apply to subsequent applications for asylum and, by the same token, an obvious sign that the Procedures Directive was drafted on the assumption that this was so.
Otherwise, one would have expected that the Directive which was enacted later would have contained provision for the supply of documentation that would have protected the asylum seeker from removal.
The next avowed anomaly that Mr Tam identified was in the application of Article 9.
It provides that Member States may require medical screening for applicants on public health grounds.
He suggested that this power makes sense only in the context of an initial encounter between an asylum seeker and a Member State.
Properly understood, the appellants complaint about this Article being applied to subsequent applications, is that it is unnecessary rather than anomalous for this to happen.
Even if this is so, it is contrived to argue that because medical screening is not necessary for subsequent applications for asylum, it must be taken that the entire Reception Directive should be held not to apply to such applications.
This is a power to be used when required and it is entirely unsurprising that it is expressed in the general and pithy way in which it appears in the Directive.
The assertion made by the appellant in relation to Article 10 falls into essentially the same category.
It provides: Schooling and education of minors 1.
Member States shall grant to minor children of asylum seekers and to asylum seekers who are minors access to the education system under similar conditions as nationals of the host Member State for so long as an expulsion measure against them or their parents is not actually enforced.
Such education may be provided in accommodation centres.
The Member State concerned may stipulate that such access must be confined to the State education system.
Minors shall be younger than the age of legal majority in the Member State in which the application for asylum was lodged or is being examined.
Member States shall not withdraw secondary education for the sole reason that the minor has reached the age of majority. 2.
Access to the education system shall not be postponed for more than three months from the date the application for asylum was lodged by the minor or the minor's parents.
This period may be extended to one year where specific education is provided in order to facilitate access to the education system. 3.
Where access to the education system as set out in paragraph 1 is not possible due to the specific situation of the minor, the Member State may offer other education arrangements.
The appellant is unquestionably right that some of the provisions contained in this Article cannot be fitted comfortably into second time applications.
The power to postpone access to education, for instance, provided for in para 2 of the Article cannot have been intended to be exercisable by the Member State on more than one occasion.
But this is not a sound basis on which to reason that, as a consequence, it cannot have been intended that the Reception Directive should apply to subsequent asylum applications.
The Article should be understood for what it is a general purpose provision setting out various duties and powers covering a variety of circumstances.
It would perhaps have been preferable if the Article had stated which of its parts should not apply to subsequent applications but the absence of such a statement does not establish that those applications are not covered by the Directive.
I have concluded therefore that none of the claimed anomalies (or their collective impact) constitutes a reason for believing that it was intended that the Reception Directive should not apply to subsequent applications for asylum.
I am reinforced in that view by the consideration that, if the Reception were held not to apply, some decidedly curious consequences would follow.
For instance, the duties under Article 8 of the Directive (to maintain as far as possible family unity) and under Article 13 (2) (to ensure a standard of living adequate for the health of applicants and capable of ensuring their subsistence) and 15 (1) (the provision of necessary health care) would not apply to those who make subsequent applications for asylum.
When one considers that many of these will be genuine applicants, it is impossible to believe that it was intended that they should not have access to these basic amenities and facilities.
Mr Tam submitted that, if the Reception Directive is held to apply to subsequent applications, the potential for abuse of the system of applications for asylum is greatly increased.
Wholly unmeritorious claims would be put forward by applicants who saw the opportunity of not only delaying their removal but also of gaining access to the benefits that the Directive confers.
This argument was rejected by the Court of Appeal on, according to Mr Tam, two grounds first that administrative problems because of unmeritorious claims should not determine the proper interpretation to be given to the Directive and, second, that abuse of the system by lodging subsequent applications was sufficiently catered for by Article 16 of the Directive which provides: Reduction or withdrawal of reception conditions 1.
Member States may reduce or withdraw reception conditions in the following cases: (a) where an asylum seeker: abandons the place of residence determined by the competent authority without informing it or, if requested, without permission, or does not comply with reporting duties or with requests to provide information or to appear for personal interviews concerning the asylum procedure during a reasonable period laid down in national law, or has already lodged an application in the same Member State.
When the applicant is traced or voluntarily reports to the competent authority, a duly motivated decision, based on the reasons for the disappearance, shall be taken on the reinstallation of the grant of some or all of the reception conditions; (b) where an applicant has concealed financial resources and has therefore unduly benefited from material reception conditions.
If it transpires that an applicant had sufficient means to cover material reception conditions and health care at the time when these basic needs were being covered, Member States may ask the asylum seeker for a refund. 2.
Member States may refuse conditions in cases where an asylum seeker has failed to demonstrate that the asylum claim was made as soon as reasonably practicable after arrival in that Member State. 3.
Member States may determine sanctions applicable to serious breaching of the rules of the accommodation centres as well as to seriously violent behaviour. 4.
Decisions for reduction, withdrawal or refusal of reception conditions or sanctions referred to in paragraphs 1, 2 and 3 shall be taken individually, objectively and impartially and reasons shall be given.
Decisions shall be based on the particular situation of the person concerned, especially with regard to persons covered by Article 17, taking into account the principle of proportionality.
Member States shall under all circumstances ensure access to emergency health care. 5.
Member States shall ensure that material reception conditions are not withdrawn or reduced before a negative decision is taken.
Systemic difficulties which the interpretation adopted by the Court of Appeal would create were not advanced in order to influence the choice of interpretation, Mr Tam claimed, but to demonstrate that an interpretation that leads to such difficulties is not consistent with the purpose of the Reception Directive.
As a general principle, it is of course correct that difficulties in implementing legislation may provide a useful guide to the identification of the true purpose of an enactment but where, as here, the purpose of the Directive is unmistakably clear, the fact that this may give rise to administrative difficulties cannot impel an interpretation which is inconsistent with that purpose.
It appears to me that Hooper LJ was saying no more when he observed in para 70 that he would be loath to interpret the Reception Directive restrictively because of the administrative problems which this country faces dealing with the backlog.
It is, I think, clear that the impact of Article 16 will fall principally on first time applications for asylum.
I consider that there is force in the appellants argument that the first and second tirets of Article 16 (1) (a) cannot sensibly be applied to subsequent applications.
Mr Tam accepted, however, that the third tiret could perform an effective attenuation of abuse but he characterised this as a bootstrap argument.
In other words, just because the third tiret can be applied to those who re apply for asylum after their first application has been finally determined, this is not a reason to expand the overall relevance of the Directive to subsequent applications.
This argument is eclipsed, however, by the determination that, for the reasons given earlier, the Directive does apply to subsequent applications.
Once that position is reached, the efficacy albeit limited of Article 16 (1) (a) to subsequent applications emerges.
Mr Tam is also undoubtedly right in saying that Article 16 (2) does not apply to subsequent applications but his submission on this point is met by his own bootstrap argument.
Simply because one aspect of a particular provision is not capable of adaptation to a particular species of application it does not follow that it must fall outside the Directives ambit.
In other words, although the principal focus of Article 16 is on first applications, it should not be assumed that it was not intended to cover subsequent applications as well.
Article 16 (4) requires individual attention to be given to decisions for reduction, withdrawal or refusal of reception conditions and the appellant has argued that the detailed assessment that this will entail would impose an onerous burden on the immigration authorities which would in turn limit the scope for withdrawal or reduction of reception conditions.
I cannot accept this argument.
There does not appear to be any reason in principle why the State should not be able to adopt what the respondents described as the screening short cut of accelerated determinations, particularly in view of the inroads which Mr Tam has told us are being made in the backlog of repeat applications.
The answer to the possibility of abuse in the making of repeat applications must surely lie in the devising of streamlined procedures for identifying and rejecting promptly those that are devoid of merit.
This is undoubtedly what was contemplated by certain provisions in the Procedures Directive, particularly Article 24 (1) (a) (which empowers Member States to create specific procedures to allow for a preliminary examination for the purposes of processing cases); and Article 32 (2) (which permits a specific procedure to be applied after a decision has been taken on a previous application).
Recital 15 of the Procedures Directive is also relevant.
It states: (15) Where an applicant makes a subsequent application without presenting new evidence or arguments, it would be disproportionate to oblige Member States to carry out a new full examination procedure.
In these cases, Member States should have a choice of procedure involving exceptions to the guarantees normally enjoyed by the applicant.
These provisions point powerfully to the way in which the problem of unmeritorious applications should be confronted and dealt with.
This is not to be achieved by disapplying the Reception Directive to all repeat applications whether or not they have merit.
The problem of undeserving cases should be counteracted by identifying and disposing promptly of those which have no merit and ensuring that those applicants who are genuine are not deprived of the minimum conditions that the Directive provides for.
A reference under Article 267 of TFEU?
In support of the application for a reference to ECJ under Article 267 of TFEU, the appellant relied on Case 283/81 CILFIT Srl v Ministro della Sanita [1982] ECR 3415.
At paragraph 16 of its judgment in that case, the ECJ had said: the correct application of Community Law may be so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved.
Before it comes to the conclusion that such is the case, 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.
Only if those conditions are satisfied, may the national court or tribunal refrain from submitting the question to the Court of Justice and take upon itself the responsibility for resolving it.
This sets what appears at first sight to be a very high standard.
The national court must not only be convinced that there is no reasonable doubt as to how the question should be answered but must also be of the unequivocal view that its opinion would be shared by courts in all the Member States and the Court of Justice.
But I do not believe that this passage was meant to convey to national courts the need to conduct an analysis of how the matter might be approached in all of those other courts.
Rather, it seems to me that what is required is for the national court to conduct a careful examination of the reasoning underlying any contrary argument ranged against the view that it has formed.
If, having done so, the court is of the opinion that such an argument, on any conventional basis of reasoning, could not be accepted, a reference should not be made.
Having anxiously assessed the appellants arguments against this yardstick, I have come firmly to the view (particularly in light of the legislative history of the Reception Directive and the Procedures Directive) that a reference is not required in this case and I would therefore also dismiss the appellants application under Article 267 of TFEU.
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The Supreme Court unanimously dismisses the Secretary of States Appeal holding that the Reception Directive can apply to second and subsequent applications for asylum.
Lord Kerr delivered the judgment of the Court.
The Supreme Court identified two principal issues in the appeal: (1) whether Article 11 of the Reception Directive applies to a person who has had an application for asylum in the United Kingdom finally determined against him when he makes a further application for asylum, and (2) whether the Court should apply for a reference to the European Court of Justice for a preliminary ruling on the proper interpretation of the Reception Directive, in particular whether it is intended to cover only the first application for asylum made by an individual to a Member State (paras [8][9]).
In relation to the first issue, considering the context in which the Reception Directive was made, it is clear that it was part of a comprehensive charter dealing with the various aspects of asylum applications.
The Procedures Directive, which was adopted ten months after the Reception Directive was required to be transposed into national law and sets out minimum standards on procedures in Member States for granting and withdrawing refugee status, is part of that charter.
Article 2 of both Directives contain virtually identical definitions for the terms application for asylum and applicant or asylum seeker.
There can be no doubt that subsequent applications for asylum come within the definitions contained in Article 2 of the Procedures Directive.
For the Secretary of State to be correct therefore, the expression application for asylum must be given a different meaning in each of two Directives.
Whilst as a matter of general principle, later legislation should not operate to change the established meaning of an earlier enactment, the later legislation may give an insight into the proper interpretation of the earlier instrument.
In any event, in this case the matter is put beyond doubt by an examination of the legislative history of the two measures (paras [14][15], [22][28]).
The proposal for the Reception Directive makes it clear that it had always been intended not only that the definitions of applicant for asylum in both Directives should be the same but also that an application should not be regarded as having been subject to a final decision until all possible remedies had been pursued and determined.
This can only mean that subsequent applications would fall within the definitions of application for asylum and asylum seeker in the Reception Directive.
Accordingly, an application for asylum in the Reception Directive must be interpreted to include a subsequent application made after an original application has been determined and asylum seeker should be construed accordingly to include a person who makes such a subsequent application (paras [29][30]).
Having decided to dismiss the appeals for the reasons set out above, the Court then considered the Secretary of States arguments that numerous anomalies would arise if the Reception Directive was held to apply to subsequent asylum claims.
The Court concludes that none of the claimed anomalies leads to the view that it was intended that the Reception Directive should not apply to subsequent asylum applications.
On the contrary, curious consequences would follow if the Reception were held not to apply to such applications (paras [33][42]).
The Secretary of State further argued that if the Reception Directive is held to apply to subsequent applications for asylum, the potential for abuse of the system would be greatly increased.
The Secretary of States concern was that applicants would bring wholly unmeritorious claims with the aim of delaying their removal and gaining access to the benefits that the Reception Directive confers.
Whilst there was some force in the Secretary of States arguments in this context, the Court considers that the problem of unmeritorious applications should be dealt with not by disapplying the Reception Directive to all repeat applications but by identifying and disposing promptly of those which have no merit and ensuring that genuine applicants are not deprived of the minimum conditions that the Reception Directive provides for (paras [43][49]).
On the second issue, the Court concluded, particularly in light of the legislative history of the Reception Directive and the Procedures Directive, that a reference to the ECJ was not required (paras [50][51]).
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It was not until the end of the last century that those who were thinking about the reform of the law in Scotland paid any attention to the problems created when men and women decide to live together without getting married.
The traditional approach was that nothing short of marriage would create rights in each others property in the event of death or separation.
But entering into a regular marriage, with all the formalities that this involved, was not essential.
As every student of Scots law knows, the common law recognised three ways in which an irregular marriage could be constituted: by declaration de praesenti; by a promise to marry subsequente copula; and by cohabitation with habit and repute.
The first two were abolished by the Marriage (Scotland) Act 1938.
The third survived until it too was abolished by section 3 of the Family Law (Scotland) Act 2006.
Irregular marriages had to be proved, however.
So a form of action was devised for this purpose.
Either of the parties could bring proceedings for declarator of marriage, even after the death of the other party.
The declarator was a judgment in rem.
Its effect was to provide conclusive proof that a marriage had been constituted, and it was binding on all persons whomsoever: Longworth v Yelverton (1867) 5 M (HL) 144, per Lord Chancellor Chelmsford at 147.
There were various reasons why such an order might be sought.
Usually it was to obtain the benefit of the property rights that were enjoyed by the parties to a regular marriage.
Before the law on legitimacy was reformed it was used to enable the children of the relationship to obtain the rights that were conferred on the children of a marriage too.
Very occasionally, when it was still the practice for undefended actions of divorce to be heard in the Court of Session, the unremitting diet of divorce proofs would be varied by an action for declarator of marriage which the other party did not wish to defend.
But the opportunity of proving a marriage by cohabitation with habit and repute was of use only to those who had the capacity to marry, were free to do so and were content to live together as husband and wife.
It was not available to cohabiting couples who had deliberately chosen not to marry.
And couples who had not made that choice but had made no effort to pretend that they were married to each other were unlikely to be able to produce evidence of habit and repute to show that they were living together as husband and wife.
It was an unsatisfactory system, as many people who had committed themselves to a relationship as cohabiting couples and were under the impression that their relationship was one of common law marriage were unable to meet the legal requirements of the common law.
Social attitudes were changing too, and pre marital cohabitation was becoming the norm.
One of the recommendations in the Scottish Law Commissions Report on Family Law (Scot Law Com No 135) (6 May 1992) was that this form of irregular marriage should be abolished, as it was anomalous: recommendation 42.
It addressed the issue of cohabitation in Part XVI of the same report.
This issue had been the subject of a discussion paper issued two years previously: The Effects of Cohabitation in Private Law (Discussion Paper No 86, May 1990).
In para 16.1 of its Report the Scottish Law Commission said that the results of its consultation, and of a survey of public opinion, had confirmed it in its view that there was a strong case for some limited reform of Scottish private law to enable certain legal difficulties faced by cohabiting couples to be overcome and to enable certain anomalies to be remedied.
It accepted, however, that legal intervention in this area, as to which widely differing views were held, ought to be limited.
There was a respectable body of opinion that it would be unwise to impose marriage like legal consequences on couples who had deliberately chosen not to marry.
The reform ought not to undermine marriage, nor should it undermine the freedom of those who had deliberately opted out of marriage.
It went on to say that the presumption of equal sharing of household goods acquired during marriage under section 25(2) of the Family Law (Scotland) Act 1985 should, in a case of cohabitation, be modified.
A comprehensive system of financial provision on termination of cohabitation comparable to the system of financial provision on divorce on principles analogous to those in sections 9(1)(d) or 9(1)(e) of the 1985 Act was not favoured.
That would be to impose a regime of property sharing, and in some cases, continuing financial support on couples who might well have opted for cohabitation to avoid such consequences: para 16.15.
But the principle in section 9(1)(b), which enables fair account to be taken of any economic advantage derived by either party from contributions by the other, and of any economic disadvantage suffered by either party in the interests of the other party or the family could be applied, quite readily and appropriately, to cohabitants: para 16.18.
A similar approach was taken to the question whether a surviving cohabitant should succeed on intestacy to his or her deceased partners estate.
A discretionary system, to enable the court to take account of all the circumstances of the relationship, would be preferable to any fixed rules.
These proposals were summarised in recommendations 80 to 83, and a draft Bill was appended to the Report.
Part III of the Bill dealt with cohabitation.
More than 10 years were to pass, however, before legislation was introduced to give effect to these recommendations.
In the meantime the trend for couples to prefer cohabitation rather than marriage had increased.
It was estimated that, of families by type of family in Scotland, the percentage of cohabiting couple families had increased from 4% in 1991 to 7% in 2001, and that the percentage of married couple families had decreased from 50.7% in 1991 to 42.5% in 2001: Legal of May 2010): Practitioners Perspectives on the Cohabitation Provisions of the Family Law (Scotland) Act 2006 (Centre for Research on Families and Relationships, University see Edinburgh, http://www.crfr.ac.uk/reports/Cohabitation%20final%20report.pdf.
This is a trend which can be expected to have continued.
In March 1999 the Scottish Office Home Department issued a Consultation Paper entitled Improving Scottish Family Law.
But the opportunity to bring the Scottish Law Commissions proposals into law did not present itself at Westminster during the period prior to the coming into effect of the Scotland Act 1998.
The process of consultation was then taken up by the Scottish Executive, and on 7 February 2005 a Bill which became the Family Law (Scotland) Act 2006 was introduced by the then Minister for Justice, Cathy Jamieson.
It was considered by, among others, the Justice 1 Committee whose Stage 1 Report was published on 7 July 2005.
In accordance with the normal procedure the Deputy Minister of Justice, Hugh Henry, provided a detailed written response to the issues raised by the Committee in August 2005.
The Stage 2 procedure then followed, and there was a debate in the Parliament on 15 December 2005 when the Bill was passed.
The Family Law (Scotland) Act 2006, asp 2, received its Royal Assent on 20 January 2006.
This appeal is concerned with the meaning and effect of section 28 of the 2006 Act.
It provides that a cohabitant can apply to a court for financial provision when the cohabitation has ended otherwise than by the death of one of the cohabitants.
The drafting of this section was much criticised while it was undergoing Parliamentary scrutiny, and the questions that it raises are not free from difficulty.
The facts
The appellant, Mrs Gow, met the respondent, Mr Grant, in 2001 at a singles club which they had both joined.
Mrs Gow, who was born on 2 January 1937, was then about 64.
Mr Grant, who was born on 18 December 1943, was about 58.
They commenced a relationship, and in about December 2002 Mr Grant asked Mrs Gow to live with him at his home in Penicuik.
Mrs Gow agreed to do so if they became engaged to be married, which they then did.
They lived together as husband and wife and engaged in an active social life together from June 2003 to January 2008, when their relationship came to an end.
When the parties met they each owned their own home and they were each in employment.
Mrs Gow owned a studio flat in Edinburgh which was subject to an interest only mortgage, of which 11,876 was outstanding in December 2002.
Mr Grant owned a three bedroom house in Penicuik which was free of any mortgage.
He encouraged Mrs Gow to sell her flat.
Indeed, as Sheriff Mackie who conducted the proof put it in para 4 of her note, her evidence, which the sheriff accepted, was that he was adamant that she should do so.
Mrs Gow, as the owner of the property, dealt with the legal and practical aspects of the sale.
But Mr Grant discussed the sale with her and gave her advice, particularly as to the price at which the property should be offered.
The sheriff held that there was no evidence that Mrs Gow was forced to sell the flat because she was in financial difficulties.
She accepted that Mrs Gow sold the property in the interests of furthering her relationship with Mr Grant.
The flat was sold in June 2003 for 50,000, from which Mrs Gow received a net sum after repayment of the mortgage and expenses of 36,559.
She used the money to repay various debts, including credit card debts and the balance of the cost of a new kitchen, amounting in total to 14,133.
She invested 5,000 in a guaranteed investment account and 5,000 in a Sterling Investment Bond, and she loaned 4,000 to her son.
The balance of 8,425 was contributed by Mrs Gow to her relationship with Mr Grant, as it was used towards the parties living expenses.
Mr Grant was able to continue to live in his own house when the parties relationship came to an end.
It was worth about 200,000 in June 2003.
Mrs Gow continued to live in Mr Grants home until she obtained rented accommodation in June 2009.
The sheriff found that the value in July 2009 of the flat which had formerly belonged to her was 88,000.
The difference between that figure and the price at which the flat was sold in June 2003 was 38,000.
Mrs Gow was employed as an audio typist until the parties began living together.
Her contract came to an end in May 2003, and at Mr Grants request she did not seek further work.
She was in receipt of an occupational pension and a state pension amounting in total to about 640 per month.
Mr Grant was employed part time as a lecturer at Jewel & Esk Valley College.
He was also in receipt of a widowers pension from the Bank of Scotland in excess of 600 per month.
He stopped working as a lecturer in 2006, and obtained part time work as a courier.
During their cohabitation the parties purchased two timeshare weeks in their joint names, each of which cost 7,000.
Mrs Gow paid 1,500 towards the first week, and in about July 2005 she surrendered her Sterling Investment Bond and used the proceeds together with other funds to pay the whole price of the second week.
In about 2006 her guaranteed investment account matured in the sum of about 6,000.
She spent 2,000 on paintings, two of which she gave to Mr Grant, and spent 1,000 on a holiday.
The balance of the proceeds was used towards the parties day to day expenses.
In consequence of the position in which she found herself when the cohabitation came to an end Mrs Gow brought an action against Mr Grant in the Sheriff Court in Edinburgh, in which she sought payment of a capital sum in terms of section 28 of the 2006 Act.
It was not disputed that the parties were cohabitants in terms of section 25 of the Act, which provides that the word cohabitant means, in the case of two persons of the opposite sex, a man and a woman who are, or were, living together as if they were husband and wife.
Mr Grant maintained, however, on various grounds that Mrs Gow was not entitled to any payment under section 28.
Section 28 of the 2006 Act
Section 28(1) provides that subsection (2) of that section applies where cohabitants cease to cohabit otherwise than by reason of the death of one (or both) of them.
Subsections (2) to (6) are in these terms: (2) On the application of a cohabitant (the applicant), the appropriate court may, after having regard to the matters mentioned in subsection (3) (a) make an order requiring the other cohabitant (the defender) to pay a capital sum of an amount specified in the order to the applicant; (b) make an order requiring the defender to pay such amount as may be specified in the order in respect of any economic burden of caring, after the end of the cohabitation, for a child of whom the cohabitants are the parents; (c) make such interim order as it thinks fit. (3) Those matters are (a) whether (and, if so, to what extent) the defender has derived economic advantage from contributions made by the applicant; and (b) whether (and, if so, to what extent) the applicant has suffered economic disadvantage in the interests of (i) the defender; or (ii) any relevant child. (4) In considering whether to make an order under subsection (2)(a), the appropriate court shall have regard to the matters mentioned in subsections (5) and (6). (5) The first matter is the extent to which any economic advantage derived by the defender from contributions made by the applicant is offset by any economic disadvantage suffered by the defender in the interests of (a) the applicant; or (b) any relevant child. (6) The second matter is the extent to which any economic disadvantage suffered by the applicant in the interests of (a) the defender; or (b) any relevant child, is offset by any economic advantage the applicant has derived from contributions made by the defender.
Subsection (4), (5) and (6) were inserted into the draft Bill at Stage 2 of the proceedings in the Parliament.
In subsection (9) the expressions contributions and economic advantage are defined.
Contributions includes indirect and non financial contributions.
Economic advantage includes gains in capital, income and earning capacity; and economic disadvantage is to be construed accordingly.
The same expressions, together with the phrase in the interests of, appear in section 9(1)(b) of the Family Law (Scotland) Act 1985.
But the wording of that provision, which sets out one of the principles which the court is to apply in deciding what order for financial provision to make on divorce, is not the same as that used in section 28(5) and (6) of the 2006 Act.
Section 9(1)(b) states that fair account is to be taken of any economic advantage and disadvantage, whereas the extent of the economic advantage and disadvantage mentioned in section 28(5) and (6) are matters to which section 28(4) says the court is to have regard in considering whether to make an order under section 28(2)(a).
Nor is the context, as one of the principles to be applied on divorce is that the net value of the matrimonial property should be shared fairly between the parties to the marriage and the sharing is to be taken to have been fair if the property is shared equally: sections 9(1)(a) and 10(1) of the 1985 Act.
Section 28 requires the court to conduct an entirely different exercise.
The proceedings below
The sheriff delivered her judgment on 7 December 2009: 2010 Fam LR 21.
She observed in para 39 of her note, at the outset of her discussion of the issues, that the approach which she required to adopt was not the same as under section 9(1)(b) of the 1985 Act, as there was no matrimonial property to be divided fairly between the parties.
Concentrating on the language of section 28 in para 41, she noted that section 28 says that the court may make an order in terms of section 28(2) after having regard to the matters mentioned in section 28(3)(a) and (b).
So the court had a discretion to make an order, and a precise calculation of loss did not require to be made.
It was significant that the court was not directed to make a fair division of property acquired during or for the purpose of cohabitation.
Having regard to section 28(3)(a), the sheriff said in para 48 that she was satisfied that Mrs Gow had contributed financially to the parties expenditure during the period of cohabitation, and that Mr Grant had also derived an economic advantage from her non financial contribution in looking after the house in which the parties cohabited and in other ways.
She then had to consider under section 28(5) the extent to which the economic advantage enjoyed by Mr Grant had been offset by economic disadvantage suffered by him in the interests of Mrs Gow.
It appeared to her that there was no evidence that he had suffered any such economic disadvantage: para 55.
As for section 28(3)(b), the sheriff said in para 56 that she was satisfied on the evidence that Mrs Gow had suffered economic disadvantage in the interests of Mr Grant.
She accepted Mrs Gows evidence that the only reason that she sold her house was as a result of Mr Grants encouragement and in the interests of furthering the relationship.
She also accepted her evidence that had she not embarked on a new life with Mr Grant she would have continued to maintain her own property and would have continued to work to enable her to do so.
As a result of the sale she had lost her principal capital asset, required now to live in rental accommodation and was unlikely to be able to afford to purchase another property.
She had enjoyed the benefit of a substantial amount of the sale proceeds, but the balance of 8,000 had been contributed to the parties relationship.
As the value of her flat was 88,000 in July 2009, she had suffered economic disadvantage in the interests of Mr Grant to the extent of 38,000, which was the difference between the sale proceeds and the flats current value: para 59.
Although the parties owned the two weeks timeshare jointly, Mrs Gow had paid more than 50% of the price.
She had suffered economic disadvantage in the interests of Mr Grant to the extent of 1,500 in the acquisition of these assets: para 60.
Turning lastly to section 28(6), the sheriff examined the question whether any economic disadvantage suffered by Mrs Gow in the interests of Mr Grant was offset by any economic advantage derived by her from contributions made by Mr Grant.
It was not disputed that he had made various contributions, financial and non financial, to the relationship.
But in her opinion such contributions as were made were not sufficient to offset the economic disadvantage suffered by Mrs Gow in the interests of Mr Grant: para 65.
Her conclusion, having regard to the matters to which she was directed to have regard by the statute, was that there was a net economic disadvantage in favour of Mrs Gow, and that she should be compensated in the sum of 39,500.
Mr Grant appealed against the sheriffs decision to the Inner House of the Court of Session.
The appeal was heard by the Second Division (the Lord Justice Clerk (Gill), Lord Mackay of Drumadoon and Lord Drummond Young), and the opinion of the court was delivered by Lord Drummond Young on 22 March 2011: [2011] CSIH 25, 2011 SC 618.
The appeal was allowed and Mrs Gows application for an award of a capital sum was refused.
Lord Drummond Young noted in para 3 of his opinion that there had been a number of cases which disclosed varying and contradictory approaches to the construction of section 28.
But he said that it was not necessary for present purposes for the court to express any view on the detailed issues that arose in them, nor was it necessary for it to express any general view as to the construction of section 28.
He did however make two observations.
First, in contrast to the scheme in sections 8 to 10 of the 1985 Act as to the rights of a spouse on divorce, the financial provision which the court was permitted to make by section 28 was in the nature of compensation for an imbalance of economic advantage or disadvantage.
Secondly, the court had to have regard to the precise wording of the section, and it must be satisfied that the requirements set out in the section are satisfied on the evidence.
The difficulties would be minimised if it was recognised that the objective of the section was limited in scope.
It was intended to enable the court to correct any clear and quantifiable economic imbalance that might have resulted from cohabitation.
After summarising the findings of fact and the crucial part of the sheriffs reasoning, Lord Drummond Young said in para 9 that the court was of the opinion that the sheriffs award was not justified by her findings of fact.
Three reasons for this conclusion are set out in that paragraph.
First, what was required by the phrase in the interests of in section 28(3)(b) was that the applicant should suffer an economic disadvantage in a manner intended to benefit the defender.
In the present case all that the findings of fact indicated was that Mrs Gow was encouraged to sell her house.
The proceeds were then used either for her own purposes or to meet the parties joint living expenses.
And the fact that the sale was encouraged by Mr Grant was clearly insufficient to draw the inference that the transaction was in his interests.
Secondly, the fact that the sale was intended to further the parties relationship was insufficient to justify the conclusion that it was in the defenders interests.
These two matters appeared to the court to be conceptually quite distinct.
Thirdly, to the extent that Mrs Gow might be said to have suffered an economic disadvantage in relation to the timeshares, it was plainly offset by the economic advantage that Mrs Gow derived from Mr Grants contributions towards joint living expenses.
The issues
The parties are agreed that the decision of the Inner House raises the following issues: (i) Is an intention to benefit the other cohabitant a necessary element of the requirements of section 28(3)(b) and (6)? (ii) Is it necessary for the applicant to establish that the defender derived actual economic benefit as a result of economic disadvantage suffered by the applicant? (iii) Must any benefit so conferred be in the interests of the defender alone, or may it be of benefit to both parties? (iv) Whether, if relevant economic disadvantage is established which is not offset by relevant economic advantage, the court has a discretion as to the amount of any award, and the extent of any such discretion.
For Mr Grant it was submitted that, having regard to the ordinary meaning of the text of section 28, an intention to benefit the other cohabitant is essential for a claim under that section to succeed.
It was also submitted that, for a claim under that section based on economic disadvantage to succeed, it is necessary for the applicant to establish that, as a result of economic disadvantage suffered by the applicant, the defender has derived economic benefit.
It was accepted that the words of the section are not apt to exclude a successful claim where both parties have benefitted from economic disadvantage suffered by the other.
On the other hand, for a claim to succeed, it is not sufficient simply to establish economic disadvantage in the interests of the parties wider, non economic affairs, such as the nature of their relationship or other social or emotional concerns.
The section requires the court to assess the net economic advantage or disadvantage derived or suffered by each party.
Background
In order to find an answer to these problems it is necessary to look more closely at the background to the legislation.
What was the mischief that section 28 was designed to address? And what were the principles to which it seeks to give effect?
As already mentioned (see para 5, above), the Scottish Law Commission rejected the concept of equal sharing where a relationship of cohabitation was terminated: Report on Family Law, para 16.15.
On the other hand it recommended that a former cohabitant should be able to apply for a financial provision based on the principle in section 9(1)(b) of the 1985 Act.
The existing common law on unjustified enrichment did not provide a clear or certain remedy: para 16.17.
The principle in section 9(1)(b), on the other hand, could be applied, quite readily and appropriately, to cohabitants.
The argument for doing so was that it would be unfair to let economic gains and losses arising out of contributions or sacrifices made in the course of a relationship simply lie where they fell.
Applying it would give them the benefit of a principle which was designed to correct imbalances arising out of a non commercial relationship where parties are quite likely to make contributions or sacrifices without counting the cost or bargaining for a return: para 16.18.
The formula which is set out in section 9(1)(b) was adopted in clause 36(2) of the draft Bill which was annexed to the Report.
It provided: (2) The court shall make an award to the applicant in pursuance of an application under subsection (1) above only if it is satisfied (a) that the other former cohabitant has derived economic advantage from contributions by the applicant, or that the applicant has suffered economic disadvantage in the interests of the other former cohabitant or their children; and (b) that having regard to all the circumstances of the case it is fair and reasonable to make such an award.
In para 16.20 the Commission observed that, although a claim based on contributions or sacrifices could often not be valued precisely, it would provide a way of awarding fair compensation, on a rough and ready valuation, in cases where otherwise none could be claimed.
The Deputy Minister for Justice, Hugh Henry, commented on the provisions in the Bill relating to legal safeguards for cohabiting couples and their children in his response to the Justice 1 Committees Stage 1 Report on the Bill in August 2005.
He said that it might be helpful if he clarified the policy principles that had informed the detailed drafting.
The Executives view was that the function of the law in relation to cohabitants should be both protective and remedial.
The law needed to provide a framework for a fair remedy when committed relationships founder or the parties to them are separated by death.
Our focus in policy terms is therefore on those cohabiting relationships which offer some evidence of the parties commitment to a joint life.
It is that evidence that justifies a remedial intervention by law, the allocation of rights and obligations by the parties towards one another, and the redistribution of certain of their property.
At the same time, however, we think it would be wrong to impose on cohabitants a legal requirement to support one another financially during the relationship: we can never know why people have not married and chosen not to incur that responsibility and in the absence of such knowledge we believe an obligation of mutual aliment would be unjustifiable.
Our sense of a fair and just outcome when committed relationships come to an end involves setting a framework for compensation where one partner can show that they have suffered net economic disadvantage in the interests of the relationship.
Reference to Parliamentary material has, of course, become commonplace since the previous rule that excluded this was relaxed by Pepper v Hart [1983] AC 593, and the rather strict rules that were laid down in that case have become gradually more relaxed.
It remains the case that this approach should be used only where the legislation is ambiguous, and then only with circumspection.
When it is used, however, the purpose of the exercise is to determine the intention of the legislator.
The Deputy Ministers remarks were set out in a letter.
They were not made orally in the course of a debate in the Committee or in the Parliament.
But I do not think that this, in itself, is a reason for excluding reference to them.
It is the normal procedure for Ministers to provide the relevant committee with a letter setting out the governments views in response to issues raised by the committee in its Stage 1 Report.
This is the kind of thing that is done orally under the procedures which are familiar in the case of the Parliament at Westminster.
The Scottish Parliament has devised a different system of procedure, but that should not inhibit reference to written material of this kind that may be of assistance.
In my opinion the Deputy Ministers letter is as much a guide as to the intention of the legislator as if its contents had been set out in a statement made by him to the Justice 1 Committee orally.
When the Bill was debated in the Parliament on 15 December 2005 the Minister for Justice, Cathy Jamieson, said that the Executive had been at pains to ensure two things (Official Report, col 21922): first, that any financial award that the courts make to an applicant addresses the net economic disadvantage that the person may face as a direct result of joint decisions that were made by the couple during the relationship; and secondly, that the economic burden of caring for a child that cohabitants have had together is shared until the child is 16.
Later in the same contribution which she made to the debate, referring to what is now section 28 of the Act, she said (ibid): Cohabitants are under no legal obligation to aliment each other during their relationship, so there is no reason that we should seek to ensure that they do so when the relationship is over.
However, it is important to achieve fairness.
That is why we have adopted the provisions set out in section 21.
Those provisions will ensure that one partner compensates the other for any net economic disadvantage that has resulted from the relationship that they formed together and that they will share the cost of caring for their children.
We believe that that offers fairness to both parties, while respecting their rights to live as they choose without the Government imposing other financial obligations.
Common to all these statements is an emphasis on fairness to both parties.
This is the principle that lies at the heart of the award that the court is able to make under this section.
The words fair and reasonable which were in clause 36(2)(b) of the Scottish Law Commissions draft Bill do not appear anywhere in section 28.
It lacks any reference to fairness as the guiding principle.
But the background shows that this is what was intended by the legislature.
Section 28(2) tells the court that it may make the orders of the kind referred to in subsection (1) after having regard to the matters referred to in subsection (3), and the same phrase appears again in subsection (4).
The purpose of this exercise must be taken to be to achieve fairness between both parties to the relationship in the assessment of any capital sum that the defender is to be ordered to pay to the other cohabitant.
The same approach must be taken to the sharing of the economic burden of caring for any child of whom they are the parents.
Fairness in the context of section 28 embraces a different concept than it does in the context of section 9(1) of the 1985 Act.
Section 9(1)(a) states that one of the principles that the court must apply is that the net value of the matrimonial property should be shared fairly between the parties to the marriage.
This provision must be read together with section 10(1), which states that in applying the principle which it sets out the net value of the matrimonial property shall be taken to be shared fairly when it is shared equally or in such other proportions as are justified by special circumstances.
As Sheriff M G Hendry observed in F v D 2009 Fam LR 111, para 7, the rebuttable presumption at the stage of the dissolution of a marriage or civil partnership is that property will be shared fairly if it is shared equally.
The rebuttable presumption at the end of cohabitation is that each party will retain his or her own property.
In that context what section 28 seeks to achieve is fairness in the assessment of compensation for contributions made or economic disadvantages suffered in the interests of the relationship.
The wording of subsections (3), (5) and (6) should be read broadly rather than narrowly, bearing in mind the point that the Scottish Law Commission made in para 16.18 that the principle in section 9(1)(b) of the 1985 Act which these subsections adopt was designed to correct imbalances arising out of a non commercial relationship where parties are quite likely to make contributions or sacrifices without counting the cost or bargaining for a return.
As Lady Hale points out (see para 54, below), in most cases it is quite impracticable to work out who has paid for what and who has enjoyed what benefits in kind during the cohabitation, as people do not keep such running accounts and the cost of working things out in detail is quite disproportionate to the task of doing justice between the parties.
Discussion
The first point to be considered is whether section 9(1)(b) of the 1985 Act has any bearing on the way the matters referred to in section 28(3), (5) and (6) of the 2006 Act should be approached.
The Second Division say in para 3 of their opinion that sections 8 to 10 of the 1985 Act have no bearing on the construction of section 28.
This, as they observe in the same paragraph, is a matter on which varying and contradictory views have been expressed: contrast, for example, the Lord Ordinarys opinion in M v S [2008] CSOH 125, 2008 SLT 871, para 272, that the provisions, while not absolutely identical, are so similar as to make it clear that the Scottish Parliament must have intended the courts to approach them in the same way, with Sheriff K R W Hoggs observation in Jamieson v Rodhouse 2009 Fam LR 111, para 51 that they are of no assistance.
In this case Sheriff Mackie said in para 39 of her note that, as there are no references in section 28 to fair and reasonable division and the Minister for Justice said during Stage 3 of the Bill that the provisions were not about seeking to replicate the financial arrangements between spouses and civil partners, there was force in the argument that one cannot adopt the same approach in its application as that to claims in terms of section 9(1)(b).
It is, of course, true that section 28 does not seek to replicate the arrangements that are available for financial provision on divorce or the termination of a civil partnership.
For this reason it would not be right to adopt the same approach to the application of that section as would be appropriate if the exercise was being conducted under section 9 of the 1985 Act.
The starting points of principle are significantly different: Malcolm, Kendall and Kellas, Cohabitation (2nd edition, 2011), para 1 10.
But it is sufficiently clear from the background to the enactment of section 28 that in its case too the underlying principle is one of fairness and that it is designed to correct imbalances of the kind referred to by the Scottish Law Commission in para 16.18 of its Report.
The Deputy Minister for Justice referred to the Executives sense of a fair and just outcome: para 28, above.
The Minister for Justice too said that it was important to achieve fairness, and that the Executive believed that the provisions offered fairness to both parties: para 30, above.
As Sheriff A D Miller put it in Lindsay v Murphy 2010 Fam LR 156, para 58, the statutory purpose does no more than reflect the reality that cohabitation is a less formal, less structured and more flexible form of relationship than either marriage or civil partnership.
I think therefore, contrary to the views expressed by the Second Division in para 3, that it would be wrong to approach section 28 on the basis that it was intended simply to enable the court to correct any clear and quantifiable economic imbalance that may have resulted from the cohabitation.
That is too narrow an approach.
As the Commission observed in para 16.20 of its Report, a claim based on contributions or sacrifices in non commercial relationships of the kind that family law must deal with cannot often be valued precisely.
Section 9(1)(b) enables fair compensation to be awarded, on a rough and ready valuation, in cases where otherwise none could be claimed.
Section 28 is designed to achieve the same effect.
So it may be helpful to refer to cases decided under section 9(1)(b) when the court is considering what might be taken to be an economic advantage, disadvantage or contribution for this purpose or how the economic burden of caring for a child is to be dealt with under section 28(2)(b).
An assessment of what is in the interests of any relevant child cannot sensibly be reduced to purely financial factors.
The next point is directed to the meaning and effect of the phrase in the interests of the defender in section 28(3)(b) and (6).
Lord Drummond Young said in para 9 of his opinion that the phrase requires that the applicant should suffer economic disadvantage in a manner intended to benefit the defender, and that the transaction in question must have been in that partys interests.
That interpretation provided the basis for holding that the sheriff erred in making an award in this case.
Her findings were that the sale of the house was encouraged by Mr Grant, that it was undertaken in the interests of furthering the relationship and that the proceeds were used in part to meet the parties joint living expenses.
But this was held to be insufficient to show that it was intended by Mrs Gow to benefit Mr Grant.
An intention to further the parties relationship did not justify the conclusion that the sale was in his interests.
Here again, however, this is to take too narrow a view of the effect of these provisions.
The phrase in the interests of the defender can be taken to mean in a manner intended to benefit the defender.
But it does not compel that interpretation, and in the present context, where the guiding principle is one of fairness, its more natural meaning is directed to the effect of the transaction rather than the intention with which it was entered into.
The reference to the defender at the end of the phrase does, of course, require that the disadvantage which the applicant suffered was in his interests.
But it does not say that this must have been his interests only, or that the fact that it was in the applicants interests also means that it must be left out of account.
Still less does it say that interests have to be equated with economic advantage or benefit.
To adopt that interpretation does not fit easily with a relationship of this kind, where many decisions are taken jointly in its interests without counting the cost or bargaining for a return: see para 16.18 of the Scottish Law Commissions Report.
Nor does it fit in with the reference to the interests of any relevant child in section 28(3)(b).
I agree with the approach that Sheriff Principal R A Dunlop QC took to this problem in Mitchell v Gibson 2011 Fam LR 53, para 13.
Provided that disadvantage has been suffered in the interests of the defender to some extent, the door is open to an award of a capital sum even though it may also have been suffered in the interests of the applicant.
It seems to me, therefore, that the Second Divisions discussion of the sheriffs reasoning did not give effect to the true meaning and effect of sections 28(3)(b) and (6) of the 2006 Act.
The sheriff was entitled to take the sale of the house into account, notwithstanding her findings that the proceeds were used by Mrs Gow for her own purposes or to meet the parties joint living expenses, that it was encouraged by Mr Grant and that it was in the interests of furthering the parties relationship.
The question for her was whether, at the end of the exercise directed by the subsections, the applicant was left with some economic disadvantage for which an award might be made.
But, as the sheriff said in para 45 of her note, it would be an unusual relationship if parties, from the commencement, proceeded to keep full and detailed accounts of their respective finances so that upon termination a mathematical calculation might be made of any contributions made, economic advantage derived or disadvantage suffered.
The Second Division appear to have overlooked the sheriffs finding that the economic disadvantage that Mrs Gow suffered in the interests of Mr Grant was her loss of the benefit of the increase in value of her principal capital asset.
They concentrated on Mrs Gows use of the proceeds as showing that the transaction was not, on their interpretation of sections 28(3)(b) and (6), intended to benefit Mr Grant and in his interests.
The sheriff, for her part, accepted that Mrs Gow had had the benefit of a substantial amount of the sale proceeds.
So she left the proceeds out of account in her assessment.
But she had a discretion as to what order she should make.
The overriding principle was one of fairness, rather than precise economic calculation having regard, as Lady Hale puts it in para 54, to where the parties were at the beginning of their cohabitation and where they were at the end.
She was entitled to hold that the loss of the benefit of the increase in value was an economic disadvantage, and that it was suffered by Mrs Gow in the interests of her relationship with Mr Grant.
As she noted in para 66 of her note, when the cohabitation ended Mrs Gow did not have a home whereas Mr Grant still had a home which had increased in value.
I do not think that her conclusion that Mrs Gow should be compensated for that disadvantage can reasonably be criticised.
There remains the sum that the sheriff awarded in relation to the acquisition of the timeshare.
The Second Division held in para 10 of their opinion that it was unwarranted.
Their reasons for doing so were not based on a finding that, in making this award, the sheriff erred in principle.
They were based on their own analysis of the facts.
Reference was made to the fact that the sum in question was relatively small in relation to the parties total expenditure and the fact that they enjoyed a relatively extravagant lifestyle, with both incurring substantial amounts of debt in order to fund it.
Reference was also made to relative significance of the contributions made by one party to the other when set against their level of expenditure.
It is clear, however, from the sheriffs note that this part of her award was arrived at after carrying out a careful analysis of all the facts.
Section 28 leaves both the making of an award and the amount to be awarded to the discretion of the court.
There must, of course, be a basis in fact for the decision that it takes.
But, as Sheriff Principal Dunlop observed in Mitchell v Gibson, para 13, as with all discretionary decisions, the scope for interference by the appellate court is constrained according to well recognised principles.
It is clear that it ought not to interfere with the decision of a judge in the exercise of his discretion unless it can be shown that he misdirected himself in law or failed to take account of a material factor or reached a result which was manifestly inequitable or plainly wrong: Gray v Gray 1968 SC 185, per Lord Guthrie at p 193; see also Little v Little 1990 SLT 785, 786.
The making of an award under section 28 of the 2006 Act is as much a matter of discretion as it is under section 9 of the 1985 Act, and the same principles apply in its case too.
I do not think that the Second Division were able to demonstrate in their reasoning that they had a proper basis for disturbing this part of the sheriffs award.
Conclusion
In my opinion the sheriffs approach to the issues with which she was faced in this case cannot be faulted.
She based her conclusions on a careful analysis of all the issues that she was directed by section 28 to consider, and it was well within the band of reasonable decisions that were open to her.
I would allow the appeal, recall the Second Divisions interlocutor and affirm the sheriffs finding in fact and law that the pursuer has suffered economic disadvantage in the interests of the defender to the extent of 39,500.
LADY HALE (WITH WHOM LORD WILSON AND LORD CARNWATH AGREE)
I agree that this appeal should be allowed for the reasons given by Lord Hope.
I add a few words because there are lessons to be learned from this case in England and Wales.
The first is that there is a need for some such remedy as this in England and Wales.
In July 2007, the Law Commission published their report on Cohabitation: the financial consequences of relationship breakdown (Law Com No 307).
They too rejected two of the principles which are applicable to financial relief upon the breakdown of a marriage: they would not impose upon unmarried couples the principle that marital assets should be fairly shared between them or that either should provide for the needs of the other.
These reflect the concept of partnership and the responsibilities towards one another which are undertaken in marriage but not in setting up home together.
But setting up home together may well result either in benefit to one party or in loss to the other for which it would be fair to expect some redress.
Like the Scots, therefore, the Law Commission adopted a principle of compensation for the economic advantages and disadvantages resulting from the relationship, although the details of their scheme contained some important differences from the Scots.
The Government had invited the Law Commission to undertake the project as a matter of some urgency and, unusually, the Report was produced without a draft Bill attached.
In March 2008, however, the Parliamentary Under Secretary of State for Justice (Bridget Prentice) announced that the Government proposed to await the results of research into the Scottish scheme before deciding what to do.
It was said then that the Scottish Executive intended to undertake research into the cost of such a scheme and its efficacy in resolving the issues faced by cohabitants when their relationships end.
The Government therefore planned to extrapolate the likely cost in England and Wales of bringing into effect a similar scheme and the likely benefits it would bring (Hansard, HC Deb 6 March 2008, c122WS).
While one can understand entirely that it is prudent to try to estimate the likely cost of any new legislation, it is much more difficult to understand how the benefits can be quantified.
Nor can the benefits in England and Wales be directly compared with those in Scotland.
The existing law relating to cohabitants property rights is quite different in England and Wales and has led to a good deal of litigation.
It has twice recently had to be clarified by the highest court in the land (Stack v Dowden [2007] 2 AC 432, Jones v Kernott [2011] UKSC 53, [2011] 3 WLR 1121).
There is some reason to think that a family law remedy such as that proposed by the Law Commission would be less costly and more productive of settlements as well as achieving fairer results than the present law.
Be that as it may, there is, so far as I am aware, no published research commissioned by the Scottish Executive into the costs and benefits of the Scottish scheme.
There is an important piece of research, by Fran Wasoff, Jo Miles and Enid Mordaunt, funded by the Nuffield Foundation, into Legal Practitioners Perspectives on the Cohabitation Provisions of the Family Law (Scotland) Act 2006 (2010), to which Lord Hope refers in paragraph 6 above.
One message from that research was that the introduction of broadly similar provisions in England and Wales would not place significant additional demands on court and legal aid resources (CRFR research briefing 51).
In September 2011, the Parliamentary Under Secretary of State for Justice Mr Jonathan Djanogly made the following announcement (Hansard, HC Deb 6 September 2011 cc15 16WS) : The findings of the research into the Scottish legislation do not provide us with a sufficient basis for change in the law.
Furthermore, the family justice system is in a transitional period, with major reforms already on the horizon.
We do not therefore intend to take forward the Law Commissions recommendations for reform of cohabitation law in this Parliamentary term.
In the House of Lords, it became clear that the research referred to was the study by Fran Wasoff and her colleagues.
Lord McNally emphasised, however, that (Hansard, HL Deb, 6 September 2011, c 119): The main message to concentrate on is that a significant period of change is due in the family justice system, which we are using to consider legislation in general.
We have taken the Scottish research on board, but it is, as I say, rather narrow, very early and not enough to persuade us that we should implement the Law Commissions recommendations now.
Responding to the Governments announcement (Law Commission, 6 September 2011), Professor Elizabeth Cooke, the Law Commissioner who leads the Commissions work in family and property law, said this: We hope that implementation will not be delayed beyond the early days of the next Parliament, in view of the hardship and injustice caused by the current law.
The prevalence of cohabitation, and the birth of children to couples who live together, means that the need for reform of the law can only become more pressing over time.
As Professor Cooke also pointed out, the existing law is uncertain and expensive to apply and, because it was not designed for cohabitants, often gives rise to results that are unjust.
The reality is that the sufficient basis for changing the law had already been amply provided by the long standing judicial calls for reform (dating back at least as far as Burns v Burns [1984] Ch 317, at 332); by the Law Commissions analysis of the deficiencies in the present law and the injustices which can result; by the demographic trends towards cohabitation and births to cohabiting couples, which are even more marked south of the border than they are in the north; and by the widespread belief that cohabiting couples are already protected by something called common law marriage which has never existed in the south.
There was no need to wait for experience north of the border to make the case for reform.
The second lesson is that reform needs to cater for a wide variety of cohabiting relationships which may result in advantage or, more commonly, disadvantage to one of the parties.
There is a tendency to concentrate upon the younger couples who have children, where one of them suffers financial disadvantage as a result of having to look after the children both during and after the relationship.
It may be very difficult to say that the other party has derived any economic advantage from those sacrifices, but it is entirely fair that he should compensate the childrens carer for the disadvantages that she has suffered.
This case is an example of such disadvantages arising in a completely different context, but one which is by no means uncommon these days: a mature couple, both of whom have been married before, each of whom has a home and an income from pensions or employment, but where one of them gives up her home and at least some of her income as a result of their living together (an occupational widows pension, for example, may well be lost on cohabitation as well as marriage).
At the end of the relationship, one of them may be markedly less well off than she was at the beginning, whereas the other may be in much the same position as he was before or even somewhat better off.
Such cases should not be forgotten in any scenario testing of proposed reforms (although they do not feature in the worked examples given in Appendix B to the Law Commissions Report).
This case also illustrates the fact, well established by research, that many, even most, cohabiting couples have not deliberately rejected marriage (A Barlow, S Duncan, G James and A Park, Marriage, Cohabitation and the Law, 2005).
For many couples, co habitation is a preliminary to the marriage they hope to enter into one day.
In this case, it is stronger than that: Mrs Gow only agreed to move in with Mr Grant if they became engaged to be married.
A third lesson from Scotland is that the lack of any definition of cohabitation, or a qualifying period of cohabitation for couples who do not have children, has not proved a problem.
Very few cases have involved short relationships and people have not disputed whether or not they have been cohabitants, although they have sometimes disputed when their cohabitation came to an end.
It might be less productive of disputes for there to be no minimum qualification period in England and Wales and, equally, for there to be no one year limitation period from the end of the cohabitation in Scotland (Wasoff et al; see also J Miles, F Wasoff and E Mordant, Cohabitation: lessons from research north of the border? (2011) 23 CFLQ 302).
A fourth lesson from Scotland is that the compensation principle, although attractive in theory, can be difficult to apply in practice because of the problems of identifying and valuing those advantages and disadvantages.
Lord Lesters Cohabitation Bill, which received a second reading in the House of Lords on 13 March 2009 (see Hansard, HL Deb, 13 March 2008, cc1413 1443), would have given the courts a much wider discretion to do what was just and equitable having regard to all the circumstances.
The Law Commissions proposals sought to cut down the problems by focussing on the end of the relationship: on the benefit retained by one party and on the present and future losses sustained by the other.
The object was to avoid protracted analysis of what may be called water under the bridge: every past gain and loss over the course of a long relationship, regardless of whether they have any enduring impact at the point of separation (see J Miles et al, (2011) 23 CFLQ 302, 316).
This case illustrates the problem very well.
It is in most cases quite impracticable to work out who has paid for what and who has enjoyed what benefits in kind during the cohabitation.
People do not keep such running accounts and the cost of working things out in detail is quite disproportionate to the task of doing justice between the parties.
Section 28(3)(a) and (9) requires regard to be had to non financial contributions; the economic disadvantage to which regard must be had under section 28(3)(b) must be suffered in the interests of the other, but does not have to amount even to a non financial contribution.
Who can say whether the non financial contributions, or the sacrifices, made by one party were offset by the board and lodging paid for by the other? That is not what living together in an intimate relationship is all about.
It is much more practicable to consider where they were at the beginning of their cohabitation and where they are at the end, and then to ask whether either the defender has derived a net economic advantage from the contributions of the applicant or the applicant has suffered a net economic disadvantage in the interests of the defender or any relevant child.
There is nothing in the Scottish legislation to preclude such an approach, as the court is bound to be assessing the respective economic advantage and disadvantage at the end of their relationship.
The English proposals make it rather clearer.
Finally, the case illustrates that it may be unwise to be too prescriptive about the order which the court should make to redress such advantage or disadvantage.
In principle, if one party has derived a clear and quantifiable economic benefit from the economic contributions of the other, it may be fair to order what is, in effect, restitution of the value of that benefit.
But sometimes the benefit will result from non financial contributions or be very hard to quantify.
Even more problematic are the cases where there is identifiable economic disadvantage, as here, without a corresponding economic advantage.
In some cases, it may be entirely fair to expect the better off partner to compensate the other in full for the losses she has sustained as a result of their relationship: as, for example, where a rich widower persuades a widow to give up her secure tenancy and widows pension to move in with him and can well afford to put her back in the position in which she was before their cohabitation began.
In others, this may be impossible or quite unfair.
Thus, it seems to me, the flexibility inherent in the Scottish provisions is preferable to the Law Commissions proposal that the losses should be shared between them.
On the other hand, the Law Commissions proposed list of factors to be taken into account in the exercise of the courts discretion might be a useful addition to the Scottish law, as also might the power to make a periodical payments order in those rare cases where it is not practicable to make an order that a capital sum be paid by instalments.
The main lesson from this case, as also from the research so far, is that a remedy such as this is both practicable and fair.
It does not impose upon unmarried couples the responsibilities of marriage but redresses the gains and losses flowing from their relationship.
As the researchers comment, The Act has undoubtedly achieved a lot for Scottish cohabitants and their children.
English and Welsh cohabitants and their children deserve no less.
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This appeal is concerned with the meaning and effect of section 28 of the Family Law (Scotland) Act 2006 which, for the first time, enables a cohabitant to apply to the court for a financial provision where the cohabitation ends otherwise than by the death of one of the parties.
The court may make an order for payment by the other cohabitant of a capital sum, having regard to whether that party (the defender) has derived economic advantage from contributions made by the applicant and whether the applicant has suffered economic disadvantage in the interests of the defender or any child.
The court must then have regard to the extent to which any economic advantage derived by one party is offset by economic disadvantage suffered by that party, or economic disadvantage suffered by one party is offset by economic advantage derived by that party.
The Appellant, Mrs Gow, met the Respondent, Mr Grant in 2001, when she was about 64 years old and he was about 58.
They commenced a relationship, and in about December 2002 Mr Grant asked Mrs Gow to move in with him at his home in Penicuik.
Mrs Gow agreed to do so if they became engaged, which they then did.
They lived together as husband and wife and engaged in an active social life together until January 2008, when their relationship came to an end.
When the parties met Mrs Gow also owned a flat in Edinburgh.
After the couple moved in together, Mr Grant strongly encouraged Mrs Gow to sell her property, which she did in June 2003.
The sheriff held that there was no evidence that Mrs Gow was forced to sell the flat because she was in financial difficulties.
Rather, she had sold the property in the interests of furthering her relationship with Mr Grant.
The net proceeds of the sale had been used partly for her own purposes and partly for the couples living expenses.
Mrs Gow continued to live in Mr Grants home until she obtained rented accommodation in June 2009.
The sheriff found that the value in July 2009 of Mrs Grants former flat was 88,000.
The difference between that figure and the price at which the flat was sold in June 2003 was 38,000.
The sheriff also heard evidence that during their cohabitation the parties purchased two timeshare weeks in their joint names, each of which cost 7,000.
Mrs Gow paid 1,500 towards the first week, and the whole price of the second week.
The sheriff recognised that the language of section 28 allowed her a discretion to make an order and that a precise calculation of loss, based on specific payments and receipts, did not require to be made.
Her conclusion, having regard to the relevant matters, was that Mrs Gow had suffered a net economic disadvantage, and that she should be compensated in the sum of 39,500.
Mr Grants appeal to the Inner House was allowed and the sheriffs award of a capital sum to Mrs Gow was set aside.
The Supreme Court unanimously allows Mrs Gows appeal, overturns the decision of the Second Division, and affirms the sheriffs finding that the Appellant has suffered economic disadvantage in the interests of the Respondent to the extent of 39,500.
The leading judgment is given by Lord Hope, with whom Lady Hale, Lord Wilson, Lord Reed and Lord Carnwath agree.
A concurring judgment is also given by Lady Hale, with whom Lord Wilson and Lord Carnwath also agree.
Section 28 does not seek to replicate the arrangements that are available for financial provision on divorce or the termination of a civil partnership.
For this reason it would not be right to adopt the same approach to the application of that section as would be appropriate if the exercise was being conducted under section 9 of the Family Law (Scotland) Act 1985.
That would be to impose a regime of property sharing, and in some cases,
continuing financial support, on couples who might well have opted for cohabitation to avoid such consequences.
But it is sufficiently clear from the background to the enactment of section 28 that in its case too the underlying principle is one of fairness.
The section is designed to enable the court to correct imbalances arising out of a non commercial relationship where parties are quite likely to have made contributions or sacrifices without counting the cost or bargaining for a return.
The statutory purpose does no more than reflect the reality that cohabitation is a less formal, less structured and more flexible form of relationship than either marriage or civil partnership [35].
It would therefore be wrong to approach section 28 on the basis that it was intended simply to enable the court to correct any clear and quantifiable economic imbalance that may have resulted from the cohabitation.
That is too narrow an approach.
Section 9(1)(b) of the 1985 Act enables fair compensation to be awarded, on a rough and ready valuation, in cases where otherwise none could be claimed.
Section 28 of the 2006 Act is designed to achieve that effect.
So it may be helpful to refer to cases decided under section 9(1)(b) when the court is considering what might be taken to be an economic advantage, disadvantage or contribution for this purpose or how the economic burden of caring for a child is to be dealt with under section 28(2)(b).
An assessment of what is in the interests of any relevant child cannot simply be reduced to purely financial factors [36].
The phrase in the interests of the defender can be taken to mean in a manner intended to benefit the defender as the Second Division indicated.
But it does not compel that interpretation, and in the present context, where the guiding principle is one of fairness, its more natural meaning is directed to the effect of the transaction rather than the intention with which it was entered into.
Provided that disadvantage has been suffered in the interests of the defender to some extent, the door is open to an award of a capital sum even though it may also have been suffered in the interests of the applicant [38].
The sheriff was therefore entitled to take the sale of the house into account, notwithstanding her findings that the proceeds were used by Mrs Gow for her own purposes or to meet the parties joint living expenses, that it was encouraged by Mr Grant and that it was in the interests of furthering the parties relationship [39].
The sheriff was also entitled to hold that the loss of the benefit of the increase in value was an economic disadvantage, and that it was suffered by Mrs Gow in the interests of her relationship with Mr Grant.
When the cohabitation ended Mrs Gow did not have a home whereas Mr Grant still had a home which had increased in value.
Mrs Gow should be compensated for that disadvantage [40].
In relation to the sums spent on acquisition of the timeshare, this was a matter for the discretion of the sheriff.
Her note indicates that this part of her award was arrived at after carrying out a careful analysis of all the facts.
The Second Division therefore had no proper basis for disturbing this part of the award [41 42].
Lady Hale states that there are lessons to be learned from this case in England and Wales.
There is a need for some such remedy south of the border.
Sufficient basis for changing the law has been amply provided by the long standing judicial calls for reform; by the Law Commissions analysis of the deficiencies in the present law and the injustices which can result; by the demographic trends towards cohabitation and births to cohabiting couples, which are even more marked south of the border than they are in Scotland; and by the widespread belief that cohabiting couples are already protected by something called common law marriage which has never existed in the south [50].
The main lesson from this case, as also from the research carried out in Scotland and England to date, is that a remedy such as this is both practicable and fair, focusing on where parties were at the beginning of the relationship and where they are at the end.
It does not impose upon unmarried couples the responsibilities of marriage but redresses the gains and losses flowing from their relationship [56].
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The Aarhus Convention (more fully, the Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters) requires that the procedures to which it refers should be fair, equitable, timely and not prohibitively expensive (article 9.4).
Although the United Kingdom is a party to the Convention, it is not directly applicable in domestic law.
However, the same requirements have been incorporated by amendments made in 2003 into directives, relating in particular to environmental impact assessment (EIA Directive 85/337/EEC) and integrated pollution prevention and control (IPPC Directive 96/61/EC); compliance was required by 25 June 2005 (Council Directive 2003/35/EC article 6) (The EIA Directive is now consolidated at 2011/92/EC).
It has not been disputed that the present proceedings, though begun before that date, are at least at this level subject to what I will call the Aarhus tests under directly applicable European law.
For reasons explained in its judgment of December 2010 ([2010] UKSC 57; [2011] 1 WLR 79), the Supreme Court referred to the Court of Justice of the European Union (CJEU) certain questions relating to the expression not prohibitively expensive.
The reference followed the dismissal of the substantive appeal, and the making of an order for costs against the effective appellant, Mrs Pallikaropoulos (Edwards v Environment Agency [2008] 1 WLR 1587; [2008] UKHL 22).
The answers of the CJEU were given in a judgment dated 11 April 2013: Edwards v Environment Agency (No 2) (Case C 260/11) [2013] 1 WLR 2914 (following an opinion of Advocate General Kokott dated 18 October 2012).
We heard oral submissions from the parties on 22 July 2013.
Following that hearing it was agreed that our decision would be deferred pending receipt of the same Advocate Generals opinion in infraction proceedings against the United Kingdom relating to alleged non implementation of the directives.
That opinion was delivered on 12 September 2013 (Commission of the European Union v United Kingdom (Case C 530/11)).
We have received further submissions of the parties on that opinion.
We have also been informed that a request by the UK government to reopen the oral procedure in that case has been refused by the court.
Judicial review proceedings
Before turning to those issues, it is necessary to recall briefly the subject matter, and somewhat unusual course, of the substantive judicial review proceedings, including the circumstances in which Mrs Pallikaropoulos became a party.
The proceedings concerned a cement works in Rugby.
On 12 August 2003 the Environment Agency issued a permit to continue operations with an alteration in its fuel from coal and petroleum coke to shredded tyres.
This proposal gave rise to a public campaign on environmental grounds, one opponent being a local pressure group called Rugby in Plume.
Judicial review proceedings were begun on 28 October 2003 challenging the Agencys decision.
The proceedings were begun in the name of a local resident, Mr David Edwards.
The background to his involvement was described by Keith J, when permitting the claim to proceed ([2004] EWHC 736 (Admin)), paras 12 13).
He noted the public campaign led by Rugby in Plume, its leading light being Mrs Pallikaropoulos, who claimed to speak for between 50,000 and 90,000 local residents affected by the proposals, and to have committed substantial funds of her own to the campaign.
Following the decision of the Rugby Borough Council, on advice from leading counsel, not to pursue its own claim for judicial review, she was reported as pledging to carry on the battle using legal aid, and was also reported as saying: I'm too rich [to get legal aid], because I own my own house, so someone in Rugby has to come forward who feels strongly enough to take the case forward under the legal aid scheme.
Although there was no direct evidence from Mr Edwards that he had responded to this request for assistance, the judge found it difficult to resist the inference that he had been put up as a claimant in order to secure public funding of the claim by the Legal Services Commission when those who are the moving force behind the claim believe that public funding for the claim would not otherwise have been available.
Keith J held that this somewhat unconventional background neither deprived Mr Edwards of a sufficient interest to bring judicial review proceedings, nor constituted an abuse of process.
There was no appeal from that conclusion.
It had the consequence that the proceedings in the High Court continued at public expense and without significant risk to the applicant, or to his supporters, of an adverse costs order if they lost.
The substantive application was heard by Lindsay J and dismissed on 19 April 2005: [2005] EWHC 657 (Admin), [2006] Env L R 56.
He observed that the public opposition was not unnatural: I say that that was not unnatural as burning rubber is notorious for the noxious smell given off and the dense smoke created and many, unaware of the way in which the chipped tyres would be burned in a modern state of the art kiln at temperatures of up to 1400 degrees, would expect and fear the worst. (para 5) However, as he found in the course of his judgment, these fears, natural or not, were contradicted by the evidence.
He dismissed an argument that the proposal was a change which may have significant adverse effects on the environment (EIA Directive Annex II para 13), saying: it is plain that tyre burning in itself as a fuel has no significant adverse effects on the environment and, indeed, overall may even have beneficial effects on the environment. (para 31).
Lord Hoffmann, giving the leading judgment in the House of Lords on the substantive appeal, described this as an unchallenged finding of fact that the only change in operation proposed by the application, namely the use of tyres, would not have significant negative effects on human beings or the environment ([2008] 1 WLR 1587, para 30) Lindsay J rejected grounds alleging non compliance with the two directives.
He upheld a complaint of procedural unfairness by the Agency arising from failure to disclose an internal assessment report AQMAU 1 relating to emissions of particulate matter (PM10), but exercised his discretion to refuse relief.
He also declined to make a reference to the CJEU.
Mr Edwards appealed to the Court of Appeal with permission granted by Keene LJ.
The appeal was heard over three days beginning on 6 February 2006, and was dismissed on similar grounds, including the exercise of discretion ([2006] EWCA Civ 877; [2007] Env LR 126).
The court held that the change was not a project within the meaning of the EIA directive, but that if that were wrong there had been substantial compliance.
On the procedural issues, Auld LJ observed: given the Judge's finding on the evidence before him of no environmental harm from the plant and the continuous and dynamic nature of the PPC regulatory system enabling assessments to be made on what is known rather than predicted by AQMAU over three years ago, it would be pointless to quash the permit simply to enable the public to be consulted on out of date data. (para 126) The court again declined to make a reference to the CJEU.
There had been an unexpected development on the third and final day of the hearing.
Mr Edwards, while wishing to continue with his appeal, withdrew his instructions from both solicitors and counsel (Mr Wolfe QC).
Mrs Pallikaropoulos, described by Auld LJ as a prime mover, who had been in court throughout the appeal, applied without objection to be joined as an additional appellant.
This course was described by Auld LJ as plainly in the public interest to enable the appeal to be concluded.
He agreed to Mr Wolfes proposal that her potential liability to costs in the Court of Appeal should be capped at 2,000.
Following dismissal of the appeal, the respondents costs capped at this level were awarded against her.
She was given leave to appeal by the House of Lords.
She applied to the House of Lords for an order varying or dispensing with the ordinary requirement, under the applicable practice direction of the House (not replicated in the new Supreme Court rules), to give security for costs in the sum of 25,000, and for a protective costs order, under the principles set out in R (Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192, [2005] 1 WLR 2600.
On 22 March 2007 the Judicial Office wrote to the parties informing them that the applications had been rejected for the following reasons: Their Lordships proceed on the basis that the appeal raises an issue or issues of general importance and they are prepared to assume that [existence] of private interest may not always preclude the making of a special costs order in such a case.
But their Lordships do not accept that information about the applicant's means, about the identity and means of any who she represents and about the position generally in the absence of any special order, are or should be regarded as immaterial; further, they do not consider that the suggested protective orders regarding costs appear proportionate on the information which is before them and in the light of the nature of the issues involved; and they do not consider that any case has been made for saying that the proposed appeal would be 'prohibitively expensive' or that Directive 2003/35/EC would be breached without a special order.
Mrs Pallikaropoulos was evidently not deterred by that ruling.
The security was duly paid and the appeal proceeded.
In the substantive hearing before the House of Lords, the main issues came down to two, one of interpretation of the EIA Directive, the other procedural.
The first was whether the proposed use of tyres and the related adaptations constituted a waste disposal installation within paragraph 10 of Annex I to the Directive, rather than a change or extension of an Annex I project, within paragraph 13 of Annex II.
The main practical difference was that paragraph 13 was limited to changes which may have significant adverse effects on the environment, and therefore (on the findings of Lindsay J) would have had no application to this case.
The second issue was one of fairness, relating to failure to disclose the AQMAU report.
The House split on the issue of interpretation: the majority held that that the proposal was not within paragraph 10, but accepted that, if this point had been determinative, a reference to the European Court would have been necessary.
However, all were agreed that it was not determinative, because, if the EIA directive applied, its requirements had been complied with (para 58, per Lord Hoffmann; para 82, per Lord Mance).
On the procedural issue, Lord Hoffmann doubted whether a common law duty arose as claimed (para 44), but held in agreement with the courts below that relief should in any event be refused since the relevance of the reports had been completely overtaken by events, in the shape of more recent reports showing no exceedances as a result of the Cemex plant (para 64 65).
The dispute over costs
The present dispute arises out of the order for costs of the appeal in the House of Lords made on 18 July 2008 in favour of both respondents, the Environment Agency and the Secretary of State.
They submitted bills totalling respectively 55,810 and 32,290.
In the course of the assessment, following transfer of jurisdiction to the Supreme Court, the costs officers determined, as a preliminary issue, that in accordance with the directives they should disallow any costs which they considered prohibitively expensive ([2011] 1 WLR 79, 92 et seq).
On the defendants application to the full court for a review, it was decided that the costs officers had had no jurisdiction to consider this issue, but that it was a matter that could be considered by the court under its jurisdiction to correct a possible injustice arising from the original costs order ([2011] 1 WLR 79 para 35, per Lord Hope).
As to the application of the Aarhus test, the court referred to the judgment of Sullivan LJ in R (Garner) v Elmbridge Borough Council [2011] 3 All ER 418; [2010] EWCA Civ 1006, in which he had identified an important point of principle, as to whether the question should be approached objectively or subjectively: Should the question whether the procedure is or is not prohibitively expensive be decided on an 'objective' basis by reference to the ability of an 'ordinary' member of the public to meet the potential liability for costs, or should it be decided on a 'subjective' basis by reference to the means of the particular claimant, or upon some combination of the two bases? (para 42) Sullivan LJ had taken the view that a purely subjective approach would not be consistent with the objectives underlying the Directive.
On the facts of the Garner case, which was concerned only with the position at first instance, he held that an order should have been made capping the claimants potential costs liability to the defendant at 5,000.
Lord Hope thought it plain that the difficult issues highlighted by Sullivan LJ had not been previously addressed by the House of Lords in the present case, either when declining to make a protective costs order or in its final order for costs, both decisions apparently being based on a purely subjective approach (para 33).
He concluded that there was no clear and simple answer, and that accordingly a reference should be made to the CJEU for guidance, the order for costs being stayed in the meantime (para 36).
Government consultation
While the reference was pending, the government issued a consultation paper on the issue of cost capping, and the scope for providing clearer guidance in the procedural rules: Costs Protection for Litigants in Environmental Judicial Review Claims (CP16/11 October 2011).
This consultation ran in parallel with the consultation on the proposals for reform of costs rules generally, following the report of Jackson LJ.
The paper noted the developing practice of the courts: 18 A number of domestic cases dating from R (Corner House Research) v Secretary of State for Trade and Industry [2005] 1 WLR 2600 including R (Garner) v Elmbridge Borough Council [2011] 1 Costs LR 48 (8 September 2010), have set out the basic principles underpinning the use of PCOs in judicial review proceedings. 19 The cases did not provide detailed guidance on the level at which a PCO should be set, but Garner made it clear that a level of twice the national average income would be too high.
In Garner itself the court awarded a PCO at 5,000.
One question raised was whether any figure laid down by the rules should be absolute, or merely presumptive: 27 An absolute cap would have the advantage for users of providing the most certainty, but it would also provide the same protection for wealthy organisations and individuals as for those of more limited means.
A presumptive limit would be more capable of being targeted at those most in need, but if too flexible could give rise to unnecessary and time consuming arguments about costs.
As to the level of cap a figure of 5,000 was proposed: 35 Taking account of the levels which are currently being used by the courts as well as the importance of setting a level which could not be further reduced, it is proposed that the cap should be set at a level of 5,000.
This is on the basis that any claimant who is so impecunious that the possibility of being liable for 5,000 would present an insuperable barrier to proceeding would in most cases be eligible for legal aid, with its attendant cost protection in any event.
The conclusions on these issues were given in a Report on Response to Consultation (CP(R) 16/11 August 2012).
As to the level of the cap, it was noted that while there was only minority support for the proposed cap of 5,000 there was no strong consensus for any alternative: 3 On the basis of the results of this consultation and the evidence of current practice in the courts, the Government takes the view that a cap of 5,000 is a proportionate amount to ask individual claimants to pay.
On the same basis it believes that it is reasonable to make a distinction between the position of individuals and organisations and therefore proposes to set a cap of 10,000 for organisations.
Consideration was also given to the position on appeal: 8 The similarity of the proposals to a fixed costs regime indicates in the Governments view, and as one respondent strongly argued, that it will be appropriate for appeals to be dealt with in accordance with the rule proposed by Lord Justice Jackson for appeals in cases to which a fixed or restricted costs regime applied at first instance.
Under that rule, when it is implemented as part of the wider Jackson reforms, the judge considering whether to give permission to appeal in a case which was subject at first instance to a fixed or restricted costs regime will at the outset determine the appropriate costs limit or limits having had regard to the decisions in the lower court.
These proposals were given effect by amendment to the Civil Procedure Rules.
It is enough for present purposes to refer to a summary of the changes in an update to the rules dated 1 April 2013: Amendments are made to comply with the Aarhus Convention so that any system for challenging decisions in environmental matters is open to members of the public and is not prohibitively expensive.
Two limits are set: on the costs recoverable by a defendant from a claimant (5,000 where the claimant is an individual and 10,000 in any other circumstances) and; on the costs recoverable by a claimant from a defendant (35,000).
Consequential amendments are made to PD 25A, Part 54 and the Pre Action Protocol Judicial Review.
The amendments do not apply to a claim commenced before 1 April 2013.
For appeals a new rule was added in CPR 52: Orders to limit the recoverable costs of an appeal 52.9A.(1) In any proceedings in which costs recovery is normally limited or excluded at first instance, an appeal court may make an order that the recoverable costs of an appeal will be limited to the extent which the court specifies. (2) In making such an order the court will have regard to (a) the means of both parties; (b) all the circumstances of the case; and (c) the need to facilitate access to justice. (3) If the appeal raises an issue of principle or practice upon which substantial sums may turn, it may not be appropriate to make an order under paragraph (1). (4) An application for such an order must be made as soon as practicable and will be determined without a hearing unless the court orders otherwise.
In the Supreme Court, the Costs Practice Direction No 13 (as amended with effect from November 2013) now includes specific provision for an order limiting the recoverable costs of an appeal in an Aarhus Convention claim (para 2.2.c).
The CJEUs decision
The court reaffirmed the principles established in its judgment in Commission of the European Communities v Ireland (Case C 427/07) [2010] Env LR 123; [2009] ECR I 6277, noting in particular that Aarhus Convention does not affect the powers of national courts to award reasonable costs, and that the costs in question are all the costs arising from participation in the judicial proceedings (paras 25 27).
In response to the questions raised by the Supreme Court, it began by affirming the duty of member states to ensure that the directive is fully effective, while retaining a broad discretion as to the choice of methods (para 37).
The national court, in turn, when ruling on issues of costs, must satisfy itself that that requirement has been complied with, taking into account both the interest of the person wishing to defend his rights and the public interest in the protection of the environment (para 35).
The following paragraphs of the judgment, which contain the substantive guidance, must be set out in full: 40 That assessment cannot, therefore, be carried out solely on the basis of the financial situation of the person concerned but must also be based on an objective analysis of the amount of the costs, particularly since, as has been stated in para 32 of the present judgment, members of the public and associations are naturally required to play an active role in defending the environment.
To that extent, the cost of proceedings must not appear, in certain cases, to be objectively unreasonable.
Thus, the cost of proceedings must neither exceed the financial resources of the person concerned nor appear, in any event, to be objectively unreasonable. 41 As regards the analysis of the financial situation of the person concerned, the assessment which must be carried out by the national court cannot be based exclusively on the estimated financial resources of an average applicant, since such information may have little connection with the situation of the person concerned. 42 The court may also take into account the situation of the parties concerned, whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure and the potentially frivolous nature of the claim at its various stages: see, by analogy, DEB Deutsche Energiehandels und Beratungsgesellschaft mbH v Bundesrepublik Deutschland (Case C 279/09) [2010] ECR I 13849, para 61. 43 It must also be stated that the fact, put forward by the Supreme Court of the United Kingdom, that the claimant has not been deterred, in practice, from asserting his or her claim is not in itself sufficient to establish that the proceedings are not, as far as that claimant is concerned, prohibitively expensive for the purpose (as set out above) of Directives 85/337 and 96/61. 44 Lastly, as regards the question whether the assessment as to whether or not the costs are prohibitively expensive ought to differ according to whether the national court is deciding on costs at the conclusion of first instance proceedings, an appeal or a second appeal, an issue which was also raised by the referring court, no such distinction is envisaged in Directives 85/337 and 96/61, nor, moreover, would such an interpretation be likely to comply fully with the objective of the European Union legislature, which is to ensure wide access to justice and to contribute to the improvement of environmental protection. 45 The requirement that judicial proceedings should not be prohibitively expensive cannot, therefore, be assessed differently by a national court depending on whether it is adjudicating at the conclusion of first instance proceedings, an appeal or a second appeal.
A number of significant points can be extracted from the Edwards judgment: First, the test is not purely subjective.
The cost of proceedings must not exceed the financial resources of the person concerned nor appear to be objectively unreasonable, at least in certain cases. (The meaning of i) the latter qualification is not immediately obvious, but it may be better expressed in the German version in Einzelfllen, meaning simply in individual cases.) The justification is related to the objective of the relevant European legislation (referred to in para 32 of the judgment), which is to ensure that the public plays an active role in protecting and improving the quality of the environment. ii) The court did not give definitive guidance as to how to assess what is objectively unreasonable.
In particular it did not in terms adopt Sullivan LJs suggested alternative of an objective assessment based on the ability of an ordinary member of the public to meet the potential liability for costs.
While the court did not apparently reject that as a possible factor in the overall assessment, exclusive reliance on the resources of an average applicant was not appropriate, because it might have little connection with the situation of the person concerned. iii) The court could also take into account what might be called the merits of the case: that is, in the words of the court, whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure, the potentially frivolous nature of the claim at its various stages. (para 42) iv) That the claimant has not in fact been deterred for carrying on the proceedings is not in itself determinative. v) The same criteria are to be applied on appeal as at first instance.
I do not understand the last point as intended to imply that the same order must be made at each stage of the proceedings, or that there should be a single global figure covering all potential stages, but rather that the same principles should be applied to the assessment at each stage, taking account of costs previously incurred.
In her 2013 opinion in Commission of the European Union v United Kingdom (Case C 530/11), the Advocate General said of the courts reasoning on this point: that finding cannot be interpreted as meaning that in assessing the permissible cost burden in appeal proceedings the costs already incurred in courts below may be ignored.
Instead, each court must ensure that the costs at all levels of jurisdiction taken together are not prohibitive or excessive. (para 23)
However, as she had recognised in her earlier opinion (2012 opinion in Edwards v Environment Agency (No 2) (Case C 260/11) [2013] 1 WLR 2914, paras 58 61), while prohibitive costs must be prevented at all levels of jurisdiction, the considerations may differ at each level.
Thus, on the one hand, as she notes, the decision of the House of Lords as the final court was potentially of special significance, because it alone had a duty to make a reference to the CJEU in case of doubt as to EU law.
On the other hand, it is possible that after the decision by the lower court, public interest in the further continuation of the proceedings would be reduced.
Accordingly, she said, it was compatible with Aarhus tests to re examine at each level of jurisdiction the extent to which prohibitive costs must be prevented.
More generally, in her 2012 opinion, in support of the need for account to be taken of both objective and subjective considerations, she had emphasised the importance of the public interest in the protection of the environment: 42.
Recognition of the public interest in environmental protection is especially important since there may be many cases where the legally protected interests of particular individuals are not affected or are affected only peripherally.
However, the environment cannot defend itself before a court, but needs to be represented, for example by active citizens or non governmental organisations.
Conversely A person who combines extensive individual economic interests with proceedings to enforce environmental law can, as a rule, be expected to bear higher risks in terms of costs than a person who cannot anticipate any economic benefit.
The threshold for accepting the existence of prohibitive costs may thus be higher where there are individual economic interests. (para 45) It is less clear how the court saw the merits of the case (para 23(iii) above)
being brought into account.
There is in the judgment no indication as to how the identified factors might affect the ultimate level of recovery, one way or the other. (The comparison there drawn with DEB Deutsche Energiehandels und Beratungsgesellschaft mbH v Bundesrepublik Deutschland (Case C 279/09) [2010] ECR I 13849 provides little direct assistance.
That case was not related to environmental law, and it concerned the circumstances in which legal aid should be granted to a claimant, rather than the extent of his potential liability to the other party.)
Taking the points in turn I would suggest the following: i) A reasonable prospect of success Lack of a reasonable prospect of success in the claim may, it seems, be a reason for allowing the respondents to recover a higher proportion of their costs.
The fact that frivolity is mentioned separately (see below), suggests that something more demanding is envisaged than, for example, the threshold test of reasonable arguability. ii) The importance of what is at stake for the claimant As indicated by Advocate General Kokott, this is likely to be a factor increasing the proportion of costs fairly recoverable.
As she said, a person with extensive individual economic interests at stake in the proceedings may reasonably be expected to bear higher risks in terms of costs. iii) The importance of what is at stake for the protection of the environment Conversely, and again following the Advocate Generals approach, this is likely to be a factor reducing the proportion of costs recoverable, or eliminating recovery altogether.
As she said, the environment cannot defend itself, but needs to be represented by concerned citizens or organisations acting in the public interest. iv) The complexity of the relevant law and procedure This factor is not further explained.
Its relevance seems to be that a complex case is likely to require higher expenditure by the respondents, and thus, objectively, to justify a higher award of costs.
Although mention is only made of complexity of law or procedure, the same presumably should apply to technical or factual complexity. v) The potentially frivolous nature of the claim at its various stages The respondents should not have to bear the costs of meeting a frivolous claim.
In domestic judicial review procedures, whether at first instance or on appeal, this issue is likely to be resolved in favour of the claimant by the grant of permission,
The present case
The present case is unusual in that the Aarhus issue did not arise in the same form at a lower level.
Full protection at first instance was given by legal aid.
In the Court of Appeal the costs cap provided for Mrs Pallikaropoulos reflected the unusual circumstances in which she became a party, and the courts view that it was in the public interest that the case could be completed with the same representation.
It therefore provides no guide to the appropriate order on the further appeal.
On the other hand, as Lord Hope recognised, the initial decision of the House itself not to provide any costs protection was made without full consideration of all the factors now known to be relevant.
The respondents are not now seeking recovery of their full costs.
They have agreed to limit their joint claim to 25,000, which is the amount of the security already paid by the appellant as the condition for bringing the appeal.
There is limited evidence as to the resources of the appellant herself, and none that an order for payment of the sum of 25,000 already in court would be beyond her means or cause her hardship.
Furthermore, it must be assumed that following the refusal of a protective costs order in March 2007, her decision to proceed was made with full knowledge of the risks involved.
It is impossible in my view on the material before us to hold that the order sought would be subjectively unreasonable.
The more difficult question is whether there should be some objectively determined lower limit, and if so how it should be assessed.
Although this was one of the main issues raised by the reference, the European court has not offered a simple or straightforward answer.
Mr Wolfe relies on the last sentence of para 40 of the judgment in Edwards v Environment Agency (No 2 ) (Case C 260/11) [2013] 1 WLR 2914, supported as he says by the Advocate Generals 2013 opinion in Commission of the European Union v United Kingdom (Case C 530/11), para 55: the correct position is that litigation costs may not exceed the personal financial resources of the person concerned and that, in objective terms, that is to say, regardless of the persons own financial capacity, they must not be unreasonable.
In other words, even applicants with the capacity to pay may not be exposed to the risk of excessive or prohibitive costs and, in the case of applicants with limited financial means, objectively reasonable risks in terms of costs must in certain circumstances be reduced further. (emphasis added) Thus, he says, it is necessary to start from an objectively defined standard, the circumstances of the particular individual being relevant only to the extent that they may reduce that figure.
Furthermore, in his submission, the question of what is objectively reasonable was answered definitively by the government itself, when following extensive consultation it adopted the figure of 5,000 (as now embodied in the High Court rules).
As he submits, the respondents cannot properly go behind that figure, at least without evidence to support any alternative suggestion.
I am doubtful whether so prescriptive an approach can be extracted from the
European courts decision.
If it were, it is difficult to see how the merits factors would play a significant part.
In any event, I cannot agree that the respondents are bound by the figure of 5,000 adopted for the purpose of the new rules.
The new rules only apply to proceedings commenced after June 2013.
More importantly, they recognise (as did the Advocate General: para 25 above) that, while the same general principles apply in the Court of Appeal, the factors affecting the judgment of what is subjectively or objectively reasonable may have changed.
This applies with even more force at the highest level, where the case for a second appeal needs special justification.
Furthermore, the factors which justify a relatively low standard figure for an advance cap, including the desirability of avoiding satellite litigation in advance of a hearing on the merits, will not apply with the same force to consideration after the event.
At that stage the court will be in a much better position to take a view on both the merits of the case (in the sense discussed above) and on the costs incurred and their consequences for the parties.
The test in principle remains the same but the court is considering it in a different context.
Of the five merits factors mentioned by the court, I would discount the second and fifth immediately.
There is no evidence that the appellant had any economic interest of her own in the proceedings, and, given the grant of permission at each stage, including the appeal to the House of Lords, they could not be said to be frivolous.
The relative complexity of the case (factor (iv)) is evidenced by the fact that it took three days before the House.
It has not been suggested that the costs incurred by the respondents were excessive in respect of the issues involved in the case.
They are not out of line with those incurred by the appellant.
The 25,000 now claimed represents a very significant reduction from that figure.
The other two factors (i) the prospects of success and (iii) the importance of the case for the protection of the environment are at best neutral from the applicants point of view.
The issue of construction of the EIA Directive was one of some difficulty, as is clear from the division of views within the House.
However, by the time it reached the House it seems to have become a point of limited practical significance for the protection of the environment in the area, given the judges unchallenged finding on that aspect.
Nor was there any clear evidence of more general public support for her appeal at this level.
Furthermore the prospects of a final order in her favour in the appeal were highly questionable.
Whatever the answer to the bare legal issue, there was a serious risk of the courts discretion being exercised against her, in the same way as had happened in the lower courts.
Accordingly, the potential significance of the legal issue in my view carries relatively little weight in the overall balance.
The alternative disclosure issue had been overtaken by events, as the Court of Appeal had held, and the House confirmed.
Taking all these factors into account, I find it impossible to say that the figure of 25,000, viewed objectively, is unreasonably high, either on its own or in conjunction with the 2,000 awarded in the Court of Appeal.
Mr Wolfe submits that if this court has any doubt as to his interpretation of the European courts decision and the Advocate Generals opinions, we should delay matters until the final judgment in the infraction proceedings.
I do not think that is necessary or desirable.
Resolution of this case has already been long delayed.
The European court has given such specific answers as it thought appropriate to the questions referred in the present case.
Although they leave some scope for judgment in their application, there is nothing in the Advocate Generals later opinion, in my view, which suggests that more definitive guidance for the purposes of the present case is to be expected from the forthcoming judgment.
objectively excessive.
Accordingly, I would make an order for costs in that amount in favour of the respondents jointly.
Michaelmas Term [2010] UKSC 57 JUDGMENT R (on the application of Edwards and another (Appellant)) v Environment Agency and others (Respondents) Lord Hope, Deputy President before Lord Walker Lord Brown Lord Mance Lord Dyson JUDGMENT GIVEN ON 15 December 2010 Heard on 11 November 2010 Appellant David Wolfe (Instructed by Richard Buxton Environmental and Public Law) Respondents James Eadie QC James Maurici Charles Banner (Instructed by Treasury Solicitor) LORD HOPE, delivering the judgment of the Panel 1.
This is an appeal against a decision by two costs officers appointed by the President of the Supreme Court under rule 49(1) of the Supreme Court Rules 2009, Mrs Registrar di Mambro and Master OHare, a copy of which is annexed to this judgment.
From the issues they were asked to decide they selected two preliminary issues which arose in the detailed assessment of bills of costs lodged by the respondents in an appeal to the House of Lords in which they were successful.
The appellant, Mrs Pallikaropoulos, had been ordered to pay the costs of the appeal.
The first respondent, the Environment Agency, had lodged a bill totalling 55,810.
The second respondent, the Secretary of State for the Environment, Food and Rural Affairs, had lodged a bill totalling 32,290. 2.
The preliminary issues were about the proper application of article 10a of Council Directive 85/337/EEC of 27 June 1985 on the assessment of the effects of certain public and private projects on the environment (the EIA Directive) and article 15a of Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution prevention and control (the IPPC Directive).
Those articles had been inserted by articles 3(7) and 4(4) of Council Directive 2003/35/EC of 26 May 2003 to implement provisions which first appeared in the Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters of 25 June 1998 (the Aarhus Convention).
Among the provisions as to access to justice in article 9 of the Aarhus Convention is a requirement that the procedures to which it refers should be fair, equitable and timely and not prohibitively expensive: article 9(4).
In proceedings to which the EIA Directive applies, article 10a requires 3.
Member States to ensure that members of the public 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 the directive.
It also provides that Any such procedure shall be fair, equitable, timely and not prohibitively expensive.
Article 15a of the IPPC Directive makes identical provision with respect to proceedings to which that directive applies. 4.
The costs officers were asked to consider the proper application of those articles to this case.
The issues which were identified from the skeleton arguments provided by the parties were as follows: (i) where an order for costs has been made, whether as a general rule the court assessing those costs has any jurisdiction to implement the directives; (ii) if so, whether in the particular circumstances of this case the costs officers should seek to do so; and (iii) if so, whether on the evidence presented the amount of costs payable by the appellant should be moderated or even excluded altogether.
The costs officers decided the first two issues in favour of the appellant.
They reserved their opinion on the third issue until they had given written reasons for their decision on the first two issues and the parties had had an opportunity to consider whether to appeal against it. 5.
The respondents appealed against the costs officers decision under rule 53 of the Supreme Court Rules.
They asked the single Justice to refer the following questions to a panel of Justices under rule 53(2): (1) whether it was open to the costs officers, in the circumstances of this case in which applications to the court to reduce or cap a partys liability had been made to and considered by and rejected by the Court, to achieve that result through the detailed assessment process; and (2) if it was, whether the test indicated by the phrase prohibitively expensive should be focused exclusively on the actual circumstances of the parties to the litigation and not on the question what would be prohibitively expensive for the ordinary member of the public.
The single Justice referred the application to a panel of five Justices and directed that these questions should be decided after an oral hearing.
The panel, having now heard counsel, is grateful for their assistance on these issues of principle.
Background 6.
The issues about costs are in respect of the appellants application for judicial review of the decision of the first respondent to issue a permit on 12 August 2003 for the operation of a cement works in Lawford Road, Rugby.
Permission had been sought and granted to replace the fuel that had previously been used for their operation, which was coal and petroleum coke, with shredded tyres.
The use of tyres for this purpose gave rise to a public campaign against the proposal on environmental grounds.
The application was originally brought in the name of a Mr David Edwards.
His claim for judicial review was dismissed by Lindsay J: [2005] EWHC 657 (Admin), [2006] Env L R 3.
He appealed to the Court of Appeal, but on the third and final day of the hearing he withdrew his instructions from his solicitors, Richard Buxton & Co, and his counsel, David Wolfe.
Mrs Pallikaropoulos, who had been present in court throughout the appeal and had been closely involved in opposition to the permit, was added as an appellant for the remainder of the proceedings.
Her liability in the Court of Appeal was capped at 2,000.
The appeal was dismissed and the respondents costs, capped at 2,000, were awarded against Mrs Pallikaropoulos: [2006] EWCA Civ 1138.
Mrs Pallikaropoulos was given leave to appeal by the House of Lords. 7.
Mrs Pallikaropoulos then applied to the House of Lords for an order varying or dispensing with the requirement to give security for costs in the sum of 25,000 in accordance with House of Lords Practice Direction 10.6.
She also applied for a protective costs order, in which she sought a cap on her liability for costs on her appeal under the principles set out in R (Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192, [2005] 1 WLR 2600.
She relied in support of these applications on the requirement of articles 10a and 15a of the EU Directives and article 9(4) of the Aarhus Convention that access to the courts should not be prohibitively expensive.
She declined to provide details of her means or details of the means of those whom she claimed to represent.
Her applications were opposed by the respondents. 8.
By letter dated 22 March 2007 the Judicial Office of the House of Lords wrote to the parties informing them that Mrs Pallikaropouloss applications had been rejected.
The following reasons were given for this decision: Their Lordships proceed on the basis that the appeal raises an issue or issues of general importance and they are prepared to assume that absence of private interest may not always preclude the making of a special costs order in such a case.
But their Lordships do not accept that information about the applicants means, about the identity and means of any who she represents and about the position generally in the absence of any special order, are or should be regarded as immaterial; further, they do not consider that the suggested protective orders regarding costs appear proportionate on the information which is before them and in the light of the nature of the issues involved; and they do not consider that any case has been made for saying that the proposed appeal would be prohibitively expensive or that Directive 2003/35/EC would be breached without a special order.
Notwithstanding the rejection of these applications Mrs Pallikaropoulos proceeded with her appeal. 9.
On 16 April 2008 the House of Lords affirmed the Court of Appeals decision and dismissed the appeal: [2008] UKHL 22, [2008] Env LR 34.
The parties were given time to make written submissions on costs.
It was submitted for Mrs Pallikaropoulos that there should be no order as to costs.
As in the case of her application for a protective costs order, she relied in support of that submission on the requirement of articles 10a and 15a of the EU Directives and article 9(4) of the Aarhus Convention that access to the courts should not be prohibitively expensive.
Some information was given about her means, but it was in general terms and it was not accompanied by detailed evidence.
Her submission was opposed by the respondents, who sought an order for the costs of the appeal.
On 18 July 2008, following consideration of what had been offered on either side, the House of Lords pronounced a costs order in these terms: That the appellant do pay or cause to be paid to the respondents their costs of the appeal to this House, the amount of such costs to be certified by the Clerk of the Parliaments if not agreed between the parties.
No reasons were given for this decision. 10.
On 1 October 2009 the jurisdiction of the House of Lords was transferred to the Supreme Court by section 40 of the Constitutional Reform Act 2005.
Among the transitional provisions in Schedule 10 to the Act relating to proceedings transferred to the Supreme Court from the House of Lords or the Judicial Committee of the Privy Council is para 5, which provides: (1) Any act, judgment or order of the original court in the transferred proceedings is to have the same effect after the transfer day as if it had been an act, judgment or order of the Supreme Court in corresponding proceedings in that court. (2) Accordingly, after the transfer day, further proceedings may be taken in the Supreme Court in respect of such an act, judgment or order. 11.
Rule 49 of the Supreme Court Rules 2009 provides that every detailed assessment of costs shall be carried out by two costs officers appointed by the President.
Rule 50, as to the basis of the assessment, provides: (1) Where the Court is to assess the amount of costs it will assess those costs (a) on the standard basis, or (b) on the indemnity basis, in the manner specified by rule 51 or (where appropriate) on the relevant bases that apply in Scotland or Northern Ireland. (2) Where (a) the Court makes an order about costs without indicating the basis on which the costs are to be assessed, or (b) the Court makes an order for costs to be assessed on a basis other than one specified in paragraph (1), the costs will be assessed on the standard basis. (3) This rule applies subject to any order or direction to the contrary. 12.
Supreme Court Practice Direction 13, para 16.1 provides: The costs officers have discretion as to the amount to allow.
In exercising this discretion they bear in mind the terms unreasonably incurred and unreasonable in amount in CPR 44.4, (or in appeals from Scotland the provisions of rule 42.10 of the Rules of the Court of Session 1994) and in particular consider to what extent an item assisted the Court in determining the appeal.
The costs officers judgment 13.
Having identified the three preliminary issues referred to in para 4 above, the costs officers dealt with them as follows.
They held that compliance with the EU Directives was a relevant factor for them to take into account on the detailed assessment of costs in cases to which the directives apply unless the court awarding costs had already done so: para 13.
In deciding what costs it was reasonable for the respondents to obtain, they said that they would disallow any costs which they considered to be prohibitively expensive: para 17.
As to the meaning of the phrase prohibitively expensive, they said that they were minded to adopt the test which had been propounded by Mr Justice Sullivan, as he then was, in the report of his Working Group, Ensuring access to environmental justice in England and Wales (May 2008), where he said costs, actual or risked, should be regarded as prohibitively expensive if they would reasonably prevent an ordinary member of the public (that is, one who is neither very rich nor very poor, and would not be entitled to legal aid) from embarking on the challenge falling within the terms of Aarhus. 14.
They then addressed the respondents argument that, as the appellant had raised the Aarhus principles on two occasions in the House of Lords and those submissions had been rejected on both occasions, she was estopped from raising those issues again before the costs officers.
They rejected it, for the reasons given in para 23 where they said: We neither have nor assert any right to set aside or vary any decision already made by the Law Lords or by the Justices in this case.
If, in advance of the hearing before us, the Law Lords or the Justices had made any decision on the implementation of the EU Directives in this case we would of course act in compliance with that decision.
However, we take the view that the pronouncements which the Law Lords have made in this case do not prevent us from applying the Aarhus principles in the course of our assessment.
In their view no part of the decision in March 2007 ruled out their discretion to decide that the reasonable costs in the case should be nil or should be no more than a nominal amount: para 25.
While the costs order of 18 July 2008 gave the respondents stronger ground for saying that the appellant had raised the Aarhus principles already and had lost them, they noted that the order did not expressly deal with them.
They said that this was consistent with their finding that those matters were best dealt with at the stage at which costs are assessed rather than at the stage at which costs are awarded.
The order expressly left the amount of costs to be determined.
They decided that they should determine that amount taking into account the Aarhus principles: para 27.
The jurisdiction of the costs officers 15.
The costs officers judgment raises a short but important point about the extent of their jurisdiction when they are carrying out their detailed assessment of costs under rule 49(1) of the Supreme Court Rules 2009. 16.
In Lahey v Pirelli Tyres Ltd [2007] EWCA Civ 91, [2007] 1 WLR 998, the Court of Appeal held that, where a costs order was deemed to have been made on the standard basis, the claimant was entitled to 100% of his assessed costs and that the costs judge had no power in advance of the assessment to vary the deemed order so as to reduce the claimants percentage entitlement to costs.
The relevant rules of the CPR were rule 44.3(1), which gives the court a discretion as to (a) whether costs are payable by one party to another, (b) the amount of those costs and (c) when they are to be paid; rule 44.4, which sets out the basis of assessment; and rule 44.5, which sets out the factors to be taken into account in deciding the amount of costs. 17.
The Supreme Court rule which corresponds to CPR rule 44.3 is rule 46(1), which provides: The Court may make such orders as it considers just in respect of the costs of any appeal, application for permission to appeal, or other application to or proceeding before the Court.
The rules about the basis of assessment of costs which correspond to those in CPR rules 44.4 and 44.5 are set out in rule 49 which provides for the detailed assessment of costs to be carried out by the costs officers (see para 11, above), and in rule 51 which provides with regard to the standard basis of assessment: (1) Costs assessed on the standard basis are allowed only if they are proportionate to the matters in issue and are reasonably incurred and reasonable in amount. (2) Any doubt as to whether costs assessed on the standard basis are reasonably incurred and are reasonable and proportionate in amount will be resolved in favour of the paying party. 18.
As Dyson LJ explained in Lahey v Pirelli Tyres Ltd, paras 20 21: 20 There is a real distinction between (a) carrying out an assessment and deciding as part of the assessment to reduce the bill by a percentage and (b) deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs.
The figure that results from (a) represents 100% of the assessed costs.
In deciding as part of the assessment to reduce the bill by a percentage, the costs judge is giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed.
The figure that results from (b) represents less than 100% of the assessed costs.
In deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs, the costs judge is not giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed. 21 Rule 44.3 gives a judge jurisdiction to make a type (b) order.
There is no doubt that at the end of a hearing the judge may make an order of the kind that the defendant sought from the [costs judge] in the present case.
In such a case, the judge is not purporting to vary an order if he disallows the successful party a proportion of his costs.
He is making the order.
He does not have the advantage accorded to the costs judge of having a detailed bill of costs.
He cannot, therefore, carry out a detailed assessment.
But he usually has the benefit, denied to the costs judge, of knowing a good deal about the case, and is often in a good position to form a view about the reasonableness of the parties conduct.
When carrying out a detailed assessment, the costs judge is not making an order for costs.
His position is quite different from that of a judge exercising the jurisdiction given by rule 44.3. 19.
The distinction in principle between carrying out an assessment and then deciding as part of the assessment to reduce the bill by a percentage on the one hand, and deciding in advance that the receiving party will receive only a percentage of the assessed costs on the other, is fully recognised by the Supreme Court Rules.
The function of the costs officers under rule 49(1), read together with Practice Direction 13, para 16.1 (see para 12, above) is to carry out the detailed assessment.
That is the limit of their jurisdiction.
Decisions as to whether the receiving party is to receive less than 100% of the assessed costs are reserved to the Court, in the exercise of the jurisdiction that is given to it by rule 46(1). 20.
The costs officers recognised the distinction that was drawn between these two functions in Lahey v Pirelli Tyres Ltd. But they were persuaded that the task of giving effect to the EU Directives fell naturally within the assessment of reasonableness.
They drew an analogy with the task that has to be performed where a party was legally aided for some but not all of the proceedings covered by the order for costs.
Section 11(1) of the Access to Justice Act 1999 provides: Except in prescribed circumstances, costs ordered against an individual in relation to any proceedings or part of proceedings funded for him shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including (a) the financial resources of all the parties to the proceedings, and (b) their conduct in connection with the dispute to which the proceedings relate; and for this purpose proceedings, or a part of proceedings, are funded for an individual if services relating to the proceedings or part are funded for him by the Commission as part of the Community Legal Service.
Since in most cases the reasonable sum that results from this exercise is nil, the assessments of reasonableness could vary substantially between periods when a losing litigant was legally aided and when he was not.
In the costs officers view the factors which they would have to take into account in implementing the EU Directives were not wholly dissimilar from the factors that they have to take into account under section 11 of the 1999 Act when it applies: para 16. 21.
This view of the costs officers jurisdiction is, with respect, misconceived.
Where section 11 of the 1999 Act applies the statute itself gives to the costs judge the authority to depart from the ordinary basis of assessment by setting a limit on the amount which it is reasonable for the paying party to pay.
In this case a statutory direction of that kind is absent, and there has been no direction by the Court that any basis of assessment other than the standard basis is to be applied.
So the costs officers must confine the exercise which they carry out to that which they are directed to perform under the rules.
It is not enough for them to refrain from deciding in advance of their assessment that the respondents will receive only a part of the assessed costs, which they have no jurisdiction to do for the reasons explained in Lahey v Pirelli Tyres Ltd. They must refrain from introducing a different basis than that prescribed by the rules when they are carrying out their assessment.
The test of reasonableness which they must apply is directed to their assessment of the costs incurred by the receiving party: see CPR 44.5 as to the factors to be taken into account by the costs judge when exercising his discretion as to costs.
It is not directed to the entirely different question whether the cost to the paying party would be prohibitively expensive, which is what the Aarhus test is concerned with. 22.
Mr Wolfe submitted that the costs officers were obliged to give effect to the EU Directives under the principle explained in Case C 62/00 Marks & Spencer plc v Customs and Excise Comrs [2003] QB 866, 888, para 24 where the European Court said that in applying domestic law the national court called upon to interpret that law is required to do so, as far as possible, in the light of the wording and purpose of a directive, in order to achieve its purpose and thereby comply with the third paragraph of article 189 of the EC Treaty (now the third paragraph of article 288 TFEU): see also Case C 106/89 Marleasing SA v La Commercial Internacional de Alimentacin SA [1990] ECR I 4135, 4159, para 8; Case C 72/95 [1996] ECR I 5403 Aannemersbedrijf P K Kraaijeveld BV v Gedeputeerde Staten van Zuid Holland, para 55, where it was said in the context of an EIA Directive that the obligation of a Member State to take all the measures necessary to achieve the result prescribed by a directive is a binding obligation imposed by the EC treaty and by the directive itself.
He said that this obligation had to be given effect to by the costs officers unless the words of the rules precluded this, which in his submission they did not. 23.
The answer to this submission is to be found in the division of responsibility that the rules themselves recognise between the Court on the one hand and the costs officers on the other.
The question whether the review procedure is prohibitively expensive is a matter that can, and should, be addressed by the Court itself.
Preferably this should be done at the outset of the proceedings.
The Sullivan Working Group recommended in Appendix 4 to its May 2008 Report that, for the proper conduct of the case, a protective costs order should be sought with the application for permission for judicial review and should wherever possible be decided at the same time as permission.
No mention was made in its recommendations of what is to be done at the stage of an appeal.
But the advantages of having the matter resolved at the outset apply just as much at that stage as they do at first instance.
So a protective costs order to meet the requirement that the proceedings should not be prohibitively expensive should be sought when permission to appeal is being asked for, or as soon as possible thereafter.
That is what Mrs Pallikaropoulos did in this case. 24.
But the refusal of a protective costs order does not preclude further consideration of the matter by the Court at the end of the proceedings.
The Aarhus Convention has been authenticated in three languages: English, French and Russian.
The English word prohibitively in the English version of article 9 suggests that the question is for consideration at the outset, as the act of prohibiting must always anticipate what is prohibited.
The French language version uses the word prohibitif.
The Russian text uses the word , indicating that the costs must not be inaccessibly high.
The words prohibitively and prohibitif are carried forward into the English and French language versions of the EU directives and the adjective in the Greek version carries the same meaning.
But the words used in the translations of the directives into German (bermssig teuer), Italian (eccessivamente onerosa) and Spanish (excesivamente onerosos) indicate that, so far as the directives are concerned, the question of expense is not exclusively for consideration at the outset. 25.
The general rule is that EU Directives should be interpreted in a manner that is consistent with international agreements concluded by the EU: Case C 341/95 Bettati v Safety Hi Tech Srl [1998] ECR I 4355, para 20.
The emphasis of the Convention, as all three language versions show, is on facilitating access to an effective remedy.
But its object and purpose would not be well served if a narrow view were to be taken of the time when the issue about the expense of the proceedings can be considered.
The essential question seems to be whether the bill of costs will be, or is, excessive bearing in mind the overriding requirement of access to justice.
This is best dealt with by making a protective costs order, but the Court can deal with the matter at the end of the case by setting a limit on the paying partys liability which meets the objective of the directives.
It does not need to carry out a detailed assessment of the costs in order to do this, any more than it does when it is making a protective costs order.
The costs officers, for their part, must confine their attention to the basis of assessment prescribed by rule 50, subject to any directions that may be given to them by the Court. 26.
For these reasons the answer to the first question which the respondents referred to the single Justice under rule 53 (see para 5, above) must be in the negative.
The ruling by the costs officers that they have jurisdiction to implement the EU Directives must be set aside.
The Courts obligation under the Directives 27.
As there is a division of responsibility, the question that must now be addressed is whether the House of Lords fulfilled its obligation to take the measures that were necessary to achieve the objects of the Directives.
That is an obligation which, in its turn, rests on this Court. 28.
Mr Eadie QC for the respondents submitted that the issue was fully and properly addressed in March 2007 when the appellant applied for a protective costs order.
He said that the House of Lords was right to rely on the fact that Mrs Pallikaropoulos had not provided the information that was needed for her to show that the proceedings would be prohibitively expensive.
As the House made clear in the reasons that it gave for not considering it appropriate to make the order, she had not made out a case for saying that the proposed appeal would be prohibitively expensive.
Furthermore she proceeded with the appeal notwithstanding that decision.
So there were no grounds for taking a different view at the stage when the order for costs was made on 18 July 2008.
That was a final decision, and the issue was not open to be considered again. 29.
The question however is whether, when it made these decisions, the House was proceeding upon a correct understanding of the test that is to be applied in order to determine whether the proceedings in question are prohibitively expensive.
There are various possible approaches to this issue.
In R (Garner) v Elmbridge Borough Council [2010] EWCA Civ 1006 the judge had refused to grant a protective costs order because he was of the view that it was impossible to tell whether the proceedings would be prohibitively expensive unless there was detailed information about the appellants resources to fund the proceedings.
In the Court of Appeal Sullivan LJ said of his decision in para 42: This raises an important issue of principle.
Should the question whether the procedure is or is not prohibitively expensive be decided on an objective basis by reference to the ability of an ordinary member of the public to meet the potential liability for costs, or should it be decided on a subjective basis by reference to the means of the particular claimant, or upon some combination of the two bases? 30.
Sullivan LJ observed that in an ideal world he would have preferred to defer taking a decision on such an important issue of principle until after the findings of the Aarhus Convention Compliance Committee as to whether our domestic costs rules are Aarhus compliant, and until after it was known whether the European Commission will accept or reject the United Kingdoms response to the Commissions reasoned opinion, announced in a press release dated 18 March 2010, in which the Commission was contending that the United Kingdom is failing to comply with the EIA Directive because challenges to the legality of environmental decisions are prohibitively expensive: para 43.
But as the court had to reach a decision as to whether the judge was wrong to refuse to grant a protective costs order, he went on to say this in para 46: Whether or not the proper approach to the not prohibitively expensive requirement under article 10a should be a wholly objective one, I am satisfied that a purely subjective approach, as was applied by Nicol J, is not consistent with the objectives underlying the directive.
Even if it is either permissible or necessary to have some regard to the financial circumstances of the individual claimant, the underlying purpose of the directive to ensure that members of the public concerned having a sufficient interest should have access to a review procedure which is not prohibitively expensive would be frustrated if the court was entitled to consider the matter solely by reference to the means of the claimant who happened to come forward, without having to consider whether the potential costs would be prohibitively expensive for an ordinary member of the public concerned.
There was evidence that without a protective costs order the liability and costs of an unsuccessful appellant was likely to be prohibitively expensive to anyone of ordinary means.
So the judges decision was set aside. 31.
The importance that is to be attached to Sullivan LJs observations in R (Garner) v Elmbridge Borough Council gathers strength when they are viewed in the light of the proposal in para 4.5 of Chapter 30 of the Jackson Review of Civil Litigation Costs (December 2009) as to environmental judicial review cases that the costs ordered against the claimant should not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, and the entirely different proposal in para 30 of the Update Report of the Sullivan Working Group (August 2010) that an unsuccessful claimant in a claim for judicial review should not be ordered to pay the costs of any other party other than where the claimant has acted unreasonably in bringing or conducting the proceedings.
They have to be viewed too in the light of the conclusion of the Aarhus Convention Compliance Committee which was communicated by letter dated 18 October 2010 that, in legal proceedings in the UK within the scope of article 9 of the Convention, the public interest nature of the environmental claims under consideration does not seem to have been given sufficient consideration in the apportioning of costs by the courts and that despite the various measures available to address prohibitive costs, taken together they do not ensure that the costs remain at a level which meets the requirements of the Convention: see paras 134 135.
It is clear that the test which the court must apply to ensure that the proceedings are not prohibitively expensive remains in a state of uncertainty.
The balance seems to lie in favour of the objective approach, but this has yet to be finally determined. 32.
It is unclear too whether a different approach is permissible at the stage of a second appeal from that which requires to be taken at first instance.
The question in R (Garner) v Elmbridge Borough Council was about the approach that was required to be taken at first instance.
In this case Mrs Pallikaropoulos did not appear at first instance.
She was given a protective costs order in the Court of Appeal, where her appeal was unsuccessful, because her liability in costs was capped at 2,000.
By the stage when her appeal reached the House of Lords the question which she wished to raise had already been considered twice in the courts below without the claimant having been deterred from seeking judicial review on grounds of expense.
It is questionable whether the public interest is best served if a limit must be set on the amount of the costs payable to the successful party in the event of a second appeal as this will inevitably mean that, if the public authority wins, some of the costs reasonably incurred by it will not be recoverable. 33.
It is plain from the reasons that were given by the House of Lords for its decision to refuse a protective costs order on 22 March 2007 that these difficult issues were not addressed at that stage.
It took a purely subjective approach to the question whether a case for such an order had been made.
No reasons were given for the costs order of 18 July 2008.
But it is to be inferred from its terms that the House was not satisfied that a case had been made out for any modification of its approach.
It must be concluded that here too the House took an approach to this issue which was a purely subjective one.
It is to say the least questionable whether in taking this approach, which has now been disapproved by the Court of Appeal in Garner v Elmbridge Borough Council, it fulfilled its obligations under the directives.
Conclusion 34.
In R v Bow Street Metropolitan Stipendiary Magistrate, Ex p Pinochet Ugarte (No 2) [2000] 1 AC 119, 132 Lord Browne Wilkinson observed that the respondents concession that their Lordships had jurisdiction in appropriate cases to rescind or vary an earlier order of the House of Lords was rightly made both in principle and on authority: In principle it must be that your Lordships, as the ultimate court of appeal, have power to correct any injustice caused by an earlier order of this House.
There is no relevant statutory limitation on the jurisdiction of the House in this regard and therefore its inherent jurisdiction remains unfettered.
In Broome v Cassell & Co Ltd (No 2) [1972] AC 1136 your Lordships varied an order for costs already made by the House in circumstances where the parties had not had a fair opportunity to address argument on the point.
He went on to say that it should be made clear that the House would not reopen any appeal save in circumstances where, through no fault of a party, he or she had been subjected to an unfair procedure. 35.
The Supreme Court is a creature of statute.
But it has inherited all the powers that were vested in the House of Lords as the ultimate court of appeal.
So it has the same powers as the House had to correct any injustice caused by an earlier order of the House or this Court.
It would however be more consistent with the principle which Lord Browne Wilkinson described to say that the power is available to correct any injustice, however it may have arisen.
In this case it seems that, through no fault of the appellant, an injustice may have been caused by the failure of the House to address itself to the correct test in order to comply with the requirements of the directives. 36.
The appellant has submitted that, taken overall, no clear and simple answer is available to the question as to what is the right test.
That indeed does seem to be the position.
In any event it cannot be said to be so obvious as to leave no reasonable scope for doubt as to the manner in which the question would be resolved: CILFIT (Srl) v Ministry of Health (Case C 283/81) [1983] 1 CMLR 472.
In these circumstances the Court will refer the issue to the Court of Justice of the European Union for a preliminary ruling under article 267 TFEU (ex article 234 EC).
The order for costs of 18 July 2008 will be stayed pending the reference.
The parties are invited to make submissions in writing within 28 days on the questions to be referred to the Court of Justice.
ANNEX IN THE SUPREME COURT OF THE UNITED KINGDOM Parliament Square London, Date: 15 January 2010 MRS REGISTRAR DI MAMBRO AND MASTER OHARE Before : Between : THE QUEEN ON THE APPLICATION OF [DAVID EDWARDS] LILIAN PALLIKAROPOULOS THE ENVIRONMENT AGENCY THE FIRST SECRETARY OF STATE FOOD AND RURAL AFFAIRS CEMEX UK CEMENT LIMITED and and SECRETARY OF STATE FOR THE ENVIRONMENT Appellant Respondents Intervener Mr Wolfe (instructed by Richard Buxton) for the Appellant Mr Maurici (instructed by Environment Agency Legal Services and the Treasury Solicitors) for the Respondents Hearing date: 4 December 2009 Approved Judgment . . . . . .
Mrs Registrar di Mambro and Master OHare: 1.
This is our decision on two preliminary issues which arose in the detailed assessment of the bills of costs lodged by the Respondents in respect of the appeal to the House of Lords in this case.
The appeal arose out of a Judicial Review, which was initially brought by a Mr David Edwards.
He instructed Mr Richard Buxton, whose fees were funded by the Legal Services Commission.
The claim was dismissed by Lindsay J ([2005] EWHC 657) and Mr Edwards brought an appeal to the Court of Appeal.
On the third and final day of that appeal Mr Edwards withdrew his instructions from Messrs Richard Buxton, and, at that stage, Mrs Pallikaropoulos was added as an additional party in order to continue the appeal.
Mrs Pallikaropoulos was not eligible for legal aid, but the Court of Appeal made a costs capping order limiting her exposure to the Respondents costs to the sum of 2,000. 2.
The appeal to the Court of Appeal was dismissed ([2006] EWCA Civ 1138) and Mrs Pallikaropoulos successfully petitioned the House of Lords for leave to appeal to that court.
Having obtained leave she then applied for a waiver of the security sum payable on such an appeal, and also applied for a protective costs order.
By letter dated 22 January 2007 the Judicial Office indicated to her that, on the basis of the information then before them, the members of the Appeal Committee were not then minded to grant either application. 3.
The appeal was heard in January 2008 and lasted three days.
On 16 April 2008 the House of Lords dismissed the appeal, thereby affirming the Court of Appeals decision.
The matter was then adjourned for the parties to make written representations on costs.
On 18 July 2008, despite her Counsels written submissions to the contrary, Mrs Pallikaropoulos was ordered to pay the Respondents costs of the appeal.
The First Respondent has now lodged a bill totalling 55,810, and the Second Respondent has lodged a bill totalling 32,290. 4.
The preliminary issues which arose in this case concern the proper application of certain articles under the Environment Impact Assessment (EIA) Directive (85/337/EEC), and the Integrated Pollution Prevention and Control (IPPC) Directive (96/61/EC) both of which implement provisions which first appeared in the Treaty known as the Aarhus Convention (UNECE Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters: 25 June 1998).
In proceedings to which the EIA Directive applies, Article 10a requires Member States to ensure that members of the public as there defined: have access to a review procedure before a court of law or another independent and impartial body established by law to 5. challenge the substantive or procedural legality of decisions, acts or omissions subject to the participation provisions of this directive. and it also provides that: Any such procedure shall be fair, equitable, timely and not prohibitively expensive. 6.
In proceedings to which the IPPC Directive applies, Article 15a makes provision identical to that set out above in respect of Article 10a of the EIA Directive. 7.
These EU Directives were considered by the Court of Appeal in Morgan v Hinton Organics (Wessex) Ltd [2009] EWCA Civ 107 from which judgment we would like to set out two quotations.
The first concerns points made in a document called the 2008 Sullivan Report, which has influenced our decision in this case.
The second quotation summarised the argument heard by the Court of Appeal on these directives.
The Court of Appeal did not give a ruling on these arguments since, as paragraph 47(ii) indicates, the directives were not applicable in that case. 32.
The 2008 Sullivan report, to which Carnwath LJ referred in granting permission in the present case, was a report of another informal working group representing a range of interested groups, this time under Sullivan J (Ensuring Access to Environmental Justice in England and Wales Report of the Working Group on Access to Environmental Justice May 2008).
The report expressed views on the application of the Aarhus principles, in the context of domestic procedures relevant to environmental proceedings, including protective costs orders.
The present case was mentioned, without further discussion, as apparently the first which has reached this court raising issues under the Convention in relation to a costs order in private law proceedings.
The following points from the report are possibly relevant in the present context: i) That the "not prohibitively expensive" obligation arising under the Convention extends to the full costs of the proceedings, not merely the court fees involved (in this respect differing from the Irish High Court in Sweetman v An Bord [2007] including Pleanala and the Attorney General IEHC 153); ii) That the requirement for procedures not to be to all prohibitively expensive applies for proceedings, applications injunctive relief, and not merely the overall application for final relief in the proceedings; iii) That costs, actual or risked, should be regarded as "prohibitively expensive" if they would reasonably prevent an "ordinary" member of the public (that is, "one who is neither very rich nor very poor, and would not be entitled to legal aid") from embarking on the challenge falling within the terms of Aarhus (para 20). iv) That there should be no general departure from the present "loser pays" principle, provided that the loser's potential liability does not make litigation prohibitively expensive in the way described above (para 38).
It may be helpful at this point to draw together some of the threads of the discussion, without attempting definitive conclusions: i) The requirement of the Convention that costs should not be "prohibitively expensive" should be taken as applying to the total potential liability of claimants, including the threat of adverse costs orders. ii) Certain EU Directives (not applicable in this case) have incorporated Aarhus principles, and thus given them direct effect in domestic law.
In those cases, in the light of the Advocate General's opinion in the Irish cases, the court's discretion may not be regarded as adequate implementation of the rule against prohibitive 47. costs.
Some more specific modification of the rules may need to be considered. iii) With that possible exception, the rules of the CPR relating to the award of costs remain effective, including the ordinary "loser pays" rule and the principles governing the court's discretion to depart from it.
The principles of the Convention are at most a matter to which the court may have regard in exercising its discretion. iv) This court has not encouraged the development of separate principles for "environmental" cases (whether defined by reference to the Convention or otherwise).
In particular the principles governing the grant of Protective Costs Orders apply alike to environmental and other public interest cases.
The Corner House statement of those principles must now be regarded as settled as far as this court is concerned, but to be applied "flexibly".
Further development or refinement is a matter for legislation or the Rules Committee. v) The Jackson review provides an opportunity for considering the Aarhus principles in the context of the system for costs as a whole.
Modifications of the present rules in the light of that report are likely to be matters for Parliament or the Civil Procedure Rules Committee.
Even if we were otherwise attracted by Mr Wolfe's invitation (on behalf of CAJE) to provide guidelines on the operation of the Aarhus convention, this would not be the right time to do so. vi) Apart from the issues of costs, the Convention requires remedies to be "adequate and effective" and "fair, equitable, timely".
The variety and lack of coherence of jurisdictional routes currently available to potential litigants may arguably be seen as additional obstacles in the way of achieving these objectives. 8.
Although the EIA Directive and the IPPC Directive were not applicable in Morgan, both of them are applicable in the case now before us.
That was accepted by Counsel for the Respondents, who also accepted that the directives were therefore directly binding upon the courts.
The skeleton argument for the Appellant set out the following quotation from the judgment of the ECJ in Marks & Spencer v Commissioners for Customs & Excise [2002] ECR I 06325: 24.
In that regard it should be remembered, first that the member states obligation under a directive is to achieve the result envisaged by the directive and their duty to take all appropriate measures whether general or particular, to ensure fulfilment of that obligation, are binding on all the authorities of the member state including, for matters within their jurisdiction, the courts 25. whenever the provisions of a directive appear, so far as their subject matter is concerned, to be unconditional and sufficiently precise, they may be relied upon before the national courts by individuals against the state where the latter has failed to implement the directive in domestic law 26. implementation of a directive must be such as to ensure its application in full 9.
In preparation for the hearing before us both parties supplied skeleton arguments which were extremely helpful and explicit.
From these we were able to identify three preliminary issues, which are as follows: i) Where an order for costs has been made, whether, as a general rule, the court assessing those costs has any jurisdiction to implement the EU Directives.
If so, whether, in the particular circumstances of this case, we should seek to implement the EU Directives.
If so, whether, on the evidence presented to the court, the amount of costs payable by the Appellant should be moderated or even excluded. 10.
At the hearing we decided the first two issues in favour of the Appellant, but thought it right not to hear argument as to the third issue until we had given written reasons for our decision, sight of which by the parties might enable them to agree the third issue subject of course to any appeal against ii) iii) our ruling on the first two issues.
We also ruled that the time for appealing our decision on the first two issues should not expire until 28 days after the delivery of our written decision.
Issue 1 : Jurisdiction of Costs Officers Generally 11.
On this point Mr Maurici, Counsel for the Respondents, argued that application of EU Directives falls wholly outside the jurisdiction of Costs Officers.
He placed reliance upon the Supreme Court Practice Direction 13 para 16.1, which states as follows: The Costs Officers have discretion as to the amount to allow.
In exercising this discretion they bear in mind the terms unreasonably incurred and unreasonable in amount in CPR 44.4 and in particular consider to what extent an item assisted the court in determining the appeal 12.
From this he argued that Costs Officers are limited to assessing the reasonableness of the costs awarded by another court.
It is for the court awarding costs to decide how and in what way to implement the European Directives.
It is not a proper function of the assessing court.
Counsel also placed reliance upon the Court of Appeal decision in Lahey v Pirelli Tyres Ltd [2007] EWCA Civ 91 which held that, where a court awards costs, the Costs Judges duty is to assess 100% of the reasonableness of the costs awarded.
The Costs Judge has no power to vary the award of costs made so as to allow less than 100% of the reasonable costs.
Counsel drew our attention to paragraphs 20 and 21 of the judgment in that case, which we now set out: 20.
There is a real distinction between (a) carrying out an assessment and deciding as part of the assessment to reduce the bill by a percentage and (b) deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs.
The figure that results from (a) represents 100% of the assessed costs.
In deciding as part of the assessment to reduce the bill by a percentage, the costs judge is giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed.
The figure that results from (b) represents less than 100% of the assessed costs.
In deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs, the costs judge is not giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed. 21.
Rule 44.3 gives a judge jurisdiction to make a type (b) order.
There is no doubt that at the end of a hearing, the judge may make an order of the kind that the defendant sought from the district judge in the present case.
In such a case, the judge is not purporting to vary an order if he disallows the successful party a proportion of his costs.
He is making the order.
He does not have the advantage accorded to the costs judge of having a detailed bill of costs.
He cannot, therefore, carry out a detailed assessment.
But he usually has the benefit, denied to the costs judge, of knowing a good deal about the case, and is often in a good position to form a view about the reasonableness of the parties' conduct.
When carrying out a detailed assessment, the costs judge is not making an order for costs.
His position is quite different from that of a judge exercising the jurisdiction given by rule 44.3. 13.
We take the view that compliance with the EU Directives is a relevant factor for us to take into account on the detailed assessment of costs in cases to which the Directives apply unless, of course, the court awarding costs has already taken them into account. 14.
We accept the submission of Mr Wolfe, Counsel for the Appellant, that the reasonableness. falls within task naturally Reasonableness can mean different things in different contexts.
We draw an analogy here with what happens when costs are awarded against a party who was legally aided for some but not all of the proceedings covered by the order for costs.
Section 11 of the Access to Justice Act 1999 provides that costs ordered against a legally aided party: the definition of shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including (a) the financial resources of all the parties to the proceedings, and their conduct in connection with the dispute to which the proceedings relate (b) 15.
The Legal Aid Regulations now leave the task of making that assessment to the Costs Officers of the courts in which those costs were awarded.
In this court paragraph 4 of Practice Direction 13 requires the Costs Officers to 16. assess the sum reasonable for a legally aided party to pay as part of the detailed assessment proceedings.
Since, in most cases, the reasonable sum is nil, the assessments of reasonableness vary substantially between periods when a losing litigant was legally aided and when he was not.
In our judgment the factors we ought to take into account in implementing the EU Directives are not wholly dissimilar from the factors we have to take into account in applying section 11 of the Access to Justice Act when it applies.
It seems to us that the implementation of any relevant EU Directive is more naturally and conveniently dealt with at the detailed assessment stage rather than at the stage of awarding costs, unless of course, the court awarding costs had already made a decision on these questions. 17.
We take the view that in deciding what costs it is reasonable for the Respondents to obtain we will disallow any costs which we consider to be prohibitively expensive.
Therefore, in making any such disallowance, we will be acting in compliance with, and not defiance of, the principles stated in Lahey. 18.
The passages from Morgan which we have quoted indicate that the EU Directives here in question have not yet been implemented by Parliament or by the Civil Procedure Rule Committee.
In Morgan the Court of Appeal expressed the hope that the current Jackson Review may consider the Aarhus principles and stated that it was not appropriate to give guidance in the context of Morgan.
In the absence of authority we are presently minded to adopt the test of prohibitively expensive which was propounded in the 2008 Sullivan Report: costs, actual or risked, should be regarded as prohibitively expensive if they would reasonably prevent an ordinary member of the public (that is, one who is neither very rich nor very poor, and would not be entitled to legal aid) from embarking on the challenge falling within the terms of Aarhus. 19.
That seems to us to require us to start by making an objective assessment of what costs are reasonable costs.
However, any allowance or disallowance of costs we make must be made in the light of all the circumstances.
We presently take the view that we should also have regard to the following: i) The financial resources of both parties. ii) Their conduct in connection with the appeal. iii) The fact that the threat of an adverse costs order did not in fact prohibit the appeal. security was in fact provided. iv) The fact that a request to waive security money was refused and v) The amount raised and paid for the Appellants own costs.
Issue 2 : Issue Estoppel 20.
For the Respondents, Mr Maurici submitted that the Appellants have raised Aarhus principles on two occasions in the House of Lords and those submissions were rejected on both occasions.
The first occasion was in respect of the Appellants applications for waiver of security monies and for a protective costs order.
On 22 March 2007 the Appeal Committee made the following decision: Their Lordships do not consider it appropriate to make any order on the application made to them for a dispensation in respect of the requirement to put up security and for a protective costs order.
Their Lordships have considered the criteria in R (Cornerhouse Research) v Secretary of State for Trade & Industry [2005] EWCA Civ 192 and the submissions made with regard to their application and potential relaxation.
Their Lordships proceed on the basis that the appeal raises an issue or issues of general importance and they are prepared to assume that absence of private interest may not always preclude the making of a special costs order in such a case.
But their Lordships do not accept that information about the Applicants means, about the identity and means of any who she represents and about the position generally in the absence of any special order, are or should be regarded as immaterial: further, they do not consider that the suggested protective orders regarding costs appear proportionate on the information which is before them and in the light of the nature of the issues involved; and they do not consider that any case has been made for saying that the proposed appeal would be prohibitively expensive or that Directive 2003/35/EC would be breached without a special order. 21.
The second occasion upon which the Aarhus principles were considered in this case preceded the making of the costs order dated 18 July 2008.
In the written submissions on costs lodged on behalf of the Appellant, much greater information about the Appellants financial resources was given than had been given on the previous occasion.
In the light of that information it was submitted that there should be no order for costs.
In the alternative, the following submissions were made: In the event of their Lordships, notwithstanding the above, deciding to award costs in favour of the Respondents, they are requested to consider: Limiting them to the costs of one Respondent Limiting the costs to 70% of the Respondents costs.
At the High Court and Court of Appeal stages only 70% of costs were awarded Reducing the burden on the Appellant by ordering any costs in excess of the 25,000 security monies already lodged with the House of Lords to be payable by instalments of at most 5,000 per annum and without interest (other than in the event of late payment).
In any event staying the effect of the order until the issues relating to prohibitive expense and Directive 2003/35/EC are resolved between the Commission and the UK Authorities. 22.
In response to those submissions the House made a standard order for costs: That the Appellant do pay or cause to be paid to the Respondents their costs of the appeal to this House, the amount of such costs to be certified by the Clerk of the Parliaments if not agreed between the parties. 23.
We neither have nor assert any right to set aside or vary any decision already made by the Law Lords or by the Justices in this case.
If, in advance of the hearing before us, the Law Lords or the Justices had made any decision on the implementation of the EU Directives in this case we would of course act in compliance with that decision.
However, we take the view that the pronouncements which the Law Lords have made in this case do not prevent us from applying the Aarhus principles in the course of our assessment. 24.
The decision made in March 2007 was made without a hearing and was made on the basis of the information about the Appellants means, about the identity and means of any who she represents and about the position generally.
This being so the order states that their Lordships did not consider that any case had been made for saying that the proposed appeal would be prohibitively expensive.
In the circumstances, we do not think that that was a final ruling upon these principles in this case.
On the 25. contrary, we think the wording their Lordships there adopted invited the Appellant to provide the court with the information it would need to decide such principles.
In our view no part of the decision made in March 2007 rules out our discretion to decide that the reasonable costs in this case should be nil or should be no more than a nominal amount.
Whilst it is difficult to imagine circumstances in which it would be appropriate for us to allow less than 25,000 if the Respondents costs would otherwise reasonably exceed that sum, it is not in theory impossible that we should do so.
In requiring the Appellant to raise such a sum as security monies their Lordships could not know, for example, what terms and conditions the Appellant might be required to agree to in order to borrow such a sum.
It may be appropriate for us to take any such terms and conditions into account when assessing whether the costs of this appeal would have been prohibitively expensive. 26.
At the hearing before us we made reference to a Court of Appeal decision on security for costs raised for an appeal: R v The Common Professional Examination Board, ex p.
Mealing McLeod [2000] EWCA Civ 138.
In that case the Court of Appeal overturned an earlier order which permitted monies paid as security for an appeal to be used in part satisfaction of costs orders made in earlier proceedings.
The Court of Appeal made its decision on the basis of the terms of the loan agreement by which the security monies had been raised: they had been raised solely for the purpose of providing security and not for any other purpose.
In fact, on examination of the decision in that case, we now appreciate that it is not directly relevant to the issues which arise in this case.
In our view, the costs order dated 18 July 2008 gives the Respondents stronger ground for saying that the Appellant has raised the Aarhus principles already in this case and has lost them.
However, on this point also, we find in favour of the Appellant.
The order dated 18 July 2008 does not expressly deal with the Aarhus principles.
As such, it is consistent with our finding that these matters are better dealt with at the stage at which costs are assessed rather than at the stage at which costs are awarded.
The order expressly leaves the amount of costs to be determined.
In our view we should determine that amount taking into account the Aarhus principles. 27.
NEXT STEPS 28.
In a draft of this judgment which was sent to the parties some time ago we foresaw the possibility that the parties may agree what sums should reasonably be allowed as costs in this case and may make such agreement subject to the decision upon any appeal the Respondents may bring against our rulings on Issues 1 and 2.
Alternatively, the parties may agree to defer any decision as to the amount of reasonable costs pending a decision on such an appeal.
The draft stated that the parties are neither required nor expected to attend the hearing at which we shall formally deliver this judgment, although they may do so if they wish. 29.
Accordingly, we will now consider any submissions any party wishes to make.
If appropriate, we will adjourn this matter to a further hearing and, perhaps, fix a date for that hearing.
In conclusion, I am satisfied that in the special circumstances of this case the figure of 25,000 now claimed by the respondents is neither subjectively nor
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This appeal concerns the meaning of prohibitively expensive under the Aarhus Convention.
The proceedings concerned a cement works in Rugby.
On 12 August 2003, the Environment Agency issued a permit to continue operations with an alteration in its fuel from coal and petroleum coke to shredded tyres.
This proposal gave rise to a public campaign on environmental grounds.
The public campaign was being led by Mrs Pallikaropolous who had committed substantial funds of her own to the campaign.
Following the decision of the Rugby Borough Council not to pursue its own claim for judicial review, Mrs Pallikaropolous was reported as pledging to carry on the battle using legal aid and, because she was too rich to get legal aid, asked for someone to come forward to take the case under legal aid.
A local resident, Mr David Edwards, began judicial review proceedings on 28 October 2003 challenging the Agencys decision.
The judge inferred that Mr David Edwards had been put up as a claimant in order to secure public funding of the claim.
The substantive application for judicial review was dismissed on 8 February 2006.
Mr Edwards appealed to the Court of Appeal.
On the final day of the Court of Appeal hearing, Mr Edwards withdrew his instructions from both solicitors and counsel.
Mrs Pallikaropolous applied without objection to be joined as an additional appellant in the public interest to enable the appeal to be concluded.
Her potential liability to costs in the Court of Appeal was capped at 2,000.
Following dismissal of the appeal, the respondents costs capped at this level were awarded against her.
Mrs Pallikaropolous was given leave to appeal by the House of Lords.
She provided security for costs in the sum of 25,000 and the appeal proceeded.
Her appeal was dismissed by the House of Lords.
The present dispute arises out of the order for costs of the appeal in the House of Lords made in favour of the respondents.
The Environment Agency and the Secretary of State submitted bills totally respectively 55,810 and 32,290.
The Supreme Court made a reference to the Court of Justice of the European Union (CJEU) for guidance relating to the expression not prohibitively expensive.
While the reference was pending, the government issued a consultation paper on the issue of cost capping and the scope for providing clearer guidance in the procedural rules.
The proposals were given effect to by amendment to the Civil Procedure Rules.
The Supreme Court makes an order for costs in the amount of 25,000 in favour of the respondents jointly.
Lord Carnwath gives the lead judgment with which Lord Neuberger, Lord Hope, Lord Mance and Lord Clarke agree.
The following points could be extracted from the CJEUs Edwards judgment: (i) The test is not purely subjective.
The cost of proceedings must not exceed the financial resources of the person concerned nor appear to be objectively unreasonable, at least in certain cases. (ii) The court did not give definitive guidance as to how to assess what is objectively unreasonable. (iii) The court could take into account the merits of the case: that is whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure, the potentially frivolous nature of the claim at its various stages. (4)That the claimant has not in fact been deterred for carrying on the proceedings is not itself determinative. (5) The same criteria are to be applied on appeal as at first instance [28].
The respondents are not now seeking recovery of their full costs.
They have agreed to limit their joint claim to 25,000 which is the amount of security already paid by the appellant as the condition for bringing the appeal.
It is impossible on the material available to hold that the order was subjectively unreasonable.
The more difficult question is whether there should be some objectively determined lower limit, and if so how it should be assessed.
Although this was one of the main issues raised by the reference, the European court has not offered a simple or straightforward answer [30 31].
Of the five factors mentioned by the court, the second and fifth can be discounted immediately.
There is no evidence that the appellant had any economic interest of her own in the proceedings and, given the grant of permission at each stage, they could not be said to be frivolous [34].
The relative complexity of the case is evidenced by the fact that it took three days before the House [35].
The other two factors (i) the prospects of success and (iii) the importance of the case for the protection of the environment are at best neutral from the applicants point of view [36].
Taking factors mentioned by the court into account, it is impossible to say that the figure of 25,000, viewed objectively, is unreasonably high, either on its own or in conjunction with the 2,000 awarded in the Court of Appeal [37].
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The respondents, Birmingham City Council, are a local housing authority within the meaning of Part VII of the Housing Act 1996.
This is the Part of the Act which sets out the duties that local housing authorities owe to a person who is homeless or threatened with homelessness.
Among its provisions is section 193, which identifies the duty that the authority owes where it 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 that situation the duty that the authority owes is to secure that accommodation is available for the applicant: section 193(2).
The section also defines circumstances in which the authority will cease to be subject to that duty.
Various circumstances will bring this about.
The one that is relevant to these appeals is where the applicant, having been informed of the possible consequences of refusal, refuses an offer of accommodation which the authority are satisfied is suitable for him and the authority notify him that they regard themselves as having discharged their duty under the section: section 193(5).
The applicant has the right to request a review of any decision of a local housing authority as to what duty, if any, is owed to him under section 193: section 202(1)(b).
The procedure for review requires that the reviewing officer must be someone who was not involved in the decision and who is senior to the officer who made it.
If the applicant is dissatisfied with the decision on the review he may appeal to the county court.
But he may only do so on a point of law arising from the decision: section 204(1).
The jurisdiction which the county court exercises under that provision is one of judicial review.
There is no general right of appeal against the decision of the reviewing officer.
The county court judge may not make fresh findings of fact.
He must accept the conclusions on credibility that have been reached by the reviewing officer.
The question which these appeals raise is whether a decision that the local housing authority take under section 193(5) of the 1996 Act that they have discharged their duty to the applicant is a determination of his civil rights within the meaning of article 6(1) of the European Convention on Human Rights and, if so, whether the quality of review that the statute provides for is sufficient to meet the requirements of that article.
Underlying these questions, however, there is a wider and more fundamental issue which has prompted the Secretary of State for Communities and Local Government to intervene.
His interest arises because he has policy responsibility for the 1996 Act.
But he is concerned at the effect, if these appeals are successful, that this result will have on the conduct of local government homelessness decision making across England and Wales and upon the way proceedings have to be conducted in the county court if these decisions are taken to appeal.
He suggests that the outcome could affect indirectly the way decisions are made in other areas of local and central government activity such as community care and education.
Lord Hoffmann drew attention to this problem in Runa Begum v Tower Hamlets London Borough Council [2003] UKHL 5, [2003] 2 AC 430, paras 42 44.
As he pointed out, it is one thing for the rule of law to require that certain decisions, such as findings of breaches of the criminal law or adjudications of private rights, be entrusted to the judicial branch of government.
But there are other areas where utilitarian considerations have their place.
It is not in the public interest that an excessive proportion of the funds available for schemes for the regulation of social welfare should be consumed in administration and legal disputes.
He referred to a passage in the joint dissenting opinion in Feldbrugge v The Netherlands (1986) 8 EHRR 425, 443, para 15 which, as he said, seems highly material in this context.
It contains the following sentence: The judicialisation of dispute procedures, as guaranteed by article 6(1), is eminently appropriate in the realm of relations between individuals but not necessarily so in the administrative sphere, where organisational, social and economic considerations may legitimately warrant dispute procedures of a less judicial and formal kind.
I would venture to suggest that those words are as true today as when they were written over twenty years ago.
In that case the minority were unable to persuade the majority to restrict the application of article 6, in the civil sphere, to rights and obligations in private law.
It has now been extended to public law rights, such as social security or other cash under publicly funded schemes.
No clearly defined stopping point to this process of expansion has yet been identified by the Strasbourg court.
But concerns about over judicialisation of dispute procedures in the administration of social and welfare benefits have not gone away.
I believe that this case provides us with an opportunity to introduce a greater degree of certainty into this area of public law.
The facts
The Court of Appeal heard argument in two cases, those of Ms Fazia Ali and Ms Khadra Ibrahim.
There was a third case, that of Ms Emma Tomlinson.
The respondents refused her application that she was homeless on the basis that she was intentionally homeless.
This was because she had been evicted from her home on account of rent arrears.
Their decision was confirmed by the reviewing officer, who held that she had not acted in good faith in relation to her finances and the way she had given up her tenancy.
Her appeal to the county court was dismissed on the grounds that an appeal lay on a point of law only and that the finding of the reviewing officer was not irrational or perverse.
But her case had become academic by the time it reached the Court of Appeal as the respondents, having accepted that the homelessness duty was owed to her, had provided her with accommodation.
So the Court of Appeal declined to hear her appeal: [2008] EWCA Civ 1228, para 17.
It did however hear the appeals in the cases of Ms Ali and Ms Ibrahim.
The way the Court of Appeal dealt with their appeals was strongly influenced by the approach which the House of Lords took to issues arising under Part VII of the 1996 Act in Runa Begum v Tower Hamlets London Borough Council [2003] 2 AC 430.
In that case the question decided by the reviewing officer, and on appeal to the county court on conventional judicial review grounds, was whether the accommodation offered to Runa Begum, which she had refused, was suitable.
The House heard argument as to whether the decision of the reviewing officer under section 202 was a determination of Runa Begums civil rights within the meaning of article 6(1) of the Convention.
But it declined to express a concluded view one way or the other on this issue.
As Lord Bingham of Cornhill explained in para 6, it preferred to assume, without deciding, that her domestic law right was also a civil right and to consider, on that assumption, whether the statutory provision of an appeal to the county court on a point of law satisfied the requirements of that article.
Having done so, it concluded that the context did not require a full fact finding jurisdiction and that the county courts appellate jurisdiction was sufficient to satisfy its requirements.
The Court of Appeal too proceeded on the assumption that article 6(1) was engaged in these cases: para 21.
The issue that they raised was not, as in Runa Begum, whether the accommodation was suitable.
For reasons that I shall explain, they raised simple questions of primary fact which were decided against the appellants by the reviewing officer.
It was submitted that, as these questions did not depend on specialist knowledge or expertise, the appellants cases were not within the scope of the decision in Runa Begum.
The Court of Appeal rejected this argument.
Thomas LJ said that no proper distinction could be drawn between these appeals and the appeal in that case.
The appellants seek to persuade this court that, where simple questions of fact are in issue, the court must exercise a full fact finding jurisdiction if the requirements of article 6(1) are to be satisfied.
They submit that the decisions of the review officers should be remitted to the county court for consideration on their merits or that it be declared that section 204(1) of the 1996 Act is incompatible with the appellants rights under that article.
The question that arose in the cases of Ms Ali and Ms Ibrahim was indeed, a very simple one, and it was a question of fact.
It was whether they received a letter from the respondents of the kind that section 193(5) requires, informing them of the possible consequences if they were to refuse their offer of accommodation under that section.
The respondents case is that the letters were sent as required by the statute.
The appellants maintain that they never received them.
The circumstances in which this issue arose in each case are as follows.
(a) Ms Ali
Ms Ali is single and has two children.
She applied for assistance under Part VII of the 1996 Act in October 2006.
By letter dated 7 November 2006 the respondents notified her that they were satisfied that she was eligible for assistance and that they would be securing accommodation for her occupation.
They also told her that their housing policy was that homeless applicants received only one offer of suitable accommodation.
On 8 November 2006 she received an offer of accommodation which she refused because she was unhappy with the location.
The respondents told her that in their opinion the accommodation was suitable but, following a review of their decision which was determined in Ms Alis favour, they agreed to make her another offer.
On 14 March 2007 a housing officer informed her by telephone that a further offer was being made, that a viewing had been arranged and that a letter would follow.
She was not, during this conversation, given the full address of the property.
The respondents case is that on 14 March 2007 they sent a letter to Ms Ali headed Final offer of accommodation offering her accommodation at 16 Bromford Lane, Erdington, Birmingham which, as discussed, was to be available for viewing by her on 16 March.
The letter satisfied the requirements of the statute, as it contained a statement that if she refused the offer without good cause the respondents would consider that they had discharged their duty to her under Part VII.
In the county court it was agreed that the letter had been sent and that the offer which it contained had been communicated orally beforehand.
But Ms Ali denied receiving it.
She said that she had to telephone the housing office to obtain the address and that the viewing appointment was re arranged.
Having viewed the property on 19 March 2007 she refused the offer as she was not happy with the condition of the communal area.
By letter dated 21 March 2007 the respondents notified her that they were satisfied that the accommodation at 16 Bromford Lane was suitable for her needs and that of her family.
They told her that they considered that their duty to her under Part VII had been discharged by her refusal.
By letter dated 29 March 2007 Ms Alis solicitors requested a review under section 202.
In another letter of the same date they said that she had never received an offer of accommodation at 16 Bromford Lane in writing.
On 3 April 2007, while her case was still pending before the review panel, the respondents made another offer of accommodation to Ms Ali.
This offer, which was made under Part VI of the 1996 Act, was of accommodation in a flat at Teviot Tower, Mosborough Crescent, Birmingham.
Although it was stated in this letter that Ms Ali had provisionally accepted the property she did not in the event accept this offer.
About a month later on 1 May 2007 Arlene Daniel, a homelessness review officer employed by the respondents, conducted a telephone interview with Ms Ali in order to establish her reasons for refusing the offer of accommodation at 16 Bromford Lane.
By letter dated 2 May 2007 she informed Ms Ali that she had decided to uphold the respondents decision that they had discharged their duty to her under section 193.
Arlene Daniels reasons for this decision were set out in her letter of 2 May 2007.
She said that she was aware that the offer of accommodation letter was sent and that she had no reason to believe that Ms Ali did not receive it, as it was sent to her current address to which a number of other letters had been sent and received by her.
There then followed this passage: In the light of the above I contacted you on the 1 May 2007 to establish the reasons why you had decided not to accept this offer of accommodation as it was apparent from the reasons given in the letter from your representatives, dated 29 March 2007, that you (sic) alleging that you had not received the offer letter was not the reason you had refused the offer of accommodation.
I put this to you and you advised that you had in fact received the offer letter and refused the offer of accommodation for a number of reasons, firstly that there was no lift.
Also the entrance was dirty and smelly.
Your son was born premature and suffers with lots of infections.
Therefore, had you accepted this offer your sons (sic) health would have been at risk.
Ms Ali does not deny saying that she had received the offer.
Her explanation is that she initially thought that she was being asked about the offer of a flat at Teviot Tower.
She then realised that she was being asked about the offer of accommodation at 16 Bromford Lane.
She gave her reasons for refusing that offer, but failed to mention her earlier confusion as to which offer was being referred to.
Ms Ali then appealed to Birmingham County Court, but on 29 August 2007 HHJ MacDuff dismissed her appeal.
He held that the decision as to whether the letter had been received was properly and fairly to be made by the reviewing officer, and he declined to hear evidence on the point.
He added that he understood Ms Alis counsel to concede that if he were to hold, as he did, that it was a decision for the reviewing officer rather than for the court hearing live evidence, it could not be regarded as perverse or otherwise capable of being set aside.
(b) Ms Ibrahim
Ms Ibrahims household consists of herself and six children.
She applied to the respondents for assistance under Part VII of the 1996 Act in May 2005.
By letter dated 29 May 2005 the respondents notified her that they were satisfied that she was eligible for assistance and that they would be securing accommodation for her occupation under Part VII of the 1996 Act.
They also told her that their housing policy was that all homelessness applicants accepted under that Part received one offer of suitable accommodation.
On 16 August 2005 they made an offer of accommodation which she refused.
She sought a review of this decision which was determined in her favour.
On 12 October 2005 they agreed to make her a further offer.
On 26 October 2005 they offered her accommodation at 11 Dawberry Road, Birmingham which she also refused.
The dispute between the parties relates to the way in which this further offer was made.
The respondents say that their housing officer, Lisa Hopkins, sent two letters both dated 26 October 2005 and both offering accommodation at 11 Dawberry Road to Ms Ibrahim in a single envelope.
As HHJ McKenna was later to observe when the case came before him in Birmingham County Court on 4 October 2006, somewhat unusually and confusingly these letters were in different terms.
One was a Part VI offer letter.
It was the type of letter which is sent to people awaiting accommodation who are on the respondents housing register.
It made no reference to the respondents homelessness duty under Part VII of the 1996 Act.
The other was a Part VII letter.
It referred to the respondents duty under that Part of the Act to secure accommodation for her, stating that to discharge their duty the respondents only had to provide one suitable offer of accommodation.
It also warned her that if she decided to refuse the offer without good reason to do so the respondents would consider that they had discharged their duty under Part VII and that no further offers of accommodation would be made.
Ms Ibrahims case is that she received the first letter but not the second.
She refused the offer of accommodation at 11 Dawberry Road without viewing it because she did not want accommodation in that area and because it was too small for her family.
By letter dated 3 November 2005 the respondents notified Ms Ibrahim that they considered that they had discharged their duty to secure accommodation for her and her family under Part VII and that no further offers of accommodation would be made.
By letter dated 14 November 2005 Ms Ibrahims representative requested a review of that decision.
By letter dated 7 December 2005 the respondents reviewing officer, David Colston, informed Ms Ibrahim that he had decided to uphold the decision of discharge of duty.
He was persuaded by Ms Ibrahims representative to take a second look at the case, but by letter dated 16 December 2005 he informed her that he had decided not to change his mind.
Ms Ibrahim then appealed to Birmingham County Court, where her appeal was disposed of by means of a consent order to the effect that the decision of 7 December 2005 be quashed and the case referred back to the review panel for a further decision to be made.
A further review was then carried out by Martin Dewell, another of the respondents review officers.
By letter dated 19 May 2006 he notified Ms Ibrahim that he was minded to uphold the respondents decision letter of 3 November 2005.
Martin Dewells reasons for this decision were set out in his letter of 19 May 2006.
He said that among the matters that he had been asked to consider were various respects in which it was submitted that the accommodation was unsuitable.
There was also a point that had not been raised before, that the offer letter did not comply with section 193(5) of the 1996 Act.
After dealing with the question whether the accommodation was suitable, the letter went on to say this: I consider that we have adequately dealt with the point you raise about the validity of the offer letter.
In her statement dated 21 February 2006 the housing officer Lisa Hopkins clearly states that the two offer letters were sent to you in the same envelope.
One was originally addressed to you at your previous temporary address of 110 Fernley Road, Sparkhill, Birmingham.
This letter was sent to this address by mistake as it was the last address showing on the computer system following your move to 61 Adria Road, Sparkhill, Birmingham.
This mistake was realised and both copies of the offer letter were then sent to you in the same envelope.
Your argument that the offer letter does not comply with section 193(5) is therefore not substantiated.
The information contained in the offer letter sent to 110 Fernley Road and then sent to 61 Adria Road is fully compliant with section 193(5).
It is therefore entirely reasonable to conclude that you were fully acquainted with your options following either acceptance or refusal of the offer.
Ms Ibrahim then appealed again to Birmingham County Court under section 204 of the 1996 Act.
She raised, as a factual issue, her contention that she did not receive the Part VII offer letter.
But by the time her case came before HHJ McKenna it had been conceded that this was a matter for the reviewing officer to decide.
No point was taken that to approach that issue in this way was incompatible with article 6(1) of the Convention.
The judge said that the issue for his determination was whether or not it was reasonable for Ms Ibrahim to have accepted the offered accommodation, and that in his judgment it was reasonable for her to have accepted it.
He rejected arguments about the content of the offer letter, holding that it was made crystal clear to her that she had the one offer only and what the consequences of refusal would be.
The issues
The issues that arise in this case can be summarised in this way.
First, does on appeal under section 204 of the 1996 Act involve the determination of a civil right for the purposes of article 6(1) either generally or in cases such as the present ones where the issue is simply one of fact? Second, if so, does article 6(1) require that the court hearing such an appeal must have a full fact finding jurisdiction so that it can determine for itself a dispute of fact either generally or in a case such as these? Third, if so, can section 204 of the 1996 Act be read compatibly with article 6(1) so as to entitle the county court to exercise that jurisdiction? If not, it is agreed that a declaration of incompatibility will have to be made.
In order to set the scene for an examination of these issues I must say a bit more about the statutory background.
This is important, as the questions that arose for decision in this case must be seen in that context.
They were, as I have said, pure questions of fact.
But they were, in each case, only one of a number of questions that had to be addressed in order to decide whether the respondents duty under section 193 had come to an end.
Their resolution was a stepping stone to a consideration of the much broader question as to whether the accommodation that had been declined was suitable.
This called for the exercise of expertise and judgment on a variety of factual issues.
The scheme of the statute is that a decision on all these questions is entrusted, in the event of a review, to the reviewing officer and is subject to appeal on a point of law only.
The statutory provisions
Section 193 of the 1996, as amended by the Homelessness Act 2002 and so far as relevant, provides as follows: (1) 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. (2) Unless the authority refer the application to another local housing authority (see section 198), they shall secure that accommodation is available for occupation by the applicant. (3) The authority are subject to the duty under this section until it ceases by virtue of any of the following provisions of this section. (5) The local housing authority shall cease to be subject to the duty under this section if the applicant, having been informed by the authority of the possible consequence of refusal and of his right to request a review of the suitability of the accommodation, refuses an offer of accommodation which the authority are satisfied is suitable for him and the authority notify him that they regard themselves as having discharged their duty under this section. (6) The local housing authority shall cease to be subject to the duty under this section if the applicant (a) ceases to be eligible for assistance, (b) becomes homeless intentionally from the accommodation made available for his occupation, (c) accepts an offer of accommodation under Part V1 (allocation of housing), or (cc) accepts an offer of an assured tenancy (other than an assured shorthold tenancy) from a private landlord, (d) otherwise voluntarily ceases to occupy as his only or principal home the accommodation made available for his occupation.
Section 202(1) as amended by the 2002 Act and the Housing and Regeneration Act 2008 deals with the right to request a review of a decision of the local housing authority.
It provides a useful guide to the nature and range of decisions that a local housing authority may have to take in the performance of their duties under Part VII of the Act.
It provides: An applicant has the right to request a review of (a) any decision of local housing authority as to his eligibility for assistance, (b) any decision of a local housing authority as to what duty (if any) is owed to him under sections 190 to 193 and 195 and 196 (duties to person found to be homeless or threatened with homelessness), (c) any decision of a local housing authority to notify another authority under section 198(1) (referral of cases), (d) any decision under section 198(5) whether the conditions are met for the referral of his case, (e) any decision under section 200(3) or (4) (decision as to duty owed to applicant whose case is considered for referral or referred), (f) any decision of a local housing authority as to the suitability of accommodation offered to him in discharge of their duty under any of the provisions mentioned in paragraph (b) or (e) or as to the suitability of accommodation offered to him as mentioned in section 193(7), or (g) any decision of a local housing authority as to the suitability of accommodation offered to him by way of a private accommodation offer (within the meaning of section 193).
Section 203(1) provides that the Secretary of State may make provision by regulations as to the procedure to be followed in connection with a review under section 202.
Section 203(2)(a) provides that provision may be made by regulations requiring the decision on review to be made by a person of appropriate seniority who was not involved in the original decision.
The Allocation of Housing and Homelessness (Review Procedures) Regulations 1999 (SI 1999/71) provide that the officer shall be someone who was not involved in the original decision and who is senior to the officer who made the original decision.
The reviewer is required to consider any representations that may be made to him.
If he considers that there is a deficiency or irregularity in the original decision, or in the manner in which it was made, but is minded nevertheless to make a decision which is against the interests of the applicant on one or more issue, he must notify the applicant that he is so minded and the reasons why he is of that view so that the applicant or someone on his behalf may make representations about them.
Section 204(1) provides that, if an applicant is dissatisfied with the decision on review, he may appeal to the county court on any point of law arising from the decision or, as the case may be, the original decision.
No provision is made for an appeal against the facts found by the reviewing officer.
The scheme which Part VII lays down can be seen, therefore, to have these characteristics.
It provides a right to assistance if the relevant conditions are satisfied.
But this is not a pecuniary right, nor is the benefit that is to be provided defined by the application of specific rules laid down by the statute.
Even where the full homelessness duty arises under section 193, the content of the statutory duty lacks precise definition.
There is no private law analogy.
The duty is expressed in broad terms to secure that accommodation is available which leave much to the discretionary administrative judgment of the authority.
As Professor Ian Loveland, Does Homelessness Decision making Engage Article 6(1) of the European Convention on Human Rights? [2003] EHRLR 176, 184 observes, no tightly defined rules are laid down.
The legislative requirement is couched only in terms of broad principle.
Is this a civil right?
The appellants submit that the right to accommodation under section 193 of the 1996 Act is a civil right within the meaning of article 6(1) of the Convention.
Mr Goudie QC summarised his argument in this way.
The effect of the statutory scheme was to confer on the appellants an entitlement to accommodation.
This was a right, the correlative of which was a duty on the local housing authority which subsisted until it ceased to be subject to the duty in one or other of the ways provided for by the statute.
The right to accommodation was an individual economic right which flowed from specific rules laid down in a statute, according to the Strasbourg courts reasoning in Salesi v Italy (1993) 26 EHRR 187 and Mennitto v Italy (2000) 34 EHRR 1122.
From this it followed that the reviewing officers decision, which brought that right to an end, was a determination of the appellants civil rights within the meaning of the article.
Mr Goudie acknowledged that a right to accommodation was a right to a benefit in kind rather than a right to a financial payment or a subsidy.
But he said this did not in itself disqualify it from being a civil right.
A series of Russian cases beginning with Teteriny v Russia, application no 11931/03, 1 July 2005, and ending with Nagovitsyn v Russia, application no 6859/02, 24 January 2008, indicated the contrary.
It was held in those cases, which arose out of failures to comply with judgments by which the applicants were to be provided with accommodation of a certain size in a specified location, that there had been a violation of article 6(1).
It was also held that the effect of the judgments, under which the applicants were entitled to a social tenancy agreement, was that their claim was sufficiently established to constitute a possession falling within the ambit of article 1 of Protocol No 1: see, eg, Teteriny, paras 48 50.
In Stec v United Kingdom (2005) 41 EHRR SE 295, para 48 the Grand Chamber said that it was in the interests of the coherence of the Convention as a whole that the autonomous concept of possessions in article 1 of Protocol No 1 should be interpreted in a way which is consistent with the concept of pecuniary rights under article 6(1) and that it was important to adopt an interpretation which avoids inequalities of treatment based on distinctions which, at the present day, appear illogical or unsustainable.
Mr Arden QC for the respondents was content to follow the approach of the House of Lords in Runa Begum v Tower Hamlets London Borough Council [2003] 2 AC 430 and to assume that the appellants entitlement to accommodation under section 193 was a civil right within the meaning of article 6(1).
As he put it, the respondents approached this issue with equanimity.
Their concern was to deal fairly with the cases that were before them.
But he said that, if this was a civil right, it was very much at the edge of cases that were engaged by that concept.
Miss Lieven QC for the Secretary of State, on the other hand, addressed this point head on.
She submitted that the proper conclusion in this case was that there was no civil right within the meaning of that article.
Strasbourg case law had limited civil rights to those which were related to individual economic rights which were enforceable through the courts.
Any right under section 193 was subject to a large number of decisions that were left to the judgment of the local housing authority.
There was also a judgmental decision as to how any such right was to be delivered, as the duty under section 193 was merely to secure that accommodation was available.
The inclusion of benefits in kind such as these in the determination of rights protected by article 6(1) was a step further than the Strasbourg court had gone, and this Court should decline to take it.
As already noted, the House preferred not to decide this question in Runa Begum.
It chose instead to concentrate on the question whether the statutory provision of an appeal to the county court on a point of law only satisfied the requirements of article 6(1).
No doubt it was content to do this because it was satisfied that the absence of a full fact finding jurisdiction in the county court did not mean that, in the context of the statutory scheme that Part VII lays down, it did not have the jurisdiction that it needed to satisfy the requirements of that article.
But the reason that Lord Hoffmann gave for preferring not to decide whether rights under section 193 should be classified as civil rights is instructive.
In para 70 he said that this was for one reason only.
This, as he explained in the previous paragraph, was his concern should it be decided in Strasbourg that the administration of social welfare benefits falling within the Salesi principle required a more intrusive form of judicial review, that no obstacle should be placed in the way of the UK Government arguing that, in a case such as that, the principle did not apply at all.
Almost seven years have now passed since the judgment in Runa Begum was delivered.
The contingency which Lord Hoffmann had in mind has not yet arisen.
The jurisprudence of the Strasbourg court has not developed in the way he thought it perhaps might.
The balance of advantage now points in a different direction.
The time has come for the Court to address this question and take a decision upon it.
The present state of uncertainty as to whether the administration of social welfare benefits, such as those which are available to those who are homeless or threatened with homelessness, is unhealthy.
It encourages litigation on issues that would not require to be addressed at all if their right to accommodation under section 193 did not give rise to a civil right within the meaning of article 6.
The delay and expense that uncertainty on this issue gives rise to involves a waste of resources which would be much better deployed elsewhere in the public interest.
It may be helpful, as Miss Lieven suggested, to approach the question in stages: to look at the position in Strasbourg before Runa Begum; to look at Runa Begum itself; and then to look at how the law has developed since the decision in that case.
(a) before Runa Begum
As Lord Walker of Gestingthorpe said in Runa Begum, para 112, the cases on this topic start with Feldbrugge v The Netherlands (1986) 8 EHRR 425 and lead on to Salesi v Italy (1993) 26 EHRR 187 and Mennitto v Italy (2000) 34 EHRR 1122.
In these cases the Strasbourg court extended the concept of civil rights to social security benefits for employees and their dependants that were analogous to benefits under insurance schemes in private law, and then to entitlements to welfare payments which lacked the analogy to private insurance as they were non contributory and not related to employment.
In Feldbrugge the issue was whether the applicants entitlement to a statutory sickness allowance, which was a contributory scheme but for which she had not registered due to illness, was a civil right within the meaning of article 6: see also Deumeland v Germany (1986) 8 EHRR 448, a case about a widows supplementary pension arising from her husbands death in an industrial accident in which judgment was delivered on the same day.
In para 37 of Feldbrugge the court said that the applicant was claiming a right flowing from specific rules laid down by the legislation in force and that the right in question was a personal, economic and individual right, a factor which brought it close to the civil sphere.
Taking account of the affinity of the statutory scheme with insurance under the ordinary law, it held that the features of private law predominated and that they conferred on her entitlement the character of a civil right within the meaning of the article: para 40.
This was a significant development because, as a powerful dissenting opinion in that case pointed out, the phrase civil rights and obligations was originally intended to mean those rights and obligations that were adjudicated upon by the civil courts: see also Runa Begum, paras 28 and 64, per Lord Hoffmann.
The scope of article 6 was then extended to statutory schemes financed entirely out of public funds.
In Salesi v Italy (1993) 26 EHRR 187 the principle was applied to welfare payments which, as they were not contributory, could not be said to be analogous to a scheme of insurance.
In para 19 the court said that the development in the law that was initiated by the judgments in Feldbrugge and Deumeland and the principle of equality of treatment warranted taking the view that the general rule now was that article 6(1) applied in the field of social insurance.
The considerations that pointed in favour of the applicability of the article were said in that paragraph to be that: Mrs Salesi was not affected in her relations with the administrative authorities as such, acting in the exercise of discretionary powers; she suffered an interference with her means of subsistence and was claiming an individual, economic right flowing from specific rules laid down in a statute giving effect to the Constitution.
That decision was followed in Mennitto v Italy (2000) 34 EHRR 1122.
But there was an important qualification.
In para 23 of its decision in that case the court said that the outcome of the proceedings must be directly decisive for the right in question.
As in Salesi, the entitlement was to an amount of benefit that was not in the discretion of the public authority.
I do not find support in these cases for Mr Goudies submission that the right to accommodation under Part VII of the 1996 Act is a civil right because, as he put it, it is an individual economic right which flows from specific rules laid down in a statute.
The entitlement in section 193(2) is simply to accommodation.
There is a considerable area of administrative discretion as to how that accommodation is to be provided by the authority in any given case.
(b) Runa Begum
Although the House preferred not to take a decision on this issue in Runa Begum, there are some pointers to the decision that it would have taken had it felt obliged to do so.
In para 6 Lord Bingham said that to hold that the right enjoyed by Runa Begum was a civil right for the purposes of article 6 would be to go further than the Strasbourg court had yet gone.
I respectfully agree with this assessment.
It would seem to follow, applying the principle which he was later to enunciate in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20 that, as the duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time, Runa Begums right to accommodation under Part VII was not a civil right within the autonomous meaning of that expression.
To reach that conclusion would not have been to dilute or weaken the effect of existing Strasbourg case law.
It would, on the contrary, be to transgress Lord Binghams warning that it was not for the national courts to interpret the Convention in a way that provides for rights more generous than those that have hitherto been found by Strasbourg.
In para 67 Lord Hoffmann said that the whole scheme of Part VII was shot through with discretions in which either the councils duty was dependent upon it being satisfied of some state of affairs or could be discharged in various ways of its own choosing.
He contrasted that situation with Mennitto where, once the applicant had satisfied the conditions for entitlement to the allowance, all that remained was an arithmetical calculation of its amount.
In para 69 he too said that to apply the Salesi doctrine to the provision of benefits in kind, involving the amount of discretion that is inevitably needed in such cases, would be to go further than the Strasbourg court has so far gone.
In para 91 Lord Millett listed among features which took the case beyond the existing case law the authoritys discretion as to how it will discharge its duties and the fact that ultimately this called for an exercise of judgment.
Runa Begum could not be said to be claiming an individual, economic right flowing from specific rules laid down in a statute: para 92.
This is directly contrary to the view Mr Goudie invited the Court to take of the appellants position in this case.
Miss Lieven said that these observations were a powerful steer towards the conclusion that to extend the concept of a civil right to a claim under Part VII of the 1996 Act would be to go beyond the tests that had been so far laid down by the Strasbourg court.
I agree, but this leaves open the question whether anything that has come from Strasbourg since the date of that decision points to the contrary conclusion.
(c) since Runa Begum
One of the issues raised in R (A) v Croydon London Borough Council [2009] UKSC 8: [2009] 1 WLR 2557 was whether a decision that a local authority makes as to whether or not to provide accommodation for a child in need under section 20(1) of the Children Act 1989 was a determination of a civil right within the meaning of article 6(1).
The question was fully and carefully argued, and with that advantage I ventured to suggest that it could be asserted with reasonable confidence that the local authoritys duty, which is to provide accommodation for any child in need within their area who appears to them to require accommodation as a result of the factors mentioned in that subsection, did not give rise to a civil right: para 65.
I reached that conclusion after an examination of various decisions by the Strasbourg court since Runa Begum and Lady Hale said in para 44 that she would be most reluctant to accept that article 6 requires the judicialisation of such claims.
We have now been shown a decision which did not appear on the list that was provided to the court in Croydon: the courts admissibility decision in Associazione Nazionale Reduci dalla Prigionia dallInternamento e dalla Guerra di Liberazione v Germany (2007) 46 EHRR SE143.
The first case that needs to be mentioned is Tsfayo v United Kingdom (2006) 48 EHRR 457.
The applicant had failed to renew her application for housing and council tax benefit.
After taking advice she submitted a prospective claim and a backdated claim for both types of benefit.
The council accepted the prospective claim but rejected the backdated one on the ground that the applicant had failed to show good cause why she had not claimed this benefit earlier.
The councils housing benefit and council tax benefit review board rejected her appeal against this decision.
Her complaint was that the board was not an independent and impartial tribunal, contrary to article 6(1).
The court held that disputes about entitlement to social security and welfare benefits generally fell within the scope of article 6(1) and that the article applied to the applicants claim for housing benefit: para 40.
The question whether the claim concerned the determination of the applicants civil rights was not disputed.
This was not surprising, as the case fell within the mainstream of cases such as Salesi v Italy (1993) 26 EHRR 187 and Mennitto v Italy (2000) 34 EHRR 1122 where the issue was one as to the entitlement to an amount of benefit that was not in the discretion of the public authority.
The case offers important guidance as to what is needed to satisfy the requirements of article 6(1).
But it takes us no further on the question whether a statutory duty to provide benefits in kind as part of a scheme of social welfare falls within the scope of that article.
There are however, as I said in the Croydon case, para 62, a number of straws in the wind since Runa Begum that suggest that a distinction can indeed be made between the class of social security and welfare benefits that are of the kind exemplified by Salesi v Italy whose substance the domestic law defines precisely and those benefits which are, in their essence, dependent upon the exercise of judgment by the relevant authority.
The phrase civil rights is, of course, an autonomous concept: eg Woonbron Volkshuisvestingsgroep v The Netherlands (2002) 35 EHRR CD161.
In that case it was held that decisions about state subsidies to housing associations do not raise issues about civil rights.
But the phrase does convey the idea of what, in Stec v United Kingdom (2005) 41 EHRR SE295, para 50, the Grand Chamber referred to as an assertable right.
The courts references in Loiseau v France application no 46809/99, 18 November 2003 (unreported), para 7, to a private right which can be said, at least on arguable grounds, to be recognised under domestic law and to an individual right of which the applicant may consider himself the holder are consistent with this approach.
So too are the references in Mennitto v Italy (2000) 34 EHRR 1122, para 23, to a right which can be said, at least on arguable grounds, to be recognised under domestic law, where the court added: The dispute must be genuine and serious; it may relate not only to the actual existence of a right but also to its scope and the manner of its exercise.
The outcome of the proceedings must be directly decisive for the right in question.
In para 64 in the Croydon case I said that the series of cases about the enforceability of judgments made by the courts about social housing in Russia to which Mr Goudie referred in this case, of which the latest is Nagovitsyn v Russia application no 6859/02, 24 January 2008 (not reported), offer no assistance as the question whether a duty to provide social housing gives rise to a civil right before it results in a court order was not argued.
I remain of that opinion.
No consideration was given in any of these cases to that question, as the only point in issue was whether a final, binding judicial decision for the provision of accommodation of a specified kind should be allowed to remain inoperative: Teteriny v Russia, application no 11931/03, 1 July 2005, para 40.
As Lady Hale said in Croydon, para 40, it is easy to slip into the assumption that once a right has been crystallised in a court judgment against a public authority it must amount to a civil right.
References to the line of authority exemplified by cases such as Salesi v Italy (1993) 26 EHRR 187 and Mennitto v Italy (2000) 34 EHRR 1122 are conspicuous by their absence.
The case of Associazione Nazionale Reduci dalla Prigionia dallInternamento e dalla Guerra di Liberazione v Germany (2007) 46 EHRR SE143 is of interest because it appears to be the only decision after Stec v United Kingdom (2005) 41 EHRR SE 295 in which the court has considered the application of article 1 of Protocol No 1.
The applicants complaint was that they had claims for compensation for forced labour under German civil law prior to the coming into force in August 2000 of a law, referred to as the Foundation Law, which excluded claims going beyond the benefits provided by the Foundation Law, as a result of which their claims were lost.
The question was whether the facts of the case attracted the protection of article 14 in conjunction with article 1 of Protocol No 1.
The court found that the applicants could not claim to have a legitimate expectation of compensation for their detention and forced labour and that the facts at issue did not fall within the ambit of Protocol No 1: para 75.
The court went on to say that this finding was not contradicted by its judgment in Stec, in which it was held that non contributory social benefits funded by general taxation fell within the scope of article 1 of Protocol No 1 and that, although that provision does not grant the right to receive a social security payment of any kind, if a state does decide to establish a benefits scheme, it must do so in a manner compatible with article 14.
This was because the payments of compensation were made outside the framework of social security legislation and could not be likened to the payments in Stec: para 77.
It also held that the case was distinguishable from Wo v Poland (2006) 45 EHRR 667 where the applicant was held to enjoy, at least on arguable grounds, a right to compensation which fell within the ambit of article 6.
But I do not detect in the courts reasoning any indication that it would hold that the right to accommodation that is in issue in this case was a civil right for the purposes of article 6(1).
If anything, the comment that article 1 of Protocol No 1 does not grant the right to receive a social security payment of any kind is an indication to the contrary.
In Crompton v United Kingdom, application no 42509/05, 27 October 2009, the applicant who had joined the Territorial Army as a pay and accounts clerk was made redundant.
He claimed redress in respect of his redundancy from his Commanding Officer.
There then followed a prolonged series of proceedings which took eleven years to reach their conclusion before he achieved a settlement of his claim.
He contended that this was a breach of his right to a hearing within a reasonable time under article 6(1).
The Government accepted that his civil rights were determined in the civil proceedings and that article 6 was applicable: para 53.
Like Tsfayo v United Kingdom (2006) 48 EHRR 457, the case is of interest as to what is needed to satisfy the requirements of article 6(1).
But it takes us no further on the question whether a statutory duty to provide benefits in kind as part of a scheme of social welfare falls within the scope of that article.
The other members of the court in the Croydon case preferred to leave open the question whether a local authoritys duty under section 20(1) of the Children Act 1989 gave rise to a civil right for the purposes of article 6(1).
In para 45 Lady Hale said that, if it was a civil right at all, she would be inclined to hold that it rested at the periphery of such rights.
The issue having been left open in that case, the way is clear for us, if we wish, to reach a concluded view on the matter.
That being the present state of the authorities, I would be prepared now to hold that cases where the award of services or benefits in kind is not an individual right of which the applicant can consider himself the holder, but is dependent upon a series of evaluative judgments by the provider as to whether the statutory criteria are satisfied and how the need for it ought to be met, do not engage article 6(1).
In my opinion they do not give rise to civil rights within the autonomous meaning that is given to that expression for the purposes of that article.
The appellants right to accommodation under section 193 of the 1996 Act falls into that category.
I would hold that article 6 was not engaged by the decisions that were taken in the appellants cases by the reviewing officer.
The article 6 review
The question whether the scheme of decision making that is set out in Part VII is compliant with article 6(1) was fully argued and, although I would hold that this is not necessary for the disposal of the appeals, I would like to make some brief observations about it.
Mr Goudie invited the court to hold that the decisions that were made in these cases were directly analogous to those that were considered in Tsfayo v United Kingdom (2006) 48 EHRR 457.
In that case the Housing Benefit Review Board was deciding a simple question of fact, namely whether there was a good cause for the applicants delay in making a claim for housing and council tax benefit.
He said that this was a gateway question of fact, a positive answer to which would determine her entitlement to the benefit.
So too in this case, he said, there were two gateway questions of fact: was the applicant informed of the consequences of a refusal, and did she refuse the accommodation.
Only when those questions were answered against her would the question arise as to the accommodations suitability.
As the court said in Tsfayo, para 46, the issues in cases such as Runa Begum required a measure of professional knowledge or experience and the exercise of administrative discretion pursuant to wider policy aims.
That was not so here, as no specialist knowledge was required to determine the issue whether or not the letters were received by the appellants.
He sought to draw support for these submissions from Crompton v United Kingdom, application no 42509/05, 27 October 2009, para 71 where the court said: The Court has previously held that in order to determine whether the article 6 compliant second tier tribunal had full jurisdiction, or provided sufficiency of review to remedy a lack of independence at first instance, it was necessary to have regard to such factors as the subject matter of the decision appealed against, the manner in which that decision was arrived at and the content of the dispute, including the desired and actual grounds of appeal.
Reference was made to Bryan v United Kingdom (1995) 21 EHRR 342, paras 44 47 and Tsfayo v United Kingdom, para 43 in which those factors were said to be among those to which it was necessary to have regard: see also the concurring opinion of Mr Bratza as he then was, in Bryan at p 354 where he set out a similar list of considerations.
Commenting on Tsfayo in para 73, the court said that the determination of the issue in that case did not require any specialist expertise.
Nor could the factual findings there be said to be merely incidental to the reaching of broader judgments of policy or expediency which it was for the democratically accountable authority to take.
That, said Mr Goudie, was the situation in the case of these appeals.
The questions that they raised were not incidental to a judgment as to whether or not accommodation was suitable, such as whether there was a lift.
The subject matter of the decision was simply whether or not the letters had been received.
I agree that the questions that had to be decided in these cases can be distinguished from the question that had to be decided in Runa Begum.
As the Strasbourg court acknowledged in Crompton, the question in that case could not be said to be purely and simply one of fact as the question whether the accommodation was suitable was one for the expert assessment of the housing officer.
But the subject matter of the decision appealed against here is exactly the same.
The question whether or not the letters were received was just one among a number of questions that had to be addressed to determine whether the respondents duty under section 193 had been discharged.
They are dealt with together in section 193(5) in a way that shows that they are all interlinked.
The scheme of the Act is that they are to be dealt with together both at the initial stage and, in the event of a review, by the reviewing officer.
To separate out questions as to whether the formalities laid down by the subsection were complied with from those as to whether the accommodation was suitable would complicate a scheme which, in the interests of speed and economy, was designed to be simple to administer.
Several of the further cases referred to in section 193(6) in which the authority ceases to be subject to the duty also raise issues that require the exercise of judgment.
That is inherent in the entire structure of Part VII of the 1996 Act.
The way the reviewing officers approached their task in these cases shows very clearly how the scheme works in practice.
For ease of administration the review is entrusted to a single officer who is equipped to deal with issues as to the suitability of the accommodation that has been declined.
An answer to the question whether or not the letters were received was incidental to a more searching and judgmental inquiry into the accommodations suitability.
It was, as Lord Bingham put it in Runa Begum, para 9(2), a staging post on the way to the much broader judgment that had to be made.
These cases are quite different from Tsfayo, where no broad questions requiring professional knowledge or experience had to be addressed once the question whether there was good cause had been answered.
In these circumstances I would hold that the ratio of the decision in Runa Begum should be applied and that the absence of a full fact finding jurisdiction in the court to which an appeal lies under section 204 does not deprive it of what it needs to satisfy the requirements of article 6(1).
I am fortified in this view by the absence of any indication by the Strasbourg court that it disagrees with the decision in Runa Begum.
On the contrary, I interpret its reference to this decision in Tsfayo, paras 45 46 as endorsing its approach.
An important factor is the way in which the House addressed the relationship between the article 6(1) concept of civil rights on the one hand and the article 6(1) requirement of an independent and impartial tribunal on the others.
As Lord Bingham put it in para 5, the narrower the interpretation given to civil rights, the greater the need to insist on a review by a tribunal exercising full powers.
Conversely, the more elastic the interpretation given to that concept, the more elastic must be the approach to the independent and impartial review if the emasculation by over judicialisation of administrative welfare schemes is to be avoided.
Mr Bratzas concurring opinion in Bryan v United Kingdom (1995) 21 EHRR 342, 354, where he said that the requirement that a court or tribunal should have full jurisdiction cannot be applied mechanically, provides valuable support for this approach.
Support for it is to be found also in Crompton, paras 71 72 and in the concept of sufficiency of review which is now well established in the jurisprudence of the Strasbourg court.
A consequence of this approach has been to drive the courts to applying a test which is imprecise and uncertain.
Is the case near or close to the borderline? Is it at the periphery, as Lady Hale said in Croydon, para 45? In Runa Begum, para 59, Lord Hoffmann expressed his agreement with Laws LJs observation in R (Beeson's Personal Representatives) v Dorset County Council [2002] EWCA Civ 1812 that there is some danger of undermining legal certainty by excessive debates over how many angels can stand on the head of the article 6 pin.
That is why I prefer to dispose of these appeals by holding that the appellants cases are outside the scope of article 6 altogether.
The third issue, whether section 204 of the 1996 Act can be read compatibly with article 6(1) so as to entitle the county court to exercise a full fact finding jurisdiction, is superseded.
I would dismiss these appeals.
LORD COLLINS
I agree with Lord Hope that the appeals should be dismissed on the basis that a decision of the local housing authority under section 193(5) of the 1996 Act that it has discharged its duty to the applicant is not a determination of the applicants civil rights for the purposes of Article 6(1) of the Convention.
Although I agree with much of Lord Hopes reasoning, I would place less emphasis on the evaluative nature of the exercise under section 193, and greater emphasis on the nature of the applicants rights under Part VII of the 1996 Act, and in particular on the absence of what the Strasbourg Court has characterised as an important, and perhaps necessary, feature, namely an individual economic right in the applicant.
The crucial developments in Strasbourg relevant to the present case are the decisions in Ringeisen v Austria (No 1) (1971) 1 EHRR 455; Knig v Federal Republic of Germany (1978) 2 EHRR 170; Feldbrugge v Netherlands (1986) 8 EHRR 425; Deumeland v Germany (1986) 8 EHRR 448; and Salesi v Italy (1993) 26 EHRR 187.
It is not necessary to elaborate on them here, because they have been the subject of characteristically helpful discussion by Lord Hoffmann in R (Alconbury Developments Ltd) v Secretary of State for the Environment [2001] UKHL 23, [2003] 2 AC 295, at [78] [84] and in Runa Begum v Tower Hamlets London Borough Council [2003] UKHL 5, [2003] 2 AC 430, at [28] [33]; and see also Lord Millett in the latter decision at [82] [90].
For present purposes it is only necessary to say that in Ringeisen and Knig the Court applied Article 6(1) to disputes with public authorities concerning licences to, respectively, sell land and to practise as a doctor.
Article 6(1) was extended to social insurance claims against the State in Feldbrugge and Deumeland, and then to welfare assistance in Salesi.
The Strasbourg Court has said that it is not necessary to give what it has called an abstract definition of the concept of civil rights and obligations: Benthem v Netherlands (1985) 8 EHRR 1 at [35]; Feldbrugge v Netherlands (1986) 8 EHRR 425 at [27]; and Deumeland v Germany (1986) 8 EHRR 448 at [61].
It is understandable that the Court has been reluctant to provide abstract definitions.
What is not so comprehensible is its apparent reluctance to enunciate principles which will enable a line to be drawn between those rights in public law which are to be regarded as civil rights and those which are not to be so regarded.
The mere fact that evaluative judgments are required will not take the case out of Article 6(1).
For example, in Schuler Zgraggen v Switzerland (1993) 16 EHRR 405 the applicants invalidity pension depended on a finding that she was at least 66.66% incapacitated.
It was held that, despite the public law features of the case, the applicant suffered an interference with her means of subsistence, and that she was claiming an individual, economic right flowing from specific rules in legislation: at [46].
The reference in that decision to an individual, economic right flowing from specific rules in legislation reflects a thread running through the case law in this area.
It is plain from the jurisprudence of the Court that an important factor in the application of Article 6(1) in disputes with public authorities in areas which in national law would normally be regarded as public law is the assertion by the applicant of what has been variously described as an economic right or an individual, economic right or a purely economic right.
The citation of passages from three decisions, among many others, will illustrate the point.
In Feldbrugge v Netherlands (1986) 8 EHRR 425 the Court said (at [37]) 37.
To begin with, Mrs. Feldbrugge was not affected in her relations with the public authorities as such, acting in the exercise of discretionary powers, but in her personal capacity as a private individual.
She suffered an interference with her means of subsistence and was claiming a right flowing from specific rules laid down by the legislation in force.
For the individual asserting it, such a right is often of crucial importance; this is especially so in the case of health insurance benefits when the employee who is unable to work by reason of illness enjoys no other source of income.
In short, the right in question was a personal, economic and individual right, a factor that brought it close to the civil sphere.
So also in Deumeland v Germany (1986) 8 EHRR 448 the Court said (at [71]) [T]he widow of Mr. Deumeland Senior was not affected in her relations with the public authorities as such, acting in the exercise of discretionary powers, but in her personal capacity as a private individual.
She was claiming a right flowing from specific rules laid down by the legislation in force.
The right in question was a personal, economic and individual right, a factor that brought it close to the civil sphere.
and which involved a contributory invalidity scheme, the Court said (at [46]) In Schuler Zgraggen v Switzerland (1993) 16 EHRR 405, referred to above, today the general rule is that Article 6(1) does apply in the field of social insurance, including even welfare assistance .
State intervention is not sufficient to establish that Article 6(1) is inapplicable; other considerations argue in favour of the applicability of Article 6(1) in the instant case.
The most important of these lies in the fact that despite the public law features pointed out by the Government, the applicant was not only affected in her relations with the administrative authorities as such but also suffered an interference with her means of subsistence; she was claiming an individual, economic right flowing from specific rules laid down in a
federal statute
In a long series of cases the Court has held that Article 6(1) applied to claims by civil servants against the State which were pecuniary and which asserted a purely or essentially economic right: e.g. Abenavoli v Italy Application No 25587/94 (unreported) 2 September 1997; Couez v France Application No 24271/94 (unreported) 24 August 1998; Kirsten v Germany Application No 19124/02 (unreported) 15 February 2007.
So also in Mennitto v Italy (2000) 34 EHRR 1122 the Court emphasised that the applicants right to an allowance as the father of a disabled child was an economic right.
In Wo v Poland (2006) 45 EHRR 667 the Court held, applying Salesi v Italy and Mennitto v Italy, that Article 6(1) applied to claims by Polish victims of Nazi persecution against a fund set up by a Polish German agreement.
The applicant had suffered an interference with his means of subsistence and was claiming an individual, economic right flowing from specific rules laid down in the Foundations Statute and its by laws: at [76].
There is an emphasis in many of the Strasbourg cases on the pecuniary nature of the applicants rights.
But there is no reason to suppose that that is anything more than a factor in the evaluation.
Consequently there is nothing in principle to prevent rights in relation to housing, whether pecuniary or not, from being civil rights for the purposes of Article 6(1).
Thus in Tsfayo v United Kingdom (2006) 48 EHRR 457 it was conceded (see at [36]) that Article 6(1) applied to a dispute concerning entitlement to housing benefit, a means tested benefit payable towards housing costs in rented accommodation.
The cases relied on by the appellants for the proposition that benefits in kind, as opposed to pecuniary benefits, are protected as civil rights under Article 6, are both cases not only where the applicants were entitled to the housing, but where the entitlement had been reflected in a court judgment.
In Teteriny v Russia Application No 11931/03 (unreported) 30 June 2005 the applicants (husband and wife) were retired judges.
Under Russian law judges were entitled to priority treatment in the allocation of flats.
A court ordered the town council to provide the husband with a flat, but the order was not complied with.
The complaint was that the failure to comply with the judgment violated the applicants rights under Article 6(1), and also their right under Article 1 of the First Protocol not to be deprived of their possessions.
The Russian Government made no submissions on the merits of the claim, and the Court found, without any discussion of whether the application concerned civil rights, that there had been a violation of Article 6(1) on the ground that it applied to the enforcement of judicial decisions.
Although Article 1 of the First Protocol did not apply to a right to live in a property not owned by the applicant because it was not a possession, the claim to a flat was sufficiently established by the Russian courts judgment to constitute a possession.
Sypchenko v Russia Application No 38368/04 (unreported) 1 March 2007 and Nagovitsyn v Russia Application No 6859/02 (unreported) 24 January 2008 are similar cases involving, respectively, judgments awarding housing to a person suffering from infectious tuberculosis, and to a person exposed to radiation as a result of the Chernobyl explosion.
None of these cases decides whether a civil right is engaged before a duty to provide housing provision crystallises in a court order.
But it does not follow from that the fact that Article 6(1) may apply in some circumstances to disputes relating to housing benefits that it applies to all such disputes.
The following aspects of the homelessness legislation in Part VII of the 1996 Act (on which see the valuable article by Loveland, Does Homelessness Decision Making Engage Article 6(1) of the European Convention on Human Rights? [2003] EHRLR 176) are important.
The duties of the local authority arise only if a person is homeless.
A person is homeless if he has no accommodation available for his occupation.
He may be in accommodation but nevertheless homeless if the accommodation is not such that it would be reasonable for the person to occupy (section 175(1), (3)).
Accommodation is regarded as available for a persons occupation only if it is available for occupation by them together with (a) any other person who normally resides with him as a member of his family; or (b) any other person who might reasonably be expected to reside with him: section 176, as amended.
It is not reasonable for a person to continue to occupy accommodation if it is probable that this will lead to domestic violence, or other violence, against him: section 177.
Certain homeless persons are treated as having a priority need for accommodation, including, persons who are vulnerable as a result (inter alia) of old age or mental illness: section 189(1)(c).
Certain homeless persons are treated as becoming homeless intentionally, where they deliberately do or fail to do anything in consequence of which they cease to occupy accommodation which is available for their occupation and which it would have been reasonable for them to continue to occupy: section 191(1).
Where a person is intentionally homeless but has a priority need, the local authority has a duty to secure that accommodation is available for his occupation for such period as they consider will give him a reasonable opportunity of securing accommodation for his occupation, and provide him with advice and assistance in securing accommodation: section 190(2).
But if he is not in priority need, the duty is limited to advice and assistance: section 190(3).
Where a person is homeless, but not in priority need and not intentionally homeless, the local authority is under a duty to provide advice and assistance (section 192(1)) and may secure that accommodation is available for occupation by the applicant (section 192 (3)).
Section 193 sets out the duties to persons in priority need, in particular the duty to secure that accommodation is available for occupation by the applicant (section 193(2)).
The consequence is that the local authority has to investigate whether applicants are homeless, whether they are in priority need, and whether they are intentionally homeless.
It is only in relation to applicants with priority need that the local authority comes under the full duty to secure accommodation.
By section 193(5) the local authority ceases to be subject to the duty if the applicant refuses an offer of accommodation which the authority is satisfied is suitable.
As Lord Hope points out (at [27]) the content of the statutory duty lacks precision.
There is no right to any particular accommodation.
The duty is to secure that accommodation is available.
In my judgment, these factors together with the essentially public nature of the duty mean that the duty does not give rise to an individual economic right, and a dispute concerning the question whether the applicant has been properly notified of the consequences of refusal of accommodation is not within Article 6(1).
LORD KERR
I agree with Lord Hope and Lord Collins that this appeal should be dismissed.
One can recognise, however, the initial attraction of the argument that the right involved here was a civil right within the autonomous meaning of article 6.
To be provided with accommodation in the circumstances in which the appellants find themselves may be argued to constitute a statutory entitlement; the right to accommodation is conferred by section 193 (2) of the 1996 Act and therefore has a statutory base; it endures until determined by the occurrence of one of the events provided for in the succeeding provisions of section 193; and it can be argued to fulfil what have been recognised as the necessary criteria for an article 6 right.
In particular, the right can be said to be an economic right; it is individual or personal to the applicant; it is the product of or flows from the application of rules; those rules are specific and they are laid down in statute.
But I have been persuaded by the respondents argument that the case law points unmistakably in the opposite direction and I think that now is the time to recognise its effect.
I have not found it easy to reach a principled basis for the distinction between social security payments and social welfare provision for both require the expenditure of public resources; both provide a valuable resource to the recipient; and both are activated by a need on the part of the beneficiary.
But, the lack of similarity to (or, rather, the distinction that can be made with) a private insurance scheme; and the dependence on discretionary judgments not only to establish entitlement but also to discharge the states obligation and the way in which the obligation can be met all combine to make this a different type of case from the Salesi (Salesi v Italy (1993) 26 EHRR 187) or Mennitto (Mennitto v Italy (2000) 34 EHRR 1122) models.
This is not an assertable right as that term was used in Stec v UK (2005) 41 EHRR SE 295.
On the question of whether judicial review provides a sufficient review by an independent and impartial tribunal, I confess to some feelings of unease about the way in which this issue has been tackled in the past.
At a fundamental level, the purpose of the article 6 review might be said to be to nullify or offset the effect of the established lack of the appearance of partiality.
In Crompton v UK 27 October 2009, application 42509/05, at para 71, the purpose was described in this way: The Court has previously held that in order to determine whether the Article 6 compliant second tier tribunal had full jurisdiction, or provided sufficiency of review to remedy a lack of independence at first instance, it was necessary to have regard to such factors as the subject matter of the decision appealed against, the manner in which that decision was arrived at and the content of the dispute, including the desired and actual grounds of appeal (see [Bryan v the United Kingdom (1995) 21 EHRR 342, paras 44 to 47 and Tsfayo v Untied Kingdom (2006) 48 EHRR 457, para 43] [My emphasis.]
The underlying purpose is identified in this passage as to remedy a lack of independence at first instance.
In Tsfayo v United Kingdom (2006) 48 EHRR 457 this was also given as the purpose of the article 6 review see para 43, sufficiency of review to remedy a lack of independence at first instance.
The means by which the examination takes place i.e. having regard to such factors as the subject matter of the decision appealed against; the manner in which that decision was arrived at; and the content of the dispute must be distinguished from the purpose of the exercise.
Where the decision involves an evaluative judgment one can quite see that a judicial review challenge would be appropriate but where a conclusion on a simple factual issue is at stake, judicial review does not commend itself as an obviously suitable means by which to rid the original decision of its appearance of bias.
In particular, judicial review might be said to be a singularly inapt means of examining issues of credibility which lie at the heart of the present appeals.
Judicial review is suitable to deal with issues such as the rationality of the judgment reached; whether relevant factors have been taken into account; whether sufficient opportunity has been given to the affected party to make representations etc.
All of these take place on if not an agreed factual matrix at least one in which the areas of factual controversy are confined.
It is quite different when one comes to decide a sharply conflicting factual issue.
But, the decision in Runa Begum v Tower Hamlets LBC [2003] 2 AC 430 continues to occupy this particular field.
The observations of Lord Bingham (in paragraph 10) and of Lord Hoffmann in paragraphs 59 et seq effectively conclude the arguments on the second issue arising on the appeal.
There is also much force in Ms Lieven QCs argument that Part VII decisions invariably partake of factual inquiry and discretionary judgment.
The nature of the scheme as a whole, therefore, dictates the answer.
I agree with Lord Collins that the Russian cases do not assist in reaching a conclusion on the second issue.
There is much to be said for Lord Browns suggestion (made during argument) that even where one litigates a claim that does not itself involve an article 6 civil right, one may nevertheless assert that such a right arises where the judgment obtained on the claim which does not fall within article 6 remains unsatisfied.
But, it is quite clear that the European Court of Human Rights did not in the Russian cases address the question whether cases such as Salesi and Mennitto should be extended.
It is impossible to conclude that the Strasbourg court intended to radically expand the category of article 6 rights by these judgments.
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The Housing Act 1996 places a duty on local housing authorities to ensure that suitable accommodation is available for homeless persons who fulfil certain criteria.
An authority may cease to be subject to that duty where an applicant refuses an offer of accommodation, but only if the authority notifies him, in writing, that it regards itself as having discharged its duty.
If dissatisfied with an authoritys decision that its duty has been discharged, an applicant may appeal to the county court.
But he may only do so on a point of law arising from the decision; the county court judge is not entitled to decide factual disputes as to whether or not events have happened.
In this case, Birmingham City Council maintained that it had successfully discharged its duty to a number of applicants who were homeless and fulfilled the relevant criteria.
The applicants disputed this, claiming that, although written notification of the kind the law requires may have been sent to them by the authority, they never actually received it.
The dispute between the parties as to whether the duty had been discharged therefore turned entirely on a pure question of fact.
It was therefore of a nature which a county court judge on appeal has no power to determine.
Before this Court, the applicants argued that the lack of a fact finding jurisdiction for a county court on appeal put that aspect of the system in breach of Article 6(1) of the European Convention on Human Rights, which guarantees the right to a fair trial in the determination of civil rights and obligations.
Two main issues arose for the courts determination: (1) whether an appeal to the county court involved the determination of a civil right for the purposes of Article 6(1); (2) if so, whether Article 6(1) required that a court hearing such an appeal must itself be able to determine issues of fact such as those raised in the present case.
The Supreme Court unanimously dismissed the appeal.
It held that a decision that a local housing authority takes under the Housing Act 1996 that it has discharged its duty to an applicant is not a determination of the applicants civil rights for the purposes of Article 6(1).
It therefore lies outside
the protection of that Article.
The Court also holds that, although it is unnecessary to decide the point, the appeal procedure as a whole complies with Article 6(1) in any event.
As to the first issue: Lord Hope (with whom Lady Hale and Lord Brown agreed) reasoned that in cases such as this, where the award of services or benefits in kind is not an individual right of which the applicant can consider himself the holder, but is dependent upon a series of evaluative judgments by the provider as to whether the statutory criteria are satisfied and how the need for it ought to be met, Article 6(1) is not engaged (see para [49]).
Lord Collins, whilst agreeing with Lord Hopes reasoning, placed less emphasis on the evaluative nature of the decision making process (para [58]).
The mere fact that evaluative judgments are required did not take the case out of Article 6(1) (para [61]).
The main reason why the decision fell outside the scope of the Article was that the statutory duty lacked precision.
There was no right to any particular accommodation; the duty was simply to ensure that accommodation was available.
Together with the essentially public nature of the duty, those factors meant that the duty did not give rise to an individual economic right (para [73]).
As to the second issue: Although the question whether or not the letters were received was factual, it was just one among a number of interlinked questions that had to be addressed to determine whether the housing authoritys duty had been discharged.
No case of the European Court of Human Rights was to the effect that an appeal from such a determination on a point of law only would constitute a breach of Article 6(1) (paras [53] [55], [79]).
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The facts giving rise to this appeal can be shortly summarised, although they are more fully set out in the judgments of Lord Sumption at paras 56 59 and of Lords Toulson and Hodge at paras 113 116 below.
Bilta (UK) Ltd is an English company which was compulsorily wound up in November 2009 pursuant to a petition presented by HMRC.
Biltas liquidators then brought proceedings against, inter alia, its two former directors, Mr Chopra, who was also its sole shareholder, and Mr Nazir; and Jetivia SA, a Swiss company and its chief executive, Mr Brunschweiler, who is resident in France (the four defendants).
The pleaded claim alleges that the four defendants were parties to an unlawful means conspiracy to injure Bilta by a fraudulent scheme, which involved Messrs Chopra and Nazir breaching their fiduciary duties as directors, and Jetivia and Mr Brunschweiler (the appellants) dishonestly assisting them in doing so.
The liquidators claim (i) through Bilta, (a) damages in tort from each of the four defendants, (b) compensation based on constructive trust from the appellants, and (ii) directly from each of the four defendants, a contribution under section 213 of the Insolvency Act 1986.
The case against the four defendants is based on the contention that between April and July 2009, Messrs Chopra and Nazir caused Bilta to enter into a series of transactions relating to European Emissions Trading Scheme Allowances with various parties, including Jetivia, and that those transactions constituted what are known as carousel frauds.
The effect of the transactions was that they generated (i) an obligation on Bilta to account to HMRC for output VAT and (ii) an obligation on HMRC to pay a slightly lower sum by way of input VAT to another company.
While the input VAT was paid by HMRC, it was inherent in the fraud that Bilta would always be insolvent and unable to pay the output VAT to HMRC.
The amount of output VAT for which Bilta consequently remains liable is said to be in excess of 38m.
The application to strike out
The appellants applied to strike out Biltas claim against them on the ground that (i) Bilta could not maintain the proceedings in view of the principle ex turpi causa non oritur actio, or, to put it another way, the appellants were bound to defeat the claims against them on the basis of an illegality defence, and (ii) in so far as the claims were based on section 213, it could not be invoked against the appellants as it does not have extra territorial effect.
The application was dismissed by Sir Andrew Morritt C, whose decision was upheld by the Court of Appeal.
The appellants now appeal to the Supreme Court.
In common with all members of the court, I consider that this appeal should be dismissed because the Court of Appeal were right to hold that (i) illegality cannot be raised by Jetivia or Mr Brunschweiler as a defence against Biltas claim because the wrongful activity of Biltas directors and shareholder cannot be attributed to Bilta in these proceedings, and (ii) section 213 of the Insolvency Act 1986 has extra territorial effect.
Attribution
So far as attribution is concerned, it appears to me that what Lord Sumption says in his paras 65 78 and 82 97 is effectively the same in its effect to what Lords Toulson and Hodge say in their paras 182 209.
Both judgments reach the conclusion which may, I think be stated in the following proposition.
Where a company has been the victim of wrong doing by its directors, or of which its directors had notice, then the wrong doing, or knowledge, of the directors cannot be attributed to the company as a defence to a claim brought against the directors by the companys liquidator, in the name of the company and/or on behalf of its creditors, for the loss suffered by the company as a result of the wrong doing, even where the directors were the only directors and shareholders of the company, and even though the wrong doing or knowledge of the directors may be attributed to the company in many other types of proceedings.
It appears to me that this is the conclusion reached by Lord Sumption and Lords Toulson and Hodge as a result of the illuminating discussions in their respective judgments in paras 65 78 and 82 95 and paras 182 209.
Particularly given the full discussion in those passages, I do not think that it would be sensible for me to say much more on the topic.
However, I would suggest that the expression the fraud exception be abandoned, as it is certainly not limited to cases of fraud see per Lord Sumption at para 71 and Lords Toulson and Hodge at para 181.
Indeed, it seems to me that it is not so much an exception to a general rule as part of a general rule.
There are judicial observations which tend to support the notion that it is, as Lord Sumption says in his para 86, an exception to the agency based rules of attribution, which is based on public policy or common sense, rationality and justice, according to the judicial observations quoted in paras 72, 73, 74, 78 and 85 of Lord Sumptions judgment.
However, I agree with Lord Mances analysis at paras 37 44 of his judgment, that the question is simply an open one: whether or not it is appropriate to attribute an action by, or a state of mind of, a company director or agent to the company or the agents principal in relation to a particular claim against the company or the principal must depend on the nature and factual context of the claim in question.
Section 213 of the 1986 Act
I agree with Lord Sumption and Lords Toulson and Hodge for the reasons they give in paras 107 110 and 210 218 that section 213 of the 1986 Act has extra territorial effect, at least to the extent of applying to individuals and corporations resident outside the United Kingdom.
The matters in dispute
There are some issues on which Lord Sumption and Lords Toulson and Hodge differ.
In that connection, I think that there are three areas of disagreement to which it is right to refer, and, taking them in the order in which it is most convenient to discuss them, they are as follows.
First, there is disagreement as to the basis upon which a defence based on illegality, or ex turpi causa, is to be approached compare Lord Sumption at paras 60 63 and 98 100 with Lords Toulson and Hodge at paras 170 174.
Secondly, Lords Toulson and Hodge would also dismiss this appeal on the attribution issue on the ground of statutory policy (see their paras 122 130), whereas Lord Sumption would not (see his paras 98 102).
Thirdly, there are differences between Lord Sumption and Lords Toulson and Hodge as to the proper interpretation of two cases, namely Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39, [2009] 1 AC 1391 (see Lord Sumption at paras 79 81 and Lords Toulson and Hodge at paras 134 155), and Safeway Foodstores Ltd v Twigger [2010] EWCA Civ 1472, [2011] 2 All ER 841 (see Lord Sumption at para 83 and Lords Toulson and Hodge at paras 156 162). 14.
The proper approach to the illegality defence
First, then, there is the proper approach which should be adopted to a defence of illegality.
This is a difficult and important topic on which, as the two main judgments in this case show, there can be strongly held differing views, and it is probably accurate to describe the debate on the topic as involving something of a spectrum of views.
The debate can be seen as epitomising the familiar tension between the need for principle, clarity and certainty in the law with the equally important desire to achieve a fair and appropriate result in each case.
In these proceedings, Lord Sumption considers that the law is stated in the judgments in the House of Lords in Tinsley v Milligan [1994] 1 AC 340, which he followed and developed (with the agreement of three of the four other members of the court, including myself and Lord Clarke) in Les Laboratoires Servier v Apotex Inc [2014] UKSC 55, [2014] 3 WLR 1257.
He distinguishes the judgment of Lord Wilson in Hounga v Allen [2014] UKSC 47, [2014] 1 WLR 2889 as involving no departure from Tinsley v Milligan, but as turning on its own context in which a competing public policy required that damages should be available even to a person who was privy to her own trafficking (para 47).
By contrast Lord Toulson (who dissented from that approach in Les Laboratoires) and Lord Hodge favour the approach adopted by the majority of the Court of Appeal in Tinsley and treat that of Lord Wilson in para 42ff of Hounga as supporting that approach.
In my view, while the proper approach to the defence of illegality needs to be addressed by this court (certainly with a panel of seven and conceivably with a panel of nine Justices) as soon as appropriately possible, this is not the case in which it should be decided.
We have had no real argument on the topic: this case is concerned with attribution, and that is the issue on which the arguments have correctly focussed.
Further, in this case, as in the two recent Supreme Court decisions of Les Laboratoires and Hounga, the outcome is the same irrespective of the correct approach to the illegality defence.
It would, in my view, be unwise to seek to decide such a difficult and controversial question in a case where it is not determinative of the outcome and where there has been little if any argument on the topic.
In Les Laboratoires, the majority did opine on the proper approach not because it was necessary to decide the appeal, but because they considered that the Court of Appeal (who had reached the same actual decision) had adopted an approach which was inconsistent with Tinsley.
Similarly in Hounga, as Lord Sumption has shown in para 99, it may well not have been necessary to 16. 15. consider the proper approach to the illegality defence, but it nonetheless remains the fact that it was the subject of argument, and that Lord Wilson did express a view on the point, and two of the four other members of the court agreed with his judgment. 17.
Les Laboratoires provides a basis for saying that the approach in Tinsley has recently been reaffirmed by this court and that it would be inappropriate for this court to visit the point again.
However, it was not argued in Les Laboratoires that Tinsley was wrongly decided, and, as Lord Toulson pointed out in his judgment, the majority decision was reached without addressing the reasoning in Hounga.
Lord Sumption is right to say that, unless and until this court refuses to follow Tinsley, it is at the very least difficult to say that the law is as flexible as Lords Toulson and Hodge suggest in their judgment, but (i) in the light of what the majority said in Hounga at paras 42 43, there is room for argument that this Court has refused to follow Tinsley, and (ii) in the light of the Law Commission report, the subsequent decisions of the Court of Appeal, and decisions of other common law courts, it appears to me to be appropriate for this court to address this difficult and controversial issue but only after having heard and read full argument on the topic.
The role of statutory policy in this case 18.
As well as dismissing this appeal on the attribution issue on the same grounds as Lord Sumption, Lords Toulson and Hodge would also dismiss the appeal on the grounds of statutory policy.
They suggest that it would make a nonsense of the statutory duty contained in section 172(3) of the Companies Act 2006 (and explained by them in their paras 125 127), if directors against whom a claim was brought under that provision could rely on the ex turpi causa or illegality defence.
That defence would be based on the proposition, relied on by the appellants in this case, that, as the directors in question (here the first and second defendants, Mr Nazir and Mr Chopra) were, between them, the sole directors and shareholders of Bilta, their illegal actions must be attributed to the company, and so the defence can run.
I agree with Lords Toulson and Hodge that this argument cannot be correct.
Apart from any other reason, it seems to me that Lord Mance must be right in saying in his para 47 that, at least in this connection, the 2006 Act restates duties which were part of the common law.
It also appears to me to follow that, if Lords Toulson and Hodge are right about the proper approach to the illegality principle, then their reasoning in paras 128 130 would be correct.
However, I would not go further than that, because, as I have already indicated, this is not an appropriate case in which this court should decide conclusively (in so far as the issue can ever be decided conclusively) on the 19. right approach to the illegality principle.
It is unnecessary to decide the right approach even in order to determine whether the illegality defence can be run in relation to the section 172(3) claim in the present case. 20.
That is, of course, because it is clear, for the very reasons given by Lord Toulson and Lord Hodge in paras 126 130 that a claim against directors under section 172(3) cannot be defeated by the directors invoking the defence of ex turpi causa.
It is clear from the language of the rule ([as] it is in a statute) and its content and policy that the act (or knowledge or state of mind) was for this purpose [not] intended to count as the act etc of the company, to quote and apply the test laid down by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, 507, set out by Lord Sumption at the end of his para 67.
The proper analysis of Stone & Rolls and of Safeway Foodstores 21.
In para 3.32 of the Report referred to above, the Law Commission observed that [i]t is difficult to anticipate what precedent, if any, Stone & Rolls will set regarding the illegality defence, explaining that, in their view at any rate, there was no majority reasoning with the members of the committee reaching different conclusions on how the defence should be applied.
The confusing nature of the decision has been commented on in a number of articles (see eg Halpern Stone & Rolls Ltd v Moore Stephens: An Unnecessary Tangle (2010) 73 MLR 487, Watts, Audit Contracts and Turpitude (2010) 126 LQR 14 and Illegality and agency law: authorising illegal action [2011] JBL 213, Ferran, Corporate Attribution and Directing Mind and Will (2011) 127 LQR 239, Watson, Conceptual Confusion: Organs, Agents and Identity in the English Courts (2011) 23 Sing Ac Law Jo 762). 22.
These critics have been joined by Lord Walker himself, who was of course a member of the majority in Stone & Rolls.
In the course of his illuminating judgment in Moulin Global Eyecare Trading Ltd (in liquidation) v Commissioner of Inland Revenue [2014] HKCFA 22, (2014) 17 HKCFAR 218, he described the decision in Stone & Rolls as a controversial exception to a general rule and referred to its facts as extreme and exceptional see para 133.
In para 106, he rightly added that the judgment of Patten LJ in the Court of Appeal in the present case had achieved a welcome clarification of the law in this area.
Casting further doubt on the decision in Stone & Rolls, in para 101 of Moulin Global Lord Walker recanted part of his reasoning in the House of Lords. 23.
It seems to me that the view that it is very hard to seek to derive much in the way of reliable principle from the decision of the House of Lords in Stone & Rolls is vindicated by the fact that, in their judgments in this case, Lord Sumption and Lords Toulson and Hodge have reached rather different conclusions as to the effect of the majority judgments. 24.
Particularly given the difference between them as to the ratio decidendi of Lord Phillipss opinion, and subject to what I say in the next four paragraphs, I am of the view that, so far as it is to be regarded as strictly binding authority, Stone & Rolls is best treated as a case which solely decided that the Court of Appeal was right to conclude that, on the facts of the particular case, the illegality defence succeeded and that the claim should be struck out.
I believe that this largely reflects the views of both Lord Sumption (see his para 81) and Lords Toulson and Hodge (see their para 152 154). 25.
But it would be unsatisfactory for us to leave the case without attempting to provide some further guidance as to its effect, in so far as we fairly can.
For that purpose I welcome Lord Sumptions enumeration of the three propositions which he suggests in his para 80 can be derived from Stone & Rolls.
With the exception of the first, I agree with what he says about them, although even the second and third propositions are supported by only three of the judgments at least one of which is by no means in harmony with the other two. 26.
Subject to that, I agree that the second and third of the propositions which Lord Sumption identifies in his para 80 can be extracted from three of the judgments in Stone & Rolls.
Those propositions concern the circumstances in which an illegality defence can be run against a company when its directing mind and will have fraudulently caused loss to a third party and it is relying on the fraud in a claim against a third party.
The second proposition, with which I agree, is that the defence is not available where there are innocent shareholders (or, it appears, directors).
The third proposition, with which I also agree, is that the defence is available, albeit only on some occasions (not in this case, but in Stone & Rolls itself) where there are no innocent shareholders or directors.
I need say no more about the second proposition, which appears to me to be clearly well founded.
As to the third proposition, I agree with Lords Toulson and Hodge that it appears to be supported (at least in relation to a company in sound financial health at the relevant time) by the reasoning in the clear judgment of Hobhouse J in Berg, Sons & Co Ltd v Mervyn Hampton Adams [2002] Lloyds Rep PN 41, which was referred to with approval and quoted from in Stone & Rolls by Lord Phillips (at paras 77 79) and Lord Walker (at 27. paras 150, 158 161), and indeed by Lord Mance, dissenting (at paras 258 260). 28.
However, I note that Lord Mance suggests that it should be an open question whether the third proposition would apply to preclude a claim against auditors where, at the relevant audit date, the company concerned was in or near insolvency.
While it appears that the third proposition, as extracted from three judgments in Stone & Rolls, would so apply, I have come to the conclusion that, on this appeal at least, we should not purport definitively to confirm that it has that effect.
I am of the view that we ought not shut the point out, in the light of (a) our conclusion that attribution is highly context specific (see para 9 above), (b) Lord Walkers change of mind (see para 22 above), (c) the fact that the three judgments in Stone & Rolls which support the third proposition) are not in harmony (in the passages cited at the end of para 27 above), and (d) the fact that the third proposition is in any event not an absolute rule (see the end of para 26 above).
I cannot agree that the first proposition identified by Lord Sumption, namely that the illegality defence is only available where the company is directly, as opposed to vicariously, responsible for the illegality, can be derived from Stone & Rolls (whether or not the proposition is correct in law, which I would leave entirely open, although I see its attraction).
I agree that, in paras 27 28, Lord Phillips accepted that the illegality defence is available against a company only where it was directly, as opposed to vicariously, responsible for it, albeit that that was ultimately an obiter conclusion.
More importantly, I do not think that Lord Walker accepted that proposition at paras 132 133: he merely identified an issue as to whether the company was primarily liable for the fraud practised on KB, or was merely vicariously liable for the fraud of Mr Stojevic, but as he then went on to accept that the Court of Appeal was clearly right in holding that the company was primarily liable, he did not have to address the point in question. 29. 30.
Subject to these points, the time has come in my view for us to hold that the decision in Stone & Rolls should, as Lord Denning MR graphically put it in relation to another case in In re King [1963] Ch 459, 483, be put on one side and marked not to be looked at again.
Without disrespect to the thinking and research that went into the reasoning of the five Law Lords in that case, and although persuasive points and observations may be found from each of the individual opinions, it is not in the interests of the future clarity of the law for it to be treated as authoritative or of assistance save as already indicated.
I turn, finally, to Safeway Foodstores.
Lord Sumption has accurately summarised the effect of the decision in his para 83.
Lords Toulson and 31.
Hodge deal with it a little more fully and much more critically in their paras 157 162.
I would take a great deal of persuading that the Court of Appeal did not arrive at the correct conclusion in that case.
However, I do not believe that it would be right on this appeal to express a concluded opinion as to whether the case was rightly decided, and, if so, whether the reasoning of the majority or of Pill LJ was correct.
It is unnecessary to reach any such conclusion and the points were not argued in detail before us: indeed, they were hardly addressed at all.
LORD MANCE: 32.
The respondent, Bilta (UK) Ltd (Bilta), claims damages from the appellants for losses suffered through its involvement in a carousel fraud on the Revenue.
The defendants in the proceedings include Biltas two directors, Mr Chopra who was also its sole shareholder and Mr Nazir, as well as a Swiss company, Jetivia SA (Jetivia), and Jetivias chief executive, Mr Brunschweiler.
Jetivia and Mr Brunschweiler are the appellants in this appeal.
The scheme involved the purchase of carbon credits by Bilta from sources outside the United Kingdom (so not subject to VAT), followed by their resale (mostly at a loss, if one takes the basic resale price excluding VAT) to UK companies registered for VAT, and the remission of the proceeds to Jetivia and other offshore companies.
Inevitably, the scheme rendered Bilta at all material times insolvent, it cannot meet its liabilities to the Revenue and the present claim is brought by liquidators, for the ultimate benefit no doubt of the Revenue as Biltas creditors. 33.
The appellants defence is that Bilta was through its directors and shareholder party to illegality which precludes it pursuing its claim.
I have read with great benefit the judgments prepared by Lords Toulson and Hodge, by Lord Sumption and by Lord Neuberger.
Neither they, nor I understand any other member of the Court, consider that the defence can succeed, and I agree that it cannot.
But there are some differences in reasoning, particularly regarding the general approach to be adopted to illegality.
Save perhaps for a slight difference of view (in para 52 below) regarding Safeway Stores Ltd v Twigger [2010] EWCA Civ 1472, [2011] 2 AER 814, I agree on all points in substance with Lord Neuberger. 34.
This is not, in my view, the occasion on which to embark on any re examination either of the House of Lords decision in Tinsley v Milligan [1994] 1 AC 340 or of the Supreme Courts recent decisions in Hounga v Allen [2014] UKSC 47; [2014] 1 WLR 2889 and Les Laboratoires Servier v Apotex Inc [2014] UKSC 55; [2014] 3 WLR 1257.
There was no challenge to or detailed examination of any of these decisions.
I agree however that these cases and their inter relationship merit further examination by this court whenever the opportunity arises. 35.
The present appeal raises the question whether a company can pursue its directors and sole shareholder for breaches of duty towards the company depriving it of its assets.
Lord Toulson and Lord Hodge consider that the straightforward answer to the question is that that it would deprive the duties which the shareholder directors owed Bilta of all content, if the defence of illegality were open to the appellants.
But they consider that, if analysed in terms of attribution, the case is not one where the shareholder directors acts and state of mind can or should be attributed to Bilta.
More generally, they favour a policy based approach to illegality, but I will not examine that possibility, in view of what I have said in para 34. 36.
Lord Sumption in contrast sees the case as turning on rules of attribution, which he views as applying regardless of the nature of the claim or the parties involved (para 86) and amongst which he identifies a rule that the acts and state of mind of a directing mind and will be attributed to a company.
But he qualifies the effect of his analysis by reference to a policy based breach of duty exception which covers the present case in order to avoid, injustice and absurdity, as Lord Walker put it in a passage in Moulin Global Eyecare Trading Ltd v The Commissioner of Inland (Hong Kong Final Court of Appeal) FACV (No 5 of 2013), which Lord Sumption quotes in para 85.
Later in his judgment however in para 92, he modifies this approach by describing it as no more than a valuable tool of analysis.
In common, as I see it, with Lords Neuberger, Toulson and Hodge, and for reasons which I set out in paras 39 44 below, I do not think it appropriate to analyse the present case as one of prima facie attribution, which is then negatived under a breach of duty exception.
As Lord Sumptions judgment demonstrates, it would, however, make no difference to the outcome in this case, if the matter were to be so analysed, though the plethora of difficult authority to which such an analysis has given rise, far from proving its value, argues for what is to my mind a simpler and more principled analysis. 37. 38.
One way or another, it is certainly unjust and absurd to suggest that the answer to a claim for breach of a directors (or any employees) duty could lie in attributing to the company the very misconduct by which the director or employee has damaged it.
A company has its own separate legal personality and interests.
Duties are owed to it by those officers who constitute its directing mind and will, similarly to the way in which they are owed by other more ordinary employees or agents.
All the shareholders of a solvent company acting unanimously may in certain circumstances (which need not here be considered, since it is not suggested that they may apply) be able to authorise what might otherwise be misconduct towards the company.
But even the shareholders of a company which is insolvent or facing insolvency cannot do this to the prejudice of its creditors, and the companys officers owe a particular duty to safeguard the interest of such creditors.
There is no basis for regarding the various statutory remedies available to a liquidator against defaulting officers as making this duty or its enforcement redundant. 39.
Rules of attribution are as relevant to individuals as to companies.
An individual may him or herself do the relevant act or possess the relevant state of mind.
Equally there are many contexts in which an individual will be attributed with the actions or state of mind of another, whether an agent or, in some circumstances, an independent contractor.
But in relation to companies there is the particular problem that a company is an artificial construct, and can only act through natural persons.
It has no actual mind, despite the laws persistent anthropomorphism as to which see the references by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, 507A and 509G H to the absence of any ding an sich, and by Professor Eilis Ferran in Corporate Attribution and the Directing Mind and Will (2011) 127 LQR 239, 239 240 to the distracting effect of references to a companys brain and nerve centre or hands. 40.
As Lord Hoffmann pointed out in Meridian Global at pp 506 507, the courts task in all such situations is to identify the appropriate rules of attribution, using for example general rules like those governing estoppel and ostensible authority in contract and vicarious liability in tort.
It is well recognised that a company may as a result of such rules have imputed to it the conduct of an ordinary employee, and this is so also in the context of illegality.
By acquiescing in the overloading of the hauliers lorries in Ashmore, Benson, Pease & Co Ltd v A V Dawson Ltd [1973] 1 WLR 828 the consignors assistant transport manager and his assistant made the haulage contract unenforceable at the instance of the consignors, who were unable to recover when a lorry toppled over damaging the goods being carried.
But it is not always appropriate to apply general rules of agency to answer questions of attribution, and this is particularly true in a statutory context.
Particular statutory provisions may indicate that a particular act or state of mind should only be attributed when undertaken or held by a companys directing mind and will: see eg Lennards Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 and Tesco Supermarkets Ltd v Nattrass [1972] AC 153, cited in Meridian Global at pp 507 509.
In contrast in Meridian Global itself the company was for criminal purposes attributed with the conduct and knowledge of the senior portfolio manager who, without knowledge of the board or managing director, had entered into the relevant transaction of which the company had failed to give notice as required by the legislation. 41.
As Lord Hoffmann made clear in Meridian Global, the key to any question of attribution is ultimately always to be found in considerations of context and purpose.
The question is: whose act or knowledge or state of mind is for the purpose of the relevant rule to count as the act, knowledge or state of mind of the company? Lord Walker said recently in Moulin Global, para 41 that: One of the fundamental points to be taken from Meridian is the importance of context in any problem of attribution.
Even when no statute is involved, some courts have suggested that a distinction between the acts and state of mind of, on the one hand, a companys directing mind and will or alter ego and, on the other, an ordinary employee or agent may be relevant in the context of third party relationships.
This is academically controversial: see Professor Peter Watts, The companys alter ego an impostor in private law (2000) LQR 525; Campbell and Armour, Demystifiying the civil liability of corporate agents (2003) CLJ 290.
Any such distinction cannot in any event override the need for attention to the context and purpose in and for which attribution is invoked or disclaimed. 42.
Where the relevant rule consists in the duties owed by an officer to the company which he or she serves, then, whether such duties are statutory or common law, the acts, knowledge and states of mind of the company must necessarily be separated from those of its officer.
The purpose of the rule itself means that the company cannot be identified with its officers.
It is self evidently impossible that the officer should be able to argue that the company either committed or knew about the breach of duty, simply because the officer committed or knew about it.
This is so even though the officer is the directing mind and will of the company.
The same clearly also applies even if the officer is also the sole shareholder of a company in or facing insolvency.
Any other conclusion would ignore the separate legal identity of the company, empty the concept of duty of content and enable the companys affairs to be conducted in fraud of creditors. 43.
At the same time, however, if the officers breach of duty has led to the company incurring loss in the form of payments to or liability towards third parties, the company must be able as part of its cause of action against its officer to rely on the fact that, in that respect, its officers acts and state of mind were and are attributable to the company, causing it to make such payments or incur such liability.
In other words, it can rely on attribution for one purpose, but disclaim attribution for another.
The rules of attribution for the purpose of establishing or negating vicarious liability to third parties 44. differ, necessarily, from the rules governing the direct relationship inter se of the principal and agent.
It follows that I would, like Lords Toulson and Hodge (para 191), endorse the observations of Professors Peter Watts and Francis Reynolds QC as editors of Bowstead & Reynolds on Agency 19th ed, (2010) para 8 213, in relation to the argument that a principal should be attributed with the state of mind of his agent who has defrauded him, so as to relieve either the agent or a third party who had knowingly assisted in the fraud: Such arguments by defendants, though hazarded from time to time, are plainly without merit.
However, in such situations imputation has no reason to operate.
The rules of imputation do not exist in a state of nature, such that some reason has to be found to disapply them.
Whether knowledge is imputed in law turns on the question to be addressed.
The same point is made in rephrased terms in their 20th ed (2014), para 8 213: The simple point is that, were the principal deemed to possess the agents knowledge of his own breaches of duty, and thereby to have condoned them, the principal could never successfully vindicate his rights. [T]here is no need for an exception as such.
The putative defence that the exception is used to rebut is premised on the fallacy that the principal is prima facie deemed to know at all times and for all purposes that which his agents know.
As observed already, imputation never operated in such a way.
Before imputation occurs, there needs to be some purpose for deeming the principal to know what the agent knows.
There is none in this type of case. 45.
The breach of duty exception has been more plausibly deployed in situations where the issue is the legal effect of relations between the company and a third party.
For example, in J C Houghton & Co v Nothard, Lowe and Wills [1928] AC 1, the issue was whether the knowledge of the directors of the latter company should be attributed to it, with the effect that the latter company could and should be treated as estopped from denying that it had consented to a particular arrangement with a third party company.
However, the arrangement was one that was against the companys interests and for the benefit of the third party company which the directors also controlled and which was in financial difficulties.
In the words of Viscount Dunedin, both common sense and authority in the form of In re Hampshire Land Co [1896] 2 Ch 743 led to the conclusion that, although It may be assumed that the knowledge of directors is in ordinary circumstances the knowledge of the company, that cannot be so if the knowledge of an infringement of the companys rights is only brought home to the man who himself was the artificer of such infringement (pp 14 15).
Even in this context it may be questioned whether an analysis involving prima facie imputation subject to exception is necessary or fruitful: see Professor Peter Watts critique in Imputed knowledge in agency law excising the fraud exception (2001) LQR 300, 316 et seq.
Since it leads to a right result and involves a different context to the present, I need however say no more about that here. 46.
With regard to Stone & Rolls Ltd v Moore Stephens [2009] 1 AC 1391 I do not propose to say very much.
The potential qualification on the application of the maxim ex turpi causa, which the majority accepted in the case of a company with innocent shareholders indicates that they too must ultimately have regarded context as having at least some relevance to attribution, and Lord Walker has in Moulin now explicitly withdrawn from the position that attribution operates independently of context: see paras 41 and 101.
More fundamentally, the context in which issues of attribution arose in Stone & Rolls was different from the present.
The companys claim was against its auditors rather than against an officer.
Lord Phillips at least in the majority clearly saw that as important, in particular in the light of what he viewed as the scope of an auditors duty.
I remain of the view, which I expressed in para 265 in Stone & Rolls, that this ought to have been the central issue in that case, not a preliminary issue about ex turpi causa into which the majority view, that the claim even though pursued for the benefit of the companys creditors should fail, was in the event fitted.
I note that Professor Eilis Ferran takes a similar view in her article, cited at para 39 above, at p 251; see also the statement by Professor Peter Watts, Audit contracts and turpitude (2010) LQR 126, that Ultimately, what divided the judges in Stone & Rolls was determining the classes of innocent parties whose interests the contract of audit is designed to protect (p 14).
I say nothing of course about the correct answer to a question addressed in terms of what an auditors duty would or should have been.
However, so far as concerns the nature and enforceability of a companys claim for misconduct by its directing mind and sole shareholder, I remain of the views expressed in paras 224 225 in Stone & Rolls: 47. 224. [B]efore the House Mr Sumptions submission was that S & R could only claim against Mr Stojevic on a narrow basis for abstraction of its moneys (a proprietary claim like that mentioned by O'Connor LJ in Caparo : see para 214 above); and that any claim against him for damages for breach of duty as an officer would be barred by the maxim ex turpi causa because it would involve pleading S & R's fraud on the banks.
I do not accept this submission.
It would mean that, if one element of Mr Stojevic's fraud on the banks had involved persuading the banks to pay the funds direct into an account represented as being S & R's but in fact Mr Stojevic's, S & R could not sue Mr Stojevic.
Mr Stojevic's common law duty as a director to S & R was to conduct its affairs honestly and properly.
Section 172(1) of the Companies Act 2006 now states the duty, in terms expressly based on common law rules and equitable principles (see section 170(3)), as being to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole a duty made expressly subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company: see section 172(3).
Section 212 of the Insolvency Act 1986 provides a summary remedy available in the course of winding up against anyone who is or has been an officer of the company in respect of, inter alia, any misfeasance or breach of any fiduciary or other duty in relation to the company. (This is in addition to the specific remedies that apply in circumstances of fraudulent or wrongful trading under sections 213 and 214.) 225.
As between S & R and Mr Stojevic, Mr Stojevic's fraud on the banks was and is just as objectionable as the later abstraction of moneys to which it was designed to lead.
In holding a director responsible in such a case, a company is as a separate legal entity enforcing duties owed to it by the director.
It is not acting inconsistently, or asking the court to act inconsistently, with the law.
It is a remarkable proposition, that the directing mind of a company can commit the company to a scheme of fraud and then avoid liability in damages if the company would have to plead and rely on this scheme to establish such liability. 48.
Like Lord Neuberger, I would not endorse Lord Sumptions suggestion (paras 79 and 80) that Stone & Rolls establishes an apparently general and context unspecific distinction between personal and vicarious liability as central to the application of the illegality defence.
Outside the statutory sphere, where such a distinction originated and has been found useful, there is very little authority for any such distinction, and there is certainly none for its application as a key to a resolution of issues of attribution in the context of illegality.
Its origin in that context lies in a concession by counsel (Mr Jonathan Sumption QC), no doubt tactically well judged, in Stone & Rolls (p 1443B C).
The only member of the House who referred to this concession as a requirement, along with turpitude, of an ex turpi causa defence was Lord Phillips, but he did so expressly on the basis that (para 24): Those are valid qualifications to the defence of ex turpi causa in the context in which it is raised on this appeal.
They are not, however, of general application to the defence of ex turpi causa. 49.
As I have already noted in para 40 above, with reference to Ashmore, Benson, it is not the law that the ordinary principles of attribution are replaced in the case of a company, any more than they are in the case of an individual, by some general principle that the only relevant conduct or state of mind is that of someone who is or can be treated as an alter ego or directing mind and will of the relevant company or individual.
In his article Audit contracts and turpitude, to which I have referred in para 46 above, at p 17, Professor Watts says this about the way in which the concept of directing mind and will entered the debate in Stone & Rolls: Their Lordships were drawn into recognising the mind and will concept by Mr Sumption QCs concession on the auditors behalf that a claimant cannot be caught by the ex turpi causa rule except as a result of his own conduct, not conduct for which he is vicariously liable or which is otherwise attributed to him under principles of the law of agency.
This is simply wrong.
Generally speaking, the ex turpi causa rule will preclude a principal from taking advantage of an agents illegal acts (see eg Apthorp v Nevill (1907) 23 TLR 575 for a human principal, and Ashmore, Benson Pease & Co Ltd v AV Dawson Ltd [1973] 1 WLR 828 CA for a company).
Nonetheless, as we have noted, context is important with the ex turpi rule, and in the case of contracts designed to deal with the risks of agents dishonesty (such as audit and insurance contracts) the law looks to where guilt really lies. 50.
With regard to the three points for which Lord Sumption suggests in para 80 that Stone & Rolls is authority, it follows from what I have said in paras 48 49 that I do not agree that the case is authority for the first point, viz that the illegality defence is only available to a company where it is directly as opposed to vicariously responsible for the illegality.
As Professor Watts says, 51. 52. there are no doubt some limited contexts in which this may be the appropriate analysis, but there is no such general rule.
I agree with Lord Sumptions second point, viz that the House rejected the auditors argument that merely because Mr Stojevic was the companys mind and will and sole owner, his conduct and state of mind should be attributed to Stone & Rolls in relation to its claim against its auditors.
I have already pointed out in para 46 above that the majority was thereby at least accepting that context must have some relevance.
The third point appears a factually correct representation of the outcome of Stone & Rolls, though the present appeal does not raise the correctness in law of that outcome, which may one day fall for reconsideration.
I turn to a defence of circuity of action which the appellants suggest arises on this appeal.
The claim against Jetivia and Mr Brunschweiler is that they dishonestly assisted Mr Chopras and Mr Nazirs breaches of duty towards Bilta, or were co conspirators with Mr Chopra and Mr Nazir.
On the face of it, Jetivia and Mr Brunschweiler cannot raise a defence of illegality if Mr Chopra and Mr Nazir cannot.
The suggestion is that Jetivia could have a defence of circuity of action.
This is, I understand, on the basis that any liability on its part arose from a conspiracy between Bilta, through Mr Chopra and Mr Nazir, and Mr Brunschweiler.
Apart from this being unpleaded, I cannot, at present at least, see how a company (here Jetivia) which is through its director or other agent held liable to another company (here Bilta) for dishonestly assisting or conspiring with the latter companys directors or agents to cause loss to the latter company can then turn round and say that it has been damaged by the former company by the very liability which it has incurred to the former company.
That would turn the law governing dishonest assistance and conspiracy on its head.
I sympathise with the views expressed by Lords Toulson and Hodge in paras 156 162 regarding the Court of Appeal decision in Safeway Stores Ltd v Twigger [2010] EWCA Civ 1472, [2011] 2 All ER 814, but any decision about its correctness must be for another day, after full argument. 53.
For the reasons given by Lords Sumption, Toulson and Hodge and again in agreement with Lord Neuberger, I consider that section 213 of the Insolvency Act 1986 has extra territorial effect, and do not regard any reference to the Court of Justice as necessary.
It follows that I also would dismiss the appeal. 54.
LORD SUMPTION: 55.
The main issue on this appeal is the scope of the rule of public policy ex turpi causa non oritur actio.
No court will lend its aid to a man who founds his cause of action on an immoral or an illegal act: Holman v Johnson (1775) 1 Cowp 34l, 343 (Lord Mansfield CJ).
It is convenient to call this the illegality defence, although the label is not entirely accurate for it also applies to a very limited category of acts which are immoral without being illegal.
The proceedings 56.
Bilta (UK) Ltd is an English company which was ordered to be wound up by the High Court on 29 November 2009 on the application of Her Majestys Revenue and Customs.
Before that order was made, its sole directors were Mr Chopra and Mr Nazir.
Mr Chopra was also Biltas sole shareholder. 57.
The present proceedings were brought by Bilta (through its liquidators) against the two former directors and a Swiss company, Jetivia SA, together with Jetivias chief executive Mr Brunschweiler.
There are other defendants also, but for present purposes they can be ignored.
The appeal arises out of a preliminary issue on the pleadings as between Bilta on the one hand and Jetivia and Mr Brunschweiler on the other.
In summary, Biltas pleaded allegation is that between April and July 2009 the two directors caused Bilta to engage in fraudulent trading in carbon credits (European Emissions Trading Scheme Allowances) recorded on the Danish Emission Trading Registry.
The fraud was very simple.
At the relevant time carbon credits traded between parties both of whom were in the United Kingdom were treated as taxable supplies subject to VAT at the standard rate of 15%, but if either the buyer or the seller of the credit was outside the United Kingdom, the sale was not subject to VAT.
Bilta bought carbon credits free of VAT from Jetivia.
It resold them back to back to UK companies registered for VAT.
In most cases, the onsale price of the credits net of VAT was artificially fixed at a level marginally below Biltas purchase price, thus enabling Biltas UK buyer to sell them on at a small profit.
The proceeds of Biltas sales, together with the VAT thereon, were paid either to Bilta and then on to Jetivia, or directly by the UK buyers to Jetivia or an offshore company called THG.
Since Bilta had no other business and no assets other than the cash generated by its sales, the result was to make the company insolvent and to generate a liability on Biltas part to account to HMRC which it was unable to satisfy. 58.
As against the directors, Biltas claim is that in breach of their fiduciary duties they organised and participated in a conspiracy to defraud and injure [Bilta] by trading in carbon credits and dealing with the proceeds therefrom in such a way as to deprive [Bilta] of its ability to meet its VAT obligations on such trades, namely to pass the money (which would otherwise have been available to [Bilta] to meet such liability) to accounts offshore, including accounts of Jetivia (Amended Particulars of Claim, para. 14(a)) As against Jetivia and Mr Brunschweiler, the allegation is that they were (i) liable as parties to the same conspiracy (ii) accountable as constructive trustees on the footing of knowing assistance in the dishonest diversion of book debts due to Bilta.
Jetivia, but not Mr Brunschweiler, is also said to be liable to account on the footing of knowing receipt of the proceeds of those book debts.
As against all parties, there is in addition a claim for fraudulent trading under section 213 of the Insolvency Act 1986. 59.
The victim identified in the pleading is Bilta.
It is not in terms pleaded that it was any part of the object of the scheme to defraud HMRC.
Patten LJ in the Court of Appeal considered that the case had to be decided without regard to the possibility that HMRC were a victim.
But that, with respect, seems unrealistic.
In Everet v Williams (1725), the famous case in which two highwaymen sought an account of their partnership profits, they did not plead the nature of their business.
But that did not prevent the court from looking through the gaps and circumlocutions to the substance of the transaction: see (1893) 9 LQR 197.
The substance of the transactions in issue on this appeal, if the pleaded facts are true, is a fraud on HMRC, who will be the real losers.
The pleadings describe a classic missing trader fraud.
Whether it was technically a carousel fraud (in which the trader sells to a connected entity, arranges for the latter to obtain a VAT refund, then pays away the VAT collected and disappears) or the simpler so called acquisition fraud where he simply disappears without accounting for VAT, does not matter.
The common feature of both is the intention of the fraudster to collect VAT and disappear before it can be accounted for, and this is the aspect of the scheme which founds the pleaded case of conspiracy.
The dishonesty alleged against the directors consists wholly in their having removed assets of Bilta which would otherwise have been available to pay creditors, in particular HMRC.
The illegality defence 60.
Although it begs many questions, the most succinct and authoritative statement of the law remains that of Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp 34l, 343: No court will lend its aid to a man who founds his cause of action on an immoral or an illegal act.
If, from the plaintiffs own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says that he has no right to be assisted.
It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff.
So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault, potior est conditio defendentis.
Thus stated, the law of illegality is a vindication of the public interest as against the legal rights of the parties.
The policy is one of judicial abstention, by which the judicial power of the state is withheld where its exercise in accordance with ordinary rules of private law would give effect to advantages derived from an illegal act.
In the two centuries which followed Lord Mansfields apparently simple proposition, it was among the most heavily litigated rules of common law, and by the end of the twentieth century it had become encrusted with an incoherent mass of inconsistent authority.
The main reason for this was the unfortunate tendency of the common law to fragmentation, as judges examined each case in its own factual and legal context without regard to broader legal principle.
By the time that the illegality defence came before the Court of Appeal in Euro Diam Ltd v Bathurst [1990] 1 QB 1, the law of illegality had generated a mass of sub rules, each appropriate to its own context, a state of affairs which necessarily gave rise to difficulty when the law had to be applied to situations which were either new or not classifiable according to existing categories.
The Court of Appeal resolved this problem by treating the whole body of authority as illustrative of a process which was essentially discretionary in nature.
Kerr LJ, delivering the only reasoned judgment, expressed that principle at p 35 by saying that the test was whether in all the circumstances it would be an affront to the public conscience to grant the plaintiff the relief which he seeks 61. because the court would thereby appear to assist or encourage the plaintiff in his illegal conduct or to encourage others in similar acts.
That question, he suggested, needed to be approached pragmatically and with caution, depending on the circumstances.
This view of the law was unanimously rejected by the House of Lords four years later in Tinsley v Milligan [1994] 1 AC 340.
Lord Goff of Chievely, delivering the leading judgment on this point, said that it would constitute a revolution in this branch of the law, under which what is in effect a discretion would become vested in the court to deal with the matter by the process of a balancing operation, in place of a system of rules ultimately derived from the principle of public policy enunciated by Lord Mansfield CJ in Holman v Johnson. (p 363B). 62.
The Law Commission struggled valiantly with the issue in the early years of this century, and at one point proposed a structured statutory discretion of the kind which has been adopted in New Zealand.
It abandoned this proposal in the expectation that the courts would reintroduce a measure of the flexibility which Tinsley v Milligan had rejected.
But Tinsley v Milligan is binding authority, subject to review in this court, and in the twenty years since it was decided, the highest court has never been invited to overrule it.
In those circumstances, the law has moved in a different direction, accepting that the illegality defence depends on a rule of law which applies regardless of the equities of any particular case but seeking to rationalise an area that has generated a perplexing mass of inconsistent case law.
In its recent decision in Les Laboratoires Servier v Apotex Inc [2014] UKSC 55; [2014] 3 WLR 1257 at paras 19 20, this court reaffirmed the principle that the illegality defence is based on a rule of law on which the court is required to act, if necessary of its own motion, in every case to which it applies.
It is not a discretionary power on which the court is merely entitled to act, nor is it dependent upon a judicial value judgment about the balance of the equities in each case: In the light of the rejection of the public conscience test, it is incumbent on the courts to devise principled answers which are no wider than is necessary to give effect to the policy stated by Lord Mansfield and are certain enough to be predictable in their application.
In Les Labratoires Servier, it was pointed out that the illegality defence commonly raised three questions: (i) what are the illegal or immoral acts which give rise to the defence? (ii) what relationship must those acts have to the claim? (iii) on what principles should the illegal or immoral acts of an 63. agent be attributed to his principal, especially when the principal is a company? Les Laboratoires Servier was about the first of the three questions.
It is authority for the proposition that the illegality defence is potentially engaged by any act of the claimant which is criminal or dishonest or falls into a limited number of closely analogous categories.
It is not disputed that the acts alleged in this case were of that kind.
Various tests have been proposed for the connection which the law requires between the illegal act and the claim, but it has not been disputed that any of them would be satisfied on the facts alleged in this case.
It is obvious, and apparent from the pleadings, that the claim against both the directors and Jetivia is directly founded on the VAT frauds. 64.
The sole question on this part of the appeal is therefore the third.
As applied to the present case, it is whether the dishonesty which engages the illegality defence is to be attributed to Bilta for the specific purpose of defeating its claim against the directors and their alleged co conspirators.
The question is whether the defence is available to defeat an action by a company against the human agent who caused it to act dishonestly for damages representing the losses flowing from that dishonesty.
The Chancellor of the High Court and Court of Appeal both held that it was not.
While there are dicta in the judgments below, especially in the Court of Appeal, which range wider than is really necessary, their essential reason was the same, namely that the agent was not entitled to attribute his own dishonesty to the company for the purpose of giving himself immunity from the ordinary legal consequences of his breach of duty.
For reasons which I shall explain below, I think that the courts below were right about that, and I understand that view to be shared by every other member of the court.
Attribution 65.
English law might have taken the position that a company, being an artificial legal construct, was mindless.
If it had done that, then legal wrongs which depended on proof of some mental element such as dishonesty or intention could never be attributed to a company and the present question could not arise.
In the early years of English company law, there were powerful voices which denied that a tort dependent on proof of a mental element could be committed by a company.
For many years this view was principally associated with Lord Bramwell, who in a well known dictum in Abrath v North Eastern Railway Co [1886] 11 App Cas 247, 250 251, declared that a fictitious person was incapable of malice or of motive even if the whole body of its directors or shareholders in general meeting approved its acts for improper reasons.
This question was, however, settled as far as English civil law was concerned by the end of the nineteenth century.
As Lord Lindley put it in Citizens Life Assurance Co Ltd v Brown [1904] AC 423, 426, once 66. companies were recognised by the law as legal persons, they were liable to have the mental states of agents and employees such as dishonesty or malice attributed to them for the purpose of establishing civil liability.
In the criminal law, the notion that a corporation was incapable of committing an offence requiring mens rea persisted rather longer.
It was asserted in both the first edition (1909) and the second edition (1933) of Halsburys Laws of England.
But it was rejected in a series of decisions in 1944: see Director of Public Prosecutions v Kent and Sussex Contractors Ltd [1944] KB 146; R v ICR Haulage Ltd [1944] KB 551; Moore v I Bresler Ltd [1944] 2 All ER 515.
It is now well established that a company can be indicted for conspiracy to defraud (R v ICR Haulage Ltd [1944] KB 551) or manslaughter before statute intervened in 2007 (Attorney Generals Reference (No 2 of 1999) [2000] QB 796), provided that an agent with the relevant state of mind can be sufficiently identified with it.
It cannot be emphasised too strongly that neither in the civil nor in the criminal context does this involve piercing the corporate veil.
It is simply a recognition of the fact that the law treats a company as thinking through agents, just as it acts through them.
It follows that in principle, the illegality defence applies to companies as it applies to natural persons.
This is the combined effect of the companys legal personality and of the attribution to companies of the state of mind of those agents who for the relevant purpose can be said to think for it.
But the principles can only apply to companies in modified form, for they are complex associations of natural persons with different interests, different legal relationships with the company and different degrees of involvement in its affairs.
A natural person and his agent are autonomous in fact as well as in law.
A company is autonomous in law but not in fact.
Its decisions are determined by its human agents, who may use that power for unlawful purposes.
This gives rise to problems which do not arise in the case of principals who are natural persons. 67.
The question what persons are to be so far identified with a company that their state of mind will be attributed to it does not admit of a single answer.
The leading modern case is Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500.
The primary rule of attribution is that a company must necessarily have attributed to it the state of mind of its directing organ under its constitution, ie the board of directors acting as such or for some purposes the general body of shareholders.
Lord Hoffmann, delivering the advice of the Privy Council, observed that the primary rule of attribution together with the principles of agency and vicarious liability would ordinarily suffice to determine the companys rights and obligations.
However, they would not suffice where the relevant rule of law required that some state of mind should be that of the company itself.
He explained, at p 507: This will be the case when a rule of law, either expressly or by implication, excludes attribution on the basis of the general principles of agency or vicarious liability.
For example, a rule may be stated in language primarily applicable to a natural person and require some act or state of mind on the part of that person himself as opposed to his servants or agents.
This is generally true of rules of the criminal law, which ordinarily impose liability only for the actus reus and mens rea of the defendant himself.
The directing organ of the company may expressly or implicitly have delegated the entire conduct of its business to the relevant agent, who is actually although not constitutionally its directing mind and will for all purposes.
This was the situation in the case where the expression directing mind and will was first coined, Lennards Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705.
Such a person in practice stands in the same position as the board.
The special insight of Lord Hoffmann, echoing the language of Lord Reid in Tesco Supermarkets Ltd v Nattrass [1972] AC 153, 170, was to perceive that the attribution of the state of mind of an agent to a corporate principal may also be appropriate where the agent is the directing mind and will of the company for the purpose of performing the particular function in question, without necessarily being its directing mind and will for other purposes.
This is always a matter of interpretation: given that it 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. (p 507, and see pp 509 511) 68.
A modern illustration of the attribution of knowledge to a company on the basis that its agent was its directing mind and will for all purposes is Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, where the Privy Council was concerned with the knowledge required to make a company liable as a constructive trustee on the footing of knowing assistance in a dishonest breach of trust.
The defendants were a one man company, BLT, and the one man, Mr Tan.
At pp 392 393, Lord Nicholls, delivering the advice of the Board, observed that Mr Tan had known the relevant facts and was therefore liable.
By the same token, and for good measure, BLT also acted dishonestly.
Mr Tan was the company and his state of mind is to be imputed to the company.
On the other hand, El Ajou v Dollar Land Holdings Ltd [1994] 2 All ER 685 did not concern a one man company.
The issue was whether knowledge of the origin of funds received for investment by Dollar Land Holdings, a public company, could be imputed to it so as to found a liability to account as a constructive trustee on the footing of knowing receipt.
Lord Hoffmann, delivering the leading judgment of the Court of Appeal and applying the principles which he would later explain in Meridian Global, held that the company was fixed with the knowledge of one Mr Ferdman, its part time chairman and a non executive director, because he had acted as its directing mind and will for the particular purpose of arranging its receipt of the tainted funds. 69.
These refinements can give rise to nice questions of fact.
But their application in a case like the present one is perfectly straightforward.
On the pleaded facts, Mr Chopra and Mr Nazir were the directing organ of Bilta under its constitution.
They constituted the board.
Mr Chopra was also the sole shareholder.
As between Bilta and Jetivia it is common ground on the pleadings that they were the directing mind and will of Bilta for all purposes, and certainly in relation to those of its functions which are relevant in these proceedings. 70.
The search for a test of a companys direct or personal liability has sometimes been criticised as a distraction or an artificial anthropomorphism, and it is certainly true that English law might have developed along other lines.
As it is, the distinction between a liability which is direct or personal and one which is merely vicarious is firmly embedded in our law and has had a considerable influence on the way it has developed in relation to both kinds of liability.
Vicarious liability does not involve any attribution of wrongdoing to the principal.
It is merely a rule of law under which a principal may be held strictly liable for the wrongdoing of someone else.
This is one reason why the law has been able to impose it as broadly as it has.
It extends far more widely than responsibility under the law of agency: to all acts done within the course of the agents employment, however humble and remote he may be from the decision making process, and even if his acts are unknown to the principal, unauthorised by him and adverse to his interest or contrary to his express instructions (Lloyd v Grace Smith & Co [1912] AC 716), indeed even if they are criminal (Lister v Hesley Hall Ltd [2002] 1 AC 215).
Personal or direct liability, on the other hand, has always been fundamental to the application of rules of law which are founded on culpability as opposed to mere liability.
One example, as Lord Hoffmann pointed out in Meridian Global, is provided by the rules governing criminal responsibility, which do not usually recognise vicarious responsibility.
Another is the class of statutory provisions dependent on a companys personal misconduct, such as a shipowners right to limit his liability for a loss which is not attributable to his personal act or omission: see article 4 of the Convention on Limitation of Liability for Maritime Claims (1976) (Merchant Shipping Act 1995, Schedule 7, Part I), a principle derived from the nineteenth century Merchant Shipping Acts of the United Kingdom.
A third example is provided by the illegality defence, which the House of Lords held in Stone & Rolls v Moore Stephens [2009] 1 AC 1391 to apply only to direct and not to vicarious responsibility.
It is, for example, the reason why public policy precludes recovery under a liability policy in respect of a criminal act where the insureds liability is personal or direct, but not where it is purely vicarious: Lancashire County Council v Municipal Mutual Insurance Ltd [1997] QB 897, 907.
As cases like this illustrate, if the illegality defence were to be engaged merely by proof of a purely vicarious liability, it would apply irrespective of any question of attribution, to any case in which the human wrongdoer was acting within the scope of his employment.
This would extend the scope of the defence far more widely than anything warranted by the demands of justice or the principle stated by Lord Mansfield.
On the footing that the attribution of culpability is essential to the defence, the concept of a directing mind and will remains valuable.
It describes a person who can be identified with the company either generally or for the relevant purpose, as distinct from one for whose acts the company is merely vicariously liable.
The exception: breach of the agents duty to the company 71.
Biltas answer to this, which was accepted by both the judge and the Court of Appeal, is that the dishonesty of Mr Chopra and Mr Nazir is not to be attributed to Bilta, because in an action for breach of duty against the directors there cannot be attributed to the company a fraud which is being practised against it by its agent, even if it is being practised by a person whose acts and state of mind would be attributable to it in other contexts.
It is common ground that there is such a principle.
It is commonly referred to as the fraud exception, but it is not limited to fraud.
It applies in certain circumstances to prevent the attribution to a principal of his agents knowledge of his own breach of duty even when the breach falls short of dishonesty.
In the context of the illegality defence, which is mainly concerned with dishonest or criminal acts, this exception from normal rules of attribution will normally arise when it is sought to attribute to a principal knowledge of his agents fraud or crime but that is not inherent in the underlying principle.
I shall call it the breach of duty exception. 72.
The breach of duty exception is commonly referred to as the Hampshire Land principle, after the judgment of Vaughan Williams J in In re Hampshire Land [1896] 2 Ch 743.
This case did not involve any allegation of fraud.
The facts were that the Hampshire Land Company had borrowed money from a building society.
The borrowing required the authority of the shareholders in general meeting, but their authority, although it was given, was vitiated by defects in the notice by which it was summoned.
The issue was whether a building society was affected by notice of the irregularity so as to be prevented from relying on the internal management rule.
The contention was that the building society was on notice because its secretary happened also to be the secretary of the borrower, and in the latter capacity he knew the facts.
In the course of discussing that question, the judge observed at p 749: If Wills had been guilty of a fraud, the personal knowledge of Wills of the fraud that he had committed on the company would not have been knowledge of the society of the facts constituting that fraud; because common sense at once leads one to the conclusion that it would be impossible to infer that the duty either of giving or receiving notice will be fulfilled where the common agent is himself guilty of fraud. 73.
Vaughan Williams Js dictum was subsequently adopted by two members of the House of Lords in Houghton & Co v Nothard, Lowe & Wills [1928] AC 1, where the issue was whether a company was bound by an arrangement adverse to the companys interest which had been made by two of its directors for their own benefit and was never approved by the board.
It was contended that the knowledge of the two directors could be attributed to the company so as to found a case of acquiescence.
Viscount Dunedin (at p 14) summarily rejected the suggestion that the company could be treated as knowing about a directors breach of duty by virtue only of the knowledge of the defaulting director himself: My Lords, there can obviously be no acquiescence without knowledge of the fact as to which acquiescence is said to have taken place.
The person who is sought to be estopped is here a company, an abstract conception, not a being who has eyes and ears.
The knowledge of the company can only be the knowledge of persons who are entitled to represent the company.
It may be assumed that the knowledge of directors is in ordinary circumstances the knowledge of the company.
The knowledge of a mere official like the secretary would only be the knowledge of the company if the thing of which knowledge is predicated was a thing within the ordinary domain of the secretary's duties.
But what if the knowledge of the director is the knowledge of a director who is himself particeps criminis, that is, if the knowledge of an infringement of the right of the company is only brought home to the man who himself was the artificer of such infringement? Common sense suggests the answer, but authority is not wanting.
He then cited the dictum of Vaughan Williams J. Lord Sumner agreed, observing (p 19) that it would be contrary to justice and common sense to treat the knowledge of such persons as that of their company, as if one were to assume that they would make a clean breast of their delinquency. 74.
These dicta are concerned only with the attribution of knowledge.
The argument which they reject is that there is no breach of duty because the company must be deemed to know the facts and therefore cannot be misled or must be supposed to have consented.
They are not concerned with the ambit of the illegality defence or the breach of duty exception to it.
For the first full consideration of the exception, one must move forward seven decades to the decision of the Court of Appeal in Belmont Finance Ltd v Williams Furniture Ltd [1979] Ch 250, which is the starting point for the modern law.
That case arose out of an elaborate scheme, to which Belmonts directors were party, to extract value from Belmont by causing it to buy the shares of a company called Maximum at a considerable overvalue.
This was a breach of the fiduciary duties of the directors.
Their object was to recycle the profit on the sale of Maximum so that it could be used to fund the purchase by three companies associated with the directors of Belmonts own shares.
This was not only a breach of the directors fiduciary duty but a criminal contravention of what was then section 54 of the Companies Act 1948.
Belmont subsequently went into liquidation, and an action was brought in its name by receivers for damages for breach of duty against the directors who had authorised the transaction, and for an account on the footing of knowing receipt against the three companies.
The plaintiff was met by the illegality defence.
The judge dismissed the action at the close of the plaintiffs case on that ground, holding that the company was a party to the conspiracy.
This was because it must be taken to have known, through its directors, that the asset was over valued and that the purpose of the transaction was to fund the purchase of Belmonts shares.
Reversing the judge, Buckley LJ said (pages 261 262): But in my view such knowledge should not be imputed to the company, for the essence of the arrangement was to deprive the company improperly of a large part of its assets.
As I have said, the company was a victim of the conspiracy.
I think it would be irrational to treat the directors, who were allegedly parties to the conspiracy, notionally as having transmitted this knowledge to the company; and indeed it is a well recognised exception from the general rule that a principal is affected by notice received by his agent that, if the agent is acting in fraud of his principal and the matter of which he has notice is relevant to the fraud, that knowledge is not to be imputed to the principal.
So in my opinion the plaintiff company should not 75. 76. be regarded as a party to the conspiracy, on the ground of lack of the necessary guilty knowledge.
In Attorney Generals Reference (No 2 of 1982) [1984] 1 QB 624 two men were charged with theft from a company which they wholly owned and controlled.
The issue was whether, for the purpose of section 2(1)(b) of the Theft Act 1968, they had appropriated the property of another in the belief that [they] would have the other's consent if the other knew of the appropriation and the circumstances of it.
The argument was that they must have had that belief because the company had no other will than theirs, so that it must be taken to consent to whatever they consented to.
This argument had been accepted by the trial judge but it failed in the Court of Appeal for two reasons.
One turned on the construction of the Theft Act and is of no present relevance.
The other was that the decision in Belmont Finance directly contradicts the basis of the defendants argument in the present case.
There can be no reason, in our view, why the position in the criminal law should be any different.
In Brinks Mat v Noye [1991] 1 Bank LR 68, gold had been stolen from Brinks Mats warehouse and delivered to a company called Scadlynn to be melted down, recast and sold.
The directors and sole shareholders of Scadlynn, who were well aware that the gold was stolen, caused the proceeds to be paid into the companys bank account and then paid away, thus leaving it without assets to meet its liabilities to Brinks Mat.
The appeal arose out of an application by Brinks Mat to amend the pleadings so as to add a number of claims against the bank.
The proposed amendments proceeded on the basis that since the payments into Scadlynns bank account represented property to which Brinks Mat was beneficially entitled, it was entitled to enforce Scadlynns rights against the bank.
It was alleged that the bank was liable to Scadlynn as a constructive trustee on the footing of knowing receipt and that Brinks Mat was entitled to enforce that liability for its own benefit.
One of the issues which arose was whether Scadlynn would have been precluded from advancing a claim against the bank because it had known (through its directors) about the origin of the gold.
Mustill LJ, rejecting this argument, considered that the corporate entity named Scadlynn was, however, odd the notion may seem at first sight, the victim of wrongful arrangements to deprive it improperly of a large part of its assets: p 72.
Nicholls LJ, agreeing, observed (p 73): On the facts alleged in the proposed amendments, Scadlynn was at all material times being used by Chappell and Palmer and others for a fraudulent purpose, viz, to realize the proceeds of sale of the robbery.
But the plaintiff was not implicated in any such fraudulent purpose.
On the contrary, along with the owners of the gold, the plaintiff was the intended victim of the scheme.
Likewise, Scadlynn itself was an intended victim, in that Scadlynn was being used as a vehicle for committing a fraud on its creditors and a fraud on those beneficially interested in property held by Scadlynn.
In those circumstances the fraudulent purposes of those controlling Scadlynn are not to be imputed to the company itself: see Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] Ch 250, per Buckley LJ at pp 261 262. 77.
Arab Bank v Zurich Insurance [1999] 1 Lloyds Rep 262 was a decision of Rix J arising out of a claim under the Third Parties (Rights against Insurers) Act 1930 against the liability insurer of a valuer.
The valuer was alleged to have issued fraudulent valuations to induce banks to lend money to third parties.
The valuations had been issued by a Mr Browne, who was the managing director and also a personal assured.
The insurer defended the claim on the ground that the company was not entitled to indemnity under the policy because Brownes dishonesty was attributable to it by virtue of his knowledge.
Rix J thought that Browne would on ordinary principles of attribution have been treated as the directing mind and will of the valuer for the relevant purpose (pp 278 279).
But he rejected the illegality defence because it was inconsistent with the terms of the contract of insurance under which Mr Browne and the company were separately insured each for his own interest (pp 272 273).
It followed that only Mr Browne would be precluded from recovering.
The attribution of his knowledge to the company would be contrary to the agreement to insure their interests separately.
The companys liability was therefore purely vicarious.
Having made these points, Rix J dealt briefly (and obiter) at p 282 with the question of attribution.
He said that although Brownes valuations were frauds on the lending banks, the valuer itself should be treated as a secondary victim, first because Brownes frauds exposed it to liability to the banks, and secondly because Brownes conduct involved such a breach of duty to [the valuer] as in justice and common sense must entail that it is impossible to infer that the knowledge of his own dishonesty was transferred to [the valuer].
He thought that the position might well be different in the case of a one man company. 78.
McNicholas Construction Co Ltd v Customs & Excise Commissioners [2000] STC 553 arose out of a classic VAT fraud against the Customs and Excise.
The fraudsters submitted invoices to McNicholas for VAT in respect of non existent goods and services.
The companys site managers, who were in league with them, procured the VAT to be paid to them.
The VAT was then reclaimed as input tax from the Customs and Excise.
The scheme inflicted a loss on the Customs & Excise but the net financial effect on the company was neutral.
The Customs & Excise claimed statutory penalties on the basis that that the companys conduct was dishonest.
This case was simply about attribution.
The illegality defence did not arise, for McNicholas was claiming nothing.
Dyson J held that as a matter of construction the statute implicitly fixed the company with the knowledge of those of its employees who handled its VAT payments, including the site managers.
The company argued that knowledge of the fraud should nevertheless not be imputed to it because it was a victim of the fraud, which exposed it to statutory penalties.
Rejecting this argument (at paras 55 56), the judge said: In my judgment, the tribunal correctly concluded that there should be attribution in the present case, since the company could not sensibly be regarded as a victim of the fraud.
They were right to hold that the fraud was neutral from the companys point of view.
The circumstances in which the exception to the general rule of attribution will apply are where the person whose acts it is sought to impute to the company knows or believes that his acts are detrimental to the interests of the company in a material respect It follows that, in judging whether a company is to be regarded as the victim of the acts of a person, one should consider the effect of the acts themselves, and not what the position would be if those acts eventually prove to be ineffective.
As the tribunal pointed out, in Director General of Fair Trading v Pioneer Concrete (UK) Ltd [1995] 1 AC 456 the company suffered a large fine for contempt of court on account of the wrongful acts of its managers.
The fact that their wrongful acts caused the company to suffer a financial penalty in this way did not prevent the acts and knowledge of the managers from being attributed to it.
The [breach of duty exception] is founded in common sense and justice.
It is obvious good sense and justice that the act of an employee should not be attributed to the employer company if, in truth, the act is directed at, and harmful to, the interests of the company.
In the present case the fraud was not aimed at the company.
It was not intended by the participants in the fraud that the interests of the company should be harmed by their conduct.
The Court of Appeal approved this reasoning in rejecting a somewhat similar argument in Bank of India v Morris [2005] BCC 739.
The facts of this case, baldly summarised, were that BCCI had placed deposits with Bank of India on unusual terms as part of a scheme to window dress its accounts at the year end.
The liquidators of BCCI brought proceedings against Bank of India under section 213 of the Insolvency Act on the ground that it had been knowingly party to the carrying on of business by BCCI with intent to defraud.
The judge found that the general manager of the Bank of India had deliberately turned a blind eye to what was going on, and that his knowledge was attributable to the bank.
The bank advanced an argument somewhat similar to that which had been advanced by McNicholas before Dyson J.
The Court of Appeal rejected it for the same reason, namely that the general managers acts were not targeted at Bank of India: see paras 114 118. 79.
This was the state of the authorities when Stone & Rolls v Moore Stephens [2009] 1 AC 1391 came before the courts.
Stone & Rolls was a company created solely for the purpose of defrauding banks.
It never did anything else.
The author of the frauds was a Mr Stojevic, its sole director, manager and shareholder.
The action was brought by the company at the instance of its liquidators against the auditors on the basis that if they had exercised due skill and care, they would have discovered that the company had no legitimate business.
The course of frauds against the bank would then have ceased earlier than it actually did.
They claimed the losses said to have been incurred as the direct result of the companys course of fraudulent behaviour continuing for longer than it would otherwise have done.
The House of Lords held that the illegality defence applied and upheld the order of the Court of Appeal striking out the proceedings.
It is a difficult case to analyse, because it was decided by a majority comprising Lord Phillips, Lord Walker and Lord Brown and there are significant differences between the reasoning of Lord Walker (with whom Lord Brown agreed) and Lord Phillips.
But the fact that they differed on critical points does not undermine the authority of their speeches on those points on which they were agreed. 80.
Lord Phillips and Lord Walker were agreed on three points for which the case is accordingly authority.
The first was that the illegality defence is available against a company only where it was directly, as opposed to vicariously, responsible for it: see Lord Phillips at paras 27 28.
Lord Walker refers to this at paras 132 133 and must have taken the same view, for if vicarious liability was enough to engage the illegality defence the attribution of Mr Stojevics knowledge to the company (with which the whole of the rest of his speech is concerned) would have been irrelevant.
This is because the company was vicariously liable for Mr Stojevics defaults whether or not it was treated as privy to them.
Secondly, the majority was agreed in rejecting the primary argument of the auditors that once it was shown that the directing mind and will of a company (whether generally or for the relevant purpose) had caused it to defraud a third party and that the company was relying on that fraud to found its cause of action, the illegality defence necessarily barred the claim.
Both Lord Phillips (para 63) and Lord Walker (para 173) rejected this submission as too broad, because it would involve the attribution of the agents dishonesty to the company even if there were innocent directors or shareholders.
Accordingly, both of them regarded it as critical that Stone & Rolls was a one man company, ie a company in which, whether there was one or more than one controller, there were no innocent directors or shareholders.
Third, Lord Phillips and Lord Walker were agreed that, as between a one man company and a third party, the latter could raise the illegality defence on account of the agents dishonesty, at any rate where it was not itself involved in the dishonesty. 81.
There are difficulties about treating Stone & Rolls as authority for any wider principles than these.
There are two main reasons for this.
The first is that Lord Phillips and Lord Walker differed in their reasons for holding that the illegality defence could be taken against a one man company.
Lord Walker adopted the sole actor principle, a label which he derived from the case law of the United States, but which he supported by reference to ordinary principles of English company law.
Lord Phillips on the other hand was guided by the principle that a loss is recoverable only if the relevant duty was to protect against loss of that kind: South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191.
He regarded this as expressing a rule of policy, which led him to conclude that Mr Stojevic constituted the entire constituency whose interests the auditors were bound to protect.
It followed in his opinion that there was no reason not to attribute his state of mind to the company for the purposes of the illegality defence.
The second reason is that Lord Phillipss view that it was no part of the purpose of an audit report to protect the interests of current or prospective creditors was peculiarly his own.
Although Lord Walker agreed with it (see para 168), the proposition was not part of his reasoning on the impact of illegality.
This has proved more controversial than any other feature of the reasoning in the case: see, for example, E Ferran, Corporate attribution and the directing mind and will (2011) 127 LQR 239, paras 251 257.
The scope of an auditors duty and its relationship to the illegality defence may one day need to be revisited by this court, but it is not an issue in this appeal.
Application to claims by the company against the defaulting agent 82.
The real issue in the present case is a different one.
Does the illegality defence bar a claim by the company against the dishonest agent who procured the fraud, in the same way as it bars a claim by the company against an honest outsider who is said to be liable to indemnify them? In Stone & Rolls the question whether the illegality defence would have been available to Mr Stojevic to defeat an action by the company did not arise directly, but it was considered by every member of the committee.
Lord Phillips did not express a concluded view.
Lord Walker presumably thought that the company could not have sued Mr Stojevic, since he regarded them as co conspirators and likened their case to an action for an account between highwaymen (paras 187 188).
Lord Scott and Lord Mance thought that Mr Stojevic could not have raised the defence against the company.
Since then the position as between the company and its dishonest agent has reached the Court of Appeal twice, in Safeway Stores Ltd v Twigger [2011] All ER 841, where the illegality defence succeeded, and in the present case where it failed.
The same question was considered, although it did not arise directly, by the Court of Final Appeal of Hong Kong in Moulin Global Eyecare Trading Ltd v Commissioner of Inland Revenue FACV (No 5 of 2013) (decided on 13 March 2014), in which Lord Walker gave the leading judgment. 83.
Safeway Stores was an action against a number of directors and senior employees of a supermarket group who by exchanging pricing information with competitors had caused the company to contravene section 2 of the Competition Act 1998.
Under section 36 of the Act, the company became liable to a penalty, provided that the OFT was satisfied that it had committed the infringement intentionally or negligently.
Safeway was not a one man company, but the statutory scheme had the peculiarity, which was critical to the reasoning of the Court of Appeal, that the offence was not capable of being committed by the individuals directly responsible.
The Act imposed the prohibition and the resulting penalty only on the company.
It was held that this required the attribution of the infringement to the company and its non attribution to the defendants.
On that ground, it was held that to apply the breach of duty exception so as to allow recovery of the penalty from the defendants would be inconsistent with the statutory scheme.
The decision is not authority for any proposition applying more generally.
In the present case, the Court of Appeal dealt with the question as a matter of general principle and reached a different conclusion.
Patten LJ, delivering the leading judgment, considered that the answer depended on the duty which was sought to be enforced and the parties between whom the issue was raised.
In an action against the company by a third party who had been defrauded, the company was responsible.
But it did not follow that the company was to be treated as responsible for a fraud for the purposes of an action against the dishonest director.
In such an action, the illegality defence cannot be available, whether the damages claimed arose from the liability which the company was caused to incur to a third party or from the direct abstraction of the companys assets.
Patten LJs reasoning on these points is encapsulated in paras 34 and 35 of his judgment: 84. 34. attribution of the conduct of an agent so as to create a personal liability on the part of the company depends very much on the context in which the issue arises.
In what I propose to refer to as the liability cases like El Ajou, Tan, McNicholas and Morris, reliance on the consequences to the company of attributing to it the conduct of its managers or directors is not enough to prevent attribution because, as Mummery LJ pointed out, it would prevent liability ever being imposed.
As between the company and the defrauded third party, the former is not to be treated as a victim of the wrongdoing on which the third party sues but one of the perpetrators.
The consequences of liability are therefore insufficient to prevent the actions of the agent being treated as those of the company.
The interests of the third party who is the intended victim of the unlawful conduct take priority over the loss which the company will suffer through the actions of its own directors. 35.
But, in a different context, the position of the company as victim ought to be paramount.
Although the loss caused to the company by its director's conduct will be no answer to the claim against the company by the injured third party, it will and ought to have very different consequences when the company seeks to recover from the director the loss which it has suffered through his actions.
In such cases the company will itself be seeking compensation by an award of damages or equitable compensation for a breach of the fiduciary duty which the director or agent owes to the company.
As between it and the director, it is the victim of a legal wrong.
To allow the defendant to defeat that claim by seeking to attribute to the company the unlawful conduct for which he is responsible so as to make it the companys own conduct as well would be to allow the defaulting director to rely upon his own breach of duty to defeat the operation of the provisions of sections 172 and 239 of the Companies Act whose very purpose is to protect the company against unlawful breaches of duty of this kind.
For this purpose and (it should be stressed) in this context, it ought therefore not to matter whether the loss which the company seeks to recover arises out of the fraudulent conduct of its directors towards a third party (as in McNicholas and Morris) or out of fraudulent conduct directed at the company itself which the Chancellor accepted was what is alleged in the present case.
There is a breach of fiduciary duty towards the company in both cases.
Patten LJ declined to apply the sole actor principle for two reasons.
First, he considered that it had no place in the context of a claim by the company against the fraudulent director, because it would be inconsistent with the duty of the directors to have regard to the interests of creditors and to the statutory restrictions on the ratification of breaches of the duty of directors.
Secondly, he regarded it as having the support of only Lord Walker and Lord Brown in Stone & Rolls and did not accept that it was now an established feature of English law for all purposes. 85.
Moulin Global Eyecare Trading Ltd FACV (No 5 of 2013) was an application for judicial review of the decision of the Hong Kong Commissioner of Inland Revenue to reject a claim by Moulin for the repayment of tax overpaid in a previous years of assessment.
Repayment had been claimed on the ground that the companys profits for the reference year had been fraudulently inflated by certain of its then directors.
The Commissioner contended that no repayment could be claimed because the dishonesty of the directors was attributable to the company.
In the Court of Final Appeal the claim failed because neither of the two provisions of the Inland Revenue Ordinance relied upon applied as a matter of construction.
For present purposes, the relevant provision was section 70A which provided for the reopening of an assessment on the ground of error.
Lord Walker, with whom the majority of the court agreed, held that there was no error because for the purpose of preparing the companys tax returns, its directing mind and will consisted of the two directors who knew the facts and had deliberately falsified them.
Their dishonesty was therefore to be attributed to the company.
A deliberate lie is not an error for the purposes of that section.
Lord Walker considered that the ordinary rules of attribution should apply unless the breach of duty exception was engaged.
He resiled from the view that he had expressed in Stone & Rolls (at para 145) that the fraud exception applied generally to any issue as to a companys notice, knowledge or complicity.
Reviewing the authorities in the light of the Court of Appeals decision in the present case, he concluded that the breach of duty exception was in fact of limited application.
Its rationale was to prevent the illegality defence from barring a claim by a company against its own agents.
He summarised the proper scope of the exception as follows, in para 80: The situation to which it most squarely applies (and some would say, the only situation to which it should properly be applied) is where a director or senior employee of a company seeks to rely on his own knowledge of his own fraud against the company as a defence to a claim by the company against him (or accomplices of his) for compensation for the loss inflicted by his fraud.
The injustice and absurdity of such a defence is obvious, and for more than a century judges have had no hesitation in rejecting it.
It is clear that Lord Walker numbered himself among the some who would say that this was the only situation in which the fraud exception should properly be applied.
At para 106(4) of his summary, he said: The underlying rationale of the fraud exception is to avoid the injustice and absurdity of directors or employees relying on their own awareness of their own wrongdoing as a defence to a claim against them by their own corporate employer.
And at para. 106(6): But the exception does not apply to protect a company where the issue is whether the company is liable to a third party for the dishonest conduct of a director or employee. 86.
The problem posed by the authorities is that until the Court of Appeals decision in this case, they have generally treated the imputation of dishonesty to a company as being governed by tests dependent primarily on the nature of the companys relationship with the dishonest agent, the result of which is then applied universally.
This was the point made by Lord Walker in Stone & Rolls at para 145, from which he resiled in Moulin.
The fundamental point made by the Court of Appeal in this case and the Court of Final Appeal in Moulin is that, while the basic rules of attribution may apply regardless of the nature of the claim or the parties involved, the breach of duty exception does not.
I agree with this.
It reflects the fact that the rules of attribution are derived from the law of agency, whereas the fraud exception, like the illegality defence which it qualifies, is a rule of public policy.
Viewed as a question of public policy, there is a fundamental difference between the case of an agent relying on his own dishonest performance of his agency to defeat a claim by his principal for his breach of duty; and that of a third party who is not privy to the fraud but is sued for negligently failing to prevent the principal from committing it. 87.
There are three situations in which the question of attribution may arise.
First, a third party may sue the company for a wrong such as fraud which involves a mental element.
Secondly, the company may sue either its directors for the breach of duty involved in causing it to commit that fraud, or third parties acting in concert with them, or (as in the present case) both.
Third, the company may sue a third party who was not involved in the directors breach of duty for an indemnity against its consequences.
In the first situation, the illegality defence does not arise.
The company has no claim which could be barred, but is responding to a claim by the third party.
It will be vicariously liable for any act within the course of the relevant agents employment, and in the great majority of cases no question will arise of attributing the wrong, as opposed to the liability, to the company.
Where 88. the law requires as a condition of liability that that the company should be personally culpable, as Lord Nicholls appears to have assumed it did in Royal Brunei Airlines, the sole function of attribution is to fix the company with the state of mind of certain classes of its agents for the purpose of making it liable.
The same is true in cases like McNicholas, involving statutory civil penalties for quasi criminal acts.
It is also true of cases like El Ajou where the relevant act (receipt of the money) was unquestionably done by the company but the law required as a condition of liability that it should have been done with knowledge of some matter.
This will commonly be the case with proprietary claims, where vicarious liability is irrelevant. 89.
A claim by a company against its directors, on the other hand, is the paradigm case for the application of the breach of duty exception.
An agent owes fiduciary duties to his principal, which in the case of a director are statutory.
It would be a remarkable paradox if the mere breach of those duties by doing an illegal act adverse to the companys interest was enough to make the duty unenforceable at the suit of the company to whom it is owed.
The reason why it is wrong is that that the theory which identifies the state of mind of the company with that of its controlling directors cannot apply when the issue is whether those directors are liable to the company.
The duty of which they are in breach exists for the protection of the company against the directors.
The nature of the issue is therefore itself such as to prevent identification.
In that situation it is in reality the dishonest directors who are relying on their own dishonesty to found a defence.
The companys culpability is wholly derived from them, which is the very matter of which complaint is made. 90.
This would be obvious if the company were suing the agent for a criminal or dishonest act committed against it where there was no third party involved: for example where the agent had embezzled the companys funds and made off with them.
This was the situation before the Court of Appeal in Attorney Generals Reference (No 2 of 1982) [1984] 1 QB 624, when the notion of attribution and the inference of consent were alike rejected.
The position would have been no different if consent had been more than an inference, for example because the fraudsters had procured the companys express consent in their capacity as its sole directors or shareholders: see Prest v Prestodel Resources Ltd [2013] 2 AC 415, 491.
As Lord Browne Wilkinson put it in Director of Public Prosecutions v Gomez [1993] AC 442, 496 497, it would offend both common sense and justice to hold that the very control which enables such people to extract the companys assets constitutes a defence to a charge of theft from the company.
The question in each case must be whether the extraction of the property from the company was dishonest, not whether the alleged thief has consented to his own wrongdoing.
Where the directors simply embezzle the companys funds the question of attribution arises but the illegality defence does not.
There is no wrongdoing by the company.
But the analysis would be precisely the same if there were.
This was the position in Belmont Finance Ltd v Williams Furniture Ltd [1979] Ch 250, where the directors scheme for abstracting the companys assets necessarily involved a criminal contravention by the company of the Companies Act.
The Court of Appeal declined to attribute knowledge of the conspiracy to the company so as to make it party to the scheme.
This was because the companys claim was against the directors who had authorised the transaction.
They could not raise the illegality defence by fixing the company with knowledge of their own plans, for the same reason that the defendants in Attorney Generals Reference (No 2 of 1982) could not raise the defence of consent on that basis.
This is so whether the company is a one man company or not, because the objection to the attribution of the culpable directors state of mind to the company is that they are being sued for abusing their powers.
It is the same objection whether they were one, some or all of the directors and whether or not they were also shareholders.
In Belmont Finance, it was held on appeal from the judgment after trial that the directors knowledge was not to be attributed to Belmont although the transaction was formally approved by the Board and completed under the companys seal: see [1980] 1 All ER 393, 398.
If the fraudulent agent cannot raise the defence of illegality in these circumstances, the same must be true of third parties who are under an ancillary liability for participating in the fraudulent agents wrong: co conspirators, aiders and abetters, knowing assisters and receivers, and so on.
That was the basis on which in Belmont Finance it was held that the companies who sold the Maximum shares at an overvalue and acquired Belmonts shares were potentially liable along with the culpable directors of Belmont. 91.
The position is different where the company is suing a third party who was not involved in the directors breach of duty for an indemnity against its consequences.
In the first place, the defendant in that case, although presumably in breach of his own distinct duty, is not seeking to attribute his own wrong or state of mind to the company or to rely on his breach of duty to avoid liability.
Secondly, as between the company and the outside world, there is no principled reason not to identify it with its directing mind in the ordinary way.
For a person, whether natural or corporate, who is culpable of fraud to say to an innocent but negligent outsider that he should have stopped him in his dishonest enterprise is as clear a case for the application of the illegality defence as one could have.
Stone & Rolls was a case of just this kind.
Leaving aside the admittedly important question of the scope of an auditors duty, if the illegality defence had not applied in that case, it could only have been because (i) the company was treated in point of law as a mindless automaton, or (ii) the defence could never apply to companies even in circumstances where it would have applied to natural persons.
Neither proposition is consistent with established principle. 92.
The technique of applying the general rules of agency and then an exception for cases directly founded upon a breach of duty to the company is a valuable tool of analysis, but it is no more than that.
Another way of putting the same point is to treat it as illustrating the broader point made by Lord Hoffmann in Meridian Global that the attribution of legal responsibility for the act of an agent depends on the purpose for which attribution is relevant.
Where the purpose of attribution is to apportion responsibility between a company and its agents so as to determine their rights and liabilities to each other, the result will not necessarily be the same as it is in a case where the purpose is to apportion responsibility between the company and a third party. 93.
This makes it unnecessary to address the elusive distinction between primary and secondary victimhood.
That distinction could arise only if the application of the breach of duty exception depended on where the loss ultimately fell, or possibly on where the culpable directors intended it to fall.
If, however, the application of the exception depends on the nature of the duty and the parties as between whom the question arises, the only question is whether the company has suffered any loss at all.
Application to Bilta 94.
As between Bilta and its former directors, the present action is brought to recover compensation for breach of the duties which they owed to the company.
They are alleged to have broken those duties by causing it to conduct its business in a manner calculated to prevent it from meeting its obligation to account to HMRC for VAT.
In particular, they are alleged to have caused the proceeds of the sales to UK purchasers, together with the VAT charged on them, to be paid out to Jetivia.
Those proceeds were either the property of Bilta (in those cases where they reached Biltas accounts), or were owed to Bilta (in those cases where they were paid by the UK purchasers directly to Jetivia).
In either case, they represented assets of Bilta.
Since the issue thus stated arises directly between the company and its directors, the fraud exception applies and the illegality defence cannot lie.
Whether the payment out to Jetivia of funds which may represent the fruits of the fraud is truly a loss may well be a difficult question, but it is a different question which will have to be examined in the light of all the facts at a trial.
It does not affect the application of the fraud exception. 95.
Jetivia and Mr Brunschweiler are in no different position from the directors, since the claim against them is that they were party to the directors misfeasance.
They are said to have participated in the conspiracy to defraud Bilta, and to have knowingly assisted the directors breach of their fiduciary duties.
The claim against Jetivia for an account on the footing of knowing receipt is likewise based on an allegation of participation in the directors misfeasance, since it is based on that companys knowledge (through Mr Brunschweiler) that the receipts represented assets of Bilta which the directors had caused to be paid to Jetivia in breach of their fiduciary duties. 96.
Before leaving these questions I should briefly refer to two further arguments of the appellants.
The first is that if Jetivia is liable to Bilta for conspiring with Biltas directors, then Bilta is liable on the same basis to Jetivia for conspiring with Mr Brunschweiler against Jetivia.
The claim therefore fails for circuity.
The Court of Appeal ignored this ingenious and problematical argument, and I would do so too.
The facts which would be necessary to found it are not agreed or even pleaded.
The second argument is that Bilta has suffered no loss because they had not been deprived of any assets that they had legitimately acquired.
In the words of Lord Phillips in Stone & Rolls, at para 5, if a person starts with nothing and never legitimately acquires anything, he cannot realistically be said to have suffered any loss.
Lord Walker (para 171) agreed.
These observations were, however, made with reference to the facts of that case, which had been found in great detail by Toulson J in parallel proceedings between the defrauded banks and Stone & Rolls.
It is not in my opinion appropriate to examine how far they are analogous to the facts of the present case at a stage of the proceedings when those facts are far from clear. 97.
For these reasons, which substantially correspond to those of the Court of Appeal and those expressed by Lord Toulson and Lord Hodge in the second part of their judgment (on attribution), I would dismiss the appeal on the illegality defence.
So far as that point is concerned, this is enough to decide the present appeal.
Policy 98.
I add to my judgment on this point only because Lord Toulson and Lord Hodge would also decide the appeal on the ground that the application of the illegality defence is inconsistent with a statutory policy requiring directors to have regard to the interests of the creditors of an insolvent or prospectively insolvent company.
Since I am unwilling to follow them down that route, I should briefly explain why. 99.
Given that the illegality defence is based on public policy, it is understandable that policy should have been invoked in a number of academic and judicial analyses of these problems.
It is, however, important to bear in mind the proper role of policy in the law of illegality, for arguments based upon it can easily degenerate into the kind of discretionary weighing of the equities which was rejected in Tinsley v Milligan and Les Laboratoires Servier v Apotex Inc. The fact that the illegality defence is based on policy does not entitle a court to reassess the value or relevance of that policy on a case by case basis.
In a broad sense, any rule of law which imposes civil liability in respect of a wrong may be described as a reflection of legal policy.
It does not follow that the courts may apply the illegality defence or not according to the relative importance which they attach to the policy underlying it by comparison with desirability of allowing an otherwise sound claim to succeed.
This was the essential problem about the reasoning of the Court of Appeal in Les Laboratoires Servier, which explains why this court felt unable to adopt that reasoning while arriving at the same result. 100.
The illegality defence is based on the subordination of private rights and liabilities to certain interests belonging to the public sphere.
The underlying rationale, as I sought to explain in Les Laboratoires Servier, at paras 23 and 25, is that the rights of private parties to remedies in private law may be overridden if the claims based on them are founded on acts which are contrary to the public law of the state and engage the public interest.
These are acts which engage what in French and other civil law systems would be categorised as interests belonging to the ordre public or, as a writer has put it, that part of law that is not at the free disposition of private individuals (R de Lange, The European Public Order, Erasmus Law Review 3 (2007), 11).
This is why a judge, as a public officer, may be required to take a point on illegality of his own motion, contrary to the ordinary adversarial practice of the English courts.
And it is why ordinary private wrongs, sounding in tort or contract, do not give rise to the illegality defence. 101.
Courts normally examine the policy rationale of a rule of law in order to discover what the rule is, not in order to decide whether they approve of its application in a particular case.
The scope for conflict between competing public policies is therefore limited.
It is, however, implicit in the reasoning in Les Laboratoires Servier that there is one situation in which an examination of competing policies may be required, and that is where a competing public policy (as opposed to a competing legal interest) requires the imposition of civil liability notwithstanding that the claim is founded on illegal acts.
A good example is a claim for damages for breach of EU or national competition law, which may in certain circumstances succeed notwithstanding that it is founded on a contract or other act which is unlawful: Case C 453/99 ECR I 6314 Crehan v Courage Ltd at paras 34, 36; Crehan v Inntrepreneur Pub Co CPC [2004] 2 CLC 803 at paras 149 153.
This was because the correction by an award of damages of the economic effects of the breach of public competition law is required in order to give effect to its purpose. 102.
More recently, a somewhat similar question came before this court in a very different context in Hounga v Allen [2014] UKSC 47.
This was a claim for unlawful discrimination in relation to the claimants dismissal.
Eighteen months before her dismissal, Ms Houngas employer had conspired with her to bring her into the United Kingdom under a false identity and had arranged for her to receive a visitors visa for six months.
The factual basis on which the appeal was argued was that by dismissing her Mrs Allen discriminated against Miss Hounga in that on racial grounds, namely on ground of nationality, she treated Miss Hounga less favourably than she would have treated others: see para 3.
It was contended that in these circumstances the claim was barred because it was founded on the illegal conspiracy.
There was no doubt that the relevant illegality constituted turpitude and no issue about attribution.
The question was whether the employees unlawful entry into the United Kingdom was sufficiently connected to her dismissal.
Because Ms Hounga had no right to work in the United Kingdom, her contract of employment was illegal and unenforceable.
But she had a distinct cause of action for the statutory tort of discrimination: see paras 24 25.
To make good that cause of action Ms Hounga did not rely, and did not need to rely on the circumstances in which she had entered into the United Kingdom, either by way of pleading or by way of evidence.
They were in reality no more than background facts.
The reliance test, which had been adopted in Tinsley v Milligan, is the narrowest test of connection which is consistent with the existence of an illegality test at all, and by that test, Ms Hounga would certainly have been entitled to succeed.
But in Cross v Kirkby [2000] EWCA Civ 426, the Court of Appeal had suggested a wider test of connection, dependent on whether the illegal act was inextricably bound up with the facts on which the cause of action depended even if it was unnecessary to rely on it.
This would have substantially extended the range of cases in which the illegality defence could apply.
Lord Wilson (with whom Baroness Hale and Lord Kerr agreed), regarded the question whether the inextricable connection test applied to the facts of that case as the bigger question: see para 41.
He answered it by holding that international conventions against human trafficking required that compensation should be available, so that the inextricably bound up test could not be applied in those circumstances.
The court was not purporting to depart from Tinsley v Milligan without saying so.
It simply recognised the case before it as one in which a competing public policy required that damages should be available even to a person who was privy to her own trafficking.
Lord Hughes (with whom Lord Carnwath agreed) did not agree with the majoritys construction of the relevant conventions, but agreed in the result on the ground that the illegal entry was not sufficiently closely connected with the dismissal.
The result was that although the panel disagreed on the effect of the conventions, so far as the law of illegality was concerned, there was no inconsistency between their approaches.
On the footing that the conventions required a right of damages to be available, the illegality defence failed on both grounds.
The result of Hounga v Allen would have been exactly the same even if Ms Hounga had entered the United Kingdom legally or had done so illegally by her own unaided efforts (so that no question of trafficking arose) and the Allens had merely known of and taken advantage of that fact.
In its recent decision in R (on the application of Best) v Chief Land Registrar [2015] EWCA Civ 17, the Court of Appeal was divided on the significance of Hounga although it was able to decide the case without reference to it.
Arden LJ expressed some scepticism about its significance as a statement of principle of general application.
It will be apparent from what I have said that I have considerable sympathy for her approach. 103.
In the present case, Lord Toulson and Lord Hodge have suggested that such a relevant countervailing public policy may be found in the rule requiring the directors of an actually or potentially insolvent company to have regard to the interests of creditors.
I would prefer to leave this question open for two reasons. 104.
The first is that it is not by any means clear that the duty of directors to have regard to the interests of creditors does require the imposition of civil liability notwithstanding the illegality defence.
It is true that many of the central principles and detailed rules of company law are matters of public policy.
They do not simply sound in private law.
This is in particular true of those rules which impose duties for the benefit of third parties, such as creditors, who are not party to the contract of incorporation.
These rules include rules for the conservation of capital, and for ensuring that companies do not trade while insolvent.
More generally, section 172 of the Companies Act 1972, which includes among the general duties of directors a duty to promote the success of the companies for the benefit of its members as a whole, treats the interests of members as corresponding to those of employees, suppliers, customers and, in certain respects the public at large.
The common law goes further than this, treating the interests of an actually or prospectively insolvent company as synonymous with those of its creditors: West Mercia Safetyware v Dodd [1988] BCLC 250.
The duty to have regard to the interests of creditors is not one of the general duties of directors identified in the statute, but the common law duty is preserved by section 172(3) of the Act, notwithstanding the directors obligation to serve the interests of members.
However, it does not follow that the public policy reflected in these principles requires the imposition of civil liability on directors notwithstanding the illegality defence.
One reason is that although the general duties of directors have effect notwithstanding any enactment or rule of law, by way of exception to this the company may in principle validly authorise something which would otherwise be a breach of those duties: Companies Act 2006, section 180(4) and (5).
Another is that the Companies Acts confer on the liquidator of a company in the course of winding up a wide range of statutory powers which enable effect to be given to these principles whether or not an ordinary civil action is available.
These include not only provisions for misfeasance proceedings against directors and other officers, but provisions for recovering the dissipated assets of insolvent companies from third parties.
These points were not fully developed in argument, and I do not think that it is desirable to resolve them on the present appeal.
As presently advised, I cannot accept that sections 172 and 180 are a sufficient answer to Jetivias reliance on the illegality defence. 105.
There is, however, a more fundamental reason why I would prefer not to go down this path in the present case, which is that it is unnecessary and undesirable.
This is a case about attribution.
It was approached in that way in both courts below, and that seems to me to be realistic.
The problem about the policy argument is that it focuses too narrowly on the status of Mr Chopra and Mr Nazir as directors and on the insolvency of this particular company given the way in which they caused it to carry on business.
In my opinion, it is perfectly clear that the illegality defence would fail even if these particular features of the facts were not present, just as in Hounga v Allen, the illegality defence would have failed even if Ms Hounga had not been trafficked.
The company would be entitled to claim against Mr Chopra and Mr Nazir (and any collaborator of theirs) for their breach of duty to the company even if those gentlemen had not been directors but mere agents who happened to be the companys directing mind and will for the relevant particular purpose.
It is equally clear that the company would be entitled to claim against them if it were solvent.
I am unwilling to decide this case on a basis which invites distinctions between different situations which are irrelevant to the principle that we are applying.
I would be extremely reluctant to see the law of illegality revert to the multiplicity of micro topics and sub rules which once characterised it.
I agree with Lord Toulson and Lord Hodge that Occams Razor is a valuable analytical tool, but only if it is correctly understood.
Entia non sunt multiplicanda praeter necessitatem.
Do not gratuitously multiply your postulates.
Insolvency Act 1986, section 213 106.
This is a short point and a straightforward one. 107.
Section 213 of the Insolvency Act provides: (1) If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect. (2) The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above mentioned are to be liable to make such contributions (if any) to the companys assets as the court thinks proper.
The appellants case is that the provision has no extraterritorial effect and therefore no application to Jetivia which is domiciled in Switzerland or Mr Brunschweiler, who is domiciled in France.
In effect the submission is that in subsection (2) any persons means only persons in the United Kingdom.
In my opinion this argument is misconceived. 108.
Most codes of insolvency law contain provisions empowering the court to make orders setting aside certain classes of transactions which preceded the commencement of the liquidation and may have contributed to the companys insolvency or depleted the insolvent estate.
They will usually be accompanied by powers to require those responsible to make good the loss to the estate for the benefit of creditors.
Such powers have been part of the corporate insolvency law of the United Kingdom for many years.
In the case of a company trading internationally, it is difficult to see how such provisions can achieve their object if their effect is confined to the United Kingdom. 109.
The English court, when winding up an English company, claims world wide jurisdiction over its assets and their proper distribution.
That jurisdiction is not universally recognised, but it is recognised within the European Union by articles 3 and 16 of Council Regulation (EC) No 1346/2000.
In Schmid v Hertel [2014] 1 WLR 633, the Court of Justice of the European Union considered these articles in the context of the jurisdiction of the German courts to make orders setting aside transactions with a bankrupt.
It held not only that articles 3 and 16 applied to such orders, but that member states must be treated as having power to make them notwithstanding any limitations under its domestic law on the territorial application of its courts orders. 110.
Section 213 is one of a number of discretionary powers conferred by statute on the English court to require persons to contribute to the deficiency who have dealt with a company now in liquidation in a manner which has depleted its assets.
None of them have any express limits on their territorial application.
Another such provision, section 238, which deals in similar terms with preferences and transactions at an undervalue, was held by the Court of Appeal to apply without territorial limitations in In re Paramount Airways Ltd [1993] Ch 223.
Delivering the leading judgment in that case, Sir Donald Nicholls V C observed (i) that current patterns of cross border business weaken the presumption against extra territorial effect as applied to the exercise of the courts powers in conducting the liquidation of a United Kingdom company; (ii) that the absence in the statute of any test for what would constitute presence in the United Kingdom makes it unlikely that presence there was intended to be a condition of the exercise of the power; and (iii) that the absence of a connection with the United Kingdom would be a factor in the exercise of the discretion to permit service out of the proceedings as well in the discretion whether to grant the relief, which was enough to prevent injustice.
These considerations appear to me, as they did to the Chancellor and the Court of Appeal, to be unanswerable and equally applicable to section 213. 111.
I would accordingly dismiss the appeal on this point also.
LORD TOULSON AND LORD HODGE: 112.
When the directors of a company involve it in a fraudulent transaction, is the company barred by the doctrine of illegality from suing them and their accessories for losses caused by their breach of fiduciary duty? Secondly, does section 213 of the Insolvency Act 1986 (IA 1986), which empowers a liquidator of a company registered in the United Kingdom to seek financial contributions from persons involved in the companys fraudulent trading, have extra territorial effect? These questions arise on an appeal by Jetivia SA (Jetivia) and Mr Brunschweiler against the dismissal of their applications for the summary dismissal or striking out of the claims against them. 113.
Bilta (UK) Ltd (Bilta), a company incorporated in England, seeks through its joint liquidators, Mr Hellard and Mr Ingram, to recover damages or equitable compensation in respect of its alleged loss.
As against the directors, Bilta claims damages for conspiracy or equitable compensation for breach of fiduciary duty.
The conspiracy is alleged to have been an unlawful means conspiracy, and the unlawful means are the directors alleged breach of their fiduciary duties.
As against Jetivia and Mr Brunschweiler, Bilta claims damages for conspiracy or compensation for dishonest assistance in the directors breach of their fiduciary duties.
Since the matter comes before the court on Jetivias and Mr Brunschweilers application for the claims against them to be summarily struck out or dismissed, it is to be assumed for present purposes that the factual allegations made in Biltas amended particulars of claim are capable of proof, and there is no need to repeat the word alleged whenever referring to the defendants conduct.
The liquidators also pursue a separate claim for fraudulent trading under section 213 of IA 1986.
Jetivia is a Swiss company and Mr Brunschweiler, who is resident in France, is its sole director. 114.
Bilta had two directors, Mr Nazir and Mr Chopra (the directors), who are the first and second defendants.
Mr Chopra owned all the issued shares.
Bilta was registered for the purposes of VAT.
Its only trading activity, which took place between 22 April and 21 July 2009, was trading in European Emissions Trading Scheme Allowances (EUAs), which are commonly known as carbon credits.
EUAs were treated as taxable supplies under the VAT Act 1994 until 31 July 2009.
Since then they have been zero rated.
The VAT status of supplies of the EUAs at the relevant time explains Biltas activities. 115.
In short, Bilta bought large numbers of EUAs from overseas suppliers, including Jetivia, free of VAT, and sold them in the UK with VAT to companies described as first line buffers, which immediately sold them on.
The price for which Bilta sold the EUAs was lower before VAT than the price at which it bought, and Bilta was therefore never going to be in a position to meet its liabilities to HM Revenue and Customs (HMRC).
Bilta had minimal capital and was insolvent virtually from the outset.
The money payable to Bilta, including the VAT due to HMRC, was either paid to Bilta and paid on by it to its overseas supplier, or was paid by the first line buffer (or a later company in the chain) directly to Biltas supplier, or was otherwise paid to offshore accounts.
At the end of the chain the EUAs would be resold to a company outside the UK, generating a right to a VAT refund.
It is a familiar kind of carousel or missing trader fraud. 116.
Bilta was insolvent throughout the period of its trading in EUAs.
In that three month period, Bilta sold more than 5.7m EUAs for about 294m.
Its liability for VAT on those transactions amounts to 38,733,444.
It did not submit any VAT returns to HMRC.
On the application of HMRC Mr Hellard and Mr Ingram were appointed provisional liquidators of Bilta on 29 September 2009.
They commenced the companys claim against the defendants who were its directors and other parties, including the appellants.
The company was compulsorily wound up on 25 November 2009.
The proceedings were amended on 13 October 2011 to include the liquidators claims under section 213 of IA 1986. 117.
Patten LJ has set out the principal allegations in Biltas particulars of claim in paras 9 14 of his impressive judgment.
We can therefore summarise them very briefly.
Biltas pleaded case focuses on the injury done to it rather than to HMRC.
It alleges that the appellants among others were parties to a conspiracy to defraud and injure it by depriving it of the money needed to pay its VAT liabilities and thereby rendering it insolvent.
The conspirators knew that their fraudulent scheme involved the breach by Mr Nazir and Mr Chopra of their fiduciary duties as directors of Bilta.
Against its directors Bilta claims compensation for breach of fiduciary duty, damages for unlawful means conspiracy and a contribution under section 213 of IA 1986.
Against the appellants Bilta alleges that they were parties to the conspiracy to defraud it, that they are liable for dishonestly assisting Mr Nazir and Mr Chopra in the breaches of their fiduciary duties to it and (under section 213) for carrying on its business with intent to defraud creditors. 118.
On 30 July 2012 Sir Andrew Morritt, the Chancellor of the High Court, dismissed the appellants application for summary dismissal of the claims.
He held that the maxim ex turpi causa non oritur actio (no action may be founded on illegal or immoral conduct) was not available as a defence to Biltas directors or the appellants and that section 213 of IA 1986 had extra territorial effect.
The Court of Appeal (the Master of the Rolls, Rimer and Patten LJJ) in a judgment dated 31 July 2013 dismissed the appellants appeal. 119.
The principal issues raised by this appeal in relation to the defence based on the maxim ex turpi causa are (i) the purpose of that maxim and its application in relation to Biltas claims and (ii) the circumstances in which and mechanisms by which the knowledge of directors and other persons is attributed to a legal person such as a registered company.
The other issue is whether section 213 of IA 1986 has extra territorial effect.
We deal with each in turn.
Illlegality: ex turpi causa non oritur actio 120.
At the heart of Biltas claims is the allegation that the directors acted in breach of their fiduciary duties to the company, in concert with others including Jetivia and its director, Mr Brunschweiler.
Although the directors have played no part in the current proceedings, it is rightly accepted by the parties to the appeal that in relation to the defence of illegality there is no distinction to be drawn between the position of Jetivia and Mr Brunschweiler and that of the directors.
The primary question for the court is whether Biltas claim against the directors for breach of fiduciary duty is barred by the doctrine of illegality.
If so, the claim for damages for conspiracy must equally fail, since the breach of fiduciary duty constitutes the unlawful means on which Bilta relies.
And the converse also applies. 121.
The appellants argue that Biltas claims against its directors are barred by reason of the criminal nature of its conduct under their control.
Its function was to serve as a vehicle for defrauding HMRC, and it is submitted that the doctrine of illegality bars it from suing the directors who caused its participation in the scheme, and their co conspirators, as a means of recovering the companys loss for the benefit of the companys creditors. 122.
In any case where the defence of illegality is raised, it is necessary to begin by considering the nature of the particular claim brought by the particular claimant and the relationship between the parties.
So we start with the nature of the directors duty to Bilta. 123.
It is well established that the fiduciary duties of a director of a company which is insolvent or bordering on insolvency differ from the duties of a company which is able to meet its liabilities, because in the case of the former the directors duty towards the company requires him to have proper regard for the interest of its creditors and prospective creditors.
The principle and the reasons for it were set out with great clarity by Street CJ in Kinsella v Russell Kinsela Pty Ltd (in liquidation) (1986) 4 NSWR 722, 730: In a solvent company the proprietary interests of the shareholders entitle them as the general body to be regarded as the company when questions of the duty of directors arise.
If, as a general body, they authorise or ratify a particular action of the directors, there can be no challenge to the validity of what the directors have done.
But where a company is insolvent the interests of the creditors intrude.
They become prospectively entitled, through the mechanism of liquidation, to displace the power of the shareholders and directors to deal with the companys assets.
It is in a practical sense their assets and not the shareholders assets that, through the medium of the company, are under the management of the directors pending either liquidation, return to solvency, or the imposition of some alternative administration. 124.
This passage was cited with approval by Dillon LJ in West Mercia Safetywear v Dodd [1988] BCLC 250, 252 253.
The principle now has statutory recognition in the Companies Act 2006.
In Part 10, Chapter 2 of the Act, concerning the general duties of directors, section 172 provides: (1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (3) The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company. 125.
Section 180 (5) provides that the general duties under the Act have effect (except as otherwise provided or the context otherwise requires) notwithstanding any enactment or rule of law.
A director of an insolvent company is not directly a fiduciary agent of the creditors and cannot be sued by an individual creditor for breach of the fiduciary duty owed by the director to the company (Yukong Line Ltd v Rendsburg Investments Corporation (No 2) [1998] 1 WLR 294). 126.
Instead, the protection which the law gives to the creditors of an insolvent company while it remains under the directors management is through the medium of the directors fiduciary duty to the company, whose interests are not to be treated as synonymous with those of the shareholders but rather as embracing those of the creditors. 127.
Such protection would be empty if it could not be enforced.
To give effect to it, this action is brought by the liquidators in the name of the company to recover, for the benefit of the creditors, the loss caused to the company by the directors breach of their fiduciary duty. 128.
It is argued on behalf of the appellants that it would offend against the doctrine of illegality for the claim to succeed.
It is said that the fact that the errant directors were in sole control of the company makes it unlawful for the company to enforce their fiduciary duty towards it.
If this were the law, it would truly deserve Mr Bumbles epithet a ass, a idiot.
For it would make a nonsense of the principle which the law has developed for the protection of the creditors of an insolvent company by requiring the directors to act in good faith with proper regard for their interests. 129.
It has been stated many times that the doctrine of illegality has been developed by the courts on the ground of public policy.
The context is always important.
In the present case the public interest which underlies the duty that the directors of an insolvent company owe for the protection of the interests of the companys creditors, through the instrumentality of the directors fiduciary duty to the company, requires axiomatically that the law should not place obstacles in the way of its enforcement.
To allow the directors to escape liability for breach of their fiduciary duty on the ground that they were in control of the company would undermine the duty in the very circumstances in which it is required.
It would not promote the integrity and effectiveness of the law, but would have the reverse effect.
The fact that they were in sole control of the company and in a position to act solely for their own benefit at the expense of the creditors, makes it more, not less, important that their legal duty for the protection of the interests of the creditors should be capable of enforcement by the liquidators on behalf of the company. 130.
For that reason in our judgment this appeal falls to be dismissed.
The courts would defeat the very object of the rule of law which we have identified, and would be acting contrary to the purpose and terms of sections 172(3) and 180(5) of the Companies Act, if they permitted the directors of an insolvent company to escape responsibility for breach of their fiduciary duty in relation to the interests of the creditors, by raising a defence of illegality to an action brought by the liquidators to recover, for the benefit of those creditors, the loss caused to the company by their breach of fiduciary duty.
In everyday language, the purpose of the inclusion of the creditors interests within the scope of the fiduciary duty of the directors of an insolvent company towards the company is so that the directors should not be off the hook if they act in disregard of the creditors interests.
It would be contradictory, and contrary to the public interest, if in such circumstances their control of the company should provide a means for them to be let off the hook on the ground that their illegality tainted the liquidators claim. 131.
There would be much to say for ending this judgment at this point, except that it would be wrong not to identify the principal counter arguments and show that we have considered them.
There is an attendant risk, in going on at further length, of losing sight of the simple and central point that the defence of illegality would undermine the rule of law, reinforced by Act of Parliament, which exists for the protection of those for whose benefit the action is brought, namely the creditors who have a right to such assets as the liquidators may recover in the name of the company.
We see no need, for example, to get into the subject of attribution and the Hampshire Land principle in order to decide the appeal, but in discussing it (as we do below) we hope by the end to achieve some simplicity and clarity. approach and whether they require reconsideration. 132.
We turn to the question whether any authorities present an impediment to this 133.
Mr Alan Maclean QCs primary submission was that it follows from the decision of the House of Lords in Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39, [2009] 1 AC 1391 that Biltas claims are barred by the doctrine of illegality by reason of its being a one man company which engaged in deliberate fraud. 134.
Stone & Rolls has been a much debated and much criticised case.
A lot of the criticism stems from the fact that there were five judgments running to nearly 100 pages, the judges were divided three to two, and differing reasons were given by the majority.
The claim was by a company in liquidation against the firm of chartered accountants, who had acted as its auditors, for negligence and breach of contract in failing to detect and report that the companys business consisted mainly of defrauding banks (by obtaining credit through presenting false documents purportedly relating to commodity trading which was fictitious).
The company was under the complete control of a Mr Stojevic.
When the bank which was the principal victim discovered the fraud it sued the company and Mr Stojevic and obtained judgment for over $90m.
The judgment was unpaid, the company was put into liquidation and it brought proceedings through the liquidators against the accountants for the benefit of the creditors.
Negligence was admitted, but the accountants applied successfully to strike out the action on the ground of illegality.
The shares in the company were held by an Isle of Man company, whose shareholders were nominee companies acting under a trust.
In the proceedings brought by the bank Mr Stojevic was evasive about the beneficial interest behind the trust, although he acknowledged that he had a beneficial interest in the company, and there was no evidence to suggest that any innocent person had a share in it.
All but one of the House of Lords (Lord Scott) proceeded on the basis that the company was Mr Stojevics company in the fullest sense. 135.
The opinions of the majority (Lords Phillips, Walker and Brown), although differently expressed in various ways, have in common that they identified two features which were critical to their analysis.
One concerned the scope of the accountants duty.
The other was the fact that no one who had any part in the ownership or management of the company was unaware of the fraud which the accountants failed to detect and report.
Put shortly, the majority (in disagreement with Lord Mance) held that the accountants owed no contractual or tortious duty of care in respect of the interests of the creditors, notwithstanding that the companys solvency depended on the fraud being undetected.
Their sole duty was to report to the company the matters which the directors and shareholders ought to know for the purpose of making informed decisions.
If those people were already aware of and complicit in the fraud, that fact provided a complete barrier to the claim.
Lord Phillips was explicit that the case turned critically on whether the auditors duty extended to protecting those for whose benefit the claim was brought.
He also observed that one fundamental proposition appeared to him to underlie the reasoning of Lord Walker and Lord Brown that the duty owed by an auditor to the company was for the benefit of the interests of the shareholders, but not those of the creditors and that here lay the critical point of difference of opinion between them and Lord Mance (para 68). 136.
While it would shorten this judgment considerably if we were to say simply that the present case is plainly distinguishable from Stone & Rolls on its facts, since this case concerns directors who unquestionably owed duties for the protection of the interests of the creditors (unlike the auditor, according to the opinions of the majority in Stone & Rolls), the case has caused so much difficulty that it would be wrong for us to leave it there.
It is therefore necessary to analyse the judgments in closer detail before expressing our final view about its status. 137.
Lord Phillips summarised his conclusions (para 18) before developing his analysis.
He said that those for whose benefit the claim was brought (the creditors) fell outside the scope of any duty owed by the accountants; and that the sole person for whose benefit the accountants duty was owed (Mr Stojevic, who owned and ran the company) was himself the person responsible for the fraud.
In those circumstances he said that ex turpi causa afforded a defence. 138.
Lord Phillips made some comments about the law of illegality and the decision of the House of Lords in Tinsley v Milligan [1994] 1 AC 340.
He rejected the idea that Tinsley v Milligan laid down a universal test of ex turpi causa.
It was concerned with the effect of illegality on title to property.
It established that once title had passed, it could not be attacked on the basis that it passed pursuant to an illegal transaction.
If title could be asserted without reliance on the illegality, the defendant could not rely on illegality to defeat the title (para 21).
But he did not believe that it was right to proceed generally on the basis that the reliance test could automatically be applied as a rule of thumb, because it was necessary to consider the policy underlying the ex turpi causa maxim in order to decide whether the defence was bound to defeat the claim (para 25). 139.
Lord Phillips said that the underlying policy in relation to contractual obligations could be divided into two principles: the court will not enforce a contract which is expressly or impliedly forbidden by statute or is entered into with the intention of committing an illegal act; and the court will not assist a claimant to recover a benefit from his own wrongdoing.
In the instant case the claim is not brought for the benefit of the shareholder/directors, but for the benefit of the defrauded creditors for whose benefit the relevant duty was owed.
Whereas in Stone & Rolls no such duty was owed for the benefit of the creditors, in this case it was.
On Lord Phillips analysis of Tinsley v Milligan there is no inconsistency between that decision and the reasons which we have given for dismissing this appeal. 140.
Lord Phillips considered the consequences of the primary argument advanced by the accountants in a case where the company carried on a legitimate business and had honest shareholders, but the person who was in charge of running it (its directing mind and will) involved it in fraudulent trading, which its auditors negligently failed to discover and report.
In such circumstances any claim by the company for the benefit of the shareholders, whose interests the auditors should have protected, would according to the accountants argument be barred by the very wrongdoing which the auditors negligence had allowed to occur (paras 29 30).
Lord Phillips did not accept that if Stone & Rolls had been a company with independent shareholders, which had been high jacked by Mr Stojevic, its claim would necessarily have been defeated by reason of the reliance test or the underlying principle of public policy (para 63). 141.
Lord Phillips considered that where a companys complaint was that its directing mind and will had infected it with turpitude, if ex turpi causa was not to apply, the reason should simply be that the public policy underlying it does not require its application (para 60).
That would be a very easy conclusion where all the shareholders were innocent (para 61).
He considered that the situation would be more problematic if some shareholders were innocent and some were not, but it was not necessary for the court to solve that problem in the case of Stone & Rolls, because it had no innocent shareholders.
In short, whether ex turpi causa applied was dependent on identifying the underlying public policy and on identifying for whose benefit the action was being brought. 142.
In Stone & Rolls (as in the present case) there was a good deal of argument about attribution and the application of the so called Hampshire Land principle (In re Hampshire Land Co [1896] 2 Ch 743), but in a passage which is important to Lord Phillips analysis he said that the real issue was not whether the fraud should be attributed to the company but whether ex turpi causa should defeat the companys claim for breach of the auditors duty, and that this depended critically on whether the scope of the auditors duty extended to protecting those for whose benefit the claim was brought (para 67). 143.
Lord Phillips proceeded to examine that issue and he concluded that the accountants owed no duty for the protection of the companys creditors. (That, of course, places them in stark contrast with the directors of an insolvent company.) In examining that question Lord Phillips cited with approval the decision of Hobhouse J in Berg, Sons & Co Ltd v Mervyn Hampton Adams (1992) [2002] Lloyds Rep PN 41.
That was also a claim by a company in liquidation, brought for the benefit of its creditors (banks and discount houses), against a firm of chartered accountants which had acted as the companys auditors.
The company operated under the sole control of a Mr Golechha, who was the beneficial owner of its entire share capital.
The accountants were found to have acted with lack of proper skill in accepting too readily assurances given to them by Mr Golechha about the recoverability of certain debts owed to the company.
The judge found that the auditors ought to have qualified the companys accounts.
At the relevant time the company was not insolvent, but it was accepted (as indeed the accountants had said in a letter to Mr Golechha) that it was foreseeable that the companys bankers and discount houses with whom it did business might place some reliance on its audited accounts.
The company asserted, but did not prove, that Mr Golechhas conduct had been fraudulent.
The claim failed on various grounds, including reasons directly comparable to the position in Stone & Rolls. 144.
Lord Phillips quoted (paras 78 and 79) the following passages from Hobhouse Js judgment: It follows [from the decision of the House of Lords in Caparo Industries Plc v Dickman [1990] 2 AC 605] that the purpose of the statutory audit is to provide a mechanism to enable those having a proprietary interest in the company or being concerned with its management or control to have access to accurate financial information about the company.
Provided that those persons have that information, the statutory purpose is exhausted.
What those persons do with the information is a matter for them and falls outside the scope of the statutory purpose.
In the present case the first plaintiffs have based their case not upon any lack of information on the part of Mr Golechha but rather upon the opportunity that the possession of the auditors certificate is said to have given for the company to continue to carry on business and to borrow money from third parties.
Such matters do not fall within the scope of the duty of the statutory auditor.
However one identifies the company, whether it is the head management, or the company in general meeting, it was not misled and no fraud was practised on it.
This is a simple and unsurprising consequence of the fact that every physical manifestation of the company Berg was Mr Golechha himself.
Any company must in the last resort, if it is to allege that it was fraudulently misled, be able to point to some natural person who was misled by the fraud.
This the plaintiffs cannot do. 145.
Lord Phillips observed that this comment demonstrated that Hampshire Land had no application to the facts of that case, but that it also had wider implications (para 80).
It supported the proposition that the law could not rationally hold the auditor liable when the entire shareholder body and the entire management was embodied in a single individual who knew everything because he had done everything.
The passages set out above correspond with and support the twin factors to which we have referred (para 26) as central to the reasoning of the majority the limited nature of the auditors duty, and the knowledge of everyone involved in the ownership and management of the company about the matters which the auditors failed to discover and report to them.
Lord Phillips returned to those points at the end of his judgment (para 86). 146.
Lord Walker concluded that he would apply what he referred to as the sole actor principle to a claim made against its former auditors by a company in liquidation, where the company was a one man company engaged in fraud, and the auditors were accused of negligence in failing to call a halt to the fraud (para 168).
He defined what he meant by a one man company, by reference to what Hobhouse J had said in Berg v Adams, as a company which has no individual concerned in its management and ownership other than those who are, or must (because of their reckless indifference) be taken to be, aware of the fraud or breach of duty with which the court is concerned (para 161).
He cited Berg v Adams as a clear case of a one man company, which did not involve fraud, but in which every physical manifestation of the company was Mr Golechha himself who knew all about the irrecoverable loans; and there is a clear echo of Hobhouse Js judgment in Lord Walkers explanation for rejecting Stone & Rolls claim (para 168).
He said that any duty of care owed by the auditors was to the company as a whole, not to current or prospective creditors, and that there was no protection which the auditors could give to the company if the only human embodiment of the company knew all about its fraudulent activities. 147.
Lord Walkers judgment was a great deal more detailed than that summary, because he considered the various arguments advanced by the company, but his critical reasoning was that the auditors were in a very different position from the companys directors (para 190), their duty of care was limited in the way that he identified, and the companys sole actor knew all that was to be known. 148.
Lord Brown agreed with Lord Walker.
He said that the claim against the accountants ran diametrically counter to the principles established in Caparo and was difficult to reconcile with Hobhouse Js decision in Berg v Adams (para 202).
In that case (see para 144 above) Hobhouse J had said that the claim against the accountants was based on the opportunity which possession of the auditors certificate was said to have given for the company to continue to carry on business and borrow money, but such matters did not fall within the scope of the auditors duty.
Similarly, said Lord Brown, the assumed negligence of the accountants had enabled the company to continue to carry on business, in this case stealing rather than borrowing from third parties. 150.
Lord Scott emphasised the public policy foundation of the doctrine of illegality.
For this reason he differentiated between an action for damages for breach of the auditors duty of care brought by a solvent company and a similar action brought by an insolvent company.
If the company had remained solvent, an action against the auditors which would have enabled Mr Stojevic to benefit from any damages would have offended the ex turpi causa rule.
But the company was insolvent and there was no possibility of Mr Stojevic benefitting from any damages recoverable from the accountants.
There was therefore no public policy reason to bar an action against the auditors based on their breach of duty.
The wielding of a rule of public policy he said, in circumstances where public policy is not engaged constitutes, in my respectful opinion, bad jurisprudence (paras 119 122). 151.
Critics of Stone & Rolls for being over long and diffuse have a fair point, and commentators and practitioners have found the case difficult.
Lord Walker himself commented in Moulin Global Eyecare Trading Ltd (in liquidation) v The Commissioner of Inland Revenue, HKFCA, final Appeal (No 5 of 2013) (Civil), 13 March 2014, that it is difficult to extract a clear ratio from the speeches of the majority, and he praised the Court of Appeal in the present case for achieving a welcome clarification of the law (paras 100 and 106).
We have endeavoured to apply Occams razor in concentrating on the critical features of the case: the scope of the auditors duty and the inability of the company to show that anyone who had any part in the ownership or management of the company was misled by the auditors negligence, which was a prerequisite for the companys claim to succeed. 152.
Much of the difficulty of Stone & Rolls is that the treatment of the issues was more roundabout, for example with much discussion of principles of attribution.
We have already referred to the fact that Lord Phillips considered that the real issue was not about attribution, but about the scope of the auditors duty, and to Lord Mances comment that the centrality of this issue had been obscured by the spread of argument over other issues.
The centrality of the point was further emphasised by the parallel with Berg v Adams which each of the majority drew in their judgments.
That parallel had nothing to do with the fraudulent nature of Stone & Rolls business.
The restricted nature of the auditors duty and the knowledge of those in charge of the company had the same significance whether the nature of the business was fraudulent (Stone & Rolls) or not (Berg v Adams).
Likewise, Lord Mances ground for distinguishing Berg v Adams had nothing to do with whether the business was lawful or fraudulent.
Lord Mance distinguished Hobhouse Js decision because the insolvency of Stone & Rolls at the time of the statutory audits made all the difference in his view to the scope of the auditors duty.
We are not of course concerned in this case to revisit the point of disagreement between Lord Mance and the majority on that question.
The finding that all whose interests were the subject of the auditors duty of care knew the facts which the auditors failed to detect was dispositive.
The conclusion of the majority that the claim was therefore barred by illegality may be seen as a reflection upon the illegal nature of the conduct as a matter of fact and perhaps a perceived need to bring their conclusion within the scope of the issues as argued, but it was not the illegality which on a proper analysis of their reasoning drove the conclusion.
As Lord Phillips observed, the fundamental proposition which underlay the reasoning of Lord Walker, Lord Brown and himself was that the auditors owed no duty for the benefit of those for whose benefit the claim was brought.
It necessarily followed that the claim should be struck out. 153.
Lord Sumption analyses the case differently.
There is no disguising the fact that serious difficulties arise from the different ways in which the majority expressed themselves.
The Law Commission in its report on The Illegality Defence (2010) Law Com 320, commented at para 3(32): It is difficult to anticipate what precedent, if any, Stone & Rolls will set regarding the illegality defence.
Though there was a majority verdict, there was no majority reasoning, with all their Lordships reaching different conclusions on how the defence should be applied. 154.
We conclude that Stone & Rolls should be regarded as a case which has no majority ratio decidendi.
It stands as authority for the point which it decided, namely that on the facts of that case no claim lay against the auditors, but nothing more. 155.
Stone & Rolls in any event does not support Mr Macleans primary submission that in the present case Biltas claims are barred because it was a one man company.
The duty of the directors was significantly different from the duty of the statutory auditors, and Stone & Rolls attempt to compare the two was rejected by the majority (see, for example, Lord Walker at para 190), although it found favour with Lord Mance.
The fact that Stone & Rolls was a one man company was relevant because it meant that the company was unable to point to anyone involved in the ownership or management of the company who was adversely affected by the accountants failure to discover what that one man had concealed from it.
But it does not follow that the person in charge of a one man company can never be liable for any form of wrongdoing towards the company.
As Lord Mance pointed out in Stone & Rolls (para 230), the controller of a one man company who dishonestly strips its assets is guilty of theft from the company (Attorney Generals Reference (No 2 of 1982) [1984] QB 624).
If the majority had agreed with Lord Mances view as to the scope of the auditors duty, it is plain from their reasoning that they would not have struck out the action, albeit that it was a one man company and its activities were fraudulent.
They saw the claim as an attempt to get around Caparo, whereas Lord Mance saw no conflict with Caparo. 156.
Mr Maclean also relied on the decision of the Court of Appeal in Safeway Stores Ltd v Twigger [2010] EWCA Civ 1472, [2011] 2 All ER 841.
The issue was whether a company could recover the amount of financial penalties imposed on it by the Office of Fair Trading, for anti competitive activity in contravention of the Competition Act 1998, from the directors or employees who were responsible for the illegal activity in breach of their contractual and fiduciary duties to the company.
The court held that the claim was barred by the illegality principle. 157.
The leading judgment was given by Longmore LJ.
His reasoning was as follows: i) The companys liability to the OFT was not a vicarious liability for the wrongful conduct of its directors or employees, because the Competition Act did not impose any liability on the directors or employees for which the company could be held vicariously responsible.
The liability under the Act was imposed on the company itself, which acted (as any company must) through agents. iii) iv) ii) The liability was therefore the personal liability of the company, so that its claim against the directors and employees was based on its own wrongdoing.
Its claim was therefore barred by illegality.
It was not open to the company to argue that it was a victim of the directors and employees misconduct, and to rely on the Hampshire Land principle, because the statutory scheme imposed responsibility on the company.
It was unnecessary to consider the position if the companys liability had been strict, because the OFT could only impose a penalty under the Competition Act if the infringement had been committed intentionally or negligently by the company. v) 158.
If that reasoning is sound, it would support Mr Macleans argument that the doctrine of illegality should apply in the present case, although this would have nothing to do with Bilta being a one man company. 159.
We disagree with the reasoning.
We have been greatly helped by the analysis provided by Professor Watts in a characteristically lucid article, Illegality and agency law: authorising illegal action [2011] JBL 213. 160.
Safeways direct liability (or personal liability in the words of the Court of Appeal) under the Competition Act arose through the acts of its directors and employees as its agents, but should the company therefore be denied the right to hold its errant directors and employees to account? We agree with Professor Watts proposition that it simply does not follow that because under the law of agency a principal becomes directly a party to an illegal agreement as a result of its agents acts, it is thereby to be deprived of its rights under separate contracts, not otherwise illegal, with its employees and other agents to act in its interests and to exercise due care and skill.
Indeed, it would not follow even if the 1998 Act were found to have invoked some sui juris concept of direct liability other than the law of agency.
In the absence of some countervailing policy reason, it is not just for someone who falls foul of a statute by reason of the acts of its employees or other agents to add to its burdens and disabilities by depriving it of any recourse against those employees or other agents. 161.
Unless there are special circumstances, the innocent shareholders should not be made to suffer twice.
The reasoning in Safeway, if taken to its logical conclusion, would also mean that the company could not lawfully dismiss the errant employees or directors; for to rely on their misconduct would be to rely on its own misconduct, as Professor Watts has observed.
It might be argued that unfair dismissal is different, but that could only be on public policy grounds. 162.
Reference to public policy takes us to the only basis on which we consider that the decision of the Court of Appeal in Safeway may have been justified.
Pill LJ considered that the policy of the Competition Act would be undermined if undertakings were able to pass on their liability to their employees.
That may have been a sound reason for striking out Safeways claims, and we express no view as to the merits of the decision.
We accept that there may be circumstances where the nature of a statutory code, and the need to ensure its effectiveness, may provide a policy reason for not permitting a company to pursue a claim of the kind brought in Safeway. 163.
In Bowman v Secular Society Ltd [1917] AC 406 the House of Lords established the principle that the illegality of a companys objects does not make its existence invalid in law.
Put broadly, a company has the same power to act illegally as an individual.
Lord Parker of Waddington also stated at 439: [I]f the directors of the society applied its funds for an illegal object, they would be guilty of misfeasance and liable to replace the money, even if the object for which the money had been applied were expressly authorised by the memorandum. 164.
That is a generalisation.
It would be harsh on directors if the law were to impose strict liability, and to do so would exceed the general duties of directors set out in the Companies Act.
But the reasoning of Longmore LJ would negate the companys right of recourse against the director who acted in breach of his fiduciary duty if his conduct as its agent was such as to give rise to a direct liability of the company to a third party.
That would be inconsistent with the dictum of Lord Parker and contrary to ordinary principles of agency.
As we have said, where the liability arises under a statute, there may in some circumstances be cause to conclude that the statutory scheme would be undermined by allowing the principal to enforce its ordinary right of recourse against its agent, but that would be a departure from ordinary rules of agency based on the specific nature of the statutory scheme and the requirements of public policy arising from it. 165.
Brinks Mat Ltd v Noye [1991] 1 Bank LR 68 provides an illustration of the application of Lord Parkers dictum.
The proceeds of the theft of gold bullion from a warehouse owned by the plaintiffs were laundered through the bank account of a company called Scadlynn Ltd with Barclays Bank.
The directors and sole shareholders of Scadlynn were signatories of the account and drew cheques on it for cash totalling nearly 8m over four months.
The plaintiffs sought to enforce rights which Scadlynn was said to possess against the bank in consequence of the payments out of its account.
The issue before the Court of Appeal (Mustill and Nicholls LJJ and Sir Roualeyn Cumming Bruce) was whether the pleading should be permitted.
This raised the question, among others, whether it was open to Scadlynn to sue the bank in respect of withdrawals made or authorised by the companys sole directors and shareholders.
The court held that there was no reason why Scadlynn, which was being put into compulsory liquidation, should be prevented from enforcing such a claim for the benefit of the creditors who would look to the assets for the satisfaction of their debts.
Nicholls LJ described the existence of the directors fiduciary duties to the company as a means by which the law sought to protect the companys creditors.
In that context, Mustill LJ rightly described Scadlyn as being an intended victim of arrangements intended dishonestly to deprive it of a large part of its assets and Nicholls LJ agreed with him. 166.
Mr Maclean submitted that there was no scope for applying the Hampshire Land principle (so as not to attribute the directors conduct to Bilta because they were acting in fraud of the company) in the circumstances that Bilta is a one man company and in any event that Biltas role in the fraud was that of villain and not victim.
The argument proceeds on the false premise that Biltas role must be characterised in the same way both as between Bilta and HMRC and as between the company and its directors; and that the attribution of the fraud to the company for the first purpose applies equally when considering the second.
We do not consider the question of attribution to be the real issue in this case.
The real issue is simpler: whether it is contrary to public policy that the company, through the liquidators, should enforce for the benefit of its creditors the duty which the directors owed for the protection of the creditors interests as part of their fiduciary duty to the company.
In this respect we echo Lord Phillips observation in Stone & Rolls (para 67) that the real issue was not whether the fraud should be attributed to the company, but whether ex turpi causa should defeat the companys claim for breach of the auditors duty.
This, as he said, depends critically on whether the scope of that duty extends to protecting those for whose benefit the claim was brought.
The answer to that question in the present case is clear.
The directors fiduciary duty to the company did extend to protecting the interests of those for whose benefit the claim is brought.
However, because the issue of attribution loomed large in the course of argument (as it did in Stone & Rolls), and because the topic has caused a fair amount of confusion, we address it below in the hope of providing some clarification. 167.
Mr Maclean further submitted that Biltas claims fall within the illegality principle because the claims are inextricably linked with, and it is relying on, its own dishonest actions.
The flaw in this argument is that when a company is insolvent or on the border of insolvency its interests are not equated solely with the proprietary interests of its owners.
Company law requires that the interests of creditors receive proper consideration by the shareholders and directors.
Although the creditors are not shareholders, as creditors they are recognised at that point as having a form of stakeholding in, or being a constituency of, the company which is under the management of the directors, and their interests are to be protected at law through the directors fiduciary duty to the company, which encompasses proper regard for the creditors interests.
It is therefore misleading to say that when the company, through the liquidators, brings an action against the directors for breach of that duty, the company (whose interests ex hypothesi include the interests of those for whose benefit the duty is owed and the action is brought) is claiming in respect of its dishonest actions. 168.
The argument about reliance harks back to Tinsley v Milligan.
We have referred (at para 138) to Lord Phillips treatment of that case in Stone & Rolls and to his statement that whether ex turpi causa should apply should depend on whether the public policy underlying it required its application.
Tinsley v Milligan sparked a debate which has continued ever since then.
This is not surprising because the judges in that case themselves considered the law to be very unsatisfactory, but they were of the opinion that it was beyond judicial reform, although it was based on public interest and was a common law doctrine.
Lord Goff referred to the New Zealand Illegal Contracts Act 1970, which provides that the court may deal with an illegal contract howsoever as the court in its discretion thinks just.
He suggested that there should be a full inquiry, and said that he would be more than happy if a new system could be evolved which was satisfactory in its effect and capable of avoiding indiscriminate results. 169.
The Law Commission studied the subject over many years with wide consultation.
It did not recommend that the court should have an open ended discretion.
However, it agreed with the great majority of consultees and commentators that the law was in an unsatisfactory state if, in the words of Lord Browne Wilkinson in Tinsley v Milligan, The effect of illegality is not substantive but procedural.
The objections were well expressed by McHugh J in the High Court of Australia in Nelson v Nelson (1995) 184 CLR 538, 609 (and many others have written or spoken in similar vein): The [reliance] rule has no regard to the legal and equitable rights of the parties, the merits of the case, the effect of the transaction in undermining the policy of the relevant legislation or the question whether the sanctions imposed by the legislation sufficiently protect the purpose of the legislation.
Regard is had only to the procedural issue; and it is that issue and not the policy of the legislation or the merits of the parties which determines the outcome.
Basing the grant of legal remedies on an essentially procedural criterion which has nothing to do with the equitable positions of the parties or the policy of the legislation is unsatisfactory, particularly when implementing a doctrine which is founded on public policy.
The Law Commission did not recommend that the solution should be statutory.
Its reason or primary reason was not the difficulty of obtaining Parliamentary time for law reform, although that has been a serious problem.
Its study of various possible legislative models did not result in it finding an altogether satisfactory version, but there also appeared to the Commission to be signs of fresh judicial thinking since Tinsley v Milligan.
It considered that judicial reform was the best way forward and it made recommendations to that end.
The Commission suggested that it was within the power of the courts to develop the law in a way which was neither simply discretionary nor arbitrary and indiscriminate, but which had regard to the underlying public policies, and its recommendations were intended to assist the courts in that direction. 170.
In Gray v Thames Trains Ltd [2009] AC 1339, para 30, Lord Hoffmann said that the doctrine is founded not on a single rationale but number of policy objectives.
His observation was echoed by Lord Phillips in Stone & Rolls (at para 25).
We have given our reasons for saying that application of the doctrine in the present context would undermine the purpose and relevant provisions of the Companies Act for the protection of the creditors of insolvent companies through the duty imposed on the directors towards the company. 171.
There may be cases which are less clear cut where there are public policy arguments which pull in opposite directions.
Hounga v Allen [2014] UKSC 47, [2014] 1 WLR 2889 was such a case.
The claimant was a victim of unlawful discrimination occurring within the context of a contract of employment, which was contrary to the terms on which the claimant had been permitted to enter the United Kingdom.
Lord Wilson, giving the judgment of the majority, adopted Lord Phillips statement in Stone & Rolls that the reliance test was not to be applied automatically but that it was necessary to consider the policy underlying ex turpi causa in order to decide whether it should defeat the claim.
He referred next to the test of inextricable link and said that he would conclude that the link was missing.
But he did not consider that to be the determining question for reasons which he set out in the critical part of his judgment under the heading Public policy.
He said (para 42): The defence of illegality rests upon the foundation of public policy Rules which rest upon the foundation of public policy, not being rules which belong to the fixed or customary law, are capable, on proper occasion, of expansion or modification: Maxim Nordenfelt Guns and Ammunition Co v Nordenfelt [1893] 1 Ch 630, 661 (Bowen LJ).
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 application of the defence would run counter? 172.
Lord Wilson examined what, if any, considerations of public policy underlying the doctrine of illegality, in particular the importance of preserving the integrity of the legal system (highlighted by McLachlin J in Hall v Hebert [1993] 2 SCR 159), militated in favour of applying the defence to defeat Miss Houngas claim, and he judged them scarcely to exist.
He considered next the second question which he had posed in para 42.
He concluded that there was an important aspect of public policy to which application of the defence would run counter, namely the protection of victims of trafficking, about which the United Kingdom was party to a European Convention.
Lord Wilson described as fanciful the idea that an award of compensation to the claimant would give the appearance of encouraging others to enter into illegal contracts of employment, whereas its refusal might engender a belief among employers that they could discriminate against such employees with impunity (para 44), and he said that to uphold the defence of illegality would run strikingly counter to the prominent strain of current public policy against trafficking and in favour of protection of its victims (para 52).
He concluded his judgment by saying: The public policy in support of the application of that defence, to the extent that it exists at all, should give way to the public policy to which its application is an affront. 173.
Lord Sumption says that the illegality defence is not dependent on a judicial value judgment about the balance of the equities in each case, and he cites Tinsley v Milligan and Les Laboratoires Servier v Apotex Inc [2014] UKSC 55 [2014] 3 WLR 1257.
In Tinsley v Milligan the House of Lords disapproved the public conscience test which had been developed by the Court of Appeal.
But that decision did not preclude this court from adopting the approach in Hounga v Allen set out above at para 129 above.
Lord Wilsons statement was one of principle.
It was made after a review of the authorities in which Lord Wilson referred to the rejection of the public conscience test in Tinsley v Milligan (para 28).
Lord Wilsons statement was part of the ratio decidendi in Hounga v Allen because it formed the foundation for the conclusion in the final paragraph of the judgment, to which we have referred at para 174.
It is not the courts practice consciously to depart from an earlier decision of the House of Lords or Supreme Court without saying so.
No member of the court in Les Laboratoires Servier suggested that the courts approach in Hounga v Allen had been wrong.
The issue in Les Laboratoires Servier was whether the doctrine of illegality should be expanded beyond the reach of previous authorities to include a tort of strict liability.
The decision is not inconsistent with ratio of Hounga v Allen.
Some of the dicta are in a different direction from Hounga v Allen but that is not a sufficient reason to conclude that the majority consciously meant to disapprove the approach in Hounga v Allen.
Since the hearing of the appeal, the Court of Appeal has considered Hounga v Allen and Les Laboratoires Servier in R (on the application of Best) v Chief Land Registrar [2015] EWCA Civ 17.
Sales LJ, with whom McCombe LJ agreed, analysed them at paras 51 to 61 and adopted the analytical framework of Lord Wilson in weighing the considerations of public policy in favour of and against applying the ex turpi causa defence in the particular circumstances.
He did not consider Les Laboratoires Servier to be incompatible with that approach and he applied Lord Wilsons guidance at para 70 and following.
Arden LJ dissociated herself from the reliance on Hounga v Allen by the majority (paras 111 to 112).
The analysis of Sales LJ accords with our views. 174.
The Law Commissions report has been considered in some detail by the Court of Appeal on two occasions, Les Laboratoires Servier and Parkingeye Ltd v Somerfield Stores Ltd [2013] 1 QB 840.
In a chapter in English and European Perspectives on Contract and Commercial Law: Essays in honour of Hugh Beale, Professor Andrew Burrows, writing before the decision of this court in Les Laboratoires Servier commended these decisions as an example of the work of the Commission helping to influence judicial law reform.
The report has not so far been considered in any detail by this court, nor has this court been invited to review the decision in Tinsley v Milligan.
The differences between Lord Sumption and us suggest to us that there is a pressing need for both.
In any future review the court would undoubtedly wish to examine the law in other countries and particularly the judgments of the High Court of Australia in Nelson v Nelson, all of which merit reading.
Conspiracy 175.
For the reasons explained we have concentrated on the claim against the directors for breach of fiduciary duty, which the appellants are said dishonestly to have assisted.
It is difficult to see that the claim for conspiracy adds anything.
Mr Maclean argued that the real conspiracy was to injure HMRC and that it is artificial to regard there as having been a conspiracy against Bilta, when it was in truth nothing more than a vehicle for defrauding HMRC.
It may be that Bilta will fail to establish the conspiracy alleged, but the merits of that argument are not fit for determination on a summary application.
Bilta has a triable case, and the only issue before the court is whether it must fail for illegality.
In that respect the appellants are on no stronger ground in relation to conspiracy than in relation to the breach of fiduciary duty relied on as the unlawful means.
It is perhaps worth observing that in Berg Sons & Co Ltd v Adams Hobhouse J noted that there was no allegation of conspiracy by the accountants and Mr Golechha to defraud the company (p 1066), implying that this would have made a potential difference.
In this case there is an allegation of conspiracy between the directors and others to defraud the company.
It does not alter the analysis to say that the aim of the dishonest director shareholders was to make a dishonest profit for themselves and their accomplices at the expense of HMRC, for this itself involved a breach of fiduciary duty towards Bilta (representing the interests of its creditors) and the intentional causation of loss to Bilta.
Loss 176.
Mr Maclean submitted that Bilta suffered no loss since it began life with negligible assets and never acquired any lawful assets, so it had none to lose.
He relied on an obiter dictum of Lord Phillips to similar effect in Stone & Rolls (para 5), but Lord Mance observed (para 231) that to cause a deficit to a company making it insolvent is to cause it loss.
Lord Phillips described his own remark as an initial impression and it was no part of his reasoning. 177.
In Brinks Mat Ltd v Noye one of the arguments advanced by the bank was that Scalynn suffered no loss because it never had any property of its own and held the proceeds of the bullion on trust.
The argument was dismissed.
Nicholls LJ observed that a director was as much in breach of fiduciary duties which he owed to the company if he misappropriated property of which the company was a trustee as if he misappropriated property belonging beneficially to the company. 178.
A companys profit and loss account and its balance sheet may be positive or negative.
When the directors caused Bilta to incur VAT liabilities, and simultaneously caused it to misapply money which should have been paid to HMRC, leaving the company with large liabilities and no means of paying them, the directors caused it to suffer a recognisable form of loss.
Circuity 179.
The appellants also submit that if Bilta is entitled to a remedy against Jetivia because it conspired with Biltas directors, so also is Jetivia entitled to claim against Bilta for conspiring with Mr Brunschweiler against it.
There is, it is submitted, circuity of action.
In our view Jetivia will be liable only if it is established that it knowingly assisted in the fraud against Bilta, which would result from Mr Brunschweilers knowledge and actions being attributed to it.
We discuss attribution below.
If the fraud against HMRC was designed to benefit Jetivia and the other overseas suppliers, we see no reason why there should not be such attribution and doubt if Jetivia would have a claim against Bilta.
But, as Lord Sumption states, the facts relevant to this issue have not been pleaded.
Attribution 180.
The issue of attribution arises in the context that Mr Nazir and Mr Chopra were the only directors of the company and Mr Chopra was its sole shareholder.
Bilta in its amended particulars of claim (at para 42) referred to them as its directing mind and will.
While there is a role in our law for the concept of the directing mind and will of a company, it is important to analyse that role and in particular to avoid the dangers of ascribing human attributes to a non natural person such as a company. 181.
In most circumstances the acts and state of mind of its directors and agents can be attributed to a company by applying the rules of the law of agency.
It has become common to speak of the Hampshire Land principle or the fraud exception as the exception to an otherwise general rule that attribution occurs.
It is our view that the fraud exception is not confined to fraud but is simply an instance of a wider principle that whether an act or a state of mind is to be attributed to a company depends upon the context in which the question arises.
The fraud exception, applied to prevent an agent from pleading his own breach of duty in order to bar his principals claim against him, is the classic example of non attribution.
But it is not the only one. 182.
We set out our conclusions on the importance of context to the process of attribution in paragraphs 202209 below.
Before then, we examine the case law which has led us to those conclusions. 183.
The starting point in an analysis of attribution is the recognition of the separate personality of the company, which the House of Lords recognised long ago in Salomon v Salomon & Co Ltd [1897] AC 22 and which this court recently confirmed in Prest v Petrodel Resources Ltd [2013] 2 AC 415.
A company, the creation of law, is, in Lord Halsburys words (Salomon at p 33), a real thing and has a legal existence even if it is controlled by one person.
Because the company is not a natural person it can operate only by the acts of its officers, employees and agents.
In Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461, 471, Lord Cranworth LC stated: The directors are a body to whom is delegated the duty of managing the general affairs of the company.
A corporate body can act only by agents.
Similar statements about the necessity of agency can be found in Ferguson v Wilson (1866) LR 2 Ch App 77 (Cairns LJ at p 89) and Citizens Life Assurance Co Ltd v Brown [1904] AC 423, (Lord Lindley at p 426). 184.
While a company cannot act but through the agency of others, it can incur obligations and have rights; and directors, including a sole director who is also the sole shareholder of a company, owe it the general duties set out in sections 171 to 177 of the Companies Act 2006.
The company can also incur liability to a third party because the law holds it responsible for the tortious acts and omissions of an employee. 185.
Lord Diplock stated the principles in a contractual context in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 848: My Lords, it is characteristic of commercial contracts, nearly all of which today are entered into not by natural legal persons, but by fictitious ones, ie companies, that the parties promise to one another that something will be done.
Such a contract is the source of primary legal obligations upon each party to it to procure that whatever he has promised will be done is done .
Where what is promised will be done involves the doing of a physical act, performance of the promise necessitates procuring a natural person to do it; but the legal relationship between the promisor and the natural person by whom the act is done, whether it is that of master and servant, or principal and agent, or of parties to an independent sub contract, is generally irrelevant.
If that person fails to do it in the manner in which the promisor has promised to procure it to be done, as, for instance, with reasonable skill and care, the promisor has failed to fulfil his own primary obligation.
This is to be distinguished from vicarious liability a legal concept which does depend upon the existence of a particular legal relationship between the natural person by whom a tortious act was done and the person sought to be made vicariously liable for it.
In the interests of clarity the expression should, in my view, be confined to liability for tort. 186.
Such vicarious liability is indirect liability; it does not involve the attribution of the employees act to the company.
It entails holding that the employee has committed a breach of a tortious duty owed by himself, and that the company as his employer is additionally answerable for the employees tortious act or omission. 187.
A company can incur direct liability in at least three circumstances.
First, the provisions of company legislation, a companys constitution (its articles of association, including provisions of a companys memorandum of association now deemed to be provisions of its articles by section 28 of the Companies Act 2006 (the 2006 Act)) and the non statutory rules of company law provide that certain acts of its board of directors are treated as the acts of the company.
For example, in the Companies (Model Articles) Regulations 2008 (SI 2008/3229) Schedule 3, article 3 provides that [s]ubject to the articles, the directors are responsible for the management of the companys business, for which purpose they may exercise all the powers of the company.
Similarly, certain resolutions of the shareholders in general meeting are treated as the acts of the company.
Further, the non statutory consent principle, that shareholders who have a right to vote may by unanimous agreement bind the company in a matter in which they had power to do so by passing a resolution at a general meeting (In re Duomatic Ltd [1969] 2 Ch 365), is preserved by section 281(6) of the 2006 Act. 188.
Secondly, a company can also incur direct liability through the transactions of agents within the scope of their agency (actual or apparent).
Thus, when an agent commits his or her company to a contract, the company incurs direct liabilities (and acquires rights) as a party to the contract under ordinary principles of the law of agency. 189.
Thirdly, a statute or subordinate legislation or a regulatory bodys code or rules of the common law or equity may impose liabilities or confer rights on a company.
For example, a company as a legal entity is owed by its directors the general duties set out in sections 171 to 176 of the Companies Act even when the controlling director is also the sole shareholder. 190.
In Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, Lord Hoffmann (at p 506) pointed out that it is a necessary part of corporate personality that there should be rules by which acts are attributed to the company.
First, he identified the primary rules of attribution from company law, which is the first of the direct forms of liability which we describe above.
He then referred to the general principles of agency and vicarious liability which in most circumstances determine a companys rights and obligations (p 507B).
He recognised that there was a third category where, exceptionally, a rule of law expressly or impliedly excludes attribution on the basis of those general principles.
For this third category, which is relevant to the third form of direct liability (above), he stated: the court must fashion a special rule of attribution for the particular substantive rule.
He described the fashioning of that special rule of attribution in these terms (p 507E F): This is always a matter of interpretation: given that it is intended to apply to a company, how is 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. 191.
The relevance of the context in which the question is asked Is Xs conduct or state of mind to be treated as the conduct or state of mind of the company for the purpose in hand? is not limited to Lord Hoffmanns third category.
The legal context, ie the nature and subject matter of the relevant rule and duty, is always relevant to that question.
In Bowstead & Reynolds on Agency (20th ed 2014) Professor Peter Watts and Professor Francis Reynolds stated (at para 8 213): Before imputation occurs there needs to be some purpose for deeming the principal to know what the agent knows.
In the 19th ed the learned editors made the same point in the same paragraph thus: The rules of imputation do not exist in a state of nature, such that some reason must be found to disapply them.
Whether knowledge is imputed in law turns on the question to be addressed.
We agree; an analysis of the relevant case law supports that view in relation to each category of rules of attribution.
We turn first to the special rules of attribution which Lord Hoffmann saw as providing the answer in exceptional cases when the other rules did not determine the companys rights and obligations. 192.
Thus, in Lennards Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705, the Merchant Shipping Act 1894 excluded the liability of a ship owner for loss or damage if it occurred without his actual fault or privity.
That phrase prevented the ship owner incurring such liability vicariously.
The House of Lords treated the fault of Mr J M Lennard, who was a director of another company which managed the ship, was registered in the ships register as the manager, and was also a director of the ship owning company, as the fault of the latter company.
Both Viscount Haldane LC and Lord Dunedin, who gave the only substantive speeches in the case saw the question as one of statutory construction which depended on the particular facts of the case.
In Tesco Supermarkets Ltd v Nattrass [1972] AC 153, the supermarket company was charged with an offence under the Trade Descriptions Act 1968.
It pleaded a defence under section 24 of the Act namely (a) that the commission of the offence was due to the act or default of another person, in this case the manager of the store at which the misleading representations as to price had occurred, and (b) that it had taken all reasonable precautions to avoid the commission of such an offence.
The House of Lords upheld that defence.
Like the Divisional Court, the House of Lords treated the store manager as another person for the purpose of section 24 of the Act and focused on the question whether the task of taking reasonable precautions was that of the board of the company or was delegated to its store managers.
It construed the statutory defence as allowing an employer who was personally blameless to escape liability and held that in this case the board of directors had not delegated their management functions to the shop managers.
As a result Tesco established the statutory defence. 193.
As in each case the court is engaged in the interpretation of a particular statute and in its application to particular facts, other statutory provisions have given rise to different approaches.
Thus in Tesco Stores Ltd v Brent London Borough Council [1993] 1 WLR 1037 the Divisional Court was concerned with the offence in section 11 of the Video Recordings Act 1984 of supplying a video recording to a person under the age specified in the classification certificate.
The court rejected Tescos statutory defence that it had neither known nor had reasonable grounds to believe that the purchaser was under 18.
It distinguished Tesco Supermarkets Ltd v Nattrass, holding that the knowledge or information that the section 11(2) defence addressed was that of the employee who supplied the video film to the purchaser and not that of the companys senior management. 194.
In Attorney Generals Reference (No 2 of 1982) [1984] 1 QB 624, to which we referred in para 155 above, the Court of Appeal had to consider whether a person or persons who through shareholding and directorship had total control of a company were capable of stealing the property of the company.
This involved, among other things, considering section 2(1)(b) of the Theft Act 1968 which provides that a persons appropriation of property is not regarded as dishonest if he appropriates the property in the belief that he would have the others consent if the other knew of the appropriation and the circumstances of it.
The Court of Appeal held that the company could not be regarded as the other for the purpose of this provision because the mind and will of the defendants fell to be treated as the mind and will of the company.
The defendants could be charged with theft of the companys property and their appropriate defence (if made out) would be that they appropriated the property in the honest belief that they had the right to deprive the company of it (section 2(1)(a)).
Again, the court approached the question of attribution as one of statutory construction. 195.
In McNicholas Construction Co Ltd v Customs and Excise Commissioners [2000] STC 553 Dyson J attributed to a main contractor the knowledge of its site managers that fraudulent invoices for sub contract labour were being created, in circumstances in which the main contractor suffered no loss because it could claim input VAT but evaded income tax.
Section 60 of the Value Added Tax Act 1994 imposes civil penalties on a person who dishonestly acts or omits to act for the purpose of evading VAT.
Dyson J recorded that it was common ground in that case that the knowledge and dishonest acts of the site managers could be attributed to the main contractors only if a special rule of attribution, of which Lord Hoffmann had written in Meridian, could be applied.
He stated (para 44): The question in each case is whether attribution is required to promote the policy of the substantive rule, or (to put it negatively) whether, if attribution is denied, that policy will be frustrated.
He held (paras 48 49) that the statutory policy of discouraging the dishonest evasion of VAT would be frustrated if the knowledge of the employees of a company who had to play a part in the making and receiving of supplies, as well as those involved in its VAT arrangements, were not attributed to the employing company.
Further, as the participants in the fraud had not intended to harm the interests of their employing company, there was no basis for excluding such attribution. 196.
The Court of Appeal took a similar approach in Morris v Bank of India, [2005] 2 BCLC 328 which concerned a claim for fraudulent trading under section 213 of the Insolvency Act 1986.
The court upheld Patten Js finding that the knowledge, which the general manager of Bank of Indias London branch had of BCCIs fraud, was to be attributed to his employers for the purpose of section 213.
In paras 156 162 above we discussed Safeway Stores Ltd v Twigger.
What is relevant for present purposes is that the court in that case looked to the wording and policy of the relevant statute in order to determine whether the acts and the intention or negligence underlying those acts were to be attributed to the company. 197.
It is not only in the field of statute that the court, when deciding whether to attribute anothers act or state of mind to a company, has regard to the purpose of the rule of law which is in play.
In the different context of a claim based on knowing receipt of the proceeds of a fraud, the Court of Appeal in El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685 had to consider whether the knowledge of an agent who was also the director of a company should be attributed to that company.
Mr Ferdman, who was a non executive director of Dollar Land, had made the arrangements by which Dollar Land acquired an interest in assets in which others had invested funds that they had earlier obtained by fraud.
He had acted without the authority of a resolution by Dollar Lands board.
Because Mr Ferdman managed and controlled the transactions, the court attributed his knowledge to the company, treating him as the directing mind and will of the company in relation to those transactions.
The court recognised that different persons could be treated as the directing mind and will of a company for different purposes (Rose LJ at p 699h and Hoffmann LJ at p 706e).
While a Mr Stern generally managed Dollar Land, Mr Ferdman was for the purpose of the receipt of the funds the companys mind and will, and on that basis his knowledge of the fraud was attributed to the company.
The plaintiffs alternative basis of attribution on the ground of agency failed.
We see force in the suggestion by the editors of Bowstead & Reynolds on Agency (at para 8.214) that the rules of agency could have resulted in imputation of knowledge in that case.
But in the event the court decided otherwise.
Thus the only basis on which Mr El Ajou succeeded was the attribution of Mr Ferdmans knowledge to the company based on the concept of a person being a companys directing mind and will in relation to a particular transaction.
Similarly, although in that case it was not necessary to do so in order to establish Mr Tans accessory liability for dishonest assistance of a breach of trust, the Judicial Committee of the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (p 393B C) attributed Mr Tans objective dishonesty to the travel agency company which he controlled. 198.
The courts have also had to consider questions of attribution of knowledge or actions in a contractual context such as that of an insurance policy.
In that context the terms of the insurance policies are relevant and can be decisive as the court seeks to give effect to the intentions of the parties as expressed in their contract.
In Arab Bank plc v Zurich Insurance Co [1999] 1 Lloyds Rep 262 Rix J addressed a professional indemnity policy which covered the legal liability of both a company which provided estate agency and valuation services and its directors.
The assumed facts included the assertion that one of the directors, who was the managing director, had made a number of fraudulent valuations in the companys name.
The plaintiffs obtained judgments against the company, which went into liquidation, and sought to enforce them against the insurance company under the Third Parties (Rights against Insurers) Act 1930.
Zurich purported to avoid the policy on the basis of the directors fraud.
But the insurance policy included fidelity insurance which indemnified the company against liabilities resulting from the fraudulent acts of a director.
Because he construed the policy as insuring the company and its directors as separate insureds, the logic of the policy was that the guilty knowledge and conduct of a director could not be attributed to the company for the purpose of giving effect to the insurance contract even if he were the directing mind and will of the company in relation to the particular transactions.
He referred to Lord Hoffmanns analysis of a special rule of attribution which we have quoted in para 190 above, and held that in the context of the particular contract he was not prepared to find that the fraudulent director was the directing mind and will of the company (pp 278 279).
In Morris v Bank of India [2005] 2 BCLC 328 the Court of Appeal (at paras 122 124) explained the Arab Bank case as a case which rested on the construction of the terms of the insurance contract. 199.
In Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] Ch 250 (Belmont No 1), the Court of Appeal considered a claim by the receiver of an insolvent company (A) that its shareholders and directors had dishonestly conspired to use As funds to purchase shares in another company (B) at an excessive price and thereby give unlawful financial assistance to the shareholders of B to purchase As shares.
The Court of Appeal held that the directors knowledge that they were effecting an illegal transaction should not be imputed to A because the object of the conspiracy was improperly to deprive A of a large part of its assets.
Buckley LJ (pp 261 262) explained the non attribution on the basis that when an agent, who is acting in fraud of his principal, has knowledge which is relevant to the fraud, that knowledge is not imputed to the principal to defeat the companys claim against the conspirators (as to which rule see Bowstead & Reynolds on Agency 20th ed 2014 paras 8 207 (article 95 rule 4) and 8 213).
When the case returned to the Court of Appeal after a retrial, (Belmont Finance Corporation Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 (Belmont No 2)) the courts findings made clear that the transaction had been approved by resolution at a formal board meeting of A and completed at two further board meetings, including by the sealing by A of the share transfers of Bs issued share capital (Buckley LJ at p 398G H).
Although the transaction was clearly subject to what Lord Hoffmann in the Meridian Global Funds case [1995] 2 AC 500 described as the primary rules of attribution, the knowledge which some of As directors (Mr James and Mr Foley) had of the illegal transaction and their misfeasance was not attributed to A so as to bar its claim but was attributed to the defendant parent companies of which they were officers. 200.
We think that the court would have reached the same conclusion in the Belmont case if it had approached the question of attribution on the basis that the board of directors of A was its directing mind and will because the company was pursuing a claim against, among others, its directors for conspiracy.
Were it otherwise a company could not vindicate its rights against its directors and those who assisted them or benefited from the conspiracy.
This approach is consistent with the older case of Gluckstein v Barnes [1900] AC 240, in which the promoters of a company, who also comprised its entire board of directors, were aware of a secret profit which they made on the asset which they had sold to the company.
The House of Lords looked at the question of disclosure in the context of the particular claim.
The Earl of Halsbury LC thought that it was absurd to suggest that the knowledge of those who were hoodwinking the shareholders should be treated as disclosed to the company (p 247) and Lord Robertson (p 258) agreed, stating colourfully that the boardroom was occupied by the enemy. 201.
Finally, in Moulin Global Eyecare Trading Ltd v Commissioner of Inland Revenue, to which we have referred, the Court of Final Appeal of Hong Kong was concerned with a claim by way of judicial review by an insolvent companys liquidator to be entitled to object out of time to tax assessments and obtain repayment of the tax paid on the basis that its former management had fraudulently inflated its profits over several years.
The companys entitlement to object out of time and also to claim repayment based on error in its tax returns depended on whether the company was attributed with its managers knowledge of the fraud.
The majority of the court held that the company was to be attributed with the knowledge of its management.
In the leading judgment, which contained an admirable analysis of the law, Lord Walker of Gestingthorpe NPJ supported an approach to the attribution to a company of a directors knowledge in civil cases which had regard to the factual situation in which they arose and the purpose of the legal rules that were in play.
See his summary (at para 129).
He distinguished between: (i) claims by the company against its directors or employees and their accomplices for loss which the company suffered as a result of their wrongdoing, where it was absurd to allow the directors or employees to rely on their own awareness of their wrongdoing and attribute it to the company as a defence against its claim, and (ii) third party claims against a company for loss caused to the third party by the misconduct of a director or employee, where the dishonesty of the director or employee would not prevent his act and knowledge being attributed to the company. 202.
It is clear from those cases that a finding that a person is for a specific purpose the directing mind and will of a company, when it is not merely descriptive, is the product of a process of attribution in which the court seeks to identify the purpose of the statutory or common law rule or contractual provision which might require such attribution in order to give effect to that purpose.
Similarly, when the question of attribution arises in the context of an agency relationship, the nature of the principals or other partys claim is highly material as the learned editors of Bowstead and Reynolds discuss at para 8 213.
Even when the primary rules of attribution apply, where the transaction is approved by the board of directors and completed under company seal as in Belmont (No 2), the court will not attribute to a company its directors or employees knowledge of their own wrongdoing to defeat the companys claim against them and their associates.
We agree with Lord Walker in Moulins case when (at para 113) having discussed the Court of Appeals judgment in this case he stated: the crucial matter of context includes not only the factual and statutory background, but also the nature of the proceedings in which the question [of attribution] arises. 203.
In our view, that applies to the knowledge of directors whether one applies the primary rules of attribution of the companys constitution (the cases of Gluckstein v Barnes and Belmont (No 2)), the rules of attribution of agency (Belmont (No 1)), or the special rules of attribution which Lord Hoffmann discussed in the Meridian Global Funds case.
Where a companys liability is only vicarious, it is attributed with responsibility for the act of the other, usually the employee; but neither the others act nor his or her state of mind is attributed to the company. 204.
It is helpful in the civil sphere, to consider the attribution of knowledge to a company in three different contexts, namely (i) when a third party is pursuing a claim against the company arising from the misconduct of a director, employee or agent, (ii) when the company is pursuing a claim against a director or an employee for breach of duty or breach of contract, and (iii) when the company is pursuing a claim against a third party. 205.
In the first case, where a third party makes a claim against the company, the rules of agency will normally suffice to attribute to the company not only the act of the director or employee but also his or her state of mind, where relevant.
In this context, the company is like the absent human owner of a business who leaves it to his managers to run the business, while he spends his days on the grouse moors (to borrow Staughton LJs colourful metaphor in PCW Syndicates v PCW Reinsurers [1996] 1 WLR 1136, 1142).
Where the rules of agency do not achieve that result, but the terms of a statute or contract are construed as imposing a direct liability which requires such attribution, the court can invoke the concept of the directing mind and will as a special rule of attribution.
Thus where the company incurs direct liability as a result of a wrongful act or omission of another (as in Lennards Carrying Co Ltd v Asiatic Petroleum Co Ltd and McNicholas Construction Co Ltd v Customs and Excise Comrs) it is deemed a wrongdoer because of those acts or omissions.
If it is only vicariously liable for its employees tort, it is responsible for the act of the other without itself being deemed a wrongdoer and without the employees state of mind being attributed to it. 206.
In the second case, where the company pursues a claim against a director or employee for breach of duty, it would defeat the companys claim and negate the directors or employees duty to the company if the act or the state of mind of the latter were to be attributed to the company and the company were thereby to be estopped from founding on the wrong.
It would also run counter to sections 171 to 177 of the 2006 Act, which sets out the directors duties, for the act and state of mind of the defendant to be attributed to the company.
This is so whether or not the company is insolvent.
A company can be attributed with knowledge of a breach of duty when, acting within its powers and in accordance with section 239 of the 2006 Act, its members pass a resolution to ratify the conduct of the director.
But, as this court discussed in Prest v Petrodel Resources Ltd [2013] 2 AC 415, para 41, shareholders of a solvent company do not have a free hand to treat a companys assets as their own.
Further, as we have discussed, actual or impending insolvency will require the directors to consider the interests of the companys creditors when exercising their powers.
This might prevent them from seeking such ratification.
Similarly, where a company ratifies a breach of duty by an agent or employee, it must be attributed with the relevant knowledge.
But otherwise, as the courts have recognised since at least Gluckstein v Barnes [1900] AC 240, it is absurd to attribute knowledge to the company and so defeat its claim. 207.
In the third case, where the company claims against a third party, whether or not there is attribution of the directors or employees act or state of mind depends on the nature of the claim.
For example, if the company were claiming under an insurance policy, the knowledge of the board or a director or employee or agent could readily be attributed to the company in accordance with the normal rules of agency if there had been a failure to disclose a material fact.
But if the claim by the company, for example for conspiracy, dishonest assistance or knowing receipt, arose from the involvement of a third party as an accessory to a breach of fiduciary duty by a director, there is no good policy reason to attribute to the company the act or the state of mind of the director who was in breach of his fiduciary duty.
If the company chose not to sue the director who was in breach of his duty, the third party defendant could seek a contribution from him or her under the Civil Liability (Contribution) Act 1978.
We have set out above why we consider that the defence of illegality is not available to a companys directors or their associates who are involved in a conspiracy against the company or otherwise act as accessories to the directors breach of duty.
Equally, there is no basis for attributing knowledge of such behaviour to the company to found an estoppel. 208.
In the present case Patten LJ rightly stated that attribution of the conduct of an agent so as to create liability on the part of the company depends very much on the context in which the issue arises.
He said that as between the company and the defrauded third party, the company should be treated as a perpetrator of the fraud; but that in the different context of a claim between the company and the directors, the defaulting directors should not be able to rely on their own breach of duty to defeat the operation of the provisions of the Companies Act in cases where those provisions were intended to protect the company (paras 34 and 35). 209.
We agree.
Accordingly, if, contrary to our view, the doctrine of illegality were insensitive to context and to competing aspects of public policy, the rules of attribution would achieve the same result and preserve Biltas claim.
Insolvency Act 1986 section 213 210.
The appellants second challenge is that the courts powers under section 213 of IA 1986 do not extend to people and corporations resident outside any of the jurisdictions of the United Kingdom. 211.
Section 213 of IA 1986 provides: (1) If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect. (2) The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above mentioned are to be liable to make such contributions (if any) to the companys assets as the court thinks proper. 212.
The appellants accept that the English courts have jurisdiction in personam.
Their challenge is to the courts subject matter jurisdiction as discussed by Hoffmann J in MacKinnon v Donaldson, Lufkin and Jenrette Securities Corpn [1986] 1 Ch 482, 493 and Lawrence Collins LJ in Masri v Consolidated Contractors International (UK) Ltd and Others (No 2) [2008] 2 All ER (Comm) 1099, paras 30 and 31.
It relates to whether the court can regulate the appellants conduct abroad.
Whether a court has such subject matter jurisdiction is a question of the construction of the relevant statute.
In the past it was held as a universal principle that a United Kingdom statute applied only to United Kingdom subjects or foreigners present in and thus subjecting themselves to a United Kingdom jurisdiction unless the Act expressly or by necessary implication provided to the contrary (Ex p Blain (1879) 12 Ch D 522, James LJ at p 526).
That principle has evolved into a question of interpreting the particular statute (Clark v Oceanic Containers Inc [1983] 2 AC 130, Lord Scarman at p 145, Lord Wilberforce at p 152; Masri v Consolidated Contractors (UK) Ltd and others (No 4) [2010] 1 AC 90, Lord Mance at para 10; and Cox v Ergo Versicherung [2014] AC 1379, Lord Sumption at paras 27 29).
In Cox Lord Sumption suggested that an intention to give a statute extra territorial effect could be implied if the purpose of the legislation could not effectually be achieved without such effect (para 29). 213.
In our view section 213 has extra territorial effect.
Its context is the winding up of a company registered in Great Britain.
In theory at least the effect of such a winding up order is worldwide (Stichting Shell Pensioenfonds v Krys [2015] 2 WLR 289 at paras 34 and 38).
The section provides a remedy against any person who has knowingly become a party to the carrying on of that companys business with a fraudulent purpose.
The persons against whom the provision is directed are thus (a) parties to a fraud and (b) involved in the carrying on of the now insolvent companys business.
Many British companies, including Bilta, trade internationally.
Modern communications enable people outside the United Kingdom to exercise control over or involve themselves in the business of companies operating in this country.
Money and intangible assets can be transferred into and out of a country with ease, as the occurrence of VAT carousel frauds demonstrates.
We accept what HMRC stated in their written intervention: there is frequently an international dimension to contemporary fraud.
The ease of modern travel means that people who have committed fraud in this country through the medium of a company (or otherwise) can readily abscond abroad.
It would seriously handicap the efficient winding up of a British company in an increasingly globalised economy if the jurisdiction of the court responsible for the winding up of an insolvent company did not extend to people and corporate bodies resident overseas who had been involved in the carrying on of the companys business. 214.
In our view the Court of Appeal reached the correct decision in In re Paramount Airways Ltd [1993] Ch 223, in which it held that the court had jurisdiction under section 238 of IA 1986 (which empowers the court to make orders against any person to reverse transactions at an undervalue) to make an order against a foreigner resident abroad.
Sir Donald Nicholls V C expressed the view (p 239D E) that Parliament did not intend to impose any limitation on the expression any person in sections 238 and 239 of IA 1986 and that it must be left to bear its literal, natural meaning.
We reach the same conclusion in relation to the use of that expression in section 213 for essentially the same reasons.
The section, like sections 238 and 239 and also section 133 (which concerns the public examination of persons responsible for the formation and running of a British company) share the statutory context of the winding up of a British company.
The Court of Appeal considered section 133 in In re Seagull Manufacturing Co Ltd [1993] Ch 345.
Peter Gibson J, who produced the leading judgment, expressed the views (a) that Parliament could not have intended that a person who had been responsible for the state of affairs of an insolvent British company should escape liability to be investigated simply because he was not within the jurisdiction (p 354G H) and (b) that reasons of international comity would not prevent the summoning for public examination of a person who had participated in the running of a British company (p 356E).
Hirst LJ said (p 360G H) that the process of investigating why a company had failed would be frustrated if a non resident director were immune from public examination.
Again, that reasoning is in our view both correct and equally applicable to section 213. 215.
The appellants argued that it was wrong that they should be required to defend themselves against a claim when it would only be after the substantive hearing that the court could decide whether to exercise its jurisdiction on the basis that the defendants were sufficiently connected with England.
We do not agree.
While the court which hears the claim will have to decide whether in all the circumstances the appellants are sufficiently connected with England, we think that the respondents have a good arguable case that they are.
The substance of the section 213 allegation is that the appellants were party to a conspiracy to defraud Bilta in the context of a wider VAT fraud, that they were parties to the conduct of Biltas business to that end, and that Jetivia obtained the proceeds of that fraud.
If Biltas liquidators establish those allegations after trial, we think it is likely that the court would decide to exercise its jurisdiction under section 213 of IA 1986 against the appellants, their foreign residence notwithstanding. 216.
Biltas liquidators also asserted that the English courts had jurisdiction by virtue of article 3(1) Council Regulation 1346/2000 on insolvency proceedings (the European Insolvency Regulation).
It provides: The courts of the member state within the territory of which the centre of a debtors main interests is situated shall have jurisdiction to open insolvency proceedings.
In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary. 217.
In Schmid v Hertel (Case C 328/12) [2014] 1 WLR 633, the Court of Justice of the European Union (CJEU) held (a) that article 3(1) conferred international jurisdiction to hear and determine actions which derive directly from those proceedings and which are closely connected with them (para 30) and (b) that the court of the relevant Member State had jurisdiction to hear and determine an action to set aside a transaction by virtue of insolvency that is brought against a person who is not resident in the territory of a Member State (para 39).
Thus, Biltas liquidators submitted, the European Insolvency Regulation, so interpreted, conferred jurisdiction against both appellants.
On the other hand, the appellants submitted that the question whether the territorial reach of section 213 of IA 1986 was worldwide was now governed by the European Insolvency Regulation, whose natural meaning was that it related to relationships between Member States and not with third party states.
Mr Maclean said that the decision in Schmid was controversial and suggested that there should be a reference to the CJEU to determine whether the section 213 proceedings were covered by the European Insolvency Regulation. 218.
We do not think that it is necessary to rely on the European Insolvency Regulation as the Court of Justice has interpreted it in Schmid in order to determine whether there is subject matter jurisdiction against Jetivia.
If the proceedings against Jetivia were not covered by the Regulation, there is a basis for the exercise of subject matter jurisdiction in our domestic law, as we have discussed above.
There is therefore no need for a reference to the CJEU.
Conclusion 219.
We therefore would dismiss the appeal. 149.
What divided the minority (Lords Scott and Mance) from the majority is that they took a different view about the classes of parties in respect of whose interests the auditors owed a duty of care.
They both regarded the insolvency of the company as critical, but Lord Mance set out his reasoning more fully.
He held that just as a directors fiduciary duty to a company which is insolvent or bordering on insolvency embraces a duty to the companys creditors, a parallel principle applied to the auditor, so that the duty of care owed by an auditor to such a company embraced a duty to have regard to the interests of the creditors.
He distinguished Berg v Adams because in that case the company was solvent at each audit date (paras 260 and 265).
He said that the fact that Stone & Rolls was insolvent at each audit date was critical.
He defined the issue as being whether the auditors duty to the company extended, like the directors, beyond the protection of the interests of shareholders in a situation where the auditors ought to have detected the companys insolvency.
He observed that the centrality of this issue may have been obscured by the spread of argument over other issues (para 265).
He considered that it was not inconsistent with Caparo to hold that the company was entitled to pursue a claim against the auditors for loss resulting from its breach of its duty in failing to detect that the company was subject to a continuing fraudulent scheme in circumstances in which it was insolvent (paras 269 271).
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Bilta (UK) Ltd was compulsorily wound up in November 2009 pursuant to a petition presented by HMRC.
Biltas liquidators then brought proceedings against its two former directors (the directors) and against Jetivia SA, (a Swiss company) together with Jetivias chief executive (the appellants).
The claim alleges that the appellants and the directors were parties to an unlawful means conspiracy to injure Bilta by a fraudulent scheme, which involved the directors breaching their fiduciary duties as directors, and the appellants dishonestly assisting them in doing so.
The conspiracy alleged is that between April and July 2009, the directors caused Bilta to enter into a series of transactions relating to European Emissions Trading Scheme Allowances (commonly known as carbon credits) with various parties, including Jetivia, and that those transactions constituted what is known as a carousel fraud, a species of VAT fraud.
The liquidators now claim (i) through Bilta, (a) damages in tort from each of the four defendants, (b) compensation based on constructive trust from the appellants, and (ii) directly from each of the four defendants, a contribution under section 213 of the Insolvency Act 1986.
The appellants applied to strike out Biltas claim on the basis (i) that the appellants were bound to defeat the claims against them on the basis of a defence of illegality and, (ii) in relation to the section 213 claim, that it could not be invoked against the appellants as section 213 does not have extra territorial effect.
In essence, the appellants argument on illegality was that Biltas claims against its directors are barred by reason of the criminal nature of Biltas conduct while under their control.
Allegedly, Biltas function was to serve as a vehicle for defrauding HMRC, and the appellants argued that the doctrine of illegality bars Bilta from suing the directors as a means of recovering the companys loss for the benefit of the companys creditors.
This raises the issues of (i) the purpose of the illegality defence and its application in relation to Biltas claims and (ii) the circumstances in which the knowledge of directors and other persons is attributed to a legal person such as a registered company.
The Supreme Court unanimously dismisses the appeal both in relation to the illegality defence and in relation to section 213.
On the first ground, the Court unanimously holds that the illegality defence cannot bar Biltas claims against the appellants on the basis that the conduct of the directors cannot be attributed to the company in the context of a claim against the directors for a breach of their duties.
On the second ground, the Supreme Court holds that section 213 of the Insolvency Act 1986 has extra territorial effect, and therefore can be invoked against the appellants.
Attribution A company has separate legal personality, but it can act only through its directors and agents.
In most circumstances the acts and state of mind of a companys directors and agents can be attributed to the
company by applying the rules of the law of agency; however, whether an act or state of mind is attributed to a company depends upon the context in which the question arises [41, 92, 181].
When the question of attribution arises in the context of an agency relationship, the nature of the principals or other partys claim is highly material [87 91, 202].
In an action like the present for breach of duty against directors for using the company to commit a fraud on a third party in a way alleged to have caused the company loss, it is inappropriate to attribute to the company the fraud to which the alleged breach of duty relates, even if it is being practised by a person whose acts and state of mind would be attributable to it in other contexts [7 9, 71, 181].
As between the company and a defrauded third party, the company should be treated as a perpetrator of the fraud but in the different context of a claim between the company and the directors, the defaulting directors should not be able to rely on their own breach of duty to defeat the operation of the provisions of the Companies Act in cases where those provisions were intended to protect the company [42 43, 208].
A claim by a company against its directors could be said to be the paradigm case where attribution is inappropriate [89].
For these reasons all of the members of the Supreme Court would dismiss the appeal on the illegality defence.
The purpose and scope of the illegality defence Lord Neuberger (Lord Clarke and Lord Carnwath agreeing) and Lord Mance all consider that this is an inappropriate case in which to decide, on a general basis, the proper approach to the defence of illegality, though they (together with Lord Toulson and Lord Hodge) emphasise the need for a review of the law of illegality by the Supreme Court in an appropriate case [15 17, 34, 174].
Lord Toulson and Lord Hodge express the view that the defence of illegality is a rule of public policy which depends on the nature of the particular claim brought by the claimant and the relationship between the parties [122].
In this case, the fiduciary duties of a director of a company which is insolvent requires the director to have proper regard for the interests of its creditors [123 126].
Such protection would be empty if it could not be enforced [127].
The doctrine of illegality has been developed on the ground of public policy and in the circumstances of this case, to allow the directors to escape liability for breach of their fiduciary duty on the ground that they were in control of the company would undermine the duty in the very circumstances in which it is required [129 130].
Lord Sumption, by contrast, regards the defence of illegality as a rule of law, independent of any judicial value judgment about the balance of the equities in each case [62].
Lord Sumption expressly disagrees with the statutory policy argument put forward by Lord Toulson and Lord Hodge.
Does Section 213 of the Insolvency Act 1986 have extra territorial effect? The Supreme Court unanimously holds that section 213 does have extra territorial effect.
Section 213 provides a remedy against any person who has knowingly become a party to the carrying on of that companys business with a fraudulent purpose.
The provision is directed against (a) parties to a fraud and (b) persons involved in the carrying on of the now insolvent companys business.
The context of section 213 is the winding up of a company registered in Great Britain; however, the effect of such a winding up order is worldwide.
It would seriously handicap the efficient winding up of a British company in an increasingly globalised economy if the jurisdiction of the court responsible for the winding up of an insolvent company did not extend to people and corporate bodies resident overseas who had been involved in the carrying on of the companys business [108, 213].
Moreover Section 238, a provision in similar terms to section 213, has previously been held by the Court of Appeal to apply without territorial limitations [110, 214].
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In March 1998 Mr Brian Pitchers owned two buildings, at 23 and 25 Moss Street, Paisley.
The tenants of the ground floor shop at number 23 were Morrison Sports Ltd (Morrison Sports).
On 6 March 1998 the building at number 23 was destroyed by fire.
The neighbouring building at number 25 was also damaged and had to be demolished.
This left the gable wall between numbers 25 and 27 exposed.
As a result, the owners of flats at 27 Moss Street had to carry out weatherproofing work to the gable wall.
Investigations identified the seat of the fire as an electricity meter cupboard in number 23.
Mr Pitchers, Morrison Sports Ltd and the flat owners at 27 Moss Street (the pursuers) raised three separate actions for damages against Scottish Power UK plc (Scottish Power) in Glasgow Sheriff Court.
The actions were remitted to the Court of Session.
All three actions are framed in the same way.
The pursuers aver that, in order to improve the fit between the prongs and the fuse holder, a metal shim had been wrapped around the end of the prongs of the cut out fuse before it was inserted into the fuse holder in the ground floor premises at number 23.
The pursuers further aver that the presence of the shim caused heating and that this led to arcing which in turn caused the fire.
The pursuers allege that the shim was fitted by employees of Scottish Power.
Scottish Power largely admit the pursuers averments as to the cause of the fire, but deny that the shim was fitted by their employees.
They believe and aver, rather, that the cut out fuse had been tampered with by someone acting on behalf of Morrison Sports.
On the basis of their factual averments the pursuers seek to hold Scottish Power liable on two bases.
First, they allege that Scottish Power are vicariously liable for the negligence of their employees in fitting the shim.
Secondly, and separately, in article 6 of condescendence they aver that the fire was caused by Scottish Powers breach of their statutory duty under regulations 17, 24 and 25 of the Electricity Supply Regulations 1988 (SI 1988 no 1057) (the 1988 Regulations).
The defenders deny the averments of fault and aver that the fire was caused by the sole fault of Morrison Sports.
Scottish Power accept that a proof before answer must be allowed in respect of the pursuers common law case of negligence.
But they plead that the pursuers averments in article 6 of condescendence, relating to the alleged breach of statutory duty, are irrelevant and should not be admitted to probation.
In short, Scottish Power submit that a breach of the relevant provisions of the 1988 Regulations does not give rise to any liability in damages to those who may suffer loss as a result of the breach.
The Lord Ordinary (Lord Wheatley) rejected Scottish Powers argument and allowed a proof before answer on the whole case: 2007 CSOH 131; 2007 SLT 1103.
Scottish Power reclaimed, but, varying the Lord Ordinarys interlocutor, an Extra Division (Lady Paton, Lady Dorrian and Lord McEwan) repelled Scottish Powers plea to the relevancy insofar as it extends to the pursuers averments in article 6 of condescendence: 2009 CSIH 92; 2010 SLT 243.
In effect, therefore, they allowed a proof of those averments.
Before this Court the Dean of Faculty explained that, in pronouncing this particular interlocutor, the Extra Division proceeded on the basis of a concession that, if they rejected Scottish Powers argument that a breach of the regulations did not give rise to civil liability, the averments in article 6 should be treated as being otherwise relevant.
The 1988 Regulations were made by the Secretary of State by virtue of his powers under section 16 of the Energy Act 1983 (the 1983 Act).
So far as relevant, section 16 provided: The Secretary of State may make such regulations as he thinks fit for the purpose of (a) securing that supplies of electricity by Electricity Boards or other persons are regular and efficient; and (b) eliminating or reducing the risk of personal injury, or damage to property or interference with its use, arising from the supply of electricity by an Electricity Board or any other person, from the use of electricity so supplied or from the installation, maintenance or use of any electrical plant. (3) Regulations under this section may provide that any person who contravenes any specified provision of the regulations, or any person who does so in specified circumstances, shall be guilty of an offence under this section. (4) A person guilty of an offence under this section shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale.
In 1988 section 16 was the latest embodiment of a power to make regulations, for securing the supply of electricity and for preserving the safety of life and property, which has existed in different incarnations since the earliest days of the public supply of electricity in this country.
See, for instance, section 6 of the Electric Lighting Act 1882 and section 60(1) of the Electricity Act 1947.
Part I of the 1983 Act, including section 16, was repealed by the Electricity Act 1989 (the 1989 Act), but the power to make regulations was maintained in section 29 of the new Act which, so far as relevant, provides: (1) The Secretary of State may make such regulations as he thinks fit for the purpose of (a) securing that supplies of electricity are regular and efficient; (b) protecting the public from dangers arising from the generation, transmission, distribution or supply of electricity, from the use of electricity interconnectors, from the use of electricity supplied or from the installation, maintenance or use of any electric line or electrical plant; and (c) without prejudice to the generality of paragraph (b) above, eliminating or reducing the risks of personal injury, or damage to property or interference with its use, arising as mentioned in that paragraph. (2) Without prejudice to the generality of subsection (1) above, regulations under this section may (e) make provision requiring compliance with notices given by the Secretary of State specifying action to be taken in relation to any electric line or electrical plant, or any electrical appliance under the control of a consumer, for the purpose of (i) preventing or ending a breach of regulations under this section; or (ii) eliminating or reducing a risk of personal injury or damage to property or interference with its use. (3) Regulations under this section may provide that any person (a) who contravenes any specified provisions of the regulation; or (b) who does so in specified circumstances, shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale; but nothing in the subsection shall affect any liability of any such person to pay compensation in respect of any damage or injury which may have been caused by the contravention.
In the Court of Session Scottish Power argued that, even though the 1983 Act had been repealed by the 1989 Act, the court should proceed on the basis that the 1988 Regulations still have effect on the basis that they were made under the 1983 Act.
Under reference to para 3(a) of Schedule 17 to the Electricity Act 1989 (the 1989 Act), however, the Extra Division rejected that argument and held that the 1988 Regulations have effect as if they were made under section 29 of the 1989 Act.
Scottish Power now accept this and so there is no need to examine that particular argument: the 1988 Regulations are to be treated as having effect as if they had been made under section 29(1) of the 1989 Act.
The difference between section 16 of the 1983 Act and section 29 of the 1989 Act and, hence, the point of the dispute in the Court of Session lies in the concluding words of section 29(3).
While both section 16(3) and (4) of the 1983 Act and section 29(3) of the 1989 Act envisage that regulations may provide for a person who contravenes the regulations, or who does so in specified circumstances, being guilty of a criminal offence and liable to a fine not exceeding level 5 on the standard scale, section 29(3) goes on to provide that nothing in subsection (3) shall affect any liability of any such person to pay compensation in respect of any damage or injury which may have been caused by the contravention.
Regulation 39 of the 1988 Regulations does indeed provide that any supplier who fails to comply with any provision of the Regulations shall be guilty of an offence under section 16 of the 1983 Act, now section 29(3) of the 1989 Act.
It follows that, if, as the pursuers aver, Scottish Power failed to comply with regulations 17, 24 and 25 of the 1988 Regulations, they would be liable to a fine under section 29(3).
In these circumstances the Extra Division attributed critical importance, for present purposes, to the concluding words of section 29(3).
They noted that section 27(5) of the 1989 Act provides for a licence holder to be liable in damages to those suffering loss as a result of a breach of a final or provisional order; similarly, section 39 provides for a public electricity supplier to make compensation to any person affected by a failure to meet a prescribed standard of performance.
The Extra Division then said, 2010 SLT 243, 252, paras 43 46: This is not therefore a regulatory scheme conferring no private rights of action for damages.
On the contrary, it is a regulatory scheme conferring certain private rights of action for damages.
Thus it is a different type of statutory scheme from those being considered by Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633 when he noted at page 731G H: Although the question is one of statutory construction and therefore each case turns on the provisions in the relevant statute, it is significant that your Lordships were not referred to any case where it had been held that statutory provisions establishing a regulatory system or a scheme of social welfare for the benefit of the public at large had been held to give rise to a private right of action for damages for breach of statutory duty. 44.
Against that background, while criticisms might be levelled at the style of drafting (in particular the apparent introduction of an important private right of action for damages by reservation in section 29(3) of the 1989 Act), we consider that the plain meaning of section 29(3) is that Parliament intended any member of the public who suffers any damage or injury which may have been caused by the contravention of the 1988 Regulations to be entitled to raise an action for damages against the person who contravened the regulations, founding the action upon that breach of statutory duty. 45.
We accept that a similar reservation provision relating to compensation did not appear in the 1983 Act.
Thus the wording of section 29(3) represents an important innovation.
However as was made clear in Stevens v General Steam Navigation Co Ltd [1903] 1 KB 890, the proper approach to the construction of statutory provisions may change if Parliament directs that the provisions are to be construed in terms of a later, modified, enactment. 46.
In the result therefore, when construing the Electricity Supply Regulations 1988 as if they had been made under section 29 of the Electricity Act 1989, Parliament's intention is in our view clear, and it is unnecessary to define a protected class.
The Extra Division were, of course, right to point out that the scheme of the 1989 Act makes provision in section 27(5) for individuals to recover damages and in section 39 for the payment of compensation to individuals.
But, where Parliament has made specific provision of this kind in two sections, the natural inference is that it does not intend there to be a right to damages or compensation for loss or injury caused by other breaches of the statute or of subordinate legislation for which no such specific provision is made.
As emerges from para 44 of their judgment, however, the Extra Division thought that, by enacting section 29(3), Parliament had indeed made specific provision for a private right of action of damages for loss caused by breaches of the regulations.
They considered that in section 29(3) Parliament had introduced an important private right of action for damages by reservation.
In other words, although the Division appear to have accepted that, on its face, the relevant words in section 29(3) merely make a reservation, they nevertheless held that, by using these words, Parliament actually intended to introduce, and did introduce, a new right of action.
The Division indicate that the drafting of this provision might be open to criticism for the style of the legislative language used to create the right.
Nevertheless, in their view, the plain meaning of section 29(3) of the 1989 Act is that Parliament intended any member of the public who suffers any damage or injury due to a contravention of the 1988 Regulations to be entitled to raise an action of damages for loss caused by the contravention.
In the hearing before this Court, Mr Ivey QC, who appeared for the pursuers, adopted the reasoning of the Extra Division.
Indeed, he expressly conceded that section 29(3) was the only indication in either the 1989 Act or in the 1988 Regulations that a person who contravened a provision of the Regulations would, ipso facto, be liable in damages to anyone who suffered loss as a result.
The Extra Divisions construction of section 29(3) is untenable.
There is no basis whatever for thinking that the drafter of the provision intended to introduce a civil right of action but somehow botched that comparatively straightforward task and came up with the words in the subsection which are so singularly ill suited to the supposed purpose.
On the contrary, the main thrust of the subsection is to provide that, where the regulations so stipulate, a person who contravenes a provision is to be guilty of a criminal offence carrying a maximum penalty of a fine not exceeding level 5 on the standard scale.
The subsection then goes on, in unmistakable terms, to provide that this criminal liability is not to affect any liability of that person to pay compensation in respect of any damage or injury caused by the contravention.
So far from itself providing that such a person should be liable to pay compensation, the subsection merely confirms that liability to the criminal penalty is not to affect any liability of the offender to pay compensation.
By any liability Parliament means the offenders liability, if any, to pay compensation.
Since section 29(3) cannot be construed as introducing a private right of action, it is, strictly speaking, unnecessary for present purposes to determine its precise scope.
One feature which stands out, however, is the reference to liability to pay compensation.
As the Extra Division held, this cannot be a reference to the compensation which may be payable under section 27(5) or section 39(3) of the 1989 Act, since section 29(3) is dealing with contraventions of regulations made under section 29(1).
The industry of junior counsel for Scottish Power has, however, cast some light on the language of the subsection, which can be seen to reflect language used in earlier regulations.
As already noted, section 6 of the Electric Light Act 1882 gave the Board of Trade power to make such regulations as they might think expedient for securing the safety of the public from personal injury or from fire or otherwise.
Section 2 of the Electricity (Supply) Act 1919 made provision for Electricity Commissioners to exercise that power.
The Commissioners proceeded to do so.
Regulation 35 of the (A) Regulations for Securing the Safety of the Public made by the Electricity Commissioners under the Electricity (Supply) Acts 1882 to 1922 provided for undertakers who failed to comply with any of the regulations to be liable to a criminal penalty.
Regulation 35 added: The recovery of a penalty under these regulations shall not affect the liability of the undertakers to make compensation of any damage or injury which may be caused by reason of the default.
In Stevens v Aldershot Gas, Water and District Lighting Co (1932) LJKB 12 the plaintiff alleged that she had suffered damage to electrical apparatus and loss of profits because the defendants had failed to supply electric current at the voltage at which they had said that they would.
Macnaghten J explained that the question was whether, if they have failed in that obligation, the plaintiff has a remedy at common law or is she limited to penalties in a court of summary jurisdiction? His Lordship held that the plaintiff was limited to the penalties.
In the course of what appears to have been an extempore judgment, Macnaghten J noted that the (B) Regulations which he had to apply, and which related to ensuring a proper supply, did not contain an equivalent of regulation 35.
This may suggest that he took the inclusion of regulation 35 in the regulations for securing the safety of the public to be some kind of an indication that an undertaker would be civilly liable for a breach of those regulations.
But the remark was obiter and he did not explore the point.
In December 1936 the Commissioners made a new set of Regulations, the Electricity Supply Regulations 1937.
Regulation 39 again made provision for a criminal penalty to be imposed for non compliance with the Regulations, but provided that The recovery of a penalty under these Regulations shall not affect the liability (if any) of the Undertakers to make compensation in respect of any damage or injury which may have been caused by reason of the default.
Note that the liability (if any) of the Undertakers replaces the reference to the liability of the undertakers in the old regulation 35.
Regulation 39 of the 1937 Regulations was considered by the Court of Appeal (Morton, Tucker and Somervell LJJ) in Heard v Brymbo Steel Company Ltd [1947] KB 692.
The plaintiff was injured in an explosion at the factory in which he worked.
It was held that the explosion had been due to a short circuit which had occurred because of breaches by the second defendants, the North Wales Power Co Ltd, of regulations 24 and 25 of the Electricity Supply Regulations 1937.
It was accepted that the Electric Lighting (Clauses) Act 1899 applied to the power company.
Paragraph 77 of the schedule to that Act provided for undertakers to be answerable for all accidents, damages and injuries happening through their act or default default being a word that was to be found in regulation 39.
In these circumstances the Court of Appeal held the power company liable in damages for the plaintiffs injuries.
Somervell LJ explained, at p 699, that the default, which was a breach of regulations 24 and 25, and which might cause damage or injury under regulation 39, was a default for which undertakers were answerable under para 77 of the schedule to the 1899 Act.
In other words, the power company were held liable to pay damages, not because the breaches of regulations 24 and 25 of the 1937 Regulations per se gave rise to civil liability, but because the default which constituted the breach of those regulations was also a default which made the company liable to pay damages under para 77 of the schedule to the 1899 Act.
The 1899 Act was repealed by the 1989 Act.
It is unnecessary to trace the subsequent course of the legislation governing the supply of electricity before the 1983 Act.
Enough has been said to suggest that, when Parliamentary counsel came to draft section 29(3) of the 1989 Act, the choice of language was influenced by the language which had been used in the old regulations.
Hence, in particular, the use of the term compensation.
On the other hand there is nothing to show why the tailpiece was omitted from section 16(4) of the 1983 Act but inserted in section 29(3) of the 1989 Act.
The fact that the language of section 29(3) can be traced back at least as far as the earlier of the two sets of regulations made by the Electricity Commissioners does, however, undermine part of the reasoning of Mr Peregrine Simon QC, Deputy High Court Judge, in A E Beckett & Sons (Lyndons) Ltd v Midland Electricity Plc 2000 WL 664506.
The claimants alleged that they had suffered loss as a result of the defendants breach of regulation 25(1) of the 1988 Regulations.
Having referred to the indicators of liability for breach of a statutory provision in the speech of Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, the Deputy High Court Judge continued at para 31: It is arguable that the claimants fell within a class which was intended to be protected by regulations introduced under the powers conferred by section 29(1)(c): namely, those affected by the risks of damage to property.
However, in my judgment, the claimants fail at the second stage of the analysis in that it is clear that Parliament did not intend to confer a private right to claim damages for a breach of the statutory duty.
First, the sanction of the criminal law for breach of the Regulations provides a clear method of securing the protection that the statute was intended to confer and militates against the intention to create private rights of action.
Secondly, by section 29(4), the power to bring criminal proceedings is confined to the Secretary of State and the DPP.
This suggests that Parliament did not intend a breach of the regulations to be widely invoked.
Thirdly, the claimants rely on the reference to compensation in section 29(3) as showing that the Act contemplated a civil action for breach of the [regulations].
However, the reference to compensation in section 29(3) is, in its context, clearly a reference to a claim for compensation under section 35 of the Powers of Criminal Courts Act 1973 and not to a civil action.
Although the decision was reversed on appeal, [2001] 1 WLR 281, this part of the reasoning was not affected.
The equivalent of section 35 of the Powers of Criminal Courts Act 1973 in Scots Law is to be found in section 249 of the Criminal Procedure (Scotland) Act 1980, which derives from section 58 of the Criminal Justice (Scotland) Act 1980.
Since, as has been seen, the term compensation was being used in the present context long before Parliament made provision for criminal courts to make compensation orders, it is implausible to confine the reference in section 29(3) to that kind of compensation.
We would therefore reject the construction adopted in A E Beckett & Sons (Lyndons) Ltd v Midland Electricity Plc.
It is apparent that, in Heard v Brymbo Steel Company Ltd [1947] KB 692, the Court of Appeal considered that the reference to compensation in regulation 35 of the then current regulations was apt to cover a liability to pay damages for a default in complying with regulations which also constituted a default for purposes of para 77 of the schedule to the 1899 Act.
Be that as it may, section 29(3) obviously envisages a situation where a person may contravene a provision of regulations made under the section and be liable to pay compensation for damage or injury which he has thereby caused.
But it does not follow that Parliament is saying that someone who contravenes any provision of any regulations made under the section is automatically liable to pay compensation for any resulting damage or injury.
Rather, it will all depend on the terms of the regulations which the Secretary of State decides to make.
And, of course, the drafter of section 29(3) did not know what regulations the Secretary of State might choose to make in the years to come.
So section 29(3) simply provides that, if in terms of any regulations made under the section a person is to be liable to pay compensation for damage or injury caused by a contravention of some provision of the regulations, then the persons liability to pay that compensation is not affected by his liability to pay a fine for the selfsame contravention.
So it all depends on what the regulations made by the Secretary of State provide.
There is, of course, nothing in the 1988 Regulations which makes express provision for a person who contravenes them to be liable to pay compensation for damage or injury.
In that situation, it is common ground that the well known authorities, as to whether a breach of a statute or subordinate legislation gives rise to a private law statutory right of action, are conveniently summarised in the speech of Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633.
Having separated out a number of different types of case, he dealt with breaches of statutory duty simpliciter, at pp 731 732: This category comprises those cases where the statement of claim alleges simply (a) the statutory duty, (b) a breach of that duty, causing (c) damage to the plaintiff.
The cause of action depends neither on proof of any breach of the plaintiffs' common law rights nor on any allegation of carelessness by the defendant.
The principles applicable in determining whether such statutory cause of action exists are now well established, although the application of those principles in any particular case remains difficult.
The basic proposition is that in the ordinary case a breach of statutory duty does not, by itself, give rise to any private law cause of action.
However a private law cause of action will arise if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty.
There is no general rule by reference to which it can be decided whether a statute does create such a right of action but there are a number of indicators.
If the statute provides no other remedy for its breach and the Parliamentary intention to protect a limited class is shown, that indicates that there may be a private right of action since otherwise there is no method of securing the protection the statute was intended to confer.
If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action: Cutler v Wandsworth Stadium Ltd [1949] AC 398; Lonrho Ltd v Shell Petroleum Co. Ltd. (No 2) [1982] A.C. 173.
However, the mere existence of some other statutory remedy is not necessarily decisive.
It is still possible to show that on the true construction of the statute the protected class was intended by Parliament to have a private remedy.
Thus the specific duties imposed on employers in relation to factory premises are enforceable by an action for damages, notwithstanding the imposition by the statutes of criminal penalties for any breach: see Groves v Wimborne (Lord) [1898] 2 QB 402.
Although the question is one of statutory construction and therefore each case turns on the provisions in the relevant statute, it is significant that your Lordships were not referred to any case where it had been held that statutory provisions establishing a regulatory system or a scheme of social welfare for the benefit of the public at large had been held to give rise to a private right of action for damages for breach of statutory duty.
Although regulatory or welfare legislation affecting a particular area of activity does in fact provide protection to those individuals particularly affected by that activity, the legislation is not to be treated as being passed for the benefit of those individuals but for the benefit of society in general.
Thus legislation regulating the conduct of betting or prisons did not give rise to a statutory right of action vested in those adversely affected by the breach of the statutory provisions, i e bookmakers and prisoners: see Cutler's case [1949] AC 398; Reg v Deputy Governor of Parkhurst Prison Ex parte Hague [1992] 1 AC 58.
The cases where a private right of action for breach of statutory duty have been held to arise are all cases in which the statutory duty has been very limited and specific as opposed to general administrative functions imposed on public bodies and involving the exercise of administrative discretions.
As Lord Browne Wilkinson explains, if a statute provides some means, other than a private law action for damages, of enforcing any duty which it imposes, that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action.
In Cutler v Wandsworth Stadium Ltd [1949] AC 398, 408, Lord Simonds observed that, where the statutory remedy was by way of criminal proceedings for a penalty, it could be argued that the criminal sanction emphasises that the statutory obligation is imposed for the public benefit and, hence, that the breach of it is a public rather than a private wrong.
This is indeed one of the arguments advanced against private law liability for breach of the 1988 Regulations in Beckett & Sons (Lyndons) Ltd v Midland Electricity Plc 2000 WL 664506.
But, in the case of regulations made under section 29 of the 1989 Act, that argument is really neutralised by the terms of section 29(3): the mere fact that there was criminal liability for a contravention would plainly not be inconsistent with there being civil liability to pay compensation for the same contravention.
On the other hand, section 29(2)(e) of the 1989 Act envisages regulations being made to give the Secretary of State power to take enforcement action in relation to any electric line or electrical plant, or any electrical appliance under the control of a consumer for the purpose of preventing or ending a breach of the regulations or eliminating or reducing a risk of personal injury or damage to property or interference with its use.
And regulation 38 of the 1988 Regulations does indeed contain a regulation with precisely that effect.
Section 30 of the 1989 Act provides for the Secretary of State to appoint inspectors to carry out various checks of electric lines and electrical plant, including lines and plant on consumers premises, with a view to determining, inter alia, whether any requirement imposed by or under Part I of the Act has been complied with.
Regulation 33 of the 1988 Regulations provides for inspections by people authorised by the Secretary of State to ascertain whether a breach of the Regulations has occurred.
These provisions point strongly to the conclusion that the regulations are to be enforced by the Secretary of State and those appointed to act on his behalf, rather than by individuals raising private actions.
Indeed, a private right of action to require, say, a supplier to comply with a regulation would be basically inconsistent with this scheme for enforcement by the Secretary of State and his representatives.
Presumably for that reason, Mr Ivey felt obliged to argue that the only right of action arising out of the 1989 Act and the 1988 Regulations was a right to damages, not, say, to interdict or to an action to require compliance with a duty.
Of course, in theory, Parliament could provide for a limited right of this kind.
But, if it had been its intention to do so, it would surely have said so in express terms.
There are further indications that the 1989 Act, as it applied in 1998, envisaged that the legislation would be enforced by means other than private action.
Section 1 provided for the appointment of a Director General of Electricity Supply.
By section 45 it was his duty to investigate any matter which appeared to him to be an enforcement matter.
While the range of such matters was prescribed by section 25 of the Act, section 46 also provided for consumers committees to investigate certain other relevant matters.
The Dean of Faculty drew attention to two other factors which tend to point against a private right of action for contraventions of the 1988 Regulations.
First, regulation 27(1) envisages that a consumer may use his electrical installation in a way that may give rise to danger or cause undue interference with the suppliers system or with the supply to others.
Regulation 28 then contains an elaborate scheme under which the supplier can discontinue supply to the consumers installation.
In addition, where the Secretary of State is satisfied that the suppliers works are being used otherwise than in accordance with the Regulations, he may serve notice on the consumer requiring him to take various steps to deal with the situation.
These regulations therefore envisage situations where a consumer may be in breach of a requirement of the Regulations and where that breach may give rise to a risk of danger to others.
While some consumers of electricity will, of course, be large businesses, others will be individuals.
If the pursuers argument were correct, the Regulations would confer a right of action against them for any failure to comply with a requirement made under these provisions.
Again, it seems unlikely that Parliament intended the legislation to operate in that way and more likely that it intended any such failures to be dealt with in accordance with the specific mechanisms in the legislation.
Secondly, the Dean referred to section 21(b) of the 1989 Act under which a supplier of electricity under section 16(1) of the Act may require any person who requires a supply of electricity to accept any terms restricting any liability of the supplier for economic loss resulting from negligence which it is reasonable in all the circumstances for that person to be required to accept.
If it really were the case that a supplier could be held liable in damages for a contravention of any regulations made under section 29, then the protection afforded by section 21(b) would be ineffective in the not uncommon situation where the suppliers negligence constituted a contravention of the regulations.
Looked at as a whole, therefore, the scheme of the legislation, with its carefully worked out provisions for various forms of enforcement on behalf of the public, points against individuals having a private right of action for damages for contraventions of regulations made under it.
That argument is reinforced by the fact that it is difficult to identify any limited class of the public for whose protection the 1988 Regulations were enacted and on whom Parliament intended to confer a private right of action for breach of the provisions of the Regulations.
In A E Beckett & Sons (Lyndons) Ltd v Midland Electricity Plc 2000 WL 664506 Mr Simon QC thought that it was arguable that regulations introduced under the powers conferred by section 29(1)(c) were intended to protect a class comprising those affected by the risks of damage to property.
The Extra Division were much bolder: assuming that a class required to be identified, they considered that Parliament intended to confer rights upon all members of the public within the United Kingdom: 2010 SLT 252, para 46.
In so holding, the Division relied on a dictum of Atkin LJ in Phillips v Britannia Hygienic Laundry [1923] 2 KB 832, 841.
But, as Neuberger J, speaking for the Court of Appeal, recognised in Todd v Adams and Chope (The Margaretha Maria) [2002] 2 Lloyds LR 293, 298, para 20, that dictum is inconsistent with the approach which was authoritatively laid down by the House of Lords in X (Minors) v Bedfordshire County Council [1995] 2 AC 633 and three other cases.
The Division also referred to Roe v Sheffield City Council [2004] QB 653, 672 673.
But in that case Pill LJ did actually identify a limited class, albeit one as broad as road users.
The potentially far reaching effects of the Extra Divisions approach are well illustrated by the claim of the owners of the flats at number 27 for the costs of weatherproofing their gable wall.
After all, their property suffered no damage in the explosion: their claim arose out of the effects of the demolition of the intervening property at number 25.
On one view, they can simply be regarded as members of the public who are averred to have suffered loss as a result of Scottish Powers breach of the 1988 Regulations.
It seems extremely unlikely, however, that Parliament would ever have intended persons in that position to have a right of action for damages for breach of the 1988 Regulations.
These are the kinds of considerations which have led the courts to hold that one of the necessary preconditions of the existence of a private law cause of action is that the statutory duty in question was imposed for the protection of a limited class of the public.
As support for their view that the Regulations gave rise to a private right of action, the Extra Division attached some weight to the fact that the aim of some of the 1988 Regulations is to reduce the risk of personal injury or damage to property: 2010 SLT 243, 252, para 47.
Even if that is a consideration which can, in an appropriate case, point to an intention on the part of the legislator to create a private right of action, the mixed aims of the 1988 Regulations weaken any argument of that kind in respect of them.
In any event, the fact that legislation is designed to reduce the risk of personal injury or damage to property is by no means an infallible indication that Parliament intended to give individuals a private right of action for breach of its provisions.
It is simply one factor to be taken into account.
See, for example, Weir v East of Scotland Water Authority 2001 SLT 1205, 1210, para 10, where Lord McCluskey considered that, although the water authority was under a statutory duty to supply wholesome water, it was not a duty that was owed to a defined limited class of the public.
The duty was accordingly enforceable in various ways, but not by a private right of action.
For these reasons we are satisfied that contraventions of regulations 17, 24 and 25 of the 1988 Regulations do not give rise to a private right of action.
The appeal must accordingly be allowed, and the interlocutors of the Extra Division and the Lord Ordinary recalled.
The Court will sustain the first plea in law for the defenders in each of the actions to the extent of excluding article 6 of condescendence from probation.
Quoad ultra the Court will allow the parties a proof before answer.
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At the heart of this appeal is whether a breach of certain provisions of the Electricity Supply Regulations 1988 can give rise to a private right of action.
In March 1998 Mr Brian Pritchers owned two buildings, at 23 and 25 Moss Street, Paisley.
The tenants of the ground floor shop at number 23 were Morrison Sports Ltd. On 6 March 1998 the building at number 23 was destroyed by fire.
Two other buildings were also damaged.
Investigations identified the seat of the fire as an electricity meter cupboard in number 23.
Those affected by the fire, who are now the respondents, raised three separate actions for damages against Scottish Power UK plc.
All three actions are framed in the same way.
The respondents aver that it was the presence of a shim fitted by employees of Scottish Power that was the cause of the fire.
Scottish Power deny that the shim was fitted by their employees.
One of the bases on which the respondents seek to hold Scottish Power liable is that the fire was caused by Scottish Powers breach of their statutory duty under regulations 17, 24 and 25 relating to a suppliers works of the 1988 Regulations.
The 1988 Regulations were made by the Secretary of State by virtue of his powers under section 16 of the Energy Act 1983.
Part I of the 1983 Act, including section 16, was repealed by the Electricity Act 1989, but the power to make regulations was maintained in section 29 of the new Act.
Scottish Power now accept that the 1988 Regulations have effect as if they were made under section 29 of the 1989 Act.
The difference between section 16 of the 1983 Act and section 29 of the 1989 Act and, hence, the point in dispute in the Court of Session lies in the concluding words of section 29(3).
Section 29(3) of the 1989 Act, but not section 16(3) and (4) of the 1983 Act, provides that nothing in subsection (3) shall affect any liability of any such person to pay compensation in respect of any damage or injury which may have been caused by the contravention.
The Extra Division thought that, by enacting section 29(3), Parliament had indeed made specific provision for a private right of action for damages for loss caused by breaches of the regulations.
They therefore considered that in section 29(3) Parliament had introduced an important private right of action for damages by reservation.
Scottish Power appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
It holds that contraventions of regulations 17, 24 and 25 of the 1988 Regulations do not give rise to a private right of action.
The judgment of the Court is delivered by Lord Rodger.
There is no basis whatever for thinking that the drafter of section 29(3) of the 1989 Act intended to introduce a civil right of action but somehow botched that comparatively straightforward task and came up with the words in the subsection which are so singularly ill suited to the supposed purpose.
Far from itself providing that a person who contravenes a provision should be liable to pay compensation, the subsection merely confirms that the liability to the criminal penalty is not to affect any liability of the offender to pay compensation.
By any liability Parliament means the offenders liability, if any, to pay compensation, for which regulations made under section 29 may provide [paras 16 and 27].
The language used in the subsection reflects language used in earlier regulations.
On the other hand there is nothing to show why the tailpiece was omitted from section 16(4) of the 1983 Act [paras 18 22].
There are indications in the overall legislative scheme that a breach of the relevant provisions of the 1988 Regulations would not give rise to a private law statutory right of action.
First, there are provisions in the 1989 Act and the 1988 Regulations that point strongly to the conclusion that the regulations are to be enforced by the Secretary of State and those appointed to act on his behalf, rather than by individuals raising private actions [paras 30 32].
In addition, there are provisions in the 1988 Regulations which envisage situations where a consumer may be in breach of a requirement of the 1988 Regulations and where that breach may give rise to a risk of danger to others.
If the respondents argument were correct, the 1988 Regulations would confer a right of action against individual consumers of electricity for any failure to comply with a requirement under these provisions.
It seems unlikely that Parliament intended the legislation to operate in that way [para 35].
If it really were the case that a supplier could be held liable in damages for a contravention of any regulations made under section 29 of the 1989 Act, then the protection afforded by section 21(b) of the Act (under which a supplier of electricity under section 16(1) of the Act may require any person who requires a supply of electricity to accept any terms restricting any liability of the supplier for economic loss resulting from negligence which it is reasonable in all the circumstances for that person to be required to accept) would be ineffective in the situation where the suppliers negligence constituted a contravention of the regulations [para 36].
That no private right of action is available is reinforced by the fact that it is difficult to identify any limited class of the public for whose protection the 1988 Regulations were enacted and on whom Parliament intended to confer a private right of action for breach of the provisions of the Regulations.
One of the necessary preconditions of the existence of a private law cause of action is that the statutory duty was imposed for the protection of a limited class of the public [paras 38 40].
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The first and principal question before us is whether the parties right of prorogation, to opt in to the jurisdiction of an EU country which would not otherwise have jurisdiction to determine a childs future, contained in article 12 of Council Regulation (EC) No 2201/2003 (Brussels II Revised), can apply to a child who is habitually resident outside the European Union.
If the answer to that question is yes, then the second question is whether that is what has happened in this case.
That depends both upon the interpretation of the criteria for opting in and upon an evaluation of what these parties did.
The first question is a good deal easier to answer than the second.
The facts
The child in question was born on 27 July 2000 and is now aged nine.
He was born in this country and is a British citizen.
His mother originates from India but has lived in this country for many years.
His father originates from Pakistan.
Both are British citizens.
They married in Pakistan on 28 October 1999 and later lived together in this country.
They separated in September 2002 and divorced in 2003.
As is common, no orders were made about the child in the course of the divorce proceedings.
In this case there were already care proceedings on foot about the child.
He was taken to hospital on 1 November 2001 and found to have several fractures to his arms.
The local authority began proceedings on 6 November 2001 and a split hearing was directed.
At the fact finding hearing in May 2002, District Judge Brasse found that the injuries were non accidental and that the father had caused them.
However, at the welfare hearing in December 2002, he reviewed that finding in the light of the new evidence which had emerged during the welfare inquiries and decided that the mother had been responsible.
At the final hearing on 22 May 2003, he made an order that the child should live with his father and have supervised contact with his mother in accordance with an agreement made between the local authority and the mother.
He also made a supervision order for 12 months.
That concluded the care proceedings.
It is an automatic condition of all residence orders that the child is not to be taken out of the jurisdiction without either the written consent of every person who has parental responsibility for the child or the leave of the court: Children Act 1989, s 13(1).
In mid 2004 the father applied for leave to take the child to live in Pakistan with the fathers mother and sister.
On 16 September 2004, Hedley J granted that leave.
At the same time, the father (who was represented by counsel at the hearing) gave the conventional undertaking to return the child to this jurisdiction when ordered to do so by the court.
The order also provided for interim contact with the mother until the child left the jurisdiction.
The father took him to Pakistan on 22 December 2004 and he has lived there ever since.
It is common ground that, whatever the precise legal test to be applied, he is now habitually resident in Pakistan.
His father returned to this country some months later.
His mother has visited him in Pakistan and he has visited his parents here.
The relevant parts of the Brussels II Revised Regulation applied from 1 March 2005.
On 31 October 2007 the mother, acting in person, issued an application in the Principal Registry of the Family Division for a contact and prohibition order, seeking to enforce telephone contact and as much contact as possible and to stop the paternal grandparents encouraging the child to call them mum and dad.
It is common ground between the parties that this is when the relevant proceedings began for the purposes of the jurisdictional questions before us.
At the first directions hearing on 5 November 2007, both parties attended, acting in person, and the matter was adjourned to a conciliation hearing on 12 December 2007.
Again, both attended that hearing acting in person and an agreed order for contact was made.
Among other things, the father agreed to facilitate the child visiting the UK if possible on an annual basis during his school holidays and seeing his mother then.
On 15 April 2008, the mother issued a further application, seeking to enforce and vary the contact order so as to ensure that the child was in the UK to facilitate contact and a local authority assessment of the possibility of unsupervised contact.
The matter eventually came before Hedley J on 17 June 2008.
The parties were still acting in person.
At that stage it appeared uncontentious that the child should come back here in 2009, possibly for more than a visit; but the parties were hopelessly divided about 2008.
Hedley J remarked that it was unusual for the Court to be retaining jurisdiction as the child was living in Pakistan, but that the Court undoubtedly does have jurisdiction because both parties have not only submitted to the jurisdiction but have actually invoked it on a number of occasions (para 29).
He directed that CAFCASS appoint a guardian for the child.
He also ordered the father to bring the child into the jurisdiction in June and July 2009, the child to have reasonable contact with the mother, and the mother to be at liberty to visit the child in Pakistan.
She spent about three weeks there in the summer of 2008 and saw the child then but she has not seen him since.
The CAFCASS guardian reported in January 2009 that his provisional view was that the child should visit this country every other year and the mother visit Pakistan in the intervening years.
The matter came back before the High Court on 2 March 2009.
By this time both parties were legally represented.
A position statement filed by counsel on the fathers behalf stated that The court has retained jurisdiction in this case and the father accepts the Courts jurisdiction and that The father accepts the court has retained jurisdiction to make orders directed towards himself in relation to contact.
He had, however, changed his mind about bringing the child to this country in 2009 and undertook to issue an application to set aside Hedley Js order that he should do so.
This he duly did on 4 March 2009.
At a directions hearing on 12 March 2009, Black J for the first time questioned whether the court did indeed have jurisdiction to make orders relating to the child.
That issue was tried before HHJ Barnett, sitting as a deputy High Court judge, on 5 and 6 May 2009.
It was then common ground between counsel that Brussels II Revised did not apply.
On 28 May 2009 HHJ Barnett held that the court did not have jurisdiction under the Family Law Act 1986.
However he also held that if the court did have jurisdiction he would not have granted a stay on the ground of forum non conveniens.
The childs guardian considered that the English court was the most appropriate forum to decide the issues between the parents, both of whom were resident here.
The mother appealed and for the first time it was argued on her behalf that article 12 of Brussels II Revised applied.
One can only feel sympathy for the Court of Appeal, confronted as they were with a novel and at first blush surprising argument.
Thorpe LJ found it obvious that HHJ Barnett had reached the right result and would have been dismayed had it been necessary to set aside his very sensible conclusion: [2009] EWCA Civ 965, para 35.
The House of Lords gave permission to appeal to this Court over the long vacation.
The law
As amended following the implementation of Brussels II Revised, section 2 of the Family Law Act 1986 reads as follows: (1) A court in England and Wales shall not make a section 1(1)(a) order with respect to a child unless (a) it has jurisdiction under the Council Regulation, or (b) the Council Regulation does not apply but (i) the question of making the order arises in or in connection with matrimonial proceedings or civil partnership proceedings and the condition in section 2A is satisfied, or (ii) the condition in section 3 of this Act is satisfied.
The council regulation is Brussels II Revised.
A section 1(1)(a) order includes a section 8 order made by a court in England and Wales under the Children Act 1989, other than an order varying or discharging such an order.
Section 2A need not concern us as there are no continuing matrimonial proceedings between the parties, nor were any orders made in connection with them.
Section 3 gives jurisdiction on the basis that the child is either habitually resident in England and Wales on the date of the application or (if there was no application) of the order, or was present here on that date and not habitually resident in another part of the United Kingdom.
It will be noted that, if Brussels II Revised applies, it governs the situation.
If some other EU country (excluding Denmark for this purpose) has jurisdiction under the Regulation, then this country does not.
But if Brussels II Revised applies and gives this country jurisdiction, it will give jurisdiction even though the residual jurisdictional rules contained in the 1986 Act would not.
Only if Brussels II Revised does not apply at all will the residual rules in the 1986 Act come into play.
The basic rule in Brussels II Revised governing jurisdiction in childrens cases is in article 8.1: The courts of a Member State shall have jurisdiction in matters of parental responsibility over a child who is habitually resident in that Member State at the time the court is seised.
But that is subject to articles 9, 10 and 12.
We are concerned with article 12, which deals with Prorogation of jurisdiction.
It is worth quoting article 12 in full, although articles 12.1 and 12.2 are not directly relevant in this case, because the answer to the first question must apply equally to the prorogation covered by article 12.1 as it does to the prorogation covered by article 12.3: at least one of the spouses has parental responsibility in the judgment allowing or refusing the application for divorce, 1.
The courts of a Member State exercising jurisdiction by virtue of Article 3 on an application for divorce, legal separation or marriage annulment shall have jurisdiction in any matter relating to parental responsibility connected with that application where: (a) relation to the child; and (b) the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by the spouses and by the holders of parental responsibility, at the time the court is seised, and is in the superior interests of the child. 2.
The jurisdiction conferred in paragraph 1 shall cease as soon as: (a) legal separation or marriage annulment has become final; (b) in those cases where proceedings relating to parental responsibility are still pending on the date referred to in (a), a judgment in these proceedings has become final; (c) for another reason. 3.
The courts of a Member State shall also have jurisdiction in relation to parental responsibility in proceedings other than those referred to in paragraph 1 where: (a) the child has a substantial connection with that Member State, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that Member State or that the child is a national of that Member State; and (b) the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child. 4.
Where the child has his or her habitual residence in the territory of a third State which is not a contracting party to the Hague the proceedings referred to in (a) and (b) have come to an end Convention of 19 October 1996 on jurisdiction, applicable law, recognition, enforcement and co operation in respect of parental responsibility and measures for the protection of children, jurisdiction under this Article shall be deemed to be in the childs interest, in particular if it is found impossible to hold proceedings in the third State in question.
The first question
Can article 12 apply at all where the child is lawfully resident outside the European Union? In my view it clearly can.
There is nothing in either article 12.1 or article 12.3 to limit jurisdiction to children who are resident within the EU.
Jurisdiction in divorce, nullity and legal separation is governed by article 3 of the Regulation, which lists no less than seven different bases of jurisdiction.
It is easy to think of cases in which a court in the EU will have jurisdiction under article 3 but one of the spouses and their children will be resident outside the EU.
A court in England and Wales would have jurisdiction if the petitioning mother were living with the children in the USA and the respondent father were living in this country.
A court in England and Wales would have jurisdiction if the petitioning father had lived here for at least a year and the respondent mother were living with the children in the USA.
A court in England and Wales would have jurisdiction if the spouses were living here but their children were living in the USA.
In some of these cases the spouses might well wish to accept the jurisdiction of the English court to decide matters relating to parental responsibility so that their childrens future could be decided in the same jurisdiction as their status, property and finances.
Professor Rauscher is quite clear that the new rule not only applies to children residing in a Member State which is not the forum State (as Article 3 Brussels II did) but also to children residing in Non Member States (T Rauscher, Parental Responsibility Cases under the new Council Regulation Brussels IIA, The European Legal Forum, 1 2005, 37 46 at p 40).
There is nothing to differentiate article 12.3 from article 12.1 in this respect.
This view of the matter is confirmed, if the third State which is referred to in article 12.4 means a non Member State.
The term third State occurs only twice in Brussels II Revised.
Article 61 provides that: As concerns the relation with the Hague Convention of 19 October 1996 on Jurisdiction, Applicable law, Recognition, Enforcement and Co operation in Respect of Parental Responsibility and Measures for the Protection of Children, this Regulation shall apply: (a) where the child concerned has his or her habitual residence on the territory of a Member State; (b) as concerns the recognition and enforcement of a judgment given in a court of a Member State on the territory of another Member State, even if the child concerned has his or her habitual residence on the territory of a third State which is a contracting Party to the Convention.
If third State in article 61 referred to some other Member State, there would be no need for paragraph (b) because paragraph (a) would cover all cases.
But in any event, both article 61 and article 12.4 are looking at the relationship between the Regulation and the 1996 Hague Convention. 16 countries have so far ratified that Convention, half within and half outside the EU (the UK has signed but not ratified; Pakistan has done neither).
If the child is habitually resident in a third State which is a party to the 1996 Convention, the Regulation applies to the recognition and enforcement in one Member State of a judgment given in another Member State.
If the child is habitually resident in a third State which is not a party to the Convention, article 12.4 lays down a presumption that it will be in the interests of the child for the EU State to assume jurisdiction if the parties have agreed to accept it.
All of this makes sense if the third State lies outside the EU but would add nothing if it lies within it.
Indeed, why limit the presumption in article 12.4 to the rare case where there are three EU States involved but not apply it to the more common situation where there are two? Nor does the reference in article 12.4 to the impossibility of holding proceedings in the third State make much sense within the EU.
Professor Rauscher predicts that Most cases under Article 12(3) will probably feature strange situations of habitual residence particularly with children being nationals of a Member State but residing farther abroad in countries with unreliable judicial structures (loc cit, p 41).
There is no case law on the meaning of third State in Brussels II Revised.
For what it is worth, the Practice Guide to the Regulation states that the option of voluntarily accepting the jurisdiction of a Member State is not limited to situations where the child is habitually resident within the territory of a Member State (p 45).
Reunite have helpfully also drawn our attention to other sources emanating from the EU which define the term to mean a State outside the EU: see, for example, the Community Research and Development Information Service (CORDIS), which uses the term Third State to mean a state that is neither a Member State nor an Associated State.
This merely reinforces the conclusion arrived at on ordinary principles of construction that article 12 can apply to children who are habitually resident outside the EU.
The second question
The second question is whether the criteria in article 12.3 are made out.
Paragraph (a) of article 12.3 requires that the child have a substantial connection with the Member State in question, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that State or that the child is a national of that State.
This is clearly satisfied in this case.
At the time these proceedings began, both parents were habitually resident in the United Kingdom and the child was and is a British national.
More complicated questions arise under paragraph (b) of article 12.3.
This can be broken down into two components: first, that the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised; and second, that the jurisdiction of the court is in the best interests of the child.
Each of these raises interesting subsidiary questions.
At the time the court is seised
The most difficult questions are posed by the words at the time the court is seised.
The first is whether they refer to a moment in time or, as held by the Court of Appeal, to any time while the proceedings are continuing.
As a general proposition, it should be clear at any particular point during the proceedings, and preferably from the outset, whether or not the court has jurisdiction.
Certainly a party who has once accepted jurisdiction should not be able to withdraw it at any time before the conclusion of the case.
Acceptance of jurisdiction must include acceptance of the courts decision whatever it may be.
Otherwise there would be no point in submitting to the courts jurisdiction.
This provides that: It is clear from article 16 that a court is seised at a particular moment in A court shall be deemed to be seised: (a) at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the applicant has not subsequently failed to take the steps he was required to take to have service effected on the respondent; or (b) if the document has to be served before being lodged with the court, at the time when it is received by the authority responsible for service, provided that the applicant has not subsequently failed to take the steps he was required to take to have the document lodged with the court.
From this it is clear that the time of seisin is fixed when the document initiating the proceedings is lodged with the court or, if it has to be served before lodging, is received by the authority responsible for service, although in each case the court may not actually be seised if the applicant does not take the steps required to inform either the respondent or the court.
There has to be a fixed time of seisin for the purpose of the rule in article 19, that the court second seised of divorce, separation or nullity proceedings shall decline jurisdiction in favour of the court first seised.
There was some debate about what constituted the proceedings in this case.
In one sense, no order about the upbringing of a child is ever final.
The parties can always agree to make different arrangements or bring the matter back to court for the court to do so.
But the reality in this case was that there were care proceedings brought by the local authority in 2002 which were concluded by the residence, contact and supervision orders made in 2003.
There were then private law proceedings brought by the father to enable him to take the child abroad to live which were concluded by the orders made by Hedley J on 16 September 2004.
There were then new proceedings brought by the mother in 2007, the object of which was to make provision for her contact with the child which had not been done in the 2004 order.
It is common ground between the parties that these are the proceedings for this purpose and in my view that is correct.
It follows, therefore, that the court became seised of this matter on 31 October 2007.
But the next question is what do those words describe? Do they, as had been assumed by all before the hearing in this Court, describe the time at which the parties have accepted jurisdiction? Or do they, as proposed by Mr Setright QC on behalf of the interveners Reunite, describe the parties whose acceptance is required? In other words, does article 12.3(b) mean the jurisdiction of the courts was accepted when the proceedings began by all those who were then parties? Or does it mean the jurisdiction of the courts has been accepted at any time after the proceedings have begun by all those who were parties when they began?
There is much to be said for Mr Setrights interpretation, both linguistically and in practice.
He draws our attention to the German text of article 12.3(b), which begins alle Parteien des Verfahrens zum Zeitpunkt der Anrufung des Gerichts .
However, given what to us is the reverse word order of most German sentences, it would be unwise to place too much reliance upon this.
The French, Italian and Spanish texts follow the same word order as the English and are therefore equally ambiguous.
Another linguistic clue could be the particular tense used in the English text.
Has been accepted is more consistent with the possibility of later acceptance of jurisdiction.
If it had been intended to limit acceptance to the exact time of seisin, it would have been more natural to use the words was accepted.
Once again, however, it might be unwise to place too much reliance upon the precise tense chosen in the English text, given that other European languages do not have the same variety of ways of referring to something which has happened in the past.
The practical attraction of Mr Setrights argument is that this interpretation would enable the court considering whether there has been unequivocal acceptance of jurisdiction to take into account the parties conduct after as well as before the proceedings have begun.
Given that the court may be seised before the respondent knows anything about the proceedings (as may well have happened here), it should be possible for the respondent to accept jurisdiction expressly or in an unequivocal manner by the way in which he reacts to the proceedings when he learns about them.
If the respondent is indeed content to accept the jurisdiction of the court it should be possible for him to indicate that, either expressly or by his conduct, even though he had not addressed his mind to the matter before the court became seised.
Otherwise the scope of both article 12.1 and article 12.3 would be limited (in the vast majority of cases) to cases where there was a written agreement in place when the proceedings were instituted.
Admittedly, this was said by the Court of Appeal in Bush v Bush [2008] EWCA Civ 865, [2008] 2 FLR 1437, at para 53, to be the paradigm case but there is no reason why it should be virtually the only case.
Prorogation of jurisdiction under article 17 of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 was limited to agreements in writing or in a form which accords with the practice of the international trade or commerce in question.
Prorogation under article 12 is not so limited.
It is clearly contemplated that conduct other than express agreement can constitute unequivocal acceptance of the jurisdiction.
Furthermore, as Lord Collins demonstrates at paragraph 53, there is no reason in principle why there should not be acceptance of jurisdiction after the proceedings have began.
Professor Rauscher accepts that jurisdiction must be accepted at the time the court is seised but argues that too literal an interpretation would render article 12.1 almost useless.
The parties to a divorce proceeding wont even think about jurisdiction as to parental responsibility before the court is seised.
Therefore a more liberal interpretation is advisable.
The wording should probably be understood in the sense of at the time the court has been seised, thereby excluding any binding prorogation before the case has been brought to court. (p 40) So now we have a suggestion that prior agreement is not the paradigm case and the parties conduct once the proceedings have begun is what matters.
After all, the parallel with agreements under the Brussels Convention is not close in matrimonial and family cases, where it is less common (and in some cases not possible) to have a binding agreement between spouses or parents before proceedings have begun.
There is, however, another way of achieving much the same result.
Article 16 fixes which is first in time for priority purposes under article 19.
But it contains within itself the possibility that apparent seisin may not mature into actual seisin unless the applicant later effects service or lodges the document with the court.
Whether this is regarded as a condition defeasant makes no difference: the result in the actual decision depends upon what happens later.
It might be possible to take a similar approach to prorogation, so that the apparent seisin when the application is lodged does not mature into actual seisin until the respondent is served and has an opportunity to indicate whether or not he accepts jurisdiction.
This too would be consistent with the English use of has been rather than was.
As will become apparent shortly, we do not need to resolve this question in this particular case, because we have unequivocal acceptance of the jurisdiction both before and after the proceedings were begun.
Moreover, it may not matter much in practice.
Even if the words at the time the court is seised qualify the parties acceptance, and refer only to the precise date when the proceedings are initiated rather than to once they have begun, the court is entitled to look at the parties conduct after the proceedings have begun in order to decide whether they had accepted jurisdiction at the time the proceedings did begin.
There is nothing unusual about this.
Courts often take into account later behaviour as evidence of an earlier state of affairs.
Whichever is the correct interpretation, the acceptance in question must be that of the parties to the proceedings at the time when the court is seised.
Later parties cannot come along and upset the agreement which the original parties have made.
In this case, as it happens, the child was later made a party to the proceedings.
Brussels II Revised rightly places great stress on the importance of the voice of the child in proceedings about his future: see paragraph 19 of the Preamble and article 11.2 dealing with the return of children under the Hague Convention on the Civil Aspects of International Child Abduction 1980.
But the way in which the child is heard will depend upon national procedures.
As was made plain by the House of Lords in In re D (A Child) (Abduction: Rights of Custody) [2006] UKHL 51, [2007] 1 AC 619, para 60, there are different ways of doing this, ranging from full scale legal representation of the child, through independent expert reporting, to a face to face interview with the judge.
It is not usually necessary for the child to become a full party to proceedings between his parents, although of course it can and should be done in an appropriate case.
The participation of the child is aimed at helping the court decide what outcome to the proceedings will be in the best interests of the child.
It is usually less relevant to questions of jurisdiction.
Acceptance
The father expressly accepted the courts jurisdiction in the position statement put before the court by his counsel for the hearing on 2 March 2009.
This is scarcely surprising, as all his conduct up until that time had been consistent with this stance.
He appeared before the court in response to the mothers application.
He participated in a conciliation appointment on 12 December 2007 and consented to the order then made.
He participated in the hearing before Hedley J on 17 June 2008.
At that stage he was acting in person.
But the solicitors who had appeared for him in the care proceedings and their aftermath then came on the record for the purpose of his application to set aside Hedley Js order that he bring the child back into the jurisdiction in 2009.
No objection was then taken to the courts jurisdiction.
Far from it.
Counsel was instructed for the hearing before the Deputy High Court Judge on 2 March 2009 and expressly accepted jurisdiction on his behalf.
All of this conduct indicates his acceptance of jurisdiction both expressly and in an unequivocal manner from the outset of the proceedings.
He recanted only when the court itself indicated that there might not be any basis upon which there could be jurisdiction.
But there was also a binding prior acceptance.
On 16 September 2004, with the benefit of legal advice, he gave an undertaking to the court to return the child to this jurisdiction when called upon to do so.
The object of the proceedings was to enable him to take the child to live in Pakistan and thus lawfully to establish a habitual residence outside the jurisdiction.
Yet at the same time he was undertaking to bring the child back when required by the court to do so.
This inevitably involved accepting the courts jurisdiction to make an order in relation, not only to him, but to the child.
In my view, the jurisdiction of the English courts has been accepted by the father, both expressly and otherwise in an unequivocal manner.
This is so whatever interpretation is placed upon article 12.3, but the diversity of views expressed by this court indicates that the interpretation is not acte clair and may have to be the subject of a reference to the European Court of Justice in another case.
But I would favour an interpretation which catered both for a binding acceptance before the proceedings began and for an unequivocal acceptance once they had begun.
In the best interests of the child
The final requirement in article 12.3 is that the jurisdiction of the English courts should be in the best interests of the child.
Nothing turns, in my view, on the difference between the best interests of the child in article 12.3, the superior interests of the child in article 12.1 and the childs interest in article 12.4.
They must mean the same thing, which is that it is in the childs interests for the case to be determined in the courts of this country rather than elsewhere.
This question is quite different from the substantive question in the proceedings, which is what outcome to these proceedings will be in the best interests of the child? It will not depend upon a profound investigation of the childs situation and upbringing but upon the sort of considerations which come into play when deciding upon the most appropriate forum.
The fact that the parties have submitted to the jurisdiction and are both habitually resident within it is clearly relevant though by no means the only factor.
In this case there are two reasons to conclude that the exercise of jurisdiction in this country would be in the childs interests.
The first is the presumption in article 12.4.
Although expressed as a deeming provision, no one suggests that this is irrebuttable.
But it makes sense.
If the child is habitually resident in a country outside the EU which, like Pakistan, is not a party to the 1996 Hague Convention on jurisdiction, applicable law, recognition, enforcement and co operation in respect of parental responsibility and measures for the protection of children, then even if the EU country in question is a party to that Convention, there would be no provision for recognition and enforcement of one anothers orders.
If, therefore, the parties have accepted the jurisdiction of an EU State, it makes sense for that State to determine the issue.
The difficulty or otherwise of holding the proceedings in the third State in question are obviously relevant.
It is not suggested that it would be impossible to hold these proceedings in Pakistan, but while neither party has had difficulty with the proceedings here, the mother would certainly face difficulties litigating in Pakistan.
The other factor in this case is the very proper stance taken by the childs guardian ad litem.
When the issue of forum non conveniens was ventilated before HHJ Barnett in the High Court, the guardian took the view that on balance it would be better for the case to be heard here.
The nub of the issue is the contact which the child should have with his mother in this country.
Any continuing risks associated with that contact will be better assessed here and any safeguards will need to be put in place here.
Inquiries in Pakistan can be made through international social services or other agencies.
Of course, the difficulties of enforcement must also be taken into account.
But it must be borne in mind that contact orders have always been enforced in personam, against the person to whom they are addressed.
Unlike residence orders, they are not enforced by the physical transport of the child from one place to another.
The court is bound to view with some scepticism the protestations of a father, who has the benefit of an order that the child is to live with him, that he will be unable in practice to secure the childs compliance with an order for contact with the mother.
It may be so but it is not very likely.
But this is to anticipate the outcome of the courts investigation into what will be in the best interests of this child as he grows up.
Is he to make a clean break from the past and be cut off from his mother and his mothers family indefinitely? Or should he be enabled to have a relationship with both sides of his heritage and in due course to form his own opinions of his mother? If the latter, how practically can that be facilitated? All of that lies in the future.
There are many conclusions which the court hearing this case might reach.
Among them is an order that it would be better for the child to make no order at all: Children Act 1989, s 1(5).
But this is not a refusal of jurisdiction (cf Owusu v Jackson (Case C 281/02) [2005] QB 801).
It is a positive conclusion, reached after the court has exercised its jurisdiction to hear and determine the case, that in all the circumstances it will be better for the child to make no further order about his future.
It is impossible at this stage to speculate upon how likely that will be.
The Pakistan Protocol
Thorpe LJ was understandably troubled about the implications for the Pakistan Protocol if the English courts were to accept jurisdiction in respect of a child who was habitually resident in Pakistan.
We have had the benefit of an intervention from Reunite, an organisation with great knowledge and experience in the field of international child abduction, and represented by lawyers who also have knowledge and experience of how these things work on the ground.
The UK Pakistan Judicial Protocol on Children Matters is not an international agreement between States.
It is an understanding first reached in January 2003 between the then President of the Family Division of the High Court in England and Wales and the then Chief Justice of the Supreme Court of Pakistan, supplemented in September 2003 by guidelines for judicial co operation to which Judges from the Court of Session in Scotland and the High Court in Northern Ireland were also party.
It was agreed that in normal circumstances the welfare of a child is best determined by the courts of the country of the childs habitual/ordinary residence (para 1).
Hence, if a child is wrongfully removed from his country of ordinary residence, the courts of the country to which he is taken should not ordinarily exercise jurisdiction save for the purpose of sending the child back (para 2).
The same should apply if a child is brought from one country to the other for the purposes of contact, and is then wrongfully retained (para 3).
This very largely reflects the principal provisions of the Hague Convention on Child Abduction.
Neither of the two substantive paragraphs is directly applicable to this case.
There has been no abduction or wrongful retention.
We are concerned only with a very limited exception, in far from normal circumstances, to the general statement in paragraph 1.
The two can, as Mr Setright pointed out, complement one another.
The courts in Pakistan might welcome the fact that the courts in England had investigated the situation here and put in place safeguards which would enable the child to visit his mother and other members of his family in this country in safety.
The Protocol would operate to secure his prompt return to Pakistan after any such visit.
Alternatively, the court in this country might, after beginning its investigation, conclude that, had this been a case within the EU, it would have been appropriate to invoke the procedure in article 15 of Brussels II Revised, for requesting the courts of another Member State which is better placed to hear the case to assume jurisdiction.
The Protocol, with the associated Guidelines for judicial co operation, provides the ideal vehicle for achieving this outside the EU.
In the view of Reunite, therefore, far from undermining the Protocol, article 12 can work harmoniously with it.
In any event, it has to be acknowledged that the proper interpretation of the Brussels II Revised Regulation cannot be affected by the terms of a private agreement between the judiciaries of one Member State and a non Member State.
Conclusion
For these reasons, therefore, I would allow this appeal and declare that the courts of England and Wales have jurisdiction in this case.
I agree with Lady Hale that the appeal should be allowed and that the I agree with Lady Hale that the appeal should be allowed, for the reasons
LORD HOPE
given by her and by Lord Collins.
LORD COLLINS
declaration proposed by her should be made.
There is something to be said for the view that the proceedings began with the fathers application in mid 2004 for leave to take the child to live in Pakistan.
If that view were right, then the proceedings would have commenced before the Brussels II Revised Regulation (Council Regulation (EC) 2201/2203) became applicable in March 2005.
The then existing Brussels II Regulation (Council Regulation (EC) 1347/2000) did not deal with matters of parental responsibility outside the context of matrimonial proceedings, and the court would have had jurisdiction on the basis of the then habitual residence or presence of the child in England: Family Law Act 1986, sections 2 and 3.
But as a matter of English law, the mothers application in 2007, was treated, and is to be treated, as a new proceeding.
Since it was issued after the Brussels II Revised Regulation became applicable, there must be a basis of jurisdiction in that Regulation.
The general rule under the Brussels II Revised Regulation is that the Member State in which the child has his or her habitual residence has jurisdiction in matters of parental responsibility: Article 8(1).
In the present case it is common ground that the child is habitually resident in Pakistan, where his residence reflects integration in a social and family environment: In re A (Case C 523/07) [2009] 2 FLR 1, at para 38.
Consequently, the English court will have jurisdiction only if one of the exceptions to the general rule applies.
The only potentially relevant exception is in Article 12 (which is set out in full by Lady Hale at para 16).
Article 12 deals with prorogation of jurisdiction in matters of parental responsibility both in matrimonial proceedings and in separate proceedings.
These are not matrimonial proceedings, and the only available basis of jurisdiction, if any, is in Article 12(3).
Where there has been a submission to the jurisdiction within the terms of Article 12(3), the court will have jurisdiction if it is in the best interests of the child.
Where the child has his or her habitual residence in the territory of a third State which is not a party to the Hague Convention of 1996, jurisdiction under Article 12 shall be deemed to be in the childs interest, in particular if it is impossible to hold proceedings in the third State in question: Article 12(4).
There is no significance in the difference between best interests in Article 12(3) and superior interests in Article 12(1).
Other language versions use the identical term for both: suprieur in French, superiore in Italian, and superior in Spanish.
It is also plain from the context and from other language versions that shall be deemed means no more than shall be presumed and that the presumption is rebuttable: est prsume/si presume/se presumir.
Lady Hale has shown that third State means a State which is not a Member State for the purposes of the Brussels II Revised Regulation.
On Article 12(4) see Professor Alegria Borrs, in Brussels II bis: its Impact and Application in the Member States (ed.
Boele Woelki and Gonzales Beilfuss, 2007), 3 at 14 15.
The question is whether the jurisdiction of the [English court] has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised.
The difficulty arises from the use of the words at the time the court is seised.
Does the use of those words in the place in which they occur mean that it is necessary that the acceptance of jurisdiction by all parties must take place, or must have taken place, at the time the court is seised, which by Article 16 is, in a case of this kind, the time when the document instituting the proceedings is lodged with the court . ? Or are those words intended simply to identify the parties at the time the court is seised whose acceptance of jurisdiction is required, as the German version of the Regulation (but not the English, French, Italian, or Spanish versions) suggests?
The answer to this question must be found in the light of Article 12 as a whole in the context of the Regulation as a whole, and in the light of the instruments which preceded it.
The Brussels Convention and the Brussels I Regulation (Council Regulation (EC) 44/2001) each contain sections on prorogation of jurisdiction by prior agreement (Article 17 and 23 respectively) and by appearance after the proceedings have commenced (Articles 18 and 24).
They both show that, as is obvious, there is no reason in principle why there should not be acceptance of jurisdiction after the commencement, or service, of proceedings.
The basic rule of jurisdiction in the 1996 Hague Convention is the habitual residence of the child; but where the courts of a Contracting State are exercising jurisdiction in matrimonial proceedings, they may take measures directed to the protection of a child habitually resident in another Contracting State if at the a time of commencement of the proceedings, one of his or her parents habitually resides in that State and one of them has parental responsibility in relation to the child, and b the jurisdiction of these authorities to take such measures has been accepted by the parents, as well as by any other person who has parental responsibility in relation to the child, and is in the best interests of the child. (Article 10)
A draft Convention on jurisdiction and the recognition and enforcement of judgments in matrimonial matters was approved by the EU Council on 28 May 1998 ([1998] OJ C221), but was superseded by the Brussels II Regulation in 2000.
Neither the draft Convention nor the Brussels II Regulation contained provision for matters of parental responsibility outside the context of matrimonial proceedings.
Article 3(2) of the draft Convention (in the same terms as what became Article 3 of the Brussels II Regulation) provides that the courts of a Member State have jurisdiction in relation to matters of parental responsibility where the child is habitually resident in another Member State and (a) at least one of the spouses has parental responsibility in relation to the child and, (b) the jurisdiction of the courts has been accepted by the spouses and is in the best interests of the child.
This provision was modelled on Article 10(1) of the Hague Convention: see the Report by Professor Alegria Borrs on the draft Convention, para 38.
It is therefore apparent that there was no suggestion that the acceptance of jurisdiction under Article 3 of the draft Convention or of the Brussels II Regulation had to be prior to, or at the time of, commencement of the proceedings.
The Commission proposal for what became the Brussels II Revised Regulation was presented on 17 May 2002: COM(2002) 222 final/2.
The proposal in relation to what became Article 12(1) in the Regulation provided for jurisdiction in matters of parental responsibility where the child was habitually resident in one of the Member States, at least one of the spouses had parental responsibility in relation to the child and if the jurisdiction of the courts has been accepted by the spouses and is in the best interests of the child (Article 12(1)(c)).
The proposal in relation to what became Article 12(3) provided that the courts of a Member State would have jurisdiction where all holders of parental responsibility have accepted jurisdiction at the time the court is seised (Article 12(2)(a)), where the child had a substantial connection with that State (in particular where one of the holders of parental responsibility was habitually resident there, or the child was a national) and jurisdiction was in the best interests of the child.
Article 12(4) of the draft provided: For the purposes of this Article the appearance of a holder of parental responsibility before a court shall not be deemed in itself to constitute acceptance of the courts jurisdiction.
The draft contained in Article 16 the same provision as to date of seisin as the Regulation.
This suggests that the Commissions intention was to require acceptance of jurisdiction at or before the date of seisin, and the Commissions Practice Guide on the Brussels II Revised Regulation (pp 16 17), which is of course not authoritative, expresses the view (in relation to both Article 12(1) and Article 12(3)) that it is at the time the court is seised when the judge has to determine whether the relevant parties have accepted the jurisdiction either explicitly or otherwise unequivocally.
If this is the correct interpretation of Article 12(1) and Article 12(3) it leads to a result which does not commend itself to common sense.
There is no reason in principle why there should not be provision for acceptance of jurisdiction after the commencement of proceedings, as Article 18 of the Brussels Convention and Article 24 of the Brussels I Regulation show.
In Bush v Bush [2008] EWCA Civ 865, [2008] 2 FLR 1437, para 53 I expressed the view that the paradigm case for acceptance of jurisdiction would be actual agreement by the parents at the time the matrimonial proceedings were instituted.
The question in that case was not the time when acceptance of jurisdiction was to be tested but whether the steps taken by the father amounted to an acceptance of the jurisdiction of the English court.
Lady Hale has referred (at 29) to Rauscher, Parental Responsibility Cases under the new Council Regulation Brussels IIA, in European Legal Forum (E) I 2005, 35 at 40.
He points out, in relation to Article 12(1) that if at the time the court is seised is to be understood literally, only an acceptance before the relevant steps under Article 16 are taken would be sufficient.
In practice such an interpretation would render Article 12(1) almost useless.
The parties to a divorce proceeding will not think about jurisdiction as regards parental responsibility before the court is seised.
He suggests a more liberal interpretation, so that it would be understood in the sense of at the time the court has been seised, thereby not requiring prorogation before the case has been brought to court.
As soon as the case is pending, consensus can be achieved (and other holders of parental responsibility must also agree).
He suggests the same solution for Article 12(3).
Another way of approaching Article 12 is to treat the words at the time the court is seised as qualifying the words by the holders of parental responsibility in Article 12(1) and the words all the parties to the proceedings in Article 12(3).
In each case this would be a sensible construction, and would be consistent with the approach in the Brussels Convention, the Brussels I Regulation, the Hague Convention, and the Brussels II Regulation.
It would also be consistent with the German version of the Brussels II Revised Regulation.
It is well established that provisions of EU law must be interpreted and applied uniformly in the light of the versions in all the official languages: see, among many others, Dirk Endendijk (Case C 187/07) [2008] ECR I 2115, at paras 22 24.
In the context of Article 18 of the Brussels Convention the European Court adopted the French version as being more in keeping with the objectives and spirit of the Convention: Elefanten Schuh GmbH v Jacqmain (Case 150/80) [1981] ECR 1671, at para 14.
This solution is an attractive one, but it is by no means an inevitable or a clear one, and, if the appeal depended on whether it was right, it would be necessary to make a reference to the European Court under Articles 68 and 234 of the EC Treaty.
But it is not necessary for this important question to be decided because on the facts it is clear that as at the date the court was seised with the mothers proceedings in 2007, the father had unequivocally accepted the courts jurisdiction in his own prior application and that everything he did after the mothers application confirmed his acceptance of the jurisdiction.
The mother has plainly accepted the jurisdiction of the court by making her application in October 2007.
Nor can there be any doubt that the father has in an unequivocal manner accepted the jurisdiction of the English court to deal with matters of parental responsibility.
On his own application in 2004 he gave an undertaking to the court to return the child from Pakistan to England if ordered by the court so to do.
When the mother issued her own application in 2007, the father attended a hearing when an agreed order for contact was made.
He appeared at a hearing in 2008 before Hedley J when it was ordered that the mother could visit the child in Pakistan, and that he should bring the child to England in June/July 2009.
Finally, counsel stated in March 2009 on the fathers behalf that he accepted the courts jurisdiction, and that the court retained jurisdiction to make contact orders directed to him.
All of those steps confirmed what was apparent and inevitable when the mother issued her application, namely that the father was already subject to the jurisdiction of the court and had accepted it in relation to matter of parental responsibility.
There was, therefore, in the circumstances of the case an unequivocal acceptance of the courts jurisdiction at the date of seisin.
I also agree with Lady Hale that the appeal should be allowed and that the
LORD KERR
declaration proposed by her should be made.
I wish to say but a few words on the approach to the interpretation of article 12.1 and 12.3 of Council Regulation (EC) No 2201/2003.
I consider that the interpretation discussed by Lord Collins in paragraph 62 of his judgment (which was that advanced by Mr Setright QC on behalf of the intervener) is the correct one.
The structure of both article 12.1 and article 12.3, if closely examined, support that conclusion, in my opinion.
Article 12.1 (b) provides that the courts of a Member State exercising jurisdiction by virtue of article 3 on an application for divorce etc shall have jurisdiction in relation to any matter relating to parental responsibility connected with the application where at least one of the spouses has parental responsibility in relation to the child and: the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by the spouses and by the holders of parental responsibility, at the time the court is seised, and is in the best interests of the child.
If it had been intended that the words, at the time the court is seised should qualify the words, accepted expressly or otherwise in an unequivocal manner, the composition of the sentence would surely have been different.
To achieve that result the provision should have read thus: the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner at the time that the court is seised by the spouses and by the holders of parental responsibility and is in the best interests of the child.
The juxtaposition of the phrase, at the time the court is seised with the preceding, the holders of parental responsibility and the enclosing of the phrase referring to the timing by commas indicate that the time that the court is seised was intended to refer to the holders of parental responsibility, in my opinion.
That this should be so is entirely to be expected.
The holders of parental responsibility may change from time to time.
It is important that those who purport to consent to the jurisdiction of the court should be those who hold that responsibility at a time when the court is seised of the proceedings.
Self evidently, spouses do not need to be identified in any temporal dimension and the words, at the time the court is seised have no reference to them.
The position is at least equally clear in relation to article 12.3 (b).
Under this provision the courts of a Member State shall have jurisdiction in relation to parental responsibility where the child has a substantial connection with that Member State and: the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child.
If it had been intended that the words, at the time the court is seised should refer to the timing of the acceptance of jurisdiction, it appears to me that the structure of the sentence best suited to achieve that result would be as follows: the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner at the time the court is seised by all the parties to the proceedings and is in the best interests of the child.
This interpretation would be, as Lord Collins suggests, sensible and would accord with the spirit of the Brussels Convention, the Brussels I Regulation, the Hague Convention, and the Brussels II Regulation.
It also avoids the spectre, identified by Professor Rauscher, of rendering article 12. 1 virtually ineffectual.
I am afraid that I could not be sanguine about the workability of article 12.1 or 12.3 if the interpretation advanced by the respondent is accepted.
Although I am reasonably firm in my opinion that the proper construction of these provisions is as Mr Setright submitted it should be, I agree with Lady Hale and Lord Collins that it is not necessary for a final view on the question to be reached in the present case.
This is so because it is clear that the father had unequivocally accepted the jurisdiction of the court when, in 2007, it was indisputably seised of the proceedings.
As has been pointed out, moreover, his subsequent attitude to the proceedings evinced unambiguous acceptance of the courts jurisdiction.
LORD CLARKE
I agree with Lady Hale that this appeal should be allowed and that we should
make a declaration that the courts of England and Wales have jurisdiction in this case.
I entirely agree with the reasoning and conclusions of Lady Hale and Lord Collins as to the meaning of third State, as to the use that can properly be made of post seisin evidence to demonstrate unequivocal acceptance at the time of seisin, as to the fathers unequivocal acceptance at that time on the facts and as to the best interests of the child.
Those conclusions are sufficient for this appeal to be decided by declaring that the English court has jurisdiction.
The only point which has caused me some concern, and which I wish briefly to address in this judgment, is the true construction of article 12.3(b) of the Brussels II Revised Regulation.
Lord Collins has considered article 12.3(b) in some detail.
I entirely agree with paragraphs 47 to 58 of his analysis.
I also agree with him that the questions whether the relevant acceptance of jurisdiction must be before the court is seised or whether it can be later and, if so when, are important questions and, if the appeal depended upon the answers, (subject to what I say below) may have to be referred to the European Court of Justice.
It is perhaps for this reason that Lord Collins does not express a concluded view on the point.
As stated above, I agree with him and Lady Hale that the outcome of the appeal does not depend upon the answers to these questions.
I add a few words of my own because I am less concerned than Lady Hale and
Lord Collins about what I regard as the natural construction of article 12.3(b).
Indeed it seems to me that there is much to be said for the conclusion that that construction is acte clair.
As I see it, the natural construction of article 12.3(b) construed in its context and having regard to its provenance as set out by Lord Collins at paragraphs 57 and 58 is that the relevant acceptance of jurisdiction must be before the court is seised.
The question is what is meant by the expression at the time the court is seised in articles 12.1 and 12.3 of Brussels II Revised.
For present purposes the relevant provision is article 12.3, which provides: 3.
The courts of a Member State shall also have jurisdiction in relation to parental responsibility in proceedings other than those referred to in paragraph 1 where: (a) the child has a substantial connection with that member State, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that Member State or that the child is a national of that Member State and (b) the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child.
Article 12.1(b) is in very similar terms.
Until after Mr Setright QC had made his submissions, it had been contended by Mr Baker QC on behalf of the mother that the expression the time the court is seised in both article 12.1 and article 12.3 meant the specific point when the court is seised as defined by article 16 of the Regulation.
Mr Baker submitted that that construction was to be preferred to that of the Court of Appeal, which held, as Thorpe LJ put it at para 28, that the court was seised throughout the continuance of the proceedings.
Article 16 has been set out by Lady Hale.
It identifies the time when a court shall be deemed to be seised.
It is plain that it is describing a particular moment and not a period of time.
Thus in both (a) and (b) it provides for a particular moment when the court is seised, namely either when the document instituting the proceedings is lodged with the court or, if the document has to be served before being lodged with the court, when it is received by the authority responsible for service.
In each case there is a proviso (or condition defeasant), namely that the applicant has not subsequently failed to take steps he was required to take, in the first case to have service effected on the respondent and in the second case to have the document lodged with the court.
As Lady Hale says, the importance of having a fixed time when the court is seised is explained by article 19 because, if the court first seised has jurisdiction, the court second seised must decline jurisdiction.
It is thus important to know in each case when the court is seised and which is the court first seised.
Mr Bakers submission was based on the natural construction of the article construed in its context, which includes articles 16 and 19.
While I entirely agree with Lady Hale that evidence of subsequent events may (and often will) assist the court to decide what the position was at the moment identified as the time the court is deemed to be seised under article 16, I see nothing in the language of article 12.3 (or the equivalent language of article 12.1) to suggest that, if the court was not seised in accordance with article 16 at the time the document instituting the proceedings is lodged, it can somehow become seised at a later date.
The only provision affecting the position as at the date of seisin is the proviso in article 16, which might defeat the seisin.
However, subject to that, as I see it, there is no scope for later seisin.
Once jurisdiction is acquired, the court has jurisdiction throughout the proceedings.
It appears to me that in principle no one should commence proceedings of any kind unless the court has jurisdiction or will have it at the moment it is seised of the proceedings.
Otherwise the court is being asked to exercise jurisdiction which it does not have.
This is of particular importance in this context because, where the court first seised has jurisdiction, under article 19 a court second seised must decline jurisdiction, once it is established that the court first seised has jurisdiction.
Article 16 makes it clear that whether it has jurisdiction is to be tested as at the time of seisin as defined by article 16.
Any other conclusion seems to me to be likely to lead to confusion.
Although Mr Setright submitted that in both article 12.1(b) and article 12.3(b) the words at the time the court is seised identify the parties, I do not think that that is a convincing reading of the language.
It is much more natural to read the expression as requiring the acceptance of jurisdiction at the time the court is seised.
All the articles of the Regulation relate to the moment of seisin.
This seems to me to be implicit in articles 3, 6 and 7 and explicit in articles 8, 12, 13 and 14.
Moreover, as Lord Collins demonstrates at paragraphs 57 and 58, the provenance of article 12 strongly supports this approach.
Thus the Commission proposal in relation to what became article 12(3) provided that the courts of a Member State would have jurisdiction where all holders of parental responsibility have accepted jurisdiction at the time the court is seised.
The Commissions Practice Guide is to the same effect.
Although I quite understand that the point was not argued, it is I think of some note that this conclusion is consistent with a dictum of Lawrence Collins LJ in Bush v Bush [2008] EWCA Civ 865, [2008] 2 FLR 1437 at para 53.
As he puts it paragraph 60 above, the paradigm case for acceptance of jurisdiction would be actual agreement by the parents at the time proceedings were instituted.
In addition it seems to me that the words has been accepted support the same approach.
Thus, as I read them, both article 12.1(b) and 12.3(b) require that the jurisdiction of the courts has been accepted at the time the court is seised as defined in article 16.
I respectfully disagree with Lady Hale at paragraph 27 that the expression has been accepted is more consistent with the possibility of later acceptance of jurisdiction.
On the contrary, it seems to me to support the proposition that the acceptance must be before the seisin.
Various other solutions have been suggested.
The Court of Appeal suggested that the parties can reach agreement at any time after seisin.
This might be months or years after the moment identified in article 16.
I do not see how such an approach fits with articles 16 and 19.
Mr Setrights construction does not seem to me to be a convincing reading of the language.
Nor to my mind is that of Professor Rauscher quoted by Lady Hale at paragraph 29.
The expression at the time the court is seised appears not only in article 12 but also in article 8, where it surely relates to the time the court is seised as defined in article 16, and does not mean has been seised.
Further, if is seised means has been seised, it is not easy to see why the Court of Appeals approach, namely that it means during the whole period of seisin, is wrong.
The problem with it is that stated above, namely that it does not readily fit in with the approach of the Regulation to the court first seised.
Lady Hale suggests at paragraph 30 that article 16 fixes which proceedings are first in time for priority purposes but contains the possibility that apparent seisin may not mature into actual seisin unless the applicant effects service or lodges with the court.
The suggestion is that a similar approach might be taken to prorogation so that the apparent seisin when the application is lodged does not mature into actual seisin until the respondent is served and has an opportunity to indicate whether or not he accepts jurisdiction.
It is also suggested that that would be consistent with the English use of has been rather than was.
For my part, I find those suggestions difficult to accept.
The Regulation could no doubt have so provided but it did not.
As I see it, as stated above, the way article 16 works is that there is seisin on the date identified subject to a condition defeasant.
That is not a case of apparent seisin maturing into actual seisin but there being actual seisin, which would take priority over any subsequent seisin, unless there was no service or lodgement.
This would be known to the respondent immediately and the position would thus be clear immediately and, absent a failure of the kind expressly specified in article 16, the seisin would have priority over seisin in another jurisdiction before service or lodgement.
I do not see how this can readily be applied to article 12.1(b) or article 12.3(b).
On the face of it the court would have no jurisdiction at the moment of seisin; yet the suggestion must I think involve the proposition that the court would have jurisdiction retrospectively if at some future moment the jurisdiction was unequivocally accepted.
By then another court might be seised and have jurisdiction as the court first seised.
Is it really to be supposed that that other court would be required to decline jurisdiction under article 19 even though at the time it was seised no other court was seised? My answer to that question would be no.
I appreciate that it is contemplated that the respondent would take a stance immediately and that the position would be much as occurs (or occurred) under, for example, article 23 of the Brussels Convention and article 24 of the Brussels I Regulation which are referred to by Lord Collins at paragraph 53.
I also appreciate the force of the point that it is very odd for an unconditional appearance, which of course takes place after seisin, to be a ground of jurisdiction in, say, the Brussels I Regulation and not in the Brussels II Revised Regulation.
However, in article 24 of Brussels I appearance is a free standing ground of jurisdiction, whereas there is no equivalent provision in the Brussels II Revised Regulation.
I fully understand the concerns expressed by Lady Hale and Lord Collins (and indeed Professor Rauscher) that article 12 will or may be of limited value if it does not extend to post seisin acceptance or agreement.
However, it seems to me that the concerns are somewhat overstated.
As I see it, the time for parties to decide in what jurisdiction to proceed in matters relating to parental responsibility is before issuing the relevant proceedings.
It is at that time that questions of jurisdiction should surely be considered, if only in order to decide where to issue the relevant process.
It seems to me to be desirable that parents considering proceedings should be advised that that is the time to make an appropriate agreement.
I agree with Lord Collins that that is the paradigm case and it seems to me that the problem should be tackled at the outset rather than that proceedings should be started without jurisdiction in the hope that the other party (or parties) will agree later or do something which could be construed as unequivocal acceptance of jurisdiction.
The concerns expressed can I think be resolved in this way.
If an express agreement to jurisdiction is made or there is an unequivocal acceptance of jurisdiction after the court is seised and, by that time, proceedings have been commenced in a court in another Member State and that court has become seised, article 19 will operate to give exclusive jurisdiction to that second court.
This is on the basis that at the time the first court was seised it did not have jurisdiction and there is nothing in the Regulation to provide for retrospective seisin; so that for the purposes of the Regulation the court first seised is the second court.
The parties legitimate interests are however protected by article 15, which gives the court having jurisdiction as to the substance of the matter a power to transfer all or part of the case to a court of another Member State if it concludes that such a court is in a Member State with which the child has a particular connection and that it would be better placed to hear the case or part of it.
If, on the other hand, there is no court of another Member State that has jurisdiction under the Regulation, I can at present see no reason why the applicant should not issue fresh proceedings and rely upon the agreement or unequivocal acceptance in those proceedings to satisfy article 12.3(b).
In this way the court will have jurisdiction at the time of seisin, which to my mind is what the Regulation intended.
As I see it, in this way the concerns expressed by the Court of Appeal, Lady Hale, Lord Collins and others can be allayed.
In particular in a case of this kind, where there is no other Member State which could have jurisdiction, the court in which the respondent has unequivocally accepted jurisdiction will have jurisdiction, albeit in proceedings commenced thereafter.
I appreciate that these are all questions for decision in another case.
I express provisional views upon them in the hope that they may help to resolve potential issues in the future without the delay inevitably involved in a reference to the European Court of Justice.
In the meantime, I agree that the appeal in this case should be allowed.
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This appeal concerns whether an English court has jurisdiction to determine the future level of contact between a child and his mother where the child does not habitually reside in an EU Member State.
Under article 12.3 of Council Regulation (EC) No 2201/2003 (Brussels II Revised) parties are able to opt in to the jurisdiction of an EU court which would not otherwise have jurisdiction to determine a childs future.
This applies where: (a) the child has a substantial connection with that Member State; and (b) the jurisdiction of the courts has been expressly accepted or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised, and the exercise of jurisdiction is in the best interests of the child.
In this case the child had been resident in Pakistan since 2004, although both he and his divorced parents are British citizens and his parents live here.
Both the High Court and the Court of Appeal held that an English court had no jurisdiction.
The mother appealed.
The Supreme Court had two issues to decide: firstly, whether article 12 extended to cases where a child lived in a non EU member state; and secondly, if it did, whether the parties in this case had accepted jurisdiction in accordance with the criteria set out in article 12.3(b).
The Supreme Court unanimously allows the appeal and declares that the courts of England and Wales have jurisdiction in this case.
The Supreme Court holds that article 12 of Brussels II Revised applies to a child who is lawfully resident outside the European Union.
In this case it was clear that the criteria of article 12.3 were satisfied and therefore that the parties had opted in to this jurisdiction.
Lady Hale gave the leading judgment.
There was a difference of opinion between the Justices on the precise meaning of article 12.3(b) but it was not necessary to decide this issue in order to decide the case.(Paragraphs [17], [35], [45])
On the first issue, if parents opt in to the jurisdiction of an EU court under article 12.3, that court can exercise jurisdiction even if the child does not lawfully reside within the territory of a an EU Member State.
Lady Hale reached this conclusion using ordinary principles of construction, concluding that nothing in article 12 limits jurisdiction to children who reside in an EU Member State.
This was confirmed by the conclusion that the term third State in other parts of the Regulation (notably articles 12.4 and 61) means a state outside the EU.
This is supported by the Practice Guide to the Regulation, as well as other sources emanating from the EU. [17] [20] The Pakistan Protocol (referred to by the Court of Appeal), in which the judiciaries of Pakistan and
England agreed it will generally be best for jurisdiction to be exercised in the country of the childs habitual residence, was not directly applicable.
In any event such an agreement between judges could not affect the proper interpretation of Brussels II Revised. [41] [44] On the second issue, the criteria under article 12.3 were clearly satisfied in this case.
Firstly, under 12.3(a), the substantial connection was satisfied by the fact the childs parents are habitually resident in the UK and they and the child are British citizens. [21] Secondly, jurisdiction had been expressly and unequivocally accepted by the parties under 12.3(b), both before and after proceedings commenced.
In particular, the father had accepted jurisdiction by undertaking to bring the child back here if required to do so by the Court. [33] [34] Finally, the exercise of jurisdiction was in the best interests of the child given the presumption in article 12.4 that where a child is resident in certain non EU States it will be in his best interests for jurisdiction to be exercised under this article.
It was also relevant that the childs guardian in the High Court considered that the childs future was best decided in this country. [37] [38] The Justices expressed different views on the meaning of the words in article 12.3(b) requiring express or unequivocal acceptance by all of the parties to the proceedings at the time the court is seised.
Did this mean before, when or after the relevant proceedings were begun? It was also unclear whether these words describe the time at which parties have accepted jurisdiction or, as argued on behalf of the interveners Reunite, describe the parties whose acceptance is required.
The Justices do not express a concluded view as it was not necessary to do so in order to decide this appeal.
In this case all the parties had given unequivocal acceptance both before and after the proceedings had begun.
The diversity of views indicates that the interpretation is not acte clair and if a case arises where the issue has to be decided it may have to be the subject of a reference to the European Court of Justice under articles 68 and 234 of the EC Treaty. (Lady Hale at paragraphs [23] [32]; Lord Collins at [51] [64]; Lord Kerr at [66] [74]; Lord Clarke at [75] [92])
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The appellants are insurance companies, whose business includes the writing of employers liability insurance policies.
They undertake to indemnify the employer in respect of any liability incurred by it for harm or injury arising out of the employers negligence.
They have brought these proceedings to challenge the lawfulness of an Act of the Scottish Parliament which was passed on 11 March 2009, received the Royal Assent on 17 April 2009 and came into force on 17 June 2009.
It is the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the 2009 Act) which provides that asymptomatic pleural plaques, pleural thickening and asbestosis shall constitute, and shall be treated as always having constituted, actionable harm for the purposes of an action of damages for personal injury.
It is no secret that the purpose of the 2009 Act was to reverse the decision of the House of Lords in Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 (Rothwell).
In that case it was held that, as pleural plaques caused no symptoms, did not increase susceptibility to other asbestos related diseases or shorten life expectancy, their mere presence in the claimants lungs did not constitute an injury which was capable of giving rise to a claim for damages.
It was anticipated that, while that decision was not binding on the Scottish courts, it would almost certainly be followed in Scotland as there is no material difference between the law of England and Wales and Scots law on this branch of the law.
In Wright v Stoddard International plc (No 2) [2007] CSOH 173, 2008 Rep LR 37 Lord Uist applied the decision in Rothwell, although on the facts he would not have awarded damages anyway: see para 161.
The appellants claim that reversing that decision will expose them to claims under their indemnity insurance policies amounting to millions of pounds annually and perhaps several billions of pounds in total.
They seek declarator that the 2009 Act is unlawful and its reduction.
The first and second respondents are, respectively, the Lord Advocate representing the Scottish Ministers and the Advocate General for Scotland representing the United Kingdom government.
The third to tenth respondents are individuals who have been diagnosed with pleural plaques caused by negligent exposure to asbestos.
They have each raised, or intend to raise, actions of damages seeking reparation for the loss, injury and damage which they claim to have sustained as a result of their employers negligence.
The defenders to their actions include, or will include, private undertakings, nationalised industries and public bodies at the level of both local and central government.
These respondents claim that they will be financially disadvantaged if the appellants attack on the 2009 Act were to be successful, as they would be deprived of the benefit of the declaration in the Act that pleural plaques constitute harm which, for the purposes of an action of damages, is actionable.
On 8 May 2009 they were allowed by the Lord Ordinary (Lord Uist) to enter the process as individuals who were directly affected by the issues raised under and in terms of rule 58.8(2) of the Rules of the Court of Session 1994.
On 8 January 2010, after a debate that took place over periods totalling 22 days, the Lord Ordinary (Lord Emslie) held that the appellants had locus standi to bring these proceedings, that the wording of Rule of Court 58.8(2) was wide enough to cover the position of the third to tenth respondents but that the appellants had failed in their various challenges to the 2009 Act and their petition must be dismissed: [2010] CSOH 2, 2010 SLT 179.
The appellants reclaimed.
On 12 April 2011, after a hearing which lasted 8 days, the First Division (the Lord President (Hamilton), Lord Eassie and Lord Hardie) allowed the reclaiming motion to the extent of repelling the answers for the third to tenth respondents on the ground that they did not have a title and interest to be convened as respondents under rule 58.8(2), but quoad ultra refused the reclaiming motion: [2011] CSIH 31, 2011 SLT 439.
The appellants have now appealed to this court and the Lord Advocate and the third to tenth respondents have cross appealed.
The Attorney General for Northern Ireland, the Northern Ireland Department of Finance and Personnel and Friends of the Earth Scotland were given permission to intervene in writing.
The First Minister of Wales was given permission to intervene both in writing and orally and the Counsel General for Wales (Mr Theodore Huckle QC) made submissions on his behalf.
Background
As the Lord Ordinary explained (2010 SLT 179, paras 2 4), pleural plaques are physical changes in the pleura.
They can be detected radiologically as areas of fibrous tissue by x rays and CT scans.
They are caused by occupational exposure to asbestos and, in common with other asbestos related conditions, they tend to develop after a long latency period of 20 years or more.
In most cases they have no discernible effect on an individuals day to day physical health or well being.
They are asymptomatic, causing no pain or discomfort.
They produce no disability or impairment of function, nor are they externally disfiguring.
But it was common ground in Rothwell that they do indicate that the quantity of asbestos fibres in the lung is significant: see Lord Rodger of Earlsferry, para 78.
While they do not in themselves threaten or lead to other asbestos induced conditions, their presence may indicate a cumulative level of asbestos exposure at which there is an increased risk of mesothelioma or other asbestos related disorders.
In that respect they are said to function as a marker for that increased risk.
Individuals who have been diagnosed with pleural plaques are liable to become alarmed and anxious for the future.
In some cases this may bring to mind the suffering and perhaps death of friends and colleagues from asbestos related diseases.
Their enjoyment and quality of life may be severely reduced by the associated anxiety.
It would, as Lord Rodger of Earlsferry said in Rothwell, para 90, make no sense, if the plaques themselves are not a condition for which the law will intervene to give damages because it is not serious enough to require its intervention, for the law to give damages for anxiety associated with plaques.
Furthermore, the anxiety is not about any risk to health caused by the plaques themselves.
Rather, it is because these individuals are worried that they may develop asbestosis or mesothelioma as a result of the accumulation of fibres in their lungs.
To give them a claim for damages for this would be to give them a claim for something that the plaques themselves did not cause.
So the mere risk that they may develop asbestosis or mesothelioma in the future will not give them a claim for damages.
For them to recover damages for the associated anxiety, the asbestos related pleural plaques themselves must be actionable.
Claims for damages in negligence for pleural plaques began to emerge in the 1980s.
In three cases, all of which were decided at first instance in England, the judges found in the claimants favour: Church v Ministry of Defence (1984) 134 NLJ 623, Peter Pain J; Sykes v Ministry of Defence The Times, 23 March 1984, Otton J; and Patterson v Ministry of Defence [1987] CLY 1194, Simon Brown J.
The claimants in these cases had all been exposed to asbestos while working in naval dockyards.
In some cases it was indicated that pleural plaques did not give rise to a cause of action: Morrison v Central Electricity Generating Board, 15 March 1984; Shuttleton v Duncan Stewart & Co Ltd 1996 SLT 517.
But damages were awarded in Gibson v McAndrew Wormald & Co Ltd 1998 SLT 562 and Nicol v Scottish Power plc 1998 SLT 822.
And the general practice of employers or their liability insurers during this period was to concede that pleural plaques were an actionable injury and to settle claims without admission of liability.
The appellants say that this was because both the number and value of such claims were low.
Insurance by employers against their liability for personal injury to their employees has been compulsory since 1 January 1972, when the Employers Liability (Compulsory Insurance) Act 1969 came into force.
In terms of section 1(1) every employer must insure, and maintain insurance, against liability for bodily injury or disease sustained by its employees and arising out of and in the course of their employment in the employers business.
But section 3 of that Act exempts a number of public employers from the requirement to carry such insurance.
These include any body corporate established by or under any enactment for the carrying on of any industry or part of an industry, any undertaking under national ownership or control and a council in Scotland constituted under section 2 of the Local Government etc (Scotland) Act 1994.
Employers will, of course, have to meet any claims if the insurer has gone out of business or refuses to indemnify.
But in many cases resulting from exposure to asbestos the employer had gone out of business by the time the harmful outcome had manifested itself.
For practical purposes much of the cost of meeting claims for pleural plaques will fall on insurers.
Regulation 2 of the Employers Liability (Compulsory Insurance) General Regulations 1971 (SI 1971/1117) prohibits any condition in a policy of insurance issued or renewed in accordance with the requirements of the 1969 Act which provides that no liability shall arise under the policy, or that any such liability so arising shall cease, in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy.
From about the mid 1990s the number and value of claims for pleural plaques began to increase sharply.
Furthermore, by this time an increase in proportional mortality from lung cancer as milder cases of asbestosis survived long enough to develop a malignancy had led to a greater interest in the benign pleural diseases, including pleural thickening and pleural plaques: Parkes, Occupational Lung Disorders (1994), Brownes Introduction to his chapter on benign asbestos pleural disease.
The consensus of medical opinion was that pleural plaques were indeed benign.
So United Kingdom government departments which had succeeded to the liabilities of former nationalised industries, and later various parties including the leading insurers, decided to challenge the practice of settling these claims.
Ten test cases were selected for trial before Holland J. He found that pleural plaques were actionable: [2005] EWHC 88 (QB).
In seven of these cases the insurers appealed to the Court of Appeal, which reversed the decision of the trial judge: [2006] EWCA Civ 27, [2006] ICR 1458.
Four of the claimants appealed to the House of Lords in Rothwell, but on 17 October 2007 their appeals were dismissed.
It was held that the mere presence of pleural plaques in the lungs was not actionable.
That decision was controversial and, as was to be expected, it was not well received by those with pleural plaques who had made, or were considering making, claims for damages.
This was especially so in those parts of the United Kingdom such as Clydebank where industries that exposed their employees to asbestos were or had been located and where asbestos related conditions were most frequently found.
There were demands for the law to be restored to what it had previously been thought to be.
On 25 October 2007 the First Minister advised the Scottish Parliament that the Scottish Government was considering its position.
On 1 November 2007 the Cabinet Secretary for Justice met representatives of the insurance industry to discuss the matter.
The issue was debated in the Scottish Parliament on 7 November 2007.
On the same day the Parliament was informed that the Cabinet Secretary for Justice had met representatives of Clydeside Action on Asbestos together with Frank Maguire of Thompsons Solicitors (who was acting for a number of persons seeking damages), and that the Scottish Governments intention was to consider a bill which had been drafted by Mr Maguires firm with a view to reversing Rothwell in Scotland.
The Scottish Governments intention to legislate to allow those with pleural plaques to continue to be able to raise an action for damages was confirmed by the Cabinet Secretary on 28 November 2007.
The legislation
The Bill which became the 2009 Act was prepared by Scottish parliamentary counsel.
It was introduced into the Scottish Parliament on 23 June 2008.
A call was issued by the Justice Committee for the submission of written evidence by 25 August 2008.
Oral evidence was taken by the Committee on the general principles of the Bill on 2 and 9 September 2008.
The Stage 1 Report was published on 13 October 2008.
It was recommended that the Parliament agree to the general principles, which it did unanimously on 5 November 2008.
Following consideration of proposed amendments to the Bill as passed at Stage 1, it passed the Justice Committee in unamended form at Stage 2 on 2 December 2008.
It was approved by the Scottish Parliament, subject to certain minor amendments, at Stage 3 on 11 March 2009, by a majority of 98 to 16.
The Bill received the Royal Assent on 17 April 2009.
The long title to the 2009 Act states that its purpose is to provide that certain asbestos related conditions are actionable personal injuries.
The Act itself is in these terms: 1.
Pleural plaques (1) Asbestos related pleural plaques are a personal injury which is not negligible. (2) Accordingly, they constitute actionable harm for the purposes of an action of damages for personal injuries. (3) Any rule of law the effect of which is that asbestos related pleural plaques do not constitute actionable harm ceases to apply to the extent it has that effect. (4) But nothing in this section otherwise affects any enactment or rule of law which determines whether and in what circumstances a person may be liable in damages in respect of personal injuries. 2.
Pleural thickening and asbestosis (1) For the avoidance of doubt, a condition mentioned in subsection (2) which has not caused and is not causing impairment of a persons physical condition is a personal injury which is not negligible. (2) Those conditions are (a) asbestos related pleural thickening; and (b) asbestosis. (3) Accordingly, such a condition constitutes actionable harm for the purposes of an action of damages for personal injuries. (4) Any rule of law the effect of which is that such a condition does not constitute actionable harm ceases to apply to the extent it has that effect. (5) But nothing in this section otherwise affects any enactment or rule of law which determines whether and in what circumstances a person may be liable in damages in respect of personal injuries. 3.
Limitation of actions (1) This section applies to an action of damages for personal injuries (a) in which the damages claimed consist of or include damages in respect of (i) asbestos related pleural plaques; or (ii) a condition to which section 2 applies, and (b) which, in the case of an action commenced before the date this section comes into force, has not been determined by that date. (2) For the purposes of sections 17 and 18 of the Prescription and Limitation (Scotland) Act 1973 (c52) (limitation in respect of actions for personal injuries), the period beginning with 17 October 2007 and ending with the day on which this section comes into force is to be left out of account. 4.
Commencement and retrospective effect (1) This Act (other than this subsection and section 5) comes into force on such day as the Scottish Ministers may, by order made by statutory instrument, appoint. (2) Sections 1 and 2 are to be treated for all purposes as having always had effect. (3) But those sections have no effect in relation to (a) a claim which is settled before the date on which subsection (2) comes into force (whether or not legal proceedings in relation to the claim have been commenced); or (b) legal proceedings which are determined before that date. 5.
Short title and Crown application (1) This Act may be cited as the Damages (Asbestos related Conditions) (Scotland) Act 2009. (2) This Act binds the Crown.
On 29 October 2007 the UK Government indicated in the course of a debate in the House of Commons that, having given careful consideration to the judgment in Rothwell, it had decided that it would not be appropriate to legislate on the issue: Hansard (HC Debates) 29 October 2007, col 798w.
It confirmed that this was its position in a written answer on 10 December 2007: (HC Debates) 10 December, col 176w.
On 9 July 2008 the Ministry of Justice issued a consultation paper entitled Pleural Plaques (CP 14/08), in which the options for increasing support, help and information to people with pleural plaques, for changing the law and for providing financial support were set out, the last two being by means of a no fault payment scheme.
The consultation period closed on 1 October 2008.
On 5 February 2010 the Damages (Asbestos related Conditions) Bill, which was designed to create parity of treatment between England and Wales and Scotland, received its second reading in the House of Lords: Hansard (HL Debates) 5 February 2010, cols 454 463.
But it did not have the support of the government and on 25 February 2010 the Ministry of Justice announced that, following the consultation, the law in England and Wales would not be amended but that it had been decided to introduce an extra statutory scheme by which payments of 5,000 would be made to persons who had begun but not resolved a pleural plaques compensation claim at the time of the decision in Rothwell: Hansard (HL Debates) 25 February 2010, cols 140 144w.
The Pleural Plaques Former Claimants Payment Scheme was launched on 2 August 2010.
It provides that applications under it must be received by 1 August 2011.
On 21 March 2011 the Northern Ireland Assembly passed a measure for Northern Ireland which in all material respects is in identical terms to the 2009 Act, the short title of which is the Damages (Asbestos related Conditions) Act: Northern Ireland Assembly Official Report 21 March, p 488.
Prior to its receiving the Royal Assent the Attorney General for Northern Ireland referred the question whether the Bill was within the legislative competence of the Assembly to this court under section 11 of the Northern Ireland Act 1998.
He submitted that its provisions offended article 6 of the European Convention on Human Rights and/or article 1 of Protocol 1 to the Convention and/or article 14 read together with those articles.
He withdrew the reference before the hearing of this appeal could take place.
The Act received the Royal Assent on 21 June 2011 when sections 4(1) and 5 came into force.
The remainder of the Act will come into force on such date as the Department of Finance and Personnel shall appoint.
No proposals were drawn to the courts attention for similar legislation to be passed by the Welsh Assembly.
But, as the Counsel General explained, the First Minister of Wales has an interest in this appeal in so far as it is directed to questions about the legislative competence at common law of the Scottish Parliament.
The issues
The appellants challenge the validity of the 2009 Act on two bases: (1) that it is incompatible with their rights under article 1 of Protocol 1 to the Convention (A1 P1) and that it is in consequence outside the legislative competence of the Scottish Parliament by virtue of section 29(2)(d) of the Scotland Act 1998; (2) that it is open to judicial review on common law grounds as an unreasonable, irrational and arbitrary exercise of the legislative authority conferred by the Scotland Act 1998 on the Scottish Parliament.
There was a third basis, argued before the Lord Ordinary, that the 2009 Act was an interference by means of legislation with a current dispute and was thus incompatible with the appellants rights under article 6.
But this argument was rejected by the Lord Ordinary (2010 SLT 179, paras 161 179) and it was not renewed in the Inner House or before this court.
The Lord Advocate in his cross appeal submits that there is no relevant interference with the existing possessions of the appellants, and that in consequence they should not be found to have victim status for the purposes of article 34 of the Convention.
If this argument is sound the appellants will not be in a position to maintain their challenge to the 2009 Act on the ground that it is outwith the legislative competence of the Scottish Parliament because it is incompatible with their rights under A1 P1, as section 100(1) of the Scotland Act 1998 provides that the Act does not enable a person to rely on any of the Convention rights in any proceedings unless he would be a victim for the purposes of article 34 if proceedings in respect of the act in question were brought in the European Court of Human Rights.
The third to tenth respondents in their cross appeal submit that, as they are members of a class affected by the 2009 Act and have a legitimate interest to protect, they are persons directly affected by the issues raised within the meaning of rule 58.8(2) and that the Lord Ordinary was right to hold that they should be made parties to the proceedings.
Legislative competence
Section 29(1) of the Scotland Act 1998 provides that an Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament.
Section 29(2)(d) of the Act provides that a provision is outside that competence so far as it is incompatible with any of the Convention rights.
Those rights include the right protected by A1 P1, which 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.
According to the jurisprudence of the Strasbourg court, A1 P1 is in substance a guarantee of the right to property.
It comprises three distinct rules: see Sporrong and Lnnroth v Sweden (1982) 5 EHRR 35, para 61; The National & Provincial Building Society, The Leeds Permanent Building Society and The Yorkshire Building Society v United Kingdom (1997) 25 EHRR 127, para 78; Bck v Finland (2004) 40 EHRR 1184, para 52; Draon v France (2005) 42 EHRR 807, para 69.
The first is expressed in the first sentence of the first paragraph, and it is of a general nature.
It lays down the general principle of the peaceful enjoyment of property.
The second is expressed in the second sentence of the same paragraph.
It deals with deprivation of property, which it subjects to the conditions to which that sentence refers.
Law in that sentence is to be understood in the autonomous sense that it has throughout the Convention.
To be law for this purpose, the provision must be accessible, clearly expressed and not arbitrary.
The third is set out in the second paragraph.
It recognises that the Contracting States are entitled, among other things, to control the use of property in the general interest and to secure the payment of taxes or other contributions or penalties.
These rules are not distinct, in the sense of being unconnected: Bck v Finland (2004) 40 EHRR 1184, para 52.
The second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle set out in the first rule.
So I do not think that we need to concern ourselves as to whether the question that has been raised in this case is directed to the rule about deprivation which is set out in the second sentence of the first paragraph rather than the general principle referred to in the first sentence.
Whichever it is, the interference must comply with the principle of lawfulness, and it must pursue a legitimate aim by means that are reasonably proportionate to the aim sought to be realised.
The questions that must be addressed are, therefore, (1) whether the appellants have been able to show that the effect of the 2009 Act is that they would be victims for the purposes of article 34 of the Convention, (2) if so, whether the interference with their possessions that its provisions represent pursues a legitimate aim and (3) if so, whether the means that have been chosen by the Scottish Parliament are reasonably proportionate to the aim sought to be realised. (a) do the appellants have victim status?
Mr Dewar QC for the Lord Advocate submitted that, in order to answer the question whether the appellants have victim status, it was necessary to understand the true nature of the possessions at stake and the nature and extent of any interference with these possessions.
In Kopeck v Slovakia (2004) 41 EHRR 944, para 35(c) the court said of the practice of the Convention institutions under A1 P1: An applicant can allege a violation of article 1 of Protocol 1 only in so far as the impugned decisions related to his possessions within the meaning of this provision.
Possessions can be either existing possessions or assets, including claims, in respect of which the applicant can argue that he or she has at least a legitimate expectation of obtaining effective enjoyment of a property right.
By way of contrast, the hope of recognition of a property right which it has been impossible to exercise effectively cannot be considered a possession within the meaning of article 1 of Protocol 1, nor can a conditional claim which lapses as a result of the non fulfilment of the condition.
Basing himself on this guidance, he submitted that the test was not satisfied.
He accepted that the expectation was that, where an insured interest was involved, the insurer would respond and provide the employer with the indemnity.
But the effect of the Act was indirect.
The contractual relationship between the employer and the insurer was quite separate from that between the employer and his employee.
A person could not claim to be a victim unless he was directly affected.
In this case the Act did not take anything away from the employers or their insurers in that sense.
As the Lord Ordinary said (2010 SLT 179, para 195), it was not the Act which would cause the claimants claims to succeed but proof of all the legal and factual requisites for an award.
So its consequences are simply too remote from the legislation to qualify.
The judges of the First Division did not accept this argument, as it seemed to them to be clear that the appellants were within a class who might be directly affected by the 2009 Act: 2011 SLT 439, para 35.
This approach to the rule that, in order to claim to be a victim of a violation, a person must be directly affected by the impugned measure, is supported by the Strasbourg courts analysis in Burden v United Kingdom (2008) 47 EHRR 857, para 34 where, having referred to the rule in the previous paragraph, it said: It is, however, open to a person to contend that a law violates his rights, in the absence of an individual measure of implementation, if he is required either to modify his conduct or risk being prosecuted or if he is a member of a class of people who risk being directly affected by the legislation.
The court referred by way of example to Marckx v Belgium (1979) 2 EHRR 330, where the applicants were found to be directly affected by, and thus victims of, legislation which would limit the childs right to inherit property from her mother upon her mothers eventual death.
On the other hand in Willis v United Kingdom (2002) 35 EHRR 547 the risk of the applicant being refused a widows pension on grounds of sex at a future date was found to be hypothetical since it was not certain that she would otherwise fulfil the statutory conditions for the payment of the benefit on the relevant date.
The difference between a risk of being directly affected and a risk which is purely hypothetical is not easy to identify.
But in Burden the applicants were held to be directly affected by the legislation because they had established that, given their age, the wills they had made and the value of the property they owned, there was a real risk that in the not too distant future one of them would be required to pay substantial inheritance tax on the property inherited from the sister: para 35.
So the fact that the interference is not present or immediate but may not occur until some time in the future does not exclude the person from being a victim for the purposes of article 34.
A persons financial resources, as in the case of the accumulated wealth of the Burden sisters or the property that Miss Marckx had it in mind to leave to her illegitimate daughter, are capable of being possessions within the meaning of A1 P1.
Here the complaint is of the imposition of a liability to indemnify which had been removed by Rothwell.
But, as the court said in Burden, para 59, the amount of money that must be paid is a possession for the purposes of the article.
The question, then, is whether the consequences for the applicants of the 2009 Act are too remote or tenuous for them to be directly affected by it.
The answer to it must depend on what the Act was designed to achieve.
As its long title makes plain, its purpose was to reverse the decision that the House of Lords took in Rothwell by making asbestos related conditions, including pleural plaques, actionable.
No doubt, where the employers still exist, it is against the employers that their claims for damages will be directed.
But there is a risk that in practice the effect of the Employers Liability (Compulsory Insurance) Act 1969 is that the liability will fall upon the insurers.
Their liability cannot be dismissed as remote or hypothetical.
The claims that have already been brought, as well as those that will be brought before they are extinguished by the limitation period, are by people in whose lungs pleural plaques have actually been detected.
There is ample material in the record of the proceedings before the Scottish Parliament to show that it was the insurance industry that was expected, and intended, to bear the burden of meeting their claims.
For these reasons I would hold, in agreement with the Inner House, that the appellants are entitled to bring these proceedings as the effect of the 2009 Act is that they would be victims for the purposes of article 34 of the Convention if proceedings in respect of that Act were to be brought in the European Court of Human Rights.
I would also hold that the amount of money that they would be required to pay to satisfy their obligations under the insurance policies is a possession for the purposes of A1 P1.
If it is to be held to be compatible with the appellants Convention right, the 2009 Act must be shown to be pursuing a legitimate aim and to be reasonably proportionate to the aim sought to be realised.
(b) legitimate aim
In James v United Kingdom (1986) 8 EHRR 123, para 47 the Strasbourg court said that eliminating what are judged to be social injustices is an example of the functions of a modern legislature.
There is ample evidence that the Scottish Ministers considered that the consequences of the decision in Rothwell were unduly harsh for people with pleural plaques and that this was a social problem that the Scottish Parliament ought to address, and that this was how the matter was perceived in the Scottish Parliament.
On 13 December 2007 the Cabinet Secretary for Justice made a statement to the Parliament reporting on the decision to introduce a bill to reverse Rothwell, in the course of which he said: The effects of asbestos are a terrible legacy of Scotlands industrial past, and we should not turn our backs on those who have contributed to our nations wealth.
We have, therefore, acted quickly to reassure people who have been diagnosed with pleural plaques through being negligently exposed to asbestos that they will continue to be able to raise an action for damages.
The rationale for government intervention was set out in para 10 of a Partial Regulatory Impact Assessment on the proposed bill which was published by the Scottish Government on 6 February 2008, in which it was stated: Pleural plaques have been regarded as actionable for over twenty years.
They are part of the unintended and unwelcome consequences of our industrial heritage.
The HoL Judgment has raised serious concerns for people with pleural plaques.
Although plaques are not in themselves harmful they do give rise to anxiety because they signify an increased risk of developing very serious illness as a result of exposure to asbestos.
In areas associated with Scotlands industrial past, people with pleural plaques are living alongside friends who worked beside them and are witnessing the terrible suffering of those who have contracted serious asbestos related conditions, including mesothelioma.
This causes them terrible anxiety that they will suffer the same fate.
The Scottish Government believes that people who have negligently been exposed to asbestos who are subsequently diagnosed with pleural plaques should continue to be able to raise an action for damages as has been the practice in Scotland for over twenty years.
It is clear from this explanation that the matter was seen as a social injustice which justified intervention by the legislature.
As was later to be pointed out in para 11 of the Explanatory Notes that accompanied the Bill when it was introduced on 23 June 2008, there was no accurate record of how many cases were being diagnosed each year in Scotland.
But the incidence of pleural plaques was thought to be rising, and it was estimated that up to half of those occupationally exposed to asbestos would have pleural plaques thirty years after first exposure.
The numbers of those likely to be involved, and the circumstances in which they had contracted this condition, were such that the issue was seen to be a legitimate one for legislation in the public interest.
The approach that the Strasbourg court takes to this matter was explained in James v United Kingdom, para 46, in which the court said: 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.
Under the system of protection established by the Convention, it is thus for the national authorities to make the initial assessment both of the existence of a problem of public concern warranting measures of deprivation of property and of the remedial action to be taken.
Here, as in other fields to which the safeguards of the Convention extend, the national authorities accordingly enjoy a certain margin of appreciation.
Furthermore, the notion of public interest is necessarily extensive.
In particular, as the Commission noted, the decision to enact laws expropriating property will commonly involve consideration of political, economic and social issues on which opinions within a democratic society may reasonably differ widely.
The Court, finding it natural that the margin of appreciation available to the legislature in implementing social and economic policies should be a wide one, will respect the legislatures judgment as to what is in the public interest unless that judgment be manifestly without reasonable foundation.
This formula has been repeated in many cases since that date: see, for example, Broniowski v Poland (2004) 40 EHRR 495, para 149; Maurice v France (2005) 42 EHRR 885, para 84.
In Draon v France (2005) 42 EHRR 807, para 76 the court said that the notion of public interest is necessarily extensive as it will commonly involve consideration of political, economic and social issues.
The court will, it said, respect the legislatures judgment as to what is in the public interest unless that judgment is manifestly without reasonable foundation.
As I pointed out in R v Director of Public Prosecutions, Ex p Kebilene [2000] 2 AC 326, 381, the doctrine by which a margin of appreciation is accorded to the national authorities is an essential part of the supervisory jurisdiction which is exercised over state conduct by the international court.
It is not available to the national courts when they are considering Convention issues arising within their own countries.
But in the hands of the national courts too the Convention should be seen as an expression of fundamental principles which will involve questions of balance between competing interests and issues of proportionality.
I suggested that in some circumstances, such as where the issues involve questions of social or economic policy, the area in which these choices may arise is an area of discretionary judgment.
It is not so much an attitude of deference, more a matter of respecting, on democratic grounds, the considered opinion of the elected body by which these choices are made.
Can it be said that the judgment of the Scottish Parliament that this was a matter of public interest on which it should legislate to remove what was regarded as a social injustice was without reasonable foundation or manifestly unreasonable? I do not think so.
There is no doubt that the negligence of employers whose activities were concentrated in socially disadvantaged areas such as Clydebank had exposed their workforce to asbestos and all the risks associated with it for many years.
The anxiety that is generated by a diagnosis of having developed pleural plaques is well documented and it had been the practice for over 20 years for such claims to be met, albeit without admission of liability.
The numbers of those involved, and the fact that many of them live in communities alongside people who are known to have developed very serious asbestos related illnesses, contributed to a situation which no responsible government could ignore.
It seems to me that the Scottish Parliament were entitled to regard their predicament as a social injustice, and that its judgment that asbestos related pleural plaques should be actionable cannot be dismissed as unreasonable.
(c) proportionality
In Sporrong and Lnnroth v Sweden (1982) 5 EHRR 35, para 69 the Strasbourg court declared that, for the purposes of the rule contained in the first sentence of the first paragraph of A1 P1: the Court must determine whether a fair balance was struck 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 inherent in the whole of the Convention and is also reflected in the structure of article 1.
In Pressos Compania Naviera SA v Belgium (1995) 21 EHRR 301, para 63, recalling this passage, the Commission said that that fair balance must be regarded as upset if the person concerned had to bear an individual and excessive burden.
In The National & Provincial Building Society, The Leeds Permanent Building Society and The Yorkshire Building Society v United Kingdom (1997) 25 EHRR 127, para 80 the court, again recalling what had been said in Sporrong, said that there must be a reasonable relationship of proportionality between the means employed and the aims pursued.
In Draon v France (2005) 42 EHRR 807, para 79 the court added these comments: Compensation terms under the relevant domestic legislation are material to the assessment whether the contested measure respects the requisite fair balance and, notably, whether it imposes a disproportionate burden on the applicants.
In this connection, the Court has already found that the taking of property without payment of an amount reasonably related to its value will normally constitute a disproportionate interference and a total lack of compensation can be considered justifiable under article 1 of Protocol 1 only in exceptional circumstances.
One of the features of the 2009 Act is that it declares that sections 1 and 2 are to be treated for all purposes as having always had effect: section 4(2).
Although the reach of this provision is limited by sections 17 and 18 of the Prescription and Limitation (Scotland) Act 1973, the effect of the Act is that claims which under the law as declared by the House of Lords in Rothwell were always bound to fail because a diagnosis that a person had pleural plaques did not give rise to a cause of action as the anxiety to which it gave rise was not actionable were now to be capable of resulting in an award of damages.
Its effect can be said to be retrospective in that the insurance policies which will be called upon to meet this liability were written when the law must, on the declaratory theory, be taken to have been as stated in Rothwell.
Claims which on the law as it must be taken to have been at that time would have been bound to have been rejected are declared by the Act to be actionable.
The issue of retroactive effect was considered in Bck v Finland (2004) 40 EHRR 1184, para 68 where the court said: Turning to the retroactive effect of the 1993 Act, the Court notes that neither the Convention nor its Protocols preclude the legislature from interfering with existing contracts.
The Court considers that a special justification is required for such interference, but accepts that in the context of the 1993 Act there were special grounds of sufficient importance to warrant it.
The Court observes that in remedial social legislation and in particular in the field of debt adjustment, which is the subject of the present case, it must be open to the legislature to take measures affecting the further execution of previously concluded contracts in order to attain the aim of the policy adopted.
The question is whether the insurance industry which the appellants represent is being called upon to bear a disproportionate and excessive burden.
This is not, of course, something that arose incidentally, as an unforeseen or unlooked for consequence of declaring in the legislation that pleural plaques are to be treated for all purposes as being always actionable.
On the contrary, there were extensive discussions with the insurance industry while the effects of the Bill were being assessed.
The implications for insurers were described in paras 17, 18 and 29 of the Explanatory Notes that accompanied the Bill when it was introduced, and an updated reassessment of the financial implications was communicated to the Convener of the Justice Committee by the Minister for Community Safetys letter dated 25 February 2009.
Moreover it is an inescapable consequence of the measure taken to deal with the demands of the general interest of the community that the burden which was to fall on the insurers could not be alleviated or compensated.
There are however two special features of this case which seem to me to show that the balance that was struck cannot be said to be disproportionate.
The first is that the claims which the Act makes possible will only succeed if it is shown that the exposure to asbestos was caused by the employers negligence.
Indeed, the Act is conspicuously careful in its draftsmanship.
Its effect is restricted to new claims and to claims that have been commenced but not yet determined.
It preserves all the other defences that may be open on the law or the facts, other than the single question whether the pleural plaques themselves are actionable.
It achieves what it has to achieve.
But it does no more than that.
The second special feature is that the business in which insurers are engaged and in pursuance of which they wrote the policies that will give rise to the obligation to indemnify is a commercial venture which is inextricably associated with risk.
Because they were long term policies there was inevitably a risk that circumstances, unseen at the date when they were written, might occur which would increase the burden of liability.
Phrases such as bodily injury or disease are capable of expanding the meaning that they were originally thought to have as medical knowledge develops and circumstances change.
Diseases that were previously unknown or rarely seen may become familiar and give rise to claims that had not at the outset been anticipated.
The effects of asbestos provide ample evidence of this phenomenon, as people began to live long enough after exposure to it to contract mesothelioma and other harmful asbestos related diseases.
The nature, number and value of claims were therefore always liable to develop in ways that were unpredictable.
The premium income that was expected to meet the claims that were foreseen at the outset may have no relationship, in the long term, to the burden that in fact materialises.
How best to provide for that eventuality is an art which takes the rough with the smooth and depends on the exercise of judgment and experience.
So the fact that the effect of the Act will be to increase the burden on the insurers, even to the extent that was anticipated, does not seem to me to carry much weight.
It might have been different if the law on the actionablity of pleural plaques had been settled by judicial decision when the policies were written.
The effect of the Act would have been to reverse the settled law after the date when the insurers committed themselves by their contract to indemnify.
As it is, the question whether they amounted to bodily injury or a disease remained open then and for many years afterwards.
The law itself might indeed have developed differently, as Lord Rodger observed in Rothwell, para 84 when he said that in theory it might have held that the claimants had suffered personal injury when there were sufficient irremovable fibres in their lungs to cause the heightened risk of asbestosis or mesothelioma.
The interference with the insurers possessions can therefore be seen to be within the area of risk with which they engaged when they undertook to indemnify the consequences of the employers negligence.
For these reasons I would hold that the interference with the appellants possessions by the 2009 Act pursued a legitimate aim and that the means chosen by the Scottish Parliament are reasonably proportionate to the aim sought to be realised.
It follows that the 2009 Act was not outside the legislative competence of the Parliament.
The common law grounds
The appellants case at common law is that the 2009 Act was the result of an unreasonable, irrational and arbitrary exercise of the legislative authority conferred by the Scotland Act 1998 on the Scottish Parliament.
Although the Dean of Faculty did not abandon that argument in this court, he accepted that if his argument that the Act was incompatible with A1 P1 were to be rejected on the grounds that there was a legitimate aim and that its provisions were reasonably proportionate to the aim sought to be realised he could not succeed on this ground at common law.
On one view, very little more need be said about it.
But the question as to whether Acts of the Scottish Parliament and measures passed under devolved powers by the legislatures in Wales and Northern Ireland are amenable to judicial review, and if so on what grounds, is a matter of very great constitutional importance.
It goes to the root of the relationship between the democratically elected legislatures and the judiciary.
At issue is the part which the rule of law itself has to play in setting the boundaries of this relationship.
I think therefore that the argument which this part of the appellants case raises cannot be dismissed so easily.
The issue can be broken down into its component parts in this way.
First, there is the question whether measures passed by the devolved legislatures are amenable to judicial review, other than in the respects expressly provided for by the devolution statutes, at all.
If not, that will be the end of the argument.
But if they are open to judicial review on common law grounds at all, there is the question as to what these grounds are.
At the one extreme are the grounds that the appellants second plea in law encapsulates: that the legislation is unreasonable, irrational or arbitrary.
At the other is the proposition that judicial intervention is admissible only in the exceptional circumstances that Lord Steyn had in mind in R (Jackson) v Attorney General [2005] UKHL 56, [2006] 1 AC 262, para 102; see also my own speech at paras 104 107 and Baroness Hale of Richmonds observations at para 159.
To answer these questions in their proper context it is necessary to set out the background in a little more detail.
Although I am conscious of the implications of what the court decides in this case for the other devolved legislatures, I shall concentrate on the position of the Scottish Parliament.
As was common ground before us, I consider that, while there are some differences of detail between the Scotland Act 1998 and the corresponding legislation for Wales and Northern Ireland, these differences do not matter for present purposes.
The essential nature of the legislatures that the legislation has created in each case is the same.
The starting point for an examination of the first question is the following proposition in West v Secretary of State for Scotland 1992 SC 385, 412 413: The Court of Session has power, in the exercise of its supervisory jurisdiction, to regulate the process by which decisions are taken by any person or body to whom a jurisdiction, power or authority has been delegated or entrusted by statute, agreement or any other instrument.
Devolution is an exercise of its law making power by the United Kingdom Parliament at Westminster.
It is a process of delegation by which, among other things, a power to legislate in areas that have not been reserved to the United Kingdom Parliament may be exercised by the devolved legislatures.
The Scotland Act 1998 sets out the effect of the arrangement as it affects Scotland with admirable clarity.
Section 1(1) of the Act declares: There shall be a Scottish Parliament.
Its democratic legitimacy is enshrined in the provisions of section 1(2) and section 1(3), which provide for the election of those who are to serve as its members as constituency members and by a system of proportional representation chosen from the regional lists.
Section 28(1) provides that the Parliament may make laws, to be known as Acts of the Scottish Parliament, and section 28(2) provides for them to receive the Royal Assent.
Section 28(5) provides that the validity of an Act of the Scottish Parliament is not affected by any invalidity in the proceedings of the Parliament leading to its enactment.
Although section 28(7) provides that that section shall not affect the power of the United Kingdom to make laws for Scotland, in practice the Scottish Parliament enjoys the same law making powers for Scotland as the Westminster Parliament except as provided expressly for in section 29 which, in certain closely defined respects, limits its legislative competence.
Section 29 does not, however, bear to be a complete or comprehensive statement of limitations on the powers of the Parliament.
The Act as a whole has not adopted that approach: see Somerville v Scottish Ministers (HM Advocate General for Scotland intervening) [2007] UKHL 44, 2008 SC (HL) 45, [2007] 1 WLR 2734, para 28.
The carefully chosen language in which these provisions are expressed is not as important as the general message that the words convey.
The Scottish Parliament takes its place under our constitutional arrangements as a self standing democratically elected legislature.
Its democratic mandate to make laws for the people of Scotland is beyond question.
Acts that the Scottish Parliament enacts which are within its legislative competence enjoy, in that respect, the highest legal authority.
The United Kingdom Parliament has vested in the Scottish Parliament the authority to make laws that are within its devolved competence.
It is nevertheless a body to which decision making powers have been delegated.
And it does not enjoy the sovereignty of the Crown in Parliament that, as Lord Bingham said in Jackson, para 9, is the bedrock of the British constitution.
Sovereignty remains with the United Kingdom Parliament.
The Scottish Parliaments power to legislate is not unconstrained.
It cannot make or unmake any law it wishes.
Section 29(1) declares that an Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament.
Then there is the role which has been conferred upon this court by the statute, if called upon to do so, to judge whether or not Acts of the Parliament are within its legislative competence: see section 33(1) and paragraphs 32 and 33 of Schedule 6, as amended by section 40 and paragraphs 96 and 106 of Schedule 9 to the Constitutional Reform Act 2005.
The question whether an Act of the Scottish Parliament is within the competence of the Scottish Parliament is also a devolution issue within the meaning of paragraph 1(a) of Schedule 6 to the Scotland Act in respect of which proceedings such as this may be brought in the Scottish courts.
Against this background, as there is no provision in the Scotland Act which excludes this possibility, I think that it must follow that in principle Acts of the Scottish Parliament are amenable to the supervisory jurisdiction of the Court of Session at common law.
The much more important question is what the grounds are, if any, on which they may be subjected to review.
There is very little guidance as to how this question should be answered in the authorities.
I do not think that we get much help from cases such as R v Secretary of the State for the Environment, Ex P Nottinghamshire County Council [1986] AC 240, R v Secretary of State for the Environment, Ex p Hammersmith and Fulham London Borough Council [1991] 1 AC 521 and Edinburgh District Council v Secretary of State for Scotland 1985 SC 261.
They were concerned with the exercise of delegated powers by ministers and, as the judges of the First Division said, 2011 SLT 439, para 83, none of them is directly in point in this case.
All I would take from them is that, even in these cases, a high threshold has been set.
I also think that the situation that was considered in R (Asif Javed) v Secretary of State for the Home Department [2001] EWCA Civ 789, [2002] QB 129 which was concerned with a draft order which was laid by the Secretary of State and approved by both Houses of Parliament is so different from that which arises here that it can safely be left on one side.
The fact is that, as a challenge to primary legislation at common law was simply impossible while the only legislature was the sovereign Parliament of the United Kingdom at Westminster, we are in this case in uncharted territory.
The issue has to be addressed as one of principle.
The dominant characteristic of the Scottish Parliament is its firm rooting in the traditions of a universal democracy.
It draws its strength from the electorate.
While the judges, who are not elected, are best placed to protect the rights of the individual, including those who are ignored or despised by the majority, the elected members of a legislature of this kind are best placed to judge what is in the countrys best interests as a whole.
A sovereign Parliament is, according to the traditional view, immune from judicial scrutiny because it is protected by the principle of sovereignty.
But it shares with the devolved legislatures, which are not sovereign, the advantages that flow from the depth and width of the experience of its elected members and the mandate that has been given to them by the electorate.
This suggests that the judges should intervene, if at all, only in the most exceptional circumstances.
As Lord Bingham of Cornhill said in R (Countryside Alliance) v Attorney General [2007] UKHL 52, [2008] AC 719, para 45, the democratic process is liable to be subverted if, on a question of political or moral judgment, opponents of an Act achieve through the courts what they could not achieve through Parliament.
The question whether the principle of the sovereignty of the United Kingdom Parliament is absolute or may be subject to limitation in exceptional circumstances is still under discussion.
For Lord Bingham, writing extrajudicially, the principle is fundamental and in his opinion, as the judges did not by themselves establish the principle, it was not open to them to change it: The Rule of Law, p 167.
Lord Neuberger of Abbotsbury, in his Lord Alexander of Weedon lecture, Who are the masters Now? (6 April 2011), said at para 73 that, although the judges had a vital role to play in protecting individuals against the abuses and excess of an increasingly powerful executive, the judges could not go against the will of Parliament as expressed through a statute.
Lord Steyn on the other hand recalled at the outset of his speech in Jackson, para 71, the warning that Lord Hailsham of St Marylebone gave in The Dilemma of Democracy (1978), p 126 about the dominance of a government elected with a large majority over Parliament.
This process, he said, had continued and strengthened inexorably since Lord Hailsham warned of its dangers.
This was the context in which he said in para 102 that the Supreme Court might have to consider whether judicial review or the ordinary role of the courts was a constitutional fundamental which even a sovereign Parliament acting at the behest of a complaisant House of Commons could not abolish.
We do not need, in this case, to resolve the question how these conflicting views about the relationship between the rule of law and the sovereignty of the United Kingdom Parliament may be reconciled.
The fact that we are dealing here with a legislature that is not sovereign relieves us of that responsibility.
It also makes our task that much easier.
In our case the rule of law does not have to compete with the principle of sovereignty.
As I said in Jackson, para 107, the rule of law enforced by the courts is the ultimate controlling factor on which our constitution is based.
I would take that to be, for the purposes of this case, the guiding principle.
Can it be said, then, that Lord Steyns endorsement of Lord Hailshams warning about the dominance over Parliament of a government elected with a large majority has no bearing because such a thing could never happen in the devolved legislatures? I am not prepared to make that assumption.
We now have in Scotland a government which enjoys a large majority in the Scottish Parliament.
Its party dominates the only chamber in that Parliament and the committees by which bills that are in progress are scrutinised.
It is not entirely unthinkable that a government which has that power may seek to use it to abolish judicial review or to diminish the role of the courts in protecting the interests of the individual.
Whether this is likely to happen is not the point.
It is enough that it might conceivably do so.
The rule of law requires that the judges must retain the power to insist that legislation of that extreme kind is not law which the courts will recognise.
As for the appellants common law case, I would hold, in agreement with the judges in the Inner House (2011 SLT 439, para 88), that Acts of the Scottish Parliament are not subject to judicial review at common law on the grounds of irrationality, unreasonableness or arbitrariness.
This is not needed, as there is already a statutory limit on the Parliaments legislative competence if a provision is incompatible with any of the Convention rights: section 29(2)(d) of the Scotland Act 1998.
But it would also be quite wrong for the judges to substitute their views on these issues for the considered judgment of a democratically elected legislature unless authorised to do so, as in the case of the Convention rights, by the constitutional framework laid down by the United Kingdom Parliament.
Are the 3rd to 10th respondents directly affected?
Rule 58.8(2) of the Rules of the Court of Session 1994, as amended by SSI 2000/317, provides: Any person not specified in the first order made under rule 58.7 as a person on whom service requires to be made, and who is directly affected by any issue raised, may apply by motion for leave to enter the process; and if the motion is granted, the provisions of this Chapter shall apply to that person as they apply to a person specified in the first order.
An annotation to this rule in Greens Annotated Rules of the Court of Session printed in the Parliament House Book, vol 2, C 478/4 states: The motion to enter the process should state the title and interest of the person.
Although the phrase title and interest does not appear in rule 58.8(2), it is used in the form of petition for judicial review which is set out in Form 58.6.
That form, which is to be read together with Rule of Court 58.6(1), requires paragraph 1 of the petition to state the designation, title and interest of the petitioner.
The Lord Ordinary said that in his view the courts discretion under rule 58.8(2) is generous rather than restrictive, and that he could see no reason why the third to tenth respondents participation in these proceedings should be restricted: 2010 SLT 179, para 87.
The judges of the First Division accepted that the phrase any person who is directly affected by any issue raised in rule 58.8(2) comprehended a wide range of persons if it was considered in isolation.
But they said that its construction was constrained by the substantive law on title and interest: 2011 SLT 439, para 54.
In their view the amendment to rule 58.8(2) by SSI 2000/317, and the introduction of rule 58.8A which made provision for public interest interventions, achieved a reasonable balance to respect the interests of all concerned.
So, before the third to tenth respondents could rely upon rule 58.8(2) to enter the process as parties, they had to demonstrate such a title and interest as would entitle them to do so: para 55.
As for the question whether any beneficiary, or potential beneficiary, of a general legislative measure had title to intervene as a responding party to counter any challenge to its validity, they said they had not been referred to any authority to support a positive answer to that proposition, and that there were important indications to the contrary.
They referred to D & J Nicol v Dundee Harbour Trustees 1915 SC (HL) 7, where the title of the pursuers to challenge the use of the ferries for excursions up the Tay was recognised as they were ratepayers but there was no suggestion that all other ratepayers could be convened as additional defenders to argue that the use of ferries for excursions was beneficial to their interests: para 56.
declared: In D & J Nicol v Dundee Harbour Trustees at pp 12 13 Lord Dunedin By the law of Scotland a litigant, and in particular a pursuer, must always qualify title and interest.
Though the phrase title to sue has been a heading under which cases have been collected from at least the time of Morisons Dictionary and Browns Synopsis, I am not aware that anyone of authority has risked a definition of what constitutes title to sue.
I am not disposed to do so, but I think that it may fairly be said that for a person to have such title he must be a party (using the word in its widest sense) to some legal relation which gives him some right which the person against whom he raises the action either infringes or denies.
Although he refrained from making any general pronouncement as to when there is title and when there is not (see p 17), he gave some examples.
At p 13 he said that the simplest case of all is where a person is the owner of something, which enabled him to have the right to sue in the vindication or defence of his property.
Next in simplicity came contract, where the relation of contract gave the one party the right to insist on the fulfilment of the contract by the other.
It was argued in the Court of Session in Dundee Harbour Trustees that the pursuers had a title and interest to challenge the use of the ferries for excursions as rival traders.
But that contention was abandoned in the House of Lords by the pursuers counsel.
Lord Dunedin said at p 12 that he thought that he was right to do so: see also the Lord Chancellor (Haldane) at p 11.
When a complainer can only say that he is a rival trader and nothing more, he qualifies an interest but not a title.
The Rule of Court 260B of the Rules of Court of Session 1965 which introduced the procedure for judicial review which is now to be found in Chapter 58 of the 1994 Rules was a procedural amendment only, which did not and could not alter the substantive law: West v Secretary of State for Scotland 1992 SC 385, 404.
So neither the nature nor the scope of the supervisory jurisdiction was altered by the introduction of the new rule.
But this does not mean that one cannot look at its nature and scope to decide what the substantive law is, and to see what it tells us about the test that should be applied to determine whether a person may bring proceedings of this kind and whether he may be permitted to enter the process as someone who is directly affected by the issues that are raised.
The Court said in West that the competency of an application for judicial review does not depend upon any distinction between public law and private law, and that it was not confined to those cases which have been accepted as amenable to judicial review in England: p 413.
That proposition was based on the review of the authorities that was undertaken in that case, and it remains true today.
But it would be wrong to take from it the idea that these proceedings have nothing to do with public law.
One of the benefits of the supervisory jurisdiction of decision taking in Scotland is that it is so wide ranging.
It is not confined to those cases which have been accepted as amenable to judicial review in England.
It extends from the field of private law on the one hand, as shown by cases such as Forbes v Underwood (1886) 13 R 465 in which the court exercised its jurisdiction to compel the performance of his duties by an arbiter under a private contract and McDonald v Burns 1940 SC 376 and St Johnstone Football Club Ltd v Scottish Football Association Ltd 1965 SLT 34 which could not be described as cases in the field of public law, to cases that undoubtedly lie within that field on the other.
In cases that lie within the private law sphere it will no doubt be appropriate to ask whether the petitioner has a title and interest to bring the proceedings in the sense indicated by Lord Dunedin.
The fact that a person upon whom a decision making function has been conferred by a private contract is amenable to the supervisory jurisdiction is not something that is likely to affect anyone other than the parties to the contract.
In that situation the application of the private law test as to whether a title and interest to bring and defend the proceedings has been demonstrated will be perfectly appropriate.
But it is hard to see the justification for applying that test which, as Lord Dunedins discussion in D & J Nicol v Dundee Harbour Trustees shows, is rooted in private law to proceedings which lie within the field of public law.
It was emphasised in West that the categories of what may amount to an excess or abuse of jurisdiction are not closed, and that they are capable of being adapted in accordance with the development of administrative law: p 413.
Their adaptation and development in the public interest risks being inhibited by a strict adherence to the private law requirement that title and interest must be shown before proceedings for judicial review may be brought or before a party who wishes to respond may enter the process.
The imbalance that exists between the way public interest issues may be dealt with in England and how they are still dealt with in Scotland can be seen from the very different view that was taken on either side of the Border of the standing of womens groups who objected to the visit to the United Kingdom of Mike Tyson, a convicted rapist, so that he could earn money here by appearing in the boxing ring.
Their attempts to bring proceedings for judicial review failed in both jurisdictions, but for quite different reasons.
In R v Secretary of State for the Home Department, Ex p Bindel [2001] Imm AR 1 Sullivan J held that Justice for Women did not have arguable grounds for interfering with the Secretary of States decision to grant Tyson a temporary visa to enter the country, not that they did not have a sufficient interest to bring the proceedings.
But in Rape Crisis Centre v Secretary of State for the Home Department 2000 SC 527 Lord Clarke applied Lord Dunedins dictum in D & J Nicol v Dundee Harbour Trustees 1915 SC (HL) 7, asking himself whether there was some legal relation which gave the petitioners some right which the person against whom they brought the proceedings either infringed or denied.
He held that the petitioners lacked the title to sue that was needed under Scots law to enable them to obtain a remedy, as the scope and function of the legislation under which the Secretary of State exercised his jurisdiction did not provide a legal nexus between him and the petitioners.
He said that they were in no different position from any other member of the public in that respect.
But he recognised at p 534 that, although Lord Dunedins dictum had stood the test of time, it was uttered in times well before the huge development of administrative law and judicial review that had taken place in recent decades.
The judges of the First Division, who were of course considering the position of the third to tenth respondents and not that of the petitioners, said that they were not referred to, and were not aware of, any authority to support the proposition that any beneficiary or potential beneficiary of a general legislative measure had a title to intervene as a responding party to counter an attack on its validity: 2011 SLT 439, para 56.
They referred to the decision in D & J Nicol v Dundee Harbour Trustees as an important indication to the contrary, and to the practical difficulty of identifying all those who might be benefited by an impugned measure.
In their view only the decision taker could appropriately expound the reasons for its decision, and nothing could be added to those reasons by benefited third parties.
In para 57 they said that to hold that these respondents were directly affected as beneficiaries of the 2009 Act would be to give an interpretation to the rule that went beyond matters of procedure and moved into the field of the substantive law of entitlement to defend.
The wording of the rule, if taken by itself, is plainly wide enough to cover the situation in which these respondents find themselves.
The positions of the appellants on the one hand and of the third to tenth respondents on the other as to the 2009 Act are, after all, really two sides of the same coin.
As the Lord Ordinary was surely right to point out, if these respondents as actual or potential pleural plaque claimants are not directly affected by its fate, it would be hard to regard the appellants as directly affected in that context either: 2010 SLT 179, para 87.
I agree, of course, that the real issue that has to be addressed, if the third to tenth respondents are to succeed, is the substantive law to which the rule must be taken to give effect.
But the other points that the First Division made in para 56 of their opinion do not seem to me to answer the unfairness created by that paradox.
Any practical difficulty in identifying all those who might be benefited by an impugned measure is answered by the point that the petitioner does not have to do this.
It is up to those who consider themselves to be in that position to make themselves known to the court.
The suggestion that only the decision taker could appropriately expound the reasons for its decision, and that nothing could be added to those reasons by benefited third parties, seems to run counter to the basic rule of natural justice that the other party to the argument has a right to be heard.
As for the substantive law, I think that the time has come to recognise that the private law rule that title and interest has to be shown has no place in applications to the courts supervisory jurisdiction that lie in the field of public law.
The word standing provides a more appropriate indication of the approach that should be adopted.
I agree with Lord Reed (see para 170, below) that it cannot be based on the concept of rights, but must be based on the concept of interests.
It is worth noting that, as Friends of the Earth Scotland pointed out in their written intervention, in the 19th century Scots law was quite liberal in its approach to the question of standing in relation to what were said to be public wrongs.
In Torrie v Duke of Athol (1849) 12 D 328 three individuals sought declarator that a route through Glen Tilt was a public road and were permitted to do so although they were not seeking to vindicate any private right.
In Macfie v Blair and Scottish Rights of Way and Recreation Society Ltd (1884) 11 R 1094 the court sustained the Societys right to be sisted as a defender to the action in which it had no private right or interest but to seek to vindicate a public right whose promotion was one of its aims.
As Lord Clyde pointed out in Scottish Old Peoples Welfare Council, Petitioners 1987 SLT 179, 184 these and several other similar cases can be regarded as examples of an actio popularis.
But that does not seem to me to take anything away from the point that a person may have a sufficient interest to invoke the courts supervisory jurisdiction in the field of public law even although he cannot demonstrate that he has a title, based on some legal relation, to do so.
Like Lord Dunedin in D & J Nicol v Dundee Harbour Trustees, I would not like to risk a definition of what constitutes standing in the public law context.
But I would hold that the words directly affected which appear in rule 58.8(2) capture the essence of what is to be looked for.
One must, of course, distinguish between the mere busybody, to whom Lord Fraser of Tullybelton referred in R v Inland Revenue Commissioners, Ex p National Federation of Self Employed and Small Businesses Ltd [1982] AC 617, 646, and the interest of the person affected by or having a reasonable concern in the matter to which the application related.
The inclusion of the word directly provides the necessary qualification to the word affected to enable the court to draw that distinction.
A personal interest need not be shown if the individual is acting in the public interest and can genuinely say that the issue directly affects the section of the public that he seeks to represent.
As I consider that it is plain that the third to tenth respondents are directly affected by the appellants challenge to the 2009 Act, I would allow their cross appeal.
Conclusion
For these reasons and for the further reasons given by Lord Reed, I would dismiss the appeal and to that extent would affirm the interlocutor of the Inner House dated 12 April 2011.
I would however, as I have just said, allow the cross appeal by the third to tenth respondents.
I would set aside that part of the interlocutor of the Inner House in which the petitioners ninth plea in law was sustained and the answers for the third to tenth respondents were repelled.
In respect of those pleas in law I would restore the interlocutor of the Lord Ordinary dated 8 January 2010.
LORD BROWN
Many will have been disappointed by the unanimous decision of the House of Lords in Rothwell v Chemical & Insulating Co Ltd [2008] AC 281, fewer surprised.
Pleural plaques that neither cause symptoms nor increase susceptibility to other asbestos related conditions, were held not to constitute actionable damage for the purposes of a personal injury claim.
Of course the existence of pleural plaques demonstrates that a persons lungs have been penetrated by asbestos fibres capable of causing various fatal diseases and naturally many who suffer them will be greatly worried on that account.
It is established law, however, that neither the risk of injury nor the apprehension of its happening are actionable.
In so far as a trilogy of first instance decisions in the mid 1980s had suggested the contrary one of them my own judgment in Patterson v Ministry of Defence [1987] CLY 1194, rejecting the contention that symptom free physiological change such as pleural plaques can alone constitute an actionable injury, but accepting that, taken together with the risk of future disease and anxiety, they do so (the so called theory of aggregation) they were wrong, as too was Smith LJs dissenting judgment in the Court of Appeal in Rothwell [2006] ICR 1458, itself substantially based on the aggregation theory.
In short, the answer to the question: is [a claimant with asymptomatic pleural plaques] appreciably worse off on account of having plaques? (the critical question identified by Lord Hoffmann in Rothwell at para 19), is no.
On all the medical evidence, he is no worse off than anyone else (a former workmate, say) who has experienced similar exposure to asbestos dust and logically, indeed, he has no greater reason (than such a former workmate) to worry about his future.
Doubtless with these considerations in mind, the Westminster Government, following various attempts by private members to reverse the decision in Rothwell by legislation, introduced an extra statutory scheme, confined to those diagnosed with pleural plaques who had raised a claim for damages prior to 17 October 2007 (the date of the House of Lords decision in Rothwell), under which such claimants would receive a one off payment of 5,000 from government funds (upon application made prior to 1 August 2011).
The Scottish Parliament, however, and subsequently the Northern Ireland Assembly also, responded very differently to the decision in Rothwell, namely by legislating to reverse it.
Under this legislation, pleural plaques, notwithstanding that they are asymptomatic, are to be treated as having always constituted actionable harm so that all who suffer them, provided only they can establish the other elements of a cause of action, can claim against their erstwhile employers, claims for the most part to be met by the employers liability insurers.
The 2008 Regulatory Impact Assessment prepared prior to the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the 2009 Act) suggested (at para 29) average settlement costs of 22,000 per case (based on 2003 4 figures), comprised of 8,000 compensation payment, 8,000 pursuers costs and 6,000 defenders costs.
The main differences, therefore, between the English (and Welsh) extra statutory scheme and the 2009 Act are: first, that the former is a no fault scheme, secondly, that the former is confined to claims made before the 2007 decision in Rothwell, and, thirdly, that the cost of the former (substantially less per case than the latter) is borne by government rather than designed to fall on the employers liability insurers.
Put more broadly, the English scheme is intended at comparatively modest public expense to assuage the disappointment of those immediately affected by Rothwell; the Scottish legislation by contrast is calculated to create a new category of actionable bodily injury at enormous cost to insurers, estimated overall perhaps in billions of pounds.
It is, after all, difficult to suppose that the great majority of those Scottish workers who were exposed to asbestos in the course of their working lives will not now, albeit symptom free, consult solicitors and doctors so as to discover whether or not they have pleural plaques (or pleural thickening) with a view to claiming substantial damages damages essentially to compensate them for their anxiety as to the future (an anxiety in some cases actually precipitated, however illogically, by the very process of discovering these intrinsically harmless physiological changes).
And sometimes, indeed, the worry experienced by those found to have these changes will then be accentuated still further by learning that they give rise to a substantial damages award which in itself suggests an obviously serious problem see Holland Js judgment at first instance in respect of Mr Quinn, one of the claimants in the Rothwell litigation: [2005] EWHC 88 (QB), [2005] PIQR P478, at para 22.
This is the essential context in which the present proceedings were brought: a claim by a number of insurance companies affected by the 2009 Act to challenge its lawfulness principally on the ground that it is incompatible with their property rights under article 1 of Protocol 1 (A1P1) to the Convention (albeit also on the common law ground of irrationality).
With regard to the claim under A1P1, it seems to me clear almost beyond argument that the appellants have victim status.
True, their liability to claimants under the 2009 Act will only arise once all the elements of the relevant damages claims against the insured employers have been established and, true too, the appellants have expressly reserved their position as to whether liability under their various policies of insurance will actually then be engaged.
But nobody doubts that a very large number of claims will be established against employers and the clear underlying intention of the 2009 Act was that the cost of these claims should indeed fall on the insurers.
The latter point could hardly be more clearly illustrated than by a letter dated 28 November 2008 written by a government official in the course of the Bills preparation to Mr Maguire of Thompsons (the union solicitors promoting the Bill and assisting in its drafting): . [W]e are concerned that there is a risk that, if we specify on the face of the Bill that its provisions are for the purposes of the law of delict, defenders may seek to argue that there is no read across to other areas of the law, eg the interpretation of contracts.
This could place a significant barrier in the way of many potential claimants, if it were argued that it leaves pursuers with a delictual claim against an employer that is not covered by the employers insurance policy.
It is a pity that a meeting to discuss such issues could not take place before amendments were lodged on 25 November, especially as the process of disclosing our concerns to the Committee may also result in those concerns being drawn to the attention of those who may wish to utilise them in opposing claims for compensation, contrary to our intention and yours.
Of course, we will endeavour to avoid that consequence so far as possible, but it is not entirely in our hands.
There is nothing further on this issue which I wish to add to Lord Hopes judgment on the point at paras 24 28 and Lord Reeds at paras 109 112 with which I wholly agree.
It follows that the critical questions arising on the A1P1 claim are, first, whether the 2009 Act pursues a legitimate aim and, secondly, whether the undoubted burden which it imposes on the appellants is reasonably proportionate to that aim.
At the heart of the appellants attack on the legitimacy and proportionality of this legislation lies the complaint that it is nakedly retrospective in its application.
Put aside section 3 of the 2009 Act which is designed simply to ensure that no claim should be statute barred simply by virtue of the lapse of time between the decision in Rothwell and the coming into force of the Act twenty months later, ie whilst understandably in the light of Rothwell claimants would not be pursuing claims.
Assuming that the Act is otherwise unobjectionable, no one could reasonably take exception to that provision a limitation holiday as Mr Aidan ONeill QC called it.
Rather the focus of the appellants argument is upon section 4(2) of the 2009 Act which, of course, stipulates that sections 1 and 2 of the Act which dictate that pleural plaques and other asymptomatic asbestos related conditions constitute actionable harm are to be treated for all purposes as having always had effect.
In other words, not merely is Rothwell being reversed in the sense that Parliament is providing that, in future, pleural plaques are to be regarded as constituting actionable harm.
Instead Parliament is in effect providing that the legal position is to be as if the House of Lords in Rothwell had reached the opposite conclusion on the question before it a decision which then, of course, under the declaratory theory, would itself have had full retrospective effect.
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 A1P1 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 [2002] UKHL 22, [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.
Why then, it may be asked, if the courts can adapt and develop (ie change) the law (albeit within well recognised constraining limits) to accord with what the judges consider to be the contemporary demands of justice, cannot Parliament with similar impunity change the law by legislation? After all, again in the broadly analogous context of mesothelioma claims, Parliament chose by section 3 of the Compensation Act 2006 (again, flatly contrary to the interests of the employers liability insurers and again, by section 16(3) of the Act, to be treated as having always had effect) to reverse the decision of the House of Lords in Barker v Corus UK Ltd [2006] 2 AC 572 (where the House had further developed the Fairchild principle but had limited the extent of any given defendants liability under that principle) on the issue of quantum.
It is not suggested that on that account insurers could successfully have had section 3 of the 2006 Act declared incompatible on A1P1 grounds.
For my part I have not found this an altogether easy question to answer.
It is not, I think, a sufficient answer merely to point to the declaratory theory of the common law the theory that judgments state what the law has always been, thereby on occasion correcting ex hypothesi erroneous earlier court decisions.
Is the answer perhaps that judges are sworn to administer the law and the public must and do accept the law as the judges declare it to be but that legislation, where, as here, it retroactively interferes with what the judges have declared to be peoples property rights and is then challenged, has to be justified as legitimate and proportionate? If, as I believe, that essentially is the difference between these two ways in which peoples property rights may be adversely affected, it must surely be relevant, indeed highly relevant, to consider just how substantial a departure from the established legal position is being effected by the impugned legislation.
With these considerations in mind, I turn then to the particular circumstances of the present case.
How substantial a departure from the established common law position, one asks, is being effected by the 2009 Act? In one sense, of course, a very great departure indeed: Rothwell is being reversed.
And it is being reversed in respect of pending claims (backed up claims as they were described in the Lord Ordinarys judgment at para 173) no less than future claims.
I had, indeed, at one time wondered whether this undoubted, and deliberate, impact of the legislation upon pending claims might not of itself have vitiated the legislation by virtue of article 6 of the Convention, if not by reference to A1P1 itself see particularly the Zielinski v France (1999) 31 EHRR 532 line of Strasbourg authorities and Anna Jasiaks article, Changing the rules mid game.
Legislative interference in specific pending cases: separation of powers and fair trial, Vienna Journal on International Constitutional Law, vol 4, Issue 1/2010.
The Lord Ordinary, however, rejected the appellants complaint under article 6 (see paras 146 179 of his judgment) and the appellants have never thereafter sought to return to it understandably, I think, because a challenge of this nature must in reality stand or fall upon the effect of the legislation generally.
It would be absurd to strike down legislation like this (and, indeed, like section 3 of the Compensation Act 2006) merely because pending actions are included within its scope.
Accordingly, instead of the respondents having to establish compelling grounds of the general interest (Zielinski at para 57), as is ordinarily required to justify legislation designed to influence the judicial determination of pre existing disputes (legislation which thus prima facie frustrates the administration of justice), they need demonstrate no more than that their claim to be acting in the public or general interest is not manifestly without reasonable justification (James v United Kingdom (1986) 8 EHRR 123, para 46, cited by Lord Hope at para 31).
This is, I need hardly add, a substantially easier test to satisfy.
As just stated, given that the 2009 Act is reversing Rothwell in respect of past claims no less than future ones all, indeed, save already determined claims its departure from the position established by Rothwell is in one sense extreme.
But its departure from the common law position as this was understood to be before the decision of the House of Lords in Rothwell is altogether less so.
Certainly, as I suggested at the outset, the majority of those concerned with asbestos related claims are likely to have made a correct prediction of the eventual outcome of the litigation; the insurers would not have been expecting an adverse finding of liability.
But no one could sensibly have described it as a foregone conclusion and, as I also noted earlier, a number of judgments (including that of Smith LJ in the Court of Appeal in Rothwell itself) favoured a different result.
Indeed, even in the House of Lords in Rothwell, Lord Rodger of Earlsferry said at para 84: The asbestos fibres cannot be removed from the claimants lungs.
In theory, the law might have held that the claimants had suffered personal injury when there were sufficient irremovable fibres in their lungs to cause the heightened risk of asbestosis or mesothelioma.
But the courts have not taken that line.
The clear inference is that the courts might have taken that line and would have been entitled to do so.
Parliament, therefore, cannot be regarded as having completely overturned a body of established law unambiguously supporting the appellants position so as to destroy what they could properly characterise as a legitimate expectation of being permanently immune from such claims.
It is not as if Parliament had declared, rather than that asymptomatic physical changes constitute actionable bodily harm, that any substantial proven exposure to asbestos fibres to an extent likely to result in their harmful ingestion should be thus actionable.
Although the Dean of Faculty for the appellants suggested that realistically this is the effect of the 2009 Act pleural plaques themselves being intrinsically harmless and their real significance being their manifestation of substantial exposure to potentially lethal fibres the existence of demonstrable physical changes seems to me ultimately all important.
Beguilingly though the appellants sought to characterise this legislation as no more than a labelling exercise, its description of asymptomatic pleural plaques as bodily injury being transparently designed to engage the employers liability insurance, the argument is in fact unsustainable.
It cannot be doubted that pleural plaques result from the ingestion of asbestos fibres and essentially what the legislation does is categorise these undoubted physical changes as actionable bodily injury.
It is this categorisation which falls to be contrasted with the common law position as earlier understood and, as I have already suggested, the contrast is really not that extreme.
It is essentially for these reasons, rather than because the appellants as insurers are in a business inevitably associated with risks and unpredictable events, that, in common with the other members of this Court, I am prepared, given the wide margin of appreciation properly accorded to a democratically elected body determining the public interest by reference, as here, to political, economic and social considerations, to regard this legislation (ill judged though many might regard it to be) as legitimate and proportionate and so immune from challenge under A1P1.
Had the test been that of compelling grounds of public interest I should not have regarded it as satisfied.
I am not, however, prepared to condemn this legislation as manifestly without reasonable justification.
With regard to the basis upon which legislation by the Scottish Parliament may be subject to common law review and the various other issues which arise for consideration on this appeal and cross appeal, there is nothing that I wish to add to the comprehensive judgments already given by Lord Hope and Lord Reed.
I too would make the orders which they propose.
LORD MANCE
There is very little to add to the comprehensive judgments given by Lord Hope and Lord Reed.
I am in essential agreement with all their reasoning and conclusions, and make only a few observations on certain of the points arising.
Victim status: I agree that the appellants have status to rely on the Convention rights within the meaning of section 7(7) of the Human Rights Act 1998, read with article 34 of the Convention.
The relevant Convention provision is article 1 of Protocol 1 (A1P1).
As Lord Hope (paras 21 22) and Lord Reed (paras 107 108) observe, it appears unlikely here to matter whether the present case engages the second sentence as well as the general principle contained in the first sentence of A1P1.
I am like them satisfied that it engages the first sentence, and I would myself also think that it engages the second.
Whether insurers position would in law be actually affected by the 2009 Act depends of course upon the future incidence of claims involving their insureds as well as the interpretation and application of the insurance policies issued to such insureds.
But it is sufficient for victim status under article 34 that there is a real risk that a persons Convention rights will be directly affected in the not too distant future: see e g Burden v United Kingdom (2008) 47 EHRR 857, para 35; Clayton and Tomlinson, The Law of Human Rights, 2nd ed (2009), paras 22.29 22.49.
Here there is clearly such a risk.
A, if not the, main target of the legislation was employers insurers, who (with their reinsurers) have borne the brunt of asbestos related claims over the last thirty or so years.
That is clear enough from the proceedings before the Scottish Parliament, as Lord Hope observes in para 27.
It is illustrated by the letter dated 5 December 2008 written by the Head of Damages and Succession of the Scottish Executives Civil Law Division to Mr Maguire of Thompsons, solicitors promoting the Bill which became the 2009 Act, expressing concern about the risk that any reference in the Bill to the law of delict could prevent a read across to other areas of law, e.g. the interpretation of insurance contracts.
Whether and how far there may be such a read across is not a matter before the Supreme Court.
The only copy of an actual insurance policy before the Supreme Court is a Combined Legal Liability Insurance Policy issued by AXA Insurance UK plc to John Laing and Son Ltd of Page Street, London NW7 2ER through C E Heath & Co (London) Ltd for three years commencing 1 January 1977, covering the insured against all sums which the insured becomes legally liable to pay as damages in respect of bodily injury (including death or disease) sustained by an Employee arising out of and in the course of his employment or engagement by the Insured in the Business and caused within the Geographical Limits during the Period of Insurance.
The Geographical Limits were worldwide.
The respondents accepted that this policy is and others are likely to be subject to English, rather than Scottish, law.
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.
Suffice it to say that insurers such as AXA have ample reason for direct concern about their forthcoming exposure.
The unreality of the objection to AXAs victim status is underlined by a consideration of the alternative.
That is that the (only) persons with victim status are employers.
It is perhaps curious that no employer has joined or been joined in these proceedings.
But in likelihood that underlines the reality, that the persons with real potential exposure are insurers.
However, if the view were to be taken that insurers have no victim status, then employers clearly must have.
The 2009 Act could not be less vulnerable to challenge by them than it would be by insurers if insurers have victim status.
Retrospectivity: The key to this issue is not in my view that insurance is a contract against risks.
There are always limits to the contingencies upon which insurers speculate, provided by the terms and conditions of the policy.
Further, insurers are normally entitled to expect that the liabilities, which their insured employers incur arising out of and in the course of [their] employment and which they insured under the specimen copy policy to which I have referred, will be liabilities capable of existing in law at the time of the occurrence during the relevant employment from which such liabilities arise.
Hence, the present challenge to the 2009 Act is based on the fact that it retrospectively converts into harm actionable in law physical changes which (it has been held in Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281) were not otherwise such, in the hope or expectation that the relevant policies will have to respond to that development.
The decision in Rothwell came decades after the relevant employment and insurance periods.
But it represents a decision as to what the common law is and in legal theory always was.
This is no mere incantation.
In the absence of any authoritative case law, responsible insurers can and will take a view as to the extent of their exposure, and conduct themselves accordingly.
They may, as here, be prepared to pay or accept limited claims for a limited period, without testing the legal position at an appellate level.
But there may come a time when, again as here, they test the position at the highest level.
It is an aspect of the rule of law that it is normally courts who determine what legal liabilities have from time to time been incurred as a result of past conduct, and that legislators leave that to courts.
There are however circumstances in which legislation with retrospective effect in respect of past conduct may be justified.
One example in the same area as the present is found in section 651(5), added to the Companies Act 1985 by the Companies Act 1989 to allow the restoration to the register of a company for up to 20 years.
The intended and actual effect was to reverse retrospectively insurers victory in Bradley v Eagle Star Insurance Co Ltd [1989] AC 957, where the House of Lords had held that it was impossible for Mrs Bradley to invoke the protection of the Third Party Rights against Insurers Act 1930 after her insured employer had not only become insolvent, but also been dissolved.
This victory conferred an uncovenanted windfall on liability insurers in precisely the circumstances in which they ought to have been in the front line of exposure.
I recounted the story in Insolvency at Sea [1995] LMCLQ 34, 37.
The government was persuaded that retrospective legislation was justified.
Lord Templeman, who had dissented in the appellate committee, spoke twice to aid the legislative passage of the relevant clause in the Lords.
A tribute should also be paid to the late Mr Robert Kiln of Kiln Underwriting Syndicate at Lloyds, well known liability underwriters, who had written to the government acknowledging the uncovenanted nature of the windfall.
Mrs Bradley was herself, I understand, able to pursue her claim.
Another potential example, unchallenged, is provided by section 3 of the Compensation Act 2006, reversing the decision of the House of Lords in Barker v Corus UK Ltd [2006] 2 AC 572 and so making all those exposing to asbestos persons subsequently contracting mesothelioma liable jointly and severally for the whole of the damage: see Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 WLR 523.
Section 16 provided that: (3) Section 3 shall be treated as having always had effect. (4) But the section shall have no effect in relation to (a) a claim which is settled before 3 May 2006 (whether or not legal proceedings in relation to the claim have been instituted), or (b) legal proceedings which are determined before that date.
There were also specific provisions enabling the variation of settlements or determinations made on or after 3 May 2006 and before the date (25 July 2006) on which the Act was passed.
The key to the present appeal is that, when the relevant policies were issued and the relevant employment occurred, there was no certainty whatever how the law might treat claims for pleural plaques if and when they ever emerged.
The wave of asbestos related claims which hit the USA in the 1970s and the United Kingdom in the 1980s was itself very largely unforeseen by everyone, and claims for pleural plaques and questions about their impact on liability policies decades after expiry were far over the horizon.
It remained uncertain how the common law would treat such a phenomenon as pleural plaques, if and when this emerged as a source of potential claims, until the decision in Rothwell itself.
It was entirely possible to regard pleural plaques, when they emerged as a potential basis of claim, as an injury (see e g per Lord Hope, para 39 in Rothwell and cf per Lord Hoffmann, paras 8 9 discussing the symptomless, but none the less serious lung damage which was the subject of Cartledge v E Jopling & Sons Ltd [1963] AC 758).
It was possible to regard the bodily change that pleural plaques involve as constituting sufficient damage to give rise to a claim for personal injury, either by itself or when taken in conjunction with the anxiety resulting from knowledge of such plaques.
A number of first instance courts had taken such a view, as did Holland J, as well as Smith LJ in the Court of Appeal, in Rothwell itself.
Insurers cannot have been in any way certain of the position, and there is no suggestion that any insurer relied in any meaningful sense upon the common law position proving to be that which was ultimately established in Rothwell.
It is in these circumstances that the Scottish Parliament decided to enact the 2009 Act to replace the common law, as ultimately established by Rothwell, with a different, statutorily imposed result at which the common law might by itself always have arrived.
No doubt it was for financial reasons that the Scottish Parliament decided on this approach, rather than on an approach which would have imposed the resulting cost on Scottish taxpayers generally.
One can have reservations about a policy framed (as the Cabinet Secretary for Justice said on 13 December 2007) to avoid turning our backs on those who have contributed to the nations wealth, when those whose backs were intended to bear the resulting burden were not the nation at large to whose wealth the contribution had been made, but employers and insurers who had, on a proper understanding of the common law and the relevant policies, never contracted to bear such cost.
Had the common law as established by Rothwell been clear when the relevant policies were written and the relevant employment occurred, or had it been possible for employers and/or insurers to show that they had in the meantime relied to a meaningful extent upon the law being held to be as it was ultimately held in Rothwell, the position would have looked very different.
But under the circumstances as they are, I think that the Scottish Parliaments statutory intervention by the 2009 Act must on balance be regarded as legitimate, as within the scope of the judgment which it was entitled to make as to what was appropriate and as proportionate.
I therefore agree that the appeal should be dismissed so far as it concerns compatibility of the 2009 Act with the Convention.
Common law review: All that I would add to what is said by Lord Hope and Lord Reed is that I question whether irrationality as a ground of review at common law is confined as closely to purpose as Lord Reed appears to regard it at the conclusion of his para 143.
In Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374, Lord Diplock said of irrationality in the Wednesbury sense, that it applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it.
There can be decisions to take a familiar extreme example, a blatantly discriminatory decision directed at red headed people where, irrespective of any limitation on the purposes for which the decision maker might act, a court would regard what has been done as irrational, because of the way in which the decision operated.
If a devolved Parliament or Assembly were ever to enact such a measure, I would have thought it capable of challenge, if not under the Human Rights Convention, then as offending against fundamental rights or the rule of law, at the very core of which are principles of equality of treatment.
LORD REED
I gratefully adopt Lord Hopes account of the background to this appeal.
Three important issues are raised.
The first is whether the Damages (Asbestos related Conditions) (Scotland) Act 2009 is incompatible with the Convention rights of insurers who are affected by it, as guaranteed by article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms (A1P1).
If so, it follows that the Act is outside the legislative competence of the Scottish Parliament, by virtue of section 29(2)(d) of the Scotland Act 1998, and is not law.
The significance of this issue is not confined to Scotland, since similar provisions are contained in the Damages (Asbestos related Conditions) Act (Northern Ireland) 2011.
Accordingly, in addition to the submissions made on behalf of the appellants, the Lord Advocate representing the Scottish Ministers, and the third to tenth respondents, there were also written interventions on this issue by the Attorney General for Northern Ireland and the Northern Ireland Department of Finance and Personnel.
The second issue is of wider significance.
It is whether the 2009 Act is susceptible to review by the courts under the common law as an irrational exercise of legislative authority.
Since such an issue could in principle arise in relation to any legislation enacted by any of the devolved legislatures, its constitutional importance is apparent.
Submissions were made on this issue not only on behalf of the appellants, the Lord Advocate, the Advocate General for Scotland representing the United Kingdom Government, and the third to tenth respondents, but also by the Counsel General for Wales on behalf of the First Minister of Wales.
The third issue is one of importance in Scottish public law.
It concerns the circumstances in which, in judicial review proceedings in Scotland, a person may be granted leave to take part in the proceedings as a person directly affected by any issue raised.
This issue arises in relation to the third to tenth respondents, who are individuals who have been diagnosed with pleural plaques, and whose cross appeal on this matter was supported by the Lord Advocate.
There was also a written intervention on this issue by Friends of the Earth Scotland.
The effect of the 2009 Act
In order to decide whether the 2009 Act constitutes an interference with the appellants possessions for the purposes of A1P1, it is necessary first to consider what the Act does.
Section 1 provides: (1) Asbestos related pleural plaques are a personal injury which is not negligible. (2) Accordingly, they constitute actionable harm for the purposes of an action of damages for personal injuries. (3) Any rule of law the effect of which is that asbestos related pleural plaques do not constitute actionable harm ceases to apply to the extent it has that effect. (4) But nothing in this section otherwise affects any enactment or rule of law which determines whether and in what circumstances a person may be liable in damages in respect of personal injuries.
The effect of section 1 is to reverse, in relation to Scotland, the decision of the House of Lords in Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 that asymptomatic pleural plaques do not constitute actionable harm.
Although that was a decision in an English appeal, it was based on legal principles which are common to Scots and English law, and there can be no doubt that a Scottish case proceeding on the same factual findings would be decided, at common law, in the same way.
That position is altered by subsections (1) to (3), but only in respect of pleural plaques and not in respect of any other non harmful physiological changes.
Subsection (4) preserves all other aspects of the law governing liability in damages for personal injuries.
Section 2 is concerned with asymptomatic asbestos related pleural thickening and asbestosis.
These conditions resemble asymptomatic pleural plaques in that they do not cause impairment of a persons physical condition, but signify that the person has ingested asbestos fibres and is therefore at risk of serious disease.
As a result, although they are not harmful in themselves, their diagnosis is likely to result in considerable anxiety.
Section 2 is in identical terms to section 1, mutatis mutandis, and removes the common law barrier to the actionability of such conditions while preserving all other aspects of the law governing liability.
Section 3 is concerned with the law of limitation, and requires the period between the date when judgment was given in Rothwell and the date when the section came into force to be left out of account in the computation of time.
That section has to be read together with section 4(2), which provides that sections 1 and 2 are to be treated for all purposes as having always had effect.
Thus, whereas sections 1 and 2, if they stood alone, would create a cause of action as from the date when they came into force, the effect of section 4(2) is to deem them always to have had effect.
That has the consequence that causes of action may be deemed to have arisen before the date when sections 1 and 2 came into force, and may be time barred; but section 3 excludes from the computation of time the period between Rothwell and the date of entry into force of sections 1 and 2, during which the conditions in question were not actionable according to the law then in force.
Section 4(2), by requiring sections 1 and 2 to be treated for all purposes as having always had effect, is also liable to affect the interpretation of contracts, including contracts of insurance, entered into before sections 1 and 2 came into force.
Finally, it is relevant to note section 4(3), which excludes from the effect of sections 1 and 2 any claim which was settled before section 4(2) came into force, and any legal proceedings which were determined before that date.
Claims which have been determined are therefore not affected by the Act.
Since the Act renders pleural plaques (and the analogous conditions mentioned in section 2) actionable, it has the effect of rendering persons liable in damages in respect of pleural plaques sustained as a result of their fault.
The pleural plaques may have been sustained before or after the Act came into force.
The fault, on the other hand, will have occurred long before the pleural plaques were sustained, the lapse of time between exposure to asbestos and the development and diagnosis of pleural plaques being measured in decades.
Since the use of asbestos in industry has been virtually eliminated in this country, almost all claims brought as a result of the Act will relate to fault which occurred long before the Act came into force.
In practice, the persons who are rendered liable in damages as a result of the Act are in most cases employers in industries, such as shipbuilding, in which asbestos was formerly used.
Most such employers were at all material times insured against liability for bodily injury or disease sustained by their employees, such insurance being compulsory, for employers other than certain public bodies, in terms of the Employers Liability (Compulsory Insurance) Act 1969.
The 2009 Act may thus have the effect of rendering insurers liable to indemnify employers under policies of employers liability insurance, depending in any individual case upon the interpretation of the policy.
Furthermore, where such an employer has become insolvent or has been wound up, its rights against the insurer in respect of the liability vest in the person to whom the liability was incurred, by virtue of the Third Parties (Rights against Insurers) Act 1930.
Subsequent to the enactment of the 2009 Act, the Third Parties (Rights against Insurers) Act 2010 has in addition made provision for such a person to bring proceedings directly against the insurer, without having first established the liability of the insured.
As a result of this statutory framework, and the step in clauses normally included in the relevant policies of insurance, it is in reality insurers rather than the insured employers who generally respond to claims, negotiate settlements, conduct or compromise legal proceedings, and assume liability for the payment of any sums which may be found or agreed to be due.
In addition, it is not uncommon, in industries such as shipbuilding, for the former employers of persons exposed to asbestos to be in liquidation, or to have been struck off the Register of Companies.
For all these reasons, many if not most legal proceedings on behalf of former employees are in reality directed against the insurers.
The Rothwell case was itself litigated by insurers; and the 2009 Act is designed to deprive them of the fruits of their victory.
Article 1 of the First Protocol
A1P1 in substance guarantees the right of property.
In its judgment in the case of Sporrong and Lnnroth v Sweden (1982) 5 EHRR 35, para 61, the European Court of Human Rights analysed A1P1 as comprising three distinct rules.
The first is a rule of a general nature, set out in the first sentence of the first paragraph, which enunciates the principle of the peaceful enjoyment of property (Every natural or legal person is entitled to the peaceful enjoyment of his possessions).
The second is the rule contained in the second sentence of the first paragraph, which covers deprivation of possessions and subjects it to certain conditions (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 third rule, stated in the second paragraph, is an explicit recognition that states are entitled, amongst other things, to control the use of property in accordance with the general interest.
The Strasbourg court also observed in its Sporrong and Lnnroth judgment that, before inquiring whether the first general rule has been complied with, it must determine whether the last two are applicable.
Those observations were repeated by the court in its judgment in the case of James v United Kingdom (1986) 8 EHRR 123, para 37, where it added that the three rules are not distinct in the sense of being unconnected: the second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property, and should therefore be construed in the light of the general principle enunciated in the first rule.
These statements have been reiterated many times in the subsequent case law of the court.
Assessment of whether there has been a violation of A1P1 thus involves consideration of whether a possession exists, whether there has been an interference with the possession, and, if so, the nature of the interference: whether, in particular, it constitutes a deprivation of the possession falling within the second rule, or a control on use falling within the third rule, or falls within the more general principle enunciated in the first rule.
Given that the second and third rules are only particular instances of interference with the right guaranteed by the first rule, however, the importance of classification should not be exaggerated.
Although, where an interference is categorised as falling under the second or third rule, the Strasbourg court will usually consider the question of justification under reference to the language of those specific provisions of A1P1, the test is in substance the same, however the interference has been classified.
If an interference has been established, it is then necessary to consider whether it constitutes a violation.
It must be shown that the interference complies with the principle of lawfulness and pursues a legitimate aim by means that are reasonably proportionate to the aim sought to be achieved.
This final question focuses upon the question whether a fair balance has been struck between the demands of the general interest of the community and the requirements of the protection of the individuals fundamental rights (Sporrong and Lnnroth, para 69).
In that regard, the Strasbourg court accepts that a margin of appreciation must be left to the national authorities.
The status of victim
The text of the guarantee makes clear that it can be relied upon by either a natural or a legal person, but in either case an application can be made to the Strasbourg court only by a person claiming to be the victim of a violation: article 34 of the Convention.
That requirement is reflected at a domestic level in section 7(7) of the Human Rights Act 1998, and also in section 100(1) of the Scotland Act, which provides that the Act does not enable a person (other than a law officer) to rely on any of the Convention rights in any proceedings unless he would be a victim for the purposes of article 34.
In reliance upon that provision, counsel for the Lord Advocate, and counsel for the third to tenth respondents, submitted that the appellants could not rely upon A1P1 in these proceedings, since they were not affected directly and personally by the 2009 Act so as to qualify as victims of an interference with their possessions.
This argument had two related aspects.
The first was that since any effect which the Act might have upon the appellants was consequential upon the effect which it had upon their insured, it followed that the true victim, if any, was the insured rather than the insurer.
The second aspect of the argument was that the effect, if any, of the 2009 Act upon the appellants depended in any event upon its application in individual cases.
Unless and until a liability arising under the Act was established against an insured wrongdoer, and that liability was thereafter held to fall within the ambit of a policy of insurance written by an individual appellant, it could not be said that any of the appellants was affected by the Act.
I find the argument unpersuasive.
It is necessary to bear in mind in the first place that the Convention is concerned with the reality of a situation rather than its formal appearance, so as to ensure that it guarantees rights that are practical and effective.
The interpretation of the concept of a victim is correspondingly broad: as the Strasbourg court has observed, an excessively formalistic interpretation of that concept would make protection of the rights guaranteed by the Convention ineffectual and illusory (Lizarraga v Spain (2004) 45 EHRR 1039, para 38).
It is also well established that a person can claim to be a victim of a violation of the Convention in the absence of an individual measure of implementation: as the Strasbourg court stated in Burden v United Kingdom (2008) 47 EHRR 857, para 34, it is open to a person to contend that a law violates his rights, in the absence of an individual measure of implementation, if he is a member of a class of people who risk being directly affected by it.
Individuals have been held to be victims by virtue of legal situations which, for example, permitted corporal punishment in schools (Campbell and Cosans v United Kingdom (1980) 3 EHRR 531, para 116), conferred on children born out of wedlock inheritance rights inferior to those enjoyed by children born in wedlock (Marckx v Belgium (1979) 2 EHRR 330, para 27), restricted the provision of information concerning abortion clinics (Open Door Counselling and Dublin Well Woman v Ireland (1992) 15 EHRR 244, para 44), or prevented sisters who lived together from enjoying the same exemption from inheritance tax as married or same sex couples (Burden v United Kingdom), even in the absence of the practical application to those individuals of the laws in question.
On the other hand, where a person is not at risk of a violation of a Convention right unless and until a particular decision is taken, for example as to deportation, the person cannot claim to be a victim unless and until such a decision is in fact made (Vijayanathan and Pusparajah v France (Application Nos 17550/90 and 17825/91) (unreported) 27 August 1992, para 46).
In the present case, it is clear that the 2009 Act will, as a matter of practical reality, affect insurers as a class, as it is intended to do.
Where employers were insured at the material time and the insurance policies now have to be interpreted as covering the conditions in question, the economic consequences of the Act will fall solely upon the insurers, and will not be secondary to economic consequences felt by their insured.
For that reason, the suggested analogy with the relationship between a company and its shareholders (under reference to such cases as Agrotexim v Greece (1995) 21 EHRR 250), or that between a mutual insurance company and its policyholders (under reference to the admissibility decision of the European Commission on Human Rights in Wasa Liv msesidigt v Sweden (Application No 13013/87) (unreported) 14 December 1988), does not hold good.
In addition, if the insurers cannot challenge the Act in the present proceedings, it is uncertain whether there are any other proceedings in which their rights under A1P1 can be protected.
It is difficult to see how the A1P1 rights of an insurer could be asserted in proceedings brought under the Act against the insured, since the court would not be concerned in such proceedings with the effect upon a third party of an award of damages against the insured.
There may be a question whether the validity of the Act could be determined in any subsequent proceedings for indemnification brought against the insurer, where the issue would be the interpretation of the insurance policy.
In these circumstances, it would in my opinion be mistaken to deny the appellants the status of victims on the basis that they are not directly affected by the Act: so restrictive an interpretation of article 34 would run counter to the object of the Convention in general and article 34 in particular.
Interference with possessions
As I have explained, the 2009 Act has the effect of imposing a liability in damages upon employers and others who wrongfully exposed individuals to asbestos, causing them to sustain one of the conditions mentioned in the Act.
Where the employer or other wrongdoer was insured, the Act consequently imposes a corresponding liability in indemnification upon the insurer, provided such liability is consistent with the interpretation of the contract of insurance which is applicable in any particular case.
Subject to that proviso, therefore, the practical effect of the Act upon insurers is to alter the effect of insurance contracts by bringing within their scope conditions which were not previously covered.
The liabilities of the insurers under the relevant contracts are thereby increased.
The premiums payable under the relevant contracts cannot now be increased to reflect these liabilities, as the periods of cover expired long ago.
The question which arises is whether this situation constitutes an interference with possessions within the meaning of A1P1, and, if so, how the interference should be categorised by reference to the three rules identified by the Strasbourg court.
The concept of possessions has been interpreted by that court as including a wide range of economic interests and assets, but one paradigm example of a possession is a persons financial resources.
That is implicitly reflected in the recognition, in the second paragraph of A1P1, that the preceding provisions do not impair the states right to secure the payment of taxes or other contributions or penalties.
In the case of an insurance company, the fund out of which it meets claims must therefore constitute a possession within the meaning of the article.
Legislation which has the object and effect of establishing a new category of claims, and which in consequence diminishes the fund, can accordingly be regarded as an interference with that possession.
It may be more difficult to categorise this interference in terms of the three rules identified by the Strasbourg court.
It is not entirely clear from the Strasbourg jurisprudence whether the exposure of an insurance company to additional contractual liabilities, and consequent costs, should be characterised as a deprivation of possessions or a control on their use, to be examined solely under the second or third rule.
As I have explained, however, those rules are only particular instances of interference with the right to peaceful enjoyment of property guaranteed by the general rule set out in the first sentence of A1P1.
The question which then arises is whether the interference with the appellants property rights is compatible with that general rule.
I note that a similar approach was adopted by the Strasbourg court in the case of Bck v Finland (2004) 40 EHRR 1184, para 58, which also concerned legislation that affected pre existing contractual arrangements, with financial consequences for the applicant.
The lawfulness of the interference
The Strasbourg court has often said that the first and most important requirement of A1P1 is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful (see, for example, Iatridis v Greece (1999) 30 EHRR 97, para 58).
In this context, as elsewhere in the Convention, the concept of law does not merely require the existence of some domestic law, but requires it to be compatible with the rule of law (see eg James v United Kingdom, para 67).
In reliance upon that principle, it was argued on behalf of the appellants that the 2009 Act was incompatible with the rule of law by reason of its retroactive effects, which were destructive of legal certainty.
Counsel for the Lord Advocate stoutly denied that the Act was retroactive in its effects, but this appears to me to be an untenable position.
By rendering actionable conditions which have a latency period of twenty years or so, the Act has for the first time made employers (and possibly others) liable in damages for conduct in the past which has caused such conditions.
Furthermore, by doing so, and a fortiori by deeming such conditions always to have constituted actionable damage, the Act is designed to render insurers liable to indemnify their insured in respect of liabilities for damage of a kind which, on a correct understanding of the law as it then stood (as subsequently established in Rothwell), was not actionable at the time when the relevant policies were written or during the period of cover.
These are retroactive effects: the legal consequences of what was done in the past will be governed not by the law in force at that time but by an Act passed many years later.
The concept of the rule of law is of fundamental importance to the Council of Europe, as appears from its Statute, in particular the Preamble and Article 3.
It is endorsed in the Preamble to the Convention, and the Strasbourg court has described it as being inherent in all the articles of the Convention (Malama v Greece, (Application No 43622/98) (unreported) 1 March 2001, para 43).
The concept has been variously interpreted: most notably, in this country, by Lord Bingham (The Rule of Law, 2010).
It has also recently been considered by the European Commission for Democracy through Law, better known as the Venice Commission, which is the Council of Europes advisory body on constitutional matters.
Its Report on the Rule of Law, adopted in March 2011, employed Lord Binghams definition of the rule of law: all persons and authorities within the state, whether public or private, should be bound by and entitled to the benefit of laws publicly made, taking effect (generally) in the future and publicly administered in the courts (para 36).
The Commission identified legal certainty as an aspect of the rule of law, and noted that legal certainty requires that the law be accessible and foreseeable in its effects.
It also observed: Legal certainty requires that legal rules are clear and precise, and aim at ensuring that situations and legal relationships remain foreseeable.
Retroactivity also goes against the principle of legal certainty, at least in criminal law (article 7 ECHR), since legal subjects have to know the consequences of their behaviour; but also in civil and administrative law to the extent it negatively affects rights and legal interests (para 46).
The Strasbourg court has itself interpreted conformity to the rule of law as requiring, amongst other things, that the relevant domestic law must be adequately accessible and sufficiently precise to be foreseeable in its effects (Lithgow v United Kingdom (1986) 8 EHRR 329, para 110), and that it should not operate in an arbitrary manner (Hentrich v France (1994) 18 EHRR 440, para 42).
The criteria of accessibility and foreseeability are not absolute; nor is the prohibition of arbitrariness incompatible with the existence of discretion.
The court has often said that the effect of these requirements in a given situation depends upon the particular circumstances (see eg Sunday Times v United Kingdom (1979) 2 EHRR 245, para 49).
In the criminal sphere, the Convention allows only a limited scope for retroactive legislation: the principles encapsulated in the maxim nullum crimen sine lege, nulla poena sine lege are reflected in article 7.
The position is different in the civil sphere.
Changes in the law, even if resulting from prospective legislation or judicial decisions, will frequently and properly affect legal relationships which were established before the changes occurred.
Changes in family law, for example, are not applicable only to families which subsequently come into existence, but affect existing families, even although the changes may not have been foreseeable at the time when individuals married or had children.
Similarly, a person who buys a house, or a company that employs staff, cannot expect the law governing the rights and responsibilities of homeowners or employers to remain unchanged throughout the period of ownership or employment.
The same point could be made in respect of other types of right and obligation of a civil character.
As Lon Fuller observed in The Morality of Law (revised ed 1969), p 60: If every time a man relied on existing law in arranging his affairs, he were made secure against any change in legal rules, the whole body of our law would be ossified forever.
A distinction might, however, be drawn between laws which alter prospectively the rights and obligations arising from pre existing legal relationships, and laws which alter such rights and obligations retrospectively.
To the extent that laws of the latter kind may undermine legal certainty more severely, they may be more difficult to justify, but there can be no doubt that justification for such laws sometimes exists.
It may exist, in particular, when the legislation has a remedial purpose.
As Fuller remarked, at p 53: It is when things go wrong that the retroactive statute often becomes indispensable as a curative measure; though the proper movement of law is forward in time, we sometimes have to stop and turn about to pick up the pieces.
As I shall explain, this point has also been noted by the Strasbourg court.
In particular, because judicial decisions normally operate retrospectively in accordance with the declaratory theory of adjudication, such decisions may upset existing expectations or arrangements, as Lord Nicholls of Birkenhead observed in In re Spectrum Plus Ltd [2005] UKHL 41, [2005] 2 AC 680, paras 6 to 8: from time to time court decisions on points of law represent a change in what until then the law in question was generally thought to be.
This happens most obviously when a court departs from, or an appellate court overrules, a previous decision on the same point of law A court ruling which changes the law from what it was previously thought to be operates retrospectively as well as prospectively People generally conduct their affairs on the basis of what they understand the law to be.
This retrospective effect of a change in the law of this nature can therefore have disruptive and seemingly unfair consequences.
In such circumstances, retrospective legislation which restores the position to what it was previously understood to be may not be incompatible with legal certainty or the rule of law.
The Strasbourg court has recognised that the fact that legislation in the civil sphere has retroactive effects does not necessarily mean that it is incompatible with the rule of law or the Convention.
In relation to A1P1, in particular, the court has considered retroactive effects in its assessment of proportionality rather than when considering the lawfulness of the interference, and has found such effects to be objectionable only in particular circumstances where they imposed an individual and excessive burden upon the applicant.
In the case of Mellacher v Austria (1989) 12 EHRR 391, for example, which concerned the introduction of rent controls that were applicable to existing leases, the court stated (para 51), in its consideration of proportionality, that in remedial social legislation, and in particular in the field of rent control, it must be open to the legislature to take measures affecting the further execution of previously concluded contracts in order to attain the aim of the policy adopted.
In the case of Zielinski v France (1999) 31 EHRR 532, which concerned a retrospective change in employment law and was brought under article 6(1), the court stated (para 57) that while in principle the legislature is not precluded in civil matters from adopting new retrospective provisions to regulate rights arising under existing laws, the principle of the rule of law and the notion of fair trial enshrined in article 6 preclude any interference by the legislature other than on compelling grounds of the general interest with the administration of justice designed to influence the judicial determination of a dispute.
In the case of Bck v Finland, which concerned legislation enabling courts to authorise arrangements under which a debtors pre existing obligations to his creditors were modified, the court stated (para 68) that neither the Convention nor its Protocols preclude the legislature from interfering with existing contracts.
In the present case, section 4(3) of the 2009 Act expressly excludes from the effect of sections 1 and 2 any claim which was settled before section 4(2) came into force, and any legal proceedings which were determined before that date.
The effect of the Act is therefore restricted to new claims, and outstanding claims which had not been disposed of.
No point is taken by the appellants in relation to the effect of the Act upon any pending proceedings.
In those circumstances, and having regard to the Strasbourg authorities which I have mentioned, the fact that the Act may alter the continuing effects of insurance contracts entered into in the past does not appear to me necessarily to offend against the rule of law as reflected in A1P1.
Whether it renders the Act incompatible with A1P1 therefore turns upon an assessment of proportionality.
I shall return to it in that context.
The aim of the interference
An interference with possessions requires to be justified as being necessary in the public or general interest.
In that regard, the Strasbourg court allows national authorities a wide margin of appreciation in implementing social and economic policies, and will respect their judgment as to what is in the public or general interest unless that judgment is manifestly without reasonable justification (James v United Kingdom, para 46).
At the domestic level, courts require to be similarly circumspect, since social and economic policies are properly a responsibility of the legislature, and policy making of this nature is amenable to judicial scrutiny only to a limited degree.
In the present case, the facts and policies underlying the Scottish Parliaments assessment that the provisions of the 2009 Act were necessary in the general interest are reasonably clear.
Pleural plaques, and the other conditions mentioned in the Act, are pathological changes in the body.
As Lord Hope observed in the Rothwell case, para 38, they may be described as a disease or an injury.
Although they are not in themselves harmful to health, their presence signifies that the person has ingested asbestos fibres and is at appreciable risk of developing a serious disease and suffering a premature death.
In consequence, the diagnosis of those conditions can cause a great deal of worry.
The conditions are usually a consequence of fault on the part of employers, asbestos having long been known to be harmful to health.
Asbestos related conditions are relatively prevalent in parts of Scotland where industries using asbestos were concentrated.
For a period of about 20 years prior to Rothwell, compensation was paid by insurers to persons who had sustained pleural plaques as a result of the fault of their employers.
Against that background, the Scottish Parliament considered it appropriate, as a matter of social policy, to legislate to reverse the Rothwell decision, so as to ensure that compensation continued to be paid to persons in that position.
It cannot be said by a court that the Parliaments judgment that that was in the public interest was manifestly unreasonable.
The proportionality of the interference
In order for an interference with possessions to be compatible with A1P1, it must not only be lawful and in the general interest, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised.
This involves an assessment of whether a fair balance has been struck between the demands of the general interest of the community and the requirements of the protection of the individuals fundamental rights: the individual should not be required to bear an individual and excessive burden (James v United Kingdom, para 50).
In making that assessment at the international level, the Strasbourg court has allowed national authorities a wide margin of appreciation (see eg JA Pye (Oxford) Ltd v United Kingdom (2007) 46 EHRR 1093, para 75).
In the present case, emphasis was placed by counsel for the appellants upon the retroactive effects of the 2009 Act.
Insurers would have to meet claims in respect of conditions which were not actionable at the time when the policies were written and were not in contemplation when the premiums were set.
Reference was made to Strasbourg cases concerned with legislation which extinguished pre existing claims which were the subject of pending proceedings, including Pressos Compania Naviera SA v Belgium (1995) 21 EHRR 301 and Draon v France (2005) 42 EHRR 807.
The imposition of a liability with retroactive effect was, it was suggested, the mirror image of such cases.
If the Scottish Parliament considered that there was a compelling reason for the payment of compensation, such compensation could be paid out of public funds, as under the Pleural Plaques Former Claimants Payment Scheme introduced in England and Wales, rather than the burden being placed on insurers.
It was pointed out that the insurers had not themselves been at fault, and it was argued that the fault of their insured did not in itself make it proportionate to require the insurers to indemnify them.
The assessment of proportionality requires careful consideration of the particular facts.
Considering the specific circumstances of this case, one aspect of importance is that, at the time when insurers entered into contracts of the type which are affected by this legislation, it could not have been predicted with confidence whether asymptomatic pleural plaques and other analogous conditions would be treated by the law as actionable or not.
It would be artificial to maintain that insurers provided insurance in the 1970s or 1980s on the basis of the law as it was subsequently established in Rothwell.
Even at the time of the Rothwell case, its outcome could not have been predicted with certainty: the argument which was ultimately rejected by the House of Lords was sufficiently attractive to have persuaded a number of judges in the lower courts.
A second relevant aspect is that pleural plaques were regarded as actionable for about 20 years prior to the decision in Rothwell.
Courts awarded damages for them, and employers and their insurers settled many claims.
Insurers treated such claims as one of the risks which they had underwritten.
The 2009 Act does not require them to do any more than that.
In that sense, it can be regarded as preserving the status quo which existed before a correct understanding of the legal position was established as a result of the Rothwell litigation.
It is of course true that the Scottish Parliament could have opted to compensate individuals affected by pleural plaques out of public funds rather than seeking to place a burden upon insurers.
The scheme operating in England and Wales, however, compensates only persons who had begun but not resolved a pleural plaques claim at the time of the Rothwell decision, and the compensation available is restricted to a payment of 5,000.
Those limitations reflect an assessment that compensation should be paid out of public funds, and of how a fair balance should then be struck between the interests of those individuals who were affected by the Rothwell decision and the other demands on the public purse.
The fact that that assessment was made in England and Wales does not entail that the same assessment ought to have been made in Scotland; nor does the fact that a publicly funded scheme would avoid any burden being placed on insurers entail that a scheme which imposes such a burden is disproportionate.
As the Strasbourg court observed in James v United Kingdom, para 51, in relation to a similar argument: This amounts to reading a test of strict necessity into the article, an interpretation which the Court does not find warranted.
The availability of alternative solutions does not in itself render the leasehold reform legislation unjustified; it constitutes one factor, along with others, relevant for determining whether the means chosen could be regarded as reasonable and suited to achieving the legitimate aim being pursued, having regard to the need to strike a fair balance.
Provided the legislature remained within these bounds, it is not for the Court to say whether the legislation represented the best solution for dealing with the problem or whether the legislative discretion should have been exercised in another way.
The concept of the margin of appreciation reflects a recognition on the part of the Strasbourg court that in certain circumstances, and to a certain extent, national authorities are better placed than an international court to determine the outcome of the process of balancing individual and community interests.
At the domestic level, the courts also recognise that, in certain circumstances, and to a certain extent, other public authorities are better placed to determine how those interests should be balanced.
Although the courts must decide whether, in their judgment, the requirement of proportionality is satisfied, there is at the same time nothing in the Convention, or in the domestic legislation giving effect to Convention rights, which requires the courts to substitute their own views for those of other public authorities on all matters of policy, judgment and discretion.
As Lord Bingham of Cornhill observed in Brown v Stott 2001 SC (PC) 43, 58 59, [2003] 1 AC 681, 703: Judicial recognition and assertion of the human rights defined in the Convention is not a substitute for the processes of democratic government but a complement to them.
While a national court does not accord the margin of appreciation recognised by the European court as a supra national court, it will give weight to the decisions of a representative legislature and a democratic government within the discretionary area of judgment accorded to those bodies.
The intensity of review involved in deciding whether the test of proportionality is met will depend on the particular circumstances.
As Lord Hope explained in R v Director of Public Prosecutions, Ex p Kebilene [2000] 2 AC 326 at p 381, the relevant circumstances include whether, as in the present case, the issue lies within the field of social or economic policy.
As I have explained, it is at the stage of considering proportionality that the Strasbourg court has generally taken account of the retroactive effects of legislative changes.
In Bck v Finland, for example, the court stated (para 68) that neither the Convention nor its Protocols preclude the legislature from interfering with existing contracts; that a special justification was required for such interference; and that, in the circumstances of that case, there were special grounds of sufficient importance to warrant it.
The court attached importance, in that regard, to the nature of the legislation in question, observing that in remedial social legislation it must be open to the legislature to take measures affecting the further execution of previously concluded contracts in order to attain the aim of the policy adopted.
The court also attached significance to the fact that the applicant had, at the time of entering into the contract in question, accepted a risk of financial loss (para 62).
Other Strasbourg cases, such as The National & Provincial Building Society, The Leeds Permanent Building Society and The Yorkshire Building Society v United Kingdom (1997) 25 EHRR 127 and OGIS Institut Stanislas, OGEC St Pie X et Blanche de Castille v France, (Application Nos 42219/98 and 54563/00) (unreported) May 2004, afford illustrations of situations where retrospective legislation designed to remedy a problem perceived as resulting from a judicial decision was held to be justified.
The present case also is concerned with remedial social legislation, the 2009 Act being designed to remedy the social problem perceived as resulting from the Rothwell decision: a problem which, if it were to be fully resolved by reversing that decision, so that insurers would continue to accept claims in respect of pleural plaques and related conditions as they had done for the previous twenty years, necessitated a remedy which altered the effect of existing contracts of insurance with retrospective effect.
In addition, as I have explained, that decision could not realistically be regarded as representing the basis upon which the contracts in question were entered into.
In the light of those specific circumstances, I have reached the conclusion that, notwithstanding its retroactive effects, the 2009 Act cannot be regarded as having failed to strike a reasonable balance between the rights of insurers under A1P1 and the general interest in ensuring that persons suffering from pleural plaques and related conditions should continue to receive compensation.
It follows that the challenge to the validity of the Act on the basis of A1P1 must be rejected.
Review on common law grounds introduction
The appellants maintain in their pleadings that, in passing the 2009 Act, the Scottish Parliament acted in a manner which was unreasonable, irrational and arbitrary, and that the Act should therefore be quashed by the court.
The Lord Ordinary accepted that Acts of the Scottish Parliament were subject to judicial review on the ground of irrationality, but considered that the scope for review could be no wider, and might be narrower, than that permitted in respect of United Kingdom subordinate instruments carrying direct Parliamentary approval, as explained by Lord Bridge of Harwich in R v Secretary of State for the Environment, Ex p Hammersmith and Fulham London Borough Council [1991] 1 AC 521 at p 597: that is to say, an Act of the Scottish Parliament was not open to challenge on the ground of irrationality short of the extremes of bad faith, improper motive or manifest absurdity.
He added that even if he had taken a contrary view, he would not in any event have closed the door on the possibility that the courts might require to intervene in defence of the rule of law and the fundamental rights and liberties of the subject.
The judges of the First Division considered that review for irrationality was not apt in the context of the 2009 Act because the aspects of the Act whose rationality was challenged were essentially political questions which a court would not enter upon.
The court appears therefore to have considered that whether an Act of the Scottish Parliament could be judicially reviewed on the ground of irrationality would depend upon an assessment of the justiciability of the issue raised in the particular case.
They added that the court might well hold itself entitled to intervene in the event of a deliberate misuse of power, or if the Scottish Parliament were to take a measure of the kind contemplated by Lord Steyn in R (Jackson) v Attorney General [2005] UKHL 56, [2006] 1 AC 262, para 102.
Discussion
The power of the Scottish Parliament to make laws derives from section 28(1) of the Scotland Act, which provides: (1) Subject to section 29, the Parliament may make laws, to be known as Acts of the Scottish Parliament.
Section 29, so far as material, and as amended by the Treaty of Lisbon (Changes in Terminology) Order 2011, provides: (1) An Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament. (2) A provision is outside that competence so far as any of the following paragraphs apply (a) it would form part of the law of a country or territory other than Scotland, or confer or remove functions exercisable otherwise than in or as regards Scotland, (b) it relates to reserved matters, (c) it is in breach of the restrictions in Schedule 4, (d) it is incompatible with any of the Convention rights or with EU law, (e) it would remove the Lord Advocate from his position as head of the systems of criminal prosecution and investigation of deaths in Scotland.
The language of section 29 does not imply that the matters listed there are necessarily exhaustive of the grounds on which Acts of the Scottish Parliament may be challenged.
In Whaley v Lord Watson 2000 SC 340 Lord President Rodger, in rejecting the approach adopted by the Lord Ordinary in that case to the relationship between the courts and the Scottish Parliament, made the following observations at pp 348 349: The Lord Ordinary gives insufficient weight to the fundamental character of the Parliament as a body which however important its role has been created by statute and derives its powers from statute.
As such, it is a body which, like any other statutory body, must work within the scope of those powers.
If it does not do so, then in an appropriate case the court may be asked to intervene and will require to do so, in a manner permitted by the legislation.
In principle, therefore, the Parliament like any other body set up by law is subject to the law and to the courts which exist to uphold that law.
Some of the arguments of counsel for the first respondent appeared to suggest that it was somehow inconsistent with the very idea of a parliament that it should be subject in this way to the law of the land and to the jurisdiction of the courts which uphold the law.
I do not share that view.
On the contrary, if anything, it is the Westminster Parliament which is unusual in being respected as sovereign by the courts.
And, now, of course, certain inroads have been made into even that sovereignty by the European Communities Act 1972.
By contrast, in many democracies throughout the Commonwealth, for example, even where the parliaments have been modelled in some respects on Westminster, they owe their existence and powers to statute and are in various ways subject to the law and to the courts which act to uphold the law.
The Scottish Parliament has simply joined that wider family of parliaments.
As the Lord Presidents remarks make clear, the Scottish Parliament is not a sovereign parliament in the sense that Westminster can be described as sovereign: its powers were conferred by an Act of Parliament, and those powers, being defined, are limited.
It is the function of the courts to interpret and apply those limits, and the Scottish Parliament is therefore subject to the jurisdiction of the courts.
Questions as to the limits of the powers of the Scottish Parliament, and as to the lawfulness of its Acts, may come before different courts in different ways.
They may, for example, be raised in the course of an appeal to the High Court of Justiciary, as in Martin v HM Advocate [2010] UKSC 10, 2010 SC (UKSC) 40, where a challenge was made to an Act of the Scottish Parliament in an appeal from the Sheriff Court.
They may be raised in the lower courts and referred to the Court of Session or the High Court of Justiciary under the provisions of Schedule 6 to the Scotland Act, as for example in A v Scottish Ministers [2001] UKPC D 5, 2002 SC (PC) 63, where the question arose in the course of civil proceedings in the Sheriff Court.
They may be raised by way of an application to the Court of Session for judicial review, as for example in Whaley v Lord Advocate [2007] UKHL 53, 2008 SC (HL) 107 and in the present case.
There can be no doubt that questions as to whether the Scottish Parliament has acted within its powers fall within the scope of the Court of Sessions supervisory jurisdiction, as defined in West v Secretary of State for Scotland 1992 SC 385 at pp 412 413: 1.
The Court of Session has power, in the exercise of its supervisory jurisdiction, to regulate the process by which decisions are taken by any person or body to whom a jurisdiction, power or authority has been delegated or entrusted by statute, agreement or any other instrument. 2.
The sole purpose for which the supervisory jurisdiction may be exercised is to ensure that the person or body does not exceed or abuse that jurisdiction, power or authority or fail to do what the jurisdiction, power or authority requires.
It cannot however be assumed that the grounds upon which the lawfulness of an Act of the Scottish Parliament may be reviewed include all, or any, of the grounds upon which the Court of Session may exercise its supervisory jurisdiction in other contexts.
In West v Secretary of State for Scotland, Lord President Hope referred at p 397 to: the distinction which must be made between the question of competency as to whether a decision is open to review by the Court of Session in the exercise of its supervisory jurisdiction, and the substantive grounds on which it may do so.
The extent of the supervisory jurisdiction is capable of a relatively precise definition, in which the essential principles can be expressed.
But the substantive grounds on which that jurisdiction may be exercised will of course vary from case to case.
And they may be adapted to conform to the standards of decision taking as they are evolved from time to time by the common law.
As that dictum makes clear, the grounds of review must be related to the nature of the power whose exercise is under review.
The approach adopted by the parties and the interveners in their submissions in the present case, like that of the Lord Ordinary and the Inner House, focused primarily upon the question whether Acts of the Scottish Parliament should be classified as primary legislation, in which case it would follow (so ran the argument) that they were immune from challenge save in exceptional circumstances of the kind discussed in Jackson, or as falling into some intermediate category of their own, possessing certain characteristics of primary legislation but also certain characteristics of secondary legislation, in which case it would follow (so ran the argument) that they were subject to review on similar grounds to those applicable to secondary legislation.
This approach appears to me to involve a number of difficulties.
In the first place, classification of legislation as primary or secondary is not determinative of its susceptibility to judicial review.
Orders in Council made under the Royal Prerogative, for example, are a form of primary legislation, but are subject to review (Council of the Civil Service Unions v Minister for the Civil Service [1985] AC 374; R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] AC 453).
Secondly, it has never been necessary to consider whether the immunity of Acts of the Westminster Parliament from judicial review is attributable only to the sovereignty of Parliament, or whether they would be immune from such review in any event for other reasons.
The question has arisen in the past in relation to overseas legislatures established by Parliament during the nineteenth century, but the context was not comparable to the devolution of legislative power within the United Kingdom, and the cases preceded modern developments in judicial review.
Classification is, at best, an indirect way of approaching what seems to me to be the underlying question, which is the extent to which judicial review, having regard to its nature and purpose, can apply to the law making functions of a devolved legislature.
I prefer to approach that question directly.
Judicial review under the common law is based upon an understanding of the respective constitutional responsibilities of public authorities and the courts.
The constitutional function of the courts in the field of public law is to ensure, so far as they can, that public authorities respect the rule of law.
The courts therefore have the responsibility of ensuring that the public authority in question does not misuse its powers or exceed their limits.
The extent of the courts responsibility in relation to a particular exercise of power by a public authority necessarily depends upon the particular circumstances, including the nature of the public authority in question, the type of power being exercised, the process by which it is exercised, and the extent to which the powers of the authority have limits or purposes which the courts can identify and adjudicate upon.
If, for example, a public authoritys powers are so widely drawn that it is in principle free to decide for itself what considerations are relevant to its decision making, the courts cannot then review its decisions as having been based on irrelevant considerations or as having failed to have regard to relevant considerations, except to the limited extent to which any constraints on its freedom might be implied, for example in order to protect fundamental rights or the rule of law.
Equally, if a public authoritys powers are such that it is free to decide for itself for what purposes they should be exercised, the courts cannot then review its decisions on the basis that the powers were used arbitrarily or for an improper purpose, except again to the limited extent to which any constraints might be implied.
Furthermore, in relation to a public authority with such wide powers, the scope for applying irrationality as a ground of review is correspondingly limited, since that ground is predicated upon the courts ability to determine whether a given decision lies within the range of decisions which are open to a rational decision maker, proceeding upon a proper understanding of the purposes for which the power in question may be exercised and the circumstances which are relevant to its exercise.
To the extent that the decision maker can itself determine those purposes and circumstances, the range of decisions which are reasonably open to it is correspondingly widened, subject again to such fundamental constraints as may be implied.
In addition to being able to identify the limits and purposes of the powers in question, the courts must also be able to adjudicate upon them.
If the question which arises is not justiciable that is to say, is not suitable for the courts to decide, having regard to their constitutional function then it cannot be made the subject of judicial review.
Considering the Scottish Parliament in the light of these general observations, it is necessary to examine the extent to which its powers have limits or purposes which the courts can identify and adjudicate upon.
As in the case of any other statutory body, the court determines the scope of the powers of the Scottish Parliament by applying the principles of statutory interpretation to the relevant provisions, taking into account the nature and purpose of the statute under consideration.
The purpose of the Scotland Act, as stated in its long title, was the establishment of a Scottish Parliament and Administration and other changes in the government of Scotland.
It established a democratically elected legislature having the power to make laws, to be known as Acts of the Scottish Parliament.
Such laws require to be made following procedures designed to ensure democratic scrutiny, some aspects of which are prescribed by the Act.
They also require Royal Assent.
They can amend or repeal Acts of the United Kingdom Parliament so far as applying to Scotland.
As a result of the Scotland Act, there are thus two institutions with the power to make laws for Scotland: the Scottish Parliament and, as is recognised in section 28(7), the Parliament of the United Kingdom.
The Scottish Parliament is subordinate to the United Kingdom Parliament: its powers can be modified, extended or revoked by an Act of the United Kingdom Parliament.
Since its powers are limited, it is also subject to the jurisdiction of the courts.
Within the limits set by section 29(2), however, its power to legislate is as ample as it could possibly be: there is no indication in the Scotland Act of any specific purposes which are to guide it in its law making or of any specific matters to which it is to have regard.
Even if it might be said, at the highest level of generality, that the Scottish Parliaments powers had been conferred upon it for the purpose of the good government of Scotland, that would not limit its powers (R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2), paras 50 51 per Lord Hoffmann, paras 107 109 per Lord Rodger of Earlsferry, paras 128 130 per Lord Carswell).
The Act leaves it to the Scottish Parliament itself, as a democratically elected legislature, to determine its own policy goals.
It has to decide for itself the purposes for which its legislative powers should be used, and the political and other considerations which are relevant to its exercise of those powers.
In these circumstances, it appears to me that it must have been Parliaments intention, when it established the Scottish Parliament, that that institution should have plenary powers within the limits upon its legislative competence which were created by section 29(2).
Since its powers are plenary, they do not require to be exercised for any specific purpose or with regard to any specific considerations.
It follows that grounds of review developed in relation to administrative bodies which have been given limited powers for identifiable purposes, and which are designed to prevent such bodies from exceeding their powers or using them for an improper purpose or being influenced by irrelevant considerations, generally have no purchase in such circumstances, and cannot be applied.
As a general rule, and subject to the qualification which I shall mention shortly, its decisions as to how to exercise its law making powers require no justification in law other than the will of the Parliament.
It is in principle accountable for the exercise of its powers, within the limits set by section 29(2), to the electorate rather than the courts.
Considerations of justiciability lead to the same conclusion.
In the present case, for example, counsel for the appellants argued before the First Division that the decision to pass the 2009 Act was irrational because it placed responsibility on private parties to pay compensation to individuals with a benign and asymptomatic condition.
The court responded, at para 88: But decisions of that kind the conferring of benefits on those who are perceived to be deserving and the manner of funding of such benefits are essentially political questions which, absent any infringement of a Convention right, a court cannot and should not enter upon.
Similarly in R v Secretary of State for the Environment, Ex p Nottinghamshire County Council [1986] AC 240, Lord Scarman commented at p 247 that matters of political judgment were not for the judges.
Law making by a democratically elected legislature is the paradigm of a political activity, and the reasonableness of the resultant decisions is inevitably a matter of political judgment.
In my opinion it would not be constitutionally appropriate for the courts to review such decisions on the ground of irrationality.
Such review would fail to recognise that courts and legislatures each have their own particular role to play in our constitution, and that each must be careful to respect the sphere of action of the other.
There remains the question whether the court possesses the power to intervene, in exceptional circumstances, on grounds other than those specified in section 29(2): as, for example, if it were shown that legislation offended against fundamental rights or the rule of law.
In their submissions, counsel for the Lord Advocate accepted that devolved legislation was subject to review on such grounds, which they categorised as constitutional review, in distinction from administrative review.
Fundamental rights and the rule of law are protected by section 29(2) of the Act, in so far as it preserves Convention rights.
But, as Lord Steyn pointed out in R (Anufrijeva) v Secretary of State for the Home Department [2003] UKHL 36, [2004] 1 AC 604, para 27: the Convention is not an exhaustive statement of fundamental rights under our system of law.
Lord Hoffmanns dictum (in Ex p Simms) applies to fundamental rights beyond the four corners of the Convention.
The question is therefore not of purely academic significance.
As I have said, the court determines the powers of the Scottish Parliament by applying the principles of statutory interpretation, taking into account the nature and purpose of the statute under consideration.
One familiar principle of statutory interpretation is the principle of legality explained by Lord Hoffmann in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115 at p 131, in the dictum to which Lord Steyn referred in the case of Anufrijeva: 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.
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 at p 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.
Lord Steyn said in the same case, at p 591: Unless there is the clearest provision to the contrary, Parliament must be presumed not to legislate contrary to the rule of law.
The nature and purpose of the Scotland Act appear to me to be consistent with the application of that principle.
As Lord Rodger of Earlsferry said in R v HM Advocate [2002] UKPC D 3, 2003 SC (PC) 21, para 16, the Scotland Act is a major constitutional measure which altered the government of the United Kingdom; and his Lordship observed that it would seem surprising if it failed to provide effective public law remedies, since that would mark it out from other constitutional documents.
In Robinson v Secretary of State for Northern Ireland [2002] UKHL 32, [2002] NI 390, para 11, Lord Bingham of Cornhill said of the Northern Ireland Act 1998 that its provisions should be interpreted bearing in mind the values which the constitutional provisions are intended to embody.
That is equally true of the Scotland Act.
Parliament did not legislate in a vacuum: it legislated for a liberal democracy founded on particular constitutional principles and traditions.
That being so, Parliament cannot be taken to have intended to establish a body which was free to abrogate fundamental rights or to violate the rule of law.
There is however no suggestion in the present case that the Scottish Parliament has acted in such a manner.
That being so, and review for irrationality being excluded, it follows that the challenge to the validity of the 2009 Act on common law grounds must be rejected.
The standing of the third to tenth respondents
The third to tenth respondents are individuals who have been diagnosed with pleural plaques caused by negligent exposure to asbestos and have actions for damages pending or in immediate contemplation.
Their cause of action is based upon the provisions of the 2009 Act.
When the appellants application for judicial review of the 2009 Act was presented, it came before the court in the usual way for a first order specifying the persons upon whom it required to be served.
That order required service to be made upon the Scottish Ministers and the Advocate General for Scotland, but did not identify any other persons who might have an interest.
The third to tenth respondents then sought leave to enter the process in accordance with Rule of Court 58.8(2), which provides that any person not specified in the first order as a person on whom service requires to be made, and who is directly affected by any issue raised, may apply by motion for leave to enter the process.
Following a contested hearing, leave was granted by Lord Uist.
Answers to the petition for judicial review were then lodged on behalf of the third to tenth respondents.
The appellants in turn amended their petition so as to add a plea that, the third to tenth respondents having no title or interest in the application, their answers should be repelled.
An argument in support of that plea was advanced before the Lord Ordinary, who concluded that it had no merit.
The plea was however upheld by the First Division.
Their conclusion, that persons who would be deprived of a cause of action if the petition succeeded were not directly affected by any issue raised, is paradoxical.
It might also be thought to be unfair: the appellants are entitled to challenge the legality of the 2009 Act because it may have the effect of requiring them to pay compensation to persons on whom it confers a cause of action, but those persons, who are liable to be deprived of their cause of action, are not permitted to be heard in response.
It is necessary to examine how the court arrived at this perplexing result.
The approach of the Inner House
The court acknowledged that the phrase any person who is directly affected by any issue raised comprehends a wide range of persons if read in isolation, but considered that its construction in the context of the rule of court was constrained by the substantive law on title and interest.
A rule of court could not alter the substantive law, and therefore could not confer a title to sue or to defend on a person who did not otherwise have such a title.
Under reference to a dictum of Lord Dunedin in the case of D & J Nicol v Dundee Harbour Trustees 1915 SC (HL) 7, the court concluded that the third to tenth respondents had no title or interest to defend.
The court also referred to the cases of Zurich General Accident and Liability Insurance Co Ltd v Livingston 1938 SC 582 and Norwich Union Life Insurance Society v Tanap Investments UK Ltd 2000 SC 515.
In the Zurich General Accident case, the pursuers were an insurance company who brought proceedings against their insured for declarator that they were entitled to avoid her policy of motor insurance.
Persons who had been injured as a result of an accident which had occurred while the defenders car was being driven by a third party applied to be sisted as additional defenders, on the basis that the avoidance of the policy would deprive them of their statutory right to recover from the insurers any award of damages which they might obtain against the driver.
They were held to be entitled to defend the proceedings, Lord Moncrieff commenting at p 590 that it seemed quite unanswerable that a person, whose statutory right may be taken away by a process of law, should, before his statutory right is taken away, be entitled to be heard as a proper defender against the conflicting claim.
In the Norwich Union case, the pursuers were creditors who held a security over property.
Following the debtors insolvency and the sale of the property, they brought proceedings against the debtor in which they sought the rectification of agreements under which they had advanced money to the debtor, so as to bring them within the scope of their security.
Another creditor, who held a postponed security over the same property, sought to defend the proceedings on the basis that the rectification of the agreements would affect its own ranking.
The court held that the postponed creditor was entitled to defend the proceedings if the rectification sought would adversely affect it.
In the present case, the First Division distinguished these two cases as being cases where the person seeking to enter the process had an undisputed right which would be affected by the proceedings, whereas in the present case the validity of the legislation establishing the right was itself in issue.
Discussion
In considering the approach adopted by the Inner House, it is appropriate to begin by reminding oneself of the nature of an application to the supervisory jurisdiction of the court (in the context of public law: the following discussion is not concerned with applications made in relation to private bodies), and of how it differs from an ordinary action.
Putting the matter broadly, in an ordinary action in private law the pursuer is seeking to vindicate his rights against the defender.
The right on which the action is founded constitutes his title to sue.
In proceedings of this kind, if a person who has not been convened as a defender wishes to be made an additional defender, that must be on the basis that his property or other rights are liable to be affected by the outcome.
In that sense, he must have a title to defend the proceedings.
That point is illustrated by the cases of Zurich General Accident and Norwich Union which were cited by the First Division.
An application to the supervisory jurisdiction, on the other hand, is not brought to vindicate a right vested in the applicant, but to request the court to supervise the actings of a public authority so as to ensure that it exercises its functions in accordance with the law.
The nature and implications of the distinction between these two types of procedure has become increasingly clear in modern times, as a result of three related developments.
The first of these was the establishment of judicial review as a distinct form of procedure.
Until 1985, the same forms of procedure were used in Scotland for applications to the supervisory jurisdiction as in other proceedings.
In practice, since the remedies commonly sought were the reduction of the decision challenged, or a declarator of the legal position, and those remedies could only be obtained in an ordinary action commenced by summons, that form of procedure was commonly used.
Reform was initiated by Lord Fraser of Tullybelton, who said in Brown v Hamilton District Council 1983 SC (HL) 1 at p 49 that it was for consideration whether there might not be advantages in developing special procedure in Scotland for dealing with questions in the public law area, comparable to the English prerogative orders; an observation which he repeated in Stevenson v Midlothian District Council 1983 SC (HL) 50 at p 59.
Shortly afterwards the Working Party on Procedure for Judicial Review of Administrative Action was set up under the chairmanship of Lord Dunpark.
Its report recommended the establishment of a form of procedure for judicial review, initiated by petition.
That recommendation was implemented in 1985, when a new rule 260B was inserted into the Rules of Court 1965.
Slightly amended, the provisions of that rule are now contained in Chapter 58 of the Rules of Court 1994.
The choice of a procedure initiated by petition rather than summons reflects the nature of an application to the supervisory jurisdiction.
The object of a summons is to enforce the pursuers legal right against a defender who resists it, or to protect a legal right which the defender is infringing.
Reflecting its nature, a summons is addressed to the defender and is served as of right.
If defences are not lodged within the time allowed, decree is normally granted as a matter of course.
A petition, on the other hand, is an ex parte application addressed to the court, requesting it to exercise the jurisdiction invoked by the petitioner.
It can only be served on other persons if the court grants a warrant to do so.
In general, the petitioner is expected to seek a warrant for service on all persons who may have an interest in the matter, and a first order is then granted authorising such service, and allowing those persons, and any other persons having an interest, to lodge answers.
In the case of judicial review procedure, in particular, rule 58.6 provides a form of petition, set out in form 58.6, which requires the petitioner to state the identity of the respondent (who will be the public authority responsible for the act, decision or omission to be reviewed), and the identity of any persons having an interest, who are to be named in the schedule for service.
Even if the petition is unopposed, it will not be granted unless the court is satisfied that it is appropriate for it to exercise the relevant power in the manner requested.
The fact that the application is made by petition is thus not a mere procedural technicality but reflects an aspect of applications to the supervisory jurisdiction which is of great practical significance: an applicant for judicial review, unlike the pursuer in an ordinary action, does not need to assert any right to a remedy.
One corollary is that the court can review a decision which does not affect the legal rights of the applicant in any way.
Another is that the court can apply grounds of review which require the decision to comply with standards which create no legal rights in the applicant.
The second important development was the decision in the case of West, which provided clarification of the nature of the supervisory jurisdiction, the need for which had become apparent following the introduction of rule 260B.
The opinion delivered by Lord President Hope made clear, in particular, the essential difference between the nature and purpose of the courts supervisory jurisdiction, on the one hand, and its jurisdiction to adjudicate on disputed questions of right, on the other.
The third development was a substantial growth in the number of applications to the supervisory jurisdiction following the introduction of the procedure for judicial review.
This has resulted in the development of public law as an area of practice and academic study.
In consequence, an area of the law which had previously been relatively neglected has become the subject of intensive consideration, and legal doctrine has been examined, criticised and refined.
Long before these developments, the question of standing was considered in a variety of contexts which would now be regarded as falling within the area of public law, although they were not understood in that way at the time.
One context in which litigation arose in the nineteenth and early twentieth centuries concerned ultra vires actings by public corporations.
The case of D & J Nicol v Dundee Harbour Trustees was one such case.
It was decided by applying the ultra vires doctrine which had previously been developed in company law, and standing was confined to persons who were considered to be in an analogous position to shareholders.
Remarks made in that case by Lord Dunedin have had an enduring influence.
He said, at pp 12 13: By the law of Scotland a litigant, and in particular a pursuer, must always qualify title and interest.
Though the phrase title to sue has been a heading under which cases have been collected from at least the time of Morisons Dictionary and Browns Synopsis, I am not aware that anyone of authority has risked a definition of what constitutes title to sue.
I am not disposed to do so, but I think it may fairly be said that for a person to have such title he must be a party (using the word in its widest sense) to some legal relation which gives him some right which the person against whom he raises the action either infringes or denies.
Lord Dunedin gave, as examples of the type of legal relation he had in mind, ownership, contract, trust and other fiduciary relationships.
The relationship between the harbour trustees and their ratepayers, who included the pursuers, was regarded as falling into the last of these categories.
Whether the harbour trustees complied with their statutory duties was thus treated as an essentially private matter between them and their ratepayers, with which third parties had no concern unless their property or other rights were affected.
Lord Dunedin expressly disavowed the intention to formulate a definition, but his observations are valuable as a guide to title and interest to bring an ordinary action in private law.
For the reasons I have explained, they are inapposite in the context of applications to the supervisory jurisdiction.
That is reflected in the fact that there are other cases of that period concerned with the acts of public authorities, such as Rossi v Magistrates of Edinburgh (1904) 7F (HL) 85, which cannot readily be fitted into the two fold analysis which Lord Dunedin described.
The inaptness of that analysis as an approach to standing in the context of judicial review has however become clearer in more recent times.
Two cases illustrate the point.
The first is Wilson v Independent Broadcasting Authority 1979 SC 351, in which members of the public were held to be entitled to bring proceedings to prevent the Authority from putting out political broadcasts in breach of their statutory duty to ensure that the programmes broadcast by them maintained a proper balance.
Lord Ross said at pp 356 357 that he could see no reason in principle why an individual should not sue in order to prevent a breach by a public body of a duty owed by that body to the public, provided the individual could qualify an interest.
The second case is Scottish Old Peoples Welfare Council, Petitioners 1987 SLT 179, in which the organisation better known as Age Concern Scotland challenged guidance issued by the chief adjudication officer regarding social security payments for severe weather conditions.
Lord Clyde followed the case of Wilson and concluded that any member of the public, or an association such as the petitioners, was entitled to bring proceedings to enforce the proper administration of social security legislation, subject to demonstrating a sufficient interest.
The case is also noteworthy for Lord Clydes use of the expression locus standi.
Lord Clyde adopted the same approach, and the same terminology, in the subsequent case of Air 2000 Ltd v Secretary of State for Transport (No 2) 1990 SLT 335.
The expression locus standi, and its English equivalent, standing, were also used by Lord Clyde extra judicially in the relevant chapter of Clyde and Edwards, Judicial Review (2000), where the authors questioned at para 10.03 the appropriateness or helpfulness of a two fold analysis, in terms of title and interest, in the context of judicial review.
In the present case, the First Division cited the cases of Wilson v Independent Broadcasting Authority and Scottish Old Peoples Welfare Council, Petitioners when considering the standing of the appellants at common law to bring the present proceedings.
They concluded that there was no reason why a member of the public adversely affected by legislation passed by the Scottish Parliament could not challenge it, provided he or she had an interest to do so.
At the same time, the court also cited Lord Dunedins dictum in the Nicol case, and endeavoured to reconcile their decision with previous cases in which, on the basis of that dictum, a more restrictive approach to standing had been adopted.
As the Inner Houses discussion of the authorities demonstrates, the results of applying a test of title and interest in the context of public law have been unpredictable: in some cases, such as the Wilson case, it has been applied liberally, but in other cases it has been applied more restrictively.
As Professor A W Bradley commented in 1987, the resulting state of the law places an unnecessary pitfall in the way of voluntary organisations and other bodies that have a serious reason for seeking judicial scrutiny of the legality of government policies (Applications for Judicial Review the Scottish Model [1987] Public Law 313, 319).
In consequence, as was noted in the Report of the Scottish Civil Courts Review (2009), vol 2, p 27, public law issues arising in Scotland are sometimes litigated in the English courts, where the rules on standing are clearer and have been less restrictively applied.
These practical difficulties reflect the problem which, as I have explained, arises as a matter of principle if the courts approach to standing in judicial review is based upon the approach followed in ordinary actions under private law.
The approach to standing which was stated by Lord Dunedin in the Nicol case is appropriate to proceedings where the function of the courts is to protect legal rights: in that context, only those who maintain that their legal rights require protection have a good reason to use the procedures established in order for the courts to perform that function.
The essential function of the courts is however the preservation of the rule of law, which extends beyond the protection of individuals legal rights.
As Lord Hope, delivering the judgment of the court, said in Eba v Advocate General for Scotland (Public Law Project intervening) (Note) [2011] UKSC 29, 2011 SLT 768, [2011] 3 WLR 149, para 8: the rule of law is the basis on which the entire system of judicial review rests.
Wherever there is an excess or abuse of power or jurisdiction which has been conferred on a decision maker, the Court of Session has the power to correct it: West v Secretary of State for Scotland 1992 SC 385, 395.
This favours an unrestricted access to the process of judicial review where no other remedy is available.
There is thus a public interest involved in judicial review proceedings, whether or not private rights may also be affected.
A public authority can violate the rule of law without infringing the rights of any individual: if, for example, the duty which it fails to perform is not owed to any specific person, or the powers which it exceeds do not trespass upon property or other private rights.
A rights based approach to standing is therefore incompatible with the performance of the courts function of preserving the rule of law, so far as that function requires the court to go beyond the protection of private rights: in particular, so far as it requires the courts to exercise a supervisory jurisdiction.
The exercise of that jurisdiction necessarily requires a different approach to standing.
For the reasons I have explained, such an approach cannot be based upon the concept of rights, and must instead be based upon the concept of interests.
A requirement that the applicant demonstrate an interest in the matter complained of will not however operate satisfactorily if it is applied in the same way in all contexts.
In some contexts, it is appropriate to require an applicant for judicial review to demonstrate that he has a particular interest in the matter complained of: the type of interest which is relevant, and therefore required in order to have standing, will depend upon the particular context.
In other situations, such as where the excess or misuse of power affects the public generally, insistence upon a particular interest could prevent the matter being brought before the court, and that in turn might disable the court from performing its function to protect the rule of law.
I say might, because the protection of the rule of law does not require that every allegation of unlawful conduct by a public authority must be examined by a court, any more than it requires that every allegation of criminal conduct must be prosecuted.
Even in a context of that kind, there must be considerations which lead the court to treat the applicant as having an interest which is sufficient to justify his bringing the application before the court.
What is to be regarded as sufficient interest to justify a particular applicants bringing a particular application before the court, and thus as conferring standing, depends therefore upon the context, and in particular upon what will best serve the purposes of judicial review in that context.
The supervisory jurisdiction has developed almost entirely through judicial decisions.
One of the responsibilities of the courts is to ensure its continuing development, on an incremental basis, so as to meet the needs of the time.
In my opinion, the time has come when it should be recognised by the courts that Lord Dunedins dictum pre dates the modern development of public law, that it is rooted in private law concepts which are not relevant in the context of applications to the supervisory jurisdiction, and that its continuing influence in that context has had a damaging effect on the development of public law in Scotland.
This unsatisfactory situation should not be allowed to persist.
The time has also come when the courts should cease to use the inappropriate terminology of title and interest in relation to such applications, and should refer instead to standing, based upon a sufficient interest.
Considering specifically the question of standing to take part in judicial review proceedings other than as the applicant or the respondent, it follows from the nature of such proceedings, as I have explained, that standing should depend upon demonstrating a sufficient interest in the issues raised by the application.
That approach was reflected in the terms of rule 260B, when the procedure for judicial review was introduced in 1985.
As under the present Rule 58.6, the applicant was required to identify persons having an interest and to seek a first order for service upon those persons.
Any such person was then entitled to lodge answers to the petition.
Paragraph (14), which was the predecessor of the current rule 58.8(2), provided that any person not specified in the first order as a person upon whom service required to be made might enrol a motion for leave to enter the process.
Since paragraph (14) referred to any person, its scope was not explicitly restricted by reference to any criterion of standing, but it was interpreted as being intended to enable persons with an interest in the issues raised by the application to take part in the proceedings.
In Sutherland District Council v Secretary of State for Scotland (unreported) 23 December 1987, Lord Clyde said: Paragraph (14) envisages that interested parties may be permitted to enter the process more freely than in the case of an ordinary action and so enable the parties and the court to have the benefit in appropriate cases of the submissions of other interested parties.
The contrast drawn by Lord Clyde between standing to participate in judicial review proceedings and standing in an ordinary action is consistent with the approach which I have explained in the present case.
Paragraph (14) was considered again in Casey v Edinburgh Airport Ltd (unreported) 23 February 1989, a decision of Lord Morison.
The case concerned a challenge to decisions taken by the airport authority, under a bye law, to refuse permits to the applicant taxi operators.
During the hearing, the applicants sought to challenge the validity of the bye law itself.
Lord Morison refused to consider such a challenge in the absence of intimation to the taxi operators who had been granted permits under the contested bye law.
He said: No intimation of the petition has been made to these persons, since in its present form it does not affect their interest It seems to me to be clear that the argument sought to be presented by the petitioners cannot be determined in the absence of intimation to other taxi operators who have an interest to uphold the validity of the permission granted to them.
I note that in the present case the judges of the First Division stated, at para 56 of their opinion, that it had never been suggested, in cases in which the validity of a bye law was challenged, that those who might benefit from it should be called for their interest, and that that was an important indication that a beneficiary of a general legislative measure had no title to counter a challenge to its validity.
The court had not been referred to the case of Casey.
As I have explained, the provisions of rule 260B were repeated in Chapter 58 of the current Rules of Court when they were introduced in 1994.
The terms of paragraph (14), in particular, were repeated in rule 58.8(2).
That rule was amended by the Act of Sederunt (Rules of the Court of Session Amendment No 5) (Public Interest Intervention in Judicial Review) 2000 (SSI 2000/317), which came into force on 2 October 2000, at the same time as the Human Rights Act.
Its purpose, as appears from its title, was to provide for public interest intervention in judicial review cases.
With that aim in mind, a new rule 58.8A was introduced, which enabled an application for leave to intervene to be made on the basis that an issue in the proceedings raised a matter of public interest which the applicant wished to address.
The introduction of that procedure made it necessary to amend rule 58.8(2) so as to clarify whether, in any particular case, the appropriate procedure for a person to adopt was an application for leave to enter the process, under rule 58.8(2), or an application to intervene, under rule 58.8A.
Accordingly, rule 58.8(2) was amended so that any person became any person who is directly affected by any issue raised, and rule 58.8A was restricted to a person to whom rule 58.8(2) does not apply.
The Act of Sederunt was not intended to make it more difficult for interested parties to take part in judicial review proceedings: on the contrary, the intention was to liberalise access by introducing an additional procedure for public interest intervention.
In those circumstances, the insertion into rule 58.8(2) of the stipulation that the person must be directly affected by any issue raised should be understood as reflecting the pre existing requirement that the person must have a sufficient interest.
Against that background, it appears to me that rule 58.8(2), in requiring that a person wishing to enter the process must be directly affected by any issue raised, did not purport to innovate upon the substantive law, but reflected it.
In the circumstances of the present case, that requirement was satisfied by the third to tenth respondents.
Conclusion
For these reasons and those given by Lord Hope, with which I respectfully agree, I would dismiss the appeal, allow the cross appeal by the third to tenth respondents, and make the order which Lord Hope proposes.
LORD KERR, LORD CLARKE AND LORD DYSON
For the reasons given by Lord Hope and Lord Reed, with which we agree, we too would dismiss the appeal and allow the cross appeal.
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The appellants are insurance companies which have undertaken to indemnify employers against liability for negligence.
They sought to challenge the lawfulness of an Act of the Scottish Parliament (the Damages (Asbestos related Conditions) (Scotland) Act 2009, the 2009 Act) which provides that asbestos related pleural plaques and certain other asbestos related conditions constitute personal injury which is actionable under Scots law.
Pleural plaques are physical changes in the tissue which lines the lungs and the chest wall.
They do not actuate or contribute to potentially fatal conditions such as lung cancer, mesothelioma or asbestosis, but their existence evidences significant previous exposure to asbestos, which of itself represents an increased risk of contracting such diseases.
The purpose of the 2009 Act was to reverse the decision of the House of Lords in Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 29.
In that case it was decided that the mere presence of pleural plaques did not constitute injury which could gave rise to a claim for damages.
The appellants challenge the validity of the Act on two bases: 1. that it is incompatible under article 1 of Protocol 1 (A1 P1) of the European Convention on Human Rights (the Convention) and therefore is outside the legislative competence of the Scottish Parliament under the Scotland Act 1998; and 2. that it is open to judicial review as an unreasonable, irrational and arbitrary exercise of the legislative authority of the Scottish Parliament.
The first and second respondents represent the Scottish Ministers and the United Kingdom government respectively.
The third to tenth respondents are individuals who have been diagnosed with pleural plaques.
These respondents have cross appealed a court finding which held that they did not have title and interest to be parties to the case.
The Supreme Court dismisses the appeal and allows the cross appeal by the third to tenth respondents.
The leading judgments were given by Lord Hope and Lord Reed, with whom the other justices agreed.
The Court holds that the appellants are entitled to bring these proceedings under the Convention as the effect of the 2009 Act is that they would be victims for the purposes of article 34 and that the
amount of money the appellants would be required to pay is a possession for the purposes of A1 P1 [28], [112 114].
Therefore in order for the 2009 Act to comply with A1 P1, it must be shown that the Act is pursuing a legitimate aim and is reasonably proportionate to the aim pursued.
In issues involving questions of social policy, which this is, the Court should respect the judgment of the elected body as to what is in the public interest unless that judgement is manifestly without reasonable foundation [31] [32].
It cannot be said that the judgement of the Scottish Parliament was without reasonable foundation [33], [125].
Therefore the Court accepts that the Act pursues a legitimate aim [41], [125].
It also considers that the means chosen are reasonably proportionate to the aim sought to be realised [41], [134].
The balance is correctly struck, first because the claims will only succeed if the asbestos exposure was caused by the employers negligence [37].
Second, the appellants obligation to indemnify inevitably entailed a risk that unforeseen circumstances would increase the burden of liability [38].
And third, because the Act can be seen as preserving the status quo prior to Rothwell [129].
It follows that the 2009 Act was not outside the legislative competence of the Scottish Parliament.
Nor can it be said that the 2009 Act was a result of an unreasonable, irrational and arbitrary exercise of the legislative authority [42].
The Court finds that in principle Acts of the Scottish Parliament are subject to judicial review but not on the grounds of irrationality, unreasonableness or arbitrariness.
The guiding principle is to be found in the rule of law.
This is the ultimate controlling factor, and the courts must insist that it is respected by legislation that the Parliament enacts.
But it would be wrong for the judges to substitute their views as to what is rational or reasonable for the considered judgment of the democratically elected legislature [47], [51] [52], [148] and [153].
As to whether the third to tenth respondents are entitled to be parties, the test of standing, rather than the private law rule that title and interest has to be shown, is a more appropriate approach in judicial review proceedings [62], [171].
The third to tenth respondents have standing as they are directly affected by the appellants challenge to the 2009 Act [63] [64] and [175].
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Each of the appellants has been committed for trial at the Crown Court on charges of false accounting.
I shall refer to them as the defendants.
The charges relate to claims in respect of parliamentary expenses and are alleged to have been committed when each defendant was a serving member of the House of Commons.
A fourth defendant, Lord Hanningfield, who is a member of the House of Lords, faces similar charges.
Each defendant and Lord Hanningfield is facing a separate trial but each of them has raised an important point of law.
Each claims that criminal proceedings cannot be brought against him because they infringe parliamentary privilege.
A single preparatory hearing pursuant to section 29 of the Criminal Procedure and Investigations Act 1996 was held to consider this point in relation to all four defendants.
On 11 June 2010 Saunders J, sitting in Southwark Crown Court, ruled against the four defendants.
All four appealed to the Court of Appeal.
On 30 July 2010 that court, Lord Judge CJ, Lord Neuberger MR and Sir Anthony May, President of the Queens Bench Division, dismissed their appeal.
On 14 September 2010 the court certified that the appeal had raised a point of law of general public importance, refused permission to appeal to this court and granted a representation order for one leading counsel, one junior counsel and one solicitor to represent the four defendants jointly in the event of an application to this court for permission to appeal and any consequent appeal.
The defendants, but not Lord Hanningfield, sought permission to appeal.
Lord Hanningfield sought permission to intervene.
Permission was granted to him to intervene in writing for the limited purpose of drawing attention to any distinction between expenses schemes and privileges in the two Houses of Parliament.
At the opening of the hearing the court granted permission to appeal.
On 10 November the court ordered that each of the three appeals be dismissed, for reasons to be delivered in due course.
These are my reasons.
The charges
Each of the defendants has been charged with false accounting contrary to section 17(1)(b) of the Theft Act 1968, which provides in so far as material: False accounting (1) Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another, (b) in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular; he shall, on conviction on indictment, be liable to imprisonment for a term not exceeding seven years. (2) For purposes of this section a person who makes or concurs in making in an account or other document an entry which is or may be misleading, false or deceptive in a material particular, or who omits or concurs in omitting a material particular from an account or other document, is to be treated as falsifying the account or document.
Mr Morley is charged with making use of monthly expenses claim forms for additional costs allowance which, initially, claimed as mortgage interest sums which were in part repayments of capital and, latterly, made claims for repayment of mortgage interest after the mortgage had been repaid.
Mr Chaytor is charged with making use of an expenses claim form for incidental expenses provision in relation to two invoices relating to the supply of IT services when no such services had been supplied.
He is further charged with making use of expenses claim forms for additional costs allowance in respect of payments of monthly rent when such payments had never been made.
Mr Devine is charged with making use of expenses claim forms for additional costs allowance and personal additional accommodation expenditure in respect of invoices relating to cleaning and maintenance services when no such services had been supplied.
He is further charged with submitting expenses claim forms in respect of communications allowance and supporting invoices in respect of the supply of stationery when no such stationery had been supplied.
The claim forms which form the subject matter of all charges were submitted to the Fees Office of the House of Commons.
Form ACA2 in respect of additional costs allowance contains a declaration, signed by the Member in the following form: I confirm that I incurred these costs wholly, exclusively and necessarily to enable me to stay overnight away from my only or main home for the purpose of performing my duties a Member of Parliament.
The issues of fact in each case would seem to be whether the expenses claimed were incurred and not the purpose for which they were incurred.
Entitlement to and administration of allowances
The entitlement of Members of Parliament to claim certain expenses dates back to 1911, but the system under which the claims with which the present appeals are concerned was introduced in 1971 and the circumstances in which such allowances and expenses may be claimed are determined by Resolutions of the House.
On 29 January 2004 the House passed a Standing Order establishing the House of Commons Members Estimate Committee (the Estimate Committee), which is chaired by the Speaker.
One of the functions of this Committee is to report to the House from time to time on the provisions of the Resolutions of the House relating to expenditure charged to the Estimate for the House of Commons: Members, as codified and modified by the Committee.
In effect the House itself is responsible for the overall scheme of allowances and the Estimate Committee is responsible for the detail.
The House of Commons (Administration) Act 1978 created the House of Commons Commission (the Commission) consisting of the Speaker, the Leader of the House, a Member nominated by the Leader of the Opposition and three other Members, not being Ministers, appointed by the House.
Under Schedule 1 to this Act the Commission is a body corporate.
The primary functions of the Commission are to appoint the staff in the House Departments, to determine their numbers, and to determine their remuneration and other terms and conditions of service (section 2).
The various House Departments include the Department of Finance and Administration.
This is divided into three main offices.
One of these is the Fees Office.
Until recently this performed the functions of receiving claim forms for allowances and expenses, which might be submitted in person or by post, considering the claims and making payments in relation to claims that appeared to be properly made.
The claim to privilege
The defendants contend that the Crown Court has no jurisdiction to try them in respect of these charges on the ground that this would infringe parliamentary privilege.
This claim to privilege has two bases.
The first is article 9 of the Bill of Rights 1689 (article 9).
This provides: That the Freedome of Speech and Debates or Proceedings in Parlyament ought not to be impeached or questioned in any Court or Place out of Parlyament.
The defendants further rely on privilege that has its origin before 1689 and which is wider than, and embraces, article 9.
This has customarily been described as the exclusive cognisance of Parliament but has also been described in argument as exclusive jurisdiction.
I shall use the former description.
Who decides the issue?
In the 17th and 18th centuries there was a dispute between the courts and the
House of Commons, often acrimonious, as to who was the final arbiter of the scope of parliamentary privilege.
This dispute was largely resolved in the course of the 19th century.
In Stockdale v Hansard (1839) 9 Ad & E 1 at pp 147 148 Lord Denman CJ said of the argument that the House of Commons was a separate Court with exclusive jurisdiction over the extent of its privileges: Where the subject matter falls within their jurisdiction, no doubt we cannot question their judgment; but we are now enquiring whether the subject matter does fall within the jurisdiction of the House of Commons.
It is contended that they can bring it within their jurisdiction by declaring it so.
To this claim, as arising from their privileges, I have already stated my answer: it is perfectly clear that none of these Courts could give themselves jurisdiction by adjudging that they enjoy it.
It is now accepted in Parliament that the courts are not bound by any views expressed by parliamentary committees, by the Speaker or by the House of Commons itself as to the scope of parliamentary privilege.
On 4 March 2010 the Clerk of the Parliaments wrote to the solicitor acting for Lord Hanningfield a letter that had received the approval of the Committee for Privileges.
This stated: Article 9 limits the application of parliamentary privilege to proceedings in Parliament.
The decision as to what constitutes a proceeding in Parliament, and therefore what is or is not admissible as evidence, is ultimately a matter for the court, not the House.
This statement was correct.
It applies as much to the House of Commons as to the House of Lords, and to an issue as to the scope of the exclusive cognisance of Parliament as it does to an issue as to the application of article 9.
Although the extent of parliamentary privilege is ultimately a matter for the court, it is one on which the court will pay careful regard to any views expressed in Parliament by either House or by bodies or individuals in a position to speak on the matter with authority.
In Stockdale v Hansard at p 157 Lord Denman CJ commented: The authority to which the Attorney General last appealed is one to which particular attention is due: I mean the report of the committee appointed by the late House of Commons to examine the subject albeit that the comments that he went on to make suggest that in the event the report did not carry the weight that he had suggested that it deserved.
Both Saunders J and the Court of Appeal attached weight to views expressed or to be implied within Parliament both as to the scope of parliamentary privilege in general and as to whether such privilege attaches on the facts of these appeals.
The decision of Saunders J
Saunders J referred at para 19 to concessions made by the prosecution which narrowed the issues.
The first was that the scheme for the payment of expenses as prescribed by resolution of the Houses of Parliament was covered by privilege either under article 9 or as part of the exclusive jurisdiction of the House.
This meant that the High Court would have no power judicially to review the scheme.
The second was that the administration of the scheme by officials in the Fees Office under the supervision of a committee was also covered by parliamentary privilege.
Saunders J expressed reservations about this concession, but treated it as correctly made.
The third was: While an instinctive reaction might be that, while honest claims are covered by privilege, dishonest ones are not, the prosecution accept that, if the submission of forms by an MP is covered by privilege then dishonest claims are also covered.
That is because, in order to prove dishonesty, the prosecution would have to question the document, which is not permitted if it is covered by privilege.
Saunders J held that he was satisfied that this concession was properly made.
It is not altogether easy to reconcile this with an earlier finding at para 18 that in the context of criminal charges parliamentary privilege should be narrowly construed, but I understand that what he meant was that, because it has the effect of ousting criminal jurisdiction, parliamentary privilege should be narrowly construed.
At para 6 Saunders J also recorded an area of ground common to all, or nearly all, counsel.
Privilege did not attach to criminal conduct within the House which was not connected to the activities of the House.
Such conduct could be described as ordinary criminal conduct.
This covered such criminal offences as an assault in the corridors of the House, theft of another Members money, or a sexual offence, none of which related to parliamentary activity or proceedings in Parliament.
Addressing the exclusive jurisdiction of Parliament, Saunders J held that the submission of a claim form fell to be distinguished from the subsequent processing of the form.
Even if the latter was covered by privilege, the former was not.
Privilege covered actions which were part of the collective processes of Parliament.
Claiming expenses was not such an action.
It was a voluntary individual activity for the benefit of the individual and not of direct benefit to Parliament.
So far as article 9 was concerned, Saunders J considered that this essentially protected freedom of speech in Parliament.
The protection extended to some actions that were incidental to exercising that freedom of speech, making a claim for expenses could not properly be said to be one of them.
Accordingly the privilege claimed was not made out.
The decision of the Court of Appeal
In the Court of Appeal the Crown withdrew its concession that the administration of the allowances and expenses scheme by officials in the Fees Office under the supervision of a committee was covered by parliamentary privilege.
At para 69 the Court of Appeal approached this withdrawal with caution, commenting: The issue in these appeals is not whether the actions of officials in allowing the defendants expenses claims is or may be privileged, but whether in submitting their claims, and making the allegedly false statements contained in them to the officials, the defendants were taking part in proceedings in Parliament, within the ambit of article 9 and privilege, as explained in the relevant authorities.
The Court of Appeal attached considerable weight to indications from within Parliament that the defendants claims were not covered by privilege, to which I shall return in due course, but went on to consider arguments advanced on behalf of the defendants.
At paras 74 and 75 the court rejected the submission that making a statement to officials in the Fees Office could be equated with making a statement to the House or to a parliamentary committee: A claim for expenses is not submitted to any other member of the House, nor even to the Speaker or Lord Speaker or to his or her office: it is submitted to an official in the Fees Office, and although that official is appointed by and is an agent of the House, he is not officiating in connection with the business carried on within the Chamber or within a committee.
He is merely carrying out an administrative task, albeit one mandated by the relevant House, and one subject to the detailed rules approved by that House.
The Court of Appeal went on to develop the theme that claiming expenses had nothing to do with the essential, or core, functions of a Member of Parliament.
In doing so, however, the court repeatedly considered this question in relation to the presenting of dishonest claims for expenses: In truth, it is impossible to see how subjecting dishonest claims for expenses to criminal investigation would offend against the rationale for parliamentary privilege (para 76).
It would therefore be curious if privilege were to apply to the member who defrauded the Fees Office by submitting a false claim for expenses (para 77). the decision to set up, and the terms of the system could not be subject to the courts jurisdiction.
Be that as it may, it does not then follow that the dishonest operation of this system by individual members is excluded from it (para 78). on the basis that the implementation of the scheme might constitute a proceeding in Parliament, it does not follow as a matter of logic, convenience or principle, that the dishonest actions by a member when making his claim should be immune from criminal prosecution (para 78).
It can confidently be stated that parliamentary privilege or immunity from criminal prosecution has never ever attached to ordinary criminal activities by members of Parliament (para 81).
The stark reality is that the defendants are alleged to have taken advantage of the allowances scheme designed to enable them to perform their important public duties as members of Parliament to commit crimes of dishonesty to which parliamentary immunity or privilege does not, has never, and, we believe, never would attach.
If the allegations are proved, and we emphasise, if they are proved, then those against whom they are proved will have committed ordinary crimes.
Even stretching language to its limits we are unable to envisage how dishonest claims by members of Parliament for their expenses or allowances begin to involve the legislative or core functions of the relevant House, or the proper performance of their important public duties (para 82).
Counsel for the defendants submitted that claiming expenses was part of a scheme that was covered by privilege in that the payment of expenses was necessary to enable, or for the purpose of enabling, Parliament to perform its core or essential parliamentary business, to which article 9 related.
This was the whole object of the system of allowances.
More particularly, counsel submitted that the Court of Appeal had erred in principle in examining this issue on the premise that the claims for expenses were dishonest.
Privilege from criminal prosecution would be nugatory if it did not apply to criminal conduct.
I consider that there was force in this criticism.
The concept of an ordinary crime, the origin of which I shall identify in due course, is only of value in the present context where it describes an act which has no connection with the conduct of parliamentary business, as counsel rightly agreed see para 18 above.
Making claims for parliamentary allowances does not fall into this category.
Such claims form part of the business of Parliament, giving that phrase a broad meaning.
The issue is whether business of this nature amounts to proceedings in Parliament, within the meaning of article 9, or is otherwise privileged from scrutiny in the criminal courts because it falls within the exclusive cognisance or jurisdiction of Parliament.
It is not appropriate to approach that question on the premise that the claims are dishonest.
Article 9
I propose to start by considering article 9, because the issues in relation to article 9 are relatively narrow and clear cut, compared to those that arise in relation to the exclusive cognisance of Parliament.
Jurisprudence
Much of the jurisprudence in relation to article 9 relates to what constitutes impeaching or questioning proceedings in Parliament most notably Pepper v Hart [1993] AC 593.
The meaning of those words is not in issue in the present case and so I shall not refer to authority dealing with that question.
What is at issue is the reach of the phrase proceedings in Parliament.
The Bill of Rights 1689 reflected the attitude of Parliament, after the Restoration, to events in the reign of Charles I, and in particular the acceptance by the Court of Kings Bench that parliamentary privilege did not protect against seditious comments in the Chamber R v Eliot, Holles and Valentine (1629) 3 St Tr 293 336.
The primary object of the article was unquestionably to protect freedom of speech in the House of Commons.
The question is, having regard to that primary object, how far the term proceedings in Parliament extends to actions that advance or are ancillary to proceedings in the Houses.
Erskine May, Parliamentary Practice, 23rd ed (2004), summarises the position as follows at pp 110 111: The term proceedings in Parliament has received judicial attention, (not all of it in the United Kingdom) but comprehensive lines of decision have not emerged and indeed it has been concluded that an exhaustive definition could not be achieved.
Nevertheless, a broad description is not difficult to arrive at.
The primary meaning of proceedings, as a technical parliamentary term, which it had at least as early as the seventeenth century, is some formal action, usually a decision, taken by the House in its collective capacity.
This is naturally extended to the forms of business in which the House takes action, and the whole process, the principal part of which is debate, by which it reaches a decision.
An individual Member takes part in a proceeding usually by speech, but also by various recognized forms of formal action, such as voting, giving notice of a motion, or presenting a petition or report from a committee, most of such actions being time saving substitutes for speaking.
One of the problems when considering the scope of article 9 is that decisions on parliamentary privilege frequently make no mention of the Bill of Rights.
That is true of Bradlaugh v Gossett (1884) 12 QBD 271.
The plaintiff, Bradlaugh, had been elected to the House of Commons.
He required the Speaker to call him to the table to take the oath and the Speaker declined to do so and the House resolved that the Serjeant at Arms should exclude Bradlaugh from the House.
Bradlaugh then sought an injunction restraining the Serjeant at Arms from complying with the resolution.
The court refused the injunction.
Lord Coleridge CJ held, at p 275: What is said or done within the walls of Parliament cannot be inquired into in a court of lawThe jurisdiction of the Houses over their own members, their right to impose discipline within their walls, is absolute and exclusive.
Stephen J was less categorical.
He held, at p 278: I think that the House of Commons is not subject to the control of Her Majestys Courts in its administration of that part of the statute law which has relation to its own internal proceedings, and that the use of such actual force as may be necessary to carry into effect such a resolution as the one before us is justifiable.
These statements do not distinguish between the narrow privilege under article 9 and the broader exclusive cognisance of Parliament.
More pertinent are some comments made by Stephen J as to what was not covered by privilege.
At p 283 he stated: The only force which comes in question in this case is such force as any private man might employ to prevent a trespass on his own land.
I know of no authority for the proposition that an ordinary crime committed in the House of Commons would be withdrawn from the ordinary course of criminal justice.
Stephen J pointed out at p 284 that, while Elliot established that nothing said in Parliament by a member as such could be treated as an offence by the ordinary courts, the House of Lords had carefully avoided deciding the question whether the Court of Kings Bench could try a Member for an assault on the Speaker in the House.
His was a cogent statement of opinion that parliamentary privilege, including that conferred by article 9, will not preclude a criminal prosecution in respect of the conduct of a Member merely because it has taken place within the House of Commons.
While Pepper v Hart was concerned with the circumstances in which reference could be made to proceedings in Parliament, Lord Browne Wilkinson made the following comment on the object of article 9, at p 638: Article 9 is a provision of the highest constitutional importance and should not be narrowly construed.
It ensures the ability of democratically elected Members of Parliament to discuss what they will (freedom of debate) and to say what they will (freedom of speech)In my judgment, the plain meaning of article 9, viewed against the historical background in which it was enacted, was to ensure that Members of Parliament were not subjected to any penalty, civil or criminal, for what they said and were able, contrary to the previous assertions of the Stuart monarchy, to discuss what they, as opposed to the monarch, chose to have discussed.
Lord Browne Wilkinson made a similar observation when giving the judgment of the Judicial Committee of the Privy Council in Prebble v Television New Zealand Ltd [1995] 1 AC 321 at p 334.
These observations are of limited assistance when considering the extent to which article 9 applies to actions that are incidental or in some way connected to proceedings on the floor of either House or in parliamentary committee.
The suggestion that article 9 should not be narrowly construed conflicted with an observation of Viscount Radcliffe when giving the advice of the Judicial Committee of the Privy Council in Attorney General of Ceylon v de Livera [1963] AC 103 at p 120.
Section 14 of the Bribery Act of Ceylon made it an offence to offer an inducement or reward to a member of the House of Representatives for doing or forbearing to do any act in his capacity as such member.
The issue was the scope of those words.
Viscount Radcliffe drew an analogy with article 9.
He said: What has come under inquiry on several occasions is the extent of the privilege of a member of the House and the complementary question, what is a proceeding in Parliament? This is not the same question as that now before the Board, and there is no doubt that the proper meaning of the words proceedings in Parliament is influenced by the context in which they appear in article 9 of the Bill of Rights (1 Wm & M, Sess 2, c 2); but the answer given to that somewhat more limited question depends upon a very similar consideration, in what circumstances and in what situations is a member of the House exercising his real or essential function as a member? For, given the proper anxiety of the House to confine its own or its members privileges to the minimum infringement of the liberties of others, it is important to see that those privileges do not cover activities that are not squarely within a members true function.
Alleged bribery of members in respect of their participation in the proceedings on the floor of one of the Houses of Parliament or in committee has raised the question of whether the connection between the act of bribery outside Parliament and the undoubted proceedings in Parliament to which the bribe relates renders the former subject to article 9 or similar privilege.
In Ex p Wason (1869) LR 4 QB 573 the issue was whether a prosecution would lie against three persons, two of whom were members of the House of Lords, for conspiring to deceive the House.
The court held that it would not.
Cockburn CJ held at p 576: It is clear that statements made by members of either House of Parliament in their places in the House, though they might be untrue to their knowledge, could not be made the foundation of civil or criminal proceedings, however injurious they might be to the interest of a third person.
And a conspiracy to make such statements would not make the persons guilty of it amenable to the criminal law.
Blackburn and Lush JJ agreed.
Lush J ended his short judgment with the following statement: I am clearly of opinion that we ought not to allow it to be doubted for a moment that the motives or intentions of members of either House cannot be inquired into by criminal proceedings with respect to anything they may do or say in the House.
It is not clear whether the reasoning of the court was that the act of conspiring was itself subject to privilege or that, as the object of the conspiracy was not an indictable offence, no indictment could lie for the conspiracy itself.
Ex p Wason was distinguished by the Supreme Court of Ontario in R v Bunting (1885) 7 OR 524, where it was held that a conspiracy to bring about a change in the Government of Ontario by bribing members of the Legislative Assembly to vote against the Government was an indictable offence at common law committed at the time of the conspiracy itself and within the jurisdiction of the ordinary courts.
Ex p Wason has also been cited by the Supreme Court of the United States in the context of considering the ambit of the Speech or Debate clause in article 1, section 6 of the Constitution.
This provides that for any speech or debate in either House, Senators or Representatives shall not be questioned in any other place see United States v Johnson (1966) 383 US 169 and United States v Brewster (1972) 408 US 501.
Each case involved an allegation of bribery to purchase support in proceedings in the House.
In the latter case Burger CJ gave the opinion of the court.
At p 518 he commented: The very fact of the supremacy of Parliament as Englands highest tribunal explains the long tradition precluding trial for official misconduct of a member in any other and lesser tribunal.
This is not an accurate summary either of parliamentary privilege in this jurisdiction or of the reason for it, but the issue of interpretation facing the Supreme Court mirrors that raised by article 9 and some of the reasoning in Brewster is relevant to consideration of the scope of that article.
At p 524 Burger CJ commented: As we noted at the outset, the purpose of the Speech or Debate Clause is to protect the individual legislator, not simply for his own sake, but to preserve the independence and thereby the integrity of the legislative process.
But financial abuses by way of bribes, perhaps even more than Executive power, would gravely undermine legislative integrity and defeat the right of the public to honest representation.
Depriving the Executive of the power to investigate and prosecute and the Judiciary of the power to punish bribery of Members of Congress is unlikely to enhance legislative independence.
Burger CJ went on to hold that prosecution for bribery did not infringe the Speech and Debate clause because there was no need to show that the defendant in fact fulfilled the alleged illegal bargain.
It was the acceptance of the bribe that constituted the offence.
Brennan J, with whom Douglas J joined, delivered a powerful dissent.
He held that one count actually charged that the defendant committed the act for which the bribe was paid, so that the defendants conduct in the House would have to be investigated.
Other counts, which merely charged receipt of the bribe, put in question the defendants motive for the legislative acts which followed, even if those acts did not have to be considered by the court.
Similar reasoning to that of Brennan J led the Supreme Court of India to hold that Members of Parliament were protected by privilege from prosecution for bribery in respect of voting in parliamentary proceedings: Rao v State (1998) 1 SCJ 529.
In 1992 a prosecution was brought against a Member of Parliament, Mr Harry Greenway, for the common law offence of bribery to use his position as a Member of Parliament to further the interests of a company in his constituency.
He applied to have the indictment quashed on the ground, inter alia, that the prosecution was precluded by parliamentary privilege.
Buckley J dismissed the application [1998] PL 357.
He referred with approval to comments of Lord Salmon in debate in the House of Lords (Hansard (HL Debates), 6 December 1976, col 631).
Lord Salmon had chaired a Royal Commission on Standards of Conduct in Public Life and the debate was on its Report, Cmnd 6524 (1976).
The passages cited by Buckley J were: To my mind equality before the law is one of the pillars of freedom.
To say that immunity from criminal proceedings against anyone who tries to bribe a Member of Parliament and any Member of Parliament who accepts the bribe, stems from the Bill of Rights is possibly a serious mistake.
Now this [the Bill of Rights] is a charter for freedom of speech in the House.
It is not a charter for corruption.
To my mind, the Bill of Rights, for which no one has more respect than I have, has no more to do with the topic which we are discussing than the Merchandise Marks Act.
The crime of corruption is complete when the bribe is offered or given or solicited and taken.
Buckley J made the following comments (pp 361 362,363): It is important to note that which Lord Salmon pointed out, namely, that corruption is complete when the bribe is offered or given, solicited or [sic] taken.
If, as is alleged here, a bribe is given and taken by a member of Parliament, to use his position dishonestly, that is to favour the briber as opposed to acting independently and on the merits, the crime is complete.
It owes nothing to any speech, debate or proceedings in Parliament.
Proof of the element of corruption in the transaction is another and quite separate consideration.
Privilege might well prevent any inquiry by a court into Parliamentary debates or proceedings.
However, it is not a necessary ingredient of the crime that the bribe worked.
A jury will usually be asked to infer corruption from the nature of and circumstances in which the gift was given.
I cannot see that article 9 in any way prevents that That a Member of Parliament against whom there is a prima facie case of corruption should be immune from prosecution in the courts of law is to my mind an unacceptable proposition at the present time.
I do not believe it to be the law.
The Committee of Privileges is not well equipped to conduct an enquiry into such a case, nor is it an appropriate or experienced body to pass sentence.
Unless it is to be assumed that it would be prejudiced in his favour, I cannot see that it would be in the Members own interest for the matter to be dealt with by the Committee.
The courts and legislature have over the years built up a formidable body of law and codes of practice to achieve fair treatment of suspects and persons ultimately charged and brought to trial.
Again, unless it is to be assumed that his peers would lean in his favour, why should a Member be deprived of a jury and an experienced judge to consider his guilt or innocence and, if appropriate, sentence? Why should the public be similarly deprived?
These decisions in relation to bribery lend support for a narrow construction of article 9.
If Greenway was rightly decided it leads inexorably to the conclusion that submitting claims for expenses falls outside the definition of proceedings in Parliament in article 9.
The nexus between bribes intended to influence what is said and proceedings in the House is much closer than the link between submitting a claim for expenses and taking part in such proceedings.
Indeed, it is the closeness of the former nexus that raises a question as to whether Greenway was correctly decided.
The dissent in Brewster is food for thought.
Accusing a Member of Parliament of taking bribes in exchange for statements to be made in the House will necessarily raise an inference that any statements that were subsequently made were corruptly motivated, even if this forms no part of the criminal inquiry.
The same point can, however, be made where a Member of Parliament affirms outside the House a statement made in the House.
Such an affirmation can found a claim in defamation.
This may well involve a challenge to the good faith of the defendant in affirming the statement, which will inferentially challenge his good faith in making the original statement.
Lord Bingham dealt with this point when giving the advice of the Judicial Committee of the Privy Council in Buchanan v Jennings (Attorney General of New Zealand intervening) [2005] 1 AC 115, at para 13: It is common ground in this appeal that statements made outside Parliament are not protected by absolute privilege even if they simply repeat what was said therein.
That proposition, established by R v Abingdon (1794) 1 Esp 226 and R v Creevey (1813) 1 M & S 273 was more recently applied by the High Court of Ontario in Stopforth v Goyer (1978) 87 DLR (3d) 373 and the Supreme Court of the United States in Hutchinson v Proxmire (1979) 443 US 111, 126 et seq.
In such a case there will inevitably be an inquiry at the trial into the honesty of what the defendant had said, and if the defendants extra parliamentary statement is found to have been untrue or dishonest the same conclusion would ordinarily, although not always, apply to the parliamentary statement also.
But such an inquiry and such a conclusion are not precluded by article 9, because the plaintiff is founding his claim on the extra parliamentary publication and not the parliamentary publication.
Lord Bingham went on to hold that it made no difference that, in that case, the repetition of what had been said in Parliament was merely by reference.
At para 17 Lord Bingham tested this conclusion for compliance with the principle underlying the absolute privilege accorded to parliamentary statements, namely the right of Members of Parliament to speak their minds in Parliament without any risk of incurring liability as a result.
He concluded that liability for repeating outside Parliament what had been said within did not conflict with this principle.
The jurisprudence to which I have referred is sparse and does not bear directly on the facts of these appeals.
It supports the proposition, however, that the principal matter to which article 9 is directed is freedom of speech and debate in the Houses of Parliament and in parliamentary committees.
This is where the core or essential business of Parliament takes place.
In considering whether actions outside the Houses and committees fall within parliamentary proceedings because of their connection to them, it is necessary to consider the nature of that connection and whether, if such actions do not enjoy privilege, this is likely to impact adversely on the core or essential business of Parliament.
If this approach is adopted, the submission of claim forms for allowances and expenses does not qualify for the protection of privilege.
Scrutiny of claims by the courts will have no adverse impact on the core or essential business of Parliament, it will not inhibit debate or freedom of speech.
Indeed it will not inhibit any of the varied activities in which Members of Parliament indulge that bear in one way or another on their parliamentary duties.
The only thing that it will inhibit is the making of dishonest claims.
Some reliance was placed by the defendants on the terms of section 13 of the Defamation Act 1996, which are as follows: 13.
Evidence concerning proceedings in Parliament (1) Where the conduct of a person in or in relation to proceedings in Parliament is in issue in defamation proceedings, he may waive for the purposes of those proceedings, so far as concerns him, the protection of any enactment or rule of law which prevents proceedings in Parliament being impeached or questioned in any court or place out of Parliament. (2) Where a person waives that protection (a) any such enactment or rule of law shall not apply to prevent evidence being given, questions being asked or statements, submissions, comments or findings being made about his conduct, and (b) none of those things shall be regarded as infringing the privilege of either House of Parliament. (3) The waiver by one person of that protection does not affect its operation in relation to another person who has not waived it. (4) Nothing in this section affects any enactment or rule of law so far as it protects a person (including a person who has waived the protection referred to above) from legal liability for words spoken or things done in the course of, or for the purposes of or incidental to, any proceedings in Parliament. (5) Without prejudice to the generality of subsection (4), that subsection applies to (a) the giving of evidence before either House or a committee; (b) the presentation or submission of a document to either House or a committee; (c) the preparation of a document for the purposes of or incidental to the transacting of any such business; (d) the formulation, making or publication of a document, including a report, by or pursuant to an order to either House or a committee; and (e) any communication with the Parliamentary Commissioner for Standards or any person having functions in connection with the registration of members interests.
In this subsection a committee means a committee of either House or a joint committee of both Houses of Parliament.
Reliance was placed on the reference in subsection (4) to protection from legal liability for words spoken or things done for the purposes of or incidental to, any proceedings in Parliament and in subsection (5)(b) to the presentation or submission of a document to either House or a committee.
I do not consider that these provisions advance the defendants case.
Section 13 is not capable of extending the ambit of article 9.
Subsection (4) cannot found a submission that any words spoken or things done that are incidental to proceedings in Parliament have automatically to be treated as part of those proceedings.
The reference to submission of a document to either House or a committee envisages the submission of documents for the purpose of the deliberations of the House or committee in question.
No comparison can be drawn between this and the presentation of claims for allowances or expenses to the Fees Office.
The views of Parliament
I now turn to views expressed in Parliament as to the ambit of article 9.
Once again it is not always easy to differentiate between comments that bear on this narrow privilege as opposed to the broader exclusive cognisance of Parliament.
The report of the Select Committee on the Official Secrets Acts 1938 1939 (the 1939 Report) included the following: 2.
The privilege to which Your Committee were directed by the order of reference to have due regard is that usually referred to as the privilege of freedom of speech.
This privilege is declared by the Bill of Rights in the following terms: That the freedom of speech and debates or proceedings in parliament ought not to be impeached or questioned in any court or place out of parliament. 3.
The article in the Bill of Rights is not necessarily an exhaustive definition of the cognate privileges.
But even assuming that it is, the privilege is not confined to words spoken in debate or to spoken words, but extends to all proceedings in parliament.
While the term proceedings in parliament has never been construed by the courts, it covers both the asking of a question and the giving written notice of such question, and includes everything said or done by a member in the exercise of his functions as a member in a committee of either House, as well as everything said or done in either House in the transaction of parliamentary business. 4.
The privilege of freedom of speech being confined to words spoken or things done in the course of parliamentary proceedings, words spoken or things done by a member beyond the walls of parliament will generally not be protected.
Cases may, however, easily be imagined of communications between one member and another, or between a member and a minister, so closely related to some matter pending in, or expected to be brought before, the House, that though they do not take place in the chamber or a committee room they form part of the business of the House, as, for example, where a member sends to a minister the draft of a question he is thinking of putting down or shows it to another member with a view to obtaining advice as to the propriety of putting it down or as to the manner in which it should be framed.
It is noteworthy that the Committee envisaged the need for a close relationship of communications outside the House to business within it in order to attract privilege.
The conclusion of the Committee was later agreed by the House CJ (1938 39) 480.
The Joint Committee on the Publication of Proceedings in Parliament in its Second Report in 1970 HL 109, HC 261 recommended that proceedings in Parliament should be defined by statute, and offered the following definition at para 27: (1) For the purpose of the defence of absolute privilege in an action or prosecution for defamation the expression proceedings in Parliament shall without prejudice to the generality thereof include a) all things said done or written by a Member or by any officer of either House of Parliament or by any person ordered or authorised to attend before such House, in or in the presence of such House and in the course of a sitting of such House, and for the purpose of the business being or about to be transacted, wherever such sitting may be held and whether or not it be held in the presence of strangers to such House: provided that for the purpose aforesaid the expression House shall be deemed to include any Committee sub Committee or other group or body of members or members and officers of either House of Parliament appointed by or with the authority of such House for the purpose of carrying out any of the functions of or of representing such House; and b) all things said done or written between Members or between Members and officers of either House of Parliament or between Members and Ministers of the Crown for the purpose of enabling any Member or any such officer to carry out his functions as such provided that publication thereof be no wider than is reasonably necessary for that purpose. (2) In this section Member means a Member of either House of Parliament; and officer of either House of Parliament means any person not being a Member whose duties require him from time to time to participate in proceedings in Parliament as herein defined.
No effect was given to this recommendation.
The Joint Committee on Parliamentary Privilege Report of 1999 HL 43 1; HC214 1 (the 1999 Report) gave detailed consideration to article 9.
At para 12 it commented: Freedom of speech is central to Parliaments role.
Members must be able to speak and criticise without fear of penalty.
This is fundamental to the effective working of Parliament, and is achieved by the primary parliamentary privilege: the absolute protection of proceedings in Parliament guaranteed by article 9 of the Bill of Rights 1689.
Members are not exposed to any civil or criminal liabilities in respect of what they say or do in the course of proceedings in Parliament.
There is no comprehensive definition of the term proceedings in Parliament, although it has often been recommended there should be.
Proceedings are broadly interpreted to mean what is said or done in the formal proceedings of either House or the committees of either House together with conversations, letters and other documentation directly connected with those proceedings.
At para 103 the Committee expressed the view that Members correspondence did not form part of parliamentary proceedings: Article 9 protects parliamentary proceedings: activities which are recognisably part of the formal collegiate activities of Parliament.
The Committee did not recommend the extension of parliamentary privilege to cover Members correspondence.
It commented at para 110: There is another consideration.
Article 9 provides an altogether exceptional degree of protection, as discussed above.
In principle this exceptional protection should remain confined to the core activities of Parliament, unless a pressing need is shown for an extension.
Each House has agreed a set of rules and guidance governing the conduct expected of its members.
The Parliamentary Commissioner for Standards is appointed to monitor the operation of the Code of Conduct of Members of the House of Commons and to advise the Committee on Standards and Privileges on the interpretation of the code.
In 15 December 2002 the Mail on Sunday published an article alleging that Mr Michael Trend MP had improperly submitted claims in respect of additional costs allowance in respect of a London home which he did not occupy.
The Commissioner for Standards submitted a memorandum on the matter which concluded that Mr Trend had claimed additional costs allowance in breach of the rules relating to that allowance.
In a post script under the heading The Criminal Law he commented: The decision whether Mr Trend or any other Member who may be shown to have wrongly claimed parliamentary allowances should face a criminal prosecution is one for the police and prosecuting authorities, not for me.
As the briefing note on the law on obtaining by deception at Annex C makes clear, there are a number of ingredients to the offence which would have to be proved if a prosecution were to succeed; achieving this would not necessarily be easy.
However, the point that needs to be made here is that claiming an allowance is not a proceeding in Parliament and the provisions of parliamentary privilege do not apply.
Members of Parliament are no less subject to the criminal law in this respect than anyone else.
They must have its provisions in mind at all times like anyone else, and decisions about whether it should be invoked against them must be taken applying the same tests as would be applied to any other citizen.
On 8 February 2010 the Speaker made a statement to the House about the application of the sub judice rule in relation to the prosecutions of the three defendants, in the following terms.
I wish to make a statement to the House about the application of the sub judice rule.
Once criminal proceedings are active by a charge having been made, cases before the courts shall not be referred to in any motion, debate or question.
The House will be aware that charges have been made against three Members of the House and that therefore the sub judice rule applies to their cases.
The matter is therefore before the courts, and the House and Members would not wish to interfere with the judicial process, risk affecting the fairness of a criminal trial or, furthermore, prevent such a trial taking place.
The last sentence does not suggest that the Speaker had any concern that the trials of the defendants might constitute a breach of the privilege enjoyed by Parliament.
It is possible that the Speaker had already received orally the advice of the Clerk of the House that was conveyed to him in writing on the following day.
This included the following paragraph: In order to make the case that privilege applies to claims it would be necessary to establish that they are indeed transactions of business of the House or one of its Committees.
Although I accept that the ACA scheme arises from Resolutions of the House, the proposition that all actions or claims under it are proceedings, seems to me to be unsustainable.
The House agrees to many things by Resolution for example to build a new building but that does not mean that all activities in connection with its erection are proceedings.
Proceedings must imply, in the words of the Joint Committee on Parliamentary Privilege, formal collegiate activities of Parliament rather than merely the consequences of decisions that either House has taken.
It also seems to me to be pertinent to the consideration of claims under the ACA scheme being protected that throughout the Houses involvement in Freedom of Information cases in respect of publication of claims and expenses, the House has never sought an exemption under section 34 of the Act which covers matters deemed to infringe parliamentary privilege.
None of these expressions of Parliamentary views lends support to the suggestion that submitting claims for allowances and expenses constitutes proceedings in Parliament for the purposes of article 9.
On the contrary they all suggest, either expressly or by implication, that the submission of such claims falls outside the protection of that article.
The recovery of allowances and expenses to defray the costs involved in attending Parliament, or travelling on Parliamentary business, has no closer nexus with proceedings in Parliament than incurring those expenses.
The question was asked rhetorically of what the position would be if Members had to go before the Estimate Committee, or even the House, to ask for their expenses.
It was submitted on behalf of the defendants that in that event their claims would constitute proceedings in Parliament and be protected by privilege, and that the same was true of claims made to the Fees Office as that office was acting on behalf of the House in receiving and considering the claim forms.
The answer is that the submission and consideration of allowances and expenses claims is essentially a matter of administration, properly to be performed by officials, and that it would be absurd for this exercise to be performed by a committee or by the House.
There are good reasons of policy for giving article 9 a narrow ambit that restricts it to the important purpose for which it was enacted freedom for Parliament to conduct its legislative and deliberative business without interference from the Crown or the Crowns judges.
The protection of article 9 is absolute.
It is capable of variation by primary legislation, but not capable of waiver, even by Parliamentary resolution.
Its effect where it applies is to prevent those injured by civil wrongdoing from obtaining redress and to prevent the prosecution of Members for conduct which is criminal.
As to the latter, Parliament has no criminal jurisdiction.
It has limited penal powers to treat criminal conduct as contempt.
These once included imprisonment for a limited period.
As to this Lord Denman CJ commented at p 114 in Stockdale v Hansard: The privilege of committing for contempt is inherent in every deliberative body invested with authority by the Constitution.
But, however flagrant the contempt, the House of Commons can only commit till the close of the existing session.
Their privilege to commit is not better known than this limitation of it.
Though the party should deserve the severest penalties, yet, his offences being committed the day before a prorogation, if the House ordered his imprisonment but for a week, every Court in Westminster Hall and every Judge of all the Courts would be bound to discharge him by habeas corpus.
Imprisonment has not been imposed in recent times and the same is true of the theoretical power to fine.
Nor is it clear that Parliament is in a position to satisfy all the requirements of article 6 which apply when imposing penal sanctions see Demicoli v Malta (1991) 14 EHRR 47.
Thus precedent, the views of Parliament and policy all point in the same direction.
Submitting claims for allowances and expenses does not form part of, nor is it incidental to, the core or essential business of Parliament, which consists of collective deliberation and decision making.
The submission of claims is an activity which is an incident of the administration of Parliament; it is not part of the proceedings in Parliament.
I am satisfied that Saunders J and the Court of Appeal were right to reject the defendants reliance on article 9.
Exclusive cognisance
This phrase describes areas where the courts have ruled that any issues should be left to be resolved by Parliament rather than determined judicially.
Exclusive cognisance refers not simply to Parliament, but to the exclusive right of each House to manage its own affairs without interference from the other or from outside Parliament.
The boundaries of exclusive cognisance result from accord between the two Houses and the courts as to what falls within the exclusive province of the former.
Unlike the absolute privilege imposed by article 9, exclusive cognisance can be waived or relinquished by Parliament.
Thus in 1980 Parliament agreed to a resolution which permitted reference to be made in court to certain Parliamentary papers which, up to then, had been subject to a claim of exclusive cognisance see Erskine May at p 105.
The areas subject to exclusive cognisance have very significantly changed, in part as a result of primary legislation.
The exclusive cognisance of Parliament was originally based on the premise that the High Court of Parliament had its own peculiar law which was not known to the courts.
The 17th edition (1814) of Blackstones Commentaries on the Laws of England observed at pp 158 159: It will be sufficient to observe, 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.
In Stockdale v Hansard at p 118 Denman CJ said of all internal proceedings
of the House of Commons: With respect to them, I freely admit that the Courts have no right to interfere, nor, perhaps, any regular means of obtaining information.
I have already cited at paras 29 and 30 passages from the judgments of Lord Coleridge CJ and Stephen J in Bradlaugh v Gossett which are relevant in the present context.
It is, of course, always open to Parliament by legislation to provide for the courts to encroach on matters falling within its exclusive cognisance, or even on article 9 privilege, as did the Parliamentary Elections Act 1695, the Parliamentary Oaths Act 1866, the Perjury Act 1911, and the Defamation Act 1996 see Erskine May at p 115.
These statutes expressly address matters that were previously subject to privilege under article 9, or the exclusive cognisance of Parliament.
Where a statute does not specifically address matters that are subject to privilege, it is in theory necessary as a matter of statutory interpretation to decide a number of overlapping questions.
Does the statute apply within the precincts of the Palace of Westminster? If it does, does it apply in areas that were previously within the exclusive cognisance of Parliament? If so, does the statute override the privilege imposed by article 9? In practice there are not many examples of these questions being considered, either within Parliament or by the courts.
If Parliament accepts that a statute applies within an area that previously fell within its exclusive cognisance, then Parliament will, in effect, have waived any claim to privilege.
The 1939 Report is an example of Parliament considering whether privilege was overridden by statute.
In two cases the courts considered the application of the Licensing Acts within the precincts of the Palace of Westminster.
In Williamson v Norris [1899] 1 QB 7 Lord Russell of Killowen CJ considered a submission that the Houses of Parliament, in the regulation of their internal arrangements as to the sale of liquor, were entirely outside the control of the law as to licensing.
He stated that he was very far from being satisfied that this proposition was correct, but decided the case on another point.
In R v Graham Campbell, Ex p Herbert [1935] 1 KB 594 Mr A P Herbert had laid two informations at Bow Street Police Station for summonses against fifteen named Members of Parliament, who were members of the Kitchen Committee of the House of Commons and the manager of the Refreshment Department of the House alleging the unlawful sale of alcohol without a licence contrary to the Licensing (Consolidation) Act 1910.
The Chief Metropolitan Magistrate held that the Members of Parliament were not susceptible to the jurisdiction of the court because they were protected by the privileges of the House.
On application for orders in the nature of mandamus, Lord Hewart CJ upheld the decision and the reasoning of the magistrate.
Only as an afterthought did he express the view that the majority of the provisions of the 1910 Act were inapplicable to the House of Commons.
Avory and Swift JJ agreed, albeit that Avory J devoted most of his judgment to the question of whether the Act on its true construction applied to the House of Commons.
The Joint Committee on Parliamentary Privilege Report HL paper 43 1, HC 214 1 (1998 99) (the 1999 Report) states at para 15 that since this case Acts of Parliament have been taken not to apply within the precincts of either House in the absence of express provision that they should apply and that the legislation that has been taken not to apply includes the Health and Safety at Work etc Act 1974 and the Data Protection Acts 1984 and 1998 but that in practice Parliament voluntarily abides by some of these statutory provisions.
The 1999 Report returns to this topic under the heading Right of each House to administer its internal affairs within its precincts.
It comments at para 240 that each House has the right to administer its internal affairs within the parliamentary precincts.
It continues at para 241: In one important respect this heading of privilege is unsatisfactory.
Internal affairs and equivalent phrases are loose and potentially extremely wide in their scope.
On one interpretation they embrace, at one edge of the spectrum, the arrangement of parliamentary business and also, at the other extreme, the provision of basic supplies and services such as stationery and cleaning.
This latter extreme would be going too far if it were to mean, for example, that a dispute over the supply of photocopy paper or dismissal of a cleaner could not be decided by a court or industrial tribunal in the ordinary way.
Here, as elsewhere the purpose of parliamentary privilege is to ensure that Parliament can discharge its functions as a legislative and deliberative assembly without let or hindrance.
This heading of privilege best serves Parliament if not carried to extreme lengths.
A little later the Report considers the dividing line between matters that fall within this type of parliamentary privilege and those which fall outside it.
This lies at the heart of these appeals and merits quotation in full: 246 Putting aside the activities of individuals, there is a need to distinguish between activities of the House which call for protection under this head of privilege and those which do not.
The Palace of Westminster is a large building; it requires considerable maintenance; it provides an extensive range of services for members; it employs and caters for a large number of staff and visitors.
These services require staff and supplies and contractors.
For the most part, and rightly so, these services are not treated as protected by privilege.
It is difficult to see any good reason why claims for breach of contract relating to catering or building services, for example, should be excluded from the jurisdiction of the courts, or why a person who sustains personal injury within the precincts of Parliament should not be able to mount a claim for damages for negligence.
This has been formally recognised in the Parliamentary Corporate Bodies Act 1992.
Under this Act each House established a corporate officer who can sign contracts on behalf of the House and sue or be sued. 247 The dividing line between privileged and non privileged activities of each House is not easy to define.
Perhaps the nearest approach to a definition is that the areas in which the courts ought not to intervene extend beyond proceedings in Parliament, but the privileged areas must be so closely and directly connected with proceedings in Parliament that intervention by the courts would be inconsistent with Parliaments sovereignty as a legislative and deliberative assembly.
One example is the Speakers decision on which facilities within the precincts of the House should be available to members who refuse to take the oath or affirmation of allegiance.
Another example might be steps taken by the library of either House to keep members informed upon matters of significant political interest.
Such steps, if authorised by the presiding officer of the House, would properly be within the scope of the principle and not amenable to orders of the court. 248 It follows that management functions relating to the provision of services in either House are only exceptionally subject to privilege.
In particular, the activities of the House of Commons Commission, a statutory body appointed under the House of Commons (Administration) Act 1978, are not generally subject to privilege, nor are the management and administration of the House departments.
The boundary is not tidy.
Occasionally management in both Houses may deal with matters directly related to proceedings which come within the scope of article 9.
For example, the members pension fund of the House of Commons is regulated partly by resolutions of the House.
So too are members salaries and the appointment of additional members of the House of Commons Commission under section 1(2)(d) of the House of Commons (Administration) Act.
These resolutions and orders are proceedings in Parliament, but their implementation is not.
The foundation of the modern system of administration of the House of Commons is the House of Commons (Administration) Act.
This established the Commission and gave it corporate status, so that it is capable of suing and being sued.
In 1992 each House took full responsibility for managing its own internal administration, which included responsibility for the maintenance of the structure of the Palace of Westminster see Erskine May p 233.
In that year, as the 1999 Report explains, the Parliamentary Corporate Bodies Act was passed a necessary practical step to facilitate the bringing of actions in contract and tort arising out of the internal administration of the House.
This has rendered easier, and implicitly contemplates, inroads into areas that previously fell within the exclusive cognisance of the House.
Statutory inroads have been made by express provisions of the Employment Act 1990, the Trade Union Reform and Employment Rights Act 1993 and the Employment Rights Act 1996 see Erskine May at pp 115 to 116.
So far as actions in contract and tort are concerned arising out of the internal administration of the House the courts are unlikely to accept the submission, in the unlikely event that it is advanced, that their jurisdiction is precluded because of the exclusive cognisance of the House.
The reasoning of Judge Russell, sitting in the Industrial Court in Bear v State of South Australia (1981) 48 SAIR 604 is likely to be followed.
Different considerations apply to claims for judicial review in relation to the conduct by each House of its internal affairs.
The courts will respect the right of each House to reach its own decision in relation to the conduct of its affairs.
Two examples will illustrate this.
In Re McGuinnesss Application [1997] NI 359 the applicant sought to challenge by judicial review the decision of the Speaker that those who had not complied with the requirements of the Parliamentary Oaths Act 1866 would be denied certain of the facilities of the House.
Kerr J dismissed his application.
He held at p 6 : I am quite satisfied that, whether it qualifies as a proceeding in Parliament or not, the Speakers action lies squarely within the realm of internal arrangements of the House of Commons and is not amenable to judicial review.
In R v Parliamentary Commissioner for Standards, Ex p Al Fayed [1998] 1 WLR 669 the Parliamentary Commissioner for Standards had published a report relating to a complaint by the applicant against a Member of Parliament.
The applicant sought permission to challenge this by judicial review.
The application was refused by Sedley J and renewed before the Court of Appeal.
Lord Woolf MR gave a judgment with which the other members of the court agreed dismissing the application.
He said, at p 673: The focus of the Parliamentary Commissioner for Standards is on the propriety of the workings and the activities of those engaged within Parliament.
He is one of the means by which the select committee set up by the House carries out its functions, which are accepted to be part of the proceedings of the House.
This being the role of the Parliamentary Commissioner for Standards, it would be inappropriate for this court to use its supervisory powers to control what the Parliamentary Commissioner for Standards does in relation to an investigation of this sort.
The responsibility for supervising the Parliamentary Commissioner for Standards is placed by Parliament, through its standing orders, on the Committee of Standards and Privileges of the House, and it is for that body to perform that role and not the courts.
In summary, extensive inroads have been made into areas that previously fell within the exclusive cognisance of Parliament.
Following Ex p Herbert there appears to have been a presumption in Parliament that statutes do not apply to activities within the Palace of Westminster unless they expressly provide to the contrary.
That presumption is open to question.
In 1984 three Law Lords, Lord Diplock, Lord Scarman and Lord Bridge of Harwich, on the Committee for Privileges expressed the view that sections 2 6 of the Mental Health Act 1983 applied to members of the House of Lords, although the Act did not expressly so state.
Crime and Parliament
I have considered the encroachment by the laws of contract and tort on areas that previously fell within the exclusive cognisance of Parliament and pointed out the distinction that must be drawn between such claims and applications for judicial review.
I now come to consider the position where an act is committed which, absent any question of parliamentary privilege, would constitute a crime falling within the jurisdiction of the criminal courts.
Parliament has never challenged, in general, the application of criminal law within the precincts of Parliament and has accepted that the mere fact that a crime has been committed within these precincts is no bar to the jurisdiction of the criminal courts.
In May 1812 John Bellingham was indicted, tried and convicted of the murder of the Prime Minister, Spencer Percival, at the entrance to the lobby of the House of Commons.
Bellingham was not a Member of Parliament, but it would have made no difference had he been.
Where a crime is committed within the House of Commons, this may well also constitute a contempt of Parliament.
The courts and Parliament have different, overlapping, jurisdictions.
The House can take disciplinary proceedings for contempt and a court can try the offender for the crime.
Where a prosecution is brought Parliament will suspend any disciplinary proceedings.
Conversely, if a Member of Parliament were disciplined by the House, consideration would be given by the Crown Prosecution Service as to whether a prosecution would be in the public interest.
In 1988 Mr Ron Brown MP damaged the mace in the course of a heated debate and declined to apologise.
The House exercised its penal powers in relation to both the damage to the mace and the lack of respect for the authority of the Chair.
The Director of Public Prosecutions subsequently halted an attempt to bring a private prosecution.
Erskine May records at pp 162 163 that in cases of breach of privilege which are also offences at law, where the punishment which the Commons has power to inflict would not be adequate to the offence, or where for any other reason the House has thought proceeding at law necessary, either as a substitute for, or in addition to, its own proceedings, the Attorney General has been directed to prosecute the offender.
It is of note that in two of the cases cited the Attorney General was directed to prosecute witnesses to parliamentary committees for wilful and corrupt perjury CJ (1860) 258 and CJ (1866) 239.
No instance is cited beyond the 19th century and a footnote records that on two occasions in the 1970s the House authorities informally invited the police to consider prosecuting those responsible for gross misbehaviour in the gallery.
Thus the House does not assert an exclusive jurisdiction to deal with criminal conduct, even where this relates to or interferes with proceedings in committee or in the House.
Where it is considered appropriate the police will be invited to intervene with a view to prosecution in the courts.
Furthermore, criminal proceedings are unlikely to be possible without the cooperation of Parliament.
Before a prosecution can take place it is necessary to investigate the facts and obtain evidence.
The powers of the police in respect of these activities are contained in the Police and Criminal Evidence Act 1984.
I am not aware that any court has had to consider the extent to which, if at all, the provisions of this Act apply within the Palace of Westminster.
What occurs is that Parliament permits the police to carry out their investigations within the precincts.
I shall give some examples of this cooperation which are of particular relevance in the context of these appeals.
On 3 April 2008 a meeting took place between the Chairman of the Committee on Standards and Privileges, the Parliamentary Commissioner for Standards and the Commissioner of Police of the Metropolis.
Following this an agreed statement was released: All parties agreed that, other than in the limited context of participation in proceedings in Parliament, Members of Parliament are in no different position in respect of alleged criminal behaviour than any other person.
The Chairman reiterated the Committees belief in the general principle that criminal proceedings against Members, where these are considered appropriate, should take precedence over the Houses own disciplinary proceedings.
The meeting discussed how the respective parties might coordinate their activities to ensure the effective delivery of this principle.
Where the Metropolitan Police receive information which suggests a Member of Parliament may have committed a criminal offence, they will take the decision on whether to institute inquiries on their own initiative, on the same basis as they would in any other case, and without regard to whether the same information had formed any part of a complaint to the Parliamentary Commissioner.
The Metropolitan Police undertook to inform the Parliamentary Commissioner in the normal course of events if they were considering initiating criminal inquiries into a Member, with a view to establishing whether the alleged conduct was also the subject of a complaint under the Code.
The Parliamentary Commissioner confirmed that he had regard, where appropriate, to the possibility of criminal behaviour when investigating complaints he received against Members of Parliament.
He would continue the practice in specific cases of liaising with the Metropolitan Police or other relevant force whenever he considered it appropriate to do so, initiating the process at the earliest opportunity.
All parties welcomed this.
If at any point in his investigation of a complaint, the Parliamentary Commissioner considers that there are sufficient grounds to justify reporting the matter to the police for them to consider a criminal inquiry, he confirmed that he would submit a recommendation to that effect to the Committee on Standards and Privileges who would decide whether such a report should be made.
Where this was done, the Chairman confirmed that the Committee would normally expect the Parliamentary Commissioner to suspend his inquiries until the question of possible criminal proceedings had been resolved.
The Parliamentary Commissioner and the Committee would follow similar procedures if informed by the police that they are considering initiating criminal inquiries into a matter which was also the subject of a complaint.
The Chairman also confirmed that if in the course of the Committees consideration of the outcome of the Commissioners investigation of a complaint it concluded that there were sufficient grounds to justify a report to the police, it would normally expect to advise the House accordingly, and defer reporting substantively on the complaint until the question of possible criminal proceedings had been resolved.
On 27 November 2008 the offices of the Conservative front bencher, Mr Damian Green, were searched by the police without a warrant.
On 8 December 2008 the Speaker issued a protocol setting out future procedures where the police sought to execute a search warrant in the House, the most material part of which provides as follows: 1.
Responsibility for controlling access to the precincts of the House has been vested by the House in me.
It is no part of my duties as Speaker to impede the proper administration of justice, but it is of equal concern that the work of the House and of its Members is not necessarily hindered. 2.
The precincts of Parliament are not a haven from the law.
A criminal offence committed within the precincts is no different from an offence committed outside and is a matter for the courts.
It is long established that a Member may be arrested within the precincts. 3.
In cases where the police wish to search within Parliament, a warrant must be obtained and any decision relating to the execution of that warrant must be referred to me.
In all cases where any Officer or other member of the staff of the House is made aware that a warrant is to be sought the Clerk of the House, Speakers Counsel, the Speakers Secretary and the Serjeant at Arms must be informed.
No Officer or other member of the staff of the House may undertake any duty of confidentiality which has the purpose or effect of preventing or impeding communication with these Officers. 4.
I will consider any warrant and will take advice on it from senior officials.
As well as satisfying myself as to the formal validity of the warrant, I will consider the precision with which it specifies the material being sought, its relevance to the charge brought and the possibility that the material might be found elsewhere.
I reserve the right to seek advice of the Attorney General and Solicitor General. 5.
I will require a record to be provided of what has been seized, and I may wish to attach conditions to the police handling of any parliamentary material discovered in a search until such time as any issue of privilege has been resolved.
On 30 September 2010 Mr Andrew Gibson, a budget officer in the Fees Office, was sentenced to 9 months imprisonment after pleading guilty to three counts of obtaining money transfers by deception.
He had drawn up false invoices in the names of three former Members of Parliament.
It is reasonable to assume that this prosecution was brought with the assistance of the House authorities.
The court was provided with information that on 12 October 2010 the Standards and Privileges Committee agreed that the Parliamentary Commissioner for Standards should report to the Metropolitan Police Service the conduct of Mr Denis MacShane MP in relation to claims for expenses.
According to the procedures agreed between the Committee, the Commissioner and the Metropolitan Police an inquiry by the Commissioner into a complaint against Mr MacShane was suspended until the question of possible criminal proceedings was resolved.
In the course of the hearing of these appeals the court was informed that, with the consent of the defendants, the Fees Office had provided the prosecution with documentation in relation to the defendants claims for allowances and expenses.
Conclusions
Parliament by legislation and by administrative changes has to a large extent relinquished any claim to have exclusive cognisance of the administrative business of the two Houses.
Decisions in relation to matters of administration are taken by parliamentary committees and it has been common ground before the Court that these decisions are protected by privilege from attack in the courts.
The 1999 Report distinguishes, however, between such decisions and their implementation, expressing the view that the latter is not subject to privilege.
I consider that view to be correct.
Where the House becomes aware of the possibility that criminal offences may have been committed by a Member in relation to the administration of the business of Parliament in circumstances that fall outside the absolute privilege conferred by article 9, the considerations of policy to which I have referred at para 61 above require that the House should be able to refer the matter to the police for consideration of criminal proceedings, or to cooperate with the police in an inquiry into the relevant facts.
That is what the House has done in relation to the proceedings brought against the three defendants.
The area of activity to which these prosecutions relate is administrative.
The payment of allowances and expenses had until recently been entrusted to the Fees Office by the Commission, a body set up for the purposes of administration see paras 9 to 11 above.
These administrative tasks are now performed by the Independent Parliamentary Standards Authority, set up under the Parliamentary Standards Act 2009.
The House has asserted a disciplinary jurisdiction over claims that have been made for allowances and expenses and, to that end, the Members Estimate Committee set up a review of such claims under Sir Thomas Legg.
The House has not, however, asserted exclusive cognisance, or jurisdiction, in respect of such claims.
On the contrary, on 20 July 2009 the Committee excluded from the claims referred to Sir Thomas any that were under investigation by the police.
Even if the House were not co operating with the prosecuting authorities in these cases, I do not consider that the court would be prevented from exercising jurisdiction on the ground that they relate to matters within the exclusive cognisance of Parliament.
If an applicant sought to attack by judicial review the scheme under which allowances and expenses are paid the court would no doubt refuse the application on the ground that this was a matter for the House.
Examination of the manner in which the scheme is being implemented is not, however, a matter exclusively for Parliament.
It was not suggested that Members have a contractual entitlement to allowances and expenses, but if they were to have such contractual rights, I see no reason why they should not sue for them.
If a question were raised as to whether allowances and expenses were taxable, the court would be entitled to examine the circumstances in which they were paid.
Equally there is no bar in principle to the Crown Court considering whether the claims made by the defendants were fraudulent.
This is not to exclude the possibility that, in the course of a criminal prosecution, issues might arise involving areas of inquiry precluded by parliamentary privilege, although that seems unlikely having regard to the particulars of the charges in the cases before us.
For these reasons I am satisfied that neither article 9 nor the exclusive cognisance of the House of Commons poses any bar to the jurisdiction of the Crown Court to try these defendants.
That is why I decided that each appeal should be dismissed.
LORD RODGER
The appellants are three former Members of Parliament who are charged with false accounting, contrary to section 17(1)(b) of the Theft Act 1968 (the Theft Act).
The first count on the indictment against Mr Morley, for example, is in these terms: STATEMENT OF OFFENCE False accounting, contrary to section 17(1)(b) of the Theft Act 1968.
PARTICULARS OF OFFENCE ELLIOT MORLEY, between 1 April 2004 and 28 February 2006, dishonestly, with a view to gain for himself or with intent to cause loss to another, in furnishing information for the purpose of making allowance claims, produced or made use of documents required for an accounting purpose, namely 19 Form ACA2 claim forms, which to his knowledge were or may have been misleading, false or deceptive in a material particular, in that they stated he was paying 800 per month in mortgage interest, when in fact he was paying a lesser amount.
The appellants have not suggested that the indictments do not disclose an offence under English law or that the counts are otherwise defective.
The argument which has eventually brought these appeals to this Court arises out of an aspect of the indictments which does not emerge immediately, even from the particulars of the offences: at the relevant time Mr Morley and the other appellants were MPs.
The reference to Form ACA2 is, however, a reference to a form which MPs used for submitting claims for allowances to the Fees Office of the House of Commons.
When submitting such claims MPs had to sign a declaration to the effect that they had incurred the costs in question wholly, exclusively and necessarily to enable [them] to stay overnight away from [their] only or main home for the purpose of performing [their] duties as a Member of Parliament.
The argument for the appellants is that the counts refer to the submission of claims by MPs to an office of the House of Commons and that, in these circumstances, a prosecution is precluded by parliamentary privilege, by reference either to article 9 of the Bill of Rights or to the exclusive jurisdiction of Parliament to regulate its own affairs.
As it existed at the relevant time, the system for payment of Members allowances had been created by, and continued to rest solely on, Resolutions of the House of Commons.
A request for the necessary funds to pay the allowances was included in the Members Estimate which was laid by the Treasury each year as part of the Governments Main Supply Estimates.
The Members Estimate Committee was responsible for oversight of the expenditure on the allowances.
The Committee on Members Allowances advised the Members Estimate Committee on this matter.
In his role as Accounting Officer, the Clerk of the House of Commons was responsible for compiling the necessary accounts and was accountable to the House for the money spent.
The Members Estimate Audit Committee advised the Clerk of the House in this connexion.
The various allowances available to Members were set out in the Green Book, on which the Committee on Members Allowances advised the Speaker, the Members Estimate Committee and the Leader of the House.
Moreover, if any question arose as to the application of the rules in the Green Book, a Member could refer it to the Committee on Members Allowances, from which there was an appeal to the Members Estimate Committee.
The administration of the system of allowances (including payment of the allowances) was handled by an office, usually referred to as the Fees Office, within the Operations Directorate.
If the Fees Office refused a Members claim to an allowance, the Member could appeal to the Committee on Members Allowances and from there to the Members Estimate Committee.
A further point to notice about the indictments is that the particulars of the offences do not specify where the MPs are alleged to have been when they submitted the claims.
For all we know, they could have completed the forms at home, whether in England or in Scotland, and sent them in by post.
Equally, they could have completed the forms while in the House of Commons and have submitted them in person to the Fees Office.
It does not matter since, on either view, the misleading information would have been furnished to the Fees Office of the House.
But, to test the point taken by the appellants, it is best to assume that the allegation is that they completed the forms in the House of Commons and submitted them in person.
So all stages of the alleged offence would have taken place within the precincts of the House of Commons.
The Theft Act extends to England and Wales.
In other words, it forms part of the law of England and Wales.
The Houses of Parliament and their dpendances are in England and so the criminal law of England applies to what is done there.
The most famous illustration of this elementary point is, perhaps, the murder of the Prime Minister, Mr Spencer Percival, in the lobby of the House of Commons in 1812.
John Bellingham was arrested, prosecuted, tried for murder at the Old Bailey, convicted and executed all according to the common law of England.
If the assassin had been a fellow MP, then by the law of England he too would have committed murder.
The same would have applied if the MP had assassinated the Prime Minister in the chamber of the House of Commons.
Less dramatically, if a Member of Parliament were to steal money from a fellow Members wallet in a room in the House of Commons or from the till in the Members Dining Room, he would commit theft under section 1 of the Theft Act.
Similarly, if a Member intentionally damaged one of the statues of former Prime Ministers in the lobby of the House of Commons, he would commit criminal damage under section 1 of the Criminal Damage Act 1971.
Equally to come to the present cases if a Member of Parliament dishonestly, with a view to gain for himself, submitted a claim form which to his knowledge was false in a material particular, the law of England would apply.
The Member would commit an offence under section 17(1) of the Theft Act, even if he completed the form in the House of Commons and submitted it in person to the Fees Office.
As already noted, the appellants say, however, that their prosecution in the Crown Court for this offence is precluded by parliamentary privilege, by reference either to article 9 of the Bill of Rights or to the exclusive jurisdiction of Parliament to regulate its own affairs.
An invocation of parliamentary privilege is apt to dazzle lawyers and judges outside Parliament.
In Wellesley v Duke of Beaufort (1831) 2 Russ & M 639, 660, Lord Brougham LC warned courts of justice against acceding to claims of privilege the instant they hear that once magical word pronounced.
A few years later, in Stockdale v Hansard (1839) 9 Ad & E 1, 112, Lord Denman CJ remarked that the privileges are well known, it seems, to the two Houses, and to every Member of them, as long as he continues a Member; but the knowledge is as incommunicable as the privileges to all beyond that pale.
Happily, it is unnecessary on this occasion to penetrate too deeply into these mysteries if mysteries they be.
The appellants formulation of their argument might seem to suggest that article 9 of the Bill of Rights deals with matters that would not necessarily fall within the exclusive jurisdiction of Parliament to regulate its own affairs.
A moments reflection shows, however, that, unless a matter did fall within the exclusive jurisdiction of Parliament with the result that it did not fall within the legitimate jurisdiction of the ordinary courts of the land, whether civil or criminal, or of any other body article 9 could not itself legitimately purport to exclude all consideration of the matter outside Parliament.
In other words, article 9 cannot be intended to apply to any matter for which Parliament cannot validly claim the privilege of exclusive cognizance.
Indeed, as the distinguished Clerk of the House of Commons, Sir Gilbert Campion (later Lord Campion), pointed out in his Memorandum to the Select Committee on the Official Secrets Acts in 1939, the relevant words in the Preamble to the Bill of Rights make this clear: Whereas the late King James the Second by the Assistance of diverse evill Councellors Judges and Ministers imployed by him did endeavour to subvert and extirpate the Protestant Religion and the Lawes and Liberties of this Kingdome By Prosecutions in the Court of Kings Bench for Matters and Causes cognizable onely in Parlyament and by diverse other Arbitrary and Illegall Courses And thereupon the said Lords Spirituall and Temporall and Commons pursuant to their respective Letters and Elections being now assembled in a full and free Representative of this Nation takeing into their most serious Consideration the best meanes for attaining the Ends aforesaid Doe in the first place (as their Auncestors in like Case have usually done) for the Vindicating and Asserting their auntient Rights and Liberties, Declare (Emphasis added).
Sir Gilbert added: The mischief the statute was intended to remedy was therefore the drawing into examination in inferior courts of matters cognizable only in Parliament.
See the Committees Report, p 24.
Therefore, even though the appellants put their case by reference to both article 9 and the exclusive jurisdiction of the House of Commons, in truth there is really only one basic question: does the matter for which the appellants are being prosecuted in the Crown Court fall within the exclusive jurisdiction or cognizance of Parliament or, more particularly, of the House of Commons? If so, then the appellants must prevail; if not, neither article 9 of the Bill of Rights nor any other doctrine gives them a right to have the prosecution stopped on the ground of parliamentary privilege.
The expression, the High Court of Parliament, makes the point that Parliament has a certain power of judicature as do the two Houses in their separate capacities.
In exercising this jurisdiction the Houses apply the law and custom of Parliament (lex et consuetudo parliamenti).
Cf Kielley v Carson (1843) 4 Moo PC 63, 89, per Parke B.
The present case concerns the House of Commons.
Since about the time of Floyds Case (1621) the Commons have accepted that they have no power to punish except for a contempt of their House: F W Maitland, The Constitutional History of England (1908), p 245.
Obviously, therefore, the House neither has, nor claims to have, any power to try anyone for an offence under English criminal law.
If, for example, someone steals money within the precincts of the House of Commons, the House cannot try him for the contravention of the Theft Act: only the ordinary courts can do that.
So, when Mr Andrew Gibson, a budget officer in the Fees Office, obtained the transfer of money by submitting false invoices to the Office in the names of three former MPs, he was prosecuted for a contravention of section 15A of the Theft Act and pleaded guilty at Southwark Crown Court, where he was sentenced to nine months imprisonment on 30 September 2010.
In such cases the most that the House itself could do would be to treat the conduct as a contempt of the House and, in the exercise of its power of judicature, punish the offender, not for the criminal offence, but for his contempt of the House.
Of course, the power to treat conduct as contempt of the House is potentially open to abuse and it was in fact abused in the past, to restrain and punish a wide variety of acts to which MPs happened to take exception.
In Wellesley v Duke of Beaufort (1831) 2 Russ & M 639, 658 660, Lord Brougham LC denounced past abuses.
A catalogue of examples is attached to the report of the speech of counsel for the plaintiff in Stockdale v Hansard (1839) 9 Ad & E 1, 12 13.
It is not suggested that such abuses would readily occur nowadays.
On the contrary, todays House of Commons is unlikely to use its power to take proceedings for contempt against a thief or fraudster operating within its precincts if only because the police and the ordinary criminal law and courts are much better adapted to dealing with such cases.
In former times, when the House rightly considered that a matter could be better dealt with by the ordinary courts than by the House under its contempt jurisdiction, it either ordered the Attorney General to institute criminal proceedings in the appropriate court or presented an address to the Sovereign, asking for such proceedings to be commenced.
See the examples in the Second Report from the Select Committee appointed to consider of the Proceedings had, and to be had, in respect of the several papers signed Francis Burdett, 15 June 1810, in J Hatsell, Precedents of Proceedings in the House of Commons vol 1, 2nd ed (1818), pp 294 295 and 302 303; and in Erskine May, Parliamentary Practice, 23rd ed (2004), p 163 n 1.
Today, the House authorities would presumably contact the police and leave the matter in their hands.
In Mr Gibsons case, for example, Scotland Yard was called in as a result of information uncovered in the course of Sir Thomas Leggs investigation of MPs expenses.
Therefore the mere fact that the House could treat a matter as one of contempt does not mean that the House must do so.
On the contrary, if the conduct in question would also constitute an offence under the ordinary criminal law of England, then the individual can be prosecuted in the criminal courts in the usual way.
The jurisdiction of the House to deal with the matter as one of contempt overlaps with the jurisdiction of the ordinary courts to deal with it as a criminal offence.
In short, the matter does not fall within the exclusive cognizance of Parliament.
The examples I have given concerned offenders, hypothetical and actual, who were not Members of Parliament.
But, in principle, the same must apply to MPs who commit an ordinary crime, such as theft.
Admittedly, it is possible to find passages in the authorities which are so widely stated that they might seem to imply that even an ordinary crime committed by a Member of Parliament within the precincts of the House of Commons would fall within the exclusive cognizance of the House.
For example, in his Commentaries on the Laws of England, 17th ed (1814), vol 1, Bk 1, chap 2, pp 158 159, 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.
Similarly, in Stockdale v Hansard (1839) 9 Ad & E 1, 114, referring to the two Houses of Parliament, Lord Denman CJ says that whatever be done within the walls of either assembly must pass without question in any other place.
These very generalised statements have, however, to be seen in the context of the actual practice of the House.
Despite their wide terms, as pointed out in para 107 above, it was, for example, the practice of the House of Commons to direct the Attorney General to prosecute someone who was alleged to have committed perjury when giving evidence to a committee of the House: James Welsh (1860) CJ 258; Henry Chambers (1866) CJ 239.
More particularly, however, for centuries the House of Commons has not claimed the privilege of exclusive cognizance of conduct which constitutes an ordinary crime even when committed by a Member of Parliament within the precincts of the House.
In this context the expression ordinary crime occurs in the judgment of Stephen J in Bradlaugh v Gossett (1884) 12 QBD 271, 283, where he said: I know of no authority for the proposition that an ordinary crime committed in the House of Commons would be withdrawn from the ordinary course of criminal justice.
Although his use of the expression has been criticised, Stephen J was clearly drawing a distinction between an ordinary crime (such as theft) and a crime (such as sedition) which a Member of Parliament committed by saying something in the exercise of his freedom of speech in the House.
What the Member said in the House would fall within the exclusive cognizance of the House and would be protected by article 9 of the Bill of Rights.
The House of Commons alone could consider the matter and decide what sanction, if any, should be applied to the MP.
So he could not be prosecuted for the crime in the ordinary courts and, if any attempt were made to prosecute him, the House would intervene to stop the prosecution in order to protect the privilege of freedom of speech and debate of the House itself and, simultaneously, the particular Members exercise of that privilege.
In expressing the view that a Member of Parliament could be prosecuted for an ordinary crime committed in the House of Commons, Stephen J referred to the case of Sir John Elliot (1629) 3 St Tr 293.
In 1629 Sir John Elliot and two others were prosecuted in the Kings Bench for uttering seditious words in the House of Commons and for laying violent hands on the Speaker.
The defendants took a plea to the jurisdiction of the court because these offences are supposed to be done in parliament, and ought not to be punished in this court, or in any other, but in parliament.
The court overruled the plea and the defendants were convicted.
In 1667, after the Civil War and the Restoration, a report of the trial was published and came to the notice of the House of Commons: (1629) Cro Car 181.
The House resolved that the judgment had been illegal and against the freedom and privilege of Parliament.
A conference was arranged with the House of Lords.
Mr John Vaughan (later Sir John Vaughan, the Chief Justice of the Common Pleas) spoke on behalf of the Commons.
He argued, at col 317, that the judges had craftily dealt with the allegations of seditious speech and of violence to the Speaker together: So that perhaps whatsoever was criminal in the actions might serve for a justification of their rule, and might make it seem in time to become a precedent, and a ruled case against the Liberty of Speech in Parliament, which they durst not singly and bare faced have done.
Mr Vaughan went on to say, at col 318: [I]t is very possible the Plea of those worthy persons, Denzil Hollis, Sir John Elliot, and the rest, was not sufficient to the jurisdiction of the court, if you take in their criminal actions altogether; but, as to the words spoken in parliament, the court could have no jurisdiction while this act of 4 Hen 8 is in force, which extends to all members that then were (or ever should be,) as well as Strode; and was a public general law, though made upon a private and a particular occasion.
On a writ of error at the instance of Denzil Hollis (by now, Lord Hollis), the House of Lords held, at cols 333 334, that the original judgment should be reversed.
It can be inferred from the Report by the Chief Justice (Sir John Kellynge), at col 332, that the House criticised the original decision on essentially the same basis as had been advanced by Mr Vaughan, viz, that the judges had treated the allegation of seditious words and the allegation of violence to the Speaker together.
In the Chief Justices view, the allegations should have been considered separately since, even if an allegation of violent trespass to the person could or should perhaps (forte) be heard and decided in the Kings Bench, nevertheless whatever is said and published in the House of Commons by a serving Member of the House should not be heard or decided anywhere else than in Parliament.
Although, as Stephen J noted in Bradlaugh v Gossett (1884) 12 QBD 271, 284, the House of Lords was careful not to express a concluded view on the matter, the indication that the charge relating to the violence to the Speaker could have been tried in the Kings Bench is pretty clear.
Indeed, it was under reference to this case that Maitland was able to say, We may take it to be law that an ordinary crime, such as theft committed by a Member in the House, might be punished in the ordinary courts in the ordinary way: Constitutional History of England, p 321.
Moreover, the simple fact is that, since 1667, the House has never claimed a privilege of exclusive cognizance in a case where a Member has committed an ordinary crime in the House or its precincts.
The Attorney General (Sir Thomas Inskip KC) drew attention to this in his argument in R v Graham Campbell, Ex p Herbert [1935] 1 KB 594, 597 598.
He submitted that it showed that there was nothing to bar a prosecution in such a case: Coke was expressing an opinion in support of the view now contended for when he said that the exercise of the power of judicature of the House of Commons was best understood by reading the judgments and records of Parliament at large, . and the book of the clerk of the House of Commons, which is a record . : see Institutes, Part IV, c 1, Of Judicature.
Admittedly, a person committing an ordinary felony or misdemeanour, even on the very steps of the Speakers chair, would not be protected by the privilege of the House, but would be amenable to the jurisdiction of the criminal courts.
That, however, is merely because the House has never claimed the right to adjudicate on such matters.
Adapting the words of Coke, there is no record of such a privilege having been exercised, and it can, therefore, be taken not to exist.
That remains the position to this day.
I have therefore no doubt that, if the offences with which the appellants are charged are to be regarded as ordinary crimes, then even assuming that they are alleged to have been committed entirely within the precincts of the House the appellants can be prosecuted in the Crown Court.
The only question, therefore, is whether there is any aspect of the offences which takes them out of the category of ordinary crime and into the narrower category of conduct in respect of which the House would claim a privilege of exclusive cognizance.
In theory, even though the allegations are of false accounting, that could be the position.
In Ex p Wason (1869) LR 4 QB 573, for example, an information alleged that three members of the House of Lords had entered into a conspiracy.
Conspiracy is, in itself, an ordinary crime.
But it was held that a charge of conspiracy to make statements which the members of the House knew to be untrue, in order to frustrate a petition to the House, was not cognizable by the criminal law since it concerned statements to be made, or actually made, in the House.
That was considered to take the alleged conspiracy into an area of conduct which would be cognizable only by the House of Lords itself.
In the present cases the charges arise out of claims for allowances that the appellants are alleged to have submitted to the Fees Office.
As explained at paras 96 97 above, at the time, the system for claiming and paying allowances rested on Resolutions of the House and was supervised by the Members Estimate Committee, with the assistance of the Committee on Members Allowances.
It was very much a matter over which the House exercised exclusive control, except in relation to the laying of the relevant estimate.
Moreover, a system of allowances can rightly be seen as providing a necessary support to Members in carrying out all their parliamentary activities, including their core activities.
It is therefore quite possible that the rules of the system would have fallen within the area for which the House would claim exclusive cognizance.
And it may be that the same could have been said of decisions by the Fees Office and, on appeal, by the supervising Committees, as to a particular claim by a Member for payment of an allowance.
A challenge to any of these matters in the ordinary courts by a Member or by anyone else might well have called into question decisions taken by Committees of the House, or on their behalf, on a matter which was intended to be under the exclusive control and cognizance of the House and its Committees.
Obviously, the offences which the appellants are alleged to have committed could not have been committed if the House of Commons had not established and operated the system for payment of Members allowances.
But it is equally true that a hypothetical Member could not steal from the till in the Members Dining Room if the Administration Committee did not consider that the Dining Room should continue to operate and to provide a service to Members.
The Dining Room merely provides the setting for the theft, however.
Prima facie, therefore, a charge against a Member of theft from the till would not call into question any decision of that Committee or of the House in relation to the Dining Room or other refreshment services.
So the alleged conduct would not, in my view, fall within the area for which the House would claim the privilege of exclusive cognizance.
A theft of that kind would be an ordinary crime which could be prosecuted in the ordinary courts.
Doubtless, the House could also treat it as a contempt of the House, but this would be in the exercise of an overlapping, not an exclusive, jurisdiction.
Similarly, in the present case, the appellants alleged conduct could well be regarded as an affront to the system of Members allowances established by the House and, so, as a contempt of the House, which the House could punish in the exercise of its power of judicature.
But even though the alleged offences presuppose the existence of the allowances system, nothing in the particulars in the indictments indicates, or even suggests, that the prosecution of the charges would raise any issue as to decisions of the House or of its Committees, or of any officers or employees acting on their behalf, as to the system or its operation.
Nor would the prosecution touch on any other core activities of Members of the House which the privilege of exclusive cognizance exists to protect their right, for example, to debate, to speak, to vote, to give notice of a motion, to present a petition, to serve on a committee, and to present a report to the House.
In short, there is nothing in the allegations against the appellants which relates in any way to the legislative or deliberative processes of the House of Commons or of its Members, however widely construed.
The charges against the appellants are simply charges that they have committed the ordinary crime of false accounting in circumstances where, it so happens, the allegedly misleading information was furnished to the Fees Office of the House of Commons.
The allowances system merely provides the setting for the alleged offences, which are ordinary crimes.
Therefore they can be prosecuted in the Crown Court.
Again, the potential jurisdiction of the House in contempt is an overlapping, not an exclusive, jurisdiction.
The very fact that the House authorities co operated with the police in the investigations which led to the charges against the appellants suggests, at least, that the House authorities do not see the allegations as falling into the category in respect of which the House would claim the privilege of exclusive cognizance.
The fact that the Speaker has not intervened to assert the privilege points in the same direction.
If the privilege of the House to exercise exclusive cognizance in cases of this kind had previously been established, then the appellants might have been able to assert that privilege, even if the House authorities had chosen not to: Wellesley v Duke of Beaufort (1831) 2 Russ & M 639, 655, per Lord Brougham LC.
It is unnecessary to express a view on this point, however, since the position in the present cases is different: the appellants are claiming a privilege which the House has not asserted in the past in these circumstances and which it has not asserted on this occasion.
The Court is entitled to notice, and to draw an inference from, that clamant silence.
I am accordingly satisfied that the prosecution does not infringe article 9 of the Bill of Rights by impeaching or questioning the freedom of speech, the freedom of debates or the freedom of proceedings of the House or of its Members.
I am equally satisfied that the prosecution is not precluded on any other basis relating to the Commons privilege of exclusive cognizance.
Of course, the Court can judge the situation only as it stands at present.
If the trial goes ahead, it may turn out that, contrary to expectations, some issue arises which is said to touch on the core activities of MPs or of the House itself.
If that were actually so, the proceedings might be trespassing on an area for which the House would claim exclusive cognizance and to which article 9 would apply.
In that event the Speaker or the House authorities might seek to intervene.
It would be up to the presiding judge, with the assistance of counsel, to decide what should be done.
In the meantime, however, there is nothing on the face of the indictments which would justify this Court in preventing the appellants trial from proceeding.
For these reasons, which I understand to coincide in substance with those advanced by Lord Phillips, I favoured dismissing the appeals.
LORD HOPE, LADY HALE, LORD BROWN, LORD MANCE, LORD
COLLINS, LORD KERR
We have read the judgments of Lord Phillips and Lord Rodger.
We agree with them and for the reasons they give we too considered that these appeals should be dismissed.
LORD CLARKE
My reasons for agreeing that these appeals should be dismissed were those given by Lord Phillips and, subject to what follows, by Lord Rodger.
I add a few words of my own limited to the second type of privilege relied upon, which is known as exclusive cognisance.
It is to my mind plain from Lord Phillips analysis of this principle that it is a privilege which belongs to Parliament and not to individual members.
This is I think clear from the fact that, unlike the privilege provided for in article 9 of the Bill of Rights, Parliament can waive or relinquish it.
It seems to me to follow logically from that conclusion that it is for Parliament, and not the individual member to rely upon it.
In his paras 79 to 83 Lord Phillips has demonstrated that Parliament has never asserted the privilege in cases of the kind at present before the court.
He then gives examples based on these and similar cases in recent times at paras 84 to 88.
In the light of the practice of Parliament over many years he then concludes in paras 89 to 92 that Parliament has never asserted the privilege in such cases and, subject to the possibility of an Act of Parliament conferring such a privilege, that it is not now open to it to do so.
I agree with him that it follows that it is not open to the appellants to do so.
Even if it were open to Parliament to rely upon the privilege in cases of this type, since Parliament has the right to waive or relinquish the right to do so, I do not think that an individual member could rely upon the privilege if Parliament has waived or relinquished the right in the particular case.
It appears to me that, on the basis of the facts stated by Lord Phillips between paras 84 to 91, Parliament has waived or relinquished any right it might otherwise have had to claim the privilege.
Having referred the investigation of allegations such as those made against the appellants to the police with a view to possible prosecution and having co operated with the police, I do not see how Parliament could now assert the exclusive cognisance relied upon.
In these circumstances it seems to me that it is not open to the appellants as individual members to do so.
I recognise that this conclusion may be inconsistent with the statement made by Lord Brougham LC in Wellesley v Duke of Beaufort (1831) 2 Russ & M 639 at 655, which is referred to by Lord Rodger at para 124 above.
Lord Broughams statement, which did not form part of the judgment and was no more than a view expressed in the course of the argument, was in these terms: If a Court of Law or of Equity, upon due deliberation, entertains an opinion that a Member of either House of Parliament has privilege of Parliament, that Court is, in my judgment, bound to give him the benefit of his privilege, and to give it him with all its incidents, even although the House to which he belongs abandons it as a claim of right; for a Court knows nothing judicially of what takes place in Parliament till what is there done becomes an Act of the Legislature.
That principle may apply to the article 9 privilege but I do not think that it can apply to the exclusive cognisance privilege.
It is inconsistent with Lord Phillips conclusion at para 63 above that exclusive cognisance can be waived or relinquished by Parliament.
Based on p 105 of the 23rd edition of Erskine May on Parliamentary Practice, Lord Phillips refers to a 1980 resolution which permitted reference to be made in court to certain Parliamentary papers which had up to then been subject to a claim for exclusive cognisance.
It appears to me to follow from those statements that, where Parliament has waived or relinquished the privilege in respect of a particular matter, no individual member can rely upon it.
In so far as Lord Brougham expressed a different view, I would not accept it.
The reason he gives sounds odd to modern ears.
I do not think that it can properly be said today that a court knows nothing judicially of what takes place in Parliament till what is there done becomes an Act of the Legislature.
In these circumstances I would not accept that Lord Broughams statement, which was after all only made arguendo, is correct today.
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These appeals concern whether the criminal courts are prevented from trying certain former Members of Parliament on charges relating to expenses claims on the basis that the proceedings would infringe parliamentary privilege.
The three Appellants, Mr Morley, Mr Chaytor and Mr Devine have been committed for trial in the Crown Court on charges of false accounting, contrary to section 17(1)(b) of the Theft Act 1968.
The charges relate to claims for parliamentary expenses and are alleged to have been committed when each Appellant was a serving member of the House of Commons.
The claims concerned mortgage payments, IT services, rent for accommodation, cleaning and maintenance services, and the supply of stationery.
A fourth defendant, Lord Hanningfield, who is a member of the House of Lords, faces similar charges.
The system for payment of Members of Parliaments allowances and expenses, as it existed at the relevant time, was created by Resolutions of the House of Commons and overseen by the Members Estimate Committee.
The Fees Office received and considered claim forms and made payments in relation to claims.
The claim forms which are the subject matter of all the charges were submitted to the Fees Office and contained a declaration, signed by the Member, confirming that the costs were incurred exclusively for the purpose of performing duties as a Member of Parliament.
Each Appellant is facing a separate trial but all have raised a common point of law, namely that criminal proceedings cannot be brought because they would infringe parliamentary privilege.
The claim to privilege has two bases.
The first is Article 9 of the Bill of Rights 1689, which provides: That the Freedome of Speech and Debates or Proceedings in Parlyament ought not to be impeached or questioned in any Court or Place out of Parlyament.
The second is described alternatively as the exclusive cognisance or exclusive jurisdiction of Parliament and refers to the right of each House to manage its own affairs without interference from the other or from outside Parliament.
It is a privilege which is wider than, and embraces, Article 9.
A single preparatory hearing was held to consider the point of law.
The judge ruled against the Appellants and Lord Hanningfield, and the Court of Appeal upheld that decision.
The Appellants appealed to the Supreme Court.
Lord Hanningfield did not appeal but was granted permission to intervene on a limited basis.
On 10 November 2010 the Supreme Court ordered that each of the three appeals be dismissed, with reasons to follow.
The Court now delivers those reasons.
The Supreme Court unanimously dismisses the appeals.
Lord Phillips (President) and Lord Rodger give the lead judgments.
The Court holds that neither Article 9 nor the exclusive jurisdiction of the House of Commons poses any bar to the jurisdiction of the Crown Court to try the Appellants.
The issue under Article 9 was whether making claims for parliamentary expenses fell within the phrase proceedings in Parliament.
The Court held that conduct of a Member is not privileged merely because it occurs within the House of Commons.
The principal matter to which Article 9 is directed is freedom of speech and debate in the Houses of Parliament and parliamentary committees.
In considering whether actions outside the Houses and committees fall within parliamentary proceedings because of their connection to them, it is necessary to consider the nature of that connection and whether, if such actions do not enjoy privilege, this is likely to impact adversely on the core or essential business of Parliament.
On this basis, submission of expenses claims does not qualify for the protection of privilege.
Scrutiny of claims by the courts will not inhibit freedom of speech or debate.
The only thing that it will inhibit is the making of dishonest claims: [48].
Parliament has expressed the same conclusion and although the extent of parliamentary privilege is ultimately a matter for the courts, it is one on which the courts will pay careful regard to the views of Parliament: [16]; [59].
There are also good policy reasons for giving Article 9 a narrow ambit, namely that its protection is absolute and, where it applies, it denies redress to those injured by civil wrongdoing and prevents Members being prosecuted for conduct which is criminal, despite the fact that Parliament has only limited penal powers of its own: [61].
On the exclusive jurisdiction issue, Parliament has to a large extent relinquished any claim to have exclusive jurisdiction over the administrative business of the two Houses.
Nor does Parliament assert an exclusive jurisdiction to deal with criminal conduct within the walls of Parliament, even where it relates to or interferes with proceedings in committee or the Houses.
The courts and Parliament have different, overlapping, jurisdictions.
Parliament can hear proceedings for contempt of Parliament and a court can try the offender for the crime.
The area of activity to which the present prosecutions relate is administrative: it concerns the implementation of the expenses scheme, not the decisions of parliamentary committees in respect of the scheme itself.
The expenses scheme merely provides the setting for the alleged offences and there is nothing in the allegations against the Appellants which relates to the core activities of Parliament, namely the legislative and deliberative processes, however widely construed.
The House of Commons has asserted a disciplinary jurisdiction over expenses claims and has set up a review of such claims under Sir Thomas Legg.
It has not, however, asserted exclusive jurisdiction.
On the contrary, it has co operated with the police investigation and excluded from the claims referred to Sir Thomas Legg any that are under investigation by the police: [89] [92]; [122] [123].
For these reasons, the Court held that the prosecutions neither infringed Article 9 nor impinged upon the exclusive jurisdiction of Parliament.
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The appeals relate to the proper interpretation of paragraph 49 of the National Planning Policy Framework (NPPF), which is in these terms: Housing applications should be considered in the context of the presumption in favour of sustainable development.
Relevant policies for the supply of housing should not be considered up to date if the local planning authority cannot demonstrate a five year supply of deliverable housing sites.
The Court of Appeal observed that the interpretation of this paragraph had been considered by the Administrative Court on seven separate occasions between October 2013 and April 2015 with varying results.
The court had been urged by all counsel to bring much needed clarity to the meaning of the policy.
Notwithstanding the clarification provided by the impressive judgment of the court (given by Lindblom LJ), controversy remains.
The appeals provide the opportunity for this court not only to consider the narrow issues of interpretation of para 49, but to look more broadly at issues concerning the legal status of the NPPF and its relationship with the statutory development plan.
Both appeals relate to applications for housing development, one at Yoxford in the administrative area of the Suffolk Coastal District Council (the Yoxford site), and the other near Willaston in the area of Cheshire East Borough Council (the Willaston site).
In the first the councils refusal of permission was upheld by the inspector on appeal, but his refusal was quashed in the High Court (Supperstone J), and that decision was confirmed by the Court of Appeal.
In the second, the council failed to determine the application, and the appeal was allowed by the inspector.
The councils challenge succeeded in the High Court (Lang J), but that decision was reversed by the Court of Appeal, the judgment of the court being given by Lindblom LJ.
Both councils appeal to this court.
The statutory provisions
The relevant statutory provisions are found in the Town and Country Planning Act 1990 (the 1990 Act) and the Planning and Compulsory Purchase Act 2004 (the 2004 Act).
Plan making
Part 2 of the 2004 Act deals with local development.
Each local planning authority in England is required to keep under review the matters which may be expected to affect the development of their area or the planning of its development (2004 Act section 13), and to prepare a local development scheme, which (inter alia) specifies the local development documents which are to be development plan documents (section 15).
The authoritys local development documents must (taken as a whole) set out the authoritys policies (however expressed) relating to the development and use of land in their area (section 17).
Local development documents are defined by regulations made under section 17(7).
In short they are documents which contain statements as to the development and use of land which the authority wishes to encourage, the allocation of sites for particular types of development, and development management and site allocations policies intended to guide determination of planning applications.
Together they comprise the development plan or local plan for the area (Town and Country Planning (Local Planning) (England) Regulations (SI 2012/767) regulations 5 and 6).
In preparing such documents, the authority must have regard (inter alia) to national policies and advice contained in guidance issued by the Secretary of State (section 19(2)).
Every development plan document must be submitted to the Secretary of State for independent examination, one of the purposes being to determine whether it complies with the relevant statutory requirements, including section 19 (section 20(1)(5)(a)).
The Secretary of State may, if he thinks that a local development document is unsatisfactory, direct the local planning authority to modify the document (section 21).
Section 39 gives statutory force to the concept of sustainable development (undefined).
Any person or body exercising any function under Part 2 in relation to local development documents must exercise it with the objective of contributing to the achievement of sustainable development, and for that purpose must have regard to national policies and advice contained in guidance issued by the Secretary of State An adopted plan may be challenged on legal grounds by application to the High Court made within six weeks of the date of adoption, but not otherwise (section 113).
Schedule 8 contained transitional provisions providing generally for a transitional period of three years, after which the plans produced under the previous system ceased to have effect subject to the power of the Secretary of State to save specified policies by direction.
Planning applications
taken into account in the handling of planning applications: Provision is made in the 1990 and 2004 Acts for the development plan to be 1990 Act section 70(2) In dealing with such an application the authority shall have regard to (a) material to the application, (b) material to the application, and (c) any local finance considerations, so far as the provisions of the development plan, so far as any other material considerations. 2004 Act section 38(6) If regard is to be had to the development plan for the purpose of any determination to be made under the planning Acts the determination must be made in accordance with the plan unless material considerations indicate otherwise.
Unlike the development plan provisions, these sections contain no specific requirement to have regard to national policy statements issued by the Secretary of State, although it is common ground that such policy statements may where relevant amount to material considerations.
The principle that the decision maker should have regard to the development plan so far as material and any other material considerations has been part of the planning law since the Town and Country Planning Act 1947.
The additional weight given to the development plan by section 38(6) reproduces the effect of a provision first seen in the Planning and Compensation Act 1991 section 54A.
In City of Edinburgh Council v Secretary of State for Scotland [1997] 1 WLR 1447, the equivalent provision (section 18A of the Town and Country Planning (Scotland) Act 1972) was described by Lord Hope (p 1450B) as designed to enhance the status of the development plan in the exercise of the planning authoritys judgment.
Lord Clyde spoke of it as creating a presumption that the development plan is to govern the decision, subject to material considerations, as for example where a particular policy in the plan can be seen to be outdated and superseded by more recent guidance.
However, the section had not touched the well established distinction between the respective roles of the decision maker and the court: It has introduced a requirement with which the decision maker must comply, namely the recognition of the priority to be given to the development plan.
It has thus introduced a potential ground on which the decision maker could be faulted were he to fail to give effect to that requirement.
But beyond that it still leaves the assessment of the facts and the weighing of the considerations in the hands of the decision maker (p 1458)
An appeal against a refusal of planning permission lies to the Secretary of State, who is subject to the same duty in respect of the development plan (1990 Act sections 78, 79(4)).
Regulations under section 79(6) and Schedule 6 now provide for most categories of appeals, including those here in issue, to be determined, not by the Secretary of State, but by an appointed person (normally referred to as a planning inspector).
The decision on appeal may be challenged on legal grounds in the High Court (section 288).
The National Planning Policy Framework
The Framework (or NPPF) was published on 27 March 2012.
One purpose, in the words of the foreword, was to (replace) over a thousand pages of national policy with around 50, written simply and clearly, thus allowing people and communities back into planning.
The Introduction explains its status under the planning law: Planning law requires that applications for planning permission must be determined in accordance with the development plan, unless material considerations indicate otherwise.
The National Planning Policy Framework must be taken into account in the preparation of local and neighbourhood plans, and is a material consideration in planning decisions.
NPPF is divided into three main parts: Achieving sustainable development (paragraphs 6 to 149), Plan making (paragraphs 150 to 185) and Decision taking (paragraphs 186 to 207).
Paragraph 7 refers to the three dimensions to sustainable development: economic, social and environmental.
Paragraph 11 begins a group of paragraphs under the heading the presumption in favour of sustainable development.
Paragraph 12 makes clear that the NPPF does not change the statutory status of the development plan as the starting point for decision making.
Paragraph 13 describes the NPPF as guidance for local planning authorities and decision takers both in drawing up plans and as a material consideration in determining applications.
Paragraph 14, which is important in the present appeals, deals with the presumption in favour of sustainable development, which is said to be at the heart of the NPPF and which should be seen as a golden thread running through both plan making and decision taking.
It continues: For plan making this means that: local planning authorities should positively seek opportunities to meet the development needs of their area; Local Plans should meet objectively assessed needs, with sufficient flexibility to adapt to rapid change, unless: any adverse impacts of doing so would significantly and demonstrably outweigh the benefits, when assessed against the policies in this Framework taken as a whole; or specific policies development should be restricted. this Framework indicate in For decision taking this means: approving development proposals that accord with the development plan without delay; and where the development plan is absent, silent or relevant policies are out of date, granting permission unless: any adverse impacts of doing so would significantly and demonstrably outweigh the benefits, when assessed against the policies in this Framework taken as a whole; or specific policies development should be restricted. this Framework indicate in We were told that the penultimate point (any adverse impacts ) is referred to by practitioners as the tilted balance.
I am content for convenience to adopt that rubric.
Footnote 9 (in the same terms for both parts) gives examples of the specific policies referred to: For example, those policies relating to sites protected under the Birds and Habitats Directives (see paragraph 119) and/or designated as Sites of Special Scientific Interest; land designated as Green Belt, Local Green Space, an Area of Outstanding Natural Beauty, Heritage Coast or within a National Park (or the Broads Authority); designated heritage assets; and locations at risk of flooding or coastal erosion.
These are said to be examples.
Thus the list is not exhaustive.
Further, although the footnote refers in terms only to policies in the Framework itself, it is clear in my view that the list is to be read as including the related development plan policies.
Paragraph 14 cannot, and is clearly not intended to, detract from the priority given by statute to the development plan, as emphasised in the preceding paragraphs.
Indeed, some of the references only make sense on that basis.
For example, the reference to Local Green Space needs to be read with paragraph 76 dealing with that subject, which envisages local communities being able through local and neighbourhood plans to identify for special protection green areas of particular importance to them, and so rule out new development other than in very special
circumstances
Section 6 (paragraphs 47 to 55) is entitled Delivering a wide choice of high quality homes.
Paragraph 47 states the primary objective of the section: To boost significantly the supply of housing, local planning authorities should: use their evidence base to ensure that their Local Plan meets the full, objectively assessed needs for market and affordable housing in the housing market area, as far as is consistent with the policies set out in [the NPPF], including identifying key sites which are critical to the delivery of the housing strategy over the plan period; identify and update annually a supply of specific deliverable sites sufficient to provide five years worth of housing against their housing requirements with an additional buffer of 5% to ensure choice and competition in the market for land. ; identify a supply of specific, developable sites or broad locations for growth, for years six to ten and, where possible, for years 11 15; for market and affordable housing, illustrate the expected rate of housing delivery through a housing trajectory for the plan period and set out a housing implementation strategy for the full range of housing describing how they will maintain delivery of a five year supply of housing land to meet their housing target; and set out their own approach to housing density to reflect local circumstances.
This group of provisions provides the context for paragraph 49, central to these appeals and quoted at the beginning of this judgment; and in particular for the advice that relevant policies for the supply of housing should not be considered up to date, unless the authority can demonstrate a five year supply of deliverable housing sites.
Section 12 is headed Conserving and enhancing the historic environment (paragraphs 126 to 141).
It includes policies for designated and non designated heritage assets, as defined in the glossary.
The former cover such assets as World Heritage Sites, Scheduled Monuments and others designated under relevant legislation.
A non designated asset is one identified as having a degree of significance meriting consideration in planning decisions because of its heritage interest.
Paragraph 135 states: The effect of an application on the significance of a non designated heritage asset should be taken into account in determining the application.
In weighing applications that affect directly or indirectly non designated heritage assets, a balanced judgment will be required having regard to the scale of any harm or loss and the significance of the heritage asset.
Significance in this context is defined by the glossary in Annex 2 as meaning the value of a heritage asset to this and future generations because of its heritage interest, which may be derived not only from a heritage assets physical presence, but also from its setting.
Annex 1 (Implementation) states that policies in the Framework are material considerations which local planning authorities should take into account from the day of its publication (paragraph 212); and that, where necessary, plans, should be revised as quickly as possible to take account of the policies through a partial review or by preparing a new plan (paragraph 213).
However, it also provides that for a transitional period of a year decision takers may continue to give full weight to relevant policies adopted since 2004, even if there is a limited degree of conflict with this Framework (paragraph 214); but that thereafter due weight should be given to relevant policies in existing plans according to their degree of consistency with this framework (the closer the policies in the plan to the policies in [the NPPF], the greater the weight that may be given). (paragraph 215)
NPPF Legal status and Interpretation
The court heard some discussion about the source of the Secretary of States power to issue national policy guidance of this kind.
The agreed Statement of Facts quoted without comment a statement by Laws LJ (R (West Berkshire District Council) v Secretary of State for Communities and Local Government [2016] EWCA Civ 441; [2016] 1 WLR 3923, para 12) that the Secretary of States power to formulate and adopt national planning policy is not given by statute, but is an exercise of the Crowns common law powers conferred by the royal prerogative.
In the event, following a query from the court, this explanation was not supported by any of the parties at the hearing.
Instead it was suggested that his powers derived, expressly or by implication, from the planning Acts which give him overall responsibility for oversight of the planning system (see R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2003] 2 AC 295, paras 140 143 per Lord Clyde).
This is reflected both in specific requirements (such as in section 19(2) of the 2004 Act relating to plan preparation) and more generally in his power to intervene in many aspects of the planning process, including (by way of call in) the determination of appeals.
In my view this is clearly correct.
The modern system of town and country planning is the creature of statute (see Pioneer Aggregates (UK) Ltd v Secretary of State for the Environment [1985] AC 132, 140 141).
Even if there had been a pre existing prerogative power relating to the same subject matter, it would have been superseded (see R (Miller) v Secretary of State for Exiting the European Union (Birnie intervening) [2017] 2 WLR 583, para 48). (It may be of interest to note that the great Case of Proclamations (1610) 12 Co Rep 74, which was one of the earliest judicial affirmations of the limits of the prerogative (see Miller para 44) was in one sense a planning case; the court rejected the proposition that the King by his proclamation may prohibit new buildings in and about London .)
Although planning inspectors, as persons appointed by the Secretary of State to determine appeals, are not acting as his delegates in any legal sense, but are required to exercise their own independent judgement, they are doing so within the framework of national policy as set by government.
It is important, however, in assessing the effect of the Framework, not to overstate the scope of this policy making role.
The Framework itself makes clear that as respects the determination of planning applications (by contrast with plan making in which it has statutory recognition), it is no more than guidance and as such a material consideration for the purposes of section 70(2) of the 1990 Act (see R (Cala Homes (South) Ltd) v Secretary of State for Communities and Local Government [2011] EWHC 97 (Admin); [2011] 1 P & CR 22, para 50 per Lindblom J).
It cannot, and does not purport to, displace the primacy given by the statute and policy to the statutory development plan.
It must be exercised consistently with, and not so as to displace or distort, the statutory scheme.
Law and policy
The correct approach to the interpretation of a statutory development plan was discussed by this court in Tesco Stores Ltd v Dundee City Council (ASDA Stores Ltd intervening) [2012] UKSC 13; 2012 SLT 739.
Lord Reed rejected a submission that the meaning of the development plan was a matter to be determined solely by the planning authority, subject to rationality.
He said: The development plan is a carefully drafted and considered statement of policy, published in order to inform the public of the approach which will be followed by planning authorities in decision making unless there is good reason to depart from it.
He added, however, that such statements should not be construed as if they were statutory or contractual provisions: It is intended to guide the behaviour of developers and planning authorities.
As in other areas of administrative law, the policies which it sets out are designed to secure consistency and direction in the exercise of discretionary powers, while allowing a measure of flexibility to be retained.
Those considerations point away from the view that the meaning of the plan is in principle a matter which each planning authority is entitled to determine from time to time as it pleases, within the limits of rationality.
On the contrary, these considerations suggest that in principle, in this area of public administration as in others policy statements should be interpreted objectively in accordance with the language used, read as always in its proper context. (para 18) Although a development plan has a legal status and legal effects, it is not analogous in its nature or purpose to a statute or a contract.
As has often been observed, development plans are full of broad statements of policy, many of which may be mutually irreconcilable, so that in a particular case one must give way to another.
In addition, many of the provisions of development plans are framed in language whose application to a given set of facts requires the exercise of judgment.
Such matters fall within the jurisdiction of planning authorities, and their exercise of their judgment can only be challenged on the ground that it is irrational or perverse (Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, 780 per Lord Hoffmann) (para 19)
In the present appeal these statements were rightly taken as the starting point for consideration of the issues in the case.
It was also common ground that policies in the Framework should be approached in the same way as those in a development plan.
However, some concerns were expressed by the experienced counsel before us about the over legalisation of the planning process, as illustrated by the proliferation of case law on paragraph 49 itself (see paras 27ff below).
This is particularly unfortunate for what was intended as a simplification of national policy guidance, designed for the lay reader.
Some further comment from this court may therefore be appropriate.
In the first place, it is important that the role of the court is not overstated.
Lord Reeds application of the principles in the particular case (para 18) needs to be read in the context of the relatively specific policy there under consideration.
Policy 45 of the local plan provided that new retail developments outside locations already identified in the plan would only be acceptable in accordance with five defined criteria, one of which depended on the absence of any suitable site within or linked to the existing centres (para 5).
The short point was the meaning of the word suitable (para 13): suitable for the development proposed by the applicant, or for meeting the retail deficiencies in the area? It was that question which Lord Reed identified as one of textual interpretation, logically prior to the exercise of planning judgment (para 21).
As he recognised (see para 19), some policies in the development plan may be expressed in much broader terms, and may not require, nor lend themselves to, the same level of legal analysis.
It must be remembered that, whether in a development plan or in a non statutory statement such as the NPPF, these are statements of policy, not statutory texts, and must be read in that light.
Even where there are disputes over interpretation, they may well not be determinative of the outcome. (As will appear, the present can be seen as such a case.) Furthermore, the courts should respect the expertise of the specialist planning inspectors, and start at least from the presumption that they will have understood the policy framework correctly.
With the support and guidance of the Planning Inspectorate, they have primary responsibility for resolving disputes between planning authorities, developers and others, over the practical application of the policies, national or local.
As I observed in the Court of Appeal (Wychavon District Council v Secretary of State for Communities and Local Government [2008] EWCA Civ 692; [2009] PTSR 19, para 43) their position is in some ways analogous to that of expert tribunals, in respect of which the courts have cautioned against undue intervention by the courts in policy judgments within their areas of specialist competence (see Secretary of State for the Home Department v AH (Sudan) [2007] UKHL 49; [2008] 1 AC 678, para 30 per Lady Hale.)
Recourse to the courts may sometimes be needed to resolve distinct issues of law, or to ensure consistency of interpretation in relation to specific policies, as in the Tesco case.
In that exercise the specialist judges of the Planning Court have an important role.
However, the judges are entitled to look to applicants, seeking to rely on matters of planning policy in applications to quash planning decisions (at local or appellate level), to distinguish clearly between issues of interpretation of policy, appropriate for judicial analysis, and issues of judgement in the application of that policy; and not to elide the two.
The two appeals
Evolving judicial guidance
To understand the reasoning of the two inspectors in the instant cases, it is necessary to set it in the context of the evolving High Court jurisprudence.
The decisions in the two appeals were given in July and August 2014 respectively, after inquiries which ended in both cases in June.
It is not entirely clear what information was available to the inspectors as to the current state of the High Court jurisprudence on this topic.
The Yoxford inspector referred only to William Davis v Secretary of State for Communities and Local Government [2013] EWHC 3058 (Admin) (Lang J, 11 October 2013).
This seems to have been the first case in which this issue had arisen.
One of the grounds of refusal was based on a policy E20 the effect of which was generally to exclude development in a so called green wedge area defined on the proposals map.
Lang J recorded an argument for the developer that the policy should have been regarded as a relevant policy for the supply of housing under paragraph 49 because the restriction on development potentially affects housing development.
The judge rejected this argument summarily, saying policy E20 does not relate to the supply of housing and therefore is not covered by paragraph 49 (her emphasis).
By the time the two inquiries in the present case ended (June 2014), and at the time of the decisions, it seems that the most recent judicial guidance then available on the interpretation of paragraph 49 was that of Ouseley J in South Northamptonshire Council v Secretary of State for Communities and Local Government and Barwood Land [2014] EWHC 573 (Admin) (10 March 2014) (the Barwood Land case).
Ouseley J favoured a wider reading which examines the degree to which a particular policy generally affects housing numbers, distribution and location in a significant manner.
He thought that the language could not sensibly be given a very narrow meaning because This would mean that policies for the provision of housing which were regarded as out of date, nonetheless would be given weight, indirectly but effectively through the operation of their counterpart provisions in policies restrictive of where development should go He contrasted general policies, such as those protecting the countryside, with policies designed to protect specific areas or features such as gaps between settlements, the particular character of villages or a specific landscape designation, all of which could sensibly exist regardless of the distribution and location of housing or other development.
At that time, it seems to have been assumed that if a policy were deemed to be out of date under paragraph 49, it was in practice to be given minimal weight, in effect disapplied (see eg Cotswold District Council v Secretary of State for Communities and Local Government [2013] EWHC 3719 (Admin), para 72 per Lewis J).
In other words, it was treated for the purposes of paragraph 14 as non policy, in the same way as if the development plan were absent or silent.
On that view, it was clearly important to establish which policies were or were not to be treated as out of date in that sense.
Later cases (after the date of the present decisions) introduced a greater degree of flexibility, by suggesting that paragraph 14 did not take away the ordinary discretion of the decision maker to determine the weight to be given even to an out of date policy; depending, for example, on the extent of the shortfall and the prospect of development coming forward to make it up (see eg Crane v Secretary of State for Communities and Local Government [2015] EWHC 425 (Admin), para 71 per Lindblom J).
As will be seen, this idea was further developed in Lindblom LJs judgment in the present case.
The Yoxford site
In September 2013 Suffolk Coastal District Council refused planning permission for a development of 26 houses on land at Old High Road in Yoxford.
The applicant, Hopkins Homes Ltd (Hopkins), appealed to an inspector appointed by the Secretary of State.
He dismissed the appeal in a decision letter dated 15 July 2014, following an inquiry which began in February and ended in June 2014.
The statutory development plan for the area comprised the Suffolk Coastal District Local Plan (SCDLP) adopted in July 2013, and certain saved policies from the previous local plan (the old Local Plan) adopted in December 1994.
Chapter 3 SCDLP set out a number of strategic policies, including: i) Under the heading Housing, Policy SP2 (Housing numbers and Distribution) proposed as its core strategy to make provision for 7,900 new homes across the district in the period 2010 2027.
In addition, an early review to be commenced by 2015 was to identify the full, objectively assessed housing needs for the district, with proposals to ensure that these were met so far as consistent with the NPPF.
A table showed the proposed locations across the district to make up the total of 7,900 homes. ii) Under the heading The Spatial Strategy, Policy SP19 (Settlement Policy) identified Yoxford as one of a number of Key Service Centres, which provide an extensive range of specified facilities, and where modest estate scale development may be appropriate within the defined physical limits (under policy SP27 Key and Local Service Centres).
Outside these settlements (under policy SP 29 The Countryside) there was to be no development other than in special circumstances. iii) The commentary to SP19 (para 4.05) explained that physical limits boundaries or village envelopes would be drawn up for the larger settlements, but that these limits are a policy tool and that where allocations are proposed outside the envelopes, the envelopes would be redrawn to include them.
In his report on the examination of the draft SCDLP, the inspector had commented on the adequacy of the housing provision (paras 31 51).
He had noted how the proposed figure of 7,590 homes fell short of what was later agreed to be the requirement for the plan period of 11,000 extra homes.
He had considered whether to suspend the examination to enable the council to assess the options.
He decided not to do so, recognising that there were other sites which might come forward to boost supply, and the advantages of enabling these to be considered in the context of an up to date suite of local development management policies that are consistent
with the Framework
The saved policies from the old plan included: AP4 (Parks and gardens of historic or landscape interest) The District Council will encourage the preservation and/or enhancement of parks and gardens of historic and landscape interest and their surroundings.
Planning permission for any proposed development will not be granted if it would have a materially adverse impact on their character, features or immediate setting.
AP13 (Special Landscape Areas) The valleys and tributaries of (named rivers) and the Parks and Gardens of Historic or Landscape Interest are designated as Special Landscape Areas and shown on the Proposals Map.
The District Council will ensure that no development will take place which would be to the material detriment of, or materially detract from, the special landscape quality.
The appeal site formed part of an area of Historic Parkland (related to an 18th century house known as Grove Park) identified by the council in its Supplementary Planning Guidance 6 Historic Parks and Gardens (SPG) dated December 1995.
In his decision letter on the planning appeal, the inspector identified the main issues as including: consideration of a five years supply of housing land, the principle of development outside the defined village, and the effects of the proposal on the local historic parkland and landscape (para 4).
He referred to paragraphs 14 and 49 of the NPPF, which he approached on the basis that it was very unlikely that a five years supply of housing land could now be demonstrated (paras 5 6).
There had been a debate before him whether the recent adoption of the local plan meant that its policies are automatically up to date, but he read the comments of the examining Inspector on the need for an early review of housing delivery as indicating the advantages of considering development in the light of other up to date policies, whilst accepting that pending the review relevant policies for the supply of housing may be considered not to be up to date (para 7).
He then considered which policies were relevant policies for the supply of housing within the meaning of paragraph 49 (paras 8 9).
Policy SP2 which sets out housing provision for the District was one such policy and cannot be considered as up to date.
Policy SP15 relating to landscape and townscape and not specifically to the supply of housing was not a relevant policy and so is up to date.
For the same reason, policy SP19, which set the settlement hierarchy and showed percentages of total proposed housing for broad categories of settlements, but did not suggest figures or percentages for individual settlements, was also seen as up to date; as was SP27, which related specifically to Key and Local Service Centres, and sought, among other things, to reinforce their individual character.
Of the saved policy AP4 he noted a degree of conflict with paragraph 215 of the Framework due to the absence of a balancing judgement in Policy AP4, but thought its broad aim consistent with the aims of the Framework.
He said: these matters reduce the weight that I attach to Policy AP4, although I shall attach some weight to it.
Similarly, he thought Policy AP13 consistent with the aims of the Framework to recognise the intrinsic quality of the countryside and promote policies for the conservation and enhancement of the natural environment (para 10).
In relation to the proposal for development outside the defined village limits, he observed that the appeal site was outside the physical limits boundary as defined in the very recently adopted Local Plan.
He regarded the policy directing development to within the physical limits of the settlement to be in accordance with one of the core principles of the Framework, recognising the intrinsic character and beauty of the countryside.
On this aspect he concluded: I consider that the appeal site occupies an important position adjacent to the settlement, where Old High Road marks the end of the village and the start to the open countryside.
The proposed development would be unacceptable in principle, contrary to the provisions of Policies SP27 and SP29 and contrary to one of the core principles of the Framework. (paras 13 14)
As to its location within a historic parkland, he discussed the quality of the landscape and the impact of the proposal, and concluded: 20.
In relation to the built character and layout of Yoxford and its setting, Old High Road forms a strong and definite boundary to the built development of the village here.
I do not agree that the proposal forms an appropriate development site in this respect, but would be seen as an ad hoc expansion across what would otherwise be seen as the village/countryside boundary and the development site would not be contained to the west by any existing logical boundary. 21.
In respect of these matters, the historic parkland forms a non designated heritage asset, as defined in the Framework and I conclude that the proposal would have an unacceptable effect on the significance of this asset.
In relation to local policies, I find that the proposal would be in conflict with the aims of
Policies AP4 and AP13 of the old Local Plan
Finally, under the heading The planning balance, he acknowledged the advantage that the proposal would bring additional homes, including some affordable, within a District where the supply of homes is a concern, but said: However, I have found significant conflict with policies in the recently adopted Local Plan.
I have also found conflict with some saved policies of the old Local Plan and I have sought to balance these negative aspects of the proposal against its benefits.
In doing so, I consider that the unacceptable effects of the development are not outweighed by any benefits and means that it cannot be considered as a sustainable form of development, taking account of its three dimensions as set out at paragraph 7 of the Framework.
Therefore, the proposal conflicts with the aims of the Framework. (paras 31 32)
Hopkins challenged the decision in the High Court on the grounds that the inspector had misdirected himself in three respects: in short, as to the interpretation of NPPF paragraph 49; as to the status of the limits boundary to Yoxford; and as to the status of Policy AP4.
The Secretary of State conceded that the inspector had misapplied the policy in paragraph 49.
Supperstone J referred to the approach of Ouseley J in the Barwood Land case, with which he agreed, preferring it to that of Lang J in the William Davis case.
He accepted the submission for Hopkins that the inspector had erred in thinking that paragraph 49 only applied to policies dealing with the positive provision of housing, with the result that his decision had to be quashed (paras 33, 38 41).
He held in addition that this inspector had wrongly proceeded on the basis that the village boundary had been defined in the recent local plan, rather than in the earlier plan (para 46); and that he had failed properly to assess the significance of the heritage asset as required by paragraph 135 of the Framework (para 53).
On 30 January 2015 Supperstone J quashed the decision.
The councils appeal to the Court of Appeal failed.
It now appeals to this court.
The Willaston site
The Crewe and Nantwich Replacement Local Plan, adopted on 17 February 2005 (the adopted RLP) sought to address the development needs of the Crewe and Nantwich area for the period from 1996 to 2011.
Under the 2004 Act, it should have been replaced by a Local Development Framework by 2008.
This did not happen.
As a consequence, the policies were saved by the Secretary of State by Direction (dated 14 February 2008).
Crewe is identified as a location for new housing growth in the emerging Local Plan, which is the subject of an ongoing examination in public and subject to objections, as are some of the proposed housing allocations.
At the time of the public inquiry in June 2014, the emerging Local Plan was understood to be over two years from being adopted.
Richborough Estates Partnership LLP (Richborough) in August 2013 applied to Cheshire East Borough Council for permission for a development of up to 170 houses on land north of Moorfields in Willaston.
The council having failed to determine the application within the prescribed period, Richborough appealed.
Willaston is a settlement within the defined urban area of Crewe, but for the most part is physically separate from the town.
As a consequence there is open land between Willaston and the main built up area of Crewe, within which open land the appeal site lies.
NE.2, NE.4, and RES.5: In the appeal Cheshire East relied on the adopted RLP, in particular policies i) Policy NE.2 (Open Countryside) seeks to protect the open countryside from new build development for its own sake, permitting only a very limited amount of small scale development mainly for agricultural, forestry or recreational purposes. ii) Policy NE.4 (Green Gap) relates to areas of open land around Crewe (including the area of the appeal site) identified as needing additional protection in order to maintain the definition and separation of existing communities.
The policy provides that permission will not be granted for new development, including housing, save for limited exceptions.
It has the same inner boundary as NE.2. iii) Policy RES.5 (Housing in the open countryside) permits only very limited forms of residential development in the open countryside, such as agricultural workers dwellings.
In his decision letter dated 1 August 2014 the inspector allowed the appeal and granted planning permission for up to 146 dwellings.
He concluded that Cheshire East was unable to demonstrate the minimum five year supply of housing land required under paragraph 47 of the NPFF.
The council appears to have accepted at the inquiry that policy NE.2 was a policy for the supply of housing.
The inspector thought that the same considerations applied to the other two policies relied on by the council, all of which were therefore relevant policies within paragraph 49, although he acknowledged that policy NE.4 also performed strategic functions in maintaining the separation and definition of settlements and in landscape protection.
He noted also that two of the housing sites in the emerging local plan were in designated green gaps, which led him to give policy NE.4 reduced weight (paras 31 35).
He concluded on this aspect (para 94): 94.
I have concluded that there is not a demonstrable five year supply of deliverable housing sites (issue (i)).
In the light of that, the weight of policies in the extant RLP relevant to the supply of housing is reduced (issue (ii)).
That applies in particular to policies NE.2, NE.4 and RES.5 in so far as their extent derives from settlement boundaries that in turn reflect out of date housing requirements, though policy NE.4 also has a wider purpose in maintaining gaps between settlements.
He considered the application of the Green Gap policy, concluding that there would be no significant harm to the wider functions of the gap in maintaining the definition and separation of these two settlements (para 95).
His overall conclusion was as follows: 101.
I conclude that the proposed development would be sustainable overall, and that the adverse effects of it would not significantly and demonstrably outweigh the benefits when assessed against the policies in the Framework as a whole.
There are no specific policies in the NPPF that indicate that this development should be restricted.
In such circumstances, and where relevant development plan policies are out of date, the NPPF indicates that permission should be granted unless material considerations indicate otherwise.
There are no further material considerations that do so.
The councils challenge succeeded before Lang J, who quashed the inspectors decision by an order dated 25 February 2015.
In short, she concluded that the inspector had erred in treating policy NE.4 as a relevant policy under paragraph 49, and in seeking to divide the policy, so as to apply it in part only (para 63).
Richboroughs appeal was allowed by the Court of Appeal with the result that the permission was restored.
The council appeals to this court.
The Court of Appeals interpretation
Giving the judgment of the court, Lindblom LJ referred to the relevant parts of the NPPF and (at para 21) the three competing interpretations of paragraph 49: i) Narrow: limited to policies dealing only with the numbers and distribution of new housing, and excluding any other policies of the development plan dealing generally with the disposition or restriction of new development in the authoritys area. ii) Wider: including both policies providing positively for the supply of new housing and other policies, or counterpart policies, whose effect is to restrain the supply by restricting housing development in certain parts of the authoritys area. iii) Intermediate: as under (ii), but excluding policies designed to protect specific areas or features, such as gaps between settlements, the particular character of villages or a specific landscape designation (as suggested by Ouseley J in the Barwood Land case).
He discussed the connection between paragraph 49 and the presumption in favour of sustainable development in paragraph 14, which lay in the concept of relevant policies being not up to date under paragraph 49, and therefore out of date for the purposes of paragraph 14 (para 30).
He explained the courts reasons for preferring the wider view of paragraph 49.
He read the words for the supply of housing as meaning affecting the supply of housing, which he regarded as not only the literal interpretation of the policy, but the only interpretation consistent with the obvious purpose of the policy when read in its context.
He continued: 33.
Our interpretation of the policy does not confine the concept of policies for the supply of housing merely to policies in the development plan that provide positively for the delivery of new housing in terms of numbers and distribution or the allocation of sites.
It recognizes that the concept extends to plan policies whose effect is to influence the supply of housing land by restricting the locations where new housing may be developed including, for example, policies for the Green Belt, policies for the general protection of the countryside, policies for conserving the landscape of Areas of Outstanding Natural Beauty and National Parks, policies for the conservation of wildlife or cultural heritage, and various policies whose purpose is to protect the local environment in one way or another by preventing or limiting development.
It reflects the reality that policies may serve to form the supply of housing land either by creating it or by constraining it that policies of both kinds make the supply what it is. (para 33)
The court rejected the narrow interpretation, advocated by the councils, which it thought plainly wrong: It is both unrealistic and inconsistent with the context in which the policy takes its place.
It ignores the fact that in every development plan there will be policies that complement or support each other.
Some will promote development of one type or another in a particular location, or by allocating sites for particular land uses, including the development of housing.
Others will reinforce the policies of promotion or the site allocations by restricting development in parts of the plan area, either in a general way for example, by preventing development in the countryside or outside defined settlement boundaries or with a more specific planning purpose such as protecting the character of the landscape or maintaining the separation between settlements. (para 34)
Whether a particular policy of a plan was a relevant policy in that sense was a matter for the decision maker, not the court (para 45).
Furthermore 46.
We must emphasize here that the policies in paragraphs 14 and 49 of the NPPF do not make out of date policies for the supply of housing irrelevant in the determination of a planning application or appeal.
Nor do they prescribe how much weight should be given to such policies in the decision.
Weight is, as ever, a matter for the decision maker Neither of those paragraphs of the NPPF says that a development plan policy for the supply of housing that is out of date should be given no weight, or minimal weight, or, indeed, any specific amount of weight.
They do not say that such a policy should
simply be ignored or disapplied
In relation to the Yoxford site, the court agreed with Supperstone J that the inspector had wrongly applied the erroneous narrow interpretation.
Policies SP 19, 27 and 29, were all relevant policies in that they all affect the supply of housing land in a real way by restraining it (paras 51 52).
The court also agreed with the judge that the inspector had been mistaken in assuming that the physical limits of the village had been established in the 2013 plan (para 58); and also that he had misapplied paragraph 135 relating to heritage assets (para 65).
In that respect there could be no criticism of his treatment of the impact of the development on the local landscape, but what was lacking was a distinct and clearly reasoned assessment of the effect the development would have upon the significance of the parkland as a heritage asset, and, crucially, the balanced judgment called for by paragraph 135, having regard to the scale of any harm or loss and the significance of the heritage asset. (para 65)
In respect of the Willaston site, the court disagreed with Lang Js conclusion that policy NE.4 was not a relevant policy for the supply of housing.
The inspector had made no error of law in that respect, and his decision should be restored (paras 69 71).
Discussion
Interpretation of paragraph 14
The argument, here and below, has concentrated on the meaning of paragraph 49, rather than paragraph 14 and the interaction between the two.
However, since the primary purpose of paragraph 49 is simply to act as a trigger to the operation of the tilted balance under paragraph 14, it is important to understand how that is intended to work in practice.
The general effect is reasonably clear.
In the absence of relevant or up to date development plan policies, the balance is tilted in favour of the grant of permission, except where the benefits are significantly and demonstrably outweighed by the adverse effects, or where specific policies indicate otherwise. (See also the helpful discussion by Lindblom J in Bloor Homes East Midlands Ltd v Secretary of State for Communities and Local Government [2014] EWHC 754 (Admin), paras 42ff)
It has to be borne in mind also that paragraph 14 is not concerned solely with housing policy.
It needs to work for other forms of development covered by the development plan, for example employment or transport.
Thus, for example, there may be a relevant policy for the supply of employment land, but it may become out of date, perhaps because of the arrival of a major new source of employment in the area.
Whether that is so, and with what consequence, is a matter of planning judgement, unrelated of course to paragraph 49 which deals only with housing supply.
This may in turn have an effect on other related policies, for example for transport.
The pressure for new land may mean in turn that other competing policies will need to be given less weight in accordance with the tilted balance.
But again that is a matter of pure planning judgement, not dependent on issues of legal interpretation.
If that is the right reading of paragraph 14 in general, it should also apply to housing policies deemed out of date under paragraph 49, which must accordingly be read in that light.
It also shows why it is not necessary to label other policies as out of date merely in order to determine the weight to be given to them under paragraph 14.
As the Court of Appeal recognised, that will remain a matter of planning judgement for the decision maker.
Restrictive policies in the development plan (specific or not) are relevant, but their weight will need to be judged against the needs for development of different kinds (and housing in particular), subject where applicable to the tilted balance.
Paragraph 49
Unaided by the legal arguments, I would have regarded the meaning of paragraph 49 itself, taken in context, as reasonably clear, and not susceptible to much legal analysis.
It comes within a group of paragraphs dealing with delivery of housing.
The context is given by paragraph 47 which sets the objective of boosting the supply of housing.
In that context the words policies for the supply of housing appear to do no more than indicate the category of policies with which we are concerned, in other words housing supply policies.
The word for simply indicates the purpose of the policies in question, so distinguishing them from other familiar categories, such as policies for the supply of employment land, or for the protection of the countryside.
I do not see any justification for substituting the word affecting, which has a different emphasis.
It is true that other groups of policies, positive or restrictive, may interact with the housing policies, and so affect their operation.
But that does not make them policies for the supply of housing in the ordinary sense of that expression.
In so far as the paragraph 47 objectives are not met by the housing supply policies as they stand, it is quite natural to describe those policies as out of date to that extent.
As already discussed, other categories of policies, for example those for employment land or transport, may also be found to be out of date for other reasons, so as to trigger the paragraph 14 presumption.
The only difference is that in those cases there is no equivalent test to that of the five year supply for housing.
In neither case is there any reason to treat the shortfall in the particular policies as rendering out of date other parts of the plan which serve a different purpose.
This may be regarded as adopting the narrow meaning, contrary to the conclusion of the Court of Appeal.
However, this should not be seen as leading, as the lower courts seem to have thought, to the need for a legalistic exercise to decide whether individual policies do or do not come within the expression.
The important question is not how to define individual policies, but whether the result is a five year supply in accordance with the objectives set by paragraph 47.
If there is a failure in that respect, it matters not whether the failure is because of the inadequacies of the policies specifically concerned with housing provision, or because of the over restrictive nature of other non housing policies.
The shortfall is enough to trigger the operation of the second part of paragraph 14.
As the Court of Appeal recognised, it is that paragraph, not paragraph 49, which provides the substantive advice by reference to which the development plan policies and other material considerations relevant to the application are expected to be assessed.
The Court of Appeal was therefore right to look for an approach which shifted the emphasis to the exercise of planning judgement under paragraph 14.
However, it was wrong, with respect, to think that to do so it was necessary to adopt a reading of paragraph 49 which not only changes its language, but in doing so creates a form of non statutory fiction.
On that reading, a non housing policy which may objectively be entirely up to date, in the sense of being recently adopted and in itself consistent with the Framework, may have to be treated as notionally out of date solely for the purpose of the operation of paragraph 14.
There is nothing in the statute which enables the Secretary of State to create such a fiction, nor to distort what would otherwise be the ordinary consideration of the policies in the statutory development plan; nor is there anything in the NPPF which suggests an intention to do so.
Such an approach seems particularly inappropriate as applied to fundamental policies like those in relation to the Green Belt or Areas of Outstanding Natural Beauty.
No one would naturally describe a recently approved Green Belt policy in a local plan as out of date, merely because the housing policies in another part of the plan fail to meet the NPPF objectives.
Nor does it serve any purpose to do so, given that it is to be brought back into paragraph 14 as a specific policy under footnote 9.
It is not out of date, but the weight to be given to it alongside other material considerations, within the balance set by paragraph 14, remains a matter for the decision maker in accordance with ordinary principles.
The two appeals
Against this background I can deal relatively shortly with the two individual appeals.
On both I arrive ultimately at the same conclusion as the Court of Appeal.
It is convenient to begin with the Willaston appeal, where the issues are relatively straightforward.
On any view, quite apart from paragraph 49, the current statutory development plan was out of date, in that its period extended only to 2011.
On my understanding of paragraph 49, the council and the inspector both erred in treating policy NE.2 (Countryside) as a policy for the supply of housing.
But that did not detract materially from the force of his reasoning (see the summary in paras 44 45 above).
He was clearly entitled to conclude that the weight to be given to the restrictive policies was reduced to the extent that they derived from settlement boundaries that in turn reflect out of date housing requirements (para 94).
He recognised that policy NE.4 had a more specific purpose in maintaining the gap between settlements, but he considered that the proposal would not cause significant harm in this context (para 95).
His final conclusion (para 101) reflected the language of paragraph 14 (the tilted balance).
There is no reason to question the validity of the permission.
The Yoxford appeal provides an interesting contrast, in that there was an up to date development plan, adopted in the previous year; but its housing supply policies failed to meet the objectives set by paragraph 47 of the NPPF.
The inspector rightly recognised that they should be regarded as out of date for the purposes of paragraph 14.
At the same time, it provides a useful illustration of the unreality of attempting to distinguish between policies for the supply of housing and policies for other purposes.
Had it mattered, I would have been inclined to place in the housing category policy SP2, the principal policy for housing allocations.
SP 19 (settlement policy) would be more difficult to place, since, though not specifically related to housing, it was seen (as the commentary indicated) as a planning tool designed to differentiate between developed areas and the countryside.
Understandably, in the light of the judicial guidance then available to him, the inspector thought it necessary to make the distinction, and to reflect it in the planning balance.
He categorised both SP 19 and SP 27 as non housing policies, and for that reason to be regarded as up to date (see para 35 above).
Under the Court of Appeals interpretation this was an erroneous approach, because each of these policies affected the supply of housing, and should have been considered out of date for that reason.
On my preferred approach his categorisation was not so much erroneous in itself, as inappropriate and unnecessary.
It only gave rise to an error in law in so far as it may have distorted his approach to the application of paragraph 14.
As to that I agree with the courts below that his approach (through no fault of his own) was open to criticism.
Having found that the settlement policy was up to date, and that the boundary had been approved in the recent plan, he seems to have attached particular weight to the fact that it had been defined in the very recently adopted Local Plan (para 37 above).
I would not criticise him for failing to record that it had been carried forward from the previous plan.
In some circumstances that could be a sign of robustness in the policy.
But in this case it was clear from the plan itself that the settlement boundary was, to an extent at least, no more than the counterpart of the housing policies, and that, under the paragraph 14 balance, its weight might need to be reduced if the housing objectives were to be fulfilled.
He should not have allowed its supposed status as an up to date policy under paragraph 49 to give it added weight.
It is true that he also considered the merits of the site (quite apart from the plan) as providing a strong and definite boundary to the village (para 20).
But I am not persuaded that this is sufficient to make it clear that the decision would have been the same in any event.
I do not, however, agree with the Court of Appeals criticisms of his treatment of the Heritage Asset policy.
Paragraph 10 of his letter (summarised at para 36 above) is in my view a faithful application of the guidance in paragraph 215 of the Framework.
That does not, and could not, suggest that even saved development plan policies are simply replaced by the policies in the Framework.
What it does is to indicate that the weight to be given to the saved policies should be assessed by reference to their degree of consistency with the Framework.
That is what the inspector did.
Having done so he was entitled to be guided by the policies as stated in the saved plans, and not treat them as replaced by paragraph 135.
In any event, in so far as there needs to be a balanced judgement, which the Court of Appeal regarded as crucial (para 65), that seems to me provided by the last section of his letter, headed appropriately the planning balance.
Overall the letter seems to me an admirably clear and carefully constructed appraisal of the relevant planning issues, in the light of the judicial guidance then available.
It is with some reluctance therefore that I feel bound to agree with the Court of Appeal that the decision must be quashed, albeit on narrower grounds.
The result, is that the order of Supperstone J will be affirmed, and the planning appeal will fall to be re determined.
Conclusion
For these reasons I would dismiss both appeals.
LORD GILL: (with whom Lord Neuberger, Lord Clarke and Lord Hodge agree)
I agree with Lord Carnwaths conclusions on the decision that is appealed against and with his views as to the disposal of these appeals.
I only add some comments on the approach that should be taken in the application of the National Planning Policy Framework (the Framework) in planning applications for housing development.
These appeals raise a question as to the respective roles of the courts and of the planning authorities and the inspectors in relation to guidance of this kind; and a specific question of interpretation arising from paragraph 49 of the Framework.
In Tesco Stores Ltd v Dundee City Council, (ASDA Stores Ltd intervening) ([2012] UKSC 13) Lord Reed considered the former question in relation to development plan policies.
He expressed the view, as a general principle of administrative law, that policy statements should be interpreted objectively in accordance with the language used, read as always in its proper context (at para 18).
The proper context, in my view, is provided by the over riding objectives of the development plan and the specific objectives to which the policy statement in question is directed.
Taking a similar approach to that of Lord Reed, I consider that it is the proper role of the courts to interpret a policy where the meaning of it is contested, while that of the planning authority is to apply the policy to the facts of the individual case.
In my opinion, the same distinction falls to be made in relation to guidance documents such as the Framework.
In both cases the issue of interpretation is the same.
It is about the meaning of words.
That is a question for the courts.
The application of the guidance, as so interpreted, to the individual case is exclusively a planning judgment for the planning authority and the inspectors.
The guidance given by the Framework is not to be interpreted as if it were a statute.
Its purpose is to express general principles on which decision makers are to proceed in pursuit of sustainable development (paras 6 10) and to apply those principles by more specific prescriptions such as those that are in issue in these appeals.
In my view, such prescriptions must always be interpreted in the overall context of the guidance document.
That context involves the broad purpose of the guidance and the particular planning problems to which it is directed.
Where the guidance relates to decision making in planning applications, it must be interpreted in all cases in the context of section 70(2) of the Town and Country Planning Act 1990 and section 38(6) of the Planning and Compulsory Purchase Act 2004, to which the guidance is subordinate.
While the Secretary of State must observe these statutory requirements, he may reasonably and appropriately give guidance to decision makers who have to apply them where the planning system is failing to satisfy an unmet need.
He may do so by highlighting material considerations to which greater or less weight may be given with the over riding objective of the guidance in mind.
It is common ground that such guidance constitutes a material consideration (Framework, para 2).
In relation to housing, the objective of the Framework is clear.
Section 6, Delivering a wide choice of high quality homes, deals with the national problem of the unmet demand for housing.
The purpose of paragraph 47 is to boost significantly the supply of housing.
To that end it requires planning authorities (a) to ensure inter alia that plans meet the full, objectively assessed needs for market and affordable housing in the housing market area, as far as is consistent with the policies set out in the Framework, including the identification of key sites that are critical to the delivery of the housing strategy over the plan period; (b) to identify and update annually a supply of specific deliverable sites sufficient to provide five years worth of housing against their housing requirements, with an additional buffer of 5% to ensure choice and competition in the market for the land; and (c) in the longer term to identify a supply of specific, developable sites or broad locations for growth for years six to ten and, where possible, for years 11 15.
The importance that the guidance places on boosting the supply of housing is further demonstrated in the same paragraph by the requirements that for market and affordable housing planning authorities should illustrate the expected rate of housing delivery through a housing trajectory for the plan period and set out a housing implementation strategy for the full range of housing, describing how they will maintain delivery of a five years supply of housing land to meet their housing target; and that they should set out their own approach to housing density to reflect local circumstances.
The message to planning authorities is unmistakeable.
These requirements, and the insistence on the provision of deliverable sites sufficient to provide the five years worth of housing, reflect the futility of authorities relying in development plans on the allocation of sites that have no realistic prospect of being developed within the five year period.
Among the obvious constraints on housing development are development plan policies for the preservation of the greenbelt, and environmental and amenity policies and designations such as those referred to in footnote 9 of paragraph 14.
The rigid enforcement of such policies may prevent a planning authority from meeting its requirement to provide a five years supply.
This is the background to the interpretation of paragraph 49.
The paragraph applies where the planning authority has failed to demonstrate a five years supply of deliverable sites and is therefore failing properly to contribute to the national housing requirement.
In my view, paragraph 49 derives its content from paragraph 47 and must be applied in decision making by reference to the general prescriptions of paragraph 14.
To some extent the issue in these cases has been obscured by the doctrinal controversy which has preoccupied the courts hitherto between the narrow and the wider interpretation of the words relevant policies for the supply of housing.
I think that the controversy results from too narrow a focus on the wording of that paragraph.
I agree with the view taken by Lindblom LJ in his lucid judgement that the task of the court is not to try to reconcile the various first instance judgments on the point, but to interpret the policy of paragraph 49 correctly (at para 23).
In interpreting that paragraph, in my opinion, the court must read it in the policy context to which I have referred, having in view the planning objective that the Framework seeks to achieve.
I regret to say that I do not agree with the interpretation of the words relevant policies for the supply of housing that Lindblom LJ has favoured.
In my view, the straightforward interpretation is that these words refer to the policies by which acceptable housing sites are to be identified and the five years supply target is to be achieved.
That is the narrow view.
The real issue is what follows from that.
If a planning authority that was in default of the requirement of a five years supply were to continue to apply its environmental and amenity policies with full rigour, the objective of the Framework could be frustrated.
The purpose of paragraph 49 is to indicate a way in which the lack of a five years supply of sites can be put right.
It is reasonable for the guidance to suggest that in such cases the development plan policies for the supply of housing, however recent they may be, should not be considered as being up to date.
If the policies for the supply of housing are not to be considered as being up to date, they retain their statutory force, but the focus shifts to other material considerations.
That is the point at which the wider view of the development plan policies has to be taken.
Paragraph 49 merely prescribes how the relevant policies for the supply of housing are to be treated where the planning authority has failed to deliver the supply.
The decision maker must next turn to the general provisions in the second branch of paragraph 14.
That takes as the starting point the presumption in favour of sustainable development, that being the golden thread that runs through the Framework in respect of both the drafting of plans and the making of decisions on individual applications.
The decision maker should therefore be disposed to grant the application unless the presumption can be displaced.
It can be displaced on only two grounds both of which involve a planning judgment that is critically dependent on the facts.
The first is that the adverse impacts of a grant of permission, such as encroachment on the greenbelt, will significantly and demonstrably outweigh the benefits of the proposal.
Whether the adverse impacts of a grant of permission will have that effect is a matter to be assessed against the policies in the Framework, taken as a whole.
That clearly implies that the assessment is not confined to environmental or amenity considerations.
The second ground is that specific policies in the Framework, such as those described in footnote 9 to the paragraph, indicate that development should be restricted.
From the terms of footnote 9 it is reasonably clear that the reference to specific policies in the Framework cannot mean only policies originating in the Framework itself.
It must also mean the development plan policies to which the Framework refers.
Green belt policies are an obvious example.
Although my interpretation of the guidance differs from that of the Court of Appeal, I have come to the same conclusions in relation to the disposal of these cases.
I agree with Lord Carnwath that in the Willaston decision, notwithstanding an erroneous interpretation of policy NE.2 as being a policy for the supply of housing, the Inspector got the substance of the matter right and accurately applied paragraph 14.
I agree too with Lord Carnwath, for the reasons that he gives (at para 68), that in the Yoxford decision the Inspector made a material, but understandable, error.
I would therefore dismiss both appeals.
|
These appeals relate to the proper interpretation of paragraph 49 of the National Planning Policy Framework (NPPF), as well as the NPPFs relationship with the statutory development plan.
Part 2 of the Planning and Compulsory Purchase Act 2004 requires local planning authorities to prepare a development plan.
In preparing local development documents authorities must have regard to national policies and advice issued by the Secretary of State, pursuant to section 19(2).
Section 38(6) of the 2004 Act and section 70(2) of the Town and Country Planning Act 1990 provide for the development plan to be taken into account in the handling of planning applications.
The NPPF was published on 27 March 2012.
Paragraph 14 of the Framework deals with the presumption in favour of sustainable development, and includes the tilted balance provision: that where the development plan is silent or policies out of date, permission should be granted unless any adverse impacts of doing so would significantly and demonstrably outweigh the benefits, when assessed against the policies in this Framework taken as a whole.
Paragraph 49 adds that: Relevant policies for the supply of housing should not be considered up to date if the local planning authority cannot demonstrate a five year supply of deliverable housing sites.
In Suffolk Coastal the council refused planning permission for a development of 26 houses in Yoxford, upheld by the inspector on appeal.
The inspector considered which local policies were relevant policies for the supply of housing within the meaning of paragraph 49 of the NPPF.
The High Court held that he had erred in thinking that paragraph 49 only applied to policies dealing with the positive provision of housing and so quashed his refusal.
Its decision was confirmed by the Court of Appeal.
In Richborough Estates the council failed to determine the application, and Richborough Estates appeal was allowed by the inspector.
The council succeeded in the High Court on the basis that the inspector erred in treating one of the local policies as a relevant policy under paragraph 49 and in seeking to divide the policy, so as to apply it in part only.
That decision was reversed by the Court of Appeal.
The Supreme Court unanimously dismisses both councils appeals.
Lord Carnwath gives the lead judgment, with which Lord Neuberger, Lord Clarke and Lord Hodge agree.
Lord Gill gives a concurring judgment, with which Lord Neuberger, Lord Clarke and Lord Hodge agree.
The Secretary of States power to issue national policy guidance such as the NPPF derives, expressly or by implication, from the planning Acts which give him overall responsibility for oversight of the
planning system.
This is reflected both in specific requirements and more generally in his power to intervene in many aspects of the planning process [19 20].
The policy making role should not, however, be overstated: the NPPF itself makes clear that in respect of the determination of planning applications (by contrast with plan making) it is not more than guidance for the purposes of section 70(2) of the 1990 Act.
It does not displace the primacy of the statutory development plan [21].
The correct approach to the interpretation of a statutory development plan was discussed by the Supreme Court in Tesco Stores Ltd v Dundee City Council [2012] UKSC 13 [23].
It is important that the role of the court is not overstated: in Tesco Stores Lord Reed identified the interpretation of the word suitable as the short point to determine, and further recognised that some policies in the development plan may be expressed in broader terms and not require the same level of legal analysis [24].
These are statements of policy whether in a development plan or in a non statutory statement such as the NPPF and must be read in that light; they are not statutory texts [74].
Lord Gill adds that the NPPF expresses general principles applied by more specific prescriptions.
These must always be interpreted in the overall context of the guidance document [75].
Furthermore, the courts should respect the expertise of the specialist planning inspectors, and start at least from the presumption that they will have understood the policy framework correctly.
Their position is in some ways analogous to that of expert tribunals, in respect of which the courts have cautioned against undue intervention by the courts in policy judgments within their areas of specialist competence [25].
Recourse to the courts may sometimes be needed to resolve distinct issues of law, or to ensure consistency of interpretation in relation to specific policies.
However, it is important to distinguish clearly between issues of interpretation of policy, appropriate for judicial analysis, and issues of judgement in the application of that policy [26].
Lord Gill describes the proper role of the courts as interpreting a policy or the NPPF where its meaning is contested, while that of the planning authority is to apply the policy or guidance to the facts of the individual case [72, 73].
The primary purpose of paragraph 49 of the NPPF is simply to act as a trigger to the operation of the tilted balance under paragraph 14 [54].
Paragraph 14 unlike paragraph 49 is not concerned solely with housing policy and needs to work for other forms of development covered by the development plan.
For example, whether a relevant policy for the supply of employment land becomes out of date is a matter of planning judgment [55].
Housing policies deemed out of date under paragraph 49 must also be read in that light and it is not necessary to label other policies as out of date merely in order to determine the weight to be given to them under paragraph 14 [56].
Paragraph 49 appears in a group of paragraphs dealing with the delivery of housing, with paragraph 47 providing the objective of boosting the housing supply [76, 80].
In that context the words policies for the supply of housing indicate the category of policies with which we are concerned: the word for simply indicates the purpose of the policies in question.
There is no justification for substituting the word affecting which has a different emphasis [57, 82].
Although this can be regarded as adopting the narrow meaning, it should not be seen as leading to the need for a legalistic exercise to decide whether individual policies do or do not come within the expression.
The important question is not how to define the individual policies, but whether the result is a five year supply in accordance with the objectives set by paragraph 47 [59].
On both appeals the Supreme Court reaches the same result as the Court of Appeal [62, 86]: in Richborough Estates the inspector erred in treating policy NE.2 as a policy for the supply of housing under paragraph 49, but that did not detract materially from the force of his reasoning [63].
In Suffolk Coastal the inspectors approach was open to criticism because his categorisation of SP 19 and SP 27 was inappropriate and unnecessary, rather than erroneous as the Court of Appeal held.
It nevertheless gave rise to an error of law insofar as it may have distorted his approach to paragraph 14 [65, 68].
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Biometric data such as DNA samples, DNA profiles and fingerprints is of enormous value in the detection of crime.
It sometimes enables the police to solve crimes of considerable antiquity.
There can be no doubt that a national database containing the data of the entire population would lead to the conviction of persons who would otherwise escape justice.
But such a database would be controversial.
It is not permitted by our law.
Parliament has, however, allowed the taking and retention of data from certain persons.
The questions raised by these appeals are whose data may be retained and for how long.
originally enacted, provided: Section 64 of the Police and Criminal Evidence Act 1984 (PACE), as (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken.
Section 64(1A) of PACE was enacted by section 82 of the Criminal Justice
and Police Act 2001.
It is still in force.
It provides: (1A) Where(a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
It will be seen at once that section 64(1A) does not specify any time limit for the retention of the data or any procedure to regulate its destruction.
These are matters which are addressed in guidelines issued by the Association of Chief Police Officers (the ACPO guidelines) entitled Exceptional Case Procedure for Removal of DNA, Fingerprints and PNC Records and published on 16 March 2006.
So far as is material, these provide: it is important that national consistency is achieved when considering the removal of such records.
Chief Officers have the discretion to authorise the deletion of any specific data entry on the [Police National Database] owned by them.
They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry.
It is suggested that this discretion should only be exercised in exceptional cases.
Exceptional cases will by definition be rare.
They might include cases where the original arrest or sampling was found to be unlawful.
Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance.
In R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) the claimants sought judicial review of the retention by the police of their fingerprints and DNA samples on the grounds inter alia that it was incompatible with article 8 of the European Convention on Human Rights (ECHR).
The majority of the House of Lords held that the retention did not constitute an interference with the claimants article 8 rights, but they unanimously held that any interference was justified under article 8(2).
The ECtHR disagreed: see its decision in S and Marper v United Kingdom (2008) 48 EHRR 1169 (Marper ECtHR).
In considering whether retention of data in accordance with the ACPO guidelines was proportionate and struck a fair balance between the competing public and private interests, the court said at para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be takenand retainedfrom a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances.
The court concluded at para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard.
Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society.
On 16 December 2008, the Secretary of the State for the Home Department announced the Governments preliminary response to the ECtHR decision.
The data of children under the age of 10 would be removed from the database immediately and the Government would issue a White Paper and consult on bringing greater flexibility and fairness into the system by stepping down some individuals over timea differentiated approach, possibly based on age, or on risk, or on the nature of the offences involved.
The White Paper, Keeping the Right People on the DNA Database, was published on 7 May 2009.
It contained a series of proposals for the retention of data, the details of which are immaterial for present purposes.
On 28 July 2009, ACPOs Director of Information wrote to all chief constables (including the respondent Commissioner) saying that the final draft for publication of new guidelines was not expected to take effect until 2010 and that until that time the current retention policy on fingerprints and DNA remains unchanged.
On 11 November 2009, after the consultation period had ended, the Secretary of State made a written ministerial statement outlining a revised set of proposals.
Again, the details are not material.
It was decided to include these proposals in the Crime and Security Act 2010 (the 2010 Act) which had its first reading on 19 November 2009.
The 2010 Act received the Royal Assent on 8 April 2010, but the relevant provisions (sections 14, 22 and 23) have not been brought into effect.
Section 23 provides that the Secretary of State must make arrangements for a National DNA Database Strategy Board (Database Board) to oversee the operation of the National DNA Database (section 23(1)); the Database Board must issue guidance about the immediate destruction of DNA samples and DNA profiles which are or may be retained under PACE (section 23(2)); and any chief officer of a police force in England and Wales must act in accordance with any such guidance issued (section 23(3)).
The Coalition Government stated in the Queens Speech on 25 May 2010 that it intended to seek amendment of the 2010 Act by bringing forward legislative proposals (in Chapter 1 of Part 1 of the Protection of Freedoms Bill) along the lines of the Scottish system.
This system permits retention of data for no more than three years if the person is suspected (but not convicted) of certain sexual or violent offences, and permits an application to be made to a Sheriff by a Chief Constable for an extension of that period (for a further period of not more than two years, although successive applications may be made): see sections 18 and 18A of the Criminal Procedure (Scotland) Act 1995, as inserted by sections 83(2) and 104 of the Police, Public Order and Criminal Justice (Scotland) Act 2006.
GC and C issued proceedings for judicial review of the retention of their data on the grounds that, in the light of Marper ECtHR, its retention was incompatible with their article 8 rights.
Recognising that there was an irreconcilable conflict between Marper UK and Marper ECtHR and that the former decision was binding on it, the Divisional Court (Moses LJ and Wyn Williams J) dismissed both judicial review challenges on 16 July 2010 and in both cases granted a certificate pursuant to section 12 of the Administration of Justice Act 1969 that the cases were appropriate for a leapfrog appeal to the Supreme Court.
The facts of these two cases can be stated briefly.
On 20 December 2007, GC was arrested on suspicion of common assault on his girlfriend.
He denied the offence.
A DNA sample, fingerprints and photographs were taken after his arrest.
On the same day, he was released on police bail without charge.
Before the return date of 21 February 2008, he was informed that no further action would be taken.
On 23 March 2009, GCs solicitors requested the destruction of the DNA sample, DNA profile and fingerprints.
The Commissioner refused to do so on the grounds that there were no exceptional circumstances within the meaning of the ACPO guidelines.
On 17 March 2009, C was arrested on suspicion of rape, harassment and fraud.
His fingerprints and a DNA sample were taken.
He denied the allegations saying that they had been fabricated by his ex girlfriend and members of her family.
No further action was taken by the police in respect of the harassment and fraud allegations.
On 18 March 2009, he was charged with rape.
On 5 May 2009 at Woolwich Crown Court, the prosecution offered no evidence and C was acquitted.
C requested the destruction of the data and its deletion from the police database.
On 12 November and again on 2 February 2010, the Commissioner informed C that his case was not being treated as exceptional within the meaning of the ACPO guidelines and his request was refused.
The issue
It is common ground that, in the light of Marper ECtHR, the indefinite retention of the appellants data is an interference with their rights to respect for private life protected by article 8 of the ECHR which, for the reasons given by the ECtHR, is not justified under article 8(2).
It is agreed that Marper UK cannot stand.
The issue that arises on these appeals is what remedy the court should grant in these circumstances.
On behalf of C, Mr Fordham QC submits that the court should grant a declaration under section 8(1) of the Human Rights Act 1998 (HRA) that the retention of Cs biometric data is unlawful.
Section 8(1) provides that 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.
He seeks no other relief.
On behalf of GC, Mr Cragg seeks an order quashing the ACPO guidelines and a reconsideration of the retention of GCs data within 28 days.
The primary submission of Lord Pannick QC (on behalf of the Commissioner of Police of the Metropolis) is that the correct remedy is to grant a declaration of incompatibility under section 4 of the HRA.
The primary submission of Mr Eadie QC (on behalf of the Secretary of State) is that, although there is no fundamental objection to a declaration of incompatibility, it is not necessary to grant one.
The arguments in support of a declaration of incompatibility
Section 6 of the HRA provides: (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.
In summary, Lord Pannick and Mr Eadie say that it is not possible to read or give effect to section 64(1A) of PACE in a way which is consistent with Marper ECtHR.
They accept that section 64(1A) confers a discretionary power on the police to retain the data obtained from a suspect in connection with the investigation of an offence.
That is why they concede that section 6(2)(a) of the HRA is not in play.
But they say that it is a power which, save in exceptional circumstances, must be exercised so as to retain the data indefinitely in all cases.
Section 64(1A) cannot, therefore, be read or given effect so as to permit the power to be exercised proportionately in the way described in Marper ECtHR.
The hands of the police are tied by section 64(1A) and that position is faithfully reflected in the ACPO guidelines.
Two arguments are advanced in support of this submission.
The first (and principal) argument is that to interpret section 64(1A) as requiring police authorities to comply with article 8 would defeat the statutory purpose of establishing a scheme for the protection of the public interest free from the limits and protections required by article 8.
It would rewrite the statutory provision in a manner inconsistent with a fundamental feature of the legislative scheme which is that, instead of being destroyed, data taken from all suspects shall be retained indefinitely.
It is this feature of the scheme which leads Lord Rodger to invoke authorities such as Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997.
Parliament intended that the discretion conferred by section 64(1A) should be exercised to promote the statutory policy and object that data taken from all suspects in connection with the investigation of an offence should be retained indefinitely.
Accordingly, any exercise of the discretion conferred by section 64(1A) which does not meet this statutory policy and object would frustrate the intention of Parliament.
The second argument is that the nature of the changes to the ACPO guidelines that would be required in order to make them compatible with the ECHR is such that, for reasons of institutional competence and democratic accountability, these should be left to Parliament to make.
The choice of compatible scheme involves a difficult and sensitive balancing of the interests of the general community against the rights of the individual and a number of different schemes would be compatible.
Neither the police nor the court (in the event of a judicial review challenge to the scheme devised by the police) is equipped to make the necessary policy choices.
Thus, for example, only Parliament is constitutionally and institutionally competent to decide whether to adopt the Scottish model in preference to the 2010 Act model.
Discussion
The first argument
This argument is based on the premise that it was the intention of Parliament that, save in exceptional cases, the data taken from all suspects in connection with the investigation of an offence should be retained indefinitely.
It goes without saying that, if that premise is correct, section 64(1A) of PACE can only be interpreted as conferring a discretion which must be exercised so as to give effect to that intention.
The conclusion necessarily follows from the premise.
On that hypothesis, a purposive interpretation of the statute inevitably leads to the conclusion that the first argument is correct.
But I do not accept the premise.
It is uncontroversial that Parliament intended (i) to abrogate section 64(1) of PACE and remove the obligation to destroy data as soon as practicable after the conclusion of the proceedings if the suspect is cleared of the offence; (ii) to create a scheme for the retention of the data taken from a suspect, whether or not he is cleared of the offence and whether or not he is even prosecuted; and (iii) that the data was to be retained so that it might be used for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came (to use the language of section 64(1A)).
I shall refer to these purposes as the statutory purposes.
It is also clear that, in order to promote the statutory purposes, Parliament must have intended that an extended, even a greatly extended, database should be created.
But in my view that is as far as it goes.
To argue from the premise that Parliament intended that a greatly extended database should be created to the conclusion that it intended that, save in exceptional circumstances, the data should be retained indefinitely in all cases is a non sequitur.
Parliament did not prescribe the essential elements of the scheme by which the statutory purposes were to be promoted.
That task was entrusted to the police, no doubt with the assistance of the Secretary of State.
If it had been intended to require a scheme whose essential elements included an obligation that, save in exceptional circumstances, the data lawfully obtained from all suspects should be retained indefinitely, that could easily have been expressly stated in the statute.
If that had been intended, surely section 64(1A) would have said in terms that, save in exceptional circumstances, the fingerprints and samples taken shall in every case be retained indefinitely after they have fulfilled the purpose for which they were taken.
This would have been the obvious way of expressing that intention.
The grant of an apparently unfettered discretion (signalled by the unqualified use of the word may) was certainly not the obvious way of expressing that intention.
The natural meaning of the word may is permissive, not mandatory.
As I have said, it is clear that Parliament intended to get rid of the requirement to destroy data after it has served its immediate purpose and to permit the retention of data in order to fulfil the statutory purposes.
But the statute is silent as to how the statutory purposes are to be fulfilled.
There is no reason to suppose that Parliament must have intended that this should be achieved in a disproportionate way so as to be incompatible with the ECHR.
Lord Rodger suggests that Mr Fordhams argument entails the proposition that under section 64(1A) the police were free to do what they liked and that the subsection contains nothing to delimit the exercise of their discretion.
I agree that, if this is the effect of Mr Fordhams argument, it would cast doubt as to its correctness.
But section 64(1A) clearly delimits the exercise of the discretion.
It must be exercised to enable the data to be used for the statutory purposes.
I would add that the discretion must be exercised in a way which is proportionate and rationally connected to the achievement of these purposes.
Thus, for example, the police could not exercise the power to retain the data only of those suspected of minor offences; or only of serious offences of a particular type; or only of suspects of a certain age or gender; or only for a short period.
But it is possible to exercise the discretion in a rational and proportionate manner which respects and fulfils the statutory purpose and does not involve the indefinite retention of data taken from all suspects, regardless of their age and the nature of the alleged offence.
The Commissioner and the Secretary of State assert that a fundamental feature (possibly the fundamental feature) of section 64(1A) is that data should be retained for use from all suspects indefinitely.
But, although expressed in different words, this is the same as the premise argument that I have already rejected.
For the reasons I have given for rejecting that argument, it is not possible to extract this fundamental feature from the statute, whether one looks at its language alone or in the context of the mischief which it was intended to cure.
In my view, the fundamental feature of section 64(1A) is that it gives the police the power to retain and use data from suspects for the stated statutory purposes of preventing crime, investigation of offences and the conduct of prosecutions.
But that does not justify a blanket or disproportionate practice.
Neither indefinite retention nor indiscriminate retention can properly be said to be fundamental features of section 64(1A).
As I have said, following the judgment of the ECtHR the Secretary of State for the Home Department took steps to take the DNA of children under the age of 10 off the database.
If the meaning of section 64(1A) is that, save in exceptional cases, there is a duty to retain samples taken from all suspects indefinitely, then surely this amendment to the ACPO guidelines was ultra vires section 64(1A).
That is not, however, suggested by Lord Pannick or Mr Eadie.
It seems to me that, once it is accepted that section 64(1A) permits a scheme which does not insist on the indefinite retention of data in all cases, then the extreme position advocated by the Commissioner and the Secretary of State cannot be maintained.
So what did Parliament intend if it was not a scheme of indefinite retention in all cases? The obvious answer is a proportionate scheme which gives effect to the statutory purposes and is compatible with the ECHR.
The fact that it is possible to create a number of different schemes all of which would meet these criteria does not matter.
Section 64(1A) gives a power.
Powers can often be lawfully exercised in different ways.
The Commissioner and the Secretary of State seek support for the first argument from two sources.
The first is the Explanatory Notes to the 2001 Act which explained at para 210: An additional measure has been included to allow all fingerprints and DNA samples lawfully taken from suspects during the course of an investigation to be retained and used for the purposes of prevention and detection of crime and the prosecution of offences.
This arises from the decisions of the Court of Appeal (Criminal Division) in R v Weir and R v B (Attorney General's Reference No 3/199) May 2000.
These raised the issue of whether the law relating to the retention and use of DNA samples on acquittal should be changed.
In these two cases compelling DNA evidence that linked one suspect to a rape and the other to a murder could not be used and neither could be convicted.
This was because at the time the matches were made both defendants had either been acquitted or a decision made not to proceed with the offences for which the DNA profiles were taken.
Currently section 64 of PACE specifies that where a person is not prosecuted or is acquitted of the offence the sample must be destroyed and the information derived from it can not be used.
The subsequent decision of the House of Lords overturned the ruling of the Court of Appeal.
The House of Lords ruled that where a DNA sample fell to be destroyed but had not been, although section 64 of PACE prohibited its use in the investigation of any other offence, it did not make evidence obtained as a failure to comply with that prohibition inadmissible, but left it to the discretion of the trial judge.
The Act removes the requirement of destruction and provides that fingerprints and samples lawfully taken on suspicion of involvement in an offence or under the Terrorism Act can be used in the investigation of other offences.
This new measure will bring the provisions of PACE for dealing with fingerprint and DNA evidence in line with other forms of evidence.
But this does not advance matters.
It shows that Parliament intended to remove the requirement of destruction of data and that fingerprints and samples lawfully taken on suspicion of involvement in an offence . can be used in the investigation of other offences.
But that sheds no light on whether it was intended that there should be a policy of blanket indefinite retention.
The Commissioner and the Secretary of State draw attention to the words an additional measure has been included to allow all [data]to be retained (emphasis added).
But in my view this is an insufficient foundation on which to base a conclusion that the true meaning of section 64(1A) is that, save in exceptional circumstances, biometric data must be retained indefinitely in all cases.
Even if all means all data taken from all suspects, the Explanatory Notes do not say that data must be retained in all cases, still less do they say anything about how long the data must or may be kept.
There is no indication in the Notes that Parliament intended all material to be kept indefinitely even if it was not necessary to do so in an individual case within the meaning of article 8(2) of the ECHR.
The second source is certain passages in speeches of the House of Lords in Marper UK.
The issue there was whether section 64(1A) and the ACPO guidelines were compatible with article 8 and 14 of the ECHR: see para 6 of the speech of Lord Steyn.
At para 2, Lord Steyn said: But as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable.
But that is a statement at a high level of generality.
Lord Steyn was not purporting to define the statutory purpose with any precision.
At para 39 Lord Steyn addressed the submission on behalf of the appellants that the legislative aim (of assisting in the investigation of crimes in the future) could be achieved by less intrusive means.
He considered the conclusion of Sedley LJ in the Court of Appeal that the degree of suspicion should be considered in individual cases before a decision was made whether or not to retain the data.
He rejected this suggestion saying: this would not confer the benefits of a greatly expanded database and would involve the police in interminable and invidious disputes (subject to judicial review of individual decisions) about offences of which the individual had been acquitted.
I have already accepted that Parliament intended that the exercise of the section 64(1A) power should lead to a greatly expanded database and that Lord Steyn was rejecting the idea that the scheme contemplated by section 64(1A) should involve assessment of the degree of suspicion on a case by case basis.
But he was not saying that, subject to exceptional circumstances, section 64(1A) required the introduction of a scheme under which the data taken from all suspects would be retained indefinitely, since any other interpretation would undermine the statutory purpose.
At para 78, Lady Hale said that the whole community (as well as the individuals whose samples are collected) benefits from there being as large a database as it is possible to have.
The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
That is undoubtedly true.
But the system included the ACPO guidelines.
It was, therefore, not contentious that the system was designed to catch and retain as many samples as possible.
Moreover, leaving ECHR issues aside, section 64(1A) does allow the collection and retention of as many samples as possible.
Lady Hale was not, however, saying that section 64(1A) required the collection and retention of as many samples as possible.
Similarly, at para 88 Lord Brown said that the benefits of the larger database brought about by the now impugned amendment to PACE were manifest.
The more complete the database, the better the chance of detecting criminals and of deterring future crime.
But here too, Lord Brown was not considering the question whether section 64(1A) conferred a power which, save in exceptional circumstances, could only be exercised by requiring the retention of the data taken from all suspects indefinitely.
The question whether, leaving ECHR issues aside, section 64(1A) required the retention of the data taken from all suspects indefinitely was not in issue in Marper UK.
The focus of the argument in Marper UK was on whether section 64(1A) and the ACPO guidelines were compatible with the ECHR.
In particular, it was on whether article 8(1) was engaged and whether the ACPO scheme was justified under article 8(2).
The context of the observations relied on to support the first argument was the practice of the police, save in exceptional cases, to retain all data indefinitely.
There was no debate on whether, if article 8(1) was engaged and the ACPO guidelines could not be justified under article 8(2), section 64(1A) could be read and given effect in a way compatible with the ECHR.
So I reject the submission that Marper UK provides support for the submission that underpins the first argument, namely that it was the intention of Parliament that, save in exceptional cases, the data of all suspects should be retained indefinitely.
In my view, section 64(1A) permits a policy which (i) is less far reaching than the ACPO guidelines; (ii) is compatible with article 8 of the ECHR; and (iii) nevertheless, promotes the statutory purposes.
Those purposes can be achieved by a proportionate scheme.
It is possible to read and give effect to section 64(1A) in a way which is compatible with the ECHR and section 6(2)(b) of the HRA cannot be invoked to defeat the claim that the ACPO guidelines are unlawful by reason of section 6(1) of the HRA.
For the reasons that I have given, to interpret section 64(1A) compatibly with article 8 does not impermissibly cross the line where, to use the words of Lord Bingham in Sheldrake v Director of Public Prosecutions [2005] 1 AC 264, para 28, it 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.
This conclusion is consistent with the decision in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410.
The claimant was employed by an agency providing staff for schools.
The agency required her to apply under section 115(1) of the Police Act 1997 for an enhanced criminal record certificate giving the prescribed details of every relevant matter relating to her which was recorded in central records, since she was a prospective employee who was being considered for a position involving regularly being involved with persons under the age of 18.
Section 115(7) provided that, before issuing a certificate, the Secretary of State shall request the chief police officer of every relevant police force to provide any information which, in the chief officers opinion (a) might be relevant for the purpose described in the statement under subsection (2), and (b) ought to be included in the certificate.
The Commissioner of Police of the Metropolis disclosed certain information about the claimant which was included in the certificate.
She sought judicial review of the decision to disclose the information on the ground that her article 8 rights had been violated.
On behalf of the Secretary of State, it was submitted that the words any information and ought to be included in section 115(7) showed that Parliament intended widespread disclosure of relevant material and a narrow exception.
This interpretation was supported by the protective purpose of the legislation: see p 416G.
That was the practice under the relevant police guidelines.
It is true that there was no issue in that case about section 6(2) of the HRA.
That is why the analogy cannot be pressed too far.
But in essence it was being argued in the context of article 8(2) of the ECHR that it was a fundamental feature of the Police Act 1997 that all relevant information could (and should) be disclosed in a criminal record certificate, since anything less would defeat the fundamental protective purpose of the statute.
These submissions are similar to those advanced in the present case.
But they were rejected.
Despite the protective purpose of the legislation and the use of the word any, at para 44, Lord Hope said that the words ought to be included should be read and given effect in a way that was compatible with the applicants article 8 rights.
At para 81, Lord Neuberger MR adopted a broad interpretation of section 115(7)(b) and said that, in deciding whether the information ought to be included, there would be a number of different, sometimes competing, factors to weigh up.
For all these reasons, I would reject the first argument advanced on behalf of the Commissioner and the Secretary of State.
The second argument
The second argument is that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police (with or without the assistance of the Secretary of State) subject only to the judicial review jurisdiction of the court.
It is said that the creation of guidelines for the exercise of the section 64(1A) power is a matter for Parliament alone and that it could not have been intended that section 64(1A) should grant a broad discretion to the police such as is contended for by Mr Fordham.
This is because the context involves high policy, balancing the public interest in the effective detection, prosecution and prevention of crime against individual freedoms.
It is a matter of political controversy, as evidenced by the different policy solutions of the previous and present Government.
There are choices to be made between a variety of compatible legislative schemes.
These choices are for Parliament alone.
The police are in no position, constitutionally or institutionally, to choose between them.
It is important to note the scope of this argument.
It is not that Parliament could not have granted the police a discretionary power to retain data otherwise than on a blanket indefinite basis.
If it had wished to grant such a power to the police, Parliament obviously could have done so.
Rather, the argument is that the constitutional and institutional limits on the competence of the police are such that Parliament could not have intended to grant such a power to them.
I cannot accept this argument.
No question of constitutional competence arises here.
Parliament is entitled to give the police the power to create a scheme.
No doubt it would have envisaged that a national scheme would be produced such as the ACPO guidelines.
The Secretary of State is accountable to Parliament for the scheme so that the democratic principle is preserved.
There are circumstances in which institutional competence is a factor in the courts deciding the extent to which it should pay deference to a decision of the executive and allow a discretionary area of judgment.
But we are not concerned with the courts judicial review jurisdiction in the present context.
We are concerned with a question of statutory interpretation.
There is no reason in principle why the police (together with the Secretary of State) should be less well equipped than Parliament to create guidelines for the exercise of the section 64(1A) power.
In creating a proportionate scheme, they have to strike a balance.
That is inherent in any exercise of this kind, whether it is performed by the executive or Parliament.
The police guidelines that were in play in L were not the product of work by Parliament.
Policy and guidance documents of this kind, often in areas of acute sensitivity, are frequently created by the executive.
Provided that they fulfil the purposes of the enabling statute, they are valid and enforceable.
In my view, the fact that difficult decisions would have to be made in producing guidelines for the exercise of the section 64(1A) power is not a sufficient reason for concluding that Parliament could not have intended to give the power to produce them to the police and the Secretary of State.
What relief, if any, should be granted?
The Biometric Data
In deciding what relief to grant, it is important to have regard to the present state of play.
As previously stated, Chapter 1 of Part 1 of the Protection of Freedoms Bill includes proposals along the lines of the Scottish model.
The history of the varying responses to Marper ECtHR shows that it is not certain that it will be enacted.
But we were told by Mr Eadie that it is the present intention of the Government to bring the legislation into force later this year.
In shaping the appropriate relief in the present case, I consider that it is right to proceed on the basis that this is likely to happen, although not certain to do so.
In these circumstances, in my view it is appropriate to grant a declaration that the present ACPO guidelines (amended as they have been to exclude children under the age of 10), are unlawful because, as clearly demonstrated by Marper ECtHR, they are incompatible with the ECHR.
It is important that, in such an important and sensitive area as the retention of biometric data by the police, the court reflects its decision by making a formal order to declare what it considers to be the true legal position.
But it is not necessary to go further.
Section 8(1) of the HRA gives the court a wide discretion to grant such relief or remedy within its powers as it considers just and appropriate.
Since Parliament is already seised of the matter, it is neither just nor appropriate to make an order requiring a change in the legislative scheme within a specific period.
The ECtHR has recently decided that, where one of its judgments raises issues of general public importance and sensitivity, in respect of which the national authorities enjoy a discretionary area of judgment, it may be appropriate to leave the national legislature a reasonable period of time to address those issues: see Greens and MT v United Kingdom (Application Nos 60041/08 and 60054/08) (ECtHR, 23 November 2010) at paras 113 115.
This is an obviously sensible approach.
The legislature must be allowed a reasonable time in which to produce a lawful solution to a difficult problem.
Nor would it be just or appropriate to make an order for the destruction of data which it is possible (to put it no higher) it will be lawful to retain under the scheme which Parliament produces.
In these circumstances, the only order that should be made is to grant a declaration that the present ACPO guidelines (as amended) are unlawful.
If Parliament does not produce revised guidelines within a reasonable time, then the appellants will be able to seek judicial review of the continuing retention of their data under the unlawful ACPO guidelines and their claims will be likely to succeed.
The Photographs of GC
Mr Cragg raises a discrete issue about the photographs that were taken of GC when he was arrested.
Section 64A of PACE confers a power to take, use and retain photographs of arrested persons who are not subsequently convicted of the offence for which they were arrested.
In the application for judicial review, the issue of whether the retention of the photographs violated GCs article 8 rights was mentioned in what Moses LJ described as a passing reference in the claim form and in paragraph 20 of the grounds.
At para 43, Moses LJ said: the issues of justification for their retention cannot now properly be considered where the Commissioner has had no opportunity to give evidence as to justification.
Lord Pannick submits that, in view of the manner in which the issue was raised in the Divisional Court, the consequent absence of any evidence as to justification and the absence of any substantive judgment on the issue from the Divisional Court, the Supreme Court should express no opinion on this part of the appeal, but leave the matter to be determined if and when the point is properly raised in another case.
I accept these submissions.
I should also mention that Mr Fordham raises a discrete point about information held on the Police National Computer about C.
This was the subject of two agreed issues which were dealt with by the Divisional Court at paras 24 26 and 46 47 of the judgment of Moses LJ.
It is common ground that the retention of this information raises no separate issues from those raised by the retention of Cs DNA material and his fingerprints.
Conclusion
For the reasons that I have given, I would allow the appeals and grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR.
I would grant no other relief.
I agree with the judgment of Lord Dyson.
I have, however, a little that
LORD PHILLIPS
would add to his reasoning.
Section 3 of the Human Rights Act 1998 (the HRA) requires this Court, in so far as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights.
Sometimes this results in the Court according to a statutory provision a meaning that conflicts with the natural meaning of a statutory provision see Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557.
In summarising the effect of that decision in Sheldrake v Director of Public Prosecutions [2004] UKHL 43; [2005] 1 AC 264, para 28 Lord Bingham of Cornhill stated that the interpretative obligation under section 3 was very strong and far reaching and might require the court to depart from the legislative intention of Parliament.
This is not a case where the HRA requires the Court to accord to a statutory provision a meaning which it does not naturally bear.
There is no difficulty in giving section 64(1A) of PACE, set out in para 3 of Lord Dysons judgment (section 64(1A)), an interpretation which is compatible with article 8 of the Convention, as interpreted by the Strasbourg Court in S and Marper v United Kingdom (2008) 48 EHRR 1169.
The section gives a discretionary power to the police to retain samples taken from a person in connection with the investigation of an offence.
Section 3 of the HRA imposes a duty on the police, as a public authority, in so far as it is possible to do so, to give effect to the power conferred on them in a way which is compatible with Convention rights.
There is nothing in the wording of section 64(1A), giving it its natural meaning, which either requires or permits the police to exercise the power conferred on them in a manner which is incompatible with article 8.
In order to hold that section 64(1A) is incompatible with the Convention it is thus necessary to identify some matter, extrinsic to the wording of the section itself, that compels one to interpret the section as either requiring or permitting the police to exercise the power conferred on them in a manner incompatible with article 8.
Such a matter needs to be extraordinarily cogent in order to overcome the effect of section 3 of the HRA.
I have not been able to identify any such matter.
In R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] UKHL 39; [2004] 1 WLR 2196 the House of Lords held, wrongly as the Strasbourg Court was to rule, that in so far as section 64(1A) interfered with article 8 rights the interference was justified under article 8(2).
In so far as Parliament considered the matter when enacting section 64(1A) it is likely to have taken the same view.
Parliament may well have considered that the Convention did not require any restriction to be placed on the exercise of the power conferred by section 64 (1A).
It does not follow, however, that Parliament must be presumed to have intended that, if the Convention did require the power to be exercised subject to constraints, the police should none the less be required, or permitted, to disregard those constraints.
The effect of section 64(1A) was to reverse the requirement of the previous section 64 of PACE that fingerprints and samples should be destroyed when a suspect was cleared of an offence.
The purpose of this reversal was plainly that the police should be permitted to establish a database of such material obtained from those suspected of criminal activity.
I see no basis for concluding, however, that Parliament intended that the establishment and maintenance of this database should be untrammelled by any requirements that might be imposed by the Convention.
While those requirements limit the circumstances in which material can be retained by application of the familiar test of proportionality, they do not prohibit the maintenance of a database that satisfies that test.
Had Parliament foreseen that the Convention required restrictions on the power conferred by section 64(1A) the likelihood is that Parliament, guided by the executive, would itself have wished to define those restrictions rather than leaving them to be determined by executive action.
That can be deduced from the fact that Parliaments reaction to Strasbourgs ruling in S and Marper (2008) 48 EHRR 1169 was to pass amending legislation and that the present Government intends to introduce an amending Bill.
I do not consider, however, that it follows from this that one must interpret section 64(1A) as requiring the police to exercise the power conferred by that section in a manner which infringes the requirements of the Convention, or even as permitting the police to disregard those requirements.
For these additional reasons I can see no warrant for making a declaration of incompatibility, convenient though this might be, and concur in the order proposed by Lord Dyson.
LADY HALE
Whether and in what circumstances the police should be able to keep the DNA samples and profiles, fingerprints and photographs of people who have been arrested but not convicted is a deeply controversial question.
The Government is promoting the Protection of Freedoms Bill which will adopt in England and Wales the present system in Scotland.
This allows retention only for a limited period and in respect of certain crimes.
It reflects a strong popular sentiment that the police should not be keeping such sensitive material relating to innocent people, even if they are only allowed to use it for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution (Police and Criminal Evidence Act 1984, section 64(1A), as substituted by the Criminal Justice and Police Act 2001, section 82).
If the popular press is any guide to public opinion, the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169 is one which captures the public mood in Britain much more successfully than many of its other decisions.
Among the arguments marshalled against retaining the data are these: (a) The agencies of the state cannot be trusted to use such information only for the permitted purposes, nor can the state be trusted not to enlarge those purposes in future.
DNA samples, in particular, might be put to many more controversial uses should the state feel so inclined. (b) Serious bodies have cast doubt upon the usefulness of retaining it even for the permitted purposes.
Both the Human Genetics Commission (Nothing to hide, nothing to fear? Balancing individual rights and the public interest in the governance and use of the national DNA Database, November 2009) and the Nuffield Council on Bioethics (The forensic use of bioinformation: ethical issues, September 2007) suggest that the value of casting the net so wide has not yet been proved. (c) The Equality and Human Rights Commission argue, in their intervention in this case, that the premise on which such data are kept, that people who are arrested are more likely than the general population to be involved in future offending, is unsustainable. (d) Liberty point out, in their intervention, that certain sections of the population, in particular men and people from the black and minority ethnic communities, run a disproportionate risk of arrest and therefore of having their data taken and kept.
This is a detriment with a discriminatory impact. (e) The detriment is the stigma, certainly felt and possibly perceived by others, involved in having ones data on the database.
This stigma, together with wider concerns about potential misuse, is sufficient to outweigh the benefits in the detection and prosecution of crime.
Among the arguments marshalled in favour of retaining the data are these: (a) Those of a more trusting nature find it difficult to imagine that there is a serious risk that the agencies of the state will indeed misuse this information for more sinister purposes.
The risk would in any event be much reduced if DNA samples were destroyed and only profiles, fingerprints and photographs retained. (b) As to their usefulness, the Chief Constable of the West Midlands gave evidence on 22 March 2011 to the House of Commons Public Bill Committee hearing on the Protection of Freedoms Bill that between 2 and 3 per cent of the 36,000 hits on the database would be lost if the proposals in the Bill became law.
These may only be a small proportion of the total, but among the 1000 or so crimes which would not be solved some would be very serious. (c) It is not clear that the underlying premise is indeed that people who have been arrested but not charged or convicted are more likely than the general population to commit crimes.
After all, the Act also allows the police to keep data they have collected from people who have never been arrested, provided that they consent.
The reality is that arrest gives the police the opportunity compulsorily to collect the data: it is not the reason why they do so. (d) The discriminatory impact of disproportionate arrest rates among male and black and minority ethnic members of the population could as logically be addressed by compiling a national database of everyone, rather than by restricting it to people involved in the criminal justice system.
There is now a proliferation of national databases holding data on large sections of the population which data can be put to far more detrimental uses than this. (e) Any stigma felt or perceived is irrational, at least if the information is used for its permitted purposes.
A person who might otherwise have been among the usual suspects arrested for a crime may be eliminated before he even gets to the police station.
A person who is rightly arrested, prosecuted and convicted because a match is found does not deserve our sympathy.
We should be concentrating on the quality of the scientific evidence as to sampling and matching rather than on the feelings of those whose samples have been kept.
The feelings of the victims of crime are at least as important as the feelings of the criminals.
They too have a human right to have their physical and mental integrity protected by the law, and it is in this context that DNA evidence, in particular, has proved most useful.
We are not called upon to resolve that debate in this case.
It is common ground that the decision of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) cannot stand in the light of the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169.
The only question is what we should do about it in this case.
This is, as I understand it, a question governed by legal principle and the Human Rights Act 1998 and not by our particular preferences for how the United Kingdom should solve the problem.
There are three broad options open to the court: (i) We could decide, in the light of the individual facts of the cases before us, whether the retention of data in each case is compatible with the appellants Convention rights.
If it is not, we could make declarations to that effect and even mandatory orders for the deletion and destruction of the data involved. (ii) We could declare that the current ACPO guidelines, approved in Marper UK, are unlawful, without determining what would be lawful in the cases before us. (iii) We could declare that section 64(1A) of PACE is incompatible with the Convention rights, thus leaving the current guidelines in place and everything done under them lawful until Parliament enacts a replacement either by primary legislation or under the fast track remedial procedure laid down in section 10 of the Human Rights Act.
The choice between (i) or (ii), on the one hand, and (iii), on the other hand, depends upon the difficult and important question (see Lord Mance in Doherty v Birmingham City Council [2008] UKHL 57, [2009] 1 AC 367, para 141) of the meaning and scope of section 6(2)(b) of the Human Rights Act.
This, rather than the policy debate outlined above, is the important issue in this case.
If it is resolved in favour of (i) or (ii) and against (iii), then the choice between (i) and (ii) depends upon what the court considers a just and appropriate remedy under section 8(1) of the 1998 Act.
I should say at once that on both issues I agree with the conclusions reached by Lord Dyson.
Under section 6(1) of the Act, it is unlawful for a public authority to act in a way which is incompatible with a Convention right.
But the sovereignty of Parliament requires that exceptions be made for certain things which are done pursuant to an Act of the United Kingdom Parliament.
As the annotations to the Act (by Peter Duffy QC and Paul Stanley) in Current Law Statutes explain, the exceptions are all designed to prevent section 6 being used to circumvent the general principle of the Act embodied in sections 3(2)(b) and 4(6)(a), that incompatible primary legislation shall remain fully effective unless and until repealed or modified.
In that event, the most that the court can do is make a declaration under section 4(2) that the Act is incompatible and leave it to Parliament to decide what, if anything, to do about it.
It follows, however, that the exceptions must be read along with section 3(1).
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.
This obligation is laid upon everyone, not just upon the courts.
Two exceptions to the general rule in section 6(1) are provided by section 6(2).
Section 6(2)(a) has presented little difficulty: it provides that subsection (1) does not apply if as the result of one or more provisions of primary legislation, the authority could not have acted differently.
This covers situations where the public authority was required by an incompatible Act of Parliament to do as it did (or perhaps where it had a choice between various courses of action, each of which was incompatible with the Convention rights).
Although section 6(2)(a) does not say so, it must be read subject to section 3(1).
So both the public authority and the courts, in deciding whether or not the authority could have acted differently, will have first to decide whether the Act of Parliament can be read or given effect in a way which is compatible rather than incompatible with the Convention rights.
If the Act can be read compatibly, then it follows that the authority could have acted differently and will have no defence if it has acted incompatibly.
Section 6(2)(b) makes the link with section 3(1) explicit, but has caused much more difficulty in practice.
It provides that section 6(1) does not apply to an act (or failure to act) if 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.
So the first question is always whether the primary legislation can be read or given effect in a compatible way.
If it can, that is an end of the matter: see Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441, paras 93 to 103.
In that case, both the provision requiring the court to make a possession order in respect of a demoted tenancy and the provision empowering the local authority to seek one could be read and given effect in a compatible way.
This bears out the prediction by Beatson and others, in Human Rights: Judicial Protection in the United Kingdom (2008), para 6 23, that cases where legislation cannot be read down under section 3 are likely to be rare.
However, if the legislation cannot be so read or given effect, the second question is whether the public authority was acting so as to give effect to or enforce it.
As to this, it is possible to detect some differences of opinion among the judges.
Some have taken the view that the fact that there may be choices involved in whether or not to give effect to or enforce the incompatible provision makes no difference: the authority was acting so as to give effect to or enforce it.
Others, most notably Lord Mance in Doherty, would draw a distinction between the court, which might have no choice but to give effect to an incompatible provision, and the public authority bringing the proceedings, which could choose whether or not to do so and should be guided by Convention values when making its decisions.
Fortunately, we do not have to resolve that debate.
This case is about the first question: can section 64(1A) be read and given effect compatibly with the Convention rights? In my view it clearly can.
This is for two principal reasons.
The first relates to the requirement to read that is, interpret statutory language compatibly with the Convention rights.
In this case, to say that section 64(1A) cannot be so read involves reading may be retained as must be retained, save in exceptional circumstances.
This would be doing the reverse of what section 3(1) requires.
In other words, it would be reading into words which can be read compatibly with the Convention rights a meaning which is incompatible with those rights.
It would be giving the broad discretion provided in section 64(1A) an unnatural or strained meaning to require it to be given effect in an incompatible way.
That view is reinforced by the fact that it was the clear intention of Parliament to legislate compatibly rather than incompatibly with the Convention rights.
Section 64(1A) was introduced into PACE by section 82 of the Criminal Justice and Police Act 2001.
When the Bill which became that Act was introduced into Parliament, it was prefaced by the ministerial statement required by section 19(1)(a) of the Human Rights Act.
The Home Secretary, Mr Straw, stated that In my view the provisions of the Criminal Justice and Police Bill are compatible with the Convention rights.
He was not alone in that view.
After all, the House of Lords in Marper UK unanimously took the view that section 64(1A) was compatible with the Convention rights.
But this does not suggest to me that Parliaments intention was that the apparent discretion which it conferred should inevitably be read incompatibly with the Convention rights should that view later prove to be unfounded.
Quite the reverse.
The second relates to the requirement in section 3(1) that legislation be given effect compatibly with the Convention rights.
As Lord Rodger emphasised in Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, para 107, section 3(1) contains not one, but two, obligations.
In retrospect, that is what the Court of Appeal had in mind in the case which became In re S (Minors) (Care Order: Implementation of Care Plan) [2002] UKHL 10, [2002] 2 AC 291: that the courts power to make a care order giving the local authority enhanced (that is, determinative) parental responsibility for a child should be given effect in such a way as to prevent the local authority exercising that responsibility incompatibly with the Convention rights of either the child or his parents.
Also in retrospect, one can see that the proper remedy for incompatible actions by the local authority is a free standing action under section 7(1)(a) of the Human Rights Act, rather than by the care court adopting powers which contradicted the cardinal principle of the separation of powers between court and local authority in care proceedings.
In re S is the strongest case in favour of the position adopted by the Chief Constable and the Secretary of State in this case.
They have to argue that, despite ostensibly giving the police a discretion, the cardinal principle was, not that data may be kept, but that they must be kept.
The ACPO guidelines could say only one thing.
Further, they must argue that that principle is so fundamental to the legislative purpose that only Parliament can modify it if it turns out that those guidelines are incompatible with the Convention rights.
I can readily accept that it may be desirable for Parliament rather than the Association of Chief Police Officers to put something in its place.
But I cannot see how it was possible for the discretion conferred by section 64(1A) to be exercised in accordance with ACPO guidelines when it was first enacted but it is not possible for it to be so exercised now.
In other words, if it was possible to read and give effect to section 64(1A) by means of ACPO guidelines when it was first enacted, it must be possible to do so now.
And ACPO as a public authority has to act compatibly with the Convention rights.
For these reasons, therefore, section 64(1A) is not incompatible with the Convention rights and cannot be so declared.
However, the need for a consistent national approach must be relevant to the choice between remedy (i) and remedy (ii).
The court is empowered by section 8(1) to grant such relief or remedy in relation to an unlawful act as it considers just and appropriate.
There would be nothing to stop ACPO promulgating some new and Convention compliant guidelines.
Now that Marper UK has been overruled, they clearly should set about doing so unless Parliament does it for them within a reasonably short time.
But I certainly accept that the system will not work if different police forces adopt different policies.
So it would not be appropriate (such a flexible word) for this court to make mandatory decisions in individual cases unless and until it becomes clear that neither ACPO or Parliament is prepared to make the difficult choices involved.
I therefore agree that we should declare the current guidelines unlawful but grant no further relief.
LORD JUDGE
I agree with the reasoning and conclusions of the majority of the members of the Court.
In deference to the contrary views I shall add some brief words of my own.
The insertion of section 64(1A) in the Police and Criminal Evidence Act 1984 (the 1984 Act) by section 82 of the Criminal Justice and Police Act 2001 resulted in the promulgation of the Retention Guidelines for Nominal Records on the Police National Computer (the ACPO Guidelines) 2006.
Thereafter in England and Wales the retention of biometric data (DNA samples) was governed by these guidelines which derived their authority from section 64(1A).
The judicial examination of these provisions in England and Wales culminated in a decision of the House of Lords in R (S and Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 that the retention of DNA samples did not constitute an interference with the rights granted by article 8 of the European Convention of Human Rights, or if it did, that the interference was modest and proportionate.
The Grand Chamber of the European Court of Human Rights disagreed, and concluded that the system created by the ACPO Guidelines constituted an interference with article 8 rights. (S v United Kingdom (2008) 48 EHRR 1169).
Taking account of the decision and applying its reasoning we are all agreed that the decision of the House of Lords should no longer be treated as authoritative.
Therefore these appeals must be allowed.
The forensic battle is directed at the consequences which should now flow.
The starting point is the reasoning of the Grand Chamber which identified the way in which different member states addressed the retention issue, and acknowledged that even following acquittal, it was permissible, subject to specific limitations within the domestic arrangements, for DNA samples to be retained.
What however was required of any arrangements for retention was an approach which discriminated between different kinds of cases and for the application of strictly defined storage periods for data, even in more serious cases.
Attention was drawn to the position in Scotland where the legislative arrangements permitted the retention of the DNA of unconvicted individuals, limited in the case of adults to those charged with violent or sexual offences and even then, for three years only, with the possibility of an extension for a further two years with judicial agreement.
These arrangements were not criticised.
Indeed the court acknowledged that the retention of DNA profiles represented the legitimate purpose of assisting in the identification of future offenders.
In short the existence of the legislative provisions for the retention of DNA samples was endorsed, but criticism was directed at the blanket and indiscriminate nature of the power of retention found in the ACPO Guidelines.
Accordingly nothing in the judgment of the Court leads to the conclusion that a different, less all encompassing scheme deriving its authority from section 64(1A) would contravene article 8, or that the law in relation to DNA samples should revert to the former wide ranging prohibition against the retention of samples of any kind which was the striking feature of section 64 of the 1984 Act as originally enacted.
Rather the judgement confirmed that legislative arrangements may provide for the retention of the DNA samples of those acquitted of criminal offences.
That is what section 64(1A), reversing the provisions of section 64, permits.
In these circumstances it was open to ACPO to reconsider and amend the guidelines (as indeed, at least in part, it did) in the light of the decision of the European Court, and it would be open to ACPO to do so in the light of the decision of this court.
Section 64(1A) does not preclude an amendment to the Guidelines which addresses the criticisms.
In other words, although the process of further amendment to the arrangements for the retention of DNA samples in England and Wales has been and continues to be addressed through legislation, this was not and is not the only way to provide for the protection of article 8 rights against the current scheme for their indiscriminate retention.
In my judgment section 64(1A) is Convention compliant, whereas the ACPO Guidelines in their present form are not.
Accordingly, the retention of the DNA samples of these appellants was unlawful, but a declaration of incompatibility would be inappropriate.
LORD KERR
Lord Rodger and Lord Brown in powerfully reasoned judgments, which I initially found persuasive, have concluded that section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE) had as its purpose the institution of a scheme for the indefinite retention of biometric data taken from all suspects (with very limited exceptions) in connection with the investigation of offences.
On that account they found that, despite the seemingly permissive language of the subsection, the Association of Chief Police Officers (ACPO), to whom the task of drawing up guidelines for the implementation of section 64(1A) had been entrusted, were obliged to ensure that, instead of being destroyed as previously required by section 64(1) of PACE, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database.
If indefinite retention of data was indeed section 64(1A)s unmistakable purpose, I would have readily agreed that the discretion that samples may be retained after they have fulfilled the purposes for which they were taken would have to be exercised so as to give effect to that intention.
That, as Lord Rodger has said, would be the inevitable consequence of the application of the principle for which Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 is the seminal authority: that a discretion conferred with the intention that it should be used to promote the policy and objects of the Act can only be validly exercised in a manner that will advance that policy and those objects.
More pertinently, the discretion may not be exercised in a way that would frustrate the legislations objectives.
Everything therefore depends on what one decides is the true intention or purpose of the legislation.
This is not as easy a question to answer as the simple formulation, what was the purpose of the legislation, suggests.
As Lord Brown has pointed out in para 145 of his judgment, the search for the purpose of a particular item of legislation may have to follow a number of avenues and may require consideration of several aspects of the enactment what is the grain of the legislation, what its underlying thrust etc.
An important factor in the conclusion on this critical question which Lord Rodger has identified is the fact that Parliament clearly saw the need for retreat from the position that had hitherto obtained under section 64(1) and (3) of PACE as originally enacted.
Those subsections were in these terms: (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken.
As Lord Rodger has pointed out, the decision of the House of Lords in Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 brought to the attention of the public and Parliament the effect of these provisions.
Potentially useful evidence was not being used for reasons that, as Lord Steyn put it, were contrary to good sense (p 118).
No doubt reaction to the experience in that case contributed to Parliaments decision to enact section 64(1A) but did it, as Lord Rodger has concluded, lead to Parliaments resolve that samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database? In my judgment, and largely for the reasons given by Lord Dyson, it did not.
In the first place, if that was Parliaments intention it chose a curious way to achieve it.
A simple, unambiguous provision to that effect would not have been difficult to devise.
And if the purpose of the legislation was to obtain a blanket, universally applied (apart from exceptional cases) policy, why would Parliament have left the practicalities of implementing the policy to ACPO? The drafting of the provision at a level of generality surely suggests that Parliament intended a measure of flexibility to be a feature of its application.
This is unsurprising.
The history of evolving knowledge as to the use to which DNA evidence could be put provided the clearest possible reasons not to adopt over prescriptive rules that might impede its full exploitation in circumstances unforeseen at the time of their enactment.
Just as it was judged, in retrospect, to be unwise to have an immutable requirement to destroy all samples from certain categories of suspects and defendants, so also it would be unwise to substitute that obligation with a blanket requirement to retain all samples.
Various members of the Appellate Committee of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 described the benefits that can flow from the maintenance of an expanded database for DNA samples and I am in respectful agreement with all that Lord Steyn, Lady Hale and Lord Brown had to say on this subject in that case.
But I do not consider that it necessarily follows that an inflexible policy requiring retention of virtually every sample taken from suspects and defendants is needed in order to have a viable and worthwhile resource.
Whatever view one takes of the competing policy arguments on this issue, however, it is, to my mind, quite clear that Parliament did not intend that this was the only way in which the legislation could be implemented.
Not only does section 64(1A) use the permissive may in relation to the retention of samples but subsection (3) is retained in its original state, albeit that it may now be disapplied in a variety of circumstances outlined in section 64(3AA) to (3AD).
This seems to me clearly to indicate recognition that there should be limits on the retention of samples but, not surprisingly, Parliament did not attempt to forecast comprehensively what those limits should be.
The structure of the new section 64 is strongly suggestive of an intention to devise a scheme that would respond to developments in this field, not least any view that might be taken as to the human rights implications that might come to be recognised.
As Lord Dyson has put it, Parliaments intention must be taken to have been to create a proportionate scheme which is compatible with ECHR.
There is nothing to impel the conclusion that Parliament intended that the scheme could not adapt to whatever the compatibility requirements were found to be.
On the contrary, there is every reason to suppose that Parliament intended that the scheme could be adapted to meet those requirements as and when they became apparent.
What the Commissioner and the Secretary of States argument resolves to is that, in interpreting section 64, we should recognise that an underlying, not expressly articulated, purpose was that the samples had to be retained indefinitely, regardless of the circumstances in which they were taken or of the circumstances of the individual from whom they had been taken.
There is nothing in the language of the section itself that compels such an exclusive interpretation.
Indeed, as Lord Phillips has pointed out, acceptance of this argument would involve reading more into section 64(1A) than its ordinary language conveys.
ACPOs guidelines were an essential complement to the statutory scheme.
Those guidelines have been altered (in relation to children under 10) as a result of the decision of the Grand Chamber in S and Marper v United Kingdom (2008) 48 EHRR 1169.
There is no lawful impediment to ACPO devising and implementing guidelines that take full account of the other features which Strasbourg has decreed are necessary for the operation of the scheme to be Convention compliant.
Classifications (as to which categories of offences or individuals should require retention of samples) and long stop provisions (as to the period that they should be retained) are well within the institutional reach of ACPO.
So also are the circumstances in which exceptions to the guidelines can be permitted.
ACPO chose the exceptionality criteria.
They may equally change those criteria.
And because there is no legal impediment in them doing so, then under section 6 of HRA, they or Parliament must.
Section 6(2)(b) can only come into play if ACPO cannot act.
If it can, then it must.
Because Parliamentary change is imminent, however, and because significant policy issues need to be considered, it is not unreasonable to leave this to Parliament.
I therefore agree with the order proposed by Lord Dyson.
I also agree with all that Lord Dyson has had to say on the argument that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police subject only to the judicial review jurisdiction of the court.
As he has said, the scope of the argument is confined.
It is to the effect that, although it could have done so if it had considered it appropriate, Parliament must be taken not to have intended to grant such a power because of the constitutional and institutional limits on the competence of the police.
But Parliament does not appear to have felt such qualms in giving the initial responsibility for the devising of guidelines to ACPO and, as Lord Dyson has pointed out, no question of constitutional competence arises.
Finally, I agree with Lord Dysons conclusion on the discrete issue of GCs photographs.
DISSENTING JUDGMENTS ON THE APPROPRIATE RELIEF
LORD RODGER
In September 1984 Sir Alec Jeffreys made his ground breaking discovery of DNA fingerprints.
A few weeks later, on 31 October, the Police and Criminal Evidence Act 1984 (PACE) was enacted.
Within a few years Sir Alecs discovery was being used routinely in the criminal courts in this country.
Section 64(1) of PACE, as originally enacted in ignorance of this major development that lay just ahead, provided: If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings.
In January 1997 an unidentified intruder raped and assaulted a woman in her home in London.
Swabs were taken from her and were found to contain semen.
A DNA profile was obtained from the semen and placed on the national DNA database.
In January 1998 a man was arrested for an unrelated offence of burglary.
A saliva sample was taken from him and a DNA profile was derived from it.
In August of the same year the man was acquitted of the burglary and, by virtue of section 64(1) of PACE, his sample should have been destroyed.
In fact, however, his profile was left on the DNA database and in October a match was made between this profile and the DNA profile derived from the semen in the swabs taken from the woman who had been raped in January 1997.
The man was arrested and a DNA profile was obtained from a hair plucked from him.
As was to be expected, this profile also matched the DNA derived from the semen.
At his trial for the rape the judge held, however, that, since the material which had led to his identification should have been destroyed as required by section 64(1), the evidence relating to the profile from the plucked hair was not admissible.
The man was acquitted.
The Attorney General referred the matter to the Court of Appeal who agreed with the judge but referred the point to the House of Lords.
In Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 the House reversed the Court of Appeal.
The speech of Lord Steyn, with which the other members of the appellate committee agreed, was notable for his observation, at p 118, that the austere interpretation of the Court of Appeal produced results which were contrary to good sense.
For present purposes, that case is important because it alerted the public and politicians to the fact that the obligation under section 64(1) of PACE to destroy samples if the suspect was acquitted meant that evidence which might lead to the detection and prosecution of the perpetrators of other crimes would be lost.
Just a few weeks after their Lordships decision, in the course of the second reading debate on the Criminal Justice and Police Bill, the Home Secretary introduced Part IV of the Bill which, he explained, was designed, inter alia, to amend section 64(1) of PACE to prevent evidence being lost in this way.
The Home Secretary referred to Lord Steyns speech as demonstrating the need for the change: Hansard (HC Debates), 29 January 2001, col 42.
This history shows beyond doubt that Parliaments purpose in enacting section 82 of the Criminal Justice and Police Act 2001, which inserted section 64(1A) into PACE, was to ensure that, in future, instead of being destroyed, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database.
This would protect the public by facilitating the detection and prosecution of the perpetrators of crimes.
Section 64(1A) provides: (1A) Where (a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
After this provision came into force, in accordance with guidelines from the Association of Chief Police Officers (ACPO) the police proceeded to retain data indefinitely and so to build up their DNA database of samples and profiles obtained from people who had been suspected of crimes, even if they had not been prosecuted or had been acquitted.
In due course in two appeals to the House of Lords this system was challenged as being in violation of the suspects article 8 Convention rights: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196.
In the leading speech Lord Steyn said, at p 2198E F, para 2, that as a matter of policy it is a high priority that police forces should expand the use of [DNA] evidence where possible and practicable.
He went on to refer to public disquiet that the obligation to destroy samples under the unamended section 64(1) of PACE had sometimes enabled defendants who had in all likelihood committed grave crimes to walk free.
Baroness Hale of Richmond observed, at p 2219G H, para 78, that The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
The benefit to the aims of accurate and efficient law enforcement is thereby enhanced.
In the light of such considerations the House of Lords held unanimously that the system did not violate the appellants article 8 Convention rights.
To Strasbourg, however, the matter appeared differently.
In S v United Kingdom (2008) 48 EHRR 1169 the Grand Chamber first held unanimously and contrary to the majority view in the House of Lords that the English system did indeed involve an interference with suspects article 8 rights.
Then, when considering the proportionality of that interference, the court observed, at pp 1200 1201, para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances.
The court went on to conclude, at p 1202, para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard.
Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society.
In response to the European Courts judgment the last Parliament passed the Crime and Security Act 2010, section 14 of which was designed to amend section 64 of PACE with a view to establishing a regime for the retention and destruction of DNA material and profiles that would be compatible with article 8 as interpreted by the European Court.
The new Government, which came into office in May 2010, decided, however, not to commence this legislation Instead, in Chapter 1 of Part 1 of the Protection of Freedoms Bill, it has put fresh legislative proposals, along similar lines to the legislation in Scotland, before Parliament.
There were indications in the European Courts judgment that a system along those lines would indeed be compatible with article 8.
As in the earlier legislation, the complex proposals include provision for a National DNA Database Strategy Board to oversee the operation of the DNA database.
Obviously, in the light of the European Courts judgment the indefinite retention of the data relating to the appellants under the existing system is incompatible with their article 8 rights.
The decision of the House of Lords to the contrary in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 must accordingly be overruled.
That is accepted by the respondent, the Metropolitan Police Commissioner, and by the Home Secretary, who has intervened in the proceedings.
Where the Commissioner and the Home Secretary part company with the appellants is as to the order, if any, which the court should pronounce in these circumstances.
In effect, for the appellant C Mr Fordham QC argued that section 64(1A) is worded (may be retained) so as to give the Commissioner and chief constables an open discretion as to whether data should be retained and, if so, for how long and subject to what conditions.
The position was therefore quite straightforward.
By virtue of section 6(1) of the Human Rights Act 1998 the Commissioner and chief constables were obliged to exercise that discretion so as to establish and maintain a system for the retention of samples and data that would comply with suspects article 8 Convention rights as they are now to be interpreted in the light of the decision of the European Court.
It was unlawful for them not to do so.
Mr Fordham indicated that he would be content for the court to pronounce a declaration to this effect, without making any order for the removal of the data relating to his client.
While adopting the bulk of Mr Fordhams submissions, on behalf of the appellant GC, Mr Cragg asked the court to go further and indicate that in his case the position should be put right within 28 days.
Mr Fordhams argument is, of course, unanswerable if he is right to say that the crucial words (may be retained) in section 64(1A) confer a wide indeed open discretion on the Commissioner and the chief constables whose forces retain the samples and data that make up the national DNA database.
If that is correct, then, even though, when section 64(1A) came into force, ACPO issued guidelines requiring that subject to a narrow exception all the DNA samples and data relating to suspects should be retained indefinitely, the Association could with equal propriety have issued completely different guidelines which would have resulted in a system that did not provide for the indefinite retention of the samples and data.
On that interpretation, any credit for the creation of the present DNA database is to be accorded to ACPO for choosing, of its own freewill, to issue the guidelines which it did.
More particularly, since ACPO had been, and still was, free to adopt other completely different guidelines, ACPO could now issue fresh guidelines which would produce a system that was compatible with the European Courts judgment.
The key question, therefore, is whether Mr Fordhams construction of section 64(1A) as conferring this wide discretion on the police is correct.
On behalf of the Commissioner Lord Pannick QC argued that it is not.
He drew attention to the context, which I have already described, in which Parliament enacted section 64(1A).
This showed that Parliament had set out to cure the mischief that the original version of section 64(1) of PACE meant that suspects samples and data were removed from the database even although as Attorney Generals Reference (No 3 of 1999) demonstrated the retention of that material could potentially result in the detection and prosecution of serious criminals.
Parliament plainly intended that in future this material should be retained on the DNA database indefinitely.
In other words, under section 64(1A) the police had to retain it indefinitely.
Mr Fordham said, rhetorically, that, if this were correct, then the Home Secretary could have brought proceedings against the police if they had failed to retain the material indefinitely.
Accepting the challenge, Mr Eadie QC said that, while the matter would probably have been sorted out in a different way, if necessary, such proceedings could indeed have been brought.
It is useful to notice just how far reaching Mr Fordhams argument is: essentially, under section 64(1A) the police were free to do what they liked.
On his approach the provision contained nothing to delimit the exercise of their discretion.
When listening to his argument, at times I felt that unconsciously, of course he was intent on pulling down one of the most important bulwarks which our predecessors so painstakingly erected against arbitrary acts of the executive.
In Car Owners Mutual Insurance Co Ltd v Treasurer of the Commonwealth of Australia [1970] AC 527, 537E F, Lord Wilberforce observed that in a statutory framework it is impossible to conceive of a discretion not controlled by any standard or consideration stated, or to be elicited from, the terms of the Act.
He was, of course, reflecting the thinking in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 where Lord Reid had said, at p 1030B D, that Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act, the policy and objects of the Act must be determined by construing the Act as a whole and construction is always a matter of law for the court.
Following that classic authority, in my view the power which was conferred on the police by section 64(1A) had to be exercised in accord with the policy and objects of that enactment.
As I have explained, the policy and objects of Parliament in enacting section 64(1A) were plainly that DNA samples and data derived from suspects should be retained indefinitely so that a large and expanding database should be available to aid the detection and prosecution of the perpetrators of crimes.
The police were therefore bound to exercise the power given to them by section 64(1A) in order to promote that policy and those objects.
This meant, in effect, that, subject to possible very narrow exceptions (e g, those suspected of a crime which turned out not to be a crime at all), the police had to retain on their database the samples and profiles of all suspects.
In short, the police were under a duty to do so.
By a slightly different route this analysis reaches the same result as the older well known line of authority to the effect that, on the proper construction of a statute as a whole and in its context, it can sometimes be seen that a power granted to, say, an official, court or other body in the public interest must be regarded as having been coupled with an implied duty on the recipient to exercise the power in the circumstances envisaged for its exercise.
See, for instance, Julius v Lord Bishop of Oxford (1880) 5 App Cas 214; Attorney General v Antigua Times Ltd [1976] AC 16, 33F G, per Lord Fraser of Tullybelton.
In my view, therefore, given the policy and objects of the enactment, before the decision of the European Court the police could not have exercised their power under section 64(1A) by choosing to retain samples and data for, say, only three years (or any other period deliberately not prescribed in the legislation) and then destroying them.
Similarly, given the policy and objects of the enactment, the police could not have exercised the power to detain material indefinitely by choosing to delete material from those against whom, in their view, suspicion fell below some arbitrary level not recognised in the legislation.
Any such exercise of their power would have defeated, rather than promoted, the policy of the enactment and would therefore have been unlawful.
In the light of the European Courts decision, it can now be seen that the policy and objects of section 64(1A), to create a virtually comprehensive and expanding database of DNA profiles from suspects, violate the article 8 Convention rights of unconvicted suspects.
Given that the Protection of Freedoms Bill has been introduced into Parliament, there is good reason to believe that legislation will be passed in the foreseeable future to establish a new system.
The question in the present proceedings is whether in the meantime, by virtue of section 3(1) of the HRA or otherwise, the police must read and give effect to section 64(1A) in a way that is compatible with article 8 as interpreted by the European Court and whether they act unlawfully if they do not.
Since I reject Mr Fordhams argument that section 64(1A) gives the police an open discretion as to what to do, I also reject his further, seductive, argument that, having regard to section 6(1) of the HRA, they can and should simply exercise that discretion in such a way as to establish a lawful system that meets the requirements of the Strasbourg court for example, by choosing to retain samples and data for only three years, subject, perhaps, to a power in an independent body to extend the period for some further defined period (as under the Scottish legislation), or by only retaining the material from those suspected of certain classes of crimes, or by only retaining the material from those against whom there is a high degree of suspicion etc.
All of those suggested steps would have been inconsistent with the policy and objects of section 64(1A) as originally enacted.
So they could only be adopted now, in order to comply with the European Courts decision, if section 3(1) of the HRA makes that not only possible but indeed obligatory.
Section 3 provides: (1) 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. (2) This section (a) applies to primary legislation and subordinate legislation whenever enacted; (b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and (c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility.
The opening phrase in subsection (1) shows that there are limits to the duty which it imposes.
The words of Lord Nicholls of Birkenhead in In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, are a useful guide to where those limits lie: For present purposes it is sufficient to say that a meaning which departs substantially from a fundamental feature of an Act of Parliament is likely to have crossed the boundary between interpretation and amendment.
This is especially so where the departure has important practical repercussions which the court is not equipped to evaluate.
In such a case the overall contextual setting may leave no scope for rendering the statutory provision Convention compliant by legitimate use of the process of interpretation.
Mr Fordham submitted that the fundamental feature of section 64(1A) was the retention of the material for the purposes of creating a DNA database, not the indefinite retention of the material with a view to establishing a virtually comprehensive database of DNA material from suspects.
In my view that submission is unrealistic.
The truth is that Parliament wanted to eliminate the danger, which existed under the pre existing legislation, that valuable evidence would be lost and potential prosecutions of the guilty based on the latest science would be jeopardised if material had to be removed from the database.
Providing for the material to be retained on the database indefinitely was therefore the fundamental feature of the amending legislation which inserted section 64(1A) into PACE.
That being so, section 3(1) of the HRA does not oblige or permit the courts or the police to read or give effect to section 64(1A) in a way that departs substantially from that fundamental feature.
And it is quite obvious that any reading of section 64(1A) which would be apt to obviate the defects identified in the existing system by the European Court would depart very substantially indeed from that fundamental feature of the provision would, indeed, contradict it.
It is therefore nothing to the point that, from a linguistic point of view, the provision might easily be read as though it said that samples may be retained, consistently with the suspects article 8 Convention rights.
The hypothetical additional words, though few in number, would have the effect, and would be intended to have the effect, of altering the provision so as, say, to limit the samples and data that were to be retained and the time for which they could be retained, and to impose a duty to remove them after that time and so to negate the defining feature of the legislation.
In other words, the court would have crossed the line from interpreting to amending the legislation.
Amending section 64(1A) in that way is something which only Parliament can do.
Parliament showed itself willing to pass amending legislation in the Crime and Security Act 2010.
The fact that the new Government decided not to commence that legislation, but chose to introduce a Bill providing for a different scheme shows that there is a range of possible ways to bring the system into line with the requirements of article 8 and room for doubt about which is the best policy to adopt.
This court is in no position to weigh the competing practical advantages and disadvantages of the possible solutions.
These are further features which confirm that the necessary changes require legislation and cannot be made by any legitimate interpretation, however extensive, under section 3(1): In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, per Lord Nicholls.
Section 64(1A) is therefore incompatible with suspects article 8 Convention rights and cannot be made compatible under section 3(1) of the HRA.
Section 3(2)(b) ensures that in these circumstances the continuing operation of section 64(1A) is unaffected.
Section 6(1) and (2) provide: (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.
Like sections 3(2) and 4(6), section 6(2) is concerned to preserve the primacy and legitimacy of primary legislation.
See Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 AC 546, 556 557, para 19, per Lord Nicholls, cited with approval by Lord Hoffmann in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 51.
If that is correct and section 3(1) of the HRA cannot be invoked in the present case, then section 64(1A) continues to operate, and Parliament intends it to operate, in the same way as when enacted.
It therefore falls to be interpreted and applied just as when enacted.
It is accepted that section 6(2)(a) applies to cases where the legislation, which cannot be read compatibly with Convention rights, imposed a duty on a public authority to act in one particular way the authority could not have acted differently.
It follows, of course as Lord Hoffmann remarked in Hooper [2005] 1 WLR 1681, 1696, para 49 that, by contrast, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3.
Since the Convention non compliant provision continues to operate, any public authority which is exercising a power conferred by it must continue do so in a way that promotes the object and purposes for which the provision confers the power and these are, ex hypothesi, incompatible with Convention rights.
As Lord Hoffmann noted, section 6(2)(b) assumes, however, that under the relevant legislation the public authority could have acted in more than one way.
For example, it might be that a public authority could have adopted either of two schemes, A and B, both of which would have promoted the policy and objects of the legislation.
So it cannot be said that, when it chose to adopt scheme A, the public authority could not have acted differently.
Nevertheless, since, when it adopted scheme A, the authority was promoting the policy and objects of the primary legislation and so was acting to give effect to the legislation, section 6(2)(b) disapplies section 6(1) and ensures that the authority was acting lawfully.
In this way the primacy and legitimacy of the provision of primary legislation are preserved.
For all the reasons which I have set out, in the present case, in substance the police could really not have acted differently: in order to promote the object and purposes of section 64(1A) of PACE, they had to retain all the samples which they did, indefinitely.
If that is so, then what the police did, and continue to do, falls within section 6(2)(a) and is accordingly lawful.
Even if one assumes, however, that, while promoting the policy and objects of the legislation, the police could, for example, have recognised a slightly wider exception and so created a slightly different system, that does not matter.
The same goes if, while promoting the policy and objects of the legislation, the police could have chosen not to recognise even the very narrow exception which they did and could have decided to retain the samples and data relating to absolutely all suspects.
In either event, even though the police could have done something (slightly) different, by doing what they actually did and are still doing, they were acting and are continuing to act so as to give effect to section 64(1A).
Section 6(2)(b) of the HRA accordingly applies and so the police have at all times acted, and continue to act, lawfully.
In these circumstances section 64(1A) is incompatible with suspects article 8 Convention rights.
Even though Parliament and the Government have the matter under review, I consider that the better course is for this court to grant a declaration of incompatibility in terms of section 4(2) of the HRA.
Cf Bellinger v Bellinger [2003] 2 AC 467, 482, para 55, per Lord Nicholls.
I would accordingly allow the appeals to the extent of making a declaration that section 64(1A) of the Police and Criminal Evidence Act 1984 is incompatible with the article 8 Convention rights of suspects.
LORD BROWN
On 4 December 2008 the Grand Chamber of the ECtHR in S v UK (2008) 48 EHRR 1169 condemned on article 8 grounds the scheme for the indefinite retention of biometric data adopted in England and Wales pursuant to section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE).
The critical issue for decision on these appeals is whether, following that decision and pending the enactment by Government of a fresh legislative scheme compatible with article 8, the police have been acting unlawfully in continuing to operate the indefinite retention scheme.
That in turn depends upon whether section 64(1A) can or cannot be read or given effect in a way which is compatible with the Convention rights within the meaning of section 6(2)(b) of the Human Rights Act 1998 (the HRA).
Before turning to address this issue it is necessary to sketch out something of the background to the appeal and the circumstances in which the point now arises for decision.
These appellants are two amongst the 850,000 odd unconvicted persons whose profiles are kept on the national DNA database, their fingerprints and samples having been taken from them when they were arrested as suspects (from 2003, whether or not they were actually charged).
This database has built up following Parliaments introduction on 11 May 2001 of section 64(1A) of PACE in substitution for the original section 64(1) which had required the destruction of a suspects fingerprints and samples as soon as practicable after he was cleared.
Section 64(1A) provides so far as is material: Where . fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence . [they] may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
In 2004 this change in the law was unsuccessfully challenged, principally on article 8 grounds, all the way up to the House of Lords, by two complainants: S, an eleven year old boy with no previous convictions who had been acquitted of attempted robbery, and Mr Marper, a man of 38, also of good character, whose case was discontinued following his arrest on the charge of harassing his partner: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196.
Lady Hale alone amongst the Appellate Committee thought that the retention and storage of DNA profiles constituted an interference with the claimants rights under article 8.
But each member of the Committee, Lady Hale included, was quite clear that, even if it did, it was readily justifiable under article 8(2).
Lord Steyn described such evidence as having the inestimable value of cogency and objectivity (para 1) and said that as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable (para 2).
At para 3 he observed that: It can play a significant role in the elimination of the innocent, the correction of miscarriages of justice and the detection of the guilty.
At para 36 Lord Steyn dealt with a submission that retention is not in accordance with law (on the basis that a law which confers a discretion must indicate the scope of that discretion: Silver v United Kingdom (1983) 5 EHRR 347, 372, para 88): The discretion involved in the power to retain fingerprints and samples makes allowance for exceptional circumstances, eg where an undertaking to destroy the fingerprints or sample was given or where they should not have been taken in the first place, as revealed by subsequent malicious prosecution proceedings.
At para 38 Lord Steyn observed that the expansion of the database by the retention confers enormous advantages in the fight against serious crime and at para 39 he remarked upon the benefits of a greatly extended database.
Lord Rodger and Lord Carswell agreed with Lord Steyn.
Lady Hale agreed that retention and storage of DNA samples and profiles was readily justifiable for the reasons given by Lord Steyn and myself.
She added: The whole community, as well as the individuals whose samples are collected, benefits from there being as large a database as it is possible to have.
The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
The benefit to the aims of accurate and efficient law enforcement is thereby enhanced. (para 78) I myself suggested (para 88): that the benefits of the larger database . are so manifest . that the cause of human rights generally (including the better protection of society against the scourge of crime which dreadfully afflicts the lives of so many of its victims) would inevitably be better served by the databases expansion than by its proposed contraction.
The more complete the database, the better the chance of detecting criminals, both those guilty of crimes past and those whose crimes are yet to be committed.
The better chance too of deterring from future crime those whose profiles are already on the database.
And I pointed out too that: The larger the database, the less call there will be to round up the usual suspects.
Instead, those amongst the usual suspects who are innocent will at once be exonerated.
These views notwithstanding, the Grand Chamber in Strasbourg, as already indicated, on the application of the same complainants, some four years later unanimously condemned the scheme as unjustifiable under article 8.
It is sufficient for present purposes to quote just three paragraphs from the Courts lengthy judgment: 119 . the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely, whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. 125 In conclusion, the Court finds that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. 134 .
In accordance with article 46 of the Convention, it will be for the respondent State to implement, under the supervision of the Committee of Ministers, appropriate general and/or individual measures to fulfil its obligations to secure the rights of the applicants and other persons in their position to respect for their private life.
Before turning to the circumstances in which these particular appellants had their fingerprints and samples taken and the precise nature of the argument they advance on this appeal, it is convenient first to indicate something of the response to the Grand Chambers judgment, on the part both of the Government and of the police.
So far as the Government was concerned, the then Home Secretary in a Press Release on 16 December 2008 indicated that the Home Office would institute a consultation process but that meantime: The DNA of children under ten the age of criminal responsibility should no longer be held on the database.
There are around 70 such cases [we are told that there were in fact 96], and we will take immediate steps to take them off. (S and Mr Marpers data was also removed.)
On 7 May 2009 the Home Office published a White Paper, Keeping the Right People on the DNA Database, setting out certain key proposals for the future and inviting views upon them.
The White Paper also considered what should happen to the 850,000 odd profiles already on the national DNA database.
On 28 July 2009 ACPOs Director of Information wrote to all Chief Constables indicating that new guidelines were not expected to take effect until 2010 and that: Until that time, the current retention policy on fingerprints and DNA remains unchanged.
ACPO strongly advise that decisions to remove records should not be based on proposed changes.
It is therefore vitally important that any applications for removals of records should be considered against current legislation and the Retention Guidelines Exceptional Case Procedure .
Those Guidelines, which have remained essentially the same since section 64(1A) was introduced, provide: Chief Officers have the discretion to authorise the deletion of any specific data entry on the PNC owned by them.
They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry.
It is suggested that this discretion should only be exercised in exceptional cases .
Exceptional cases will by definition be rare.
They might include cases where the original arrest or sampling was found to be unlawful.
Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance.
On 11 November 2009, following the consultation period, the Home Secretary made a written Ministerial statement outlining a revised set of proposals for the retention of fingerprints and DNA data (Hansard (HC Debates), 11 November 2009, col 25WS).
It was originally intended to implement these by way of order making powers under the Policing and Crime Act 2009 but, following strong opposition to the introduction of a new scheme by secondary rather than primary legislation, the proposed new scheme was included in the Crime and Security Act 2010, introduced in the House of Commons on 19 November 2009 and receiving Royal Assent on 8 April 2010.
Following a change of government in May 2010, however, rather than bringing the Crime and Security Act into force, the incoming government instead announced its proposal for new legislation designed essentially to mirror the Scottish system and this finally, by the Protection of Freedoms Bill 2011, introduced in the House of Commons as recently as 11 February 2011, it has now set in train.
For reasons which will shortly become clear, it is unnecessary for the purposes of this judgment to indicate anything of the detailed nature of the various proposals which at one time or another have been considered for enactment in substitution for the existing scheme so as to achieve compatibility with article 8 pursuant to the Grand Chamber judgment.
It is sufficient to indicate that a wide range of differing schemes have been canvassed and considered and that arriving at the preferred solution has inevitably involved complex and sensitive choices.
It is similarly unnecessary to describe in any detail the facts of these appellants cases and the following brief summary will suffice.
GC is 41.
On 20 December 2007, following his girlfriends complaint that he had assaulted her (albeit without causing her injury), he voluntarily attended the police station and was arrested on suspicion of common assault.
He strongly denied the allegation, explaining rather that he had been defending himself against attack by her.
Following the taking of DNA samples, fingerprints and a photograph, GC was released on police bail without charge.
Before 21 February 2008, when he was due to surrender to his bail, GC was told that no further action would be taken against him.
GCs fingerprints (but not DNA) had in fact been taken previously and retained in connection with a firearms offence for which he had been sentenced at the Central Criminal Court on 18 February 1992 to seven years imprisonment.
C is 34, a man of good character.
On 17 March 2009 he was arrested on suspicion of rape, harassment and fraud following allegations made the previous day by a former girlfriend and members of her family, allegations which C strenuously denied.
The same day, Cs fingerprints and DNA samples were taken.
Although no further action was taken in relation to the alleged harassment and fraud, on 18 March 2009 C was charged with rape.
On 5 May 2009, however, the prosecution offered no evidence on the rape charge and C was accordingly acquitted.
Both appellants, through solicitors, applied to the respondent Police Commissioner to have their fingerprints and DNA data deleted from police records GC on 23 March 2009, C on 19 August 2009 (in each case, of course, after the Grand Chambers decision in S v UK).
Consistently with ACPOs guidelines, however, both applications were refused.
The appellants then issued judicial review proceedings, GC on 11 December 2009, C on 9 February 2010.
The applications were heard together by the Divisional Court (Moses LJ and Wyn Williams J) on 15 July 2010 and on 16 July 2010 were dismissed, the Divisional Court correctly holding itself bound by the decision of the House of Lords in S and Marper v Chief Constable of the South Yorkshire Police (the subsequent Grand Chamber decision notwithstanding).
The Divisional Court did, however, certify a point of law of general importance and, with the consent of all parties, granted a certificate pursuant to section 12 of the Administration of Justice Act 1969, thus enabling the matter to proceed directly to this court.
Before this court, Mr Fordham QC for C and Mr Cragg for GC both submit that, in the light of the Grand Chambers judgment, the earlier decision of the House of Lords can no longer stand and the existing scheme must now be recognised to be unlawful so much, indeed, is clear and conceded.
Pursuant to section 6 of the HRA, their argument then continues, the police must now therefore cease retaining their data incompatibly with their article 8 rights.
Instead, they submit, the police must take account of the various criticisms made by the Grand Chamber of the existing scheme, must devise a new, compatible scheme, and must then deal with these appellants requests (and any other outstanding or future requests) for the removal of information from the national DNA database this, indeed, in GCs case, within 28 days, contends Mr Cragg.
Not so, submit Lord Pannick QC for the Metropolitan Police Commissioner and Mr Eadie QC for the Home Secretary (properly joined in the proceedings as an interested party).
It is, they submit, for the government, not for the police, to devise and enact a new scheme; the police meantime have no alternative but to continue operating the existing scheme pursuant to section 64(1A) of PACE.
Their case is founded on section 6(2)(b) of the HRA which, they argue, disapplies section 6(1) and thus relieves the police of liability for continuing to operate what the Grand Chamber has ruled to be (in international law) an unlawful scheme.
The most the appellants are entitled to is a declaration of incompatibility pursuant to section 4 of the HRA.
As I indicated at the outset, this is the critical issue in the appeal and plainly it centres upon the proper understanding of, and interplay between, sections 3, 4 and 6 of the HRA which (as to their most material parts) I now set out: 3(1) 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. 4(2) If the court is satisfied that [a provision of primary legislation] is incompatible with a Convention right, it may make a declaration of that incompatibility. 6(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. 6(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 precise symmetry between section 3(1) and section 6(2)(b) will at once be noted: each invites consideration of whether legislation can be read or given effect in a way which is [Convention] compatible section 3 indicating what must be done if this is possible, section 6(2)(b) indicating the consequence (the disapplication of section 6(1)) if it is not.
At first blush the respondents argument appears distinctly unpromising.
Section 64(1A) is, after all, couched in terms that appear to confer on the police an open discretion: samples may be retained.
On the face of it, therefore, the police appear to be in a position to act compatibly with the article 8 rights of those whose samples have been taken and this, indeed, even without resort to section 3.
But suppose there were some doubt about this, why would that not fall to be resolved by the interpretative imperative of section 3? How can it be appropriate, in the face of such a strong statutory direction, to place upon section 64(1A) a construction which denies the police the ability to exercise their data retention power compatibly? I confess to having come only comparatively late to the conclusion that, difficult though the respondents argument initially appears, it is in fact correct.
Section 6(2)(b) has long been recognised to give rise to difficulty at the margins see, for example, the judgments respectively of Lord Hope, Lord Walker and Lord Mance in Doherty v Birmingham City Council [2009] AC 367.
Clearly, as Lord Hoffmann observed in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 49, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3.
This, as was pointed out, was in contradistinction to section 6(2)(a) which applies when a public authority could not have acted differently when, in other words, the authority has been compelled by primary legislation to act in a way ex hypothesi incompatible with Convention rights.
Superficially, of course, the very assumption that a public authority could have acted differently appears to postulate that the power in question could therefore have been exercised compatibly with Convention rights.
Plainly, however, section 3 notwithstanding, it cannot follow that the power must therefore in all cases be exercised compatibly else section 6(2)(b) could never come into play.
A simple illustration of section 6(2)(b) in operation is, of course, where primary legislation confers a power on a public authority and where a decision to exercise that power (or, as the case may be, not to exercise it) would in every case inevitably give rise to an incompatibility.
R v Kansal (No 2) [2002] 2 AC 69 was just such a case and in such situations it can readily be understood why section 6(2)(b) applies.
Otherwise, instead of giving effect to a provision conferring a power, the public authority would have to treat the provision (in cases where not to exercise it would give rise to incompatibility) as if it imposed a duty or, in cases where any exercise of the power would give rise to incompatibility (as in Kansal (No 2) itself), would have to abstain from ever exercising the power.
In either instance, it is obvious, Parliaments will would be thwarted.
I would take this opportunity to resile from what I myself said in the latter part of para 118 of my own judgment in Hooper.
I was surely right to say in the first part of that paragraph: Plainly it is not the case that section 6(2)(b) applies whenever a statutory discretion falls to be exercised in a particular way to ensure compliance with a Convention right.
This occurs in a host of different situations and, so far as I am aware, no one has ever suggested that, had the discretion not been exercised compatibly, the public authority would nevertheless have been protected against a domestic law claim by the section 6(2)(b) defence on the basis that otherwise a power would be turned into a duty.
I was, however, wrong to suggest that the situation would be no different if to secure Convention compliance the statutory discretion had to be exercised in every case.
It now seems to me that the underlying question in all these cases indeed, the determinative question in every case lying between the two extremes I have thus far dealt with is: what essentially was Parliament intent on achieving by this legislation? Is it or is it not something which could realistically be achieved consistently with the observance of Convention rights? If it is, then it must be so construed and applied.
If, however, it is not, then section 6(2)(b) will apply: the legislation will be incompatible, a declaration of incompatibility may be made, and the public authority will be immune from liability.
In short, the question to be asked in deciding whether section 6(2)(b) applies is essentially the same question as is more usually asked under section 3 when deciding whether or not, by a strained construction of apparently incompatible legislation, it is possible to read and give effect to it compatibly with Convention rights.
Would such a construction depart substantially from a fundamental feature of the legislation? Would it be inconsistent with the underlying thrust of the legislation? Would it go with the grain of the legislation? Would it violate a cardinal principle of the legislation? Would it remove its pith and substance? Would it create an entirely different scheme? The Court must not cross the boundary from interpretation into legislation.
All these familiar concepts and phrases are to be found in the well known cases on section 3 but their importance has hitherto not perhaps been fully recognised in the context also of section 6(2)(b).
It is time to return to section 64(1A) of PACE and in the light of these considerations to ask whether realistically it could be construed for all the world as if, in enacting it, the government was leaving it to individual police forces or even to ACPO acting on their joint behalf to decide upon just what sort of scheme should be implemented for the future retention of biometric data.
Is it really suggested that the police could and should then (in 2001) of their own volition have decided that, instead of retaining data indefinitely, they would retain it for only, say, one year or five years, or different periods in different cases and so forth? And if this was not open to them in 2001, how then could it become so merely because of the Grand Chambers condemnation of the indefinite scheme some years later? As Lord Nicholls observed in Ghaidan v Godin Mendoza [2004] 2 AC 557, 572, para 33, when indicating the limits of the courts section 3 powers: There may be several ways of making a provision Convention compliant, and the choice may involve issues calling for legislative deliberation. It is difficult to think of any case in which that objection to a section 3 construction applies more obviously than here.
Lord Steyn reflected the same objection in the same case (para 49): Interpretation could not provide a substitute scheme.
It is surely plain that legislative deliberation was required here.
DNA retention can only sensibly operate on a national basis and section 64(1A), properly understood, in my judgment not merely authorised but required precisely the sort of scheme for the indefinite retention of biometric data that the House of Lords came to describe (and, indeed, so enthusiastically to support, in my case unrepentingly) in S and Marper.
Realistically it was just not possible to construe the section differently, least of all as authorising the police to create for themselves a fundamentally different scheme which would achieve compatibility with the requirements of article 8 as subsequently identified by the Grand Chamber.
Of course, some degree of latitude was given to the police as to how precisely the retention scheme was to operate.
But this was essentially to decide what narrow categories should be excluded from its scope cases of the sort described by Lord Steyn at para 36 of S and Marper (see para 125 above) and, indeed, in the ACPO Guidelines (see para 129 above).
The discretion could not sensibly be construed as extending to the basic nature of the scheme: whether retention should be indefinite or time limited.
That section 64(1A) was intended to introduce a database for the indefinite retention of DNA samples is surely clear from the very circumstances in which this legislative change was brought about the deeply disturbing circumstances in which a violent rapist and a brutal murderer had both gone free because of the unsatisfactory existing scheme see Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 and In re British Broadcasting Corporation [2010] 1 AC 145 and, indeed, to my mind clear also from the speeches in the House in S and Marper to which I have already referred.
One of the specific issues before the House in S and Marper was, it should be noted: (4) if the retention of fingerprints and DNA profiles and/or samples is an unjustified interference with the appellants Convention rights, whether it would be possible to give section 64(1A) a Convention compatible interpretation under section 3 of the 1998 Act (Lord Steyns judgment at para 17) an issue, of course, as Lord Steyn observed at para 57, that in the event fell away.
In short, the argument before the House assumed that section 64(1A) called for the indefinite retention of data and that, if this was incompatible with article 8, the appellants then needed to resort to section 3 of HRA for their requests for data removal to succeed.
The appellants here submit that, following the Grand Chamber judgment, it was open to the police to adjust their data retention policy to meet the newly recognised requirements of article 8 in just the same way as they were required by this court in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410 on article 8 grounds to adjust their previous approach to the disclosure of information for the purposes of enhanced criminal record certificates (ECRCs) pursuant to section 115(7) of the Police Act 1997.
In my judgment, however, the two situations are entirely different: in L all that the courts decision required of the police was that in future they give no less weight to the statutory requirement that in their opinion the information ought to be included in the certificate than the requirement that they think it might be relevant (and in borderline cases give the prospective employee an opportunity to say why the information ought not to be disclosed).
There was no requirement whatever for fresh policy choices to be made let alone legislative deliberation or democratic accountability.
Rather the court was well able to decide the limited adjustment that needed to be made.
Contrast the position in the present case.
The Grand Chamber, in para 134 of its judgment (see para 126 above), can hardly have been expecting the police, rather than the Government, to implement the newly required measures under the supervision of the Committee of Ministers.
Correspondingly, the States reaction to the Grand Chambers judgment was that it was plainly for Government, not the police, to devise and implement a new and Convention compliant scheme.
It was, indeed, the Home Office rather than the police who decided that children under ten should be removed from the database (see para 127 above).
No less significantly, the perceived need for a fully legitimate parliamentary solution to the problem was manifested by the political insistence upon the new scheme being introduced by primary and not merely secondary legislation.
If this was not appropriate by secondary legislation, how much less so by revised ACPO guidelines.
Even if it is suggested that section 64(1A) does not preclude ACPO from now amending their Guidelines to address the Grand Chambers criticisms in S v UK, that with respect is not a sufficient answer to the section 6(2)(b) defence.
As I have said (para 143 above), the section 6(2)(b) defence necessarily postulates that the public authority could act differently.
The critical question is whether they could do so consistently with the essential scheme and thrust of the legislation and a good test of that, I would suggest, is to ask whether it can really be said to be their duty to do so and to be unlawful and wrong for them not to do so.
The whole purpose of section 6(2)(b) is to safeguard a public authority from liability (and, indeed, from misplaced criticism) in circumstances where in truth it is acting (as for my part I have no doubt that the police are acting here) perfectly properly.
It follows from all this that, in common with Lord Rodger, with whose judgment on the section 6 issue I respectfully agree, I would hold that it is not unlawful (under domestic law) for the respondent police commissioner to continue to hold the appellants data on the national DNA database.
As to whether this Court should now make a declaration of incompatibility in respect of section 64(1A) I hold no strong view.
Nowhere is this identified as an issue before us and frankly I find it difficult to see any possible need or use for it in the present circumstances.
But if others think it desirable, I would be quite content with that.
I would add that, even had I concluded that the police could now act compatibly with article 8 under section 64(1A), I should certainly not have thought it just and appropriate within the meaning of section 8 of the HRA to require them to change their existing practice pending the introduction of a new legislative data retention scheme.
It may be, indeed, that the strength of this reaction to the respondents fall back argument under section 8, on true analysis, reinforces the correctness of my primary conclusion on the section 6 issue: quite simply it would be wrong for the police to change their approach to section 64(1A) before Parliament so dictates and this court cannot properly direct them to do so.
If anyone is to be criticised for the failure of the existing database to meet the States obligations under article 8, it is surely the Government, not the police.
In my judgment they have a section 6(2)(b) defence to these claims.
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Section 64 of the Police and Criminal Evidence Act 1984 (PACE) required the destruction of samples or fingerprints taken from a person in connection with the investigation of an offence if he was cleared of that offence.
Section 64(1A) of PACE, enacted by section 82 of the Justice and Police Act 2001 (the 2001 Act), replaced that statutory obligation to destroy data with a discretion.
Section 64(1A) provides that samples taken in connection with the investigation of an offence may be retained after they have fulfilled the purposes for which they were taken.
Section 64(1A) was supplemented by guidelines issued by the Association of Chief Police Officers (ACPO).
These guidelines provided that data should be destroyed only in exceptional cases.
The polices retention policy was challenged in R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of South Yorkshire Police [2004] 1 WLR 2196 (Marper UK).
The claimants argued that the retention by the police of their finger prints and DNA samples was incompatible with article 8 of the European Convention on Human Rights (the ECHR).
The majority of the House of Lords held that retention did not constitute an interference with the claimants article 8 rights and they held unanimously that in any event any such interference was justified under article 8(2).
However, in 2008, the European Court of Human Rights (ECtHR) disagreed: see S and Marper v United Kingdom (2008) 48 EHRR 50 (Marper ECtHR).
It found the indefinite retention of data to be an interference which was not justified under Article 8(2).
The Governments immediate response was to remove children under the age of 10 from the database.
They then opened a consultation period to consider the appropriate legislative reform.
This resulted in legislation which, following the change of government in May 2010, was not brought into force.
The Coalition Government is promoting new legislation to take account of the ECtHRs judgment.
In December 2007, GC was arrested on suspicion of common assault on his girlfriend.
He denied the offence.
A DNA sample, fingerprints and photographs were taken after his arrest.
On the same day he was released on police bail without charge and was subsequently informed that no further action would be taken.
In March 2009, C was arrested on suspicion of rape, harassment and fraud.
His finger prints and a DNA sample were taken.
He denied the allegations.
He was charged in respect of the rape allegation but no further action was taken in respect of the harassment and fraud allegations.
In the Woolwich Crown Court in May 2009, the prosecution offered no evidence and C was acquitted.
In both cases, the appellants requested the destruction of the data taken.
Their requests were refused as there were no exceptional circumstances within the meaning of the ACPO guidelines.
The appellants issued proceedings for judicial review of the retention of their data on grounds that, in light of Marper
ECtHR, its retention was incompatible with their article 8 rights.
In the circumstances, the Divisional Court (Moses LJ and Wyn Williams J) dismissed the applications for judicial review and granted a certificate that the cases were appropriate for a leapfrog appeal to the Supreme Court: [2010] EWHC 2225 (Admin).
The Supreme Court, by a majority, allows the appeals (Lords Rodger and Brown dissenting).
Lord Dyson gives the lead judgment.
The majority grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR.
They grant no other relief.
Interpretation of section 64(1A) of PACE It is common ground that Marper UK should be overruled.
It is also agreed that in light of Marper ECtHR, the indefinite retention of the appellants data under the current retention policy is a breach of article 8 ECHR.
The only issue in these appeals, therefore, is what the court should do about that in the present circumstances.
Section 3 of the Human Rights Act 1998 (HRA) requires the court, insofar as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights.
It is uncontroversial that the statutory purpose of section 64(1A) was to remove the requirement to destroy data after it had served its immediate purpose so as to create a greatly extended database.
The extended database was to facilitate the prevention of crime, the investigation of offences and the conduct of prosecutions.
However, this does not mean that Parliament intended that, save in exceptional circumstances, the data should be retained indefinitely.
Rather, Parliament conferred a discretion on the police to retain data.
The natural meaning of the word may in section 64(1A) is permissive not mandatory.
There is no reason to suppose that Parliament must have intended its statutory purpose to be achieved in a disproportionate way so as to be incompatible with article 8: [23] [24], [88] [89].
The police were entrusted with setting out the precise means of achieving the statutory purpose: [26].
There is no reason in principle why the police, with the input of the Secretary of State, should be less well equipped than Parliament to create guidelines for the exercise of this power: [40] [44].
Accordingly, it is possible to read section 64(1A) in a way which is compatible with article 8 ECHR as interpreted in Marper ECtHR.
A declaration of incompatibility is not appropriate and section 6(2)(b) of the HRA is not engaged: [35], [55], [69].
Lords Rodger and Brown dissent.
They would have dismissed the appeals.
In their view, the history shows that Parliament's purpose in enacting section 64(1A) was to ensure that in future samples taken from suspects would be retained indefinitely: [94] [97].
Therefore, the police had no choice but to retain the data: [108] [109].
In their view, it is not possible to interpret section 64(1A) in accordance with section 3 HRA: [115], [146] [147].
However, since the police could not have acted differently in substance, what they did and what they continue to do, falls within section 6(2)(a) or section 6(2)(b) HRA and is lawful: [119].
Appropriate relief The present intention of the government is to bring the new legislation into force later this year.
In these circumstances, in relation to biometric data it is sufficient to grant a declaration under section 8(1) HRA that the present ACPO guidelines are unlawful because they are incompatible with the ECHR.
Where Parliament is seised of the matter, it is not appropriate to make an order requiring a change in the legislative scheme within a specific period or an order requiring destruction of data: [45] [49], [73], [91] [92].
It is, however, open to ACPO to reconsider and amend the guidelines in the interim: [73], [81], [90].
Lord Rodger would have preferred to grant a declaration of incompatibility under section 4 HRA: [121].
In relation to the photographs of GC, in view of the manner in which the issue was raised in the Divisional Court and the consequent lack of any substantive judgment, the Supreme Court expresses no opinion on this part of the appeal: [50] [51].
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The appeals now before the Supreme Court in Belhaj and Boudchar v Straw and Ministry of Defence v Rahmatullah concern the alleged complicity of United Kingdom authorities and officials in various torts, allegedly committed by various other states in various overseas jurisdictions.
The torts alleged include unlawful detention and rendition, torture or cruel and inhuman treatment and assault.
The defences include in both appeals state immunity and the doctrine of foreign act of state.
The case of Rahmatullah also raises for consideration the inter relationship of these concepts with article 6 of the European Convention on Human Rights.
The meticulous but differing analyses of the Court of Appeal (Lord Dyson MR and Sharp and Lloyd Jones LJJ) in Belhaj and Leggatt J in Rahmatullah underline the difficulties.
The Supreme Court has nonetheless benefitted greatly from their analyses, as well as that of a previous Court of Appeal (Rix, Longmore and Davis LJJ) in Yukos Capital Sarl v OJSC Rosneft Oil Co (No 2) [2012] EWCA Civ 855; [2014] QB 458 (Yukos v Rosneft).
The issues come before the courts by way of challenges under CPR rule 11.1 to the existence or exercise by the court of jurisdiction over the appellants (the defendants in the proceedings), combined with applications for dismissal of the relevant claims under CPR rule 3.1.
The issues have, necessarily, to be determined by reference to allegations contained in the respondents (the claimants) pleadings which have not been investigated or tested.
One of the appellants objections to their adjudication is indeed that it is impermissible or inappropriate for a domestic court to investigate allegations of the type advanced.
The claimants allegations
Both cases originate with events in February/March 2004.
In Belhaj, Mr Belhaj, a Libyan national and opponent of Colonel Gaddafi, and his wife, Mrs Boudchar, a Moroccan national, attempted (under, it seems likely, other names) to take a commercial flight from Beijing to London, but were instead and for whatever reason deported by the Chinese authorities to Kuala Lumpur.
There they were detained.
MI6 is alleged to have become aware of their detention and on 1 March 2004 to have sent the Libyan intelligence services a facsimile reporting their whereabouts.
This is said to have led to a plan being developed to render them against their will to Libya.
Thereafter, they allege, they were unlawfully detained first by Malaysian officials in Kuala Lumpur and then by Thai officials and United States agents in Bangkok, before being put on board a US airplane which took them to Libya.
There they were further detained, in the case of Mrs Boudchar until 21 June 2004, in the case of Mr Belhaj until 23 March 2010.
Mr Belhaj and Mrs Boudchar allege that the United Kingdom procured this detention in all these places by common design with the Libyan and US authorities.
They allege that they suffered mistreatment amounting to torture at the hands of US agents in Bangkok and in the airplane and at the hands of Libyan officials in Libya.
They allege that the United Kingdom by common design arranged, assisted and encouraged [their] unlawful rendition to Libya.
They rely in this connection upon a letter dated 18 March 2004 alleged to have been written by the second appellant, Sir Mark Allen, allegedly a senior official of the Secret Intelligence Service (SIS) to Mr Moussa Koussa, Head of the Libyan External Security Organisation.
The letter congratulated Mr Moussa Koussa on the safe arrival of [Mr Belhaj].
It said that This was the least we could do for you and for Libya to demonstrate the remarkable relationship we have built over recent years.
It indicated that British intelligence had led to Mr Belhajs transfer to Libya, although the British services did not pay for the air cargo.
Mr Belhaj and Mrs Boudchar further allege that the United Kingdom conspired in, assisted and acquiesced in torture, inhumane and degrading treatment, batteries and assaults inflicted upon [them] by the US and Libyan authorities.
Again, it should be stressed that these are allegations, based inter alia on alleged awareness of the risks of torture of detainees in United States and/or Libyan hands.
It is also pleaded that the renditions took place as part of a co ordinated strategy designed to secure diplomatic and intelligence advantages from Colonel Gaddafi.
The claims are framed as claims for false imprisonment, trespass to the person, conspiracy to injure or to use unlawful means, misfeasance in public office and negligence.
They are brought against Mr Jack Straw as Foreign Secretary, Sir Mark Allen, the SIS, the Security Service, the Attorney General, the Foreign and Commonwealth Office and the Home Office, all of whom are the appellants in Belhaj.
The first and second appellants, Mr Straw and Sir Mark Allen, state that the Official Secrets Act makes it impossible for them to advance any positive case in response to the allegations against them.
The remaining appellants state that it is the position of Her Majestys Government that it would be damaging to the public interest for them to plead to such allegations.
Upholding Simon J on the point, the Court of Appeal held, and it is now accepted, that all the claims depend upon proof that torts such as those alleged existed under the laws of the places where they were allegedly committed (subject only to any countervailing considerations of, in particular, public policy under section 14 of the Private International Law (Miscellaneous Provisions) Act 1995).
The issues now before the Court relate to all the claims, save for three negligence claims which are independent of the alleged facilitation of and acquiescence in rendition to and detention in Libya and which arise from alleged failure by the appellants to take protective steps after they became aware that Mr Belhaj and Mrs Boudchar were in Libya.
In Rahmatullah, Mr Rahmatullah, a Pakistani citizen, was on 28 February 2004 detained by British forces in Iraq on suspicion of being a member of Lashkar e Taiba, a proscribed organisation with links to Al Qaeda.
The UK and the USA were at the time occupying forces in Iraq, where there was a situation of international armed conflict.
Shortly after his original detention, within a matter of days at most, Mr Rahmatullah was transferred into the custody of US forces, and by the end of March 2004 they had transferred him to Bagram Airbase in Afghanistan, where he was detained for over ten years without charge or trial, until released on 15 May 2014.
He alleges that he was subjected to severe mistreatment in both British and United States detention.
His claims are put under the like heads to Mr Belhajs and Mrs Boudchars, with assault and torture as additions.
Again, the claims allege in various terms that the relevant appellants acted in concert or combination with the United States authorities, or assisted, encouraged or were complicit in relation to the alleged unlawful detention and mistreatment by the United States authorities.
Again, the tenor of the allegations is that the United States authorities were the actors, even if they were being encouraged or engaged, procured, or utilised by the appellants to do as they allegedly did.
Leggatt J regarded the claims relating to Mr Rahmatullahs detention by British forces and transfer into the custody of US forces as barred by the defence of Crown act of state, assuming that arrest and detention were authorised pursuant to lawful United Kingdom policy.
The appeal from that aspect of his judgment was joined with the appeal in Mohammed (Serdar) v Ministry of Defence [2015] EWCA Civ 843; [2016] 2 WLR 247.
The Court of Appeal allowed the appeal on the basis that Crown act of state is a nuanced defence, applicable only where there are compelling considerations of public policy which require the court to deny a claim founded on an act of the Executive performed abroad (para 359), with the result that there must be a trial on the facts on the issue of Crown act of state.
In its separate judgment of todays date from that decision of the Court of Appeal, the Supreme Court restores (though for different reasons) Leggatt Js conclusions that Crown act of state is in principle available in respect of the United Kingdoms detention and transfer to US custody of Mr Rahmatullah.
The issues now before the Supreme Court relate solely to Mr Rahmatullahs claims in tort in respect of alleged acts or omissions of US personnel while he was in US detention.
The claims are brought against the Ministry of Defence and the Foreign and Commonwealth Office, both of which are the appellants in Rahmatullah.
The appellants case in both proceedings is that the issues now before the Supreme Court are inadmissible or non justiciable on their merits by reason of principles governing state immunity and/or foreign act of state.
More specifically, the appellants submit that the claims are based on conduct where the prime actors were foreign state officials, and they either implead the foreign states or would require the English courts to adjudicate upon foreign acts of state.
I use the phrase foreign act of state loosely at this point to cover various bases on which it is submitted that the English court cannot or should not adjudicate upon proceedings against the United Kingdom, its authorities or officials when the proceedings would also involve adjudicating upon the conduct of a foreign state, even though state immunity is not established on the part of the United Kingdom and the relevant foreign state is not impleaded in the proceedings.
The appellants submit that the principles governing foreign act of state dovetail naturally with those governing state immunity, and that underpinning both are conceptions of mutual international respect and comity.
That said, there are, as will appear, also differences, not least that state immunity is firmly based on customary international law, whereas foreign act of state in most if not all of its strands has been developed doctrinally in domestic law.
State immunity qualifies the jurisdiction of domestic courts.
Foreign act of state in one sense requires a domestic court to accept without challenge the validity of certain foreign state acts, but in another sense it is a broader principle of non justiciability, whereby the domestic court must simply declare itself incompetent to adjudicate.
The difficulties which exist in separating or aligning these strands are considerable.
I note at this point that the appellants do not suggest that the tortious claims against them which are in issue on these appeals can or do attract a defence of Crown act of state.
The leading authorities on Crown act of state are now Nissan v Attorney General [1970] AC 179 and the Supreme Courts separate judgment, delivered today in the cases of Rahmatullah and Serdar Mohammed (para 6 above).
In Nissan, Lord Pearson said (at p 237F G) that: it is necessary to consider what is meant by the expression act of state, even if it is not expedient to attempt a definition.
It is an exercise of sovereign power.
Obvious examples are making war and peace, making treaties with foreign sovereigns, and annexations and cessations of territory.
Apart from these obvious examples, an act of state must be something exceptional.
Any ordinary governmental act is cognisable by an ordinary court of law (municipal not international): if a subject alleges that the governmental act was wrongful and claims damages or other relief in respect of it, his claim will be entertained and heard and determined by the court.
Nissan concerned the Crowns occupation of a hotel while assisting to maintain peace under an agreement made between the United Kingdom and Cyprus.
The doctrine of Crown act of state was held not to bar a claim for compensation.
Lord Morris said (at p 217D) that the acts in question in that case (of feeding and housing troops in the hotel) were far removed from the category of transactions which by reason of being a part of or in performance of an agreement between states are withdrawn from the jurisdiction of the municipal courts.
And Lord Wilberforce indicated (pp 235H 236A) that between the acts complained of and the pleaded agreement with the Government of Cyprus, the link was altogether too tenuous for the Crown to be able to invoke Crown act of state if accepted as sufficient to attract the description of act of state it would cover with immunity an endless and indefinite series of acts, judged by the officers in command of the troops to be necessary, or desirable, in their interest.
On the other hand, in our concurrently delivered judgment, we have accepted that the doctrine of Crown act of state is available in respect of the United Kingdoms detention and transfer to United States custody of Mr Rahmatullah.
In these circumstances, two questions arise as to how that fits with the absence of any suggestion that Crown act of state is or could be a defence in respect of the United Kingdoms alleged involvement in the wrongful detention, combined with mistreatment, by various foreign states of Mr Belhaj, Mrs Boudchar and Mr Rahmatullah.
First, one can understand why there is no plea of Crown act of state in respect of the allegations of severe mistreatment inflicted on the various respondents by various foreign state authorities.
Further, in the cases of Mr Belhaj and Mrs Boudchar, the allegations of wrongful detention and mistreatment might well be regarded as inseparable.
However, in the case of Mr Rahmatullah, the appellants deny the allegations of mistreatment, while admitting that he remained in United States custody for more than ten years.
There has been no plea of Crown act of state in respect of any period of this detention, which is not necessarily linked with any mistreatment.
If Crown act of state is available, as the court holds, in respect of detention by the United Kingdom, then one might have thought that it would logically be available in respect of detention by a third state in respect of which the Crown is alleged to have been complicit.
The explanation may, however, lie in the length of the period of Mr Rahmatullahs detention and the considerations that he was never charged or tried, was deprived of any access to a lawyer for the first six years and was unable to speak freely for the remainder of the period.
A plea of Crown act of state in respect of detention of this nature might well have been considered unrealistic.
Second, however, this leaves a tension between, on the one hand, apparent recognition that the nature of the acts is not such as to justify a plea of Crown act of state in respect of the United Kingdoms alleged complicity in such acts and, on the other hand, the case now advanced that the alleged involvement of other states in such acts precludes any claim against the United Kingdom in respect of them on the grounds of foreign act of state.
As I have said in my separate concurrent judgment (para 4), it is likely to be easier to establish that a domestic court should abstain from adjudicating on the basis of Crown act of state than on the basis of foreign act of state.
Summary of conclusions
For the reasons which I shall set out, I have reached the following conclusions: State immunity (paras 12 to 31): (i) The appellants pleas of state immunity fail because the various foreign states (Malaysia, Thailand, the United States and Libya) are not impleaded, and their legal position is not affected, either directly or indirectly by the claims in tort advanced by the respondents solely against the appellants: para 31.
Foreign act of state (paras 32 to107): (ii) The concept of foreign act of state needs to be disaggregated, or broken down, and approached at a more particular level of enquiry: para 34. (iii) Three types of foreign act of state can be identified under current English authority: a) The first is the rule of private international law, whereby a foreign states legislation will normally be recognised and treated as valid, so far as it affects movable or immovable property within the foreign states jurisdiction: para 35. b) The second is that a domestic court will not normally question the validity of any sovereign act in respect of property within the foreign states jurisdiction, at least in times of civil disorder: para 38. c) The third is that a domestic court will treat as non justiciable or, to use language perhaps less open to misinterpretation, abstain or refrain from adjudicating upon or questioning certain categories of sovereign act by a foreign state abroad, even if they occur outside the foreign states jurisdiction: para 40. (iv) The appellants case, to the effect that the second and/or third types should be expanded or combined so as to cover all sovereign (jure imperii) acts by a foreign state anywhere abroad outside the jurisdiction of the domestic court whose jurisdiction is in issue, should be rejected: a) To the extent that it exists at all, the second type of foreign act of state is and should be limited to acts relating to property within the jurisdiction of the foreign state: para 74 to 78. b) If (contrary to a), the second type were to be viewed as covering acts directed against the person, it would be subject to a public policy exception, which would enable at least the allegations of complicity in torture, unlawful detention, enforced rendition and disappearance made in these cases to be pursued in the English courts: para 80. c) The third type of foreign act of state is not limited territorially.
Whether an issue is non justiciable falls to be considered on a case by case basis.
Considerations both of separation of powers and of the sovereign nature of foreign state or inter state activities may lead to a conclusion that an issue is non justiciable in a domestic court: paras 90 to 95.
But in deciding whether an issue is non justiciable, English law will have regard to the extent to which the fundamental rights of liberty, access to justice and freedom from torture are engaged by the issues raised: paras 98 and 101. d) I see little attraction in and no basis for accepting a yet further doctrine whereby United Kingdom courts might be precluded from investigating acts of a foreign state, if the Foreign Office communicated to it the Governments view that this would embarrass the United Kingdom in its international relations (though I accept that consequences for international relations may feed into the question of justiciability or abstention under the third type of foreign act of state): para 41. e) In the present case, the circumstances as they are presently before the Supreme Court do not lead to a conclusion that the issues are non justiciable in a domestic court: paras 96 to 105. f) Had a contrary conclusion been reached, the result would have been that, although the relevant foreign states could, at least in theory, have been sued within their own jurisdictions for the torts alleged to have been directly committed by their own officers, the appellants could not have been sued anywhere for their alleged complicity in such torts, since they would be entitled to invoke state immunity in any foreign jurisdiction: para 102.
Miscellaneous points (paras 108 to 110): (v) It is unnecessary to reach any final determination of the respondents case: a) that, in so far as what is alleged amounts to complicity in torture, the United Nations Convention against Torture (Treaty Series No 107 (1991)) obliges states to provide a universal civil remedy in respect of torture wherever committed in the world, at least when (allegedly) committed by or with the connivance of United Kingdom citizens, and that any otherwise applicable type of foreign act of state should be modified accordingly.
It suffices to say that I would as at present advised see no basis for differing from the rejection of this argument in Jones v Ministry of the Interior of the Kingdom of Saudi Arabia (Secretary of State for Constitution Affairs intervening) (Jones v Saudi Arabia) [2006] UKHL 26; [2007] 1 AC 270. b) that article 6 of the Convention rights scheduled to the Human Rights Act 1998 is engaged by and renders impermissible in the present circumstances any reliance by the appellants on either state immunity or foreign act of state.
Again, this would face a difficulty raised by the House of Lords conclusions in Holland v Lampen Wolfe [2000] 1 WLR 1573 and Jones v Saudi Arabia, paras 14 and 64, that article 6 is not engaged by a plea of state immunity.
The European Court of Human Rights has reached a contrary conclusion (see eg Al Adsani v United Kingdom (2001) 34 EHRR 11; Sabeh El Leil v France (2011) 54 EHRR 14), and it would have been necessary to consider this disagreement.
Foreign act of state, on the other hand, operates, even under the case law of the European Court of Human Rights, as a substantive bar to liability or adjudication (see Roche v United Kingdom (2005) 42 EHRR 30; Markovic v Italy (2006) 44 EHRR 52), and so would not, if applicable, engage article 6.
Further, even if article 6 were engaged, the question would then have arisen whether it rendered impermissible any reliance on either state immunity or foreign act of state.
But, since I would hold that the appellants cannot rely on either in any event, it is unnecessary to go further into this.
Conclusion: (vi) These conclusions lead to the conclusion that the appellants are not entitled to rely on state immunity or the doctrine of foreign act of state to defeat the present proceedings, and the appeals must accordingly be dismissed and the cases proceed to trial.
The detailed reasoning supporting them follows.
State immunity
State immunity is, as indicated, a principle of customary international law recognised at common law, but now provided for by the State Immunity Act 1978.
The International Court of Justice has described state immunity as occupying an important place in international law and international relations and as deriving from the principle of sovereign equality of states, which, as article 2, para 1 of the United Nations Charter makes clear, is one of the fundamental principles of the international legal order: Jurisdictional Immunities of the State, Germany v Italy, judgment of 3 February 2012 [2012] ICJ Rep, p 99.
The absolute independence of every sovereign authority and the international comity which induces every sovereign state to respect the independence and dignity of every other sovereign state were similarly identified as the bases of state immunity by Brett LJ in the seminal common law case of The Parlement Belge (1880) 5 PD 197, 214 215.
Section 1 of the 1978 Act provides: General immunity from jurisdiction. (1) A state is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act. (2) A court shall give effect to the immunity conferred by this section even though the state does not appear in the proceedings in question.
The Act specifies various exceptions to state immunity, including, but not limited to, submission to the jurisdiction (section 2), commercial contracts and contracts to be performed in the United Kingdom (section 3), personal injuries and damage to property (section 5) and ownership, possession and use of property (section 6).
Sections 5 and 6 read: 5.
Personal injuries and damage to property.
A state is not immune as respects proceedings in respect of (a) death or personal injury; or (b) damage to or loss of tangible property, caused by an act or omission in the United Kingdom. 6.
Ownership, possession and use of property. (1) A State is not immune as respects proceedings relating to any interest of the state in, or its possession or use (a) of, immovable property in the United Kingdom; or (b) in, or its possession or use of, any such property. any obligation of the state arising out of its interest (2) A state is not immune as respects proceedings relating to any interest of the state in movable or immovable property, being an interest arising by way of succession, gift or bona vacantia. (3) The fact that a state has or claims an interest in any property shall not preclude any court from exercising in respect of it any jurisdiction relating to the estates of deceased persons or persons of unsound mind or to insolvency, the winding up of companies or the administration of trusts. (4) A court may entertain proceedings against a person other than a State notwithstanding that the proceedings relate to property (a) which is in the possession or control of a state; or (b) in which a state claims an interest, if the state would not have been immune had the proceedings been brought against it or, in a case within para (b) above, if the claim is neither admitted nor supported by prima facie evidence.
It follows that state immunity is a personal immunity, ratione personae, possessed by the state in respect of its sovereign activities (acta jure imperii) so far as these do not fall within any of the exceptions.
When state immunity exists, the nature and gravity of the alleged misconduct are irrelevant.
Even the admitted illegality of the acts complained of does not alter the characterisation of those acts as acta jure imperii: Jurisdictional Immunities, para 60; see also Jones v Saudi Arabia [2007] 1 AC 270, where the House rejected the argument that torture or some other contravention of a jus cogens cannot attract immunity rationae materiae because it cannot be an official act: per Lord Hoffmann at para 85.
The classification does not appear in the 1978 Act, but the situations in which state immunity applies are commonly described as involving either direct or indirect impleading of the state.
A state is (directly) impleaded by legal proceedings taken against it without its consent: Cia Naviera Vascongado v SS Cristina (The Cristina) [1938] AC 485, 490, per Lord Atkin.
Lord Atkin also identified a second situation of immunity in which, even though the state may not be a party, the proceedings relate to state property.
In so far as the state is put in a position where it must either forego or appear to defend its property interest, this situation can readily be described as one of indirect impleading: see eg The Parlement Belge (1880) 5 PD 197, 217 219, where the Court of Appeal did just that.
On the other hand, immunity exists, as will appear, in some situations where a states property interests are affected in ways which it may not be so natural to identify as indirect impleading, and these are sometimes therefore treated separately: see eg United States of America v Dollfus Mieg et Cie SA [1952] AC 582, where Lord Porter at pp 612 and 614 referred to an action impleading the two governments or affecting their rights and to the foreign governments being implicated or their rights invaded, while Lord Radcliffe in contrast at p 616 treated it as a suit which might affect a sovereigns interest in property under the head of proceedings which amount in one way or another to a suit against the sovereign; and see recently in Canada Khadr v The Queen 2014 FC 1001, para 35 per Mosley J.
The appellants submit that the immunity is wide enough to cover cases such as the present where it is integral to the claims made that foreign states or their officials must be proved to have acted contrary to their own laws, before any claim against the United Kingdom authorities and individuals sued can get off the ground.
The respondents submit the contrary, on the basis that nothing in the present proceedings can or would involve any form of judgment against, or in any way affect any legal interests of, the relevant foreign states or their officials.
Some uncertainty exists about the appropriate classification of the undoubted immunity which exists in relation to proceedings directed against state officials for acts done in their official capacity, in circumstances where the state itself would if sued have had state immunity.
That immunity is firmly established: see Propend Finance Pty v Sing (1997) 111 ILR 611 and Jones v Saudi Arabia, cited above.
But the two leading speeches in Jones v Saudi Arabia, with both of which all other members of the House expressed their agreement, explain it on differing bases.
Lord Bingham in para 31 said: It is, however, clear that a civil action against individual torturers based on acts of official torture does indirectly implead the state since their acts are attributable to it.
Were these claims against the individual defendants to proceed and be upheld, the interests of the Kingdom would be obviously affected, even though it is not a named party.
In contrast, Lord Hoffmann at para 69 said that: state in section 1(1) of the [State Immunity Act] and government, which the term state is said by section 14(1)(b) to include, must be construed to include any individual representative of the state acting in that capacity, as it is by article 2(1)(b)(iv) of the Immunity Convention.
The official acting in that capacity is entitled to the same immunity as the state itself.
It is unnecessary to consider which of these two formulations may be preferable, although Lord Hoffmanns should not be misunderstood as suggesting that a state official possesses his own personal immunity which he can waive.
His immunity depends upon the states, and can only be waived by the state.
The immunity in respect of acts done in the course of their office extends to state officials ratione materiae even after they have left office (as well as to heads of state, who enjoy an additional immunity ratione personae while in office): see eg R v Bow Street Metropolitan Stipendiary Magistrate, Ex p Pinochet Ugarte (No 3) [2000] 1 AC 147, 202G H, 269F and 281C G, per Lords Browne Wilkinson, Millett and Phillips, citing Hatch v Baez (1876) 7 Hun 596.
Whatever classification be adopted, the property cases are instructive as to the boundaries of state immunity.
They originate in the context of admiralty proceedings in rem: see eg The Parlement Belge, an action in rem against a mail ship belonging to the King of the Belgians in his public capacity, and The Cristina itself.
In the light of modern understanding of the nature of an action in rem, it might be argued that such an action involves from the outset direct impleading: see Republic of India v India Steamship Co Ltd (The Indian Grace) [1997] UKHL 40; [1998] AC 878.
Be that as it may be, the House in The Cristina approved a number of previous authorities indicating that a state might be impleaded by proceedings against a vessel of which it had de facto possession, or such rights of direction and control, without possession, as arise from requisitioning (referring to The Broadmayne [1916] P 64), when those proceedings would, if successful result in an order of the court affecting that possession or those other rights: see United States of America v Dollfus Mieg et Cie SA [1952] AC 582, 617, per Lord Radcliffe.
United States of America v Dollfus Mieg et Cie SA was concerned with property, but in a very different context.
The Bank of England held for safe custody 64 numbered bars of gold which had in 1944 been forcibly and wrongfully removed by German troops from a French bank holding them on behalf of Dollfus Mieg.
The bars were recovered from Germany by Allied forces and lodged with the Bank of England, to be held to the order of a Tripartite Commission for the Restitution of Monetary Gold established by the American, British and French governments to deal on their behalf with gold taken from Germany.
The Commission was no more than three sovereigns joined in a particular relation: p 615, per Lord Radcliffe.
The Bank of England by mistake sold 13 of the bars, retaining 51.
Dollfus Mieg claimed delivery up alternatively damages against the Bank of England.
The action was stayed at the instance of the United States and France as regards the 51 bars, on the basis that the claim indirectly impleaded the three states as bailors in respect of their immediate possessory rights as against the Bank.
It was allowed to continue as regards the 13 bars, on the basis that the Bank had terminated any bailment by their sale.
Lord Radcliffe faced squarely the problem that title was what was in issue, saying: But certainly a special difficulty begins when he [the sovereign] is not actually named but the suit is one which may result in a judgment or order that will affect his interest in some piece of property.
Even to say that much begs one important question, for it assumes that he has a valid interest in that property: whereas a stay of proceedings on the ground of immunity has normally to be granted or refused at a stage in the action when interests are claimed but not established, and indeed to require him to establish his interest before the court (which may involve the courts denial of his claim) is to do the very thing which the general principle requires that our courts should not do.
Lord Radcliffe resolved the problem by reference to the three states possessory rights as bailors of the goods to the Bank of England, concluding at pp 618 619 that: The property of a sovereign state, which is an abstraction, must be in the physical possession of some actual person, and I do not see any distinction of substance in a matter of this kind between the possession of a servant of the state and the possession of its bailee when the bailment is of such a nature as that of the bank in this case.
Indeed, I think that the Commissions possession and control of the gold bars in the hands of the bank amounted to a form of property more substantial than that which HM Government acquired by requisitioning the Broadmayne.
The suit began as a claim in detinue.
That means that the court was going to be asked or at any rate could be asked to make an order upon the bank to hand over the bars to the plaintiffs.
Such an order would unquestionably interfere with the Commissions possession of them and compel the Commission, if they wished to recover possession, to come to court and try to get them back from the plaintiffs.
I cannot feel any doubt that such a suit offends against the principle of sovereign immunity.
In short, the Commission would no longer be entitled to look to the Bank as bailees, but would have as owners to establish title by proceedings against Dollfus Mieg.
Addressing an argument that Dollfus Mieg could avoid the problem by limiting itself to a claim in conversion for damages, Lord Radcliffe found the point one of considerable difficulty, but in the end concluded that a claim on this basis was also precluded by state immunity: when I consider the real nature of a claim for damages for conversion I come to the same conclusion.
Subject to the payment of costs and special damages (if there are any) an action for damages for conversion can always be stayed if the defendant offers to hand over the property in dispute.
In that sense a suit for damages for conversion is an attempt to use the courts process to interfere with the existing possession of the chattel the title to which is in dispute.
If the defendant continues to resist and damages are awarded against him he may keep the chattel and pay the damages; but if he does he becomes entitled, if he is a bailee, to set up the plaintiffs title to the goods, which he has thus paid for, against his own bailor.
In other words the courts judgment in the personal action against him would materially affect the existing right of his bailor in respect of the possession and disposal of the chattel.
The result of a judgment in damages has thus some analogy to a sale by the court of a chattel which is in the possession or under the requisition of a foreign sovereign: if the sale cannot be ordered in the one case because to order it would be to use the courts process against the sovereign, then the judgment cannot be rendered in the other.
Again, the Commission would no longer be able to look to the Bank of England as simple bailees, but would face the issue that the Bank now stood, at least in theory, in the same position as Dollfus Mieg.
It seems clear that Lord Radcliffe viewed the facts in Dollfus Mieg as close to the outer parameters of state immunity.
Ultimately, the decision focused on the existence of a bailment, and on the second order consequences for the three States and the Bank of Englands legal positions as bailors and bailee if Dollfus Miegs claim could be pursued and was successful.
Five years later the House confirmed in Rahimtoola v Nizam of Hyderabad [1958] AC 379 that a similar position applied where the issue was title to a chose in action, consisting of monies transferred without authority from an account of the Nizam and his government at the Westminster Bank Ltd to an account opened by that bank in the name of Mr Rahimtoola, the High Commissioner for Pakistan, in his capacity (as the House held) as agent for the state of Pakistan.
The Nizams suit was barred by state immunity.
Viscount Simonds put the matter as follows at p 395: A suit by a third party, the Nizam, is calculated and intended to interfere with the title of Rahimtoola and his principals, the Government of Pakistan, and with their possession or control of their property.
It can only be maintained if the Government of Pakistan take a course which their sovereign dignity entitles them to reject and descend into the arena.
The appellants argue on the present appeals that state immunity was recognised as existing in Rahimtoola, although the State of Pakistan would not have been bound by a judgment in proceedings involving a third party.
But that was not how Viscount Simonds saw the matter unsurprisingly since Mr Rahimtoola was acting in his official capacity and proceedings against him therefore involved, on their face, state property.
The special treatment in section 6(4) of the State Immunity Act 1978 of claims against third parties in respect of property cases also suggests that such cases represent a particular head of immunity, based on a states possession or control of or claim to some (legal) interest in the property in question.
However, the appellants rely upon the United Nations Convention on Jurisdictional Immunities of States and Their Property (2004) as being based on a broader conception of interests, which, they submit, should inform the domestic understanding of indirect impleading.
Articles 5 and 6 provide: Article 5 State immunity A state enjoys immunity, in respect of itself and its property, from the jurisdiction of the courts of another state subject to the provisions of the present Convention.
Article 6 Modalities for giving effect to state immunity 1.
A state shall give effect to state immunity under article 5 by refraining from exercising jurisdiction in a proceeding before its courts against another state and to that end shall ensure that its courts determine on their own initiative that the immunity of that other state under article 5 is respected.
A proceeding before a court of a state shall be considered to have been instituted against another state if that other state: a. is named as a party to that proceeding; or b. is not named as a party to the proceeding but the proceeding in effect seeks to affect the property, rights, interests or activities of that other state.
By article 2(1)(b), State is defined in broad terms, as meaning: (i) the State and its various organs of government; (ii) constituent units of a federal State or political subdivisions of the State, which are entitled to perform acts in the exercise of sovereign authority, and are acting in that capacity; (iii) agencies or instrumentalities of the State or other entities, to the extent that they are entitled to perform and are actually performing acts in the exercise of sovereign authority of the State; and (iv) representatives of the State acting in that capacity.
The appellants rely on the words interests or activities in article 6(2)(b) which, they submit, indicate that state immunity should be understood as extending beyond claims affecting property or other rights.
The Convention is not yet in force, lacking a sufficient number of ratifications, including any from the United Kingdom.
But in Jones v Saudi Arabia, at para 26, Lord Bingham referred to the Convention as being, [d]espite its embryonic status, the most authoritative statement available on the current international understanding of the limits of state immunity in civil cases, going on to say that the absence of a torture or jus cogens exception [in it was] wholly inimical to the claimants contention.
This was a statement made expressly about the limits of state immunity in the context of an issue whether the legal liability of a state official for torture fell outside the scope of such immunity.
That was a fundamental question which the Convention, however embryonic, could be expected to cover.
To attach equivalent relevance to the use in a Convention with no binding international status of the ambiguous terminology of article 6(2)(b) is to take Lord Binghams words out of context.
The appellants reliance on the further passage in Lord Binghams speech quoted at para 17 above, with its adoption of the word interests is open to the same objection.
The appellants note that the International Court of Justice has referred to the adoption of the Convention (see eg Jurisdictional Immunities, paras 77 and 89).
Again, this was in the context of the issue, very different from the present, whether state immunity was subject to any exception in the case of violations of human rights, the law of armed conflict or jus cogens.
The drafting history locates article 6 firmly in the context of the case law concerning the arrest of vessels, such as The Parlement Belge, and property in which states claim an interest, such as Dollfus Mieg: see eg the Report of the International Law Commission (Yearbook 1991, Vol II, (2), pp 23 25).
The Report also explains the focus of article 6 as avoiding the exercise of State jurisdiction in a way which would put any foreign sovereign in the position of having to choose between being deprived of property or otherwise submitting to the jurisdiction; and it explains the words to affect as having been introduced to replace the prior draft wording to bear the consequences of a determination by the court which may affect, in order to avoid unduly broad interpretations of article 6(2)(b).
Even so, concerns were expressed at the drafting stage by both Australia and the United States about the potential width of article 6(2)(b): see the Report of the Secretary General of the United Nations A/47/326 of 4 August 1992.
But academic commentators have concluded that any uncertainty in its scope should be addressed by recognising that interests should be limited to a claim for which there is some legal foundation and not merely to some political or moral concern of the State in the proceedings: Fox and Webb, The Law of State Immunity, 3rd ed (2015 revision), p 307; and OKeefe, Tams (eds), The United Nations Convention on Jurisdictional Immunities of States and Their Property (2013), pp 110 111, indicating that some specifically legal effect should be required as distinct from a social, economic or political effect.
Reliance was also placed by the appellants on two decisions of the International Court of Justice, the first the Case of The Monetary Gold removed from Rome in 1943 (judgment of 15 June 1954) ICJ Reports 1954, P19 and the second the Case concerning East Timor (Portugal v Australia) (judgment of 30 June 1995) ICJ Reports 1995, P90.
In Monetary Gold an arbitrator had held that certain gold removed from Rome by the Germans had belonged to Albania, but France, the United Kingdom and the United States agreed that it would be delivered up to the United Kingdom in partial settlement of the International Courts judgment of 15 December 1949 against Albania in the Corfu Channel case [1949] ICJ Rep, p 244, unless either Albania or Italy applied to establish a claim.
Albania did not so apply.
Italy did, but objected to the courts jurisdiction in the absence of Albania.
The court held that, since Italys claim would involve determining the legal position as between Albania and Italy, it could not adjudicate without Albanias consent.
It said, inter alia, that Albanias legal interests would not only be affected by a decision, but would form the subject matter of the decision (p 32).
Addressing an argument that, as a third party, Albania would not under the courts rules be bound, the court responded: This rule, however, rests on the assumption that the court is at least able to render a binding decision.
Where, as in the present case, the vital issue to be settled concerns the international responsibility of a third state, the court cannot, without the consent of that third state, give a decision on that issue binding upon any state, either the third state, or any of the parties before it.
The case is distinct from the present.
The International Court was, above all and as in the domestic case of Dollfus Mieg, being asked to determine the immediate destination of specific property.
In the courts below, Leggatt J at para 78 distinguished East Timor and the Court of Appeal at para 42 distinguished Monetary Gold as cases about international jurisdiction, required in the case of the International Court to be based upon consent, in contrast with which domestic courts exercise compulsory jurisdiction over those within their reach.
That is correct as far as it goes, but states domestic jurisdiction also depends on consent in contexts where state immunity otherwise exists.
The situation is therefore nuanced.
Nevertheless, Monetary Gold is not about state immunity, and does not on its facts assist on the issue now before the court, even by way of analogy.
The same applies to the East Timor case.
By United Nations Resolution 1514 of 15 December 1960, East Timor was under Portuguese administration as a non self governing territory.
Following internal disturbances in 1975, the Portuguese authorities withdrew to an island, and the armed forces of Indonesia intervened, after which the Portuguese withdrew entirely.
In 1978 Australia recognised the fact that East Timor was part of Indonesia but not the means by which this was brought about, and in 1989 Australia negotiated a Treaty with Indonesia, to create a Zone of Cooperation in an area between the Indonesian Province of East Timor and Northern Australia.
Portugal claimed that, in entering into this Treaty, Australia had acted unlawfully and in violation of the obligation to respect the status both of Portugal as the administering power and of East Timor as an area under such administration.
The court accepted the erga omnes character of this obligation, but declined jurisdiction to rule on the lawfulness of Australias conduct, when any judgment would imply an evaluation of the lawfulness of the conduct of another State [viz Indonesia] which is not a party to the case (p 102).
It stressed that, as in Monetary Gold, Indonesias rights and obligations would constitute the very subject matter of such a judgment made in the absence of that partys consent, contrary to the well established principle that the Court can only exercise jurisdiction over a state with its consent.
The subject matter of any judgment would have been, in essence, whether Portugal or Indonesia had the right to administer, and so enter into treaties relating to, East Timor, an issue about territorial title.
The present appeals involve no issues of proprietary or possessory title.
All that can be said is that establishing the appellants liability in tort would involve establishing that various foreign states through their officials were the prime actors in respect of the alleged torts.
But, unlike the position in Dollfus Mieg, that would have no second order legal consequences for the relationship between the respondents and the foreign states in question or their officials.
None of the above domestic and international cases carries the concept of interests so far as to cover any reputational or like disadvantage that could result to foreign states or their officials from findings as between the appellants and respondents.
On the contrary, the pains which the House of Lords took in Dollfus Mieg and Rahimtoola to identify a potential legal effect of the litigation on the relevant state rights point against any broader conception of interest.
Some consequences of the appellants case are also worthy of note.
The present proceedings in which they are sued as ancillary parties would be incapable of being maintained in this jurisdiction against them or against the states (Malaysia, Thailand, Libya and the United States) alleged to be primarily responsible for the physical conduct complained of by the respondents.
Each such other state would, on conventional principles governing state immunity, be capable of being pursued in its own courts in respect of the particular conduct complained of in its case.
But the claims could also not be pursued against the appellants in the courts of any of such other states, since the appellants would there enjoy state immunity against any direct impleading.
The appellants case on state immunity in this jurisdiction would preclude suit against them anywhere.
For the reasons given, I consider that the issues now before the Supreme Court do not attract state immunity, because the legal position of the foreign states, the conduct of whose officials is alleged to have been tortious in the places where such conduct occurred, will not be affected in any legal sense by proceedings to which they are not party.
The decisions reached by the Court of Appeal in Belhaj and by Leggatt J in Rahmatullah were correct and the appeals should be dismissed on the issue of state immunity.
The starting point of the appellants case is that adjudication of the issues now before the court in favour of the claimants would necessarily involve a finding by the English courts that foreign states had acted illegally under the laws of the places where the conduct complained of occurred.
With regard to Mr Belhajs and Mrs Boudchars alleged detention and mistreatment, that would mean in Kuala Lumpur by Malaysian officials, in Bangkok by Thai officials as well as United States officials, in the airplane by United States officials and in Libya by Libyan and United States officials.
With regard to Mr Rahmatullahs detention and alleged mistreatment, that would mean by Foreign act of state United States officials in Iraq and Afghanistan.
So much can be accepted as the premise to what follows.
In the opening words of his introduction to the chapter entitled The Foreign Act of State in his book Foreign Affairs in English Courts (1986), Dr Francis Mann wrote that: Public policy dominates one of the most difficult and most perplexing topics which, in the field of foreign affairs, may face the municipal judge in England: the doctrine of the foreign act of State displays in every respect such uncertainty and confusion and rests on so slippery a basis that its application becomes a matter of speculation.
In Yukos v Rosneft the Court of Appeal suggested (para 115) that, in view of the limitations on foreign act of state recognised in the case law: The important thing is to recognise that increasingly in the modern world the doctrine is being defined, like a silhouette, by its limitations, rather than to regard it as occupying the whole ground save to the extent that an exception can be imposed.
Leggatt J observed (para 134) that, when a rule is said to be defined by its absence, there is reason to wonder whether there is in fact such a rule.
That aphorism goes too far.
As Dr Francis Mann has suggested, quoting Cardozo J (Mann, Conflict of Laws and Public Law [1971] 1 Recueil des Cours 107, pp 148 149, 151 156 and Foreign Affairs in English Courts (1986) p 164), what is required is to approach the concept of foreign act of state at a more particular level of enquiry, by enunciating principles rather than maxims which, starting as devices to liberate thought, often end by enslaving it.
Or, to adopt a phrase from Professor Campbell McLachlans Foreign Relations Law (CUP, 2014), para 12.129, what is required is a much more fine grained approach disaggregating the general category in order to achieve the specialization of the principle in its application to particular classes of case.
Happily, there is a very substantial measure of common ground within the Supreme Court about the broad framework or structure of the relevant principles.
Addressing briefly at this point such differences as there are between Lord Sumption and myself, Lord Sumption in para 227 distinguishes between (i) cases concerned with the applicability or examinability of foreign municipal legislation within a states own territory (which he calls municipal law act of state) and (ii) cases concerning the transactions of foreign states (which he calls international law act of state).
This distinction corresponds generally with the distinction which I have identified in para 11(iii) above between the first type of foreign act of state (which I consider is better viewed as a rule of private international law, a view with which Lord Sumption expresses sympathy in the first four sentences of his para 229) and the third type of foreign act of state (which I describe as a rule of non justiciability or judicial abstention).
What Lord Sumption does in para 228 is enlarge the first of his two categories, to embrace the second potential type of foreign act of state identified in para 11(iii) above), that is executive acts by a foreign state within its own territory.
Apart from differences in the terminology we prefer, the differences between us lie in the ambit assigned to the second and third type of foreign act of state.
Lord Sumption includes within the second acts against the person as well as property, and he gives the third type of foreign act of state (non justiciability or judicial abstention, or in his terminology international law act of state) a wider scope than I do, but then cuts that back by a domestic public policy qualification drawing inter alia on the international law concept of jus cogens.
VI Three types of foreign act of state
Three types of foreign act of state are in my opinion identifiable under current English authority.
First, there is a well established rule of private international law, according to which a foreign states legislation will be recognised and normally accepted as valid, in so far as it affects property, whether movable or immovable, situated within that state when the legislation takes effect: Dicey, Morris and Collins, The Conflict of Laws, 15th ed (2012), rule 137; and see Carr v Fracis Times & Co [1902] AC 176 (seizure of ammunition by British officers in Muscat under the authority of a proclamation of the absolute ruler, the Sultan of Muscat, whose word was law), Luther v Sagor [1921] 23 KB 532 (seizure by decree of Russian revolutionaries later recognised as the government), Princess Paley Olga v Weisz [1929] 1 KB 718 (seizure by similar decrees) and Williams & Humbert Ltd v W & H Trade Marks (Jersey) Ltd [1986] AC 368 (compulsory purchase of shares in Spain).
Movable and immovable property is thus subject to a territorial principle.
So too is domestic trade mark protection based on a reputation acquired domestically, which cannot therefore be affected by foreign legislation: Lecouturier v Rey [1910] AC 262, cited by Warrington LJ in Luther v Sagor, pp 548 549.
Under familiar conflict of laws principles, different connecting factors govern the recognition of foreign state legislation in other spheres.
For example, foreign legislation affecting contractual rights will be recognised if enacted by the state whose law governs the contract: Dicey, Morris and Collins, op cit, rule 227(1); and see eg In re Helbert Wagg & Co Ltds Claim [1956] Ch 323 and Adams v National Bank of Greece and Athens [1961] AC 255.
And, if one moves away from state legislation to adjudication by state courts, yet further connecting factors govern the recognition of foreign judgments.
Leaving aside treaty arrangements and the European regime of the Brussels Regulation and Lugano Convention, the recognition of foreign judgments depends upon the foreign court having had jurisdiction in the limited international sense recognised by English courts and examined in Dicey, Morris & Collins, op cit, rules 43 to 47.
However recognition will, exceptionally, be refused, when recognition would conflict with a fundamental principle of domestic public policy.
The classic authorities in respect of legislation affecting property or contracts are Oppenheimer v Cattermole [1976] AC 249 (non recognition of Nazi laws discriminating against Jews) and Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19; [2002] 2 AC 883 (non recognition of an Iraqi law confiscating the Kuwait Airways fleet, which was in Iraq, and giving it to Iraqi Airways in undeniable breach of Security Council Resolutions).
Similarly, recognition may be denied to foreign judgments where this would be contrary to public policy: Dicey, Morris & Collins, rule 51; see also Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7; [2012] 1 WLR 1804 (Altimo) and Yukos Capital Sarl v OJSC Rosneft Oil Co (No 2) [2014] QB 458.
Second, it has been held that a rule exists whereby an English court will not question a foreign governmental act in respect of property situated within the jurisdiction of the foreign government in question.
The Court of Appeal in Princess Paley Olga upheld the judgment against the claimant Princess on this (its third) ground, as well as two others in the case, stating that: This court will not inquire into the legality of acts done by a foreign Government against its own subjects in respect of property situate in its own territory (per Russell LJ at p 736) See also per Scrutton LJ at pp 723 724 and Sankey LJ at pp 726 730.
Similar reasoning, derived from United States authority including Oetjen v Central Leather Co (1918) 246 US 297 (para 51 below), had appeared in AOAM v James Sagor & Co [1920] 3 KB 532, in particular in the judgment of Warrington LJ at p 549.
The issue there was however whether to recognise a confiscatory decree, which was treated by the other members of the court simply as Russian legislation.
Other direct authority on this type of foreign act of state is limited, though there are some general dicta wide enough to embrace it as well as the third type of foreign act of state: see eg Lord Sumners statement in Johnstone v Pedlar [1921] 2 AC 262, 290 that Municipal Courts do not take it upon themselves to review of the dealings of State with State or of Sovereign with Sovereign.
They do not control the acts of a foreign state done within its own territory, in the execution of sovereign powers, so as to criticise their legality or to require their justification; See also Lord Wilberforces dicta in Buttes Gas, to which reference is made in para 59 below.
The existence of this second type of act of state has not in fact been challenged on this appeal.
However, assuming (as I am prepared for present purposes to do without deciding) that it exists, it will be necessary to examine more closely its scope and rationale.
It may be regarded, like the first type of act of state, as a rule of private international law though this can hardly be in a literal conflicts of laws sense since the effect of the relevant act is determined not by law, but regardless of law.
Perram J called it in Habib v Commonwealth [2010] FCAFC 12; (2010) 265 ALR 50 at paras 38 and 43 a super choice of law rule.
In these circumstances, it can, so far as it exists, just as well be understood as a special rule of abstention: witness Scrutton LJs reference to an act of state into the validity of which this Court would not enquire in Princess Paley Olga v Weisz [1929] 1 KB 718, 723 724.
In Empresa Exportadora de Azucar v Industria Azucarera Nacional SA (The Playa Larga and Marble Islands) [1983] 2 Lloyds Rep 171, the Court of Appeal was concerned with unlawful conduct involving theft by Cuban sellers of one cargo of sugar, property in which had already passed to the buyers, and non delivery of a second combined with trickery whereby the intended buyers were nonetheless induced to pay its price.
The first cargo was on a vessel which was discharging at its Chilean discharge port, when the vessel was withdrawn by the sellers.
The second cargo was on the high seas en route to Chile when withdrawn.
The Court rejected any defence of foreign act of state for a series of reasons, primarily because there was no such plea and no proof that the acts were acts of the Chilean government, but secondarily also because, if they were, there seems no compelling reason for judicial restraint or abstention in a case where it is clear that the acts relied on were carried out outside the sovereigns own territory.
Whether that reasoning was correct in respect of the second type of foreign act of state arises for consideration on these appeals.
Whether any like doctrine extends to sovereign acts in respect of persons, rather than property, also requires determination.
Third, it is established at the highest level that there are issues which domestic courts should treat as non justiciable or should abstain from addressing.
The Court of Appeal in Yukos v Rosneft understood this principle as not so much a separate principle as a more general and fundamental principle, which had to a large extent subsumed [the first and second types of act of state] as the paradigm restatement of that principle (paras 48 and 66).
That, in my view, plays into the problem identified by Dr Mann and Professor McLachlan (see para 33 above).
It blurs the distinctions between different types of foreign act of state to which I have referred in para 11 above.
It impedes the important task of identifying the scope and characteristics of each type of foreign act of state.
The Court of Appeal in Yukos v Rosneft suggested at para 65 that the third type might be allied with a yet further doctrine, precluding United Kingdom courts from investigating any acts of a foreign state when and if the Foreign Office communicated the Governments view that such investigation would embarrass the United Kingdom in its international relations.
I see little attraction in and no basis for giving the Government so blanket a power over court proceedings, although I accept and recognise that the consequences for foreign relations can well be an element feeding into the question of justiciability.
I consider in paras 100 to 102 below the reliance placed by the appellants on adverse effects of these proceedings on international relations.
Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888 is the leading English authority on the third type.
It was recently considered by this Court in dicta in Shergill v Khaira [2014] UKSC 33; [2015] AC 359.
In Buttes Gas, the claimant Buttes Gas sued Dr Hammer and Occidental Oil Company for slander, eliciting a counterclaim for an alleged conspiracy between Buttes Gas, the Ruler of Sharjah and others to cheat and defraud, and to procure the British government and others to act unlawfully to the detriment of, Dr Hammer and Occidental Oil.
The counterclaim related to oil exploration rights off the island of Abu Musa in the Persian Gulf, and raised a whole series of boundary and other international and inter state law issues, set out by Lord Wilberforce on p 937 of the report.
The claimant applied to strike out the counterclaim.
Lord Wilberforce, giving the sole reasoned speech concluded at p 938A C: It would not be difficult to elaborate on these considerations, or to perceive other important inter state issues and/or issues of international law which would face the court.
They have only to be stated to compel the conclusion that these are not issues upon which a municipal court can pass.
Leaving aside all possibility of embarrassment in our foreign relations (which it can be said not to have been drawn to the attention of the court by the executive) there are to follow the Fifth Circuit Court of Appeals no judicial or manageable standards by which to judge these issues, or to adopt another phrase (from a passage not quoted), the court would be in a judicial no mans land: the court would be asked to review transactions in which four sovereign states were involved, which they had brought to a precarious settlement, after diplomacy and the use of force, and to say that at least part of these were unlawful under international law.
I would just add, in answer to one of the respondents arguments, that it is not to be assumed that these matters have now passed into history, so that they now can be examined with safe detachment.
Having concluded that the counterclaim was non justiciable, the House noted the injustice which could follow if the claim alone proceeded.
In the event, the House was able, without more, to take advantage of the claimants offer to submit to a stay of the claim as a term of dismissal of the counterclaim.
In Shergill v Khaira [2015] AC 359 this Court referred to the third type of foreign act of state under the head of non justiciability which it said (para 41) refers to a case where an issue is said to be inherently unsuitable for judicial determination by reason only of its subject matter (even though it would otherwise be within the English courts jurisdiction under, for example, the Brussels Regulation and Lugano Convention or the rules of court).
The court went on (paras 41 43) to say that such cases generally fall into one of two categories: (i) The first was where the issue was beyond the constitutional competence assigned to the courts under our conception of the separation of powers, of which the paradigm cases are the non justiciability of certain transactions of foreign states and of proceedings in Parliament.
The distinctive feature of such cases was that once the forbidden area is identified, the court may not adjudicate on the matters within it, even if it is necessary to do so in order to decide some other issue which is itself unquestionably justiciable.
Buttes Gas falls into this category. (ii) The second category was of cases not involving private legal rights or obligations or reviewable matters of public policy, and included issues of international law which engage no private right of the claimant or reviewable question of public law.
Such issues were not justiciable in the abstract, but must nevertheless be resolved if their resolution is necessary in order to decide some other issue which is in itself justiciable.
Examples of this second category, where no private right or reviewable question of public law was engaged, are Nabob of the Carnatic v East India Co (1793) 2 Ves Jun 56, where the Nabob was seeking to sue for an account due under an international treaty, and JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC 418, where the House of Lords stated that it is axiomatic that municipal courts have not and cannot have the competence to adjudicate upon or to enforce the rights arising out of transactions entered into by independent sovereign states between themselves on the plane of international law (p 499F G per Lord Oliver of Aylmerton).
The appellants propose a different categorisation, pursuing a theme pointed up by Rix LJ in Yukos v Rosneft (No 2) and by the Court of Appeal in Belhaj.
According to this categorisation, a domestic court will not adjudicate upon any sovereign or jure imperii act committed by a foreign state anywhere abroad.
Analytically, this can be viewed either as expanding the scope of the second type of foreign act of state and treating the third type as a particular instance, or (following Rix LJ) as expanding the scope of the third type to subsume and treat as non justiciable not merely special circumstances comparable with, even if not identical to, those involved in Buttes Gas, but any sovereign or jure imperii act committed by a foreign state anywhere outside the domestic jurisdiction invoked in the relevant proceedings.
Whichever view is taken, there is a tension between the proposed categorisation, on the one hand, and Lord Wilberforces cautious references to the second and third types of foreign act of state in Buttes Gas, followed up by Rix LJs emphasis in Yukos v Rosneft (No 2) on the limited, or silhouette like, nature of the doctrine, to which reference has already been made: para 33 above.
The appellants categorisation would lead to a dramatic expansion of the scope of foreign governmental act of state as a bar to domestic adjudication against defendants otherwise amenable to the English jurisdiction.
Whatever typology be adopted, the appellants submit that both cases now before the Supreme Court fall into one or both of the second and third types of foreign act of state, properly understood, and that, in so far as they fall within the third type, they belong within the first sub category.
The second type, they submit, should be understood as covering acts relating to the person as well as property.
On this basis, the second type would cover, at least, the governmental acts of Malaysian, Thai and Libyan officials within their own jurisdictions.
The acts of United States officials on United States aircraft in Belhaj or in Iraq where the United States was an occupying power or Afghanistan where it was present by consent should, the appellants submit, likewise be regarded as occurring within United States jurisdiction.
But, in any event, they submit that the second type should not be limited territorially, any more than the third.
As to the third type, the issues before the Court concern alleged or actual detention and interrogation allegedly agreed between, and involving transfers of the relevant individuals between, states in the context of arrangements made for political or security reasons.
This category cannot, the appellants submit, be limited territorially.
VII Analysis of the case law
(i) Carr v Fracis Times & Co
Carr v Fracis Times & Co falls squarely within the first type of foreign act of state.
The seizure of ammunition was lawful because the Sultan of Muscat was an absolute ruler whose word and proclamation were law in that state.
The only possible hint of the second type of act of state appears in a dictum near the end of the Earl of Halsbury LCs speech, saying that the lawfulness of what happened rests, and must rest, upon the authority of the sovereign of Muscat; and it appears to me that any other decision would be open to very serious questions of policy if, in every case where the lord of a country has declared what the law of his own country is, it were open to an English tribunal to enter into the question and to determine, as against him, what was the law of his country.
The judgment can, on the other hand, also be read as positively emphasising the significance of establishing a legal base for an act such as expropriation.
The same may be said of the earlier authority of Dobree v Napier (1836) 2 Bing (NC) 781, where (it appears from the fourth declaration) a vessel supplying the revolutionary Don Miguel of Portugal was seized in the Portuguese port of St Martinho by Sir Charles Napier as admiral in the service of the Queen of Portugal lawfully under Portuguese law (p 796). (Today, the action against Sir Charles Napier would also be expected to fail on grounds of sovereign immunity, wherever the seizure took place.
The fact that the seizure occurred in the context of a civil war might also bring into play the third type of act of state.)
(ii) The United States authorities
In relation to the first and second types of foreign act of state, the Court of Appeal in Luther v Sagor and Princess Paley Olga drew heavily on United States authority, particularly Underhill v Hernandez 168 US 250 (1896) and Oetjen v Central Leather Co 246 US 297 (1918).
As with Luther v Sagor and Princess Paley Olga, these were cases concerning the acts of revolutionaries who were ultimately successful and became recognised governments.
It is, as Dr Mann wrote in The Sacrosanctity of the Foreign Act of State in Studies in International Law (1973), referring to Williams v Bruffy 96 US 176 (1877) and other authority, well established that recognition has retroactive effect.
But one difference between the issues in the two United States and the two English cases appears to have passed unmarked in the latter.
In both the United States cases, the issue considered by the court was not whether state conduct fell to be regarded as lawful or valid though unlawful under ordinary domestic law.
It was whether state conduct should be regarded as unlawful because it was contrary to international law governing armed conflict.
Admittedly, in Underhill v Hernandez the plaintiffs case appears to have been that the law of nations was under the Constitution of Venezuela to be enforced in cases of civil war and the defendant was ready to assume that international law was part of the law of the land where any question arises which is properly the subject of its jurisdiction (plaintiffs brief pp 27 28 and defendants brief p 29).
But reliance in a domestic court on the law of war to establish the wrongfulness of a revolutionary governmental act is self evidently more ambitious than reliance on unlawfulness under ordinary domestic law.
A precursor of Underhill v Hernandez is Hatch v Baez (1876) 7 Hun 596, where the claimant sought to sue a former president of the Dominican Republic, now resident in New York, for injuries allegedly suffered as a result of acts done by the former president as president.
Gilbert Js judgment contains a sentence in terms echoed in later case law: We think that, by the universal comity of nations and the established rules of international law, the courts of one country are bound to abstain from sitting in judgment on the acts of another government done within its own territory.
But, for the rest and on its facts, Hatch v Baez can be seen as a clear case of sovereign immunity, enjoyed, and not so far as appears waived, by the Dominican Republic, as well as a case dating (like the Duke of Brunswicks case, which Gilbert J cited) from a time when the strands of state immunity and foreign act of state were not distinctly separated.
Similarly, one would today expect the claim in Underhill v Hernandez to have been met by a plea of state immunity.
In Underhill v Hernandez, Underhill, a US citizen, had constructed a waterworks in Bolivar for the government which was eventually overthrown by revolutionary forces, one of whose generals was Hernandez.
After Hernandez had captured Bolivar, Underhill sought to leave.
Hernandez refused the request and confined Underhill to his house, in order to coerce Underhill into continuing to operate his waterworks and repair works for the benefit of the revolutionary forces.
Underhills claim for damages was dismissed.
In Underhill v Hernandez Fuller CJ opened his judgment with another broad statement along the same lines as Gilbert Js (p 252): Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory.
Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves.
Throughout much of the rest of his short judgment the focus was on the existence of civil war, and it is relevant to note that he went on (p 254): The decisions cited on plaintiff's behalf are not in point.
Cases respecting arrests by military authority in the absence of the prevalence of war; or the validity of contracts between individuals entered into in aid of insurrection; or the right of revolutionary bodies to vex the commerce of the world on its common highway without incurring the penalties denounced on piracy; and the like, do not involve the questions presented here. (italics added)
The words which I have italicised open the possibility that the ratio of Underhill v Hernandez may be limited to state detention in war time situations.
The recognition in that context by United States courts of what was effectively a right to detain would not necessarily have been a radical step, in view of international humanitarian legal considerations subsequently enshrined in the Geneva Conventions of 1949.
For example, the Fourth Convention relative to the Protection of Civilian Persons in Time of War entitles civilians to leave the territory unless their departure is contrary to the interests of the State (article 35) and authorises the confinement to residence of a civilian if necessary for security reasons (articles 42 and 78).
Hernandezs acts were, in the light of his success, the acts of the government of Venezuela (p 254).
True, this was a civil war, but article 3 of the Third Convention itself contemplates that the parties to a non international armed conflict will endeavour to agree to bring its other provisions into force.
It is, at the least, an open question what the attitude of the Supreme Court would have been to a case such as the present where there is no suggestion of any war, international or civil, to serve as the context for the detention or rendition.
In Oetjen, animal hides were seized and sold to satisfy a monetary assessment to support the revolution, and there was an issue of title between an assignee from the original owner and a person deriving his claim to title from the purchaser from the revolutionary forces.
This was resolved by application of Fuller CJs opening words, with the unsurprising conclusion that the assignee of the former owner failed in its claim.
Subsequent consideration of these and other similar cases by the United States Supreme Court in Ricaud v American Metal Co Ltd 246 US 304 and Banco Nacional de Cuba v Sabbatino 376 US 398 (1964) evidences a shift in their rationalisation.
Like Oetjen, Sabbatino concerned competing claims to property (sugar) which had been disposed of in two inconsistent directions as a result of its revolutionary expropriation.
The Court cited with approval (p 418) reasoning from Ricaud to the effect that act of state: does not deprive the courts of jurisdiction once acquired over a case.
It requires only that, when it is made to appear that the foreign government has acted in a given way on the subject matter of the litigation, the details of such action or the merit of the result cannot be questioned but must be accepted by our courts as a rule for their decision.
Discussing the conceptual basis for this rule of decision, the court went on (pp 421 422): We do not believe that this doctrine is compelled either by the inherent nature of sovereign authority, as some of the earlier decisions seem to imply, see Underhill, supra; American Banana, supra; Oetjen, supra, at 303, or by some principle of international law.
That international law does not require application of the doctrine is evidenced by the practice of nations.
Most of the countries rendering decisions on the subject fail to follow the rule rigidly If international law does not prescribe use of the doctrine, neither does it forbid application of the rule even if it is claimed that the act of state in question violated international law.
A footnote to the second sentence recorded that a doctrine in similar terms had been articulated in England in Luther v Sagor and Princess Paley Olga, with which the US Supreme Court compared Anglo Iranian Oil Co v Jaffrate (The Rose Mary) [1953] 1 WLR 246, [1953] Intl L Rep 316 (Aden Sup.
Ct) as endorsing an exception to the doctrine if the foreign act violated international law.
The Supreme Court cannot have been informed of Upjohn Js disapproval of that general exception in In re Helbert Wagg & Co Ltds Claim [1956] 1 Ch 323, 346 349.
The footnote went on to observe that Civil law countries, however, which apply the rule make exceptions for acts contrary to their sense of public order.
The Court explained its own view of act of state as follows (p 423): The act of state doctrine does, however, have constitutional underpinnings.
It arises out of the basic relationships between branches of government in a system of separation of powers.
It concerns the competency of dissimilar institutions to make and implement particular kinds of decisions in the area of international relations.
The doctrine as formulated in past decisions expresses the strong sense of the Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder rather than further this countrys pursuit of goals both for itself and for the community of nations as a whole in the international sphere.
Subsequent to Sabbatino, Congress passed the Hickenlooper amendment, providing that no United States court should in future decline, on the ground of the act of state doctrine, to give effect to the principles of international law, including the principles of compensation, except in any case where the President determined application of that doctrine to be required by the foreign policy interests of the United States.
At least at this point, therefore, United States law departed significantly from any principle in English common law.
Still more recently, the Supreme Court in WS Kirkpatrick & Co Inc v Environmental Tectonics Corpn, International (1990) 493 US 400 endorsed the basis of the doctrine explained in Sabbatino (p 404), underlining that it is not some vague doctrine of abstention but a principle of decision binding on federal and state courts alike.
It endorsed the statement in Ricaud that the act within its own boundaries of one sovereign state becomes a rule of decision for the courts of this country (p 406).
However, it went on: Act of state issues only arise when a court must decide that is, when the outcome of the case turns upon the effect of official action by a foreign sovereign.
The issues in Kirkpatrick were held not to turn upon the effect of official action by a foreign sovereign (p 406).
An unsuccessful under bidder sued the successful bidder for a Nigerian construction contract under United States anti racketeering statutes, on the basis that the contract had been won by bribing officials of the Nigerian Government.
Although it was clear that the bribery would have been illegal under Nigerian law, the court held that Regardless of what the courts factual findings may suggest as to the legality of the Nigerian contract, its legality is simply not a question to be decided in the present suit, and there is thus no occasion to apply the rule of decision that the act of state doctrine requires.
The Supreme Court also addressed instructively the relationship between the considerations underlying the doctrine of foreign act of state and its application: Petitioners insist, however, that the policies underlying our act of state cases international comity, respect for the sovereignty of foreign nations on their own territory, and the avoidance of embarrassment to the Executive Branch in its conduct of foreign relations are implicated in the present case because, as the District Court found, a determination that Nigerian officials demanded and accepted a bribe would impugn or question the nobility of a foreign nations motivations, and would result in embarrassment to the sovereign or constitute interference in the conduct of foreign policy of the United States.
These urgings are deceptively similar to what we said in Sabbatino, where we observed that sometimes, even though the validity of the act of a foreign sovereign within its own territory is called into question, the policies underlying the act of state doctrine may not justify its application.
We suggested that a sort of balancing approach could be applied the balance shifting against application of the doctrine, for example, if the government that committed the challenged act of state is no longer in existence. 376 US, at 428.
But what is appropriate in order to avoid unquestioning judicial acceptance of the acts of foreign sovereigns is not similarly appropriate for the quite opposite purpose of expanding judicial incapacities where such acts are not directly (or even indirectly) involved.
It is one thing to suggest, as we have, that the policies underlying the act of state doctrine should be considered in deciding whether, despite the doctrines technical availability, it should nonetheless not be invoked; it is something quite different to suggest that those underlying policies are a doctrine unto themselves, justifying expansion of the act of state doctrine (or, as the United States puts it, unspecified related principles of abstention) into new and uncharted fields.
This passage bears out an earlier observation by Lord Wilberforce in Buttes Gas (p 934C) that United States courts have moved towards a flexible use of the doctrine [of act of state] on a case to case basis: see para 57 below.
(iii) Buttes Gas v Hammer
The reasoning and nuances of United States law have not been constant and are not necessarily transposable to English law.
This was also expressly recognised by Lord Wilberforce in Buttes Gas at p 936F G.
However, he drew support from reasoning in the United States case law for his conclusion that there was room for a principle, in suitable cases, of judicial restraint or abstention: p 934C, and see pp 936H 937A.
After noting the statement in Sabbatino that international law does not require application of the doctrine of act of state, he went on (p 934): Granted this, and granted also, as the respondents argue, that United States courts have moved towards a flexible use of the doctrine on a case to case basis, there is room for a principle, in suitable cases, of judicial restraint or abstention.
Lord Wilberforce then examined where this approach had led the United States courts in litigation on the very same situation as that before the House.
He quoted in extenso from a letter written by the Legal Adviser to the US Department of State, discounting any suggestion that issues relating to disputed territorial jurisdiction should be analysed by reference to the so called Act of State doctrine which is traditionally limited to governmental action within the territory of the respective state, and arguing that judicial self restraint rather follows from the general notion that national courts should not assume the functions of arbiters of territorial conflicts between third powers even in the context of a dispute between private parties (p 936B C).
In essence, this was the argument that Lord Wilberforce accepted.
He summarised the approach he took in relation to the United States case law as follows (pp 936F 937A): The constitutional position and the relationship between the executive and the judiciary in the United States is neither identical with our own nor in itself constant.
Moreover, the passages which I have cited lay emphasis upon the foreign relations aspect of the matter which appeared important to the United States at the time.
These matters I have no wish to overlook or minimise.
I appreciate also Mr Littmans argument that no indication has been given that Her Majestys Government would be embarrassed by the court entering upon these issues.
But, the ultimate question what issues are capable, and what are incapable, of judicial determination must be answered in closely similar terms in whatever country they arise, depending, as they must, upon an appreciation of the nature and limits of the judicial function.
This has clearly received the consideration of the United States courts.
When the judicial approach to an identical problem between the same parties has been spelt out with such articulation in a country, one not only so closely akin to ours in legal approach, the fabric of whose legal doctrine in this area is so closely interwoven with ours, but that to which all the parties before us belong, spelt out moreover in convincing language and reasoning, we should be unwise not to take the benefit of it.
This led on pp 937 938 to Lord Wilberforces summary of the complex inter state issues and to his conclusion, based on a principle of judicial abstention and non justiciability, set out in para 42 above.
Lord Wilberforces treatment earlier in his speech of foreign act of state in the more limited senses of the first and second types is instructive.
Speaking of the category of cases exemplified by Carr v Fracis Times & Co, Luther v Sagor and Princess Paley Olga, he described them (p 931A B) as: cases which are concerned with the applicability of foreign municipal legislation within its own territory, and with the examinability of such legislation often, but not invariably, arising in cases of confiscation of property.
He said that Mr Littman (counsel for Dr Hammer and Occidental) had given the House a valuable analysis of such cases , suggesting that these are cases within the area of the conflict of laws, concerned essentially with the choice of the proper law to be applied.
Without more, Lord Wilberforce then simply identified two suggested limitations, one that foreign legislation can be called in question where it is seen to be contrary to international law or to public policy, the other that foreign legislation is only recognised territorially ie within the limits of the authority of the state concerned.
He dismissed their relevance not by questioning the existence of the suggested limitations, but on the contrary on the basis, as to the first, that It is one thing to assert that effect will not be given, to a foreign municipal law or executive act if it is contrary to public policy, or to international law (cf In re Helbert Wagg & Co Ltds Claim [1956] Ch 323) and quite another to claim that the courts may examine the validity, under international law, or some doctrine of public policy, of an act or acts operating in the area of transactions between states. and, as to the second, that The second argument seems to me to be no more valid.
To attack the decree of 1969/70 extending Sharjahs territorial waters, ie its territory, upon the ground that the decree is extra territorial seems to me to be circular or at least question begging.
There is here, in the reference to an executive act, a possible passing reference, though no more, to the second type of foreign act of state.
Lord Wilberforce did not regard this as covering the circumstances before him, because he went on to make clear that he did not regard the case against justiciability of the instant dispute as validated by the rule [ie the rule governing the second type of foreign act of state] itself and that any conclusion in favour of non justiciability would have to be upon some wider principle: p 931F.
A further reference to the first and/or second types of foreign act of state appears in Lord Wilberforces reference at p 934B to Sabbatino as a case of act of state in the normal meaning, viz, action taken by a foreign sovereign state within its own territory.
In Sabbatino, the United States courts had declined to determine whether the Cuban expropriation decree complied with the requirements of Cuban law: 376 US 398 (1964); 416 FN 17.
What is clear, therefore, is that Lord Wilberforces reliance on reasoning in the United States authorities of Underhill v Hernandez, Oetjen and Sabbatino as well as on the judgments delivered in the United States in parallel litigation between Buttes Gas and Occidental led on his analysis not to an expanded principle of the second type I have identified; rather, it led to a principle of self restraint or abstention in suitable cases (p 934C), which he described as inherent in the very nature of the judicial process and which constitutes the third type of foreign act of state.
Similarly, Lord Wilberforce treated the older English cases of Blad v Bamfield (1674) 3 Swans 603 607 (App) 607 and Duke of Brunswick v King of Hanover (1844) 6 Beav 1; (1848) 2 HL Cas 1 as precursors of these United States cases.
Indeed, he referred (p 933C D) to Underhill v Hernandez (933C D) as following the Duke of Brunswicks case, which, although not mentioned expressly by Fuller CJ, had been referred to in the Circuit Court of Appeals and certainly finds echoes in Fuller CJs language in Underhill v Hernandez.
Blad v Bamfield is sometimes treated, on the basis of the report of the first hearing of the case (p 603), as a claim by English traders, Bamfield and others, against Peter Blad, a Dane, for wrongful seizure of their goods in Iceland for allegedly fishing contrary to letters patent granted to the defendant by the King of Denmark, as ruler of Iceland.
Blad sought an injunction to restrain the proceedings.
Bamfield and others claim was seen by the Privy Council at that point as a question of private injury which would depend upon Danish law, for whatever was law in Denmark, would be law in England in this case but if the wrong were done without colour of authority, it was fit to be questioned (p 604).
On that basis, the claim was at Lord Nottingham LCs instance allowed to proceed, and the case stood over.
However, a different picture emerges from the report of the second hearing before Lord Nottingham a year later in chancery.
It then became clear, first, that the claim relates to a trespass done upon the high sea (p 605), and second that the very manner of the defence [to the injunction] offered by [Bamfield and others] had made it directly a case of state; for they insist upon the articles of peace to justify their commerce, which is of vast consequence to the public; for every misinterpretation of an article may be the unhappy occasion of a war; and if it had been known at Board that this would have been the main part of their case, doubtless the Council would not have suffered it to depend in Westminster Hall.
On that basis, Lord Nottingham decreed a permanent stay since it would be monstrous and absurd to send it to a trial at law, where either the court must pretend to judge of the validity of the kings letters patent in Denmark, or of the exposition and meaning of the articles of peace; or that a common jury should try whether the English have a right to trade in Iceland, is monstrous and absurd.
The House in Buttes Gas understandably saw this reasoning as an early precursor of a concept of non justiciability.
The actual decision can also be seen as an example of the second category of case identified in Shergill v Khaira [2015] AC 359, paras 41 42, in so far as Bamfield was attempting to derive private rights from an unincorporated treaty (see para 43(ii) above), and perhaps also as an example of the second type of act of state, if and so far as Bamfield was attempting to challenge the validity of the kings letters patent in Denmark, granted in favour of Blad for the sole trade of Iceland.
In Duke of Brunswick, the King of Hanover was sued for sovereign acts in respect of which it is clear that he had sovereign immunity (once the submission was rejected that he was acting in his private capacity as an English subject).
But, drawing directly on words used by Lord Cottenham LC, Lord Wilberforce saw the case also as recognising a general principle of restraint or immunity ratione materiae, to the effect that the courts in England will not adjudicate or sit in judgment upon acts done abroad by virtue of sovereign authority (p 932E F).
At p 932F G, he identified this point in Lord Cottenhams further words: It is true, the bill states that the instrument was contrary to the laws of Hanover and Brunswick, but, notwithstanding that it is so stated, still if it is a sovereign act, then, whether it be according to law or not according to law, we cannot inquire into it.
Lord Wilberforce thus derived from his examination of the Duke of Brunswicks case support, no doubt by reference to the issue in dispute, for a principle of non justiciability by the English courts of a certain class of sovereign acts (p 933C).
Lord Wilberforce viewed the relevant acts in that case as having been performed within the territory of the sovereign concerned (p 933B).
But he did not suggest that this limited the principle of self restraint, and the decision in Buttes Gas itself indicates that there can be no such absolute limitation.
Lord Wilberforces view as to where the acts were committed is in fact questionable.
The plea was that the King of Hanover had, after succeeding HM William IV in 1837, taken possession of the Dukes personal property in Brunswick and elsewhere (p 5).
Further, the instrument directly challenged by the claim, under which the King of Hanover claimed to be the lawful guardian of the Dukes personal property, was signed by HM William IV at St Jamess on 6 February 1833 and by the claimants brother in Brunswick on 14 March 1833.
The Lord Chancellor also observed (pp 19 21) that the challenge to that instrument was itself a challenge to acts of persons claiming to have the right so to act by virtue of their sovereign authority.
That referred to authority claimed under a decree of the Germanic Diet of Confederation, which was established by the Treaty of Vienna 1815 and sat in Frankfurt under Austrian presidency.
The Diet had on 2 September 1830 purported to depose the Duke and declare that the throne of Brunswick had passed to his brother.
As the Lord Chancellor said, whether the constitution of Germany authorized it or not, is a question we have no power to interfere with, or to inquire into.
The case can be seen on this basis as falling, like Buttes Gas itself, into the first category in Shergill v Khaira, ie as non justiciable or requiring judicial abstention.
VIII Application of the first and second types of foreign act of state
The appellants can gain no assistance from the first type of act of state.
That depends upon establishing the legality of what occurred in the relevant foreign state.
They do however invoke the second type of foreign act of state, or the generalised doctrine which they submit underlies this and the third type of foreign act of state.
Leaving aside for the moment any issue as to whether the second type of act of state or any such generalised doctrine can cover acts against the person or acts committed outside the jurisdiction of the state committing them, it is convenient to deal at the outset with the respondents submission that the respondents are not inviting the English court to adjudicate upon the validity of the conduct of the foreign states allegedly involved, but are only asking the court to find that such conduct occurred as a matter of fact.
The respondents rely in this context on the United States authorities of Kirkpatrick and Sharon v Time, Inc 599 F Supp 538, 546 (SDNY 1984).
But in my view validity in the Kirkpatrick sense encompasses legality.
To that extent, I do not agree with one part of the reasoning of Perram J in The Federal Court of Australia in Habib v Commonwealth of Australia [2010] FCAFC 12; (2010) 265 ALR 50, at para 44.
On these appeals the respondents cases on the issues before the Supreme Court depend upon showing illegal conduct by the various States allegedly implicated as well as by the appellants as accomplices.
I turn therefore to consider the second type of foreign act of state.
This has direct support at Court of Appeal level: para 38 above.
But other support for it in English law is noticeably limited, and it is in my opinion unnecessary on this appeal for this Court to reach or endorse a conclusion that it exists in any form at all.
Rule 137 of Dicey, Morris and Collins makes no reference to it, but, on the contrary, reads: A governmental act affecting any private proprietary right in any movable or immovable thing will be recognised as valid and effective in England if the act was valid by the law of the country where the thing was situated (lex situs) at the moment when the act takes effect, and not otherwise.
The qualifications if the act was valid by the law of the country and the final phrase and not otherwise confine the scope of rule 137 to the first type of foreign act of state.
They might, by themselves, be read as inconsistent with the existence of any second type of foreign act of state.
But rule 3 in Dicey, Morris and Collins is in terms which it is possible to read widely enough to cover the second type of foreign act of state.
It reads: English courts have no jurisdiction to entertain an action: (1) For the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign state; or (2) founded upon an act of state.
The commentary to rule 3 in Dicey, Morris and Collins approves the suggestion made by Lord Keith of Avonholm in Government of India v Taylor [1955] AC 491, 511, that enforcement of claims of the sort identified would amount to an extension of the sovereign power which imposed the taxes or law, or as an assertion of sovereign authority by one state within the territory of another.
On that basis, sub rule (2) may be seen inversely as a recognition of the sovereign authority of a foreign state within its own foreign jurisdiction.
But a potential problem about such a reading is that it equates sovereignty with executive activity.
In states subject to the rule of law, a states sovereignty may be manifest through its legislative, executive or judicial branches acting within their respective spheres.
Any excess of executive power will or may be expected to be corrected by the judicial arm.
A rule of recognition which treats any executive act by the government of a foreign state as valid, irrespective of its legality under the law of the foreign state (and logically, it would seem, irrespective of whether the seizure was being challenged before the domestic courts of the state in question), could mean ignoring, rather than giving effect to, the way in which a states sovereignty is expressed.
The position is different in successful revolutionary or totalitarian situations, where the acts in question will in practice never be challenged.
It is probably unsurprising that the cases relied upon as showing the second kind of foreign act of state are typically concerned with revolutionary situations or totalitarian states of this kind.
The commentary in Dicey, Morris and Collins goes on to indicate that sub rule (2) covers both Crown act of state and foreign act of state.
In relation to Crown act of state, Dicey, Morris and Collins makes clear that it contemplates acts against person as well as property.
In relation to foreign act of state, the text is less specific.
At para 5 047 Dicey picks up the citation from Underhill v Hernandez quoted in para 49 above and its deployment in Luther v Sagor and in Princess Paley Olga and then focuses on cases of property seizure: Thus the executive seizure of property by a foreign sovereign within its territory will not give rise to an action in tort in England, either on the basis of this general principle, or because the act was lawful by the law of the place where it was committed.
Nor can a former owner challenge title to property acquired from a foreign government which had been confiscated within its own territory, again either on the basis of the general principle or on the basis of the rule that the validity of a confiscatory transfer of title depends on the lex situs.
In discussing these cases in Foreign Affairs in English Courts (1986) p 179, Dr Francis Mann also says pertinently in my view that it is clear in English law that the doctrine of act of state is limited to action taken by a foreign state within its own territory or, perhaps one should say, in respect of property situate in its territory. (italics added for emphasis) In its judgment in Sabbatino, the United States Supreme Court laid some stress on the fact that it was limiting itself to a property context.
It said at p 428: Therefore, rather than laying down or reaffirming an inflexible and all encompassing rule in this case, we decide only that the Judicial Branch will not examine the validity of a taking of property within its own territory by a foreign sovereign government, extant and recognized by this country at the time of suit, in the absence of a treaty or other unambiguous agreement regarding controlling legal principles, even if the complaint alleges that the taking violates customary international law.
The Court went on to underline what is special about property when addressing the suggested violation of customary international law at p 433: Another serious consequence of the exception pressed by respondents would be to render uncertain titles in foreign commerce, with the possible consequence of altering the flow of international trade.
If the attitude of the United States courts were unclear, one buying expropriated goods would not know if he could safely import them into this country.
Even were takings known to be invalid, one would have difficulty determining after goods had changed hands several times whether the particular articles in question were the product of an ineffective state act.
As I have already observed, the United States authorities of Hatch v Baez and Underhill v Hernandez, which might on their facts be taken to be authorities extending the second type of foreign act of state to acts affecting persons as well as property, were both cases which could and would now be seen as involving a straightforward defence of state immunity.
Looking elsewhere abroad for assistance on this aspect, German law treats foreign confiscatory acts of state as falling outside normal conflicts principles and subject to special rules.
Based on the territorial principle (Territorialittsprinzip) such foreign confiscatory acts fall to be recognised, so long as the confiscated property was at the time of its confiscation within the jurisdiction of the confiscating state.
This is subject only to considerations of ordre public, according to which the Rechtsnorm (legal norm or rule) of another state will not be applied, if it leads to a result inconsistent with fundamental principles of international law, as opposed to purely domestic constitutional provisions, regarding confiscation.
The following two cases illustrate the position.
First, in a judgment with wide significance delivered on 23 April 1991, the principles stated in the previous paragraph were held by the German Federal Constitutional Court (Bundesverfassungsgericht or BVerfG) to be consistent with fundamental principles of the German Federal Constitution (Grundgesetz).
The issue was the constitutionality of provisions in the Agreement dated 15 June 1990 and Treaty of 31 August 1990 (incorporating such Agreement) between the Federal Republic and the German Democratic Republic (DDR) providing for the reunification of Germany.
These provided that confiscations of property effected in the years 1945 to 1949 (the period of Russian occupation before the founding of the DDR) by virtue of the law governing such occupation or act of state were not to be reversed.
The Constitutional Court at paras 132 133 explained the principles of what it described as German international confiscation law in the terms identified in para 67 above.
It made clear that these principles applied, even if such a confiscation would (for lack of compensation or any other reason) be illegitimate in a domestic context.
It regarded the Territorialittsprinzip governing international confiscatory measures as internationally recognised, and, on this basis, it accepted that the confiscatory measures effected in the DDR without compensation both in the immediate post war period by Russian occupying forces and later during the years 1945 1949 with a view to the establishment of a new socialist order were constitutional in terms of the Federal German Constitution.
Second, in an impressively reasoned judgment of 7 January 2005 (1 W 78/04), the Hanseatisches Oberlandesgericht Hamburg elaborated the conceptual basis of the same principles.
The claim was by a Zimbabwean farmer, whose harvest had allegedly been illegally expropriated by state officials.
He claimed elements of that harvest which he alleged had, as a result of a chain of sales, arrived in Hamburg harbour.
The Hamburg Court of Appeal rejected the claim, holding inter alia, in translation (para 7): In the context of worldwide trade, goods arrive daily in Germany from across the whole world for the purpose of further processing, onward sale or end use.
Not a few come from states, which do not provide the legal protection which is among the fundamental principles of German law.
It is demanding too much of the domestic jurisdiction to give it the task, in the case of a foreign act of state taking place abroad, of offering the legal protection which the foreign state is not ready to provide its own citizens, simply because a chain of sales leads through Germany.
Conduct contrary to international law falls to be addressed in other ways, such as through political influence, through the conclusion of treaties between individual states and through the development of the protective legal system of international tribunals.
I note in parenthesis that the Hamburg Court recognised that, in certain situations, this principle might have to give way to considerations of ordre public, if the application of the foreign norm led to a result which was inconsistent with fundamental principles of German law (para 6).
But it made clear that, for this to be the case, the subject matter would have to involve a substantial German connection, which did not exist in a case of Zimbabwean expropriation.
While the principle applied in this case parallels the second type of foreign act of state in a property context, there does not appear to be any authority accepting a similar principle of foreign act of state in German law outside a property context.
Two authorities suggest that it is no bar to a claim against the German Federal Republic that it involves determining the lawfulness under international law of the conduct of a third state or an international organisation outside the jurisdiction of any such third state: see the judgments in the Vavarin Bridge case, of the Oberlandesgericht Kln: Az 7 U 8/04, (28.07.2005) paras 73 to 74 (decided on different grounds on appeal to the Bundesgerichtshof (the BGH or German Supreme Court): III ZR 190/05) and in separate proceedings before the BVerfG (the Federal Constitutional Court): 2 BvR 2660/06; 2 BvR 487/07; and the judgment in the Kunduz Road Tankers case of the Oberlandesgericht Kln: Az 7 U 4/14 (30.04.2015).
Both the Vavarin Bridge and the Kunduz Road Tankers cases were however concerned with activities of the German armed forces outside Germany (in respectively Kosovo and Afghanistan).
So they fall outside the scope of the second type of foreign act of state, as I have defined this, and are better read as authority indicating that a need to adjudicate upon the conduct of a foreign state was not seen in the German courts as a basis for any abstention on the lines of the third type of foreign act of state.
For completeness, both cases are also of interest as indicating the existence under German law of a doctrine along the lines of Crown act of state.
Thus in the Vavarin Bridge case, the BVerfG acknowledged that certain foreign and defence policy decisions were non justiciable under German law, but confined these within narrow limits by reference to the high complexity or particular dynamics of the relevant material and the difficulty of implementing any decision with regard to it under domestic law: section IV, para 3(aa); and in the Kunduz Road Tankers case the German Supreme Court, overruling the Oberlandesgericht, has recently held, firstly, that an individual foreign victim has no international law right to pursue in a domestic court a claim for alleged violation of international humanitarian law (the law of armed conflict) by the state of that domestic court rather, any remedy in international law lay through invoking the protection of his own state and, secondly, that such a victim also has no claim under German domestic law; in the latter connection, the BGH said that the responsibility of state officers under para 839 of the Brgerliches Gesetzbuch (the BGB or German civil code) for intentionally or negligently causing harm to third parties could not be extended to injuries caused by the armed intervention of German forces since this was essentially an international law matter and any such extension would impact on the area of German foreign policy: II ZR 140/15 (06.10.2016).
Lord Sumption refers briefly in para 201 of his judgment to dicta in French and Dutch authority as suggesting a principle very similar to his view of the English act of state doctrine.
It is, however, necessary to put such authority in context.
All but one of the French cases cited by Lord Sumption were property cases falling within the first or second type of foreign act of state (and the one possible exception, considered in para 72(vi) below, is inconsistent with established United Kingdom case law).
Thus: (i) In Socit Cementos Rezola v Larrasquitu et tat espanol (Cour dappel de Poitiers) [1938] Sirey Rec Gen iii, 68, the issue before the French courts was whether to recognise the requisitioning by the Republican Government of Spain of a vessel registered in Spain but evidently outside the Spanish jurisdiction at the time of her requisition.
In accordance with the Spanish decree ordering the requisition, notice had been placed in the vessels register by the Spanish consul at Bordeaux.
The French Court of Appeal accepted the requisition as effective, thereby, in effect, applying a rule whereby the transfer of merchant vessels depends not on their physical situs, but on the legal position under the law of their registry: compare Dicey, Morris & Collins, The Conflict of Laws (15th ed) para 22E 057 for a discussion of the common law position.
It is worth noting that the Poitiers Court of Appeal referred to the requisitioning as an exercise of full sovereignty by the Spanish state qui na port aucune atteinte lordre public de ltat franais.
The inference is that there could be some circumstances in which a foreign act of state of this nature might be refused recognition, as being contrary to the public policy of the forum state. (ii) This inference is supported by a decision of the Cour de cassation, Companie Algrienne de Transit et dAffrtement Serres et Pilaire (la SATA) v Socit Nationale des Transport Routiers (la SNTR) (10 mars 1979 (No de pourvoi: 77 13943), in which the Chambre commerciale refused to recognise un acte de puissance public of the State of Algeria, transferring the property of SATA to SNTR, because it constituted expropriation by a foreign state without payment of appropriate compensation (une dpossession opre par un tat tranger sans quune indemnit quitable ait t pralablement verse). (For a sharp critique of this decision, advocating an approach to property cases similar in fact to the German, see a note by Paul Lagarde in Revue critique de droit international priv 1981, pp 527 525.) (iii) Martin v Bank of Spain [1952] ILR 202 involved a refusal by the Bank of Spain as agent of the Spanish state to issue in Spain new notes in exchange for old notes which were no longer legal tender.
In holding that the acts in question were, even apart from the principle of immunity, public acts which are not subject to judicial control in France, the Cour de cassation was doing no more, at most, than recognise the second type of act of state, that is the right of a state to deal with property within its own jurisdiction. (iv) Similarly, in poux Reynolds v Ministre des Affaires trangres (1965) 47 ILR 53, the Tribunal de Grande Instance de la Seine was being asked by a buildings former owners to adjudicate upon the validity of a confiscation of property by the Hungarian State, and its subsequent assignment to the French Legation in Hungary said to have taken place under an international agreement.
Again, the confiscation falls directly within the second type of act of state.
The court also said that the French courts were not competent to interpret the provisions of the international agreement (which it was said did not cover the assignment to the French Legation), but, in the light of the confiscation, the claimants can have had no sustainable rights in any event. (v) Bank Indonesia v Senembah Maatschappij and Twentsche Bank (1959) 30 ILR 28 is another case regarding seizure by the Indonesian State in Indonesia of property which was then, apparently, put into the hand of Bank Indonesia acting in a private law capacity, not as a state organ.
It was therefore within the second type of act of state.
The case is also of particular interest for the Court of Appeal of Amsterdams statement that the Act of State doctrine relied on by the Bank Indonesia was not a generally accepted rule of international law, and did not apply when the relevant measures were in conflict with international law.
On that basis, although the court said that as a rule, a court will not, and should not, sit in judgment on the lawfulness of acts jure imperii performed by, or on behalf of, a foreign Government, this rule must be subject to an exception when the acts in question can be deemed to be in flagrant conflict with international law.
This, the Court went on to hold, they were, because they were unmistakably discriminatory and also because they were being used as a means to exert pressure in a political dispute over Netherlands New Guinea. (vi) The Cour de cassation concluded in the case of Ramirez Sanchez Illich, alias Carlos (ECLI:FR:CCASS: 1995:CR06093) that Carloss arrest in Khartoum by Sudan authorities with a view to his return to France for trial constituted an act of sovereignty and that domestic jurisdictions were incompetent to adjudicate upon the conditions under which such authorities had effected such arrest and handed Carlos over to French police in Khartoum to be transported back to France for trial without any arrest warrant or legal procedures.
French civil law and common law therefore diverge in this area: see para 73(v) below.
Thus it can be said that, even in relation to property, the general picture is that French and Netherlands case law is not unqualified in accepting the validity of foreign acts of state.
That the second type of foreign act of state is, assuming that it exists, subject to significant limitations under English law has become increasingly clear over recent years.
The Court of Appeal was on any view correct in Yukos v Rosneft to identify the importance of these limitations.
Thus: (i) The second type of foreign act of state is, by definition, limited to sovereign or jure imperii acts, excluding in other words commercial or other private acts. (ii) It has been held inapplicable to judicial acts, even though such acts can engage the states responsibility in human rights or international law: Yukos v Rosneft, paras 73 91, citing Altimo (above).
In Altimo, the Privy Council held (para 101) that: The true position is that there is no rule that the English court (or Manx court) will not examine the question whether the foreign court or the foreign court system is corrupt or lacking in independence.
The rule is that considerations of international comity will militate against any such finding in the absence of cogent evidence.
On that basis, the Court of Appeal in Yukos v Rosneft held justiciable the issue whether judicial acts had been part of a campaign waged by the Russian state for political reasons against the Yukos group and its former CEO (para 29), where it was alleged that the courts were in a position of systematic dependency on the dictates or interference of the domestic government (para 90).
Another possible explanation of these cases is, however, that they do not illustrate an exception from the second type of foreign act of state, but reflect the public policy exception to the recognition of foreign judicial acts which exists as a matter of conflicts of law in respect of the first type of foreign act of state: see para 37 above.
In an English (or English law based) court, it is not surprising if public policy has a fairly expansive role in relation to foreign judicial acts.
If one believes in justice, it is on the basis that all courts will or should subscribe to and exhibit similar standards of independence, objectivity and due process to those with which English courts identify.
Given the evidence, a domestic court should be able to detect, and it would be surprising if it were obliged to overlook, accept or endorse, any significant shortfall in this respect. (iii) The English courts are entitled to determine whether a foreign law is legal, for example under the local constitution; the foreign law will not be regarded as an act of state which cannot be challenged: Buck v Attorney General [1965] Ch 745, 770; Al Jedda v Secretary of State for Defence [2010] EWCA Civ 758, [2011] QB 773, para 74, per Arden LJ and para 189 per Lord Dyson MR; and see McLachlan, Foreign Relations Law, para 12 129; Dicey, Morris and Collins para 5 048. (iv) Acts of officials granting or registering intellectual property rights have been held to be outside any doctrine of foreign act of state: Lucasfilm Ltd v Ainsworth [2011] UKSC 39; [2012] 1 AC 208. (v) In a criminal law context, English courts have had no hesitation (a) about investigating and adjudicating upon the wrongful detention and rendition of individuals by foreign states in conjunction with United Kingdom authorities, in breach of a foreign law.
In R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42, the House held that kidnapping and abduction from South Africa of a person wanted for trial in England in violations of international law and of the laws of another state [ie South Africa] required recognition by the court in order to uphold the rule of law, with the result that the trial was stayed: see eg pages 62G, 67G and 73G.
In R v Mullen [2000] QB 520, the Court of Appeal Criminal Division followed Ex p Bennett, setting aside the conviction of Mr Mullen, who had been deported from Zimbabwe to the United Kingdom as a result of a plan concocted between the United Kingdom and Zimbabwean authorities which involved breaching Zimbabwean extradition law.
The Australian High Court decision in Moti v The Queen [2011] HCA 50, 245 CLR 456, discussed in para 82 below, has adopted the same approach after expressly considering and rejecting a Crown submission that foreign act of state precluded its adoption. (b) Lord Sumption suggests (para 246) that Mullen, Bennett and Moti can all be explained on the basis that any unlawfulness in the conduct of the foreign officials was incidental, that the unlawfulness of the Australian officials conduct was enough to justify staying the proceedings against Mr Moti and that the unlawfulness of the acts of their foreign collaborators was irrelevant.
This in my opinion misreads all three cases; it inverts their significance.
It was an essential step in the reasoning of each that the foreign officials (the primary actors in the illegal deportation in each case) had acted illegally.
Far from being incidental or irrelevant, the foreign officials illegal conduct was in each case the key to the scheme of deportation.
Without it, there would have been no illegal deportation at all.
If the second type of foreign act of state had any application to personal wrongs of this nature, investigation and condemnation of the British authorities conduct should have been precluded on the grounds that the direct actors in the illegality were foreign state officials, acting within their own territory, whose conduct was immune from investigation or criticism.
In neither of the first two cases did anyone conceive of such an argument, and in the third, where it was raised, it was categorically, and rightly, dismissed.
In so far as the present appeals relate to alleged complicity by British officials in illegal conduct by foreign officials within their own foreign jurisdictions, they present exact parallels in a civil context to these three deportation cases in a criminal context.
It is no answer to this that, on a hypothesis contrary to the actual facts, the British or Australian authorities in these cases might (possibly) have been able to kidnap the wanted individuals from the foreign jurisdictions by themselves without the relevant local authorities involvement.
The doctrine of foreign act of state must depend on the actual facts, not on inapplicable counter factuals.
Indeed, if counter factuals of this nature were relevant at all, they could presumably also be advanced in the current cases of Belhaj and Rahmatullah.
All this suggests caution in todays world about recognising the application of the second type of foreign act of state in areas where it has hitherto had no discernible domestic role.
The recognition by the Court of Appeal in (in particular) Princess Paley Olga of the second type of foreign act of state was not challenged on the present appeal, and I am, as I have said, content for present purposes to proceed on that basis, because of the special characteristics of property, and the special considerations applying to it, in particular the need for security of title and of international trade.
Similar characteristics and considerations do not apply to individuals who have been the victim of personal torts, and who can found jurisdiction against a relevant non state actor outside the territory of any foreign state also implicated in the tortious acts.
Recognising title to property is different from refusing to inquire into the justification for the infliction of personal injury.
The second type of foreign act of state can and should, in my view, be limited as a matter of principle to sovereign acts seizing or affecting (i) property which is (ii) within the jurisdiction of the state in question at the time when the act takes effect.
It is for the common law to define to what extent, if at all, it is prepared to refrain from adjudicating upon an issue involving a foreign states conduct, when the foreign state is not impleaded and the actual defendant has him or itself no immunity.
I see no reason in this context to go any further than I have indicated by giving the doctrine any wider effect.
In the United States, as I have noted, Hatch v Baez was and Underhill v Hernandez could have been, and would today certainly be, resolved by reference to state immunity.
Whether, even in the United States, the reasoning in Underhill v Hernandez should be limited to contexts where a plea of state immunity would also be possible, or, as may even be (see paras 49 and 50 above), to situations of detention by the military in times of war, is unnecessary for decision here.
On any view, movable property presents special considerations because of its marketability, as all the decided cases on movables (Oetjen, Luther v Sagor, Princess Paley Olga and Sabbatino) illustrate.
Personal injury or detention does not present these considerations.
Crown act of state also presents different considerations, since the Crown cannot claim state immunity in its own courts.
In contrast, any proceedings against a foreign state or its officials in the English courts will be barred by state immunity.
It is only in particular situations, like the present, that foreign act of state of the second type could conceivably be relevant.
I see no reason to extend the doctrine (assuming the second type to exist at all) to cover such situations.
On the contrary, to do so would, once again, be on the face of it to render the appellants immune from suit both in their own jurisdiction and anywhere else, while leaving the foreign states at least vulnerable to suit in their own jurisdictions.
The appellants submit in response to this last point that foreign act of state would cease to be an objection to English proceedings against the appellants as secondary parties, if and when the respondents had successfully established the relevant facts and the liability of each of the relevant foreign states by proceedings in those states domestic courts.
It is true that General Assembly Resolution 56/83 on Responsibility of States for internationally wrongful acts deals in turn with a state which breaches an international obligation (articles 12 15), before dealing with the responsibility of a state in connection with the act of another state.
In the latter connection, it addresses situations of aid or assistance (article 16), direction and control (article 17) and coercion (article 18).
A rgime which insisted on the actual actor being sued first would attach jurisdictional significance to a factor which would not normally have this significance and which might distort the natural course of events: a state aiding or assisting, and certainly a state procuring, directing, controlling or coercing, might be the more culpable party and natural target than the actual actor.
There could also be two main actors, or it could be uncertain which state was a main actor and which a secondary participant; eg in the present case, take for example the alleged wrongful rendition from Malaysia by collaboration between Malaysian and United States authorities.
So it could be uncertain which should be sued first.
It would on any view be optimistic to view the proposed course as a light task.
It would make recourse against the appellants dependent upon the operation, in the present case, of up to four separate foreign court systems.
In their joint intervention before the Supreme Court, the International Commission of Jurists, JUSTICE, Amnesty International and Redress (the NGO Interveners) make the point that No rendition to torture case against US officials has, to the knowledge of the NGO Interveners, ever succeeded in a US court since September 11.
Such actions are commonly blocked by various other US doctrines to which the appellants refer in their written case, in particular the political questions doctrine and the state secrets doctrine.
As Professor Jonathan Hafetz has observed [in Recapitualising Federal Courts in the War on Terror, St Louis University Law Journal, Vol 56, 2012, p 21]: Federal courts have repeatedly dismissed actions by noncitizens against US officials seeking damages for arbitrary detention, torture, and other mistreatments.
The dismissals, which rest on various grounds, including the state secrets privilege, Bivens special factors, and qualified immunity, typically cite the twin concerns of separation of powers and limited judicial capacity as reasons for denying litigants a federal forum.
The decisions portray federal courts as unable to provide remedies for
even the most egregious rights violations
In the upshot, therefore, in relation to the second type of foreign act of state, I consider that Leggatt J was correct in paras 115 and 177 of his judgment in Rahmatullah to treat the traditional foreign act of state doctrine, by which I understand he meant to cover the first and second types of foreign act of state, as limited to acts done within the foreign states jurisdiction as well as subject to a potential public policy exception.
But Leggatt J was, in my view, on less certain ground in so far as he held that the second type of act of state could not apply to acts of the United States in Iraq and Afghanistan, because these were not acts done within US territory where the laws of the United States applied.
He did not address, and may not have been asked to address, the basis on which the United States was present in those countries.
In the case of Iraq, it was, together with the United Kingdom, an occupying power acting pursuant to Security Council Resolution 1483 (2003) dated 22 May 2003.
As such, it had the duty under article 43 of the Geneva Convention IV dated 18 October 1907 to respect unless absolutely prevented, the laws in force in the country.
Nonetheless, it was the relevant state power, and it is certainly arguable that, within the ambit of the second type of foreign act of state, its acts should be recognised.
As to Afghanistan, the United States was present there by consent of the Afghan Transitional Authority as part of the International Security Assistance Force: see Security Council Resolution 1510 (2003) dated 13 October 2003.
No doubt, it had considerable powers, but it appears much less possible to argue that its acts in that capacity should be regarded as within the ambit of the second type of foreign act of state.
Whatever answer is given to these points, however, I would reach the same conclusion as Leggatt J with regard to the second type of act of state, on the basis that (assuming it to exist at all) it is and should be confined to acts affecting property.
The second type of foreign act of state therefore has no application in Rahmatullah.
Similar reasoning applies in Belhaj, with regard to any reliance on the second type of foreign act of state.
The claims are all for physical detention or rendition or mistreatment and so, I would hold, outside the second type.
Those for mistreatment by the United States officials in Thailand and (if such mistreatment be alleged there, which is unclear) Libya also relate to conduct on any view outside United States jurisdiction.
In contrast, those for mistreatment on a United States airplane in transit between Thailand and Libya, at least while over areas like the high seas not under the sovereignty of any state, can and should be probably regarded as occurring within United States jurisdiction, assuming the aircraft to have been registered there: see Dicey, Morris and Collins, rule 129 exception 2 and compare also the (Chicago) Convention on International Civil Aviation, article 17.
The Court of Appeal in Belhaj dealt with the issues before it on a different basis, by recognising a public policy exception unrestricted by any need for the facts relied upon to be indisputable or undisputed.
Had I regarded the second type of foreign act of state as applicable to personal wrongs, I would have concluded that the Court of Appeal was right in Belhaj to recognise such an exception or, as I would prefer to see it, qualification.
Lord Wilberforce in Buttes Gas recognised in general terms that public policy could constitute a valid basis for refusal to recognise a foreign act of state of either the first or second type: see the quotation from his speech cited in para 59 above.
The appellants submit that to recognise such an exception or qualification, when its application would involve investigating disputed facts, goes beyond anything contemplated or decided in the Kuwait Airways case.
I do not accept that submission.
In Kuwait Airways, Iraqi Airways was raising a conventional defence by relying on the Iraqi law by which the Kuwait Airways fleet, then in Iraq, was transferred to it.
To take itself outside the scope of the first type of foreign act of state, Kuwait Airways had in response to invoke the public policy exception, by relying on matters happening at an international level and involving hostilities between states and the reactions and resolutions of the Security Council.
That response raised immediate problems of justiciability, which could however be overcome by pointing to the clarity, indisputability and seriousness of the violations of the United Nations Charter and Security Council Resolutions.
Unless a claim for detention or mistreatment by United Kingdom officers in conjunction with foreign state authorities can be regarded as non justiciable within the third type of foreign act of state, no such considerations arise.
Were it (contrary to my view) necessary to identify the scope of such a qualification, it would at least be as extensive as that discussed later in this judgment in the context of non justiciability or judicial abstention.
The Court of Appeal in Belhaj found (in paras 96 102) assistance and support for its conclusion in the Federal Court of Australia decision in Habib v Commonwealth [2010] FCACA 12; (2010) 265 ALR 50.
It saw this, rightly in my view, as based on two distinct lines of reasoning.
One, not directly relevant here, was the Australian constitutional position, which was viewed as requiring a remedy.
The other was a more general conclusion regarding the scope of the second type of foreign act of state.
The Federal Court treated this type as potentially applicable to claims relating to person as well as property.
The claim was that Australian officials had aided, abetted and counselled torture of an Australian citizen by foreign officials while he was detained in Pakistan, Egypt and Afghanistan and in Guantanamo Bay.
Contrary to the appellants case, the relevant facts were neither clear nor accepted: see eg paras 58 67 per Perram J and para 110 per Jagot J. Black CJ saw public policy as an answer to any defence of act of state in relation to the claim (paras 7 and 13).
Perram J saw the defence of foreign act of state being advanced as a rule of validity (not a rule of abstention or deference), and therefore as one on which a human rights exception might be hung: see paras 43 and 45.
Jagot J accepted that there was a public policy exception, and explicitly rejected any distinction between known and alleged violations, as without support in the authorities or in principle.
She added that there were legal parameters in international and Australian law enabling judicial determination of the claims and meaning that this was no judicial no mans land: paras 107 110.
The case is also of particular interest, because the claim was, as it is in the issues now before the Supreme Court, for secondary responsibility arising from alleged aid, abetting or counselling by Commonwealth officials in relation to conduct allegedly committed by foreign officials.
The Australian High Court returned to this theme in Moti v The Queen 245 CLR 456 in a context which has resonance in the present appeals.
Mr Moti claimed that he had been deported by officials of the Solomon Islands Government from the Solomon Islands to Australia, where he was wanted for trial.
The deportation occurred after the High Commissioner had issued a travel document for Mr Moti and visas for the Solomon Islands officials who were to accompany him on the aircraft bound for Australia, knowing that Solomon Islands law was going to be breached by deporting Mr Moti on the same day without giving him a seven day opportunity to challenge deportation.
The majority judgment, given by French CJ for six out of the seven members of the High Court, held that there was no general and universally applicable rule that Australian courts may not be required (or do not have or may not exercise jurisdiction) to form a view about the lawfulness of conduct that occurred outside Australia by reference to foreign law (para 50) and that Here, the question of the lawfulness of the appellants removal from Solomon Islands, although effected by the Solomon Islands Government, was a preliminary to the decision whether a stay should be granted.
The primary judge was not right to conclude that [i]t is not for this court to express an opinion on these decisions made by the Solomon Islands government.
The appellants submit that this decision falls within the Kirkpatrick exception, as a case where all that mattered was the facts about what happened in the Solomon Islands, not whether these facts involved illegality.
I reject that analysis, basically for reasons already given in para 73(v)(b) above.
It was critical to establish that there was illegality under Solomon Islands law, with which the Australian High Commissioner had at the least gone along.
In the present appeals, the issue whether there was illegal conduct by foreign state officials under their own laws is also a preliminary to a decision on whether the appellants arranged, assisted or encouraged or otherwise connived or joined in such conduct, but that is no reason for an English court to refuse to determine it.
There remains the question what considerations could as a matter of public policy require the English court to investigate and adjudicate upon an issue if and to the extent that this would otherwise be impermissible on the ground that it constituted a foreign act of state of the second type.
In the property context, to which I consider the second type of foreign act of state should be confined, the relevant considerations are likely to be extreme.
In Luther v Sagor the Court of Appeal rejected roundly submissions that the confiscatory decree was so immoral and so contrary to the principles of justice recognised in the United Kingdom that no attention should be paid to it.
In relation to the second type of foreign act of state, considered in Princess Paley Olga, the arbitrariness of a governmental seizure of property without any legislative footing was even more evident.
On the other hand, the Hamburg Court of Appeal case mentioned in para 69 above and the Amsterdam Court of Appeal case of Bank Indonesia v Senembah Maatschappij and Twentsche Bank (1959) 30 ILR 28, mentioned in para 72(v) above, both suggest that, even in relation to property, there may be some public policy limits in terms of arbitrariness and discrimination to the foreign state acts which a domestic court should recognise.
On the hypothesis, contrary to my conclusion, that the second type of foreign act of state should be seen as extending to sovereign acts against the person, the case for recognising some public policy limits would seem, if anything, even stronger.
However, since I do not consider that the second type of foreign act of state has any application to sovereign conduct against the person within the relevant foreign state, it is unnecessary and I think undesirable on these appeals to attempt to be more specific about the circumstances in which public policy could and should entitle a domestic court to adjudicate upon any such conduct.
For these reasons, I do not consider that the issues now before the Supreme Court fall within the second type of foreign act of state, assuming this to exist in any form, or that it should not proceed to trial for that reason.
IX Application of third type of foreign act of state
In the light of the above, the critical issue becomes the scope of the third type of foreign act of state.
On this, the Courts below adopted different approaches.
The Court of Appeal in Belhaj, paras 53 55, drawing on the analysis of the Court of Appeal in Yukos v Rosneft (No 2), paras 66 67, approached foreign act of state as an over arching principle of non justiciability, subject to limitations.
It saw it as founded on the principle of sovereign equality of states identified in the Duke of Brunswicks case (see para 63 above) and by Fuller CJs statement in Underhill v Hernandez (para 49 above).
It coupled this with considerations of comity, with the caveat that this should not be confused with the avoidance of embarrassment (para 66).
The Court of Appeal noted correctly (paras 65 66) that both these bases for an over arching principle of non justiciability had been cited, with approval, by Lord Wilberforce in Buttes Gas.
It did not accept that this Courts judgment in Shergill v Khaira should be read as suggesting that the third type of act of state is limited to situations of lack of judicial competence arising from the principle of separation of powers (para 67).
The critical limitation identified by the Court of Appeal in Belhaj at paras 83 87 and 114 (and in Yukos v Rosneft at para 69) was the public policy limitation identified in Oppenheimer v Cattermole and the Kuwait Airways case.
Those were both cases involving the first type of foreign act of state the requirement under ordinary conflicts principles for domestic recognition of foreign legislation affecting movable or immovable property within the foreign jurisdiction: see, in relation to Kuwait Airways, para 80 above.
As explained in para 80 above, the third type of foreign act of state only arose for consideration in Kuwait Airways, because the public policy, on which Kuwait Airways relied in response to prevent the recognition of the Iraqi law, concerned inter state hostilities and the Security Councils intervention under Chapter VII of the UN Charter.
The clarity and seriousness of the breaches of international law involved enabled the House to conclude that Kuwait Airways response was justiciable.
The facts in Belhaj are in dispute.
They are neither indisputable nor obvious.
On its approach to foreign act of state and to the Kuwait Airways case, the Court of Appeal in Belhaj saw itself as faced with an exception to the foreign act of state doctrine, which had hitherto only been recognised in cases of indisputable and obvious violations of fundamental rights, and which would need to be understood in a wider sense if the claims by Mr Belhaj and Mrs Boudchar were to proceed.
It concluded that the limitation was indeed to be understood more widely, drawing on various considerations set out at paras 114 121.
They were, in summary, that (i) international law has moved from regulating state to state conduct, to regulating human rights for the benefit of individuals, (ii) the allegations in Belhaj are of particularly grave violations of human rights, (iii) the respondents are either current or former officials of state in the United Kingdom or government departments or agencies, whose conduct would not normally be exempt from an investigation, in which there is a compelling public interest, and who are only suggested to be exempt because of the alleged involvement of other states and their officials, (iv) there is no lack of judicial or manageable standards, (v) unless the English courts exercise jurisdiction, the allegations will never be subject to judicial investigation and (vi) the risk of displeasing allies or offending other states cannot outweigh the need to exercise jurisdiction.
Leggatt J in contrast understood the third type of foreign act of state as a principle of non justiciability limited to cases where the issues were genuinely political in one of the two senses mentioned in Shergill v Khaira.
I understand by this that he meant that either (i) the court was being asked to adjudicate upon the legality of decisions and acts of sovereign states on the international political stage governed by power politics, or in relation to which there were no manageable or judicial standards, or (ii) the court was being asked to adjudicate in the abstract on international legal issues without there being any domestic foothold in the form of a relevant enforceable legal right requiring this to be done.
He held that neither was the case: paras 141 and 163.
In my view, Leggatt J was correct in Rahmatullah to approach the claims on the basis that the question is whether the principle of non justiciability constituting the third type of foreign act of state applies at all, rather than whether any exception to it exists or should be grafted onto it.
The third type of foreign act of state is a principle of non justiciability or abstention.
The Court of Appeal explained the principle as founded on the sovereign equality of states and comity.
There is force in the appellants submission that, if this is the basis of the principle and if it is otherwise engaged by the issues or subject matter, then a public policy exception to its application is difficult to rationalise.
The graver the alleged violations by foreign state officials, the greater would then be the infringement of the principles of sovereign equality of states and comity if domestic courts were to investigate and adjudicate upon the allegations.
For this reason, I prefer to put the focus on the ambit of the third type of foreign act of state.
However, I agree with Lord Sumption (para 248) that this difference between us cannot be critical.
What matters is how one defines the ambit or any exceptions.
It is clear from Buttes Gas that the application of the third type of foreign act of state is fact and issue sensitive; it needs to be considered on a case by case basis in the light of the issues involved.
There is, in this context, no reason why the third type of foreign act of state should be limited territorially.
Further, in Buttes Gas the House was concerned with a highly unusual situation, and I accept the appellants submission that it does not follow that the principle is limited to analogous situations.
In particular, Lord Wilberforces reference to an absence of judicial or manageable standards (para 42 above) was directed very specifically to the circumstances before him.
If and when it is the case that there are no judicial or manageable standards by which to determine an issue, then the case will no doubt be non justiciable.
But an absence of such standards should not be seen as a generalised or exclusive test.
In Shergill v Khaira, the Supreme Court was concerned with a very different factual situation to the present and it did not have the benefit of the extensive citation of authority and submissions which we have had on the present appeals.
The categorisation advanced in paras 41 43 of the Supreme Courts judgment in that case was deliberately not exhaustive (vide, the word generally), and neither were the examples given of cases within the two identified sub categories intended to be exhaustive.
As to the Court of Appeals conclusion (paras 67 68) that this Courts judgment in Shergill v Khaira should not be understood as limiting the third type of act of state to situations of lack of judicial competence arising from the separation of powers, I agree that lack of judicial competence is not a helpful qualification.
Judicial abstention is in contrast a helpful term, and preferable in my view to non justiciability.
This third type of act of state (described explicitly by Lord Sumption as international law act of state) has on any view a broad international basis.
This was, in Shergill v Khaira, identified briefly by the reference in para 40 to the dispute in Buttes Gas as trespassing on the proper province of the executive, as the organ of the state charged with the conduct of foreign relations, and developed more fully in para 42 in Shergill v Khaira.
Considerations of separation of powers and of the sovereign nature of foreign sovereign or inter state activities may both lead to a conclusion that an issue is non justiciable in a domestic court.
The problem is to identify more precisely in relation to what issues and when such adjudication is inappropriate.
The appellants submit that Leggatt J took too large a view of the issues properly justiciable in a domestic court.
In particular, having held that there were judicial and manageable standards to resolve the issues in Rahmahtullah, and dismissed in this context any difficulties which might arise if the United States did not cooperate with evidence or documents, he considered that justiciability depended upon whether examination of the acts of United States officials was necessary in order to decide a question of domestic legal right: paras 153 and 163.
In short he circumscribed the circumstances capable of being embraced by the first sub category, and too readily assumed that, because a claim of right was made, the case fell within the second sub category, in Shergill v Khaira (see para 43 above).
In this connection, Leggatt J also treated the previous Court of Appeal decision in R (Noor Khan) v Secretary of State for Foreign and Commonwealth Affairs [2014] 1 WLR 872 as falling within the second sub category, and explained the Court of Appeals refusal there to grant relief on the basis that no claim of right was involved.
The claimant in Noor Khan was seeking no more than a public declaration that a GCHQ officer or other Crown agent who passes locational intelligence to an agent of the US may commit an offence of encouraging or assisting in a crime under sections 44 46 of the Serious Crime Act 2007 (para 150).
The claimant in Noor Khan was the son of a tribal elder killed in a US drone strike in Pakistan pursuant, allegedly, to locational intelligence supplied by GCHQ to the CIA.
He maintained that there could be no defence of combat immunity to a charge of murder: GCHQ and CIA officials were not members of the US and UK armed forces and could not be combatants, there was no armed conflict in Pakistan and Al Qaeda was too incoherent and sporadic in its actions for it to be shown that there was an armed conflict even in Afghanistan.
In any event, if there was an armed conflict, it was non international in nature.
Leggatt J explained this case as one where the claimant was not claiming that he had any legal right which the defendant had violated.
The relief sought was, in effect, an advisory opinion on the criminal law.
The case, he said, fell therefore into the second sub category identified in Shergill v Khaira (para 43 above).
It would seem to follow from this and from para 163 of Leggatt Js judgment that, if the claimant had had some substantive claim (eg for damages in his fathers or his own right), the claim would, in Leggatt Js view, have been justiciable.
In my opinion, that is unlikely to be correct, though it is unnecessary to reach any firm conclusions in this area.
Noor Khan was a very particular case: it proceeded on an assumption that, under sections 44 46 of the Serious Crime Act 2007, the liability of UK nationals should be determined not by reference to whether the United States agents whose conduct was said to have been assisted by UK nationals were actually guilty of any offence within the jurisdiction of the UK courts, but by considering whether the conduct so assisted would have constituted an offence within the jurisdiction of the UK courts, if committed by a UK national.
Lord Dyson MR, giving the sole reasoned judgment, regarded the claim as non justiciable, because, quoting (at paras 34 and 35) from and agreeing with Moses LJs analysis below: The proposition, even if it is right, that a person may be guilty of secondary liability for murder under sections 44 46, although the principal could not, is no answer to the fundamental objection to Lord Dyson went on to say (para 37): the grant of a declaration: that it involves, and would be regarded around the world as an exorbitant arrogation of adjudicative power in relation to the legality and acceptability of another sovereign power.
Even if the argument focused on the status of the attacks in North Waziristan (international armed conflict, armed conflict not of an international nature, pre emptive self defence) for the purposes of considering whether the United Kingdom employee might have a defence of combatant immunity, it would give the impression that this court was presuming to judge the activities of the United States.
In my view, a finding by our court that the notional UK operator of a drone bomb which caused a death was guilty of murder would inevitably be understood (and rightly understood) by the US as a condemnation of the US.
In reality, it would be understood as a finding that (i) the US official who operated the drone was guilty of murder and (ii) the US policy of using drone bombs in Pakistan and other countries was unlawful.
The fact that our courts have no jurisdiction to make findings on either of these issues is beside the point.
What matters is that the findings would be understood by the US authorities as critical of them.
Although the findings would have no legal effect, they would be seen as a serious condemnation of the US by a court of this country.
In substance, therefore, Lord Dyson saw the issue as one of the lawfulness of the use of drones and as non justiciable, because its resolution would depend upon determining whether there was an armed conflict in Pakistan and/or Afghanistan, whether any such conflict was international or non international in nature and what rights of action or self defence existed.
All those are issues on which the policy and judgment of the executive and armed forces might be expected to prevail: compare the Court of Appeal Criminal Divisions provisional view to that effect in R v Gul (Mohammed) [2012] 1 WLR 3432, paras 20 to 23. (The decision in Gul was upheld on grounds not referring to this point at [2014] UKSC 64; [2014] AC 1260).
It is true that the common law develops and responds to changing times and attitudes, and that a sharp division between the domestic and international legal sphere is less visible today than in the past.
The case of Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 is an example of this development.
I also note encouragement given by distinguished international lawyers in article 2 of the Institut de Droit internationals resolution The Activities of National Judges and the International Relations of their State (Milan, 1993), to the effect that: National courts, when called upon to adjudicate a question relating to the exercise of political power, should not decline competence on the basis of the political nature of the question if such exercise of power is subject to a rule of international law.
Some matters are however better addressed at the international legal level, rather than in domestic courts.
In civil as well as common law, it appears unsurprising under present conditions that domestic courts should treat acts of government consisting of an act of war or of alleged self defence at the international level as non justiciable and should abstain from adjudicating upon them: see the concurrently issued judgment in the cases of Rahmatullah and Serdar Mohammed to which reference is made in paras 6 and 8 above; see also para 71 above and the remarks of the majority and of Judge Costa in his concurring judgment in Markovic v Italy (2006) 44 EHRR 52, paras 113 116.
Whether, at least apart from the special statutory provisions in Noor Khan, there might also have been issues of non justiciability under the principle of Crown act of state does not require further examination here.
However, even if Leggatt J took too limited a view in this respect of the circumstances in which domestic courts should exercise self restraint and abstain, I have little difficulty with the result he reached on the facts as alleged and assumed for present purposes before him.
What is alleged in Rahmatullah is wrongful detention combined with severe mistreatment over a period of years by United States authorities, in circumstances for which the United Kingdom is alleged to have secondary responsibility.
Whether that case can be made out will depend on identifying the relevant laws in force at the relevant times, whether they be the domestic laws in force in Iraq and Afghanistan or international law, as well as upon investigation of the relevant facts.
Apart from the mere fact that the primary actor was the United States, I do not on present material see a basis for concluding that the issues will involve sovereign, international or inter state considerations of such a nature that a domestic court cannot or should not appropriately adjudicate upon them.
The mere fact that Mr Rahmatullah was handed over to the United States under an agreement cannot, I think, suffice to make the claims for alleged wrongful detention combined with severe mistreatment by the United States non justiciable in respect of either the United States primary, or the United Kingdoms ancillary, involvement.
I would accept that detention overseas as a matter of considered policy during or in consequence of an armed conflict and to prevent further participation in an insurgency could in some circumstances constitute a foreign act of state, just as it may constitute Crown act of state when undertaken by the United Kingdom: see our concurrent judgment in Rahmatullah and Serdar Mohammed.
But here we are concerned, in Belhaj, with allegations of apparently arbitrary rendition with a view to forcible handing over to an arbitrary ruler and, in Rahmatullah, with allegations of what again appears to have been arbitrary detention without any of the usual forms of legal or procedural protection accompanied by severe mistreatment.
Even if one could say that such treatment reflects some policy of the various foreign states involved, or indeed of the United Kingdom, it goes far beyond any conduct previously recognised as requiring judicial abstention.
There is certainly also no lack of judicial and manageable standards by which to judge it.
The critical point in my view is the nature and seriousness of the misconduct alleged in both cases before the Supreme Court, at however high a level it may have been authorised.
Act of state is and remains essentially a domestic law doctrine, and it is English law which sets its limits.
English law recognises the existence of fundamental rights, some long standing, others more recently developed.
Among the most long standing and fundamental are those represented in Magna Carta 1225, article 29, which reads: No free man shall be taken, or imprisoned, or dispossessed, of his Liberties, , or be outlawed, or exiled, or in any way destroyed; nor will we condemn him, nor will we commit him to prison, excepting by the legal judgment of his peers, or by the laws of the land.
To none will we sell, to none will we deny, to none will we delay right or justice.
Further, torture has long been regarded as abhorrent by English law: see eg A v Secretary of State for the Home Department (No 2) [2005] UKHL 71; [2006] 2 AC 221, para 11, per Lord Bingham, and individuals are unquestionably entitled to be free of deliberate physical mistreatment while in the custody of state authorities.
Sovereign states who without justification and without permitting access to justice detain or mistreat individuals in the course or in relation to their conduct of foreign relations or affairs have sovereign immunity in foreign domestic courts.
But I see no reason why English law should refrain from scrutinising their conduct in the course of adjudicating upon claims against other parties involved who enjoy no such immunity here, where the alleged conduct involves almost indefinite detention, combined with deprivation of any form of access to justice and, for good measure, torture or persistent ill treatment of an individual.
This is consistent with the reasoning in R (Abbasi) v Secretary of State for Foreign and Commonwealth Affairs [2002] EWCA Civ 1598, where, in the context of a claim judicially to review the Secretary of State for alleged inaction in respect of the plight of a British citizen detained in Guantanamo, the Court of Appeal said that where fundamental human rights are in play, the courts of this country will not abstain from reviewing the legitimacy of the actions of a foreign sovereign state (para 53) and that it was not possible to approach this claim for judicial review other than on the basis that, in apparent contravention of fundamental principles recognised by both jurisdictions and by international law, Mr Abbasi is at present arbitrarily detained in a legal black hole (para 64).
These observations are together sufficient to support a conclusion that Mr Rahmatullahs claims against the Ministry of Defence and the Foreign and Commonwealth Office are not, as presented, barred by reason of the doctrine of foreign act of state.
I recognise of course that the whole factual position may appear differently if and when the case is tried on the basis of actual, rather than assumed facts.
There will or may then be evidence as to what actually happened and what really motivated those holding and treating Mr Rahmatullah.
I also recognise, as Leggatt J did, that there may be practical evidential difficulties in disputing the accounts of what happened to Mr Rahmatullah in US custody.
That assumes that the United States will not cooperate with information and evidence.
But, even if the United States do not cooperate, evidential difficulties of this nature are, I think, far from what was in mind in Buttes Gas or any other of the relevant authorities and are not a basis for concluding that a claim is non justiciable.
Turning to Belhaj, on the assumed facts, this appeal too cannot in my view be regarded as raising any issues of a sovereign, international or inter state nature upon which a domestic court cannot or should not appropriately adjudicate.
Simon J at first instance concluded with hesitation that there were no clear and incontrovertible standards for deciding both whether the actions of the Chinese state were unlawful by the standards of Chinese law (para 146) and whether the conduct of US authorities outside the United States was unlawful (para 150).
The respondents have since made clear that they do not rely on any act or conduct committed by or in conjunction with the Chinese authorities.
A hint of the underlying reasons why the United Kingdom may have been willing to supply information to Libya about Mr Belhaj is present in the alleged letter reference to demonstrating the remarkable relationship we have built over the years, and the respondents themselves add to this an allegation that the renditions took place as part of a co ordinated strategy designed to secure diplomatic and intelligence advantages from Colonel Gaddafi.
As to this, there is, as I have noted (paras 8 to 10 above) no suggestion that general foreign policy advantages of this nature could justify a plea of Crown act of state.
Any attempt to rely on them to support a plea of foreign act of state in respect of the present claims against the United Kingdom for collaboration or connivance in the alleged false imprisonment, rendition from one country to another or mistreatment of individuals such as Mr Belhaj and Mrs Boudchar would at once meet the difficulty that the United Kingdom would be advancing its own breaches of the fundamental rights of those individuals.
The letter reference and the respondents allegation do not therefore represent any basis for regarding the claims as non justiciable.
Essentially, what is relied upon by the appellants is the fact that they were not, while various foreign states were, the prime actors in the alleged false imprisonment, rendition or mistreatment.
Bearing in mind the nature and seriousness of the infringements of individual fundamental rights involved, this constitutes no basis for a domestic court to abstain or refrain from adjudicating upon the claims made.
I note, once again, that a contrary conclusion would have meant that the claims against the appellants could not be pursued anywhere in the world, in contrast with the claims against the alleged prime actors.
In circumstances, where the alleged letter might, on one reading, suggest that one or more of the appellants in Belhaj was aware that the intelligence supplied to Libya about Mr Belhaj would be used to effect his rendition to Libya, even though the United Kingdom did not actually pay for the air cargo, a distinction between those primarily and secondarily responsible may also prove to be unpersuasive.
A similar point applies in Rahmatullah where some of the pleaded allegations appear to assert that, even though United States authorities were the actors, the prime instigator was the appellants.
Again, the evidential difficulties on which Mr James Eadie QC relied, on the basis that cooperation is unlikely to be forthcoming from the Malaysian, Thai, Libyan and United States authorities or their states, cannot in my view make the claims against the appellants non justiciable or require judicial abstention.
Some reliance has been placed in both sets of proceedings on evidence about the effect on international relations of investigation in English courts of the issues which they raise.
The appellants have relied in both sets of proceedings on evidence from Dr Laurie Bristow, a senior diplomat, currently National Security Director in the Foreign and Commonwealth Office.
He considered it highly unlikely that the foreign states involved would supply evidence to enable the appellants to defend themselves.
He reminded the court of the policy of successive governments to neither confirm nor deny allegations in relation to the intelligence services.
Although he had not consulted any of the relevant foreign governments, he considered that there was a real risk that the trial of the proposed proceedings would cause serious harm to, and that findings of the nature sought in respect of United States officials would have a seriously damaging impact on, the United Kingdoms relationship with the United States, and could well lead to a restriction of the unparalleled access and the historic intelligence sharing relationship and national security cooperation which the United Kingdom currently enjoys.
He accepted that, given the change in regime in Libya, it is unlikely that the findings sought in respect of Libya would damage relations with Libya, but considered that the allegations in respect of Malaysia and Thailand were highly politically sensitive, and that findings would probably be interpreted as interference or give rise to a strongly negative reaction.
In Rahmatullah this evidence was countered by the respondent with evidence from a former US diplomat Mr Thomas Pickering, and a former US government official adviser, then director of American Studies at the Department of Politics and International Studies at Cambridge University who expressed the firm belief that adjudicating on Mr Rahmatullahs case was highly unlikely to cause damage to the relations or national security cooperation between the US and UK and that to assert that the US would be offended was to misunderstand the value the United States places on the rule of law and an unbiased and open judicial system.
Leggatt J in Rahmatullah thought it wrong for a court to become involved in attempting to resolve this sort of issue, and declined to attach weight to the evidence.
Simon J in Belhaj reached with hesitation his conclusion that foreign act of state applied in reliance both on his view (with which I have already expressed disagreement) that there were no clear and incontrovertible standards for deciding whether United States officials had acted unlawfully and on the fact that there is incontestable evidence that such an inquiry would be damaging to the national interest (para 150).
The Court of Appeal noted that, although deference to executive suggestion as to the likely consequences for foreign relations may well be suited to the very different constitutional arrangements in the United States, it has played no part in the development of the act of state doctrine in this jurisdiction, and that in Buttes Gas Lord Wilberforce expressly left aside all possibility of embarrassment in our foreign relations in coming to the conclusion that the issues raised were not justiciable.
As to this last point, however, Lord Wilberforce did this at pp 936G and 938A B, expressly noting by way of explanation that no indication of any embarrassment had been drawn to the Houses attention by Her Majestys Government.
The inference is, if anything, that it might have been a relevant factor, had it been shown.
The courts are placed in a difficult situation when asked to feed into a judgment about justiciability an assessment of the likely prejudice to the United Kingdoms good relations and security interests with a foreign state, if serious allegations of misconduct involving misconduct by that foreign state are ventilated in the English courts.
Such an assessment might also be easier to take into account if the issue was whether a prima facie defence of foreign act of state of the second type was outweighed by public policy considerations, rather than where, as here, the issue is whether a foreign act of state of the third type has been shown, making the case non justiciable.
That said, I would not exclude the relevance to justiciability of a clear governmental indication as to real and likely damage to United Kingdom foreign policy or security interests.
But little emphasis was in fact placed before the Supreme Court on such considerations as a relevant, still less a decisive factor.
Viewing the appeals together, it can also be seen that Dr Bristows forcefully expressed views are not unchallenged.
Finally, as Dr Bristow recognised, the governmental position in Libya has changed radically, even if not very happily.
One might even also add that a different administration holds office in the United States.
On the present appeals, I do not consider that the evidence available can lead to a conclusion that the cases should be regarded as non justiciable or require judicial abstention.
Lord Sumption takes a more general view of the third type of foreign act of state (non justiciability or abstention or, in his terminology, international law act of state).
But in paras 249 280 he argues in favour of the recognition in English domestic law of a public policy qualification.
He finds it helpful in this connection to consider the scope of certain international law rules with jus cogens force, though he does not suggest that domestic public policy in all cases necessarily reflects or corresponds with international law rules having jus cogens force: see para 257.
On this basis, he concludes that, so far as the allegations made in these proceedings amount to allegations of complicity in torture or of arbitrary detention without any legal ground or recourse to the courts, including enforced disappearance and rendition, a domestic court should not abstain from adjudicating upon them.
Not every unlawful detention would, in his view, fall into this category, and nor would the allegations made of other cruel, inhuman or degrading treatment, but the position on the facts is not at this stage clear to the point where any of the allegations made should be struck out (see paras 278 280).
Such difference in approach as there is between Lord Sumption and myself in this area makes no difference to the outcome of these appeals, and seems unlikely to make much if any difference to the outcome of any trial.
But I prefer to analyse the qualifications to the concept of foreign act of state by reference to individual rights recognised as fundamental by English statute and common law, rather than to tie them too closely to the concept of jus cogens: (i) The analogy of jus cogens would suggest that a domestic court would be able to adjudicate upon an allegation that its national government connived in a serious violation of the claimants rights by a foreign government, but would be required to abstain from adjudicating upon a less serious violation, such as mere unlawful detention or cruel or inhuman treatment not amounting to torture. (ii) Jus cogens is a developing concept notoriously difficult to define, and capable of giving rise to considerable argument.
Oppenheims International Law (9th ed) (1995) Vol 1, para 2 said: Such a category of rules of ius cogens is a comparatively recent development and there is no general agreement as to which rules have this character, citing a wealth of authority in a footnote.
Brownlies Principles of International Law (8th ed) (2000) notes that during the 1960s scholarly opinion came to support the view that there can exist overriding norms of international law, referred to as peremptory norms (ius cogens), identified in article 53 of the Vienna Convention on the Law of Treaties as comprising any norm accepted and recognized 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.
Brownlies Principles says that The least controversial of this class are the prohibition of the use of force in article 2(4) of the [United Nations] charter, of genocide, of crimes against humanity (including systematic forms of racial discrimination), and the rules prohibiting trade in slaves.
It goes on to cite the International Law Commissions synopsis in Fragmentation of International Law: Difficulties arising from the Diversification and Expansion of International Law (A/CN.4/L.702, 18 July 2006), which lists the prohibition of aggression, slavery and the slave trade, genocide, racial discrimination apartheid and torture, as well as basic rules of international humanitarian law applicable in armed conflict, and the right to self determination.
Similarly, Harris and Sivakumarans Cases and Materials on International Law (8th ed) (2015), para 2 033 footnote 68, gives the prohibitions on the use of armed force, torture and genocide as prime examples of jus cogens rules.
The Report of the United Nations Working Group on Arbitrary Detention, A/HRC/22/44, 24 December 2012), to which Lord Sumption refers in paras 269 271 is clearly a most valuable and important soft law pronouncement, which is likely to influence the development of generally accepted and recognised norms.
But the scope for argument about the precise parameters of even such norms as the Working Group suggests in this area is evident from a full reading of para 38, reading: The Working Group regards cases of deprivation of liberty as arbitrary under customary international law in cases where: (a) When it is clearly impossible to invoke any legal basis justifying the deprivation of liberty; (b) the deprivation of liberty results from the exercise of the rights or freedoms guaranteed by articles 7, 13, 14, 18, 19, 20 and 21 of the Universal Declaration of Human Rights; (c) The total or partial non observance of the international norms relating to the right to a fair trial established in the Universal Declaration of Human Rights and in the relevant international instruments is of such gravity as to give the deprivation of liberty an arbitrary character; (d) Asylum seekers, immigrants or refugees are subjected to prolonged administrative custody without the possibility of administrative or judicial review of remedy; (e) The deprivation of liberty constitutes a violation of the international law for reasons of discrimination based on birth; national, ethnic or social origin; language; religion; economic condition; political or other opinion; gender; sexual orientation; disability or other status, and which aims towards or can result in ignoring the equality of human rights. (iii) If violation of a jus cogens were a primary test of whether a domestic court could adjudicate upon an issue which was otherwise non justiciable and upon which it would otherwise have to abstain from adjudicating, central areas of abstention identified by Lord Sumption would become potentially amenable to adjudication.
The prohibition on the use of armed force and on aggression are core examples of jus cogens.
Yet these are, rightly as would be my present view, treated by Lord Sumption himself as giving rise to core examples of issues upon which domestic courts should refrain from adjudicating: see eg Lord Sumptions paras 223 224, with references to Noor Khan; and see paras 93 95 above. (iv) If, as Lord Sumption indicates is his view (para 257), not every violation of a peremptory norm of international law is an exception to the foreign act of state doctrine, then it is not clear how one determines when or why ius cogens is an appropriate basis for any exception in any particular case. (v) Ultimately, in an area of judicial abstention, a case by case approach, along lines to which Lord Wilberforce referred, is in my opinion always likely to be necessary.
Nothing I have said should be taken to mean that the existence of relevant jus cogens principles may not be a stimulus to considering whether judicial abstention is really called for in a particular situation.
But the doctrine of abstention rests on underlying principles relating to the role of a domestic judge and the existence of alternative means of redress at an international level, which make it difficult to tie too closely to particular rules of international law, however basic and binding at that level.
X Miscellaneous points
It follows from my above conclusions that it is unnecessary to reach any final determination upon the respondents case that, in so far as what is alleged amounts to complicity in torture, the United Nations Convention against Torture (Treaty Series No 107 (1991)) obliges states to provide a universal civil remedy in respect of torture wherever committed in the world, at least when (allegedly) committed by or with the connivance of United Kingdom citizens such as the appellants, and that any otherwise applicable type of foreign act of state should be modified to enable this.
The argument turns on the scope of article 14 of the Convention.
As the Court of Appeal observed, Lord Bingham in Jones v Saudi Arabia, para 25, expressed the clear conclusion, after looking at the drafting history and other background material, that this article does not provide for universal civil jurisdiction, and that it requires a private right of action for damages only for acts of torture committed in territory under the jurisdiction of the forum state.
As at present advised, I see no basis for reaching a contrary conclusion, or indeed for treating the concept of jurisdiction in this context in an expanded sense, such as the European Court of Human Rights has been prepared to attach to it in the specific context of article 1 of the European Convention on Human Rights.
But it is unnecessary to express any concluded view on this, any more than it was for the Court of Appeal to do so.
Another point which can strictly remain undecided is whether article 6 of the Convention rights scheduled to the Human Rights Act 1998 is engaged by and renders impermissible in the present circumstances any reliance by the appellants on either state immunity or foreign act of state.
As regards state immunity, Mr Belhaj and Mrs Boudchar would have faced the initial difficulty of trying to persuade the Supreme Court in the light of the European Court of Human Rights judgments in Al Adsani v United Kingdom (2001) 34 EHRR 11 and Jones v United Kingdom (2014) 59 EHRR 1 to overrule Holland v Lampen Wolfe [2000] 1 WLR 1573, in which a majority of the House of Lords held that article 6 is not even engaged by a plea of state immunity: see also Jones v Saudi Arabia at paras 14 and 64 per Lord Bingham and Lord Hoffmann.
As regards foreign act of state, the question would have been whether for similar reasons article 6 was or was not engaged.
Foreign act of state, on the other hand, operates, even under the case law of the European Court of Human Rights, as a substantive bar to liability or adjudication: see Roche v United Kingdom (2005) 42 EHRR 30; Markovic v Italy (2006) 44 EHRR 52).
On this basis, foreign act of state, even if it had been otherwise applicable, would not engage article 6.
In either case, if article 6 was engaged, the question would then have arisen whether it rendered impermissible any reliance on either state immunity or foreign act of state.
But, in view of what I have already decided, it is unnecessary to go further into this.
XI Overall Conclusion
As indicated in para 11(vi) above, it follows from the reasoning and conclusions on the issues of state immunity and foreign act of state set out above, that the appeals in both Belhaj and Rahmatullah should in principle be dismissed although by reasoning differing in some significant respects from that of both courts below thus enabling both sets of claims to be further pursued.
The Supreme Court will however invite written submissions as to the precise form of order and of any declarations that may be appropriate as well as on costs within 28 days of the handing down of this judgment.
LORD NEUBERGER: (with whom Lord Wilson agrees)
Introductory
These two appeals involve allegations that the defendants, in their capacity as officials or emanations of the executive arm of the government of the United Kingdom, facilitated the claimants unlawful detention, and ill treatment (and, in the cases of Mr Belhaj and Mrs Boudchar, their kidnapping and rendition), and should pay the claimants compensation accordingly.
Mr Belhaj and Mrs Boudchar allege that the defendants assisted United States and Libyan officials in their unlawful kidnapping and detention, their unlawful rendition (accompanied by ill treatment), and their subsequent incarceration and torture in Libya.
Mr Rahmatullah alleges that, following his capture by UK troops in Iraq (and his unlawful detention and ill treatment), he was handed over to US officials pursuant to a memorandum of understanding (MoU) between the UK and US Governments, and that US officials then unlawfully detained him for ten years and ill treated and tortured him, and that the defendants facilitated that detention, ill treatment and torture.
As the two claims are against UK government officials and entities, and not against any foreign government officials or entities, there is no question of any relief being sought other than against domestic defendants.
Nonetheless, various points of principle have been raised by those defendants as to why the claims cannot or should not be entertained by the courts of England and Wales.
Those points of principle must be determined on the assumption that the facts as pleaded by the claimants are true.
The points to be determined at this stage are whether the defendants can rely on (a) the doctrine of state immunity or (b) the doctrine of foreign act of state, as defences to the claims.
So far as the doctrine of state immunity is concerned, I agree that it cannot assist the defendants for the reasons given by Lord Mance in paras 12 31 above and by Lord Sumption in paras 181 197 below.
There is nothing that I can usefully add to their impressive analyses of this issue.
The doctrine of foreign act of state (the Doctrine) raises more troubling issues.
The nature of the Doctrine
In summary terms, the Doctrine amounts to this, that the courts of the United Kingdom will not readily adjudicate upon the lawfulness or validity of sovereign acts of foreign states, and it applies to claims which, while not made against the foreign state concerned, involve an allegation that a foreign state has acted unlawfully.
In so far as it is relied on in these proceedings, the Doctrine is purely one of domestic common law, and it has all the advantages and disadvantages of a principle that has been developed on a case by case basis by judges over the centuries.
Thus, while it is pragmatic and adaptable to changing norms (as Lord Wilberforce pointed out in Blathwayt v Baron Cawley [1976] AC 397, 426), it is a principle whose precise scope is not always easy to identify.
Another problem of relying on what was said in most of the earlier cases which have been cited to us in relation to the Doctrine is that the legal basis for a judicial decision that a claim could or would not be resolved by a court was not expanded on in any detail, and was not characterised by an expression such as act of state at least as a term of article Many of the judgments do not distinguish between what are now treated as three separate doctrines, namely Crown act of state, foreign act of state, and state immunity.
The rules identified in the cases
It appears to me that the domestic cases, to which we have been referred, suggest that there may be four possible rules which have been treated as aspects of the Doctrine, although there is a strong argument for saying that the first rule is not part of the Doctrine at all, or at least is a free standing aspect of the Doctrine effectively franked by international law.
The first rule is that the courts of this country will recognise, and will not question, the effect of a foreign states legislation or other laws in relation to any acts which take place or take effect within the territory of that state.
The second rule is that the courts of this country will recognise, and will not question, the effect of an act of a foreign states executive in relation to any acts which take place or take effect within the territory of that state.
The third rule has more than one component, but each component involves issues which are inappropriate for the courts of the United Kingdom to resolve because they involve a challenge to the lawfulness of the act of a foreign state which is of such a nature that a municipal judge cannot or ought not rule on it.
Thus, the courts of this country will not interpret or question dealings between sovereign states; [o]bvious examples are making war and peace, making treaties with foreign sovereigns, and annexations and cessions of territory per Lord Pearson in Nissan v Attorney General [1970] AC 179, 237.
Nissan was a case concerned with Crown act of state, which is, of course, a different doctrine and is considered in Rahmatullah v Ministry of Defence 2017 UKSC 1, but the remark is none the less equally apposite to the foreign act of state doctrine.
Similarly, the courts of this country will not, as a matter of judicial policy, determine the legality of acts of a foreign government in the conduct of foreign affairs.
It is also part of this third rule that international treaties and conventions, which have not become incorporated into domestic law by the legislature, cannot be the source of domestic rights or duties and will not be interpreted by our courts.
This third rule is justified on the ground that domestic courts should not normally determine issues which are only really appropriate for diplomatic or similar channels (see Shergill v Khaira [2015] AC 359, paras 40 and 42).
A possible fourth rule was described by Rix LJ in a judgment on behalf of the Court of Appeal in Yukos Capital SARL v OJSC Rosneft Oil Co (No 2) [2014] QB 458, para 65, as being that the courts will not investigate acts of a foreign state where such an investigation would embarrass the government of our own country: but that this doctrine only arises as a result of a communication from our own Foreign Office.
The cases where the rules have been applied
The first rule appears to me to be well established and supported by a number of cases, at least in relation to property.
It was applied in Duke of Brunswick v King of Hanover (1848) 2 HLC 1, where Lord Cottenham LC rejected a challenge to the validity of a Hanoverian bill deposing and replacing the Duke of Brunswick, on the ground that a foreign sovereign cannot be made responsible here for an act done in his sovereign character in his own country.
It was also relied on in Carr v Fracis Times & Co [1902] AC 176, where seizure of ammunition within Muscat territorial waters was effected by a British officer pursuant to a proclamation issued by the Sultan of Muscat, and the validity of the proclamation could not be challenged as, per Lord Halsbury LC at p 179, the Sultans authority there [sc Muscat] is supreme, and what he says is law for the purpose of governing all acts which take place within his territory.
Another example of the first rule is Aksionairnoye Obschestvo AM Luther v James Sagor & Co [1921] 3 KB 532, where at p 549 Warrington LJ said that the English courts could not ignore and override legislative and executive acts of the Government of Russia and its agents affecting the title to property in that country (and see Bankes LJ to the same effect at p 545).
The first rule was also applied in Princess Paley Olga v Weisz [1929] 1 KB 718 see Scrutton LJs first two reasons at pp 722 723, reflected also in the judgments of Sankey and Russell LJJ at pp 730 732 and 732 736 respectively).
The first rule was also invoked in Buttes Gas and Oil Co v Hammer (Nos 2 and 3) [1982] AC 888, 937, where Lord Wilberforce said that an inquiry into the motives of the then ruler of Sharjah in making [a] decree was non justiciable, because the decree applied within the territory of Sharjah.
The second rule also has significant judicial support, but again only in relation to property.
Thus, it appears to have been applied in Blad v Bamfield (1673) 3 Swans 604, in the light of Lord Nottinghams point that the validity of the Kings letters patent in Denmark was non justiciable in English courts (emphasis added).
Another example is Dobree v Napier (1836) 2 Bing NC 781, where Tindal CJ stated that no one can dispute the right of the Queen of Portugal to appoint in her own dominions the defendant as her officer to seize a vessel which is afterwards condemned as a prize (emphasis added).
The second rule was also relied on in Luther v Sagor (in the passages in the judgments of Warrington and Bankes LJJ cited above), and in Princess Paley Olga (see Scrutton LJs third reason at pp 722 724, reflected in the judgments of Sankey and Russell LJJ at pp 726 730 and 736 respectively).
The third rule has been applied in a number of cases, again in relation to property.
Examples of the third rule involving transactions between states include Blad in the light of Lord Nottinghams view that a trial about the exposition and meaning of the articles of peace between two states would be monstrous and absurd.
It also was applied in Nabob of the Carnatic v East India Co (1793) 2 Ves Jun 56, which was expressly treated as a case of mutual treaty between persons acting as states independent of each other so that it consequently not a subject of private, municipal jurisdiction.
The third rule is also apparent from Lord Kingsdowns dictum in Secretary of State in Council of India v Kamachee Boye Sahaba (1859) 13 Moo PCC 22 (a decision based on Crown act of state) that [t]he transactions of independent States between each other are governed by other laws than those which Municipal Courts administer.
That point was repeated by Lord Halsbury LC in Cook v Sprigg [1899] AC 572.
Most of the issues held to be such that the court would not adjudicate upon them in Buttes Gas by Lord Wilberforce at pp 937 938 seem to me to be examples of the third rule eg what was the boundary of the continental shelf between (i) Sharjah and UAQ, (ii) Abu Musa and UAQ, (iii) Iran and both Emirates.
As the Court of Appeal said in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883, para 287, at the heart of the dispute in that case was a boundary dispute between states which made it impossible to say what the territorial limitations of those states were.
And, as it was put in this Court in Shergill, para 40, the dispute arose out of the way in which the four states concerned had settled the issue of international law by a mixture of diplomacy, political pressure and force.
A more recent example of the application of the third rule, and this time in relation to injury to the person, is in R (Noor Khan) v Secretary of State for Foreign Affairs [2014] 1 WLR 872, where the Court of Appeal refused the applicant permission to seek judicial review of the provision of information by the UK intelligence services to the US government to assist it in targeting drone strikes in Pakistan.
The argument was that the provision of information for this purpose was unlawful, as it involved requiring GCHQ officers to encourage and/or assist the commission of murder (para 7).
At para 29 Lord Dyson MR, giving the judgment of the Court of Appeal, said that the court will also usually not sit in judgment on the acts of a sovereign state as a matter of discretion.
In expressing that view, he was following some remarks of Simon Brown LJ in R (Campaign for Nuclear Disarmament) v Prime Minister of the United Kingdom (2002) 126 ILR 727, para 47(ii).
As to the supposed fourth rule, it derives support from the United States, whose jurisprudence was said by Lord Wilberforce to be helpful in Buttes Gas at pp 936 937.
After initially suggesting in Oetjen v Central Leather Co 246 US 297, 303 304 (1918) that the Doctrine was based on the highest considerations of international comity and expediency, the US Supreme Court preferred to explain it by reference to the strong sense of the Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder the conduct of foreign affairs per Harlan J in Banco Nacional de Cuba v Sabbatino 376 US 398, 423 (1964), cited with apparent approval by Scalia J in WS Kirkpatrick & Co Inc v Environmental Tectonics Corpn, International 493 US 400, 406 (1990).
There is little authority to support the notion that the fourth rule is part of the law of this country, save that, as discussed in the Court of Appeals judgment in Kuwait Airways, paras 340 350, there are certain areas (such as the recognition of foreign governments, and the extent of a foreign governments territory) in which a certificate from the Foreign Office is regarded by the courts of this country as conclusive see Luther v Sagor.
But that is rather a different point.
However, there is a trace of the fourth rule in the Court of Appeals reasoning that the application in Noor Khan was not to be entertained because, if it succeeded, it would be understood as a finding that (i) the US official who operated the drone was guilty of murder and (ii) the US policy of using drone bombs in Pakistan and other countries was unlawful, which would be seen as a serious condemnation of the US by a court of this country (para 37).
If the fourth rule exists, which I doubt (see para 150 below), it would require exceptional circumstances before it could be invoked.
Decisions of foreign courts
While other jurisdictions may have developed analogous principles to some or all of the four rules, it seems to me that courts in this jurisdiction should exercise great caution before relying on, let alone adopting, the reasoning of foreign courts in connection with the Doctrine.
Decisions of courts in states with a civil law system and with a coherent written constitution seem to me to be as likely to mislead as to help when it comes to analysing the boundaries of a common law rule developed on a case by case basis over the years.
However, I accept that any practical explanation by a court for or against judicial abstention is worth considering.
In this case, for example, Lord Mance and Lord Sumption have referred to decisions of courts in France, the Netherlands and Germany.
In each of those three countries, the courts appear to have developed some legal rules in this area which, while differing from each other (not much in the cases of France and the Netherlands), are, unsurprisingly, comprehensible and principled.
Deciding which of those rules would be most appropriate for the courts of this country seems an unnecessarily cumbersome way, and indeed an unnecessarily constraining way, of resolving the question we have to decide.
While they were cited with approval in this jurisdiction (most notably by Bankes, Warrington and Scrutton LJJ in Luther v Sagor at pp 541 542, 550 551 and 557, by Scrutton and Sankey LJJ in Princess Paley Olga at pp 724 725 and 728 729 and by Lord Wilberforce in Buttes Gas at pp 933 937), decisions of courts of the United States, which have purported to adopt the Doctrine as initially developed in this jurisdiction, appear to me to be of very limited assistance.
This is for three reasons.
First, the constitutional arrangements and conventions in the USA are very different from those in the UK.
Secondly, much of the reasoning in the cases where act of state was first referred to as a principle (Hatch v Baez (1876) 7 Hun 596 and Underhill v Hernandez 168 US 250 (1897)) was really directed to the different doctrine of state immunity.
And, thirdly, the justification for the doctrine of act of state has been recast by the US Supreme Court as summarised in para 131 above, which ties in very well with the first reason.
The validity of the first rule in relation to property and property rights
There is no doubt but the first rule exists and is good law in relation to property (whether immovable, movable, or intellectual) situated within the territory of that state concerned.
Sovereignty, which founds the basis of the Doctrine, denotes the legal competence which a state enjoys in respect of its territory (Brownlies Principles of Public International Law, 8th ed, (2012), p 211), and there is no more fundamental competence than the power to make laws.
There is no doubt, however, that the first rule only applies to acts which take effect within the territory of the state concerned see eg Peer International Corpn v Termidor Music Publishers Ltd [2004] Ch 212.
The validity of the second rule in relation to property and property rights
I find aspects of the second rule in relation to property and property rights more problematical.
In so far as the executive act of a state confiscating or transferring property, or controlling or confiscating property rights, within its territory is lawful, or (which may amount to the same thing) not unlawful, according to the law of that territory, I accept that the rule is valid and well established.
However, in so far as the executive act is unlawful according to the law of the territory concerned, I am not convinced, at least in terms of principle, why it should not be treated as unlawful by a court in the United Kingdom.
Indeed, if it were not so treated, there would appear something of a conflict with the first rule.
None the less, I accept that there are dicta which can be fairly said to support the existence of the rule even where the act is unlawful by the laws of the state concerned (see para 127 above).
However, I am not persuaded that there is any judicial decision in this jurisdiction whose ratio is based on the proposition that the second rule applies to a case where the states executive act was unlawful by the laws of the state concerned.
Thus, the Duke of Brunswick, Carr v Fracis, Luther v Sagor and Princess Paley Olga cases all involved acts which were apparently lawful according to the laws of the state concerned (being pursuant to a bill or decree), and there is no suggestion of unlawfulness in relation to the acts in Blad or Dobree.
Similarly, there is nothing to suggest that, when Lord Wilberforce suggested in Buttes Gas at p 931 that an act of state extended to a foreign municipal law or executive act, he intended to refer to an executive act which was unlawful by the laws of the state concerned, let alone, where the act took place in the territory of another state, by the laws of that state.
At best, therefore, there are simply some obiter dicta which support the notion that the second rule can apply to executive acts which are unlawful by the laws of the state concerned.
There is support for the notion that the second rule does not apply to executive acts which are not lawful by the laws of the state concerned in Dicey, Morris and Collins on The Conflict of Laws, (15th ed (2012)) which at p 1380 sets out Rule 137 in these terms: A governmental act affecting any private proprietary right in any movable or immovable thing will be recognised as valid and effective in England if the act was valid by the law of the country where the thing was situated (lex situs) at the moment when the act takes effect, and not otherwise.
Further, it does not appear to me that the common law regards it as inappropriate for an English court to decide whether a foreign states executive action infringed the law of that state, at least where that is not the purpose of the proceedings.
Support for that view is to be found in the judgment of Diplock LJ in Buck v Attorney General [1965] Ch 745, 770, and of Arden and Elias LJJ in Al Jedda v Secretary of State for Defence [2011] QB 773; [2010] EWCA Civ 758 at paras 74 and 189 respectively.
However, I am unconvinced that cases such as R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42 assist on this point.
In that case, the assumed facts (which subsequently turned out to be inaccurate: see 1995 SLT 510) were that the applicant had been kidnapped and brought to this country from South Africa in a joint exercise involving the police of the UK and of South Africa.
Accordingly, even if the second rule would otherwise have applied, the courts of this country had jurisdiction to rule on the apparent unlawfulness of the applicants treatment because of the public policy exception (considered in paras [153ff] below).
Having said that, there is pragmatic attraction in the argument that an executive act within the state, even if unlawful by the laws of that state, should be treated as effective in the interest of certainty and clarity, at least in so far as it relates to property and property rights.
In relation to immovable property within the jurisdiction of the state concerned, there appear to be good practical reasons for a foreign court recognising what may amount to a de facto, albeit unlawful, transfer of, or other exercise of power over, such property.
So far as movable property or other property rights are concerned, if by an executive, but unlawful act, the state confiscates such property within its territory, the same point applies so long as the property remains within the territory of that state.
And there is practical sense, at any rate at first sight, if when the property is transferred to another territory following a sale or other transfer by the state, the transferee is treated as the lawful owner by the law of the other territory.
However, there are potential difficulties: if the original confiscation was unlawful under the laws of the originating state, and the courts of that state were so to hold, or even should so hold, it is by no means obvious to me that it would be, or have been, appropriate for the courts of the subsequent state to treat, or have treated, the confiscation as valid.
The question whether the second rule exists in relation to executive acts which interfere with property or property rights within the jurisdiction of the state concerned, and which are unlawful by the laws of that state, is not a point which needs to be decided on the present appeal.
Property rights do not come into this appeal, and no doubt for that very reason, the point was not debated very fully before us.
Accordingly, it seems to me that it is right to keep the point open.
The validity of the third rule in relation to property and property rights
There is no doubt as to the existence of the third rule in relation to property and property rights.
Where the Doctrine applies, it serves to defeat what would otherwise be a perfectly valid private law claim, and, where it does not apply, the court is not required to make any finding which is binding on a foreign state.
Accordingly, it seems to me that there is force in the argument that, bearing in mind the importance which both the common law and the Human Rights Convention attach to the right of access to the courts, judges should not be enthusiastic in declining to determine a claim under the third rule.
On the other hand, even following the growth of judicial review and the enactment of the Human Rights Act 1998, judges should be wary of accepting an invitation to determine an issue which is, on analysis, not appropriate for judicial assessment.
I believe that this is reflected in observations of Lord Pearson in Nissan.
Immediately after the passage quoted in para 123 above, he said Apart from these obvious examples, an act of state must be something exceptional.
Any ordinary governmental act is cognisable by an ordinary court of law (municipal not international): if a subject alleges that the governmental act was wrongful and claims damages or other relief in respect of it, his claim will be entertained and heard and determined by the court.
A little later, he explained that where the Doctrine applied the court does not come to any decision as to the rightness or wrongness of the act complained of: the decision is that because it was an act of state the court has no jurisdiction to entertain a claim in respect of it, and added that [t]his is a very unusual situation and strong evidence is required to prove that it exists in a particular case.
In Yukos v Rosneft, para 66, Rix LJ suggested that Lord Wilberforces principle of non justiciability has to a large extent subsumed [the act of state Doctrine] as the paradigm restatement of that principle.
If the foreign act of state principle is treated as including what I have called the first and second rules, then I do not agree.
The third rule is based on judicial self restraint and is, at least in part, concerned with arrangements between states and is not limited to acts within the territory of the state in question, whereas the first and second rules are of a more hard edged nature and are almost always concerned with acts of a single state, normally within its own territory.
Having said that, I accept that it will not always be easy to decide whether a particular claim is potentially subject to the second or third rule.
The third rule may be engaged by unilateral sovereign acts (eg annexation of another state) but, in practice, it almost always only will apply to actions involving more than one state (as indeed does annexation).
However, the fact that more than one sovereign state is involved in an action does not by any means justify the view that the third rule, rather than the second, is potentially engaged.
The fact that the executives of two different states are involved in a particular action does not, in my view at any rate, automatically mean that the third rule is engaged.
In my view, the third rule will normally involve some sort of comparatively formal, relatively high level arrangement, but, bearing in mind the nature of the third rule, it would be unwise to be too prescriptive about its ambit.
The validity of the fourth rule
As already mentioned, there will be issues on which the position adopted by the executive, almost always the Foreign Office, will be conclusive so far as the courts are concerned for instance, the recognition of a foreign state, also the territorial limits of a foreign state and whether a state of war exists.
However, apart from those types of cases, the fourth rule has no clear basis in any judicial decisions in this jurisdiction, although, at least on one reading, the Court of Appeal in R (Khan) v Secretary of State for Foreign and Commonwealth Affairs [2014] 1 WLR 872 seem to have accepted that it existed.
If a member of the executive was to say formally to a court that the judicial determination of an issue raised in certain legal proceedings could embarrass the Governments relations with another state, I do not consider that the court could be bound to refuse to determine that issue.
That would involve the executive dictating to the judiciary, which would be quite unacceptable at least in the absence of clear legislative sanction.
However, there is a more powerful argument for saying that such a statement should be a factor which the court should be entitled to take into account when deciding whether to refuse to determine an issue.
Some indirect support for such an argument is to be found in In re Westinghouse Electric Corpn Uranium Contract Litigation MDL Docket No 235 [1978] AC 547, 616 617 and 639 640, and in Adams v Adams [1971] P 188, 198.
Again, it is a point which does not have to be decided in this case, and was not argued.
In fairness to the defendants, there was some evidence to support such an argument, but it was answered in some detail, and in any event it was, rightly in my view, not pressed on their behalf in relation to the application of the Doctrine in these two cases.
Characterisation of the Doctrine:
Having discussed the four possible rules which may be said to fall under the umbrella of the Doctrine, it is appropriate briefly to identify the characterisation of the various rules.
I agree with Lord Mance that the first rule is a general principle of private international law.
The rule was characterised by Upjohn J in In re Helbert Wagg & Co Ltds Claim [1956] Ch 323, 344 345 as: the elementary proposition that it is part of the law of England, and of most nations, that in general every civilized state must be recognized as having power to legislate in respect of movables situate within that state and in respect of contracts governed by the law of that state, and that such legislation must be recognized by other states as valid and effectual to alter title to such movables. (Emphasis added) To the extent that it exists, the second rule also seems to me to be a general principle, and, at least to some extent, it may be close to being a general principle of private international law.
The third rule is based on judicial self restraint, in that it applies to issues which judges decide that they should abstain from resolving, as discussed by Lord Mance in paras 40 45 and by Lord Sumption in paras 234 239 and 244.
It is purely based on common law, and therefore has no international law basis, although, as discussed below, its application (unsurprisingly) can be heavily influenced by international law.
I turn now to discuss the limitations of, and exceptions to, the Doctrine.
The cases establish that there are limitations and exceptions, each of which apply to some or all of these three or four rules.
Many of those limitations and exceptions were fully examined by the Court of Appeal in Yukos v Rosneft, paras 68 to 115.
But only three are relevant for present purposes.
Limits and exceptions to the Doctrine: Public Policy
It is well established that the first rule, namely that the effect of a foreign states legislation within the territory of that state will not be questioned, is subject to an exception that such legislation will not be recognised if it is inconsistent with what are currently regarded as fundamental principles of public policy see Oppenheimer v Cattermole [1976] AC 249, 277 278, per Lord Cross of Chelsea.
This exception also applies where the legislation in question is a serious violation of international law see Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883, para 29, per Lord Nicholls of Birkenhead.
The circumstances in which this exception to the Doctrine should apply appear to me to depend ultimately on domestic law considerations, although generally accepted norms of international law are plainly capable of playing a decisive role.
In his opinion in Kuwait Airways, paras 28 and 29, Lord Nicholls emphasised the need to recognise and adhere to standards of conduct set by international law and held that recognition of the fundamental breach of international law manifested by the Iraqi decree in that case would be manifestly contrary to the public policy of English law, like the Nazi German confiscatory decree in Oppenheimer.
However, there is nothing in what Lord Nicholls said which suggests that it is only breaches of international law norms which would justify disapplication of the Doctrine.
On the contrary: his reference to the public policy of English law supports the notion that the issue is ultimately to be judged by domestic rule of law considerations.
The point is also apparent from the opinion of Lord Hope.
At para 139, he said that the public policy exception is not limited to cases where there is a grave infringement of human rights, but is founded upon the public policy of this country plainly a domestic standard.
The exception to the Doctrine based on public policy has only been considered by the courts in relation to the first of the four rules set out above.
However, I cannot see grounds for saying that it does not apply similarly to the second rule, executive acts within the territory of the state concerned.
As to the third rule, dealings between states, (as well as the fourth rule if it exists) it appears to me that in many types of case this exception may be applicable, but in some it may not.
In the course of its judgment in R (Abbasi) v Secretary of State for Foreign & Commonwealth Affairs and Secretary of State for the Home Department [2003] UKHRR 76, the Court of Appeal effectively suggested that the exception could be applied to the third rule.
In paras 32 and 33, they said that the English court will not adjudicate upon the legality of a foreign States transactions in the sphere of international relations in the exercise of sovereign authority, but that this was subject to exceptions, as Oppenheimer and Kuwait Airways demonstrated.
The Court was accordingly prepared to hold that the detention of a UK citizen in Guantanamo Bay subject to indefinite detention in territory over which the United States has exclusive control with no opportunity to challenge the legitimacy of his detention before any court or tribunal was unlawful, despite his detention being an act of state on the part of the US see paras 64, 66 and 107. (It is fair to add that, although expressed as if it involved transactions in the field of international relations, it is arguable that the issue before the Court of Appeal in Abbasi was not in fact concerned with the third rule, but the second).
Limits and exceptions to the Doctrine: Injury to the person
None of the English cases discussed so far (save Noor Khan [2014] 1 WLR 872) involved alleged wrongs or acts in relation to the person, as opposed to alleged wrongs or acts in relation to property.
As to that, it appears to me to be a very powerful argument for saying that the first rule must apply equally to injuries to the person as it applies to the taking of property.
The notion that English courts will respect a sovereign states right to legislate as it sees fit in relation to the taking of property within its territory (subject always to the exception of legislation which conflicts with public policy) appears to me to be based on the principle that the law in a given territory should generally be treated as being that laid down by the legislature of that territory.
In other words, it is either based on, or at least is close to, the choice of law, or proper law, principle which applies in private law conflict cases.
That seems to derive support from what Lord Wilberforce said in Buttes Gas at p 931, and indeed from the reasoning of Lord Bingham in R (Al Jedda) v Secretary of State for Defence (JUSTICE intervening) [2008] AC 332, paras 40 43, approving the reasoning and decision of the Court of Appeal at [2007] QB 621, paras 105 107.
Assuming that the second rule can apply to executive acts in relation to property which are unlawful by the laws of the state in which it occurred, I am unconvinced that it would apply in such a case in so far as the act resulted in injuries to the person.
In no English case has it been held, or even suggested, that an executive act, unlawful by the laws of the state in which it occurred, can be subject to the Doctrine in a case where the cause of action is personal injury or death.
As discussed in paras 143 144 above, there is a serious practical argument in favour of the second rule applying to unlawful executive acts in so far as they relate to interference with property and property rights, but that argument does not apply to personal harm whether physical or mental.
Bearing in mind that (i) the Doctrine is not concerned with claims against a foreign state, (ii) there is no good practical reason for the second rule to apply to cases of unlawfully causing harm to the person, (iii) there are no judicial decisions or even judicial observations where it has been held so to apply, and (iv) there will be cases of personal harm where the third rule can be invoked, I consider that we should hold that the second rule does not apply to cases where a foreign state executive has caused physical or mental harm to a claimant through an act in the territory of that state which was unlawful under the laws of that state.
Further, such recent authority as there is in this jurisdiction tends to support a limited interpretation of the second rule.
In Lucasfilm Ltd v Ainsworth [2012] 1 AC 208, para 86, Lord Walker and Lord Collins said that in England the foreign act of state doctrine has not been applied to any acts other than foreign legislation or governmental acts of officials such as requisition, and so refused to apply it to the grant of a patent.
The notion that the second rule only applies to executive acts in relation to property within the jurisdiction of the state concerned is also supported by the editors of Dicey, Morris and Collins in the passage cited in para 139 above.
In a case where neither the first nor the third rule applies, it seems to me that there is force in the point that, as a matter of elementary justice, if a member of the executive of a foreign state injures a claimant physically in the territory of that state, and the injury was not authorised by the law of that state, a third party who is properly sued in this country on the ground that he was in some way also responsible for the injury should not normally be allowed to rely on the Doctrine as a defence. (I say normally, because, as already indicated, there will be occasions where the third rule may apply).
In other words, the onus seems to me to be very much on those who wish to justify the extension of the second rule to unlawful acts which cause physical or mental damage, and I can see no good reason for doing so.
Limits and exceptions to the Doctrine: Territoriality
So far as the cases are concerned, the first, second and third rules have only been applied in relation to acts within the territory of the state concerned.
I find it hard to see how it could be argued that the first rule, which is concerned with legislation, could apply to acts which take effect in a location outside the territory of the state concerned.
The same applies to the second rule, which is concerned with executive acts.
The older cases indicate that both rules are based on sovereign power, and, as mentioned in para 136 above, the nature of sovereign power is that it is limited to territory over which the power exists.
Further, a location outside the relevant territory would be in the territory of another state, and normal principles, including the first rule, would indicate that the laws of that other state will normally apply.
It is therefore hard to see how the law of the state which committed the act could apply so far as the first rule is concerned.
As to the second rule, in the absence of any judicial decision to the contrary, I cannot see any good reason why, if the act in question was unlawful pursuant to the laws of the location in which it occurred, the act of state doctrine should assist a defendant simply because the act was carried out by the executive of another state.
The position with regard to territoriality seems to me to be less clear so far as the third rule is concerned.
As Rix LJ observed in Yukos at para 49, [i]t is not entirely clear from what Lord Wilberforce actually said in Buttes Gas whether what I have called the third rule is confined to what transpires territorially within a foreign sovereign state.
However, I also agree with Rix LJ that, at least in some circumstances it could do so, as it is inherent in the nature of the rule that it may apply to actions outside the territory of the state concerned.
The application of these principles to these cases
Mr Belhaj and Mrs Boudchar contend that the defendants assisted US officials to kidnap, detain and torture them in Malaysia and Thailand, and to take them to Libya, in order for them to be detained and tortured there by Libyan officials.
It is not suggested (at least at this stage of the proceedings) that the alleged detention, kidnapping and torture in Malaysia or Thailand or the alleged rendition to Libya were lawful in Malay or Thai law, or that the alleged rendition was lawful in US law, or that the subsequent detention and torture in Libya were lawful in Libyan law.
They were executive actions by members of the executive of the governments of the US and Libya, and it appears, to some extent, members of the executive of the governments of Malaysia and of Thailand.
In my view, at least on the evidence available so far, and in agreement with Lord Mance and Lord Sumption, the acts complained of by Mr Belhaj and Mrs Boudchar do not fall within the third rule.
There is no suggestion that there was some sort of formal or high level agreement or treaty between any of the states involved which governed the cooperation between the executives of the various countries concerned.
As already mentioned, the mere fact that officials of more than one country cooperate to carry out an operation does not mean that the third rule can be invoked if that operation is said to give rise to a claim in domestic law.
It would be positively inimical to the rule of law if it were otherwise.
Having said that, even if the third rule otherwise applied, I would still hold that this was a case where, assuming that the claimants were detained, kidnapped and tortured as they allege, the public policy exception would apply.
In that connection, Lord Sumptions impressive analysis of the relevant international law is important in the present context because I consider that any treatment which amounts to a breach of jus cogens or peremptory norms would almost always fall within the public policy exception.
However, as explained above, because the Doctrine is domestic in nature, and in agreement with Lord Mance and Lord Sumption, I do not consider that it is necessary for a claimant to establish that the treatment of which he complains crosses the international law hurdle before he can defeat a contention that the third rule applies.
Given that the third rule does not apply, I consider that it is clear that the Doctrine cannot be relied on as against Mr Belhaj and Mrs Boudchar, and the first rule plainly does not apply.
As to the second rule, I consider that it cannot be relied on because (i) the alleged wrong doing involves harm to individuals and not property, and (ii) the public policy exception would anyway apply, as it would in relation to the third rule.
The position of Mr Rahmatullah is arguably a little more nuanced.
Although I accept that there is an argument to the contrary, at the moment it does not seem to me that his treatment by the US authorities should be treated as having taken place within the US jurisdiction, because it was within the Afghan jurisdiction.
Quite apart from this, Mr Rahmatullahs allegations involve physical and mental harm.
Accordingly, for each of those two reasons, the second rule is not engaged.
However, because the defendants were apparently acting pursuant to the MoU between the UK and US governments, there is an argument that, unlike in the case of Mr Belhaj and Mrs Boudchar, the third rule is engaged.
I was initially inclined to think that that argument may be a good one.
However, I have come to the conclusion that the third rule does not apply in relation to Mr Rahmatullah.
As Lord Mance says, the existence and terms of the MoU do not bear on the allegations which are of complicity in unlawful detention and ill treatment.
In any event, even if that is wrong and the third rule was engaged, I consider that Mr Rahmatullah could rely on the public policy exception, essentially for the reasons given by Lord Sumption.
To be held without charge or trial for ten years, particularly when coupled with significant mistreatment (even if it did not amount to torture) is sufficient to take Mr Rahmatullahs case into the public policy exception, bearing in mind the severity and flagrancy of the alleged interference with his rights, and the length of time for which it allegedly lasted.
Conclusion
Accordingly, I would dismiss the defendants appeals in so far as they contend that the courts below held that their defences of state immunity and foreign act of state in each of the two actions must be rejected.
LADY HALE AND LORD CLARKE:
We agree with the reasoning and conclusion in the judgment of Lord Neuberger.
The defences of state immunity and foreign act of state do not apply at all in the two cases before us.
This is also the conclusion reached by Lord Mance for essentially the same reasons.
It is not necessary for us to express a view on other issues which do not strictly arise for decision in these cases.
LORD SUMPTION: (with whom Lord Hughes agrees)
Introduction
These appeals raise questions of some constitutional importance concerning the ambit of the act of state rule.
They arise from allegations that British officials were complicit in acts of foreign states constituting civil wrongs and in some cases crimes and breaches of international law.
Yunus Rahmatullah is a national of Pakistan.
He was detained in Baghdad in February 2004 by British forces, on suspicion of being a member of Lashkar e Taiba, a terrorist organisation based in Pakistan with links to Al Qaeda.
At the time of his detention, the United Kingdom and the United States were occupying powers in Iraq.
British forces were part of a multinational force responsible for the security and stabilisation of the country under Resolution 1511/2002 of the Security Council of the United Nations.
They were deployed primarily in a designated area of south eastern Iraq, but Mr Rahmatullah was detained outside that area in a sector under the control of the United States.
Accordingly, on the day after his detention he was transferred to United States custody under the terms of a Memorandum of Understanding concerning the custody of detainees, which had been agreed between the two occupying powers.
The United States removed him shortly afterwards to Bagram airbase in Afghanistan, where he was detained for more than ten years without charge or trial, before he was finally released in May 2014.
Mr Rahmatullah alleges that while in the custody of British and American forces he was subjected to torture and other serious mistreatment.
The present appeal is not concerned with any mistreatment that may have occurred while Mr Rahmatullah was in British custody.
It is concerned only with his case that the United Kingdom is responsible for the acts of United States personnel during the period when he was in their custody.
He claims damages from the British government on the ground (i) that his treatment by US personnel was part of a common design or concerted course of action between Britain and the United States, (ii) that United States personnel were in the relevant respects agents of the United Kingdom, and (iii) that the United Kingdom knew or should have known that if delivered into the custody of United States forces he was liable to be unlawfully rendered to other countries, and unlawfully detained, tortured and otherwise mistreated.
We are told that Rahmatullah is representative of many hundreds of claims in the High Court in which the same legal issues arise.
Mr Belhaj is a Libyan national.
In 2004 he was the leader of the Libyan Islamic Fighting Group, an organisation opposed to the government of Colonel Gaddafi, which is alleged to have been a terrorist organisation at the relevant time.
He led an attempted uprising against the Gaddafi regime in 1998, and fled the country when it was suppressed.
Mrs Boudchar, his wife, is a Moroccan national.
In February 2004 Mr Belhaj and Mrs Boudchar were living in China but wished to come to the United Kingdom to claim asylum.
They allege that Chinese officials detained them at Beijing airport as they were about to board a flight to London, and later put them on a flight to Kuala Lumpur in Malaysia.
There, they were held for two weeks by the Malaysian authorities.
They were then allowed to leave for the United Kingdom but were required to go via Bangkok.
On 7 March 2004 they were put on a commercial flight to London via Bangkok.
At Bangkok they were taken off the aircraft by Thai officials and delivered to agents of the United States.
At some time in the next two days they were flown to Libya in a US registered aircraft said to have been owned by a CIA front company.
In Libya, they were taken to Tajoura prison.
Mrs Boudchar was released in June 2004 after being held there for rather more than three months.
Mr Belhaj was held successively at Tajoura and Abu Salim prisons for six years before being released in March 2010.
It is alleged that they were tortured and subjected to other serious mistreatment by US officials in Bangkok and in the aircraft carrying them to Libya, and by Libyan officials in Libya.
The claimants at one stage relied upon mistreatment by the Chinese authorities, but they no longer do so.
The present proceedings are brought in support of a claim for damages against a number of departments and officials of the British government who are said to have been complicit in what happened to them.
The defendants include the intelligence services, the departments of state responsible for them, the then Foreign Secretary Mr Straw, and Sir Mark Allen, who is said to have been a senior official of the Secret Intelligence Service.
The case against them is that the SIS, having learned that Mr Belhaj and Mrs Boudchar were being detained in Malaysia, passed the information to the Libyan intelligence services and assisted the rendition flight with transit facilities at the British owned but American operated base at Diego Garcia in the Indian Ocean.
It is not alleged that British officials were directly involved in the rendition, torture or mistreatment of the claimants.
But it is said that they enabled it to happen, knowing of the risk that the defendants would be unlawfully detained, tortured and otherwise mistreated by the Americans and the Libyans.
It is also alleged that British officials took advantage of Mr Belhajs detention in Libya by interrogating him there at least twice.
The defendants, it is said, thereby incurred liability in tort.
Both claims were pleaded by reference to English law.
But it is now common ground that any liability in tort is governed by the law of the countries where they occurred, ie successively Malaysia, Thailand and Libya, and (in respect of what happened outside those countries on a US registered aircraft), the United States.
It is important to draw attention to the limited character of the issues presently before the Court.
The allegations of fact summarised in the two preceding paragraphs are taken from the pleadings.
They are no more than allegations.
None of them has been proved.
The present appeals are concerned with the question whether they would give rise to a cause of action if they were true.
That turns on three issues: (i) whether the claims against the British government and its officials indirectly implead Malaysia, Thailand, Libya and the United States, so as to be barred by state immunity; (ii) whether the tortious acts alleged are non justiciable or non actionable as acts of state of those countries; and (iii) if the claim is barred or non justiciable as a matter of domestic law, whether that is consistent with article 6 of the European Convention on Human Rights.
In Belhaj, Simon J held that there was no state immunity but that the claims were barred as being based on foreign acts of state.
He rejected the argument that this outcome was inconsistent with article 6 of the Convention.
The Court of Appeal affirmed the judgment on state immunity and accepted that the act of state doctrine was engaged.
But it allowed the appeal on the ground that the act of state doctrine was subject to (i) a limitation to acts of state occurring within the jurisdiction of the state in question, and (ii) an exception on the ground of public policy for grave violations of human rights.
In Rahmatullah, Leggatt J also rejected the argument based on state immunity.
He, however, took a more radical approach to the foreign act of state doctrine, holding that it was not engaged at all.
He then made a leap frog order with a view to enabling the case to be considered by this court together with Belhaj.
State Immunity
State immunity is a rule of customary international law which requires states to accord each other immunity from the jurisdiction of their domestic courts in respect of their sovereign acts (acts jure imperii).
In Jurisdictional Immunities of the State (Germany v Italy, Greece intervening) [2012] ICJ Rep 99, the International Court of Justice held that the rule derived from the principle of the sovereign equality of states, which was one of the fundamental principles of the international legal order (para 57).
In the United Kingdom, effect was given to the rule of international law by the common law for some three centuries before it became statutory with the enactment of the State Immunity Act 1978.
Section 1(1) of that Act provides that a state is immune from the jurisdiction of the courts except in cases specified by the Act.
For this purpose, a state includes the sovereign or other head of state in his public capacity, the government of that state and any department of that government: see section 14(1).
The same immunity is conferred on a separate entity, in respect of anything which it does in the exercise of sovereign authority, if the circumstances are such that a state would have been immune: section 14(2).
The statutory exceptions are for proceedings relating to private, as opposed to sovereign or public acts.
They relate broadly to commercial transactions, and other transactions in which a state engages otherwise than in the exercise of sovereign authority: sections 3 11.
All of these exceptions depend for their application on the nature or subject matter of the action.
To that extent it may be described as a subject matter immunity.
But the basic rule, subject to the exceptions, is that state immunity is a personal immunity from the exercise of jurisdiction, which depends upon the identity of the person sued.
As a matter of both international and domestic law, the categorisation of an act as sovereign depends on its character, not its purpose or underlying motive: see Playa Larga (Owners of Cargo lately laden on board) v I Congreso del Partido (Owners) [1983] AC 244, 262 267 (Lord Wilberforce), where the national and international authorities are reviewed.
Lord Wilberforce formulated the test as follows, at p 267: in considering under the restrictive theory whether state immunity should be granted or not, the court must consider the whole context in which the claim against the state is made, with a view to deciding 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.
By this standard there can be no real doubt that the acts alleged against the relevant foreign governments in these cases were sovereign acts, whether they were lawful or not.
If Malaysia, Thailand, Libya and the United States had been sued, they would have been immune.
However, they have not been sued.
Only the government and agents of the United Kingdom have been.
They accept that state immunity is not available to them, but none the less invoke it on the basis that the issues engage the interests of the other states.
Their argument is based on the very limited categories of cases in which state immunity may apply notwithstanding that the relevant foreign state is not itself a party.
Two such categories are well established in English law.
The first, which does not arise in these appeals, is the case of a civil claim against an employee or other agent of a state in respect of acts which are attributable in international law to that state.
In Jones v Ministry of the Interior of the Kingdom of Saudi Arabia (Secretary of State for Constitutional Affairs intervening) [2007] 1 AC 270, the House of Lords held that the agent was entitled to immunity on the same basis as his principal.
This is because so far as the agents of a state act in their public capacities, they are identified with the state in international law, so that references in the Act to a state must be construed to include any individual representative of the state acting in that capacity: para 69 (Lord Hoffmann), cf para 10 (Lord Bingham).
The second case comprises actions in which a state, without being a party, is said to be indirectly impleaded because some relevant interest of that state is directly engaged.
In England, the only cases in which a foreign state has been held to be indirectly impleaded in this way are those involving the assertion of some right over property of that state situated within the jurisdiction of the English courts.
The paradigm case of indirect impleader, and the earliest to be considered by the English courts, is an Admiralty action in rem against a state owned ship.
During the period when the United Kingdom applied the absolute doctrine of state immunity it was established that an action in rem against a state owned ship was barred by state immunity.
The principle, adapted to reflect the restricted doctrine of state immunity, is now embodied in section 10 of the State Immunity Act.
The reason is that an action in rem is in reality an action against the ships owner, although the owner is not named.
Thus the action may be brought only if at the time when the cause of action arose the owner would have been liable in personam; in current practice it may be brought against a ship in respect of a liability arising in connection with another ship under the same ownership.
A defendant who appears to the writ in rem thereby becomes liable in personam even if he would not otherwise have been.
In The Parlement Belge (1880) 5 PD 197, Brett LJ, delivering the judgment of the court, said at pp 218 219: In a claim made in respect of a collision the property is not treated as the delinquent per se.
Though the ship has been in collision and has caused injury by reason of the negligence or want of skill of those in charge of her, yet she cannot be made the means of compensation if those in charge of her were not the servants of her then owner, as if she was in charge of a compulsory pilot.
This is conclusive to shew that the liability to compensate must be fixed not merely on the property but also on the owner through the property.
If so, the owner is at least indirectly impleaded to answer to, that is to say, to be affected by, the judgment of the court To implead an independent sovereign in such a way is to call upon him to sacrifice either his property or his independence.
To place him in that position is a breach of the principle upon which his immunity from jurisdiction rests.
We think that he cannot be so indirectly impleaded, any more than he could be directly impleaded.
The case is, upon this consideration of it, brought within the general rule that a sovereign authority cannot be personally impleaded in any court.
Although the expression indirect impleader has passed into common usage, the truth is that proceedings in rem against property are a form of direct impleader, as Lord Wright pointed out in The Cristina [1938] AC 485, at p 505.
The principle that a state is impleaded by proceedings against its property is, however, based on more than the technicalities of Admiralty procedure.
It reflects the broader rule that if the relief claimed would directly affect a foreign states interest in property, it makes no difference whether the action is framed in rem or in personam, and no difference whether it is brought against the state or someone else who is in possession or control of the property.
In United States of America v Dollfus Mieg et Cie SA [1952] AC 582, gold bars had been looted by German troops in 1944 from a French bank which was holding them for Dollfus Mieg & Cie.
They were recovered by allied forces in Germany and lodged with the Bank of England by a Tripartite Commission comprising the governments of Britain, France and the United States to await the Commissions decision upon their ultimate disposal.
Accordingly the allied governments had no beneficial interest in the gold but an immediate right to possession as against the Bank.
Dollfus Mieg brought a personal action against the Bank, claiming delivery of the bars still in its possession or damages for the Banks act in converting the bars by refusing delivery.
The House of Lords held that the action against the Bank for specific delivery of the gold was barred by state immunity.
Earl Jowitt considered (p 604) that the two foreign states were neither directly nor indirectly impleaded, but that state immunity should be extended to apply to actions against a states bailee.
He did not expand on the reasons for that extension, but appears to have regarded it as a principle sui generis rather than an illustration of some broader rule.
It is, however, clear that this was not the view taken by his colleagues.
Lord Porter pointed out (p 612) that chattels and other personal property must necessarily be held by states through servants or agents and that bailees were on the same footing as agents.
In other words, the Bank was to be identified with the three governments so far as it acted as their bailee.
Lord Oaksey (p 614) agreed with Lord Porter.
Lord Tucker (pp 621 622) took the same view.
Lord Radcliffe, whose analysis is the most complete, approved the statement in the then current edition of Diceys Conflict of Laws that any action or proceeding against the property of [a foreign sovereign] is an action or proceeding against such person (p 616).
In his view the merit of the rule thus stated was that it does make it clear that the property of a sovereign enjoys no immunity in legal proceedings except in so far as those proceedings amount in one way or another to a suit against a sovereign.
This left unresolved the alternative claim against the Bank in its own right for damages for conversion.
Lord Radcliffe rejected that claim also, on the ground that upon discharging any liability for conversion, the Bank would become entitled to set up the plaintiffs title against his bailor.
In other words the courts judgment would materially affect the existing right of his bailor in respect of the possession and disposal of the chattel: pp 619 620.
Similar issues arose in Rahimtoola v Nizam of Hyderabad [1958] AC 379.
The Nizam sued the former High Commissioner of Pakistan in the United Kingdom, who had received a sum of money paid out of the Nizams account by a signatory during the Indian invasion of Hyderabad.
It was held that the action was barred.
The critical point was the capacity in which the High Commissioner had acted.
The Court of Appeal had decided that no question of state immunity arose because the High Commissioner was only an agent of the state of Pakistan.
In the House of Lords that decision was reversed, but there are some differences in the reasoning of the appellate committee.
In my view, the correct analysis was that of Viscount Simonds, who thought that as an agent of Pakistan for the purpose of receiving the money, the High Commissioner was in the relevant respect to be identified with Pakistan.
Like Lord Radcliffe in Dollfus Mieg, he approved the rule stated in Dicey (pp 393 394), observing: No doubt, if a defendant, by whatever name he is called, can be identified with the sovereign state, his task is easy: he need prove no more in order to stay the action against him.
But, as soon as it is proved that quoad the subject matter of the action the defendant is the agent of a sovereign state, that, in other words, the interests or property of the state are to be the subject of adjudication, the same result is reached.
Accordingly, he treated an action to assert a proprietary right in assets under the control of a state as a mode of impleading that state.
Addressing an argument that Pakistan held the money in trust for the Nizam or as money had and received to his use, he added at p 397 These are matters which directly concern the principal on whose behalf Rahimtoola received the money.
They cannot be determined without impleading him.
Therefore they cannot be determined at all.
This principle is now implicitly reflected in section 6(4) of the State Immunity Act, which provides that a court may entertain proceedings against a person other than a state relating to property in the possession or control of a state, or in which a state claims an interest, if the state would not have been immune had the proceedings been brought against it.
In these cases, English and international law treated a claim against a states property as tantamount to a claim against the state.
The appellants argue that the true rationale of this rule is broader than this.
It is, they submit, that a state is to be treated as indirectly impleaded in any case where the issues would require the court to adjudicate on its legal rights or liabilities, albeit as between other parties.
Two matters in particular are urged in support of this argument.
The first is that it is said that an analogous principle is applied as a matter of international law by tribunals of international jurisdiction.
The second is that the extension for which they contend is recognised in the current draft convention adopted by the United Nations for codifying the international law of state immunity.
In both cases, the argument is that English law should conform to the principles of international law which underlie the domestic doctrine of state immunity.
In support of the first point, the appellants rely on two decisions of the International Court of Justice, Monetary Gold Removed from Rome (1954) ICJ Rep, p 19 and East Timor (Portugal v Australia) (1995) ICJ Rep, p 90.
The jurisdiction of the International Court over states is founded on their agreement to submit, either specifically in relation to a particular dispute or generally in relation to certain categories of dispute.
In both of these cases the Court declined to decide an issue as between the parties because it affected the rights of a non party state.
Monetary Gold concerned a claim by the United Kingdom to apply Albanian gold stored at the Bank of England towards satisfaction of a judgment which it had previously obtained from the Court against Albania.
A competing claim had been made by Italy to apply the same gold in satisfaction of its own claims against Albania.
Italy, however, had no judgment.
The court declined to decide the issue as between the United Kingdom and Italy because it could not do so without deciding whether Italys claims against Albania were well founded, something that it could not do in litigation to which Albania was not a party.
Giving its reasons at pp 32 33, the court observed: In the present case, Albanias legal interests would not only be affected by a decision, but would form the very subject matter of the decision.
It is true that, under article 59 of the Statute, the decision of the court in a given case only binds the parties to it and in respect of that particular case.
This rule, however, rests on the assumption that the court is at least able to render a binding decision.
Where, as in the present case, the vital issue to be settled concerns the international responsibility of a third state, the court cannot, without the consent of that third state, give a decision on that issue binding upon any state, either the third state, or any of the parties before it.
East Timor concerned a claim by Portugal that Australia had not been entitled to conclude a treaty with Indonesia relating to the exploitation of certain natural resources of East Timor, a Portuguese territory which had been occupied by Indonesia since 1975.
Indonesia was not a party.
The Court applied the Monetary Gold principle.
It declined to entertain the dispute because it could not do so without adjudicating in the absence of Indonesia on the lawfulness of its occupation and its right to make treaties concerning the natural resources of East Timor.
As the Court pointed out in Monetary Gold (p 32), the underlying principle is that a court can only exercise jurisdiction over a state with its consent.
But the point about both of these cases was that the decision would have involved an exercise of jurisdiction over a non party state without its consent.
This was because the resolution of the dispute as between the parties might have conferred upon at least one of them an international right at the expense of the non party.
In Monetary Gold, the resolution of the issue in favour of Italy would have enabled Italy to satisfy its claim against Albanias gold, leaving Albania to satisfy the United Kingdoms judgment from other assets.
In East Timor, the resolution of the issue in favour of Portugal, by binding Australia, would have prevented Australia from implementing its treaty with Indonesia and Indonesia from concluding any other treaty with Australia in right of East Timor.
Both cases had two features which in combination account for the outcome.
First, the rights or liabilities of the non party state were the very subject matter of the dispute between the parties.
Secondly, although the judgment would have bound only the parties, each of the parties would have been bound to deal with the non party in accordance with it.
Even on the assumption (and it is a large one) that the principle applied in these cases can readily be transposed to the domestic law plane, the mere fact that the rights or liabilities of the non party were in issue would not be enough.
Turning to the appellants second argument, the United Nations Convention on Jurisdictional Immunities of States and their Property (2004) is an attempt to codify the international law of state immunity.
It was drafted by the International Law Commission of the United Nations between 1977 and 2004.
The final document was adopted by the General Assembly of the United Nations in December 2004.
It will enter into force when 30 states have ratified it.
As yet, however, it has been signed by only 31 states and ratified by only 19, not including the United Kingdom.
Notwithstanding its uncertain status as a treaty, it has been regarded as an authoritative statement of customary international law.
In Jones v Ministry of the Interior of the Kingdom of Saudi Arabia, supra, at para 8, Lord Bingham endorsed the view expressed by Aikens J in AIG Capital Partners Inc v Republic of Kazakhstan [2006] 1 WLR 1420 (para 80) that the Convention powerfully demonstrates international thinking.
Article 1 of the Convention recites that it applies to the immunity of a state and its property from the jurisdiction of the courts of another state.
Article 6 of the Immunities Convention provides: 1.
A State shall give effect to State immunity under article 5 by refraining from exercising jurisdiction in a proceeding before its courts against another State and to that end shall ensure that its courts determine on their own initiative that the immunity of that other State under article 5 is respected. 2.
A proceeding before a court of a State shall be considered to have been instituted against another State if that other State: is named as a party to that proceeding; or (a) (b) is not named as a party to the proceeding but the proceeding in effect seeks to affect the property, rights, interests or activities of that other State.
Article 6(2)(b) incorporates the concept of indirect impleader.
The appellants rely for their case on the breadth of the concluding words of paragraph (2)(b), and notably the extension of the concept beyond a states property or rights, to its interests and activities.
There was an issue before us about how far these expressions can be said to represent the current consensus of nations.
Certainly, comments in the course of the drafting suggest that some states considered the final words to be too broad.
It is, however, unnecessary to resolve this question, because the scope of the final words of article 6(2)(b) are plainly limited by their context.
Article 6(2)(b) is concerned only with cases where the proceedings seek to affect the property, rights, interests or activities of a state.
It is difficult to envisage a case where this would be true, unless it related to property within the jurisdiction of the domestic forum in which the foreign state had an interest, especially in the context of a Convention which is expressly concerned only with the immunity of the state eo nomine and its property (see article 1).
An examination of the travaux confirms this.
The most illuminating document is the International Law Commissions report to the General Assembly of 1991, which includes a commentary on article 6: see Yearbook of the International Law Commission, 1991, ii(2), 23 25.
This describes the genesis of article 6(2)(b) in domestic court decisions about state owned property.
It records that the word affect was used in order to avoid appearing to create too loose a relationship between the proceedings and their consequences.
And the discussion of its meaning relates wholly to actions involving seizure or attachment of public properties or properties belonging to a foreign state or in its possession or control: see paras 11 13 of the commentary under article 6.
The essential point about the property cases is that they have the potential directly to affect the legal interests of states notwithstanding that they are not formally parties.
In the case of an action in rem, this is obvious.
The courts decision binds all the world.
But although perhaps less obvious it is equally true of an action in personam, where the court is asked to recognise an adverse title to property in someone else or award possession of property as of right to another.
As Lord Porter and Lord Radcliffe put it in Dollfus Mieg (pp 613, 616) the law cannot consistently with the immunity of states require a state to appear before a domestic court as the price of defending its legal interests.
None of this reasoning, however, applies in a case where the foreign state has no legal interest to defend because the courts decision in its absence cannot directly affect its legal interests.
I would not altogether rule out the possibility that litigation between other parties might directly affect interests of a foreign state other than interests in property.
But, as I have observed, it is not easy to imagine such a case.
The appellants argument is in reality an attempt to transform a personal immunity of states into a broader subject matter immunity, ie, one which bars the judicial resolution of certain issues even where they cannot affect the existence or exercise of a states legal rights.
No decision in the present cases would affect any rights or liabilities of the four foreign states in whose alleged misdeeds the United Kingdom is said to have been complicit.
The foreign states are not parties.
Their property is not at risk.
The courts decision on the issues raised would not bind them.
The relief sought, namely declarations and damages against the United Kingdom, would have no impact on their legal rights, whether in form or substance, and would in no way constrict the exercise of those rights.
It follows that the claim to state immunity fails.
Act of state: foundations
In Nissan v Attorney General [1970] AC 179, 211 212, Lord Reid observed: I think that a good deal of the trouble has been caused by using the loose phrase act of state without making clear what is meant.
Sometimes it seems to be used to denote any act of sovereign power or of high policy or any act done in the execution of a treaty.
That is a possible definition, but then it must be observed that there are many such acts which can be the subject of an action in court if they infringe the rights of British subjects.
Sometimes it seems to be used to denote acts which cannot be made the subject of inquiry in a British court.
But that does not tell us how to distinguish such acts: it is only a name for a class which has still to be defined.
The first task of a court dealing with a contention that the act of state doctrine applies is to clarify what is meant by an act of state, and what legal consequences follow from this categorisation.
The act of state doctrine comprises two principles.
The first can conveniently be called Crown act of state and does not arise in the present cases.
It is that in an action based on a tort committed abroad, it is in some circumstances a defence that it was done on the orders or with the subsequent approval of the Crown in the course of its relations with a foreign state.
The second, commonly called foreign act of state, is that the courts will not adjudicate upon the lawfulness or validity of certain sovereign acts of foreign states.
For this purpose a sovereign act means the same as it does in the law of state immunity.
It is an act done jure imperii, as opposed to a commercial transaction or other act of a private law character.
These are distinct principles, although they are based on certain common legal instincts.
Unlike state immunity, act of state is not a personal but a subject matter immunity.
It proceeds from the same premise as state immunity, namely mutual respect for the equality of sovereign states.
But it is wholly the creation of the common law.
Although international law requires states to respect the immunity of other states from their domestic jurisdiction, it does not require them to apply any particular limitation on their subject matter jurisdiction in litigation to which foreign states are not parties and in which they are not indirectly impleaded.
The foreign act of state doctrine is at best permitted by international law.
It is not based upon it: see Carreau & Marrella, Droit International, 11th ed (2012), 701; Weil, Le controle par les tribunaux nationaux de la licit des actes des gouvernements trangers, Annuaire franais de droit international, 23 (1977), 16, 30.
The policy which the foreign act of state doctrine reflects does, however, have partial analogues in the municipal law of a number of civil law jurisdictions, subject in some cases to extensive public policy exceptions.
The question has generally arisen in the context of foreign legislative expropriations.
These might have been recognised in other countries on the basis that the passing of property is governed by the lex situs.
In fact, however, they are recognised in some civil law countries on the basis that they are acts of state beyond challenge in the domestic courts of another country.
The French courts in particular have proceeded in these cases upon a principle based on a lack of competence or jurisdiction to rule on the legality of foreign acts of state, which is quite distinct from the corresponding principle (acte de gouvernement) relating to acts of the French government in the conduct of its foreign relations: see Larrasquitu et l'Etat Espagnol v Socit Cementos Rezola (Cour dAppel de Poitiers, 20 December 1937), (1938) 8 ILR 196 (the French jurisdiction is incompetent to consider the regularity of the act of a foreign sovereign, for that would be to judge that act); Martin v Banque d'Espagne (Cour de Cassation, 3 November 1952) (1952) ILR 202 (the acts in question, even apart from the principle of immunity from jurisdiction, were public acts which are not subject to judicial control in France); Epoux Reynolds v Ministre des Affaires Etrangres (Tribunal de Grande Instance de la Seine, 30 June 1965) (1965) 47 ILR 53 (a French court has no jurisdiction to adjudicate on the legality of that measure).
The principle is thus expressed in terms which are not confined to expropriation cases, and it has in fact been applied more widely, notably in a well known decision of the Cour de Cassation in a case involving the lawfulness of the act of a foreign state in deporting a criminal suspect to France: In re Illich Ramirez Sanchez (Cour de Cassation, 21 February 1995) ECLI:FR:CCASS:1995:CR06093).
So also the courts of the Netherlands: Petroservice & Credit Minier Franco Roumain v El Aguila (Ct App, The Hague, 4 December 1939), (1939) 11 ILR 17 (A Dutch Court is obliged to refrain from entering into an independent examination of the validity or invalidity of public acts of a foreign government); Bank Indonesia v Senembah Maatschappij and Twentsche Bank NV (1959) 30 ILR 28 (Court of Appeal of Amsterdam, 4 June 1959) (as a rule, a Court will not, and should not, sit in judgment on the lawfulness of acts jure imperii performed by, or on behalf of, a foreign Government, except in cases of flagrant conflict with international law).
Like the French courts, the Dutch courts have applied the same principle in contexts other than expropriation, for example in addressing allegations of complicity by Dutch companies in the military operations of a foreign state: Republic of South Moluccas v Royal Packet Shipping Co (Amsterdam Court of Appeal, 8 February 1951) (1951) 17 ILR 150.
German law, on the other hand, arrives at a similar result, by reference to a special rule based on the autonomy of states acting within their own territory: Unification Treaty Constitutionality Case, Bundesverfassungsgericht, judgment of 23 April 1991, 94 ILR 42.
The German courts appear to have rejected any more general principle limiting the subject matter jurisdiction of the courts over issues incidentally requiring a determination of the lawfulness or validity of a foreign states sovereign acts: Kunduz, Oberlandsgericht Kln, judgment of 30 April 2015, AZ 7 U 4/14, para 17.
In none of these jurisdictions does the question appear to be governed by ordinary principles of the choice of law.
Differences between major civil law jurisdictions means that one cannot attach too much weight to the case law of any one of them.
None the less, I find the approach of the French and Dutch courts instructive.
It reflects a strong juridical instinct in two jurisdictions with a long standing engagement with international relations, which has an obvious relevance for the United Kingdom.
In England, the origin of the foreign act of state doctrine is commonly thought to be the decision of Lord Chancellor Nottingham in Blad v Bamfield (1673) 3 Swan 603; (1674) 3 Swan 604, although this view turns more on his expansive turns of phrase than on anything that he actually decided.
The dispute arose out of the volatile relations between England and Denmark in the second half of the 17th century.
Peter Blad appears to have been the holder of a patent of monopoly from the King of Denmark to trade in Iceland, then a Danish possession.
Bamfield was an Englishman whose property was seized on the high seas in 1668 by the authority of the Danish Crown and forfeited by the Danish courts, on the ground that he had been fishing off Iceland in breach of the monopoly.
Some years later, Blad made the mistake of visiting England.
Bamfield sued him at law, contending that the monopoly was illegal and invalid since it was contrary to a right to trade which had in practice been recognised by Denmark for 50 years before the seizure.
Blad contended that he could not be liable because the seizure was an act of state.
He initially complained to the Privy Council on the ground that as an act of state it was susceptible of relief only by diplomatic means.
Lord Nottingham, who was sitting on the Council, stood up and said this was not a question of state, but of private injury, and suggested that the matter should properly be brought before the Court of Chancery.
But when the case came before him in chancery, Lord Nottingham changed his mind.
This was because Bamfield was now contending that reliance on the Danish letters patent was precluded by the terms of the Anglo Danish commercial treaty of 1670.
This, he said, made all the difference: it is very true that this cause was dismissed from the council board being not looked on there as a case of state, because for aught appeared to them, it might be a private injury, and unwarrantable, and so fit to be left to a legal discussion.
But now the very manner of the defence offered by the defendant had made it directly a case of state; for they insist upon the articles of peace to justify their commerce, which is of vast consequence to the public; for every misinterpretation of an article may be the unhappy occasion of a war.
Nottingham restrained Bamfields action at law on the ground that to send it to a trial at law, where either the court must pretend to judge of the validity of the Kings letters patent in Denmark or of the exposition and meaning of the articles of peace; or that a common jury should try whether the English have a right to trade in Iceland, is monstrous and absurd.
What barred Bamfields case was his reliance on a treaty as invalidating a legal instrument of the Danish Crown relating to commercial operations in a Danish possession.
In a later age it would have been held that a treaty operated only on the plane of international law, and could not give rise to private rights in a citizen.
But Lord Nottinghams concern was a different one.
He was simply expressing the view, which was still commonly expressed long after his day, that a domestic court was incompetent to construe a treaty.
Nabob of the Carnatic v East India Co (1793) 2 Ves Jun 56 arose out of the East India Companys controversial relations with the Nabob at a stage when the courts had not yet learned to identify the East India Company with the British government.
The companys dealings with the Nabob are the subject of some of Edmund Burkes most famous Parliamentary orations.
The facts, in summary, were that the Company had assisted the Nabob, a sovereign ruler, in his wars against neighbouring princes.
The Nabob had thereby incurred large debts to them, secured on his public revenues and on part of his territory.
The Nabob alleged that they had taken more than he owed them, and sued for an account.
The company, although a private person in respect of its trading activities, was treated as a sovereign in relation to its operations as the ruler of a large part of India.
The commissioners discharging the office of Chancellor dismissed the claim (p 60): It is a case of mutual treaty between persons acting in that instance as states independent of each other; and the circumstance, that the East India Company are mere subjects with relation to this country, has nothing to do with that.
That treaty was entered into with them, not as subjects, but as a neighbouring independent state, and is the same, as if it was a treaty between two sovereigns; and consequently is not a subject of private, municipal, jurisdiction.
Dobree v Napier (1836) 2 Bing NC 781 marked an important development of the law.
It arose out of the civil wars of Portugal in the 1830s.
The plaintiffs steamship Lord of the Isles was captured on the high seas in 1833 while trying to run warlike stores through a blockade of the Portuguese coast maintained by warships loyal to Queen Maria II.
The ship was subsequently forfeited by a Portuguese prize court.
The Queens admiral happened to be a British subject, the adventurer Sir Charles Napier (not to be trusted except in the hour of danger), and upon his return home he was sued in the Kings Bench for trespass.
Tindal CJ dismissed the action.
The main reason was that the decree of the prize court was a judgment in rem and conclusive.
But he went on to reject an argument to the effect that having entered Portuguese service in breach of the Foreign Enlistment Act 1819, Napier was disabled from relying on the authority of the Queen of Portugal or the decision of her prize courts.
He did so on the ground that a breach of the Act could not render the acts of the Portuguese state justiciable: no one can dispute the right of the Queen of Portugal, to appoint in her own dominions, the defendant or any other person she may think proper to select, as her officer or servant, to seize a vessel which is afterwards condemned as a prize; or can deny, that the relation of lord and servant, de facto, subsists between the queen and the defendant Napier.
For the Queen of Portugal cannot be bound to take any notice of, much less owe any obedience to, the municipal laws of this country For as we hold that the authority of the Queen of Portugal to be a justification of the seizure as prize, there is as little doubt but that she might direct a neutral vessel to be seized when in the act of breaking a blockade by her established, which is the substance of the first special plea, or of supplying warlike stores to her enemies, which is the substance of the second. (pp 796 798) The decision on this last point was approved by the House of Lords in Carr v Fracis Times & Co [1902] AC 176.
Lord Halsbury LC analysed the case as follows, at pp 179 180: There, it was an act of state done by command of the Portuguese Crown and done by an English subject.
It was an a fortiori case; the act done by the English subject was an act which he was by English law prohibited from doing; to the plea that it was done by the authority of the Portuguese Crown, there was a replication that he was forbidden by the Foreign Enlistment Act to take that part in the proceedings which he was proved to have taken; nevertheless, the judgment of the Court held that that was a perfectly lawful proceeding, that it was an act of State, that it was authorized by the Portuguese Crown, and no action would lie in this country against an English subject who participated in it.
The essential point was that the blockade was, as a matter of international law, a sovereign act of Portugal in the conduct of its relations with the rest of the world, in particular those nations who might, or whose subjects might, seek to run the blockade in support of the Queen of Portugals domestic enemies.
Duke of Brunswick v King of Hanover (1848) 2 HLC 1 marked another milestone in the development of this area of the law, not only in England but in the United States, where it would later serve as the point of departure for adoption of the foreign act of state doctrine into their law.
The background to this celebrated decision was a revolution in the German state of Brunswick which overthrew the government of the feckless and despotic Duke Charles in 1830.
In accordance with a power conferred on them by the Diet of the German Confederation, HM William IV of England, in his separate capacity as King of Hanover, and the deposed Dukes brother William, subsequently joined in two public instruments.
The first, of 1831, purported to depose Charles in favour of William.
The second, of 1833, purported to deprive him of his assets in Brunswick, France, England and elsewhere for his own protection and vest them in the Duke of Cambridge as guardian.
In 1843 Charles brought an action in Chancery against the current guardian, who was HM William IVs successor as King of Hanover, for an account of his dealings with the property on the footing that these transactions were contrary to the law of Hanover and void.
The bill was dismissed by Lord Langdale MR for want of equity.
His decision was affirmed on different grounds by the House of Lords.
The defendant was entitled to state immunity, and parts of the reasoning appear to be based on that ground.
But as Lord Wilberforce later observed in Buttes Gas & Oil Co v Hammer [1982] AC 888, 932E F, it also stands as authority for the foreign act of state doctrine, because the ground of the decision was that the decree of the Diet and the two public instruments could not be challenged in an English court.
The Lord Chancellor (Cottenham) said, at pp 21 22: If it were a private transaction , then the law on which the rights of individuals may depend might have been a matter of fact to be inquired into, and for the court to adjudicate upon, not as a matter of law, but as a matter of fact.
If it be a matter of sovereign authority, we cannot try the fact whether it be right or wrong: The allegation that it is contrary to the laws of Hanover, taken in conjunction with the allegation of the authority under which the defendant had acted, must be conceded to be an allegation, not that it was contrary to the existing laws as regulating the right of individuals, but that it was contrary to the laws and duties and rights and powers of a Sovereign exercising sovereign authority.
If that be so, it does not require another observation to shew, because it has not been doubted, that no court in this country can entertain questions to bring Sovereigns to account for their acts done in their sovereign capacities abroad.
The rest of the House agreed, Lord Campbell observing at p 26 that even if the Duke of Cambridge, who was not a sovereign, had been sued it would equally have been a matter of state, and at p 27 that the Court of Chancery I presume would not grant an injunction against the French Republic marching an army across the Rhine or the Alps.
Secretary of State in Council of India v Kamachee Boye Sahaba (1859) 13 Moo PCC 22 was a case of Crown act of state.
The question at issue was the lawfulness of the annexation of the princely state of Tanjore by the East India Company on behalf of the British Crown.
However, the Privy Council made no distinction between Crown and foreign act of state for this purpose.
Lord Kingsdown, delivering the advice of the Board, formulated the issue (p 77) as being whether the annexation was done under colour of legal right, in which case the existence of that right was a justiciable question, or as an exercise of power, an act not affecting to justify itself on grounds of municipal law, in which case it was an act of state.
Holding that it was the latter, Lord Kingsdown said (p 86): Of the propriety or justice of that act, neither the court below/or the Judicial Committee have the means of forming, or the right of expressing if they had formed, any opinion.
It may have been just or unjust, politic or impolitic, beneficial or injurious, taken as a whole, to those whose interests are affected.
These are considerations into which their Lordships cannot enter.
It is sufficient to say that, even if a wrong has been done, it is a wrong for which no municipal court of justice can afford a remedy.
In Cook v Sprigg [1899] AC 572 another case of colonial annexation, Lord Halsbury LC expressed the same principle in terms which would subsequently be taken up by Lord Wilberforce in Buttes Gas & Oil Co v Hammer [1982] AC 888, 933F G: It is a well established principle of law that the transactions of independent states between each other are governed by other laws than those which municipal courts administer.
In Carr v Fracis Times [1902] AC 176, the captain of HMS Lapwing, acting on the authority of the Sultan of Muscat, seized a cargo of ammunition within the territorial waters of Muscat.
The proclamation which authorised the seizure was lawful by the law of Muscat.
The case might have been decided on ordinary choice of law grounds.
But the Sultans proclamation was challenged on the ground that he had made it under a mistake as to the destination of the cargo.
This argument was rejected because, mistaken or not, the proclamation was an act of state.
Lord Halsbury LC said, at p 179: It is not an act as between person and person; it is an act of state which the Sultan says authoritatively is lawful; and I cannot doubt that under such circumstances the act done is an act which is done with complete authority and cannot be made the subject of an action here.
He went on to say (pp 179 80) that it made no difference that the seizure was carried out by a British naval officer.
This was the state of English authority at the time when the foreign act of state doctrine was considered by the courts of the United States in a number of decisions which have proved influential on both sides of the Atlantic.
United States cases
Although there are, as always, precursors in earlier dicta about related issues, the foreign act of state doctrine in the United States really begins with the decision of the Supreme Court of New York in Hatch v Baez 7 Hun 596 (1876).
The issue arose out of a coup d'tat in the Dominican Republic in 1868, which resulted in the deposition of the then President and his replacement by Buonaventura Baez.
Hatch, who was living at the time in Dominica, was believed to have supported the old regime.
As a result, he was arrested and imprisoned and his goods seized by Baezs soldiery.
Some years later, after Baez had left office, he settled in New York and Hatch sued him there for trespass to his person and goods on the footing that these things had been done on his orders.
Before the New York Supreme Court, Baez admitted that the New York courts had jurisdiction over him, but pleaded act of state, relying on Duke of Brunswick v King of Hanover.
The court dismissed the claim.
It observed, at pp 599 600: We think that, by the universal comity of nations and the established rules of international law, the courts of one country are bound to abstain from sitting in judgment on the acts of another government done within its own territory.
Each state is sovereign throughout its domain.
The acts of the defendant for which he is sued were done by him in the exercise of that part of the sovereignty of St Domingo which belongs to the executive department of that government.
To make him amenable to a foreign jurisdiction for such acts, would be a direct assault upon the sovereignty and independence of his country.
The only remedy for such wrongs must be sought through the intervention of the government of the person injured.
The issue first came before the Supreme Court in Underhill v Hernandez 168 US 250 (1897).
This case arose out of another civil war, in Venezuela.
General Hernandez had been the local commander of the revolutionary army which enabled Joaquin Crespo to seize power in 1892.
Crespos government was subsequently recognised by the United States as the legitimate government of Venezuela.
In November 1893, Hernandez was arrested at a New York hotel and required to post a bond to secure damages for false imprisonment, assault and battery, claimed against him in a civil suit brought by Underhill, an American businessman who lived in Venezuela and owned a commercial waterworks in Bolivar.
Underhill alleged that Hernandez had refused him a passport to leave the city and had ordered him to be confined to his house, and that his soldiers had assaulted and abused him, all in order to force him to operate his waterworks in the interest of the new regime.
The New York judge directed a verdict for Hernandez, on the ground that he had been a military commander representing a de facto government in the prosecution of a war.
The case was then removed to the Federal Courts, and the judges decision was upheld by the Second Circuit Court of Appeals, on the ground that the acts of the defendant were the acts of the government of Venezuela, and as such, are not properly the subject of adjudication in the courts of another government.
The Supreme Court granted a petition to review the decision and upheld it.
The judgment of Chief Justice Fuller began (p 252) by rationalising the act of state doctrine on the same basis as the Supreme Court of New York in Hatch v Baez: Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory.
Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves.
Where a civil war prevails, that is, where the people of a country are divided into two hostile parties, who take up arms and oppose one another by military force, generally speaking foreign nations do not assume to judge of the merits of the quarrel.
It is clear that for the court the critical factor was the subsistence of armed hostilities.
Hernandez was a military commander representing the authority of the revolutionary party as a government, which afterwards succeeded and was recognized by the United States.
In both of these cases, state immunity might have been raised, on the footing that Baez was a former head of state and Hernandez had been acting as an agent of the (subsequently) recognised government of Venezuela.
But in both cases, the defendant submitted to the jurisdiction and the matter was dealt with after a trial.
Any right to raise state immunity was therefore lost, and foreign act of state was the sole relevant ground of appeal.
On the other hand, in Oetjen v Central Leather Co 246 US 297 (1918), state immunity never could have been raised.
The case arose out of the Mexican civil war of the early 20th century.
In 1914, forces loyal to Venustiano Carranza occupied the town of Torreon and seized a large quantity of hides belonging to one Martinez.
Subsequently, after the United States had recognised Carranzas government, Martinezs assignee sued a Texan company to whom the hides had been sold, alleging that the title of the original owner subsisted because the hides had been taken contrary to the Hague Convention respecting the Laws and Customs of War on Land (1907).
The court dismissed the suit.
It doubted whether the Convention applied to a civil war or whether it prohibited seizures in these circumstances.
But in order to provide guidance in similar cases, it preferred to base its decision on the fact that the seizure was an act of state.
Having held that the recognition of the Carranza government by the United States meant that it fell to be treated as the government of the state of Mexico, the Court continued at pp 303 304: The principle that the conduct of one independent government cannot be successfully questioned in the courts of another is as applicable to a case involving the title to property brought within the custody of a court, such as we have here, as it was held to be to the cases cited, in which claims for damages were based upon acts done in a foreign country, for it rests at last upon the highest considerations of international comity and expediency.
To permit the validity of the acts of one sovereign state to be re examined and perhaps condemned by the courts of another would very certainly imperil the amicable relations between governments and vex the peace of nations.
It is not necessary to consider, as the New Jersey court did, the validity of the levy of the contribution made by the Mexican commanding general, under rules of international law applicable to the situation, since the subject is not open to re examination by this or any other American court.
The remedy of the former owner, or of the purchaser from him, of the property in controversy, if either has any remedy, must be found in the courts of Mexico or through the diplomatic agencies of the political department of our Government.
These cases were decided at a time when the courts of the United States adopted an approach to foreign sovereign acts which was very similar to that adopted in England, and largely influenced by it.
They proceed on the footing that the act of state doctrine is based on the same concept as state immunity, viz the equality and autonomy of sovereign states.
Like Lord Cottenham in Duke of Brunswick v King of Hanover, the US Supreme Court objected to the concept of a domestic court sitting in judgment upon the acts of another sovereign, even in his absence.
More recently, the US Supreme Court in Banco Nacional de Cuba v Sabbatino 376 US 398 (1964), has viewed the act of state doctrine primarily as an aspect of the constitutional separation of powers under the US Constitution and has closely associated it with the political question rule.
This has led it to attach greater significance to the views of the executive about the impact that different outcomes would have on US foreign policy, and to adopt a flexible approach to the act of state doctrine depending mainly on the degree of embarrassment that would be caused to the State Department in each case.
This development would not be consistent with the accepted principles governing the relations between the courts and the executive in England.
English law has continued to act on the original rationale of the US doctrine, and Underhill v Hernandez continues to be cited on this side of the Atlantic as a correct statement of the principle.
England: the Russian Revolution cases
Johnstone v Pedlar [1921] 2 AC 262 did not involve a foreign act of state.
It is the leading modern authority for the proposition that Crown act of state is not a plea available to a defendant in relation to acts done in the United Kingdom, even against aliens.
But in the course of distinguishing between Crown and foreign acts of state, Lord Sumner summarised the effect of the latter doctrine as follows, at p 290: Municipal Courts do not take it upon themselves to review the dealings of State with State or of Sovereign with Sovereign.
They do not control the acts of a foreign state done within its own territory, in the execution of sovereign powers, so as to criticise their legality or to require their justification.
Shortly after this statement was made, the principle stated was applied in a series of cases heard after the United Kingdoms recognition of the Soviet government, which arose from the confiscation of private property in Russia in the aftermath of the Russian Revolution.
These raised questions very similar to those which had been considered by the courts of the United States.
In Aksionernoye Obschestvo AM Luther v James Sagor & Co [1921] 3 KB 532, the stock of the plaintiffs timber mill had been confiscated by a decree of the Russian Republic in June 1918 and sold to the defendants, who subsequently imported it into England.
The plaintiffs sued them there for a declaration that the timber remained their property and damages for its conversion.
They contended that no effect should be given to the decree of June 1918 because (among other reasons) it was immoral.
In the Court of Appeal, all three judges rejected the argument that the decree was immoral.
Bankes LJ did so on straightforward choice of law grounds.
The passing of property was governed by the lex situs, and the decree was part of that law.
No question of its morality arose.
But Warrington and Scrutton LJJ rejected it on the ground the decree was an act of state.
Warrington LJ thought (pp 548 549) that the decree was entitled to the respect due to the acts of an independent sovereign state, and added that the acts of an independent sovereign government in relation to property and persons within its jurisdiction cannot be questioned in the Courts of this country, citing Oetjen v Central Leather Co. Scrutton LJ thought (pp 558 559) that any criticism of the morality of the decree was the proper function of the executive, not the judiciary.
In Princess Paley Olga v Weisz [1929] 1 KB 718, the facts were similar except that the goods in question were works of art forcibly removed from the plaintiffs palace at Tsarskoye Selo.
The Court of Appeal again dismissed the claim.
All three members of the Court held that effect fell to be given to the decree as part of the lex situs.
But they also upheld a distinct argument that even if, as the plaintiff alleged, the decree did not justify the seizure, it was an act of state into the validity of which this Court would not inquire: see pp 723 724 (Scrutton LJ); cf pp 729 730 (Sankey LJ), and 723 724.
Scrutton LJ (pp 724 725) adopted the statement of principle in Oetjen v Central Leather Co on this point as corresponding to the law of England.
Buttes Gas
In Regazzoni v KC Sethia (1944) Ltd [1958] AC 301, a contract for the sale of jute was held to be unenforceable because it involved the shipment of the cargo from India in breach of an Indian prohibition of exports to South Africa.
The House of Lords rejected an argument that the Indian law should be disregarded on the ground that it was contrary to international law because it is a hostile act directed against a friendly state, and as such contrary to English public policy (see p 307).
Commenting on this argument at pp 325 326, Lord Reid said: It was argued that this prohibition of exports to South Africa was a hostile act against a Commonwealth country with which we have close relations, that such a prohibition is contrary to international usage, and that we cannot recognize it without taking sides in the dispute between India and South Africa.
My Lords, it is quite impossible for a court in this country to set itself up as a judge of the rights and wrongs of a controversy between two friendly countries, we cannot judge the motives or the justifications of governments of other countries in these matters and, if we tried to do so, the consequences might seriously prejudice international relations.
By recognizing this Indian law so that an agreement which involves a breach of that law within Indian territory is unenforceable we express no opinion whatever, either favourable or adverse, as to the policy which caused its enactment.
Lord Keith of Avonholm, concurring, said at p 327: The English courts cannot be called on to adjudicate upon political issues between India and South Africa.
Regazzoni v Sethia marked a return to concepts of non justiciability canvassed a century before in the colonial annexation cases.
The principal modern landmark in this area of the law is the important and much debated decision of the House of Lords in Buttes Gas & Oil Co v Hammer [1982] AC 888.
This was ostensibly an action for slander with a counterclaim for common law conspiracy to defraud.
But it was actually a dispute about the extent of the territorial waters of the emirate of Sharjah around the island of Abu Musa in the Persian Gulf.
Buttes Gas sued Dr Hammer and Occidental Petroleum for alleging in a press release that it had procured the Ruler of Sharjah to backdate a decree extending the territorial waters of the emirate.
Their object was said to be to obtain for themselves the benefit of oil bearing deposits in the extended area, at the expense of Occidental which claimed to hold a concession for the same area from the neighbouring Ruler of Umm al Qywain.
Occidental alleged that the extension of Sharjahs territorial waters was contrary to international law, and counterclaimed damages for an alleged conspiracy to defraud them, to which the Ruler and the United Kingdom were parties.
According to the counterclaim the United Kingdom, which was responsible for the foreign relations and defence of both emirates, intervened politically with the Ruler of Umm al Qywain to forbid Occidentals drilling operations there and deployed a warship to turn back the companys drilling platform.
Buttes applied to have the counterclaim struck out, principally on the ground that it was based on acts of state by the Ruler of Sharjah and the government of the United Kingdom.
The House struck out the proceedings.
The leading speech was delivered by Lord Wilberforce, with whom the rest of the Appellate Committee agreed.
After rejecting the argument that the counterclaim was barred as being based on a claim to title to foreign land, and putting to one side the case law about Crown act of state, he continued, at p 931: A second version of act of state consists of those cases which are concerned with the applicability of foreign municipal legislation within its own territory, and with the examinability of such legislation often, but not invariably, arising in cases of confiscation of property.
Mr Littman gave us a valuable analysis of such cases as Carr v Fracis Times & Co [1902] AC 176; Aksionairnoye Obschestvo AM Luther v James Sagor & Co [1921] 3 KB 532 and Princess Paley Olga v Weisz [1929] 1 KB 718, suggesting that these are cases within the area of the conflict of laws, concerned essentially with the choice of the proper law to be applied.
Two points were taken as regards the applicability of this line of authority.
First, it was said that foreign legislation can be called in question where it is seen to be contrary to international law or to public policy; the decree of 1969/70 was so contrary.
Secondly, it was contended that foreign legislation is only recognised territorially ie within the limits of the authority of the state concerned.
In my opinion these arguments do not help the respondents.
As to the first, it is true, as I have pointed out, that the attack on Sharjahs decree of 1969/70 is not upon its validity under the law of Sharjah, but upon its efficacy in international law.
But this brings it at once into the area of international dispute.
It is one thing to assert that effect will not be given to a foreign municipal law or executive act if it is contrary to public policy or to international law (cf In re Helbert Wagg & Co Ltds Claim [1956] Ch 323) and quite another to claim that the courts may examine the validity, under international law or some doctrine of public policy, of an act or acts, operating in the area of transactions between states.
The second argument seems to me to be no more valid.
To attack the decree of 1969/70 extending Sharjahs territorial waters, ie its territory, upon the ground that the decree is extra territorial seems to me to be circular or at least question begging.
Lord Wilberforce went on, at pp 931 932, to dismiss Occidentals counterclaim as raising matters which were non justiciable on wider grounds: the essential question is whether there exists in English law a more general principle that the courts will not adjudicate upon the transactions of foreign sovereign states.
Though I would prefer to avoid argument on terminology, it seems desirable to consider this principle, if existing, not as a variety of act of state but one for judicial restraint or abstention.
In my opinion there is, and for long has been, such a general principle, starting in English law, adopted and generalised in the law of the United States of America which is effective and compelling in English courts.
This principle is not one of discretion, but is inherent in the very nature of the judicial process.
Lord Wilberforce regarded the general principle as being derived from a wider principle concerning the transactions of sovereign states, of which the cases about the expropriation of property under municipal law were no more than a part.
While eschewing arguments about terminology, he appears in this passage to have regarded the general principle as something different from the act of state doctrine.
It is unquestionably different from the rule about the application to a sovereign act of the sovereigns municipal law, which was I think the only point that he was making.
There is much to be said for the view of Rix LJ, delivering the judgment of the Court of Appeal in Yukos Capital Sarl v OJSC Rosneft Oil Co (No 2) [2014] QB 458, para 66, that Lord Wilberforces principle of non justiciability has, on the whole, not come through as a doctrine separate from the act of state principle itself, but rather has to a large extent subsumed it as the paradigm restatement of that principle.
It would seem that, generally speaking, the doctrine is confined to acts of state.
However, I do not believe, any more than Lord Wilberforce did, that anything is gained by arguments about labels.
He proceeded to make good his general principle by reference to the decisions in Blad v Bamfield and Duke of Brunswick v King of Hanover.
The latter case, which Lord Wilberforce regarded as still authoritative, has generally been cited both in England and the United States as turning on the act of state doctrine.
Lord Wilberforce regarded it as authority for the proposition that the courts will not adjudicate upon acts done abroad by virtue of sovereign authority.
He considered that it was the basis of the US Supreme Courts decisions in Underhill v Hernandez and Oetjen v Central Leather Co, the cases which provided the foundation for the act of state doctrine in the United States, and which he had cited with approval at pp 933 934.
In applying this wider principle to the particular facts before him, Lord Wilberforce emphasised (p 938) that the issue before the House turned on questions of international law arising between states: It would not be difficult to elaborate on these considerations, or to perceive other important inter state issues and for issues of international law which would face the court.
They have only to be stated to compel the conclusion that these are not issues upon which a municipal court can pass.
Leaving aside all possibility of embarrassment in our foreign relations (which it can be said not to have been drawn to the attention of the court by the executive), there are no judicial or manageable standards by which to judge these issues, or to adopt another phrase (from a passage not quoted), the court would be in a judicial no mans land: the court would be asked to review transactions in which four sovereign states were involved, which they had brought to a precarious settlement, after diplomacy and the use of force, and to say that at least part of these were unlawful under international law.
Recent decisions
The detailed application of the principle formulated by Lord Wilberforce in Buttes Gas has often been disputed but the principle itself has not.
It was restated by Lord Oliver in JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry (the Tin Council case) [1990] 2 AC 418, in a speech with which Lord Keith of Kinkel, Lord Brandon and Lord Griffiths agreed.
Rejecting an argument that the treaty creating the International Tin Council could give rise to justiciable private law rights, he held at p 499 that it was axiomatic that municipal courts have not and cannot have the competence to adjudicate upon or to enforce the rights arising out of transactions entered into by independent sovereign states between themselves on the plane of international law.
In R (Abbasi) v Secretary of State for Foreign Affairs [2002] EWCA Civ 1598; [2003] UKHRR 76 the Court of Appeal declined to decide that the detention of prisoners in Guantanamo Bay was contrary to the obligations of the Unites States under the 3rd Geneva Convention.
At para 32, the court accepted the following statement by Counsel of the general rule: It is well established that the English court will not adjudicate upon the legality of a foreign states transactions in the sphere of international relations in the exercise of sovereign authority, citing Buttes Gas and Oil v Hammer [1982] AC 888 at 932 (per Lord Wilberforce); Westland Helicopters Ltd v AOI [1995] QB 282.
To do so would involve a serious breach of comity: see Buck v Attorney General [1965] 1 Ch 745 at 770 771 (per Lord Diplock) and R v Secretary of State, Ex p British Council of Turkish Cypriot Associations 112 ILR 735 at 740 (per Sedley J). [Counsel] observed that the relief sought by the claimants was founded on the assertion that the United States government was acting unlawfully.
For the court to rule on that assertion would be contrary to comity and to the principle of state immunity.
Apart from the decisions in the present case, the most recent discussion of the principles underlying the foreign act of state doctrine is the decision of the Court of Appeal in R (Noor Khan) v Secretary of State for Foreign Affairs [2014] 1 WLR 872.
The case raised issues in some ways similar to the present ones.
The claimants father had been killed in Pakistan by a missile fired from an American drone.
He applied for judicial review of the decision of the Foreign Secretary to supply intelligence to the United States for use in targeting drone strikes and sought various declarations as to the lawfulness of supplying locational intelligence for this purpose.
His case was that an official passing intelligence in these circumstances committed an offence by encouraging or assisting an act by the American operators of the drone which would, if committed by a British subject, amount to murder, contrary to sections 44 to 46 of the Serious Crimes Act 2007.
The Court of Appeal dismissed the application on grounds of both principle and discretion.
Addressing the point of principle, it adopted the following statement of Moses LJ in the Divisional Court as a correct statement of principle: It is necessary to explain why the courts would not even consider, let alone resolve, the question of the legality of United States drone strikes.
The principle was expressed by Fuller CJ in the United States Supreme Court in Underhill v Hernandez (1897) 168 US 250, 252: Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory.
Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves (cited with approval in Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, 933, and R v Jones (Margaret) [2007] 1 AC 136, 163).
The principle that the courts will not sit in judgment on the sovereign acts of a foreign state includes a prohibition against adjudication on the legality, validity or acceptability of such acts, either under domestic law or international law: Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883, 1080, para 24.
The rationale for this principle, is, in part, founded on the proposition that the attitude and approach of one country to the acts and conduct of another is a matter of high policy, crucially connected to the conduct of the relations between the two sovereign powers.
To examine and sit in judgment on the conduct of another state would imperil relations between the states: Buttes Gas case [1982] AC 888, 933.
Turning to the question of discretion, the Court of Appeal accepted that arguably the offences created by sections 44 to 46 of the 2007 Act did not require a finding that the US operators of the drone had committed murder, but only a finding that they would have done so if they had been British citizens.
However, they declined (paras 36 37) to determine the question because the public, especially in the United States, would be unlikely to make or understand that distinction: But none of this can disguise the fact that in reality the court will be asked to condemn the acts of the persons who operate the drone bombs.
Whilst for the purposes of the 2007 Act these persons are to be treated as if they are UK nationals, everyone knows that this is a legal fiction devised by Parliament in order to found secondary liability under sections 44 to 46.
In reality, the persons who operate the drones are CIA officials and in doing so they are implementing the policy of the US Government.
In my view, a finding by our court that the notional UK operator of a drone bomb which caused a death was guilty of murder would inevitably be understood (and rightly understood) by the US as a condemnation of the US.
In reality, it would be understood as a finding that (i) the US official who operated the drone was guilty of murder and (ii) the US policy of using drone bombs in Pakistan and other countries was unlawful.
The fact that our courts have no jurisdiction to make findings on either of these issues is beside the point.
What matters is that the findings would be understood by the US authorities as critical of them.
Although the findings would have no legal effect, they would be seen as a serious condemnation of the US by a court of this country.
Remedies by way of judicial review are of course discretionary.
But the only relevance of the discretion to this decision was that it enabled the court to ignore any difference that there might be between the legal analysis and the public perception, and to reject the claim on the ground that it would embarrass Anglo American relations, a consideration that would be irrelevant to a claim of right.
For present purposes, the point is that the claimants allegations involved a challenge to the lawfulness under English law of the acts of British officials, who were said to have incurred an accessory liability for murder by US forces.
If Mr Khan, instead of applying for judicial review, had claimed damages in tort for personal injury, in his own right or on behalf of his fathers estate, no discretion would have been involved.
But he would still have lost, on the point of principle identified by Moses LJ and approved in the Court of Appeal.
It should be noted that the principle stated by Moses LJ and approved by the Court of Appeal was founded on the rule formulated by Fuller CJ in Underhill v Hernandez.
The search for general principle
The English decisions have rarely tried to articulate the policy on which the foreign act of state doctrine is based and have never done so comprehensively.
But it is I think possible to discern two main considerations underlying the doctrine.
There is, first and foremost, what is commonly called comity but I would prefer to call an awareness that the courts of the United Kingdom are an organ of the United Kingdom.
In the eyes of other states, the United Kingdom is a unitary body.
International law, as Lord Hoffmann observed in R v Lyons [2003] 1 AC 976 at para 40, does not normally take account of the internal distribution of powers within a state.
Like any other organ of the United Kingdom, the courts must respect the sovereignty and autonomy of other states.
This marks the adoption by the common law of the same policy which underlies the doctrine of state immunity.
Secondly, the act of state doctrine is influenced by the constitutional separation of powers, which assigns the conduct of foreign affairs to the executive.
This is why the court does not conduct its own examination of the sovereign status of a foreign state or government but treats the Secretary of States certificate as conclusive: Government of the Republic of Spain v SS Arantzazu Mendi [1939] AC 256, 264 (Lord Atkin).
It is why Lord Templeman graphically described the submissions of the claimants in the Tin Council case as involving a breach of the British constitution and an invasion by the judiciary of the functions of the Government and of Parliament: see p 476.
To that extent the rationale of the foreign act of state doctrine is similar to that of the corresponding doctrine applicable to acts of the Crown, as Elias LJ observed in Al Jedda v Secretary of State for Defence [2011] QB 773, paras 209 212.
When one turns to the ambit of the doctrine, the first point to be made is that there are many cases involving the sovereign acts of states, whether British or foreign, in which the action fails, not on account of any immunity of the subject matter from judicial scrutiny, but because the acts in question are legally irrelevant.
They give rise to no rights as a matter of private law and no reviewable questions of public law.
It is on this ground that the court will not entertain an action to determine that Her Majestys government is acting or proposes to act in breach of international law in circumstances where no private law status, right or obligation depends on it: R (Campaign for Nuclear Disarmament) v Prime Minister [2001] EWHC 1777 (Admin); R (Al Haq) v Secretary of State for Foreign and Commonwealth Affairs [2009] EWHC 1910 (Admin).
Unlike Mr Khan, who contended that his father had been killed as a result of breaches of English domestic law, the claimants had, as Cranston J put it in the latter case, at para 60, no domestic foothold; cf Shergill v Khaira [2015] AC 359 at para 43.
By comparison Mr Khan did have a domestic foothold.
He had standing to apply for judicial review, and he contended that his father had been killed because of a breach by British officials of English law, but the court declined to treat the matter as governed by ordinary principles of English law because of its subject matter.
The same is true of the present cases.
They are concerned with the effect of a foreign act of state in a case where private law rights are engaged, because the claimants rely on the acts of the relevant states as ordinary torts under the municipal law of the countries in which they were committed.
The question that we have to decide on this appeal is whether they can do so consistently with the law relating to foreign acts of state.
As Lord Wilberforce observed in Buttes Gas, at p 930F G, the main difficulty in identifying a principle underlying that law arises from the indiscriminate use of act of state to cover situations which are quite distinct and different in law.
It is always possible to break down the cases into different factual categories, and deconstruct the law into a fissiparous bundle of distinct rules.
But the process is apt to make it look more arbitrary and incoherent than it really is.
I think that it is more productive to distinguish between the decisions according to the underlying principle that the court is applying.
The essential distinction which Lord Wilberforce was making in Buttes Gas was between (i) those cases which are concerned with the applicability of foreign municipal legislation within its own territory and with the examinability of such legislation (p 931A B), and (ii) cases concerning the transactions of sovereign states (p 931G H).
This distinction is supported by the case law extending over more than three centuries which I have reviewed above.
It is possible to extract two related principles from it.
The first is concerned with the application to a state of its own municipal law, and the second with the application of international law to that states dealings with other states.
Municipal law act of state
The first principle can conveniently be called municipal law act of state.
It comprises the two varieties of foreign act of state identified in the judgment of Lord Mance at paras 11(iii)(a) and (b) of his judgment, although he would limit it to legislative or executive acts against property.
The principle is that the English courts will not adjudicate on the lawfulness or validity of a states sovereign acts under its own law.
Municipal courts, as Lord Sumner put it in Johnstone v Pedlar [1921] 2 AC 262, 290, do not control the acts of a foreign State done within its own territory, in the execution of sovereign powers, so as to criticise their legality or to require their justification.
In Yukos Capital Sarl v OJSC Rosneft Oil Co (No 2), supra, at para 110, Rix LJ formulated the principle as involving a distinction between referring to acts of state (or proving them if their occurrence is disputed) as an existential matter, and on the other hand asking the court to inquire into them for the purpose of adjudicating upon their legal effectiveness, including for these purposes their legal effectiveness as recognised in the country of the forum.
It is the difference between citing a foreign statute (an act of state) for what it says (or even for what it is disputed as saying) on the one hand, something which of course happens all the time, and on the other hand challenging the effectiveness of that statute on the ground, for instance, that it was not properly enacted, or had been procured by corruption, or should not be recognised because it was unfair or expropriatory or discriminatory.
Municipal law act of state is by definition confined to sovereign acts done within the territory of the state concerned, since as a general rule neither public nor private international law recognises the application of a states municipal law beyond its own territory.
It has commonly been applied to legislative acts expropriating property: examples include Carr v Fracis Times, Luther v Sagor and the general principle which served as the starting point of the House of Lords in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883 (see paras 257 258 below).
In these cases, title will have passed under the lex situs and the expropriation will be recognised in England on ordinary choice of law grounds unless, exceptionally, its recognition would be contrary to public policy.
In this context, it is difficult to see that anything is added by calling the expropriation an act of state.
However, the fact that the act of state doctrine and ordinary choice of law principles lead to the same result in the case of the legislative expropriations of property, does not entitle one to press the analogy any further.
In particular, it cannot follow that municipal law act of state is limited to legislative acts expropriating property.
Property is of course special for some purposes.
It is likely to be under the exclusive jurisdiction of the state where it is located.
It is marketable and may be tradeable internationally.
It gives rise to policies favouring certainty of title.
Considerations like these go some way to explaining why the lex situs of property is generally regarded as the law with the closest connection to an issue about title, and is for that reason designated as the proper law.
But it is difficult to see that they have any bearing on the very different problems with which the act of state doctrine is concerned.
The rules governing the choice of law are concerned with the law to be applied in determining an issue assumed to be justiciable, while the act of state doctrine in all its forms is concerned with the proper limits of the English courts right to determine certain kinds of issue at all.
Thus it is well established that municipal law act of state applies not just to legislative expropriations of property, but to expropriations by executive acts with no legal basis at all.
Examples include Duke of Brunswick v King of Hanover and Princess Paley Olga v Weisz, and the United States decisions in Hatch v Baez, Underhill v Hernandez, and Oetjen v Central Leather Co. These transactions are recognised in England not because they are valid by the relevant foreign law, but because they are acts of state which an English court cannot question.
Strictly speaking, on the footing that the decree authorising the seizure of Princess Paley Olgas palace did not extend to her chattels, the acts of the revolutionary authorities in seizing them were Russian law torts.
But once the revolutionary government was recognised by the United Kingdom, it would have been contrary to principle for an English court to say so.
Once it is accepted that executive acts may be acts of state, there is no rational reason why the principle should be limited to executive seizures of property, as opposed to injury to other interests equally protected by the municipal law of the place where they occurred.
I can see no rational ground for distinguishing between the expropriation of property by executive act and its physical destruction by executive act, and no sensible basis on which the former is to be treated as an act of state and the latter not.
For the same reasons, I think that personal injury and other wrongs against the person inflicted by the agents of a foreign state are as much capable of being acts of state as the destruction or detention of property.
No such limitation applies to extraterritorial exercises of sovereign authority, whether by the British Crown or by a foreign state.
No such limitation was recognised by Lord Wilberforce in Buttes Gas, who included executive acts as potentially relevant acts of state (p 931D E).
In Hatch v Baez, the plaintiffs main complaint was that he had been imprisoned and assaulted.
In Underhill v Hernandez the plaintiff claimed to have been imprisoned and intimidated.
The decisions in these cases were in terms justified by reference to the act of state doctrine.
State immunity not having been claimed, they could not have been decided on any other basis.
One might ask why an English court should shrink from determining the legality of the executive acts of a foreign state by its own municipal law, when it routinely adjudicates on foreign torts and foreign breaches of contract.
The answer is that the law distinguishes between exercises of sovereign authority and acts of a private law character.
It is fair to say that the decided cases on this point generally involved internal revolutions or civil wars leading to a breakdown of law of a kind which could ultimately be resolved only by force.
Other countries implicitly recognise the outcome diplomatically with retrospective effect, and their courts follow suit.
Similar problems can arise in relation to the acts of totalitarian states where there may be no rule of law even in normal times.
But I do not think that the act of state doctrine can be limited to cases involving a general breakdown of civil society or states without law.
Quite apart from the formidable definitional problems to which such an approach would give rise, the basis of the doctrine is not the absence of a relevant legal standard but the existence of recognised limits on the subject matter jurisdiction of the English courts.
It is this principle which applies to the alleged act of Malaysia in deporting Mr Belhaj and Mrs Boudchar, and Thailands act in detaining them and delivering them to the Americans.
They were domestic exercises of governmental authority by those two countries.
So was the detention and torture of Mr Belhaj and Mrs Boudchar by Libya in Libyan prisons.
International law act of state
The second principle, which can conveniently be called international law act of state, corresponds to the variety of foreign act of state identified in the judgment of Lord Mance at para 11(iii)(c).
It is that the English courts will not adjudicate on the lawfulness of the extraterritorial acts of foreign states in their dealings with other states or the subjects of other states: see Blad v Bamfield, Nabob of the Carnatic v East India Co, Dobree v Napier, Secretary of State in Council of India v Kamachee Boye Sahaba, Cook v Sprigg, Buttes Gas & Oil Co v Hammer, R (Abbasi) v Secretary of State for Foreign Affairs, and R (Noor Khan) v Secretary of State for Foreign Affairs.
This is because once such acts are classified as acts of state, an English court regards them as being done on the plane of international law, and their lawfulness can be judged only by that law.
It is not for an English domestic court to apply international law to the relations between states, since it cannot give rise to private rights or obligations.
Nor may it subject the sovereign acts of a foreign state to its own rules of municipal law or (by the same token) to the municipal law of a third country.
In all of the cases cited, the claimant relied on a recognised private law cause of action, and pleaded facts which disclosed a justiciable claim of right.
But the private law cause of action failed because, once the cause of action was seen to depend on the dealings between sovereign states, the court declined to treat it as being governed by private law at all.
As Tindal CJ observed in Dobree v Napier, the English courts could not apply English law to the sovereign acts of the Queen of Portugal on the high seas.
Nor, on the same principle, could they have applied the municipal law of some third country.
This, as it seems to me, is as true of private law causes of action based on wrongs against the person (as in Hatch v Baez and Noor Khan) as it is of those based on wrongs against property (as in Dobree v Napier).
If a foreign state deploys force in international space or on the territory of another state, it would be extraordinary for an English court to treat these operations as mere private law torts giving rise to civil liabilities for personal injury, trespass, conversion, and the like.
This is not for reasons peculiar to armed conflict, which is no more than an ill defined extreme of inter state relations.
The rule is altogether more general, as was pointed out by Lord Wilberforce in Buttes Gas (p 931D E).
Once the acts alleged are such as to bring the issues into the area of international dispute the act of state doctrine is engaged.
Dicey, Morris & Collins on the Conflict of Laws, 15th ed (2012) write at para 5 049: The act of state doctrine has no application when it is clear that the relevant acts were done outside the sovereigns territory.
The authority cited for this statement is the decision of the Court of Appeal in Empresa Exportadora de Azucar v Industria Azucarera Nacional CA (The Playa Larga and the Marble Islands) [1983] 2 Lloyds Rep 171, 194.
The facts of that case were that a Cuban state owned trading enterprise had sold two cargoes of sugar for delivery at a Chilean port.
President Allendes government in Chile was overthrown while one of the ships, the Playa Larga, was discharging at Valparaiso and the other, the Marble Islands, was on its way.
Both vessels were operated by another Cuban state enterprise.
The Cuban government arranged for the Playa Larga to leave Chile with part of its cargo still on board and for the Marble Islands to be diverted elsewhere.
In an arbitration under the contract of sale, the tribunal awarded the Chilean buyers damages for non delivery and conversion of the undelivered part of the cargo of the Playa Larga, together with the restitution of the purchase price of the cargo of the Marble Islands.
Act of state was not raised before the arbitrators, but was said to be available on their findings of fact.
It was rejected by the judge and the Court of Appeal on the ground that it was not open to the sellers, and was in any event unsound because there was no act of state.
The claim arose from a commercial transaction, not a sovereign act: p 193.
But the court went on to deal briefly with other points, including the argument that the act of state doctrine was limited to acts done within the territory of the foreign state, which they accepted: p 194.
For this, they relied mainly on statements in Duke of Brunswick v King of Hanover, Underhill v Hernandez and Buttes Gas.
In my opinion the statement in Dicey, Morris & Collins is applicable to what I have called municipal law act of state but not to international law act of state.
As I have observed, where the issue is whether the legislative or executive acts of a foreign sovereign are valid or lawful under its own municipal law, a limit to the sovereigns territory follows as a matter of course from the rule itself.
This is because, with limited exceptions, generally governed by treaty, international law does not recognise the right of states to apply its domestic public laws extra territorially: France v Turkey (Affaire du Lotus) PCIJ, Series A, No 10, at pp 18 19.
This limitation is recognised in the municipal law of most states, and is a fundamental principle of English private international law: see Government of India v Taylor [1955] AC 491, 511 (Lord Keith of Avonholm); Ortiz v Attorney General of New Zealand [1984] AC 1, 21 (Lord Denning MR); Williams & Humbert Ltd v W & H Trade Marks (Jersey) Ltd [1986] AC 368, 428, 430 3; In re State of Norways Application [1990] AC 723, 808 (Lord Goff).
All of the judicial observations supporting the territorial limitation of the foreign act of state doctrine, including those on which the Court of Appeal relied in the Playa Larga, have been made in the context of challenges to the recognition of foreign municipal legislation or to the lawfulness of an executive act of state under the foreign states municipal law: see Duke of Brunswick v King of Hanover, supra, at 17; Hatch v Baez, supra, at p 599; Underhill v Hernandez, supra, at p 252; Buttes Gas, at p 931A B; WS.
Kirkpatrick & Co Inc v Environmental Tectonics Corporation International, 493 US 400 (1900) 400, 405; Kuwait Airways Corpn v Iraqi Airways Co (Nos 4&5), at para 135 (Lord Hope); A Ltd v B Bank [1997] FSR 165, at para 13.
Turning to international law act of state, the position is different.
Where the question is the lawfulness of a states acts in its dealings with other states and their subjects, the act of state doctrine applies wherever the relevant act of the foreign state occurs (save, arguably, if it occurred in the United Kingdom: see A Ltd v B Bank [1997] FSR 165 at para 13).
The reason is, again, inherent in the principle itself.
It is not concerned with the lawfulness of the states acts under municipal systems of law whose operation, in the eyes of other states, is by definition territorial, but with acts whose lawfulness can be determined only by reference to international law, which has no territorial bounds.
In the nature of things a sovereign act done by a state in the course of its relations with other states will commonly occur outside its territorial jurisdiction.
States maintain embassies and military bases abroad.
They conduct military operations outside their own territory.
They engage in intelligence gathering.
They operate military ships and aircraft.
All of these are sovereign acts.
The paradigm cases are acts of force in international space or on the territory of another state.
Obvious examples, as Lord Pearson observed in Nissan v Attorney General [1970] AC 179, 237, are making war and peace, making treaties with foreign sovereigns, and annexations and cessions of territory.
In my opinion, subject to the important public policy exception to which I shall come, it is not open to an English court to apply the ordinary law of tort, whether English or foreign, to acts of this kind committed by foreign sovereign states.
Thus if, in the Playa Larga, the Cuban mode of prosecuting its dispute with General Pinochets government in Chile had been an act of state, it would have been contrary to principle for an English court to judge its lawfulness according to English (or any other) municipal law, whether it happened in Cuba, Chile or on the high seas.
In Dobree v Napier the relevant acts occurred on the high seas, but their inherently governmental character made it impossible to treat it as a tortious conversion of goods under English municipal law.
In Buttes Gas, it was impossible to know in whose territory they had occurred, since that begged the question at issue, but Lord Wilberforces wider principle was applied regardless of the answer to that question.
The Court of Appeal proceeded on the same basis in R (Noor Khan) v Secretary of State for Foreign and Commonwealth Affairs, where the relevant acts occurred in Pakistan.
I think that they were right to do so.
Subject to any public policy exception, it is this principle which applies to the acts alleged against United States officials in the present cases.
In Rahmatullah, they were exercises of governmental authority by the armed forces and officials of the United States, acting as an occupying power in Iraq and a mandatory power in Afghanistan.
In Belhaj, the claimants rendition from Thailand to Libya and their mistreatment in the process was also an exercise by the United States of governmental authority.
It involved the application of force by United States officials in the course of their governments campaign against international terrorism and in the conduct of their relations with Malaysia, Thailand and Libya.
Whatever one may think of the lawfulness or morality of these acts, they were acts of state performed outside the territorial jurisdiction of the United States, which cannot be treated by an English court as mere private law torts, any more than drone strikes by US armed forces can.
Juridical basis
The foreign act of state doctrine has commonly been described as a principle of non justiciability.
The label is unavoidable, but it is fundamentally unhelpful because it is applied to a number of quite different concepts which rest on different principles.
One, comparatively rare, case in which an issue may be non justiciable is that although it is legally relevant, the courts are incompetent to pronounce upon it or disabled by some rule of law from doing so.
Leaving aside cases in which the issue is assigned to the executive or the legislature under our conception of the separation of powers, most cases of this kind involve issues which are not susceptible to the application of legal standards.
The most famous example is Buttes Gas, where Lord Wilberforce declined to resolve the issue because there were no judicial or manageable standards by which to do so.
The court was therefore incompetent to adjudicate upon it at all.
As this court pointed out in Shergill v Khaira [2015] AC 359 at para 40, this was because the issue was political.
But there is another sense in which an issue may be non justiciable, which is also illustrated by the facts of Buttes Gas.
It may be non justiciable because the English court ought not to adjudicate upon it even though it can, because it is not a matter which can properly be resolved by reference to the domestic law of the state.
Occidentals contention in Buttes Gas was that the mixture of diplomacy and power politics by which the four states involved had eventually resolved the border dispute in a manner unsatisfactory to them, could be characterised as an unlawful conspiracy for the purposes of domestic law.
An unlawful conspiracy is in itself justiciable.
It is a recognised cause of action in English law.
But an English court could not adjudicate upon it because it was parasitic upon a finding that the foreign states involved had acted in breach of international law, being the only law relevant to their acts.
This too can fairly be called a principle of non justiciability, because its effect is that it is not the proper function of the English courts to resolve the issue.
But Buttes Gas has been widely misunderstood as suggesting that an absence of judicial or manageable standards is the juridical basis of the foreign act of state doctrine in all cases where it is applied to the transactions of sovereign states.
It is not.
The absence of judicial or manageable standards was simply the reason why the House declined to review the particular facts alleged in that case.
Incidental unlawfulness
The act of state doctrine does not apply, in either form, simply by reason of the fact that the subject matter may incidentally disclose that a state has acted unlawfully.
It applies only where the invalidity or unlawfulness of the states sovereign acts is part of the very subject matter of the action in the sense that the issue cannot be resolved without determining it.
There is no real difference between the parties on this point, but it is worth emphasising none the less, for it is of some importance.
Some such distinction is essential if the act of state doctrine is not to degenerate into a mere immunity against international embarrassment.
The principle is implicit in many of the English cases, but it can best be illustrated by the decision of the US Supreme Court in WS Kirkpatrick & Co Inc v Environmental Tectonics Corpn International, 493 US 400 (1990), which is also the case in which it was first clearly articulated.
Environmental Tectonics had succeeded in a competitive tender for a construction contract with the government of Nigeria.
The plaintiff, an unsuccessful bidder, alleged that the company had bribed Nigerian government officials, and claimed damages under various US federal statutes.
The receipt of bribes was illegal under Nigerian law, but the Supreme Court held that the act of state doctrine did not apply because the legal implications of bribery in Nigerian law were not a necessary part of the plaintiffs case.
He had only to prove that the bribes had been paid, and that Environmental Tectonics had thereby committed an act unlawful under US law.
That the facts would incidentally disclose offences by the bribed officials was irrelevant.
Scalia J, delivering the judgment of the Court held (p 406) that act of state issues only arise when a court must decide that is, when the outcome of the case turns upon the effect of official action by a foreign sovereign.
There are many circumstances in which an English court may have occasion to express critical views about the public institutions of another country, without offending against the foreign act of state doctrine or any analogous rule of law.
In deportation and extradition cases, for example, it may be necessary to review the evidence disclosing that the person concerned would be tortured or otherwise ill treated by the authorities in the country to which he would be sent.
In forum non conveniens cases the court may have to conclude that in some countries the courts are corrupt or controlled by the state.
When evidence is said to have been obtained by torture at the hands of officials of a foreign state, a court which is invited to exclude it cannot avoid investigating the allegation and upholding it if the evidence bears it out.
I do not regard this as undermining the foreign act of state doctrine, because that doctrine proceeds on a different basis.
The foreign act of state doctrine has never been directed to the avoidance of embarrassment, either to foreign states or to the United Kingdom government in its dealings with them.
But neither is it concerned with incidental illegality.
Where an English court makes findings in a deportation case about, say, the use of torture in a foreign jurisdiction it is not concerned with its lawfulness or unlawfulness, either under the law of the foreign jurisdiction or in international law.
It is simply applying its own standards to an exercise of its own jurisdiction.
In the present cases the question whether the acts alleged against the relevant foreign states were unlawful is not incidental.
It is essential to the pleaded causes of action against the defendants in both actions.
This is because the various civil wrongs which are alleged to have caused damage to the claimants are not said to have been committed directly by the defendants.
They were committed by the foreign states.
If the conduct of the foreign states was lawful, it cannot be tortious for the defendants to have assisted in their commission.
The Court of Appeal analysed the various causes of action against the defendants in order to demonstrate that each of them depended on establishing that the conduct of the foreign states was unlawful.
I think that their analysis is unanswerable.
The judgment of Leggatt J
In his judgment in Rahmatullah, Leggatt J accepted that there was a difference between cases which turned on the application to a states sovereign acts of its own municipal law, and cases concerning transactions between states.
Indeed, he regarded them as juridically wholly distinct.
Borrowing a concept from the decisions of the United States Supreme Court in Ricaud v American Metal Co Ltd 246 US 304 (1918) and WS Kirkpatrick & Co Inc v Environmental Tectonics Corpn International, 493 US 400 (1990), 406, he described what he called the traditional act of state doctrine as a rule of decision applicable to challenges to the lawfulness of an act of state under the states municipal law.
By this he meant that it requires the court to decide the case on the footing that the relevant acts of a foreign state were valid under its own law (para 123).
By comparison, in cases concerning the transactions of foreign sovereign states, the rule was one of judicial restraint or abstention.
It prevents a court from deciding or adjudicating upon a case on the ground that its subject matter is not suitable for judicial determination.
He regarded judicial restraint or abstention as being required only when there were no judicial or manageable standards, and that, he thought, could never be the case if a municipal law right was engaged.
For this last point, he relied mainly on the decision of this court in Shergill v Khaira [2015] AC 359.
It will be apparent from what I have already said that I cannot accept this analysis.
In the first place, I doubt whether the act of state doctrine, as applied to the sovereign acts of a foreign state, is helpfully described as a rule of decision.
The principle, at any rate in the English case law, is one of non justiciability.
It is that the court will decline to determine the lawfulness of an act of state, not that it will determine its lawfulness on some assumption about the content of the foreign law.
Secondly, not all cases in which the foreign act of state doctrine is applied to transactions between states lack judicial or manageable standards for their decision.
The courts are, for example, perfectly competent to construe treaties, and regularly do so when municipal law rights depend on it: Republic of Ecuador v Occidental Exploration and Petroleum Co [2006] QB 432.
As Lord Wilberforce pointed out in Buttes Gas (p 926F), they are competent to determine the international boundaries of sovereign states and have done so without difficulty in proper cases.
On the facts of R (Noor Khan) v Secretary of State for Foreign Affairs, the courts would have been competent to apply English criminal law to the operators of drones over Pakistan.
If the courts, in appropriate cases, decline to do these things, it is usually not because of any lack of legal standards, but because it would be contrary to principle.
Shergill v Khaira was not an act of state case.
The question was whether the court could entertain a claim to enforce the trusts of a religious charity, if that would require it to decide religious issues.
It was argued that it could not do so, because such issues were non justiciable for want of judicial or manageable standards by which to assess them.
Lord Neuberger, Lord Sumption and Lord Hodge, in a joint judgment with which Lord Mance and Lord Clarke agreed, distinguished (para 41) between (i) rules of law such as state immunity which confer immunity from jurisdiction, or rules like the act of state doctrine which protected certain acts from challenge; and (ii) cases where an issue is said to be inherently unsuitable for judicial decision by reason only of its subject matter.
Where a legal right of the citizen or a reviewable question of public law arose, the case could not be regarded as inherently unsuitable for judicial decision.
But the case is not authority for the proposition that the application of the foreign act of state doctrine to transactions between states depends on the absence of any municipal law right, nor that it was coterminous with the class of cases in which there were no judicial or manageable standards.
Leggatt Js analysis derives some support from the decision of the High Court of Australia in Moti v The Queen 245 CLR 456.
The facts of this case were somewhat similar to those of the English cases of R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42 and R v Mullen [2000] QB 520.
In these cases, it had been held that the involuntary deportation of an accused person from a foreign country by British officials to face trial in England, otherwise than by way of lawful extradition, was an abuse of process in English criminal proceedings.
In each case, the deportation had been carried out with the co operation of the police in the foreign country.
What made this an abuse of process was the breach of the domestic law of the foreign country and of international law by the British prosecuting authorities or British officials acting in support of them: see Bennett, at pp 62G (Lord Griffiths), 67G (Lord Bridge); and Mullen, at p 535F.
The assumed facts suggested that the local police must also have acted in breach of their own law, but I cannot accept Lord Mances view that this was critical to the analysis.
The removal of the victim to the jurisdiction in which he was brought to trial would have been as much an abuse of process and for exactly the same reasons if the prosecutors had simply kidnapped him with no assistance from local officials.
Any unlawfulness in the conduct of the foreign officials was incidental.
That was presumably why no point was taken on the foreign act of state doctrine in either of the English cases.
Mr Motis position was exactly the same.
He had been illegally deported from the Solomon Islands by a process in which Australian officials in the Islands were involved.
His case was that the criminal proceedings should be stayed because of what Australian officials did in connection with his deportation (para 9).
On this occasion the foreign act of state doctrine was raised.
The short answer to this would have been that the unlawfulness of the Australian officials conduct was enough to justify staying the proceedings against Mr Moti.
The unlawfulness of the acts of their foreign collaborators was incidental and irrelevant.
But in rejecting the argument, the Court adopted the view of Dr F A Mann, a long standing critic of the act of state doctrine, that there was no bar to adjudication of the lawfulness of a foreign governmental act if it was necessary to the resolution of an issue within the jurisdiction and competence of the forum: see paras 50 52.
In my view this was too wide and certainly wider than anything that was required for the decision of the case.
The proposition which the High Court of Australia accepted from Dr Mann is tantamount to the abolition of the foreign act of state doctrine.
This was indeed a consummation devoutly wished by that great scholar.
He regarded the whole doctrine as incoherent.
Properly understood, I do not think that it is incoherent.
What is clear, however, is that to arrive at the view held by Dr Mann it would be necessary to throw over a substantial body of jurisprudence, much of it recent and much of it not considered by the High Court of Australia, including Lord Wilberforces analysis in Buttes Gas.
The judgment of the Court of Appeal
The Court of Appeal took a different approach.
They considered that while the facts of Buttes Gas might be analysed in terms of lack of judicial competence the act of state doctrine was not limited to such situations, even as applied to the transactions of sovereign states.
I agree with this.
The Court of Appeal accepted that the act of state doctrine was engaged by the claimants allegations in Belhaj, and that it barred the claim unless those allegations fell within one of the recognised exceptions to the doctrine.
The exceptions which they regarded as relevant were (i) an exception for cases where the unlawful character of the foreign states acts was merely incidental to the allegations; (ii) an exception for acts done outside the territory of the foreign state; and (iii) a public policy exception for violations of international law or fundamental human rights.
The Court of Appeal held that the second and third exceptions applied.
I have already dealt with exception (i), which is uncontentious, and exception (ii), which I consider inapplicable to the kind of act of state relied upon here.
The critical point, to my mind, is exception (iii).
Violations of international law or fundamental human rights
The Court of Appeal described this as an exception to the ordinary immunity of foreign acts of state.
It might equally have been described, as Lord Mance does, as a category of case to which the principle does not apply to begin with.
The difference, if there is one, does not seem to me to matter.
What matters, on either analysis, is that the principle which underlies this category should be sufficiently clear to make the law coherent and as clear as is consistent with the difficulty of the subject.
To say of a rule of law or an exception to that rule that it is based on public policy does not mean that its application is discretionary according to the courts instinct about the value of the policy in each particular case.
But rules of judge made law are rarely absolute, and this one like any other falls to be reviewed as the underlying policy considerations change or become redundant, or as it encounters conflicting policy considerations which may not have arisen or had the same significance before.
Conceptions of public policy, as Lord Wilberforce observed in Blathwayt v Baron Cawley [1976] AC 397, 426, should move with the times and that widely accepted treaties and statutes may point the direction in which such conceptions, as applied by the courts, ought to move.
The acceptability of a foreign law must be judged by contemporary standards, Lord Nicholls added in adopting that statement in Kuwait Airways, at para 28.
The standards which public policy applies in cases with an international dimension have changed a great deal in the past half century.
In Hatch v Baez, Underhill v Hernandez and Oetjen v Central Leather Co the US Supreme Court declined to consider whether the arbitrary detention of the plaintiff and the expropriation of his property were breaches of international law.
In all three cases, this was said to be because any such breach would have been a matter for diplomatic resolution between the United States and the foreign states involved and not for domestic litigation.
The courts view on this point reflected the then state of customary international law, which recognised only limited obligations owed by states with regard to the treatment of aliens within their territory.
These were generally based on discrimination or denial of justice, as they had been since the middle ages.
They were not based on the acceptance of minimum standards for the content of a states municipal law.
A comparison between the first edition of Oppenheims International Law (1905), paras 320 321, and the ninth edition (1992) edited by Sir Robert Jennings and Sir Arthur Watts, paras 404 405, 407, 409, will make the point.
Since the Second World War there has been a considerable expansion of the range of matters with which international law is concerned, which now extends to many aspects of the relations between states on the one hand and their subjects or residents on the other.
The growing importance of the international protection of human rights is one aspect of this change, but not the only one.
International law increasingly places limits on the permissible content of municipal law and on the means available to states for achieving even their legitimate policy objectives.
At the same time, the relationship between English law and international law has changed.
It used to be said that customary international law is part of the common law.
The sentiment dates back to Lord Mansfield in Triquet v Bath (1764) 3 Burr 1478, 1481 and Blackstones Commentaries, Bk IV, Chapter 5.
The classic example in their day was the recognition at common law of the immunities of states and diplomatic agents.
At a time when there was very little overlap between international and municipal law, the assumption of Mansfield and Blackstone had much to be said for it.
Today it would be truer to say, as Lord Bingham was inclined to think in R v Jones (Margaret) [2007] 1 AC 136 (para 11), that international law is not a part of but is one of the sources of the common law.
The same view has been expressed by Professor Brierly, International Law in England (1935) 51 LQR 24, 31, and by the editors of Brownlies Public International Law, 8th ed (2012), 68.
English law has always held to the dualist theory of international law.
In principle, judges applying the common law are not at liberty to create, abrogate or modify municipal law rights or obligations in accordance with unincorporated norms derived from international law, whether customary or treaty based.
But, as Lord Bingham pointed out in R v Lyons [2003] 1 AC 976, at para 13, international law may none the less affect the interpretation of ambiguous statutory provisions, guide the exercise of judicial or executive discretions and influence the development of the common law.
Although the courts are not bound, even in these contexts, to take account of international law, they are entitled to do so if it is appropriate and relevant: see, in the context of discretions R (Hurst) v London Northern District Coroner [2007] 2 AC 189, paras 53 59 (Lord Brown), and R (Wang Yam) v Central Criminal Court [2015] UKSC 76, at paras 35 36 (Lord Mance).
In those areas which depend on public policy, the content of that policy may be and in practice often is influenced by international law.
These observations are especially pertinent when public policies conflict, as they inevitably do when one seeks to fix limits to a principle of law such as the foreign act of state doctrine.
There is a danger that retaining the doctrine while recognising exceptions, will result either in the exception consuming the rule or in the rule becoming incoherent.
This concern lies behind the refusal of the US Supreme Court to treat a violation of international law as such as being an exception to the foreign act of state doctrine: see Banco Nacional de Cuba v Sabbatino, supra, at p 431.
Any exception must be limited to violations of international law which can be distinguished on rational grounds from the rest.
This was the question with which the House of Lords had to contend in the milestone decisions in Oppenheimer v Cattermole [1976] AC 249 and Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883.
The question in Oppenheimer v Cattermole was whether the English courts should recognise a Nazi decree law of 1941 which deprived Jews of their German nationality and confiscated their property if they were ordinarily resident outside Germany at the date of the decree.
If regard was had to the decree, Mr Oppenheimer lost his German nationality upon its publication, with the result that his pension from the German Federal Republic did not qualify for exemption from income tax in the United Kingdom.
The basic rule, at any rate before the Universal Declaration of Human Rights (1948), was not in doubt.
In both public and private international law, each state was exclusively entitled to determine who its nationals were in accordance with its own law, subject to limits upon its right to impose its own nationality extra territorially.
The Court of Appeal had held that a relevant foreign law regulating nationality had to be recognised however inequitable, oppressive or objectionable it may be: [1973] Ch 264, 273 (Buckley LJ).
The House of Lords dismissed his appeal on other grounds, without finding it necessary to decide this point.
But Lord Cross, with whom Lord Hodson and Lord Salmon agreed, held that had the point arisen the decree would have been disregarded.
His analysis includes extensive reference to international law.
But the real ground of his decision was not that the decree was itself a violation of international law.
It was that the principle of international law which left each state free to determine who were its nationals could not require the courts of other states to recognise determinations repugnant to their own public policy.
That raised the question how effect could be given to English public policy.
The decree of 1941 could not be regarded as invalid under German law.
Nor could the subsistence of German nationality be determined according to some law other than German law.
The solution adopted by Lord Cross was that as a matter of English public policy a law of this sort constitutes so grave an infringement of human rights that the courts of this country ought to refuse to recognise it as a law at all (p 278).
In Kuwait Airways, the House of Lords went further than Lord Cross had done.
It held by a majority (Lord Scott dissenting) that in certain circumstances the municipal law of a state could be disregarded, even in its application to matters within its own territory and notwithstanding the act of state doctrine, on the ground that it constituted a sufficiently serious violation of international law.
The issue was whether an English court should recognise a decree law of the Iraqi government (Resolution 369) extinguishing the existence of Kuwait as an independent state and expropriating its assets, including aircraft belonging to Kuwait Airways Corporation which were then located in Iraq.
Iraqi law was the lex situs.
As such, it was the law designated by ordinary principles of private international law.
The argument (summarised by Lord Nicholls at para 24) was that it could not be disregarded as a violation of the law of nations consistently with the foreign act of state doctrine.
The violation itself was admitted, and in any event incontestable.
Resolution 369 was, in Lord Nicholls words, part and parcel of the Iraqi seizure of Kuwait.
The seizure had been a flagrant breach of article 2(4) of the United Nations Charter by which states renounce the threat or use of force as an instrument of international policy, a provision which as Lord Steyn (para 115) pointed out had the character of jus cogens.
The annexation and the seizure of the assets of Kuwaiti nationals had been specifically condemned by successive resolutions of the UN Security Council.
Further Security Council resolutions had called on all states to take all necessary measures to protect the assets of the legitimate government of Kuwait and its agencies and to refrain from any action that might be regarded as recognising the seizures.
These resolutions were binding in international law on all states, including the United Kingdom.
The House declined to give effect to Resolution 369.
The leading speech was delivered by Lord Nicholls.
Lord Steyn and Lord Hope agreed with Lord Nicholls, adding observations of their own on the exclusion of Resolution 369.
Lord Hoffmann also agreed, adding observations on another point.
Lord Nicholls starting point (para 16) was that the rejection of an otherwise applicable foreign law was justified in cases where its application would be wholly alien to fundamental requirements of justice as administered by an English court.
In particular (para 26) the rule that the transactions of sovereign states were not justiciable could not prevent the court from examining them in a case where, because the violation of international law was incontestable, the adjudication problems confronting the English court in the Buttes litigation do not arise.
That being so, the court was at liberty to refuse to recognise a foreign law which offended against English public policy.
The next question was whether it did.
Lord Nicholls regarded Resolution 369 as contrary to public policy for three related reasons, which are summarised at para 29 of his speech.
First, it was a gross violation of established rules of international law of fundamental importance, as repugnant to English public policy as the Nazi decree considered in Oppenheimer v Cattermole.
Secondly (for good measure), the enforcement or recognition of Resolution 369 would be contrary to the obligations of the United Kingdom under the UN Charter (para 29).
Third, it would sit uneasily with the almost universal condemnation of Iraqs behaviour and with the military action, in which this country participated, taken against Iraq to compel its withdrawal from Kuwait.
Lord Steyn, while warning (para 114) that not every breach of international law will trigger the public policy exception, gave his own reasons in terms similar to Lord Nicholls.
So did Lord Hope.
He identified the relevant public policy as being that our courts should give effect to clearly established principles of international law (para 139).
But he thought it clear that very narrow limits must be placed on any exception to the act of state rule (para 138).
He concluded, at para 149: Respect for the act of state doctrine and the care that must be taken not to undermine it do not preclude this approach.
The facts are clear, and the declarations by the Security Council were universal and unequivocal.
If the court may have regard to grave infringements of human rights law on grounds of public policy, it ought not to decline to take account of the principles of international law when the act amounts as I would hold that it clearly does in this case to a flagrant breach of these principles.
As Lord Upjohn indicated in In re Claim by Helbert Wagg Co Ltd [1956] Ch 313, 334, public policy is determined by the conceptions of law, justice and morality as understood in the courts.
I would hold that the effectiveness of Resolution 369 as vesting title in IAC to KACs aircraft is justiciable in these proceedings, and that such a flagrant international wrong should be deemed to be so grave a matter that it would be contrary to the public policy of this country to give effect to it.
The principle which the Appellate Committee applied in Kuwait Airways was that the English courts were not precluded from questioning the propriety or otherwise of a foreign legislative act and declining to recognise it, if it offended a fundamental requirement of justice as administered by an English court.
It is the same as the principle which allows an English court to decline to apply a rule of an otherwise applicable foreign law which is contrary to public policy: see, now, section 14(3)(a)(i) of the Private International Law (Miscellaneous Provisions) Act 1995.
This is a principle of English public policy.
But in an international context, it is informed by any relevant norms of international law binding on the United Kingdom as it was in Kuwait Airways.
Recognition of the influence of international law does not mean that every rule of international law must be adopted as a principle of English public policy, even if it is acknowledged as a peremptory norm (jus cogens) at an international level.
For my part, I would adopt the cautious observations of Le Bel J, delivering the judgment of the Supreme Court of Canada in Kazemi Estate v Islamic Republic of Iran [2014] SCC 62; [2014] 3 SCR 176 at paras 150 151.
The issue before the court in that case was whether to recognise a public policy exception to state immunity in cases where this would conflict with the values protected by the Canadian Charter of Rights and Freedoms.
Le Bel J pointed out that not all commitments in international agreements amount to principles of fundamental justice.
Their nature is very diverse.
International law is ever changing.
The interaction between domestic and international law must be managed carefully in light of the principles governing what remains a dualist system of application of international law and a constitutional and parliamentary democracy.
The mere existence of an international obligation is not sufficient to establish a principle of fundamental justice.
Were we to equate all the protections or commitments in international human rights documents with principles of fundamental justice, we might in effect be destroying Canadas dualist system of reception of international law and casting aside the principles of parliamentary sovereignty and democracy.
The role of international law in this field, as he went on to point out, is to influence the process by which judges identify a domestic principle as representing a sufficiently fundamental legal policy: 151.
That being said, I am prepared to accept that jus cogens norms can generally be equated with principles of fundamental justice and that they are particularly helpful to look to in the context of issues pertaining to international law.
Just as principles of fundamental justice are the basic tenets of our legal system . , jus cogens norms are a higher form of customary international law.
In the same manner that principles of fundamental justice are principles upon which there is some consensus that they are vital or fundamental to our societal notion of justice, jus cogens norms are customs accepted and recognized by the international community of states from which no derogation is permitted
Torture
The legal implications of torture in English and international law have been considered by the House of Lords on a number of occasions: R v Bow Street Metropolitan Stipendiary Magistrate, Ex p Pinochet Ugarte (No 3) [2000] 1 AC 147, A v Secretary of State for the Home Department (No 2) [2006] 2 AC 221, Jones v Ministry of the Interior of the Kingdom of Saudi Arabia [2007] 1 AC 270.
Torture is unconditionally prohibited by article 3 of the European Convention on Human Rights and by the UN Convention against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment (1984).
The United Kingdom is a party to these instruments and has given effect to them by statute.
The prohibition has the status of jus cogens erga omnes.
That is to say that it is a peremptory norm of international law which gives rise to obligations owed by each state to all other states and from which no derogation can be justified by any countervailing public interest.
In the words of article 2.1 of the UN Torture Convention, no exceptional circumstances whatsoever, whether a state of war or a threat of war, internal political instability or any other public emergency, may be invoked as a justification of torture.
In A v Secretary of State for the Home Department (No 2), supra, at para 33, Lord Bingham, said: There can be few issues on which international legal opinion is more clear than on the condemnation of torture.
Offenders have been recognised as the common enemies of mankind (Demjanjuk v Petrovsky (1985) 612 F Supp 544, 566, Lord Cooke of Thorndon has described the right not to be subjected to inhuman treatment as a right inherent in the concept of civilisation (Higgs v Minister of National Security [2000] 2 AC 228, 260), the Ninth Circuit Court of Appeals has described the right to be free from torture as fundamental and universal (Siderman de Blake v Argentina (1991) 965 F 2d 699, 717) and the UN Special Rapporteur On Torture (Mr Peter Koojimans) has said that If ever a phenomenon was outlawed unreservedly and unequivocally it is torture (Report of the Special Rapporteur on Torture, E/CN 4/1986/15, para 3).
In Jones v Ministry of the Interior of the Kingdom of Saudi Arabia, the House of Lords held that notwithstanding the status of the prohibition of torture as jus cogens in international law, the United Kingdom was under no international law obligation to make a civil remedy available for torture committed outside its territorial jurisdiction.
There were two reasons for this.
The main reason was that as a matter of customary international law breach of a jus cogens norm does not itself require civil jurisdiction to be assumed by states.
Lord Bingham, with whom the rest of the Appellate Committee agreed, expressed this (para 24) in terms taken from the first edition of Fox, The Law of State Immunity: State immunity is a procedural rule going to the jurisdiction of a national court.
It does not go to substantive law; it does not contradict a prohibition contained in a jus cogens norm but merely diverts any breach of it to a different method of settlement.
Lord Hoffmann, concurring, said, at para 45: To produce a conflict with state immunity, it is therefore necessary to show that the prohibition on torture has generated an ancillary procedural rule which, by way of exception to state immunity, entitles or perhaps requires states to assume civil jurisdiction over other states in cases in which torture is alleged.
Such a rule may be desirable and, since international law changes, may have developed.
But it is not entailed by the prohibition of torture.
Lord Bingham and Lord Hoffmann went on to consider whether an obligation to make a civil remedy available could be derived from the Torture Convention.
They concluded that it could not.
Article 14 of the Torture Convention, which dealt with the states obligations in respect of civil remedies, dealt only with remedies for torture committed within the states territorial jurisdiction.
These conclusions have provoked some academic controversy and have been criticised by the respondents on these appeals.
But they were supported by the decision of the International Court of Justice in Democratic Republic of Congo v Belgium (case concerning arrest warrant of 11 April 2000) (2002) ICJ Rep 3, in which state immunity was held to be available in proceedings based on breach of another peremptory norm of international law, namely the prohibition of war crimes and crimes against humanity.
More recently, in Jurisdictional Immunities of the State (Germany v Italy, Greece Intervening) [2012] ICJ Rep 99, the International Court of Justice reaffirmed its decision in Arrest Warrant and held that Italy and Greece were in breach of customary international law in rejecting claims by Germany to state immunity in respect of massacres and deportations of civilians by German armed forces in Italy and Greece during the Second World War.
The Court specifically endorsed the decision of the House of Lords in Jones v Saudi Arabia: see paras 85, 87, 96.
In its reasoning, the International Court adopted the same distinction between procedure and substance as Lord Bingham at para 24 of his speech in that case: 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. (para 95) Since that decision, the European Court of Human Rights in Jones v United Kingdom (2014) 59 EHRR 1, at para 198 and the Supreme Court of Canada in Kazemi Estate v Islamic Republic of Iran [2014] SCC 62; [2014] 3 SCR 176 at paras 102 105, 141 167, have both conducted a careful review of the international material and the decisions of national courts, and arrived at the same conclusion on this point as the House of Lords did in Jones.
I do not propose to re examine that material once more, because the present question is not the correctness of the decision in Jones, but its relevance in the rather different context of the foreign act of state doctrine.
In Jones, the absence of any international law obligation to make a civil remedy available for torture abroad mattered.
This was because states unquestionably have an international law obligation to recognise the forensic immunity in their own courts of other states and their agents.
The International Court of Justice held as much in Arrest Warrant and again in Jurisdictional Immunities.
That international law obligation might have been displaced if there had been a countervailing international law obligation to provide a civil remedy for torture wherever committed.
The act of state doctrine, by comparison, does not reflect any obligation of states in international law.
It follows that an exception to it does not need to be based on a countervailing international law obligation in order to accord with principle.
It is enough that the proposed exception reflects a sufficiently fundamental rule of English public policy.
In my opinion, it would be contrary to the fundamental requirements of justice administered by an English court to apply the foreign act of state doctrine to an allegation of civil liability for complicity in acts of torture by foreign states.
Respect for the autonomy of foreign sovereign states, which is the chief rationale of the foreign act of state doctrine, cannot extend to their involvement in torture, because each of them is bound erga omnes and along with the United Kingdom to renounce it as an instrument of national or international policy and to participate in its suppression.
In those circumstances, the only point of treating torture by foreign states as an act of state would be to exonerate the defendants from liability for complicity.
The defendants are not foreign states.
Nor are they the agents of foreign states.
They are or were at the relevant time officials and departments of the British government.
They would have no right of their own to claim immunity in English legal proceedings, whether ratione personae or ratione materiae.
On the other hand, they would be protected by state immunity in any other jurisdiction, with the result that unless answerable here they would be in the unique position of being immune everywhere in the world.
Their exoneration under the foreign act of state doctrine would serve no interest which it is the purpose of the doctrine to protect.
This is not a point which has arisen in any English case apart from R (Noor Khan) v Secretary of State for Foreign Affairs.
But it was considered by the Supreme Court of Canada in Omar Ahmed Khadr v Canada [2008] 2 SCR 125 and by the Federal Court of Australia in Habib v Commonwealth (2010) 265 ALR 50.
Khadr was not a case of torture.
The plaintiff had been captured by US forces in Afghanistan and transferred to Guantanamo Bay.
The allegation was that Canadian officials had connived in his unlawful detention there by the United States government.
The Supreme Court of Canada held that the foreign act of state doctrine had no application for two reasons.
First, the US Supreme Court in Rasul v Bush (2004) 542 US 466 had held that the indefinite detention without access to a court of persons captured in military operations was a violation of the Geneva Conventions: paras 21 24.
That constituted an admission by the United States and made a finding of violation uncontentious.
The court declined to consider what the position would have been in the absence of that decision.
Secondly, the considerations of comity which underlay the foreign act of state doctrine cannot be used to justify Canadian participation in activities of a foreign state or its agents that are contrary to Canadas international obligations: para 18.This was because (i) Canada was itself party to the Geneva Convention, and under an international law obligation not to countenance the violations in question, and (ii) the right to apply for habeas corpus was a fundamental human right recognised by Canadian law also: paras 25 26.
In Habib, the plaintiff had been arrested in Pakistan and successively detained there, in Egypt and at Guantanamo Bay.
The allegation was that Australian officials aided and abetted officials of the various foreign states involved to torture him.
Jagot J, delivering the leading judgment in the Federal Court of Australia, held, at para 114, that the modern cases on the foreign act of state doctrine do not support a conclusion that the act of state doctrine prevents an Australian court from scrutinising the alleged acts of Australian officials overseas in breach of peremptory norms of international law to which effect has been given by Australian laws having extra territorial application.
She went on to point out that the public policy considerations which justified both the act of state doctrine and the exceptions to it had to be considered in a context where the prohibition on torture forms part of customary international law and those partners themselves are signatories to an international treaty denouncing torture.
The purpose of the foreign act of state doctrine is to preclude challenges to the legality or validity of the sovereign acts of foreign states.
It is not to protect English parties from liability for their role in it.
In itself, that would not prevent them from taking incidental advantage of the foreign act of state doctrine.
In R (Noor Khan) v Secretary of State for Foreign Affairs, British officials were entitled to take advantage of the doctrine in a case where they were said to have assisted in military action overseas by a foreign sovereign.
I think that that decision was correct.
But torture is different.
It is by definition an act of a public official or a person acting in an official capacity: see article 1 of the Torture Convention.
Article 4 of the Convention requires the United Kingdom to criminalise not only torture (as defined) but acts constituting complicity in torture.
Article 5 requires the United Kingdom to establish criminal jurisdiction over offences referred to in article 4 wherever in the world they are committed, if they are committed by its nationals or by persons present in its territory.
It is no answer to these points to say that these treaty provisions are concerned with criminal law and jurisdiction.
So they are.
But the criminal law reflects the moral values of our society and may inform the content of its public policy.
Torture is contrary to both a peremptory norm of international law and a fundamental value of domestic law.
Indeed, it was contrary to domestic public policy in England long before the development of any peremptory norm of international law.
It derives its force chiefly from Englands long domestic tradition of abhorrence of torture, even in a period when it was commonplace in other jurisdictions.
As Lord Bingham observed in A v Secretary of State for the Home Department (No 2), supra, at para 12, the condemnation of torture is not simply an exclusionary rule of evidence.
It is more aptly categorised as a constitutional principle than as a rule of evidence: cf para 51.
The Secretary of State submits that unless the facts are undisputed or indisputable, as they were in Kuwait Airways, the foreign act of state doctrine precludes any examination of the facts.
In my view this submission fails to distinguish between two different inquiries: (i) an enquiry into the lawfulness or validity of the alleged act of state, and (ii) an inquiry into the question whether there is any factual foundation for applying the foreign act of state doctrine at all.
Whenever the foreign act of state doctrine is invoked, the court must decide whether it applies.
If it cannot do it by reference to the pleadings or admissions, it must examine the evidence.
This may involve examining what the state has done, for example where there is an issue as to its responsibility for the acts of its alleged agents.
Thus in Underhill v Hernandez the application of the foreign act of state doctrine came before the Supreme Court on an appeal from the decision at a trial.
The trial court had made findings of fact about the responsibility of the government of Venezuela.
The Supreme Court relied on these findings (p 254) without any suggestion that in making them the lower court had been sitting in judgment on that government.
The same point could be made about Hatch v Baez and Oetjen v Central Leather Co. The need to establish a factual foundation for the application of the doctrine must equally apply where the issue concerns not the character of the act but the availability of an exception.
I conclude that it would not be consistent with English public policy to apply the foreign act of state doctrine so as to prevent the court from determining the allegations of torture or assisting or conniving in torture made against these defendants.
Unlawful detention, enforced disappearance and rendition
Article 9 of the Universal Declaration of Human Rights (1948) provides that no one shall be subjected to arbitrary arrest, detention or exile.
The prohibition of arbitrary detention gives rise to problems of definition far more complex than those associated with the prohibition of torture.
Torture is always contrary to international law, but not all detention is arbitrary.
On the question what makes it arbitrary, there is as yet no clear consensus.
The editors of the American Law Institutes authoritative Restatement (3rd) of the Foreign Relations Law of the United States (1987) express the view that arbitrary detention violates customary international law if it is prolonged and practiced as state policy: see para 702(e) and Comment (h).
More recently, in December 2012, the UN Working Group on Arbitrary Detention, after canvassing states on the question what factors qualified detention as arbitrary in their domestic law, concluded that detention might be regarded as arbitrary in customary international law if it lacked any legal basis, but also in some circumstances even if it did have a legal basis, depending on the reason for the detention and in some cases on its duration: UN A/HRC/22/44, at para 38.
These more or less speculative suggestions may indicate that the boundaries of arbitrary detention in international human rights law are not yet fixed.
But it is clear that the irreducible core of the international obligation, on which there is almost complete consensus, is that detention is unlawful if it is without any legal basis or recourse to the courts.
The consensus on that point is reflected in the terms of the International Covenant on Civil and Political Rights (1966), an expansion in treaty form of the Universal Declaration of 1948, which provides by article 9: 1.
Everyone has the right to liberty and security of person.
No one shall be subjected to arbitrary arrest or detention.
No one shall be deprived of his liberty except on such grounds and in accordance with such procedures as are established by law. 3.
Anyone arrested or detained on a criminal charge shall be brought promptly before a judge or other officer authorized by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release 4.
Anyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings before a court in order that that court may decide without delay on the lawfulness of his detention and order his release if the detention is not lawful. 5.
Anyone who has been the victim of unlawful arrest or detention shall have an enforceable right to compensation.
The Covenant has been ratified by 167 states to date, including the United Kingdom, the United States, Thailand and Libya.
Malaysia is one of a handful of states which are not a party, but it has declared that it adheres to its principles.
The UN Working Group regarded this irreducible core as jus cogens: loc cit, para 49.
In my opinion they were right to do so.
It is fair to say that article 4 of the Covenant does recognise a limited right to derogate from its terms in time of public emergency which threatens the life of the nation to the extent strictly required by the exigencies of the situation, with certain exceptions such as torture, arbitrary killing and slavery.
The existence of a right to derogate is normally regarded as inconsistent with the status of jus cogens: see article 53 of the Vienna Convention on the Law of Treaties.
But this difficulty is more apparent than real.
Although expressed as a right of derogation, the exception for public emergencies corresponds to the general exception from state responsibility which international law recognises in cases where an act prohibited by international law is shown to be the only way for a state to safeguard an essential interest against a grave and imminent peril: see the International Law Commissions Draft Articles on Responsibility of States for Internationally Wrongful Acts, article 25, and the extensive review of judicial decisions and state practice cited in the associated commentary.
For this reason the UN Working Group considered that non derogability in an emergency was consistent with the prohibition being a peremptory norm: UN A/HRC/22/44, at paras 50 51.
The same view is expressed in the Reporters Notes to para 702 of the American Restatement: see Note 11.
The significant point for present purposes is that the core prohibition in international law of detention without legal basis or recourse to the courts corresponds to a fundamental principle of English public policy.
Like English laws rejection of torture it is an essential feature of our constitutional order.
It has traditionally been traced, at any rate since the time of Sir Edward Coke, to the 29th article of Magna Carta.
Charles James Fox is not always a useful source of constitutional principle, but most lawyers would agree with his famous description of the writ of habeas corpus as the great palladium of the liberties of the subject.
The principle underlying the writ is that the availability of recourse to a court to test the legality of detention is the hallmark of its constitutionality.
Indeed, although the position has in some respects been modified by statute, at common law the reach of the writ of habeas corpus has even been held to extend to anywhere in the world where a servant of the Crown or any other person amenable to the personal jurisdiction of the court has detained a person: Ex p Anderson (1861) 3 El & El 487.
Or appears to be in a position to procure his production: Rahmatullah v Secretary of State for Defence [2013] AC 614.
I turn to rendition and enforced disappearance, both of which are aggravated forms of arbitrary detention.
Rendition is an archaic expression which was once more or less synonymous with extradition.
The Oxford English Dictionary, in its Supplement for September 2006, defines extraordinary rendition as the seizure and transportation by authorities of a criminal suspect from one country to another without the formal process of extradition.
Sometimes used spec with reference to moving a terrorist suspect for interrogation in a country considered to have less rigorous regulations for the humane treatment of prisoners.
I shall take it to have the meaning given to it by the Belhaj claimants in their Particulars of Claim, namely a euphemism commonly used since about 2001 to describe covert unlawful abduction organised and carried out by state agents, across international borders, for the purpose of unlawful detention, interrogation and/or torture.
The context of Mr Rahmatullahs pleading shows that he is using it in the same sense.
Enforced disappearance was described by Leggatt J in R (Al Saadoon) v Secretary of State for Defence [2015] EWHC 715 (Admin); [2015] 3 WLR 503, para 209, as a concept recognised in international law and a practice which is internationally condemned.
It involves detention outside the protection of the law where there is a refusal by the state to acknowledge the detention or disclose the fate of the person who has been detained.
Its cruelty and vice lie in the facts that the disappeared person is completely isolated from the outside world and at the mercy of their captors and that the persons family is denied knowledge of what has happened to them.
Enforced disappearance is a violation of article 5 of the European Human Rights Convention in the case of persons within the jurisdiction of a Convention state: Kurt v Turkey (1998) 27 EHRR 373.
In December 2006 the United Nations adopted a draft Convention for the Protection of all Persons from Enforced Disappearance, which seeks to provide more generally for enforced disappearance.
The Convention came into force in December 2010.
It has to date been signed by 94 states and ratified by 45.
But the parties do not include the United Kingdom, the United States, Malaysia or Libya.
Thailand is a signatory, but has not ratified.
In these circumstances I consider that the Convention has nothing to contribute to the issues on this appeal.
However, even in the absence of specific rules of international law relating to rendition and enforced disappearance, a prohibition of these practices is necessarily comprised in the more general prohibition of arbitrary detention by other international instruments, notably article 9 of the International Covenant on Civil and Political Rights.
The UN Working Group on Arbitrary Detention was surely right to say (loc cit, para 60) that secret and/or incommunicado detention constitutes the most heinous violation of the norm protecting the right to liberty of human beings under customary international law.
The arbitrariness is inherent in these forms of deprivation of liberty as the individual is left outside the cloak of any legal protection.
Likewise, the European Court of Human Rights has had no difficulty in dealing with rendition cases within the jurisdiction of a Convention state under the broader heading of the right to liberty and security of the person protected by article 5: see El Masri v Macedonia (2013) 57 EHRR 25; Al Nashiri v Poland & Husayn v Poland (2015) 60 EHRR 16.
Historically, rendition is not a complete stranger to English practice.
As Lord Hope pointed out in A v Secretary of State for the Home Department (No 2) [2006] 2 AC 221, at paras 106 10, in the second half of the 17th century, persons accused of treason were occasionally deported by administrative decision to Scotland, where confessions could lawfully be extracted from them by torture.
More recently, administrative deportation of British subjects was practised by British colonial administrations: M Lobban, Habeas Corpus, Imperial Rendition and the Rule of Law, Current Legal Problems, (2015) 68, 27 84.
But renditions to Scotland were probably always contrary to the law of England, and colonial renditions were only ever accepted by the courts on the basis that the Crown had power to legislate for the colonies in a manner contrary to fundamental principles of English law: see R v Earl of Crewe, Ex p Sekgome [1910] 2 KB 576, 607, 609 610 (Vaughan Williams LJ), 615 617 (Farwell LJ), 627 629 (Kennedy LJ).
This digression into history serves mainly to show how much has changed as a result of the adoption of fundamental human rights by English law and, more broadly, its recognition of the broader implications of the rule of law.
In the rare modern instances of rendition to the United Kingdom by or with the complicity of British officials, the courts have not been willing to tolerate the consequences.
The difference, as Lord Griffiths put it in R v Horseferry Road Magistrates Court, Ex p Bennett, at p 62A, is that the judiciary accept a responsibility for the maintenance of the rule of law that embraces a willingness to oversee executive action and to refuse to countenance behaviour that threatens either basic human rights or the rule of law.
In my opinion the foreign act of state doctrine cannot be applied to the detention alleged to have been inflicted on these claimants by US and Libyan officials, for substantially the same reasons as it cannot be applied to the allegations of torture.
They exhibit the same combination of violation of peremptory norms of international law and inconsistency with principles of the administration of justice in England which have been regarded as fundamental since the 17th century.
The fact that if the pleaded allegations are correct the claimants were forcibly transported across international borders without any lawful process of extradition is a significant aggravating factor engaging the same considerations of public policy.
The position is less clear in relation to the relatively brief periods of detention said to have been inflicted on Mr Belhaj and Mrs Boudchar by the authorities in Malaysia and Thailand, in respect of which the pleaded allegations are thinner.
But there can be no justification for striking out that part of the Particulars of Claim in the absence of a trial of the facts.
Other cruel, inhuman or degrading treatment
The Torture Convention applies to both torture and other cruel, inhuman or degrading treatment, but it distinguishes between them.
Article 1.1 of the Convention defines torture properly so called.
Article 2.2, which precludes derogations in any circumstances, applies only to torture as defined.
The international obligation of states in relation to other cruel, inhuman or degrading treatment is defined by article 16.
It is to prevent such acts within its jurisdiction.
The Convention also imposes on states the ancillary administrative and investigatory obligations laid down by articles 10, 11, 12 and 13 of the Convention.
The international obligation upon states to assume universal criminal jurisdiction over torture does not apply to the lesser forms of ill treatment.
In A v Secretary of State for the Home Department (No 2), supra, at para 53, Lord Bingham acknowledged the significance of these differences: Ill treatment falling short of torture may invite exclusion of evidence as adversely affecting the fairness of a proceeding under section 78 of the 1984 Act, where that section applies.
But I do not think the authorities on the Torture Convention justify the assimilation of these two kinds of abusive conduct.
Special rules have always been thought to apply to torture, and for the present at least must continue to do so.
In these circumstances, it is difficult to regard the prohibition of ill treatment falling short of torture as jus cogens.
Nor does it engage the same fundamental considerations of English public policy which justify treating torture as an exception to the foreign act of state doctrine.
The practical consequences of this difference in cases like the present are, however, limited.
Like torture, other cruel, inhuman or degrading treatment must by definition be committed or authorised by a public official: article 16.
It may fall short of torture, either because it is insufficiently severe or because it is not committed for one of the purposes specified in article 1 (obtaining information or a confession, punishment, intimidation, coercion, or other reasons based on discrimination).
Given the breadth of the definition of torture, which extends to any intentional infliction of severe pain and suffering, whether physical or mental, and the wide range of motives which may lead to ill treatment being classified as torture, the residual category of other cruel, inhuman or degrading treatment is in practice likely to be a very narrow one.
Article 6 of the European Convention on Human Rights
The conclusion that I have reached on the ambit of the exceptions to the act of state doctrine means that article 6 is only marginally relevant to the present appeals.
It could not apply to the detentions themselves.
It could apply only so far as the treatment of the claimants while they were detained amounted to cruel, inhuman or degrading treatment but fell short of torture.
I will therefore deal with it briefly.
Article 6 might in principle apply so far as the application of the foreign act of state doctrine would constitute a denial of the claimants right to a court: Golder v United Kingdom (1975) 1 EHRR 524.
There are circumstances in which an immunity from liability or adjudication will engage article 6.
In these cases, it must be justified by reference to the legitimacy of the objective and the proportionality of the means.
State immunity is a controversial but well established example in the jurisprudence of the Strasbourg Court: Fogarty v United Kingdom (2002) 34 EHRR 12; Al Adsani v United Kingdom (2002) 34 EHRR 11; Cudak v Lithuania (2010) 51 EHRR 15; Sabeh El Leil v France (2012) 54 EHRR 14.
But, except in rare cases where there are no judicial or manageable standards by which to determine an issue, the foreign act of state doctrine is not an immunity.
It is a rule of substantive law which operates as a limitation on the subject matter jurisdiction of the English court.
In Roche v United Kingdom (2005) 42 EHRR 30 the European Court of Human Rights held that the right to a court protected by article 6 was not engaged by a substantive rule of domestic law excluding liability, but only by a bar which was procedural in nature.
The most pertinent illustration is Markovic v Italy (2006) 44 EHRR 52.
The applicants in this case were relatives of persons who had been killed in the NATO air raid on Belgrade in 1999.
The raid was said to be an act of war in violation of international law.
It had been launched from bases in Italy.
The Corte de Cassazione had held that by a rule of substantive law the Italian courts had no jurisdiction over acts of war or indeed over any acts of the Italian state which were impugned on the sole ground that they violated international law.
The Strasbourg court applied the distinction between substance and procedure that they had formulated in Roche.
They agreed that the limitation on the jurisdiction of the Italian court was substantive.
It followed (para 114) that the decision of the Corte de Cassazione, does not amount to recognition of an immunity but is merely indicative of the extent of the courts powers of review of acts of foreign policy such as acts of war.
To the limited extent that the foreign act of state doctrine might apply in these cases, it does not in my opinion engage article 6.
Disposition
For these reasons I would declare (i) that the claimants claims are not barred by state immunity, and (ii) that on the facts pleaded the claimants claims are not barred by the foreign act of state doctrine so far as they are based on allegations of complicity or participation in torture or in detention or rendition otherwise than by legal authority.
I would affirm the decision of the Court of Appeal in Belhaj that no part of the claim is struck out.
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This judgment is one of a number given by the Supreme Court today on issues arising from alleged complicity of United Kingdom officials in allegedly tortious acts of the UK or other states overseas.
Mr Belhaj and his wife were detained in Kuala Lumpur in 2004.
The respondents allege that MI6 informed the Libyan authorities of their whereabouts, leading to them being rendered to Libya against their will.
They allege that they were unlawfully detained by Malaysian officials in Kuala Lumpur, Thai officials and US agents in Bangkok, and finally in Libya.
They allege that the United Kingdom arranged, assisted and encouraged their rendition, as well as conspired in and assisted torture, inhumane and degrading treatment inflicted on them by the US and Libyan authorities.
Mr Rahmatullah was detained by British forces in Iraq on 28 February 2004 on suspicion of being a member of the proscribed organisation Lashkar e Taiba.
Within a few days he was transferred into US custody.
By the end of March 2004 the US authorities had transferred him to Bagram Airbase in Afghanistan, where he was detained by such authorities without charge for over ten years.
Part of his claim is that, in relation to this ten year period, British officials acted in combination with the US authorities and/or assisted or encouraged his unlawful detention and mistreatment by the US authorities.
Rahmatullah is said to be representative of other claims currently before the High Court.
The issues before the Court are whether, assuming for present purposes that the allegations made are true, the claims of UK complicity for unlawful detention and mistreatment overseas at the hands of foreign state officials are properly triable in the English courts.
The appellants rely on the doctrines of state immunity and/or foreign act of state.
In Belhaj the High Court held that there was no state immunity but that the claims were barred being based on foreign acts of state.
The Court of Appeal affirmed the decision on state immunity but held the doctrine of foreign act of state to be: (i) limited to acts occurring within the jurisdiction of the relevant foreign state; and (ii) subject to a public policy exception for grave human rights violations.
In Rahmatullah, the High Court held that neither doctrine applied.
Both cases come before the Court on appeal, in the case of Rahmatullah by leapfrog order.
The Supreme Court unanimously dismisses the Governments appeals.
Lord Mance gives the lead judgment.
Lord Neuberger gives a concurring judgment, with which Lord Wilson, Lady Hale and Lord Clarke agree.
Lord Sumption adds a further concurring judgment, with which Lord Hughes agrees.
State immunity is based on the sovereign equality of states and international comity [12].
The appellants submit that state immunity covers (under the concept of indirect impleading) cases where it is integral to a claim against United Kingdom authorities to prove that foreign officials acted contrary to their own laws.
They rely on the concepts of interests or activities in Article 6(2)(b) of the 2004 UN Convention on Jurisdictional Immunities of States and Their Property [25].
However, the Court concludes that none of those concepts covers reputational disadvantage that could be suffered by foreign states [29, 195].
The relevant foreign states will not be affected in any legal sense by proceedings to which they are not party.
The pleas of state immunity fail accordingly [31, 197].
Lord Mance identifies three types of foreign act of state rule recognised in current English authority, broadly also reflected in the judgment of Lord Neuberger.
The first is a rule of private international law, whereby a foreign states legislation will normally be recognised and treated as valid, so far as it affects movable or immovable property within that states jurisdiction [35, 135].
The second rule (taking, without necessarily endorsing current Court of Appeal authority) goes no further than to preclude a domestic court from questioning the validity of a foreign states sovereign act in respect of property within its jurisdiction, at least in times of civil disorder [38, 74 78].
Even if this rule were, however, viewed as extending more generally to acts directed against the person, it would be subject to a public policy exception which would permit the allegations of complicity in torture, unlawful detention and enforced rendition in this case to be pursued in the English courts [80, 156].
Thirdly, a domestic court will treat as non justiciable or will refrain from adjudicating on or questioning certain categories of sovereign act by a foreign state abroad, even if outside the jurisdiction of that state [40, 123].
Whether an issue is non justiciable under the third rule falls to be considered on a case by case basis, having regard to the separation of powers and the sovereign nature of activities [90 95].
English law will take into account whether issues of fundamental rights are engaged, including liberty, access to justice and freedom from torture [98, 101].
The international relations consequences of a court adjudicating on an issue may also feed into the assessment under the third rule [41].
In this case, the circumstances do not lead to a conclusion that the issues are non justiciable [96 105, 167 8].
Lord Neuberger underlines the limits of the foreign act of state doctrine.
A public policy exception qualifies the first and (so far as it exists) second rules; and, if necessary, also the third rule [157].
Lord Sumption identifies in the case law two relevant principles: municipal law act of state corresponding generally with the first two rules of Lord Mances framework [228], and international law act of state corresponding generally with Lord Mances third rule.
Municipal act of state is confined to acts done within the territory of the relevant foreign state [229].
International law act of state requires the English courts not to adjudicate on the lawfulness of the extraterritorial acts of foreign states in their dealings with other states or the subjects of other states, since these occur on the plane of international law [234].
But the doctrine does not apply simply because the subject matter may incidentally disclose that a state has acted unlawfully and it is subject to a further public policy exception, potentially applicable in cases of violations of jus cogens under international law (fundamental norms from which no derogation is permitted) and of fundamental human rights [248].
It is unnecessary to decide whether: a) the UN Convention against Torture requires any modification of the doctrine of foreign act of state to give a universal civil remedy for torture [11(v)(a), 108]; b) article 6 of the European Convention on Human Rights precludes reliance on state immunity or foreign act of state; or to say more than that the appellants would face difficulties on each point [11(v)(b), 281 4].
In the result, state immunity is no bar to the claims, and the appellants have not, on the assumed facts, shown any entitlement to rely on the doctrine of foreign act of state to defeat the present proceedings.
The appeals are dismissed and the cases may proceed to trial.
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The United Kingdom operates a points based system (PBS) for the grant of leave to remain to non EU nationals who wish to work or study here.
There are five tiers, and for the purposes of this appeal the relevant tier is Tier 2 (General) Migrant.
The applicant migrant must be sponsored by an employer which is licensed to sponsor migrants.
The guidance relevant to the application makes it clear that his sponsor must be licensed by the Home Office.
It also states that an applicant must have a valid certificate of sponsorship (CoS) provided by his sponsor and that, if he does not have a valid CoS, the Home Office will reject his application.
There is no discretion about this.
The PBS has been described as prescriptive (Kaur v Secretary of State for the Home Department [2015] EWCA Civ 13, para 41 per Burnett LJ).
The Secretary of State has a discretion to grant leave outside the PBS in exceptional circumstances (R (Agyarko) v Secretary of State for the Home Department [2017] 1 WLR 4546, para 4 per Lord Reed).
Moreover, the Home Office has power to revoke a licence at any time.
In this case, Mr Pathan made his application and was sponsored by his employer, Submania Ltd (Submania).
It was his second application for Tier 2 leave.
Submania held a sponsors licence and provided him with a valid CoS when he put in his application, but he contends that, unbeknown to him, while his application was outstanding, the Home Office revoked his sponsors licence before his application was determined.
The Home Office did not inform Mr Pathan of this and simply rejected his application on the basis that his sponsor was no longer licensed, and so he had not fulfilled the conditions for the grant of leave.
The principal issue is whether the Secretary of States failure to inform Mr Pathan of the revocation of his sponsors licence is reviewable in public law on the grounds that it amounts to procedural unfairness, that is, a breach of the rules of natural justice.
These, so far as relevant, in appropriate circumstances require a person to have an opportunity to be heard on any material information which the decision maker acquires and of which he was unaware.
Procedural unfairness is to be contrasted with substantive unfairness, where the challenge is to the merits of the rule under which the decision against him was or is to be challenged.
The grounds on which such a challenge can succeed are generally limited to situations where the rule is irrational.
Mr Pathan sought an administrative review of the Secretary of States decision to reject his application, but the decision was maintained.
He then sought judicial review of that decision in the Upper Tribunal.
Mr Pathan contended in the Upper Tribunal (Upper Tribunal Judge Allen) [2017] UKUT 369 (IAC) and in the Court of Appeal (Sir Andrew McFarlane P, Singh and Coulson LJJ) [2018] 4 WLR 161 that the decision of the Secretary of State to reject his application without giving him an opportunity to find another sponsor is reviewable in public law on the grounds of procedural unfairness.
Both the Upper Tribunal and the Court of Appeal dismissed Mr Pathans appeal.
In the Court of Appeal, Singh LJ gave a full judgment and the other members of the Court agreed (with Coulson LJ expressly agreeing with reservations of Singh LJ about the decision mentioned in the next paragraph).
The Court of Appeal held that Mr Pathans appeal raised a question of substantive fairness.
As substantive fairness was not a free standing ground for judicial review, Mr Pathan would have to show irrationality.
He could not succeed on that ground because the rules for the PBS had been drafted for rational policy reasons.
The Court of Appeal expressed doubt about the correctness of another decision of the Upper Tribunal, Patel (Revocation of Sponsor Licence Fairness) India [2011] UKUT 211 (IAC); [2011] Imm AR 5, dealing with the extension of leave to a student under Tier 4 if his colleges licence is revoked, but did not overrule that decision.
In Patel, the principal holding of the Upper Tribunal was that, where the college with which a student with Tier 4 leave is enrolled has its licence revoked and the student has acted in good faith, the common law duty of fairness required that the student should generally be given a 60 day extension to find a fresh sponsorship letter to enable them to apply to vary their existing leave to include study at another college which was licenced.
As a result of that decision, the practice of the Secretary of State is now to grant all students in that position an extension of 60 days unless the student has not been a bona fide student or has participated in the practices that may have contributed to the sponsors licence being withdrawn.
In those cases, the students leave is limited to any existing permission to stay that he has.
On this appeal, the Secretary of State does not ask this Court to overrule Patel but submits that the basis of the decision was unsound.
For the reasons set out below, I consider that it was a breach of the procedural
duty of fairness for the Secretary of State not to have informed Mr Pathan that his sponsors licence had been withdrawn, which meant that his application, as it stood, would be bound to fail.
All the members of the Court reach this conclusion and accordingly the appeal succeeds on that issue.
I go on to hold that the duty of procedural fairness meant that the Secretary of State had to give Mr Pathan an opportunity to avert that difficulty.
Lord Wilson has reached the same conclusion as appears from his judgment, with which as explained below I agree.
Lord Kerr and Lady Black in their joint judgment and Lord Briggs in his judgment take a different view.
They consider that the grant of an extension of time is a matter of substance and falls outside the duty of procedural fairness.
On that issue, the views of Lord Kerr, Lady Black and Lord Briggs as the majority prevail.
Why Mr Pathans Tier 2 application failed and the proceedings Mr Pathan then
initiated
Mr Pathan, his wife and son are Indian nationals living in the UK.
The ability of Mr Pathans family to remain in the UK is dependent on Mr Pathans success in the present appeal.
Mr Pathan was granted leave to enter the UK as the dependant partner of a Tier 4 (General) Student on 7 September 2009, with leave to remain (LTR) until 31 December 2012.
LTR was extended from 1 December 2010 to 30 April 2014.
Subsequently, Mr Pathan was given further LTR as a Tier 2 (General) Migrant from 23 March 2013 to 15 October 2015 in order to work as a business development manager for Submania, a food outlet with some seven to ten outlets in London and the South East.
Submania held a sponsors licence and provided him with a valid CoS.
On 2 September 2015 Mr Pathan made an application for further LTR to enable him to continue working for Submania.
The Secretary of States evidence was that Mr Pathans application was put on hold whilst officials visited Submania to investigate whether the vacancy was genuine.
On 7 March 2016 (following an initial suspension giving Submania a chance to make representations which it did not take) the Secretary of State revoked Submanias sponsors licence.
This invalidated the CoS provided by Mr Pathan in his application for LTR.
On 7 June 2016 the Secretary of State, without previously informing Mr Pathan of the revocation, refused his application because his CoS was invalid.
Mr Pathans LTR would have expired on 15 October 2015 but for his application for further leave.
In those circumstances section 3C of the Immigration Act 1971 (the 1971 Act) (as substituted by section 118 of the Nationality, Immigration and Asylum Act 2002) operated to extend his expiring leave pending his further application and any administrative review or appeal of the decision on that application.
I will call this leave section 3C leave.
When Mr Pathan applied for administrative review of the decision rejecting his application on 14 June 2016, he sought a 60 day period to enable him to provide a fresh CoS. The Secretary of State maintained the decision to refuse his application, ruling not that no period beyond the 14 days allowed for removal was appropriate but that the 60 day period (curtailment period) would only have been appropriate if Mr Pathan had had 60 days leave remaining.
As explained, his LTR had by then expired.
When Mr Pathan issued judicial review proceedings, he again sought a period of 60 days to provide a further CoS. The Upper Tribunal dismissed his application, as did the Court of Appeal.
Mr Pathan now seeks relief from this Court.
Relevant rules and legislation
The relevant Immigration Rules are those in force at July 2016.
The relevant provisions of these Rules start at paragraph 245H, which states the purpose of Tier 2 (General) is to enable UK employers to recruit workers from outside the EEA [European Economic Area] to fill a particular vacancy that cannot be filled by a British or EEA worker.
Paragraph 245HD states: To qualify for leave to remain as a Tier 2 (General) Migrant 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.
It sets out the requirements for leave to remain in this context.
requirements include at paragraph (f): If applying as a Tier 2 (General) migrant, the applicant must have a minimum of 50 points under paragraphs 76 to 79D of Appendix A.
Appendix A includes a requirement at paragraph 77A that, in order to obtain points for a CoS, the applicant must provide a valid CoS reference number.
Paragraph 77C(f) provides that the reference number must not have been withdrawn or cancelled by the Sponsor or by the UK Border Agency since it was assigned .
From February 2016, the curtailment of leave was dealt with by paragraphs 323 onwards.
Leave could be curtailed if, for example, deception was used to obtain leave to remain or a variation of leave to remain (paragraph 323) or if the migrants sponsor ceases to have a sponsor licence (paragraph 323A(b)(i)).
At all material times there was guidance in place for applicants.
At the time of Mr Pathans application, version 04/15 of the guidance was in force and applied to applications made on or after 6 April 2015.
This had been superseded by version 04/16 by the time of the decision but this does not affect paragraph 190 of 04/15, which stated: A Certificate of Sponsorship can be withdrawn or cancelled at any time by either the Home Office or your Sponsor.
Where your application relies on a Certificate of Sponsorship that has been either withdrawn or cancelled, your application will be refused.
As to the consequences of revocation of the sponsors licence, the version of the guidance dated 04/16 stated:
9 If we revoke your licence, we will: immediately end (curtail) the permission to stay in the UK, or worker authorisation of any migrants whom we believe were actively and knowingly involved (complicit) in the reasons for the revocation of your licence such as if the migrant agreed that you would arrange a non existent job for them so they could come to the UK shorten the length of the worker authorisation, or permission to stay in the UK of any other migrants who were not actively involved to 60 calendar days if the migrant has fewer than 60 calendar days of their leave or worker authorisation remaining, we will not shorten it 19.10 In the first case above, any migrant with leave in Tiers 2, 4 or 5 will have to leave the UK or face enforced removal.
In the second case above, they will also have to leave or face enforced removal if, at the end of the 60 calendar days, they have not made an application for leave in a category for which they qualify.
If they were complicit in any abuse of the immigration system, their leave will end (curtailed) with immediate effect. 19.
The equivalent passages in the version dated 04/15 were in virtually identical terms.
Evidence on behalf of the Secretary of State
Mr Richard Jackson, a senior executive officer in the Migration Policy Unit, which is part of the Immigration and Border Policy Directorate of the Home Office, filed a witness statement on behalf of the Secretary of State.
This was largely directed to explaining what curtailment period is given to Tier 2 migrants and the reasons for treating Tier 2 and Tier 4 cases differently.
Mr Jackson states that an applicant for Tier 2 leave will know that his application is dependent on his sponsor having a valid licence and that he can therefore have no expectation from the Home Offices published guidance that [he] will be given 60 days if their sponsors licence is revoked. (para 18)
He also states that the Home Office considered making available to Tier 2 applicants the curtailment granted in the light of Patel to Tier 4 migrants.
However, the Home Office concluded that there were differences between the two cases which made it inappropriate to give Tier 2 applicants a similar 60 day period.
Migrants already entitled to leave to remain at the time when a sponsors licence was withdrawn in general have the benefit of a similar 60 day period.
On revocation, the sponsor would cease to be able to employ the migrants who had obtained leave to remain on the basis of a CoS issued by that sponsor and this group of migrants would be given a 60 day curtailment period, reducing their leave to 60 days (or such lesser number of days as represented their unexpired leave) unless they had been complicit in the conduct which led to the revocation of the licence.
But the curtailment period was not extended to applicants essentially for the following reasons: i) The curtailment period was given to Tier 4 migrants in those circumstances to allow them time to sort out their affairs. (This could include submitting another application for leave to remain in Tier 4 or some other category).
A Tier 2 applicant was in a different position.
They could have no expectation that their stay would continue and could therefore be expected to have put their affairs in order in case their application was refused. ii) The applicants position was protected by his section 3C leave.
Under the Immigration Rules they were entitled to stay for a further 14 days (previously 28 days) after the administrative review was completed. iii) To treat the applicant in the same way as a migrant who already has Tier 2 leave would give him an additional 60 days that he would not otherwise have had, while the migrant who already has leave has his leave curtailed to 60 days.
If he had less than 60 days remaining, his leave is not curtailed but neither is it extended to allow for 60 days. iv) There was evidence of manipulation as a result of the Patel decision if extra time is given, as there had been found to be students who were exploiting the extra days (this is discussed in the judgment of the Upper Tribunal). v) An application under Tier 2 will not be successful if the sponsor has not complied with the conditions of his licence in hiring the applicant, even if the licence is not revoked.
There are a variety of reasons why a Tier 2 application might fail. vi) Tier 2 is different from Tier 4 because it is concerned with filling a particular labour market gap experienced by the sponsor and leave is given to fill a particular vacancy.
The migrant will not lose wages as a result of the revocation of a licence and there is no guarantee that there is a gap elsewhere which a resident worker cannot fill.
The courses provided to Tier 4 students are more generic, and the higher fees which they pay assist in ensuring the availability of courses for UK students.
Tier 2 migrants are expected to know if their sponsor loses or is at risk of losing its licence.
Mr Jackson expressed the view that where issues relating to the applicants job is among the reasons for revocation of a licence, it is probable that the employee has been complicit in those issues.
In the first of those reasons, Mr Jackson draws no distinction between a Tier 2 applicant who has not yet started his job and a Tier 2 applicant who is currently working for the sponsor and is making an application for leave to extend that existing employment.
Some key arguments
Mr Michael Biggs appears for Mr Pathan.
His primary complaint is that the Court of Appeal was wrong to treat Mr Pathans claim as one of substantive unfairness.
He does not dispute the lawfulness of the licence revocation but contends that he should have been informed of it.
He argues that this case engages common law unfairness, that is (among other matters) the principle that a person should know important information that might significantly impact the decision and have the opportunity to put in more information which would enable him to satisfy the decision maker.
The actions of the Secretary of State were unfair because the rejection of Mr Pathans Tier 2 application radically impacted his and his familys rights and interests.
The licence revocation prevented him from continuing his employment.
The decision put him at risk of criminal liability and other restrictions as an overstayer.
His article 8 rights and those of his family were engaged.
Notice of the licence revocation could have made a difference to the outcome of Mr Pathans LTR application.
If he was aware of it, he could have varied his application to one relying upon a new CoS, or he could have made a new application.
Mr Alan Payne, for the Secretary of State, submits that no case suggests that procedural fairness requires notice to be given for any reason other than giving an individual an opportunity to address the merits of the applicable criteria or proposed decision.
No case says an application that is bound to fail must be given a second chance.
What Mr Pathan seeks is a substantive benefit (a second chance) and so his complaint is not as to procedural fairness.
The Court of Appeal were correct and their decision should be upheld.
Discussion The complaint is procedural because establishing a procedural impropriety
is a necessary first step
The judgment of the Court of Appeal hinges on its conclusion that Mr Pathans complaint was about substantive, and not procedural, fairness.
It is easy to see how this conclusion was reached.
The overall objective of Mr Pathan in bringing these proceedings is to obtain a 60 day curtailment (see para 10 above).
That is effectively to insert an exception into the requirement for a valid CoS, and to qualify the statements made as to the consequences which ensue on licence revocation in the Guidance.
However, the preliminary and essential step in Mr Pathans argument is that as a matter of fairness the Secretary of State should have told him that she had revoked his sponsors licence.
What Mr Pathan really wants to do is to have the opportunity to respond to the licence revocation by putting forward some other application for leave which would ensure that his application was not refused.
Role of section 3C leave
Section 3C makes it possible for him to do this because while the application is pending he can make another application for leave to remain on a different basis, and his application will be merged into his original application.
Section 3C (as amended) provides: (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) leave expires, and (c) variation having been decided. the leave expires without the application for the application for variation is made before the (2) The leave is extended by virtue of this section during any period when the application for variation is neither decided (a) nor withdrawn, (b) an appeal under section 82(1) of the Nationality, Asylum and Immigration Act 2002 could be brought, while the appellant is in the United Kingdom against the decision on the application for variation (ignoring any possibility of an appeal out of time with permission), [. ] (c) (ca) (cb) an administrative review of the decision on the (d) application for variation (i) (ii) could be sought, or is pending. (3) Leave extended by virtue of this section shall lapse if the applicant leaves the United Kingdom. (3A) Leave extended by virtue of this section may be cancelled if the applicant (a) has failed to comply with a condition attached to the leave, or (b) has used or uses deception in seeking leave to remain (whether successfully or not). (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).
The Secretary of States practice on timing is not entirely clear.
In the present case there was an interval of three months between the revocation of the sponsors licence and the rejection of Mr Pathans application.
It may be that, where a sponsors licence has been revoked, the Secretary of State generally takes no step for three months, ie until the usual period for bringing judicial review proceedings has elapsed.
But it seems unlikely that the Secretary of State could wait that long before giving notice to other migrant workers since they would be likely to hear about the revocation at work.
While it may be difficult for the Secretary of State to link up completely new applications with a particular sponsor, it may well be easier to identify applicants like Mr Pathan who are already working for the sponsor and are making an application for further leave.
Because section 3C of the 1971 Act applies to any application for leave, Tier 2 leave applications are always inherently capable of being varied so that the applicant can rely on a different basis for leave, whether a different sponsor or some other basis altogether.
It follows that even if the policy objective of the Secretary of State is that an application for Tier 2 leave should only match a particular employer (the sponsor) and that employer alone, the Secretary of State cannot resist a variation application made during the pendency of a Tier 2 application.
Moreover, the fact that the primary purpose of section 3C of the 1971 Act was to prevent the proliferation of multiple claims does not prevent the possibility of its being used for the purpose of making an application which is more likely to succeed, and I venture to suggest that it is regularly used by applicants and practitioners for that purpose.
There is an element of substantive unfairness in the complaint
It seems to me that there is undeniably also an element of substance in Mr Pathans challenge, but the way I see it is that it is as a consequence of his argument about procedural fairness, not vice versa.
If the challenge could only be analysed as one of substantive fairness, it would be impossible to bring a challenge on the grounds of procedural fairness unless the rule under which the decision maker was acting allowed such a challenge.
It is not the law that a procedural challenge can be made only if there is no challenge to a substantive provision.
In Cooper v Wandsworth Board of Works (1863) 14 CB NS 180, the defendant public board took the view that a landowner had failed to notify it of his intention to build a house as he was required to do by statute, and proceeded to exercise its statutory power to demolish his house without giving the landowner any opportunity to explain.
The power to demolish was for public benefit, and the statute did not require the board to give the houseowner the opportunity to make representations.
Nonetheless, the owner was held to have a right to be heard in case he could give information that might have caused the board not to demolish his house but to take some other step. (The public board did not assert that it did not know who the owner was.) It was no answer that the challenge also involved a challenge to a substantive provision of the relevant statute.
Byles J famously cited an example given by Fortescue J in R v Chancellor, Masters and Scholars of the University of Cambridge (1723) 2 Ld Raym 1334; 1 Stra 557 (Dr Bentleys case): The judgment of Mr Justice Fortescue, in Dr Bentleys case, is somewhat quaint, but it is very applicable, and has been the law from that time to the present.
He says, The objection for want of notice can never be got over.
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.
Adam (says God), where art thou? Hast thou not eaten of the tree whereof I commanded thee that thou shouldest not eat? And the same question was put to Eve also. (pp 194 195)
In the present case, if the Secretary of State had given Mr Pathan notice that Submanias sponsors licence had been revoked, he would have been able to take steps to produce another basis for leave and applied to vary his application.
By that means, he would have had the opportunity, equivalent to that of Mr Cooper in the Wandsworth case of persuading the board not to demolish his house, of persuading the Secretary of State not to reject his application.
It is common ground that the rules of natural justice apply to decision makers in public law whether or not they are acting judicially.
In the Wandsworth case it was argued that the board, as successors to the commissioners for sewers, who were a judicial body, also acted judicially.
I need not go into that question as I give an example in para 46 below of the Secretary of State being required to observe the rules of natural justice.
The line between procedure and substance
Going back to Byles Js famous example of the expulsion of Adam and Eve from the Garden of Eden, that determination was undoubtedly a substantive decision, but the grant to Adam and Eve of an opportunity to provide an explanation was a procedural decision.
It might be thought that the distinction between substance and procedure is hard to grasp but that is only because the same substantive decision can give rise to both a claim of procedural unfairness and a claim that a substantive decision is unfair.
As stated, both claims in Byles Js example arose out of the same substantive decision of expulsion from the Garden of Eden.
This confusing state of affairs also occurs in the common law.
For example, in R v Secretary of State for the Home Department, Ex p Venables [1998] AC 407 the Secretary of State increased the tariff for the two young persons convicted of murder beyond that fixed in their case by the Lord Chief Justice.
One of the matters which the Secretary of State took into account was the public concern expressed in the media about the nature of their crimes.
The House of Lords held that the decision of the Secretary of State was unlawful because (among other matters) this was an irrelevant consideration.
The House also decided that it was contrary to the rules of natural justice for the Secretary of State to take these factors into account.
The decision should have been made only on the basis of relevant considerations.
That case is an example of how the same act of a public body can lead to claims of both procedural unfairness and unlawfulness.
Lord Steyn expressly noted the overlap between substance and procedure, which illustrates the point I made in the preceding paragraph: [. ] I have come to the conclusion that the decisions of the Home Secretary as contained in his letters of 22 July 1994, which fixed a 15 year tariff for both Venables and Thompson, were unlawful for substantive reasons as well as a breach of the principles of procedural fairness.
There are two separate substantive reasons why I conclude that the Home Secretarys decisions were unlawful.
First, the Home Secretary regarded a sentence of detention during Her Majestys pleasure under section 53(1) imposed on a child convicted of murder as in law equivalent to a mandatory sentence of life imprisonment imposed on an adult convicted of murder.
His legal premise was wrong: the two sentences are different.
A sentence of detention during Her Majestys pleasure requires the Home Secretary to decide from time to time, taking into account the punitive element, whether detention is still justified.
The Home Secretary misunderstood his duty.
This misdirection by itself renders his decision unlawful.
Secondly, the Home Secretary misdirected himself by giving weight to public protestations about the level at which the tariff in the cases of Venables and Thompson should be fixed.
In doing so the Home Secretary took into account in aggravation of the appropriate level of punishment legally irrelevant considerations.
This was a material defect in the reasoning of the Home Secretary.
It rendered his decisions unlawful.
On the issues of alleged procedural unfairness, I have concluded that the decisions of the Home Secretary were also procedurally flawed by the credence and weight which he gave to public clamour for an increase in the level of the tariff.
This point overlaps with my second substantive conclusion.
It may be two sides of the same coin: either way the quality of the decision making was adversely affected in a material way. (pp 518 519)
The next section of this judgment develops the question of overlap.
Line between procedural and substantive unfairness need not be rigid
The closely reasoned decision of the Court of Appeal in the present case drew a rigid line between procedural and substantive fairness.
This distinction harks back to the well known passage in the speech of Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374.
At pp 410 411, Lord Diplock held: Judicial review has I think developed to a stage today when without reiterating any analysis of the steps by which the development has come about, one can conveniently classify under three heads the grounds upon which administrative action is subject to control by judicial review.
The first ground I would call illegality, the second irrationality and the third procedural impropriety.
That is not to say that further development on a case by case basis may not in course of time add further grounds.
I have in mind particularly the possible adoption in the future of the principle of proportionality which is recognised in the administrative law of several of our fellow members of the European Economic Community; but to dispose of the instant case the three already well established heads that I have mentioned will suffice.
By illegality as a ground for judicial review I mean that the decision maker must understand correctly the law that regulates his decision making power and must give effect to it.
Whether he has or not is par excellence a justiciable question to be decided, in the event of dispute, by those persons, the judges, by whom the judicial power of the state is exercisable.
By irrationality I mean what can by now be succinctly referred to as Wednesbury unreasonableness (Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223).
It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it.
Whether a decision falls within this category is a question that judges by their training and experience should be well equipped to answer, or else there would be something badly wrong with our judicial system.
To justify the courts exercise of this role, resort I think is today no longer needed to Viscount Radcliffes ingenious explanation in Edwards v Bairstow [1956] AC 14 of irrationality as a ground for a courts reversal of a decision by ascribing it to an inferred though unidentifiable mistake of law by the decision maker.
Irrationality by now can stand upon its own feet as an accepted ground on which a decision may be attacked by judicial review.
I have described the third head as procedural impropriety rather than failure to observe basic rules of natural justice or failure to act with procedural fairness towards the person who will be affected by the decision.
This is because susceptibility to judicial review under this head covers also failure by an administrative tribunal to observe procedural rules that are expressly laid down in the legislative instrument by which its jurisdiction is conferred, even where such failure does not involve any denial of natural justice.
But the instant case is not concerned with the proceedings of an administrative tribunal at all.
Lord Diplocks speech is not, however, to be read as excluding the possibility that there may be, as counsel argues, a subset of one of the heads (which Lord Diplock calls procedural propriety) which arises only in particular circumstances and which has different attributes from the circumstances in which other cases under that head arise.
In my judgment, Mr Biggs is correct in his submission that there is a subset of procedural fairness.
This subset applies where there is a rule for the conduct of applications for some benefit, and the alleged unfairness stems from the fact that that rule does not expressly provide an applicant with the right to be heard or to be informed on a point when a significant event occurs which is brought about (rightly or wrongly) by the actions of the executive and which has grave impact on the applicant, who is not otherwise aware of those actions.
Lord Diplocks categorisation of grounds for judicial review is important and I do not suggest otherwise.
But the real issue is the level of intensity, or sensitivity, to judicial review given the roles and responsibilities of the judiciary under the British constitution.
In R (Talpada) v Secretary of State for the Home Department [2018] EWCA Civ 841, para 63, Singh LJ held that unless kept within clearly defined and predictable boundaries, the doctrine of substantive unfairness risks (even if unconsciously) inviting the court to intrude impermissibly on the province of the executive.
I share his overriding concern, but it is in the nature of the common law that the boundaries cannot always be clearly defined in advance or predictable.
Examples of procedural unfairness throwing light on this case
One of the cases which illustrates the last point is one which was not cited, namely FP (Iran) v Secretary of State for the Home Department [2007] EWCA Civ 13.
That was an early decision directed at mitigating some of the hardship brought about when the Immigration Rules are drafted with a view to understandable efficiency, and in absolute terms, without perhaps taking full account of potential procedural unfairness.
In some ways the case is close to this one because it too was a case where the Immigration Rules made it impossible for an applicant to make representations to the immigration tribunal rehearing his appeal against a refusal to accept his asylum claim.
The rules stipulated that, if an applicant made no representations, the hearing had to proceed in his absence and there was no procedure for reopening that decision to allow the applicant to show a good reason for his absence.
The appellants legal representative had failed to give notice of his change of address so that he was not notified of the hearing at which his appeal was to be reheard.
Sedley LJ considered that rules could not stand where they were productive of irremediable procedural unfairness (para 48).
The Rules deprived the applicant of his right to be heard (para 49).
The fact that the rules took the form they did to to eliminate manipulation of the system did not justify the breadth of their effect (para 31).
The Rules in question were outside the rule making powers and the purpose for which those powers were given.
My judgment was based on the question whether the rules fell within the rule making power and drew on (among other matters) Professor Lon Fullers work, The Morality of Law, revised ed (1969) which is mentioned again at para 50 below.
Wall J agreed with Sedley LJ.
The breach of the common law principle of unfairness led to the rules being unlawful.
A point to note is that the court considered how the rule would operate across the board and not simply in the instant case before them.
So too here.
Mr Pathans complaint is not peculiar to him.
It must apply to anyone who is ignorant of a revocation of his sponsors licence but is working for him in the expectation that he will qualify for a Tier 2 visa.
The complaint in this sort of case is about a systemic failure.
The particular subset of procedural fairness with which this case is involved is a material systemic failure and the applicant is already in the employment of the sponsor but completely ignorant of the circumstances which led to the revocation of the licence.
In my judgment in this subset of procedural fairness, the challenge will inevitably engage the substantive rule as well as procedural unfairness.
Once the applicant is through the procedural gateway, the decision has to be set aside and the question of the rationality of the rule is then demonstrably irrelevant.
There are many cases which apply the principle of procedural fairness.
In the recent case of R (Balajigari) v Secretary of State for the Home Department [2019] EWCA Civ 673; [2019] 1 WLR 4647, the Court of Appeal (Underhill, Hickinbottom and Singh LJJ) held that where the Secretary of State was minded to refuse indefinite leave on the basis of dishonesty, which was likely to be a serious matter, common law procedural fairness required that an indication of that suspicion should be supplied to the applicant to give him an opportunity to respond.
Underhill LJ, giving the judgment of the court, stated at para 160: Specifically, we do not believe that it was fair that Mr Kawos should have been expected to give detailed and definitive answers to an accusation of dishonesty without any prior notice.
The contrary view seems to us to depend on the assumption that he must have known what the Secretary of State had in mind and should therefore have come prepared to face an interview in which he would have to give a detailed explanation of the original error in order to rebut an allegation of dishonesty; but if he was in fact innocent which is the very question which the Secretary of State had to decide why should he have anticipated any such thing?
Another example in the numerous authorities on procedural fairness placed before us is R v Secretary of State for the Home Department, Ex p Fayed [1998] 1 WLR 763 (Lord Woolf MR, Kennedy and Phillips LJJ).
Mr Al Fayed and his brother had applied to the Secretary of State for naturalisation as a British citizen.
Section 44 of the British Nationality Act 1981 stated that the Secretary of State did not have to give reasons for his decision and his decision was not reviewable in the courts.
The Secretary of State made an announcement that the applications were especially difficult and sensitive.
Both applications were refused.
It was held that procedural fairness applied and that the Secretary of State had to give the applicant an indication of the areas that were causing him concern.
Lord Woolf explained that there was a long tradition in administrative law that a person should act fairly before exercising a statutory discretion and that inconvenience to the decision maker was not a bar.
This case illustrates the point that the requirements of procedural fairness are affected by issues such as the difficulty for the applicant in identifying the critical matter unless the decision maker gives him some indication as to what it is.
Lord Woolf held: I appreciate there is also anxiety as to the administrative burden involved in giving notice of areas of concern.
Administrative convenience cannot justify unfairness but I would emphasise that my remarks are limited to cases where an applicant would be in real difficulty in doing himself justice unless the area of concern is identified by notice.
In many cases which are less complex than that of the Fayeds the issues may be obvious.
If this is the position notice may well be superfluous because what the applicant needs to establish will be clear.
If this is the position notice may well not be required.
However, in the case of the Fayeds this is not the position because the extensive range of circumstances which could cause the Secretary of State concern mean that it is impractical for them to identify the target at which their representations should be aimed. (p 777)
Values served by procedural fairness
In R (Osborn) v Parole Board [2014] AC 1115, Lord Reed considered the values served by the requirements about procedural fairness.
He mentioned three in particular.
The first was that it satisfied a persons intuitive expectations of what a just process involved: The first was described by Lord Hoffmann (ibid) [Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269, para 72] 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. (para 68)
Lord Reeds second point is particularly relevant to this case.
Procedural fairness promotes congruence between decision making and the law: 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), ch 6. (para 71)
Lord Reeds third value concerned cost.
While it might appear that the cost of providing a person with an oral hearing (not in point here) increases the cost of decision making, that may not be the case if the decision reached is a fairer one: 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. (para 72)
Procedural fairness is thus an important matter.
It makes the law more just and at the same time improves the standards with which decision makers are expected to comply in the 21st century.
Substantive unfairness is not in itself a head of judicial review
In referring as I do to unfairness, I do not in any way depart from what Lord Carnwath (with whose judgment the other members of this Court agreed) held in R (Gallaher Group Ltd) v Competition and Markets Authority [2019] AC 96, para 41 that substantive unfairness is not a self standing head of judicial review: In summary, procedural unfairness is well established and well understood.
Substantive unfairness on the other hand or, in Lord Dyson MRs words whether there has been unfairness on the part of the authority having regard to all the circumstances is not a distinct legal criterion.
Nor is it made so by the addition of terms such as conspicuous or abuse of power.
Such language adds nothing to the ordinary principles of judicial review, notably in the present context irrationality and legitimate expectation.
It is by reference to those principles that cases such as the present must be judged.
Lord Sumption made a similar point at para 50 in that case.
What does fairness require in this case?
Procedural fairness is adaptable to the environment in which it is applied.
Procedural unfairness does not entail that the decision maker must comply with a pre designed set of rules.
As Lord Mustill held in a very well known passage in R v Secretary of State for the Home Department, Ex p Doody [1994] 1 AC 531, 560, what fairness requires in any particular case will depend on the circumstances and may change over time.
Lord Mustill held: What does fairness require in the present case? My Lords, I think it unnecessary to refer by name or to quote from, any of the often cited authorities in which the courts have explained what is essentially an intuitive judgment.
They are far too well known.
From them, I derive that (1) where an Act of Parliament confers an administrative power there is a presumption that it will be exercised in a manner which is fair in all the circumstances. (2) The standards of fairness are not immutable.
They may change with the passage of time, both in the general and in their application to decisions of a particular type. (3) The principles of fairness are not to be applied by rote identically in every situation.
What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects. (4) An essential feature of the context is the statute which creates the discretion, as regards both its language and the shape of the legal and administrative system within which the decision is taken. (5) Fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result; or after it is taken, with a view to procuring its modification; or both. (6) Since the person affected usually cannot make worthwhile representations without knowing what factors may weigh against his interests fairness will very often require that he is informed of the gist of the case which he has to answer.
Here what procedural fairness aims to achieve is that a person who, like Mr Pathan, is applying for further leave in order to continue working for his sponsor, and had a valid CoS at the date of his application, should have notice of the communication to the sponsor of the determination of the Secretary of State that the sponsors licence is revoked.
Where the Secretary of State has initiated the process for the revocation of the sponsors licence, and revocation is the cause of the invalidation of his application, it is right that the applicant should have that information in order to avert or mitigate the potential fatal blow to his application.
This is because, while the applicant can be under no illusion as to the effect of revocation, he is not told in terms that the Secretary of State will take this course without his being informed.
In order to give the applicant a meaningful opportunity for the applicant to take averting action if he can, the Secretary of State must give him a further period selected by her (subject of course to any successful challenge to the revocation).
The Secretary of State is likely to have to allow three months for a challenge to the revocation in any event and so the reasonable period might be 60 days.
Both periods could run together.
By the time revocation occurs, an applicant may have no part of their leave left and so he may be relying on the extension to his leave conferred by section 3C of the 1971 Act.
But such applicants would have also been expecting to obtain their leave and so it seems to me that the length of the period should be the same for these applicants as it is for those applicants who made their application for Tier 2 (General) leave and continue to have sufficient days remaining to cover the curtailment period.
The decision as to the appropriate period will be a matter (subject to any judicial review) for the Secretary of State.
It has been represented to us that a shorter period of 28 days would not give the applicant time to find a new sponsor if the new sponsor had to comply with the resident labour market test.
Once the Secretary of State has given notice of revocation to Mr Pathan it would be up to him to find out from his original sponsor whether the sponsor proposes to, and does successfully, challenge the revocation.
Fairness does not require the Secretary of State to answer questions about that or keep the applicant informed.
Averting what I have described as a potential fatal blow to his application may include the applicant seeking to vary his application so that he obtains LTR under the sponsorship of another sponsor; demonstrating that he has other sponsorship to the Secretary of State is but another form of the making of representations to which Lord Mustill refers in his fifth point (point (5)) in the passage which I have set out from Doody.
It is not right to say, as Mr Payne submits, that, once his sponsors licence is revoked, his application is doomed and that, because of this, procedural fairness has no role to play and so does not require any steps to be taken.
The applicant has a chance (which may be only a small chance) that he may find a new basis for applying for LTR.
There is no difficulty in making an application for a variation in these circumstances, as the Upper Tribunal held in Patel [2011] Imm AR 5, para 21.
Lord Kerr and Lord Briggs conclude that the duty of fairness extends no further than giving Mr Pathan notice of the revocation.
Respectfully, I do not share this view.
As De Smith s Judicial Review, 8th ed (2019), states at paras 7 045 and 7 046: 7 045 The Court of Appeal has characterised the principle of natural justice or procedural fairness as requiring that any participant in adversarial proceedings is entitled to know the case which he has to meet and to have a reasonable opportunity to adduce evidence and make submissions in relation to that opposing case. 7 046 Individuals should not be taken unfairly by surprise.
In disciplinary and analogous situations, there will often be a further reason why adequate prior notice should be given to the party to be charged to give him the opportunity of offering to resign or (for example) surrender his licence, rather than face the prospect of formal condemnation.
The duty to notify also includes the duty to take into consideration any representations made in response to notification. (footnotes omitted)
The first sentence of para 7 046 contrast with para 196 of the judgment of Lord Briggs in this matter.
In addition, De Smith references at the end of para 7 046 R v North Yorkshire County Council, Ex p M [1989] QB 411.
The local authority had failed to disclose to the childs guardian ad litem major changes in the circumstances of the child.
Ewbank J held that that the authority had both to notify the guardian of these circumstances and also to listen to the guardians views.
For that purpose, the guardian would have to have been given time to formulate views and submit them to the authority.
The examples given in para 7 046 of enabling a defendant to disciplinary proceedings to resign or to surrender his licence are interesting examples of situations in which a person should be given the chance not simply to make further representations in the proceedings but also to take steps which are independent of them.
There is no case law footnoted as supporting these examples, but the text clearly expresses the view of the learned editors.
There is an obvious parallel between those examples and a case such as this where the applicant wishes to find another sponsor so that he can apply to vary his application for Tier 2 (General) leave.
Since an applicant is permitted to vary his application, it is moreover foreseeable that an applicant may properly wish to take steps which are not directly related to his then current application.
There is no basis therefore why his further pursuit of his application should be disregarded or treated as substantive, as Lord Briggs considers that it should, simply because the original purpose of the application had failed.
The PBS will remain a prescriptive scheme, and the requirements of fairness must take that into account.
Unless the applicant can produce an alternative basis for LTR, his application will fail.
Under the PBS, the Secretary of State will not have to consider statements of intention by the applicant or applications for further extensions of the Secretary of States usual timeframe for dealing with his original application, which will presumably be three months from the date of communication of revocation to allow for challenges by way of judicial review.
There will be other cases where fairness does not require the applicant to be informed: obvious examples are where he already knows that there are grounds for revocation and where he is complicit in them.
In those circumstances, he already knows that the success of his application is in jeopardy.
There is also no need for the Secretary of State to give notice to the applicant if the licence is terminated other than as the result of the Secretary of States actions (see paras 82 to 84 below).
Similarly there may be cases where the applicant will be unable to obtain any remedy if the Secretary of State does not give him notice of the revocation, because, for example, it is shown that even if he had had that notice he would still have been unable to find a sponsor (see generally De Smiths Judicial Review, paras 8 065 to 8 072, which cites among other authorities Cinnamond v British Airports Authority [1980] 1 WLR 582, which is cited by Lord Briggs in his judgment in this case.
We are also only concerned with a person in the sponsors employment, who is seeking LTR in order to continue working for their sponsor.
The Secretary of State has accepted that existing workers are likely to have entered into commitments for which they will need time to sort out their affairs.
The difference said to exist between them and migrants like Mr Pathan who, being existing employees of the sponsor, are seeking further LTR is that the latter group is said to have no expectation that their application will be successful.
But this somewhat overstates the position.
One of the effects of the PBS is that if a person makes an application and calculates that he has the required number of points he will in reality expect his application to succeed.
Paragraph 245HD (set out above) states: If the applicant meets these requirements, leave to remain will be granted.
Success in obtaining leave under the PBS, as its name suggests, involves earning sufficient points.
I have already described the PBS as prescriptive: see para 1 above.
By way of further background, under the PBS the Home Office has a large volume of applications each year: Mr Jackson explains that there were about 90,000 applicants in 2016 for Tier 2 leave involving some 28,000 sponsors.
The policy aims are very specific: the Home Office has designed Tier 2 around the principle of sponsorship with the sponsor having a specific vacancy that cannot be filled by a resident worker and undertaking certain duties in relation to the applicant.
As explained, the applicant is then awarded points for meeting conditions.
As Burnett LJ put it in Kaur at [2015] EWCA Civ 13, para 41: 41.
The points based system for determining whether to grant leave to enter or remain in the United Kingdom, which applies to students as well as a number of other categories of applicant, is designed to achieve predictability, administrative simplicity and certainty.
It does so at the expense of discretion, that is to say it is prescriptive.
The consequence is that failure to comply with all its detailed requirements will usually lead to a failure to earn the points in question and thus refusal: see eg Sullivan LJ in Alam v Secretary of State for the Home Department [2012] EWCA Civ 960 at para 44, Davis LJ in Secretary of State for the Home Department v Rodriguez [2014] EWCA Civ 2 at para 100; Sales LJ in EK (Ivory Coast) v Secretary of State for the Home Department [2014] EWCA Civ 1517 at para 28 and Briggs LJ at para 59.
It was that important background which informed the decision in EK (Ivory Coast).
I have considered with care the whole of the evidence of Mr Jackson.
In my judgment, it is unreal to suppose that, as he states, if an applicant who seeks LTR so that he can continue working for his sponsor and puts in an application which is apparently in order when submitted, he is going to put himself in a position where he has no commitments so that he can leave if required to do so.
Moreover, if he is kept in ignorance as to his sponsors shortcomings, he will not know about any revocation unless the Secretary of State informs him.
There is something deeply unsatisfactory about the Secretary of State being able to take that decision which may have a profound influence on the life of the applicant, without any obligation to tell him.
It is after all knowledge which is peculiarly in the Secretary of States possession.
The Secretary of State has accepted an obligation to give a window of opportunity to migrant workers who become unemployed when their sponsor loses his licence.
It seems to me that fairness demands that the Secretary of State accepts some similar obligation to tell the applicant, who is also an employee of a sponsor, of the revocation to give him too time to sort his affairs out.
It is not really an answer to say that his leave had expired.
He would have been planning his affairs on the basis that he would be granted a new Tier 2 Migrant visa.
He is likely to have engaged the same sort of commitments as other migrant workers of the sponsor.
Moreover, employees who have already obtained their Tier 2 leave are allowed to look for other sponsors which suggest that the stated aim of Tier 2 to match migrants to particular vacancies can, as one would expect, equally be satisfied by matching resident labour market shortages to migrants.
We are not concerned with a new applicant or an applicant for a new position.
It would not be reasonable to expect the Secretary of State to assume that such applicants would have commitments.
Lord Kerr, Lady Black and Lord Briggs have reached a different conclusion from me on the question whether the applicant would be entitled to a period of time to amend his application or take other steps if informed that the Secretary of State had revoked his sponsors licence.
In my view, the duty of procedural fairness requires the Secretary of State to give a meaningful opportunity to take steps in the light of the information supplied to him.
The giving of information to him is largely pointless if this does not happen and the Secretary of State is able to reject his application the very next day as Lord Briggs holds.
Likewise the appropriate period of time cannot serendipitously depend on the amount of time which happens to pass in any individual case between the notification by the Secretary of State to the applicant and the rejection of his application, as Lord Kerr and Lady Black hold.
However I agree with Lord Kerr and Lady Black that the duty to give notice of a decision to someone who will be adversely affected by it cannot be defined solely by the consideration that it is pointless for that person to make representations with a view to reversing or avoiding the effect of the decision (para 131).
That is to confuse the duty with the courts discretion to determine the appropriate remedy.
Why the question is not one of substance
Singh LJ held that the dispute is about whether the mandatory requirement for a valid CoS is lawful.
So put, the question in issue is indeed one of substance but it is not the issue raised by Mr Pathan and for which he was granted leave to bring judicial review proceedings.
His case is that the Secretary of State should have given him notice that his sponsors licence was revoked and time to deal with it.
In my judgment, and with respect, the distinction between procedure and substance does not justify recharacterising his complaint.
Lord Briggs also reaches the conclusion that the issue is one of substance by looking at the reality of the complaint.
He calls it a question of substance dressed up as procedure, but I do not read that description as a suggestion that the application was clothed with the label of procedural unfairness but put forward as one of substance, like a wolf in sheeps clothing.
Mr Biggs has not sought to challenge either the substantive decision made by the Secretary of State, or the rationality of the rule.
Moreover, leave was given for the procedural unfairness argument to be run.
As the Venables case [1998] AC 407 (see para 38 above) illustrates, where an applicant relies on procedural fairness, the court looks at the process.
It is true that if a decision has been taken and procedural unfairness is found, the decision will be set aside.
That may or may not show a defect in the rule.
In the present case, the rule that the applicant for Tier 2 must have a valid CoS at the time when the Secretary of State makes his decision on his application, which was the substantive rule identified by Singh LJ, is unaffected by the determination of the procedural unfairness claim in Mr Pathans favour.
In other words, that rule is in fact not affected by a conclusion that the process of decision making which involved an omission to give notice as in the Wandsworth case 14 CBNS 180 was unfair.
A defect in the decision making process is the hallmark of a procedural dispute.
A substantive decision is the decision that determines the application, ie a decision on the merits.
As I see it, Mr Pathans case falls within, not beyond, the phrase used by Lord Briggs: the true boundaries of procedural fairness.
Question whether rule irrational does not need to be decided
Having found that the challenge was one of substantive unfairness Singh LJ went on to conclude that the Tier 2 rules, which meant that Mr Pathan had no time to seek another sponsor, were not irrational.
The aim of Tier 2 was to match a migrant to a particular vacancy.
The Tier 4 regime was different because the aim was to encourage foreign students to study in the UK.
Tier 4 applicants were given notice that their application would fail because the Secretary of State had revoked their sponsors licence.
Tier 2 applicants could always renew their application from abroad.
In that way they would avoid the risk of criminal liability as an overstayer.
Singh LJ considered that the applicant is in a different position from a migrant who is already working for the sponsor.
Given that I have found that there was procedural unfairness to a person in Mr Pathans position, these points do not arise on this appeal.
Unfairness in this case is not displaced by administrative review or the need not to impose burdens on the executive
In my judgment, it is not an answer to Mr Pathans challenge to say that his
leave is extended during the administrative review period and for 14 days thereafter.
If he wishes to make an application to vary his application for Tier 2 leave because he has a different sponsor, he must do this before his section 3C leave expires.
If he makes a variation application before his section 3C leave expires, that application is then automatically merged with his previous application.
Making a variation application will hasten the end of his section 3C leave as he will be prevented from continuing with an administrative review if he makes an application for variation.
If the applicants section 3C leave comes to an end and no other leave has
been put in his place, the applicant becomes an illegal overstayer.
Mr Biggs emphasised the hostile environment in which a migrant finds himself if he becomes an illegal overstayer.
He may be expelled and prevented from returning to the UK for ten years.
Mr Biggs submission to this court is essentially the same that he made in Balajigari, which Underhill LJ helpfully records as follows: 81.
Secondly, Mr Biggs relied on the legal consequences for an applicant who remained in the UK without leave, which have been rendered more severe by the so called hostile environment provisions introduced by the Immigration Act 2014.
It is, in the first place, a criminal offence to be in the UK without leave to remain: see section 24 of the Immigration Act 1971.
As regards practical consequences, a person without leave faces severe restrictions on their right to work (see section 24B of the 1971 Act), to rent accommodation (section 22 of the 2014 Act), to have a bank account (section 40 of the 2014 Act) and to hold a driving licence (sections 97, 97A and 99 of the Road Traffic Act 1988); nor will they be entitled to free treatment from the NHS: section 175 of the National Health Service Act 2006.
He submitted that those consequences are bound to have a serious impact on a migrants private life irrespective of any removal action.
The Secretary of State recognises that a migrant worker needs 60 days to put his affair in order.
It cannot be fair to leave an applicant for LTR who is also working for his sponsor with a shorter period of time.
That period may indeed be too short as a new sponsor may have to complete a resident labour market test before issuing him with a CoS, and this may require him to advertise the post twice in order to see if there is a resident worker who would fill the vacancy.
I appreciate that the Secretary of State sees the position of the applicant simply as matched to the job vacancy with the original sponsor, but the Secretary of State has also to discharge his duty of procedural fairness to the individual applicant as well.
As to imposing burdens on the executive, it is well known that the PBS has been devised to enable the Secretary of State to deal efficiently with the number of cases which Britain attracts.
Fairness must take full account of this, but the resultant scheme must not sacrifice fairness in order to achieve efficiency.
As Sedley LJ, giving the judgment of the Court, held in R (Refugee Legal Centre) v Secretary of State for the Home Department [2004] EWCA Civ 1481; [2005] 1 WLR 2219, para 8: The choice of an acceptable system is in the first instance a matter for the executive, and in making its choice it is entitled to take into account the perceived political and other imperatives for a speedy turn round of asylum applications.
But it is not entitled to sacrifice fairness on the altar of speed and convenience, much less of expediency; and whether it has done so is a question of law for the courts.
Where revocation is not the result of the Secretary of States actions
Singh LJ considered that Mr Pathans case was analogous to that of Talpada [2018] EWCA Civ 841, mentioned above, but in my judgment that case is distinguishable.
The applicants application was for leave to remain as a Tier 2 migrant, and he received a CoS from his employer.
Unfortunately, this was a CoS which had been used and so he could not meet the requirement that he should hold a valid CoS. Singh LJ held, at para 62: The reality of the complaint is that, despite what the Immigration Rules require, the respondent should have been prepared to accept something else, namely a COS number which in fact had already been used.
That has nothing to do with any duty on the respondent to hear the appellant before taking her decision.
In reality it is concerned with a matter of substance, namely whether the requirements in the Rules should be complied with in full or whether the respondent should be prepared to dispense with one of those requirements.
In my view, it makes no difference to this analysis to say that the requirement in the Rules is itself concerned with a matter of procedure rather than, for example, whether a person should be granted leave to remain or a work permit.
The important point is that this is nothing to do with procedural fairness in the sense outlined above.
It is to do with whether a substantive requirement of the rules themselves needs to be complied with in making a relevant application.
The officer of the sponsor company who had spoken to an official at the Home Office thought she had got permission to assign a previously used CoS. The Court of Appeal did not accept that there had been unfairness because the reason why the appellant had no valid CoS was not in the system provided by the Home Office.
It was due to an error made by the officer of the sponsor company.
Likewise, in EK (Ivory Coast) v Secretary of State for the Home Department [2014] EWCA Civ 1517; [2015] INLR 287, the Court of Appeal (Sales and Briggs LJJ; Floyd LJ dissenting) rejected an argument that the Secretary of State should have allowed a Tier 4 applicant further time when her college withdrew sponsorship from her by mistake.
Another case where the cause of the failure of the application could not be attributed to the actions of the Secretary of State was R (Raza) v Secretary of State for the Home Department [2016] EWCA Civ 36; [2016] Imm AR 682, where the applicants sponsors licence was withdrawn but the Court of Appeal (Arden, Beatson and Christopher Clarke LJJ) rejected his claim for judicial review as he was already an overstayer when he made his application.
Making an application from abroad
In his judgment, Singh LJ accepted the Secretary of States argument that a person in Mr Pathans position could always return to their own country and make an application from there.
But that course of action may be unreal if the migrant has financial commitments through having already worked for the sponsor.
If the applicant went abroad and applied from another country, he would have to pay another fee.
Procedural fairness does not of course apply any differently because of this.
If the applicant is entitled to receive notification from the Secretary of State that his sponsors licence has been revoked, and if he is then able to apply for a variation of his application for leave, he will not incur that fee.
Should this Court rule on the question whether the basis of the Upper Tribunals decision in Patel was unsound?
As I have explained, Singh LJ said that he had considerable reservations about the decision of the Upper Tribunal (Blake J, President, and Batiste SIJ) in Patel, which concerned Tier 4 migrants, but he did not consider that the Court of Appeal in this case should overrule it because the Secretary of State had not appealed in that case and the submissions made in Raza to the effect that Patel was wrongly decided had been rejected, albeit obiter.
Coulson LJ also expressed his concerns about this decision.
As previously explained, this Court is not asked to overrule Patel.
Singh LJs concerns arose from observations in Patel about equal treatment.
What the tribunal had held in its decision under appeal in Patel to the Upper Tribunal was that the students should have leave but in error did not limit the leave to 60 days leave.
One of the reasons of the Upper Tribunal for allowing the appeal was that the students in that case should be treated as other students were.
Singh LJ held that as the law stands equal treatment was not as a self standing head of unfairness.
However, as I read the decision, the reference to equal treatment was only one basis for the decision.
Fairness in that case required 60 days to be given to all students of colleges whose licences the Secretary of State took steps to revoke.
The point which the Upper Tribunal was making was that the same 60 days should be given to all Tier 4 applicants even if they did not have 60 days leave left.
In the second half of para 23 and in para 24, the Upper Tribunal decided the case on the basis of fairness alone: 23.
Although we accept that there is no such policy for refusal cases, fairness requires that such cases be treated in broadly the same way.
The applicant must be given an equal opportunity before refusal of application to amend it in the way we have described.
This was clearly not done in this case.
The Home Office knew that it had suspended the college in January 2010 but no one else did.
The applicant could not have known that subsequently the colleges status as an approved sponsor was revoked before his application for an extension of stay was decided. 24.
It is obviously unfair for the Secretary of State to revoke the colleges status after the application has been made when it was an approved sponsor and not to inform the applicant of such revocation and not afford him an opportunity to vary the application.
Moreover, the Secretary of State in that case had accepted that there was procedural unfairness to that extent.
Furthermore, the reality is that the question whether equal treatment was part of the basis for the decision is academic because, as Mr Jackson explains, the Secretary of State accepts (and did accept before the decision in Patel) that as a matter of procedural fairness notice of withdrawal of the licence for their college should in general be given to applicants for Tier 4 leave, and the effect of the decision has been absorbed in the Secretary of States revised practices as regards Tier 4 applications.
That was a proper and sensible decision for the Secretary of State to take.
In my judgment, it is sufficient to explain Patel as I have done, and I do not consider that this Court should indicate that the basis of the decision in Patel so explained was unsound.
I have not had to rely on Patel in reaching my conclusions in this judgment, which of course concerns a different tier of leave for migrants.
Lord Wilsons judgment
Since preparing this judgment, I have had the privilege of reading in draft the judgment of Lord Wilson, with which I completely agree.
Conclusion
For the reasons and to the extent summarised in para 6 above I would allow the appeal.
LORD KERR AND LADY BLACK:
Mr Pathan was granted leave to enter the United Kingdom as the dependant partner of a Tier 4 (general) student on 7 September 2009 with leave to remain until 31 December 2012 (later extended until 30 April 2014).
Before the latter date arrived, Mr Pathan applied for and was granted leave to remain as a Tier 2 (general) migrant from 23 March 2013 until 15 October 2015.
This was so that he could be employed by a company known as Submania Ltd as a business development manager.
The period between March 2013 and October 2015 is known as the period of leave.
Before the period of leave was due to expire in October 2015, Mr Pathan applied, on 2 September 2015, for further leave to remain in order to continue to work for Submania in the same capacity as before.
The application was made on the basis that he would retain his Tier 2 status.
It was made within the time allowed and it was in correct form.
His wife and child were named as dependants in the application.
It was supported by a certificate of sponsorship (CoS) issued by Submania.
Mr Pathans application was put on hold while a Sponsor Compliance Team of the Home Office investigated Submania.
As a result of their investigations, Submanias sponsor licence was suspended on 4 February 2016.
The licence was subsequently revoked on 7 March 2016.
This had the automatic effect of invalidating Mr Pathans CoS.
Although, as seen below in para 101, his leave was automatically extended until the Secretary of State considered his individual case, he had no opportunity to take steps to deal with the impending, inevitable determination of his application.
Mr Pathan was not informed of the revocation until 7 June 2016.
He was therefore unaware of the impact that the decision would have on his status until three months after it had been taken.
Mr Pathan applied for judicial review.
The nature of the judicial challenge has been the subject of, if not dispute, at least discussion, in the Upper Tribunal (Immigration and Asylum Chamber) (the UT) and in the Court of Appeal.
The UT judge who dismissed Mr Pathans judicial review claim characterised the issue in this way at [2017] UKUT 369 (IAC), para 2: Whether an immigration applicant who has applied . for leave to remain under the Tier 2 (General) Migrant Category of the Immigration Rules and has submitted a Certificate of Sponsorship from their sponsoring employer which is valid at the time the application is made is entitled to challenge the respondents decision not to provide [him] with a period of 60 days in which to secure an alternative sponsor, in circumstances where the sponsors Tier 2 Licence was revoked .
On the appeal by Mr Pathan from the UT judges dismissal of his claim, it became clear that this formulation went further than the case which the appellants wished to advance.
In the course of the hearing before the Court of Appeal ([2018] EWCA Civ 2103; [2018] 4 WLR 161, Sir Andrew McFarlane P, Singh and Coulson LLJ) the issue was framed thus by Singh LJ (who delivered the principal judgment with which McFarlane P and Coulson LJ agreed), at para 5: [the appellants] contend that they were entitled to notice of the fact that the sponsors licence had been revoked and a reasonable opportunity (not necessarily 60 days) to re arrange their affairs, not necessarily to find an alternative sponsor but potentially to do other things, including making an application to the Secretary of State on an alternative basis, for example on human rights grounds or to ask for the exercise of his residual discretion, or even to leave the United Kingdom voluntarily without the risks associated with being found to have been staying here after their leave to remain had expired. (para 5) (there was another appellant besides Mr Pathan who was in a broadly similar situation as he but who plays no part in the appeal to this court.)
The difference in the two formulations is significant.
As articulated or refined in the Court of Appeal, Mr Pathans case does not specify that he was entitled to a particular defined period between becoming aware of the revocation of the licence and the final decision on his migrant status, the new formulation being that he was entitled to a reasonable period.
And the purpose of the time sought is no longer confined to obtaining an alternative sponsor.
His case can be seen to have two elements.
The primary case that he advances is that he should have been given notice of the revocation when that occurred.
The second element is that he should have had a reasonable period thereafter to rearrange his affairs in response to that.
If Mr Pathan had been given notice of the revocation of his sponsors licence, a number of options would have opened for him: (i) he could have sought to vary his leave application, other than by making a human rights or asylum claim (eg by making an application relying on a new CoS from a different employer); (ii) he could have made an application to vary the terms on which he was entitled to remain so as to rely on human rights grounds; (iii) he could have made practical plans to remove himself, his wife and his child from the United Kingdom to his native India, thereby avoiding the prospect of their becoming overstayers, with all the negative consequences which that entailed; and (iv) he could have decided to take no steps until formally notified by the Secretary of State that his leave to remain was refused.
The possible advantages of early notification
By section 3C of the Immigration Act 1971, when a person applies for variation of his leave to remain before that leave expires, if it then expires before a decision is taken, the leave is automatically extended to the point at which the appropriate period for appealing a refusal comes to an end.
By virtue of subsection (2), the existing leave will be extended during any period when (a) the application is neither decided nor withdrawn; or (b), if the application has been decided and there is a right of appeal against that decision, an appeal could be brought; or (c), if an appeal has been brought, that appeal is pending, or (d), an administrative review of the decision could be sought or is pending.
None of these options was realistically open to Mr Pathan because the first he knew of the problem with his application was when he received the Secretary of States letter of 7 June 2016 refusing it.
Before this was communicated to him, Mr Pathan had no occasion to seek leave to remain other than on foot of what he believed was a valid CoS.
Although his leave had been extended (by operation of section 3C) while the Secretary of State considered his application, because he was unaware of the virtually certain outcome of that consideration, Mr Pathan took no steps to deal with that inevitability.
Why would he? He simply did not know what lay ahead.
But what unavoidably lay ahead, while his application for leave to remain depended on a CoS which was of no value, was the end of his leave to remain, as from the conclusion of the administrative review period following refusal of his application.
If he had known that this was inevitable, Mr Pathan could have applied to vary the application.
Even if the variation constituted a significant departure from the original application, it is recognised as a variation for the purposes of section 3C of the 1971 Act, so long as the original application for leave had not been determined: paragraph 34BB of the Immigration Rules, section 3C(5), and JH (Zimbabwe) v Secretary of State for the Home Department [2009] EWCA Civ 78; [2009] Imm AR 3, para 40.
Section 3C(5) has the effect that any new application made by the migrant during the currency of a variation application (VA1), operates as a variation of VA1.
If, therefore, the new application succeeds, it is tantamount to VA1 succeeding.
This can be regarded as akin to the conventional procedural fairness situation of an applicant being allowed to make further submissions with a view to improving the chances of his application succeeding.
As Lord Briggs has said in para 170, in appropriate cases, the rules of natural justice may require a party to be afforded time to amend his case in a way that cures an otherwise fatal defect of which he had, without fault on his part, previously been unaware.
Whether this is required is, as Lord Briggs says, heavily context specific, but the question quite obviously arises for consideration where the circumstances are as they were in the present case.
A real and distinct advantage would have accrued to Mr Pathan if he had been notified of the revocation of his sponsors licence as soon as that had taken place and rejection of his Tier 2 application occurred some time later.
Between those two dates, all of the options adumbrated in para 100 above and explored in paras 113 and 114 below) would have become available.
Crucially for present purposes, he would have become aware of the need to vary under section 3C.
By contrast, if someone in his position is notified of the revocation of his sponsors licence at the time that it is revoked and his application for a Tier 2 licence is rejected at the same time, that range of options is not available to him.
Applying for administrative review is the only course.
It was not suggested by the respondent that it was necessary that the revocation and the rejection of the Tier 2 application take place concurrently.
Indeed, Mr Pathans case demonstrates that it was not.
It was perfectly possible to inform him at the time of revocation and, as appears to be the practice, to consider his application on its merits in due time.
The proper discharge of a duty to act in a procedurally fair way recognises the advantage that comes of having notice of a fundamental difficulty in the way of the original application, so that steps can be taken to allow it to be adjusted.
Underpinning the duty to act fairly in this context is the notion that a person such as Mr Pathan should be afforded as much opportunity as reasonably possible to accommodate and deal with a decision which potentially has devastating consequences.
One only has to envisage how Mr Pathan must have reacted to the news that his Tier 2 application had been rejected because of the revocation of Submanias licence, to understand the fundamental justice in giving him the chance to do something about it.
He had every reason to believe that his application would succeed.
The reason that it did not had nothing whatever to do with him.
But, failure in the application represented a calamitous upheaval for him and his family.
To ensure in those circumstances that he had timely notice that, for wholly unanticipated reason his application was bound to fail, so that he could seek to avoid its consequences seems to us to be a self evident aspect of the duty to act fairly.
That is not to say that the Secretary of State should be fixed with a positive duty to provide Mr Pathan with that opportunity, much less that he should have allocated a specific period (not already available under the Rules/legislation) within which it might be exploited.
The duty to act fairly in these circumstances involves a duty not to deprive, not an obligation to create.
It appears to us that requiring of the Secretary of State that he or she should supply a period of time for someone such as Mr Pathan during which to deal with the decision would be to impose a positive duty, and, importantly, a duty that would involve an extra extension of leave beyond that expressly set out in the legislation/Rules.
Such an extension is a matter of substance.
In contrast, there is nothing incompatible with the legislation or the Rules in allowing the affected person to know, as soon as may be, of the circumstances which imperil their application, so that they may make use of whatever time remains to them under those provisions.
This does not confer a substantive benefit.
It may be properly characterised as a procedural duty to act fairly.
It is not a duty to bestow.
It is an obligation not to deprive.
Expressed in another way, the Secretary of State did not incur an obligation to give someone such as Mr Pathan an extra period of grace beyond that provided for in the legislation and the Rules but fairness required that she/he did not take steps to frustrate or circumscribe the period during which action might have been taken if timely notice of the revocation of the licence had been given.
Thus, the duty to act procedurally fairly comprehends an obligation to tell somebody such as Mr Pathan immediately about circumstances which doomed his current application so that he could avail of the full period which would then have become available to allow him to do something about it.
It follows that to contrive to ensure that Mr Pathan was informed of the revocation of Submanias licence at the same time that he was told that his application to renew his Tier 2 status was refused would be procedurally unfair.
These decisions are, naturally and conventionally, taken sequentially.
To compress them in order to reduce the time available in which to seek to avoid their impact would obviously be procedurally unfair.
That is not to say that a decision to revoke a CoS, communicated at the same time as a refusal of an application to renew a Tier 2 status will inevitably and invariably be unfair.
Exigencies, as yet unforeseen, may make such a convergence of decisions and their coincident communication unavoidable.
It is only where the coincidence of communication of both has been contrived in order purposely to deprive an affected person of the period between learning of the revocation of the CoS and the refusal of the application that procedural unfairness would arise.
That theoretical case has nothing to do with the present appeal, however.
Here, there was time between the revocation of the sponsors licence and the determination of Mr Pathans application, during which he could have sought to do something about the changed circumstances, but the Secretary of State did not provide him with information about the revocation of the CoS which would have opened that door for him.
True it may be, as Lord Briggs states in para 148, that there is no evidence that the Secretary of State decided deliberately [to] keep Mr Pathan in the dark about the revocation of his sponsors licence, or subject him to some kind of ambush.
But what the Secretary of State neglected to do was something that lay squarely within her power, namely, to let Mr Pathan know, as soon as the decision on revocation of the licence was made, that the entire basis of his application was undermined.
It might be suggested that this too would involve the imposition of a positive duty and the correlative conferral of a substantive benefit.
It does not.
This is information which he would have had to be given.
A decision that it should have been communicated at the time that revocation occurred involves no more than the assertion of a fair procedure.
A window would have existed for Mr Pathan, therefore, if he had learned timeously of the revocation of Submanias sponsor licence and before the Secretary of States determination of his application for leave to remain.
One way in which he might have used this would have been to apply for a new Tier 2 (general) migrant visa with a new CoS from a new employer.
Another was to apply for a variation of leave on the basis of a human rights claim.
Even if this was initially rejected, Mr Pathan could have appealed under sections 82(1)(b) and 92 of the Nationality, Immigration and Asylum Act 2002.
His leave to remain in the United Kingdom would thereby be extended for: (a) the first 14 day period during which such an appeal may be brought: section 3C(2)(b) of the 1971 Act; and (b) the period during which any such appeal remained pending: section 3C(2)(c) of the 1971 Act; section104 of the 2002 Act.
A further option available to Mr Pathan if he had been notified of the revocation of Submanias sponsorship licence was that he could have used the extra time which this afforded him to arrange his affairs so as to make an orderly return for himself and his family to India.
The benefit of doing so would have been that he could have avoided the effect on him and his family of becoming overstayers.
Acquiring the status of an overstayer carries a number of potentially serious adverse consequences.
The consequences of being an overstayer
There are two types of effect of becoming an overstayer: immediate and long term.
If one is knowingly an overstayer, one automatically commits an offence under section 24(1)(b) of the 1971 Act and becomes liable to imprisonment for a term of up to six months or a fine.
Overstaying also tips a person into the Home Offices hostile environment.
Since July 2016 it has been illegal for an overstayer to be in employment.
That prohibition remains in place even after an overstayer has applied for a visa extension.
It persists until (and if) they are granted leave to remain.
Overstayers may find it difficult to rent accommodation and may be prevented from driving.
Long term consequences may be even more serious.
The Home Office would not normally accept an immigration application from an overstayer unless, as was the law in force before November 2016, an overstayers application is made within 28 days of the applicants leave expiring see policy paper, statement of changes to the Immigration Rules HC194, June 2012, and paragraphs 245CD(i) and 245HD(p) of the Rules. (The period of 28 days was reduced to 14 days by Statement of Changes HC 667.
This came into force on 24 November 2016.)
Individuals who overstay for longer periods may be subject to a re entry ban under rule 320(7B) of the Rules, preventing them from returning to the UK for between 12 months and ten years depending on the particular circumstances.
There will be no re entry ban if the person overstayed for less than 90 days and left the UK voluntarily and not at the expense of the Secretary of State.
The table below summarises the various consequences: Overstay period If overstay for 28 days or less If overstayed for 90 days or less If overstayed for more than 90 days If overstayed for any period Other circumstances and left UK voluntarily not at expense of Home Office and left UK voluntarily not at expense of the Home Office and left UK voluntarily at expense of Home Office within six months of being given removal notice or within six months of exhausting appeal or administrative review process and left UK voluntarily at expense of Home Office OR was removed from the UK as a condition of a caution If overstayed for any period If removed or deported from the UK OR used deception in an application for entry clearance Consequence No effect No mandatory ban 1 year ban 2 year ban 5 year ban 10 year ban
The duty of procedural fairness: the issue of pointlessness
We should supplement what we have said already about the duty of procedural fairness by considering a particular question that arises in relation to it.
When an administrative body is contemplating a decision which will adversely affect an individual, does the duty to act in a procedurally fair way require the body to inform the individual even though any representations that he or she might make will not affect the outcome? Or, to put it in other words, is the duty to act fairly by giving notice of an impending adverse decision dependent on the existence of the possibility of submissions by the person affected bringing about a change of mind by the decision maker?
Before addressing that question, it should be pointed out that the scope of inquiry into the duty to act fairly cannot be confined, in every instance, to circumstances in which the affected person aspires to change the decision makers mind on the precise decision made.
Where notice of the decision might prompt a change of direction which would achieve the aim of the person, albeit by a different route, there is an active inquiry to be had as to whether the duty is activated.
There is ample authority on the issue of whether the duty to afford the opportunity to make representations arises where any such representations are bound to fail.
Thus, as Lord Briggs has pointed out, in Cinnamond v British Airports Authority [1980] 1 WLR 582, 593, it was said that no one could complain of not being given an opportunity to make representations if it would have achieved nothing.
A somewhat similar view was expressed in Bank Mellat v HM Treasury (No 2) [2014] AC 700, para 179 in the passage from Lord Neuberger of Abbotsburys judgment cited by Lord Briggs at para 161 below. (It is noteworthy, however, that in that passage Lord Neuberger was at pains to point out that any argument advanced in support of pointlessness should be very closely examined, as a court will be slow to hold that there is no obligation to give the opportunity, when such an obligation is not dispensed with in the relevant statute.)
Pointlessness can have two dimensions.
The first is that there is no possibility of bringing about a change of mind on the part of the authority on the terms of the decision that has been made.
So, for instance, in the present case, Mr Pathans application, so long as it was based on a CoS issued by a company which had ceased to have authority to issue such a certificate, could not succeed in any circumstances.
The second dimension is different.
It involves an examination of whether, on becoming aware of the decision, there was simply nothing that the affected person could do to achieve his aim.
In other words, there was no other avenue which he or she could explore to avoid the impact of the adverse decision.
We are here concerned with the second dimension, and it will already be apparent that, in our view, it cannot be said that, even if notified promptly, Mr Pathan would still have been without avenues to pursue in an attempt to alter the outcome of the decision making process.
We have outlined above the various options which we believe would have been open to Mr Pathan if he had been alerted earlier to the decision to cancel Submanias sponsor licence.
Before turning again to those options, it is necessary to say something of the nature of the duty to act fairly in the context of bringing to the attention of an individual at the earliest time reasonably possible a decision in relation to revocation of the sponsor licence which is likely to affect him or her adversely.
In Cinnamond the pointlessness argument was put starkly.
Lord Neubergers exposition of it in Bank Mellat (No 2) was more muted.
The argument needs to be viewed, however, in the context of other judicial pronouncements where a less stringent view of the requirements of the utility of notice can be discerned.
In Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28; [2010] 2 AC 269, para 72, Lord Hoffmann noted that the purpose of the audi alteram partem rule is not merely to improve the chances of the tribunal reaching the right decision but to avoid the subjective sense of injustice which an accused may feel if he knows that the tribunal relied upon material of which he was not told.
And in R (Osborn) v Parole Board [2013] UKSC 61; [2014] AC 1115, para 68, Lord Reed endorsed a normative understanding of the duty to act procedurally fairly: [J]ustice 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.
In their work Administrative Law: Text and Materials, 5th ed (2016), Elliott and Varuhas at para 10.2.5 discuss this passage from Lord Reeds judgment: Referring to the dictum from R v The Chancellor of Cambridge (1723) 1 Stra 557 set out at 10.1, concerning Gods willingness to grant Adam a hearing, Lord Reed continued (at para 69): The point 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.
On this view, the notion of procedural fairness which would make no difference becomes a contradiction in terms, since it rests on an exclusively outcomes oriented view which overlooks the much wider role played by procedural fairness in an administrative state that seeks to build constructive relationships between individuals and public bodies by casting the former as participants in the process of governance.
These statements do not, of course, relate directly to Mr Pathans case.
But they serve as a useful reminder that utility is not the only yardstick by which to measure the duty to act fairly in communicating to an individual why (and more relevantly in this case when) a decision adverse to their interests has been or is to be taken.
It cannot have been lost on those who were involved in the decision in this case that it would have a significant impact on Mr Pathan and his family.
The duty to inform him at the earliest reasonable opportunity that this effect was due to accrue seems to us to be obvious.
Not only should those concerned with the decision have been aware that Mr Pathan and his family would experience a major disruption to their lives, they must also have been alive to the likelihood that he would want to do something to mitigate the effects of the decision.
This reinforces the need to inform him timeously.
Of course, as Lord Briggs has said (in para 146 below), the rules provide for a very short time between notification of the decision to reject the Tier 2 application and the requirement to leave the United Kingdom.
As Lord Briggs put it, the tight timetable is the consequence of the rules.
But the rules are not necessarily comprehensive of the duty to act in a procedurally fair way.
They do not inhibit release of information when that can be first provided.
True it may be that Mr Pathan would have been taken as much by surprise if he had been notified immediately of the revocation of his sponsors licence as he was when told of it three months later but he would have had a longer period in which to do something about it if he had been told on the earlier date.
At para 10.3.2 of their work, Elliott and Varuhas, referring to cases such as Al Rawi v Security Service [2011] UKSC 34; [2012] 1 AC 531 and R (B) v Westminster Magistrates Court [2014] UKSC 59; [2015] AC 1195, suggest that the courts have generally taken the view that unless primary legislation so provides (either explicitly or, as in Bank Mellat v HM Treasury (No 1) [2013] UKSC 38; [2014] AC 700, by necessarily implication), they may not adopt procedures enabling them to take account of evidence to which one of the parties is denied access.
This approach they describe as the principle of open justice to which, they say, the common law has a strong commitment.
This is not a case of denying Mr Pathan access to evidence relating to the cancellation of Submanias sponsorship licence, nor even to the material which led to the rejection of his Tier 2 application.
But, in a telling passage (also at para 10.3.2) Elliott and Varuhas continue: The open justice principle finds its analogue in the administrative context in the duty to give notice.
At its lowest, this means that individuals must know that a matter liable to affect them is going to be decided before any final decision is taken.
As Lord Sumption put it in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014] AC 700, at para 29: The duty to give advance notice and an opportunity to be heard to a person against whom a draconian statutory power is to be exercised is one of the oldest principles of what would now be called public law.
We freely acknowledge that these observations were made with a different context in mind from that of the present case.
The decision to refuse Mr Pathans application was, in a sense, preordained by the Immigration Rules.
By contrast, Elliott and Varuhas were discussing circumstances where the decision was at large.
The outcome depended on a weighing of evidence.
One can readily see how, in such a situation, the person to be affected should be given notice of the prospect of a decision so as to be able to contribute evidence which might influence the outcome.
But, if I should be given notice of the prospect of a decision which I might be able to influence by the production of evidence, should I not be given notice of that prospect when I might take steps to avoid its impact on me?
Discussion
We are of the view that the duty to give notice of a decision to someone who will be adversely affected by it cannot be defined solely by the consideration that it is pointless for that person to make representations with a view to reversing or avoiding the effect of the decision.
The duty to give notice is an accepted element of the duty to act fairly.
Three months elapsed between Submanias sponsors licence being revoked and the refusal of Mr Pathans application.
It cannot be suggested that informing him promptly of the revocation of the licence when it had been cancelled would not have made a difference.
The options that would have become available to Mr Pathan have been discussed at paras 100 to 105 and 113 to 114 above.
To have the three months extra in which to explore those options that prompt notification would have afforded him would have made a difference.
That conclusion does not rest on any estimate of his likely success in pursuing any of the chances that opened up for him.
Nor does it depend on a view as to whether he would have sought to follow up on any of them.
The cornerstone here is procedural fairness.
What was the fair thing to do, procedurally? In our judgment, it was to tell Mr Pathan as soon as reasonably possible after the cancellation of Submanias licence that this had happened.
He would then have known that his application in its current form was bound to fail.
He could then have tried to get a different sponsor.
Lord Briggs has pointed out (in para 151) that Mr Pathan did make a second Tier 2 application after finding a new sponsoring employer and that he made two applications based on human rights grounds all of which failed.
This is true.
It is also true that their failure was not due to the fact that Mr Pathan had become an overstayer.
But, simply because, in the event, the applications were unsuccessful, does not mean that the withholding of the information was fair.
It is not possible to know, now, what would have happened had Mr Pathan had the additional time that a timely notification would have afforded him.
To take an obvious example, he might have had different opportunities to find an acceptable sponsor which would have enabled him to put in an application on that basis before his original application was determined against him in light of the withdrawal of Submanias licence.
Furthermore, the fairness of withholding the information is not to be judged on an ex post facto basis.
At the time when it was first possible to inform Mr Pathan of the cancellation of Submanias licence, there was no means of knowing whether he would have been able to obtain a new, acceptable sponsor.
But, this is the time that the fairness of withholding the information falls to be judged.
If it was not fair then, it cannot be converted to a condition of fairness because of Mr Pathans subsequent failure to put forward an employer who could have provided a CoS acceptable to the Home Office.
Quite apart from these considerations, failing to tell Mr Pathan at the time that Submanias licence was cancelled meant that his acquisition of the status of overstayer was accelerated with all the adverse consequences which that entailed.
To deny him the greater opportunity to avoid those consequences was in itself unfair.
Again, that conclusion does not depend on any judgment as to whether he would have sought to avoid that outcome.
Whether he would or not, to deprive him of the chance was unfair.
We have concluded, therefore, that the failure to inform Mr Pathan promptly of the revocation of Submanias licence constituted procedural unfairness.
It is not a species of the audi alteram partem rule in the classic meaning of that rubric.
This was not a case of the Home Office making sure that Mr Pathan had a chance to make representations to it about the correctness of its decision to reject his application as originally formulated.
Rather, it is an instance of his being deprived of the enlarged period that timeous information would have provided, during which he might have been able to vary his existing application so as to put it into a form that could succeed.
There is, however, no material difference between these two situations.
Furthermore, in principle, it can be just as unfair, procedurally, to restrict a persons opportunity to take steps to avoid the effect of the decision as it would be to deny him the opportunity to make representations.
The objective of the person affected is the same in both scenarios.
It is to avoid the adverse consequences of an unfavourable decision.
We must turn then to the debate as to whether the duty to act fairly by providing the information promptly is procedural or substantive.
At para 178, Lord Briggs says that time for the applicant to put his best case forward on the facts already available may be procedural, but time to change or improve the underlying facts to make them more favourable is substantive.
We acknowledge the force of this argument and its initial attractiveness.
But we cannot agree with it.
A distinction must be drawn between the duty to act in a procedurally fair way and the use which the beneficiary of the discharge of that duty will avail of it.
Leaving aside the pointlessness argument, it is generally accepted that the duty to give a person affected by an adverse decision the opportunity to make representations is procedural.
If, by making the representations, the affected person secures a change of mind by the decision maker, the favourable result may be regarded as a substantive benefit.
The procedural duty to act fairly by giving the opportunity to make representations exists whether or not that opportunity is availed of.
Likewise, in the case of the duty to provide relevant information promptly.
In both cases the agency responsible acts in contemplation that the person affected will take a particular course to avoid the impact of the decision and that it is fair that he or she should have the chance to do so.
This is what underpins the duty.
If the opportunity is taken and a different outcome is obtained, that can be regarded as a substantive benefit.
But it does not make the duty to inform or to allow representations to be made any less of a procedural duty.
It can be argued that the making of submissions on the decision to be taken is integral to the decision making process, whereas the opportunity to avoid the effect of an adverse outcome by taking a course not directly connected to that process is not.
But why should this make a difference to the characterisation of the duty? Again, the notion of what is fair holds the key.
If there is a duty to allow representations to be made for the purpose of bringing about a result favourable to the representor, why should it not also be fair to allow the affected person to have the chance by a different means to secure that outcome? In both cases the duty to act fairly involves allowing the opportunity to influence the result.
And in both cases, in our opinion, the duty is properly to be regarded as a procedural duty.
The answer to this difficult issue lies, we believe, in maintaining a strict segregation between the procedural duty to act fairly at the time when the decision is taken or is imminent and the steps which a person affected might take to achieve a different result.
Once the opportunity to make submissions or the chance to take different steps has been provided, the procedural duty has been fulfilled.
To deny the chance to make submissions or to fail to inform promptly involves breach of that duty.
By contrast, an obligation positively to confer a particular period of grace during which to take action would, as we have explained at para 108 above, amount to the imposition of a substantive rather than a procedural duty.
Essentially, the procedural duty extended to the maintaining of a fair procedure.
Telling Mr Pathan at the earliest reasonable opportunity that his sponsors licence had been cancelled preserved the fairness of that procedure.
Giving him an allotted time thereafter in which to take action would involve a modification of the processes laid down by the Rules and the legislation, rather than conducing to the intrinsic fairness of the stipulated procedure.
As Lord Briggs says in para 186, the provisions in the Rules and the legislation which define when migrants have permission to remain, and when they become overstayers are matters of substance implementing immigration policy.
Conclusion
We would therefore allow the appeal on the basis that the failure promptly to inform Mr Pathan of the cancellation of Submanias licence was a breach of the respondents procedural duty.
We would hold, however, that the Secretary of State was not under an obligation to allow him a particular period within which to make an alternative application.
Postscript
We consider that it is necessary, in a case where all members of the court have provided judgments, to identify the core of the decision of the court.
Here, it consists in (1) the decision that the appeal must be allowed (as agreed by us in our joint judgment and by Lord Wilson and Lady Arden in their respective judgments, albeit that there are differences of reasoning), (2) the determination (agreed by at least four members of the court) that there was a duty on the Secretary of State to notify Mr Pathan promptly of the revocation of his sponsors licence, it being procedurally unfair not to do so, and (3) the determination (agreed by us and Lord Briggs) that there is no positive obligation on the Secretary of State to provide a period of time following notification to enable an applicant to make an alternative application or otherwise to react to the revocation of the sponsors licence.
LORD BRIGGS: (dissenting)
Although I broadly agree with Lord Kerrs and Lady Blacks analysis of this difficult case, I would nonetheless have dismissed this appeal.
It is best therefore that I set out my reasons in full.
Overview
In summary, when the considerable complexity is properly analysed, Mr Pathans entirely understandable perception that he has been treated harshly does not amount to a basis for quashing the rejection of his Tier 2 application on the grounds of procedural unfairness.
For the reasons given by Lord Kerr I am inclined to agree that it was procedurally unfair for the Secretary of State not promptly to inform Mr Pathan of the revocation of his sponsors licence rather than, as actually happened, to delay informing him of that important event for three months.
But his real grievance is not simply that he should have been informed more quickly than he was.
Rather it is that, once his application became bound to fail because of the revocation of his sponsors licence, the Secretary of State should have given him more time after notification of it than allowed by the rules to make alternative arrangements, either to extend his leave to remain by other means (including an amendment of his application) or to bring it to an orderly end, before he and his family incurred the very real disabilities of becoming overstayers.
He says that time should have been given to him, as it is given under current departmental policy to Tier 4 students in a similar predicament, by extending the life of his original Tier 2 application after he had been told of the revocation of his sponsors licence, so that he could pursue those arrangements under the protection of the extended leave to remain afforded by his pending Tier 2 application.
Many would agree with Mr Pathan that the time to make alternative arrangements, given by the Rules to a Tier 2 applicant who is taken completely by surprise by the rejection of his application, is very short indeed and that it would often be impracticable for him for example to find a new sponsor, or even to pack up and leave the UK, before becoming an overstayer.
But that is what the Rules provide for a person in his position.
No direct attack is made upon the Rules in these proceedings.
But it is said that the discretionary grant of an extended period, say 60 days, after notification of the revocation and before the refusal of his original application would provide the necessary extended time to remain lawfully for him to have a fair chance to make those arrangements.
But the tight timetable is the consequence of the Rules, which make no more lenient provision for a person taken by surprise by the rejection of a Tier 2 application than they do for any other unsuccessful applicant for extended leave to remain.
Applicants for leave to remain under the PBS system are quite frequently taken by surprise when their application fails, but thus far (subject to two exceptions referred to below) the courts have not treated being taken by surprise as a reason for requiring the Secretary of State to find some discretionary way of giving them some means, outside the Rules, to achieve a recovery of their position, or an extension of their leave to remain, before becoming an overstayer.
It was not irrational or Wednesbury unreasonable (see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223) for the Secretary of State to decline to exercise such a discretion in this case, by giving advance notice of the impending failure of Mr Pathans application.
Even if under a fairness duty to give prompt notice of the revocation of his sponsors licence, she could, for example, lawfully have notified him of the revocation on the day it happened, and rejected his Tier 2 application on the same or the following day.
There is therefore no basis upon which her not giving him time can be subjected to judicial review.
The fact that the Secretary of State provides just that kind of relief to Tier 4 students in a similar situation does not enable a Tier 2 migrant to complain by way of judicial review about being treated differently, because the two classes of permitted immigration are there for different political and economic reasons.
Analysis
It is necessary to begin by dispelling some myths which have arisen from the way in which this appeal has been presented.
The Secretary of State did not deliberately keep Mr Pathan in the dark about the revocation of his sponsors licence, or subject him to some kind of ambush.
Nor was the failure of his original Tier 2 application in substance brought about by something done by the Secretary of State.
An employing sponsor has to be licenced, and the continuation of its licence depends upon compliance with conditions.
In this case the sponsor was warned that its licence was liable to be revoked, invited to make representations why it should continue, and failed to do so.
Revocation followed as a matter of course, with unfortunate but inevitable consequences for all its sponsored employees, including Mr Pathan.
Although the Secretary of State necessarily played a part in that process, the real cause of the failure of Mr Pathans Tier 2 application was the conduct (or rather misconduct) of his employing sponsor.
The limited involvement of the Secretary of State was insufficient, in my view, to serve as the basis for identifying a new sub category of procedural fairness, encapsulated in a requirement to give 60 days advance notice of the revocation of the sponsors licence before refusing any Tier 2 application which had been based upon it.
Nor is this case in substance about whether a party to a pending matter is in fairness obliged to give the other party immediate or early notice of some fact of which it is aware which will be fatal to the application when decided at a pre arranged date in the future, like a County Court trial for which a date or a window has already been set.
The Secretary of State is in principle entitled to choose the date upon which to determine a Tier 2 application, subject perhaps to the margin permitted by the dictates of good public administration, which may render unreasonable delay unlawful.
In principle, the sooner a Tier 2 application is determined (once the relevant examination of the facts has been completed) the better for all concerned.
When asked by the Court what would have been Mr Pathans position if the Secretary of State had immediately notified him of the revocation of his sponsors licence, and then, or on the same or the following day, refused his by then hopeless application (rather than three months after the revocation, as actually happened), Mr Biggs submitted that his case would be just the same.
The immediate refusal of the Tier 2 application would be unfair, because Mr Pathan would not have a fair opportunity to make alternative arrangements, after being taken by surprise.
The resolution of this appeal does not therefore depend in any way upon the mere happenstance that the application was refused three months after the revocation of the licence.
Mr Pathan would have been taken just as much by surprise in either case and is in no different a predicament.
Nor did Mr Pathan have some legitimate expectation, the denial of which of itself entitles him to the courts assistance by way of judicial review.
He had been informed in writing that the success of his Tier 2 application depended, among other things, upon his sponsor maintaining its licenced status.
His immigration status as a Tier 2 migrant depended upon him continuing to be employed by his licenced sponsor.
The purpose of the written warning in paragraph 190 of the Guidance (quoted in Lady Ardens judgment) was to make it clear that the sponsors licence could be withdrawn or cancelled at any time either by the Home Office or by the sponsor, and that if this occurred it would cause the Tier 2 application to be refused.
A Tier 2 migrant can check on the Government website whether his sponsor remains licenced and is encouraged by published Guidance to do so, for example before travelling to the UK to work for a sponsor.
Mr Pathan has not shown that not being given prompt notice of the revocation of his sponsors licence, followed by time to respond to it before the determination of his application prevented him from taking any of the steps which he says he would have wished to take to obtain extended leave to remain.
Thus in fact he could and did make a further Tier 2 application after finding a new sponsored employer.
He could and did make two applications based on human rights grounds.
For complicated reasons none of these applications were adversely affected by his having become an overstayer by the time when he made them.
They all failed for other reasons.
Rather his complaint is that he could not at the same time preserve himself and his family from becoming overstayers while he took those steps, by postponing the determination of his original Tier 2 application in the meantime.
The defining feature of this appeal is that the Tier 2 applicant was taken by surprise by the failure of his application, at a time when (because of the expiry of his earlier leave to remain) the lawfulness of his continued stay in the UK depended solely upon his outstanding application, which he understandably expected to succeed, but which failed due to an event for which (on the assumed facts) he was in no way to blame, and of which he was unaware until informed about it by the Secretary of State.
The defining nature of the unfair prejudice which he alleges is being unable to postpone becoming an overstayer beyond the time when that would otherwise occur in accordance with the Rules, by obtaining the discretionary grant of time between being told of the revocation of his licence and the determination of his application.
For reasons which follow, that is not procedural unfairness.
The Law Procedural Unfairness
In respectful agreement with the Court of Appeal, and with Lady Arden, I do consider that procedural unfairness (as it is now called) is a distinct ground for judicial review, not a sub set of some general ground of unfairness, and that its boundaries need to be carefully defined if it is not to operate as a gateway through which the courts can pass judgment on the substantive merits, rather than the lawfulness, of administrative action.
The parties to this appeal were therefore right to raise, as the first issue to be decided, whether not being given extra time to respond to the revocation of his sponsors licence gives rise to a case of procedural unfairness at all.
In my judgment, and largely for the reasons given by Singh LJ in the Court of Appeal, it does not.
I put on one side the question whether he should in any event have been given prompt notice of the revocation, and concentrate for the moment on the main question, whether he should have been given further time, after that notification, before the determination of his Tier 2 application.
The reason why it is necessary to decide whether an allegation of unfairness is procedural or not is that it is only if it is, that it amounts to a distinct ground for judicial review.
If it is not, then the allegation of unfairness is just an aspect of a case based upon irrationality, Wednesbury unreasonableness or denial of a legitimate expectation.
In this respect Lady Arden and I are at one: see R (Gallaher Group Ltd) v Competition and Markets Authority [2019] AC 96 per Lord Carnwath at para 41, in a passage cited by Lady Arden at para 53 of her judgment.
The ordinary principles of judicial review have been developed over many years to ensure that the courts confine themselves to a review of the lawfulness of administrative decision making, rather than an appeal against its substantive merits.
Irrationality and Wednesbury unreasonableness are stern tests.
They are by no means satisfied merely because the court thinks that it would have reached a different decision.
The legitimate expectation principle has its own internal checks and balances.
By contrast, where procedural unfairness is alleged, the court is the final arbiter of what is, or is not, fair.
This is because a decision made by a process which is in fact procedurally unfair is for that very reason unlawful.
Thus it is necessary for the court to be satisfied that an allegation of unfairness falls squarely within the true boundaries of procedural unfairness, if its dominion over the answer to the unfairness question is not to lead it into an inappropriate role as the final arbiter of an appeal on the merits of administrative action.
In R (Osborn) v Parole Board [2014] AC 1115, Lord Reed said, at para 65: 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 [2010] EWHC 580 at para 38 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.
In the case of the appellant Reilly, the Court of Appeal in Northern Ireland stated [2012] NI 38, 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: see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223.
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] 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.
Procedural unfairness is a modern title for a form of unlawfulness which used to be called breach of the rules of natural justice.
That phrase collected together a number of traditional doctrines, the most important of which were the requirement that a decision should be unaffected by bias (nemo judex in causa sua) and the principle espoused by the Latin tag audi alteram partem or, literally translated, hear the other side.
The rules of natural justice served originally to protect the integrity of decision making by courts but have been applied for more than 150 years to maintain the lawfulness of administrative decision making: see eg Cooper v Wandsworth Board of Works (1863) 14 CBNS 180.
For present purposes the court is concerned only with the second of those main principles, which enshrines the healthy notion that a matter should not be decided against a party without that person being offered a fair opportunity to present their case to the decision maker.
It is to be noted that all but one of the cases referred to by Lady Arden in her elucidation of the principles of procedural fairness are about the audi alteram partem principle: see Cooper v Wandsworth (concerning the right to be heard to stop a building being demolished); FP (Iran) [2007] EWCA Civ 13 (the right to be heard at a substantive asylum hearing); Balajigari [2019] 1 WLR 4647 (the right to reply to dishonesty allegations); and Fayed [1998] 1 WLR 763 (the right to be informed of proposed reasons for rejecting a nationality application in order to reply to them).
The right to be heard assumes that there is some case, however weak, that the party might actually advance, and has no application to a situation where the decision is inevitable, whatever the party adversely affected by it may say.
Presentation of a case need not, of course, necessarily be oral.
The one case relied upon by Lady Arden in which a finding of procedural unfairness was not squarely within the audi alteram partem principle is the Venables case [1998] AC 407.
But there the main ground for the quashing of the increased tariff was that the Secretary of State had acted unlawfully in making the decision itself by taking an irrelevant matter into account.
That was not itself a procedural ground at all, but a separate ground for review.
It was merely described as procedural as well.
Here there is no attack on the lawfulness of the refusal of the original Tier 2 application.
In Cinnamond v British Airports Authority [1980] 1 WLR 582, 593, Brandon LJ said: no one can complain of not being given an opportunity to make representations if such an opportunity would have availed him nothing.
In Bank Mellat v HM Treasury (No 2) [2014] AC 700, para 179 Lord Neuberger said, speaking of the audi alteram partem rule in the administrative context: In my view, the rule is that, before a statutory power is exercised, any person who foreseeably would be significantly detrimentally affected by the exercise should be given the opportunity to make representations in advance, unless (i) the statutory provisions concerned expressly or impliedly provide otherwise or (ii) the circumstances in which the power is to be exercised would render it impossible, impractical or pointless to afford such an opportunity.
I would add that any argument advanced in support of impossibility, impracticality or pointlessness should be very closely examined, as a court will be slow to hold that there is no obligation to give the opportunity, when such an obligation is not dispensed with in the relevant statute. (My emphasis)
The present case is a perhaps rare example of pointlessness, although one which may well arise quite frequently under the mainly mechanical provisions of the PBS scheme.
Mr Pathan had at the outset been fully heard, as contemplated by the rules, on the basis of his on line application for extended leave under Tier 2.
It was common ground, and inevitable, that it depended critically upon him continuing to be employed and sponsored by a particular licenced sponsor, namely Submania Ltd. The question is whether he should have been heard further when the central plank of his application was swept away by the revocation of his sponsors licence.
It was common ground before this Court that nothing he could have said could have affected the negative outcome of the original application.
Audi alteram partem is usually relied upon as a means of challenging the decision made after the alleged departure from fair procedure.
Here there is no such challenge.
Mr Pathan accepts that, following the revocation of his sponsors licence, there could only have been one outcome to his original Tier 2 application, whatever the procedure subsequently adopted by the Secretary of State.
Nor does he complain about having been unable to make representations to the Secretary of State.
Rather he complains about not being given a period of time when, knowing of the revocation of the sponsors licence, he could have taken alternative steps to protect (or bring to an orderly end) his status as a lawful migrant, while protected from becoming an overstayer by the continuing pendency of his by then hopeless application.
Using Brandon LJs formulation, being told of the revocation of the sponsors licence, together with being given time before the refusal of his Tier 2 application, would have availed Mr Pathan something rather than nothing, just as does the same facility when granted to students who lose their educational sponsor.
But this sort of collateral advantage from the adoption of a particular procedural step is not in my view something which the audi alteram partem principle is designed to protect.
On the contrary, the integrity of a decision making process is in general damaged rather than preserved by enabling a participant to buy time by the prolongation of a hopeless case.
That is why, in the private law sphere, there exists a regime for the grant of summary judgment when there is no real issue needing to be tried.
I do not mean by describing the advantage as collateral to imply that it is not a real advantage, or that it might not be usefully deployed, even by the Secretary of State, for the purpose of giving an applicant time to respond to an unexpected failure of his application.
It is now something which the Secretary of State does routinely, as a matter of policy, to assist Tier 4 applicant students who lose their educational sponsor.
Buying time in that way is a common practice.
For example it was common ground between counsel that, under the rules, a disappointed applicant in Mr Pathans position could buy a minimum of an extra 14 days leave to remain, by applying for an administrative review of the refusal of his Tier 2 application, however hopeless that might be.
But the question is whether it can be procedurally unfair, in the sense of being a breach of the rules of natural justice, for the Secretary of State not to grant such time, beyond that provided by the Rules, as a matter of discretion.
It is plain that this inaction by the Secretary of State did not amount to a breach of the audi alteram partem rule.
Mr Pathan was not seeking to be heard in support of his application, after being informed of the revocation of his licence.
Further submissions would have been pointless.
The integrity of the outcome was in no way affected by the refusal of his original application at a time when he was unaware of the revocation of his sponsors licence.
I have searched in vain for some other aspect of the rules of natural justice which might have assisted him, and none were suggested.
Rather, the case is put on the broad basis that the boundaries of procedural fairness are not fixed and that the taking, or not taking, of any step which might loosely be described as procedural falls within the purview of procedural fairness, even if it amounts to nothing more than letting the existing rules which apply to a given situation take their course, rather than interfering with them by the exercise of some residual discretion, such as delaying the determination of a pending application.
The only authorities which might appear to support such a basis for judicial review are the decisions of the Upper Tribunal in Thakur (PBS decision common law fairness) Bangladesh [2011] UKUT 151 (IAC) and Patel (Revocation of Sponsor licence Fairness) India [2011] UKUT 211 (IAC); [2011] Imm AR 5.
In both cases the relevant appellant was a Tier 4 student applicant whose educational sponsor lost its licence while his application was pending, and who (like Mr Pathan) only found out that this had occurred when (or shortly before) his application was refused.
The decision in the Thakur case was heavily based on the well known dicta of Lord Mustill about procedural fairness in R v Secretary of State for the Home Department, Ex p Doody [1994] 1 AC 531, 560, cited by Lady Arden at para 55 of her judgment.
The decision in both Thakur and Patel was that Tier 4 students in the position summarised above should be informed of the loss of their sponsors licence and (by analogy with departmental policy in a different but related factual situation) given 60 days in which to attempt to find an alternative sponsor with which to complete their education, and vary their application for leave to remain by substituting the new sponsor for the old one.
It is convenient to focus on the reasoning in the Patel case, rather than on Thakur, because most of the controversy which has followed those two cases, at Court of Appeal level, has done the same.
At para 22, Blake J said: Where the applicant is both innocent of any practice that led to loss of the sponsorship status and ignorant of the fact of such loss of status, it seems to us that common law fairness and the principle of treating applicants equally mean that each should have an equal opportunity to vary their application by affording them a reasonable time with which to find a substitute college on which to base their application for an extension of stay to obtain the relevant qualification. (My emphasis)
It is apparent that Blake J relied in combination on what he called common law fairness and the supposed principle of equal treatment.
The latter principle was not relied upon before this Court, following cogent criticism of it by Singh LJ in the Court of Appeal, and it is doubtful whether, as a separate principle, it survives the detailed analysis of it in the Gallaher case [2019] AC 96.
It appears to have arisen from a misreading by Blake J of the way in which leave to remain is cut down to 60 days upon the failure of an application for Tier 4 extended leave, where (unlike in Mr Pathans case) the applicant still has leave to remain for longer than that.
Shorn of equal treatment, Blake Js reliance on common law fairness is not further developed by way of legal analysis.
Perhaps the best aspect of Mr Pathans argument that both his and Mr Patels cases were cases of procedural unfairness is because of the way in which the rules deal with the making of a fresh application for extended leave to remain, when an earlier application is pending.
Blake J spoke in the quoted passage and elsewhere in his ruling about Mr Patel needing to be given the opportunity to vary or amend his application.
Mr Pathan says that he was deprived of the same opportunity, because he was given no time in which to vary or amend his application by substituting a new sponsoring employer, before it was refused.
I would readily accept that, in appropriate cases, the rules of natural justice may require a party to be afforded time to amend his case in a way that cures an otherwise fatal defect of which he had, without fault on his part, previously been unaware.
Such time is frequently given to a party in civil proceedings, whose statement of case is found to disclose no cause of action, to attempt to amend it to cure that defect, before his claim is struck out.
Whether the rules of natural justice do or do not impose that requirement is heavily context specific, and in the sphere of civil proceedings the position has changed significantly in recent years, following changes in the detail of the Overriding Objective governing civil procedure generally.
In the immigration context there is (now) a special deeming process whereby a second application for extended leave to remain, made during the pendency of an earlier first application, is treated as if it were a deemed variation of the first application, however completely different it may be in substance.
It is designed to avoid an applicant obtaining, in effect, an endless extension of leave to remain by making a series of successive applications, however ill founded on the merits, each new one just before the determination of its predecessor.
It applies equally to Tier 2 and Tier 4 applications, and to applications on human rights grounds.
Thus for example, a pending Tier 2 application may be deemed to be varied by a fresh Tier 2 application based on employment by a different sponsor, or even by a fresh application based on human rights grounds, and vice versa.
Section 3C of the Immigration Act 1971 (as amended) provides, so far as relevant, as follows: (1) This section applies if a person who has limited leave to enter or remain (a) in the United Kingdom applies to the Secretary of State for variation of the leave, (b) leave expires, and (c) variation having been decided. the leave expires without the application for the application for variation is made before the (2) The leave is extended by virtue of this section during any period when the application for variation is neither decided (a) nor withdrawn, (d) application for variation an administrative review of the decision on the (i) (ii) could be sought, or is pending (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).
The Immigration Rules provide, in this connection, as follows: Multiple Applications 34BB(1) An applicant may only have one outstanding application for leave to remain at a time. (2) If an application for leave to remain is submitted in circumstances where a previous application for leave to remain has not been decided, it will be treated as a variation of the previous application Variation of Applications or Claims for Leave to Remain 34E If a person wishes to vary the purpose of an application or claim for leave to remain in the United Kingdom and an application form is specified for such new purpose or paragraph A34 applies, the variation must comply with the requirements of paragraph 34A or paragraph A34 (as they apply at the date the variation is made) as if the variation were a new application or claim, or the variation will be invalid and will not be considered. 34F Any valid variation of a leave to remain application will be decided in accordance with the immigration rules in force at the date such variation is made.
Paragraph 34BB was not in force at the relevant time, but it merely reflected that which the courts had already worked out: see JH (Zimbabwe) v Secretary of State for the Home Department [2009] EWCA Civ 78; [2009] Imm AR 3, paras 34 46 per Richards LJ.
I will call it the deemed variation rule.
The result is that, for example, a Tier 2 application which has become hopeless because the employing sponsor has had its licence revoked may nonetheless be saved by the making of what is in substance a fresh Tier 2 application on a completely new form, based upon employment by a new licenced sponsor, because (provided that the new application is made before the previous application has been determined), it will (however artificially) be deemed to be a variation or amendment of the previous application.
It is a very artificial form of variation, because the rationale of the Tier 2 process is that each applicant seeks to fill a distinct gap in the labour market identified by their sponsoring employer.
Thus if, for example, the original sponsor immediately informs the applicant that its licence has been revoked, and the applicant has time to find employment by a new sponsor before his application is determined, he can make a fresh application based on employment by the new sponsor and it will be deemed to be a variation of his original application.
But if the applicant only discovers that his sponsors licence has been revoked from reading the Secretary of States letter refusing his application, he cannot of course save it by a new application which is deemed to be a variation of his original application.
This is for two reasons.
First, he has no time to complete the new application.
But secondly he will not have left the employment of his original sponsor, still less found a new one.
And the new employer, once found, may well (if it has not already done so) have to carry out the resident labour market test, which takes a minimum of 28 days.
In the present case it must be assumed that Mr Pathan was still employed by his original sponsor when his application was refused, and he discovered that its licence had been revoked.
Mr Biggs submitted that he needed time, following that discovery but before the refusal of his Tier 2 application, to take one or more of three alternative steps, in each case with a view to avoiding becoming an overstayer: first, finding employment with a new licenced sponsor and making a fresh Tier 2 application; second, seeking a right to remain on human rights grounds; third, making an orderly departure from the UK.
None of these alternatives could, he submitted, realistically be achieved before Mr Pathan became an overstayer, even if he obtained a 14 day (or a little longer) window by making a hopeless application for administrative review.
The question whether the failure to provide time for the taking of any of those steps can amount to procedural unfairness, rather than unfairness in any more general sense, does not necessarily admit of a uniform answer.
Although the grant or refusal of an adjournment (ie time before an application is determined) is in one sense a question about procedure, it is relevant to ask, what is the giving of time for? If it is for time simply to take a procedural step, such as amending a claim or application, in a way that may affect its outcome, then a refusal may, depending on the facts and the context, amount to procedural unfairness.
But if time is sought to do something more, or different, than that, then the question is likely to be about substantive rather than procedural fairness.
In short, time for the applicant to put his best case forward on the facts already available may be procedural, but time to change or improve the underlying facts to make them more favourable is substantive.
Time before determination to enable an applicant facing a refusal to prepare for an orderly departure from the UK (Mr Pathans third alternative) is in my view clearly substantive.
It can have no effect on the outcome of his application and is not sought to give him time to take a procedural step in the process.
It is just a way of getting a longer time as a lawful migrant than provided by the Rules, before becoming an overstayer.
It is like an occupier of a home seeking the adjournment of a possession application to which he has no defence, in order to give him more time to move out than permitted by the courts limited jurisdiction to postpone enforcement of a possession order once made.
It is, at best, substance dressed up as procedure.
Time simply to raise an existing human rights ground for an extension of leave to remain, which would presumably require no longer than time to find a lawyer, make the application and pay the fee, may be procedural, so that a refusal might amount to procedural unfairness.
If sought by a fresh application before the Tier 2 application was refused, it would amount to a deemed variation of the original application, and therefore be capable of affecting its outcome.
Time to seek fresh employment with a new licensed sponsor, and then to make a new Tier 2 application on that basis, again by way of the deemed variation rule, is something of a hybrid.
To the extent that it is designed to give Mr Pathan time to alter the available facts by finding new sponsored employment so as to qualify for Tier 2 leave to remain, I consider it to be substantive.
If it had merely been to give him time to complete a fresh application based on qualifying employment which had already been begun or offered, it might have been procedural.
The former might well require something like the 60 days now afforded to Tier 4 students in a similar predicament, not least because of the employers need to carry out a resident labour market test.
The latter would not generally require more than a working week.
Both could in fact be done within the period of grace following the refusal of his Tier 2 application, within which a fresh application could be made despite being an overstayer (then a minimum of 42 days, ie 28 days after the end of the minimum 14 days protection afforded by an administrative review).
But it would expose him to becoming an overstayer while the fresh application remained pending, whereas the same application made by way of deemed variation, before the determination of his first application, would not.
The fact that the Secretary of State did not give Mr Pathan any time at all by way of a breathing space between informing him of the revocation of his sponsors licence and refusing his Tier 2 application may therefore in a strictly limited and rather artificial sense be described as procedural.
However, this does not mean that it was therefore procedurally unfair.
It is convenient at this point to examine what actually happened following the refusal, and the then legal consequences, in order to identify the prejudice which not being given such a breathing space may have caused him.
His Tier 2 application was refused on 7 June 2016.
He had 14 days in which to mount an administrative review, which he did, in time.
It was refused on 7 July, whereupon he became an overstayer.
But the rules then in force gave him a further 28 days grace (now reduced to 14 days) in which to make a further application for leave to remain, without the fact that he was by then an overstayer being taken into account to his disadvantage.
On 3 August, within the period of grace, he made an application for leave to remain based on article 8.
He made a further application on 29 November, and a further Tier 2 application on 12 December, (presumably having by then found further employment with a licenced sponsor, although there is no evidence about this).
They were both treated as successive variations of his 3 August application, to which the period of grace therefore applied, although it had by then expired.
He made a further article 8 application on 27 May 2017, again treated as a variation of his 3 August application.
That final article 8 application was refused on 11 October 2018 on grounds wholly unrelated to his being by then an overstayer.
Two factors clearly emerge from this factual description.
The first is that being given no breathing space between discovering that his sponsors licence had been revoked and having his original Tier 2 application refused did not in fact have any adverse effect upon Mr Pathans ability to pursue alternative ways of obtaining extended leave to remain.
Secondly the combined effect of the period for administrative review and the (then) 28 day period of grace thereafter within which to make a fresh application (typically 70 days in total if the response to the application to the request for administrative review was in accordance with the 28 day departmental target) was actually ten days longer than the full 60 days now afforded to Tier 4 students in a similar predicament.
Even if the Secretary of State conducted the administrative review within a single day it would still be 42 days.
In the present case Mr Pathan actually secured 58 days.
It was (for good reason) no part of Mr Pathans case before this Court that fairness required nothing less than a full 60 days rather than some other reasonable period.
The adverse effect was only that for the period of the pendency of those alternative applications, Mr Pathan would (if he chose to remain in the UK) be an overstayer rather than a migrant with leave to remain.
I do not by that description mean thereby to belittle that adverse effect.
Being an overstayer has very serious consequences, although leaving is always an alternative to being an overstayer, and Mr Pathan was not an asylum seeker.
But the point is that they are consequences of substance rather than procedure.
The consequences of being an overstayer had no effect (procedural or otherwise) upon the outcome of his repeated applications for extended leave to remain.
They all failed for other reasons.
They are also consequences which flow from a statutory framework and from Rules approved by Parliament which (for example by providing for the 28 day period of grace during which being an overstayer is not to prejudice a fresh application) expressly contemplate that migrants whose first application for leave fails may have to pursue alternative applications while an overstayer (or after a return to their country of origin).
Parliament has, in short, provided a tough, rigid regime for migrants who wish to pursue multiple applications for leave to remain, and the Rules treat a person taken by surprise by the refusal of an original application in exactly the same way as an applicant who is not taken by surprise.
The lawfulness of those Rules (however tough in their effect) is not challenged in these proceedings.
Furthermore, the only reason why the giving of time between communicating the revocation of the sponsors licence and the refusal of the Tier 2 application is capable of being viewed as procedural at all is because of the deemed variation rule.
But that rule is part of a structure designed, as explained above, to hinder rather than facilitate the obtaining of extended leave to remain by the making of multiple applications.
And these are relevant specific details within the context of a PBS scheme which is itself deliberately designed to be operated mechanically, in accordance with strict rules, with minimal scope for discretionary adjustment.
They matter because they constitute the contextual framework within which, as Lord Mustill explains in the Doody case, an allegation of procedural unfairness has to be evaluated.
I would acknowledge that procedural unfairness might arise from the imposition of hurdles which, while not absolutely preventing the taking of further procedural steps to achieve the original objective, may properly be characterised as designed to render the taking of them impracticable.
But the provisions in the Immigration Act 1971 and Rules which define (with great particularity) when migrants have permission to remain, and when (if they do not depart) they become overstayers are matters of substance which implement immigration policy, not (generally at least, and not in the present case) procedural bars in the way of obtaining extended leave to remain by further applications, even if they may have the consequence (although not in this case) that further applications have to be made from abroad.
Drawing together the threads of this unavoidably complicated analysis, I reach the following conclusions about the class of case where a Tier 2 migrant, whose status as lawfully present in the UK hangs on the slender thread of an outstanding application for extended leave to remain, learns of the revocation of his sponsors licence only at the same time as his application is refused: i) The migrant will have the opportunity to seek employment with a new licensed sponsor and make a new Tier 2 application within a minimum of (then) 42 days, and typically 70 days, without his having become an overstayer during that period adversely affecting its outcome.
He will suffer the disadvantages of becoming an overstayer, but this is not procedurally unfair since both: a) His requirement to find a new sponsored employer is substantive rather than merely procedural, and b) His loss of the status of being entitled to remain while pursuing his fresh application is itself a matter of substance rather than procedure and does not generally render the making of his further application impracticable, although there may be cases, on different facts from those affecting Mr Pathan, where it might do so. ii) It is not therefore procedurally unfair for the Secretary of State not to volunteer to such a migrant a time between the communication of the revocation of the sponsors licence and the refusal of his Tier 2 application. iii) Nor is the absence of the conferral of such a time period otherwise judicially reviewable because: a) There is no wider principle of common law or substantive fairness, outside the rules of natural justice, which supports it, b) It is not irrational or Wednesbury unreasonable for the Secretary of State in such circumstances to allow the Act and the Rules to take their ordinary course, for the purpose of giving effect to an immigration policy approved by Parliament in circumstances where specific provision is made for what is to happen, and c) The migrant is denied no legitimate expectation, because of the written warning about the consequences of the revocation of the sponsors licence in the Guidance, and the migrants ability to check on the Governments website whether his sponsor remains licenced.
It remains to check whether this outcome falls within the general thrust of the authorities which address similar apparently hard cases arising under the PBS.
With the exception only of the Patel and Thakur cases they present an austere jurisprudence which gives effect to the requirements of a rigid rules based scheme, at considerable cost to individual applicants who, in circumstances demanding at least sympathy, frequently fall foul of it, and often to their surprise.
While a full analysis would be beyond the scope of this dissenting judgment, the following cases will serve as sufficient examples.
First, the Rules impose very strict requirements on applicants in terms of documentary evidence.
Thus where a Tier 1 applicant failed to provide payslips to prove that he had employed the requisite number of workers, but had submitted amply sufficient other forms of proof of the same facts, this gave rise to no obligation on the Secretary of State to give him time to correct the error, otherwise than as very narrowly required by the Rules: see Singh v Secretary of State for the Home Department [2018] EWCA Civ 2861, following Mudiyanselage v Secretary of State for the Home Department [2018] EWCA Civ 65; [2018] 4 WLR 55.
Secondly where, through no fault of his own, a Tier 4 student applicant was taken by surprise by the accidental cancellation by her college of her CAS letter due to an administrative error, the Secretary of State was under no obligation of fairness to give the student time to obtain another valid letter from the same college before deciding her application, even though (in sharp contrast with the present case) that would have made her original application good: see EK (Ivory Coast) v Secretary of State for the Home Department [2014] EWCA Civ 1517; [2015] INLR 287.
In that case the Court of Appeal recognised a line of authority which justified a different outcome where the Secretary of State bore substantial responsibility for the happening of a mistake which, unless corrected, threatened to undermine an otherwise perfectly well founded PBS application: see Naved v Secretary of State for the Home Department [2012] UKUT 14 (IAC).
The Court of Appeal was minded to treat the Patel and Thakur cases as falling within the same category because, in each of them, as in the present case, the Secretary of State had been instrumental, although not in any way at fault, in bringing about the revocation of the Tier 4 sponsors licence.
But the Court did so under the clear caveat that the duty to give the applicant an opportunity to respond would not apply where, as here, the relevant defect was obviously irremediable (per Floyd LJ, at para 49, dissenting but not on this point).
In my judgment both the Patel and Thakur cases were wrongly decided.
This is because: i) The combined use of the twin supposed general principles of common law fairness and equal treatment were shaky foundations, for reasons already given. ii) Mere involvement without fault in the process of the revocation of a licence does not impose on the Secretary of State a fairness duty to go outside the Rules in affording recovery time to an applicant to find another sponsor, still less by enabling the migrant to take advantage of the deemed variation rule to achieve a result which it was not designed to facilitate.
Revocation of a sponsors licence is an irremediable defect in any Tier 4 (or Tier 2) application based on a relevant relationship of education or employment with that sponsor.
In both those cases (as in the present case) the relevant fault lay squarely with the sponsor, no less than in EK (Ivory Coast). iii) In any event the general unfairness which may be inherent in the applicant being taken by surprise is not procedural in nature, for the reasons already given. iv) The supposed parallel with the curtailment situation (where an existing period of leave is shortened to 60 days where a sponsor loses its licence) is not a true comparable from which a supposed principle of equal treatment could properly be applied.
The fact that those two cases were wrongly decided, at least as far as laying down any general principle in a fact and context sensitive field, makes no practical difference in Tier 4 cases on the same facts, since it is now departmental policy to give disappointed applicant students 60 days to find another sponsor.
But the elevation of what is in truth a non existent legal duty into an administrative policy provides no alternative means of support for the existence of an equivalent duty in Tier 2 cases.
It is not in question whether the Secretary of State could, if she thought fit, now decide to give Tier 2 migrants who unexpectedly lose their licenced sponsor while their application for extended leave is pending further time in which to find another sponsor, without risking becoming overstayers.
The question is whether she is obliged to do so, in the sense that any other decision would be irrational.
The Court of Appeal thought not, and I agree, for the reasons given by Singh LJ at para 71.
In short, the evident policy behind Tier 4 is to provide students with education, whereas the policy behind Tier 2 is to enable specific employers to find suitable employees where (after due enquiry) the local labour market is found to be deficient.
Those policy differences are sufficient to prevent a different policy approach to giving time to find another sponsor being stigmatised as irrational, regardless whether others, including the Court, would disagree.
Remedy
I began this judgment by acknowledging the force of Lord Kerrs and Lady Blacks opinion that it was in any event procedurally unfair for the Secretary of State not to have informed Mr Pathan promptly of the revocation of his sponsors licence.
The question then arises whether, if so, that of itself rendered her decision, three months later, to refuse his Tier 2 application unlawful.
Mr Pathans claim is to have that decision set aside.
If one assumes that (for some unexplained reason to do with internal administrative delay) she would, after giving such prompt notice of revocation, still have done nothing about determining his Tier 2 application for another three months, it is easy to see that, in the events which have happened, Mr Pathan could and probably would have done something to improve his position by making the series of applications which in fact he did make, but earlier, before his original application was determined.
Critically, he would have done so by way of successive deemed amendments of his original application, and thereby have avoided becoming an overstayer in the meantime.
In theory he might even have improved upon one or more of the applications which he did make, so that he might have succeeded in obtaining Tier 2 permission to remain, although no factual basis for that possibility has ever been suggested.
On any view the opportunity to delay becoming an overstayer would have been a solid advantage of which he was deprived, on those assumed facts.
But the reality is that, on those assumed facts, the reason why Mr Pathans position would have been improved is not because of the promptness of the notification per se, but because of the time which the Secretary of State did in fact let pass, following the revocation, before refusing his application, even though, for the reasons already given, she was under no duty to give him such a breathing space.
I have deliberately described that three months gap as a mere happenstance.
Mr Pathan would have obtained no such benefit if, as she was entitled to do, the Secretary of State had followed up a prompt notice of revocation with an equally prompt refusal of his application.
That analysis raises the stark question: if the Secretary of State was not obliged to give Mr Pathan time between the notification of the revocation and the determination of his application, so as to avoid him being taken by surprise by the revocation, why should an unfair delay in notification in this case mean that the refusal of his application was unlawful? He had no right not to be taken by surprise, and it was the surprise, not the time lapse between revocation and notification of it, which caused him the detriment which I have described.
It is I think no coincidence that, upon enquiry by the court, counsel for Mr Pathan based his appeal squarely upon a right not to be taken by surprise, ie an entitlement to a breathing space, rather than simply upon a right to prompt notification.
Like Lord Kerr and Lady Black I have concluded that the case for a right to a time between notification and refusal fails, because it is a matter of substance governed by the Act and the Rules, with solid consequences for his immigration status, rather than a matter of procedure.
By contrast the denial of his right to prompt notification of revocation, although procedurally unfair, had no adverse consequence of its own, save when aggregated with the Secretary of States purely voluntary (and probably unconscious) delay in dealing with Mr Pathans application for three months after the revocation.
I do not consider that, where causation of detriment rests upon such a happenstance, the court should intervene by striking down the refusal of Mr Pathans Tier 2 application as unlawful.
LORD WILSON: (partly dissenting) (with whom Lady Arden agrees)
We should with precision identify the issue raised on this appeal.
The issue is not whether Mr Pathan should have been notified of the revocation of Submanias licence.
For he was notified of it.
In the letter dated 7 June 2016, by which she refused his application for extension of leave to remain as of that date, the Secretary of State told him that she had cancelled the CoS reference number which he had provided; and in the letter dated 7 July 2016, by which she determined his application for administrative review, she added that she had cancelled the number because, following investigation, she had revoked his sponsors licence.
The issue is whether notification to Mr Pathan of the revocation of the licence should have occurred prior to the determination of his application for extension.
The issue is therefore not notification but what, for short, I will call prior notification.
Like Lady Arden, I agree with that part of the judgment of Lord Kerr and Lady Black (the joint judgment) in which they explain why the Secretary of State owed to Mr Pathan a duty of what, for short, I will call prompt notification of her revocation of the licence; and, in the light of her delay of three months in notifying him, she was clearly in breach of it.
So there is a majority of four members of the court in favour of that conclusion.
But, with respect, I disagree with that part of the joint judgment in which they reject Mr Pathans submission that the Secretary of State also owed to him a duty of prior notification.
In effect like Lady Arden, I conclude that, concomitant with the duty of prompt notification, the Secretary of State owed to Mr Pathan a duty not to determine his application for extension of leave to remain until a reasonable period had elapsed following notification to him of the revocation of the licence.
Irrespective of the precise parameters of a reasonable period, it is clear that the determination of Mr Pathans application on the very day on which he was notified of the revocation falls outside it.
A judgment qualifies as a dissenting judgment if it disagrees with any significant part of the actual order to be made by the majority.
Lord Kerr, Lady Black and Lord Briggs understandably propose that the actual order of the court should record not only the conclusion of four of its members that the Secretary of State was in breach of her duty to Mr Pathan of prompt notification but also the conclusion of the three of them that she had no duty of prior notification.
It follows that the judgments of Lady Arden and myself qualify as partly dissenting judgments.
In Lloyd v McMahon [1987] AC 625 Lord Bridge of Harwich said at pp 702 703: it is well established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedural safeguards as will ensure the attainment of fairness.
Lord Bridges reference to the procedure prescribed by the statute must include the procedure prescribed by a rule made pursuant to a statute.
There is no doubt that his statement of principle applies to the rules relating to the points based system in the law of immigration.
In SH (Pakistan) v Secretary of State for the Home Department [2016] EWCA Civ 426 Beatson LJ, in the course of addressing the public duty of fairness at common law, said at para 29: It is common ground that this may impose obligations on the Secretary of State in addition to those under the Rules
concerning the points based system
So in this context the duty of fairness at common law provides additions.
It cannot displace a rule unless, as in the joined FP (Iran) and MP (Libya) cases cited by Lady Arden at para 43 above, the rule was made outside the powers given to the rule maker or unless it can be disapplied under the Human Rights Act 1998.
Lord Kerr and Lady Black at paras 108 and 141 above and Lord Briggs at paras 146, 164 and 197 above suggest that a duty of prior notification would be inconsistent with statute or the Immigration Rules.
I beg to differ.
There is no such legislative provision as requires the Secretary of State to determine an application for extension within a specified period.
Equally there is no such provision as requires her to determine an application for extension at the same time as she notifies the applicant of an irremediable defect in the application as then framed.
There are of course numerous legislative provisions which address the consequences of the ultimate refusal of an application for extension.
But Mr Pathans assertion of a duty of prior notification does not relate to the period following refusal.
Nor, crucially, does it amount to an attempt to extend his leave to remain beyond the terminal point specified in section 3C(2) of the Immigration Act 1971 (the 1971 Act), namely the refusal of his application and the negative conclusion of any associated appeal or review.
In his judgment in the present case Singh LJ relied heavily on observations which he had made in the Talpada case, cited by Lady Arden at para 42 above.
In his application for extension Mr Talpada had furnished a Certificate of Sponsorship reference number which he had already furnished in a prior unsuccessful application.
Para 77C(e) of the Immigration Rules provided that a reference number could not be re used in such circumstances.
So his second application was also refused.
The Court of Appeal dismissed his appeal against an order declining to grant him permission to apply for judicial review of the second refusal.
The courts decision is, I suggest, readily explained on the basis that, although the requirement of a fresh reference number was procedural, it was contained in a rule and that accordingly there was no room for the duty of procedural fairness at common law to fulfil its auxiliary function.
Singh LJ, however, chose to describe the requirement as substantive.
Having explained in para 57 that procedural fairness was the modern term for the two hallowed principles of natural justice, he suggested in para 58 that Mr Talpadas complaint had nothing to do with procedural fairness in that sense.
It is, he said, to do with whether a substantive requirement of the rules themselves needs to be complied with in making a relevant application.
Every observation of Singh LJ on a matter of public law commands particular respect.
But how helpful was it for him to have stamped Mr Talpadas complaint as one of substantive rather than procedural unfairness?
In his judgment in the present case Singh LJ enlarged the meaning which in the Talpada case he had ascribed to the concept of substantive unfairness.
He said, at para 62, that the two cases then before the court were analogous to the Talpada case and, at para 63, that the complaint in the present case is properly to be analysed as one of substantive rather than procedural unfairness.
But was a complaint that notice of revocation had not been given prior to the determination of the application analogous to a complaint about a rule which prohibited re use of a reference number? And how, without departure from ordinary meaning, could Mr Pathans complaint be described as not being procedural?
In paras 177 to 181 above Lord Briggs addresses in detail the conclusion of Singh LJ that Mr Pathans complaint was one of substantive unfairness and he subjects it to generally favourable analysis.
Lord Briggs there draws various distinctions between substance and procedure which, I confess, I find challenging.
Then at para 197 he concludes: the case for a right to a time between notification and refusal fails, because it is a matter of substance governed by the Act and the Rules, with solid consequences for his immigration status, rather than a matter of procedure. ceased to be entitled to state benefits; committed a criminal offence punishable with imprisonment; committed a criminal offence if he continued to work for Submania or I have already suggested, with respect, that the matter is not governed by statute or rule.
I now suggest, with equal respect, that the matter is not one of substance.
What, however, no one can dispute is that the ultimate refusal of Mr Pathans application had, in the almost understated language of Lord Briggs above, solid consequences for his immigration status.
Upon the negative determination of his request for administrative review of the decision to refuse his application, Mr Pathan at once became an overstayer.
The consequences were that, while he remained in the UK, he (a) (b) became liable to detention pending forcible removal; (c) worked elsewhere; (d) (e) became disqualified from occupying rented accommodation; (f) (g) became subject to the freezing of funds in his bank account; (h) became subject to revocation of his driving licence; and (i) in the various circumstances identified in para 117 of the joint judgment above, became subject to a ban on later re entry into the UK.
It follows that, when on 7 July 2016 Mr Pathan became an overstayer, legal disabilities at once precluded his continued pursuit of normal life in the UK.
It is in this light that a controversial part of Lord Briggs reasoning falls to be considered.
In para 181 of his judgment he sets out a history of applications made by Mr Pathan to the Secretary of State between 3 August 2016 and 11 October 2018; and earlier, became subject to NHS charging provisions; in para 151, Lord Briggs states that none of the applications was adversely affected by the fact that Mr Pathan was an overstayer at the time when he made them.
Lord Briggs would be the last person knowingly to pile procedural unfairness on top of procedural unfairness.
It must, however, be noted that the history of later applications plays no part in these proceedings issued on 4 August 2016 now before the court.
The Court of Appeal did not refer to the history.
It is not included in the agreed Statement of Facts and Issues.
Lord Briggs has located it in a brief footnote to the Secretary of States written Case, to which neither counsel made reference in their oral argument before the court.
So the question arises: in the absence of any invitation to Mr Pathans counsel to address the later applications, is it fair for Lord Briggs to conclude that the disabilities which, as an overstayer, stunted his ability to function in so many respects played no part in his failure to pursue them successfully?
In para 166 of his judgment Lord Briggs cites the decisions of the Upper Tribunal in 2011 in the Thakur case (Simon J and Latter SIJ) and in the Patel case (Blake P and Batiste SIJ); and in para 192 he concludes that they were wrongly decided.
Mr Thakur and Mr Patel were students rather than employees so the revocations in their cases were of the licences of their colleges to act as sponsors under Tier 4 of the system, rather than of the licence of an employer to act as a sponsor under Tier 2.
In every other respect their cases are materially identical to that of Mr Pathan: all three of them had applied for extensions prior to the expiry of their leave and prior to the revocation of the licences.
The Thakur and Patel cases have been regarded as good law for more than nine years.
In Alam v Secretary of State for the Home Department [2012] EWCA Civ 960 Sullivan LJ, at para 44, cited the Patel case, then recently decided, with apparent approval but distinguished it from the case before him on the basis that Mr Patel had not contributed to the reasons for the revocation of his colleges licence and was unaware of it until informed of the refusal.
In the EK (Ivory Coast) case, cited by Lord Briggs (who had been a member of that court) in para 190 above, the decisions in the Thakur and Patel cases were again cited with apparent approval at para 38 and, in relation to the Thakur case, by Lord Briggs himself at para 54.
But they were distinguished from the facts of Ms EKs case in which her college had, albeit accidentally, withdrawn its confirmation of her acceptance for studies and in which therefore the Secretary of State had not been instrumental in rendering her application no longer valid.
Indeed, in the Raza case, cited by Lady Arden in para 84 above, Christopher Clarke LJ, who gave the only substantive judgment, at para 1 expressly identified one of the issues before the court to be whether the Patel case had been rightly decided.
In conclusion, at para 38, he rejected any suggestion that it was not good law; but he held that the case was distinguishable because Mr Razas application had been made following the expiry of his leave.
Indeed the standing of the decisions in the Thakur and Patel cases is, in practical terms, even stronger than that which arises from their endorsement by the Court of Appeal.
For, within a year of the later decision, the Secretary of State had reflected the effect of the decisions in her Policy Guidance.
It is currently reflected in para 11 of Annex 1 to Tier 4 of the Points Based System Policy Guidance for use in respect of applications made on or after 29 October 2019.
Many will take the view that, if Lord Briggs now considers that the decisions in the Thakur and Patel cases are wrong, he is right to say so.
But some may harbour concern about whether the doubts now cast on them by so authoritative a voice might influence the formulation of future guidance and impair the ability of students and their lawyers confidently to analyse their rights.
For my part, I consider that the decisions in the Thakur and Patel cases are correct.
I also consider that they help to indicate the proper resolution of the present appeal.
I do not understand how the different reasons of policy which lead the UK to admit students to study at particular colleges, on the one hand, and employees to fill particular vacancies, on the other, can affect the level of unfairness which each group suffers when the Secretary of State takes action which renders their subsisting applications for extension no longer valid.
There is, however, one factor which, so I acknowledge, increases the level of unfairness upon students in that situation.
For they will have come to the UK in order to gain a qualification and, if required to leave prior to the expiry of their course, their work will have yielded nothing for them, whereas employees will at least have been remunerated for the work that they did.
But that extra level of unfairness on students does not in my view eradicate the unfairness on employees.
If a strong level of unfairness operates on A, it is not diminished when an even stronger level of unfairness is seen to operate on B.
Lord Briggs concludes at para 197 above that Mr Pathans appeal should be dismissed.
We other four members of the court agree that it should be allowed.
But, as already explained, we do not agree about the basis on which it should be allowed.
The basis favoured in the joint judgment is a breach of a duty only of prompt notification.
The basis favoured by Lady Arden and myself is a breach of duties not only of prompt notification but also of prior notification.
It remains for me to address that difference.
To hold that the Secretary of State owes a duty to Mr Pathan to give, and therefore that he has a reciprocal right to receive, prompt notification of the revocation is, I respectfully suggest, to give nothing of value to Mr Pathan unless it is accompanied by a duty, and a reciprocal right, of prior notification.
The law should not impose a duty nor confer a right if they are of no value.
The reasoning in the joint judgment appears to me to be as follows: (a) It was fundamental to the duty of procedural fairness that, prior to the determination of his application, Mr Pathan should be afforded a reasonable opportunity to avoid the consequences of the revocation of his sponsors licence: paras 106 and 107 above. (b) But the Secretary of State had no positive duty to afford that opportunity to him: para 108 above. (c) For the effect of any such positive duty would be to extend Mr Pathans leave beyond that for which the rules provide and any such duty would therefore be substantive rather than procedural: paras 108 and 141 above. (d) The natural and conventional practice of the Secretary of State is to determine an application for extension after she has notified the applicant of revocation of the licence: paras 106 and 110 above. (e) Exceptionally she will determine the application at the same time as she notifies the applicant of the revocation but, were she to contrive to do so in order to deprive him of the above opportunity, she would be in breach of the duty of procedural fairness: para 110 above.
In the present case prompt notification would have afforded to Mr (f) Pathan three months extra in which to explore [his] options: para 132 above.
With the brevity apt to dissenting observations, I respectfully respond to each stage of the above reasoning as follows: I disagree and question whether this is consistent with (a).
I do not accept that Mr Pathan seeks an extension of leave beyond the (a) There are four statements to this effect in paras 106 and 107 above and I entirely agree with them. (b) (c) provisions of section 3C(2) of the 1971 Act. (d) Mr Pathans case belie it.
I am unaware of the evidence of the suggested practice.
The facts of (e) I disagree with the first proposition and, in relation to the second, question whether enquiry into the Secretary of States motive for taking action is a satisfactory determinant of breach of duty. (f) paragraph.
I seek to unpack the reference to three months extra in the following
In referring to three months extra Lord Kerr and Lady Black clearly have in mind that revocation of the licence occurred on 7 March 2016 and that refusal of Mr Pathans application occurred on 7 June 2016.
So, for convenience, they surely here adopt a hypothesis of notification on the date when the revocation actually occurred; and then they take the hypothetical date of refusal to be the date when the refusal actually occurred.
This yields the three months to which they refer.
But the question, already posed by Lord Briggs in paras 194 and 195 above, is whether, were the Secretary of State to have had a duty of prompt notification but not also a duty of prior notification, she would, following prompt notification, have delayed for three months before refusing Mr Pathans application.
I can see no reason why she would have delayed her refusal to any extent at all.
If one adopts the convenient hypothesis that the Secretary of State should have notified Mr Pathan of the revocation on 7 March 2016, then in my view, in the absence of a concomitant duty of prior notification, she would be likely to have refused his application on the same day.
He would then no doubt have applied for administrative review, as he later did; it would no doubt have been determined negatively to himself, as it later was; and all this would probably have been concluded within the space of a month from the date of refusal, as it later was.
So, instead of his becoming an overstayer on 7 July 2016, Mr Pathan would have become an overstayer on 7 April 2016.
The limited duty recognised in the joint judgment is therefore not just valueless to Mr Pathan: it is likely to be prejudicial to him.
It is a curious result of his forensic success.
In my view counsel for Mr Pathan is right to submit that, in fairness, the duty of prompt notification must be accompanied by a duty of prior notification.
This alone would yield to Mr Pathan a reasonable period in which, while not being an overstayer, he could seek to vary his application under section 3C(5) of the 1971 Act by identifying a fresh employer licensed, able and willing to sponsor him, or by asserting a human right not to be removed from the UK, or by seeking leave to remain outside the rules.
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The Appellant made an application for leave to remain as a Tier 2 (General) Migrant in the UK.
At the time his application was made, it was supported by a valid certificate of sponsorship (CoS) from his employer, Submania Limited (Submania).
However, the Home Office revoked Submanias sponsor licence while the application was outstanding.
The Home Office did not inform the Appellant and, three months after revoking Submanias licence, rejected his application on the basis that he no longer had a valid CoS from a licensed sponsor and so he had not fulfilled the conditions for the grant of leave.
The Appellant sought an administrative review of the decision to reject his application and a 60 day period to enable him to provide a fresh CoS, but the decision was maintained.
The Appellant then applied for judicial review in the Upper Tribunal.
The Upper Tribunal dismissed his application, and the Court of Appeal dismissed his appeal, the Court of Appeal holding that the Appellants challenge raised an issue of substantive unfairness.
The Appellant appealed to the Supreme Court.
The Supreme Court allows the appeal.
The Court unanimously holds that the Home Secretary breached her procedural duty to act fairly by failing promptly to notify the Appellant of the revocation of his sponsors licence.
The majority of the Justices (Lord Kerr, Lady Black, and Lord Briggs) hold that the Home Secretary was not under a further duty to provide a period of time following notification to enable the Appellant to react to the revocation of his sponsors licence.
Lord Wilson and Lady Arden concluded that the law did impose this further duty on the Home Secretary.
Lord Briggs would have dismissed the appeal despite the Home Secretarys breach of the duty promptly to notify.
Issue (i): Did the Home Secretarys failure promptly to notify the Appellant of the revocation of his sponsors licence breach the duty of procedural fairness? The Court unanimously answers this question yes.
Lord Kerr and Lady Black (delivering a joint judgment) consider that it is a self evident aspect of that duty for the Home Secretary to ensure that the Appellant had timely notice that, for a wholly unanticipated reason, his application was bound to fail (carrying potentially devastating consequences).
They find that this duty is underpinned by the notion that a person such as the Appellant should be afforded as much opportunity as reasonably possible to accommodate and deal with such a decision [107].
Lord Kerr and Lady Black consider that this duty can be characterised as procedural rather than substantive because it is a negative duty: an obligation not to deprive the Appellant of the chance to avoid, or mitigate the effects of, the Home Secretarys adverse decision on his application [108].
The Appellant would ultimately have to be notified that his sponsors licence had been revoked, and so the duty promptly to notify does not create any novel positive obligations [112].
Nor does the fact that the procedural duty may result in the opportunity to avoid the effect of an adverse outcome affect that conclusion [137 140].
Consequently, the duty arose as a matter of procedural fairness.
Lord Briggs agrees that the Home Secretarys failure to notify constituted procedural unfairness, but he does not consider that this breach justifies the Court setting aside the Home Secretarys decision.
He considers that the Appellants lost opportunity to improve his position resulted from the Home Secretarys voluntary (and probably unconscious) three month delay in dealing with the application and that, because the delay was a mere happenstance and the Home Secretary was not obliged to give the Appellant any such breathing space, this breach ought not to render the decision unlawful [197].
Issue (ii): Was the Home Secretary under a duty to provide a period of time following notification to enable the Appellant to react to the revocation of his sponsors licence? The majority answer this question no. Lord Kerr and Lady Black consider that the duty to act fairly in the circumstances involves a duty not to deprive, not an obligation to create.
To require the Home Secretary to grant a grace period following notification would be to impose a positive duty and an extra extension of leave beyond that set out in the legislation or Immigration Rules [108 109].
This would be a substantive duty, falling outside of the bounds of procedural fairness [108; 141].
Lord Briggs agrees that a duty to provide a grace period following notification would be a substantive duty going beyond that set out in the Immigration Rules [164; 187].
He reasons that, if time is sought to change or improve the underlying facts to make them more favourable, the issue is probably substantive [177].
A grant of time to find new sponsored employment so as to qualify for Tier 2 leave to remain is therefore substantive [180].
So too is a grant of time to prepare for an orderly departure from the UK [178].
Furthermore, the ultimate consequence of the Home Secretarys failure to grant a grace period that the Appellant became an overstayeris itself a matter of substance [183].
Lord Briggs also considers that the duty to provide a grace period would be perhaps a rare example of pointlessness [162] and that the principles that underlie procedural fairness have no application to a situation where the decision is inevitable (as was the outcome of the Appellants original application) [158; 162].
Equally, the collateral advantage of being able to take alternative steps as a lawful migrant while being protected from being an overstayer is not one which procedural fairness is designed to protect [164 165].
Consequently, the Home Secretarys failure to provide a grace period was not challengeable under that head of judicial review (nor any other) [187].
In separate judgments, Lady Arden and Lord Wilson disagree with the majority.
Lady Arden holds that the duty falls under procedural fairness because establishing a procedural impropriety is a necessary first step [27 28].
The substantive element in the challenge is a consequence of the procedural fairness argument rather than vice versa [32], and this conclusion is supported both by the fact that the Home Secretarys substantive decision is unchallenged [74] and by the fact that the rule in question is unaffected by the determination of procedural unfairness [75].
Lady Arden also considers that this is not a case of pointlessness: if granted a grace period, the Appellant would have a chance (which may only be small) that he may find a new basis for applying for leave to remain [61].
Rather, it is pointless to impose a duty on the Home Secretary to notify the Appellant promptly if that duty is not accompanied by a grace period giving the Appellant a meaningful opportunity to take steps in light of that notification [72].
She also considers that the opportunity to take any such steps ought not to depend serendipitously on the amount of time that happens to pass between notification and rejection [72].
She agrees with the judgment of Lord Wilson [92].
Lord Wilson agrees with Lady Arden.
He holds that the duty of fairness at common law can impose positive obligations [203 204] and that a duty to provide a grace period would not be inconsistent either with the statute or the Immigration Rules [205].
He queries how, without departure from ordinary meaning, the Appellants complaint could be described as not being procedural [208].
Furthermore, he finds that a duty of prompt notification would be to give nothing of value to the Appellant unless accompanied by a duty to provide a grace period and that the law should not impose a duty nor confer a right if they are of no value [217].
He finds that the Home Secretary would have been likely to refuse the Appellants application immediately after notification if it were only subject to a duty of prompt notification [221].
Consequently, he considers that only both dutiestaken togetherwould yield the Appellant a reasonable time within which, while not suffering the serious consequences of being an overstayer, he could seek to vary his leave to remain application or seek leave to remain outside the Immigration Rules [222].
He therefore considers that procedural fairness requires both duties to be imposed.
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The appeal arises in another case which involves the meaning of credit, the amount of credit and the charge for credit in the Consumer Credit Act 1974 (the Act).
The case for the appellant borrowers is that the respondent lender failed correctly to state the amount of credit in the loan agreement.
If that case is accepted, it follows that the loan agreement is wholly unenforceable under the Act.
This point was not taken before District Judge Gilham, who made a suspended order for possession on terms that the borrowers made the payments as and when due and paid off what were substantial arrears by monthly instalments.
The borrowers appealed to the Circuit Judge and were permitted to take the point that the agreement was unenforceable.
They succeeded before His Honour Judge Halbert on 27 April 2009, with the result that he ordered the discharge of the charge registered on the property.
However, the Court of Appeal allowed the lenders appeal on 12 November 2009.
This appeal by the borrowers is brought with the permission of the Supreme Court.
The agreement
The borrowers are Mr and Mrs Walker.
They completed an application form for a loan from the lender, Southern Pacific Personal Loans Limited (SPPL).
The respondent is the successor in title to SPPL.
The parties signed a credit agreement which it is common ground is regulated by the Act.
On the front the agreement contains a number of boxes under the heading FINANCIAL MATTERS, some NOTES in smaller but legible print, some warnings in capital letters and the parties signatures.
The borrowers signed it on 26 March 2005 and SPPL signed it on 20 April 2005.
On the reverse there appear 46 LENDING CONDITIONS and some definitions.
The boxes are set out in this way: FINANCIAL MATTERS: A Loan B Payment Protection Insurance (Optional) C Amount of Credit (A+B) Single Joint 17500 Current Margin Rate at: Above LIBOR We may change the interest rate (see below) Single & Joint & Single Life Joint Life 0 17500 The rate of interest payable is\: Repayment term: 9 % 13.98 % 180 months 244.46 D Broker Administration Fee 875 Monthly payment: We may change the Monthly Payment under the Terms and Conditions E Total Amount Financed (C+D) 18375 The APR applicable to the credit as shown in both A&B is 16 %
The NOTES make it clear that all the terms, including the LENDING CONDITIONS, form part of the agreement, and also include this: Payments You must repay the Amount of Credit together with any amounts financed under this Agreement with interest by making the Monthly Payments.
Clause 15 of the LENDING CONDITIONS provides: We will charge interest on the money you owe us (which includes the Loan, interest and Expenses) at the Interest Rate.
The issue
The issue in this appeal is whether the Amount of Credit is incorrectly stated in box C.
The borrowers case is that the true amount of credit was not 17,500 as stated in box C but 18,375, which is the amount stated in box E, where it is described as Total Amount Financed.
It is common ground that the amount of 875, which is described in box D as the Broker Administration Fee was advanced to the borrowers and that interest was payable on it at the same rate as on the sum of 17,500.
Thus the Total Amount Financed is shown as 17,500 plus 875, namely 18,375, and interest is shown to be payable at 13.98 per cent per annum on that total figure.
It is submitted on behalf of the borrowers that it follows from the fact that the total amount of the loan was 18,375 that the Amount of Credit was 18,375.
It is said that, applying the principle of truth in lending, it is wrong to describe the Amount of Credit as only 17,500 because SPPL lent the borrowers the total sum of 18,375 and charged interest on that total.
So expressed, that submission seems to us to have some attraction.
However, it was rejected by the Court of Appeal in an admirably succinct judgment given by Mummery LJ, with whom Sullivan LJ and Owen J agreed.
The issue is whether the Court of Appeal was correct.
All depends upon the true construction of section 9 of the Act.
The Act and the Regulations
By section 8(2) of the Act, as amended as at the relevant time, a consumer credit agreement is a personal credit agreement by which the creditor provides the debtor with credit not exceeding 25,000.
Sections 9 and 20 of the Act provide, so far as relevant, as follows: 9 Meaning of Credit (1) In this Act credit includes a cash loan, and any other form of financial accommodation. (4) For the purposes of this Act, an item entering into the total charge for credit shall not be treated as credit even though time is allowed for its payment. 20 Total charge for credit (1) The Secretary of State shall make provisions containing such regulations as appear to him to be appropriate for determining the true cost to the debtor of the credit provided or to be provided under an actual or prospective consumer credit agreement (the total charge for credit), and regulations so made shall prescribe (a) what items are to be treated as entering into the total charge for credit, and how their amount is to be ascertained; the method of calculating the rate of the total charge for credit. (b) By section 189, unless the context otherwise requires, credit is to be construed in accordance with section 9.
The relevant regulations under the Act were the Consumer Credit (Total Charge for Credit) Regulations 1980 (the TCC Regulations) and the Consumer Credit (Agreements) Regulations 1983 (the Agreements Regulations).
We will refer to them together as the Regulations.
They have been amended over time, both before and after the agreement.
For present purposes both the Act and the Regulations in the form in which they were in April 2005 apply.
The TCC Regulations were made under section 20 of the Act.
Regulation 4 of them is entitled Items included in total charge for credit and provides, so far as relevant: Except as provided by regulation 5 below, the amounts of the following charges are included in the total charge for credit in relation to an agreement: (a) the total of the interest on the credit which may be provided under the agreement; (b) other charges at any time payable under the transaction by or on behalf of the debtor or a relative of his whether to the creditor or any other person.
Section 60 of the Act requires the Secretary of State to make regulations as to the form and content of documents embodying regulated agreements.
He made the Agreements Regulations under that section.
Section 61(1)(a) of the Act provides that, among other things, a regulated agreement is not properly executed unless a document containing all the prescribed terms is signed by the debtor.
The Act and the Regulations distinguish between prescribed terms and required terms.
In the case of an agreement predating 6 April 2007 such as the agreement which is the subject of this appeal, by section 127(3) of the Act a failure properly to include a prescribed term in the agreement renders the agreement wholly unenforceable, whereas a failure properly to include a required term merely means that the agreement is enforceable only by court order under section 65(1) of the Act.
In the case of the agreement in this case, the prescribed terms were: a term stating the amount of credit (Agreements Regulations reg 6(1) and Sch 6, para 2), a term stating the rate of any interest on the credit to be provided under the agreement (ibid Sch 6, para 4) and a term stating how the debtor is to discharge his obligations under the agreement to make the repayments (ibid Sch 6, para 5).
In the instant case it is common ground that, if the agreement contains a term correctly stating the amount of the credit, it complies with Schedule 6, para 2 of the Agreements Regulations and is enforceable, whereas if it does not, it is irredeemably unenforceable.
Discussion
But for the provisions of section 9 of the Act, there would be a strong case for saying that, since the total amount advanced was 18,350, that was the amount of credit and, since that sum was not stated in the agreement to be the amount of the credit, it follows that it does not contain a prescribed term and is unenforceable.
The problem is that section 9(4) provides that an item entering into the total charge for credit shall not be treated as credit.
It follows that if an item is part of the total charge for credit, it cannot form part of the amount of credit, even if it would otherwise be regarded as credit.
That conclusion, which, in our judgment, follows from the plain meaning of subsection (4), is supported by the authorities: see in particular Wilson v First County Trust Ltd [2001] QB 407, Watchtower Investments Ltd v Payne [2001] EWCA Civ 1159, [2001] GCCR 3055 and Wilson v Robertsons (London) Ltd [2005] EWHC 1425 (Ch), [2006] 1 WLR 1248.
In each of those cases it was stressed that the first step is to assess the total charge for credit because, as Mummery LJ put it at para 15 of his judgment in this case, those items financed by the creditor which form part of the charge for credit must be identified and stripped out before the amount of credit can be determined.
He took that phrase from para 35 of the judgment of Laddie J in the Robertsons (London) case, where the judge quoted from para 24.144 of the then edition of Professor Goodes work Consumer Credit Law and Practice.
In Wilson v First County it was held that the agreement was unenforceable because the amount of credit was not correctly stated in it.
The lender had agreed a loan of 5,000, to which was added a document fee of 250, which itself bore interest.
The agreement stated that the amount of the loan was 5,250.
So indeed in one sense it was.
However, the Court of Appeal held that the amount of the credit was 5,000 and was incorrectly stated as 5,250.
The reason was that the document fee was part of the charge for credit, that is the cost of the credit, and that, under section 9(4) of the Act, it could not be treated as, and thus form part of, the amount of the credit.
As Mummery LJ observed at para 16, the Act does not define charge for credit.
At para 52 of his judgment in the Watchtower case Peter Gibson LJ noted that it is not always easy to draw the line between an item forming part of the total charge for credit and an item forming part of the credit itself.
He concluded that, in order to identify the total charge for credit, the purpose of the courts consideration is to arrive at what in reality is the true cost to the debtor of the credit provided.
See also the judgment of Clarke LJ in that case at para 63, where it is noted that section 20 of the Act (quoted above) points the way.
The question is thus what was the true cost to the borrowers of the credit provided under the agreement.
There are two items which have been the subject of debate.
The first is the Broker Administration Fee and the second is the interest on that fee.
As to the fee, there cannot, in our judgment, be any doubt that it was part of the total cost of the credit.
It was a fee paid to intermediary brokers and, as such, was a cost to the borrowers of borrowing the 17,500 from SPPL.
That is plainly so, even though it was itself borrowed from SPPL.
Once it is accepted that it was part of the total charge for credit, it follows that it must be stripped out of the amount of credit and, by section 9(4) of the Act shall not be treated as credit.
It is analogous to the document fee in the Wilson v First County case.
If it had been expressed as part of the amount of credit, like the document fee, so that amount of credit was expressed as 18,375, the agreement would have been unenforceable for the same reason as the Court of Appeal held the agreement, which stated the amount of credit as 5,250, to be unenforceable in that case.
There seems little doubt that the form in which the agreement was drafted in the instant case owed much to the decision and reasoning of the Court of Appeal in the Wilson v First County case.
The question remains whether that conclusion is affected by the fact that SPPL was lending the fee at the same rate of interest as that on the sum of 17,500, or indeed at any rate of interest.
The answer must be no. Section 9(4) does not prohibit the charging of interest.
If the fee itself was part of the total charge for credit, it seems to us to follow that interest on that fee was also part of the total charge for credit and not therefore to be treated as credit.
As the court sees it, both the fee and interest on the fee are other charges within regulation 4(b) of the TCC Regulations quoted above and are thus included in the total charge for credit.
Even if, for some reason, the interest were not so included in the charge for credit, we do not see how the interest could itself be credit.
The borrowers argument involves saying that, whereas in the case of, say, a loan of 1,000 repayable with interest and a document fee of 50 repayable without interest, the amount of credit is 1,000, nevertheless in the case of such a loan but with a document fee of 50 repayable with interest, the amount of credit is 1,050.
That seems to us to be nonsensical.
Either the credit is 1,050 in both cases or in neither.
For the reasons we have given we conclude that the answer in both cases is 1,000.
The borrowers submission is that so to conclude is to infringe the principle of truth in lending.
The argument is essentially that the true position here is that the total amount lent was 18,375 and that to describe the amount of the credit as 17,500 was therefore misleading and wrong.
It is true that the total amount financed was 18,375 and that, in ordinary parlance, that was indeed the total amount of the loan or the total amount of the credit.
So to conclude would, however, be to disregard the provisions of the Act, especially section 9(4).
As the court sees it, the borrowers case involves construing section 9(4) as if it read: For the purposes of this Act, an item entering into the total charge for credit shall not be treated as credit even though time is allowed for payment (unless interest is charged, in which case it shall be treated as credit).
There is in our judgment no warrant for the addition of the words in italics.
We agree with the conclusions of Mummery LJ at paras 34 and 35: in particular that the borrowers submissions treat interest as a necessary feature or indicator of credit, which it is not, and that it was not the function of section 9 to prohibit anything but rather to supply a special statutory meaning to the core concept of credit in the Act and to distinguish it from the charge for, or cost of, credit.
For the reasons we have given, which are based both on the language of the statute and the authorities cited above, we hold that, although it too was advanced to the borrowers and repayable with interest, the fee of 875 was part of the total cost of, or charge for, credit and therefore cannot be treated as part of the credit.
Once that is appreciated, it can be seen that there is no infringement of the principle of truth in lending.
The agreement is in clear terms.
In the box on the front it draws a distinction between Amount of Credit, which in this case is the amount of the Loan namely 17,500 and the Total Amount Financed, namely the Amount of the Credit plus the Broker Administration Fee of 875, which makes 18,375.
Moreover the boxes, together with the provision quoted at para 4 above, make it clear that the rate of interest of 13.98 per cent is payable on the whole of the Total Amount Financed and that the Monthly Payment was 244.46.
There was no basis for confusion as to what sum was to be paid each month or as to what made up the Amount of Credit and what was the Broker Administration Fee.
Nor was there any basis for confusion as to the calculation of the APR shown in the bottom right hand box of 16 per cent.
As the description states, it was applicable to the credit shown in both A&B, namely the Amount of Credit of 17,500, but taking into account the interest chargeable on both that sum and the 875 Broker Administration Fee.
It is not suggested that the APR was incorrectly calculated.
For these reasons, which are essentially the same as those more concisely set out by Mummery LJ in the Court of Appeal, we dismiss the appeal.
We merely note by way of postscript that, if the fee had been included in the amount of credit, so that the Amount of Credit was stated as 18,375, the borrowers would no doubt have said that the loan was unenforceable on the ground that the fee was part of the cost of the credit and should not therefore have been treated as part of the credit.
Such an argument would have succeeded on the basis of the decision and reasoning in Wilson v First County.
As we see it, in order to succeed in this appeal, the borrowers would have to persuade the court that Wilson v First County was wrongly decided.
However, in our opinion it was not.
Finally, some reliance was placed upon the last sentence of para 19 of Sir Andrew Morritt V Cs judgment in Wilson v First County, which was in these terms: It is apparent from these two considerations that section 9(4) must be applied without too narrow an interpretation of the word item.
If a charge for credit is correctly recognised in accordance with the detailed regulations to which I have referred then any cash loan or other financial accommodation made or afforded by the creditor to the debtor for the purpose of discharging the liability for that charge should not be treated as part of that credit to which the total charge for credit relates.
It may be, though it is unnecessary to any decision in this case, that the loan made to pay the charge is itself a separate credit which should be made the subject of a regulated agreement to which the Act applies, whether as a linked transaction within section 19 or otherwise.
We can see that there might be cases in which, on analysis of the facts, it might be held that the loan to pay a charge was a separate credit which should be made the subject of a regulated agreement but it is not easy to envisage such a case.
In any event there is no question that this is such a case.
Here the Broker Administration Fee was simply part of the cost of the credit and thus not to be treated as part of the credit.
It is perhaps important to note for the future that section 127(3) of the Act was repealed by sections 15, 70 and Schedule 4 of the Consumer Credit Act 2006 and does not apply to agreements made after 5 April 2007.
Further, when the Consumer Credit (Agreements) Regulations 2010 come into force, they will require documentation of the total amount of credit, which is defined as the credit limit or the total sums made available under a consumer credit agreement.
CONCLUSION
The appeal is dismissed, essentially for the reasons given by the Court of Appeal.
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The parties entered into a fixed sum credit agreement on 20 April 2005 whereby Southern Pacific Securities (the respondent) loaned Mr and Mrs Walker (the appellants), the sum of 17,500.
In addition to the loan a Broker Administration Fee of 875 was advanced to the appellants to enable them to pay for the arrangement of the loan.
Interest was payable on the Broker Administration Fee at the same rate as on the loan of 17,500.
The credit agreement set out the Amount of Credit as 17,500 (being the loan) and the Total Amount Financed as 18,375 (being the loan together with the Broker Administration Fee).
Under the Consumer Credit Act 1974 (the Act) agreements predating 6 April 2007 are only enforceable if they contain certain prescribed terms (section 127(3)).
The prescribed terms for agreements such as the one entered into by the parties in this case included a term stating the amount of credit.
Section 9 of the Act defines credit as including a cash loan, and any other form of financial accommodation (section 9(1)) and provides that for the purposes of the Act an item entering into the total charge for credit shall not be treated as credit even though time is allowed for its payment (section 9(4)).
The appellants are in arrears on the loan payments, owing at least 40,000, and risk losing their home.
On 21 June 2007, a District Judge granted a suspended order for possession of the property.
They appealed to the Circuit Judge, arguing that the credit agreement incorrectly states the amount of credit and therefore, by section 127(3) of the Act, the credit agreement is unenforceable.
The appellants case is that the true amount of credit was not 17,500 but 18,375, which is the amount shown in the agreement as the Total Amount Financed.
The Appellants succeeded in the Chester County Court on 27 April 2009, and the judge ordered the discharge of the charge registered on their property.
The Court of Appeal allowed the respondents appeal on 12 November 2009.
The issue in the appellants appeal to the Supreme Court is the correct definition of an amount of credit under the Act, and whether the Act permits interest to be charged on a sum (such as the Broker Administration Fee) which is not part of the total amount of credit but rather is a charge for credit.
The Supreme Court unanimously dismisses the appeal, essentially for the reasons given by the Court of Appeal.
Although the Broker Administration Fee of 875 was advanced to the appellants
and repayable with interest, it was part of the total cost of, or charge for, credit and therefore cannot be treated as part of the credit.
Lord Clarke delivered the judgment of the Court.
Section 9(4) of the Act provides that an item entering into the total charge for credit shall not be treated as credit.
It follows that if an item is part of the total charge for credit, it cannot form part of the amount of credit.
The relevant authorities stress that the first step is to assess the total charge for credit so that those items financed by the creditor which form part of the charge for credit can be identified and stripped out before the amount of credit is determined (paras [14] [16]).
The Act does not define charge for credit.
Following Watchtower Investments Ltd v Payne [2001] EWCA Civ 1159, in determining the charge for credit, the court must decide the true cost to the appellants of the credit provided under the agreement.
In this case, two items were the subject of debate: the Broker Administration Fee and the interest charged on that fee.
In the courts judgment there was no doubt that the Broker Administration Fee was part of the total cost of the credit.
It was a fee paid to intermediary brokers and, as such, was a cost to the appellants of borrowing the 17,500.
Once it is accepted that the fee was part of the total charge for credit, it follows that it must be stripped out of the amount of credit and, by section 9(4) of the Act, cannot be treated as credit.
If the fee had been expressed in the agreement as part of the amount of credit so that the amount of credit was shown as 18,375, the agreement would have been unenforceable, as was held in Wilson v First County Trust Ltd [2001] QB 407 (paras [18] [19]).
The court then considered whether that conclusion is affected by the fact that the respondent was lending the fee at a rate of interest.
The court concluded it is not.
Section 9(4) does not prohibit the charging of interest.
If the fee itself was part of the total charge for credit, it follows that interest on the fee was also part of the total charge for credit and cannot be treated as credit.
Contrary to the Appellants submissions, interest is not a necessary feature or indicator of credit (paras [20] [24]).
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The appeal concerns a proposed development by Crisp Maltings Group Ltd (CMGL) at their Great Ryburgh plant in Norfolk, in the area of the North Norfolk District Council (the council).
It was opposed by the appellant, Mr Matthew Champion, a member of the Ryburgh Village Action Group.
The proposal involved the erection of two silos for 3,000 tons of barley, and the construction of a lorry park with wash bay and ancillary facilities, on a site close to the River Wensum.
Permission was granted by the council, following consultation with the relevant statutory bodies, notably Natural England (NE) and the Environment Agency (EA), on 13 September 2011.
The river is a Special Area of Conservation, part of the EU Natura 2000 network of sites, and thus entitled to special protection as a European site under the EU Habitats Directive (Directive 97/62/EC), which is given effect in this country by the Conservation and Habitats Species Regulations 2010 (the Habitats Regulations).
The river was described in one council report as . probably the best whole river of its type in nature conservation terms, with a total of over 100 species of plants, a rich invertebrate fauna and a relatively natural corridor.
The river supports an abundant and diverse invertebrate fauna including the native freshwater crayfish (a European protected species) as well as a good mixed fishery.
The appellants complaint, in short, is that the council failed to comply with the procedures required by the regulations governing Environmental Impact Assessment (EIA) and appropriate assessment, respectively under EIA and Habitats Regulations.
Legislation
Environmental Impact Assessment
Directive 2011/92/EU (the EIA Directive) provides the framework for the national regulations governing environmental assessment.
The preamble (para (2)) states that Union policy is based on the precautionary principle and that effects on the environment should be taken into account at the earliest possible stage in all the technical planning and decision making processes.
By article 2 the EIA Directive requires member states to adopt all measures necessary to ensure that projects likely to have a significant effect on the environment are subject to environmental impact assessment before consent is given.
The projects to which it applies are those defined in article 4 and annexes I and II.
Projects in annex I require assessment in any event; those in annex II (which covers the present project) require a determination by the competent authority whether it is likely to have a significant effect, so as to require assessment (article 4(2)).
The competent authority is the authority designated for that purpose by the member state (article 1(f)).
For projects subject to assessment member states are required to adopt the measures necessary to ensure that the developer supplies in an appropriate form the information specified in annex IV, which includes details of the project and its anticipated effects, and the measures proposed to prevent or reduce adverse effects (article 5).
That information is to be made available to the public likely to be affected, who must be given early and effective opportunities to participate in the decision making process (article 6).
In the United Kingdom the environmental assessment procedure is integrated into the procedures for granting planning permission under the planning Acts.
The current regulations are the Town and Country Planning (Environmental Impact Assessment) (England and Wales) Regulations 2011.
It will be convenient to refer to these (the EIA Regulations), although they replaced the 1999 Regulations which were in force at the time of the present application.
The Regulations do not follow precisely the form of the EIA Directive, but there is no suggestion of any failure of implementation.
The starting point is the expression EIA development, defined by reference to Schedules 1 and 2 (corresponding to annexes I and II of the EIA Directive).
Although the Regulations do not in terms designate a competent authority, it is clear at least by implication that this role is given in the first instance to the local planning authority, which is given the task of determining whether Schedule 2 development is EIA development (see eg regulation 4(6)).
The mechanism by which the authority determines whether assessment is required is referred to in the Regulations as screening (not an expression used in the EIA Directive).
A screening opinion may be given in response to a specific request by the developer (regulation 5), or, in various circumstances where an application is received by the authority for development which appears to require EIA and is not accompanied by an environmental statement (regulations 7 10).
Regulation 3 prohibits the grant of consent for EIA development without consideration of the environmental information, defined (by regulation 2) to include the environmental statement and any representations duly made about the environmental effects of the development.
The contents of the environmental statement are defined by reference to Schedule 4 (which corresponds to annex IV of the EIA Directive, and like it includes a reference to measures envisaged to prevent, reduce or offset any significant adverse effects on the environment).
The environmental statement, in proper form, is central to this process.
In Berkeley v Secretary of State for the Environment [2001] 2 AC 603, Lord Hoffmann rejected the submission that it was enough if the relevant information was available to the public in the various documents provided for inspection: I do not accept that this paper chase can be treated as the equivalent of an environmental statement.
In the first place, I do not think it complies with the terms of the Directive.
The point about the environmental statement contemplated by the Directive is that it constitutes a single and accessible compilation, produced by the applicant at the very start of the application process, of the relevant environmental information and the summary in non technical language.
It is true that article 6(3) gives member states a discretion as to the places where the information can be consulted, the way in which the public may be informed and the manner in which the public is to be consulted.
But I do not think it allows member states to treat a disparate collection of documents produced by parties other than the developer and traceable only by a person with a good deal of energy and persistence as satisfying the requirement to make available to the public the annex III information which should have been provided by the developer. (p 617D F)
Habitats Directive
Council Directive 92/43/EEC (the Habitats Directive) provides for the establishment of a European network of special areas of conservation under the title Natura 2000.
Article 6 imposes duties for the protection of such sites.
By article 6(3) Any plan or project not directly connected with or necessary to the management of the site but likely to have a significant effect thereon, either individually or in combination with other plans or projects, shall be subject to appropriate assessment of its implications for the site in view of the site's conservation objectives.
In the light of the conclusions of the assessment of the implications for the site and subject to the provisions of paragraph 4, the competent national authorities shall agree to the plan or project only after having ascertained that it will not adversely affect the integrity of the site concerned and, if appropriate, after having obtained the opinion of the general public.
Article 6(4) provides for limited exceptions, but only for imperative reasons of overriding public interest, including those of a social or economic nature.
The relevant implementing regulations are the Conservation of Habitats and Species Regulations 2010 (the Habitats Regulations).
Regulation 61 reproduces the effect of article 6(3).
A competent authority, before deciding to give consent for a project which is likely to have a significant effect on a European site (either alone or in combination with other plans or projects) must make an appropriate assessment of the implications for that site in view of that sites conservation objectives.
It may agree to the project only after having ascertained that it will not adversely affect the integrity of the European site, having regard to any conditions or restrictions subject to which they propose that the consent should be given.
Authoritative guidance on the interpretation of article 6(3) has been given by the Court of Justice of the European Union (CJEU) in (Case C 127/02) Waddenzee [2006] 2 CMLR 683 (relating to a proposal for mechanical cockle fishing in the Waddenzee Special Protection Area).
There is an elaborate analysis of the concept of appropriate assessment, taking account of the different language versions, in the opinion of Advocate General Kokott (paras 95 111).
In its judgment the court made clear that the article set a low threshold for likely significant effects: 41. the triggering of the environmental protection mechanism provided for in article 6(3) of the Habitats Directive does not presume as is, moreover, clear from the guidelines for interpreting that article drawn up by the Commission, entitled Managing Natura 2000 Sites: The provisions of article 6 of the Habitats Directive (92/43/EEC) that the plan or project considered definitely has significant effects on the site concerned but follows from the mere probability that such an effect attaches to that plan or project.
The court noted that article 6(3) adopts a test essentially similar to the corresponding test under the EIA Directive. (para 42), and that it subordinates the requirement for an appropriate assessment of a project to the condition that there be a probability or a risk that the latter will have significant effects on the site concerned.
The Habitats Directive had to be interpreted in accordance with the precautionary principle which is one of the foundations of Community policy on the environment (para 44).
It concluded: 45.
In the light of the foregoing, the answer to Question 3(a) must be that the first sentence of article 6(3) of the Habitats Directive must be interpreted as meaning that any plan or project not directly connected with or necessary to the management of the site is to be subject to an appropriate assessment of its implications for the site in view of the sites conservation objectives if it cannot be excluded, on the basis of objective information, that it will have a significant effect on that site, either individually or in combination with other plans or projects.
As to the content of such appropriate assessment, the court said: 52.
As regards the concept of appropriate assessment within the meaning of article 6(3) of the Habitats Directive, it must be pointed out that the provision does not define any particular method for carrying out such an assessment. 53.
None the less, according to the wording of that provision, an appropriate assessment of the implications for the site concerned of the plan or project must precede its approval and take into account the cumulative effects which result from the combination of that plan or project with other plans or projects in view of the sites conservation objectives. 54.
Such an assessment therefore implies that all the aspects of the plan or project which can, either individually or in combination with other plans or projects, affect those objectives must be identified in the light of the best scientific knowledge in the field.
Those objectives may, as is clear from articles 3 and 4 of the Habitats Directive, in particular article 4(4), be established on the basis, inter alia, of the importance of the sites for the maintenance or restoration at a favourable conservation status of a natural habitat type in annex I to that Directive or a species in annex II thereto and for the coherence of Natura 2000, and of the threats of degradation or destruction to which they are exposed 56.
It is therefore apparent that the plan or project in question may be granted authorisation only on the condition that the competent national authorities are convinced that it will not adversely affect the integrity of the site concerned.
More recently in Sweetman v An Bord Pleanla (Galway County Council intervening) (Case C 258/11) [2014] PTSR 1092 the court spoke of the two stages envisaged by article 6(3): 29.
That provision thus prescribes two stages.
The first, envisaged in the provisions first sentence, requires the member states to carry out an appropriate assessment of the implications for a protected site of a plan or project when there is a likelihood that the plan or project will have a significant effect on that site [citing Waddenzee (above) paras 41, 43] 31.
The second stage, which is envisaged in the second sentence of article 6(3) of the Habitats Directive and occurs following the aforesaid appropriate assessment, allows such a plan or project to be authorised on condition that it will not adversely affect the integrity of the site concerned, subject to the provisions of article 6(4). 40.
Authorisation for a plan or project, as referred to in article 6(3) of the Habitats Directive, may therefore be given only on condition that the competent authorities once all aspects of the plan or project have been identified which can, by themselves or in combination with other plans or projects, affect the conservation objectives of the site concerned, and in the light of the best scientific knowledge in the field are certain that the plan or project will not have lasting adverse effects on the integrity of that site.
That is so where no reasonable scientific doubt remains as to the absence of such effects
The application and its consideration
Before addressing the issues of law, it is necessary to return to the factual background.
The application for planning permission was initially made on 1 October 2009, but not validated until 15 April 2010.
It was accompanied by a Site Specific Flood Risk Assessment, which recognised that the proposal involved the potential to discharge surface water runoff to the nearby ditch system and could lead to pollution reaching the River Wensum.
This risk was to be mitigated by a staged system of drainage, involving an interceptor/separator facility and thereafter a storage infiltration basin to be planted with indigenous plants to act as a secondary passive treatment system.
The lengthy process of investigation and consultation, which led eventually to the grant of conditional permission for the proposal on 13 September 2011, is described in detail in the judgments below.
For present purposes the process can be divided into three main phases: ii) i) October 2009 to June 2010: the initial supporting material, consultations with statutory agencies, and EIA screening (23 April 2010); July 2010 to January 2011: submission of July Flood Risk Assessment (updated in August) and Phase II Ecological Assessment, leading to withdrawal of statutory objections and the decision of the planning committee on 20 January 2011 to give delegated powers to officers to approve the development subject to conditions; June 2011 to September 2011: correspondence with appellants solicitors leading to a reference back to the committee and final decision to approve on 8 September 2011. iii)
Phase 1
It became apparent at a very early stage that the main environmental issue was the possible effect of run off from the site to the river.
On this there was a substantial degree of common ground between all concerned that more information was required, and that appropriate assessment under the Habitats Regulations was likely to be needed: i) In response to an informal approach by CMGLs planning consultant, Natural England on 3 December 2009 expressed concern in respect of the possible effect on the river of the drain system, particularly in relation to the potential for diesel spillage and polluted run off from the water bay when lorries are washed down.
They said that if hydrological connectivity could be established, it was likely that an ii) appropriate assessment would be required under the Habitats Regulations.
In February 2010 a Phase I Ecological Assessment, commissioned by CMGL from specialist consultants, recorded that the potential risks to the River Wensum SAC had not been fully evaluated.
It was essential that pollution control measures and operation of the Interceptor were adequate for the lorry park in all conditions, particularly during heavy rainfall.
It was assumed that an Appropriate Assessment will be required under the Habitats Regulations 1994 which will fully address risks to the SAC and identify further mitigation requirements. iii) On 14 May 2010 Natural England objected to the application on the basis that there was insufficient information for them to advise whether the proposal was likely to have significant effects on the river under the Habitats Regulations.
The applicant should be required to submit information relating to the hydrological connectivity between the Surface Water Infiltration Basin and drain system adjacent to the proposed lorry park, and the River Wensum SAC. iv) On the same day the planning officer wrote to CMGL expressing his own concerns that the submitted water measures would be inadequate.
He observed that the details submitted in respect of flood risk and surface water management were very sketchy and imprecise regarding the actual management train to be used to handle surface water pollutants.
Advice from the Construction Industry Research and Information Association (CIRIA) suggested that the use of oil receptors should be avoided where possible, primarily because of the management required to maintain them, and the risk that inadequate management in heavy rain could result in pollutants not being properly contained. v) On 28 May 2010, the Environment Agency wrote to the council recording their objection on the basis of the inadequate flood risk assessment, noting in particular the lack of information on the infiltration test and the design of the infiltration basin.
The screening opinion The formal registration of the application in April 2010 seems to have triggered the EIA screening process.
The evidence comes in a copy of the standard form filled in by the relevant planning officer, Mr Lyon, acting under delegated powers, and signed by him on 23 April 2010.
That was supplemented by a witness statement.
According to this, he contacted Natural England by way of telephone call on 23 April, and spoke with Mr Mike Meadows: I explained the proposed development to Natural England and was advised that, subject to pollution prevention measures being clearly identified and addressed, an Environmental Impact Assessment would not be required.
The screening form, as completed by him, indicated that the site was in a sensitive area and that the development fell within Schedule 2 of the Regulations, but that it was not likely to have significant effects on the environment and no EIA was required, the reasons being given as follows: Subject to the applicant/agent ensuring that appropriate mitigation and safeguarding measures are put in place to prevent the possible discharge of pollutants and contamination from the site in the River Wensum (SAC & SSSI).
Advice received from Natural England (Mike Meadows) that subject to pollution prevention measures being clearly identified and addressed, EIA would not be necessary.
Given the views expressed by Natural England in December 2009 and again in May 2010 as to the need for further information and the likely need for appropriate appraisal, this report of Mr Meadowss views seems surprising.
He also gave evidence of the same conversation.
Although he confirmed Mr Lyons account as broadly accurate, it was not a formal consultation and he had kept no record.
It was not Natural Englands role to decide whether an EIA is necessary and he did not purport to do so on this occasion.
His advice was solely related to the degree to which there might be a significant effect on the SPA on the basis that CMGL would advance suitable pollution prevention control measures.
In the same evidence he makes clear that on the information then available he could not exclude the risk of significant effects on the SAC.
Phase 2
On 10 July 2010 new consultants for CMLG produced a Flood Risk Assessment and Pollution Prevention Strategy (the July 2010 FRA).
Part of the scope of the report was to carry out an assessment of the environmental impacts of the proposals to the water environment (and provide potential solutions) including pollution risks to groundwater, surface water and the adjacent SSSI.
This contained detailed information about site conditions and hydrology, and set out detailed mitigation measures, to be formulated in accordance with the relevant guidance.
The responses of the statutory authorities to this new information were mixed: i) On 13 August 2010, Natural England withdrew their objection, indicating that the new material had addressed satisfactorily the concerns raised in their previous letter. ii) The Environment Agency, by letter dated 19 August 2010, maintained its objection on a number of grounds, including the absence of details about future maintenance.
In response CMGLs consultants prepared a further report (the August 2010 FRA), which included further details of run off and peak rainfall proposed by the Environment Agency were incorporated, and proposals for a larger separator, and also set out the proposed maintenance regime.
This satisfied the Agency, which on 13 September 2010 withdrew its previous objection, on the condition that a surface water drainage scheme in accordance the August 2010 FRA be implemented prior to the completion and occupation of the development. iii) On 3 October a report from the councils own Conservation, Design and Landscape team maintained their objections, commenting on inadequacies in the two FRAs.
On 9 December 2010, following receipt of further information from CMGL, they withdrew their objections.
The judge noted (para 85), and as I understand accepted, the evidence of the planning officer as to the reasons for their change of position.
It follows that by the time the proposal came before the committee on 20 January 2011 the concerns of all the statutory consultees on the SAC issue had been overcome.
The committee resolved by a bare majority to give the senior planning officer delegated powers to approve the development, subject to the imposition of a number of planning conditions.
Phase 3
The January decision was met by a large number of complaints locally.
On 10 June 2011, solicitors for the appellant, acting for the Ryburgh Village Action Group, wrote complaining that there had been a failure to comply with the requirements of the Habitats and EIA Directives.
Of the former they noted that NEs view in early correspondence that assuming hydrological connectivity with the SAC an appropriate assessment would be required, but that, although hydrological connectivity had been established, no appropriate assessment had been undertaken.
Of the latter, they said that the EIA screening dated 23 April 2010 had been defective because it failed to assess the specifics of the environmental issues raised in the application, and asking for the council to revise its EIA screening to require the developer to carry out a full environmental assessment.
On 2 August 2011, the council wrote to the appellants solicitors noting that the application was to be referred back to a future Development Committee.
The letter drew attention to the current views of Natural England on this issue, and invited any further specific comments or evidence to support the assertion that an appropriate assessment under the Habitats Directive or an Environmental Impact Assessment under the EIA Directive was still required.
A response was requested within 21 days.
Apart from a holding letter, there was no substantive response to this letter before the meeting of the Development Control Committee, which took place on 8 September 2011.
At that meeting the committee had a detailed officers report.
As the judge noted (para 99), the report summarised the extensive representations against the proposed development, including concerns about light pollution, noise pollution, the storage of hazardous fuel, environmental degradation, wildlife habitat destruction, water table and river pollution, but also extensive representations in support on local economic grounds.
In relation to an objection concerning drainage, it was reported that consent would be needed from the Internal Drainage Board, which had requested a number of conditions.
In relation to the Habitats Directive, it summarised the views of Natural England and stated: [Officers] are of the view that no appropriate assessment is required in light of all the information that now exists and that there would not be a likely significant effect on the River Wensum SAC as a result of this proposal and that the requirements of the Habitats Directive and Habitats Regulations have been satisfied.
In relation to the EIA Directive, the officers' view remains that the proposal is not EIA development on the basis that there are not likely to be significant environmental effects.
This view was supported by the recent response from Natural England confirming that there would not be a likely significant effect on the River Wensum SAC as a result of this proposal if the proposed mitigation measures are put in place.
The committee were invited first to agree the officers view that the proposal was not EIA development, and that it was entitled to determine the planning application without the need for an environmental statement or appropriate assessment.
This was approved (by nine votes to zero with one abstention).
The officers then recommended that the application be approved subject to the conditions, including implementation of a surface water drainage scheme in accordance with the details set out in the August 2010 FRA (conditions 13 and 14).
There followed a substantive debate on whether the application for planning permission should be granted.
In particular, there was discussion of one councillors continuing concern about the risk of substantial run off from the site into the River Wensum.
She proposed that water monitoring should be carried out over a period of time to assess whether there were any pollution issues.
The committee then resolved (by ten votes to two) to approve the application subject to appropriate conditions to deal with this point.
The formal planning permission was issued on 13 September 2011.
The conditions included conditions 23 and 24 relating to monitoring of water quality and remedial measures if needed, as requested by the councillor.
The present proceedings
The proceedings for judicial review were commenced by a claim form filed on 12 December 2011.
They were heard in April 2013 before James Dingemans QC, sitting as a Deputy High Court Judge, who allowed the application and quashed the permission.
In his judgment (paras 119 121) the judge accepted that the committee would have been entitled on the material before them in 2011 rationally to reach the conclusion that there was no relevant risk requiring appropriate assessment or an EIA.
However, he thought such a conclusion was inconsistent with their decision at the same time to impose a requirement for testing of water quality and remediation if necessary: These conditions, which could only be imposed where the Committee considered them necessary, suggested that the Committee considered that there was a risk that pollutants could enter the river.
This would also have been a rational and reasonable conclusion available to the Committee, in the light of the detailed matters set out above.
It does not seem to me that the council could, rationally, adopt both positions at once.
I do not consider that it is open for me to consider that this inconsistency was simply a function of local democracy at work, and that it could be ignored.
He did not think that the decision could be saved by exercising a discretion not to quash.
Accordingly he ordered that the grant of permission be quashed.
At the same time he dismissed a separate claim to quash the response given by Natural England, which he considered to have been based on the correct Waddenzee test.
There has been no appeal against that part of his judgment.
In the Court of Appeal the only substantive judgment was given by Richards LJ.
He set out the relevant statutory provisions relating to both the EIA and the Habitats Directives.
In connection with the former he noted that in determining the likelihood of significant effects, it is open to the decision maker to have regard to proposed remedial measures, citing Gillespie v First Secretary of State [2003] EWCA Civ 400, [2003] Env LR 30, and R (Jones) v Mansfield District Council [2003] EWCA Civ 1408, [2004] Env LR 21.
He added: The only other point I should mention in relation to the EIA Regulations is that they make provision for a local planning authority to adopt an early screening opinion as to whether a proposed development requires an EIA.
A defective screening opinion does not, however, invalidate the entire decision making process.
The ultimate question is whether planning permission has been granted without an EIA in circumstances where an EIA was required: see R (Berky) v Newport City Council [2012] EWCA Civ 378, [2012] Env LR 35, per Carnwath LJ at para 22 (para 12).
I would respectfully question Richards LJs reliance on my own remarks in Berky, which were not directed to the same issue.
However, the judgment thereafter seems to have proceeded on the basis (which does not seem to have seriously challenged) that a defect in the screening process at an early stage could be remedied by proper consideration at the time of the actual grant.
Having set out the facts, he addressed the appeal against the judges decision to quash the permission (paras 42 49).
He was unable to support the judges reasoning.
The committees decision on the issues arising under the Directives showed that they were satisfied that there would be no significant adverse effects.
That was not inconsistent with the imposition of conditions as a precautionary measure for the purposes of reassurance, without considering that in their absence there was a likelihood that pollutants would enter the river.
Although this point was not abandoned by Mr Buxton in this court, it was not strongly pressed in his written or oral submissions.
In my view the Court of Appeal was clearly right on this issue, and I need say no more about it.
On the other grounds of challenge, Richards LJ noted that the main thrust of the submissions of Mr Harwood QC (then appearing for Mr Champion) had been that the committee at its meeting on 8 September 2011 was not in a position to make a lawful decision as to whether an EIA or appropriate assessment was required, having been given insufficient information for that purpose: for example as to how low the threshold of likelihood was, as to the relevant criteria and the significance of proximity to a sensitive location, or as to the case law on the relevance of mitigation measures (para 51).
Richards LJ did not accept that submission.
He said: It is true that the decision making process got off to a bad start, with a flawed screening opinion.
But that did not lead in practice to any failure to consider relevant matters.
The concerns expressed by Natural England and the Environment Agency, in particular, ensured that the question of mitigation measures was properly addressed.
The measures proposed in the resulting flood risk assessments served to meet those concerns.
Natural Englands final view that there would not be a likely significant effect was re stated in emphatic terms in its letter of 26 July 2011, which was one of the documents before the Committee and was highlighted in the officers report The committee had all the necessary information before them, and there was nothing to suggest that they applied too relaxed a test.
The significance of the sites proximity to the River Wensum SSSI and the SAC was spelled out very clearly in the report, as was the relevance of mitigation measures to the assessment.
He concluded: In my view, therefore, the Committee was put in a position where it could properly make the requisite assessment as to the likely effect of the development on the SSSI and the SAC, and I agree with the deputy judge that the decision not to have an EIA or an Appropriate Assessment was a rational and reasonable conclusion available to the Committee on the material before it. (para 52) He also rejected, in the same terms as the judge, the grounds of challenge relating to matters other than effects on the SAC.
In view of these conclusions, it was not necessary for the court to consider the possible exercise of discretion in relation to remedies.
The arguments in the appeal
Before this court, the argument for Mr Champion has been presented for the first time by Mr Richard Buxton, appearing as a solicitor advocate.
The emphasis appears to have shifted from the arguments as presented to the courts below, and certainly as addressed in their judgments.
At their heart are two related issues, first the timing of the decision whether EIA (or appropriate assessment) is required, and secondly the relevance of mitigation measures.
They are put perhaps most succinctly in his printed case in the context of the EIA Regulations (para 14): domestic law (in line with the [preamble to the EIA Directive]) anticipates a decision on whether or not EIA is required to be made by the decision making authority at an early stage.
It is accepted that it may happen for whatever reason that a decision not to have EIA is made erroneously at an earlier stage and this can and must be rectified.
Indeed the decision maker should keep a negative screening under review.
However what is not permitted, but which occurred starkly in the present case, is reliance on mitigation measures during the consenting process (here, measures contained in the [July FRA]) to convert a project that is likely to have significant effects on the environment into one which is judged not to do so and thus screen out the project from the assessment process.
No objection has been taken to this reformulation.
The issues, as set out in the agreed statement of facts and issues, are in summary: i) The correct approach towards the timing of screening for the need for EIA and AA, in the process of applying for planning permission or other consents; ii) Whether or to what extent mitigation measures may be taken into iii) account in EIA screening.
If either the first or second issue is decided in the appellants favour, whether the court nevertheless can and should exercise its discretion to refuse to quash the planning permission. iv) Whether the answers to the above points under European law are sufficiently clear not to require a reference to the CJEU.
Screening and the Habitats Directive
It is convenient first to address Mr Buxtons contention that a process analogous to EIA screening is an implicit requirement of the Habitats Directive.
As he puts it in his case: In summary as the CJEU explains the HD process is a two step process and the decision maker has to be sure at stage one (the screening stage) that the possibility of adverse effects can be excluded before dispensing with the requirement for AA.
In order to satisfy the HD, the decision maker doing the screening must identify the conservation objectives of the site and the risks posed by the project and reach a decision that the risks to the conservation objectives can be excluded on the basis of objective information.
If the risks are not excluded and an AA is required at stage 2, the project can only be authorised if the decision maker can be sure that no reasonable scientific doubt remains as to an absence of adverse effects to the conservation objectives.
This two stage view of the process under the Habitats Directive was not as such challenged by Mr Lockhart Mummery.
To some extent, as I understood him, he felt constrained by the fact that a similar approach had been adopted by the council itself.
However, since there seems to be some confusion on the point, it is important that we should address it as a matter of principle.
As has been seen, the Habitats Directive and Regulations contain no equivalent to screening under the EIA Regulations.
Mr Buxton relies on the opinion of Advocate General Sharpston in Sweetman itself.
She was principally concerned to dispel confusion created by different terminology used in some of the cases to describe the test under article 6(3).
In her view all that was needed at what she called the first stage of article 6(3) was to show that there may be a significant effect (para 47): 49.
The threshold at the first stage of article 6(3) is thus a very low one.
It operates merely as a trigger, in order to determine whether an appropriate assessment must be undertaken of the implications of the plan or project for the conservation objectives of the site 50.
The test which that expert assessment must determine is whether the plan or project in question has an adverse effect on the integrity of the site, since that is the basis on which the competent national authorities must reach their decision.
The threshold at this (the second) stage is noticeably higher than that laid down at the first stage.
That is because the question (to use more simple terminology) is not should we bother to check? (the question at the first stage) but rather what will happen to the site if this plan or project goes ahead; and is that consistent with maintaining or restoring the favourable conservation status of the habitat or species concerned?
Mr Buxton suggests that her first stage (Should we bother to check?) can be regarded as analogous to screening.
He points also to use of the term screening in a document entitled Assessment of plans and projects significantly affecting Natura 2000 sites Methodological guidance (prepared by consultants for the European Commission in 2001).
It identifies four stages in the process under article 6(3): stage one screening; stage two appropriate assessment; stage three assessment of alternative solutions; stage four assessment where no alternative solutions exist and where adverse effects remain.
However, there is nothing in the language of the Habitats Directive to support a separate stage of screening in any formal sense.
Nor is it reflected in the reasoning of the CJEU itself.
In Sweetman the first stage was the appropriate assessment, the second the decision whether in the light of its conclusions the project could be permitted.
Triggering was simply the word the CJEU used to set the threshold for the first stage.
The same approach is also found in the European Commissions guidance Managing Natura 2000 Sites: The Provisions of article 6 of the Habitats Directive 92/43/EEC, which adds a third stage, with reference to article 6(4): Article 6(3) and (4) define a step wise procedure for considering plans and projects. (a) The first part of this procedure consists of an assessment stage and is governed by article 6(3), first sentence. (b) The second part of the procedure, governed by article 6(3), second sentence, relates to the decision of the competent national authorities. (c) The third part of the procedure (governed by article 6(4)) comes into play if, despite a negative assessment, it is proposed not to reject a plan or project but to give it further consideration.
The applicability of the procedure and the extent to which it applies depend on several factors, and in the sequence of steps, each step is influenced by the previous step. (para 4.2)
It is true that the guidance, when commenting on the low threshold required to trigger the safeguards in article 6(3) and (4), observes that the formula is almost identical to that in the EIA Directive, and it comments on the close relationship in practice between the two procedures (paras 4.4.2, 4.5.1).
The guidance also extends to the content of the assessment, again drawing parallels with the methodology envisaged by the EIA Directive (para 4.5.2).
However, there is no suggestion that this imposes any separate legal obligation analogous to EIA screening.
It is important to emphasise that the legal requirements must be found in the legislation, as interpreted by the CJEU itself, not (with respect) in the opinions of the Advocates General nor in guidance issued by the Commission (however useful it may be as an indication of good practice).
At least in this country the use of the term screening in relation to the Habitats Directive is potentially confusing, because of the technical meaning it has under the EIA Regulations.
The formal procedures prescribed for EIA purposes, including screening, preparation of an environmental statement, and mandatory public consultation, have no counterpart in the Habitats legislation.
As Sullivan J said in R (Hart District Council) v Secretary of State for Communities and Local Government [2008] EWHC 1204 (Admin), [2008] 2 P & CR 302, para 71: Unlike an EIA, which must be in the form prescribed by the EIA Directive, and must include, for example, a non technical summary, enabling the public to express its opinion on the environmental issues raised (see Berkeley v the Secretary of State for the Environment [2001] 2 AC 603 per Lord Hoffmann at p 615), an appropriate assessment under article 6(3) and regulation 48(1) does not have to be in any particular form (see para 52 of Waddenzee judgment), and
obtaining the opinion of the general public is optional
A similar argument by Mr Buxton was rejected by the Court of Appeal in No Adastral New Town Ltd (NANT) v Suffolk Coastal District Council [2015] EWCA Civ 88, paras 63 69.
Richards LJ considered the language of article 6(3), which focuses on the end result of avoiding damage to an SPA and the carrying out of an AA for that purpose.
He noted the difference in Sweetman between the Advocate Generals formulation, but found no support in the courts judgment for the contention that there must be a screening assessment at an early stage in the decision making process: In none of this material do I see even an obligation to carry out a screening assessment, let alone any rule as to when it should be carried out.
If it is not obvious whether a plan or project is likely to have a significant effect on an SPA, it may be necessary in practice to carry out a screening assessment in order to ensure that the substantive requirements of the Directive are ultimately met.
It may be prudent, and likely to reduce delay, to carry one out [at] an early stage of the decision making process.
There is, however, no obligation to do so. (para 68)
The process envisaged by article 6(3) should not be over complicated.
As Richards LJ points out, in cases where it is not obvious, the competent authority will consider whether the trigger for appropriate assessment is met (and see paras 41 43 of Waddenzee).
But this informal threshold decision is not to be confused with a formal screening opinion in the EIA sense.
The operative words are those of the Habitats Directive itself.
All that is required is that, in a case where the authority has found there to be a risk of significant adverse effects to a protected site, there should be an appropriate assessment.
Appropriate is not a technical term.
It indicates no more than that the assessment should be appropriate to the task in hand: that task being to satisfy the responsible authority that the project will not adversely affect the integrity of the site concerned taking account of the matters set in the article.
As the court itself indicated in Waddenzee the context implies a high standard of investigation.
However, as Advocate General Kokott said in Waddenzee: 107. the necessary certainty cannot be construed as meaning absolute certainty since that is almost impossible to attain.
Instead, it is clear from the second sentence of article 6(3) of the Habitats Directive that the competent authorities must take a decision having assessed all the relevant information which is set out in particular in the appropriate assessment.
The conclusion of this assessment is, of necessity, subjective in nature.
Therefore, the competent authorities can, from their point of view, be certain that there will be no adverse effects even though, from an objective point of view, there is no absolute certainty.
In short, no special procedure is prescribed, and, while a high standard of investigation is demanded, the issue ultimately rests on the judgement of the authority.
In the present case, in the light of the new information provided and the mitigation measures developed during the planning process, the competent authority, in common with their expert consultees, were satisfied that any material risk of significant effects on the SAC had been eliminated.
Although this was expressed by the officers as a finding that no appropriate assessment under article 6(3) was required, there is no reason to think that the conclusion would have been any different if they had decided from the outset that appropriate assessment was required, and the investigation had been carried out in that context.
Mr Buxton has been unable to point to any further action which would have been required to satisfy the Waddenzee standard.
The mere failure to exercise the article 6(3) trigger at an earlier stage does not in itself undermine the legality of the final decision.
It follows that issue (i), relating to the timing of screening as a matter of law, is one which can only arise under the EIA Regulations.
Timing of EIA screening
It is not in dispute that authorities should in principle adopt screening opinions early in the planning process.
That intention is expressed in the preamble to the EIA Directive, and carried into the trigger events in the EIA Regulations.
Equally, it is not in dispute that a negative screening opinion may need to be reviewed in the light of later information.
In R (Mageean) v Secretary of State for Communities and Local Government [2011] EWCA Civ 863, [2012] Env LR 3, in the context of screening directions made by the Secretary of State, it was held that that circumstances may require initial screening decisions to be reviewed where other material facts come to light.
In R (Loader) v Secretary of State for Communities and Local Government [2012] EWCA Civ 869, [2013] PTSR 406, Pill LJ applied the same reasoning to the adoption of screening opinions by local planning authorities: 40.
Mr Maurici [for the Secretary of State] accepted that screening decisions will usually be made at an early stage of the planning process.
However, if a council came to the belief during the course of making the decision that the proposed development might have significant effects on the environment it would be open to the council
to require an environmental statement at that stage
Mr Lockhart Mummery QC (for the respondents) also relies on words of Elias J in British Telecommunications Plc v Gloucester City Council [2001] EWHC (Admin) 1001, [2002] 2 P & CR 33.
The issue in that case was different.
The council had failed to adopt a screening opinion within the three week period provided for by the Regulations; the claimant argued that it was too late to require an environmental statement.
In dismissing this argument, Elias J made some more general comments on the procedure: Provided the procedures relating to consultation are complied with, and the representations are before the planning authority when it makes its decision, neither logic nor common sense nor the public interest dictate that the courts should treat the exercise as invalid merely because the planning authority only realised the need for the statement late in the day.
Similarly, in my view it also follows that if a decision is taken not to call for a statement, that is capable of being a valid decision notwithstanding that it was not taken until shortly before the permission was given.
There would be no point in requiring a fresh application in which the authority would again conclude that no statement was required. (para 58, emphasis added)
While the actual decision in that case was unremarkable, the second sentence in the passage quoted above (Similarly ) is perhaps open to misinterpretation.
It is one thing to say that a negative opinion, lawfully arrived at on the information then available, may need to be reviewed in the light of subsequent information.
It is quite another to say that a legally defective opinion not to require EIA, or even a failure to conduct a screening exercise at all, can be remedied by the carrying out of an analogous assessment exercise outside the EIA Regulations.
Even if that exercise results in the development of mitigation measures which are in themselves satisfactory, it would subvert the purposes of the EIA Directive for that to be conducted outside the procedural framework (including the environmental statement and consultation) set up by the Regulations.
In the present case, there is no disagreement that it was appropriate for the authority to undertake a screening exercise in April 2010, once the application was formally registered.
Nor is it now in dispute that the exercise was legally defective.
As the judge said: in circumstances where the pollution prevention measures had not been fully identified at that stage the council could not be satisfied that the mitigation measures would prevent a risk of pollutants entering the river, when the mitigation measures were not known (para 60) Mr Lyon evidently relied on his understanding of the advice of Mr Meadows, but he in turn had not regarded it as a formal consultation, and it was not part of his role to advise on EIA issues.
More importantly, it was impossible at that stage to reach the view that there was no risk of significant adverse effects to the river.
All the expert opinion, including that of CMGLs own advisers, was to the effect that there were potential risks, and that more work was needed to resolve them.
It was also clear that the mitigation measures as then proposed had not been worked up to an extent that they could be regarded as removing that risk.
This could be regarded as an archetypal case for environmental assessment under the EIA Regulations, so that the risks and the measures intended to address them could be set out in the environmental statement and subject to consultation and investigation in that context.
In my view that defect was not remedied by what followed.
It is intrinsic to the scheme of the EIA Directive and the Regulations that the classification of the proposal is governed by the characteristics and effects of the proposal as presented to the authority, not by reference to steps subsequently taken to address those effects.
No point having been taken about delay since the date of the defective screening opinion (an issue to which I shall return), Mr Buxtons request in June 2011 that the development should be reclassified as EIA development was in principle well founded.
It was not enough to say that the potential adverse effects had now been addressed in other ways.
Mitigation measures
The second agreed issue relates to the relevance of mitigation measures in EIA screening.
It is said to be common ground that mitigation measures may be considered as part of the process of appropriate assessment once it has been decided following screening that appropriate assessment should be carried out.
In the case as presented by Mr Buxton, the issue is not so much the relevance of mitigation measures in general, but the reliance on them at the permission stage to dispense retrospectively with the requirement for EIA which should have been initiated at the outset.
The relevance of mitigation measures at the screening stage has been addressed in a number of authorities.
One of the first was R (Lebus) v South Cambridgeshire DC [2002] EWHC 2009 (Admin), [2003] Env LR 17 (relating to a proposed egg production unit for 12,000 free range chickens).
Sullivan J said: 45.
Whilst each case will no doubt turn upon its own particular facts, and whilst it may well be perfectly reasonable to envisage the operation of standard conditions and a reasonably managed development, the underlying purpose of the Regulations in implementing the Directive is that the potentially significant impacts of a development are described together with a description of the measures envisaged to prevent, reduce and, where possible, offset any significant adverse effects on the environment.
Thus the public is engaged in the process of assessing the efficacy of any mitigation measures. 46.
It is not appropriate for a person charged with making a screening opinion to start from the premise that although there may be significant impacts, these can be reduced to insignificance as a result of the implementation of conditions of various kinds.
The appropriate course in such a case is to require an environmental statement setting out the significant impacts and the measures which it is said will
reduce their significance
Of the particular proposal in that case, he said that it must have been obvious that with a proposal of this kind there would need to be a number of non standard planning conditions and enforceable obligations under section 106, and that these were precisely the sort of controls which should have been identified in a publicly accessible way in an environmental statement prepared under the Regulations it was not right to approach the matter on the basis that the significant adverse effects could be rendered insignificant if suitable conditions were imposed.
The proper approach was to say that potentially this is a development which has significant adverse environmental implications: what are the measures which should be included in order to reduce or offset those adverse effects?
Those passages to my mind fairly reflect the balancing considerations which are implicit in the EIA Directive: on the one hand, that there is nothing to rule out consideration of mitigating measures at the screening stage; but, on the other, that the EIA Directive and the Regulations expressly envisage that mitigation measures will where appropriate be included in the environmental statement.
Application of the precautionary principle, which underlies the EIA Directive, implies that cases of material doubt should generally be resolved in favour of EIA.
We were shown various statements on the same issue, with arguably differing shades of emphasis, in a number of judgments of the Court of Appeal: Gillespie v First Secretary of State [2003] Env LR 30, paras 37, 48, 49; R (Jones) v Mansfield District Council [2004] Env LR 21, paras 38 39; R (Catt) v Brighton and Hove City Council [2007] EWCA Civ 298, [2007] Env LR 32, paras 33 35.
Some were cited by the Court of Appeal in the present case.
Mr Lockhart Mummery, rightly in my view, did not rely on any of those statements as representing a material departure from the approach of Sullivan J. They simply illustrate the point that each case must depend on its own facts.
In R (Jones) v Mansfield District Council (in a judgment with which I agreed), Dyson LJ said: 39.
I accept that the authority must have sufficient information about the impact of the project to be able to make an informed judgment as to whether it is likely to have a significant effect on the environment.
But this does not mean that all uncertainties have to be resolved or that a decision that an EIA is not required can only be made after a detailed and comprehensive assessment has been made of every aspect of the matter.
As the judge said, the uncertainties may or may not make it impossible reasonably to conclude that there is no likelihood of significant environmental effect.
It is possible in principle to have sufficient information to enable a decision reasonably to be made as to the likelihood of significant environmental effects even if certain details are not known and further surveys are to be undertaken.
Everything depends on the circumstances of the individual case.
As far as concerns the present case, it is not now in dispute that the screening opinion should have gone the other way.
The mitigation measures as then proposed were not straightforward, and there were significant doubts as to how they would be resolved.
I do not ignore Mr Meadows evidence to the court that the proposed mitigation did not represent novel or untested techniques and that similar methods have and are being successfully used around the country.
But that was said in the light of the further reports produced in July 2010, and even then there remained unresolved problems for the Environment Agency and the councils own officers, for example in relation to the maintenance regime.
The fact that they were ultimately resolved to the satisfaction of Natural England and others did not mean that there had been no need for EIA.
The failure to treat this proposal as EIA development was a procedural irregularity which was not cured by the final decision.
Discretion
Having found a legal defect in the procedure leading to the grant of permission, it is necessary to consider the consequences in terms of any remedy.
Following the decision of this court in Walton v Scottish Ministers [2012] UKSC 44, [2013] PTSR 51, it is clear that, even where a breach of the EIA Regulations is established, the court retains a discretion to refuse relief if the applicant has been able in practice to enjoy the rights conferred by European legislation, and there has been no substantial prejudice (para 139 per Lord Carnwath, para 155 per Lord Hope).
Those statements need now to be read in the light of the subsequent judgment of the CJEU in Gemeinde Altrip v Land Rheinland Pfalz (Case C 72/12) [2014] PTSR 311.
That concerned a challenge to proposals for a flood retention scheme, on the grounds of irregularities in the assessment under the EIA Directive.
A question arose under article 10a of the Directive 85/337 (article 11 of the 2011 EIA Directive), which requires provision for those having a sufficient interest to have access to a court to challenge the substantive or procedural legality of decisions under the Directive.
One question, as reformulated by the court (para 39), was whether article 10a was to be interpreted as precluding decisions of national courts that make the admissibility of actions subject to conditions requiring the person bringing the action to prove that the procedural defect invoked is such that, in the light of the circumstances of the case, there is a possibility that the contested decision would have been different were it not for the defect and that a substantive legal position is affected thereby.
In answering that question, the court reaffirmed the well established principle that, while it is for each member state to lay down the detailed procedural rules governing such actions, those rules in accordance with the principle of equivalence, must not be less favourable than those governing similar domestic actions and, in accordance with the principle of effectiveness, must not make it in practice impossible or excessively difficult to exercise rights conferred by Union law (para 45) Since one of the objectives of the Directive was to put in place procedural guarantees to ensure better public information and participation in relation to projects likely to have a significant effect on the environment, rights of access to the courts must extend to procedural defects (para 48).
The judgment continued: 49.
Nevertheless, it is unarguable that not every procedural defect will necessarily have consequences that can possibly affect the purport of such a decision and it cannot, therefore, be considered to impair the rights of the party pleading it.
In that case, it does not appear that the objective of Directive 85/337 of giving the public concerned wide access to justice would be compromised if, under the law of a member state, an applicant relying on a defect of that kind had to be regarded as not having had his rights impaired and, consequently, as not having standing to challenge that decision. 50.
In that regard, it should be borne in mind that article 10a of that Directive leaves the member states significant discretion to determine what constitutes impairment of a right 51.
In those circumstances, it could be permissible for national law not to recognise impairment of a right within the meaning of subparagraph (b) of article 10a of that Directive if it is established that it is conceivable, in view of the circumstances of the case, that the contested decision would not have been different without the procedural defect invoked. 52.
It appears, however, with regard to the national law applicable in the case in the main proceedings, that it is in general incumbent on the applicant, in order to establish impairment of a right, to prove that the circumstances of the case make it conceivable that the contested decision would have been different without the procedural defect invoked.
That shifting of the burden of proof onto the person bringing the action, for the application of the condition of causality, is capable of making the exercise of the rights conferred on that person by Directive 85/337 excessively difficult, especially having regard to the complexity of the procedures in question and the technical nature of environmental impact assessments. 53.
Therefore, the new requirements thus arising under article 10a of that Directive mean that impairment of a right cannot be excluded unless, in the light of the condition of causality, the court of law or body covered by that article is in a position to take the view, without in any way making the burden of proof fall on the applicant, but by relying, where appropriate, on the evidence provided by the developer or the competent authorities and, more generally, on the case file documents submitted to that court or body, that the contested decision would not have been different without the procedural defect invoked by that applicant. 54.
In the making of that assessment, it is for the court of law or body concerned to take into account, inter alia, the seriousness of the defect invoked and to ascertain, in particular, whether that defect has deprived the public concerned of one of the guarantees introduced with a view to allowing that public to have access to information and to be empowered to participate in decision making in accordance with the objectives of Directive 85/337.
Allowing for the differences in the issues raised by the national law in that case (including the issue of burden of proof), I find nothing in this passage inconsistent with the approach of this court in Walton.
It leaves it open to the court to take the view, by relying on the evidence provided by the developer or the competent authorities and, more generally, on the case file documents submitted to that court that the contested decision would not have been different without the procedural defect invoked by that applicant.
In making that assessment it should take account of the seriousness of the defect invoked and the extent to which it has deprived the public concerned of the guarantees designed to allow access to information and participation in decision making in accordance with the objectives of the EIA Directive.
Judged by those tests I have no doubt that we should exercise our discretion to refuse relief in this case.
In para 52 of its judgment, the Court of Appeal summarised the factors which in its view entitled the authority to conclude that applying the appropriate tests, and taking into account the agreed mitigation measures, the proposal would not have significant effects on the SAC.
That, admittedly, was in the context of its consideration whether the committee arrived at a rational and reasonable conclusion, rather than the exercise of discretion.
However, there is nothing to suggest that the decision would have been different had the investigations and consultations over the preceding year taken place within the framework of the EIA Regulations.
This was not a case where the environmental issues were of particular complexity or novelty.
There was only one issue of substance: how to achieve adequate hydrological separation between the activities on the site and the river.
It is a striking feature of the process that each of the statutory agencies involved was at pains to form its own view of the effectiveness of the proposed measures, and that final agreement was only achieved after a number of revisions.
It is also clear from the final report that the public were fully involved in the process and their views were taken into account.
It is notable also that Mr Champion himself, having been given the opportunity to raise any specific points of concern not covered by Natural England before the final decision, was unable to do so.
That remains the case.
That is not to put the burden of proof on to him, but rather to highlight the absence of anything of substance to set against the mass of material going the other way.
For completeness I should mention that, in his written submissions to this court, Mr Buxton attempted to rely on a witness statement which had been prepared for the High Court in support of an additional ground relating to failure to consider cumulative effects of incremental development at the site over many years.
This he suggests can be used as evidence that it is at least possible that lawful screening might produce a different substantive result.
However, as he accepts, this ground, and the evidence in support, were not admitted in the High Court.
This court can only proceed on the evidence properly before it.
Conclusion
For the reasons given, I would dismiss the appeal, albeit for somewhat different reasons from those of the Court of Appeal, taking account of the different emphasis of the arguments before us.
Although the proposal should have been subject to assessment under the EIA Regulations, that failure did not in the event prevent the fullest possible investigation of the proposal and the involvement of the public.
There is no reason to think that a different process would have resulted in a different decision, and Mr Champions interests have not been prejudiced.
Finally, I see no need for a reference to the CJEU.
As I have attempted to indicate, the principles, in so far as not clear from the Directives themselves, are fully covered by existing CJEU authority, and the only issues are their application to the facts of the case.
I would add two final comments.
First, as I have said, no issue has been taken on the delay which elapsed between the screening opinion in April 2010 and the date when it was first challenged in correspondence more than a year later.
The formal provision, in both the EIA Directive and the Regulations, for a decision on this issue at an early stage seems designed to provide procedural clarity for the developer and others affected.
It is in no ones interest for the application to proceed in good faith for many months on a basis which turns out retrospectively to have been defective.
However, in R (Catt) v Brighton & Hove City Council [2007] Env LR 32, para 39ff, it was decided by the Court of Appeal (applying by analogy the decision of the House of Lords in R (Burkett) v Hammersmith and Fulham LBC [2002] 1 WLR 1593) that a failure to mount a timeous legal challenge to the screening opinion was no bar to a challenge to a subsequent permission on the same grounds.
Although we have not been asked to review that decision, I would wish to reserve my position as to its correctness.
I see no reason in principle why, in the exercise of its overall discretion, whether at the permission stage or in relation to the grant of relief, the court should be precluded from taking account of delay in challenging a screening opinion, and of its practical effects (on the parties or on the interests of good administration).
Secondly, although this development gave rise to proper environmental objections, which needed to be resolved, it also had support from those who welcomed its potential contribution to the economy of the area.
It is unfortunate that those benefits have been delayed now for more than four years since those objections were, as I have found, fully resolved.
I repeat what I said, in a similar context, in R (Jones) v Mansfield District Council [2003] EWCA Civ 1408: 57.
The appellant (who is publicly funded) lives near the site, and shares with other local residents a genuine concern to protect her surroundings.
With hindsight it might have saved time if there had been an EIA from the outset.
However, five years on, it is difficult to see what practical benefit, other than that of delaying the development, will result to her or to anyone else from putting the application through this further procedural hoop. 58.
It needs to be borne in mind that the EIA process is intended to be an aid to efficient and inclusive decision making in special cases, not an obstacle race.
Furthermore, it does not detract from the authority's ordinary duty, in the case of any planning application, to inform itself of all relevant matters, and take them properly into account in deciding the case.
In this case also CMGL may feel in retrospect that it would have been better if they had prepared an environmental statement under the EIA Regulations on their own initiative rather than simply relying on the negative opinion of the planning officer.
That might in any event have been a more logical response to the advice of their own consultant that appropriate assessment under the Habitats Directive was likely to be required.
Jones was decided at a time when the extent of the courts discretion to refuse relief in such cases was less clear.
It is to be hoped that this appeal has enabled this court to lay down clearer guidance as to the circumstances in which relief may be refused even where an irregularity has been established.
In future cases, the court considering an application for permission to bring judicial review proceedings should have regard to the likelihood of relief being granted, even if an irregularity is established. (I emphasise that this is said without any reference to the new section 31A(2) of the Senior Courts Act 1981, which as is agreed does not apply to this appeal.)
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The appeal concerns a proposed development by Crisp Maltings Group Limited (CMGL) at a plant in the area of the North Norfolk District Council (the council).
The development comprised two silos and a lorry park with associated facilities on a site close to the River Wensum.
The appellant, Mr Champion, is a member of the Ryburgh Village Action Group, which opposed the development.
The river is a Special Area of Conservation protected by the EU Habitats Directive (97/92/EC), given effect in the UK by the Conservation and Habitats Species Regulations 2010.
Regulation 61, implementing article 6(3) of the Directive, requires that before giving consent for a project likely to have a significant effect on a European site, the competent authority must make an appropriate assessment of the implications for that site.
It may agree to the project only after having ascertained that it will not adversely affect the integrity of the European site.
Also relevant is the Environmental Impact Assessment (EIA) Directive, given effect by the Town and Country Planning (Environmental Impact Assessment) Regulations 2011.
Under the regulations, a competent authority carries out screening to decide if a proposal is likely to have significant effects on the environment.
If so, EIA is required.
The EIA process involves an environmental statement and public consultation, which informs the decision whether to grant consent to an EIA development.
CMGLs planning application of October 2009 included a Flood Risk Assessment (FRA) recognising a risk that surface water runoff from the site would pollute the river.
There followed investigation of measures meant to prevent this pollution.
From October 2009 June 2010 the council consulted with relevant statutory bodies.
It issued a screening opinion on 23 April 2010 stating that EIA was not required.
Between July 2010 and January 2011, two new FRAs and an ecological assessment were prepared, which led to the statutory bodies withdrawing their objections.
The council decided on 20 January 2011 to give delegated powers to its officers to approve the development subject to conditions.
This led to local complaints, including from the appellant, who argued that appropriate assessment and EIA were required.
The council decided to refer the application back to committee and asked for further comments from the appellant, who did not respond.
At the councils committee meeting of 8 September 2011, planning officers presented a detailed report concluding that appropriate assessment and EIA were not required.
The committee resolved to approve the application subject to conditions, including monitoring the rivers water quality.
The appellant challenged the consent successfully before the High Court for failure to comply with the EIA and Habitats legislation, but lost in the Court of Appeal.
The Supreme Court unanimously dismisses the appeal.
Lord Carnwath gives a judgment with which Lord Neuberger, Lord Mance, Lord Clarke and Lord Toulson agree.
The two issues were the timing of the councils decisions that appropriate assessment or EIA was not required, and the relevance of measures meant to address adverse effects on the river from the site.
On the first issue, there is nothing in the Habitats Directive or regulations to support a separate stage of screening in any formal sense.
Case law of the Court of Justice of the European Union describes two stages under article 6(3) of the Directive: the appropriate assessment, and the decision in light of it.
It used the word trigger to set the threshold for the first stage.
The formal procedures in the EIA regulations, including screening, an environmental statement, and mandatory public consultation, have no counterpart in the habitats legislation.
Where it is not obvious, the competent authority will consider whether the trigger for appropriate assessment is met, but this is not a screening in the EIA sense.
All that is required is that, where there is found to be a risk of significant adverse effects to a protected site, there is an appropriate assessment.
In this case, the planning authority and the expert consultees were satisfied that the material risk of significant effects on the river had been eliminated.
Though the officers expressed this conclusion by saying that no appropriate assessment was required, there is no reason to think that the conclusion would have been different if they had decided from the outset that appropriate assessment was required.
The mere failure to exercise the article 6(3) trigger at an earlier stage does not in itself undermine the legality of the final decision. [37 42] On timing of EIA screening, authorities should in principle adopt screening opinions early in the planning process. [43] Though a negative opinion, lawfully arrived at on the information then available, may need to be reviewed in light of subsequent information, this does not mean that a legally defective screening opinion not to require EIA, or a failure to conduct a screening opinion at all, can be cured by carrying out an assessment exercise outside the EIA regulations.
In the present case it was accepted that the councils screening exercise in April 2010 was legally defective: the pollution prevention measures had not been fully identified at that point, so the council could not be satisfied then that mitigation measures would prevent a risk of pollutants entering the river.
This was an archetypal case for EIA so that the risks and measures to address them could be set out in the environmental statement and subject to consultation and investigation.
That defect was not remedied by what followed: it was not enough to say that the potential adverse effects had now been addressed in other ways. [45 47] On the second issue, the appellant disputed the legality of the councils reliance on mitigation measures, at the stage of granting planning permission, to dispense retrospectively with the requirement for EIA which should have been initiated at the outset. [48] There is nothing to rule out consideration of mitigation measures at the EIA screening stage, but the Directive and the regulations expressly envisage that they will where appropriate be included in the environmental statement.
Cases of material doubt should generally be resolved in favour of EIA. [51].
The failure to treat this proposal as EIA development was a procedural irregularity, which was not cured by the final decision. [53] Despite the legal defect in the procedure leading to the grant of planning permission, the court retains a discretion to refuse relief if the applicant has been able in practice to enjoy the rights conferred by European legislation and there is no substantial prejudice. [54] There is nothing to suggest that the councils decision would have been different had the process taken place within the framework of the EIA regulations.
There was only one issue of substance: measures to achieve adequate hydrological separation between the sites activities and the river.
It is clear from the final report that the statutory agencies involved formed their own view of the measures effectiveness, and that the views of the public were taken into account.
At the time the appellant was unable to raise specific concerns that had not been dealt with before the final decision, which remains the case.
The appeal is dismissed. [59 62]
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This is the judgment of the Court on the issue of whether a bribe or secret commission received by an agent is held by the agent on trust for his principal, or whether the principal merely has a claim for equitable compensation in a sum equal to the value of the bribe or commission.
The answer to this rather technical sounding question, which has produced inconsistent judicial decisions over the past 200 years, as well as a great deal of more recent academic controversy, is important in practical terms.
If the bribe or commission is held on trust, the principal has a proprietary claim to it, whereas if the principal merely has a claim for equitable compensation, the claim is not proprietary.
The distinction is significant for two main reasons.
First, if the agent becomes insolvent, a proprietary claim would effectively give the principal priority over the agents unsecured creditors, whereas the principal would rank pari passu, ie equally, with other unsecured creditors if he only has a claim for compensation.
Secondly, if the principal has a proprietary claim to the bribe or commission, he can trace and follow it in equity, whereas (unless we develop the law of equitable tracing beyond its current boundaries) a principal with a right only to equitable compensation would have no such equitable right to trace or follow.
The facts
On 22 December 2004, FHR European Ventures LLP purchased the issued share capital of Monte Carlo Grand Hotel SAM (which owned a long leasehold interest in the Monte Carlo Grand Hotel) from Monte Carlo Grand Hotel Ltd (the Vendor) for 211.5m.
The purchase was a joint venture between the claimants in these proceedings, for whom FHR was the vehicle.
Cedar Capital Partners LLC provided consultancy services to the hotel industry, and it had acted as the claimants agent in negotiating the purchase.
It is common ground that Cedar accordingly owed fiduciary duties to the claimants in that connection.
Cedar had also entered into an agreement with the Vendor (the Exclusive Brokerage Agreement) dated 24 September 2004, which provided for the payment to Cedar of a 10m fee following a successful conclusion of the sale and purchase of the issued share capital of Monte Carlo Grand Hotel SAM.
The Vendor paid Cedar 10m on or about 7 January 2005.
On 23 November 2009 the claimants began these proceedings for recovery of the sum of 10m from Cedar (and others).
The trial took place before Simon J, and the main issue was whether, as it contended, Cedar had made proper disclosure to the claimants of the Exclusive Brokerage Agreement.
Simon J gave a judgment in which he found against Cedar on that issue [2012] 2 BCLC 39.
There was then a further hearing to determine what order should be made in the light of that judgment, following which Simon J gave a further judgment [2013] 2 BCLC 1.
In that judgment he concluded that he should (i) make a declaration of liability for breach of fiduciary duty on the part of Cedar for having failed to obtain the claimants fully informed consent in respect of the 10m, and (ii) order Cedar to pay such sum to the claimants, but (iii) refuse to grant the claimants a proprietary remedy in respect of the monies.
The claimants appealed to the Court of Appeal against conclusion (iii), and it allowed the appeal for reasons given in a judgment given by Lewison LJ, with supporting judgments from Pill LJ and Sir Terence Etherton C [2014] Ch 1.
Accordingly, the Court of Appeal made an order which included a declaration that Cedar received the 10m fee on constructive trust for the claimants absolutely.
Cedar now appeals to the Supreme Court on that issue.
There is and was no challenge by Cedar to the Judges conclusions (i) and (ii), so the only point on this appeal is whether, as the Court of Appeal held, the claimants are entitled to the proprietary remedy in respect of the 10m received by Cedar from the Vendor.
Prefatory comments
The following three principles are not in doubt, and they are taken from the classic summary of the law in the judgment of Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1, 18.
First, an agent owes a fiduciary duty to his principal because he is someone who has undertaken to act for or on behalf of [his principal] in a particular matter in circumstances which give rise to a relationship of trust and confidence.
Secondly, as a result, an agent must not make a profit out of his trust and must not place himself in a position in which his duty and his interest may conflict and, as Lord Upjohn pointed out in Boardman v Phipps [1967] 2 AC 46, 123, the former proposition is part of the [latter] wider rule.
Thirdly, [a] fiduciary who acts for two principals with potentially conflicting interests without the informed consent of both is in breach of the obligation of undivided loyalty; he puts himself in a position where his duty to one principal may conflict with his duty to the other.
Because of the importance which equity attaches to fiduciary duties, such informed consent is only effective if it is given after full disclosure, to quote Sir George Jessel MR in Dunne v English (1874) LR 18 Eq 524, 533.
Another well established principle, which applies where an agent receives a benefit in breach of his fiduciary duty, is that the agent is obliged to account to the principal for such a benefit, and to pay, in effect, a sum equal to the profit by way of equitable compensation.
The law on this topic was clearly stated in Regal (Hastings) Ltd v Gulliver (Note) (1942) [1967] 2 AC 134, 144 145, by Lord Russell, where he said this: The rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged or benefited by his action.
The liability arises from the mere fact of a profit having, in the stated circumstances, been made.
The principals right to seek an account undoubtedly gives him a right to equitable compensation in respect of the bribe or secret commission, which is the quantum of that bribe or commission (subject to any permissible deduction in favour of the agent eg for expenses incurred).
That is because where an agent acquires a benefit in breach of his fiduciary duty, the relief accorded by equity is, again to quote Millett LJ in Mothew at p 18, primarily restitutionary or restorative rather than compensatory.
The agents duty to account for the bribe or secret commission represents a personal remedy for the principal against the agent.
However, the centrally relevant point for present purposes is that, at least in some cases where an agent acquires a benefit which came to his notice as a result of his fiduciary position, or pursuant to an opportunity which results from his fiduciary position, the equitable rule (the Rule) is that he is to be treated as having acquired the benefit on behalf of his principal, so that it is beneficially owned by the principal.
In such cases, the principal has a proprietary remedy in addition to his personal remedy against the agent, and the principal can elect between the two remedies.
Where the facts of a particular case are within the ambit of the Rule, it is strictly applied.
The strict application of the Rule can be traced back to the well known decision in Keech v Sandford (1726) Sel Cas Ch 61, where a trustee held a lease of a market on trust for an infant, and, having failed to negotiate a new lease on behalf of the infant because the landlord was dissatisfied with the proposed security for the rent, the trustee negotiated a new lease for himself.
Lord King LC concluded at p 62 that, though I do not say there is a fraud in this case and though it may seem hard, the infant was entitled to an assignment of the new lease and an account of the profits made in the meantime a conclusion which could only be justified on the basis that the new lease had been beneficially acquired for the infant beneficiary.
Since then, the Rule has been applied in a great many cases.
The question on
this appeal is not so much concerned with the application of the Rule, as with its limits or boundaries.
Specifically, what is in dispute is the extent to which the Rule applies where the benefit is a bribe or secret commission obtained by an agent in breach of his fiduciary duty to his principal.
On the one hand, Mr Collings QC contends for the appellant, Cedar, that the Rule should not apply to a bribe or secret commission paid to an agent, because it is not a benefit which can properly be said to be the property of the principal.
This has the support of Professor Sir Roy Goode, who has suggested that no proprietary interest arises where an agent obtains a benefit in breach of his duty unless the benefit either (i) flows from an asset which was (a) beneficially owned by the principal, or (b) intended for the principal, or (ii) was derived from an activity of the agent which, if he chose to undertake it, he was under an equitable duty to undertake for the principal.
Sir Roy suggested that to treat [a principal] as having a restitutionary proprietary right to money or property not derived from any asset of [the principal] results in an involuntary grant by [the agent] to [the principal] from [the agents] pre existing estate Proprietary Restitutionary Claims in Restitution: Past, Present and Future (1998) ed Cornish, p 69 and see more recently (2011) 127 LQR 493.
Professor Sarah Worthington has advanced a slightly different test.
She suggests (summarising at the risk of oversimplifying) that proprietary claims arise where benefits are (i) derived from the principals property, or (ii) derived from opportunities in the scope of the agents endeavours on behalf of the principal, but not (iii) benefits derived from opportunities outside the scope of those endeavours Fiduciary Duties and Proprietary Remedies: Addressing the Failure of Equitable Formulae (2013) 72 CLJ 720.
On the other hand, it is suggested by Mr Pymont QC on behalf of the respondent claimants in this appeal, that the Rule does apply to bribes or secret commissions received by an agent, because, in any case where an agent receives a benefit, which is, or results from, a breach of the fiduciary duty owed to his principal, the agent holds the benefit on trust for the principal.
This view has been supported by Lord Millett writing extra judicially.
In Bribes and Secret Commissions [1993] Rest LR 7, he suggested that, on grounds of practicality, policy and principle, a principal should be beneficially entitled to a bribe or secret commission received by his agent and see more recently, (2012) 71 CLJ 583.
He bases his conclusion on the proposition that equity will not permit the agent to rely on his own breach of fiduciary duty to justify retaining the benefit on the ground that it was a bribe or secret commission, and will assume that he acted in accordance with his duty, so that the benefit must be the principals.
This approach is also supported by Lionel Smith, Constructive trusts and the no profit rule (2013) 72 CLJ 260, whose view, in short, is that the basic rule should be that an agent who obtains a benefit in breach of his fiduciary duty to his principal holds that benefit on trust for his principal.
The decision as to which view is correct must be based on legal principle, decided cases, policy considerations, and practicalities.
We start by summarising the effect of many of the cases which touch on the issue; we then turn to the policy and practical arguments, and finally we express our conclusion.
The decided cases
There is a number of 19th century cases not involving bribes or secret commissions, where an agent or other fiduciary makes an unauthorised profit by taking advantage of an opportunity which came to his attention as a result of his agency and judges have reached the conclusion that the Rule applied.
Examples include Carter v Palmer (1842) 8 Cl & F 657, where a barrister who purchased his clients bills at a discount was held by Lord Cottenham to have acquired them for his client.
The Privy Council in Bowes v City of Toronto (1858) 11 Moo PC 463 concluded that the mayor of a city who bought discounted debentures issued by the city was in the same position as an agent vis vis the city, and was to be treated as holding the debentures on trust for the city.
Bagnall v Carlton (1877) 6 Ch D 371 involved complex facts, but, pared to a minimum, agents for a prospective company who made secret profits out of a contract made by the company were held to be trustees for the company of those profits (per James, Baggallay and Cotton LJJ).
In the Privy Council case of Cook v Deeks [1916] 1 AC 554, a company
formed by the directors of a construction company was held to have entered into a contract on behalf of the construction company as the directors only knew of the contractual opportunity by virtue of their directorships.
In Phipps v Boardman [1964] 1 WLR 993 (affirmed [1965] Ch 992, and [1967] 2 AC 46), where agents of certain trustees purchased shares, in circumstances where they only had that opportunity because they were agents, Wilberforce J held that the shares were held beneficially for the trust.
More recently, in Bhullar v Bhullar [2003] 2 BCLC 241, the Court of Appeal reached the same conclusion on similar facts to those in Cook (save that the asset acquired was a property rather than a contract).
Jonathan Parker LJ said this at para 28: [W]here a fiduciary has exploited a commercial opportunity for his own benefit, the relevant question, in my judgment, is not whether the party to whom the duty is owed (the company, in the instant case) had some kind of beneficial interest in the opportunity: in my judgment that would be too formalistic and restrictive an approach.
Rather, the question is simply whether the fiduciarys exploitation of the opportunity is such as to attract the application of the rule.
Turning now to cases concerned with bribes and secret commissions, the effect of the reasoning of Lord Lyndhurst LC in Fawcett v Whitehouse (1829) 1 Russ & M 132 was that an agent, who was negotiating on behalf of a prospective lessee and who accepted a loan from the lessor, held the loan on trust for his principal, the lessee.
In Barker v Harrison (1846) 2 Coll 546, a vendors agent had secretly negotiated a sub sale of part of the property from the purchaser at an advantageous price, and Sir James Knight Bruce V C held that that asset was held on trust for the vendor.
In In re Western of Canada Oil, Lands and Works Co, Carling, Hespeler, and Walshs Cases (1875) 1 Ch D 115, the Court of Appeal (James and Mellish LJJ, Bramwell B and Brett J) held that shares transferred by a person to individuals to induce them to become directors of a company and to agree that the company would buy land from the person, were held by the individuals on trust for the company.
In In re Morvah Consols Tin Mining Co, McKays Case (1875) 2 Ch D 1, the Court of Appeal (Mellish and James LJJ and Brett J) decided that where a company bought a mine, shares in the vendor which were promised to the companys secretary were held by him for the company beneficially.
The Court of Appeal (Sir George Jessel MR and James and Baggallay LJJ) in In re Caerphilly Colliery Co, Pearsons Case (1877) 5 Ch D 336 concluded that a company director, who received shares from the promoters and then acted for the company in its purchase of a colliery from the promoters, held the shares on trust for the company.
In Eden v Ridsdale Railway Lamp and Lighting Co Ltd (1889) 23 QBD 368, a company was held by the Court of Appeal (Lord Esher MR and Lindley and Lopes LJJ) to be entitled as against a director to shares which he had secretly received from a person with whom the company was negotiating.
There are a number of other 19th century decisions to this effect, but it is unnecessary to cite them.
Inducements and other benefits offered to directors and trustees have been treated similarly.
In Sugden v Crossland (1856) 2 Sm & G 192, Sir William Page Wood V C held that a sum of money paid to a trustee to persuade him to retire in favour of the payee was to be treated as a part of the trust fund.
Similarly, in Nant y glo and Blaina Ironworks Co v Grave (1878) 12 Ch D 738, shares in a company given by a promoter to the defendant to induce him to become a director were held by Sir James Bacon V C to belong to the company.
In Williams v Barton [1927] 2 Ch 9, Russell J decided that a trustee, who recommended that his co trustees use stockbrokers who gave him a commission, held the commission on trust for the trust.
The common law courts were meanwhile taking the same view.
In Morison v Thompson (1874) LR 9 QBD 480, Cockburn CJ, with whom Blackburn and Archibald JJ agreed, held that a purchasers agent who had secretly agreed to accept a commission from the vendor of a ship, held the commission for the benefit of his principal, the purchaser, in common law just as he would have done in equity see at p 484, where Cockburn CJ referred to the earlier decision of Lord Ellenborough CJ to the same effect in Diplock v Blackburn (1811) 3 Camp 43.
In Whaley Bridge Calico Printing Co v Green (1879) 5 QBD 109, Bowen J (albeit relying on equity at least in part) held that a contract between the vendor and a director of the purchaser, for a secret commission to be paid out of the purchase money, was to be treated as having been entered into for the benefit of the purchaser without proof of fraud.
It is fair to say that in the majority of the cases identified in the previous five
paragraphs it does not appear to have been in dispute that, if the recipient of the benefit had received it in breach of his fiduciary duty to the plaintiff, then he held it on trust for the plaintiff.
In other words, it appears to have been tacitly accepted that the Rule applied, so that the plaintiff was entitled not merely to an equitable account in respect of the benefit, but to the beneficial ownership of the benefit.
However, many of those cases contain observations which specifically support the contention that the Rule applies to all benefits which are received by an agent in breach of his fiduciary duty.
In Sugden at p 194, Sir William Page Wood V C said that it is a well settled principle that if a trustee make a profit of his trusteeship, it shall enure to the benefit of his cestuique trusts.
And in McKays Case at p 5, Mellish LJ said that it was quite clear that, according to the principles of a Court of Equity, all the benefit which the agent of the purchaser receives under such circumstances from the vendor must be treated as received for the benefit of the purchaser.
In Carlings Case at p 124, James LJ said the arrangement amounted to a a simple bribe or present to the directors, constituting a breach of trust on their part and that the company would be entitled to get back from their unfaithful trustees what the unfaithful trustees had acquired by reason of their breach of trust.
In Pearsons Case Sir George Jessel MR said at pp 340 341 that the director as agent could not retain that present as against the actual purchasers and must be deemed to have obtained [the benefit] under circumstances which made him liable, at the option of the cestuis que trust, to account either for the value or for the thing itself .
In Eden, Lord Esher said at p 371 that if an agent put[s] himself in a position which the law does not allow [him] to assume he commit[s] a wrong against his principal, and [i]f that which the agent has received is money he must hand it over to his principal, if it is not money, but something else, the principal may insist on having it.
Lindley and Lopes LJJ each said that they were of the same opinion as Lord Esher, and Lindley LJ observed at p 372 that it would be contrary to all principles of law and equity to allow the plaintiff to retain the gift.
It is also worth noting that in Morison at pp 485 486, Cockburn CJ quoted with approval from two contemporary textbooks.
First, he cited Story on Agency, para 211, where it was said that it could be laid down as a general principle, that, in all cases when a person is an agent for other persons, all profits and advantages made by him in the business, beyond his ordinary compensation, are to be for the benefit of his employers.
Secondly, he referred to Paley on Principal and Agent, p 51, which stated that not only interest, but every other sort of profit or advantage, clandestinely derived by an agent from dealing or speculating with his principals effects, is the property of the latter, and must be accounted for.
The cases summarised in paras 13 17 above and the observations set out in paras 19 20 above are all consistent with the notion that the Rule should apply to bribes or secret commissions paid to an agent, so that the agent holds them on trust for his principal, rather than simply having an equitable duty to account to his principal.
It is true that in many of those cases there was apparently no argument as to whether the benefit obtained by the fiduciary was actually held on trust for the principal.
However, in some of the cases there was a dispute on the nature of the relief; in any event, the fact that it was assumed time and again by eminent barristers and judges must carry great weight.
However, there is one decision of the House of Lords which appears to go the other way, and several decisions of the Court of Appeal which do go the other way, in that they hold that, while a principal has a claim for equitable compensation in respect of a bribe or secret commission received by his agent, he has no proprietary interest in it.
The House of Lords decision is Tyrrell v Bank of London (1862) 10 HL Cas 26.
The facts of the case are somewhat complex and the reasoning of the opinions of Lord Westbury LC, Lord Cranworth and Lord Chelmsford is not always entirely easy to follow.
The decision has been carefully and interestingly analysed by Professor Watts, Tyrrell v Bank of London an Inside Look at an Inside Job (2013) 129 LQR 527.
In very brief terms, a solicitor retained to act for a company in the course of formation secretly arranged to benefit from his prospective clients anticipated acquisition of a building called the Hall of Commerce by obtaining from the owner a 50% beneficial interest in a parcel of land consisting of the Hall and some adjoining land.
After the client had purchased the Hall from the owner, it discovered that the solicitor had secretly profited from the transaction and sued him.
Sir John Romilly MR held that the solicitor had held on trust for the client both (i) his interest in (and therefore his subsequent share of the proceeds of sale of) the Hall, and (ii) with very considerable hesitation, his interest in the adjoining land (1859) 27 Beav 273, especially at p 300.
On appeal, the House of Lords held that, while the Master of the Rolls was right about (i), he was wrong about (ii): although the client had an equitable claim for the value of the solicitors interest in the adjoining land, it had no proprietary interest in that land.
Lord Westbury LC made it clear at pp 39 40 that the fact that the client had not been formed by the time that the solicitor acquired his interest in the land did not prevent the claim succeeding as the client had been conceived, and was in the process of formation.
He also made it clear at p 44 that, in respect of the profit which the solicitor made from his share of the Hall (which he described as the subject matter of the transaction, and, later at p 45, that particular property included in the [clients] contract), the solicitor must be converted into a trustee for the [client].
However, he was clear that no such trust could arise in relation to the adjoining land, which was outside the limit of the agency, and so there [was] no privity, nor any obligation, although the solicitor must account for the value of that property p 46.
Lord Cranworth agreed, making it clear that the financial consequences for the solicitor were no different from those that followed from the Master of the Rolls order, although he had thought that possibly we might arrive at the conclusion that the decree was, not only in substance, but also in form, perfectly correct p 49.
Lord Chelmsford agreed, and discussed bribes at pp 59 60, holding that the principal had no right to a bribe received by his agent.
Although there have been suggestions that, with the exception of Lord Chelmsfords obiter dicta about bribes, the decision of the House of Lords in Tyrrell was not inconsistent with the respondents case on this appeal, it appears clear that it was.
If, as the House held, the solicitor was liable to account to the client for the profit which he had made on the adjoining land, that can only have been because it was a benefit which he had received in breach of his fiduciary duty; and, once that is established, then, on the respondents case, the Rule would apply, and that profit would be held on trust for the client (or, more accurately, his share of the adjoining land would be held on trust), as in Fawcett, Sugden, Carter, Bowes and Barker, all of which had been decided before Tyrrell, and of which only Fawcett was cited to the House.
We turn to the Court of Appeal authorities which are inconsistent with the notion that the Rule applies to bribes or secret commissions.
In Metropolitan Bank v Heiron (1880) 5 Ex D 319, the Court of Appeal held that a claim brought by a company against a director was time barred: the claim was to recover a bribe paid by a third party to induce the director to influence the company to negotiate a favourable settlement with the third party.
It was unsuccessfully argued by the bank that its claim was proprietary.
Brett LJ said at p 324 [n]either at law nor in equity could this sum be treated as the money of the company, but he apparently considered that, once the company had obtained judgment for the money there could be a trust.
Cotton LJ expressed the same view.
James LJ simply thought that there was an equitable debt and applied the Limitation Acts by analogy.
This approach was followed in Lister & Co v Stubbs (1890) 45 Ch D 1, where an agent of a company had accepted a bribe from one of its clients, and an interlocutory injunction was refused on the ground that the relationship between the company and its agent was that of creditor and debtor not beneficiary and trustee.
Cotton LJ said at p 12 that the money which [the agent] has received cannot be treated as being the money of the [company].
Lindley LJ agreed and said at p 15 that the notion that there was a trust startle[d] him, not least because it would give the company the right to the money in the event of the agents bankruptcy.
Bowen LJ agreed.
Lister was cited with approval by Lindley LJ in In re North Australian Territory Co, Archers case [1892] 1 Ch 322, 338, and it was followed in relation to a bribe paid to an agent by Sir Richard Henn Collins MR (with whom Stirling and Mathew LJJ agreed) in Powell & Thomas v Evan Jones & Co [1905] 1 KB 11, 22, where the principal was held entitled to an account for the bribe, but not to a declaration that the bribe was held on trust.
The same view was taken in the Court of Appeal in Attorney Generals Reference (No 1 of 1985) [1986] QB 491, 504 505, where Lord Lane CJ quoted from the judgments of Cotton and Lindley LJJ in what he described as a powerful Court of Appeal in Lister, and followed the reasoning.
In Regal (Hastings), the decision in Lister was referred to by Lord Wright at p 156, as supporting the notion that the relationship in such a case is that of debtor and creditor, not trustee and cestui que trust.
However, that was an obiter observation, and it gets no support from the other members of the committee.
More recently, in 1993, in Attorney General for Hong Kong v Reid, the Privy Council concluded that bribes received by a corrupt policeman were held on trust for his principal, and so they could be traced into properties which he had acquired in New Zealand.
In his judgment on behalf of the Board, Lord Templeman disapproved the reasoning in Heiron, and the reasoning and outcome in Lister, and he thought his conclusion inconsistent with only one of the opinions, that of Lord Chelmsford, in Tyrrell.
In Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119, paras 75ff, Lawrence Collins J indicated that he would follow Reid rather than Lister, as did Toulson J in Fyffes Group Ltd v Templeman [2000] 2 Lloyds Rep 643, 668 672.
But in Sinclair Investments Ltd v Versailles Trade Finance Ltd [2012] Ch 453, in a judgment given by Lord Neuberger MR, the Court of Appeal decided that it should follow Heiron and Lister, and indeed Tyrrell, for a number of reasons set out in paras 77ff, although it accepted that this Court might follow the approach in Reid.
In this case, Simon J considered that he was bound by Sinclair, whereas the Court of Appeal concluded that they could and should distinguish it.
Legal principle and academic articles
As mentioned above, the issue raised on this appeal has stimulated a great deal of academic debate.
The contents of the many articles on this issue provide an impressive demonstration of penetrating and stimulating legal analysis.
One can find among those articles a powerful case for various different outcomes, based on analysing judicial decisions and reasoning, equitable and restitutionary principles, and practical and commercial realities.
It is neither possible nor appropriate to do those articles justice individually in this judgment, but the court has referred to them for the purpose of extracting the principle upon which the Rule is said to be based.
In addition to those referred to in paras 10, 11 and 23 above, those articles include Hayton, The Extent of Equitable Remedies: Privy Council versus the Court of Appeal [2012] Co Law 161, Swadling, Constructive trusts and breach of fiduciary duty (2012) 18 Trusts and Trustees 985, Virgo, Profits Obtained in Breach of Fiduciary Duty: Personal or Proprietary Claim? (2011) 70 CLJ 502, Edelman Two Fundamental Questions for the Law of Trusts (2013) 129 LQR 66 and others listed by Sir Terence Etherton, The Legitimacy of Proprietary Relief, (2014) Birkbeck Law Review vol 2(1), 59, at p 60.
At p 62 Sir Terence refers to this relentess and seemingly endless debate, which, in the Court of Appeal in this case, Pill LJ described as revealing passions of a force uncommon in the legal world [2014] Ch 1, para 61.
The respondents formulation of the Rule, namely that it applies to all benefits received by an agent in breach of his fiduciary duty to his principal, is explained on the basis that an agent ought to account in specie to his principal for any benefit he has obtained from his agency in breach of his fiduciary duty, as the benefit should be treated as the property of the principal, as supported by many judicial dicta including those in para 19 above, and can be seen to be reflected in Jonathan Parker LJs observations in para 14 above.
More subtly, it is justified on the basis that equity does not permit an agent to rely on his own wrong to justify retaining the benefit: in effect, he must accept that, as he received the benefit as a result of his agency, he acquired it for his principal.
Support for that approach may be found in Mellish LJs judgment in McKays Case at p 6, and Bowen Js judgment in Whaley Bridge at p 113.
The appellants formulation of the Rule, namely that it has a more limited reach, and does not apply to bribes and secret commissions, has, as mentioned in para 10 above, various different formulations and justifications.
Thus, it is said that, given that it is a proprietary principle, the Rule should not apply to benefits which were not derived from assets which are or should be the property of the principal, a view supported by the reasoning of Lord Westbury in Tyrrell.
It has also been suggested that the Rule should not apply to benefits which could not have been intended for the principal and were, rightly or wrongly, the property of the agent, which seems to have been the basis of Cotton LJs judgment in Heiron at p 325 and Lister at p 12.
In Sinclair, it was suggested that the effect of the authorities was that the Rule should not apply to a benefit which the agent had obtained by taking advantage of an opportunity which arose as a result of the agency, unless the opportunity was properly that of the [principal] para 88.
Professor Worthingtons subsequent formulation, referred to in para 10 above, is very similar but subtly different (and probably more satisfactory).
Each of the formulations set out in paras 30 and 31 above have their supporters and detractors.
In the end, it is not possible to identify any plainly right or plainly wrong answer to the issue of the extent of the Rule, as a matter of pure legal authority.
There can clearly be different views as to what requirements have to be satisfied before a proprietary interest is created.
More broadly, it is fair to say that the concept of equitable proprietary rights is in some respects somewhat paradoxical.
Equity, unlike the common law, classically acts in personam (see eg Maitland, Equity, p 9); yet equity is far more ready to accord proprietary claims than common law.
Further, two general rules which law students learn early on are that common law legal rights prevail over equitable rights, and that where there are competing equitable rights the first in time prevails; yet, given that equity is far more ready to recognise proprietary rights than common law, the effect of having an equitable right is often to give priority over common law claims sometimes even those which may have preceded the equitable right.
Given that equity developed at least in part to mitigate the rigours of the common law, this is perhaps scarcely surprising.
However, it underlines the point that it would be unrealistic to expect complete consistency from the cases over the past 300 years.
It is therefore appropriate to turn to the arguments based on principle and practicality, and then to address the issue, in the light of those arguments as well as the judicial decisions discussed above.
Arguments based on principle and practicality
The position adopted by the respondents, namely that the Rule applies to all unauthorised benefits which an agent receives, is consistent with the fundamental principles of the law of agency.
The agent owes a duty of undivided loyalty to the principal, unless the latter has given his informed consent to some less demanding standard of duty.
The principal is thus entitled to the entire benefit of the agents acts in the course of his agency.
This principle is wholly unaffected by the fact that the agent may have exceeded his authority.
The principal is entitled to the benefit of the agents unauthorised acts in the course of his agency, in just the same way as, at law, an employer is vicariously liable to bear the burden of an employees unauthorised breaches of duty in the course of his employment.
The agents duty is accordingly to deliver up to his principal the benefit which he has obtained, and not simply to pay compensation for having obtained it in excess of his authority.
The only way that legal effect can be given to an obligation to deliver up specific property to the principal is by treating the principal as specifically entitled to it.
On the other hand, there is some force in the notion advanced by the appellant that the Rule should not apply to a bribe or secret commission paid to an agent, as such a benefit is different in quality from a secret profit he makes on a transaction on which he is acting for his principal, or a profit he makes from an otherwise proper transaction which he enters into as a result of some knowledge or opportunity he has as a result of his agency.
Both types of secret profit can be said to be benefits which the agent should have obtained for the principal, whereas the same cannot be said about a bribe or secret commission which the agent receives from a third party.
The respondents formulation of the Rule has the merit of simplicity: any benefit acquired by an agent as a result of his agency and in breach of his fiduciary duty is held on trust for the principal.
On the other hand, the appellants position is more likely to result in uncertainty.
Thus, there is more than one way in which one can identify the possible exceptions to the normal rule, which results in a bribe or commission being excluded from the Rule see the differences between Professor Goode and Professor Worthington described in paras 10 and 32 above, and the other variations there described.
Clarity and simplicity are highly desirable qualities in the law.
Subtle distinctions are sometimes inevitable, but in the present case, as mentioned above, there is no plainly right answer, and, accordingly, in the absence of any other good reason, it would seem right to opt for the simple answer.
A further advantage of the respondents position is that it aligns the circumstances in which an agent is obliged to account for any benefit received in breach of his fiduciary duty and those in which his principal can claim the beneficial ownership of the benefit.
Sir George Jessel MR in Pearsons Case at p 341 referred in a passage cited above to the agent in such a case having to account either for the value or for the thing itself .
The expression equitable accounting can encompass both proprietary and non proprietary claims.
However, if equity considers that in all cases where an agent acquires a benefit in breach of his fiduciary duty to his principal, he must account for that benefit to his principal, it could be said to be somewhat inconsistent for equity also to hold that only in some such cases could the principal claim the benefit as his own property.
The observation of Lord Russell in Regal (Hastings) quoted in para 6 above, and those of Jonathan Parker LJ in Bhullar quoted in para 14 above would seem to apply equally to the question of whether a principal should have a proprietary interest in a bribe or secret commission as to the question of whether he should be entitled to an account in respect thereof.
The notion that the Rule should not apply to a bribe or secret commission received by an agent because it could not have been received by, or on behalf of, the principal seems unattractive.
The whole reason that the agent should not have accepted the bribe or commission is that it puts him in conflict with his duty to his principal.
Further, in terms of elementary economics, there must be a strong possibility that the bribe has disadvantaged the principal.
Take the facts of this case: if the vendor was prepared to sell for 211.5m, on the basis that it was paying a secret commission of 10m, it must be quite likely that, in the absence of such commission, the vendor would have been prepared to sell for less than 211.5m, possibly 201.5m.
While Simon J was not prepared to make such an assumption without further evidence, it accords with common sense that it should often, even normally, be correct; indeed, in some cases, it has been assumed by judges that the price payable for the transaction in which the agent was acting was influenced pro rata to account for the bribe see eg Fawcett at p 136.
The artificiality and difficulties to which the appellants case can give rise may be well illustrated by reference to the facts in Eden and in Whaley Bridge.
In Eden, the promoter gave 200 shares to a director of the company when there were outstanding issues between the promoter and the company.
The Court of Appeal held that the director held the shares on trust for the company.
As Finn J said in Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22, para 570, the effect of that decision, if Heiron and Lister were rightly decided, would appear to be that where a bribe is paid to an agent, the principal has a proprietary interest in the bribe if it consists of shares but not if it consists of money, which would be a serious anomaly.
In Whaley Bridge, a director of a company who negotiated a purchase by the company for 20,000 of a property was promised but did not receive 3,000 out of the 20,000 from the vendor.
The outcome according to Bowen J was that the vendor was liable to the company for the 3,000, because the company was entitled to treat the contract between the vendor and the director as made by the director on behalf of the company.
Bowen J held that it could not be successfully denied that if the 3,000 had been paid to the director he would have held it on trust for the company.
Mr Collings suggested that the decision was correct because, unlike in this case, the director and vendor had agreed that the 3,000 would come out of the 20,000 paid by the company.
Not only is there no trace of such reasoning in Bowen Js judgment, but it would be artificial, impractical and absurd if the issue whether a principal had a proprietary interest in a bribe to his agent depended on the mechanism agreed between the briber and the agent for payment of the bribe.
The notion that an agent should not hold a bribe or commission on trust because he could not have acquired it on behalf of his principal is somewhat inconsistent with the long standing decision in Keech, the decision in Phipps approved by the House of Lords, and the Privy Council decision in Bowes.
In each of those three cases, a person acquired property as a result of his fiduciary or quasi fiduciary position, in circumstances in which the principal could not have acquired it: yet the court held that the property concerned was held on trust for the beneficiary.
In Keech, the beneficiary could not acquire the new lease because the landlord was not prepared to let to him, and because he was an infant; in Boardman, the trust could not acquire the shares because they were not authorised investments; in Bowes, the city corporation would scarcely have been interested in buying the loan notes which it had just issued to raise money.
The respondents are also able to point to a paradox if the appellant is right and a principal has no proprietary right to his agents bribe or secret commission.
If the principal has a proprietary right, then he is better off, and the agent is worse off, than if the principal merely has a claim for equitable compensation.
It would be curious, as Mr Collings frankly conceded, if a principal whose agent wrongly receives a bribe or secret commission is worse off than a principal whose agent obtains a benefit in far less opprobrious circumstances, eg the benefit obtained by the trustees agents in Boardman.
Yet that is the effect if the Rule does not apply to bribes or secret commissions.
Wider policy considerations also support the respondents case that bribes and secret commissions received by an agent should be treated as the property of his principal, rather than merely giving rise to a claim for equitable compensation.
As Lord Templeman said giving the decision of the Privy Council in Attorney General for Hong Kong v Reid [1994] 1 AC 324, 330H, [b]ribery is an evil practice which threatens the foundations of any civilised society.
Secret commissions are also objectionable as they inevitably tend to undermine trust in the commercial world.
That has always been true, but concern about bribery and corruption generally has never been greater than it is now see for instance, internationally, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1999 and the United Nations Convention against Corruption 2003, and, nationally, the Bribery Acts 2010 and 2012.
Accordingly, one would expect the law to be particularly stringent in relation to a claim against an agent who has received a bribe or secret commission.
On the other hand, a point frequently emphasised by those who seek to justify restricting the ambit of the Rule is that the wide application for which the respondents contend will tend to prejudice the agents unsecured creditors, as it will serve to reduce the estate of the agent if he becomes insolvent.
This was seen as a good reason in Sinclair for not following Reid see at [2012] Ch 453, para 83.
While the point has considerable force in some contexts, it appears to us to have limited force in the context of a bribe or secret commission.
In the first place, the proceeds of a bribe or secret commission consists of property which should not be in the agents estate at all, as Lawrence Collins J pointed out in Daraydan, para 78 (although it is fair to add that insolvent estates not infrequently include assets which would not be there if the insolvent had honoured his obligations).
Secondly, as discussed in para 37 above, at any rate in many cases, the bribe or commission will very often have reduced the benefit from the relevant transaction which the principal will have obtained, and therefore can fairly be said to be his property.
Nonetheless, the appellants argument based on potential prejudice to the agents unsecured creditors has some force, but it is, as we see it, balanced by the fact that it appears to be just that a principal whose agent has obtained a bribe or secret commission should be able to trace the proceeds of the bribe or commission into other assets and to follow them into the hands of knowing recipients (as in Reid).
Yet, as Mr Collings rightly accepts, tracing or following in equity would not be possible, at least as the law is currently understood, unless the person seeking to trace or follow can claim a proprietary interest.
Common law tracing is, of course, possible without a proprietary interest, but it is much more limited than equitable tracing.
Lindley LJ in Lister at p 15 appears to have found it offensive that a principal should be entitled to trace a bribe, but he did not explain why, and we prefer the reaction of Lord Templeman in Reid, namely that a principal ought to have the right to trace and to follow a bribe or secret commission.
Finally, on this aspect, it appears that other common law jurisdictions have adopted the view that the Rule applies to all benefits which are obtained by a fiduciary in breach of his duties.
In the High Court of Australia, Deane J said in Chan v Zacharia (1984) 154 CLR 178, 199 that any benefit obtained in circumstances where a conflict . existed or by reason of his fiduciary position or of opportunity or knowledge resulting from it is held by the fiduciary as constructive trustee.
More recently, the Full Federal Court of Australia has decided not to follow Sinclair: see Grimaldi, where the decision in Reid was preferred see the discussion at paras 569 584.
Although the Australian courts recognise the remedial constructive trust, that was only one of the reasons for not following Sinclair.
As Finn J who gave the judgment of the court said at para 582 (after describing Heiron and Lister as imposing an anomalous limitation on the reach of Keech v Sandford at para 569), Australian law in this connection matches that of New Zealand , Singapore, United States jurisdictions and Canada.
As overseas countries secede from the jurisdiction of the Privy Council, it is inevitable that inconsistencies in the common law will develop between different jurisdictions.
However, it seems to us highly desirable for all those jurisdictions to learn from each other, and at least to lean in favour of harmonising the development of the common law round the world.
Conclusions
The considerations of practicality and principle discussed in paras 33 44 above appear to support the respondents case, namely that a bribe or secret commission accepted by an agent is held on trust for his principal.
The position is perhaps rather less clear when one examines the decided cases, whose effect we have summarised in paras 13 28 above.
However, to put it at its lowest, the authorities do not preclude us adopting the respondents case in that they do not represent a clear and consistent line of authority to the contrary effect.
Indeed, we consider that, taken as a whole, the authorities favour the respondents case.
First, if one concentrates on the issue of bribes or secret commissions paid to an agent or other fiduciary, the cases, with the exception of Tyrrell, were consistently in favour of such payments being held on trust for the principal or other beneficiary until the decision in Heiron which was then followed in Lister.
Those two decisions are problematical for a number of reasons.
First, relevant authority was not cited.
None of the earlier cases referred to in paras 13, 14 or 16 above were put before the court in Heiron (where the argument seems to have been on a very different basis) or in Lister.
Secondly, all the judges in those two cases had given earlier judgments which were inconsistent with their reasoning in the later ones.
Brett LJ (who sat in Heiron) had been party to the decision in McKays and Carlings Cases; Cotton LJ (who sat in Heiron and Lister) had been party to Bagnall (which was arguably indistinguishable), James LJ (who sat in Heiron) was party to Pearsons and McKays Cases, as well as Bagnall; Lindley LJ (who sat in Lister) had been party to Eden; and Bowen LJ (who sat in Lister) had decided Whaley Bridge.
Thirdly, the notion, adopted by Cotton and Brett LJJ that a trust might arise once the court had given judgment for the equitable claim seems to be based on some sort of remedial constructive trust which is a concept not referred to in earlier cases, and which has authoritatively been said not to be part of English law see per Lord Browne Wilkinson in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 714 716.
Fourthly, the decisions in Heiron and Lister are difficult to reconcile with many cases not concerned with bribes or secret commissions paid to agents, such as those set out in paras 12, 13 and 15 above.
If the reasoning in Heiron and Lister is correct, then either those other cases were wrongly decided or the law is close to incoherent in this area.
As for the domestic cases subsequent to Lister, they are all explicable on the basis that it was either conceded or decided that the reasoning in the Court of Appeal in Lister was binding.
Further, even after Lister, cases were being decided in which it seems to have been accepted or decided by Chancery Judges that where an agent or other fiduciary had a duty to account for a benefit obtained in breach of his fiduciary duty, the principal was entitled to a proprietary interest in the benefit examples include Wilberforce J in Phipps, Lord Templeman in Reid, and Lawrence Collins J in Daraydan Holdings Ltd.
Were it not for the decision in Tyrrell, we consider that it would be plainly appropriate for this Court to conclude that the courts took a wrong turn in Heiron and Lister, and to restate the law as being as the respondents contend.
Although the fact that the House of Lords decided Tyrrell in the way they did gives us pause for thought, we consider that it would be right to uphold the respondents argument and disapprove the decision in Tyrrell.
In the first place, Tyrrell is inconsistent with a wealth of cases decided before and after it was decided.
Secondly, although Fawcett was cited in argument at p 38, it was not considered in any of the three opinions in Tyrrell; indeed, no previous decision was referred to in the opinions, and, although the opinions were expressed with a confidence familiar to those who read 19th century judgments, they contained no reasoning, merely assertion.
Thirdly, the decision in Tyrrell may be explicable by reference to the fact that the solicitor was not actually acting for the client at the time when he acquired his interest in the adjoining land hence the reference in Lord Westburys opinion to the limit of the agency and the absence of privity [or] obligation as mentioned in para 24 above.
In other words, it may be that their Lordships thought that the principal should not have a proprietary interest in circumstances where the benefit received by the agent was obtained before the agency began and did not relate to the property the subject of the agency.
Quite apart from these three points, we consider that, the many decisions and the practical and policy considerations which favour the wider application of the Rule and are discussed above justify our disapproving Tyrrell.
In our judgment, therefore, the decision in Tyrrell should not stand in the way of the conclusion that the law took a wrong turn in Heiron and Lister, and that those decisions, and any subsequent decisions (Powell & Thomas, Attorney Generals Reference (No 1 of 1985) and Sinclair), at least in so far as they relied on or followed Heiron and Lister, should be treated as overruled.
In this case, the Court of Appeal rightly regarded themselves as bound by Sinclair, but they managed to distinguish it.
Accordingly, the appeal is dismissed.
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This appeal concerns the issue of whether a bribe or secret commission received by an agent is held by that agent on trust for his principal, or whether the principal merely has a claim for equitable compensation in a sum equal to the value of the bribe or commission.
If the bribe or commission is held on trust, the principal has a proprietary claim to it, whereas if the principal merely has a claim for equitable compensation, the claim is not proprietary.
The distinction is important for two main reasons.
First, if the agent becomes insolvent, a proprietary claim would give the principal priority over the agents unsecured creditors.
Secondly, if the principal has a proprietary claim to a bribe or commission, he can trace and follow it in equity.
On 22 December 2004, FHR European Ventures LLP purchased the issued share capital of Monte Carlo Grand Hotel SAM from Monte Carlo Grand Hotel Ltd (the Seller) for 211.5m.
The purchase was a joint venture between the claimants in these proceedings, for whom FHR was the vehicle.
Cedar Capital Partners LLC provided consultancy services to the hotel industry, and it had acted as the claimants agent in negotiating the purchase.
Cedar accordingly owed fiduciary duties to the claimants.
Cedar had also entered into an Exclusive Brokerage Agreement with the Seller, which provided for the payment to Cedar of a 10m fee following a successful conclusion of the sale and purchase of the issued shared capital of Monte Carlo Grand Hotel SAM.
The Seller paid Cedar 10m on or about 7 January 2005.
On 23 November 2009 the claimants began these proceedings for recovery of the sum of 10m from Cedar.
The main issue at trial was whether Cedar had made proper disclosure to the claimants of the Exclusive Brokerage Agreement.
Simon J found against Cedar on that issue, and made a declaration of liability for breach of fiduciary duty on the part of Cedar for having failed to obtain the claimants fully informed consent in respect of the 10m, and ordered Cedar to pay that sum to the claimants.
However, he refused to grant the claimants a proprietary remedy in respect of the monies.
The claimants successfully appealed to the Court of Appeal, who made a declaration that Cedar received the 10m fee on constructive trust for the claimants absolutely.
Cedar now appeals to the Supreme Court on this issue.
The Supreme Court unanimously dismisses the appeal.
Lord Neuberger gives the judgment of the court.
Where an agent acquires a benefit which came to his notice as a result of his fiduciary position, or pursuant to an opportunity which results from his fiduciary position, the general equitable rule (the Rule) is that he is to be treated as having acquired the benefit on behalf of his principal, so it is beneficially owned by the principal.
The dispute in this case is the extent to which the Rule applies where the benefit is a bribe or secret commission obtained by an agent in breach of his fiduciary duty to his principal.
While it is not possible, as a matter of pure legal authority, to identify any plainly right or plainly wrong answer to the issue of the extent of the Rule, considerations of practicality and principle support the case that a bribe or secret commission accepted by an agent is held on trust for his principal.
The only point on this appeal is whether the claimants are entitled to the proprietary remedy in respect of the 10m received by Cedar from the Seller [4].
The following principles are not in doubt:
1) An agent owes a fiduciary duty to his principal because he is someone who has undertaken to act for or on behalf of his principal in a particular matter in circumstances which give rise to a relationship of trust and confidence; 2) As a result, an agent must not make a profit out of his trust, and must not place himself in a position in which his duty and his interest may conflict; and 3) A fiduciary who acts for two principals with potentially conflicting interests without the informed consent of both is in breach of the obligation of undivided loyalty, by putting himself in a position where his duty to one principal may conflict with his duty to the other [5].
Another well established principle, which applies where an agent receives a benefit in breach of his fiduciary duty, is that the agent is obliged to account to the principal for such a benefit, and to pay, in effect, a sum equal to profit by way of equitable compensation [6].
The principals right to seek an account undoubtedly gives him a right in equitable compensation in respect of the bribe or secret commission, which equals the quantum of that bribe or commission.
In cases to which the Rule applies, the principal has a proprietary remedy in addition to his personal remedy against the agent, and the principal can elect between the two remedies [7].
What is in dispute is the extent to which the Rule applies where the benefit is a bribe or secret commission obtained by an agent in breach of his fiduciary duty to his principal [9].
The appellant contends that the Rule should not apply to a bribe or secret commission paid to an agent, because it is not a benefit which can properly be said to be the property of the principal [10].
The respondents argue that the Rule does apply to bribes or secret commissions received by an agent, because, in any case where an agent receives a benefit, which is, or results from, a breach the fiduciary duty owed to his principal, the agent holds the benefit on trust for the principal [11].
It is not possible to identify any plainly right or plainly wrong answer to the issue of the extent of the Rule, as a matter of pure legal authority [32].
The respondents formulation of the Rule has the merit of simplicity: any benefit acquired by an agent as a result of his agency and in breach of his fiduciary duty is held on trust for the principal.
In contrast, the appellants position is more likely to result in uncertainty [35].
Wider policy considerations also support the respondents case that bribes and secret commissions received by an agent should be treated as the property of his principal, rather than merely giving rise to a claim for equitable compensation.
Bribes and secret commissions undermine trust in the commercial world, and one would expect the law to be particularly stringent in relation to a claim against an agent who has received a bribe or secret commission [42].
The argument that the respondents version of the Rule will tend to prejudice the agents unsecured creditors has limited force in the context of a bribe or secret commission.
In the first place, the proceeds of a bribe or secret commission consists of property which should not be in the agents estate at all.
Secondly, the bribe or commission will very often have reduced the benefit from the relevant transaction which the principal will have obtained, and therefore can fairly be said to be his property.
Finally, it is just that a principal whose agent has obtained a bribe or secret commission should be able to trace the proceeds of the bribe or commission into other assets and to follow them into the hands of knowing recipients [43 44].
Considerations of practicality and principle support the case that a bribe or secret commission accepted by an agent is held on trust for his principal.
While the position is less clear when one examines the decided cases, taken as a whole the authorities support the respondents case [46].
The cases, with the exception of Tyrrell v Bank of London (1862) 10 HL Cas 26, are consistently in favour of bribes or secret commissions being held on trust for the principal or other beneficiary until the decision in Metropolitan Bank v Heiron (1880) 5 Ex D 319, which was then followed in Lister & Co v Stubbs (1890) 45 Ch D 1.
The domestic cases subsequent to Lister are explicable on the basis that the issue was either conceded, or decided on the basis that Lister was binding.
The decision in Tyrrell should not stand in the way of the conclusion that the law took a wrong turn in Heiron and Lister, and that those decisions, and any subsequent decisions in so far as they relied on or followed Heiron and Lister, should be treated as overruled [47 50].
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Mrs Owens appeals against an order of the Court of Appeal dated 24 March 2017 (Sir James Munby, the President of the Family Division, and Hallett and Macur LJJ), [2017] EWCA Civ 182, [2017] 4 WLR 74, by which it dismissed her appeal against the dismissal of her petition for divorce by Judge Tolson QC (the judge) on 25 January 2016 in the Central Family Court in London.
The petition of Mrs Owens was based upon section 1(2)(b) (the subsection) of the Matrimonial Causes Act 1973 (the 1973 Act), which extends only to England and Wales: she alleged that her marriage to Mr Owens had broken down irretrievably and that he has behaved in such a way that [she] cannot reasonably be expected to live with [him].
It was in the belief that the appeal of Mrs Owens would raise a novel issue about the interpretation of the subsection that this court gave permission for it to be brought.
Her principal ground of appeal had been that the subsection should now be interpreted as requiring not that the behaviour of Mr Owens had been such that she could not reasonably be expected to live with him but that the effect of it on her had been of that character.
But, important though the effect on the petitioner of the respondents behaviour is under the subsection, Mr Marshall QC on her behalf conceded at the hearing that the principal ground went too far.
So issues about the interpretation of the subsection, at any rate as between Mr and Mrs Owens, have narrowed substantially.
But our judgments may nevertheless remain of some value to those who in the future wish to invoke, or need to apply, the subsection.
Resolution, the name by which the Solicitors Family Law Association is now known, intervenes in the appeal.
It commends, by contrast, a re interpretation of the subsection along the lines of that principal ground of appeal.
The court is grateful for its presentation but in the circumstances will refer only briefly to it.
Mrs Owens is aged 68.
Mr Owens is aged 80.
They were married in 1978 and have two children, now adult.
During the marriage, with the support of Mrs Owens, Mr Owens built a successful business and they each now have significant wealth.
The matrimonial home, in which Mr Owens continues to live, is a substantial manor house in a village in Gloucestershire.
Mrs Owens now lives next door, in a property which they also own.
It was in June 2012 that Mrs Owens first consulted her solicitors about a divorce.
In about November 2012 she began an affair.
It ended in August 2013, which was when (as Mrs Owens later discovered) Mr Owens learnt of it.
Mrs Owens told the judge that the affair was the result of a bad marriage, not the cause for divorce.
The judge did not say whether he accepted what she said: he could not do so because, as I will explain, he did not receive evidence about the quality of the marriage prior to 2013.
In February 2015 Mrs Owens left the matrimonial home and, following five months in rented accommodation, began to occupy the property next door to the home.
They have not lived together since her departure.
The judge found as facts that the marriage had broken down; that Mrs Owens could not continue to live with Mr Owens; and that, in so far as he believed otherwise, Mr Owens was deluding himself.
Back in December 2012 Mrs Owens had handed to Mr Owens a letter written by her solicitors, with which was enclosed a draft petition for divorce based upon the subsection; and in the letter the solicitors had enquired of Mr Owens whether, if a petition were to be issued in the terms of the draft, he would defend it.
As he accepts, Mr Owens then told Mrs Owens that, if she filed the petition, he would never speak to her again.
The judge remarked that, like the petition which she filed much later, this initial draft lacked beef.
That should have been a compliment, not a criticism.
Family lawyers are well aware of the damage caused by the requirement under the current law that, at the very start of proceedings based on the subsection, one spouse must make allegations of behaviour against the other.
Such allegations often inflame their relationship, to the prejudice of any amicable resolution of the ensuing financial issues and to the disadvantage of any children.
Thus for many years the advice of the Law Society, now contained in the second guideline of para 9.3.1 of the fourth edition (2015) of the Family Law Protocol, has been: Where the divorce proceedings are issued on the basis of unreasonable behaviour, petitioners should be encouraged only to include brief details in the statement of case, sufficient to
satisfy the court
In his judgment the judge observed that the draft petition was delivered to Mr Owens at the time when Mrs Owens had begun the affair.
The strong implication, he said, is that there was no substance in the draft petition.
Indeed at the hearing he had suggested that the existence of the affair knocks out the allegations made in it and provides an ulterior motive for the proposed petition.
With respect, I suggest that it is wrong to infer that a spouse who aspires to present a petition while conducting an affair has no case under the subsection.
In the event the draft petition was never issued.
Mr and Mrs Owens continued to live in the matrimonial home, and to a substantial extent to live together, for a further two years.
But Mrs Owens continued to keep a diary of incidents between herself and Mr Owens of which she might later wish to complain.
In May 2015 Mrs Owens issued the petition which is the subject of the proceedings.
Like the earlier draft, it was based on the subsection and was cast in appropriately anodyne terms.
The statement of case comprised five paragraphs.
In them Mrs Owens alleged only that Mr Owens had prioritised his work over their life at home; that his treatment of her had lacked love or affection; that he had often been moody and argumentative; that he had disparaged her in front of others; and that as a result she had felt unhappy, unappreciated, upset and embarrassed and had over many years grown apart from him.
For some reason Mr Owens declined to instruct the solicitors who had been corresponding on his behalf with Mrs Owens solicitors to accept service of the petition; so it was served upon him personally.
He indicated an intention to defend the suit.
By his answer, he denied that the marriage had broken down irretrievably and alleged, in the event incorrectly, that in bringing the suit Mrs Owens was motivated by a wish to continue the affair and that the other man was exercising a malign influence over her.
At that stage Mr Owens largely denied the allegations about his behaviour and said that, although never emotionally intense, the marriage had been successful and that he and Mrs Owens had learnt how to rub along.
In October 2015 a recorder conducted a case management hearing pursuant to rule 7.22(2) of the Family Procedure Rules 2010 (the FPR).
In the light of Mr Owens defence of the suit, Mrs Owens was granted permission to amend the petition so as to expand her allegations of behaviour.
The recorder also directed that the parties should file short witness statements, which were to stand as their evidence in chief.
The recorder made two further significant directions.
The first was that there should be no witness other than the parties themselves.
It appears that, by counsel, Mrs Owens agreed to that direction.
The second related to the requirement under the rule for the recorder to give directions for the conduct of the final hearing of the suit.
The court is told that, by their respective counsel, the wife suggested that a hearing of one half day would suffice whereas the husband suggested that three days were required.
In the event the recorders direction was for a hearing of one day.
Why did the experienced legal advisers to Mrs Owens consider that the court would need only one half day in which to determine the issues raised by her petition and that she would not need to call any witness to corroborate, for example, her allegation of disparaging comments on the part of Mr Owens in front of others?
The answer to this question is not in dispute.
It lies in an understanding of the practical operation of the family court nowadays when determining a defended suit for divorce.
Defended suits are exceedingly rare.
In his judgment the President noted that, in relation to the 114,000 petitions for divorce which were filed in England and Wales in 2016, fewer than 800 answers were filed; and he estimated that the number of suits which proceeded to a final, contested hearing was 0.015% of the petitions filed, which amounts to about 17 in that whole year.
The degree of conflict between the parties which is evident in a fully defended suit will of itself suggest to the family court that in all likelihood their marriage has broken down.
While it recognises that, unless and until repealed by Parliament, section 1 of the 1973 Act must conscientiously be applied, the family court takes no satisfaction when obliged to rule that a marriage which has broken down must nevertheless continue in being.
In No Contest: Defended Divorce in England and Wales, published in 2018 by the Nuffield Foundation, Professor Trinder and Mark Sefton make a report on their detailed study of recently defended suits.
In an admirable summary of the approach of the family court at pp 7 8, they say: While respondents are typically focused on defence as a means to establish their truth of why the marriage broke down, the family justice system is predicated on settlement and compromise.
That settlement orientation applies even in cases where a formal defence has been issued, with encouragement to settle at each stage of proceedings, up to and including, contested hearings.
The very active promotion of settlement at each stage, with lawyers and judges working in concert, reflects the dominant family justice perspective that agreed outcomes are less costly and damaging, that trying to apportion blame is a fruitless and inherently non justiciable task and that defence is futile where one party has decided that the marriage is over.
For reasons which I will explain, the subsection nowadays sets at a low level the bar for the grant of a decree.
The expectations therefore are that, even when defended to the bitter end, almost every petition under the subsection will succeed; that, in the interests again of minimising acrimony, the petitioner will be encouraged at the hearing to give no more than brief evidence in relation only to a few allegations of behaviour; and that then, after an equally short riposte on behalf of the respondent by cross examination, oral evidence and submission, the court will deliver a brief judgment, almost certainly culminating in the pronouncement of a decree.
As Mr Owens himself acknowledged when recounting the advice given to him, Courts rarely stand in the way of a party seeking a divorce.
Indeed the authors of the No Contest report discovered no recent example, other than Mr Owens himself, of a respondent to a defended suit who successfully opposed the grant of a decree on some basis or other.
Mrs Owens duly amended her petition.
By alleged reference to her diary, she gave 27 individual examples of the third and fourth allegations in her petition that Mr Owens had been moody and argumentative and had disparaged her in front of others.
She cannot have thought that the time allowed for the hearing would enable her to give evidence of more than a few of them.
The earliest of her examples was said to have occurred in 2013.
So she chose not to give any specific example of Mr Owens behaviour during the first 35 years of the marriage or prior to the date of the initial draft petition.
Perhaps there was no such example which she could honestly give; or perhaps, on advice, she did not regard it as necessary to do so.
In his amended answer Mr Owens admitted some of the alleged examples but sought to place them in a different context; described some as exaggerated; and professed not to remember others.
He entered very few denials.
At the outset of the hearing before the judge, which took place ten days before he handed down his judgment, Mr Marshall QC, on behalf of Mrs Owens, said that, although in her witness statement she had confirmed the veracity of all 27 of the examples given in the amended petition, he proposed to focus only on a very few of them.
Mr Marshall did so; and, at the judges invitation, Mr Dunlop, on behalf of Mr Owens, did likewise.
Indeed, during his final submission Mr Marshall, at the request of the judge, identified the four examples on which he most relied.
The result was that no evidence was put before the judge in relation to most of the 27 examples, apart from the written confirmation of their veracity on the part of Mrs Owens and from the mixture of responses to them which Mr Owens had given in his amended answer and confirmed to be true in his witness statement.
It also follows that, although at one point Mrs Owens told Mr Dunlop that Mr Owens had been making hurtful and disparaging remarks to her long before 2012, in effect no evidence was given in relation to the marriage prior to its two final years.
In a short judgment written on six pages, to which I will refer in more detail below, the judge announced at the outset that the petition was hopeless.
Having concluded that the marriage had broken down, he found that: a) all 27 of the pleaded examples of behaviour were at best flimsy; b) Mrs Owens had significantly exaggerated their context and seriousness; c) Mr Owens was somewhat old school; d) Mrs Owens was more sensitive than most wives; e) three of the examples on which Mr Marshall had in particular relied (the judge making no reference to the fourth) were isolated incidents, not part of a persistent course of conduct on the part of Mr Owens; f) Mrs Owens had cherry picked one of those examples, which illustrated her approach; the three examples scarcely merited criticism of Mr Owens; and g) h) much the same could be said of the other 24 examples.
The Law
This court, like the appellate committee of the House of Lords which preceded it, has never had occasion to consider what the law requires a petitioner to establish under the subsection.
Its words largely speak for themselves.
But there are six judgments delivered in the lower courts which helpfully illumine their effect.
They are old authorities which date from a period when controversy surrounding the establishment of a case under the subsection was slightly less rare.
First, Pheasant v Pheasant [1972] Fam 202.
A husband petitioned for divorce pursuant to section 2(1)(b) of the Divorce Reform Act 1969 (the 1969 Act), which came into force on 1 January 1971 and which was repealed when the 1973 Act came into force on 1 January 1974.
Section 1(2)(b) of the 1973 Act is in the same terms as was section 2(1)(b) of the 1969 Act.
The husbands case was that the wife had been unable to give him the demonstrative affection which he needed.
Ormrod J dismissed the petition.
At p 206 he observed that Parliament had not yet assimilated the law relating to marriage with the law of partnership, which made different provisions both for dissolution and for the resolution of financial issues consequent upon it.
At pp 207 208 he construed section 2(1)(b) as placing primary emphasis on the respondents behaviour rather than on the petitioners personal idiosyncrasies.
And at p 208 he asked himself whether it was: reasonable to expect this petitioner to put up with the behaviour of this respondent, bearing in mind the characters and the difficulties of each of them, trying to be fair to both of them, and expecting [of them] neither heroic virtue nor selfless
abnegation
Second, Livingstone Stallard v Livingstone Stallard [1974] Fam 47.
Dunn J upheld a wifes petition based on the subsection.
At p 54 he suggested that it was unhelpful to analyse the conduct required by the subsection in terms of its gravity.
While purporting to distance himself from the question posed in the Pheasant case, Dunn J seems there to have asked himself a closely similar question, namely: Would any right thinking person come to the conclusion that this husband has behaved in such a way that this wife cannot reasonably be expected to live with him, taking into account the whole of the circumstances and the characters and personalities of the parties? This question was approved and applied by the Court of Appeal in ONeill v ONeill [1975] 1 WLR 1118 at 1125.
Third, Thurlow v Thurlow [1976] Fam 32.
A husbands petition under the subsection was based on the wifes failure to contribute to the running of the home and on her increasingly erratic behaviour, both of which were the result of a severe neurological condition.
At p 41 Rees J noted that, before approving the form of words in section 2(1)(b) of the 1969 Act, Parliament had considered and rejected a form of words that the conduct of the respondent has been so intolerable that the petitioner could not reasonably be expected to continue or resume cohabitation.
At pp 41 43 he held that a respondents failure to act could amount to behaviour for the purposes of the subsection.
Even more significantly, he held at p 46 that behaviour caused by illness could fall within the subsection; and, in granting a decree to the husband, he added that no blame of any kind can be nor is attributed to the wife.
Fourth, Stevens v Stevens [1979] 1 WLR 885.
The facts were unusual and, for present purposes, of interest.
In March 1976 a judge had dismissed the wifes petition under the subsection.
He had held that the marriage had irretrievably broken down; that the wife had not established her case of behaviour against the husband; and that the cause of the breakdown had been her own behaviour.
Thereupon the parties had continued to live under the same roof.
In due course the wife presented a second petition, again under the subsection but relying only on the husbands behaviour occurring after March 1976.
Sheldon J granted her a decree.
He adhered at p 887 to the earlier findings that the marriage had irretrievably broken down prior to March 1976 and that the wifes behaviour had caused it to do so.
He held that he had to consider the totality of the evidence of the matrimonial history and the cumulative conduct of the husband.
He found that following March 1976 the husband had behaved in such a way that the wife could not reasonably be expected to live with him; and he held that it was irrelevant that the husbands behaviour was not the cause of the breakdown of the marriage.
Fifth, Balraj v Balraj (1981) 11 Fam Law 110.
The husbands petition was based not on the subsection but on section 1(2)(e) of the 1973 Act, namely that he and the wife had lived apart for at least five years.
The Court of Appeal upheld the judges rejection of the wifes opposition to the grant of a decree, which was that it would result in grave hardship to her within the meaning of section 5 of the 1973 Act.
She had argued that the judge had failed to pay sufficient regard to her subjective reaction, as a Hindu wife, to the grant of a decree.
In giving the leading judgment Cumming Bruce LJ at p 112 offered an analogy: In behaviour cases the court has to decide the single question whether the husband (for example) has so behaved that it is unreasonable to expect the wife to live with him.
In order to decide that, it is necessary to make findings of fact of what the husband actually did and then findings of fact upon the impact of his conduct on that particular lady.
As has been said again and again between a particular husband and a particular lady whose conduct and suffering are under scrutiny, there is of course a subjective element in the totality of the facts that are relevant to the solution but, when that subjective element has been evaluated, at the end of the day the question falls to be determined on an objective test.
And sixth, Buffery v Buffery [1988] 2 FLR 365.
A recorder had dismissed a wifes petition under the subsection on the basis that she had failed to establish either that the husbands behaviour had been grave and weighty or that it had caused the breakdown of the marriage.
The Court of Appeal held that behaviour under the subsection did not have to be grave or weighty.
At p 367 May LJ said that the gravity or otherwise of the conduct complained of is of itself immaterial.
The court also reiterated what Sheldon J had held in the Stevens case, namely that the 1973 Act did not require the respondents behaviour to have caused the breakdown of the marriage.
The wifes appeal was nevertheless dismissed on the basis that, even when judged by reference to correct principles, her petition failed.
As in effect the Court of Appeal in the present case has held, and as Mrs Owens now concedes, these six old authorities continue to provide a correct interpretation of the subsection.
The inquiry has three stages: first (a), by reference to the allegations of behaviour in the petition, to determine what the respondent did or did not do; second (b), to assess the effect which the behaviour had upon this particular petitioner in the light of the latters personality and disposition and of all the circumstances in which it occurred; and third (c), to make an evaluation whether, as a result of the respondents behaviour and in the light of its effect on the petitioner, an expectation that the petitioner should continue to live with the respondent would be unreasonable.
Resolution explains that its members are gravely concerned about the continued existence of a law which in substantial part links entitlement to divorce to the making of allegations by one spouse against the other.
It argues that the State thereby actively precipitates dispute.
Pending wholesale reform of section 1 of the 1973 Act, it clearly wishes to mitigate what it regards as the malign effect of the subsection.
It therefore submits that historically the lower courts have placed a flawed construction on it.
It contends, as in effect Mrs Owens contended in her grounds of appeal but no longer contends, that the entire focus should be on the reaction of the petitioner to the respondents behaviour; and that, if the petitioner genuinely cannot continue to live with the respondent, it might well be thought that the petitioner cannot reasonably be expected to live with the respondent.
But the question posed by the subsection is more narrow than whether the petitioner cannot reasonably be expected to live with the respondent; it is whether the respondents behaviour has been such that the petitioner cannot reasonably be expected to do so.
In determining whether a continuation of life with the respondent cannot reasonably be expected of the petitioner, it is therefore impossible to avoid focus on the respondents behaviour, albeit assessed in the light of its effect on the petitioner.
With respect to Resolution, its suggested interpretation of the subsection is incorrect.
So also, for the reasons given by the President in paras 76 to 81 of his judgment, is its suggestion (not further maintained by Mrs Owens in her grounds of appeal to this court) that either the subsection if taken alone or section 1 of the 1973 Act if taken as a whole might be incompatible with the rights of petitioners under article 8 of the European Convention on Human Rights.
But, although its interpretation by these courts remains correct even after 40 years, the application of the subsection to the facts of an individual case is likely to change with the passage of the years.
In R (Quintavalle) v Secretary of State for Health [2003] UKHL 13, [2003] 2 AC 687, Lord Bingham of Cornhill said: 9.
There is, I think, no inconsistency between the rule that statutory language retains the meaning it had when Parliament used it and the rule that a statute is always speaking.
If Parliament, however long ago, passed an Act applicable to dogs, it could not properly be interpreted to apply to cats; but it could properly be held to apply to animals which were not regarded as dogs when the Act was passed but are so regarded now.
The meaning of cruel and unusual punishments has not changed over the years since 1689, but many punishments which were not then thought to fall within that category would now be held to do so.
In Miller v Miller, McFarlane v McFarlane [2006] UKHL 24, [2006] 2 AC 618, the appellate committee developed a new approach to the exercise of the discretionary jurisdiction under the 1973 Act to make financial orders following divorce.
It was in that context, somewhat similar to the present, that both Lord Nicholls of Birkenhead at para 4 and Lord Hope of Craighead at para 115 justified the new approach by reference to the change in social and moral values from one generation to the next.
I cannot readily think of a decision which more obviously requires to be informed by changing social norms than an evaluation whether, as a result of the respondents behaviour and in the light of its effect on the petitioner, an expectation of continued life together would be unreasonable.
In Ash v Ash [1972] Fam 135 Bagnall J suggested at p 140: that a violent petitioner can reasonably be expected to live with a violent respondent; a petitioner who is addicted to drink can reasonably be expected to live with a respondent similarly addicted; and if each is equally bad, at any rate in similar respects, each can reasonably be expected to live with the other.
The judges suggestion now seems almost comical.
In the two specific examples quoted, surely each spouse would nowadays be entitled to a decree against the other under the subsection.
But the relevant social norm which has changed most obviously during the last 40 years has, I suggest, related to our societys insistence upon equality between the sexes; to its recognition that marriage is a partnership of equals; and, specifically, to its assessment of the moment when a husbands behaviour, in the light of its effect on his wife, begins to make it unreasonable to expect her to continue to live with him.
For a wife that moment now arrives earlier than it did before; it now arrives at the same time for both sexes in equivalent situations.
In Priday v Priday [1970] 3 All ER 554, which was decided months before section 2(1)(b) of the 1969 Act came into force, Cumming Bruce J dismissed a husbands petition for divorce on the ground of the wifes cruelty under section 1(1)(a)(iii) of the Matrimonial Causes Act 1965.
But, in recounting the history of the marriage, the judge also commented at p 557 on the conduct of the husband towards the wife: Up to 1968 [the husband] sometimes attempted intercourse by force in the hope that if he succeeded in intercourse, even by such method, that . might stimulate her again emotionally to return to reality, but that was unsuccessful and he naturally abstained from such attempts.
I am satisfied that his recourse to force in intercourse was not in any sense culpable but was a desperate attempt on his part to re establish what might have been an important element in matrimonial consortium.
Today such an assessment would be inconceivable.
Eight years ago, in Miller Smith v Miller Smith in the Court of Appeal, [2009] EWCA Civ 1297, [2010] 1 FLR 1402, I observed at para 15: Our society in England and Wales now urgently demands a second attempt by Parliament, better than in the ill fated Part II of the [Family Law Act 1996], to reform the five ancient bases of divorce; meanwhile, in default, the courts have set the unreasonableness of the behaviour required to secure the success of a petition on the second basis, namely pursuant to section 1(2)(b) of the Act of 1973, even when defended, at an increasingly low level.
The ease with which a petitioner can nowadays establish a case under the subsection, if undefended, led the President in his judgment to speak of its widespread dishonest and collusive manipulation.
If the allegations of behaviour are not true, there is indeed dishonesty and, by not challenging them, a respondent might loosely be said to collude with it; and unfortunately such dishonesty is unlikely to be uncovered when, by reference only to the papers filed, the court decides pursuant to rule 7.20(2)(a) of the FPR whether to certify that the petitioner is entitled to a decree.
But my reference in the Miller Smith case to the greater availability of a decree under the subsection was intended to recognise not its abuse in some cases but a legitimate enlargement of its application reflective of changing social norms in other cases.
Nevertheless, in making that reference, I used a phrase which I regret: for I referred to the unreasonableness of the behaviour.
Unreasonable behaviour has always been the family lawyers shorthand description for the content of the subsection.
But it is wrong.
The subsection requires not that the behaviour should have been unreasonable but that the expectation of continued life together should be unreasonable.
Within about a year of the advent of the 1969 Act, the error inherent in the shorthand description was exposed: Katz v Katz [1972] 1 WLR 955, 960.
Indeed, in Bannister v Bannister (1980) 10 Fam Law 240, in which the Court of Appeal allowed a wifes appeal against the dismissal of her petition for divorce, Ormrod LJ observed at p 240: The learned judge, I am afraid, fell into the linguistic trap which is waiting for all of us when we speak of unreasonable behaviour in relation to section 1(2)(b) cases.
The basis of this subsection is not unreasonable behaviour but behaving in such a way that the petitioner cannot reasonably be expected to live with the respondent, a significantly different concept.
It is difficult to find an alternative shorthand expression for this subsection, so we all talk, inaccurately, of unreasonable behaviour.
The Judgment
In the course of his short judgment in the present case the judge referred five times to unreasonable behaviour.
Questions arise.
Was he looking for behaviour objectively worse than what the law requires? What lay behind his search for beef? Was he looking for behaviour for which he might blame Mr Owens, contrary to the decision in the Thurlow case cited at para 24 above? Was he looking for behaviour of gravity, contrary to the decision in the Buffery case cited at para 27 above? No doubt blameworthy or grave behaviour often makes it more likely that the third stage evaluation under the subsection will be that an expectation of continued life together would be unreasonable.
But such is not a pre requisite of a successful petition under the subsection.
as it went.
He said: It seems, however, that the judge gave himself a correct self direction, so far In determining the question whether this respondent has behaved in such a way I apply an objective test what would the hypothetical reasonable observer make of the allegations but with subjective elements.
I have to take into account the individual circumstances of the spouses and the marriage The judge then proceeded to repeat the question which Dunn J had asked himself in the Livingstone Stallard case, set out at para 23 above.
The President described the judges self direction as entirely adequate.
But did it go far enough? Did he remind himself of the need, noted in the Stevens case cited at para 25 above, to consider the behaviour of Mr Owens as a whole? Or equally, of the need to consider the effect of all of it on Mrs Owens cumulatively? In Jamieson v Jamieson [1952] AC 525 the appellate committee reversed the decision of the Court of Session that a wifes allegations of cruelty should be struck out as irrelevant and insufficient.
Lord Normand suggested at pp 535 536: that it does not do justice to the averments to take up each alleged incident one by one and hold that it is trivial or that it is not hurtful or cruel The relationship of marriage is not just the sum of a number of incidents Equally, as Hallett LJ pointed out in the present case, behaviour which the other spouse may consider trivial in the context of a happy marriage may bear more heavily upon a spouse trapped in an unhappy marriage.
In his judgment the President noted that the judge had failed to make explicit reference to the cumulative effect of Mr Owens behaviour on Mrs Owens, of which indeed she had given copious evidence.
He said, however, that once he had surveyed the whole of the judges judgment, including in particular the reference to the whole of the circumstances in the question first articulated by Dunn J, he had become satisfied that the judge had paid sufficient regard to the cumulative effect of it on Mrs Owens, whom he had acknowledged to be more sensitive than most wives.
But had the judge heard enough evidence to be able to appraise the cumulative effect on Mrs Owens of the conduct, taken as a whole, upon which she relied? How could he find the three examples of behaviour to which he made specific reference to be no more than isolated incidents, not part of a persistent course of conduct, in circumstances in which it had been agreed to be convenient to place so many other pleaded examples, albeit verified in writing by Mrs Owens, to one side? This, says Mrs Owens, represents appealable error even in this court.
It was this court itself which, at the hearing, raised with counsel another possible cause for concern about the judgment.
It is clear from the cases of Stevens and Buffery, cited in paras 25 and 27 above, that section 1 of the 1973 Act does not require the behaviour under the subsection to have caused the breakdown of the marriage.
Nevertheless Mr Owens and his advisers energetically denied that any behaviour on his part had caused the breakdown of the marriage.
In his witness statement Mr Owens twice averred that if, which he did not accept, the marriage had broken down, the breakdown had not been the result of his behaviour; and his counsels skeleton argument before the judge spoke of the possibility that the marriage was at an end but not due to [Mr Owens] fault.
This courts question to counsel was whether these no doubt innocent misrepresentations of the nature of the inquiry under the subsection had misled the judge into considering that Mrs Owens needed to establish that the alleged behaviour of Mr Owens had caused the marriage to break down.
For, in adverting briefly to the allegation in the petition, never particularised, that Mr Owens had prioritised his work over life at home, the judge first pointed out that Mr Owens had in effect been retired for many years; and then, in a passage which Mr Dyer QC on behalf of Mr Owens acknowledged to be unfortunate and difficult for him to interpret, continued: The idea that the lifestyle, whatever it may have been, now contributes to the breakdown of the marriage is fanciful.
The ground is no more than a conventional form of words with no application to the present or the breakdown of the marriage at all.
Moreover, at the end of his judgment, the judge explained his crucial conclusion in the following few words: I find no behaviour such that the wife cannot reasonably be expected to live with the husband.
The fact that she does not live with the husband has other causes.
The petition will be dismissed. (italics supplied) The facts remain, however, that Mr Marshall on behalf of Mrs Owens never argued in the Court of Appeal that the judge had fallen into this possible error; that the Court of Appeal did not see fit to raise it of its own motion; and that, even after it was raised at the hearing in this court, Mr Marshall did not squarely rely on it.
The judge has long experience of family law (albeit, as he said, that he had previously tried only one defended suit for divorce) and the view must have been taken that the quoted passages represent too weak a foundation for a conclusion that he had fallen into elementary error.
In such circumstances it is inappropriate for this court further to consider the point.
There is no denying that the appeal of Mrs Owens generates uneasy feelings: an uneasy feeling that the procedure now conventionally adopted for the almost summary despatch of a defended suit for divorce was inapt for a case which was said to depend on a remorseless course of authoritarian conduct and which was acknowledged to appear unconvincing if analysed only in terms of a few individual incidents; an uneasy feeling about the judges finding that the three incidents which he analysed were isolated in circumstances in which he had not received oral evidence of so many other pleaded incidents; and an uneasy feeling about his finding that Mrs Owens had significantly exaggerated her entire case in circumstances in which Mr Owens had not disputed much of what she said.
But uneasy feelings are of no consequence in this court, nor indeed in any other appellate court.
The advantages of the judge in reaching the relevant conclusions need no rehearsal.
The complaints of Mrs Owens about his judgment have already been analysed and dismissed by members of the Court of Appeal who have unrivalled authority in this sphere.
Permission for her further appeal to this court was founded upon a novel interpretation of the subsection which at the hearing and in the event correctly she abandoned.
As the above paragraphs testify, this court is not precluded from proceeding to address her remaining complaints, in particular in relation to the judges evaluation at the third stage of the inquiry; but in the above circumstances it is most unlikely to be appropriate for it to intervene.
The Conclusion
The appeal of Mrs Owens must be dismissed.
She must remain married to Mr Owens for the time being.
Were she to continue to live apart from Mr Owens until 2020, he would surely have no defence to a petition then brought under section 1(2)(e) of the 1973 Act on the basis that they had lived apart for a continuous period of five years.
Parliament may wish to consider whether to replace a law which denies to Mrs Owens any present entitlement to a divorce in the above circumstances.
LADY HALE:
I have found this a very troubling case.
It is not for us to change the law laid down by Parliament our role is only to interpret and apply the law that Parliament has given us.
Lord Wilson has explained very clearly what that law requires.
He sets out the three stages of the inquiry at para 28.
He explains at para 30 that the application of that inquiry to the facts of an individual case is likely to change with the passage of the years.
Expectations of whether it is reasonable to expect one spouse to continue to live with the other, in the light of the way the latter has behaved and its effect upon the former, have indeed changed over the 47 years since the Divorce Reform Act 1969 came into force.
As Lord Wilson observes at para 34, the social norm which has changed most obviously over that time is the recognition that marriage is a partnership of equals.
Indeed, the equality of the sexes is now also a legal norm, reflected in developments not only in family law but also in equality and anti discrimination law.
With that statement of the law in mind, I have several misgivings about the trial judges judgment in this case.
The first is his repeated reference to unreasonable behaviour.
This is a convenient but deeply misleading shorthand for a very different concept.
And it can so easily lead into error.
In particular, it can lead to a search for blame, which is not required.
Indeed, those of us who have made or supported proposals for reform of the law over the years may not have helped by referring to no fault divorce when the current law does not require fault.
Worse still, referring to unreasonable behaviour can also lead to a search for who is the more to blame, which is also irrelevant.
The Divorce Reform Act 1969 swept away the concepts in the old law relating to matrimonial offences which did make an attempt, however crude, to work out who was the more to blame.
The current law simply does not do this.
It is, for example, no answer to a petition based on adultery that the petitioner had been unfaithful and unloving for years or that the couple had not lived together for a long time.
We should be referring to the facts in section 1(2)(a) and (b) as conduct based rather than fault based.
My second misgiving is that the judge appears, at least from the passages quoted by Lord Wilson in para 41, to have thought that the behaviour complained of had to be the cause of the breakdown of the marriage.
That is, as Lord Wilson has explained, simply not the law.
The marriage has to have broken down irretrievably.
One of the five facts prescribed in section 1(2)(a) to (e) of the 1973 Act has to be proved.
But the Act does not require that there be a causal connection between them.
It is, for example, most unlikely that the fact that a couple have been living apart for five years (fact (e)) is the cause of the breakdown of their marriage: it will have broken down for other reasons often attributable to the petitioner and long ago.
But my third misgiving is the most troubling of all.
This was a case which depended upon the cumulative effect of a great many small incidents said to be indicative of authoritarian, demeaning and humiliating conduct over a period of time.
Those who have never experienced such humiliation may find it difficult to understand how destructive such conduct can be of the trust and confidence which should exist in any marriage.
There is an analogy here with constructive dismissal cases in employment law.
As Langstaff J (President) in the Employment Appeal Tribunal has put it (in Ukegheson v London Borough of Haringey, UKEAT/0312/14/RN, at paras 30 31): The meaning that correspondence or observations have when they are directed by one person to another may often depend very much on the context of the relationship between the two . [Looking at incidents in isolation] is perhaps to fail to see the eloquence of the story painted by the whole of the series of events and to focus instead upon events taken individually as though they were in silos.
In a constructive dismissal case arising out of a poisoned relationship between parties, what matters is the totality of the picture rather than any individual point along the way.
The problem, as Lord Wilson has shown, is that this hearing was not set up or conducted in a way which would enable the full flavour of such conduct to be properly evaluated.
But what are we to do about it?
This court is not a court of error.
If the law is clear, permission to appeal is not normally given, either by this court or the court below, simply because the law may have been misapplied in the individual case.
In this case, as Lord Wilson has explained, permission to appeal was given because it was argued that it was the effect of the respondents behaviour, rather than the behaviour itself, which should make it unreasonable to expect the petitioner to live with the respondent.
That argument is no longer pursued.
However, permission having been given to come to this court, we would in my view be failing in our duty if we were not to correct any error into which we found that the courts below had fallen.
I am concerned that the trial court did indeed fall into error in the three respects identified earlier.
Are we then to do nothing? Or are we to allow the appeal? And if so can we decide it ourselves or should we send it back to be heard again? Given that the principal problem is that the hearing did not enable the court to evaluate the petition as a whole and in context, it seems to me that the case would have to go back for a rehearing.
We cannot assume that a properly instructed and constructed hearing would inevitably lead to a decree being granted.
In my view therefore, the correct disposal of this appeal would be to allow the appeal and send the case back to be tried again.
However, in the appellants written case, it was argued that it cannot be in the interests of the parties or in accordance with the overriding objective for there to be a further contested hearing (para 94).
Orally, counsel viewed such a prospect with dread.
It would place the appellant in an unenviable dilemma, given that, in February 2020, five years will have elapsed from their separation and, should the petitioner still wish to be divorced, it is difficult to see that there would be any obstacle standing in her way.
I am therefore reluctantly persuaded that this appeal should be dismissed.
LORD MANCE:
I agree that this appeal should be dismissed.
As to the law, I agree with paras 21 37 of Lord Wilsons judgment.
As to its application to the facts, my reasons can be put in like terms to those contained in Lord Wilsons summary in para 43.
I also agree with his conclusions and observations in paras 44 45.
The judge stated and explained the legal test correctly in his para 10.
His references, when summarising or referring to the evidence, to allegations of unreasonable behaviour adopted an inaccurate shorthand which is evidently, though regrettably, common in the profession.
But there is no reason to think that the judge did not ultimately apply the correct test to the allegations.
He expressly applied it when reaching his conclusions in his para 15.
The judge, in the course of explaining the correct test in para 10, identified the need to take into account the individual circumstances of the spouses and the marriage the whole of the circumstances and the characters and personalities of the parties.
He went on find that all of the allegations were at best flimsy, and, having heard both parties give evidence, that Mrs Owens had exaggerated their context and seriousness to a significant extent.
He then considered various batches of allegations and three allegations which counsel for Mrs Owens ranked foremost in terms of seriousness.
He concluded that these were all insignificant and that much the same could be said of all the other allegations and of Mrs Owens case generally.
It appears fanciful to suppose that it would have made any difference to the judges assessment if he had also expressly put and answered the question whether, even if the allegations were individually insignificant, they were cumulatively significant.
The judge clearly formed the view that there was nothing in the case overall.
I share Lord Wilsons unease in paras 13 19 and 42 about an apparently conventional procedure, whereby this defended divorce petition was listed for what, in common law terms, might be regarded as a relatively short period in this case one day.
But it was Mrs Owens who through counsel submitted that even that period was not required, and that only half a day would suffice, while Mr Owens case was that three days were required.
The case was conducted, and the judge was invited to decide it, on the basis of his direction for a hearing of one day, not appealed as such.
I do not think that we can now interfere to say that it was not possible in the circumstances to have a fair determination or for the judge to reach the overall conclusions which he did.
Finally, I do not think that the judges judgment is open to the construction (raised with counsel by the Supreme Court) that he thought that the husbands conduct had to cause the breakdown.
Considering the allegation that the husbands working lifestyle had caused Mrs Owens much unhappiness and made her feel unloved, the judge said (para 7) that: The idea that the lifestyle, whatever it may have been, now contributes to the breakdown of the marriage is fanciful.
In his conclusions in para 15, he said: I find no behaviour such that the wife cannot reasonably be expected to live with the husband.
The fact that she does not live with the husband has other causes.
The judges use of the word contributes in the first passage is consistent with his recognising that, even though the actual breakdown may have had some other cause, the husbands behaviour may still have been such that the petitioner could not be expected to live with him.
After expressly rejecting, in the first sentence quoted above from para 15, Mrs Owens case that the husbands behaviour had been such, the judge was in my view doing no more in the second quoted sentence than responding to the obvious factual or evidential question: if the husbands conduct was not such as the wife could not reasonably be expected to put up with, why is she living apart from him? There is to my mind no inference that he thought that the husbands behaviour must not only be such that the wife could not reasonably be expected to live with him as a matter of fact, but also that it must as a matter of law be the actual reason why she had determined to live, or was living, apart from him.
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The Appellant, Mrs Owens, and the Respondent, Mr Owens, were married in 1978 and have two adult children.
Mrs Owens had been contemplating a divorce since 2012 (when she consulted solicitors who prepared a draft divorce petition for her) but it was not until February 2015 that she left the matrimonial home.
The parties have not lived together since her departure.
In May 2015 Mrs Owens issued the divorce petition which is the subject of the current proceedings.
It was based on s.1(2)(b) of the Matrimonial Causes Act 1973, and alleged that the marriage had broken down irretrievably and that Mr Owens had behaved in such a way that Mrs Owens could not reasonably be expected to live with him.
It was drafted in anodyne terms but when it was served on Mr Owens he nevertheless indicated an intention to defend the suit, arguing that the marriage had largely been successful.
In October 2015 the matter came before a recorder for a case management hearing.
In light of Mr Owens defence, the recorder granted Mrs Owens permission to amend her petition so as to expand her allegations of behaviour.
The recorder also directed that the substantive hearing of the dispute would take place over the course of a day (Mrs Owens had originally suggested a half day would suffice) and that there would be no witnesses other than the parties themselves.
Mrs Owens duly amended her petition so as to include 27 individual examples of Mr Owens being moody, argumentative, and disparaging her in front of others, but at the one day hearing her counsel ultimately focussed on only a very few of these.
The judge found that the marriage had broken down, but that Mrs Owens 27 examples were flimsy and exaggerated, and that those relied on at the hearing were isolated incidents.
Accordingly, the test under s.1(2)(b) was not met and Mrs Owens petition for divorce was dismissed.
Mrs Owens appealed against this decision to the Court of Appeal, but her appeal was also dismissed.
She now appeals against the Court of Appeals decision to the Supreme Court.
The Supreme Court unanimously dismisses the appeal, with the result that Mrs Owens must remain married to Mr Owens for the time being.
Lord Wilson gives the majority judgment, with whom Lord Hodge and Lady Black agree.
Lady Hale and Lord Mance each give a concurring judgment.
It is important to bear in mind the legal context to this dispute, namely that defended suits for divorce are exceedingly rare.
While the family court recognises that s.1 of the Matrimonial Causes Act 1973 must be conscientiously applied, it takes no satisfaction when obliged to rule that a marriage which has broken down must nevertheless continue in being [15].
The expectations are that almost every petition under section 1(2)(b) will succeed, that the evidence before any contested hearing will be brief, and that the judgment
of the court in such a hearing will almost certainly result in the pronouncement of a decree [17].
This is the background to the contested hearing in this case, and explains why Mrs Owens advisors agreed to a short hearing with no external witnesses to corroborate her evidence [14 15].
When applying section 1(2)(b) the correct inquiry is: (i) by reference to the allegations of behaviour in the petition, to determine what the respondent did or did not do; (ii) to assess the effect which the behaviour had upon this particular petitioner in light of all the circumstances in which it occurred; and (iii) to make an evaluation as to whether, as a result of the respondents behaviour and in the light of its effect on the petitioner, an expectation that the petitioner should continue to live with the respondent would be unreasonable [28].
This test has been applied for many years but the application of the test to the facts of an individual case is likely to change over time, in line with changes in wider social and moral values [30 32].
The most relevant change over the past forty years is the recognition of equality between the sexes, and of marriage as a partnership of equals [34].
At the hearing, the judge gave himself the correct self direction; he understood he was applying an objective test, but with subjective elements [39].
The majority nevertheless have concerns about other aspects of the judges analysis.
In particular, they have an uneasy feeling about the summary despatch of a suit which was said to depend on an authoritarian course of conduct, when the judge had scrutinised only a few individual incidents of Mr Owens behaviour [42].
However, uneasy feelings are of no consequence in an appellate court.
A first instance judge has many advantages in reaching the relevant conclusions, and Mrs Owens complaints about the judgment have already been rehearsed and dismissed by the Court of Appeal.
In such circumstances it is most unlikely for it to be appropriate for the Supreme Court to intervene [43].
However, the majority invite Parliament to consider replacing a law which denies Mrs Owens a divorce in the present circumstances [44 45].
Concurring judgments Lady Hale agrees with Lord Wilson as to the legal analysis, but has several misgivings about the judges judgment [47 48].
Her gravest misgiving relates to the fact that this was a case which depended upon the cumulative effect of a great many small incidents (which were said to be indicative of authoritarian and demeaning conduct over a period of time), yet the hearing before the judge was not set up or conducted in a way which would enable the full flavour of such conduct to be properly evaluated [50].
In light of her misgivings, she considers that the proper disposal is to allow the appeal, and send the case back to the first instance court to be tried again.
However, this is not a disposal which Mrs Owens is actually seeking, and Lady Hale is therefore reluctantly persuaded that the appeal should be dismissed [53 54].
Lord Mance also agrees with Lord Wilson as to the wider legal analysis, however he does not share the concerns expressed by Lord Wilson and Lady Hale about the judges judgment.
Lord Mance considers that the judge did not misdirect himself at any stage, and that the judge properly concluded that there was nothing in the case overall [57, 59].
Moreover, although the hearing of the defended divorce petition was listed for a relatively short period, this was how the judge was invited to decide the matter.
It would be inappropriate for the Supreme Court to interfere at this stage and say it was not possible in the circumstances for the judge to have reached a fair determination [58].
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